STOCK AND ASSET PURCHASE AGREEMENT
Exhibit
2.1
STOCK
AND ASSET PURCHASE AGREEMENT
By and
among
SELECTIVE
INSURANCE GROUP, INC.
SELECTIVE
HR SOLUTIONS, INC., SELECTIVE HR SOLUTIONS II, INC.,
SELECTIVE
HR SOLUTIONS III, INC., SELECTIVE HR SOLUTIONS IV, INC.,
SELECTIVE
HR SOLUTIONS V, INC., SELECTIVE HR SOLUTIONS VI, INC.,
SELECTIVE
HR SOLUTIONS VII, INC., SELECTIVE HR SOLUTIONS VIII, INC.,
SELECTIVE
HR SOLUTIONS IX, INC., SELECTIVE HR SOLUTIONS X, INC.,
SELECTIVE
HR SOLUTIONS XI, INC., SELECTIVE HR SOLUTIONS XII, INC. AND
SELECTIVE
HR SERVICES, LLC
and
ALPHASTAFF
GROUP, INC.
ALPHASTAFF,
INC., ALPHASTAFF HOLDINGS, INC.,
ALPHA
NYPEO, INC., ALPHASTAFF SYSTEMS V, INC. AND
ALPHASTAFF
2, INC.
Dated as
of October 27, 2009
TABLE OF
CONTENTS
Page
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ARTICLE
I DEFINITIONS
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2
|
|
SECTION
1.01
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Certain
Defined Terms
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2
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SECTION
1.02
|
Definitions
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13
|
SECTION
1.03
|
Interpretation
and Rules of Construction
|
15
|
ARTICLE
II PURCHASE AND SALE
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16
|
|
SECTION
2.01
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Purchase
and Sale of the Business
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16
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SECTION
2.02
|
Assumption
of Liabilities
|
16
|
SECTION
2.03
|
Purchase
Price; Allocation of Purchase Price
|
16
|
SECTION
2.04
|
Closing
|
18
|
SECTION
2.05
|
Closing
Deliveries by the Seller
|
18
|
SECTION
2.06
|
Closing
Deliveries by the Purchaser
|
20
|
SECTION
2.07
|
Post-Closing
Adjustment of Purchase Price
|
21
|
SECTION
2.08
|
Purchase
Price Acceleration
|
23
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE SELLER
|
24
|
|
SECTION
3.01
|
Organization,
Authority and Qualification of the Seller
|
24
|
SECTION
3.02
|
Organization,
Authority and Qualification of the Company
|
25
|
SECTION
3.03
|
Subsidiaries
|
25
|
SECTION
3.04
|
Capitalization
|
26
|
SECTION
3.05
|
Corporate
Books and Records
|
26
|
SECTION
3.06
|
No
Conflict
|
27
|
SECTION
3.07
|
Governmental
Consents and Approvals
|
27
|
SECTION
3.08
|
ESAC
Accreditation
|
27
|
SECTION
3.09
|
Common
Ownership
|
27
|
SECTION
3.10
|
Financial
Information; Books and Records
|
28
|
SECTION
3.11
|
Absence
of Undisclosed Liabilities
|
28
|
SECTION
3.12
|
Receivables
|
28
|
SECTION
3.13
|
[Reserved]
|
28
|
SECTION
3.14
|
Conduct
in the Ordinary Course; Absence of Certain Changes, Events and
Conditions
|
28
|
SECTION
3.15
|
Litigation
|
31
|
SECTION
3.16
|
Compliance
with Laws
|
31
|
SECTION
3.17
|
Environmental
and Other Permits and Licenses; Related Matters
|
32
|
SECTION
3.18
|
Material
Contracts
|
32
|
SECTION
3.19
|
SHRS
Client Contracts
|
34
|
SECTION
3.20
|
Intellectual
Property
|
34
|
SECTION
3.21
|
Real
Property
|
35
|
SECTION
3.22
|
Tangible
Personal Property
|
36
|
SECTION
3.23
|
Assets
|
36
|
SECTION
3.24
|
Bank
Accounts; Powers of Attorney
|
36
|
SECTION
3.25
|
Customers
|
37
|
(i)
SECTION
3.26
|
Suppliers
|
37
|
SECTION
3.27
|
Employee
Benefit Matters
|
37
|
SECTION
3.28
|
Labor
Matters
|
40
|
SECTION
3.29
|
Key
Employees
|
40
|
SECTION
3.30
|
[Reserved]
|
40
|
SECTION
3.31
|
Taxes.
|
40
|
SECTION
3.32
|
Insurance
|
42
|
SECTION
3.33
|
Certain
Business Practices
|
43
|
SECTION
3.34
|
Transaction
Brokers
|
43
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
|
43
|
|
SECTION
4.01
|
Organization
and Authority of the Purchaser
|
43
|
SECTION
4.02
|
No
Conflict
|
44
|
SECTION
4.03
|
Governmental
Consents and Approvals
|
44
|
SECTION
4.04
|
Common
Ownership
|
44
|
SECTION
4.05
|
Financing
|
44
|
SECTION
4.06
|
Litigation
|
45
|
SECTION
4.07
|
Transaction
Brokers
|
45
|
SECTION
4.08
|
Errors
and Omissions Coverage
|
45
|
ARTICLE
V ADDITIONAL AGREEMENTS
|
45
|
|
SECTION
5.01
|
Conduct
of Business Prior to the Closing
|
45
|
SECTION
5.02
|
Access
to Information
|
46
|
SECTION
5.03
|
Confidentiality
|
47
|
SECTION
5.04
|
Regulatory
and Other Authorizations; Notices and Consents; Efforts
|
48
|
SECTION
5.05
|
Notice
of Developments
|
50
|
SECTION
5.06
|
No
Solicitation or Negotiation
|
50
|
SECTION
5.07
|
Use
of Intellectual Property
|
51
|
SECTION
5.08
|
Non-Competition
|
51
|
SECTION
5.09
|
Post-Closing
Insurance Matters
|
52
|
SECTION
5.10
|
Release
|
54
|
SECTION
5.11
|
Certain
Payments
|
55
|
SECTION
5.12
|
Bulk
Transfer Laws
|
55
|
SECTION
5.13
|
Intercompany
Arrangements
|
55
|
SECTION
5.14
|
Excluded
Contracts
|
55
|
SECTION
5.15
|
[Reserved]
|
56
|
SECTION
5.16
|
Transition
Services
|
56
|
SECTION
5.17
|
Further
Action
|
56
|
SECTION
5.18
|
Risk
of Loss
|
56
|
SECTION
5.19
|
Merger
of Company Subsidiaries
|
56
|
SECTION
5.20
|
Limited
Liability Company Conversion
|
56
|
SECTION
5.21
|
Estimated
Initial Payment
|
57
|
SECTION
5.22
|
Operational
Independence
|
57
|
SECTION
5.23
|
Financial
Statements
|
57
|
(ii)
ARTICLE
VI EMPLOYEE MATTERS
|
57
|
|
SECTION
6.01
|
Termination
of Employees
|
57
|
SECTION
6.02
|
Employee-Related
Costs
|
57
|
SECTION
6.03
|
COBRA
|
58
|
ARTICLE
VII TAX MATTERS
|
58
|
|
SECTION
7.01
|
Indemnity
|
58
|
SECTION
7.02
|
Returns
and Payments.
|
59
|
SECTION
7.03
|
Tax
Refunds
|
60
|
SECTION
7.04
|
Contests
|
60
|
SECTION
7.05
|
Time
of Payment
|
61
|
SECTION
7.06
|
Tax
Cooperation and Exchange of Information
|
61
|
SECTION
7.07
|
Conveyance
Taxes
|
62
|
SECTION
7.08
|
Miscellaneous
|
62
|
ARTICLE
VIII CONDITIONS TO CLOSING
|
63
|
|
SECTION
8.01
|
Conditions
to Obligations of the Seller
|
63
|
SECTION
8.02
|
Conditions
to Obligations of the Purchaser
|
63
|
ARTICLE
IX INDEMNIFICATION
|
65
|
|
SECTION
9.01
|
Survival
of Representations and Warranties
|
65
|
SECTION
9.02
|
Indemnification
by the Seller
|
65
|
SECTION
9.03
|
Indemnification
by the Purchaser
|
66
|
SECTION
9.04
|
Limits
on Indemnification
|
67
|
SECTION
9.05
|
Notice
of Loss; Third Party Claims
|
68
|
SECTION
9.06
|
Right
of Set-Off
|
69
|
SECTION
9.07
|
Sole
Remedy
|
69
|
ARTICLE
X TERMINATION, AMENDMENT AND WAIVER
|
70
|
|
SECTION
10.01
|
Termination
|
70
|
SECTION
10.02
|
Effect
of Termination
|
71
|
ARTICLE
XI GENERAL PROVISIONS
|
72
|
|
SECTION
11.01
|
Expenses
|
72
|
SECTION
11.02
|
Notices
|
72
|
SECTION
11.03
|
Public
Announcements
|
72
|
SECTION
11.04
|
Severability
|
73
|
SECTION
11.05
|
Entire
Agreement
|
73
|
SECTION
11.06
|
Assignment
|
73
|
SECTION
11.07
|
Amendment
|
73
|
SECTION
11.08
|
Waiver
|
73
|
SECTION
11.09
|
No
Third Party Beneficiaries
|
73
|
SECTION
11.10
|
Specific
Performance
|
74
|
SECTION
11.11
|
Governing
Law
|
74
|
SECTION
11.12
|
Waiver
of Jury Trial
|
74
|
(iii)
SECTION
11.13
|
Currency
|
74
|
SECTION
11.14
|
Counterparts
|
74
|
(iv)
EXHIBITS
1.01(a)
|
Form
of Assignment of Intellectual Property
|
1.01(b)
|
Form
of Assumption Agreement
|
1.01(c)
|
Form
of Xxxx of Sale and Assignment
|
1.01(d)
|
Client
Assignment and Consent Agreement
|
2.03(a)(i)
|
Initial
Payment
|
2.03(a)(i)-A
|
Initial
Payment Statement
|
2.03(a)(i)-B
|
Estimated
Initial Payment Statement
|
2.03(a)(ii)
|
Initial
Earn-Out Payment
|
2.03(a)(ii)-A
|
Initial
Earn-Out Statement
|
2.03(a)(iv)
|
Quarterly
Earn-Out Payment
|
2.03(a)(iv)-A
|
Quarterly
Earn-Out Statement
|
2.07(a)
|
Reference
Balance Sheet
|
2.08(a)
|
Annual
Acceleration Payment
|
2.08(a)-A
|
Annual
Acceleration Statement
|
2.08(b)
|
Quarterly
Acceleration Payment
|
2.08(b)-A
|
Quarterly
Acceleration Statement
|
2.08(b)-B
|
Quarterly
Acceleration Payment Calculation
|
5.10
|
Form
of Release
|
5.16
|
Transition
Services Agreement Terms
|
(v)
STOCK AND ASSET PURCHASE
AGREEMENT (this “Agreement”), dated as
of October 27, 2009, by and among Selective Insurance Group, Inc., a New Jersey
corporation (the “Seller”), Selective
HR Solutions, Inc., a Florida corporation and wholly-owned Subsidiary of the
Seller (the “Company”), Selective
HR Solutions II, Inc., a Georgia corporation and wholly-owned Subsidiary of the
Company (“SHRS-II”), Selective
HR Solutions III, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-III”), Selective
HR Solutions IV, Inc., a Maryland corporation and wholly-owned Subsidiary of the
Company (“SHRS-IV”), Selective
HR Solutions V, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-V”), Selective
HR Solutions VI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VI”), Selective
HR Solutions VII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VII”), Selective
HR Solutions VIII, Inc., a Florida corporation and wholly-owned Subsidiary of
the Company (“SHRS-VIII”),
Selective HR Solutions IX, Inc., a Florida corporation and wholly-owned
Subsidiary of the Company (“SHRS-IX”), Selective
HR Solutions X, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-X”), Selective
HR Solutions XI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XI”), Selective
HR Solutions XII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XII”), Selective
HR Services, LLC, a limited liability company organized under the laws of the
Commonwealth of Pennsylvania and wholly-owned Subsidiary of the Company (“SHRS-LLC”), and
AlphaStaff Group, Inc., a Florida corporation (the “Purchaser”),
AlphaStaff, Inc., a Florida corporation and wholly-owned Subsidiary of the
Purchaser (“Alpha”), AlphaStaff
Holdings, Inc., a Florida corporation and indirect, wholly-owned Subsidiary of
the Purchaser (“Holdings”), Alpha
NYPEO, Inc., a Florida corporation and indirect, wholly-owned Subsidiary of the
Purchaser (“Alpha-NY”),
AlphaStaff Systems V, Inc., a Florida corporation and indirect, wholly-owned
Subsidiary of the Purchaser (“Systems-V”), and
AlphaStaff 2, Inc., a Florida corporation and indirect, wholly-owned Subsidiary
of the Purchaser (“Alpha-2”).
WHEREAS, the Company, directly
and through the Company Subsidiaries, is engaged in the business of a
professional employer organization at various locations in the United States
(the “Business”);
and
WHEREAS, the Seller wishes to
sell to the Purchaser, and the Purchaser wishes to purchase from the Seller, the
Business, including the Shares (as defined below) and all of the assets of the
Company Subsidiaries (as defined below), and in connection therewith the
Purchaser is willing to assume all of the liabilities of the Company
Subsidiaries, all upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in
consideration of the promises and the mutual agreements and covenants
hereinafter set forth, and intending to be legally bound, the Seller and the
Purchaser hereby agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01 Certain Defined
Terms. For
purposes of this Agreement:
“Acceleration Rate”
means six percent per annum, compounded quarterly, and calculated on the basis
of a 365-day year.
“Acquiring
Subsidiaries” means, collectively, Alpha-NY, Alpha-2, Holdings and
Systems-V and any other Subsidiaries of the Purchaser designated by the
Purchaser as Acquiring Subsidiaries.
“Action” means any
claim, action, suit, arbitration, inquiry, proceeding or investigation by or
before any Governmental Authority.
“Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
“Ancillary Agreements”
means the Assignment of Intellectual Property, the Assumption Agreement, the
Xxxx of Sale, the Client Assignments, the Escrow Agreement and the Transition
Services Agreements.
“Annual Acceleration Payment
Date” means the fifth Business Day following the Annual Acceleration
Settlement Date.
“Annual Acceleration
Statement” means a statement substantially in the form of Exhibit 2.08(a)-A
hereto stating the Purchaser’s good faith computation of the Annual Acceleration
Payment in accordance with the terms of this Agreement.
“Annual Acceleration
Statement Date” means the date on which the Purchaser delivers the Annual
Acceleration Statement to the Seller.
“Annual Payment” means
$100,000.00.
“Assets” means the
Purchased Assets and the assets and properties of the Company.
“Assignment of Intellectual
Property” means the assignment of Intellectual Property to be executed by
the Seller at the Closing, substantially in the form set forth in Exhibit 1.01(a).
“Assumption Agreement”
means the Assumption Agreement to be executed by the Purchaser and the Company
Subsidiaries at the Closing, substantially in the form set forth in Exhibit 1.01(b).
“Xxxx of Sale” means
the Xxxx of Sale and Assignment to be executed by the Company Subsidiaries at
the Closing, substantially in the form of Exhibit 1.01(c).
2
“Business Day” means
any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by Law to be closed in The City of Miami.
“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended through the Closing.
“Change of Control of the
Purchaser” means the occurrence of any of the following: (a)
any Person other than Accretive, LLC or its Affiliates becomes a “beneficial
owner” (within the meaning of Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of more than 50% of the combined voting power of the
then outstanding voting securities of the Purchaser, or the voting securities of
any subsidiary of the Purchaser conducting a PEO Business and insured by
Seller’s insurance company Subsidiaries or Affiliates, entitled to vote
generally in the election of directors; (b) there is consummated a merger or
consolidation of the Purchaser, or any subsidiary of the Purchaser conducting a
PEO Business and insured by Seller’s insurance company Subsidiaries or
Affiliates, with an Entity that is not controlled by Accretive, LLC or its
Affiliates, other than a merger or consolidation that would result in the voting
securities of the Purchaser or such subsidiary outstanding immediately prior to
such merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or any parent thereof) at least 50% of the combined voting power of the
securities of the Purchaser, such subsidiary or the surviving entity immediately
following such merger or consolidation; or (c) there is consummated an agreement
for the sale or disposition by the Purchaser, or any subsidiary of the Purchaser
conducting a PEO Business and insured by Seller’s insurance company Subsidiaries
or Affiliates, of all or substantially all of the assets of the Purchaser or
such subsidiary to a Person other than Accretive, LLC or its
Affiliates.
“Change of Control Quarterly
Payment” means $500,000.00.
“Claims” means any and
all administrative, regulatory or judicial actions, suits, petitions, appeals,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations, proceedings, consent orders or consent agreements.
“Client Assignment”
means the Client Assignment and Consent Agreement to be executed prior to the
Closing by each SHRS Client and each SHRS ASO Client, substantially in the form
of Exhibit 1.01(d).
“Closing Date
Statement” means the final and binding Closing Balance Sheet and
calculation of Net Working Capital based thereon as determined in accordance
with the final sentence of Section 2.07(b)
hereof or in accordance with Section 2.07(c)
hereof, as applicable.
“Code” means the
Internal Revenue Code of 1986, as amended through the date hereof.
“Common Stock” means
the shares of common stock, $0.01 par value per share, of the
Company.
“Company Intellectual
Property” means Intellectual Property owned by the Company or any Company
Subsidiary.
3
“Company IP
Agreements” means (a) licenses of Intellectual Property material to the
Business by the Company or any Company Subsidiary to any third party, (b)
licenses of Intellectual Property that is material to the Business by any third
party to the Company or any Company Subsidiary, (c) agreements between the
Company or any Company Subsidiary and any third party relating to the
development or use of Intellectual Property, the development or transmission of
data, or the use, modification, framing, linking, advertisement, or other
practices with respect to Internet web sites, in each case that is material to
the Business, and (d) consents, settlements, decrees, orders, injunctions,
judgments or rulings governing the use, validity or enforceability of Company
Intellectual Property that are material to the Business.
“Company Subsidiaries”
means, collectively, SHRS-II, SHRS-III, SHRS-IV, SHRS-V, SHRS-VI, SHRS-VII,
SHRS-VIII, SHRS-IX, SHRS-X, SHRS-XI, SHRS-XII and SHRS-LLC.
“control” (including
the terms “controlled
by” and “under
common control with”), with respect to the relationship between or among
two or more Persons, means the possession, directly or indirectly or as trustee,
personal representative or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities permitting the owner to exercise such management
authority, as trustee, personal representative or executor, by contract, credit
arrangement or otherwise.
“Conveyance Taxes”
means all sales, use, value added, transfer, stamp, stock transfer, real
property transfer or gains and similar Taxes.
“Disclosure Letter”
means the Disclosure Letter, dated as of the date hereof, delivered by the
Seller to the Purchaser in connection with this Agreement.
“Employee-Leasing
Arrangement” means an arrangement whereby an employee leasing company
assigns its employees to a client and allocates the direction of and control
over the leased employees between the leasing company and the client, as
contemplated by Chapter 468, Part XI of the Florida Statutes or the comparable
Law of a given state which governs such Employee-Leasing
Arrangement.
“Encumbrance” means
any security interest, pledge, hypothecation, mortgage, lien (including
environmental and tax liens), charge, encumbrance, easement or restrictive
covenant of record, including any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
“Entity” means a
partnership, firm, corporation, limited liability company, association, trust,
unincorporated organization or other entity.
“Environment” means
surface waters, groundwaters, soil, subsurface strata and ambient
air.
“Environmental Claims”
means any Claims relating in any way to any Environmental Law or any
Environmental Permit, including (a) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (b) any and
all Claims by any Person seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
Environment.
4
“Environmental Laws”
means all Laws, now or hereafter in effect and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety,
natural resources or Hazardous Materials, including CERCLA; the Resource
Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. §§ 6901 et seq.; the Clean Water
Act, 33 U.S.C. §§ 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air
Act, 42 U.S.C. §§ 7401 et seq.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic
Energy Act, 42 U.S.C. §§ 2011 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; and the Federal
Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq.
“Environmental
Permits” means all material permits, approvals, identification numbers,
licenses and other authorizations required under or issued pursuant to any
applicable Environmental Law.
“Escrow Account” means
the escrow account designated by the Escrow Agent in accordance with the Escrow
Agreement.
“Escrow Agent” means
CSC Trust Company of Delaware, a Delaware corporation, or such other Person as
may be mutually acceptable to the Seller and the Purchaser.
“Escrow Agreement”
means an escrow agreement, dated on or before the Closing Date, in form and
substance reasonably satisfactory to the Seller, the Purchaser and the Escrow
Agent.
“Estimated Initial Payment
Statement” means a statement substantially in the form of Exhibit 2.03(a)(i)-B
hereto stating the Seller’s computation of the Estimated Initial
Payment.
“Excluded Taxes” means
(i) all Income Taxes owed by the Seller or any of its Affiliates other than the
Company or the Company Subsidiaries for any period; (ii) [reserved]; (iii) all
Taxes relating to the Purchased Assets, the Business or the Assumed Liabilities
for any Pre-Closing Period; (iv) all Taxes of the Company or any Company
Subsidiary for any Pre-Closing Period; (v) with respect to Straddle Periods, all
Taxes of the Company or any Company Subsidiary which are allocable, pursuant to
Section
7.01(b), to the portion of such period ending on the Closing Date; (vi)
all Taxes of the Seller or any other Person (other than the Company or any
Company Subsidiary) for which the Company or any Company Subsidiary may be
liable by reason of being a member of a consolidated, combined, unitary or
affiliated group that includes the Seller or such other Person prior to the
Closing, by reason of entering into a tax sharing, tax indemnity or similar
agreement with the Seller or such other Person prior to the Closing (other than
this Agreement) or by reason of transferee or successor liability arising in
respect of a transaction undertaken prior to the Closing; (vii) Taxes imposed on
Purchaser or the Company or any Company Subsidiary as a result of any breach of
warranty or misrepresentation under Section 3.31 hereof,
or breach by the Seller of any covenant relating to Taxes; and (viii) any Tax
refunds or Tax credits that were taken into account in calculating the Net
Working Capital shown on the Closing Balance Sheet which are not received or
utilized by the second anniversary of the Closing Date (and the Company shall
specifically identify each such Tax refund or Tax credit as a schedule to the
Closing Balance Sheet).
5
“Exclusivity
Agreement” means that certain Exclusivity Agreement, dated September 9,
2009, by and among the Purchaser, the Seller and the Company.
“Existing Client”
means any Entity engaged in an Employee-Leasing Arrangement with the Company or
any of the Company Subsidiaries as of immediately prior to the Closing; provided, however, that if such Entity
does not process a payroll payment through the Purchaser or any of its
Subsidiaries prior to February 1, 2010 (or, if the Closing Date occurs after
January 1, 2010, then the first day of the month following the first full month
after the Closing Date), then such Entity shall not be considered an Existing
Client for any purposes under this Agreement, except for purposes of federal,
state and local employment Taxes.
“GAAP” means United
States generally accepted accounting principles and practices in effect from
time to time applied consistently throughout the periods involved.
“Governmental
Authority” means any federal, national, supranational, state, provincial,
local, or similar government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
“Governmental Order”
means any order, writ, judgment, injunction, decree, stipulation, determination
or award entered by or with any Governmental Authority.
“Hazardous Materials”
means (a) petroleum and petroleum products, radioactive materials,
asbestos-containing materials, urea formaldehyde foam insulation, transformers
or other equipment that contain polychlorinated biphenyls and radon gas, (b) any
other chemicals, materials or substances defined as or included in the
definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”,
“extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”,
“toxic pollutants”, “contaminants” or “pollutants”, or words of similar import,
under any applicable Environmental Law, and (c) any other chemical,
material or substance which is regulated by any Environmental Law.
“Income Taxes” means
Taxes imposed on or measured by reference to gross or net income or receipts,
and franchise, net worth, capital or other doing business Taxes.
“Indebtedness” means,
with respect to any Person, (a) all indebtedness of such Person, whether or
not contingent, for borrowed money, (b) all obligations of such Person for
the deferred purchase price of property or services, (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property),
(e) all obligations of such Person as lessee under leases that have been or
should be, in accordance with GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities, (g) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any capital
stock of such Person or any warrants, rights or options to acquire such capital
stock, valued, in the case of redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Indebtedness of others referred to in clauses (a)
through (g) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement to assure a creditor against loss, and (i) all Indebtedness
referred to in clauses (a) through (g) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Encumbrance on property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.
6
“Indemnified Party”
means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case
may be.
“Indemnifying Party”
means the Seller pursuant to Section 9.02 or the
Purchaser pursuant to Section 9.03, as the
case may be.
“Initial Earn-Out Payment
Date” means the fifth Business Day following Initial Earn-Out Settlement
Date.
“Initial Earn-Out
Period” means the fiscal quarter beginning January 1, 2010 and ending
March 31, 2010 (or, if the Closing Date occurs after January 1, 2010, then the
fiscal period beginning on the Closing Date and ending March 31,
2010).
“Initial Earn-Out Reference
Date” means the last calendar day of the Initial Earn-Out
Period.
“Initial Earn-Out
Statement” means a statement substantially in the form of Exhibit 2.03(a)(ii)-A
hereto stating the Purchaser’s good faith computation of the Initial Earn-Out
Payment in accordance with the terms of this Agreement.
“Initial Payment Date”
means the fifth Business Day following Initial Payment Settlement Date; provided, however, that if the Initial
Payment Settlement Date is on or before February 4, 2010, Initial Payment Date
shall mean February 5, 2010.
“Initial Payment
Statement” means a statement substantially in the form of Exhibit 2.03(a)(i)-A
hereto stating the Purchaser’s good faith computation of the Initial Payment in
accordance with the terms of this Agreement.
“Intellectual
Property” means (i) patents, patent applications and statutory invention
registrations, (ii) trademarks, service marks, domain names, trade dress, logos,
trade names, corporate names and other identifiers of source or goodwill,
including registrations and applications for registration thereof and including
the goodwill of the business symbolized thereby or associated therewith and
common law rights, (iii) mask works and copyrights, including, but not limited
to, copyrights in computer software, and registrations and applications for
registration thereof, (iv) rights of publicity and (v) confidential and
proprietary information, including Trade Secrets, know-how and invention
rights.
“IRS” means the
Internal Revenue Service of the United States.
7
“Knowledge of the
Seller” means the actual knowledge, upon reasonable inquiry, of Xxxxx X.
Xxxxxxx, Xxxx X. Xxxx, Xxxx Xxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxxxx
X. Xxxxxxx, Xxxx X. Xxxxxxxx, Xxxx X. Xxxxxxx and Xxxxxx
Xxxxxxxxxxxx.
“Law” means any
federal, national, supranational, state, provincial, local or similar statute,
law, ordinance, regulation, rule, code, order, requirement or rule of law
(including common law and Governmental Orders).
“Leased Real Property”
means the real property leased by the Seller or any Affiliate of the Seller that
is exclusively related to the Business, and the real property leased by the
Company or any Company Subsidiary, in each case, as tenant, together with, to
the extent leased by the Seller (in connection with the Business), the Company
or any Company Subsidiary, pursuant to the terms of such lease, (i) all
buildings and other structures, facilities or improvements currently located
thereon and (ii) all buildings and other structures, facilities or improvements
located thereon between the date hereof and the Closing, all fixtures, systems,
equipment and items of personal property of the Seller (related to the
Business), the Company or any Company Subsidiary attached or appurtenant thereto
and all easements, licenses, rights and appurtenances relating to the
foregoing.
“Liabilities” means
any and all debts, liabilities and obligations, whether accrued or fixed,
absolute or contingent, matured or unmatured or determined or determinable,
including those arising under any Law (including any Environmental Law), Action
or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
“Licensed Intellectual
Property” means Intellectual Property licensed to the Company or any
Company Subsidiary pursuant to the Company IP Agreements.
“Material Adverse
Effect” means any circumstance, change in or effect (any such item, an
“Effect”) on
the Business, the Seller, the Company or any Company Subsidiary that,
individually or in the aggregate with all other circumstances, changes in or
effects on the Business, the Seller, the Company or any Company
Subsidiary: (a) is materially adverse to the business,
operations, assets or liabilities, results of operations or the financial
condition of the Company and the Company Subsidiaries, taken as a whole, or
(b) is reasonably likely to materially adversely effect the ability of the
Purchaser to operate or conduct the Business substantially in the manner in
which it is currently or contemplated to be operated or conducted by the Seller,
the Company or any Company Subsidiary; provided, however, that none of the
following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Material Adverse Effect: any
adverse Effect attributable to (i) the announcement or pendency of the
transactions contemplated by this Agreement; (ii) conditions affecting the
industry in which the Company and the Company Subsidiaries participate, the U.S.
economy as a whole or the capital markets in general or the markets in which the
Company and the Company Subsidiaries participate; (iii) compliance with the
terms of, or the taking of any action required or contemplated by, this
Agreement; (iv) actions required to be taken under applicable law, contracts or
agreements; (v) any change in GAAP or other accounting requirements or
principles; (vi) an earthquake or other natural disaster; or (vii) the
commencement, continuation or escalation of a war, material armed hostilities or
other material international or national calamity or act of terrorism directly
or indirectly involving the United States of America; unless, in the case of
clauses (ii), (v), (vi) or (vii) above, such Effect would reasonably be expected
to have a materially disproportionate adverse effect on or change in the
business, operations, assets or liabilities, results of operations or the
financial condition of the Company and the Company Subsidiaries, taken as a
whole, relative to other affected Persons, taken as a whole.
8
“Net Working Capital”
means, as of any date, the difference between (a) the consolidated current
assets of the Company and the Company Subsidiaries, and (b) the consolidated
current liabilities of the Company and the Company Subsidiaries. Net Working
Capital shall be determined in accordance with GAAP and in a manner consistent
with that used to prepare the Reference Balance Sheet, provided that if there is
a conflict between GAAP and the manner in which the Reference Balance Sheet was
prepared, GAAP will nonetheless be applied in the determination of Net Working
Capital. For all purposes of Net Working Capital, intercompany
accounts shall be settled or eliminated.
“Owned Intellectual
Property” means, collectively, the Seller Intellectual Property and
Company Intellectual Property.
“Owned Real Property”
means (a) the real property in which the Seller or any Affiliate of the
Seller has fee title (or equivalent) interest that is used exclusively in the
Business, together with all buildings and other structures, facilities or
improvements currently located thereon and all easements, licenses, rights and
appurtenances of record relating to the foregoing, and (b) the real
property in which the Company or any Company Subsidiary has fee title (or
equivalent) interest, together with all buildings and other structures,
facilities or improvements currently located thereon and all easements,
licenses, rights and appurtenances of record relating to the
foregoing.
“Payment Date” means
any of the Initial Payment Date, the Initial Earn-Out Payment Date, an Annual
Payment Date or a Quarterly Earn-Out Payment Date.
“PEO Approvals” means
the consents, approvals and authorizations necessary for the consummation of the
transactions contemplated by this Agreement listed on Section 3.07(a) of
the Disclosure Letter.
“Permitted
Encumbrances” means the following: (a) liens for Taxes
not yet due and payable for which adequate reserves have been maintained in
accordance with GAAP; (b) Encumbrances imposed by Law, such as
materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other
similar liens arising in the ordinary course of business securing obligations
that (i) are not overdue for a period of more than 30 days and
(ii) are not in excess of $5,000 in the case of a single property or
$50,000 in the aggregate at any time; (c) pledges or deposits to secure
obligations under workers’ compensation laws or similar legislation or to secure
public or statutory obligations; (d) survey exceptions, easements,
licenses, covenants, rights-of-way, rights of re-entry, zoning, building,
subdivision or other similar requirements or restrictions, environmental
restrictions on the use of any Real Property (including deed restrictions), or
other customary encumbrances on title to real property that do not, individually
or in the aggregate, materially adversely affect the value of or the use of such
property; and (e) statutory Encumbrances of landlords for amounts not yet due
and payable.
9
“Person” means any
individual or Entity, as well as any syndicate or group that would be deemed to
be a person under Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended.
“Post-Closing Period”
means any taxable period (or portion thereof) beginning after the Closing
Date.
“Pre-Closing Period”
means any taxable period (or portion thereof) ending on or prior to Closing
Date.
“Purchase Price” means
an amount equal to the aggregate of the Initial Payment, the Initial Earn-Out
Payment, the Subsequent Payment and the Quarterly Earn-Out
Payments.
“Purchase Price Bank
Account” means a bank account in the United States to be designated by
the Seller from time to time in a written notice to the Purchaser; provided that such written
notice must be received by the Purchaser at least three Business Days before a
given Payment Date to be effective for such Payment Date.
“Purchased Assets”
means, collectively, all of the assets and properties of the Company
Subsidiaries.
“Purchaser ASO Client”
means an Entity for which the Purchaser or any of its Subsidiaries provides
administrative services only through an administrative services
agreement.
“Purchaser ASO
Employee” means an individual employed by a Purchaser ASO
Client.
“Purchaser WSEE” means
an individual employed by the Purchaser or any of its Subsidiaries pursuant to
an Employee-Leasing Arrangement.
“Quarterly Acceleration
Payment Date” means the fifth Business Day following the Quarterly
Acceleration Settlement Date.
“Quarterly Earn-Out Payment
Date” means, for any given Quarterly Earn-Out Period the fifth Business
Day following the Quarterly Earn-Out Settlement Date for such Quarterly Earn-Out
Period.
“Quarterly Earn-Out
Period” means a fiscal quarter beginning with the start of the fiscal
quarter ending June 30, 2010 and ending with the end of the fiscal quarter
ending March 31, 2020.
“Quarterly Earn-Out Reference
Date” means the last calendar day of a Quarterly Earn-Out
Period.
“Quarterly Earn-Out
Statement” means a statement substantially in the form of Exhibit 2.03(a)(iv)-A
hereto stating the Purchaser’s good faith computation of a Quarterly Earn-Out
Payment in accordance with the terms of this Agreement.
“Real Property” means
the Leased Real Property and the Owned Real Property.
10
“Receivables” means
any and all accounts receivable, notes, refunds from customers, suppliers or
Governmental Authorities, Tax refunds and other amounts receivable from third
parties, including customers and employees, whether or not in the ordinary
course, together with any unpaid financing charges accrued thereon.
“Reference Statement
Date” means July 31, 2009.
“Regulations” means
the Treasury Regulations (including Temporary Regulations) promulgated by the
United States Department of Treasury with respect to the Code or other federal
tax statutes.
“Release” means
disposing, discharging, injecting, spilling, leaking, leaching, dumping,
emitting, escaping, emptying, seeping, placing and the like into or upon any
land or water or air or otherwise entering into the Environment.
“Remedial Action”
means all action to (a) clean up, remove, treat or handle in any other way
Hazardous Materials in the Environment; (b) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or the Environment; or (c) perform remedial
investigations, feasibility studies, corrective actions, closures and
post-remedial or post-closure studies, investigations, operations, maintenance
and monitoring.
“Seller Intellectual
Property” means Intellectual Property owned by the Seller and used in
connection with the Business.
“Seller’s Accountants”
means KPMG LLP, independent accountants of the Seller.
“Shares” means all of
the issued and outstanding shares of Common Stock, including all of the issued
and outstanding limited liability company membership interests into which such
shares of Common Stock may be converted or exchanged upon the Conversion as
contemplated by Section 5.20
hereof.
“SHRS ASO Client”
means an Entity for which the Company or Company Subsidiaries provides
administrative services only through an administrative services
agreement. Listed in Section 3.25(b) of
the Disclosure Letter is a true and complete list of the names, addresses and
number of employees of all SHRS ASO Clients.
“SHRS ASO Employee”
means an individual employed by an SHRS ASO Client.
“SHRS Client” means an
Entity engaged in an Employee-Leasing Arrangement with the Company or any of the
Company Subsidiaries.
