ASSET PURCHASE AGREEMENT by and among LINK STAFFING SERVICES CORPORATION, FRANLINK, INC., and STAFFLINK, INC., Each a “Seller”, and collectively, the“Sellers”, and HQ LINK CORPORATION “Buyer” Dated: February 12, 2021 TABLE OF CONTENTS

 

 

 

 

 

 

 

Exhibit A – Transition Plan

Exhibit B – Form of Trademark License Agreement

Exhibit C – Form of Assignment and Assumption Agreement

Exhibit D – Escrow Agreement

This Asset Purchase Agreement (this “Agreement”), dated as of February 12, 2021, is entered into among LINK STAFFING SERVICES CORPORATION, a Delaware corporation, FRANLINK, INC., a Texas corporation, and STAFFLINK, INC., a Texas corporation, (each a “Seller” and, collectively the “Sellers”) on the one hand, and HQ LINK CORPORATION, a Delaware corporation (“Buyer”) on the other hand.

WHEREAS, Sellers are engaged through various subsidiaries and franchisees in the business of providing temporary staffing services to customers (the “Business”);

WHEREAS, Sellers wish to sell and assign to Buyer, and Buyer wishes to purchase and assume from Sellers, the certain assets and specified liabilities of the Business specifically set forth in this Agreement and subject to the terms and conditions set forth herein; and

WHEREAS, a portion of the Purchase Price payable by Buyer to Seller shall be placed in escrow by Buyer upon the execution of this Agreement, the release of which shall be contingent upon certain events and conditions, all as set forth in this Agreement and the Escrow Agreement (as defined herein);

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

The following terms have the meanings specified or referred to in this Article I:

“Accounts Receivable” has the meaning set forth in Section 2.02(b).

“Acquired Franchisees” has the meaning set forth in Section 2.01(a).

“Acquisition Proposal” has the meaning set forth in Section 6.03(a).

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble.

“Allocation Schedule” has the meaning set forth in Section 2.08.

“Ancillary Documents” means the Escrow Agreement, the Assignment and Assumption Agreement, the Trademark License Agreement, and the other agreements, instruments and documents required to be delivered at the Closing.

“Annual Financial Statements” has the meaning set forth in Section 4.04.

“Assigned Contracts” has the meaning set forth in Section 2.01(c).

“Assignment and Assumption Agreement” has the meaning set forth in Section 3.03(a)(i).

“Assumed Liabilities” has the meaning set forth in Section 2.03.

“Balance Sheet Date” has the meaning set forth in Section 4.04.

“Benefit Plan” has the meaning set forth in Section 4.16(a).

“Books and Records” has the meaning set forth in Section 2.01(i).

“Business” has the meaning set forth in the recitals.

“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in Charleston, South Carolina are authorized or required by Law to be closed for business.

“Buyer” has the meaning set forth in the preamble.

“Buyer Closing Certificate” has the meaning set forth in Section 7.03(f).

“Buyer Indemnitees” has the meaning set forth in Section 8.02.

“Buyer PPP Escrow Contribution” means an amount equal to the PPP Escrow Amount, minus the Buyer Termination Fee, minus the Sellers’ PPP Escrow Contribution; provided, however, that the Buyer PPP Escrow Contribution shall not exceed $9,500,000.

“Buyer Termination Escrow Account” has the meaning set forth in Section 2.07(a).

“Buyer Termination Fee” means One Million Five Hundred Thousand Dollars ($1,500,000).

“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act of 2020,, Pub. L. No. 116-136, 134 Stat. 281, as amended, and all regulations and guidance issued by any Governmental Authority with respect thereto.

“Cash” means all cash and cash equivalents (including checking account balances, bank account balances and certificates of deposit, plus all deposited but uncleared bank deposits and marketable securities and short-term investments) of the Sellers.

“Closing” has the meaning set forth in Section 3.02.

“Closing Date” has the meaning set forth in Section 3.02.

“Closing Payment” has the meaning set forth in Section 2.06(b).

“Closing Settlement Payment” has the meaning set forth in Section 2.06(b).

“Code” means the Internal Revenue Code of 1986, as amended.

“Contracts” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments, and legally binding arrangements, whether written or oral.

“Copyrights” has the meaning set forth in the definition of Intellectual Property.

“Deductible” has the meaning set forth in Section 8.04(a).

“Disclosure Schedules” means the Disclosure Schedules delivered by Sellers and Buyer concurrently with the execution and delivery of this Agreement.

“Dollars or $” means the lawful currency of the United States.

“Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Seller or any of its Affiliates as a “single employer” within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“Escrow Agent” means Wilmington Trust, National Association.

“Escrow Agreement” means the Escrow Agreement to be entered into by Buyer, Seller and the Escrow Agent upon the execution of this Agreement, substantially in the form of Exhibit D.

