Exhibit 2.1
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
the 20th day of December, 2002 by and among Travel Nurse International, a
California corporation with a principal business address at 611 Mission Street,
7th Floor, San Francisco, California 94105 ("Seller"), Gary W. Fanger
("Shareholder") whose address is 22 Shannon Circle, Alameda, California 94502
and Medical Staffing Network, Inc., a Delaware corporation with a principal
business address at 901 Yamato Road, Suite 110, Boca Raton, Florida 33431
("Buyer").
For value received, and in consideration of the mutual promises contained
in this Agreement, the parties agree to the following recitals, terms and
conditions.
1. Recitals.
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(a) Seller owns and operates a healthcare staffing business under the trade
name of "Travel Nurse International" in the State of California (the
"Business").
(b) The Shareholder and Lesley J. King are the Seller's sole officers and
directors. The Shareholder is the sole stockholder of Seller.
(c) Seller desires to sell, and Buyer desires to purchase, substantially
all of the assets used in or relating to the operation of the Business, as a
going concern, in accordance with the terms and conditions set forth in this
Agreement.
2. Transfer of Assets. Except as expressly excluded below, Seller agrees to
sell, assign, transfer and deliver to Buyer, and Buyer agrees to purchase and
accept from Seller, at the Closing (as defined below), as described below, all
of Seller's assets and properties, real and personal, tangible and intangible,
of every kind and description, wherever located, which are used by Seller in
connection with the operation of the Business, as a going concern including,
without limitation, the following assets (collectively, the "Assets"):
(a) Tangible Personal Property. All machinery, equipment, tools, furniture,
fixtures, office equipment, supplies, inventory, and other items of tangible
personal property of every kind owned by Seller and used in connection with the
Business (wherever located and whether or not carried on Seller's books),
including, without limitation, those listed on Schedule 2(a) (the "Tangible
Personal Property"), and any additions, improvements, replacements and
alterations thereto made between the date of this Agreement and the Closing Date
(as defined below), together with any express or implied warranty by the
manufacturers of any item or component part thereof, and all maintenance records
and other documents relating thereto in Seller's
Initialed (Seller): Initialed (Shareholder): Initialed (Buyer):
_______ _______ _______
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possession or control; together with all of Seller's other tangible assets of
every kind and description, real, personal or mixed, wherever located, which are
carried on the books of the Business or which are owned by Seller and used in
connection with the Business.
(b) Leased Real Property. All of Seller's interest in the following real
property (collectively, the "Leased Real Property"): (i) the 6th and 7th floors
of that real property leased by Seller pursuant to that certain Sub-Sublease
dated September 20, 2001 and a First Amendment to Sub-Sublease dated April 16,
2002 by and between Seller and Andromedia, Inc. (predecessor in interest to
Macromedia, Inc.) in connection with the real property located at 611 Mission
Street, San Francisco, California (the "Business Office") and (ii) the real
property leased by Seller for travel nurse housing pursuant to the leases
described on Schedule 2(c)(1) (collectively, the "Real Property Leases").
(c) Contracts. All of Seller's interests in Seller's ordinary course
contracts with its clients, Seller's rights under covenants not to compete,
confidentiality agreements and/or proprietary rights agreements with Seller's
employees (to the extent such agreements exist and such rights are assignable),
Seller's contracts and commitments described on Schedule 2(c) and Seller's
ordinary course contracts and leases for its travel nurses (including leases for
housing, furniture, and other personal property), which contracts are set forth
on Schedule 2(c)(1) (collectively, the "Contracts").
(d) Intellectual Property. Except as set forth on Schedule 2(l)(13), all of
the intellectual property rights that are owned or used by Seller in connection
with the Business, including the following: (A) the name "Travel Nurse
International" and all trademarks, service marks, licenses, trade names, logos
and other designations (the "Marks") and all registrations and applications for
registration relating thereto, (B) all computer databases, software and licenses
thereto, and all copyrighted works (the "Copyrights") and registrations
therefor, (C) all inventions that are the subject of letters patent or
applications therefor (the "Patents") and (D) all confidential or proprietary
processes, technical data and other similar information that is of commercial
value to the Business (the "Trade Secrets") (the Marks and registrations
therefor, Copyrights and registrations therefor, Patents and Trade Secrets being
referred to collectively herein as the "Intellectual Property"), together with
the goodwill related thereto, and any royalty income from the Intellectual
Property accruing after the Closing Date.
(e) Permits. All permits, authorizations, certificates, approvals and
licenses relating to the operation of the Business, including without limitation
those listed on Schedule 2(e) (the "Permits").
(f) Accounts Receivable. All of Seller's accounts receivable and trade
accounts in connection with the Business ("Receivables") as of the Effective
Date (as defined below) that are outstanding on the Closing Date, except
Intercompany Receivables (as defined below).
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(g) Records. All of Seller's records, technical data, asset ledgers, books
of account, inventory records, budgets, customer and supplier lists, payroll and
personnel records, computer programs, advertising material, marketing
information, policy or operational manuals, correspondence and other files
created or maintained in connection with the Business.
(h) Deposits and Prepaid Expenses. Except as set forth in Section 2(l)(6)
and 2(l)(12), all of Seller's deposits with vendors and creditors, rights to
refunds and prepaid expenses in connection with the Business.
(i) Claims. All of Seller's rights to any choses in action, claims, causes
or rights of action arising in connection with the Business, except as they
relate to any breach of this Agreement.
(j) Goodwill. Any and all of Seller's goodwill in and going concern value
of the Business, together with Seller's confidentiality, proprietary rights or
non-competition agreements with employees, whether oral or written, and Seller's
rights to its existing telephone numbers.
(k) Other Intangibles. All other intangible assets of any kind or
description, wherever located, which are carried on the books of the Business,
which are owned or used in connection with the operation of the Business by
Seller.
(l) Excluded Assets. The following assets shall be excluded from the Assets
and shall be retained by Seller.
(1) Cash. All cash on hand and on deposit in banks, cash equivalents
and investments.
(2) Intercompany Receivables. All intercompany receivables of Seller
appearing on Seller's balance sheet dated December 20, 2002 ("Intercompany
Receivables").
(3) Note Receivable. All principal and interest due under the Amended
and Restated Promissory Note dated December 19, 2002 in the principal
amount of $4,300,000.00 (the "HCSS Note") from Healthcare Consulting and
Staffing Services, Inc. ("HCSS").
(4) Personal Property Disposed Of. All tangible personal property
disposed of or consumed in the ordinary course of business of the Business
or with the written consent of Buyer between the date hereof and the
Closing Date.
(5) Assets of Benefit Plans. Pension, profit sharing or savings plans
and trusts and the assets thereof.
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(6) Certain Deposits. Deposits described in Schedule 2(l)(6).
(7) Certain Records. Seller's (and any predecessor in interest of
Seller's) corporate minute books and stock books.
(8) Intentionally Omitted.
(9) Certain Contracts. Any contracts or other agreements entered into
by Seller or by which Seller or any of the Assets is bound, which Contracts
are described in Schedule 2(l)(9); provided, however, that Buyer shall have
the option of assuming one or more of such contracts and receiving
assignments of such assumed contracts to the extent assignable.
(10) Intentionally Omitted.
(11) Employees' Property. Any personal property owned by employees of
the Seller.
(12) Insurance. All insurance policies relating to the Business in
force prior to or at the time of Closing and all prepaid premiums relating
thereto.
(13) Certain Intellectual Property. The Intellectual Property
described on Schedule 2(l)(13) and the Intellectual Property which is the
subject of litigation in the case styled Contract Management Services, Inc.
("CMSI"), a Texas corporation; Kathleen Thomas, an individual, and William
T. Cherry III, an individual v. Travel Nurse International, Case No. CIV
F-01-5317 SMS, filed in the Eastern District of California, Fresno
Division..
(14) Subleased Telephone System. The telephone system equipment lease
subleased by Seller to HCSS.
3. Liabilities.
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(a) Except as otherwise specified herein, the Assets shall be sold and
conveyed to Buyer free and clear of all liabilities, obligations, liens,
security interests and encumbrances whatsoever, other than the Assumed
Liabilities (as defined below). Buyer shall in no event assume or be liable for
any liability or obligation of Seller other than the Assumed Liabilities, and
Seller shall retain responsibility for all other liabilities accrued up to and
including the Closing Date, and except as otherwise specified herein, Seller
shall remain responsible for all other liabilities arising from the Seller's
operations, whether or not accrued and whether or not disclosed. Specifically,
but without limiting the generality of the foregoing sentence, Buyer shall not
assume any liability or obligation of Seller with respect to (i) malpractice
liability and any other similar claims, (ii) taxes and related penalties and
interest of any kind, (iii) employees or
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former employees of Seller, including any liability for accrued salaries, wages,
payroll taxes, severance pay entitlements, health, medical, retirement, vacation
or deferred compensation benefits or any other obligations or expenses arising
out of or relating to the employment by Seller of its employees or Seller's
termination of such employees except as otherwise expressly provided in this
Agreement and (iv) any other liabilities of Seller. Seller shall retain and
shall assume and discharge all liabilities and costs under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") (including
liabilities for violations thereof), for all "qualifying events" (as defined in
COBRA) occurring with respect to Seller's employees and their dependents,
including qualifying events that occur as a result of the sale of the Assets
contemplated by this Agreement.
