UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE EXCHANGE ACT
COMMISSION FILE NUMBER 0-22388
US INDUSTRIAL SERVICES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 99-0273889
------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11011 JONES ROAD
HOUSTON, TEXAS 77070
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(281) 774-7010
(ISSUER'S TELEPHONE NUMBER)
8111 PRESTON ROAD, SUITE 715, DALLAS, TEXAS 75225
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR
IF CHANGED SINCE LAST REPORT)
Check whether the issuer(1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as the latest practicable date.
Class Outstanding at March 31, 1999
----- -----------------------------
Common stock, no par value 8,763,978
Transitional Small Business Disclosure Format (Check one): Yes ; No X
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
US INDUSTRIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
----------- ------------
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $1,832,210 $2,349,491
Accounts receivable 1,833,240 15,829,040
Notes receivable 1,246,552 --
Securities available for sale 298,080 410,400
Receivable officer 120,507 120,507
Cost and estimated earnings on contracts
in progress in excess of billings 61,109 1,381,950
Prepaid expenses and other current assets 2,121,216 1,220,118
Deferred income taxes 3,123,823 3,603,480
----------- -----------
Total current assets 10,636,737 24,914,986
Property, plant and equipment, net 434,484 6,591,677
Other noncurrent assets:
Goodwill 696,730 2,844,419
Receivable officer 340,107 304,148
Notes receivable 5,170,281 --
Investments 552,000 246,000
Prepaid expenses and other assets 9,502 611,359
----------- -----------
6,768,820 4,005,926
Total assets $17,839,841 $35,512,589
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $2,018,642 $9,731,197
Notes payable 137,898 8,704,380
Billings in excess of costs and estimated
earnings on contracts in progress 37,226 629,736
Reserve for contingencies --- 510,000
Net liabilities for discontinued operations --- 266,216
----------- -----------
Total current liabilities 2,193,766 19,841,529
Non-current liabilities:
Long term debt --- 3,598,577
Total liabilities 2,193,766 23,440,106
Shareholders' equity
Common stock 87,640 87,640
Additional paid-in capital 22,636,302 22,636,302
Unrealized loss on securities available
for sale (1,000,172) (887,852)
Accumulated deficit (6,077,695) (9,763,607)
----------- -----------
Total stockholders' equity 15,646,075 12,072,483
----------- -----------
Total liabilities and stockholders' equity $17,839,841 $35,512,589
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
1
<PAGE>
US INDUSTRIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months ended
December 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Revenue $15,072,655 $10,453,400
Cost of revenue 12,423,070 7,808,302
----------- -----------
Gross profit 2,649,585 2,645,098
Selling, general and administrative expenses 2,239,989 1,885,667
----------- -----------
409,596 759,431
Other:
Gain on sale of assets 4,573,970 ---
Other income --- (53,668)
Interest expense 9,017 536,096
----------- ----------
Income before income taxes 4,974,549 277,003
Income taxes 1,288,637 20,000
----------- ----------
Net income $3,685,912 $257,003
=========== ==========
Net income per share $0.42 $0.10
=========== ==========
Weighted average number of common shares
outstanding 8,763,978 2,461,820*
========== ==========
</TABLE>
* Restated to reflect a 1-for-10 reverse split of the total number of
common shares outstanding that occurred on June 22, 1998.
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
US INDUSTRIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED DECEMBER 31
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net cash provided by (used in) operating
activities net of effects of
business acquired $ 307,408 $ 71,002
Cash flow from investing activities:
Purchase of Machinery and equipment --- (359,669)
Proceeds from sale of equipment --- 233,129
Acquisition of business net of cash acquired --- 192,253
----------- -----------
Increase in investment (306,000) ---
Net cash (used in) provided by investing
activities (306,000) 65,713
Cash flow from financing activities:
Proceeds from sale of marketable securities --- 2,100,000
Net (payments) advances on notes payable and
long term debt (7,490,070) 421,400
Net (advances) payments on notes receivable
(335,718) 299,521
Net proceeds from the sale of assets 7,307,099 ---
----------- -----------
Net cash provided by financing activities (518,689) 2,820,921
----------- -----------
Net increase (decrease) in cash (517,218) 2,957,636
Cash, beginning of period 2,349,491 304,678
----------- -----------
Cash, end of period $ 1,832,210 $ 3,262,314
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
US INDUSTRIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been
prepared by US Industrial Services, Inc., (the "Company"), in accordance with
generally accepted accounting principles pursuant to Regulation S-B of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Accordingly, these interim consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and related
notes as contained in Form 10-KSB for the year ended September 30, 1998. In the
opinion of management, the interim consolidated financial statements reflect all
adjustments, including normal recurring adjustments, necessary for fair
presentation of the interim periods presented. The results of operations for the
three months ended December 31, 1998 are not necessarily indicative of results
of operations to be expected for the full year.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary P.W. Stephens Contractors, Inc. and
P.W. Stephens Services, Inc. (collectively referred to as "St. Louis"), and, for
the time period owned, J.L. Manta, Inc. and P.W. Stephens Residential, Inc. In
addition, The P.W. Stephens Contractors, Inc. and QHI Stephens Contractors, Inc.
subsidiaries were discontinued in May 1997 and have been accounted for as
discontinued operations for all current periods reported under this Form 10-QSB.
Kelar Controls, Inc. was divested on June 30, 1997, and is also accounted for as
discontinued operations for all periods reported under this current Form 10-QSB.
Net Income Per Share Information: The net income per share amounts have been
computed by dividing net income by the weighted-average number of common shares
outstanding during the respective periods. The weighted-average for the quarter
ended December 31,1997 has been restated to give effect to a 1-for10 reverse
split that occurred on June 22,1998.
In February 1997, The Financial Accounting Standards Board Issued Statement
No. 128, Earnings Per Share, which was required to be adopted on December 31,
1997. Statement 128 replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per share is
consistent with the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
Fair Value of Financial Instruments: The Company's financial instruments consist
of cash and cash equivalents, marketable equity securities, accounts receivable,
accounts payable and notes payable. The Company believes that the carrying value
of these instruments on the accompanying balance sheet approximates their fair
value.
Reclassifications: Certain reclassifications have been made to prior year
financial statements to conform with the current year presentation.
SECURITIES AVAILABLE FOR SALE
Securities available for sale consist of 180,000 common shares of
American Eco Corporation. The Company intends to sell these securities to settle
certain existing obligations.
TRANSACTIONS WITH AFFILIATES
As of July 24, 1998, American Eco sold certain promissory notes owed by
the Company (the "Notes") to USIS Acquisition, L.L.C. (the "Holder") for $5.0
million in cash and a secured promissory note for $12.9 million repayable on
January 29, 1999. The Holder converted the Notes into 5,295,858 shares of the
Company's Common Stock, and secured its promissory note to American Eco with a
pledge of the 5,295,858 shares. In November 1998, the Holder advised American
Eco that the Holder would not be able to pay its note at maturity, and American
Eco took ownership of the pledged shares in discharge of the Holder's note. At
December 31, 1998, American Eco owned 7,175,858 shares of the Company's Common
Stock representing 81.9% of the outstanding shares.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
In November 1998 the Company adopted a strategic plan to dispose of all
industrial service and environmental companies with the goal of revitalizing the
Company with a strong balance sheet. The Company has engaged a consulting firm
to assist in the preparation of a strategic business plan and to help refocus
the company in other businesses, one of which may be the real estate
construction and management business.
The implementation of this strategy began when the Company sold the
assets and transferred the liabilities of Manta on November 30, 1998. The second
step was completed on December 31, 1998 when the Company sold the assets and
transferred the liabilities of P.W. Stephens Residential, Inc. Management is
engaged in preliminary negotiations with several acquisition prospects, however
no agreements have been finalized.
In November 1998, USIS sold the assets of J.L. Manta, Inc.("Manta"),
and transferred related liabilities, including the credit facility, to Kenny
Industrial Services, L.L.C., for $23,000,000 consisting of a combination of
$3,000,000 of cash, a short term note of $15,000,000 which was paid December 15,
1998 and $5,000,000 in separate notes at an interest rate of 5.0%. Cost of the
transaction was$6,531,950.
On December 31, 1998, USIS sold the assets of P.W. Stephens
Residential, Inc. and transferred its related liabilities to American Temporary
Sanitation, Inc. for $2,400,000, consisting of $1,004,000 in cash and a five
year promissory note for $1,396,000 payable quarterly through 2004, together
with interest at the Prime Rate plus 2.5% per annum.
RESULTS OF OPERATIONS:
General
The Company currently operates primarily in the environmental
remediation services industry through St. Louis. The other services formerly
provided by the Company have been classified as discontinued operations in the
accompanying financial statements. The following discussion and analysis relate
to the Company's continuing operations. The results of operations for the three
months ended December 31, 1998 are not necessarily indicative of results of
operations to be expected for the full year.
Revenue
Revenue during the three months ended December 31, 1998, was
$15,072,655 compared to $10,453,400 for the same period in 1997. Manta, which
was sold in November 1998, contributed $11,219,800 of revenue for the first
quarter of 1998. PW Stephens Residential, which was sold in December 1998,
contributed $1,690,150 of revenue for the first quarter of 1998.
Gross Profit
Gross Profit during the three months ended December 31, 1998, was
$2,649,585 compared to $2,645,098 for the same period in 1997. Manta and
Residential contributed $1,400,195 and $862,451, respectively, of this amount
for the first quarter of 1998.
Selling, General and Administrative Expenses (SG&A)
SG&A during the three months ended December 31, 1998, was $2,664,989
compared to $1,885,667 for the same period in 1997. Manta and Residential
contributed $1,215,226 and $587,596, respectively, of this amount for the
first quarter of 1998.
Other Expenses
Interest expense during the three months ended December 31, 1998, was $
9,000 compared to $536,000 for the same period in 1997. The significant
reduction of interest expense was attributed to the conversion of approximately
$18,000,000 of notes originally owed to American Eco Corporation into equity in
July 1998, and the retirement of various notes owed to financial institutions
for the initial purchase of Manta that occurred in November 1997.
