EXHIBIT 99.2
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AGREEMENT AND PLAN OF MERGER
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AMONG
HIRE CALLING HOLDING COMPANY
AND
HIRE CALLING ACQUISITIONS, INC.
AND
SOS STAFFING SERVICES, INC.
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DATED SEPTEMBER 10, 2003
Table of Contents
Page
ARTICLE I THE MERGER.................................................................................1
1.01. Effective Time of the Merger...................................................................1
1.02. Closing........................................................................................2
1.03. Effects of the Merger..........................................................................2
ARTICLE II CONVERSION OF SECURITIES...................................................................3
2.01. Conversion of Capital Stock....................................................................3
2.02. Target Stock Options...........................................................................4
2.03. Exchange of Certificates.......................................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TARGET...................................................5
3.01. Organization of Target.........................................................................6
3.02. Target Capital Structure.......................................................................6
3.03. Authority, No Conflict, Required Filings and Consents..........................................7
3.04. SEC Filings; Financial Statements..............................................................8
3.05. No Undisclosed Liabilities.....................................................................9
3.06. Absence of Certain Changes or Events..........................................................10
3.07. Taxes.........................................................................................10
3.08. Tangible Properties...........................................................................11
3.09. Intellectual Property.........................................................................11
3.10. Agreements, Contracts, and Commitments........................................................14
3.11. Litigation....................................................................................15
3.12. Environmental Matters.........................................................................15
3.13. Regulatory Compliance.........................................................................17
3.14. Employee Benefit Plans........................................................................17
3.15. Compliance with Laws..........................................................................19
3.16. Interested Party Transactions.................................................................19
3.17. No Existing Discussions.......................................................................19
3.18. No Secured Debt...............................................................................19
3.19. Opinion of Financial Advisor..................................................................19
3.20. Insurance.....................................................................................20
3.21. Employment Matters............................................................................20
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3.22 Accounts Receivable.......................................................................... 20
3.23 Restricted Cash.............................................................................. 20
3.24 Employee Payments............................................................................ 21
3.25 Workers Compensation Reserve .................................................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..........................................21
4.01. Organization of Parent and Sub................................................................21
4.02. Authority, No Conflict, Required Filings and Consents.........................................21
4.03. Ownership and Interim Operations of Sub.......................................................22
4.04 Disclosure Documents..........................................................................22
4.05 Financing.....................................................................................22
ARTICLE V Intentionally Deleted.....................................................................23
ARTICLE VI Intentionally Deleted.....................................................................23
ARTICLE VII Intentionally Deleted.....................................................................23
ARTICLE VIII Conduct of business.......................................................................23
8.01. Covenants of Parent and Target................................................................23
8.02. Cooperation...................................................................................25
ARTICLE IX ADDITIONAL AGREEMENTS AND COVENANTS.......................................................25
12.1. No Solicitation by Target..............................................................................25
12.2. Proxy Statement........................................................................................27
12.3. Access to Information..................................................................................27
12.4. Target Stockholders' Meetings.........................................................................28
12.5. Legal Conditions to Merger.............................................................................28
12.6. Payment of Taxes.......................................................................................28
12.7. Affiliates.............................................................................................28
12.8. Public Disclosure......................................................................................29
12.9. Consents ..............................................................................................29
12.10. Brokers or Finders ....................................................................................29
12.11. Employee Benefits; Employee Issues ....................................................................29
9.12 Exempt Disposition; No Affiliate..............................................................30
9.13 Notification of Certain Matters ..............................................................30
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9.14 Additional Agreements; Reasonable Efforts .....................................................30
9.15 Continuing Indemnification ....................................................................31
ARTICLE X CONDITIONS TO MERGER......................................................................31
12.1. Conditions to Each Party's Obligation To Effect the Merger ............................................31
12.2. Additional Conditions to Obligations of Parent and Sub.................................................32
12.3. Additional Conditions to Obligations of Target.........................................................32
ARTICLE XI TERMINATION AND AMENDMENT.......................................................................33
12.1 Termination............................................................................................33
12.2. Effect of Termination..................................................................................35
12.3. Fees and Expenses......................................................................................35
12.4. Amendment..............................................................................................36
12.5. Extension; Waiver......................................................................................36
ARTICLE XII MISCELLANEOUS.................................................................................36
12.1 Nonsurvival of Representations, Warranties, and Agreements.............................................36
12.2. Notices 36
12.3. Interpretation.........................................................................................37
12.4. Counterparts...........................................................................................37
12.5. Entire Agreement, No Third Party Beneficiaries.........................................................38
12.6. Governing Law..........................................................................................38
12.7. Assignment.............................................................................................38
12.8. Definitions............................................................................................38
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated September
10, 2003, is by and among Hire Calling Holding Company, an Oregon corporation,
("Parent"), Hire Calling Acquisitions, Inc., an Oregon corporation and a wholly
owned subsidiary of Parent ("Sub"), and SOS Staffing Services, Inc. ("Target").
WHEREAS, the Boards of Directors of each of Parent, Sub, and Target
deem it advisable and in the best interest of each corporation and its
respective stockholders that Sub and Target combine in order to advance the
long-term business interests of Parent and Target;
WHEREAS, the Parent and Sub required that the Target arrange with Wells
Fargo Bank, National Association, Bank One, NA, Jackson National Life Insurance
Company, Great-West Life & Annuity Insurance Company, Farm Bureau Life Insurance
Company of Michigan, Farm Bureau Mutual Insurance Company of Michigan, The
Canada Life Insurance Company, Canada Life Insurance Company of New York and
Canada Life Insurance Company of America (the "Creditors") to cancel the debt
obligations of Target to the Creditors (the "Debt") before Sub would merge with
Target;
WHEREAS, the Target entered an agreement dated September 5, 2003 with
Hire Calling, Inc. and the Creditors agreeing to the terms by which the
Creditors would cancel the Debt at a discounted value (the "Discounted Payoff
Letter");
WHEREAS, subject to the terms and conditions of this Agreement and in
accordance with Oregon Law and Utah Law, at the Effective Time (as defined
below), Sub shall be merged with and into Target (the "Merger"), pursuant to
which each outstanding share of common stock of the Target shall be exchanged
for the right to receive from Sub a cash payment as specified below;
WHEREAS, the Board of Directors of Target, upon the recommendation of
the outside, disinterested directors (i) has determined that the Merger is
advisable and necessary for the long-term prospects of Target and is fair to,
and in the best interests of Target and its stockholders, (ii) has determined
that this Agreement is advisable and has approved this Agreement, the Merger and
the other transactions contemplated by this Agreement, and (iii) has determined
to recommend that the stockholders of Target adopt this Agreement.
WHEREAS, the Board of Directors of Parent (i) has determined that the
Merger is advisable and consistent with and in furtherance of the long-term
business strategy of Parent and is fair to, and in the best interests of, Parent
and its stockholders, and (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, and agreements set forth herein and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the parties hereby agree
as follows:
ARTICLE I
THE MERGER
.1. Effective Time of the Merger. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date (as defined in
Section 1.02), articles of merger giving effect to the agreement of the parties
described in this Article I (the "Articles of Merger"), shall be duly executed
and acknowledged by the Continuing Corporation (as defined in Section 1.03), and
thereafter (a) delivered to the Secretary of State of the State of Oregon, for
filing, as provided in Oregon Law, and (b) delivered to the Utah Department of
Commerce, Division of Corporations and Commercial Code. The Merger shall become
effective upon the later to occur of (a) or (b) above (the "Effective Time").
.2. Closing. The closing of the Merger (the "Closing") will take place
at 1:00 p.m., Mountain time, on or by November 1, 2003 (the "Closing Date") at
the offices of Target in Salt Lake City, Utah, unless another date or place is
agreed to in writing by Parent and Target. All actions taken at the Closing
shall be deemed to have been taken simultaneously at the time the last of any
such actions is taken or completed, with the exception of the payoff by the
Company of the Debt, which shall take place and shall also be deemed to have
taken place prior to the other transactions described herein.
.3. Effects of the Merger.
(a) At the Effective Time (i) the separate existence of Sub shall cease
and Sub shall be merged with and into Target, with Target as the surviving
corporation in the Merger (Sub and Target are sometimes referred to below as the
"Constituent Corporations" and Target is sometimes referred to below as the
"Continuing Corporation"), (ii) the Articles of Incorporation of Target shall be
amended so that Article IV of such Articles of Incorporation reads in its
entirety as follows: "The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 1,000, all of which shall
consist of Common Stock, par value $0.01 per share," and as so amended, such
Articles of Incorporation shall be the Articles of Incorporation of the
Continuing Corporation, and (iii) the Bylaws of Target as in effect immediately
prior to the Effective Time shall be the Bylaws of the Continuing Corporation.
(b) At and after the Effective Time, the Continuing Corporation shall
possess all the rights, privileges, powers, and franchises of a public as well
as of a private nature, and be subject to all the restrictions, disabilities,
and duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers, and franchises of each of the Constituent Corporations, and
all property, real, personal, and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Continuing Corporation, and all property,
rights, privileges, powers, and franchises, and all and every other interest
shall be thereafter as effectually the property of the Continuing Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
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upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities, and duties of the Constituent
Corporations shall thereafter attach to the Continuing Corporation, and may be
enforced against it to the same extent as if such debts and liabilities had been
incurred by it.
(c) At the Effective Time, the directors of Sub immediately prior to
the Effective Time shall be the directors of the Continuing Corporation, each of
such directors to hold office, subject to the applicable provisions of Utah Law
and the Articles of Incorporation and By-Laws of the Continuing Corporation,
until the earlier of their resignation or the next annual shareholders' meeting
of the Continuing Corporation and until their respective successors shall be
duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES
.1. Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Target Common Stock or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $0.01 par value per share, of the
Continuing Corporation.
(b) Cancellation of Target Common Stock. All shares of Target Common
Stock (i) that are held by Target as treasury stock or otherwise or (ii) that
are held by Parent or Sub ((i) and (ii), collectively, "Excluded Shares") shall
be canceled and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Merger Consideration. Subject to Section 2.01(d) and 2.02, each
issued and outstanding share of Target Common Stock, other than Excluded Shares,
shall be converted into the right to receive $3,500,000/number of shares of
Target Common Stock outstanding; approximately $1.3789 per share in cash (the
"Merger Consideration"). The Merger Consideration shall be appropriately
adjusted to reflect any stock split, stock dividend, recapitalization, exchange,
subdivision, combination of, or other similar change Target Common Stock
following the date of this Agreement. All shares of Target Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and holders of certificates which
immediately prior to the Effective Time represented shares of Target Common
Stock (the "Certificates") shall cease to have any rights with respect thereto,
except the right to receive cash to be issued or paid in consideration therefor
upon the surrender of the Certificates in accordance with Section 2.02, without
interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, if any shareholders entitled to exercise appraisal rights pursuant to
Section 16-10a-1321 of Utah Law ("Dissenting Shareholders") shall demand to be
paid the fair cash value of such holder's shares of Target Common Stock, as
provided in Section 16-10a-1323 of Utah Law, such shares shall not be converted
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into or be exchangeable for the right to receive the Merger Consideration;
provided that if any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the shares of Target Common
Stock held by such Dissenting Shareholder shall thereupon be treated as though
such shares had been converted into the Merger Consideration at the Effective
Time pursuant to Section 2.01(c). At the Effective Time, all shares of Target
Common Stock held by Dissenting Shareholders shall automatically be canceled and
shall cease to exist or be outstanding, and each Dissenting Shareholder shall
cease to have any rights with respect thereto, except such rights as are granted
under Section 16-10a-1301 through 1331 of Utah Law.