(b) The only liabilities of Seller to be assumed by Buyer (the "Assumed
Liabilities") are (i) the obligations of Seller under the Contracts and Real
Property Leases disclosed to Buyer, to the extent that such obligations are not
performed or to be performed prior to the Closing Date, are disclosed in the
text of such Contracts and Real Property Leases and accrue subsequent to the
Closing Date and (ii) accrued and unpaid vacation/sick pay for employees of
Seller that has been earned and not been used during calendar year 2002;
provided, however, that the cost assumed by Buyer pursuant to this subsection
and Section 10(b) shall not exceed $49,000 in the aggregate.
4. Consideration.
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(a) Purchase Price. Subject to the Post-Closing Adjustment provided for in
Section 4(h), the aggregate purchase price (the "Purchase Price") for the Assets
shall be $5,500,000, plus the Earnout set forth in Section 4(c). Buyer shall pay
the Purchase Price to Seller as follows:
(1) $3,494,678 (the "Escrow Amount") shall be paid pursuant to the
terms and conditions of an escrow agreement (the "Escrow Agreement") in the
form attached hereto as Exhibit A.
(2) $1,750,000 (the "TNI Amount") shall be paid by wire transfer to an
account designated by Seller, $250,000 (the "Employee Severance") of which
shall be used by Seller to pay severance to its employees as set forth in
Schedule 10(b).
(3) $255,322 (the "SunTrust Payment") shall be paid by wire transfer
to an account designated by SunTrust Capital Markets, Inc. ("SunTrust").
(b) Loan to Seller. Buyer shall loan to Seller the principal amount of
$4,000,000 pursuant to a promissory note (the "Note") in favor of Buyer in the
form attached hereto as Exhibit B bearing interest at a rate of 6% per annum,
the proceeds of which shall be paid as follows: $2,429,235 (the "Flexible
Funding Payment") shall be paid by wire transfer to an
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account designated by Flexible Funding LLC (the "Factoring Agent") and
$1,570,765 (the "Additional Escrow Amount") shall be paid by wire transfer to an
account designated by the Escrow Agent under the Escrow Agreement and held in
escrow pursuant to the terms of the Escrow Agreement.
(c) Earnout.
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(1) An earnout ("Earnout") shall be payable to Seller as set forth below in
cash in an amount equal to (i) three multiplied by (ii) the amount by which
earnings before interest, taxes, depreciation and amortization attributable to
the Business ("EBITDA"), as such amount is calculated in accordance with
generally accepted accounting principles ("GAAP") exceeds the applicable
threshold set forth below (the "Post-Closing EBITDA Threshold"). The
Post-Closing EBITDA Threshold shall be calculated for two time periods and the
Earnout, if any, shall be paid on two dates. The first time period shall be the
full 12 months after January 1, 2003 ("First Anniversary Earnout Period") and
the Post-Closing EBITDA Threshold for the First Anniversary Earnout Period shall
be $1,400,000. The second time period shall be the full 12 months after January
1, 2004 ("Second Anniversary Earnout Period") and the Post-Closing EBITDA
Threshold for the Second Anniversary Earnout Period shall be EBITDA for the
First Anniversary Earnout Period. Buyer shall pay the Earnout attributable to
the First Anniversary Earnout Period, if any, on July 1, 2004 ("First
Anniversary Payout Date") and shall pay the Earnout attributable to the Second
Anniversary Earnout Period, if any, on July 1, 2005 ("Second Anniversary Payout
Date"); provided, however, that Buyer shall not be required to pay the
applicable Earnout if on the First Anniversary Payout Date or the Second
Anniversary Payout Date, as applicable, the Shareholder's employment with Buyer
has been terminated (i) by Shareholder without Good Reason (as defined in the
Employment Agreement between Buyer and Shareholder of even date herewith) or
(ii) by the Buyer for Cause (as defined in the Employment Agreement between
Buyer and Shareholder of even date herewith). Seller agrees that if any amount
remains outstanding under the Note at the time of payment of any Earnout, then
outstanding amounts under the Note shall be set off against the amount of the
Earnout to be paid by Buyer to Seller under this subsection in the order
specified in the Note. Buyer shall pay the Earnout, if any, to Seller by wire
transfer to an account designated by Seller.
(2) For purposes of this Section, EBITDA shall be calculated in good faith
in accordance with GAAP on the accrual basis of accounting and in a manner
consistent with Buyer's consolidated audited financial statements, taking into
account the need to segregate the Business from Buyer's other business. After
the Closing, the Business shall become known as the Travel Nurse International
Group (the "TNI Group") of Buyer's Travel Nurse Division. Buyer agrees (i) to
provide sufficient working capital to support the growth of the TNI Group as
determined reasonably and in good faith by Buyer in consultation with
Shareholder, as manager of the TNI Group and (ii) not to limit the geographic
scope of the TNI Group's client base.
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Buyer agrees not to charge any corporate administrative, management and/or
accounting fees to the TNI Group's operations post-Closing. If Buyer decides to
merge, consolidate or otherwise join the TNI Group with any other business,
Buyer shall take all necessary steps to ensure that the Earnout can be clearly
and properly calculated after such merger, consolidation or other event
resulting in the TNI Group not being operated as a separate business unit of
Buyer.
(3) After the Closing and until December 31, 2005, upon written
request of Seller or Shareholder, Buyer shall permit Seller or Shareholder,
or an agent of Seller or Shareholder reasonably acceptable to Buyer (the
"Auditor"), to have access during normal business hours to such of the
records of Buyer as may be reasonably necessary to verify Buyer's
calculation of any portion of the Earnout ("Buyer's Calculation"). Within
15 days after concluding its review of Buyer records, Seller, Shareholder
or the Auditor, as applicable, shall provide a written report setting forth
in reasonable detail its calculation of the Earnout (the "Seller
Calculation"). If the Seller Calculation shows that Buyer underpaid the
applicable portion of the Earnout, Buyer shall have 15 days after its
receipt of the Seller Calculation to review such calculation. If Buyer
disagrees with the Seller Calculation, Buyer shall give Seller notice of
its intent to retain an independent certified public accounting firm (the
"Independent Auditor") to audit the Earnout calculation. If the Independent
Auditor's calculation of the Earnout (the "Independent Auditor
Calculation") results in an Earnout that is the same as the Buyer
Calculation or the Seller Calculation, the Independent Auditor Calculation
shall be final and binding on the parties. If the Independent Auditor
Calculation differs from the Buyer Calculation and the Seller Calculation,
Buyer and Seller shall mutually select an independent certified public
accounting firm (the "Final Auditor") to review the Buyer Calculation, the
Seller Calculation and the Independent Auditor Calculation, to determine
the Earnout, if any, due to Seller and to provide a report of its findings
to Buyer and Seller (the "Final Audit"). The results of the Final Audit
shall be final and binding on the parties. Buyer shall pay any additional
amount found due as a result of the Final Audit within 30 days after
Buyer's receipt of the Final Audit report. If it is determined that Buyer
underpaid the Earnout, any fees and expenses charged by the Auditor, the
Independent Auditor and the Final Auditor shall be paid by Buyer. If it is
determined that Buyer overpaid the Earnout, any fees and expenses charged
by the Auditor, the Independent Auditor and the Final Auditor shall be paid
by Seller and Shareholder. Seller may request to audit the calculation of
the Earnout not more than once during any 12 month period. Seller and
Shareholder shall not, and shall cause third parties retained by Seller or
Shareholder pursuant to this Section not to, disclose any financial or
other confidential information of Buyer received pursuant to this Section.
(d) Allocation. The Purchase Price shall be allocated among the Assets as
set forth on Schedule 4(d), which shall be delivered at Closing. For tax
purposes, the parties shall report the transactions contemplated by this
Agreement in accordance with such allocation.
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(e) Adjustment of Certain Items. With respect to certain expenses incurred
in the operation of the Business, Buyer and Seller shall make the following
adjustments, and after all adjustments have been made and a determination has
been made as to which party is entitled to a credit, such party shall be
promptly reimbursed by the other party in the amount of such credit:
(1) Operating Expenses. Seller shall continue to be responsible for
all costs and expenses attributable to the operation of the Business or
ownership of the Assets up to the Closing Date, and Buyer shall become
responsible for all costs and expenses attributable to the operation of the
Business or ownership of the Assets from and after the Closing Date, except
as otherwise expressly provided in this Agreement.
(2) Taxes. Personal property taxes shall be apportioned at the Closing
as of the Closing Date, based on current tax bills if available; and if not
available, based on the most recent tax bills available with appropriate
subsequent adjustment when bills for the current year are received. Seller
shall be liable for all taxes that result from the payments received by or
made on behalf of Seller pursuant to the transactions contemplated by this
Agreement, except for sales tax, which sales tax shall be paid by Buyer.
