\n1.1(a) List of Personal Property<\/p>\n1.1(b) List of Current Assets<\/p>\n
1.1(c) List of Contracts<\/p>\n
1.1(d) List of Governmental Permits<\/p>\n
1.1(e) List of Proprietary Rights<\/p>\n
1.1(k) List of Real Property<\/p>\n
1.2 List of Excluded Assets<\/p>\n
2.1 List of Assumed Liabilities<\/p>\n
4.2(g) October 31, 1998 Balance Sheet of Seller<\/p>\n
<\/c><\/caption>\n
<\/c><\/caption>\n<\/table>\n
iii<\/p>\n
HUNTINGTON ASSET PURCHASE AGREEMENT<\/p>\n
THIS AGREEMENT is dated as of November 18, 1998 by and among Hall,
\nKinion & Associates, Inc., a Delaware corporation (“Hall Kinion”), Huntington
\nAcquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
\nHall Kinion (the “Purchaser”), Alexander, Boehmer and Tomasco, LLC, a
\nConnecticut limited liability company (“Huntington” or the “Seller”), and
\nRaymond Tomasco and Karen Vacheron Alexander individuals (each, a Member, and
\ncollectively, the “Members”).<\/p>\n
WHEREAS, Huntington and Interactive Technology Consultants, LLC, a
\nConnecticut limited liability company (“ITC”) operate as affiliated businesses
\nwhich provide information technology professionals to meet the MIS staffing
\nneeds of customers; and<\/p>\n
WHEREAS, ITC is engaged in the business of placing temporary employees
\nwho have information technology skills with employers in need of such skilled
\ntemporary employees (the “ITC Business”); and<\/p>\n
WHEREAS, Huntington is in the business of placing permanent employees
\nwho have information technology skills with employers in need of such skilled
\npermanent employees (the “Huntington Business”); and<\/p>\n
WHEREAS, Interactive Acquisition Corporation, another wholly-owned
\nsubsidiary of Hall Kinion (“IAC”) has contracted to acquire from ITC, and ITC
\nhas contracted to transfer to Purchaser, pursuant to the Asset Purchase
\nAgreement, dated as of even date herewith, by and among Hall Kinion, Interactive
\nAcquisition Corporation, ITC, Raymond Tomasco, Karen Vacheron Alexander and Gary
\nMalbin (the “ITC Asset Purchase Agreement”), substantially all of the assets,
\nproperties, and rights of ITC used or utilized in the ITC Business; and<\/p>\n
WHEREAS, Purchaser desires to acquire from the Seller, and the Seller
\ndesires to transfer to Purchaser, substantially all of the assets, properties,
\nand rights of the Seller in the Huntington Business (except as provided in
\nSection 1.2 below) as provided by this Agreement, upon the terms and conditions
\nof this Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the mutual promises and covenants
\nset forth herein, the parties hereby agree as follows:<\/p>\n
ARTICLE 1
\n PURCHASE AND SALE OF ASSETS
\n —————————<\/p>\n
1.1 Description of Assets to be Acquired. Upon the terms and subject
\n ————————————
\nto the conditions set forth in this Agreement, at the Time of Closing (as
\ndefined in Section 6.1), the Seller agrees to convey, sell, transfer, assign and
\ndeliver to Purchaser, and Purchaser shall purchase from the Seller, all right,
\ntitle and interest of the Seller at the Time of Closing in and to the assets,
\nproperties, and rights of the Huntington Business of every kind, nature and
\ndescription, personal, tangible and intangible, known or unknown, wherever
\nlocated, including, without limiting the generality of the foregoing (but
\nexcluding the “Excluded Assets,” as such term is defined in Section 1.2 below):<\/p>\n
(a) All interests in machinery, equipment, copiers, computers,
\nfurniture, fixtures, supplies, other tangible personal property and fixed assets
\nand all proprietary rights relating thereto (the “Personal Property”), including
\nwithout limitation those listed on Schedule 1.1(a) hereto, subject to changes in
\n —————
\nthe ordinary course of business, consistent with prior practice, since the date
\nspecified on Schedule 1.1(a);
\n ————— <\/p>\n
(b) All lease deposits, prepaid expenses, prepaid property taxes
\nand all other current assets, including cash (the “Current Assets”), including
\nwithout limitation those listed on Schedule 1.1(b) hereto;
\n ————— <\/p>\n
(c) All claims and rights under all agreements, contracts,
\ncontract rights, licenses, evidences of indebtedness, purchase and sale orders,
\nquotations and other executory commitments but excluding any liabilities
\nassociated therewith (collectively, the “Contracts”), including, without
\nlimitation those listed on Schedule 1.1(c) hereto;
\n ————— <\/p>\n
(d) All franchises, licenses, permits, consents, authorizations
\nand approvals of any federal, state or local regulatory, administrative or other
\ngovernmental agency or body, that are not listed on Schedule 1.1(d) under the
\n —————
\nheading “Non-Transferable Governmental Permits” (the “Non-Transferable
\nGovernmental Permits”), including but not limited to those listed on Schedule
\n ——–
\n1.1(d) under the heading “Transferable Governmental Permits” (those franchises,
\n– ——
\nfranchises, licenses, permits, consents, authorizations and approvals that are
\nnot Non-Transferable Governmental Permits are hereinafter referred to as the
\n“Transferable Governmental Permits”);<\/p>\n
(e) All rights in and to inventions, formulae, process
\nengineering, art works, schematic drawings, secret processes, product plans,
\nlogos, trademarks, trademark applications, service marks, copyrights, trade
\nnames, trade secrets, know-how, technical information, patents, patent
\napplications, software, databases, source code, employee lists, and customer
\nlists (collectively, the “Proprietary Rights”), including without limitation
\nthose listed on Schedule 1.1(e) hereto;
\n —————<\/p>\n
(f) Originals of all sales invoices, revenue registers and
\naccounts receivable records, and originals of all warranties on all supplies and
\nequipment, files, papers and all other records of the Seller, that relate to the
\nHuntington Business (collectively the “Records”);<\/p>\n
(g) All rights under express or implied warranties from suppliers
\nof the Seller and\/or the Huntington Business to the extent assignable;<\/p>\n
(h) All causes of action, judgments and claims or demands of
\nwhatever kind or description of the Seller, or that arise out of or relate to
\nthe Huntington Business;<\/p>\n
(i) All rights and interests of the Seller to the proceeds of
\ninsurance claims arising from damage to the Assets (as defined below) prior to
\nClosing;<\/p>\n
(j) All employee and customer lists and records of the Seller;<\/p>\n
2<\/p>\n
(k) All interests in the lease of office space described in
\nSchedule 1.1(k), including all leasehold improvements thereto, and all related
\n– —————
\nrights (collectively, the “Real Property”);<\/p>\n
(l) All goodwill of the Huntington Business (the “Goodwill”); and<\/p>\n
(m) Such rights, if any, as Huntington may have in the assets to
\nbe conveyed by ITC pursuant to the terms of the ITC Asset Purchase Agreement.<\/p>\n
The assets, properties, and rights to be conveyed, sold, transferred,
\nassigned, and delivered to Purchaser pursuant to this Section 1.1 are sometimes
\nhereinafter collectively referred to as the “Assets.”<\/p>\n
1.2 Excluded Assets. Notwithstanding the provisions of Section 1.1
\n —————
\nhereof, the Assets to be transferred to Purchaser pursuant to this Agreement
\nshall not include the Non-Transferable Governmental Permits and other assets, if
\nany, listed on Schedule 1.2 (collectively, the “Excluded Assets”).
\n ———— <\/p>\n
1.3 Non-Assignment of Certain Contracts. Notwithstanding anything to
\n ———————————–
\nthe contrary in this Agreement, to the extent that the assignment hereunder of
\nany of the Assets shall require the consent of any other party (or in the event
\nthat any of the same shall be nonassignable), neither this Agreement nor any
\naction taken pursuant to its provisions shall constitute an assignment or an
\nagreement to assign if such assignment or attempted assignment would constitute
\na breach thereof or result in the loss or diminution thereof; provided, however,
\nthat in each such case, the Seller shall, at its own expense, use its best
\nefforts to obtain the consent of such other party to an assignment to Purchaser.<\/p>\n
ARTICLE 2
\n LIABILITIES ASSUMED
\n ——————-<\/p>\n
2.1 Liabilities Assumed. Purchaser hereby agrees to assume, satisfy,
\n ——————-
\nand\/or perform when due and to indemnify and hold harmless the Seller from those
\nliabilities and obligations of the Seller specifically listed on Schedule 2.1
\n ————
\nattached hereto (the “Assumed Liabilities”). Purchaser shall not assume any
\nliabilities of the Seller not specifically set forth on Schedule 2.1.
\n ———— <\/p>\n
ARTICLE 3
\n PURCHASE PRICE
\n ————–<\/p>\n
3.1 Consideration. Upon the terms and subject to the conditions
\n ————-
\ncontained in this Agreement, in consideration for the Assets and in full payment
\ntherefor, Purchaser will pay to the Seller (or cause to be paid to the Seller),
\nfor the benefit of the Seller and the Members, the purchase price set forth in
\nSection 3.2, subject to the adjustment in accordance with Section 3.3 below, and
\nPurchaser will assume all the liabilities listed on Schedule 2.1, if any. Hall
\n ————
\nKinion hereby guarantees the Purchaser’s obligations contained herein to pay the
\nconsideration, to assume the liabilities, and to perform the covenants contained
\nor provided in this Article 3.<\/p>\n
3<\/p>\n
3.2 Amount. The Purchaser shall pay to the Seller the purchase price
\n ——
\n(“Purchase Price”) for the Assets as follows:<\/p>\n
(a) One Million Nine Hundred Seventy-Nine Thousand Six Hundred
\nForty Dollars ($1,979,640) in cash, payable to the Seller by check or wire
\ntransfer at the time of Closing (the “Initial Consideration”);<\/p>\n
(b) Up to Three Million Six Hundred Thousand Dollars ($3,600,000)
\nshall be paid pursuant to the terms and conditions of Section 3.3 hereof (each
\nsuch payment shall be referred to as an “Earn-Out Payment” and such funds shall
