Exhibit 99.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of the 25th day of June 2007 by and among Advanced Roofing Solutions,
Inc., a California corporation ("ARS"), Xxxxxxx Xxxxxx, an individual and 50%
shareholder of ARS, Xxxxx Xxxxxx, an individual and 50% shareholder of ARS
(collectively, the "Seller"), and Environmental Service Professionals, Inc., a
Nevada corporation (the "Buyer" or "Company"), with respect to the following
facts:
R E C I T A L S
A. Seller owns 100% of the total issued and outstanding capital stock of
ARS.
B. ARS is engaged in the business of providing analysis, preventative
maintenance, service and repairs for the roofs of clients such as
individual homeowners, home owner associations, property managers,
commercial property owners, multi-unit residences, and commercial
organizations with five or more units within any city limit (the
"Business").
C. The Company desires to acquire from Seller and Seller desires to sell
to the Company 100% of the total issued and outstanding stock of ARS
in exchange for a minimum of 1,100,000 shares and a maximum of
1,500,000 shares of the Company's common stock issuable in
installments over time, 1,000,000 warrants entitling the Seller to
purchase 1,000,000 additional shares of the Company's common stock at
a purchase price of $0.75 per share for a period of three years from
the date of the closing of the purchase under this Agreement, issuable
at such time as specified in this Agreement, plus a minimum of
$1,000,000 and a maximum of $1,950,000 in cash (subject to possible
further increase), payable in installments over time.
D. Upon Closing (as such term is defined in Section 4.1), the Company
will create an ARS division (the "ARS Division") as described in this
Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged by the parties to this Agreement,
and in light of the above recitals to this Agreement, the parties to this
Agreement hereby agree as follows:
1. SALE AND PURCHASE
1.1 SALE AND PURCHASE OF STOCK. In consideration for the Purchase Price
(as defined in Section 1.2 of this Agreement) and the other covenants of the
Company in this Agreement, Seller hereby agrees to convey to the Company all of
their capital stock (the "ARS Stock") and right, title and interest in and to
ARS, on the Closing Date (as defined in Section 4.1 of this Agreement).
1.2 PURCHASE PRICE. As consideration for the sale by Seller of the
shares of ARS Stock to the Company on the Closing Date, the Company will pay to
Seller the following, subject to possible increase as provided in Section 1.2(e)
of this Agreement (the "Purchase Price"): (i) $1,000,000 in cash (the "Cash
Payment"), payable as provided in Section 1.2(a) of this Agreement, (ii)
1,100,000 shares (the "Shares") of the Company's common stock (the "Stock
Payment"), issuable as provided in Section 1.2(b) of this Agreement, and (iii)
1,000,000 warrants entitling the Seller to purchase 1,000,000 additional shares
of the Company's common stock at a purchase price of $0.75 for a period of three
years from the Closing Date, issuable at the Closing Date. The certificates
evidencing the Shares will bear the following legend:
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"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
(a) CASH PAYMENT. Seller is to receive a total minimum cash payment
of $1,000,000 as part of the Purchase Price, subject to the terms
and conditions of this Agreement. The Cash Payment to Seller
shall be made as follows: (i) $750,000 paid upon Closing (as
defined in Section 4.1 of this Agreement), (ii) $100,000 paid 30
days after Closing, (iii) $100,000 paid 60 days after Closing,
and (iv) $50,000 paid 90 days after Closing.
(b) COMPANY SHARES. Seller is to receive a total minimum of 1,100,000
shares of the Company's common stock as part of the Purchase
Price, subject to the terms and conditions of this Agreement. The
Stock Payment will be made among the Seller (as among them on a
50% - 50% basis) as follows: (i) 750,000 shares upon Closing,
(ii) 50,000 shares 30 days after Closing, (iii) 50,000 shares 60
days after Closing, (iv) 50,000 shares 120 days after Closing,
(v) 50,000 shares 180 days after Closing, and (vi) 150,000 shares
275 days after Closing.
(c) COMPANY WARRANTS. Seller will be issued (as among them on a 50% -
50% basis) a collective total of 1,000,000 warrants on the
Closing which will entitle each of them to purchase up to 500,000
additional shares of common stock of the Company at a purchase
price of $0.75 per share for a period of three years from the
Closing.
(d) HOLDING PERIOD AND PIGGYBACK REGISTRATION RIGHTS. All Shares of
the Company's common stock and all of the Company's warrants
issued to Seller by the Company under this Agreement shall be
held by Seller for a period of at least one year from the date of
Closing. Seller will have piggyback registration rights with
respect to the Shares and the shares underlying the warrants,
subject to potential adjustment by the underwriter for such
registration statement, if any. Accordingly, the Company agrees
to notify the Seller in writing at least ten days prior to the
filing of any registration statement by it under Section 5 of the
Securities Act of 1933, as amended, on Form X-0, XX-0 or S-3, and
to include all of Seller's Shares and shares underlying the
warrants that are requested by them in writing for inclusion in
the registration statement, subject to the underwriter's (if any)
reasonable approval.
(e) ADJUSTMENTS TO PURCHASE PRICE. The amount of the Cash Payment and
Stock Payment may be increased and paid subject to the following
terms and conditions:
(I) ADJUSTMENT IN CASH PAYMENT. The Seller will earn and the
Buyer will pay to the Seller a collective total of an
additional $250,000 in cash if and upon ARS signing a Home
Warranty Program (the "Program") with a nationwide home
warranty provider which represents over 100,000 national
home warranty contracts across several markets in the United
States, reflecting a minimum of $16,000,000 of estimated
gross revenue for ARS over the 36 months following the
execution of the agreements evidencing the Program. The
Seller will earn and the Buyer will pay to the Seller a
collective total of an additional $200,000 in cash on or
before January 31, 2009 if ARS achieves 85% or more of its
projected gross revenue and net profits during the period
from Closing to December 31, 2008, as reflected in the ARS
Budget (as defined in Section 3 herein), a copy of which is
attached to this Agreement as Exhibit A. The Seller will
earn and the Buyer will pay to the Seller a collective total
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of an additional $500,000 in cash on or before January 31,
2009 if ARS exceeds its projected gross revenue during the
period from Closing to December 31, 2008, as set forth in
the ARS Budget, by more than 35%. If ARS achieves or exceeds
its projected net profits during the period from Closing to
December 31, 2008 as set forth in the ARS Budget and exceeds
it projected gross revenue during that period by more than
35%, then for each percentage point above 35% that ARS
exceeds it projected revenue during said period, the Buyer
will pay an additional collective total of $14,000 of the
Purchase Price in cash to the Seller on or before January
31, 2009, up to a total maximum of an additional $300,000 in
Cash Payment.
(II) ADJUSTMENT TO STOCK PAYMENT. The Seller will earn and the
Buyer will issue to the Seller a collective total of an
additional 400,000 shares of the Buyer's common stock on or
before January 31, 2009 if ARS achieves 85% or more of its
projected gross revenue and net profits during the period
from Closing to December 31, 2008, as reflected in the ARS
Budget.
(III)ACCELERATION OF CERTAIN ADJUSTMENTS. In the event that (i)
the employment of both Sellers with ARS and the Buyer and
their successors-in-interest and affiliates is unilaterally
terminated by the Buyer without cause (i.e. the Sellers have
not during their employment voluntarily resigned nor
breached this Agreement, nor committed negligence, fraud,
willful misconduct, breach of fiduciary duty, or a felony,
nor been disabled for more than six months or died) prior to
December 31, 2008, or (ii) the Buyer does not upon the
written request of Sellers invest at least $500,000 into
ARS, including the amount invested pursuant to Section
1.2(f) of this Agreement, then the Buyer will immediately
pay to the Seller in cash a collective total of the $250,000
Program bonus, $200,000 projection bonus, and $500,000
excess projection bonus referenced in Section 1.2(e)(I) of
this Agreement, as well as issue to Seller the 400,000
additional shares of bonus stock referenced in Section
1.2(e)(II) of this Agreement.
