SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
Current Report
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Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): May 14, 1998
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SOS Staffing Services, Inc.
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(Exact name of registrant as specified in its charter)
Utah 0-26094 87-0295503
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(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation) Identification No.)
1415 South Main Street
Salt Lake City, Utah 84115
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(Address of principal executive offices, including zip code)
(801) 484-4400
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(Registrant's telephone number, including area code)
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TABLE OF CONTENTS
Page
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Item 7. Financial Statements and Exhibits 3
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SIGNATURES 4
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The Registrant hereby amends Item 7 of its Form 8-K previously filed
with the Commission by deleting it and replacing it in its entirety in order to
file as exhibits, the acquisition agreements for Aquas, Inc. and Abacab
Software, Inc. which were not available at the time of original filing.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
2.1 Acquisition agreement - Aquas, Inc.
2.2 Acquisition agreement - Abacab Software, Inc.
99.1 Press Release dated May 26, 1998 *
* Previously filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Current Report on Form 8-K/A to be signed on
its behalf by the undersigned thereto duly authorized.
SOS STAFFING SERVICES, INC.
\S\ Gary B. Crook
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Gary B. Crook
Executive Vice President and Chief Financial Officer
Date: August 19, 1998
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ASSET PURCHASE
AGREEMENT
AQUAS, INC.
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ASSET PURCHASE AGREEMENT
COME NOW, Wolfe & Associates, Inc., a New Mexico corporation at 5325
Wyoming Boulevard, N.E., Suite 200, Albuquerque, New Mexico, 87109 (hereinafter
referred to as "Buyer"); Buyer's parent company, SOS Staffing Services, Inc., a
Utah corporation at 1415 South Main Street, Salt Lake City, Utah, 84115
(hereinafter referred to as "SOS"); Aquas, Inc., a California corporation at 599
N Mathilda Avenue, Suite 210 Sunnyvale, California, 94086 (hereinafter referred
to as "Seller"); and Sunil Poddar (hereinafter referred to as "Poddar"), Sandip
Chintawar (hereinafter referred to as "Chintawar"), Nitin Komawar (hereinafter
referred to as "Komawar") and Jitendra Parmar (hereinafter referred to as
"Parmar") (Poddar, Chintawar, Komawar, and Parmar may hereinafter be
collectively referred to as "Principals") and agree as follows:
WITNESSETH:
WHEREAS, Seller owns the assets and business set out in Article 1 and
Exhibits A and B herein and desires to sell them to Buyer, which assets and
business do not include any of the assets or business of the Seller's product
division which has been spun-off to a wholly-owned subsidiary.
WHEREAS, Principals are officers of Seller, are Seller's only
shareholders, are authorized to vote all of the outstanding shares of Seller and
stand to benefit from Seller transferring said assets to Buyer;
WHEREAS, Buyer desires to purchase said assets and business from Seller
for cash payable to Seller in accordance with this Asset Purchase Agreement;
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 assets and business;
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. (a) The "Closing" of the transactions contemplated by
this Agreement shall take place at 9:00 a.m. (Mountain
Daylight Time) on May 14, 1998 (the "Closing Date") at 1415
South Main Street, Salt Lake City, Utah, 84111, SOS's
principal office. Closing may also take place at any other
time or place mutually agreed to in writing by the parties.
The parties agree that the Closing may take place by
exchanging signed documents at the time of Closing via
facsimile. The parties agree that a facsimile signature shall
have the same force and effect as a signature on an original
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document. For purposes of determining the allocation of
certain assets and liabilities between Seller and Buyer, April
1, 1998 shall be deemed the effective date of transfer of the
assets and liabilities of Seller hereunder (the "Effective
Date").
(b) Buyer agrees to purchase and Seller agrees to sell,
convey, transfer, and deliver to Buyer the business and assets
as set out more specifically in Exhibits A and B which are
hereby incorporated by reference as if fully set forth herein
(the "Assets"). The "Business" shall mean the business
activities conducted by Seller's staffing division of
employing software programmers and making those programmers
available to Seller's customers on a contract basis as
temporary staffing to work on particular customer assignments
in the Java, networking and database fields. The Business is
currently conducted in the area commonly referred to as the
Silicon Valley, located in California. Buyer is only
purchasing the assets set forth on Exhibits A and B. Seller is
conveying to Buyer only the assets listed on Exhibits A and B.
The Assets specifically exclude Seller's cash, cash
equivalents, accounts receivable for any services provided
prior to the Effective Date, workers' compensation deposits,
and bank accounts as of the Effective Date of this Agreement
and such assets shall not be transferred hereby to Buyer.
Assets not referenced or identified on Exhibits A or B shall
not be transferred to Buyer.
(c) Seller agrees to sell or convey to Buyer and Buyer
hereby agrees to purchase and assume the obligations of the
Seller under the equipment leases, third party contracts
and/or other liabilities listed in Exhibit C of this
Agreement. Seller shall remain fully responsible and liable
for all Seller's liabilities other than those liabilities
specifically identified on Exhibit C which Buyer hereby agrees
to assume. With respect to the liabilities identified in
Exhibit C, Buyer is assuming only those liabilities arising
after or relating to the period following the Effective Date.
Seller shall remain responsible for all liabilities, including
those listed in Exhibit C, to the extent performance is
required before the Effective Date; provided that, Seller will
assist Buyer with the performance required with respect to any
transferred liabilities to the extent performance is required
after the Effective Date but prior to the Closing. Buyer does
not in any way or manner assume any debt, liability, or
obligation of Seller, other than those set forth in Exhibit C,
whether known or unknown, whether asserted or unasserted,
whether absolute or contingent. Buyer hereby specifically
assumes the obligations of the Seller for the real property
lease, contingent upon the landlord's approval, arising after
the Effective Date for the real property referenced in Exhibit
A, to wit: the real property lease for the demised premises
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located at 599 N. Mathilda Avenue, Suite 210 Sunnyvale,
California, 94086.
(d) Seller shall pay all sales taxes due as a result of
the Closing of this Agreement.
(e) Buyer shall also assume all liabilities described in
Exhibit D which are related to Buyer being considered a
successor employer for Seller's H-1B visa status employees.
2. In consideration for receiving said Assets and in
consideration of the representations, warranties, and
covenants of Seller set forth herein, Buyer agrees to pay
Seller the following amounts on the conditions set forth
herein:
(a) On the Closing Date, Buyer shall pay Seller Four
Million Seven Hundred Sixty Thousand Dollars ($4,760,000.00)
and shall pay to each Principal Sixty Thousand Dollars
($60,000) as set forth in Article 3(e) for an aggregate
initial payment of Five Million Dollars (the "Initial Purchase
Price"), by direct wire transfer to the accounts which have
been designated by Seller and Principals on Schedule 1.
(b) (i) In addition to the Initial Purchase Price,
Buyer shall pay Seller five (5) times the EBIT as of March 31,
1999 (as defined in Article 2 (c) herein) earned by the
Business as operated by Buyer during the period commencing on
April 1, 1998 and continuing through March 31, 1999 (the
"First Earnout Period") which is greater than $792,002. Buyer
shall pay Seller the Earnout for the First Earnout Period in
two installments. Buyer shall pay Seller four (4) times the
EBIT earned by the Business as operated by Buyer during the
period commencing on April 1, 1998 and continuing through
September 30, 1998 which is greater than $396,001 (the
"Interim Payment"). Such payment shall be made no later than
October 31, 1998. The balance, if any, of the payment for the
First Earnout Period shall be paid within forty (45) days from
the last day of said First Earnout Period. If the Interim
Payment is greater than the payment for the entire First
Earnout Period, then the excess shall be deducted from future
Earnout Payments. Buyer shall pay Seller two and one-half (2
1/2) times the EBIT as of March 31, 2000 earned by the
Business during the period commencing April 1, 1999 and
continuing through March 31, 2000 (the "Second Earnout
Period") which is greater than the EBIT earned by the Business
during the First Earnout Period. Buyer shall pay Seller one
and one-half (1/2) times the EBIT as of March 31, 2001 earned
by the Business during the period commencing April 1, 2000 and
continuing through March 31, 2001 (the "Third Earnout Period")
which is greater than the EBIT earned by the Business during
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the Second Earnout Period. Buyer shall pay Seller one (1)
times the EBIT as of March 31, 2002 earned by the Business
during the period commencing April 1, 2001 and continuing
through March 31, 2002 (the "Fourth Earnout Period") which is
greater than the EBIT earned by the Business during the Third
Earnout Period. Except for the Interim Payment, each such
Earnout payment shall be paid within forty-five (45) days of
the ending of the Earnout Period for which it is made and all
Earnout Payments shall be made by direct wire transfer to an
account or accounts which have been designated by Seller from
time to time. Buyer's obligation to pay the Earnout Payments
described herein shall be independent of Principals'
employment with Buyer and shall survive Principals' separation
from employment with Buyer for any reason or cause.
(ii) The total Earnout payments made pursuant to
this Article 2(b) shall not exceed Nine Million Nine Hundred
Thousand Dollars ($9,900,000).
(iii) Buyer's representatives will make the
determination of the EBIT for each Earnout Period and deliver
a copy of such determination, including the financial data
which served as the basis for such determination, to the
Seller. If Seller disagrees with Buyer's determination, Buyer
and Seller shall negotiate in good faith to reach an agreement
as to the EBIT. If no agreement can be reached within twenty
(20) days, then at Seller's expense, a third party independent
auditor acceptable to both Buyer and Seller shall audit the
books and records of the Business and make a determination as
to the EBIT. In the event that the Buyer and Seller cannot
agree upon the appointment of a third party independent
auditor, then they shall jointly send a written request to the
American Arbitration Association located in Santa Clara
County, California or to a nationally recognized trade
association asking that such entity recommend a third party
independent auditor located in Santa Clara County, California,
and the auditor so recommended shall be deemed to be the third
party independent auditor selected by Buyer and Seller. The
third party independent auditor's determination of the EBIT
shall be final. Notwithstanding the foregoing, the third party
independent auditor shall have no power to alter or modify any
express provision of this Agreement, nor shall he/she make any
determination or calculation which, by its terms, effects any
such alteration or modification. The Earnout Payments shall be
made based on the third party's auditor's determination of
EBIT. If the third party auditor's determination is materially
different than Buyer's determination in Seller's favor, then
Buyer shall reimburse Seller the cost of the third party
auditor. As used herein "material" shall mean a $20,000.00
difference between Buyer's determination of the EBIT and the
third party auditor's determination of the EBIT in Seller's
favor.