5
<PAGE>
Net Income
Net income for the three months ended December 31, 1998 was $3,685,912
compared to $257,000 for the same period in the 1997. The significant increase
in net income was the result of the gain on the sale of the assets of Manta and
Residential that occurred in November 1998 and December 1998, respectively.
Liquidity and Capital Resources:
The Company believes that the proceeds from the sale of assets, the
cash flows from the existing operations of St. Louis coupled with the financing
arrangements the Company currently has in place will be sufficient throughout
the next twelve months to finance its working capital needs, planned capital
expenditures, debt service and the outstanding obligations from the Company's
discontinued operations. Implementation of the Company's strategic plan of
expanding into another line of business may require additional capital.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENT INCLUDED IN THIS FORM 10-QSB
This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives relating to
future growth of the Company's business activities and availability of funds.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, regulatory framework, and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate and, therefore, there
can be no assurance that the forward-looking statements included in this
Form 10-QSB will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
YEAR 2000 MATTERS
In 1998, the Company began converting its computer systems to be year 2000
compliant. The Company has evaluated its internal systems, both hardware and
software, facilities, and interactions with business partners in relation to
year 2000 issues. As of December 31, 1998, the Company believes that it had
completed its efforts to bring the systems in compliance. The total cost
incurred during the year ended December 31, 1998 to modify these existing
systems, which include both internal and external costs of programming, coding
and testing, was not material. The Company continually evaluates computer
hardware and software upgrades and, therefore, many of the costs to replace
existing items with year 2000 compliant upgrades are not likely to be
incremental costs to the Company. During 1999, the Company will continue to
contact its business partners to determine the status of their compliance and to
assess the impact of noncompliance on the Company. The Company believes that it
is taking the necessary measures to mitigate issues that may arise relating to
the year 2000. To the extent that any additional issues arise, the Company will
evaluate the impact on its business, results of operations and financial
condition and, if material, make the necessary disclosures and take appropriate
remedial action.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature and scope of the Company's business operations bring it into
regular contact with the general public, a variety of businesses and government
agencies. These activities inherently subject the Company to the hazards of
litigation, which are defended in the normal course of business. Management
believes that such proceedings are either adequately covered by insurance, or if
uninsured, by the estimated losses it has recorded to date. The resolution of
such claims, however, could have a material effect on the Company's results of
operations or cash flows.
ITEM 5. OTHER INFORMATION
The following matters have not been previously reported by the Company
in a Report on Form 8-k:
(a) Sale of PW Stephens Residential, Inc.
-------------------------------------
On December 31, 1998, USIS sold the assets of P.W. Stephens
Residential, Inc. and transferred its related liabilities to American Temporary
Sanitation, Inc. for $2,400,000, consisting of $1,004,000 in cash and a
five-year promissory note for $1,396,000 payable quarterly through 2004,
together with interest at the Prime Rate plus 2.5% per annum.
6
<PAGE>
(b) Appointment of New Chairman and Chief Executive Officer
-------------------------------------------------------
On January 28, 1999, the Board of Directors appointed David L. Norris
as interim Chief Executive Officer and Chairman of the Board. In addition, the
Board accepted the resignation of Albert V. Furman as Chief Executive Officer
and Chairman of the Board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
2.5 Asset Purchase Agreement between American Temporary Sanitation Inc.
and PW Stephens Residential, Inc.
27.0 Financial Data Schedule
(b) REPORTS ON FORM 8-K
The following reports Form 8-K were filed during the quarter ended
December 31, 1998:
(i) A report dated December 15, 1998 for an event of November 30,
1998 on Item 2 concerning the sale of all of the assets of
J.L. Manta, Inc. to Kenny Industrial Services, L.L.C.
(ii) A report dated December 16, 1998 concerning the proforma
financial information for J.L. Manta.
(iii) A report dated December 30, 1998 for an event of November 30,
1998 reporting on Item 1 changes in control from USIS
Acquisition L.L.C. to American Eco Corporation.
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.
US INDUSTRIAL SERVICES, Inc.
April 26, 1999 By: /s/ DAVID L. NORRIS
-------------------
David L. Norris
Chairman and Chief Executive Officer
April 26, 1999 By: /s/ C. THOMAS MULLIGAN
----------------------
C. Thomas Mulligan
Chief Financial Officer
8
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
2.5 Asset Purchase Agreement between American Temporary
Sanitation Inc. and PW Stephens Residential, Inc.
27.0 Financial Data Schedule
ASSET PURCHASE AGREEMENT,
BETWEEN
AMERICAN TEMPORARY SANITATION, INC.
AND
P.W. STEPHENS RESIDENTIAL, INC.
DATED DECEMBER ___, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
This Agreement ("Agreement") is made as of this ___ day of December,
1998, between AMERICAN TEMPORARY SANITATION, INC., a New York corporation, whose
address is 17 Reardon Road, Queensbury, NY 12804 ("Purchaser"), and P.W.
STEPHENS RESIDENTIAL, INC., a California corporation, whose address is 15201
Pipeline Lane, Suite B, Huntington Beach, CA 92649, ("Seller"). Purchaser and
Seller are collectively sometimes referred to in this Agreement as "Parties" or,
individually, as a "Party".
INTRODUCTION
WHEREAS, Purchaser wishes to purchase from Seller, and Seller wishes to
sell to Purchaser, substantially all of the assets of Seller used in the
[industrial services business] conducted by the Seller as of the date hereof
(the "Business"), which sale and purchase shall hereinafter be referred to as
the "Acquisition";
NOW THEREFORE, in consideration of the following representations,
warranties, covenants and agreements, the parties agree as follows:
DEFINITIONS
"Accounts Receivable" means the accounts receivable of the Business as
of the Closing Date, including work in progress that has been accrued but not
yet invoiced as of the Closing Date, as shown on the Accounts Receivable
Schedule.
"Accounts Receivable Schedule" means the schedule of the Seller's
accounts receivable as of the Closing Date to be delivered by Seller to the
Purchaser pursuant to ss. 2.4.
"Acquisition" has the meaning set forth in the preface above.
"Acquisition Proposal" means any proposal for a merger, consolidation
or other business combination involving the Seller for the acquisition or
purchase of any equity interest in or material portion of the assets of the
Seller, other than the transactions with Purchaser contemplated by this
Agreement.
"Adjustment Amount." has the meaning set forth in ss. 2.3.1 below.
"Adverse Consequences" has the meaning set forth in ss. 4.1.1 below.
"Assets" has the meaning set forth in ss. 2.1 below.
"Assumed Liabilities" has the meaning set forth in ss. 3.1.6 below.
"Benefit Plan" has the meaning set forth in ss. 5.1.14 below.
"Bill of Sale" has the meaning set forth in ss. 2.8.1 below.
"Business" has the meaning set forth in the preface above.
"Business Data" has the meaning set forth in ss. 2.1.7 below.
"Cash Consideration" has the meaning set forth in ss. 2.3.
"Closing Date" has the meaning set forth in ss. 1.1 below.
"Completed Project" means a project in which, as of the Closing Date,
the Company has within the one-year period immediately preceding the Closing,
completed all services required to be performed thereunder and that has been
closed out and fully invoiced.
"Contract Value " means the amount (including expenses) that each
party with whom the Seller is engaged in a Project is required to pay to the
Seller upon completion of such Project, as set forth on the Job Summary
Schedule.
"Contracts" as the meaning set forth in ss. 2.1.3 below.
Encumbrances" means all liens, security interests, pledges, mortgages,
deeds of trust, claims, rights of first refusal, options, charges, restrictions
or conditions to transfer or assignment, liabilities, obligations, privileges,
equities, easements, rights of way, limitations, reservations, restrictions, and
other encumbrances of any kind or nature.
"Environmental Laws "means: (i) the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. sec 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. sec 6901 et seq., the Clean
Water Act, 33 U.S.C. sec 1251 et seq., the Clean Air Act, 42 U.S.C sec 7401 et
seq., the Toxic Substances Control Act, 15 U.S.C. sec 2601 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. sec 136; the Occupational
Safety and Health Act, 29 U.S.C. sec 651 et seq. ("OSHA"); the Pollution
Prevention Act, 42 U.S.C. sec 13101 et seq.; the Oil Pollution Act, 33 U.S.C.
sec 2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. sec 300fet seq.; and
(ii) national, state, regional and local counterparts to any of the foregoing
statutes, both within and outside the U.S.; (iii) national, state, regional and
local enactments which regulate or address Environmental Matters, both within
and outside of the U.S.; and, (iv) regulations, codes, plans, orders, decrees,
judgments, notices guidelines, authoritative interpretations or demands issued,
entered, promulgated or approved under any of the foregoing.
"Environmental Matters" means all matters relating in any way to (i)
soil, air and water and groundwater pollution or contamination, including
without limitation, any on-site or off-site pollution or contamination; (ii)
damages to the natural environment or natural resources; (iii) releases or
discharges of waste, Hazardous Materials, or pollutants or contaminants; (iv)
occupational health and safety; or (v) the generation, transport, storage,
recycling or disposal of Hazardous Materials or wastes (including, without
limitation, garbage, refuse, slag, sludge and other discarded materials, whether
solid, liquid, semisolid or gaseous and whether on-site or off-site).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Hazardous Materials" means those elements, compounds and substances
identified in any of the Environmental Laws as "hazardous materials", "hazardous
substances", or "hazardous wastes", as well as any other elements, compounds or
substances which are listed or identified as "pollutants", "contaminants",
"hazardous" or "toxic" (or by other terms of similar meaning) under any of the
Environmental Laws. The term "Hazardous Materials" specifically includes,
without limitation, radioactive materials, petroleum products and asbestos.
"Indemnifying Party" has the meaning set forth in ss. 4.2 below.