(f) BRIDGE LOAN. Upon the execution of this Agreement by all parties
hereto, ESP will make a $250,000 bridge loan to ARS to be used by
ARS for the establishment of its training and educational program
as mutually agreed by ESP and ARS. The loan will be noninterest
bearing and will be converted into an equity investment in ARS at
the Closing, or if the Closing does not occur, will be converted
into voting common stock of ARS issued to ESP in an amount based
on a pre-money valuation of ARS of $3,200,000; provided, that if
the Closing does not occur due to a breach of this Agreement by
ARS, then the loan will be immediately due and payable and
commence bearing interest at the rate of 10% per annum.
2. COVENANT NOT TO COMPETE.
As an inducement to Buyer to enter into and to perform its obligations
under this Agreement, Seller covenants to enter into a non-compete agreement
with the Buyer on the Closing Date pursuant to which Seller will agree that
during the term of their employment with the Company and for so long as Seller
is an officer, director, employee or consultant of the Company or any of its
subsidiaries or affiliates, he will not directly or indirectly, whether (a) as
an employee, agent, consultant, employer, principal, partner, officer or
director; (b) holder of more than five percent of any class of equity securities
or more than five percent of the aggregate principal amount of any class of
equity securities or more than five percent of the aggregate principal amount of
any class of debt, notes or bonds of a company with publicly traded equity
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securities; or (c) in any other individual or representative capacity
whatsoever, for their own account or the account of any other person or entity,
engage in any business or trade competing with the then business or trade of the
Buyer or its affiliates in the United States (the "Non-Compete Agreement").
Seller acknowledges that the restrictions set forth in this Section 2 are fair
and reasonable with respect to their duration, scope and area. If, at the time
of enforcement of this Section 2, a court holds that the duration, scope or area
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope or area reasonable under such
circumstances will be substituted for the stated duration, scope or area. In the
event of any material breach of any provisions of this Section 2, Buyer will
have the right, in addition to any other rights and remedies existing in its
favor hereunder, to enforce its rights and the obligations of Seller under this
Section 2 not only by an action or actions for damages but also by an action or
actions for specific performance and/or injunctive or other equitable relief in
order to enforce or prevent any violations of the provisions of this Section.
3. EMPLOYMENT
On the Closing Date (as defined in Section 4.1 of this Agreement), the
Company will employ Xxxxx Xxxxxx as the Division President of the ARS Division,
and Xxxxxxx Xxxxxx as the Senior Vice President of ARS with an annual salary to
be agreed upon for both individuals in the annual budget and projections of ARS
for 2007 and 2008, a copy of which is attached hereto as Exhibit A (the "ARS
Budget"). Xxxxxxx Xxxxxx shall be employed by the Company as Executive Vice
President of Strategic Planning and shall report directly to the President and
Chief Executive Officer of the Company. The term of such employment arrangement
will be for a minimum of 275 days after the Closing, and thereafter on an "at
will" basis. Xxxxx Xxxxxx will handle all day to day responsibilities of the ARS
Division, with the exception of any tasks to be handled by the Company as
described in Section 8.1 of this Agreement. Additionally, Xxxxx Xxxxxx will
oversee the ARS Division's financial responsibilities as stated and agreed to in
the ARS Budget. Xxxxx Xxxxxx'x other responsibilities shall include having the
ARS Division staff prepare the necessary monthly financial documentation for ARS
needed by the Company's management by the 10th day of each month for the prior
month, finalizing the ARS Budget with the Company, assisting in the transfer of
ARS staff to the Company's leased staffing program serviced by Xxxxx Staffing
within 90 days after Closing, and mutually establishing a five year plan of
action with the Company that will include a 20-25% pre-tax profit for ARS for
each year. Seller will receive standard Company benefits such as medical and
dental insurance which can be extended to their family through a cafeteria
program. Upon 90 days after Closing, Seller shall be appointed one seat to the
Company's Board of Directors. Seller agrees to attend two monthly meetings of
Company executives in Palm Springs, California with the expenses to attend to be
paid by the Company.
4. CLOSING AND FURTHER ACTS.
4.1 TIME AND PLACE OF CLOSING. Upon satisfaction or waiver of the
conditions set forth in Section 7 of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
0000 Xxxxx Xxxx Xxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxxx 00000 at 11:00 a.m.
(local time) on the date of July 15, 2007, or on another date, place and time as
the parties mutually agree in writing, or within 10 days after completion of
ARS's 2005 and 2006 audited and 2007 unaudited financial statements, whichever
occurs later, but in no event after July 31, 2007 (the "Closing Date"), unless
extended by mutual written agreement of the parties.
4.2 ACTIONS AT CLOSING. At the Closing, the following actions will take
place:
(a) Buyer will pay to Seller the first installment of the Cash
Payment and Stock Payment of the Purchase Price as described in Section
1.2 of this Agreement by delivery of (i) the appropriate amount of cash
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or cash equivalent which will be deposited in a single account
designated by Seller in a writing delivered to the Buyer prior to the
Closing, and (ii) stock certificates evidencing the first installment
of the Stock Payment.
(b) Seller will tender to the Company certificates and/or any
other documents evidencing 100% ownership of ARS.
(c) Seller will deliver to Buyer copies of necessary corporate
resolutions of the Board of Directors of ARS authorizing the execution,
delivery, and performance of this Agreement and the other agreements
contemplated by this Agreement for ARS's execution, and consummation of
the transactions contemplated by this Agreement, which resolutions have
been certified by an officer of ARS as being valid and in full force
and effect.
(d) Buyer will deliver to Seller copies of necessary corporate
resolutions of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated by this Agreement for Buyer's execution and
consummation of the transactions contemplated by this Agreement, which
resolutions have been certified by an officer of Buyer as being valid
and in full force and effect.
(e) Both ARS and the Company will deliver to the other party
true and complete copies of each party's Certificate of Incorporation,
as amended, and a Certificate of Good Standing from the appropriate
official of each party's jurisdiction of incorporation, which
certificates of good standing are dated not more than 30 days prior to
the Closing Date.
(f) Any additional documents or instruments that a party may
reasonably request or as may be necessary to evidence and affect the
sale, assignment, transfer and delivery of the ARS Stock to the Buyer
and the sale, assignment, transfer and delivery of the Purchase Price
to Seller will be delivered.
4.3 CONDUCT OF BUSINESS PRIOR TO CLOSING. After the execution of this
Agreement by the Buyer and until the Closing, ARS will:
(a) consistent with the ordinary course and past practice of
business, maintain the operations and goodwill of the business of ARS,
and continue its relationships with persons having business dealings
with ARS; and
(b) consistent with the ordinary course and past practice of
business, maintain all of the assets of ARS in their current condition,
ordinary wear and tear excepted, and insurance on all of said assets in
such amounts and of such kinds comparable to that in effect on the date
of this Agreement; and
(c) maintain the books, accounts and records of ARS consistent
with ARS's normal business practices consistently applied, including
recognition of revenues and expenses, continue to collect accounts
receivable and pay accounts payable consistent with ARS's normal
procedures and without discontinuing or accelerating payment of such
accounts and comply with all contractual and other obligations
applicable to ARS consistent with its normal business practices; and
(d) not make any change to, or otherwise amend in any material
way, the contracts with, salaries, wages or other compensation of, any
officer, director, agent or other similar representative of ARS
(including any increase in any benefits or benefit plan costs or any
change in any bonus, insurance, pension, compensation or other benefit
plan) except as consistent with the ordinary course and past practice
of business; and
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(e) not hire any officer, director, employee, agent or other
similar representative of ARS except employees hired in the normal
course of business and consistent with the ordinary course and past
practice of business; and
(f) not incur any material indebtedness for borrowed money
except consistent with the ordinary course of business, and not pledge
or grant liens or security interests in any of the ARS's assets except
consistent with the ordinary course and past practice of business; and
(g) not sell, transfer or dispose of any material assets
except for sales consistent with the ordinary course and past practice
of business; and
(h) not distribute any material assets of ARS to any of its
shareholders or other affiliates of ARS, or to any other party except
consistent with the ordinary course and past practice of business.
