ASSET PURCHASE AGREEMENT
between
INTELIANT CORPORATION,
Seller,
SOS STAFFING SERVICES, INC.,
Seller's parent,
and
HERRICK DOUGLASS, INC.,
Buyer.
Dated as of December 29, 2000.
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TABLE OF EXHIBITS AND SCHEDULES
Exhibits
A Bill of Sale
B Assignment and Assumption Agreement
C Promissory Note
D Loan and Stock Pledge Agreement
E Security Agreement
F Escrow Agreement
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT ("Agreement") is entered into as of
December 29, 2000, by and between INTELIANT CORPORATION, a Delaware corporation
("Seller"), SOS STAFFING SERVICES, INC., a Utah corporation and sole shareholder
of Seller ("Parent"), and HERRICK DOUGLASS, INC., a Washington corporation
("Buyer").
RECITALS
A. Seller, through its Consulting Division, engages in an information
technology consulting business conducted through offices located in Kirkland,
Washington; Tustin, California; Venice, California; San Diego, California and
Dallas, Texas, which provides project-based consulting and systems integration
services in the areas of (i) information systems or network communications
operations, processes or strategy (ii) the selection, design, deployment or
testing of information systems or network communications infrastructure, (iii)
software application selection, development, testing or implementation, and (iv)
extended technical support for information systems infrastructure, network
communications infrastructure or software applications (the "Business").
B. Buyer is in the software integration consulting business.
C. Buyer wishes to buy from Seller, and Seller wishes to sell to Buyer,
certain assets of the Business, and to enter into certain other agreements with
respect to the Business, under the terms and conditions set forth in this
Agreement.
AGREEMENT
In consideration of the representations, warranties and covenants in
this Agreement, the parties agree as follows:
1. Purchase and Sale of Assets.
1.1 Purchase and Sale. On the Closing Date, Seller will sell, transfer,
assign, convey and deliver to Buyer, and Buyer will purchase from Seller, all of
Seller's assets, properties and rights (except the Excluded Assets, as defined
below) constituting or primarily used or held primarily for use in the Business,
tangible or intangible, and wherever located (the "Assets"), including without
limitation, the following:
1.1.1 Tangible personal property, including but not limited to
office equipment, business plans, computer equipment, vehicles, inventory,
furniture, fixtures, and spare and replacement parts (the "Personal Property");
1.1.2 All oral and written contracts, agreements, commitments, real
and personal property leases, licenses, purchase orders, sales orders, insurance
policies and documents, (the "Contracts"), including all Contracts (a) for work
that is currently being performed for customers of the Business (the
"Customers"), (b) for Customer work that has not yet begun or is on hold, or (c)
currently being negotiated which the Seller has a reasonable expectation of
entering into with existing or potential Customers (the "Pipeline");
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1.1.3 Governmental licenses, permits, approvals, authorizations,
consents, franchises, tariffs, orders and other registrations required for the
conduct of the Business, to the extent that they are assignable;
1.1.4 Software, patents, copyrights, trademarks, service marks and
trade names, and all derivatives of thereof (except as provided in Section 1.3);
all registrations and applications pending or allowed which relate to the
foregoing; and all other proprietary rights and intangible property, such as
trade secrets, technology, operating systems, customer and supplier lists,
know-how, formulae, slogans, processes and operating rights (the "Intellectual
Property");
1.1.5 Prepaid expenses ("Prepaids"), including but not limited to
prepaid rentals, insurance, taxes, unbilled charges and deposits, to the extent
they are assignable;
1.1.6 All books and records relating exclusively to the Business,
including those relating to any Employee (as defined in Section 6.11.1) employed
by Buyer after the Closing (each a "Transferred Employee"); and
1.1.7 the Seller's goodwill, customer relations and other general
intangible rights (the "Goodwill").
1.2 Excluded Assets. The Assets shall not include (a) Seller's cash,
(b) accounts receivables, (c) Work-In-Progress as of the Closing Date, (d) all
rights to refunds of taxes paid by Seller, or (e) any assets of the Seller that
are not used in the Business (collectively, the "Excluded Assets") as set forth
on Schedule 1.2.
1.2.1 "Work-In-Progress" means work performed by an employee of
Seller under a contract or agreement for services to a third-party which, as of
the Closing Date, has not yet been billed. Work-In Progress shall not include
any amounts which have been prepaid to Seller under a contract or agreement for
services to a third-party for which no work has been performed by an employee of
Seller as of the Closing Date.
1.2.2 Software Licenses. For any third-party software licenses that
are included in the Assets, the Seller and Buyer will divide the number of
authorized seats pro rata based on the number of Transferred Employees who use
that software versus the number of non-Transferred Employees who use that
software, as set forth on Schedule 1.2. Any such seats used by non-Transferred
Employees shall be included in the Excluded Assets. The parties will work
cooperatively after the Closing to split the master contract for such software
licenses into two Master Contracts, one for each of the Transferred Employee's
seats and one for the non-Transferred Employees seats.
1.3 Transitional License to Use Name of "Inteliant". Seller hereby
grants Buyer a license to use the name "Inteliant" for a period of 180 days
after the Closing. Buyer's right to use the name shall terminate at the end of
that period.
1.4 Conveyance of Assets. Subject to the terms and conditions of this
Agreement, at the Closing Seller will transfer, convey, and assign the Assets to
Buyer free and clear of all liabilities, obligations, liens and encumbrances
("Liens"), except for the Permitted Liens (as defined in Section 6.8), pursuant
to a Bill of Sale in substantially the form attached as Exhibit A (the "Bill of
Sale") and an Assignment and Assumption Agreement in substantially the form
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attached as Exhibit B (the "Assignment Agreement"), and such other general
warranty deeds, bills of sale, endorsements, assignments, vehicle titles and
other instruments of transfer and conveyance, in form and substance sufficient
to vest in Buyer all right, title and interest in and to the Assets.
1.5 Further Assurances. Upon Buyer's request and without further
consideration, Seller will take such further commercially reasonable actions and
will execute such further documents, on and after the Closing Date, as are
reasonably necessary to (a) place Buyer in possession and operating control of
the Assets, (b) vest in Buyer good, valid and marketable title to the Assets,
free and clear of any liens, claims or encumbrances of any kind except for the
Permitted Liens, (c) complete the transactions described this Agreement, (d)
comply with all laws and regulations applicable to such transactions, and (e)
transfer to Buyer any governmental permits, consents or approvals currently held
by Seller that relate to the Business and that are transferable.
1.6 Consents. Seller will use all good faith efforts to secure
third-party consents if required for assignment of the Contracts. However, if
any consents are not obtained before Closing and Buyer elects to waive receipt
of such consents as a Closing condition, then Buyer and Seller will cooperate to
arrange for Buyer to receive the benefit of the Contracts to which such consents
relate, after Closing. Seller will pay Buyer any amounts (other than amounts
that are Excluded Assets) received under any such Contract.
2. No Assumption of Liabilities.
Buyer will not assume or be liable for any of Seller's or Parent's
liabilities, obligations, or debts, known or unknown, contingent or absolute,
accrued or otherwise, including, but not limited to, any (a) taxes, (b) unpaid
salaries, employee benefits or severance pay, or (c) fines or penalties payable
to any governmental authority, except for any Permitted Liens and as expressly
assumed by Buyer in the Assignment Agreement.
3. Purchase Price.
3.1 Purchase Price. Buyer will pay to Seller the following amounts as
the purchase price for the Assets (the "Purchase Price"):
3.1.1 At Closing. The sum of $1,000,000 to be delivered to the
Seller at the Closing (the "Cash Purchase Price"); and
3.1.2 Earn Out.
(a) Amount. Subject to Section 3.2, for up to four years
following Closing Date (the "Earn Out Period"), Buyer will pay to Seller an
aggregate amount not to exceed $3,500,000 (the "Earn Out"). The Earn Out will be
paid at a rate (the "Earn Out Rate") of 2.94% of Gross Margin (as defined below)
for each year during the Earn Out Period so long as the resulting payment (the
"Earn Out Payment") would be equal to or greater than $500,000 per year. If the
2.94% Earn Out Rate would cause an Earn Out Payment of less than $500,000 for
any year during the Earn Out Period, then the Earn Out Rate for that year will
increase to the percentage that would cause an Earn Out Payment of $500,000 for
that year (the "Adjusted Earn Out Rate"), except that in no event will the Earn
Out Rate exceed 6% of Gross Margin even if the resulting Earn Out Payment for
that year would be less than $500,000.