"Intellectual Property" means all of the Seller's rights to the names
under which it is incorporated or under which it currently conducts its
business, and all of the Seller's rights to any patents, patent applications,
trademarks and service marks (including registrations and applications
therefor), trade names, logos, copyrights and written know-how, trade secrets,
licenses and sublicenses and all similar proprietary data and the goodwill
associated therewith.
"Inventory and Supplies" has the meaning set forth in ss. 2.1.5 below.
"Job Summary Schedule" means the schedule of Projects and their
related Contract Values, Recognized Billings and Recognized Costs to be
delivered by the Seller to the Purchaser three days before the Closing Date in
accordance with ss. 2.5.
"Leased Properties" has the meaning set forth in ss. 2.1.3 below.
"Licenses and Permits" has the meaning set forth in ss. 2.1.6 below.
"Material" means any amount, effect, changed circumstance or condition
significant or substantive to the business, operations, assets or financial
condition or results of operations of the Party or Parties at issue, unless such
amount, effect, changed circumstance or condition is due to general changes in
the economy or the general industry in which the Party at issue operates.
"Ongoing Project" means a project that is not a Completed Project and
for which the Seller has incurred Recognized Billings and Recognized Costs, but
has not received the entire Contract Value therefor.
"Personal Property" has the meaning set forth in ss. 2.1.2 below.
"Project" means any project that has been assigned a job number in the
Company's accounting system and in which the Seller is performing services
pursuant to the Business as of the date of the Job Summary Schedule, all of
which are set forth on the Job Summary Schedule.
"Properties" has the meaning set forth in ss. 2.1.3 below.
"Purchase Price" means an amount equal to the Cash Consideration and
the initial principal amounts of the Secured Note.
"Purchaser" has the meaning set forth in the preface above.
"Real Property" has the meaning set forth in ss. 2.1.1 below.
"Recognized Billings" means the amount of revenue, calculated in
accordance with the Seller's accounting procedures recognized on the Job Summary
Schedule, with respect to each Project.
"Recognized Costs" means the amount of Seller's costs, calculated in
accordance with Seller's accounting procedures, recognized on the Job Summary
Schedule with respect to each Project.
"Retained Assets" has the meaning set forth in ss. 2.2 below.
"Secured Note" has the meaning set forth in ss. 2.3 below.
"Seller" has the meaning set forth in the preface above.
"Title Policy" has the meaning set forth in ss. 3.2 below.
"Transaction Documents" means this Agreement, the Secured Note, the
Security Agreement - Pledge and the Employment Agreements.
1. CLOSING
1. Closing. The closing of the transactions contemplated hereby (the
"Closing") shall take place on a date mutually acceptable to Seller and
Purchaser no later than 30 days after all of the conditions precedent described
in ss. 10 and 11 hereof have been satisfied or waived (the "Closing Date"), but
in no event shall the Closing be later than December 31, 1998. The Closing shall
take place at 10:00 a.m. on the Closing Date at the offices
of___________________________
2. PURCHASE, SALE AND RELATED MATTERS
2.1. Assets. At Closing, Seller will sell, transfer, convey, assign
and deliver to Purchaser, and Purchaser will purchase and acquire from Seller,
all of Seller's assets (the "Assets"), including, but not limited to, the
following assets:
2.1.1. Real Property. The real property set forth in Schedule
2.1.1 together with all buildings, improvements, easements,
restrictions and fixtures relating thereto (collectively, the "Real
Property");
2.1.2. Machinery and Equipment. All machinery, equipment,
vehicles, furniture, office equipment, computers and computer
accessories, spare parts and all other items of tangible personal
property owned or used (but excluding leased personal property) by
Seller in the Business, including without limitation those items set
forth in Schedule 2.1.2 (collectively, the "Personal Property");
2.1.3. Contracts and Leased Properties. To the extent
transferable or assignable, without further consideration, the
contracts, purchase orders, leases, lease improvements, non-compete
agreements, vendor approvals, confidentiality agreements, insurance
policies, performance bonds, claims, benefits under all liens,
warrants and guarantees, bids and proposals (whether or not awarded),
work in progress and other agreements associated with the Business,
including without limitation those set forth in Schedule 2.1.3
(collectively, the "Contracts"). Schedule 2.1.3 also identifies all
leases of real property used or occupied by Seller (the "Leased
Properties"; the Real Property and Leased Properties are collectively
referred to in this Agreement as the "Properties");
2.1.4. Intellectual Property. The Intellectual Property and
associated licenses and sublicenses used by the Seller and Seller's
rights to the Intellectual Property, all material items of which are
listed on Schedule 2.1.4, remedies against infringements of the
Intellectual Property, and rights to protection of the Intellectual
Property under the laws of all jurisdictions;
2.1.5. Inventory and Supplies. To the extent owned by Seller, all
work-in-process, inventory, materials, finished products, supplies
(including marketing materials and brochures), and packaging supplies,
including, without limitation, those set forth in Schedule 2.1.5
(collectively, the "Inventory and Supplies");
2.1.6. Licenses and Permits. To the extent transferable, all
governmental licenses, permits, authorizations and approvals,
franchises, consents, filings and applications for any of the
foregoing, used by Seller in the Business, including without
limitation those set forth in Schedule 2.1.6 (collectively, the
"Licenses and Permits");
2.1.7. Business Data. All information, documents and records
(such as customer files, pricing data and supplier data) used by
Seller in connection with the Business or used in connection with any
of the Assets (collectively, the "Business Data");
2.1.8. Accounts Receivable. The accounts receivable of the
Business as of the Closing Date as shown on the Accounts Receivable
Schedule;
2.1.9. Lock Boxes. To the extent transferable, any and all
lock-boxes of Seller, all of which are listed on Schedule 2.1.9;
2.1.10. Tax and Accounting Records. All tax and accounting
records and files relating to the Business;
2.1.11. Personnel Files. All personnel files and records related
to any employee of Seller who gives permission to Seller to transfer
such records to Purchaser;
2.1.12. Prepaid Expenses. The expenses of the Seller and the
Business, to the extent pre-paid as of the Closing, including, but not
limited to, pre-paid taxes, pre-paid rent, pre-paid service contracts,
and prepaid miscellaneous expenses;
2.1.13. Cash. All cash;
2.1.14. Other Assets. All other assets shown on the worksheet
attached as Schedule 2.1.14., and all of the additional privileges,
rights, interests, properties and assets of the Seller of every kind
and description and wherever located that are used in the Business or
intended for use in the Business in connection with, or that are
necessary for the continued conduct of, the Business.
2.2. Retained Assets. Seller shall retain all right,
title and interest in and to the following assets (collectively, the
"Retained Assets"),all of which are itemized on Schedule 2.2.
2.2.1. Tax Refunds and Other Credits. All tax refunds, insurance
proceeds and credits attributable to the Business before the Closing
Date or resulting from the consummation of the transactions
contemplated herein;
2.2.2. Personnel Files. All personnel files and records related
to any employee of Seller who does not give permission to provide such
records to Purchaser;
2.2.3. Employee Benefit Plans. All right, title, or interest in
any employee benefit plan of Seller;
2.2.4. Corporate Charter and Related Documents. The corporate
charter, qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and
other documents relating to the organization, maintenance, and
existence of Seller as a corporation;
2.2.5. Lawsuits. All records relating to pending lawsuits to
which Seller is a party (provided that copies of non-privileged
material and that relate to or involve the Business shall, upon
request, be furnished to Purchaser);
2.2.6. Property Unrelated to the Business. All owned or leased
real and personal property that is not associated with the Business,
together with all of the structures, fixtures and improvements located
thereon;
2.2.7. Purchase Price. The consideration to be delivered to
Seller pursuant to this Agreement;
2.2.8. Seller's Contractual Rights. Any of the rights of Seller
under this Agreement (or under any side agreement between Seller on
the one hand and the Purchaser on the other hand entered into on or
after the date of this Agreement); and,
2.2.9. Assets Unrelated to the Business. Every other asset that
is not an Asset relating to the Business.
2.3. Purchase Price. As consideration for the Assets, the Purchaser
shall pay to the Seller $2,400,000: The Purchase Price shall be adjusted after
the Closing in accordance with Section 2.3.1 by adding the Adjustment Amount to
the Purchase Price.
2.3.1. Adjustment Amount. The Adjustment Amount (which may be a
positive or negative number) will be equal to
(a)Accounts Receivable less i)allowance for bad debt and
ii) Accounts Payable, minus (b) $1,250,000.
2.4. Uncollectible Accounts Receivable. At the Closing, Seller shall
deliver to the Purchaser the Accounts Receivable Schedule, which shall show the
Accounts Receivable of the Business as of the Closing Date, along with a
breakdown of all invoiced Accounts Receivable and all accrued Accounts
Receivable that have not been invoiced.
2.4.1. With respect to any Accounts Receivable on the Accounts
Receivable Schedule that relate to Completed Projects, if any such
Accounts Receivable prove to be uncollectible within 120 days of the
Closing Date, the Purchaser shall assign such Accounts Receivable to
the Seller or its designee and the principal amount of the Purchase
Price shall be reduced by the amount, if any, by which the amount of
such Accounts Receivable exceeds the accrual for bad debts as of the
Closing Date.
2.4.2. With respect to any other Accounts Receivable on the
Accounts Receivable Schedule: (i) if any such Accounts Receivable
prove to be uncollectible within 120 days of the later of the invoice
date or the Closing Date; and, (ii) if the collectibility of such
Accounts Receivable shall not have been adversely affected by the act
or omission of the Purchaser on or after the Closing, the Purchaser
shall assign such Accounts Receivable to the Seller or its designee
and the principal amount of the Purchase Price will be reduced by the
amount, if any, by which the amount of such Accounts Receivable
exceeds the accrual for bad debts as of the Closing Date.
2.4.3. The total of all reductions in the principal amount of the
Purchase Price pursuant to sections 2.4.1 and 2.4.2 above, the Seller
shall pay to the Purchaser the amount by certified or bank check
within 30 days of receiving Purchaser's invoice for such amount
accompanied by an assignment of the Accounts Receivable in question.
