Exhibit 2.1
ASSET PURCHASE AGREEMENT
AMONG
CROSS COUNTRY NURSES, INC.,
CROSS COUNTRY, INC.,
MED-STAFF, INC.,
WILLIAM G. DAVIS,
DAVIS FAMILY ELECTING SMALL BUSINESS TRUST
AND TIMOTHY RODDEN
DATED AS OF MAY 8, 2003
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of May 8, 2003, among Cross Country
Nurses, Inc., a Delaware corporation ("Buyer"), Cross Country, Inc., a Delaware
corporation ("Parent"), Med-Staff, Inc., a Pennsylvania corporation ("Seller"),
and William G. Davis ("Davis"), Davis Family Electing Small Business Trust (the
"Trust") and Timothy Rodden ("Rodden," together with Davis and the Trust, the
"Principals").
WITNESSETH:
WHEREAS, Seller is engaged in the business of temporary and permanent
healthcare staffing (the "Business"); and
WHEREAS, the Principals own all of the capital stock of Seller; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets of Seller used in or related to the
Business, on the terms set forth herein; and
WHEREAS, the Principals will receive substantial benefit from such
transaction;
NOW THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.01. GENERAL, All Article and Section numbers, and Exhibit and
Schedule references used in this Agreement refer to Articles and Sections of
this Agreement, and Exhibits and Schedules attached hereto or delivered
simultaneously herewith, unless otherwise specifically stated. Any of the terms
defined in this Agreement may be used in the singular or the plural. In this
Agreement, unless otherwise specifically stated, "hereof," "herein," "hereto,"
"hereunder" and the like mean and refer to this Agreement as a whole and not
merely to the specific Section, paragraph or clause in which the word appears
and words importing any gender include the neuter and the other genders.
1.02. DEFINED TERMS. For purposes of this Agreement, including the
Exhibits and Schedules, the following defined terms have the meanings set forth
in this Section:
"ACCOUNTS RECEIVABLE" means all of the outstanding accounts, notes and
other receivables of Seller and the full benefit of all security for such
accounts or rights to payment, including, but not limited to, Seller's
outstanding accounts receivable and all unbilled fees for services rendered or
products sold in connection with the Business prior to the Closing Date and any
claim, remedy or other right related to any of the foregoing.
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"ACQUISITION PROPOSAL" means an inquiry, offer or proposal regarding
any of the following (other than the Contemplated Transactions) involving
Seller: any merger, reorganization, consolidation, share exchange,
recapitalization, business combination, liquidation, dissolution or other
similar transaction involving, or, any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of, five percent (5%) or more of the assets or the
equity interests of Seller in a single transaction or series of related
transactions which could reasonably be expected to interfere with the completion
of the Contemplated Transactions (as defined herein).
"ADJUSTED EBITDA" means the audited earnings before interest, income
taxes, depreciation and amortization of the Business for the twelve month period
ending December 31, 2003 (determined in accordance with generally accepted
accounting principles) as adjusted to reflect certain one-time revenues and
expenses, including, but not limited to, the following:
(i) plus expenses accrued during 2003 relating to the Med-Staff Phantom
Equity Plan and other personal expenses of the Principals mutually agreed upon
by the parties that are of a nature that will not be incurred or continued by
Buyer after the Closing Date; and
(ii) minus amounts by which SG&A expenses in 2003 as a percentage of
revenue are relatively less than those from the prior two-year periods (2001 and
2002) based on reasonableness and consistency, as mutually agreed upon by the
parties hereto.
The Principals agree that in calculating the Adjusted EBITDA for the fiscal year
ended December 31, 2003, the accrued professional liability expense shall be
$837,500. Adjusted EBITDA shall not include (i) allocations of shared corporate
expenses in excess of amounts that would have been incurred by Seller if the
transaction had not occurred, (ii) allocation of overhead, executive
compensation and employee benefit costs of Parent and its affiliates other than
Buyer in its operation of the Business, including, without limitation, the
compensation and related expenses associated with any employees of Parent or
Buyer who are assigned to assist in the monitoring or integration of the
Business, (iii) expenses associated with the consummation of the transactions
contemplated by this Agreement (including any accounting and legal fees and
expenses incurred in connection with the performance of special procedures in
the calculation of Adjusted EBITDA for the period ending December 31, 2003) and
(iv) adjustments made in connection with the write-up of assets in connection
with the transactions contemplated by this Agreement.
The parties acknowledge and agree that the following expenses incurred by Seller
or Seller's successor (not including Buyer or any of its Affiliates) subsequent
to the Closing shall not affect the calculation of Adjusted EBITDA: (i) payments
made at or after the Closing by Seller or its successor in interest to persons
employed by Seller at the time of Closing pursuant to Seller's Phantom Equity
Plan or otherwise made as bonus payments contingent upon the Closing, (ii) any
taxes or withholding payments made by Seller or its successor in interest
associated with payments made pursuant to the preceding clause (i), and (iii)
any taxes paid by Seller as a result of the consummation of the Contemplated
Transactions, including, without limitation, capital stock tax, gross receipts
tax or payroll tax.
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"AFFILIATE" means, with respect to any specified Person, at the time at
which such status is being determined, (i) any other Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person or (ii) any officer, director, partner,
member or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct, or cause the
direction of, the management and policies of a Person, directly or through one
or more intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of such
Person (on a fully diluted basis) or of warrants or other rights to acquire such
equity (whether or not presently exercisable).
"AGREEMENT" means this Asset Purchase Agreement.
"ASSUMED CONTRACTS" has the meaning given to such term in Section
2.01(a)(ii).
"ASSUMED LIABILITIES" has the meaning given such term in Section 2.02.
"BASE NET WORKING CAPITAL RANGE" means an amount between and including
$19,100,000 and $20,300,000.
"BUSINESS" has the meaning given such term in the recitals hereto.
"BUSINESS DAY" means a day that is not a Saturday or Sunday, nor a day
on which banks are generally closed in New York City.
"BUYER" has the meaning given such term in the preamble hereto.
"BUYER CLAIMANTS" has the meaning given such term in Section 14.02.
"BUYER GROUP" means, collectively, Buyer, Parent and their Affiliates.
"BUYER PARTIES" means Buyer and Parent.
"BUYER'S STATEMENT" has the meaning given such term in Section
2.06(b)(ii)(A).
"BUYER'S CLOSING STATEMENT" has the meaning given such term in Section
4.02(b).
"BUYER'S STATEMENT DELIVERY DATE" has the meaning given such term in
Section 2.06(b)(ii)(A).
"CLAIM" means any claim, demand, suit, action or proceeding.
"CLAIMANT" has the meaning given such term in Section 14.04.
"CLOSING" means the actions to be taken by the parties described in
Section 3.03.
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"CLOSING DATE" means on or before June 30, 2003 or another date
mutually agreed upon in writing by the parties, subject to the terms and
conditions herein.
"CLOSING NET WORKING CAPITAL" means the amount equal to (x) Current
Assets (minus the sum of (i) cash, cash equivalents, short term investments and
marketable securities, (ii) non-transferable Accounts Receivable, (iii) without
duplication, Accounts Receivable outstanding in excess of 90 days, (iv) prepaid
expenses, rents and deposits for which Buyer is not assuming a corresponding
liability hereunder (e.g. deposit on car leases, etc.), and (v) receivables from
employees) minus (y) Current Liabilities of Seller (less the sum of (i) accrued
state income taxes payable, and (ii) notes payable to any of the Principals and
any accrued interest pertaining to such notes), all as of the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor law or successor regulations issued by the Internal Revenue Service
pursuant to the Code or any successor law.
"CONFIDENTIALITY AGREEMENT" has the meaning given such term in Section
8.03(c).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
in this Agreement.
"COVERED PARTIES" has the meaning given such term in Section 8.05.
"CURRENT ASSETS" means the sum of (a) cash and cash equivalents, (b)
short-term investments, (c) Accounts Receivable, (d) prepaid expenses (to the
extent Buyer derives benefit therefrom following the Closing), (e) receivables
from employees, and (f) prepaid rents and deposits (as each item is
characterized in the audited balance sheet of the Seller as of December 31,
2002), included within the Financial Statements.
"CURRENT LIABILITIES" means the sum of: (a) Accounts Payable, (b)
accrued expenses (excluding accruals for professional liability expense), and
(c) accrued payroll and payroll taxes (as each item is characterized in the
audited balance sheet of the Seller as of December 31, 2002 included within the
Financial Statements).
"DAMAGES" means any and all penalties, fines, damages (whether actual
or consequential), liabilities, claims, losses, costs or expenses (including,
but not limited to, reasonable Litigation Expenses) whether or not involving a
third party claim.
"E&Y" means Ernst & Young LLP.
"EARNOUT DISPUTE PERIOD" has the meaning given such term in Section
2.06(b)(ii)(A) herein.
"EARNOUT PAYMENT" has the meaning given such term in Section 2.06(b)
herein.
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"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" (as defined
under Section 3(3) of ERISA) and any other health, life, vacation, bonus,
deferred compensation, pension, retirement, stock purchase, stock appreciation,
severance, post-retirement, individual employment, consulting, retention or
change in control or any other employee benefit plan, agreement, trust fund,
policy, arrangement or practice (written or unwritten, insured or uninsured).
"ENVIRONMENT" means any surface or subsurface physical medium or
natural resource, including, air, land, soil, surface waters, ground waters,
drinking water supply, streams, ponds, drainage basins, wetlands, ambient air
(including indoor air), plant and animal life, stream and river sediments, biota
and any indoor area, surface or physical medium and any other environmental
medium or natural resource.
"ENVIRONMENTAL LAWS" means any Law, order or judgment relating to the
injury to, or the pollution or protection of, human health and safety (including
occupational health and safety) or the Environment.
"ENVIRONMENTAL LIABILITIES" means any claims, judgments, damages
(including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation or monitoring, or defense of
any matter relating to human health, safety or the Environment of whatever kind
or nature by any party, entity or authority, except for normal ongoing operating
costs for maintaining compliance with Environmental Laws, (A) which are incurred
as a result of (i) the existence of Hazardous Substances in, on, under, at or
emanating from any of the Purchased Assets or in connection with the operation
of the Business, (ii) the off-site transportation, treatment, storage or
disposal of Hazardous Substances generated by the Business, (iii) the violation
of or non-compliance with any Environmental Laws, (iv) exposure to any Hazardous
Substances, noises, odors or vibrations or (B) which arise under the
Environmental Laws. The term "remediation" includes the types of activities
covered by the United States Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. ss.9601 et seq., as amended.
"ENVIRONMENTAL PERMITS" has the meaning given such term in Section
5.21(d).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and any successor
law, regulations or rules issued pursuant thereto.
"ERISA AFFILIATE" means any entity that would be deemed a "single
employer" with the Seller under Section 414(b), (c), (m) or (o) of the Code or
Section 4001 of ERISA.
"ESCROW AGENT" means SunTrust Bank.
"FACILITY" means, collectively, the properties located at 295 and 297
South Newtown Street Road, Newtown Square, Pennsylvania 19073 used by Seller to
operate the Business.
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"FACILITY LEASE" means that certain lease agreement, dated as of June
21, 2001, as amended, by and between Seller and Newtown Street Road Associates
relating to the Facility and that certain lease agreement, dated as of June 23,
1998, by and between Seller and Newtown Street Road Associates, as amended.
"FINAL ORDER" has the meaning given such term in Section 15.01(c).
"FINANCIAL STATEMENTS" means (a) the audited balance sheets of Seller
as of December 31 in each of the years ended 2000, 2001 and 2002 and the related
audited statements of income, stockholders' equity and cash flows for the fiscal
years then ended, including the notes thereto, together with the report thereon
of E&Y, independent certified public accountants (the "Audited Financial
Statements") and (b) the Interim Financial Statements.
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL AUTHORITY" means any jurisdiction, whether domestic or
foreign, exercising executive, legislative, judicial, police, regulatory, taxing
authority, quasi-governmental or administrative functions of government,
including, but not limited to, agencies, departments, boards, commissions or
other instrumentalities.
"HAZARDOUS SUBSTANCES" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead-based paint, radon, urea formaldehyde, asbestos
or any materials containing asbestos, pesticides and any chemicals, materials or
substances regulated under any Environmental Law, or defined as or included in
the definition of "hazardous substances," "extremely hazardous substances,"
"hazardous materials," "hazardous wastes," "hazardous constituents," "toxic
substances," "pollutants," "contaminants" or any similar denomination intended
to classify or regulate substances by reason of toxicity, carcinogenicity,
ignitability, corrosivity or reactivity under any Environmental Law, including
any admixture or solution thereof, and specifically including petroleum and all
deliverables thereof or synthetic substitutes therefor and asbestos or asbestos
containing materials.
"HOLDBACK AMOUNT" means the amount equal to the sum of (x) the
Purchase Price Holdback Amount and (y) the Indemnity Holdback Amount.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any successor law, and regulations and rules issued pursuant to that Act
or any successor law.
"INSURANCE POLICIES" means all of the policies of fire, casualty,
fidelity, liability, professional liability and other forms of insurance
relating to the Business, as set forth in SCHEDULE 5.12.
"INDEBTEDNESS" means without duplication (i) indebtedness for borrowed
money, whether secured or unsecured, (ii) obligations under conditional sale or
other title retention agreements relating to property or services purchased by
such Person, (iii) capitalized lease obligations, (iv) obligations under
interest rate cap, swap, collar or similar transaction or currency hedging
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transactions (valued at the termination value thereof), (v) all obligations
evidenced by notes, bonds, debentures or other similar instruments, (vi) all
obligations, contingent or otherwise, as an account party under acceptance,
letter of credit or similar facilities, (vii) all obligations, contingent or
otherwise, to purchase, redeem retire or otherwise acquire for value any capital
stock, (viii) all trade payables, (ix) all guarantee obligations in respect of
obligations of the kind referred to in clauses (i) through (viii) above, and (x)
all obligations of the kind referred to in clauses (i) through (ix) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) a lien on property (including, but
not limited to, accounts and contract rights) owned, whether or not assumed or
liabilities for the payment of such obligation.
"INDEMNITOR" has the meaning given such term in Section 14.04(a).
"INDEMNITY CLAIM OBJECTION PERIOD" has the meaning given such term in
Section 15.01(a).
"INDEMNITY HOLDBACK AMOUNT" means $7,500,000, which shall be held in
escrow by the Escrow Agent and be paid in accordance with Article XV.
"INDEMNITY HOLDBACK PAYMENT" has the meaning given such term in Section
15.01(b).
"INDEMNITY HOLDBACK PAYMENT DATE" has the meaning given such term in
Section 15.01(b).
"INDEMNITY HOLDBACK PAYMENT DEDUCTION" has the meaning given such term
in Section 15.01(a).
"INDEMNITY NOTICE" has the meaning given such term in Section 14.04(a).
"INTERIM FINANCIAL STATEMENTS" means an unaudited balance sheet of
Seller as of March 31, 2003, and the related unaudited statements of income,
stockholders' equity and cash flows for the three (3) months then ended.
"KEY EMPLOYEES" means, collectively, the following: Dave Brower, Dennis
Sher, Isabelle Stanshine, Paul Giannaula, Jamie Huston, Jeff Ianotti, Vasken
Aznavorian, Eric Stott, Todd Delaney and Debbie Vaden.
"KNOWLEDGE" of any Seller Party means the knowledge, on the date of
this Agreement or on the Closing Date, as applicable, of the Principals and Key
Employees after having exercised reasonable diligence.
"LAWS" means federal, state or local laws, statutes, ordinances, rules,
regulations or directives, whether legislatively, judicially or
administratively, promulgated, including, but not limited to, those related to
health, safety or the Environment.
"LEASE" has the meaning given such term in Section 5.05(a).
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"LEASED REAL PROPERTY" means those parcels of leased real property used
in the Business, including, but not limited to, the Facility.
"LEASEHOLD SITES" has the meaning given such term in Section 5.05(a).
"LENDERS" means the senior lenders under Buyer's Second Amended and
Restated Credit Agreement, dated as of March 16, 2001 and amended thereafter.
"LETTER OF INTENT" means the letter of intent dated January 10, 2003,
between Parent and Seller, as amended on March 28, 2003.
"LICENSE AGREEMENTS" has the meaning given such term in Section
5.17(b).
"LICENSED IP" has the meaning given such term in Section 5.17(b).
"LIEN" means any mortgage, pledge, hypothecation, security interest,
agreement to sell, option to buy, right of first refusal, title retention
device, restriction on transfer or other lien or encumbrance, including any of
the foregoing arising under a deed of trust or indenture.
"LITIGATION EXPENSES" means reasonable attorneys' fees and other costs
and expenses incident to investigations or proceedings in respect of, or the
prosecution or defense of, a Claim.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, assets, operations, properties, contingent liabilities, material
agreements, prospects or condition (financial or otherwise) of the Business.
Seller may, however, at its option, include in the Disclosure Schedules items
that would not have a Material Adverse Effect within the meaning of the previous
sentence in order to avoid any misunderstanding. Disclosure of any items on any
Disclosure Schedules shall not be deemed to be an acknowledgment by Seller that
such items would have a Material Adverse Effect or further define the meaning of
such term for the purposes of this Agreement.
"NET WORKING CAPITAL ADJUSTMENT DISPUTE PERIOD" has the meaning given
such term in Section 4.02(c).
"NET WORKING CAPITAL AMOUNT" has the meaning given such term in Section
4.02(a).
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person if:
(i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; and
(ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority).
"OTHER CONTRACTS" has the meaning given such term in Section 2.04.
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"OTS SOFTWARE" has the meaning given such term in Section 5.17(c).
"OTS SOFTWARE LICENSE" has the meaning given such term in Section
5.17(c).
"OVERAGE AMOUNT" has the meaning given to such item in Section 4.02(a).
"PERMITS" means all governmental, quasi-governmental or regulatory
agency licenses, consents, certificates of authority, accreditations, permits,
registrations, orders, credentials, authorizations, certifications and approvals
held or obtained by or issued to Seller in connection with the operation of the
Business.
"PERMITTED LIENS" means (a) Liens for Taxes which are not due and
payable or which may thereafter be paid without penalty, or which are being
contested in good faith by appropriate proceedings; (b) mechanics',
materialmen's, workers', repairmen's, warehousemen's, carriers' and other
similar Liens for amounts which are not yet due and payable, or which may be
paid without penalty, or which are being contested in good faith by appropriate
proceedings; (c) Liens incurred in the Ordinary Course of Business in connection
with workers' compensation, unemployment insurance and other types of social
security; and (d) other liens or imperfections on property, individually or in
the aggregate, which are not material in amount or which, individually or in the
aggregate, do not materially detract from the value of or materially impair the
existing use of the property affected by such liens or imperfections.
"PERSON" means any individual, general or limited partnership, firm,
trust, association, corporation (including any non-profit corporation), joint
venture, unincorporated organization, estate, other business entity or
Governmental Authority.
"PRINCIPALS" has the meaning given thereto in the preamble.
"PURCHASE PRICE" has the meaning given such term in Section 2.06.