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(b) Payment. The first Earn Out Payment will be determined
from Buyer's December 31, 2001 financial statements, and will be payable not
later than March 31, 2002. Subsequent Earn Out Payments will be determined and
paid on an annual basis, based on such year's financial statements, by not later
than the March 31 following the end of each fiscal year during the Earn Out
Period. The last Earn Out Payment will be paid at the earlier of (i) March 31 of
the year in which the total Earn Out Payments equal the Earn Out, or (ii) March
31, 2005, based on December 31, 2004 financial statements, regardless of whether
the total Earn Out Payments earned as of December 31, 2004 equal the maximum
Earn Out.
(c) Determination of Earn Out. The Earn Out will be computed
based on Buyer's internally prepared financial statements for the Earn Out
Period, which will be prepared in accordance with Buyer's reasonable and
consistently applied accounting practices employed during the one year preceding
the Closing Date. "Gross Margin" means (i) the aggregate of Buyer's consolidated
operations including the Business revenues and credits invoiced and otherwise
applied to the accounts of Buyer's customers, including additions and reductions
for allowed prompt payment discounts and invoice adjustments applied to invoices
generated during the Earn Out Period, less (ii) the cost of sales applicable to
those revenues. The Gross Margin shall be computed in accordance with United
States generally accepted accounting principles ("GAAP").
(d) Earn Out Certificate. Concurrently with each Earn Out
Payment Buyer will provide Seller with a certificate executed by an officer of
Buyer setting forth an itemized calculation of the Earn Out (the "Earn Out
Certificate"). Buyer will maintain business and financial records that contain
information sufficient to verify the material completeness and material accuracy
of the information contained in the Earn Out Certificate. At Seller's expense,
Seller will have the right to examine such records, or to have its agent or
accountants examine such records, following Seller's receipt of any Earn Out
Certificate, for the sole purpose of verifying the material completeness and
material accuracy of those certificates. If any such examination determines that
the Earn Out Payment was understated, then (i) Buyer will promptly pay Seller
the amount of any underpayment and Seller will promptly pay Buyer the amount of
any overpayment, and (ii) Buyer will pay Seller's reasonable costs associated
with such examination if the Earn Out Payment was understated by more than 10%.
(e) Continuation of Sales. Buyer intends to use reasonable
good faith efforts to maximize sales to the Customers consistent with a level of
profitability and other business criteria acceptable to Buyer taking into
account the Earn Out. Nothing in this Section 3.1.2, however, shall obligate
Buyer to operate or continue to operate the Business at any given level, or to
use or sell the Assets, or make sales to any Customer for all or part of the
Earn Out Period or at any other time.
3.2 Pipeline Adjustment. If at March 31, 2001, the aggregate revenue
realized from the Business is less than $7.36 million then (a) Buyer will
provide Seller with a certificate documenting the dollar amount of such
shortfall (the "Adjustment Certificate") by April 31, 2001, and (b) 50% of the
Gross Margin of the aggregate revenue shortfall will be deducted from the total
Earn Out and the Earn Out Payment due March 31, 2002. Buyer will not be entitled
to any indemnification for breach of Section 6.8.3 for the other 50% of the
shortfall.
3.3 Dispute Resolution.If the parties are unable to agree on the amount
or computation contained in any Earn Out Certificate or Adjustment Certificate
within five days after the delivery of such certificate, then the parties will
select a mutually acceptable independent auditor to audit such certificate.
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However, if the parties are unable to agree on a mutually acceptable independent
auditor within 10 days after the delivery of the disputed certificate, the each
party shall select one independent auditor who shall then agree, within 15 days
after the delivery of the disputed certificate, upon a third independent auditor
to conduct the audit. In each case the determination of the independent auditor
who conducts the audit shall be binding on the parties.
3.4 Allocation of Purchase Price. The parties agree to allocate the
fair market value of the Assets in accordance with Schedule 3.4 for all federal,
state and local tax purposes, including IRS Form 8594. Buyer and Seller agree to
attach a Form 8594 in the agreed form to their respective federal income tax
returns.
3.5 Accounts Receivable. Buyer will assist Seller in collecting
accounts receivable for work performed for Customers before the Closing Date.
Any amounts that Buyer receives from Customers will be posted to the invoice
indicated on the payment. Buyer will remit to Seller all payments received by
Buyer that are designated for application against pre-Closing invoices. Seller
will remit to Buyer all payments received by Seller that are designated for
application against post-Closing invoices, except for invoices representing
Work-In Progress. If a payment does not designate an invoice number, then the
Buyer and Seller will split the payment pro rata based on the amounts owed to
Buyer and Seller respectively. All collected Accounts Receivable owed by one
party to the other party will be paid over the course of each month and mailed
or wired within three days of collection.
4. Closing.
Subject to satisfaction of the closing conditions set forth in Section
9, the closing of the transactions contemplated in this Agreement (the
"Closing") shall take place at 10:00 a.m. on December 29, 2000 at the offices of
Davis, Wright, Tremaine, LLP, 2600 Century Square, 1501 Fourth Avenue, Seattle,
Washington, or at such other time and place as the parties may agree upon (the
"Closing Date").
5. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller and Parent that the following
are true and correct as of the date of this Agreement, and will be true and
correct as of the Closing Date:
5.1 Authorization. Buyer is a corporation duly organized and validly
existing under the laws of the State of Washington. Buyer has taken all
corporate action necessary to authorize execution and delivery of, and
performance of its obligations under, this Agreement. Buyer has full corporate
power and authority to enter into, and to carry out its obligations under, this
Agreement. Buyer has duly executed and delivered this Agreement, and this
Agreement is a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as such enforceability may be limited
by applicable laws relating to bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws relating
to or affecting creditor's rights generally or by equitable principles of
general application.
5.2 Consents. Except as set forth on Schedule 5.2, no consent,
authorization or approval by any third person or public authority is required in
connection with the execution, delivery or performance of this Agreement or
other transaction documents by Buyer, and consummation of the transactions
contemplated hereby and thereby.
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5.3 No Violations. Except for any required consents set forth on
Schedule 5.2, the execution and delivery of this Agreement by Buyer, and the
performance of its obligations hereunder, do not and will not conflict with,
result in the breach of, or constitute a default under: (a) the Articles of
Incorporation or Bylaws of Buyer; (b) any material note, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which Buyer is
a party or by which Buyer is bound; or (c) any statute, award, writ, order,
injunction, judgment, decree, rule or regulation of any court or regulatory
authority or governmental body applicable to Buyer.
5.4 No Litigation. There is no action, dispute, claim, proceeding,
suit, appeal or investigation pending or, to Buyer's knowledge, threatened
against Buyer that involves the Seller, the Business or the Assets, or that
questions the validity of this Agreement. To Buyer's knowledge, there are no
facts that could reasonably be expected to result in a judgment or other
determination that would cause this Agreement to be prohibited or enjoined.
5.5 Brokers. Buyer has not entered into or authorized any arrangements
with any broker, finder, or investment banker that will result in payment of a
fee in connection with this transaction.
5.6 Disclosure. Neither this Agreement nor any Schedule or certificate
furnished to Seller by or on behalf of Buyer in connection with this Agreement
contains any untrue statement of a material fact. Buyer has not omitted to state
a material fact known by Buyer to be necessary in order to make Buyer's
statements contained in this Agreement and any such Schedule or certificate not
misleading.