\nbe referred to as the “Earn-Out Funds”); and<\/p>\n
(c) An assumption of liabilities pursuant to Section 2.1.<\/p>\n
3.3 Certain Definitions.
\n ——————-
\n (a) “Closing Date Balance Sheet” shall mean the balance sheet
\nreflecting the Companies’ Closing Date Net Worth. The Closing Date Balance
\nSheet shall be prepared by Purchaser as soon as reasonably practicable following
\nthe Closing but in any event not later than December 31, 1998, as more
\nparticularly set forth in Section 3.7.<\/p>\n
(b) “Closing Date Net Worth” shall equal total assets of the
\nCompanies at the time of Closing minus total liabilities of the Companies at the
\ntime of Closing, as set forth on the Closing Date Balance Sheet, which shall be
\ndetermined in accordance with generally accepted accounting principles
\nconsistently applied (“GAAP”).<\/p>\n
(c) “Minimum Net Worth” shall equal $602,589.<\/p>\n
(d) “Closing Date Net Worth Shortfall” shall be the amount by
\nwhich (x) the Minimum Net Worth exceeds (y) the Closing Date Net Worth.<\/p>\n
(e) “Base Revenue” shall equal $3,280,562.08 and shall mean the
\nCompanies’ Gross Margin for the twelve (12) month period ending October 31,
\n1998, calculated in accordance with GAAP, including appropriate adjustments,
\nincluding adjustments for bad debt reserves.<\/p>\n
(f) “Companies” shall mean the ITC Business and the Huntington
\nBusiness, on a combined basis, or the subsidiary or subsidiaries of Hall Kinion,
\nincluding without limitation, Purchaser, ITC and any successors in interest
\nthereto which, after the Closing, is or are comprised of the former ITC Business
\nand Huntington Business on a combined basis, the financial results of which, for
\npurposes of calculating the Closing Date Net Worth and the Earn-Out Payments,
\nare accounted for on a consolidated stand-alone basis.<\/p>\n
(g) “Gross Margin” is calculated by adding: (1) the revenue
\ngenerated during the twelve (12) month period ending October 31, 1998 from the
\nITC Business (including conversion fees), less Bad Debt or refunds, less the
\nCost of Goods Sold; and (2) the revenue generated during the twelve (12) month
\nperiod ending October 31, 1998 from the Huntington Business (including
\nconversion fees), less Bad Debt or refunds, less the Cost of Goods Sold.<\/p>\n
4<\/p>\n
(h) “Cost of Goods Sold” for each of ITC and Huntington is equal
\nto the revenue generated during the twelve (12) month period ending October 31,
\n1998 by ITC or Huntington, as the case may be, plus fifteen percent (15%)* of
\nsuch revenue to account for the burden of, specifically, direct payroll,
\nemployer payroll taxes, business insurance, workers’ compensations, unemployment
\nand other costs incurred by Hall Kinion or Purchaser that are directly tied to
\nthe employment of a specific contractor during the ordinary course of business.<\/p>\n
(i) “Bad Debt” shall mean any account receivable that has not
\nbeen collected within 120 days and\/or any customer revenue adjustment.<\/p>\n
(j) “First Year Achieved Revenue” shall mean the Companies’ total
\nrevenues for the twelve (12) month period ending on October 31, 1999.<\/p>\n
(k) “Second Year Achieved Revenue” shall mean the Companies’
\ntotal revenues for the twelve (12) month period ending on October 31, 2000.<\/p>\n
(l) “Third Year Achieved Revenue” shall mean the Companies’ total
\nrevenues for the twelve (12) month period ending on October 31, 2001.<\/p>\n
(m) “First Year Period” shall mean the twelve (12) month period
\nfrom November 1, 1998 to October 31, 1999.<\/p>\n
(n) “Second Year Period” shall mean the twelve (12) month period
\nfrom November 1, 1999 to October 31, 2000.<\/p>\n
(o) “Third Year Period” shall mean the twelve (12) month period
\nfrom November 1, 2000 to October 31, 2001.<\/p>\n
(p) “First Year Target Revenue” shall equal the sum of Base
\nRevenue plus the product that results from multiplying Base Revenue by .45.<\/p>\n
(q) “Second Year Target Revenue” shall equal the sum of First
\nYear Achieved Revenue plus the product that results from multiplying First Year
\nAchieved Revenue by .25.<\/p>\n
(r) “Third Year Target Revenue” shall equal the sum of Second
\nYear Achieved Revenue plus the product that results from multiplying Second Year
\nAchieved Revenue by .20.<\/p>\n
(s) “First Year Factor” shall mean a fraction, the numerator of
\nwhich is (i) First Year Achieved Revenue minus (ii) Base Revenue, and the
\ndenominator of which is (x) First Year Target Revenue minus (y) Base Revenue.<\/p>\n
– —————
\n* Hall Kinion shall retain the right to adjust the percentage above or below
\nfifteen (15) in accordance with changes to insurance rates or tax rates beyond
\nHall Kinion’s control, provided that Hall Kinion provide the Members with
\nreasonable notice of such modification.<\/p>\n
5<\/p>\n
(t) “Second Year Factor” shall mean a fraction, the numerator of
\nwhich is (i) Second Year Achieved Revenue minus (ii) First Year Achieved
\nRevenue, and the denominator of which is (x) Second Year Target Revenue minus
\n(y) First Year Achieved Revenue.<\/p>\n
(u) “Third Year Factor” shall mean a fraction, the numerator of
\nwhich is (i) Third Year Achieved Revenue minus (ii) Second Year Achieved
\nRevenue, and the denominator of which is (x) Third Year Target Revenue minus (y)
\nSecond Year Achieved Revenue.<\/p>\n
(v) “Maximum Earnout Payment Per Year” shall equal One Million
\nSix Hundred Thousand Dollars ($1,600,000.00) for the First Year Period; One
\nMillion Six Hundred Thousand Dollars ($1,600,000.00) for the Second Year Period
\nand Four Hundred Thousand Dollars ($400,000.00) for the Third Year Period.<\/p>\n
3.4 Adjustment Upon Determination of Closing Date Balance Sheet. No
\n ———————————————————–
\nadjustment shall be made to the Purchase Price provided that Seller has not
\nengaged in any business or activities outside of the ordinary course of business
\nfrom October 31, 1998 through the time of Closing. In the event that Seller has
\nengaged in any business or activities outside of the ordinary course of business
\nduring such period, then on the date that is not more than five (5) business
\ndays after the final determination of the Closing Date Balance Sheet, ITC and
\nHuntington shall pay, by check or wire transfer, to the Purchaser an amount
\nequal to the Closing Date Net Worth Shortfall, if any. In the event ITC and
\nHuntington do not timely remit such amount to Purchaser, Purchaser shall have,
\nin addition to such other rights and remedies as Purchaser shall be entitled to
\nexercise by law or equity, the right to offset any or all EarnOut Payments (as
\nsuch term is defined in Section 3.5) by such amount together with interest
\nthereon at the lesser of (x) ten percent (10%) per annum, compounded annually,
\nor (y) the maximum rate allowable by law.<\/p>\n
3.5 Earn-Out Payments. (a) Subject to offset pursuant to the
\n —————–
\nindemnification provisions set forth in Article 8 hereof, Purchaser shall pay to
\nITC and Huntington up to an aggregate amount of Three Million Six Hundred
\nThousand Dollars ($3,600,000) in cash, payable by check or wire transfer in
\nthree (3) payments (collectively, the “Earnout Payments”), based upon the
\nachievement of certain milestones over a three (3) year period ending October
\n31, 2001 (the “Earnout Period”) as follows:<\/p>\n
(i) The subsequent payment corresponding to the First Year
\nPeriod (the “First Earnout Payment”), shall be the Maximum Earnout Payment for
\nthe First Year Period, provided that the First Year Achieved Revenue is greater
\nthan or equal to the First Year Target Revenue. If the First Year Achieved
\nRevenue is less than the sum of Base Revenue plus the product that results from
\nmultiplying Base Revenue by .35, then the First Earnout Payment shall be equal
\nto zero. However, if the First Year Achieved Revenue is greater than or equal to
\nthe sum of Base Revenue plus the product that results from multiplying Base
\nRevenue by .35, but less than the First Year Target Revenue, then the First
\nEarnout Payment shall be calculated by multiplying the Maximum Earnout Payment
\nfor the First Year Period by the First Year Factor. The date of the First
\nEarnout Payment, if any, shall not be later than December 15, 1999, or within
\nten (10) days after any dispute under Section 3.7 is finally resolved, whichever
\nis later.<\/p>\n
6<\/p>\n
(ii) The subsequent payment corresponding to the Second Year
\nPeriod (the “Second Earnout Payment”), shall be the Maximum Earnout Payment for
\nthe Second Year Period, provided that the Second Year Achieved Revenue is
\ngreater than or equal to the Second Year Target Revenue. If the Second Year
\nAchieved Revenue is less than the sum of First Year Achieved Revenue plus the
\nproduct that results from multiplying First Year Achieved Revenue by .20, then
\nthe Second Earnout Payment shall be equal to zero. However, if the Second Year
\nAchieved Revenue is greater than or equal to the sum of First Year Achieved
\nRevenue plus the product that results from multiplying First Year Achieved
\nRevenue by .20, but less than the Second Year Target Revenue, then the Second
\nEarnout Payment shall calculated by multiplying the Maximum Earnout Payment for
\nthe Second Year Period by the Second Year Factor. The date of the Second Earnout
\nPayment, if any, shall not be later than December 15, 2000, or within ten (10)
\ndays after any dispute under Section 3.7 is finally resolved, whichever is
\nlater.<\/p>\n
(iii) The subsequent payment corresponding to the Third Year
\nPeriod (the “Third Earnout Payment”), shall be the Maximum Earnout Payment for
\nthe Third Year Period, provided that the Third Year Achieved Revenue is greater
\nthan or equal to the Third Year Target Revenue. If the Third Year Achieved
\nRevenue is less than the sum of Second Year Achieved Revenue plus the product
\nthat results from multiplying Second Year Achieved Revenue by .15, then the
\nThird Earnout Payment shall be equal to zero. However, if the Third Year
\nAchieved Revenue is greater than or equal to the sum of Second Year Achieved
\nRevenue plus the product that results from multiplying Second Year Achieved
\nRevenue by .15, but less than the Third Year Target Revenue, then the Third
\nEarnout Payment shall calculated by multiplying the Maximum Earnout Payment for
\nthe Third Year Period by the Third Year Factor. The date of the Third Earnout
\nPayment, if any, shall not be later than December 15, 2001, or within ten (10)
\ndays after any dispute under Section 3.7 is finally resolved, whichever is
\nlater.<\/p>\n
(b) By way of example, if (i) Base Revenue equals $5,000,000;
\n(ii) First Year Achieved Revenue equals $10,000,000; (iv) Second Year Achieved
\nRevenue equals $12,000,000; and (v) Third Year Achieved Revenue equals
\n$13,700,000, then First Year Target Revenue would equal $7,250,000, Second Year
\nTarget Revenue would equal $12,500,000 and Third Year Target Revenue would equal
\n$14,400,000. The amount of the First Earnout Payment would be $1,600,000, the
\namount of the Second Earnout Payment would be $1,280,000 and the amount of the
\nThird Earnout Payment would be zero.<\/p>\n
(c) 75.56% of any Earn-Out Payment made hereunder shall be made
\npayable to ITC and the remaining 24.44% shall be made payable to Huntington.<\/p>\n
3.6 Special Provision Regarding Existing Clients. Any reference to
\n ——————————————–
\nthe Companies’ First Year Achieved Revenue, Second Year Achieved Revenue or
\nThird Year Achieved Revenue (in each case, “Annual Achieved Revenue”) shall
\ninclude, without limitation, any revenue derived by the Purchaser after the Time
\nof Closing from clients that were clients of ITC or Huntington within the two
\nyear period prior to the Time of Closing as shall be determined pursuant to an
\ninter-company accounting method mutually acceptable to the Chief Financial
\nOfficer of Purchaser and Raymond Tomasco.<\/p>\n
7<\/p>\n
3.7 Accounting Procedures.
\n ———————
\n (a) As soon as practicable after the Time of Closing, but in any
\nevent not later than December 31, 1998, Hall Kinion shall cause its chief
\nfinancial officer (the “Hall Kinion CFO”) to prepare the Closing Date Balance
\nSheet and a related unaudited statement of income of the Companies for the
\ntwelve (12) months ended October 31, 1998 setting forth for the period under
\nexamination (i) the Closing Date Net Worth, if not sooner agreed upon in writing
\nby Purchaser, Hall Kinion, ITC and Huntington (the “Special Determination”). If
\nRaymond Tomasco and Karen Vacheron Alexander, acting jointly (the “Remaining
\nMembers”), do not agree that the Special Determination correctly states the
\nClosing Date Net Worth, the Remaining Members shall promptly (but not later than
\n30 days after the delivery of the Special Determination) give written notice to
\nHall Kinion of any exceptions thereto (in reasonable detail describing the
\nnature of the disagreement asserted). If the Remaining Members and Hall Kinion
\nreconcile their differences, the Closing Date Net Worth shall be adjusted
\naccordingly and shall thereupon become binding, final and conclusive upon all of
\nthe parties hereto and enforceable in a court of law. If the Remaining Members
\nand Hall Kinion are unable to reconcile their differences in writing within 20
\ndays after written notice of exceptions is delivered to the Purchaser, the items
\nin dispute shall be submitted to a mutually acceptable accounting firm selected
\nfrom among the six largest accounting firms in the United States in terms of
\ngross revenues (the “Independent Auditors”) for final determination, and the
\nClosing Date Net Worth shall be deemed adjusted in accordance with the
\ndetermination of the Independent Auditors and shall become final and conclusive
\nupon all of the parties hereto and enforceable in a court of law. The
\nIndependent Auditors shall consider only the items in dispute and shall be
\ninstructed to act within 20 days (or such longer period as the Remaining Members
\nand Hall Kinion may agree) to resolve all items in dispute. If the Remaining
\nMembers do not give notice of any exception within 30 days after the delivery of
\nthe Special Determination or if the Remaining Members in their discretion give
\nwritten notification of their acceptance of the Closing Date Net Worth prior to
\nthe end of such 30 day period, the Closing Date Balance Sheet set forth in the
\nSpecial Determination (as the case may be) shall thereupon become binding, final
\nand conclusive upon all the parties hereto and enforceable in a court of law.
