----------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 12, 1999
(Date of Report)
ONSITE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 1-12738 33-0576371
- ------------------- -------------- -----------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
701 Palomar Airport Road, Suite 200, Carlsbad, California 92009
-----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 760-931-2400
<PAGE>2
Item 2. Acquisition or Disposition of Assets.
On November 2, 1999, Onsite Energy Corporation, dba ONSITE SYCOM Energy
Corporation, a Delaware corporation ("ONSITE SYCOM"), executed an Acquisition
and Release Agreement (the "Acquisition Agreement") to sell ninety-five percent
(95%) of the issued and outstanding stock of Lighting Technology Services, Inc.,
a California corporation ("LTS"), to Russell Wm. Royal ("Royal"). ONSITE SYCOM
had acquired title to all of the issued and outstanding stock of LTS on or about
June 12, 1998 ("Original Acquisition Date"), pursuant to that certain Agreement
of Purchase and Sale of Stock in which Royal and Keith Aldrich ("Aldrich") were
the selling shareholders (the "Original Acquisition Agreement").
In exchange for ninety-five percent (95%) of the issued and outstanding LTS
stock, ONSITE SYCOM received (i) 345,000 shares of ONSITE SYCOM Class A Common
Stock, $.001 par value, issued to Royal pursuant to the Original Acquisition
Agreement, (ii) a promissory note executed on behalf of Royal in favor of ONSITE
SYCOM to either (A) pay the principal sum of Ninety-Six Thousand and Six Hundred
Dollars ($96,600), or (B) deliver 345,000 shares of ONSITE SYCOM Class A Common
Stock, $.001 par value, issued to Aldrich pursuant to the Original Acquisition
Agreement, by December 31, 1999, and (iii) a promissory note executed on behalf
of LTS in favor of ONSITE SYCOM in the amount of Nine Hundred and Thirty-Five
Thousand Eight Hundred Twenty-One Dollars and Eighty-Seven Cents ($935,821.87)
payable by December 31, 2009 (the "LTS Note"). Under the terms of the LTS Note,
the principal amount shall be satisfied through the payment of cash, retention
by ONSITE SYCOM of amounts due LTS as compensation for specified services
rendered, and the performance of lighting services by LTS for projects offered
by ONSITE SYCOM to LTS.
In connection with the Original Acquisition Agreement, Royal and Aldrich
had executed Employment Agreements with ONSITE SYCOM to provide exclusive
services to LTS until March 31, 2000. Royal has served as the President and
Chief Operating Officer of LTS, and Aldrich has served as the Vice President and
Responsible Managing Officer. Royal and Aldrich continued to serve as directors
of LTS. Pursuant to the Acquisistion Agreement, the Employment Agreements of
Royal and Aldrich have been terminated.
Richard T. Sperberg, the Chief Executive Officer of ONSITE SYCOM, has
served as the Chairman of the Board of Directors and Chief Executive Officer of
LTS. In addition, Frank Mazanec (until March 10, 1999), J. Bradford Hanson
(effective March 10, 1999), and Audrey Nelson Stubenberg, all officers of ONSITE
SYCOM, have served on the LTS Board of Directors. Mr. Hanson also has served as
Chief Financial Officer and Ms. Stubenberg has served as Secretary. Pursuant to
the Acquisition Agreement, the above named officers of ONSITE SYCOM (with the
exception of Mr. Mazanec who resigned as a director as of March 10, 1999) have
resigned from their positions as officers of LTS and members of the LTS Board of
Directors.
<PAGE>3
The foregoing description of the Acquisition Agreement is a summary of
certain of its provisions. Reference is made to the entire Acquisition Agreement
attached hereto as Exhibit 2.1 which is incorporated herein by reference for all
of its terms and conditions.
LTS is a Costa Mesa, California based lighting services company. It will
continue to pursue independent lighting services opportunities in commercial,
industrial, and educational markets, while providing lighting subcontractor
services to energy services companies, including ONSITE SYCOM.
ONSITE SYCOM is a comprehensive energy service company that assists its
customers in reducing electricity and fuel costs by developing, designing,
constructing, owning and operating efficient, environmentally sound energy
projects. ONSITE SYCOM also offers a full range of professional consulting
services, which include direct access planning, market assessments, business
strategy and public policy analyses, utility deregulation and environmental
impact/feasibility studies. It is ONSITE SYCOM's mission to save customers money
and improve the quality of the environment through independent energy solutions.
Item 7. Financial Statements and Exhibits.
c. Exhibits.
2.1 Copy of the Acquisition Agreement.
<PAGE>4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 12, 1999
ONSITE ENERGY CORPORATION, dba
ONSITE SYCOM ENERGY CORPORATION
By: /s/ RICHARD T. SPERBERG
---------------------
Richard T. Sperberg
President
ACQUISITION AND RELEASE AGREEMENT
FOR
LIGHTING TECHNOLOGY SERVICES, INC.
THIS ACQUISITION AND RELEASE AGREEMENT (this "Agreement") is dated as of
November 2, 1999, and is entered into by and among Russell Wm. royal, an
individual ("Buyer" or "Royal"), ONSITE ENERGY CORPORATION dba ONSITE SYCOM
Energy Corporation, a Delaware corporation ("Seller"), and LIGHTING TECHNOLOGY
SERVICES, INC., a California corporation (the "Company"), and is made with
reference to the following facts:
RECITALS:
A. Seller acquired title to all of the issued and outstanding stock of
the Company on or about June 12, 1998, pursuant to that certain Agreement of
Purchase and Sale of Stock in which Seller was the purchaser and Buyer was one
of the selling shareholders (the "Original Acquisition Agreement").
