Exhibit 10.16
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement"), dated as of May 11,
2004, is made among WTI Acquisition, Inc., a Delaware corporation (the
"Purchaser"), RCG Companies Incorporated, a Delaware corporation ("RCG") and
Allen Gutterman ("Gutterman"), Edward Caliguiri ("Caliguiri") and Barry Cohen
("Cohen", and collectively with Gutterman and Caliguiri, the "Sellers").
RECITALS
WHEREAS, the Sellers own beneficially and of record all of the issued
and outstanding shares of common stock (the "Common Stock"), of Response
Personnel, Inc. ("RPI"); RPI Professional Alternatives, Inc., RPI Services,
Inc., Response Medical Staffing of Connecticut, Inc. and Response Medical
Staffing of New Jersey, Inc. (each a "Company" and collectively the "Companies")
and the number of shares of Common Stock owned by each of the Sellers on the
date hereof is set forth opposite such Seller's name on Schedule 4.2(a) hereto
(collectively the "Securities"). RPI owns beneficially and of record all of the
issued and outstanding shares of capital stock of Response Staffing Solutions of
New Jersey, Inc., Response Staffing Solutions of CT, Inc., and Response Staffing
Solutions of Long Island, Inc. (collectively, the "Subsidiaries");
WHEREAS, RCG owns all of the issued and outstanding capital stock of
the Purchaser;
WHEREAS, the Purchaser desires to purchase, and each of the Sellers
desire to sell, the Securities;
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and an inducement to the willingness of RCG and the Purchaser to enter
into this Agreement, at the Closing, each of the Sellers shall enter into an
employment agreement with Purchaser (together, the "Employment Agreements") in
the forms attached hereto as Exhibit A-1, A-2 and A-3, respectively.
NOW, THEREFORE, in consideration of the foregoing, the agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, when used in this Agreement,
have the meaning as set forth below:
"2003 Balance Sheet" shall have the meaning set forth in Section 4.3.
"Action" shall mean any claim, action, suit, inquiry, judicial or
administrative proceeding, or arbitration by or before any Governmental
Authority.
"Additional Taxes" shall have the meaning set forth in Section 9.5.
"Affiliate" shall mean with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities or voting interests,
by contract or otherwise.
"Affiliate Transactions" shall mean the liabilities, obligations,
contracts and claims set forth on Schedule 4.24(a).
"Agreement" shall have the meaning set forth in the Preamble.
"Amended Tax Return" shall have the meaning set forth in Section 9.3.
"Asset Lien" shall have the meaning set forth in the Section 4.5.
"Audited Financial Statements" shall have the meaning set forth in the
Section 4.3.
"Business Assets" shall have the meaning set forth in the Section 4.6.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in New York, New York and Charlotte, North
Carolina are required or authorized to be closed.
"Caliguiri" shall have the meaning set forth in the Recitals.
"Claim Notice" shall have the meaning set forth in the Section 7.2.
"Claims" shall mean all claims, demands, causes of action, obligations,
damages or liabilities.
"Closing" shall have the meaning set forth in the Section 3.1.
"Closing Date" shall have the meaning set forth in the Section 3.1.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Cohen" shall have the meaning set forth in the Recitals.
"Common Stock" shall have the meaning set forth in the Recitals.
"Companies" shall have the meaning set forth in the Recitals.
"Companies Articles" shall have the meaning set forth in the Section
4.1.
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"Companies Bylaws" shall have the meaning set forth in the Section 4.1.
"Consents" shall mean all authorizations, notices, waivers, approvals
and consents required by any Governmental Authority or under any Contracts for
Sellers to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
"Contingent Payment(s)" shall have the meaning set forth in the Section
2.5.
"Contingent Payment Period" shall have the meaning set forth in the
Section 2.5.
"Contracts" shall mean all contracts, agreements, leases, license
agreements, obligations, promises or undertakings (whether written or oral and
whether expressed or implied).
"Defense Notice" shall have the meaning set forth in the Section 7.2.
"Directors' and Officers' Releases" hall have the meaning set forth in
the Section 3.2.
"Disputed Claims" shall have the meaning set forth in the Section 7.2.
"EBITDA" shall mean, with respect to any Contingent Payment Period, the
combined earnings of the Companies and the Subsidiaries for such period
determined in accordance with GAAP applied on a consistent basis before taking
into account interest, income taxes, depreciation and amortization. In
determining EBITDA no allocation of corporate overhead of Purchaser or RCG shall
be included.
"EBITDA Statement" shall have the meaning set forth in the Section 2.5.
"Employment Agreements" shall have the meaning set forth in the
Recitals.
"Environmental Claim" shall mean any written or, to Sellers' Knowledge,
oral, notice by any Person alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (A)
the presence, or release into the environment of any Hazardous Material at any
location, whether or not owned by the Companies or any Subsidiaries, or (B)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" shall mean all Laws relating to pollution or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, Laws
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
"ERISA" shall mean the Employment Retirement Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in the Section 4.4.
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"ERISA Plans" shall have the meaning set forth in the Section 4.4.
"Escrow Agent" shall mean such bank as the parties shall mutually
agree.
"Escrow Agreement" shall have the meaning set forth in the Section 2.6.
"Escrow Amount" shall mean the sum of One Million Dollars ($1,000,000).
"Escrow Period" shall have the meaning set forth in the Section 2.6.
"Estimated Working Capital" shall have the meaning set forth in the
Section 2.3.
"Expiration Date" shall have the meaning set forth in the Section 7.5.
"Final EBITDA Statement" shall have the meaning set forth in the
Section 2.5(b).
"Final Statement" shall have the meaning set forth in the Section 2.4.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
"Governmental Authority" shall mean any court, governmental, regulatory
or administrative body, agency or authority, department, commission, agency,
self-regulatory organization, instrumentality or arbitrator, whether federal,
state, local or foreign.
"Gutterman" shall have the meaning set forth in the Recitals.
"Hazardous Material" shall mean (A) asbestos, polychlorinated
biphenyls, radioactive materials, petroleum, and any fraction or product of
crude oil or petroleum and (B) all other substances, materials, chemicals,
compounds, pollutants or wastes regulated by, under or pursuant to any
Environmental Laws, or any similar common law theory of liability; except that
"Hazardous Materials" shall not include substances, materials, chemicals,
compounds, pollutants or wastes used in the normal course of business, in
commercially reasonable quantities and in compliance with Environmental Laws.
"Indemnifiable Claim" shall have the meaning set forth in the Section
7.2.
"Indemnification Cap" shall have the meaning set forth in the Section
7.3.
"Indemnified Party" shall have the meaning set forth in the Section
7.2.
"Indemnifying Party" shall have the meaning set forth in the Section
7.2.
"Independent Accounting Firm" shall have the meaning set forth in the
Section 2.4.
"Initial Purchase Price" shall have the meaning set forth in the
Section 2.2.
"Intellectual Property" shall have the meaning set forth in the Section
4.5.
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"Knowledge of the Sellers", "Sellers Knowledge" or any similar terms
shall mean that which (i) is actually known by Gutterman, Caliguiri and/or Cohen
or (ii) which would reasonably be expected to be known by Gutterman, Caliguiri
and/or Cohen in light of his position, responsibilities and duties with the
Companies and the Subsidiaries.
"Known Pre-Closing Litigation" shall have the meaning set forth in
Section 4.7.
"Laws" shall mean all federal, state, local and foreign laws, statutes,
regulations or other requirements
"Leased Real Property" shall have the meaning set forth in the Section
4.8.
"Liens" shall mean liens, charges, pledges, security interests, claims,
mortgages, options, encumbrances, rights of first refusal, conditions, covenants
and other restrictions.
"Losses" shall have the meaning set forth in the Section 7.1.
"March Financial Statements" shall have the meaning set forth in the
Section 4.3.
"Market Value" shall mean the value of RCG Common Stock calculated as
the average closing price of the RCG Common Stock for the ten (10) trading days
ending one trading day prior to the date of delivery by Purchaser to Sellers of
the EBITDA Statement pursuant to Section 2.5(c) hereof.
"Material Adverse Effect" shall mean a materially adverse effect on the
business, results of operations, assets, liabilities or condition (financial or
otherwise) of the Companies and the Subsidiaries taken as a whole, other than
any change, event or occurrence resulting from any change to the extent
generally affecting the national or any local economy or the industries in which
the Companies and the Subsidiaries operate.
"Material Contracts" shall have the meaning set forth in the Section
4.10.
"Material Intellectual Property" shall mean all Intellectual Property
that is material to the conduct of the Companies' or its Subsidiaries'
businesses as currently conducted, whether owned, licensed or used by the
Companies or its Subsidiaries.
"Materials of Environmental Concern" shall mean toxic chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
"Order" shall mean any order, judgment, writ, injunction or decree of
any Governmental Authority
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Percentage Interest" shall have the meaning set forth in the Section
2.2.
"Permits" shall have the meaning set forth in the Section 4.12
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"Permitted Investments" shall have the meaning set forth in Section
4.16
"Permitted Liens" shall mean (i) statutory Liens imposed by Law for
Taxes that are not yet due and payable, (ii) landlords', carriers', vendors',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising by operation of Law in the ordinary course of business, consistent with
past practice, and with respect to amounts not overdue for a period of more than
45 calendar days or being contested in good faith by appropriate proceedings,
(iii) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security Laws, (iv) deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of like nature, in each
case, incurred in the ordinary course of business consistent with past practice,
(v) zoning laws and ordinances, easements, rights-of-way, restrictions and other
similar encumbrances which do not, individually or in the aggregate, interfere
with the use of the relevant assets as being used on the date hereof, (vi)
rights of any lessor of any leased assets, Liens securing capitalized lease
obligations and purchase money obligations not in default, incurred in the
ordinary course of business, consistent with past practice, (vii) Liens pursuant
to the Companies' credit facility with Sterling National Bank, and (viii) Liens
expressly reflected in the Audited Financial Statements (which have not been
discharged).
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, association or entity of any
kind whatsoever, including any Governmental Authority.
"Plans" shall have the meaning set forth in the Section 4.4.
"Pre-Closing Period" shall have the meaning set forth in Section 9.1.
"Pre-Closing Period Tax Returns" shall have the meaning set forth in
Section 9.3.
"Purchase Price" shall have the meaning set forth in the Section 2.2.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Indemnified Parties" shall have the meaning set forth in the
Section 7.1.
"RCG" shall have the meaning set forth in the Preamble.
"RCG Common Stock" shall mean the common stock, $.004 par value of RCG.
"Real Property Leases" shall have the meaning set forth in the Section
4.8.
"Recipient" shall have the meaning set forth in Section 9.6.
"Reserve Amounts" shall have the meaning set forth in Section 7.2.
"Restrictive Covenant" shall have the meaning set forth in Section 6.2.
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"RPI" shall have the meaning set forth in the Recitals.
"Securities" shall have the meaning set forth in the Recitals.
"Security Liens" shall mean Liens solely to the extent arising under
any applicable federal or state securities laws.
"Seller Indemnified Parties" shall have the meaning set forth in the
Section 7.1.
"Seller Indemnifying Party" shall have the meaning set forth in the
Section 7.6.
"Seller Offset Amounts" shall have the meaning set forth in the Section
7.2.
"Seller Transaction Agreements" shall have the meaning set forth in the
Section 4.21.
"Sellers" shall have the meaning set forth in the Preamble.
"Sellers' Representative" shall have the meaning set forth in Section
12.15.
"Software" shall have the meaning set forth in the Section 4.5.
"Statement" shall have the meaning set forth in the Section 2.4.
"Stock Powers" shall have the meaning set forth in Section 3.2.
"Stockholder Agreement" shall mean that agreement by and among RPI and
each Seller.
"Straddle Period" shall have the meaning set forth in Section 9.1.
"Straddle Period Tax Returns" shall have the meaning set forth in
Section 9.3.
"Subsidiaries" shall have the meaning set forth in the Recitals.
"Subsidiary Shares" shall have the meaning set forth in the Section
4.2.
"Surviving ERISA Claim" shall have the meaning set forth in Section
7.1.
"Tax" or "Taxes" shall mean (w) any and all taxes, assessments,
customs, duties, levies, fees, tariffs, imposts, deficiencies and other
governmental charges of any kind whatsoever (including, but not limited to,
taxes on or with respect to net or gross income, franchise, profits, gross
receipts, capital, sales, use, ad valorem, value added, transfer, real property
transfer, transfer gains, inventory, capital stock, license, payroll,
employment, social security, unemployment, severance, occupation, real or
personal property, estimated taxes, rent, excise, occupancy, recordation, bulk
transfer, intangibles, alternative minimum, doing business, withholding and
stamp), together with any interest thereon, penalties, fines, damages costs,
fees, additions to tax or additional amounts with respect thereto, imposed by
the United States or any state or local or other applicable jurisdiction; (x)
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any liability or obligations to a governmental authority as a result of any
escheat or similar law, (y) any liability for the payment of any amounts
described in clause (w) or (x) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result of transferor or
successor liability; and (z) any liability for the payments of any amounts as a
result of being a party to any Tax Sharing Agreement or as a result of any
express or implied obligation to indemnify any other person with respect to the
payment of any amounts of the type described in clause (w), (x) or (y).
"Tax Claim" shall have the meaning set forth in Section 9.6.
"Tax Return" shall mean all returns (whether federal, state, local or
otherwise) and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1120-S)) required to be supplied to a Tax
authority relating to Taxes.
"Tax Sharing Agreements" shall have the meaning set forth in Section
4.14.
"Terminating Breach" shall have the meaning set forth in the Section
11.1.
"Termination Date" shall have the meaning set forth in the Section
11.1.
"Third Party Claim" shall have the meaning set forth in the Section
7.2.
"Trade Secrets" shall have the meaning set forth in the Section 4.5.
"Trademarks" shall have the meaning set forth in the Section 4.5.
"Transaction Agreements" shall mean this Agreement (together with the
Exhibits and Schedules hereto), the Escrow Agreement, the Directors' and
Officers' Release, the Employment Agreements and any other documents,
certificates or agreements executed in connection with the transactions
contemplated hereby or thereby.
"Transfer Taxes" shall have the meaning set forth in Section 9.7.
"Unknown Pre-Closing Litigation" shall have the meaning set forth in
Section 4.7.
"Updated Information" shall have the meaning set forth in Section 6.7.
"Working Capital" shall mean the combined current assets of the
Companies and the Subsidiaries as of the Closing Date less the combined current
liabilities of the Companies and the Subsidiaries as of the Closing Date, in
each case determined in accordance with GAAP, consistently applied.
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ARTICLE II
PURCHASE AND SALE OF SECURITIES
2.1 Agreement to Purchase and Sell. At the Closing, and upon the
terms and subject to the conditions set forth in this Agreement, the Sellers
shall sell, assign, transfer, convey and deliver to the Purchaser, and the
Purchaser shall accept and purchase from the Sellers, the Securities, free and
clear of Liens other than Security Liens.
2.2 Purchase Price; Consideration Paid to Each Seller. The
aggregate purchase price to be paid by the Purchaser for the Securities (the
"Purchase Price") shall be comprised of a payment in cash in an amount of ten
million ($10,000,000) dollars (the "Initial Purchase Price") plus the Contingent
Payments, if any. The Initial Purchase Price shall be increased on a dollar for
dollar basis if, and to the extent, the Working Capital is more than $2,000,000
and shall be decreased on a dollar for dollar basis if, and to the extent, the
Working Capital is less than $2,000,000. Each Seller shall be entitled to
receive his proportionate share of the Initial Purchase Price based upon his
percentage ownership in the Companies as set forth on Schedule 4.2(a). (the
"Percentage Interest").
2.3 Estimated Working Capital.
Not less than five (5) nor more than seven (7) Business Days
prior to the Closing Date, the Sellers shall deliver to the Purchaser a good
faith estimate of the Working Capital as of the close of business on the Closing
Date (the "Estimated Working Capital"), setting forth in reasonable detail the
calculation thereof. The Estimated Working Capital shall be calculated in
accordance with GAAP. Purchaser and its accountants and other representatives
shall have an opportunity to review and comment upon the Estimated Working
Capital.
2.4 Determination of Final Working Capital.
(a) As soon as practicable, but in no event later than
120 calendar days after the Closing Date, the Purchaser shall review the books
and records of the Companies and Subsidiaries to determine the Working Capital
and shall prepare and deliver to Sellers a statement (the "Statement") setting
forth the Working Capital and setting forth in reasonable detail the calculation
thereof. The Working Capital shall be calculated in accordance with GAAP.
(b) Sellers' Representative shall have 30 calendar days
following receipt of the Statement during which to dispute in writing any item
contained in the Statement. Such notice of dispute shall set forth in reasonable
detail the items disputed and Sellers' Representative's proposed adjustment to
such items. If the Sellers' Representative fails to notify the Purchaser in
writing of any such dispute within such 30-day period, the Statement shall be
the "Final Statement." If the Sellers' Representative timely notifies the
Purchaser in writing of any such dispute, and the Purchaser and the Sellers'
Representative cannot resolve any such dispute within 30 calendar days after
receipt by Purchaser of such notice of dispute, such dispute shall be resolved
by a nationally recognized independent accounting firm mutually selected by
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Purchaser and Sellers' Representative (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practicable and shall be final and binding on Purchaser and each of the Sellers.
Any fees and expenses relating to the engagement of the Independent Accounting
Firm shall be borne one-half by the Purchaser and one-half collectively by the
Sellers, in accordance with their Percentage Interests. In the event of a
dispute, the Statement, as modified by resolution by Purchaser and the Sellers'
Representative, or by the Independent Accounting Firm, shall be the "Final
Statement." Following the issuance of the Statement until the Statement becomes
the Final Statement, Purchaser shall make available to the Sellers and their
representatives, such books and records of the Companies and the Subsidiaries as
Sellers may reasonably request.
(c) If the Working Capital, as set forth in the Final
Statement is less than $2,000,000, the Sellers shall pay the Purchaser, no later
than five (5) Business Days from the date of such Final Statement, an amount
equal to such difference in cash. Each Seller shall be responsible for paying
only such Seller's Percentage Interest of the difference to the Purchaser.
(d) If the Working Capital, as set forth in the Final
Statement, is greater than $2,000,000, then the Purchaser shall pay such excess
to the Sellers in accordance with their Percentage Interests, not later than
five (5) Business Days from the date of such Final Statement.
2.5 Contingent Payments.
(a) Subject to the terms and conditions set forth in this
Agreement, the Purchaser shall make the following payments (the "Contingent
Payments") after the Closing Date to the Sellers. For each twelve (12) month
period commencing on the first day of July and ending on June 30, (each a
"Contingent Payment Period"), commencing July 1, 2004 and ending on June 30,
2008 (i) if the EBITDA exceeds $2,500,000, but is less than $3,999,999, the
Purchaser shall pay to the Sellers an amount equal to twenty-five percent (25%)
of the amount by which EBITDA exceeds $2,500,000 and (ii) if the EBITDA exceeds
$4,000,000, the Purchaser shall pay to the Sellers an amount equal to fifty
percent (50%) of the entire EBITDA.