6. Representations and Warranties of Seller and Parent.
Seller and Parent represent and warrant, jointly and severally, to
Buyer that the following are true and correct as of the date of this Agreement,
and will be true and correct as of the Closing Date:
6.1 Authorization. Seller is a corporation duly organized and validly
existing under the laws of the State of Delaware. Seller is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which it owns property or leases property or does business, except in those
jurisdictions where the failure to be so qualified would not have a material
adverse effect on the Seller. Seller has taken all corporate action necessary to
authorize, and, to the extent required by applicable law, Seller's shareholders
have approved, Seller's execution and delivery of, and the performance of its
obligations under, this Agreement. Seller has full corporate power and authority
to enter into, and to carry out its obligations under this Agreement. Seller has
duly executed and delivered this Agreement, and this Agreement is a valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms, except as such enforceability may be limited by applicable laws relating
to bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to or affecting
creditor's rights generally or by equitable principles of general application.
Except as set forth in Schedule 6.1, (a) Parent owns 100% of the outstanding
shares of capital stock of Seller, free and clear of any pledges, security
interests, liens, encumbrances, or claims, and (b) there is no subscription,
option, warrant, or other right or agreement relating to the issuance, sale,
delivery, or transfer of Seller's capital stock.
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6.2 Consents. Except as set forth on Schedule 6.2, no consent,
authorization or approval by any third person or public authority is required to
authorize, or is required in connection with, the execution, delivery or
performance of this Agreement consents to include transaction documents and
consummation of transaction by Seller or Parent.
6.3 No Violations. Except for any required consents set forth on
Schedule 6.2, the execution and delivery of this Agreement by Seller and Parent,
and the performance of their obligations hereunder, do not and will not conflict
with, result in the breach of, or constitute a default under (a) Seller's
Certificate of Incorporation or Bylaws; (b) any note, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which Seller or Parent
is a party or by which Seller is bound; or (c) any statute, order, injunction,
judgment, decree, rule or regulation of any court or regulatory authority or
governmental body applicable to Seller.
6.4 Financial Statements. Seller has furnished to Buyer complete and
accurate copies of the internally-prepared financial statements of the Business
(i) as contained in the Confidential Memorandum, dated September 15, 2000,
provided to Buyer by Seller, and (ii) for the 11 months ended November 25, 2000
(collectively, the "Financial Statements"). The Financial Statements (a) have
been prepared in accordance with Seller's reasonable and consistently applied
accounting principles, and (b) fairly present the financial condition of the
Business as of the dates specified and the results of operations for the periods
specified.
6.5 Material Adverse Changes. There has been no material adverse change
to the Assets or the Business since the date of the most recent Financial
Statements.
6.6 Taxes. Seller has timely paid all federal, state, local or foreign
taxes, assessments, fees, imposts, levies and other charges that might affect
the Assets, including without limitation all income, sales, use, business and
occupation, withholding, payroll, employment, excise or property taxes or
assessments, and interest and penalties thereon (collectively, "Taxes") that
have become due and payable. Seller has timely filed all required returns and
reports with respect to such Taxes. Seller has not waived any statute of
limitations relating to Taxes. Seller is not subject to any dispute, audit or
proceeding regarding Taxes that might affect the Assets.
6.7 Absence of Indebtedness and Other Obligations. Except as set forth
in the most recent of the Financial Statements, Seller has no (a) Indebtedness
(as defined below) of a material nature, or (b) other obligations of a material
nature, whether accrued, absolute, contingent or otherwise (including without
limitation liabilities as a surety or guarantor) and whether due or to become
due, including without limitation any liabilities for Taxes, which relate to or
impact the Assets or the Business. "Indebtedness" means all indebtedness of
Seller, related to or impacting the Business or the Assets, including (i) all
indebtedness, for borrowed money or for the deferred purchase price of property
or services, including without limitation any indebtedness of Seller with
respect to any shareholder of Seller or any affiliate of Seller and any
indebtedness incurred by Seller, and (ii) any other indebtedness of Seller which
is evidenced by a note, bond, debenture or similar instrument.
6.8 Assets; Title. Seller has good and marketable title to all of the
Assets, free and clear of all liabilities, claims, liens, sales agreements
(conditional or otherwise), leases, or other encumbrances of any kind, except
for those listed on Schedule 6.8 (the "Permitted Liens").
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6.8.1 Personal and Real Property. Schedule 6.8.1 contains a
complete and accurate description of all Personal Property and real property
owned or leased by the Business, except for any Excluded Assets.
(a) Personal Property. Except as set forth on Schedule 6.8.1,
(i) Seller is not a party to any lease of Personal Property, either as lessee or
lessor, and (ii) all of the Personal Property is in good operating condition,
ordinary wear and tear excepted, and free from material defects.
(b) Real Property. Except as set forth on Schedule 6.8.1,
Seller does not, with respect to the Business, own any real property and is not
a party to any lease of real property, either as lessee or lessor. To Seller's
and Parent's knowledge, with respect to the Business, neither the operations of
Seller or any lessee on any such real property, nor any improvements on any real
property, violate any applicable building or zoning code or regulation of any
governmental authority having jurisdiction.
6.8.2 Inventory. The Business has no inventory.
6.8.3 Contracts. Schedule 6.8.3 contains a true and correct list of
the Contracts, including a separate list of the Contracts included in the
Pipeline and their dollar value. Except as set forth in Schedule 6.8.3:
(a) the Contracts are valid, binding and enforceable against
the Seller and against the other parties to the Contracts, in accordance with
their terms, except as such enforceability may be limited by applicable laws
relating to bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to or affecting
creditor's rights generally or by equitable principles of general application;
(b) the Contracts are assignable and no other person is
required to consent to the assignment of any Contract to Buyer;
(c) the Seller has performed, or is now performing, the
obligations of, and is not in material default (and would not by the lapse of
time or the giving of notice be in material default) under, any Contracts;
(d) no party has raised any claim, dispute or controversy or
withheld payments from the Seller with respect to any Contract, which claim,
dispute, controversy or withholding of payment could, if such party were to
prevail, have a material adverse effect, either individually or in the
aggregate, on the Contract;
(e) no other party to a Contract is in material default or
has breached any material term or provision of such Contract that has not
previously been cured;
(f) Seller has not received notice or warning of alleged
nonperformance, delay in delivery or other noncompliance with respect to any of
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the Contracts, nor any notice that the other parties may totally or partially
terminate any of the Contracts; and
(g) Seller has paid, prior to Closing, all amounts due under
the Contracts and under any outstanding agreements with its Customers to provide
credits, price rebates or reductions, and there are no such agreements
outstanding or expected that will arise after the Closing.
6.8.4 Intellectual Property Rights. Seller owns or has the right
to use the Intellectual Property, and to transfer the Intellectual Property to
Buyer, free and clear of all liabilities, claims, liens, licenses, or other
encumbrances of any kind, except as set forth on Schedule 6.8.4. To Seller's
knowledge, the use by Seller of the Intellectual Property has not conflicted
with or infringed, and no one has asserted that such use conflicts with or
infringes, upon any proprietary rights owned, possessed or used by any third
party. There are no claims, disputes, actions, proceedings, suits or appeals
pending with respect to any of the Intellectual Property, and, to Seller's
knowledge, none has been threatened. Except as set forth on Schedule 6.8.4,
Seller has not licensed to others, or agreed to license, any of the Intellectual
Property, or entered into any contracts with respect thereto.
6.8.5 Customers. Schedule 6.8.5 sets forth a true and correct list
of the Customers. Except as set forth on Schedule 6.8.5, (a) there has not been
any material adverse change in the business relationship of Seller with any
Customer, (b) neither Seller nor Parent has any reason to believe that any
Customer intends to cancel any existing Contract or materially reduce the amount
of business it conducts with the Business, and (c) to Seller's knowledge, Seller
enjoys a good relationship with its Customers and there have been no significant
difficulties experienced that would indicate that this good relationship will
not continue with Buyer after Closing Date.
6.9 Compliance. Schedule 6.9 sets forth all governmental permits,
registrations, authorizations, and other approvals which are required to be
obtained in order to operate the Business. Except as set forth on Schedule 6.9,
Seller has all such permits, registrations, authorizations, and other approvals.