"PURCHASE PRICE ADJUSTMENT PAYMENT DATE" has the meaning given such
term in Section 4.02(a).
"PURCHASE PRICE HOLDBACK AMOUNT" means $500,000 which shall be held in
escrow by the Escrow Agent and to be paid in accordance with Section 4.02.
"PURCHASED ASSETS" has the meaning given such term in Section 2.01(a).
"REAL PROPERTY" has the meaning given such term in Section 5.21(a).
"RELATED PERSON" means with respect to a particular individual:
(i) each other member of such individual's Family (as hereinafter
defined);
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(ii) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(iii) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest
(as hereinafter defined); and
(iv) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
member, executor or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(i) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(ii) any Person that holds a Material Interest in such specified
Person;
(iii) each Person that serves as a director, officer, partner, member,
executor or trustee of such specified Person (or in a similar capacity);
(iv) any Person in which such specified Person holds a Material
Interest;
(v) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(vi) any Related Person of any individual described in clause (a) or
(b) below.
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule l3d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 50% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 50% of the outstanding equity securities or
equity interests in a Person.
"RETAINED ASSETS" has the meaning given such term in Section 2.01(b).
"RETAINED LIABILITIES" has the meaning given such term in Section 2.03.
"SELLER" has the meaning given thereto in the preamble.
"SELLER CLAIMANTS" has the meaning given such term in Section 14.03.
"SELLER CLOSING DISPUTE NOTICE" has the meaning given such term in
Section 4.02(c).
"SELLER'S DISPUTE NOTICE" has the meaning given such term in Section
2.06(b)(ii)(A).
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"SELLER GRANTS" has the meaning given such term in Section 5.17(d).
"SELLER INFRINGEMENT" has the meaning given such term in Section
5.17(g).
"SELLER IP" collectively, means all intellectual property (other than
OTS Software licensed by Seller) that is used or currently being developed by or
on behalf of any Seller Party in connection with the Business, including, but
not limited to, all of Seller's right, title and interest in and to the name
"Med-Staff, Inc." and all derivations thereof, all patents, trademarks, service
marks and all goodwill associated therewith, tradenames and service names and
all goodwill associated therewith, logos, designs, formulations, copyrights (in
both published and unpublished works) and other trade rights and all
derivations, registrations and applications therefor, all know-how, trade
secrets, patents, patent applications, inventions, confidential information, all
versions of software (including, but not limited to, in all cases all source
codes, object codes, programs, data, schema, applications, tools, modules,
routines and sub-routines), technology, methods, processes, research and
development, all telephone numbers, facsimile numbers, e-mail addresses, URLs
and Internet domain addresses, all customer and supplier lists as of the Closing
Date owned, used or licensed by Seller as a licensee or licensor that Seller has
any interest in or has ever used in the Business, the Websites located at those
locations set forth on SCHEDULE 5.17(A) attached hereto and all other Websites
(including, but not limited to, all forms, images, photographs, graphics and
graphic user interfaces, artwork, animation, video, audio, sound recordings,
databases, scripts, names, likenesses, testimonials and all other text and
content in whatever media that is viewable on or otherwise accessed through the
Websites), all HTML elements that express or otherwise relate to the Websites,
all computer programs, control panels, surcharge calculators, data files and
data bases, notes, flow charts, schema, hypermaps, wireframes and diagrams and
software documentation, and all common and civil law rights to the foregoing,
all rights to royalties paid by others in respect of any of the foregoing and
all claims or causes of actions for infringement thereof.
"SELLER PARTIES" means, individually and collectively, Seller and each
of the Principals.
"SELLER PLAN" means any Employee Benefit Plan (1) maintained, sponsored
or contributed to (or with respect to which any obligation to contribute has
been undertaken) by Seller or any ERISA Affiliate as of the Closing Date on
behalf of any director, member or employee of the Business (whether current,
former or retired) or their beneficiaries or (2) with respect to which Seller or
any ERISA Affiliate has on the Closing Date any obligation or contributed or
contributes to on behalf of any such director, member or employee.
"SHORTFALL AMOUNT" has the meaning given to such term in Section 4.02.
"SUBSIDIARIES" of a party means any corporation or other organization,
whether incorporated or unincorporated, of which at least a majority of the
securities or interests having power to elect at least a majority of the board
of directors or other Persons performing similar functions or having power to
manage such organization, is directly or indirectly owned or controlled by such
party or one or more of its Subsidiaries.
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"TANGIBLE ASSETS" means all of the tangible assets used in the
Business, including, but not limited to, machinery, office and other equipment,
furniture, fixtures, supplies, inventory, furnishings, hardware, computers and
related equipment, and business machines, parts and accessories (other than
owned or leased vehicles).
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes (whether filed with or
submitted to any Governmental Authority or required to be filed with or
submitted with any Governmental Authority), including any schedule or attachment
thereto, and including any amendment or extension thereof.
"TAXES" means all federal, state, county, local, foreign and other
taxes (including, but not limited to, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production, transfer, withholding, employment and payroll related
and property taxes, import duties and other governmental charges and
assessments), whether attributable to statutory or nonstatutory rules and
whether or not measured in whole or in part by net income, and including, but
not limited to, interest, additions to tax or interest, charges and penalties
with respect thereto imposed on Seller or any of the Purchased Assets.
"TERMINATING BUYER EVENT" has the meaning given such term in Section
13.01(d).
"TERMINATING SELLER EVENT" has the meaning given such term in Section
13.01(c).
"THIRD-PARTY CLAIMS" has the meaning given such term in Section
15.01(c).
"THREATENED" means any claim, proceeding, dispute, action or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) with respect to a claim, proceeding, dispute, action, or other matter
being asserted, commenced taken, or otherwise pursued in the future.
"TRADENAMES" has the meaning given such term in Section 5.17(e).
"TRANSACTION DOCUMENTS" means this Agreement, the transfer and
assumption documents to be executed at or before the Closing pursuant to Section
3.03, the Transitional Services Agreement and any other document or instrument
required to be executed and delivered pursuant hereto.
"TRANSFERRED EMPLOYEES" means (i) Davis, (ii) Rodden, (iii) the Key
Employees, (iv) all other employees primarily serving the Business and actively
employed as of the Closing Date, and (v) field employees of the Business as of
the Closing Date.
"TRANSITIONAL SERVICES AGREEMENT" means the Transitional Services
Agreement, in the form of EXHIBIT 10.12 hereto, dated as of the date hereof,
between Seller and Buyer.
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"WITHHELD AMOUNTS" has the meaning given such term in Section 15.01(c).
ARTICLE II.
PURCHASE AND SALE
2.01. ENUMERATION OF THE PURCHASED ASSETS; RETAINED ASSETS.
(a) On the Closing Date, Seller shall sell, assign, transfer, convey
and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller,
all right, title and interest of Seller in and to all of the assets, rights and
properties that are owned or leased by Seller and utilized in connection with
the Business, other than the Retained Assets (collectively, the "Purchased
Assets"), including, but not limited to:
(i) the Tangible Assets, including those set forth on SCHEDULE
2.01(A)(I);
(ii) subject to Section 2.04, all of the contracts and
amendments of Seller relating to the Business set forth on SCHEDULE 2.01(A)(II)
(the "Assumed Contracts"):
(iii) the Seller IP;
(iv) the Accounts Receivable (other than intercompany and
other non-transferable accounts receivable);
(v) to the extent legally transferable or assignable, all
right, title and interest in and to any and all Permits held in connection with
the Business;
(vi) all books, records, general ledgers, operating data,
employee records, computer records and other data of Seller relating to the
Business, including, but not limited to, all customer and supplier lists,
payment invoices, billing records, correspondence, all records, documents or
data relating to accounting and financial information and all other sales and
marketing information which relate to the Business and related information of
the Business or used by the Business, all rights of Seller in all telephone and
facsimile numbers and post office boxes used in connection with the Business, as
well as all existing catalogs and other support material, advertising plans of
any kind, sales literature, marketing material and related items (including, but
not limited to, all art work and printers' plates presently in the possession of
Seller's advertising agencies and printers);
(vii) subject to Section 2.01(b)(vii), all right, title and
interest to all causes of action, claims and rights in litigation or which could
result in litigation against any party pertaining to the Business or the
Purchased Assets;
(viii) all deposits and prepaid expenses relating to the Purchased Assets;
(ix) all of the goodwill and other intangibles pertaining or
relating to the Business and the Purchased Assets; and
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(x) all Licensed IP.
(b) The following assets of Seller (collectively, the "Retained
Assets") shall not be included in the Purchased Assets:
(i) all cash, cash equivalents and investments, except to the
extent held in escrow for the benefit of the Business or contractually required
to be so held (e.g. prepaid expenses, deposits, bonds, etc.);
(ii) except as set forth on SCHEDULE 2.01(A)(II), Seller's
Insurance Policies and rights in connection therewith;
(iii) all claims (and benefits to the extent they arise
therefrom) and litigation against third parties to the extent that such claims
and litigation relate to any Retained Assets or any Retained Liabilities;
(iv) Seller's corporate minutes, tax returns and other records
having to do solely with such party's organization and/or capitalization, any
books and records that such party is required by law to retain, and any books
and records relating solely to Retained Assets and/or Retained Liabilities;
provided, however, that Seller will promptly provide Buyer with copies thereof
upon Buyer's reasonable request;
(v) any rights to any of Seller's claims for any federal,
state or local tax refunds;
(vi) any Seller Plans not listed on SCHEDULE 2.01(A)(II) or
SCHEDULE 12.04 attached hereto;
(vii) all assets, if any, listed on SCHEDULE 2.01(B) hereto;
and
(viii) any rights which accrue or will accrue to Seller under
this Agreement or the Contemplated Transactions.
2.02. ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall not be
liable for and is not assuming any liabilities of the Seller Parties whatsoever,
other than (i) liabilities relating exclusively to the Purchased Assets or the
Business, (ii) liabilities of Seller accruing in the Ordinary Course of
Business, other than all liabilities relating to litigation or resulting from
claims regarding breach of contract, death, personal injury, malpractice, all
liabilities relating to or arising out of obligations of any Seller Party to any
of their Affiliates, directors or officers, all liabilities relating to Taxes
which arose prior to the Closing Date, all liabilities regarding retirement and
post retirement benefits and all liabilities to present and past employees of
Seller for severance payments other than those arising under the Seller Plans
set forth on SCHEDULE 12.04 attached hereto and referred to in Sections 12.03
and 12.04 herein and (iii) liabilities accruing or arising after the Closing
Date under the Assumed Contracts in force and effect as of the Closing Date
(other than liabilities arising out of a breach or default prior to the Closing
Date)(collectively, the "Assumed Liabilities").
15
2.03. RETAINED LIABILITIES. Except as otherwise provided in this
Agreement, Buyer will not assume or be responsible for any, and each of the
Seller Parties shall be and remain liable and responsible for, all obligations,
liabilities, commitments and Indebtedness of any of the Seller Parties not
specifically assumed by Buyer under Section 2.02 (the "Retained Liabilities").
Retained Liabilities include, among other things: (i) all liabilities of Seller
under Seller's Phantom Equity Plan; (ii) all liabilities of Seller as a result
of any claims arising in connection with breach of contract, death or personal
injury, losses or damages caused by or resulting from the provision of any
services by Seller prior to the Closing Date; (iii) all liabilities of Seller
for Taxes; and (iv) all liabilities of Seller for wages, severance payments and
employee benefits to the extent not fully accrued for by Seller in the
calculation of the Closing Net Working Capital; (v) all liabilities for vacation
and sick time to the extent not fully accrued for by Seller in the calculation
of the Closing Net Working Capital; and (vi) liabilities of Seller Plans not
listed on SCHEDULE 2.01(A)(II) or SCHEDULE 12.04 attached hereto. Seller shall
retain all Retained Liabilities and shall discharge all such liabilities as and
when due.
2.04. OTHER CONTRACTS. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign or transfer, or an assignment or transfer of, any claim, contract,
agreement or commitment of Seller or any claim or right to any benefit arising
thereunder or resulting therefrom, if an attempted assignment or transfer
thereof, without the consent to such assignment or transfer by the other parties
thereto, would constitute a breach thereof or in any way adversely affect the
rights of Seller thereunder (the "Other Contracts"). In each case in which
consent of a third party is required for assignment or transfer of such Other
Contract to Buyer, Seller shall use its best efforts to obtain, and Buyer hereby
agrees to cooperate with Seller in its efforts to obtain, such consent in a form
acceptable to Buyer. If such consent is not obtained, Seller, the Principals and
Buyer shall cooperate in an effort to provide Buyer the benefits and relieve
Seller of the obligations under such Other Contract, including, but not limited
to, Seller appointing Buyer as its subcontractor with respect to such Other
Contract.
2.05. NO ENCUMBRANCES. The sale, conveyance, assignment, transfer and
delivery of the Purchased Assets hereunder shall be free and clear of any and
all Liens, and shall be free and clear of all obligations and liabilities of the
Seller Parties, except for Assumed Liabilities.
2.06 CONSIDERATION. In consideration of the aforesaid sale, assignment,
transfer and delivery of the Purchased Assets, Buyer and/or Parent shall deliver
the following payments to Seller:
(a) On the Closing Date, Buyer shall deliver to Seller:
(i) an amount of cash equal to $100,000,000 as consideration
for the Assets; and
(ii) $4,000,000 as consideration for Seller and the Principals
agreeing to structure the proposed transaction as a purchase of assets in lieu
of a purchase of all of the issued and outstanding capital stock of Seller;
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(iii) less the Holdback Amount, which shall be deposited by
Buyer with the Escrow Agent on the Closing Date.
The payment calculated in accordance with this Section 2.06(a) and paid by Buyer
to Seller shall be referred to as the "Closing Date Payment."
(b) (i) If, and only if, the Adjusted EBITDA of the Business
for the year ending 2003 is equal to or greater than $19,250,000 and subject to
the provisions in Article IV herein and the terms and conditions set forth in
Section 2.06(b)(ii) below, Buyer shall pay Seller the additional amounts set
forth below (the "Earnout Payment") based on the Adjusted EBITDA of the Business
for the period commencing on January 1, 2003 and ending on December 31, 2003:
- ------------------------------------------------------------ ---------------------------------------------------------
2003 ADJUSTED EBITDA EARNOUT PAYMENT
- ------------------------------------------------------------ ---------------------------------------------------------
= $19.25 million $5 million
- ------------------------------------------------------------ ---------------------------------------------------------
> $19.25 < $20.25 million $5 million, plus $5.00 for each $1.00 of incremental
- Adjusted EBITDA in excess of $19.25 million
- ------------------------------------------------------------ ---------------------------------------------------------
>$20.25 < $21.25 million $10 million, plus $12.50 for each $1.00 of incremental
- Adjusted EBITDA in excess of $20.25 million
- ------------------------------------------------------------ ---------------------------------------------------------
> $21.25 < $22.25 million $22.5 million, plus $8.70 for each $1.00 of incremental
- Adjusted EBITDA in excess of $21.25 million
- ------------------------------------------------------------ ---------------------------------------------------------
> $22.25 < $23.25 million $31.2 million, plus $3.80 for each $1.00 of incremental
- Adjusted EBITDA in excess of $22.25 million
- ------------------------------------------------------------ ---------------------------------------------------------
> $23.25 < $24.25 million $35.0 million, plus $2.50 for each $1.00 of incremental
- Adjusted EBITDA in excess of $23.25 million
- ------------------------------------------------------------ ---------------------------------------------------------
>$24.25 million $37.5 million
- ------------------------------------------------------------ ---------------------------------------------------------
(ii) (A) Within seventy-five (75) days after December 31,
2003 (the "Buyer's Statement Delivery Date"), Buyer shall prepare and deliver to
Seller a statement, prepared in accordance with GAAP using the accrual method of
accounting (the "Buyer's Statement") showing in reasonable detail calculations
of Adjusted EBITDA and the Earnout Payment, if any, payable in respect thereof
and which shall be delivered to Seller. Seller shall have a period of fifteen
(15) Business Days after receipt of the Buyer's Statement (the "Earnout Dispute
Period") within which to dispute the calculations set forth therein by means of
a written notice of dispute setting forth in reasonable detail the grounds for
such dispute ("Seller's Dispute Notice"). If Seller does not timely deliver
Seller's Dispute Notice, the calculations set forth in the Buyer's Statement
shall be final and binding on Seller and the Principals and Buyer shall
thereafter promptly pay Seller any Earnout Payment detailed in the Buyer's
Statement. Seller may, at any time during the Earnout Dispute Period, provide
written notice to Buyer that Seller has agreed to the Earnout Payment detailed
in the Buyer's Statement (which notice shall be irrevocable once received by
Buyer), in which case Buyer shall pay to Seller such Earnout Payment within ten
(10) Business Days after Buyer has received such written notice.
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(B) If Seller timely delivers a Seller Dispute
Notice within the Earnout Dispute Period, the dispute shall be resolved as set
forth in this clause (B). Buyer and Seller shall first use their commercially
reasonable efforts to resolve any dispute for a period of ten (10) days after
Buyer has received the Seller Dispute Notice. If no resolution is achieved
during such period, Buyer and Seller agree that PriceWaterhouse Coopers shall be
retained by them to resolve the remaining elements of such dispute as soon as
reasonably practicable based on a review of the Buyer's Statement, relevant
books and records, work papers and other information supplied from time to time
by Buyer and Seller, including, without limitation, the Seller Dispute Notice.
PriceWaterhouse Coopers shall communicate its resolution to Buyer and Seller in
writing as promptly as practicable after being retained and that resolution
shall be final and binding upon Buyer, Seller and the Principals. If any
unresolved dispute is submitted to PriceWaterhouse Coopers in accordance with
this Section 2.06(b)(ii)(B), Buyer shall pay 50% of the fees and expenses of
PriceWaterhouse Coopers and Seller and the Principals shall, jointly and
severally, pay the other 50% thereof; provided, however, that all fees and
expenses of Buyer's own accountants, advisors or other representatives, if any,
shall be paid by Buyer and the fees and expenses of Seller's and the Principals
own accountants, advisors or other representatives, if any shall be paid by
them.
(C) Upon the final determination of an Earnout
Payment pursuant to Section 2.06(b)(ii)(B), Buyer shall pay to Seller within
five (5) Business Days thereafter the finalized Earnout Payment, if any.
(D) The Earnout Payment shall be paid by Buyer,
at Seller's discretion, either (i) by certified or official bank check payable
to the order of Seller or (ii) by wire transfer of federal funds to an account
as Seller shall direct in writing on or before the Earnout Determination Date.
The payments required to be made by Buyer to Seller pursuant to this
Section 2.06 are collectively referred to herein as the "Purchase Price." Those
portions of the Purchase Price set forth in Sections 2.06(a) and (b) above are
subject to further adjustment pursuant to Section 4.02 and Section 15.01 hereof.
ARTICLE III.
CLOSING
3.01. CLOSING DATE. Unless otherwise agreed by the parties in an
amendment to this Agreement, executed and delivered in accordance with Section
20.04, the Closing shall take place on the third Business Day after all
conditions set forth in Articles X and XI have been satisfied or waived.
