SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number:33-24108D
TRSG CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-045382
---------- -----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3095 East Patrick Lane, Suite 1, Las Vegas, Nevada 89120
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(702) 938-9316
-----------------------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
---- ----
The number of outstanding shares of the issuer's common stock, $0.001 par
value (the only class of voting stock), as of May 15, 2002 was 47,093,731.
TABLE OF CONTENTS
PART I- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............4
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS......................................................6
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................9
SIGNATURES....................................................................10
INDEX TO EXHIBITS.............................................................11
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to TRSG Corporation., a Delaware
corporation, and its subsidiaries and predecessors unless otherwise indicated.
Consolidated, unaudited, condensed interim financial statements including a
balance sheet for the Company as of the quarter ended March 31, 2002 and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F- 14 and are incorporated herein
by this reference.
[THIS SPACE LEFT BLANK INTENTIONALLY]
3
TRSG CORPORATION
FINANCIAL STATEMENTS
MARCH 31, 2002
F-1
TRSG CORPORATION
- CONTENTS -
PAGE NUMBER
Financial Statements:
Balance Sheet 4
Statement of Operations 6
Statement of Changes in Stockholders' Equity (Deficit) 7
Statement of Cash Flows 9
Notes to Financial Statements 12
F-2
TRSG CORPORATION
BALANCE SHEET
(UNAUDITED)
ASSETS
MARCH 31, MARCH 31,
2002 2001
---------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 18,116 $ 5,021
Accounts receivable:
Trade 42,217 45,594
Related party 861,292 360,264
Other 215,998 22,888
Inventories 60,687 215,703
Prepaid expenses - 50,085
---------------- --------------
Total current assets 1,198,310 699,555
Property and equipment 437,358 430,330
Less accumulated depreciation and amortization (334,855) (283,043)
---------------- --------------
102,503 147,287
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $177,093 and $94,398, respectively 1,224,939 1,257,634
Other 30,060 35,410
---------------- --------------
1,254,999 1,293,044
$ 2,555,812 $ 2,139,886
=============== ==============
The accompanying notes are an integral part of the financial statements.
F-3
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
MARCH 31, MARCH 31,
2002 2001
---------------- --------------
CURRENT LIABILITIES:
Notes payable $ 198,158 $ 115,000
Deferred revenue - 63,203
Accounts payable:
Trade 935,389 469,479
Commissions 84,412 66,833
Settlement payable - 40,000
Accrued expenses 82,204 47,597
---------------- --------------
Total current liabilities 1,300,163 802,112
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - $.001 par value
Authorized - 5,000,000 shares
No shares issued and outstanding - -
Common stock, - $.001 par value
Authorized - 200,000,000 shares
Issued and outstanding -
46,693,731 and 17,810,308 shares
at March 31, 2002 and
March 31, 2001, respectively 46,694 17,810
Additional paid-in capital 3,655,239 1,720,425
Accumulated deficit (2,446,284) (400,461)
---------------- ---------------
1,255,649 1,337,774
---------------- ---------------
$ 2,555,812 $ 2,139,886
================ ===============
The accompanying notes are an integral part of the financial statements.
F-4
TRSG CORPORATION
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------
MARCH 31, MARCH 31,
2002 2001
-------------- --------------
SALES $ 279,944 $ 703,797
COST OF SALES 108,341 140,964
--------------- --------------
GROSS PROFIT 171,603 562,833
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 712,678 699,578
--------------- --------------
LOSS FROM OPERATIONS (541,075) (136,745)
OTHER INCOME (EXPENSE):
Loss on sale of A & A Medical Supply co. (43,105) -
Interest expense (3,469) (4,313)
Gain on settlement - 568,970
Other (451) 4,231
Abandonment of leasehold improvements (26,329) -
--------------- --------------
(73,354) 568,888
--------------- --------------
NET INCOME(LOSS) $ (614,429) $ 432,143
=============== ==============
BASIC EARNINGS (LOSS) PER SHARE (.014) $ .03
=============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 42,767,886 15,295,601
=============== ==============
The accompanying notes are an integral part of the financial statements.
F-5
TRSG CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2001
---------------------------------
ADDITIONAL
COMMON PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------------- ---------------- -------------- ------------- --------------
BALANCE -January 1, 2001 $ 2,368,988 $ 2,369 $ 200,975 $ (832,604) $ (629,260)
Stock issued for cash 826,500 826 265,934 - 266,760
Stock issued for services 1,166,160 1,166 42,834 - 44,000
Stock issued for acquisition 13,448,660 13,449 1,210,682 - 1,224,131
Net income - - - 432,143 432,143
-------------- ---------------- -------------- ------------- --------------
BALANCE - March 31, 2001 $ 17,810,308 $ 17,810 $ 1,720,425 $ (400,461) $ 1,337,774
============== ================ ============== ============= ==============
THREE MONTHS ENDED MARCH 31, 2002
BALANCE -January 1, 2002 $ 24,822,731 $ 24,823 $ 3,437,660 $ (1,831,855) $ 1,630,628
Stock issued for services 13,871,000 13,871 225,579 - 239,450
Stock issued to Gateway
Distributors, Ltd. 8,000,000 8,000 (8,000) - -
The accompanying notes are an integral part of the financial statements.
F-6
Net (loss) - - - (614,429) (614,429)
------------ --------------- ------------ ------------- -----------
BALANCE - March 31, 2002 $ 46,693,731 $ 46,694 $ 3,655,239 $ (2,446,284) $ 1,255,649
============ =============== ============ ============ ===========
The accompanying notes are an integral part of the financial statements.
