EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of the 31st day of January 2007 by and among Allstate Home Inspection &
Household Environmental Testing, Ltd., a Delaware corporation ("AHI"), Xxxxxxx
X. Xxxxxxx, an individual and sole shareholder of AHI ("Xxxxxxx" or "Seller"),
and Environmental Service Professionals, Inc., a Nevada corporation (the "Buyer"
or "Company"), with respect to the following facts:
R E C I T A L S
A. Seller owns 100% of the total issued and outstanding capital
stock of AHI.
B. AHI is engaged in the business of home inspection and has
services available to assess major environmental concerns for
potential homeowners (the "Business").
C. The Company desires to acquire from Xxxxxxx and Xxxxxxx
desires to sell to the Company 100% of the total issued and
outstanding stock of AHI in exchange for 1,000,000 shares of
the Company's common stock issuable in installments over time,
250,000 warrants entitling him to purchase 250,000 additional
shares of the Company's common stock at a purchase price of
$0.75 per share for a period of five years from the date of
the closing of the purchase under this Agreement, issuable at
such time as specified in this Agreement, plus $950,000 in
cash, payable in installments over time.
D. Upon Closing (as such term is defined in Section 4.1), the
Company will create an AHI division (the "AHI Division") as
described in this Agreement.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged by the parties to this Agreement,
and in light of the above recitals to this Agreement, the parties to this
Agreement hereby agree as follows:
1. SALE AND PURCHASE
1.1 SALE AND PURCHASE OF STOCK. In consideration for the Purchase Price
(as defined in Section 1.2 of this Agreement) and the other covenants of the
Company in this Agreement, Xxxxxxx hereby agrees to convey to the Company all of
his capital stock (the "AHI Stock") and right, title and interest in and to AHI,
on the Closing Date (as defined in Section 4.1 of this Agreement).
1.2 PURCHASE PRICE. As consideration for the sale by Xxxxxxx of the
shares of AHI Stock to the Company on the Closing Date, the Company will pay to
the Seller the following (the "Purchase Price"): (i) $950,000 in cash (the "Cash
Payment"), payable as provided in Section 1.2(a) of this Agreement, (ii)
1,000,000 shares (the "Shares") of the Company's common stock (the "Stock
Payment"), issuable as provided in Section 1.2(b) of this Agreement, and (iii)
250,000 warrants entitling Seller to purchase 250,000 additional shares of the
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Company's common stock at a purchase price of $0.75 for a period of five years
from the Closing Date, issuable 275 days after the Closing Date. The
certificates evidencing the Shares will bear the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
(a) CASH PAYMENT. Seller is to receive a total cash payment of
$950,000 as part of the Purchase Price, subject to the terms
and conditions of this Agreement. The Cash Payment to Seller
shall be made as follows: (i) $250,000 paid upon Closing (as
defined in Section 4.1 of this Agreement), (ii) $100,000 paid
30 days after Closing, (iii) $50,000 paid 60 days after
Closing, (iv) $50,000 paid 120 days after Closing, (v)
$200,000 paid 180 days after Closing, and (vi) $300,000 paid
275 days after Closing.
(b) COMPANY SHARES. Seller is to receive a total of 1,000,000
shares of the Company's common stock as part of the Purchase
Price, subject to the terms and conditions of this Agreement.
The Stock Payment will be made as follows: (i) 250,000 shares
upon Closing, (ii) 100,000 shares 30 days after Closing, (iii)
50,000 shares 60 days after Closing, (iv) 50,000 shares 120
days after Closing, (v) 200,000 shares 180 days after Closing,
and, (vi) 350,000 shares 275 days after Closing.
(c) COMPANY WARRANTS. Seller will be issued a total of 250,000
warrants on a date 275 days after Closing which will entitle
him to purchase up to 250,000 additional shares of common
stock of the Company at a purchase price of $0.75 per share
for a period of five years from the Closing.
(d) HOLDING PERIOD AND PIGGYBACK REGISTRATION RIGHTS. All Shares
of the Company's common stock and all of the Company's
warrants issued to Seller by the Company under this Agreement
shall be held by Xxxxxxx for a period of at least one year
from the date of Closing. Furthermore, Seller will have
piggyback registration rights with respect to the Shares and
the shares underlying the warrants, subject to potential
adjustment by the underwriter for such registration statement,
if any. Accordingly, the Company agrees to notify the Seller
in writing at least ten days prior to the filing of any
registration statement by it under Section 5 of the Securities
Act of 1933, as amended, on Form X-0, XX-0 or S-3, and to
include all of Seller's Shares and shares underlying the
warrants that are requested by him in writing for inclusion in
the registration statement, subject to the underwriter's (if
any) reasonable approval.
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2. COVENANT NOT TO COMPETE.
As an inducement to Buyer to enter into and to perform its obligations
under this Agreement, Xxxxxxx covenants to enter into a non-compete agreement
with the Buyer on the Closing Date pursuant to which Xxxxxxx will agree that
during the term of his employment with the Company and for so long as Seller is
an officer, director, employee or consultant of the Company or any of its
subsidiaries or affiliates, he will not directly or indirectly, whether (a) as
an employee, agent, consultant, employer, principal, partner, officer or
director; (b) holder of more than five percent of any class of equity securities
or more than five percent of the aggregate principal amount of any class of
equity securities or more than five percent of the aggregate principal amount of
any class of debt, notes or bonds of a company with publicly traded equity
securities; or (c) in any other individual or representative capacity
whatsoever, for his own account or the account of any other person or entity,
engage in any business or trade competing with the then business or trade of the
Buyer or its affiliates in the United States except for the activities expressly
allowed pursuant to Section 4.6 (the "Non-Compete Agreement"). Xxxxxxx
acknowledges that the restrictions set forth in this Section 2 are fair and
reasonable with respect to their duration, scope and area. If, at the time of
enforcement of this Section 2, a court holds that the duration, scope or area
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope or area reasonable under such
circumstances will be substituted for the stated duration, scope or area. In the
event of any material breach of any provisions of this Section 2, Buyer will
have the right, in addition to any other rights and remedies existing in its
favor hereunder, to enforce its rights and the obligations of Xxxxxxx under this
Section 2 not only by an action or actions for damages but also by an action or
actions for specific performance and/or injunctive or other equitable relief in
order to enforce or prevent any violations of the provisions of this Section.
Notwithstanding anything to the contrary contained herein, the obligations of
Seller described in this Section 2 shall not impact or otherwise affect the
actions expressly allowed by Section 4.6.
3. EMPLOYMENT
On the Closing Date (as defined in Section 4.1 of this Agreement), the
Company will employ Xxxxxxx as the Division President of the AHI Division with
an annual salary of $130,000. The term of such employment arrangement will be
for a minimum of 275 days after the Closing, and thereafter on an "at will"
basis; provided, however that such 275 day period shall be extended one day for
each day that Seller extends the time for Buyer to convey the final portion of
the Purchase Price in the event that Seller extends such period pursuant to
Section 8.3(i). Xxxxxxx will handle all day to day responsibilities of the AHI
Division, with the exception of any tasks to be handled by the Company as
described in Section 8.1 of this Agreement. Additionally, Xxxxxxx will oversee
the AHI Division's financial responsibilities as stated and agreed to in the AHI
2007 Budget. Xxxxxxx'x other responsibilities shall include having the AHI
Division staff prepare the necessary monthly financial documentation for AHI
needed by the Company's management by the 11th day of each month for the prior
month, finalizing the AHI 2007 Budget with the Company, assisting in the
transfer of AHI staff to the Company's leased staffing program serviced by Xxxxx
Staffing within 90 days after Closing, and mutually establishing a five year
plan of action with the Company that will include a 20-25% pre-tax profit for
each year. Xxxxxxx will receive standard Company benefits such as medical and
dental insurance which can be extended to his family through a cafeteria
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program. Within 120 days after the Closing, Xxxxxxx shall be appointed to the
Company's Board of Directors, and agrees to attend two monthly meetings of
Company executives in Palm Springs, California with the expenses to attend to be
paid by the Company.