4.4 NO SOLICITATION AND DUE DILIGENCE. ARS will not, nor will ARS
encourage, facilitate, solicit, or authorize any of its shareholders, directors,
officers, employees, agents or representatives to solicit or enter into any
discussion (or continue any discussion) with any third party (including the
provision of any information to a third party), or enter into any agreement or
understanding of any kind regarding the purchase, sale, lease, assignment,
conveyance or other disposition or acquisition of all or any portion of its
assets, its business or any capital stock of ARS, for the period commencing on
the date first above written and extending until July 1, 2007. During this
period and until the Closing or termination of this Agreement, ARS and Seller
will fully cooperate with the Buyer and its representatives to enable them to
conduct complete due diligence of ARS, its business, and the books, records,
financial statements and documents relating to ARS and its business during
normal business hours.
4.5 TERMINATION OF AGREEMENT. This Agreement may be terminated by
either party upon written notice to the other party and without further
obligation by either party to the other party, if (i) the Closing does not occur
by the latest date specified in Section 4.1 of this Agreement, or (ii) Seller
may also terminate this Agreement by written notice to Buyer as provided in
Section 8.3 of this Agreement, or (iii) if either party provides written notice
of termination on or before July 31, 2007 and seller agrees to immediately
refund Bridge Loan pursuant to section 1.2 (f).
5. REPRESENTATIONS AND WARRANTIES OF ARS AND SELLER.
Except as disclosed on the Schedules attached hereto and incorporated
herein by reference, ARS and Seller each individually and not jointly represent
and warrant to Buyer to the best of their respective knowledge as follows:
5.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Each of ARS and
Seller has full power and authority to enter into this Agreement and to perform
their respective obligations hereunder. The execution, delivery, and performance
of this Agreement by ARS have been duly authorized by all necessary corporate
action on its part. Assuming that this Agreement is a valid and binding
obligation of each of the other parties hereto, this Agreement is a valid and
binding obligation of ARS and Seller.
5.2 SUBSIDIARIES. There is no corporation, general partnership, limited
partnership, joint venture, association, trust or other entity or organization
that ARS directly or indirectly controls or in which ARS directly or indirectly
owns any equity or other interest with the exception of the franchisees of ARS
in which ARS has certain control and financial interest as described in the
applicable franchise agreement.
5.3 GOOD STANDING. ARS (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
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(ii) has all necessary power and authority to own its assets and to conduct its
business as it is currently being conducted, and (iii) is duly qualified or
licensed to do business and is in good standing in every jurisdiction (both
domestic and foreign) where such qualification or licensing is required based
upon the current operations of ARS.
5.4 CHARTER DOCUMENTS AND CORPORATE RECORDS. ARS has made available to
Buyer complete and correct copies or provided Buyer with the right to inspect
true and complete copies of all (i) the articles of incorporation, bylaws and
other charter or organizational documents of ARS, including all amendments
thereto, (ii) the stock records of ARS, and (iii) the minutes and other records
of the meetings and other proceedings of the shareholders and directors of ARS.
ARS is not in violation or breach of (i) any of the provisions of its articles
of incorporation, bylaws or other charter or organizational documents, or (ii)
any resolution adopted by its shareholders or directors. There have been no
meetings or other proceedings of the shareholders or directors of ARS that are
not fully reflected in the appropriate minute books or other written records of
ARS.
5.5 FINANCIAL STATEMENTS. ARS has delivered, will deliver prior to
Closing or otherwise make available to Buyer the following financial statements
relating to ARS (the "ARS Financial Statements"): (i) the unaudited balance
sheet, statements of operations, retained earnings and shareholders' equity for
the three months ended March 31, 2007 and (ii) the audited financial statements
prepared in accordance with GAAP as of and for the twelve months ending December
31, 2005 and 2006, including balance sheets, statements of operations,
statements of stockholders' equity, cash flow statements, and all required
related footnotes and schedules. Except as stated therein or in the notes
thereto, the ARS Financial Statements: (a) present fairly the financial position
of ARS as of the respective dates thereof and the results of operations and
changes in financial position of ARS for the respective periods covered thereby;
and (b) have been prepared in accordance with ARS's normal business practices
applied on a consistent basis throughout the periods covered.
5.6 CAPITALIZATION. The authorized capital stock of ARS consists of
10,000 shares of common stock, par value $0.01 per share, of which 10,000 shares
are issued and outstanding, and no shares of preferred stock, par value $0.01
per share, of which no shares are issued and outstanding. All of the outstanding
shares of the capital stock of ARS are validly issued, fully paid and
nonassessable, are owned by Seller, and have been issued in full compliance with
all applicable federal, state, local and foreign securities laws and other laws.
5.7 ABSENCE OF CHANGES. Except as otherwise set forth on Schedule 5.7
hereto or otherwise disclosed to Buyer in writing prior to the Closing, since
December 31, 2006:
(a) There has not been any material adverse change in the
business, condition, assets or operations of ARS.
(b) ARS has not (i) declared, set aside or paid any dividend
or made any other contribution in respect of any shares of capital
stock, nor (ii) repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities.
(c) ARS has not sold or otherwise issued any shares of capital
stock or any other securities.
(d) ARS has not amended its articles of incorporation, bylaws
or other charter or organizational documents, nor has it effected or
been a party to any merger, recapitalization, reclassification of
shares, stock split, reverse stock split, reorganization or similar
transaction.
(e) ARS has not formed any subsidiary or contributed any funds
or other assets to any subsidiary.
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(f) ARS has not purchased or otherwise acquired any material
assets, nor has it leased any material assets from any other person,
except in the ordinary course of business consistent with past
practice.
(g) ARS has not made any capital expenditure outside the
ordinary course of business or inconsistent with past practice, or in
an amount exceeding ten thousand dollars ($10,000) singly or in excess
of fifty thousand dollars ($50,000) in the aggregate, without Buyer's
consent.
(h) ARS has not sold or otherwise transferred any assets to
any other person, except in the ordinary course of business consistent
with past practice and at a price equal to the fair market value of the
assets transferred.
(i) There has not been any material loss, damage or
destruction to any of the properties or assets of ARS (whether or not
covered by insurance).
(j) ARS has not written off as uncollectible any indebtedness
or accounts receivable, except for write offs that were made in the
ordinary course of business consistent with past practice and that
involved less than $10,000 singly and less than $50,000 in the
aggregate or as required by Buyer pursuant to Section 8.1.
(k) ARS has not leased any assets to any other person except
in the ordinary course of business consistent with past practice and at
a rental rate equal to the fair rental value of the leased assets.
(l) ARS has not mortgaged, pledged, hypothecated or otherwise
encumbered any assets, except in the ordinary course of business
consistent with past practice.
(m) ARS has not entered into any contract, or incurred any
debt, liability or other obligation (whether absolute, accrued,
contingent or otherwise), except for (i) contracts that were entered
into in the ordinary course of business consistent with past practice
and that have terms of less than twelve months and do not contemplate
payments by or to ARS which will exceed, over the term of the contract,
ten thousand dollars ($10,000) in the aggregate, and (ii) current
liabilities incurred in the ordinary course of business consistent with
the past practice.
(n) ARS has not made any material loan or advance to any other
person, except for advances that have been made to customers and sales
persons in the ordinary course of business consistent with past
practice and that have been properly reflected as "accounts
receivables."
(o) Other than annual raises or bonuses paid or provided
consistent with past business practices, ARS has not paid any bonus to,
or materially increased the amount of the salary, fringe benefits or
other compensation or remuneration payable to, any of the directors,
officers or employees of ARS.
