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Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
FLAGSHIP SERVICES GROUP, INC.,
FLAGSHIP RECONSTRUCTION PARTNERS, LTD.,
FLAGSHIP RECONSTRUCTION ASSOCIATES - COMMERCIAL, LTD.,
FLAGSHIP RECONSTRUCTION ASSOCIATES - RESIDENTIAL, LTD.
AND
PDG ENVIRONMENTAL, INC.,
PROJECT DEVELOPMENT GROUP, INC.
DATED AS OF AUGUST 24, 2005
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TABLE OF CONTENTS
PAGE
ARTICLE I Sale and
Purchase................................................ 2
1.1
Assets...........................................................
2
1.2 Retained
Assets.................................................. 3
1.3 Liabilities Assumed by the
Purchaser: Excluded Liabilities....... 5
1.4
Consideration....................................................
6
1.5 Payment of Purchase Price
Consideration..........................13
1.6 Allocation of Assets and
Purchase Price Consideration............14
ARTICLE II Closing; Effective
Time.........................................14
ARTICLE III Representations and Warranties of
the Seller...................14
3.1 Incorporation;
Qualification.....................................15
3.2 Authority to Execute and
Perform the Agreement; No Breach
by the Seller...............................................15
3.3
Assets...........................................................16
3.4
Contracts........................................................16
3.5 Real
Property....................................................17
3.6 Customers and
Suppliers..........................................18
3.7 Compliance with
Laws.............................................18
3.8 Permits and
Licenses.............................................18
3.9 Actions and
Proceedings..........................................19
3.10 Material
Changes.................................................20
3.11
Intellectual
Property............................................20
3.12
Environmental....................................................21
3.13
Tax
Matters......................................................21
3.14
Employees........................................................22
3.15
Employee Benefit
Plans...........................................22
3.16
Insurance........................................................24
3.17
Labor
Matters....................................................24
3.18
No
Default.......................................................25
3.19
No
Misrepresentations............................................25
3.20
Brokers or
Finders...............................................25
3.21
Warranties.......................................................25
3.22
Surety
Bonds.....................................................26
3.23
Interest
Holders.................................................26
ARTICLE IV Representations and Warranties of
the Purchaser.................26
4.1
Organization.....................................................26
4.2 Authority to Execute and
Perform the Agreement: No Breach
by the Purchaser............................................27
4.3 Brokers or
Finders...............................................27
4.4 Compliance with
Laws.............................................27
4.5 Actions and
Proceedings..........................................28
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4.6 Purchase Price Shares and
Disclosure.............................28
4.7
Litigation.......................................................29
4.8
Solvency.........................................................29
ARTICLE V Covenants of the
Seller..........................................29
5.1 No Actions to Make
Representations Untrue........................29
ARTICLE VI Covenants of the
Purchaser......................................29
6.1 No Actions to Make
Representations Untrue........................29
6.2 Post-Closing Access to
Information...............................30
ARTICLE VII Additional
Agreements..........................................30
7.1 Notification of Certain
Matters..................................30
7.2 Public
Statements................................................30
7.3 Assignment of
Leases.............................................31
7.4 Employee
Benefits................................................31
7.5 Consents and
Approvals...........................................32
ARTICLE VIII No
Compete/Employment.........................................32
8.1 Trade Sensitive
Information......................................32
8.2
Non-Solicitation.................................................33
8.3
Remedies.........................................................34
8.4 Employment of Petersen By
the Purchaser..........................35
8.5 Modification of
Noncompetition/Default...........................35
ARTICLE IX Items Delivered at
Closing......................................36
9.1 Items Delivered by the
Seller....................................36
9.2 Items Delivered by the
