ASSET PURCHASE AGREEMENT by and among LINK STAFFING SERVICES CORPORATION, FRANLINK, INC., and STAFFLINK, INC., Each a “Seller”, and collectively, the “Sellers”, and HQ LINK CORPORATION Dated: February 12, 2021
by and among
LINK STAFFING SERVICES CORPORATION,
FRANLINK, INC.,
and
STAFFLINK, INC.,
Each a “Seller”, and collectively, the
“Sellers”,
and
HQ LINK CORPORATION
“Buyer”
Dated:
February 12, 2021
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1
ARTICLE II PURCHASE AND
SALE 9
2.01 Purchase
and Sale of the Assets. 9
2.02 Excluded
Assets. 10
2.03 Assumed
Liabilities.
11
2.04 Excluded
Liabilities. 11
2.05 Trademark
License Agreement. 13
2.06 Purchase
Price.
13
2.07 Payment of the Buyer
Termination Fee, the Buyer
PPP Escrow Contribution, and the Sellers' PPP
Escrow
Contribution. 13
2.08 Allocation
of Purchase Price. 14
2.09 Withholding
Tax. 14
ARTICLE III EXECUTION AND
CLOSING 14
3.01 Pre-Closing
Deliverables 14
3.02 Closing.
14
3.03 Closing
Deliverables. 15
4.01Organization, Good
Standing, Foreign Qualifications
of
Sellers.
16
4.02 Authority
of Sellers. 16
4.03 No
Conflicts; Consents. 16
4.04 Financial
Statements. 17
4.05 Subsidiaries.
17
4.06 Undisclosed
Liabilities. 17
4.07 Absence
of Certain Changes, Events and Conditions. 17
4.08 Material
Contracts. 17
4.09 Title
to Purchased Assets. 19
4.10 Sufficiency
of Assets. 19
4.11
Intellectual Property.
19
4.12
Real Property. 19
4.13
Insurance.
19
4.14
Legal Proceedings; Governmental Orders. 20
4.15
Compliance With Laws; Permits. 20
4.16
Employee Benefit Matters. 20
4.17
Environmental Matters. 22
4.18 Employment
Matters. 23
4.19 Taxes.
24
4.20
Brokers. 24
4.21
CARES Act Relief Funds. 24
5.01 Organization
of Buyer. 25
5.02 Authority
of Buyer. 25
5.03 No
Conflicts; Consents. 25
5.04 Brokers.
25
5.05 Sufficiency
of Funds. 25
5.06 Legal
Proceedings. 25
5.07 Independent
Evaluation. 26
ARTICLE VI COVENANTS
26
6.01 Conduct
of Business Prior to the Closing. 26
6.02 Access
to Information and Acquired Franchisees. 27
6.03 No
Solicitation of Other Bids. 27
6.04 Notice
of Certain Events. 28
6.05 Employees
and Employee Benefits. 28
6.06 Confidentiality.
29
6.07 Non-Competition;
Non-Solicitation. 29
6.08 Closing
Conditions.
30
6.09 Public
Announcements. 30
6.10
Receivables. 31
6.11
Transfer Taxes.
31
6.12
Further Assurances. 31
6.13
Assignment
of Certain Contracts. 31
6.14 Transition
Services.
31
6.15 PPP
Escrow and Forgiveness. 32
ARTICLE VII CONDITIONS TO
CLOSING 32
7.01 Conditions
to Obligations of All Parties. 32
7.02 Conditions
to Obligations of Buyer. 32
7.03 Conditions
to Obligations of Sellers. 34
ARTICLE VIII
INDEMNIFICATION 35
8.01 Survival.
35
8.02 Indemnification
by Sellers. 35
8.03 Indemnification
by Buyer.
36
8.04 Limitations.
36
8.05 Procedures
of Indemnification. 37
ARTICLE IX TERMINATION
38
9.01 Termination.
38
9.02 Buyer
Termination Fee. 39
9.03 Effect
of Termination.
40
ARTICLE X MISCELLANEOUS
40
10.01 Expenses.
40
10.02 Notices.
40
10.03 Interpretation.
41
10.04 Headings.
42
10.05 Severability.
42
10.06 Entire
Agreement.
42
10.07 Successors
and Assigns.
42
10.08 No
Third-party Beneficiaries. 42
10.09 Amendment
and Modification; Waiver. 42
10.10Governing
Law; Submission to Jurisdiction; Waiver of Jury
Trial.
43
10.11 Specific
Performance.
44
10.12 Counterparts.
44
Exhibits
Exhibit A – Transition Plan
Exhibit B – Form of Trademark License
Agreement
Exhibit C – Form of Assignment and Assumption
Agreement
Exhibit D – Escrow Agreement
Exhibit E – Form of PPP Escrow Agreement
This Asset Purchase Agreement (this “Agreement”),
dated as of February 12, 2021, is entered into among LINK STAFFING
SERVICES CORPORATION, a Delaware corporation, FRANLINK, INC., a
Texas corporation, and STAFFLINK, INC., a
Texas corporation, (each a “Seller”
and, collectively the “Sellers”)
on the one hand, and HQ LINK CORPORATION, a Delaware corporation
(“Buyer”)
on the other hand.
RECITALS
WHEREAS, Sellers are engaged through various
subsidiaries and franchisees in the business of providing temporary
staffing services to customers (the “Business”);
WHEREAS,
Sellers wish to sell and assign to Buyer, and Buyer wishes to
purchase and assume from Sellers, the certain assets and specified
liabilities of the Business specifically set forth in this
Agreement and subject to the terms and conditions set forth herein;
and
WHEREAS,
a portion of the Purchase Price payable by Buyer to Seller shall be
placed in escrow by Buyer upon the execution of this Agreement, the
release of which shall be contingent upon certain events and
conditions, all as set forth in this Agreement and the Escrow
Agreement (as defined herein);
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
“Accounts
Receivable” has the
meaning set forth in Section
2.02(b).
“Acquired
Franchisees” has the
meaning set forth in Section
2.01(a).
“Acquisition
Proposal” has the meaning
set forth in Section
6.03(a).
“Action” means any claim, action, cause of action,
demand, lawsuit, arbitration, inquiry, audit, notice of violation,
proceeding, litigation, citation, summons, subpoena or
investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in
equity.
“Affiliate” of a Person means any other Person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such
Person. The term “control” (including the terms
“controlled by” and “under common control
with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
“Agreement” has the meaning set forth in the
preamble.
“Allocation
Schedule” has the meaning
set forth in Section
2.08.
“Ancillary
Documents” means the
Escrow Agreement, the Assignment and Assumption Agreement, the
Trademark License Agreement, and the other agreements, instruments
and documents required to be delivered at the
Closing.
“Annual Financial
Statements” has the
meaning set forth in Section
4.04.
“Assigned
Contracts” has the
meaning set forth in Section
2.01(c).
“Assignment and Assumption
Agreement” has the
meaning set forth in Section
3.03(a)(i).
“Assumed
Liabilities” has the
meaning set forth in Section
2.03.
“Balance Sheet
Date” has the meaning set
forth in Section
4.04.
“Benefit Plan” has the meaning set forth in
Section
4.16(a).
“Books and
Records” has the meaning
set forth in Section
2.01(i).
“Business” has the meaning set forth in the
recitals.
“Business Day” means any day except Saturday, Sunday or
any other day on which commercial banks located in Charleston,
South Carolina are authorized or required by Law to be closed for
business.
“Buyer” has the meaning set forth in the
preamble.
“Buyer Closing
Certificate” has the
meaning set forth in Section
7.03(f).
“Buyer
Indemnitees” has the
meaning set forth in Section
8.02.
“Buyer PPP Escrow
Contribution” means an
amount equal to the PPP Escrow Amount, minus the Buyer Termination Fee, minus the Sellers’ PPP Escrow Contribution;
provided,
however,
that the Buyer PPP Escrow Contribution shall not exceed
$9,500,000.
“Buyer Termination Escrow
Account” has the meaning
set forth in Section
2.07(a).
“Buyer Termination
Fee” means One Million
Five Hundred Thousand Dollars ($1,500,000).
“CARES Act” means the Coronavirus Aid, Relief, and
Economic Security Act of 2020,, Pub. L. No. 116-136, 134 Stat. 281,
as amended, and all regulations and guidance issued by any
Governmental Authority with respect thereto.
“Cash” means all cash and cash equivalents (including
checking account balances, bank account balances and certificates
of deposit, plus all deposited but uncleared bank deposits and
marketable securities and short-term investments) of the
Sellers.
“Closing” has the meaning set forth in
Section
3.02.
“Closing Date” has the meaning set forth in
Section
3.02.
“Closing
Payment” has the meaning
set forth in Section
2.06(b).
“Closing Settlement
Payment” has the meaning
set forth in Section
2.06(b).
“Code” means the Internal Revenue Code of 1986,
as amended.
“Contracts” means all contracts, leases, deeds,
mortgages, licenses, instruments, notes, commitments, undertakings,
indentures, joint ventures and all other agreements, commitments,
and legally binding arrangements, whether written or
oral.
“Copyrights” has the meaning set forth in the
definition of Intellectual Property.
“Deductible” has the meaning set forth in
Section
8.04(a).
“Disclosure
Schedules” means the
Disclosure Schedules delivered by Sellers and Buyer concurrently
with the execution and delivery of this
Agreement.
“Dollars or $” means the lawful currency of the United
States.
“Encumbrance” means any charge, claim, community
property interest, pledge, condition, equitable interest, lien
(statutory or other), option, security interest, mortgage,
easement, encroachment, right of way, right of first refusal, or
restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of
ownership.
“Environmental
Law” means any applicable
Law, and any Governmental Order or binding agreement with any
Governmental Authority: (a) relating to pollution (or the cleanup
thereof) or the protection of natural resources, endangered or
threatened species, human health or safety, or the environment
(including ambient air, soil, surface water or groundwater, or
subsurface strata); or (b) concerning the presence of, exposure to,
or the management, manufacture, use, containment, storage,
recycling, reclamation, reuse, treatment, generation, discharge,
transportation, processing, production, disposal or remediation of
any Hazardous Materials. The term “Environmental Law”
includes, without limitation, the following (including their
implementing regulations and any state analogs): the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of
1976, as amended by the Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water
Pollution Control Act of 1972, as amended by the Clean Water Act of
1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances
Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et
seq.; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of
1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C.
§§ 7401 et seq.; and the Occupational Safety and Health
Act of 1970, as amended, 29 U.S.C. §§ 651 et
seq.
“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended, and the regulations promulgated
thereunder.
“ERISA
Affiliate” means all
employers (whether or not incorporated) that would be treated
together with the Seller or any of its Affiliates as a
“single employer” within the meaning of Section 414 of
the Code or Section 4001 of ERISA.
“Escrow Agent” means Wilmington Trust, National
Association.
“Escrow
Agreement” means the
Escrow Agreement to be entered into by Buyer, Seller and the Escrow
Agent upon the execution of this Agreement, substantially in the
form of Exhibit D.
“Excluded
Assets” has the meaning
set forth in Section
2.02.
“Excluded
Contracts” has the
meaning set forth in Section
2.02(e).
“Excluded
Liabilities” has the
meaning set forth in Section
2.04.
“Financial
Statements” has the
meaning set forth in Section
4.04.
“Franchisee
Notes” has the meaning
set forth in Section 2.01(g).
“Fundamental
Representations” has the
meaning set forth in Section
7.02(a).
“GAAP” means United States generally accepted
accounting principles in effect from time to
time.
“Government
Contracts” has the
meaning set forth in Section
4.08(a)(vi).
“Governmental
Authority” means any
federal, state, local or foreign government or political
subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated
organization or other non-governmental regulatory authority or
quasi-governmental authority (to the extent that the rules,
regulations or orders of such organization or authority have the
force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.
“Governmental
Order” means any order,
writ, judgment, injunction, decree, stipulation, determination, or
award entered by or with any Governmental
Authority.
“Hazardous
Substance” shall mean:
(a) any material, substance, chemical, waste, product, derivative,
compound, mixture, solid, liquid, mineral, or gas, in each case,
whether naturally occurring or man-made, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect
under Environmental Laws; and (b) any petroleum or
petroleum-derived products, radon, radioactive materials or wastes,
asbestos in any form, lead or lead-containing materials, urea
formaldehyde foam insulation, and polychlorinated
biphenyls.
“Indemnified
Party” has the meaning
set forth in Section
8.05(a).
“Indemnifying
Party” has the meaning
set forth in Section
8.05(a).
“Insurance
Policies” has the meaning
set forth in Section
4.13.
“Intellectual
Property” means any and
all rights in, arising out of, or associated with any of the
following in any jurisdiction throughout the world: (a) trademarks,
service marks, brands, certification marks, logos, trade dress,
trade names, and other similar indicia of source or origin,
together with the goodwill connected with the use of and symbolized
by, and all registrations, applications for registration, and
renewals of, any of the foregoing (“Trademarks”);
(b) copyrights and works of authorship, whether or not
copyrightable, and all registrations, applications for
registration, and renewals of any of the foregoing
(“Copyrights”);
(c) trade secrets, know-how, inventions (whether or not
patentable), discoveries, improvements, technology, business and
technical information, databases, data compilations and
collections, tools, methods, processes, techniques, and other
confidential and proprietary information and all rights therein
(“Trade
Secrets”); and (d)
computer programs, operating systems, applications, firmware and
other code, including all source code, object code, application
programming interfaces, data files, databases, protocols,
specifications, and other documentation thereof; excluding, in each
case, commercially available software products under standard
end-user object code license agreements (“Software”).
