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Exhibit 10.1
STOCK PURCHASE
AGREEMENT
▇▇▇▇▇ & ASSOCIATES, INC.
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STOCK PURCHASE AGREEMENT
COMES NOW, SOS Staffing Services, Inc. a Utah corporation at ▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter referred to as "▇▇▇▇"); ▇▇▇▇▇ &
Associates, Inc., a New Mexico corporation at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇.▇.,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter referred to as "▇▇▇▇▇"); ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (a/k/a ▇▇▇▇▇ ▇▇▇▇▇) and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (hereinafter
collectively referred to as "SELLING SHAREHOLDERS"); and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
(hereinafter referred to as "COMMUNITY PROPERTY INTEREST HOLDER") and agree as
follows:
WITNESSETH:
WHEREAS, ▇▇▇▇ desires to purchase all of the outstanding shares of
stock in ▇▇▇▇▇ from SELLING SHAREHOLDERS for cash or other good and valuable
consideration;
WHEREAS, SELLING SHAREHOLDERS, own all of the shares of stock issued
and outstanding in ▇▇▇▇▇ and desire to exchange such shares with ▇▇▇▇ for cash
and other good and valuable consideration;
WHEREAS, the parties desire to enter into a written Agreement
describing and setting forth the terms and conditions under which they will
transfer ownership of said stock;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and conditions hereinafter set forth, and for other good and valuable
consideration, the parties agree as follows:
1. As a result of the stock purchase transaction contemplated by this
Agreement, ▇▇▇▇ shall acquire all of the assets and liabilities of ▇▇▇▇▇ which
exist at the Closing Date. ▇▇▇▇▇'▇ balance sheet at the time of Closing is
attached as Exhibit A. The assets at Closing are more fully set forth and
described, including the value of such assets, in Exhibits B (general assets), C
(operational assets) and D (cash, bank accounts, accounts receivable and
non-operational assets) which are incorporated herein by reference. ▇▇▇▇▇'▇
liabilities at the time of Closing are more fully set forth and described in
Exhibits E (third party contracts and leases), F (accounts payable), G (other
liabilities), H (contingent liabilities), J (tax liabilities) and Exhibit K
(causes of actions and lawsuits) which are incorporated herein by reference.
The parties acknowledge that ▇▇▇▇▇ may currently have other
assets and liabilities which are not listed in the preceding Exhibits. Such
assets may be sold or otherwise transferred and such liabilities extinguished
and satisfied prior to the Closing of the Agreement. Any such asset or liability
not specifically listed in the Exhibits hereto are not to be transferred
hereunder and shall remain the property or responsibility of the SELLING
SHAREHOLDERS. Any asset or liability not identified in the Exhibits hereto which
have not
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been legally and validly transferred by ▇▇▇▇▇ or assumed from ▇▇▇▇▇ shall upon
the Closing of this Agreement be transferred to or assumed by SELLING
SHAREHOLDERS.
2. The closing of the transaction contemplated by this Agreement shall
take place on , 1996 at :00 .m. at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, the principal place of business of ▇▇▇▇ or at such other
date, time or place as the parties may agree upon in writing (the "Closing").
3. At Closing, SELLING SHAREHOLDERS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, as joint tenants, shall deliver, convey and transfer 4,000 shares of
▇▇▇▇▇ stock to ▇▇▇▇ for the consideration described in Article 4 herein.
Additionally, SELLING SHAREHOLDER, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, and COMMUNITY PROPERTY
INTEREST HOLDER, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, shall deliver, convey and transfer 4,000
shares of ▇▇▇▇▇ stock to ▇▇▇▇ for the consideration described in Article 4
herein. The aggregate number of shares of ▇▇▇▇▇ stock to be transferred by all
SELLING SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER hereunder is
8,000 shares.
4. In consideration for receiving the stock pursuant to Article 3
herein and in consideration of the representations, warranties, and covenants of
▇▇▇▇▇, SELLING SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER, ▇▇▇▇
agrees to pay SELLING SHAREHOLDERS and the COMMUNITY INTEREST HOLDER the
following amounts on the conditions set forth herein:
(a) The total purchase price for the shares of stock described
in Article 3 of this Agreement and the payments described in
this Article 4 shall in no event exceed TEN MILLION DOLLARS
($10,000,000.00).
(b) ▇▇▇▇ shall pay SELLING SHAREHOLDERS and the COMMUNITY PROPERTY
INTEREST HOLDER, in the aggregate (each party shall be paid
proportionally to his or her interest in ▇▇▇▇▇), as an initial
purchase price FOUR MILLION DOLLARS ($4,000,000.00), as
adjusted, at the time of Closing of this Agreement. The
$4,000,000.00 initial purchase price shall be adjusted by
increasing the sum by the value of the Assets shown on Exhibit D
(cash, bank accounts, accounts receivable and non-operational
assets), , including depreciation, less the liabilities,
including accruals for such liabilities, as listed on the
financial statement and specifically described in Exhibits E
(third party contracts and leases), F (accounts payable), G
(other liabilities), H (contingent liabilities), J (tax
liabilities) and Exhibit K (causes of actions and lawsuits). No
adjustment to the purchase price shall be made for the general,
operational and fixed assets described in Exhibits B and C.
