STOCK PURCHASE AGREEMENT
Exhibit
2.1
AGREEMENT
made this 21st day of
December, 2007, by and among DUTCHESS PRIVATE EQUITIES FUND, LTD., a Cayman
Islands exempted company (hereinafter called "Buyer" or “Dutchess”) and US
Energy Initiatives, Inc., a Georgia corporation (hereinafter called
“Corporation” or “Seller”) and Advanced Aerosol Technologies, Inc., a Delaware
corporation and wholly owned subsidiary of the Corporation (the
“AAT”).
WHEREAS,
The
Corporation owns an aggregate of 100 shares of Common Stock of AAT comprising
all of the outstanding shares of capital stock of Corporation (hereinafter
sometimes called the "Stock").
WHEREAS,
AAT provides
specialty aerosol technologies and bulk compounding for proprietary products
and
contract servicing ("AAT's Business"). Corporation owns all of the
assets relating to or used in connection with AAT's Business.
WHEREAS,
Buyer and
Seller desire that Buyer acquire eighty (80) of the presently outstanding
capital stock of Corporation on the terms and conditions hereinafter set
forth.
WHEREAS,
Corporation
has entered into that certain Letter of Intent, dated December 14, 2007,
providing for the terms and conditions of the purchase and sale of the Stock
(collectively, the “LOI”).
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WHEREAS,
in
consideration of the benefits that they will receive by virtue of the
transaction contemplated by this Agreement, Seller is agreeing to make the
representations, warranties and indemnifications in this Agreement;
WHEREAS,
the
Corporation has outstanding debt due to Dutchess, together with interest and
penalties totaling approximately thirteen million one hundred and ninety
thousand seven hundred ninety-eight dollars ($13,190,798) (“Current Debt”) which
is secured by Dutchess with that certain amended security agreement entered
into
on September 27, 2007 between Dutchess and Corporation (“Security
Agreement”).
WHEREAS,
the
Corporation is currently in default on the Current Debt and the Security
Agreement, and Dutchess is hereby exercising its rights under the Current Debt
and Security Agreement to take possession of the Collateral, as defined in
the
Security Agreement.
NOW,
THEREFORE, in
consideration of the premises and of the mutual covenants hereinafter set forth
herein, and certain other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section
1. Purchase
of Stock.
At
the Closing (as hereinafter
defined), Seller shall sell, convey, transfer and assign, upon the terms and
conditions hereinafter set forth, to Buyer, free and clear of all liens,
pledges, claims and encumbrances of every kind, nature and description, and
Buyer shall purchase and accept from Seller the Stock, which represents all
of
the issued and outstanding capital stock of AAT.
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Section
2. Purchase
Price.
2.1 Amount
of Purchase Price. The purchase price for the Stock pursuant
to Section 1 above shall be the aggregate amounts payable according to Sections
2.2 and 2.3 below.
2.2
Payment of Purchase Price. The purchase price shall be
credited by the Buyer at the Closing, as defined in Section 10, toward the
Current Debt due from the Seller shall Two Million One Hundred Forty-Eight
Thousand Dollars ($2,148,000). Notwithstanding the aforementioned,
the purchase shall include cash on hand and in AAT's bank accounts.
2.3 Review
Period. During the ninety (90) days following the Closing, the
Corporation shall maintain its current business and its directors shall use
all
commercially reasonable efforts, to not seek relief of the Corporation’s
obligation in bankruptcy court under any jurisdiction.
2.4 Assumption
of Debt. The Buyer shall assume the debt of AAT,
including that certain note with Xxxx Xxxxxx dated August 24, 2007 in the amount
of one million three hundred and thirty-three thousand dollars
($1,333,000).
2.5 Equity
Line. Corporation shall be entitled to receive up to one
hundred thousand dollars ($100,000) within thirty (30) days of Closing from
the
current Equity Line of Credit. Corporation shall issue a duly
authorized Put Notice, as defined in the Investment Agreement between
Corporation and Dutchess dated March 23, 2006. Corporation shall
immediately cause the transfer agent to issue all remaining shares available
for
issuance under the Equity Line to Dutchess via DWAC, not to exceed 4.99% of
the
total outstanding shares of the Corporation’s common stock.
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Section
3. Seller’s
Representations and
Warranties.
To
induce Buyer to enter into this
Agreement and for the benefit of Buyer, Seller jointly and severally represent
and warrant and agree as follows:
3.1
Corporate
Status and Authority. AAT is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has the requisite corporate power and authority to own, operate
and lease its assets and properties and to carry on its business as now being
conducted and is duly qualified to do business in all jurisdictions in which
the
nature of its business requires such qualification. AAT is not in
default under or in violation of its Certificate of Formation and
By-Laws.
3.2 Capitalization. AAT
was incorporated under the laws of the State of Delaware on and has an
authorized capital consisting of one thousand shares (1,000) shares of
Common Stock, of which one hundred (100) shares of Common Stock are validly
issued and outstanding, fully paid and non-assessable and free of preemptive
rights or encumbrances. No other AAT securities are issued and
outstanding. There are not outstanding any options, warrants, or
other rights to purchase or subscribe for, or contracts or commitments to issue,
or any interests, instruments, evidences of indebtedness or other securities
convertible in any manner into, shares of AAT's capital stock and their is
no
liability for dividends accrued but unpaid.