3.02. TIME AND PLACE OF CLOSING; SIMULTANEITY. Subject to fulfillment
or waiver of the conditions set forth in Articles X and XI, the Closing shall
take place at 10:00 a.m. local time on the Closing Date at the offices of
Proskauer Rose LLP or at such other time or place, as shall be mutually agreed
upon by the parties. All of the actions to be taken and documents to be executed
and delivered at the Closing shall be deemed to be taken, executed and delivered
18
simultaneously, and no such action, execution or delivery shall be effective
until all actions to be taken and executions and deliveries to be effected at
the Closing are complete. Each document of transfer or assumption executed and
delivered pursuant to this Agreement must be reasonably satisfactory in form and
substance to Seller and Buyer.
3.03. ACTIONS AT THE CLOSING. At the Closing, on the terms and subject
to the conditions set forth in this Agreement:
(a) Seller will execute and deliver to Buyer bills of sale, instruments
of assignment and other instruments of transfer for the Purchased Assets, in
form reasonably satisfactory to Buyer;
(b) Buyer will pay the amounts payable on the Closing Date to Seller
and the Escrow Agent under Section 2.06 herein by wire transfer of federal funds
to such account as Seller and the Escrow Agent, as the case may be, shall direct
in writing at least three (3) Business Days before the Closing Date;
(c) The respective Buyer Parties and Seller Parties will deliver such
certificates, opinions and other documents as are required by Articles X and XI;
and
(d) The respective Buyer Parties and Seller Parties will deliver all
other documents, instruments and writings reasonably required to consummate the
Contemplated Transactions.
3.04. ALLOCATION OF PURCHASE PRICE AND ASSUMED LIABILITIES. The
Purchase Price shall be allocated for tax reporting purposes in the manner set
forth in SCHEDULE 3.04 attached to this Agreement. Buyer and Seller declare that
the valuation of the Purchased Assets and the Assumed Liabilities has been
determined in good faith and as the result of arms' length bargaining and Buyer
and Seller agree that no position inconsistent with the allocation agreed to by
Buyer and Seller shall be taken by either party before any governmental or
judicial authority. Buyer and Seller agree to file Internal Revenue Service Form
8594 in accordance with the agreed upon allocation referenced in SCHEDULE 3.04.
ARTICLE IV.
NET WORKING CAPITAL ADJUSTMENT
4.01. CLOSING OF BOOKS. Seller and Buyer shall cooperate to close
Seller's books and related accounting records of Seller relating to the Business
effective as of 12:01 a.m. local time on the Closing Date.
4.02. NET WORKING CAPITAL ADJUSTMENT.
(a) If the Closing Net Working Capital is within the Base Net Working
Capital Range, then there shall be no adjustment to the Purchase Price and, in
such event, Seller and Buyer shall jointly instruct the Escrow Agent to deliver
to Seller the Purchase Price Holdback Amount. If the Closing Net Working Capital
19
is below the Base Net Working Capital Range, then the Purchase Price shall be
adjusted by an amount equal to the Closing Net Working Capital minus the low end
of the Base Net Working Capital Range ($19,100,000). If the Closing Net Working
Capital is above the Base Net Working Capital Range, then the Purchase Price
shall be adjusted by an amount equal to the Closing Net Working Capital minus
the high end of the Base Net Working Capital Range ($20,300,000. If the
calculation provided in the two immediately preceding sentences results in a
positive number, the Purchase Price shall be increased by such amount (the
"Overage Amount"). If the Purchase Price is to be increased, (x) Seller and
Buyer shall jointly instruct the Escrow Agent to deliver to Seller the Purchase
Price Holdback Amount and (y) Buyer shall remit the Overage Amount to Seller. If
the calculation provided in the first sentence of this Section 4.02(a) results
in a negative number, the Purchase Price shall be decreased by the absolute
value of such amount (the "Shortfall Amount"). If the Purchase Price is to be
decreased, the Seller and Buyer shall jointly instruct the Escrow Agent to pay
to Buyer from the Purchase Price Holdback Amount, the Shortfall Amount and the
portion, if any, of the Purchase Price Holdback Amount that exceeds the
Shortfall Amount shall be paid by the Escrow Agent to Seller. If the Shortfall
Amount exceeds the Purchase Price Holdback Amount, Seller and Buyer shall
jointly instruct the Escrow Agent to pay Buyer the full Purchase Price Holdback
Amount. In addition, Seller shall pay to Buyer an amount equal to (x) the
Shortfall Amount, minus (y) the Purchase Price Holdback Amount. All payments to
be made pursuant to this Section shall be made on a date (the "Purchase Price
Adjustment Payment Date") on or before the fifth Business Day after the date of
the final determination of the Net Working Capital Amount.
(b) Within sixty (60) days following the Closing Date, Buyer shall
prepare and deliver to Seller a statement, prepared in accordance with generally
accepted accounting principles (the "Buyer's Closing Statement"), showing the
Closing Net Working Capital as well as the calculation of the Net Working
Capital Amount. Upon and after delivery to Seller of the Buyer's Closing
Statement, Seller and Seller's independent accountants shall be given access to
Buyer's working papers to facilitate Seller's review of the calculation of the
Net Working Capital Amount. The parties agree that any Accounts Receivable on
Sellers balance sheet dated December 31, 2002 that are uncollected on or prior
to the Closing Date and not fully reserved for on the Interim Financial
Statements shall be written off as of the Closing Date. Any such write-off shall
not negatively impact the calculation of Closing Net Working Capital.
(c) Seller shall have thirty (30) days after receipt of the Buyer's
Closing Statement (such 30-day period being, the "Net Working Capital Adjustment
Dispute Period") within which to dispute the calculations set forth in the
Buyer's Closing Statement by delivering a written notice of dispute, setting
forth in reasonable detail the grounds for such dispute (the "Seller Closing
Dispute Notice"). If Seller does not timely deliver a Seller Closing Dispute
Notice, the calculation of the Net Working Capital Amount set forth in the
Buyer's Closing Statement shall be final and binding on Seller. If Seller timely
delivers a Seller Closing Dispute Notice within the Net Working Capital
Adjustment Dispute Period, Buyer and Seller shall promptly use their
commercially reasonable efforts to resolve such dispute through negotiation for
a period of ten (10) Business Days following the date of Buyer's receipt of the
Seller Closing Dispute Notice. If no resolution is achieved during such period,
Buyer and Seller agree that PriceWaterhouse Coopers shall be retained by them to
resolve the remaining elements of such dispute as soon as reasonably
practicable. PriceWaterhouse Coopers shall communicate its resolution to Buyer
and Seller in writing as promptly as practicable after being retained and that
resolution shall be final and binding upon Buyer, Seller and the Principals. If
20
any unresolved dispute is submitted to PriceWaterhouse Coopers in accordance
with this Section 4.02(c), Buyer shall pay 50% of the fees and expenses of
PriceWaterhouse Coopers and Seller and the Principals shall, jointly and
severally, pay the other 50% thereof; provided, however, that all fees and
expenses of Buyer's own accountants, advisors or other representatives, if any,
shall be paid by Buyer and the fees and expenses of Seller's and the Principals
own accountants, advisors or other representatives, if any, shall be paid by
them.
ARTICLE V.
SELLER PARTIES' REPRESENTATIONS AND WARRANTIES
With the understanding that Buyer and Parent intend to rely hereon,
Seller and each of the Principals, jointly and severally, represent and warrant
to Buyer and Parent (which warranties and representations shall survive the
Closing to the extent set forth in Section 14.01 herein regardless of what
examinations, inspections, audits and other investigations Buyer and Parent have
made or may hereafter make, with respect to such warranties and
representations), as of the date hereof and as of the Closing Date as follows:
5.01. SELLER PARTIES STATUS AND AUTHORITY, OWNERSHIP, ETC.
(a) STATUS AND AUTHORITY. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has full corporate power and authority to conduct its business
as it is now being conducted, to own and use the properties and assets that it
purports to own or use and to perform all of its obligations under the Assumed
Contracts. In connection with the Business, Seller is licensed or qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction set forth on SCHEDULE 5.01(A), which are all the jurisdictions
where the failure of the Business to be so qualified would, individually or in
the aggregate, have a Material Adverse Effect. Each of the Seller Parties has
all requisite power and authority to execute, deliver and perform its/his
obligations under the Transaction Documents to which it/he is or will be a
party. A true, correct and complete copy of the Articles of Incorporation,
Bylaws and any shareholders' agreements or voting agreements among shareholders
(including all amendments and modifications thereto) are attached hereto as
SCHEDULE 5.01(A). Such Articles of Incorporation and Bylaws of Seller are in
full force and effect and have not been amended since the date thereof and
Seller is not in default thereunder, as applicable. True, correct and complete
copies of the documents governing the Trust have been provided to Buyer and such
documents are in full force and effect and have not been amended since the date
thereof and the Trust is not in default thereunder.
(b) COMPANY OWNERSHIP. The Principals own, of record and beneficially,
all of the capital stock of Seller, free and clear of any Liens. There are no
other rights, options or warrants outstanding to purchase equity. Seller is not
a participant in any joint venture, partnership or similar arrangement and does
not own of record, beneficially or equitably any capital stock, securities or
other ownership interest, directly or indirectly, in any other firm, corporation
or entity other than short-term investments.
21
5.02. AUTHORIZATION; CONSENTS.
(a) The execution and delivery by each Seller Party of the Transaction
Documents to which it/he is or will be a party and the performance by the Seller
Parties of their respective obligations hereunder and thereunder have been duly
authorized by all required corporate and shareholder action, and no other
corporate proceedings or shareholder actions are necessary to approve and
authorize the execution and delivery of the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby.
(b) Except as set forth on SCHEDULE 5.02(B), no Seller Party is nor
will be required to give any notice to or obtain any consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions herein where the failure
to give such notice(s) or obtain such consent(s) would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, including,
but not limited to the assignment of the Assumed Contracts.
5.03. EXECUTION AND DELIVERY. Each of the Seller Parties has duly and
validly executed and delivered the Transaction Documents to which it/he is a
party and which are being executed and delivered simultaneously with this
Agreement; and such Transaction Documents are legal, valid and binding
obligations of the respective Seller Parties, as applicable, enforceable against
such parties in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, fraudulent transfer,
marshalling or other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity (whether or not considered in a
proceeding at law or in equity). The remaining Transaction Documents to which
the respective Seller Parties will be a party, when executed and delivered at
the Closing, will be duly and validly executed and delivered by the appropriate
Seller Parties and upon such execution and delivery, will be legal, valid and
binding obligations of the respective Seller Parties, enforceable against such
parties in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer, marshalling or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether or not considered in a proceeding at law or in equity).
5.04. NO CONFLICT. The execution and delivery by each of the Seller
Parties of the Transaction Documents to which it/he is or will be a party, and
such party's performance of its/his obligations hereunder and thereunder, does
not and will not, directly or indirectly (with or without notice or lapse of
time, or both): (i) conflict with or violate any provision of the Articles of
Incorporation, Bylaws, shareholders' agreement or other organizational documents
of the Seller or the Trust; (ii) conflict with or violate, result in a breach of
or constitute a default (or an event which, with or without notice, lapse of
time or both, would constitute a default) under or result in the invalidity of,
or accelerate the performance required by or cause or give rise to any right of
acceleration, termination or modification of any right or obligation pursuant to
any agreement or contract to which any of the Seller Parties is a party or by
which any of them (or any of their respective assets) is subject or bound,
including, but not limited to, the Assumed Contracts, which event, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
22
Effect; (iii) conflict with, or result in a violation of, or give any
Governmental Authority or other Person the right to challenge the Contemplated
Transactions or to exercise any remedy or obtain any relief under, any legal
requirement or any order to which the Seller Parties or any of the Purchased
Assets are subject; (iv) result in the imposition or creation of, or give any
party the right to create, any Lien upon any of the Purchased Assets; (v)
violate, result in a breach of or constitute a default (or an event which, with
or without notice, lapse of time or both, would constitute a default) under any
judgment, decree, order, writ, injunction or process of any Governmental
Authority binding upon the Seller Parties or any of their respective businesses
or properties, including the Purchased Assets; (vi) assuming that the parties
comply with the requirements of the HSR Act, violate any Law applicable to
either the Seller Parties or any of their respective businesses or properties,
including the Purchased Assets; (vii) except as required by the HSR Act, require
any of the Seller Parties to obtain any authorization, consent, approval or
waiver from, or to make any filing with, any Person where such event,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect; or (viii) cause Buyer to become subject to, or to
become liable for the payment of, any tax, except as set forth on SCHEDULE 5.04.
5.05. LEASES; ASSUMED CONTRACTS.
(a) SCHEDULE 5.05(A) sets forth a description of the Leased Real
Property and any rights of third parties to occupy space at such leased
premises. Seller enjoys peaceful possession of all such property. None of the
Seller Parties or any of their Affiliates owns any real property used in the
Business. Seller has valid and subsisting leasehold interests in each of the
leasehold sites listed on SCHEDULE 5.05(A) (the "Leasehold Sites") pursuant to a
written lease a true and correct copy of which has been delivered to Buyer (each
a "Lease"), and Seller has not encumbered any such leasehold interest, except
for Permitted Liens. No condition exists under any such Lease which, with
notice, lapse of time or both, would constitute a default thereunder by Seller
or, to the Seller Parties' Knowledge, any other party thereto. Seller has not
granted or been granted any material waiver or forbearance with respect to any
such Lease. Except as set forth on SCHEDULE 5.05(A), there are no leases,
subleases, licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, whether written or oral, pursuant to which a Seller
Party has granted to any person the right to purchase, lease, use, possess or
occupy any of the Leasehold Sites or any portion thereof, or any interest in any
of the Leasehold Sites. Seller is in material compliance with all Laws
applicable to, and has all Permits necessary for the use, occupancy, operation
or maintenance of, each of the Leasehold Sites. No brokerage or leasing
commissions are or may be due and payable by Seller with respect to any such
Lease or any renewal or extension thereof.
(b) Seller has delivered to Buyer true and correct copies of all
written Assumed Contracts and summaries of all oral Assumed Contracts. Attached
hereto as SCHEDULE 5.05(B) is a list of all Assumed Contracts (except those made
in the Ordinary Course of Business and requiring annual payments or liabilities
of Seller of $186,000 or less), including those which relate to the Purchased
Assets or the operation of the Business and (i) under which Seller has any
present or potential liability or obligation, or from which Seller derives, or
may in the future derive, a benefit, (ii) which involve annual payments or
liabilities of Seller in excess of $100,000, (iii) which relate to the license
of any Seller IP by or from Seller (other than licenses arising from the
23
purchase of OTS Software or other standard products), (iv) which contain
provisions restricting or affecting the development, manufacture or distribution
of Seller's products or services, or (v) which provide for indemnification by
Seller. Neither Seller nor, to the Seller Parties' Knowledge, any other party,
is in breach of or default under any Assumed Contract, except where such breach
or such default would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and to the Seller Parties'
Knowledge, there exists no event or condition which (whether with or without
notice, lapse of time or both) could reasonably be expected to constitute a
default thereunder, gives rise to a right to accelerate or terminate any
provision thereof or gives rise to any Lien on the Purchased Assets, except for
those defaults, accelerations, terminations or Liens that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and no party to any of the Assumed Contracts, including the
Leases, has made or asserted any claim or defense, set-off or counterclaim under
any Assumed Contract or Lease or has exercised any option granted to it to
cancel or terminate such agreement to shorten the term of such agreement or to
extend or renew such agreement, and Seller has not received any notice to that
effect. Each Assumed Contract is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms, of
Seller, and, to the Seller Parties' Knowledge, each other party thereto. Except
as set forth on SCHEDULE 5.05(B), no Seller Party is restricted by any agreement
or other commitment from carrying on the Business in any area of the world. None
of the Assumed Contracts has had, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. There are no
current renegotiations of, or outstanding rights to renegotiate any material
amounts paid or payable to Seller under current or completed Assumed Contracts
with any Person and, to the Knowledge of Seller and the Principals, no such
Person has made written demand for such renegotiation.
5.06. TANGIBLE ASSETS. Attached hereto as SCHEDULE 2.01(A)(I) is a true
and correct list or description of the material Tangible Assets. Each of the
Tangible Assets is in good and operable condition, reasonable wear and tear
excepted, and is reasonably fit and usable for the purpose for which it is being
used.
5.07. TITLE TO PURCHASED ASSETS; ABSENCE OF LIENS. Seller owns or
leases all of the Purchased Assets. Seller has good and valid title to all of
the Purchased Assets, and in the case of leased or subleased items of Tangible
Assets, real property or intangible personal property used in the Business,
valid and subsisting leasehold interest therein, free and clear of (i) any Lien
other than Permitted Liens which will be discharged prior to the Closing Date,
or (ii) any adverse claims by any third parties. At the Closing and upon
consummation of the Contemplated Transactions, Buyer will receive good and valid
title to the Purchased Assets, free and clear of all Liens. The Purchased Assets
are substantially the same as were held by Seller on December 31, 2002, except
for changes occurring in the Ordinary Course of Business.
5.08. THE BUSINESS. The Purchased Assets include all rights,
properties, interests and assets that are necessary to permit Seller to carry on
the Business as presently conducted. All of the assets and liabilities held by
Medical Professional Contractors, Inc. and relating to the Business have been or
will be transferred to Seller at or prior to the Closing Date.
24
5.09. RELATED PERSONS.
(a) Except as set forth on SCHEDULE 5.09, there are no obligations of
Seller to officers, directors or employees of Seller or their Related Persons
other than (a) for payment of salary, bonuses or other compensation for services
rendered in such capacity and (b) reimbursement for reasonable expenses incurred
in such capacity on behalf of Seller. Except as set forth on SCHEDULE
5.09(A)(I), no officer, director or employee of Seller or any of their Related
Persons are indebted to Seller or have (and in the case of employees, to the
Seller Parties' Knowledge) any direct or indirect ownership interest in any
Person (i) with which Seller is an Affiliate, or with which Seller has a
business relationship or (ii) that competes with Seller, except that such
officers, directors or employees of the Seller may own up to five percent (5%)
of the securities of any company listed on a national securities exchange or
quoted on the Nasdaq Stock Market that competes with Seller. Except as set forth
on SCHEDULE 5.09(A)(II), none of the officers, directors or employees of Seller
or their Related Parties is, directly or indirectly, interested in any Assumed
Contract.
(b) Except as set forth on SCHEDULE 5.09(B)(I), as of the date of this
Agreement, (i) there are no intercompany liabilities or obligations relating to
the Business between any of Seller, the Principals, their Affiliates, their
shareholders or Related Persons, (ii) no shareholder of Seller causes to be
provided, or has any interest in any agreement for the provision of, any assets,
services or facilities relating to the Business, (iii) neither Seller nor either
of the Principals provides, or has any interest in any agreement for the
provision of, any assets, services or facilities to the Business and (iv) none
of Seller, the Principals or their Affiliates has any direct or indirect
ownership interest in any Person with which Seller has a business relationship.