4. CLOSING AND FURTHER ACTS.
4.1 TIME AND PLACE OF CLOSING. Upon satisfaction or waiver of the
conditions set forth in Section 7 of this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
0000 Xxxxx Xxxx Xxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxxx 00000 at 11:00 a.m.
(local time) on the date that the parties may mutually agree in writing, but in
no event after February 15, 2007 (the "Closing Date"), unless extended by mutual
written agreement of the parties.
4.2 ACTIONS AT CLOSING. At the Closing, the following actions will take
place:
(a) Buyer will pay to Seller the first installment of the Cash
Payment and Stock Payment of the Purchase Price as described in Section
1.2 of this Agreement by delivery of (i) the appropriate amount of cash
or cash equivalent which will be deposited in a single account
designated by Seller in a writing delivered to the Buyer prior to the
Closing, and (ii) stock certificates evidencing the first installment
of the Stock Payment.
(b) Seller will tender to the Company certificates and/or any
other documents evidencing 100% ownership of AHI.
(c) Seller will deliver to Buyer copies of necessary corporate
resolutions of the Board of Directors of AHI authorizing the execution,
delivery, and performance of this Agreement and the other agreements
contemplated by this Agreement for AHI's execution, and consummation of
the transactions contemplated by this Agreement, which resolutions have
been certified by an officer of AHI as being valid and in full force
and effect.
(d) Buyer will deliver to Seller copies of necessary corporate
resolutions of the Board of Directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated by this Agreement for Buyer's execution and
consummation of the transactions contemplated by this Agreement, which
resolutions have been certified by an officer of Buyer as being valid
and in full force and effect.
(e) Both AHI and the Company will deliver to the other party
true and complete copies of each party's Certificate of Incorporation,
as amended, and a Certificate of Good Standing from the appropriate
official of each party's jurisdiction of incorporation, which
certificates of good standing are dated not more than 30 days prior to
the Closing Date.
(f) Any additional documents or instruments that a party may
reasonably request or as may be necessary to evidence and affect the
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sale, assignment, transfer and delivery of the AHI Stock to the Buyer
and the sale, assignment, transfer and delivery of the Purchase Price
to Seller will be delivered.
4.3 CONDUCT OF BUSINESS PRIOR TO CLOSING. After the execution of this
Agreement by the Buyer and until the Closing, AHI will:
(a) consistent with the ordinary course and past practice of
business, maintain the operations and goodwill of the business of AHI,
and continue its relationships with persons having business dealings
with AHI; and
(b) consistent with the ordinary course and past practice of
business, maintain all of the assets of AHI in their current condition,
ordinary wear and tear excepted, and insurance on all of said assets in
such amounts and of such kinds comparable to that in effect on the date
of this Agreement; and
(c) maintain the books, accounts and records of AHI consistent
with AHI's normal business practices consistently applied, including
recognition of revenues and expenses, continue to collect accounts
receivable and pay accounts payable consistent with AHI's normal
procedures and without discontinuing or accelerating payment of such
accounts and comply with all contractual and other obligations
applicable to AHI consistent with its normal business practices; and
(d) not make any change to, or otherwise amend in any material
way, the contracts with, salaries, wages or other compensation of, any
officer, director, agent or other similar representative of AHI
(including any increase in any benefits or benefit plan costs or any
change in any bonus, insurance, pension, compensation or other benefit
plan) except as consistent with the ordinary course and past practice
of business; and
(e) not hire any officer, director, employee, agent or other
similar representative of AHI except employees hired in the normal
course of business and consistent with the ordinary course and past
practice of business; and
(f) not incur any material indebtedness for borrowed money
except consistent with the ordinary course of business, and not pledge
or grant liens or security interests in any of the AHI's assets except
consistent with the ordinary course and past practice of business; and
(g) not sell, transfer or dispose of any material assets
except for sales consistent with the ordinary course and past practice
of business; and
(h) not distribute any material assets of AHI to any of its
shareholders or other affiliates of AHI, or to any other party except
consistent with the ordinary course and past practice of business.
4.4 NO SOLICITATION AND DUE DILIGENCE. AHI will not, nor will AHI
encourage, facilitate, solicit, or authorize any of its shareholders, directors,
officers, employees, agents or representatives to solicit or enter into any
discussion (or continue any discussion) with any third party (including the
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provision of any information to a third party), or enter into any agreement or
understanding of any kind regarding the purchase, sale, lease, assignment,
conveyance or other disposition or acquisition of all or any portion of its
assets, its business or any capital stock of AHI, for the period commencing on
the date first above written and extending until February 15, 2007. During this
period and until the Closing or termination of this Agreement, AHI and Seller
will fully cooperate with the Buyer and its representatives to enable them to
conduct complete due diligence of AHI, its business, and the books, records,
financial statements and documents relating to AHI and its business during
normal business hours.
4.5 TERMINATION OF AGREEMENT. This Agreement may be terminated by
either party upon written notice to the other party and without further
obligation by either party to the other party, if the Closing does not occur by
the latest date specified in Section 4.1 of this Agreement. Seller may also
terminate this Agreement by written notice to Buyer as provided in Section 8.3
of this Agreement.
4.6 EXCLUSION OF CERTAIN BUSINESS. Buyer acknowledges that the assets,
stock and business of AHI at the Closing will not include those specifically
relating to American Radon Laboratory and American Indoor Air Quality Assessment
Service (collectively, the "Excluded Businesses"), which are specifically listed
and described on Schedule 4.6 attached to this Agreement. Notwithstanding
anything to the contrary contained herein, including but not limited to Section
2, Seller is permitted to continue his involvement in the Excluded Businesses,
provided that such involvement does not materially interfere with the
performance of his duties and covenants (other than those provided in Section 2)
under this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF AHI AND SELLER.
Except as disclosed on the Schedules attached hereto and incorporated
herein by reference, AHI and Seller each individually and not jointly represent
and warrant to Buyer to the best of their respective knowledge as follows:
5.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Each of AHI and
Seller has full power and authority to enter into this Agreement and to perform
their respective obligations hereunder. The execution, delivery, and performance
of this Agreement by AHI have been duly authorized by all necessary corporate
action on its part. Assuming that this Agreement is a valid and binding
obligation of each of the other parties hereto, this Agreement is a valid and
binding obligation of AHI and Seller.
5.2 SUBSIDIARIES. There is no corporation, general partnership, limited
partnership, joint venture, association, trust or other entity or organization
that AHI directly or indirectly controls or in which AHI directly or indirectly
owns any equity or other interest with the exception of the franchisees of AHI
in which AHI has certain control and financial interest as described in the
applicable franchise agreement.
5.3 GOOD STANDING. AHI (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
(ii) has all necessary power and authority to own its assets and to conduct its
business as it is currently being conducted, and (iii) is duly qualified or
licensed to do business and is in good standing in every jurisdiction (both
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domestic and foreign) where such qualification or licensing is required based
upon the current operations of AHI.
5.4 CHARTER DOCUMENTS AND CORPORATE RECORDS. AHI has made available to
Buyer complete and correct copies or provided Buyer with the right to inspect
true and complete copies of all (i) the articles of incorporation, bylaws and
other charter or organizational documents of AHI, including all amendments
thereto, (ii) the stock records of AHI, and (iii) the minutes and other records
of the meetings and other proceedings of the shareholders and directors of AHI.
AHI is not in violation or breach of (i) any of the provisions of its articles
of incorporation, bylaws or other charter or organizational documents, or (ii)
any resolution adopted by its shareholders or directors. There have been no
meetings or other proceedings of the shareholders or directors of AHI that are
not fully reflected in the appropriate minute books or other written records of
AHI.
5.5 FINANCIAL STATEMENTS. AHI has delivered, will deliver prior to
Closing or otherwise make available to Buyer the following financial statements
relating to AHI (the "AHI Financial Statements"): (i) the unaudited balance
sheet, statements of operations, retained earnings and shareholders' equity for
the eleven months ended November 30, 2006 and (ii) the audited financial
statements prepared in accordance with GAAP as of and for the twelve months
ending December 31, 2004 and 2005, including balance sheets, statements of
operations, statements of stockholders' equity, cash flow statements, and all
required related footnotes and schedules. Except as stated therein or in the
notes thereto, the AHI Financial Statements: (a) present fairly the financial
position of AHI as of the respective dates thereof and the results of operations
and changes in financial position of AHI for the respective periods covered
thereby; and (b) have been prepared in accordance with AHI's normal business
practices applied on a consistent basis throughout the periods covered.