“SHRS WSEE” means an
individual co-employed by the Company or any of the Company Subsidiaries and any
SHRS Client pursuant to an Employee-Leasing Arrangement.
“Straddle Period”
means any taxable period beginning on or prior to and ending after the Closing
Date.
11
“Subsequent Quarterly
Period” means a Quarterly Earn-Out Period, the Quarterly Earn-Out
Reference Date for which is subsequent to the Quarterly Acceleration Statement
Date.
“Subsidiaries” means,
with respect to a Person, any Entity controlled by such Person directly or
indirectly through one or more intermediaries.
“Target NWC” means
$3,000,000.
“Tax” or “Taxes” means (i) all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, registration,
license, lease, service, service use, withholding, payroll, employment,
unemployment, retirement, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto; (ii) any liability
for payment of amounts described in clause (i) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
group for any period or otherwise through operation of law; and (iii) any
liability for the payment of amounts described in clause (i) or (ii) as a result
of any tax sharing, tax indemnity or tax allocation agreement or any other
express or implied agreement to indemnify any other Person, including, in each
of clauses (i), (ii) and (iii), with respect to any Purchaser WSEE or SHRS WSEE,
as the case may be.
“Tax Returns” means
any return, declaration, report, election, claim for refund or information
return or other statement or form filed or required to be filed with any Tax
authority relating to Taxes, including any schedule or attachment thereto or any
amendment thereof.
“Trade Secrets” means
trade secrets, know-how and other confidential or proprietary technical,
business and other information, including manufacturing and production processes
and techniques, research and development information, technology, drawings,
specifications, designs, plans, proposals, technical data, financial, marketing
and business data, pricing and cost information, business and marketing plans,
customer and supplier lists and information, and all rights in any jurisdiction
to limit the use or disclosure thereof.
“Transferred ASO
Client” means an SHRS ASO Client as of immediately prior to the Closing;
provided, however, that if such Entity
does not process a payroll payment through the Purchaser or any of its
Subsidiaries prior to February 1, 2010 (or, if the Closing Date occurs after
January 1, 2010, then the first day of the month following the first full month
after the Closing Date), then such Entity shall not be considered a Transferred
ASO Client for any purposes under this Agreement, except for purposes of
federal, state and local employment Taxes.
“Transferred ASO Closing
Employee” means an individual employed by a Transferred ASO Client as of
immediately prior to the Closing.
“Transferred ASO
Employee” means an individual employed by a Transferred ASO
Client.
“Transferred WSEE”
means an SHRS WSEE co-employed by an Existing Client as of immediately prior to
the Closing.
12
“WARN Act” means that
Worker Adjustment and Retraining Notification Act of 1988, and the regulations
promulgated thereunder.
SECTION
1.02 Definitions. The
following terms have the meanings set forth in the Sections set forth
below:
Definition
|
Location
|
|
“Acceleration
Notice”
|
2.08(d)
|
|
“Accountant
Statement”
|
2.07(c)(i)
|
|
“Agreement”
|
Preamble
|
|
“Allocation”
|
2.03(b)
|
|
“Annual
Acceleration Payment”
|
Exhibit 2.08(a)
|
|
“Annual
Acceleration Settlement Date”
|
Exhibit 2.08(a)
|
|
“Annual
Payment Date”
|
2.03(a)(iii)
|
|
“Alpha”
|
Recitals
|
|
“Alpha-NY”
|
Recitals
|
|
“Alpha-2”
|
Recitals
|
|
“Bank
Accounts”
|
3.24
|
|
“Business”
|
Recitals
|
|
“Closing”
|
2.04
|
|
“Closing
Balance Sheet”
|
2.07(b)
|
|
“Closing
Date”
|
2.04
|
|
“Closing
Time”
|
2.04
|
|
“COBRA”
|
3.27(i)
|
|
“Common
ASO Client”
|
Exhibit
2.03(a)(iv)
|
|
“Common
ASO Client Employee”
|
Exhibit
2.03(a)(iv)
|
|
“Common
ASO Client Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Common
ASO Client Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Broker”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Broker Consideration Percentage”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Client”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Client Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Client Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Common
Client WSEE”
|
Exhibit
2.03(a)(iv)
|
|
“Company”
|
Recitals
|
|
“Company
Plan”
|
3.27(a)
|
|
“Conversion”
|
5.20
|
|
“Customer
Policy”
|
3.32
|
|
“Determining
Accounting Firm”
|
Exhibit
2.03(a)(i)
|
|
“Employee
Amounts”
|
6.02
|
|
“ERISA”
|
3.27(a)
|
|
“ERISA
Affiliate”
|
3.27(a)
|
|
“Estimated
Initial Payment”
|
Exhibit
2.03(a)(i)
|
|
“Excluded
Contracts”
|
5.14
|
|
“Existing
Client”
|
Exhibit
2.03(a)(iv)
|
|
“Existing
Client Acceleration”
|
Exhibit
2.08(b)
|
13
Definition | Location | |
“Existing
Client Acceleration Payment”
|
Exhibit
2.08(b)
|
|
“Existing
Client Acceleration WSEEs”
|
Exhibit
2.08(b)
|
|
“Existing
Client Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Existing
Client WSEE”
|
Exhibit
2.03(a)(iv)
|
|
“Financial
Statements”
|
3.10(ii)
|
|
“Holdings”
|
Recitals
|
|
“Initial
Earn-Out Payment”
|
Exhibit
2.03(a)(ii)
|
|
“Initial
Earn-Out Settlement Date”
|
Exhibit
2.03(a)(ii)
|
|
“Initial
Payment”
|
Exhibit
2.03(a)(i)
|
|
“Initial
Payment Settlement Date”
|
Exhibit
2.03(a)(i)
|
|
“Litigation
Losses”
|
3.15
|
|
“Loss”
|
9.02
|
|
“Material
Contracts”
|
3.18(a)
|
|
“MCWCPs”
|
5.09(b)
|
|
“Merger”
|
5.19
|
|
“New
ASO Client”
|
Exhibit
2.03(a)(iv)
|
|
“New
ASO Client Employee”
|
Exhibit
2.03(a)(iv)
|
|
“New
ASO Client Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“New
Client”
|
Exhibit
2.03(a)(iv)
|
|
“New
Client Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“New
Client WSEE”
|
Exhibit
2.03(a)(iv)
|
|
“Non-PEO
Business Affiliate”
|
5.09(b)
|
|
“Permits”
|
3.07(b)
|
|
“Plans”
|
3.27(a)
|
|
“Purchaser”
|
Preamble
|
|
“Purchaser
Indemnified Party”
|
9.02
|
|
“Quarterly
Acceleration Payment”
|
Exhibit
2.08(b)
|
|
“Quarterly
Acceleration Settlement Date”
|
Exhibit
2.08(b)
|
|
“Quarterly
Acceleration Statement”
|
Exhibit
2.08(b)
|
|
“Quarterly
Acceleration Statement Date”
|
Exhibit
2.08(b)
|
|
“Quarterly
Acceleration Transferred ASO Closing Employees”
|
Exhibit
2.08(b)
|
|
“Quarterly
Acceleration Transferred WSEEs”
|
Exhibit
2.08(b)
|
|
“Quarterly
Earn-Out Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Quarterly
Earn-Out Settlement Date”
|
Exhibit
2.03(a)(iv)
|
|
“Reference
Balance Sheet”
|
2.07(a)
|
|
“Reference
NWC”
|
2.07(a)
|
|
“Restricted
Period”
|
5.08
|
|
“Reviewing
Accountants”
|
2.07(c)(i)
|
|
“Selective
Agent”
|
Exhibit
2.03(a)(iv)
|
|
“Seller”
|
Preamble
|
|
“Seller
Indemnified Party”
|
9.03
|
|
“Seller
Marks”
|
5.07
|
|
“Set-Off
Excess Amount”
|
9.06
|
14
Definition
|
Location
|
|
“Share
Purchase”
|
2.04
|
|
“Shortfall
Amount”
|
2.07(d)
|
|
“SHRS-II”
|
Recitals
|
|
“SHRS-III”
|
Recitals
|
|
“SHRS-IV”
|
Recitals
|
|
“SHRS-IX”
|
Recitals
|
|
“SHRS-LLC”
|
Recitals
|
|
“SHRS-V”
|
Recitals
|
|
“SHRS-VI”
|
Recitals
|
|
“SHRS-VII”
|
Recitals
|
|
“SHRS-VIII”
|
Recitals
|
|
“SHRS-X”
|
Recitals
|
|
“SHRS-XI”
|
Recitals
|
|
“SHRS-XII”
|
Recitals
|
|
“Statement
of Objection”
|
2.03(b)
|
|
“Subsequent
Payment”
|
2.03(a)(iii)
|
|
“Systems-V”
|
Recitals
|
|
“Tangible
Personal Property”
|
3.22(a)
|
|
“Terminated
Employee”
|
6.01
|
|
“Third
Party Claim”
|
9.05(b)
|
|
“Transferred
ASO Quarterly Payment”
|
Exhibit
2.03(a)(iv)
|
|
“Transferred
ASO Acceleration”
|
Exhibit
2.08(b)
|
|
“Transferred
ASO Acceleration Employees”
|
Exhibit
2.08(b)
|
|
“Transferred
ASO Acceleration Payment”
|
Exhibit
2.08(b)
|
|
“Wind-down
Period”
|
5.07
|
SECTION
1.03 Interpretation and Rules of
Construction. In
this Agreement, except to the extent otherwise provided or that the context
otherwise requires:
(a) when
a reference is made in this Agreement to an Article, Section, Exhibit or
Schedule, such reference is to an Article or Section of, or a Schedule or
Exhibit to, this Agreement unless otherwise indicated;
(b) the
table of contents and headings for this Agreement are for reference purposes
only and do not affect in any way the meaning or interpretation of this
Agreement;
(c) whenever
the words “include,” “includes” or “including” are used in this Agreement, they
are deemed to be followed by the words “without limitation”;
(d) the
words “hereof,” “herein” and “hereunder” and words of similar import, when used
in this Agreement, refer to this Agreement as a whole and not to any particular
provision of this Agreement;
(e) all
terms defined in this Agreement have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto, unless
otherwise defined therein;
15
(f) the
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms;
(g) references
to a Person are also to its successors and permitted assigns; and
(h) the
use of “or” is not intended to be exclusive unless expressly indicated
otherwise.
ARTICLE
II
PURCHASE AND
SALE
SECTION
2.01 Purchase and Sale of the
Business. Upon
the terms and subject to the conditions of this Agreement, at the Closing, the
Seller shall purchase the Business as a going concern as set forth in this Section
2.01.
(a) Purchase and Sale of
Assets. First, upon the terms and subject to the conditions of
this Agreement, at the Closing, the Company Subsidiaries shall, and the Seller
shall cause the Company Subsidiaries to, sell, assign, transfer, convey and
deliver, or cause to be sold, assigned, transferred, conveyed and delivered, to
the Purchaser, by and through the Acquiring Subsidiaries, and the Purchaser, by
and through the Acquiring Subsidiaries, shall purchase from the Company
Subsidiaries, the Purchased Assets. It is acknowledged and agreed
that the Purchaser shall determine in its sole discretion prior to the Closing
Date to which Acquiring Subsidiary each Purchased Asset shall be sold, and such
determination shall be reflected in the Assignment of Intellectual Property,
Assumption Agreement, Xxxx of Sale and Assignment or Client Assignment and
Consent Agreement, as applicable.
(b) Purchase and Sale of the
Shares. Second, upon the terms and subject to the conditions
of this Agreement, at the Closing, the Seller shall sell, assign, transfer,
convey and deliver, or cause to be sold, assigned, transferred, conveyed and
delivered, to the Purchaser, by and through Alpha, the Shares, and the
Purchaser, by and through Alpha, shall purchase the Shares.
SECTION
2.02 Assumption of
Liabilities. Upon
the terms and subject to the conditions of this Agreement, at the Closing, the
Purchaser shall assume and shall agree to pay, perform and discharge all
Liabilities of the Company Subsidiaries (the “Assumed
Liabilities”).
SECTION
2.03 Purchase Price; Allocation
of Purchase Price. (a)
Subject to the adjustments set forth in Section 2.07, the
Purchase Price acceleration provisions set forth in Section 2.08 and the
set-off provisions set forth in Section 9.06, the
Purchaser shall pay the Purchase Price for the Shares, the Purchased Assets and
the covenants contained in Section
5.08. The Purchaser shall deduct from the Purchase Price
(including any amounts payable under Section 2.07) any
amounts required to be withheld and deducted under the Code or other applicable
Tax Law. Any amounts so deducted shall be remitted by the Purchaser
to the appropriate Governmental Authority on a timely basis and such deducted
amounts shall be treated for all purposes of this Agreement as having been paid
to the Seller. The Purchaser shall make payment on account of the
Purchase Price as follows:
16
(i) Initial
Payment
(A) On
the Closing Date, the Purchaser shall pay to the Seller the Estimated Initial
Payment, as set forth on Exhibit 2.03(a)(i);
provided, however, that in the event
that the Closing Date is not a Business Day, the Purchaser shall deliver, no
later than two Business Days prior to the Closing Date, the Estimated Initial
Payment to the Escrow Account to be held in escrow by the Escrow Agent until the
Closing. If the Estimated Initial Payment has been delivered by the
Purchaser to the Escrow Account to be held in escrow by the Escrow Agent and,
for any reason, including by fault of the Purchaser, the Closing does not occur
on the Closing Date, the Escrow Agent shall, subject to the terms and conditions
set forth in the Escrow Agreement, return the Estimated Initial Payment to the
Purchaser, including any proceeds thereof, on the first Business Day following
the Closing Date.
(B) The
Purchaser shall pay to the Seller the Initial Payment, less the Estimated
Initial Payment, on the Initial Payment Date, as set forth on Exhibit 2.03(a)(i);
provided, however, that in the event
the Estimated Initial Payment is greater than the Initial Payment, the Seller
shall instead pay to the Purchaser on the Initial Payment Date an amount equal
to the difference between the Estimated Initial Payment and the Initial
Payment.
(ii) The
Purchaser shall pay to the Seller the Initial Earn-Out Payment on the Initial
Earn-Out Payment Date, as set forth on Exhibit 2.03(a)(ii).
(iii) The
Purchaser shall pay to the Seller an Annual Payment on the one-year anniversary
of the Closing Date, or, if such date is not a Business Day, the first Business
Day following such date, and on each of the succeeding nine anniversaries of the
Closing Date, or, if any such date is not a Business Day, the first Business Day
following such date (each such date an “Annual Payment Date”
and such ten Annual Payments, collectively, the “Subsequent
Payment”).
(iv) The
Purchaser shall pay to the Seller the Quarterly Earn-Out Payment for each
Quarterly Earn-Out Period on the respective Quarterly Earn-Out Payment Date for
such Quarterly Earn-Out Period, as set forth on Exhibit 2.03(a)(iv);
provided, however, that in the event
that the Purchaser pays the Change of Control Quarterly Payment, the Purchaser
shall offset all subsequent payments of the Quarterly Earn-Out Payment against
such Change of Control Quarterly Payment until the aggregate amount of such
offsets is equal to the Change of Control Quarterly Payment.
(v) All
payments made pursuant to this Section 2.03 shall be
made by wire transfer of immediately available funds. Except as set
forth in Section
2.03(a)(i)(A), all payments made by the Purchaser to the Seller pursuant
to this Section
2.03 shall be made to the Purchase Price Bank Account. All
payments made by the Seller to the Purchaser pursuant to this Section 2.03 shall be
made to an account designated in writing by the Purchaser.
17
(b) The
sum of the Purchase Price and the Assumed Liabilities shall be allocated among
the Shares, the Purchased Assets and the covenants contained in Section 5.08 as of
the Closing in a manner reasonably determined in good faith by the Purchaser and
the Seller prior to the Closing Date and set forth in writing (the “Allocation”); provided, however, that, if the
Purchaser and Seller are unable to agree on the Allocation prior to December 11,
2009, either the Purchaser or the Seller may elect to have the Allocation
determined by the Reviewing Accountants, the fees of which shall be borne evenly
between the Purchaser and the Seller. Any subsequent adjustments to
the sum of the Purchase Price and Assumed Liabilities shall be reflected in the
Allocation in a manner consistent with Section 1060 of the Code and the
Regulations thereunder. For all Tax purposes, the Purchaser and the
Seller agree that the transactions contemplated in this Agreement shall be
reported in a manner consistent with the terms of this Agreement, including the
Allocation, and that none of them will take any position inconsistent therewith
in any Tax Return, in any refund claim, in any litigation, or
otherwise. Each of the Seller and the Purchaser agrees to cooperate
with the other in preparing IRS Form 8594, and to furnish the other with a copy
of such Form prepared in draft form within a reasonable period before its filing
due date.
SECTION
2.04 Closing. Subject
to the terms and conditions of this Agreement, the sale and purchase of the
Shares and the Purchased Assets and the assumption of the Assumed Liabilities
contemplated by this Agreement shall take place at a closing (the “Closing”) to be held
at the offices of Xxxxxxxxx Traurig, P.A., 0000 Xxxxxxxx Xxxxxx, Xxxxx, Xxxxxxx
00000 beginning at 12:00 A.M. Miami time (the “Closing Time”) on a
date to be specified by the Seller and the Purchaser, which date shall not be
later than the fifth Business Day following the satisfaction or waiver (to the
extent permitted by Law) of all of the conditions to Closing set forth in Article VIII of this
Agreement (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver (to the extent
permitted by Law) of those conditions), or at such other place, date and time as
shall be agreed upon in writing by the parties hereto. The date on
which the Closing takes place shall be referred to herein as the “Closing
Date”. The parties hereto acknowledge and agree that the
Closing Date shall be January 1, 2010, subject to the satisfaction or, to the
extent permitted by applicable Law, waiver of the conditions thereto, unless the
Seller shall have elected to extend the Outside Date, as provided in Section
10.01(a)(i). At the Closing, the closing of the sale and
purchase of the Purchased Assets and the assumption of the Assumed Liabilities
contemplated by this Agreement shall occur at 12:01 A.M. Miami time on the
Closing Date, the closing of the Merger shall occur at 12:02 A.M. Miami time on
the Closing Date and the sale and purchase of the Shares contemplated by this
Agreement (the “Share
Purchase”) shall occur at 12:03 A.M. Miami time on the Closing Date,
unless otherwise mutually agreed upon in writing by the Seller and the
Purchaser.
SECTION
2.05 Closing Deliveries by the
Seller. At
the Closing, the Seller shall deliver or cause the Company or the Company
Subsidiaries to deliver to the Purchaser:
(a) an
executed instrument of assignment of limited liability company interests, in
form reasonably satisfactory to the Purchaser, evidencing the transfer of the
Shares;
(b) the
Xxxx of Sale, Assignment of Intellectual Property and Client
Assignments;
18
(c) executed
counterparts of the Assumption Agreement;
(d) executed
counterparts of each Ancillary Agreement to which the Seller, the Company or a
Company Subsidiary is a party other than the Ancillary Agreements delivered
pursuant to Section
2.05(b) and (c);
(e) a
true and complete copy, certified by the Secretary or an Assistant Secretary of
the Seller, of the resolutions duly and validly adopted by the Board of
Directors of the Seller evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements to which the Seller is a
party and the consummation of the transactions contemplated hereby and
thereby;
(f) a
true and complete copy, certified by the Secretary or an Assistant Secretary of
the Company, of the resolutions duly and validly adopted by the Board of
Directors of the Company evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements to which the Company is
a party and the consummation of the transactions contemplated hereby and
thereby;
(g) true
and complete copies, certified by the Secretary or an Assistant Secretary of
each Company Subsidiary, of the resolutions duly and validly adopted by the
Board of Directors of such Company Subsidiary evidencing its authorization of
the execution and delivery of this Agreement and the Ancillary Agreements to
which such Company Subsidiary is a party and the consummation of the
transactions contemplated hereby and thereby;
(h) a
certificate of the Secretary or an Assistant Secretary of the Seller certifying
the names and signatures of the officers of the Seller authorized to sign this
Agreement and the Ancillary Agreements and the other documents to be delivered
hereunder and thereunder;
(i)
a certificate of the Secretary or an Assistant Secretary of the
Company certifying the names and signatures of the officers of the Company
authorized to sign this Agreement and the Ancillary Agreements and the other
documents to be delivered hereunder and thereunder;
(j)
a certificate of the Secretary or an Assistant Secretary of each
Company Subsidiary certifying the names and signatures of the officers of such
Company Subsidiary authorized to sign this Agreement and the Ancillary
Agreements and the other documents to be delivered hereunder and
thereunder;
(k) a
certificate of a duly authorized officer of the Seller certifying as to the
matters set forth in Section
8.02(a);
(l)
the resignations, effective as of the Closing, of all of the
directors and officers of the Company, except for such persons as shall have
been designated in writing prior to the Closing by the Purchaser to the Seller
(and approved by the Seller);
19
(m) a
copy of (i) the Articles of Incorporation, as amended (or similar organizational
documents), of the Company, certified by the Secretary of State of the
jurisdiction in which such entity is incorporated or organized, as of a date not
earlier than ten Business Days prior to the Closing and accompanied by a
certificate of the Secretary or Assistant Secretary of such entity, dated as of
the Closing, stating that no amendments have been made to such Articles of
Incorporation (or similar organizational documents) since such date, and (ii)
the By-laws (or similar organizational documents) of the Company, certified by
the Secretary or Assistant Secretary of such entity;
(n)
a certificate of non-foreign status executed by the Seller (in a
form reasonably acceptable to the Purchaser) pursuant to Section 1.1445-2(b)(2)
of the Regulations;
(o) good
standing certificates for the Company and for each Company Subsidiary from the
Secretary of State of the jurisdiction in which case such entity is incorporated
or organized, in each case dated as of a date not earlier than ten Business Days
prior to the Closing;
(p)
a schedule of all SHRS Clients as of no earlier than three Business
Days prior to the Closing Date with an indication of those SHRS Clients that
have executed a Client Assignment as of such date;
(q)
evidence, reasonably satisfactory to the Purchaser, of receipt of
those consents set forth in Section 8.02(c) of
the Disclosure Letter;
(r)
evidence, reasonably satisfactory to the Purchaser, of the
termination or amendment of the Excluded Contracts;
(s)
evidence, reasonably satisfactory to the Purchaser, that the
Merger will become effective at 12:02 A.M. on the Closing Date;
(t)
evidence, reasonably satisfactory to the Purchaser, of the
Conversion;
(u)
such documents and information as the Purchaser may reasonably
request to transfer control of the Bank Accounts to the Purchaser;
(v)
evidence, reasonably satisfactory to the Purchaser, that the
Seller has taken the actions set forth in Section
6.01;
(w)
the general release and discharge from the Seller in form attached hereto
as Exhibit
5.10; and
(x) all
original corporate books and records of the Company and the Company Subsidiaries
that are not present at the Leased Real Property.
SECTION
2.06 Closing Deliveries by the
Purchaser. At
the Closing, the Purchaser shall deliver to the Seller:
(a) the
Estimated Initial Payment;
20
(b) executed
counterparts of the Assumption Agreement and the Assignment of Intellectual
Property;
(c) executed
counterparts of each Ancillary Agreement (other than the Ancillary Agreements
delivered pursuant to Section 2.06(b)) to
which the Purchaser is a party;
(d) a
true and complete copy, certified by the Secretary or an Assistant Secretary of
the Purchaser, of the resolutions duly and validly adopted by the Board of
Directors of the Purchaser evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements to which it is a party
and the consummation of the transactions contemplated hereby and
thereby;
(e) true
and complete copies, certified by the Secretary or an Assistant Secretary of
Alpha and the Acquiring Subsidiaries, of the resolutions duly and validly
adopted by the Board of Directors of each of Alpha and the Acquiring
Subsidiaries evidencing its authorization of the execution and delivery of this
Agreement and the Ancillary Agreements to which such Entity is a party and the
consummation of the transactions contemplated hereby and thereby;
(f) a
certificate of the Secretary or an Assistant Secretary of the Purchaser
certifying the names and signatures of the officers of the Purchaser authorized
to sign this Agreement and the other documents to be delivered
hereunder;
(g) a
certificate of the Secretary or an Assistant Secretary of Alpha and the
Acquiring Subsidiaries certifying the names and signatures of the officers of
Alpha and the Acquiring Subsidiaries authorized to sign this Agreement and the
other documents to be delivered hereunder; and
(h) a
certificate of a duly authorized officer of the Purchaser certifying as to the
matters set forth in Section
8.01(a).
SECTION
2.07 Post-Closing Adjustment of
Purchase Price. The
Purchase Price shall be subject to adjustment after the Closing as specified in
this Section
2.07:
(a) Reference Balance
Sheet. Attached hereto as Exhibit 2.07(a) is
the unaudited consolidated balance sheet of the Company and the Company
Subsidiaries as of July 31, 2009 (the “Reference Balance
Sheet”) and the calculation of the Net Working Capital as of July 31,
2009 calculated in reference thereto (the “Reference
NWC”).
(b) As
promptly as practicable, but in any event within the earlier of (i) 90 calendar
days following the Closing Date or (ii) 10 calendar days following the
completion of the audit of the Company for the fiscal year ending December 31,
2009, the Purchaser shall deliver to the Seller an unaudited consolidated
balance sheet of the Company and Company Subsidiaries as of 11:59 p.m. on the
date immediately preceding the Closing Date (the “Closing Balance
Sheet”) and a calculation of Net Working Capital based on such Closing
Balance Sheet. The Closing Balance Sheet shall be prepared in
accordance with GAAP and in a manner consistent with that used to prepare the
Reference Balance Sheet and the Net Working Capital shall be calculated in the
same manner as was used to calculate the Reference NWC; provided, however, that if there is a
conflict between GAAP and the manner in which the Reference Balance Sheet was
prepared, GAAP will nonetheless be applied in the preparation of the Closing
Balance Sheet. Unless within 15 calendar days after its receipt of
the Closing Balance Sheet, the Seller shall deliver to the Purchaser a statement
describing its objections to the Closing Balance Sheet (a “Statement of
Objection”), the Net Working Capital as set forth on the Closing Balance
Sheet shall be final and binding on the parties hereto and the Closing Balance
Sheet shall be the final Closing Date Statement hereunder.
21
(c) Disputes.
(i) If
the Seller shall deliver to the Purchaser a timely Statement of Objection, the
Seller and the Purchaser and their respective independent accountants shall
negotiate in good faith and use commercially reasonable efforts to resolve any
dispute. If a resolution is reached, such resolution shall be final
and binding on the parties and the Net Working Capital shall be set forth on a
mutually acceptable statement and such statement shall be the Closing Date
Statement. If a final resolution is not reached within 30 days after
the Seller has submitted its Statement of Objection, any remaining disputes
shall be resolved by Ernst & Young LLP or such other independent accounting
firm of national reputation as may be mutually acceptable to the Seller and the
Purchaser (the “Reviewing
Accountants”). The Reviewing Accountants shall be instructed
to review this Agreement and the disputed items or amounts for the purpose of
calculating Net Working Capital (it being understood that in making such
calculation, the Reviewing Accountants shall be functioning as an expert and not
as an arbitrator). In making such calculation, the Reviewing
Accountants shall consider only those items or amounts in the Closing Balance
Sheet and the Purchaser’s calculation of Net Working Capital as to which the
Seller has disagreed. The Reviewing Accountants’ determination of any
disputed items or amounts and the calculation of Net Working Capital shall be
within the range of the amount thereof shown in the Closing Balance Sheet and
the amount shown in the Statement of Objection. The Reviewing
Accountants shall deliver to the Purchaser and the Seller, as promptly as
practicable (but in any case no later than 30 days from the date of engagement
of the Reviewing Accountants), a statement (the “Accountant
Statement”) setting forth such calculation of Net Working
Capital. Such statement shall be final, binding and conclusive upon
the Purchaser and the Seller, and the Accountant Statement shall be the Closing
Date Statement.
(ii) The
fees and expenses of the Reviewing Accountants shall be borne by the Purchaser
and the Seller in inverse proportion as they may prevail on matters resolved by
the Reviewing Accountants, and such proportionate allocation shall also be
determined by the Reviewing Accountants when their determination is rendered on
the merits of the matter submitted. For illustration purposes only,
(i) if the total amount of disputed items by the Seller is $100,000 and the
Purchaser is awarded $50,000 by the Reviewing Accountants, then the Seller and
the Purchaser shall bear the Reviewing Accountants’ fees and expenses equally;
or (ii) if the total amount of disputed items by the Seller is $100,000 and
the Purchaser is awarded $75,000 by the Reviewing Accountants, then the
Purchaser shall bear 25% and the Seller shall bear 75% of the Reviewing
Accountants’ fees and expenses. The Seller and the Purchaser shall
cooperate with each other and any Reviewing Accountants in connection with the
matters contemplated by this Section 2.07, in each
case including by furnishing such information and access to books, records
(including accountants’ work papers), personnel and properties as may be
reasonably requested.
22
(iii) In
acting under this Agreement, the Reviewing Accountants shall be entitled to the
privileges and immunities of arbitrators, but shall not otherwise be deemed to
be arbitrators for purposes of this Agreement or any other purpose.
(d) Purchase Price
Adjustment. If the Net Working Capital shown on the Closing
Date Statement is greater than the Target NWC (the value of such excess, the
“Excess
Amount”), the Purchaser shall promptly, and in any case within five
Business Days after the date that the Closing Date Statement becomes final, pay
to the Seller the Excess Amount. If the Net Working Capital shown on
the Closing Date Statement is less than the Target NWC (the absolute value of
such shortfall, the “Shortfall Amount”),
the Seller shall promptly, and in any case within five Business Days after the
date that the Closing Date Statement becomes final, pay to the Purchaser the
Shortfall Amount.
SECTION
2.08 Purchase Price
Acceleration. (a)
At any time following the one-year anniversary of the Closing Date, the
Purchaser may, in its sole discretion, pay in full the remaining Annual Payments
to be paid pursuant to Section 2.03(a)(iii)
by paying to the Seller the Annual Acceleration Payment on the Annual
Acceleration Payment Date, as set forth on Exhibit 2.08(a).
(b) At
any time following the one-year anniversary of the Closing Date, the Purchaser
may, in its sole discretion, pay in full that portion of the remaining Quarterly
Earn-Out Payments to be paid pursuant to Section 2.03(a)(iv)
relating to Existing Client WSEEs and Transferred ASO Employees, by paying to
the Seller the Quarterly Acceleration Payment on the Quarterly Acceleration
Payment Date, as set forth on Exhibit 2.08(b).
(c) For
the avoidance of doubt, the Purchaser shall not be entitled to accelerate the
New Client Quarterly Payments or the Common Client Quarterly Payments, and the
Purchaser shall be obligated to continue to make such payments in accordance
with Section
2.03(a)(iv) notwithstanding any acceleration under Sections 2.08(a) and
(b) above.
(d) In
the event that after the Closing Date (A) there occurs a Change of Control of
the Purchaser or (B) the Purchaser, the Company or the Company Subsidiaries make
a general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Purchaser or any Subsidiary of the Purchaser
conducting a PEO Business and insured by the Seller’s insurance company
Subsidiaries or Affiliates seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization, the Seller may, in either
case in its sole discretion, upon notice to the Purchaser (such notice, the
“Acceleration
Notice”), elect to have paid in full by the Purchaser (i) the remaining
Annual Payments to be paid pursuant to Section 2.03(a)(iii)
by payment to the Seller of the Annual Acceleration Payment on the Annual
Acceleration Payment Date as set forth on Exhibit 2.08(a)
(provided that for
purposes of this Section 2.08(d), the
Purchaser shall deliver the Annual Acceleration Statement to the Seller within 5
Business Days of receipt of the Acceleration Notice) and (ii) the Change of
Control Quarterly Payment, provided, however, that if the
Quarterly Acceleration Payment payable if the date of receipt of the
Acceleration Notice were the Quarterly Acceleration Payment Date is less than
$500,000, then the Purchaser shall pay to the Seller an amount equal to
Quarterly Acceleration Payment in full satisfaction of the payment required by
clause (ii) above.
23
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES
OF THE
SELLER
As an
inducement to the Purchaser to enter into this Agreement, except as set forth in
the Disclosure Letter (it being understood that: (i) the Disclosure Letter has
been arranged for purposes of convenience in separately titled sections
corresponding to the Sections of this Article III; (ii) each section of the
Disclosure Letter shall be deemed to incorporate by reference all information
disclosed in any other section of the Disclosure Letter to the extent it is
reasonably apparent on its face that such information is relevant to such other
section of the Disclosure Letter; and (iii) capitalized terms used in the
Disclosure Letter and not otherwise defined therein shall have the meanings
given to them in this Agreement), the Seller hereby represents to the Purchaser
as follows:
SECTION
3.01 Organization, Authority and
Qualification of the Seller. The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all necessary
power and authority to enter into this Agreement and the Ancillary Agreements,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Seller is duly
licensed or qualified to do business and is in good standing in each
jurisdiction which the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary, except to the extent
that the failure to be so licensed or qualified and in good standing would not
(a) adversely affect the ability of the Seller to carry out its obligations
under, and to consummate the transactions contemplated by, this Agreement and
the Ancillary Agreements or (b) adversely affect the ability of the Seller,
the Company and the Subsidiaries to conduct the Business. The
execution and delivery of this Agreement and the Ancillary Agreements by the
Seller, the performance by the Seller of its obligations hereunder and
thereunder and the consummation by the Seller of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part
of the Seller and its stockholders. This Agreement has been, and upon
their execution the Ancillary Agreements shall have been, duly executed and
delivered by the Seller, and (assuming due authorization, execution and delivery
by the Purchaser) this Agreement constitutes, and upon their execution the
Ancillary Agreements shall constitute, legal, valid and binding obligations of
the Seller, enforceable against the Seller in accordance with their respective
terms, except that (i) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now
or hereafter in effect, relating to or limiting creditors’ rights generally and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
24
SECTION
3.02 Organization, Authority and
Qualification of the Company. (a) As
of the date hereof, the Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. As of the Closing Date, the Company will be a limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. The Company has all
necessary power and authority to own, operate or lease the properties and assets
now owned, operated or leased by it and to carry on its business substantially
as it is currently conducted. Except as would not reasonably be
expected to have a Material Adverse Effect, the Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary or desirable. True and correct
copies of the Articles of Incorporation and By-laws of the Company, each as in
effect on the date hereof, have been delivered by the Seller to the
Purchaser.
(b) The
execution by the Company of this Agreement and each Ancillary Agreement to which
it is a party has been duly authorized by all requisite action on the part of
the Company and its stockholders.
SECTION
3.03 Subsidiaries. (a)
Section 3.03(a)
of the Disclosure Letter sets forth a true and complete list of all Subsidiaries
of the Company, listing for each Subsidiary its name, type of entity and the
jurisdiction and date of its incorporation or organization.
(b) Other
than the Company Subsidiaries, there are no other Entities in which the Company
or any Company Subsidiary owns, of record or beneficially, any direct or
indirect equity or other interest or any right (contingent or otherwise) to
acquire the same. Other than the Company Subsidiaries, neither the
Company nor any Company Subsidiary is a member of (nor is any part of the
Business conducted through) any partnership nor is the Company or any Company
Subsidiary a participant in any joint venture or similar
arrangement.
(c) Each
Company Subsidiary that is a corporation: (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all necessary power and authority to
own, operate or lease the material properties and assets now owned, operated or
leased by such Company Subsidiary and to carry on its business substantially as
it is currently conducted by such Company Subsidiary and (iii) except as would
not reasonably be expected to have a Material Adverse Effect, is duly licensed
or qualified to do business and is in good standing in each jurisdiction in the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary or desirable. Each Company
Subsidiary that is not a corporation: (i) is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, (ii) has all necessary power and authority to own, operate or
lease the material properties and assets now owned, operated or leased by such
Company Subsidiary and to carry on its business substantially as it is currently
conducted by such Company Subsidiary and (iii) except as would not
reasonably be expected to have a Material Adverse Effect, is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary or desirable.