“Intellectual Property
Assets” means all
Intellectual Property that is owned by a Seller and used or held
for use in the conduct of the Business as currently
conducted.
“Interim Balance
Sheet” has the meaning
set forth in Section
4.04.
“Interim Financial
Statements” has the
meaning set forth in Section
4.04.
“Knowledge of Seller or
Sellers’ Knowledge”
or any other similar knowledge qualification, means the actual
knowledge of any director or officer of any Seller, after due
inquiry.
“Law” means any statute, law, ordinance,
regulation, rule, code, order, constitution, treaty, common law,
judgment, decree, other requirement or rule of law of any
Governmental Authority.
“Liabilities” means liabilities, obligations or
commitments of any nature whatsoever, asserted or unasserted, known
or unknown, absolute or contingent, accrued or unaccrued, matured
or unmatured or otherwise.
“Losses” means losses, damages, liabilities,
deficiencies, Actions, judgments, interest, awards, penalties,
fines, costs or expenses of whatever kind, including reasonable
attorneys' fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance
providers; provided,
however,
that “Losses” shall not include punitive damages,
except to the extent actually awarded to a Governmental Authority
or other third party.
“Material Adverse
Effect” means any event,
occurrence, fact, condition or change that is, or could reasonably
be expected to become, individually or in the aggregate, materially
adverse to (a) the business, results of operations, condition
(financial or otherwise) or assets of the Business as it relates to
the Acquired Franchisees or the Purchased Assets; (b) the value of
the Assets; or (c) the ability of Sellers or Buyer to consummate
the transactions contemplated hereby on a timely basis;
provided,
however,
that no state of facts, change, event, effect or occurrence arising
or related to any of the following shall be deemed to constitute,
and none of the following shall be taken into account in
determining whether there has been a “Material Adverse
Effect”: (i) national or international business, economic or
political conditions, including the engagement by the United States
of America in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the United States of America
or any of its respective territories, possessions or diplomatic or
consular offices or upon any military installation, equipment or
personnel of the United States of America; (ii) events affecting
financial, banking or securities markets (including any disruption
thereof or any decline in the price of securities generally or any
market or index); (iii) conditions (or changes in such conditions)
generally affecting the industry in which the Business is
conducted; (iv) pandemic, including the current coronavirus
pandemic, epidemic, moratoriums, lock-downs or stay-at-home orders;
(v) changes in GAAP or Law, except for statutory changes in Law
enacted between the signing of this Agreement; (vi) the taking of
any action required by this Agreement; (vii) changes as a result of
the negotiation, announcement, pendency or performance of this
Agreement, including by reason of the identity of Buyer or any
communication by Buyer or any of its Affiliates of their plans or
intentions regarding the operation of the Assets; (viii) any
actions taken or omitted to be taken by or at the request or with
the written consent of Buyer; (ix) in the case of Seller, the
failure to meet or exceed any projection or forecast (it being
understood, however, that the underlying circumstances giving rise
to such failure may be taken into account unless otherwise excluded
in this definition); or (x) effects or changes that are cured or no
longer exist by the earlier of the Closing or the termination of
this Agreement, provided, further, however, that any event,
occurrence, fact, condition, or change referred to in clauses (i)
through (v) immediately above shall be taken into account in
determining whether a Material Adverse Effect has occurred or could
reasonably be expected to occur to the extent that such event,
occurrence, fact, condition, or change has a disproportionate
effect on the business of Sellers compared to other participants in
the industries in which the Sellers
operate.
“Material
Contracts” has the
meaning set forth in Section
4.08(a).
“Multiemployer
Plan” has the meaning set
forth in Section
4.16(c).
“Non-Disclosure
Agreement” means that
certain Non-Disclosure Agreement with an Effective Date of November
13, 2020 by and between HireQuest, Inc. and LINK Staffing Services
Corporation and its subsidiaries.
“Paycheck Protection
Program” means the
business loan program established by the CARES Act that is commonly
referred to as the “Paycheck Protection
Program.”
“Permitted
Encumbrances” means any
of the following Encumbrances: (a) Encumbrances in favor of
carriers, warehousemen, mechanics, landlords and materialmen and
other similar Persons that are incurred in the ordinary course of
the Business for sums not yet due and payable;
(b) Encumbrances for current Taxes incurred in the ordinary
course of the Business that are not delinquent or remain payable
without any penalty or are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves
are maintained; (c) rights reserved to any Governmental
Authority to regulate the affected property; (d) as to any
leased assets or properties, rights of the lessors thereof;
(e) Encumbrances incurred or deposits made in the ordinary
course of the Business in connection with workers' compensation and
other types of social security, unemployment insurance, or old age
pension programs mandated under applicable laws or regulations and
(f) Encumbrances that will be assumed, released or discharged at
Closing or retained by the Sellers following the
Closing.
“Permits” means all permits, licenses, franchises,
approvals, authorizations, registrations, certificates, variances
and similar rights obtained, or required to be obtained, from
Governmental Authorities.
“Person” means an individual, corporation,
partnership, joint venture, limited liability company, Governmental
Authority, unincorporated organization, trust, association or other
entity.
“Post-Closing Tax
Period” means any taxable
period beginning after the Closing Date and, with respect to any
taxable period beginning before and ending after the Closing Date,
the portion of such taxable period beginning after the Closing
Date.
“PPP Escrow
Account”
means the interest-bearing bank
account designated by the PPP Escrow Agent to be controlled by the
PPP Lender, held, invested, and distributed by the PPP Escrow Agent
under the PPP Escrow Agreement.
“PPP Escrow
Agent” means BOKF, NA
doing business as Bank of Oklahoma.
“PPP Escrow
Agreement” means the
Escrow Agreement to be entered into at the Closing by and among
Link Staffing Services Corporation, a Delaware corporation, the PPP
Lender and the PPP Escrow Agent, substantially in the form attached
hereto as Exhibit E.
“PPP Escrow
Amount” means the amount
of money to be deposited into the PPP Escrow Account at Closing to
fully fund the PPP Escrow Account, as determined by the PPP Escrow
Agent provided,
however,
that in no event shall the amount be less than the outstanding
balance of the PPP Loan.
“PPP Lender” means BOKF, NA doing business as Bank of
Oklahoma.
“PPP Loan” means the Paycheck Protection Program loan
in the original principal amount of $10,000,000 issued to Link
Staffing Services Corporation, a Delaware corporation, by the PPP
Lender on May 5, 2020.
“Pre-Closing Tax
Period” means any taxable
period ending on or before the Closing Date and, with respect to
any taxable period beginning before and ending after the Closing
Date, the portion of such taxable period ending on and including
the Closing Date.
“Purchase
Price” has the meaning
set forth in Section
2.06.
“Purchased
Assets” has the meaning
set forth in Section
2.01.
“Representative”
means, with respect to any Person, any and all directors, officers,
employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.
“Restricted
Business” means engaging
in temporary employment, temporary or permanent placement,
staffing, payrolling, or recruiting services.
“Restricted
Period” has the meaning
set forth in Section
6.07(a).
“SBA Procedural
Notice” means the SBA
Procedural Notice with Control No.: 5000-20057 and Effective Date
of October 2, 2020 on SBA Form 1253.3 (4-93) and signed by ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Director, Office of Financial Assistance and all
amendments and supplements thereto.
“Seller” and “Sellers”
have the meanings set forth in the
preamble.
“Sellers’ PPP Escrow
Contribution” means the
amount designated by Sellers as provided in Section 3.01(b)
to be paid by Sellers to the PPP
Escrow Account, provided,
however,
that the Sellers’ PPP Escrow Contribution shall be no less
than an amount, when combined with the Buyer PPP Escrow
Contribution, as would be necessary to fully fund the PPP Escrow
Account.
“Sellers’ Closing
Certificate” has the
meaning set forth in Section
7.02(f).
“Seller
Indemnitees” has the
meaning set forth in Section
8.03.
“Single Employer
Plan” has the meaning set
forth in Section
4.16(c).
“Software” has the meaning set forth in the
definition of Intellectual Property.
“Stimulus
Funds” has the meaning
set forth in Section
4.21.
“Tangible Personal
Property” has the meaning
set forth in Section
2.02(l).
“Taxes” means all federal, state, local, foreign
and other income, gross receipts, sales, use, production, ad
valorem, transfer, documentary, franchise, registration, profits,
license, lease, service, service use, withholding, payroll,
employment, unemployment, estimated, excise, severance,
environmental, stamp, occupation, premium, property (real or
personal), real property gains, windfall profits, customs, duties
or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or
penalties whether disputed or not and including any transferee or
secondary liability in respect of any of the foregoing and any
liability in respect of any tax as a result of being a member of an
affiliated, consolidated, combined, unitary, or similar
group.
“Tax Return” means any return, declaration, report,
claim for refund, information return or statement or other document
relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
“Territory” means all areas included within the
Designated Market Areas of the current franchise agreement of any
of the Acquired Franchisees as of the Closing
Date.
“Trademark License
Agreement” has the
meaning set forth in Section
2.05.
“Trademarks” has the meaning set forth in the
definition of Intellectual Property.
“Trade
Secrets” has the meaning
set forth in the definition of Intellectual
Property.
ARTICLE
II
PURCHASE AND SALE
Section 2.01 Purchase and Sale of
Assets. Subject to the terms
and conditions set forth herein, at the Closing, Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase from Seller, free and clear of any Encumbrances other than
Permitted Encumbrances, all of Seller's right, title and interest
in, to and under the following assets, properties, and rights
(collectively, the “Purchased
Assets”), but
specifically excluding the Excluded Assets:
(a) all
of Sellers’ franchise agreements and franchise relationships
with its franchisees including, without limitation, all such
agreements and relationships identified in Schedule
2.01(a) (the
“Acquired
Franchisees”);
(b) all
customer lists of the Acquired Franchisees along with all customer
files and records including correspondence, customer purchasing
histories, sales, training and promotional materials related to
customers, and all Contracts with customers serviced by the
Acquired Franchisees;
(c) all
Contracts set forth on Schedule
2.01(c) (the
“Assigned
Contracts”) as and to the
extent relating specifically to the Acquired Franchisees or to the
ownership and use of the Purchased Assets;
(d) to
the extent transferable, all Permits which are held by Seller and
required for the conduct of the Business as it relates specifically
to the Acquired Franchisees or for the ownership and use of the
Purchased Assets;
(e) all
rights to any Actions of any nature available to or being pursued
by Seller to the extent they may occur after the Closing Date
related to the Acquired Franchisees, the Purchased Assets, or the
Assumed Liabilities whether arising by way of direct claim,
counterclaim, or otherwise;
(f) all
of Seller's rights under warranties and all similar rights against
third parties to the extent related to any Acquired Franchisees,
the Purchased Assets, or the Assumed Liabilities;
(g) all
accounts or notes receivable held by Seller which are due or are to
become due from any of the Acquired Franchisees, and any security,
claim, remedy or other right related to any of the foregoing (the
“Franchisee
Notes”) to the extent
identified in Schedule
2.01(g);
(h) all
of Sellers’ employees’ files for temporary employees
associated with the Acquired Franchisees including, without
limitation, applications, employment agreements, restrictive
covenant agreements, complaints, disciplinary records, pay data,
and other employment records; and
(i) electronic
copies of all books and records, including, but not limited to,
books of account, ledgers and general, financial and accounting
records, machinery and equipment maintenance files, customer lists,
customer purchasing histories, price lists, distribution lists,
supplier lists, production data, quality control records and
procedures, customer complaints and inquiry files, research and
development files, records and data (including all correspondence
with any Governmental Authority), sales material and records
(including pricing history, total sales, terms and conditions of
sale, sales and pricing policies and practices), strategic plans,
internal financial statements, marketing and promotional surveys,
materials and all other documents related to the Acquired
Franchisees (“Books and
Records”).
Section 2.02 Excluded Assets.
Notwithstanding the foregoing, the
Purchased Assets shall not include the following assets
(collectively, the “Excluded
Assets”):
(a) all
Cash;
(b) all
accounts or notes receivable held by Sellers, other than the
Franchisee Notes, and any unbilled revenue of the Business and any
security, claim, remedy or other right related to any of the
foregoing (“Accounts
Receivable”);
(c) all
Intellectual Property Assets, provided,
however,
that Sellers shall enter into the Trademark License Agreement as
set forth in Section
2.05;
(d) all
of Sellers’ company-owned offices and operations identified
in Schedule
2.02(d);
(e) Contracts
that are not Assigned Contracts, including the Insurance Policies
(the “Excluded
Contracts”);
(f) the
corporate seals, organizational documents, minute books, stock
books, Tax Returns, books of account or other records having to do
with the corporate organization of Seller;
(g) all
Benefit Plans and assets attributable thereto;
(h) all
workers’ compensation refunds, collateral and deposits
related to the Business;
(i) Sellers’
or any of their Affiliates’ rights as lessees under any real
property leases;
(j) all
property interests in Sellers’ candidate screening instrument
and process now known as L.O.P.E.;
(k) the
rights which accrue or will accrue to Sellers under this Agreement
and the Ancillary Documents;
(l) all
tangible personal property of the Seller (the
“Tangible
Personal Property”);
(m) all
claims (including insurance and indemnification claims), judgments
and causes of action of Seller arising from acts, omission or
events occurring prior to the Closing Date, including all rights to
any Actions of any nature available to or being pursued by Seller
to the extent they may occur prior to the Closing Date related to
the Acquired Franchisees, the Purchased Assets, or the Assumed
Liabilities whether arising by way of direct claim, counterclaim,
or otherwise;
(n) all
prepaid expenses, credits, advance payments, claims, security,
refunds, rights of recovery, rights of set-off, rights of
recoupment, deposits, charges, sums, and fees; and
(o) all
other assets of Sellers which are not Purchased
Assets.