(p) No material contract or other instrument to which ARS is
or was a party or by which ARS or any of its assets are or were bound
has been amended or terminated, except in the ordinary course of
business consistent with past practice.
(q) ARS has not discharged any lien or discharged or paid any
indebtedness, liability or other obligation, except for current
liabilities that (i) are reflected in the ARS Financial Statements as
of December 31, 2006 or have been incurred since December 31, 2006 in
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the ordinary course of business consistent with past practice, and (ii)
have been discharged or paid in the ordinary course of business
consistent with past practice.
(r) ARS has not forgiven any debt or otherwise released or
waived any right or claim, except in the ordinary course of business
consistent with past practice.
(s) ARS has not changed its methods of accounting or its
accounting practices in any material respect.
(t) ARS has not entered into any transaction outside the
ordinary course of business or inconsistent with past practice.
(u) ARS has not agreed or committed (orally or in writing) to
do any of the things described in clauses (b) through (t) of this
Section 5.7.
5.8 ABSENCE OF UNDISCLOSED LIABILITIES. ARS has no material debt,
liability or other obligation of any nature (whether due or to become due and
whether absolute, accrued, contingent or otherwise) that is not reflected or
reserved against in the ARS Financial Statements as of December 31, 2006, except
for obligations incurred since December 31, 2006 in the ordinary and usual
course of business consistent with past practice.
5.9 CONTRACTS.
(a) ARS has delivered to Buyer or made available a complete
and accurate list or provided Buyer with true and complete copies of or
otherwise made available to Buyer all contracts or agreements of ARS
which are (i) material to the Business as currently conducted; (ii) are
subject to default or termination upon a change in control of ARS;
(iii) create a partnership or joint venture; (iv) impose a
noncompetition obligation on ARS, or an officer, director or employee
thereof; or (v) relating to the employment of any individual on a
full-time, part-time, consulting, or other basis (collectively,
"Material Contracts").
(b) Each Material Contract is in full force and effect and is
valid and enforceable in accordance with its terms subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium
or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at
law or in equity).
(c) No event has occurred or circumstance exists that may
contravene, conflict with or result in a material violation or material
breach of, or give any party to a Material Contract the right to
declare a material default or exercise any remedy thereunder, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify any Material Contract.
(d) Neither ARS nor any of its affiliates have received any
written notice regarding any actual, alleged or potential material
violation or material breach of, or material default under, any
Material Contract which has not been entirely cured.
(e) ARS has not and will not enter into any new Material
Contract after the date of this Agreement without the prior approval of
the Company, except those agreements that are germane to the day to day
operation of ARS, including but not limited to: franchise agreements,
short term vendor contracts less than one year in term, training sale
agreements, consulting contracts, and other normal business
undertakings.
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5.10 ACCOUNTS RECEIVABLE. Except as otherwise disclosed in writing to
Buyer prior to the Closing, all of ARS's accounts receivable represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business and have been collected or are collectible in
the lawful and ordinary course of business as heretofore conducted, subject to
the reserve for bad debt recorded on the ARS Financial Statements.
5.11 ARS ASSETS.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
a material breach of the terms and conditions of, or result in a
material loss of rights under, or result in the creation of any
material lien, charge or encumbrance upon, any of the assets of ARS.
(b) ARS has good title to all of its assets reflected in the
ARS Financial Statements, free and clear of all mortgages, liens,
leases, pledges, charges, encumbrances, equities or claims, except as
expressly disclosed in writing by Seller to Buyer prior to the Closing
Date or reflected in the ARS Financial Statements.
(c) ARS owns all copyrights, trademarks, and tradenames
related to its business and the use of such copyrights, trademarks, and
tradenames has not and will not infringe on the rights of any third
party.
(d) Seller has provided to Buyer in writing a materially
accurate description of all of the material assets of ARS used in the
business of ARS, including but not limited to a list of all Material
Contracts.
(e) All of the machinery, equipment, furniture and fixtures of
ARS as of the Closing Date will be in the same condition as on the date
of this Agreement, normal wear and tear excepted. ARS hereby conveys to
Buyer (to the extent it is able under the applicable warranty
documents) any and all product warranty or similar rights that ARS may
have against third parties in respect of the condition of any assets.
5.12 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. ARS is not in material
violation of, nor has it failed to conduct its business in material compliance
with, any applicable federal, state, local or foreign laws, regulations, rules,
treaties, rulings, orders, directives or decrees. ARS has delivered to Buyer a
complete and accurate list or provided Buyer with the right to inspect true and
complete copies of all of the licenses, permits, authorizations and franchises
to which ARS is subject and all said licenses, permits, authorizations and
franchises are valid and in full force and effect. Said licenses, permits,
authorizations and franchises constitute all of the licenses, permits,
authorizations and franchises necessary to permit ARS to conduct its business in
the manner in which it is now being conducted, and ARS is not in material
violation or material breach of any of the terms, requirements or conditions of
any of said licenses, permits, authorizations or franchises.
5.13 TAXES. Except as disclosed herein, ARS has filed with the
appropriate United States, state, local and foreign governmental agencies all
tax returns and reports required to be filed (subject to permitted extensions
applicable to such filings), and has paid or accrued in full all taxes, duties,
charges, withholding obligations and other governmental liabilities as well as
any interest, penalties, assessments or deficiencies, if any, shown thereon as
owing (including taxes on properties, income, franchises, licenses, sales and
payrolls). (All such items are collectively referred to herein as "Taxes"). The
ARS Financial Statements fully accrue or reserve all current and deferred taxes.
ARS is not a party to any pending action or proceeding, nor is any such action
or proceeding threatened by any governmental authority for the assessment or
collection of Taxes. There are no liens for Taxes except for liens for property
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taxes not yet delinquent. ARS is not a party to any Tax sharing, Tax allocation,
Tax indemnity or statute of limitations extension or waiver agreement and in the
past year has not been included on any consolidated combined or unitary return
with any entity other than ARS. ARS has duly withheld from each payment made to
each person from whom such withholding is required by law the amount of all
Taxes or other sums (including but not limited to United States federal income
taxes, any applicable state or municipal income tax, disability tax,
unemployment insurance contribution and Federal Insurance Contribution Act
taxes) required to be withheld therefrom and has paid the same to the proper tax
authorities prior to the due date thereof. To the extent any Taxes withheld by
ARS have not been paid as of the Closing Date because such Taxes were not yet
due, such Taxes will be paid to the proper tax authorities in a timely manner.
All Tax returns filed by ARS materially comply with and were prepared in
accordance with applicable statutes and regulations.
5.14 ENVIRONMENTAL COMPLIANCE MATTERS. Without conducting any study or
independent investigation, ARS represents that it has at all relevant times been
in material compliance with all environmental laws, and has received no
potentially responsible party notices or similar notices from any governmental
agencies or private parties concerning releases or threatened releases of any
"hazardous substance" as that term is defined under 42 U.S.C. 960(1)(14).
5.15 COMPENSATION. Since December 31, 2006, ARS has not paid or
committed to pay to or for the benefit of any of its officers or directors any
compensation of any kind other than wages, salaries and benefits at times and
rates in effect on December 31, 2006, subject to wage increases of less than ten
percent paid or payable to employees other than officers and directors, nor have
they effected or agreed to effect any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus, incentive,
retirement, medical reimbursement, life insurance, deferred compensation or any
other employee benefit plan or arrangement. ARS has provided Buyer or otherwise
made available to Buyer a full and complete list of all officers, directors,
employees and consultants of ARS as of the date hereof, specifying their names
and job designations, their dates of hire, the total amount paid or payable as
wages, salaries or other forms of direct compensation, and the basis of such
compensation, whether fixed or commission or a combination thereof.
