EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the 19th day of
November, 2002, by and between Stratus Services Group, Inc., a Delaware
corporation (the "Buyer") with its principal business offices located at 000
Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000, and Elite Personnel
Services, Inc., a California corporation ("Seller") with its principal business
offices located at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000.
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer certain of the properties, rights, assets and
business of the Seller, all upon and subject to the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE AND DELIVERY OF THE ASSETS.
1.1. PURCHASE AND SALE AND DELIVERY OF THE ASSETS.
(a) PURCHASED ASSETS. Subject to and upon the terms and
conditions of this Agreement and excluding the assets retained by the Seller as
set forth in Section 1.1(b) herein, as of the "Effective Date" (as defined in
Section 1.5 below), the Seller shall sell, transfer, convey, assign and deliver,
to the Buyer, and the Buyer shall purchase from the Seller, free and clear of
all liens and encumbrances (except for Permitted Liens as defined in Section
2.8), all of the properties, rights, assets and business as a going concern, of
every kind and nature, real, personal or mixed, tangible or intangible, wherever
located, which are owned, leased, licensed or used by Seller in the conduct of
its business at its offices located at West Covina, California, Bellflower,
California, Xxxxxxxxx, Nevada, Las Vegas, Nevada, Culver City, California, and
Rancho Cucamonga, California and which exist on the "Effective Date" (as defined
in Section 1.5 below) (collectively, the "Purchased Assets"), including, without
limitation, the following assets:
(i) all office supplies and similar materials (the
"Supplies");
(ii) all contracts, agreements, leases, arrangements
and/or commitments of any kind, whether oral or written, relating to the
Purchased Assets as set forth on Schedule 2.12 attached hereto (the
"Contracts");
(iii) all customer lists, files, records and documents
(including credit information) relating to customers and vendors of the
Purchased Assets and all other business, financial and employee books, records,
files, documents, reports and correspondence relating to the Purchased Assets,
but excluding records relating to accounts receivable, except to the extent
required by Sections 2.22 and 7.2(d) herein (collectively, the "Records");
(iv) all rights of the Seller, if any, under express
or implied warranties from the suppliers of the Seller in connection with the
Purchased Assets;
(v) all furnishings, furniture, fixtures, tools,
machinery, equipment and leasehold improvements owned by the Seller and related
to the Purchased Assets, whether or not reflected as capital assets in the
accounting records of the Seller (collectively, the "Fixed Assets"), as set
forth on Schedule 2.8; and
(vi) all patents, trademarks and tradenames and
applications therefor which are owned by the Seller and related to the Purchased
Assets, excluding the name "Elite Personnel Services";
(vii) all computers, computer programs, computer
databases, hardware and software owned or licensed by the Seller and used in
connection with the Purchased Assets;
(viii) all municipal, state and federal franchises,
licenses, authorizations and permits of the Seller which are necessary to
operate or are related to the Purchased Assets;
(ix) all prepaid charges, deposits, sums and fees of
Seller relating to the Purchased Assets;
(x) all claims and rights of Seller related to or
arising from the Purchased Assets; and
(xi) all of the goodwill.
(b) RETAINED ASSETS. Notwithstanding anything to the
contrary set forth in this Agreement, the following assets of the Seller are not
included in the sale of Purchased Assets contemplated hereby: (i) the cash and
cash equivalents, accounts receivable, prepaid security deposits on Real
Property Leases (as defined in Section 2.10) and deposits or prepaid expenses
related to insurance contracts, (ii) the Purchase Price (as hereinafter defined)
and the other rights of the Seller under or relating to this Agreement, (iii)
the corporate minute books, stock records, qualification to conduct business as
a foreign corporation, and other documents relating to the incorporation,
maintenance or existence as a corporation of the Seller, except that Seller
agrees that it will provide copies of any such document from the corporate
minute books as reasonably requested by the Buyer which the Buyer believes are
necessary for the use and operation of the Purchased Assets after the Effective
Date, (iv) motor vehicles, and (v) all properties, rights, assets and services
related to the conduct of Seller's business at its offices located in
Montebello, Glendale and Gardena, California, and the office in Downey,
California from which no customer accounts are serviced (collectively, the
"Retained Assets").
1.2. PURCHASE PRICE. The purchase price for the Purchased Assets
shall be One Million, Two Hundred Sixty-Four Thousand and 00/100 Dollars
($1,264,000.00) plus the deferred purchase price referred to in Section (b)
below (collectively, the "Purchase Price") payable as follows:
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(a) the Buyer shall execute and deliver to Seller on the
Closing Date a promissory note, in the form attached hereto as Exhibit A (the
"Note"). The Note shall be in the principal amount of One Million, Two Hundred
Sixty-Four Thousand and 00/100 Dollars ($1,264,000.00), which is deemed to
include interest at the rate of four percent (4%) per annum, with payments over
an eight (8) year period, such payments due monthly. Payments shall be made at a
rate of $13,167.00 per month, the first such payment commencing on the Effective
Date, and the rest of such payments being made on the first of the month
following thereafter. The Note shall be subordinated to the Buyer's present and
future bank and other financial institution debt and the debt listed on Schedule
1.2(a) hereof, incurred or to be incurred by the Buyer, but shall rank senior to
all future acquisition indebtedness and shall rank no worse than pari pasau with
all other future indebtedness of the Buyer.
(b) the Seller will receive as deferred purchase price an
amount equal to ten percent (10%) of "Gross Profits" in excess of $2,500,000 up
to $3,200,000, plus fifteen percent (15%) of Gross Profits in excess of
$3,200,000, per year so long as Xxxxxxx Xxxxxxxx is employed by Buyer, but for a
minimum of one year, measured from the Effective Date. Gross Profits shall be
determined in accordance with Schedule 1.2(b). The amount payable under this
paragraph will be paid within seventy-five (75) days after the expiration of
each one-year period. Any disputes concerning the deferred purchase price shall
be resolved in accordance with Schedule 1.2(b).
1.3. ASSUMPTION OF LIABILITIES.
(a) ASSUMED LIABILITIES. Effective as of the Effective
Date, the Buyer agrees to assume and to pay, perform and discharge all
liabilities and obligations arising under the Contracts on and after the
Effective Date and with respect to the use and operation of the Purchased Assets
by the Buyer after the Effective Date (the "Assumed Liabilities"). To the extent
that any personal property included as part of the Purchased Assets is leased by
Seller as of the Effective Date and the Buyer and Seller agree that the lease
agreement cannot be formally assigned to the Buyer, the Buyer will thereafter
pay the rental charge or lease payment for same to the Seller, and the Seller
shall be required to make such payments directly to the Lessor. If at any time,
Seller, in its sole discretion, chooses to pay off the lease liability of any
such asset in one lump sum, Buyer shall reimburse Seller for such payment and
title to such asset shall pass to Buyer.
(b) LIABILITIES RETAINED BY THE BUYER. Except for the
Assumed Liabilities, the Buyer shall not assume, be liable for or pay, and none
of the Purchased Assets shall be subject to, and the Seller shall retain, be
unconditionally liable for and pay, any liability or obligation (whether known
or unknown, matured or unmatured, stated or unstated, recorded or unrecorded,
fixed or contingent, currently existing or hereafter arising) of the Seller,
without limitation, the following:
(i) any obligation or liability of Seller arising
out of this Agreement, any agreement entered into in connection herewith or the
transactions contemplated hereby or thereby;
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(ii) except as otherwise provided herein, any
obligation or liability of Seller for the fees and expenses of its counsel,
accountants and other experts and all other expenses incurred by Seller incident
to the negotiation, preparation and execution of this Agreement and any
agreement entered into in connection herewith and the performance by Seller of
its obligations hereunder or thereunder;
(iii) except as otherwise provided herein, any
obligation or liability of Seller and its directors, officers, employees,
consultants and other representatives, arising out of or resulting from any
business, activity, course of conduct, action or omission before, on or after
the Effective Date;
(iv) all accounts payable of the Seller;
(v) any liability or obligation under or in
connection with the Retained Assets.