F-7
TRSG CORPORATION
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
----------------------------
MARCH 31, MARCH 31,
2002 2001
--------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (614,429) $ 432,143
Adjustments to reconcile net income (loss)
to net cash from (to) operating activities:
Loss on disposal of A & A Medical
Supply co. 43,105 -
Loss on abandonment of leasehold
improvements 26,329 -
Net current assets disposed of on disposal
of A & A Medical Supply Co. (18,201) -
Depreciation and amortization 33,717 33,335
Stock issued for services 239,450 44,000
Changes in operating assets and liabilities which increase
(decrease) cash flow:
Accounts receivable (128,435) (15,918)
Inventories 438,907 (9,992)
Prepaid expenses - 84,993
Accounts payable (192,187) (52,948)
Accrued expenses (11,059) 47,597
Deferred revenue - (229,881)
--------------- ----------------
431,626 (98,814)
--------------- ----------------
Net cash from (to) operating activities (182,803) 333,329
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of A & A Medical Supply Co. 50,000 -
Capital expenditures - (2,000)
Purchase of TRSG CORPORATION - (350,000)
Advances (to) from related party 30,665 (360,264)
Cash received in acquisition - 2,196
--------------- ----------------
Net cash to investing activities 80,665 (710,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock - 266,760
Proceeds from issuance of debt 108,158 115,000
--------------- ----------------
Net cash from financing activities 108,158 381,760
--------------- ----------------
NET INCREASE (DECREASE)
IN CASH EQUIVALENTS 6,020 5,021
The accompanying notes are an integral part of the financial statements.
F-8
CASH AND CASH EQUIVALENTS:
BALANCE - beginning of period 12,096 -
----------- ------------
BALANCE - end of period $ 18,116 $ 5,021
=========== ============
The accompanying notes are an integral part of the financial statements.
F-9
TRSG CORPORATION
STATEMENT OF CASH FLOWS - CONTINUED
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE
THREE MONTHS ENDED
----------------------------
MARCH 31, MARCH 31,
2002 2001
---------------- ----------------
CASH PAID FOR INTEREST $ - $ 3,750
================ ================
CASH PAID FOR TAXES $ - $ -
================ ================
NONCASH INVESTING AND FINANCING ACTIVITIES
STOCK ISSUED FOR ACQUISITION $ - $ 1,224,131
================ ================
STOCK ISSUED FOR SERVICES $ 239,450 $ 44,000
================ ================
F-10
TRSG CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The balance sheet as of March 31, 2002 and the related statements of
operations, changes in stockholders' equity, and cash flows for the
three months ended March 31, 2002 and 2001 are unaudited. In the
opinion of management, the information reflects all adjustments
(consisting solely of normal recurring adjustments) that are necessary
to a fair presentation of the financial statements. The results of
operations for the three months ended March 31, 2002 and 2001 are not
necessarily indicative of the results to be expected for the whole
year.
Certain amounts in 2001 have been reclassified to conform to the 2002
financial statement presentation.
NOTE 2- BUSINESS COMBINATION:
On January 11, 2001, the Company obtained substantially all of the
assets and operations of Gateway Distributors, Ltd. ("Gateway") in
exchange for 13,448,660 shares of common stock. Gateway is a publicly
held company and is a distributor of vitamin and nutritional
supplements, health foods, cleaning and skin care products mainly in
the United States, Canada, and Japan. As a result of this transaction,
TRSG Corporation became a subsidiary of Gateway. The transaction was
accounted for under the purchase method of accounting, therefore,
assets and liabilities were recorded on their fair values at the date
of acquisition. Operating results have been included in the Company's
statement of operations from the date of acquisition. The Company
recorded $350,000 in costs in excess of net assets acquired, which are
being amortized over 15 years.
NOTE 3 - NOTES PAYABLE:
At March 31, 2002, the Company had $90,000 of notes payable to certain
individuals. Both notes bear interest at a fixed rate of 15%, are
unsecured and due within one year.
NOTE 4 - SETTLEMENT PAYABLE:
F-11
On December 29, 2000, the Company obtained a settlement on the
judgment against it of $618,970 for $50,000. The obligation was
satisfied and resulted in a gain on settlement of $568,970 in the
current period ended March 31, 2001.
F-12
TRSG CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2002
NOTE 5 - NOTE PAYABLE - RELATED PARTIES:
At March 31, 2002, the Company had a $108,158 note payable to
stockholders. There is no schedule for repayments of these notes at
March 31, 2002.
NOTE 6 - SALE OF A & A MEDICAL SUPPLY CO.:
On February 1, 2002, the Company sold its medical supply division in
Utah. A summary of the transaction is as follows:
Assets sold $619,817
Liabilities assumed by buyer 316,712
---------
303,105
Sales price - cash to be received over
term of agreement 260,000
---------
Loss on sale of division $ 43,105
=========
At March 31, 2002, other receivables include
an amount of $210,000 related to this sale.
NOTE 5 - ADDITIONAL FOOTNOTES INCLUDED BY REFERENCE:
Except as indicated in Notes above, there have been no other material
changes in the information disclosed in the notes to the financial
statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2001. Therefore, these footnotes are
included by reference. In addition, the footnotes for inventory,
property and equipment and amortization of Gateway Distributors, LTD.
December 31, 2001 10-KSB should also be referred to due to the
acquisition per Note 2.