3.3
Directors,
Officers and Bank Accounts. Schedule 3.5 is a correct and
complete list of all directors and officers of AAT, all bank accounts and safe
deposit boxes of AAT and of all persons authorized to sign checks drawn on
such
accounts and to have access to such safe deposit boxes. (the
schedules and exhibits referred to herein are attached hereto and hereby made
a
part hereof).
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3.4
Real
Estate. AAT has no interest as owner, lessor, lessee, or
otherwise in any real estate except as set forth in
Schedule "3.6".
3.5
Subsidiaries
and Joint Ventures. Except as set forth in Schedule
"3.7", AAT has no subsidiaries and does not own any capital stock,
securities, partnership interests or other interests of any kind of any
corporation, partnership, joint venture, association or other
entity.
3.6
Ownership
of Assets and Properties. AAT has good and marketable title
to all of their real and personal assets and properties, tangible and
intangible, All of such assets and properties are owned free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of every kind and character, except as disclosed in
Schedule "3.8" or as disposed of by AAT in the ordinary course of
its business since the date of the Base Balance Sheet, which disposition has
been disclosed to the extent required by this Agreement. All properties and
assets material to the present operations of AAT are owned or leased by
Corporation in the manner and to the extent required by applicable
law.
3.
7 Ownership of Rights.
(a)
AAT
and the Seller has taken all reasonable security measures to protect the
secrecy, confidentiality, and value of its Trade Secrets, ("Trade Secrets"
is
defined to include all AAT files, records, contracts and agreements, documents,
customer information, client lists, financial information, sales and marketing
plans and forecasts, business relationships, business strategies, technical
know
how, processes, techniques, procedures, unique expertise, licenses, processes,
algorithms, formulae, designs, methods, trade secrets, inventions, proprietary
or technical information, Design Documentation and data covering or embodied
in
any software or other assets owned by AAT or used in the conduct of its
business) and any other persons who have knowledge of or access to information
relating to the Trade Secrets have been put on notice and, if appropriate,
have
entered into agreements that the Trade Secrets are proprietary to AAT and are
not to be divulged or misused. All of the Trade Secrets are presently valid
and
protectable, are not part of the public domain, and have not been used,
divulged, or appropriated for the benefit of any persons other than AAT or
to
the detriment of AAT. AAT and the Seller have no knowledge that any person
is
infringing on any Trade Secret of the AAT.
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3.9 Accounts
Receivable. Each of the accounts receivable of AAT have been
acquired in the ordinary course of business, is valid and enforceable and is
fully collectible and constitutes a valid claim in the full amount thereof
against the debtor charged therewith on the books of AAT subject to no defenses,
deductions, set-offs or counterclaims. Except as stated in Schedule
"3.11", each such account receivable is fully collectible to the extent of
the face value thereof plus accrued interest and fees (less the amount of the
reserve for doubtful accounts, if any, reflected on the books of AAT with
respect to such account).
3.10 Taxes. Except
as set forth in Schedule "3.12", AAT have filed all tax returns and
reports required to be filed with all appropriate federal, state, foreign and
local taxing authorities and has paid in full all taxes and assessments
(including, but not limited to, income withholding, excise, unemployment, Social
Security, occupation, transfer, franchise, property, sales and use taxes, import
duties or charges and all penalties and interest in respect thereof) required
to
have been paid to date. Such tax returns and reports are correct in
all material respects. AAT has no material tax liabilities, other than those
provided for in the Financial Statements. Buyer shall not be liable for any
taxes of the Seller for any amount up to and including the Closing
Date.
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3.11
Compliance
with Law and Other Regulations. Except as set forth
in
Schedule "3.14", AAT is in compliance with all requirements (including
those relating to environmental matters) of federal, state and local law, and
all requirements of all governmental bodies and agencies having jurisdiction
over it, the conduct of its business, the use of its assets and properties
and
all premises occupied by it. Without limiting the foregoing, AAT has properly
filed all reports, paid all monies and obtained all licenses, permits,
certificates and authorizations needed or required for the conduct of its
business and the use of its assets and properties and the premises occupied
by
it in connection therewith and is in compliance in all respects with all
conditions, restrictions and provisions of all of the foregoing. AAT has not
received any notice, from any federal, state or local authority or any insurance
or inspection body that any of its assets, properties, facilities, equipment
or
business procedures or practices fails to comply with any applicable law,
ordinance, regulation, building or zoning law, or requirement of any public
authority or body.
3.12
Liabilities. AAT has no obligations or liabilities
whether related
to tax or non-tax matters, known or unknown, matured or unmatured, liquidated
or
unliquidated, fixed or contingent, or otherwise, except and to the extent
reflected or reserved against on the Base Balance Sheet or in this Agreement
or
any schedule or exhibit hereto other than obligations or liabilities incurred
in
the ordinary course of its business and disclosed to the extent required by
this
Agreement. Without limiting the foregoing, AAT has no obligation or
liability, contingent or otherwise, with respect to warranties relating to
products sold or services rendered by it not adequately covered by
insurance. AAT has not provided any services on a contingent or
similar basis or granted any delivery credits except as set forth in Schedule
"3.16".