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(c) (i) "EBIT" as used in this Agreement means gross
sales (total sales of goods and services) less adjustments and
discounts; the cost of sales (temporary employee or contractor
programs, direct costs, temporary or contractor payroll,
temporary or contractor payroll taxes, i.e. FICA,
unemployment, temporary or contractor worker's compensation);
staff and consultant expenses (staff or consultant payroll,
temporary staff or consultant payroll, commissions and
bonuses, branch staff, temporary staff and consultant payroll
taxes, i.e. FICA, unemployment insurance, branch staff
worker's compensation, sales and travel, group insurance,
background checks, and drug testing); operation expenses
(telephone, office supplies, legal, professional, postage and
delivery, training expenses, and other operating expenses);
facilities expenses (rent, repair and maintenance, utilities);
bad debt (to constitute a bad debt, the receivable must be
actually written off); miscellaneous expenses (dues and
subscriptions, adjustments/recoveries, and reimbursements);
printing expenses; consultation expenses; taxes (exclusive of
federal, state and local income tax) and insurance; plus other
current income (bad debt recovery, finance charges collected
and other income). Except for receivables due from a customer
that is in bankruptcy, no receivable aged less than one
hundred twenty (120) days shall be written off without the
permission of Seller. After the Closing Date, all accounts
receivable aged more than one hundred and twenty (120) days
shall be considered bad debt, unless such account is subject
to a payment plan which requires substantial and regular
payments to be completed within one year. Upon breach of any
such payment plan, the remaining receivable shall be
considered a bad debt. All recoveries made on any receivables
written off as a bad debt shall be added back to total sales.
EBIT shall exclude all corporate or home office expenses or
allocations, fees related to transfer of H-1B visas and any
unusual, extraordinary or non-recurring expenses. EBIT shall
exclude interest, depreciation and amortization expenses and
shall exclude any additional purchase price paid in the form
of the Earnout Payments. EBIT shall be based only on the
operation of the Business and shall not include the profit or
loss of any other operating unit of Buyer.
(ii) Seller acknowledges and agrees that EBIT
will be based on Buyer's operation of the Business. Seller
acknowledges and agrees that there shall be no limitation on
Buyer's operation of the Business during the Earnout Period,
except that Buyer shall operate the Business in a manner
consistent with good business judgment, consistent with past
practice and as a separate operating division for accounting
purposes with separate profit and loss statements. Seller
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acknowledges that Buyer's workers' compensation insurance,
unemployment insurance, bonding insurance and cost of employee
benefits differ from Seller's and past performance will not
necessarily be indicative of future profits.
(d) The parties agree that the Initial Purchase Price of Five
Million Dollars ($5,000,000.00) and the Earnout Payments shall
be allocated as set forth in Exhibit E.
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All parties agree to file IRS Form 8594 reflecting the
purchase price allocation contained in Exhibit E. ---------
3. As further consideration for Buyer to enter into this
Agreement and in consideration for Buyer making payments to
Seller pursuant to Article 2 and in consideration of
Principals benefiting from this Agreement, Principals agree to
the following:
(a) For a period commencing on the Closing Date hereof
and continuing until the end of the Fourth Earnout Period (the
"Covenant Period"), Seller and each of the Principals for
himself alone shall not, for any reason, within one hundred
(100) miles of Seller's Office as of the Closing Date;
directly or indirectly, except as required to fulfill Seller's
obligations until such time Seller obtains the consent to
assignment of Seller's customer agreements, (i) engage in the
Business, except that Seller shall be permitted to lease
employees to the Seller's product division, which will be
conducted through a wholly-owned subsidiary of Seller, until
the H-1B visas of such employees have been transferred or, if
applicable, such employees have obtained legal permanent
resident status in the United States; (ii) enter the employ
of, or render any services to or consult with, any person
engaged in direct competition with the Buyer in the Business;
(iii) become associated with or interested in any such person
engaged in a business which is substantially similar to the
Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director,
principal, agent or trustee; provided, however, each Principal
may own, directly or indirectly, solely as an investment,
securities of any person traded on any national securities
exchange or over-the-counter if such Principal is 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 the Buyer relating to the
Business, any affiliate or any of their successors in interest
in a manner designed to (or that could) take business away
from the Buyer relating to the Business, or from any affiliate
of Buyer or any of their successors in interest; (v) solicit
or otherwise induce any employee of the Buyer, any affiliate
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or any of their successors in interest to terminate his/her
employment with the Buyer, any affiliate or any of their
successors in interest, except for Mohan Mulbagal and
Srinivasan Raghavan after the first six (6) months following
the Closing Date; or (vi) solicit any consultant under
contract with the Buyer, any affiliate or any of their
successors in interest or encourage such consultant to
terminate such relationship.
(b) For the Covenant Period, each Principal for herself
or himself alone agrees not to disclose to any unauthorized
person any confidential information he or she may obtain or
has obtained regarding Seller's Business the assets of which
are being sold to Buyer hereunder or, Buyer's, any
affiliates, or their successors' services, products,
customers, employees or methods of doing business, nor use
such information in violation of Article 3 (a) during said
period.
(c) Each Principal for himself alone acknowledges that
she or he will be able to earn a livelihood without violating
the foregoing restrictions. Each Principal for herself or
himself alone further acknowledges: (1) that the consideration
set forth in Exhibit E for the covenant is adequate, (2) that
compliance with the restrictive covenant contained in this
Article 3 is necessary to protect the business and goodwill of
the Buyer, any affiliates or its successors in interest, and
(3) that a breach will result in irreparable and continuing
damage to the Buyer or its successors in interest, for which
money damages may not provide adequate relief. Consequently,
each Principal for herself and himself alone agrees that, in
the event that she or he breaches the restrictive covenant of
this Article 3, the Buyer or its successors in interest shall
be entitled to seek: (1) a preliminary or permanent injunction
to prevent the continuation of harm, and (2) money damages
insofar as they can be determined. Nothing in this Agreement
shall be construed to prohibit the Buyer or its successors in
interest from also pursuing any other remedy, the parties
having agreed that all remedies are cumulative.
(d) The parties have attempted to limit each Principals
right to compete only to the extent necessary to protect the
Buyer or its successors in interest from unfair competition.
The parties recognize that reasonable people may differ in
making a determination. Consequently, the parties agree that,
if the scope or enforceability of the restrictive covenant is
in any way disputed at any time, a court, arbitrator or other
trier of fact may modify and enforce the covenant to the
extent that it believes to be reasonable under the
circumstances existing at the time.
(e) The parties agree that of the Four Hundred Eighty
Thousand Dollars ($480,000) consideration allocated to the
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non-competition agreement, Two Hundred Forty Thousand Dollars
($240,000) shall be allocated to the Seller and Two Hundred
Forty Thousand Dollars ($240,000) shall be allocated to the
Principals, which amount shall be divided equally among the
four Principals. Buyer further agrees to pay such
consideration directly to the Principals, in an amount equal
to Sixty Thousand Dollars to each Principal at the Closing.
4. [Intentionally deleted.]
5. (a) At the Closing, Seller and Principals shall
deliver to Buyer the following, unless waived in
writing by Buyer:
(i) A Bill of Sale for all items of personal and
tangible property to be transferred hereby;
(ii) An assignment of Sellers right to and
interest in all trademarks and trade names listed on
Exhibit A and B;
(iii) All Assets listed on Exhibits A and B; and
(iv) Lien releases for any encumbered Asset.
(b) At Closing, Buyer or SOS shall deliver to
Seller or Principals the following:
(i) All funds or monies described in Article
2(a) herein;
(ii) Certificate that all necessary consents have
been obtained; and
(iii) Executed Employment Agreements or Offer
Letters attached hereto as Exhibits F-1 through F-4,
as applicable, between Buyer and Principals.
6. [Intentionally deleted.]
7.
In the event the transaction contemplated by this Agreement
does not close, Buyer will maintain as confidential all proprietary information
and shall not use for any reason any proprietary information which it or any of
its representatives may obtain from Seller, any of its employees or the
Principals. This restriction shall not apply, however, (i) as may otherwise be
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required by law (if such disclosure is required by legal process, Buyer shall
notify Seller, prior to any response to such legal process. Thereafter, Seller,
at its sole cost and expense, may oppose such disclosure), (ii) to the extent
such information (A) shall be or have become publicly available, (B) was legally
available to Buyer on a non-confidential basis prior to its disclosure by Seller
or (C) becomes available to Buyer on a non-confidential basis from a person
other than Seller or (iii) with respect to disclosure by Buyer to parties to
whom disclosure may be required or desirable in connection with the transactions
contemplated by this Agreement, provided such parties agree to be bound by the
provisions of this Article 7. This confidentiality Agreement will also apply to
any proprietary information not purchased by Buyer regardless of whether the
transaction closes.
8. Seller represents and warrants to the Buyer that the
statements made herein 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 Article 8, "material"shall mean any discrepancy in the financial statements
or representations that in the aggregate have an impact of more than One Hundred
Thousand Dollars ($100,000).
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the state of
California. Seller 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. Seller is not in default
under or in violation of any provision of its charter,
articles of incorporation, or bylaws.
(b) Seller has good and marketable title to all the
Assets listed in Article 1 and Exhibits A and B. All Assets
are free and clear of mortgages, liens, pledges, charges,
encumbrances, equities, or claims, except for the trademark
and tradename "Aquas" which is currently subject to an
infringement claim filed in the State of Maryland. Seller has
agreed in principal with the claimant to a settlement which
would permit the Seller to continue to use the trademark for a
limited time.
(c) To the Sellers Knowledge (as defined in Article 8(q)
below), 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 Seller is a party.
(d) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in
accordance with its terms. Seller has the absolute and
unrestricted right, power, and authority to execute and
deliver this Agreement and to perform its obligations under
this Agreement.
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(e) Seller 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.
(f) Seller has maintained workers compensation insurance
on each of its employees at all times since February 22, 1996.
Seller has paid all workers' compensation insurance premiums
and is not deficient on any such premium payment.
(g) To the Seller's Knowledge, Seller has complied with
all environmental, health, and safety laws which are
applicable to it in all material respects and does not have
any material liability relating to any environmental, health,
or safety law.
(h) To the Seller's Knowledge, Seller 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 any federal, state or
local equal employment opportunity or anti-discrimination law.
(i) To the Seller's Knowledge, Seller has complied with
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), in all material respects and does not have any
material liability relating to ERISA.
(j) To the Seller's Knowledge, Seller has complied with
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") in all material respects and does not have
any material liability relating to COBRA.
(k) Seller has paid or provided for the payment of all
payroll taxes and other withholdings mandated by federal,
state and local laws, including, but not limited to, workers
compensation, unemployment insurance, FICA, Medicaid and
employee income tax withholdings.
(l) To the Seller's Knowledge, Seller has complied with the
federal Occupation Safety and Health Act, National Labor
Relations Act, and the Fair Labor Standards Act, and any
equivalent state or local laws in all material respects and
does not have any material liability relating to any such law.
(m) To the Sellers Knowledge, Seller has complied with all laws,
regulations, rules and requirements issued by any and all
governmental entity related to the eligibility of its
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employees to work in the United States of America. To the
Seller's Knowledge, all H-1B and other visas sponsored by
Seller and used by its employees are validly issued and were
obtained in accordance with all related laws, regulations,
rules and requirements and that all applications sponsored by
or made by Seller were truthful in all respects.
(n) To the Seller's Knowledge, Buyer may apply for H-1B visas for
all employees sponsored by Seller whom Buyer will employ as a
result of this Agreement, in accordance with all Department of
Justices Immigration and Naturalization Service and
Department of Labor rules, regulations and requirements and
all applicable law.
(o) All financial statements and information provided by Seller to
Buyer are true, correct and complete in all material respects.