Each of the liabilities and transactions listed in SCHEDULE 5.09(B)(I) was
incurred or engaged in, as the case may be, on an arm's-length basis. Except as
disclosed in SCHEDULE 5.09(B)(II), all settlements of intercompany liabilities
relating to the Business between Seller, the Principals, and any of their
Affiliates have been made, and all allocations of intercompany expenses have
been applied, in the Ordinary Course of Business consistent with past practice.
As of the date hereof and as of the Closing Date, neither the Principals nor
their Affiliates have or will have any claims against Seller, except for claims
arising out of the Contemplated Transactions.
5.10. LITIGATION; INVESTIGATIONS.
Except as set forth in SCHEDULE 5.10, there have not been in the past
three (3) years, nor are there currently, any actions, suits or proceedings
pending or, to the Seller Parties' Knowledge, actions, suits, investigations or
proceedings Threatened against the Seller Parties (i) with respect to the
Purchased Assets or the Business, (ii) with respect to the Agreement, the
Transaction Documents or Contemplated Transactions, (iii) which may result,
either individually or in the aggregate, in a Material Adverse Effect, (iv)
which may result in any change in the current ownership of Seller, or (v)
involving any of Seller's employees, directors or officers (current or former),
including, but not limited to, healthcare staffing personnel of the Business in
their capacity as such. None of the Seller Parties or any of their Affiliates is
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any Governmental Authority related to the Business. There is no
action, suit, proceeding or investigation brought by any Seller Party currently
pending or which such Person intends to initiate related to the Business. To
Seller's and each Principal's Knowledge, no event has occurred or circumstance
exists that may reasonably serve as a basis for the commencement of any
proceeding against Seller, the Purchased Assets or the Business.
25
To the Seller Parties' Knowledge, there are no pending or Threatened,
governmental investigations against Seller or the Business.
5.11. ABSENCE OF CHANGES OR EVENTS. Since December 31, 2002, the
Business has been conducted only in the Ordinary Course of Business. Without
limiting the generality of the foregoing, since December 31, 2002, Seller has
not: (a) suffered any material adverse change which has had, or would reasonably
be expected to have, a Material Adverse Effect, and to the Knowledge of the
Seller Parties, no other event has occurred or circumstances exist that would
reasonably be expected to cause a Material Adverse Effect; (b) suffered any
damage, destruction or casualty loss (whether or not covered by insurance) which
has had, or would reasonably be expected to have, a Material Adverse Effect on
the Business or the Purchased Assets; (c) converted any Current Assets of the
Business into non-current assets other than in the Ordinary Course of Business
consistent with past practice; (d) written down the value of any inventory of
the Business or written off as uncollectible any notes or Accounts Receivable of
the Business other than in the Ordinary Course of Business consistent with past
practice; (e) canceled any debts of the Business or waived any material claims
or rights relating to the Business other than in the Ordinary Course of
Business; (f) sold, transferred, leased or otherwise disposed of any of its
properties or assets relating to the Business, except in the Ordinary Course of
Business and consistent with past practice; (g) except as set forth on SCHEDULE
5.11, disposed of, abandoned or permitted to lapse any rights to the use of any
Seller IP; (h) agreed, whether in writing or otherwise, to take any action
described in this Section 5.11; (i) made any material change in the accounting
methods of Seller relating to the Business; (j) failed to pay or satisfy any of
its debts, obligations or liabilities as the same become due and owing; or (k)
agreed to do any of the foregoing. In addition, without limiting the generality
of the foregoing, except as set forth on SCHEDULE 5.11 and other than in the
Ordinary Course of Business, since December 31, 2002, Seller has not: (i)
granted any increase in the rate or terms of compensation payable or to become
payable to any officers, directors or employees of the Business or granted any
extraordinary bonus or compensation to any employee of Seller during the year
ended December 31, 2002 that was not paid in full during such year; (ii) granted
any increase in the rate or terms of any bonus, insurance, pension or other
employee benefit plan payment or arrangement relating to the Business; (iii)
entered into any employment bonus or deferred compensation agreement with any
employee of the Business; (iv) entered into any agreement (including but not
limited to, any borrowing, capital expenditure or capital financing of more than
$50,000), material to the Business, except agreements in the Ordinary Course of
Business; (v) made any change in accounting methods, principles or practices
relating to Seller or the Business; (vi) paid, discharged or satisfied any
claim, liability or obligation relating to the Business other than the payment,
discharge or satisfaction of liabilities and obligations reflected or reserved
against in the Financial Statements, or incurred in the Ordinary Course of
Business and consistent with past practice; (vii) prepaid any obligation
relating to the Business having a fixed maturity of more than ninety (90) days
from the date such obligation was issued or incurred, or not paid, within a
reasonable date of when due, consistent with past practice, an account payable
relating to the Business, or sought the extension of the payment date of any
account payable relating to the Business, other than an account payable that was
26
being contested in good faith; (viii) made any capital expenditures or
commitments in excess of $50,000 in the aggregate for repairs or additions to
Tangible Assets or other property relating to the Business; (ix) permitted or
allowed any of its property or assets relating to the Business to be subjected
to any Lien, other than Permitted Liens; or (x) agreed, whether in writing or
otherwise, to take any action described in this Section 5.11. Since December 31,
2002, there has not been any damage to or destruction or loss of any Purchased
Asset or property of Seller or the Leased Premises, whether or not covered by
insurance, materially and adversely affecting the Purchased Assets, the
Business, financial condition or prospects of Seller, taken as a whole.
5.12. INSURANCE. SCHEDULE 5.12 is a true, correct and complete list of
the insurance coverage (including insured, insurer, amount deductible, premium,
expiration date) maintained by Seller or any of its Affiliates for the Business
and the Purchased Assets, together with a list of all claims made under each
such Insurance Policy. None of the Seller Parties nor any of their Affiliates
have received any notice from, or on behalf of, any insurance carrier issuing to
their Insurance Policies to the effect that: (a) insurance rates with respect to
the Business or the Purchased Assets will be substantially increased; (b) there
will be no renewal of existing policies; or (c) material modification of any
aspect of the Business will be required. The insurance policies required to be
disclosed on SCHEDULE 5.12 (i) are in full force and effect in accordance with
their terms, (ii) no notice of cancellation, no restriction from relocating or
suspension, modification or amendment to any Insurance Policy has been received,
and, to the Seller Parties' Knowledge, there is no existing default or event
which, with the giving of notice or lapse of time or both, would constitute a
default thereunder, (iii) such Insurance Policies provide coverage in amounts
and upon terms that are reasonable and adequate for people having similar
business, operations and property, (iv) all premiums to date have been paid in
full to the extent due and payable, and (v) Seller and its Affiliates, as
applicable, have not been refused any insurance, or had its coverage limited by
any insurance carrier.
5.13. FINANCIAL STATEMENTS.
(a) Annexed hereto as SCHEDULE 5.13(A)(I) is a true and complete copy
of the Financial Statements. The Financial Statements present fairly, in all
material respects, the financial condition and results of operations, cash flows
and shareholders' equity of the Seller as at the date of such statements, and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, and are based on the books, records and accounts
of Seller. Except as set forth on SCHEDULE 5.13(A)(II), Seller has no
liabilities or obligations of any kind (whether accrued, absolute, direct,
indirect, contingent or otherwise) which would be required to be reflected on a
balance sheet prepared in accordance with generally accepted accounting
principles and which are not fully accrued or reserved against in the balance
sheet of Seller contained in the Financial Statements (except for changes in the
Ordinary Course of Business since December 31, 2002) that do not and would not
reasonably be expected to have a Material Adverse Effect). Except as set forth
on SCHEDULE 5.13(A)(II), none of the Seller Parties or any of their Affiliates
has any outstanding loans relating to the Business of any kind and none of
Seller Parties' obligations which relate to the Business have been guaranteed by
any other Person.
27
(b) Except as set forth on the most recent balance sheet of Seller
contained in the Financial Statements, and other than as disclosed on SCHEDULE
5.13(B), Seller does not have, and none of the Seller Parties or any of their
Affiliates, on behalf of Seller, has any liabilities (including contingent
liabilities) in excess of $50,000, except Current Liabilities incurred in the
Ordinary Course of Business. To the Seller Parties' Knowledge, there is no basis
for the assertion against the Seller Parties' of any claim or liability relating
to the Business that would reasonably be expected to cause a Material Adverse
Effect. No financial statements of any Person other than Seller are required by
generally accepted accounting principles to be included in the Financial
Statements. Seller has not engaged in any transaction, maintained any bank
account or used any of the funds of Seller in the conduct of its business,
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of Seller.
5.14. EMPLOYEE AND LABOR RELATIONS.
(a) SCHEDULE 5.14(A) includes a true and complete list of all full and
part-time employees and independent contractors of the Business and their
compensation, including the date and amount of the most recent increase in each
employee's compensation. There are no collective bargaining agreements with any
of the employees of the Business. There is no labor union organizing to the
Seller Parties' Knowledge, pending or Threatened with respect to the Business,
and no restriction from relocation or closing any of its obligations. To the
Seller Parties' Knowledge, no employee of the Business, or any consultant with
whom Seller has contracted in connection with the Business, is in violation of
any term of any employment contract, proprietary information agreement or any
other agreement relating to the right of any such individual to be employed by,
or to contract with, Seller because of the nature of the business to be
conducted by the Business; and to the Seller Parties' Knowledge, the continued
employment by Seller of its present employees of the Business, and the
performance of Seller's contracts with its independent contractors in connection
with the Business, will not result in any such violation. None of the Seller
Parties have received any notice alleging that any such violation has occurred.
Seller is not bound to employ, or to continue the employment of, any employee of
the Business for any period. Except as disclosed on SCHEDULE 5.14(A), Seller is
not bound to pay any amounts to any employee of the Business following such
employee's termination of employment. To the Seller Parties' Knowledge, no
officer or Key Employee, or any group of Key Employees, intends to terminate
their employment with Seller, nor does Seller have a present intention to
terminate the employment of any officer, Key Employee or group of Key Employees,
except as contemplated by this Agreement.
(b) Except as set forth in SCHEDULE 5.14(B), there have not been in the
last twelve (12) months, nor are there currently, any actions, suits or
proceedings pending or, to the Seller Parties' Knowledge, actions, suits,
investigations or proceedings Threatened against Seller or any of its Affiliates
by any employees, former employees, employees' collective bargaining
representatives, job applicants or any association or group of such persons,
relating to employment in or with Seller or the Business. Except as set forth in
SCHEDULE 5.14(B), there are no written personnel policies, rules or procedures
applicable to any employees of the Business. True and correct copies of all such
policies, rules or procedures set forth in SCHEDULE 5.14(B) have been provided
to Buyer. Seller and each of its Affiliates have complied in all material
28
respects with all Laws applicable to present or former employees (or any Person
found to be a present or former employee), employees' collective bargaining
representatives, job applicants or any association or group of such persons, of
the Business, including but not limited to any provisions thereof relating to
terms and conditions of employment, wages, hours, the payment of social security
and similar taxes and occupational safety and health.
5.15. EMPLOYEE BENEFITS.
(a) SCHEDULE 5.15(A) sets forth a true and complete list of all Seller
Plans.
(b) Neither Seller, any ERISA Affiliate nor any of their respective
predecessors has ever contributed to, contributes to, has ever been required to
contribute to, or otherwise participated in or participates in or in any way,
directly or indirectly, has any liability with respect to any plan subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including,
but not limited to any, "multiemployer plan" (within the meaning of Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), or any single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) which
is subject to Sections 4063 and 4064 of ERISA.
(c) With respect to each of the Seller Plans and to the Seller Parties'
Knowledge: (i) each Seller Plan intended to qualify under Section 401(a) of the
Code is qualified and has received a determination letter from the IRS or is on
a standardized prototype document that is the subject of a favorable opinion
letter to the effect that the Seller Plan is qualified in form under Section 401
of the Code and any trust maintained pursuant thereto is exempt from federal
income taxation under Section 501 of the Code and nothing has occurred or is
expected to occur through the Closing Date that caused or could cause the loss
of such qualification or exemption or the imposition of any penalty or tax
liability; (ii) all payments required by any Seller Plan, any collective
bargaining agreement or other agreement or by law (including, but not limited
to, all contributions, insurance premiums or intercompany charges) with respect
to all periods through the Closing Date shall have been made prior to the
Closing Date (on a pro rata basis where such payments are otherwise
discretionary at year end) or provided for by Seller as applicable, by full
accruals as if all targets required by such Seller Plan had been or will be met
at maximum levels) on its financial statements; (iii) no claim, lawsuit,
arbitration or other action has been Threatened, asserted, instituted or is
anticipated against the Seller Plans (other than non-material routine claims for
benefits and appeals of such claims), any trustee or fiduciaries thereof in
their capacities as trustees or fiduciaries of such Seller Plan or, with respect
to the Seller Plans, against, Seller, any ERISA Affiliate, or any director,
officer or employee thereof or any of the assets of any trust of the Seller
Plans; (iv) the Seller Plan complies and has been maintained and operated in
accordance with its terms and applicable law, including, but not limited to,
ERISA and the Code; (v) no "prohibited transaction" within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is expected
to occur with respect to the Seller Plan (and the consummation of the
transactions contemplated by this Agreement will not constitute or directly or
indirectly result in such a "prohibited transaction"); (vi) no Seller Plan is
under audit or investigation by the IRS, U.S. Department of Labor or any other
governmental authority and no such completed audit, if any, has resulted in the
imposition of any tax or penalty that has not been paid as of the Closing Date;
and (vii) with respect to each Seller Plan that is funded mostly or partially
29
through an insurance policy, neither Seller nor any ERISA Affiliate has any
liability in the nature of retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring on or before the Closing Date.
(d) Except for liability under Part 6 of Title I of ERISA and Section
203 of ERISA and as set forth on SCHEDULE 5.15(D), to the Seller Parties'
Knowledge, the consummation of the Contemplated Transaction will not give rise
to any liability arising under any of the Seller Plans, including, but not
limited to, liability for severance pay, unemployment compensation, termination
pay or withdrawal liability or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee or
shareholder of Seller (whether current, former or retired) or their
beneficiaries solely by reason of such transactions or by reason of a
termination following such transactions. Neither Seller nor any ERISA Affiliate
maintains, contributes to or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal Social
Security Act or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee. None of Seller, any ERISA Affiliate or
any officer, member or employee thereof, has made any promises or commitments to
create any additional plan, agreement or arrangement or to modify or change any
existing Seller Plan, except as set forth in Sections 12.03 and 12.04 herein or
in SCHEDULE 2.01(A)(II) attached hereto. Except as set forth in Section 204(g)
of ERISA and Section 411(d)(6) of the Code, no event, condition or circumstance
exists that would prevent the amendment or termination of any Seller Plan.
(e) Seller has delivered to Buyer true, correct and complete copies of:
(i) all documents (and amendments or modifications thereto)
that set forth the terms of each Seller Plan, including (A) all plan
descriptions and summary plan descriptions of Seller Plans for which Seller is
required to prepare, file and distribute plan descriptions and summary plan
descriptions, and (B) all summaries and descriptions furnished to participants
and beneficiaries regarding Seller Plans, for which a plan description or
summary plan description is not required;
(ii) all current personnel, payroll and employment manuals and
policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including both pension and
welfare benefits) by Seller and the ERISA Affiliates of Seller, if any, and all
collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities;
(iv) a written description of any Seller Plan that is not
otherwise in writing;
(v) all registration statements filed with respect to any
Seller Plan;
(vi) all current Insurance Policies purchased by or to provide
benefits under any Seller Plan;
30
(vii) all current contracts with third party administrators,
actuaries, investment managers, consultants and other independent contractors
that relate to any Seller Plan;
(viii) the Form 5500 filed in each of the most recent three
plan years with respect to the Seller Plan, including all schedules thereto and
the opinions of independent accountants, if applicable;
(ix) all notices that were given by Seller or any Seller Plan
to the IRS or any participant or beneficiary, pursuant to statute, within the
three years preceding the date of this Agreement; and
(x) all notices that were given by the IRS, the PBGC, or the
Department of Labor to Seller or any Seller Plan within the four years preceding
the date of this Agreement.
5.16. COMPLIANCE WITH LAWS; PERMITS.
(a) The use, operation, ownership and possession of the Purchased
Assets by Seller and its Affiliates and the operation of the Business are in
compliance with all applicable Laws, including, but not limited to, all
Occupational Safety and Health Administration Laws. Neither Seller, nor either
of the Principals has received any notification, demand, subpoena or inquiry
(whether oral or written) relating to any present or past failure by the
Business to comply with any Laws or any order, writ, injunction, judgment or
decree of any Governmental Authority nor, to the Seller Parties' Knowledge, has
the Business been the subject of any inquiry or investigation by any
Governmental Authority regarding any such present or past failure. Except as set
forth on SCHEDULE 5.16(A), Seller is not a party to any contract that would
require Seller to comply with federal affirmative action Laws.
(b) Seller has all Permits necessary for the conduct of the Business
where the failure to do so would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect and each of such Permits is listed
on SCHEDULE 5.16(B) and each is in full force and effect; there are no
proceedings pending or, to the Seller Parties' Knowledge, Threatened that may
result in the revocation, cancellation, suspension or modification of any
Permit. The Permits listed on SCHEDULE 5.16(B) constitute all of the Permits
necessary for Seller to lawfully conduct and operate the Business in the manner
it currently conducts and operates the Business and to permit Seller to own and
use the Purchased Assets in the manner in which it currently owns and uses such
assets.
(c) (i) Except as set forth on SCHEDULE 5.16(C)(I), to the Seller
Parties' Knowledge, no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) would be reasonably likely to result in a
material violation by Seller of, or a failure on the part of Seller to comply
with, any Law, or (B) would be reasonably likely to give rise to any obligation
on the part of Seller to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature; and
(ii) Except as set forth on SCHEDULE 5.16(C)(II), none of the
Seller Parties have received any notice or other communication (whether oral or
written) from any Governmental Authority or any other Person regarding (A) any
31
actual, alleged, possible or potential violation of, or failure to comply with,
any Law, or (B) any actual, alleged, possible or potential obligation on the
part of Seller to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
5.17. INTELLECTUAL PROPERTY.
(a) The Seller IP comprises all intellectual property and intellectual
property rights necessary for or used in the Business as currently conducted.
Except for Licensed IP and OTS Software, Seller is the sole and exclusive owner
of all of Seller IP, free and clear of all Liens other than Permitted Liens
which shall be discharged prior to the Closing Date. Except for Licensed IP and
OTS Software, all Seller IP has been (i) developed, created or invented by
Seller's employees in the normal course of their employment or (ii) acquired by
Seller from third parties pursuant to valid and enforceable acquisition
agreements, assignments and/or work-for-hire agreements. SCHEDULE 5.17(A)
attached hereto is a true and correct list of all Seller IP. SCHEDULE 5.17(A)
attached hereto is a true and correct list of all Seller IP in respect of which
Seller has registered or applied for registration, including, but not limited
to, all trademark, copyright and patent registrations and registration
applications. All registrations disclosed on SCHEDULE 5.17(A) are valid,
subsisting and in full force and effect.