\nNotwithstanding the foregoing, the Special Determination shall not be made
\nunless the Seller has engaged in business or activities outside of the ordinary
\ncourse of business from October 31, 1998 through the time of Closing and the
\nHall Kinion CFO notifies the Seller of that fact (to which the Seller may take
\nexception pursuant to the same procedures set forth above) within the Special
\nDetermination.<\/p>\n
(b) For each of the First Year Period, the Second Year Period and
\nthe Third Year Period, respectively, (each, an “Annual Earn-Out Period”), Hall
\nKinion’s CFO shall prepare a report containing an unaudited balance sheet of the
\nCompany and a related statement of income of the Companies for the Annual Earn-
\nOut Period then ended, setting forth for the period under examination the
\ncalculation of Annual Achieved Revenue and the Annual Earn-Out Payments to be
\npaid in respect of such Earn-Out Period, and all adjustments required to be made
\nto such financial statements in order to make the calculations required under
\nSection 3.5 (the “Annual Determination”). Hall Kinion shall deliver a copy of
\neach such Annual Determination to the Remaining Members within 30 days after the
\nend of the Annual Earn-Out Period to which such Annual Determination relates.<\/p>\n
8<\/p>\n
(c) If the Remaining Members do not agree that the Annual
\nDetermination for any Earn-Out Period correctly states the Annual Achieved
\nRevenue or the Annual Earn-Out Payments for the Earn-Out Period under
\nexamination, the Remaining Members shall promptly (but not later than 30 days
\nafter the delivery of the Annual Determination) give written notice to Hall
\nKinion of any exceptions thereto (in reasonable detail describing the nature of
\nthe disagreement asserted). If the Remaining Members and Hall Kinion reconcile
\ntheir differences, such Annual Determination shall be adjusted accordingly and
\nshall thereupon become final and conclusive upon all of the parties hereto and
\nenforceable in a court of law. If the Remaining Members and Hall Kinion are
\nunable to reconcile their differences the items in dispute shall be submitted to
\nthe Independent Auditors for final determination, and such Annual Determination
\nshall be deemed adjusted in accordance with the determination of the Independent
\nAuditors and shall become binding, final and conclusive upon all of the parties
\nhereto and enforceable in a court of law. The Independent Auditors shall
\nconsider only the items in dispute and shall be instructed to act within 20 days
\n(or such longer period as the Remaining Members and Hall Kinion may agree) to
\nresolve all items in dispute. If the Remaining Members do not give notice of
\nany exception within 30 days after the delivery of an Annual Determination or if
\nthe Remaining Members in their discretion give written notification of their
\nacceptance of an Annual Determination prior to the end of such 30 day period,
\nsuch Annual Determination shall thereupon become binding, final and conclusive
\nupon all the parties hereto and enforceable in a court of law.<\/p>\n
(d) In the event the Independent Auditors are for any reason
\nunable or unwilling to perform the services required of them under this section,
\nthen Hall Kinion and the Remaining Members agree to select another accounting
\nfirm from among the six largest accounting firms in the United States in terms
\nof gross revenues to perform the services to be performed under this Section by
\nthe Independent Auditors. If Hall Kinion and the Remaining Members fail to
\nselect another accounting firm within 7 days after it is determined that the
\nIndependent Auditors will not perform the services required, either Hall Kinion
\nor the Remaining Members may request the American Arbitration Association to
\nappoint an independent firm of certified public accountants of recognized
\nnational standing to perform the services required under this section by the
\nIndependent Auditors. For purposes of this section the term “Independent
\nAuditors” shall include such other accounting firm chosen in accordance with
\nthis clause (d).<\/p>\n
(e) The fees and expenses of the Independent Auditors shall be
\nborne equally by Hall Kinion on the one hand and ITC and Huntington on the other
\nhand.<\/p>\n
3.8 Examination of Books and Records.
\n ——————————–
\n The books and records of the Company shall be made available during
\nnormal business hours upon reasonable advance notice at the principal office of
\nthe Company to the parties and the Independent Auditors to the extent required
\nto determine the Closing Date Net Worth or the calculations required under
\nSection 3.5 (as the case may be).<\/p>\n
9<\/p>\n
ARTICLE 4
\n REPRESENTATIONS AND WARRANTIES
\n ——————————<\/p>\n
4.1 Representations of Hall Kinion and Purchaser. Each of Hall
\n ——————————————–
\nKinion and the Purchaser hereby represents to the Seller that:<\/p>\n
(a) Organization. It is a corporation duly organized, validly
\n ————
\nexisting and in good standing under the laws of the State of Delaware.<\/p>\n
(b) Authorization. It has full corporate power and authority to
\n ————-
\nenter into this Agreement and the Related Agreements (as defined below) to which
\nit is a party, to perform its obligations hereunder and thereunder and to
\nconsummate the transactions contemplated hereby and thereby, including, without
\nlimitation, the execution and delivery of this Agreement and the Related
\nAgreements to which it is a party. It has taken all necessary and appropriate
\ncorporate action with respect to the execution and delivery of this Agreement
\nand the Related Agreements, to which it is a party, and this Agreement and each
\nof the Related Agreements to which it is a party (to the extent to which it is a
\nparty) constitute valid and binding obligations of it enforceable in accordance
\nwith their terms, except as limited by applicable bankruptcy, insolvency,
\nmoratorium, reorganization or other laws affecting creditors’ rights and
\nremedies generally. For purposes of this Agreement, the “Related Agreements”
\nshall mean the Employment Agreements (as defined in Section 7.1(g)), the
\nNoncompetition Agreement (as defined in Section 7.1(h)) and the Lease Assignment
\n(as defined in Section 7.1(l)).<\/p>\n
(c) Compliance With Other Instruments. Its execution and delivery
\n ———————————
\nof this Agreement and the Related Agreements to which it is a party, the
\nconsummation of the transactions contemplated hereby and thereby, and the
\ncompliance with the terms hereof and thereof by it do not, or as of the Closing
\nwill not, conflict with or result in a breach of any terms of, or constitute a
\ndefault under, its Certificate of Incorporation or Bylaws, or any material
\nagreement, obligation or instrument to which it is a party or by which it is
\nbound.<\/p>\n
(d) Litigation. Except as set forth in the statements, reports
\n ———-
\nand other documents filed or required to be filed by Hall Kinion with the
\nSecurities and Exchange Commission, there is no private or governmental action,
\nsuit, proceeding, claim, arbitration or investigation pending before any agency,
\ncourt or tribunal, foreign or domestic, or, to the knowledge of Purchaser,
\nthreatened against Purchaser or any of its subsidiaries or any of their
\nrespective properties or any of their respective officers or directors (in their
\ncapacities as such) that, individually or in the aggregate, could reasonably be
\nexpected to have a material adverse effect on Purchaser’s ability to comply with
\nthe Earn-Out provisions of Section 3.5 herein. There is no judgment, decree or
\norder against Purchaser or any of its subsidiaries or, to the knowledge of
\nPurchaser or any of its subsidiaries, any of their respective directors or
\nofficers (in their capacities as such) that could prevent, enjoin, or materially
\nalter or delay any of the transactions contemplated by this Agreement.<\/p>\n
4.2 Representations of Seller and the Members. Except as otherwise
\n —————————————–
\nset forth in the disclosure letter dated as of the date hereof and delivered by
\nthe Seller and the Members to the Purchaser and its counsel (the “Disclosure
\nLetter”) or as set forth in the Schedules to this <\/p>\n
10<\/p>\n
Agreement, the Seller and the Members hereby jointly and severally represent and
\nwarrant to the Purchaser that:<\/p>\n
(a) Organization, Good Standing and Qualification of the Seller.
\n ———————————————————–
\nSeller is a limited liability company duly organized and validly existing under
\nthe laws of the State of Connecticut and has all corporate power and authority
\nto carry on its business as now conducted. Seller is qualified to transact
\nbusiness and in good standing in each jurisdiction where failure to qualify
\nwould have a material adverse effect on the Huntington Business or the assets of
\nthe Seller (the “Assets”).<\/p>\n
(b) Authorization of the Seller. Seller has full corporate power
\n —————————
\nand authority to enter into this Agreement and those Related Agreements to which
\nit is a party, to perform its obligations hereunder and thereunder, and to
\nconsummate the transactions contemplated hereby and thereby, including, without
\nlimitation, the execution and delivery of this Agreement, general conveyances,
\nbills of sale, assignments and other documents and instruments evidencing the
\nconveyance of the Assets or delivered in accordance with Section 6.2 hereunder
\n(the “Closing Documents”) and the Related Agreements to which it is a party.
\nSeller has taken all necessary and appropriate company action with respect to
\nthe execution and delivery of this Agreement, the Closing Documents, and the
\nRelated Agreements to which it is a party. This Agreement, the Closing Documents
\nand the Related Agreements to which the Seller is a party (to the extent to
\nwhich it is a party) constitute valid and binding obligations of the Seller
\nenforceable in accordance with their terms, except as limited by applicable
\nbankruptcy, insolvency, moratorium, reorganization, or other laws affecting
\ncreditors’ rights and remedies generally.<\/p>\n
(c) Authorization of the Members. Each of the Members has full
\n —————————-
\npower and authority to enter into this Agreement and those Related Agreements to
\nwhich he or she is a party, to perform his or her obligations hereunder and
\nthereunder, and to consummate the transactions contemplated hereby and thereby.