.2. Target Stock Options. At the Effective Time, all then outstanding
options to purchase Target Common Stock under Target's employee stock incentive
plans listed in Schedule 3.02 of the Target Disclosure Schedule (collectively,
the "Target Option Plans"), whether vested or unvested, and all outstanding
other options to purchase Target Common Stock (collectively, the "Target
Non-Plan Options") shall immediately prior to the Effective Time, automatically
be exercised or terminated pursuant to the terms of the applicable option. At
the Effective Time, any unexercised Options shall cease to exist, and each
holder thereof shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration provided that any such option was duly
exercised (including payment to the Target of the applicable exercise price)
prior to the Closing Date.
.3. Exchange of Certificates.
(a) Parent shall authorize Zions Bank N.A., or such other firm as is
reasonably acceptable to Target, to serve as exchange agent hereunder (the
"Exchange Agent"). Promptly after the Effective Time, Parent shall deposit or
shall cause to be deposited in trust with the Exchange Agent Three Million Five
Hundred Thousand and No 100ths dollars ($3,500,000.00) to which the holders of
Target Common Stock are entitled pursuant to this Article II (such cash amounts
being hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
invest such funds as directed by the Continuing Corporation on a daily basis;
provided that no such investment or loss thereon shall affect the amounts
payable to Target's shareholders pursuant to this Article II. Parent and the
Continuing Corporation shall replace any monies lost through any investment made
pursuant to this Section 2.02(a). Any interest and other income resulting from
such investments shall be the exclusive property of and shall be paid promptly
to the Continuing Corporation. The Exchange Agent shall, pursuant to irrevocable
instructions received from Parent, deliver the amounts of cash provided for in
Section 2.01 out of the Exchange Fund. The Exchange Fund shall not be used for
any other purpose, except as provided in this Agreement, or as unanimously
agreed among Parent, Sub, and Target prior to the Effective Time.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail and otherwise make available to each record holder, who as of the
Effective Time was a holder of a Certificate, a form of letter of transmittal
and instructions for use in effecting the surrender of the Certificate for
payment therefor. Delivery shall be effected, and risk of loss and title to the
Certificate shall pass, only upon proper delivery of the Certificate to the
Exchange Agent and the form of letter of transmittal shall so reflect. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
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transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check representing the Merger Consideration to
which such holder shall have become entitled pursuant to Section 2.01 (c) and
the Certificate so surrendered shall forthwith be marked canceled. No interest
will be paid or accrued on the cash payable upon surrender of the Certificate.
If any portion of the consideration to be received pursuant to this Article II
upon exchange of a Certificate is to be issued or paid to a person other than
the person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange shall pay in advance any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of the Certificate surrendered, or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or that no such tax is applicable. Until surrendered as contemplated by this
Section 2.03, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the Merger Consideration in cash as
contemplated by this Section 2.03. The right of any shareholder to receive the
Merger Consideration shall be subject to and reduced by any applicable
withholding tax obligation.
All payments in respect of shares of Target Common Stock that are made in
accordance with the terms hereof shall be deemed to have been made in full
satisfaction of all rights pertaining to such securities.
(c) In case of any lost, mislaid, stolen, or destroyed Certificate, the
holder thereof may be required, as a condition precedent to the delivery to such
holder of the consideration described in Section 2.01 and in accordance with
Utah Law, to deliver to Parent a bond in such reasonable sum as Parent may
direct as indemnity against any claim that may be made against the Exchange
Agent, Parent, or the Continuing Corporation with respect to the Certificate
alleged to have been lost, mislaid, stolen, or destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Continuing Corporation of the shares of Target Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Continuing Corporation for
transfer, they shall be canceled and exchanged for the consideration described
in Section 2.01. After the Effective Time, the shares of Target Common Stock
shall be delisted from the SmallCap Market of the National Association of
Securities Dealers Automated Quotation System ("SmallCap Market").
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Target for six months after the Effective Time shall be returned
to Parent, upon demand, and any holder of Target Common Stock who has not
theretofore complied with Section 2.03(b) shall thereafter look only to Parent
for issuance of consideration to which such holder has become entitled pursuant
to Section 2.01, provided, however, that neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Target Common Stock for
any amount required to be paid to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Parent and Sub that the statements contained
in this Article III are true and correct as of the date hereof, except as set
forth in the disclosure schedules delivered contemporaneously with this
Agreement or as amended or supplemented on or by October 1, 2003 (the "Target
Disclosure Schedule"). The Target Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article III and the disclosures in any paragraph, including appropriate
cross references, shall qualify only the corresponding paragraph in this Article
III. The mere inclusion of an item in the Target Disclosure Schedule in response
to an express disclosure requirement or as an exception to a representation,
warranty or covenant shall not be deemed an admission by Target that such item
is material or represents a material exception or material fact, event or
circumstance or that such item has had or would reasonably be expected to have a
Material Adverse Effect.
.1. Organization of Target. Target is a corporation duly organized,
validly existing, and in good standing under Utah Law, has all requisite
corporate power to own, lease, and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would have a Material Adverse Effect on Target.
Except as set forth in Schedule 3.01, Target does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture, or other business association or entity excluding securities in any
publicly traded company held for investment by Target and comprising less than
one percent of the outstanding equity of such company.
.2. Target Capital Structure.
(a) The authorized capital stock of Target consists of Twenty Million
(20,000,000) shares of Common Stock, $0.002 par value ("Target Common Stock"),
and Five Million (5,000,000) shares of Preferred Stock, no par value ("Target
Preferred Stock").
On September 10, 2003:
(i) 2,538,316 shares of Target Common Stock were outstanding, all of
which were validly issued, fully paid, and nonassessable,
(ii) No shares of Target Common Stock were held in the treasury of
Target,
(iii) 347,720 shares of Target Common Stock were reserved for future
issuance pursuant to stock options granted and outstanding or available
for grant under the May 4, 1995 Incentive Stock Option Plan and other
Target Option Plans, and
(iv) an aggregate of no shares of Target Common Stock were reserved for
future issuance pursuant to granted and outstanding Target Non-Plan
Options.
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Since June 30, 2003, no shares of Target Common Stock have been issued
except pursuant to the exercise of options granted under the Target
Option Plans, nor has Target become obligated to issue any additional
shares of Target Common Stock other than pursuant to additional grants
of options under the Target Option Plans, each of which grants has been
made in the ordinary course of Target's business and in accordance with
existing policies.
None of the shares of Target Preferred Stock are issued and outstanding
and Target is not obligated to issue any such shares. There are no
obligations, contingent or otherwise, of Target to repurchase, redeem,
or otherwise acquire any shares of Target Common Stock or to provide
funds to or make any investment (in the form of a loan, capital
contribution, or otherwise) in any other entity.
(b) Except as set forth in this Section 3.02, there are no:
(i) equity securities of any class of Target, or any security
exchangeable into or exercisable for such equity securities issued,
reserved for issuance, or outstanding,
(ii) options, warrants, equity securities, calls, rights,
commitments, or agreements of any character to which Target is a party
or by which it is bound obligating Target to issue, deliver, or sell,
or cause to be issued, delivered, or sold, additional shares of capital
stock of Target or obligating Target, to grant, extend, accelerate the
vesting of, or enter into any such option, warrant, equity security,
call, right, commitment, or agreement
((i) and (ii) collectively, "Target Stock Rights"). Target is not a
party to, nor is Target aware of, any voting agreement, voting trust,
proxy, or other agreements or understandings with respect to the shares
of capital stock of Target or any agreement, arrangement, or
understanding providing for registration rights with respect to any
shares of capital stock of Target, other than the Lockup and Voting
Agreements.
.3. Authority, No Conflict, Required Filings and Consents.
(a) Target has all requisite corporate power and authority to enter
into this Agreement and (subject to obtaining the Required Target Stockholder
Vote) to consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement by Target and the
consummation of the transactions by Target contemplated by this Agreement have
been duly authorized by all necessary corporate action on the part of Target,
subject only to obtaining the Required Target Stockholder Vote.
This Agreement has been duly executed and delivered by Target and
constitutes the valid and binding obligation of Target, enforceable in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of
creditors generally and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
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(b) Except as set forth on Schedule 3.03(b), the execution and delivery
of this Agreement by Target does not, and, subject to obtaining the Required
Target Stockholder Vote, the consummation of the transactions contemplated by
this Agreement by Target will not:
(i) conflict with, or result in any violation or breach of any
provision of the Articles of Incorporation or Bylaws of Target,
(ii) result in any violation or breach of, or constitute (with
or without notice or lapse of time, or both) a default (or give rise to
right of termination, cancellation, or acceleration of any obligation
or loss of any benefit) under any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, or lease or any
material contract, or other material agreement, instrument, or
obligation to which Target is a party or by which Target or any of its
properties or assets may be bound, or
(iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule, or regulation applicable to Target or any of its properties or
assets, except (in the case of each of (ii) and (iii)) for any breach,
violation or conflict which would not have a Material Adverse Effect on
Target.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any court, administrative agency, or commission or
other governmental authority or instrumentality ("Governmental Entity"), is
required by or with respect to Target in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for:
(i) the filing of the Articles of Merger with the Utah
Department of Commerce, Division of Corporations and Commercial Code,
(ii) the filing of any documents, instruments and certificates
required by applicable law with the Secretary of State of the State of
Oregon, and
(iii) the filing with, and (if necessary) approval by, the SEC
of the Proxy Statement in accordance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(d) The affirmative vote of the holders of two-thirds (2/3) of the
shares of Target Common Stock outstanding on the record date for the Target
Stockholders' Meeting (the "Required Target Stockholder Vote") is the only vote
of the holders of any class or series of the Target's capital stock necessary
for Target to effect the Merger and consummate the transactions contemplated in
this Agreement.
.4. SEC Filings; Financial Statements.
(a) Target has filed all forms, reports, and documents required to be
filed by Target with the SEC since January 1, 1999 (including all exhibits,
notes, and schedules thereto and documents incorporated by reference therein)
(collectively, the "Target SEC Reports"). The Target SEC Reports:
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(i) at the time filed, with respect to all of the Target SEC
Reports other than registration statements filed under the Securities
Act of 1933 (the "Securities Act"), or at the time of their respective
effective dates, with respect to registration statements filed under
the Securities Act, complied as to form in all material respects with
the applicable requirements of the Securities Act or the Exchange Act,
as the case may be, and
(ii) did not at the time filed or at the time of their
respective effective dates, as the case may be (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing), contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Target
SEC Reports or necessary in order to make the statements in such Target
SEC Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the financial statements (including, in each case, any
related notes) contained in the Target SEC Reports at the time filed or at the
time of their respective effective dates, as the case may be, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and fairly presented the financial position of
Target at the respective dates and the results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements do not contain footnote disclosures and are subject to normal
recurring year-end adjustments.
Target has provided Parent with Target's audited financial statements
as of and for the year ended December 29, 2002 and the most recent quarterly
statements; such financial statements, including any related notes, are attached
hereto as Schedule 3.04(b) (the "Target Financial Statements"). The Target
Financial Statements comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect to financial
statements included in a report on Form 10-K, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis with
the consolidated financial statements of Target contained in the Target SEC
Reports and fairly present the financial position of Target at the date and the
results of its operations and cash flows for the period indicated. The balance
sheet of Target as of July 27, 2003 is referred to herein as the "Target Balance
Sheet."
