ASSET PURCHASE, JOINT VENTURE
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TERMINATION AND MUTUAL RELEASE AGREEMENT
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This Asset Purchase, Joint Venture Termination and Mutual Release
Agreement (together with the schedules attached hereto, this "Agreement"), dated
as of April 7, 1998, is entered into by and among the following parties:
EMPLOYEE SOLUTIONS, INC., an Arizona corporation ("ESI"), EMPLOYEE
SOLUTIONS-EAST, INC., a Georgia corporation ("ESI-East"), XXXXXX X. XXXX, XX.,
an unmarried individual ("Xxxx"), and THE XXXXXX X. XXXX AGENCY, INC., a Georgia
corporation ("Agency"). Xxxx and Agency are sometimes referred to severally and
collectively herein as "Seller," and severally and collectively with their
Affiliates (as defined below) as the "Seller Group." ESI, ESI-East and their
Affiliates are sometimes referred to severally and collectively as the "ESI
Group."
RECITALS
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1. ESI and ESI-East, which is a wholly-owned subsidiary of
ESI, are professional employer organizations, which contract with client
companies to become the "employer of record" for the client companies' employees
("PEOs"). In their capacity as PEOs, ESI and ESI-East provide employers
throughout the United States with comprehensive employee payroll, human
resources, and benefits outsourcing services, including payroll processing and
reporting, human resources administration, employment regulatory compliance
management, risk management/workers' compensation services, retirement and
healthcare programs, and other products and services provided directly to
worksite employees. All of these activities are referred to herein as the "PEO
Business."
2. ESI, ESI-East and Xxxx entered into a Joint Venture
Agreement dated as of June 24, 1994, pursuant to which, among other things,
Xxxx, through ESI-East, which was owned 99% by Xxxx and 1% by ESI, was to market
and sell certain types of PEO Business east of the Mississippi River.
3. ESI, ESI-East and Xxxx, in conjunction with the Joint
Venture Agreement, entered into an Employment Agreement dated November 11, 1994,
with an effective date of June 24, 1994, which was amended and restated in
conjunction with the Acquisition Agreement by that Amended and Restated
Employment Agreement, with an effective date as of January 1, 1996, and
thereafter was modified by an extension letter agreement dated as of October 17,
1997 (collectively, the "Prior Employment Agreement").
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4. ESI now desires to buy, and Seller desires to sell, all of
Seller's Assets (as defined below) on the terms and conditions set forth herein.
5. In conjunction with the purchase and sale of Seller's
Assets, the parties also desire to address a number of other issues related
thereto, and to the Joint Venture Agreement, the Prior Employment Agreement, and
all other prior agreements and understandings between any of the parties
relating to any of the matters discussed herein or therein (collectively, the
"Prior Agreements"), all on the terms and conditions set forth herein.
AGREEMENT
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In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
1. Purchase and Sale of Assets. Subject to and upon the other terms and
conditions set forth in this Agreement, Seller will sell, transfer, convey,
assign and deliver to ESI, and ESI will purchase, the following assets
(collectively, the "Assets" or "Seller's Assets"):
(a) All of Seller's rights to receive commissions or any other
type of compensation or payment on any PEO Business,
including, but not limited to, PEO Business generated from the
customers described on Schedule "1(a)" (the "Customers"), and
all of Seller's contract rights relating to the Customers;
(b) Without limiting Section 1(a) above, all of Seller's rights to
the repayment of commission advances, including, but not
limited to, obligations to repay commission advances evidenced
by a $17,000 promissory note payable from Xxxx XxXxxxx to
Agency and a $13,477.03 promissory note payable from Xxxx
Xxxxx to Agency (collectively, the "Transferred Notes"); and
(c) The termination of the Joint Venture Agreement.
The Seller's Assets will be conveyed to ESI, and ESI will purchase the Seller's
Assets, at the Closing (as defined below). Seller's Assets shall be conveyed
free and clear of all liabilities, obligations, liens and encumbrances, except
only the following (hereinafter collectively referred to as the "Permitted
Exceptions"): (i) those liabilities, obligations, liens and encumbrances in
favor of any member of the ESI Group, and (ii) those liabilities for payments of
commissions or other sums to producers, sub-producers or other third parties
disclosed on Schedule "1(b)", to the extent accruing after the Closing Date,
with such payments in the amounts and upon the terms described on Schedule
"1(b)" (to the extent accruing after the Closing Date, the "Authorized
Continuing Commissions"). The conveyance of Seller's Assets shall be deemed to
include any of Seller's contract rights with regard to contracts for Authorized
Continuing Commissions. ESI shall only assume the Authorized Continuing
Commissions and those obligations which may be imposed upon a transferee payee
or holder of the Transferred Notes (provided that any assumption of obligations
with respect to the Transferred Notes
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shall not limit the representations, warranties, covenants, agreements and
indemnification obligations of Seller with respect to the Transferred Notes),
and shall have no obligation whatsoever to provide any commission payments or
other compensation to producers, sub-producers or third parties with respect to
any of Seller's Assets.