25
(d) The
execution by each Company Subsidiary of this Agreement and each Ancillary
Agreement to which it is a party has been duly authorized by all requisite
action on the part of such Company Subsidiary.
(e) True
and complete copies of the certificate of incorporation and by-laws (or similar
organizational documents), in each case as in effect on the date hereof, of each
Company Subsidiary have been delivered by the Seller to the
Purchaser.
SECTION
3.04 Capitalization. (a)
As of the date hereof, the authorized capital stock of the Company consists of
5,000,000 shares of Common Stock, 1,000,000 shares of which are issued and
outstanding, all of which are validly issued, fully paid and
nonassessable. None of the issued and outstanding shares of Common
Stock was issued in violation of any preemptive rights. There are no
options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating to the Shares or
obligating either the Seller or the Company to issue or sell any Shares, or any
other interest in, the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of Common Stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person. The
Shares constitute all of the issued and outstanding capital stock or membership
interests, as the case may be, of the Company and are owned of record and
beneficially by the Seller free and clear of all Encumbrances. Upon
consummation of the transactions contemplated by this Agreement, the Purchaser
will own all the issued and outstanding equity interests of the Company free and
clear of all Encumbrances. There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect
to the voting or transfer of any of the Shares.
(b) All
the outstanding shares of capital stock or other equity interests of each
Company Subsidiary are validly issued and free of preemptive rights and are
owned by the Company, whether directly or indirectly, free and clear of all
Encumbrances. All the outstanding shares of capital stock of each
Company Subsidiary that is a corporation are fully paid and
nonassessable. There are no options, warrants, convertible securities
or other rights, agreements, arrangements or commitments of any character
relating to the capital stock of any Company Subsidiary or obligating the
Seller, the Company or any Company Subsidiary to issue or sell any shares of
capital stock of, or any other interest in, any Company
Subsidiary. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any shares of capital stock of or any other interests in
any Company Subsidiary.
SECTION
3.05 Corporate Books and
Records. Complete
and accurate copies of the minute books of the Company and each Company
Subsidiary have been provided by the Seller to the Purchaser.
26
SECTION
3.06 No
Conflict. Assuming
that all consents, approvals, authorizations and other actions described in
Section 3.07
have been obtained, the execution, delivery and performance of this Agreement
and the Ancillary Agreements by the Seller do not and will not (a) violate,
conflict with or result in the breach of any provision of the certificate of
incorporation or by-laws (or similar organizational documents) of the Seller,
the Company or any Company Subsidiary, (b) conflict with or violate in any
material respect (or cause an event which would reasonably be expected to have a
Material Adverse Effect as a result of) any Law or Governmental Order applicable
to the Seller, the Company, any Company Subsidiary or any of their respective
assets, properties or businesses including the Business, or (c) conflict in any
material respect with, result in a material breach of, constitute a material
default (or event which with the giving of notice or lapse of time, or both,
would become a material default) under, require any material consent under, or
give to others any material rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
material Encumbrance on any of the Shares or any of the Assets pursuant to, any
note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Seller, the Company or any Company Subsidiary is a party or by which any of the
Shares or any of such assets or properties is bound or affected, except, in the
case of clause (c), to the extent that such conflicts, breaches, defaults or
other matters would not (i) adversely affect the ability of the Seller to carry
out its obligations under, and to consummate the transactions contemplated by,
this Agreement and the Ancillary Agreements or (ii) adversely affect the ability
of the Seller, the Company and the Subsidiaries to conduct the
Business.
SECTION
3.07 Governmental Consents and
Approvals. (a) The
execution, delivery and performance of this Agreement and each Ancillary
Agreement by the Seller do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to, any
Governmental Authority, except as described in Section 3.07(a) of
the Disclosure Letter. To the Knowledge of the Seller, there is no
reason why all the consents, approvals and authorizations necessary for the
consummation of the transactions contemplated by this Agreement will not be
received.
(b) Section 3.07(b) of
the Disclosure Letter sets forth a true and complete list of all material
permits, licenses, franchises, approvals, certificates, consents, waivers,
concessions, exemptions, orders, registrations, notices or other authorizations
of any Governmental Authority necessary for each of the Company and the Company
Subsidiaries to own, lease and operate its properties and to carry on the
Business in all material respects as currently conducted (the “Permits”). Each
of the Company and the Company Subsidiaries is and has been in compliance in all
material respects with all Permits required to be set forth in Section 3.07(b) of
the Disclosure Letter. No suspension, cancellation, modification,
revocation or nonrenewal of any Permit is pending or, to the Knowledge of the
Seller, threatened, except as set forth on Section 3.07(b) of
the Disclosure Letter. To the Knowledge of the Seller, no Permit is
held in the name of any employee, officer, director, stockholder, agent or
otherwise on behalf of the Company or any of the Company
Subsidiaries.
SECTION
3.08 ESAC
Accreditation. The
Company (a) is accredited pursuant to the accreditation program for professional
employer organizations maintained by the Employer Services Assurance Corporation
and has been so accredited since May 31, 2000, and (b) is in good standing
pursuant to such program.
SECTION
3.09 Common
Ownership. Neither
the Seller, the Company nor any Company Subsidiary has any ownership, management
or control for purposes of Section 443.131 of the Florida Statutes of or over
the Purchaser and its Subsidiaries.
27
SECTION
3.10 Financial Information; Books
and Records. True
and complete copies of (i) the Reference Balance Sheet and (ii) the audited
consolidated balance sheet of the Company for each of the three fiscal years
ended as of December 31, 2008, 2007 and 2006, and the related audited
consolidated statements of income, retained earnings, stockholders’ equity and
changes in financial position of the Company, together with all related notes
and schedules thereto, accompanied by the reports thereon of the Seller’s
Accountants (collectively referred to herein as the “Financial
Statements”) have been delivered by the Seller to the
Purchaser. The Reference Balance Sheet (i) was prepared in
accordance with the books of account and other financial records of the Seller,
the Company and the Company Subsidiaries, (ii) presents fairly, in all
material respects, the consolidated financial condition of the Company and the
Company Subsidiaries as of the date thereof, and (iii) has been prepared in
accordance with GAAP applied on a basis consistent with the past practices of
the Seller, the Company and the Company Subsidiaries. The Financial
Statements (i) were prepared in accordance with the books of account and
other financial records of the Seller, the Company and the Company Subsidiaries,
(ii) present fairly, in all material respects, the consolidated financial
condition and results of operations of the Company and the Subsidiaries as of
the dates thereof or for the periods covered thereby, and (iii) have been
prepared in accordance with GAAP applied on a basis consistent with the past
practices of the Seller, the Company and the Company Subsidiaries.
SECTION
3.11 Absence of Undisclosed
Liabilities. There
are no Liabilities of the Company or any Company Subsidiary of the variety
required to be disclosed in a balance sheet prepared in accordance with GAAP,
other than Liabilities (i) reflected or reserved against on the Reference
Balance Sheet, (ii) set forth in Section 3.11 of the
Disclosure Letter or (iii) incurred since the date of the Reference Balance
Sheet in the ordinary course of business, consistent with past practice, of the
Company and the Company Subsidiaries.
SECTION
3.12 Receivables. Section 3.12 of the
Disclosure Letter is an aged list of Receivables as of the Reference Statement
Date. Except to the extent, if any, reserved for on the Reference
Balance Sheet, all Receivables reflected on the Reference Balance Sheet arose
from, and the Receivables existing as of the Closing will have arisen from,
services to Persons not affiliated with the Seller, the Company or any Company
Subsidiary and in the ordinary course of business consistent with past practice
and, except as reserved against on the Reference Balance Sheet, constitute or
will constitute, as the case may be, valid claims of the Seller, the Company or
a Company Subsidiary not subject, to the Knowledge of the Seller, to valid
claims of setoff or other defenses or counterclaims other than normal cash
discounts accrued in the ordinary course of business consistent with past
practice. The bad debt reserve reflected on the Reference Balance
Sheet was established in accordance with GAAP.
SECTION
3.13 [Reserved].
SECTION
3.14 Conduct in the Ordinary
Course; Absence of Certain Changes, Events and Conditions. Except
as set forth in Section 3.14 of the
Disclosure Letter, from the Reference Statement Date to the date of this
Agreement, none of the Seller (only insofar as such actions relate to the
Business), the Company nor any Company Subsidiary has:
28
(a) permitted
or allowed any of the Assets to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that will be released at or prior to the
Closing;
(b) written
down or written up (or failed to write down or write up in accordance with GAAP
consistent with past practice) the value of any Receivables or revalued any of
the Assets other than in the ordinary course of business consistent with past
practice and in accordance with GAAP;
(c) made
any change in any method of accounting or accounting practice or policy used by
the Seller, the Company or any Company Subsidiary, other than such changes
required by GAAP and set forth in Section 3.14 of the
Disclosure Letter;
(d) amended,
terminated, cancelled or compromised any material claims of the Seller (related
to the Business), the Company or any Company Subsidiary or waived any other
rights of the Seller (related to the Business), the Company or any Company
Subsidiary with a reasonably anticipated value in excess of $25,000 individually
or $50,000 in the aggregate;
(e) sold,
transferred, leased, subleased, licensed or otherwise disposed of any properties
or assets, real, personal or mixed (including leasehold interests and intangible
property) for consideration in excess of $25,000 individually or $50,000 in the
aggregate other than in the ordinary course of business consistent with past
practice;
(f) issued
or sold any capital stock, notes, bonds or other securities, or any option,
warrant or other right to acquire the same, of the Company or any Company
Subsidiary;
(g) redeemed
any of the capital stock or declared, made or paid any dividends or
distributions (whether in cash, securities or other property) to the holders of
capital stock of the Company or any Company Subsidiary or otherwise, other than
dividends, distributions and redemptions declared, made or paid by any Company
Subsidiary solely to the Company or another Company Subsidiary;
(h) merged
with, entered into a consolidation with or acquired an interest of five percent
or more in any Person or acquired a substantial portion of the assets or
business of any Person or any division or line of business thereof, or otherwise
acquired any material assets other than in the ordinary course of business
consistent with past practice;
(i) made
any capital expenditure or commitment for any capital expenditure in excess of
$15,000 individually or $30,000 in the aggregate, except as contemplated by the
capital expenditure budget of the Company and the Company Subsidiaries
previously provided to the Purchaser;
(j) issued
any sales orders or otherwise agreed to make any purchases involving exchanges
in value in excess of $25,000 individually or $50,000 in the aggregate other
than in the ordinary course of business consistent with past
practice;
29
(k) made
any material changes in the customary methods of operations of the Seller, the
Company, any Company Subsidiary or the Business, including practices and
policies relating to marketing, selling and pricing;
(l) made,
revoked or changed any Tax election or method of Tax accounting, or settled or
compromised any liability with respect to Taxes of the Seller (relating to the
Business), the Company or any Company Subsidiary;
(m) filed
any claims for refunds related to unemployment insurance Taxes other than those
previously disclosed to the Purchaser;
(n) incurred
any Indebtedness in excess of $17,500 individually or $37,500 in the
aggregate;
(o) made
any loan to, guaranteed any Indebtedness of or otherwise incurred any
Indebtedness on behalf of any Person;
(p) failed
to pay any creditor any material amount owed to such creditor when
due;
(q) except
in the ordinary course of business or, in the case of clause (ii) below, as set
forth in Section
3.27(a) of the Disclosure Letter: (i) granted any increase, or announced
any increase, in the wages, salaries, compensation, bonuses, incentives, pension
or other benefits payable by the Seller, the Company or any Company Subsidiary
to any of its employees, including any increase or change pursuant to any Plan,
or (ii) established or increased or promised to increase any benefits under any
Plan, in either case except as required by Law;
(r) entered
into any agreement, arrangement or transaction with any of its directors,
officers, employees or stockholders (or with any relative, beneficiary, spouse
or Affiliate of such Persons);
(s) terminated,
discontinued, closed or disposed of any plant, facility or other business
operation, or laid off any employees (other than layoffs of less than 50
employees in any six-month period in the ordinary course of business consistent
with past practice) or implemented any early retirement, separation or program
providing early retirement window benefits within the meaning of Section
1.401(a)-4 of the Regulations or announced or planned any such action or program
for the future;
(t) allowed
any Permit or Environmental Permit that was issued or relates to the Seller, the
Company or any Company Subsidiary or otherwise relates to the Business to lapse
or terminate or failed to renew any insurance policy, Permit or Environmental
Permit that is scheduled to terminate or expire within 45 calendar days of the
Closing;
(u) suffered
any casualty loss or damage with respect to any of the Assets which in the
aggregate have a replacement cost of more than $25,000, whether or not such loss
or damage shall have been covered by insurance;
30
(v) amended,
modified or consented to the termination of any Material Contract or the
Seller’s, the Company’s or any Company Subsidiary’s rights
thereunder;
(w) amended
or restated the certificate of incorporation or By-laws (or other organizational
documents) of the Company or any Company Subsidiary;
(x) suffered
any Material Adverse Effect; or
(y) agreed,
whether in writing or otherwise, to take any of the actions specified in this
Section
3.14.
SECTION
3.15 Litigation. Except
as set forth in Section 3.15 of the
Disclosure Letter, there are no Actions by or against the Company or any Company
Subsidiary (or by or against the Seller or any Affiliate thereof and relating to
the Business, the Company or any Company Subsidiary) or affecting any of the
Assets or the Business pending before any Governmental Authority (or, to the
Knowledge of the Seller, threatened to be brought by or before any Governmental
Authority). None of the matters set forth in Section 3.15 of the
Disclosure Letter has or has had a Material Adverse Effect or would reasonably
be expected to result in this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby. All
Losses that the Company or any Company Subsidiary may suffer in respect of the
matters set forth in Section 3.15 of the
Disclosure Letter, “Litigation
Losses”. None of the Seller, the Company, the Company
Subsidiaries or any of their respective assets or properties, including the
Assets, is subject to any Governmental Order (nor, to the Knowledge of the
Seller, are there any such Governmental Orders threatened to be imposed by any
Governmental Authority) which has had or would reasonably be expected to have a
Material Adverse Effect or would reasonably be expected to affect the legality,
validity or enforceability of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby.
SECTION
3.16 Compliance with
Laws. (a)
The Seller, the Company and the Subsidiaries have each conducted, since January
1, 2005, and continue to conduct the Business in all material respects in
accordance with all Laws and Governmental Orders applicable to the Seller, the
Company or any Company Subsidiary or any of their properties or assets,
including the Assets, or the Business, and none of the Seller, the Company or
the Company Subsidiaries is in violation in any material respect of any such Law
or Governmental Order; provided, however, that the terms of
this Section
3.16 shall not apply to: (i) Environmental Laws, which are addressed in
Section 3.17
hereof; (ii) Laws regarding Intellectual Property, which are addressed in Section 3.20 hereof;
(iii) Laws regarding Real Property, which are addressed in Section 3.21 hereof;
(iv) Laws regarding employment and employment practices, which are addressed in
Sections 3.27 and
3.28 hereof, and (v) Tax Laws, which are addressed in Section 3.31
hereof.
(b) Section 3.16(b) of
the Disclosure Letter sets forth a brief description of each Governmental Order
applicable to the Seller (related to the Business), the Company, or any Company
Subsidiary or any of their material properties or assets, including the Assets,
or the Business, and no such Governmental Order has had or would reasonably be
expected to have a Material Adverse Effect or would reasonably be expected to
affect the legality, validity or enforceability of this Agreement, any Ancillary
Agreement or the consummation of the transactions contemplated hereby or
thereby.
31
(c) Since
January 1, 2007, the Company and each Company Subsidiary has, in all material
respects, properly remitted all unclaimed property in its possession, included
payroll checks, to the appropriate Governmental Authority pursuant to the
escheat provisions of applicable Law. Section 3.16(c) of
Disclosure Letter sets forth all unclaimed property currently held by the
Company and each Company Subsidiary and the date on which such property shall
escheat to the appropriate Governmental Authority.
SECTION
3.17 Environmental and Other
Permits and Licenses; Related Matters.
(a)
Except as set forth in Section 3.17 of the
Disclosure Letter or as would not reasonably be expected to have a Material
Adverse Effect:
(i) The
Seller (as it relates to the Business), the Company and each Company Subsidiary
is in compliance in all material respects with all applicable Environmental Laws
and all Environmental Permits.
(ii) Since
January 1, 2005, there has been no Release by the Seller, the Company or any
Company Subsidiary of any Hazardous Material on any of the Real Property or on
any property formerly owned, leased, used or occupied by the Seller, the Company
or any Company Subsidiary.
(iii) There
are no Environmental Claims pending or, to the Knowledge of Seller, threatened
against the Seller (relating to the Business), the Company or any Company
Subsidiary.
(b) Neither
the execution of this Agreement or the Ancillary Agreements nor the consummation
of the transactions contemplated hereby or thereby will require any Remedial
Action or notice to or consent of Governmental Authorities or third parties
pursuant to any applicable Environmental Law or Environmental
Permit.
(c) The
representations set forth in this Section 3.17 are the
sole and exclusive representations of the Seller relating to environmental
matters.
SECTION
3.18 Material
Contracts. (a)
Section 3.18(a)
of the Disclosure Letter lists each of the following contracts and agreements
(including oral agreements) of the Seller (relating to the Business), the
Company and the Company Subsidiaries (such contracts and agreements, together
with all leases and subleases listed or otherwise set forth in Section 3.21(b) of
the Disclosure Letter, customer contracts listed or otherwise set forth in Section 3.25 of the
Disclosure Letter, all Company IP Agreements and all contracts, agreements,
leases and subleases relating to Tangible Personal Property, being “Material
Contracts”):
(i) each
contract or agreement for the purchase of materials or personal property, with
any supplier or for the furnishing of services to the Seller (related to the
Business), the Company, any Company Subsidiary or otherwise related to the
Business under the terms of which the Seller, the Company or any Company
Subsidiary: (A) is likely to pay or otherwise give consideration
of more than $50,000 in the aggregate during the calendar year ended December
31, 2009, (B) is likely to pay or otherwise give consideration of more than
$50,000 in the aggregate over the remaining term of such contract or
(C) cannot be cancelled by the Seller, the Company or such Company
Subsidiary without penalty or further payment and without more than 30 days’
notice;
32
(ii)
each contract or agreement for the sale of personal property,
or for the furnishing of services by the Seller (relating to the Business), the
Company or any Company Subsidiary which: (A) is likely to
involve consideration of more than $25,000 in the aggregate over the remaining
term of the contract or (B) cannot be cancelled by the Seller, the Company
or such Company Subsidiary without penalty or further payment and without more
than 30 days’ notice; in each case other than customer contracts which are the
subject of Section
3.25;
(iii) all
broker, distributor, dealer, manufacturer’s representative, franchise, agency,
sales promotion, referral, market research, marketing, consulting and
advertising contracts and agreements to which the Seller (relating to the
Business), the Company or any Company Subsidiary is a party
which: (A) is likely to involve consideration of more than
$25,000 in the aggregate during the calendar year ending December 31, 2009,
(B) is likely to involve consideration of more than $25,000 in the
aggregate over the remaining term of the contract or (C) cannot be
cancelled by the Seller, the Company or such Company Subsidiary without penalty
or further payment and without more than 30 days’ notice;
(iv) all
management contracts and contracts with independent contractors or consultants
(or similar arrangements) to which the Seller (relating to the Business), the
Company or any Company Subsidiary is a party and which are not cancelable
without penalty or further payment and without more than 30 days’
notice;
(v) all
contracts and agreements relating to Indebtedness of the Seller (relating to the
Business), the Company or any Company Subsidiary;
(vi) all
contracts and agreements with any Governmental Authority to which the Seller
(relating to the Business), the Company or any Company Subsidiary is a party,
releasee or beneficiary;
(vii) all
contracts and agreements that limit or purport to limit the ability of the
Seller (relating to the Business), the Company or any Company Subsidiary to
compete in any line of business or with any Person or in any geographic area or
during any period of time;
(viii) all
contracts and agreements between or among the Company or any Company Subsidiary,
on one hand, and the Seller or any Affiliate of the Seller (other than the
Company or any Company Subsidiary), on the other hand;
(ix) all
contracts and agreements providing for benefits under any Plan; and
33
(x) all
other contracts and agreements, whether or not made in the ordinary course of
business, which are material to the Seller (relating to the Business), the
Company, any Company Subsidiary or the conduct of the Business, or the absence
of which would reasonably be expected to have a Material Adverse
Effect.
For
purposes of this Section 3.18 and
Sections 3.21,
3.22 and 3.23, the term “lease” shall include
any and all leases, subleases, sale/leaseback agreements or similar
arrangements.
(b) Except
as set forth in Section 3.18(b) of
the Disclosure Letter, each Material Contract: (i) is valid and
binding on the Company and, the Knowledge of the Seller, each other party
thereto and is in full force and effect, (ii) is freely and fully assignable to
the Purchaser without penalty or other adverse consequences, and (iii) upon
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements, except to the extent that any consents set forth in Section 3.07 of the
Disclosure Letter are not obtained, shall continue in full force and effect
without penalty or other adverse consequence. None of the Seller, the
Company nor any Company Subsidiary is in material breach of, or material default
under, any Material Contract.
(c) To
the Knowledge of the Seller, no other party to any Material Contract is in
breach thereof or default thereunder and none of the Seller, the Company or any
Company Subsidiary has received any notice of termination, cancellation, breach
or default under any Material Contract.
(d) The
Seller has made available to the Purchaser true and complete copies of all
Material Contracts. To the Knowledge of the Seller, there has been no
material modification, change or amendment to any Material
Contract.
(e) There
is no contract, agreement or other arrangement granting any Person any
preferential right to purchase, other than in the ordinary course of business
consistent with past practice, any of the Assets or any of the
Shares.
SECTION
3.19 SHRS Client
Contracts. To
the Knowledge of the Seller, each of the contracts with SHRS Clients to which
the Company or the Company Subsidiaries are parties and that were not provided
to the Purchaser prior to October 20, 2009, are terminable by the Company or
such Company Subsidiary at any time upon not more than 30 days’ notice to such
SHRS Client.
SECTION
3.20 Intellectual
Property.
(a) Section 3.20(a) of
the Disclosure Letter sets forth a true and complete list of (i) all patents and
patent applications, registered trademarks and trademark applications,
registered copyrights and copyright applications, and domain names included in
the Owned Intellectual Property, (ii) all Company IP Agreements, other than
commercially available off-the-shelf computer software licensed pursuant to
shrink-wrap or click wrap licenses that is not material to the Business and that
in the aggregate are commercially available for not more than $25,000, and (iii)
other Owned Intellectual Property material to the Business.
34
(b) The
Seller, the Company or a Company Subsidiary is the exclusive owner of the entire
right, title and interest in and to the Owned Intellectual Property, and has a
valid license to use the Licensed Intellectual Property in connection with the
Business. The Seller, the Company or a Company Subsidiary is entitled
to use all Owned Intellectual Property and Licensed Intellectual Property in the
continued operation of the Business, subject only to the terms of the Company IP
Agreements. The Owned Intellectual Property and the Licensed
Intellectual Property have not been adjudged invalid or unenforceable in whole
or in part, and are to the Knowledge of the Seller, valid and
enforceable.
(c) The
conduct of the Business as currently conducted does not infringe or
misappropriate the Intellectual Property of any third party, and no Action
alleging any of the foregoing are pending, and no Claim has been threatened or
asserted against the Seller, the Company or any Company Subsidiary alleging any
of the foregoing. To the Knowledge of the Seller, no Person is
engaging in any activity that infringes the Owned Intellectual
Property.
(d) To
the Knowledge of the Seller, no Owned Intellectual Property is subject to any
outstanding decree, order, injunction, judgment or ruling restricting the use of
such Intellectual Property or that would impair the validity or enforceability
of such Intellectual Property.
(e) The
representations set forth in this Section 3.20 are the
sole and exclusive representations of the Seller relating to intellectual
property matters.
SECTION
3.21 Real
Property. (a)
Neither the Company nor any of Company Subsidiary owns or, since January 1,
2005, has owned any interest in any Owned Real Property.
(b) Section 3.21(b) of
the Disclosure Letter lists each parcel of Leased Real Property, which leasehold
interest in each case is free and clear of all Encumbrances (other than
Permitted Encumbrances). The Company has made available to the
Purchaser true, correct and complete copies of each lease (“Lease”) for each
parcel of Leased Real Property and all material agreements related
thereto. None of the Leases have been amended except to the extent
set forth in the Disclosure Letter. Each Lease is valid and in full
force and effect in accordance with its respective terms and, to the Knowledge
of Seller, there are no existing defaults thereunder.
(c) Either
the Seller, the Company or a Company Subsidiary, as the case may be, is in
peaceful and undisturbed possession of each parcel of Real Property, and there
are no contractual or, to the Knowledge of the Seller, legal restrictions that
preclude or restrict the ability to use the Real Property for the purposes for
which it is currently being used. All existing water, sewer, steam,
gas, electricity, telephone, cable, fiber optic cable, Internet access and other
utilities required for the use, occupancy, operation and maintenance of the Real
Property are adequate for the conduct of the Business as it has been and
currently is conducted. There are no material latent defects or
material adverse physical conditions affecting the Real Property or any of the
facilities, buildings, structures, erections, improvements, fixtures, fixed
assets and personalty of a permanent nature annexed, affixed or attached to,
located on or forming part of the Real Property. Neither the Company
nor any Company Subsidiary has leased or subleased any parcel or portion of any
Leased Real Property to any other Person and no other Person has any rights to
the use, occupancy or enjoyment thereof pursuant to any lease, sublease,
license, occupancy or other agreement, nor has the Company or any Company
Subsidiary assigned its interest under any Lease to any third party, except as
set forth in the Disclosure Letter.
35
(d) The
interests of Seller in the Leased Real Property to be transferred pursuant to
this Agreement are sufficient for the continued conduct of the Business after
the Closing in substantially the same manner as conducted prior to the
Closing.
(e) The
rental set forth in each lease or sublease of the Leased Real Property is the
actual rental being paid, and there are no separate agreements or understandings
with respect to the same.
(f)
The representations set forth in this Section 3.21 are the
sole and exclusive representations of the Seller relating to real property
matters.
SECTION
3.22 Tangible Personal
Property. (a)
Section 3.22(a)
of the Disclosure Letter lists each material item or materially distinct group
of machinery, equipment, tools, supplies, furniture, fixtures, personalty,
vehicles and other tangible personal property (the “Tangible Personal
Property”) used primarily in the Business or owned or leased by the
Company or any Company Subsidiary.
(b) Section 3.22(b) of
the Disclosure Letter sets forth a true and complete list of all leases and
subleases for Tangible Personal Property used primarily in the Business or owned
or leased by the Company or any Company Subsidiary.
(c) Since
January 1, 2007, the Seller has caused the Tangible Personal Property to be
maintained in accordance with good business practice. All material
Tangible Personal Property is in good operating condition and repair and is
suitable for the purposes for which it is used and intended, normal wear and
tear excepted.
SECTION
3.23 Assets. (a)
The Assets constitute all of the assets that are necessary to permit the
Purchaser to operate the Business from and after the Closing in substantially
the same manner as such operations have heretofore been conducted by the Company
and the Company Subsidiaries.
(b) The
Company or the Company Subsidiaries have, and upon consummation on the Closing
Date of the transaction contemplated in this Agreement the Purchaser or its
Subsidiaries will have, good and marketable title to, or a valid leasehold
interest in, the Assets, free and clear of any Encumbrances, other than
Permitted Encumbrances; provided, however, that the terms of
this Section
3.23(b) shall not apply to: (i) Intellectual Property, which is addressed
in Section 3.20
hereof; (ii) Real Property, which is addressed in Section 3.21; (iii)
leased Tangible Personal Property, which is addressed in Section 3.22
hereof.
SECTION
3.24 Bank Accounts; Powers of
Attorney. Listed
in Section 3.24
of the Disclosure Letter is a true and complete list of all bank accounts or
safe deposit boxes under the control or for the benefit of the Company or any
Company Subsidiaries (collectively, the “Bank
Accounts”).
36
SECTION
3.25 Customers. (a)
Listed in Section
3.25(a) of the Disclosure Letter is a true and complete list of (i) the
names and addresses of all customers of the Business from which the Seller (in
connection with the Business), the Company and the Company Subsidiaries have
derived an annualized administrative fee for each such client of $50,000 or more
during the nine-months ended September 30, 2009, (ii) the number of employees
co-employed by the Company and such customers as of September 30, 2009, and
(iii) the amount of the administrative fee for which each such client was
invoiced during such period. To the Knowledge of the Seller, none of
the Seller, the Company or the Company Subsidiaries has received any written
notice that any significant customer listed in Section 3.25(a) of
the Disclosure Letter has ceased, or will cease, to use the services of the
Seller, the Company or any Company Subsidiary, has substantially reduced, or
will substantially reduce, the use of such services, or has sought, or is
seeking, to reduce the price it will pay for the services of the Seller, the
Company or any Company Subsidiary.
(b) Listed
in Section
3.25(b) of the Disclosure Letter is a true and complete list of the
names, addresses and number of employees of all SHRS ASO Clients and the
annualized amount for which each such client was invoiced during the 2009
year.
(c) All
Employee-Leasing Arrangements to which the Company or any Company Subsidiary is
a party as of the Closing will either be (i) purchased by or assigned or
otherwise transferred to the Purchaser or any of its Subsidiaries at the
Closing, or (ii) if not so purchased, assigned or transferred, terminated by the
Seller, the Company or any Company Subsidiary effective as of no later than the
Closing.
SECTION
3.26 Suppliers. Listed
in Section 3.26
of the Disclosure Letter are the names and addresses of all the suppliers from
which the Seller (in connection with the Business), the Company and the Company
Subsidiaries ordered products, insurance or services for the Business having an
aggregate purchase price of $50,000 or more during the nine months ended
September 30, 2009 and the amount for which each such supplier invoiced the
Seller, the Company and the Subsidiaries during such period. To the
Knowledge of the Seller, neither of the Seller, the Company nor any Company
Subsidiary has received any written notice that any such supplier will not sell
products, insurance or services to the Company or any Company Subsidiary at any
time after the Closing on terms and conditions substantially similar to those
used in its current sales to the Business, subject only to general and customary
price increases.
SECTION
3.27 Employee Benefit
Matters. (a)
Plans. Section 3.27(a) of
the Disclosure Letter lists all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”)) and all
material bonus plans, incentive compensation plans, stock option or other equity
compensation plans, stock purchase plans, deferred compensation plans, fringe
benefit plans, health plans, dental plans, vision plans, life insurance plans,
disability plans, retiree medical or life insurance plans, employee assistance
programs, supplemental plans, supplemental retirement plans, severance plans or
other similar benefit plans, programs or arrangements, and all employment
agreements to which the Company or any Company Subsidiary is a party, with
respect to which the Company, any Company Subsidiary and/or any ERISA Affiliate
(as defined below) has any obligation or which are maintained, contributed to or
sponsored by the Company, any Company Subsidiary and/or any ERISA Affiliate for
the benefit of any current or former employee, officer or director (exclusive of
any such officer or director who is not also a current or former employee) of
the Company or any Company Subsidiary (collectively, the “Plans”). Section 3.27(a) of
the Disclosure Letter separately identifies each Plan maintained exclusively by
the Company and/or any Company Subsidiary (any such Plans, collectively, the
“Company
Plans”). For purposes of this Section, the term “ERISA Affiliate”
shall mean any trade or business, whether or not incorporated, that together
with the Company would be deemed a “single employer” within the meaning of
Section 4001(b)(i) of ERISA. Neither the Company nor any Company
Subsidiary has any express or implied commitment, whether legally enforceable or
not, to (1) create, incur liability with respect to or cause to exist any other
employee benefit plan, program or arrangement, (2) to enter into any contract or
agreement to provide compensation or benefits to any individual, or (3) to
modify, change or terminate any Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
37
(b) Provision of Company Plan
Documents. With respect to each Company Plan, the Seller has
made available to the Purchaser (i) a complete and accurate copy of each Company
Plan and a complete and accurate copy of each trust agreement, insurance,
annuity or other funding contracts or arrangements, investment management
agreements, recordkeeping agreements, and third party administrative
agreements), (ii) the most recent summary plan description and summary of
material modifications (if applicable), (iii) the most recent
Form 5500 annual report and accompanying schedules (if applicable), and
(iv) the most recent IRS determination letter (if applicable).
(c) Absence of Certain Types of
Plans. None of the Plans (i) is a multiemployer plan (as
defined in Section 3(37) of ERISA), (ii) obligates the Company or any Company
Subsidiary to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by this Agreement, or (iii)
provides for or promises retiree medical, disability or life insurance benefits
to any current or former employee, officer or director of the Company or any
Company Subsidiary. No Company Plan is (i) a defined benefit plan
subject to section 412 of the Code, (ii) a group health plan that is
self-insured, or (iii) a plan subject to Title IV of ERISA. Each of
the Company Plans is subject only to the Laws of the United States or a
political subdivision thereof.
(d) Compliance with Applicable
Law. Each Company Plan is now and always has been operated in
all material respects in compliance with its terms and the requirements of all
applicable Law, including ERISA and the Code. The Company (and each
Company Subsidiary) has performed all obligations required to be performed by it
under, is not in any respect in default under or in violation in any material
respects of, and, to the Knowledge of the Seller, no other party is in default
under or in material violation of, any Company Plan. No Action is
pending or, to the Knowledge of the Seller, threatened with respect to any
Company Plan (other than claims for benefits in the ordinary course) and to the
Knowledge of the Seller no fact or event exists that could give rise to any such
Action.. All material reports, returns and similar documents required
to be filed with any governmental agency or distributed to any Plan participant
have been duly and timely filed or distributed.
(e) Qualification of Certain
Plans. Each Plan that is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination, opinion or volume submitter approval letter from the
IRS that it is so qualified, and to the Knowledge of the Seller no fact or event
has occurred since the date of such determination, opinion or approval letter
from the IRS to adversely affect the qualified status of any such Plan or the
exempt status of any such trust.
38
(f) Absence of Certain
Liabilities and Events. There has been no prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Company Plan. Neither the Company nor any
Company Subsidiary has incurred any liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary
course). Neither the Company nor any Company Subsidiary will incur
any liability after the Closing under or otherwise in respect of any Plan that
is not a Company Plan.
(g) Plan Contributions and
Funding. All contributions, premiums or payments required to
be made with respect to any Company Plan have been timely made on or before
their due dates.
(h) Section
409A. No Company Plan is a nonqualified deferred compensation
plan within the meaning of Section 409A of the Code.
(i) COBRA. The
Company and the Company Subsidiaries have complied, to the extent responsible
therefor, with all requirements under Section 4980B of the Code and Parts 6 and
7 of Title I of ERISA and the regulations thereunder ("COBRA") in respect of
each individual to whom Purchaser must provide COBRA in accordance with Section
6.03 hereof. Section 3.27(i) of
the Disclosure Letter contains a complete and accurate list of such individuals
receiving COBRA continuation coverage as of the date hereof and shall have
been amended by the Seller as required prior to the Closing to contain (i)
a complete and accurate list of such individuals receiving COBRA continuation
coverage as of the Closing, and (ii) a substantially complete list of any other
individuals who have incurred a “qualifying event” within the meaning of COBRA
that entitles them to receive COBRA continuation coverage under Section 6.03
hereof if
they were to so elect.
(j) Exclusive
Representations. The representations set forth in this Section 3.27 are the
sole and exclusive representations of the Seller relating to employee benefit
matters.