5.6 CAPITALIZATION. The authorized capital stock of AHI consists of
1,000 shares of common stock, no par value per share, of which 1,000 shares are
issued and outstanding, and no shares of preferred stock. All of the outstanding
shares of the capital stock of AHI are validly issued, fully paid and
nonassessable, are owned by Seller, and have been issued in full compliance with
all applicable federal, state, local and foreign securities laws and other laws.
5.7 ABSENCE OF CHANGES. Except as otherwise set forth on Schedule 5.7
hereto or otherwise disclosed to Buyer in writing prior to the Closing, since
December 31, 2006:
(a) There has not been any material adverse change in the
business, condition, assets or operations of AHI.
(b) AHI has not (i) declared, set aside or paid any dividend
or made any other contribution in respect of any shares of capital
stock, nor (ii) repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities.
(c) AHI has not sold or otherwise issued any shares of capital
stock or any other securities.
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(d) AHI has not amended its articles of incorporation, bylaws
or other charter or organizational documents, nor has it effected or
been a party to any merger, recapitalization, reclassification of
shares, stock split, reverse stock split, reorganization or similar
transaction.
(e) AHI has not formed any subsidiary or contributed any funds
or other assets to any subsidiary.
(f) AHI has not purchased or otherwise acquired any material
assets, nor has it leased any material assets from any other person,
except in the ordinary course of business consistent with past
practice.
(g) AHI has not made any capital expenditure outside the
ordinary course of business or inconsistent with past practice, or in
an amount exceeding ten thousand dollars ($10,000) singly or in excess
of fifty thousand dollars ($50,000) in the aggregate, without Buyer's
consent.
(h) AHI has not sold or otherwise transferred any assets to
any other person, except in the ordinary course of business consistent
with past practice and at a price equal to the fair market value of the
assets transferred.
(i) There has not been any material loss, damage or
destruction to any of the properties or assets of AHI (whether or not
covered by insurance).
(j) AHI has not written off as uncollectible any indebtedness
or accounts receivable, except for write offs that were made in the
ordinary course of business consistent with past practice and that
involved less than $10,000 singly and less than $50,000 in the
aggregate or as required by Buyer pursuant to Section 8.1.
(k) AHI has not leased any assets to any other person except
in the ordinary course of business consistent with past practice and at
a rental rate equal to the fair rental value of the leased assets.
(l) AHI has not mortgaged, pledged, hypothecated or otherwise
encumbered any assets, except in the ordinary course of business
consistent with past practice.
(m) AHI has not entered into any contract, or incurred any
debt, liability or other obligation (whether absolute, accrued,
contingent or otherwise), except for (i) contracts that were entered
into in the ordinary course of business consistent with past practice
and that have terms of less than twelve months and do not contemplate
payments by or to AHI which will exceed, over the term of the contract,
ten thousand dollars ($10,000) in the aggregate, and (ii) current
liabilities incurred in the ordinary course of business consistent with
the past practice.
(n) AHI has not made any material loan or advance to any other
person, except for advances that have been made to customers and sales
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persons in the ordinary course of business consistent with past
practice and that have been properly reflected as "accounts
receivables."
(o) Other than annual raises or bonuses paid or provided
consistent with past business practices, AHI has not paid any bonus to,
or materially increased the amount of the salary, fringe benefits or
other compensation or remuneration payable to, any of the directors,
officers or employees of AHI.
(p) No material contract or other instrument to which AHI is
or was a party or by which AHI or any of its assets are or were bound
has been amended or terminated, except in the ordinary course of
business consistent with past practice.
(q) AHI has not discharged any lien or discharged or paid any
indebtedness, liability or other obligation, except for current
liabilities that (i) are reflected in the AHI Financial Statements as
of November 30, 2006 or have been incurred since November 30, 2006 in
the ordinary course of business consistent with past practice, and (ii)
have been discharged or paid in the ordinary course of business
consistent with past practice.
(r) AHI has not forgiven any debt or otherwise released or
waived any right or claim, except in the ordinary course of business
consistent with past practice.
(s) AHI has not changed its methods of accounting or its
accounting practices in any material respect.
(t) AHI has not entered into any transaction outside the
ordinary course of business or inconsistent with past practice.
(u) AHI has not agreed or committed (orally or in writing) to
do any of the things described in clauses (b) through (t) of this
Section 5.7.
5.8 ABSENCE OF UNDISCLOSED LIABILITIES. AHI has no material debt,
liability or other obligation of any nature (whether due or to become due and
whether absolute, accrued, contingent or otherwise) that is not reflected or
reserved against in the AHI Financial Statements as of November 30, 2006, except
for obligations incurred since November 30, 2006 in the ordinary and usual
course of business consistent with past practice.
5.9 CONTRACTS.
(a) AHI has delivered to Buyer or made available a complete
and accurate list or provided Buyer with true and complete copies of or
otherwise made available to Buyer all contracts or agreements of AHI
which are (i) material to the Business as currently conducted; (ii) are
subject to default or termination upon a change in control of AHI;
(iii) create a partnership or joint venture; (iv) impose a
noncompetition obligation on AHI, or an officer, director or employee
thereof; or (v) relating to the employment of any individual on a
full-time, part-time, consulting, or other basis (collectively,
"Material Contracts").
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(b) Each Material Contract is in full force and effect and is
valid and enforceable in accordance with its terms subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium
or other similar federal or state laws affecting the rights of
creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at
law or in equity).
(c) No event has occurred or circumstance exists that may
contravene, conflict with or result in a material violation or material
breach of, or give any party to a Material Contract the right to
declare a material default or exercise any remedy thereunder, or to
accelerate the maturity or performance of, or to cancel, terminate, or
modify any Material Contract.
(d) Neither AHI nor any of its affiliates have received any
written notice regarding any actual, alleged or potential material
violation or material breach of, or material default under, any
Material Contract which has not been entirely cured.
(e) AHI has not and will not enter into any new Material
Contract after the date of this Agreement without the prior approval of
the Company, except those agreements that are germane to the day to day
operation of AHI, including but not limited to: franchise agreements,
short term vendor contracts less than one year in term, training sale
agreements, consulting contracts, and other normal business
undertakings.
5.10 ACCOUNTS RECEIVABLE. Except as otherwise disclosed in writing to
Buyer prior to the Closing, all of AHI's accounts receivable represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business and have been collected or are collectible in
the lawful and ordinary course of business as heretofore conducted, subject to
the reserve for bad debt recorded on the AHI Financial Statements.
5.11 AHI ASSETS.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
a material breach of the terms and conditions of, or result in a
material loss of rights under, or result in the creation of any
material lien, charge or encumbrance upon, any of the assets of AHI.
(b) AHI has good title to all of its assets reflected in the
AHI Financial Statements, free and clear of all mortgages, liens,
leases, pledges, charges, encumbrances, equities or claims, except as
expressly disclosed in writing by Seller to Buyer prior to the Closing
Date or reflected in the AHI Financial Statements.
(c) AHI owns all copyrights, trademarks, and tradenames
related to its business and the use of such copyrights, trademarks, and
tradenames has not and will not infringe on the rights of any third
party.
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(d) Seller has provided to Buyer in writing a materially
accurate description of all of the material assets of AHI used in the
business of AHI, including but not limited to a list of all Material
Contracts.
(e) All of the machinery, equipment, furniture and fixtures of
AHI as of the Closing Date will be in the same condition as on the date
of this Agreement, normal wear and tear excepted. AHI hereby conveys to
Buyer (to the extent it is able under the applicable warranty
documents) any and all product warranty or similar rights that AHI may
have against third parties in respect of the condition of any assets.