B. Buyer desires to reacquire from Seller ninety-five percent (95%) of
all of the issued and outstanding common capital stock of the Company, and
Seller desires to sell such stock to Buyer on the terms and conditions set forth
in this Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Buyer, Seller and the Company, intending to be legally
bound, hereby agree as follows:
1 PURCHASE AND SALE OF SHARES.
1.1 Shares to be Transferred. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to sell, transfer and assign to
Buyer, and Buyer hereby agrees to purchase from Seller, the entire right, title
and interest of Seller in and to thirty-eight thousand (38,000) shares of the
common stock of the Company (the "Stock").
1.2 Purchase Price for Stock. The purchase price ("Purchase Price") for
the Stock shall be One Dollar ($1.00) payable on the Closing Date (as defined
below) plus the separate components described in Section 1.3 and Section 2
below.
<PAGE>
1.3 Transfer of Seller Stock. As part of the Purchase Price, the Buyer
shall deliver to Seller at the Closing certificates transferring three hundred
forty-five thousand (345,000) shares of Seller's Class A Common Stock, $.001 par
value issued to Buyer pursuant to the Original Acquisition Agreement.
1.4 Conditions Precedent to Closing. All obligations of the parties
under this Agreement are subject to the fulfillment, prior to or at the Closing
Date, of all conditions herein set forth, including, but not limited to
fulfillment, prior to the Closing Date, of the following conditions:
1.4.1 Seller Board Approval. The Board of Directors of Seller
shall approve the sale of Stock to Buyer under the terms and subject to the
conditions set forth herein.
1.4.2 Aldrich Employment Agreement. The Employment Agreement,
dated April 1, 1998, entered into by and between the Company, Seller and Keith
Aldrich, pertaining to the Company's employment of Keith Aldrich is terminated
with no further obligations or liabilities on the part of Seller. Evidence of
such termination shall be provided by Buyer and Company to Seller.
2 PROMISSORY NOTES.
2.1 Buyer Note.
2.1.1 Terms. Buyer agrees that on the Closing Date Buyer shall
execute a promissory note substantially in the form attached hereto as Exhibit A
(the "Buyer Note"). Under the terms of the Buyer Note, the Buyer shall pay to
Seller (i) the principal sum payment of Ninety-Six Thousand and Six Hundred
Dollars ("$96,600) ("Principal Sum Amount"), due and payable on December 31,
1999 ("Buyer Note Due Date"), and (ii) interest which shall accrue on the
Principal Sum Amount at the rate of Twelve Percent (12%) per annum, simple
interest from the Closing Date until the date the Principal Sum Amount is paid.
The Principal Sum Amount shall be forgiven by delivery to Seller of certificates
transferring three hundred forty-five thousand (345,000) shares of Seller's
Class A Common Stock, $.001 par value issued to Keith Aldrich pursuant to the
Original Acquisition Agreement (the "Aldrich Shares") on or before the Buyer
Note Due Date.
2.1.2 Events of Default. In the event (i) payment of the
Principal Sum Amount is not made to Seller on or before the Buyer Note Due Date,
or (ii) the Aldrich Shares are not delivered to Seller on or before the Buyer
Note Due Date, the Principal Sum Amount shall be deemed delinquent, and such
delinquency shall be considered an event of default under the Company Note (as
defined below) pursuant to Section 2.2.3. The occurrence of any of the events of
default set forth in Section 2.2.3 shall be considered a default of the Buyer
Note and Seller may pursue any remedies available under the Buyer Note and/or
Company Note.
2.2 Company Note. Company agrees that at the Closing the Company shall
<PAGE>
execute a promissory note substantially in the form attached hereto as Exhibit B
for Nine Hundred and Thirty-Five Thousand Eight Hundred Twenty-One Dollars and
Eighty-Seven Cents ($ 935,821.87) ("Principal Amount") due and payable by
December 31, 2009 (the "Company Note Due Date") (the "Company Note"). Under the
terms of the Company Note, the Company shall satisfy payment of the Principal
Amount to Seller through (i) payment of cash to Seller, (ii) the reduction in
the Principal Amount equal to the sum retained by Seller of those amounts due
Company as compensation for services rendered by Company for the Projects (as
defined in the Master Consulting Services Agreement pursuant to Section 7.8.3)
("SPC Payments"), and (iii) the performance of the equivalent value of lighting
services for projects offered by Seller to Company ("Lighting Services")
pursuant to Section 2.2.1.
2.2.1 Performance of Lighting Services At Cost. Subject to the
conditions set forth in Section 2.2.1.3, Company shall perform Lighting Services
whereby Company will be entitled to compensation from Seller for Budgeted Costs
(as defined below), and the Principal Amount shall be reduced by an amount equal
to twenty-five percent (25%) of the Budgeted Costs. "Budgeted Costs" shall mean
the Company's direct labor and materials costs (i) in an amount agreed to by
Company and Seller prior to project implementation, (ii) in accordance with the
course of prior dealings between the parties, (iii) in accordance with open book
pricing, and (iv) in which costs are consistent with other similar projects
between the parties. For purposes of determining Budgeted Costs, Company shall
provide Seller reasonable access for inspection and copying during regular
business hours to the books and records of the Company pertaining to "estimating
sheets" (i.e. documentation supporting estimations of Budgeted Costs). Subject
to Section 2.2.3, Seller shall pay Company for the Budgeted Costs in accordance
with the project agreements between the parties and shall not offset the amount
due Company for the Budgeted Costs against the balance of the Principal Amount
due Seller.