39
SECTION
3.28 Labor
Matters. (a)
Neither the Company nor any Company Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary (excluding any SHRS WSEE),
and, to the Knowledge of the Seller, currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition of a
collective bargaining unit of persons employed by the Company or any Company
Subsidiary (excluding any SHRS WSEE); (b) there are no strikes, slowdowns or
work stoppages pending or, to the Knowledge of the Seller, threatened between
the Company or any Company Subsidiary and any of their respective employees
(excluding any SHRS WSEEs), and neither the Company nor any Company Subsidiary
has experienced any such strike, slowdown or work stoppage within the past three
years; (c) there are no unfair labor practice complaints pending against the
Company or any Company Subsidiary or, to the Knowledge of the Seller, any SHRS
Client before the National Labor Relations Board or any other Governmental
Authority involving employees of the Company or any Company Subsidiary which
would reasonably be expected to have a Material Adverse Effect; (d) the Company
and each Company Subsidiary are currently in compliance in all material respects
with all applicable Laws relating to the employment of labor, including those
related to wages, hours, collective bargaining and the payment and withholding
of taxes and other sums as required by the appropriate Governmental Authority
and has withheld and paid to the appropriate Governmental Authority or is
holding for payment not yet due to such Governmental Authority all amounts
required to be withheld from employees of the Company or any Company Subsidiary
and any SHRS Client and is not liable for any arrears of wages, Taxes, penalties
or other sums for failure to comply with any of the foregoing; (e) the Company
and each Company Subsidiary is not in default in any material manner with
respect to payments to their respective employees or accrues (in accordance with
GAAP) for wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such employees; (f) to the Knowledge of the Seller, there
is no claim with respect to payment of wages, salary or overtime pay that has
been asserted or is now pending or threatened before any Governmental Authority
with respect to any Persons currently or formerly employed by the Company or any
Company Subsidiary (excluding any SHRS WSEE) which would reasonably be expected
to have a Material Adverse Effect; (g) neither the Company nor any Company
Subsidiary is a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Authority relating to employees or employment
practices; (h) to the Knowledge of the Seller, there is no charge or proceeding
with respect to a violation of any occupational safety or health standard that
has been asserted or is now pending or threatened that names the Company or any
Company Subsidiary which would reasonably be expected to have a Material Adverse
Effect; and (i) to the Knowledge of the Seller, there is no charge of
discrimination in employment or employment practices, for any reason, including
age, gender, race, religion or other legally protected category, which has been
asserted or is now pending or, to the Knowledge of the Seller, threatened before
the United States Equal Employment Opportunity Commission, or any other
Governmental Authority in any jurisdiction in which the Company or, to the
Knowledge of the Seller, any Company Subsidiary or any SHRS Client has employed
or currently employs any Person (excluding any SHRS WSEE) which would reasonably
be expected to have a Material Adverse Effect.
(b) The
representations set forth in this Section 3.28 are the
sole and exclusive representations of the Seller relating to labor
matters.
SECTION
3.29 Key
Employees. All
directors, officers, management employees and technical and professional
employees of the Company and each Subsidiary are under written obligation to the
Company or such Subsidiary to maintain in confidence confidential or proprietary
information acquired by them in the course of their employment upon the terms of
a non-disclosure agreement substantially on the terms set forth in Section 3.18 of the
Disclosure Letter.
SECTION
3.30 [Reserved]
SECTION
3.31 Taxes. (a)
(i) All material Tax Returns for Taxes required to be filed by or on
behalf or with respect to the income, profits, gains, operations and/or assets
of the Company, each Company Subsidiary, the Purchased Assets and the Business
have been timely filed with the appropriate Tax Authority (after giving effect
to any valid extensions of time in which to make such filings) and all such Tax
Returns are true and complete in all material respects insofar as they relate to
the Company, each Company Subsidiary, the Purchased Assets and the Business,
(ii) the Company and each Company Subsidiary has, or the Seller has on behalf of
the Company and each Company Subsidiary, duly and timely paid all material Taxes
shown to be due and payable on such Tax Returns or otherwise due in respect of
the Purchased Assets, the Business, the Company or any Company Subsidiary, and
(iii) none of the Company or any Company Subsidiary has waived in writing any
statute of limitations in respect of material Taxes which waiver is currently in
effect.
40
(b) Each
of the Company and each Company Subsidiary is in material compliance with all
applicable withholding Tax laws and has duly and timely withheld and paid over
to the appropriate Tax Authorities all material withholding Taxes required to be
so withheld and paid over for all open periods under all applicable Laws
(including, without limitation, withholding of Taxes from employee salaries,
wages and other compensation).
(c) All
material deficiencies or assessments made in writing as a result of any
examinations by any Tax Authority of Tax Returns of the Company and each Company
Subsidiary have been paid, and no material audits by any Tax Authority relating
to any Tax Returns of the Company or any Company Subsidiary are in
progress. Neither the Company nor any Company Subsidiary has received
written notice from a Tax Authority of the commencement of any material audit
not yet in progress.
(d) No
power of attorney that will be in force after the Closing Date has been granted
with respect to any matter relating Taxes that could affect the Company or any
Company Subsidiary or relating to the Purchased Assets or the
Business.
(e) Neither
the Seller nor any Affiliate is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or deemed payment by
the Company or a Company Subsidiary of any "excess parachute payments" within
the meaning of section 280G of the Code (without regard to section 280G(b)(4) or
the Code).
(f) From
and after December 31, 2006, the Company and each Company Subsidiary have been
and continue, except as may result from the Merger, to be members of the
affiliated group (within the meaning of Section 1504(a)(1) of the Code) for
which the Seller files a consolidated return as the common
parent. Neither the Company nor any Company Subsidiary will have any
liability after the Closing for Taxes of any person or entity under Section
1.1502-6 of the Treasury Regulations or any similar provision of state, local or
foreign law (other than an entity that is or was a member of an affiliated,
combined or unitary Tax group, of which the Seller is or was the common
parent).
(g) There
are no Liens for Taxes upon any of the Purchased Assets or the assets of either
the Company or any Company Subsidiary except for Liens for Taxes, assessments or
other governmental charges or levies that are not yet due or payable or that are
being contested in good faith by appropriate proceedings.
(h) No
material written claim has been made within the last five years by a Tax
Authority in a jurisdiction where the Company or any Company Subsidiary does not
file, or have filed on its behalf, Tax Returns that such Company or Company
Subsidiary is or may be subject to material taxation by that
jurisdiction.
41
(i)
On the Reference Balance Sheet, reserves and
allowances have been provided, and on the Closing Balance Sheet, reserves and
allowances will be provided, in each case adequate to satisfy all Liabilities
for Taxes relating to the Purchased Assets, the Company, the Company
Subsidiaries and the Business for all taxable periods through the Closing
(without regard to the materiality thereof).
(j)
Neither the Company nor any Company Subsidiary has
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code within the last two years, and neither
the stock of the Company nor the stock of any of its Subsidiaries has been
distributed in a transaction satisfying the requirements of Section 355 of the
Code within the last two years.
(k) Neither
the Company nor and Company Subsidiary has entered into any transaction
identified as a “reportable transaction” for purposes of Treasury regulations
Sections 301.6011-4(b). If either the Company or any Company
Subsidiary has entered into any transaction such that, if the treatment claimed
by it were to be disallowed, the transaction would constitute a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code, then it believes that it has either (i) substantial authority for the tax
treatment of such transaction or (ii) disclosed on its Tax Return the relevant
facts affecting the tax treatment of such transaction.
(l)
No taxing authority is asserting or threatening in writing to
assert a claim against the Company or any Company Subsidiary under or as a
result of Section 482 of the Code or any similar provision of any foreign, state
or local Tax law.
SECTION
3.32 Insurance. The
commercial property and casualty risks of the Seller (relating to the Business),
the Company and each Company Subsidiary are, and since January 1, 2005 have
been, covered by valid and, except for insurance policies that have expired
under their terms in the ordinary course, currently effective insurance policies
or binders of insurance (including general liability insurance, property
insurance and workers’ compensation insurance for employees of the Company or a
Company Subsidiary who are not co-employed by an SHRS Client) issued in favor of
the Company or a Company Subsidiary, as the case may be, in each case with
responsible insurance companies affiliated with Seller (the “Selective
Policies”). No notice of cancellation, termination or
reduction of coverage or increase in premiums has been received with respect to
any such policies that are currently in force and all premiums with respect
thereto have been paid to the extent due. All workers’ compensation
insurance policies in favor of the Seller, the Company or a Company Subsidiary,
as the case may be, are, and since January 1, 2005 have been, first-dollar,
guaranteed cost policies with statutory limits. All SHRS Clients and all SHRS
WSEEs are and since January 1, 2005 have been, to the extent co-employed by the
Company or the Company Subsidiaries during such period, covered under a workers’
compensation policy from an authorized and admitted insurance carrier or
residual market and issued to the relevant SHRS Client. The Company
and each Company Subsidiary have, to the Knowledge of the Seller, requested that
each SHRS Client with a workers’ compensation policy in its name (each, a “Customer Policy”)
list the Company as a certificate holder with respect to such Customer Policy as
a party to receive notice of non-renewal or cancellation of such Customer
Policy. The activities and operations of the Company and the Company
Subsidiaries have been conducted in a manner so as to conform in all material
respects to all applicable provisions of such insurance policies. The
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not cause the Selective Policies to be canceled or the
coverage reduced.
42
SECTION
3.33 Certain Business
Practices. None
of the Seller, the Company or any of the Company Subsidiaries or, to the
Knowledge of the Seller, any of the directors, officers, agents, representatives
or employees of the Company or the Company Subsidiaries (in their capacity as
directors, officers, agents, representatives or employees) has: (a)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity in respect of the Business; (b)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item of property, however characterized, to any finder, agent, or other
party acting on behalf of or under the auspices of a governmental official or
Governmental Authority, in the United States or any other country, which is in
any manner illegal under any Law of the United States or any other country
having jurisdiction; or (c) made any payment to any customer or supplier of the
Seller, the Company or any of the Company Subsidiaries or any officer, director,
partner, employee or agent of any such customer or officer, director, partner,
employee or agent for the unlawful reciprocal practice, or made any other
unlawful payment or given any other unlawful consideration to any such customer
or supplier or any such officer, director, partner, employee or agent, in
respect of the Business.
SECTION
3.34 Transaction
Brokers. No
transaction broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission from the Seller, the Company or the Company
Subsidiaries in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements based upon arrangements made by or on behalf of the
Seller, other than brokers who are paid commissions for the referral of clients
in the in the ordinary course of business, consistent with past
practice.
ARTICLE
IV
REPRESENTATIONS AND
WARRANTIES
OF THE
PURCHASER
As an
inducement to the Seller to enter into this Agreement, the Purchaser hereby
represents and warrants to the Seller as follows:
SECTION
4.01 Organization and Authority
of the Purchaser. (a) The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all necessary
corporate power and authority to enter into this Agreement and the Ancillary
Agreements to which it is a party, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by the Purchaser of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by the Purchaser of its obligations hereunder and thereunder and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of the Purchaser. This Agreement has been, and upon their execution
the Ancillary Agreements to which the Purchaser is a party shall have been, duly
executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Seller) this Agreement constitutes, and upon their
execution the Ancillary Agreements to which the Purchaser is a party shall
constitute, legal, valid and binding obligations of the Purchaser, enforceable
against the Purchaser in accordance with their respective terms, except that (i)
such enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Laws, now or hereafter in effect,
relating to or limiting creditors’ rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
43
(b) The
execution by each of the Purchaser, Alpha and the Acquiring Subsidiaries of this
Agreement and each Ancillary Agreement to which it is a party and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite action on the part of the Purchaser, Alpha and the
Acquiring Subsidiaries.
SECTION
4.02 No
Conflict. Assuming
the making and obtaining of all filings, notifications, consents, approvals,
authorizations and other actions referred to in Section 4.03, except
as may result from any facts or circumstances relating solely to the Seller, the
execution, delivery and performance by the Purchaser of this Agreement and the
Ancillary Agreements to which it is a party do not and will not
(a) violate, conflict with or result in the breach of any provision of the
Articles of Incorporation or By-laws of the Purchaser, (b) conflict with or
violate any Law or Governmental Order applicable to the Purchaser or
(c) conflict with, or result in any breach of, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
any note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument or arrangement to which the
Purchaser is a party, which would adversely affect the ability of the Purchaser
to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement or the Ancillary Agreements.
SECTION
4.03 Governmental Consents and
Approvals. The
execution, delivery and performance by the Purchaser of this Agreement and each
Ancillary Agreement to which the Purchaser is a party do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to any Governmental Authority, except for the PEO
Approvals and the consents, approvals and authorizations set forth in Section 4.03 of the
disclosure letter provided by the Purchaser to Seller contemporaneously with the
execution of this Agreement.
SECTION
4.04 Common
Ownership. Neither
the Purchaser nor any of its Subsidiaries has any ownership, management or
control for purposes of Section 443.131 of the Florida Statutes of or over the
Seller, the Company or any Company Subsidiaries.
SECTION
4.05 Financing. The
Purchaser has currently available funds necessary to enable the Purchaser to pay
the Initial Payment and will have available funds to pay the remaining portions
of the Purchase Price to the Seller in the amounts and at the times due under
this Agreement and pay any related transaction expenses.
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SECTION
4.06 Litigation. No
Action by or against the Purchaser is pending or, to the knowledge of the
Purchaser after due inquiry, threatened, which could affect the legality,
validity or enforceability of this Agreement, any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby.
SECTION
4.07 Transaction
Brokers. No
transaction broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser, other than brokers who are paid commissions for the referral of
clients in the in the ordinary course of business, consistent with past
practice.
SECTION
4.08 Errors and Omissions
Coverage. Set
forth in Section
4.08 of the disclosure letter provided by the Purchaser to the Seller
contemporaneously with the execution of this Agreement is a complete list of all
coverage amounts and carriers for the Purchaser’s E&O coverage of the
Purchaser and its Subsidiaries.
ARTICLE
V
ADDITIONAL
AGREEMENTS
SECTION
5.01 Conduct of Business Prior to
the Closing. (a)
The Seller covenants and agrees that, except as described in Section 5.01(a) of
the Disclosure Letter or as otherwise provided or permitted by this Agreement
(including, without limitation, under Sections 5.19 and
5.20 hereof), between the date hereof and the time of the Closing,
neither the Seller (as it relates to the Business), the Company nor any Company
Subsidiary shall conduct its business other than in the ordinary course and
consistent with the Seller’s, the Company’s and such Company Subsidiary’s prior
practice. Without limiting the generality of the foregoing, except as
described in Section
5.01(a) of the Disclosure Letter or as otherwise provided or permitted by
this Agreement (including, without limitation, under Sections 5.19 and
5.20 hereof), the Seller shall (as it relates to the Business), and shall
cause the Company and each Company Subsidiary to use commercially reasonable
efforts between the date hereof and the time of Closing to (i) continue
their advertising and promotional activities, and pricing and purchasing
policies, in accordance with past practice; (ii) not shorten or lengthen
the customary payment cycles for any of their payables or receivables;
(iii) preserve intact their business organizations and the business
organization of the Business; (iv) keep available to the Purchaser the
reasonable services of the employees of the Seller, the Company and each Company
Subsidiary, unless otherwise directed by the Purchaser; (v) continue in
full force and effect without material modification all existing policies or
binders of insurance currently maintained in respect of the Seller, the Company,
each Company Subsidiary and the Business; (vi) preserve their current
relationships with their customers, suppliers and other persons with which they
have had significant business relationships; and (vii) exercise, but only
after notice to the Purchaser and receipt of the Purchaser’s prior written
approval, any rights of renewal pursuant to the terms of any of the leases or
subleases set forth in Section 3.21(b) of
the Disclosure Letter which by their terms would otherwise expire.
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(b) Except
as described in Section 5.01(b) of
the Disclosure Letter, the Seller covenants and agrees that, between the date
hereof and the time of the Closing, without the prior written consent of the
Purchaser, which consent shall not be unreasonably withheld, conditioned or
delayed, none of the Seller, the Company or the Company Subsidiaries will (i) do
any of the things enumerated in the second sentence of Section 3.14
(including clauses (a) through (y) thereof, but not
including clause (l)), (ii) except in the ordinary course of business consistent
with past practice, discharge or otherwise obtain the release of any Encumbrance
related to the Business, the Company or the Company Subsidiaries or pay or
otherwise discharge any Liability related to the Business, the Company or the
Company Subsidiaries, other than current liabilities reflected on the Reference
Balance Sheet and current liabilities incurred in the ordinary course of
business consistent with past practice since the Reference Statement Date, (iii)
make, revoke or change any Tax election or method of Tax accounting or settle or
compromise any liability with respect to Taxes of the Seller (relating to the
Business), the Company or any Company Subsidiary except to the extent required
by Law; or (iv) fail to maintain, in all material respects, the Seller’s, the
Company’s and each Company Subsidiary’s plant, property and equipment which is
material to the operation of the Business in good repair and operating
condition, ordinary wear and tear excepted.
(c) The
Seller covenants and agrees that, between the date hereof and the time of the
Closing, without the prior written consent of the Purchaser, which consent shall
not be unreasonably withheld, conditioned or delayed, none of the Seller, the
Company or the Company Subsidiaries will file any claims for refunds related to
unemployment insurance Taxes (as such Taxes relate to the
Business). The Seller further covenants and agrees that, subsequent
to the date hereof, without the prior written consent of the Purchaser, which
consent shall not be unreasonably withheld, conditioned or delayed, neither the
Seller nor the Company Subsidiaries will file any claims for refunds related to
unemployment insurance Taxes (as such Taxes relate to the
Business).
(d) From
and after the Closing, the Purchaser shall provide the Seller with such
information as it may reasonably request in order to keep informed on the status
of the Selective Agents and Common Brokers and their activity under the programs
contemplated under this Agreement, as well as any other elements directly
relevant to its ongoing receipt of the Purchase Price, including without
limitation, information on submissions, declinations, hit ratios by agency and
hit ratios by producer.
(e) No
later than December 11, 2009, the Seller shall provide the Purchaser with a list
of (i) the names of all persons authorized to draw on or have access to the Bank
Accounts and their method of access and (ii) all outstanding powers of attorney
or similar authorizations granted by the Company or any Company
Subsidiaries.
SECTION
5.02 Access to
Information. (a)
From the date hereof until the Closing, upon reasonable notice, the Seller shall
cause its officers, directors, employees, agents, representatives, accountants
and counsel and shall cause the Company and the Company Subsidiaries and each of
the Company’s and the Company Subsidiaries’ officers, directors, employees,
agents, representatives, accountants and counsel to: (i) afford
the officers, employees, agents, accountants, counsel and representatives of the
Purchaser reasonable access, during normal business hours, to the offices,
properties, plants, other facilities, books and records of the Seller relating
to the Business, the Company and each Company Subsidiary and to those officers,
directors, employees, agents, accountants and counsel of the Seller, the Company
and of each Company Subsidiary who have any knowledge relating to the Company,
any Subsidiary or the Business and (ii) furnish to the officers, employees,
agents, accountants, counsel and representatives of the Purchaser such
additional financial and operating data and other information regarding the
assets, properties, liabilities and goodwill of the Seller, the Company, the
Company Subsidiaries and the Business (or legible copies thereof) as the
Purchaser may from time to time reasonably request; provided, however, that notwithstanding
anything in the foregoing clauses (i) or (ii) to the contrary, the Purchaser and
its officers, employees, agents, accountants, counsel and representatives shall
not contact any employee or customer of the Company without the prior written
consent of the Seller, which consent shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding the foregoing, (i) the
Seller, the Company and the Company Subsidiaries shall not be required to take
any action which would constitute (based on the advice of counsel) a waiver of
the attorney-client or other privilege, (ii) the Seller, the Company and the
Company Subsidiaries need not supply any information which, based on the advice
of counsel, the Seller, the Company or the Company Subsidiaries are under a
legal obligation not to supply and (iii) the Seller shall not be required to
supply any information that does not relate primarily to the
Business.
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(b) In
order to facilitate the resolution of any claims made against or incurred by the
Seller prior to the Closing or for any other reasonable purpose, for a period of
seven years after the Closing, the Purchaser shall (i) retain the books and
records relating to the Business, the Company and the Company Subsidiaries
relating to periods prior to the Closing in a manner reasonably consistent with
the prior practice of the Seller, the Company and the Company Subsidiaries and
(ii) upon reasonable notice, afford the officers, employees, agents and
representatives of the Seller reasonable access (including the right to make, at
the Seller’s expense, photocopies), during normal business hours, to such books
and records.
(c) In
order to facilitate the resolution of any claims made by or against or incurred
by the Purchaser, the Company or any Company Subsidiary after the Closing or for
any other reasonable purpose, for a period of seven years following the Closing,
the Seller shall (i) retain the books and records of the Seller which
relate to the Business, the Company and the Company Subsidiaries and their
operations for periods prior to the Closing and which shall not otherwise have
been delivered to the Purchaser, the Company or any Company Subsidiary and
(ii) upon reasonable notice, afford the officers, employees, agents and
representatives of the Purchaser, the Company or any Company Subsidiary
reasonable access (including the right to make photocopies, at the expense of
the Purchaser, the Company or such Company Subsidiary), during normal business
hours, to such books and records.
SECTION
5.03 Confidentiality. (a)
The Seller agrees to, and shall cause its agents, representatives, Affiliates,
employees, officers and directors to: (i) treat and hold as
confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, patent applications, product
development, price, customer and supplier lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts, operations
methods, product development techniques, business acquisition plans, new
personnel acquisition plans and all other confidential or proprietary
information with respect to the Business, the Company and each Company
Subsidiary, (ii) in the event that the Seller or any such agent,
representative, Affiliate, employee, officer or director becomes legally
compelled to disclose any such information, provide the Purchaser with prompt
written notice of such requirement so that the Purchaser, the Company or any
Company Subsidiary may seek a protective order or other remedy or waive
compliance with this Section 5.03,
(iii) in the event that such protective order or other remedy is not
obtained, or the Purchaser waives compliance with this Section 5.03, furnish
only that portion of such confidential information which is legally required to
be provided and exercise its commercially reasonable efforts to obtain
assurances that confidential treatment will be accorded such information, and
(iv) promptly furnish (prior to, at, or as soon as practicable following, the
Closing) to the Company or the Purchaser any and all copies (in whatever form or
medium) of all such confidential information then in the possession of the
Seller or any of its agents, representatives, Affiliates, employees, officers
and directors and, except as otherwise required by Section 5.02(c),
destroy any and all additional copies then in the possession of the Seller or
any of its agents, representatives, Affiliates, employees, officers and
directors of such information and of any analyses, compilations, studies or
other documents prepared, in whole or in part, on the basis thereof; provided, however, that this sentence
shall not apply to any information that, at the time of disclosure, is available
publicly and was not disclosed in breach of this Agreement by the Seller, its
agents, representatives, Affiliates, employees, officers or directors; and
provided further, that, with respect to Intellectual Property, specific
information shall not be deemed to be within the foregoing exception merely
because it is embraced in general disclosures in the public
domain. In addition, with respect to Intellectual Property, any
combination of features shall not be deemed to be within the foregoing exception
merely because the individual features are in the public domain unless the
combination itself and its principle of operation are in the public
domain.
47
(b) Notwithstanding
anything herein to the contrary, each party hereto (and its representatives,
agents and employees) may consult any tax advisor regarding the tax treatment
and tax structure of the transactions contemplated hereby and may disclose to
any person, without limitation of any kind, the tax treatment and tax structure
of such transactions and all materials (including opinions and other tax
analyses) that are provided relating to such treatment or
structure.
SECTION
5.04 Regulatory and Other
Authorizations; Notices and Consents; Efforts. (a)
Each of the Purchaser and the Seller shall use its commercially reasonable
efforts to obtain (or cause its Subsidiaries to obtain) all authorizations,
consents, orders and approvals of all Governmental Authorities and officials
that may be or become necessary for its execution and delivery of, and the
performance of its obligations pursuant to, this Agreement and the Ancillary
Agreements and will cooperate fully with the other in promptly seeking to obtain
all such authorizations, consents, orders and approvals, including, if
applicable, by filing such applications and other submissions, including
requests for terminations of existing approvals or authorizations, with
Governmental Authorities as the Purchase shall reasonably
request. Notwithstanding the receipt of any such authorizations,
consents, orders and approvals prior to the Closing, no change of ownership of
the Company or any Company Subsidiaries from the Seller or any of its
Subsidiaries to the Purchaser or any of its Subsidiaries shall occur until the
Closing. Prior to furnishing any written materials to any
Governmental Authority in connection with the transactions contemplated by this
Agreement, the party filing such materials shall furnish the other party with a
copy thereof, and the other party shall have an opportunity to provide comments
thereon. Each party shall give to the other party prompt written
notice if it receives any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement,
and, in the case of any such notice or communication which is in writing, shall
promptly furnish the other party with a copy thereof. If any
Governmental Authority requires that a hearing be held in connection with any
such approval, the party receiving such request shall use its commercially
reasonable efforts to arrange for such hearing to be held promptly after the
notice that such hearing is required has been received by such party and the
other party shall use its commercially reasonable efforts, and shall cooperate
fully with the party receiving such request in its efforts to arrange that such
hearings are held promptly after notice is received that such hearing is
required. Each party shall give to the other reasonable prior written
notice of the time and place when any meetings or other conferences may be held
by it with any Governmental Authority in connection with the transactions
contemplated by this Agreement, and each of the parties shall have the right to
have a representative or representatives attend or otherwise participate in any
such meeting or conference.
48
(b) The
Seller shall or shall cause the Company and the Company Subsidiaries to give
promptly such notices to third parties and use its or their commercially
reasonable efforts to obtain such third party consents as are listed in Section 5.04(b) of
the Disclosure Letter. The Seller shall or shall cause its
Subsidiaries to use its or their commercially reasonable efforts to obtain
Client Assignments (which shall be effective at the Closing) prior to the
Closing from each SHRS Client and each SHRS ASO
Client. Notwithstanding the foregoing, (i) the Purchaser shall have
no obligation to give any guarantee or other consideration of any nature in
connection with any such consent or to consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole discretion may deem
adverse to the interests of the Purchaser, the Company, any Company Subsidiary
or the Business and (ii) in the event that any third-party has indicated its
willingness to grant a third party consent listed in Section 8.02(c) of
the Disclosure Letter upon receipt of a monetary payment and the Purchaser
elects not to make such monetary payment, such consent shall be deemed for all
purposes to be deleted from Section 8.02(c) of
the Disclosure Letter and the receipt of such consent shall not be a condition
to Purchaser’s obligation to consummate the transactions contemplated by this
Agreement.
(c) The
Seller, the Company and the Company Subsidiaries, on the one hand, and the
Purchaser, on the other hand, shall cooperate and use all commercially
reasonable efforts to assist the other in giving such notices and obtaining such
consents as are required to be obtained by it pursuant to Sections 5.04(a) and
(b); provided,
however, that the
Seller, the Company and the Company Subsidiaries shall not be required to make
any payment, expend any funds or give any guarantee or other consideration of
any nature in connection with obtaining any such consents.
(d) The
Seller and the Purchaser agree that, in the event that any consent, approval or
authorization necessary or desirable to preserve for the Business, the Company
or any Company Subsidiary any right or benefit under any lease, license,
contract, commitment or other agreement or arrangement to which the Seller, the
Company or any Company Subsidiary is a party is not obtained prior to the
Closing, the Seller will, subsequent to the Closing, cooperate with the
Purchaser, the Company or any such Company Subsidiary in attempting to obtain
such consent, approval or authorization as promptly thereafter as
practicable. If such consent, approval or authorization cannot be
obtained, the Seller shall use its commercially reasonable efforts to provide
the Purchaser, the Company or such Company Subsidiary, as the case may be, with
the rights and benefits of the affected lease, license, contract, commitment or
other agreement or arrangement for the term of such lease, license, contract or
other agreement or arrangement, and, if the Seller provides such rights and
benefits, the Purchaser, the Company or such Company Subsidiary, as the case may
be, shall assume the obligations and burdens thereunder.
49
(e) The
Seller and the Purchaser agree to exercise commercially reasonable efforts to
cause the Closing to occur on January 1, 2010, but in any event on or prior to
the Outside Date.
SECTION
5.05 Notice of
Developments. (a) Prior
to the Closing, the Seller shall promptly notify the Purchaser in writing of (i)
all events, circumstances, facts and occurrences arising subsequent to the date
of this Agreement which would reasonably be expected to result in any breach of
a representation or warranty or covenant of the Seller in this Agreement or
which would reasonably be expected to have the effect of making any
representation or warranty of the Seller in this Agreement untrue or incorrect
in any respect, (ii) all other material developments affecting the business,
operations, assets or liabilities, results of operations, or the financial
condition of the Company, any Company Subsidiary or the Business, and (iii) any
notices of termination received from an SHRS Client or Selective Agent; provided, however, that in the case of
clause (iii) a bi-weekly notice of all SHRS Client termination notices received
within the prior two-week period shall suffice unless a termination notice is
received from an SHRS Client in respect of a Material Contract, in which case
the Seller shall promptly notify the Purchaser in writing of the termination of
such Material Contract.
(b) The
Seller may from time to time prior to the Closing supplement or amend the
Disclosure Letter with respect to (i) any matter that existed as of the date of
this Agreement and should have been set forth or described in the Disclosure
Letter and (ii) any matter hereafter arising which, if existing as of the date
of this Agreement, would have been required to be set forth or described in the
Disclosure Letter; provided, however, that, with respect
to clause (i) above, any such supplemental or amended disclosure shall not be
deemed to have been disclosed as of the date of this Agreement unless expressly
consented to in writing by the Purchaser, which consent shall not be
unreasonably withheld, conditioned or delayed; and provided, further, that, with respect
to clause (ii) above, any such supplement or amended disclosure shall, for
purposes of this Agreement, be deemed to have been disclosed as of the date of
this Agreement to the extent that the Losses incurred, or to be incurred, by the
Company and the Company Subsidiaries with respect to such
supplementally-disclosed matters would not reasonably be expected to exceed in
the aggregate $100,000.
SECTION
5.06 No Solicitation or
Negotiation. The
Seller and the Purchaser hereby ratify and confirm the terms of the Exclusivity
Agreement, which terms are incorporated herein by reference.
50
SECTION
5.07 Use of Intellectual
Property. (a)
It is expressly agreed that, except as provided in the Assignment of
Intellectual Property, the Purchaser is not purchasing, acquiring or otherwise
obtaining any right, title or interest in and to Seller Intellectual Property,
including the name “Selective” or any trade names, trademarks, Internet domain
names, identifying logos or service marks related thereto or employing the word
“Selective” or any part or variation or derivation of the foregoing or any
confusingly similar trade name, trademark, Internet domain name, logo or service
xxxx, including without limitation SELECTIVE HR SOLUTIONS (U.S. Registration No.
2896639) (collectively, the “Seller
Marks”). Notwithstanding the foregoing, the Seller and the
Purchaser agree that during the period from the Closing Date until two years
after the Closing Date (the “Wind-down Period”),
each the Company and the Company Subsidiaries shall be entitled to continue to
use, and the Seller hereby grants each of the Company and the Company
Subsidiaries a non-exclusive, royalty-free license to use, and grant sublicenses
to their Affiliates and licensees to use, the Seller Marks to the full extent
used in connection with the Business as of the Closing Date, including, without
limitation, on any business cards, schedules, stationery, displays, signs,
promotional materials, manuals, forms, computer software, websites and other
similar material used prior to the Closing Date in the operation of the
Business. The nature and quality of all uses of the Seller Marks made
by the Company and the Company Subsidiaries shall substantially conform to the
quality standards employed by the Company and the Company Subsidiaries as of the
Closing Date. None of the Company or the Company Subsidiaries shall
use the Seller Marks in any manner which might reasonably be expected to dilute,
tarnish, disparage, or reflect adversely on the Seller or the Seller
Marks. The Purchaser agrees that is shall cause the Company and the
Company Subsidiaries to cease usage of the Seller Marks as promptly as
commercially practicable and, in any event, immediately upon termination of the
Wind-down Period, at which time the Company and the Company Subsidiaries shall
cease and desist from all further use of the Seller Marks and shall adopt new
trade names, trademarks, Internet domain names, identifying logos and service
marks which are not confusingly similar to the Seller
Marks. Notwithstanding anything in this Section 5.07 to the
contrary, the Purchaser shall cause the Company and each of the Company
Subsidiaries to, promptly following the Closing Date, change its name to delete
any reference to “Selective” or any other Seller Xxxx (and to file with the
appropriate Governmental Authorities any certificates or instruments required to
effect such name change).
(b) From
and after the Closing, neither the Seller nor any of its Affiliates shall use
any of the Company Intellectual Property or any of the Licensed Intellectual
Property.
SECTION
5.08 Non-Competition. (a)
For a period of ten years after the Closing (the “Restricted Period”),
without the prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, conditioned or delayed, the Seller shall not engage,
directly or indirectly, in the PEO Business (as defined below), or directly or
indirectly, own an interest in, manage or operate any Person that engages in the
PEO Business; provided,
however, that, for the
purposes of this Section 5.08, (i)
ownership of securities having less than five percent of the outstanding voting
power of any Person that engages in the PEO Business shall not be deemed to be
in violation of this Section 5.08; and
(ii) the acquisition by Seller or any of its Affiliates of any Person that
operates a PEO Business shall not be deemed to be in violation of this Section 5.08 as long
as the revenues of such PEO Business constitute less than ten percent of the
total revenues of such acquired Person, and the acquisition of Seller or any of
its Affiliates by any Person that operates a PEO Business shall not be deemed to
be in violation of this Section
5.08.
(b) For
a period of ten years after the Closing, the Seller shall not in any way,
directly or indirectly, without the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld, conditioned or delayed, for
the purpose of conducting or engaging in the PEO Business, solicit any customers
of the Company or any Company Subsidiary with whom the Company or any Company
Subsidiary had dealings during the period of time in which the Company or such
Company Subsidiary was an Affiliate of the Seller, or induce or attempt to
induce any officer, employee, representative or agent of the Company or any
Company Subsidiary to leave the employment of the Company or such Company
Subsidiary; provided,
however, that the
foregoing shall not prohibit a general solicitation to the public of general
advertising.
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(c) Notwithstanding
anything in the foregoing Sections 5.08(a) and
(b) to the contrary, neither the Seller nor any of its Affiliates shall
be prohibited by virtue of the provisions of this Section 5.08 from
conducting any business other than the PEO Business (subject to the exceptions
set forth above).
(d) The
Restricted Period shall be extended by the length of any period during which the
Seller is determined by a court of competent jurisdiction to have been in breach
of the terms of this Section
5.08.
(e) The
Seller acknowledges that the covenants of the Seller set forth in this Section 5.08 are an
essential element of this Agreement and that, but for the agreement of the
Seller to comply with these covenants, the Purchaser would not have entered into
this Agreement. The Seller acknowledges that (i) this Section 5.08
constitutes an independent covenant that shall not be affected by performance or
nonperformance of any other provision of this Agreement by the Purchaser, and
(ii) a portion of the Purchase Price to be set forth in the Allocation shall be
consideration allocable to such independent covenant. The Seller has
independently consulted with its counsel and after such consultation agrees that
the covenants set forth in this Section 5.08 are
reasonable and proper.
(f) As
used in this Agreement, the term “PEO Business” shall mean the business of
providing clients with a mechanism to outsource the management of human
resources, employee benefits, payroll and workers’ compensation through the
establishment and maintenance of an employer relationship with the employees at
the client's worksite and by contractually assuming certain employer rights,
responsibilities, and risk.
SECTION
5.09 Post-Closing Insurance
Matters. (a)
For a period of ten years after the Closing, the Seller’s insurance Subsidiaries
shall have a right of first refusal to provide workers’ compensation coverage to
any New Client placed by a broker of record appointed by the Purchaser (after
appointment as a producer by the Seller’s insurance Subsidiaries) and referred
by a Selective Agent at the time such New Client enters into an Employee-Leasing
Arrangement with the Purchaser or its Subsidiaries on the following
conditions: (i) the coverage is subject to the underwriting,
criteria, rules and guidelines of the Seller’s insurance Subsidiaries, as the
same may be amended from time to time in the ordinary course of business, and
(ii) the terms and pricing of the coverage are pursuant to Law and commercially
reasonable when compared to comparable policies the Purchaser could otherwise
offer to New Clients from an insurer with a similar rating as Seller at the
timely.