Purchaser.................................37
9.3 Other Items to be Delivered
Following Closing....................37
ARTICLE X
Indemnification..................................................37
10.1
General
Indemnification..........................................37
10.2
Obligations of the
Indemnitor and Indemnitee.....................39
10.3
Failure to Defend
Action.........................................40
10.4
Limitation.......................................................41
10.5
Survival of
Indemnity............................................43
ARTICLE XI
Miscellaneous...................................................43
11.1
Termination......................................................43
11.2
Expenses.........................................................43
11.3
Governing
Law....................................................43
11.4
Entire Agreement;
Modification, Waiver...........................44
11.5
Survival of
Representations and Warranties.......................44
11.6
Collection of Accounts
Receivable................................45
11.7
Notices..........................................................45
11.8
Counterparts.....................................................46
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11.9
Headings.........................................................47
11.10 Record
Retention.................................................47
11.11 Gender and
Number................................................47
11.12
Severability.....................................................47
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SCHEDULES
Schedule 1.1(a)
Equipment and Supplies
Schedule 1.1(b)
Non-Assignable Computer Software
Schedule 1.1(c)
Customer Contracts
Schedule 1.2(b)(ii)
Closing Date Accounts
Schedule 1.2(k)
Retained Property and Assets
Schedule 1.3(c)
Other Obligations Assumed by Purchaser
Schedule 1.3(x)
Excluded Liabilities
Schedule 1.4(b)
Purchase Price Note
Schedule 1.4(d)
Form of Warrant Payment
Schedule 3.1
Articles of Incorporation and Bylaws
Schedule 3.2
Exceptions to Seller's Authority to Execute and
Perform the Agreement
Schedule 3.3(a)
Encumbrances on the Assets
Schedule 3.3(b)
Additional Assets Used to Operate Business
Schedule 3.4(a)
Contracts Future Purchase/Sale or Use
Schedule 3.4(b)
Contracts
Schedule 3.5
Real Property Leased by Seller
Schedule 3.6(a)
Material Change in Relations
Schedule 3.6(b)
Significant Suppliers and Significant Customers
Schedule 3.7
Compliance With
Laws
Schedule 3.8
Permits and Licenses
Schedule 3.8(a)
Additional Permits or Modifications
Schedule 3.9
All Pending Suits and Actions
Schedule 3.10
Material Changes
Schedule 3.10(a)
Internal Unaudited Statement
Schedule 3.11
Intellectual Property
Schedule 3.11(a)
Licenses
Schedule 3.11(b)
Employees Who Have Signed Non-Disclosure Agreements
Schedule 3.12
All Pending and Threatened Regulatory Actions,
None of Which Are Material
Schedule 3.14
Employment Agreements
Schedule 3.15(a) & 3.15(b) Employee Plans
Schedule 3.16
Insurance Policies
Schedule 3.17
Labor Agreements
Schedule 3.20
Brokers
Schedule 3.21(a)
Seller Warranties
Schedule 3.21(b)
Claims for Breach of Warranty
Schedule 3.21(c)
Claims for Personal Injury or Property Damage
Schedule 3.22
Surety Bonds
Schedule 3.23
Shareholders/Interest Holders
Schedule 4.7
Litigation Regarding Other Purchases of Purchaser
Schedule 8.4
Employment Agreement
Schedule 9.1(c)
Assignment and Assumption Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT") is dated as of
the
24th day of August, 2005, between Flagship
Services Group, Inc., a Texas
corporation ("FLAGSHIP SERVICES"), Flagship
Reconstruction Partners, Ltd., a
Texas limited partnership, ("FLAGSHIP
PARTNERS"), Flagship Reconstruction
Associates - Commercial, Ltd., a Texas
limited partnership, ("FLAGSHIP
ASSOCIATES"), Flagship Reconstruction
Associates - Residential, Ltd., a Texas
limited partnership, ("FLAGSHIP
RESIDENTIAL") (Flagship Services, Flagship
Partners, Flagship Associates and Flagship
Reconstruction referred to herein
collectively as the "SELLER"), and PDG
ENVIRONMENTAL, INC., a Delaware
corporation, (the "Parent") and Project
Development Group, Inc., a Pennsylvania
corporation (the "PURCHASER") and Roy
Petersen, an individual ("Mr. Petersen,
and Laura Petersen, an individual ("Mrs.
Petersen) (collectively the
"Petersens") for the limited purpose of the
covenants set forth in Article VIII.
WITNESSETH:
WHEREAS, the Seller owns and operates a business which contracts
to
provide emergency response, loss
mitigation, restoration and reconstruction
services (the "BUSINESS"); and
WHEREAS, the Petersens are the sole owners of the Seller; and
WHEREAS, the Seller desires to sell and transfer, and the
Purchaser
desires to purchase and acquire, in
exchange for the consideration hereinafter
specifically set forth, certain of the
assets related to the Business, upon the
terms and conditions hereinafter set
forth.
THEREFORE, the parties agree as follows with the intent to be
legally
bound.