Seller maintains and operates, and to the knowledge of Seller, has maintained
and operated, the Assets and the Business in material compliance with all
applicable laws, ordinances, codes and regulations. Except as set forth on
Schedule 6.9, Seller has not received any notice of violation relating to the
Assets or the operation of the Business of (a) any applicable governmental
permit, zoning regulation or ordinance, (b) Environmental Law (as defined in
Section 6.13), Federal Occupational, Safety and Health Act, or comparable state
laws, regulations and rulings, or (c) other law, order, regulation or
requirement. To the knowledge of Seller, there is no such violation.
6.10 Certain Interests. No current or former 10% shareholder of Seller
and no entity owned or controlled by any of them (a) has any material interest
in the Assets or the Business, (b) is indebted to Seller, or (c) to Seller's
knowledge has any financial interest, direct or indirect, in any Customer of, or
other outside business which has any transactions with, the Business. The
Business is not indebted to Parent, except for amounts due under normal
compensation arrangements or for reimbursement of ordinary business expenses.
6.11 Employment Matters.
6.11.1 Employees. Schedule 6.11.1 contains an accurate and
complete list of all names, positions and current salaries of the Transferred
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Employees, and the name and addresses of any agency that currently supplies the
Seller with temporary workers. Except as set forth on Schedule 6.11.1:
(a) Seller is not a party to or bound by any employment,
commission, or consulting agreement and each of Seller's employees is an
"at-will" employee.
(b) For all Transferred Employees, Seller has paid all
salaries, 401(k) matching funds, medical and other employment benefits or
severance payments due to be paid as of the Closing Date or arising in
connection with periods prior to the Closing Date.
(c) Seller has provided Buyer with copies of all relevant
information regarding current (i) vacation, holiday or sick leave policies or
arrangements with Transferred Employees and (ii) compensation arrangements with
Transferred Employees and any consultants. Seller has also provided Buyer true
and complete copies of all employment manuals and policies currently in force
which are used in the Business or apply to any Transferred Employee.
(d) None of the Transferred Employees are working under an
existing U.S. visa or pending visa application.
(e) Seller has operated the Business at all times in
material compliance with laws and regulations related to employment practices,
terms and conditions of employment, and wages and hours.
6.11.2 Employee Benefits. With respect to the Employees or any
Transferred Employees, there are not, and will not be, any claims, judgments,
damages, penalties, taxes, assessments or similar items attributable to the
Business by virtue of: (a) the violation of any provision of any compensation,
retirement, life, health, medical or other welfare benefit plan, (b) liabilities
under Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), Section 301 of ERISA, or Sections 412 or 4971 of the Internal
Revenue Code, or (c) any failure of Seller to satisfy the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Internal
Revenue Code ("COBRA"). Other than the coverage the Seller is required to
provide terminated Employees under COBRA, Seller has no arrangements with any
Employees that could result in liability or potential liability to Buyer for
life, health, medical or other welfare benefits following termination of
employment.
6.12 Labor Matters. The Seller is not a party to or bound by any
collective bargaining agreement with respect to the Business and the Business
has never been subject to any union organizing effort, unfair labor practice
complaint, labor strike, employee slowdown or work stoppage, representation
petition brought before the National Labor Relations Board, or grievance or
arbitration proceeding arising out of or under any collective bargaining
agreements. Neither Seller nor Parent has any knowledge of the existence or
threat of, any union organizing effort with respect to the Business.
6.13 Environmental Matters. To Seller's and Parent's knowledge, (a) no
Hazardous Substances have been stored or disposed in the conduct of the Business
since its inception, except for lawful storage or disposal undertaken as part of
the ordinary course of the Business, in full compliance with all pertinent
handling, storage, labeling, use, disposal and other applicable laws,
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regulations, and ordinances, and (b) there is no underground storage tank on the
real property where the Business is situated and no underground storage tank has
ever been located on the real property. "Hazardous Substance" means any
hazardous, toxic, radioactive or infectious substance, material or waste as
defined or listed under any Environmental Law. "Environmental Law" means any
federal, state or local statute, regulation or ordinance pertaining to the
protection of human health or the environment.
6.14 Insurance. All premiums owing on all insurance policies which
insure the Business and the Assets are paid in full and no notice of
cancellation or termination has been received with respect to any such policies.
Such policies (a) are and will be in full force and effect, (b) are and will be
sufficient for compliance with all material requirements of law and of material
agreements to which Seller is a party, and (c) provide and will provide
insurance coverage for the Assets and operations of the Business comparable to
that of companies similarly situated until Closing. Seller has not been refused
any insurance with respect to the Assets or the Business nor had such coverage
limited by any insurance carrier.
6.15 Litigation. Except as set forth on Schedule 6.15 there is no
action, dispute, claim, proceeding, suit, appeal or investigation pending or, to
Seller's knowledge, threatened against Seller that involves the Assets or the
Business or that questions the validity of this Agreement. To Seller's and
Parent's knowledge, there are no facts that could reasonably be expected to
result in a judgment or other determination that would have a material adverse
effect on Seller, the Assets or the Business, or that would cause this Agreement
to be prohibited or enjoined.
6.16 Letters of Credit and Powers of Attorney. Seller does not have
outstanding letters of credit or powers of attorney which relate to or could in
any way affect the value or disposition of the Assets or the Business.
6.17 Operating Loan. Parent has the financial ability and wherewithal
to fund the Operating Loan upon the following schedule: $1 million at Closing,
$1.5 million by January 25, 2001, and $1 million by February 10, 2001.
6.18 Y2K Compliance. Any computer or computer-related hardware or
software that is part of the Assets (the "Computer System") is millennium
compliant. "Millennium Compliant" means that the Computer System (a) allows for
the input of all dates in a four-digit format, (b) provides date output in a
four-digit format, (c) accommodates same century and multi-century date related
formulas and calculations, and (d) responds to two-digit date input in a way
that resolves any ambiguity as to century.
6.19 Brokers. Neither Seller nor Parent has entered into or authorized
any arrangements with any broker, finder, or investment banker that will result
in payment of a fee in connection with this transaction except for George K.
Baum & Company which Seller and Parent acknowledge as solely their
responsibility to pay.
6.20 Reliance. Seller and Parent recognize and agree that Buyer is
relying upon the representations and warranties made by Seller and Parent in
this Agreement, notwithstanding any investigation by Buyer.
6.21 Undisclosed Liabilities. There are no liabilities or obligations
of or relating to the Business (whether absolute, accrued, contingent or other,
and whether due or to become due) not otherwise disclosed on the attached
Schedules, or accrued, reserved against, or otherwise disclosed in the most
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recent Financial Statements, except liabilities in an amount less than $1,000
incurred within 60 days prior to the date of the most recent Financial
Statements, for which Seller was not invoiced by such date.
6.22 Disclosure. No representation or warranty made by Seller or
Parent in this Agreement or in any certificate furnished or to be furnished by
Seller or Parent to Buyer in connection with the transaction contemplated by
this Agreement, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained herein or
therein not misleading.
7. Pre-Closing Agreements.
7.1 Transition and Conduct of the Parties. Before the Closing, Seller
will cooperate with Buyer in the transition of its customer base and make its
best efforts to assist the smooth transition of Contracts and Customer
relationships to the Buyer. Each of the parties will fully cooperate with the
other parties and their counsel and accountants in connection with any steps
required to be taken as part of the obligations of the parties under this
Agreement. Each party will use its best efforts to close the transactions
described by this Agreement, and will take no action inconsistent with its
obligations under this Agreement or that could hinder or delay Closing, except
that nothing in this Section 7.1 will limit the rights of the parties under
Sections 9 or 11. None of the parties will take any actions prior to the Closing
that would cause their respective representations and warranties made in this
Agreement to become untrue, without the other parties' prior written consent.
7.2 Access to Properties, Books and Records.
7.2.1 Buyer. To permit Buyer to complete its due diligence
investigation, Seller will permit Buyer and its agents, upon prior notice,
during normal business hours, to have reasonable access to the premises in which
Seller conducts the Business and to all of its books, records, and personnel
files, and to all of the relevant books and records of the Business. Seller will
furnish to Buyer such financial data, operating data, and other information as
Buyer shall reasonably request. Seller will provide Buyer access to the
Customers, Suppliers and Employees of the Business upon request.