Section 2.03 Assumed Liabilities.
Subject to the terms and conditions
set forth herein, Buyer shall assume and agree to pay, perform and
discharge all Liabilities in respect of the Assigned Contracts but
only to the extent that such Liabilities thereunder were incurred
and are required to be performed after the Closing Date, were
incurred in the ordinary course of business, and do not relate to
any failure to perform, improper performance, warranty or other
breach, default or violation by a Seller on or prior to the Closing
(the “Assumed
Liabilities”). Buyer will
not assume any other Liabilities of Sellers.
Section 2.04 Excluded Liabilities.
Buyer shall not assume and shall not
be responsible to pay, perform or discharge any Liabilities of
Sellers or any of their Affiliates of any kind or nature whatsoever
other than the Assumed Liabilities (the “Excluded
Liabilities”). Sellers
shall, and shall cause each of their Affiliates to, pay and satisfy
in due course all Excluded Liabilities which they are obligated to
pay and satisfy. Without limiting the generality of the foregoing,
the Excluded Liabilities shall include, but not be limited to, the
following:
(a) any
Liabilities of Sellers arising or incurred in connection with the
negotiation, preparation, investigation and performance of this
Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby, including, without limitation,
fees and expenses of counsel, accountants, consultants, advisers
and others;
(b) any
Liability for (i) Taxes of Sellers (or any stockholder or Affiliate
of Sellers) or relating to the Business, the Purchased Assets or
the Assumed Liabilities for any Pre-Closing Tax Period; (ii) Taxes
that arise out of the consummation of the transactions contemplated
hereby or that are the responsibility of Seller pursuant to
Section
6.11; (iii) unpaid payroll
Taxes of any employee of Seller or any of the Acquired Franchisees;
or (iv) other Taxes of Seller (or any stockholder or Affiliate of
Seller) of any kind or description that becomes a Liability of
Buyer under any common law doctrine of de facto merger or
transferee or successor liability or otherwise by operation of
contract or Law);
(c) any
Liabilities relating to or arising out of the Excluded
Assets;
(d) any
Liabilities in respect of any pending, threatened, or not yet
threatened Action arising out of, relating to or otherwise in
respect of the operation of the Business, the Acquired Franchisees,
or the Purchased Assets to the extent such Action relates to such
operation on or prior to the Closing Date including, without
limitation, Actions related to, arising out of, or otherwise in
respect of any actual or alleged violation of any Laws by Seller or
any of Seller’s agents or employees;
(e) any
Liabilities of Seller arising under or in connection with any
Benefit Plan providing benefits to any present or former employee
of Seller;
(f) any
Liabilities of Sellers for any obligations to any Governmental
Authority or financial institution, including, without limitation,
any amounts due or to become due under any Paycheck Protection
Program or other loan provided to a Seller (including the PPP
Loan);
(g) any
Liabilities of Seller for any present or former employees,
officers, directors, retirees, independent contractors or
consultants of Seller, including, without limitation, any
Liabilities associated with any claims for wages or other benefits,
bonuses, accrued vacation, workers' compensation, severance,
retention, termination or other payments;
(h) any
trade accounts payable of Seller or other accrued
Liabilities, provided,
however
that such trade accounts and
Liabilities related to the Assigned Contracts shall be Excluded
Liabilities only to the extent that such Liabilities thereunder
arise prior to the Closing Date;
(i) any
Liabilities for any workers’ compensation claims incurred at
any point for claims made or incurred by Sellers’, or their
respective affiliates’, employees;
(j) any
amounts due, payable, or accrued in relation to any of the Acquired
Franchises but only to the extent that such amounts accrued prior
to the Closing Date or any stockholders of the Seller;
(k) any
Liabilities to indemnify, reimburse or advance amounts to any
present or former officer, director, employee or agent of Seller
(including with respect to any breach of fiduciary obligations by
same);
(l) any
Liabilities under the Excluded Contracts or any other Contracts,
(i) which are not validly and effectively assigned to Buyer
pursuant to this Agreement, subject to Section
6.13; (ii) which do not conform
to the representations and warranties with respect thereto
contained in this Agreement; or (iii) to the extent such
Liabilities arise out of or relate to a breach by Seller of such
Contracts prior to Closing;
(m) any
Liabilities associated with debt, loans or credit facilities of
Seller and/or the Business owing to financial institutions or
Governmental Authorities; and
(n) any
Liabilities arising out of, in respect of or in connection with the
failure by Seller or any of its Affiliates to comply with any Law
or Governmental Order.
Section 2.05 Trademark License
Agreement. Each appropriate
Seller will enter into a royalty free, non-exclusive, transferable
license agreement with Buyer licensing to Buyer and its successors
and assigns a non-exclusive transferable license to freely
advertise and utilize certain of the Intellectual Property Assets
set forth in Schedule 2.05
in perpetuity in connection with the
Acquired Franchisees (the “Trademark
License Agreement”). The
Trademark License Agreement shall be in substantially the same
format as set forth in Exhibit A hereto.
Section 2.06 Purchase
Price.
(a) The
aggregate consideration to be paid by Buyer to Sellers for the
Purchased Assets will consist of Eleven Million One Hundred
Twenty-Two Thousand Nine Hundred and Eleven Dollars
($11,122,911.00) (the “Purchase
Price”), plus the
assumption of the Assumed Liabilities. The Purchase Price shall be
paid as provided in this Article
II and Section
3.01.
(b) At
the Closing, Buyer will pay to Sellers an amount equal to the
Purchase Price, minus the Buyer Termination Fee, minus the Buyer PPP Escrow Contribution (the
“Closing
Payment”), by wire
transfer of immediately available funds, in accordance with the
wire transfer instructions designated in writing by Sellers. At the
Closing, Buyer and Sellers shall execute and deliver to each other
a settlement statement (the “Closing
Settlement Statement”)
that sets forth the calculation of the Purchase Price and each of
the payments to be made at Closing pursuant to this
Article
II.
Section 2.07 Payment
of the Buyer Termination Fee, the Buyer PPP Escrow Contribution,
and the Sellers’ PPP Escrow Contribution.
(a) Buyer Termination
Fee. Upon execution of this
Agreement, Buyer will pay, or cause to be paid, to the Escrow Agent
the Buyer Termination Fee, to be held in escrow by the Escrow Agent
in a separate account (the “Buyer
Termination Escrow Account”) for the purpose of securing the
obligations of Buyer set forth in Section
9.02(a). The Buyer Termination
Fee shall be disbursed by the Escrow Agent in accordance with the
terms and provisions of the Escrow Agreement, provided, however,
that at the Closing, Buyer and Sellers shall jointly instruct the
Escrow Agent to release the Buyer Termination Fee to Sellers, to be
credited against payment of the Purchase Price. All fees and
expenses of the Escrow Agent under the Escrow Agreement shall be
borne one half by Sellers and one half by
Buyer.
(b) Buyer PPP Escrow Contribution
and Sellers’ PPP Escrow Contribution. At the Closing, (i) Buyer will pay, or cause to
be paid, to the PPP Escrow Agent the Buyer PPP Escrow Contribution,
and (ii) Sellers will pay, or cause to be paid, to the PPP Escrow
Agent the Sellers’ PPP Escrow Contribution (if any), in each
case by wire transfer of immediately available funds in accordance
with the wire transfer instructions designated in writing by the
PPP Escrow Agent, to be held by the PPP Escrow Agent in the PPP
Escrow Account for the purpose of securitizing the repayment of the
PPP Loan and to be disbursed by the PPP Escrow Agent in accordance
with the terms and provisions of the PPP Escrow
Agreement.
Section 2.08 Allocation of Purchase
Price. Seller and Buyer agree
that the Purchase Price and the Assumed Liabilities (plus other
relevant items) shall be allocated among the Purchased Assets for
all purposes (including Tax and financial accounting) as shown on
the allocation schedule (the “Allocation
Schedule”). A draft of
the Allocation Schedule shall be prepared by Buyer and delivered to
Seller within thirty (30) days following the Closing Date. If
Seller notifies Buyer in writing that Seller objects to one or more
items reflected in the Allocation Schedule, Seller and Buyer shall
negotiate in good faith to resolve such dispute. Buyer and Seller
shall file all Tax Returns (including amended returns and claims
for refund) and information reports in a manner consistent with the
Allocation Schedule.
Section 2.09 Withholding Tax.
Buyer shall be entitled to deduct and
withhold from the Purchase Price all Taxes that Buyer may be
required to deduct and withhold under any provision of Tax Law. All
such withheld amounts shall be treated as delivered to Seller
hereunder.
ARTICLE III
EXECUTION AND CLOSING
Section 3.01 Pre-Closing
Deliverables.
(a) Upon
execution of this Agreement, the parties shall simultaneously
execute and deliver to all other parties and the Escrow Agent the
Escrow Agreement, in substantially the form attached hereto as
Exhibit D, and Buyer shall deliver the Buyer Termination Fee to the
Escrow Agent pursuant to
Section 2.07(a).
(b) At
least three (3) Business Days prior to Closing, Sellers shall
deliver to Buyer a schedule setting forth the PPP Escrow Amount,
the Buyer PPP Escrow Contribution and the Sellers’ PPP Escrow
Contribution. The Buyer PPP Escrow Contribution and the
Sellers’ PPP Escrow Contribution will be paid into the PPP
Escrow Account at Closing pursuant to Section
2.07(b).
Section 3.02 Closing. Subject to the terms and conditions of this
Agreement, the consummation of the transactions contemplated by
this Agreement (the “Closing”)
shall take place at the offices of HireQuest, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or remotely by exchange of documents
and signatures (or their electronic counterparts), at 12:01 a.m.,
Eastern time, on the second Business Day after all of the
conditions to Closing set forth in Article VII
are either satisfied or waived (other
than conditions which, by their nature, are to be satisfied on the
Closing Date) but no later than March 31, 2021. The Parties may
mutually agree in writing upon a different Closing Date. The date
on which the Closing is to occur is herein referred to as the
“Closing
Date”.
Section 3.03 Closing
Deliverables.
(a) At
the Closing, Sellers shall deliver to Buyer the
following:
(i) an
assignment and assumption agreement in the form of Exhibit C hereto
(the “Assignment
and Assumption Agreement”) and duly executed by Sellers, effecting
the assignment to and assumption by Buyer of the Acquired
Franchisees, Purchased Assets and the Assumed
Liabilities;
(ii) the
Trademark License Agreement duly executed by Sellers;
(iii) the
Sellers’ Closing Certificate;
(iv) the
certificates of the Secretary or Assistant Secretary of each Seller
required by Section 7.02(g)
and Section
7.02(h);
(v) documents
evidencing: (x) the forgiveness or other satisfaction of any
Paycheck Protection Program or other CARES Act loan received by a
Seller; or (y) the establishment of the PPP Escrow Account pursuant
to Section
2.07(b), including, without
limitation, the PPP Escrow Agreement, or an escrow for any other
Paycheck Protection Program or CARES Act loan received by a Seller;
and
(vi) such
other customary instruments of transfer, assumption, filings or
documents, in form and substance reasonably satisfactory to Buyer,
as may be required to give effect to this Agreement.
(b) At
the Closing, Buyer shall deliver to Sellers the
following:
(i) the
Closing Payment by wire transfer of immediately available funds to
an account designated in writing by Seller to Buyer;
(ii) the
Assignment and Assumption Agreement duly executed by
Buyer;
(iii) the
Trademark License Agreement duly executed by Buyer;
(iv) the
Buyer Closing Certificate; and
(v) the
certificates of the Secretary or Assistant Secretary of Buyer
required by Section
7.03(g), and
Section
7.03(h).
(c) At
the Closing, Buyer shall deliver the Buyer PPP Escrow Contribution
and Sellers shall deliver the Sellers’ PPP Escrow
Contribution (if any), to the PPP Escrow Agent pursuant to
Section
2.07(b), and the Escrow
Agent shall release the Buyer Termination Fee to Sellers pursuant
to Section
2.07(b).
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the correspondingly
numbered Section of the Disclosure Schedules, Seller represents and
warrants to Buyer that the statements contained in this
Article
IV are true and correct as of
the date hereof (it being agreed that any matter disclosed in the
Disclosure Schedules with respect to any section of this Agreement
shall be deemed to have been disclosed for purposes of each other
section of this Agreement to the extent that the applicability of
such matter so referenced is reasonably apparent on the face of
such included matter).
Section 4.01 Organization, Good Standing,
Foreign Qualification of Sellers. Each Seller is a limited liability company or
corporation (as applicable) duly organized, validly existing and in
good standing under the laws of the state of its formation or
incorporation. Sellers have made available to Buyer true and
complete copies of the Organizational Documents of the Sellers,
each as amended on or prior to the date of this Agreement and
presently in effect. Each Seller is duly qualified to do business
and in good standing in each jurisdiction in which the nature of
the business as now conducted or the character of the property
owned or leased by it makes such qualification necessary, except
where the failure to so qualify or be in good standing would not
reasonably be expected to have a Material Adverse Effect. Each
Seller has all requisite limited liability company or corporate
power and authority to own, operate or lease its properties and
assets and to carry on its business as currently
conducted.
