EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement ("Agreement") is made as of the 27th day
of December, 2001, by and between STRATUS SERVICES GROUP, INC., a Delaware
corporation (the "Buyer") with its principal business offices located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, and PROVISIONAL EMPLOYMENT
SOLUTIONS, INC., a Georgia corporation with its corporate headquarters located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Seller).
WHEREAS, the Buyer desires to purchase from the Seller, and the Seller
desires to sell to the Buyer substantially all of the properties, rights, assets
and business of the Seller involving light industrial and clerical temporary
services conducted in California out of the offices listed on SCHEDULE 2.9 as
well as the employees listed on SCHEDULE 2.19, currently working at the offices
on SCHEDULE 2.9 (collectively, the "Acquired Business") all upon and subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and for other good and valuable consideration, the receipt of which are
hereby acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE AND DELIVERY OF THE ASSETS.
1.1. PURCHASE AND SALE AND DELIVERY OF THE ASSETS.
(a) PURCHASED ASSETS. Subject to and upon the terms
and conditions of this Agreement and excluding the assets of the Acquired
Business retained by the Seller as set forth in Section 1.1(b) herein and in
SCHEDULE 1.1(A) and the Prepaids IN SCHEDULE 1.1(B) attached hereto, at the
"Closing" (as defined in Section 1.5 below) of the transactions contemplated by
this Agreement, the Seller shall sell, transfer, convey, assign and deliver to
the Buyer, and the Buyer shall purchase from the Seller, free and clear of all
liens and encumbrances, all of the properties, rights, assets and business as a
going concern, of every kind and nature, real, personal or mixed, tangible or
intangible, wherever located, which are owned, leased, licensed or used by
Seller in connection with the operation of the Acquired Business (collectively,
the "Assets"), including, without limitation, the following Assets:
(i) all office supplies and similar materials
which exist on the "Closing Date" (as defined in Section 1.5 below) and are used
in the Acquired Business (the "Supplies");
(ii) all contracts, agreements, leases (including
the Real Property Leases as herein defined), arrangements and/or commitments of
any kind, whether oral or written, relating to the Acquired Business as set
forth on SCHEDULE 2.11 attached hereto (the "Contracts");
(iii) all customer lists, files, records and
documents (including credit information) relating to customers and vendors of
the Acquired Business and all other business, financial and employee books,
records, files, documents, reports and correspondence relating to the Assets or
the Acquired Business (collectively, the "Records");
(iv) all rights of the Seller, if any, under
express or implied warranties from the suppliers of the Seller in connection
with the Acquired Business;
(v) all furnishings, furniture, fixtures, tools,
machinery, equipment and leasehold improvements owned by the Seller and used in
the Acquired Business, whether or not
reflected as capital assets in the accounting records of the Seller
(collectively, the "Fixed Assets"), as set forth on SCHEDULE 2.7; and
(vi) all computers, computer programs, computer
databases, hardware and software owned or licensed by the Seller and used in the
Acquired Business;
(vii) all municipal, state and federal
franchises, licenses, authorizations and permits of the Seller which are
necessary to operate or are used in the Acquired Business;
(viii) all claims and rights of Seller related to
or arising from the Acquired Business or the Assets; and
(ix) all of the goodwill of the Acquired
Business.
(b) RETAINED ASSETS. Notwithstanding anything to the contrary
set forth in this Agreement, the following items of the Seller are not included
in the sale of Assets contemplated hereby: (i) the cash and cash equivalents,
accounts receivable, prepaid sums and fees, deposits, the trade name(s) (except
as qualified below), and the assets of the acquired business located in Arizona;
(ii) the Purchase Price (as hereinafter defined) and the other rights of the
Seller under or relating to this Agreement, (iii) the corporate minute books,
stock records, qualification to conduct business as a foreign corporation, and
other documents relating to the incorporation, maintenance or existence as a
corporation of the Seller, except that Seller agrees that it will provide copies
of any such document from the corporate minute books as reasonably requested by
the Buyer which the Buyer believes are necessary for the operation of the
Acquired Business after the Closing, and (iv) any real property owned by the
Seller (collectively, the "Retained Assets"). Furthermore, Buyer shall have the
right to use the trade name "Provisional Employment Solutions, Inc." for a
period of 120 days after the Closing.
1.2. PURCHASE PRICE. The purchase price for the Assets shall be One
Million, Four Hundred Eighty Thousand and 00/100 ($1,480,000) (the "Purchase
Price"); based upon a closing price for Buyer's stock on November 23, 2001 of
ninety-five cents ($0.95) payable in accordance with Paragraphs (a) and (b)
(a) the Buyer shall execute and deliver to Seller on the
Closing Date a promissory note, in the form attached hereto as EXHIBIT A (the
"Note"). The Note shall be in the principal amount of One Million One Hundred
Thousand and 00/100 Dollars ($1,100,000) and be amortized and payable over a
ten-year period at a six percent (6%) annual interest rate with payments due
quarterly, the first payment beginning ninety (90) days after the Closing Date.
The Note shall be secured by a security interest in all of the Assets purchased
by Buyer hereunder pursuant to the terms of a security agreement executed by the
parties as of the Closing Date in substantially the form attached hereto as
EXHIBIT B (the "Security Agreement "). The Note and the security interest
granted pursuant to the Security Agreement shall be subordinated to the Buyer's
present and future bank and other financial institution debt and other senior
debt incurred or to be incurred by the Buyer;
(b) Buyer will issue in the Seller's name, or such other
name(s) the Seller may designate, Four Hundred Thousand (400,000) shares of
Stratus Services Group, Inc. common stock for the remainder of the Purchase
Price.
(c) ADDITIONAL PURCHASE PRICE. Seller is entitled to receive
One Million, Two Hundred Fifty Thousand and 00/100 Dollars ($1,250,000) in a ten
year earnout at the rate of fifteen percent (15%) of pretax profit payable
quarterly. The payments will be made 30 days after each calendar
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quarter that they are earned and 60 days after each year ending quarter due to
annual filing Revenue shall be defined as all revenue earned by buyer in the
State of California in the counties of Riverside, Orange, San Bernadino and Los
Angeles. Pre-Tax Profits are defined as PESI regional California revenue, less
SG&A, less 2% of revenue corporate overhead which includes receivable interest
expense. With each quarterly payment Buyer will issue a statement of earnout
calculation certified as accurate by the Chief Financial Officer of the Buyer.
Furthermore, Seller shall have the right to inspect the books and records used
in the determination of the earnout payment upon a thirty (30) day notice to
Buyer.
1.3. ASSUMPTION OF LIABILITIES.
(a) ASSUMED LIABILITIES. Effective as of the Closing, the
Buyer agrees to assume and to pay, perform and discharge the liabilities and
obligations accruing under the Contracts after the Closing with respect to the
operation of the Acquired Business by the Buyer after the Closing (the "Assumed
Liabilities").
(b) LIABILITIES RETAINED BY THE SELLER. Except for the Assumed
Liabilities, the Buyer shall not assume, be liable for or pay, and none of the
Assets shall be subject to, and the Seller, as the case may be, shall retain, be
unconditionally liable for and pay, any liability or obligation (whether known
or unknown, matured or unmatured, stated or unstated, recorded or unrecorded,
fixed or contingent, currently existing or hereafter arising) of the Seller, as
the case may be, including, without limitation, the following:
(i) any obligation or liability of Seller arising out of
this Agreement, any agreement entered into in connection herewith or the
transactions contemplated hereby or thereby;
(ii) any obligation or liability of Seller for the fees
and expenses of its counsel, accountants and other experts and all other
expenses incurred by Seller incident to the negotiation, preparation and
execution of this Agreement and any agreement entered into in connection
herewith and the performance by Seller of its obligations hereunder or
thereunder;
(iii) any obligation or liability of Seller and their
directors, officers, employees, consultants and other representatives, arising
out of or resulting from any business, activity, course of conduct, action or
omission before, on or after the Closing Date;
(iv) all accounts payable of the Seller;
(v) any liability or obligation under or in connection
with the Retained Assets.