(p) Seller warrants that it has used the services of Dellhi and
Dublin Ventures LLC as a broker in connection with the
transaction contemplated by this Agreement and has not used
the services of any other broker or agency in connection with
the transaction contemplated by this Agreement. Seller
warrants that it shall pay all costs and fees due Dellhi and
Dublin Ventures LLC in connection with the transaction
contemplated by this Agreement and is not obligated to pay any
other broker, agency or finders fee in connection with the
transaction contemplated by this Agreement
(q) As used herein, Principal or an individual shall be
deemed to have "Knowledge" of a particular fact or other
matter if: (i) Principal or an individual is actually aware of
such fact or other matter; or (ii) a reasonably prudent
individual with similar experience and background could be
expected to discover or otherwise become aware of such fact or
other matter. Seller will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is
serving, or who has at any time served, as a director,
officer, partner, executor or trustee of Seller (or in any
similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
9. Buyer and SOS represent and warrant to Seller and
Principals that the statements made below are correct and
complete as of the date of this Agreement and will be correct
and complete as of the Closing Date.
(a) Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the state of New Mexico.
Buyer 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. Buyer is not in default under or in violation
of any provision of its charter, articles of incorporation, or
bylaws.
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(b) Buyer is sufficiently capitalized to undertake and perform the
obligations and covenants under this Agreement.
(c) The Buyer's board of directors has approved the terms of this
Agreement and the officers of Buyer have been duly authorized
to enter into and execute this Agreement.
(d) The Buyer has obtained all necessary consents to enter into
this Agreement.
(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
Buyer is a party.
(f) Buyer warrants that it has not used the services of any broker
or agency in connection with the transaction contemplated by
this Agreement. Buyer warrants that it is not obligated to pay
any broker, agency or finder's fee in connection with the
transaction contemplated by this Agreement.
10. SOS and Buyer represent and warrant to Seller and Principals
that the statements made below are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date.
(a) SOS is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Utah. SOS 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. SOS is not in default under or in violation of any
provision of its charter, articles of incorporation, or
bylaws.
(b) SOS's board of directors have approved the terms of this
Agreement and the officers of SOS have been duly authorized to
enter into and execute this Agreement.
(c) SOS has obtained all necessary consents to enter into this
Agreement.
(d) 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
SOS is a party.
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<PAGE>
(e) The financial statements of SOS and Buyer provided to Seller
and Principals are true, correct and complete in all material
respects and have been prepared in accordance with generally
accepted accounting principals.
(f) SOS warrants that it has not used the services of any broker
or agency in connection with the transaction contemplated by
this Agreement. SOS warrants that it is not obligated to pay
any broker, agency or finder's fee in connection with the
transaction contemplated by this Agreement.
(g) SOS is sufficiently capitalized to undertake and perform its
obligations and covenants under this Agreement, including the
obligation to guarantee the performance of Buyer hereunder.
11. (a) Seller and Principals agree severally to indemnify Buyer
and SOS, and hold Buyer and SOS harmless from any material
loss, damage, expense, liability, or claim (whether asserted
or unasserted, whether absolute or contingent), including
without limitation, attorney's fees and expenses of litigation
(collectively, a "Loss"), to which Buyer or SOS may become
subject arising out of: (a) any material misstatement of the
Seller or Principals as warranted in Article 8; or (b) any
material failure of Seller or Principals to perform any of
their covenants, Agreements or undertakings contained in this
Agreement or in any other Agreement executed in connection
with the transactions contemplated herein, except for
Principals' employment agreements and their performance
thereunder and nothing herein shall be construed as creating
any indemnification in Buyer's favor based on Principals'
employment agreements and their performance, or
non-performance, thereunder.
Seller and Principals further agree to indemnify Buyer and
hold Buyer harmless from any material loss, damage, expense,
liability, or claim (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent),
including without limitation, reasonable attorney's fees and
expenses of litigation, for any claim relating to Seller or
the Business arising prior to Effective Date or relating to
performance under agreements prior to Effective Date.
As used in this Article 11, "material" shall mean losses,
damages, expenses, liabilities or claims, including without
limitation, attorney's fees and expenses of litigation which
are One Hundred Thousand Dollars ($100,000) in the aggregate.
(b) Notwithstanding the foregoing, the indemnification
obligations under this Article 11 shall terminate at the date that is the later
of one (1) year from the Effective Date or, with respect to a Loss in connection
with Article 8(e) only, the date immediately following the expiration of the
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<PAGE>
longest applicable federal or state statute of limitations relating to tax
liability.
(c) The aggregate amount of liability pursuant to this
Article 11 shall not exceed the Two Million Five Hundred Thousand Dollars
($2,500,000); provided that, there shall be no liability for indemnification
under this Article 11 unless, and solely to the extent that, the aggregate
amount of any Losses exceeds One Hundred Thousand Dollars ($100,000); and
provided further that, each Principal shall be responsible for any Loss up to
twenty-five percent (25%) of such Loss and each Principal shall be responsible,
in the aggregate, up to twenty-five percent (25%) of Two Million Five Hundred
Thousand Dollars ($2,500,000).
(d) Buyer and SOS shall be required promptly to provide
written notice of any claim or demand made pursuant to which the indemnification
provisions of this Article 11 may apply ("Claim Notice") to Seller. Seller shall
have fifteen (15) days from the date of receipt of the Claim Notice to notify
Buyer and/or SOS whether (i) Seller disputes such liability to Buyer and/or SOS,
and if so, the basis for such dispute, and (ii) if Seller does not dispute the
liability, whether or not Seller desires, at the sole cost and expense of Seller
to defend against any claim or demand.
(e) Any claim or demand shall be paid by the Seller first
through the reduction of payments due to Seller under the Earnout provisions set
forth in Article 2.
12. Buyer and SOS agree to indemnify Seller and Principals and
hold Seller and Principals harmless from any material loss, damage, expense,
liability, or claim, including without limitation, attorney's fees and expenses
of litigation, to which Seller or Principals may become subject arising out of
or relating to: (a) any material failure of Buyer to perform any of its
covenants, Agreements or undertaking contained in this Agreement or in any other
Agreement executed in connection with the transactions contemplated herein; (b)
any material misstatement of Buyer as warranted in Article 9 or 10; or (c) the
Business from and after the Effective Date.
Buyer and SOS agree to indemnify Seller and Principals and
hold Seller and Principals harmless from any material loss, damage, expense,
liability, or claim (whether known or unknown, whether asserted or un-asserted,
whether absolute or contingent), including without limitation, reasonable
attorney's fees and expenses of litigation, for any claim arising or occurring
after the Closing Date by reason of Buyer's failure to perform any assumed
liability or for which Seller or Principals are otherwise held liable which
arise from or relate to the Business after the Closing Date.
As used in this Article 12, "material" shall mean losses,
damages, expenses, liabilities or claims, including without limitation,
attorney's fees and expenses of litigation which are twenty-five thousand
dollars ($25,000.00) in the aggregate.
14
<PAGE>
13. Seller agrees from the time of the execution of this Agreement
through the Closing Date, that Seller will conduct its Business only in the
ordinary course consistent with past practices and will not enter into any
agreement which would materially adversely affect the business or the assets to
be purchased which would binding upon Buyer after the closing, without Buyer's
consent.
14. Buyer agrees to employ the Principals for a period of four (4)
years following the Effective Date pursuant to the terms and conditions of
separate employment agreements. The form of the employment agreements is
attached hereto as Exhibits F-1 through F-4. Buyer's obligation to employ the
Principals and to close this Agreement is contingent upon the results of a
background check, which shall be performed on each Principal. The background
check shall be performed by a third party and shall consist of a search of court
records for criminal convictions in each state in which the respective Principal
has lived during the past seven (7) years. In compliance with the Fair Credit
Reporting Act, Buyer shall provide a copy of any undesirable or negative report.
If a background check reveals any information that Buyer deems undesirable, then
Buyer shall not be obligated to employ any Principal.
15. Buyer agrees that it shall offer employment to the Key
Employees pursuant to employment agreements and to each other of Seller's
current employees related to the Business. Alternatively, Buyer shall assume and
accept the assignment of each such employee's employment contract with Seller.
For each of Seller's former employees hired by Buyer, Buyer shall recognize time
of service with Seller as time of service with Buyer for purposes of non-health,
life or disability benefits, such as, 401(k) eligibility and matching
contribution vesting, C-125, etc. Seller acknowledges that Buyer maintains a
drug-free workplace policy and that all of Seller's former employees hired by
Buyer will be subject to such policy. Such staff employees shall be exempt from
the pre-employment drug screen, but shall be subject to all other provisions of
the policy applicable in California. After the Closing, each of Seller's
employees hired by Buyer will be subject to post-incident screening. Buyer may
modify its policy at any time to reflect changes in statutory or case law or for
any other reason consistent with good business judgment.
Seller and Principals shall make reasonable assurances and
efforts to encourage Seller's existing employees to accept employment with
Buyer. Buyer and Seller acknowledge and agree that due to the requirements of
the INS relating to transfer of H-1B visas and the legal permanent residency
process, Seller will lease to Buyer any employees who are subject to H-1B visas
and the legal permanent residency process until such time as the INS approves
and processes the transfer of H-1B visas or finally approves the legal permanent
residency of such employees. Such employees will be leased to Buyer at the cost
of the salary of such employee plus any allocation of actual overhead and
benefit costs of Seller relating to such leased employees.
15
<PAGE>
Buyer and Seller further agree to cooperate in every way in
order to expedite the transfer of Seller's employees subject to H-1B visas to
Buyer. Buyer agrees to begin the transfer process immediately following the
Closing Date.
16. Seller shall pay all staff, consultant, contractor and
temporary employee benefits, costs and expenses earned prior to the Effective
Date of this Agreement. Seller agrees to pay before the Effective Date or to
accrue and maintain adequate reserves for any staff and temporary employee
benefits earned prior to the Effective Date of this Agreement, but to be paid
after the Effective Date. For those employee benefits, costs or expenses which a
specific date cannot be determined, Buyer and Seller shall share the payment of
the benefit, cost or expense on a pro-rated basis.
Buyer agrees, with the cooperation and assistance of Seller,
to reimburse Seller for any expenditures made by Seller following the Effective
Date, which expenditures relate to the obligations assumed by Buyer for the
period following the Effective Date. Such reimbursement shall be made within two
(2) weeks of the Closing Date.
17. Buyer agrees to assist Seller to collect accounts receivable.
Such assistance shall include, but not be limited to, turning over payments due
Seller which are received by Buyer within five (5) days of receipt of such
payment. Buyer shall use all reasonable efforts to collect accounts receivable,
and in the event Buyer fails to collect such accounts receivable within 120 days
Buyer shall permit Seller to use Buyer's name and supplies to collect such
accounts receivable. If Buyer receives payment for both its services as well as
Seller's, Buyer will deposit said funds in its accounts and pay the amount due
Seller to Seller within five (5) days of receipt of such payment. Payments shall
be applied to the oldest outstanding invoice first.
Seller agrees if it receives any payment for any account
receivable due Buyer that it will turn over such payment to Buyer within five
(5) days of the Closing Date or receipt of such payment. If Seller receives
payment for both its services as well as Buyer's, Seller will deposit said funds
in its accounts and pay the amount due Buyer to Buyer within five (5) days of
receipt of such payment. Payments shall be applied to the oldest outstanding
invoice first.