(b) A Contingent Payment shall be paid by the Purchaser
as follows: Together with the Purchaser's delivery to the Sellers of an EBITDA
Statement for a Contingent Payment Period as provided in Section 2.5(c) hereof,
the Purchaser shall pay to the Sellers the aggregate amount of the Contingent
Payment, if any, with respect to such Contingent Payment Period, as set forth on
such EBITDA Statement. If the Sellers object to the EBITDA Statement in the
manner permitted by Section 2.5(c) hereof and the amount of the Contingent
Payment for such Contingent Payment Period is subsequently determined, pursuant
to Section 2.5(c), to be greater than the amount of the Contingent Payment set
forth in such EBITDA Statement, within five (5) Business Days after such
determination, the Purchaser shall pay to the Sellers such additional amount of
the Contingent Payment.
(c) Promptly following the end of each Contingent Payment
Period, the Purchaser shall cause audited financial statements to be prepared
for such period for the Companies and the Subsidiaries, which audited financial
statements shall be prepared in accordance with GAAP consistently applied Not
later than 90 calendar days after the end of each Contingent Payment Period, the
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Purchaser shall deliver to the Sellers' Representative such audited financial
statements together with a statement (the "EBITDA Statement") setting forth the
EBITDA for such Contingent Payment Period and a calculation of the amount of the
Contingent Payment, if any, to be paid with respect to such Contingent Payment
Period, setting forth in reasonable detail the calculation thereof. The Sellers
shall be deemed to have accepted the amounts and determinations set forth in the
EBITDA Statement unless the Sellers' Representative delivers to the Purchaser
not later than 30 calendar days after receipt by the Sellers' Representative of
the EBITDA Statement a written notice listing in reasonable detail those items
to which the Sellers take exception and their proposed adjustment to such items.
During such period, the Purchaser shall make available to the Sellers'
Representative and representatives of the Sellers, such books and records of the
Companies and the Subsidiaries as Sellers may reasonably request. If the
Sellers' Representative and the Purchaser are unable, within 15 calendar days
after receipt by the Purchaser of the objection notice from the Sellers'
Representative, to resolve the disputed exceptions, such disputed exceptions
will be referred to the Independent Accounting Firm. The Independent Accounting
Firm shall, within 30 calendar days following its engagement, deliver to the
Sellers' Representative and the Purchaser a written report determining such
disputed exceptions, and its determinations will be conclusive and binding upon
Purchaser and each of the Sellers for the purposes of determining the amount of
such Contingent Payment, if any. In the event of a dispute, the EBITDA
Statement, as modified by resolution by Purchaser and the Sellers'
Representative, or by the Independent Accounting Firm shall be the "Final EBITDA
Statement." The fees and expenses of the Independent Accounting Firm shall be
shared one-half by Purchaser and one-half collectively by Sellers, in accordance
with their Percentage Interest.
(d) The Contingent Payment shall be paid to Sellers in
cash, provided that, RCG or Purchaser, at their option, but subject to the
provisions set forth on Schedule 2.5(d) may pay part or all of any Contingent
Payment by issuing to the Sellers, in proportion to their Percentage Interests,
shares of RCG Common Stock registered for resale, provided that (i) any such
stock payment shall in no event have an aggregate Market Value greater than 50%
of such Contingent Payment and (ii) no such stock may be issued to any Seller if
such issuance, when added to all other shares of RCG stock then beneficially
owned by such Seller, would cause such Seller to beneficially own more than 4.9%
of all of the then issued and outstanding stock of RCG and (iii) in no event
will RCG issue, in connection with this Agreement, without shareholder approval,
more than 19.9% of its shares of Common Stock outstanding as of the Closing
Date. Each Seller acknowledges and agrees that he will not in any day sell any
RCG Common Stock the amount of which would be in excess of 20% of the average
trading volume of RCG Common Stock for the five (5) consecutive trading days
prior to any such sale. Each Seller acknowledges and agrees that he is acting
individually, and not as part of any "group" as defined in the Securities
Exchange Act of 1934, as amended. The Contingent Payment shall be paid to each
of the Sellers in accordance with his Percentage Interest, provided that in the
event a Seller shall have forfeited his rights to any Contingent Payment under
the terms of such Seller's Employment Agreement, such Seller shall not be
entitled to such forfeited Contingent Payment which shall be reallocated equally
among the remaining Seller or Sellers then employed by Purchaser.
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2.6 Escrow Agreement. At the Closing, the Purchaser and the
Sellers shall enter into an escrow agreement, by and among the Purchaser, the
Escrow Agent and the Sellers, substantially in the form attached hereto as
Exhibit B (the "Escrow Agreement"). At the Closing, the Purchaser shall deliver
to the Escrow Agent the Escrow Amount which shall be held in an escrow account
in accordance with the terms of the Escrow Agreement for a period of one (1)
year from the Closing Date (the "Escrow Period") for the purpose of securing the
Sellers' indemnification obligations hereof. On the date which is six (6) months
after the date of the Escrow Agreement, one-half of the Escrow Amount, less (i)
any amounts previously paid in respect of a claim and (ii) any amounts then
subject to an unresolved claim, pursuant to the Escrow Agreement, shall be
distributed to Sellers in proportion to their respective Percentage Interests;
provided, if a Seller voluntarily terminates his Employment Agreement without
Good Reason, or for Cause or Disability, such Seller's Percentage Interest in
the Escrow Amount shall remain in escrow for an additional one year from each
release date. The Escrow Amount remaining at the end of the Escrow Period that
is not then subject to an unresolved claim pursuant to the Escrow Agreement
shall be distributed to the Sellers in proportion to their respective Percentage
Interests pursuant to terms of the Escrow Agreement.
2.7 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Securities as agreed by Purchaser and Sellers prior to the
Closing. Sellers, RCG and Purchaser agree to be bound by such allocation and
will not take any position inconsistent with such allocation and will file all
returns and reports with respect to the transactions contemplated by this
Agreement, including all federal, state and local tax returns, on the basis of
such allocation, unless otherwise required by a Governmental Authority.
ARTICLE III
CLOSING
3.1 Closing. The consummation of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Sonnenschein Nath &
Rosenthal LLP, 1221 Avenue of the Americas, New York, NY 10020-1089 or such
other place or manner as the parties shall agree as soon as practicable, but in
any event within five (5) Business Days after the day on which the last to be
fulfilled or waived of the conditions set forth in Article IX hereof (other than
those conditions that by their nature are to be fulfilled at the Closing, but
subject to the fulfillment or waiver of such conditions) shall be fulfilled or
waived in accordance with this Agreement or at such other place and time or on
such other date as the parties hereto may mutually agree in writing (the date
upon which the Closing actually occurs is referred to herein as the ("Closing
Date"). The Closing shall be effective as of 12:01 a.m. on the Closing Date.
Written notice shall be promptly delivered by the Purchaser to the Sellers, and
by the Sellers to the Purchaser, when such conditions to their respective
obligations to consummate the transactions contemplated hereby have been
fulfilled or waived.
3.2 Sellers' Closing Deliveries. At the Closing and simultaneously
with the Purchaser's deliveries hereunder, the Sellers shall deliver or cause to
be delivered to the Purchaser:
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(a) stock certificates representing all of the
Securities, accompanied by stock or similar powers duly endorsed in blank or
accompanied by duly executed instruments of transfer (the "Stock Powers").
(b) the Employment Agreements, duly executed by
Gutterman, Caliguiri and Cohen, as applicable;
(c) the Escrow Agreement, duly executed by the Sellers;
(d) certificates duly executed by the Sellers as to the
satisfaction of the conditions set forth in Sections 10.2(a), (b) and (c);
(e) a certificate duly executed by respective Secretary
of the Companies and the Subsidiaries certifying the organizational documents
and all amendments thereto of the Companies and each of the Subsidiaries;
(f) a certificate certifying the existence and good
standing of each of the Companies and the Subsidiaries issued by the Secretary
of State of the State where it is incorporated, formed or created and each State
in which it is qualified to do business as a foreign corporation or trust, each
as of a recent date;
(g) duly executed copies of those Consents set forth on
Schedule 4.9(b);
(h) resignations as directors, duly executed by each of
those persons serving as directors of the Companies and each of the Subsidiaries
immediately prior to the Closing (such resignations shall be effective either
before or upon the consummation of the Closing);
(i) duly executed releases from each of the directors and
officers of the Companies and the Subsidiaries, in each case, substantially in
the form attached hereto as Exhibit D (the "Directors' and Officers' Releases");
(j) duly executed spousal consents for each of the
Sellers to the extent required;
(k) a cross-receipt duly executed by the Sellers;
(l) the stock books, stock ledgers, minute books and
corporate seals of each of the Companies and the Subsidiaries;
(m) all such other certificates, documents and
instruments as the Purchaser shall reasonably request in connection with the
consummation of the transactions contemplated by this Agreement.
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3.3 Purchaser's Closing Deliveries. At the Closing, and
simultaneous with the Sellers' deliveries hereunder, the Purchaser shall deliver
or cause to be delivered the following:
(a) cash in an amount equal to the Initial Purchase
Price, less Escrow Amount, by wire transfer to the bank account or accounts
designated in writing by Sellers;
(b) cash in an amount equal to the Escrow Amount by wire
transfer to a bank account designated by the Escrow Agent;
(c) the Employment Agreements duly executed by Purchaser;
(d) the Escrow Agreement, duly executed by the Purchaser;
(e) certificates of the Chief Executive Officer of each
of RCG and the Purchaser certifying as to the satisfaction of the conditions set
forth Sections 10.3(a) and (b);
(f) a cross-receipt duly executed by the Purchaser;
(g) certified resolutions of the Board of Directors of
each of RCG and Purchaser and, if such shareholder approval is required, of the
shareholders of RCG, evidencing that RCG and Purchaser have taken all corporate
action necessary to authorize the execution and delivery of this Agreement and
the Transaction Documents and the consummation of the transactions contemplated
hereby and thereby;
(h) a certificate certifying the existence and good
standing of Purchaser issued by the Secretary of State of the State of Delaware
and each state where it is qualified to do business as a foreign corporation;
and
(i) all such other certificates, documents and
instruments as the Sellers shall reasonably request in connection with the
consummation of the transactions contemplated by the Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to the Purchaser the
following:
4.1 Corporate Organization; Authority; No Violation.
(a) Except as set forth on Schedule 4.1(a), each of the
Companies and the Subsidiaries is a corporation, duly organized or created,
validly existing and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate power and authority to own, lease,
operate or otherwise hold its properties and assets and to carry on its business
as now being conducted. Each of the Companies and the Subsidiaries is duly
qualified or licensed and in good standing as a foreign corporation, authorized
to do business under the Laws of each jurisdiction where the character of the
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properties owned, leased or used by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, would not have a Material Adverse Effect. Schedule 4.1(a)
sets forth a true, complete and correct list of all jurisdictions in which each
of the Companies and the Subsidiaries is presently qualified or licensed to do
business.
(b) True, correct and complete copies of the articles of
incorporation of the Companies (the "Companies Articles") and bylaws of the
Companies (the "Companies Bylaws") and the charter documents and bylaws (and all
amendments thereto), of each of the Subsidiaries, each as currently in effect,
have been made available to Purchaser. The Companies are not in violation of any
term of the Companies Articles or the Companies Bylaws. None of the Subsidiaries
is in violation of any term of its charter documents or bylaws.
(c) The Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby, do not and will not (i)
conflict with or result in a breach of any provision of the Companies Articles,
Companies Bylaws, deed of trust or comparable organizational documents of any of
the Subsidiaries; (ii) subject to obtaining any Consents, materially violate, or
conflict with, or result in a material breach of any provisions of or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a benefit under, any material note, bond, mortgage, indenture, deed of
trust, lease, license, Permit, franchise, agreement, commitment, contract or
other instrument or obligation to which the Companies or any of the Subsidiaries
is a party or by which its properties are bound or affected; (iii) violate in
any material respect any Laws or material Order applicable to the Companies or
any of the Subsidiaries, or by which any of their properties is bound or
affected; or (iv) result in the creation of any material Lien or Asset Lien on
any Business Assets.
4.2 Capitalization.
(a) The authorized, issued and outstanding capital stock
of the Companies consists solely of shares of Common Stock as set forth on
Schedule 4.2(a). The Securities are all of the issued and outstanding shares of
Common Stock and are owned of record and beneficially by the Sellers. The number
of shares of Common Stock owned by each of the Sellers on the date hereof is set
forth on Schedule 4.2(a). The Securities have been duly authorized and validly
issued, and are fully paid and nonassessable. None of the Securities have been
issued in violation of any preemptive or subscription rights, or is subject to
any preemptive or subscription rights.
(b) Schedule 4.2(b) sets forth a true, correct and
complete description of the name, jurisdiction of organization or creation,
authorized and outstanding capitalization and ownership thereof of each of the
Subsidiaries. All of the issued and outstanding shares of capital stock or other
equity or beneficial interests of the Subsidiaries (the "Subsidiary Shares") are
owned of record and beneficially by Response Personnel, Inc.. Response
Personnel, Inc. has good and valid title to the Subsidiary Shares, free and
clear of all Liens except Securities Liens. Each issued and outstanding share of
capital stock or other equity interests of each of the Subsidiaries has been
duly authorized and validly issued, is fully paid and nonassessable, and has not
been issued in violation of, and is not subject to, any preemptive or
subscription rights. Other than the Subsidiaries, neither the Companies, nor the
Subsidiaries, owns capital stock or other equity or beneficial interests in any
entity.
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(c) Except as set forth on Schedule 4.2(c), (i) there is
no option, warrant or other right, agreement, arrangement, or commitment of any
kind whatsoever to which the Companies or any of the Subsidiaries is a party
relating to the issued or unissued capital stock or other equity or beneficial
interests of the Companies or any of the Subsidiaries or obligating the
Companies or any Subsidiaries to grant, issue or sell any share of the capital
stock or other equity or beneficial interests of any of the Companies or the
Subsidiaries by sale, lease, license on otherwise; (ii) there is no obligation,
contingent or otherwise, of any of the Companies or the Subsidiaries to (A)
repurchase, redeem or otherwise acquire any share of the capital stock or other
equity or beneficial interests of any of the Companies or the Subsidiaries, or
(B) provide funds to, or make any investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect to the
obligations of any of the Companies or the Subsidiaries or any other person;
(iii) neither the Companies nor the Subsidiaries, directly or indirectly, owns,
or has agreed to purchase or otherwise acquire, the capital stock or other
equity or beneficial interests of, or any interest convertible into or
exchangeable or exercisable for such capital stock or such equity or beneficial
interests of any corporation or other entity; (iv) there is no agreement,
arrangement, contract or other commitment of any kind whatsoever (contingent or
otherwise) pursuant to which any person is or may become entitled to receive any
payment from the Companies or the Subsidiaries based on the revenues or
earnings, or calculated in accordance therewith, of the Companies or the
Subsidiaries; (v) there is no voting trust, proxy or other agreement,
arrangement, contract or other commitment of any kind whatsoever to which any of
the Companies or the Subsidiaries is a party, or by which any of the Companies
or the Subsidiaries, or any of their respective properties or assets, is bound
with respect to the voting of any share of capital stock or other equity or
beneficial interest of any of the Companies or the Subsidiaries; and (vi) there
are no outstanding rights, subscriptions, warrants, puts, calls, preemptive
rights, options or other agreements, instruments or undertakings of any kind
relating to any capital stock or other equity security of any of the Companies
or the Subsidiaries, and there is no security of any kind convertible into or
exchangeable for any such capital stock or other equity or beneficial interest.
(d) Upon delivery to Purchaser at the Closing of
certificates representing the Securities pursuant to Section 4.2(a) hereof and
payment by Purchaser of the Purchase Price therefore pursuant to Section 2.2
hereof, Purchaser shall acquire and receive all right, title and interest in and
to all of the issued and outstanding shares of capital stock of the Companies,
free and clear of all Liens except Security Liens.
4.3 Financial Statements.
(a) Attached as Schedule 4.3(a) are the audited combined
financial statements and combined supplementing information, including the
balance sheets of the Companies and the Subsidiaries as of December 31, 2003
(the "2003 Balance Sheet"), and as of December 31, 2002 and 2001, together with
audited combined statements of income and retained earnings and cash flows for
each of the years then ended, all certified by the Companies' independent public
accountants, whose reports thereon are included therein (the "Audited Financial
Statements").
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(b) Attached as Schedule 4.3(b) are the draft unaudited
combined financial statements and combined supplementing information, including
the balance sheets of the Companies and the Subsidiaries as of March 31, 2004,
together with the unaudited combined statements of income and retained earnings
and cash flows for the three-month period then ended (the "March Financial
Statements").
(c) The Audited Financial Statements and the March
Financial Statements have been prepared from, and are in accordance with the
books and records of the Companies and the Subsidiaries, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be stated in the notes thereto and except, in the case of the
March Financial Statements, for normal and recurring year-end adjustments and
the absence of footnote disclosure), and fairly present the financial position
and the results of operations, stockholders' equity and cash flows (and changes
in financial position, if any) of the Companies and the Subsidiaries as of the
times and for the periods referred to therein.
4.4 Directors, Officers, Employees, Employee Benefit Plans; ERISA.
(a) Schedule 4.4(a) contains a complete and accurate list
as of the date hereof of the name, title, current annual base salary and bonuses
paid or earned with respect to the last completed fiscal year for each current
employee, independent contractor, director and officer of the Companies and the
Subsidiaries.
(b) Except as set forth on Schedule 4.4(b), since January
1, 2001, there has not been, nor to Sellers' Knowledge is there pending or
threatened, (i) any labor dispute between the Companies and the Subsidiaries and
any labor organization, or any strike, slowdown, jurisdictional dispute, work
stoppage or other similar organized labor activity involving any employee of the
Companies and the Subsidiaries or affecting the Companies and the Subsidiaries
or (ii) any union organizing, or election activity involving, any employee of
the Companies and the Subsidiaries.
(c) Except as set forth on Schedule 4.4(c), there exists
no pending or to the Knowledge of Sellers, threatened lawsuit, administrative
proceeding or investigation between any of the Companies and the Subsidiaries
and any current or former director, officer or employee of the Companies and the
Subsidiaries, including any claim for wrongful termination, breach of express or
implied contract of employment or for violation of equal employment opportunity
laws. There exists no pending or, to the Knowledge of Sellers, threatened
lawsuit, administrative proceeding or investigation of the Companies and the
Subsidiaries or any employee thereof regarding allegations of hostile work
environment, sexual discrimination or racial discrimination.
