EXHIBIT 2.13
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
PCN ACQUISITION, INC.,
PROFESSIONAL CONSULTING NETWORK, INC.,
ITS STOCKHOLDERS,
AND
ITS PROSPECTIVE STOCKHOLDERS
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998 among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), PCN ACQUISITION, INC., a California corporation and a wholly owned
subsidiary of WORK ("Newco"), PROFESSIONAL CONSULTING NETWORK, INC., a
California corporation (the "Company"), the persons listed on the signature
pages of this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder"), and the
persons listed on the signature pages of this Agreement under the caption
"Prospective Stockholders" (collectively, the "Prospective Stockholders," and
each of them, individually, a "Prospective Stockholder."
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries,
will acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
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following terms have the meanings assigned to them below in this Section 1.01:
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the California General Corporation
Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time (a) $9,640,132 plus (b) the
aggregate amount of Contingent Merger Consideration which the Stockholders
have been paid, or are entitled to be paid, at such time.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value per share,
of the Company.
"Contingent Merger Consideration" means the consideration payable to
the Stockholders pursuant to Sections 2.08(a) and 2.08(b).
"Counsel for the Company and the Stockholders" means Mandel Bruder &
Verges.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Earn-Out EBIT" means, for any period, earnings of the Company for
such period before interest expense and federal and state income taxes, all
determined in accordance with GAAP, adjusted to: (a) exclude investment
income and gains and losses from dispositions of capital assets, (b)
exclude all extraordinary items of gain or loss, as defined by GAAP, to be
applied on a basis consistent with the Initial Financial Statements dated
as of December 31, 1997, and (c) eliminate any management fees or
administrative costs (including audit fees) charged by WORK to the Company,
and any charges to the Company's earnings with respect of allocations of
indirect corporate overhead expenses, including amortization of goodwill
and other intangibles, but not eliminating expenses directly attributable
to the Company or its operations, such as charges for insurance coverage,
charges for employee benefit plans and charges associated with obtaining
the Company's accounting and financial information in an accurate and
timely manner; provided, however, that such charges for insurance coverage
shall not be greater than the cost being paid by the Company for similar
coverage at the time of the Closing, and any employee benefit plan charges
per employee will not be greater than the charges being paid at the time of
Closing.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $1,255,893, the estimated amount, as of
the Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $1,235,464, the
estimated amount, as of the Initial Calculation Date, of the net adjustment
that would be required under
Section 481(a) of the Code if the Company changed its method of accounting
for tax purposes from the cash basis to the accrued basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and 1996 and the related audited
statements of operations, stockholders' equity and cash flows for each of
the Company's three fiscal years in the three-year period ended December
31, 1997, together with the related audit report of KPMG Peat Marwick LLP,
and (b) the Current Balance Sheet and the related unaudited statements of
operations, stockholders' equity and cash flows for the three-month period
ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means PCN Acquisition, Inc., a California corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and James
Schneider and Peter Jozwik, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of James Schneider or Peter Jozwik.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
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in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
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conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of California.
Section 2.02. The Effective Time. The effective time of the Merger (the
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"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
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Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business
Corporation Act, (b) Newco will cease to exist as a separate legal entity, (c)
the certificate or articles of incorporation of the Company will be amended to
change its authorized capital stock to 1,000 shares, par value $1.00 per share,
of Common Stock, (d) the Company will be the Surviving Corporation and, as such,
will, all with the effect provided by the Business Corporation Act, (i) possess
all the properties and rights, and be subject to all the restrictions and
duties, of the Company and Newco and (ii) be governed by the laws of the State
of California, (e) the Charter Documents of the Company then in effect (after
giving effect to the amendment of the Company's certificate or articles of
incorporation specified in clause (c) of this sentence) will become and
thereafter remain (until changed in accordance with (i) applicable law, in the
case of the certificate or articles of incorporation or (ii) their terms, in the
case of the bylaws) the Charter Documents of the Surviving Corporation, (f) the
initial board of directors of the Surviving Corporation will be the Persons
named in Schedule 2.03, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
California and the Charter Documents of the Surviving Corporation, and (g) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Corporation,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
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Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration") and the Contingent Merger Consideration, (ii) cease
to be outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
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(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will
be payable with respect to the payment of such dividends or other
distributions (or cash for and in lieu of fractional shares) on surrender
of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
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this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or before
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the day preceding the IPO Closing Date, the Company shall distribute in kind to
the Stockholders, in accordance with their respective Pro Rata Shares, cash
basis accounts and notes receivable outstanding at such time (including, without
limitation, notes, advances and other payment obligations of the Stockholders to
the Company) which have a value equal to the net adjustment that would be
required under Section 481(a) of the Code if, as of the IPO Closing Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis. In the event that, notwithstanding such distribution, the
Company receives any payment with respect to any such receivables, the Company
will promptly pay the amount so received over to the Stockholders in accordance
with their respective Pro Rata Shares. The aggregate amount of accounts and
notes receivable to be distributed pursuant to this Section 2.07 is herein
referred to as the "Cash Basis Accounts Receivable Distribution Amount."