(3) Utilities. To the extent not covered by those obligations assumed
by Buyer pursuant to Section 3(b), electric, water, sewer and similar
charges shall be paid directly to the obligee by Seller and Buyer based on
meter readings as of the Closing Date and at the prevailing rates, if
possible; otherwise such charges shall be apportioned based on the number
of operating days occurring before and after the Closing Date during the
billing period for each such charge.
(4) Leases and Vendor Contracts. The most recent payment under the
Real Property Leases and the Contracts listed on Schedule 2(c)(1) and to
personal property lessors during the month in which the Closing Date occurs
with respect to any leased real or personal property that is assigned to
and assumed by Buyer shall be apportioned between Seller and Buyer based on
the time in such period before and after the Closing Date.
(5) Employee Expenses. Except as set forth in Section 3(b)(ii),
salaries, wages, commissions, payroll taxes, vacation pay and sick pay for
employees of Seller shall be paid by Seller.
Appropriate cash payments by Seller or Buyer, as the case may require,
shall be made from time to time, as soon as practicable after the facts giving
rise to the obligation for such payments are known, to give effect to the
prorations provided in this Subsection.
(f) Noncompetition. In order to ensure to Buyer the full benefits of the
Assets and the Business, Seller and the Shareholder, for themselves and their
affiliates, will execute and
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deliver at the Closing a Confidential Information and Noncompete Agreement (the
"Noncompetition Agreement") in the form attached hereto as Exhibit C.
(g) Employment. In order to provide for the orderly transition of the
Business, Shareholder will enter into an Employment Agreement (the "Employment
Agreement") in the form attached as Exhibit D with Buyer whereby Shareholder
will continue to provide services to Buyer for a period of thirty (30) months
following the Closing Date.
(h) Post-Closing Adjustments to Purchase Price. If Buyer becomes aware of
any omissions or misrepresentations with respect to the financial documentation
that was provided to Buyer during its due diligence of Seller, which omissions
or misrepresentations caused Buyer to fail to include items of income or expense
of Seller in its calculation of Seller's value, and such omissions or
misrepresentations are discovered within 12 months after the Closing Date (the
"Post-Closing Adjustment Period"), the Purchase Price shall be adjusted by
multiplying 2.86 by the amount of each item of income or expense. If adjustments
are made that result in a net increase in the Purchase Price, the amount of the
adjustment shall be paid by Buyer into the escrow held pursuant to the Escrow
Agreement. If the adjustment results in a net reduction of the Purchase Price,
the Seller and the Shareholder shall pay the amount of the adjustment to the
Buyer, first from amounts held in escrow pursuant to the Escrow Agreement and
then directly by Seller and the Shareholder. The adjustment shall be paid within
90 days after the close of the Post-Closing Adjustment Period.
5. Effective Date; Closing. The effective date of the transactions contemplated
by this Agreement shall be November 17, 2002. The closing ("Closing") of the
sale and purchase contemplated by this Agreement shall take place on the 20th
day of December, 2002, or at such other time as the parties may mutually agree
("Closing Date"), at Buyer's office or at such other place as the parties may
mutually agree.
6. Closing Documentation.
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(a) Seller's and Shareholder's Documents. At Closing, Seller and the
Shareholder shall deliver or cause to be delivered to Buyer the following:
(1) A Bill of Sale in the form attached to this Agreement as Exhibit
E;
(2) An Assignment of Trade Names and Intellectual Property Rights in
the form attached to this Agreement as Exhibit F (the "Intellectual
Property Assignment");
(3) A Sub-Sub-Sublease in the form attached to this Agreement as
Exhibit G-2 (the "Sub-Sub-Sublease") relating to that portion of the
Business Office to be acquired by Buyer pursuant to this Agreement;
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(4) An Assignment and Assumption of Contracts in the form attached to
this Agreement as Exhibit H (the "Contract Assignment");
(5) The Noncompetition Agreement;
(6) The Employment Agreement;
(7) The Escrow Agreement;
(8) The Note and a Guaranty Agreement in the form attached to this
Agreement as Exhibit I;
(9) UCC-3 Termination Statement ("UCC-3") filed by the Factoring
Agent, or written assurance from the Factoring Agent in a form reasonably
acceptable to Buyer that the Factoring Agent will file a UCC-3, terminating
UCC-1 Financing Statements filed with respect to assets of Seller acquired
by Buyer;
(10) Duly entered corporate resolutions of Seller authorizing the
transactions contemplated by this Agreement, accompanied by a certificate
of the Secretary of Seller to the effect that such resolutions are in full
force and effect and have not been amended, modified or rescinded, together
with good standing certificates from the Secretary of State of California
and all states in which the Seller is qualified to do business, each dated
not more than 10 days prior to the Closing Date;
(11) A certificate of Seller and Shareholder certifying that Seller's
and Shareholder's representations and warranties contained in Section 7 of
this Agreement are true and correct on the Closing Date as though made on
and as of the Closing Date;
(12) Opinions of counsel in the forms attached to this Agreement as
Exhibit J-1 and Exhibit J-2;
(13) Such releases, consents, waiver or agreements, in forms
reasonably satisfactory to Buyer and its lenders, as may be required by
Buyer's lenders for their approval of the transactions contemplated by this
Agreement;
(14) Such releases, consents, waivers and approvals, in forms
reasonably satisfactory to Buyer, as may be necessary to effect the
conveyance, transfer, assignment and delivery of the Assets, free and clear
of all Liens; and
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(15) Such other instruments of transfer or assignment, in forms
reasonably satisfactory to Buyer, as may be necessary in order to vest
Buyer with good and marketable title to the Assets.
(b) Buyer's Documents. At Closing, Buyer shall deliver or cause to be
delivered to Seller the following:
(1) Duly entered corporate resolutions of Buyer authorizing the
transaction contemplated by this Agreement, accompanied by a certificate of
the Secretary of Buyer to the effect that such resolutions are in full
force and effect and have not been amended, modified or rescinded, together
with a good standing certificate from the Delaware Secretary of State dated
not more than 10 days prior to the Closing Date;
(2) A certificate of Buyer certifying that Buyer's representations and
warranties contained in Section 8 of this Agreement are true and correct on
the Closing Date as though made on and as of the Closing Date;
(3) A final version of Schedule 4(d) to this Agreement acceptable to
Seller;
(4) The TNI Amount ($1,750,000), the Flexible Funding Payment
($2,429,235) and the SunTrust Payment ($255,322);
(5) The Intellectual Property Assignment;
(6) The Sub-Sub-Sublease;
(7) The Contract Assignment;
(8) The Noncompetition Agreement;
(9) The Employment Agreement; and
(10) The Escrow Agreement, the Escrow Amount ($3,494,678) and the
Additional Escrow Amount ($1,570,765).
7. Warranties and Representations. Seller and the Shareholder, jointly and
severally, warrant and represent to Buyer as follows in this Section 7, except
as expressly indicated on the Seller Disclosure Schedule described below, which
exceptions are deemed to be representations and warranties made within this
Section 7:
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(a) Title. Seller is the owner of and has good and marketable title to the
Assets, and, as of the Closing Date, the Assets shall be free and clear of all
Liens of every kind, except those Liens assumed by Buyer in accordance with this
Agreement.
(b) Financial Statements. All income tax returns, profit and loss
statements, balance sheets, cash flow statements and other financial information
furnished and to be furnished to Buyer in connection with this transaction are
complete and fairly represent the financial information set forth therein. There
has been no material adverse change in the financial condition of the Business
since September 30, 2002. Except as described in this Agreement or reflected in
the financial statements furnished by Seller to Buyer, there is no liability or
obligation of Seller related to the operation of the Business, whether accrued,
absolute or contingent, other than liabilities and obligations that have been
incurred in the ordinary course of business since September 30, 2002, and are
not material, in the aggregate, to the Business or the operations or financial
condition of Seller.
(c) No Contract. Seller has entered into no other contract for the sale of
the Assets.
(d) Compliance with Laws. Seller has complied and through the Closing Date
shall continue to comply in all material respects with federal, state and local
laws, rules and regulations except where failure to comply would not have a
material adverse effect on the Business or operations of Seller. Seller has not
received written notice of a material violation or an alleged material violation
of any such federal, state or local law, rule or regulation.
(e) Organization; Qualification. Seller is a corporation which is duly
organized and in good standing under the laws of the State of California, with
all requisite power and authority to carry on the Business as it is presently
conducted. Seller is qualified to do business and in good standing under the
laws of each jurisdiction in which it is required to be qualified to do
business.
(f) Taxes. Seller has duly filed all federal, state and local tax returns
required to be filed by it and has paid all federal, state and local taxes
required to be paid with respect to the periods covered by such returns. All
federal, state and local taxes of Seller shall be paid as of the Closing Date.
Neither the Internal Revenue Service nor any other taxing authority is now
asserting or, to the knowledge of Seller or the Shareholder after due and
diligent investigation, threatening to assert against Seller any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith, which additional taxes, interest or penalties, if any, Seller shall
promptly pay upon assessment.