5.16 NO DEFAULT.
(a) Each of the Material Contracts is a legal, binding and enforceable
obligation by or against ARS, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity). Neither ARS nor any other party to a Material Contract is in default
thereunder or has breached any terms or provisions thereof which is material to
the conduct of ARS's business.
(b) ARS has performed, or is now performing, the obligations of, and
ARS is not in material default (or would by the lapse of time and/or the giving
of notice be in material default) in respect of, any Material Contract. No third
party has raised any claim, dispute or controversy with respect to any of the
Material Contracts, nor has ARS received notice of warning of alleged
nonperformance, delay in delivery or other noncompliance by ARS with respect to
its obligations under any of the Material Contracts, nor are there any facts
which exist indicating that any of the Material Contracts may be totally or
partially terminated or suspended by the other parties thereto.
5.17 BUSINESS AND CUSTOMERS. ARS has provided or made available to
Buyer a complete and accurate list and provided Buyer with the right to inspect
true and complete copies of (a) a written list of all its customers, (b) the
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amount for which each such customer was invoiced during the twelve month period
ending December 31, 2006, and (c) the expiration date of ARS's contracts with
such customers.
5.18 SUPPLIERS. ARS has provided or made available to Buyer (a) the
names of all suppliers from which ARS ordered inventories and other products,
goods, and services with an aggregate purchase price for each such supplier of
$10,000 or more during the twelve month period ended December 31, 2006, and (b)
the amount for which each such supplier invoiced ARS during such period.
5.19 PRODUCT WARRANTIES. Except as otherwise disclosed in writing or
made available to Buyer prior to the Closing and for warranties under applicable
law, (a) there are no warranties, express or implied, written or oral, with
respect to the products of ARS, (b) there are no pending or threatened material
claims with respect to any such warranty, and (c) ARS has no, and after the
Closing Date will have no material liability with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent, or otherwise and
whether due or to become due, other than customary returns in the ordinary
course of business that are fully reserved against in the ARS Financial
Statements.
5.20 PROPRIETARY RIGHTS.
(a) ARS has provided in writing or made available to Buyer a
complete and accurate list and provided Buyer with the right to inspect
true and complete copies of all software, patents and applications for
patents, trademarks, trade names, service marks, and copyrights, and
applications therefore, owned or used by ARS or in which it has any
rights or licenses, except for software used by ARS and generally
available on the commercial market. ARS has provided or made available
to Buyer a complete and accurate description of all agreements or
provided Buyer with the right to inspect true and complete copies of
all agreements of ARS with each officer, employee or consultant of ARS
providing ARS with title and ownership to patents, patent applications,
trade secrets and inventions developed or used by ARS in its business.
To ARS's knowledge, all of such agreements are valid, enforceable and
legally binding, subject to the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity).
(b) ARS owns or possesses licenses or other rights to use all
computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, service marks, trade
names, copyrights, inventions, drawings, designs, customer lists,
propriety know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the
business of ARS, and the same are sufficient to conduct ARS's business
as it has been and is now being conducted.
(c) The operations of ARS do not conflict with or infringe,
and no one has asserted to ARS that such operations conflict with or
infringe on any Proprietary Rights owned, possessed or used by any
third party. There are no claims, disputes, actions, proceedings,
suits or appeals pending against ARS with respect to any Proprietary
Rights, and to the knowledge of the management of ARS none has been
threatened against ARS. To the knowledge of the management of ARS,
there are no facts or alleged facts which would reasonably serve as a
basis for any claim that ARS does not have the right to use, free of
any rights or claims of others, all Proprietary Rights in the
development, manufacture, use, provision, sale or other disposition of
any or all products or services presently being used, furnished or
sold in the conduct of the business of ARS as it has been and is now
being conducted.
(d) No employee of ARS is in violation of any term of any
employment contract, proprietary information and inventions agreement,
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non-competition agreement, or any other contract or agreement relating
to the relationship of any such employee with ARS or any previous
employer.
5.21 INSURANCE. ARS has provided or made available to Buyer a complete
and accurate list of all policies of insurance and provided Buyer with the right
to inspect true and complete copies of all policies of insurance to which ARS is
a party or is a beneficiary or named insured as of the Closing Date. ARS has in
full force and effect, with all premiums due thereon paid, the policies of
insurance set forth therein. There were no claims in excess of $10,000 asserted
or currently outstanding under any of the insurance policies of ARS, including
but not limited to all motor vehicle, general liability, errors and omissions,
workers compensation, and medical claims during the calendar year ending on
December 31, 2005 and during the calendar year ending on December 31, 2006.
5.22 LABOR RELATIONS. None of the employees of ARS are represented by
any union or are parties to any collective bargaining arrangement, and no
attempts are being made to organize or unionize any of ARS's employees. Except
as disclosed in writing to Buyer prior to the Closing, there is not presently
pending or existing, and there is not presently threatened, any (a) strike,
slowdown, picketing, work stoppage or employee grievance process, or (b) action,
arbitration, audit, hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal) against or affecting ARS
relating to the alleged violation of any legal requirement pertaining to labor
relations or employment matters. ARS is in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor practices. ARS is in material compliance with
the Immigration Reform and Control Act of 1986.
5.23 EMPLOYEE BENEFITS. ARS has provided or made available to Buyer a
complete and accurate list of all employee payroll and benefit plans of ARS and
provided Buyer with the right to inspect true and complete copies of all
employee payroll and benefit plans of ARS (i) currently in effect, and (ii) with
respect to which ARS may have any liability or obligation (the "Employee
Plans"). ARS has made available to Buyer a copy of each Employee Plan, including
any amendments thereto and all related trust agreements and insurance contracts
and, to the extent any Employee Plan is not in writing, a short summary of such
plan has been provided to Buyer. All Employee Plans have been administered in
substantial compliance with their terms, except for any noncompliance that could
not be reasonably expected to have a material adverse effect on ARS, its
business, or ARS's assets. Except as disclosed to Buyer by ARS in writing, none
of the employees of ARS are covered by a collective bargaining agreement or any
multi-employer plan.
5.24 INTENTIONALLY OMITTED.
5.25 INTENTIONALLY OMITTED.
5.26 NO DISTRIBUTOR AGREEMENTS. Except as disclosed in writing to Buyer
prior to the Closing, ARS is not a party to, nor is the property of ARS bound
by, any distributors' or manufacturer's representative or agency agreement.
5.27 CONFLICT OF INTEREST TRANSACTIONS. No past or present shareholder,
director, officer or employee of ARS or any of their affiliates (i) is indebted
to, or has any financial, business or contractual relationship or arrangement
with ARS, or (ii) has any direct or indirect interest in any property, asset or
right which is owned or used by ARS or pertains to the business of ARS.
5.28 LITIGATION. There is no action, suit, proceeding, dispute,
litigation, claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or threatened
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against or with respect to ARS which (i) if adversely determined would have a
material adverse effect on the business, condition, assets or operations of ARS,
or (ii) challenges or would challenge any of the actions required to be taken by
ARS under this Agreement.
5.29 NON-CONTRAVENTION. Neither (a) the execution and delivery of this
Agreement, nor (b) the performance of this Agreement will: (i) contravene or
result in a violation of any of the provisions of the organizational documents
of ARS; (ii) contravene or result in a violation of any resolution adopted by
the shareholders or directors of ARS; (iii) result in a material violation or
material breach of, or give any person the right to declare (whether with or
without notice or lapse of time) a material default under or to terminate, any
Material Contract; (iv) give any person the right to accelerate the maturity of
any indebtedness or other obligation of ARS; (v) result in the loss of any
license or other contractual right of ARS; (vi) result in the loss of, or in a
violation of any of the terms, provisions or conditions of, any governmental
license, permit, authorization or franchise of ARS; (vii) result in the creation
or imposition of any lien, charge, encumbrance or restriction on any of the
assets of ARS; (viii) result in the reassessment or revaluation of any property
of ARS by any taxing authority or other governmental authority; (ix) result in
the imposition of, or subject ARS to any liability for, any conveyance or
transfer tax or any similar tax; or (x) result in a violation of any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which ARS or any of its assets or business are subject.