3. 13
Litigation. Except as set forth in Schedule
"3.17", there are no suits, actions,
claims, arbitrations, administrative or other proceedings or governmental
investigations pending or threatened against or affecting AAT, its business
or
the assets and properties being transferred hereunder in any court or before
or
by any federal, state, local or other governmental department or agency, and
neither AAT nor its business or the assets and properties are subject to or
directly affected by any order, judgment, award, decree or ruling of any court
or governmental agency. In addition to the foregoing, AAT is not contemplating
the institution of any suit, action, claim, arbitration, administrative or
other
proceeding or has any knowledge of any basis for any such proceeding against
it.
3.14
Conflicting Interest. Except as set forth in
Schedule "3.19", no director,
officer or shareholder of AAT (i) has any pecuniary interest in any supplier
or
customer of AAT or in any other business with which AAT conducts business or
with which AAT is in competition or (ii) is indebted to AAT for borrowed
money.
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3.15
Agreement Not in Breach of Other Instruments
Affecting Corporation. Except
as set forth in Schedule "3.20", the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof, will not violate any provision of, or result
in
the breach of any term or provision of, or result in the termination or
modification of, or constitute a default under, or conflict with, or cause
the
acceleration of any obligation under, or permit any party to modify or terminate
the articles of incorporation or by-laws of Corporation and AAT, any loan
agreement, note, debenture, indenture, mortgage, deed of trust, lease, contract,
agreement or other obligation of any description to which Corporation and AAT
is
a party or by which Corporation and AAT is bound, or any judgment, decree,
order, or award of any court, governmental body, or arbitrator or any applicable
law, rule or regulation.
3.16
No Material Adverse Change. Except as set forth in
Schedule "3.22",
since the LOI, there has not been and there is not threatened (a) any material
adverse change in the financial condition, results of operations or business
of
Corporation, (b) any material physical loss or damage to any of assets or
properties or to the premises occupied by AAT (whether or not such damage or
loss is covered by insurance), or (c) any other event or condition of any
character which has materially and adversely affected, or may be reasonably
expected to materially and adversely affect, the assets, properties, business
prospects or affairs of AAT including without limitation the loss or threatened
loss of any of its 10 largest customers in terms of revenues.
3. 17
No Payments to Directors, Officers, Seller or Others. Since
the LOI,
there has not been any purchase or redemption of any shares of capital stock
of
AAT or any transfer, distribution or payment by Corporation, directly or
indirectly, of any money or other assets or properties to any director, officer,
shareholder or other person other than the payment of compensation for services
actually rendered at rates not in excess of the rates prevailing on the Base
Balance Sheet or payments in the ordinary course of business or for goods or
services in other than arm's length transactions except as shown in Schedule
"3.23".
3. 18
Statements and Other Documents Not
Misleading. Neither this Agreement,
including all schedules and exhibits hereto, nor any other financial statement,
document or other instrument furnished or delivered by Seller or AAT to Buyer
or
Subsidiary in connection with the transactions contemplated hereby, contains
any
untrue statement of material fact or omits to state a material fact required
to
be stated in order to make such statement, document or other instrument not
misleading. In addition to the foregoing, Seller has not failed to inform Buyer
as to any material fact relating to the business, assets, properties, prospects
or affairs of AAT.
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3. 19
Seller’s Consultation with Counsel. Seller has had the opportunity to
consult with legal counsel, this Agreement is satisfactory to the Seller, and
the Seller understands the terms of the Agreement and intends to fully perform
and be bound by this Agreement.
Section
4. Further
Representations and Warranties of Seller.
To
induce Buyer to enter into this
Agreement and for the benefit of Buyer and Subsidiary, Seller further represent
and warrant as follows:
4.1 Ownership
of Capital Stock of Corporation. Seller owns an aggregate of
one hundred (100) shares of Common Stock of Corporation, constituting all of
the
issued and outstanding capital stock of Corporation. Seller has good,
marketable and unencumbered title to such stock, and there are no restrictions
on their right to transfer such stock to Buyer or Subsidiary pursuant to this
Agreement. No transfer of record ownership of, or beneficial interest
in, any of such stock will be made between the date hereof and the
Closing.
4.2 Rights
To Acquire Shares. Seller does not have any outstanding
options, warrants or other rights to purchase or subscribe to, or contracts
or
commitments to sell, or any interests, instruments, evidences of indebtedness
or
other securities convertible in any manner into, shares of AAT's capital
stock. In the event, any party steps forth claiming the right to
acquire capital stock of AAT, that right shall be honored by Seller with shares
of the Corporation’s stock and not the capital stock of AAT.
4.3
Power
of Seller to Execute Agreement. Seller has full power and
authority to execute, deliver and perform this Agreement, and this Agreement
is
the legal and binding obligation of Seller and is enforceable against them
in
accordance with its terms.
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4.4 Agreement
Not in Breach of Other Instruments Affecting Seller. The
execution and delivery of this Agreement, the consummation of the transactions
hereby contemplated, and the fulfillment of the terms hereof, will not result
in
the breach of any term or provision of, or constitute a default under, or
conflict with, or cause the acceleration of any obligation under, any agreement
or other instrument of any description to which any Seller is a party or by
which any Seller is bound, or any judgment, decree, order, or award of any
court, governmental body, or arbitrator, or any applicable law, rule or
regulation.