(c) (i) The "Earn-out Period" shall commence on the Closing
Date of this Agreement and continue to December 28, 1997 (the
close of ▇▇▇▇' 1997 fiscal year). ▇▇▇▇ shall pay SELLING
SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER, in the
aggregate, two and seven-tenths
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(2.7) times the Branch Profit (defined in Article 4 (d) herein)
generated by the business currently known as ▇▇▇▇▇ during the
Earn-out Period in excess of $500,000.00, but less than
$700,000.00 (as adjusted to reflect a period greater than
fifty-two (52) weeks in 1997 to include the operation of the
Business from the Closing Date to December 28, 1997). Such
adjustments shall be made by multiplying $500,000.00 and
$700,000.00 by a fraction, the numerator of which is the number
of weeks in the Earn-out Period and the denominator of which is
fifty-two (52). For example, if the Closing Date is November 4,
1996, then there would be sixty weeks in the Earnout Period.
▇▇▇▇ would pay 2.7 times the Branch Profit generated during the
sixty week Earnout Period which is in excess of $576,923.08
($500,000.00 x 60/52), but which is less than or equal to
$807,692.31 ($700,000.00 x 60/52). Such payment shall be made no
later than forty-five (45) days from the close of the Earn-out
Period.
(ii) In addition to the monies paid pursuant to Article 4(c)
(i) herein, ▇▇▇▇ shall pay SELLING SHAREHOLDERS and the
COMMUNITY PROPERTY INTEREST HOLDER, in the aggregate, four (4)
times the Branch Profit generated by the business currently
known as ▇▇▇▇▇ during the Earn-out Period in excess of
$700,000.00 (as adjusted to reflect a period greater than
fifty-two (52) weeks in 1997 to include the operation of the
Business from the Closing Date to December 28, 1997). Such
adjustment shall be made by multiplying $700,000.00 by a
fraction, the numerator of which is the number of weeks in the
Earn-out Period and the denominator of which is fifty-two (52).
For example, if the Closing Date is November 4, 1996, then there
would be sixty weeks in the Earnout Period. ▇▇▇▇ would pay 4
times the Branch Profit generated during the sixty week Earnout
Period which is in excess of $807,692.31 ($700,000.00 x 60/52).
Such payment shall be made no later than forty-five (45) days
from the close of the Earn-out Period.
(iii) SELLING SHAREHOLDERS and the COMMUNITY PROPERTY
INTEREST HOLDER acknowledge and agree that such earn-out will be
based on ▇▇▇▇' operation of the business and acknowledges that
▇▇▇▇' workers' compensation insurance, unemployment insurance,
bonding insurance, cost of interest, cost of employee benefits
and other costs differ from ▇▇▇▇▇'▇ and past performance will
not necessarily be indicative of future profits. SELLING
SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER further
acknowledge that ▇▇▇▇' payroll taxes are not adjusted on branch
statements for limits on FICA or unemployment insurance. SELLING
SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER further
acknowledge that the Earn-out base of $500,000.00, has been
adjusted downward from the original base amount to reflect the
difference in some expenses from ▇▇▇▇ and ▇▇▇▇▇.
(d) (i) "Branch Profit" as used in this Agreement means gross sales
(total sales of goods and services) less adjustments and
discounts; the cost of sales (temporary employee programs,
direct costs, temporary payroll, temporary payroll taxes,
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i.e. FICA, unemployment, etc., temporary worker's compensation,
drug testing and bonding insurance); branch staff expenses
(branch staff payroll, temporary staff payroll, commissions and
bonuses, branch staff and temporary staff payroll taxes, i.e.
FICA, unemployment insurance, etc., branch staff worker's
compensation, sales and travel, group insurance, background
checks, and drug testing); advertising expenses (specialty
items, classified ads, yellow pages, promotional events, other
advertising); operation expenses (telephone, office supplies,
legal, interest on accounts receivable, professional, postage
and delivery, ▇▇▇▇▇ cash, training expenses, and other operating
expenses); facilities expenses (rent, repair and maintenance,
utilities, depreciation and leasehold amortization); bad debt;
miscellaneous expenses (dues and subscriptions,
adjustments/recoveries, and reimbursements); printing expenses;
computer expenses; consultation expenses; taxes and insurance;
gain or loss on disposal of assets; depreciation of assets and
other expenses (career fair; services fees, internal expenses,
etc.); plus other income (bad debt recovery, finance charges
collected and other income). The Branch Profit does not include
corporate overhead expenses. The interest on accounts receivable
is calculated based upon the dollar amount of accounts
receivable at the end of each fiscal month at the prime rate as
set by First Security Bank of Utah on the last day of the fiscal
month. For purposes of calculating the Earnout, Branch Profit
shall be based on the combined operation of all offices
currently operated by ▇▇▇▇▇.