(b) SCHEDULE 5.17(B) is a true and correct list of all Seller IP that
the Business uses and/or has a right to use under license or other authorization
from a third party ("Licensed IP"). SCHEDULE 5.17(B) also sets forth the name
and address of the grantor with respect to each item of Licensed IP ("License
Agreements"). Except as disclosed on SCHEDULE 5.17(B), none of the Licensed IP
has been incorporated into or made a part of any Seller IP or any other Licensed
IP. Seller has not received notice of cancellation, termination or refusal to
renew. Except as set forth on SCHEDULE 5.17(B), Seller is not in breach of any
Licensed IP.
(c) SCHEDULE 5.17(C) is a true and correct list of all off-the-shelf
software that is used by the Business ("OTS Software"). Except as disclosed on
SCHEDULE 5.17(C), Seller obtained all OTS Software pursuant to a shrink-wrap,
cling-wrap or similar agreement between licensor and Seller (each, an "OTS
Software License").
(d) SCHEDULE 5.17(D) attached hereto sets forth a true and correct list
of all agreements pursuant to which Seller grants to any one or more third
parties the license, sublicense, right, authorization or other consent to access
and/or use, for whatever purpose, any part or all of Seller IP, Licensed IP or
OTS Software (the "Seller Grants"). SCHEDULE 5.17(D) also sets forth the name
and address of the grantee and a summary of the material terms and conditions of
each Seller Grant. Seller has not received notice of cancellation, termination
or refusal to renew. Seller is not in breach of any Seller Grants.
(e) SCHEDULE 5.17(E) attached hereto lists all of Seller's registered
and unregistered tradenames, service names and/or assumed names (collectively,
"Tradenames") that are currently used, intended to be used or have been used in
connection with the Business.
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(f) Except as set forth on SCHEDULE 5.17(F), Seller has taken all
measures reasonably necessary to maintain and protect its right, title and/or
interest in and to each item of Seller IP, including in response to any action
taken by Governmental Authorities. Expressly, but without limiting the
generality of the foregoing, Seller has taken all measures reasonably necessary
to protect the confidentiality of that part of Seller IP that is comprised of
the trade secrets of Seller or of Seller's licensors. Seller has not disclosed
Seller IP to any person, or is contractually obligated to disclose such Seller
IP except as set forth on SCHEDULE 5.17(F).
(g) In connection with the Business, Seller has not infringed on,
violated and/or misappropriated and, to Seller Parties' Knowledge, is not
infringing on, violating and/or misappropriating, the rights of any third party,
including, but not limited to, any copyright, patent rights, trademark rights,
trade secret rights, other intellectual property rights, or rights of privacy or
publicity, except as set forth on SCHEDULE 5.17(G) (collectively, "Seller
Infringement"). Seller has no reason to believe that continued operation of the
Business will interfere with, infringe upon or misappropriate intellectual
property of any other person, except as set forth on SCHEDULE 5.17(G). No claim
of Seller Infringement has been asserted or, to Seller Parties' Knowledge,
Threatened by any Person in connection with the Business. Except as set forth on
SCHEDULE 5.17(G), Seller has not agreed to indemnify any Person for or against
any interference, infringement, misappropriation or other conflict with respect
to any one or more items of Seller IP.
(h) Except as set forth on SCHEDULE 5.17(H), no claims have been
asserted or, to the Seller Parties' Knowledge, Threatened by any Person, nor, to
the Seller Parties' Knowledge, is there any basis for any bona fide claims
challenging the ownership, legality, use, validity and/or enforceability of the
Seller IP, and/or Seller's rights under the License Agreements and the OTS
Software Licenses.
(i) To Seller Parties' Knowledge, no Person (including, but not limited
to, any employee or former employee of the Business) has infringed upon,
violated, misappropriated or otherwise used without the consent of Seller any
part or all of Seller IP.
(j) Except as set forth on SCHEDULE 5.17(J), all patents and trademarks
have been registered with the United States Patent and Trademark Office, if any,
are currently in compliance with all formal legal requirements (including the
timely post-registration filing of affidavits of use and incontestability and
renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety (90) days after
the Closing Date.
5.18. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 5.18, all of
the Accounts Receivable reflected on the Financial Statements (i) represent
sales actually made in the Ordinary Course of Business for goods or services
delivered or rendered in bona fide arm's length transactions, (ii) are or will
be as of the Closing Date current and collectible and are payable on ordinary
trade terms, (iii) are current (i.e., outstanding fewer than ninety (90) days
past the day of invoice), (iv) are legal, valid and binding obligations of the
respective debtors enforceable in accordance with their terms, (v) are not
subject to any valid set-off or counterclaim, (vi) are collectible in the
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Ordinary Course of Business in the aggregate recorded amounts thereof, net of
any applicable reserve reflected in the most recent balance sheet included in
the Interim Financial Statements and (vii) are not the subject of any actions,
suits or proceedings brought by or on behalf of the Seller Parties or their
Affiliates.
5.19. TAXES.
(a) Seller has timely filed (or had filed on its behalf) with
appropriate tax authorities all Tax Returns required to be filed by it; Seller
has delivered to Buyer copies of all Tax Returns filed by it since the year
ending 1999; to the Seller Parties' Knowledge, all such Tax Returns are true,
correct and complete in all material respects; and Seller has timely paid or
accrued (or had paid or accrued on its behalf) all Taxes due for all periods
ending on or prior to the Closing Date; (b) all amounts required to be withheld
or collected by Seller from customers or from or on behalf of employees or
independent contractors with respect to the Business for income, social security
and unemployment insurance Taxes have been collected or withheld and either paid
to the appropriate governmental agency or set aside and, to the extent required
by law, held in accounts for such purpose; (c) there are no pending actions or
proceedings by any applicable taxing authority for the assessment, collection,
adjustment or deficiency of Taxes against Seller relating to the Business and,
to the Seller Parties' Knowledge, there are no pending Tax audits of Seller; (d)
there are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any assessment of Tax or audit of any Tax Return of
Seller for any period; and (e) Seller throughout its existence has been
classified as a corporation for federal tax purposes. An extension of time to
file any Tax Return that has not been filed has not been required or granted.
Seller has paid all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Sellers through
the date of this Agreement. To the Seller Parties' Knowledge, there is no
dispute as to Taxes payable by Seller that could have or result in any adverse
effect on the Purchased Assets, the Business or, after the Closing Date, the
Buyer. There is no tax sharing agreement that will require any payment by Seller
after the date of this Agreement. There are no liens for Taxes (other than for
current Taxes not yet due and payable) on the Purchased Assets.
5.20. FINDERS. Neither the Seller Parties nor anyone acting on their
behalf, has taken any action that, directly or indirectly, would obligate Seller
to anyone other than Goldman Sachs & Co. acting as broker, finder, financial
advisor or in any similar capacity in connection with this Agreement or any of
the Contemplated Transactions hereby.
5.21. ENVIRONMENTAL MATTERS.
(a) All of the current and past operations of the Purchased Assets and
the Business, including any operations at or from any real property presently or
formerly owned, used, leased, occupied, managed or operated by Seller in
connection with the Business (the "Real Property"), comply and have at all times
complied, in all material respects, with all applicable Environmental Laws.
Neither Seller, nor to any Seller Parties' Knowledge, any other Person, has
engaged in, authorized, allowed or suffered any operations or activities upon
any of the Real Property, for the purpose of or in any way involving the
handling, manufacture, treatment, processing, storage, use, generation, release,
discharge, spilling, emission, dumping or disposal of any Hazardous Substances
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at, on, under or from the Real Property, except in full compliance with all
applicable Environmental Laws.
(b) To the Seller Parties' Knowledge, neither the Purchased Assets nor
the Real Property contain any Hazardous Substances in, on, over, under or at it,
in concentrations which violate any applicable Environmental Laws or would be
reasonably likely to result in the imposition of a material Environmental
Liability on the owner, lessee, manager or operator of the Real Property under
any applicable Environmental Laws, including any liability or obligations for
the investigation, corrective action, remediation or monitoring of Hazardous
Substances in, on, over, under.
(c) To the Seller Parties' Knowledge, none of the Real Property is
listed or proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. 9601 et seq., or any similar inventory of sites requiring
investigation, monitoring or remediation maintained by any state or locality.
Seller has not received any notice from any Governmental Authority or other
Person of any actual or Threatened Environmental Liabilities with respect to the
Real Property, the Business or the Purchased Assets.
(d) Seller has all the permits, licenses, authorizations and approvals
materially necessary in connection with the Business and for the operations on,
in or at the Purchased Assets and the Real Property (the "Environmental
Permits"), that are required under applicable Environmental Laws. Seller is
materially in full compliance with the terms and conditions of all such
Environmental Permits.
(e) Seller has not contractually nor, to Seller Parties' Knowledge, by
operation of law (including the Environmental Laws) or otherwise, assumed or
succeeded to any Environmental Liabilities of any predecessors or any other
person or entity except for Environmental Liabilities not related to the Real
Property, the Business or the Purchased Assets.
5.22. QUESTIONABLE PAYMENTS. In connection with the Business, neither
the Seller Parties nor any officer or director of Seller, nor to the Seller
Parties' Knowledge, any agent, employee, or any other Person acting on behalf of
the Seller Parties has, directly or indirectly, used any company funds for
unlawful contributions, gifts, entertainment or other unlawful expenses; made
any unlawful payment to government officials or employees or to political
parties or campaigns; established or maintained any unlawful fund of corporate
monies or other assets; made or received any bribe or any unlawful rebate,
payoff, influence payment, kickback or other payment; given any favor or gift
which is not deductible for federal income tax purposes; or made any bribe,
kickback or other payment of a similar or comparable nature, to any governmental
or non-governmental Person, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions or to pay for favorable treatment for business or for
special concessions secured.
5.23. BOOKS AND RECORDS. The books of account, minute books, stock
record books, sales records, payment records, invoices, shipment records,
production records, customer complaint and recall records, purchasing records
and any and all formulations (including, but not limited to, governmental
35
formulations) of Seller, all of which have been made available to Buyer, are
true, complete and correct in all material respects and have been maintained in
accordance with sound business practices and on a consistent basis.
5.24. NO SUBSIDIARIES. Seller does not own, either of record,
beneficially or equitably, any capital stock or other securities or any other
direct or indirect interest in any firm, corporation or other entity (including
any joint venture or partnership) other than short-term investments.
5.25. CLIENTS AND SUPPLIERS. SCHEDULE 5.25 contains a list setting
forth the twenty (20) largest per diem nurse clients of Seller and the twenty
(20) largest travel nurse clients of Seller, by dollar amount of revenues over
each of the 12-month periods ended December 31, 2000, 2001 and 2002. All
commitments by Seller to provide services to each of its clients or to receive
services from its suppliers have been made in the Ordinary Course of Business,
and Seller has made no payments to any client, supplier or their representatives
other than pursuant to invoices prepared or received by Seller in the Ordinary
Course of Business.
5.26. FULL DISCLOSURE. This Agreement, the Schedules and Exhibits
hereto and the Transaction Documents do not contain any untrue statement of a
material fact nor, to the Seller Parties' Knowledge, omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. To the Seller Parties' Knowledge, there are no facts which
(individually or in the aggregate) would reasonably be expected to have a
Material Adverse Effect that have not been set forth in the Agreement, the
Schedules or the Exhibits hereto, or in the Transaction Documents.
ARTICLE VI.
BUYER'S AND PARENT'S REPRESENTATIONS AND WARRANTIES
With the understanding that Seller and the Principals intend to rely
hereon, Buyer and Parent, jointly and severally, represent and warrant to Seller
and each of the Principals (which warranties and representations shall survive
the Closing to the extent set forth in Section 14.01 herein regardless of what
examinations, inspections, audits and other investigations Seller and the
Principals have made or may hereafter make, with respect to such warranties and
representations), as of the date hereof and as of the Closing Date as follows:
Seller and Parent, jointly and severally, represent and warrant to Buyer and the
Principals as follows:
6.01. CORPORATE STATUS AND AUTHORITY. Each of the Buyer Parties is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full corporate power and authority to own its
properties and to carry on its business as presently conducted. Each of the
Buyer Parties has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Transaction Documents to
which it is or will be a party.
6.02. AUTHORIZATION. The execution and delivery by each of the Buyer
Parties of this Agreement and, as applicable, the Transaction Documents to which
it is or will be a party, and its performance of its obligations hereunder and
thereunder, have been duly authorized by all required corporate action and no
36
other corporate proceedings are necessary to approve and authorize the execution
and delivery of this Agreement, the Transaction Documents or the consummation of
the transactions contemplated hereby and thereby.
6.03. EXECUTION AND DELIVERY. Each of the Buyer Parties has duly and
validly executed and delivered this Agreement and, as applicable, the
Transaction Documents to which it is a party and which are being executed and
delivered simultaneously with this Agreement; and, this Agreement and such
Transaction Documents, as applicable, are valid and binding obligations of each
of the Buyer Parties, enforceable against them in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether or not considered in a proceeding at law or in equity). The
remaining Transaction Documents to which each of the Buyer Parties will be a
party, when executed and delivered at the Closing, will be duly and validly
executed and delivered by each of the Buyer Parties, and upon such execution and
delivery, will be legal, valid and binding obligations of each of the Buyer
Parties, enforceable against them in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and general principles of equity
(whether or not considered on a proceeding at law or in equity).
6.04. NO CONFLICT. The execution and delivery by each of the Buyer
Parties of the Transaction Documents to which it is or will be a party, and such
party's performance of its obligations hereunder and thereunder, does not and
will not, directly or indirectly (with or without notice or lapse of time): (i)
conflict with or violate any provision of the Articles of Incorporation, Bylaws,
shareholders' agreement or other organizational documents of the Buyer Parties;
(ii) except for the consent from our Lender, conflict with or violate, result in
a breach of or constitute a default (or an event which, with or without notice,
lapse of time or both, would constitute a default) under or result in the
invalidity of, or accelerate the performance required by or cause or give rise
to any right of acceleration, termination or modification of any right or
obligation pursuant to any agreement or contract to which any of the Buyer
Parties is a party or by which any of them (or any of their respective assets)
is subject or bound, which event, individually or in the aggregate, would
reasonably be expected to have a material adverse effect; (iii) conflict with,
or result in a violation of, or give any Governmental Body or other Person the
right to challenge the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any legal requirement or any order to which the Buyer
Parties or are subject or (iv) except for the approval of its Lenders and
pursuant to the HSR Act, require any authorization, consent, approval or waiver
from any Person.
6.05. LITIGATION AND PROCEEDINGS. There are no claims, actions, suits,
proceedings or investigations, judicial or administrative, pending or, to the
Knowledge of either Buyer Party, Threatened against or involving Buyer or Parent
that seek to restrain, prohibit or invalidate the transactions contemplated by
this Agreement or that might materially adversely affect the ability of the
parties to consummate the transactions contemplated hereby.
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6.06. FINDERS. Neither the Buyer Parties nor anyone acting on their
behalf, has taken any action that, directly or indirectly, would obligate Buyer
to anyone acting as broker, finder, financial advisor or in any similar capacity
in connection with this Agreement or any of the transactions contemplated
hereby.
ARTICLE VII.
NONCOMPETITION; NONSOLICITATION COVENANTS
7.01. NONCOMPETITION.
(a) Seller and each of the Principals hereby acknowledge that: (i) the
agreements and covenants they are providing in this Section 7.01 are reasonable
and necessary to the protection of the Buyer Group's legitimate interests in the
undertakings contemplated by this Agreement; (ii) Seller and each of the
Principals have certain Knowledge of the business operations that may be
required to ensure the effective and successful conduct of the Business, (iii)
Buyer will be irreparably damaged and its substantial investment in the
undertakings contemplated by this Agreement materially impaired if Seller and/or
the Principals were to enter into an activity competing or interfering with the
businesses of the Buyer Group in violation of the terms of this Section 7.01 or
if they were to disclose or make unauthorized use of any confidential
information concerning the Business or the Purchased Assets; (iv) the scope and
length of the term of this Section 7.01 and the geographical restrictions
contained herein are fair and reasonable and not the result of overreaching,
duress or coercion of any kind and the full, uninhibited and faithful observance
of each of the agreements and covenants contained in this Section 7.01 will not
cause Seller or either Principal any undue hardship, financial or otherwise, and
enforcement of each of the covenants contained in this Section 7.01 will not
impair either Principal's ability, if he so desires, to engage in other business
ventures acceptable to him or otherwise obtain income required for his
profitable operation and the satisfaction of the needs of his creditors.
(b) Seller and each of the Principals covenant and agree that they will
not, and will cause their Affiliates not to, directly or indirectly, at any time
from the date of this Agreement and continuing for a period of five (5) years
after the Closing Date, compete with Buyer or any of its Affiliates in the
United States of America, directly or indirectly, whether for its own account or
otherwise. As used in this Article VII, to "compete" shall mean to, directly or
indirectly, own, manage, operate, join, control, be employed by, or become a
director, officer, employee, agent, broker, consultant, representative or
shareholder of a corporation or an owner of an interest in or an employee,
agent, broker, consultant, representative or partner of a partnership or in any
other capacity whatsoever of any other form of business association, sole
proprietorship or partnership, or otherwise be connected in any manner with the
ownership, management or operation of any Person that engages in a business
similar to the Business; provided, however, that nothing herein shall prevent
Seller, the Principals or their Affiliates from (i) engaging in the temporary
placement business of information technology personnel (including, but not
limited to, such personnel as computer programmers or other similarly skilled
individuals engaged in similar lines of work) or (ii) acquiring up to five
percent (5%) of the securities of any company listed on a national securities
exchange or quoted on the Nasdaq Stock Market.
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7.02. NONSOLICITATION. For a period commencing on the Closing Date and
ending on the fifth anniversary of the Closing Date, neither Seller, the
Principals nor any of their Affiliates shall, unless acting with the express
written consent of Buyer, directly or indirectly, in any capacity, (i) solicit,
induce or employ any Person who is or was, at the time of such solicitation,
inducement or employment by Seller or its Affiliates, an employee, subcontractor
or consultant of the Business, or a Buyer Entity to leave such position or to
accept a position with Seller, the Principals or any of its Affiliates, or (ii)
tortiously interfere with any Buyer Entity's relationship with, or solicit any
business that is a competing business from, any of its subcontractors, customers
or employees.
7.03. GENERAL. With respect to the covenants contained in this Article
VII, Seller and each of the Principals agree that any remedy at law for any
breach of said covenants may be inadequate and that Buyer and/or Parent shall be
entitled to specific performance or any other mode of injunctive or other
equitable relief to enforce their rights hereunder or any other relief a court
might award. The existence of any claim or cause of action, which Seller or
either Principal or any other Person may have against any Buyer Entity, shall
not constitute a defense or bar to the enforcement of any of the covenants
contained in this Article VII. In the event this Article VII shall be more
restrictive than permitted by applicable law, the restrictions in this Article
VII shall be limited to the minimum extent required to make them enforceable. It
is specifically agreed that the periods stated in this Article VII shall be
computed by excluding from such computation any time during which the Principals
and/or their Affiliates are determined by final and unappealable judicial
decision to be in violation of any provision of this paragraph.