5.12 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. AHI is not in material
violation of, nor has it failed to conduct its business in material compliance
with, any applicable federal, state, local or foreign laws, regulations, rules,
treaties, rulings, orders, directives or decrees. AHI has delivered to Buyer a
complete and accurate list or provided Buyer with the right to inspect true and
complete copies of all of the licenses, permits, authorizations and franchises
to which AHI is subject and all said licenses, permits, authorizations and
franchises are valid and in full force and effect. Said licenses, permits,
authorizations and franchises constitute all of the licenses, permits,
authorizations and franchises necessary to permit AHI to conduct its business in
the manner in which it is now being conducted, and AHI is not in material
violation or material breach of any of the terms, requirements or conditions of
any of said licenses, permits, authorizations or franchises.
5.13 TAXES. Except as disclosed herein, AHI has filed with the
appropriate United States, state, local and foreign governmental agencies all
tax returns and reports required to be filed (subject to permitted extensions
applicable to such filings), and has paid or accrued in full all taxes, duties,
charges, withholding obligations and other governmental liabilities as well as
any interest, penalties, assessments or deficiencies, if any, shown thereon as
owing (including taxes on properties, income, franchises, licenses, sales and
payrolls). (All such items are collectively referred to herein as "Taxes"). The
AHI Financial Statements fully accrue or reserve all current and deferred taxes.
AHI is not a party to any pending action or proceeding, nor is any such action
or proceeding threatened by any governmental authority for the assessment or
collection of Taxes. There are no liens for Taxes except for liens for property
taxes not yet delinquent. AHI is not a party to any Tax sharing, Tax allocation,
Tax indemnity or statute of limitations extension or waiver agreement and in the
past year has not been included on any consolidated combined or unitary return
with any entity other than AHI. AHI has duly withheld from each payment made to
each person from whom such withholding is required by law the amount of all
Taxes or other sums (including but not limited to United States federal income
taxes, any applicable state or municipal income tax, disability tax,
unemployment insurance contribution and Federal Insurance Contribution Act
taxes) required to be withheld therefrom and has paid the same to the proper tax
authorities prior to the due date thereof. To the extent any Taxes withheld by
AHI have not been paid as of the Closing Date because such Taxes were not yet
due, such Taxes will be paid to the proper tax authorities in a timely manner.
All Tax returns filed by AHI materially comply with and were prepared in
accordance with applicable statutes and regulations.
5.14 ENVIRONMENTAL COMPLIANCE MATTERS. Without conducting any study or
independent investigation, AHI represents that it has at all relevant times been
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in material compliance with all environmental laws, and has received no
potentially responsible party notices or similar notices from any governmental
agencies or private parties concerning releases or threatened releases of any
"hazardous substance" as that term is defined under 42 U.S.C. 960(1)(14).
5.15 COMPENSATION. Since November 30, 2006, AHI has not paid or
committed to pay to or for the benefit of any of its officers or directors any
compensation of any kind other than wages, salaries and benefits at times and
rates in effect on November 30, 2006, subject to wage increases of less than ten
percent paid or payable to employees other than officers and directors, nor have
they effected or agreed to effect any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus, incentive,
retirement, medical reimbursement, life insurance, deferred compensation or any
other employee benefit plan or arrangement. AHI has provided Buyer or otherwise
made available to Buyer a full and complete list of all officers, directors,
employees and consultants of AHI as of the date hereof, specifying their names
and job designations, their dates of hire, the total amount paid or payable as
wages, salaries or other forms of direct compensation, and the basis of such
compensation, whether fixed or commission or a combination thereof.
5.16 NO DEFAULT.
(a) Each of the Material Contracts is a legal, binding and enforceable
obligation by or against AHI, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors and the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity). Neither AHI nor any other party to a Material Contract is in default
thereunder or has breached any terms or provisions thereof which is material to
the conduct of AHI's business.
(b) AHI has performed, or is now performing, the obligations of, and
AHI is not in material default (or would by the lapse of time and/or the giving
of notice be in material default) in respect of, any Material Contract. No third
party has raised any claim, dispute or controversy with respect to any of the
Material Contracts, nor has AHI received notice of warning of alleged
nonperformance, delay in delivery or other noncompliance by AHI with respect to
its obligations under any of the Material Contracts, nor are there any facts
which exist indicating that any of the Material Contracts may be totally or
partially terminated or suspended by the other parties thereto.
5.17 BUSINESS AND CUSTOMERS. AHI has provided or made available to
Buyer a complete and accurate list and provided Buyer with the right to inspect
true and complete copies of (a) a written list of all its customers, (b) the
amount for which each such customer was invoiced during the eleven month period
ending November 30, 2006, and (c) the expiration date of AHI's contracts with
such customers.
5.18 SUPPLIERS. AHI has provided or made available to Buyer (a) the
names of all suppliers from which AHI ordered inventories and other products,
goods, and services with an aggregate purchase price for each such supplier of
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$10,000 or more during the eleven month period ended November 30, 2006 and (b)
the amount for which each such supplier invoiced AHI during such period.
5.19 PRODUCT WARRANTIES. Except as otherwise disclosed in writing or
made available to Buyer prior to the Closing and for warranties under applicable
law, (a) there are no warranties, express or implied, written or oral, with
respect to the products of AHI, (b) there are no pending or threatened material
claims with respect to any such warranty, and (c) AHI has no, and after the
Closing Date will have no material liability with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent, or otherwise and
whether due or to become due, other than customary returns in the ordinary
course of business that are fully reserved against in the AHI Financial
Statements.
5.20 PROPRIETARY RIGHTS.
(a) AHI has provided in writing or made available to Buyer a
complete and accurate list and provided Buyer with the right to inspect
true and complete copies of all software, patents and applications for
patents, trademarks, trade names, service marks, and copyrights, and
applications therefore, owned or used by AHI or in which it has any
rights or licenses, except for software used by AHI and generally
available on the commercial market. AHI has provided or made available
to Buyer a complete and accurate description of all agreements or
provided Buyer with the right to inspect true and complete copies of
all agreements of AHI with each officer, employee or consultant of AHI
providing AHI with title and ownership to patents, patent applications,
trade secrets and inventions developed or used by AHI in its business.
To AHI's knowledge, all of such agreements are valid, enforceable and
legally binding, subject to the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity).
(b) AHI owns or possesses licenses or other rights to use all
computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, service marks, trade
names, copyrights, inventions, drawings, designs, customer lists,
propriety know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the
business of AHI, and the same are sufficient to conduct AHI's business
as it has been and is now being conducted.
(c) The operations of AHI do not conflict with or infringe,
and no one has asserted to AHI that such operations conflict with or
infringe on any Proprietary Rights owned, possessed or used by any
third party. There are no claims, disputes, actions, proceedings, suits
or appeals pending against AHI with respect to any Proprietary Rights,
and to the knowledge of the management of AHI none has been threatened
against AHI. To the knowledge of the management of AHI, there are no
facts or alleged facts which would reasonably serve as a basis for any
claim that AHI does not have the right to use, free of any rights or
claims of others, all Proprietary Rights in the development,
manufacture, use, provision, sale or other disposition of any or all
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products or services presently being used, furnished or sold in the
conduct of the business of AHI as it has been and is now being
conducted.
(d) No employee of AHI is in violation of any term of any
employment contract, proprietary information and inventions agreement,
non-competition agreement, or any other contract or agreement relating
to the relationship of any such employee with AHI or any previous
employer.
5.21 INSURANCE. AHI has provided or made available to Buyer a complete
and accurate list of all policies of insurance and provided Buyer with the right
to inspect true and complete copies of all policies of insurance to which AHI is
a party or is a beneficiary or named insured as of the Closing Date. AHI has in
full force and effect, with all premiums due thereon paid, the policies of
insurance set forth therein. There were no claims in excess of $10,000 asserted
or currently outstanding under any of the insurance policies of AHI, including
but not limited to all motor vehicle, general liability, errors and omissions,
workers compensation, and medical claims during the calendar year ending on
December 31, 2005 and during the eleven months ending on November 30, 2006.