4.5
Dilutive Effect. The Seller understands and
acknowledges that the number of shares of capital stock of AAT may increase
in
certain circumstances including, but not necessarily limited to, the
circumstance wherein the directors deem it necessary to complete employee
compensation plans, additional investments by investors, current or future,
upon
the company become publicly traded, and if that trading price of the Common
Stock declines following the effective date of the registration statement
covering the Common Stock underlying the financings completed as deemed
necessary by the Board of Directors of AAT. The Seller has studied
and fully understand the nature of the transactions contemplated by this
Agreement and recognize that they have a potential dilutive
effect. The Seller has concluded, in its good faith business judgment
that such Agreement is in the best interests of the Seller. The
Company specifically acknowledges that, subject to such limitations as are
expressly set forth in the by ATT and it’s directors in their sole capacity, and
the decision to issue shares of AAT capital stock is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the AAT or the Seller
specifically. The Seller hereby agrees that in any such case of an
issuance of AAT capital stock, they will indemnify and hold harmless AAT, it’s
directors, officers, employees and shareholders as outlined in Section 11
herein.
\
Section
5. Buyer's
Representations and Warranties.
To
induce Seller to enter into this
Agreement, Buyer represents and warrants as follows:
10
5.1 Corporate
Status and Authority. Buyer is, a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The execution and delivery of this Agreement
and
the consummation of the transactions contemplated hereby have been validly
authorized by all appropriate corporate action.
5.2 Agreement
Not in Breach of Other Instruments. The execution and
delivery of this Agreement, the consummation of the transactions contemplated
hereby, and the fulfillment of the terms hereof, will not violate any provision
of the articles of incorporation or by-laws of Buyer nor will they result in
the
breach of any term or provision of, or constitute a default under, or conflict
with, or cause the acceleration of any obligation under, any loan agreement,
note, debenture, indenture, mortgage, deed of trust, lease, contract, agreement
or other obligation of any description to which Buyer is a party or by which
either of them is bound, or any judgment, decree, order, or award of any court,
governmental body or arbitrator, or any applicable law, rule or
regulation.
Section
6. Continuation
and Survival of
Representations and Warranties.
Each
of the representations and
warranties contained in this Agreement shall be true and correct on and as
of
the Closing Date and at all times between the execution of the LOI and the
Closing Date with the same force and effect as if made at each of such times,
except to the extent, if any, that such representations and warranties shall
be
affected by transactions contemplated by this Agreement. All such
representations and warranties shall survive the consummation of the
transactions contemplated by this Agreement irrespective of any investigations
or inquiries made by any party or any knowledge which any party may now possess
or which may hereafter come to any party's attention, and each party shall
be
entitled to rely upon such representations and warranties irrespective of any
investigations, inquiries or knowledge.
Section
7. Seller’s
Covenants.
Seller
agrees that, since the LOI date to the Closing Date, inclusive:
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7.1 Untruth
of Representations and Warranties. Seller caused AAT to refrain from
taking or suffering or permitting any action which would render untrue any
of
the representations or warranties of Seller herein contained, nor shall Seller
omit to cause AAT to take any action, the omission of which would render untrue
any such representation or warranty.
7.2 Conduct
of Business. Seller caused AAT to conduct its business only
in the regular, ordinary and usual course and manner.
7.3 Preservation
of Organization. Seller caused AAT to use its best efforts
(a) to preserve intact the present business organizations of AAT, (b) to keep
available the services of employees, independent contractors and agents of
AAT,
(c) to maintain the present goodwill and favorable relationships of AAT with
suppliers, customers and all others having business dealings or relationships
with AAT, and (d) to preserve and maintain in force all licenses, registrations,
franchises, trademarks, copyrights, bonds and other similar rights of
AAT.
7.4 Right
of Inspection. Seller caused AAT to make available to Buyer
and their representatives for inspection at all reasonable times all of the
assets, properties, facilities, records, agreements (including all documents
of
any description evidencing any right or obligation of Corporation) and the
financial statements of AAT and allow Buyer and their representatives the right
to make whatever copies of such materials they require, and Seller shall cause
AAT to permit Buyer and their independent accountants to audit or make such
audit tests respecting the accounts of Corporation as Buyer or those accountants
consider appropriate.
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7.5 Entry
Into Obligations. Unless otherwise agreed in writing by
Buyer or as otherwise provided herein, Seller caused AAT, other than within
the
normal course of its business, to refrain from (a) entering into any lease,
contract, agreement or other obligation with any party, other than contracts
for
the sale of merchandise or services and contracts for the purchase of supplies
in the ordinary and usual course of business or, (b) amending, modifying or
terminating any presently existing lease, contract, agreement or other
obligation, (c) selling, encumbering or mortgaging any assets or properties,
(d)
incurring any obligation (contingent or otherwise) or purchasing or acquiring
or
transferring or conveying any material assets or properties or entering into
any
transaction or making or entering into any contract or commitment except in
the
ordinary course of business, or (e) or acquiring or disposing of any stock
or
other equity interest in any corporation, trust or other entity.
7.6 Confidentiality. Seller
caused AAT to refrain from revealing, orally or in writing, to any person,
other
than Buyer and their representatives, any of the business procedures or
practices followed by it in the conduct of its business or any other information
of a confidential nature.