(b) (1)
For a period of three years after the Closing and except as required by Law or
with the prior consent of the Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed, the Seller’s insurance Subsidiaries shall not
provide workers’ compensation coverage to any Person engaged in the PEO Business
other than a Subsidiary of the Seller subsequently acquired pursuant to the
provisions of Section
5.08(a); provided, however, that the foregoing
provision shall not prohibit the Seller’s insurance Subsidiaries from providing
any non-workers’ compensation insurance of any kind to any non-PEO Business
Affiliate of a Person that is engaged in the PEO Business (a “Non-PEO Business
Affiliate”).
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(2) For a
period of seven years after the third anniversary of the Closing and except as
may be required by Law or with the prior consent of the Purchaser, which consent
shall not be unreasonably withheld, conditioned or delayed, the Seller’s
insurance Subsidiaries shall not provide workers’ compensation coverage through
a Master Policy or Master Policies to any Person engaged in the PEO Business;
provided, however, that the foregoing provision shall not prohibit the Seller's
insurance Subsidiaries from providing any non-master workers' compensation or
other property or casualty insurance of any kind to any Person, including any
Non-PEO Business Affiliate.
(3)
Notwithstanding the foregoing, for a period of seven years after the third
anniversary of the Closing, the Seller’s insurance Subsidiaries may provide
workers’ compensation coverage through Multiple Coordinated Workers Compensation
Policies (“MCWCPs”) to Persons
engaged in the PEO Business on the following conditions: (i) the MCWCPs are
subject to the underwriting, criteria, rules and guidelines of the Seller’s
insurance Subsidiaries, as the same may be amended from time to time in the
ordinary course of business; and (ii) the terms and pricing of the coverage of
the MCWPCs are no more favorable than those provided by the Seller's insurance
Subsidiaries to the Purchaser and its Subsidiaries, to the extent permitted by
Law; provided, however, that, except as
expressly provided above, the foregoing provision shall not limit the ability of
the Seller's insurance Subsidiaries to provide any property or casualty
insurance of any kind to any Person, including any Non-PEO Business
Affiliate.
(c) For
a period of one year after the Closing, the Seller’s insurance Subsidiaries
shall offer to provide workers’ compensation coverage through a Master Policy or
Master Policies or, where required by Law, MCWCPs for the Purchaser and its
Subsidiaries that are placed by a broker of record appointed by the Purchaser
(after appointment as a producer by the Seller's insurance Subsidiaries) and
that cover risks that are referred by a Selective Agent on the following
conditions: (i) the Master Policy or Policies and MCWCPs, as applicable, are
subject to the underwriting, criteria, rules and guidelines of the Seller’s
insurance Subsidiaries, as the same may be amended from time to time in the
ordinary course of business; and (ii) the coverage and pricing of the Master
Policy or Policies and MCWCPs, as applicable, are pursuant to Law and
commercially reasonable.
(d) For
a period of nine years after the first anniversary of the Closing, the Seller’s
insurance Subsidiaries shall offer to provide workers’ compensation coverage
through MCWCPs to the Purchaser and its Subsidiaries that are placed by a broker
of record appointed by the Purchaser (after appointment as a producer by the
Seller’s insurance Subsidiaries) and that cover risks that are referred by a
Selective Agent on the following conditions: (i) the MCWCPs are
subject to the underwriting, criteria, rules and guidelines of the Seller’s
insurance Subsidiaries, as the same may be amended from time to time in the
ordinary course of business, and (ii) the coverage and pricing of the MCWCPs are
pursuant to Law and commercially reasonable, it being acknowledged and agreed
that the Seller's insurance Subsidiaries shall use their respective commercially
reasonable efforts to cause the pricing of any MCWCPs provided pursuant to this
Section 5.09(d)
to be the same as the pricing of the aggregate of the previously provided Master
Policy or Master Policies and MCWCPs, as applicable, given then current
circumstances.
53
(e) In
furtherance of the provisions of Section 5.09(c), for
a period commencing on the Closing and ending on the date when there are no
longer any Master Policies from the Seller's insurance Subsidiaries in place
pursuant to Section
5.09(c), the Purchaser shall supply the Seller's insurance Subsidiaries
with: (i) a monthly list of the Purchaser's co-employers that are covered by any
workers’ compensation carrier other than the Seller's insurance Subsidiaries,
which list shall include (A) the identity of each such carrier, (B) the
effective date and termination date, if any, of the coverage, (C) the policy
limits and deductible amounts applicable to such coverage and (D) the addresses
of all locations of each applicable co-employer’s operations in all
jurisdictions; and (ii) a complete list of all coverage amounts and carriers,
including deductible amounts and self-insured retentions, for the errors and
omissions insurance coverage (and excess limits available therefor) of the
Purchaser and its Subsidiaries, as in effect from time to time after the
Closing. For as long as a Master Policy or Master Polices are in
effect from the Seller's insurance Subsidiaries pursuant to Section 5.09(c), the
Seller or its insurance Subsidiaries shall be entitled to conduct up to four
audits per policy year (one per quarter) of the Purchaser’s books and records
for the purpose of verifying the information provided by the Purchaser pursuant
to this Section
5.09(e). The Purchaser shall make its appropriate personnel
and its books and records available during normal business hours and shall
reasonably cooperate with any such audit. The Purchaser acknowledges
and agrees that in order for the Seller to provide to the Purchaser and its
Subsidiaries the Master Policy or Master Policies referenced in Section 5.09(c), the
Seller will require the Purchaser to provide the information described in this
Section 5.09(e)
and such other information as the Seller shall reasonably request in connection
therewith. In furtherance of the foregoing, the parties hereto agree
to negotiate in good faith to develop appropriate procedures for the provision
of such information by no later than November 30, 2009 and, if such procedures,
in a form reasonably acceptable to the Seller, are not agreed upon by such date,
then the Seller's insurance Subsidiaries shall not be required to comply with
their obligations under Section 5.09(c) and
may issue MCWCPs instead of a Master Policy or Master Policies.
(f) Notwithstanding
the foregoing provisions of this Section 5.09, in the
event that any payments have been accelerated under Section 2.08(d)
hereof, the Seller may, at its sole and absolute election, determine to
terminate, in whole or in part, and at any time and from time to time
thereafter, the foregoing provisions of this Section
5.09.
(g) Except
as set forth in the foregoing provisions of this Section 5.09, the
Seller’s insurance Subsidiaries shall be entitled to terminate, effective from
and after the Closing, any insurance policy maintained by any of the Seller’s
insurance Subsidiaries for the benefit of the Company or the Company
Subsidiaries, including without limitation any property or other casualty
insurance including workers compensation polices covering SHRS VI.
SECTION
5.10 Release. The
Seller covenants and agrees, on or prior to the Closing, to execute and deliver
to the Company, for the benefit of the Company and each Company Subsidiary, a
general release and discharge, in substantially the form set forth in Exhibit 5.10,
releasing and discharging the Company and each Company Subsidiary from any and
all Liabilities to the Seller and its Affiliates.
54
SECTION
5.11 Certain Payments. All
bonuses due to employees of the Company or the Company’s Subsidiaries, if any,
or commissions or bonuses due to agents of the Company or the Company’s
Subsidiaries, if any, in each case relating to or arising from actions taken or
services provided prior to December 31, 2009, shall either be paid by Seller or
accrued by the Company prior to the Closing (in which case they shall be
paid by the Purchaser).
SECTION
5.12 Bulk Transfer Laws. The
Purchaser hereby waives compliance by the Seller with any applicable bulk sale
or bulk transfer laws of any jurisdiction in connection with the sale of the
Purchased Assets to the Purchaser (other than any obligations with respect to
the application of the proceeds therefrom). Pursuant to Article IX, the
Seller has agreed to indemnify the Purchaser against any and all liabilities
(including any liabilities for Taxes of Seller as a transferee or otherwise)
which may be asserted by third parties against the Purchaser as a result of the
Seller’s noncompliance with any such law.
SECTION
5.13 Intercompany
Arrangements. (a) Prior to the Closing, the Seller shall cause
any contract or arrangement, whether oral or written, that is disclosed (or
should have been disclosed) in Section 3.18(a)(vii)
of the Disclosure Letter, other than those contracts or arrangements set forth
in Section 5.13
of the Disclosure Letter, to be terminated or otherwise amended to exclude the
Company and any Company Subsidiaries as a party thereto.
(b) Immediately
prior to the consummation of the Closing, all intercompany Indebtedness owed by
the Company and any Purchased Subsidiary to the Seller and its Affiliates (other
than the Company and the Purchased Subsidiaries) and all intercompany
Indebtedness owed by the Seller and its Affiliates (other than the Company and
the Purchased Subsidiaries) to the Company and any Purchased Subsidiary shall,
in each case, be settled.
(c) The
provisions of this Section 5.13 shall
not apply with respect to workers compensation matters, which shall be governed
by other provisions of this Agreement, as applicable.
SECTION
5.14 Excluded
Contracts. (a) Prior to the Closing, the Seller
shall use its commercially reasonable efforts to cause any contract or
arrangement listed on Section 5.14(a) of
the Disclosure Letter (such contracts or agreements being “Excluded Contracts”)
to be terminated or otherwise amended to exclude the Company and any Company
Subsidiaries as a party thereto without incurring any Liabilities to the Company
or any Company Subsidiaries as a result of such termination or
amendment.
(b) Prior
to the Closing, the Seller shall, with respect to each insurance policy listed
on Section 5.14(b)
of the Disclosure Letter (such policies being “Excluded Policies”),
use its commercially reasonable efforts to (i) notify the carrier under such
Excluded Policy of the change of control that will result from the Closing, (ii)
request that such Excluded Policy coverage continue until termination of the
policy period but only in respect of claims for actions taking place
prior to the Closing; and (iii) if necessary, request the extended
reporting periods, if any, available without cost under such Excluded
Policy.
55
SECTION
5.15 [Reserved].
SECTION
5.16 Transition
Services. Following the Closing, (i) the Seller shall provide,
or cause to be provided, to the Business certain services that are currently
provided by the Seller and its Affiliates to the Business, and (ii) the
Purchaser shall provide, or cause the Company to provide, to the Seller certain
services that are currently provided by the employees of the Company and the
Company Subsidiaries for the benefit of the Company and the Seller, in each
case, on a transitional basis and as more fully set forth in Exhibit
5.16. In furtherance of the foregoing, the parties agree to
negotiate in good faith and enter into at the Closing one or more transition
services agreements providing for the services set forth in Exhibit 5.16 hereto
and otherwise in form and substance reasonably satisfactory to each of the
Seller and the Purchaser (the “Transition Services
Agreement(s)”), it being acknowledged and agreed that the parties shall
use their respective commercially reasonable efforts to cause the definitive
terms of such Transition Services Agreement(s) to be finalized by no later than
November 15, 2009.
SECTION
5.17 Further Action. Each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all appropriate action, do or cause to be done all things necessary, proper or
advisable under applicable Law, and to execute and deliver such documents and
other papers, as may be required to carry out the provisions of this Agreement
and the Ancillary Agreements to which it is a party and consummate and make
effective the transactions hereby and thereby contemplated hereby and
thereby. Subsequent to the Closing, the Seller and the Company
Subsidiaries shall consent to and execute any and all documentation necessary to
support the transfers of state unemployment tax experience as the Purchaser
shall reasonably request.
SECTION
5.18 Risk of Loss. The Purchaser
shall bear all risk of loss or damage to any Leased Real Property from and after
the Closing Time subject to and in accordance with the applicable lease
agreement.
SECTION
5.19 Merger of Company
Subsidiaries. The Seller shall (A) cause the Company and each
of the Company Subsidiaries to enter into an agreement and plan of merger
pursuant to which, effective at 12:02 A.M. on the Closing Date, (i) each of the
Company Subsidiaries will merge with and into the Company with the Company
surviving each merger (collectively, the “Merger”) and,
immediately thereafter, the Company shall distribute to the Seller all rights,
if any, of the Company or the Company Subsidiaries to the receipt of any cash
consideration pursuant to this Agreement, including without limitation, any
consideration for the sale of the Purchased Assets and any claim to any portion
of the Purchase Price whether payable before, on or after the Closing Date, and
(B) shall cause the Company and each of the Company Subsidiaries to
take all actions reasonably necessary to effectuate the closing of the Merger at
12:02 A.M. on the Closing Date; provided, however, that all aspects of
the Merger shall be in form and substance reasonably acceptable to the
Purchaser.
SECTION
5.20 Limited Liability Company
Conversion. Prior to the Closing, the Seller shall cause the
Company to convert from a Florida corporation to a limited liability company
organized and existing under the laws of the State of Florida (the “Conversion”); provided, however, that (a) the
Conversion shall be in form and substance reasonably acceptable to the Purchaser
and (b) the Company shall use its commercially reasonable efforts to effectuate
the Conversion in a manner which maintains the IRS Employer Identification
Number of the Company as of the date hereof as the IRS Employer Identification
Number of the Company subsequent to the Conversion.
56
SECTION
5.21 Estimated Initial
Payment. The Purchaser and the Seller shall work together in
good faith to prepare the Estimated Initial Payment Statement, which shall be
delivered not less than ten Business Days prior to the Closing; provided, however, that the Seller
shall be solely responsible for the content thereof.
SECTION
5.22 Operational
Independence. Subject to the terms of this Agreement and the
Ancillary Agreements, subsequent to the Closing, the Purchaser shall have sole
discretion with regard to all matters relating to the operation of the Business,
including but not limited to, increasing the prices charged for services of
Business, terminating existing clients accepting or rejecting new clients,
including those referred to the Company by Selective Agents; provided, however, that the Purchaser
shall use commercially reasonable efforts to preserve the operation of the
Business and shall take no action for the primary purpose of reducing the
Purchase Price payable to the Seller hereunder.
SECTION
5.23 Financial Statements. From
and after the Closing Date, the Purchaser shall provide the Seller with such
cooperation and information as the Seller may reasonably require in connection
with its preparation of financial statements of the Seller with respect to any
and all periods beginning prior to the Closing Date.
ARTICLE
VI
EMPLOYEE
MATTERS
SECTION
6.01 Termination of
Employees. As of the Closing, the Seller, the Company or the
Company Subsidiaries, as the case may be, shall terminate the employment of all
employees of the Company or the Company Subsidiaries (collectively, the “Terminated
Employees”) other than those employees of the Company or the Company
Subsidiaries who are SHRS WSEEs. For the avoidance of doubt, the
Company shall not terminate any SHRS ASO Employees pursuant to this Section
6.01. The Seller, the Company or the Company Subsidiaries, as
the case may be, shall notify all of the Terminated Employees of their
termination and provide such Terminated Employees with any notices required
under the WARN Act no later than November 1, 2009.
SECTION
6.02 Employee-Related Costs. The
Seller shall be responsible for complying with any and all obligations imposed
upon it under the WARN Act in respect of the Terminated Employees and shall,
pursuant to Article
IX, indemnify and hold the Purchaser and its Affiliates harmless from any
claims, liabilities, costs and penalties suffered by the Purchaser and/or its
Affiliates because of the Seller’s failure to comply with its WARN Act
obligations. Except as set forth in Section 6.03, the
Purchaser shall not be liable to the Seller, the Company or the Company
Subsidiaries for any severance obligations, benefit obligations or any other
Liabilities in connection with the termination of the Terminated Employees, all
of which Liabilities shall either be paid by the Seller or accrued by the
Company prior to the Closing (in which case they shall be paid by the
Purchaser).
57
SECTION
6.03 COBRA. The Purchaser shall,
at its cost, provide and be solely responsible for any continuation coverage
required under COBRA to each individual who is a current or former employee of
the Company or the Company Subsidiaries (including without limitation any SHRS
WSEE or SHRS ASO Employee) or otherwise a “qualified beneficiary” as that term
is defined in COBRA in respect of any such current or former employee, in any
event regardless of whether the applicable “qualifying event” (as defined in
COBRA) occurs before, on or after the Closing Date, and including without
limitation any COBRA obligations arising out of the transactions contemplated in
this Agreement.
ARTICLE
VII
TAX
MATTERS
SECTION
7.01 Indemnity. (a) The Seller
agrees to indemnify and hold harmless the Purchaser, the Company and each
Company Subsidiary against Excluded Taxes and, except as otherwise provided in
Section 7.04,
against any loss, damage, liability or expense, including reasonable fees for
attorneys and other outside consultants incurred in contesting or otherwise in
connection with any such Excluded Taxes; provided, however, that the Seller
shall have no obligation to indemnify and hold harmless the Purchaser, the
Company or any Company Subsidiary unless and until the amount of Taxes paid by
the Purchaser, the Company or any Company Subsidiary that would otherwise be
subject to indemnification by the Seller pursuant to this Article VII
(including payments made to the Seller pursuant to Section 7.02(c)) exceeds the
amount of the reserves for Taxes of the Company and the Company Subsidiaries
which is used in the calculation of the Net Working Capital calculated in
reference to the Closing Balance Sheet.
(b) In
the case of Taxes that are payable with respect to a Straddle Period, the
portion of any such Tax that is allocable to the portion of the Straddle Period
ending on the Closing Date shall be:
(i) in
the case of 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) (other than
conveyances pursuant to this Agreement, as provided under Section 7.07), deemed
equal to the amount which would be payable if the taxable year ended on the
Closing Date; and
(ii) in
the case of Taxes imposed on a periodic basis with respect to the assets of the
Company or any Company Subsidiary or otherwise measured by the level of any
item, deemed to be the amount of such Taxes for the entire period (or, in the
case of such Taxes determined on an arrears basis, 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 period ending on the Closing Date
and the denominator of which is the number of calendar days in the entire
Straddle Period. Any credit or refund resulting from an overpayment
of Taxes for a Straddle Period shall be prorated based upon the method employed
in this paragraph (b) taking into account type of the Tax to which the refund
relates. In the case of any Tax based upon or measured by capital
(including net worth or long-term debt) or intangibles, any amount thereof
required to be allocated under this (b) shall be computed
by reference to the level of such items on the Closing Date. All
determinations necessary to effect the foregoing allocations shall be made in a
manner consistent with prior practice of the Seller, the Company and the Company
Subsidiaries.
58
SECTION
7.02 Returns and Payments. (a)
From the date of this Agreement through and after the Closing, the Seller shall
prepare or cause to be prepared all Tax Returns relating to the Purchased
Assets, the Business, the Company and the Company Subsidiaries that are due on
or before or relate to any taxable period ending on or before the Closing Date
(and the Purchaser shall do the same with respect to any taxable period ending
after the Closing Date). Tax Returns of the Company and the Company Subsidiaries
or relating to the Purchased Assets or the Business not yet filed for any
taxable period that begins before the Closing Date shall be prepared in a manner
consistent with past practices employed with respect to the Seller, the Company
and the Company Subsidiaries (except to the extent that counsel for the Seller
or the Company renders a legal opinion that there is no reasonable basis in law
therefor or determines that a Tax Return cannot be so prepared and filed without
being subject to penalties). With respect to any such Tax Return required to be
prepared by the Purchaser or the Seller, the preparing party shall provide the
other party and its authorized representatives with a copy of such completed Tax
Return and, if applicable, a statement certifying the amount of Tax shown on
such Tax Return that is allocable to such other party pursuant to Section
7.01(b) and/or payable to such other party pursuant to Section 7.02(c), together
with appropriate supporting information and schedules at least 20 Business Days
prior to the due date (including any extension hereof) for the filing of such
Tax Return, for all Taxes with the exception of payroll taxes and
five Business Days for such Tax Return that is for payroll taxes and such other
party and its authorized representatives shall have the right to review and
comment on such Tax Return and statement prior to the filing of such Tax
Return.
(b) The
Seller shall pay or cause to be paid when due and payable all Taxes with respect
to the Company and the Company Subsidiaries or relating to the Purchased Assets
or the Business for any Pre-Closing Period (subject to its rights set forth in
Section 7.02(c)), and the Purchaser shall so pay or cause to be paid all Taxes
for any Post-Closing Period (subject to its right of indemnification from the
Seller by the date set forth in Section 7.05 for Taxes attributable to the
portion of any Straddle Period pursuant to Section 7.01(a) and Section
7.01(b)).
(c) The
Purchaser shall pay or cause to be paid to the Seller at least three Business
Days before the due date of the applicable estimated or final Tax Return
required to be filed by the Seller, without regard to whether the Tax Return
shows overall net income or loss for such period, an amount equal to the lesser
of (i) the amount of Excluded Taxes shown as unpaid and owed on such Tax Return
and (ii) the amount of the reserves for Taxes of the Company and the Company
Subsidiaries which is used in the calculation of the Net Working Capital
calculated in reference to the Closing Balance Sheet for such Excluded Tax
reduced by any amount previously paid by Purchaser either to the Seller or an
appropriate Governmental Authority, in each case in respect of Excluded
Taxes. The Seller shall be entitled to recover professional fees and
related costs that it may reasonably incur to enforce the provisions of this
Section 7.02(c).
59
(d) The
Purchaser shall file or otherwise furnish all such Tax Returns that it is
required to furnish (including Tax Returns for Pre-Closing Periods that are not
due until after the Closing Date that relate to payroll taxes) in proper form to
the appropriate Governmental Authority (or cause to be prepared and filed or so
furnished) in a timely manner and shall provide proof of such timely filing to
the Seller promptly after the filing of any Pre-Closing Period or Straddle
Period Tax Returns and the Seller shall file or otherwise furnish all such tax
Returns that it is required to furnish in proper form to the appropriate
Governmental Authority (or cause to be prepared and filed or so furnished) in a
timely manner and shall provide proof of such timely filing to the Seller
promptly after the filing.
SECTION
7.03 Tax Refunds. Any Tax refund
(including any interest with respect thereto) relating to the Purchased Assets,
the Business, the Company or any Company Subsidiary for any Pre-Closing Period
shall be the property of the Purchaser, and if received by the Seller or any
Company Subsidiary shall be paid over promptly to the Purchaser.
SECTION
7.04 Contests. (a) After the
Closing, the Purchaser shall promptly notify the Seller in writing of any
written notice of a proposed assessment or claim in an audit or administrative
or judicial proceeding of the Purchaser or any of the Purchased Assets, the
Business, the Company and the Company Subsidiaries which, if determined
adversely to the taxpayer, would be grounds for indemnification under this Article VII; provided, however, that the failure to
give such notice will not affect the Purchaser’s right to indemnification under
this Article
VII except to the extent, if any, that, but for such failure, the Seller
could have avoided all or a portion of the Tax liability in
question.
(b) In
the case of an audit or administrative or judicial proceeding that relates to
Pre-Closing Periods, the Seller shall have the right at its expense to
participate in and control the conduct of such audit or proceeding, but only to
the extent that such audit or proceeding relates solely to a potential
adjustment for which the Seller may be liable; the Purchaser also may
participate in any such audit or proceeding and, if the Seller does not assume
the defense of any such audit or proceeding, the Purchaser may defend the same
in such manner as it may deem appropriate, including settling such audit or
proceeding after five Business Days prior written notice to the Seller setting
forth the terms and conditions of settlement. In the event that
issues relating to a potential adjustment for which the Seller may be liable are
required to be contested in the same audit or proceeding as separate issues
relating to a potential adjustment for which the Purchaser would be liable, the
Purchaser shall have the right, at its expense, to control the audit or
proceeding with respect to the latter issues.
(c) With
respect to issues relating to a potential adjustment for which both the Seller
and the Purchaser or the Company or any Company Subsidiary could be liable, (i)
both the Seller and the Purchaser may participate in the audit or proceeding,
and (ii) the audit or proceeding shall be controlled by that party which would
bear the burden of the greater portion of the sum of the adjustment and any
corresponding adjustments that may reasonably be anticipated for future taxable
periods. The principle set forth in this Section 7.04(c) also
shall govern for purposes of deciding any issue that must be decided jointly
(including choice of judicial forum) in situations in which separate issues are
otherwise controlled under this Article VII by the
Purchaser and the Seller.
60
(d) With
respect to any Tax audit or proceeding that could affect a taxable period that
begins before the Closing Date, neither the Purchaser nor the Seller shall enter
into any compromise or agree to settle any claim pursuant to such audit or
proceeding which would adversely affect the other party for such taxable period
or a subsequent taxable period without the written consent of the other party,
which consent may not be unreasonably withheld. The Purchaser and the
Seller agree to cooperate, and the Purchaser agrees to cause the Company and the
Subsidiaries to cooperate, in the defense against or compromise of any claim in
any such audit or proceeding.
SECTION
7.05 Time of Payment. Payment by
the Seller of any amounts due under this Article VII in
respect of Taxes shall be made (a) at least three Business Days before the
due date of the applicable estimated or final Tax Return required to be filed by
the Purchaser on which is required to be reported income for a taxable period
ending after the Closing Date for which the Seller is responsible under Section 7.01(a) and
Section 7.01(b)
without regard to whether the Tax Return shows overall net income or loss for
such period; provided,
however, that payment
by the Seller shall not be required any sooner than 17 Business Days after a
copy of such Tax Return is provided to Seller pursuant to Section 7.02, and (b)
other than with respect to those amounts described in clause (a) of this
sentence, within three Business Days following an agreement between the
Seller and the Purchaser that an indemnity amount is payable, an assessment of a
Tax by a taxing authority, or a “determination” as defined in Section 1313(a) of
the Code. If liability under this Article VII is in
respect of costs or expenses other than Taxes, payment by the Seller of any
amounts due under this Article VII shall be
made within thirty Business Days after the date when the Seller has been
notified by the Purchaser that the Seller has a liability for a determinable
amount under this Article VII and is
provided with calculations or other materials supporting such
liability.
SECTION
7.06 Tax Cooperation and Exchange of
Information. The Seller and the Purchaser shall provide each
other with such cooperation and information as either of them reasonably may
request of the other (and the Purchaser shall cause the Company and the Company
Subsidiaries to provide such cooperation and information) in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting any
audit or other proceeding in respect of Taxes or making representations to or
furnishing information to parties subsequently desiring to purchase any part of
the Purchased Assets, the Business, the Company or the Company Subsidiaries from
the Purchaser. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
related work papers and documents relating to rulings or other determinations by
taxing authorities. The Seller and the Purchaser shall make
themselves (and their respective employees) reasonably available on a mutually
convenient basis to provide explanations of any documents or information
provided under this Section
7.06. Notwithstanding anything to the contrary in Section 5.02 hereto,
each of the Seller and the Purchaser shall retain all Tax Returns, work papers
and all material records or other documents in its possession (or in the
possession of its Affiliates) relating to Tax matters relevant to the Purchased
Assets, the Business, the Company or any Company Subsidiary for any taxable
period that includes the Closing Date and for all prior taxable periods until
the later of (i) the expiration of the statute of limitations of the
taxable periods to which such Tax Returns and other documents relate, without
regard to extensions or (ii) six years following the due date (without
extension) for such Tax Returns. After such time, before the Seller
or the Purchaser shall dispose of any such documents in its possession (or in
the possession of its Affiliates), the other party shall be given an
opportunity, after 90 days prior written notice, to remove and retain all or any
part of such documents as such other party may select (at such other party’s
expense). Any information obtained under this Section 7.05 shall be
kept confidential, except 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.
61
SECTION
7.07 Conveyance Taxes. The
Purchaser shall be liable for and shall hold the Seller harmless against any
Conveyance Taxes which become payable in connection with the transactions
contemplated by this Agreement. The Purchaser, after the review and
consent by the Seller, shall file such applications and documents as shall
permit any such Conveyance Tax to be assessed and paid on or prior to the
Closing in accordance with any available pre-sale filing
procedure. The Seller shall execute and deliver all instruments and
certificates necessary to enable the Purchaser to comply with the
foregoing. The Seller shall complete and execute a resale or other
exemption certificate with respect to the inventory items sold hereunder, and
shall provide the Purchaser with an executed copy thereof.
SECTION
7.08 Miscellaneous. (a) The
Seller and the Purchaser agree to treat all payments made by either of them to
or for the benefit of the other (including any payments to the Company or any
Company Subsidiary) under this Article VII, under
other indemnity provisions of this Agreement and for any misrepresentations or
breaches of warranties or covenants as adjustments to the Purchase Price for Tax
purposes.
(b) All
payments payable under any tax sharing agreement or arrangement between the
Seller and the Company or any Company Subsidiary for any taxable period ending
on or prior to the Closing shall be calculated on a basis consistent with past
practice and shall be payable in full prior to the Closing. Any such
tax sharing agreement or arrangement between the Seller and the Company or any
Company Subsidiary shall be terminated prior to the Closing.
(c) Notwithstanding
any provisions in this Agreement to the contrary, the obligations of the Seller
to indemnify and hold harmless the Purchaser, the Company and the Company
Subsidiaries pursuant to this Article VII, and the
representations and warranties contained in Section 3.31, shall
terminate at the close of business on the 90th day following the expiration of
the applicable statute of limitations with respect to the Tax liabilities in
question (giving effect to any waiver, mitigation or extension
thereof).
(d) From
and after the date of this Agreement, the Seller shall not, without the prior
written consent of the Purchaser (which may, in its sole and absolute
discretion, withhold such consent), make, or cause or permit to be made, any Tax
election that would affect the Company or any Company Subsidiary except to the
extent required by Law.
(e) For
purposes of this Article VII, “the
Purchaser” and “the Seller”, respectively, shall include each member of the
affiliated group of corporations of which it is or becomes a member (other than
the Company and the Company Subsidiaries, except to the extent expressly
referenced).
(f) The
Purchaser shall be entitled to recover professional fees and related costs that
it may reasonably incur to enforce the provisions of this Article
VII.
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(g) Notwithstanding
anything to the contrary in this Agreement, in the event that any provision of
this Agreement regarding the rights and obligations of the parties with respect
to indemnification for any and all Tax matters conflicts with the provisions of
this Article
VII, other than the limits on indemnification for Taxes described in
Section 9.04,
such rights and obligations shall be governed solely by this Article
VII.
ARTICLE
VIII
CONDITIONS TO
CLOSING
SECTION
8.01 Conditions to Obligations of the
Seller. The obligations of the Seller to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or written waiver, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties
and Covenants. (i) The representations and warranties of the
Purchaser contained in this Agreement (x) that are not qualified by
“materiality” shall have been true and correct in all material respects when
made and shall be true and correct in all material respects as of the Closing
with the same force and effect as if made as of the Closing and (y) that
are qualified by “materiality” shall have been true and correct when made and
shall be true and correct as of the Closing with the same force and effect as if
made as of the Closing, except to the extent such representations and warranties
are as of another date, in which case, such representations and warranties shall
be true and correct as of that date, with the same force and effect as if made
as of the Closing, and (ii) the covenants and agreements contained in this
Agreement to be complied with by the Purchaser on or before the Closing shall
have been complied with in all material respects.
(b) No Proceeding or
Litigation. No Action shall have been commenced by or before
any Governmental Authority against any of the Seller, the Company, the Company
Subsidiaries, the Purchaser or the Acquiring Subsidiaries, seeking to restrain
or materially and adversely alter the transactions contemplated by this
Agreement which, in the reasonable, good faith determination of the Seller, is
likely to prevent the consummation of such transactions; provided, however, that the provisions
of this Section
8.01(b) shall not apply if the Seller has directly or indirectly
solicited or encouraged any such Action.
(c) Consents and
Approvals. Subject to Section 5.04(d), the
Purchaser and the Seller shall have received, each in form and substance
reasonably satisfactory to the Seller, all authorizations, consents, orders and
approvals of all Governmental Authorities and officials and all third party
consents listed in Section
8.02(c).
SECTION
8.02 Conditions to Obligations of the
Purchaser. The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
or written waiver, at or prior to the Closing, of each of the following
conditions:
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(a) Representations, Warranties
and Covenants. (i) The representations and warranties of the
Seller contained in this Agreement (x) that are not qualified by “materiality”
or “Material Adverse Effect” shall have been true and correct in all material
respects when made and shall be true and correct in all material respects as of
the Closing with the same force and effect as if made as of the Closing and
(y) that are qualified by “materiality” or Material Adverse Effect” shall
have been true and correct when made and shall be true and correct as of the
Closing with the same force and effect as if made as of the Closing, except to
the extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct as of that
date, with the same force and effect as if made as of the Closing, and except in
the case of clause (y) above for such failure of such representations and
warranties to be true and correct that would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect, and (ii) the
covenants and agreements contained in this Agreement to be complied with by the
Seller on or before the Closing shall have been complied with in all material
respects.
(b) No Proceeding or
Litigation. No Action shall have been commenced or threatened
by or before any Governmental Authority against any of the Seller, the Company,
the Company Subsidiaries, the Purchaser or the Acquiring Subsidiaries, seeking
to restrain or materially and adversely alter the transactions contemplated by
this Agreement which, in the reasonable, good faith determination of the
Purchaser, is likely to prevent the consummation of such transactions or which
would reasonably be expected to have a Material Adverse Effect provided, however, that the provisions
of this Section
8.02(b) shall not apply if the Purchaser has directly or indirectly
solicited or encouraged any such Action.;
(c) Consents and
Approvals. Subject to Section 5.04(d), the
Purchaser and the Seller shall have received, each in form and substance
reasonably satisfactory to the Purchaser, all authorizations, consents, orders
and approvals of all Governmental Authorities and officials and all third party
consents set forth in Section 8.02(c) of the
Disclosure Letter.
(d) No Material Adverse
Effect. No event or events shall have occurred which,
individually or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect.
(e) Conversion. The
Seller shall have completed the Conversion and provided the Purchaser with
evidence thereof reasonably satisfactory to the Purchaser.
(f) Merger. The
Seller shall have taken all such actions as are necessary so that the Merger
will become effective at 12:02 A.M. on the Closing Date and shall have provided
the Purchaser with evidence thereof reasonably satisfactory to the
Purchaser.
(g) Estimated Initial
Payment. The Seller shall have delivered the Estimated Initial
Payment Statement to the Purchaser no later than ten Business Days prior to the
Closing Date and such Estimated Initial Payment Statement shall have been
reasonably acceptable to the Purchaser in both form and substance.
(h) Net Working Capital
Requirements. As of the Closing Date, the Company shall have
positive Net Working Capital.
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ARTICLE
IX
INDEMNIFICATION
SECTION
9.01 Survival of Representations and
Warranties. (a) The representations and warranties of the
Seller contained in this Agreement shall survive the Closing until the second
anniversary of the Closing; provided, however, that (i) the
representations and warranties made pursuant to the first, third and fourth
sentences of Section 3.01,
the first sentence of Section 3.02, the
first and fifth sentences of Section 3.04(a), the
first sentence of Section 3.04(b), Section 3.23(b) and
Section 3.34
shall survive indefinitely, and (ii) the representations and warranties dealing
with Tax matters, including, for the avoidance of doubt, the representations and
warranties made pursuant to Section 3.31, shall
survive until 90 days after the expiration of the relevant statute of
limitations for the Tax liabilities in question. Neither the period
of survival nor the liability of the Seller with respect to the Seller’s
representations and warranties shall be reduced by any investigation made at any
time by or on behalf of the Purchaser. If written notice of a claim
has been given prior to the expiration of the applicable representations and
warranties by the Purchaser to the Seller, then the relevant representations and
warranties shall survive as to such claim, until such claim has been finally
resolved.
(b) The
representations and warranties of the Purchaser contained in this Agreement
shall survive the Closing until the second anniversary of the Closing; provided, however, that the
representations and warranties made pursuant to Section 4.01 and
Section 4.07
shall survive indefinitely. Neither the period of survival nor the
liability of the Purchaser with respect to the Purchaser’s representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Seller. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties by the
Seller to the Purchaser, then the relevant representations and warranties shall
survive as to such claim, until such claim has been finally
resolved.