\nThe Members have taken all necessary and appropriate Member action with respect
\nto the execution and delivery of this Agreement, the Closing Documents, and the
\nRelated Agreements to which he or she is a party. This Agreement, the Closing
\nDocuments and the Related Agreements (to the extent to which he or she is a
\nparty) constitute valid and binding obligations of each Member enforceable in
\naccordance with their terms, except as limited by applicable bankruptcy,
\ninsolvency, moratorium, reorganization, or other laws affecting creditors’
\nrights and remedies generally.<\/p>\n
(d) Capital Structure. The membership interests of Huntington are
\n —————–
\nheld by the following individuals and in the following amounts: 90% are held by
\nRaymond Tomasco and 10% are held by Karen Alexander. These interests constitute
\nall of the membership interests of Huntington. There are no outstanding
\nsubscriptions, options, warrants, calls, conversion rights, rights of exchange,
\nor other rights, plans, agreements or commitments of any character whatsoever
\n(including, without limitation, conversion or preemptive rights) providing for
\nthe purchase, issuance or sale of any membership interest of Huntington or any
\nsecurities convertible into or exchangeable for any membership interest of
\nHuntington. There are no obligations, contingent or otherwise, of Huntington to
\nrepurchase, redeem or otherwise acquire any membership interest of Huntington.<\/p>\n
11<\/p>\n
(e) Assets and Bulk Sales Laws. The Assets include all
\n ————————–
\nintellectual property, and all other property in which the Seller has any right,
\ntitle, and interest. The Assets include all the assets necessary to operate the
\nHuntington Business in the same manner as the Huntington Business was operated
\nby the Seller prior to the Time of Closing. A listing of the fixed assets of the
\nSeller as of September 30, 1998 is set forth in the Disclosure Letter or
\nSchedule 1.1(a). There are no “bulk sales” laws in the State of Connecticut
\n– —————
\nwhich impose any obligation on Purchaser regarding the sale and transfer of the
\nAssets contemplated hereunder.<\/p>\n
(f) Title to the Property.
\n ———————
\n (i) The Seller has good and marketable title to the Assets,
\nfree and clear of all mortgages, pledges, liens, encumbrances, security
\ninterests, equities, charges and restrictions of any nature whatsoever, except,
\nwith respect to Personal Property, such rights as ITC may have thereunder and
\nliens arising from Taxes not yet due and payable, statutory mechanics and
\nmaterialman’s liens incurred in the ordinary course of business to secure
\nobligations which are not past due and liens and encumbrances disclosed in the
\nDisclosure Letter. The Seller has valid leasehold interests in all leased
\nproperties listed on Schedule 1.1(a) and Schedule 1.1(k) as leased by the
\n ————— —————
\nSeller.<\/p>\n
(ii) By virtue of the deliveries made at the Closing,
\nPurchaser will obtain good and marketable title to the Assets, free and clear of
\nall liens, mortgages, pledges, encumbrances, security interests, charges,
\nequities, and restrictions of any nature whatsoever, other than those described
\nin Section 4.2(f)(i) hereof.<\/p>\n
(g) Financial Information. The Seller and the Members have
\n ———————
\ndelivered to the Purchaser (i) unaudited financial statements (balance sheet,
\nprofit and loss statement and statement of cash flows) for the Seller and ITC at
\nand for the twelve month period ended December 31, 1997, and, with the
\nPurchaser’s support and utilizing the Purchaser’s method of accounting, for the
\ntwelve-month period ended October 31, 1998 (collectively, the “Financial
\nStatements”). The Financial Statements include the Combined Balance Sheet and
\nRelated Combined Statements of Income and Members’ Equity and cash flows of ITC
\nand the Seller for the twelve months ended October 31, 1998, a copy of which is
\nattached hereto as Schedule 4.2(g) and is hereinafter referred to as the
\n —————
\n“Balance Sheet.” The Balance Sheet is complete and correct in all material
\nrespects, and was prepared in accordance with generally accepted accounting
\nprinciples. The Balance Sheet accurately describes and fairly presents the
\nfinancial condition and operating results of the Seller as of the date, and for
\nthe period, indicated therein. Except as set forth in the Balance Sheet, there
\nare no debts, liabilities or obligations of the Seller and ITC to which the
\nAssets or the Business are subject, contingent or otherwise (whether or not such
\ndebts, liabilities or obligations would be required to be described or included
\nunder generally accepted accounting principles), other than liabilities incurred
\nin the ordinary course of business subsequent to October 31, 1998.<\/p>\n
(h) Absence of Certain Changes and Events. Except as
\n ————————————-
\ncontemplated herein, since October 31, 1998, there has not been:<\/p>\n
(i) Any material adverse change in the financial condition,
\nresults of operation, assets, liabilities, or prospects of the Huntington
\nBusiness, or, to the <\/p>\n
12<\/p>\n
knowledge of the Seller and the Members any occurrence, circumstance, or
\ncombination thereof which reasonably could be expected to result in any such
\nmaterial adverse change;<\/p>\n
(ii) Any material transaction relating to or involving the
\nHuntington Business or the Seller (other than the transactions contemplated
\nherein) which was entered into or carried out by the Seller other than in the
\nordinary and usual course of business;<\/p>\n
(iii) Any material change made by the Seller in its method
\nof operating the Huntington Business or its accounting practices relating
\nthereto;<\/p>\n
(iv) Any mortgage, pledge, lien, security interest,
\nhypothecation, charge, or other encumbrance imposed or agreed to be imposed on
\nor with respect to the Seller, the Huntington Business or the Assets;<\/p>\n
(v) Any sale, lease, or disposition of, or any agreement to
\nsell, lease or dispose of any of the Assets, other than sales, leases, or
\ndispositions in the usual and ordinary course of business and consistent with
\nprior practice; <\/p>\n
(vi) Any increase in or modification of the compensation or
\nbenefits payable or to become payable by the Seller to any director or officer
\nof the Seller or any employee of the Seller or the Huntington Business; or<\/p>\n
(vii) Any other event or condition of any character which,
\nto the knowledge of the Seller and the Members, materially adversely affects, or
\nmay reasonably be expected to so affect, the Assets taken as a whole or the
\nresults of operations, financial condition or prospects of the Seller or the
\nHuntington Business.<\/p>\n
(i) Receivables. Except as set forth in the reserve for doubtful
\n ———–
\naccounts, set forth on the Balance Sheet, the accounts receivable shown on the
\nBalance Sheet arose in the ordinary course of business, have been collected or
\nare collectible in the book amounts thereof, without setoff or counter-claim.<\/p>\n
(j) Taxes. Seller has completed and duly and timely filed in
\n —–
\ncorrect form with the appropriate tax authorities all tax returns and reports
\nrequired to be filed on or prior to the date hereof. All of such tax returns
\nthat have been filed were accurate and complete as filed. Sellers have paid in
\nfull all taxes, assessments or deficiencies shown to be due on those tax returns
\nthat have been filed, claimed to be due by any taxing authority or otherwise due
\nor owing. Seller has made all withholdings of tax required to be made under all
\napplicable tax laws and regulations; and such withholdings have been or will be
\npaid to the respective governmental agencies when due and to the extent not yet
\ndue have been set aside in accounts for purposes of such payment. The Assets are
\nnot subject to any liens for taxes, except liens for current ad valorem taxes
\nnot yet due, and neither Purchaser nor any affiliate thereof will become
\ndirectly or indirectly liable for, and no lien, claim or encumbrance will be
\nplaced upon the Assets with respect to, (A) any taxes attributable to the
\nownership or use of the Assets with respect to periods prior to and including
\nthe Closing Date (other than ad valorem taxes not yet due and payable as of the
\nClosing Date) or (B) any other taxes (regardless of whether attributable to
\nperiods prior to and including the Closing Date) imposed upon the Seller or
\nattributable to the actions or activities of the Seller.<\/p>\n
13<\/p>\n
(k) Compliance With Law. The use of the Assets and Seller’s
\n ——————-
\nconduct of the Huntington Business is and has been in compliance, in all
\nmaterial respects, with all applicable laws, statutes, ordinances, rules
\nregulations, decrees and orders (each and all of the foregoing being herein
\nreferred to as “Laws”), including Laws respecting employment, employment
\npractices, labor and safety.<\/p>\n
(l) Immigration Compliance.
\n ———————-
\n (i) Seller is in compliance with all applicable federal,
\nstate and local laws, rules, directives and regulations relating to the
\nemployment authorization of their respective employees (including, without
\nlimitation, the Immigration Reform and Control Act of 1986, as amended and
\nsupplemented, and Section 212(n) and 274A of the Immigration and Nationality
\nAct, as amended and supplemented, and all implementing regulations relating
\nthereto), and Seller has not employed nor is any such entity currently employing
\nany unauthorized aliens (as such term is defined under 8 CFR 274a.1(a)).<\/p>\n
(ii) Seller has not received any notice from the Immigration
\nand Naturalization Service (the “INS”) or the United States Department of Labor
\n(the “DOL”) of the disapproval or denial of any visa petition or entry permit
\npending before the INS or labor certification pending before the DOL on behalf
\nof any employee or prospective employee of Seller.<\/p>\n
(iii) Since the approval of each of their respective visa
\npetitions, there has been no material change in the terms and conditions of
\nemployment of any employees of Seller.<\/p>\n
(iv) Seller shall have delivered to Purchaser by the Closing
\nDate true, accurate and complete copies of all visa petitions, entry permits and
\nvisa applications (and all supporting documents) submitted to the INS for all
\nforeign employees and prospective foreign employees of Seller.<\/p>\n
(m) Proprietary Rights. The Seller has sufficient title and
\n ——————
\nownership of all patents, trademarks, service marks, trade names, copyrights,
\ntrade secrets, information, proprietary rights and processes necessary for its
\nbusiness as now conducted without any conflict with or infringement of the
\nrights of others. There are no outstanding options, licenses, or agreements of
\nany kind relating to the foregoing, nor is the Seller bound by or a party to any
\noptions, licenses or agreements of any kind with respect to the patents,
\ntrademarks, service marks, trade names, copyrights, trade secrets, licenses,
\ninformation, proprietary rights and processes of any other person or entity,
\nexcept, in either case, for standard end-user, object code, internal-use
\nsoftware license and support\/maintenance agreements. The Seller has not received
\nany communications alleging that the Seller has violated or, by conducting its
\nbusiness as proposed, would violate any of the patents, trademarks, service
\nmarks, trade names, copyrights or trade secrets or other proprietary rights of
\nany other person or entity. Neither the execution nor delivery of this Agreement
\nor the Related Agreements, nor the carrying on of the Seller’s business by the
\nemployees of the Seller, nor the conduct of the Seller’s business as proposed,
\nwill, to the best of the Seller’s knowledge, conflict with or result in a breach
\nof the terms, <\/p>\n
14<\/p>\n
conditions or provisions of, or constitute a default under, any contract,
\ncovenant or instrument under which any of such employees is now obligated.<\/p>\n
(n) Contracts and Commitments. Except as set forth in the
\n ————————-
\nDisclosure Letter, there are no agreements or contracts, whether or not in
\nwriting, to which the Seller is a party which may: (i) involve obligations of or
\npayments by (contingent or otherwise) the Seller in excess of $25,000; (ii)
\ncontain provisions restricting and\/or affecting the development, distribution,
\nmarketing or sales of the Seller’s or the Huntington Business’ products or
\nservices; (iii) involve any joint venture or partnership contract or arrangement
\nor any other agreement which has involved or is expected to involve a sharing of
\nprofits with other persons; (iv) involve any agreement containing covenants
\npurporting to limit the freedom of the Seller to compete in any line of business
\nor geographic area or involve the distribution of the Seller’s or the Huntington
\nBusiness’ products or services; (v) involve any agreement of indemnification
\nregarding the Seller and\/or the Huntington Business; (vi) establish any powers
\nof attorney regarding the Seller and\/or the Huntington Business, (vii) obligate
\nthe Seller for the repayment of borrowed money; or (viii) involve any other
\nagreement, contract, or commitment which is material to the Seller taken as a
\nwhole. To the best knowledge of the Seller and the Members, each such contract
\nis valid and binding on all parties thereto and in full force and effect.