(ii) Branch Profit shall exclude profit from gross sales of
any single account to the extent gross sales of any single
account exceed twenty percent (20%) of total gross sales (the
amount by which gross sales of any such single account exceed
twenty percent (20%) of total gross sales will be hereinafter be
referred to as the "Excess"). If any single account has an
Excess, Branch Profit shall be reduced by a fraction, the
numerator of which is the Excess and the denominator of which is
the total gross sales. For example, if total gross sales are
$2,000,000 and a single account generated $600,000 in gross
sales, then the Excess for such account would be $200,000 [.2 x
$2,000,000 = $400,000 (to establish what 20% of total gross
sales would be); $600,000 - 400,000 = $200,000 (the amount the
single account was in Excess of the 20% cap)]. The Branch Profit
would then be reduced by 10% ($200,000 (Excess)/$2,000,000
(total gross sales) = .10 = 10%). Therefore in this example, if
Branch Profit was $500,000, then Branch Profit would be reduced
by $50,000 (10% x $500,000 = $50,000). The adjustments made
pursuant to this paragraph are based on the assumption that the
profitability rate/gross profit percentage of the account with
the excess is similar to the profitability rate/gross profit
percentage of other ▇▇▇▇▇ & Associates, Inc. business. The
limitation on Branch Profit contained in this Article 4(d)(ii)
is applicable only to the Earnout Period and shall not apply to
subsequent years.
(iii) If the profitability rate/gross profit percentage of
an account which has an Excess deviates more than ten percent
(10%) from the profitability rate/gross
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profit percentage of other ▇▇▇▇▇ & Associates, Inc. business,
then in addition to the adjustments made to the Branch Profit
pursuant to Article 4(d)(ii), the Branch Profit shall be
further reduced by the percent deviation in the profitability
rate/gross profit percentage for Excess. For example, if other
▇▇▇▇▇ & Associates, Inc. business had a profitability
rate/gross profit percentage of forty percent (40%) and the
account with an Excess had a profitability rate/gross profit
percentage of thirty percent (30%) the deviation would be
twenty-five percent (25%) (40%-30% = 10%; 10%/40% = .25 =
25%). If using the figures from the example in Article
4(d)(ii) ($2,000,000 total gross sales, $200,000 Excess), the
Branch Profit would then be further reduced by $50,000
($200,000 (Excess) x 25% (percent deviation) = $50,000). The
total reduction pursuant to both Article 4 (d) (i) and (ii)
would be $100,000 ($50,000 (from 4(d)(i)) + $50,000 (from
4(d)(ii)) = $100,000). Therefore if the Branch Profit was
$500,000 it would be reduced to $400,000 for Earnout
calculation purposes. The limitation on Branch Profit
contained in this Article 4(d)(iii) is applicable only to the
Earnout Period and shall not apply to subsequent years.
5. At the time of Closing of this transaction SOS Staffing Services
Inc. shall become the sole shareholder of ▇▇▇▇▇ & Associates, Inc. and there
shall be no limitation of ▇▇▇▇ operation of ▇▇▇▇▇ and ▇▇▇▇ makes no
representations or warranties to the SELLING SHAREHOLDERS and the COMMUNITY
PROPERTY INTEREST HOLDER concerning ▇▇▇▇ operation of ▇▇▇▇▇ or its continued
existence, except that ▇▇▇▇ shall continue to operate ▇▇▇▇▇ either as a
subsidiary or an operating division at least during the Earn-out Period and
during the term of any SELLING SHAREHOLDER's employment agreement in a manner
consistent with good business judgment. Nothing herein shall limit ▇▇▇▇' ability
dissolve and/or liquidate ▇▇▇▇▇ at any time, provided during the Earn-out Period
and during the term of SELLING SHAREHOLDERS' employment agreements ▇▇▇▇ shall
continue operate ▇▇▇▇▇ as a division in a manner consistent with good business
judgement.
6. 6.1 Non-Competition.
6.1.1 Acknowledgments. SELLING SHAREHOLDERS acknowledge that:
(i) ▇▇▇▇ and its subsidiaries or affiliates currently existing or that may be
formed or incorporated during the Covenant Period (as defined in Article 6.2.1),
are currently engaged in the business of providing temporary staffing and
consulting personnel to employer-customers throughout the United States,
including clerical, industrial, technical, information systems, information
technology, data processing, professional, construction and manufacturing
personnel, as well as related services, including staff leasing, payrolling,
executive placement, permanent placement, and employee testing (all such
activities in which ▇▇▇▇ any subsidiaries or affiliates engage during the
Covenant Period and all nations in which ▇▇▇▇, its subsidiaries or affiliates
operate during the Covenant Period are collectively referred to herein as the
"Business"); (ii)
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SELLING SHAREHOLDERS acknowledge that ▇▇▇▇▇ provides information technology
and information system consulting and staffing services and other related
services throughout the United States of America and Canada, and when ▇▇▇▇
acquires the stock of ▇▇▇▇▇, ▇▇▇▇' Business will include all states and
provinces of the United States and Canada; (iii) SELLING SHAREHOLDERS
acknowledge that ▇▇▇▇ would be materially harmed if SELLING SHAREHOLDERS
competed either directly or indirectly with ▇▇▇▇, its subsidiaries or affiliates
in a business related to ▇▇▇▇▇'▇ business; (iv) the agreements and covenants
contained in this Article 6.1 are essential to protect the Business and goodwill
of ▇▇▇▇, its subsidiaries and affiliates; and (v) SELLING SHAREHOLDERS have
means to support themselves and their dependents other than by engaging in the
Business, and the provisions of this Article 6 will not impair such ability.