(g) Authority. Seller has full power and authority to enter into this
Agreement and to carry out the transactions contemplated by this Agreement.
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(h) Corporate Authorization. The transactions contemplated by this
Agreement have been duly authorized by appropriate corporate actions on the part
of Seller and, upon the execution and delivery of this Agreement, it shall be a
valid and binding obligation of the Seller.
(i) No Violation. Neither the execution and delivery by Seller or
Shareholder of this Agreement nor the consummation without the giving of notice
or passage of time, or both, be contrary to or violate, breach, or constitute a
default under, or permit the termination or acceleration of maturity of, or
result in the imposition of any Lien upon any property or asset of Seller or
Shareholder pursuant to any provision of any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness or lease agreement, other agreement or
instrument or any judgment, order, injunction or decree by which Seller or any
Shareholder is bound, to which Seller or any Shareholder is a party, or to which
the assets of Seller or any Shareholder is subject; nor is the effectiveness or
enforceability of this Agreement or such other documents adversely affected by
any provision of the articles of incorporation or bylaws of Seller.
(j) Permits. Seller has all necessary licenses and permits to carry on its
business, and the Seller's business is being operated and its property is being
used in compliance with all applicable laws, ordinances and regulations. No
authorization or approval of, or filing with, any governmental agency, authority
or other body or any other third persons will be required in connection with
Seller's or the Shareholder's execution and delivery of this Agreement or
consummation of the transactions contemplated herein.
(k) No Proceedings. There are no legal actions, suits, arbitrations, or
other legal, administrative or other proceedings instituted, pending or to
Seller's knowledge after due and diligent investigation, threatened against the
Seller or the Shareholder, their properties, assets or the Business, and Seller
and the Shareholder are not aware of any fact which might result in any such
action, suit, arbitration or other legal, administrative or other proceeding.
Neither Seller nor the Shareholder is in default with respect to any currently
effective judgment, order, writ, injunction, decree, demand or assessment issued
by any court or of any federal, state, municipal or other governmental agency,
board, commission, bureau, instrumentality or department. Neither Seller nor the
Shareholder is charged or threatened with or under investigation with respect to
any violation of any provision of any federal, state, municipal or other law or
administrative rule or regulation.
(l) Contracts. All Contracts are in full force and effect, valid and
enforceable in accordance with their respective terms. There are no existing
defaults of Seller or events of default that, with the giving of notice or lapse
of time, or both, would constitute defaults of Seller under the Contracts, nor
are material amendments pending with respect to any Contracts. No Contract is a
governmental contract subject to price redetermination or renegotiation. Seller
has no oral agreements with customers that require Seller to provide services at
no charge or at rates
13
significantly below the average rates for such services set forth in Seller's
written customer contracts.
(m) Ownership of Seller. The Shareholder is the sole stockholder of Seller.
(n) Equipment. All equipment used in connection with the Business is in
proper working order and is, and will be on the Closing Date, in compliance with
the rules and regulations of all applicable statutes, ordinances, rules and
regulations.
(o) Lease. A true, correct and complete copy of the Real Property Lease for
the Business Office is attached to this Agreement as Schedule 7(o) of the Seller
Disclosure Schedule and a list of the Real Property Leases for travel nurse
housing are set forth in Schedule 2(c)(1). The payments due under the Real
Property Leases are current as of the Closing Date. There have been no
violations or breaches under the Real Property Leases by either Seller or the
landlord, and Seller has not notified the landlord, or received notice from the
landlord, of any intention to terminate the Lease. Seller has not carried out
any alterations or caused any damage to the Leased Real Property which would
require Seller, as tenant, to restore the Leased Real Property to its original
condition at the expiration of the Real Property Leases. The Real Property
Leases may be assigned to Buyer, subject to approval of the landlord, and prior
to the Closing Date, Seller shall furnish Buyer with evidence of the landlord's
consent to the assignment of the Real Property Leases to Buyer in a form
satisfactory to Buyer.
(p) Environmental Matters. Seller is operating and has operated the
Business in compliance with all applicable local, state and federal
environmental laws, rules, regulations and ordinances including, but not limited
to, the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. ss.ss.9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, 42 U.S.C. ss.ss.6901 et seq., the Clean Water Act, 33 U.S.C. ss.ss.1251 et
seq., and the environmental laws, rules and regulations of the State of
California as each such statute or regulation has been amended from time to time
(collectively, "Environmental Laws and Regulations"). Seller has not knowingly
accepted for storage, and to its knowledge, does not store, any nitrate film or
any hazardous substance or hazardous material. Seller has never knowingly caused
the release of an amount of any hazardous substance or hazardous material into
the environment which release would constitute a violation of any Environmental
Laws and Regulations. For purposes of this paragraph, "hazardous substance,"
"release" and "environment" shall have the same meanings as those terms are
defined by Section 101 of CERCLA, 42 U.S.C. ss.9601, and "hazardous material"
shall have the same meaning as that term is defined by Environmental Laws and
Regulations. Seller does not own, lease, rent or otherwise utilize any
underground storage tanks and, to Seller's knowledge, there are no waste tanks,
containers, cylinders, drums or cans buried, stored or deposited in or at any of
the Leased
14
Real Property. To Seller's knowledge, the Leased Real Property does not contain
(i) any asbestos or (ii) any polychlorinated biphenyl (PCB) substances.
(q) Employee Benefit Plans. Schedule 7(q) of the Seller Disclosure Schedule
lists each employee pension benefit plan, deferred compensation plan or other
plan subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (each such plan, an "Employee Benefit Plan") that
Seller maintains or to which it contributes or has any obligation to contribute.
(1) Each Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with
the applicable requirements of ERISA and the Internal Revenue Code of 1986,
as amended (the "Code"), except where the failure to comply would not have
a material adverse effect on the financial condition of Seller.
(2) All required reports and descriptions have been timely filed and
distributed appropriately with respect to each Employee Benefit Plan. The
requirements of COBRA have been met with respect to each Employee Benefit
Plan to which COBRA applies.
(3) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each Employee Benefit Plan and all contributions for any period ending on
or before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of Seller. All premiums or other payments for all
periods ending on or before the Closing Date have been paid or accrued with
respect to each such Employee Benefit Plan that is an Employee Welfare
Benefit Plan.
(4) In the previous five years, no Employee Benefit Plan of Seller has
been completely or partially terminated or been the subject of a Reportable
Event (as defined in ERISA) as to which notices would be required to be
filed with the Pension Benefit Guaranty Corporation ("PBGC"). No proceeding
by the PBGC to terminate any Employee Benefit Plan of Seller (other than
any Multiemployer Plan (as defined in ERISA)) has been instituted or, to
the knowledge of the Seller, threatened.
(5) There have been no non-exempt Prohibited Transactions (as defined
in ERISA) with respect to any Employee Benefit Plan of Seller that could
reasonably be expected to result in a material liability either for a tax
imposed pursuant to Section 4975(a) or (b) of the Code or a civil penalty
assessed pursuant to Section 502(i) of ERISA. To the knowledge of Seller,
no Fiduciary (as defined in ERISA) has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit Plan of
Seller which could reasonably be expected to result in a liability for a
civil penalty assessed pursuant to Sections 409 or 502(l) of ERISA. No
action, suit,
15
proceeding, hearing, or investigation with respect to the administration or
the investment of the assets of any Employee Benefit Plan of Seller (other
than routine claims for benefits) is pending or, to the knowledge of
Seller, threatened. Seller has no knowledge of any basis for any such
action, suit, proceeding, hearing, or investigation.
(6) Seller has not incurred, and Seller does not have any reason to
expect that it will incur any Liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability as defined in Section 4201 of ERISA) or under the Code
with respect to any Employee Benefit Plan.
(r) Customers. Since November 17, 2002, none of Seller's major customers
have terminated or stated an intention to terminate its business with, or reduce
the volume of its business with, Seller. Seller has no customers whose business
is or has within 90 days prior to the Closing Date been the subject of
competitive bidding procedures.
(s) Employees. Schedule 7(s) of the Seller Disclosure Schedule lists the
names of all full-time and part-time employees of Seller (except for employees
of Seller who work for Seller exclusively as travel nurses) and sets forth a job
description or title and compensation for each such person. Schedule 7(s) of the
Seller Disclosure Schedule also sets forth a list of all written and oral
employment, proprietary rights and noncompetition agreements with Seller's
employees. All such employees are, or, as of the Closing Date, will be subject
to Non-Disclosure and Non-Solicitation Agreements (the "Employee Agreements") in
a form reasonably satisfactory to the Buyer. During the past three years there
has not been, and there is not now, any strike, labor dispute, slow down, work
stoppage, or other material interference with or impairment by labor of the
business of Seller pending or, to the knowledge of Seller, threatened or
contemplated against or directly affecting the Business. Seller's employees are
not represented by any labor or trade union, nor has there been any attempt to
organize Seller's employees during the 90 day period prior to the date of this
Agreement. There has been no employee turnover since November 1, 2002, except as
noted on Schedule 7(s) of the Seller Disclosure Schedule. Seller warrants that
employees of Seller whose employment was terminated on or prior to the Closing
Date returned all property of Seller including, but not limited to, client lists
and employee lists. Seller warrants that there has been no carryover of employee
vacation or sick pay from prior fiscal years.