(vi) any federal, state, local or other foreign tax
payable by the Seller whether such tax is due and payable prior to or after the
Effective Date;
(vii) any indebtedness of the Seller for borrowed
money;
(viii) all liabilities of the Seller with respect to
any claim, litigation or proceeding accruing with respect to, or arising from or
relating to any business, activity, course of conduct, action or omission
before, on or after the Effective Date, including, without limitation, those
matters set forth on Schedule 2.9, whether such claim, litigation or proceeding
is presented or instituted prior to or after the Effective Date;
(ix) all liabilities, obligations, payments,
benefits, costs and expenses including, without limitation, any salary, wage,
vacation, bonus, severance, expense reimbursement or other benefit: (a) accruing
and payable to staff and part-time employees of the Seller who become employed
by the Buyer after the Effective Date with respect to any period before the
Effective Date as set forth in Schedule 1.3 attached hereto, (b) accruing and
payable to all other employees of the Seller with respect to any period before
or after the Effective Date, (c) accruing and payable to all former employees of
the Seller whose employment terminated before the Effective Date, (d) accruing
and payable pursuant to any employee benefit plans (including pension plans) of
the Seller or under federal and state laws governing such plans, whether before
or after the Effective Date, including, without limitation, in connection with
the termination of participation under such plan by a staff or part-time
employee; or (e) accruing and payable in connection with the termination of any
such employee benefit plan of the Seller, whether before or after the Effective
Date.
(x) all warranty liability of the Seller, including
without limitation, for claims which arise prior to the Effective Date, whether
such claims are presented prior to or after the Effective Date.
1.4. OTHER AGREEMENTS.
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As further consideration for the transactions contemplated hereby, the
Seller (a) will enter into a the Non-Competition Agreement attached hereto as
Exhibit C-1, and (b) shall cause Xx. Xxxxxxx Xxxxxxxx ("Xx. Xxxxxxxx"), to enter
into an Employment Agreement and a Non-Competition Agreement, as attached hereto
as Exhibits C-2 and C-3, respectively.
1.5. CLOSING. The closing (the "Closing") shall take place at the
offices of the Seller's counsel in Los Angeles, California, at 9:00 a.m. Pacific
Time, on November 19, 2002, or such other time or date or such other location as
the parties may mutually agree (the "Closing Date"), but the transactions
contemplated hereby shall be deemed to occur at 12:01 a.m., Eastern Time, on
December 1, 2002 (the "Effective Date"). At the Closing the parties will
exchange facsimile executed documents and they will promptly send each other
original signature pages by overnight mail.
1.6. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the various Purchased Assets by mutual agreement of the parties
as set forth on Schedule 1.6 and such allocations shall include amounts
allocable to Seller and Xx. Xxxxxxxx, under the Non-Competition Agreements
referenced in Section 1.4 of this Agreement. The parties covenant and agree with
each other that this allocation was arrived at by arm's length negotiation and
that none of them will take a position on any income tax return, before any
governmental agency charged with the collection of any income tax or in any
judicial proceeding that is in any manner inconsistent with the terms of this
Section 1.6 without the written consent of the other parties to this Agreement.
Each of Buyer and Seller covenant and agree to execute and timely file U.S.
Treasury Form 8594 consistent with Schedule 1.6, and upon a party's reasonable
request the other party shall execute and file such other documents as may be
necessary to document such allocation.
2. REPRESENTATIONS OF THE SELLER. The Seller and, with respect only to
Section 2.11, Xx. Xxxxxxxx jointly and severally represent and warrant to the
Buyer as follows:
2.1. ORGANIZATION. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified to do business in, and is in good standing under the laws
of, the States of California and Nevada. The Seller is not required to be
qualified or licensed to do business as a foreign corporation or other
organization in any other jurisdiction, except such jurisdictions, if any, in
which the failure to be so qualified or licensed will not have a material
adverse effect on the conduct of its business or use of any of its properties or
assets. The Seller has delivered to the Buyer complete and correct copies of the
Seller's Articles of Incorporation and By-Laws as in effect on the date hereof.
The Seller is not in default under or in violation of any provision of its
Articles of Incorporation or By-Laws. The Seller has all requisite power and
authority (corporate and other) to execute and deliver this Agreement and the
documents, instruments and agreements contemplated herein, and to consummate the
transactions contemplated hereby and thereby.
2.2. AFFILIATES AND OTHER EQUITY INVESTMENTS. The Seller does not
own, directly or indirectly, any shares of capital stock of any corporation or
any equity investment in any partnership, limited liability company, association
or other business organization.
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2.3. AUTHORIZATION. The Seller has the power to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement, and the agreements provided for herein by the
Seller, and the consummation by the Seller of all transactions contemplated
hereby and thereby, have been duly authorized by all requisite corporate action.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which the
Seller is a party constitute the valid and legally binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
2.4. NO VIOLATION. Except as set forth in Schedule 2.4, neither the
execution, delivery or performance of this Agreement and the agreements provided
for herein, nor the consummation of any of the transactions contemplated hereby
or thereby (i) will violate or conflict with the Articles of Incorporation or
By-Laws of Seller, or (ii) conflict with, result in any breach of, constitute
(with or without due notice or lapse of time or both) a default under, or result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require notice, consent or waiver under any provision of
any contract or agreement of any kind to which the Seller is a party or by which
the Seller is bound (including, without limitation, the Contracts) or to which
any property or asset (including, without limitation, the Purchased Assets) of
any of them is subject, (iii) is prohibited by or requires the Seller to obtain
or make any consent, authorization, approval, registration or filing under any
statute, law, ordinance, regulation, rule, judgment, decree or order of any
court or governmental agency, board, bureau, body, department or authority, (iv)
will cause any acceleration of maturity of any note, instrument or other
obligation to which Seller is a party or by which Seller is bound or with
respect to which Seller is an obligor or guarantor, or (v) will result in the
creation or imposition of any lien, claim, charge, restriction, equity or
encumbrance of any kind whatsoever upon or give to any other person any interest
or right (including any right of termination or cancellation) in or with respect
to any of the properties, assets (including, without limitation, the Purchased
Assets), business, agreements or contracts (including, without limitation, the
Contracts) of Seller.
2.5. FINANCIAL STATEMENTS. Seller has delivered to Buyer unaudited
compilation financial statements, for the six-month period ended June 30, 2002,
for the Seller's operations as a whole. Such financial statements fairly present
the financial position of Seller as of the date thereof and the results of its
operations and cash flows for the period indicated.