ARTICLE VIII.
COVENANTS
8.01. ACCESS AND INQUIRY; HSR FILING.
(a) Seller has furnished to Buyer true, correct and complete copies of
all records, documentation and other information in its possession (or in the
possession of Seller's attorneys or other representatives) as Buyer has
reasonably requested concerning the ownership, use, operation and condition of
the Business and the Assets. Seller has given Buyer reasonable access to its
facilities, books, properties and records relating to the Business during normal
business hours upon reasonable notice and without undue interruption and Buyer
will be permitted to contact and make reasonable inquiry of employees and
customers and suppliers of the Business regarding the Purchased Assets and
Assumed Liabilities.
(b) Buyer and Seller have prepared and filed all notifications and
documents required to be filed for the Contemplated Transactions to comply with
the HSR Act, if necessary. Buyer and Seller shall each be responsible for all of
their own costs, filing fees and expenses (including, but not limited to,
reasonable attorneys' fees) associated with the preparation and filing of all
documents required under the HSR Act, except that Buyer shall pay the filing fee
for the requisite filing under the HSR Act.
8.02. BULK TRANSFER. The parties agree to waive compliance with any
bulk transfer law applicable to any of the transactions contemplated hereby.
Seller and the Principals hereby agree, jointly and severally, to indemnify and
39
hold harmless Buyer against liability, cost and expense (including, but not
limited to, reasonable attorneys' fees) arising out of noncompliance with
applicable bulk transfer laws.
8.03. CONFIDENTIAL INFORMATION.
(a) The Seller Parties acknowledge that in the course of negotiations
and discussions in connection with this Agreement and transactions contemplated
hereby, the Seller Parties will have and have had access to confidential or
proprietary data or information relating to the Business or to the businesses of
the Buyer or Parent. For a period commencing on the date of this Agreement and
ending on the fifth anniversary of the Closing Date, the Seller Parties shall
not, in any capacity, divulge, communicate, disclose or make available to any
Person, nor shall any Seller Party direct, or permit, any of its employees,
officers, representatives or Affiliates to divulge, communicate, disclose or
make available to any Person (other than to a Person bound by confidentiality
obligations similar to those contained herein and other than as necessary in
performing such Seller Party's duties hereunder) or use to the detriment of
Buyer and/or Parent or for the benefit of any other Person, any of such data or
information. The provisions of this Section 8.03 shall survive the termination
of this Agreement hereunder, whether by the normal expiration thereof or
otherwise. As used in this Section 8.03, the term "confidential or proprietary
data or information" shall mean information relating to Buyer and/or Parent not
generally available to the public or generally known. Notwithstanding anything
to the contrary contained in this Section 8.03, the term "confidential or
proprietary data or information" shall not include any information which (i) has
been rightly received from a third party without restriction or breach of this
Agreement, (ii) is required to be disclosed by Law or court order, provided,
however, that the Seller Parties shall provide the Buyer Group with written
notice at least thirty (30) days prior to the disclosure of such information,
(iii) is already known by the Seller Parties without any confidentiality
undertaking, or (iv) is or becomes publicly known through no fault of the Seller
Parties.
(b) In the event the Contemplated Transactions in this Agreement are
not consummated such that the Closing does not occur, the provisions of Section
8.03(a) shall apply with equal force and effect to the Buyer Group to protect
the confidential or proprietary data or information of the Seller Parties.
(c) The terms and conditions set forth in this Section 8.03 shall
supersede the terms and conditions set forth in the Confidentiality Agreement
entered into between Seller and Parent (the "Confidentiality Agreement"), and
the Confidentiality Agreement shall cease to be of force and effect as of the
date of this Agreement.
8.04. USE OF NAME. On the Closing Date, Seller shall change its name to
a name not confusingly similar to Med-Staff, Inc. and shall cease doing business
under any assumed name or tradenames listed on SCHEDULE 5.17(E). On the Closing
Date, Seller shall deliver to Buyer any and all required instruments deemed
necessary by any and all applicable Governmental Authorities to terminate any
previously filed assumed name or tradenames listed on SCHEDULE 5.17(E). Promptly
after any such filing, Buyer shall deliver proof of said filings to Seller.
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8.05. NO SOLICITATION, ETC. Seller and any Affiliate, officer, employee
or representative thereof and each of the Principals (collectively, the "Covered
Parties") shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any parties
conducted heretofore by the Covered Parties with respect to an Acquisition
Proposal (as defined herein) regarding the Purchased Assets and/or the Business.
From the date hereof, the Covered Parties shall not, directly or indirectly,
encourage, solicit or initiate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to an Acquisition Proposal
from any Person, or engage in any discussion or negotiations relating thereto or
accept any Acquisition Proposal.
8.06. FULFILLMENT OF CONDITIONS. Each of the Seller Parties and the
Buyer Parties shall use its commercially reasonable efforts to cause the
conditions to Closing in Articles X and XI, respectively, to be fulfilled in a
timely manner after the date hereof.
8.07. CONSENTS. The Seller Parties shall use their reasonable efforts
to obtain and deliver to Buyer (a) the consents, approvals, waivers or
acknowledgments listed on SCHEDULE 8.07, and (b) any and all Permits, consents,
or declarations to or filings with, any Governmental Authority required in
connection with the Contemplated Transactions and the Transaction Documents,
duly executed by all parties other than Buyer prior to Closing, without the
imposition on Buyer of any material condition, restriction or required
undertaking.
8.08. AFFILIATE TRANSACTIONS. Immediately prior to the Closing, all
liabilities relating to the Business or, the Purchased Assets and payable to any
Affiliate of Seller and/or the Principals shall be satisfied and discharged in
full and all liabilities of any employee, officer, director or Affiliate of
Seller and/or the Principals due and owing to Seller shall be satisfied and
discharged in full.
8.09. PUBLICITY. Each of the Seller Parties, on the one hand, and each
of the Buyer Parties, on the other hand, covenants and agrees, jointly and
severally, that all written publicity and notices to third parties (other than
such party's lenders) concerning the sale of the Business and the other
transactions contemplated by this Agreement shall be subject to the prior
written approval of (x) Buyer, in the case of written publicity or notices to
third parties by any Seller Party and (y) Seller, in the case of written
publicity or notices to third parties by any Buyer Party; provided, however,
this Section 8.09 shall not apply to disclosure and reporting requirements of
the Buyer Parties under applicable securities laws or regulations of the Nasdaq
Stock Market, which the Buyer Parties agree to provide to the Seller Parties as
soon as reasonably practicable.
8.10. UPDATE NOTICES. The Seller Parties, on the one hand, and the
Buyer Parties, on the other hand, shall deliver to the other, as soon as
practicable after obtaining Knowledge that any representation or warranty made
by it is not true and correct, a notification of such fact.
8.11. TAX COVENANTS. No new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Purchased
Assets and/or the Business shall be made before the Closing Date without the
prior written consent of Buyer. At or prior to Closing, Seller shall furnish
Buyer an affidavit, stating under penalty of perjury, the transferor's United
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States taxpayer identification number and that the transferor is not a foreign
person, pursuant to ss. 1445(b)(2) of the Code.
8.12. MED-STAFF NAME. On or prior to the Closing Date, Seller shall
have resolved any and all pending claims against Med-Staff regarding the use
and/or ownership of the name "Med-Staff" or "Med-Staff, Inc." in any form
(domain name or otherwise).
8.13. ACCRUAL FOR PROFESSIONAL LIABILITY INSURANCE. Professional
liability insurance expense shall be accrued by Seller on its Financial
Statements at the rate of $0.35 for each hour worked by healthcare
professionals, commencing on January 1, 2003 to March 31, 2003. Commencing on
April 1, 2003 and continuing until the Closing Date, professional liability
insurance expense of the acquired business shall be accrued at the rate of $0.50
for each hour worked by healthcare professionals.
8.14 FINANCING. The Buyer Parties shall use their commercially
reasonable efforts to complete the $200,000,000 financing contemplated by the
Commitment Letter provided to Seller on the date hereof.
ARTICLE IX
CONDUCT OF THE BUSINESS
9.01. From the date hereof and until the Closing Date, except as
contemplated by this Agreement or expressly consented to in writing signed by
Buyer, Seller and the Principals shall, and shall cause their Affiliates to: (i)
conduct the Business only in the Ordinary Course of Business, (ii) maintain and
preserve the Business's properties in good repair, working order and condition,
including but not limited to, performing maintenance in a manner and on a basis
consistent with past practice, (iii) use commercially reasonable efforts to
preserve the Business's operations and organizations intact, (iv) use
commercially reasonable efforts to keep available the services of the Business's
current officers, (v) use commercially reasonable efforts to preserve the
Business's current business relationships, including, but not limited to, the
goodwill of its customers and suppliers and others having business relationships
with it, (vi) except as set forth on Schedule 9 attached hereto, not change the
rate or terms of compensation payable, or to become payable, to any of the
Business's officers or employees, except in the Ordinary Course of its Business,
(vii) not grant any change in the rate or terms of any Seller Plan, (viii) not
enter into any agreement or make any other commitment in connection with the
Business or the Purchased Assets involving an amount in excess of $50,000, (ix)
not sell, lease (as lesser), transfer, license (as licensor), encumber, grant or
create a Lien on, any of the Purchased Assets, other than in a manner and on a
basis consistent with past practice, (x) not terminate or amend any Assumed
Contract, (xi) refrain from doing, or causing to be done, anything which would
cause the representations and warranties set forth in Article V of this
Agreement from not being true, complete and correct on the Closing Date as if
made on such date, (xii) continue to insure itself and the Purchased Assets and
all property owned by Seller in accordance with the manner disclosed in this
Agreement, and to use, operate, maintain and repair the Purchased Assets
consistent with past practices, (xiii) not enter into any agreement to sell
Purchased Assets or supply services to others without Buyer's prior written
consent, except in the Ordinary Course of Business, (xiv) refrain from doing any
act or omitting to do any act, or permitting any act or omission to act, which
will cause a breach of any contract, commitment or obligation of Seller related
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to the Business, the Purchased Assets or the Assumed Liabilities, (xv) promptly
notify Buyer in writing of any written or Threatened investigation or proceeding
by or relating to Seller, the Purchased Assets, the Business or this Agreement
before any court or governmental department, commission, board, bureau, agency
or instrumentality, (xvi) refrain from doing any act or omitting to do any act,
or permitting any act or omission to act, which will cause any of the Purchased
Assets to be depleted or any of the Accounts Receivables or trade payables to be
collected on an accelerated basis, other than in the Ordinary Course of
Business, (xvii) use its best efforts to cause all of the conditions to the
obligations of Seller under this Agreement to be satisfied on or prior to the
Closing Date and (xviii) not terminate any of its employees without the prior
written consent of Buyer, other than in the Ordinary Course of Business; (xix)
not dispose of or modify or alter the Purchased Assets, other than in the
Ordinary Course of Business, or incur, create or assume any Lien (other than
Permitted Liens, which must be discharged on or prior to the Closing Date) on
any Purchased Asset; or (xx) take any action which could reasonably be expected
to prevent or materially delay the consummation of the Contemplated
Transactions.
ARTICLE X.
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of the Buyer Parties under this Agreement are subject,
at the Buyer Parties' sole and absolute discretion, to the fulfillment prior to
or at the Closing, of each of the following conditions.
10.01. REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and
warranties of the Seller Parties contained in this Agreement shall be true and
correct (a) in all respects with regard to representations and warranties
limited by materiality qualifications or references to Material Adverse Effect
and (b) in all material respects with regard to all other representations and
warranties, as of the date of this Agreement and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
10.02. PERFORMANCE OF COVENANTS AND AGREEMENTS. Each Seller Party shall
have performed in all material respects the covenants and agreements required to
be performed by it/him at or prior to the Closing pursuant to this Agreement.
10.03. CONSENTS. Seller shall have delivered to Buyer at or prior to
the Closing all consents from governmental and regulatory agencies, landlords,
mortgagees, secured parties or other third parties that, individually or in the
aggregate, could have a Material Adverse Effect on the Business or the Purchased
Assets subsequent to Closing if not obtained and all such consents shall be in
full force and effect on the Closing Date, without the imposition upon Buyer or
the Business of any new conditions, restrictions or required undertakings.
10.04. NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, assets, operations, properties,
condition (financial or otherwise), contingent liabilities, prospects or
material agreements of Seller since December 31, 2002.
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10.05. EMPLOYMENT AGREEMENTS.
(a) Each of Davis and Rodden shall have executed an employment
agreement with Buyer in the form attached hereto as EXHIBIT 10.05(A)(I) and
EXHIBIT 10.05(A)(II), respectively.
(b) Each of the Key Employees of Seller identified on SCHEDULE 10.05(B)
shall have executed an employment agreement with Buyer in the form attached
hereto as EXHIBIT 10.05(B).
(c) Each of the persons listed on SCHEDULE 10.05(C) shall have executed
confidentiality/non-compete agreements with Buyer in the form attached hereto as
EXHIBIT 10.05(C).
10.06. FINANCING COMMITMENT. The Buyer Parties shall have received
financing of no less than $200,000,000 having terms no less favorable to them
than are contained in the Commitment Letter provided to Seller on the date
hereof, as necessary to consummate the Contemplated Transactions.
10.07. LITIGATION. There shall not be in effect on the Closing Date any
order, writ, judgment, decree or similar order or any Law, of any Governmental
Authority restraining, enjoining or questioning the validity of, or otherwise
prohibiting or making illegal the consummation of, any of the transactions
contemplated by the Transaction Documents. There shall not be pending or
Threatened on the Closing Date any action or proceeding that questions the
validity or legality of this Agreement or the transactions contemplated by this
Agreement or that seeks injunctive relief in connection therewith.
10.08. OPINION OF SELLER'S COUNSEL. Seller shall have delivered to
Buyer an opinion of Ballard Spahr Andrews & Ingersoll, LLP dated the Closing
Date in a form mutually agreed upon by the parties.
10.09. SELLER PARTIES' DELIVERIES. Each Seller Party, as applicable,
shall deliver on the Closing Date the following items and documents to Buyer:
(a) Physical delivery of all Tangible Assets by making them available
at Seller's offices, together with any and all warranties, manuals, instructions
and other literature in the possession of Seller relating to the ownership or
operation of the Tangible Assets. In addition, such notices to telephone
companies, internet service providers and others required to transfer Seller's
telephone and facsimile numbers, e-mail addresses, intellectual property
addresses and domain addresses, used in the Business to Buyer and physical
delivery of all books, files and records concerning the Purchased Assets.
(b) Such instruments of assignment, transfer or conveyance executed by
Seller, as Buyer may reasonably request in order to assign, convey and transfer
to Buyer good and marketable title to all of the Purchased Assets, free and
clear of all Liens, other than Permitted Liens, including, but not limited to, a
bill of sale reasonably satisfactory to Buyer.
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(c) Certificates, on behalf of each of the Seller Parties, executed by
the President or Trustee, as applicable, of each of the Seller Parties, dated
the Closing Date, certifying that the conditions set forth in Sections 10.01
through 10.04 have been satisfied; and
(d) Physical delivery of all original or certified copies of
documentation concerning the Seller IP, including, but not limited to,
registrations and applications of any patents, copyrights, trade marks or
service marks, original artwork, data bases, computer programs, notes, sketches,
flowcharts, diagrams and software.
10.10. GOVERNANCE.
Seller shall deliver to Buyer the following corporate documentation
with respect to Seller:
(a) Seller shall deliver to Buyer the following corporate
documentation:
(i) Seller's Articles of Incorporation, certified as of a date
within ten (10) days prior to the Closing Date by the Department of State of the
Commonwealth of Pennsylvania and Seller's Bylaws, both certified as of the
Closing Date by the President or Secretary of Seller as being in full force and
effect;
(ii) Subsistence Certificate with respect to Seller, certified
as of a date within ten (10) days prior to the Closing Date from the Secretary
of State of the Commonwealth of Pennsylvania and Good Standing Certificates in
each other state in which Seller is qualified to do business;
(iii) Resolutions of the Board of Directors of Seller and each
of the Principals in their capacities as sole shareholders, approving this
Agreement and all the transactions contemplated hereby on behalf of Seller and
certified by the President or Secretary of Seller, respectively, as being in
full force and effect and unmodified;
(iv) An incumbency and specimen signature certificate with
respect to the officers of Seller executing this Agreement and any Transaction
Documents to which Seller is a party.
(b) Seller shall deliver to Buyer the following other documentation:
(i) A confidentiality/non-compete agreement between Buyer and
Dave Gorelick in the form attached hereto as EXHIBIT 10.10(B)(I);
(ii) such other documents, instruments or certificates as
shall be reasonably requested by Purchaser or its counsel to consummate the
Contemplated Transactions;
(iii) the Trust's governing documents, certified as of a date
within five (5) days prior to the Closing Date by the Trustee as being in full
force and effect; and
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(iv) A resolution of the Trust approving this Agreement and
the Contemplated Transactions.
10.11. OTHER TRADENAME CHANGE Seller shall deliver to Buyer evidence
that Seller has changed its name and any and all required instruments deemed
necessary by any and all applicable Governmental Authorities to terminate any
previously filed assumed name or similar certificates regarding such tradenames
listed on SCHEDULE 5.17.
10.12. TRANSITIONAL SERVICES AGREEMENT; ESCROW AGREEMENT. Seller shall
execute and deliver to Buyer the Transitional Services Agreement and an Escrow
Agreement having terms and conditions mutually agreed upon by the parties.
10.13. ESTOPPEL LETTERS. Seller shall deliver to Buyer estoppel letters
in a form reasonably acceptable to Buyer and dated not more than ten (10) days
prior to the Closing Date, with respect to (a) the Leased Real Property, (b)
those Assumed Contracts listed on SCHEDULE 10.13 attached hereto and (c) the
Indebtedness set forth on SCHEDULE 10.13, executed by the landlord of each
respective Leased Real Property, the hospital facility of each such Assumed
Contract and the bank(s), as applicable.
10.14. TERMINATION OF LIENS. Seller shall deliver to Buyer evidence, in
form and substance satisfactory to Buyer in its sole and absolute discretion, of
the full and unconditional release of any Liens, other than Permitted Liens, on
the Purchased Assets.
10.15. HSR ACT. All filings required under the HSR Act, if any, shall
have been made and any required waiting period under the laws applicable to the
Contemplated Transactions shall have expired or earlier terminated.
10.16 WORKER'S COMPENSATION INSURANCE. Seller shall have delivered to
Buyer an Estoppel Letter from AIG regarding Seller's workers' compensation
insurance in a form reasonably acceptable to Buyer and dated not more than ten
(10) days prior to the Closing Date.
10.17. SUBLEASE. Buyer and Drexel Technical, Inc., shall have entered
into a Sublease pursuant to which Drexel Technical, Inc. subleases space from
Buyer at the Facility.