2.5. Recognized Costs. No less than three days before the Closing, the
Seller shall deliver to the Purchaser a schedule (the "Job Summary Schedule")
setting forth, with respect to each Project, the Contract Value, the Recognized
Costs, and the identification of the Project as a Completed Project or an
Ongoing Project.
2.5.1. With respect to each Completed Project, if there are costs
attributable to such Completed Project in excess of the Recognized
Costs set forth on the Job Summary Schedule, the Purchaser shall
provide to Seller documentation substantiating such costs and the
principal amount of the Purchase Price shall be reduced by the amount
of such costs; provided, however, that there shall be no adjustment of
the principal amount of the Purchase Price until the aggregate amount
of such costs for all Completed Projects exceeds $10,000. If and when
the aggregate amount of such costs for all Completed Projects exceeds
$10,000, the principal amount of the Purchase Price shall be reduced
by the amount of the total of all such costs.
2.5.2. With respect to each Ongoing Project, if there are costs
that were incurred before the date of the Job Summary Schedule
attributable to such Ongoing Project in excess of the Recognized Costs
set forth on the Job Summary Schedule, the Purchaser shall provide to
Seller documentation substantiating such costs and the principal
amount of the Purchase Price shall be reduced by the amount of such
costs; provided, however, that there shall be no adjustment of the
principal amount of the Purchase Price until the aggregate amount of
such costs for all Ongoing Projects exceeds $10,000. If and when the
aggregate amount of such costs for all Ongoing Projects exceeds
$10,000, the principal amount of the Purchase Price shall be reduced
by the amount of the total of all such costs.
2.5.3. The total of all reductions in the principal amount of the
Purchase Price pursuant to Sections 2.5.2 and 2.5.3 above, the Seller
shall pay to the Purchaser the excess amount by certified or bank
check within 30 days of receiving Purchaser's invoice for such amount
accompanied by the substantiating documentation.
2.6. Allocation of the Purchase Price. Seller and Purchaser shall use
their best efforts to agree, within 90 days of the Closing Date, to an
allocation of the Purchase Price (together with liabilities assumed hereunder
and other relevant items) among the Assets. Seller and Purchaser represent,
warrant and agree that such allocation will be determined through arm's length
negotiations. If the Parties are unable to agree on the allocation, the
allocation shall be determined by an independent accounting firm acceptable to
Purchaser and Seller, such agreement not to unreasonably withheld, conditioned
or delayed, whose resolution shall be binding and enforceable against the
Parties hereto. Such allocation will comply with the requirements of Section
1060 of the Code. Purchaser will prepare IRS Form 8594 for Seller's review and
comment. Seller and Purchaser each agrees that, to the extent permitted by
applicable law, it will adopt and use the amounts allocated to each asset or
class of assets for purposes of all Federal, state and other income Tax returns
or reports of any nature filed by it, and that it will not voluntarily take any
position inconsistent therewith upon examination of any such Tax returns or
reports, in any claim for refund, in any litigation or otherwise with respect to
such Tax returns or reports. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date without
limitation.
2.7. Further Assurances. At the Closing, and from time to time after
the Closing:
2.7.1. Conveyance Documents. At the request of Purchaser, and
without further consideration, Seller shall promptly execute and
deliver to Purchaser such certificates and other instruments of sale,
conveyance, assignment and transfer, and take such other action, as
may reasonably be requested by Purchaser to sell, convey, assign and
transfer to and vest in Purchaser or to put Purchaser in possession of
the Assets;
2.7.2. Assumption Documents. At the request of Seller and without
further consideration, Purchaser shall promptly execute and deliver to
Seller such certificates and other instruments of assumption, and take
such other action, as may reasonably be requested by Seller more
effectively to confirm and carry out the assumption by Purchaser of
the obligations of Seller assumed by Purchaser hereunder.
2.7.3. Consents and Related Matters. To the extent that any
consents, waivers or approvals necessary to convey items of Assets to
Purchaser are not obtained before the Closing, Seller shall use its
reasonable best efforts to:
2.7.3.1.Benefits of Assets. Provide to Purchaser, at the
request of Purchaser, the benefits of any such Asset;
2.7.3.2. Cooperation. Cooperate in any reasonable and
lawful arrangement, approved by Purchaser, designed to provide
such benefits to Purchaser; and
2.7.3.3. Exercise of Rights. Enforce and perform, at the
request and expense of Purchaser, and for the liability and
account of Purchaser, any rights or obligations of Seller
arising from any such Asset against or in respect of any third
person (including a government or governmental unit), including
the right to elect to terminate any contract, arrangement or
agreement in accordance with the terms thereof upon the advice
of Purchaser;
2.8. Instruments of Conveyance, Transfer, Assumption, Etc. Seller
shall properly execute and deliver to Purchaser at the Closing:
2.8.1. Bill of Sale. The Bill of Sale, substantially the form of
Exhibit B, evidencing the sale of the Assets to the Purchaser,
assigning to the Purchaser the assignable Contracts, the assignable
leases for the Leased Properties, and the Licenses and Permits, and
transferring to Purchaser all of Seller's right, title and interest in
and to the Intellectual Property included in the Assets.
2.8.2. Deeds. Deeds in the form of Exhibit C; and,
2.8.3. Other. Such other necessary documents as Purchaser may
reasonably request.
2.9. Risk of Loss. The risk of loss or damage to all Assets shall
remain with Seller until consummation of the Closing.
3. CERTAIN LIABILITIES
3.1. Liabilities Assumed. At the Closing, and on and subject to the
terms and conditions of this Agreement, the Purchaser shall assume and become
responsible for only the following liabilities:
3.1.1. Accounts Payable. Seller's accounts payable as of the
Closing, including purchase orders issued in the ordinary course of
business, but not yet booked as an account payable as of the Closing
Date;
3.1.2. Unpaid Taxes. All liabilities of Seller for unpaid taxes
with respect to periods after the Closing;
3.1.3. Employees. All liabilities and obligations for all periods
as of and after the Closing Date with respect to Seller's employees
who become employed by Purchaser, including all liabilities and
obligations with respect to such employees for disability or workers'
compensation claims, that arise out of incidents occurring after the
Closing Date, it being understood that the Seller will retain all
liabilities and obligations for all periods before the Closing Date
with respect to Seller's employees, including all liabilities and
obligations with respect to such employees for disability or workers'
compensation claims that arose out of events occurring before the
Closing Date;
3.1.4. Liabilities Relating to the Assets. Other than the
liabilities and obligations identified on Schedule 3.1.4, all
liabilities and obligations of Seller under the agreements, contracts,
leases, licenses, and other arrangements referred to in the definition
of Assets;
3.1.5. Environmental Liabilities. All liabilities relating to
Environmental Matters arising out of acts or omissions occurring as of
or after the Closing Date; it being understood that the Seller will
remain obligated for any liabilities relating to Environmental Matters
arising out of acts or omissions occurring before the Closing Date.
3.1.6. Other. All other liabilities and obligations of Seller or
the Business arising as of or after the Closing (collectively, and
together with amounts described in ss. 3.2, the "Assumed
Liabilities").
3.2. Transfer Taxes and Expenses. Purchaser assumes liability for and
shall pay all sales, use, privilege and other transfer or similar Taxes imposed
on it by law as a result of the transactions contemplated hereby. Purchaser
shall pay all recording fees and costs, and all transfer taxes or revenue stamps
incidental to the recordation of the deed(s) conveying the Real Property. Seller
shall pay all survey costs and Purchaser shall pay all title commitment (the
"Title Policy") and title insurance premiums in connection with the Real
Property.
4. INDEMNIFICATION AND RELATED COVENANTS.
4.1. Indemnification.
4.1.1. Indemnification by the Seller. Seller shall indemnify the
Purchaser from and against any and all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees,
including court costs and reasonable attorneys' fees and expenses
(collectively, "Adverse Consequences") that the Purchaser shall suffer
through and after the date of the claim for indemnification (but
excluding any Adverse Consequences the Purchaser shall suffer after
the end of any applicable survival period) caused by: (i) Seller's
breach of any of its representations, warranties, covenants or
agreements contained in this Agreement; or (ii) any liability of
Seller that is not an Assumed Liability (including any liability of
Seller that becomes a liability of the Purchaser under any bulk
transfer law of any jurisdiction, under any common law doctrine of
defacto merger or successor liability (including, but not limited to
ERISA), or otherwise by operation of law); provided, however, that
Seller shall not have any obligation to indemnify the Purchaser under
this ss. 4.1 .1:
4.1.1.1. Deductible. Until the Purchaser has suffered
Adverse Consequences by reason of all such breaches in
excess of a $10,000 aggregate deductible (after which point
Seller will be obligated only to indemnify the Purchaser
from and against further such Adverse Consequences); or,
4.1.1.2. Limits on Indemnification. To the extent the
Adverse Consequences the Purchaser has suffered by reason of
all such breaches exceeds a ceiling equal to the Purchase
Price (after which point Seller will have no obligation to
indemnify the Purchaser from and against further such
Adverse Consequences).
4.1.2. Indemnification by Purchaser. Purchaser shall indemnify
Seller from and against any and all Adverse Consequences Seller shall
suffer through and after the date of the claim for indemnification
(but excluding any Adverse Consequences Seller shall suffer after the
end of any applicable survival period) arising from or relating to
Purchaser's breach any of its representations, warranties, covenants
or agreements contained in this Agreement; any Assumed Liability; or,
the Business or the Assets (other than those matters for which Seller
shall indemnify Purchaser under ss. 4.1 .1 above); provided, however,
that Purchaser shall not have any obligation to indemnify the Seller
under this ss. 4.1.2:
4.1.2.1. Deductible. Until the Seller has suffered
Adverse Consequences by reason of all such breaches in
excess of a $10,000 aggregate deductible (after which point
Purchaser will be obligated only to indemnify the Seller
from and against further such Adverse Consequence);
4.1.2.2. Limitation on Indemnification. To the extent
the Adverse Consequences the Seller has suffered by reason
of all such breaches exceeds a ceiling equal to the Purchase
Price (after which point Purchaser will have no obligation
to indemnify the Seller from and against further such
Adverse Consequences).