(d) Schedule 4.4(d) sets forth a true and complete list
of each bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance or termination pay, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program, agreement or arrangement, and each other
employee benefit plan, program, agreement or arrangement, or any employment,
severance, consulting or similar agreement, sponsored, maintained or contributed
to or required to be contributed to, or entered into by the Companies or any
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Subsidiaries for the benefit of any employee or former employee, or director or
former director, of the Companies or any Subsidiaries, whether formal or
informal (collectively, the "Plans"). Schedule 4.4(d) identifies each of the
Plans that is an "employee benefit plan," as that term is defined in Section
3(3) of ERISA (such plans being hereinafter referred to collectively as the
"ERISA Plans"). Except as set forth on Schedule 4.4(d), neither the Companies
nor any Subsidiaries have any commitment to create any additional Plan or
materially increase the benefits provided under any existing Plan.
(e) None of the Companies, any Subsidiary nor any trade
or business (an "ERISA Affiliate"), that together with the Companies would be
deemed a "single employer" within the meaning of Section 4001(b) of ERISA,
currently sponsors, maintains or contributes to, or at any time within the last
six (6) years has sponsored, maintained or contributed to, any employee pension
benefit plan (as defined in Section 3(2) of ERISA) that is subject to Section
412 of the Code or Title IV of ERISA (including any described in Section 4063(a)
of ERISA).
(f) Neither the Companies nor the Subsidiaries nor any
ERISA Plan, nor any trust created thereunder nor, to the Sellers' Knowledge, any
trustee or administrator of any such ERISA plan, has engaged in a transaction
with respect to any ERISA Plan that could subject the Companies, any Subsidiary
or any ERISA Plan or such trust created thereunder (whether by way of
indemnification or otherwise), to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976
of the Code.
(g) Full payment has been made of all amounts that the
Companies or any Subsidiaries is required to pay under the terms of each ERISA
Plan as of the last day of the most recent Plan year thereof ended prior to the
date of this Agreement, and all such amounts properly accrued through the
Closing Date with respect to the current plan year thereof will be paid by the
Companies or the applicable Subsidiaries on or prior to the Closing Date or will
be properly recorded in the Companies' combined financial statements in
accordance with GAAP consistently applied.
(h) Each ERISA Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter to the effect that it is so qualified-and that the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code,
and neither the Companies nor the Sellers are aware of any circumstances that
could result in such Plan no longer being qualified. All such ERISA Plans have
been amended for the Tax Laws commonly known as "GUST" and "EGTRRA" and each
such ERISA Plan has been submitted to the Internal Revenue Service for a
favorable determination letter within the remedial amendment period prescribed
under GUST.
(i) Except as set forth on Schedule 4.4(i), no Plan
provides welfare benefits, including death or medical benefits (whether or not
insured), with respect to current or former employees of the Companies or any
Subsidiaries beyond their retirement or other termination of service (other than
coverage mandated by applicable Laws), and neither the Companies nor any
Subsidiaries has any binding obligation to provide any employee or group of
employees with any such benefits upon their retirement or termination of
employment.
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(j) Except as set forth on Schedule 4.4(j), neither the
execution and delivery of this Agreement by the Sellers nor the performance by
the Sellers of this Agreement nor the consummation of the transactions
contemplated hereby will (i) entitle any current or former director, officer or
employee of the Companies or the Subsidiaries to severance pay, unemployment
compensation or any other payment from the Companies or any Subsidiaries, (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such director, officer or employee, or (iii) result in any
prohibited transaction described in Section 406 of ERISA or Section 4975 of the
Code with respect to any ERISA Plan for which an exemption is not available. No
amounts payable under the Plans will fail to be deductible for federal Income
tax purposes by virtue of Section 162(a)(1) or 280G of the Code.
4.5 Intellectual Property.
(a) As used herein, the term "Intellectual Property"
means the following items, in each case held for use in, used in, or necessary
for the businesses of the Companies and the Subsidiaries as currently conducted:
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing (collectively,
`Trademarks"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part renewals, reissues, and applications for any
of the foregoing); copyrights (including any registrations and applications for
any of the foregoing); Software; "mask works" (as defined under 17 U.S.C. ss.
901) and any registrations and applications for "mask works"; technology, trade
secrets and other confidential information, know-how, proprietary processes,
inventions, formulae, algorithms, models, and methodologies (collectively,
"Trade Secrets"); and rights of publicity and privacy relating to the use of the
names, likenesses, voices, signatures and biographical information of real
persons, As used herein, the term "Software" means any and all (i) computer
programs (other than "off-the-shelf" or shrink-wrap software), including, but
not limited to, any and all software implementation of algorithms, models and
methodologies, whether in source code or object code form, (ii) computerized
databases and compilations of data, and (iii) all documentation, including, but
not limited to, user manuals and training materials, relating to any of the
foregoing.
(b) Schedule 4.5(b) sets forth a true, complete and
accurate list of all U.S. and foreign (i) patents and patent applications; (ii)
trademark registrations, trademark applications and Internet domain names; and
(iii) copyright and mask work registrations and copyright and mask work
applications.
(c) Except as set forth on Schedule 4.5(c), (i) the
Companies or one of the Subsidiaries owns or has the right to use all Material
Intellectual Property and, to the Sellers' Knowledge, all other Intellectual
Property, free and clear of all Liens and Asset Liens and (ii) the Companies or
one of the Subsidiaries is listed in the records of the appropriate United
States, state, or foreign registry as the sole current owner of record for each
application and registration listed on Schedule 3.5(b), and (iii) any
registrations or applications for Material Intellectual Property owned or used
by the Companies and the Subsidiaries, and, to the Sellers' Knowledge, any
registrations or applications for any other Intellectual Property owned or used
by the Companies and the Subsidiaries, is valid and subsisting, is in full force
and effect and has not been cancelled, expired or abandoned. With respect to any
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assets, rights or properties, an "Asset Lien" shall mean all restrictions,
rights of first refusal, conditions, covenants and similar rights that
materially impair the use of such asset, right or property by the Companies or
the Subsidiaries in connection with the conduct of the Companies' or the
Subsidiaries' businesses.
(d) Schedule 4.5(d) sets forth, with respect to the
Material Intellectual Property, a true, complete and accurate list of all
Software (other than readily available, "off-the-shelf" commercial or
shrink-wrap software programs having an acquisition price of less than $5,000)
which is owned, licensed or leased by the Companies and the Subsidiaries,
describing which Software is owned, licensed or leased, as the case may be. The
Software owned by the Companies and the Subsidiaries was developed by (i)
employees of the Companies or the Subsidiaries or (ii) independent contractors
who have created such Software as "work for hire" (as such term is defined in 17
U.S.C. ss. 101) and/or assigned their rights in such Software to the Companies
or the Subsidiaries by written agreement.
(e) Schedule 4.5(e) sets forth a true, complete and
accurate list of all agreements (whether oral or written, and whether between
the Companies or inter-corporate) to which the Companies or the Subsidiaries is
a party or otherwise bound, (i) granting or obtaining any right to use or
practice any rights under any Material Intellectual Property (other than
licenses for readily available, "off-the-shelf' commercial or shrink-wrap
software programs having an acquisition price of less than $5,000), or (ii)
restricting the Companies' or the Subsidiaries' rights to use any Material
Intellectual Property or, to the Sellers' knowledge, any other Intellectual
Property, including, but not limited to, license agreements, development
agreements, distribution agreements, settlement agreements, consent to use
agreements, and covenants not to sue (collectively, the "License Agreements").
No royalties or other fees (other than fees of the appropriate agency or
government office for maintaining and protecting the Material Intellectual
Property or other Intellectual Property) are payable by the Companies or the
Subsidiaries to any third parties for the use of or right to use any Material
Intellectual Property or, to the Sellers' knowledge, any other Intellectual
Property except pursuant to the License Agreements. The License Agreements are
valid and binding obligations of the Companies or the Subsidiaries, enforceable
in accordance with their respective terms except as enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other similar Laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity). To
the Sellers' Knowledge, there exists no event or condition which will result in
a material violation or breach of or constitute (with or without due notice or
lapse of time or both) a default by the Companies or the Subsidiaries or, to the
Sellers' Knowledge, the other party thereto, under any such License Agreements.
(f) Except as set forth on Schedule 4.5(f), to the
Sellers' Knowledge, there has been no prior use of the Trademarks by any third
party that would confer upon said third party superior rights in such
Trademarks. The Companies and the Subsidiaries have used commercially reasonable
efforts to police the Trademarks against third-party infringement in order to
maintain the validity of such Trademarks.
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(g) Except as set forth on Schedule 4.5(g), there is no
pending or, to the Sellers' Knowledge, threatened claim, suit, arbitration or
other adversarial proceeding before any court, agency, arbitral tribunal, or
registration authority, in any jurisdiction, and neither the Companies nor the
Subsidiaries have received written notice regarding any of the foregoing,
involving the Intellectual Property owned by the Companies or the Subsidiaries
or, to the Sellers' knowledge, the Intellectual Property licensed to the
Companies or the Subsidiaries, including, but not limited to, any claim, suit,
arbitration or other adversarial proceeding alleging that the activities or the
conduct of the Companies' or the Subsidiaries' business infringes upon, violates
or constitutes the unauthorized use of the intellectual property or other
proprietary rights of any third party or challenging the Companies' or the
Subsidiaries' ownership or use of any Intellectual Property, or the validity,
enforceability or registrability of any Intellectual Property.
(h) To the Sellers' Knowledge, no third party is
misappropriating, infringing, diluting or violating any Material Intellectual
Property and no such claims, suits, arbitrations or other adversarial
proceedings have been brought or threatened against any third party by the
Companies or the Subsidiaries.
(i) To Sellers' Knowledge, the conduct of the Companies'
and the Subsidiaries' businesses as currently conducted does not misappropriate,
infringe upon (either directly or indirectly such as through contributory
infringement or inducement to infringe) or dilute any intellectual property
rights owned or controlled by any third party.
(j) Except as set forth on Schedule 4.5(j), the Companies
and the Subsidiaries take reasonable measures to protect the confidentiality of
Trade Secrets. To the Sellers' knowledge, no Trade Secret has been disclosed or
authorized to be disclosed to any third party other than pursuant to a written
confidentiality and non-disclosure agreement. To the Sellers' knowledge, no
party to any non-disclosure agreement relating to its Trade Secrets is in breach
or default thereof.
(k) Except as set forth on Schedule 4.5(k), (i) the
consummation of the transactions contemplated by this Agreement or the
Transaction Agreements will not result in the loss or impairment of the
Purchaser's rights to own, use, or bring any action for the infringement of any
of the Material Intellectual Property, nor will such consummation require the
consent of any third party in respect of any Material Intellectual Property and
(ii) to the Sellers' Knowledge, the consummation of the transactions
contemplated by this Agreement or the Transaction Agreements will not result in
the loss or impairment of the Purchaser's rights to own, use, or bring any
action for the infringement of any of the other Intellectual Property, nor will
such consummation require the consent of any third party in respect of any other
Intellectual Property. No current or former director, officer, employee,
contractor or consultant of the Companies or the Subsidiaries (or any of its
predecessors in interest) will, after giving effect to the transactions
contemplated by this Agreement or the Transaction Agreements, own or retain any
rights to use any of the Material Intellectual Property or, to the Sellers'
Knowledge, any Intellectual Property.
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4.6 Assets.
(a) Schedule 4.6(a) sets forth a true, correct and
complete list of all tangible assets, properties and rights owned, leased or
licensed by the Companies or any of the Subsidiaries having a value in excess of
$10,000. All of the buildings, improvements, machinery and equipment currently
used in connection with the businesses of the Companies and the Subsidiaries are
in good and working condition and repair to permit the continual operation and
conduct of the businesses of the Companies and its Subsidiaries as presently
conducted, ordinary wear and tear excepted. Except as set forth on Schedule
4.6(a), the Companies and the Subsidiaries have good and valid title to all
assets, properties and rights owned by the Companies and the Subsidiaries
reflected in the Audited Financial Statements (except inventory and other
properties disposed of in the ordinary course of business since December 31,
2003, and accounts receivable paid since December 31, 2003), free and clear of
all Liens and Asset Liens, except for Permitted Liens.
(b) All material assets, properties, interests and rights
used or held for use in the conduct of the businesses of the Companies and the
Subsidiaries (the "Business Assets") are owned, leased or licensed by the
Companies and the Subsidiaries. The Business Assets include all of the material
assets, properties, interests and rights material to, or used for the conduct of
the businesses of the Companies and the Subsidiaries as presently conducted. The
Companies and the Subsidiaries have such technology sufficient for the
operations of its business as it is presently conducted. The Companies and the
Subsidiaries have the right to use all of the assets, properties, interests and
rights used in the conduct of the businesses of the Companies and the
Subsidiaries as presently conducted, notwithstanding any Asset Liens on such
assets, properties, interests and rights.
4.7 Litigation.
(a) Except as set forth on Schedule 4.7, (i) the
Companies or the Subsidiaries have not received written notice of any pending or
threatened Action and, to the Sellers' Knowledge, there is no Action pending or
threatened, in each case, by or against the Companies or the Subsidiaries before
any Governmental Authority, and (ii) there is no Order outstanding against the
Companies or any Subsidiaries. Actions listed on Schedule 4.7 shall collectively
be referred to herein as "Known Pre-Closing Litigation" and all Actions relating
to or arising out of events, occurrences or circumstances prior to the Closing
(whether or not such Action is commenced prior to Closing) but which is not
listed on Schedule 4.7 shall collectively be referred to herein as "Unknown
Pre-Closing Litigation."
(b) There is no Action pending or, to the Sellers'
Knowledge, threatened against the Companies or any Subsidiaries which (i)
challenges the transactions contemplated hereby, (ii) would prevent or
materially interfere with or delay the consummation of the transactions
contemplated hereby, or (iii) seeks damages in connection with the transactions
contemplated hereby.
4.8 Title to Properties.
(a) Schedule 4.8(a) is a true, correct and complete list
of all leases, subleases, licenses and other agreements (collectively, the "Real
Property Leases") under which the Companies or the Subsidiaries use or occupy,
or have the right to use or occupy, any real property (the land, buildings and
other improvements covered by the Real Property Leases are referred to herein as
the "Leased Real Property"), including the date, address, lessor and lessee (or
sublessor or sublessee, as the case may be) and use of the premises under each
Real Property Lease. The Companies have heretofore made available to the
Purchaser true, correct and complete copies of each of the Real Property Leases.
The Companies hold good and valid leasehold interests to the Leased Real
Property, in each case subject to the provisions of the applicable Real Property
Lease. Each Real Property Lease is valid, binding and enforceable and in full
force and effect and no material default or circumstance exists which, with the
giving of notice or the passage of time, or both, would constitute a material
default by the Companies or any Subsidiaries, or to the Sellers' Knowledge, any
other party to any Real Property Lease.
(b) The Companies and the Subsidiaries do not own any
real property.
(c) To the Sellers' Knowledge, there are no condemnation
or real estate Tax proceedings pending or threatened with respect to any of the
Leased Real Properties, and the Companies have not received written notice of
any such proceedings.
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4.9 Consents, Notices and Approvals.
(a) Except for Consents set forth on Schedule 4.9(a), no
Consent of any Governmental Authority is required to be made or obtained by the
Companies, any of the Subsidiaries or any of the Sellers in connection with the
execution, delivery and performance by the Sellers of this Agreement and the
consummation of the transactions contemplated hereby.
(b) Except as set forth on Schedule 4.9(b), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) require the Consent of any party to
any Material Contract, or (ii) violate, or conflict with, or result in a breach
of any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation, modification or acceleration of the
performance required by or a loss of a benefit under, any Material Contract.
4.10 Contracts.
(a) Set forth on Schedule 4.10(a) is a true, correct and
complete list of the following types of Contracts, to which the Companies or the
Subsidiaries, as the case may be, is a party or by which it or its properties
are bound, or pursuant to which it obtains benefits or incurs obligations in the
conduct of its businesses (the "Material Contracts"):
(i) Contracts for the purchase of goods by, or
for the furnishing of services to, the Companies and the Subsidiaries
that provide for, or could reasonably be expected to provide for,
remaining payments by the Companies and the Subsidiaries in excess of
$25,000 during the term of any such Contract;
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(ii) Contracts between (x) the Companies or any
Subsidiaries and (y) any of its Affiliates, officers or directors (or
any Affiliates of any of the foregoing);
(iii) Contracts with any Person containing any
guaranties by, or residual obligations of, the Companies or any
Subsidiaries;
(iv) any lease agreement between the Companies or
any Subsidiaries and any Person for leasing equipment, which has an
aggregate rental value in excess of $25,000 during the term of the
lease;
(v) Contracts under which the Companies or the
Subsidiaries provides consulting services to any person;
(vi) any employment, severance, non-competition,
consulting or other Contracts with any current or former stockholder,
director, officer, sales associate or employee of the Companies and the
Subsidiaries;
(vii) joint venture, partnership, stockholder,
voting trust or other Contracts whereby the Companies or the
Subsidiaries have agreed with any other Person (A) to enter into a
joint business arrangement for profit or (B) to vote any shares of
capital stock or other equity or beneficial interests in any other
Person in any particular manner;
(viii) Contracts entered into since January 1, 2001
providing for the acquisition or disposition of assets having a value
in excess of $25,000, other than such acquisitions or dispositions in
the ordinary course of business, consistent with past practice;
(ix) licenses and agreements relating to Material
Intellectual Property;
(x) Contracts for the lease of personal property
to or from any Person requiring payments in excess of $25,000;
(xi) Contracts requiring the Companies or any
Subsidiaries to indemnify or hold harmless any Person in respect of
which the aggregate potential obligation could reasonably be expected
to exceed $25,000;
(xii) Contracts contemplating the referral of any
services to any Person or to the Companies or any Subsidiaries, as the
case may be, the performance of which involves consideration in excess
of $25,000;
(xiii) any Contracts (A) relating to indebtedness
for borrowed money or other financing transactions or (B) restricting
the ability of the Companies or any Subsidiaries to incur indebtedness
for borrowed money or make any loan or advance or own, operate, sell,
transfer, pledge or otherwise dispose of any assets;
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(xiv) Contracts under which any other Person has
directly or indirectly guaranteed any indebtedness, liability or
obligation of the Companies or any Subsidiaries, or letter of credit
issued to guarantee any obligation of the Companies or any
Subsidiaries, or any vendor or customer of the Companies or any
Subsidiaries;
(xv) mortgages, pledges, security agreements,
deeds of trust or other documents granting a Lien;
(xvi) Contracts (A) providing for the payment of
any bonus or commission based on sales or earnings or (B) providing for
any bonus or other payment based on the sale of the Companies or any
Subsidiaries or any portion thereof or any other change of control of
the Companies or any Subsidiaries;
(xvii) Contracts that provide for a payment, or
that the terms and conditions that would otherwise govern the
relationship of the parties thereto will be altered, upon a change of
control of the Companies or any Subsidiaries;
(xviii) Contracts with any Governmental Authority;
(xix) Contracts containing covenants which
restrict the Companies or the Subsidiaries from engaging in any
business or in any geographical area or containing any prohibition on
the disclosure of confidential information in the possession of the
Companies or any Subsidiaries or any exclusivity provision with respect
to any business or geographic area; and
(xx) Any other Contracts not listed in
subparagraphs (i) through (xix) above, that are material to the
business of the Companies and the Subsidiaries, whether or not in the
ordinary course of business consistent with the past practice, made or
entered into since January 1, 2001.