7.7 Maintenance
of Insurance. Seller caused AAT to maintain in force all of
the insurance policies listed in Schedule "3.18" and refrain from making
any change in any insurance coverage without the prior written consent of
Buyer.
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7.8 Maintenance
of Assets and Properties. Seller caused AAT to keep the
premises occupied by it and all of its equipment and other tangible assets
and
personal property in good operating condition and to perform all necessary
repairs and maintenance.
7.9 Maintenance
of Books and Records. Seller caused AAT to maintain or cause
to be maintained all of its usual business books, accounts and records in the
usual, regular and ordinary manner, and on a basis consistent with past
practices and in accordance with generally accepted accounting
practices.
7.10 Satisfaction
of Obligations and Liabilities. Seller caused AAT to (a) pay
or cause to be paid all of the obligations and liabilities arising out of its
business as they mature, except for those which are in good faith disputed
with
the written approval of Buyer, (b) maintain in all material respects and perform
its obligations under all agreements and contracts to which it is bound in
accordance with their terms and (c) comply in all material respects with all
requirements of applicable federal, state and local laws, regulations and
rules.
7.11 Consents
and Approvals. Seller caused AAT to use its best efforts to
obtain all necessary consents and approvals of other persons and governmental
authorities to the performance by it of the transactions contemplated by this
Agreement. Seller caused AAT to make or cause to be made
all filings, applications, statements and reports to all federal and state
government agencies or entities which are required by or on behalf of AAT
pursuant to any statute, rule or regulation in connection with the transactions
contemplated by this Agreement. Without limiting the foregoing,
Seller caused AAT to take all action necessary to call and hold a special
meeting of shareholders for the purpose of approving the transactions
contemplated by this Agreement and any and all actions which may be necessary
in
order for AAT to comply fully with the terms and provisions hereof.
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7.12 No
Payments to Seller or Others. Seller caused AAT to refrain
from (a) declaring, making or paying any dividend or other distribution with
respect to its capital stock, (b) purchasing, redeeming or otherwise acquiring
any shares of its capital stock, (c) transferring, distributing or paying,
directly or indirectly, any money or other assets or properties to Seller or
to
any other person except as otherwise permitted in this Agreement, (d) issuing
any shares of capital stock (except upon the exercise of outstanding stock
options) or (e) granting any option, warrant or other right to purchase or
to
convert any obligation into shares of its capital
stock.
7.13 Organic
Changes. Seller caused to refrain from (a) amending its
Articles of Incorporation or by-laws, (b) making any changes in its capital
stock by reclassification, subdivision, reorganization or otherwise or (c)
merging or consolidating with any corporation, trust or other entity or changing
the character of its business.
7.14 Employees. Seller
caused AAT from increasing the compensation of or benefits for any employee,
agent or independent contractor, hiring any employee or engaging any independent
contractor or agent.
Section
8. Buyer's
or Subsidiary's Conditions Precedent to Closing.
The
obligations of Buyer hereunder and
its obligations to consummate the Closing herein provided for herein shall
be
subject to the following conditions precedent, any one or more of which may
be
waived by Buyer and Subsidiary:
8.1 Compliance
With Agreements and Covenants. Seller and AAT, respectively,
shall have performed and complied with each of their agreements, covenants
and
obligations to be performed on or prior to the Closing Date except those calling
for performance after the Closing Date.
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8.2 Accuracy
of Representations and Warranties. The representations and
warranties of Seller and AAT contained in this Agreement shall have been true
and correct at all times between the date of the LOI and the Closing
Date.
8.3 Payment
of Indebtedness. All indebtedness owing to Corporation by
any AAT or any of AAT directors, officers, employees or shareholders or
Corporation’s directors, officers, employees or shareholders, except as
otherwise stated specifically in this Agreement, shall have been paid at or
prior to the Closing. AAT shall not be responsible for any payment of
debt to any director, officer, employee or shareholder of Corporation after
the
Closing Date.
8.4 No
Material Adverse Change. There shall have been no material
adverse change in the business, assets, properties or financial condition of
AAT
and its subsidiaries taken as a whole.
8.5 Absence
of Litigation or Proceedings. No litigation, governmental
action or other proceedings shall have been threatened or commenced against
AAT
with respect to any matter or against any person with respect to the
consummation of the transactions provided for herein.
8.6 Delivery
of Documents. All other documents required to be delivered
by Corporation or Seller at or prior to the Closing shall have been delivered
or
shall be tendered at the Closing.
Section
9. Seller’s
Conditions Precedent to Closing.
The
obligations of Seller hereunder and
their obligations to consummate the Closing provided for herein shall be subject
to the following conditions precedent, any one or more of which may be waived
by
Seller:
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9.1 Compliance
with Agreements and Covenants. Buyer shall have performed
and complied with each of their agreements, covenants and obligations to be
performed hereunder on or prior to the Closing Date except those calling for
performance after the Closing Date.
9.2 Truth
and Correctness of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall have
been true and correct at all times between the date of this Agreement and the
Closing Date, with the same force and effect as if made on and as of that
date.
9.3 Delivery
of Documents. All other documents required to be delivered
by Buyer or Subsidiary at or prior to the Closing shall have been delivered
or
shall be tendered at the Closing.