4.2. Indemnification Procedure. If any Party hereto discovers or
otherwise becomes aware of a claim with respect to which a claim for
indemnification may be made pursuant to ss.ss. 4.1.1 or 4.1.2 of this Agreement
(including any third party claim) (the "Indemnified Party"), such Indemnified
Party shall give written notice to the other Party (the "Indemnifying Party"),
specifying such claim; provided, however, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of any obligations hereunder to the extent the Indemnifying Party is not
Materially prejudiced thereby. Further, promptly after receipt by an Indemnified
Party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this ss. 4, such Indemnified Party shall, if a claim in respect
thereof is to be made against any Indemnifying Party, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of any obligations hereunder to the extent the Indemnifying
Party is not Materially prejudiced thereby. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall assume the defense
thereof to the extent that it may wish, with counsel reasonably satisfactory to
such Indemnified Party, and after such notice from the Indemnifying Party to
such Indemnified Party of its assumption of the defense thereof, the
Indemnifying Party shall not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof unless the Indemnifying Party has failed to assume the defense
of such claim and to employ counsel reasonably satisfactory to such Indemnified
Party. An Indemnifying Party who does not assume the defense of a claim shall
not be liable for the fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such Indemnifying Party with respect
to such claim or with respect to claims separate but similar or related in the
same jurisdiction arising out of the same general allegations. Notwithstanding
any of the foregoing to the contrary, the Indemnified Party will be entitled to
select its own counsel and assume the defense of any action brought against it
if the Indemnifying Party fails to select counsel reasonably satisfactory to the
Indemnified Party, the expenses of such defense to be paid by the Indemnifying
Party. No Indemnifying Party shall consent to entry of any judgment or enter
into any settlement with respect to a claim without the consent of the
Indemnified Party, which consent shall not be unreasonably withheld, or unless
such judgment or settlement includes as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim. No Indemnified Party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an Indemnifying Party, without the consent
of such Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. All costs and expenses to be paid by an Indemnifying Party on behalf of
an Indemnified Party shall be paid on a current basis as incurred.
4.3. Determination of Adverse Consequences. The Purchaser and Seller
shall make appropriate adjustments for insurance coverage in determining Adverse
Consequences for purposes of this ss. 4. All indemnification payments made by
the Seller under this ss. 4 shall be deemed adjustments to the Purchase Price.
4.4. Exclusive Remedy. The Purchaser and Seller acknowledge and agree
that other than as set forth in ss.ss. 2.4 and 2.5, the foregoing
indemnification provisions in this ss. 4 shall be the exclusive remedy of the
Purchaser and Seller with respect to the transactions contemplated by this
Agreement.
4.5. Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement, other
than the representations and warranties of the Seller contained in SS.SS. 5.1.13
and 5.1.14, shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of two years
thereafter. The representations and warranties of the Seller contained in ss.ss.
5.1.13 and 5.1.14 of this Agreement shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect until the
statute of limitations relating to the action giving rise to the potential
liability has expired.
5.1. Representations and Warranties. Seller represents and warrants to
the Purchaser as follows:
5.1.1. Organization and Good Standing. Seller is a corporation
duly organized, validly existing and in good standing under the laws
of California has full requisite corporate power and authority to
carry on its business as it is currently conducted, and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
businesses conducted by it would make such qualification or licensing
necessary.
5.1.2. Agreements Authorized and their Effect on Other
Obligations. Seller has requisite power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it
is a party. The execution and delivery of this Agreement and the other
Transaction Documents to which the Seller is a party have been
authorized by all necessary corporate, shareholder and other action on
the part of the Seller, and this Agreement and the other Transaction
Documents to which the Seller is a party are the valid and binding
obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting the rights of creditors generally and subject
to normal equitable principles. The execution, delivery and
performance of this Agreement and the other Transaction Documents to
which the Seller is a party, and the consummation of the transactions
contemplated hereby and thereby, will not conflict with or result in a
violation or breach of any term or provision of, nor constitute a
default under (i) the charter or bylaws (or other organizational
documents) of the Seller, (ii) any obligation, indenture, mortgage,
deed of trust, lease, contract or other agreement to which the Seller
is a party or by which the Seller or its properties are bound; or
(iii) any provision of any law, rule, regulation, order, permit,
certificate, writ, judgment, injunction, decree, determination, award
or other decision of any court, arbitrator, or other governmental
authority to which the Seller or any of its properties are subject.
5.1.3. Subsidiaries. The Seller does not have any subsidiary
corporations or any interest in any other organization, incorporated
or unincorporated, partnership or any other entity of any type.
5.1.4. Contracts. Schedule 2.1.3 hereto sets forth a true,
complete and accurate list of all Material Contracts of the Seller,
including leases under which the Seller is lessor or lessee, which
relate to the Assets or the Business and are to be performed in whole
or in part after the date hereof. All of the Material Contracts are in
full force and effect, and constitute valid and binding obligations of
the Seller. The Seller is not, and to Seller's knowledge, no other
party to any of the Material Contracts is, in Material default
thereunder, and no event has occurred that (with or without notice,
lapse of time, or the happening of any other event) would constitute a
Material default thereunder.
5.1.5. Title to and Condition of Assets. The Seller has good
title to all of the Assets, free and clear of any Encumbrances. The
Seller will transfer good title to the Assets and the Purchaser will
acquire such good title upon consummation of the transactions
contemplated hereby. All of the Assets are in a state of good
operating condition and repair, ordinary wear and tear excepted, and
are free from any known defects except as may be repaired by routine
maintenance and such minor defects as to not substantially interfere
with the continued use thereof in the conduct of normal operations.
All of the Assets Materially conform to all applicable laws governing
their use. No notice of any violation of any law, statute, ordinance,
or regulation relating to any of the Assets has been received by the
Seller, except such as have been complied with in all Material
respects.
5.1.6. Intellectual Property. Schedule 2.1.4 hereto sets forth a
true, complete and accurate list of all of the Intellectual Property.
Except as set forth on Schedule 2.1.4, (i) the Intellectual Property
is owned or licensed by the Seller free and clear of any Encumbrances;
(ii) the Seller has not granted to any other person any license to use
any Intellectual Property; and (iii) the Seller has not received any
notice of infringement, misappropriation, or conflict with the
intellectual property rights of others in connection with the use by
the Seller of the Intellectual Property.
5.1.7. Licenses and Permits. Schedule 2.1.6 hereto sets forth a
true, complete and accurate list of all of the Licenses and Permits.
Except as set forth on Schedule 5.1.7, each of the Licenses and
Permits and the Seller's rights with respect thereto is valid and
subsisting, in full force and effect, and enforceable by the Seller
subject to administrative powers of regulatory agencies having
jurisdiction. Except as set forth on Schedule 5.1.7, the Seller is in
Material compliance with the terms of each of the Licenses and
Permits. None of the Licenses and Permits have been, or to the
knowledge of the Seller, are threatened to be, revoked, canceled,
suspended or modified. Upon consummation of the transactions
contemplated hereby, all of the Licenses and Permits that are
assignable without the consent of any governmental or other agency
shall be assigned to the Purchaser.
5.1.8. Financial Statements. The Seller has delivered to the
Purchaser copies of the Seller's unauditcd balance sheet as of October
31, 1998 and related statements of income and shareholders' equity as
of and for the eight months ended October 31, 1998 (collectively, the
"Financial Statements"), copies of which are attached hereto as
Schedule 5.1.8. The Financial Statements are true, correct and
complete in all Material respects and present fairly and fully the
financial condition of the Seller as of the dates and for the periods
indicated thereon, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except
as noted therein. The accounts receivable reflected on the Financial
Statements, or which have been thereafter acquired by the Seller, have
been collected or are collectible at the aggregate recorded amounts
thereof less applicable reserves, which reserves are adequate.
5.1.9. Recognized Billings and Costs. The Contract Values,
Recognized Billings, Recognized Costs and the status of each Project
set forth in the Job Summary Schedule will be true, correct and
complete in all Material respects as of the date thereof and present
fairly and fully such information regarding each Project, and have
been prepared in accordance with Seller's customary accounting
procedures.
5.1.10. Additional Information. Attached as Schedule 5.1.10.1
through and including Schedule 5.1.10.12, which, except for omissions
and inaccuracies that are not, in the aggregate, Material to the
Business, are true, complete and correct lists of the following items:
5.1.10.1. Receivables. All accounts and notes receivable of
the Seller as of October 31, 1998, together with (i) an
appropriate invoice date and due date aging schedule; (ii) the
amounts provided for as an allowance for bad debts; (iii) the
identity and location of any asset in which the Seller holds a
security interest to secure payment of the underlying
indebtedness; and (iv) a description of the nature and amount of
any Encumbrances on such accounts and notes receivable;
5.1.10.2. Payables. All accounts and notes payable of the
Seller as of October 31, 1998, together with an appropriate aging
schedule;
5.1.10.3. Bank Accounts. The name of each bank in which the
Seller has an account, the names of all persons authorized to
draw thereon, the account balances and the account numbers for
each such account;
5.1.10.4. Employee Agreements. Any collective bargaining
agreements of the Seller with employees, including amendments,
supplements, and written understandings, and all written
employment, compensation or consulting agreements, of the Seller
with any person;
5.1.10.5. Employees. All employees, their positions with the
Company and their compensation (including bonus);
5.1.10.6. Promissory Notes and Indebtedness. All long-term
and short-term promissory notes, installment contracts, loan
agreements, credit agreements and any other agreements of the
Seller relating thereto or with respect to collateral securing
the same;
5.1.10.7. Guaranties. All indebtedness, liabilities and
commitments of others and as to which the Seller is a guarantor,
endorser, co-maker, surety, or accommodation maker, or is
contingently liable therefor (excluding liabilities as an
endorser of checks and the like in the ordinary course of
business) and all letters of credit, whether stand-by or
documentary, issued by any third party.