2. Payment of Purchase Price. In full payment for the sale, transfer,
conveyance, assignment and delivery of Seller's Assets to ESI, and in reliance
upon the representations, warranties, agreements and releases, made herein by
Seller, ESI will pay the following to Seller at Closing, which payment in shall
be by wire transfer and shall be the entire purchase price for Seller's Assets
and the other warranties, agreements and releases of Seller set forth herein:
(i) $10,000 to Xxxx for the termination of the Joint Venture Agreement and for
the noncompetition agreement contained in the New Employment Agreement (defined
below); and (ii) $505,000 to Agency for the other Seller's Assets.
Notwithstanding the preceding sentence, of the amount payable to Agency, (A)
$16,418.20 shall be applied directly to the payment of past-due PERC accounts
receivable to ESI, and (B) approximately $15,000 shall be applied to past
commissions owing from Agency to H.P. Xxxxx, Xxxx Xxxxxx and Xxxx Xxxxxxx and
paid directly by ESI, on behalf of Agency, to those individuals. The sums
described in the preceding sentence shall be credited toward the purchase price
payment owing from ESI to Agency and shall reduce the joint wire from ESI to
Xxxx and Agency from $515,000 to $483,581.80, with the exact amount of the wire
subject to further adjustment based upon the exact amount of the payments to
Messrs. Xxxxx, Xxxxxx and Xxxxxxx. Seller also shall provide a full release of
the ESI Group from Xxxxx Xxxxxxx (and/or any applicable entity owned or
controlled by Xxxxxxx) on or before closing with respect to similar commissions
owing to Xxxxxxx (and/or any such Xxxxxxx entity). ESI will make the payment of
the entire purchase price to Agency, and Agency shall be solely responsible for
apportioning the payment between Xxxx and itself. Seller acknowledges and agrees
that said purchase price constitutes the sole and entire payment from all
members of the ESI Group to all members of the Seller Group for the Seller's
Assets.
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3. Closing Matters.
(a) Time and Place. The closing shall take place on Tuesday, April 7,
1998, or as promptly as possible thereafter, subject to fulfillment of all
closing contingencies, in Phoenix, Arizona at the offices of Xxxxxxx & Xxxxx
(the "Closing" or the "Closing Date"). If Seller elects, ESI will initiate a
wire transfer into the trust account of Seller's counsel of funds payable at
Closing on the day preceding Closing if ESI has received (i) facsimile
signatures from Seller to all of the Closing documents, (ii) confirmation from
Seller's counsel that it holds all of such original documents and other Closing
deliveries of Seller with unconditional instructions to forward immediately the
counterpart originals of all such documents by overnight courier for arrival on
the next business day at the offices of Xxxxxxx & Xxxxx, and (iii) confirmation
from Seller's counsel that any funds wired into the trust account of Seller's
counsel will be held by Seller's counsel in trust for ESI at all times prior to
Closing and will not be turned over to Seller until ESI and its counsel have
received the counterpart original documents from Seller and have confirmed in
writing to Seller's counsel that they are in appropriate form, with the further
agreement of Seller's counsel to rewire funds back to ESI upon instructions from
ESI to do so, in which event, ESI will return all of the Closing deliveries of
Seller to Seller. The counterparts for all of the original documents shall be
assembled at the offices of Xxxxxxx & Xxxxx. Notwithstanding anything herein to
the contrary, the Closing also may occur at such other time and place, and in
such other manner, as the parties may agree.
(b) Seller's Deliveries. At the Closing, Seller will deliver to ESI the
following items, all duly executed, as applicable, and in form and content
acceptable to ESI:
(i) this Agreement;
(ii) Xxxx of Sale and Assignment of Contract Rights attached
hereto as Schedule 3(b)(ii);
(iii) New Employment Agreement (including that certain Option
Grant Agreement attached thereto as Schedule "A" (the "Option
Agreement"));
(iv) $350,000 Promissory Note (discussed below);
(v) the original Transferred Notes, with an acceptable
endorsement to ESI affixed to each Transferred Note;
(vi) such other consents and instruments of conveyance,
assignment and transfer as may be necessary to vest in ESI good and
marketable title to Seller's Assets free from the claims of any third
parties, including, but not limited to, the Xxxxxxx release, certain
other agreements from Xxxxxxx and PERC, and certain agreements from
Xxxxx Xxxxx, Xxxxx Xxxxx and Xxxx Xxxxxxxx, subject only to the
Permitted Exceptions;
(vii) all contracts, files, records, data and documents
relating to (A) Seller's Assets and the Authorized Continuing
Commissions, and (B) contract and due diligence disclosure documents
required pursuant to Section 4(j) below; and
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(viii) a satisfactory engagement letter with Xxxxx, Xxxxx,
Xxxxxx et al.
(c) ESI's and ESI-East's Deliveries. At the Closing, ESI and ESI-East
will deliver to Seller the following items, all duly executed, as applicable,
and in form and content acceptable to Seller:
(i) this Agreement;
(ii) a wire transfer to Agency (for its benefit and for
Xxxx'x benefit) in the approximate amount of $483,581.80;
(iii) [Reserved];
(iv) New Employment Agreement (including the Option Agreement);
and
(v) the following obligations, all instruments evidencing
which shall be marked as "canceled and superseded by that $350,000
promissory note from Xxxxxx X. Xxxx, Xx. to Employee Solutions, Inc.,
dated as of April 7, 1998" (collectively, the "Former Obligations"):
(A) that certain promissory note dated as of December 31, 1996 in the
principal amount of $273,000 from PERC Insurance, Inc., a/k/a
Professional Employer Resources Corporation, f/k/a PER Corp. ("PERC"),
as maker, to ESI, as payee, and (B) those certain obligations of Xxxx
to ESI in relation to commissions overpaid by ESI to Xxxx. The Former
Obligations shall be deemed automatically released, canceled, voided,
superseded, and replaced by and upon the execution of the
aforementioned $350,000 note, notwithstanding any failure to so xxxx
instruments evidencing the Former Obligations at Closing.