2.2.1.2 Offers of Lighting Services Seller shall make Offers
of Lighting Services (as defined below) during the term, and any extensions
thereof, of the Company Note to enable the Company to satisfy a portion of the
Principal Amount balance through the performance of Lighting Services. "Offers
of Lighting Services" shall mean the offers by Seller to Company for Company to
supply Lighting Services for those projects which (i) Seller has identified a
potential customer and has requested a bid for services from Company, (ii)
Company has submitted a quote with estimating sheets for budgeted costs and
project scope to Seller, (iii) Seller has reviewed Company quote and project
scope, (iv) Company and Seller agree upon project scope and Budgeted Costs, and
(v) a contract has been executed by Seller's customer. In the event there are
not Offers of Lighting Services for projects with associated Budgeted Costs
sufficient to enable Company to satisfy the Principal Amount through the
performance of Lighting Services, after application of SPC Payments, by the
Company Note Due Date, the term of the Company Note shall be extended until the
Principal Amount is satisfied through (i) performance by the Company of Lighting
Services, (ii) reduction of the Principal Amount by application of SPC Payments,
and/or (iii) payment in cash.
<PAGE>
2.2.1.3 Requirement to Perform Lighting Services. Subject to
Section 2.2.1.3.1, Company may not decline to perform Lighting Services pursuant
to Section 2.2.1 above in any given Payment Year (as defined below) to the
extent that the total of Budgeted Costs for all projects offered by Seller
during a Payment Year are less than the greater of (i) Five Hundred Thousand
Dollars ($500,000), or (ii) fifteen percent (15%) of the annual gross revenues
of the Company for the twelve (12) month period preceding the first day of the
month Seller offers a project to Company ("Twelve Month Period"). "Payment Year"
shall be each calendar year during the term of the Company Note. To the extent
that the total Budgeted Costs for all projects offered by Seller during a
Payment Year are greater than the greater of (i) Five Hundred Thousand Dollars
($500,000), or (ii) fifteen percent (15%) of the annual gross revenues of the
Company for the Twelve Month Period, Company shall perform the Lighting Services
and Seller shall pay Company an amount equal to twenty-five percent (25%) of the
Budgeted Costs ("Markup"). Subject to Section 2.2.3, the Markup shall not be
offset against the balance of the Principal Amount due.
2.2.1.3.1 Exception to Requirement to Perform Lighting
Services. Company may decline to perform Lighting Services otherwise required
pursuant to Section 2.2.1.3, in the event (i) Seller is more than ninety (90)
days delinquent in meeting its payment obligations to Company in accordance with
project agreements between the parties, or (ii) the outstanding amounts due to
Company by Seller for Budgeted Costs exceed Two Hundred Thousand Dollars
($200,000).
2.2.1.4 Monthly Financial Statements. Commencing on December
1, 1999 and continuing each calendar month thereafter until the Principal Amount
is paid, Company shall deliver to Seller financial statements, including but not
limited to a balance sheet, income statement, and documentation of the gross
revenues of the Company, for the preceding twelve (12) months ("Monthly
Financial Statements"). The Monthly Financial Statements shall (i) include
calculation of rolling twelve (12) month gross revenues, (ii) be delivered to
Seller within thirty (30) days after the last day of each month for which
Monthly Financial Statements must be provided by Company, and (iii) on an annual
basis, be reviewed by an independent accountant and be delivered to Seller
within ninety (90) days after the last day of Company's fiscal year.
2.2.1.5 Monthly Accountings. Commencing on December 1, 1999
and continuing each month thereafter until the Principal Amount is paid, Seller
shall provide Company an accounting of the outstanding Principal Amount due.
2.2.2 Security Interest. The obligations to Seller under this
Agreement and the Company Note shall be secured by all of the present and
after-acquired assets of the Company, including without limitation all accounts
receivable, inventory, contract rights, chattel paper, general intangibles,
tangible property of every nature and description wherever located, present and
future, rights to payment of money, goods, goodwill, trade secrets, documents
and instruments, equipment, deposit accounts, all insurance proceeds from any
policy of insurance covering any of the aforementioned collateral now owned or
hereinafter acquired by Company, and products and proceeds thereof
<PAGE>
(collectively, the "Collateral"), and the Company hereby grants to Seller a
security interest in the Collateral. The security interest granted hereunder
secures the payment of the Principal Amount (plus applicable interest) in
accordance with the terms and conditions of this Agreement and the Company Note.
The Company represents and warrants that it has the power to encumber the
Collateral as set forth herein. The Company will defend any proceeding that may
affect the title to or Seller's security interest in the Collateral, and the
Company will execute any financing statements or other filings and amendments
thereto requested by Seller to perfect Seller's interest in the Collateral.
Seller is hereby appointed the Company's attorney in fact at any time before or
after default to do any act that the Company is obligated to do under this
Agreement, collect the Collateral including proceeds, to execute and file in the
Company's name any financing statements, other filings and amendments thereto
required to perfect Seller's security interest in the Collateral, and to take
any other reasonable action to protect and preserve the Collateral. Except as
otherwise provided in this Agreement, the Company will not sell, transfer,
further encumber or grant an additional security interest in or to any of the
Collateral until the Principal Amount (plus applicable interest) has been paid,
except in the ordinary course of business; provided, however, that Seller agrees
to subordinate its security interest in the Collateral granted hereunder to a
security interest in the Collateral granted by the Company to a regionally or
other nationally recognized bank in connection with the financing of the Company
or the acquisition of additional debt, not to exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate.