Schedule 4.10(a) shall set forth, with respect to each Material Contract listed
thereon, the subparagraph(s) of subsection (a) above to which such Material
Contract relates.
(b) The Companies and the Subsidiaries have made
available to the Purchaser copies of all of the Material Contracts. Each of the
Material Contracts is in full force and effect and is a valid and binding
obligation of the Companies and the Subsidiaries, enforceable against the
Companies and the Subsidiaries in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar Laws now or hereafter
in effect relating to creditors' rights generally or by general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). To the Sellers' Knowledge, each of the Material Contracts is
a valid and binding obligation of the other parties thereto, enforceable against
such other parties in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent conveyance,
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reorganization, moratorium, or other similar Laws now or hereafter in effect
relating to creditors' rights generally or by general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity). Except as set forth on Schedule 4.10(b), with respect to the Material
Contracts, no default or circumstances exist which, with the giving of notice or
the passage of time, or both, would constitute a material default by the
Companies or any of the Subsidiaries or, to the Sellers' Knowledge, by the other
party or parties thereto. None of the parties to any Material Contract has
terminated such Material Contract, and the Companies and the Subsidiaries have
not given oral or written notice of termination of any Material Contract or
received oral or written notice of termination of any such Material Contract
from any other party thereto, nor has the Companies or any Subsidiaries received
any oral or written notice of any such party's intention to discontinue its
business relationship with the Companies or any Subsidiaries or oral or written
notice of such party's intention to reduce the volume of business it conducts
with the Companies or any Subsidiaries under any of the Material Contracts.
4.11 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 4.11, neither the Companies nor any Subsidiaries has incurred any
contractual liability or, to the Sellers' Knowledge, incurred any other
liability, whether accrued, contingent, absolute, determined, indeterminable or
otherwise, which was not (i) reflected or reserved against in the Audited
Financial Statements or (ii) incurred in the ordinary course of business
consistent with past practice since December 31, 2003, in each case, in an
amount less than $25,000 individually and $100,000 in the aggregate. Except as
set forth on Schedule 4.11, the reserves for such liabilities and obligations
reflected on the 2003 Balance Sheet are adequate in accordance with GAAP
consistent with past practice.
4.12 Compliance with Laws; Permits.
(a) Neither the Companies nor any Subsidiaries has
violated in any respect any Orders and each of the Companies and the
Subsidiaries has complied and is presently in compliance in all material
respects with all applicable Laws that are material to the conduct of the
Companies' or the Subsidiaries' respective businesses or ownership of their
respective properties or assets.
(b) The Companies and the Subsidiaries and their
respective employees have all licenses, including being a licensed "travel
agency" in the states in which it operates, franchises, permits and
authorizations of any Governmental Authority as are material for the lawful
conduct of the business of the Companies and the Subsidiaries as presently
conducted, including, without limitation, required by Law (collectively,
"Permits"), and such Permits are in full force and effect. Schedule 4.12(b) sets
forth a true, complete and accurate list of all of the material Permits. Neither
the Companies nor any Subsidiaries nor any of such employees has received any
written notice of revocation of or default under, any Permits.
4.13 Environmental Matters.
(a) Except as set forth on Schedule 4.13(a), the
Companies and the Subsidiaries are in compliance in all material respects with
all applicable Environmental Laws. Except as set forth on Schedule 4.13(a), the
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Companies and the Subsidiaries have not received any communication (written or
oral), whether from a Governmental Authority, citizens group, employee or
otherwise, that alleges that the Companies and the Subsidiaries are not in
compliance with Environmental Laws, and, to the Sellers' knowledge, there are no
circumstances that may prevent or materially interfere with such compliance in
the future.
(b) Except as set forth on Schedule 4.13(b), there is no
Environmental Claim pending or, to the Sellers' Knowledge, threatened against
the Companies and the Subsidiaries.
(c) Except as set forth on Schedule 4.13(c), there are no
past or present actions, activities, circumstances, conditions, events or
incidents, including, without limitation, the release, emission, discharge or
disposal of any Hazardous Material, that, to the Sellers' Knowledge, could form
the basis of any Environmental Claim against the Companies or any Subsidiaries
or any person whose liabilities for any such Environmental Claim, the Companies
or any Subsidiaries have or may have retained or assumed either contractually or
by operation of law.
4.14 Tax Matters.
(a) Except as set forth on Schedule 4.14(a):
(i) Each of the Companies and the Subsidiaries
has (x) timely filed (or there has been filed on its behalf) all Tax
Returns required to be filed by it (taking into account valid
extensions) and all Tax Returns are true and correct, (y) paid (or
there has been paid on its behalf) in full all Taxes required to be
paid by it, and (z) established (or there has been established on its
behalf) on the 2003 Balance Sheet reserves that are adequate for the
payment of any Taxes not yet due and payable. Since the date of the
2003 Balance Sheet, none of the Companies or any of the Subsidiaries
has incurred any liability for Taxes other than in the ordinary course
of business, consistent with past practice;
(ii) There are no Liens for Taxes upon any assets
of the Companies or any of the Subsidiaries, except Permitted Liens;
(iii) No deficiency for any Taxes has been
proposed, asserted or assessed against the Companies or any of the
Subsidiaries that has not been resolved and paid in full. No waiver,
extension or comparable consent given by the Companies or any of the
Subsidiaries regarding the application of the statute of limitations
with respect to any Taxes or Tax Return is outstanding, nor is any
request for any such waiver or consent pending;
(iv) There are no federal, state, local or
foreign audits, actions, suits, proceedings, claims or administrative
proceedings or, to Sellers' Knowledge, investigations, relating to
Taxes or any Tax Returns of the Companies or any of the Subsidiaries
now pending, and none of the Companies or any of the Subsidiaries has
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received any notice of any proposed audits, investigations, claims or
administrative proceedings relating to Taxes or any Tax Returns;
(v) Each of the Companies and the Subsidiaries
have complied in all material respects with all applicable Laws
relating to the payment, collection or withholding of any Tax, and the
remittance thereof, including, but not limited to, Sections 1441, 1442,
1445 and 3402 of the Code.
(vi) None of the Companies or any of the
Subsidiaries has received any written ruling from any Tax authority. No
closing agreement pursuant to Section 7121 of the Code (or any similar
provision of state, local or foreign Law) has been entered into by or
with respect to the Companies or any of the Subsidiaries;
(vii) None of the Companies or any of the
Subsidiaries (A) is a party to, is bound by or has any obligation
under, any Tax sharing agreement, Tax indemnification agreement or
similar contract or arrangement, whether written or unwritten
(collectively, "Tax Sharing Agreements") or (B) has any potential
liability or obligation to any person as a result of or pursuant to,
any such Tax Sharing Agreement;
(viii) None of the Companies or any of the
Subsidiaries has agreed or is required to make any adjustments under
Section 481(a) of the Code (or any similar provision of state, local or
foreign Law) by reason of a change in accounting method or otherwise
for any Tax period for which the applicable statute of limitations has
not yet expired;
(ix) No jurisdiction where the Companies or any
of the Subsidiaries does not file a Tax Return has made a Claim that
the Companies or any of the Subsidiaries is required to file a Tax
Return for such jurisdiction or that any Taxes are due as a result of
doing any business in such jurisdiction;
(x) Since their formation, none of the Companies
or any of the Subsidiaries have been a "distributing corporation" or a
"controlled corporation" in a distribution intended to qualify under
Section 355(a) of the Code;
(xi) Since their formation, none of the Companies
nor any of the Subsidiaries have taken any action that would cause such
Companies or Subsidiaries to not qualify as an "S" corporation or
Qualified Subchapter "S" Subsidiaries (as the case may be); and
(xii) Since their inception the Companies and the
Subsidiaries have been either "S" corporations or qualified subchapter
"S" subsidiaries.
(b) Other than any Tax Returns which have not yet been
required to be filed, each of the Companies and the Subsidiaries has made
available to the Purchaser true and correct copies of the United States federal
income Tax Return and any state, local or foreign Tax Return for each of the
taxable years ended December 31, 2002 and 2001.
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(c) Each of the Companies and the Subsidiaries has
previously delivered or made available to the Purchaser complete and accurate
copies of each of (i) all audit reports, letter rulings, technical advice
memoranda, and similar documents issued since January 1, 2000 by a Governmental
Authority relating to the United States federal, state or local Taxes due from
or with respect to it, and (ii) any closing agreements entered into by it with
any Tax authority, in each case, existing on the date hereof. The Companies and
each of the Subsidiaries will deliver to the Purchaser all materials with
respect to the foregoing for all matters arising after the date hereof through
the Closing Date.
4.15 No Material Adverse Change.
(a) Except as set forth on Schedule 4.15(a), since
January 1, 2004, the businesses of the Companies and the Subsidiaries have been
conducted in the ordinary course of business, consistent with past practice.
(b) Except as set forth on Schedule 4.15(b), since
January 1, 2004, there has not occurred any event, change or development which
has had or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
4.16 Affiliated Transactions.
(a) Except as set forth on Schedule 4.16(a), no (x)
officer, director, or employee or any Affiliate of the Companies or any
Subsidiaries, (y) Seller, or (z) spouse, child, or Affiliate of the foregoing:
(i) has any direct or indirect financial
interest in any competitor, supplier or customer of the Companies or
any Subsidiaries (other than ownership of less than 1% of the
outstanding securities of a company that is publicly listed on a
national securities exchange ("Permitted Investments")) or has had,
since January 1, 2001, any material direct or indirect financial
interest in any competitor, supplier or customer of the Companies or
any Subsidiaries (other than Permitted Investments);
(ii) owns, directly or indirectly, in whole or in
part, or has any interest in any material tangible or intangible
property which the Companies or any Subsidiaries uses in the conduct of
its business or otherwise or, since January 1,2001, has owned, directly
or indirectly, in whole or in part, or had any interest in any material
tangible or intangible property which the Companies or any Subsidiaries
uses or has used in the conduct of its business or otherwise;
(iii) has outstanding borrowings of any amount of
money or other property from the Companies or any Subsidiaries or has,
since January 1, 2001, borrowed any material amount of money or other
property from the Companies or any Subsidiaries; or
(iv) is participating or engaging or has, since
January 1, 2001, participated or engaged in any business substantially
similar to the businesses of the Companies or any Subsidiaries other
than such business as will be acquired by the Purchaser pursuant to
this Agreement.
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(b) Except as set forth on Schedule 4.16(b), (i) the
Companies and the Subsidiaries have no liabilities, debts or any other
obligation of any nature whatsoever (whether absolute, accrued or contingent or
otherwise and whether due or become due) to any Seller or any officer, director
or employee of the Companies or any Subsidiaries or to any spouse or child,
stockholder, director, officer or Affiliate of any of the foregoing, and (ii)
since January 1, 2001, the Companies and the Subsidiaries have had no material
liabilities, debts or any other obligation of any nature whatsoever (whether
absolute, accrued or contingent or otherwise and whether due or become due) to
any Seller or any officer, director or employee of the Companies or any
Subsidiaries or to any spouse or child, stockholder, director, officer or
Affiliate of any of the foregoing, other than, with respect to (i) and (ii)
above, in the case of any such officer or employee of the Companies or any
Subsidiaries, in respect of accrued wages, the reimbursement of expenses and the
extension of benefits to such person made in the ordinary course of business
consistent with past practice.
4.17 Insurance.
(a) Schedule 4.17(a) sets forth a true, correct and
complete list of all insurance policies covering the properties and activities
of the Companies and the Subsidiaries. All such policies are in full force and
effect. The Companies and the Subsidiaries have not received written notice of
cancellation or non-renewal with respect thereto. All premiums due with respect
to such policies have been timely paid and the Companies and the Subsidiaries
are not in default with respect to its material obligations under such insurance
policies. Except as set forth on Schedule 4.17(a), since December 31, 2002
neither the Companies nor any of the Subsidiaries has been refused any insurance
coverage with respect to its assets or properties, coverage has not been limited
or cancelled by any insurance carrier to which the Companies or any Subsidiaries
has applied for any such insurance or with which the Companies or any
Subsidiaries has carried insurance.
(b) Schedule 4.17(b) sets forth the loss history for each
of the insurance policies that the Companies or any Subsidiaries has and has had
since January 1, 2001.
4.18 Brokers and Finders. Except as set forth on Schedule 4.18,
there are no outstanding broker, finder or investment banker fees or commissions
owed or to be owed by or on behalf of any of the Sellers or the Companies or any
Subsidiaries in connection with the transactions contemplated by this Agreement.
Such fees and expenses shall be the responsibility of the Sellers.
4.19 Books and Records. Except as set forth on Schedule 4.19, the
books of account, stock record books, and other records (other than minute
books) of the Companies or any Subsidiaries, all of which have been made
available to the Purchaser, are complete and correct in all material respects.
Except as set forth on Schedule 4.19, the minute books of the Companies and the
Subsidiaries, all of which have been made available to the Purchaser, are true
and correct.
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4.20 Seller Ownership of Stock; Title. Each Seller is the sole
lawful record and beneficial owner of the Securities, set forth opposite such
Seller's name on Schedule 4.2(a), which ownership is free and clear of all Liens
other than Security Liens. Such Seller is not a party to any agreement creating
rights with respect to such Securities in any Person and such Seller has the
full power and legal right to sell, assign, transfer and deliver such
Securities. There are no existing warrants, options, stock purchase agreements,
redemption agreements, restrictions of any nature, voting trust agreements,
proxies, calls or rights to subscribe of any character relating to such
Securities. Such Seller has not received any written notice of any adverse claim
to the ownership of any of such Securities (or any capital stock of the
Companies), and has no Knowledge of existing facts that could reasonably be
expected to give rise to any adverse claim to the ownership of such Securities
(or any capital stock of the Companies). The delivery of certificates for such
Securities owned by such Seller to the Purchaser pursuant to the provisions of
this Agreement will transfer to the Purchaser at the Closing good and valid
title to such Securities, free and clear of all Liens except Security Liens.
4.21 Seller Authority.
(a) Each Seller has the requisite power and authority and
has full legal capacity necessary to execute, deliver and perform his or its
obligations under this Agreement and the Seller Transaction Agreements to which
such Seller is a party, and to perform such Seller's obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
This Agreement has been, and at the Closing each of the Seller Transaction
Agreements to which such Seller is a party will be, duly and validly executed
and delivered to the Purchaser by such Seller. As used herein, "Seller
Transaction Agreements" shall mean the Escrow Agreement, the Employment
Agreements, the Stock Powers, the Directors' and Officers' Releases and any
other documents or agreements executed in connection with the transactions
contemplated hereby and thereby.
(b) This Agreement constitutes, and at the Closing each
of the Seller Transaction Agreements to which such Seller is a party will
constitute, a valid and binding obligation of such Seller, enforceable against
such Seller in accordance with its terms; except that such enforcement is
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar Laws, now or hereafter in effect, affecting creditors' rights generally
and (ii) principles of equity (regardless of whether enforceability is
considered in a proceeding at law or equity).
(c) If such Seller is married and the Securities
constitute community property or otherwise are owned or held in a manner that
requires spousal or other approval for this Agreement or the Seller Transaction
Agreements to which such Seller is a party to be legal, valid and binding, this
Agreement or such Seller Transaction Agreements or another valid instrument has
been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of such Seller's spouse or the person giving such approval,
enforceable against such spouse or person in accordance with its terms.
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4.22 Seller: No Violation; Consents and Approvals.
(a) The execution and delivery by such Seller of this
Agreement and the Seller Transaction Agreements to which such Seller is a party
and the consummation of the transactions contemplated hereby do not and will
not: (i) violate, or conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by any
note, bond, mortgage, indenture, deed of trust, lease, license, permit,
franchise, agreement, commitment, contract or other instrument or obligation by
which such Seller or any of such Seller's Securities is bound; (ii) constitute a
violation of any Law, Order, judgment or decree to which such Seller or any of
such Seller's Securities is bound; (iii) result in the creation of any Lien or
Asset Lien (other than a Permitted Lien) upon any of the assets or properties of
the Companies or the Subsidiaries, or such Sellers' Securities; or (iv) result
in the creation of any Lien other than a Security Lien on the Securities.
(b) Except as set forth on Schedule 4.9(a) and Schedule
4.9(b), no Consent of any Governmental Authority or other Person is required to
be made or obtained in connection with the execution, delivery and performance
by such Seller of this Agreement or the Seller Transaction Agreements to which
such Seller is a party or the consummation of the transactions contemplated
hereby or thereby.
4.23 Litigation. There is no Action pending or, to such Seller's
Knowledge, threatened against such individual Seller, which (a) challenges the
transactions contemplated by this Agreement or the Seller Transaction
Agreements, (b) would prevent or materially interfere with or delay the
consummation of the transactions contemplated hereby, or (c) seeks damages in
connection with the transactions contemplated hereby.
4.24 Seller Outstanding Obligations.
(a) Except as set forth on Schedule 4.24(a), the
Companies have no outstanding liabilities or obligations of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due) to such Seller and there are no amounts due from the Companies
to such Seller, nor any Contracts between the Companies and such Seller (or, in
each case, any of such Seller's spouse, children, or Affiliates), and such
Seller (or any of such Seller's spouse, children, or Affiliates) has no Claim
against the Companies.