5.22 LABOR RELATIONS. None of the employees of AHI are represented by
any union or are parties to any collective bargaining arrangement, and no
attempts are being made to organize or unionize any of AHI's employees. Except
as disclosed in writing to Buyer prior to the Closing, there is not presently
pending or existing, and there is not presently threatened, any (a) strike,
slowdown, picketing, work stoppage or employee grievance process, or (b) action,
arbitration, audit, hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal) against or affecting AHI
relating to the alleged violation of any legal requirement pertaining to labor
relations or employment matters. AHI is in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor practices. AHI is in material compliance with
the Immigration Reform and Control Act of 1986.
5.23 EMPLOYEE BENEFITS. AHI has provided or made available to Buyer a
complete and accurate list of all employee payroll and benefit plans of AHI and
provided Buyer with the right to inspect true and complete copies of all
employee payroll and benefit plans of AHI (i) currently in effect, and (ii) with
respect to which AHI may have any liability or obligation (the "Employee
Plans"). AHI has made available to Buyer a copy of each Employee Plan, including
any amendments thereto and all related trust agreements and insurance contracts
and, to the extent any Employee Plan is not in writing, a short summary of such
plan has been provided to Buyer. All Employee Plans have been administered in
substantial compliance with their terms, except for any noncompliance that could
not be reasonably expected to have a material adverse effect on AHI, its
business, or AHI's assets. Except as disclosed to Buyer by AHI in writing, none
of the employees of AHI are covered by a collective bargaining agreement or any
multi-employer plan.
5.24 INTENTIONALLY OMITTED.
5.25 INTENTIONALLY OMITTED.
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5.26 NO DISTRIBUTOR AGREEMENTS. Except as disclosed in writing to Buyer
prior to the Closing, AHI is not a party to, nor is the property of AHI bound
by, any distributors' or manufacturer's representative or agency agreement.
5.27 CONFLICT OF INTEREST TRANSACTIONS. No past or present shareholder,
director, officer or employee of AHI or any of their affiliates (i) is indebted
to, or has any financial, business or contractual relationship or arrangement
with AHI, or (ii) has any direct or indirect interest in any property, asset or
right which is owned or used by AHI or pertains to the business of AHI.
5.28 LITIGATION. There is no action, suit, proceeding, dispute,
litigation, claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or threatened
against or with respect to AHI which (i) if adversely determined would have a
material adverse effect on the business, condition, assets or operations of AHI,
or (ii) challenges or would challenge any of the actions required to be taken by
AHI under this Agreement.
5.29 NON-CONTRAVENTION. Neither (a) the execution and delivery of this
Agreement, nor (b) the performance of this Agreement will: (i) contravene or
result in a violation of any of the provisions of the organizational documents
of AHI; (ii) contravene or result in a violation of any resolution adopted by
the shareholders or directors of AHI; (iii) result in a material violation or
material breach of, or give any person the right to declare (whether with or
without notice or lapse of time) a material default under or to terminate, any
Material Contract; (iv) give any person the right to accelerate the maturity of
any indebtedness or other obligation of AHI; (v) result in the loss of any
license or other contractual right of AHI; (vi) result in the loss of, or in a
violation of any of the terms, provisions or conditions of, any governmental
license, permit, authorization or franchise of AHI; (vii) result in the creation
or imposition of any lien, charge, encumbrance or restriction on any of the
assets of AHI; (viii) result in the reassessment or revaluation of any property
of AHI by any taxing authority or other governmental authority; (ix) result in
the imposition of, or subject AHI to any liability for, any conveyance or
transfer tax or any similar tax; or (x) result in a violation of any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which AHI or any of its assets or business are subject.
5.30 APPROVALS. AHI has provided Buyer with a complete and accurate
list of all jurisdictions in which AHI is authorized to do business. No
authorization, consent or approval of, or registration or filing with, any
governmental authority is required to be obtained or made by AHI in connection
with the execution, delivery or performance of this Agreement.
5.31 BROKERS. AHI has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to AHI's knowledge, no person is entitled, or intends to
claim that it is entitled, to receive any such fees or commissions in connection
with such transaction.
5.32 SPECIAL GOVERNMENT LIABILITIES. AHI has no existing or pending
liabilities, obligations or deferred payments due to any federal, state or local
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government agency or entity in connection with its business or with any program
sponsored or funded in whole or in part by any federal, state or local
government agency or entity, nor is AHI or Seller aware of any threatened action
or claim or any condition that could support an action or claim against AHI or
its business for any of said liabilities, obligations or deferred payments.
5.33 INTENTIONALLY OMITTED.
5.34 NON-DISTRIBUTIVE INTENT. The Shares and warrants being acquired by
Seller as part of the Purchase Price pursuant to this Agreement are not being
acquired by Seller with a view to the public distribution of them.
5.35 TAX ADVICE. AHI and Seller hereby represent and warrant that they
have sought their own independent tax advice regarding the transactions
contemplated by this Agreement, and neither AHI nor Seller have relied on any
representation or statement made by Buyer or its representatives regarding the
tax implications of such transactions.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer, to its actual knowledge in all cases without independent
investigation or verification, hereby represents and warrants to Seller as
follows:
6.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Buyer has full
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Buyer
have been duly authorized by all necessary action on its part. Assuming that
this Agreement is a valid and binding obligation of the other party hereto, this
Agreement is a valid and binding obligation of Buyer.
6.2 GOOD STANDING OF BUYER. Buyer (i) is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, (ii) has all necessary power and authority to own its assets and
to conduct its business as it is currently being conducted, and (iii) is duly
qualified or licensed to do business and is in good standing in every
jurisdiction (both domestic and foreign) where such qualification or licensing
is required.
6.3 CHARTER DOCUMENTS AND CORPORATE RECORDS OF BUYER. Buyer has made
available to Seller to review complete and correct copies of (i) the articles of
incorporation, bylaws and other charter or organizational documents of Buyer,
including all amendments thereto, (ii) the stock records of Buyer, and (iii) the
minutes and other records of the meetings and other proceedings of the
shareholders and directors of Buyer. Buyer is not in violation or breach of (i)
any of the provisions of its articles of incorporation, bylaws or other charter
or organizational documents, or (ii) any resolution adopted by its shareholders
or directors. There have been no meetings or other proceedings of the
shareholders or directors of Buyer that are not fully reflected in the
appropriate minute books or other written records of Buyer.
6.4 CAPITALIZATION OF BUYER. The authorized capital stock of Buyer
consists of 100,000,000 shares of common stock, par value $0.001 per share,
13,560,000 shares of which are issued and outstanding, and 5,000,000 shares of
preferred stock, par value $0.001 per share, none of which are issued or
outstanding. All of the outstanding shares of the capital stock of Buyer are
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validly issued, fully paid and nonassessable, and have been issued in full
compliance with all applicable federal, state, local and foreign securities laws
and other laws. Buyer either has sufficient authorized capital stock to meet its
obligations under this Agreement or has the ability to authorize the issuance of
additional capital stock.
6.5 FINANCIAL STATEMENTS. The Company has made available to Seller to
review the following financial statements (the "Company Financial Statements"):
the audited financial statements of the Company as of and for the fiscal years
ended December 31, 2004 and 2005, including the audited balance sheets of the
Company as of December 31, 2004 and 2005, and the audited statement of
operations for the twelve months ending December 31, 2004 and 2005, as well as
the unaudited financial statements of the Company for the nine months ending
September 30, 2006. Except as stated therein or in the notes thereto, the
Company Financial Statements: (a) present fairly the financial position of the
Company as of the respective dates thereof and the results of operations and
changes in financial position of the Company for the respective periods covered
thereby; and (b) have been prepared in accordance with the Company's normal
business practices applied on a consistent basis throughout the periods covered.
6.6 APPROVALS. To Buyer's knowledge, no authorization, consent or
approval of, or registration or filing with, any governmental authority or any
other person is required to be obtained or made by Buyer in connection with the
execution, delivery or performance of this Agreement.
6.7 BROKERS. Buyer has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to Buyer's knowledge, no person is entitled, or intends
to claim that it is entitled, to receive any such fees or commissions in
connection with such transaction.
6.8 NON-DISTRIBUTIVE INTENT. The shares of AHI Stock being purchased by
the Company pursuant to this Agreement are not being acquired by the Company
with a view to the public distribution of them.