2.2.3 Events of Default. If the Company (i) fails to (A) pay
the Principal Amount on or before the Company Note Due Date, or any extension
thereof, (B) perform Lighting Services in accordance with Section 2.2.1 or
Section 2.2.1.3, or (C) provide Monthly Financial Statements in accordance with
Section 2.2.1.4; (ii) subsequent to the Closing Date suffers a material adverse
change in financial conditions, or defaults with respect to any order, judgment,
injunction, decree, writ or demand of any court or other public authority which
exceeds $150,000; (iii) makes an assignment for the benefit of creditors; (iv)
is the subject of any voluntary or involuntary filing under the federal
bankruptcy law, any receivership proceedings, or under any federal or state law
for the relief of debtors; (v) is the subject of any dissolution or liquidation
proceedings; and (vi) has issued against it or its property any writ of
attachment, execution or other legal process involving an amount or risk
reasonably deemed material by Seller, and such writ of attachment, execution or
other legal process is not lifted or settled within thirty (30) days of the date
of the same (or other time period mutually agreeable to Seller and the Company),
or if the Buyer fails to (i) pay to Seller the Principal Sum Amount on or before
the Buyer Note Due Date, or (ii) deliver the Aldrich Shares to Seller on or
before the Buyer Note Due Date in accordance with Section 2.1, Seller shall have
the right to declare all or part of the Principal Amount (plus applicable
interest) and the Principal Sum Amount (plus applicable interest) immediately
due and payable, provided Seller has furnished Company with thirty (30) days
written notice in which to cure such default, and the same is not cured (except
that no written notice to cure is required where (i) failure to satisfy the
Principal Amount by the Company Note Due Date, or (ii) failure to pay the
Principal Sum Amount by the Buyer Note Due Date is the event of default). Upon
the occurrence of any of the events of default set forth herein, Seller shall
have all of the rights provided in the Uniform Commercial Code and otherwise
<PAGE>
available by law, may sue for any unpaid amount of the Principal Amount and
Principal Sum Amount (plus applicable interest) without proceeding against any
or all of the Collateral or sue for any deficiency remaining after disposition
of any or all of the Collateral, may without notice or demand setoff sell and
apply toward payment of any unpaid amount of the Principal Amount and Principal
Sum any amounts owed to Company and any property of the Company under Seller's
possession or control, and may sell in any commercially reasonable manner in one
or more transactions any or all of the Collateral.
2.2.4 Sale/Merger/Reorganization. In the event the Company
enters into a sale, merger or other reorganization in which the Company is the
disappearing corporation, or in which the Company sells all or substantially all
of its assets, the terms and conditions of such sale, merger or reorganization
shall provide that the Company Note shall be paid by the surviving corporation
of such merger or reorganization (the "Survivor") or by the purchaser in such
sale (the "Purchaser") in accordance with the terms and conditions of the
Company Note, except to the extent that Seller makes a good faith determination
that the Survivor or the Purchaser is not qualified to perform Lighting Services
which could have been performed by the Company had the Company not merged with
the Survivor or otherwise been reorganized, or sold to the Purchaser, the
Survivor or the Purchaser shall satisfy the unpaid balance of the Principal
Amount as of the date of such sale, merger, or reorganization through the
payment of cash on or before the Company Note Due Date. Company shall furnish
Seller with ten (10) days prior written notice of such sale, merger, or other
reorganization containing (i) the name of the Survivor or the Purchaser, and
(ii) a copy of the agreement in which such transaction is contemplated (the
"Notice"). Absent the Notice, such sale, merger, or other reorganization shall
be null and void.
2.2.5 Miscellaneous. After the Effective Date, Buyer shall
cause the Company to provide Seller and its authorized representatives
reasonable access for inspection and copying during regular business hours to
the books and records of the Company, the Survivor, or the Purchaser, as
applicable, for the purpose of confirming the determination of the annual gross
revenues of the Company, the Survivor, or the Purchaser, as applicable, pursuant
to Section 2.2.1.4. Prior to and until the termination of the Company Note,
Buyer and the Company hereby agree that Buyer (i) shall retain all necessary
authority to independently operate, manage and control the Company; and (ii) may
enter into any sales of assets, mergers, consolidations or other reorganizations
that affect the Company, or sell the Stock to any third party, without the prior
written consent of Seller so long as the terms and conditions of such sale,
merger, consolidation or other reorganization provides for the payment of the
Company Note to Seller in accordance with Section 2.2. The Company agrees to
provide at least ten (10) days prior written notice to Seller of such mergers or
sales.
<PAGE>
3 WARRANTIES AND REPRESENTATIONS.
3.1 Warranties by Seller. Seller warrants and represents to Buyer that:
3.1.1 Authority. Seller has full power and authority to
execute and deliver this Agreement and to perform the duties and obligations of
Seller hereunder.
3.1.2 Title. Seller has valid and marketable title to the
Stock that Seller will deliver hereunder, and on the Closing Date Seller shall
have such title free and clear of any liens, claims, rights or encumbrances of
or by any person, and shall have the absolute and unrestricted right, power,
authority and capacity to sell, assign and transfer such shares to Buyer as
provided herein, and shall transfer title to the Stock free and clear of all
liens, claims, rights or encumbrances.
3.1.3 No Consents Required. The entering into of this
Agreement and the consummation of the transactions contemplated hereunder do not
and will not violate the provisions of any contract or agreement to which Seller
is a party or by which Seller is bound and do not require the consent of any
person or entity that has not been obtained as of the Closing Date. Seller is
transferring the Stock in accordance with applicable Federal securities laws.
3.1.4 Capitalization. The Stock being sold and transferred to
Buyer hereunder comprises ninety-five percent (95%) of the issued and
outstanding stock of the Company.
3.2 Warranties by Buyer and the Company. Buyer and the Compan
warrant and represent to Seller that:
3.2.1 Authority. Buyer and the Company have full power and
authority to execute and deliver this Agreement and to perform the duties and
obligations of Buyer and the Company hereunder.
3.2.2 No Consents Required. The entering into of this
Agreement and the consummation of the transactions contemplated hereunder do not
and will not violate the provisions of any contract or agreement to which Buyer
or the Company is a party or by which Buyer or the Company are bound and do not
require the consent of any person or entity.
3.2.3 Purchase of Stock. Buyer acknowledges that Buyer is
purchasing the Stock subject to applicable securities laws, and will resell the
same only in accordance with applicable securities laws.