7.2.2 Seller. To permit Seller to complete its due diligence
investigation, Buyer will provide Seller and its agents with reasonable access
to the premises in which Buyer conducts its business, and will furnish to Seller
such financial data, operating data, and other information as Seller shall
reasonably request.
7.3 Financial Examination. Seller shall consent to Buyer or its
independent public accounting firm contacting Seller's independent accountants
to discuss, and examine the work papers for, the Financial Statements.
7.4 Solicitation of Seller's Employees. Seller consents to Buyer's
solicitation before the Closing of the Employees for employment with Buyer after
the Closing. However, any such employment will be in Buyer's sole and absolute
discretion and Buyer will have no obligation to employ or offer to employ any of
the Employees.
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7.5 Operation of the Business. From the date of this Agreement
through Closing, Seller and Parent agree to operate the Assets and the Business
as follows:
7.5.1 Business Operation and Preservation. Seller will operate
the Assets and the Business in a reasonable and prudent manner, in accordance
with reasonable past practices. Furthermore, Seller will use commercially
reasonable efforts to: (a) preserve its existing business and relationships with
its Employees, Customers, Suppliers and others, (b) preserve the Assets, and (c)
conduct its Business in compliance with all applicable laws and regulations.
7.5.2 Assets. Except as permitted under Section 7.5.4, Seller
will not and will not agree to (a) transfer, lease, or dispose of any Asset,
except for goods or services sold or used in the ordinary course of the
Business, (b) grant any powers of attorney pertaining in any way to the Assets
or the Business, or (c) acquire any assets which would be material to the
Business, without Buyer's prior written consent.
7.5.3 Accounts Receivables and Payables. Without the prior
written consent of Buyer, (a) Seller will not change or grant exceptions to its
billing or collection policies applicable to the accounts receivable of the
Business, and (b) Seller shall not delay payment on any accounts payable,
benefit payment or other liability or obligation until after the Closing Date if
Seller's normal practice and procedures would have processed such payment,
obligation or liability before such date.
7.5.4 Contracts and Business Relations. Seller will not, without
the prior written consent of the Buyer: (a) enter into any transaction, contract
or commitment except in the ordinary course of the Business, nor incur any
financial obligation in excess of $25,000 in any single transaction or $50,000
in the aggregate; (b) enter into any material contract or incur any long-term
debt, except as provided in clause (a) above; or (c) disrupt, cancel or
terminate any Customer or other revenue-generating relationship.
7.5.5 Employee Salaries or Benefits. Except as set forth on
Schedule 7.5.5, (a) Seller will not, and will not agree to, increase salaries or
benefits of the Employees, without the prior written consent of Buyer, and (b)
Seller will pay to the Employees, immediately prior to or on the Closing Date,
the amount of any benefits, including any 401(k) matching funds, medical and
dental benefits and other benefits, provided that such Employee is entitled to
such benefits under the Seller's benefit plans.
7.5.6 Litigation; Material Changes. Seller will advise Buyer in
writing of (a) any litigation, governmental investigation, or administrative
proceeding, or threat thereof, that challenges or otherwise materially affects
the Assets, the Business or transactions described in this Agreement, or (b) any
material adverse change or any event, occurrence or circumstance that is likely
to cause a material adverse change in the Assets or the Business, except that
Seller has advised the Buyer prior to Closing that Tom Prosia and Jeff
Springborn will not be included in the Transferred Employees.
7.5.7 Books and Records. Seller will maintain the books and
records of the Business in accordance with past practices, and will not change
its accounting methods, policies or practices, without the prior written consent
of Buyer.
7.6 Exclusivity. From and after the date of this Agreement, and until
Closing, neither Seller nor Parent will directly or indirectly through any
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subsidiary, officer, director, agent, representative or otherwise, solicit any
proposals or offers from any persons relating to any sale, recapitalization,
merger, liquidation, acquisition or similar transaction (an "Acquisition
Transaction") with regard to the Business. Notwithstanding the foregoing, Seller
and Parent may furnish information, or cause information to be furnished to, and
may participate in negotiations and discussions and enter into agreements
relating to an Acquisition Transaction with, any third party who makes an
unsolicited proposal or offer for the Business, if the board of directors of
Parent determines in good faith that the failure to consider such proposal or
offer could reasonably be deemed to cause its directors to breach their
fiduciary duties under applicable law. If Parent's board of directors, on or
before January 31, 2001, consummates an Acquisition Transaction with any party
other than Buyer, then Parent and Seller shall, jointly and severally, be
obligated to pay Buyer a break-up fee of $300,000 in immediately available funds
at the closing of the Acquisition Transaction. However, no break-up fee will be
due if the Closing does not occur by midnight on December 31, 2000, as a result
of Buyer's willful refusal to close after all conditions to Closing set forth in
Section 9.1 have been satisfied.
8. Further Agreements.
8.1 Employment Agreements. On or before Closing, Buyer may, in its
sole discretion, offer terms of employments or enter into an employment
agreement with each of Matt Deischman and Alex Salottolo, and those persons may
accept such terms of employment or employment agreement. Buyer waives the
provisions of any non-competition and/or non-solicitation agreement(s) that it
may have with these persons with regard to their discussions with Buyer and
acceptance of any such terms of employment or employment agreement.
8.2 Operating Loan. Parent agrees to extend a subordinated loan to
Buyer in an amount to be determined by Buyer's management as necessary to meet
Buyer's need for operating the Business after the Closing, up to a maximum of
$3,500,000 (the "Operating Loan"). The Operating Loan will be evidenced by a
promissory note in substantially the form attached as Exhibit C (the "Note").
The Note shall be made and secured pursuant to (a) a Loan and Stock Pledge
Agreement, which, among other things, contains a pledge of a certain amount of
Buyer's stock owned by Charles Herrick and William Douglass, in substantially
the form attached as Exhibit D (the "Loan Agreement") and (b) a Security
Agreement, which contains the grant of a security interest in the Buyer's assets
junior to that of the Buyer's primary lender, in substantially the form attached
as Exhibit E (the "Security Agreement"). Parent shall advance $1 million at
Closing and $1.5 million to Buyer by January 25, 2001, and $1 million by
February 10, 2001, under the Operating Loan.
8.3 Escrow. Buyer shall open an escrow account (the "Buyer's Escrow")
with a mutually acceptable escrow agent in the joint names of Buyer and Seller,
pursuant to the terms of an Escrow Agreement in substantially the form attached
to this Agreement as Exhibit F (the "Escrow Agreement"). Buyer shall place into
the Buyer's Escrow the certificates representing the Buyer's stock securing the
Operating Loan pursuant to the Loan Agreement.
8.4 Public Disclosure. Except as otherwise required by law, neither
Buyer, nor Seller or Parent, or any person affiliated with any of them, will
issue or approve any news release or other announcement concerning this
Agreement or the transactions contemplated by this Agreement without the prior
approval of the other parties as to the contents of the announcement or release,
such approval not to be unreasonably withheld.
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8.5 Restrictive Covenants.
8.5.1 Confidentiality. No information concerning one party that
has been furnished to or obtained by another party in connection with this
Agreement may be disclosed by such other party to any person other than in
confidence to employees, legal counsel, financial advisers or independent public
accountants who reasonably need to know such information in connection with the
transactions contemplated by this Agreement and who agree to be bound by this
Section. Each party agrees not to use any such information for any purpose other
than fulfilling its obligations under this Agreement. Each party agrees that,
upon request, it will immediately return to the other party all such information
in the event this Agreement is terminated before Closing. Notwithstanding the
foregoing, this obligation shall not apply to information that (a) is, or
becomes, publicly available from a source other than the other party; (b) was
known and can be shown to have been known by the other party at the time of its
receipt; (c) is received by the other party from a third party without breach of
this Agreement; (d) is required by law or court order to be disclosed; or (e) is
disclosed in accordance with the written consent of the other party.
Notwithstanding the foregoing, Buyer will not be prohibited from disclosing or
using information regarding the Business after Closing.