4. Representations, Warranties and Covenants of Seller and Agency. Each
party comprising Seller, jointly and severally, represents, warrants and
covenants to ESI and ESI-East, as of the date of Closing, as follows, which
shall be subject to the materiality qualification contained in Subsection 4(l)
hereof:
(a) Organization, Standing and Qualification. Agency is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Georgia.
(b) Consents; Authority. Seller has obtained all consents, approvals,
authorizations and orders necessary for the execution, delivery and performance
of this Agreement, and Seller has the full right, power and authority to enter
into this Agreement. No permission, approval, determination, consent or waiver
by, or any declaration, filing or registration with, any governmental or
regulatory authority is required in connection with the execution, delivery and
performance of this Agreement by Seller, except those that already have been
obtained prior to the Closing.
(c) Enforceability. This Agreement and all other documents contemplated
hereby constitute the legal, valid and binding obligations of Seller,
enforceable in accordance with their
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respective terms (except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally or by the general principles of equity).
(d) Compliance with Laws. Seller has complied with all existing laws,
rules, regulations, ordinances, orders, judgments and decrees now or hereafter
applicable to Seller's Assets. Neither the execution, delivery nor performance
of this Agreement by Seller will, with or without the giving of notice or the
passage of time, or both, violate or conflict with any provision of Agency's
articles of incorporation or bylaws, or any agreement, understanding, law,
ordinance, rule, regulation, order, judgment, decree or other legal or
contractual requirement to which Seller is a party or may be bound or affected.
(e) Litigation. Except as set forth in Schedule "4(e)", to the
Knowledge (defined below) of Seller, there is no claim, legal action, suit,
arbitration, governmental investigation or other legal or administrative
proceeding affecting Seller or Seller's Assets, nor any order, decree or
judgment in progress, pending or in effect, or to the Knowledge of Seller
threatened, against or relating to Seller or Seller's Assets, and Seller has no
Knowledge of any basis for the same.
(f) Title to Properties. Subject only to the Permitted Exceptions,
Seller has good and marketable title to Seller's Assets, free and clear of all
liabilities, obligations, liens and encumbrances.
(g) Customers. To the Knowledge of Seller, but without any due
diligence inquiry, there is no reason why any of the Customers would terminate
its relationship or materially decrease its PEO Business with the ESI Group
after the Closing; provided, however, that Seller does not guarantee that any
Customers will continue their relationship with the ESI Group after the Closing.
(h) [Reserved.]
(i) No Broker. There are no broker's or finder's fees or obligations
due to any persons engaged by Seller, or any of the affiliates, employees,
representatives or agents of any of such persons, in connection with the sale of
Seller's Assets contemplated by this Agreement, except for the fees and expenses
of Seller's counsel and accountants, all of which shall be paid by Seller.
(j) PEO Business, Contract and Due Diligence Disclosures. Except as
listed on Schedules 4(j)(i) through 4(j)(ix), Seller represents and warrants the
following (1) with respect to each of Seller and (2) to Seller's Knowledge, with
respect to any member of the Seller Group other than Seller:
(i) except for the contracts evidencing Agency's obligation to
pay Authorized Continuing Commissions, all of which have been provided to ESI,
no member of Seller Group, directly or indirectly, has any written or oral
contracts, agreements or understandings for conducting any PEO Business;
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(ii) no member of Seller Group has any business, ownership or
pecuniary interest or commitment to purchase any business, ownership or
pecuniary interest, direct or indirect, in any corporation, partnership, limited
liability company, joint venture or other business enterprise or entity (other
than in a member of the ESI Group or as a less than five percent (5%) passive
shareholder of a publicly-held company) which conducts or, to Seller's
Knowledge, plans to conduct any PEO Business;
(iii) no member of Seller Group has any contract or
understanding, written or oral, with any PEO Business producer or sub-producer
of any kind;
(iv) no member of Seller Group has any contract or
understanding, written or oral, with Professional Employers Resource
Corporation, dba PERC Insurance, Inc., fka PERC Corp., an Indiana corporation
("PERC"), Xxxxx Xxxxxxx or any affiliate of PERC or Xxxxx Xxxxxxx that relates,
directly or indirectly, to any PEO Business;
(v) no member of Seller Group has placed since January 1, 1996
any PEO Business with any party that is not a member of the ESI Group, other
than PEO Business placed with the XxXxxxx-Xxxxx Group (prior to its acquisition
by ESI), the "ERC" companies and/or "STI" (prior to their acquisition by ESI),
or Prompt Pay, Inc. (prior to its acquisition by ESI);
(vi) except as set forth in or with respect to Subsection
4(j)(v), no member of Seller Group has placed since January 1, 1996, any
workers' compensation PEO Business with any party other than ESI Risk Management
Agency;
(vii) except for Authorized Continuing Commissions, there are
no arrangements whereby any member of Seller Group splits any commissions or
other payments on PEO Business with sub-producers or other third parties, and
for each commission splitting arrangement, if any, disclosed on Schedule
4(j)(vii), Seller has provided a complete and accurate summary of the
arrangements with respect thereto;
(viii) true and correct copies of Agency's 1996 and 1997 year
end balance sheets and income statements are attached on Schedule 4(j)(viii),
which fairly present in all material respects the results of operations of the
Agency for the periods presented using a cash basis of accounting; and
(ix) no member of Seller Group has conducted any business
other than the PEO Business generating revenues in excess of $100,000 for any
one year period since and including January 1, 1996.