5.1.10.8. Other Assets. Schedules 2.1.1, 2.1.2, 2.1.3,
2.1.4, 2.1.5 and 2 1 6 are true complete and correct listings of
the Real Property, Machinery and Equipment, Contracts and Leased
Properties, Intellectual Property, Inventory and Supplies, and
Licenses and Permits of the Company, except to the extent of
inaccuracies that are not Material to the assets of the Business.
5.1.11. Absence of Certain Changes and Events. Other than as a
result of the transactions contemplated by this Agreement or as set
forth on Schedule 5.1.11, since October 31, 1998, there has not been:
5.1.11.1. Financial Change. Any material adverse change in
the Assets, the Business or the financial condition, operations,
liabilities or prospects of the Seller;
5.1.11.2. Property Damage. Any material damage, destruction,
or loss to any of the Assets or the Business (whether or not
covered by insurance);
5.1.11.3. Waiver. Any waiver or release of a material right
of or claim held by the Seller;
5.1.11.4. Change in Assets. Any acquisition, disposition,
transfer, dividend, encumbrance, mortgage, pledge or other
encumbrance of any asset of the Seller other than in the ordinary
course of business;
5.1.11.6. Employment Arrangements. Any change in the
duration or level of compensation, bonus or severance payable
under any employment or contract arrangement with the Seller
(whether by amendment to any existing arrangement or by the
entering into a new arrangement) outside of the ordinary course
of business; or
5.1.11.7. Other Material Changes. Any other event or
condition known to either the Seller that would or may have a
Material adverse effect on the Seller, the Assets or the
Business.
5.1.12. Assets. The Assets constitute all of the assets used by
Seller to conduct the Business as historically conducted by the
Seller.
5.1.13. Environmental Matters. Except as set forth on Schedule
5.1.13, none of the current or past operations of the Business or any
of the Assets is being or has been conducted or used in such a manner
as to constitute a Material violation of any Environmental Law. The
Seller has not received any written notice from any entity,
governmental agency or individual regarding any existing, pending or
threatened investigation or inquiry related to violations of any
Environmental Law or regarding any claims for remedial obligations or
contribution for removal costs or damages under any Environmental Law,
which, in the aggregate, would have a Material adverse effect on the
Business or operations of the Assets. There are no writs, injunction
decrees, orders or judgments outstanding, or lawsuits, claims,
proceedings or investigations pending or, to the knowledge of the
Seller, threatened, relating to the ownership, use, maintenance or
operation of the Assets or the conduct of the Business, nor, to the
knowledge of the Seller, is there any basis for any of the foregoing.
Schedule 5.1.13 contains a list of all reports and environmental
assessments that the Seller has received with respect to any property
owned, operated or leased by the Seller, and the Seller has provided
copies of such reports and environmental assessments to the Purchaser.
Except as set forth on Schedule 5.1.13, the Seller has no liability at
any third party site as a result of disposing or arranging for the
disposal of Hazardous Materials.
5.1.14. Employee Benefit Plans; Labor Issues. The Seller will
deliver to the Purchaser copies of the Employee Plans and any other
health, dental and life insurance plans, bonus, deferred compensation,
pension, profit sharing and retirement plans and all other employee
benefit plans, programs or arrangements providing benefits for
employees of the Seller (the "Benefit Plans").
5.1.15. Necessary Consents. As of the Closing Date, the Seller
will have obtained and delivered to the Purchaser all consents
required to be obtained from any governmental authority or from any
other third party necessary for the Seller to consummate the
transactions contemplated hereby.
5.1.16. Investigations, Litigation. No investigation or review by
any governmental entity with respect to the Seller or any of the
transactions contemplated by this Agreement is pending or, to the
knowledge of the Seller, threatened, nor has any governmental entity
indicated to the Seller an intention to conduct the same. Except as
disclosed on Schedule 5.1.16, there is no material suit, action, or
legal, administrative, arbitration or other proceeding, or
governmental investigation pending to which the Seller is a party or,
to the knowledge of the Seller, might become a party.
5.1.17. Transactions with Management. Except as set forth on
Schedule 5.1.17, the Seller is not a party to any contract, lease or
agreement with any of the officers or directors of the Seller.
5.1.18. Compliance with Other Laws. The Seller is not in Material
violation of or in material default with respect to, or in alleged
violation of or alleged default with respect to OSHA, or any
applicable law or any applicable rule, regulation, or any writ or
decree of any court or any governmental commission, board, bureau,
agency, or instrumentality, or delinquent with respect to any Material
report required to be filed with any governmental commission, board,
bureau, agency or instrumentality except for such defaults or
violation3 that will not have a Material adverse effect on the Assets
or the Business.
5.1.19. Finder's Fee. Except as set forth on Schedule 5.1.19, all
negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by the Seller and its counsel
directly with Purchaser and its counsel, without the intervention of
any other person in such manner as to give rise to any valid claim
against any of the Parties hereto for a brokerage commission, finder's
fee or any similar payment.
6. PURCHASER'S REPRESENTATIONS AND WARRANTIES
6.1. Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of Texas, has
full requisite corporate power and authority to carry on its business as it is
currently conducted, and to own and operate the properties currently owned and
operated by it, and is duly qualified or licensed to do business and is in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of the properties owned or the nature of the business
conducted by it would make such qualification or licensing necessary.
6.2. Agreement Authorized and its Effect on Other Obligations. The
Purchaser has requisite power and authority to execute and deliver this
Agreement and the other Transaction Documents to which it is a party. The
execution and delivery of this Agreement and the other Transaction Documents to
which the Purchaser is a party have been authorized by all necessary corporate,
shareholder and other action on the part of the Purchaser, and this Agreement
and the other Transaction Documents to which the Purchaser is a party are the
valid and binding obligations of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, debtor relief or
similar laws affecting rights of creditors generally and subject to normal
equitable principles. The execution, delivery and performance of this Agreement
and the other Transactions Documents to which the Purchaser is a party, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in a violation or breach of any term or provision of,
nor constitute a default under (i) the charter or bylaws (or other
organizational documents) of the Purchaser, (ii) any obligation, indenture,
mortgage, deed of trust, lease, contract or other agreement to which the
Purchaser is a party or by which the Purchaser or its properties are bound; or
(iii) any provision of any law, rule, regulation, order, permit, certificate,
writ, judgment, injunction, decree, determination, award or other decision of
any court, arbitrator, or other governmental authority to which the Purchaser or
any of its properties are subject.
6.3. Necessary Consents. As of the Closing Date, the Purchaser will
have obtained and delivered to the Seller all consents required to be obtained
from any governmental authority or from any other third party necessary for the
Purchaser to consummate the transactions contemplated hereby.
6.4. Investigations. No investigation or review by any governmental
entity with respect to the Purchaser or any of the transactions contemplated by
this Agreement is pending, or to knowledge of Purchaser, threatened, nor has any
governmental entity indicated to Purchaser an intention to conduct the same.
6.5. Finder `s Fee. Except as set forth on Schedule 6.5, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by the Purchaser and its counsel directly with the Seller
and its counsel, without the intervention of any other person in such manner as
to give rise to any valid claim against any of the Parties hereto for brokerage
commission, finder's fee or any similar payment.
7. SELLER'S COVENANTS
7.1. Seller ~ Covenants. In addition to those covenants of Seller
inSS.4 above, Seller covenants as follows:
7.1.1. Employees.
7.1.1.1. Liability for Retention Bonuses. The Seller
acknowledges that payment of any applicable retention bonuses to
induce certain employees to remain employed by the Business for a
specified period of time following the Closing Date is the
obligation of the Seller or its affiliates, and payment of
retention bonuses will not be a liability of the Purchaser under
any circumstances.
7.1.1.2. Non-Solicitation of Employees. Except for those
individuals listed on Schedule 7.1.1.2, if Purchaser extends an
offer of employment to a Seller employee pursuant to SS. 8.1.1
below, Seller and Seller's affiliates shall not make a competing
offer of employment in any capacity to such employee for one year
following the Closing Date and will waive any non-competition or
other employment contract obligation that might otherwise
restrict the employee's ability to be employed by Purchaser;
provided, that nothing shall prevent Seller from offering
employment to any present Seller employee who is not offered
employment by Purchaser or whose employment with Purchaser is
terminated by Purchaser.
7.1.1.3. Medical Insurance. Seller shall arrange for the
benefits administration company currently coordinating the
medical benefits coverage for the Seller's employees to offer to
provide, at the expense of the Purchaser, continuation of
benefits, at Seller's existing pricing terms and conditions, as
of and after the Closing.
7.1.2. Name Change. Within 30 days following the Closing
Date, Seller shall apply to the appropriate governmental
authorities to change its corporate name to a name that is
different from "P.W. Stephens Residential, Inc."
7.1.3. Covenant Against Competition. For a period of five
years following the Closing Date, Seller will not directly or
indirectly through any affiliate or subcontractor, (i) engage in
any manner in a business which is the equivalent of, or is
competitive with, the products and services of the Purchaser,
within the United States or any foreign country (a "Competing
Business"), (ii) assist any other person in engaging in a
Competing Business or (iii) solicit or contact any customer,
supplier, employee or other person with a business relationship
with the Purchaser to influence such person or entity to alter in
any manner its or his relationship with the Purchaser. If at the
time of enforcement of this ss. 7.1.3, a court of competent
jurisdiction should hold that the restrictions herein are
unreasonable under the circumstances then existing, the Parties
agree that the maximum duration, scope or geographical area
legally permissible under such circumstances will be substituted
for the duration, scope or area stated herein.