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ARTICLE I
Sale and Purchase
1.1 Assets. On the Closing Date (as hereinafter defined) and upon
the
terms and subject to the conditions set
forth in this Agreement, the Seller
shall sell, transfer, assign, convey, and
deliver to the Purchaser, and the
Purchaser shall purchase, acquire, and
accept from the Seller, certain of the
assets of the Seller related to or used in
connection with the Business and
which the Seller has the right to transfer
(all of such assets, property and
business are hereinafter collectively
referred to as the "Assets"). The Assets
include all properties and assets of every
kind, nature and description,
tangible and intangible, used in connection
with the Business that are owned by
the Seller and in which the Seller has any
right or interest and which the
Seller has the right to transfer (to the
extent of such right or interest),
including, without limiting the generality
of the foregoing, the following (but
excluding those assets described in Section
1.2 hereof):
(a) all of the property, inventory, and equipment, including,
furniture and fixtures, leasehold
improvements, and computer equipment related
to and used in connection with the
Business, including the items set forth on
Schedule 1.1(a) hereto (the "EQUIPMENT AND
SUPPLIES");
(b) all customer lists, supplier lists, telephone numbers,
engineering data, licenses, customer
records, patents, tradenames (including,
but not limited to, "Flagship
Reconstruction", trademarks, intellectual
property, assignable or transferable
computer software, (any of the Seller's
computer software which is not assignable
or transferable is listed on Schedule
1.1(b) hereto), including, but not limited
to, all versions of source code,
including annotations and comments, object
code, documentation, specifications,
flowcharts, logic
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diagrams, and any other information or
material used or prepared by programmers
or software engineers for internal use in
developing, debugging, testing, using,
or documenting the software, and all other
intangible assets related to or used
in connection with the Business (the
"INTANGIBLE ASSETS"), provided, however,
the Purchaser hereby grants a license to
Seller to use the names, "Flagship
Reconstruction", "Flagship Services Group,
Inc.", "Flagship Reconstruction
Partners, Ltd.", "Flagship Reconstruction
Associates--Commercial, Ltd.", and
"Flagship Reconstruction
Associates--Residential, Ltd." (collectively, the
"Company Names"), as provided in Section
1.2(b) of this Agreement.;
(c) except as expressly specified in Section 1.2 or listed on
Schedule 1.2(b)(ii), all (i) customer
contracts, including those customer
contracts listed on Schedule 1.1(c) (ii)
open orders, and (iii) all other
agreements or contracts arising in the
normal course of business (the
"CONTRACTS"); and
(d) all other current assets of the Business.
1.2 Retained Assets. Notwithstanding anything to the contrary
contained
in this Agreement, the Purchaser shall not
purchase, and the Seller shall
retain, the Seller's right, title, and
interest in and to the following:
(a) all of the Seller's cash on hand and other cash
equivalents, overpayments, security and
other deposits, retroactive product
liability or workmen's compensation
insurance premium adjustments, shareholder
promissory notes, partner promissory notes,
tax refunds and other claims for
government charges, and prepaid expenses,
including, without limitation, those
accounts listed on Schedule 1.2(k) and the
shareholder loan listed on Schedule
1.2(b)(ii);
(b) all of the Seller's accounts receivable existing as of the
Closing Date, i.e., all amounts owing for
services, equipment, or licenses which
have been fully delivered or
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requests for reimbursements which have been
billed, all amounts for services
which have been fully performed but not yet
billed (i.e., work in progress), and
all American Association of Restoration
Contractors (also known as AAORC)
referral fees under written or verbal
contracts not yet billed including,
without limitation, those listed on
Schedule 1.2(b)(ii) (collectively, the
"CLOSING DATE Accounts"). The Purchaser
hereby covenants and agrees to forward
any and all amounts received by the
Purchaser after the Closing Date that are
properly payable to the Seller under the
terms and conditions of this Agreement
within a reasonable time, not to exceed ten
(10) days, after receipt by the
Purchaser of such amounts. The Seller
hereby further covenants and agrees to
forward any and all amounts received by the
Seller after the Closing Date that
are properly payable to the Purchaser under
the terms and conditions of this
Agreement within a reasonable time, not to
exceed ten (10) days, after receipt
by the Seller of such amounts.
Notwithstanding anything in this Agreement to the
contrary, for a period of eighteen (18)
months following the Closing Date (or
such longer period as the Seller may
reasonably require for such purposes), the
Seller and Mr. Petersen shall be permitted
to use the Company Names solely in
connection with (i) tax matters with local,
state and federal governmental
agencies; (ii) collection of the Closing
Date Accounts; and (iii) the
negotiation of any checks properly
belonging to the Seller;
(c) any of the rights of the Seller under this Agreement or
any agreements associated in connection
herewith;
(d) the Seller's organizational documents, records, entity
seals, minute books, membership interest
books and other records (and all
amendments thereto) having exclusively to
do with the organization and
capitalization of the Seller;
(e) all insurance policies and rights thereunder;
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(f) all personnel records and other records that the Seller is
required by law to retain in its
possession;
(g) all ownership rights of the Seller in the American
Association of Restoration Contractors
(AAORC);
(h) all rights in connection with and assets of the Plans
(hereinafter defined);
(i) all
rights in and to all contracts other than the
Contracts;
(j) all ownership rights of Flagship Services in Flagship
Partners, Flagship Associates, and Flagship
Residential; and
(k) the property and assets expressly designated in Schedule
1.2(k).