2.6. NO UNDISCLOSED LIABILITIES. Since June 30, 2002 except for the
transactions contemplated by this Agreement and except as set forth in Schedule
2.6, Seller has not incurred any material liability or obligation (absolute,
accrued, contingent or otherwise) of any nature, other than liabilities and
obligations incurred in the ordinary course of business, that would properly be
reflected or reserved against in a balance sheet prepared in conformity with
GAAP, applied on a basis consistent with that used in the preparation of the
Financial Statements;
2.7. ABSENCE OF CERTAIN CHANGES. Since June 30, 2002 except for the
execution and delivery of this Agreement and except as set forth in Schedule
2.7, Seller has not
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(i) had any change in its condition (financial or otherwise), operations
(present or prospective), business (present or prospective), assets or
liabilities, other than changes in the ordinary course of business, none of
which has been materially adverse; (ii) incurred or agreed to incur any
indebtedness for borrowed money; (iii) paid or obligated itself to pay in excess
of ten thousand dollars ($10,000) in the aggregate for Fixed Assets; (iv)
suffered any substantial loss or waived any substantial right; (v) agreed to
sell, transfer or otherwise dispose any of the Purchased Assets; (vi) mortgaged,
pledged or subjected to any charge, lien, claim or encumbrance, or agreed to
mortgage, pledge or subject to any charge, lien, claim or encumbrance, any of
the Purchased Assets; (vii) made or permitted any material amendment or
termination of any Contract, license or permit to which it is a party other than
in the ordinary course of business; (viii) experienced any shortage or
difficulty in obtaining qualified personnel to meet customer orders, demands and
requirements; (ix) made any change in its accounting methods or practices with
respect to its condition, operations, business, properties, assets or
liabilities; or (x) entered into any transaction not in the ordinary course of
the business.
2.8. TITLE; OWNERSHIP, CONDITION AND ADEQUACY OF THE ASSETS. Except
with respect to Purchased Assets that are leased and except as set forth in
Schedule 2.8, Seller has good and marketable title to all of its respective
properties and assets included in the Purchased Assets, and valid leasehold
interests in all such Purchased Assets leased by it under any personal property
lease, in each case free and clear and not subject to any mortgage, pledge,
conditional sales contract, lien, security interest, right of possession in
favor of any third party, claim or other encumbrance, except for Permitted
Liens. The Fixed Assets are in good operating condition and repair, subject only
to the ordinary wear and tear. Schedule 2.8 sets forth an accurate, correct and
complete list of all of the Fixed Assets owned or used by the Seller with
respect to the Purchased Assets. As used herein, the term "Permitted Liens"
means (i) liens or encumbrances for taxes not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of Seller; (ii) carrier's,
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens or
encumbrances arising in the ordinary course of business which are not overdue
for a period of more than thirty (30) days or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect thereto
are maintained on the books of Seller; and (iii) those liens or encumbrances
described on Schedule 2.8 attached hereto.
2.9. LITIGATION. Except as set forth in Schedule 2.9, there are no
actions, suits, proceedings or investigations, either at law or in equity, or
before any commission or other administrative authority in any United States or
foreign jurisdiction, of any kind now pending or, to the best of Seller's
knowledge, threatened involving Seller that (i) if asserted and decided
adversely to Seller, could materially and adversely affect the use or operations
of the Purchased Assets (in a manner consistent with Seller's past practices),
or (ii) questions the validity of this Agreement or the other agreements to be
entered into in connection herewith, or (iii) seeks to delay, prohibit or
restrict in any manner any action taken or contemplated to be taken by the
Seller under this Agreement or the other agreements to be entered into in
connection herewith. Except as set forth in Schedule 2.9, there is no
arbitration proceeding pending or, to Seller's knowledge, threatened or proposed
in any manner under any collective bargaining agreement or other agreement or
otherwise. Neither Seller nor any of the Purchased Assets are subject to any
judicial or administrative judgment, order, decree or restraint.
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2.10. REAL PROPERTY; LEASES. Seller does not own any real property
used in connection with the Purchased Assets. Schedule 2.10 attached hereto sets
forth a true, correct and complete list as of the date hereof of all leases of
real property to which the Seller is a party in connection with the Purchased
Assets (collectively, the "Real Property Leases"). Except as set forth on
Schedule 2.10, true, correct and complete copies of the Real Property Leases,
and all amendments and modifications thereof, have previously been delivered by
the Seller to the Buyer. The Real Property Leases have not been modified or
amended since the date of delivery to the Buyer. No party to any Real Property
Lease has sent written notice to the other claiming that such other party is in
default thereunder, which alleged default remains uncured.
2.11. TAX MATTERS. All federal, state, local and foreign tax and
information returns required to have been filed prior to the date of this
Agreement by Seller have been duly filed, and each such return correctly
reflects the income, franchise or other tax liability and all other information
required to be reported thereon, and the Seller has paid or accrued all income,
franchise and other taxes due by it as reflected on said returns. There are not
pending, nor to the knowledge of Seller, threatened, any audits, examinations,
investigations or other proceedings in respect of taxes or tax matters and there
are not, to the knowledge of Seller, any unresolved questions or claims
concerning Seller's tax liability.
2.12. CONTRACTS. Schedule 2.12 contains a true and complete list of
all Contracts. The Seller has made available to the Buyer a true and complete
copy of each such written Contract and a true, correct and complete written
description of each such oral Contract. Except as set forth as Schedule 2.12,
neither the Seller, nor, to the knowledge of the Seller, any other party, is in
default under or in breach or in violation of any Contract, nor has an event
occurred that (with or without notice, lapse of time, or both) would constitute
a default, breach or violation by the Seller, or, to the knowledge of the
Seller, by any other party, under any Contract.
2.13. COMPLIANCE WITH AGREEMENTS AND LAWS. Except as set forth in
Schedule 2.15, Seller has complied in all material respects with all federal,
state, local and foreign statutes, laws, ordinances, regulations, rules,
permits, judgments, orders or decrees applicable to it, and to Seller's
knowledge there does not exist any basis for any claim of default under or
violation of any such statute, law, ordinance, regulation, rule, judgment, order
or decree except such defaults or violations, if any, that in the aggregate do
not and will not materially and adversely affect the Purchased Assets or the
operation, financial condition or prospects of the Purchased Assets.
2.14. ENVIRONMENTAL MATTERS. Except for such matters that, alone or
in the aggregate, are not reasonably likely to have a material adverse effect on
the Seller, to its knowledge: (i) Seller has complied with all applicable
"Environmental Laws" (as defined below); (ii) Seller has not received any
notice, demand, letter, claim or request for information alleging that it may be
in violation of or liable under any Environmental Law; and (iii) Seller is not
subject to any orders, decrees, injunctions or other arrangements with any
governmental entity relating to liability under any Environmental Law or
relating to Hazardous Substances.
For purposes of this Agreement, the term "Environmental Law" means any law
relating to pollution (or the clean up of the environment), or the protection of
air, surface water, groundwater, drinking water, land (surface or subsurface),
human health, the environment or any other natural resource or the use, storage,
recycling, treatment, generation, processing, handling,
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production or disposal of Hazardous Materials, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
USC Sections 9601 et seq. And 40 CFR Sections 302.1 et seq., and regulations
thereunder; the Federal Clean Air Act, as amended, 42 USC Sections 7401 et seq.,
and regulations thereunder; the Resource Conservation and Recovery Act, 42 USC
Sections 6901 et seq., as amended and regulations thereunder; and the Federal
Water Pollution Control Act, 33 USC Sections 1251 et seq., as amended, and
regulations thereunder.