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATION
General
As used herein the term "Company" refers to TRSG Corporation., a
Delaware corporation, its subsidiaries and predecessors, unless the
context indicates otherwise. The Company was originally incorporated
in the State of Delaware on January 11, 1988.
On January 11, 2001, the Company issued 13,448,660 shares of its
common stock to Gateway Distributors, Inc. ("Gateway") in exchange for
substantially all of the assets and operations of Gateway. As a result
of this transaction, the Company is now a 75.5% owned subsidiary of
Gateway.
The Company's products are marketed through network marketing within
the United States and wholesale personal import sales outside of the
United States. Network marketing enables the Company's independent
distributors in the United States to earn profits by selling the
Company's products to retail consumers. Distributors may also develop
their own distributor downline organizations by sponsoring others to
do business in any market where the Company operates, entitling the
sponsors to receive overrides or commissions (cash incentives,
including royalties and bonuses) on product sales within their
downline organizations.
The Company believes that through special blends, whole foods such as
grains and vegetables can be combined to help produce optimum health.
Recent studies reveal that prevention through health maintenance is a
key to enjoying a healthy lifestyle. However, health challenges today
are at an all-time high. The need for proper nutrition has never been
greater. The Company markets whole food products based on the
proposition that pure, natural, unprocessed, unpreserved, unsprayed,
simple, organic foods provide whole food nutrition. The Company
believes that whole food nutrition is the key, the answer, and the
solution to creating a long healthy life. The health care products
that the Company sells are intended to provide nutritional
supplementation to the product's users. The products are not intended
to diagnose, treat, cure or prevent any disease.
As previously disclosed in the Company's Form 10-QSB for the period
ended June 30, 2001, the Company entered into an agreement to acquire
substantially all of the assets and business of A&A Medical Supply
Company. The transaction closed on or about July 1, 2001. On February
1, 2002, the Company sold substantially all of the assets and business
originally acquired from A&A Medical Supply Company (See Exhibits
10(vi) through 10(viii) attached hereto) to A and A MEDICAL COMPANY, a
Nevada Limited Liability Company ("Buyer"). The Buyer has declined to
provide the Company with financial information regarding the month of
January, 2001; and therefore such information is not included in these
financial statements. Management does not believe that the omission of
such information regarding the business relating to these assets has
had a material affect upon the operating results of the Company for
the quarter ended March 31, 2002. Management is continuing its
4
endeavors to procure this information from the purchaser and intends
to include such information in its financial statements once such
information is made available to the Company.
Results of Operations
Sales for the quarter ended March 31, 2002, were $279,944 compared to
$703,797 for the same period in 2001. The decrease in sales is
attributable to the Company's lack of inventory. The lack of inventory
was the result of the Company's lack of cash.
Costs of sales were $108,341 for the quarter ended on March 31, 2002,
compared to $140,964 for the comparable period in 2001. Cost of sales
decreased due to a drop in sales.
Selling, general, and administrative expenses were $712,687 for the
quarter ended on March 31, 2001 and $699,578 for the comparable period
in 2001. Selling, general, and administrative expenses increased as a
result of additional consulting agreements entered into and paid for
during the period.
Net loss was $614,429 during the quarter ended on March 31, 2002,
compared to net income of $432,143 for the comparable quarter in 2001.
The Company's net loss for the quarter ended March 31, 2002, is the
result of the significant drop in sales.
Liquidity and Capital Resources
The Company had a net working capital deficit of $101,853 for the
quarter ended March 31, 2002, as compared to a $102,557 deficit at the
end of December 31, 2001.
Cash flow used in operations was $182,803 for the quarter ended March
31, 2002, compared to cash flow provided by operations of $333,329 for
the comparable period in 2001.
Cash flow from investing activities for the quarter ended March 31,
2002 was $80,665, compared with a negative cash flow from investing
activities of $710,068 for the comparable period in 2001.
Cash flow generated from financing activities was $108,158 for the
quarter ended March 31, 2002 as compared to $381,760 for the
comparable period in 2001.
Due to the Company's expected cash flow fluctuations, the Company may
experience occasional cash flow shortages. To satisfy its cash
requirements, including the debt service, the Company must
periodically raise funds from external sources. This may involve the
Company conducting exempt offerings of its equity securities.
5
Impact of Inflation
The Company believes that inflation has had a negligible effect on
operations over the past two years. The Company believes that it can
offset inflationary increases in the cost of materials and labor
through increased sales and improved operating efficiency.
Capital Expenditures
The Company made no material capital expenditures during the period
covered by this report.
Income Tax Expense (Benefit)
The Company's income tax benefits may be limited to the losses
sustained since January 12, 2001 due to the change of management.
Going Concern
The Company's ability to continue as a going concern is an issue
raised as a result of an accumulated deficit of $2,446,284 as of March
31, 2002. The Company's ability to continue as a going concern is
subject to the ability of the Company to obtain a profit and /or
obtaining the necessary funding from outside sources. Management is
committed to taking the necessary steps to ensure the Company remains
a going concern. Management's plan to address the Company's ability to
continue as a going concern includes: (1) obtaining additional funding
from the sale of the Company's securities; (2) increasing sales; (3)
obtaining loans and grants from various financial institutions where
possible. Although management believes that it will be able to obtain
the necessary funding to allow the Company to remain a going concern
through the methods discussed above, there can be no assurances that
such methods will prove successful.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Cynthia M. Maleski, Insurance Commissioner of the Commonwealth of
Pennsylvania v. Jutland Enterprises, Inc. - On July 5, 1994, Maleski,
in her capacity as statutory liquidator of Corporate Life Insurance
Company, filed an action against the Company in the Commonwealth Court
of Pennsylvania No. 294 M.D. 1994. That court entered a Default
Judgement on December 28, 1994 against the Company in the amount of
$300,000 plus 10% interest from October 8, 1993, plus attorney's fees
and costs. On May 8, 1995, a suit was filed in the Superior Court of
New Jersey, Somerset County, Docket No. SOM-L-871-95 seeking to
enforce the Pennsylvania judgement. On June 7, 1996, judgement was
granted by the New Jersey Court in the amount of $398,884.36 plus
costs and attorney's fees.