3.2.4 Knowledge of Buyer. Buyer acknowledges that Buyer has
served as president, chief operating officer, and director on the board of
directors of the Company since the sale of the Stock to Seller pursuant to the
Original Acquisition Agreement, and that Buyer's knowledge of the financial and
operating condition of the Company, the condition of its business and its
assets, and all other aspects of the Company's business, is at least equal to if
not greater than the knowledge of Seller and its officers and directors with
<PAGE>
respect to such matters.
3.3 Disclaimer of Additional Representations. Neither Buyer, the
Company nor Seller make any warranties or representations to the other parties
other than those expressly set forth in Sections 3.1 and 3.2, respectively.
4 COVENANTS OF THE PARTIES
4.1 Covenants of Buyer and the Company
4.1.1 Assertion of Claims. Buyer shall not assert any claims
against Seller before or after the Closing Date with respect to the condition of
the Company or its assets or business operations for any reason other than a
breach by Seller of the express representations, warranties and covenants of
Seller set forth in Section 3.1 above.
4.1.2 Acquisition of Stock. Buyer shall acquire the Stock and
Company assets subject to all outstanding debts and obligations of the Company
as of the Closing Date, including any liabilities that are not known to or that
have not been disclosed to Buyer or Company. Seller agrees that Buyer may
subsequently sell all or any portion of the Stock to any third party investor
and\or purchaser without the prior written consent of Seller so long as such
investor and\or purchaser understands and acknowledges to Seller in writing in
advance of such sale the Company's obligations under this Agreement (and agrees
that the terms of this Agreement shall remain in full force and effect) and
Buyer provides at least ten (10) days prior written notice to Seller. Buyer and
the Company hereby release and discharge and the Buyer and Company shall, in
good faith, indemnify, defend (with counsel acceptable to the Seller in its
reasonable discretion), pay and hold harmless Seller and its shareholders,
directors, officers, employees, agents and representatives, and each of them,
from and against all claims, actions, suits, losses, liabilities, damages,
assessments, taxes, fines, judgments, demands, deficiencies, disbursements,
penalties, costs and expenses (including without limitation court costs and
reasonable attorneys' fees) (collectively "Liabilities") arising out of, related
to, resulting from, or by reason of any acts or omissions of Seller or any of
its directors, officers, employees, agents or representatives (collectively,
"Representatives") in connection with Seller's or Seller's Representatives'
management, operation or administration of the Company (in the capacity of
director, officer or agent of the Company) prior to the Closing Date.
4.1.3 Unknown Liabilities. The Company shall indemnify,
defend, pay and hold Seller free and harmless from and against all Liabilities
of Seller with respect to any debts, obligations or liabilities that the Buyer
or the Company has caused the Company to incur without the knowledge of Seller
that have not been disclosed by Buyer or the Company to Seller and which Seller
becomes liable.
4.1.4 Access to Books, Records. After the Closing Date, Buyer
<PAGE>
shall cause the Company to provide Seller and its authorized representatives
reasonable access for inspection and copying during regular business hours to
the books and records of the Company pertaining to periods during which the
Stock was owned by Seller for any reasonable business purpose, including the
preparation and filing of tax returns or any other reports required to be made
to governmental or quasi-governmental agencies, including securities exchanges,
the resolution of disputes with third parties, and the like. The Seller shall
not disclose any such information to third parties without the consent of the
Company except to the extent that such disclosure is required by law, but the
Company shall not be entitled to withhold its consent to any proposed disclosure
that could not reasonably be expected to adversely affect the Company's business
or its competitive market position. Seller shall reimburse to the Company any
reasonable, out-of-pockets costs or disbursements incurred or made by the
Company in satisfying its obligations under this subsection 4.1.4.
4.1.5 Confidentiality and Non-Compete. Buyer and the Company
acknowledge that, by virtue of the subsidiary/parent relationship that existed
prior to the Closing Date between the Company and Buyer as president, chief
operating officer, and director of Company, on one hand, and Seller, on the
other hand, Buyer and the Company have become familiar with the internal
operations of Seller, and the customers and potential customers of Seller, which
information derives independent economic value, actual or potential, from not
being generally known to the public or to other persons who can obtain economic
value from its disclosure or use ("Confidential Information"). Buyer and Company
agree that they will not disclose or utilize any of the Confidential
Information. With respect to confidential and proprietary information which may
be disclosed between the parties after the Closing Date, Buyer and the Company
agree that at the Closing the Buyer and Company shall execute a confidentiality
agreement substantially in the form attached hereto as Exhibit C.
Furthermore, Buyer and the Company (i) acknowledge that consulting services or
activities related to (A) incentive payments sought under the standard
performance contract ("SPC") and/or the Power Saving Partners ("PSP") programs
implemented by the California Public Utilities Commission (the "CPUC"), and/or
Southern California Edison Company, Pacific Gas and Electric Company and/or San
Diego Gas & Electric Company ("SPC/PSP Services"), and (B) mechanical
measurement and verification [(A) and (B) are collectively referred to herein as
("Consulting Services")] are a small or limited portion of the business or
services to be offered by Buyer and the Company; and (ii) therefore agree that
for a period of two (2) years after the Closing Date, neither Buyer nor the
Company shall render Consulting Services (A) competitive with or adverse to
Seller's business or welfare; or (B) to direct or indirect competitors of
Seller; or (C) to any Customer (as defined below), unless such services or
activities are provided under this Agreement or some other agreement between
Buyer and/or Company and Seller. "Customer" shall refer to (i) those customers
identified on Exhibit F and any applicable amendment to the Master Consulting
Services Agreement substantially in the form attached hereto and incorporated
herein as Exhibit G, and (ii) any potential customer to which Seller has
proposed to offer its services as an energy services company (and not solely as
a lighting contractor) within three (3) years of the Closing Date as evidenced
<PAGE>
by Seller's written correspondence. In the event Seller becomes aware that
Company is soliciting a Customer and notifies Buyer and/or Company that such
solicitation is with a Customer, (i) Buyer and/or Company shall immediately
cease all activities with such Customer, unless Seller otherwise consents in
writing to the solicitation, and (ii) Seller shall provide Company an
opportunity to submit a bid for lighting contractor services unless such
services already have been obtained prior to Seller first becoming aware of
Company's solicitation.