5.30 APPROVALS. ARS has provided Buyer with a complete and accurate
list of all jurisdictions in which ARS is authorized to do business. No
authorization, consent or approval of, or registration or filing with, any
governmental authority is required to be obtained or made by ARS in connection
with the execution, delivery or performance of this Agreement.
5.31 BROKERS. ARS has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to ARS's knowledge, no person is entitled, or intends to
claim that it is entitled, to receive any such fees or commissions in connection
with such transaction.
5.32 SPECIAL GOVERNMENT LIABILITIES. ARS has no existing or pending
liabilities, obligations or deferred payments due to any federal, state or local
government agency or entity in connection with its business or with any program
sponsored or funded in whole or in part by any federal, state or local
government agency or entity, nor is ARS or Seller aware of any threatened action
or claim or any condition that could support an action or claim against ARS or
its business for any of said liabilities, obligations or deferred payments.
5.33 INTENTIONALLY LEFT BLANK.
5.34 INTENTIONALLY LEFT BLANK.
5.35 TAX ADVICE. ARS and Seller hereby represent and warrant that they
have sought their own independent tax advice regarding the transactions
contemplated by this Agreement, and neither ARS nor Seller have relied on any
representation or statement made by Buyer or its representatives regarding the
tax implications of such transactions.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer, to its actual knowledge in all cases without independent
investigation or verification, hereby represents and warrants to Seller as
follows:
6.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Buyer has full
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Buyer
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have been duly authorized by all necessary action on its part. Assuming that
this Agreement is a valid and binding obligation of the other party hereto, this
Agreement is a valid and binding obligation of Buyer.
6.2 GOOD STANDING OF BUYER. Buyer (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, (ii) has all necessary power and authority to own its assets and
to conduct its business as it is currently being conducted, and (iii) is duly
qualified or licensed to do business and is in good standing in every
jurisdiction (both domestic and foreign) where such qualification or licensing
is required.
6.3 CHARTER DOCUMENTS AND CORPORATE RECORDS OF BUYER. Buyer has made
available to Seller to review complete and correct copies of (i) the articles of
incorporation, bylaws and other charter or organizational documents of Buyer,
including all amendments thereto, (ii) the stock records of Buyer, and (iii) the
minutes and other records of the meetings and other proceedings of the
shareholders and directors of Buyer. Buyer is not in violation or breach of (i)
any of the provisions of its articles of incorporation, bylaws or other charter
or organizational documents, or (ii) any resolution adopted by its shareholders
or directors. There have been no meetings or other proceedings of the
shareholders or directors of Buyer that are not fully reflected in the
appropriate minute books or other written records of Buyer.
6.4 CAPITALIZATION OF BUYER. The authorized capital stock of Buyer
consists of 100,000,000 shares of common stock, par value $.001, 14,743,624
shares of which are issued and outstanding as of the date of the filing of the
Buyer's Report on Form 10-QSB with the Securities and Exchange Commission for
the fiscal quarter ending March 31, 2007, and 5,000,000 shares of preferred
stock, no par value, none of which are issued or outstanding. All of the
outstanding shares of the capital stock of Buyer are validly issued, fully paid
and non-assessable, and have been issued in full compliance with all applicable
federal, state, local and foreign securities laws and other laws. Buyer either
has sufficient authorized capital stock to meet its obligations under this
Agreement or has the ability to authorize the issuance of additional capital
stock.
6.5 FINANCIAL STATEMENTS. The Company has made available to Seller to
review the following financial statements (the "Company Financial Statements"):
the audited financial statements of the Company as of and for the fiscal years
ended December 31, 2005 and 2006, including the audited balance sheets of the
Company as of December 31, 2005 and 2006, and the audited statement of
operations for the twelve months ending December 31, 2005 and 2006, as well as
the unaudited financial statements of the Company for the three months ending
March 31, 2007. Except as stated therein or in the notes thereto, the Company
Financial Statements: (a) present fairly the financial position of the Company
as of the respective dates thereof and the results of operations and changes in
financial position of the Company for the respective periods covered thereby;
and (b) have been prepared in accordance with the Company's normal business
practices applied on a consistent basis throughout the periods covered.
6.6 APPROVALS. To Buyer's knowledge, no authorization, consent or
approval of, or registration or filing with, any governmental authority or any
other person is required to be obtained or made by Buyer in connection with the
execution, delivery or performance of this Agreement.
6.7 BROKERS. Buyer has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to Buyer's knowledge, no person is entitled, or intends
to claim that it is entitled, to receive any such fees or commissions in
connection with such transaction.
6.8 INTENTIONALLY LEFT BLANK.
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6.9 NON CONTRAVENTION. To the Company's knowledge, neither (a) the
execution and delivery of this Agreement, nor (b) the performance of this
Agreement will: (i) contravene or result in a violation of any of the provisions
of the organizational documents of Buyer; (ii) contravene or result in a
violation of any resolution adopted by the shareholders or directors of Buyer;
(iii) result in a violation or breach of, or give any person the right to
declare (whether with or without notice or lapse of time) a default under or to
terminate, any material agreement by which the Buyer is bound; (iv) give any
person the right to accelerate the maturity of any indebtedness or other
obligation of Buyer; (v) result in the loss of any license or other contractual
right of Buyer; (vi) result in the loss of, or in a violation of any of the
terms, provisions or conditions of, any governmental license, permit,
authorization or franchise of Buyer; (vii) result in the creation or imposition
of any lien, charge, encumbrance or restriction on any of the assets of Buyer;
(viii) result in the reassessment or revaluation of any property of Buyer by any
taxing authority or other governmental authority; (ix) result in the imposition
of, or subject Buyer to any liability for, any conveyance or transfer tax or any
similar tax; or (x) result in a violation of any law, rule, regulation, treaty,
ruling, directive, order, arbitration award, judgment or decree to which Buyer
or any of its assets or business are subject.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Buyer of the following:
(a) Seller shall have delivered to the Company all
certificates evidencing Seller's ownership of 100% of the capital stock
of ARS.
(b) All Taxes (except corporate income taxes) due and payable
by ARS without regard to any deferral by reason of extension, payment
programs, or any other reason, must have been paid in full. Any Taxes
accrued but not yet payable must be reflected on ARS's balance sheet
delivered to Buyer.
(c) The financial condition of ARS must not be materially
different than as set forth in the ARS Financial Statements as of
December 31, 2006, except for changes arising as a result of the
conduct of ARS's business in the ordinary course of business since
December 2006.
(d) ARS must have delivered to Buyer a certificate executed by
the Secretary of ARS certifying (i) the names of the officers of ARS
authorized to sign this Agreement to which it is a party and all other
documents and instruments executed by ARS pursuant hereto, together
with the true signatures of such officers; (ii) copies of corporate
resolutions adopted by the Board of Directors of ARS authorizing the
appropriate officers of ARS to execute and deliver this Agreement and
all other agreements, documents and instruments executed by ARS
pursuant hereto and to consummate the transactions contemplated herein.
(e) The Buyer must in its reasonable discretion be satisfied
with its full and complete due diligence of ARS by a date on or before
June 30, 2007, including but not limited to financial, legal and
business affairs of ARS. The Buyer must confirm its satisfaction in a
writing delivered to the Seller. In the event that no such writing is
delivered to Seller on or before June 30, 2007, then this condition
shall be deemed satisfied.
(f) Such directors of ARS, as the Company shall have specified
in writing, shall have submitted their resignations (to be effective as
of the Closing) from the Board of Directors of ARS. The directors of
ARS shall have duly appointed (effective as of the Closing) such other
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persons as the Company shall have designated to fill the vacancies on
the Company's Board of Directors.