(c) Target has in place the "disclosure controls and procedures" (as
defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act) required in order
for the Chief Executive Officer and Chief Financial Officer of Target to engage
in the review and evaluation process mandated by the Exchange Act. Target's
"disclosure controls and procedures" are reasonably designed to ensure that all
information (both financial and non-financial) required to be disclosed by
Target in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such information is accumulated
and communicated to Target's management as appropriate to allow timely decisions
regarding required disclosure and to make the certifications of the Chief
Executive Officer and Chief Financial Officer of Target required under the
Exchange Act with respect to such reports.
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.5. No Undisclosed Liabilities. Except as set forth in Schedule 3.05,
Target does not have any liabilities, either accrued or contingent (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to become due,
which individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Target, other than:
(i) liabilities reflected in the Target Balance Sheet,
(ii) obligations to perform under contracts disclosed on
Schedule 3.05(b)(ii), and
(iii) normal or recurring liabilities incurred since the date
of the Target Balance Sheet, in the ordinary course of business
consistent with past practices.
.6. Absence of Certain Changes or Events. Except as disclosed on
Schedule 3.06, since the date of the Target Balance Sheet, Target has conducted
its business only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been:
(i) any Material Adverse Effect on Target,
(ii) any damage, destruction, or loss (whether or not covered
by insurance) with respect to any property of Target having a Material
Adverse Effect on Target,
(iii) any material change by Target in its accounting methods,
principles, or practices to which Parent has not previously consented
in writing,
(iv) any revaluation by Target of any of its assets having a
Material Adverse Effect on Target, or
(v) any other action or event that would have required the
consent of Parent pursuant to Section 8.01 of this Agreement had such
action or event occurred after the date of this Agreement.
.7. Taxes.
(a) All returns and reports, including without limitation information
and withholding returns and reports (collectively, "Tax Returns"), of or
relating to any foreign, Federal, state, local or other income, premium,
property, sales, excise and other taxes of any nature whatsoever, including any
interest, penalties and additions to tax in respect thereof ("Tax" or "Taxes")
heretofore required to be filed by Target, the failure to file such which would
have a Material Adverse Effect, have been duly filed on a timely basis. All such
Tax Returns were complete and accurate in all material respects. Target has paid
or has made adequate provision for the payment of all Taxes.
(b) Except as set forth on Schedule 3.07(b), as of the date of this
Agreement there are no audits or administrative proceedings, court proceedings
or claims pending against Target with respect to any Taxes, no assessment,
deficiency or adjustment has been asserted or, to the knowledge of Target,
proposed with respect to any Tax Return of or with respect to Target, and there
are no liens for Taxes upon the assets or properties of Target, except liens for
Taxes not yet delinquent.
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(c) Except as set forth on Schedule 3.07(c), there are not in force any
waivers of agreements, arrangements, or understandings by or with respect to
Target of or for an extension of time for the assessment or payment of any
Taxes. Target has not received a written ruling of a taxing authority relating
to Taxes or entered into a written and legally binding agreement with a taxing
authority relating to Taxes that would have a continuing effect after the
Closing Date. Target is not required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by Target, and to the knowledge of Target the
Internal Revenue Service ("IRS") has not proposed any such adjustment or change
in accounting method.
(d) To the knowledge of Target, Target has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, creditor, independent contractor or other third party.
(e) Target has not filed a consent under Section 341(f) of the Code.
Target is not a party to any Tax allocation or Tax sharing arrangements.
.8. Tangible Properties.
(a) Real Property. Target has provided or made available to Parent a
true and complete list of all real property owned by Target and real property
leased pursuant to leases ("Leases") by Target as of the date hereof, and the
name of the lessor, the date of the Lease and description of each amendment to
the Lease, and the aggregate annual rental or other fees payable under any such
Lease, on Schedule 3.08(a). All such Leases are valid and binding obligations of
Target and, to Target's knowledge, of each other party thereto, in all material
respects, in accordance with their respective terms, as those terms are
reflected in documents provided to Parent, subject to:
(i) applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the rights of creditors
generally and
(ii) rules of law governing specific performance, injunctive
relief and other equitable remedies, and Target is not in material
default under any such Lease.
(b) Tangible Personal Property. All material items of tangible personal
property of Target as set forth on Schedule 3.08(b) are in good operating
condition and repair (ordinary wear and tear excepted), are performing
satisfactorily, and are available for use in the conduct of Target's business.
Target has and will have good and marketable title to all of material personal
property owned by it, free and clear of all security interests, mortgages,
liens, pledges, charges, valid claims or encumbrances of any kind or character
except as set forth on Schedule 3.08(b)(1), and other than liens (i) for taxes
not yet due and payable; or (ii) incurred in the ordinary course of Target's
business that do not, individually or in the aggregate, have a Material Adverse
Effect on Target.
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.9. Intellectual Property.
(a)Ownership of Intellectual Property Assets. Target owns, either
directly or indirectly, or has valid rights or licenses to use, all of the
Target Intellectual Property Assets. Except as provided in Schedule 3.09, all
Target Intellectual Property Assets are free and clear of all mortgages,
pledges, charges, liens, equities, security interests or other encumbrances, and
Target has the right to use without payment to a third party all of such Target
Intellectual Property Assets.
No claim is pending against Target or, to Target's knowledge,
threatened against Target or its officers, employees or consultants to the
effect that Target's right, title and interest in and to any of the Target
Intellectual Property Assets is invalid or unenforceable by Target. Target is
not aware of any material information that would adversely affect the validity
or enforceability of any of the Patents, Marks, Trade Secrets or Copyrights
which constitute Target Intellectual Property Assets.
All former and current employees, consultants and contractors of Target
who were involved in, or who contributed to, the creation or development of any
of the Target Intellectual Property Assets have executed written instruments
with Target that assign to Target all of such Person's rights to any inventions,
improvements, discoveries, writings or information constituting Target
Intellectual Property Assets in any case where the failure to do so would cause
a Material Adverse Effect. To the knowledge of Target, no employee of Target has
entered into any agreement that restricts or limits in any way the scope or type
of work in which the employee may be engaged or requires the employee to
transfer, assign or disclose information concerning his work to anyone other
than Target, other than in the ordinary course of Target's business.
(b) Patents. Target does not have any Patents registered with the U. S.
Patent and Trademark Office.
(c) Trademarks. Schedule 3.09(c) sets forth a complete and accurate
list of all Marks constituting Target Intellectual Property Assets. All such
Marks that have been registered with the U. S. Patent and Trademark Office or
any other jurisdiction are currently in compliance with formal governmental
legal requirements (including, without limitation, the timely post-registration
filing of affidavits of use and incontestability and renewal applications), and
are, to Target's knowledge, valid and enforceable in the jurisdictions in which
they are registered.
In each case where such a Mark is held by Target by assignment, the
assignment has been duly recorded with the U.S. Patent and Trademark Office and
all other jurisdictions of registration. No such Mark has been or is now
involved in any opposition, invalidation or cancellation proceeding and, to
Target's knowledge, no such action is threatened against Target with respect to
any of such Marks. All Target Products and materials containing a Mark bear the
proper notice where required by law.
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(d) Copyrights. Target does not have any Copyrights registered with the
U. S. Copyright Office.
(e) Trade Secrets. Target has taken all reasonable security measures
(including, without limitation, entering into appropriate confidentiality and
nondisclosure agreements with all officers, directors, employees and consultants
of Target and any other Persons with access to the Trade Secrets constituting
Target Intellectual Property Assets) to protect the secrecy, confidentiality and
value of the Trade Secrets constituting Target Intellectual Property Assets. To
the knowledge of Target, there has not been any breach by any party to any such
confidentiality or non-disclosure agreement.
The Trade Secrets constituting Target Intellectual Property Assets have
not been disclosed by Target to any Person other than employees or contractors
of Target who had a need to know and use such Trade Secrets in the course of
their employment or contract performance, or under confidentiality and
non-disclosure agreements. To the knowledge of Target, Target has the right to
use, free and clear of claims of third parties, all Trade Secrets constituting
Target Intellectual Property Assets. To the knowledge of Target, no third party
has asserted that the use by Target of any Trade Secret constituting Target
Intellectual Property Assets violates the rights of such third party.
(f) Exclusivity of Rights. Except as set forth in Schedule 3.09(f), (i)
Target has the exclusive right to use, license, distribute, transfer and bring
infringement actions with respect to the Target Intellectual Property Assets
owned or exclusively licensed by Target, and (ii) Target (a) has not licensed or
granted to anyone rights of any nature to use any of the Target Intellectual
Property Assets and (b) is not obligated to and does not pay royalties or other
fees to anyone for Target's ownership, use, license or transfer of any of the
Target Intellectual Property Assets.
(g) Licenses Received. All material licenses or other material
agreements under which Target is granted rights by others in Target Intellectual
Property Assets are listed in Schedule 3.09(g). For the purpose of the foregoing
sentence, licenses and agreements for commercial off-the-shelf computer software
having a cost of less than $1,000 per seat or license shall not be deemed
material. Except as set forth in Schedule 3.09(g)(1):
(i) all licenses or other agreements under which Target is
granted rights by others in Target Intellectual Property Assets are in
full force and effect,
(ii) to the knowledge of Target, there is no material default
under any such license or other agreement by any party thereto, and
(iii) all of the rights of Target under such licenses and
other agreements are assignable without the consent of the licensor
except, with respect to this clause (iii), as would not reasonably be
expected to have a Material Adverse Effect on Target. True and complete
copies of all material licenses or other agreements, and any amendments
thereto, have been provided to Parent, and to the knowledge of Target,
the licensors under the licenses and other agreements under which
Target is granted rights have all requisite power and authority to
grant the rights purported to be conferred thereby.
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(h) Licenses Granted. All licenses or other agreements under which
Target has granted rights to others in Target Intellectual Property Assets are
listed in Schedule 3.09(h). Except as set forth thereon, all such licenses or
other agreements are in full force and effect and, to the knowledge of Target,
there is no material default thereunder by any party thereto. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to Parent.
(i) Sufficiency. The Target Intellectual Property Assets constitute all
of the Intellectual Property Assets used in designing, creating and developing
the Target Services and are all of the Intellectual Property Assets necessary
for the operation of Target's business as currently conducted.
(j) Infringement. Except as set forth in Schedule 3.09(j), none of the
Target Services developed or under development, manufactured or sold by Target,
nor any process or know-how used by Target in connection therewith, infringes,
conflicts with or misappropriates any Copyright or Trade Secret of any Person,
or to Target's knowledge, infringes any Patent, Mark, or other proprietary right
of any Person in any material respect.
(k) Target Nondisclosure, Noncompete, Nonsolicitation and Consulting
Contracts. Except as set forth in Schedule 3.09(k), to the knowledge of Target,
each of the Target Nondisclosure Contracts and noncompete, nonsolicitation and
consulting contracts entered into by Target is a valid and binding obligation of
the other party thereto enforceable in accordance with its terms, and, to
Target's knowledge, no such third party is in material breach of any such Target
Nondisclosure Contracts or noncompete, nonsolicitation and consulting contracts.