10.18. INDEBTEDNESS. All funded debt of the Seller as well as any
amounts due to any Related Person of the Seller or any of the Principals shall
have been paid in full and Seller shall have delivered to Buyer, evidence,
satisfactory to Buyer, to such effect.
10.19 FAILURE TO OBTAIN CONSENTS, LICENSES, PERMITS AND APPROVALS.
Without restricting Buyer's right not to proceed to the Closing if the
conditions in Article X are not satisfied, to the extent that the rights of
Seller under any contract, license, permit or approval or other Purchased Asset
or Assumed Liability to be assigned to Buyer under this Agreement may not be
assigned without the consent of another person or entity which, notwithstanding
Seller's use of its best efforts to obtain any such required consent(s) as
promptly as possible, have not been obtained by the Closing Date, Buyer may
elect that this Agreement not constitute an agreement to assign the same if an
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attempted assignment would constitute a breach thereof or be unlawful and,
instead, proceed with Closing, provided Buyer indemnifies for same pursuant to
Article XIV.
ARTICLE XI.
CONDITIONS PRECEDENT TO THE SELLER PARTIES' OBLIGATIONS
All obligations of the Seller Parties under this Agreement are subject,
at the Seller Parties' option, to the fulfillment prior to or at the Closing, of
each of the following conditions:
11.01. REPRESENTATIONS AND WARRANTIES ACCURATE. The representations and
warranties of the Buyer Parties contained in this Agreement shall be true and
correct (x) in all respects with regard to representations and warranties
limited by materiality qualifications or references to Material Adverse Effect
and (y) in all material respects with regard to all other representations and
warranties, as of the date of this Agreement and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
11.02. PERFORMANCE OF COVENANTS AND AGREEMENTS. Each Buyer Party shall
have performed, in all material respects, all of the covenants and agreements
required to be performed by such Buyer Party at or prior to the Closing pursuant
to this Agreement.
11.03. LITIGATION. There shall not be in effect on the Closing Date any
order, writ, judgment, decree or similar order or any Law, of any Governmental
Authority restraining, enjoining or questioning the validity of, or otherwise
prohibiting or making illegal the consummation of, any of the transactions
contemplated by the Transaction Documents. There shall not be pending or
Threatened on the Closing Date any action or proceeding that questions the
validity or legality of this Agreement or the transactions contemplated by this
Agreement or that seeks injunctive relief in connection therewith.
11.04. BUYER'S AND PARENT'S DELIVERIES. Each of the Buyer Parties shall
have delivered to Seller a certificate, dated the Closing Date, signed by its
respective Chief Executive Officer or President, certifying to the effect that,
in the case of Buyer, the conditions set forth in Sections 11.01, 11.02 and
11.06 have been satisfied, and, in the case of Parent, that the conditions set
forth in Sections 11.01 and 11.02 have been satisfied.
11.05. CORPORATE GOVERNANCE. Each of the Buyer Parties shall have
delivered the following corporate documentation to Seller on its respective
behalf:
(a) Good Standing certificate with respect to itself, certified as of a
date within five (5) days prior to the Closing Date by the Secretary of State of
Delaware.
(b) Resolutions of its Board of Directors, approving this Agreement and
all the transactions contemplated hereby on behalf of such party, certified by
its President or Secretary as being in full force and effect and unmodified.
(c) An incumbency and specimen signature certificate with respect to
the officers of Buyer executing this Agreement and any Transaction Documents to
which Buyer is a party.
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(d) An incumbency and specimen signature certificate with respect to
the officers of Parent executing this Agreement and any Transaction Documents to
which Parent is a party.
11.06. HSR ACT. All filings required under the HSR Act, if any, shall
have been made and any required period under the laws applicable to the
Contemplated Transactions shall have expired or earlier terminated.
11.07. EMPLOYMENT AGREEMENTS.
(a) Buyer shall have executed the employment agreements with Davis and
Rodden in the form attached hereto as EXHIBIT 10.04(A)(I) and EXHIBIT
10.04(A)(II), respectively.
(b) Buyer shall have executed employment agreements with each of the
Key Employees of Seller in the form attached hereto as EXHIBIT 10.04(B).
11.08. TRANSITIONAL SERVICES AGREEMENT; ESCROW AGREEMENT. Buyer shall
execute and deliver to Seller the Transitional Services Agreement and the Buyer
and Parent shall execute and deliver to Seller the Escrow Agreement having terms
and conditions mutually acceptable to the parties.
ARTICLE XII.
EMPLOYEE MATTERS
12.01. EMPLOYMENT. On or prior to the Closing Date, Buyer shall make an
offer of employment to each Transferred Employee of Seller; provided, however,
that any such offer of employment shall be contingent on the consummation of the
Closing. Seller consents to Buyer contacting the Transferred Employees with
respect to the desire of such employees to enter the employ of Buyer.
Notwithstanding the foregoing, nothing herein shall be construed as to prevent
Buyer from terminating the employment of any Transferred Employee at any time
after the Closing Date for any reason (or no reason). Seller shall deliver to
Buyer as of the Closing Date all personnel files relating to Transferred
Employees who have signed authorizations and releases permitting Seller to
deliver such files. Buyer will give credit to the Transferred Employees
subsequent to the Closing Date for their years of service to Seller prior to the
Closing Date with respect to vacation and sick time.
12.02. COBRA. Seller agrees that it shall be Seller's (or its
Affiliates') sole responsibility to provide the required notices under Part 6 of
Title I of ERISA ("COBRA") to all M&A Qualified Beneficiaries (as defined in
Treas. Reg. Section 54.4980B-9, Q&A 4), and that it shall provide coverage under
COBRA to such individuals and be responsible for all obligations and liabilities
relating to or arising under the COBRA continuation coverage requirements.
12.03 401(K). On or before June 1, 2003, Seller shall cause a
"spin-off" of the assets and liabilities of the Med-Staff/Drexel Technical
Associates, Inc. 401(k) Profit Sharing Plan (the "Seller 401(k) Plan") resulting
in the division of the Seller 401(k) Plan into two separate, identical,
component plans and trusts, in accordance with applicable law (including,
48
without limitation, Section 414(l) of the Code), covering, respectively (i)
Transferred Employees and their beneficiaries (the "New 401(k) Plan") and (ii)
all other Seller 401(k) Plan participants (and their beneficiaries) (the "Drexel
401(k) Plan"). Seller shall cause the sponsorship of the Drexel 401(k) Plan to
be transferred to Drexel Technical Associates, Inc. on or before the Closing
Date. Seller shall draft the appropriate documents in a form and substance
reasonably satisfactory to Buyer and use its best efforts to take all actions
necessary, to the extent possible, to effectuate the intent of this Section
12.03. Effective as of the Closing Date, Buyer shall assume the sponsorship of
the New 401(k) Plan subject to, and conditioned upon, the Closing. In the event
that the Closing Date occurs on or after June 1, 2003, the Seller represents and
warrants that it will maintain and operate the New 401(k) Plan in compliance
with applicable law, including, without limitation, ERISA and the Code, and that
the representations and warranties set forth in Section 5.15 shall be true and
accurate as of the Closing Date.
12.04. WELFARE PLANS.
(a) As of the Closing Date, Buyer shall assume and maintain for the
benefit of
the Transferred Employees the New Welfare Plans (defined below) and the Seller
Plans which cover solely Transferred Employees listed on SCHEDULE 12.04(A)
(collectively, the "Assumed Seller Plans").
(b) Immediately prior to, and subject to, the Closing, Seller shall
cause all of the Seller Plans that are "employee welfare benefit plans" which
cover Transferred Employees as well as other employees of the Seller and its
Affiliates ("Seller Welfare Plans") to be divided into separate, identical
component plans covering respectively (i) Transferred Employees (and their
beneficiaries) (the "New Welfare Plans") and (ii) all other Seller Welfare Plan
participants (and their beneficiaries), including without limitation, M&A
Qualified Beneficiaries (the "Drexel Welfare Plans"). Immediately prior to, and
subject to, the Closing, Seller shall cause the Drexel Welfare Plans to be
transferred to Drexel Technical Associate, Inc. Prior to the Closing, Seller
shall draft the appropriate documents in a form and substance reasonably
satisfactory to Buyer and use its best efforts to take all actions necessary, to
the extent possible, to effectuate the intent of this Section 12.04(b).
Effective as of the Closing Date, Buyer shall assume the New Welfare Plans
subject to, and conditioned upon, the Closing.
(c) Notwithstanding the foregoing, to the extent that Buyer provides
similar benefits under a different plan, nothing contained in this Section 12.04
shall cause or result in the Transferred Employees receiving, or being eligible
to receive, duplicate benefits or, until December 31, 2003, if the Transferred
Employees (and their beneficiaries) are eligible to participate at substantially
similar terms in the Buyer's different plan(s) providing similar benefits,
require the Buyer to continue such Assumed Seller Plans or New Welfare Plans for
any period of time following the Closing Date, or (iii) preclude the Buyer from
terminating, amending or suspending the Assumed Seller Plans or the New Welfare
Plans.
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ARTICLE XIII.
TERMINATION
13.01. RIGHTS TO TERMINATE. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time before the Closing
by prompt written notice given in accordance with Section 19.01:
(a) by mutual written instrument signed by Buyer and Seller;
(b) at any time after June 30, 2003 by either Buyer or Seller, if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party
(or its Affiliates);
(c) by Buyer, upon a material breach of any representation, warranty or
covenant on the part of any of the Seller Parties set forth herein (as
determined in accordance with Section 14.07 herein), if such breach is not cured
to the satisfaction of Buyer (in its sole and absolute discretion) within
fifteen (15) days after delivery of a written notice from Buyer to the Seller
Parties specifically describing such breach, or if any representation or
warranty of any of the Seller Parties shall have become untrue, in either case
such that the conditions set forth in Sections 10.01 through 10.04 would not be
satisfied (a "Terminating Seller Event");
(d) by Seller, upon a material breach of any representation, warranty
or covenant on the part of Buyer or Parent set forth herein if such breach is
not cured to the satisfaction of the Seller Parties (in their sole and absolute
discretion) within fifteen (15) days after delivery of a written notice from the
Seller Parties to the Buyer Parties specifically describing such breach or if
any representation or warranty of Buyer or Parent shall have become untrue, in
either case such that the conditions set forth in Section 11.01 or 11.02 would
not be satisfied (a "Terminating Buyer Event").
13.02. PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement by either or both parties pursuant to Section 13.01 hereof,
written notice thereof shall forthwith be given to the other party specifying
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become void and there shall be no liability on the
part of the parties hereto (or their respective officers, directors, members or
Affiliates), except as set forth in Sections 8.03 (Confidential Information) and
18.01 (Expenses); provided, however, that if this Agreement is terminated by a
party because of the breach of the Agreement by the other party or because one
or more of the conditions precedent to the terminating party's obligations under
this Agreement is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
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ARTICLE XIV.
SURVIVAL; INDEMNIFICATION
14.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS.
(a) Notwithstanding any right of Buyer and Parent (whether or not
exercised) to investigate the affairs of Seller and the Business or any right of
any party (whether or not exercised) to investigate the accuracy of the
representations and warranties of the other party contained in this Agreement,
Seller and Buyer have the right to rely fully upon the representations,
warranties, covenants and agreements of the other contained in this Agreement.
Except as provided in the next sentence, the representations, warranties,
covenants and agreements of the Seller Parties and the Buyer Parties contained
in this Agreement will survive the Closing (i) indefinitely with respect to the
representations and warranties contained in Sections 5.01, 5.02, 5.03, 5.07,
5.15, 5.21, 6.01, 6.02 and 6.03 contained in this Agreement; (ii) until thirty
(30) calendar days after the expiration of the applicable statutes of limitation
(including all periods of extension, whether automatic or permissive) with
respect to matters covered by Section 5.19; and (iii) until the date that is
eighteen (18) months after the Closing Date in the case of all other
representations and warranties; provided, however, that any representation,
warranty, covenant or agreement that would otherwise terminate in accordance
with clause (ii) or (iii) above will continue to survive with respect to any
Claim if a notice shall have been timely given under Section 14.04 on or prior
to such termination date, until the related Claim for indemnification has been
satisfied or otherwise resolved.
(b) The representations and warranties contained in Article V and
Article VI hereof are the only representations and warranties made by the
parties in connection with the transactions contemplated by this Agreement and
supersede any and all previous written or oral statements made by any of the
parties.
14.02. SELLER PARTIES' INDEMNIFICATION OF BUYER. Subject to the terms
and limitations of this Article, from and after the Closing, the Seller Parties
shall, jointly and severally, indemnify Buyer and Parent and their respective
directors, officers, employees, shareholders, members, partners, agents,
successors and permitted assigns (collectively, "Buyer Claimants") against any
Damages which are caused by or arise out of: (i) the failure to perform or
fulfill any covenant or agreement to be performed or fulfilled by the Seller
Parties under any of the Transaction Documents, (ii) any inaccuracy in any
representation or breach of any warranty made by any of the Seller Parties
herein or in any certificate, document or instrument delivered pursuant hereto,
(iii) the Retained Liabilities, (iv) the Retained Assets, (v) except for the
Assumed Liabilities, the ownership of the Purchased Assets or the operation of
the Business prior to the Closing Date, (vi) any Taxes imposed on Buyer
attributable to the revenue or income Seller earned prior to the Closing Date,
the revenue or income the Business earned prior to the Closing Date, or any
Taxes imposed on the Purchased Assets or the Business with respect to the period
on or prior to the Closing Date and (vii) the waiver of compliance with
applicable Uniform Commercial Code bulk transfer requirements and (viii) any
brokerage commission, finders' fee or similar alleged payments alleged to be
payable relating to the Contemplated Transactions.
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14.03. BUYER PARTIES' INDEMNIFICATION OF SELLER. Subject to the terms
and limitations of this Article, from and after the Closing, the Buyer Parties
shall, jointly and severally, indemnify Seller and each of its officers,
partners, agents, successors and permitted assigns and the Principals
(collectively, "Seller Claimants") against any Damages which are caused by or
arise out of: (i) the failure to perform or fulfill any covenant or agreement to
be performed or fulfilled by the Buyer Parties under any of the Transaction
Documents, (ii) any inaccuracy in any representation or breach of any warranty
made by any of the Buyer Parties herein or in any certificate, document or
instrument delivered pursuant hereto, (iii) the Assumed Liabilities, (iv) the
operation of the Business or ownership of the Purchased Assets by Buyer on or
after the Closing Date, (iv) any brokerage commission, finders' fee or similar
payments alleged to be payable relating to the Contemplated Transactions or (v)
Buyer's involvement in the resolution of any Claim subject to the provisions of
Section 14.08, whether or not Buyer acts reasonably (such action being
conclusively presumed to be for the benefit of Buyer).
14.04. TERMS AND CONDITIONS OF INDEMNIFICATION. The respective
obligations and liabilities of the Seller Parties and of the Buyer Parties to
indemnify each other pursuant to this Article XIV shall be subject to the
following terms and conditions:
(a) The party seeking indemnification (the "Claimant") must promptly
give the party or parties from which it is seeking indemnification
(collectively, the "Indemnitor"), written notice of any such Claim. The
Claimant's failure to give prompt notice, however, shall not serve to eliminate
or limit the Claimant's right to indemnification hereunder except to the extent
such failure materially prejudices the rights of the Indemnitor. Any indemnity
notice (an "Indemnity Notice") shall state (with reasonable specificity) the
basis on which any indemnification is being sought, set forth the amount of
Damages for which indemnification is being sought, and in the case of third
party claims, be accompanied by copies of all relevant pleadings, demands and
other papers served on the Claimant.
(b) The respective obligations and liabilities of the Seller Parties
and the Buyer Parties to indemnify pursuant to this Article XIV in respect of
any Claim or assertion of liability by a third party shall be subject to the
following additional terms and conditions:
(i) The Indemnitor shall have the right to undertake, by
counsel of its own choosing reasonably satisfactory to Claimant, the defense,
compromise and settlement of such Claim.
(ii) In the event that the Indemnitor shall elect not to
undertake such defense, or within a reasonable time after notice of any such
Claim from the Claimant shall fail to defend, the Claimant (upon further written
notice to the Indemnitor) shall have the right to undertake the defense,
compromise or settlement of such Claim, by counsel of its own choosing, on
behalf of and for the account and risk of the Indemnitor (subject to the right
of the Indemnitor to assume defense of such Claim at any reasonable time prior
to settlement, compromise or final determination thereof).
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(iii) Anything in this Section 14.04 to the contrary
notwithstanding, (a) if there is a reasonable probability that a Claim may
materially and adversely affect the Claimant other than as a result of money
damages or other money payments, the Claimant shall have the right, at its own
cost and expense, to participate in the defense, compromise or settlement of the
Claim, (b) the Indemnitor shall not, without the Claimant's written consent,
settle or compromise any Claim or consent to entry of any judgment which does
not include as an unconditional term thereof the giving by the claiming party or
the plaintiff to the Claimant of a release from all liability in respect of such
Claim, (c) the Indemnitor shall not, without the Claimant's written consent,
consent to the entry of any order with respect to a Claim, or compromise or
settle any Claim, on terms imposing any obligation on the Claimant other than
the payment of money in a single installment (which amount shall be paid by
Indemnitor), (d) except as set forth in subsection (iv) below, the Claimant
shall not, without the Indemnitor's written consent, which shall not be
unreasonably withheld, consent to the entry of an order with respect to a Claim,
or compromise or settle any Claim and (e) in the event that the Indemnitor
undertakes the defense of any Claim, the Claimant by counsel or other
representative of its own choosing and at its sole cost and expense, shall have
the right to consult with the Indemnitor and its counsel or other
representatives concerning such Claim and the Indemnitor and the Claimant and
their respective counsel or other representatives shall cooperate with respect
to such Claim.
(iv) If the Indemnitor fails to pay, compromise or settle the
Claim within sixty (60) days of the date of receipt of the notice thereof
pursuant to Section 14.04(a) or to commence to contest the Claim within such
60-day period and thereafter to prosecute such contest diligently, the Claimant
may pay the Claim and the Indemnitor shall promptly, upon written demand of
Claimant, reimburse Claimant for the full amount of such payment, plus interest
from the date of such payment by Claimant to the date of reimbursement by
Indemnitor at the publicly announced base interest rate of Citibank, N.A. (or
any successor bank) in effect from time to time during such period.
14.05. LIMIT ON INDEMNIFICATION.
(a) The amount of Damages for which indemnification is provided under
this Article XIV shall be net of any amounts recovered by the Claimant under
Insurance Policies on its behalf (after giving effect to any deductibles) with
respect to such Damages. A Claimant will be required to use reasonable
commercial efforts to pursue collection under any of its Insurance Policies, as
applicable. For purposes of this Agreement, "Damages" shall be deemed to include
the portion of any increases in insurance premiums shown to be attributed to
Claims for which indemnification was to be provided under this Agreement but for
recovery by the Claimant under Insurance Policies on its behalf.