(b) Except as set forth on Schedule 4.24(b), neither such
Seller, nor any spouse, child, or Affiliate of such Seller:
(i) has any direct or indirect financial
interest in any competitor, supplier or customer of the Companies or
any Subsidiaries (other than Permitted Investments) or has had, since
January 1, 2001, any material direct or indirect financial interest in
any competitor, supplier or customer of the Companies or any
Subsidiaries (other than Permitted Investments);
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(ii) owns, directly or indirectly, in whole or in
part, or has any interest in any tangible or intangible property which
the Companies or any Subsidiaries uses in the conduct of its business
or otherwise or, since January 1, 2001, has owned or used, directly or
indirectly, in whole or in part, or had any interest in any material
tangible or intangible property which the Companies or any Subsidiaries
uses or has used in the conduct of its business or otherwise;
(iii) uses in a material manner, directly or
indirectly, in whole or in part, other than in connection with the
conduct of the Companies' or any of the Subsidiaries' business, any
tangible or intangible property of the Companies or any Subsidiaries
or, since January 1, 2001, has used, directly or indirectly, in whole
or in part, other than in connection with the conduct of the Companies'
or any Subsidiaries' business, any material tangible or intangible
property of the Companies or any Subsidiaries;
(iv) has outstanding borrowings of any amount of
money or other property from the Companies or any Subsidiaries or has,
since January 1, 2001, borrowed any material amount of money or other
property from the Companies or any Subsidiaries; or
(v) is participating or engaging or has, since
January 1, 2001, participated or engaged in any business substantially
similar to the businesses of the Companies or any Subsidiaries other
than such businesses as will be acquired by the Purchaser pursuant to
this Agreement.
(c) Except as set forth on Schedule 4.24(c), effective as
of immediately prior to the Closing, each of the Affiliate Transactions shall be
terminated and shall thereafter be null and void and of no further force or
effect.
4.25 Receivables. Except as set forth on Schedule 4.25, all
accounts receivable and notes receivable of the Companies and the Subsidiaries
(i) are valid obligations of the obligors, (ii) have arisen from bona fide
transactions in the ordinary course of business consistent with past practices,
and (iii) have been adequately reserved for in the Financial Statement.
4.26 Consent of Spouse. If such Seller is married, such Seller
represents and warrants that he is not a domiciliary resident of a "community
property" state and has not been a resident of such a state since acquiring the
Securities owned by such Seller.
4.27 Bank Accounts. Set forth on Schedule 4.27 is a list of all
bank accounts registered or listed in the name of the Companies and the
Subsidiaries.
4.28 Disclosure. No representation or warranty of any Seller
contained in this Agreement or any of the Transaction Agreements contains or
will contain any untrue statement of material fact, or omits or will omit to
state any material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which it was or will be made, not
misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RCG AND THE PURCHASER
RCG and the Purchaser hereby jointly and severally represent and
warrant to each of the Sellers the following:
5.1 Organization; Authority.
(a) Each of RCG and the Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and (except as set forth on Schedule 5.1) has all requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the other agreements and instruments to be executed and delivered
by it hereunder or in connection herewith and to carry out its respective
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements and instruments to be executed and delivered
by RCG and the Purchaser hereunder or in connection herewith, and the
consummation by it of the transactions contemplated hereby, have been duly
authorized by all necessary corporate and other actions of RCG and the Purchaser
pursuant to and in accordance with the Laws governing RCG and the Purchaser.
(b) This Agreement and the other agreements and
instruments to be executed and delivered by RCG and the Purchaser hereunder or
in connection herewith have been duly executed and delivered by RCG and the
Purchaser, and constitute valid and binding obligations of RCG and the
Purchaser, enforceable against RCG and the Purchaser in accordance with their
respective terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other similar
Laws now or hereafter in effect relating to creditors' rights generally or by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
5.2 No Violation. Except as set forth on Schedule 5.2, the
execution and delivery by RCG and the Purchaser of this Agreement and the other
agreements and instruments to be executed by RCG and the Purchaser hereunder and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) conflict with or result in any breach of any provision of the
respective articles of incorporation or by-laws of RCG and the Purchaser; (ii)
violate, or conflict with, or result in a breach of any provisions of or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by, any
material note, bond, mortgage, indenture, deed of trust, lease, license, permit,
franchise, agreement, commitment, contract or other instrument or obligation by
which RCG or the Purchaser is bound; (iii) constitute a violation of any Law,
Order, judgment or decree to which RCG or the Purchaser is bound; or (iv) result
in the creation of any material Lien.
5.3 Consents and Approvals. Except for consents and approvals set
forth on Schedule 5.3, no consent, approval, permit, waiver, authorization of,
or notice or filing with, any Governmental Authority or other Person is required
to be made or obtained in connection with the execution, delivery and
performance by RCG or the Purchaser of this Agreement or the other agreements
and instruments to be executed by RCG or the Purchaser hereunder or the
consummation of the transactions contemplated hereby or thereby.
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5.4 Brokers and Finders. Except as set forth on Schedule 5.4,
there are no outstanding broker, finder or investment broker fees or commissions
owed or to be owed by RCG or the Purchaser in connection with the transactions
contemplated by this Agreement for which the Companies or the Sellers are or may
be responsible.
5.5 Investment Intent. The Purchaser is acquiring the Securities
for investment for its own account and not with a view to the distribution of
any part thereof. The Purchaser acknowledges that the Securities have not been
registered under U.S. federal or any applicable state securities laws or the
laws of any other jurisdiction and cannot be resold without registration under
such laws or an exemption therefrom.
ARTICLE VI
COVENANTS
6.1 Interim Operation of the Company and the Subsidiaries. Except
as expressly permitted by this Agreement or with the prior written consent of
Purchaser or as required by Law, during the period from the date of this
Agreement to the Closing Date, the Sellers shall cause the Companies and each of
the Subsidiaries to conduct their business only in the ordinary course,
consistent with past practice, and the Sellers shall cause each of the Companies
and Subsidiaries to use their commercially reasonable best efforts, to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its current relationships with,
customers, suppliers, financing sources, employees and any others having
business dealings with them. Without limiting the generality of the foregoing,
and except as otherwise expressly permitted by this Agreement, required by Law
or set forth on Schedule 6.1, during the period from the date of this Agreement
through the Closing Date, the Companies shall not, and the Companies and the
Sellers shall not cause any of the Subsidiaries to, without the prior written
consent of Purchaser:
(a) amend the certificate of incorporation or by-laws of
the Companies or any Subsidiaries;
(b) issue, reissue, sell, deliver, transfer, repurchase,
redeem, acquire or pledge or authorize or propose the issuance, reissuance,
sale, delivery, transfer, repurchase, redemption, acquisition or pledge of
shares of capital stock of any class or series, or any securities convertible
into capital stock of any class or series, or grant or enter into any rights,
warrants, options, units, agreements or commitments with respect to the issuance
of such capital stock or other entity interest or convertible securities or
amend any terms of any such right, warrant, option, agreement or commitment;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock or other entity
interest;
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(d) adjust, split, combine, subdivide or reclassify any
shares of its capital stock or other entity interest, as the case may be, or any
option, warrant or right relating thereto;
(e) (i) sell, lease, transfer or otherwise dispose of any
of its properties, assets or rights, other than in the ordinary course of
business consistent with past practice in an amount not to exceed $25,000
individually or $100,000 in the aggregate; (ii) permit, allow or suffer any of
its properties or assets to be subjected to any Lien or Asset Lien other than
Permitted Liens; or (iii) acquire or lease any properties, assets or rights in
an amount not to exceed $25,000 individually or $100,000 in the aggregate;
(f) create, incur, assume or guarantee (i) any
indebtedness or (ii) any other liability or obligation, in each case, other than
in the ordinary course of business consistent with past practice;
(g) pay, discharge or satisfy any claim, encumbrance,
liability or obligation (whether absolute, accrued, contingent or otherwise, and
whether due or to become due), other than the payment, discharge or satisfaction
in the ordinary course of business consistent with past practice of liabilities
and obligations that are actually due and payable and are reflected on the 2003
Balance Sheet or incurred in the ordinary course of business consistent with
past practice since the date thereof;
(h) fail to maintain the accounts, books and records of
the Companies or any Subsidiaries in the usual, regular and ordinary manner on a
basis consistently applied;
(i) enter into, amend or supplement any employment,
severance, termination or other agreement or employee benefit plan, including
any of the Plans, or employment policies, or make any change in the
compensation, severance or termination benefits payable or to become payable to
any of its officers, directors, employees, agents or consultants (other than
planned annual increases in the rates of compensation to employees who are not
officers or directors of the Companies or any Subsidiaries in the ordinary
course of business consistent with past practice, provided such increases are
disclosed to Purchaser in advance);
(j) make any payments (other than regular compensation
payable to officers and employees of the Companies or any Subsidiaries in the
ordinary course of business consistent with past practice), loans, advances or
other distributions to, or enter into any transaction, agreement or arrangement
with officers, directors, partners, employees, agents, consultants,
stockholders, associates or family members;
(k) acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets or securities of or by any other
manner, any corporation, partnership, joint venture or other entity;
(l) make or authorize any capital expenditures or
commitment for capital expenditures in excess of $25,000 individually or
$100,000 in the aggregate;
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(m) settle or compromise any Tax liability, agree to any
adjustment of any Tax, make, change or revoke any election with respect to Taxes
(except for depreciation elections), surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the statute of limitations period
applicable to any Taxes, Tax Return or Tax Claim, amend any Tax Return, or enter
into any closing agreement with respect to Taxes;
(n) (i) except in the ordinary course of business
consistent with past practice and involving liabilities or obligations not in
excess of $25,000 individually or $100,000 in the aggregate, enter into, or
amend, terminate or waive any right under, any Material Contract, or (ii) take
any action or fail to take any action that, with or without either notice or
lapse of time or both, would constitute a material default under any contract,
agreement or arrangement;
(o) fail to maintain, renew or replace (at levels
consistent with presently existing levels) any policy of insurance listed on
Schedule 4.17 or terminate or amend or fail to perform any of its obligations or
permit any default to exist or cause any material breach under, any such policy
of insurance, or enter into (except for renewals or replacements in the ordinary
course of business consistent with past practice), any policy of insurance;
(p) make or authorize (i) any change to the Companies' or
any Subsidiary's accounting principles, methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates or any
change in the policies pertaining to the recognition of accounts receivable or
the discharge of accounts payable or accounting for inventories) or (ii) any
change to the Companies' or any of the Subsidiaries' Tax accounting principles,
methods or practices (including, without limitation, any change in depreciation
or amortization policies or rates or any change in the policies pertaining to
the recognition of accounts receivable or the discharge of accounts payable or
accounting for inventories), other than, in each case, as required by changes in
applicable Law, provided that the Companies provides the Purchaser prior written
notice of such changes;
(q) fail to keep current and in full force and effect or
renew any Permit set forth on Schedule 4.12(b);
(r) dispose of or permit to lapse any rights to any
Material Intellectual Property; or
(s) enter into any Contract, commitment or transaction
with respect to taking any of the foregoing actions or any action that would
make any representation or warranty contained in this Agreement which is
qualified by materiality untrue or incorrect, or which is not so qualified,
untrue or incorrect in any material respect, or which could reasonably be
expected to prevent the satisfaction of any condition to Closing set forth
herein or to otherwise prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
6.2 Non-Disclosure; Access.
(a) None of the Sellers shall directly or indirectly,
whether individually, as a director, stockholder, owner, partner, employee,
principal or agent of any business, or in any other capacity, make known,
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disclose, furnish, make available or utilize any confidential information
relating to the Purchaser or the Companies or any of the Subsidiaries or the
transactions contemplated by this Agreement, except if, in the opinion of legal
counsel, such disclosure is required by Law or a court of competent jurisdiction
or other administrative or legislative body; provided, however, that prior to
disclosing any of such confidential information so required, such Seller shall
promptly notify the Purchaser in writing so that the Purchaser may seek a
protective order or other appropriate remedy.
(b) If any of the Sellers breach, or threaten to commit a
breach of any of the provisions of this Section 6.2 (the "Restrictive
Covenant"), the Purchaser shall have the right and remedy to seek to have the
Restrictive Covenant specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach may cause irreparable injury to the Purchaser and that money
damages may not provide adequate remedy to the Purchaser. The foregoing rights
shall be in addition to, and not in lieu of any other rights and remedies
available to the Purchaser under law or in equity.
(c) If any court determines that the Restrictive
Covenant, or any part thereof is invalid or unenforceable, the remainder of the
Restrictive Covenant shall not thereby be affected and shall be given full
effect, without regard to the invalid portions. If any court determines that the
Restrictive Covenant, or any part thereof is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable and shall be
enforced,
(d) During the period from the date of this Agreement
through the Closing Date, Sellers shall permit the Purchaser and its advisors,
accountants, attorneys and representatives to have access, during regular
business hours and upon reasonable notice, to the offices, facilities, assets,
properties, employees, books and records of the Companies and the Subsidiaries,
and shall furnish, or cause to be furnished, to the Purchaser, such financial,
Tax and operating data and other information with respect to such entities and
their respective offices, facilities, assets, properties, employees, businesses
and operations as the Purchaser shall from time to time reasonably request. The
Purchaser shall hold, and shall cause its advisors, accountants, attorneys and
representatives to hold, any non-public information so provided to the Purchaser
by or on behalf of Sellers or the Companies in connection with the transactions
contemplated by this Agreement in confidence in accordance with the provisions
of the letter of intent agreement, by and among RCG and the Companies and
Sellers, dated as of March 22, 2004 (the "Confidentiality Agreement"), and any
existing Non-disclosure Agreement.
6.3 Publicity. The parties hereto agree that no publicity release
or announcement concerning this Agreement or the transactions contemplated
hereby shall be made without mutual agreement of the Seller's Representative and
the Purchaser; provided that if any announcement is required by Law or the rules
of any securities exchange or market to be made by any party hereto, prior to
making such announcement, such party will, to the extent practicable, deliver a
draft of such announcement to the other party hereto and shall give the other
party reasonable opportunity to comment thereon. Upon the execution of this
Agreement and the Closing, the Purchaser and the Seller's Representative will
consult with the other with respect to (i) the issuance of a joint report,
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statement or press release regarding this Agreement and the transactions
contemplated hereby and (ii) a communication plan with respect to customers,
suppliers and syndication financing sources regarding the transactions
contemplated by this Agreement.
6.4 Distributions Prior to Closing. Immediately prior to the
Closing, the Sellers shall cause the Companies and the Subsidiaries to make a
distribution to the Sellers as of the close of business on the date immediately
prior to the Closing Date of such of the current assets, of the type reflected
on the Combined Balance Sheets of Response Personnel, Inc. and Affiliates, and
the current liabilities of the type reflected on such balance sheet, such that,
as of the Closing, the only current assets of the Companies and the Subsidiaries
shall consist of $2,000,000 in cash and the only current liabilities shall
consist of obligations under the capital leases. From and after the Closing, any
checks or other payments for accounts receivable or other such distributed
assets received by any of the Companies and the Subsidiaries shall not be
deposited into any account of such Company or Subsidiary, but rather shall be
deposited directly into an account or accounts designated for such purpose by
the Sellers.
6.5 Repayment of Debt. Prior to, or at the Closing, each of the
Sellers shall repay in full the amount of any and all outstanding indebtedness
or other liabilities owed by such Seller to the Companies or any of the
Subsidiaries, together with any accrued interest thereon.
6.6 Reasonable Best Efforts; Consents. Each Seller and the Sellers
shall cause the Companies, and the Purchaser shall use their respective
reasonable best efforts to take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
and the Transaction Agreements as promptly as practicable, including obtaining
from any Governmental Authorities or third party any and all Consents required
to be obtained or made by the Companies, such Seller or the Purchaser,
respectively, or any of their respective Affiliates to consummate the
transactions contemplated by this Agreement and the Transaction Agreements,
including without limitation, making any required filings with Governmental
Authorities and sending letters seeking any required third party Consents. The
Companies, each Seller and the Purchaser shall cooperate with each other in
connection with obtaining the Consents referenced in the preceding sentence,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. The Sellers shall cause
the Companies to complete a review of all jurisdictions in which the Companies
are required to obtain Permits and licenses and the Companies shall make all
required filings with respect thereto (as mutually agreed with Purchaser) use
its reasonable best efforts to obtain such Permits and licenses as promptly as
practical.
6.7 Updating Schedules. The Sellers shall, on a timely basis,
supplement or amend the Schedules with respect to any material matter hereafter
arising or discovered which, if existing or known at the date of this Agreement,
would have been required to be set forth or otherwise disclosed in the Schedules
or could result in a material breach of a representation or warranty (the
"Updated Information"). No such supplement or amendment of the Schedules to the
Updated Information shall (i) affect the ability of the Purchaser to rely on the
conditions to Closing set forth in Article X hereof, or (ii) be deemed to have
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been set forth or otherwise disclosed as of the date of this Agreement unless
the Purchaser specifically agrees thereto in writing. In the event the Purchaser
elects to proceed with the Closing after receiving supplemented or amended
Schedules from Sellers, the Purchaser shall continue to be entitled to bring an
Indemnifiable Claim under Article VII or Article IX hereof based upon the
Updated Information set forth in such supplemented or amended Schedules unless
any such Indemnifiable Claim shall have been expressly waived by the Purchaser.
6.8 Exclusivity. Unless and until this Agreement is terminated,
Sellers will not, and will cause each Company and the Subsidiaries and their
directors, officers, employees, brokers, agents and representatives not to
solicit, negotiate, enter into an agreement or entertain an offer or alternative
acquisition or merger proposals, or provide any information to any person
relating to any such transaction.
6.9 Key Man Insurance. The Companies and/or the Subsidiaries shall
maintain life insurance on the lives of each of the Sellers in a minimum amount
of $2,000,000 for Gutterman and $1,000,000 for each of Caliguiri and Cohen. The
proceeds of such key man life insurance polices shall be for the benefit of the
Companies and the Subsidiaries. Any life insurance policies in access of such
amounts shall be transferred to Sellers prior to Closing.
6.10 Employees and Employee Benefits. The employees of the
Companies and the Subsidiaries shall be given credit for periods of service with
the Companies and Subsidiaries prior to the Closing Date under all employee
benefit plans, programs and policies of Buyer or Parent in which such employees
become eligible to participate for purposes of eligibility and vesting.
ARTICLE VII
INDEMNIFICATION; SURVIVAL
7.1 Indemnification.
(a) Each of the Sellers shall indemnify Purchaser, the
Companies and the Subsidiaries and Affiliates, and their respective successors
and assigns, and their respective officers, directors, stockholders, employees
and Affiliates (collectively, the "Purchaser Indemnified Parties"), from and
against, and shall reimburse the same for and in respect of, any and all losses,
costs, fines, liabilities, claims, penalties, damages and expenses (including
all reasonable legal fees and expenses) of any nature or kind, know or unknown,
fixed, accrued, absolute or contingent, liquidated or unliquidated,
(collectively, "Losses") incurred by any Purchaser Indemnified Party or to which
any of them may be subject which arise from or are related to (i) any breach of
any representation or warranty made by the Sellers pursuant to Article IV of
this Agreement or any of the Seller Transaction Agreements, (ii) any Company or
Subsidiary Claims, (iii) any Known Pre-Closing Litigation, (iv) the failure
prior to Closing of any ERISA Plans to be administered in accordance with its
terms and in compliance with ERISA and the Code including any Losses incurred by
the Companies or the Subsidiaries as a result of actions of participants in the
ERISA Plans or other third party (a "Surviving ERISA Claim"), or (v) a breach of
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any covenant or obligation of such Seller in this Agreement or any Transaction
Documents. Subject to Section 7.3, each Seller shall be responsible only for
such Seller's Percentage Interest for any such Losses; provided, that any such
Losses incurred as a result of a breach by any Seller of the representations and
warranties contained in Sections 4.20, 4.21, 4.22, 4.23, 4.26 and 4.27 or any
breach of any covenant hereunder by any Seller shall be borne only by such
Seller.