A complete list of all Target Nondisclosure Contracts and noncompete,
nonsolicitation and consulting contracts (excluding and employees currently
placed as temporary employees with other on-site employers) and a copy of the
currently used form for the employee noncompete contracts is provided in
Schedule 3.09(k).
.10. Agreements, Contracts, and Commitments. Schedules 3.10(a) through
3.10(j) list (i) all contracts that are material to the business or financial
condition of Target; and (ii) all amendments to Target Material Contracts
(defined below).
The contracts listed in this Section 3.10 of the Target Disclosure
Schedule are referred to collectively as the "Target Material Contracts". All
Target Material Contracts listed in this Section 3.10, have either expired or
remain in full force and effect, in each case in accordance with their terms as
stated in such documents. Each Target Material Contract referred to in this
Section 3.10 has been entered into in the ordinary course of business and has
been entered into with Persons dealing at arm's length with the Target. As part
of Target Material Contracts:
(a) Equipment Lease Agreements. Target has no equipment or capital
lease agreements currently in effect other than as listed in Schedule 3.10(a).
14
(b) Purchase Contracts. Target has no supplies and inventory purchase
agreements outstanding.
(c) Sale Contracts. Target has no outstanding client contracts,
subvendor contracts, and employee leasing contracts made by the Target that are
still in effect other than as listed in Schedule 3.10(c). All outstanding sales
contracts and quotes of the Target, regardless of their value, were incurred in
the ordinary course of business by the Target and on commercially reasonable
terms.
(d) Advertising and Promotion Contracts. Target has no advertising,
promotional, public relations and fulfillment firm agreements, or display house,
exhibit and show agreements other than as listed in Schedule 3.10(d) which
describes the term of each agreement and a summary of payments due.
(e) Guarantee and Indemnity Agreements. Target has no guarantee and
indemnity agreements other than as listed in Schedule 3.10(e) which describes
the terms of each such agreement.
(f) Computer Hardware and Software Leases. Target has no computer
hardware and software agreements other than as listed in Schedule 3.10(f) which
describes the terms of each such agreement.
(g) Transportation Agreements. Target has no transportation leases and
contracts other than as listed in Schedule 3.10(g) which describes the terms of
each such agreement.
(h) Loan Agreements. Target has no loan, mortgage or pledge agreements
other than as listed in Schedule 3.10(h) which describes the terms of each such
agreement.
(i) No Other Contracts. Except as set forth on Schedule 3.10(i), Target
has no other material contracts, agreements or instruments to which Target is a
party and by which it or any of Target's Assets are bound which might have a
Material Adverse Effect and do not fall in any other category listed in this
Section 3.10.
(j) Breach of Contracts. Except as provided in Schedule 3.10(j), Target
has not breached, or received in writing any claim or threat that it has
breached, any of the material terms and conditions of any Target Material
Contracts in such a manner as would permit any other party to cancel or
terminate the same or would permit any other party to seek material damages from
Target under any Target Material Contract. Target is not aware of the existence
of a material breach of a Target Material Contract by any other party thereto.
Except in the ordinary course of Target's business, Target is not engaged, and
has not agreed to engage, in any discussions related to the material amendment
of any Target Material Contract.
.11. Litigation. Except as set forth on Schedule 3.11, there are no
claims, actions, suits, investigations or proceedings pending of which it has
notice or, to the knowledge of Target, threatened against or affecting Target or
15
any of its assets or properties, at law or in equity, before or by any Federal,
state, municipal or other governmental agency or authority, foreign or domestic,
or before any arbitration board or panel, wherever located, except for
threatened claims that are not currently filed with any such court or agency and
that would not have a Material Adverse Effect on Target.
.12. Environmental Matters.
(a) Hazardous Substances. To the knowledge of Target, no Hazardous
Substances have ever been buried, spilled, leaked, discharged, emitted,
generated, stored, used or released, and no Hazardous Substances are now
present, in, on, or under any premises or other property that Target has at any
time owned, operated, occupied or leased, except for immaterial quantities
stored or used by Target in the ordinary course of its business and in
accordance with all applicable Environmental Laws.
"Hazardous Substance" means any pollutant, contaminant, flammable or
explosive material, hazardous substance or waste, solid waste, petroleum or any
fraction thereof, petroleum products, radioactive materials, asbestos, radon,
lead, or any other chemical, substance or material listed or identified in or
regulated by any Environmental Law;
"Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. ss.ss. 1251 to 1387, the Clean Air Act, 42
U.S.C. ss. 7401 et seq., and any other federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health, natural resources and/or the environment.
(b) Environmental Compliance. Except as set forth in Schedule 3.12(b):
(i) to the knowledge of Target, Target has obtained all
applicable permits, licenses and other authorizations required under
federal, state and local laws relating to pollution or protection of
the environment, and federal, state and local statutes, laws,
ordinances, codes, rules, regulations, orders and decrees relating to
or imposing liability or standards on conduct concerning any emissions,
discharges, releases or threatened releases of pollutants,
contaminants, hazardous or toxic materials, hazardous substances or
wastes into ambient air, surface water, groundwater or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or wastes;
(ii) to the knowledge of Target, Target is now and at all times
has been in material compliance with all terms and conditions of those
required permits, licenses and authorizations and is also in material
compliance with all other conditions, standards, requirements and
obligations contained in all applicable Environmental Laws;
(iii) Target is not aware of, nor to the knowledge of Target,
has Target received notice of, any event, condition, circumstance,
activity, practice, incident, action or plan that may materially
16
interfere with or prevent Target's continued compliance with or that
may give rise to any liability of Target under any Environmental Law,
or any release or threatened release of any Hazardous Substance,
pollutant or contaminant from or onto any property owned, operated or
leased by Target.
(c) Hazardous Waste Activities. To the knowledge of Target, no property
that Target has ever owned, operated, occupied or leased has ever been used in
connection with the business of manufacturing, storing or transporting Hazardous
Wastes, and no RCRA Hazardous Wastes (defined below) have been treated, stored
or disposed of there, except for immaterial quantities stored or used by Target
in the ordinary course of its business.
"RCRA Hazardous Wastes" means a hazardous waste as that term is defined
in and pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. ss.
6901 et seq.
(d) UST's and AST's. To the knowledge of Target, there are not now and
never have been any underground or aboveground storage tanks or other
containment facilities of any kind on any premises or other property that Target
has ever owned, occupied, operated or leased which contain or ever did contain
any Hazardous Substances.
(e) Listing. To the knowledge of Target, no premises that Target has
ever owned, operated, occupied or leased has ever been listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(f) Environmental Reports. Target has made available to Parent for
inspection true and complete copies of all environmental site assessments,
reports, authorizations, permits, licenses, disclosures and other documents in
its possession, custody or control describing or relating in any way to Target,
or any property that Target has ever owned, operated, occupied or leased, which
suggest that any Hazardous Substances may be present in, on, or under any such
property in material quantities or that Target may have breached any
Environmental Law.
(g) Environmental Claims, etc. To the knowledge of Target, there are
not and there never have been any requests, notices, investigations, claims,
demands, regulatory orders, notices of violation, notices of penalties,
administrative proceedings, hearings, litigation or other legal proceedings
relating in any way to Target, or any property that Target has ever owned,
operated, occupied or leased, alleging liability under, violation of or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the knowledge of Target, no such
matter is threatened or impending, nor does there exist any substantial basis
therefor.
(h) Compliance with Environmental Laws. Target operates, and at all
times has operated, its business in accordance with all applicable Environmental
Laws, and all licenses, permits and other authorizations required pursuant to
any Environmental Law and necessary for the lawful operation of the business of
Target are in Target's possession and are in full force and effect. To Target's
knowledge, there is no threat that any such permit, license or other
authorization will be withdrawn, terminated, limited or materially changed.
17
.13. Regulatory Compliance.
(a) As set forth on Schedule 3.13 Target has provided Parent with
copies of any and all notices of inspectional observations, establishment
inspection reports and any other documents received from governmental entities,
that indicate or suggest lack of material compliance with the regulatory
requirements of such governmental entities. Target has made available to Parent
for review all correspondence to or from all governmental entities, minutes of
meetings, written reports of phone conversations, visits or other contact with
governmental entities, notices of inspectional observations, establishment
inspection reports, and all other documents concerning communications to or from
governmental entities, or prepared by or which bear in any way on Target's
material compliance with regulatory requirements of governmental entities.
.14. Employee Benefit Plans.
(a) There are no "employee pension benefit plans," as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or "multiemployer plans" as defined in Section 3(37) of ERISA,
maintained or contributed to by Target or any trade or business (whether or not
incorporated) (an "ERISA Affiliate") which is aggregated with Target pursuant to
Section 414 of the Code for the benefit of its current or former employees.
Target has set forth on Schedule 3.14 all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, welfare, severance,
fringe benefit (including, but not limited to, benefits relating to Company
automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave,
medical, dental, hospitalization, life insurance and other types of insurance),
and other similar employee benefit plans, arrangements, and employment and
consulting agreements, whether or not such plans, arrangements, or agreements
are "employee benefit plans", written or otherwise, for the benefit of or
relating to, any current or former employee of Target or any ERISA Affiliate
(together the "Target Employee Plans").
(b) With respect to each Target Employee Plan, Target has made
available to Parent a true and correct copy of:
(i) the annual report (Form 5500) for the most recent plan
year that has been filed with the IRS or U. S. Department of Labor, if
applicable,
(ii) the current plan document and summary plan description,
and all amendments thereto, for each such Target Employee Plan,
(iii) each trust agreement and group annuity contract, if any,
relating to such Target Employee Plan,
(iv) the most recent actuarial report or valuation relating to
an Target Employee Plan subject to Title IV of ERISA, and
(v) the most recent IRS determination letter, where applicable.
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(c) Except as set forth in Schedule 3.14(c), with respect to the Target
Employee Plans, individually and in the aggregate, Target and its ERISA
Affiliates are in full compliance with the applicable provisions of ERISA, the
regulations and published authorities thereunder, and all other laws applicable
with respect to all such Target Employee Plans, and no event has occurred, and
to the knowledge of Target, there exists no condition or set of circumstances in
connection with which Target could be subject to any liability that is
reasonably likely to have a Material Adverse Effect on Target, under ERISA, the
Code, or any other applicable law.
Target has classified all individuals who perform services for Target
correctly under each Target Employee Plan, ERISA and the Code as common law
employees, independent contractors or leased employees. Except as set forth in
Schedule 3.14(c) to the extent required under Section 4980B of the Code, neither
Target nor any ERISA Affiliate provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employees.
(d) With respect to the Target Employee Plans, individually and in the
aggregate, there are no benefit obligations required to be funded for which
contributions have not been made or properly accrued, and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting principles
on the financial statements of Target.
Except as disclosed on Schedule 3.14(d) and except as provided for in
this Agreement, neither Target nor any ERISA Affiliate is a party to any oral
or written:
(i) union or collective bargaining agreement,
(ii) agreement with any officer or other key employee of
Target, the benefits of which are contingent, or the terms of which are
materially altered upon the occurrence of a transaction involving
Target of the nature contemplated by this Agreement,
(iii) agreement with any officer of Target providing any term
of employment or compensation guarantee extending for a period longer
than one year from the date hereof or for the payment of compensation
in excess of $100,000 per annum, or
(iv) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan, or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
.15. Compliance with Laws. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, or local statute, law, or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have a Material Adverse Effect
on Target.