For purposes of this Agreement, the term "Hazardous Substance" means any
asbestos containing materials, mono- and polychlorinated biphenyls, urea
formaldehyde products, radon, radioactive materials, any "hazardous substance",
"hazardous waste", "pollutant", "toxic pollutant", "oil" or "contaminant" as
used in, or defined pursuant to any Environmental Law, and any other substance,
waste, pollutant, contaminant or material, including petroleum products and
derivatives, the use, transport, disposal, storage, treatment, recycling,
handling, discharge, release, threatened release, discharge or emission of which
is regulated or governed by any Environmental Law.
2.15. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Schedule 2.15
lists all licenses, franchises, permits and other governmental authorizations
held by Seller material to the use of the Purchased Assets. Such licenses,
franchises, permits and other governmental authorizations are valid, and Seller
has not received any notice that any governmental authority intends to cancel,
terminate or not renew any such license, franchise, permit or other governmental
authorization. Except as set forth on Schedule 2.15, Seller holds all licenses,
franchises, permits and other governmental authorizations, the absence of any of
which could have a material adverse effect on the use of the Purchased Assets.
2.16. ACCOUNTING PRACTICES. The books and accounts of Seller are
complete and correct, and fully and fairly reflect the assets and transactions
of the Company.
2.17. SHAREHOLDERS. The Xxxxxxxx Family Trust is the sole
shareholder of Seller.
2.18. INSURANCE. Schedule 2.18 contains a true and complete list of
all policies of fire, liability, workers' compensation and other forms of
insurance owned by or held by Seller, and Seller has made available for
inspection by the Buyer true and complete copies of all of such policies. All
such policies are in full force and effect, all premiums with respect thereto
covering all periods to the date of this Agreement have been paid, and no notice
of cancellation or termination has been received with respect to any such
policy. Except as set forth in Schedule 2.18, such policies (i) are sufficient
for compliance with all requirements of law and all agreements to which Seller
is a party, (ii) are valid, outstanding and enforceable policies, (iii) will
remain in full force and effect through the Effective Date, and (iv) will not in
any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. Except as set forth in Schedule 2.18, Seller has
not made any material claims under such insurance policies.
2.19. BROKERS. Except for Oxford Mergers & Acquisitions, Inc.
("Oxford"), 0000 Xxxxx Xxxxxx, Xxxxx X, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by Seller directly with
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Buyer and without the intervention of any other person and in such manner as not
to give rise to any valid claim against any of the parties for any finder's fee,
brokerage commission or like payment.
2.20. LABOR MATTERS. Seller is not the subject of any proceeding
asserting that it has committed an unfair labor practice or is seeking to compel
it to bargain with any labor union or labor organization nor is there pending
or, to the Seller's knowledge, threatened, nor has there been for the past five
years, any labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving it.
2.21. INTELLECTUAL PROPERTY RIGHTS. Schedule 2.21 contains an
accurate and complete description of all domestic and foreign patents,
trademarks, trademark registration, service marks, service marks registration,
logos, trade names, assumed names, copyrights and copyright registrations and
all applications therefor, presently owned or held by Seller or under which
Seller owns or holds any license, or in which Seller owns or holds any direct or
indirect interest, and no others are necessary for the use of the Purchased
Assets. To the knowledge of Seller, no products sold or services provided by
Seller, nor any patents, formulae, know-how, secrets, trademarks, trademark
registrations, service marks, service marks registration, logos, trade names,
assumed names, copyrights, copyright registrations, or designation used or
licensed for use in connection with the Purchased Assets, infringe on any
patents, trademarks, licenses, or copyrights, or any other rights, of any
person. Seller is the sole owner of, has the sole and exclusive right to use,
has the right and power to sell, and has taken all reasonable measures to
maintain and protect, the patents, trademarks, trademark registrations, logos,
trade names, assumed names, copyrights, copyright registrations, service marks
and service xxxx registrations listed in Schedule 2.21. Except as set forth in
Schedule 2.21, no claims have been asserted against Seller in writing by any
person and received by it challenging the use of any such patents, trademarks,
trademark registrations, service marks, service xxxx registrations, logos, trade
names, assumed names, copyrights and copyright registrations or challenging or
questioning the validity or effectiveness of any such license or agreement, or
the use of any formula, know-how or secrets used in connection with the
Purchased Assets and, to the knowledge of the Seller, there is no valid basis
for any such claim. Except as set forth in Schedule 2.21, to Seller's knowledge,
no other party is infringing on the patents, trademarks, trademark
registrations, logos, tradenames, assumed names, copyrights copyright
registrations, service marks and service xxxx registrations listed in Schedule
2.21.
2.22. RECEIVABLES. Seller has delivered to Buyer a true and complete
aging report of Seller's accounts receivable as of November 15, 2002.
2.23. EMPLOYEES. Schedule 2.23 contains a complete list of the name,
position, and salary, of all staff employees of Seller, including persons who
are temporarily absent from active employment by Seller. Seller has no
employment agreement, patent disclosure agreement, non-compete agreement, or any
other written contract or agreement relating to the right of any such staff
employee to be employed by Seller. To the knowledge and belief of Seller, no
staff employee has any present intention of terminating his or her employment
with the Seller, and Seller has no present intention of terminating such
employment.
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2.24. ERISA. The only employee benefit plans of Seller are group
medical and dental insurance policies.
(a)
2.25. CUSTOMERS. The accounts receivable aging report delivered
pursuant to Section 2.22 lists all current customers of the Seller. Except as
set forth in Schedule 2.25 the Seller has not received any written threat or
written notice that any one or more customers who in the aggregate purchased
goods or services in excess of $25,000 from it during the nine months ended
9/30/02 intends to discontinue or to reduce significantly purchases of such
goods or services or default under or terminate any Contract whether as a result
of the transactions contemplated by this Agreement or otherwise and the Seller
has not received any written notice of, nor is it aware of any basis for, any
material dispute between any such customer and the Seller, whether with respect
to payment due, workmanship or otherwise.
2.26. NO UNTRUE STATEMENTS. No statement by Seller contained in this
Agreement and no written statement contained in any certificate or other
document required to be furnished by Seller, or any officer, or other agent of
Seller to Buyer pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary in order to make the statements therein contained not misleading.
3. REPRESENTATIONS OF THE BUYER. The Buyer represents and warrants to
the Seller as follows:
3.1. ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has requisite power and authority (corporate and other) to own its
properties and to carry on its business as now being conducted. The Buyer has
full power to execute and deliver this Agreement and all other documents,
instruments and agreements to be delivered by it hereunder and to consummate the
transactions contemplated hereby and thereby. The Buyer has delivered to the
Seller complete and correct copies of the Buyer's Articles of Incorporation and
By-Laws as in effect on the date hereof. The Buyer is not in default under or in
violation of any provision of its Articles of Incorporation or By-Laws. The
Buyer has all requisite power and authority (corporate and other) to execute and
deliver this Agreement and the documents, instruments and agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby.
3.2. AUTHORIZATION. The execution and delivery of this Agreement by
the Buyer, and the agreements provided for herein, and the consummation by the
Buyer of all transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement and all such other
agreements and written obligations entered into and undertaken in connection
with the transactions contemplated hereby constitute the valid and legally
binding obligations of the Buyer, enforceable against it in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
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3.3. NO VIOLATION. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Articles of Incorporation or By-Laws; (c) violate
any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term of provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which it or its properties is a party
or by which the Buyer is or may be bound.
3.4. CONSENTS. Except for the consent of Capital Temp Funds, Inc.,
no consent, approval, authorization or other action by, or filing with, any
governmental authority or any third party is required in connection with the
execution, delivery and performance by the Buyer of its obligations under this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby.