6.9 NON CONTRAVENTION. To the Company's knowledge, neither (a) the
execution and delivery of this Agreement, nor (b) the performance of this
Agreement will: (i) contravene or result in a violation of any of the provisions
of the organizational documents of Buyer; (ii) contravene or result in a
violation of any resolution adopted by the shareholders or directors of Buyer;
(iii) result in a violation or breach of, or give any person the right to
declare (whether with or without notice or lapse of time) a default under or to
terminate, any material agreement by which the Buyer is bound; (iv) give any
person the right to accelerate the maturity of any indebtedness or other
obligation of Buyer; (v) result in the loss of any license or other contractual
right of Buyer; (vi) result in the loss of, or in a violation of any of the
terms, provisions or conditions of, any governmental license, permit,
authorization or franchise of Buyer; (vii) result in the creation or imposition
of any lien, charge, encumbrance or restriction on any of the assets of Buyer;
(viii) result in the reassessment or revaluation of any property of Buyer by any
taxing authority or other governmental authority; (ix) result in the imposition
of, or subject Buyer to any liability for, any conveyance or transfer tax or any
similar tax; or (x) result in a violation of any law, rule, regulation, treaty,
ruling, directive, order, arbitration award, judgment or decree to which Buyer
or any of its assets or business are subject.
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6.10 SOLVENCY. Immediately after giving effect to the Closing, the
Buyer believes that it will be able to pay its debts as they become due and will
own property having a fair saleable value greater than the amounts required to
pay its debts (including a reasonable estimate of the amount of all contingent
liabilities). Immediately after giving effect to the transactions contemplated
by this Agreement, the Buyer believes that it will have adequate capital to
carry on its business. No transfer of property is being made and no obligation
is being incurred in connection with the transactions contemplated by this
Agreement with the intent to hinder, delay or defraud either present or future
creditors of Buyer.
6.11 ABSENCE OF UNDISCLOSED LIABILITIES. Buyer has no material debt,
liability or other obligation of any nature (whether due or to become due and
whether absolute, accrued, contingent or otherwise) that is not reflected or
reserved against in the Company Financial Statements as of September 30, 2006,
except for obligations incurred since September 30, 2006 in the ordinary and
usual course of business consistent with past practice, or as otherwise
disclosed to the Seller.
6.12 ACCOUNTS RECEIVABLE. Except as otherwise disclosed in writing to
Seller prior to the Closing, all of Buyer's accounts receivable represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business and have been collected or are collectible in
the lawful and ordinary course of business as heretofore conducted, subject to
the reserve for bad debt recorded on the Company Financial Statements.
6.13 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. Buyer is not in
material violation of, nor has it failed to conduct its business in material
compliance with, any applicable federal, state, local or foreign laws,
regulations, rules, treaties, rulings, orders, directives or decrees. Buyer has
delivered to Seller a complete and accurate list or provided Seller with the
right to inspect true and complete copies of all of the licenses, permits,
authorizations and franchises to which Buyer is subject and all said licenses,
permits, authorizations and franchises are valid and in full force and effect.
Said licenses, permits, authorizations and franchises constitute all of the
licenses, permits, authorizations and franchises necessary to permit Buyer to
conduct its business in the manner in which it is now being conducted, and Buyer
is not in material violation or material breach of any of the terms,
requirements or conditions of any of said licenses, permits, authorizations or
franchises.
6.14 BUYER ASSETS.
(a) Buyer owns all copyrights, trademarks, and tradenames
related to its business and the use of such copyrights, trademarks, and
tradenames has not and will not infringe on the rights of any third
party.
(b) Buyer has provided to Seller in writing or made available
a materially accurate description of all of the material assets of
Buyer used in the business of Buyer.
6.15 TAXES. Except as disclosed herein, Buyer has filed with the
appropriate United States, state, local and foreign governmental agencies all
tax returns and reports required to be filed (subject to permitted extensions
applicable to such filings), and has paid or accrued in full all taxes, duties,
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charges, withholding obligations and other governmental liabilities as well as
any interest, penalties, assessments or deficiencies, if any, shown thereon as
owing (including taxes on properties, income, franchises, licenses, sales and
payrolls). (All such items are collectively referred to herein as "Taxes"). The
Company Financial Statements fully accrue or reserve all current and deferred
taxes. Buyer is not a party to any pending action or proceeding, nor is any such
action or proceeding threatened by any governmental authority for the assessment
or collection of Taxes. There are no liens for Taxes except for liens for
property taxes not yet delinquent. Buyer is not a party to any Tax sharing, Tax
allocation, Tax indemnity or statute of limitations extension or waiver
agreement and in the past year has not been included on any consolidated
combined or unitary return with any entity other than Buyer. Buyer has duly
withheld from each payment made to each person from whom such withholding is
required by law the amount of all Taxes or other sums (including but not limited
to United States federal income taxes, any applicable state or municipal income
tax, disability tax, unemployment insurance contribution and Federal Insurance
Contribution Act taxes) required to be withheld therefrom and has paid the same
to the proper tax authorities prior to the due date thereof. To the extent any
Taxes withheld by Buyer have not been paid as of the Closing Date because such
Taxes were not yet due, such Taxes will be paid to the proper tax authorities in
a timely manner. All Tax returns filed by Buyer materially comply with and were
prepared in accordance with applicable statutes and regulations.
6.16 PROPRIETARY RIGHTS.
(a) Buyer owns or possesses licenses or other rights to use
all computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, service marks, trade
names, copyrights, inventions, drawings, designs, customer lists,
propriety know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the
business of Buyer, and the same are sufficient to conduct Buyer's
business as it has been and is now being conducted.
(b) The operations of Buyer do not conflict with or infringe,
and no one has asserted to Buyer that such operations conflict with or
infringe on any Proprietary Rights owned, possessed or used by any
third party. There are no claims, disputes, actions, proceedings,
suits or appeals pending against Buyer with respect to any Proprietary
Rights, and to the knowledge of the management of Buyer none has been
threatened against Buyer. To the knowledge of the management of Buyer,
there are no facts or alleged facts which would reasonably serve as a
basis for any claim that Buyer does not have the right to use, free of
any rights or claims of others, all Proprietary Rights in the
development, manufacture, use, provision, sale or other disposition of
any or all products or services presently being used, furnished or
sold in the conduct of the business of Buyer as it has been and is now
being conducted.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Buyer of the following:
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(a) Seller shall have delivered to the Company all
certificates evidencing Seller's ownership of 100% of the capital stock
of AHI.
(b) All Taxes (except corporate income taxes) due and payable
by AHI without regard to any deferral by reason of extension, payment
programs, or any other reason, must have been paid in full. Any Taxes
accrued but not yet payable must be reflected on AHI's balance sheet
delivered to Buyer.
(c) The financial condition of AHI must not be materially
different than as set forth in the AHI Financial Statements as of
November 30, 2006, except for changes arising as a result of the
conduct of AHI's business in the ordinary course of business since
October 2006.
(d) AHI must have delivered to Buyer a certificate executed by
the Secretary of AHI certifying (i) the names of the officers of AHI
authorized to sign this Agreement to which it is a party and all other
documents and instruments executed by AHI pursuant hereto, together
with the true signatures of such officers; (ii) copies of corporate
resolutions adopted by the Board of Directors of AHI authorizing the
appropriate officers of AHI to execute and deliver this Agreement and
all other agreements, documents and instruments executed by AHI
pursuant hereto and to consummate the transactions contemplated herein.
(e) The Buyer must in its reasonable discretion be satisfied
with its full and complete due diligence of AHI by a date on or before
February 7, 2007, including but not limited to financial, legal and
business affairs of AHI. The Buyer must confirm its satisfaction in a
writing delivered to the Seller. In the event that no such writing is
delivered to Seller on or before February 7, 2007, then this condition
shall be deemed satisfied.
(f) Such directors of AHI as the Company shall have specified
in writing shall have submitted their resignations (to be effective as
of the Closing) from the Board of Directors of AHI. The directors of
AHI shall have duly appointed (effective as of the Closing) such other
persons as the Company shall have designated to fill the vacancies on
the Company's Board of Directors.