6
On December 29, 2001, the plaintiff agreed to accept a cash settlement
in the sum of $50,000 in complete settlement of the above judgment. On
March 21, 2001, the settlement agreement was amended to allow the
$50,000 to be paid in installments. The Company satisfied this debt
prior to March 31, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 11 of this Form
10-QSB, and are incorporated herein by this reference.
(b)Reports on Form 8-K.
(i) The Company filed a Form 8-K on January 30, 2001,
disclosing that as of January 28, 2002, the number of
shares outstanding of the registrant's Common Stock,
$0.001 par value (the only class of voting stock),
was 44,956,231.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 20 day of May 2002.
TRSG Corporation
By: /s/ Rick Bailey
------------------------------------------
Rick Bailey
Its: President, Chief Executive Officer and
Director
7
INDEX TO EXHIBITS
Exhibit Page Description
3(i) * Articles of Incorporation of the Company
(incorporated herein by reference to the
Company's Form S-18 as filed with the
Securities and Exchange Commission on
December 6, 1988 ).
3(ii) * Bylaws of the Company, as amended
(incorporated herein by reference to the
Company's Form S-18 as filed with the
Securities and Exchange Commission on
December 6, 1988).
4(i) * Form of certificate evidencing shares of
"Common Stock" in the Company (incorporated
herein by reference to from Exhibit 4(a) to
the Company's Form S-18 as filed with the
Securities and Exchange Commission on
December 6, 1988).
3(iii) * Certificate of Amendment of Articles of
Incorporation Changing the Company's Name From
Jutland Enterprises, Inc. to Professional Wrestling
Alliance Corporation and increasing the number of
authorized shares of stock dated November 15, 1999.
(Incorporated herein by reference to the Company's
Form 8-K filed with the Securities and Exchange
Commission on December 3, 1999).
Material Contracts
10(i) * Acquisition Agreement dated October 12, 2000
(incorporated herein by reference to the Company's
Form 8-K filed with the Securities and Exchange
Commission on October 17, 2000) .
10(ii) * Advisory and Consulting Agreement with David Michael
LLC, dated January 10, 2001 (incorporated herein by
reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on October 17,
2000).
10(iii) * Addendum to Consulting Agreement, amending original
agreement dated October 6, 2000, signed January 9,
2001 (incorporated herein by reference to the
Company's Form 8-K filed with the Securities and
Exchange Commission on October 17, 2000).
8
10(iv) * Stock Purchase Agreement dated January 24, 2000,
between the Company and Prominent Management
Limited ("Prominent"), a British Virgin Islands
corporation, wherein the Company agreed to sell five
million restricted shares of its $0.001 par value
common stock to Prominent at a price equal to forty
percent (40%) of the daily market quotation (1/8
discount of the bid) of the Corporation's shares on
the NASDAQ Electronic Bulletin Board (incorporated
herein by reference to the Company's Form 8K dated
March 9, 2001).
10(v) * Addendum to Consulting Agreement between TRSG
Corporation and Hudson Consulting Group, Inc. dated
January 9, 2001. (incorporated herein by reference
to the Company's Form 10-QSB dated May 18, 2001).
10(vi) 10 Asset Purchase Agreement dated February 1, 2002
between TRSG Corporation and A and A Medical
Company.
10(vii) 28 Bill of Sale and Assignment of Assets dated February
6, 2002.
10(viii) 31 Assignment of Contracts dated February 6, 2002.
* Incorporated by reference from previous filings of the Company, as
noted.
9
Exhibit 10(vi)
ASSET PURCHASE AGREEMENT
This Agreement is made and entered into this 1st day of
February, 2002, by and between TRSG CORP., a Delaware corporation
("Seller"), and A and A MEDICAL COMPANY, a Nevada Limited Liability
Company ("Buyer"). The parties hereto are collectively and individually
referred to herein as the "Parties."