(vi) any federal, state, local or other foreign tax
payable by the Seller whether such tax is due and payable prior to or after the
Closing;
(vii) any indebtedness of the Seller for borrowed money;
(viii) all liabilities of the Seller with respect to any
claim, litigation or proceeding accruing with respect to, or arising from or
relating to any business, activity, course of conduct, action or omission
before, on or after the Closing, including, without limitation, those matters
set forth on SCHEDULE 2.8, whether such claim, litigation or proceeding is
presented or instituted prior to or after the Closing;
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(ix) all liabilities, obligations, payments, benefits,
costs and expenses including, without limitation, any salary, wage, vacation,
bonus, severance, expense reimbursement or other benefit: (a) accruing and
payable to employees of the Seller who become employed by the Buyer after the
Closing, ("Transferring Employee") with respect to any period before the
Closing, (b) accruing and payable to all other employees of the Seller with
respect to any period before or after the Closing, (c) accruing and payable to
all former employees of the Seller whose employment terminated before the
Closing, (d) accruing and payable pursuant to any employee benefit plans
(including pension plans) of the Seller or under federal and state laws
governing such plans, whether before or after the Closing, including, without
limitation, in connection with the termination of participation under such plan
by a Transferring Employee; or (e) accruing and payable in connection with the
termination of any such employee benefit plan of the Seller, whether before or
after the Closing.
(x) all warranty liability of the Seller, including
without limitation, for claims which arise out of events occurring prior to the
Closing, whether such claims are presented prior to or after the Closing.
1.4. OTHER AGREEMENTS.
As further consideration for the transactions contemplated hereby, as of
the Closing Date, the Seller as an entity and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇ as individuals will enter into a non-solicit/non-compete
agreement with Buyer prohibiting the Seller from competing against the Buyer for
twenty-four (24) months in the California market and prohibiting them from
soliciting clients or employees of the Buyer, including, without limitation, the
clients and employees of the Acquired Business, for forty-eight (48) months as
set forth on Exhibit C-2.
1.5. CLOSING. Subject to and after fulfillment or waiver of the
conditions set forth in Sections 8 and 9 of this Agreement, the closing (the
"Closing") shall take place at the offices of the Buyer in Manalapan, New
Jersey, at 12:00 p.m. Eastern Time, on December 27, 2001, or such other time or
date or such other location as the parties may mutually agree (the "Closing
Date"). However, for all purposes, the transaction shall be deemed to occur at
12:01 a.m. on January 1, 2002.
1.6. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the various Assets by mutual agreement of the parties as set
forth on SCHEDULE 1.6. The parties covenant and agree with each other that this
allocation was arrived at by arm's length negotiation and that none of them will
take a position on any income tax return, before any governmental agency charged
with the collection of any income tax or in any judicial proceeding that is in
any manner inconsistent with the terms of this Section 1.6 without the written
consent of the other parties to this Agreement. Each of Buyer and Seller
covenant and agree to execute and timely file U.S. Treasury Form 8594 consistent
with SCHEDULE 1.6, and upon a party's reasonable request the other party shall
execute and file such other documents as may be necessary to document such
allocation.
2. REPRESENTATIONS OF THE SELLER. The Seller represents and
warrants to the Buyer as follows:
2.1. ORGANIZATION. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia and
is duly qualified to do business in, and is in good standing under the laws of,
the states where it conducts business. The Seller is not required to be
qualified or licensed to do business as a foreign corporation or other
organization in any other jurisdiction, except such jurisdictions, if any, in
which the failure to be so qualified or licensed will not have a material
adverse effect on the conduct of its business or use of any of its properties or
assets. The Seller has delivered to the Buyer complete and correct copies of the
Seller's Articles of Incorporation or Articles of Formation and By-Laws or other
operating agreements as in effect on the date hereof. The
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Seller is not in default under or in violation of any provision of its Articles
of Incorporation or Articles of Formation or By-Laws or other operating
agreement. The Seller has all requisite power and authority (corporate and
other) to execute and deliver this Agreement and the documents, instruments and
agreements contemplated herein, and to consummate the transactions contemplated
hereby and thereby. Seller has no obligations under successor liability and all
prior transfers or acquisitions of assets or stock of any business was
effectuated properly to ensure that seller would not be found responsible for
any predecessor company obligations.
2.2. AUTHORIZATION. The Seller has the power to enter into
this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement, and the agreements provided for
herein by the Seller, and the consummation by the Seller of all transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action. This Agreement and all such other agreements and obligations
entered into and undertaken in connection with the transactions contemplated
hereby to which the Seller is a party constitute the valid and legally binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general equitable principles,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
2.3. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement and the agreements provided for herein, nor the
consummation of any of the transactions contemplated hereby or thereby (i) will
violate or conflict with the Articles of Organization or By-Laws of Seller, or
(ii) conflict with, result in any breach of, constitute (with or without due
notice or lapse of time or both) a default under, or result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require notice, consent or waiver under any provision of any contract or
agreement of any kind to which the Seller is a party or by which the Seller is
bound (including, without limitation, the Contracts), except as otherwise
provided therein or to which any property or asset (including, without
limitation, the Assets) of any of them is subject, (iii) is prohibited by or
requires the Seller to obtain or make any consent, authorization, approval,
registration or filing under any statute, law, ordinance, regulation, rule,
judgment, decree or order of any court or governmental agency, board, bureau,
body, department or authority, or of any other person, (iv) will cause any
acceleration of maturity of any note, instrument or other obligation to which
Seller is a party or by which Seller is bound or with respect to which Seller is
an obligor or guarantor, or (v) will result in the creation or imposition of any
lien, claim, charge, restriction, equity or encumbrance of any kind whatsoever
upon or give to any other person any interest or right (including any right of
termination or cancellation) in or with respect to any of the properties, assets
(including, without limitation, the Assets), business, agreements or contracts
(including, without limitation, the Contracts) of Seller.
2.4. FINANCIAL STATEMENTS. Seller has delivered or will
deliver within a reasonable period of time to Buyer, information sufficient to
create the following financial statements (the "Financial Statements"):
Audited statements of Net Assets Acquired and Liabilities Assumed
of Seller as of September 30, 2000 and 2001 and audited
statements of operations of Seller for the years ended
December 31, 1998, 1999 and 2000. The financial statements
will include, where applicable, accounts of the predecessor
companies, TEAM, Inc., and Applied Workforce Solutions, Inc.
("Predecessors")
The information provided fairly presents the financial position of
Seller as of the dates thereof and the results of its operations for the periods
indicated.
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2.5. NO UNDISCLOSED LIABILITIES. Since November 30, 2001
except for the transactions contemplated by this Agreement and except as set
forth in SCHEDULE 2.5, Seller has not incurred any material liability or
obligation (absolute, accrued, contingent or otherwise) of any nature, other
than liabilities and obligations incurred in the ordinary course of business,
that would properly be reflected or reserved against in a balance sheet prepared
in conformity with GAAP.
2.6. ABSENCE OF CERTAIN CHANGES. Since November 30, 2001
except for the execution and delivery of this Agreement and except as set forth
in SCHEDULE 2.6, Seller have not (i) had any change in its condition (financial
or otherwise), operations (present or prospective), business (present or
prospective), assets or liabilities, other than changes in the ordinary course
of business, none of which has been materially adverse; (ii) incurred or agreed
to incur any indebtedness for borrowed money; (iii) paid or obligated itself to
pay in excess of ten thousand dollars ($10,000) in the aggregate for Fixed
Assets; (iv) suffered any substantial loss or waived any substantial right; (v)
agreed to sell, transfer or otherwise dispose any of the Assets; (vi) mortgaged,
pledged or subjected to any charge, lien, claim or encumbrance, or agreed to
mortgage, pledge or subject to any charge, lien, claim or encumbrance, any of
the Assets; (vii) made or permitted any material amendment or termination of any
Contract, license or permit to which it is a party other than in the ordinary
course of business; (viii) had any labor trouble or knows of any impending or
threatened labor trouble; (ix) made any change in its accounting methods or
practices with respect to its condition, operations, business, properties,
assets or liabilities; or (x) entered into any transaction not in the ordinary
course of the business.