8.5.2 Non-Competition. Except as provided in Section 8.10,
neither Seller nor Parent will, without the prior written consent of Buyer, for
a period of one year following the Closing Date, directly or indirectly engage
in, or have any interest in any corporation, partnership or other enterprise
that engages in, any Competitive Activity. "Competitive Activity" means the
ownership, operation or management of a business engaged in the same business as
the Business as conducted by Seller as of the Closing Date. Competitive Activity
does not include the ownership by Seller of equity securities in any
publicly-traded corporation that does not exceed 5% of the outstanding capital
stock of such corporation. Nothing contained in this Section 8.5.2 shall
preclude Seller or Parent from continuing to engage in any operations in which
the Seller or Parent is currently engaged through their subsidiaries or
divisions as of the Closing Date.
8.5.3 Non-Solicitation. Seller and Parent covenant and agree
that for a period of one year following the Closing Date, they shall not,
directly or indirectly, for their benefit or for the benefit of any other person
(a) solicit any such Business from any customer or supplier of Buyer, (b) induce
or cause any customer to cease purchasing any service or product from Buyer or
to terminate or change such customer's relationship with Buyer in any manner,
(c) induce or cause any supplier to cease providing or selling any service or
product to Buyer or to terminate or change such supplier's business relationship
with Buyer in any manner, or (d) induce or solicit any person who is then
employed by Buyer to leave such employment or other position with Buyer or to
accept any other employment or position.
8.5.4 Reasonableness. Seller and Parent acknowledge that the
covenants set forth in Sections 8.5.1, 8.5.2 and 8.5.3 do not (a) impose
unreasonable restrictions or hardship on them, (b) are necessary and fundamental
to the protection of the Business to be conducted by Buyer, (c) are reasonable
as to scope, duration, and territory, (d) are given as a condition to Buyer's
entering into this Agreement, (e) are necessary to preserve the value of the
Assets, and (f) are for the purpose of restricting the activities of Seller and
Parent only to the extent necessary for the protection of the legitimate
business interests of Buyer.
8.5.5 Equitable Relief. Seller and Parent acknowledge and agree
(a) that any damages sustained by the Buyer as a result of a breach of this
Section 8.5 cannot be adequately remedied by damages, and (b) that Buyer,
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notwithstanding any other provision of this Agreement, and in addition to any
other remedy it may have under this Agreement or at law, shall be entitled to
injunctive and other equitable relief to prevent or curtail any breach of any
provision of this Section 8.5.
8.6 Transition. After the Closing, Seller, Parent and Buyer will
cooperate in the transition of Business, the Customers and Suppliers to Buyer
and use their best efforts to provide for a smooth transition of the Contracts
and Customer relationships to Buyer.
8.7 Employment Offer Letters. Within a reasonable time after Closing,
Buyer shall deliver employment offer letters to the Transferred Employees in
which Buyer agrees to grant each Transferred Employee, as a signing bonus, a
number of additional paid time-off days equal to the accrued paid time-off days
currently due to each Transferred Employee by the Seller.
8.8 Year End Financial Statements. By February 15, 2001, Seller shall
deliver accurate and complete internally prepared financial statements for the
Business for the year ended December 31, 2000. After their delivery, these
financial statements shall be included in the definition of Financial Statements
contained in Section 6.4.
8.9 Kansas City Operations. With regard to Buyer's and Seller's
respective operation in Kansas City after the Closing Date:
8.9.1 Buyer is permitted to provide consulting services to
Sprint Broadband without limitation.
8.9.2 Buyer will refer Sprint Broadband staffing and permanent
placement leads to Seller.
8.9.3 Buyer shall not provide consulting services or otherwise
deal with Sprint PCS without Seller's consent for a period of six months
following the Closing Date, which consent shall not unreasonably be withheld.
8.9.4 Seller will continue to provide services, including
consulting services, to Sprint PCS in order to finish any current projects.
8.9.5 Buyer will employ Jim Riggs, who is not currently employed
by the Business. Mr. Riggs will be included in the definition of Transferred
Employees.
8.10 WIP Schedule. Seller will deliver an estimated Schedule of
Work-in-Progress to Buyer, and will deliver a final WIP Schedule to Buyer within
two weeks after the Closing Date ("WIP Schedule").
9. Closing Conditions.
9.1 Closing Conditions of Buyer. The obligations of Buyer to close
the transactions described in this Agreement are subject to satisfaction, at or
before the Closing, of each of the following conditions:
9.1.1 Consents. All releases, authorizations, consents, and
approvals required to be obtained from any third-party, including the Seller's
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landlord(s), any regulatory authorities, and as set forth on Schedules 5.2 or
6.2, shall have been obtained in a form satisfactory to Buyer.
9.1.2 Representations, Warranties and Covenants. The
representations and warranties of Seller and Parent contained in this Agreement
shall be true and correct in all material respects as if made at Closing. Seller
and Parent shall have complied with or performed, in all material respects, all
covenants, obligations and agreements to be complied with or performed by them
at or before the Closing Date.
9.1.3 Officer's Certificate. Seller and Parent shall have
executed and delivered to Buyer an officer's certificate, certifying (a)
satisfaction of the conditions set forth in Sections 9.1.1 and 9.1.2 as of the
Closing Date, and (b) copies of the resolutions of Seller's Board of Directors
and of resolutions of Parent, as Seller's sole shareholder, authorizing the
execution, delivery and performance of this Agreement and all other agreements
executed in connection with this Agreement, (c) copies of Seller's Certificate
of Incorporation and Bylaws, and all amendments, and (d) a recent certificate of
existence and good standing from Seller's state of incorporation, and
certificate(s) of authorization to do business as a foreign corporation from the
States of Washington, Oregon, California, Utah, Texas, Colorado, Kansas,
Missouri and any other jurisdiction in which the Seller is conducting the
Business.
9.1.4 Litigation. No litigation, investigation or proceeding
shall have been instituted or, to Seller's knowledge, threatened by any third
party that would materially adversely affect the Assets or the Business or the
ability of any party to this Agreement to comply with the provisions of this
Agreement.
9.1.5 No Material Adverse Change. There shall not have been any
material adverse change in the Assets or the Business since the date of the most
recent Financial Statement.
9.1.6 Corporate Approval. The execution, delivery and
performance of this Agreement shall have been approved by the Boards of
Directors of Buyer, Seller, and Parent as the shareholder of Seller.
9.1.7 Due Diligence. Buyer shall have completed its due
diligence review of the Assets and the Business and the results of such review
shall be satisfactory to Buyer in its sole discretion.
9.1.8 Financial Statements. The Financial Statements are in a
form acceptable to Buyer, in its sole discretion.
9.1.9 Licenses. Buyer has obtained all licenses and permits
required for it to operate the Business.
9.1.10 Documents. Buyer has received the following executed
documents:
A. Bill of Sale
B. Assignment Agreement
C. Loan and Stock Pledge Agreement
D. Security Agreement
E. Escrow Agreement
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9.1.11 Other Conveyance Documents. In addition to the Bill of
Sale and the Assignment Agreement, Seller shall have executed and delivered to
Buyer such other bills of sale, change of title forms, endorsements,
assignments, tax forms and other instruments of conveyance and transfer as Buyer
may request in order to effect the transfer, assignment and conveyance of the
Assets.
9.1.12 Control of Assets. Seller shall have taken all steps
necessary or desirable to place Buyer in actual possession and operating control
of the Assets, including but not limited to delivering to Buyer all keys, pass
cards and other access devices to the facilities in which the Business operates.
9.1.13 Actions Satisfactory to Buyer's Counsel. All actions,
proceedings, instruments and documents required to be carried out by or in
connection with this Agreement, and all other relevant legal matters, will be
reasonably satisfactory to counsel for Buyer.
9.1.15 Advance on Operating Loan. Buyer has received a $1
million advance on the Operating Loan.
9.2 Closing Conditions of Seller and of Parent. The obligations of
Seller and Parent to close the transactions described in this Agreement are
subject to satisfaction, at or before the Closing, of each of the following
conditions:
9.2.1 Consents. All releases, authorizations, consents and
approvals required to be obtained from any third party or any regulatory
authorities have been obtained in a form reasonably satisfactory to Seller.