4.1.6 Software Licenses. Buyer and the Company acknowledge
that the Company has installed software licensed to Seller, including BoxCar Pro
(version four), Office 2000 Premium Upgrade, and AudoCad 2000, and has had
access to the Internet via network connection services provided by Fiberlink
Communications. Effective as of the Closing Date, any and all rights of the
Company to utilize any computer software under any of Seller's licenses shall
terminate, and Buyer shall promptly erase such software programs and no longer
utilize the same. Additionally, Buyer and the Company no longer shall have
access to Seller's computer network or network connection services provided by
Fiberlink Communications. The Company hereby agrees to indemnify, defend, pay
and hold Seller and its Representatives free and harmless from and against all
Liabilities arising out of, related to, resulting from or by reason of any use
by the Company (or any of its Representatives) of Seller's software licenses
after the Closing Date.
4.1.7 Taxes. Buyer and Company shall make prompt payment of
any unpaid portion of the Paid Taxes and Taxes (as defined below in Section
7.3).
4.1.8 Salaries. The Salary (as defined below) of any Company
employee shall not exceed two hundred and fifty thousand dollars ($250,000) per
year, with a cost of living adjustment equal to five percent (5%) per annum,
until the following has been paid to Seller: (i) the Principal Sum Amount
(unless the Principal Sum Amount has been forgiven by the delivery of the
Aldrich Shares) and any accrued interest under the Buyer Note, and (ii) the
Principal Amount under the Company Note. "Salary" shall include all forms of
compensation including but not limited to base salary, bonus, commissions, and
allowances.
4.1.9 Security Interest. Buyer and Company shall obtain a
release or an agreement to subordinate from the holders of any pre-existing
liens or security interests in the Collateral (as defined in Section 2.2.2)
("Holders"). Holders shall not include material liens or stop notice rights of
Company's materialmen and/or subcontractors.
4.2 Termination of Agreements. Buyer, Seller and the Company hereby
terminate the Employment Agreement, dated April 1, 1998, entered into by and
between the Company, Seller and Royal, pertaining to the Company's employment of
Royal.
4.3 Resignation of Directors and Officers. Effective as of the Closing
Date, the following directors and officers of Seller who also serve as directors
and officers of the Company will resign as directors and officers of the Company
in their respective capacities as set forth below: (i) Richard T. Sperberg as
<PAGE>
Chairman of the Board of Directors and Chief Executive Officer, (ii) J. Bradford
Hanson as Director and Chief Financial Officer, and (iii) Audrey Nelson
Stubenberg as Director and Secretary.
4.4. Negligence or Intentional Misconduct of Seller. The Seller shall
indemnify, defend, pay and hold Buyer and Company free and harmless from and
against any liabilities of Buyer and Company with respect to the debts,
obligations or liabilities of the Company arising out of the negligence or
intentional misconduct of Seller and for which Buyer and Company becomes liable.
5 RECIPROCAL RELEASES.
5.1 Cancellation of Inter-company Debt. On the Closing Date, in
exchange for execution by Company of the Company Note, Seller, for itself and
for any affiliated entity which is under the control of Seller, cancels and
forgives any inter-company indebtedness or other obligation owing by the Company
or Buyer to Seller or any of its affiliated entities, except as specifically
identified on Exhibit D attached hereto and incorporated herein. Similarly, on
the Closing Date, Buyer and the Company cancel and forgive any inter-company
indebtedness owing to Buyer or the Company by Seller or any of its affiliates,
except as specifically identified on Exhibit D. On and after the Closing Date,
Seller agrees not to issue or write any checks on or from the Company's
account(s).
5.2 Release by Buyer and Company. Effective as of the Closing Date,
except with respect to obligations arising under this Agreement, Buyer and the
Company hereby release and discharge Seller and its shareholders, directors,
officers, employees, agents, representatives, auditors and attorneys and any
affiliated entities of Seller and their respective directors, officers,
employees, agents, representatives, auditors and attorneys from any further
liability to Buyer and the Company with respect to the (i) Original Acquisition
Agreement, (ii) any contract, agreement or undertaking given by Seller or its
affiliated entities pursuant to the Original Acquisition Agreement, or (iii) any
contract, agreement or undertaken given by Seller or its affiliated entities,
either orally or in writing, to Buyer and/or Company, or any claims arising
thereof, with the exception of the salary reduction agreement executed between
the parties in August 1999.
5.3 Release by Seller. Effective as of the Closing Date, except with
respect to obligations arising under this Agreement, Seller hereby releases and
discharges Buyer and the Company and its shareholders, directors, officers,
employees, agents, representatives and attorneys from any further liability to
Seller or its affiliated entities with respect to the Original Acquisition
Agreement or any contract, agreement or undertaking given by Buyer or the
Company pursuant to the Original Acquisition Agreement, including without
limitation, the agreements given by the parties in connection therewith ("the
Related Agreements").
5.4 General Release. The releases granted by Seller to Buyer and the
<PAGE>
Company, and by Buyer and the Company to Seller and its affiliates, under this
Agreement are in each case intended to be general releases, and to extend to and
to include all claims which the parties may have against one another, whether
known or unknown, whether foreseeable or unforeseeable, and whether realized or
contingent, with respect to the items that are the subject of such releases.
Each party assumes the risk that the facts which now exist, or which are
believed to exist, may in the future change or be shown to have been different
from the facts on which such parties are relying in granting this release.