Seller further represents and warrants that true and complete copies of all
contracts disclosed pursuant to this Section 4(j) are attached to the end of the
Schedules for Section 4(j).
(k) Disclosure. No representation or warranty by Seller contained in
this Agreement, nor any statement or certificate attached hereto from Seller
contains any untrue statement of a material
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fact, or omits to state any material fact required to make the statements herein
or therein contained not misleading.
(l) Materiality. Notwithstanding the foregoing, no inaccuracy or
omission by Seller with respect to the foregoing representations and warranties
and the schedules thereto shall be deemed a breach of said provisions until said
inaccuracies or omissions cause the ESI Group to sustain damages in excess of
$10,000 by reason thereof, at which point, all such inaccuracies or omissions
shall be deemed to constitute a breach, and the ESI Group shall be entitled to
exercise its rights and remedies hereunder for all damages, including the first
$10,000.
5. Representations, Warranties and Covenants by ESI and ESI-East. ESI
and ESI-East, jointly and severally, each represents, warrants and covenants to
Seller and Agency, as of the date of the Closing, as follows, which shall be
subject to the materiality qualification contained in Subsection (g) hereof:
(a) Organization. ESI is a corporation duly organized, validly existing
and in good standing under the laws of Arizona. ESI-East is a corporation duly
organized, validly existing and in good standing under the laws of Georgia.
(b) Consents; Authority. ESI and ESI-East have obtained all consents,
approvals, authorizations and orders necessary for the execution, delivery and
performance of this Agreement, and ESI and ESI-East have the full right, power
and authority to enter into this Agreement. No permission, approval,
determination, consent or waiver by, or any declaration, filing or registration
with, any governmental or regulatory authority is required in connection with
the execution, delivery and performance of this Agreement by ESI or ESI-East,
except those that already have been obtained prior to the Closing.
(c) Enforceability. This Agreement and all other documents contemplated
hereby constitute the legal, valid and binding obligations of ESI and ESI-East,
enforceable in accordance with their respective terms (except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors generally or by the general
principles of equity).
(d) Compliance With Laws. Neither the execution, delivery nor
performance of this Agreement by ESI or ESI-East will, with or without the
giving of notice or the passage of time, or both, violate or conflict with any
provision of ESI's or ESI-East's articles of incorporation or bylaws, or any
agreement, understanding, law, ordinance, rule, regulation, order, judgment,
decree or other legal or contractual requirement to which ESI or ESI-East is a
party or may be bound or affected.
(e) No Broker. There are no broker's or finder's fees or obligations
due to any persons engaged by ESI or ESI-East, or any of the affiliates,
employees, representatives or agents of any such persons in connection with the
sale of Seller's Assets contemplated by this Agreement, except for the fees and
expenses of ESI's and ESI-East's counsel and accountants, all of which shall be
paid by ESI and/or ESI-East.
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(f) Disclosure. No representation or warranty by ESI or ESI-East
contained in this Agreement, nor any statement or certificate attached hereto
from ESI or ESI-East contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact required to make the
statements herein or therein contained not misleading.
(g) Materiality. Notwithstanding the foregoing, no inaccuracy or
omission by ESI or ESI-East with respect to the foregoing representations and
warranties and the schedules thereto shall be deemed a breach of said provisions
until said inaccuracies or omissions cause the Seller Group to sustain damages
in excess of $10,000 by reason thereof, at which point, all such inaccuracies or
omissions shall be deemed to constitute a breach, and the Seller Group shall be
entitled to exercise its rights and remedies hereunder for all damages,
including the first $10,000.
6. New Employment Agreement. At the Closing, ESI, ESI-East and Xxxx
will execute and deliver that Second Amended and Restated Employment Agreement
(Xxxxxx X. Xxxx, Xx.), with noncompete and other provisions in form and
substance to be agreed upon by the parties (the together with the schedules
thereto, "New Employment Agreement"). The New Employment Agreement shall replace
and supersede the Prior Employment Agreement, except that certain noncompetition
and confidentiality provisions of the Prior Employment Agreement shall continue
in the manner specified in the New Employment Agreement.
7. Termination of Joint Venture Agreement. The Joint Venture Agreement
is terminated as of the Closing Date, with all representations, warranties,
covenants and provisions of the Joint Venture Agreement, and all rights and
remedies of any party thereunder, being terminated immediately as of the Closing
Date, regardless of whether such items by their terms were intended to survive
such termination. Each party acknowledges this complete and final termination
and waives any and all rights and remedies with respect to the Joint Venture
Agreement and the Prior Agreements.