RECITALS:
WHEREAS, Seller, which is in the business of the network
marketing of nutritional, health and dietary supplements and products,
wishes to sell to Buyer its A & A Medical Supply division (sometimes
referred to hereinafter as "Business");
WHEREAS, Buyer desires to acquire certain items of Seller's
personal property used in the operation of the business and Seller
desires to sell, transfer and assign same to Buyer;
WHEREAS, DAVID WEINER ("WEINER") is the principal owner of W-NET,
INC., a California corporation ("W-NET"). W-NET is the majority owner
of Buyer;
WHEREAS, WEINER is also a shareholder of Seller. Seller is a
publicly traded company;
WHEREAS, the Parties represent that Seller approached and initiated
with WEINER this transaction;
WHEREAS, very limited negotiations took place between WEINER and
Seller as to this transaction, and in particular the consideration to
be paid by Buyer was proposed by Seller; and
WHEREAS, Seller is not issuing a fairness opinion as to this
transaction;
NOW THEREFORE, in consideration of the mutual promises and
covenants herein contained, the Parties, intending to be legally
bound, agree as follows:
1. Assets to be Conveyed. On the Closing Date and at the Closing
Place, as defined below in Paragraph 26, Seller will sell, assign,
convey, transfer and deliver to Buyer, and Buyer will acquire,
purchase and accept all of the following (hereinafter collectively
referred to as the "Assets"), free and clear of all debts, liens,
security interests, mortgages, trusts, claims, liabilities and
encumbrances, except as specifically assumed by Buyer:
(a) All of the tangible personal property, physical assets and
equipment used or intended to be used in the operation of the Station,
including but not limited to those assets set forth in Exhibit A
attached hereto, except for those items of tangible personal property
specifically identified as excluded assets on Exhibit A, together with
any replacements thereof or additions thereto made between the date
hereof and the Closing Date, less any retirements made in the ordinary
and usual course of business in connection with the acquisition of
similar property or assets of greater or equal value (hereinafter
referred to as the "Personal Tangible Assets");
(b) The contracts, leases and agreements which Buyer has reviewed
and agreed to assume and which are listed and described in Exhibit B,
attached hereto, together with such others as Buyer expressly agrees
in writing to assume at Closing. Buyer will assume and perform all of
10
of the executory obligations of Seller arising after the Closing Date
under such contracts, leases and agreements assigned to and assumed by
Buyer hereunder;
(c) All right, title and interest to any and all rights,
licenses, permits, authorizations and other intangibles, to the extent
lawfully transferrable, which are used, useful or intended to be used
in the operation of Business;
(d) All of Seller's cash or prepaid deposits, accounts receivable
as all are listed on Exhibit B attached hereto ("Balance Sheet") (the
supporting documentation shall be provided by Seller to Buyer under
Exhibit B); and
(e) Transfer, conveyance of 750,000 restricted shares ("Shares")
of Seller's common stock to Buyer. The Shares will be unrecognized
under the provisions of '144 of the 1934 Act. The Shares issued to
Buyer will be granted "piggyback" rights, in the event Seller
registers its common stock. The Shares will be issued to Buyer
2. Excluded Assets, Liabilities and Contracts. Seller shall be
solely responsible for, and there shall be no assumption of liability
by Buyer of, any liabilities, obligations or commitments of Seller of
any nature whatsoever except as expressly set forth in Paragraph 1(c)
of this Agreement. Without limiting the generality of the foregoing,
Buyer shall not assume or be liable for any liability or obligation of
Seller arising out of (i) any contract of employment, collective
bargaining agreement, insurance, pension, retirement, deferred
compensation, incentive bonus or profit sharing plan or trust; or (ii)
any litigation, proceeding or claim of any person or entity relating
to the business or operation of the Business prior to and through the
Closing Date, whether or not such litigation, proceeding or claim is
pending, threatened or asserted before, on or after the Closing Date.
3. Purchase Price. The purchase price for the Assets to be
conveyed pursuant -------------- to this Agreement is as follows:
(a) The sum of One Hundred Thousand Dollars ($100,000.00),
payable as follows: Fifty Thousand Dollars ($50,000.00) upon execution
of this Agreement, Twenty- Five Thousand Dollars ($25,000.00) fifteen
(15)days after execution of this Agreement, and Twenty-Five Thousand
Dollars ($25,000.00) forty-five (45) days after execution of this
Agreement.
(b) Buyer will issue twenty percent (20%) of Buyer's Limited
Liability ownership interests to Seller; and
(c) Buyer shall make weekly cash payments (each Friday) (the
"Inventory Stream"), calculated and payable as follows: Commencing on
date of the Closing, Buyer shall pay to Seller a sum of $0.25 of each
dollar of Inventory sold based on the Book Value of Inventory of
Company (as of Closing), up to the sum of $85,000.00.
4. Allocation. It is agreed between the Parties hereto that the
purchase price is being paid for the Assets in the amounts set forth
in Exhibit D, attached hereto. Seller and Buyer agree to jointly
complete and separately file Form 8594 with their federal income tax
returns for the tax year in which the Closing Date occurs, that
neither Seller nor Buyer shall take a position on any income, transfer
or gain tax return, before any governmental agency charged with the
collection of any such tax or in any judicial proceeding that is in
any manner
11
substantially inconsistent with the terms of any such allocation
without the written consent of the other.
5. Representations, Warranties and Covenants of Seller. Seller
represents, warrants and covenants to Buyer that:
(a) Organization and Standing. Seller on the Closing Date shall
be a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and is authorized to do
business in the State of Utah and has all necessary power and
authority to own, lease and operate the Assets and to operate the
Business as now being conducted and as proposed to be conducted by
Seller between the date hereof and the Closing Date;
(b) Authorization. Seller has full right, power and authority to
enter into and perform this Agreement and the transactions
contemplated hereby. All necessary corporate action to approve the
execution, delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby has been taken by
Seller, and this Agreement constitutes a valid and binding agreement
of Seller enforceable in accordance with its terms;
(c) Personal Property. All of the Personal Tangible Assets are
listed and described in Exhibit A, attached hereto. Seller now has, or
on the Closing Date shall have, good valid and marketable title to the
Personal Tangible Assets listed and described in Exhibit A, free and
clear of all mortgages, liens, charges, claims, pledges, security
interests and encumbrances whatsoever, except as assumed by Buyer;
(d) Insurance. All of the Personal Tangible Assets are now, and
will be through the Closing Date, insured by Seller, including but not
limited to protection against fire, casualty, liability, vandalism,
and burglary for the full replacement value thereof, and Seller
maintains, and will maintain through the Closing Date, all policies
currently in effect;
(e) Condition and Adequacy of Assets. Seller now owns and on the
Closing Date will own and transfer to Buyer the Assets. The Personal
Tangible Assets are now and on the Closing Date will be in good
operating condition and repair, reasonable wear and tear from ordinary
use excepted, and are now and on the Closing Date will be adequate and
suitable for the purposes for which they are presently used and
intended to be used.
