November 2, 2005
EXHIBIT
10.56
November
2, 2005
CONFIDENTIAL
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, CFO
Stratus
Services Group, Inc.
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▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Stratus
Services Group
Re:
Binding letter agreement to purchase certain assets of Stratus Services Group,
Inc. (“Stratus” or the “Company”)
Dear
▇▇.
▇▇▇▇▇▇▇▇:
1. Purchase
Price and Terms.
Except
to the extent set forth within this letter, the terms of Transaction are
as
described in the Term Sheet attached hereto as Exhibit “A” (the “Term Sheet”).
The defined terms set forth in the Term Sheet shall have the same meaning
herein.
2. Definitive
Agreements.
Consummation of the Transaction will be subject to the execution of mutually
acceptable definitive purchase agreements and other applicable documents.
The
purchase agreements will include reasonable indemnification provisions;
representations and warranties by the Company regarding ownership of and
ability
to convey free and clear of liens the Purchased Assets, and compliance with
laws; reasonable non-competition covenants; and other standard and customary
provisions for transactions of this type. All indemnification provisions
and
representations and warranties by the Company will survive the
closing.
The
closing of the Transaction will be subject to the following conditions
precedent:
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(a)
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Approval
of the board of directors of the Company;
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(b)
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A
shareholder vote authorizing the Company to consummate the
sale
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(c)
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Receipt
of all legally required third party approvals, other governmental
or
third-party consents and approval of the Company’s lenders.
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(d)
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Receipt
of a commitment from Purchaser’s Lender for the financing required to
consummate the Transaction.
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3. Due
Diligence; Best Efforts and Access.
Both
parties acknowledge that all necessary due diligence has been completed so
that
the parties are presently able to enter this binding letter agreement. The
Company and the Purchaser each agree to use best efforts to seek and obtain
all
necessary approvals, including shareholder approval by the Company, and to
satisfy all conditions precedent. Without limited the generality of the
foregoing, the parties agree to use best efforts to have all conditions
precedent, other than approval by the Company’s shareholders, satisfied by
November 30,2005. The Company will continue to provide Purchaser and its
accountants, lawyers, and other agents access to the Company’s books and
records, files, and other necessary documents, and make available appropriate
employees, consultants, accountants, legal counsel and other agents or
representatives in order to permit Purchaser to obtain all necessary information
to obtain required financing, to consummate the Transactions and ensure that
no
material changes have occurred.
4. Confidentiality
and Publicity.
The
parties each agree that they will not, except as legally obligated to, without
the prior written consent of the other, disclose the existence of this letter,
the terms hereof, the existence or status of negotiations or any information
concerning the transaction contemplated hereby, except as required by law
and to
their respective directors, officers, employees and agents who have a need
to
know in order to consummate the transaction contemplated. Notwithstanding
the
foregoing or anything contained in any confidentiality agreement previously
executed by the parties, Company shall allow Purchaser to contact and provide
financial information to any financing source deemed necessary by Purchaser.
5. Non-Solicitation.
Company
will not directly or indirectly solicit or encourage any inquiries or proposals
from (nor enter into any agreements with) any person other than Purchaser
for
the purchase of the Purchased Assets, or enter into discussions with, or
furnish
any non-public information concerning Company, its assets or business, to
any
such other person in connection with such proposal, until shareholder approval
for the Transaction is obtained or denied or this agreement is terminated
as a
result of ALS’ failure to satisfy the conditions set forth in section 2 (d)
above by January 30th
2006.;
Company shall promptly notify Purchaser of any such proposal or inquiry received
by Company, or any of their representatives. The non-solicitation period
shall
be extended pursuant to the definitive purchase agreement.
6. Fees
and Expenses.
Company
and Purchaser shall bear their own costs and expenses related to the transaction
contemplated by this letter, including, without limitation, fees and expenses
of
legal counsel and accountants.
7. Further
Assurances.
The
parties hereby agree to execute any other documents or agreements reasonably
necessary to consummate the Transaction and the agreements made
herein.
8. Binding
Effect of this Letter Agreement.
This
letter agreement constitutes a binding and enforceable agreement between
the
parties to consummate the Transaction subject only to the conditions precedent
set forth herein and in the Term Sheet. The provisions of sections 3, 4,
5 and 6
are binding on the parties and enforceable against one another immediately
upon
execution and are not subject to any condition.