Accordingly, SELLING SHAREHOLDERS covenant and agree as follows:
6.2 Covenants and Reformation.
6.2.1 Non-Competition Covenants. For a period
commencing at the Closing of this Agreement and continuing for thirty-six (36)
months (the "Covenant Period"), SELLING SHAREHOLDERS shall not within the United
States of America or Canada, directly or indirectly, (i) engage in the Business
or any aspect of the Business for SELLING SHAREHOLDERS' own account in
competition with ▇▇▇▇, its subsidiaries or affiliates; (ii) enter the employ of,
or render any services to or consult with, any person engaged in competition
with ▇▇▇▇, its subsidiaries or affiliates in the staffing or consulting
industry; (iii) become associated with any such person in any capacity,
including, without limitation, as an individual, partner, shareholder, officer,
director, principal, agent or trustee; provided, however, SELLING SHAREHOLDERS
may own, directly or indirectly, solely as an investment, securities of any
person traded on any national securities exchange or over-the-counter if SELLING
SHAREHOLDERS are not a controlling person of, or a member of a group which
controls, such person and does not, directly or indirectly, own 5% or more of
any class of securities of such person; (iv) solicit or otherwise deal with any
client of ▇▇▇▇, its subsidiaries or affiliates in a manner designed to take
staffing or consulting business away from ▇▇▇▇, its subsidiaries or affiliates;
(v) solicit or otherwise induce any employee of ▇▇▇▇ or its subsidiaries or
affiliates to terminate his/her employment with ▇▇▇▇, its subsidiaries or
affiliates; or (vi) hire or solicit any consultant then under contract with
▇▇▇▇, its subsidiaries or affiliates or encourage such consultant to terminate
such relationship.
6.2.2 Limitation on Non-Competition Covenants. If any SELLING
SHAREHOLDER is terminated from employment from ▇▇▇▇ or its subsidiaries or
affiliates for any reason other than for cause, as defined in the respective
SELLING SHAREHOLDER's employment agreement, then the Non-Competition Covenant
contained in Article 6.2.1 shall only prohibit the terminated SELLING
SHAREHOLDER from in any way engaging in the Business with persons or entities
with which WOLFE, SOSS, its subsidiaries or affiliates had engaged in
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Business during the preceding two (2) year period. This limitation shall not
have effect until the payment of the Annual Salary as described in the
respective SELLING SHAREHOLDER's employment agreement terminates.
6.2.3 Reformation or "blue-penciling". ▇▇▇▇ intends to
restrict legitimate business under Article 6.2.1 only to the extent necessary to
protect ▇▇▇▇' legitimate business interests. SELLING SHAREHOLDERS and ▇▇▇▇ agree
that the terms and conditions hereof should be enforced to the fullest extent
permitted by law. If any court determines that any provision of Article 6.2.1,
or any part thereof, is unenforceable because of the scope, duration or
geographic breadth of such provision, such court shall have the power to reform
such provision to the maximum scope, duration or geographical breadth, as the
case may be, that such court has determined is enforceable in accordance with
the law.
6.3 Nondisclosure Covenant. During the Covenant Period,
SELLING SHAREHOLDERS will maintain as confidential all proprietary information
which they may obtain from ▇▇▇▇, its subsidiaries or affiliates or any of their
respective employees. This restriction shall not apply, however, (i) as may
otherwise be required by law, (ii) to the extent such information (A) shall be
or have become publicly available, (B) was available to SELLING SHAREHOLDERS on
a non-confidential basis prior to its disclosure by ▇▇▇▇, its subsidiaries or
affiliates or (C) becomes available to SELLING SHAREHOLDERS on a
non-confidential basis from a person other than ▇▇▇▇, its subsidiaries or
affiliates or (iii) with respect to disclosure by SELLING SHAREHOLDERS to
parties to whom disclosure may be required or desirable in connection with the
transactions contemplated by this Agreement.
6.4 Property of ▇▇▇▇. All of ▇▇▇▇', its subsidiaries' or
affiliates' Trade Secrets, and all tangible items, including, without
limitation, all memoranda, notes, lists, records, proprietary and other software
and information systems, and other documents or papers (and all copies thereof),
including such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of SELLING SHAREHOLDERS, or made
available to SELLING SHAREHOLDERS relating to the past, existing, or
contemplated business or work of ▇▇▇▇, its subsidiaries or affiliates, other
than purely personal matters, are and shall remain ▇▇▇▇' exclusive property and
shall be delivered to ▇▇▇▇ promptly upon the termination of SELLING
SHAREHOLDERS' employment with ▇▇▇▇ or at any other time on request of ▇▇▇▇.