8. Payment of Amounts Owing from Seller to ESI.
(a) New Note. In settlement of the Former Obligations, Xxxx
shall execute a promissory note in the principal amount of $350,000, which note
shall bear interest at 6% per annum (the "New Note"). The New Note shall be due
and payable on February 28, 2000, and if not paid in full by said date, the
interest rate shall increase to 10% per annum until payment is received. Except
as otherwise provided in the New Note, no payments of principal or interest
shall be due upon the New Note prior to its maturity. Without limiting other
provisions of the New Note that address the timing for payment of principal and
interest, the New Note provides that payments of principal and all accrued and
unpaid interest shall be due and payable at an earlier date under the following
circumstances:
(i) Upon exercise of any options held by Xxxx in the
Common Stock of ESI (as described in more detail in the New Employment
Agreement), a portion of the principal
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balance of the New Note, and any accrued and unpaid interest with respect
thereto, shall be due (the "Required Payment"), with the principal portion of
the Required Payment calculated as follows:
($350,000 x [no. of options currently being exercised/400,000])
Provided, however, that if the net proceeds after Xxxx'x income taxes from the
exercise and sale of the options currently being exercised is less than the
amount calculated pursuant to the above formula, the "Required Payment" shall be
reduced to the amount of such net proceeds. The options shall be governed by
Section 3(d) of the New Employment Agreement and the Option Agreement. As a
requirement to the exercise of any options, Seller agrees to cooperate with ESI
to ensure payment of the Required Payment in a manner reasonably acceptable to
ESI in conjunction with the exercise of options and issuance of the ESI Common
Stock. The Required Payment shall be made as quickly as possible after the
exercise date, and in no event later than twenty (20) days after the exercise
date.
(ii) At any time and from time to time after April 7,
1999, when the Average Price (defined below) of ESI's Common Stock is at least
$5.00 per share, ESI shall have the right to force Seller upon thirty (30) days'
written notice to pay the Required Payment that would be due at such point upon
the exercise of all then-vested options by Xxxx. In such event, Xxxx agrees to
cooperate with ESI to ensure payment of the Required Payment in a manner
reasonably acceptable to ESI.
(b) Remedies for Non Payment. If Xxxx fails to pay the Required Payment
by the applicable deadline, in addition to all other rights and remedies
available at law or in equity, ESI shall have the right either (i) to terminate
all or any part of the vested options that Xxxx would have been required to
exercise to make the Required Payment, with each such terminated option valued
based upon the difference between the Average Price and the exercise price, with
the "Average Price" equal to the average of the quoted closing prices for ESI
Common Stock for the thirty (30) day period immediately preceding ESI's delivery
of the 30-day notice required pursuant to Section 8(a)(ii) above, or (ii) to
exercise all or any part of the vested options necessary to make the Required
Payment, with each such exercised option valued at the difference between the
Average Price and the exercise price, and issue Common Stock pursuant thereto,
and to retain all such Common Stock in payment of the Required Payment. Further,
if the New Note is not paid in full on or before February 28, 2000, ESI shall
have the same rights as set forth in the preceding sentence for the collection
of all amounts owing on the New Note, and not just the Required Payment,
regardless of whether ESI's Common Stock is trading above or below $5.00 per
share at such time.
(c) Security Interest. To secure repayment of the New Note, Seller
hereby pledges to ESI, and grants to ESI a security interest in all of Seller's
rights with respect to the options and any Common Stock relating thereto, and
agrees to execute any financing statements required by ESI with respect to such
security interest.
(d) Power of Attorney. Seller hereby constitutes and appoints ESI as
the true and lawful attorney of Seller with full power of substitution in the
name of ESI to institute and prosecute all
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proceedings which ESI in its sole discretion deems proper to carry out any of
the rights granted to ESI in this Section 8, including, but not limited to, the
right to exercise the options, to transfer any Common Stock issued upon exercise
of the options, and to demand and receive payment from the selling brokerage
firm or any purchaser of said Common Stock.
9 Payment of Authorized Continuing Commissions. After Closing, ESI
and/or ESI-East shall pay the Authorized Continuing Commissions in the manner
and to the sub-producers set forth on Schedule "1(b)."
10 Return of Materials. Seller agrees on or before Closing to return to
ESI, and to cause the Seller Group and all attorneys, accountants and other
parties to whom Seller Group has provided any billing factor worksheets to
return to ESI, all billing factor worksheets in their possession. Seller further
agrees to leave all ESI Group Materials (defined below) in Seller's possession
or located at ESI-East's office in Atlanta, Georgia (the "Office"), at the
Office when Seller vacates the same in accordance with the terms of the New
Employment Agreement. "ESI Group Materials" shall include, in all forms,
including, but not limited to, print, computer disks and databases and other
electronic media, all information relating to Customers, pricing and payment
information, all information relating to commission payments, rates and
structures, all marketing materials, all strategic plans, all billing factor
worksheets and any Confidential Information (as defined in the New Employment
Agreement), but shall not include any personal notes taken by Xxxx relating to
matters other than customer, price or cost information. Seller represents and
warrants on behalf of the Seller Group that, upon vacating the Office, the
Seller Group will have returned to ESI all originals and copies of ESI Group
Materials and no member of Seller Group will have retained any ESI Group
Materials or any copies thereof. The failure of Seller Group to return to ESI or
leave behind at the Office any ESI Group Materials in the manner required above,
or, with respect to ESI Group Materials discovered after Closing, to turn over
the same within forty-eight (48) hours after the earlier of discovery thereof by
Seller or demand by ESI shall constitute a material breach of this Agreement and
the New Employment Agreement for which no additional cure period shall be
required before the exercise by the ESI Group of its rights and remedies.