Section 2.08. Contingent Merger Consideration.
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(a) On April 1, 1999, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, cash in an amount equal
to seven times the amount by which the Earn-out EBIT for the twelve-month
period ended December 31, 1998 exceeds $1,139,006.
(b) On April 1, 2000, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, cash in an amount equal
to five times the amount by which the Earn-out EBIT for the twelve-month
period ended December 31, 1999 exceeds the Earn-out EBIT for the twelve-
month period ended December 31, 1998.
(c) The obligation of WORK to pay Contingent Merger Consideration to
any Stockholder will not be affected by the termination of such
Stockholder's employment by the Company as the result of such Stockholder's
death, disability or for any other reason.
(d) During the period from the date of Closing until December 31,
1999, (i) the Stockholders will be given sufficient autonomy, working
capital and other reasonable support to manage the daily operations of the
Company, consistent with prior practices and reasonable business judgment,
(ii) WORK will cause James Schneider to be elected a director of the
Company to serve throughout such period; provided, however, that in the
event that prior to the end of such period Mr. Schneider is no longer a
director of the Company for any reason, WORK will cause Peter Jozwik to be
elected to serve, as of the time of the vacancy of the seat held by Mr.
Schneider until the end of the remainder of such period, as a director of
the Company and (iii) WORK will, and will cause the Company, to sign such
proxies and other documents and to take such other action as may be
reasonably required from time to time to accomplish the action reflected in
clause (ii) above. In addition, the Company will not terminate the
employment of Mr. Schneider or Mr. Jozwik during such period except for
death, disability or Cause (as such term is defined in the New Employment
Agreement).
(e) WORK agrees that from the IPO Closing Date until December 31,
1999, WORK will not cause the Company to:
(i) be liquidated or dissolved;
(ii) sell all or substantially all of its assets, sell all or
substantially all of the Company's stock, or merge the
Company with any other entity;
(iii)relocate the Company's principal office from its present
location or open any new offices or locations;
(iv) acquire another business entity or the assets or operations
of another business entity;
(v) increase the number of employees; or
(vi) make any expenditures outside the normal course of the
Company's business.
Except as specifically prohibited above in this Section 2.08(e), the
Company may at any time change or discontinue any of its present or future
assets or operations, or may close any of its present or future offices, or
undertake new operations, or may take any and all steps which the Company's
Board of Directors, in its reasonable business judgment and by unanimous
vote, shall deem advisable and in the best interest of the Company, and if
any such action adversely affects the Earn-Out EBIT, the Stockholders shall
have no claim or recourse by reason of such action.
(f) The calculation of Earn-out EBIT will be performed by the Company
based on the Company's financial statements as audited by WORK's
independent public accountants. Any dispute arises with respect to the
amount of the Contingent Merger Consideration shall be resolved by WORK's
independent public accountants or any other mutually acceptable dispute
resolution procedure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
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(a) The Closing. On or before the IPO Pricing Date, the Parties
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will take all actions necessary to (i) effect the Merger on the IPO
Closing Date (including, as permitted by the Business Corporation Act, (A)
the execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Secretary of State of the State of California), (ii) verify
the existence and ownership of the certificates evidencing the Company
Common Stock to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
James Schneider. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
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Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01 Prohibited Activities. Each Stockholder severally agrees
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that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
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losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
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10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
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are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
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are intended by each Party to, and 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 WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
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and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
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(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed 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), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes 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 any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY 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
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON 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 EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
595 Market Street
Suite 1400
San Francisco, CA 94105-2821
Attn: Jim Schneider
Telecopy No.: (415) 777-8632
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Mandel Buder & Verges
101 Vallejo Street
San Francisco, CA 94111
Attn: Bill Mandel
Telecopy No.: (415) 989-5143
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision shall, to the
extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the Parties as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 603 and 1113
of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 603 and 1113 of
the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay (or distribute in accordance with
Section 2.07) the entire unpaid amount of all notes, advances and other payment
obligations owed by such Stockholder to the Company.