(g) All representations and warranties of ARS and Seller made
in this Agreement or in any exhibit or schedule hereto delivered by ARS
or Seller must be true and correct as of the Closing Date with the same
force and effect as if made on and as of that date. Buyer must receive
a written representation from ARS and Seller at the Closing that no
material adverse change has occurred to ARS or its business between
December 31, 2006 and the Closing Date.
(h) ARS must have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by ARS prior to or at the Closing Date.
(i) Seller must have signed a customary investor
representation letter requested by the Buyer in connection with the
issuance of the Buyer's securities as part of the Purchase Price for
the ARS Stock, which will include, but not be limited to
representations and warranties by Seller confirming their investment
sophistication, knowledge, and experience, their financial condition,
and their access to information regarding the Buyer.
(j) ARS will supply ESP with a schedule of outstanding short
and long-term debt, including a working line of credit and credit card
balances, in an amount not to exceed $150,000, prior to or at the
Closing Date. ESP agrees to transfer or otherwise extinguish said debt
and close such accounts within 120 days of Closing, during which time
ESP will service the debt in a manner consistent with the terms and
conditions of the issuing creditor.
(k) As a condition to the Closing, ARS will deliver audited
financial statements of it covering the fiscal years ending December
31, 2005 and 2006, prepared in accordance with generally accepted
accounting principles ("GAAP"), sufficient to enable the Company to
comply with its SEC reporting requirements on Form 8-K. The Company
will bear all of the expenses incurred for the audit.
7.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Seller of the following:
(a) All representations and warranties of Buyer made in this
Agreement or in any exhibit hereto delivered by Buyer must be true and
correct on and as of the Closing Date with the same force and effect as
if made on and as of that date. Seller must receive a written
representation from the Company at the Closing that no material adverse
change has occurred to the Company or its business between December 31,
2006 and the Closing Date.
(b) Buyer must have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with
by Buyer prior to or at the Closing Date.
(c) Buyer must have delivered to ARS and Seller a certificate executed by
the Secretary of Buyer certifying (i) the names of the officers of
Buyer authorized to sign this Agreement to which it is a party and all
other documents and instruments executed by Buyer pursuant hereto,
together with the true signatures of such officers; (ii) copies of
corporate resolutions adopted by the Board of Directors of Buyer
authorizing the appropriate officers of Buyer to execute and deliver
this Agreement and all other agreements, documents and instruments
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executed by the Buyer pursuant hereto and to consummate the
transactions contemplated herein.
8. FURTHER ASSURANCES AND POST CLOSING COVENANTS AND OBLIGATIONS.
8.1 COVENANTS OF BUYER TO ARS AND SELLER AFTER CLOSING. Upon Closing,
the Company shall create the ARS Division within the structure of the Company.
After Closing, the Buyer shall handle all of the ARS Division's financial
responsibilities, all of the ARS Division's funding requirements and all human
resource requirements such as payroll and benefits.
8.2 COVENANTS OF SELLER AND ARS TO BUYER. Seller hereby assumes and
agrees to bear and pay all liability and responsibility for any and all
liabilities arising from the arbitration proceeding known as Advance Roofing
Solutions, Inc. v. Upside Consulting Group (the "Case") prior to and after the
Closing Date. Seller shall indemnify the Company, ARS and their affiliates, and
save them harmless from all damages, liabilities, claims, losses, costs and
expenses, including attorneys' costs and fees, which may be incurred by Buyer,
ARS, or any of their affiliates as a direct or indirect result of the Case. ARS
and the Company hereby assign all liability for and any monetary awards arising
from the Case to Seller. All other expenses incurred shall be approved by the
Buyer's Chief Executive Officer or Chief Financial Officer. Furthermore, Xxxxx
Xxxxxx is to remain as the President of ARS, and will handle all day-to-day
responsibilities of ARS with the exception of those tasks to be handled by the
Company. Additionally, Xxxxxxx Xxxxxx has agreed to be assigned to a number of
tasks to be handled by him after the Closing: (i) he will oversee the financial
responsibilities of the ARS division as stated and agreed to in the ARS Budget
outline; (ii) he will have staff prepare all necessary monthly financial
documentation for ARS needed by the Company by the 10th day of each month for
the prior month; (iii) he will assist with the transfer of ARS staff to the
Company's leased staffing program serviced by Xxxxx Staffing within 90 days
after Closing; (iv) he will monitor ARS's performance in relation to the ARS
Budget; and (v) he will mutually establish with the Company a five-year plan of
action that will include a 25-35% pre-tax profit for ARS for each year.
8.3 REMEDIES UPON CERTAIN DEFAULTS BY BUYER. In the event that Buyer
defaults on a Cash Payment or a Stock Payment under Section 1.2 of this
Agreement and fails to cure said default within 60 days after written notice of
the default by Seller to Buyer, then Seller may either (i) agree in writing to
give Buyer more time to cure the default, in which case this Agreement will
otherwise remain in full force and effect, or (ii) terminate this Agreement by
written notice to Buyer. In the event that Seller elects to terminate this
Agreement pursuant to the immediately preceding sentence, Buyer will provide
Seller with reasonable access to examine the financial records relating to the
ARS Division and Seller shall (i) return the entire Stock Payment to Buyer,
including all Shares and warrants; (ii) retain all Cash Payments and convert
them into stock ownership of ARS by the Company at the same valuation as
provided in Section 1.2(f) of this Agreement; and (iii) at Seller's election, be
conveyed back all ARS Stock by the Company (except as provided above in Sections
1.2(f) and 8.3(ii) of this Agreement), and have all ARS documents of any kind
returned to Seller, whereupon neither party nor ARS will have any further
obligations to the other parties under this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by each of the parties hereto
will survive the Closing for a period of two years after the Closing Date.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLER. Seller agrees to indemnify, defend and
hold Buyer harmless against any and all claims, demands, losses, costs,
expenses, obligations, liabilities and damages, including interest, penalties
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and attorney's fees and costs but excluding punitive, consequential or special
damages and damages for lost profits in all cases net of insurance proceeds
(collectively, "Losses"), incurred by Buyer arising, resulting from, or relating
to any material misrepresentation of a material fact or omission to disclose a
material fact made by Seller or ARS in this Agreement or in any exhibits to this
Agreement or any material breach of, or material failure by ARS or Seller to
perform, any of their respective representations, warranties, covenants or
agreements in this Agreement or in any exhibit or schedule to this Agreement.
Notwithstanding anything else herein to the contrary, Seller's indemnification
obligation will only arise when all Losses incurred or suffered by Buyer exceed
$25,000; shall survive only one year after the Closing Date; and in no event
shall such obligation exceed the amount of the Purchase Price paid to him under
this Agreement.
10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and
hold Seller harmless against any and all claims, demands, losses, costs,
expenses, obligations, liabilities and damages, including interest, penalties
and attorneys' fees and costs but excluding punitive, consequential or special
damages and damages for lost profits in all cases net of insurance proceeds
(collectively "S Losses"), incurred by Seller arising, resulting from or
relating to any material misrepresentation of a material fact or omission to
disclose a material fact made by Buyer in this Agreement or in any exhibits or
schedule to this Agreement or any material breach of, or material failure by
Buyer to perform, any of its representations, warranties, covenants or
agreements in this Agreement or in any exhibit to this Agreement.
10.3 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) Whenever any parties become aware that a claim (an
"Underlying Claim") has arisen entitling them to seek indemnification
under this Agreement, such parties (the "Indemnified Parties") shall
promptly send a notice ("Notice") to the parties liable for such
indemnification (the "Indemnifying Parties") of the right to
indemnification (the "Indemnity Claim"); provided, however, that the
failure to so notify the Indemnifying Parties will relieve the
Indemnifying Parties from liability under this Agreement with respect
to such Indemnity Claim only if, and only to the extent that, such
failure to notify the Indemnifying Parties results in the forfeiture by
the Indemnifying Parties of rights and defenses otherwise available to
the Indemnifying Parties with respect to the Underlying Claim. Any
Notice pursuant to this Section 10.3(a) shall set forth in reasonable
detail, to the extent then available, the basis for such Indemnity
Claim and a reasonable estimate of the amount of damages arising
therefrom.