Section 4.02 Authority of Sellers.
Each Seller has full corporate power
and authority to enter into this Agreement and the Ancillary
Documents to which such Seller is a party, to carry out its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and
delivery by Sellers of this Agreement and any Ancillary Document to
which Sellers are a party, the performance by Sellers of their
obligations hereunder and thereunder and the consummation by
Sellers of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part
of each Seller. This Agreement has been duly executed and delivered
by each Seller, and (assuming due authorization, execution and
delivery by Buyer) this Agreement constitutes a legal, valid and
binding obligation of Sellers enforceable against Sellers in
accordance with its terms. When each Ancillary Document to which
Sellers are or will be a party has been duly executed and delivered
by Sellers (assuming due authorization, execution and delivery by
each other party thereto), such Ancillary Document will constitute
a legal and binding obligation of Sellers enforceable against them
in accordance with its terms.
Section 4.03 No Conflicts; Consents.
The execution, delivery and
performance by Sellers of this Agreement and the Ancillary
Documents to which they are a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not:
(a) conflict with or result in a violation or breach of, or default
under, any provision of the certificate of incorporation, by-laws
or other organizational documents of Sellers; (b) conflict with or
result in a violation or breach of any provision of any Law or
Governmental Order applicable to Sellers, the Business or the
Purchased Assets; or (c) result in the creation or imposition of
any Encumbrance on the Purchased Assets. No consent, approval,
Permit, Governmental Order, declaration or filing with, or notice
to, any Governmental Authority is required by or with respect to
any Seller in connection with the execution and delivery of this
Agreement or any of the Ancillary Documents and the consummation of
the transactions contemplated hereby and thereby, except to the
extent that the parties may be required to file or amend certain
applications in accordance with relevant regulations under state
franchise Laws.
Section 4.04 Financial Statements.
Complete copies of (i) the audited
financial statements consisting of the balance sheet of the Seller
as at December 31 in each of the years 2019, and 2018 and the
related statements of income and retained earnings, stockholders'
equity and cash flow for the years then ended (the
“Annual
Financial Statements”),
(ii) the unaudited consolidated balance sheet of the Sellers as of
December 31, 2020 (the “Interim
Balance Sheet”), and the
related unaudited consolidated income statement and statement of
cash flows for the 12-month period then ended (collectively with
the financial statement described in clause
(ii), the
“Interim
Financial Statements”)
have been delivered to Buyer. December 31, 2020 is referred to as
the “Balance
Sheet Date.” The Annual
Financial Statements and the Interim Financial Statements are
referred to collectively as the “Financial
Statements.” The Annual
Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved. The
Interim Financial Statements consist of internal operating reports
of Seller using Seller’s historical accounting principles
applied on a consistent basis throughout the period involved. The
Financial Statements are based on the books and records of the
Seller, and the Annual Financial Statements fairly present in all
material respects the financial condition of the Seller as of the
respective dates they were prepared and the results of the
operations of the Seller for the periods indicated, subject,
however, to the absence of notes and other textual disclosure
required by GAAP. Seller maintains a standard system of accounting
for the Business established and administered in accordance with
GAAP.
Section 4.05 Subsidiaries. Section
4.05 of the Disclosure
Schedules sets forth, for each Seller and each of Seller’s
subsidiaries, its name, jurisdiction of organization, form of
organization, and classification for U.S. federal income tax
purposes.
Section 4.06 Undisclosed Liabilities.
Sellers have no material Liabilities
with respect to the Purchased Assets or Acquired Franchisees except
(a) those which are adequately reflected or reserved against in the
Interim Balance Sheet as of the Balance Sheet Date, (b) those which
have been incurred in the ordinary course of business consistent
with past practice since the Balance Sheet Date (c) those referred
to in the Disclosure Schedules, (d) those Liabilities under
contracts and that are not required to be disclosed in the
Disclosure Schedules to this Agreement which
have been incurred in the ordinary course of business consistent
with past practice and (e) Liabilities that have been or will be
discharged on or before the Closing Date or retained by Seller as
provided in this Agreement.
Section 4.07 Absence of Certain Changes,
Events and Conditions. Since
the Balance Sheet Date, and other than in the ordinary course of
business consistent with past practice, there has not occurred any
Material Adverse Effect. Since the Balance Sheet Date, each Seller
has operated its business in the ordinary
course.
Section 4.08 Material
Contracts.
(a) Section
4.08(a) of the Disclosure
Schedules lists each of the following Contracts (x) by which any of
the Purchased Assets are bound or affected or (y) to which any
Seller is a party or by which it is bound in connection with the
Business as it relates to the Acquired Franchisees or the Purchased
Assets (the “Material
Contracts”):
(i) all
franchise agreements for the Acquired Franchisees and all Contracts
involving aggregate consideration in excess of $10,000 and which,
in each case, cannot be cancelled without penalty or without more
than 90 days' notice;
(ii) all
Contracts that have as their principal purpose is to provide for
the indemnification of any Person or the assumption of any Tax,
environmental or other Liability of any Person;
(iii) all
Contracts that relate to the acquisition or disposition of any
business, a material amount of stock or assets of any other Person
or any real property (whether by merger, sale of stock, sale of
assets or otherwise);
(iv) all
employment agreements and Contracts with independent contractors or
consultants (or similar arrangements) and which are not cancellable
without material penalty or without more than 90 days'
notice;
(v) except
for Contracts relating to trade receivables and the PPP Loan, all
Contracts relating to indebtedness (including, without limitation,
guarantees);
(vi) all
Contracts with any Governmental Authority
(“Government
Contracts”);
(vii) all
Contracts that limit or purport to limit the ability of any Seller
to compete in any line of business or with any Person or in any
geographic area or during any period of time, other than the
franchise agreements;
(viii) all
joint venture, partnership or similar Contracts;
(ix) all
Contracts for the sale of any of the Purchased Assets or for the
grant to any Person of any option, right of first refusal or
preferential or similar right to purchase any of the Purchased
Assets;
(x) all
powers of attorney with respect to the Business or any Purchased
Asset; and
(xi) all
other Contracts that are material to the Purchased Assets or the
operation of the Business as it relates to the Acquired Franchisees
and not previously disclosed pursuant to this Section
4.08.
(b) Each
Material Contract is valid and binding on the appropriate Seller in
accordance with its terms and is in full force and effect. None of
Seller or, to Sellers’ Knowledge, any other party thereto is
in material breach of or material default under (or is alleged to
be in material breach of or material default under) or has provided
or received any notice of any intention to terminate, any Material
Contract. Except
as set forth on Section 4.08
of the Disclosure Schedules, to
Sellers’ Knowledge, no event or circumstance has occurred
that, with notice or lapse of time or both, would constitute an
material event of default under any Material Contract or result in
a termination thereof or would cause or permit the acceleration or
other changes of any right or obligation or the loss of any
material benefit thereunder. Complete and correct copies of each
Material Contract (including all modifications, amendments and
supplements thereto and waivers thereunder) have been made
available to Buyer. Except as set forth on Section 4.08
of the Disclosure Schedules, to
Sellers’ Knowledge, there are no material disputes pending or
threatened under any Contract included in the Purchased
Assets.
Section 4.09 Title to Purchased
Assets. Seller has good and
valid title to all of the Purchased Assets. All such Purchased
Assets are free and clear of Encumbrances, other than Permitted
Encumbrances.
Section 4.10 Sufficiency of Assets.
The Purchased Assets are sufficient
for the continued conduct of the Business as it relates to the
Acquired Franchisees after the Closing in substantially the same
manner as conducted prior to the Closing and constitute all of the
rights, property and assets necessary to conduct the Business as it
relates to the Acquired Franchisees as currently conducted. None of
the Excluded Assets are material to the Business as it relates to
the Acquired Franchisees.
Section 4.11 Intellectual Property.
Sellers’ ownership of the
Intellectual Property Assets that are subject to the Trademark
License Agreement is free and clear of all Encumbrances, other than
Permitted Encumbrances.
Section 4.12 Real
Property.
(a) No
Seller owns any real property.
(b)
No
Seller leases any real property any interest which will be conveyed
as a Purchased Asset.
(c)
No
real property owned or leased by the Sellers is necessary to
operate the business as it relates to the Purchased Assets or
Acquired Franchisees other than to perform back office
administrative functions.
Section 4.13 Insurance. Section 4.13
of the Disclosure Schedules sets forth
(a) a true and complete list of all current policies or binders of
fire, liability, product liability, umbrella liability, real and
personal property, workers' compensation, vehicular, fiduciary
liability and other casualty and property insurance maintained by a
Seller or its Affiliates and relating to the Business as it relates
to the Acquired Franchisees, the Purchased Assets or the Assumed
Liabilities (collectively, the “Insurance
Policies”); and (b) with
respect to the Business, the Purchased Assets or the Assumed
Liabilities, a list of all pending claims and the claims history
for Seller since January 1, 2017. Except as set forth on
Section
4.13 of the Disclosure
Schedules, there are no claims related to the Business, the
Purchased Assets or the Assumed Liabilities pending under any such
Insurance Policies as to which coverage has been questioned, denied
or disputed or in respect of which there is an outstanding
reservation of rights. Neither Sellers nor any of their Affiliates
have received any written notice of cancellation of, premium
increase with respect to, or alteration of coverage under, any of
such Insurance Policies. All premiums due on such Insurance
Policies have either been paid or, if not yet due, accrued. All
such Insurance Policies (a) are in full force and effect and
enforceable in accordance with their terms; (b) are provided by
carriers who are financially solvent; and (c) have not been subject
to any lapse in coverage. None of Sellers or any of their
Affiliates are in default under, or have otherwise failed to comply
with, in any material respect, any provision contained in any such
Insurance Policy. True and complete copies of the Insurance
Policies have been made available to Buyer. None of the Insurance
Policies described in the Certificate of Insurance or rights
thereunder will be assigned to Buyer.
Section 4.14 Legal Proceedings; Governmental
Orders.
(a) Except
as set forth in Section 4.14(a)
of the Disclosure Schedules, there are
no Actions pending or, to Sellers’ Knowledge, threatened
against or by any Seller (i) relating to or affecting the Business
as it relates to the Acquired Franchisees, the Purchased Assets or
the Assumed Liabilities; or (ii) that challenge or seek to prevent,
enjoin or otherwise delay the transactions contemplated by this
Agreement. No event has occurred or circumstances exist that may
give rise to, or serve as a basis for, any such
Action.
(b) Except
as set forth in Section 4.14(b)
of the Disclosure Schedules, there are
no outstanding Governmental Orders and no unsatisfied judgments,
penalties or awards against, relating to or affecting the Business
as it relates to the Acquired Franchisees or the Purchased
Assets.
Section 4.15 Compliance With Laws;
Permits.
(a) Sellers
have complied, and are now complying, in all material respects with
all Laws applicable to the conduct of the Business as currently
conducted or the ownership and use of the Purchased
Assets.
(b) All
Permits required for Sellers to conduct the Business as currently
conducted or for the ownership and use of the Purchased Assets have
been obtained by Sellers and are valid and in full force and
effect. All fees and charges with respect to such Permits as of the
date hereof have been paid in full.
Section 4.16 Employee Benefit
Matters.
(a) Section
4.16(a) of the Disclosure
Schedules contains a true and complete list of each pension,
benefit, retirement, compensation, employment, consulting,
profit-sharing, deferred compensation, incentive, bonus,
performance award, phantom equity, stock or stock-based, change in
control, retention, severance, vacation, paid time off (PTO),
medical, vision, dental, disability, welfare, Code Section 125
cafeteria, fringe-benefit and other similar agreement, plan,
policy, program or arrangement (and any amendments thereto), in
each case whether or not reduced to writing and whether funded or
unfunded, including each “employee benefit plan” within
the meaning of Section 3(3) of ERISA, whether or not tax-qualified
and whether or not subject to ERISA, which is or has been
maintained, sponsored, contributed to, or required to be
contributed to by Seller for the benefit of any current or former
employee, officer, director, retiree, independent contractor or
consultant of the Business as it relates to the Acquired
Franchisees or any spouse or dependent of such individual, or under
which Sellers or any of their ERISA Affiliates has or may have any
Liability from
the conduct of the Business as it relates to the Acquired
Franchisees, or with respect to which Buyer or any of its
Affiliates would reasonably be expected to have any Liability,
contingent or otherwise (as listed on Section 4.16(a)
of the Disclosure Schedules, each, a
“Benefit
Plan”).
(b) With
respect to each Benefit Plan, Sellers have made available to Buyer
accurate, current and complete copies of each of the following: (i)
where the Benefit Plan has been reduced to writing, the plan
document together with all amendments; (ii) where the Benefit Plan
has not been reduced to writing, a written summary of all material
plan terms; (iii) where applicable, copies of any trust agreements
or other funding arrangements, custodial agreements, insurance
policies and contracts, administration agreements and similar
agreements, and investment management or investment advisory
agreements, now in effect or required in the future as a result of
the transactions contemplated by this Agreement or otherwise; (iv)
copies of any summary plan descriptions, summaries of material
modifications, summaries of benefits and coverage, COBRA
communications, employee handbooks and any other written
communications (or a description of any oral communications)
relating to any Benefit Plan; (v) in the case of any Benefit Plan
that is intended to be qualified under Section 401(a) of the Code,
a copy of the most recent determination, opinion or advisory letter
from the Internal Revenue Service and any legal opinions issued
thereafter with respect to such Benefit Plan's continued
qualification; (vi) in the case of any Benefit Plan for which a
Form 5500 must be filed, a copy of the two most recently filed
Forms 5500, with all corresponding schedules and financial
statements attached; (vii) actuarial valuations and reports related
to any Benefit Plans with respect to the most recently completed
plan years; (viii) the most recent nondiscrimination tests
performed under the Code; and (ix) copies of material notices,
letters or other correspondence from the Internal Revenue Service,
Department of Labor, Department of Health and Human Services,
Pension Benefit Guaranty Corporation or other Governmental
Authority relating to the Benefit Plan.