1.3 Liabilities Assumed by the Purchaser: Excluded Liabilities.
The
Purchaser agrees to assume and discharge in
accordance with their terms only the
following liabilities of the Seller
(collectively, the "ASSUMED LIABILITIES").
(a) all liabilities and obligations from and after the Closing
Date under the Seller's lease for the
property located at 1200 Gambrel, Ste.
100, Arlington, Texas 76014 and the
Seller's lease for the property located at
200 West Fort Morgan Road #208-D, Gulf
Shores, AL 36689 (collectively, the
"LEASES");
(b) all liabilities and obligations from and after the Closing
Date under the Contracts; and
(c) all liabilities and obligations from and after the Closing
Date under the agreements, if any, listed
on Schedule 1.3(c). Other than the
Assumed Liabilities, the Purchaser is not
assuming and shall not otherwise
become liable for any debts, liabilities,
or obligations of the Seller or the
Business, whether now asserted or
unasserted, known or unknown, fixed or
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contingent, including, without limitation,
those liabilities listed on Schedule
1.3(x) (collectively, the "EXCLUDED
LIABILITIES").
1.4 Consideration. The consideration to be paid by the Purchaser
for
the Assets (the "PURCHASE PRICE
CONSIDERATION") shall be as follows:
(a) Cash. Five Million Two Hundred Fifty Thousand and No/100s
Dollars ($5,250,000.00) in cash (the
"PURCHASE PRICE CASH"); plus
(b) Note. A promissory note executed by Parent and the
Purchaser as makers in the principal amount
of Seven Hundred Fifty Thousand and
No/100s Dollars ($750,000.00) bearing
interest at the rate of six percent (6.0%)
per annum in the form attached hereto as
Schedule 1.4(b) (the "PURCHASE PRICE
NOTE"); plus
(c) Stock. An aggregate number of shares of PDG Environmental,
Inc. common stock, $0.02 par value per
share (the "Common Stock") having a value
of Two Hundred Fifty Thousand and No/100s
Dollars ($250,000.00) calculated based
on the average of the VWAP (hereinafter
defined) each day during the ten (10)
consecutive trading day period prior to the
Closing (the "PURCHASE PRICE
STOCK"). "VWAP" means, for any date, the
price determined by the first of the
following clauses that applies: (a) if the
Common Stock is then listed or quoted
on the New York Stock Exchange , the
American Stock Exchange or NASDAQ including
its OTC Electronic Bulletin Board and "Pink
Sheets" (a "Trading Market"), the
daily volume weighted average price of the
Common Stock for such date (or the
nearest preceding date) on the primary
Trading Market on which the Common Stock
is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. EST to 4:02 p.m.
Eastern Time) using the VAP
function; (b) if the Common Stock is not
then listed or quoted on the Trading
Market and if prices for the Common Stock
are then reported in the "Pink Sheets"
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published by the Pink Sheets, LLC (or a
similar organization or agency
succeeding to its functions of reporting
prices), the most recent bid price per
share of the Common Stock so reported;
plus
(d)
Warrants.
(i) Warrant to purchase up to two hundred fifty
thousand (250,000) shares of the Common
Stock at a per share purchase price
equal to One and No/100s Dollars ($1.00) in
the form attached hereto as Schedule
1.4(d); and
(ii) Warrant to purchase up to One Hundred Fifty
Thousand (150,000) shares of the Common
Stock at a per share purchase price
equal to the average of the VWAP for each
day during the ten (10) consecutive
trading day period prior to the Closing in
the form attached hereto as Schedule
1.4(d) (collectively, the "PURCHASE PRICE
Warrants"); plus
(e) Earn
Out.