(f) Litigation. No judgment is issued or outstanding against the
Business. To the best of Seller's knowledge, except for matters
affecting the Business generally or as set forth in Exhibit E,
attached hereto, presently and as of the Closing Date there is no
litigation, action, claim, special assessment, suit, fine, judgment,
proceeding or investigation pending or outstanding before any
arbitrator, forum, court or governmental body, department or agency of
any kind, to which Seller or the Business is a party. To the best of
Seller's knowledge, no such litigation, action, claim, special
assessment, suit, fine, proceeding or investigation is now or on the
Closing Date shall be threatened, which might result in any material
adverse change in the business, prospects or financial conditions of
the Business.
12
(g) Contracts. With respect to the Business, except for
contracts listed on Exhibit B, Seller has no existing contract,
agreement, lease, commitment or understanding, written or oral,
expressed or implied, not terminable upon thirty (30) days'
notice or less without penalty or premium, or which involves
payments or commitments in the aggregate of more than One
Thousand Dollars ($1,000). The contracts, leases and agreements
listed in Exhibit B, attached hereto, are now and on the Closing
Date shall be in full force and effect and unimpaired by any act
of Seller, its employees or agents, and Seller will not modify in
any significant respect any such contracts, leases and agreements
without Buyer's written consent, which will not be unreasonably
withheld or delayed. Seller shall indemnify, defend and hold
Buyer harmless against all claims, directly or indirectly,
obligations, liabilities, actions, or causes of action, including
Buyer's reasonable attorneys' fees and costs, arising out of
Seller's contracts not listed in Exhibit B, attached hereto.
Seller is now and on the Closing Date shall be in compliance in
all material respects with the terms and conditions of all of the
Business's contracts, and shall not be in default thereunder; and
there is no claim of such breach or default known to Seller.
(h) Personnel.
(i) As of the Closing Date, Seller has or will have paid to
or on behalf of its employees all amounts due each employee,
including, but not limited to, all wages and salaries earned,
including commissions, bonuses, and incentive compensation, and
all amounts for vacation or sick leave, severance pay, and all
taxes thereon, or made proper and adequate provisions therefor,
directly with each employee. Seller has no employment contracts
with persons employed in the operation of the Business, nor any
employee benefit plan or other fringe benefits for such persons
which will survive the Closing. Seller has, in the conduct of the
affairs of the Business, complied in all material respects with
applicable laws, rules and regulations relating to the employment
of labor, including those relating to wages, hours, collective
bargaining, equal employment opportunity, and the payment of
FICA, FUTA, and similar federal, state, and local employment
taxes, and is not liable for any arrears of wages or any tax or
other penalties for failure to comply with any of the foregoing.
(ii) Seller has delivered to Buyer a schedule of personnel
and employee benefits showing (Exhibit E): (1) the names of all
persons currently on the payroll of Business, together with a
statement of the amount paid or payable to each such person for
such services and the basis thereof; (2) the bonus arrangements
for all employees; (3) any other material compensation or
personnel benefits or policies in effect; and (4) a complete copy
of each such plan, benefit and policy. Seller and Business are
not now and on the Closing Date will not be a party to any
pension or profit-sharing plan or collective bargaining or other
employee or labor agreement for which Buyer will be obligated on
or after the Closing Date. To the best of Seller's knowledge,
none of the Business's employees is now or on the Closing Date
will be represented by any labor union and there is not now and
on the Closing Date will not be any labor strike or other
employee or labor controversy or dispute pending (including,
without limitation, any organization drive) or, to the best
knowledge of Seller, threatened which may affect the operations
of employees of Business;
13
(i) Absence of Restrictions. The execution, delivery and
performance of this Agreement and the transaction contemplated
hereby by Seller do not and on the Closing Date will not: (i)
require the consent of any third party, except the contracts
being assumed by Buyer; (ii) violate any material provision of
law applicable to Seller or conflict with, result in the
termination or breach of any term, condition of provision of, or
constitute a default under, the Articles of Incorporation or
By-Laws of Seller, or of any contract, lease, agreement or other
instrument or condition to which Seller is a party or to which
the Assets are subject, or result in the creation of any lien,
charge, claim, pledge, security interest or encumbrance on any of
the Assets; or (iii) cause or result in the advancement or
acceleration of maturity of any liability of the Seller or the
alteration or modification to the detriment of Buyer of the
terms, conditions or provisions of any contract, lease agreement
or other instrument or condition by which Seller is bound or to
which any of the Assets are subject;
(j) Bankruptcy. No insolvency proceedings of any character,
including without limitation bankruptcy, reorganization,
composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of the Assets, are pending
or threatened, and Seller has not made any assignment for the
benefit of creditors nor taken any action in contemplation of or
which would constitute the basis for the institution of such
insolvency proceedings.
(k) Disclosure. Seller has made full disclosure of all
material events and facts pertaining to the operation of the
Business of which it has knowledge, including but not limited to
any material events and facts pertaining to the operation and
business of the Business about which Buyer has requested
information. No covenant, representation or warranty by Seller
and no written statement, certificate or exhibit furnished or to
be furnished by Seller pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of
a material fact or omits or will omit to state any material fact
necessary to make the statement contained therein not misleading
and to provide Buyer with complete and accurate information as to
the Business. Moreover, no material facts of any kind which might
affect the licenses, leases and agreements or any other assets to
be acquired, have been withheld by Seller.