(c) Each
Benefit Plan and any related trust (other than any multiemployer
plan within the meaning of Section 3(37) of ERISA (each a
“Multiemployer
Plan”)) has been
established, administered and maintained in accordance with its
terms and in compliance with all applicable Laws (including ERISA
and the Code). All benefits,
contributions and premiums relating to each Benefit Plan have been
timely paid in accordance with the terms of such Benefit Plan and
all applicable Laws and accounting principles, and all benefits
accrued under any unfunded Benefit Plan have been paid, accrued or
otherwise adequately reserved to the extent required by, and in
accordance with GAAP.
(d) Neither
Sellers nor any of their ERISA Affiliates have (i) incurred or
reasonably expect to incur, either directly or indirectly, any
material Liability under Title I or Title IV of ERISA or related
provisions of the Code or applicable local Law relating to employee
benefit plans; (ii) failed to timely pay premiums to the Pension
Benefit Guaranty Corporation; (iii) withdrawn from any Benefit
Plan; (iv) engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; (v)
incurred taxes under Section 4971 of the Code with respect to any
Single Employer Plan; or (vi) participated in a multiple employer
welfare arrangements (MEWA).
(e) With
respect to each Benefit Plan (i) no such plan is a Multiemployer
Plan; and (ii) no such plan is a “multiple employer
plan” within the meaning of Section 413(c) of the Code or a
“multiple employer welfare arrangement” (as defined in
Section 3(40) of ERISA).
(f) There
is no pending or, to Sellers’ Knowledge, threatened Action
relating to a Benefit Plan (other than routine claims for
benefits), and no Benefit Plan has within the three years prior to
the date hereof been the subject of an examination or audit by a
Governmental Authority or the subject of an application or filing
under, or is a participant in, an amnesty, voluntary compliance,
self-correction or similar program sponsored by any Governmental
Authority.
(g) Each
Benefit Plan that is subject to Section 409A of the Code has been
administered in compliance with its terms and the operational and
documentary requirements of Section 409A of the Code and all
applicable regulatory guidance (including, notices, rulings and
proposed and final regulations) thereunder. Seller does not have
any obligation to gross up, indemnify or otherwise reimburse any
individual for any excise taxes, interest or penalties incurred
pursuant to Section 409A of the Code.
(h) Neither
the execution of this Agreement nor any of the transactions
contemplated by this Agreement will (either alone or upon the
occurrence of any additional or subsequent events): (i) entitle any
current or former director, officer, employee, independent
contractor or consultant of the Business to severance pay or any
other payment; (ii) accelerate the time of payment, funding or
vesting, or increase the amount of compensation (including
stock-based compensation) due to any such individual; or (iii)
increase the amount payable under or result in any other material
obligation pursuant to any Benefit Plan.
Section 4.17 Environmental
Matters.
(a) The
Sellers, and to Sellers’ Knowledge, the Acquired Franchisees,
are, and have been, in compliance in all material respects with all
Environmental Laws, which compliance includes the possession,
maintenance of, compliance with, or application for, all Permits
required under applicable Environmental Laws for the operation of
the business of the Sellers and Acquired Franchisees as currently
conducted.
(b) Neither
the Sellers, nor, to Sellers’ Knowledge, any of the Acquired
Franchisees has disposed of, released, or discharged any Hazardous
Substances on, at, under, in, or from any real property currently
or, formerly owned, leased, or operated by it or any of the
Acquired Franchisees or at any other location that is: (i)
currently subject to any investigation, remediation, or monitoring;
or (ii) reasonably likely to result in liability to the Sellers or
any of the Acquired Franchisees, in either case of (i) or (ii)
under any applicable Environmental Laws.
(c) The
Sellers have not: (i) produced, processed, manufactured, generated,
transported, treated, handled, used, or stored any Hazardous
Substances, except in compliance with Environmental Laws, at any
property owned or leased by Sellers at any point; or (ii) exposed
any employee or any third party to any Hazardous Substances under
circumstances reasonably expected to give rise to any material
Liability or obligation under any Environmental Law.
(d) Sellers
have not received written notice of and there is no legal Action
pending, or to the Sellers’ Knowledge, threatened against any
Seller or any of the Acquired Franchisees, alleging any Liability
or responsibility under or non-compliance with any Environmental
Law or seeking to impose any financial responsibility for any
investigation, cleanup, removal, containment, or any other
remediation or compliance under any Environmental Law. Sellers are
not subject to any Order, settlement agreement, or other written
agreement by or with any Governmental Authority or third party
imposing any material Liability or obligation with respect to any
of the foregoing.
(e) Neither
the Sellers, nor, to the Sellers’ Knowledge, any of the
Acquired Franchisees, have expressly assumed or retained any
Liabilities under any applicable Environmental Laws of any other
Person, including in any acquisition or divestiture of any property
or business.
Section 4.18 Employment
Matters. Sellers
are and have been in compliance with all applicable Laws pertaining
to employment and employment practices to the extent they relate to
employees, consultants and independent contractors of the Business,
including all Laws relating to labor relations, equal employment
opportunities, fair employment practices, employment
discrimination, harassment, retaliation, reasonable accommodation,
disability rights or benefits, immigration, wages, hours, overtime
compensation, child labor, hiring, promotion and termination of
employees, working conditions, meal and break periods, privacy,
health and safety, workers' compensation, leaves of absence, paid
sick leave and unemployment insurance. All individuals
characterized and treated by Seller as consultants or independent
contractors of the Business are properly treated as independent
contractors under all applicable Laws. All employees of the
Business classified as exempt under the Fair Labor Standards Act
and state and local wage and hour laws are properly classified.
Sellers are in compliance with and have complied with all
immigration laws, including Form I-9 requirements and any
applicable mandatory E-Verify obligations. There are no Actions
against Sellers pending, or to the Sellers’ Knowledge,
threatened to be brought or filed, by or with any Governmental
Authority or arbitrator in connection with the employment of any
current or former applicant, employee, consultant or independent
contractor of the Business, including, without limitation, any
charge, investigation or claim relating to unfair labor practices,
equal employment opportunities, fair employment practices,
employment discrimination, harassment, retaliation, reasonable
accommodation, disability rights or benefits, immigration, wages,
hours, overtime compensation, employee classification, child labor,
hiring, promotion and termination of employees, working conditions,
meal and break periods, privacy, health and safety, workers'
compensation, leaves of absence, paid sick leave, unemployment
insurance or any other employment related matter arising under
applicable Laws.
Section 4.19 Taxes.
(a) All
Tax Returns with respect to the Business required to be filed by
Sellers for any Pre-Closing Tax Period have been, or will be,
timely filed. Such Tax Returns are, or will be, true, complete and
correct in all respects. All Taxes due and owing by Seller (whether
or not shown on any Tax Return) have been, or will be, timely
paid.
(b) Sellers
have withheld and paid each Tax required to have been withheld and
paid in connection with amounts paid or owing to any Employee,
independent contractor, creditor, customer, shareholder or other
party, and complied with all information reporting and backup
withholding provisions of applicable Law.
(c) No
extensions or waivers of statutes of limitations have been given or
requested with respect to any Taxes of Sellers.
(d) All
deficiencies asserted, or assessments made, against Sellers as a
result of any examinations by any taxing authority have been fully
paid.
(e) Sellers
are not a party to any Action by any taxing authority. There are no
pending or threatened Actions by any taxing authority.
(f) There
are no Encumbrances for Taxes upon any of the Purchased Assets nor
is any taxing authority in the process of imposing any Encumbrances
for Taxes on any of the Purchased Assets (other than for current
Taxes not yet due and payable).
Section 4.20 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement or any
Ancillary Document based upon arrangements made by or on behalf of
Seller.
Section 4.21 CARES
Act Relief Funds.
The Sellers have made available to Buyer for
review information regarding all CARES Act stimulus fund programs
in which the Sellers are participating, including the amount of
funds received by the Sellers (the “Stimulus
Funds”). The Sellers have
maintained records associated with the Stimulus Funds in material
compliance with all Laws and regulations related to the CARES Act
and all conditions and related guidance available as of the date
hereof. The Sellers have utilized all such Stimulus Funds in
accordance with the applicable Laws and regulations. The Sellers
have completed a forgiveness application reflecting their use of
all of the Stimulus Funds and have submitted it, together with any
supporting documentation, to the PPP Lender. The transactions contemplated herein comply in all
respects with the SBA Procedural Notice.
ARTICLE
V
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the correspondingly
numbered Section of the Disclosure Schedules, Buyer represents and
warrants to Seller that the statements contained in this
Article
V are true and correct as of
the date hereof.
Section 5.01 Organization of Buyer.
Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the state
of Delaware.
Section 5.02 Authority of Buyer.
Buyer has full corporate power and
authority to enter into this Agreement and the Ancillary Documents
to which Buyer is a party, to carry out its obligations hereunder
and thereunder and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Buyer of this
Agreement and any Ancillary Document to which Buyer is a party, the
performance by Buyer of its obligations hereunder and thereunder
and the consummation by Buyer of the transactions contemplated
hereby and thereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer, and (assuming due authorization,
execution and delivery by Seller) this Agreement constitutes a
legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms. When each Ancillary Document to
which Buyer is or will be a party has been duly executed and
delivered by Buyer (assuming due authorization, execution and
delivery by each other party thereto), such Ancillary Document will
constitute a legal and binding obligation of Buyer enforceable
against it in accordance with its terms.
Section 5.03 No Conflicts; Consents.
The execution, delivery and
performance by Buyer of this Agreement and the Ancillary Documents
to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (a) conflict
with or result in a violation or breach of, or default under, any
provision of the certificate of incorporation, by-laws or other
organizational documents of Buyer; (b) conflict with or result in a
violation or breach of any provision of any Law or Governmental
Order applicable to Buyer; or (c) require the consent, notice or
other action by any Person under any Contract to which Buyer is a
party. No consent, approval, Permit, Governmental Order,
declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to Buyer in connection
with the execution and delivery of this Agreement and the Ancillary
Documents and the consummation of the transactions contemplated
hereby and thereby.
Section 5.04 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement or any
Ancillary Document based upon arrangements made by or on behalf of
Buyer.
Section 5.05 Sufficiency of Funds.
Buyer has sufficient cash on hand or
other sources of immediately available funds to enable it to make
payment of the Purchase Price and consummate the transactions
contemplated by this Agreement.
Section 5.06 Legal Proceedings.
There are no Actions pending or, to
Buyer's knowledge, threatened against or by Buyer or any Affiliate
of Buyer that challenge or seek to prevent, enjoin or otherwise
delay the transactions contemplated by this Agreement. No event has
occurred or circumstances exist that may give rise or serve as a
basis for any such Action.
Section
5.07
Independent Evaluation. Buyer acknowledges that Buyer and its Affiliates
are experienced and knowledgeable investors in the business of
purchasing, owning and operating businesses such as the Business as
it relates to the Acquired Franchisees or the Purchased Assets. In
making the decision to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer has relied solely upon
the representations, warranties, covenants, and agreements of the
Parties set forth in this Agreement and Buyer’s own
independent due diligence and investigation of the Business as it
relates to the Acquired Franchisees or the Purchased Assets, and
has been advised by and has relied solely on their own expertise
and their own legal, tax, operations, and other professional
counsel and advisors concerning this transaction, the Business as
it relates to the Acquired Franchisees or the Purchased Assets and
the value thereof. Notwithstanding anything to
the contrary, nothing in this paragraph shall prohibit or otherwise
serve as a defense against any claims by Buyer as a result of fraud
by any Seller.
ARTICLE
VI
COVENANTS
Section 6.01 Conduct of Business Prior to
the Closing. From the date
hereof until the Closing, except as otherwise provided in this
Agreement or consented to in writing by Buyer, Sellers shall (x)
conduct the Business, including as it relates to the Acquired
Franchisees, in the ordinary course of business consistent with
past practice; and (y) use reasonable best efforts to maintain and
preserve intact its current Business organization, operations, and
franchises and to preserve the rights, franchises, goodwill and
relationships of its employees, customers, lenders, suppliers,
regulators and others having relationships with the Business.
Without limiting the foregoing, from the date hereof until the
Closing Date, Sellers shall use commercially reasonable efforts
to:
(a) preserve
and maintain all Permits required for the conduct of the Business
as it relates to the Acquired Franchisees as currently conducted or
the ownership and use of the Purchased Assets;
(b) pay
the debts, Taxes and other obligations of the Business when
due;
(c) maintain
the properties and assets included in the Purchased Assets in the
same condition as they were on the date of this Agreement, subject
to reasonable wear and tear;
(d) continue
in full force and effect without modification all Insurance
Policies, except as required by applicable Law;
(e) defend
and protect the properties and assets included in the Purchased
Assets from infringement, unfair competition, or
usurpation;
(f) perform
all of its obligations under all Assigned Contracts;
(g) maintain
the Books and Records in accordance with past
practice;
(h) comply
in all material respects with all Laws applicable to the conduct of
the Business or the ownership and use of the Purchased Assets;
and
(i) not
take or permit any action that would cause any of the changes,
events or conditions described in Section 4.07
to occur.