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.16. Interested Party Transactions. Except as disclosed in the Target
SEC Reports, since the date of Target's last proxy statement to its
stockholders, no event has occurred that would be required to be reported by
Target as a Certain Relationship or Related Transaction pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
.17. No Existing Discussions. As of the date of this Agreement, Target
is not engaged, directly or indirectly, in any substantive discussions or
negotiations with any other party with respect to a Target Acquisition Proposal.
.18. No Secured Debt. Except as disclosed on Schedule 3.18, there is
not now any secured debt (including capitalized leases) of Target. The existence
of any outstanding secured debt (including capitalized leases) of Target does
not violate the terms of any material note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument or
other agreement or commitment to which Target is a party or by which Target or
any of its assets or properties is bound or encumbered.
.19. Opinion of Financial Advisor. Houlihan Valuation Advisors of Salt
Lake City, Utah, has delivered to the Board of Directors of Target an opinion
dated as of the date of this Agreement concluding that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable and are
fair from a financial point of view to the holders of the Target's Common Stock.
.20. Insurance. Each policy of insurance maintained by or for the
benefit of Target (collectively, the "Target Policies") is listed in Schedule
3.20. Except as noted in Schedule 3.20:
(i) Target is the sole beneficiary of each of the Target
Policies;
(ii) each of the Target Policies is in full force and effect,
and Target has received no notice of intent to cancel any of the Target
Policies and is not otherwise aware of the intent of any carrier to
cancel any of the Target Policies or of any basis for any such
cancellation;
(iii) the carrier or carriers under each of the Target
Policies are reputable, and Target has no information leading it to
believe that any such carrier is experiencing or is likely to
experience liquidity problems; and
(iv) the Target Policies, in the aggregate are sufficient in
kind and coverage limits to provide risk protection comparable to that
provided to prudent companies engaged in activities similar to those
engaged in by Target under similar policies customarily maintained by
such companies.
.21. Employment Matters. Except as set forth in Schedule 3.21, Target
has complied with, is not in violation of, and has not received any notices of
violation with respect to all applicable laws, rules and regulations relating to
employment, including the Immigration Reform and Control Act, as amended, those
related to wages, hours (including payment of overtime required by state or
federal law), equal employment opportunity and the payment of state and federal
20
payroll taxes, including Social Security taxes where such violation would have a
Material Adverse Effect. There are no claims, actions, suits, investigations or
proceedings pending of which it has notice or, to the knowledge of Target,
threatened against or affecting Target alleging any violation of any of the
foregoing laws, rules or regulations that would have a Material Adverse Effect,
which if determined adversely to Target would, individually or in the aggregate,
have a Material Adverse Effect on Target.
3.22 Accounts Receivable. Schedule 3.22 lists all outstanding accounts
receivable as of August 24, 2003. Except as noted in Schedule 3.22:
(i) the allowance for doubtful accounts is adequate to cover
anticipated bad debt;
(ii) there have been no material changes in the credit extension and
collection policies of Target; and
(iii) Target has no knowledge of changes in credit worthiness of
customers that would materially affect the collection of the accounts receivable
and that are not adequately covered by the allowance for doubtful accounts.
3.23 Restricted Cash. Schedule 3.23 lists all restricted cash, details
the restrictions placed upon restricted cash, and describes actions needed to
remove restrictions from restricted cash.
3.24 Employee Payments. Other than the normal monthly and quarterly
bonuses and incentives for non-executive employees and except as set forth on
Schedule 3.24 there are no employee bonuses, incentive compensation, stock
options, deferred compensation, severance, change in control payments, or any
other payments due and not properly accrued.
3.25 Workers' Compensation Reserve. The Target Balance Sheet includes a
Workers' Compensation Reserve to cover future payments on existing injuries and
Incurred But Not Reported ("IBNR") injuries pursuant to the Target workers'
compensation program. Except as noted in Schedule 3.25:
(i) the Workers' Compensation Reserve is adequate to cover anticipated
future payments on existing injuries and IBNR injuries;
(ii) there have been no material changes in the reserving policy of
Target or Target's Third Party Administrator and in the mix of business of
Target as allocated between clerical staffing, light industrial staffing, and
industrial staffing; and
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to Target
that the statements contained in this Article IV are true and correct as of the
date hereof, except as set forth in the Disclosure Schedule delivered by Parent
to Target on or before the date of this Agreement (the "Parent Disclosure
Schedule"). The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph, including appropriate cross references,
shall qualify only the corresponding paragraph in this Article IV.
.1. Organization of Parent and Sub. Each of Parent and Sub is a
corporation duly organized, validly existing, and in good standing respectively
under the Oregon Law, has all requisite corporate power to own, lease, and
operate its property and to carry on its business as now being conducted, and is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
Material Adverse Effect on Parent.
.2. Authority, No Conflict, Required Filings and Consents.
(a) Each of Parent and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
Parent and Sub, and the consummation of the transactions by Parent and Sub
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub and constitutes the valid and binding
obligation of Parent and Sub, enforceable in accordance with its terms, subject
to (i) applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
(b) The execution and delivery of this Agreement by Parent and Sub does
not, and the consummation of the transactions contemplated by this Agreement by
Parent and Sub will not, (i) conflict with, or result in any violation or breach
of any provision of the Certificate of Incorporation or Bylaws of Parent or Sub,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to right of termination,
cancellation, or acceleration of any obligation or loss of any benefit) under
any of the terms, conditions, or provisions of any note, bond, mortgage,
indenture, or lease or any material contract, or other material agreement,
instrument, or obligation to which Parent or Sub is a party or by which Parent
or Sub or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Parent or Sub or any
of their properties or assets, except in the case of each of (ii) and (iii) for
any breach, violation or conflict which would not have a Material Adverse Effect
on Parent.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any Governmental Entity, is required by or with
respect to Parent or Sub in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of the Certificate of Merger with the Utah Department of
Commerce, Division of Corporations and Commercial Code, (ii) the filing of any
22
documents, instruments and certificates required by applicable law with the
Secretary of State of the State of Oregon, and (iii) the filing with, and (if
necessary) approval by, the SEC of the Proxy Statement with the SEC in
accordance with the Exchange Act.
.3. Ownership and Interim Operations of Sub. All outstanding capital
stock of Sub is owned by Parent. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities, and has conducted its operations only as contemplated
by this Agreement.
.4. Disclosure Documents. No information supplied or to be supplied by
Parent or Sub for inclusion or incorporation by reference in the Proxy Statement
will, at the respective times any such documents or any amendments or
supplements thereto are filed with the SEC, are first published, sent or given
to stockholders or, in the case of the Proxy Statement, at the time of the
Target Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. This Agreement and all other
documents executed in connection with this Agreement will comply as to form in
all material respects with the requirements of all applicable laws, including
the Securities Act and Exchange Act and the rules and regulations thereunder.
Notwithstanding the preceding, no representation or warranty is made by Parent
or Sub with respect to statements made or incorporated by reference in any such
documents based on information supplied by the Company for inclusion or
incorporation by reference therein.
.5. Financing. Parent has obtained a commitment from funding sources to
provide funding for this transaction or has sufficient funds to complete the
Merger, and at the Effective Time, Parent and Sub will have available all the
funds necessary to purchase all the Target Common Stock pursuant to the Merger.
ARTICLE V
Intentionally Deleted
ARTICLE VI
Intentionally Deleted
ARTICLE VII
Intentionally Deleted
ARTICLE VIII
CONDUCT OF BUSINESS
..1. Covenants of Target. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Effective Time (the "Pre-Closing Period"), Target agrees (except to the extent
that Parent shall otherwise consent in writing), to carry on its business in the
usual, regular, and ordinary course in substantially the same manner as
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previously conducted, to pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, to pay or perform other obligations when due,
and, to the extent consistent with such business, to use all reasonable efforts
consistent with past practices and policies to preserve intact its present
business organization, to keep available the services of its present officers
and key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it.
Target shall promptly notify Parent of any material event or occurrence not in
the ordinary course of business of Target. Except as set forth in Schedule 8.01,
Target shall not, during the Pre-Closing Period, without the prior written
consent of Parent (which consent may not be unreasonably withheld or delayed):
(i) Accelerate, amend, or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such party
or otherwise or authorize cash payments in exchange for any options granted
under any of such plans except as required by the terms of such plans or any
related agreements or other agreements in effect as of the date of this
Agreement;
(ii) Declare or pay any dividends on or make any other distributions
(whether in cash, stock, or property) in respect of any of its capital stock or
split, combine, or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of, or in substitution
for shares of capital stock of such party, or purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
(iii) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association, or other business organization or division, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of such party;
(iv) Sell, lease, license, or otherwise dispose of any of its
properties or assets which are material, individually or in the aggregate, to
the business of Target;
(v) (A) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of employees other than officers of Target in accordance with past
practices, (B) increase or agree to increase the compensation payable or to
become payable to officers of Target or grant any additional severance or
termination pay to, or enter into any employment or severance agreements with
such officers, (C) grant any severance or termination pay to, or enter into any
employment or severance agreement with, any employee, except in accordance with
past practices, (D) enter into any collective bargaining agreement, (E)
establish, adopt, enter into, or amend any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance, or other plan, trust, fund,
policy, or arrangement for the benefit of any directors, officers, or employees,
or (F) establish any new executive employee position;
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(vi) Revalue any of its assets, including writing down the value of
equipment or writing off notes or accounts receivable, other than revaluations
in accordance with generally accepted accounting principles or in the ordinary
course of business;
(vii) Amend or propose to amend its charter documents or Bylaws, except
as contemplated by this Agreement;
(viii) Make any capital expenditure or commitment for which it is not
contractually bound at the date hereof except (i) expenditures and commitments
incurred in the ordinary course of the existing business of such party, and (ii)
other capital expenditures and commitments not to exceed $175,000 in the
aggregate;
(ix) Take, or agree in writing or otherwise to take, any action which
is reasonably likely to make any of Target's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on the
date made (to the extent so limited) or as of the Effective Time;
(x) Transfer or license to any person or entity or otherwise extend,
amend, or modify any rights to the Target Intellectual Property Rights, other
than in the ordinary course of business consistent with past practices or
pursuant to obligations entered into prior to the date hereof;
(xi) Issue, deliver, or sell or authorize or propose the issuance,
delivery, or sale of, or purchase or propose the purchase of, any shares of its
capital stock or any Target Stock Rights, other than the grant of options to
employees in a manner consistent with past practices and pursuant to currently
existing stock option plans, the issuance of shares upon the exercise of options
outstanding as of the date hereof, or pursuant to obligations entered into prior
to the date hereof and disclosed on the Target Disclosure Schedule; or
(xii) Incur, except pursuant to existing credit agreements, any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
such Target's subsidiaries or guarantee any debt securities of others, or
voluntarily prepay any outstanding indebtedness.
.2. Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, Target shall confer on a regular and
frequent basis with one or more representatives of Parent to report operational
matters of materiality and the general status of ongoing operations and shall
promptly provide the other party and its counsel with copies of all filings made
by such party with any Governmental Entity in connection with this Agreement,
the Merger, and the transactions contemplated hereby and thereby.
ARTICLE IX
ADDITIONAL AGREEMENTS AND COVENANTS
.1. No Solicitation by Target.