\nNeither the Seller nor any of the Members have received any notice of default,
\ncancellation, or termination in connection with any such contract.<\/p>\n
(o) Insurance. The Seller has not been refused any insurance by
\n ———
\nan insurance carrier during the past three (3) years nor has any insurance
\npolicy been canceled with respect to the Seller, the Huntington Business or the
\nAssets. The Disclosure Letter lists and summarizes all insurance policies and
\nfidelity bonds covering the Assets, the Huntington Business, and the operations,
\nemployees, officers, and directors of the Seller and the amounts of coverage
\nunder each such policy and bond. There is no claim by the Seller pending under
\nany of such policies or bonds with respect to the Seller, the Huntington
\nBusiness or the Assets. All premiums payable under all such policies and bonds
\nhave been paid, and the Seller is otherwise in full compliance with the material
\nterms of such policies and bonds. Such policies of insurance and bonds are of
\nthe type and in amounts customarily carried by entities conducting business
\nsimilar to that of the Seller. Neither the Seller nor the Members knows of any
\nthreatened termination of or material premium increase with respect to any of
\nsuch policies.<\/p>\n
(p) Litigation. Neither the Seller nor any of the Seller’s
\n ———-
\nofficers or directors is engaged in, or has received any threat of, any
\nlitigation, arbitration, investigation, or other proceeding, at law or in
\nequity, before any federal, state, local or foreign court, or regulatory agency,
\nor other governmental authority, involving the Seller, the Huntington Business,
\nthe Assets, or the temporary or regular employees of Seller (the “Employees”);
\nor against or affecting the transactions contemplated by the Agreement and the
\nRelated Agreements. There is no action, suit, proceeding, or investigation
\npending or to the knowledge of the Seller and the Members threatened against the
\nSeller or the Seller’s officers or directors that questions the validity of this
\nAgreement, the Related Agreements to which it is or they are a party, or the
\nright of the Seller, to enter into this Agreement, the Related Agreements, to
\nconsummate the transactions contemplated hereby or thereby, or which might
\nresult in any material adverse change in the Seller, the Business, the Assets or
\nthe results of operations, prospects, or financial condition of the Huntington
\nBusiness or the Seller. There is no action, <\/p>\n
15<\/p>\n
suit, proceeding, or investigation by the Seller currently pending or which it
\ncurrently intends to initiate. None of the Seller nor the Seller’s officers or
\ndirectors is bound by any judgment, decree, injunction, ruling, or order of any
\ncourt, governmental, regulatory or administrative department, commission, agency
\nor instrumentality, arbitrator, or any other person which has or could have a
\nmaterial adverse effect on the Huntington Business, the Assets, or the results
\nof operations, prospects, or financial condition of the Huntington Business or
\nthe Seller.<\/p>\n
(q) No Conflict or Default. Neither the execution and delivery of
\n ———————-
\nthis Agreement by the Seller or the Members, nor compliance by each of the
\nSeller and each of the Members with the terms and provisions hereof, including
\nwithout limitation, the consummation of the transactions contemplated hereby,
\nwill violate any statute, regulation, or ordinance of any governmental
\nauthority, or conflict with or result in the breach of any term, condition, or
\nprovision of the Articles of Organization, or the Bylaws of the Seller or of any
\nagreement, deed, contract, mortgage, indenture, writ, order, decree, legal
\nobligation, or instrument to which the Seller is a party or by which it or any
\nof the Assets are or may be bound, or constitute a default (or an event which,
\nwith the lapse of time or the giving of notice, or both, would constitute a
\ndefault) thereunder, where such violation, conflict and\/or default could have a
\nmaterial adverse effect on (i) the continued operation by the Purchaser of the
\nHuntington Business after the Closing on substantially the same basis as
\ntheretofore operated by the Seller, (ii) the consummation of the transactions
\ncontemplated by this Agreement, or (iii) the Assets, or result in the creation
\nor imposition of any lien, charge, or encumbrance, or restriction of any nature
\nwhatsoever with respect to any of the Assets, or give to others any interest or
\nrights, including rights of termination, acceleration, or cancellation in or
\nwith respect to the Assets.<\/p>\n
(r) Third-Party Consents. No consent, approval, or authorization
\n ——————–
\nof any third party on the part of the Seller is required in connection with the
\nconsummation of the transactions contemplated hereunder, where the failure to
\nobtain such consent, approval, and\/or authorization could have a material
\nadverse effect on (i) the continued operation by the Purchaser of the Seller and
\nthe Huntington Business after the Closing on substantially the same basis as
\ntheretofore operated, (ii) the consummation of the transactions contemplated by
\nthis Agreement, or (iii) the Assets.<\/p>\n
(s) Employees and Employee Benefit Plans.
\n ————————————<\/p>\n
(i) The Disclosure Letter sets forth a full and complete
\nlist of all directors, officers, employees, and consultants of the Seller and
\nthe Huntington Business (collectively, “Regular Service Providers”) as of
\nOctober 31, 1998, which schedule includes the names, job title, and the total
\namount of base salary, whether fixed or commission or a combination thereof, and
\nbonus for each Regular Service Provider. The Disclosure Letter sets forth a full
\nand complete list of those individuals the Seller has assigned to its customers
\n(the “Temporary Service Providers”) as of October 31, 1998, which schedule
\nincludes such Temporary Service Providers’ names, job title, hourly or daily
\ncompensation, and hourly or daily bill rate, the name of client\/customer where
\nsuch Temporary Service Provider is working, and to the best of the Members’ and
\nthe Seller’s knowledge, the date assignment is expected to terminate. The
\nRegular Service Providers and the Temporary Service Providers are sometimes
\ncollectively referred to herein as the “Service Providers.” None of the Service
\nProviders is subject to any contracts, written or unwritten, that specify a
\nparticular employment or service<\/p>\n
16<\/p>\n
term, or limit the Seller’s right to terminate the employment or service
\nrelationship of such Service Provider with the Seller. The Seller does not have
\nany contractual obligation (1) to provide any particular form or period of
\nnotice prior to termination, or (2) to pay any of such Service Providers any
\nseverance benefits in connection with their termination of employment or
\nservice. In addition, no severance pay will become due to any Service Providers
\nin connection with the transactions contemplated by this Agreement, as a result
\nof any Seller agreement, plan, or program. Neither the execution and delivery of
\nthis Agreement by the Seller nor the consummation of the transactions
\ncontemplated by this Agreement will result in the acceleration or creation of
\nany rights of any Service Provider to benefits under any employee plan
\n(including, without limitation, the acceleration of the vesting or
\nexercisability of any stock options or the acceleration of the vesting of any
\nrestricted stock). Following the consummation of the transactions contemplated
\nby this Agreement, the Purchaser will not have any obligations towards any
\nService Provider, nor any former director, officer, employee, or consultant of
\nthe Huntington Business, or of the Seller, other than pursuant to agreements
\ndirectly entered into by Purchaser with such persons. Neither the Seller nor the
\nMembers is aware that any Employee, or that any group of Employees, intends to
\nterminate their employment with the Seller, nor does it have a present intention
\nto terminate the employment of any of the foregoing.<\/p>\n
(ii) The Seller has not failed to comply in any respect with
\nTitle VII of the Civil Rights Act of 1964, as amended, the Fair Labor Standards
\nAct, as amended, the Occupational Safety and Health Act of 1970, as amended, the
\nSafe Drinking Water and Toxic Enforcement Act of 1986, as amended, all
\napplicable federal, state, and local laws, rules, and regulations relating to
\nemployment, and all applicable laws, rules, and regulations governing payment of
\nminimum wages and overtime rates, and the withholding and payment of taxes from
\ncompensation of employees, where the failure to so comply could have a material
\nadverse effect on the continued operation by the Purchaser of the Huntington
\nBusiness after the Closing Date on substantially the same basis as theretofore
\noperated.<\/p>\n
(iii) The Seller is not a party to any plan defined in
\nSection 3(1) of the Employee Retirement Income Security Act of 1974, as amended
\n(“ERISA”) including a pension, profit sharing, savings, or retirement plan; any
\nplan defined in Section 3(2) of ERISA, including a cafeteria or group health
\nplan; or other deferred compensation plan, or any bonus (whether payable in cash
\nor stock) or incentive program; or any stock, stock purchase, option, or similar
\nplan; director or employee loan or fringe benefit program; or severance plan or
\narrangement; or any other plan that provides any benefits to employees,
\nincluding but not limited to any plan defined in Section 3(3) of ERISA.<\/p>\n
If any such plans exist, the Seller has furnished to the Purchaser or
\ntheir counsel complete and accurate copies of such plans, summaries, summary
\nplan descriptions, annual reports such as Form 5500s. The Seller has prepared
\nin good faith and timely filed all requisite governmental reports including Form
\n5500s and a determination letter with the IRS to the extent applicable and has
\nproperly and timely posted, or distributed all notices and reports to employees
\nrequired to be filed, posted, or distributed with respect to each of such plans.
\nThe terms of each such plans comply with all applicable laws, including ERISA,
\nthe Internal Revenue Code of 1986, as amended (the “Code”) and the Family
\nMedical Leave Act (FMLA) and the plans at all times have been operated and
\nadministered in all material respects in accordance with its terms and all
\napplicable laws currently in effect, including ERISA, the Code and FMLA.<\/p>\n
17<\/p>\n
(iv) The Seller has not violated any of the health care
\ncontinuation coverage requirements of the Consolidated Omnibus Budget
\nReconciliation Act of 1985 (“COBRA”) applicable to its employees prior to the
\nTime of Closing.<\/p>\n
(v) There are no material pending claims by or on behalf of
\nany ERISA Plan by any Employee or beneficiary covered under any such plan or
\notherwise involving any such plan (other than routine claims for benefits).<\/p>\n
(vi) All contributions, premiums or other payments due from
\nthe Seller to (or under) any Plan have been fully paid or adequately provided
\nfor on the books and financial statements of Seller. All accruals (including,
\nwhere appropriate, proportional accruals for partial periods) have been made in
\naccordance with prior practices.<\/p>\n
(t) Interested Party Relationships. Neither the Seller, nor any
\n ——————————
\nofficer or director of the Seller (nor any family member of such officer or
\ndirector of the Seller, nor any corporation, partnership, or other entity that,
\ndirectly or indirectly, alone or together with others, controls, is controlled
\nby, or is in common control with the Seller, any officer or director of the
\nSeller, or any such family member), have any material financial interest, direct
\nor indirect, in any material supplier or customer of or to the Huntington
\nBusiness or other party to any contract that is material to the Huntington
\nBusiness.<\/p>\n
(u) Indebtedness. The Disclosure Letter sets forth a list of all
\n ————
\nagreements and other instruments under which the Seller is indebted for borrowed
\nmoney. The Seller has furnished the Purchaser with true and correct copies of
\neach such agreement or other instrument under or pursuant to which it has
\noutstanding indebtedness for borrowed money. Except as set forth in the
\nDisclosure Letter, the Seller is not in default in any material respect under
\nany of such agreements or other instruments, nor is the Seller or the Members
\naware of any event that, with the passage of time, or notice, or both, would
\nresult in an event of default thereunder. No employee or consultant of the
\nSeller or the Huntington Business is indebted to the Seller.<\/p>\n
(v) Books and Records. The books and records of the Seller to
\n —————–
\nwhich the Purchaser has been given access are the true books and records of the
\nSeller and truly and accurately reflect the underlying facts and transactions in
\nall material respects.<\/p>\n
(w) Complete Disclosure. No representation or warranty by the
\n ——————-
\nSeller in this Agreement, and no exhibit, schedule, statement, certificate, or
\nother writing furnished to the Purchaser or its advisors pursuant to this
\nAgreement or the Related Agreements to which it is a party or in connection with