(b) The Purchaser shall indemnify each of the Sellers and
their respective Affiliates, and their respective successors and assigns, and
their respective officers, directors, stockholders, employees and Affiliates
(collectively, the "Seller Indemnified Parties"), from and against, and shall
reimburse the same for and in respect of any and all Losses incurred by any
Seller Indemnified Party or to which any of them may be subject which arise from
(i) any breach of any representation or warranty made by the Purchaser pursuant
to Article V of this Agreement or any Transaction Agreements, (ii) a breach of
any covenant by Purchaser in this Agreement or any Transaction Agreements.
(c) RCG shall indemnify the Sellers and the Seller
Indemnified Parties from and against and shall reimburse the same for or in
respect of any and all Losses incurred by any Seller or Seller Indemnified Party
or to which any of them may be subject which arise from (i) any breach of any
representation or warranty made by RCG and the Purchaser pursuant to Article V
of this Agreement (including as set forth on Schedule 2.5(d)), (ii) any breach
of any covenant by RCG in this Agreement or the Transaction Documents (including
as set forth on Schedule 2.5(d)), or (iii) any breach, prior to the consummation
of the Closing, of any covenant by Purchaser in this Agreement or the
Transaction Documents.
7.2 Indemnification Procedures.
(a) A party entitled to indemnification under this
Article VII (an "Indemnified Party") shall give each party obligated to provide
indemnification pursuant to this Article VII (an "Indemnifying Party") prompt
written notice (the "Claim Notice") of any Claim, assertion, event, condition or
proceeding involving Losses as to which it is entitled to indemnification
hereunder (an "Indemnifiable Claim"), provided, however, that failure of the
Indemnified Party to give the Claim Notice will not relieve the Indemnifying
Party from liability hereunder except to the extent such failure results in the
forfeiture by the Indemnifying Party of substantial rights and defenses, and
will not in any event relieve the Indemnifying Party from any obligations to the
Indemnified Party other than the indemnification obligation provided herein. If
the Sellers, collectively, are the Indemnifying Party, references to the
Indemnifying Party in the procedural provisions of this Section 7.2 (for
procedural purposes only) shall be to the Sellers' Representative.
(b) With respect to Indemnifiable Claims by or in respect
of any third party (each, a "Third Party Claim"), an Indemnifying Party shall
have the right, upon written notice to the Indemnified Party (the "Defense
Notice") within ten (10) days of its receipt from the Indemnified Party of the
Claim Notice, to conduct at its expense the defense against such Third-Party
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Claim in its own name, or, if necessary, in the name of the Indemnified Party.
When the Indemnifying Party assumes the defense, the Indemnified Party will have
no liability for any compromise or settlement of any such claim that is effected
without its prior written consent (which consent shall not be unreasonably
withheld), unless the sole relief provided is monetary damages that are paid in
full by the Indemnifying Party and such compromise or settlement includes an
unconditional release of each Indemnified Party from any liabilities arising out
of such Third-Party Claim. In the event that the Indemnifying Party does deliver
a Defense Notice and thereby elects to conduct the defense of such Third-Party
Claim, the Indemnified Party will, at the Indemnifying Party's sole expense,
cooperate with the Indemnifying Party. Regardless of which party defends such
Third-Party Claim, the other party shall have the right at its expense to
participate in the defense assisted by counsel of its own choosing, In the event
that the Indemnifying Party shall fail to give the Defense Notice within the
time prescribed by this Section 7.2(b), the Indemnified Party shall have the
sole right to reasonably conduct such defense at the expense of the Indemnifying
Party and the Indemnified Party may pay, compromise or defend such claim or
proceeding at the Indemnifying Party's expense.
(c) In the event of any Surviving ERISA Claim involving
the failure of such ERISA Plan to be administered in accordance with its terms
and applicable law (other than a Third Party Claim), the Sellers shall have the
right in their sole reasonable discretion upon advance notice to and after
consultation with the Purchaser to determine the appropriate correction
methodology and to implement (or cause the Purchaser or the Companies to
implement) such correction to such ERISA Plan(s) (including without limitation
any retroactive amendment to such ERISA Plan that Sellers deem to be necessary
or appropriate to effectuate such correction). Sellers may in their own name or
in the name of the Purchaser Indemnified Parties, upon advance notice to and
after consultation with the Purchaser submit any such proposed correction to the
Internal Revenue Service (or, if applicable, to the Department of Labor) to
obtain the approval of such correction by such governmental agency. The
Purchaser Indemnified Parties will have no liability for any compromise or
settlement of any such Surviving ERISA Claim that is effected without its prior
written consent (which consent shall not be unreasonably withheld), unless the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party.
(d) In the event any Indemnified Party should have a
claim against any Indemnifying Party hereunder which does not involve a
Third-Party Claim, the Indemnifying Party shall pay the amount set forth in the
Claim Notice unless it objects in writing to the amount or validity thereof
within 30 calendar days after receipt of the Claim Notice. In the event that the
Indemnifying Party objects to the amount or the validity of the Indemnifiable
Claim set forth in the Claim Notice, the parties will use their good faith
reasonable best efforts to resolve such matter within 30 days of receipt of the
objection to the Claim Notice. If the dispute is not resolved during such 30-day
period, such matter shall be resolved in accordance with Sections 12.8 and 12.11
hereof.
(e) Each of the Purchaser Indemnified Parties shall be
entitled, in its sole discretion to exercise a right of offset against any
amounts required to be paid by such Purchaser Indemnified Party under this
Agreement or any of the Transaction Agreements, including, without limitation,
the amount of any Contingent Payment required to be paid by the Purchaser
pursuant to Section 2.5 hereof by deducting the amount of any claims for
indemnification pursuant to Section 7.1(a) or Section 9.1(a), but only to the
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extent that the amount of such claim for indemnification has not been timely
disputed by the Indemnifying Party or has been definitively determined and is
not subject to further appeal or challenge (the "Seller Offset Amounts"). Before
a Seller Indemnified Party can exercise such a right of offset, it must provide
two (2) Business Days written notice thereof to the Indemnifying Party.
(f) In the event that any Contingent Payment becomes due
and payable to any Indemnifying Party pursuant to Section 2.5 hereof at a time
when there is one or more unresolved disputes as to any claim for
indemnification pursuant to Section 9.1 or Article VII ("Disputed Claims"), the
Escrow Agent shall establish a sub-account under the Escrow Agreement and the
Purchaser shall deposit with the Escrow Agent the portion of the Contingent
Payment (equal to the excess of the amount of the Disputed Claims over the
then-remaining available balance of the Escrow Account that is not subject to a
Reserve (as defined in the Escrow Agreement)) (the "Reserve Amounts") as
security for the payment of the Disputed Claims until resolution of any such
disputes in accordance with the provisions hereof. Upon resolution of such
Disputed Claims, the Escrow Agent shall distribute to the Purchaser and/or the
applicable Seller or Sellers the relevant portion of the Reserve Amounts in
accordance with the terms the Escrow Agreement.
7.3 Limitations on Indemnification.
(a) Notwithstanding anything to the contrary in this
Agreement, the maximum aggregate liability of the Sellers pursuant to Section
7.1(a) shall not exceed an amount equal to $4,000,000 (the "Indemnification
Cap"). No claim for indemnification may be made by the Purchaser Indemnified
Parties pursuant to Section 7.1(a) until such claims for which Losses are
otherwise recoverable are in the aggregate in excess of $100,000, after which
the Purchaser Indemnified Parties will be entitled to make any and all such
claims only for Losses in excess of $100,000; provided that the limitations set
forth in this sentence and the first sentence of this Section 7.3(a) shall not
apply to Losses incurred by reason of any Known Pre-Closing Litigation,
Surviving ERISA Claim or a breach by any Seller of a representation or warranty
contained in Sections 4.1, 4.2, 4.4, 4.13, 4.16, 4.18, 4.20 or 4.21, which
Losses shall be limited to such Seller's Percentage Interest of the Initial
Purchase Price..
(b) Notwithstanding anything to the contrary in this
Agreement, the maximum aggregate liability of the Purchaser pursuant to clauses
(i) and (ii) of Section 7.l(b) shall not exceed the Indemnification Cap. No
claim for indemnification may be made by the Seller Indemnified Parties pursuant
to clauses (i) and (ii) of Section 7.1(b) until such claims for which Losses are
otherwise recoverable are in the aggregate in excess of $100,000, after which
the Seller Indemnified Parties will be entitled to make any and all such claims
only for Losses in excess of $100,000.
7.4 Method of Payment. All amounts payable to any Purchaser
Indemnified Party pursuant to this Article VII and pursuant to Section 9.1
hereof shall be paid first from the Escrow Account held by the Escrow Agent,
pursuant to the Escrow Agreement. To the extent such funds are insufficient to
satisfy Sellers' obligations hereunder, then, such Purchaser Indemnified Party
may exercise the right of offset and reserve set forth in Sections 7.2(e) and
(f) to the extent any Contingent Payment is then owing; and if such amounts are
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insufficient, each Seller shall be responsible for indemnifying such Purchaser
Indemnified Party in accordance with the terms hereof. All amounts payable to
any Seller Indemnified Party pursuant to this Article VII shall be paid in cash
by RCG or the Purchaser, to the extent such party is liable, within ten (10)
Business Days following determination of such amounts due.
7.5 Survival of Representations, Warranties and Covenants. Except
as set forth in Section 9.10, the representations and warranties of the parties
contained herein shall survive until the first anniversary of the Closing Date
(the "Expiration Date"), and no party may seek indemnification under this
Article VII with respect to a breach of a representation or warranty after the
Expiration Date; provided, however, that (i) the representations and warranties
contained in Sections 4.1, 4.2, 4.4, 4.13, 4.16 and 4.18 shall survive until 90
calendar days after the applicable statute of limitations (including any and all
valid extensions thereof) and a Purchaser Indemnified Party may seek
indemnification with respect to a breach of such representation or warranty any
time prior to the expiration of such statute of limitations, and (ii) the
representations and warranties of the Sellers contained in Sections 4.20 and
4.21 shall survive indefinitely. Notwithstanding anything to the contrary
contained herein, all representations and warranties made by each of the
Sellers, RCG and the Purchaser in this Agreement or in any schedule, Transaction
Agreement or other document delivered pursuant hereto, and the liability with
respect thereto, shall not terminate with respect to any Claim, whether or not
fixed as to liability or liquidated as to amount, with respect to which such
party has been given a Claim Notice prior to the date on which such
representation or warranty expires. The parties' respective covenants and
agreements contained in this Agreement or in any Transaction Agreement shall
survive indefinitely unless otherwise set forth herein or therein.
Notwithstanding anything to the contrary in this Agreement, (a) no investigation
by a party shall affect the representations, warranties, covenants and
agreements of the other parties under this Agreement or in any Transaction
Agreement certificate, schedule, list, exhibit, agreement, document or other
writing delivered pursuant hereto or in connection with the transactions
contemplated hereby furnished or to be furnished to the other parties and (b)
such representations, warranties, covenants and agreements shall not be affected
or deemed waived by reason of the Closing or of the fact that the other party or
parties knew or should have known that any of the same is or might be inaccurate
in any respect.
7.6 Limitation of Other Indemnification Rights. Notwithstanding
anything to the contrary in the organizational documents or other instruments of
the Companies and Subsidiaries, if the Indemnifying Party is one of the Sellers
(a "Seller Indemnifying Party"), such Seller Indemnifying Party shall not have
any right to indemnification or other recovery thereunder or otherwise (whether
as an officer, director, stockholder or in any other capacity except to the
extent covered by any applicable "D&O Insurance") from the Companies or
Subsidiaries with respect to any matter to the extent that such Seller
Indemnifying Party is liable, or would be liable but for the limitations on
indemnification contained herein, to any of Purchaser Indemnified Parties for
indemnification under this Article VII or Article IX with respect to such
matter. 7.7 Exclusivity of Article IX. Notwithstanding anything contained herein
to the contrary, except as set forth in Section 7.2(e), Section 7.2(f), Section
7.4 and Section 7.6, Article VII shall have no application to any matter that is
governed by Article IX.
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7.8 Insurance Payments. Notwithstanding the foregoing provisions
of this Article VII, a party shall not be entitled to be indemnified hereunder
for any portion of the amount of any Losses with respect to which such party is
insured and receives payment.
ARTICLE VIII
COSTS
8.1 Transactional Costs. The Purchaser shall be responsible for
all of its legal, accounting, advisory, consulting, finder and other fees and
expenses incurred in connection with this Agreement and the Transaction
Agreements, and the consummation of the transactions contemplated hereby and
thereby, and the Sellers shall be responsible for all legal, accounting,
advisory, consulting and other fees and expenses incurred by the Sellers in
connection with this Agreement, the Transaction Agreements and the consummation
of the transactions contemplated hereby and thereby, including the fees set
forth on Schedule 4.18. All legal, accounting, advisory, consulting, finder and
other fees and expenses incurred by the Sellers, the Companies and Subsidiaries
in connection with this Agreement, the Transaction Agreements and the
consummation of the transactions contemplated hereby and thereby, shall be paid
prior to or at the Closing and, from and after the Closing neither the Company
nor the Purchaser, nor any of their respective Affiliates (exclusive of the
Sellers), shall have any further obligation with respect thereto.
ARTICLE IX
TAX MATTERS
9.1 Tax Indemnification.
(a) Each of the Sellers shall jointly and severally
indemnify, defend and hold harmless the Purchaser Indemnified Parties against,
and shall reimburse the Purchaser Indemnified Parties for any and all Losses
arising out of, based upon or relating or attributable to (without duplication):
(i) all Taxes imposed on the Companies or any
Subsidiaries relating or attributable to taxable periods ending on or
before the Closing Date ("Pre-Closing Period") and, with respect to any
period that begins on or before and that ends after the Closing Date
(in each case, a "Straddle Period"), the portion of such Straddle
Period deemed to end on and include the Closing Date (in the manner
determined pursuant to Section 9.1(c));
(ii) any breach of or inaccuracy in any
representation or warranty contained in Section 4.14 of this Agreement;
and
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(iii) the failure by the Sellers or the Sellers'
Representative to perform (or cause to have performed) any of the
covenants made by them or agreements entered into contained in this
Article IX, Section 6.1(m) and Section 6.1(p)(ii).
(b) The Purchaser shall each indemnify, defend and hold
harmless the Sellers against, and shall reimburse the Sellers for their
respective Percentage Interest of any and all Losses arising out of, based upon
or relating or attributable to (without duplication):
(i) all Taxes imposed on the Companies or any
Subsidiaries relating or attributable to taxable periods beginning
after the Closing Date ("Post-Closing Period") and, with respect to the
Straddle Period, the portion of such Straddle Period deemed to begin
after the Closing Date (in the manner determined pursuant to Section
9.1(c);
(ii) the failure by RCG and the Purchaser to
perform (or cause to have performed) any of the covenants made by them
or agreements entered into contained in this Article IX; and
(iii) all additional Taxes imposed on each
Shareholder, Company or any Subsidiary in excess of the amount of Taxes
that would have been imposed if no elections under Section 338(h)(10)
of the Code were made with respect to the acquisition of the Companies.
(c) For purposes of this Section 9.1(c), in order to
apportion appropriately any Taxes relating to a Straddle Period, the parties
hereto shall, to the extent permitted under applicable Law, elect with the
relevant Tax authority to treat for all Tax purposes the Closing Date as the
last day of the taxable year or period of the Companies and Subsidiaries. In any
case where applicable Law does not permit the Companies or any Subsidiaries to
treat the Closing Date as the last day of the taxable year or period, the
portion of any Taxes that are allocable to the portion of the Straddle Period
ending on the Closing Date shall be:
(i) in the case of Taxes that are imposed on a
periodic basis, deemed to be the amount of such Taxes for the entire
period (or, in the case of such Taxes determined on an arrears basis
(such as real property taxes), the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the Straddle Period ending on
(and including) the Closing Date and the denominator of which is the
number of calendar days in the entire relevant Straddle Period; and
(ii) in the case of Taxes not described in (i)
such as Taxes that are either (x) based upon or related to income or
receipts, or (y) imposed in connection with any sale or other transfer
or assignment of property (real or personal, tangible or intangible)),
deemed equal to the amount that would be payable if the taxable year or
period ended on the Closing Date.
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(d) The Sellers shall have no rights or claims against
the Companies or any Subsidiaries with respect to any liabilities any Seller
incurs pursuant to this Article IX, including, without limitation, any claim for
indemnification or contribution. Notwithstanding this Section 9.1(d), RCG,
Purchaser and Sellers shall take all actions within their control (including,
but not limited to, cooperating with the Sellers as set forth in Section 9.5) to
help reduce or alleviate any Taxes for which the parties may be liable pursuant
to this Article IX.
9.2 Tax Refunds. Subject to Section 9.4, the Purchaser shall pay
to the Sellers (a) all refunds or credits of Taxes received by the Purchaser,
the Companies, or any Subsidiaries after the Closing Date and attributable to
Taxes paid by the Companies or any Subsidiaries with respect to a Pre-Closing
Period and (b) a portion of all refunds or credits of Taxes received the
Purchaser, the Companies, or any Subsidiaries after the Closing Date and
attributable to Taxes paid by the Companies or any Subsidiaries with respect to
any Straddle Period (such portion to be allocated consistent with the principles
set forth in Section 9.1(c)), in each case, net of any Taxes imposed on such
refund amount (that is not otherwise paid by Sellers hereunder).