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(a) Target shall not directly or indirectly, and shall not authorize or
permit any of its representatives directly or indirectly to:
(i) solicit, initiate, encourage, induce or facilitate the
making, submission or announcement of any Target Acquisition Proposal
or take any action that could reasonably be expected to lead to a
Target Acquisition Proposal,
(ii) furnish any information regarding Target to any Person in
connection with or in response to a Target Acquisition Proposal or an
inquiry or indication of interest that could lead to a Target
Acquisition Proposal,
(iii) engage in discussions or negotiations with any Person
with respect to any Target Acquisition Proposal,
(iv) approve, endorse or recommend any Target Acquisition
Proposal or
(v) enter into any letter of intent or similar document or any
contract contemplating or otherwise relating to any Target Acquisition
Transaction;
provided, however, that this Section 9.01(a) shall not prohibit:
(A) Target, or Target's Board of Directors, in response to any
Target Acquisition Proposal, from requesting clarifications from any
third party which makes a Target Acquisition Proposal, if such action
is taken solely for the purpose of obtaining information reasonably
necessary for the Target to ascertain whether such Target Acquisition
Proposal is a Target Superior Offer;
(B) Target, or the Board of Directors of Target from furnishing
nonpublic information regarding Target to, or entering into discussions
or negotiations with, any Person in response to a Target Superior Offer
that is submitted to Target by such Person (and not withdrawn) if:
(1) neither Target nor any of its representatives
shall have violated any of the restrictions set forth in
Section 9.01 (b),
(2) the Board of Directors of Target determines, in
good faith, based on the advice of its outside legal counsel,
that failing to take such action would reasonably be expected
to result in a breach of the fiduciary duties of the Board of
Directors of Target to comply with its fiduciary obligations to
Target's stockholders under applicable law,
(3) prior to furnishing any such nonpublic information
to, or entering into discussions or negotiations with, such
Person, Target gives Parent written notice of the identity of
such Person and of Target's intention to furnish nonpublic
information to, or enter into discussions or negotiations with,
such Person, and Target receives from such Person an executed
confidentiality and standstill agreement containing customary
limitations on the use and disclosure of all nonpublic written
26
and oral information furnished to such Person or any of such
Person's representatives and containing customary restrictions
on the purchase of Target stock by or on behalf of Target on
terms no less favorable to Target than the Nondisclosure
Agreement, and
(4) prior to furnishing any such nonpublic information
to such Person, Target furnishes such nonpublic information to
Parent (to the extent such nonpublic information has not been
previously furnished by Target to Parent); or
(C) Target from complying with Rule 14D-9 and Rule 14e-2
promulgated under the Exchange Act with regard to a Target Acquisition
Proposal or from making any required disclosure to the Target's
shareholders if, in the reasonable good faith judgment of the Target's
Board of Directors, after consultation with outside counsel, failure so
to disclose would be inconsistent with its disclosure obligations under
applicable law..
Without limiting the generality of the foregoing, Target acknowledges
and agrees that any violation of any of the restrictions set forth in the
preceding sentence by any of its representatives, whether or not such
representatives is purporting to act on behalf of Target, shall be deemed to
constitute a breach of this Section 9.01 by Target.
(b) Target shall promptly (and in no event later than 24 hours after
receipt of any Target Acquisition Proposal, any inquiry or indication of
interest that could lead to a Target Acquisition Proposal or any request for
nonpublic information) advise Parent orally and in writing of any Target
Acquisition Proposal, any inquiry or indication of interest that could lead to a
Target Acquisition Proposal or any request for nonpublic information relating to
Target (including the identity of the Person making or submitting such Target
Acquisition Proposal, inquiry, indication of interest or request, and the terms
thereof) that is made or submitted by any Person during the Pre-Closing Period.
Target shall keep Parent fully informed on a prompt basis with respect to the
status of any such Target Acquisition Proposal, inquiry, indication of interest
or request and any modification or proposed modification thereto.
Target shall immediately cease and cause to be terminated any
discussions or negotiations existing prior to the date hereof with any Person
(other than Parent) that relate to any Target Acquisition Proposal, except as
may be provided for in Section 9.01(a). Target agrees not to release any Person
(other than Parent) from or waive any provision of any confidentiality,
"standstill" or similar agreement to which it is a party and will use its best
efforts to enforce each such agreement at the request of Parent.
.2. Proxy Statement.
(a) As promptly as practical after the execution of this Agreement,
Target shall prepare and file with the SEC a proxy statement/prospectus to be
sent to the stockholders of Target in connection with the Target Stockholders'
Meeting (the "Proxy Statement"). Target shall make reasonable efforts to cause
the Proxy Statement to comply with the rules and regulations promulgated by the
SEC and to respond promptly to any comments of the SEC or its staff. Target will
cause the Proxy Statement to be mailed to the Target's stockholders as promptly
27
as practicable. Target shall make all other necessary filings with respect to
the Merger under the Securities Act and the Exchange Act and the rules and
regulations thereunder and Target shall use reasonable efforts to cause its
respective Quarterly Reports on Form 10-Q for the quarter ended September 30,
2003 and any other the Securities Act or Exchange Act required filings to be
filed within the time required by law.
(b) Target shall take such action as may be necessary to ensure that
the information supplied by Target for inclusion in the Proxy Statement shall
not, 1) on the date the Proxy Statement is first mailed to stockholders of
Target, 2) at the time of the Target Stockholders' Meeting and 3) at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement not false or misleading, or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Target
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to Target or any of its Affiliates,
officers, or directors should be discovered by Target which should be set forth
in a supplement to the Proxy Statement, Target shall promptly so inform Parent.
.3. Access to Information. Upon reasonable notice and to the extent
permitted under applicable law (including anti-trust laws and regulations) and
the provisions of agreements to which Target is a party, Target shall afford to
the officers, employees, accountants, counsel, and other representatives of
Parent, access, during normal business hours during the Pre-Closing Period, to
all its properties, books, contracts, commitments, and records and, during such
period, Target shall furnish promptly to Parent:
(a) a copy of each report, schedule, registration statement, and other
document filed or received by it during such period pursuant to the requirements
of federal securities laws and
(b) all other information concerning its business, properties, and
personnel as Parent may reasonably request. Unless otherwise required by law,
the parties will hold any such information which is non-public in confidence in
accordance with the Nondisclosure Agreement and all applicable laws.
No information or knowledge obtained in any investigation pursuant to
this Section 9.03 shall affect or be deemed to modify a representation or
warranty construed in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.
.4. Target Stockholders' Meetings.
(a) Target shall take all action necessary under all applicable laws to
call, give notice of and hold a meeting of the holders of Target Common Stock to
vote on a proposal to adopt this Agreement (the "Target Stockholders' Meeting").
The Target Stockholders' Meeting shall be held no later than October 30, 2003.
Target shall use its reasonable efforts to solicit from its stockholders proxies
for the adoption of this Agreement consistent with the fiduciary duties of the
Target's Board of Directors.
28
(b) The Proxy Statement shall include a statement to the effect that
the Board of Directors of Target recommends that Target's stockholders vote to
adopt this Agreement at the Target Stockholders' Meeting (the recommendation of
Target's Board of Directors that Target's stockholders vote to adopt this
Agreement being referred to as the "Target Board Recommendation").
.5. Legal Conditions to Merger.
Each of Parent and Target will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on it with
respect to the Merger (which actions shall include filings with any other
Governmental Entity) and will promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon either of
them in connection with the Merger. Each of Parent and Target will take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order, or approval of, or any exemption
by, any Governmental Entity or other public third party, required to be
obtained or made by Parent or Target in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement.
.6. Payment of Taxes. Target shall pay prior to the Effective Time: (i)
all Taxes required to be paid prior to that day, and (ii) shall withhold with
respect to its employees all federal and state income taxes, FICA, FUTA, and
other Taxes required to be withheld.
.7. Affiliates. Within two weeks of the date of this Agreement, Target
will provide Parent with a list of those persons who are, in Target's reasonable
judgment, "affiliates" of Target within the meaning of Rule 145 (each such
person who is an "affiliate" of Target within the meaning of Rule 145 is
referred to as an "Affiliate") promulgated under the Securities Act ("Rule
145"). Target shall provide Parent such information and documents as Parent
shall reasonably request for purposes of reviewing such list and shall notify
Parent in writing regarding any change in the identity of its Affiliates prior
to the Closing Date.
.8. Public Disclosure. Prior to the Closing, except where disclosure is
otherwise required by applicable law, each party will use reasonable diligence
to cause its employees, agents, accountants, legal counsel and other
representatives to hold in strict confidence the fact of and terms and
conditions of this Agreement and all matters relating thereto, and any
information pertaining to the Target or Parent which is not otherwise publicly
known and to not disclose the same to any person except only for such disclosure
as is reasonably necessary to fulfill this transaction.
The parties hereto shall mutually work together to finalize the public
announcement to be made simultaneously to key customers and the public in
general regarding this proposed transaction.
.9. Consents. Target shall use all reasonable efforts to obtain all
necessary consents, waivers, and approvals under any of Target's material
agreements, contracts, licenses, or leases in connection with the Merger.
29
.10. Brokers or Finders. Each of Parent and Target represents, as to
itself and its Affiliates, that no agent, broker, investment banker, financial
advisor, or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except W. Capital Partners,
whose fees and expenses will be paid by Target in accordance with Target's
agreement with such firm (a copy of which has been delivered by Target to Parent
or is attached hereto).
.11. Employee Benefits; Employee Issues.
(a) Parent agrees that all employees of Target who continue employment
with Parent or the Continuing Corporation after the Effective Time ("Continuing
Employees") shall be eligible to continue to participate in the Continuing
Corporation's non-equity based Target Employee Plans. For all purposes under any
replacement Target Employee Plans providing benefits to any Continuing Employee
as of the Effective Time, each such Continuing Employee shall be credited with
his or her years of service with Target and its subsidiaries before the
Effective Time, to the same extent as such employee was entitled, before the
Effective Time, to credit for such service under any similar Target Employee
Plans for purposes of eligibility to participate, vesting and accruals
(including vacation and sick leave accruals). In addition, (i) each employee
shall be immediately eligible to participate, without any waiting time, in any
and all replacement new Target Employee Plans to the extent coverage under such
plan replaces coverage under a comparable Target Employee Plan in which such
employee participated immediately before the Effective Time and (ii) for
purposes of each Target Employee Plan providing medical, dental, pharmaceutical
or vision benefits to any Continuing Employee, Continuing Corporation shall
cause all pre-existing condition exclusions of such plan to be waived for such
employee and his or her covered dependents (other than limitations or waiting
periods that are already in effect with respect to such employees and dependents
and that have not been satisfied as of the Effective Time), and Parent shall
cause any eligible expenses incurred by such employee and his or her covered
dependents during the portion of the plan year of the Target Employee Plan
ending on the date such employee's participation in the corresponding plan
begins, to be taken into account under such new plan for purposes of satisfying
all deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such new Target Employee Plan.
(b) Notwithstanding the preceding, nothing in this Section 9.12 or
elsewhere in this Agreement shall limit the right of Parent or the Continuing
Corporation to amend or terminate any such Target Employee Plans at any time.
(c) Parent will not, in connection with this Agreement or as an
inducement to employment with the Continuing Corporation, offer compensation to
the officers or directors of the Target that is more beneficial to the officers
and directors of Target than their current Target compensation.