2.7. TITLE; OWNERSHIP, CONDITION AND ADEQUACY OF THE ASSETS.
Seller has good and marketable title to all of their respective properties and
assets included in the Assets, and valid leasehold interests in all such Assets
leased by them under any personal property lease, in each case free and clear
and not subject to any mortgage, pledge, conditional sales contract, lien,
security interest, right of possession in favor of any third party, claim or
other encumbrance. The Fixed Assets are in good operating condition and repair,
subject only to the ordinary wear and tear. SCHEDULE 2.7 sets forth an accurate,
correct and complete list of all of the Fixed Assets owned or used by the Seller
with respect to the Acquired Business. Any Asset which is owned or leased by
Seller is not in violation of any applicable ordinance, regulation or building,
zoning, environmental or other law in respect thereof to the best of Seller's
knowledge and belief.
2.8. LITIGATION. Except as set forth in SCHEDULE 2.8, there
are no actions, suits, proceedings or investigations, either at law or in
equity, or before any commission or other administrative authority in any United
States or foreign jurisdiction, of any kind now pending or, to the best of
Seller's knowledge, threatened or proposed in any manner, or, to the best of the
Seller's knowledge, any circumstances which should or could reasonably form the
basis of any such action, suit, proceeding or investigation, involving Seller
that (i) if asserted and decided adversely to Seller, could materially and
adversely affect the operations (present or prospective) of the Acquired
Business (present or prospective), or (ii) questions the validity of this
Agreement or the other agreements to be entered into in connection herewith, or
(iii) seeks to delay, prohibit or restrict in any manner any action taken or
contemplated to be taken by the Seller under this Agreement or the other
agreements to be entered into in connection herewith. Except as set forth in
SCHEDULE 2.8, there is no arbitration proceeding pending or threatened or
proposed in any manner under any collective bargaining agreement or other
agreement or otherwise. Neither Seller nor any of the Assets are subject to any
judicial or administrative judgment, order, decree or restraint.
2.9. REAL PROPERTY; LEASES. Seller does not own any real
property used in connection with the Acquired Business. SCHEDULE 2.9 attached
hereto sets forth a true, correct and complete list as of the date hereof of all
leases of real property to which the Seller is a party in connection with the
Acquired Business (collectively, the "Real Property Leases"). True, correct and
complete copies of the Real
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Property Leases, and all amendments and modifications thereof, have previously
been delivered by the Seller to the Buyer. The Real Property Leases are in full
force and effect, valid and enforceable in accordance with their terms and have
not been modified or amended since the date of delivery to the Buyer. Except as
otherwise provided therein, the legality, validity and enforceability of any
Real Property Lease will not be affected in any manner by, and each Real
Property Lease shall be legal, valid, binding, enforceable and in full force and
effect in accordance with the terms thereof as in effect immediately prior to
the Closing, upon the consummation of the transactions contemplated by this
Agreement. No party to any Real Property Lease has sent written notice to the
other claiming that such other party is in default thereunder, which alleged
default remains uncured.
2.10. TAX MATTERS. All federal, state, local and foreign tax
and information returns required to have been filed prior to the date of this
Agreement by Seller have been duly filed, and each such return correctly
reflects the income, franchise or other tax liability and all other information
required to be reported thereon, and the Seller has paid or accrued all income,
franchise and other taxes due by them as reflected on said returns. There are
not pending, nor to the knowledge of Seller, threatened, any audits,
examinations, investigations or other proceedings in respect of taxes or tax
matters and there are not, to the knowledge of Seller, any unresolved questions
or claims concerning Seller's tax liability which would affect the Acquired
Business. Seller has no liability with respect to taxes in excess of the
amountspreviously disclosed through due diligence or in the above referenced
financial information.
2.11. CONTRACTS. SCHEDULE 2.11 contains a true and complete
list of all Contracts. The Seller has made available to the Buyer a true and
complete copy of each such written Contract and a true, correct and complete
written description of each such oral Contract. Neither the Seller, nor, to the
knowledge of the Seller, any other party, is in default under or in breach or in
violation of any Contract, nor has an event occurred that (with or without
notice, lapse of time, or both) would constitute a default, breach or violation
by the Seller, or, to the knowledge of the Seller, by any other party, under any
Contract. Each Contract is legal, valid, binding, enforceable and in full force
and effect. Except as otherwise provided therein, the legality, validity and
enforceability of any Contract will not be affected in any manner by, and each
Contract shall be legal, valid, binding, enforceable and in full force and
effect in accordance with the terms thereof as in effect immediately prior to
the Closing, upon the consummation of the transactions contemplated by this
Agreement.
2.12. COMPLIANCE WITH AGREEMENTS AND LAWS. To the best of
Seller's knowledge and belief, Seller has complied with and is in compliance
with all federal, state, local and foreign statutes, laws, ordinances,
regulations, rules, permits, judgments, orders or decrees applicable to them,
and there does not exist any basis for any claim of default under or violation
of any such statute, law, ordinance, regulation, rule, judgment, order or decree
except such defaults or violations, if any, that in the aggregate do not and
will not materially and adversely affect the Assets or the operation, financial
condition or prospects of the Acquired Business. Seller has not received any
opinion or memorandum or legal advice from any legal counsel to the effect that
the Seller is exposed to any liability or disadvantage that is or may be
material to them. Seller is in compliance with, (i) all applicable requirements
of the Occupational Safety and Health Act of 1970 within the United States and
comparable workplace-safety laws of all other jurisdictions and all rules,
regulations and orders thereunder, and (ii) all applicable laws and related
rules and regulations of all United States and foreign jurisdictions affecting
labor union activities, civil rights or employment, including without
limitation, in the United States, the Civil Rights Act of 1964, the Age
Discrimination in Employment Act of 1967, the Equal Employment Opportunity Act
of 1972, the Employee Retirement Income Security Act of 1974, the Equal Pay Act
and the National Labor Relations Act.
2.13. GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. SCHEDULE
2.13 lists all licenses, franchises, permits and other governmental
authorizations held by Seller material to the conduct of the
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Acquired Business. Such licenses, franchises, permits and other governmental
authorizations are valid, and Seller has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. Seller holds all
licenses, franchises, permits and other governmental authorizations, the absence
of any of which could have a material adverse effect on the Acquired Business.
2.14. ACCOUNTING PRACTICES. The Seller makes and keeps
accurate books and records reflecting their assets and maintain internal
accounting controls that provide reasonable assurance that (i) transactions are
executed with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of Seller's consolidated financial statements
and to maintain accountability for the assets of Seller, (iii) access to the
assets of Seller is permitted only in accordance with management's
authorization, and (iv) the reported accountability of the assets of Seller is
compared with existing assets at reasonable intervals.
2.15. MINUTE BOOKS. Seller has provided the Buyer with
complete copies of the minute books of the Seller. The minute books of the
Seller contain complete and accurate records of their directors, officers and
shareholders.
2.16. INSURANCE. SCHEDULE 2.16 contains a true and complete
list of all policies of fire, liability, workers' compensation and other forms
of insurance owned by or held by Seller, and Seller has made available for
inspection by the Buyer true and complete copies of all of such policies. All
such policies are in full force and effect, all premiums with respect thereto
covering all periods to the date of this Agreement have been paid, and no notice
of cancellation or termination has been received with respect to any such
policy. Such policies (i) are sufficient for compliance with all requirements of
law and all agreements to which Seller is a party, (ii) are valid, outstanding
and enforceable policies, (iii) will remain in full force and effect through the
Closing Date, and (iv) will not in any way be affected by, or terminate or lapse
by reason of, the transactions contemplated by this Agreement. Except as set
forth in SCHEDULE 2.16, Seller has not made any material claims under such
insurance policies.
2.17. LABOR MATTERS. Seller is not the subject of any
proceeding asserting that it has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor
is there pending or, to the Seller's knowledge, threatened, nor has there been
for the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it.
2.18. RECEIVABLES. SCHEDULE 2.18 sets forth an aging schedule
of Seller's accounts receivable arising out of the Acquired Business as of the
date immediately proceeding the Closing Date. All of the accounts receivable
reflected in SCHEDULE 2.18 (i) arose from bona fide transactions, (ii) represent
bona fide indebtedness of the respective debtors, (iii) are valid and do not
have original payment terms in excess of forty-five (45) days, and (iv) are not
subject to any defense or offset.