SECTION
9.02 Indemnification by the
Seller. The Purchaser and its Affiliates, officers, directors,
employees, agents, successors and assigns (each a “Purchaser Indemnified
Party”) shall be indemnified and held harmless by the Seller for and
against any and all Liabilities, losses, diminution in value, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including
attorneys’ and consultants’ fees and expenses) actually suffered or incurred by
them (including any Action brought or otherwise initiated by any of them)
(hereinafter a “Loss”), arising out
of or resulting from:
(i) the
breach of any representation or warranty made by the Seller contained in this
Agreement;
(ii) the
breach of any covenant or agreement by the Seller contained in this
Agreement;
(iii) any
and all Losses suffered or incurred by the Purchaser, the Company or any Company
Subsidiary by reason of or in connection with any claim or cause of action of
any third party to the extent arising out of any action, inaction, event,
condition, liability or obligation of the Seller occurring or existing prior to
the Closing and not relating to the Company, the Company Subsidiaries or the
Business;
65
(iv) Taxes,
as set forth in Section
7.01;
(v) Liabilities
relating to Terminated Employees or amounts payable pursuant to Section
6.02;
(vi) Litigation
Losses;
(vii) Losses
arising from or related to workers’ compensation insurance and workers’
compensation claims, including claims incurred prior to the Closing Date but not
reported until thereafter;
(viii) Liabilities
arising from or related to any failure to comply with laws relating to bulk
transfers or bulk sales with respect to the transactions contemplated by this
Agreement (notwithstanding the waiver contained in Section 5.12);
or
(ix) Liabilities
resulting directly or indirectly from the provision by the Seller to the
Purchaser of inaccurate information pursuant to Section
3.27(i).
To the
extent that the Seller’s undertakings set forth in this Section 9.02 may be
unenforceable, the Seller shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Purchaser Indemnified Parties.
SECTION
9.03 Indemnification by the
Purchaser. The Seller and its Affiliates, officers, directors,
employees, agents, successors and assigns (each a “Seller Indemnified
Party”) shall be indemnified and held harmless by the Purchaser for and
against any and all Losses, arising out of or resulting from:
(i) the
breach of any representation or warranty made by the Purchaser contained in this
Agreement; or
(ii) the
breach of any covenant or agreement by the Purchaser contained in this
Agreement;
(iii) any
and all Losses suffered or incurred by the Seller by reason of or in connection
with any claim or cause of action of any third party to the extent arising out
of any action, inaction, event, condition, liability or obligation of the
Purchaser, the Company or the Company Subsidiaries occurring after the Closing,
including without limitation any failure by the Purchaser, the Company or the
Company Subsidiaries to make any payment under any contract, lease or agreement
guaranteed by the Seller;
(iv) Liabilities
resulting directly or indirectly from the provision by the Purchaser to the
Seller of inaccurate information pursuant to Section 5.09;
or
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(v)
Liabilities relating to the COBRA obligations of the Purchaser
or amounts payable pursuant to Section
6.03.
To the
extent that the Purchaser’s undertakings set forth in this Section 9.03 may be
unenforceable, the Purchaser shall contribute the maximum amount that it is
permitted to contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Seller Indemnified Parties.
SECTION
9.04 Limits on
Indemnification. Notwithstanding anything to the contrary
contained in this Agreement, except as set forth below: (a) an
Indemnifying Party shall not be liable for any claim for indemnification
pursuant to Section
9.02 or 9.03, unless and
until the aggregate amount of indemnifiable Losses which may be recovered from
the Indemnifying Party equals or exceeds $100,000, after which the Indemnifying
Party shall be liable only for those Losses in excess of $100,000; (b) no
Losses may be claimed under Section 9.02 or Section 9.03 by an
Indemnified Party or shall be reimbursable by an Indemnifying Party or shall be
included in calculating the aggregate Losses set forth in clause (a) above
other than Losses in excess of $5,000 resulting from any single or aggregated
claims arising out of the same facts, events or circumstances; and (c) the
maximum amount of indemnifiable Losses which may be recovered from an
Indemnified Party arising out of or resulting from the causes set forth in Section 9.02 or Section 9.03, as the
case may be, shall be an amount equal to $2,225,000. The provisions of this
Section 9.04
shall not apply with respect to indemnification (A) of either party for Taxes,
provided that an
Indemnifying Party shall not be liable for any claim for indemnification for
Taxes unless and until the aggregate amount of indemnifiable Losses (including
Losses other than for Taxes) which may be recovered from the Indemnifying Party
equals or exceeds $100,000, after which the Indemnifying Party shall be liable
only for those Losses in excess of $100,000, (B) by the Seller of the Purchaser
for Losses arising from or related to workers’ compensation insurance and
workers’ compensation claims, including claims incurred prior to the Closing
Date but not reported until thereafter, (C) by the Seller of the Purchaser for
(x) Litigation Losses or (y) Liabilities resulting directly or indirectly from
the provision by the Purchaser to the Seller of inaccurate information pursuant
to Section
3.27(i), or (D) by the Purchaser of the Seller for (x) Liabilities
resulting directly or indirectly from the provision by the Purchaser to the
Seller of inaccurate information pursuant to Section 5.09
(provided the Seller has not terminated its obligations under Section 5.09(c)
pursuant to Section 5.09(e)) or (y) relating to the COBRA obligations of the
Purchaser or amounts payable pursuant to Section
6.03.
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SECTION
9.05 Notice of Loss; Third Party
Claims. (a) An Indemnified Party shall give the Indemnifying
Party notice of any matter which an Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement, promptly
after, and in any event within 60 days, of such determination, stating the
amount of the Loss, if known, and method of computation thereof, and containing
a reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises. The failure to provide
notice within such time period, however, shall not release the Indemnifying
Party from any of its obligations under this Article IX except to
the extent that the Indemnifying Party is materially prejudiced by such failure
and shall not relieve the Indemnifying Party from any other obligation or
Liability that it may have to any Indemnified Party otherwise than under this
Article
IX. Except where a claim by the Indemnified Party relates to a
Third Party Claim (in which case, the provisions of Section 9.05(b) below
will apply, if the Indemnifying Party does not notify the Indemnified Party
within 30 days following its receipt of such notice that the Indemnifying Party
disputes its liability to the Indemnified Party hereunder, such claim specified
by the Indemnified Party in such notice shall be conclusively deemed a liability
of the Indemnifying Party hereunder and, if the Indemnifying Party is the
Purchaser, the Indemnifying Party shall pay the amount of such liability to the
Indemnified Party on demand, and if the Indemnifying Party is the Seller, the
Indemnifying Party shall pay the amount of such liability to the Indemnified
Party as set forth in Section 9.06; provided, however, in the case of any
notice in which the amount of the claim (or any portion thereof) is estimated,
such payments shall be made only on such later date when the amount of such
claim (or such portion thereof) becomes finally determined. If the
Indemnifying Party has timely disputed its liability with respect to such claim,
as provided above, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved pursuant to Sections 11.11 and
11.12 hereof. If the Indemnifying Party agrees that it has an
indemnification obligation but asserts that it is obligated to pay a lesser
amount than that claimed by the Indemnified Party, the Indemnifying Party shall
pay such lesser amount promptly to the Indemnified Party, without prejudice to
or waiver of the Indemnified Party’s claim for the difference.
(b) (i)
If an Indemnified Party shall receive notice of any Action, audit, demand or
assessment (each, a “Third Party Claim”)
against it or which may give rise to a claim for Loss under this Article IX, within 30
days of the receipt of such notice, the Indemnified Party shall give the
Indemnifying Party notice of such Third Party Claim; provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
obligations under this Article IX except to
the extent that the Indemnifying Party is materially prejudiced by such failure
and shall not relieve the Indemnifying Party from any other obligation or
Liability that it may have to any Indemnified Party otherwise than under this
Article
IX. If the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party hereunder against any Losses that
may result from such Third Party Claim, then the Indemnifying Party shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention to
do so to the Indemnified Party within five days of the receipt of such notice
from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Party, based on the advice of
counsel, for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel in each jurisdiction for which the Indemnified Party determines
counsel is required, at the expense of the Indemnified Party.
(ii) In
the event that the Indemnifying Party exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Indemnified
Party shall cooperate with the Indemnifying Party in such defense and make
available to the Indemnifying Party, at the Indemnifying Party’s expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party’s possession or under the Indemnified Party’s control relating thereto as
is reasonably required by the Indemnifying Party. Similarly, in the
event the Indemnified Party is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Party shall cooperate with
the Indemnified Party in such defense and make available to the Indemnified
Party, at the Indemnified Party’s expense, all such witnesses, records,
materials and information in the Indemnifying Party’s possession or under the
Indemnifying Party’s control relating thereto as is reasonably required by the
Indemnified Party. The party controlling the defense of the Third
Party Claim shall at all times use commercially reasonable efforts to keep the
Indemnified Party or the Indemnifying Party, as the case may be, reasonably
apprised of the status of the defense.
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(iii) No
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed, unless such settlement includes as an
unconditional term thereof the delivery by the claimant to the Indemnified Party
of a written release from all liability in respect of such Third Party
Claim. If the Indemnified Party is in control of the defense of the
Third Party Claim, it may settle the claim on behalf of and for the account and
risk of the Indemnifying Party, who shall be bound by the result; provided, however, that it shall have
exercised efforts in resolving such Third Party Claim consistent with the
efforts that it would have exercised if such settlement was for its own account;
and provided, further, that if a settlement
offer for monetary damages is made by the claimant that includes an
unconditional release of the Indemnified Party and the Indemnifying Party
notifies the Indemnified Party in writing of its willingness to accept such
settlement offer and pay the amount called for by such offer, then the
Indemnifying Party’s obligation with respect to such Third Party Claim shall be
limited to the lesser of (A) the amount of the settlement offer and (B) the
aggregate Losses of the Indemnified Party with respect to such
Claim.
SECTION
9.06 Right of Set-Off. The
Purchaser shall have the right to set-off any amount finally determined in
accordance with the procedures set forth in Section 9.05 hereof
to be owed to the Purchaser under Article VII and this
Article IX
against any portion of the Purchase Price yet to be paid to the Seller; to the
extent any amount payable to the Purchaser pursuant to Article VII or this
Article IX
remain outstanding after such set-off, the Seller shall pay all such amounts by
wire transfer of immediately available funds to an account designated in writing
by the Purchaser. Notwithstanding the foregoing sentence, in the
event that any amount determined in accordance with the procedures set forth in
Section 9.05
hereof to be owed to the Purchaser under Article VII and this
Article IX is
greater than an amount equal to four times the most recently paid Quarterly
Earn-Out Payment (the value of such excess, the “Set-Off Excess
Amount”), the Seller shall pay to the Purchaser that portion of the
Set-Off Excess Amount that is equal to the amount of the Purchase Price which
has been paid to the Seller as of such date, by wire transfer of immediately
available funds to an account designated in writing by the Purchaser; the
remainder of any amounts payable to the Purchaser under Article VII and this
Article IX
shall be paid by the Seller to the Purchaser in accordance with the foregoing
sentence.
SECTION
9.07 Sole Remedy.
(a) The
Purchaser acknowledges and agrees that, if the Closing occurs, its sole and
exclusive remedy (other than for actual fraud) following the Closing with
respect to any and all claims, including Third-Party Claims, relating to the
subject matter of this Agreement shall be pursuant to the provisions set forth
in this Article IX; provided, however, that nothing
contained herein shall prevent an Indemnified Party from pursuing remedies as
may be available to such party under applicable Law in the event of an
Indemnifying Party’s failure to comply with its indemnification obligations
hereunder.
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(b) The
Indemnifying Party shall be subrogated to the rights of the Indemnified Party
(to the extent permitted by the terms of such insurance agreements) in respect
of any insurance relating to the Loss to the extent of any indemnification
payments made hereunder. The Indemnified Party shall be obligated to
use commercially reasonable efforts to mitigate the amount of any Loss for which
such party is entitled to seek indemnification hereunder. Any
liability for indemnification hereunder shall be determined without duplication
of recovery by reason of the state of facts giving rise to such liability
constituting a breach of more than one representation, warranty, covenant or
agreement.
(c) The
Seller and the Purchaser agree to treat (and cause their Affiliates to treat)
any indemnification payment under this Agreement as an adjustment to the
consideration to be transferred between the Seller and the Purchaser in
connection with the transactions contemplated hereby. Any
indemnification obligation under this Agreement shall be net of (i) any
cash tax benefit actually realized by the Indemnified Party or its Affiliates in
the same year that the indemnification obligation is satisfied, and
(ii) any insurance proceeds or any indemnity, contribution or other similar
payment received by the indemnified party or its Affiliates from any third party
with respect thereto, net of any expenses related to the recovery of such
proceeds and the cost of any insurance premiums. The Indemnified
Party shall use commercially reasonable efforts to obtain full recovery under
all insurance policies covering any indemnification obligation to the same
extent as they would if such indemnification obligation were not subject to
indemnification under this Agreement. In the event that an insurance
or other recovery is received by any Indemnified Party with respect to any
indemnification obligation for which any such Person has been indemnified under
this Agreement, then a refund equal to the aggregate amount of the recovery
shall be made promptly to the Indemnifying Party.
(d) Notwithstanding
anything in Article IX to the contrary, any right of a party hereunder to
indemnification for any “Loss” shall not include damages incurred directly or
indirectly as a result of lost profits or any damages that are special,
consequential or punitive in nature, regardless of whether such damages are
permissible by applicable Law.
ARTICLE
X
TERMINATION, AMENDMENT AND
WAIVER
SECTION
10.01 Termination. This Agreement
may be terminated at any time prior to the Closing:
(a) by
written notice:
(i) (A)
from the Seller if the Closing shall not have occurred by January 1, 2010 (the
“Outside Date”); provided, however, that the Seller may elect to extend the
Outside Date until a date not later than January 31, 2010 in the event that both
(x) on January 1, 2010 the only condition to Closing set forth in Article VIII of this
Agreement (other than those conditions that by their nature are to be satisfied
at the Closing) that has not been satisfied or waived is the receipt of any PEO
Approvals set forth in Section 8.02(c) of
the Disclosure Letter and (y) the Seller agrees to pay any additional FICA, FUTA
and SUTA taxes payable by the Purchaser, any SHRS Client or any SHRS ASO Client
solely by reason of such extension resulting in an employee having two employers
during calendar year 2010 (but, for the avoidance of doubt, not any additional
costs associated with the Purchaser having to prepare additional W-2s for any
SHRS WSEE or ASO Client Employee); or (B) from the Seller or the Purchaser if
the Closing has not occurred by January 31, 2010; provided, however, that the right to
terminate this Agreement under this Section 10.01(a)(i)
shall not be available to any party whose failure to comply with any provision
of this Agreement has been the principal cause of, or resulted in, the failure
of the Closing to occur on or before such Outside Date; or
70
(ii) of
the Seller or the Purchaser, if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
or
(b) by
the Purchaser upon a breach of any representation, warranty, covenant or
agreement on the part of the Seller set forth in this Agreement such that the
conditions set forth in Section 8.02 would
not be satisfied as of the time of such breach, if such breach shall be
incapable of being cured or shall not have been cured to such extent as is
necessary to permit such conditions to be satisfied prior to the Outside Date;
provided that the Purchaser
shall not have the right to terminate this Agreement pursuant to this Section 10.01(b) if
the Purchaser is then in breach of any of its representations, warranties,
covenants or agreements such that the conditions in Section 8.01 are
incapable of being satisfied;
(c) by
the Seller upon a breach of any representation, warranty, covenant or agreement
on the part of the Purchaser set forth in this Agreement such that the
conditions set forth in Section 8.01 would
not be satisfied as of the time of such breach, if such breach shall be
incapable of being cured or shall not have been cured to such extent as is
necessary to permit such conditions to be satisfied prior to the Outside Date;
provided that the Seller shall
not have the right to terminate this Agreement pursuant to this Section 10.01(c) if
the Seller is then in breach of any of its representations, warranties,
covenants or agreements such that the conditions in Section 8.02 are
incapable of being satisfied; or
(d) by
the mutual written consent of the Seller and the Purchaser.
SECTION
10.02 Effect of Termination. In
the event of termination of this Agreement as provided in Section 10.01, this
Agreement shall forthwith become void and there shall be no liability on the
part of either party hereto except (a) as set forth in Section 5.03 and
Section 11.01
and (b) that nothing herein shall relieve either party from liability for
any breach of this Agreement.
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ARTICLE
XI
GENERAL
PROVISIONS
SECTION
11.01 Expenses. Except as
otherwise specified in this Agreement, all costs and expenses, including
regulatory filing fees, fees and disbursements of counsel, financial advisors
and accountants, incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have occurred. For the
avoidance of doubt, all costs and expenses of regulatory counsel to the
Purchaser shall be paid by the Purchaser.
SECTION
11.02 Notices. All notices,
requests, claims, demands and other communications hereunder shall in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, or if by facsimile, upon written confirmation of receipt by
facsimile, or otherwise, (b) on the first Business Day following the date of
dispatch if delivered utilizing a next-day service by a recognized next-day
courier or (c) on the earlier of confirmed receipt or the fifth Business Day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid, to the respective parties hereto at
the following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section
11.02):
(a)
|
if
to the Seller:
|
Selective
Insurance Group, Inc.
|
00
Xxxxxxx Xxxxxx
|
||
Xxxxxxxxxxx,
XX 00000
|
||
Telecopy: (000)
000-0000
|
||
Telephone: (000)
000-0000
|
||
Attention: Xxxxxxx
Xxxxx, Esq.
|
||
with
a copy (which shall
|
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
|
|
not constitute notice) to: |
Xxx
Xxxxxx Xxxxxx
|
|
X.X.
Xxx 000
|
||
Xxxxxxxxxx,
XX 00000
|
||
Telecopy: (000)
000-0000
|
||
Telephone: (000)
000-0000
|
||
Attention: Xxxxxx
X. Xxxxxxx, Esq.
|
||
(b)
|
if
to the Purchaser:
|
AlphaStaff
Group, Inc.
|
000
Xxxxxxxxx Xxxxx, Xxxxx 000
|
||
Xxxx
Xxxxxxxxxx, XX 00000
|
||
Telecopy: (000)
000-0000
|
||
Telephone: (000)
000-0000
|
||
Attention: Xxxxxxx
Xxxxxx, Esq.
|
||
with
a copy (which shall
|
Xxxxxxxxx
Xxxxxxx, P.A.
|
|
not constitute notice) to: |
0000
Xxxxxxxx Xxxxxx
|
|
Xxxxx,
XX 00000
|
||
Telecopy: (000)
000-0000
|
||
Telephone:
(000) 000-0000
|
||
Attention:
Xxxxxxx X. Xxxxxxxxx,
Esq.
|
SECTION
11.03 Public
Announcements. Neither party hereto shall make, or cause to be
made, any press release or public announcement in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without prior notification to the other party unless otherwise required by
Law or applicable stock exchange regulation, and the parties hereto shall
cooperate as to the timing and contents of any such press release, public
announcement or communication.
72
SECTION
11.04 Severability. If any term
or other provision of this Agreement is invalid, illegal or incapable of being
enforced by any Law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect for so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party
hereto. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION
11.05 Entire Agreement. This
Agreement and the Ancillary Agreements constitute the entire agreement of the
parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and undertakings, both written and oral, between
the Seller and the Purchaser with respect to the subject matter hereof and
thereof.
SECTION
11.06 Assignment. This Agreement
may not be assigned by operation of law or otherwise without the express written
consent of the Seller and the Purchaser (which consent may be granted or
withheld in the sole discretion of the Seller or the Purchaser); provided, however, that the Purchaser
may assign this Agreement or any of its rights and obligations hereunder to one
or more Affiliates of the Purchaser without the consent of the
Seller.
SECTION
11.07 Amendment. This Agreement
may not be amended or modified except (a) by an instrument in writing
signed by, or on behalf of, the Seller and the Purchaser or (b) by a waiver
in accordance with Section
11.08.
SECTION
11.08 Waiver. Either party to
this Agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained herein or in any
document delivered by the other party pursuant hereto or (c) waive
compliance with any of the agreements of the other party or conditions to such
party’s obligations contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the party
to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. The failure of either party hereto to assert any of its
rights hereunder shall not constitute a waiver of any of such
rights. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
SECTION
11.09 No Third Party
Beneficiaries. Except for the provisions of Article IX relating
to indemnified parties, this Agreement shall be binding upon and inure solely to
the benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person, including any union or any employee or former employee of
the Seller, any legal or equitable right, benefit or remedy of any nature
whatsoever, including any rights of employment for any specified period, under
or by reason of this Agreement.
73
SECTION
11.10 Specific Performance. The
Seller acknowledges and agrees that the Purchaser would be irreparably damaged
if any of the provisions of this Agreement are not performed in accordance with
their specific terms and that any breach of this Agreement by the Purchaser
could not be adequately compensated in all cases by monetary damages
alone. Accordingly, except as otherwise provided in Section 9.07, in
addition to any other right or remedy to which the Purchaser may be entitled, at
law or in equity, it shall be entitled to enforce any provision of this
Agreement by a decree of specific performance and to temporary, preliminary and
permanent injunctive relief to prevent breaches or threatened breaches of any of
the provisions of this Agreement, without posting any bond or other
undertaking.
SECTION
11.11 Governing Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Florida applicable to contracts executed in and to be performed in
that State. All Actions arising out of or relating to this Agreement
shall be heard and determined exclusively in any Florida federal court sitting
in Miami-Dade County, Florida, provided, however, that if such federal
court does not have jurisdiction over such Action, such Action shall be heard
and determined exclusively in any Florida state court sitting in Miami-Dade
County, Florida. Consistent with the preceding sentence, the parties
hereto hereby (a) submit to the exclusive jurisdiction of any federal or state
court sitting in Miami-Dade County, Florida for the purpose of any Action
arising out of or relating to this Agreement brought by any party hereto and
(b) irrevocably waive, and agree not to assert by way of motion, defense,
or otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the transactions contemplated by this Agreement may not be enforced
in or by any of the above-named courts.
SECTION
11.12 Waiver of Jury Trial. Each
of the parties hereto hereby waives to the fullest extent permitted by
applicable law any right it may have to a trial by jury with respect to any
litigation directly or indirectly arising out of, under or in connection with
this Agreement or the transactions contemplated by this
Agreement. Each of the parties hereto hereby (a) certifies that no
representative, agent or attorney of the other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it has been induced to
enter into this Agreement and the transactions contemplated by this Agreement,
as applicable, by, among other things, the mutual waivers and certifications in
this Section
11.12.
SECTION
11.13 Currency. Unless otherwise
specified in this Agreement, all references to currency, monetary values and
dollars set forth herein shall mean United States (U.S.) dollars and all
payments hereunder shall be made in United States dollars.
SECTION
11.14 Counterparts. This
Agreement may be executed and delivered (including by facsimile or other
electronic transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
74
IN WITNESS WHEREOF, the Seller
and the Purchaser have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
SELLER
AND AFFILIATES
|
||
SELECTIVE
INSURANCE GROUP, INC.
|
||
By:
|
/s/ Xxxxxxx X.
Xxxxxx
|
|
Name:
Xxxxxxx X. Xxxxxx
|
||
Title:
Chairman, President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS II, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS III, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS IV, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive
Officer
|
75
SELECTIVE
HR SOLUTIONS V, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS VI, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS VII, INC.
|
||
By:
|
/s/ Xxxxx X.
Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS VIII, INC.
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS IX, INC.
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS X, INC.
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive
Officer
|
76
SELECTIVE
HR SOLUTIONS XI, INC.
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SOLUTIONS XII, INC.
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
SELECTIVE
HR SERVICES, LLC
|
||
By:
Selective HR Solutions, Inc.
|
||
Its:
Sole Member
|
||
By:
|
/s/ Xxxxx X. Xxxxxxx
|
|
Name:
Xxxxx X. Xxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
PURCHASER
AND AFFILIATES
|
||
ALPHASTAFF
GROUP, INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
ALPHASTAFF,
INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive
Officer
|
77
ALPHASTAFF
HOLDINGS, INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
ALPHA
NYPEO, INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
ALPHASTAFF
SYSTEMS V, INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive Officer
|
||
ALPHASTAFF
2, INC.
|
||
By:
|
/s/ Xxx Xxxxxxxx
|
|
Name:
Xxx Xxxxxxxx
|
||
Title:
President and Chief Executive
Officer
|
78
EXHIBIT
1.01(a)
FORM
OF ASSIGNMENT OF INTELLECTUAL PROPERTY
FORM OF
INTELLECTUAL PROPERTY
ASSIGNMENT
THIS INTELLECTUAL PROPERTY
ASSIGNMENT (this “Assignment”) is
delivered effective as of this ____ day of ____________, ____ (“Effective Date”) by
SELECTIVE INSURANCE GROUP, INC., a New Jersey corporation having an address of
00 Xxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (“Assignor”) to and in
favor of ___________________, a ____________ _____________ having an address of
000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 (“Assignee”).
WHEREAS, Assignor and Assignee
are parties to that certain Stock and Asset Purchase Agreement dated as of
October 27, 2009 (the “Purchase Agreement");
and
WHEREAS, pursuant to the
Purchase Agreement, Assignor wishes to assign to Assignee, and Assignee wishes
to acquire from Assignor, the items listed on Schedule A attached
hereto (collectively, the “Assigned Seller Intellectual Property”).
NOW, THEREFORE, for $10.00
(US) and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor hereby sells, assigns, transfers and
sets over to Assignee its entire right, title and interest in and to the
Assigned Seller Intellectual Property for the United States and for all foreign
countries, including, without limitation, any registrations and applications
therefor, any renewals and extensions of the registrations, and all other
corresponding rights that are or may be secured under the laws of the United
States or any foreign country, now or hereafter in effect, for Assignee's own
use and enjoyment, and for the use and enjoyment of Assignee's successors,
assigns or other legal representatives, at least as fully and entirely as the
same would have been held and enjoyed by Assignor if this Assignment had not
been made, together with all income, royalties or payments due or payable as of
the Effective Date or thereafter, including, without limitation, all claims for
damages by reason of past, present or future infringement or other unauthorized
use of the Assigned Seller Intellectual Property, with the right to xxx for and
collect the same for Assignee's own use and enjoyment and for the use and
enjoyment of its successors, assigns or other legal
representatives.
Assignor
hereby requests the Commissioner of Patents and Trademarks, the Register of
Copyrights and the corresponding entity or agency in any applicable foreign
country, to record, as applicable, Assignee as the Assignee and owner of the
Assigned Seller Intellectual Property.
Assignor
represents and warrants that: (i) it is the sole and exclusive owner of the
entire right, title and interest in and to the Assigned Seller Intellectual
Property (including, without limitation, the corresponding rights set forth in
the above), free and clear of any liens, security interests, licenses, options
or other encumbrances of any kind; (ii) it has the full right and authority to
execute this Assignment and to assign to Assignee the rights assigned herein);
and (iii) it has not executed, and will not execute, any agreement or other
instrument in conflict herewith. Assignor shall indemnify, defend and
hold Assignee and its affiliates harmless from and against any liability, claim
or other obligation (including but not limited to any attorneys fees, court
costs or other expenses) incurred by or made against Assignee resulting from the
breach of any of the foregoing representations and warranties.
Assignor
shall take all further reasonable actions, and provide to Assignee, Assignee's
successors, assigns or other legal representatives, all such reasonable
cooperation and assistance (including, without limitation, the
execution and delivery of any and all affidavits, declarations, oaths, samples,
exhibits, specimens, assignments, powers of attorney or other documentation),
requested by Assignee to more fully and effectively effectuate the purposes of
this Assignment, including, without limitations, with respect to the
following: (1) the preparation and prosecution of any application for
registration, or any application for renewal of a registration, relating to any
of the rights assigned herein; (2) the prosecution or defense of any
interference, opposition, infringement or other proceedings that may arise in
connection with any of the rights assigned herein, including, without
limitation, testifying as to any facts relating to the Assigned Seller
Intellectual Property and this Assignment; (3) obtaining by Assignee any
additional protection relating to rights assigned herein that Assignee
reasonably may deem appropriate that may be secured under the laws now or
hereafter in effect in the United States or any foreign country; and (4) in the
implementation or perfection of this Assignment in all applicable jurisdictions
throughout the world.
This
Assignment is intended solely to effect the transfer of certain property sold
and purchased pursuant to the Purchase Agreement in accordance with the Purchase
Agreement, and no provision of this Assignment shall rescind or waive any of the
express provisions (including the representations, warranties, covenants,
agreements, conditions, or any of the indemnification obligations and other
obligations of the Assignor) set forth in the Purchase
Agreement. This Assignment shall be governed by and construed in
accordance with the laws of the State of Florida without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Florida or any other jurisdiction) that would cause the application of the
laws of any other jurisdiction.
[Signature page
follows]
IN WITNESS WHEREOF, Assignor
has caused this Assignment to be executed by its duly authorized representative
as of the Effective Date.
ASSIGNOR:
|
||
SELECTIVE
INSURANCE GROUP, INC., a New Jersey corporation
|
||
By:
|
||
Name:
|
||
Title:
|
NOTARIAL
ACKNOWLEDGEMENT
STATE
OF _________
|
)
|
) SS:
|
|
COUNTY OF _____________
|
)
|
The
foregoing Assignment was acknowledged before me this ____ day _________, 2009 by
____________________, the ________________ of Selective Insurance Group, Inc., a
New Jersey corporation. He is personally known to me or has produced
_________________ as identification and acknowledged that he executed the
foregoing Assignment in his duly authorized capacity on behalf of the Assignor
and that by his signature on this Assignment the Assignor executed this
Assignment.
Notary:
___________________________
Print
Name: _______________________
[NOTARIAL
SEAL]
Notary
Public, State of __________
My
commission expires:
SCHEDULE
A
ASSIGNED SELLER INTELLECTUAL
PROPERTY
X.
|
Xxxxx
|
1. Registrations/Applications
XXXX
|
Applic.
Xxx.Xx./Filing
Date
|
Reg. No./Date
|
CLASS/GOODS/SERVICES
|
|||
EFREEDOM
|
76-559,866
|
2,935,831
|
35-PROVIDING
AN ONLINE DATABASE FOR ADMINISTRATION OF BUSINESS PAYROLL FOR OTHERS,
NAMELY, ENABLING A PROFESSIONAL EMPLOYER ORGANIZATION TO MAKE PAYROLL
ENTRIES; REVIEW EMPLOYEE RECORDS; AND PREPARE BUSINESS REPORTS RELATING TO
HUMAN RESOURCES AND EMPLOYEE COMPENSATION
|
|||
SELECT
EMPLOYER OPTIONS
|
76-473,387
|
2,775,270
|
35-SERVING
AS A HUMAN RESOURCES DEPARTMENT FOR OTHERS
|
|||
SEO
|
76-473,390
|
2,775,271
|
35-SERVING
AS A HUMAN RESOURCES DEPARTMENT FOR OTHERS
|
|||
SOLUTIONS
FOR SUCCESS
|
76-473,391
|
3,203,236
|
35-ADMINISTRATION
OF BUSINESS PAYROLL FOR
OTHERS
|
EXHIBIT
1.01(b)
FORM
OF ASSUMPTION AGREEMENT
FORM
OF ASSUMPTION AGREEMENT
This
ASSUMPTION
AGREEMENT (this “Assumption
Agreement”), dated as of January 1, 2010], by and among Selective
Insurance Group, Inc., a New Jersey corporation (the “Seller”), Selective
HR Solutions, Inc., a Florida corporation and wholly-owned Subsidiary of the
Seller (the “Company”), Selective
HR Solutions II, Inc., a Georgia corporation and wholly-owned Subsidiary of the
Company (“SHRS-II”), Selective
HR Solutions III, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-III”), Selective
HR Solutions IV, Inc., a Maryland corporation and wholly-owned Subsidiary of the
Company (“SHRS-IV”), Selective
HR Solutions V, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-V”), Selective
HR Solutions VI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VI”), Selective
HR Solutions VII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VII”), Selective
HR Solutions VIII, Inc., a Florida corporation and wholly-owned Subsidiary of
the Company (“SHRS-VIII”),
Selective HR Solutions IX, Inc., a Florida corporation and wholly-owned
Subsidiary of the Company (“SHRS-IX”), Selective
HR Solutions X, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-X”), Selective
HR Solutions XI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XI”), Selective
HR Solutions XII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XII”), Selective
HR Services, LLC, a limited liability company organized under the laws of the
Commonwealth of Pennsylvania and wholly-owned Subsidiary of the Company (“SHRS-LLC” and,
together with SHRS-II, SHRS-III, SHRS-IV, SHRS-V, SHRS-VI, SHRS-VII, SHRS-VIII,
SHRS-IX, SHRS-X, SHRS-XI, SHRS-XII, the “Company
Subsidiaries”), and AlphaStaff Group, Inc., a Florida corporation (the
“Purchaser”),
and AlphaStaff, Inc., a Florida corporation and wholly-owned Subsidiary of the
Purchaser (“Alpha”). Seller,
the Company, the Company Subsidiaries, the Purchaser and Alpha may each be
individually referred to as a “Party” in this
Assumption Agreement and collectively as, the “Parties.”
WHEREAS, the Parties are
parties to that certain Stock and Asset Purchase Agreement dated as of October
27, 2009 (the “Purchase Agreement”)
(capitalized terms having the meaning assigned to them in the Purchase Agreement
unless otherwise defined herein); and
WHEREAS, pursuant to the
Purchase Agreement, the Purchaser, through Alpha, has agreed to assume, pay,
perform and discharge when due, any and all of the Assumed
Liabilities.
NOW, THEREFORE, in
consideration of the premises and the mutual agreements and covenants set forth
in the Purchase Agreement and hereinafter set forth, the Parties hereby agree as
follows:
NOW, THEREFORE, to induce the
Seller, the Company and the Company Subsidiaries to consummate the transactions
contemplated by the Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties herby agree as follows:
1. Assumption of
Liabilities Effective as of the date hereof, Alpha hereby
assumes, and agrees to pay, perform and discharge when due, all of the Assumed
Liabilities.
2. Purchase
Agreement. The terms of the Purchase Agreement, including, but
not limited to, the Seller’s representations, warranties, covenants and
indemnities relating to the Assumed Liabilities, are incorporated herein by
reference. The Seller acknowledges and agrees that the
representations, warranties, covenants and indemnities contained in the Purchase
Agreement shall not be superseded hereby, but shall remain in full force and
effect to the full extent provided therein. In the event of any
conflict or inconsistency between the terms of the Purchase Agreement and the
terms of this Assumption Agreement, the terms of the Purchase Agreement shall
govern.
3. Assignment This
Agreement may not be assigned by operation of law or otherwise without the
express written consent of each of the Parties; provided, however, that Alpha
may assign this Agreement or any of its rights and obligations hereunder to one
or more Affiliates of Alpha without the consent of the Company
Subsidiaries.
4. Further
Actions. Each of the Parties hereto covenants and agrees, at
its own expense, to execute and deliver, at the request of the other Party, such
further instruments of transfer and assignment and to take such other action as
such other part may reasonably request to more effectively consummate the
assignments and assumptions contemplated by this Assumption
Agreement.
5. No Third Party
Beneficiaries This Agreement shall be binding upon and inure
solely to the benefit of the Parties and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
person, including, without limitation, any union or any employee or former
employee of the Company Subsidiaries, any legal or equitable right, benefit or
remedy of any nature whatsoever, including, without limitation, any rights or
employment for any specified period, under or by reason of this Assumption
Agreement.
6. Amendment This
Assumption Agreement may not be amended or modified except (a) by an instrument
in writing signed by, or on behalf of, each of the Parties or (b) by a waiver
pursuant to Section 7 below.