(i) An additional amount of cash (the "EARN OUT")
based upon the contribution generated by
the operations of the Seller acquired
by the Purchaser pursuant to the terms of
this Agreement for the performance and
delivery of emergency response, loss
mitigation, restoration and reconstruction
services calculated as follows: Thirty-five
percent (35%) of the amount by which
the Adjusted Net Income (hereinafter
defined) during the period commencing on
the Closing Date and ending 18 months
thereafter (the "EARN OUT PERIOD") exceeds
Five Hundred Thousand and No/100s Dollars
($500,000.00). The "ADJUSTED NET
INCOME" for the purposes of this Section
1.4 shall mean the net operating income
for the Earn Out Period generated and
performed by the Flagship Operations less
Previous Period Losses (as defined) and
less direct costs of operation, in the
ordinary course of business, of the
Flagship Operations as determined in
accordance with historical accounting
practices of the
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Seller, including, but not limited to, all
contract costs including insurance
and bonding costs and other expenses
directly associated with the operation of
the Flagship Operations including
depreciation, salaries, wages, and benefits
paid to employees in the Flagship
Operations excluding corporate overhead
expenses of the Parent for the Flagship
Operations and excluding extraordinary
costs including, without limitation, the
cost of this transaction. "Flagship
Operations" shall mean business generated
and/or performed out of the
Purchaser's office located in and around
Dallas, Texas and dealing specifically
with emergency response, loss mitigation,
restoration and reconstruction
services. "Previous Periods Losses" for
purposes of this section shall mean
negative Adjusted Net Income for the Earn
Out Period. For instance if the
Flagship Operations experience a loss
during the Earn Out Period, the loss shall
be included in the Earn Out Calculation
(i.e., any net losses during the Earn
Out Period shall be deducted against
profits in subsequent months and periods
during the Earn Out Period). In all
instances where revenues are generated by
joint efforts of the Flagship Operations
and other operations of the Purchaser
or Parent, a reasonable and equitable
allocation of such revenues will be made.
Within forty-five (45) days following the expiration of the
first
twelve months during the Earn Out Period,
the Purchaser shall calculate the
amount of the Earn Out accrued during such
twelve month period and pay such
amount (the "INSTALLMENT") to the Seller.
Along with the Installment, the
Purchaser shall prepare and deliver to the
Seller a written calculation of the
amount of such Installment. Within ten (10)
days following the end of each
calendar month during the Earn Out Period,
the Purchaser shall prepare and
deliver to the Seller a written calculation
of the amount of the Earn Out
accrued from the commencement of the Earn
Out Period through such month's end.
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(ii) Within sixty (60) days after the expiration of
the Earn Out Period, the Purchaser shall
prepare and deliver to the Seller a
written calculation of the Earn Out earned,
if any, (the "Earn Out Calculation
Sheet"), which shall be prepared consistent
with the foregoing formula, together
with immediately available funds in the
amount of the Earn Out less the amount
of the Installment previously paid to the
Seller or in the instance that the
Earn Out as determined by the Earn Out
Calculation Sheet is less than the amount
of the Installment (hereinafter defined)
the Seller shall pay to the Purchaser
within fifteen (15) days after receipt of
the Earn Out Calculation Sheet, in
immediately available funds, an amount
equal to the difference between the Earn
Out as determined by the Earn Out
Calculation Sheet and the Installment;
provided, however, in no event shall the
Seller be required to repay the
Purchaser an amount in excess of the
Installment (the "Earn Out Funds").
(iii) The Seller shall have a period of thirty (30)
days to review the Earn Out Calculation
Sheet. During such period, the Purchaser
shall afford to the Seller access to any of
the books, records, and work papers
of the Purchaser requested by the Seller to
assist the Seller in reviewing the
Earn Out Calculation Sheet and the
calculation of the Earn Out. If the Seller
disputes any items in the Earn Out
calculation ("Disputed Item(s)"), then the
Seller shall provide written notice to the
Purchaser specifying each of the
Disputed Items and setting forth in
reasonable detail the basis for such
dispute. Failure by the Seller to provide
written notice to the Purchaser
specifying the Disputed Items within thirty
(30) days of delivery of the Earn
Out Calculation Sheet by the Purchaser
shall be deemed acquiescence therein by
the Seller to the Earn Out Calculation
Sheet and calculation of the Earn Out.
(iv) If within thirty (30) days after delivery by the
Seller to the Purchaser of any notice of
any Disputed Items, the Seller and the
Purchaser are unable to resolve
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all of such Disputed Items, then any
remaining Disputed Items shall be submitted
to an accountant with an accounting firm
mutually acceptable to the Purchaser
and the Seller (the "Accountant"). Using
the standards described in this Section
1.4(e), the Accountant shall resolve only
the Disputed Items and report in
writing to the Seller and the Purchaser
upon the resolution of the Disputed
Items. The Accountant's decision shall be
final, conclusive and binding on all
parties. The fees and disbursements of the
Accountant shall be borne equally by
the Seller and the Purchaser.