(b) If an Indemnity Claim does NOT result from or arise in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties will have thirty (30) calendar days
following receipt of the Notice to issue a written response to the
Indemnified Parties, indicating the Indemnifying Parties' intention to
either (i) contest the Indemnity Claim or (ii) accept the Indemnity
Claim as valid. The Indemnifying Parties' failure to provide such a
written response within such thirty (30) day period shall be deemed to
be an acceptance of the Indemnity Claim as valid. In the event that an
Indemnity Claim is accepted as valid, the Indemnifying Parties shall,
within fifteen (15) Business Days thereafter, pay the damages incurred
by the Indemnified Parties in respect of the Underlying Claim in cash
by wire transfer of immediately available funds to the account or
accounts specified by the Indemnified Parties. To the extent
appropriate, payments for indemnifiable damages made pursuant to
Section 10 of the Agreement will be treated as adjustments to the
Purchase Price.
(c) In the event an Indemnity Claim results from or arises in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties shall have fifteen (15) calendar days
following receipt of the Notice to send a Notice to the Indemnified
Parties of their election to, at their sole cost and expense, assume
the defense of any such Underlying Claim or legal proceeding; provided
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that such Notice of election shall contain a confirmation by the
Indemnifying Parties of their obligation to hold harmless the
Indemnified Parties with respect to damages arising from such
Underlying Claim. The failure by the Indemnifying Parties to elect to
assume the defense of any such Underlying Claim within such fifteen
(15) day period shall entitle the Indemnified Parties to undertake
control of the defense of the Underlying Claim on behalf of and for the
account and risk of the Indemnifying Parties in such manner as the
Indemnified Parties may deem appropriate, including, but not limited
to, settling the Underlying Claim. However, the parties controlling the
defense of the Underlying Claim shall not settle or compromise such
Underlying Claim without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
The non-controlling parties shall be entitled to participate in (but
not control) the defense of any such action, with their own counsel and
at their own expense.
(d) The Indemnifying Parties and the Indemnified Parties will
cooperate reasonably, fully and in good faith with each other, at the
sole expense of the Indemnifying Parties, in connection with the
defense, compromise or settlement of any Underlying Claim including,
without limitation, by making available to the other parties all
pertinent information and witnesses within their reasonable control.
11. INJUNCTIVE RELIEF.
11.1 DAMAGES INADEQUATE. Each party acknowledges that it would be
impossible to measure in money the damages to the other party if there is a
failure to comply with any covenants and provisions of this Agreement, and
agrees that in the event of any breach of any covenant or provision, the other
party to this Agreement will not have an adequate remedy at law.
11.2 INJUNCTIVE RELIEF. It is therefore agreed that the other party to
this Agreement who is entitled to the benefit of the covenants and provisions of
this Agreement which have been breached, in addition to any other rights or
remedies which they may have, will be entitled to immediate injunctive relief to
enforce such covenants and provisions, and that in the event that any such
action or proceeding is brought in equity to enforce them, the defaulting or
breaching party will not urge a defense that there is an adequate remedy at law.
12. FURTHER ASSURANCES.
Following the Closing, Seller shall furnish or make available, as the
case may be, to Buyer such instruments and other documents as Buyer may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated hereby.
13. FEES AND EXPENSES.
Each party hereto shall pay all fees, costs and expenses that it incurs
in connection with the negotiation and preparation of this Agreement and in
carrying out the transactions contemplated hereby (including, without
limitation, all fees and expenses of its counsel and accountant).
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14. WAIVERS.
If any party at any time waives any rights hereunder resulting from any
breach by the other party of any of the provisions of this Agreement, such
waiver is not to be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement. Resort to any remedies referred to
herein will not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
15. SUCCESSORS AND ASSIGNS.
Subject to Section 19, each covenant and representation of this
Agreement will inure to the benefit of and be binding upon each of the parties,
their personal representatives, assigns and other successors in interest.
16. ENTIRE AND SOLE AGREEMENT.
This Agreement constitutes the entire agreement between the parties and
supersedes all other agreements, representations, warranties, statements,
promises and undertakings, whether oral or written, with respect to the subject
matter of this Agreement. This Agreement may be modified or amended only by a
written agreement signed by the parties against whom the amendment is sought to
be enforced.
17. GOVERNING LAW.
This Agreement will be governed by the laws of California without
giving effect to applicable conflict of laws provisions. With respect to any
litigation arising out of or relating to this Agreement, each party agrees that
it will be filed in and heard by the state or federal courts with jurisdiction
to hear such suits located either in Los Angeles County, California, or in the
State of Vermont, at the election of the plaintiff in the case.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts will be deemed to be an original, and
such counterparts will constitute but one and the same instrument.
19. ASSIGNMENT.
Except in the case of an affiliate of the Buyer, this Agreement may not
be assignable by any party without prior written consent of the other parties.
20. REMEDIES.
Except as otherwise expressly provided herein, none of the remedies set
forth in this Agreement are intended to be exclusive, and each party will have
all other remedies now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more remedies will not constitute a waiver
of the right to pursue other available remedies.
21. SECTION HEADINGS.
The section headings in this Agreement are included for convenience
only, are not a part of this Agreement and will not be used in construing it.
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22. SEVERABILITY.
In the event that any provision or any part of this Agreement is held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect the validity or enforceability of any other
provision or part of this Agreement. The parties shall attempt by mutual
agreement to arrive at an amendment of this Agreement which eliminates such
invalidity or conflict while at the same time permitting the accomplishment of
the objectives of this Agreement.
23. NOTICES.
Each notice or other communication hereunder must be in writing and
will be deemed to have been duly given on the earlier of (i) the date on which
such notice or other communication is actually received by the intended
recipient thereof, or (ii) the date five (5) days after the date such notice or
other communication is mailed by registered or certified mail (postage prepaid)
to the intended recipient at the following address (or at such other address as
the intended recipient will have specified in a written notice given to the
other parties hereto):
IF TO ARS:
Advanced Roofing Solutions, Inc.
0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx
(000) 000-0000 Phone
(000) 000-0000 Fax
IF TO SELLER:
Xxxxxxx Xxxxxx
0000 X. Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 000000
(000) 000-0000 Phone
(000) 000-0000 Fax
IF TO BUYER:
Environmental Service Professionals, Inc.
0000 Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
24. PUBLICITY.
Except as may be required in order for a party to comply with
applicable laws, rules, or regulations or to enable a party to comply with this
Agreement, or necessary for the Buyer to prepare and disseminate any private or
public placements of its securities or to communicate with its shareholders or
franchisees, no press release, notice to any third party or other publicity
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concerning the transactions contemplated by this Agreement will be issued, given
or otherwise disseminated without the prior approval of each of the parties
hereto; provided, however, that such approval will not be unreasonably withheld.
IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first above written.
ARS: ADVANCED ROOFING SOLUTIONS, INC.,
a California corporation
By: /s/Xxxxxxx Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx, President
COMPANY/BUYER: ENVIRONMENTAL SERVICE PROFESSIONALS, INC.,
a Nevada corporation
By: /s/Xxxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
SELLER: /s/Xxxxxxx Xxxxxx
-----------------------------------------
Xxxxxxx Xxxxxx
/s/Xxxxx Xxxxxx
-----------------------------------------
Xxxxx Xxxxxx
*See Exhibit A and Schedules attached to this Agreement and incorporated herein
by reference.
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EXHIBIT A
to
Stock Purchase Agreement
ARS 2007 and 2008 Budget & Projections