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Please
execute this letter agreement below indicating the Company’s acceptance of and
agreement to the terms set forth herein. We look forward to working with
you
toward the successful consummation of this Transaction.
Very
truly
yours,
ALS,
LLC
By:
/s/
▇▇▇ ▇▇▇▇▇
Accepted
and agreed:
STRATUS
SERVICES GROUP, INC.
By:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Date:
11/3/05
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Exhibit
“A” to Letter of Intent
Term
Sheet
November
2, 2005
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Proposed
Transaction
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The
sale, free and clear of all liens and encumbrances, of (i) all
accounts
receivable (the “Receivables”) and (ii) the contracts and fixed assets
related to Stratus’ Southern California region, Phoenix region and Dallas
Morning News account (collectively, the “Purchased Accounts” and together
with the Receivables, the “Purchased Assets”)
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Proposed
Buyer
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ALS
or its designee
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Sale
Structure
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Asset
Purchase Agreement approved by (i) the Stratus’ Board of Directors and
(ii) the Stratus shareholders in a special meeting
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Existing
Senior Secured Debt
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To
be paid in full or otherwise satisfied at or prior to Closing
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Interim
financing general terms and conditions:
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ALS
will fund up to $1 million of cash flow shortfall from day to day
operations, from November 1, 2005 through the completion of a shareholder
vote on the following conditions:
· ALS
must receive satisfactory collateral
· All
Stratus disbursements are made in the ordinary course
· No
default in the exclusivity provisions of this term sheet
· Shareholder
vote no later than January 30, 2006
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Purchase
Price
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The
purchase price shall be approximately $20 million for the Purchased
Assets. The purchase price shall be paid as follows:
· $3.0
million in cash at Closing
· $6.0
million earnout, payable monthly in arrears in an amount equal
to 15% of
collected gross profit from the Purchased Accounts (the
“Earnout”)
· Payment
or other satisfaction of the existing funded senior debt, excluding
any
unpaid fees or other service charges (estimated to be $9.5 million)
(the
“Funded Senior Debt”)
· Forgiveness
of Stratus’ indebtedness to ALS as of Closing (estimated to be $2.5
million) (the “ALS Debt”)
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Earnout
Offset
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The
Earnout shall be subject to the following offset:
· In
the event ALS’ collection of the Receivables is less than the sum of (i)
the Funded Senior Debt and (ii) the ALS Debt, there will be a dollar
for
dollar reduction in the Earnout
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Exclusivity
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Stratus
shall negotiate exclusively with ALS towards the completion of
the
transaction described in this term sheet from October 31, 2005
through the
shareholder vote
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Shareholder
vote
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Stratus
shall have a special meeting of shareholders and have shareholders
vote on
the transaction described in this term sheet no later than January
30,
2006
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Pre-Closing
Transaction
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· Prior
to Closing, ALS may purchase all the Receivables for an amount
equal to
the Funded Senior Debt
· In
the event ALS chooses to execute this pre-Closing transaction,
ALS will
direct ▇▇▇▇ all Stratus’ customers and receive a service fee from Stratus
for such services
· In
the event ALS chooses to execute this pre-Closing transaction,
the
Purchased Assets will exclude the Receivables and the purchase
price due
at Closing will exclude amounts paid pursuant to this pre-Closing
transaction
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Post-Closing
Relationship between Stratus & ALS
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· Stratus
will provide up to three (3) months of post-Closing support and
transition
services (billing, collection, etc) at no cost to ALS. Stratus
shall make
best efforts to (i) transition the Purchased Assets to ALS and
(ii)
maintain personnel required to satisfy its obligations to provide
such
support and transition services.
· For
the remaining term of the Outsourcing Agreement, ALS will continue
to
process Stratus payroll at rates negotiated prior to ALS’ acquisition of
Stratus’ Northern California assets. The agreement will be terminable with
30 days notice by either party. It will be terminable by Stratus
only if
all obligations to ALS are paid in full.
· Stratus,
ALS, each of their officers and ▇▇▇▇ ▇▇▇▇▇▇▇ and his affiliated
entities
will execute non-compete and non-solicitation agreements with respect
to
each other’s assets post-Closing
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Other
terms and conditions
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Customary
for transactions of this type
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