Section 11.17. Treatment of Prospective Stockholders. Each of the
-------------------------------------
Prospective Stockholders has been granted the conditional right to acquire
shares of the Company Common Stock from the Stockholders. The Company and the
Stockholders agree that, prior to Closing, they intend to take all such actions
as may be reasonably necessary to transfer such shares of Company Common Stock
to the Prospective Stockholders pursuant to the terms and conditions set forth
in any
and all agreements entered into by the Stockholders and the Prospective
Stockholders. Upon the transfer of those shares, the Company Common Shares will
be owned as follows:
Name No. of Shares Percentage Interest
------ ------------- -------------------
James Schneider 90,000 45%
Peter Jozwik 90,000 45%
Heinz H. Bartesch 10,000 5%
Gregory J. Krueger 10,000 5%
------------- -------------------
200,000 100%
From and after the transfer of such shares to the Prospective Stockholders, the
Prospective Stockholders will be deemed to be Stockholders hereunder and the Pro
Rata Shares of the Stockholder and the Prospective Stockholders will be adjusted
in accordance with the foregoing percentage interests. The Prospective
Stockholders hereby agree that their rights to acquire shares of Company Capital
Stock, and their right, if any, to receive compensation pursuant to "phantom
stock" or any other similar arrangement, will terminate and be of no further
force and effect upon the issuance of the shares of Company Common Stock
contemplated hereby or the occurrence of the Effective Time, whichever first
occurs. If the transfer of such shares has not taken place as of the Effective
Time, the Prospective Stockholders shall have no rights hereunder or claims
against WORK, the Company or the Stockholders.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per
share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of California, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholders advises WORK are required by the applicable laws of
the State of California to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
PCN ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
PROFESSIONAL CONSULTING NETWORK, INC.
By: /s/ James Schneider
--------------------------------------
James Schneider, President
STOCKHOLDERS:
/s/ James Schneider
--------------------------------------------
James Schneider
/s/ Peter Jozwik
--------------------------------------------
Peter Jozwik
PROSPECTIVE STOCKHOLDERS:
/s/ Heinz H. Bartesch
--------------------------------------------
Heinz H. Bartesch
/s/ Gregory J. Krueger
--------------------------------------------
Gregory J. Krueger
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
James Schneider
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President James Schneider
Vice President Peter Jozwik
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder and each Prospective
Stockholder are as follows:
Name Address
-------------------- ----------------------
James Schneider 8 Deer Hill
Mill Valley, CA 94941
Peter Jozwik 20 Dutch Valley Lane
San Anselmo, CA 94960
Heinz H. Bartesch 16 Regina Way
San Rafael, CA 94903
Gregory J. Krueger 513 Valley View Ct.
Martinez, CA 94553
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $4,820,068, as adjusted pursuant to paragraph D below, and (ii)
401,672 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares.
Subject to adjustment as set forth in Section 11.17, the Pro Rata Shares of the
Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---------- --------------------- --------
James Schneider 100,000 50%
Peter Jozwik 100,000 50%
Following the transfer of shares of the Company Common Stock to the
Prospective Stockholders contemplated by Section 11.17, the Pro Rata Shares will
be as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---------- --------------------- --------
James Schneider 90,000 45%
Peter Jozwik 90,000 45%
Heinz H. Bartesch 10,000 5%
Gregory J. Krueger 10,000 5%
--------------------- ----------------
200,000 100%
D. The cash portion of the Merger Consideration will be subject to
adjustment ba ed upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder and each Prospective Stockholder is an "accredited
investor" as defined in Securities Act Rule 501(a), except for the following:
Gregory J. Krueger
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. Subject to the provisions of Section 11.17, the following table sets
forth the ownership of the Company's Capital Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
James Schneider Common 100,000
Peter Jozwik Common 100,000
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ----------- ----------- ------ -----------
Common None 1,000,000 200,000 None None
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. The Company intends to ask Union Bank of California, N.A. to extend
the maturity date of its Commercial Promissory Note from August 31, 1999 to
October 31, 1999. Otherwise, no exception is taken to the covenants contained
in Section 6.02.
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions, in cash or other assets, up to
the amount equal to the sum of the Accumulated Adjustment Account as
of the Initial Calculation Date plus the Company's good faith estimate
of any additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In addition, the
Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07 and of life insurance
policies as contemplated by Schedule 6.10(B)(b).
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
(a) Prior to the Closing, the Company shall distribute the cash
basis accounts and notes receivable (including notes, advances or
other payment obligations of the Stockholders to the Company) to be
distributed pursuant to Section 2.07.
(b) Prior to the Closing, the Company shall be permitted to
transfer to the Stockholders (at no cost to the Stockholders) the life
insurance policies owned by the Company and insuring their lives.
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
1. Guarantee by Peter Jozwik and James Schneider, dated September
29, 1995, of Equipment Lease Agreement between the Company and Taylor Leasing,
Inc.
2. Continuing Guaranty by James Schneider, dated December 1, 1997,
of all obligations of the Company to Union Bank of California, N.A.
3. Continuing Guaranty by Peter Jozwik, dated December 1, 1997, of
all obligations of the Company to Union Bank of California, N.A.