(b) Notwithstanding anything herein to the contrary, (i) the Seller
Parties shall not be required to indemnify a Buyer Claimant under Section
14.02(ii) or Section 14.02(v) unless, and only to the extent that, the aggregate
cumulative sum of all Claims for which indemnity would otherwise be due under
Section 14.02 exceeds $900,000. Notwithstanding anything herein to the contrary,
the Buyer Parties shall not be required to indemnify a Seller Claimant under
Section 14.03(ii) unless, and only to the extent that, the aggregate cumulative
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sum of all claims for which indemnity would otherwise be due under Section 14.03
exceeds $900,000. This Section 14.05 shall not apply to any claims of fraud.
(c) The total amount of indemnification to be paid jointly and
severally by the Seller Parties on the one hand, and the Buyer Parties on the
other hand pursuant to this Article XIV shall be limited to fifty percent (50%)
of the Purchase Price actually paid to the Seller Parties.
14.06 EXCLUSIVE REMEDY. The indemnification in this Article XIV shall
be the exclusive remedy of the parties hereto with respect for claims for
Damages; provided, however, in no event will this Article XIV limit any rights
to injunctive or other equitable relief pursuant to the terms herein.
14.07. QUALIFICATIONS. Notwithstanding anything to the contrary in this
Agreement, for purposes of the application of the indemnity provisions in this
Article XIV, the determination of whether a breach of any representation,
warranty or covenant in this Agreement has occurred and the amount of any
Damages resulting therefrom shall be determined without giving effect to any
"Material Adverse Effect" qualification or any other materiality or similar
qualification contained in the representations, warranties, covenants or
agreements herein.
14.08 OTHER CLAIMS. Each of the parties hereto acknowledges and agrees
that in the event Seller is Threatened with or receives written notice of the
commencement of any proceeding against Seller by any of its former healthcare
facility customers that is also a client of Buyer and/or its Affiliates, Seller
will promptly notify Buyer in writing of the same. Such notice shall identify
(i) the name of the healthcare facility, (ii) copies of all notices and
documentation delivered to Seller by the healthcare facility or its
Representatives, (iii) a detailed description of the alleged event(s) leading to
the Claim and (iv) a summary of Seller's position regarding such Claim. Because
any such Claim could adversely affect the relationship between Buyer and such
healthcare facility, the Principals agree not to consent to the entry of any
order with respect to any such Claim or compromise or settle any such Claim
without first obtaining Buyer's written consent (which will not be unreasonably
withheld or delayed), subject to Buyer's indemnification obligation arising if
Buyer's involvement increases the cost to Seller of the resolution of such
Claim.
ARTICLE XV.
INDEMNITY HOLDBACK AMOUNT ARRANGEMENTS
15.01. INDEMNITY HOLDBACK PAYMENT.
(a) If Buyer delivers to Seller an Indemnity Notice and Seller does not
give written notice of its objection on or before the twentieth Business Day
thereafter (the "Indemnity Claim Objection Period"), the Indemnity Holdback
Amount will be reduced, as set forth in Section 15.01(b)(ii)(x), by the amount
of such Claim (the amount of each such reduction being an "Indemnity Holdback
Payment Deduction") and shall be considered to be paid to Buyer in satisfaction
of the Claim set forth in the Indemnity Notice. If Seller gives written notice
of its objection to an Indemnity Notice during the Indemnity Claim Objection
Period, the Claim will not give rise to an Indemnity Holdback Payment Deduction
until Seller gives written notice of its consent to such Claim or as provided in
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Section 15.01(c). Notwithstanding anything to the contrary in this Agreement,
Seller's obligations under Section 14.02 will not be limited to the Indemnity
Holdback Amount.
(b) On the date eighteen (18) months after the Closing Date (the
"Indemnity Holdback Payment Date"), Buyer and Seller shall direct the Escrow
Agent to release an amount of cash (the "Indemnity Holdback Payment") to Buyer,
equal to (i) the Indemnity Holdback Amount minus (ii) the sum of (x) any
Indemnity Holdback Payment Deductions and (y) the amount of any additional
Claims made by Buyer pursuant to an Indemnity Notice that are pending or
unresolved as of the Indemnity Holdback Payment Date.
(c) If, on the Indemnity Holdback Payment Date, any amounts are
withheld from Seller under Section 15.01(b)(ii)(y) ("Withheld Amounts"), Buyer
and Seller shall direct the Escrow Agent to deliver such amounts to Seller when
and to the extent (i) Buyer gives written notice of its consent to make such
payments, (ii) Seller, in the case of Claims other than Third-Party Claims,
delivers to Buyer a final order of a court of competent jurisdiction (a "Final
Order"), or, if the parties agree to arbitration, an arbitrator agreed to by the
parties, with respect to such Claim ordering such payment or (iii) in the case
of Third-Party Claims, Buyer receives a Final Order determining that the amounts
payable by Buyer with respect to such Claims are less than the Withheld Amounts
with respect thereto. Notwithstanding anything to the contrary in this Article
XV, Seller will not be entitled to any Withheld Amounts with respect to which
Seller does not commence litigation, or, if arbitration is agreed to by the
parties, arbitration, on or before the date six months after the Indemnity
Holdback Payment Date other than Withheld Amounts relating to Claims to the
extent they arise from third-party claims commenced against Buyer (or Buyer and
Seller) ("Third-Party Claims").
(d) Buyer shall, in any Indemnity Notice it delivers prior to the
Indemnity Holdback Payment Date, set forth the sum of (x) all Indemnity Holdback
Payment Deductions and (y) all additional Claims made by Buyer pursuant to an
Indemnity Notice that are pending or remain unresolved. In addition, up to once
per calendar quarter, upon the written request of Seller, Buyer shall deliver a
statement, signed by an officer of Buyer, setting forth the sum remaining in the
Indemnity Holdback Amount. Any amount of the Indemnity Holdback Payment not
required to be released by the Escrow Agent to Seller under this Section 15.01
shall be released to Buyer on the Indemnity Holdback Payment Date.
ARTICLE XVI.
COOPERATION IN VARIOUS MATTERS
16.01. MUTUAL COOPERATION. After the Closing, the Seller Parties and
Buyer shall cooperate with each other as reasonably requested between them in
connection with the prosecution or defense of any claims or other matters
relating to the Business or the Purchased Assets. Such cooperation shall include
the furnishing of testimony and other evidence as reasonably requested,
permitting access to employees during normal business hours, upon reasonable
notice and without undue interruption and providing information regarding the
whereabouts of former employees.
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16.02. PRESERVATION OF SELLER PARTIES' FILES AND RECORDS. For a period
of six (6) years after the Closing, the Seller Parties shall, and shall cause
their Subsidiaries, if any, to, preserve all files and records in their
possession relating directly and primarily to the Business, allow the Buyer
Group access to such files and records and the right to make copies and extracts
therefrom at the Buyer Group's expense at any time during normal business hours
and upon reasonable notice, and not dispose of any thereof, except that at any
time after the Closing, any Seller Party may, but shall not be required to, give
Buyer written notice of its intention to dispose of any records that are more
than six (6) years old, specifying the items to be disposed of in reasonable
detail. Any Buyer Entity may, within a period of sixty (60) days after receipt
of any such notice, notify such Seller Party of the Buyer Group's desire to
retain one or more of the items to be disposed of. Such Seller Party shall, upon
receipt of such a notice from the Buyer Group, deliver such items as reasonably
requested, at the Buyer Group's expense.
ARTICLE XVII.
POST-CLOSING MATTERS
17.01. INFORMATION FOR REPORTS. At the reasonable request of Seller,
Buyer shall provide to Seller on a timely basis, in such form as Seller may
reasonably request, such information relating to Seller and the Business for
periods ending on or prior to the Closing Date as Seller may require in order to
enable it to prepare financial, Tax and other reports and statements for such
periods.
17.02. FURTHER COOPERATION AND ASSISTANCE.
(a) The parties hereto will, at any time and from time to time after
the Closing Date, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, all such further deeds, assignments, powers of
attorney, instruments of conveyance, transfer and license, and take such
additional actions, as the other party or their successor and/or assigns, may
reasonably request, to effect, consummate, confirm or evidence the transactions
contemplated by this Agreement, including for the better assigning,
transferring, granting, conveying, assuring and confirming to Buyer any
Purchased Assets.
(b) The Seller Parties shall, after the Closing Date, cooperate and
provide assistance to Buyer on the terms and conditions set forth in the
Transitional Services Agreement.
(c) After the Closing Date, unless Buyer shall otherwise agree in
writing, Seller shall: accurately prepare and file in the time periods
prescribed therefor all Tax Returns with respect to income attributable to the
Business in the period prior to the Closing Date, and pay when due all Taxes due
and owing with respect thereto to the extent they may create any encumbrance on
any Asset, discharge all Retained Liabilities in the Ordinary Course of Business
in accordance with past practices and not use the Seller IP.
17.03. PAYMENTS RECEIVED BY SELLER SUBSEQUENT TO THE CLOSING DATE. From
and after the Closing, Buyer shall have the right and authority to endorse
without recourse the name of Seller on any check or any other evidences of
indebtedness received by Buyer on account of the Business, the Purchased Assets
or the Assumed Liabilities. After the Closing, Seller will hold and promptly
56
transfer and deliver to Buyer (in no event later than five (5) days after
receipt), from time to time, as and when received, any cash, checks with
appropriate endorsements or other property that Seller may receive on or after
the Closing which properly belongs to Buyer and will account to Buyer for all
such receipts.
17.04. PENDING DISPUTES. Except as listed on SCHEDULE 17.04, from and
after the Closing Date, Buyer shall have complete control over the payment,
settlement or other disposition of, or any dispute involving, any customer of
the Business and any Purchased Asset, obligation or liability of Seller acquired
or assumed by Buyer pursuant hereto, and Buyer shall have the right to conduct
and control all negotiations and proceedings with respect thereto upon
disclosing to and consulting with Seller. Seller shall notify Buyer immediately
of any claim made with respect to any such customer, asset, obligation or
liability and shall not, except with the prior written consent of Buyer, make
any payment of, or settle or offer to settle, or consent to any compromise with
respect to, any such obligation or liability. Seller shall cooperate with Buyer
in any reasonable manner requested by Buyer in connection with any negotiations
or proceedings involving any such obligation or liability.
ARTICLE XVIII.
EXPENSES
18.01. BUYER'S AND SELLER PARTIES' EXPENSES. Except as otherwise
provided in this Agreement, the Buyer Parties, on their behalf, and the Seller
Parties, on their behalf, shall pay the expenses incurred by or on behalf of
such party in connection with the transactions contemplated by this Agreement,
including, but not limited to, expenses in connection with the preparation,
authorization, execution and performance of this Agreement and the Transaction
Documents and all fees and expenses of such party's brokers, finders, agents,
representatives, counsel and accountants.
18.02. TRANSFER TAXES. Buyer shall pay the cost of any sales, transfer,
value added, excise, recording, registration or similar Taxes (but excluding any
capital gains taxes or similar Taxes) applicable to the transfer of the
Purchased Assets pursuant to this Agreement.
ARTICLE XIX.
NOTICES
19.01. NOTICES. All notices, requests, demands and other communications
required or permitted to be given under this Agreement or any of the Transaction
Documents shall be deemed to have been duly given if in writing and delivered
personally, delivered by facsimile transmission (upon telephonic confirmation of
receipt), or delivered by overnight courier or first-class, postage prepaid,
registered or certified mail, return receipt requested, addressed as follows:
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If to the Seller Parties:
Seller:
Med-Staff, Inc.
4 Aronwold Lane
Newtown Square, PA 19073
Attn: Mr. William G. Davis
Fax No.: (610) 353-7850
E-mail address: bdavis@medstaffinc.com
Shareholders:
Mr. William G. Davis
4 Aronwold Lane
Newtown Square, PA 19073
Attn: Mr. William G. Davis
Fax No.: (610) 353-7850
E-mail address: bdavis@medstaffinc.com
Davis Family Electing Small Business Trust
4 Aronwold Lane
Newtown Square, PA 19073
Attn: Mr. William G. Davis
Fax No.: (610) 353-7850
E-mail address: bdavis@medstaffinc.com
And
Mr. Timothy Rodden
18 Castle Rock Drive
Havertown, PA 19083
Fax No.: (610) 353-7850
E-mail address: trodden@medstaffinc.com
With, in any such case, a mandatory copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attn: John B. Wright, II, Esquire
Fax No.: (215) 864-8999
E-mail address: wrightj@ballardspahr.com
58
If to the Buyer Parties: With a copy to:
c/o Cross Country, Inc. Proskauer Rose LLP
6551 Park of Commerce Blvd., N.W. 1585 Broadway
Suite 200 New York, New York 10036
Boca Raton, FL 33487
Attn: Victor Kalafa Fax: (800) 565 9774 Attn: Stephen W. Rubin, Esq.
Fax No.: (800) 551-7782 Fax No.: (212) 969-2900
E-mail address: vkalafa@crosscountry.com E-mail address: srubin@proskauer.com
Any party may change the address to which such communications are to be directed
to it by giving written notice to the other party in the manner provided above.
ARTICLE XX.
MISCELLANEOUS
20.01. ENTIRE AGREEMENT. This Agreement and the Transaction Documents
set forth the entire agreement and understanding of the parties with respect to
the subject matter hereof and thereof and supersede the Letter of Intent and all
prior agreements, arrangements and understandings relating thereto. No
representation, promise, inducement or statement of intention relating to the
transactions contemplated by this Agreement has been made by any party or any
Related Person which is not set forth in this Agreement or in the Transaction
Documents.
20.02. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, excluding any
conflict-of-laws provisions thereof that would otherwise require the application
of the law of any other jurisdiction.
20.03. SUCCESSORS AND ASSIGNS. This Agreement shall not be transferred
or assigned by any of the Seller Parties without the prior written consent of
Buyer or by Parent without the prior written consent of Seller. Any permitted
assignee shall assume, and shall agree to be bound by, all obligations of the
assignor to be performed under this Agreement from and after the date of such
assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
20.04. AMENDMENTS AND WAIVER. This Agreement may be amended, superseded
or canceled, and any of the terms hereof may be waived, only by a written
instrument specifically referring to this Agreement and specifically stating
that it amends, supersedes or cancels this Agreement or waives any of its terms,
executed by each of the Buyer Parties and each of the Seller Parties. Failure of
any party to insist upon strict compliance with any of the terms of this
Agreement in one or more instances shall not be deemed to be a waiver of its
rights to insist upon such compliance in the future, or upon compliance with
other terms hereof.
20.05. CAPTIONS. The captions used in this Agreement are for
convenience of reference only and shall not be considered in the interpretation
of the provisions hereof.
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20.06. EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel and accountants.
20.07. BINDING EFFECT. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties and their respective legal representatives, heirs, successors and
permitted assigns, whether so expressed or not.
20.08. THIRD PARTIES. Unless expressly stated herein to the contrary,
nothing in this Agreement, whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on any persons other
than the parties hereto and their respective legal representatives, successors
and permitted assigns. Nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
20.09. SCHEDULES INCLUDED IN EXHIBITS; INCORPORATION BY REFERENCE. Any
reference to an Exhibit to this Agreement contained herein shall be deemed to
include any Schedules to such Exhibit. Each of the Exhibits referred to in this
Agreement (including Schedules thereto), and each Schedule to this Agreement is
hereby incorporated by reference in this Agreement as if such Exhibits and
Schedules were set out in full in the text of this Agreement.
20.10. ARBITRATION. Any controversy or claim between the Seller Parties
and the Buyer Parties with respect to the subject matter of this Agreement will
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law) and the Expedited
Procedures under the Commercial Arbitration Rules of the American Arbitration
Association or such other rules and procedures as the parties to the dispute may
hereafter consent to in writing. Judgment upon any arbitration award may be
entered into in any court having jurisdiction. Any party to this Agreement may
bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim under this Agreement in any court having
jurisdiction over such action. The arbitration will be conducted in New York,
New York by a three-person panel and administered by the American Arbitration
Association. All arbitration hearings will commence within ninety (90) days of
the demand for arbitration. One arbitrator shall be appointed by the Seller
Parties and one arbitrator shall be appointed by the Buyer Parties and, such
arbitrators shall use commercially reasonable efforts to jointly appoint a third
arbitrator who has either a knowledge of the staffing industry or knowledge of
the healthcare industry. Further, the arbitrators will only, upon a showing of
cause, be permitted to extend the commencement of such hearing for up to an
additional sixty (60) days. Notwithstanding the above, any party may seek
equitable relief permitted by this Agreement from any court of competent
jurisdiction. The dispute that is the subject of such request for equitable
relief shall be submitted to arbitration in accordance with this Section 20.10.
20.11. SEVERABILITY. If any provision of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
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and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible. If any provision of this Agreement may be
construed in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable.
20.12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. Confirmation of execution
by electronic transmission of a facsimile signature page shall be binding upon
any party so confirming.
20.13. NO CONSTRUCTION AGAINST DRAFTSMEN. The parties acknowledge that
this is a negotiated agreement, and that in no event shall the terms hereof be
construed against either party on the basis that such party, or its counsel,
drafted this Agreement.
20.14. ENFORCEMENT COSTS. If any civil action, arbitration or other
legal proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expenses even if not taxable as court costs (including, but not
limited to, all such fees, taxes, costs and expenses incident to arbitration,
appellate, bankruptcy and post-judgment proceedings), incurred in that civil
action, arbitration or legal proceeding, in addition to any other relief to
which such party or parties may be entitled. Attorneys' fees shall include, but
not limited to, paralegal fees, investigative fees, administrative costs, sales
and use taxes and all other charges billed by the attorney to the prevailing
party.
20.15. EQUITABLE REMEDIES. Each of the parties acknowledges that the
parties will be irreparably damaged (and damages at law would be an inadequate
remedy) if this Agreement is not specifically enforced. Therefore, in the event
of a breach or Threatened breach by any party of any provision of this
Agreement, then the other parties shall be entitled, in addition to all other
rights or remedies, to an injunction restraining such breach, without being
required to show any actual damage or to post an injunction bond, and/or to a
decree for specific performance of the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CROSS COUNTRY NURSES, INC.
By: /s/ Joseph A. Boshart
-----------------------
Name: Joseph A. Boshart
Title: President
CROSS COUNTRY, INC.
By: /s/ Joseph A. Boshart
-----------------------
Name: Josheph A. Boshart
Title: President
MED-STAFF, INC.
By: /s/ William G. Davis
-----------------------
Name: William G. Davis
Title: CEO/President
DAVIS FAMILY SMALL BUSINESS ELECTING TRUST
By: /s/ William G. Davis
-----------------------
Name: William G. Davis
Title: Trustee
/s/ William G. Davis
- ---------------------------
William G. Davis, individually
/s/ Timothy Rodden
- ---------------------------
Timothy Rodden, individually
62
DAVIS FAMILY SMALL BUSINESS ELECTING TRUST
/s/ Deborah A. Davis
- ---------------------------
Deborah A. Davis
/s/ James Davis
- ---------------------------
James Davis