“Excluded Assets” has the meaning set forth in Section 2.02.

“Excluded Contracts” has the meaning set forth in Section 2.02(e). 

“Excluded Liabilities” has the meaning set forth in Section 2.04.

“Financial Statements” has the meaning set forth in Section 4.04. 

“Franchisee Notes” has the meaning set forth in Section 2.01(g).

“Fundamental Representations” has the meaning set forth in Section 7.02(a). 

“GAAP” means United States generally accepted accounting principles in effect from time to time.

“Government Contracts” has the meaning set forth in Section 4.08(a)(vi). 

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination, or award entered by or with any Governmental Authority. 

“Hazardous Substance” shall mean: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral, or gas, in each case, whether naturally occurring or man-made, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

“Indemnified Party” has the meaning set forth in Section 8.05(a). 

“Indemnifying Party” has the meaning set forth in Section 8.05(a).

“Insurance Policies” has the meaning set forth in Section 4.13. 

“Intellectual Property” means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout the world: (a) trademarks, service marks, brands, certification marks, logos, trade dress, trade names, and other similar indicia of source or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications for registration, and renewals of, any of the foregoing (“Trademarks”); (b) copyrights and works of authorship, whether or not copyrightable, and all registrations, applications for registration, and renewals of any of the foregoing (“Copyrights”); (c) trade secrets, know-how, inventions (whether or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations and collections, tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein (“Trade Secrets”); and (d) computer programs, operating systems, applications, firmware and other code, including all source code, object code, application programming interfaces, data files, databases, protocols, specifications, and other documentation thereof; excluding, in each case, commercially available software products under standard end-user object code license agreements (“Software”).

“Intellectual Property Assets” means all Intellectual Property that is owned by a Seller and used or held for use in the conduct of the Business as currently conducted.

“Interim Balance Sheet” has the meaning set forth in Section 4.04. 

“Interim Financial Statements” has the meaning set forth in Section 4.04.

“Knowledge of Seller or Sellers’ Knowledge” or any other similar knowledge qualification, means the actual knowledge of any director or officer of any Seller, after due inquiry.

“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

“Liabilities” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys' fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however, that “Losses” shall not include punitive damages, except to the extent actually awarded to a Governmental Authority or other third party.

“Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Business as it relates to the Acquired Franchisees or the Purchased Assets; (b) the value of the Assets; or (c) the ability of Sellers or Buyer to consummate the transactions contemplated hereby on a timely basis; provided, however, that no state of facts, change, event, effect or occurrence arising or related to any of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been a “Material Adverse Effect”: (i) national or international business, economic or political conditions, including the engagement by the United States of America in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States of America or any of its respective territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States of America; (ii) events affecting financial, banking or securities markets (including any disruption thereof or any decline in the price of securities generally or any market or index); (iii) conditions (or changes in such conditions) generally affecting the industry in which the Business is conducted; (iv) pandemic, including the current coronavirus pandemic, epidemic, moratoriums, lock-downs or stay-at-home orders; (v) changes in GAAP or Law, except for statutory changes in Law enacted between the signing of this Agreement; (vi) the taking of any action required by this Agreement; (vii) changes as a result of the negotiation, announcement, pendency or performance of this Agreement, including by reason of the identity of Buyer or any communication by Buyer or any of its Affiliates of their plans or intentions regarding the operation of the Assets; (viii) any actions taken or omitted to be taken by or at the request or with the written consent of Buyer; (ix) in the case of Seller, the failure to meet or exceed any projection or forecast (it being understood, however, that the underlying circumstances giving rise to such failure may be taken into account unless otherwise excluded in this definition); or (x) effects or changes that are cured or no longer exist by the earlier of the Closing or the termination of this Agreement, provided, further, however, that any event, occurrence, fact, condition, or change referred to in clauses (i) through (v) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition, or change has a disproportionate effect on the business of Sellers compared to other participants in the industries in which the Sellers operate. 

“Material Contracts” has the meaning set forth in Section 4.08(a).

“Multiemployer Plan” has the meaning set forth in Section 4.16(c).

“Non-Disclosure Agreement” means that certain Non-Disclosure Agreement with an Effective Date of November 13, 2020 by and between HireQuest, Inc. and LINK Staffing Services Corporation and its subsidiaries.

“Paycheck Protection Program” means the business loan program established by the CARES Act that is commonly referred to as the “Paycheck Protection Program.”