18. Buyer agrees, for the three (3) months following the Closing
Date, (i) to provide to and forward to Seller any phone calls, facsimiles, mail
and/or Internet inquiries received by Buyer relating to Seller's product
division; (ii) to permit Seller and Seller's product division to continue to
occupy and use office space currently occupied and used by Seller's product
division; and (iii) Buyer hereby grants to Seller a non-exclusive, fully-paid,
worldwide, non-assignable right and license to use the "Aquas" trademark and
trade name "Aquas" in connection with Seller's product division.
16
<PAGE>
19.
Buyer, Seller, and Principals agree 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, including Seller's using its best efforts to obtain the
consents to assignment of all material leases, material contracts, material
service agreements with customers of the Business, if any, to the extent such
contracts require consent for assignment to Buyer.
20. This Agreement and all documents executed and delivered
hereunder shall be deemed to be contracts under the laws of the State of
California without regard to conflicts of law principals, 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 Santa Clara County, California.
21. In the event of the commencement of any litigation or
arbitration to enforce any provision of this Agreement or that is related to
this Agreement, the prevailing party shall be entitled to its costs for such
action, including reasonable attorney's fees, expert witness fees and other
reasonable costs incurred related to such action.
22. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
upon confirmation of transmission or, if mailed, five days after the date of
deposit in the United States mail, as follows:
(i) if to Buyer, to:
Wolfe & Associates, Inc.
5325 Wyoming Boulevard, N.E., Suite 200,
Albuquerque, NM 87109
Fax No. (505) 821-1741
(ii) if to SOS, to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, Utah 84115
Attn: Legal Department
Fax No. (801) 483-4253
17
<PAGE>
(iii) if to Seller to:
Aquas, Inc.
599 N. Mathilda Avenue, Ste. 210
Sunnyvale, California 94086
(iv) if to Poddar to:
Sunil Poddar
1251 Vicente Dr. #100
Sunnyvale, California 94086
Fax No. --------
(v) if to Parmar to:
Jitendra Parmar
507 South Bernardo Ave., #I
Sunnyvale, California 94086
Fax No. --------
(vi) if to Komawar to:
Nitin Komawar
905 West Middlefield Rd., #988
Mountain View, California 94043
Fax No.
(vii) if to Chintawar to:
Sandip Chintawar
905 West Middlefield Rd., #988
Mountain View, California 94043
Fax No. --------
(viii) if to Seller or any Principal, Copy to:
Graham & James LLP
600 Hansen Way
Palo Alto, California 94304-1043
Attn: Ralph M. Pais
Any party may change its address for notice hereunder by
written notice to the parties hereto.
23. Any term or provision of this Agreement that is invalid or
18
<PAGE>
unenforceable shall not affect the validity and enforceability of the remaining
terms and provisions of this Agreement.
24. Each party shall bear its own costs and expenses incurred in
connection with this Agreement, including any fee to be paid to a broker.
25. 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.
26. 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.
27. 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.
28. Time is of the essence of this Agreement and all its
provisions.
29. Without the prior written consent of the other parties hereto,
no party to this Agreement shall make any public announcement of the
transactions contemplated by this Agreement until one week following the Closing
Date, except that Seller may announce the transactions contemplated hereby to
its employees and contractors immediately following the Closing Date.
30. SOS hereby guarantees the performance of Buyer of each
provision of this Agreement. If Buyer fails to perform or satisfy any covenant,
promise, term or condition of this Agreement, including Principal's employment
agreement described in Article 14, within ten (10) days of written notice from
Seller or Principal to SOS, SOS shall perform or cause Buyer to perform or
satisfy such covenant, promise, term or condition.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
DATED this 14th day of May, 1998. DATED this 14th day of May, 1998.
Buyer SOS
Wolfe & Associates, Inc., by: SOS Staffing Services, Inc. by:
\s\ Curtis L. Wolfe \s\ Peter R. Sollenne
- ------------------- ---------------------
Name: Curtis L. Wolfe Name: Peter R. Sollenne
Title:President Title:President and COO
DATED this 7th day of July, 1998. DATED this 14th day of May, 1998.
Seller Seller
Aquas, Inc. Aquas, Inc.
\s\ Sandip Chintawar \s\ Nitin Komawar
- -------------------- -----------------
Sandip Chintawar, in his capacity as Nitin Komawar, in his capacity as
President of Seller and as an Chief Executive Officer of Seller and as
individual Principal an individual Principal
DATED this 14th day of May, 1998. DATED this 14th day of May, 1998.
Seller Seller
Aquas, Inc. Aquas, Inc.
\s\ Sunil Poddar \s\ Jitendra Parmar
- ---------------- -------------------
Sunil Poddar, as an Jitendra Parmar, as an
individual Principal individual Principal
20
<PAGE>
EXHIBIT A
Exhibit A consists of assets to be purchased assumed by Buyer from Seller
<PAGE>
EXHIBIT B
Exhibit B consists of the asset inventory and a description of and all
leasehold, rent, security and utility deposits to be provided by Seller
<PAGE>
EXHIBIT C
Exhibit C consists of leases, third party contracts and other liabilities
provided by Seller
<PAGE>
EXHIBIT D
Liabilities Related to H 1-B
Return airfare to home country for all employees and prospective employees for
whom H-1B visa applications have been submitted if employee is terminated and
wants to return to employees home country, as required by the Immigration and
Naturalization Service.
<PAGE>
EXHIBIT E
Allocation of purchase price
Property, Facilities, Equipment and Leasehold Improvements $ 20,000
Non-competition agreement by Seller 240,000
Non-competition agreement by Principals 240,000
Goodwill, including the business model 4,500,000
---------
Total $ 5,000,000
All Earnout payments shall be allocated to Goodwill, including the business
model.
ASSET PURCHASE
AGREEMENT
ABACAB SOFTWARE, INC.
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
COME NOW, Wolfe & Associates, Inc., a New Mexico corporation at 5325
Wyoming Boulevard, N.E., Suite 200, Albuquerque, New Mexico, 87109 (hereinafter
referred to as "Buyer"); Buyer's parent company, SOS Staffing Services, Inc., a
Utah corporation at 1415 South Main Street, Salt Lake City, Utah, 84115
(hereinafter referred to as "SOS"); Abacab Software, Inc., a California
corporation at 21070 Homestead Road, Suite 210, Cupertino, California, 95104
(hereinafter referred to as"Seller"); Srinath Murthy (hereinafter referred to
as "Principal") and Shashi Srinath ( a Shareholder of Seller, and , together
with Principal, hereinafter referred to as a "Shareholder") and agree as
follows:
WITNESSETH:
WHEREAS, Seller owns the assets and business set out in Article 1 and
Exhibits A and B herein and desires to sell them to Buyer;
WHEREAS, Principal is an officer, director and Shareholder of Seller,
and stands to benefit from Seller
transferring said assets to Buyer;
WHEREAS, the Shareholders are authorized to vote all of the outstanding
shares of Seller and are Seller's only Shareholders.
WHEREAS, Buyer desires to purchase said assets and business from Seller
for cash and other 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 assets and business;
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. (a) Buyer agrees to purchase and Seller agrees to sell,
convey, transfer, and deliver to Buyer the business
and assets as set out more specifically in Exhibits
A, B and C which are hereby incorporated by reference
as if fully set forth herein (the "Assets"). The
"Business" shall mean the business activities
conducted by Seller's staffing division of employing
software programmers and making those programmers
available to Seller's customers on a contract basis
as temporary staff. Buyer is only purchasing the
assets set forth on Exhibits A, B and C. Seller is
conveying to Buyer only the assets listed on Exhibits
A, B and C. Assets not referenced or identified on
Exhibits A, B and C shall not be transferred to
Buyer.
<PAGE>
(b) Seller agrees to sell or convey to Buyer and Buyer
hereby agrees to purchase and assume the equipment
and real property leases, third party contracts
and/or other liabilities listed in Exhibit D of this
Agreement. Seller agrees to sell or convey to Buyer
and Buyer hereby agrees to purchase and assume all
other liabilities described in Exhibit E of this
Agreement. Buyer shall also assume all liabilities
described in Exhibit F which are related to Buyer
being considered a successor employer for Seller's
H-1B visa status employees. Seller shall remain fully
responsible and liable for all Seller's liabilities,
except for the liabilities specifically identified on
Exhibits D, E and F, which Buyer hereby agrees to
assume. Buyer does not in any way or manner assume
any debt, liability, or obligation of Seller, other
than those set forth in Exhibit D, E and F, whether
known or unknown, whether asserted or un-asserted,
whether absolute or contingent. Buyer hereby
specifically assumes the obligations for real
property lease, contingent upon the landlord's
approval, arising after Closing for the real property
referenced in Exhibit A, to wit: the real property
lease for the demised premises located at 21070
Homestead Road, Suite 210, Cupertino, California,
95104.
(c) Seller shall pay all sales taxes, if any, due as a
result of the Closing of this Agreement.
2. In consideration for receiving said Assets and in
consideration of the representations, warranties, and covenants of Seller set
forth herein, Buyer agrees to pay Seller the following amounts on the conditions
set forth herein:
(a) At the time of Closing of this Agreement, Buyer shall
pay Seller Six Million Dollars ($6,000,000.00)(the
"Initial Purchase Price") as adjusted by the
following sentence, by direct wire transfer (or other
method designated by Seller) to an account which has
been designated by Seller. If the dollar value of the
liabilities described in Exhibits D (excluding lease
payments becoming due after the Closing) and E, is
greater than the dollar value of Assets described in
Exhibits B and C which is to be purchased by Buyer,
then the Initial Purchase Price shall be reduced by
such difference.
(b) (i) In addition to the Initial Purchase Price, Buyer
shall pay Seller five (5) times the EBIT (as defined in
Article 2 (c) herein) earned by the Business as operated by
Buyer during the period commencing on May 1, 1998 and
continuing through April 30, 1999 (the "First Earnout Period")
which is greater than the EBIT earned by the Business for the
period commencing May 1, 1997 and continuing through April 30,
1998. The parties agree that the EBIT for the period
commencing May 1, 1997 and continuing through April 30, 1998
was $885,000. Buyer shall pay Seller three (3) times the EBIT
earned by the Business during the period commencing May 1,
1999 and continuing through April 30, 2000 (the "Second
Earnout Period") which is greater than the EBIT earned by the
Business during the First Earnout Period. Buyer shall pay
Seller one (1) times the EBIT earned by the Business during
2
<PAGE>
the period commencing May 1, 2000 and continuing through April
30, 2001 (the "Third Earnout Period") which is greater than
the EBIT earned by the Business during the Second Earnout
Period. Each such Earnout payment shall be paid to Seller
within forty-five (45) days of the Earnout Period for which it
is made.
(ii) The total Earnout payments made pursuant to
this Article 2 (b) shall not exceed Eight Million Nine Hundred
Thousand Dollars (8,900,000.00).