(d) Nothing in this Section 9.11 or elsewhere in this Agreement,
however, shall be construed to create a right in any employee to employment with
Parent, the Continuing Corporation or any other subsidiary of Parent and,
subject to any binding written agreement between an employee and Parent or the
Continuing Corporation, the employment of each Continuing Employee shall be "at
will" employment.
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.12. Exempt Disposition; No Affiliate. Prior to the Effective Time, the
Board of Directors of Target shall approve the disposition of Target Common
Stock in connection with the Merger by those directors and officers of Target
subject to the reporting requirements of Section 16 of the Exchange Act to the
extent necessary for such disposition to be an exempt disposition pursuant to
SEC Rule 16b-3. Prior to the Effective Date, neither Parent nor Sub is or will
become an "affiliate" of Target, as such term is defined under Rule 13e-3 of the
Exchange Act (17 CFR sec. 240.13e-3).
.13. Notification of Certain Matters. Target will give prompt notice to
Parent upon discovery thereof, and Parent will give prompt notice to Target upon
discovery thereof, of (a) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause the failure of any of the
conditions set forth in Article X, and (b) any material failure of Target or
Parent, or any director, officer, employee, agent or representative thereof, to
comply with or satisfy any covenant, condition, or agreement to be complied with
or satisfied by it hereunder.
.14. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this Agreement and further subject to the fiduciary duties of
the Target's Board of Directors, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including cooperating fully with the other party. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement or to vest the Continuing Corporation
with full title to all properties, assets, rights, approvals, immunities, and
franchises of the Affiliated corporations, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
.15. Continuing Indemnification.
(a) Parent shall guaranty the obligations of Target to indemnify its
present and former directors and officers, to the extent of, and in accordance
with, the Articles of Incorporation and Bylaws of Target as in effect on the
date of this Agreement and Utah Law. Subject to Utah Law, Target's Bylaws
relating to indemnification shall not be amended in a manner which adversely
affects the rights of any party entitled to indemnification thereunder. With
respect to any claim relating to an occurrence prior to the Effective Time, such
guarantee shall be subordinate in all respects to the rights of Target and/or
such indemnified person under any policy of insurance maintained by Target.
(b) Target shall maintain directors and officers insurance with policy
limits of no less than $10 million on customary terms and conditions to the
Effective Time. At the Effective Time, Parent shall take all necessary steps to
terminate such policy and substitute, without any lapse of coverage, a "tail"
policy for a minimum of three years on commercially reasonable terms providing
coverage for acts or omissions of Target's directors and officers occurring
prior to the Effective Time.
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(c) The provisions of this Section 9.15 shall survive the consummation
of the Merger and expressly are intended to benefit each of the indemnified
parties under the Articles of Incorporation and Bylaws of Target.
Notwithstanding any other provision of this Agreement to the contrary, the
provisions of this Section 9.15 shall continue in full force and effect after
the Effective Time (without modification or amendment, except as required by
applicable law) in accordance with their terms, to the fullest extent permitted
by law, and shall be enforceable by such indemnified parties against the Parent
and the Continuing Corporation.
ARTICLE X
CONDITIONS TO MERGER
.1. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by the
requisite vote of the stockholders of Target as may be required by law, by the
rules of the SmallCap Market, and by any applicable provisions of Target's
Articles of Incorporation or Bylaws.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger shall have been issued, nor shall any
proceeding brought by a domestic administrative agency or commission or other
domestic Governmental Entity seeking any of the foregoing be pending or
threatened in writing; nor shall there be any action taken, or any statute,
rule, regulation, or order enacted, entered, enforced, or deemed applicable to
the Merger which makes the consummation of the Merger illegal.
.2. Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Parent and Sub:
(a) Representations and Warranties. The representations and warranties
of Target set forth in this Agreement shall be true and correct in all respects
as of the date of this Agreement; provided, however, that for the purposes of
this paragraph, such representations and warranties shall be deemed to be
accurate unless the failure or failures of such representations and warranties
to be accurate, either individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on Target as of the
Closing; it being understood that, for purposes of determining the accuracy of
such representations and warranties, all "Material Adverse Effect"
qualifications and other materiality qualifications, and any similar
qualifications, contained in such representations and warranties shall be
disregarded; and Parent shall have received a certificate signed on behalf of
Target by the chief executive officer and the chief financial officer of Target
to such effect.
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(b) Performance of Obligations of Target. Target shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date; and Parent shall have received a
certificate signed on behalf of Target by the chief executive officer and the
chief financial officer of Target to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, there
has not been a Material Adverse Effect on Target, which is continuing as of the
Closing.
(d) No Litigation. There shall not be pending any legal proceeding
brought by a Governmental Entity and related to the transactions contemplated by
this Agreement in which, in the reasonable judgment of Parent, there is a
reasonable possibility of an outcome that would reasonably be expected to have a
Material Adverse Effect on Target.
(e) Employment Agreements. The key management of employees of Target
shall have accepted employment with Target on terms substantially similar to
their current terms of employment with the Company.
(f) Debt Payoff. Target shall have paid a discounted amount to the
Creditors to cancel the Debt as described in the Discounted Payoff Letter and
Creditors shall have executed all releases attached to the Discounted Payoff
Letter and delivered to Sub written evidence that Creditors have cancelled all
debt pursuant to the terms of the Discounted Payoff Letter.
(g) Noncompete/Nonsolicitation. Stockholder Dick Reinhold shall have
entered a noncompete/nonsolicitation agreement with Sub in exchange for $10,000
restricting him for five years from competing with Target in its market states
or soliciting Target employees to work with him.
(h) Workers Compensation Tail Insurance. Target shall have purchased
tail coverage on AIG paid loss retro policy (1993-1996).
(i) Named Insured. Target shall have considered the feasibility of
naming Parent and Sub as named insureds under Target's various applicable
insurance policies.
.3. Additional Conditions to Obligations of Target. The obligation of
Target to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, exclusively by
Target:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement; provided, however, that for the
purposes of this paragraph, such representations and warranties shall be deemed
to be accurate unless the failure or failures of such representations and
warranties to be accurate, either individually or in the aggregate, has had, or
would reasonably be expected to have, a Material Adverse Effect on Parent or Sub
as of the Closing; it being understood that, for purposes of determining the
accuracy of such representations and warranties, all "Material Adverse Effect"
qualifications and other materiality qualifications, and any similar
qualifications, contained in such representations and warranties shall be
33
disregarded; and Target shall have received a certificate signed on behalf of
Parent or Sub by the chief executive officer and the chief financial officer of
Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date.
ARTICLE XI
TERMINATION AND AMENDMENT
.1. Termination. This Agreement may be terminated at any time prior to
the Closing Date, by written notice by the terminating party to the other party,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Target:
(a) by mutual written consent of Parent and Target; or
(b) by either Parent or Target if the Closing Date shall not have been
occurred by November 1, 2003 (unless delayed by the Securities Exchange
Commission review, in which case the date for Closing under this Section 11.01
(b) shall be extended one day for each day in excess of 10 days that the
Securities Exchange Commission takes to review the Stock Transaction (but in no
event later than December 1, 2003)) (the "Termination Date") (provided that the
right to terminate this Agreement under this Section 11.01(b) shall not be
available to a party to the extent that party's failure to fulfill any
obligation under this Agreement has been the primary cause of or primarily
resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or Target if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order, decree,
or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining, or otherwise prohibiting the Merger; or
(d) by either Parent or Target if (i) the Target Stockholders' Meeting
(including any adjournments or postponements thereof) shall have been held and
completed and the Target's stockholders shall have taken a final vote on a
proposal to adopt this Agreement, and (ii) this Agreement shall not have been
adopted at such meeting by the Required Target Stockholder Vote (and shall not
have been adopted at any adjournment or postponement thereof); provided,
however, that a party shall not be permitted to terminate this Agreement
pursuant to this Section 11.01(d) if the failure to obtain the Required Target
Stockholder Vote is attributable to a failure on the part of such party to
perform any material obligation required to be performed by such party at or
prior to the Effective Time; or
(e) by Parent (at any time prior to the adoption of this Agreement by
the Required Target Stockholder Vote) if a Target Triggering Event shall have
occurred; or
34
(f) by Parent if:
(i) Inaccuracies. Any of Target's representations and
warranties contained in this Agreement shall be inaccurate as of the
date of this Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent
date), such that the condition set forth in Section 10.02(a) would not
be satisfied; or
(ii) Material Adverse Effects. (A) Target Disclosure Schedule
contains any qualifications to the representations and warranties,
either individually or in the aggregate, that would be reasonably
determined by Parent or Sub to have a Material Adverse Effect on Target
as of the Closing; provided that Parent and Sub shall provide Target
notice of such determination in a reasonably timely manner after making
such determination and in a good faith attempt to allow Target to cure
the Material Adverse Effect or (B) there occurs a Material Adverse
Effect such that the condition set forth in Section 10.02(c) would not
be satisfied; or
(iii) Covenants. Any of Target's covenants contained in this
Agreement shall have been breached such that the condition set forth in
Section 10.02(b) would not be satisfied;
provided, however, that, in the case of (i), (ii) and (iii) above, if
an inaccuracy in Target's representations and warranties, a Material
Adverse Effect or a breach of a covenant by Target is reasonably
capable of being cured by Target prior to the Termination Date and
Target is continuing to exercise its reasonable efforts to cure such
inaccuracy, Material Adverse Effect or breach, then Parent may not
terminate this Agreement under this Section 10.01(h) if such
inaccuracy, Material Adverse Effect or breach is cured prior to the
later of: 1) November 1, 2003 or 2) the third calendar day from the
date on which Target received a written notice of such breach from
Parent; or
(g) by Target if :
(i) Inaccuracies. Any of Parent's representations and
warranties contained in this Agreement shall be inaccurate as of the
date of this Agreement, or shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent
date), such that the condition set forth in Section 10.03(a) would not
be satisfied,
(ii) Covenants. Any of Parent's covenants contained in this
Agreement shall have been breached such that the condition set forth in
Section 10.03(b) would not be satisfied;
provided, however, that, in the case of (i) or (ii) above, if an
inaccuracy in Parent's representations and warranties or a breach of a
covenant by Parent is reasonably capable of being cured by Parent prior
to the Termination Date and Parent is continuing to exercise its
reasonable efforts to cure such inaccuracy or breach, then Target may
not terminate this Agreement under this Section 11.01(g) on account of
such uncured inaccuracy or breach until the later of: 1) the November
1, 2003 or 2) the third calendar day from the date on which Parent
received a written notice of such breach from Target; or
35
(iii) if the shareholders of Sub shall have failed to approve
the Merger on or before the Closing Date, or
(iv) if at any time prior to the Closing Date, the Board of
Directors of Target reasonably determines in good faith (after
consultation with outside counsel) that it is necessary to terminate
this Agreement in order to comply with its fiduciary duties to the
Target's shareholders under applicable law.
.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 11.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Parent,
Target, Sub or their respective officers, directors, stockholders, or
Affiliates, except as set forth in Section 11.03; provided that (i) the
provisions of Section 11.03 of this Agreement shall remain in full force and
effect and survive any termination of this Agreement and (ii) the termination of
this Agreement shall not relieve any party from any liability or damages for any
willful breach of any provision contained in this Agreement.
.3. Fees and Expenses.