3.5. LITIGATION. No action, investigation, audit, review, claim,
suit or proceeding by any governmental authority or third party is pending or,
to the knowledge of the Buyer, threatened against the Buyer which seeks to delay
or prevent the consummation of the transactions contemplated by this Agreement,
or which may adversely affect or restrict the Buyer's ability to consummate the
transactions contemplated hereby. The Buyer is not bound by any outstanding
judgment, order, injunction or decree of any governmental authority or any third
party which would prevent the Buyer from consummating the transactions
contemplated by this Agreement.
3.6. BROKERS. Except for Oxford, all negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by Buyer
directly with Seller and without the intervention of any other person and in
such manner as not to give rise to any valid claim against any of the parties
for any finder's fee, brokerage commission or like payment.
3.7. NO UNTRUE STATEMENTS. No statement by the Buyer contained in
this Agreement and no written statement contained in any certificate or other
document required to be furnished by any officer, or other agent of Buyer to
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary in
order to make the statements therein contained not misleading.
4. CLOSING DELIVERIES.
4.1. BY SELLER. The Seller shall deliver to the Buyer at the
Closing or, if so indicated, on the Effective Date, each of the following
documents:
(a) this Agreement, duly executed by Seller and
Xx. Xxxxxxxx;
(b) a Xxxx of Sale in the form attached hereto as
EXHIBIT B, duly executed by Seller;
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(c) an Assignment and Assumption of Contracts and
Liabilities executed by the Seller evidencing the Seller's assignment and the
Buyer's assumption of the Assumed Liabilities contemplated by Section 1.3 hereof
in the form attached hereto as EXHIBIT D (the "Assignment and Assumption
Agreement");
(d) the Non-Competition Agreements in the form attached
hereto as EXHIBITS C-1 AND C-3;
(e) the Employment Agreement in the form attached hereto as
Exhibit C-2 duly executed by Xxxxxxx Xxxxxxxx;
(f) the Records, on the Effective Date;
(g) copies of the general ledgers and books of account of
the Seller pertaining to the Purchased Assets for the period December 1, 1999 to
the Effective Date, on the Effective Date.
(h) cross receipt executed by the Seller, in the form of
EXHIBIT F ("Cross Receipt");
(i) a certificate executed by the Chief Executive Officer
of the Seller that all representations and warranties made herein by Seller are
true and correct and that all terms, conditions and provisions of this Agreement
have been performed and complied with at the time of Closing;
(j) a certificate from the secretary of the Seller
attesting to the accuracy of resolutions to be attached thereto approved by the
Board of Directors and the shareholders of the Seller authorizing the sale of
the Purchased Assets and providing incumbency information for the individual
signing this Agreement on behalf of the Seller;
(k) such certificates or other documents as may be
reasonably requested by Buyer, including, without limitation, certificates of
legal existence, good standing and certified charter documents from the
Secretaries of State of the States of California and Nevada, and certificates of
the Chief Executive Officer of the Seller with respect to minutes, resolutions,
by-laws and any other relevant matters concerning the Seller in connection with
the transactions contemplated by this Agreement.
(i)
4.2. BY THE BUYER. The Buyer shall deliver to the Seller at the
Closing or, if so indicated, on the Effective Date, each of the following
documents:
(a) this Agreement, executed by the Buyer;
(b) the Assignment and Assumption Agreement (EXHIBIT D),
executed by Buyer;
(c) Employment Agreement;
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(d) on the Effective Date, the first payment on the Note,
and the amount of $17,561.35, representing deposits under the Real Property
Leases and one month rent for the Xxxxxx office, by check or wire transfer;
(e) the Note (EXHIBIT A), executed by the Buyer;
(f) the Cross Receipt, executed by the Buyer;
(g) a certificate executed by the President of the Buyer
that all representations and warranties made herein are true and correct and
that all terms, conditions and provisions of this Agreement have been performed
and complied with at the time of Closing; and
(h) a certificate of the secretary of the Buyer attesting
to the accuracy of the resolutions of the Board of Directors of the Buyer
authorizing the purchase of the Purchased Assets and providing incumbency
information for the individual signing this Agreement on behalf of the Buyer.
(i) such certificates or other documents as may be
reasonably requested by Seller, including, without limitation, certificates of
legal existence, good standing and certified charter documents from the
Secretary of State of Delaware, and certificates of an officer of the Buyer with
respect to directors' resolutions, by-laws and other matters.
5. INDEMNIFICATION.
5.1. SURVIVAL OF REPRESENTATIONS. Except for the representations in
Sections 2.9 and 2.11 which shall survive three (3) years after the Effective
Date, all representations and warranties made by the parties herein or in any
instrument or document furnished in connection herewith shall survive for a
period of one (1) year (or the date of final payment on the Note, whichever is
sooner), following the Effective Date and any investigation at any time made by
or on behalf of the parties hereto.
5.2. BY THE SELLER. The Seller and, solely with respect to Section
2.11, Xx. Xxxxxxxx hereby agree to indemnify and hold harmless each of the
Buyer, its affiliates and their respective directors, officers, employees,
agents and representatives (the "Buyer Indemnitees") from and against any and
all actions, claims, liabilities (whether known or unknown, matured or
unmatured, stated or unstated, fixed or contingent), obligations, damages of any
kind (including, without limitation, general, special, incidental and
consequential damages), judgments, liens, injunctions, charges, orders, decrees,
rulings, demands, losses, dues, assessments, taxes, fines, fees, penalties,
amounts paid in settlement, costs or expenses (including, without limitation,
reasonable attorney's and expert fees and expenses in connection with
investigating, defending or settling any action or threatened action) (each, a
"Loss" and collectively, "Losses") that any of the Buyer Indemnitees may incur,
or to which it, he or she may become subject, arising out of, resulting from or
relating to:
(i) any misrepresentation or breach of any warranty of
Seller or Xx. Xxxxxxxx contained in this Agreement or in any schedule of Seller
or any certificate delivered by Seller pursuant to this Agreement;
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(ii) any breach of any covenant of Seller contained in this
Agreement;
(iii) any debt, liability or obligation of Seller other than
the Assumed Liabilities; and
(iv) the operations of the Purchased Assets prior to the
Effective Date.
Provided, however, that Seller and Xx. Xxxxxxxx shall be required to
indemnify and hold harmless the Buyer Indemnitees only to the extent that the
aggregate amount of all Losses exceeds $50,000, at which xxxx Xxxxxx and, to the
extent applicable, Xx. Xxxxxxxx, shall be liable hereunder for Losses in excess
of the initial $50,000 and provided further that except for Losses arising from
a breach of those representations and warranties in Sections 2.9 and 2.11
hereof, which shall have no such limitation, the aggregate indemnification
obligation of Seller and Xxxxxxx Xxxxxxxx under this Section 5 shall not exceed
the Purchase Price.
5.3. BY THE BUYER. The Buyer shall indemnify and hold harmless the
Seller and Xxxxxxx Xxxxxxxx and their respective directors, officers,
shareholders, employees, agents, representatives and successors (the "Seller
Indemnitees") from and against any and all Losses that any of the Seller
Indemnitees may incur, or to which it, he or she may become subject, arising out
of, resulting from or relating to:
(i) any misrepresentation or breach of warranty of Buyer
contained in this Agreement or in any schedule of Buyer or in any certificate
delivered by Buyer pursuant to this Agreement;
(ii) any breach of any covenant of Buyer contained in this
Agreement;
(iii) any of the Assumed Liabilities;
(iv) the use or operation of the Purchased Assets after the
Effective Date; and
(v) the failure to obtain any of the Real Property Lease
consents and releases described in Section 7.6(a).