\nthe transactions contemplated hereby and thereby, contains or will contain any
\nuntrue statement of a material fact or omits or will omit to state a material
\nfact necessary to make the statements contained herein and therein not
\nmisleading.<\/p>\n
18<\/p>\n
ARTICLE 5
\n COVENANTS
\n ———<\/p>\n
5.1 Maintenance of Huntington Business.
\n ———————————-
\n (a) During the period from the date hereof through the Time of
\nClosing, the Seller shall carry on and use commercially reasonable efforts to
\npreserve the Huntington Business, the goodwill of the Huntington Business, and
\nrelationships with customers, suppliers, officers, employees, agents, licensees
\nand others with respect to the Huntington Business in substantially the same
\nmanner as the Seller did prior to the date hereof. The Seller will use
\ncommercially reasonable efforts to keep and maintain the existing favorable
\nbusiness relationship with each of its respective customers, suppliers, and
\nofficers, employees, licensees and agents with respect to the Huntington
\nBusiness. If the Seller or the Members become aware of a deterioration in a
\nrelationship with any customer, supplier, licensee or officer, employee, or
\nagent with respect to the Huntington Business, they will promptly bring such
\ninformation to the attention of the Purchaser and will use commercially
\nreasonable efforts to restore such relationship.<\/p>\n
(b) During the period from the date hereof through the Time of
\nClosing, the Seller and the Members agree to advise the Purchaser of any
\nmaterial operating decisions (including, without limitation, proposed employee
\nhiring, layoff, and termination decisions) with respect to the Huntington
\nBusiness. Notwithstanding the foregoing, the Seller and the Members acknowledge
\nthat such operating decisions shall be made independently by the Seller and the
\nSeller shall be solely responsible for its implementation, consequences, and
\nliabilities, if any.<\/p>\n
5.2 Post-Closing Access to Information. With respect to the
\n ———————————-
\noriginals of the books and records of Seller relating to the Huntington Business
\nprior to the Time of Closing provided to Purchaser pursuant to this Agreement,
\nPurchaser shall allow Seller or its representatives appropriate access to such
\noriginal books and records. The Purchaser agrees that for three (3) years after
\nthe Time of Closing such originals shall not be removed from their principal
\nplaces of business or destroyed without the prior written consent of the
\nMembers, which shall not be unreasonably withheld.<\/p>\n
5.3 Employees. Purchaser shall use its best efforts to employ all of
\n ———
\nthe employees of Seller and\/or the Huntington Business immediately following the
\ntime of Closing. Without limiting the generality of the foregoing, Purchaser
\nand Hall Kinion shall use their best efforts to incentivize Robin Cassella and
\nColin Burgess on substantially similar terms as those under which each is
\ncurrently employed by Seller, ITC or Huntington Group Leasing Corporation, as
\nthe case may be.<\/p>\n
5.4 Taxes. Seller will complete and duly and timely file in correct
\n —–
\nform with the appropriate tax authorities all tax returns and reports required
\nto be filed after the date hereof. All of such tax returns that will be filed
\nwill be accurate and complete when filed. Seller will pay in full when due all
\ntaxes due after the date hereof. The Seller shall pay all taxes imposed upon
\nthe Seller as a result of the sale of the Assets. The Seller shall also pay, or
\nindemnify the Purchaser for, all taxes imposed on the Purchaser or any affiliate
\nand any taxes to which the<\/p>\n
19<\/p>\n
Assets are subject or for which a lien, claim or encumbrance can be placed upon
\nthe Assets but only in each case to the extent that any such taxes relate to
\nperiods (or portions thereof) ending on or prior to the Closing Date or
\ntransactions or events occurring on or prior to the Closing Date. Liability for
\nany taxes that Seller is required to satisfy pursuant to this Section 5.5 shall
\nnot constitute or be treated as Assumed Liabilities.<\/p>\n
5.5 Confidentiality. Without the prior written consent of the other
\n —————
\nparty, neither Purchaser nor Hall Kinion nor Seller (nor any of their respective
\nofficers, directors, employees, agents members or affiliates) will disclose the
\nexistence or terms of this Agreement prior to the Closing, except to the extent
\nthat disclosure is required by law, including, without limitation, the federal
\nsecurities laws and regulations or the disclosure obligations of Purchaser.<\/p>\n
5.6 Publicity. Purchaser and Seller agree not to issue any press
\n ———
\nrelease or public statement regarding this Agreement or the transactions
\ncontemplated hereunder without the prior consent of the other party, which shall
\nnot be unreasonably withheld. A mutually agreed upon press release shall be
\nmade upon the execution of the Agreement.<\/p>\n
ARTICLE 6
\n CLOSING
\n ——-<\/p>\n
6.1 Time of Closing. The transactions contemplated by this Agreement
\n —————
\nshall be effective as of 11:00 a.m. (California time) on November 18, 1998, or
\nif later, on the first business day on which the last of the conditions
\ncontained in Article 7 hereof is fulfilled or waived (the “Time of Closing”);
\nprovided, that in no event shall the Closing occur later than December 31, 1998
\nunless otherwise agreed to by the parties (“Termination Date”). The Closing
\nshall take place at the offices of Gunderson Dettmer Stough Villeneuve Franklin
\n& Hachigian, LLP, Menlo Park, California, or at such other place or date as may
\nbe agreed upon from time to time in writing by the parties. The “Closing” shall
\nmean the deliveries to be made by the Purchaser, the Seller and the Members at
\nthe Time of Closing in accordance with this Agreement.<\/p>\n
6.2 Deliveries by Members and the Seller. At the Time of Closing,
\n ————————————
\nthe Seller and the Members shall deliver to Purchaser, all duly and properly
\nexecuted, the following:<\/p>\n
(a) A Bill of Sale in the form attached hereto as Exhibit 6.2(a).<\/p>\n
(b) Good and sufficient assignments of the Contracts, which shall
\nbe in form and substance reasonably satisfactory to Purchaser and shall include,
\nsubject to Section 1.3 hereof, the written consents of all parties necessary in
\norder to transfer all of Members’ rights thereunder to Purchaser.<\/p>\n
(c) Certificates executed by the Members of Huntington certifying
\n(i) that the conditions specified in subsections (a)-(d) of Section 7.1 have
\nbeen satisfied, (ii) that there shall have been no adverse change in the
\nHuntington Business since October 31, 1998 and (iii) that the financial
\nstatements previously delivered to the Purchaser fairly present the financial
\ncondition of the Seller as of the date of such financials.<\/p>\n
20<\/p>\n
(d) An opinion of Cohen & Wolf, P.C., dated the date of the
\nClosing, in substantially the form attached hereto as Exhibit 6.2(d).
\n ————–
\n (e) Executed copies of the Related Agreements to the extent to
\nwhich each is a party.<\/p>\n
6.3 Deliveries by Hall Kinion and Purchaser. At the Closing,
\n —————————————
\nPurchaser and Hall Kinion shall deliver, or cause to be delivered to the Seller
\nand the Members, as applicable, all duly and properly executed, the following:<\/p>\n
(a) The portion of the Purchase Price set forth in Section
\n3.2(a).
\n (b) Executed copies of the Related Agreements to the extent to
\nwhich it is a party.<\/p>\n
(c) Officers’ Certificates executed by the President or Chief
\nFinancial Officer of Purchaser and Hall Kinion, respectively, certifying that
\nthe conditions specified in subsections (a)-(c) of Section 7.2 have been
\nsatisfied.<\/p>\n
(d) An opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, dated the date of the Closing, in substantially the form
\nattached hereto as Exhibit 6.3(d).
\n ————– <\/p>\n
6.4 Further Assurances. At or after the Time of Closing, each party
\n ——————
\nshall each prepare, execute and deliver, at the preparer’s expense, such further
\ninstruments of conveyance, sale, assignment or transfer, and shall take or cause
\nto be taken such other or further action, as any party shall reasonably request
\nof any other party at any time or from time to time in order to perfect, confirm
\nor evidence in Purchaser title to all or any part of the Assets or to
\nconsummate, in any other manner, the terms and provisions of this Agreement.<\/p>\n
ARTICLE 7
\n CONDITIONS PRECEDENT TO OBLIGATIONS
\n ———————————–<\/p>\n
7.1 Conditions to Obligations of Purchaser. Each and every
\n ————————————–
\nobligation of Purchaser to be performed at the Closing shall be subject to the
\nsatisfaction as of or before the Time of Closing of the following conditions
\n(unless waived in writing by Purchaser):<\/p>\n
(a) Representations and Warranties. The Seller’s and Members’
\n ——————————
\nrepresentations and warranties set forth in Section 4.2 of this Agreement shall
\nhave been true and correct when made and shall be true and correct at and as of
\nthe Time of Closing, as if such representations and warranties were made as of
\nsuch date and time.<\/p>\n
(b) Consents. The Seller shall have obtained and delivered to the
\n ——–
\nPurchaser all consents the Purchaser deems necessary or desirable, in the
\nPurchaser’s sole discretion, in order to consummate the transactions
\ncontemplated herein. Without limiting the effect of Section 1.3, the
\nrepresentations and warranties in Article 4 or the Indemnification obligations
\nin Article 8, Purchasers acknowledges that the consents listed on Schedule
\n7.1(b)<\/p>\n
21<\/p>\n
have not been obtained and the failure to obtain same shall not constitute a
\nbreach of this Agreement.<\/p>\n
(c) Performance of Agreement. All covenants, conditions, and
\n ————————
\nother obligations under this Agreement that are to be performed or complied with
\nby the Seller prior to the Time of Closing shall have been fully performed and
\ncomplied with at or prior to the Time of Closing, including the delivery of the
\ninstruments and documents in accordance with Section 6.2.<\/p>\n
(d) No Material Adverse Change. There shall have been no material
\n ————————–
\nadverse change in the financial condition, business, or properties of the
\nHuntington Business or the Seller, which materially adversely affects the
\nconduct of the Huntington Business or the Seller as presently being conducted or
\nthe condition or business prospects, financial or otherwise, of the Huntington
\nBusiness or the Seller, since October 31, 1998.<\/p>\n
(e) Absence of Governmental or Other Objection. There shall be no
\n ——————————————
\npending or threatened lawsuit challenging the transaction by any body or agency
\nof the federal, state, or local government or by any third party, and the
\nconsummation of the transaction shall not have been enjoined by a court of
\ncompetent jurisdiction as of the Time of Closing;<\/p>\n
(f) Approval of Documentation. The form and substance of all
\n ————————-
\ncertificates, instruments, opinions, and other documents delivered or to be
\ndelivered to the Purchaser under this Agreement shall be satisfactory to the
\nPurchaser and its counsel in all reasonable respects.<\/p>\n
(g) Employment Agreements. The Purchaser IAC shall have entered
\n ———————
\ninto employment agreement with Raymond Tomasco and Karen Vacheron Alexander in
\nsubstantially the forms attached hereto as Exhibits 7.1(g)(i) and 7.1(g)(ii)
\n(the “Employment Agreements”).<\/p>\n
(h) Intentionally Omitted.