(t) Intellectual Property. Except for the trade name "Travel Nurse
International" which is a registered trade name under California law and
Seller's copyrighted website, Seller has no patents, trademarks, service marks,
trade names, copyrights, computer programs or program rights, licenses or other
similar intangible property rights and interest which it uses in connection with
the Business. Except as set forth on Schedule 7(t) of the Seller Disclosure
Schedule, Seller has the right to use, free and clear of any claims or rights of
others, all trade
16
secrets, customer lists, intellectual property and operating methods required
for or incident to the operation of the Business. Except as set forth on
Schedule 7(t) of the Seller Disclosure Schedule, Seller is not using or in any
way making use of any confidential information or trade secrets of any third
party, including without limitation, a former employer of any present or past
employee of Seller.
(u) Relationships with Other Businesses. As of the Closing, neither Seller
nor any Shareholder owns directly or indirectly, on an individual or joint
basis, any material interest in any customer, competitor or supplier of the
Business, or any organization which has a material contract or arrangement with
the Business. Except as permitted under Section 10(f) of this Agreement, all
business dealings between Seller and HCSS relating to per diem and travel nurse
staffing have been terminated. Neither HCSS nor any other business owned or
operated by Caryl Randazzo ("Randazzo") has hired any employees of Seller in the
past 12 months except as set forth on Schedule 7(u) of the Seller Disclosure
Schedule.
(v) Brokers. Except for SunTrust, neither Seller nor the Shareholder has
dealt with a broker or finder in connection with this Agreement, and except for
SunTrust, no broker or other person or entity is entitled to any commission or
finder's fee from Seller or any Shareholder in connection with the consummation
of the transactions contemplated by this Agreement.
(w) Completeness. No representation or warranty by the Seller or any
Shareholder in this Agreement contains any untrue statement of a material fact,
or omits to state any material fact required to make the statements contained
herein not misleading.
8. Warranties and Representations of Buyer. Buyer warrants and represents to
Seller as follows in this Section 8, except as expressly indicated on the Buyer
Disclosure Schedule described below, which exceptions are deemed to be
representations and warranties made within this Section 8:
(a) Organization. Buyer is a corporation which is duly organized and in
good standing under the laws of the State of Delaware. Buyer has all requisite
power and authority to carry on its business as it is presently conducted.
(b) Authority; Consents. Buyer has full power and authority to enter into
this Agreement and to carry out the transactions contemplated by this Agreement,
except that, if required by the applicable lending documents, Buyer must obtain
consent to the transactions contemplated by this Agreement from its lenders.
(c) Corporate Authorization. The transactions contemplated by this
Agreement have been duly authorized by appropriate corporate actions, and upon
the execution and delivery of this Agreement, it shall be a valid and binding
obligation of the Buyer.
17
(d) Compliance with Laws. Buyer has complied, and through the Closing Date
will continue to comply, in all material respects with federal, state and local
laws, rules and regulations except where failure to comply would not have a
material adverse effect on the business or operations of Buyer, and Buyer has
not received written notice or a material violation or an alleged material
violation of any federal, state or local laws, rules or regulations.
(e) No Violation. Buyer and its officers, directors, employees, and
stockholders have no obligation (nor has any third party alleged the existence
for such an obligation) to any third party (except its lenders) to (i) maintain
the confidentiality of any information, (ii) not solicit customers or suppliers,
(iii) not engage in any competitive activity, (iv) fulfill any fiduciary duty,
or (v) comply with a contractual or other obligation that would in any way be
violated by the transactions contemplated hereby or the operation of the
Business after the closing of the transactions contemplated hereby.
(f) Brokers. Except for SunTrust, Buyer has not dealt with a broker or
finder in connection with this Agreement, and no broker or other person or
entity is entitled to any commission or finder's fee from Buyer in connection
with the consummation of the transactions contemplated by this Agreement.
(g) Completeness. No representation or warranty by Buyer in this Agreement
contains any untrue statement of a material fact, or omits to state any material
fact required to make the statements contained herein not misleading.
9. Expenses of Sale. Except as otherwise provided in this Agreement, each party
agrees to bear its own legal, accounting and other expenses in connection with
the preparation and consummation of this Agreement.
10. Covenants of the Parties.
------------------------
(a) Seller Debts and Obligations. Except as otherwise provided in this
Agreement, all of Seller's debts and obligations including, but not limited to,
accounts payable and sales, federal and state income taxes, will be paid by
Seller. Seller shall be responsible for paying salary, wages and related payroll
taxes for all office employees of Seller for the pay period ended December 20,
2002 and for all other employees of Seller for the pay period ended December 14,
2002.
(b) Employment of Seller's Employees. Seller and Buyer acknowledge that
Buyer desires to hire those employees of Seller that meet Buyer's employment
criteria. Such employees are set forth on Schedule 10(b). Seller agrees to use
its best efforts to assist Buyer in hiring such employees of Seller. Each office
employee of Seller who is hired by Buyer (each, a "Hired Employee") shall be
given the opportunity to participate in the MSN Holdings, Inc. 2001
18
Stock Incentive Plan. In addition, each Hired Employee shall be credited a year
of service for each year of service the applicable Hired Employee provided to
Seller for purposes of participation in Buyer's employee benefit plans and other
benefits that are based on length of employment. Buyer agrees to assume the
obligation of Seller to pay accrued and unpaid vacation/sick pay for employees
of Seller that has been earned and not been used during calendar year 2002;
provided, however, that the cost assumed by Buyer pursuant to this subsection
and Section 3(b) shall not exceed $49,000 in the aggregate. Seller shall pay the
Employee Severance to its employees in the amounts set forth in Schedule 10(b).
(c) Access to Information. Between the date of this Agreement and the
Closing Date, Seller and Shareholder will, at reasonable times, upon reasonable
notice and upon reasonable request, and in a manner so as not to unduly
interfere with the business operations of Seller, and subject to compliance with
all applicable laws, (i) give Buyer and its representatives access to the books,
records, plans, and financial, title, tax, corporate and legal materials of
Seller and of the Shareholder, to the extent reasonably required for the
transactions contemplated by this Agreement, (ii) furnish Buyer with copies of
any Contracts, permits, leases, books and records or other documents and data
that Buyer may reasonably request, and (iii) cooperate and assist in any
investigation of the assets and financial and legal condition of Seller and of
the Business that Buyer or its representatives may deem necessary or advisable
with respect to the transactions contemplated by this Agreement; provided,
however, that (y) neither Seller nor the Shareholder shall be required to take
any action which would constitute a waiver of any attorney-client, attorney work
product or other evidentiary privilege and (z) neither Seller nor the
Shareholder must supply Buyer with any information which Seller or the
Shareholder is under a legal or contractual obligation not to disclose.
(d) Disclosure of Transaction. No public announcement of the execution of
this Agreement or the transactions contemplated herein shall be made without the
mutual prior written approvals of Buyer and Seller. No party shall make any
disclosure of the Purchase Price or other terms hereunder except to its lenders
or investors without the prior written approval of the other party; provided
that any party may disclose such information as may be required under federal,
state or provincial laws.
(e) Conduct of Business.
-------------------
(1) Prior to the Closing Date, unless Buyer otherwise consents in
writing, which consent shall not be unreasonably withheld, conditioned or
delayed, Seller shall, and the Shareholder shall cause Seller to, conduct
its operations in the ordinary course of business, consistent with the
manner in which it previously has been conducted (including maintaining in
effect all insurance coverages relating to the assets and operation of
Seller which are in effect as of the date hereof). Without limiting the
generality of and in addition to the foregoing, until the
19
Closing Date, Seller shall not, and the Shareholder shall cause Seller not
to, without the prior written consent of Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed):
(A) declare, set aside or pay any dividend with respect to the
shares of Seller;
(B) redeem or otherwise acquire any of the shares of Seller;
(C) incur or guarantee any indebtedness other than (A) trade
payables incurred in the ordinary course of business or (B) with
respect to any current capital expenditures permitted pursuant to
Section 10(e)(2);
(D) place or allow to be placed a Lien on any of the Assets,
other than any Liens (A) existing on the date of this Agreement or (B)
incurred with respect to any current capital expenditures permitted
pursuant to Section 10(e)(2);
(E) cancel any indebtedness owing to Seller or any claims which
Seller may possess or waive any rights of substantial value, other
than in the ordinary course of business permitted hereunder or in
respect of the execution and delivery of any document herein provided;
(F) except with respect to litigation disclosed in the Seller
Disclosure Schedule, enter into any compromise or settlement of any
litigation, proceeding or governmental investigation relating to the
Assets or the Business;
(G) amend or waive any rights under any Contract, lease or other
agreement of Seller that is binding upon the Assets;
(H) make any material changes in management personnel, employee
policies or any operations of the Business;
(I) agree to any pricing scheme or service offering other than
the Seller's standard practices in connection with a request for
proposals from, or a bid to, a prospective customer whose estimated
needs exceed 1,000 hours of temporary employee services per month;
(J) make any departure from Seller's standard pricing practices;
(K) alter the compensation rates to be paid to Seller's
employees;
20
(L) take any action, engage in any transaction, or enter into any
agreement which would cause any of the representations or warranties
of Seller and the Shareholder set forth in Section 7 to be untrue in
any material respect as of the Closing Date;
(M) accelerate the payment of accounts receivable or delay the
payment of accounts payable; or
(N) enter into a legally binding commitment with respect to or
enter into any agreement to take any of the foregoing actions.