5.4. REDUCTION FOR INSURANCE PROCEEDS. To the extent that any Buyer
Indemnitee or Seller Indemnitee shall receive payment under any insurance
policies on account of claims arising under Section 5.2 or Section 5.3 hereof,
the amount (if any) payable by the indemnifying party on account of such claims
shall be reduced by the amount of such payment or, if the Buyer Indemnitee or
Seller Indemnitee shall have already collected on such claims from the
indemnifying party, then the Buyer Indemnitee or Seller Indemnitee shall repay
to the indemnifying party the amount of such payment.
5.5. PROCEDURE FOR INDEMNIFICATION CLAIMS. For purposes of this
Agreement, each of Seller, Xx. Xxxxxxxx and Buyer may be referred to as an
"Indemnifying Party" in connection with their indemnification obligations
herewith. For purposes of this Agreement, Buyer Indemnitees and Seller
Indemnitees may be referred to individually as an "Indemnitee" or collectively
as "Indemnitees." The procedures to be followed with respect to indemnification
15
claims based upon or arising out of any claim, action or proceeding by any
person not a party to this Agreement, shall be as follows:
(a) If an Indemnitee believes that it has suffered or
incurred any Loss, such Indemnitee shall so notify the Indemnifying Party
promptly in writing describing such Loss, the amount thereof, if known, and the
method of computation of such Loss, all with reasonable particularity and
containing a reference to the provisions of this Agreement or other agreement,
instrument or certificate delivered pursuant hereto in respect of which such
Loss shall have occurred. In the event that any claim or demand in respect of
which an Indemnitee may seek recovery of a Loss under this Section 5 is asserted
against or sought to be collected from such Indemnitee by a third party, the
Indemnitee shall notify the Indemnifying Party promptly in writing as soon as
practicable but in any event within 30 days following receipt of notice of such
third party claim or demand.
(b) Unless in the reasonable judgment of Indemnitee (i)
there is a conflict between the positions of the Indemnifying Party and the
Indemnitee in conducting the defense of such claim or (ii) legitimate business
considerations would require the Indemnitee to defend or respond to such claim
in a manner different from that recommended by the Indemnifying Party, the
Indemnifying Party shall, by giving notice thereof to the Indemnitee confirming
the Indemnifying Party's obligation under this Section 5 to indemnify the
Indemnitee in respect of such claim, be entitled to assume and control such
defense with counsel chosen by it. The Indemnitee shall be entitled to
participate therein after such assumption, but the costs of such participation
(other than the costs of providing witnesses or documents at the request of the
Indemnifying Party or in response to legal process) following such assumption
shall be at the expense of the Indemnitee. Upon assuming such defense, the
Indemnifying Party shall have full right to enter into any compromise or
settlement which is dispositive of the matter involved; provided that except for
the settlement of a claim that involves no obligation of the Indemnitee other
than the payment of money for which indemnification is provided hereunder, the
Indemnifying Party shall not settle or compromise any claim without the prior
written consent of the Indemnitee, which consent will not be unreasonably
withheld; and provided, further, the Indemnifying Party may not consent to entry
of any judgment or enter into any settlement in respect of a claim which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnitee of a release from all liability in respect of such
claim.
(c) With respect to a claim as to which the Indemnifying
Party (i) does not have the right to assume the defense under Section (b) or
(ii) shall not have exercised its right to assume the defense, the Indemnitee
shall assume and control the defense of and contest such claim with counsel
chosen by it and the Indemnifying Party shall be obligated to pay all reasonable
attorneys' fees and expenses of the Indemnitee incurred in connection with such
defense. The Indemnifying Party shall be entitled to participate in the defense
of such claim, but the cost of such participation shall be at its own expense.
Notwithstanding the foregoing, the Indemnitee shall not be required to defend
any claim under this Section (c) unless the Indemnifying Party confirms its
obligation under this Section 5 to indemnify the Indemnitee in respect of such
claim by written notice to the Indemnitee. If the Indemnitee is not required to
defend any claim under the immediately preceding sentence, it shall owe no
duties to the Indemnifying Party with respect to such claim and may defend, fail
to defend or settle such claim without affecting its right to indemnity
hereunder.
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(d) If the Indemnitee assumes the defense of a claim
pursuant to Section (c) above, the Indemnitee may compromise or settle any claim
against it at any time; provided, however, that the Indemnitee shall not settle
or compromise any claim without the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld; provided, further, that
if in the reasonable judgment of the Indemnitee it would be materially harmed or
otherwise prejudiced by not entering into a proposed settlement or compromise
and the Indemnifying Party withholds consent to such settlement or compromise,
the Indemnitee may enter into such settlement or compromise and such settlement
or compromise shall not be conclusive as to, or otherwise be used to establish,
the existence or amount of the liability of the Indemnifying Party to the
Indemnitee or any third party. The Indemnitee may not consent to entry of any
judgment or enter into any settlement or compromise with respect to a claim
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnifying Party of a release from all liability
in respect of such claim.
(e) Both the Indemnifying Party and the Indemnitee shall
cooperate fully with one another in connection with the defense, compromise or
settlement of any claim, including without limitation making available to the
other all pertinent information and witnesses within its control at reasonable
intervals during normal business hours.
5.6. EXCLUSIVE REMEDY. The parties hereto agree that the
indemnification provisions set forth in this Section 5 are the exclusive remedy
for any indemnifiable Loss.
5.7. SET-OFF. Buyer may offset any Loss indemnifiable by Seller
and/or Xx. Xxxxxxxx under this Agreement against any amounts payable to Seller
or to Xx. Xxxxxxxx or any heir, beneficiary or assign by Buyer at or after the
Effective Date pursuant to this Agreement, the Note, the Non-Competition
Agreements or otherwise, whether or not Seller or Xx. Xxxxxxxx continues to be
the holder or beneficiary of such obligations of Buyer upon the determination of
the amount of such Loss in accordance with the final judgment of a court of
competent jurisdiction or as finally agreed by the parties.
6. Other Agreements.
6.1. TRANSFERRING EMPLOYEES. As a condition to their employment by
the Buyer, certain staff employees of Seller have entered into Buyer's standard
form of confidential information and non-solicitation agreements and executed
the Buyer's Employee Handbook. From the date of this Agreement until the
Effective Date, Seller has not paid or obligated itself to pay, any
compensation, commission or bonus to any staff employee or independent
contractor as such, except for the regular compensation, accrued benefits and
commissions payable to such staff employee or independent contractor at the rate
in effect on the date of this Agreement. Seller agrees to notify Buyer of the
departure or pending departure of any staff employee prior to the Effective
Date.