11 Securities Class Action Litigation. Xxxx withdraws his request for
separate representation in the securities class action litigation matters
presently pending against ESI, Xxxx and other members of the ESI Group, among
others; Xxxx agrees to conduct a coordinated and common defense with ESI and
other defendants against the claims asserted in the securities class action
litigation, provided that Xxxx reserves the right to reinstate his request for
separate representation in the event Xxxx reasonably believes that a conflict of
interest has arisen that requires separate representation.
12 Mutual Releases and Waiver.
(a) Except as set forth in Subsection (c) below, effective as of the
Closing Date, each member of Seller, for himself or itself, and on behalf of his
or its present and former officers, directors, shareholders, partners, members,
managers, agents and employees, and their separate and respective heirs,
personal representatives, successors and assigns, unconditionally and
irrevocably
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releases and forever discharges each member of the ESI Group, and, with respect
to each such member, all of its present and former officers, directors,
shareholders, partners, members, managers, agents, finders, brokers, attorneys
and employees, and their separate and respective heirs, personal
representatives, successors and assigns (collectively, the "ESI Entities"), of
and from any and all costs, damages, liabilities, claims, demands, actions and
causes of actions, whether known or unknown, contingent or matured, and whether
arising pursuant to statute, contract, tort or equity, now existing or hereafter
acquired, arising from or in any way, directly or indirectly, connected with (i)
the Prior Agreements (except those portions of the Prior Agreements that
expressly survive pursuant to the New Employment Agreement), or (ii) any acts or
omissions of any of the ESI Entities at any time on or prior to the Closing
Date.
(b) Except as set forth in Subsection (c) below, effective as of the
Closing Date, each of ESI and ESI-East, for itself and on behalf of its present
and former members, managers, officers, directors, partners, shareholders,
agents and employees, and their separate and respective heirs, personal
representatives, successors and assigns, unconditionally and irrevocably
releases and forever discharges each member of Seller, and, with respect to each
such member, all of his or its present and former officers, directors,
shareholders, partners, members, managers, agents, finders, brokers, attorneys
and employees, and their separate and respective heirs, personal
representatives, successors and assigns (collectively, the "Seller Entities"),
of and from any and all costs, damages, liabilities, claims, demands, actions
and causes of actions, whether known or unknown, contingent or matured, and
whether arising pursuant to statute, contract, tort or equity, now existing or
hereafter acquired, arising from or in any way, directly or indirectly,
connected with (i) the Prior Agreements (except those portions of the Prior
Agreements that expressly survive pursuant to the New Employment Agreement), or
(ii) any acts or omissions of the Seller Entities at any time on or prior to the
Closing Date.
(c) Notwithstanding anything to the contrary herein, the releases set
forth herein shall not release any party from breaches of, or any other
obligations or liabilities created by, this Agreement, the New Employment
Agreement, the New Note, the Xxxx of Sale and Assignment of Contract Rights or
by any other written agreements or instruments entered into in connection
herewith or therewith and which are attached hereto or thereto. All such items
are expressly excluded from the releases set forth herein and shall survive the
execution hereof.
13 Indemnification.
(a) Indemnification by Seller. Each member of Seller, jointly and
severally, agrees to indemnify, defend and hold harmless each of the ESI
Entities from, against and in respect of (and shall on demand reimburse the ESI
Entities for):
(i) any and all losses, liabilities or damages suffered or
incurred by reason of (A) any untrue representation, breach of warranty
or non-fulfillment of any covenant, representation or agreement by
Seller contained herein, in the New Employment Agreement, the New Note,
the Xxxx of Sale and Assignment of Contract Rights, or in any other
certificate, document or instrument attached hereto or thereto, or (B)
any obligations, claims or demands
12
to pay commissions or other compensation to producers, sub-producers or
other third parties other than the Authorized Continuing Commissions
and as contracted for by the ESI Group after Closing;
(ii) any and all losses, liabilities or damages suffered or
incurred by reason of any action, suit, proceeding, claim or demand by
or on behalf of Legion Insurance Company or any brokers, agents or
finders of PERC relating to or arising from Legion's contracts,
arrangements and/or understandings with PERC, except for premium
payments owing from the ERC Companies to PERC for the period from
September 1, 1997 through November 25, 1997, up to, but not exceeding,
the amounts set forth on Schedule 13(a)(ii) attached hereto (except for
any excess due solely to increases in payroll), which ESI agrees to pay
(or to cause the ERC Companies to pay) within seven (7) days following
Closing; and
(iii) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and reasonable expenses,
including, without limitation, reasonable legal fees and expenses,
incident to any of the matters referenced in Sections 13(a)(i) and/or
13(a)(ii) above or incurred in investigating or attempting to avoid the
same or to oppose the imposition thereof, or in enforcing this
Agreement (including the release set forth herein and this indemnity).