Section
10. Closing.
The
Closing under this Agreement shall
take place on the date hereof, or at such other date, time and place as may
be
agreed upon by Seller and Buyer, which date is sometimes herein called the
"Closing Date".
10.1 Deliveries
by Seller. At the Closing, Seller shall
deliver:
(a) Certificates
for eighty
(80) shares of Corporation's Common Stock, duly endorsed for transfer to
Buyer.
(b) The
certificate of Seller that all representations and warranties of Seller
contained in this Agreement have been true and correct at all times between
the
Term Sheet Date of this Agreement and the Closing Date.
(c) The
Corporation’s resolution of the board of directors authorizing this transaction
as outline on Exhibit 3 herein.
17
(d) The
opinion required by Section 8.6 above.
(e) All
of
the books, records, files and customer lists of Seller including matters but
not
limited to, records of purchases, records of sales and pertaining to employees,
Corporation's corporate minute books, its stock books or records, and the
corporate seal of Corporation.
(f) All
assignments, consents, certificates and other documents delivered by Seller
shall be in form reasonably satisfactory to counsel for Buyer.
(h) Certificate
of Good Standing from the State of Delaware dated within a recent date of the
Closing Date but in no event more than five (5) days prior to the Closing
Date.
10.2 Deliveries
by Buyer or Subsidiary. At the Closing, Buyer or Subsidiary
shall deliver:
(a) The
Purchase Price in such form stated herein, and shall be in the form of a letter
to Corporation.
Section
11. Non-competition.
Because
of the importance of Seller to
the development and operation of the business of AAT, as well as their knowledge
of and reputation in AAT's industry, Buyer is unwilling to enter into and
perform this Agreement unless Seller and the current directors of Seller
(“Directors”) enter into the non-competition agreement contained in
this Section 11.
11.1
Duration and Extent of Restriction. Seller or
Directors shall not, for a period of six months from Closing, engage in a
business the same as, similar to or in general competition with the business
being conducted by AAT at or prior to the Closing Date (“Non Compete
Agreement”), included as Exhibit 2 herein. The term "engage in" shall
include, but shall not be limited to, activities, whether direct or indirect,
as
proprietor, partner, stockholder, principal, agent, employee, consultant or
lender; provided, however, that the ownership of not more than three percent
in
the aggregate by Seller of the stock of a publicly held corporation shall not
be
included in said term. At the Closing, as defined in Section 10, Dutchess shall
forgive Ten Million Forty Thousand Seven Hundred Ninety-Eight Dollars
($10,042,798) the toward the Current Debt due from the Seller to Dutchess as
consideration for the Non Compete Agreement. The parties agree that
this amount shall not be included in the Purchase Price of AAT, nor shall it
be
considered consideration for entering into this Agreement.
18
11.4
Remedies for Breach. Seller acknowledge that the
restrictions contained in this Section 11, in view of the nature of the business
in which AAT is engaged, are reasonable and necessary to protect the legitimate
interests of Buyer and that any violation of these restrictions would result
in
irreparable injury to Buyer. Seller agrees that, in the event of a violation
of
any of such restrictions, Buyer shall be entitled to preliminary and permanent
injunctive relief as well as an equitable accounting of all earnings, profits
and other benefits arising from such violation, which rights shall be cumulative
and in addition to any other rights or remedies to which Buyer may be entitled.
In the event of a violation, the period of non-competition referred to in
Section 11.1 above shall be extended by a period of time equal to that period
beginning when such violation commenced and ending when the activities
constituting such violation shall have been finally terminated in good
faith. In the event that any covenant in this Section is held to be
invalid, illegal or unenforceable by any court of competent jurisdiction or
any
other governmental entity or agency, it is agreed and understood that, to the
extent possible, such covenant will not be voided but rather will be construed
to impose limitations upon the Seller activities no greater than allowable
under
then applicable law.
Section
12. Further
Assurances.
Seller
and Buyer or Subsidiary shall
execute and deliver all such other instruments and take all such other action
as
any party may reasonably request from time to time, before or after the Closing,
in order to effectuate the transactions provided for herein. The parties shall
cooperate with each other and with their respective counsel and accountants
in
connection with any steps to be taken as a part of their respective obligations
under this Agreement, including the preparation of financial
statements.
19
Section
13. Indemnification..
13.1 Indemnity
Against Losses, Suits and Claims. Without in any way
limiting any of the rights of Buyer or Subsidiary, Seller jointly and severally,
will indemnify and hold harmless Buyer and its employees, officers, directors,
stockholders, controlling persons, and affiliates (collectively, the
"Indemnified Persons"), and will reimburse the Indemnified Persons, for any
loss, liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, but excluding
consequential or punitive damages, whether or not involving a third-party claim
(collectively, "Damages"),including but not limited to any loss, liability,
claim, damage, expense or diminution in value arising from or in connection
with: (a) any material misrepresentation, in accuracy or breach of any
representation or warranty made by AAT or the Seller in or pursuant to this
Agreement, the Schedules, the supplements to the Schedules, or any other
certificate or document delivered by AAT or the Seller pursuant to this
Agreement and the Ancillary Agreements; (b) any non-compliance with or breach
by
AAT or the Seller of any covenant or obligation of AAT or the Seller in this
Agreement; (c) any liabilities or obligations of AAT other than those listed
in
the Base Balance Sheet; (d) any claim (whether based in tort or contract) by
any
person for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by any such person
with AAT or the Shareholder (or any person acting on its or his behalf) in
connection with any of the transactions contemplated under this Agreement;
or
(e) Corporation’s and the Seller’s conduct of the Corporation’s business prior
to the Closing Date.