\n ——————— <\/p>\n
(i) Termination of 401(k) Plan. The Seller shall take all actions
\n ————————–
\nnecessary to cause the termination of any 401(k) or pension plan or the like as
\nrequested by Purchaser prior to Closing.<\/p>\n
(j) Due Diligence Review. The Purchaser shall have completed to
\n ——————–
\nits sole satisfaction its due diligence review of the Seller, the Assets, the
\nHuntington Business and its business operations, financial condition and
\nprospects, and the Purchaser shall have received favorable reviews from its
\nadvisors of the results of their due diligence review of the same.<\/p>\n
(k) ITC Asset Purchase Agreement. Hall Kinion, ITC and the other
\n —————————-
\nparties thereto shall have executed the ITC Asset Purchase Agreement in
\nsubstantially the form attached hereto as Exhibit 7.1(k).
\n ————–<\/p>\n
(l) Assignment of Real Estate Lease. The Seller shall have
\n ——————————-
\nexecuted the Assignment of Lease and Assumption of Lease Obligations with
\nrespect to the Seller’s leased premises at 6527 Main Street, Trumbull,
\nConnecticut, in substantially the form attached hereto as Exhibit 7.1(l) (the
\n“Lease Assignment”).<\/p>\n
22<\/p>\n
7.2 Conditions to Obligations of Members and Seller. Each and every
\n ———————————————–
\nobligation of Members and the Seller to be performed at the Time of Closing
\nshall be subject to the satisfaction as of or before such time of the following
\nconditions (unless waived in writing by the Seller):<\/p>\n
(a) Representations and Warranties. The Purchaser’s and Hall
\n ——————————
\nKinion’s representations and warranties set forth in Section 4.1 of this
\nAgreement shall have been true and correct when made and shall be true and
\ncorrect at and as of the Time of Closing as if such representations and
\nwarranties were made as of such time and date.<\/p>\n
(b) Performance of Agreement. All covenants, conditions, and
\n ————————
\nother obligations under this Agreement which are to be performed or complied
\nwith by the Purchaser and Hall Kinion shall have been fully performed and
\ncomplied with at or prior to the Time of Closing, including the delivery of the
\ninstruments and documents in accordance with Section 6.3.<\/p>\n
(c) No Material Adverse Change. There shall have been no material
\n ————————–
\nadverse change in the financial condition, business, or properties of the
\nPurchaser or Hall Kinion which materially adversely affects the conduct of its
\nbusiness as presently being conducted or the condition or business prospects,
\nfinancial or otherwise, of the Purchaser, since October 31, 1998.<\/p>\n
(d) Employment Agreements. The Purchaser and Hall Kinion shall
\n ———————
\nhave entered into the Employment Agreements.<\/p>\n
(e) ITC Asset Purchase Agreement. Hall Kinion, IAC, ITC and the
\n —————————-
\nother parties thereto shall have executed the ITC Asset Purchase Agreement.<\/p>\n
(f) Assignment of Real Estate Lease. The Purchaser and Hall
\n ——————————-
\nKinion shall have executed the Lease Assignment.<\/p>\n
ARTICLE 8
\n INDEMNIFICATION
\n —————<\/p>\n
8.1 Survival of Representations, Warranties, and Agreements.
\n ——————————————————- <\/p>\n
(a) Subject to this Article 8, all representations, warranties,
\ncovenants, and agreements of each party in this Agreement shall survive the
\nexecution, delivery, and performance of this Agreement and shall in no way be
\naffected by any investigation of the subject matter thereof made by or on behalf
\nof the parties to this Agreement. All representations and warranties of each
\nparty set forth in this Agreement shall be deemed to have been made again by
\nsuch party at and as of the Time of Closing. The obligations of indemnity
\nprovided herein with respect to the representations and warranties of the Seller
\nand the Members set forth in Section 4.2 shall terminate on November 30, 1999;
\nprovided, however, that the representations and warranties set forth in Section
\n4.2(k) (Compliance With Law), and Section 4.2(e) (Assets) and the obligations of
\nindemnity therefor shall survive indefinitely, and the representations and
\nwarranties set forth in Section 4.2(j) (Taxes) and the obligations of indemnity
\ntherefor shall survive until the expiration of the applicable statutes of
\nlimitation. The obligations of indemnity provided herein with respect to the
\nrepresentations and warranties of the Purchaser set forth in Section 4.1 shall
\nterminate November 30, 1999.<\/p>\n
23<\/p>\n
(b) As used in this Article, any reference to a representation,
\nwarranty, or covenant contained in any Section of this Agreement shall include
\nthe schedule relating to such Section.<\/p>\n
8.2 Indemnification of the Purchaser.
\n ——————————–
\n (a) The Seller and each of the Members hereby agrees, jointly and
\nseverally to indemnify and hold harmless the Purchaser, and its respective
\nofficers, directors, stockholders and affiliates against any and all losses,
\nliabilities, damages, demands, claims, suits, actions, judgments or causes of
\naction, assessments, costs and expenses, including, without limitation,
\ninterest, penalties, attorneys’ fees, any and all expenses incurred in
\ninvestigating, preparing, or defending against any litigation, commenced or
\nthreatened, or any claim whatsoever, and any and all amounts paid in settlement
\nof any claim or litigation (collectively, “Purchaser Damages”), asserted
\nagainst, resulting from, imposed upon, or incurred or suffered by the Purchaser,
\nor its respective officers, directors, stockholders or affiliates directly or
\nindirectly,<\/p>\n
(i) as a result of or arising from any inaccuracy in or
\nbreach or nonfulfillment of any of the representations, warranties, covenants,
\nor agreements made by the Seller or the Members in this Agreement; or<\/p>\n
(ii) except as specifically set forth on Schedule 2.1,
\nwithout giving effect to any of the disclosures set forth in this Agreement, any
\naccompanying schedule, exhibit, certificate or the Disclosure Letter, any
\nPurchaser Damages arising from the operation of the Huntington Business prior to
\nthe Time of Closing, or arising out of the Seller’s status as employer of
\ncurrent or former employees of Seller, or as a result of failure to comply with
\nthe requirements of the “bulk sales” laws of any jurisdiction applicable to the
\nsale of the Assets to Purchaser.<\/p>\n
All of the claims described in Sections 8.2(a)(i) and 8.2(a)(ii) shall be
\nreferred to as “Purchaser Indemnifiable Claims.”<\/p>\n
(b) Subject in all cases to the limitations upon survival of
\nclaims as set forth in Section 8.1(a), with respect to the payment of such
\nPurchaser Damages owed by the Members to the Purchaser or its officers,
\ndirectors or affiliates, the Members agree that the Purchaser shall, in addition
\nto other remedies, be entitled to offset as payment for such Purchaser Damages
\nany portion or all of any Earnout Payment pursuant to Section 3.5 hereof,
\nprovided that no offset shall be made from Earnout Payments due and payable
\nafter November 30, 2000.<\/p>\n
8.3 Indemnification of Seller and the Members. The Purchaser and
\n —————————————–
\nHall Kinion hereby agree to indemnify and hold harmless the Seller and the
\nMembers against any and all losses, liabilities, damages, demands, claims,
\nsuits, actions, judgments or causes of action, assessments, costs and expenses,
\nincluding, without limitation, interest, penalties, attorneys’ fees, any and all
\nexpenses incurred in investigating, preparing, or defending against any
\nlitigation, commenced or threatened, or any claim whatsoever, and any and all
\namounts paid in settlement of any claim or litigation (collectively, the “Seller
\nDamages” or the “Member Damages”), asserted against, resulting from, imposed
\nupon, or incurred or suffered by the Seller or the<\/p>\n
24<\/p>\n
Members directly or indirectly, as a result of or arising from any inaccuracy in
\nor breach or nonfulfillment of any of the representations, warranties,
\ncovenants, or agreements made by the Purchaser in this Agreement (all of which
\nshall be referred to as “Member Indemnifiable Claims”). (Purchaser Indemnifiable
\nClaims and Member Indemnifiable Claims are sometimes referred to herein as
\n“Indemnifiable Claims;” Purchaser Damages and Member Damages or Seller Damages
\nare sometimes referred to herein as “Damages.”)<\/p>\n
8.4 Procedure for Indemnification with Respect to Third-Party Claims.
\n —————————————————————-
\nIf the Purchaser, its respective officers, directors or affiliates or the Seller
\nor any of the Members determines to seek indemnification under this Article 8
\nwith respect to Indemnifiable Claims (the party seeking such indemnification is
\nhereinafter referred to as the “Indemnified Party” and the party against whom
\nsuch indemnification is sought is hereinafter referred to as the “Indemnifying
\nParty”) resulting from the assertion of liability by third parties, the
\nIndemnified Party shall give written notice to the Indemnifying Party within
\nthirty (30) days of the Indemnified Party becoming aware of any such
\nIndemnifiable Claim or of facts upon which any such Indemnifiable Claim will be
\nbased; the notice shall set forth such material information with respect thereto
\nas is then reasonably available to the Indemnified Party; provided, however,
\nthat such written notice shall be effective only if delivered to the
\nIndemnifying Party before the later of November 30, 2000 or the termination,
\npursuant to Section 8.1(a) hereof, of the representation and warranties upon
\nwhich such Indemnifiable Claim(s) are based. In case any such liability is
\nasserted against the Indemnified Party, and the Indemnified Party notifies the
\nIndemnifying Party thereof, the Indemnifying Party will be entitled, if it so
\nelects by written notice delivered to the Indemnified Party within twenty (20)
\ndays after receiving the Indemnified Party’s notice, to assume the defense
\nthereof with counsel satisfactory to the Indemnified Party. Notwithstanding the
\nforegoing, (i) the Indemnified Party shall also have the right to employ its own
\ncounsel in any such case, but the fees and expenses of such counsel shall be at
\nthe expense of the Indemnified Party unless the Indemnified Party shall
\nreasonably determine that there is a conflict of interest between the
\nIndemnified Party and the Indemnifying Party with respect to such Indemnifiable
\nClaim, in which case the fees and expenses of such counsel will be borne by the
\nIndemnifying Party, (ii) the Indemnified Party shall not have any obligation to
\ngive any notice of any assertion of liability by a third party unless such
\nassertion is in writing, and (iii) the rights of the Indemnified Party to be
\nindemnified hereunder in respect of Indemnifiable Claims resulting from the
\nassertion of liability by third parties shall not be adversely affected by its
\nfailure to give notice pursuant to the foregoing unless, and, if so, only to the
\nextent that, the Indemnifying Party is materially prejudiced thereby. With
\nrespect to any assertion of liability by a third party that results in an
\nIndemnifiable Claim, the parties hereto shall make available to each other all
\nrelevant information in their possession material to any such assertion.<\/p>\n
(a) In the event that the Indemnifying Party, within twenty (20)
\ndays after receipt of the aforesaid notice of an Indemnifiable Claim, fails to
\nassume the defense of the Indemnified Party against such Indemnifiable Claim,
\nthe Indemnified Party shall notify the Indemnifying Party of such failure,
\nwhereupon the Indemnifying Party shall have ten (10) additional days to assume
\nthe defense of the Indemnifiable Claim, after the expiration of which the
\nIndemnified Party shall have the right to undertake the defense, compromise, or
\nsettlement of such action on behalf of and for the account and risk of the
\nIndemnifying Party.<\/p>\n
25<\/p>\n
(b) Notwithstanding anything in this Section to the contrary, (i)
\nif there is a reasonable probability that an Indemnifiable Claim may materially
\nand adversely affect the Indemnified Party, the Indemnified Party shall have the
\nright to participate, at its own cost and expense, in such defense, compromise,
\nor settlement and the Indemnifying Party shall not, without the Indemnified
\nParty’s written consent (which consent shall not be unreasonably withheld),
\nsettle or compromise any Indemnifiable Claim or consent to entry of any judgment
\nin respect thereof unless such settlement, compromise, or consent includes as an
\nunconditional term thereof the giving by the claimant or the plaintiff to the
\nIndemnified Party a release from all liability in respect of such Indemnifiable
\nClaim.<\/p>\n
8.5 Procedure For Indemnification with Respect to Non-Third Party
\n ————————————————————-
\nClaims.