(b) Indemnification by ESI and ESI-East. ESI and ESI-East, jointly and
severally, each hereby agrees to indemnify, defend and hold harmless each of
Seller Entities from, against and in respect of (and shall on demand reimburse
the Seller Entities for):
(i) any and all losses, liabilities or damages suffered or
incurred by reason of any untrue representation, breach of warranty or
non-fulfillment of any covenant, representation or agreement by ESI or
ESI-East contained herein, in the New Employment Agreement, the New
Note, the Xxxx of Sale and Assignment of Contract Rights, or in any
other certificate, document or instrument attached hereto or thereto;
and
(ii) any and all actions, suits, proceedings, claims, demands,
assessments, judgements, costs and expenses, including, without
limitation, legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to
oppose the imposition thereof, or in enforcing this Agreement
(including the releases set forth herein and this indemnity).
(c) Notice and Defense. If at any time a party entitled to
indemnification hereunder (the "Indemnitee") shall receive notice of any matter
claimed to give rise to indemnification hereunder, the Indemnitee shall promptly
give notice thereof (a "Claims Notice") to the party obligated to provide
indemnification (the "Indemnitor") therefor. The Claims Notice shall set forth a
brief description of the facts and circumstances giving rise to such claim for
indemnification, and, if ascertainable, the estimated amount of the losses,
liabilities or damages that have been or may be suffered by the Indemnitee.
Thereafter, the Indemnitor shall have at its election, the right to settle or
defend any such matter at the Indemnitor's sole cost and expense through counsel
chosen by the Indemnitor and
13
approved by the Indemnitee (which approval shall not unreasonably be withheld);
provided, however, that any such settlement or defense shall be conducted in a
manner which is reasonable and not contrary to the Indemnitee's interests and
the Indemnitee shall in all events have a right to reasonably veto any
settlement or any defense which would jeopardize in any material respect any
assets or business of the Indemnitee or any of its affiliates or increase the
potential liability of, or create a new liability for, the Indemnitee or any of
its affiliates and provided further that the Indemnitor hereby agrees to
indemnify the Indemnitee and its affiliates for the manner in which such matter
is settled or defended including any failure to pay any such claim which such
litigation is pending. In the event that the Indemnitor does so undertake to
settle and defend a claim, the Indemnitor shall notify the Indemnitee of its
intention to do so in writing within ten (10) business days after receipt of
notice from Indemnitee; otherwise Indemnitee may proceed to undertake its own
defense. Even if the Indemnitor undertakes to settle or defend a claim, the
Indemnitee shall have the right to settle any matter for which a claim for
indemnification has been made hereunder upon notice to the Indemnitor and by
waiving any right against Indemnitor with respect to such matter. Subject to the
above, each party agrees in all cases to cooperate with the defending party and
its counsel in the settlement of or defending of any such liabilities or claims.
In addition, the non-defending party shall at all times be entitled to monitor
such defense through the appointment, at its own cost and expense, of advisory
counsel of its own choosing.
14 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be delivered or sent to the
parties at the address set forth below, or at such other address that they
designate by notice to all other parties in accordance with this Section. Any
party delivering notice to Seller shall deliver it to:
Xxxxxx X. Xxxx, Xx.
With a copy to:
---------------
Xxxxxxx Xxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
0000 Xxxxxxxx
Xxxxxxx, Xxxxx 00000
And a copy to:
--------------
Xxxxxxx X. Xxxxxxxxx, Esq.
XxXxxxxxxx Xxxxxxxx, LLP
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
14
Any party delivering notice to ESI or ESI-East shall deliver it to:
Xxxxxx X. Xxxxx
Chief Executive Officer
-and-
Xxxx X. Xxxxx, Esq.
Senior Vice President and General Counsel
EMPLOYEE SOLUTIONS, INC.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Fax No. (000) 000-0000
All notices and communications shall be deemed to have been received: (i) in the
case of personal delivery, on the date of such delivery; (ii) in the case of
telex or facsimile transmission, on the date of such delivery; (iii) in the case
of overnight air courier, on the second business day following the day sent,
with receipt confirmed by the courier; and (iv) in the case of mailing by first
class certified or registered mail, postage prepaid, return receipt requested,
on the date of delivery, as evidenced by the certified or registered mail
receipt.
15 Survival of Representations and Warranties. All statements,
representations, warranties, indemnities, covenants and agreements made by each
of the parties hereto, shall survive the Closing and shall not expire until
December 31, 2001. Notwithstanding the previous sentence, any misrepresentations
set forth herein or in the Employment Agreement, the New Note, the Xxxx of Sale
and Assignment of Contract Rights or any other written agreements attached
hereto or thereto amounting to actual fraud shall survive until the expiration
of the applicable statute of limitations for the fraud in question. Claims for
violations of representations and warranties shall be subject to the same
limitations and mechanics as claims for indemnification. Any party may make a
claim for indemnification by sending written notice to the other party or
parties hereto on or before midnight M.S.T. on the last date of the time period
for survival of the representation and warranty in question. The termination,
during the pendency of the prosecution of any claims qualifying for
indemnification hereunder, of the rights of an indemnified party to receive
indemnification as provided in the Agreement shall not affect any person's right
to prosecute to conclusion any claim made by that person prior to the time that
the relevant right of indemnity terminates.