(2) In addition to the foregoing, Seller shall not, and the
Shareholder shall cause Seller not to, make any current capital
expenditures in excess of $10,000 for individual expenditures or $25,000
for such expenditures in the aggregate, without the prior written consent
of Buyer, which consent will not be unreasonably withheld, conditioned or
delayed.
(f) Business Dealings with HCSS. For a period of three years after the
Closing Date, Seller and the Shareholder agree that neither of them will have
any involvement in the business of HCSS or any other businesses owned or
operated by Randazzo after the Closing unless otherwise consented to in writing
by Buyer (which consent may be withheld in Buyer's sole discretion). Seller
agrees promptly to pursue (i) all legal remedies available to Seller arising out
of or related to violation by HCSS of the Noncompetition, Nondisclosure, and
Nonsolicitation Agreement dated December 19, 2002 between HCSS and Seller (the
"HCSS Noncompetition Agreement"), (ii) all common law remedies available to
Seller arising out of or related to solicitation or recruitment of current or
former clients of Seller or current or former employees of Seller by HCSS and
(iii) all legal remedies available to Seller in connection with enforcing its
rights under the HCSS Note. Notwithstanding the foregoing, it is acknowledged
that certain remedies under the HCSS Note, the Mortgage dated December 20, 2002
by HCSS in favor of Seller (the "HCSS Mortgage") and the Security Agreement by
HCSS in favor of Seller dated December 19, 2002 (the "HCSS Security Agreement")
permit Seller to foreclose and levy upon the assets of HCSS in the event of a
default. Buyer will permit Seller and Shareholder to become involved with HCSS
(and any successor or assign) for the limited purpose of marshalling and
realizing the value of HCSS's assets in connection with a default under the HCSS
Note. To better assure that the HCSS Note is paid, Shareholder may provide
uncompensated consultation to HCSS so long as such consultation (i) does not
interfere with Shareholder's performance of his duties under the Employment
Agreement, (ii) does not constitute a violation of the Noncompetition Agreement
(it being agreed by Buyer that the business of HCSS conducted on the Closing
Date of providing healthcare staffing services in connection with strikes by
Healthcare Professionals shall not be considered a competing business under the
Noncompetition Agreement) and (iii) does not have, or is not reasonably likely
to have, an adverse effect on Buyer or its business.
21
(g) Proof of Payment and Release from IRS. Upon payment of all taxes,
penalties and interest due from Seller to the IRS, Seller shall deliver to Buyer
documentation reflecting such payment together with a release from the IRS
indicating that no additional taxes, interest or penalties are due from Seller
and a release of all tax liens on any property of Seller.
(h) Authorizations and Consents. Each party shall use its commercially
reasonable efforts to obtain all authorizations, consents, orders, and approvals
of, and to give all notices to and make all filings with, all governmental
authorities and third parties that may be or become necessary for its execution
and delivery of, and the performance of the obligations under, this Agreement
and will cooperate fully with the other parties in promptly seeking to obtain
all such authorizations, consents, orders, and approvals, giving such notices,
and making such filings.
(i) Risk of Loss. The risk of loss and damage to the Assets shall be borne
by Seller prior to Closing. If substantial damage by fire or other casualty to
the Assets occurs prior to the Closing Date that reasonably could be expected to
require expenditures of $25,000 or more to repair or replace (a "Material
Casualty Loss"), either party may elect to terminate its obligations under this
Agreement by providing notice of termination to the other parties within fifteen
(15) days after Buyer's receipt of written notice from Seller describing the
Material Casualty Loss. If neither party elects to terminate this Agreement
within such time period or chooses to proceed with the transactions contemplated
hereby, Seller, at its option, shall either (i) promptly commence to repair or
replace the damaged Assets and complete such repair or replacement work on or
before the Closing Date or (ii) agree in writing to indemnify Buyer for the
amount of the Material Casualty Loss.
(j) Further Assurances. Seller, the Shareholder and Buyer, as applicable,
shall use their respective best efforts to (i) cause to be fulfilled and
satisfied all of the conditions to the Closing; (ii) cause to be performed all
of the matters required to be performed upon the Closing; and (iii) take such
steps and do such acts as may be necessary to make all of the warranties and
representations of the applicable party true and correct in all material
respects as of the Closing Date. From time to time after the Closing Date, at
Buyer's request, and without further consideration, Seller and the Shareholder,
as applicable, shall execute and deliver such other instruments of conveyance
and transfer and take such other actions as Buyer may reasonably require in
order to more effectively convey, transfer, assign or deliver the Assets to
Buyer, its successors or assigns.
(k) Notification. Between the date of this Agreement and the Closing,
Seller and the Shareholder shall promptly notify Buyer in writing if any of them
becomes aware of any fact or condition that (i) causes any of the
representations and warranties contained in Section 7 to be untrue as of the
date of this Agreement or (ii) is reasonably likely to cause any of the
representations and warranties contained in Section 7 to be untrue as of the
Closing Date.
22
(l) Name Change. As soon as practicable after the Closing Date, Seller will
change its name to a name that is not similar to its current name, and will
provide Buyer with prompt written notice of the name change, including a copy of
any certificate or document issued by the Secretary of State of California
confirming the name change.
(m) Earnout. Buyer agrees (i) to provide sufficient working capital to
support the growth of the TNI Group as determined reasonably and in good faith
by Buyer in consultation with Shareholder, as manager of the TNI Group and (ii)
not to limit the geographic scope of the TNI Group's client base. Buyer agrees
not to charge any corporate administrative, management and/or accounting fees to
the TNI Group's operations post-Closing. If Buyer decides to merge, consolidate
or otherwise join the TNI Group with any other business, Buyer shall take all
necessary steps to ensure that the Earnout can be clearly and properly
calculated after such merger, consolidation or other event resulting in the TNI
Group not being operated as a separate business unit of Buyer.
(n) Maintenance of Business Records. For a period of five (5) years after
the Closing Date, Buyer will preserve and safe keep any records, files and
documents transferred to Buyer that relate to the Assets as required by
reasonable business practices for the joint benefit of Seller and Buyer. Each of
Seller and Buyer shall cooperate from and after the Closing Date to provide to
the other upon request such information and records relating to the Business in
the possession of the non-requesting party which information or record is
reasonably necessary for the operation of the requesting party or the requesting
party is required to produce to a third party in connection with legal,
administrative or governmental proceedings. The requesting party agrees to give
the non-requesting party prompt notice of all requests for disclosure of such
information or records that arise during legal, administrative or governmental
proceedings involving the requesting party, so that the non-requesting party may
seek a protective order with respect to the threatened disclosure. If the
requesting party or any other person is required to disclose such information or
records, the requesting party agrees to give written notice to the
non-requesting party as soon as possible of the information and records required
to be disclosed and, at the non-requesting party's request and expense, to use
reasonable efforts to obtain assurances that such information and records
required to be disclosed will be maintained on a confidential basis and will not
be disclosed to a greater degree than required by law. In addition to the
foregoing, Buyer will permit Seller and Seller's designated agents access to
journals and general ledgers of Seller for the purpose of maintaining and
closing out those records for tax purposes. Seller hereby designates Shareholder
as its agent for purposes of closing out the foregoing records. If Shareholder
is an employee of Buyer at the time Seller desires access to the foregoing
records, Buyer agrees to provide Shareholder the time and opportunity to perform
this task.
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11. Conditions Precedent.