(c) (i) "EBIT," in all respects, shall be calculated
on an accrual basis in a manner consistent with generally
accepted accounting principles. "EBIT" as used in this
Agreement means gross sales of the Business (total sales of
goods and services) less the following adjustments and
discounts arising directly from the conduct of the Business;
the cost of sales (temporary employee or contractor programs,
direct costs, temporary or contractor payroll, temporary or
contractor payroll taxes, i.e. FICA, unemployment, etc.,
temporary or contractor worker's compensation, drug testing
and bonding insurance); staff and consultant expenses (staff
or consultant payroll, temporary staff or consultant payroll,
commissions and bonuses, branch staff, temporary staff and
consultant 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, professional,
postage and delivery, petty cash, training expenses, and other
operating expenses); facilities expenses (rent, repair and
maintenance, and utilities); bad debt (to constitute a bad
debt, the receivable must be actually written off);
miscellaneous expenses (dues and subscriptions,
adjustments/recoveries, and reimbursements); printing
expenses; computer expenses; consultation expenses; taxes
(exclusive of federal, state and local income tax) and
insurance; or loss on disposal of assets; depreciation of
current assets and other expenses (career fair; services fees,
internal expenses, etc.). EBIT shall be increased by the
amount of any gain on disposal of assets and other current
income (bad debt recovery, finance charges collected and other
income). Except for receivables due from a customer that is in
bankruptcy, no receivable aged less than one hundred eighty
(180) days shall be written off without the permission of
Seller. No receivable for which Buyer seeks and obtains
indemnification pursued to Article 11 shall be written off or
treated as bad debt. After the Closing Date, all accounts
receivable aged more than one hundred and eighty (180) shall
be considered bad debt, unless such account is subject to a
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<PAGE>
payment plan which requires substantial and regular payments
to be completed within one year. Upon breach of any such
payment plan, the remaining receivable shall be considered a
bad debt. All recoveries made on any receivables written off
as a bad debt shall be added back to total sales. EBIT shall
exclude all corporate or home office expenses or allocations.
EBIT shall exclude interest and amortization expenses, EBIT
shall exclude any additional purchase price paid in the form
of the Earnout Payments. EBIT shall be based only on the
operation of the Business and shall not include the profit or
loss any other operating unit of Buyer. Buyer's obligation to
pay the Earnout Payments described herein shall be independent
of Principal's employment with Buyer and shall survive
Principal's separation from employment with Buyer for any
reason or cause.
(ii) Seller acknowledges and agrees that EBIT will be
based on Buyer's operation of the Business. Seller
acknowledges and agrees that there shall be no limitation on
Buyer's operation of the Business during the Earnout Period,
except that Buyer shall operate the Business in a manner
consistent with good business judgment, consistent with
Buyer's past practices with respect to acquired businesses and
as a separate operating division for accounting purposes with
separate profit and loss statements. Buyer shall not incur any
unreasonable expenses in order to reduce the amount of the
Earnout Payments. Seller acknowledges that Buyer's workers'
compensation insurance, unemployment insurance, bonding
insurance, cost of employee benefits and other costs differ
from Seller's and past performance will not necessarily be
indicative of future profits.
(iii) During the Earnout Periods, Buyer shall provide
Seller with profit and loss statements on a monthly basis.
Such statements shall be provided within a reasonable time
after the close of the month for which the statement is
generated. Buyer's representatives will make the determination
of the EBIT for each Earnout Period and deliver a copy of such
determination, including the financial data which served as
the basis for such determination, to the Seller. If Seller
disagrees with Buyer's determination, Buyer and Seller shall
negotiate in good faith to reach an agreement as to the EBIT.
If no agreement can be reached within twenty (20) days, then
at Seller's expense, a third party independent auditor
acceptable to both Buyer and Seller shall audit the books and
records of the Business and make a determination as to the
EBIT. In the event that the Buyer and Seller cannot agree upon
the appointment of a third party independent auditor, then
they shall jointly send a written request to the American
Arbitration Association located in Salt Lake County, Utah or
to a nationally recognized trade association asking that such
entity recommend a third party independent auditor located in
Salt Lake County, Utah, and the auditor so recommended shall
4
<PAGE>
be deemed to be the third party independent auditor selected
by Buyer and Seller. The third party independent auditor's
determination of the EBIT shall be final. Notwithstanding the
foregoing, the third party independent auditor shall have no
power to alter or modify any express provision of this
Agreement, nor shall he/she make any determination or
calculation which, by its terms, effects any such alteration
or modification. The Earnout Payments shall be made based on
the third party's auditor's determination of EBIT. If the
third party auditor's determination is materially different
than Buyer's determination in Seller's favor, then Buyer shall
reimburse Seller the cost of the third party auditor. As used
herein "material" shall mean a $20,000.00 difference between
Buyer's determination of the EBIT and the third party
auditor's determination of the EBIT in Seller's favor.
(d) In the event that Principal's employment with Buyer
or SOS is terminated by Buyer or SOS without cause or
by Principal for "Good Reason" (as defined in the
Employment Agreement), and such termination occurs
prior to the completion of the Third Earnout Period,
then for the Earnout Period in which the termination
occurs, Buyer shall pay Seller an Earnout Payment
based on the annualized EBIT earned by the Business
during the Earnout Period during which the
termination occurred. The Earnout Payment for any
future Earnout Periods remaining shall be based upon
the annualized EBIT earned by the Business during the
Earnout Period during which the termination occurs is
made multiplied by the annual growth rate of EBIT
from the Effective Date to the date that the
termination occurs. Such payment shall be made within
thirty (30) days from the date of the termination and
shall terminate all other obligations of Buyer and
SOS under Section 2 (b) of this Agreement.
(e) The parties agree that the Initial Purchase Price
payment of Six Million Dollars ($6,000,000.00) shall
be allocated as follows:
to Goodwill: $5,135,357;
to Customer Lists: $10,000.00;
to Employee Lists: $10,000.00;
to Pre-paid Deposits: $5,800.00;
to Accounts Receivable: $729,137.00;
to Employee Loans and Advances: $17,206.00;
to the Non-Competition Covenant: $75,000.00; and
to Property, Facilities and Equipment $17,500.00.
Any adjustments to the Initial Purchase Price shall be
deducted from the allocation to goodwill. All additional
payments made hereunder shall be allocated to goodwill.
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<PAGE>
All parties agree to file IRS Form 8594 reflecting the
purchase price allocation contained herein.
3. As further consideration for Buyer to enter into this
Agreement and in consideration for Buyer making payments to Seller pursuant to
Article 2 and in consideration of Principals benefiting from this Agreement,
Principal agrees to the following:
(a) For a period commencing on the Closing Date hereof
and continuing until twenty-four (24) months after
the earlier of (i) end of the Third Earnout Period,
(ii) the termination of Principal's employment with
Buyer without cause or (iii) the termination of
Principal's employment with Buyer by Principal for
"Good Reason" as defined in the Employment Agreement
(the "Covenant Period"), Seller and Principal shall
not, for any reason, within one hundred (100) miles
of Seller's Office; directly or indirectly, (i)
engage in software consulting, contract staffing or
outsourcing business; or provide any other related
service; (ii) enter the employ of, or render any
services to or consult with, any person engaged in
competition with the Buyer, any affiliate or any of
their successors in interest; (iii) become associated
with or interested in any person engaged in
competition with Buyer in any capacity, including,
without limitation, as an individual, partner,
shareholder, officer, director, principal, agent or
trustee; provided, however, each Principal may own,
directly or indirectly, solely as an investment,
securities of any person traded on any national
securities exchange or over-the-counter if such
Principal is 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 the Buyer, any
affiliate or any of their successors in interest in a
manner designed to (or that could) take business away
from the Buyer, any affiliate or any of their
successors in interest; (v) solicit or otherwise
induce any employee of the Buyer, any affiliate or
any of their successors in interest to terminate
his/her employment with the Buyer, any affiliate or
any of their successors in interest; or (vi) hire or
solicit any consultant under contract with the Buyer,
any affiliate or any of their successors in interest
or encourage such consultant to terminate such
relationship.
(b) Principal agrees not to disclose to any unauthorized
person any confidential information he may obtain or
has obtained regarding Seller's, Buyer's, any
affiliate's, or their successors' services, products,
customers, employees or methods of doing business,
nor use such information in violation of Article 3
(a) during the Covenant Period.
(c) Principal acknowledges that he will be able to earn a
livelihood without violating the foregoing
restrictions.
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<PAGE>
Principal further acknowledges: (1) that the
consideration for the covenant is adequate, (2) that
compliance with the restrictive covenant contained in
this Article 3 is necessary to protect the business
and goodwill of the Buyer, any affiliate's or its
successors in interest, and (3) that a breach will
result in irreparable and continuing damage to the
Buyer or its successors in interest, for which money
damages may not provide adequate relief.
Consequently, Principal agrees that, in the event
that he breaches the restrictive covenant of this
Article 3, the Buyer or its successors in interest
shall be entitled to seek: (1) a preliminary or
permanent injunction to prevent the continuation of
harm, and (2) money damages insofar as they can be
determined. Nothing in this Agreement shall be
construed to prohibit the Buyer or its successors in
interest from also pursuing any other remedy, the
parties having agreed that all remedies are
cumulative.
(d) The parties have attempted to limit Principal's right
to compete only to the extent necessary to protect
the Buyer or its successors in interest from unfair
competition. The parties recognize that reasonable
people may differ in making a determination.
Consequently, the parties agree that, if the scope or
enforceability of the restrictive covenant is in any
way disputed at any time, a court, arbitrator or
other trier of fact may modify and enforce the
covenant to the extent that it believes to be
reasonable under the circumstances existing at the
time.
4. The "Closing" of the transactions contemplated by this
Agreement shall take place at 9:00 a.m. (Mountain Daylight Time) on the date of
this Agreement (the "Closing Date") at 1415 South Main Street, Salt Lake City,
Utah, 84111, SOS's principal office. Closing may also take place at any other
time or place mutually agreed to in writing by the parties. The parties agree
that the Closing may take place by exchanging signed documents at the time of
Closing via facsimile. The parties agree that a facsimile signature shall have
the same force and effect as a signature on an original document.
This Agreement shall be effective upon its execution by each
party hereto. For all purposes, the transfer of the Assets and Business herein
described to Buyer is hereby recognized as occurring at 12:01 a.m. on May 1,
1998, regardless of the date when this Agreement shall be executed. At 12:01
a.m. on May 1, 1998, Buyer will also commence operation of Seller's Business
with respect to the Assets purchased. May 1, 1998 shall be referred to herein as
the "Effective Date".
5 (a)
At Closing, Seller and Principal shall deliver to Buyer the following:
(i) A Bill of Sale for all items of personal and
tangible property to transferred hereby;
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<PAGE>
(ii) An assignment of all trademarks and trade
names to be transferred hereby;
(iii) All Assets to be transferred hereby;
(iv) Lien releases for any encumbered Asset;
(b)
At Closing, Buyer or SOS shall deliver to Seller or Principal the following:
(i) All funds or monies described in Article 2
herein;
(ii) Certificate that all necessary consents have
been obtained; and
(iii) Executed Employment Agreement between Buyer
and Principal.