(v) Thereafter,
(aa) If the Earn Out as calculated
consistent with the Accountant's decision
with respect to the Disputed Items is
less than the Earn Out (inclusive of the
Installment) paid by the Purchaser,
then the Purchaser shall be entitled to
receive from the Seller, an amount equal
to the difference between the Earn Out as
so calculated and the Earn Out
(inclusive of the Installment) actually
paid by the Purchaser (the "Deficit");
(bb) If the Earn Out as calculated
consistent with the Accountant's decision
with respect to the Disputed Items is
greater than the Earn Out (inclusive of the
Installment) actually paid by the
Purchaser, then the Seller shall be
entitled to receive from the Purchaser an
amount equal to the difference between the
Earn Out as so calculated and the
Earn Out (inclusive of the Installment)
actually paid by the Purchaser (the
"Surplus");
(cc) Any Surplus shall be paid by the
Purchaser in cash within ten (10) days of
the receipt of the Accountant's
decision with respect to the Disputed Items
by wire transfer of immediately
available funds to an account designated by
the
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Seller. Any Deficit shall be paid in cash
within ten (10) days of the receipt of
the Accountant's decision with respect to
the Disputed Items by wire transfer of
immediately available funds to an account
designated by the Purchaser. The
Deficit or the Surplus, as the case may be,
shall be deemed an adjustment to the
Purchase Price.
(vi) Acceptance or negotiation by the Seller of the
Earn Out Funds and/or the Installments
shall in no manner constitute a waiver of
the Seller's right to dispute the
calculation of the Earn Out and/or prejudice
any remedy of the Seller with respect
thereto.
(vii) If the calculation of the Earn Out results in a
negative number, i.e., a loss, in no event
shall the Seller participate in
and/or in manner be liable for the payment
of any such loss, beyond the
repayment of the Installment, if any, and
there shall be no payment of any
amount to the Seller by the Purchaser
attributable to the Earn Out.
(viii) Notwithstanding the foregoing, the Purchaser
and the Seller hereby agree that in the
event the employment of Mr. Petersen by
the Purchaser is (aa) terminated by the
Purchaser as a result of the Employee
engaging in conduct materially injurious to
the Purchaser, including, but not
limited to acts of dishonesty or fraud
related to his employment with the
Purchaser, commission of a felony or a
crime of moral turpitude, or substance
abuse; or (bb) terminated by Mr. Petersen
following the expiration of 180 days
following the Closing Date other than Mr.
Petersen's termination of his
employment due to a material breach by the
Purchaser of its obligations under
this Agreement, the Purchase Price Note
and/or the Employment Agreement, the
Earn Out shall be reduced by a fraction,
the numerator of which is the number of
days remaining in the Earn Out Period
following the termination of Mr.
Petersen's employment for the reasons
stated in Subsections 1.4 (viii) (aa) or
1.4 (viii) (bb) and the denominator of
which is 540. In such event, the reduced
Earn Out amount shall remain payable
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in accordance with the payment schedule set
forth above. For example, if the
Earn Out Period were to commence on March
1, 2005 and Mr. Petersen's employment
with the Purchaser was terminated for the
reasons stated in Subsections 1.4
(viii) (aa) or 1.4 (viii) (bb) 135 days
later, the Earn Out would be reduced by
Seventy-five percent (75%). In the event
that Mr. Petersen's employment by the
Purchaser is terminated for any reason
other than for the reasons stated in
Subsections 1.4 (viii) (aa) or 1.4 (viii)
(bb), except as provided by the
immediately following sentence, there shall
be no reduction in the Earn Out and
the entire amount of the Earn Out shall be
paid to the Seller. The Purchaser and
the Seller hereby further agree that if Mr.
Petersen's employment is terminated
by Mr. Petersen prior to the expiration of
180 days following the Closing Date
other than Mr. Petersen's termination of
his employment due to a material breach
by the Purchaser of its obligations under
this Agreement, notwithstanding
anything to the contrary herein, the Seller
shall not be entitled to receive any
portion of the Earn Out.