13.2
Procedure for Indemnification-Third Party Claims. (a)
Promptly after receipt by an indemnified person under Section 13.1 of notice
of
a claim against it (a "Claim"), the indemnified person will, if a claim is
to be
made against an indemnifying party under such Section, give notice to the
indemnifying party of the Claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have
to any indemnified person, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
person's failure to give such notice.
20
(b) If any Claim referred to in this Section (a) is made against an indemnified person and it gives notice to the indemnifying party of the Claim, the indemnifying party will, unless the Claim involves tax liabilities, be entitled to participate in the defense of the Claim and, to the extent that it wishes unless (i) the indemnifying party is also a party to the Claim and the indemnified person determines in good faith that joint representation would result in a conflict of interest, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend the Claim and provide indemnification with respect to the Claim), to assume the defense of the Claim with counsel satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified person of its election to assume the defense of the Claim, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified person under such Section for any fees of other counsel or any other expenses with respect to the defense of the Claim in each case subsequently incurred by the indemnified party in connection with the defense of the Claim, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Claim, (a) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent unless (i) there is no finding or admission of any violation of Applicable Legal Requirements or any violation of the rights of any person and no effect on any other Claims that may be made against the indemnified party, and (ii) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (b) the indemnifying party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of a Claim and the indemnifying party does not, within ten days after the indemnified person's notice is given, give notice to the indemnified person of its election to assume the defense of the Claim, the indemnifying party will be bound by any determination with respect to the Claim or any compromise or settlement effected by the indemnified person.
(c)
Notwithstanding the foregoing, if an indemnified person determines in good
faith
that there is a reasonable probability that a Claim may adversely affect it
other than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified person may, by notice
to
the indemnifying party, assume the exclusive right to defend, compromise, or
settle the Claim, but the indemnifying party will not be bound by any
determination of a Claim so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(d)
AAT,
the Seller and Buyer hereby consent to the non-exclusive jurisdiction of any
court in which a Claim is brought against any indemnified person for purposes
of
any claim that an indemnified person may have under this Agreement with respect
to such Claim or the matters alleged therein, and agree that process may be
served on AAT, the Seller and Buyer with respect to such a claim anywhere in
the
United States.
21
13.3 Procedure
for Indemnification – Other Claims. A claim for indemnification for any
matter not involving a third-party claim may be asserted by notice to the party
from whom indemnification is sought.
Section
14. Brokers
and Finders.
Seller
represents and warrants to Buyer
that it has not employed or retained any broker or finder in connection with
the
transactions contemplated by this Agreement nor has it had any dealings with
any
person which may entitle that person to a fee or commission from any other
party
hereto.
Section
15. Designation
of Transferee.
Buyer
shall have the right to designate
a wholly-owned subsidiary of Buyer to purchase the stock to be transferred
by
Seller hereunder.
Section
16. General
Provisions.
16.1 Notices. All
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
22
(a) If
to
Buyer or Subsidiary:
Dutchess
Private Equities Fund, Ltd
00
Xxxxxxxxxxxx Xxxxxx, Xxxxx 0
Xxxxxx,
XX 00000
Attention: Xxxxxxx
Xxxxxxxx
(b) If
to
Seller:
Xxxx
Xxxxxx
US
Energy
Initiatives, Inc.
00000
Xxxxxx Xxxxxx
Xxxxx,
Xxxxxxx 00000
Telephone:
000-000-0000
Any
party may alter the address to
which communications or copies are to be sent by giving notice of such change
of
address in conformity with the provisions of this paragraph for the giving
of
notice.
16.2 Binding
Nature of Agreement; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns, except that no party
may assign or transfer its or his rights or obligations under this Agreement
without the prior written consent of the other parties hereto.
23
16.3 Entire
Agreement. This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes the Term Sheet and any amendments thereto and all prior
and contemporaneous agreements, understandings, inducements and conditions,
express or implied, oral or written, of any nature whatsoever with respect
to
the subject matter hereof. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
16.4 Controlling
Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by
and
construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Massachusetts, notwithstanding any Commonwealth of Massachusetts
or other conflict-of-law provisions to the contrary.
16.5 Schedules
and Exhibits. All Schedules and Exhibits referred to herein
or attached hereto are hereby incorporated by reference into, and made a part
of, this Agreement.
16.6 Indulgences,
Not Waivers. Neither the failure nor any delay on
the part
of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it
is
in writing and is signed by the party asserted to have granted such
waiver.
16.7 Costs
and Expenses. Each party hereto shall bear its or his own
costs
and
expenses (including the fees and disbursements of counsel and accountants)
incurred in connection with the negotiation and preparation of and the Closing
under this Agreement, and all matters incident thereto.