Accordingly, each party waives any rights that they might otherwise have under
Section 1542 of the California Civil Code, which reads in part as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
5.5 Covenant Not to Sue. In furtherance of the releases granted by the
parties pursuant to this Agreement, each party covenants that, from and after
the Closing Date, such parties shall not assert any claim against the other with
respect to any matters or issues arising (i) under the Original Acquisition
Agreement or the Related Agreements; (ii) as a consequence of the relationship
between the parties resulting from the transactions that were consummated
pursuant to the Original Acquisition Agreement or the Related Agreements and
that thereafter existed through the Closing Date; or (iii) in connection with
the business operations of the Company subsequent to the effective date of the
Original Acquisition Agreement, it being intended that neither party shall be
entitled to assert any claims against the other for any breach or alleged breach
of any duty or obligation believed to be owing by one party to the other, other
than a breach of any covenant or warranty contained in this Agreement; or the
duties and obligations arising hereunder.
6 CLOSING.
6.1 Closing Date and Place. The closing ("Closing") shall occur at the
offices of Seller, at 1:00 p.m. (PST), on November 2, 1999 (the "Closing Date),
unless such time and/or place is otherwise mutually agreed by the parties.
6.2 Accounting Date. Buyer and Seller shall each account for the
transaction as if the closing had occurred as of September 30 , 1999.
7 ADDITIONAL PROVISIONS.
7.1 Employee Benefit Plans and Commissions. The employee benefits and
commissions available to employees of Company have been provided solely by
Company. Buyer and Company acknowledge and agree that they are responsible and
liable for the payment of any and all employee benefits and commissions to
employees of Company. Buyer and Company shall indemnify and hold Seller harmless
from and against any liability associated with claims by any employees of
Company against Seller for employee benefits and/or commissions.
<PAGE>
7.2 Workers' Compensation Claims. Buyer and Company shall indemnify and
hold Seller harmless from and against any liability associated with (i) any
workers' compensation claims submitted by any employees of Company, and (ii) any
workers' compensation premium payment adjustments arising out of or resulting
from any miscalculations based upon information provided by Company.
7.3 Payment of Taxes. Buyer and Company acknowledge that prior to the
Closing Date, Buyer as president, chief operating officer, and director of
Company, and the Company controller were the sole decision makers, to the
exclusion of other Company officers, with respect to the payment of obligations
of the Company. Company and Buyer represent and warrant to Seller that all
Federal and State payroll taxes withheld from employees (and thus are trust fund
obligations of the Seller) for payroll paid through and including the Closing
Date have been paid and that the employer portion of Federal and State payroll
taxes for payroll paid through and including the Closing Date will be paid
promptly (the "Paid Taxes"), and Company and Buyer agree to indemnify and hold
Seller harmless from liability with respect to the Paid Taxes, or the
calculation of the same or any unpaid taxes. Seller shall provide financial
information to Company with respect to the Paid Taxes as may be reasonably
requested by Company. Buyer and the Company acknowledge and agree that they are
responsible and liable for, and will make prompt payment of, any and all (i)
general excise taxes due and owing from and after the Closing Date; (ii) Federal
and State payroll taxes withheld from employees from and after the Closing Date;
(iii) the employer portion of Federal and State payroll taxes from and after the
Closing Date, (iv) temporary disability insurance from and after the Closing
Date; and (v) all income and/or franchise taxes, if any, of the Company after
the Closing Date (collectively, the "Taxes"), and agrees to indemnify and hold
harmless Seller from liability with respect to the Taxes.
7.4 Delivery of Certificates. At the Closing, Seller shall deliver to
Buyer certificates transferring all of the shares of the Stock to Buyer.
7.5 Delivery of Books and Records. At the Closing, Seller shall deliver
to Buyer the corporate minute book, stock books and other corporate books and
records containing the organizational records of the Company and its ownership.
7.6 Buyer Indemnification. Buyer agrees to execute an indemnification
substantially in the form attached hereto as Exhibit E ("Indemnification") on
the Closing Date. Under the terms of the Indemnification, Buyer agrees to
indemnify and hold Seller and Representatives harmless for all debts,
obligations and liabilities arising out of any guaranty made by Seller for any
indebtedness or obligation of Company.
7.7 Employees of Company. All employees of the Company as of the
Closing Date shall remain employees of the Company. Buyer and Seller agree not
<PAGE>
to solicit the employees of the other for a period of one (1) year from the
Closing Date without the prior written consent of the other.
7.8 Project Commitments.
7.8.1 Current Projects. As of the Closing Date, Company and
Seller are pursuing entering into business arrangements with each other with
respect to those projects identified in Exhibit F attached hereto, as may be
amended from time to time ("Projects").
7.8.2 Future Projects. All projects not (i) specifically
identified in Exhibit F, Part C nor (ii) comprising SPC/PSP Services, and
therefore, governed by the Master Agreement (as defined below), or are
specifically identified in Exhibit F, Part B shall be considered Lighting
Services for the purposes of the satisfaction by Company of the Principal
Payment, and therefore, subject to the provisions of Section 2.2 thereof, unless
otherwise agreed by Company and Seller. Seller and Company shall use reasonable
efforts to update the list of Projects on a periodic basis.
7.8.3 SPC/PSP Services. The parties agree that projects in
which Company shall assist Seller in performing SPC/PSP Services shall be
governed by a Master Consulting Services Agreement ("Master Agreement") to be
executed by the parties substantially in the form attached hereto as Exhibit G.
Under the terms of the Master Agreement, Company shall notify Seller in writing
of any opportunities to perform SPC/PSP Services for customers of Company after
the Closing Date. In the event Seller chooses not to perform SPC/PSP services
for the customer of Company, Seller shall notify Company in writing of its
decision and Company shall have the option to pursue the customer of Company on
its own or with another energy services company. Unless otherwise agreed between
the parties, as compensation for SPC/PSP Services performed by Company, the
compensation set forth in Section 2 and Schedule C of the Master Agreement shall
be retained by ONSITE SYCOM and credited towards the Principal Amount of the
Company Note until the Principal Amount has been satisfied in accordance with
the terms of the Company Note.