Section 6.02 Access to Information and
Acquired Franchisees. From the
date hereof until the Closing, Sellers shall (a) afford Buyer and
its Representatives full and free access to and the right to
inspect all of the properties, assets, premises, Books and Records,
Contracts and other documents and data related to the Business as
it relates to the Acquired Franchisees and Purchased Assets; (b)
furnish Buyer and its Representatives with such financial,
operating and other data and information related to the Acquired
Franchisees and Purchased Assets as Buyer or any of its
Representatives may reasonably request; (c) provide Buyer with
access to all Sellers’ personnel, franchisees, and systems to
aid in the transition to Buyer’s franchised system,
including, without limitation, transition to the use of
Buyer’s proprietary software for billing, employee pay, and
day-to-day activities of the Business, and (d) instruct the
Representatives of Sellers to cooperate with Buyer in its
investigation of the Business, the Acquired Franchisees, and the
Purchased Assets. Buyer and Seller shall cooperate in good faith to
access information and perform investigations pursuant to the
Transition Plan attached hereto as Exhibit A. Any investigation
pursuant to this Section 6.02
shall be conducted in such manner as
not to interfere unreasonably with the conduct of the Business or
any other businesses of Sellers. No investigation by Buyer or other
information received by Buyer shall operate as a waiver or
otherwise affect any representation, warranty or agreement given or
made by Sellers in this Agreement or the Ancillary Documents. Buyer
is responsible for any loss, claim, liability, encumbrance, cause
of action, and expense resulting from Buyer's inspections and
investigations, including any property damage or personal injury.
Buyer shall indemnify and defend each of Sellers and their
Affiliates and their respective Representatives against any claim
involving a matter for which Buyer is responsible under this
paragraph.
Section 6.03 No Solicitation of Other
Bids.
(a) Sellers
shall not, and shall not authorize or permit any of their
Affiliates or any of their Representatives to, directly or
indirectly, (i) encourage, solicit, initiate, facilitate or
continue inquiries regarding an Acquisition Proposal; (ii) enter
into discussions or negotiations with, or provide any information
to, any Person concerning a possible Acquisition Proposal; or (iii)
enter into any agreements or other instruments (whether or not
binding) regarding an Acquisition Proposal. Sellers shall
immediately cease and cause to be terminated, and shall cause their
Affiliates and all of their Representatives to immediately cease
and cause to be terminated, all existing discussions or
negotiations with any Persons conducted heretofore with respect to,
or that could lead to, an Acquisition Proposal. For purposes
hereof, “Acquisition
Proposal” means any
inquiry, proposal or offer from any Person (other than Buyer or any
of its Affiliates) relating to the direct or indirect disposition,
whether by sale, merger or otherwise, of all or any portion of the
Business or the Purchased Assets.
(b) In
addition to the other obligations under this Section
6.03, Sellers shall promptly
(and in any event within three Business Days after receipt thereof
by any Seller or its Representatives) advise Buyer orally and in
writing of any Acquisition Proposal, any request for information
with respect to any Acquisition Proposal, or any inquiry with
respect to or which could reasonably be expected to result in an
Acquisition Proposal, the material terms and conditions of such
request, Acquisition Proposal or inquiry, and the identity of the
Person making the same.
Section 6.04 Notice of Certain
Events.
(a) From
the date hereof until the Closing, Sellers shall promptly notify
Buyer in writing of:
(i) any
fact, circumstance, event or action the existence, occurrence or
taking of which (A) has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect,
(B) has resulted in, or could reasonably be expected to result in,
any representation or warranty made by Sellers hereunder not being
true and correct or (C) has resulted in, or could reasonably be
expected to result in, the failure of any of the conditions set
forth in Section 7.02
to be satisfied;
(ii) any
notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(iii) any
notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement;
and
(iv) any
Actions commenced or, to Seller's Knowledge, threatened against,
relating to or involving or otherwise affecting the Business, the
Acquired Franchisees, the Purchased Assets, or the Assumed
Liabilities that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to
Section
4.14 or that relates to the
consummation of the transactions contemplated by this
Agreement.
(b) Buyer's
receipt of information pursuant to this Section 6.04
shall not operate as a waiver or
otherwise affect any representation, warranty or agreement given or
made by Seller in this Agreement or the Ancillary Documents and
shall not be deemed to amend or supplement the Disclosure
Schedules.
Section 6.05 Employees and Employee
Benefits.
(a) On
the Closing Date, the employment of all temporary employees of the
Business who have worked through any of the Acquired Franchisees at
any point preceding the Closing Date will terminate and, at Buyer's
sole discretion, Buyer may offer employment, on an “at
will” basis, to any or all of such temporary
employees.
(b) Sellers
shall be solely responsible, and Buyer shall have no obligations
whatsoever for, any compensation or other amounts payable to any
current or former employee, including without limitation, temporary
employees, officer, director, independent contractor or consultant
of the Business, including, without limitation, hourly pay,
commission, bonus, salary, accrued vacation, fringe, pension or
profit sharing benefits or severance pay for any period relating to
the service with Sellers at any time on or prior to the Closing
Date and Sellers shall pay all such amounts to all entitled persons
on or prior to the Closing Date or when otherwise due.
(c) Sellers
shall remain solely responsible for the satisfaction of all claims
for medical, dental, life insurance, health accident,
workers’ compensation, or disability benefits brought by or
in respect of current or former employees, including without
limitation temporary employees, officers, directors, independent
contractors or consultants of the Business or the spouses,
dependents or beneficiaries thereof, which claims relate to events
occurring on or prior to the Closing Date. Sellers shall pay, or
cause to be paid, all such amounts to the appropriate Persons as
and when due.
Section 6.06 Confidentiality.
From and after the Closing, Sellers
shall, and shall cause their Affiliates to, hold, and shall use
their reasonable best efforts to cause their respective
Representatives to hold, in confidence any and all information,
whether written or oral, concerning the Business as it relates to
the Acquired Franchisees or the Purchased Assets, except to the
extent that Sellers can show that such information (a) is generally
available to and known by the public through no fault of Sellers,
any of their Affiliates or their respective Representatives; or (b)
is lawfully acquired by Sellers, any of their Affiliates or their
respective Representatives from and after the Closing from sources
which are not prohibited from disclosing such information by a
legal, contractual or fiduciary obligation. If Sellers or any of
their Affiliates or their respective Representatives are compelled
to disclose any information by judicial or administrative process
or by other requirements of Law, Sellers shall promptly notify
Buyer in writing and shall disclose only that portion of such
information which Sellers are advised by counsel in writing is
legally required to be disclosed, provided that
Sellers shall use reasonable best
efforts to obtain an appropriate protective order or other
reasonable assurance that confidential treatment will be accorded
such information.
Section 6.07 Non-Competition;
Non-Solicitation.
(a) For
a period of two (2) years commencing on the Closing Date (the
“Restricted
Period”), Sellers shall
not, and shall not permit any of their Affiliates, or officers, to,
directly or indirectly, (i) engage in or assist others in engaging
in the Restricted Business in the Territory; (ii) have an interest
in any Person that engages directly or indirectly in the Restricted
Business in the Territory in any capacity, including as a partner,
shareholder, member, employee, principal, agent, trustee or
consultant; or (iii) cause, induce or encourage any material actual
or prospective client, customer, supplier or licensor of the
Business as it relates to the Acquired Franchisees (including any
existing or former client or customer of Sellers at any of the
Acquired Franchisees and any Person that becomes a client or
customer of the Acquired Franchisees after the Closing), or any
other Person who has a material business relationship with the
Acquired Franchisees, to terminate or modify any such actual or
prospective relationship. Notwithstanding the foregoing, Sellers
may service any customer outside of the Territory and may own,
directly or indirectly, solely as an investment, securities of any
Person traded on any national securities exchange if Sellers are
not a controlling Person of, or a member of a group which controls,
such Person and does not, directly or indirectly, own 5% or more of
any class of securities of such Person.
(b) During
the Restricted Period, in the Territory, Sellers shall not, and
shall not permit any of their Affiliates to, directly or
indirectly, hire or solicit any staff employee or owner of any of
the Acquired Franchisees or encourage any such person to leave such
employment or hire any such person who has left such employment,
except pursuant to a general solicitation which is not directed
specifically to any such employees; provided,
that nothing in this
Section
6.07(b) shall prevent Sellers
or any of their Affiliates from hiring (i) any employee whose
employment has been terminated by Buyer or (ii) after 180 days from
the date of termination of employment, any employee whose
employment has been terminated by the employee.
(c) Sellers
acknowledge that a breach or threatened breach of this
Section
6.07 would give rise to
irreparable harm to Buyer, for which monetary damages would not be
an adequate remedy, and hereby agrees that in the event of a breach
or a threatened breach by Sellers of any such obligations, Buyer
shall, in addition to any and all other rights and remedies that
may be available to it in respect of such breach, be entitled to
equitable relief, including a temporary restraining order, an
injunction, specific performance and any other relief that may be
available from a court of competent jurisdiction (without any
requirement to post bond).
(d) Sellers
acknowledge that the restrictions contained in this
Section
6.07 are reasonable and
necessary to protect the legitimate interests of Buyer and
constitute a material inducement to Buyer to enter into this
Agreement and consummate the transactions contemplated by this
Agreement. In the event that any covenant contained in this
Section
6.07 should ever be adjudicated
to exceed the time, geographic, product or service or other
limitations permitted by applicable Law in any jurisdiction, then
any court is expressly empowered to reform such covenant, and such
covenant shall be deemed reformed, in such jurisdiction to the
maximum time, geographic, product or service or other limitations
permitted by applicable Law. The covenants contained in this
Section
6.07 and each provision hereof
are severable and distinct covenants and provisions. The invalidity
or unenforceability of any such covenant or provision as written
shall not invalidate or render unenforceable the remaining
covenants or provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such covenant or provision in any other
jurisdiction.
Section 6.08 Closing Conditions
From the date hereof until the
Closing, each party hereto shall use reasonable best efforts to
take such actions as are necessary to expeditiously satisfy the
closing conditions set forth in Article VII
hereof.
Section 6.09 Public Announcements.
Upon execution of this Agreement,
Buyer will prepare a Current Report on Form 8-k to be filed with
the United States Securities and Exchange Commission describing
this Agreement and the transactions contemplated herein. The
parties will cooperate to prepare an appropriate press release to
be issued upon execution of this Agreement. Upon Closing, Buyer
will prepare a Current Report on Form 8-k to be filed with the
United States Securities and Exchange Commission announcing the
Closing. The parties will cooperate to prepare an appropriate press
release to be issued upon Closing. Thereafter, the parties shall
cooperate as to the timing and contents of any such announcement
occurring within six (6) months of Closing. Nothing in this
Section
6.09 shall be construed to
prevent Buyer from making all filings required by Law with the
United States Securities and Exchange
Commission.
Section 6.10 Receivables.
From and after the Closing, if Sellers
or any of their Affiliates receive or collect any funds relating to
any Purchased Asset, Sellers shall remit such funds to Buyer within
five Business Days after its receipt thereof. From and after the
Closing, if Buyer or its Affiliates receive or collect any funds
relating to any Excluded Asset, Buyer shall remit any such funds to
Sellers within five Business Days after its receipt
thereof.
Section 6.11 Transfer Taxes.
All transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees
(including any penalties and interest) incurred in connection with
this Agreement and the Ancillary Documents shall be borne and paid
by Sellers when due. Sellers shall, at their own expense, timely
file any Tax Return or other document with respect to such Taxes or
fees (and Buyer shall cooperate with respect thereto as
necessary).
Section 6.12 Further Assurances.
Following the Closing, each of the
parties hereto shall, and shall cause their respective Affiliates
to, execute and deliver such additional documents, instruments,
conveyances and assurances and take such further actions as may be
reasonably required to carry out the provisions hereof and give
effect to the transactions contemplated by this Agreement and the
Ancillary Documents.
Section 6.13 Assignment of Certain
Contracts. The terms of many of
the Assigned Contracts require the consent of the counterparty for
the assignment and transfer to Buyer. The failure to obtain any
consents for the assignment and transfer of the Assigned Contracts
to Buyer prior to the Closing Date shall not constitute a breach or
default under this Agreement. Seller shall use its commercially
reasonable efforts to cooperate with Buyer in obtaining all
consents requested by Buyer that are necessary for the assignment
and transfer of the Assigned Contracts to Buyer. Buyer shall
cooperate with Seller and use its commercially reasonable efforts
to assist Seller in obtaining such consents, including providing
such information regarding Buyer as such persons shall reasonably
request as a condition to providing their consent. If Seller is
unable to obtain any such consent, Seller shall, at the reasonable
direction of Buyer, use its commercially reasonable efforts to act
after the Closing as Buyer’s agent for the sole purposes of
obtaining for Buyer the benefits under such Assigned Contract to
the extent relating specifically to the Acquired Franchisees or to
the ownership and use of the Purchased Assets and cooperate with
Buyer in any other commercially reasonable arrangement designed to
provide such benefits to Buyer, in each case to the maximum extent
permitted by Law and the Assigned Contract, with Buyer bearing all
Liabilities associated with the performance of such contract after
the Closing Date.
Section 6.14 Transition Services.