9.2.2 Representations, Warranties and Covenants. The
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects as if made at Closing. Buyer shall have
complied with or performed, in all material respects, all covenants, obligations
and agreements to be complied with or performed by Buyer at or before the
Closing Date.
9.2.3 Officer's Certificate. Buyer has executed and delivered
to Seller and Parent an officer's certificate certifying (a) satisfaction of the
conditions set forth in Sections 9.2.1 and 9.2.2 as of the Closing Date, (b)
copies of the resolutions of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and all other agreements
executed in connection with this Agreement, (c) copies of Buyer's Articles of
Incorporation and Bylaws, and all amendments, (d) a Certificate of Existence and
Authorization from the Washington Secretary of State, and (e) copy of Buyer's
Master Business License from the State of Washington.
9.2.4 Litigation. No litigation, investigation or proceeding
has been instituted or threatened by a third party that would materially
adversely affect the ability of any party to this Agreement to comply with the
provisions of this Agreement.
9.2.5 Purchase Price. Seller has received the Cash Purchase
Price.
9.2.6 Documents. Buyer has executed and delivered the following
agreements or other documents to Seller:
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A. Assignment Agreement
B. Note
C. Loan and Stock Pledge Agreement
D. Security Agreement
E. Escrow Agreement
9.2.7 Actions Satisfactory to Seller's Counsel. All actions,
proceedings, instruments and documents required to be carried out by or in
connection with this Agreement, and all other relevant legal matters, shall be
reasonably satisfactory to Seller's and Parent's counsel.
9.3 Post-Closing Letter. Any conditions to Closing that the parties
agree to defer until after Closing will be documented in a post-Closing letter
agreement executed and delivered at the Closing.
10. Closing Costs.
10.1 Closing Costs and Prorations.
10.1.1 Seller's Closing Costs. Except as otherwise agreed by the
parties in writing, Seller will pay (a) any sums due with respect to licenses,
fees, and charges related to the Assets and necessary to discharge of any
encumbrances affecting the Assets, except Permitted Liens, (b) the prorations
described below, and (c) any other applicable usual and customary closing costs
paid by sellers.
10.1.2 Buyer's Closing Costs. Except as otherwise agreed by the
parties in writing, Buyer will pay (a) any recording fees in connection with
conveyance of the Assets, (b) any sales or use taxes payable on the conveyance
of the Assets, (c) the prorations described below, and (d) any other applicable
usual and customary closing costs paid by buyers.
10.1.3 Prorations. Buyer and Seller agree to pay their
respective prorated shares of all operating expenses of the Business, including
but not limited to rent, property taxes, utilities, services, and other
applicable items that are customarily prorated. All prorations shall be as of
the Closing Date.
10.1.4 Insurance. Seller is solely responsible for insuring the
Assets against casualty and general liability until Closing. After Closing,
Buyer is solely responsible for obtaining such other insurance as Buyer may
desire.
10.1.5 Other Costs, Expenses and Professional Fees. Except as
provided otherwise in this Agreement, the parties each agree to bear their own
costs and expenses, including without limitation all fees of attorneys,
accountants, environmental consultants, and other service providers that are
incurred in connection with the negotiation and preparation of this Agreement,
and with any due diligence conducted, and documents required to be executed, in
connection with this Agreement and the consummation of the transaction
contemplated in this Agreement.
11. Termination.
11.1 Right to Terminate. This Agreement may be terminated at any time
prior to the Closing Date by:
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11.1.1 written agreement of the parties; or
11.1.2 either Seller or Buyer by written notice to the other if
the Closing has not occurred on or before midnight of December 31, 2000, unless
the terminating party's failure to fulfill or perform any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date.
11.2 Effect of Termination. After termination under Section 11.1, the
parties will thereafter be released from all liabilities and obligations arising
under this Agreement, except as otherwise provided in this Agreement.
12. Survival; Indemnification.
12.1 Survival. The representations, warranties, covenants and
agreements of the parties contained in this Agreement or in any certificate or
agreement delivered in accordance with this Agreement shall survive for 18
months after the execution and delivery of this Agreement, any investigation by
or on behalf of any party, and the consummation of the transactions contemplated
hereby, except that Sections 6.6 (Taxes), 6.8 (Assets, Title), 6.10 (Certain
Interests), 6.11 (Employee Matters), 6.13 (Environmental), 6.15 (Litigation),
6.19 (Brokers), 7.5.2 (Assets), 7.5.5 (Employees Salaries and Benefits), 7.5.6
(Litigation), 7.6 (Exclusivity), 12.2.(d) and (e), and 12.3(c) shall survive for
the applicable statute of limitations. Notwithstanding Section 11.2, Seller's
obligations under Section 7.6 shall survive termination of this Agreement.
12.2 Indemnification by Seller and Parent. Seller and Parent shall
indemnify Buyer, Buyer's subsidiaries, affiliates, directors, officers,
employees and agents ("Affiliates"), and hold each of them harmless from and
against all losses, costs, expenses, damages or liabilities, including
reasonable attorneys' fees (collectively, "Damages"), incurred by any of them as
the result of or directly related to: (a) any breach or inaccuracy of any
representation or warranty of Seller or Parent made in this Agreement; (b) any
failure by Seller or Parent to fulfill any of their covenants or other
agreements contained in this Agreement or in any agreement delivered pursuant to
this Agreement; (c) any liability or obligation of Seller or Parent to any third
party not expressly assumed by Buyer in accordance with the terms of this
Agreement; (d) any obligation of the Business relating to periods before the
Closing Date, and (e) except as expressly assumed by Buyer, any Damages (i) with
regard to any claim relating to Buyer's use of the "Inteliant" name under
Section 1.3, (ii) relating to any litigation listed on Schedule 6.15, or (iii)
relating to the employment matters set forth in Sections 6.11 or 7.5.5
regardless of whether the items, facts or issues giving rise to such Damages are
set forth on those sections respective schedules.
12.3 Indemnification by Buyer. Buyer will indemnify Seller and Parent
and hold them harmless from and against all Damages incurred by Seller or Parent
by reason of or arising out of or in connection with any of them as a result of
or directly related to: (a) any breach or inaccuracy in any representation or
warranty of Buyer made in this Agreement, (b) any failure by Buyer to fulfill
any of its covenants or other agreements contained in this Agreement or in any
agreement delivered by it pursuant to this Agreement, and (c) any obligation of
the Business relating to periods after the Closing Date.
12.4 Indemnification Period. Except as otherwise specified in this
Agreement, no claim for indemnification under this Section 12 will be effective
if not made within six months following end of the survival period set forth in
Section 12.1 for that claim (the "Indemnification Period"). Notwithstanding the
foregoing, claims based (a) upon the assertion that either the Seller or Parent
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had actual knowledge that a representation or warranty made by either of them in
this Agreement was materially false when made or was made with the intent to
deceive, or (b) upon Sections 6.6, 6.8, 6.11, 6.13, 6.15, 6.19, 7.5.2, 7.5.5,
7.5.6, 7.6, 12.2(d) or (e), or 12.3(c) may be made at any time up to the
expiration of the applicable statute of limitations.
12.5 Threshold Amount. Except as stated below, no party that is
entitled to indemnification under this Agreement shall be indemnified unless and
until the aggregate of all of such party's claims for indemnification exceed
$50,000, which shall act as a threshold to discourage the pursuing of
insubstantial claims, and not as a deductible. Notwithstanding the foregoing, no
threshold shall required for claims under (a) Section 3.2 - Pipeline Adjustment,
or (b) Section 6.11.
12.6 Indemnification Procedures.
12.6.1 Claim Notice. Any claim for indemnification must be made
in writing, with notice delivered by the party seeking indemnification to the
party from whom indemnification is sought within the Indemnification Period (the
"Claim Notice"). The Claim Notice must specify in reasonable detail the nature
and estimated amount of the claim.