9.3 Preparation and Filing of Tax Returns and Payment of Taxes.
(a) Subject to the third sentence of this Section 9.3(a),
the Sellers shall prepare and timely file (or cause to be prepared and timely
filed) all Tax Returns required to be filed by each Company and Subsidiary for
all Pre-Closing Periods and shall pay or cause to be paid all Taxes due and
payable in respect of such Tax Returns (such Tax Returns, the "Pre-Closing
Period Tax Returns"). All such Pre-Closing Period Tax Returns shall be prepared
and filed in a manner that is consistent with the prior practice of the
Companies and the Subsidiaries, except as required by applicable Law and shall
take into account the Section 338(h)(10) elections set forth in Section 9.5(d)
hereof. If any such Pre-Closing Period Tax Returns are due after the Closing and
if the Sellers are not authorized to file such Pre-Closing Period Tax Returns by
Law, the Sellers shall submit drafts of such returns to the Purchaser for its
review at least twenty (20) days prior to the due date of any such Tax Return,
provided, however, that such drafts of any such Pre-Closing Period Tax Return
shall be subject to the Purchaser's review and approval, which approval shall
not be unreasonably withheld or delayed. Subject to the provisions of the
immediately preceding and succeeding sentences, if the Sellers are not
authorized to file a Pre-Closing Period Tax Return by Law, Purchaser shall
timely file (or caused to be filed) such Pre-Closing Period Tax Return due after
the Closing Date with the appropriate taxing authorities. The Sellers shall pay
or cause to be paid all Taxes due and payable in respect of such Pre-Closing
Period Tax Returns to the Purchaser no later than three (3) days prior to the
due date of such Tax Return, and the Purchaser shall, in connection with its
obligation to file (or cause to be filed) such Tax Return, pay (or cause to be
paid) to the appropriate Tax authority the amount of Taxes shown to be due on
such Tax Return. Purchaser shall be liable for any penalties or interest as a
result of their failure to timely file any Tax Returns pursuant to this Section
9.3 (except to the extent such failure is a direct result of a failure of
Sellers to perform hereunder).
(b) The Purchaser shall prepare and timely file or cause
the Companies or any Subsidiaries to prepare and timely file, all Tax Returns
required to be filed by the Companies or such Subsidiaries for all Straddle
Periods (such Tax Returns, the "Straddle Period Tax Returns"). All such Straddle
Period Tax Returns shall be prepared and filed in a manner that is consistent
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with the prior practice of the Companies or such Subsidiaries, except as
required by applicable Law. The Purchaser shall deliver drafts of all such
Straddle Period Tax Returns to the Sellers for its review at least sixty (60)
days prior to the due date of any such Tax Return (taking into account valid
extensions) and shall notify the Sellers of the Purchaser's calculation of the
Sellers' share of the Taxes of the Companies or such Subsidiaries for any such
Straddle Periods (determined in accordance with Section 9.1(c)); provided,
however, that such drafts of any such Straddle Period Tax Returns and such
calculations of the Sellers' share of the Tax liability for such Straddle Period
(determined in accordance with Section 9.1(c)) shall be subject to the Sellers
review and approval, which approval shall not be unreasonably withheld or
delayed. If the Sellers disputes any item on such Tax Return, it shall notify
the Purchaser (by written notice within ten (10) days of receipt of the
Purchaser's calculation) of such disputed item (or items) and the basis for its
objection. If the Sellers do not object by written notice within such ten (10)
day period, the Purchaser's calculation of the Sellers' share of the Taxes for
such Straddle Period shall be deemed to have been accepted and agreed upon, and
final and conclusive, for all purposes hereof. The parties hereto shall act in
good faith to resolve any such dispute prior to the date on which the Tax Return
is required to be filed. If the parties hereto cannot resolve any disputed item,
the item in question shall be resolved by an Independent Accounting Firm as
promptly as practicable. The fees and expenses of the Independent Accounting
Firm shall be shared equally by the parties. No later than five (5) days prior
to the filing of such Tax Return, the Sellers shall pay the Purchaser in
immediately available funds the amount of the Sellers' share of the Tax
liability for the Straddle Period determined under this Section 9.3(b). Subject
to the preceding sentence and Section 9.1, the Purchaser shall pay or cause to
be paid their allocable share of any Taxes due and payable in respect of all
such Straddle Period Tax Returns. Purchaser shall be liable for any penalties or
interest as a result of its failure to timely file any Tax Returns pursuant to
this Section 9.3 not caused by the delay of any of the Sellers'.
(c) Sellers shall include any income, gain, loss,
deduction or other tax items for any Pre-Closing or Straddle Period in a manner
consistent with Schedule K-1's prepared with respect to such periods. Such
Schedule K-1s shall include any gain or income allocable to the Sellers as a
result of the Section 338(h)(10) elections described in Section 9.5(d) hereto.
9.4 Accounting and Tax Records. The Sellers shall make available
to the Purchaser all Tax Returns (and other information relating to Taxes,
including Tax work papers and files in its possession) of the Companies and each
Subsidiary for taxable periods ending December 31, 2001 and thereafter as well
as other information to the extent available. Sellers shall retain all books and
records with respect to Tax matters pertinent to any of the Companies or
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations of the respective taxable
periods, and shall abide by all record retention agreements with any Tax
authority. In addition, the Sellers shall give the Purchaser reasonable written
notice prior to transferring, destroying or discarding any such books and
records and shall allow the Purchaser to take possession of such books and
records.
9.5 Tax Cooperation; Amendment of Tax Returns; Section 338(h)(10)
Elections.
(a) The Sellers' Representative, the Sellers and the
Purchaser agree to furnish or cause to be furnished to each other, upon request,
as promptly as practicable, such information (including access to books and
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records) and assistance relating to the Companies and each Subsidiaries, as is
reasonably requested for the filing of any Tax Returns, for the preparation of
any audit and for the prosecution or defense of any Tax Claim. Any information
obtained under this Section 9.5 shall be kept confidential except (i) as may be
otherwise necessary in connection with the filing of Tax Returns or claims for
refund or in conducting an audit or other proceeding, or (ii) with the consent
of the Sellers' Representative or the Purchaser, as the case may be.
(b) Sellers' Representative shall not, and the Purchaser
shall not be required by the Sellers' Representative to, amend any Tax Return of
or relating to the Companies or any Subsidiaries, except that the Sellers shall
be permitted to amend a Pre-Closing Period Tax Return (an "Amended Tax Return"),
and the Purchaser shall cooperate with Sellers in the preparation and filing of
such Amended Tax Return if such amendment would entitle the Sellers to a refund
of Pre-closing Period Taxes under Section 9.2; provided that Purchaser shall
have the right to review and approve such Amended Tax Return, which approval
shall not be unreasonably withheld or delayed; provided, further, that if and to
the extent that such refund shall have any adverse effect upon the Companies
(resulting in an increase in Taxes, hereinafter referred to as "Additional
Taxes") for any period for which Sellers are required to indemnify Purchaser,
then notwithstanding anything to the contrary contained in this Agreement, the
amount of refund required to be paid to Sellers pursuant to Section 9.2 shall be
reduced by the amount of such additional Taxes.
(c) Unless required by law and subject to the provisions
of Section 9.6 of this Agreement, none of the Purchaser or any of its Affiliates
shall or shall cause or permit the Companies or any of the Subsidiaries to
amend, refile or otherwise modify any Tax Return of the Companies or any of the
Subsidiaries with respect to any Pre-Closing Period without the consent of
Sellers not to be unreasonably withheld, provided, however, that Purchaser and
its Affiliates shall be entitled to amend, refile, or otherwise modify any such
Tax Return as a result of a carryback of a Tax attribute relating to any period
ending after the Closing Date.
(d) Each of the Sellers and the Purchaser shall jointly
make timely elections pursuant to Section 338(h)(10) (and any comparable
provision of applicable law) of the Code to treat the sale of the Common Stock
as a sale of the assets of the Companies. The Purchaser and the Sellers shall
jointly prepare and timely file any required forms and schedules in order to
effectuate such election. The aggregate sales price for the Common Stock shall
be allocated among the assets deemed to have been purchased in a manner
reasonably agreed upon by the Sellers and the Purchaser. The parties shall
report the deemed sale consistently with such allocation for all purposes,
including without limitation, for purposes of filing all Tax Returns. Each party
will promptly notify the other of any proceeding relating to the allocation
described in this section and will keep the other advised of the progress
thereof.
(e) Purchaser and Sellers shall take all actions within
their control (including, but not limited to, cooperating with the Sellers as
set forth in this Section 9.5) to help reduce or alleviate any Taxes for which
the parties may be liable.
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9.6 Tax Audits.
(a) After the Closing, each of the Purchaser, on the one
hand, and the Sellers' Representative, on the other hand ("Recipient"), shall
promptly notify the other party in writing upon receipt by the Recipient or any
of its Affiliates (including in the case of the Sellers' Representative, the
Sellers) of any written notice of any pending or threatened audit or assessment,
suit, proposed adjustment, deficiency, dispute, administrative judicial
proceeding or other similar Claim ("Tax Claim") received by the Recipient from
any Tax authority or any other party with respect to Losses for which any of the
Sellers may be liable hereunder; provided, however, that a failure by the
Purchaser or Sellers' Representative to give such notice shall not affect the
other party's rights to indemnification under Section 9.1 unless the other party
is materially adversely prejudiced as a consequence of such failure.
(b) The Sellers' Representative may elect to control the
conduct, through counsel of the Sellers' own choosing and at the Sellers'
Representative's sole expense and with the participation of the Purchaser, of
any Tax Claim involving any asserted liability with respect to or relating to
any Pre-Closing Period. If the Sellers' Representative desires to elect to
control any such Tax Claim, the Sellers shall within ten (10) calendar days of
receipt of the notice of such Tax Claim notify the Purchaser in writing of its
intent to do so. If the Sellers' Representative properly elects to control such
Tax Claim, then the Sellers' Representative shall have all rights to settle,
compromise and/or concede such asserted liability and the Purchaser shall
reasonably cooperate and shall cause the Companies and the Subsidiaries to
reasonably cooperate; provided, however, that the Sellers' Representative shall
not settle, compromise and/or concede such asserted liability (i) without the
written consent of Purchaser (whose consent shall not be unreasonably withheld)
if such settlement, compromise or concession could increase the Tax liability of
any of the Purchaser (or any of its Affiliates), the Companies or any
Subsidiaries for any other taxable period. If the Sellers' Representative does
not elect to control a Tax Claim for a Pre-Closing Period pursuant to this
Section 9.6(b) (or, after assuming control, the Sellers' Representative fails to
reasonably defend against such Tax Claim), the Purchaser, the Companies, or the
Subsidiaries may, without affecting its or any other indemnified party's rights
to indemnification under this Article IX, assume and control the defense of such
Tax Claim with participation by the Sellers' Representative (at the Sellers'
expense); provided, however, that the Purchaser may not settle or compromise
such Tax Claim without the consent of the Sellers' Representative, which consent
shall not be unreasonably withheld or delayed.
(c) With respect to any Tax Claim that involves any
Straddle Period, the Purchaser shall notify the Sellers of such Tax Claim and
the Purchaser shall control the conduct of any such Tax Claim, through counsel
of the Purchaser's own choosing with participation by the Sellers'
Representative (at the Sellers' expense) and the Purchaser shall have all rights
to settle, compromise and/or concede such Tax Claim with the consent of Sellers
(which shall not be unreasonably withheld or delayed).
9.7 Transfer Taxes. Notwithstanding the foregoing, Sellers, on the
one hand, and the Purchaser, on the other hand shall each pay one-half of any
sales, use, real property transfer, real property gains, transfer, stamp,
registration, documentary, recording or similar Taxes, if any, together with any
interest thereon, penalties, fines, costs, fees, additions to tax or additional
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amounts with respect thereto (collectively, "Transfer Taxes") for which
Purchaser and Sellers are liable (in any capacity) under applicable Law and that
are incurred in connection with the transactions contemplated by this Agreement.
RCG and the Purchaser will be responsible for preparing and timely filing (and
the Sellers will cooperate with RCG and/or at Purchasers' expense in preparing
the filing) any Tax Returns required with respect to any such Transfer Taxes.
The Purchaser will provide to the Sellers a true copy of each such Tax Return as
filed and evidence of the timely filing thereof.
9.8 Payments. Except as provided in this Article IX, any amounts
owed by any party to any other party under this Article IX shall be paid in cash
within fifteen (15) Business Days upon written notice from such other party.
9.9 Conflicts; Survival. Notwithstanding any other provision of
this Agreement to the contrary, the obligations of the parties hereto set forth
in this Article IX shall: (a) be unconditional and absolute, (b) remain in full
force and effect indefinitely, and (c) not be subject to Article VII (other than
Section 7.2(d), Section 7.2(c), Section 7.4 and Section 7.6); provided, however,
that the representations and warranties contained in Section 4.14 shall survive
the Closing until ninety (90) days following the expiration of the applicable
statute of limitations (taking into account all extensions thereof); provided,
further, in the event notice for indemnification under Section 9.1 hereof shall
have been given within the applicable survival period in accordance with Section
12.2 hereof, the representation or warranty that is the subject of such
indemnification Claim shall survive until such time as such Claim is finally
resolved. In the event of a conflict between this Article IX and any other
provision of this Agreement, this Article IX shall govern and control.
Notwithstanding anything to the contrary in this Agreement, no investigation by
a party shall affect the representations, warranties, covenants and agreements
of the other parties under this Agreement or in any certificate, schedule, list,
exhibit, agreement, document or other writing delivered pursuant hereto or in
connection with the transactions contemplated hereby furnished or to be
furnished to the other parties, and such representations, warranties, covenants
and agreements shall not be affected or deemed waived by reason of the Closing
or of the fact that the other party or parties knew or should have known that
any of the same is or might be inaccurate in any respect.
9.10 Tax Treatment. Unless otherwise required by applicable Law,
the parties hereto agree to treat any payment made pursuant to this Article IX
as an adjustment to the Purchase Price for all Tax purposes.
ARTICLE X
CONDITIONS PRECEDENT TO CLOSING
10.1 General Conditions. The respective obligations of Purchaser
and each Seller to effect the Closing are subject to the fulfillment or waiver,
prior to or at the Closing, of each of the following conditions, any of which
may be waived by each such party:
(a) No Injunctions, Orders or Restraints; Illegality. No
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a Governmental Authority nor any statute,
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rule, regulation or executive order promulgated or enacted by any Governmental
Authority shall be in effect which would (i) make the consummation of the
transactions contemplated hereby illegal, or (ii) otherwise restrict, prevent or
prohibit the consummation of any of the transactions contemplated by this
Agreement; and
(b) Statutes. There shall not be in effect any statute,
regulation, order, decree or judgment of any Governmental Authority which makes
illegal or enjoins or prevents the consummation of the transactions contemplated
by this Agreement.
10.2 Conditions Precedent to Purchaser's Obligations. Except as
otherwise provided herein, the obligation of Purchaser to effect the Closing is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any of which may be waived in writing by Purchaser:
(a) Representations and Warranties of Sellers. Each of
the representations and warranties of Sellers contained in this Agreement (i)
which is qualified by materiality shall be true and correct in all respects and
(ii) which is not so qualified, shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though such representations and warranties were made at and as of the
Closing Date.
(b) Performance by Sellers. Sellers shall have performed
and complied in all material respects with all agreements and covenants required
to be performed or complied with by them under this Agreement at or prior to the
Closing and delivered such agreements and other documents as may be reasonably
requested by Purchaser.
(c) Material Adverse Effect. Since the date of this
Agreement, there shall have been no changes, events or occurrences that,
individually or in the aggregate, have had or are reasonably likely to result in
a Material Adverse Effect.
(d) Fairness Opinion. The board of directors of RCG shall
have obtained a fairness opinion from an investment banking firm stating that
the consideration to be paid to Sellers is fair to RCG from a financial point of
view.
(e) Employment Agreements. Each of Gutterman, Caliguiri
and Cohen have executed their respective Employment Agreement substantially in
the forms of Exhibits A-1, A-2 and A-3, respectively attached hereto.
(f) Financing. RCG shall obtain financing for the Initial
Purchase Price on terms acceptable to RCG.
(g) Long-Term Liabilities. The Sellers shall have
provided information reasonably satisfactory to Purchaser that the Companies and
their Subsidiaries have no long-term debt or liabilities at Closing other than
obligations under capital leases.
(h) Real Estate Lease. RPI shall have entered into a real
estate lease for its New York City office space containing terms including as
annexed hereto as Exhibit E.
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(i) Bank Facility. The Companies shall have a line of
credit in a minimum amount of $6,000,000 with Sterling National Bank or such
other bank reasonably acceptable to Purchaser, such line of credit shall be in
good standing, with no outstanding balances and the Companies shall be in
compliance with all financial covenants and in all material respects with all
other loan covenants contained in such line of credit. The Companies and
Subsidiaries shall have the ability to draw on such line of credit.
(j) Termination of the Stockholder Agreement. The
Stockholder Agreement shall have been terminated.
(k) Approvals. The approvals, authorizations and Consents
of Governmental Authorities required to consummate the transactions contemplated
hereby set forth on Schedule 4.9(a) and all Consents which may be required under
Material Contracts, as set forth on Schedule 4.9(b), shall have been obtained
and remain in full force and effect, and (to the extent applicable) any waiting
periods relating to such approvals, authorizations and Consents shall have
expired or been terminated.
(l) Shareholder Approval. The approval of the
shareholders of RCG shall have been obtained.
(m) Cash. The Companies and Subsidiaries shall have
unrestricted cash at Closing of at least $2,000,000.
10.3 Conditions Precedent to Sellers' Obligations. The obligation
of Sellers to effect the Closing of the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions, any of which may be waived in writing by Sellers:
(a) Representations and Warranties of RCG and the
Purchaser. The representations and warranties of RCG and Purchaser contained in
Article V of this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Closing Date as though such
representations and warranties Were made at and as of the Closing Date;
(b) Performance by RCG and the Purchaser. RCG and the
Purchaser shall have performed and complied in all material respects with all
agreements and covenants required to be performed or complied with by RCG and
the Purchaser under this Agreement at or prior to the Closing and delivered such
agreements and other documents as may be reasonably requested by Sellers;
(c) Employment Agreements. Purchaser shall have executed
the Employment Agreements in the forms of Exhibits A-1, A-2 and A-3 attached
hereto; and
(d) Guarantees. Sellers shall either (i) have been
released from all personal guarantees set forth on Schedule 10.3(d) attached
hereto or (ii) such other accommodation or arrangement shall have been made
which is satisfactory to Sellers with respect to such guarantees.
- 53 -
(e) Approvals. The approvals, authorizations and consents
set forth on Schedule 5.3 shall have been obtained and remain in full force and
effect, and (to the extent applicable) any waiting period relating to such
approvals, authorizations and Consents shall have expired or been terminated.
ARTICLE XI
TERMINATION AND WAIVER
11.1 Termination. This Agreement may be terminated at any time
prior to Closing by:
(a) The mutual written consent of Purchaser and the
Sellers' Representative;
(b) The Purchaser, upon a material breach of any covenant
or agreement set forth in this Agreement (a "Terminating Breach") on the part of
any of the Sellers if such Terminating Breach is not cured within 30 calendar
days following written notice thereof;
(c) The Sellers, upon a Terminating Breach on the part of
Purchaser if such Terminating Breach is not cured within 30 calendar days
following written notice thereof; or
(d) By Sellers, if the Board of Directors of each of RCG
and Purchaser shall not have authorized and approved the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
on or before May 12, 2004.