--------------------
(a) Conditions Precedent to Buyer's Obligations. Buyer's obligations
pursuant to this Agreement are subject to the satisfaction of the following
conditions on or before the Closing Date:
(1) The execution of the Employee Agreements by all of Seller's
employees listed in Schedule 7(s) of the Seller Disclosure Schedule;
(2) Evidence that all employees who leave the employ of Seller on or
prior to the Closing Date are subject to Confidentiality, Proprietary
Information and Noncompetition Agreements in a form reasonably satisfactory
to Buyer;
(3) Execution of the Note, Guaranty, UCC-3s, Employment Agreement,
Noncompetition Agreement and Escrow Agreement;
(4) Evidence of execution of the HCSS Note, HCSS Security Agreement,
HCSS Mortgage and HCSS Noncompetition Agreement;
(5) All third-party consents and approvals required in connection with
the transactions contemplated by this Agreement shall have been obtained
and be in full force and effect, and Buyer shall have received evidence
reasonably satisfactory to Buyer reflecting the granting of the consents
and approvals;
(6) All actions, proceedings, instruments, documents and other
relevant legal matters in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory to counsel for the Buyer;
(7) Seller's and Shareholder's representations and warranties
contained in this Agreement being true and correct as of the date of this
Agreement and true and correct on the Closing Date as though made on and as
of the Closing Date;
(8) Seller's delivery to Buyer of all bills, instruments of transfer
and assignment documents necessary or appropriate to transfer to Buyer good
and marketable title in and to the Assets, free and clear of Liens
including, without limitation, all documents described in Section 6(a);
(9) Seller and the Shareholder having duly performed and complied with
all covenants, agreements and obligations required by this Agreement to be
performed or complied with by Seller or the Shareholder, as applicable, on
or before the Closing Date;
24
(10) No action or proceeding shall be pending by or before any Court
or other governmental body or agency seeking to restrain, prohibit or
invalidate the transactions contemplated by this Agreement; and
(11) Seller's obtaining and providing Buyer with evidence reasonably
satisfactory to Buyer that Seller's insurance coverage for all medical
malpractice liability arising prior to the Closing Date (i) is on an
occurrence basis and (ii) is in full force and effect.
(b) Conditions Precedent to Seller's and Shareholder's Obligations.
Seller's and Shareholder's obligations pursuant to this Agreement are subject to
the satisfaction of the following conditions on or before the Closing Date:
(1) All consents and approvals required in connection with the
transactions contemplated by this Agreement shall have been obtained and be
in full force and effect;
(2) Buyer's delivery to Seller of all documents described in Section
6(b);
(3) Buyer's delivery of the Flexible Funding Payment, Escrow Amount
and Additional Escrow Amount and its funding of the amount required under
the Escrow Agreement;
(4) Buyer having duly performed and complied with all covenants,
agreements and obligations required by this Agreement to be performed or
complied with by Buyer on or before the Closing Date;
(5) All actions, proceedings, instruments, documents and other
relevant legal matters in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory to counsel for the Seller;
(6) No action or proceeding shall be pending by or before any Court or
other governmental body or agency seeking to restrain, prohibit or
invalidate the transactions contemplated by this Agreement; and
(7) Buyer's representations and warranties contained in this Agreement
being true and correct.
12. Termination.
-----------
(a) Termination Events. This Agreement may be terminated at or prior to
Closing upon delivery of a written notice by the terminating party. This
Agreement may be terminated:
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(1) by Buyer if Buyer notifies Seller in writing on or prior to 5:00
p.m. Eastern Prevailing Time on December 20, 2002 that based on its due
diligence investigation it has determined not to proceed to purchase the
Assets pursuant to this Agreement;
(2) by Buyer upon a Material Casualty Loss as described in Section
10(i);
(3) by Seller upon a Material Casualty Loss as described in Section
10(i);
(4) by Buyer upon a material breach of any of the terms of this
Agreement by Seller or the Shareholder if such breach is not waived by
Buyer in writing;
(5) by Seller or the Shareholder upon a material breach of any of the
terms of this Agreement by Buyer if such breach is not waived by Seller or
the Shareholder in writing;
(6) by Buyer if the conditions set forth in Section 11(a) are not
satisfied on or before the Closing Date or if satisfaction of the
conditions set forth in Section 11(a) becomes impossible (other than
through the failure of Buyer to comply with its obligations under this
Agreement);
(7) by Seller or the Shareholder if the conditions set forth in
Section 11(b) are not satisfied on or before the Closing Date or if
satisfaction of the conditions set forth in Section 11(b) becomes
impossible (other than through the failure of Seller or the Shareholder to
comply with its or his obligations under this Agreement);
(8) by mutual agreement of Buyer and Seller; or
(9) by Buyer or Seller, if the transactions contemplated in this
Agreement have not closed by 5:00 p.m. eastern time on December 24, 2002,
unless otherwise extended by written agreement of the parties.
(b) Effect of Termination. Except as set forth in Section 14(f), upon
termination of this Agreement pursuant to this Section 12, all obligations of
the parties under this Agreement shall cease.
13. Indemnification.
---------------
(a) Indemnification by Seller and Shareholder. For a period of two years
after the Closing, Seller and the Shareholder, jointly and severally, shall
reimburse, indemnify and hold harmless Buyer and its successors and assigns
(each an "Indemnified Buyer Party") against and in respect of all damages,
losses, deficiencies, liabilities, costs and expenses incurred or suffered by
any Indemnified Buyer Party that result from, relate to or arise out of:
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(1) liabilities and obligations of Seller or the Shareholder of any
nature whatsoever (including liabilities for taxes), except for those
liabilities and obligations of Seller which Buyer specifically assumes
pursuant to this Agreement;
(2) actions, suits, claims, or legal, administrative, arbitration,
governmental or other proceedings or investigations against any Indemnified
Buyer Party that relate to Seller, the Shareholder or the Business in which
the principal event giving rise thereto occurred prior to the Closing Date
or which result from or arise out of any action or inaction prior to the
Closing Date of Seller or the Shareholder or any director, officer,
employee, agent, representative or subcontractor of Seller, except for
those which Buyer specifically assumes pursuant to this Agreement; or
(3) any misrepresentation, breach of warranty or nonfulfillment of any
agreement or covenant on the part of Seller or the Shareholder under this
Agreement, or from any misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to Buyer
pursuant hereto or in connection with the negotiation, execution or
performance of this Agreement; and
(4) all actions, suits, claims, proceedings, investigations, demands,
assessments, audits, fines, judgments, costs and other expenses (including,
without limitation, reasonable legal fees and expenses) incident to any of
the foregoing or to the enforcement of this Section.
(b) Indemnification by Buyer. For a period of two years after the Closing,
Buyer shall reimburse, indemnify and hold harmless Seller and Shareholder and
their respective personal representatives, successors and assigns (each an
"Indemnified Seller Party") against and in respect of all damages, losses,
deficiencies, liabilities, costs and expenses incurred or suffered by any
Indemnified Seller Party that result from or arise out of:
(1) liabilities and obligations of Buyer of any nature whatsoever
(including liabilities for taxes), except for liabilities and obligations
for which Buyer is entitled to indemnification by Seller and Shareholder
pursuant to this Agreement;
(2) actions, suits, claims, or legal, administrative, arbitration,
governmental or other proceedings or investigations against any Indemnified
Seller Party that relate to Buyer or the Business in which the principal
event giving rise thereto occurred from and after the Closing Date (unless
and to the extent arising from action of or failure to act by Seller or the
Shareholder) or which result from or arise out of any action or inaction
from and after the Closing Date of Buyer or any director, officer,
employee, agent or representative of Buyer;
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(3) any material misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of Buyer under this
Agreement, or from any material misrepresentation in or omission from any
certificate, schedule, statement, document or instrument furnished to
Seller or the Shareholder pursuant to this Agreement or in connection with
the negotiation, execution or performance of this Agreement; and
(4) all actions, suits, claims, proceedings, investigations, demands,
assessments, audits, fines, judgments, and reasonable costs and other
expenses (including, without limitation, reasonable legal fees and
expenses) incident to any of the foregoing or to the enforcement of this
Section.
(c) Indemnification Procedure.
-------------------------
(1) Notice by Indemnitee. In the event that an Indemnified Buyer Party
or an Indemnified Seller Party seeks indemnification (the "Indemnitee")
from the other party or parties to this Agreement (the "Indemnitor"), the
Indemnitee shall promptly notify the Indemnitor in writing of such claim or
demand, specifying the nature of such claim or demand and the amount or the
estimated amount thereof to the extent then feasible, which estimate shall
not be conclusive of the final amount of such claim or demand (the "Claim
Notice"). The Indemnitor shall have ten days from the date of delivery of
the Claim Notice (the "Notice Period") to notify the Indemnitee whether or
not the Indemnitor disputes its liability to the Indemnitee hereunder with
respect to such claim or demand and, notwithstanding any such dispute,
whether or not it desires, at its sole cost and expense, to defend the
Indemnitee against any such claim or demand.
(2) Response by Indemnitor. In the event that Indemnitor notifies the
Indemnitee within the Notice Period that it desires to defend the
Indemnitee against such claim or demand then, except as hereinafter
provided, the Indemnitor shall have the right to defend the Indemnitee by
appropriate proceedings, which proceedings shall be promptly settled or
prosecuted by it to a final conclusion in such a manner as to avoid any
risk of Indemnitee becoming subject to further liability in respect of such
matter; provided, however, Indemnitor shall not, without the prior written
consent of the Indemnitee, consent to the entry of any judgment against the
Indemnitee or enter into any settlement or compromise which does not
include, as an unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnitee of a release, in form and substance
satisfactory to the Indemnitee, as the case may be, from all liability in
respect of such claim or litigation. If any Indemnitee desires to
participate in, but not control, any such defense or
28
settlement, it may do so at its sole cost and expense. If, in the
reasonable opinion of the Indemnitee, any such claim or demand or the
litigation or resolution of any such claim or demand involves an issue or
matter which would reasonably be expected to have a materially adverse
effect on the business, operations, assets, properties or prospects of the
Indemnitee, then the Indemnitee shall have the right to control the defense
or settlement of any such claim or demand and its reasonable costs and
expenses shall be included as part of the indemnification obligation of
Indemnitor hereunder; provided, however, that the Indemnitee shall not
settle any such claim or demand without the prior written consent of the
Indemnitor, which consent shall not be unreasonably withheld, conditioned
or delayed. If the Indemnitee elects to exercise such right, the Indemnitor
shall have the right to participate in, but not control, the defense or
settlement of such claim or demand at its sole cost and expense.