7.1.4. Further Assurances. To the extent any Licenses and
Permits are not transferable, the Seller will use its reasonable
best efforts to assist the Purchaser in obtaining newly issued
Licenses and Permits before the Closing Date.
7.1.5. Insurance, Performance Bonds and Guaranties. The
Seller will use its reasonable best efforts to keep in place, at
Purchaser's expense, all insurance policies, performance bonds
and guarantees maintained by, or for the benefit of, the Seller
and listed on Schedule 7.1.5 until the earlier of (i) the
expiration of such insurance policies, performance bonds and
guaranties; (ii) until the Purchaser has obtained substitute
insurance policies, performance bonds or guaranties; or (iii) six
months after the Closing. The Purchaser shall indemnify the
Seller against any liabilities incurred by the Seller under such
performance bonds and guarantees listed on Schedule 7.1.5, and
shall provide to the Seller backup guarantees, performance bonds
or other sources of security reasonably acceptable to the Seller
to secure the Purchaser's obligations pursuant to this ss. 7.1.5.
8. PURCHASER'S COVENANTS
8.1. Purchaser`s Covenants. In addition to those covenants of
Purchaser in SS.4 above, Purchaser covenants as follows:
8.1.1. Employees. On the Closing Date, Purchaser shall offer
employment to each of Seller's employees.
8.1.2. Bulk Sales Requirement. Purchaser hereby waives compliance
by Seller with any bulk sales notice requirements under applicable
law, and Seller shall indemnify and hold Purchaser harmless from any
and all losses, liabilities, claims and expenses incurred by Purchaser
as a result of Seller's failure to comply with such requirements.
8.1.3. Closing of Seller's Books. Within 60 days of the Closing
Date, Purchaser shall close the books of the Business as of the
Closing Date, consistent with the Seller's past practice, and shall
supply Seller with a copy of the closing documents.
8.1.4. Full Access. On and after the Closing Date,
representatives of Seller shall have, upon reasonable notice, and for
reasonable business purposes (such as defense of litigation, response
to inquiries from tax and regulatory authorities, etc.), access at
reasonable times during normal business hours to the premises, senior
management and employees, books, records, contacts, and documents of
Purchaser relating to the Business, Assets, or any other liability or
obligation that is not an Assumed Liability; provided, however, that
the representatives of Seller shall comply with all security
procedures and requirements of Purchaser with respect to such
premises, books, records, contracts, tax matters, and documents, and
that any such activities shall be conducted in a manner that does not
unreasonably interfere with Purchaser's operations.
9. PRE-CLOSING CONVENANTS
9.1. Pre-Closing Covenants. The Parties agree as follows with respect
to the period between the execution of this Agreement and the Closing:
9.1.1. General. Each of the Parties will use its reasonable best
efforts to take all action and to do all things reasonably necessary
to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in ss. 10 and ss. 11 below).
9.1.2. Agreements of the Seller. Except as expressly contemplated
elsewhere in this Agreement, the Seller agrees that from the date
hereof until the Closing Date, the Seller will:
9.1.2.1. Maintenance of Present Business. Operate its
business only in the usual, regular, and ordinary manner so as to
maintain the goodwill it now enjoys and, to the extent consistent
with such operation, use its reasonable best efforts to preserve
intact its present business organization, keep available the
services of its present officers and employees, and preserve its
relationship with customers, suppliers, jobbers, distributors and
others having business dealings with it;
9.1.2.2. Maintenance of Properties. At its expense,
consistently with historic practices, maintain all of its
property and Assets in customary repair, order and condition,
reasonable wear and tear excepted;
9.1.2.3. Maintenance of Books and Records. Maintain its
books of account and records in the usual, regular, and ordinary
manner, in accordance with its customary accounting principles
applied on a consistent basis;
9.1.2.4. Compliance with Law. Comply with all laws
applicable and Material to the conduct of its business;
9.1.2.5. Prohibition of Certain Contracts and Liabilities.
Except for orders made and contracts entered into in the ordinary
course of business, not enter into any contracts, enter into a
commitment for expenditures or incur any liability, in each case
exceeding $5,000, unless approved in writing by the Purchaser,
which involve the payment of more than $5,000 each;
9.1.2.6. Prohibition of Loans. Not incur any obligations for
borrowed money, except for loans in the ordinary course of
business;
9.1.2.7. Disposal of Assets. Not sell, dispose of, or
encumber any property or assets, except in the ordinary course of
business;
9.1.2.8. Maintenance of Insurance. Maintain insurance upon
all its properties and with respect to the conduct of its
business of such kinds and in such amounts as is not less than
that presently carried by it;
9.1.2.9. No Amendment to Charter Documents and Related
Matters. Not amend its charter documents, or merge or consolidate
with or into any person, change in any manner the rights of its
capital stock or the character of its business;
9.1.2.10. Prohibition on Dividends. Not declare any dividend
on shares of its capital stock or make any other non-cash
distribution of assets to the holders thereof;
9.1.2.11. Acquisition Proposals. Not directly or indirectly
(i) solicit, initiate or encourage any inquiry or Acquisition
Proposal from any person or (ii) participate in any discussions
or negotiations regarding, or furnish to any person other than
Purchaser or its representatives any information with respect to,
or otherwise facilitate or encourage any Acquisition Proposal by
any other person. The Seller shall promptly communicate to
Purchaser the terms of any such written Acquisition Proposals
that it may receive or any written or oral inquiries made to
Seller or any of its directors, officers, representatives or
agents.
9.1.3. Notices and Consents. The Seller will give any notices to
third parties, and the Seller will use its reasonable best efforts to
obtain any third party consents, that the Purchaser reasonably may
request in connection with the matters referred to in ss. 5.1.15. Each
of the Parties will give any notices to, make any filings with, and
use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in ss. ss. 5.1.15 and 6.3.
9.1.4. Full Access. The Seller will permit representatives of the
Purchaser to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of the
Seller, to all premises, properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to
the Seller and the Business.
9.1.5. Notice of Developments.
9.1.5.1. The Seller may, by written notice to Purchaser
elect, at any time before Closing, to update any of the Schedules
to this Agreement. Unless the Purchaser has the right to
terminate this Agreement pursuant to ss. 12.1.2 below by reason
of the update and exercises that right within the period referred
to in ss. 12.1.2 below, the written notice pursuant to this ss.
9.1.5.1 will be deemed to have amended the affected Schedule(s),
to have qualified the representations and warranties contained in
ss. 5 above, and to have cured any misrepresentation or breach of
warranty that otherwise might have existed.
9.1.5.2. Each Party will give prompt written notice to the
other Party of any act, omission, event or occurrence, other than
a Seller update described in ss. 9.1.5.1, above, causing a breach
of any of its own representations and warranties contained in
this Agreement. No disclosure by any Party pursuant to this ss.
9.1.5.2, however, shall be deemed to amend or supplement the
Schedules or to prevent or cure any misrepresentation or breach
of warranty.
10. SELLER'S CONDITIONS PRECEDENT TO CLOSING
10.1. Seller's Obligation. Seller's obligation to enter into and
complete the Closing is subject to the fulfillment on or before the Closing Date
of each of the following conditions. Seller may waive any or all of these
conditions, in whole or in part, at Seller's sole option.
10.1.1. Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in this
Agreement shall be true and correct in all Material respects as of the
date of this Agreement and as of the Closing Date. Purchaser shall
have performed and complied in all Material respects with all
covenants and agreements required by this Agreement to be performed or
complied with by Purchaser on or before the Closing Date. Purchaser
shall have delivered to Seller a certificate, in form reasonably
satisfactory to Seller, dated as of the Closing Date and signed by a
duly authorized officer of Purchaser, to the foregoing effect.
10.1.2. Consents. All governmental and third party consents,
approvals and waivers, if any, required for the consummation of the
Acquisition shall have been received.
10.1.3. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Seller's knowledge, threatened,
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit or to obtain damages or provide other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
10.1.4. Corporate Action. Seller shall have received:
10.1.4.1. Board Resolutions. A copy of the resolution or
resolutions duly adopted by the Board or Directors of Purchaser
authorizing the execution, delivery and performance by the
Purchaser of this Agreement and the other Transaction Documents
to which the Purchaser is a Party, certified by its Secretary;
10.1.4.2. Secretary's Certificate. A certificate of the
Secretary of Purchaser, in form reasonably satisfactory to
Seller, certifying the incumbency and signature of the officers
of Purchaser executing this Agreement and the other Transaction
Documents to which the Purchaser is a Party, and stating that the
foregoing resolutions remain in effect and unaltered; and
11. PURCHASER'S CONDITIONS PRECEDENT TO CLOSING
11.1. Purchaser's Obligation. Purchaser's obligation to enter into and
complete the Closing is subject to the fulfillment on or before the Closing Date
of each of the following conditions. Purchaser may waive any or all of these
conditions, in whole or in part, at Purchaser's sole option.
11.1.1. Representations, Warranties and Covenants. The
representations and warranties of Seller contained in this Agreement
shall be true and correct in all Material respects as of the Closing
Date. Seller shall have performed and complied in all Material
respects with all covenants and agreements required by this Agreement
to be performed or complied with by Seller on or before the Closing
Date. Seller shall have delivered to Purchaser a certificate in form
reasonably satisfactory to Purchaser, dated as of the Closing Date and
signed by duly authorized officers of Seller, to the foregoing effect.
11.1.2. No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Purchaser's knowledge,
threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby. 11.1.3. Consents. All
governmental and third party consents, approvals and waivers, if any,
required for the consummation of the Acquisition shall have been
received.
11.1.4. Corporate Action. Purchaser shall have received:
11.1.4.1. Board Resolutions. A copy of the resolution or
resolutions duly adopted by the Board of Directors of Seller
authorizing the execution, delivery and performance by Seller of
this Agreement and the other Transaction Documents to which
Seller is a party, certified by its Secretary;
11.1.4.2. Secretary `s Certificate. Certificate of the
Secretary of Seller, in form reasonably satisfactory to
Purchaser, certifying the incumbency and signature of the
officers of Seller executing this Agreement and the other
Transaction Documents to which Seller is a party, and stating
that the foregoing resolutions remain in effect and unaltered;
and
11.1.5. Transfer Documents.
11.1.5.1. Bill of Sale and Deeds. Seller shall have executed
and delivered to Purchaser on the Closing Date the items
specified in ss.ss. 2.8.1, 2.8.2 and 2.8.3.