2.19. EMPLOYEES. SCHEDULE 2.19 contains a complete list of the
name, position, salary, length of service and location of all persons employed
by Seller in the Acquired Business who are Transferring Employees including
persons who are temporarily absent from active employment by Seller. To the best
of the Seller's knowledge and belief, no Transferring Employee is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant or any other common law obligation to a
former employer relating to the right of any such employee to be employed by the
Seller because of the nature of the Acquired Business or to the use of trade
secrets or proprietary information of others, and to the best of Seller's
knowledge and belief, the employment of such employees of the Seller does not
subject the Seller to any liability. There is neither pending nor, to Seller's
knowledge and belief, threatened any action, suit, proceeding or claim, or to
its knowledge any basis therefore, with respect to
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any contract, agreement, covenant or obligation referred to in the preceding
sentence. To the knowledge and belief of Seller, no Transferring Employee has
any present intention of terminating his or her employment with the Seller, and
Seller has no present intention of terminating such employment All remaining
employees have submitted proper documentation of eligibility to work and all
such documentation is true and accurate to the best of sellers knowledge.
2.20. ERISA.
(a) A copy of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, severance, compensation, medical, health or other plan, agreement,
policy or arrangement that covers employees, officers, directors, former
employees, former officers or former directors of the Seller (collectively, the
"Benefit Plans") and any trust agreements or insurance contracts forming a part
of such Benefit Plans has been made available to Buyer prior to the date hereof
and each such Benefit Plan is listed on SCHEDULE 2.20.
(b) All of the Benefit Plans are in substantial
compliance with all applicable law, including the Internal Revenue Code of 1986,
as amended (the "Code") and the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). None of the Benefit Plans is a defined benefit plan (as
defined in Section 3(35) of ERISA) or a multi-employer plan (as defined in
Section 3(37) of ERISA). Each of the Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS"),
and the Seller is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. There is no pending or, to the
knowledge of the Seller, any threatened litigation relating to its Benefit
Plans. The Seller has not engaged in a transaction with respect to any of its
Benefit Plans that, assuming the taxable period of such transaction expired as
of the date hereof, would subject it to a material tax or penalty imposed by
either Section 4976 of the Code or Section 502 of ERISA.
(c) As of the date hereof, no liability under Subtitle C
or D of Title IV of ERISA (other than the payment of prospective premium amounts
to the Pension Benefit Guarantee Corporation in the normal course) has been or
is expected to be incurred by the Seller with respect to any ongoing, frozen or
terminated "single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by the Seller, or the single-employer
plan of any entity which is considered one employer with the Seller under
Section 4001 of ERISA or Section 414 of the Code (its "ERISA Affiliate") (each
such single-employer plan, its "ERISA Affiliate Plan"). The Seller and its ERISA
Affiliates have not contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E or Title IV of ERISA. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any of the Company's Pension Plans or any of its ERISA Affiliate Plans
within the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the
terms of any of the Benefit Plans as of the date hereof have been timely made or
have been reflected on its most recent balance sheet delivered by it to the
Seller Neither any of the Seller's Pension Plans nor any of any of its ERISA
Affiliate Plans have an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA. The
Seller has not provided, and is not required to provide, security to any of its
Pension Plans or to any of its ERISA Affiliate Plans pursuant to Section
401(a)(29) of the Code.
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(e) Under each of the Seller's Pension Plans which is a
single-employer plan and each of its ERISA Affiliate Plans, as of the last day
of the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the meaning
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan or ERISA Affiliate Plan and there has been no material change in the
financial condition of such Pension Plan or ERISA Affiliate Plan since the last
day of the most recent plan year.
(f) Seller has no obligations for retiree health and
life insurance benefits under any of its Benefit Plans, except as required by
applicable law.
(g) The consummation of the transactions contemplated by
this Agreement or other agreements contemplated hereby will not (x) entitle any
of the Seller's employees, officers or directors to severance pay, directly or
indirectly, upon termination of employment, (y) accelerate the time of payment
or vesting or trigger any payment or trigger any payment of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of its Benefit Plans, or (z) result in any breach or
violation of, or a default under, any of the Benefit Plans.
2.21. CUSTOMERS. SCHEDULE 2.21 lists all customers of the
Acquired Business of the Seller to which the Seller sold goods or services in
excess of $25,000 during the period from December 1, 2000 until November 30,
2001 (the "Customer Period"). Seller has not received any written threat or
written notice that any one or more customers who in the aggregate purchased
goods or services in excess of $25,000 from them during the Customer Period
intend to discontinue or to reduce significantly purchases of such goods or
services or default under or terminate any Contract whether as a result of the
transactions contemplated by this Agreement or otherwise. Seller has not
received any notice of, nor is it aware of any basis for, any material dispute
between a customer and the Acquired Business of Seller, whether with respect to
payment due, workmanship or otherwise.
2.22. CERTAIN PAYMENTS. Since the inception of the Seller,
neither the directors of the Seller, or any officer, agent, or employee of the
Seller, has directly or indirectly made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any person or entity,
private or public, regardless of form, whether in money, property or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Selleror
the Acquired Business.
2.23. NO UNTRUE STATEMENTS. No statement by any Party
contained in this Agreement and no written statement contained in any
certificate or other document required to be furnished by any Party, any member,
or any officer, or other agent of Seller to Buyer pursuant to this Agreement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary in order to make the statements
therein contained not misleading.
2.24. SECURITY INVESTMENT. Seller hereby represents and
warrants to Buyer that:
(a) Seller is acquiring the Stratus shares for its own
account as principal, for investment purposes only, and not for or with a view
to the resale, distribution or granting of a participation therein, in whole or
in part, in violation of the Securities Act.
(b) Seller acknowledges its understanding that the
offering and sale of the Stratus shares has not been registered under the
Securities Act, on the basis of the exemption in Section
10
4(2) thereof relating to transactions not involving a public offering, or any
state securities laws. Seller understands that Stratus' reliance on the Section
4(2) exemption is based on the representations herein made by Seller. Seller is
an "Accredited Investor" as that term is defined in Regulation D under the
Securities Act.
(c) Seller acknowledges that it is familiar with the
limitations which are imposed by the Securities Act on any transfer of an
interest in the Stratus shares. Seller understands and acknowledges that it may
have to bear the economic risk of its investment in the Stratus shares for an
indefinite period of time unless the Stratus shares are subsequently registered
under the Securities Act or an exemption therefrom is available. Seller hereby
agrees that the Stratus shares will not be transferred other than (i) pursuant
to a registration under the Securities Act or pursuant to an exemption therefrom
and (ii) in compliance with any applicable state securities laws.
(d) Seller has been given access to all information
regarding Stratus and the business, condition and operations of Stratus that
Seller has requested in order to evaluate its investment in the Stratus shares.
Seller has been given the opportunity to ask questions of, and to receive
answers from representatives of Stratus concerning the terms and conditions of
the offering of the Stratus shares and other matters pertaining to such Seller's
investment in the Stratus shares.
(e) Seller understands that the Stratus shares will
initially bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
THIS SECURITY MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OF (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE
STATE SECURITIES LAWS AS TO WHICH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY SHALL HAVE BEEN DELIVERED TO
STRATUS."
3. REPRESENTATIONS OF THE BUYER. The Buyer represents and warrants to
the Seller as follows:
3.1. ORGANIZATION AND AUTHORITY. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has requisite power and authority (corporate and other) to own its
properties and to carry on its business as now being conducted. The Buyer has
full power to execute and deliver this Agreement and all other documents,
instruments and agreements to be delivered by it hereunder and to consummate the
transactions contemplated hereby and thereby. The Buyer has delivered to the
Seller complete and correct copies of the Buyer's Articles of Incorporation and
By-Laws as in effect on the date hereof. The Buyer is not in default under or in
violation of any provision of its Articles of Incorporation or By-Laws. The
Buyer has all requisite power and authority (corporate and other) to execute and
deliver this Agreement and the documents, instruments and agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby.