For a period of ninety (90) days
following Closing, Sellers agree to cooperate and assist Buyer as
reasonably requested by Buyer, with the transition of the Purchased
Assets and Assumed Liabilities to Buyer. Any out-of-pocket expenses
incurred by Sellers and payable to third parties for such
cooperation and assistance shall be promptly paid by Buyer,
provided,
however
that Seller shall consult Buyer prior
to incurring expenses to any third party in excess of
$5,000.
Section 6.15 PPP Escrow and
Forgiveness. In the event the
PPP Loan is not fully satisfied or forgiven prior to Closing, then
after Closing and until the PPP Loan is fully satisfied or
forgiven, Sellers will cause the PPP Escrow Account to remain fully
funded with the entirety of the PPP Escrow Amount. The PPP Escrow
Amount will only be released in accordance with the terms and
conditions of the PPP Escrow Agreement and in full compliance with
all Laws including, without limitation, the SBA Procedural
Notice.
ARTICLE
VII
CONDITIONS TO CLOSING
Section 7.01 Conditions to Obligations of
All Parties. The obligations of
each party to consummate the transactions contemplated by this
Agreement and the Ancillary Documents shall be subject to the
condition that no Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Governmental Order which is in effect and has the
effect of making the transactions contemplated by this Agreement
illegal, prohibited, or impracticable, or otherwise restraining or
prohibiting consummation of such transactions or causing any of the
transactions contemplated hereunder or thereunder to be rescinded
following completion thereof.
Section 7.02 Conditions to Obligations of
Buyer. The obligations of Buyer
to consummate the transactions contemplated by this Agreement and
the Ancillary Documents shall be subject to the fulfillment or
Buyer's waiver, at or prior to the Closing, of each of the
following conditions:
(a) Other
than the representations and warranties of Sellers contained
in Section
4.01, Section
4.02, Section
4.03, Section
4.09, Section
4.16, Section
4.19, and Section 4.20
(collectively, the
“Fundamental
Representations”), the
representations and warranties of Sellers contained in this
Agreement, the Ancillary Documents and any certificate or other
writing delivered pursuant hereto shall be true and correct in all
respects (in the case of any representation or warranty qualified
by materiality or Material Adverse Effect) or in all material
respects (in the case of any representation or warranty not
qualified by materiality or Material Adverse Effect) on and as of
the date hereof and on and as of the Closing Date with the same
effect as though made at and as of such date (except those
representations and warranties that address matters only as of a
specified date, the accuracy of which shall be determined as of
that specified date in all respects) but
only to the extent the aggregate of the inaccuracies and
breaches of such representations and warranties of Sellers, taken
as a whole, would have a Material Adverse Effect. The Fundamental
Representations shall be true and correct in all respects on and as
of the date hereof and on and as of the Closing Date with the same
effect as though made at and as of such date (except those
representations and warranties that address matters only as of a
specified date, the accuracy of which shall be determined as of
that specified date in all respects).
(b) Sellers
shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this
Agreement and each of the Ancillary Documents to be performed or
complied with by it prior to or on the Closing Date.
(c) No
Action shall have been commenced against Buyer or a Seller, which
would prevent the Closing. No injunction or restraining order shall
have been issued by any Governmental Authority, and be in effect,
which restrains or prohibits any transaction contemplated
hereby.
(d) Sellers
shall have delivered to Buyer duly executed counterparts to the
Ancillary Documents and such other documents and deliveries set
forth in Section
3.03(a).
(e) All
liens, other than Permitted Encumbrances, relating to the Purchased
Assets shall have been released in full and Sellers shall have
delivered to Buyer written evidence, in form satisfactory to Buyer
in its sole discretion, of the release of such liens.
(f) Sellers
shall have satisfied, either through forgiveness, appropriate
escrow, payment or any combination, all amounts borrowed pursuant
to the Paycheck Protection Program or other CARES Act program. At
their option, Sellers may satisfy this condition through the PPP
Escrow Account.
(g) Buyer
shall have received a certificate, dated the Closing Date and
signed by a duly authorized officer of each Seller, that each of
the conditions set forth in Section 7.02(a)
and Section 7.02(b)
have been satisfied (the
“Sellers’
Closing Certificate”).
(h) Buyer
shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of each Seller certifying that
attached thereto are true and complete copies of all resolutions
adopted by the board of directors or other governing body of each
Seller authorizing the execution, delivery and performance of this
Agreement and the Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby, and that all such
resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions
contemplated hereby and thereby.
(i) Buyer
shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of each Seller certifying the
names and signatures of the officers of each Seller authorized to
sign this Agreement, the Ancillary Documents and the other
documents to be delivered hereunder and thereunder.
(j) Seller
shall have delivered a consent or approval as required pursuant to
the SBA Procedural Notice from the PPP Lender in connection with
the transactions contemplated under this Agreement.
(k) Sellers
shall have delivered to Buyer such other documents or instruments
as Buyer reasonably requests and are reasonably necessary to
consummate the transactions contemplated by this
Agreement.
Section 7.03 Conditions to Obligations of
Sellers. The obligations of
Sellers to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or Seller's waiver,
at or prior to the Closing, of each of the following
conditions:
(a) Other
than the representations and warranties of Buyer contained
in Section
5.01, Section
5.02, and Section
5.04, the representations and
warranties of Buyer contained in this Agreement, the Ancillary
Documents and any certificate or other writing delivered pursuant
hereto shall be true and correct in all respects (in the case of
any representation or warranty qualified by materiality or Material
Adverse Effect) or in all material respects (in the case of any
representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the
Closing Date with the same effect as though made at and as of such
date (except those representations and warranties that address
matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects) but only to
the extent the aggregate of the inaccuracies and breaches of such
representations and warranties of Buyer, taken as a whole, would
have a Material Adverse Effect. The representations and warranties
of Buyer contained in Section
5.01, Section
5.02, and Section 5.04
shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing
Date with the same effect as though made at and as of such
date.
(b) Buyer
shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this
Agreement and each of the Ancillary Documents to be performed or
complied with by it prior to or on the Closing Date.
(c) No
injunction or restraining order shall have been issued by any
Governmental Authority, and be in effect, which restrains or
prohibits any material transaction contemplated
hereby.
(d) Buyer
shall have delivered to Seller duly executed counterparts to the
Ancillary Documents and such other documents and deliveries set
forth in Section
3.03(b).
(e) Buyer
shall have delivered the Buyer Termination Fee to the Escrow Agent
pursuant to Section 2.07(a)
upon the execution of this Agreement
and instructions to the Escrow Agent to release such funds to
Sellers pursuant to Section
2.07(a).
(f) Sellers
shall have received a certificate, dated the Closing Date and
signed by a duly authorized officer of Buyer, that each of the
conditions set forth in Section 7.03(a)
and Section 7.03(b)
have been satisfied (the
“Buyer
Closing Certificate”).
(g) Sellers
shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Buyer certifying that attached
thereto are true and complete copies of all resolutions adopted by
the board of directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the Ancillary Documents and
the consummation of the transactions contemplated hereby and
thereby, and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the
transactions contemplated hereby and thereby.
(h) Sellers
shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Buyer certifying the names and
signatures of the officers of Buyer authorized to sign this
Agreement, the Ancillary Documents and the other documents to be
delivered hereunder and thereunder.
(i) Buyer
shall have delivered to Sellers such other documents or instruments
as Sellers reasonably request and are reasonably necessary to
consummate the transactions contemplated by this
Agreement.
ARTICLE
VIII
INDEMNIFICATION
Section 8.01 Survival. Subject to the limitations and other provisions of
this Agreement, the representations and warranties contained herein
shall survive the Closing and shall remain in full force and effect
until the eighteen (18) month anniversary of the Closing Date,
except that (a) the Fundamental Representations and those
representations and warranties contained in Section
5.01, Section
5.02, and Section 5.04
shall survive indefinitely. Any
pre-Closing breach of a covenant or agreement shall survive the
Closing until resolution thereof in accordance with this Agreement
(unless such breach is waived). All covenants and agreements set
forth herein requiring performance following the Closing shall
survive the Closing in accordance with their respective terms and
shall survive indefinitely if no term is
specified.
Section
8.02 Indemnification by
Sellers. Subject to the other
terms and conditions of this Article
VIII, Sellers shall indemnify
and defend each of Buyer and its Affiliates and their respective
Representatives (collectively, the “Buyer
Indemnitees”) against,
and shall hold each of them harmless from and against, and shall
pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Buyer Indemnitees based upon,
arising out of, with respect to or by reason
of:
(a) any
inaccuracy in or breach of any of the representations or warranties
of Sellers contained in this Agreement, the Ancillary Documents or
in any certificate or instrument delivered by or on behalf of
Sellers pursuant to this Agreement, as of the date such
representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for
representations and warranties that expressly relate to a specified
date, the inaccuracy in or breach of which will be determined with
reference to such specified date);
(b) any
breach or non-fulfillment of any covenant, agreement, or obligation
to be performed by Sellers pursuant to this Agreement, the
Ancillary Documents or any certificate or instrument delivered by
or on behalf of Seller pursuant to this Agreement;
(c) any
Excluded Asset or any Excluded Liability; or
(d) any
third-party claim based upon, resulting from or arising out of the
business, operations, actions or obligations of Sellers or any of
their Affiliates that were conducted on or prior to, or claims that
accrued on or prior to the Closing Date.
Section 8.03 Indemnification by
Buyer. Subject to the other
terms and conditions of this Article
VIII, Buyer shall indemnify and
defend each of Sellers and their Affiliates and their respective
Representatives (collectively, the “Seller
Indemnitees”) against,
and shall hold each of them harmless from and against, and shall
pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Seller Indemnitees based upon,
arising out of, with respect to or by reason
of:
(a) any
inaccuracy in or breach of any of the representations or warranties
of Buyer contained in this Agreement or in any certificate or
instrument delivered by or on behalf of Buyer pursuant to this
Agreement, as of the date such representation or warranty was made
or as if such representation or warranty was made on and as of the
Closing Date (except for representations and warranties that
expressly relate to a specified date, the inaccuracy in or breach
of which will be determined with reference to such specified
date);
(b) any
breach or non-fulfillment of any covenant, agreement, or obligation
to be performed by Buyer pursuant to this Agreement;
or
(c) any
Assumed Liability to the extent such Losses arise out of conduct or
the requirement of the performance of an obligation occurring after
the Closing Date or any third-party claim based upon, resulting
from, or arising out of the business, operations, properties,
assets, or obligations of the Business as it relates to the
Acquired Franchisees or the Purchased Assets conducted or arising
after the Closing Date;
(d) any
Action by any Acquired Franchise or any third party arising out of
conduct by Buyer or actions by Buyer with respect to the Acquired
Franchises, franchise agreement, or Buyer’s operation of its
business or any other business related to the Purchased Assets
after the Closing Date.
Section 8.04 Limitations. Notwithstanding anything to the contrary set
forth herein:
(a) Neither
Buyer Indemnitees nor Seller Indemnitees shall make a claim against
Buyer or Sellers for indemnification pursuant to this
Article
VIII unless and until the
aggregate amount of such claims exceeds $50,000 (the
“Deductible”),
in which event Buyer Indemnitees or Seller Indemnitees may only
claim indemnification for such Claims that in the aggregate are in
excess of the Deductible; and
(b) The
maximum aggregate liability of Buyer or Sellers for Claims with
respect to claims for indemnification pursuant to
Section
8.02(a) or Section 8.03(a)
shall be $2,200,000;
provided,
however,
that the foregoing limitation shall not apply to any breach or
alleged breach of any Fundamental
Representations.
(c) Subject
to the limitations set forth in this Section, each of the Parties
acknowledges and agrees that the foregoing provisions in this
Section will be the sole and exclusive remedy for money damages of
the Parties with respect to any inaccuracy of representations and
warranties and any breach of any covenants in this
Agreement.
(d) If
an indemnitee receives insurance proceeds or other indemnity on a
claim for which it has already received indemnity from an
indemnifying Party, the indemnitee shall as soon as reasonably
practicable thereafter pay the insurance or other indemnity
proceeds to the indemnifying Party to the extent necessary to
refund the indemnity provided by the indemnifying Party. For
purposes hereof, obligations of an indemnifying Party shall be
reduced by the amount of any available insurance or other indemnity
proceeds so long as the insurer has no recourse against the
indemnitee for amounts so paid. The indemnitee will use its
commercially reasonable efforts to recover under any insurance
policies or indemnity or other similar agreements for any
losses.
(e) After
the Closing, no party hereto shall be liable for any punitive,
special, consequential, indirect, exemplary or remote damages
(other than those required to be paid to a third party or
Governmental Authority as a part of a Claim).
Section 8.05 Procedures of
Indemnification. The procedures
for indemnification shall be as follows:
(a) The
party claiming the indemnification (the “Indemnified
Party”) shall promptly
give notice to each party from whom the indemnification is claimed
(the “Indemnifying
Party”) of any claim
whether between the parties or brought by a third party against the
Indemnified Party, specifying (i) the factual basis for such claim,
and (ii) the amount of the claim. If a claim relates to an action,
suit, or Proceeding filed by a third party against the Indemnified
Party, such notice shall be given by the Indemnified Party to the
Indemnifying Party promptly but in any event within fifteen (15)
days after written notice of such action, suit, or Proceeding shall
have been given to the Indemnified Party. Failure to give prompt
notice shall not affect the indemnification obligations hereunder
in the absence of actual prejudice.