6.5 Rights and Remedies upon Breach. If either SELLING
SHAREHOLDER breaches, or threatens to commit a breach of, any of the provisions
of Articles 6.2.1, 6.3, or 6.4 (collectively, the "Restrictive Covenants"), ▇▇▇▇
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of which
is in addition to, and not in lieu of, any other rights and remedies available
to ▇▇▇▇ under law or in equity:
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6.5.1 Specific Performance. The right and remedy to
have the Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed by the parties hereto that any breach or
threatened breach of the Restrictive Covenants would cause irreparable injury to
▇▇▇▇ and that money damages would not provide an adequate remedy to ▇▇▇▇.
6.5.2 Accounting. The right and remedy to require
SELLING SHAREHOLDERS to account for and pay over to ▇▇▇▇ all compensation,
profits, monies, accruals, increments or other benefits derived or received by
SELLING SHAREHOLDERS as the result of any transactions constituting a breach of
the Restrictive Covenants.
6.6 Severability of Covenants. SELLING SHAREHOLDERS
acknowledge and agree that the Restrictive Covenants are reasonable and valid in
scope, and geographical and temporal breadth and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
6.7 Enforceability. ▇▇▇▇ and SELLING SHAREHOLDERS hereby agree
that jurisdiction to enforce the Restrictive Covenants shall rest with the
courts of the state wherein the Restrictive Covenants are alleged to have been
violated. It is the intent of the parties that the Restrictive Covenant be
construed according to the laws of the state in which the violation was alleged
to have occurred. If the court determines that any one or more of such
jurisdictions would hold the Restrictive Covenants unenforceable by reason of
their scope or otherwise, it is the intention of ▇▇▇▇ and SELLING SHAREHOLDERS
that such determination not bar or in any way affect ▇▇▇▇' right to the relief
provided above for violations of the Restrictive Covenants alleged to have
occurred in any other jurisdiction. As to breaches of such covenants in such
other respective jurisdictions, such covenants as they relate to each
jurisdiction, for this purpose, shall be severable into diverse and independent
covenants.
7. (a) The Closing of this Agreement is contingent and conditioned
upon a successful completion of due diligence by ▇▇▇▇. Within a
reasonable time after the execution of this Agreement, ▇▇▇▇
shall cause its representatives, including its independent
auditors, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, to begin to undertake a due
diligence review of ▇▇▇▇▇'▇ books and records. ▇▇▇▇ will finish
its due diligence review within thirty (30) days from the date
this Agreement is executed. ▇▇▇▇ shall have five (5) days from
the completion of its due diligence to notify ▇▇▇▇▇ and SELLING
SHAREHOLDERS of its intent not to close this Agreement and its
basis for such a decision.
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(b) This Agreement is also contingent and conditioned upon
▇▇▇▇' Board of Director's approving the terms of the
Agreement. ▇▇▇▇ shall cause its Board of Directors to act
upon this Agreement within five (5) days after its
execution. ▇▇▇▇ shall have five (5) days from the time its
Board of Directors acts in which to notify ▇▇▇▇▇ and
SELLING SHAREHOLDERS of any approval or disapproval.
(c) If the Agreement does not close for any of the reasons
listed herein, the Agreement shall terminate except for
those covenants and conditions set forth in Articles 8
which shall survive any such termination.
8. In the event the transaction contemplated by this Agreement does not
close, each party will maintain as confidential for a period of five years from
the date of this Agreement all written proprietary information which it or any
of its representatives may obtain from any other party, or any other parties'
employees. This restriction shall not apply, however, (i) as may otherwise be
required by law, (ii) to the extent such information (A) shall be or have become
publicly available, (B) was available to the party on a non-confidential basis
prior to its disclosure by any other party or (C) becomes available to a party
on a non-confidential basis from a person other than any other party or (iii)
with respect to disclosure by a party to parties to whom disclosure may be
required or desirable in connection with the transactions contemplated by this
Agreement.
9. ▇▇▇▇▇ and SELLING SHAREHOLDERS represent and warrant to ▇▇▇▇ that
the statements in this Article 9 below are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date. As
used in this Agreement "material" shall mean any discrepancy in the financial
statements or representations that in the aggregate have an impact of more than
twenty thousand dollars ($20,000.00).
(a) ▇▇▇▇▇ & Associates, Inc. is a corporation duly organized,
validly existing, and in good standing under the laws of the
state of New Mexico. ▇▇▇▇▇ & Associates, Inc. has full
corporate power and authority and all licenses, permits, and
authorizations necessary to carry on the business in which it
is engaged and to own and use the properties owned and used by
it. ▇▇▇▇▇ & Associates, Inc. is not in default under or in
violation of any provision of its charter, articles of
incorporation, or bylaws.
(b) Exhibit A represents a true and complete balance sheet of
▇▇▇▇▇ & Associates, Inc., as of the Closing Date. ▇▇▇▇
acknowledges that ▇▇▇▇▇ currently has other assets and
liabilities which are not listed in Exhibit A that will be
transferred prior to the Closing Date. ▇▇▇▇▇'▇ representations
are limited to those assets and liabilities to be transferred
pursuant to this Agreement.