3.2. AUTHORIZATION. The execution and delivery of this Agreement by
the Buyer, and the agreements provided for herein, and the consummation by the
Buyer of all transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate action. This Agreement and all such other
agreements and written obligations entered into and undertaken in connection
with the
11
transactions contemplated hereby constitute the valid and legally binding
obligations of the Buyer, enforceable against it in accordance with their
respective terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.3. NO VIOLATION. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Articles of Incorporation or By-Laws; (c) violate
any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term of provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which it or its properties is a party
or by which the Buyer is or may be bound.
3.4. CONSENTS. No consent, approval, authorization or other action
by, or filing with, any governmental authority or any third party is required in
connection with the execution, delivery and performance by the Buyer of its
obligations under this Agreement and the agreements provided for herein, and the
consummation by the Buyer of the transactions contemplated hereby.
3.5. LITIGATION. No action, investigation, audit, review, claim,
suit or proceeding by any governmental authority or third party is pending or,
to the knowledge of the Buyer, threatened against the Buyer which seeks to delay
or prevent the consummation of the transactions contemplated by this Agreement,
or which may adversely affect or restrict the Buyer's ability to consummate the
transactions contemplated hereby. The Buyer is not bound by any outstanding
judgment, order, injunction or decree of any governmental authority or any third
party which would prevent the Buyer from consummating the transactions
contemplated by this Agreement.
3.6. FINANCIAL STATEMENTS. All financial statements filed with the
Securities and Exchange Commission are true and correct and no material
deterioration in the Seller's financial position has occurred since the latest
financial statement filed.
3.7. COMMON SHARES. The common shares of Stratus Services Group,
Inc. issued for the purchase price are validly issued, fully paid and
non-accessible.
3.8. NO UNTRUE STATEMENTS. No statement by the Buyer contained in
this Agreement and no written statement contained in any certificate or other
document required to be furnished by any officer, or other agent of Buyer to
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact necessary in
order to make the statements therein contained not misleading.
4. CLOSING DELIVERIES.
4.1. BY SELLER. The Seller shall deliver to the Buyer at the
Closing, or as soon thereafter as available, each of the following documents:
(a) this Agreement, duly executed by Seller;
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(b) a ▇▇▇▇ of Sale in the form attached hereto as EXHIBIT D,
duly executed by Seller;
(c) an Assignment and Assumption of Contracts and Liabilities
executed by the Seller evidencing the Seller's assignment and the Buyer's
assumption of the Assumed Liabilities contemplated by SECTION 1.3 hereof in the
form attached hereto as EXHIBIT E (the "Assignment and Assumption Agreement");
(d) the Employment Agreements in the form attached hereto as
EXHIBIT C-1, duly executed by ▇▇▇ ▇▇▇▇▇▇;
(e) the Records;
(f) copies of the general ledgers and books of account of the
Seller pertaining to the Assets of the Acquired Business and Predecessor's for
the past three years and audited annual and unaudited interim financial
statements satisfaction of Rule 3.05(c) of Regulation S-X and for the required
periods of Form 8-K, it being understood and agreed by the Buyer that any cost
and expense charged by Seller's auditors to produce such Statements will be
equally split between Buyer and Seller with the Seller's portion to be deducted
from the amount due on Buyer's Note which will not exceed Twenty-Five Thousand
and 00/100 Dollars ($25,000). Seller's portion will be deducted as follows:
$5,000 per payment due under the Promissory Note and all amounts due under the
Earn-Out, up to an amount not to exceed $25,000.
(g) Seller shall use its best efforts to deliver consents, in
the form of EXHIBIT F attached hereto from each lessor relating to all Real
Property Leases identified on SCHEDULE 2.09 attached hereto, consenting to the
assumption of each such Real Property Lease by the Buyer and any other consents
required under any Contract or otherwise in connection with the transactions
contemplated by this Agreement;
(h) the cross receipt executed by the Seller, in the form of
EXHIBIT G ("Cross Receipt");
(i) a certificate executed by the Chief Executive Officer of
the Seller that all representations and warranties made herein by Seller are
true and correct and that all terms, conditions and provisions of this Agreement
have been performed and complied with at the time of Closing;
(j) a certificate from the secretary of the Seller attesting to
the accuracy of resolutions to be attached thereto approved by the Board of
Directors of the Seller authorizing the sale of the Assets and providing
incumbency information for the individual signing this Agreement on behalf of
the Seller;
(k) any required UCC-3 Termination Statements necessary to
remove any security interests from the acquired assets.
(l) The legal opinion of Seller's counsel as provided for in
Section 9.5.
4.2. BY THE BUYER. The Buyer shall deliver to the Seller at the
Closing each of the following documents:
(a) this Agreement, executed by the Buyer;
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(b) the Note (EXHIBIT A), executed by the Buyer;
(c) the Security Agreement (EXHIBIT B) executed by the Buyer;
(d) evidence of the issuance to the Seller of 400,000 shares of
common stock of Stratus Services Group, Inc.;
(e) the Assignment and Assumption Agreement (EXHIBIT E),
executed by Buyer;
(f) a UCC-1 financing statement, executed by the Buyer;
(g) the Cross Receipt, EXHIBIT G, executed by the Buyer;
(h) a certificate executed by the President or Chief Financial
Officer of the Buyer that all representations and warranties made herein are
true and correct and that all terms, conditions and provisions of this Agreement
have been performed and complied with at the time of Closing;
(i) corporate resolution of Buyer's Board of Directors
approving the acquisition of the Acquired Business certified as true and
accurate by the Secretary; and
(j) the Collateral Assignment of Leases in the form attached
hereto as Exhibit H.
(k) The Landlord's Agreement in the form attached hereto as
Exhibit I.
5. INDEMNIFICATION.
5.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties
made by the parties herein or in any instrument or document furnished in
connection herewith shall survive for a period of twenty-four (24) months,
following the Closing and any investigation at any time made by or on behalf of
the parties hereto. No action shall be brought under this Agreement nor set-off
made against the note after 24 months.
5.2. BY THE SELLER. The Seller hereby agrees to indemnify and hold
harmless each of the Buyer, and its directors, officers, employees, agents and
representatives (the "Buyer Indemnitees") from and against any and all actions,
claims, liabilities (whether known or unknown, matured or unmatured, stated or
unstated, fixed or contingent), obligations, damages of any kind (including,
without limitation, general, special, incidental and consequential damages),
judgments, liens, injunctions, charges, orders, decrees, rulings, demands,
losses, dues, assessments, taxes, fines, fees, penalties, amounts paid in
settlement, costs or expenses (including, without limitation, reasonable
attorney's and expert fees and expenses in connection with investigating,
defending or settling any action or threatened action) (each, a "Loss" and
collectively, "Losses") that any of the Buyer Indemnitees may incur, or to which
it, he or she may become subject, arising out of, resulting from or relating to:
(i) any material misrepresentation or breach of any warranty of
Seller contained in this Agreement or in any schedule of Seller or any
certificate delivered by Seller at the Closing;
14
(ii) any material breach of any covenant of Seller contained in
this Agreement;
(iii) any debt, liability or obligation of Seller other than
the Assumed Liabilities; and
(iv) the operations of the Acquired Business prior to the
Closing.
5.3. BY THE BUYER. The Buyer shall indemnify and hold harmless the
Seller, and its directors, officers, employees, agents and representatives (the
"Seller Indemnitees") from and against any and all Losses that any of the Seller
Indemnitees may incur, or to which it, he or she may become subject, arising out
of, resulting from or relating to:
(i) any misrepresentation or breach of warranty of Buyer
contained in this Agreement or in any schedule of Buyer or in any certificate
delivered by Buyer at the Closing;
(ii) any breach of any covenant of Buyer contained in this
Agreement; and
(iii) any of the Assumed Liabilities.