\n– ——
\n (a) In the event that the Indemnified Party asserts the existence
\nof a claim giving rise to Damages (but excluding claims resulting from the
\nassertion of liability by third parties), it shall give written notice to the
\nIndemnifying Party. Such written notice shall state that it is being given
\npursuant to this Section 8.5, specify with particularity the nature and amount
\nof the claim asserted, accompanied by any written materials supporting such
\nclaim, and indicate the date on which such assertion shall be deemed accepted
\nand the amount of the claim deemed a valid claim (such date to be established in
\naccordance with the next sentence); provided, however, that such written notice
\nshall be effective only if delivered to the Indemnifying Party before the later
\nof November 30, 2000 or the termination, pursuant to Section 8.1(a) hereof, of
\nthe representation and warranties upon which such Indemnifiable Claim(s) are
\nbased. If the Indemnifying Party, within 60 days after the mailing of notice by
\nthe Indemnified Party, shall not give written notice to the Indemnified Party
\nannouncing its intent to contest such assertion of the Indemnified Party, such
\nassertion shall be deemed accepted and the amount of claim shall be deemed a
\nvalid claim. In the event, however, that the Indemnifying Party contests the
\nassertion of a claim by giving such written notice to the Indemnified Party
\nwithin said period, then the parties shall act in good faith to reach agreement
\nregarding such claim.<\/p>\n
8.6 Threshold Determination of and Limitations on Indemnification.
\n ————————————————————-
\nNotwithstanding anything in this Article 8 to the contrary, the Seller and the
\nMembers shall not be under any obligations of indemnity with respect to
\nPurchaser, and Purchaser shall not be under any obligations to the Seller and
\nthe Members until such time as Purchaser or Member (or Seller), respectively,
\nhas incurred Purchaser Damages or Member Damages (or Seller Damages), as the
\ncase may be, in the aggregate in excess of $25,000, for which Purchaser or
\nMember (or Seller), respectively, would have been entitled to be indemnified
\nagainst but for the provisions of this Section 8.6; and upon reaching the
\n$25,000 threshold set forth above, an Indemnifying Party shall only be liable
\nfor Damages to the extent of the excess over such $25,000 threshold.<\/p>\n
8.7 Limitation on Gary Malbin’s Indemnification of Purchaser.
\n ——————————————————–
\nNotwithstanding anything contained in this Agreement to the contrary, Gary
\nMalbin shall bear no liability whatsoever to Purchaser in connection with any
\nmatter relating to Huntington.<\/p>\n
26<\/p>\n
ARTICLE 9
\n MISCELLANEOUS PROVISIONS
\n ————————<\/p>\n
9.1 Notices. All notices and other communications hereunder shall be
\n ——-
\nin writing and shall be deemed given (a) on the same day if delivered
\npersonally, (b) three (3) business days after being mailed by registered or
\ncertified mail (return receipt requested), or (c) on the same day if sent by
\nfacsimile, confirmation received, to the parties at the following addresses and
\nfacsimile numbers (or at such other address or number for a party as shall be
\nspecified by like notice):<\/p>\n
If to Purchaser, to:<\/p>\n
Hall, Kinion & Associates, Inc.
\n 19925 Stevens Creek Boulevard, Suite 180
\n Cupertino, CA 95014
\n Attention: Brenda C. Rhodes
\n Telephone No.: (408) 863-5600
\n Facsimile No.: (408) 863-5648<\/p>\n
with copy (which shall not constitute notice) to:<\/p>\n
Gunderson Dettmer Stough Villeneuve
\n Franklin & Hachigian, LLP
\n 155 Constitution Drive
\n Menlo Park, CA 94025
\n Attention: Scott C. Dettmer, Esq.
\n Telephone No.: (650) 321-2400
\n Facsimile No.: (650) 321-2800<\/p>\n
If to Seller or Member:<\/p>\n
Alexander, Boehmer and Tomasco, LLC
\n 6527 Main Street
\n Trumbull, CT 06611
\n Attention: Raymond Tomasco or Karen Alexander
\n Telephone No.: (203) 452-3818
\n Facsimile No.: (203) 452-2303<\/p>\n
with copy (which shall not constitute notice) to:<\/p>\n
Cohen & Wolf, P.C.
\n 1115 Broad Street
\n Bridgeport, CT 06604
\n Attention: David Levine, Esq.
\n Telephone No.: (203) 337-4137
\n Facsimile No.: (203) 576-8504<\/p>\n
27<\/p>\n
9.2 Entire Agreement. This Agreement, the exhibits and schedules
\n —————-
\nhereto, and the documents referred to herein embody the entire agreement and
\nunderstanding of the parties hereto with respect to the subject matter hereof,
\nand supersede all prior and contemporaneous agreements and understandings, oral
\nor written, relative to said subject matter including the letter of intent dated
\nOctober 16, 1998.<\/p>\n
9.3 Binding Effect; Assignment. This Agreement and the various
\n ————————–
\nrights and obligations arising hereunder shall inure to the benefit of and be
\nbinding upon the Seller, its successors and permitted assigns, the Members,
\ntheir successors and permitted assigns, and the Purchaser and its successors and
\npermitted assigns. Neither this Agreement nor any of the rights, interests, or
\nobligations hereunder shall be transferred or assigned (by operation of law or
\notherwise) by either of the parties hereto without the prior written consent of
\nthe other party; provided, however, that the Purchaser may, without such written
\nconsent, assign its rights in connection with a merger of the Purchaser with or
\ninto another entity, a sale of all or substantially all of the Purchaser’s
\nassets, or a reorganization involving the Purchaser.<\/p>\n
9.4 Captions. The Article and Section headings of this Agreement are
\n ——–
\ninserted for convenience only and shall not constitute a part of this Agreement
\nin construing or interpreting any provision hereof.<\/p>\n
9.5 Expenses of Acquisition. The Seller and the Members shall pay in
\n ———————–
\nfull all fees and expenses incurred by the Seller and the Members in connection
\nwith this Agreement, and the transactions contemplated hereby. The Purchaser
\nshall pay all fees and expenses incurred by the Purchaser in connection with
\nthis Agreement, and the transactions contemplated hereby.<\/p>\n
9.6 Waiver; Consent. This Agreement may not be changed, amended,
\n —————
\nterminated, augmented, rescinded, or discharged (other than by performance), in
\nwhole or in part, except by a writing executed by the parties hereto, and no
\nwaiver of any of the provisions or conditions of this Agreement or any of the
\nrights of a party hereto shall be effective or binding unless such waiver shall
\nbe in writing and signed by the party claimed to have given or consented
\nthereto. Except to the extent that a party hereto may have otherwise agreed in
\nwriting, no waiver by that party of any condition of this Agreement or breach by
\nthe other party of any of its obligations or representations hereunder or
\nthereunder shall be deemed to be a waiver of any other condition or subsequent
\nor prior breach of the same or any other obligation or representation by the
\nother party, nor shall any forbearance by the first party to seek a remedy for
\nany noncompliance or breach by the other party be deemed to be a waiver by the
\nfirst party of its rights and remedies with respect to such noncompliance or
\nbreach.<\/p>\n
9.7 Third-Party Beneficiaries. Except as otherwise expressly
\n ————————-
\nprovided for in this Agreement, nothing herein, expressed or implied, is
\nintended or shall be construed to confer upon or give to any person, firm,
\ncorporation, or legal entity, other than the parties hereto, any rights,
\nremedies, or other benefits under or by reason of this Agreement.<\/p>\n
9.8 Counterparts. This Agreement may be executed simultaneously in
\n ————
\nmultiple counterparts, each of which shall be deemed an original, but all of
\nwhich taken together shall constitute one and the same instrument. A facsimile
\nsignature may be in lieu of an original signature provided that original
\nsignatures are thereafter delivered to the other party by overnight courier
\nwithin twenty-four (24) hours.<\/p>\n
28<\/p>\n
9.9 Gender. Whenever the context requires, words used in the
\n ——
\nsingular shall be construed to mean or include the plural and vice versa, and
\npronouns of any gender shall be deemed to include and designate the masculine,
\nfeminine, or neuter gender.<\/p>\n
9.10 Severability. If one or more provisions of this Agreement are
\n ————
\nheld to be unenforceable under applicable law, such provision shall be excluded
\nfrom this Agreement and the balance of the Agreement shall be interpreted as if
\nsuch provision were so excluded and shall be enforceable in accordance with its
\nterms.<\/p>\n
9.11 Remedies of the Purchaser. The Seller and the Members agree that
\n ————————-
\nthe Assets are unique and not otherwise readily available to the Purchaser.
\nAccordingly, the Seller and the Members acknowledge that, in addition to all
\nother remedies to which the Purchaser is entitled, the Purchaser shall have the
\nright to enforce the terms of this Agreement by a decree of specific
\nperformance, provided the Purchaser is not in material default hereunder.<\/p>\n
9.12 Governing Law. This Agreement shall in all respects be construed
\n ————-
\nin accordance with and governed by the laws of the State of California, as
\napplied to contracts entered into and to be performed solely within the state,
\nsolely between residents of the state.<\/p>\n
9.13 Venue. Any dispute arising under or in relation to this
\n —–
\nAgreement shall be resolved exclusively in a federal district court in the State
\nof California and each of the parties hereby submits irrevocably to the
\nexclusive jurisdiction of such court.<\/p>\n
9.14 Attorney’s Fees. If any action at law or in equity is necessary
\n —————
\nto enforce or interpret the terms of this Agreement or to protect the rights
\nobtained hereunder the prevailing party shall be entitled to its reasonable
\nattorneys’ fees, costs, and disbursements in addition to any other relief to
\nwhich it may be entitled.<\/p>\n
9.15 Rules of Construction. The parties hereto agree that they have
\n ———————
\nbeen represented by counsel during the negotiation, preparation and execution of
\nthis Agreement and, therefore, waive the application of any law, regulation,
\nholding or rule of construction providing that ambiguities in an agreement or
\nother document will be construed against the party drafting such agreement or
\ndocument.<\/p>\n
[The Remainder of this Page is Blank]<\/p>\n
29<\/p>\n
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
\nbe executed as of the day and year first above written.<\/p>\n
HALL, KINION & ASSOCIATES, INC.<\/p>\n
By:
\n ——————————————
\n Paul H. Bartlett
\n President<\/p>\n
Address: 19925 Stevens Creek Blvd., Ste. 180
\n Cupertino, CA 95014<\/p>\n
PURCHASER:<\/p>\n
HUNTINGTON ACQUISITION CORPORATION<\/p>\n
By:
\n —————————————–<\/p>\n
Address: 19925 Stevens Creek Blvd., Ste. 180
\n Cupertino, CA 95014<\/p>\n
SELLER:<\/p>\n
ALEXANDER, BOEHMER AND
\n TOMASCO, LLC<\/p>\n
By:
\n —————————————-
\n Name:
\n ————————————–
\n Title:
\n ————————————-<\/p>\n
Address: 6527 Main Street
\n Trumbull, CT 06611<\/p>\n
30<\/p>\n
MEMBERS:<\/p>\n
——————————————
\n Raymond Tomasco<\/p>\n
Address:
\n ———————————-<\/p>\n
———————————-<\/p>\n
——————————————
\n Karen Vacheron Alexander<\/p>\n
Address:
\n ———————————-<\/p>\n
———————————-<\/p>\n
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