16 Miscellaneous.
(a) Entire Agreement. This writing constitutes the entire agreement of
the parties with respect to the subject matter hereof and may not be modified,
amended or terminated except by a written agreement specifically referring to
this Agreement signed by all of the parties hereto.
(b) No Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
15
(c) Binding Effect; Third Party Beneficiary. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their heirs,
personal representatives, permitted successors, assigns, and
beneficiaries-in-interest. Each member of the ESI Group shall be a third party
beneficiary hereunder, and shall be entitled to enforce the provisions of this
Agreement conveying any right or remedies to such party.
(d) Headings. The paragraph headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said paragraphs.
(e) Further Assurances. Each party hereto shall cooperate, shall take
such further action and shall execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
(g) Governing Law. This Agreement and all amendments thereof shall be
governed by and construed in accordance with the law of the State of Arizona
applicable to contracts made and to be performed therein, without regard to
principles relating to conflicts of laws.
(h) Arbitration; Exclusive Venue. Any controversy or claim arising out
of or relating to this agreement or the breach or validity thereof, whether or
not a contract claim, shall be settled exclusively by binding and non-appealable
arbitration in Phoenix, Arizona, by one (1) arbitrator selected by the parties,
or if the parties cannot agree upon a single arbitrator within thirty (30) days
of a party giving notice to the other of a proposed choice for an arbitrator,
then by a single arbitrator appointed by the Phoenix Office of the American
Arbitration Association; all such proceedings shall be conducted in accordance
with the rules of said association. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof, and the
parties consent to the exclusive jurisdiction of the Maricopa County, Arizona
courts and the Arizona Federal District Court for this purpose and for all other
purposes under this Agreement.
(i) No Disparagement. Each party agrees that neither it nor any of its
Affiliates, officers or directors will make any public statement regarding the
transactions contemplated by this Agreement without first consulting the other
parties hereto in order than such public statement shall be jointly worded and
issued by the parties; each party, however, shall retain the right to make
disclosures (A) necessary in the enforcement of such party's rights hereunder,
and/or (B) required by any court of competent jurisdiction or any government
agency lawfully requiring such disclosures. Further, ESI shall be entitled to
make such disclosures as it reasonably concludes are required of it by
applicable securities law.
(j) Costs. If the Defaulting Party defaults in its obligations under
this Agreement and, as a result thereof, the Non-Defaulting Party seeks to
legally enforce its rights hereunder against the Defaulting Party, then, in
addition to all damages and other remedies to which the Non-Defaulting Party is
entitled by reason of such default, the Defaulting Party shall promptly pay to
the Non-
16
Defaulting Party an amount equal to all reasonable costs and expenses (including
reasonable attorneys' fees) paid or incurred by the Non-Defaulting Party in
connection with such enforcement.
(k) Certain Definitions. "Knowledge" shall mean, with respect to any
party, the actual knowledge of that party after due inquiry into the matter to
which the knowledge relates. "Affiliate" shall mean (i) any other person that
directly or indirectly controls, is controlled by or is under common control
with, such person or any of its subsidiaries and (ii) if such person is an
individual, any other individual that is a relative (by blood or marriage) of
such person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
(l) Incorporation of Schedules. All schedules attached to this
Agreement or listed on the page immediately following the signature page hereto
are deemed incorporated into this Agreement by this reference and made a part
hereof for all purposes. Notwithstanding any provision in this Agreement to the
contrary, each time that the Selling Group makes any representation, warranty,
covenant or agreement (i) based upon the list of Customers set forth on Schedule
1(a), the Selling Group shall only be deemed as representing, warranting,
covenanting and/or agreeing as to the accuracy of Schedule 1(a) to the Knowledge
of the Selling Group, without any due diligence inquiry, and (ii) based upon the
Authorized Continuing Commission list set forth on Schedule 1(b), the Selling
Group shall only be deemed as representing, warranting, covenanting and/or
agreeing to the accuracy of Schedule 1(b) to the Knowledge of the Selling Group
for all Authorized Continuing Commissions on or before January 15, 1998, and to
the Knowledge of the Selling Group without any due diligence inquiry for all
Authorized Continuing Commissions after January 15, 1998, through the Closing
Date.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ESI: EMPLOYEE SOLUTIONS, INC., an
Arizona corporation
By: /S/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Chief Executive Officer and
Chairman of the Board
ESI-EAST: EMPLOYEE SOLUTIONS-EAST, INC.,
a Georgia corporation
By: /S/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Chief Executive Officer and
Chairman of the Board
XXXX: /S/ Xxxxxx X. Xxxx, Xx.
----------------------------------
XXXXXX X. XXXX, XX., an unmarried
individual
AGENCY: THE XXXXXX X. XXXX AGENCY, INC., a
Georgia corporation
By: /S/ Xxxxxx X. Xxxx, Xx.
-------------------------------
Xxxxxx X. Xxxx, Xx.
President
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