6. In the event the transaction contemplated by this Agreement
does not close, Buyer will maintain as confidential all proprietary information
and shall not use for any reason any proprietary information which it or any of
its representatives may obtain from Seller, any of its employees or the
Principal. This restriction shall not apply, however, (i) as may otherwise be
required by law (if such disclosure is required by legal process, Buyer shall
notify Seller, prior to any response to such legal process. Thereafter, Seller,
at its sole cost and expense, may oppose such disclosure), (ii) to the extent
such information (A) shall be or have become publicly available, (B) was legally
available to Buyer on a non-confidential basis prior to its disclosure by Seller
or (C) becomes available to Buyer on a non-confidential basis from a person
other than Seller or (iii) with respect to disclosure by Buyer to parties to
whom disclosure may be required or desirable in connection with the transactions
contemplated by this Agreement, provided such parties agree to be bound by the
provisions of this Article 6. This confidentiality Agreement will also apply to
any proprietary information not purchased by Buyer regardless of whether the
transaction closes.
7. Seller and Principal represent and warrant to the Buyer that
the statements made herein 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 Article 7, "material" shall mean any discrepancy in the financial
statements or representations that in the aggregate have an impact of more than
twenty-five thousand dollars ($25,000.00).
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the
state of California. Seller 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
8
<PAGE>
owned and used by it. Seller is not in default under
or in violation of any provision of its charter,
articles of incorporation, or bylaws.
(b) Seller has good and marketable title to all the
Assets listed in Article 1 and Exhibits A, B and C.
All Assets are free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, or claims,
except as set forth in Exhibits A, B and C.
(c) To the Knowledge of Seller and Principal, all
accounts receivable of Seller listed on Exhibit C
represent or will represent valid obligations arising
from sales actually made or services actually
performed in the ordinary course of business and are
fully collectable.
(d) 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 material
Agreement, contract, license, or other arrangement to
which Seller is a party.
(e) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against
Seller in accordance with its terms. Seller has the
absolute and unrestricted right, power, and authority
to execute and deliver this Agreement and to perform
its obligations under this Agreement.
(f) Seller has filed all income tax returns that it was
required to file, has paid in full all taxes
associated with such tax returns except for those
contested in good faith and is not deficient on any
tax payments or liabilities.
(g) To the extent required by law, Seller has maintained
workers' compensation insurance on each of its
employees at all times since Seller's incorporation.
Seller has paid all workers' compensation insurance
premiums and is not deficient on any such premium
payment.
(h) Seller has complied with all environmental, health,
and safety laws which are applicable to it in all
material respects and does not have any material
liability relating to any environmental, health, or
safety law.
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<PAGE>
(i) Seller 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 any federal, state or
local equal employment opportunity or
anti-discrimination law.
(j) Seller has complied with Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), in all
material respects and does not have any material
liability relating to ERISA.
(k) Seller has complied with the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended
("COBRA") in all material respects and does not have
any material liability relating to COBRA.
(l) Seller has paid or provided for the payment of all
payroll taxes and other withholdings mandated by
federal, state and local laws, including, but not
limited to, workers compensation, unemployment
insurance, FICA, Medicaid and employee income tax
withholdings.
(m) Seller has complied with the federal Occupation
Safety and Health Act, National Labor Relations Act,
and the Fair Labor Standards Act, and any equivalent
state or local laws in all material respects and does
not have any material liability relating to any such
law.
(n) Seller has complied with all laws, regulations, rules
and requirements issued by any and all governmental
entity related to the eligibility of its employees to
work in the United States of America. Seller
warrants, to the Knowledge of Seller and Principal,
that all H-1B and other visas sponsored by Seller and
used by its employees are validly issued and were
obtained in accordance with all related laws,
regulations, rules and requirements and that all, to
the Knowledge of Seller and Principal, applications
sponsored by or made by Seller were truthful in all
respects.
(o) All financial statements and information provided by
Seller to Buyer are true, correct and complete in all
material respects.
(p) Seller warrants that it has used the services of
Delhi and Dublin Ventures as a broker in connection
with the transaction contemplated by this Agreement
and has not used the services of any other broker or
agency in connection with the transaction
contemplated by this Agreement. Seller warrants that
it shall pay all costs and fees due Delhi and Dublin
Ventures in connection with the transaction
contemplated by this Agreement and is not obligated
to pay any other broker, agency or finder's fee in
connection with the transaction contemplated by this
Agreement.
(q) Seller warrants that there are no liabilities of
Seller other than those described in Exhibits D, E,
and F, except as described in Schedule 7q.
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<PAGE>
(r) As used herein, Principal or Seller shall be deemed
to have "Knowledge" of a particular fact or other
matter if: (i) Principal or Seller is actually aware
of such fact or other matter; or (ii) a prudent
individual having access to the same information as
Principal and Seller could reasonably be expected to
discover or otherwise become aware of such fact or
other matter. Seller will be deemed to have
"Knowledge" of a particular fact or other matter if
any individual who is serving, or who has at any time
served, as a director, officer, partner, executor or
trustee of Seller (or in any similar capacity) has
Knowledge of such fact or other matter.
8. Buyer and SOS represent and warrant to Seller and
Principal that the statements made below are correct
and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date.
(a) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the
state of New Mexico. Buyer 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. Buyer is not in default under
or in violation of any provision of its charter,
articles of incorporation, or bylaws.
(b) Buyer is sufficiently capitalized to undertake and
perform the obligations and covenants under this
Agreement.
(c) The Buyer's board of directors has approved the terms
of this Agreement and the officers of Buyer have been
duly authorized to enter into and execute this
Agreement and to perform the obligations of Buyer
hereunder.
(d) The Buyer has obtained all necessary consents to
enter into this Agreement.
(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
Buyer is a party.
(f) Buyer warrants that it has not used the services of
any broker or agency in connection with the
transaction contemplated by this Agreement. Buyer
warrants that it is not obligated to pay any broker,
agency or finder's fee in connection with the
transaction contemplated by this Agreement.
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<PAGE>
9. SOS and Buyer represent and warrant to Seller and Principal
that the statements made below are correct and complete as of
the date of this Agreement and will be correct and complete as
of the Closing Date.
(a) SOS is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Utah. SOS 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. SOS is not in default under or in violation of any
provision of its charter, articles of incorporation, or
bylaws.
(b) SOS's board of directors have approved the terms of this
Agreement and the officers of SOS have been duly authorized to
enter into and execute this Agreement and to perform all the
obligations of SOS hereunder.
(c) SOS has obtained all necessary consents to enter into this
Agreement.
(d) 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
SOS is a party.
(e) SOS warrants that it has not used the services of any broker
or agency in connection with the transaction contemplated by
this Agreement. SOS warrants that it is not obligated to pay
any broker, agency or finder's fee in connection with the
transaction contemplated by this Agreement.
(f) SOS is sufficiently capitalized to undertake and perform its
obligations and covenants under this Agreement, including the
obligation to guarantee the performance of Buyer hereunder.
10. Seller and Principal agree to indemnify Buyer and SOS, and
hold Buyer and SOS harmless from any material loss, damage, expense, liability,
or claim, including without limitation, attorney's fees and expenses of
litigation, to which Buyer or SOS may become subject arising out of: (a) any
material misstatement of the Seller or Principal as warranted in Article 7; (b)
any material failure of Seller or Principals to perform any of its covenants,
Agreements or undertakings contained in this Agreement ;provided that nothing
herein shall be construed as creating any indemnification in Buyer's favor based
on Principal's employment agreement and his performance, or non-performance,
thereunder; (c) any undisclosed liability (whether known or unknown, whether
asserted or un-asserted, whether absolute or contingent) for any claim relating
to Seller or the Business; or (d) any account receivable described in Exhibit C
which remains unpaid after one hundred eighty days (180) from the Effective
Date.
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<PAGE>
In no event shall Seller or Principal be required to make
payments to Buyer or SOS pursuant to this Section 10 in excess of $3,000,000.
As used in this Article 10, "material" shall mean losses,
damages, expenses, liabilities or claims, including without limitation,
attorney's fees and expenses of litigation which are twenty-five thousand
dollars ($25,000.00) in the aggregate, except that Seller shall reimburse Buyer
for any account receivable described in Exhibit C which remains unpaid after one
hundred eighty days (180) from the Effective Date, however any such payment for
the receivables shall be excluded from the twenty-five thousand dollars
($25,000.00)-cap.
11. Buyer and SOS agree to indemnify Seller and Principal and hold
Seller and Principals harmless from any material loss, damage, expense,
liability, or claim, including without limitation, attorney's fees and expenses
of litigation, to which Seller or Principals may become subject arising out of:
(a) any material failure of Buyer to perform any of its covenants, Agreements or
undertaking contained in this Agreement or in any other Agreement executed in
connection with the transactions contemplated herein; (b) any material
misstatement of Buyer as warranted in Article 8 or 9; (c) Buyer's operation of
the Business after the Effective Date; or (d) any liability specifically assumed
by Buyer hereunder.
As used in this Article 11, "material" shall mean losses,
damages, expenses, liabilities or claims, including without limitation,
attorney's fees and expenses of litigation which are twenty-five thousand
dollars ($25,000.00) in the aggregate.
12. Buyer agrees to employ the Principal for a period of three (3)
years following the Closing Date pursuant to the terms and conditions of a
separate employment agreement. The form of the employment agreement is attached
hereto as Exhibit G.
13. Buyer agrees that it shall offer employment to each of
Seller's current employees which it deems is suitable for employment with Buyer.
Alternatively, Buyer shall assume and accept the assignment of each such
employee's employment contract with Seller. For each of Seller's former
employees hired by Buyer, Buyer shall recognize time of service with Seller as
time of service with Buyer for purposes of non-health, life or disability
benefits, such as, 401(k) eligibility and matching contribution vesting, C-125,
etc. Seller acknowledges that Buyer maintains a drug-free workplace policy and
that all of Seller's former employees hired by Buyer will be subject to such
policy. Such staff employees shall be exempt from the pre-employment drug
screen, but shall be subject to all other provisions of the policy applicable in
California. After the Closing, each of Seller's employees hired by Buyer will be
subject to post-incident screening. Buyer may modify its policy at any time to
reflect changes in statutory or case law or for any other reason consistent with
good business judgment.
13
<PAGE>
Seller and Principals shall make reasonable assurances and
efforts to encourage Seller's existing employees to accept employment with
Buyer. Buyer and Seller acknowledge and agree that due to the requirements of
the INS relating to transfer of H-1B visas and the legal permanent residency
process, Seller will lease to Buyer any employees who are subject to H-1B visas
and the legal permanent residency process until such time as the INS approves
and processes the transfer of H-1B visas or finally approves the legal permanent
residency of such employees. Such employees will be leased to Buyer at the cost
of the salary of such employee plus any allocation of actual overhead and
benefit costs of Seller relating to such leased employees.
Buyer and Seller further agree to cooperate in every way in
order to expedite the transfer of Seller's employees subject to H-1B visas to
Buyer. Buyer agrees to begin the transfer process immediately following the
Closing Date.
14. Seller shall pay all staff, consultant, contractor and
temporary employee benefits, costs and expenses earned prior to the Effective
Date of this Agreement. Seller agrees to pay before the Effective Date or to
accrue and maintain adequate reserves for any staff and temporary employee
benefits earned prior to the Effective Date of this Agreement, but to be paid
after the Effective Date. For those employee benefits, costs or expenses which a
specific date cannot be determined, Buyer and Seller shall share the payment of
the benefit, cost or expense on a pro-rated basis. Alternatively, Buyer shall
assume such liabilities if described in Exhibit E and included on the Balance
Sheet attached as Exhibit H.