5.4. REDUCTION FOR INSURANCE PROCEEDS. To the extent that any Buyer
Indemnitee or Seller Indemnitee shall receive or be entitled to receive payment
under any insurance policies on account of claims arising under Section 5.2 or
Section 5.3 hereof, the amount (if any) payable by the indemnifying party on
account of such claims shall be reduced by the amount of such payment or, if the
Buyer Indemnitee or Seller Indemnitee shall have already collected on such
claims from the indemnifying party, then the Buyer Indemnitee or Seller
Indemnitee shall repay to the indemnifying party the amount of such payment.
5.5. PROCEDURE FOR INDEMNIFICATION CLAIMS. For purposes of this
Agreement, each of Seller and Buyer may be referred to as an "Indemnifying
Party" in connection with their indemnification obligations herewith. For
purposes of this Agreement, Buyer Indemnitees and Seller Indemnitees may be
referred to individually as an "Indemnitee" or collectively as "Indemnitees."
The procedures to be followed with respect to indemnification claims based upon
or arising out of any claim, action or proceeding by any person not a party to
this Agreement, shall be as follows:
(a) Unless in the reasonable judgment of Indemnitee (i) there is a
conflict between the positions of the Indemnifying Party and the Indemnitee in
conducting the defense of such claim or (ii) legitimate business considerations
would require the Indemnitee to defend or respond to such claim in a manner
different from that recommended by the Indemnifying Party, the Indemnifying
Party shall, by giving notice thereof to the Indemnitee confirming the
Indemnifying Party's obligation under this Section 5 to indemnify the Indemnitee
in respect of such claim, be entitled to assume and control such defense with
counsel chosen by it. The Indemnitee shall be entitled to participate therein
after such assumption, but the costs of such participation (other than the costs
of providing witnesses or documents at the request of the Indemnifying Party or
in response to legal process) following such assumption shall be at the expense
of the Indemnitee. Upon assuming such defense, the Indemnifying Party shall have
full right to enter into any compromise or settlement which is dispositive of
the matter involved; provided that except for the settlement of a claim that
involves no obligation of the Indemnitee other than the payment of money for
which indemnification is provided hereunder, the Indemnifying Party shall not
settle or compromise any claim without the prior written consent of the
Indemnitee, which consent will not be unreasonably withheld; and provided,
further, the Indemnifying Party may not consent to entry of any
15
judgment or enter into any settlement in respect of a claim which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to the Indemnitee of a release from all liability in respect of such claim.
(b) With respect to a claim as to which the Indemnifying Party (i)
does not have the right to assume the defense under Section (a) or (ii) shall
not have exercised its right to assume the defense, the Indemnitee shall assume
and control the defense of and contest such claim with counsel chosen by it and
the Indemnifying Party shall be obligated to pay all reasonable attorneys' fees
and expenses of the Indemnitee incurred in connection with such defense. The
Indemnifying Party shall be entitled to participate in the defense of such
claim, but the cost of such participation to be as its own expense.
Notwithstanding the foregoing, the Indemnitee shall not be required to defend
any claim under this Section (b) unless the Indemnifying Party confirms its
obligation under this Section 5 to indemnify the Indemnitee in respect of such
claim by written notice to the Indemnitee. If the Indemnitee is not required to
defend any claim under the immediately preceding sentence, it shall owe no
duties to the Indemnifying Party with respect to such claim and may defend, fail
to defend or settle such claim without affecting its right to indemnity
hereunder.
(c) The Indemnitee may compromise or settle any claim against it
at any time; provided, however, that the Indemnitee shall not settle or
compromise any claim without the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld; provided, further, that
if in the reasonable judgment of the Indemnitee it would be materially harmed or
otherwise prejudiced by not entering into a proposed settlement or compromise
and the Indemnifying Party withholds consent to such settlement or compromise,
the Indemnitee may enter into such settlement or compromise and such settlement
or compromise shall not be conclusive as to, or otherwise be used to establish,
the existence or amount of the liability of the Indemnifying Party to the
Indemnitee or any third party. The Indemnitee may not consent to entry of any
judgment or enter into any settlement or compromise with respect to a claim
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnifying Party of a release from all liability
in respect of such claim.
(d) Both the Indemnifying Party and the Indemnitee shall cooperate
fully with one another in connection with the defense, compromise or settlement
of any claim, including without limitation making available to the other all
pertinent information and witnesses within its control at reasonable intervals
during normal business hours.
5.6. SET-OFF. Buyer may offset any Loss indemnifiable by Seller under
this Agreement against any amounts payable to Seller or any heir, beneficiary or
assign by Buyer at or up to (but not beyond) twenty-four (24) months after the
Closing pursuant to this Agreement, the Notes, or otherwise, whether or not
Seller continues to be the holder or beneficiary of such obligations of Buyer.
5.7. LIMITATION ON INDEMNIFICATION. In no event shall the
indemnification by Seller under this Agreement exceed the monies to be paid by
Buyer and shall be limited to twenty-four (24) months after the closing. Any
action for indemnification must be brought within twenty-four months after
closing.
5.8. Notwithstanding anything contained herein to the contrary, Seller
shall have no obligation for any breaches under any provision of the Agreement
until the aggregate of all claims for which Seller is responsible exceeds
$35,000.
6. PRE-CLOSING AGREEMENTS.
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6.1. TRANSFERRING EMPLOYEES. As a condition of the Closing and their
employment by the Buyer,all employees of Seller listed on SCHEDULE 2.19 will be
required to enter into employment, confidentiality and non-solicitation
agreements in the form attached hereto as EXHIBIT J-1 and EXHIBIT J-2,
respectively. The Seller will make a good faith effort in encouraging the
Transferring Employees to enter into such agreements with Buyer. From the date
of this Agreement through the Closing, Seller will not pay or obligate itself to
pay any compensation, commission or bonus to any Transferring Employee or
independent contractor as such, except for the regular compensation and
commissions payable to such Transferring Employee or independent contractor at
the rate in effect on the date of this Agreement. Seller agrees to notify Buyer
of the departure or pending departure of any Transferring Employee.
6.2. CONDUCT OF BUSINESS. From the date of this Agreement through the
Closing, Seller will use its best efforts to preserve the Acquired Business
intact, to keep available to Buyer the services of its employees and independent
contractors and to preserve for Buyer its relationships with suppliers,
licensees, distributors and customers and others having business relationships
with it. From the date of this Agreement through the Closing, the Seller shall
carry on the Acquired Business substantially in the same manner as heretofore
and shall not make or institute any unusual or new methods of purchase, sale,
performance, lease, management, accounting or operation. From the date of this
Agreement through the Closing, all of the Assets shall be used, operated,
repaired and maintained by the Seller in a normal business manner consistent
with past practice. Unless instructed otherwise by the Buyer in writing, the
Seller will accept customer requests for services in the ordinary course of
business and consistent with past practice for all services offered by the
Seller but expected to be performed by the Buyer after the Closing. The Seller
and the Buyer will cooperate in communications with suppliers and customers to
accomplish the transfer of the Assets to the Buyer at the Closing. From the date
of this Agreement through the Closing, the Seller will not, and will not
obligate itself to, sell or otherwise dispose of or pledge or otherwise encumber
any of the Assets except in the ordinary course of business and Seller will
maintain the Fixed Assets and its facilities in good operating condition and
repair, subject only to ordinary wear and tear. The Seller will comply with all
laws and regulations which are applicable to their ownership of the Assets or to
the conduct of the Acquired Business and will perform and comply with all of the
Contracts and other commitments and obligations by which any of them are bound.
Seller will continue to carry all of its existing insurance. Seller agrees to
notify and consult with Buyer with respect to all decisions outside of the
ordinary course relating to the Acquired Business.
6.3. ACCESS TO MANAGEMENT, PROPERTIES AND RECORDS. From the date of
this Agreement, the Seller shall afford the officers, attorneys, accountants and
other authorized representatives of the Buyer reasonable access upon reasonable
notice and during normal business hours to all management personnel, and books
and records of the Seller relating to the Acquired Business. The Buyer shall be
permitted to make abstracts from, or copies of, all such books and records. The
Seller shall furnish to the Buyer such financial and operating data and other
information as to the Assets and the Acquired Business as the Buyer shall
reasonably request and cause its management personnel to cooperate with the
Buyer and to be available at the reasonable request of the Buyer so as to
provide the Buyer's agents with any and all information concerning the Assets
and the Acquired Business that may reasonably be required to close the
transactions contemplated hereby.