(c) ▇▇▇▇▇ has good and marketable title to all the assets listed
in Exhibits B, C and
11
D. Such lists constitute a full and complete list of all
assets of ▇▇▇▇▇. All assets are free and clear of mortgages,
liens, pledges, charges, encumbrances, equities, or claims,
except for the mortgages, liens, pledges, charges,
encumbrances, equities, or claims as described in Exhibit I,
which is attached hereto and incorporated herein.
(d) The liabilities listed in Exhibits E, F, G, H, J and K
constitute a full and complete list of the liabilities of
▇▇▇▇▇. All contingent liabilities are described in Exhibit H.
(e) Neither the execution nor the delivery of this Agreement will
(i) violate any statute, regulation, judgment, order, or other
restriction of any governmental agency or court; or (ii)
conflict with, result in a breach or default under any
Agreement, contract, license, or other arrangement to which
▇▇▇▇▇ is a party.
(f) ▇▇▇▇▇ has filed all income tax returns that it was required to
file, has paid in full all taxes associated with such tax
returns and is not deficient on any tax payments or
liabilities except as set forth in Exhibit J, which is hereby
incorporated herein.
(g) ▇▇▇▇▇ has complied with the environmental, health, and safety
laws in all material respects and does not have any material
liability relating to the environmental, health, and safety
laws.
(h) ▇▇▇▇▇ has complied with all federal, state and local equal
employment opportunity and anti-discrimination laws in all
material respects and does not have any material liability
relating to the federal, state and local equal employment
opportunity and anti-discrimination laws.
(i) ▇▇▇▇▇ has complied with ERISA in all material respects and
does not have any material liability relating to ERISA.
(j) ▇▇▇▇▇ has complied with COBRA in all material respects and
does not have any material liability relating to COBRA.
(k) ▇▇▇▇▇ has paid in full all payroll taxes and other
withholdings mandated by federal, state and local laws,
including, but not limited to FICA, Medicare, unemployment,
workers' compensation insurance and trust fund withholding
taxes. ▇▇▇▇▇ has filed all appropriate returns for such taxes
and withholdings.
(l) ▇▇▇▇▇ has maintained at all times during the past four years
workers compensation and general liability insurance. Such
policies are currently in effect.
12
▇▇▇▇▇ has paid all premiums for such insurance or has financed
such premiums through a premium finance company and has
accrued such charges in its financial statement.
(m) ▇▇▇▇▇ has disclosed all lawsuits, claims, potential claims or
causes of actions that have arisen against ▇▇▇▇▇ that are
known or that it should reasonably be expected to know. All
such lawsuits, claims, potential claims or causes of action
are listed and described in Exhibit K, which is attached
hereto and incorporated herein.
10. SELLING SHAREHOLDERS agree to indemnify ▇▇▇▇ and hold ▇▇▇▇ harmless
from any loss, damage, expense, liability, or claim, including without
limitation, attorney's fees and expenses of litigation, to which ▇▇▇▇ may become
subject arising out of: (a) any material misstatement of ▇▇▇▇▇ or the SELLING
SHAREHOLDERS as warranted in Article 9; or (b) any failure of ▇▇▇▇▇ or the
SELLING SHAREHOLDERS to perform any of their covenants, Agreements or
undertaking contained in this Agreement or in any other Agreement executed in
connection with the transactions contemplated herein or (c) any material
liability (whether known or unknown, whether asserted or un-asserted, whether
absolute or contingent) not disclosed to ▇▇▇▇.
11. ▇▇▇▇ agrees to employ each SELLING SHAREHOLDER pursuant to the
terms and conditions of a separate employment agreement. The form of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇'▇ employment agreement is attached as Exhibit L. The form of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇'▇ employment agreement is attached as Exhibit M. Such employment may
be conditioned upon the successful completion of a personal history and criminal
background check, which shall be completed within ten (10) days after this
Agreement is signed. Each SELLING SHAREHOLDER hereby consents to ▇▇▇▇ conducting
a personal history and criminal background check prior to employment with ▇▇▇▇.
12. ▇▇▇▇ shall issue options to purchase ten thousand (10,000) shares
of ▇▇▇▇' common stock each to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. Such
stock options will be issued under a separate agreement pursuant to and in
accordance with the ▇▇▇▇' May 1995 Incentive Stock Option Plan and shall vest
over a period of five (5) years pursuant to such separate agreement.
13. ▇▇▇▇ shall issue options to purchase a combined twenty thousand
(20,000) shares of ▇▇▇▇' common stock to certain key employees of ▇▇▇▇▇ (other
than the SELLING SHAREHOLDERS and the COMMUNITY PROPERTY INTEREST HOLDER) which
as a result of this Agreement are subsequently employed by ▇▇▇▇. Such stock
options will be issued under a separate agreement pursuant to and in accordance
with the ▇▇▇▇' May 1995 Incentive Stock Option Plan and shall vest over a period
of five (5) years pursuant to such separate agreement. Said plan requires that
any specific grant be approved by the compensation committee of ▇▇▇▇' board of
directors. As part of the approval process described in Article 7(b) herein,
▇▇▇▇ shall submit a list of persons and number of shares to be granted as
indicated in Exhibit N to the compensation
13
committee for authorization.