7. Waiver Any
Party to this Assumption Agreement may (a) extend the time for the performance
of any of the obligations or other acts of the other Parties, (b) waive any
inaccuracies in the representations and warranties of the other Parties
contained herein or in any document delivered by the other party pursuant hereto
or (c) waive compliance with any of the agreements of the other party or
conditions to such Parties’ obligations contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Assumption Agreement. The failure of any Party
to assert any of its rights hereunder shall not constitute a waiver of any such
rights.
8. Severability If
any term or other provision of this Assumption Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Assumption Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated by this Assumption Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this Assumption Agreement
so as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated by this Assumption
Agreement are consummated as originally contemplated to the greatest extent
possible.
9. Counterparts This
Assumption Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different Parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.
10. Governing
Law This Assumption Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida applicable to
contracts executed in and to be performed in that State (without regard to
conflicts of law provisions thereof).
[Signature
page follows]
IN WITNESS WHEREOF, the
parties hereto have caused this Assumption Agreement to be duly executed by
their authorized representatives as of the day and year first above
written.
ALPHA
|
||
ALPHASTAFF,
INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
COMPANY
SUBSIDIARIES
|
||
SELECTIVE
HR SOLUTIONS II, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS III, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS IV, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
- 10
-
SELECTIVE
HR SOLUTIONS V, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS VI, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS VII, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS VIII, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS IX, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS X, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
- 11
-
SELECTIVE
HR SOLUTIONS XI, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SOLUTIONS XII, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELECTIVE
HR SERVICES, LLC
|
||
By:
|
||
Name:
|
||
Title:
|
Acknowledged
and Agreed:
|
||
PURCHASER
|
||
ALPHASTAFF
GROUP, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
SELLER
AND COMPANY
|
||
SELECTIVE
INSURANCE GROUP, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
- 12
-
SELECTIVE
HR SOLUTIONS, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
- 13
-
EXHIBIT
1.01(c)
FORM
OF XXXX OF SALE AND ASSIGNMENT
- 14
-
FORM
OF
XXXX OF SALE AND
ASSIGNMENT
This
XXXX OF SALE AND
ASSIGNMENT (this “Xxxx of Sale”), is
made this [1st day of
January, 2010], by and among Selective HR Solutions II, Inc., a Georgia
corporation and wholly-owned Subsidiary of the Company (“SHRS-II”), Selective
HR Solutions III, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-III”), Selective
HR Solutions IV, Inc., a Maryland corporation and wholly-owned Subsidiary of the
Company (“SHRS-IV”), Selective
HR Solutions V, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-V”), Selective
HR Solutions VI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VI”), Selective
HR Solutions VII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VII”), Selective
HR Solutions VIII, Inc., a Florida corporation and wholly-owned Subsidiary of
the Company (“SHRS-VIII”),
Selective HR Solutions IX, Inc., a Florida corporation and wholly-owned
Subsidiary of the Company (“SHRS-IX”), Selective
HR Solutions X, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-X”), Selective
HR Solutions XI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XI”), Selective
HR Solutions XII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XII”), Selective
HR Services, LLC, a limited liability company organized under the laws of the
Commonwealth of Pennsylvania and wholly-owned Subsidiary of the Company (“SHRS-LLC” and,
together with SHRS-II, SHRS-III, SHRS-IV, SHRS-V, SHRS-VI, SHRS-VII, SHRS-VIII,
SHRS-IX, SHRS-X, SHRS-XI, SHRS-XII, each an “Assignor”, and
together, the “Assignors”), and
AlphaStaff Holdings, Inc., a Florida corporation (“Holdings”), Alpha
NYPEO, Inc., a Florida corporation and indirect, wholly-owned Subsidiary of the
Purchaser (“Alpha-NY”),
AlphaStaff Systems V, Inc., a Florida corporation and indirect, wholly-owned
Subsidiary of the Purchaser (“Systems-V”), and
AlphaStaff 2, Inc., a Florida corporation and indirect, wholly-owned Subsidiary
of the Purchaser (“Alpha-2” and,
together with Alpha-NY, Holdings and Systems-V, each an “Assignee”, and
together the “Assignees”). The
Assignors and the Assignees may each be individually referred to as a “Party” in this Xxxx
of Sale and collectively as, the “Parties.”
WHEREAS, the Parties are
parties to that certain Stock and Asset Purchase Agreement, dated as of October
27, 2009 (the “Purchase Agreement”),
among Selective Insurance Group, Inc., Selective HR Solutions, Inc., the
Assignors and AlphaStaff Group, Inc., AlphaStaff, Inc., and the Assignees
(capitalized terms having the meaning assigned to them in the Purchase Agreement
unless otherwise defined herein); and.
WHEREAS, s provided for in
Section 2.01(a) of the Purchase Agreement, each Assignor will assign those
Purchased Assets set forth across from such Assignor’s name on Exhibit A attached
hereto and incorporated by reference herein to that Assignee whose name is set
forth across from such Assignor’s name; and
WHEREAS, effective as of the
date hereof, the Assignees and the Assignors now desire to consummate the
assignment of the Purchased Assets as contemplated by and provided for in the
Purchase Agreement.
- 15
-
NOW, THEREFORE, in
consideration of the foregoing recitals and of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt, adequacy
and legal sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. Recitals. The
recitals contained herein are true and correct and by this reference are
incorporated herein and made a part of this Xxxx of Sale.
2. Xxxx of
Sale.
2.1 As
of the date hereof, each Assignor does hereby assign to the applicable Assignee,
and the applicable Assignee does hereby accept from such Assignor, all of the
Assignor’s right, title and interest in and to all of the Purchased Assets
listed across from the names of the Assignor and the Assignee on Exhibit A effective
as of the date hereof. Notwithstanding anything contained herein to
the contrary, this Xxxx of Sale shall not constitute an assignment of any
contract if the attempted assignment thereof without the consent of the other
party thereto would constitute a breach thereof, or in any way adversely affect
the rights of the Assignor or the Assignee thereunder. Instead, the
Assignor shall hold such contract for the benefit of the Assignee, and the
parties shall use commercially reasonable efforts to seek any consents necessary
to permit such assignment.
2.2 Each
Assignee hereby accepts this Xxxx of Sale and agrees to assume those Purchased
Assets listed across from the name of such Assignee on Exhibit A and all
obligations of the Assignors thereunder. Assignees assume no
liabilities other than those expressly assumed herein and the parties hereto
agree that all liabilities not assumed by the Assignees herein shall remain the
sole responsibility of the Assignors.
2.3 Each
Assignor hereby represents and warrants to each Assignee: (i) that it
has the power and authority to enter into this Xxxx of Sale and perform its
obligations hereunder; and (ii) that the Stock Purchase Agreement is in full
force and effect as of the date hereof.
2.4 Each
Assignee hereby represents and warrants to each Assignor: (i) that it
has the power and authority to enter into this Xxxx of Sale and perform its
obligations hereunder; and (ii) that the Purchase Agreement is in full force and
effect as of the date hereof.
3. Excluded
Assets. For the avoidance of doubt, the Assignors shall not be
deemed to have transferred pursuant to this Xxxx of Sale any asset other than
the Purchased Assets.
4. Other
Instruments. It is understood that each Assignor,
contemporaneously with the execution and delivery of this Xxxx of Sale, may
further execute and deliver to the applicable Assignee certain other assignments
and instruments of transfer which, in particular, cover certain of the interests
and assets hereinabove assigned, the purpose of which other assignments or
instruments, as the case may be, is to supplement, facilitate and otherwise
implement the transfers intended.
5. Successors and
Assigns. This instrument and the covenants and agreements
herein contained shall inure to the benefit of and shall bind the respective
parties hereto and their respective successors and assigns.
- 16
-
6. Governing
Law. This Xxxx of Sale shall be governed by, and construed in
accordance with, the laws of the State of Florida applicable to contracts
executed in and to be performed in that State. All Actions arising
out of or relating to this Xxxx of Sale shall be heard and determined
exclusively in any Florida federal court sitting in Miami-Dade County, Florida,
provided, however, that if such federal
court does not have jurisdiction over such Action, such Action shall be heard
and determined exclusively in any Florida state court sitting in Miami-Dade
County, Florida. Consistent with the preceding sentence, the parties
hereto hereby (a) submit to the exclusive jurisdiction of any federal or state
court sitting in Miami-Dade County, Florida for the purpose of any Action
arising out of or relating to this Xxxx of Sale brought by any party hereto and
(b) irrevocably waive, and agree not to assert by way of motion, defense,
or otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this Xxxx
of Sale or the transactions contemplated by this Xxxx of Sale may not be
enforced in or by any of the above-named courts.
7. Counterparts and Facsimile
Signature. This Xxxx of Sale may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument. A facsimile signature shall be deemed to be
an original for all purposes hereunder.
8. Purchase
Agreement. The terms of the Purchase Agreement, including, but
not limited to, the representations, warranties, covenants and indemnities
relating to the Purchased Assets, are incorporated herein by
reference. Each Assignor and each Assignee acknowledges and agrees
that the representations, warranties, covenants and indemnities contained in the
Purchase Agreement shall not be superseded hereby, but shall remain in full
force and effect to the full extent provided therein. In the event of
any conflict or inconsistency between the terms of the Purchase Agreement and
the terms of this Xxxx of Sale, the terms of the Purchase Agreement shall
govern.
9. Further
Actions. Each of the Parties hereto covenants and agrees, at
its own expense, to execute and deliver, at the request of the other part, such
further instruments of transfer and assignment and to take such other action as
such other part may reasonably request to more effectively consummate the
assignments and assumptions contemplated by this Xxxx of Sale.
10. EACH
ASSIGNEE ACKNOWLEDGES AND AGREES THAT THE ASSIGNORS ARE TRANSFERRING THE
PURCHASED ASSETS TO THE ASSIGNEES AS IS AND WHERE IS, IN THEIR EXISTING STATE
AND PHYSICAL CONDITION AND LOCATION WITH ALL FAULTS. ASSIGNORS SHALL
NOT BE DEEMED TO HAVE MADE, AND ASSIGNORS HEREBY EXPRESSLY DISCLAIM, ALL
REPRESENTATIONS AND WARRANTIES, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
RELATING TO THE PURCHASED ASSETS INCLUDING, WITHOUT LIMITATION: (A) THE
CONDITION OF THE PURCHASED ASSETS, (B) THE MERCHANTABILITY, SUITABILITY OR THE
FITNESS FOR ANY PARTICULAR PURPOSE, (C) THE QUALITY OF THE MATERIAL OR
WORKMANSHIP OF THE PURCHASED ASSETS, (D) THE CONFORMITY TO SPECIFICATIONS, (E)
THE OPERATION, PERFORMANCE OR MAINTENANCE OF THE PURCHASED ASSETS, (F) FREEDOM
FROM PATENT OR TRADEMARK INFRINGEMENT AND (G) THE ABSENCE OF LATENT OR OTHER
DEFECTS, WHETHER OR NOT DISCOVERABLE. ASSIGNEES AGREE THAT ALL SUCH
RISKS, OBLIGATIONS AND LIABILITIES AS AMONG ASSIGNEES AND ASSIGNORS ARE TO BE
BORNE BY ASSIGNEES. ASSIGNORS ALSO SHALL NOT BE LIABLE FOR INCIDENTAL
OR CONSEQUENTIAL DAMAGES (INCLUDING LIABILITY IN TORT, STRICT LIABILITY OR
OTHERWISE) RELATING WHATSOEVER TO THE PURCHASED ASSETS. THE
PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES AND SUCH
PROVISIONS ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF
REPRESENTATIONS AND WARRANTIES BY ASSIGNORS, EXPRESS OR IMPLIED, WITH RESPECT TO
THE PURCHASED ASSETS, WHETHER PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, IN
EQUITY OR OTHERWISE.
[SIGNATURES
FOLLOW ON NEXT PAGE]
- 17
-
IN
WITNESS WHEREOF, the parties hereto have executed this Xxxx of Sale on the date
hereinabove written.
ASSIGNORS:
|
|
SELECTIVE
HR SOLUTIONS II, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE HR SOLUTIONS III, INC. | |
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE HR SOLUTIONS IV, INC. | |
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE HR SOLUTIONS V, INC. | |
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE HR SOLUTIONS VI, INC. | |
By:
|
|
Name:
|
|
Title:
|
- 18
-
SELECTIVE
HR SOLUTIONS VII, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
|
|
SELECTIVE
HR SOLUTIONS VIII, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE
HR SOLUTIONS IX, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE
HR SOLUTIONS X, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE
HR SOLUTIONS XI, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
SELECTIVE
HR SOLUTIONS XII, INC.
|
|
|
|
By:
|
|
Name:
|
|
Title:
|
- 19
-
SELECTIVE
HR SERVICES, LLC
|
|
By:
|
|
Name:
|
|
Title:
|
|
ASSIGNEES:
|
|
ALPHASTAFF
NYPEO, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
|
|
ALPHASTAFF
SYSTEMS V, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
ALPHASTAFF
HOLDINGS, INC.
|
|
By:
|
|
Name:
|
|
Title:
|
|
ALPHASTAFF
2, INC..
|
|
By:
|
|
Name:
|
|
Title:
|
- 20
-
EXHIBIT
A
Description
of Purchased Assets
Assignor
|
Assignee
|
Purchased Assets
|
||
|
|
EXHIBIT
1.01(d)
FORM
OF CLIENT ASSIGNMENT
Xxxxx
X. Xxxxxxx, CPCU, CIC
|
|
President
and Chief Executive Officer
|
|
Selective
HR Solutions, Inc.
|
|
0000
Xxxxxxxxxxxx Xxxxxxx Xxxx
|
|
Xxxxxxxx,
XX 00000
|
|
Tel:
000 000 0000
/ 000-000-0000
|
|
Fax:
000 000 0000
|
|
E-mail:
Xxxxx.Xxxxxxx@Xxxxxxxxxxx.xxx
|
October
___, 2009
Dear
Valued SHRS Client:
Selective
HR Solutions, Inc. (“SHRS”) is very excited to inform you that an agreement has
been reached with AlphaStaff, Inc. (“AlphaStaff”), one of the country’s most
successful PEOs, for the sale of SHRS to AlphaStaff. The closing is
subject customary closing conditions, including Florida regulatory approval, and
is expected to be effective January 1, 2010.
AlphaStaff
(xxx.Xxxxxxxxxx.xxx) is the
fifth largest PEO in the country. With more than 50,000 work site
employees in 48 states, we think AlphaStaff is the perfect choice to assume the
SHRS operations and to be a partner with Selective’s agent
network. Pursuant to the terms of the agreement, AlphaStaff will be
the only PEO partnering with the insurance subsidiaries of Selective Insurance
Group, Inc. for workers compensation insurance.
You are
the center of the transition structured with AlphaStaff. Most
notably, all of your workers’ compensation and administrative fee pricing will
be unchanged for all of 2010. Further, your current SUTA rates will
not change in 2010 unless you have locations in states requiring client
reporting. We think that this is remarkable given that the recession
and the crisis in the financial markets have spiked unemployment claims and
significantly increased state unemployment taxes.
Upon
closing of the transaction, you will have all your current products and services
at the same price with the benefits of AlphaStaff’s service improvements in some
areas. We are planning the changeover and expect that it will be done
without any service interruptions in payroll administration or
benefits. Like SHRS, AlphaStaff employs a high-touch, field-based HR
model. In most cases, your current primary SHRS contact and other
service providers will continue to serve your needs after January 1st –
further reducing any impact to you.
You will
still enjoy the ease of working with a single source provider of all your
product and service needs. As an added benefit of partnering with
AlphaStaff, you will have access to more sophisticated HR technology that
provides greater reporting capabilities and increased employer and employee
self-service. AlphaStaff also has two complete operational centers,
one in Atlanta and the other in Fort Lauderdale, so you have confidence of
service stability during any natural disaster.
Like
SHRS, AlphaStaff is committed to your independent agent andhas worked
exclusively through the agency channel since its founding in
1997. Also like SHRS, AlphaStaff is one of the few PEOs with the
surety bond protection of Employer Services Accreditation
Corporation.
SHRS will
continue to operate as it has until the transaction closes in January
2010. Between now and the closing, we will be available to answer
your questions as they arise, but the following are some key
points:
|
o
|
Your
pricing, benefit and other insurance programs will NOT change through the
term of your policy.
|
|
o
|
Most
of the same dedicated SHRS professionals who have served you so well for
many years will continue to provide services through
AlphaStaff.
|
|
o
|
Any
migration to improved systems will be done slowly and with no negative
impact upon your operations or your
employees.
|
|
o
|
You
don’t have to sign a new contract, simply sign below and you will have all
the same services and pricing currently in effect without interruption
with AlphaStaff on January 1, 2010.
|
Thank you
for your years of support for and trust in SHRS. We know AlphaStaff
feels privileged to have the opportunity to be your service partner in the years
to come and to join their forces with so many of SHRS’s very talented, committed
personnel. If you have any questions, please don’t hesitate to
contact us at 0-000-000-0000.
To become
an AlphaStaff customer, please sign the consent below my signature and return it
as soon as possible as directed below. In the unfortunate event that
we do not receive your consent by November 30, 2009, we must hereby provide you
notice that your Employer Protection Program Service Agreement with SHRS will be
terminated effective at 11:59 PM on December 31, 2009.
Sincerely,
Xxxxx X.
Xxxxxxx
President
and Chief Executive Officer
CONSENT TO SERVICE AGREEMENT
TRANSFER
In order
to transfer your Service Agreement from SHRS to AlphaStaff, please sign below
confirming your consent to the assignment of your Employer Protection Program
Service or other Service Agreement from SHRS to any of its subsidiaries and from
SHRS or any of its subsidiaries, as the case may be, to AlphaStaff or any of its
subsidiaries.
____________________________
Signature
Print
Name___________________
Print
Title ___________________
Fax or
email to (INSERT CONTACT INFO)
EXHIBIT
2.03(a)(i)
INITIAL
PAYMENT
I. Initial
Payment.
(A) “Initial Payment”
means an amount equal to the sum of (a) (i) the aggregate number of Transferred
WSEEs, multiplied by (ii) $50.00, plus (b) (i) the aggregate number of
Transferred ASO Closing Employees, multiplied by (ii) $25.00.
(B) “Estimated Initial
Payment” means an amount equal to (a) the sum of (i) the aggregate number
of SHRS WSEEs as of November 30, 2009, multiplied by $50.00, plus (ii) the
aggregate number of SHRS ASO Employees as of November 30, 2009, multiplied by
$25.00; multiplied by (b) 85%.
II. Initial Payment
Statement. As promptly as practicable, but in any event by no
later than February 2, 2010 or, if the Closing Date occurs after January 1,
2010, as soon as practicable thereafter, the Purchaser shall deliver to the
Seller the Initial Payment Statement; provided that the information
required for such Initial Payment Statement is available from the Company’s
information technology systems in such time frame. The Seller shall
have 15 calendar days from its delivery to review the Initial Payment Statement
and either accept or dispute the Initial Payment Statement. The
Seller may accept the Initial Payment Statement by providing the Purchaser with
written notification thereof. The Seller may dispute any item of the
Initial Payment Statement by providing the Purchaser with written notification
of each disputed item, setting forth, in reasonable detail, the basis for such
dispute. If the Seller neither accepts nor disputes the Initial
Payment Statement in writing within 15 calendar days following delivery by the
Purchaser of the Initial Payment Statement, then the Initial Payment Statement
prepared by the Purchaser shall be deemed to be final and
binding. If, however, the Seller disputes the Initial Payment
Statement within such 15 calendar day period, the Purchaser and Seller shall
negotiate in good faith to resolve any differences within 15 calendar days
following delivery of such notification of dispute, and any resolution by them
as to any disputed items shall be final, binding and conclusive on the parties
hereto. If the Seller and the Purchaser are unable to reach a
resolution within such 15 calendar day period, then all remaining disputed items
shall be submitted for resolution to Ernst & Young LLP (or, if such firm
shall decline or is unable to act or is not, at the time of such submission,
independent of the Seller and the Purchaser, to another independent accounting
firm of international reputation mutually acceptable to the Seller and the
Purchaser) (either Ernst & Young LLP or such other accounting firm being
referred to herein as the “Determining Accounting
Firm”), which shall, within 30 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Seller and the Purchaser. The Determining Accounting Firm shall be
instructed to review this Agreement and the disputed items or amounts for the
purpose of making its report (it being understood that in making such report,
the Determining Accounting Firm shall be functioning as an expert and not as an
arbitrator). In making such report, the Determining Accounting Firm
shall consider only those items or amounts as to which the Seller and the
Purchaser have disagreed. The Determining Accounting Firm’s
determination of any disputed items or amounts shall be within the range of the
amounts proposed by the Seller and by the Purchaser,
respectively. The fees and disbursements of the Determining
Accounting Firm shall be allocated between the Seller and the Purchaser in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Determining Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Determining Accounting Firm) bears
to the total amount of such remaining disputed items so
submitted.
The
Initial Payment Statement shall be deemed final and binding upon the earliest of
(x) the acceptance of the Initial Payment Statement by the Seller pursuant
to a written notice to the Purchaser, (y) the failure of the Seller to notify
the Purchaser of a dispute within 15 calendar days of the Purchaser’s delivery
of the Initial Payment Statement to the Seller, or (z) the resolution of
all disputes regarding the Initial Payment Statement, pursuant to this Exhibit 2.03(a)(i)
(the date on which the earliest of (x), (y) or (z) occurs, the “Initial Payment Settlement
Date”).
EXHIBIT
2.03(a)(i)-A
INITIAL
PAYMENT STATEMENT
***Note: All
WSEE numbers are illustrative; actual payments will be based on actual WSEE
counts at time of payment.***
WSEEs
|
Metric
|
Payment
|
||||||||||
Transferred
WSEEs
|
18,000 | $ | 50.00 | $ | 900,000 | |||||||
Transferred
ASO Closing Employees
|
2,000 | $ | 25.00 | $ | 50,000 | |||||||
Total
|
$ | 950,000 |
EXHIBIT
2.03(a)(i)-B
ESTIMATED
INITIAL PAYMENT STATEMENT
***Note: All
WSEE numbers are illustrative; actual payments will be based on actual WSEE
counts at time of payment.***
WSEEs
|
Metric
|
Multiplier
|
Payment
|
|||||||||||||
SHRS
WSEEs as of 11/30/09
|
18,000 | $ | 50.00 | 85.0 | % | $ | 765,000 | |||||||||
SHRS
ASO Employees as of 11/30/09
|
2,000 | $ | 25.00 | 85.0 | % | $ | 42,500 | |||||||||
Total
|
$ | 807,500 |
EXHIBIT
2.03(a)(ii)
INITIAL
EARN-OUT PAYMENT
I. “Initial Earn-Out
Payment” means an amount equal to (a) (i) the aggregate number of
Transferred WSEEs who remain Purchaser WSEEs as of the Initial Earn-Out
Reference Date, multiplied by (ii) $25.00, plus (b) (i) the aggregate number of
Transferred ASO Closing Employees who remain Transferred ASO Employees as of the
Initial Earn-Out Reference Date, multiplied by (ii) $12.50.
II. Initial Earn-Out
Statement. As promptly as practicable, but in any event within
15 calendar days following the Initial Earn-Out Reference Date, the Purchaser
shall deliver to the Seller the Initial Earn-Out Statement. The
Seller shall have 15 calendar days from its delivery to review the Initial
Earn-Out Statement and either accept or dispute the Initial Earn-Out
Statement. The Seller may accept the Initial Earn-Out Statement by
providing the Purchaser with written notification thereof. The Seller
may dispute any item of the Initial Earn-Out Statement by providing the
Purchaser with written notification of each disputed item, setting forth, in
reasonable detail, the basis for such dispute. If the Seller neither
accepts nor disputes the Initial Earn-Out Statement in writing within 15
calendar days following delivery by the Purchaser of the Initial Earn-Out
Statement, then the Initial Earn-Out Statement prepared by the Purchaser shall
be deemed to be final and binding. If, however, the Seller disputes
the Initial Earn-Out Statement within such 15 calendar day period, the Purchaser
and Seller shall negotiate in good faith to resolve any differences within 15
calendar days following delivery of such notification of dispute, and any
resolution by them as to any disputed items shall be final, binding and
conclusive on the parties hereto. If the Seller and the Purchaser are
unable to reach a resolution within such 15 calendar day period, then all
remaining disputed items shall be submitted for resolution to the Determining
Accounting Firm which shall, within 30 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Seller and the Purchaser. The Determining Accounting Firm shall be instructed to
review this Agreement and the disputed items or amounts for the purpose of
making its report (it being understood that in making such report, the
Determining Accounting Firm shall be functioning as an expert and not as an
arbitrator). In making such report, the Determining Accounting Firm
shall consider only those items or amounts as to which the Seller and the
Purchaser have disagreed. The Determining Accounting Firm’s
determination of any disputed items or amounts shall be within the range of the
amounts proposed by the Seller and by the Purchaser,
respectively. The fees and disbursements of the Determining
Accounting Firm shall be allocated between the Seller and the Purchaser in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Determining Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Determining Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
The
Initial Earn-Out Statement shall be deemed final and binding upon the earliest
of (x) the acceptance of the Initial Earn-Out Statement by the Seller
pursuant to a written notice to the Purchaser, (y) the failure of the Seller to
notify the Purchaser of a dispute within 15 calendar days of the Purchaser’s
delivery of the Initial Earn-Out Statement to the Seller, or (z) the
resolution of all disputes regarding the Initial Earn-Out Statement, pursuant to
this Exhibit 2.03(a)(ii)
(the date on which the earliest of (x), (y) or (z) occurs, the “Initial Earn-Out Settlement
Date”).
EXHIBIT
2.03(a)(ii)-A
INITIAL
EARN-OUT STATEMENT
***Note: All
WSEE numbers are illustrative; actual payments will be based on actual WSEE
counts at time of payment.***
WSEEs
|
Metric
|
Payment
|
||||||||||
Transferred
WSEEs
|
18,000 | $ | 25.00 | $ | 450,000 | |||||||
Transferred
ASO Closing Employees
|
2,000 | $ | 12.50 | $ | 25,000 | |||||||
Total
|
$ | 475,000 |
EXHIBIT
2.03(a)(iv)
QUARTERLY
EARN-OUT PAYMENT
I.
“Quarterly Earn-Out
Payment” means, as of a given Quarterly Earn-Out Reference Date and for a
given Quarterly Earn-Out Period, the sum of (a) the aggregate number of Existing
Client WSEEs multiplied by the Existing Client Quarterly Payment; (b) the
aggregate number of New Client WSEEs multiplied by the New Client Quarterly
Payment; (c) the Common Client Quarterly Payment; (d) the aggregate number of
Transferred ASO Employees multiplied by the Transferred ASO Quarterly Payment;
(e) the aggregate number of New ASO Client Employees multiplied by the New ASO
Client Quarterly Payment; and (f) the Common ASO Client Quarterly
Payment. For purposes of calculating the Quarterly Earn-Out Payment
and this Agreement:
(A) “Common ASO Client”
means an Entity (a) which is not a Transferred ASO Client, (b) which becomes a
Purchaser ASO Client subsequent to the Closing, but on or before March 31, 2020,
and (c) for which a Common Broker is designated as the referring broker by the
Purchaser; provided
that such Common ASO Client became a Common ASO Client effective no later than
the first day of the most recently begun Quarterly Earn-Out Period.
(B) “Common ASO Client
Employee” means an individual who, as of a given Quarterly Earn-Out
Reference Date, is employed by a Common ASO Client.
(C) “Common ASO Client
Payment” means, for a Common ASO Client as of a Quarterly Earn-Out
Reference Date, an amount equal to (a) the aggregate number of Common ASO Client
Employees employed by such Common ASO Client, multiplied by the New ASO Client
Quarterly Payment, multiplied by (b) the Common Broker Consideration Percentage
of the Common Broker designated as the referring broker for such Common ASO
Client.
(D) “Common ASO Client Quarterly
Payment” means an amount equal to the aggregate of the Common ASO Client
Payments for all Common ASO Clients as of a given Quarterly Earn-Out Reference
Date.
(E) “Common Broker” means
those Persons set forth on Section 2.03(a)(iv)-A
of the Disclosure Letter.
(F) “Common Broker Consideration
Percentage” means, for a given Common Broker, the weighted average of the
gross payroll of the Seller associated with the Common Broker as a percentage of
aggregate gross payroll of the Seller and the Purchaser associated with such
Common Broker for the reference period preceding the signing of this Agreement,
in each case as set forth opposite such Common Broker’s name in Section 2.03(a)(iv)
of the Disclosure Letter.
(G) “Common Client” means
an Entity (a) which is not an Existing Client, (b) which becomes engaged in an
Employee-Leasing Arrangement with the Purchaser or any of its Subsidiaries
subsequent to the Closing, but on or before March 31, 2020, and (c) for which a
Common Broker is designated as the referring broker by the Purchaser; provided, however, that such
Employee-Leasing Arrangement between the Purchaser or any of its Subsidiaries
and the Common Client was effective no later than the first day of the most
recently begun Quarterly Earn-Out Period.
(H) “Common Client
Payment” means, for a Common Client as of a Quarterly Earn-Out Reference
Date, an amount equal to (a) the aggregate number of Common Client WSEEs
co-employed by such Common Client, multiplied by the New Client Quarterly
Payment, multiplied by (b) the Common Broker Consideration Percentage of the
Common Broker designated as the referring broker for such Common
Client.
(I) “Common Client Quarterly
Payment” means an amount equal to the aggregate of the Common Client
Payments for all Common Clients as of a given Quarterly Earn-Out Reference
Date.
(J) “Common Client WSEE”
means an individual who, as of a given Quarterly Earn-Out Reference Date, is
co-employed by (a) the Purchaser or any of its Subsidiaries and (b) a Common
Client, pursuant to an Employee-Leasing Arrangement.
(K) “Existing Client Quarterly
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $22.50, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $15.00; provided,
however, that beginning
on the Quarterly Acceleration Payment Date, the Existing Client Quarterly
Payment shall be zero.
(L) “Existing Client WSEE”
means an individual who, as of a given Quarterly Earn-Out Reference Date, is
co-employed by (a) the Purchaser or any of its Subsidiaries, and (b) an Existing
Client, pursuant to an Employee-Leasing Arrangement.
(M) “New ASO Client” means
an Entity (a) which is not a Transferred ASO Client, (b) which becomes a
Purchaser ASO Client subsequent to the Closing but on or before March 31, 2020,
and (c) for which a Selective Agent is designated as the referring broker by the
Purchaser.
(N) “New ASO Client
Employee” means an individual who, as of a given Quarterly Earn-Out
Reference Date, is employed by a New ASO Client; provided that such New ASO
Client became a New ASO Client effective no later than the first day of the
Quarterly Earn-Out Period to which the Quarterly Earn-Out Reference Date
relates.
(O) “New ASO Client Quarterly
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $7.50, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $3.75.
(P) “New Client” means an
Entity (a) which is not an Existing Client, (b) which becomes engaged in an
Employee-Leasing Arrangement with the Purchaser or any of its Subsidiaries,
subsequent to the Closing but on or before March 31, 2020, and (c) for which a
Selective Agent is designated as the referring broker by the
Purchaser.
(Q) “New Client Quarterly
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $15.00, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $7.50.
(R) “New Client WSEE”
means an individual who, as of a given Quarterly Earn-Out Reference Date, is
co-employed by (a) the Purchaser or any of its Subsidiaries, and (b) a New
Client, pursuant to an Employee-Leasing Arrangement; provided that such
Employee-Leasing Arrangement between the Purchaser or any of its Subsidiaries,
and the New Client was effective no later than the first day of the Quarterly
Earn-Out Period to which the Quarterly Earn-Out Reference Date
relates.
(S) "Selective Agent"
means those Persons set forth on Section 2.03(a)(iv)-B
of the Disclosure Letter as the same may be amended by, from time to time, by
the reasonable and mutual agreement of the parties, provided, however, that in no instance
shall a Common Broker be deemed to be a Selective Agent. The Seller and
Purchaser shall mutually agree, on or before December 15, 2009, to any
amendments proposed by the Seller on or before November 1, 2009 to Section
2.03(a)(iv)-(B) of the Disclosure Letter.
(T) “Transferred ASO Quarterly
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $11.25, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $7.50; provided,
however, that beginning
on the Quarterly Acceleration Payment Date, the Transferred ASO Quarterly
Payment shall be zero.
II.
Quarterly Earn-Out
Statement. As promptly as practicable, but in any event within
15 calendar days following each Quarterly Earn-Out Reference Date, the Purchaser
shall deliver to the Seller the Quarterly Earn-Out Statement. The
Seller shall have 15 calendar days from its delivery to review the Quarterly
Earn-Out Statement and either accept or dispute the Quarterly Earn-Out
Statement. The Seller may accept the Quarterly Earn-Out Statement by
providing the Purchaser with written notification thereof. The Seller
may dispute any item of the Quarterly Earn-Out Statement by providing the
Purchaser with written notification of each disputed item, setting forth, in
reasonable detail, the basis for such dispute. If the Seller neither
accepts nor disputes the Quarterly Earn-Out Statement in writing within 15
calendar days following delivery by the Purchaser of the Quarterly Earn-Out
Statement, then the Quarterly Earn-Out Statement prepared by the Purchaser shall
be deemed to be final and binding. If, however, the Seller disputes
the Quarterly Earn-Out Statement within such 15 calendar day period, the
Purchaser and Seller shall negotiate in good faith to resolve any differences
within 15 calendar days following delivery of such notification of dispute, and
any resolution by them as to any disputed items shall be final, binding and
conclusive on the parties hereto. If the Seller and the Purchaser are
unable to reach a resolution within such 15 calendar day period, then all
remaining disputed items shall be submitted for resolution to the Determining
Accounting Firm which shall, within 30 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Seller and the Purchaser. The Determining Accounting Firm shall be
instructed to review this Agreement and the disputed items or amounts for the
purpose of making its report (it being understood that in making such report,
the Determining Accounting Firm shall be functioning as an expert and not as an
arbitrator). In making such report, the Determining Accounting Firm
shall consider only those items or amounts as to which the Seller and the
Purchaser have disagreed. The Determining Accounting Firm’s
determination of any disputed items or amounts shall be within the range of the
amounts proposed by the Seller and by the Purchaser,
respectively. The fees and disbursements of the Determining
Accounting Firm shall be allocated between the Seller and the Purchaser in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Determining Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Determining Accounting Firm) bears
to the total amount of such remaining disputed items so
submitted.
The
Quarterly Earn-Out Statement shall be deemed final and binding upon the earliest
of (x) the acceptance of the Quarterly Earn-Out Statement by the Seller
pursuant to a written notice to the Purchaser, (y) the failure of the Seller to
notify the Purchaser of a dispute within 15 calendar days of the Purchaser’s
delivery of the Quarterly Earn-Out Statement to the Seller, or (z) the
resolution of all disputes regarding the Quarterly Earn-Out Statement, pursuant
to this Exhibit 2.03(a)(iv)
(the date on which the earliest of (x), (y) or (z) occurs, the “Quarterly Earn-Out
Settlement Date”).
III. The
Seller shall be entitled to conduct up to one audit per year of the Purchaser’s,
the Company’s and the Company Subsidiaries’ books and records for purposes of
verifying the determination and calculation of the amounts contemplated in this
Exhibit 2.03(a)(iv),
including without limitation the methodology and systems utilized in determining
whether the referring broker is a Selective Agent. The Purchaser
shall make its appropriate personnel and its books and records available during
normal business hours and shall reasonably cooperate in such audit.
IV. For
all purposes of this Exhibit 2.03(a)(iv),
any Person that was a Transferred ASO Employee or a Transferred Closing ASO
Employee, the employer for whom becomes an Existing Client, shall thereafter be
deemed a Transferred WSEE for all purposes under this
Agreement.