6.4. APPROVAL BY SELLER'S SHAREHOLDERS. Seller will cause a meeting of
its shareholders to be called and held for the purpose of voting upon this
Agreement and the transactions contemplated hereby. Seller shall recommend to
its shareholders the approval of, and shall otherwise use its best efforts to
cause its shareholders to approve, this Agreement and the consummation of the
transactions contemplated hereby.
6.5. CONSENTS, APPROVALS AND NOTICES. Seller shall give prior to the
Closing the notice required by or under, and shall use its best efforts to
obtain prior to the Closing all consents,
17
authorizations and approvals required by or under, all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority or of any
other person, including, without limitation, required by or under any Contract,
required to be obtained by Seller in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
6.6. NO SOLICITATION OF OFFERS. Seller shall not, directly or
indirectly, through any officer, director, employee, agent or otherwise, (i)
solicit, initiate or encourage the submission of proposals or offers from any
person relating to any acquisition or purchase of all or a material amount of
the assets of, or any equity interest in, or any merger, consolidation or
business combination with Seller (an "Acquisition Proposal"), or (ii)
participate in any discussion or negotiation regarding, or furnish to any other
person any information with respect to, or otherwise cooperate in any way with
or assist, facilitate or encourage, any Acquisition Proposal by any other
person.
6.7. KEEP INFORMED. From the date hereof through the Closing Date,
Seller shall promptly notify Buyer of (i) any changes to the information
disclosed on any schedule hereto, including changes occurring after the date
hereof (although such disclosure shall not in any way amend or supplement any
schedule) and (ii) any condition, circumstance, fact or other information that
may cause the representations and warranties of the Seller contained herein to
be incomplete or untrue as of the Closing Date as if made on and as of such time
or cause the Seller to be unable to perform its covenants contained herein that
it is required to perform on or before the Closing Date.
7. POST-CLOSING AGREEMENTS. The Seller and the Buyer, as the case may be,
agreed that from and after the Closing Date:
7.1. PROPRIETARY INFORMATION.
(a) The Seller shall hold in confidence and use its best efforts
to have all of the officers, directors, employees, other personnel and agents of
the Seller hold in confidence, all knowledge and information of a secret or
confidential nature with respect to the Acquired Business and shall not
disclose, publish or make use of the same without the consent of the Buyer,
except (i) to the extent that such information shall have become public
knowledge other than through the act of Seller, or any of its officers,
directors and personnel except as would be permitted under (ii) and (iii) of
this Section 7.1(a), (ii) as may be required to enforce any of Seller's rights
against Buyer, or (iii) as may be required by applicable law or legal process.
(b) The Seller agrees that the remedy at law for any breach of
this Section 7.1 may be inadequate and that the Buyer shall be entitled to seek
injunctive relief in addition to any other remedy it may have upon breach of any
provision of this Section 7.1.
7.2. FURTHER ASSURANCES AND DATA.
(a) At any time and from time to time after the Effective Date, at
the Buyer's reasonable request and without further consideration, the Seller
shall execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take such other actionas the Buyer may
reasonably request to more effectively transfer, convey and assign to the Buyer,
and to confirm the Buyer's title to, all the Assets, to put the Buyer in actual
possession and operating control thereof, to assist the Buyer in exercising all
rights with respect thereto, and to carry out the purpose and intent of this
Agreement. Immediately after the Closing, the Seller shall, to the extent
applicable, authorize the release to the Buyer of all files pertaining to the
Assets or the Acquired Business held by any federal, state, county or local
authorities, agencies or instrumentalities.
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(b) The parties agree that from and after the Effective Date, as
to any monies received that rightfully belong to the other party, they shall
remit such monies within five (5) business days to the other party.
(c) Within fifteen (15) business days after the Closing Date, the
parties shall mutually agree on the pro-ration as of the Effective Date of rent,
utilities and telephone for the Acquired Business, and the party obligated to
pay the net amount of such prorated items to the other party will make such
payment ten (10) days after the agreement on pro-rations is consummated.
(d) The Buyer shall have the right, for a period of three (3)
years following the Closing Date, to have reasonable access to those books,
records and accounts, including financial and tax information, correspondence,
employment records and other records that may, at that time, be retained by the
Seller to the extent that any of the foregoing relates to the Acquired Business
and is need by the Buyer in order to comply with its obligations under
applicable securities, tax, environmental, employment or other laws and
regulations.
7.3. COOPERATION IN LITIGATION. Each party hereto will reasonably
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such party relating to or arising out of the conduct of the Acquired Business
prior to the Closing Date (other than litigation arising out of the transactions
contemplated by this Agreement). The party requesting such cooperation shall pay
the out-of-pocket expenses (including legal fees and disbursements) of the party
providing such cooperation and of its officers, directors, employees, other
personnel and agents reasonably incurred in connection with providing such
cooperation.
7.4. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The Seller agrees that
it will utilize normal collection efforts consistent with past business
practices of the Seller in collecting the outstanding Accounts Receivable of the
Seller as of the Closing Date. Seller shall undertake any formal collection
action (whether legal action, referral to a collection agency or otherwise) with
respect to any such account receivable without first consulting with the Buyer.
The Seller agrees to pay in a manner consistent with past business practice of
the Seller, the outstanding accounts payable of the Seller as of the Closing
Date. On or before the Closing, the Seller shall identify in writing to the
Buyer any disputed accounts payable of the Seller as of the Closing Date.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO SELL THE ASSETS. The
obligations of Seller to sell the Assets is subject to the fulfillment prior to
or at the Closing of the following conditions:
8.1. BUYER'S PERFORMANCE. There shall not be any material error,
misstatement or omission in the representations and warranties made by Buyer in
this Agreement; all representations and warranties by Buyer contained in this
Agreement or in any written statement delivered by Buyer to Seller pursuant to
this Agreement shall be true in all material respects at and as of the Closing
as though such representations and warranties were made at and as of said time
(except (i) as contemplated by this Agreement and (ii) to the extent, if any,
Seller shall waive the same); and Buyer shall have performed and complied with
all the terms, provisions and conditions of this Agreement to be performed and
complied with by Buyer at or before the Closing.
8.2. TRANSACTION AGREEMENTS. Buyer shall have executed and delivered
this Agreement, all related transaction agreements contemplated herein, and all
other documents identified in Section 4.2 of this Agreement.
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8.3. CHARTER DOCUMENTS AND CERTIFICATES. Buyer shall have
delivered such certificates or other documents as may be reasonably requested by
Seller, including, without limitation, certificates of legal existence, good
standing and certified charter documents from the Secretary of State of
Delaware, and certificates of an officer of the Buyer with respect to directors'
resolutions, by-laws and other matters.
8.4. ATTORNEY OPINION. Buyer shall have delivered an opinion of
counsel as to the validity of the shares, the Note, Security Agreement, and this
Agreement including the earn-out.
8.5. CONSENTS AND APPROVALS. Buyer shall have provided all notices
and obtained all consents, authorizations and approvals under all statutes,
laws, ordinances, regulations, rules, judgments, decrees and orders of any court
or governmental agency, board, bureau, body, department or authority or of any
other person required to be provided or obtained by Buyer, in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO PURCHASE THE ASSETS. The
obligation of Buyer to purchase THE Assets is subject to the fulfillment prior
to or at the Closing of the following conditions:
9.1. SELLER'S PERFORMANCE. There shall not be any material error,
misstatement or omission in the representations and warranties made by Seller in
this Agreement; all representations and warranties by Seller contained in this
Agreement or in any written statement delivered by Seller to Buyer pursuant to
this Agreement shall be true in all material respects at and as of the Closing
as though such representations and warranties were made at and as of said time
(except (i) as contemplated by this Agreement and (ii) to the extent, if any,
Buyer shall waive the same); and Seller shall have performed and complied with
all the terms, provisions and conditions of this Agreement to be performed and
complied with by Seller at or before the Closing.
9.2. TRANSACTION DOCUMENTS. Seller shall have executed and delivered
this Agreement, and Seller shall have executed and delivered, or caused to be
executed and delivered, all related transaction agreements contemplated herein
and all other documents set forth in Section 4.1 of this Agreement.