Notwithstanding anything herein to the contrary, the Earn Out was
the
result of negotiations and is agreed to by
the parties to be payment for the
fair value of the Assets being sold by the
Seller to the Purchaser. An
independent appraisal of the value of the
Assets purchased will be completed by
the Purchaser. The appraisal is anticipated
to confirm the intent of the parties
that the Earn Out is intended to be a part
of the consideration paid by the
Purchaser for the fair value of the Assets;
provided, however, the Purchaser
agrees that such appraisal is being
obtained for its independent purposes and
there shall be no adjustment of any kind to
the Purchase Price, including, but
not limited to the Earn Out, in the event
that appraisal is less than or more
than the consideration paid by the
Purchaser for the Assets being sold by the
Seller to the Purchaser.
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(f) Overbilling/Underbilling. Notwithstanding anything to the
contrary herein, the amount of the billings
in excess of contract costs and
estimated earnings (the "Overbilling") in
existence at the Effective Date shall
be deemed assigned to the Purchaser as part
of the Assets and the contract costs
and estimated earnings in excess of
billings (the "Underbilling") in existence
at the Effective Date shall be deemed
retained by the Seller as part of the
Closing Date Accounts.
After the Closing, the Overbilling shall be collected by the Seller
and
the Underbilling shall be billed and
collected by the Purchaser. The Seller
shall immediately pay to the Purchaser any
amounts attributable to the
Overbilling as such amounts are collected.
The Purchaser shall immediately pay
to the Seller any amounts attributable to
the Underbilling as such amounts are
collected.
1.5 Payment of Purchase Price Consideration. The Purchase Price
Consideration shall be paid as follows:
(a) On the Closing Date, the Purchaser shall:
(i) pay to the Seller the Purchase Price Cash by wire
transfer of immediately available funds to
accounts designated by the Seller;
(ii) deliver to the Seller the fully executed
Purchaser Price Note;
(iii) deliver to the Seller an irrevocable order to
the Parent's transfer agent to issue the
Purchase Price Shares to the Seller
("the Irrevocable Order"); and
(iv) deliver to the Seller the Purchase Price
Warrants.
(b) Thereafter, the Purchaser shall pay the Seller the amount
of the Earn Out, if any, as provided in
Section 1.4 (e).
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1.6 Allocation of Assets and Purchase Price Consideration. For
federal
income tax purposes, the Consideration
shall be allocated among the Acquired
Assets in accordance with and as provided
by Section 1060 of the Code (the
"Section 1060 Allocation"). Within ninety
(90) business days after the Closing
Date, the Purchaser and the Seller shall
prepare a mutually acceptable version
of the Section 1060 Allocation. The Parties
agree that any tax returns shall be
prepared and filed consistently with such
agreed upon Section 1060 Allocation.
In this regard, the Parties agree that, to
the extent required, they will each
properly prepare and timely file Form 8594
in accordance with the agreed upon
Section 1060 Allocation.
ARTICLE II
Closing; Effective Time
The Closing shall take place at the offices of Lanter Westermann
P.C.
at 226 Bailey Avenue, Suite 100, on August
24, 2005, at 10:00 a.m. (Fort Worth,
Texas time), or on such other date and time
as may be agreed upon between the
Purchaser and the Seller (herein referred
to as the "CLOSING" or the "CLOSING
DATE"). The Purchaser and the Seller
acknowledge and agree that all transactions
entered into on the Closing Date pursuant
to this Agreement shall be deemed to
have occurred simultaneously and shall
become effective as of 12:00 p.m. (Fort
Worth, Texas time) on August 24, 2005 (the
"EFFECTIVE DATE").
ARTICLE III
Representations and Warranties of the Seller
The Seller hereby represents and warrants to the Purchaser the
following, which shall remain true and
accurate as of the Closing Date and shall
survive the Closing Date as set forth in
Section 11.5 hereof:
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3.1 Incorporation; Qualification. Flagship Services and each of
the
Flagship Companies is a corporation or
limited partnership, as applicable, duly
organized, validly existing, and in good
standing under the laws of the state of
its formation with all requisite power to
own, lease and operate its assets,
properties, and business and to carry on
the Business as now being conducted.
Attached hereto and made a part hereof as
Schedule 3.1 are true and complete
copies of the articles of incorporation,
by-laws, certificate of limited
partnership and limited partnership
agreement of each Flagship Services and the
Flagship Companies, as applicable, as in
effect on the date hereof, and to the
Knowledge of the Seller there are no
dissolution, liquidation, or bankruptcy
proceedings pending, contemplated by, or
threatened against Flagship Services
and/or any of the Flagship Companies. For
purposes of this Agreement,
"KNOWLEDGE" and/or the "KNOWLEDGE OF THE
SELLER" shall mean the actual knowledge
of Mr. Petersen after due inquiry.