14. For each of ▇▇▇▇▇'▇ employees hired by ▇▇▇▇, ▇▇▇▇ shall recognize
time of service with ▇▇▇▇▇ as time of service with ▇▇▇▇ for purposes of
non-health or welfare benefits, such as, 401(k) eligibility and matching
contribution vesting, C-125, etc. ▇▇▇▇ currently has in effect a 401(k) plan.
▇▇▇▇▇'▇ employees currently participating in its 401(k) plan may rollover such
monies to the ▇▇▇▇ plan subject to all ERISA requirements and restrictions. ▇▇▇▇
shall maintain current incentive plans, as described in Exhibit O, for ▇▇▇▇▇'▇
employees, excluding SELLING SHAREHOLDERS. ▇▇▇▇▇ acknowledges that ▇▇▇▇
maintains a drug-free workplace policy and that all of ▇▇▇▇▇'▇ staff or regular
employees hired by ▇▇▇▇ will be subject to ▇▇▇▇' drug free work place and drug
testing policy.
For each of ▇▇▇▇▇'▇ employees hired by ▇▇▇▇, ▇▇▇▇ will provide the same
health, life and disability benefits as currently provided by ▇▇▇▇▇, insofar as
▇▇▇▇ may provide such coverage without violating the discrimination provisions
of any employee benefit law. If at any time in the future, ▇▇▇▇ can obtain
comparable benefits at a lesser cost, ▇▇▇▇ may purchase such similar benefits
from the lower cost provider.
15. ▇▇▇▇▇ agrees from the time of the execution of this Agreement
through the effective date that ▇▇▇▇▇ will conduct its Business only in the
ordinary course consistent with past practices and will not enter into any
agreement which would materially affect its business, assets or liabilities
which would be binding upon ▇▇▇▇ after the Closing, without ▇▇▇▇' consent.
16. Each party agrees to take such further action as is necessary to
carry out the purpose of this Agreement, including the execution and delivery of
such further instruments and documents as any party reasonably may request.
17. Each party agrees that prior to the commencement of any action for
breach of this Agreement they will submit to non-binding mediation or
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect at the time of the action. The parties agree
to negotiate in good faith to resolve the breach or enter a settlement. An
arbitrator will be chosen by the affected parties. If the parties are unable to
agree upon an arbitrator, an arbitrator shall be selected pursuant to the rules
of the American Arbitration Association then in effect.
Arbitration shall take place in Salt Lake City, Utah.
18. This Agreement and all documents executed and delivered hereunder
shall be deemed to be contracts under the laws of the State of Utah, and for all
purposes shall be construed and governed in accordance with such laws. Any suit
or other action to enforce any provision of this Agreement or to obtain any
remedy with respect hereto shall be brought in any federal or state court with
competent jurisdiction sitting in Salt Lake County, State of Utah.
19. Any term or provision of this Agreement that is invalid or
unenforceable shall not
14
affect the validity and enforceability of the remaining terms and provisions of
this Agreement.
20. Each party shall bear its own costs and expenses incurred in
connection with this Agreement.
21. Each party acknowledges that it has sought the advice (or has had
the opportunity to do so) of competent legal counsel and tax advisors with
respect to the subject matter of this Agreement and the legal and tax
consequences of entering this Agreement.
22. This Agreement, together with the exhibits incorporated herein,
constitutes the entire agreement of the parties with respect to the subject
matter herein. This Agreement may only be modified by written instrument
executed by the parties hereto.
23. This Agreement may be executed in any number of counterparts, each
of which when executed and delivered shall be an original, but all such
counterparts shall constitute one and the same instrument. As used herein,
"counterparts" shall include full copies of this Agreement signed and delivered
by facsimile transmission, as well as photocopies of such facsimile
transmission.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
DATED this day of , 1996. DATED this day of , 1996.
----- ------- ----- ----
▇▇▇▇▇ & Associates, Inc., by: SOS Staffing Services, Inc., by:
------------------------------ ---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, its President ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, its CEO
DATED this day of , 1996. DATED this day of , 1996.
----- ------- ----- ----
SELLING SHAREHOLDER SELLING SHAREHOLDER
------------------------------ ---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
15
DATED this day of , 1996. DATED this day of , 1996.
----- ------- ----- ----
SELLING SHAREHOLDER COMMUNITY PROPERTY INTEREST
HOLDER
------------------------------ ---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who signs with
respect to any interest she may
claim due to her status as ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇'▇ spouse under
California's community property
laws.