9.3. CHARTER DOCUMENTS AND CERTIFICATES. Seller shall have delivered
such certificates or other documents as may be reasonably requested by Buyer,
including, without limitation, certificates of legal existence, good standing
and certified charter documents from the Secretaries of State of the States of
New Jersey, Pennsylvania and Delaware, and certificates of the Chief Executive
Officer of the Seller with respect to minutes, resolutions, by-laws and any
other relevant matters concerning the Seller in connection with the transactions
contemplated by this Agreement.
9.4. ACCOUNTANTS' LETTER. Buyer shall have received a letter, dated no
earlier than a date ten days preceding the Closing Date, from Seller's
independent accountants, satisfactory in form and substance to Buyer, stating
that, based upon:
(a) a reading of the latest available unaudited interim
consolidated Financial Statements of Seller, and
(b) discussions with officials of Seller and its consolidated
subsidiaries responsible for financial and accounting matters,
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nothing has come to their attention which, in their judgment, would lead them to
believe that the unaudited, interim consolidated Financial Statements of Seller
are not fair presentations of the financial position, results of operations and
changes in financial position of Seller or, except as set forth in the notes to
such Financial Statements, have not been prepared in accordance with GAAP.
9.5. OPINION OF SELLER'S COUNSEL. Buyer shall have received an
opinion, dated as of the Closing Date, from counsel for Seller, as to the
matters addressed
9.6. CONSENTS AND APPROVALS. Seller shall have provided notice and
obtained all consents, authorization and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority or of any
other person including, without limitation, as required by or under any
Contract, required to be provided or obtained by Seller, as the case may be, in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
9.7. ASSETS; MATERIAL ADVERSE CHANGE. There shall have occurred no
material damage to or destruction or loss of (whether or not covered by
insurance) any of the Assets, nor any material adverse change in the business,
financial condition, operating results or prospects of Seller with respect to
the Acquired Business.
9.8. EMPLOYMENT CONTRACTS. Each of the Key Employees shall have
entered into an employment contract with Buyer in the form of EXHIBIT H.
9.9. EMPLOYEES. Each of the other Transferring Employees as of the
date hereof shall have agreed to continue his or her employment with Buyer, and
shall have entered into employment agreements and/or non-solicit/non-compete
agreements with Buyer in the form of EXHIBIT J-1 AND J-2, RESPECTIVELY.
9.10. RELEASE OF LIENS. Any lien or encumbrance on the Assets
shall have been released.
10. TRANSFER AND SALES TAX. Notwithstanding any provisions of law imposing
the burden of such taxes on the Seller or the Buyer, as the case may be, the
Seller shall be responsible for and shall pay (a) all sales, bulk sales, use and
transfer taxes, and (b) all governmental charges, if any, upon and due in
connection with the sale or transfer of any of the Assets hereunder. If the
Seller shall fail to pay such amounts on a timely basis, the Buyer may pay such
amounts to the appropriate governmental authority or authorities, and the Seller
shall promptly reimburse the Buyer for any amounts so paid by the Buyer.
11. Events of DEFAULT. Failure of Buyer to comply with the terms,
conditions and covenants of this Agreement or any obligations under the Notes
shall constitute an event of default after notice from Seller and thirty (30)
days to cure.
12. REMEDIES. Upon occurrence of an event of default, Seller shall have the
following remedies:
12.1. Force registration of the shares issued pursuant to paragraph
1.2(d).
12.2. Accelerate all amounts owed under the Note and/or enforce the
Security Agreement securing the Note and this Agreement.
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12.3. Any other rights or remedies allowed by law.
13. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be sufficiently given if delivered
personally or sent by facsimile (with transmission confirmed), Federal Express,
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows or to such other address or facsimile number of which the
parties may have given notice:
TO THE SELLER: WITH A COPY TO:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 1600 ▇▇▇▇▇▇▇ Building ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------ -------------------------
TO THE BUYER: WITH A COPY TO:
------------- ---------------
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
President & CEO Secretary and General Counsel
Stratus Services Group, Inc. Stratus Services Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, by facsimile
or by Federal Express; or (b) three business days after being sent, if sent by
registered or certified mail.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
assigns, except that neither party may assign its obligations hereunder without
the prior written consent of the other parties hereto; provided, however, that
the Buyer may assign Buyer's rights hereunder to a subsidiary or affiliate of
Buyer, provided that the Buyer shall remain liable for its obligations
hereunder. Any assignment in contravention of this provision shall be null and
void. No assignment shall release the Buyer from any obligation or liability
under this Agreement.
15. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS.
15.1. ENTIRE AGREEMENT; AMENDMENT. This Agreement, all schedules and
exhibits hereto, and all agreements and instruments to be delivered by the
parties pursuant hereto represent the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior oral and written, and all contemporaneous oral negotiations, commitments
and understandings between such parties including, without limitation, the
letter of intent, dated November 12, 2001, executed by the parties. The Buyer
and the Seller, by the consent of their respective Boards of Directors or
officers authorized by such Boards, may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by the Buyer and
the Seller.
15.2. ATTACHMENTS. If the provisions of any schedule or exhibits to
this Agreement are inconsistent with the provisions of this Agreement, the
provisions of this Agreement shall prevail. The exhibits and schedules attached
hereto or to be attached hereafter are hereby incorporated as integral parts of
this Agreement.
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16. EXPENSES. Except as otherwise provided herein, each party hereto
shall pay its own expenses in connection with this Agreement and the
transactions contemplated hereby.
17. LEGAL FEES. In the event that legal proceedings are commenced by
any party hereto against any other party hereto in connection with this
Agreement or the transactions contemplated hereby, the party which does not
prevail in such proceedings shall pay the reasonable attorneys' fees and costs
incurred by the prevailing party in such proceedings.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of
New Jersey, without regard to conflicts
of law principles. The parties hereto agree to be subject to the exclusive
jurisdiction and venue shall reside in the courts of the State of
New Jersey
located in Monmouth County,
New Jersey and in the courts of the United States of
America located in the State of
New Jersey for the purpose of adjudicating any
dispute relating to or arising out of this Agreement.
19. SECTION HEADINGS. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
20. SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which, when
taken together, shall be one and the same document.
22. PUBLIC DISCLOSURE. Neither party shall make any public statement
about, nor issue any press release concerning this Agreement or the transactions
contemplated hereby without first consulting with the other party hereto as to
the form and substance of any such press release or public disclosure; provided,
however, that nothing in this Section 21 shall be deemed to prohibit any party
hereto from making any disclosure that its counsel deems necessary or advisable
in order to satisfy such party's disclosure obligation imposed by law.
23. TERMINATION. This Agreement may be terminated at any time prior to
or on the Closing Date:
(a) by mutual written consent of the Buyer and the Seller; or
(b) by Buyer who may, without liability to Seller, terminate this
Agreement by notice to Seller (i) at any time prior to the Closing if default
shall be made by Seller in the observance or in the due and timely performance
of any of the terms hereof to be performed by Seller that cannot be cured at or
prior to the Closing, (ii) at the Closing if any of the conditions precedent to
the performance of Buyer's obligations at the Closing shall not have been
fulfilled; or
(c) by Seller who may, without liability to Buyer, terminate this
Agreement by notice to Buyer (i) at any time prior to the Closing if default
shall be made by Buyer in the observance or in the due and timely performance of
any of the terms hereof to be performed by Buyer that cannot be cured at or
prior to the Closing, or (ii) at the Closing if any of the conditions precedent
to the performance of Seller's obligations at the Closing shall not have been
fulfilled.
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REMEDIES CUMULATIVE. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy confirmed hereby, or by law or equity upon
such party, and the exercise by a party of any remedy will not preclude the
exercise of any other remedy.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
ATTEST: PROVISIONAL EMPLOYMENT SOLUTIONS,
------ INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------ --------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman
ATTEST: STRATUS SERVICES GROUP, INC.
------
/s/ J. ▇▇▇▇ ▇▇▇▇▇▇▇, Esq. By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------- --------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
24