6.2. CONDUCT OF BUSINESS. From the date of this Agreement through
the Effective Date, Seller will use its best efforts to preserve the Purchased
Assets intact, to keep available to Buyer the services of its employees and
independent contractors and to preserve for Buyer its relationships with
suppliers, licensees, distributors and customers and others having
17
business relationships with the Purchased Assets. From the date of this
Agreement through the Effective Date, the Seller shall carry on its business of
the Purchased Assets substantially in the same manner as heretofore and shall
not make or institute any unusual or new methods of purchase, sale, performance,
lease, management, accounting or operation. From the date of this Agreement
through the Effective Date, all of the Purchased Assets shall be used, operated,
repaired and maintained by the Seller in a normal business manner consistent
with past practice. Unless instructed otherwise by the Buyer in writing, the
Seller will accept customer requests for services in the ordinary course of
business and consistent with past practice for all services offered by the
Seller but expected to be performed by the Buyer after the Effective Date. From
the date of this Agreement through the Effective Date, the Seller will not, and
will not obligate itself to, sell or otherwise dispose of or pledge or otherwise
encumber any of the Purchased Assets except in the ordinary course of business
and Seller will maintain the Fixed Assets and its facilities in good operating
condition and repair, subject only to ordinary wear and tear. The Seller will
comply with all laws and regulations which are applicable to its ownership of
the Purchased Assets or the use of the Purchased Assets and will perform and
comply with all of the Contracts and other commitments and obligations by which
it is bound. Seller will continue to carry all of its existing insurance until
the Effective Date. Seller agrees to notify and consult with Buyer with respect
to all decisions outside of the ordinary course relating to the Purchased Assets
until the Effective Date.
6.3. KEEP INFORMED. From the date hereof through the Effective
Date, Seller shall promptly notify Buyer of (i) any changes to the information
disclosed on any schedule hereto, including changes occurring after the date
hereof (although such disclosure shall not in any way amend or supplement any
schedule) and (ii) any condition, circumstance, fact or other information that
may cause the representations and warranties of the Seller and Xx. Xxxxxxxx
contained herein to be incomplete or untrue as of the Effective Date as if made
on and as of such time or cause the Seller to be unable to perform its covenants
contained herein that it is required to perform on or before the Effective Date.
7. POST-CLOSING AGREEMENTS. The Seller and the Buyer, as the case may be,
agree that from and after the Closing Date:
7.1. PROPRIETARY INFORMATION.
(a) The Seller shall hold in confidence, and use its best
efforts to have all of the officers, directors, employees, other personnel and
agents of the Seller to hold in confidence, all knowledge and information of a
secret or confidential nature with respect to the Purchased Assets and shall not
disclose, publish or make use of the same without the consent of the Buyer,
except (i) to the extent that such information shall have become public
knowledge other than through the act of Seller, or any of its officers,
directors and personnel except as would be permitted under (ii) and (iii) of
this Section 7.1(a), (ii) as may be required to enforce any of Seller's rights
against Buyer, or (iii) as may be required by applicable law or legal process.
(b) The Seller agrees that the remedy at law for any breach
of this Section 7.1 may be inadequate and that the Buyer shall be entitled to
seek injunctive relief in addition to any other remedy it may have upon breach
of any provision of this Section 7.1.
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7.2. FURTHER ASSURANCES AND DATA.
(a) At any time and from time to time after the Effective
Date, at the Buyer's reasonable request and without further consideration, the
Seller shall execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take such other action, all at the Buyer's sole
cost and expense, as the Buyer may reasonably request to more effectively
transfer, convey and assign to the Buyer, and to confirm the Buyer's title to,
all the Purchased Assets, to put the Buyer in actual possession and operating
control thereof, to assist the Buyer in exercising all rights with respect
thereto, and to carry out the purpose and intent of this Agreement. Immediately
after the Effective Date, the Seller shall, to the extent applicable, authorize
the release to the Buyer of all files pertaining to the Purchased Assets held by
any federal, state, county or local authorities, agencies or instrumentalities.
The Seller and the Buyer will cooperate in communications with suppliers and
customers to accomplish the transfer of the Purchased Assets to the Buyer.
(b) The parties agree that from and after the Effective
Date, as to any monies received that rightfully belong to the other party, they
shall remit such monies promptly to the other party.
(c) Within fifteen (15) business days after the Effective
Date, the parties shall mutually agree on the pro-ration as of the Effective
Date of rent, utilities and telephone relative to the Purchased Assets, and the
party obligated to pay the net amount of such prorated items to the other party
will make such payment ten (10) days after the agreement on pro-rations is
consummated. Seller will pay the premiums for the health benefits of Seller's
employees to be employed by Buyer through November 30, 2002.
(d) Seller shall cooperate fully in connection with the
preparation of audited financial statements of Seller for the three (3) years
ended December 31, 2001 and unaudited interim financial statements of Seller for
the nine (9) months ended September 30, 2002, and Seller's accountant shall use
its best efforts to deliver such financial statements to Buyer with forty-five
(45) days of the Effective Date. These financial statements (the "Financial
Statements") consist of:
(i) The audited statement of net assets of Seller as
of December 31, 2001 and 2000, and its audited statement of earnings for each of
the three (3) calendar years ending December 31, 2001; and
(ii) The unaudited statement of net assets of Seller
as of September 30, 2002, its unaudited statement of earnings for the nine (9)
months ending September 30, 2002 and its unaudited statement of earnings for the
three (3) months ending December 31, 2001, certified by the Chief Financial
Officer of Seller.
The Financial Statements will be prepared in accordance
with generally accepted accounting principals (GAAP) applied on a consistent
basis during the periods involved and fairly present the financial position of
Seller as of the dates thereof and the results of its operations and cash flows
for the periods indicated. Buyer shall pay all costs and
19
expenses related to the preparation and audit of such Financial Statements,
including the fees and expenses of Seller's accountants, not to exceed $50,000.
(e) Each party shall have the right, for a period of three
(3) years following the Effective Date, to have reasonable access to those
books, records and accounts, including financial and tax information,
correspondence, employment records and other records that may, at that time, be
in the possession of the other party to the extent that any of the foregoing
relates to the Purchased Assets and is needed by such party in order to comply
with its obligations under applicable securities, tax, environmental, employment
or other laws and regulations.
(f) Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any
approval, agreement, contract, lease, or other commitment included in the
Purchased Assets if an attempted assignment thereof without the consent of a
party thereto would constitute a breach thereof.
(g) BROKERS. The Buyer hereby agrees to pay the investment
banker/broker fee due to Oxford Mergers and Acquisitions, Inc. with the first
payment of $50,000.00 being made by Buyer on March 1, 2003, and Buyer paying
$5,000.00 per month for the ten (10) months thereafter.
(h) By the Effective Date, Seller's independent accountants
shall deliver a letter, dated no earlier than a date ten days preceding the
Effective Date, satisfactory in form and substance to Buyer, stating that, based
upon:
(i) a reading of the September 30, 2002 interim
compilation financial statements of Seller, and
(ii) discussions with officials of Seller responsible
for financial and accounting matters, nothing has come to their attention which,
in their judgment, would lead them to believe that the unaudited, interim
compilation financial statements of Seller are not fair presentations of the
financial position, results of operations and changes in financial position of
Seller or, except as set forth in the notes to such financial statements, have
not been prepared in accordance with GAAP applied on a basis consistent with
that of the prior financial statements.
(i) Within ten (10) days of the Effective Date Seller shall
deliver to Buyer an aging schedule of Seller's accounts receivable as of
November 30, 2002.