16
EXHIBIT A
17
[ATTACH ▇▇▇▇▇'▇ BALANCE SHEET AS EXHIBIT A]
18
EXHIBIT B
The following is a general list of assets of ▇▇▇▇▇ to be transferred to ▇▇▇▇ as
a result of this Agreement:
(a) The real property leases for the demised premises located at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ together with all rights and privileges under said leases to
real property subject to said leases; and
(b) All papers and records in ▇▇▇▇▇'▇ care, custody or control relating to the
operational aspects of ▇▇▇▇▇'▇ business or any of its Assets, including but not
limited to all personnel and labor relations records, environmental control
records, sales records, accounting and financial records, maintenance and
production records, except that ▇▇▇▇▇ and SELLING SHAREHOLDERS shall either have
unlimited access to or copies of such records for the purpose of preparing
governmental reports and tax returns or any other legitimate purpose; and
(c) All records in any way related to ▇▇▇▇▇, its customers, business, employees,
etc. that are maintained at any location;
(d) Telephone numbers of ▇▇▇▇▇, to wit: (▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇, (510)
225-9800 and any other number which is listed as ▇▇▇▇▇ & Associates, Inc. or
owned by ▇▇▇▇▇, including, if so listed or owned, (▇▇▇) ▇▇▇-▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇
and (▇▇▇) ▇▇▇-▇▇▇▇; and
(e) Facsimile telephone numbers of ▇▇▇▇▇, to wit: (▇▇▇) ▇▇▇-▇▇▇▇, (505)
821-1741, (▇▇▇) ▇▇▇-▇▇▇▇ and any other number which is listed as ▇▇▇▇▇ &
Associates, Inc. or owned by ▇▇▇▇▇, including, if so listed or owned, (847)
359-4219 and (▇▇▇) ▇▇▇-▇▇▇▇; and
(f) All of ▇▇▇▇▇'▇ Intangibles including:
(i) all assumed business or trade names, including but not limited to:
"▇▇▇▇▇ & Associates" and all other forms or derivations using "▇▇▇▇▇," and all
other assumed business names and trade names owned or used by ▇▇▇▇▇; and all
other slogans, trademarks and service marks related to ▇▇▇▇▇ owned or used by
▇▇▇▇▇; and
(ii) all intellectual property, including, but not limited to
copyrights, trade secrets, patents and technical know-how; and
(iii) all employee lists, including, but not limited to complete
personnel files, work
19
histories, employment agreements between ▇▇▇▇▇ and employees of ▇▇▇▇▇, employee
confidentiality and non-compete agreements between ▇▇▇▇▇ and employees of ▇▇▇▇▇,
and all other documents related to employees of ▇▇▇▇▇; and
20
(iv) all customer lists, including but not limited to all telephone
numbers, credit histories, sales histories and other documents related to
▇▇▇▇▇'▇ customers; and
(v) ▇▇▇▇▇'▇ goodwill; and
(vi) all other intangibles of ▇▇▇▇▇; and
(g) All proprietary software, hardware and information systems and all other
software, hardware, and information systems; and
(h) All prepaid expenses relating to any of the assets, facilities, and
operations of ▇▇▇▇▇, including, but not limited to any deposits used in the
normal operation of ▇▇▇▇▇'▇ business such as deposits for insurance, rent,
utilities, etc.; and
(i) All operational assets of ▇▇▇▇▇ including, but not limited to all inventory,
office furniture, phones, electronic and computer equipment and all other
equipment used by ▇▇▇▇▇ to conduct business which are listed in Exhibit C; and
(j) All cash, bank accounts, accounts receivable and non-operational assets, as
specifically described in Exhibit D;
21
EXHIBIT B
22
[Exhibit C shall consist of the operational asset inventory provided by ▇▇▇▇▇
and shall include a description of market value and depreciated book value]
23
EXHIBIT C
24
[Exhibit D shall consist of a complete list of ▇▇▇▇▇'▇ cash, bank accounts,
accounts receivable and any other non-operational asset to be transferred
hereunder]
25
[Exhibit E shall consist of a list of third party contracts and leases to be
provided by ▇▇▇▇▇]
26
[Exhibit F shall consist of a list of all of ▇▇▇▇▇'▇ accounts payable]
[To be provided by ▇▇▇▇▇]
27
[Exhibit G is a list of all other fixed or known liabilities of ▇▇▇▇▇]
To be provided by ▇▇▇▇▇
28
[Exhibit H is a list of all contingent liabilities]
To be provided by ▇▇▇▇▇
29
[EXHIBIT I shall be a list or description of all liens, mortgages,
encumbrances, etc. attached to any asset of ▇▇▇▇▇. To be provided by ▇▇▇▇▇.]
30
[EXHIBIT J is description of all tax liabilities. To be provided by ▇▇▇▇▇]
31
[Exhibit K is a list and description of all lawsuits, claims or causes of
actions against ▇▇▇▇▇. To be provided by ▇▇▇▇▇]
32
[Exhibit L is a form of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇'▇ employment agreement]
33
[Exhibit M is a form of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇'▇ employment agreement]
34
[Exhibit N is a list of key employees of ▇▇▇▇▇ and the number of options to be
granted to each such employee. To be provided by ▇▇▇▇▇]
35
[Exhibit O is a description of ▇▇▇▇▇ employees' incentive plans. To be provided
by ▇▇▇▇▇]
36
EXHIBIT D
37
EXHIBIT E
38
EXHIBIT F
39
EXHIBIT G
40
EXHIBIT H
41
EXHIBIT I
42
EXHIBIT J
43
EXHIBIT K
44
EXHIBIT L
45
EXHIBIT M
46
EXHIBIT N
47
EXHIBIT O