(g) All representations and warranties of AHI and Seller made
in this Agreement or in any exhibit or schedule hereto delivered by AHI
or Seller must be true and correct as of the Closing Date with the same
force and effect as if made on and as of that date. Buyer must receive
a written representation from AHI and Seller at the Closing that no
material adverse change has occurred to AHI or its business between
November 30, 2006 and the Closing Date.
(h) AHI must have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by AHI prior to or at the Closing Date.
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(i) Seller must have signed a customary investor
representation letter requested by the Buyer in connection with the
issuance of the Buyer's securities as part of the Purchase Price for
the AHI Stock, which will include, but not be limited to
representations and warranties by Seller confirming his investment
sophistication, knowledge, and experience, his financial condition, and
his access to information regarding the Buyer.
(j) AHI must have extinguished all long term loans and must
have paid off all credit card debt prior to or at the Closing Date.
7.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Seller of the following:
(a) All representations and warranties of Buyer made in this
Agreement or in any exhibit hereto delivered by Buyer must be true and
correct on and as of the Closing Date with the same force and effect as
if made on and as of that date. Seller must receive a written
representation from the Company at the Closing that no material adverse
change has occurred to the Company or its business between September
30, 2006 and the Closing Date.
(b) Buyer must have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied
with by Buyer prior to or at the Closing Date.
(c) Buyer must have delivered to AHI and Seller a certificate
executed by the Secretary of Buyer certifying (i) the names of the
officers of Buyer authorized to sign this Agreement to which it is a
party and all other documents and instruments executed by Buyer
pursuant hereto, together with the true signatures of such officers;
(ii) copies of corporate resolutions adopted by the Board of Directors
of Buyer authorizing the appropriate officers of Buyer to execute and
deliver this Agreement and all other agreements, documents and
instruments executed by the Buyer pursuant hereto and to consummate the
transactions contemplated herein
(d) The agreement described in Section 3 pertaining to the
policy for allocating general administrative and overhead costs among
the Company and the AHI Division shall have been executed by the Buyer,
AHI and Seller.
(e) The financial condition of Buyer must not be materially
different than as set forth in the Company Financial Statements, except
for changes arising as a result of the conduct of Buyer's business in
the ordinary course of business since September 30, 2006.
8. FURTHER ASSURANCES AND POST CLOSING COVENANTS AND OBLIGATIONS.
8.1 COVENANTS OF BUYER TO AHI AND SELLER AFTER CLOSING. Upon Closing,
the Company shall create the AHI Division within the structure of the Company.
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After Closing, the Buyer shall handle all of the AHI Division's financial
responsibilities (including making loan programs available to franchisees), all
of the AHI Division's funding requirements (including but not limited to
supplying short-term capital needs should cash flow shortages arise), all human
resource requirements such as payroll, all legal issues and allow Seller
reasonable access to all such records for examination and consultation. Buyer
will assume all of AHI's leases for a training center and office for a period of
six months while Xxxxxxx and Xxxxxx Xxxxxx, President of the Company, mutually
form the future long term goals and structure of the Company. Marketing and
public relations shall be a joint effort on behalf of both the Company and the
AHI Division. Buyer shall use commercially reasonable efforts to preserve and
maintain AHI's payroll records for each fiscal year until the expiration of the
statute of limitations (and any waivers or extensions thereof) for tax purposes
relating to such year, and all other records relating to AHI for at least three
years after the Closing Date. In addition, within two (2) weeks of Closing,
Buyer will provide a new franchise agreement/UFOC for use of the AHI Division
that complies with Federal Trade Commission requirements.
8.2 COVENANTS OF SELLER AND AHI TO BUYER. Xxxxxxx hereby assumes and
agrees to bear and pay all liability and responsibility for any and all
liabilities arising from the arbitration proceeding known as Allstate Home
Inspection & Household Environmental Testing, Ltd. v. Upside Consulting Group
(the "Case") prior to and after the Closing Date. Xxxxxxx shall indemnify the
Company, AHI and their affiliates, and save them harmless from all damages,
liabilities, claims, losses, costs and expenses, including attorneys' costs and
fees, which may be incurred by Buyer, AHI, or any of their affiliates as a
direct or indirect result of the Case. AHI and the Company hereby assign all
liability for and any monetary awards arising from the Case to Xxxxxxx. AHI
shall submit to Buyer within ten (10) weeks of the Closing Date (i) audited
financial statements prepared in accordance with GAAP, certified by an
independent certified public accounting firm, covering AHI's two most recent
fiscal years (at AHI's expense) and (ii) unaudited financial statements covering
AHI's most recent fiscal quarter, prepared in AHI's normal business practices
consistently applied.
8.3 REMEDIES UPON CERTAIN DEFAULTS BY BUYER. In the event that Buyer
defaults on a Cash Payment or a Stock Payment under Section 1.2 of this
Agreement and fails to cure said default within 45 days after written notice of
the default by Seller to Buyer, then Seller may either (i) agree in writing to
give Buyer more time to cure the default and or demand payment, in which case
this Agreement will otherwise remain in full force and effect, or (ii)terminate
this Agreement by written notice to Buyer. In the event that Seller elects to
terminate this Agreement pursuant to the immediately preceding sentence, Buyer
will provide Seller with reasonable access to examine the financial records
relating to the AHI Division and Seller shall (i) return the entire Stock
Payment to Buyer, including all Shares and warrants; (ii) retain all Cash
Payments as liquidated and final damages; and (iii) at Seller's election, be
conveyed back all AHI Stock by the Company and have all AHI documents of any
kind returned to Seller, whereupon neither party nor AHI will have any further
obligations to the other parties. In any event, if the Seller defaults as
described above, then late Cash Payments shall bear simple interest from the due
date until paid at the rate of 10% per annum.
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9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by each of the parties hereto
will survive the Closing for a period of one year after the Closing Date.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLER. Seller agrees to indemnify, defend and
hold Buyer harmless against any and all claims, demands, losses, costs,
expenses, obligations, liabilities and damages, including interest, penalties
and attorney's fees and costs but excluding punitive, consequential or special
damages and damages for lost profits in all cases net of insurance proceeds
(collectively, "Losses"), incurred by Buyer arising, resulting from, or relating
to any material misrepresentation of a material fact or omission to disclose a
material fact made by Seller or AHI in this Agreement or in any exhibits to this
Agreement or any material breach of, or material failure by AHI or Seller to
perform, any of their respective representations, warranties, covenants or
agreements in this Agreement or in any exhibit or schedule to this Agreement.
Notwithstanding anything else herein to the contrary, Seller's indemnification
obligation will only arise when all Losses incurred or suffered by Buyer exceed
$25,000; shall survive only one year after the Closing Date; and in no event
shall such obligation exceed the amount of the Purchase Price paid to him under
this Agreement.
10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and
hold Seller harmless against any and all claims, demands, losses, costs,
expenses, obligations, liabilities and damages, including interest, penalties
and attorneys' fees and costs but excluding punitive, consequential or special
damages and damages for lost profits in all cases net of insurance proceeds
(collectively "S Losses"), incurred by Seller arising, resulting from or
relating to any material misrepresentation of a material fact or omission to
disclose a material fact made by Buyer in this Agreement or in any exhibits or
schedule to this Agreement or any material breach of, or material failure by
Buyer to perform, any of its representations, warranties, covenants or
agreements in this Agreement or in any exhibit to this Agreement.
Notwithstanding anything else herein to the contrary, Buyer's indemnification
will only arise when all S Losses incurred or suffered by the Seller exceed
$25,000; shall survive only one year after the Closing Date; and in no event
shall such obligation exceed $1,000,000 in addition to the amount of the
Purchase Price paid by it under this Agreement.