11.1.5.2. Assignments of Contracts and Licenses and Permits.
All of the Contracts and Licenses and Permits that are assignable
as of the Closing Date shall have been validly assigned to the
Purchaser without the consent of any other Party thereto other
than consents that have been obtained as of the Closing Date.
11.1.6. Title Insurance/Surveys. Purchaser shall have received
from a title company and surveyor:
11.1.6.1. Title Policy. With respect to the Real Property
the Title Policy, in form reasonably acceptable to Purchaser, at
standard rates, together with copies of all documents affecting
title; and
11.1.6.2. Survey. A survey of the Real Property certified to
Purchaser and the title insurance company issuing the Policy in a
manner reasonably acceptable to Purchaser and such title company.
11.1.7. Additional Agreements. The following additional
agreements shall have been executed and delivered:
11.1.7.1. Employment Agreements. Purchaser and the other
parties thereto shall have entered into the Employment
Agreements.
11.1.7.2. Assignment of Indemnities. The indemnities under
the contracts and agreements listed on Schedule 11.1.7.2
currently running to the Seller or its affiliates shall be
effectively assigned to the Purchaser in such a fashion that the
Purchaser will have the full benefits thereof. 11.1.8. Completion
of Due Diligence. The Purchaser shall have completed and have
been satisfied with the results of its due diligence review of
the Seller's Assets and the Business.
11.1.9. Opinion of Counsel. The Purchaser shall have received
from counsel to the Seller an opinion in form and substance reasonably
satisfactory to Purchaser and its counsel, addressed to the Purchaser,
and dated as of the Closing Date.
12. TERMINATION
12.1. Termination of Agreement. Either of the Parties may terminate
this Agreement as provided below:
12.1.1. By Mutual Consent. The Purchaser and the Seller may
terminate this Agreement by mutual written consent at any time before
the Closing.
12.1.2. By Purchaser Due to Material Adverse Effect. The
Purchaser may terminate this Agreement by giving written notice to the
Seller at any time before the Closing if (i) the Seller has within the
then previous 10 days given the Purchaser any notice updating the
Schedules to this Agreement pursuant to ss. 9.1.5.1 above and (ii) the
development that is the subject of the notice has had a Material
adverse effect upon the financial condition of the Business or Assets
taken as a whole.
12.1.3. By Purchaser Due to Breach of Representation or Warranty.
The Purchaser may terminate this Agreement by giving written notice to
the Seller at any time before the Closing if the Seller has breached
any representation, warranty or covenant contained in this Agreement
in any Material respect.
12.1.4. By Purchaser Due to Failure to Close Before December __
1998. The Purchaser may terminate this Agreement by giving written
notice to the Seller if the Closing shall not have occurred on or
before December __,1 998, by reason of the failure of any condition
precedent under ss. 11 hereof (unless the failure results primarily
from the Purchaser itself breaching any representation, warranty, or
covenant contained in this Agreement).
12.1.5. By Seller Due to Breach of Representation or Warranty.
The Seller may terminate this Agreement by giving written notice to
the Purchaser at any time before the Closing if the Purchaser has
breached any representation, warranty or covenant contained in this
Agreement in any material respect.
12.1.6. By Seller Due to Failure to Close Before December __
1998. The Seller may terminate this Agreement by giving written notice
to the Purchaser if the Closing shall not have occurred on or before
December ___ 1998, by reason of the failure of any condition precedent
under ss. 10 hereof (unless the failure results primarily from the
Seller itself breaching any representation, warranty, or covenant
contained in this Agreement).
12.2. Effect of Termination. If any Party terminates this Agreement
pursuant to ss. 12.1 above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party; provided,
however, that a termination of this Agreement shall not relieve any party hereto
from any liability for damages incurred as a result of a breach by such party of
its representations, warranties, covenants, agreements or other obligations
hereunder occurring before such termination.
13. ACTIONS AT CLOSING
13.1. Actions to be Taken by Seller at the Closing. Seller shall
deliver the items specified for delivery by Seller in ss.ss. 11.1.1, 11.1.3,
11.1.4, 11.1.5, 11.1.6, 11.1.7 and 11.l.9 above, unless delivery has bee waived
by Purchaser.
13.2. Action to be Taken by Purchaser at the Closing. Purchaser will
take the following actions at the Closing:
13.2.1. Purchaser shall deliver the items specified for delivery
by Purchaser in ss. ss. 10.1.1, 10.1.4 and 10.1.5 above, unless
delivery has been waived by Seller.
13.2.2. Purchaser shall pay the consideration specified for
payment at Closing in ss. 2.3 above.
14. MISCELLANEOUS
14.1. Publicity. Seller and Purchaser shall consult in advance on the
form, timing and contents of any publicity, announcement or disclosure with
respect to the Acquisition, whether to the financial community, governmental
authorities, the public generally or otherwise. Seller and Purchaser shall
issue, at a mutually acceptable date, a joint press release announcing the
change in ownership of the Assets.
14.2. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be addressed as follows and delivered
personally, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid, or by a nationally recognized overnight courier
service marked for overnight delivery. Any such notice shall be deemed received
when so delivered personally; or when sent by facsimile transmission (with
immediate confirmation thereafter); or, if mailed, upon receipt as confirmed by
written receipt; or. if sent by overnight courier marked for overnight delivery,
upon receipt.
If to Purchaser, to: Brian Barber
American Temporary Sanitation, Inc.
17 Reardon Road
Queensbury, NY 12804
If to Seller, to: P.W. Stephens Residential, Inc.
15201 Pipeline Lane, Suite B
Huntington Beach, CA 92649
Any of the entities referred to above may, by notice given in
accordance with this ss. 14.3 to the other entities, designate another address
or person for receipt of notices hereunder.
14.3. Assignment. This Agreement shall be binding upon and shall inure
to the benefit of, the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or transferred in whole or
in part by either party hereto without the prior written consent of the other
party, and any attempt to assign or transfer this Agreement or any part of
either in violation of this ss. 14.3 shall be void and of no effect.
14.4. Expenses. Each of the parties hereto shall be responsible for
and shall pay all of its own expenses incurred in connection with this Agreement
and the transactions contemplated herein, including without limitation all legal
fees and other expenses incident to the negotiation, preparation and execution
of this Agreement.
14.5. Controlling Law and Venue. This Agreement shall be governed by
and construed in accordance with the laws of the United States and the State of
California, without regard to the conflict of laws principles of that state or
any other jurisdiction. Judicial proceedings arising from or relating to this
Agreement shall only be instituted in the courts of the State of California and
the courts of the United States located in California. The Parties irrevocably
consent to the personal jurisdiction of the courts of State of California and
the courts of the United States located in California and waive all defenses to
jurisdiction and objections to the propriety or convenience of these courts that
they may have.
14.6. Entire Agreement. This Agreement, the exhibits and schedules
hereto, constitute the entire Agreement and understanding of the parties
relating to the subject matter hereof, and shall supersede all prior and
contemporaneous agreements and understandings, representations and warranties,
whether oral or written, relating to the subject matter hereof, including
without limitation any Letter of Intent that may have been entered into by
either Party or their agents.
14.7. Modification, Waiver. No waiver, acquiescence or forbearance by
either party hereto of any breach or default this Agreement, and no course of
conduct or dealings between the parties that varies from the terms and
conditions of this Agreement, shall: (i) be deemed a waiver as to any subsequent
and/or similar breach or default by either Party; or, (ii) constitute or be
deemed a modification of this Agreement; or, (iii) affect the rights or
obligations of the Parties under this Agreement in any way. This Agreement
cannot be modified except by a writing executed by both parties and this ss. 4.8
cannot be orally modified or waived.
14.8. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The Parties hereto stipulate and declare to
be their intention that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, void or unenforceable.
14.9. Captions. Captions contained in this Agreement are solely for
convenient reference and shall not be deemed to affect the meaning or
interpretation of any article, section or paragraph hereof.
14.10. Counterparts. Any number of counterparts of this Agreement may
be executed and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
instrument.
14.11. Headings. All headings in this Agreement, including the
exhibits and schedules, have been inserted for convenience only and shall not
affect the interpretation of any provision hereof.
14.12.Mutual Negotiations. This Agreement, including the exhibits
and schedules, has been arrived at through the mutual
negotiation of the parties. Accordingly, no provision shall be
construed against one party or in favor of another party
merely because one party or the other drafted the provision.
14.13.IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed on the day and year first set forth above.
"SELLER"
P.W. STEPHENS, RESIDENTIAL, INC.
By: /s/
------------------------------
Authorized Agent
"BUYER"
AMERICAN TEMPORARY SANITATION, INC.
By: /s/
------------------------------
Authorized Agent
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
U.S. INDUSTRIAL SERVICES, INC. FORM 10-QSB FOR THE PERIOD ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 1,832,210
<SECURITIES> 410,400
<RECEIVABLES> 3,079,792
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,749,057
<PP&E> 434,484
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,952,161
<CURRENT-LIABILITIES> 2,193,766
<BONDS> 0
0
0
<COMMON> 87,640
<OTHER-SE> 16,558,607
<TOTAL-LIABILITY-AND-EQUITY> 17,952,161
<SALES> 15,072,655
<TOTAL-REVENUES> 15,072,655
<CGS> 12,423,070
<TOTAL-COSTS> 12,423,070
<OTHER-EXPENSES> 2,664,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,017
<INCOME-PRETAX> 4,974,549
<INCOME-TAX> 1,288,637
<INCOME-CONTINUING> 3,685,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,685,912
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
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