(d) Presumptions.
------------
(1) If the Indemnitor elects not to defend the Indemnitee against a
claim or demand, by not giving the Indemnitee timely notice as provided
above or otherwise, then the amount of any such claim or demand, or if the
same be defended by the Indemnitor or the Indemnitee (but no Indemnitee
shall have any obligation to defend any such claim or demand), then that
portion thereof as to which such defense is unsuccessful, in each case,
shall be conclusively deemed to be a liability of the Indemnitor hereunder,
unless the Indemnitor shall have disputed its liability to the Indemnitee
hereunder.
(2) In the event an Indemnitee has a claim against the Indemnitor
hereunder that does not involve a claim or demand being asserted against or
sought to be collected from the Indemnitee by a third party, the Indemnitee
shall promptly send a Claim Notice with respect to such claim to
Indemnitor. If Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such claim, the amount of such claim shall be
conclusively deemed a liability of Indemnitor hereunder.
(e) Payment. Upon the determination of liability under this Section, the
Indemnitor shall pay to the Indemnitee, within ten days after such
determination, the amount of the claim for indemnification made hereunder. In
the event that the Indemnitee is not paid in full for any such claim pursuant to
the foregoing provisions promptly after the Indemnitor's obligation to indemnify
has been determined, the Indemnitee shall have the right, notwithstanding any
other rights that it may have against any other person, firm or corporation, to
set off the unpaid amount of any such claim against any amounts owed by the
Indemnitee under any agreements entered into pursuant to this Agreement. Upon
the payment in full of a claim, either by set off or otherwise, the Indemnitor
shall be subrogated to the rights of the Indemnitee against any person, firm or
corporation with respect to the subject matter of such claim.
(f) Nonexclusive Remedy. The indemnification rights under this Section are
independent of and in addition to such rights and remedies as the parties may
have at law or in equity or otherwise for any misrepresentation, breach of
warranty or failure to fulfill any agreement or covenant hereunder on the part
of any party hereto including, without limitation, the right to seek specific
performance, rescission or restitution, none of which rights or remedies shall
be affected or diminished hereby.
29
(g) Offset. Without precluding Buyer from exercising any other right, power
or remedy pursuant to this Agreement or at law or in equity, Buyer shall be
entitled to offset against amounts due Seller hereunder any expenses suffered,
incurred or sustained, directly or indirectly, by Buyer because a representation
or warranty of Seller or the Shareholder contained in this Agreement is false or
materially misleading or which arises or results from or relates to any breach
of or failure by Seller or the Shareholder to perform any of its or his
representations, warranties, covenants or agreements contained in this
Agreement.
14. Miscellaneous Provisions.
------------------------
(a) Notices. All notices, demands or other communications required to be
given under this Agreement shall be in writing and shall be delivered to the
parties at the addresses set forth below by (i) certified mail, return receipt
requested, and in such case shall be deemed given three business days after
mailing or (ii) confirmed facsimile, personal delivery or overnight delivery by
a nationally recognized delivery service, and in each case shall be deemed given
upon delivery. Any party may, by written notice to the other parties as provided
in this Section, change the place to which all further notices to such party
shall be sent.
If to Seller or Shareholder:
Travel Nurse International, Inc.
22 Shannon Circle
Alameda, California 94502
Attention: Gary W. Fanger
Facsimile: (510) 748-0281
30
with a copy to:
Scherer & Smith, LLP
214 Grant Avenue, Suite 400
San Francisco, California 94108
Attention: William M. Scherer, Esq.
Facsimile: (415) 986-1730
If to Buyer:
Medical Staffing Network, Inc.
901 Yamato Road, Suite 110
Boca Raton, FL 33431
Attention: President
Facsimile: (561) 322-1202
with a copy to:
Steel Hector & Davis LLP
1900 Phillips Point West
777 South Flagler Drive
West Palm Beach, FL 33401
Attention: Kim A. Hines, Esq.
Facsimile: (561) 655-1509
(b) Binding Effect. This Agreement shall inure to the benefit of, and shall
be binding upon, the parties and their respective heirs, representatives,
administrators, successors and assigns.
(c) Governing Law; Jurisdiction; Interpretation. This Agreement shall be
governed by and shall be construed in accordance with the laws of the State of
Florida without regard to conflicts of law principles. Any and all disputes
arising out of or relating to the validity, interpretation enforceability, or
performance of this Agreement will be solely and finally settled by means of
binding arbitration under the provisions of the Federal Arbitration Act. The
arbitration shall be conducted in accordance with the then current Commercial
Dispute Resolution Rules of the American Arbitration Association. The
arbitration shall be final, conclusive and binding upon the parties and may be
confirmed in any federal or state court having jurisdiction over the parties.
All arbitrator's fees and related expenses shall be divided equally between the
parties, and each party shall bear its own attorneys' fees and costs. THE BUYER,
SELLER AND SHAREHOLDER KNOWINGLY AND INTENTIONALLY WAIVE
31
THE RIGHT ANY OF THEM HAS TO A TRIAL BY JURY OR BEFORE A COURT. Such arbitration
shall be conducted in Palm Beach County, Florida. The paragraph headings have
been used solely for convenience, and are not intended to describe, interpret,
define or limit the scope of this Agreement. Conflicts or discrepancies, errors,
or omissions in this Agreement or the various documents delivered in connection
with this Agreement will not be strictly construed against the drafter of the
contract language; rather, they shall be resolved by applying the most
reasonable interpretation under the circumstances, giving full consideration to
the intentions of the parties at the time of contracting.
(d) Attorneys' Fees. In connection with any litigation, including appellate
or bankruptcy proceedings, arising out of or related to this Agreement, the
non-prevailing party shall pay all reasonable attorneys' fees and costs of the
prevailing party.
(e) Severability. If any one or more of the provisions of this Agreement is
held invalid, illegal or unenforceable, the remaining provisions of this
Agreement shall be unimpaired, and the invalid, illegal or unenforceable
provision shall be replaced by a mutually acceptable valid, legal and
enforceable provision that comes closest to the intent of the parties.
(f) Survival. The representations, warranties and covenants contained in
this Agreement shall survive the closing of the transactions contemplated by
this Agreement. The provisions of Sections 9, 10(d), 14(c), and 14(d) shall
survive the termination of this Agreement and shall inure to the benefit of the
parties and their permitted successors and assigns.
(g) Counterparts; Facsimile Signature. This Agreement may be executed by
facsimile signature and in any number of counterparts, each of which shall be
deemed an original, but all of which, when taken together, shall constitute but
one and the same instrument.
(h) Assignability. Neither party may assign its rights under this Agreement
to any other person or entity without the prior written consent of the
non-assigning party.
(i) Time of Essence. Time is of the essence of this Agreement.
(j) Entire Agreement; Amendment. This Agreement together with the Schedules
and Exhibits to this Agreement constitute the entire agreement of the parties
with respect to its subject matter and supersede and replace all previous verbal
or written agreements that the parties may have made. All modifications or
amendments of this Agreement must be in writing and signed by all parties to
this Agreement.
(k) No Waiver. No term or condition of this Agreement shall be deemed to
have been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with the waiver or estoppel. No
32
written waiver shall be deemed a continuing waiver unless specifically stated
therein, and each waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of the term or condition for the future
or as to any act other than that specifically waived. The waiver by any party of
any other party's breach of any provision of this Agreement shall not operate or
be construed as a waiver of any subsequent breach, and the failure of any party
to exercise any right or remedy shall not operate or be construed as a waiver or
bar to the exercise of such right or remedy upon the occurrence of any
subsequent breach. No delay on the part of a party in exercising a right, power
or privilege hereunder shall operate as a waiver thereof. No waiver on the part
of a party of a right, power or privilege, or a single or partial exercise of a
right, power or privilege, shall preclude further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of this
Agreement are cumulative and are not exclusive of the rights or remedies that a
party may otherwise have at law or in equity.
[[Remainder of page intentionally left blank. Signatures on next page.]
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The parties have executed this Agreement as of the date first written
above.
SELLER: BUYER:
TRAVEL NURSE INTERNATIONAL, INC. MEDICAL STAFFING NETWORK, INC.
By: /s/ Gary W. Fanger By: /s/ Robert J. Adamson
----------------------------- ---------------------------------
Gary W. Fanger, its President Robert J. Adamson, its President
SHAREHOLDER:
- ---------------------------------
Gary W. Fanger, Individually
34