12.6.2 Third-Party Claims. If the claim specified in the Claim
Notice relates to a third-party claim, the indemnifying person shall have 15
days after its receipt of the Claim Notice to notify the indemnified person
whether the indemnifying person agrees that the claim is subject to
indemnification pursuant to this Section 12 and whether the indemnifying person
elects to defend such third-party claim at its own expense. If the claim relates
to a third-party claim that the indemnifying person elects to defend, the
indemnifying person shall control the defense or settlement of the claim and the
indemnified person shall not consent to the entry of any judgement or settle the
claim and shall reasonably cooperate with such defense or settlement. The
indemnified person shall, however, be entitled to (a) participate in the defense
or settlement of such a third-party claim through its own counsel and at its own
expense and (b) approve or disapprove any proposed settlement that would impose
a duty or obligation on the indemnified person. No settlement of a claim shall
be made without the approval of the indemnified party regardless of who is
defending such claim. If the indemnifying person does not timely elect to defend
a third-party claim, or if the indemnifying person fails to conduct such defense
with reasonable diligence, the indemnified party may conduct the defense of, or
settle, such claim at the risk and expense of the indemnifying person. If the
indemnifying person does not timely elect to defend a third-party claim, it can
later assume the defense of such claim. In such event, the indemnifying person
will reimburse the indemnified person for all costs and expenses of defense
(including attorneys' fees) incurred by the indemnified person to defend the
claim through the date the defense is assumed.
12.6.3 Claims Other Than Third-Party Claims. If the claim does
not relate to a third-party claim, the indemnifying person shall have 30 days
after receipt of the Claim Notice to notify the indemnified person in writing
whether the indemnifying person accepts liability for all or any part of the
claim and the method and timing of any proposed payment. If the indemnifying
person does not so notify the indemnified party, the indemnifying persons shall
be deemed to have accepted liability for all damages described in the Claim
Notice if: (a) the Claim Notice contains a statement that failure to respond
will constitute acceptance of liability; (b) the indemnified person sends a
second Claim Notice by certified mail giving the indemnifying persons an
additional ten days in which to respond and the indemnifying persons do not deny
liability within the ten-day period; and (c) the indemnified person sends a copy
of the second Claim Notice to the indemnified person's legal counsel named in
this Agreement.
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12.6.4 Maximum Liability. The maximum liability of Seller and
Parent under Section 12.2, and of Buyer under Section 12.3, at any time during
an Indemnification Period shall be the amount of the Purchase Price paid to the
date that the Claim Notice is delivered to the indemnifying party. However, any
liability of an indemnifying party that exceeds the amount of the Purchase Price
paid to the date of the Claim Notice, shall be offset against any future Earn
Out Payments, but cannot exceed the total Purchase Price paid by the end of the
Earn Out Period.
12.6.5 Offset. Buyer may, but shall not be obligated to, offset
any amounts owed to it by Seller or Parent under Section 12.2, (a) first against
any unpaid amount due under the Note, and (b) then against any unpaid Earn Out
Payment. However, Seller and Parent will remain obligated to pay any
indemnification payment owed to Buyer under Section 12.2, in cash, if there are
no unpaid Earn Out Payments or Note payments against which to offset any such
indemnification obligation or if Buyer elects not to make such offset.
13. Other Provisions.
13.1 Assignment; Benefit. No party may voluntarily or involuntarily
assign its interest under this Agreement without the prior written consent of
the other parties to this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
13.2 Amendment; Waiver. The provisions of this Agreement, or of any
agreement or document executed in connection with this Agreement, may be amended
or waived only in a written agreement signed by the party against which
enforcement of such amendment or waiver is sought. Any waiver of any right or
breach under this Agreement shall not be construed as a waiver of any other or
any subsequent right or breach.
13.3 Severability. If any portion of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, the remaining
terms of this Agreement shall remain in full force and effect to the extent
possible.
13.4 Governing Law. The construction and performance of this Agreement
will be governed by the laws of the State of Washington (except for the choice
of law provisions thereof). The parties consent to the jurisdiction of, and
venue laid in, any appropriate court in King County, Washington.
13.5 Independent Counsel. Seller and Parent acknowledge that they have
been represented by independent legal counsel with regard to this Agreement, and
have had an adequate opportunity to seek independent legal counsel with regard
to all documents executed in connection with this Agreement. Seller and Parent
acknowledge that Davis Wright Tremaine LLP has not represented either of them.
13.6 Notices. The parties shall deliver any notices required under
this Agreement in writing by personal or courier delivery, facsimile
transmission, or by registered or certified U.S. mail, return receipt requested,
postage prepaid, to the addresses set forth below, or to such other address as
specified by a party in writing. Notices shall be deemed effective as of the
date of personal or courier delivery, confirmed facsimile transmission, or three
days after the date on the U.S. postmark affixed to the notice.
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------------------------------- ------------------------------------------------
If to Buyer: With a copy to:
------------------------------- ------------------------------------------------
Herrick Douglass, Inc. Davis Wright Tremaine, LLP
1750 112th Avenue 1501 Fourth Avenue, Suite 2600
Bellevue, WA 98004 Seattle, Washington 98101-1688 Facsimile: (206)
Facsimile: 425-467-1127 628-7699
Attention: Bill Douglass Attention: Eugenie D. Mansfield, Esq.
------------------------------- ------------------------------------------------
If to Seller or Parent: With a copy to:
------------------------------- ------------------------------------------------
SOS Staffing Services, Inc. Stroock & Stroock & Lavan LLP
1415 South Main 180 Maiden Lane
Salt Lake City, UT 84115 New York, New York 10038-4982
Facsimile: 801-483-4291 Facsimile: (212) 806-6006
Attention: John Morrison Attention: Mark Rosenbaum, Esq.
------------------------------- ------------------------------------------------
13.7 Time of Performance. Time is of the essence of each and every
term, covenant and condition of this Agreement.
13.8 Incorporation. All Exhibit and Schedules referred to in or
attached to this Agreement are incorporated by reference into this Agreement in
their entirety.
13.9 Headings. The headings in this Agreement are inserted solely for
the purpose of convenience and shall not affect its interpretation.
13.10 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
13.11 Attorneys' Fees. The prevailing party in any arbitration or
litigation concerning this Agreement is entitled to reimbursement of its
reasonable attorney fees, costs and expenses from the non-prevailing party,
including fees, costs and expenses incurred on appeal or in bankruptcy
proceedings.
13.12 Entire Agreement. This Agreement, its attached schedules and
exhibits, and the documents executed in connection with this Agreement including
any agreement executed in connection with Section 9.3, contain the entire
agreement of the parties with respect to the subject matter of this Agreement,
and supersede any and all prior agreements, written or oral, relating to their
subject matter.
13.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
will constitute the same instrument.
[Signatures are on the next page.]
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Executed as of the first date written above.
SELLER: INTELIANT CORPORATION
By _________________________________
Name:
Its:
PARENT: SOS STAFFING SERVICES, INC.
By _________________________________
Name:
Its:
BUYER: HERRICK DOUGLASS, INC.
By _________________________________
Name:
Its:
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<TABLE>
<CAPTION>
LIST OF SCHEDULES
<S> <C>
Schedule 1.2 Excluded Assets
Schedule 5.2 Buyer's Consents
Schedule 6.1 Certain Exceptions to Ownership of Seller's Shares
Schedule 6.2 Seller's and Parent's Consents
Schedule 6.8.1 a Personal Property Listing
Schedule 6.8.1 b Real Property Leases
Schedule 6.8.3 Customer Agreements, Real Property Leases and Insurance Policies
Schedule 6.8.4 Certain Exceptions or Limitations Related to Intellectual Property
Schedule 6.8.5 Customer List
Schedule 6.9 Governmental Compliance
Schedule 6.11.1 Employee List
Schedule 6.11.1 b Temporary Labor Vendors
Schedule 6.11.1 d Non-Immigrant Workers
Schedule 6.15 Threatened or Pending Litigation
Schedule 7.5.5 Exceptions Related to Certain Employee Compensation Matters
</TABLE>
The Company agrees to furnish supplementally a copy of any Schedule to the
Purchase Agreement not filed herewith to the Commission upon Request.
25