7.3. COOPERATION IN LITIGATION. Each party hereto will reasonably
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such party relating to or arising out of the use of the Purchased Assets prior
to the Effective Date (other than litigation arising out of the transactions
contemplated by this Agreement). The party requesting such cooperation shall pay
the out-of-pocket expenses (including legal fees and disbursements) of the party
providing such cooperation and of its officers, directors, employees, other
personnel and agents reasonably incurred in connection with providing such
cooperation, but shall not be responsible to reimburse the party providing such
cooperation for such party's time spent in such cooperation or the salaries or
costs of fringe benefits or similar expenses paid by the party providing such
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cooperation to its officers, directors, employees, other personnel and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
7.4. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The Seller agrees
that it will utilize normal collection efforts consistent with past business
practices of the Seller in collecting the outstanding Accounts Receivable of the
Seller as of the Effective Date. The Seller shall not undertake any formal
collection action (whether legal action, referral to a collection agency or
otherwise) with respect to any such account receivable without first consulting
with the Buyer. The Seller agrees to pay, in a manner consistent with past
business practice of the Seller, the outstanding accounts payable of the Seller
as of the Effective Date. The Buyer shall not, and shall not permit its
employees, officers, directors, independent contractors or agents to, directly
or indirectly, encourage any customer of Seller not to make payment on any
accounts receivable of Seller or commit any action which could reasonably lead
or cause any customer not to make such a payment and the Buyer shall otherwise
cooperate with Seller and its designees (and cause its personnel and accountants
to cooperate) in Seller's collection efforts.
7.5. The Buyer will pay to Seller, as and when the same becomes
due, the monthly rental payment on the Downey, California office lease, for the
three (3) month period following the Effective Date, and Buyer will occupy a
portion of such office for the purpose of conducting certain of its corporate
operations.
7.6. CONSENTS. Seller and Buyer will use their commercially
reasonable best efforts to obtain by the Effective Date,
(a) consents in the form of EXHIBIT E attached hereto from
each landlord relating to all Real Property Leases identified on Schedule 2.10
attached hereto, consenting to the assumption of each such Real Property Lease
by the Buyer and the release of Seller and Xxxxxxx Xxxxxxxx from all obligations
and liabilities under such Real Property Leases and any related guarantees, and
any other consents required under any Contract or otherwise in connection with
the transactions contemplated by this Agreement; and
(b) the consent of Capital Temp Funds, Inc. (the "Lender")
to the sale, transfer and assignment of the Purchased Assets to the Buyer as
contemplated by this Agreement, and (ii) the release of the Lender as evidenced
by UCC-3 Termination Statements, pursuant to which the Lender releases or
terminates its security interest in the Purchased Assets; PROVIDED, HOWEVER,
that as a condition to obtaining such consent Seller will not be required to
repay amounts due Lender other than in accordance with past practice and Buyer
shall not be required to pay any amounts due Lender on behalf of Buyer.
Buyer shall pay all costs and fees payable to landlords in connection with
obtaining the consents related to the Real Property Leases. If a consent is not
obtained with respect to any Real Property Lease by the Effective Date, Buyer
shall continue to pay Seller, when and as the same becomes due, the monthly
rental due pursuant to such Real Property Lease.
If the Lender's consent is not obtained by the Effective Date,
Buyer shall have the right to terminate this Agreement by written notice to
Seller by December 10, 2002. In the event of such termination, the provisions of
Section 5 of this Agreement and the
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Confidentiality Agreement executed by Buyer dated May 14, 2002, shall survive
such termination.
8. TRANSFER AND SALES TAX. Notwithstanding any provisions of law imposing
the burden of such taxes on the Seller or the Buyer, as the case may be, the
Seller shall be responsible for and shall pay (a) all sales, bulk sales, use and
transfer taxes, and (b) all governmental charges, if any, upon and due in
connection with the sale or transfer of any of the Purchased Assets hereunder.
If the Seller shall fail to pay such amounts on a timely basis, the Buyer may
pay such amounts to the appropriate governmental authority or authorities, and
the Seller shall promptly reimburse the Buyer for any amounts so paid by the
Buyer.
9. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be sufficiently given if delivered
personally or sent by facsimile (with transmission confirmed), Federal Express,
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows or to such other address or facsimile number of which the
parties may have given notice:
TO THE SELLER:
Xx. Xxxxxxx Xxxxxxxx
Chief Executive Officer
00000 Xxxxxxxxxx Xx.
Xxx Xxxxxxx, XX 00000
TO THE BUYER: WITH A COPY TO:
Xx. Xxxxxx X. Xxxxxxx Xxxxxxx Xxxxxxx Xxxxxxx, Esq.
President & CEO General Counsel
Stratus Services Group, Inc. Stratus Services Group, Inc.
000 Xxxxx Xxxx, Xxxxx 000 000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, by facsimile
or by Federal Express; or (b) three business days after being sent, if sent by
registered or certified mail.
10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
assigns, except that neither party may assign its obligations hereunder without
the prior written consent of the other parties hereto; PROVIDED, HOWEVER, that
the Buyer may assign Buyer's rights hereunder to a subsidiary or affiliate of
Buyer, PROVIDED that the Buyer shall remain liable for its obligations
hereunder. Any assignment in contravention of this provision shall be null and
void. No assignment shall release the Buyer from any obligation or liability
under this Agreement.
11. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS.
11.1. ENTIRE AGREEMENT; AMENDMENT. This Agreement, all schedules and
exhibits hereto, and all agreements and instruments to be delivered by the
parties pursuant hereto represent the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior oral and written, and all contemporaneous oral
22
negotiations, commitments and understandings between such parties including,
without limitation, the proposed letter of intent, dated October 21, 2002. The
Buyer and the Seller, by the consent of their respective Boards of Directors or
officers authorized by such Boards, may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by the Buyer and
the Seller.
11.2. ATTACHMENTS. If the provisions of any schedule or exhibit to
this Agreement are inconsistent with the provisions of this Agreement, the
provisions of this Agreement shall prevail. The exhibits and schedules attached
hereto or to be attached hereafter are hereby incorporated as integral parts of
this Agreement.
12. EXPENSES. Except as otherwise provided herein, each party hereto shall
pay its own expenses in connection with this Agreement and the transactions
contemplated hereby.
13. LEGAL FEES. In the event that legal proceedings are commenced by any
party hereto against any other party hereto in connection with this Agreement or
the transactions contemplated hereby, the party which does not prevail in such
proceedings shall pay the reasonable attorneys' fees and costs incurred by the
prevailing party in such proceedings.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without regard to conflicts
of law principles.
15. SECTION HEADINGS. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.
16. SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which, when
taken together, shall be one and the same document.
18. PUBLIC DISCLOSURE. Neither party shall make any public statement
about, nor issue any press release concerning this Agreement or the transactions
contemplated hereby without first consulting with the other party hereto as to
the form and substance of any such press release or public disclosure; provided,
however, that nothing in this Section 21 shall be deemed to prohibit any party
hereto from making any disclosure that its counsel deems necessary or advisable
in order to satisfy such party's disclosure obligation imposed by law.
19. WARN ACT. For a period of at least forty-five (45) days from and after
the Effective Date, Buyer shall employ substantially all, but in no event less
than 70%, of the full-time employees associated with the Purchased Assets and
shall not terminate more than 50 full time employees who were employed by the
Seller as of the Effective Date. Buyer shall be liable and responsible for any
obligations under the Worker Adjustment and Retraining Notification Act, as
amended (the "WARN ACT"), arising out of Buyer's breach of this Section 19 with
respect to the employees associated with the Purchased Assets.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
ELITE PERSONNEL SERVICES, INC.
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------
Print Name: Xxxxxxx Xxxxxxxx
Title: Chief Executive Officer
STRATUS SERVICES GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Print Name: Xxxxxx X. Xxxxxxx
Title: President and CEO
Accepted and Agreed for
purposes of Section 2.11
and Article 5 of this Agreement.
/s/ Xxxxxxx Xxxxxxxx
--------------------------------
Xxxxxxx Xxxxxxxx
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