15. Buyer agrees to assist Seller to collect accounts receivable.
Such assistance shall be limited to turning over payments due Seller which are
received by Buyer within five (5) days of receipt of such payment. If Buyer
receives payment for both its services as well as Seller's, Buyer will deposit
said funds in its accounts and pay the amount due Seller to Seller within five
(5) days of receipt of such payment. Payments for which no invoice is designated
shall be applied to the oldest outstanding invoice.
Seller agrees if it receives any payment for any account
receivable due Buyer that it will turn over such payment to Buyer when received
by Seller. If Seller receives payment for both its services as well as Buyer's,
Seller will deposit said funds in its accounts and pay the amount due Buyer to
Buyer. Payments for which no invoice is designated shall be applied to the
oldest outstanding invoice.
16. To the extent that Seller's rights under any agreement,
contract, commitment, lease or other Asset to be assigned to Buyer hereunder may
not be assigned without the consent of another person which has not been
obtained, this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof or be unlawful, and
Seller shall use its best efforts to obtain any such required consent(s) as
promptly as possible. If any such consent shall not be obtained or in any
attempted assignment would be ineffective or would impair Buyer's rights under
14
<PAGE>
the Asset in question so that Buyer would not in effect acquire the benefit of
all such rights, Seller, to the maximum extent permitted by law and the Asset,
shall act after the Closing as Buyer's agent in order to obtain for it the
benefits thereunder and shall cooperate, to the maximum extent permitted by law
and the Asset, with buyer in any other reasonable arrangement designed to
provide such benefits to Buyer. Buyer, Seller, and Principal agree 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. Buyer, Seller and Principal agree that prior to the
commencement of any action for indemnification under Sections 10 or 11 or 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 Buyer and Seller. 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 All of the representations and warranties contained in this
Agreement shall survive the Closing Date (except that representations and
warranties that specifically relate to a particular date or period shall be true
and correct as of such date and for such period) and shall continue in full
force and effect until the date of the first anniversary of the Closing, except
that the representations and warranties related to taxes and ERISA shall
continue in full force and effect until the applicable statute of limitations
for claims made thereunder shall have expired.
19. This Agreement and all documents executed and delivered
hereunder shall be deemed to be contracts under the laws of the State of Utah
without regard to conflicts of law principles, 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.
20. In the event of the commencement of any litigation or
arbitration to enforce any provision of this Agreement or that is related to
this Agreement, the prevailing party shall be entitled to its costs for such
action, including reasonable attorney's fees, expert witness fees and other
reasonable costs incurred related to such action.
21. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
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(i) if to Buyer, to:
Wolfe & Associates, Inc.
5325 Wyoming Boulevard, N.E., Suite 200,
Albuquerque, NM 87109
Fax No. (505) 821-1741
(ii) if to SOS, to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, Utah 84115
Attn: Legal Department
Fax No. (801) 483-4253
(iii) if to Seller to:
Abacab Software, Inc.
21070 Homestead Rd., Ste 210
Cupertino, CA 95014
Fax No. (408) 253-3535
(iv) if to Principal to:
Srinath Murthy
21070 Homestead Rd., Ste 210
Cupertino, CA 95014
Fax No. 408-253-3535
(v) if to Seller or Principal, Copy to:
Scott M. Stanton, Esq.
Gary Cary Ware Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, CA 92121
Fax No. (619) 677-1477
Any party may change its address for notice hereunder by
written notice to the parties hereto.
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<PAGE>
22. Any term or provision of this Agreement that is invalid or
unenforceable shall not affect the validity and enforceability of the remaining
terms and provisions of this Agreement.
23. Each party shall bear its own costs and expenses incurred in
connection with this Agreement, including any fee to be paid to a broker.
24. 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.
25. 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.
26. 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.
27. Time is of the essence of this Agreement and all its
provisions.
28. SOS hereby guarantees the performance of Buyer of each
provision of this Agreement. If Buyer fails to perform or satisfy any covenant,
promise, term or condition of this Agreement, including Principal's employment
agreement described in Article 14, within ten (10) days of written notice from
Seller or Principal to SOS, SOS shall perform or cause Buyer to perform or
satisfy such covenant, promise, term or condition.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement.
DATED this day of May, 1998. DATED this day of May, 1998.
Buyer SOS
Wolfe & Associates, Inc., by: SOS Staffing Services, Inc. by:
\s\ Curtis L. Wolfe \s\ Peter R. Sollenne
- ------------------- ---------------------
Curtis L. Wolfe, President Peter R. Sollenne, President
DATED this 21st day of May, 1998. DATED this 21st day of May, 1998
17
<PAGE>
Seller
Abacab Software, Inc. Shareholder
\s\ Srinath Murthy \s\ Shashi Srinath
- ------------------ ------------------
Srinath Murthy, in his capacity as President Shashi Srinath
of Seller and as an individual Principal
18
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EXHIBIT A
<PAGE>
EXHIBIT A
The following assets are to be purchased assumed by Buyer from Seller:
(a) The real property lease for the demised premises located at 21070
Homestead Road, Suite 210, Cupertino, California, 95014, together with all
rights and privileges under said lease to real property subject to said lease;
and
(b) All papers and records in Seller's care, custody or control relating to
the operational aspects of Seller's consulting business or any of the Assets to
be transferred under this Agreement, including but not limited to all personnel
and labor relations records of Seller's employees hired by Buyer, environmental
control records, sales records, accounting and financial records, maintenance
and production records, except that Seller shall either have unlimited access to
or copies of such records; and
(c) All records in any way related to Seller's customers, business,
employees (which are hired by Buyer), etc. that are maintained at any location,
except for Seller's corporate minute books and other documents related solely to
Seller's corporate affairs or governance;
(d) To the extent of Seller's interest, the telephone numbers of Seller, to
wit: (408) 523-5880 and all other telephone numbers listed or used by Seller
(Seller shall transfer any right or interest it might have in such numbers to
Buyer) ; and
(e) To the extent of Seller's interest, the facsimile telephone numbers of
Seller, to wit: (408) 523-5888 (Seller shall transfer any right or interest it
might have in such numbers to Buyer) ; and
(f) E-mail domain address of Seller; and
(g) All of Seller's intangibles relating to its consulting business,
including:
(i) all assumed business or trade names to the extent such trade
names are used in connection with providing outsourcing, consulting or staffing
services, including temporary help services, payroll services, permanent
placement or employee leasing. Such names to be transferred include but are not
limited to: Abacab," Abacab Software", and all other assumed business names and
trade names owned or used by Seller; and all other slogans, trademarks and
service marks related to Seller; and
(ii) for any of Seller's employees hired by Buyer, their complete
personnel files, work histories, employment agreements between Seller and
employees of Seller, employee Confidentiality and non-compete agreements between
Seller and employees of Seller, and all other documents related to employees of
Seller which are hired by Buyer; and
<PAGE>
(iii) all customer lists, including but not limited to all telephone
numbers, credit histories, sales histories and other documents related to
Seller's customers; and
(iv) Seller's goodwill; and
(v) all other intangibles of Seller; and
(h) All proprietary and other software and hardware; and
(i) All operational assets of Seller including, but not limited to all
inventory, office furniture, phones, electronic and computer equipment and all
other equipment used by Seller to conduct business which are listed in Exhibit
B; and
(j) All prepaid expenses relating to any of the assets, facilities, and
operations being taken over by Buyer, including any deposits used in the normal
operation of Seller's business such as deposits for rent or security which were
or are required by the terms of any real property lease (excludes voluntary
pre-payments not required by any lease), all utility deposits, and any other
equipment lease deposits, all of which are more particularly described in
Exhibit B.
(k) All accounts receivable, cash, cash equivalents and other balance sheet
items as described in Exhibit C
<PAGE>
EXHIBIT B
Exhibit B consists of the asset inventory and a description of
and all leasehold, rent, security and utility deposits to be
provided by Seller
<PAGE>
EXHIBIT C
Exhibit C consists of a description of all accounts
receivable, cash and cash equivalents of the Seller as of May
1, 1998, the Effective Date
<PAGE>
EXHIBIT D
Exhibit D consists of leases and third party contracts provided by Seller
<PAGE>
EXHIBIT E
Exhibit E consists of the list of all balance sheet liabilities
to be assumed by Buyer
<PAGE>
EXHIBIT F
Buyer agrees that it shall be responsible for all costs, expenses and fees
associated with transferring the H-1B visas of Seller's employees to Buyer.
<PAGE>
EXHIBIT G
<PAGE>
EMPLOYMENT AND NONDISCLOSURE AGREEMENT
--------------------------------------
THIS EMPLOYMENT AND NONDISCLOSURE AGREEMENT (the "Agreement") is
entered into this 21st of May, 1998 by and between Wolfe & Associates, Inc., a
New Mexico corporation (the "Company"), and Srinath Murthy ("Murthy").
WHEREAS, the Company desires to employ Murthy based on the terms and
conditions of this Agreement; and
WHEREAS, Murthy desires to accept such employment on the terms and
conditions of this Agreement.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company hereby agrees
to employ Murthy as a full-time employee of the Company in the position of Vice
President of the Company's Abacab Division based in Cupertino, California office
for the Term as hereinafter defined, to render such services and to perform such
duties as the Management of the Company shall reasonably request (for purposes
of this agreement, "Management" means any officer of the Company or any person
designated by the officers of the Company at their sole discretion to whom
Murthy reports). Murthy's primary duties shall be to supervise and manage the
Company's Abacab Division based in Cupertino, California. Notwithstanding the
foregoing, Murthy's position and duties may be reasonably modified or changed
from time to time at the discretion of the management without additional
compensation. Murthy shall also serve during all or any part of the Term in any
other office (office does not refer to any physical office) to which he may be
appointed or elected without any compensation therefor other than that specified
in this Agreement. Any material change to Murthy's position or duties, including
relocation, must be agreed to by Murthy. A refusal by Murthy shall not diminish
his status or position with the Company.
1.2 Acceptance of Employment by Murthy. Murthy hereby
accepts such continued employment and shall render the services described above.
Murthy will faithfully, and at all times, and to the best of his ability,
experience and talents, perform all of the duties which are required of him
under this Agreement, including devoting of his full business time to and for
the exclusive benefit of the Company, and shall keep free from conflicting
enterprises or any other activities which would be detrimental to or interfere
with the business of the Company or the devotion of his full time to the
business of the Company. Murthy agrees to use his best efforts to comply with
any and all instructions that management may give him from time to time, and to
promote and maintain the success, quality, professionalism and reputation of the
Company.
<PAGE>
2. Term of Agreement and Employment. The term of this Agreement
and Murthy's employment hereunder (the "Term") shall commence on May , 1998 (the
"Commencement Date") and shall continue for a period of three (3) years
thereafter (such period may hereinafter be referred to as the "Initial Term").
Thereafter, the Term shall be extended automatically on each anniversary of the
Commencement Date for successive one (1) year periods unless either the Company
or Murthy give not less than ninety (90) days written notice of its or his
intent not to extend the contract. As used in this Agreement, "Term" shall mean
and include the Initial Term of Murthy's employment with the Company and any
extension thereof.