(e) The Purchaser or the Sellers, if the Closing shall
not have occurred by August 15, 2004 (the "Termination Date") (unless the
failure to consummate the Closing by such date shall be due to or have resulted
from any breach of the representations or warranties made by, or the failure to
perform or comply in any material respect with any of the agreements or
covenants hereof to be performed or complied with prior to the Closing by, the
party seeking to terminate this Agreement).
11.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 11.1 above, all rights and obligations of the party
hereunder shall terminate without any liability of any party to the other party
(except for any liability of any party then in breach) provided, however, that
the confidentiality provisions contained in Section 6.2, the expense obligations
in Article VIII and Article XII shall survive termination; and further provided,
that in the event the conditions to closing are not satisfied solely as a result
of any one or more of (i) failure of RCG to obtain financing as set forth in
Section 10.2(f), (ii) the failure of RCG to obtain shareholder approval as set
forth in Section 10.2(l), (iii) the failure of RCG to obtain a fairness opinion
as set forth in Section 10.2(d) on or before August 15, 2004, or (iv) in the
event this Agreement is terminated by Sellers pursuant to Section 11.1(d),
Purchaser or RCG shall reimburse the Sellers and/or the Companies for their
- 54 -
reasonable costs and expenses, including reasonable attorneys' fees and expenses
upon documentation thereof, in an amount not to exceed $100,000. Such costs and
expenses shall be expenses incurred by Sellers as they relate to this Agreement
and the Transaction Agreement from and after March 22, 2004. Such reimbursement
shall be Seller's exclusive remedy for the failure of such conditions; provided,
such reimbursement shall be in addition to, and not in lieu of, any damages or
other remedies available to Sellers, at law or equity, resulting from any breach
by RCG and/or Purchaser of this Agreement.
11.3 Waiver of Agreement. Any term or condition hereof may be
waived at any time by the party hereto which is entitled to the benefits thereof
by a written instrument duly executed on behalf of such party. The failure of a
party to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision nor shall it in any way affect the
validity of this Agreement or the right of such party thereafter to enforce any
such provision No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or any subsequent breach.
11.4 Amendment of Agreement. This Agreement may be amended with
respect to any provision contained herein at any time by written action of the
parties hereto,
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Successors and Assigns. This Agreement and all provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns; provided, however,
that neither this Agreement nor any right, interest, or obligation hereunder may
be assigned by any party hereto without the prior written consent of the other
party, except that the Purchaser, with written notice thereof to the Sellers'
Representative, may assign all or any portion of its rights, interests or
obligations to one or more Affiliates of the Purchaser, which assignees may
thereafter assign any such rights, interests or obligations to one or more
Affiliates; provided that Purchaser shall remain responsible for the performance
of, and any breach of the terms and obligations of this Agreement by any such
Affiliate of Purchaser. Notwithstanding the foregoing, nothing in this Agreement
will preclude the Companies from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation or
entity after the Closing, or preclude the Purchaser from transferring any or all
of the capital stock of the Companies to another corporation or entity after the
Closing, but only if such corporation or entity (a "Successor") (i) assumes this
Agreement and the other Transaction Documents and all obligations and
undertakings of the Purchaser hereunder and under the other Transaction
Documents and (ii) agrees that any Contingent Payment for the Contingent Payment
Period in which such transaction occurs, and each subsequent Contingent Payment
Period, shall be guaranteed by such Successor to be not less than the Contingent
Payment for the Contingent Payment Period prior to that in which such
transaction occurs, provided, however, if such transaction occurs in the first
Contingent Payment Period, not less than the greater of (a) $2,000,000 or (b)
the actual Contingent Payment Amount. Upon such a consolidation, merger or
transfer, the term "the Purchaser" will mean the Successor and this Agreement
will continue in full force and effect.
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12.2 Notices. All notices, requests, consents, instructions and
other communications required or permitted to be given hereunder shall be in
writing and sent by nationally-recognized, next-day delivery service or mailed
by certified or registered mail, return receipt requested, postage prepaid,
addressed as set forth below or by facsimile transmission confirmed in writing
by next-day delivery service; receipt shall be deemed to occur on the date of
actual receipt if delivered by registered or certified mail or at the time of
transmission if sent by facsimile.
(a) if to the Purchaser, to:
WTI Acquisition, Inc.
c/o RCG Companies Incorporated
6836 Morrison Blvd., Suite 200
Charlotte, NC 28211
Attention: William Hodge
Fax: 704-366-5056
and a copy to:
Adorno & Yoss, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
Attention: Joel D. Mayersohn, Esq.
Fax: (954) 766-7800
(b) if to Sellers, to:
Allen Gutterman (individually, and as Sellers'
Representative)
c/o The Response Companies
23 East 39th Street
New York, NY 10016
Fax: 212-376-8084
Edward Caliguiri
c/o The Response Companies
23 East 39th Street
New York, NY 10016
Fax: 212-376-8084
Barry Cohen
c/o The Response Companies
23 East 39th Street
New York, NY 10016
Fax: 212-376-8084
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with a copy to:
Sonnenschein Nath & Rosenthal LLP
1221 Avenue of the Americas, 25th Floor
New York, NY 10020-1089
Attention: H. Frances Kleiner
Fax: 212-768-6800
or such other address or persons as the parties may from time to time designate
in writing in the manner provided in this Section 12.2.
12.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." The words "hereof," "hereto," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Unless otherwise stated, any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
12.4 Entire Agreement. This Agreement and the Transaction
Agreements, together with the schedules and exhibits hereto, represents the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
12.5 Amendments and Waivers. This Agreement maybe amended,
superseded, cancelled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Purchaser and the Sellers or, in the
case of a waiver, by the party waiving compliance or his or her representative.
No delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any waiver on the part of
any party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege.
12.6 Severability. This Agreement shall be deemed severable and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof.
- 57 -
12.7 Headings. The article and section headings contained in this
Agreement are solely for convenience of reference and shall not affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
12.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to choice of law principles.
12.9 Schedules and Exhibits. The Schedules and Exhibits attached
hereto are a part of this Agreement as if fully set forth herein.
12.10 No Third-Party Beneficiaries. Except as expressly contemplated
in this Agreement, this Agreement shall be binding upon and inure solely to the
benefit of each party hereto and nothing in this Agreement is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
12.11 Waiver by Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT
ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, AND (iii) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 11.11.
12.12 Counterparts. This Agreement may be executed in two or more
counterparts (which may be by facsimile), each of which shall be deemed an
original and all of which together shall be considered one and the same
agreement.
12.13 Further Assurances. After the Closing, each of the Sellers (in
his capacity as a director, officer or employee or equity holder of the
Companies, as the case may be), and the Purchasers shall from time to time, at
the request of another party, execute and deliver such other instruments of
conveyance and transfer, certificates, instruments, records or other documents,
assurances or things and take such other actions as may be reasonably necessary
in order to more effectively consummate the transactions contemplated hereby and
to allow each party fully to enjoy and exercise the rights accorded and required
by it under this Agreement.
12.14 Obligations of Each of the Sellers and the Companies. Whenever
this Agreement requires the Companies to take any action prior to the Closing,
that shall be deemed to include an undertaking on the part of the Sellers to use
reasonable best efforts to cause the Companies to take that action.
- 58 -
12.15 Sellers' Representative.
(a) The Sellers hereby authorize, direct and appoint
Gutterman to act as agent, attorney-in-fact and representative of the Sellers
(the "Sellers' Representative"), with full power of substitution with respect to
all matters under this Agreement, including, without limitation, determining,
giving and receiving notices and processes hereunder, contesting and settling
claims for indemnification pursuant to Articles VII and IX hereof or resolving
any other disputes hereunder or under the Transaction Agreements; provided,
that, the authority given to Sellers' Representative hereunder shall not extend
to any matter arising out of any representation and warranty of any Seller
pursuant to Sections 4.20, 4.21, 4.22, 4.23, 4.26 and 4.27, any breach of any
covenant arising hereunder by any Seller, or any matters arising under any
Seller's Employment Agreement. Any such actions taken, exercises of rights,
power or authority, and any decision or determination made by the Sellers'
Representative consistent herewith, shall be absolutely and irrevocably binding
on each Seller as if such Seller personally had taken such action, exercised
such rights, power or authority or made such decision or determination in such
Seller's individual capacity. Notwithstanding anything to the contrary contained
in this Agreement, any action required to be taken by the Sellers hereunder or
any action which Sellers, at their election, have the right to take hereunder,
as to which authority is granted to the Sellers' Representative under this
Section 12.15(a) shall be taken only by the Sellers' Representative and no
Seller acting on its own shall be entitled to take any such action. The
Purchaser shall not be liable for allocation of particular deliveries and
payments among the Sellers if made to the Sellers' Representative as authorized
herein.
(b) The provisions of this Section 12.15 shall in no way
impose any obligations on the Purchaser. In particular, notwithstanding any
notice received by the Purchaser to the contrary (except any notice of the
appointment of a successor Sellers' Representative) and absent bad faith or
willful misconduct, the Purchaser (i) shall be fully protected in relying upon
and shall be entitled to rely upon, shall have no liability to the Sellers with
respect to, actions, decisions and determinations of the Sellers' Representative
taken in accordance with the authority granted in Section 12.15(a) and (ii)
shall be entitled to assume that all actions, decisions and determinations of
the Sellers' Representative taken in accordance with the authority granted in
Section 12.15(a) are fully authorized by all of the Sellers.
(c) The Sellers' Representative shall not be liable to
any of the Sellers or any of their respective Affiliates for any decisions made
or actions taken by the Sellers' Representative in accordance with the authority
granted in Section 12.15(a). Each of the Sellers agrees, severally in proportion
to his Percentage Interest, to indemnify the Sellers' Representative from and
against any Losses that the Sellers' Representative may incur as a result of his
acting as the Sellers' Representative hereunder or in connection with the
performance of any of his duties hereunder to the fullest extent permitted by
applicable Law, except to the extent that such Losses are caused by actions
taken by, or omitted to be taken by, the Sellers' Representative in bad faith.
- 59 -
12.16 Acknowledgements. The parties hereto acknowledge and agree
that (i) each party has reviewed and negotiated the terms and provisions of this
Agreement and has had the opportunity to contribute to its revision, and (ii)
each party has been represented by counsel in reviewing and negotiating such
terms and provisions. Accordingly, the rule of construction to the effect that
ambiguities are resolved against the drafting party shall not be employed in the
interpretation of this Agreement. Rather, the terms of this Agreement shall be
construed fairly as to both parties hereto and not in favor of or against either
party.
- 60 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WTI ACQUISITION, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
RCG Companies Incorporated
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
----------------------------------------
STOCKHOLDERS:
----------------------------------------
Allen Gutterman
----------------------------------------
Edward Caliguiri
Barry Cohen
CONFIDENTIAL
STOCK PURCHASE AGREEMENT
Dated May 11, 2004
Among
WTI Acquisition, Inc.
RCG Companies Incorporated
and
Allen Gutterman
Edward Caliguiri
and
Barry Cohen
as
the Stockholders of
Response Personnel, Inc.,
RPI Professional Alternatives, Inc.
RPI Services, Inc.
Response Medical Staffing of Connecticut, Inc.
and
Response Medical Staffing of New Jersey, Inc.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
1.1 Definitions.....................................................1
ARTICLE II PURCHASE AND SALE OF SECURITIES....................................9
2.1 Agreement to Purchase and Sell..................................9
2.2 Purchase Price; Consideration Paid to Each Seller...............9
2.3 Estimated Working Capital.......................................9
2.4 Determination of Final Working Capital..........................9
2.5 Contingent Payments............................................10
2.6 Escrow Agreement...............................................12
2.7 Allocation of Purchase Price...................................12
ARTICLE III CLOSING 12
3.1 Closing........................................................12
3.2 Sellers' Closing Deliveries....................................12
3.3 Purchaser's Closing Deliveries.................................14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS.....................14
4.1 Corporate Organization; Authority; No Violation................14
4.2 Capitalization.................................................15
4.3 Financial Statements...........................................16
4.4 Directors, Officers, Employees, Employee Benefit Plans; ERISA..17
4.5 Intellectual Property..........................................19
4.6 Assets.........................................................22
4.7 Litigation.....................................................22
4.8 Title to Properties............................................23
4.9 Consents, Notices and Approvals................................23
4.10 Contracts......................................................23
4.11 Absence of Undisclosed Liabilities.............................26
4.12 Compliance with Laws; Permits..................................26
4.13 Environmental Matters..........................................26
4.14 Tax Matters....................................................27
4.15 No Material Adverse Change.....................................29
4.16 Affiliated Transactions........................................29
4.17 Insurance......................................................30
4.18 Brokers and Finders............................................30
4.19 Books and Records..............................................30
4.20 Seller Ownership of Stock; Title...............................31
4.21 Seller Authority...............................................31
4.22 Seller: No Violation; Consents and Approvals..................32
4.23 Litigation.....................................................32
4.24 Seller Outstanding Obligations.................................32
4.25 Receivables....................................................33
4.26 Consent of Spouse..............................................33
4.27 Bank Accounts..................................................33
4.28 Disclosure.....................................................33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF RCG AND THE PURCHASER............34
5.1 Organization; Authority........................................34
5.2 No Violation...................................................34
5.3 Consents and Approvals.........................................34
5.4 Brokers and Finders............................................35
5.5 Investment Intent..............................................35
ARTICLE VI COVENANTS.........................................................35
6.1 Interim Operation of the Company and the Subsidiaries..........35
6.2 Non-Disclosure; Access.........................................37
6.3 Publicity......................................................38
6.4 Distributions Prior to Closing.................................39
6.5 Repayment of Debt..............................................39
6.6 Reasonable Best Efforts; Consents..............................39
6.7 Updating Schedules.............................................39
6.8 Exclusivity....................................................40
6.9 Key Man Insurance..............................................40
6.10 Employees and Employee Benefits................................40
ARTICLE VII INDEMNIFICATION; SURVIVAL........................................40
7.1 Indemnification................................................40
7.2 Indemnification Procedures.....................................41
7.3 Limitations on Indemnification.................................43
7.4 Method of Payment..............................................43
7.5 Survival of Representations, Warranties and Covenants..........44
7.6 Limitation of Other Indemnification Rights.....................44
7.7 Exclusivity of Article IX......................................45
7.8 Insurance Payments.............................................45
ARTICLE VIII COSTS 45
8.1 Transactional Costs............................................45
ARTICLE IX TAX MATTERS.......................................................45
9.1 Tax Indemnification............................................45
9.2 Tax Refunds....................................................47
ii
9.3 Preparation and Filing of Tax Returns and Payment of Taxes.....47
9.4 Accounting and Tax Records.....................................48
9.5 Tax Cooperation; Amendment of Tax Returns......................48
9.6 Tax Audits.....................................................50
9.7 Transfer Taxes.................................................50
9.8 Payments.......................................................51
9.9 Conflicts; Survival............................................51
9.10 Tax Treatment..................................................51
ARTICLE X CONDITIONS PRECEDENT TO CLOSING....................................51
10.1 General Conditions.............................................51
10.2 Conditions Precedent to Purchaser's Obligations................52
10.3 Conditions Precedent to Sellers' Obligations...................53
ARTICLE XI TERMINATION AND WAIVER............................................54
11.1 Termination....................................................54
11.2 Effect of Termination..........................................54
11.3 Waiver of Agreement............................................55
11.4 Amendment of Agreement.........................................55
ARTICLE XII MISCELLANEOUS PROVISIONS.........................................55
12.1 Successors and Assigns.........................................55
12.2 Notices........................................................56
12.3 Interpretation.................................................57
12.4 Entire Agreement...............................................57
12.5 Amendments and Waivers.........................................57
12.6 Severability...................................................57
12.7 Headings.......................................................58
12.8 Governing Law..................................................58
12.9 Schedules and Exhibits.........................................58
12.10 No Third-Party Beneficiaries...................................58
12.11 Waiver by Jury Trial...........................................58
12.12 Counterparts...................................................58
12.13 Further Assurances.............................................58
12.14 Obligations of Each of the Sellers and the Companies...........58
12.15 Sellers' Representative........................................59
12.16 Acknowledgements...............................................60
iii
EXHIBITS
A-1 Employment Agreement with Allen Gutterman
A-2 Employment Agreement with Edward Caliguiri
A-3 Employment Agreement with Barry Cohen
B Escrow Agreement
C [Intentionally Omitted]
D Form of Directors and Officers' Release
E Terms of Lease for NYC Office Space
SCHEDULES
2.5(d) Provisions Relating to Issuance of RCG Stock
4.1(a) Jurisdictions of Organization and Qualification
4.2(a) Capitalization, Companies
4.2(b) Capitalization, Subsidiaries
4.3(a) Financial Statements
4.3(b) March Financial Statements
4.4(a) Employees, Salaries and Bonuses
4.4(b) Labor Issues
4.4(c) Employment Lawsuits
4.4(d) Employee Plans
4.4(i) Post Retirement Welfare Benefits
4.4(j) Triggering of Obligations
4.5(b) Intellectual Property
4.5(c) Intellectual Property; Exceptions
4.5(d) Intellectual Property; Software
4.5(e) Intellectual Property; Agreements
4.5(f) Intellectual Property; Trademarks
4.5(g) Intellectual Property; Litigation
4.5(j) Intellectual Property; Trade Secrets
4.5(k) Intellectual Property; Loss or Impairment
4.6(a) Assets
4.7 Litigation
4.8(a) Real Property Leases
4.9(a) Governmental Consents
4.9(b) Material Contract Consent
4.10(a) Material Contracts
4.10(b) Advise Changes to Material Contracts
iv
4.11 Undisclosed Liabilities
4.12(b) Necessary Permits/Licenses
4.13(a) Environmental Matters; Compliance
4.13(b) Environmental Matters, Claims
4.13(c) Environmental Matters, Incidents
4.14 Tax Matters
4.15(a) No Material Adverse Charge; Conduct in Ordinary Course
4.15(b) No Material Adverse Charge; Material Adverse Effect
4.16(a) Affiliate Transactions
4.16(b) Affiliate Transactions; Debt Obligations to Affiliates
4.17(a) Insurance Policies
4.17(b) Insurance, Loss History
4.18 Brokers
4.19 Books and Records
4.24(a) Seller Outstanding Obligations; Company Liabilities to Seller
4.24(b) Seller Outstanding Obligations; Interests
4.24(c) Affiliate Transactions
4.25 Accounts Receivable
4.27 Bank Accounts
5.1 RCG's and Purchaser's Authority
5.2 RCG and Purchaser; No Violations
5.3 RCG and Purchaser Consents
5.4 RCG's and Purchaser's Brokers
6.1 Exception to Covenants
10.3(d) Guarantees
v