“Permitted Encumbrances” means any of the following Encumbrances: (a) Encumbrances in favor of carriers, warehousemen, mechanics, landlords and materialmen and other similar Persons that are incurred in the ordinary course of the Business for sums not yet due and payable; (b) Encumbrances for current Taxes incurred in the ordinary course of the Business that are not delinquent or remain payable without any penalty or are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are maintained; (c) rights reserved to any Governmental Authority to regulate the affected property; (d) as to any leased assets or properties, rights of the lessors thereof; (e) Encumbrances incurred or deposits made in the ordinary course of the Business in connection with workers' compensation and other types of social security, unemployment insurance, or old age pension programs mandated under applicable laws or regulations and (f) Encumbrances that will be assumed, released or discharged at Closing or retained by the Sellers following the Closing.

“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Post-Closing Tax Period” means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.

“PPP Escrow Account” means the interest-bearing bank account designated by the PPP Escrow Agent to be controlled by the PPP Lender, held, invested, and distributed by the PPP Escrow Agent under the PPP Escrow Agreement.

“PPP Escrow Agent” means BOKF, NA doing business as Bank of Oklahoma.

“PPP Escrow Agreement” means the Escrow Agreement to be entered into at the Closing by and among Link Staffing Services Corporation, a Delaware corporation, the PPP Lender and the PPP Escrow Agent, substantially in the form attached hereto as Exhibit E.

“PPP Escrow Amount” means the amount of money to be deposited into the PPP Escrow Account at Closing to fully fund the PPP Escrow Account, as determined by the PPP Escrow Agent provided, however, that in no event shall the amount be less than the outstanding balance of the PPP Loan.

“PPP Lender” means BOKF, NA doing business as Bank of Oklahoma.

“PPP Loan” means the Paycheck Protection Program loan in the original principal amount of $10,000,000 issued to Link Staffing Services Corporation, a Delaware corporation, by the PPP Lender on May 5, 2020.

“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.

“Purchase Price” has the meaning set forth in Section 2.06.

“Purchased Assets” has the meaning set forth in Section 2.01.

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Restricted Business” means engaging in temporary employment, temporary or permanent placement, staffing, payrolling, or recruiting services.

“Restricted Period” has the meaning set forth in Section 6.07(a).

“SBA Procedural Notice” means the SBA Procedural Notice with Control No.: 5000-20057 and Effective Date of October 2, 2020 on SBA Form 1253.3 (4-93) and signed by Dianna L. Seaborn, Director, Office of Financial Assistance and all amendments and supplements thereto.

“Seller” and “Sellers” have the meanings set forth in the preamble.

“Sellers’ PPP Escrow Contribution” means the amount designated by Sellers as provided in Section 3.01(b) to be paid by Sellers to the PPP Escrow Account, provided, however, that the Sellers’ PPP Escrow Contribution shall be no less than an amount, when combined with the Buyer PPP Escrow Contribution, as would be necessary to fully fund the PPP Escrow Account.

“Sellers’ Closing Certificate” has the meaning set forth in Section 7.02(f).

“Seller Indemnitees” has the meaning set forth in Section 8.03.

“Single Employer Plan” has the meaning set forth in Section 4.16(c).

“Software” has the meaning set forth in the definition of Intellectual Property.

“Stimulus Funds” has the meaning set forth in Section 4.21.

“Tangible Personal Property” has the meaning set forth in Section 2.02(l).

“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties whether disputed or not and including any transferee or secondary liability in respect of any of the foregoing and any liability in respect of any tax as a result of being a member of an affiliated, consolidated, combined, unitary, or similar group.

“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Territory” means all areas included within the Designated Market Areas of the current franchise agreement of any of the Acquired Franchisees as of the Closing Date.

“Trademark License Agreement” has the meaning set forth in Section 2.05.

“Trademarks” has the meaning set forth in the definition of Intellectual Property.

“Trade Secrets” has the meaning set forth in the definition of Intellectual Property.

Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this Article IV are true and correct as of the date hereof (it being agreed that any matter disclosed in the Disclosure Schedules with respect to any section of this Agreement shall be deemed to have been disclosed for purposes of each other section of this Agreement to the extent that the applicability of such matter so referenced is reasonably apparent on the face of such included matter).

 The Sellers have made available to Buyer for review information regarding all CARES Act stimulus fund programs in which the Sellers are participating, including the amount of funds received by the Sellers (the “Stimulus Funds”). The Sellers have maintained records associated with the Stimulus Funds in material compliance with all Laws and regulations related to the CARES Act and all conditions and related guidance available as of the date hereof. The Sellers have utilized all such Stimulus Funds in accordance with the applicable Laws and regulations. The Sellers have completed a forgiveness application reflecting their use of all of the Stimulus Funds and have submitted it, together with any supporting documentation, to the PPP Lender. The transactions contemplated herein comply in all respects with the SBA Procedural Notice.

Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this Article V are true and correct as of the date hereof.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.