(a) Each Party Pays its Own Fees. Except as set forth in this Section
11.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) Breakup Fee. Target shall pay to Parent, in cash at the time
specified below, a nonrefundable fee in the amount of $1,110,000 (the "Breakup
Fee") if this Agreement is terminated under either Subsection (A) or (B) below:
(A) No Stockholder Approval. By Parent or Target pursuant to a
failure to obtain the Target Stockholder's approval under the terms of
Section 11.01(d), if:
(1) at or prior to the time of such termination a
Target Acquisition Proposal shall have been publicly disclosed,
announced or commenced, and
(2) such Target Acquisition Proposal shall not have
been unconditionally and publicly withdrawn by the Person
making such Target Acquisition Proposal at least five (5)
business days prior to the date of the Target Stockholders'
Meeting, and
(3) within nine months after such termination Target
consummates such Target Acquisition Transaction;
or
(B) Triggering Event. By Parent due to the occurrence of a
Target Triggering Event under the terms of Section 11.01(e),
36
In the case of termination of this Agreement by Target pursuant to
Section 11.01(d) (and the conditions set forth in clauses (A)(1)
through (A)(4) of this Section 11.03(b)(A) are satisfied), then the
Breakup Fee shall be paid by Target upon consummation of the Target
Acquisition Transaction referred to in clause (A)(4) above.
In the case of termination of this Agreement by Parent pursuant to
Section 11.01(e) (and the conditions set forth in (A)(1) through (A)(4)
of this Section 11.03(b)(A) are satisfied), then the Breakup Fee shall
be paid by Target within two business days after such termination.
(c) Interest. Target acknowledges that the agreements contained in this
Section 11.03 are an integral part of the transaction contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if Target fails to pay in a timely manner the amounts
due pursuant to this Section 11.03 and, in order to obtain such payment, Parent
makes a claim that results in a judgment against Target for the amounts set
forth in this Section 11.03, Target shall pay to Parent interest on the amounts
set forth in this Section 11.03 at the prime rate of Citibank, N.A. in effect on
the date such payment was required to be made.
(d) Other Damages. Payment of the fees and interest described in this
Section 11.03 shall not be in lieu of damages incurred in the event of willful
breach of this Agreement.
.4. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Target, but, after any such approval, no amendment shall
be made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
.5. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
ARTICLE XII
MISCELLANEOUS
.1. Survival of Representations, Warranties, and Agreements. The
representations, warranties, and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, including the Nondisclosure Agreement.
37
.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed), or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Sub, to:
James Madden
Hire Calling, Inc.
720 E. Jackson Street
Medford, Oregon 97504
with a required copy to (which alone shall not constitute
notice):
Foster Pepper & Shefelman PLLC
1111 Third Ave
Suite 3400
Seattle, Washington 98101
Attention: Lucas D. Schenck.
(b) if to Target, to:
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
Attention: Chairman
with a required copy to (which alone shall not constitute
notice):
LeBoeuf, Lamb, Greene & MacRae, LLP
136 South Main Street, Suite 1000
Salt Lake City, Utah 84111
Attn: Stephen M. Tumblin
.3. Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth in the first paragraph of this Agreement.
38
.4. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
.5. Entire Agreement, No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as specifically provided herein are not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
.6. Governing Law. EXCEPT TO THE EXTENT THAT UTAH LAW EXPRESSLY GOVERNS
THE MERGER, THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF OREGON WITHOUT REGARD TO ANY APPLICABLE CONFLICTS OF
LAW. In the event of any claim being made under this Agreement, the parties
agree that, in no event shall punitive or exemplary damages or attorney's fees
be awardable and hereby agree not to assert and hereby waive any and all right
to claim such damages or awards.
.7. Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by the parties
and their respective successors and assigns.
.8. Definitions. For purposes of this Agreement, the following terms
shall have the respective meaning set forth below:
"Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
"Intellectual Property Assets" means:
(A) patents, patent applications, patent rights, and inventions and
discoveries and invention disclosures (whether or not patented) (collectively,
"Patents");
(B) all trade names, trade dress, logos, packaging design, slogans,
Internet domain names, registered and unregistered trademarks and service marks
and applications therefor (collectively, "Marks");
39
(C) copyrights in both published and unpublished works, including
without limitation all compilations, databases and computer programs, and all
copyright registrations and applications, and all derivatives, translations,
adaptations and combinations of the above (collectively, "Copyrights");
(D) know-how, trade secrets, confidential or proprietary information,
research in progress, algorithms, data, designs, processes, formulae, drawings,
schematics, blueprints, flow charts, models, prototypes, techniques, beta
testing procedures and beta testing results (collectively, "Trade Secrets");
(E) goodwill, franchises, licenses, technical information and claims of
infringement against third parties; and
(F) customer lists and telephone numbers, business strategies, outside
analyst's plans and reports, outlooks, forecasts and other similar documents.
"knowledge of a corporation" shall mean actual knowledge of any one or
more of its executive officers employed by Target as of the date of this
Agreement.
"Material Adverse Effect." An event will be deemed to have a "Material
Adverse Effect" on Target if such event has had or would reasonably be expected
to have or give rise to a material adverse effect on:
(i) the business, condition, assets, liabilities, operations or
financial performance of Target, or
(ii) the ability of Target to consummate the Merger or any of the other
transactions contemplated by this Agreement or to perform any of its obligations
under this Agreement prior to the Termination Date;
(iii) Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Continuing
Corporation;
provided however, that in no event shall any of the following, in and of
themselves, constitute a Material Adverse Effect on Target:
(A) any change in the business, condition, capitalization, assets,
liabilities, operations or financial performance of Target caused by, related to
or resulting from, directly or indirectly, the transactions contemplated by this
Agreement or the announcement thereof,
(B) any failure by Target to meet internal projections or forecasts or
published revenue or earnings predictions for any period ending (or which
revenues or earnings are released) unless the reason for such failure is, in and
of itself, a Material Adverse Effect as determined without regard to this clause
(B),
(C) any adverse change, effect or occurrence attributable to the U.S.
economy as a whole or the industries in which Target competes, including the
temporary staffing industry,
40
(D) any change in accounting requirements or principles or any change
in applicable laws, rules or regulations or the interpretation thereof.
"Nondisclosure Agreement" shall mean the Nondisclosure Agreement dated
August 20, 2003 between Hire Calling, Inc. and Target and the Confidentiality
Agreement dated September 3, 2003 between Hire Calling, Inc. and Target.
"Oregon Law" shall mean the Oregon General Corporation Law.
"Person" shall mean any individual, Entity or Governmental Entity.
"Proxy Statement" shall have the meaning set forth in Section 9.02(a)
of this Agreement.
"Required Target Stockholder Vote" shall have the meaning set forth in
Section 3.03(d) of this Agreement.
"Target Acquisition Proposal" shall mean any offer, proposal, inquiry
or indication of interest (other than an offer, proposal, inquiry or indication
of interest by Parent) contemplating or otherwise relating to any Target
Acquisition Transaction.
"Target Acquisition Transaction" shall mean any transaction or series
of transactions involving: (i) any merger, consolidation, share exchange,
business combination, issuance of securities, direct or indirect acquisition of
securities, tender offer, exchange offer or other similar transaction in which
(1) Target is a constituent corporation, (2) a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires beneficial or record ownership of securities representing
more than 20% of the outstanding securities of any class of voting securities of
Target, or (3) Target issues securities representing more than 20% of the
outstanding securities of any class of voting securities of Target; (ii) any
direct or indirect sale, lease, exchange, transfer, license, acquisition or
disposition of any business or businesses or of assets or rights that constitute
or account for 20% or more of the consolidated net revenues, net income or
assets of Target; or (iii) any liquidation or dissolution of Target.
"Target Board Recommendation" is defined in Section 9.04(b).
"Target Common Stock" shall have the meaning set forth in Section
3.02(a) of this Agreement.
"Target Intellectual Property Assets" means all Intellectual Property
Assets owned by Target, used in the business of Target as it is presently or
presently proposed to be conducted or otherwise necessary for the conduct of the
Target operations in the jurisdictions in which Target is presently operating.
"Target Intellectual Property Assets" includes, without limitation, the
intellectual property related to the names: "SOS Staffing", "Inteliant", "Tops
Staffing" and "SOS Staffing Services", "Experience. The Difference", "Uniting
Talent With Opportunity" and the three crescents mark.
41
"Target Nondisclosure Contracts" means all nondisclosure or
confidentiality agreements entered into between Target and any Person in
connection with disclosures by Target relating to the Target operations or the
Target Intellectual Property Assets.
"Target Services" means any service being designed, developed, tested,
marketed or sold by Target.
"Target Stockholders' Meeting" shall have the meaning set forth in
Section 9.04(a) of this Agreement.
"Target Superior Offer" shall mean an unsolicited, bona fide written
offer made by a third party (other than Parent) for a merger, consolidation,
business combination, sale of substantial assets, sale of shares of capital
stock (including without limitation by way of a tender offer) or similar
transaction on terms that the Board of Directors of Target determines, in its
reasonable judgment, after consultation with an independent financial advisor,
to be more favorable to Target's stockholders than the terms of the Merger;
provided, however, that any such offer shall not be deemed to be a "Target
Superior Offer" if any financing required to consummate the transaction
contemplated by such offer is not committed or is not reasonably capable of
being obtained by such third party on a timely basis.
"Target Triggering Event" shall be deemed to have occurred if:
(i) the Board of Directors of Target shall have failed to recommend
that Target's stockholders vote to adopt this Agreement, or shall for any reason
have withdrawn or shall have modified in a manner adverse to Parent the Target
Board Recommendation;
(ii) Target shall have failed to include in the Proxy Statement the
Target Board Recommendation,
(iii) the Board of Directors of Target fails to reaffirm the Target
Board Recommendation, or fails to reaffirm its determination that this Agreement
and the Merger are in the best interests of Target's stockholders, within five
business days after Parent requests in writing that such recommendation or
determination be reaffirmed;
(iv) the Board of Directors of Target shall have approved, endorsed or
recommended any Target Acquisition Proposal;
(v) Target shall have entered into any letter of intent or similar
document or any contract relating to any Target Acquisition Proposal;
(vi) Target shall have failed to hold the Target Stockholders' Meeting
before the Termination Date (unless such failure is due to the SEC taking more
than 30 days in total in its time to review the Merger);
(vii) a tender or exchange offer relating to securities of Target shall
have been commenced and Target shall not have sent to its security holders,
within ten business days after the commencement of such tender or exchange
offer, a statement disclosing that Target recommends rejection of such tender or
42
exchange offer, it being understood that taking no position or indicating its
inability to take a position does not constitute recommending a rejection of
such tender or exchange offer by Target; or
(viii) a Target Acquisition Proposal is publicly announced, and Target:
(A) fails to issue a press release announcing its opposition to such Target
Acquisition Proposal within seven business days after such Target Acquisition
Proposal is announced or (B) otherwise fails to actively oppose such Target
Acquisition Proposal.
"Utah Law" means the Utah Code Annotated.
IN WITNESS WHEREOF, Parent, Sub, and Target have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
Hire Calling Holding Company, Inc.
By: /s/ R.L. Wendt
-------------------------------------
R.L. Wendt
Its: Chairman
Hire Calling Acquisitions, Inc.
By: /s/ R.L. Wendt
-------------------------------------
R.L. Wendt
Its: Chairman
SOS Staffing Services, Inc.
By: /s/ JoAnn Wagner
-------------------------------------
JoAnn Wagner
Its: Chairman
43