3. Compensation and Other Benefits.
-----------------------------------------
3.1 Compensation. As compensation for services to be
rendered pursuant to this Agreement, the Company shall pay Murthy, during the
Term, a salary of not less than $75,000.00 per annum (the "Annual Salary"),
subject to such increases as the Management may, at its discretion, approve.
3.2 Expenses. Murthy shall be entitled to reimbursement
of his reasonable expenses incurred related to the performance of his duties
hereunder pursuant to the Company's expense reimbursement program. The expenses
covered by such policy include mileage reimbursement for business related travel
or reimbursement for actual allowable automobile expenses or mileage,
reimbursement for other business related travel, entertainment of potential and
current customers of the Company, etc. Murthy shall submit to the Company
receipts and the Company's expense reimbursement report. The Company shall
reimburse Murthy within a reasonable time (not to exceed thirty (30) days) after
the appropriate Company employee receives the expense reimbursement report and
supporting documentation.
3.3 Other Compensation. Murthy shall be eligible for such
other compensation, whether in the form of stock options, stock appreciation
rights, restricted stock awards or otherwise, in such amounts and upon such
terms and conditions as the Board of Directors (or a compensation committee
thereof) may, at its discretion, approve. All compensation described in Articles
3.2 and 3.3, shall be collectively referred to as "Additional Compensation."
3.4 Payment. The Annual Salary and the Additional
Compensation shall be payable in accordance with the applicable payroll and/or
other compensation policies and plans of the Company as from time to time in
effect, less such deductions as shall be required to be withheld by applicable
law and regulations.
<PAGE>
3.5 Participation in Employee Benefit Plans. Murthy shall
be permitted, during the Term to participate in any group life, hospitalization
or disability insurance plan, health program, pension plan, nonqualified
deferred compensation plan, similar benefit plan or other so-called "fringe
benefits" of the Company for which he may be eligible pursuant to the terms of
such plans on the same terms and conditions as other employees of the Company.
4. Nondisclosure.
--------------
4.1 Non-Competition Covenants. Murthy shall comply with
all non-competition covenants and the Company shall have all remedies as set
forth in Section 3 of the Asset Purchase Agreement between the Company, SOS
Staffing Services, Inc. and Murthy dated May 21, 1998.
4.2 Nondisclosure Covenant. During the Covenant Period,
Murthy shall not, without the prior written consent of the Company,
intentionally, reveal, make accessible, or disseminate to any person not an
employee of the Company, or to any other entity, or use for the benefit of
himself or others, the Trade Secrets and any and all other confidential matters
of the Company. "Trade Secret" means information, including a formula, pattern,
compilation, program, device, method, technique, or process that: (a) derives
independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Murthy covenants and agrees during the Covenant Period that he shall not exploit
for his own benefit, or the benefit of others, personal relationships with
customers, suppliers or agents of the Company in a manner that would or may
adversely affect the Company.
4.3 Property of the Company. All of the Company's Trade
Secrets, and all tangible items, including, without limitation, all memoranda,
notes, lists, records 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 Murthy, or made available to Murthy
relating to the past, existing, or contemplated business or work of the Company,
other than purely personal matters, are and shall remain the Company's exclusive
property and shall be delivered to the Company promptly upon the termination of
Murthy's employment (whether for Cause or otherwise) or at any other time on
request of the Company.
4.4 Rights and Remedies upon Breach. If Murthy breaches
any of the provisions of Articles 4.2, or 4.3 (collectively, the "Restrictive
Covenants"), the Company shall have the following rights and remedies, each of
<PAGE>
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 the Company under law or in equity:
4.4.1 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
the Company and that money damages would not provide an adequate remedy to the
Company.
4.4.2 Accounting. Upon the determination, judgment or
finding of a court of competent jurisdiction or an arbitrator under binding
arbitration hereunder that Murthy has breached the terms of the Restrictive
Covenants, the right and remedy to require Murthy to account for and pay over to
the Company all compensation, profits, monies, accruals, increments or other
benefits derived or received by Murthy as the result of any transactions
constituting a breach of the Restrictive Covenants.
5. Termination of Agreement and Employment.
----------------------------------------
5.1 Termination upon Death. If Murthy dies during the
Term, this Agreement and Murthy's employment hereunder shall terminate, except
that Murthy's legal representatives, successors, heirs or assigns shall be
entitled to receive the Annual Salary, the Additional Compensation, other
accrued benefits, if any, earned up to the date of Murthy's death; provided,
however, if any Additional Compensation or other benefits are governed by the
provisions of any written employee benefit plan or policy of the Company, any
written agreement contemplated thereunder, or any other separate written
agreement entered into between Murthy and the Company, the terms and conditions
of such plan, policy or agreement shall control in the event of any discrepancy
or conflict with the provisions of this Agreement regarding such Additional
Compensation or other benefit upon the death, termination or disability of
Murthy pursuant to this Article 5.
5.2 Termination for Cause. The Company has the right, at
any time during the Term, subject to all of the provisions hereof, exercisable
by serving notice, effective in accordance with its terms, to terminate this
Agreement and Murthy's employment hereunder and discharge Murthy for "Cause" (as
hereinafter defined). If such right is exercised, the Company's obligation to
Murthy shall be limited to the payment of any unpaid Annual Salary, Additional
Compensation and other benefits, if any, accrued up to the effective date (which
shall not be retroactive) specified in the Company's notice of termination. As
used in this Article 5.2, the term "Cause" shall mean and include (i) breach by
Murthy of the material terms of Article 4 of this Agreement, (ii) wrongful
misappropriation of any money or other assets or properties of the Company or
any subsidiary or affiliate of the Company, (iii) the conviction of Murthy for
<PAGE>
any felony, (iv) use of illegal drugs, (v) use of alcohol if such use renders
Murthy unable to perform the essential functions of his job, (vi) Murthy's gross
moral turpitude relevant to his office or employment with the Company or any
subsidiary or affiliate of the Company ("gross moral turpitude" as used herein
shall mean any act involving dishonesty, fraud or deliberate misrepresentation,
(vii) Murthy's violation of the Company's sexual harassment or
anti-discrimination policy, or (vii) Murthy's violation of other established
Company policies, whether currently in place or adopted during the Term, where
such violations ordinarily result in termination.
5.3 Suspension upon Disability. If during the Term,
Murthy becomes physically or mentally disabled, whether totally or partially, as
evidenced by the written statement of (2) competent physicians licensed to
practice medicine in the United States, so that Murthy is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any
twelve-month period, the Company may at any time after the last day of the six
consecutive months of disability, or on the day on which the shorter periods of
disability equal an aggregate of six months, by written notice to Murthy,
suspend Murthy's employment and the performance of the Company's obligations
hereunder, including payments of the Annual Salary, Additional Compensation and
other benefits. If at any time Murthy shall no longer be disabled, as evidenced
by the written statement of two (2) competent physicians licensed to practice
medicine in the United States, the Company may, at its election, fully reinstate
this Agreement and Murthy's employment hereunder, and all of the terms of this
Agreement, including payment of the Annual Salary, shall resume in full force
for the balance of the Term. Nothing in this Article 5.3 shall be deemed,
however, to extend the Term. Additionally, nothing in this Article 5.3 shall
limit or diminish Company's obligations towards Murthy with respect to the
Americans with Disabilities Act of 1990, as amended, the Family and Medical
Leave Act of 1993, as amended, or any similar state laws.
5.4 Termination other than for Cause. During the Term,
the Company may terminate Murthy's employment other than for Cause by (i)
serving written notice of termination to Murthy and (ii) enclosing with the
notice a check in the amount of the Annual Salary then in effect for the
remainder of the Term. If Murthy's employment is terminated per this paragraph
5.4, Company's liability under this Agreement shall be limited to the Annual
Salary payable for the remainder of the Term and any Additional Compensation
accrued and owing on the date of such termination.
5.5 Termination by Murthy for Good Reason. During the
Term, Murthy may terminate his employment with Company for Good Reason by
serving notice of resignation to the company with a description of the
circumstances giving rise to the Good Reason. "Good Reason" means one or both of
the following events that occurs without Murthy's express written consent during
the Term; (i) the relocation of the principal place of Murthy's employment to a
<PAGE>
location that is more than thirty (30) miles from Cupertino, California; or (ii)
a significant decrease in Murthy's responsibilities and duties. If Murthy's
employment is terminated per this paragraph 5.5, the Company's liability under
this Agreement shall be limited to the Annual Salary payable for the remainder
of the Term and any Additional Compensation accrued and owing on the date of
such termination.
6. Insurance. The Company may, from time to time, apply for and
take out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which is may change from time to time), policies for
health, accident, disability or other insurance upon Murthy in any amount or
amounts that it may deem necessary or appropriate to protect its interest.
Murthy agrees to aid the Company in procuring such insurance by submitting to
reasonable medical examinations and by filling out, executing and delivering
such applications and other instruments in writing as may reasonably be required
by an insurance company or companies to which any application or applications
for insurance may be made by or for the Company.
7. Continuing Obligations. Notwithstanding the expiration or
early termination of the Term of this Agreement pursuant to Article 2 or Article
5 hereof, respectively, any provision of this Agreement calling for performance
by any party after such expiration or termination, including, without
limitation, the obligations of Murthy set forth in Article 4 hereof, shall
continue in full force and effect.
8. Other Provisions.
8.1 Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mail, as follows:
(i) if to the Company, to:
Wolfe & Associates, Inc.
5325 Wyoming Boulevard, N.E., Suite 200
Albuquerque, NM 87109
Fax No. (505) 821-1741
<PAGE>
Copy to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
Attn: Legal Department
Fax No. (801) 483-4283
(ii) if to Murthy to:
Srinath Murthy
21070 Homestead Rd., Ste 210
Cupertino, CA 95014
Fax No. (408) 253-3535
Copy to:
Scott M. Stanton, Esq.
Gary Cary Ware Freidenrich LLP
4365 Executive Drive, Suite 1600
San Diego, CA 92121
Fax No. (619) 677-1477
Any party may change its address for notice hereunder by
written notice to the parties hereto.
8.2 Entire Agreement. This Agreement contains the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto; provided, however, that nothing herein shall in any way limit the
obligation, rights or liabilities of the parties under any written stock option
agreement separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
8.4 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Utah without regard to
conflicts of laws principles.
8.5 Arbitration. Each party agrees that with respect to
<PAGE>
any dispute related to or arising out of this Agreement or Murthy's employment
with the Company that the parties shall submit to binding arbitration in
accordance with the Arbitration Rules for Employment Contracts 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 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.
8.6 Assignment. This Agreement, and any rights and
obligations hereunder, may not be assigned by either party hereto without the
prior written consent of the other party. Notwithstanding the foregoing, this
Agreement may be assigned by the Company to its parent company (SOS Staffing
Services, Inc., a Utah corporation ("SOS")) or any subsidiary of SOS without
Murthy's consent. An assignment to SOS or any affiliate of SOS shall not
diminish or interfere with any right, including vesting, of any employee benefit
plan in which Murthy participates.
8.7 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.8 Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Wolfe & Associates, Inc.
By: \s\ Curtis L. Wolfe \s\ Srinath Murthy
------------------- ------------------
Curtis L. Wolfe Srinath Murthy
President
<PAGE>
EXHIBIT H
Exhibit H consists of Seller's Balance Sheet as of the April 30, 1998