24
16.8 Titles
Not to Affect Interpretation. The titles of Sections
contained
in this Agreement are for convenience only, and they neither form a part of
this
Agreement nor are they to be used in the construction or interpretation
hereof.
16.9 Execution
in Counterparts. This Agreement may be executed in
any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon
as
the signatories. Any photographic or xerox copy of this Agreement,
with all signatures reproduced on one or more sets of signature pages, shall
be
considered for all purposes as of it were an executed counterpart of this
Agreement.
16.10 Provisions
Separable. The provisions of this Agreement
are independent
and separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other
or
others of them may be invalid or unenforceable in whole or in part.
16.11 Gender. Words
used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
requires.
16.12 Number
of Days. In computing the number of days for purposes
of
this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or holiday, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
25
16.13
Submission Of Claims To Arbitration.
(a) Any
and all controversies or claims arising out of or relating to this Agreement,
or
the breach of this Agreement, shall be settled by binding arbitration held
in
Boston, Massachusetts (if such arbitration is initiated by Buyer and shall
be
conducted (except to the extent otherwise specifically provided for in this
Agreement) under the commercial arbitration rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction of this Agreement; provided,
however, that a controversy or claim otherwise subject to arbitration
hereunder may initially be heard by any court of competent jurisdiction to
the
extent, and only to the extent, that initial submission of the matter to a
court
is necessary for a party to seek emergency injunctive relief, and provided,
further, however, that the matter initially submitted to a court shall be
remanded by the court to arbitration as soon as the matter as to which such
emergency injunctive relief was sought has been heard by the
court. Nothing in this section shall limit the Buyer's right to
obtain an injunction for a breach of this Agreement from a court of
law. Any injunction obtained shall remain in full force and effect
until the arbitrator, as set forth herein, fully adjudicates the
dispute.
(b)
Fees
and Costs. The prevailing party in any arbitration or litigation shall be
entitled to recover, as an element of the costs of the arbitration or litigation
and not as damages, its reasonable attorneys’ fees, experts’ fees and other
costs and expenses incurred in such arbitration to be fixed by the arbitrator
(including without limitation, costs, expenses and fees on any appeal and costs,
expenses and fees in any initial proceedings before any court).
Section
17 Integration. The execution and delivery of this
Agreement shall not alter the prior written agreements between the Company
and
the Holder, excepted as state herein regarding the balance due on Current
Debt. The terms and conditions of the Current Debt shall be in full
force in effect and the terms and conditions and the obligations of Seller
under
the Current Debt shall in no way be considered modified by the execution of
this
Agreement, except with respect to the total amounts due to Buyer from the
Seller. The Security Agreement and all the provisions and remedies
stated therein, shall also remain in full force and effect. This Agreement
is
the final agreement between the Company and the Holder with respect to the
terms
and conditions set forth herein, and, the terms of this Agreement may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the Parties.
26
IN
WITNESS WHEREOF, the parties have
executed and delivered this Agreement on the date first above
written.
DUTCHESS
PRIVATE EQUITIES FUND LTD
By
Xxxxxxx
Xxxxxxxx, Director
SELLER
US
Energy
Initiatives, Inc.
By:
Xxxx
Xxxxxxx, Chairman of the Board
Xxxx
Xxxxxx, Director
__________________________________________
Xxxxxxx
Xxxxx, CEO
27
"EXHIBIT"
NON-COMPETITION
AGREEMENT
In
consideration of Ten Million Forty
Thousand Seven Hundred Ninety-Eight Dollars ($10,042,798) currently due
(“Default Amount”) to Dutchess Private Equities Fund, LTD
(“Dutchess”) on certain Notes between US Energy Initiatives, Inc. (the
“Company”), the forgiveness from the Dutchess of the Default Amount and other
good and valuable consideration, the Company agrees as follows:
I. The
Company will Not Compete with the Dutchess or it’s subsidiary Advanced Aerosol
Technologies, Inc. (“AAT”) after the Closing of the Stock Purchase
Agreement.
The
Company acknowledges that the AAT operates a nation-wide business in a highly
competitive industry and that the Company has been exposed to confidential
and
proprietary information through Company’s involvement with the
AAT. In addition, the Company acknowledges that they have been
trained in the AAT’s business through their involvement with the
AAT. In recognition thereof, and for the other reasons set forth in
this agreement, following the termination of the Non-Compete Period, for any
reason whatsoever, for a period of six (6) months, throughout the United States,
Company shall not, whether directly or indirectly, compete with the AAT by
starting a competing business or by consulting or taking employment with a
competitor of the AAT.
II. Successors
and Assigns.
This
agreement is binding on the Company, his/her heirs, directors, executors,
administrators and assigns and inures to the benefit of the AAT, its successors
and assigns.
III. Governing
Law.
This
Agreement will be governed by the laws of the Commonwealth of Massachusetts,
without regard to conflicts of law principles.
EXECUTED
THIS 21st DAY
OF DECEMBER, 2007.
COMPANY
_______________________________ _______________________
Print
Name: Xxxx
Xxxxxxx
Xxxx Xxxxxx
Title:
Chairman of the
Board Director
_______________________________
Xxxxxxx
Xxxxx, CEO
DUTCHESS
PRIVATE EQUITIES FUND, LTD
________________________________
Xxxxxxx
X. Xxxxxxxx, Director
28