(l) Environmental Matters. Without limiting the generality
of any other representation contained herein, (i) to the best
knowledge of Seller no solid waste or other substances known or
suspected to cause a threat to health or the environment
("Hazards") or "hazardous substances" (as defined below) have
been disposed of or otherwise released or are present on, over,
beneath, in or upon any property occupied by Seller in connection
with the operation of the Business; (ii) to the best of Seller's
knowledge, no present or prior use by Seller of the Business,
violates any "Environmental Laws" as defined below; (iii) to the
best knowledge of Seller there are no on-site locations where
hazardous substances, including such substances as asbestos and
Polychlorinated Biphenals (PCBs), solid wastes or Hazards from
the Business have been stored, treated, recycled or disposed of;
(iv) there has been no litigation brought or, to the best
knowledge of Seller, threatened, and no settlement reached, by or
with any parties alleging the presence, disposal, release or
threatened release of any hazardous substances, solid wastes or
14
Hazards from the use or operation of the Business; and (v) to the best
knowledge of Seller no portion of the Business has been used as a
landfill. The terms "hazardous substance," "release," "solid waste"
and "disposal" (or "disposed") each shall have the broadest meanings
specified in any of the Environmental Laws. The term "Environmental
Laws" shall include any and all federal, state and local laws that
relate to or impose liability or standards of conduct concerning
public or occupational health and safety or protection of the
environment, as now or hereinafter in effect, and as have been or
hereafter may be amended or reauthorized, including without limitation
the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. 9601, et seq.); the Hazardous Materials Transportation
Act (42 U.S.C. 1802, et seq.); the Resources Conservation and Recovery
Action (42 U.S.C. 6901, et seq.); the Federal Water Pollution Control
Action (33 U.S.C. 1251, et seq.); the Toxic Substances Control Action
(15 U.S.C. 2601, et seq.); the Clean Air Act (42 U.S.C. 7901, et
seq.); the National Environmental Policy Act (42 U.S.C. 4231, et
seq.); the Refuse Act (33 U.S.C. 407, et seq.); the Safe Drinking
Water Act (42 U.S.C. 300(f), et seq.); the Occupational Safety and
Health Act (29 U.S.C. 651, et seq.); and all rules, regulations,
codes, ordinances and guidance documents promulgated or published
thereunder, and the provisions of any licenses, permits, orders and
decrees issued pursuant to any of the foregoing.
(m) Financial Statements. The balance sheets of Business as
of December 31, 2001 and related statements of operations and
cash flows for the fiscal year then ended and (the "Year-End
Financial Statements") (Exhibit C) and the balance sheet and
related statements of operations, are accurate. The most recent
balance sheet so described is referred to herein as the "Latest
Balance Sheet." Except as disclosed therein, the aforesaid
financial statements (i) are in accordance with the books and
records of the Buyer and have been prepared in conformity with
generally accepted accounting principles ("GAAP") consistently
applied for all periods, and (ii) fairly present the financial
position of Business as of the respective dates thereof, and the
results of operations, changes in shareholders' equity and
changes in cash flow for the periods then ended, all in
accordance with GAAP consistently applied for all periods.
(n) Loss Contingencies; Other Non-Accrued Liabilities.
Except as described in the notes to the Latest Balance Sheet,
Business does not have (i) any Loss Contingencies (as hereinafter
defined) which are not required by GAAP to be accrued; (ii) any
Loss Contingencies involving an unasserted claim or assessment
which are not required by GAAP to be disclosed because the
potential claimants have not manifested to the Buyer an awareness
of a possible claim or assessment; or (iii) any categories of
known liabilities or obligations (other than non-pension
post-retirement medical care, dental care, life insurance or
other benefits) which are not required by GAAP to be accrued. For
purposes of this Agreement, "Loss Contingency" shall mean an
existing condition, situation, or set of circumstances involving
uncertainty as to possible charges against income, including
those charges commonly referred to as "expenses," to an
enterprise that will ultimately be resolved when one or more
future events occur or fail to occur.
15
(o) Absence of Certain Changes. Since the date of the Latest
Balance Sheet, the Buyer has owned and operated its assets,
properties and businesses in the ordinary course of business and
consistent with past practice; without limiting the generality of
the foregoing, the Seller has not, subject to the aforesaid
exceptions,
(i) Suffered any adverse change in its condition (financial
or otherwise), working capital, assets, properties, liabilities,
obligations, reserves, businesses, prospects, goodwill or going
concern value or experienced any event or failed to take any
action which reasonably could be expected to result in such an
adverse change;
(ii) Suffered any loss, damage, destruction or other
casualty (whether
or not covered by insurance) or suffered any loss of officers,
employees, dealers, distributors, independent contractors, customers,
or suppliers or other favorable business relationships;
(iii) Declared, set aside, made or paid any dividend or
other distribution in respect of its capital stock; or purchased
or redeemed any shares of its capital stock;
(iv) Issued or sold any shares of its capital stock, or any
options, warrants, conversion, exchange or other rights to
purchase or acquire any such shares or any securities convertible
into or exchangeable for such shares;
(v) Incurred any indebtedness for borrowed money;
(vi) Mortgaged, pledged, or subjected to any lien, lease,
security interest or other charge or encumbrance any of its
properties or assets, tangible or intangible; (vii) Acquired or
disposed of any assets or properties, except in the ordinary
course of business;
(viii) Forgiven or canceled any debts or claims, or waived
any rights; (ix) Granted to any officer or salaried employee or
any other employees any increase in compensation in any form or
paid any severance or termination pay;
(x) Entered into any commitment for capital expenditures for
additions to plant, property or equipment; or
(xi) Agreed, whether in writing or otherwise, to take any
action described in this subsection.