EXHIBIT
2.03(a)(iv)-A
QUARTERLY
EARN-OUT STATEMENT
***Note: All
WSEE numbers are illustrative; actual payments will be based on actual WSEE
counts at time of payment.***
***Note: Actual
Common Broker Consideration % to be based on scheduled provided.***
Periods
|
Periods
|
|||||||
June 30, 2010 -
March 31, 2015
|
June 30, 2015 -
March 31, 2020
|
|||||||
Existing
Clients WSEEs
|
18,000 | 18,000 | ||||||
Multiplied
by: Existing Client Quarterly Payment
|
$ | 22.50 | $ | 15.00 | ||||
Total
Paid
|
$ | 405,000 | $ | 270,000 | ||||
New
Client WSEEs
|
500 | 500 | ||||||
Multiplied
by: New Client Quarterly Payment
|
$ | 15.00 | $ | 7.50 | ||||
Total
Paid
|
$ | 7,500 | $ | 3,750 | ||||
Common
Client WSEEs
|
500 | 500 | ||||||
Multiplied
by: Common Client Quarterly Payment
|
$ | 15.00 | $ | 7.50 | ||||
Multiplied
by: Common Broker Consideration %
|
50.0 | % | 50.0 | % | ||||
Common
Client Quarterly Payment
|
$ | 3,750 | $ | 1,875 | ||||
Transferred
ASO Employees
|
2,000 | 2,000 | ||||||
Multiplied
by: Transferred ASO Quarterly Payment
|
$ | 11.25 | $ | 7.50 | ||||
Total
Paid
|
$ | 22,500 | $ | 15,000 | ||||
New
ASO Client Employees
|
100 | 100 | ||||||
Multiplied
by: New ASO Client Quarterly Payment
|
$ | 7.50 | $ | 3.75 | ||||
Total
Paid
|
$ | 750 | $ | 375 | ||||
Common
ASO WSEEs
|
100 | 100 | ||||||
Multiplied
by: Common ASO Quarterly Payment
|
$ | 7.50 | $ | 3.75 | ||||
Multiplied
by: Common Broker Consideration %
|
50.0 | % | 50.0 | % | ||||
Total
Paid
|
$ | 375 | $ | 188 | ||||
Total
Paid
|
$ | 439,875 | $ | 291,188 |
EXHIBIT
2.07(A)
REFERENCE
BALANCE SHEET
Selective
HR Solutions, Inc. and subsidiaries
Consolidated
Balance Sheets
July 31, 2009
|
||||
Assets
|
||||
Current
Assets:
|
||||
Cash
and cash equivalents
|
13,692,177 | |||
Accounts
receivable, net of allowance for doubtful accounts
|
14,562,898 | |||
Current
state income tax recoverable
|
93,041 | |||
Current
federal income tax recoverable
|
331,732 | |||
Prepaid
expenses and other current assets
|
490,758 | |||
Total
current assets
|
29,170,606 | |||
Property,
equipment, and software, net of accumulated depreciation
|
||||
and
amortization
|
82,374 | |||
Goodwill
|
21,787,595 | |||
Deferred
state income tax
|
97,665 | |||
Other
assets
|
6,305 | |||
Total
Assets
|
51,144,545 | |||
Liabilities
& Stockholders' Equity
|
||||
Current
Liabilities:
|
||||
Accrued
worksite employee payroll expense, payroll taxes
|
||||
and
other payroll deductions
|
20,365,547 | |||
Accounts
payable and accrued expenses
|
4,408,135 | |||
Payable
to Parent
|
1,597,002 | |||
Total
current liabilities
|
26,370,684 | |||
Client
deposits
|
54,919 | |||
Deferred
federal income tax liability
|
4,319,386 | |||
Other
liabilities
|
75,468 | |||
Total
Liabilities
|
30,820,457 | |||
Stockholders'
Equity:
|
||||
Common
stock
|
10,000 | |||
Additional
paid-in capital
|
22,094,729 | |||
Retained
earnings
|
(1,780,641 | ) | ||
Total
Stockholders' Equity
|
20,324,088 | |||
Total
Liabilities and Stockholders' Equity
|
51,144,545 |
Selective
HR Solutions, Inc. and subsidiaries
Net
Working Capital Calculation
July 31, 2009
|
||||
Assets
|
||||
Current
Assets:
|
||||
Cash
and cash equivalents
|
13,692,177 | |||
Accounts
receivable, net of allowance for doubtful accounts
|
14,562,898 | |||
Current
state income tax recoverable
|
93,041 | |||
Current
federal income tax recoverable
|
331,732 | |||
Prepaid
expenses and other current assets
|
490,758 | |||
Total
current assets
|
29,170,606 | |||
Current
Liabilities:
|
||||
Accrued
worksite employee payroll expense, payroll taxes
|
||||
and
other payroll deductions
|
20,365,547 | |||
Accounts
payable and accrued expenses
|
4,408,135 | |||
Payable
to Parent
|
1,597,002 | |||
Total
current liabilities
|
26,370,684 | |||
Net
Working Capital Calculation
|
2,799,922 |
EXHIBIT
2.08(A)
ANNUAL
ACCELERATION PAYMENT
I. “Annual Acceleration
Payment” means the net present value, as of the Annual Acceleration
Statement Date, of the remaining Annual Payments to be paid by the Purchaser to
the Seller as of such date, calculated using the Acceleration Rate as the
discount rate.
II. Annual Acceleration
Statement. In the event that the Purchaser shall decide to pay
in full the remaining Annual Payments to be paid to the Seller pursuant to Section 2.03(a)(iii)
the Purchaser shall deliver to the Seller the Annual Acceleration
Statement. The Seller shall have 15 calendar days from its delivery
to review the Annual Acceleration Statement and either accept or dispute the
Annual Acceleration Statement. The Seller may accept the Annual
Acceleration Statement by providing the Purchaser with written notification
thereof. The Seller may dispute any item of the Annual Acceleration
Statement by providing the Purchaser with written notification of each disputed
item, setting forth, in reasonable detail, the basis for such
dispute. If the Seller neither accepts nor disputes the Annual
Acceleration Statement in writing within 15 calendar days following delivery by
the Purchaser of the Annual Acceleration Statement, then the Annual Acceleration
Statement prepared by the Purchaser shall be deemed to be final and
binding. If, however, the Seller disputes the Annual Acceleration
Statement within such 15 calendar day period, the Purchaser and Seller shall
negotiate in good faith to resolve any differences within 15 calendar days
following delivery of such notification of dispute, and any resolution by them
as to any disputed items shall be final, binding and conclusive on the parties
hereto. If the Seller and the Purchaser are unable to reach a
resolution within such 15 calendar day period, then all remaining disputed items
shall be submitted for resolution to the Determining Accounting Firm which
shall, within 30 Business Days after such submission, determine and report to
the Seller and the Purchaser upon such remaining disputed items, and such report
shall be final, binding and conclusive on the Seller and the
Purchaser. The Determining Accounting Firm shall be instructed to
review this Agreement and the disputed items or amounts for the purpose of
making its report (it being understood that in making such report, the
Determining Accounting Firm shall be functioning as an expert and not as an
arbitrator). In making such report, the Determining Accounting Firm
shall consider only those items or amounts as to which the Seller and the
Purchaser have disagreed. The Determining Accounting Firm’s
determination of any disputed items or amounts shall be within the range of the
amounts proposed by the Seller and by the Purchaser,
respectively. The fees and disbursements of the Determining
Accounting Firm shall be allocated between the Seller and the Purchaser in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Determining Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Determining Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
The
Annual Acceleration Statement shall be deemed final and binding upon the
earliest of (x) the acceptance of the Annual Acceleration Statement by the
Seller pursuant to a written notice to the Purchaser, (y) the failure of the
Seller to notify the Purchaser of a dispute within 15 calendar days of the
Purchaser’s delivery of the Annual Acceleration Statement to the Seller, or
(z) the resolution of all disputes regarding the Annual Acceleration
Statement, pursuant to this Exhibit 2.08(a)
(the date on which the earliest of (x), (y) or (z) occurs, the “Annual Acceleration
Settlement Date”).
EXHIBIT
2.08(a)-A
ANNUAL
ACCELERATION STATEMENT
Date
|
Payment Due
|
Net Present Value
|
||||||
1/1/2011
|
$ | 100,000 | $ | 780,034 | ||||
1/1/2012
|
$ | 100,000 | $ | 720,836 | ||||
1/1/2013
|
$ | 100,000 | $ | 658,192 | ||||
1/1/2014
|
$ | 100,000 | $ | 591,683 | ||||
1/1/2015
|
$ | 100,000 | $ | 521,184 | ||||
1/1/2016
|
$ | 100,000 | $ | 446,455 | ||||
1/1/2017
|
$ | 100,000 | $ | 367,301 | ||||
1/1/2018
|
$ | 100,000 | $ | 283,339 | ||||
1/1/2019
|
$ | 100,000 | $ | 194,340 | ||||
1/1/2020
|
$ | 100,000 | $ | 100,000 |
EXHIBIT
2.08(b)
QUARTERLY
ACCELERATION PAYMENT
I. “Quarterly Acceleration
Payment” means, as of the Quarterly Acceleration Statement Date, the sum
of the Existing Client Acceleration and the Transferred ASO
Acceleration. For purposes of calculating the Quarterly Acceleration
Payment and this Agreement:
(A) “Existing Client
Acceleration” means the sum of the net present value of that portion of
each Quarterly Earn-Out Payment for a Subsequent Quarterly Period that relates
to Existing Client WSEEs, where the portion of each Quarterly Earn-Out Payment
for a Subsequent Quarterly Period that relates to Existing Client WSEEs shall be
calculated by multiplying the Existing Client Acceleration WSEEs for such
Subsequent Quarterly Period by the Existing Client Acceleration
Payment. The “Existing Client Acceleration
WSEEs” for a given Subsequent Quarterly Period shall be calculated by
reducing the Quarterly Acceleration Transferred WSEEs at an attrition rate of
3.125% per Subsequent Quarterly Period between the Quarterly Acceleration
Statement Date and the given Subsequent Quarterly Period.
(B) “Existing Client Acceleration
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $22.50, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $15.00.
(C) “Quarterly Acceleration
Statement” means a statement substantially in the form of Exhibit 2.08(b)-A
hereto stating the Purchaser’s computation of the Quarterly Acceleration
Payment.
(D) “Quarterly Acceleration
Statement Date” means the date on which the Purchaser delivers the
Quarterly Acceleration Statement to the Seller.
(E) “Quarterly Acceleration
Transferred WSEEs” means the aggregate number of Transferred WSEEs who
remain Purchaser WSEEs as of the Initial Earn-Out Reference Date (as set forth
on the Initial Earn-Out Statement), reduced at an attrition rate of 3.125% per
Quarterly Earn-Out Period ended prior to the Quarterly Acceleration Statement
Date.
(F) “Quarterly Acceleration
Transferred ASO Closing Employees” means the aggregate number of
Transferred ASO Closing Employees who remain Transferred ASO Employees as of the
Initial Earn-Out Reference Date (as set forth on the Initial Earn-Out
Statement), reduced at an attrition rate of 3.125% per Quarterly Earn-Out Period
ended prior to the Quarterly Acceleration Statement Date.
(G) “Transferred ASO
Acceleration” means the sum of the net present value of that portion of
each Quarterly Earn-Out Payment for a Subsequent Quarterly Period that relates
to Transferred ASO Employees, where the portion of each Quarterly Earn-Out
Payment for a Subsequent Quarterly Period that relates to Transferred ASO
Employees shall be calculated by multiplying the Transferred ASO Acceleration
Employees for such Subsequent Quarterly Period by the Transferred ASO
Acceleration Payment. The “Transferred ASO Acceleration
Employees” for a given Subsequent Quarterly Period shall be calculated by
reducing the Quarterly Acceleration Transferred ASO Closing Employees at an
attrition rate of 3.125% per Subsequent Quarterly Period between the Quarterly
Acceleration Statement Date and the given Subsequent Quarterly
Period.
(H) “Transferred ASO Acceleration
Payment” means (a) for each of the Quarterly Earn-Out Periods beginning
with the Quarterly Earn-Out Period ending June 30, 2010 and ending with the
Quarterly Earn-Out Period ending March 31, 2015, $11.25, and (b) for each of the
Quarterly Earn-Out Periods beginning with the Quarterly Earn-Out Period ending
June 30, 2015 and ending with the Quarterly Earn-Out Period ending March 31,
2020, $7.50.
II. Net Present
Value. The net present value of each of the Existing Client
Acceleration, the Transferred ASO Acceleration and the components thereof shall
be calculated using the Acceleration Rate as the discount rate.
III. Calculation of Quarterly
Acceleration Statement. For the avoidance of doubt,
Exhibit 2.08(b)-B sets forth a calculation of the Quarterly Acceleration
Payment at varying dates where the aggregate number of Transferred WSEEs who
remain Purchaser WSEEs as of the Initial Earn-Out Reference Date is equal to
18,000. In the event that the Quarterly Acceleration Payment
calculated using the methodology set forth on Exhibit 2.08(b)-B shall
differ with the Quarterly Acceleration Payment calculated using the methodology
set forth on this Exhibit 2.08(b), the Quarterly Acceleration Payment
calculated using the methodology set forth on Exhibit 2.08(b)-B shall be
the Quarterly Acceleration Payment.
IV. Quarterly Acceleration
Statement. In the event that the Purchaser shall decide to pay
in full that portion of the remaining Quarterly Earn-Out Payments to be paid
pursuant to Section 2.03(a)(iv) relating to Existing Client WSEEs and
Transferred ASO Employees, the Purchaser shall deliver to the Seller the
Quarterly Acceleration Statement. The Seller shall have 15 calendar
days from its delivery to review the Quarterly Acceleration Statement and either
accept or dispute the Quarterly Acceleration Statement. The Seller
may accept the Quarterly Acceleration Statement by providing the Purchaser with
written notification thereof. The Seller may dispute any item of the
Quarterly Acceleration Statement by providing the Purchaser with written
notification of each disputed item, setting forth, in reasonable detail, the
basis for such dispute. If the Seller neither accepts nor disputes
the Quarterly Acceleration Statement in writing within 15 calendar days
following delivery by the Purchaser of the Quarterly Acceleration Statement,
then the Quarterly Acceleration Statement prepared by the Purchaser shall be
deemed to be final and binding. If, however, the Seller disputes the
Quarterly Acceleration Statement within such 15 calendar day period, the
Purchaser and Seller shall negotiate in good faith to resolve any differences
within 15 calendar days following delivery of such notification of dispute, and
any resolution by them as to any disputed items shall be final, binding and
conclusive on the parties hereto. If the Seller and the Purchaser are
unable to reach a resolution within such 15 calendar day period, then all
remaining disputed items shall be submitted for resolution to the Determining
Accounting Firm which shall, within 30 Business Days after such submission,
determine and report to the Seller and the Purchaser upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
Seller and the Purchaser. The Determining Accounting Firm shall be
instructed to review this Agreement and the disputed items or amounts for the
purpose of making its report (it being understood that in making such report,
the Determining Accounting Firm shall be functioning as an expert and not as an
arbitrator). In making such report, the Determining Accounting Firm
shall consider only those items or amounts as to which the Seller and the
Purchaser have disagreed. The Determining Accounting Firm’s
determination of any disputed items or amounts shall be within the range of the
amounts proposed by the Seller and by the Purchaser,
respectively. The fees and disbursements of the Determining
Accounting Firm shall be allocated between the Seller and the Purchaser in the
same proportion that the aggregate amount of such remaining disputed items so
submitted to the Determining Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Determining Accounting Firm) bears
to the total amount of such remaining disputed items so
submitted.
The
Quarterly Acceleration Statement shall be deemed final and binding upon the
earliest of (x) the acceptance of the Quarterly Acceleration Statement by
the Seller pursuant to a written notice to the Purchaser, (y) the failure of the
Seller to notify the Purchaser of a dispute within 15 calendar days of the
Purchaser’s delivery of the Quarterly Acceleration Statement to the Seller, or
(z) the resolution of all disputes regarding the Quarterly Acceleration
Statement, pursuant to this Exhibit 2.08(b)
(the date on which the earliest of (x), (y) or (z) occurs, the “Quarterly Acceleration
Settlement Date”).
EXHIBIT
2.08(b)-A
QUARTERLY
ACCELERATION STATEMENT
EXHIBIT
2.08(b)-B
QUARTERLY
ACCELERATION PAYMENT CALCULATION
***Note: All
WSEE numbers are illustrative; actual payments will be based on actual WSEE
counts at time of payment.***
Date
|
Existing
Clients
WSEEs
|
Existing
Client
Quarterly
Payment
|
Transferred
ASO
Employees
|
Transferred
ASO
Quarterly
Payment
|
Quarterly
Acceleration
Payment
|
|||||||||||||||
6/30/2010
|
18,000 | $ | 22.50 | 2,000 | $ | 11.25 | $ | 7,265,924 | ||||||||||||
9/30/2010
|
17,438 | $ | 22.50 | 1,938 | $ | 11.25 | $ | 6,939,601 | ||||||||||||
12/31/2010
|
16,893 | $ | 22.50 | 1,877 | $ | 11.25 | $ | 6,622,007 | ||||||||||||
3/31/2011
|
16,365 | $ | 22.50 | 1,818 | $ | 11.25 | $ | 6,310,832 | ||||||||||||
6/30/2011
|
15,853 | $ | 22.50 | 1,761 | $ | 11.25 | $ | 6,008,832 | ||||||||||||
9/30/2011
|
15,358 | $ | 22.50 | 1,706 | $ | 11.25 | $ | 5,715,648 | ||||||||||||
12/31/2011
|
14,878 | $ | 22.50 | 1,653 | $ | 11.25 | $ | 5,430,067 | ||||||||||||
3/31/2012
|
14,413 | $ | 22.50 | 1,601 | $ | 11.25 | $ | 5,151,006 | ||||||||||||
6/30/2012
|
13,963 | $ | 22.50 | 1,551 | $ | 11.25 | $ | 4,879,064 | ||||||||||||
9/30/2012
|
13,526 | $ | 22.50 | 1,503 | $ | 11.25 | $ | 4,614,733 | ||||||||||||
12/31/2012
|
13,104 | $ | 22.50 | 1,456 | $ | 11.25 | $ | 4,357,008 | ||||||||||||
3/31/2013
|
12,694 | $ | 22.50 | 1,410 | $ | 11.25 | $ | 4,104,347 | ||||||||||||
6/30/2013
|
12,297 | $ | 22.50 | 1,366 | $ | 11.25 | $ | 3,858,511 | ||||||||||||
9/30/2013
|
11,913 | $ | 22.50 | 1,324 | $ | 11.25 | $ | 3,619,214 | ||||||||||||
12/31/2013
|
11,541 | $ | 22.50 | 1,282 | $ | 11.25 | $ | 3,385,640 | ||||||||||||
3/31/2014
|
11,180 | $ | 22.50 | 1,242 | $ | 11.25 | $ | 3,156,574 | ||||||||||||
6/30/2014
|
10,831 | $ | 22.50 | 1,203 | $ | 11.25 | $ | 2,933,350 | ||||||||||||
9/30/2014
|
10,492 | $ | 22.50 | 1,166 | $ | 11.25 | $ | 2,715,713 | ||||||||||||
12/31/2014
|
10,164 | $ | 22.50 | 1,129 | $ | 11.25 | $ | 2,503,014 | ||||||||||||
3/31/2015
|
9,847 | $ | 22.50 | 1,094 | $ | 11.25 | $ | 2,294,337 | ||||||||||||
6/30/2015
|
9,539 | $ | 22.50 | 1,060 | $ | 11.25 | $ | 2,090,627 | ||||||||||||
9/30/2015
|
9,241 | $ | 15.00 | 1,027 | $ | 7.50 | $ | 1,891,653 | ||||||||||||
12/31/2015
|
8,952 | $ | 15.00 | 995 | $ | 7.50 | $ | 1,771,161 | ||||||||||||
3/31/2016
|
8,672 | $ | 15.00 | 964 | $ | 7.50 | $ | 1,653,261 | ||||||||||||
6/30/2016
|
8,401 | $ | 15.00 | 933 | $ | 7.50 | $ | 1,538,131 | ||||||||||||
9/30/2016
|
8,139 | $ | 15.00 | 904 | $ | 7.50 | $ | 1,425,897 | ||||||||||||
12/31/2016
|
7,885 | $ | 15.00 | 876 | $ | 7.50 | $ | 1,316,221 | ||||||||||||
3/31/2017
|
7,638 | $ | 15.00 | 849 | $ | 7.50 | $ | 1,208,623 | ||||||||||||
6/30/2017
|
7,399 | $ | 15.00 | 822 | $ | 7.50 | $ | 1,103,602 | ||||||||||||
9/30/2017
|
7,168 | $ | 15.00 | 796 | $ | 7.50 | $ | 1,001,039 | ||||||||||||
12/31/2017
|
6,944 | $ | 15.00 | 772 | $ | 7.50 | $ | 900,673 | ||||||||||||
3/31/2018
|
6,727 | $ | 15.00 | 747 | $ | 7.50 | $ | 802,166 | ||||||||||||
6/30/2018
|
6,517 | $ | 15.00 | 724 | $ | 7.50 | $ | 705,831 | ||||||||||||
9/30/2018
|
6,313 | $ | 15.00 | 701 | $ | 7.50 | $ | 611,562 | ||||||||||||
12/31/2018
|
6,116 | $ | 15.00 | 680 | $ | 7.50 | $ | 519,170 | ||||||||||||
3/31/2019
|
5,925 | $ | 15.00 | 658 | $ | 7.50 | $ | 428,444 | ||||||||||||
6/30/2019
|
5,740 | $ | 15.00 | 638 | $ | 7.50 | $ | 339,530 | ||||||||||||
9/30/2019
|
5,560 | $ | 15.00 | 618 | $ | 7.50 | $ | 252,329 | ||||||||||||
12/31/2019
|
5,387 | $ | 15.00 | 599 | $ | 7.50 | $ | 166,720 | ||||||||||||
3/31/2020
|
5,218 | $ | 15.00 | 580 | $ | 7.50 | $ | 82,623 |
SECTION
5.10
FORM
OF RELEASE
FORM
OF GENERAL RELEASE
This
General Release (this “General Release”) is
executed and delivered as of [January 1, 2010], by Selective Insurance Group,
Inc. (the “Releasor”) to and in
favor of, and for the benefit of, Selective HR Solutions, Inc., a Florida
corporation and wholly-owned Subsidiary of the Seller (the “Company”), and
Selective HR Solutions II, Inc., a Georgia corporation and wholly-owned
Subsidiary of the Company (“SHRS-II”), Selective
HR Solutions III, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-III”), Selective
HR Solutions IV, Inc., a Maryland corporation and wholly-owned Subsidiary of the
Company (“SHRS-IV”), Selective
HR Solutions V, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-V”), Selective
HR Solutions VI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VI”), Selective
HR Solutions VII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-VII”), Selective
HR Solutions VIII, Inc., a Florida corporation and wholly-owned Subsidiary of
the Company (“SHRS-VIII”),
Selective HR Solutions IX, Inc., a Florida corporation and wholly-owned
Subsidiary of the Company (“SHRS-IX”), Selective
HR Solutions X, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-X”), Selective
HR Solutions XI, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XI”), Selective
HR Solutions XII, Inc., a Florida corporation and wholly-owned Subsidiary of the
Company (“SHRS-XII”), Selective
HR Services, LLC, a limited liability company organized under the laws of the
Commonwealth of Pennsylvania and wholly-owned Subsidiary of the Company (“SHRS-LLC” and,
together with SHRS-II, SHRS-III, SHRS-IV, SHRS-V, SHRS-VI, SHRS-VII, SHRS-VIII,
SHRS-IX, SHRS-X, SHRS-XI, SHRS-XII, the “Company
Subsidiaries”), and the other Releasees (as defined in Section
2).
RECITALS
A. Contemporaneously
with the execution and delivery of this General Release, the Releasor is selling
the Business (as defined in the Purchase Agreement) to Purchaser pursuant to a
Stock and Asset Purchase Agreement, dated as of October 27, 2009 (the “Purchase Agreement”),
among the Releasor, the Company, the Company Subsidiaries, and the Purchaser,
Alpha and the Acquiring Subsidiaries (each as defined in the Purchase
Agreement).
B. Purchaser
has required, as a condition to consummating the transactions contemplated by
the Purchase Agreement, that the Releasor execute and deliver this General
Release.
C. Capitalized
terms used herein and not defined shall have respective meanings ascribed
thereto in the Purchase Agreement.
AGREEMENT
In order
to induce the Company and the Company Subsidiaries to consummate the
Contemplated Transactions, and for other valuable consideration (the receipt and
sufficiency of which are hereby acknowledged by the Releasor), the Releasor
hereby covenants and agrees as follows:
1. Release. The
Releasor, for himself and for each of the Releasor’s Associated Parties (as
defined in Section
2), hereby generally, irrevocably, unconditionally and completely
releases and forever discharges each of the Releasees from, and hereby
irrevocably, unconditionally and completely waives and relinquishes, each of the
Released Claims (as defined in Section
2).
2. Definitions.
(a) The
term “Associated
Parties,” when used herein with respect to the Releasor, shall mean and
include: (i) the Releasor’s predecessors, successors, executors, administrators,
heirs and estate; (ii) the Releasor’s past, present and future assigns, agents
and representatives acting in such capacity; (iii) each controlled Affiliate of
the Releasor and any other entity that the Releasor has the power to bind (by
its acts or signature) or over which the Releasor directly or indirectly
exercises control.
(b) The
term “Releasees” shall
mean and include: (i) the Company; (ii) the Company Subsidiaries; (iii)
each other controlled Affiliate of the Company and the Company Subsidiaries; and
(iv) the successors and past, present and future assigns, directors,
officers, employees, agents, attorneys and representatives, in each case acting
in such capacity, of the respective entities identified or otherwise referred to
in clauses “(i)” through “(iii)” of this sentence, other than the
Releasor.
(c) The
term “Claims” shall mean
and include all past, present and future disputes, claims, controversies,
demands, rights, obligations, liabilities, actions and causes of action of every
kind and nature, including: (i) any unknown, unsuspected or undisclosed claim;
(ii) any claim or right that may be asserted or exercised by the Releasor in its
capacity as a member, manager, stockholder, director, officer, consultant or
employee of the Company, any of the Company Subsidiaries or in any other
capacity; and (iii) any claim, right or cause of action based upon any breach of
any express, implied, oral or written contract or agreement.
(d) The
term “Released Claims”
shall mean and include each and every Claim that (i) the Releasor or any
Associated Party of the Releasor may have had in the past, may now have or may
have in the future against any of the Releasees, and (ii) has arisen or arises
directly or indirectly out of, or relates directly or indirectly to, any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or prior to the date of this General Release (excluding only the
Releasor’s rights, if any, under the Purchase Agreement and all other documents
executed and delivered in connection with the consummation of the transactions
contemplated by the Purchase Agreement).
3. Statutory and Common Law
Principles. The Releasor (a) represents, warrants and
acknowledges that the Releasor has been fully advised by its attorney that,
under certain statutory or common law principles applied in certain states, a
general release does not extend to claims which a creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by it must have materially affected its settlement with the debtor, and
(b) hereby expressly waives the benefits thereof and any rights the Releasor may
have under, any statute or common law principle of similar effect in any
jurisdiction.
4. Representations and
Warranties. The Releasor represents and warrants
that:
(a) the
Releasor has not assigned, transferred, conveyed or otherwise disposed of any
Claim against any of the Releasees, or any direct or indirect interest in any
such Claim, in whole or in part;
(b) to
the Releasor’s knowledge, no other person or entity has any interest in any of
the Released Claims;
(c) to
the Releasor’s knowledge, no Associated Party of the Releasor has or had any
Claim against any of the Releasees;
(d) to
the Releasor’s knowledge, no Associated Party of the Releasor will in the future
have any Claim against any Releasee that arises directly or indirectly from or
relates directly or indirectly to any circumstance, agreement, activity, action,
omission, event or matter occurring or existing on or before the date of this
General Release;
(e) this
General Release has been duly and validly executed and delivered by the
Releasor;
(f) this
General Release is a valid and binding obligation of the Releasor and, to the
Releasor’s knowledge, the Releasor’s Associated Parties, and is enforceable
against the Releasor and, to the Releasor’s knowledge, each of the Releasor’s
Associated Parties in accordance with its terms, except that (i) such
enforcement may be subject to any bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other Laws, now or hereafter in effect,
relating to or limiting creditors’ rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought;
(g) there
is no action, suit, proceeding, dispute, litigation, claim, complaint or
investigation by or before any court, tribunal, governmental body, governmental
agency or arbitrator pending or, to the knowledge of such Releasor, threatened
against the Releasor or any of the Releasor’s Associated Parties that challenges
or would challenge the execution and delivery of this General Release or the
taking of any of the actions required to be taken by the Releasor under this
General Release;
(h) neither
the execution and delivery of this General Release nor the performance hereof
will (i) result in any violation or breach of any agreement or other instrument
to which the Releasor or, to the knowledge of such Releasor, any of the
Releasor’s Associated Parties is a party or by which such Releasor or any of
such Releasor’s Associated Parties is bound, or (ii) result in a violation or
any law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which such Releasor or, to the knowledge of such Releasor,
any of the Releasor’s Associated Parties is subject; and
(i) no
authorization, instruction, consent or approval of any person or entity is
required to be obtained by the Releasor or, to the knowledge of such Releasor,
any of the Releasor’s Associated Parties in connection with the execution and
delivery of this General Release or the performance hereof.
5. Indemnification. Without
in any way limiting any of the rights or remedies otherwise available to any
Releasee, the Releasor shall indemnify and hold harmless each Releasee against
and from any loss, damage, injury, harm, detriment, lost opportunity, liability,
exposure, claim, demand, settlement, judgment, award, fine, penalty, tax, fee,
charge or expense (including attorneys’ fees) that is directly or indirectly
suffered or incurred at any time by such Releasee, or to which such Releasee
otherwise becomes subject at any time, and that arises directly or indirectly
out of or by virtue of, or relates directly or indirectly to, (a) any failure on
the part of the Releasor to observe, perform or abide by, or any other breach
of, any restriction, covenant, obligation, representation, warranty or other
provision contained herein, or (b) the assertion or purported assertion of any
of the Released Claims by the Releasor or any of the Releasor’s Associated
Parties.
6. Miscellaneous.
(a) This
General Release sets forth the entire understanding of the Releasor and the
Releasees relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings among or between any of the
Releasor and Releasees relating to the subject matter hereof.
(b) Any
term or provision of this General Release that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this General Release shall be enforceable as so modified. In the
event such court does not exercise the power granted to it in the prior
sentence, the parties hereto agree to replace such invalid or unenforceable term
or provision with a valid and enforceable term or provision that will achieve,
to the extent possible, the economic, business and other purposes of such
invalid or unenforceable term.
(c) This
General Release shall be construed in accordance with, and governed in all
respects by, the laws of the State of Delaware without regard to the rules of
conflict of laws of such state that would cause the laws of another jurisdiction
to apply.
(d) Any
legal action or other legal proceeding relating to this General Release or the
enforcement of any provision of this General Release may be brought or otherwise
commenced by any Releasee in any state or federal court located in Miami-Dade
County, Florida. Each Releasor:
(i) expressly
and irrevocably consents and submits to the jurisdiction of each state and
federal court located in Miami-Dade County, Florida in connection with any such
legal proceeding;
(ii) agrees
that each state and federal court located in Miami-Dade County, Florida shall be
deemed to be a convenient forum; and
(iii) agrees
not to assert (by way of motion, as a defense or otherwise), in any such legal
proceeding commenced in any state or federal court located in Miami-Dade County,
Florida, any claim that the Releasor is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
General Release or the subject matter of this General Release may not be
enforced in or by such court.
Nothing
contained in this General Release shall be deemed to limit or otherwise affect
the right of any Releasee (1) to commence any legal proceeding or to otherwise
proceed against any of the Releasor or any other person or entity in any other
forum or jurisdiction, or (2) to raise this Release as a defense in any legal
proceeding in any other forum or jurisdiction.
(e) THE
RELEASOR HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS GENERAL
RELEASE.
(f) This
General Release may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement. Facsimile or other electronically scanned and
transmitted signatures shall be deemed originals for all purposes of this
General Release.
(g) The
Releasor shall execute and/or cause to be delivered to each Releasee such
instruments and other documents, and shall take such other actions, as the
Releasee may reasonably request for the purpose of carrying out or evidencing
any of the actions contemplated by this General Release.
(h) If
any legal action or other legal proceeding relating to this General Release or
the enforcement of any provision hereof is brought by the Releasor or any
Releasee, the prevailing party shall be entitled to recover reasonable
attorneys’ fees, costs and disbursements to the extent actually incurred (in
addition to any other relief to which the prevailing party may be
entitled).
(i) Whenever
required by the context, the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and neuter genders; and
the neuter gender shall include the masculine and feminine genders.
(j) Any
rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not be applied in the construction or interpretation of
this General Release.
(k) As
used in this General Release, the words “include” and “including,” and
variations thereof, shall not be deemed to be terms of limitation, and shall be
deemed to be followed by the words “without limitation.”
IN
WITNESS WHEREOF,
the Releasor has caused this General Release to be executed as of the date first
above written.
Releasor:
|
||
Selective
Insurance Group, Inc.
|
||
By:
|
||
Name:
|
||
Title:
|
EXHIBIT
5.16
TRANSITION
SERVICES AGREEMENT TERMS
SERVICES
TO BE PROVIDED BY THE SELLER TO THE PURCHASER:
Subject
to the definitive terms and conditions of the Transition Services Agreement(s)
to be agreed upon by the parties, the Seller shall provide (or cause one or more
of its Affiliates to provide)to the Purchaser the following
services:
Service
|
Duration
|
Limitations
|
||
Services
under information technology agreements to which the Seller or its
Affiliates are parties and which historically have been used by the
Business, to the extent reasonably required by the Purchaser in
order to operate the Business.
|
Not
to exceed six months
|
Service
to be provided to the extent (i) permitted under the terms of the
applicable contract or arrangement and (ii) appropriate Company personnel
are made available.
|
||
Support,
access to and use of the Seller’s information technology system, network
infrastructure, server and equipment to the extent reasonably required by
the Purchaser in order to operate its operational information technology
systems relating to the Business.
|
Not
to exceed six months
|
Service
to be provided (i) subject to development of appropriate security
protocols and (ii) only to the extent appropriate Company personnel are
made available.
|
||
Support,
access to and use of the hardware, software and technological applications
and equipment to the extent reasonably required by the Purchaser in order
to operate the Business.
|
Not
to exceed six months
|
Service
to be provided (i) subject to development of appropriate security
protocols and (ii) only to the extent appropriate Company personnel are
made available.
|
||
Support
reasonably required by the Purchaser for the transition and migration to
the Purchaser’s information technology systems of the data and information
relating to the Business.
|
Not
to exceed six months
|
Service
to be provided (i) subject to development of appropriate security
protocols and (ii) only to the extent appropriate Company personnel are
made
available.
|
The
Purchaser shall covenant and agree to use the transition services described
above for the shortest period of time reasonably practicable. All
such services shall be provided by the Seller at the Seller’s cost.
SERVICES
TO BE PROVIDED BY THE PURCHASER TO THE SELLER
Subject
to the definitive terms and conditions of the Transition Services Agreement(s)
to be agreed upon by the parties, the Purchaser shall provide (or cause its
Affiliates to provide) to the Seller the following services:
Service
|
Duration
|
Limitations
|
||
Full-time
support and assistance from each of the personnel currently employed in
the finance and accounting group of the Company in order to close the
accounting books of the Company for fiscal year 2009 and provide related
support and assistance.
|
From
January 1, 2010 until January 8, 2010.
|
Service
provided to the extent appropriate Company personnel are
available.
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The
Seller shall covenant and agree to use the transition services described above
for the shortest period of time reasonably practicable. In
consideration for the provision of the services described above, the Seller
shall pay to the Purchaser an amount equal to one-half the salary and other
costs associated with the Purchaser's employment of the personnel performing the
services for a period of one week.