7.9 Consulting Services of Seller's Employees. At the Closing, the
parties shall execute a Consulting Services Agreement substantially in the form
of Exhibit H attached hereto. Under the terms of the Consulting Services
Agreement, Company shall pay Seller for the (i) labor costs associated with time
spent by Joseph Dillard, Kimberly Boeck, and Kathryn Russ, employees of the
Seller, on Company business activities after the Accounting Date, (ii) expenses
associated with the office facilities utilized by Company in San Ramon,
California, and (iii) insurance premiums paid by Seller on behalf of Company.
8 GENERAL PROVISIONS.
8.1 Warranty of Authority. Each person who executes this Agreement on
behalf of a party hereto warrants, by his or her signature, that he or she has
authority to execute this Agreement on behalf of such party and that such party
is bound by this Agreement.
<PAGE>
8.2 Notices. Any notices permitted or required hereunder shall be in
writing and shall be deemed to have been given (i) on the date of delivery if
delivery of a legible copy was made personally or by confirmed facsimile
transmission; (ii) one (1) day following deposit with a representative of
Federal Express, Express Mail or another like overnight service; or (iii) on the
third business day after the date on which mailed by registered or certified
mail, return receipt requested, addressed to the party for whom intended at the
address set forth on the signature page of this Agreement or such other address,
notice of which is given as provided herein.
8.3 Effect; Assignment. Except as otherwise set forth in this
Agreement, neither party shall assign its rights or delegate its duties under
this Agreement without the prior written consent of the other party. The
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the heirs, successors, assigns and personal representatives of the
respective parties hereto.
8.4 Counterparts. This Agreement may be executed in one (1) or more
counterparts (including via facsimile), each of which shall be deemed to be an
original copy of the Agreement.
8.5 Attorney's Fees. In the event either party commences any action or
proceeding against the other party by reason of any breach or claimed breach in
the performance of this Agreement, or to seek a judicial declaration of rights
hereunder, the prevailing party in such action shall be entitled to recover
reasonable attorneys' fees, costs and expenses.
8.6 No Third Party Beneficiary. Nothing in this Agreement shall be
construed to be for the benefit of any third party, and no creditor of the
Company shall be considered to be a third party beneficiary of any provisions of
this Agreement.
8.7 Interpretation. This Agreement shall be governed by and construed
in accordance with the laws of the State of California. No addition to or
modification of any term or provision shall be effective unless set forth in
writing, signed by all parties hereto. This Agreement and all exhibits thereto
contain the the entire agreement of the parties hereto, and supersedes any prior
written or oral agreements between them concerning the subject matter contained
herein. There are no representations, agreements, arrangements or
understandings, oral or written, relating to the subject matter, which are not
fully expressed herein.
8.8 Arbitration. Except as set forth in Section 9 of the
Confidentiality Non-disclosure Agreement attached hereto as Exhibit C and
incorporated herein, any controversy or claim arising out of or relating to this
Agreement, or any alleged breach thereof, will be settled by binding arbitration
with such arbitration service as the parties may agree, and in the absence of
such agreement, before a single arbitrator in accordance with the Commercial
Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrator(s) may be entered in any court having jurisdiction
thereof. Unless otherwise agreed by the parties, all arbitration hearings shall
be held in San Diego County, California. In no event will the arbitration of any
controversy or the settlement thereof delay the performance of this Agreement.
Reasonable attorney's fees, costs and expenses, including those incurred in any
<PAGE>
arbitration hearing, shall be awarded by the arbitrator to the prevailing party.
8.9 Headings. The title of this Agreement and the section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
8.10 Additional Documents. From time to time during and after the term
of this Agreement, each party shall execute and deliver such instruments of
transfer and other documents as may be necessary to carry out the purpose and
intent of this Agreement.
8.11 Expenses. Each of the parties will bear his or its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
8.12 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any such party by virtue of the
authorship of any of the provisions of this Agreement.
8.13 Legal Representation. Each party acknowledges, represents and
warrants that he/it has had reasonable opportunity to retain independent legal
counsel to represent his/its interests in connection with this Agreement prior
to the execution of this Agreement, that he/it has either retained such
independent legal counsel to explain the legal nature and effect of this
Agreement or has declined to obtain such legal representation, and that each
party fully understands the terms and provisions of this Agreement and its
nature and effect. Each party further represents that it is relying solely on
the advice of its own counsel, if any, in executing this Agreement and has not
relied on the representation of any other party or of the counsel of any other
party.
<PAGE>
8.14 Condition Subsequent. In the event the parties have not executed
definitive agreements for those projects identified in Exhibit F, Part C on or
before November 5, 1999, the purchase and sale of Stock effected on the Closing
Date shall be null and void, and the parties shall not be under any further
obligation with respect to the sale of Stock contemplated herein.
IN WITNESS WHEREOF, Buyer, Seller and the Company have executed this Agreement
as of the Effective Date.
BUYER: SELLER:
___________________________________ ONSITE ENERGY CORPORATION,
Russell Wm. Royal, an individual dba ONSITE SYCOM Energy Corporation,
a Delaware corporation
Address for Notices:
19729 Clancy
Huntington Beach, CA 92646
By:__________________________________
Richard T. Sperberg, President
Address for Notices:
701 Palomar Airport Road,
Suite 200
Carlsbad, CA 92009
COMPANY:
LIGHTING TECHNOLOGY SERVICES, INC.,
a California corporation
By:_________________________________ By: _________________________________
Richard T. Sperberg, CEO Russell Wm. Royal, President & COO
Address for Notices:
3520 Cadillac Avenue, Suites E & H
Costa Mesa, CA 92626