(b) Following
receipt of notice from the Indemnified Party of a claim, the
Indemnifying Party shall have thirty (30) days (or fifteen (15)
days in the case of any claim by a third party) in which to make
such investigation of the claim as the Indemnifying Party shall
deem necessary or desirable. For the purposes of such
investigation, the Indemnified Party agrees to make available to
the Indemnifying Party and/or its authorized representative(s) the
information relied upon by the Indemnified Party to substantiate
the claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of said thirty (30) day period
(or fifteen (15) day period in the case of any third party claim)
(or any agreed upon extension thereof) to the validity and amount
of such claim, the Indemnifying Party shall immediately pay to the
Indemnified Party the full amount of the claim.
(c) With
respect to any claim by a third party as to which both parties have
agreed that the Indemnified Party is entitled to indemnification
hereunder (i) the Indemnifying Party shall have the right at its
own expense to participate in or, if it so elects, to assume
control of the defense of such claim, (ii) the Indemnifying Party
must conduct the defense of such claim actively and diligently
thereafter in order to preserve its rights to control the defense
of such claim, and (iii) the Indemnified Party shall cooperate
fully with the Indemnifying Party, subject to reimbursement for
reasonable actual out-of-pocket expense incurred by the Indemnified
Party as the result of a request by the Indemnifying Party to so
cooperate. If the Indemnifying Party elects to assume control of
the defense of any third-party claim, the Indemnified Party shall
have the right to participate in the defense of such claim at its
own expense. The Indemnifying Party shall not, without the prior
written consent of the Indemnified Party, settle, compromise or
offer to settle or compromise any such claim or demand unless the
proposed settlement or compromise (i) involves only the payment of
money by one or more Indemnifying Party, (ii) does not impose any
injunction or other equitable relief upon the Indemnified Party,
and (iii) includes an unconditional release of Indemnified Party
for any Liability arising out of such claim or demand or any
related claim or demand.
(d) If
the Indemnifying Party does not elect to assume control or
otherwise participate in the defense of any third-party claim, the
Indemnifying Party shall be bound by the results obtained in good
faith by the Indemnified Party with respect to such
claim.
ARTICLE IX
TERMINATION
Section 9.01 Termination.
This Agreement may be terminated at
any time prior to the Closing:
(a) by
the mutual written consent of Seller and Buyer;
(b) by
Buyer by written notice to Seller if:
(i) there
has been a material breach, inaccuracy in, or failure to perform
any representation, warranty, covenant, or agreement made by a
Seller pursuant to this Agreement that would give rise to the
failure of any of the conditions specified in Section 7.01
or Section 7.02
and such breach, inaccuracy or failure
is incapable of being cured by March 31, 2021or, if capable of
being so cured, has not been cured by Seller within ten days of
Seller's receipt of written notice of such breach, inaccuracy or
failure from Buyer; provided, that there is not then a breach, inaccuracy in
or failure to perform any representation, warranty, covenant, or
agreement made by Buyer pursuant to this Agreement that would give
rise to the failure of any of the conditions specified in
Section
7.03; or
(ii) any
of the conditions set forth in Section 7.01
or Section 7.02
shall not have been, or if it becomes
apparent that any of such conditions will not be, fulfilled by
March 31, 2021, unless such failure shall be due to the failure of
Buyer to perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by it prior to
the Closing;
(iii) for
any other reason not set forth in Section
9.01(b)(i), or
(ii),
provided, however,
that in the event of a termination by Buyer pursuant to this
Section
9.01(b)(iii), no termination
shall be effective unless Buyer complies with Section
9.02;
(c) by
Seller by written notice to Buyer if:
(i) there
has been a material breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Buyer
pursuant to this Agreement that would give rise to the failure of
any of the conditions specified in Section 7.01
or Section 7.03
and such breach, inaccuracy or failure
is incapable of being cured by March 31, 2021 or, if capable of
being so cured, has not been cured by Buyer within ten days of
Buyer's receipt of written notice of such breach, inaccuracy or
failure from Seller; provided,
that there is not then a breach, inaccuracy in or failure to
perform any representation, warranty, covenant or agreement made by
Sellers pursuant this Agreement that would give rise to the failure
of any of the conditions specified in Section
7.02; or
(ii) any
of the conditions set forth in Section 7.01
or Section 7.03
shall not have been, or if it becomes
apparent that any of such conditions will not be, fulfilled by
March 31, 2021, unless such failure shall be due to the failure of
Seller to perform or comply with any of the covenants, agreements
or conditions hereof to be performed or complied with by it prior
to the Closing; or
(d) by
Buyer or Sellers in the event that (i) there shall be any Law that
makes consummation of the transactions contemplated by this
Agreement illegal, impracticable, or otherwise prohibited; or (ii)
any Governmental Authority shall have issued a Governmental Order
restraining or enjoining the transactions contemplated by this
Agreement, and such Governmental Order shall have become final and
non-appealable.
Section 9.02 Buyer
Termination Fee.
(a) If
Buyer terminates this Agreement pursuant to Section
9.01(b)(iii) or Seller
terminates this Agreement pursuant to Section
9.01(c), other than termination
because of a failure of any condition set forth in
Section
7.01 or Section
7.03(c), and all of the
conditions to Buyer’s obligations to consummate the Closing
under Section 7.02
have been satisfied, Buyer shall
instruct the Escrow Agent to pay to Sellers the Buyer Termination
Fee, it being understood that in no event shall Buyer be required
to pay the Buyer Termination Fee on more than one
occasion.
(b) If
the parties mutually agree to terminate this Agreement, Buyer
terminates this Agreement for any reason set forth in
Section
9.01(b)(i), or
(ii),
Seller terminates this Agreement pursuant to Section 9.01(c)
because of a failure of any condition
set forth in Section 7.01
or Section
7.03(c), or either Party
terminates this Agreement pursuant to Section
9.01(d), or this Agreement is
terminated, voided, or made invalid for any reason not set forth
in Section
9.02(a), the Buyer shall not be
required to pay the Buyer Termination Fee to Sellers and the Buyer
shall immediately be entitled to a return of the Buyer Termination
Fee from the Escrow Agent.
(c) Notwithstanding
anything to the contrary in this Agreement, (i) Sellers’
right to receive payment of the Buyer Termination Fee pursuant to
this Section 9.02
shall be the sole and exclusive remedy
of Sellers or any of their Affiliates against Buyer or any of its
Affiliates or any of their respective stockholders, partners,
members or Representatives for any and all losses that may be
suffered based upon, resulting from or arising out of the
circumstances giving rise to such termination, and (ii) upon
payment of the Buyer Termination Fee by the Escrow Agent to
Sellers, none of Buyer or any of its Affiliates or any of their
respective stockholders, partners, members or Representatives shall
have any further liability or obligation relating to or arising out
of Buyer's failure to consummate the transactions contemplated by
this Agreement or any of the Ancillary
Documents. In
no event shall Sellers seek any (x) equitable relief or equitable
remedies of any kind whatsoever or (y) money damages or any other
recovery, judgment, or damages of any kind, including
consequential, indirect, or punitive damages, other than damages in
an amount not in excess of the Buyer Termination Fee, in each case,
relating to or arising out of Buyer's failure to consummate the
transactions contemplated by this Agreement or any of the Ancillary
Documents.
Section 9.03 Effect of Termination.
In the event of termination of this
Agreement in accordance with this Article
IX, this Agreement shall
forthwith become void and there shall be no liability on the part
of any party hereto except:
(a) as
set forth in this Article IX
and Article
X;
(b) that,
subject in all cases to Section
9.02, nothing herein shall
relieve any party hereto from liability for any intentional breach
of any provision of this Agreement which results in a termination;
and
(c) no
termination of this Agreement shall affect to obligations of the
Parties (and any other Person subject thereto) under the
Non-Disclosure Agreement.
ARTICLE
X
MISCELLANEOUS
Section 10.01 Expenses. Except as otherwise expressly provided herein, all
costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have
occurred.
Section 10.02 Notices. All notices, requests, consents, claims, demands,
waivers and other communications hereunder shall be in writing and
shall be deemed to have been given (a) when delivered by hand (with
written confirmation of receipt); (b) when received by the
addressee if sent by a nationally recognized overnight courier
(receipt requested); (c) on the date sent by facsimile or e-mail of
a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business
Day if sent after normal business hours of the recipient or (d) on
the third day after the date mailed, by certified or registered
mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall
be specified in a notice given in accordance with this
Section
10.02):
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If to Seller:
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Link Staffing Services Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention Chief Executive Officer(s)
▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
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with a copy to:
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▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇@▇▇▇▇▇▇▇-▇▇▇.▇▇▇
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If to Buyer:
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HQ Link Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
Attention: Chief Legal Officer
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Section 10.03 Interpretation.
For purposes of this Agreement, unless
otherwise expressly provided herein: (a) the words
“include,” “includes” and
“including” shall be deemed to be followed by the words
“without limitation”; (b) the word “or” is
not exclusive; and (c) the words “herein,”
“hereof,” “hereby,” “hereto”
and “hereunder” refer to this Agreement as a whole (d)
the singular includes the plural and vice versa; (e) reference to a
Person includes such Person’s successors and assigns but, in
the case of a Party, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a
particular capacity excludes such Person in any other capacity; (f)
reference to any gender includes the other gender and the neutral
gender; (g) each accounting term not otherwise defined in this
Agreement has the meaning commonly applied to it in accordance with
GAAP; (h) references to “days” are calendar days; and
(i) all references to dollars refer to the lawful currency of the
United States. Unless the context otherwise requires, references
herein: (x) to Articles, Sections, Disclosure Schedules and
Exhibits mean the Articles and Sections of, and Disclosure
Schedules and Exhibits attached to, this Agreement; (y) to an
agreement, instrument or other document means such agreement,
instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof
and (z) to a statute means such statute as amended from time to
time and includes any successor legislation thereto and any
regulations promulgated thereunder. This Agreement shall be
construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an
instrument or causing any instrument to be drafted. The Disclosure
Schedules and Exhibits referred to herein shall be construed with,
and as an integral part of, this Agreement to the same extent as if
they were set forth verbatim herein.
Section 10.04 Headings. The Table of Contents and the Article and Section
headings in this Agreement are for reference only and shall not
affect the interpretation of this Agreement.
Section 10.05 Severability.
If any term or provision of this
Agreement is invalid, illegal or unenforceable in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect
any other term or provision of this Agreement or invalidate or
render unenforceable such term or provision in any other
jurisdiction. Except as provided in Section
6.07(d), upon such
determination that any term or other provision is invalid, illegal
or unenforceable, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent
possible.
Section 10.06 Entire Agreement.
This Agreement, the Non-Disclosure
Agreement and the Ancillary Documents constitute the sole and
entire agreement of the parties to this Agreement with respect to
the subject matter contained herein and therein, and supersede all
prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. In the event
of any inconsistency between the statements in the body of this
Agreement and those in the Ancillary Documents, the Exhibits and
Disclosure Schedules (other than an exception expressly set forth
as such in the Disclosure Schedules), the statements in the body of
this Agreement will control.
Section 10.07 Successors and Assigns.
This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party may assign
its rights or obligations hereunder without the prior written
consent of the other parties, which consent shall not be
unreasonably withheld or delayed. No assignment shall relieve the
assigning party of any of its obligations
hereunder.
Section 10.08 No Third-party
Beneficiaries. This Agreement
is for the sole benefit of the parties hereto and their respective
successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or
entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this
Agreement.
Section 10.09 Amendment and Modification;
Waiver. This Agreement may only
be amended, modified or supplemented by an agreement in writing
signed by each party hereto. No waiver by any party of any of the
provisions hereof shall be effective unless explicitly set forth in
writing and signed by the party so waiving. No waiver by any party
shall operate or be construed as a waiver in respect of any
failure, breach or default not expressly identified by such written
waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or
delay in exercising, any right, remedy, power or privilege arising
from this Agreement shall operate or be construed as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power
or privilege.
Section 10.10 Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial.
(a) This
Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction).
(b) ANY
LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE ANCILLARY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE
UNITED STATES OF AMERICA OR ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ IN EACH CASE LOCATED IN THE CITY OF CHARLESTON AND COUNTY
OF CHARLESTON, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING.
SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO
SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY
SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY
PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH
PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS
AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE
EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION
10.10(c).
Section 10.11 Specific Performance.
The parties hereto agree that
irreparable damage would occur if any provision of this Agreement
were not performed by Sellers in accordance with the specific terms
hereof or were otherwise breached by Sellers. It is accordingly
agreed that Buyer shall be entitled, without posting a bond or
similar indemnity, to an injunction or injunctions to prevent
breaches of this Agreement or the Ancillary Documents or to enforce
specifically the performance of the terms and provisions hereof in
any court located in the State of South Carolina, in addition to
any other remedy to which it is entitled at law or in equity.
Sellers agree that they will not oppose the granting of an
injunction, specific performance and other equitable relief when
expressly available pursuant to the terms of this Agreement or the
Ancillary Documents on the basis that Buyer has an adequate remedy
at law or an award of specific performance is not an appropriate
remedy.
Section 10.12 Counterparts.
This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which together shall be deemed to be one and the same agreement. A
signed copy of this Agreement delivered by facsimile, e-mail, or
other means of electronic transmission shall be deemed to have the
same legal effect as delivery of an original signed copy of this
Agreement. The parties agree that electronic signatures shall be
enforceable.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first written above by their
respective officers thereunto duly authorized.
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SELLERS:
Link Staffing Services Corporation
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By /s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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Franlink, Inc.
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By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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Stafflink, Inc.
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By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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BUYER:
HQ Link Corporation
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By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Legal Officer
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