10.3 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) Whenever any parties become aware that a claim (an
"Underlying Claim") has arisen entitling them to seek indemnification
under this Agreement, such parties (the "Indemnified Parties") shall
promptly send a notice ("Notice") to the parties liable for such
indemnification (the "Indemnifying Parties") of the right to
indemnification (the "Indemnity Claim"); provided, however, that the
failure to so notify the Indemnifying Parties will relieve the
Indemnifying Parties from liability under this Agreement with respect
to such Indemnity Claim only if, and only to the extent that, such
failure to notify the Indemnifying Parties results in the forfeiture by
the Indemnifying Parties of rights and defenses otherwise available to
the Indemnifying Parties with respect to the Underlying Claim. Any
Notice pursuant to this Section 10.3(a) shall set forth in reasonable
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detail, to the extent then available, the basis for such Indemnity
Claim and a reasonable estimate of the amount of damages arising
therefrom.
(b) If an Indemnity Claim does NOT result from or arise in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties will have thirty (30) calendar days
following receipt of the Notice to issue a written response to the
Indemnified Parties, indicating the Indemnifying Parties' intention to
either (i) contest the Indemnity Claim or (ii) accept the Indemnity
Claim as valid. The Indemnifying Parties' failure to provide such a
written response within such thirty (30) day period shall be deemed to
be an acceptance of the Indemnity Claim as valid. In the event that an
Indemnity Claim is accepted as valid, the Indemnifying Parties shall,
within fifteen (15) Business Days thereafter, pay the damages incurred
by the Indemnified Parties in respect of the Underlying Claim in cash
by wire transfer of immediately available funds to the account or
accounts specified by the Indemnified Parties. To the extent
appropriate, payments for indemnifiable damages made pursuant to
Section 10 of the Agreement will be treated as adjustments to the
Purchase Price.
(c) In the event an Indemnity Claim results from or arises in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties shall have fifteen (15) calendar days
following receipt of the Notice to send a Notice to the Indemnified
Parties of their election to, at their sole cost and expense, assume
the defense of any such Underlying Claim or legal proceeding; provided
that such Notice of election shall contain a confirmation by the
Indemnifying Parties of their obligation to hold harmless the
Indemnified Parties with respect to damages arising from such
Underlying Claim. The failure by the Indemnifying Parties to elect to
assume the defense of any such Underlying Claim within such fifteen
(15) day period shall entitle the Indemnified Parties to undertake
control of the defense of the Underlying Claim on behalf of and for the
account and risk of the Indemnifying Parties in such manner as the
Indemnified Parties may deem appropriate, including, but not limited
to, settling the Underlying Claim. However, the parties controlling the
defense of the Underlying Claim shall not settle or compromise such
Underlying Claim without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
The non-controlling parties shall be entitled to participate in (but
not control) the defense of any such action, with their own counsel and
at their own expense.
(d) The Indemnifying Parties and the Indemnified Parties will
cooperate reasonably, fully and in good faith with each other, at the
sole expense of the Indemnifying Parties, in connection with the
defense, compromise or settlement of any Underlying Claim including,
without limitation, by making available to the other parties all
pertinent information and witnesses within their reasonable control.
11. INJUNCTIVE RELIEF.
11.1 DAMAGES INADEQUATE. Each party acknowledges that it would be
impossible to measure in money the damages to the other party if there is a
failure to comply with any covenants and provisions of this Agreement, and
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agrees that in the event of any breach of any covenant or provision, the other
party to this Agreement will not have an adequate remedy at law.
11.2 INJUNCTIVE RELIEF. It is therefore agreed that the other party to
this Agreement who is entitled to the benefit of the covenants and provisions of
this Agreement which have been breached, in addition to any other rights or
remedies which they may have, will be entitled to immediate injunctive relief to
enforce such covenants and provisions, and that in the event that any such
action or proceeding is brought in equity to enforce them, the defaulting or
breaching party will not urge a defense that there is an adequate remedy at law.
12. FURTHER ASSURANCES.
Following the Closing, Seller shall furnish or make available, as the
case may be, to Buyer such instruments and other documents as Buyer may
reasonably request for the purpose of carrying out or evidencing the
transactions contemplated hereby.
13. FEES AND EXPENSES.
Each party hereto shall pay all fees, costs and expenses that it incurs
in connection with the negotiation and preparation of this Agreement and in
carrying out the transactions contemplated hereby (including, without
limitation, all fees and expenses of its counsel and accountant).
14. WAIVERS.
If any party at any time waives any rights hereunder resulting from any
breach by the other party of any of the provisions of this Agreement, such
waiver is not to be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement. Resort to any remedies referred to
herein will not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
15. SUCCESSORS AND ASSIGNS.
Subject to Section 19, each covenant and representation of this
Agreement will inure to the benefit of and be binding upon each of the parties,
their personal representatives, assigns and other successors in interest.
16. ENTIRE AND SOLE AGREEMENT.
This Agreement constitutes the entire agreement between the parties and
supersedes all other agreements, representations, warranties, statements,
promises and undertakings, whether oral or written, with respect to the subject
matter of this Agreement. This Agreement may be modified or amended only by a
written agreement signed by the parties against whom the amendment is sought to
be enforced.
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17. GOVERNING LAW.
This Agreement will be governed by the laws of California without
giving effect to applicable conflict of laws provisions. With respect to any
litigation arising out of or relating to this Agreement, each party agrees that
it will be filed in and heard by the state or federal courts with jurisdiction
to hear such suits located either in Los Angeles County, California, or in the
State of Vermont, at the election of the plaintiff in the case.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts will be deemed to be an original, and
such counterparts will constitute but one and the same instrument.
19. ASSIGNMENT.
Except in the case of an affiliate of the Buyer, this Agreement may not
be assignable by any party without prior written consent of the other parties.
20. REMEDIES.
Except as otherwise expressly provided herein, none of the remedies set
forth in this Agreement are intended to be exclusive, and each party will have
all other remedies now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more remedies will not constitute a waiver
of the right to pursue other available remedies.
21. SECTION HEADINGS.
The section headings in this Agreement are included for convenience
only, are not a part of this Agreement and will not be used in construing it.
22. SEVERABILITY.
In the event that any provision or any part of this Agreement is held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect the validity or enforceability of any other
provision or part of this Agreement. The parties shall attempt by mutual
agreement to arrive at an amendment of this Agreement which eliminates such
invalidity or conflict while at the same time permitting the accomplishment of
the objectives of this Agreement.
23. NOTICES.
Each notice or other communication hereunder must be in writing and
will be deemed to have been duly given on the earlier of (i) the date on which
such notice or other communication is actually received by the intended
recipient thereof, or (ii) the date five (5) days after the date such notice or
other communication is mailed by registered or certified mail (postage prepaid)
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to the intended recipient at the following address (or at such other address as
the intended recipient will have specified in a written notice given to the
other parties hereto):
IF TO AHI:
Allstate Home Inspection & Household Environmental Testing, Ltd.
00 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
IF TO SELLER:
Xxxxxxx X. Xxxxxxx
00 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
IF TO BUYER:
Environmental Service Professionals, Inc.
0000 Xxxxxxxx Xxxxxx Xxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
24. PUBLICITY.
Except as may be required in order for a party to comply with
applicable laws, rules, or regulations or to enable a party to comply with this
Agreement, or necessary for the Buyer to prepare and disseminate any private or
public placements of its securities or to communicate with its shareholders or
franchisees, no press release, notice to any third party or other publicity
concerning the transactions contemplated by this Agreement will be issued, given
or otherwise disseminated without the prior approval of each of the parties
hereto; provided, however, that such approval will not be unreasonably withheld.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first above written.
AHI: ALLSTATE HOME INSPECTION &
HOUSEHOLD ENVIRONMENTAL TESTING, LTD.,
a Delaware corporation
By: \s\ Xxxxxxx X. Xxxxxxx
---------------------------------------------------------
Xxxxxxx X. Xxxxxxx, President
XXXXXXX/SELLER: \s\ Xxxxxxx X. Xxxxxxx
---------------------------------------------------------
Xxxxxxx X. Xxxxxxx, Individually
COMPANY/BUYER: ENVIRONMENTAL SERVICE PROFESSIONALS, INC.,
a Nevada corporation
By: \s\ Xxxxxx Xxxxxx
---------------------------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
*See Schedules attached to this Agreement and incorporated herein by reference.
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