3.2 Authority to Execute and Perform the Agreement; No Breach by
the
Seller. The Seller has the right and power
and authority, and has received such
approvals and taken such actions as are
required, to enter into, execute, and
deliver this Agreement. This Agreement,
when duly executed and delivered, will
be the valid and binding obligation of the
Seller enforceable in accordance with
its terms, except to the extent that
enforceability may be limited by applicable
bankruptcy, insolvency, or other laws
affecting the enforcement of creditors'
rights generally or by general principles
of equity. Except as provided in
Schedule 3.2, the execution and delivery of
this Agreement, the consummation of
the transactions contemplated hereby, and
the performance by the Seller of this
Agreement in accordance with its terms and
conditions will not (i) require the
approval or consent of any federal, state,
county, local, or other governmental
or regulatory body; or (ii) violate any
provision of the articles of
incorporation or by-laws of the Seller.
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3.3 Assets. Except as set forth on Schedule 3.3(a), the Seller has,
and
shall have as of the Closing, good, valid,
and marketable title to all of the
Assets, free and clear of all liens,
encumbrances, and claims of third parties.
The Seller further represents and warrants
that there are no options,
conditional rights, or other agreements or
arrangements of any kind to purchase
or acquire from the Seller any of the
Assets except as contemplated by this
transaction. Except as set forth on
Schedule 3.3(b), the Assets are the
properties and assets used by the Seller in
the operation of the Business, and
no other assets are used by the Seller to
operate the Business as currently
conducted by the Seller. No other entities
owned or controlled by the Petersens
are in the same business as the Seller. All
of the Equipment and Supplies are in
commercially reasonable operating condition
and repair (subject to normal wear
and tear) and maintenance (other than
normally scheduled maintenance) in order
to permit the same to be used for the same
purposes for which they are currently
being used. EXCEPT AS EXPRESSLY SET FORTH
IN THIS SECTION 3.3, THE SELLER MAKES
NO EXPRESS OR IMPLIED WARRANTIES WITH
RESPECT TO THE EQUIPMENT AND SUPPLIES OR
OTHER FIXED ASSETS, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE; AND THE EQUIPMENT AND
SUPPLIES AND OTHER FIXED ASSETS ARE BEING
SOLD AS-IS, WHERE-IS.
3.4 Contracts. Except in the usual and ordinary course of business
and
as set forth on Schedule 3.4(a), the Seller
is not a party to any material
written or oral contract with respect to
the Business (a) for the future
purchase of equipment, materials, supplies,
or services or (b) for the sale or
use of any Assets or other properties of
the Seller relating to the Business.
Except as set forth on Schedule 3.4(b), to
the Knowledge of the Seller, the
Seller has performed all material
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obligations required to be performed by it
to date under all of the agreements
to which the Seller is a party or pursuant
to the terms of which the Seller may
be bound. Except as set forth on Schedule
3.4(b), to the Knowledge of the
Seller, all of the Contracts are in full
force and effect and there is no
material default, nor any event under any
Contract which, with notice or lapse
of time, or both, will become a material
default, by the Seller or, to the best
of the Seller's Knowledge, by any other
party to such Contract. Notwithstanding
the foregoing and/or anything to the
contrary herein, the Seller makes no
representations regarding the profitability
of the Contracts. Some of the
Seller's Contracts expressly require
consent by the other party thereto for
assignment. The Seller makes no
representations that the Seller's Contracts may
be assigned, that the other party thereto
may consent to assignment, or that the
Contracts will not be terminated by the
other party thereto following the
Closing Date. As respects the Contracts
which are not assignable and a consent
to assignment is not obtained, the Seller
and the Purchaser hereby agree to
cooperate with one another to perform the
Contracts under the Seller, as
applicable; provided, however, the
Purchaser shall make available to the Seller
its employees, equipment, offices,
insurance and other resources, as necessary
in connection therewith, and the Purchaser
shall be responsible for the payment
of and shall indemnify the Seller against
all liabilities and obligations from
and after the Closing Date under the
Contracts not assigned.
3.5 Real Property. Schedule 3.5 contains a complete and correct
copy of
the leases for all real properties,
buildings, and structures leased, in whole
or in part, by the Seller. All leases for
real property leased by or to the
Seller are valid and enforceable except to
the extent enforceability may be
limited by applicable bankruptcy,
insolvency, or other laws affecting the
enforcement of creditors' rights generally
or by general pr