(p) Tax Matters.
(i) Tax Returns. Business has duly and timely filed all tax
information reports, returns and related documents required to be
filed by it with respect to the income- type, sales/use-type and
employment-related taxes of the United States and the states and
other jurisdictions. Business has duly and timely filed all other
tax and information reports, returns and related documents
required to by filed by it with any Authority, including without
limitation all returns and reports of income, franchise, gross
receipts, sales, use, occupation, employment, withholding,
excise, transfer, real and personal property and other taxes,
charges and levies (collectively, the "Tax Returns") and has duly
paid, or made adequate provisions for the due and timely payment
of all such taxes and other charges, including without limitation
interest, penalties, assessments and deficiencies, due or claimed
to be due from them by any such Authorities; the reserves for all
of such taxes and other charges reflected in the Latest Balance
Sheet are adequate; and there are no liens for such taxes or
other charges upon any property or assets of Business.
16
There is no material omission, deficiency, error, misstatement or
misrepresentation, whether innocent, intentional or fraudulent, in any
Tax Return filed by Business for any period. The federal income tax
returns of Business have been examined by the Internal Revenue Service
and, except to the extent shown therein, all deficiencies asserted as
a result of such examinations have been paid or finally settled and no
issue has been raised by the Internal Revenue Service in any such
examination which, by application of similar principles, reasonably
could be expected to result in a proposed deficiency for any other
period not so examined. All deficiencies and assessments resulting
from examination of the Tax Returns of Business have been paid. There
are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any Tax Return for any period.
(ii) Cooperation on Tax Matters. The Seller and Buyer shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns and any
audit, litigation or other proceeding with respect to taxes. Such
cooperation shall include the retention and (upon the other
party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation on any material provided hereunder.
6. Buyer's Representations and Warranties. Buyer represents
and warrants to Seller that:
(a) Organization and Standing. Buyer is now and on the
Closing Date will be a limited liability company duly organized,
validly existing and in good standing under the laws of the State
of Nevada;
(b) Authorization. All necessary action to approve the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby has been
taken by Buyer, and this Agreement constitutes a valid and
binding agreement of Buyer enforceable in accordance with its
terms;
(c) Absence of Restrictions. No unwaived contract, agreement
or other instrument or condition exists or on the Closing Date
will exist which restricts, limits or in any manner materially
adversely affects any aspect of this Agreement or the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the transactions contemplated
hereby by Buyer do not, and will not at Closing Date, conflict
with or result in the termination or breach of any terms,
condition or provisions of, or constitute a default under the
certificate of incorporation, or any contract, lease agreement or
other instrument or condition by which Buyer is bound; and
(d) Litigation. There is no litigation, proceeding or
governmental investigation pending and no other judicial or
administrative proceedings which would materially adversely
affect Buyer's power, authority or ability to enter into this
Agreement and to carry out the transactions contemplated hereby,
nor any circumstances which might give rise to such proceedings.
7. Conditions Precedent to Buyer's Obligations. The
obligation of Buyer to consummate the transactions contemplated
17
hereby is, at Buyer's option, subject to the fulfillment prior to and
at the Closing Date of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Seller contained in this Agreement or in any
statement, exhibit or other document delivered pursuant to this
Agreement or in connection with the transaction contemplated
hereby shall be true and correct in all material respects on and
as of the Closing Date as though such representations and
warranties were made at and as of such time;
(b) Performance. Seller shall have in all material respects
performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied
with by it prior to and on the Closing Date;
(c) No Adverse Change. Between the date hereof and the
Closing Date, there shall not have been any material adverse
change in the Assets or the operations or financial position of
the Business (excluding loss of personnel and advertising sales
for air time on the Business), which would include the fact that
there has not been any action in contemplation of, or which would
constitute the basis for, the institution of an insolvency
proceeding of any character;
(d) Actions. No action, suit or proceeding before any court
or any governmental body or authority pertaining to the
transactions contemplated by this Agreement or its consummation
shall have been instituted or threatened on or before the Closing
Date; and
(e) Documentation. All of the requirements of Paragraph 12
have been met.
8. Conditions Precedent to Seller's Obligations. The
obligation of Seller to consummate the transactions contemplated
hereby is subject to the fulfillment prior to and on the Closing
Date of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement or in any
statement, certificate, exhibit or other document delivered
pursuant to this Agreement or in connection with the transaction
contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date as though such
representation and warranties were made at and as of such time;
(b) Performance. Buyer shall have in all material respects
performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied
with by it prior to and at the Closing Date;
(c) Actions. No action, suit or proceeding before any court
or any governmental body or authority which relates to Buyer's
qualifications and which would be materially adverse to Seller
under this Agreement and the consummation of this Agreement shall
have been instituted or threatened on or before the Closing Date;
and
(d) Documentation. All of the requirements of Paragraph 13
have been met.
9. Indemnification by Seller. (a) It is understood and
agreed that Buyer does not assume, and shall not be obligated to
18
pay, any liability of Seller under the terms of this Agreement or
otherwise, and shall not be obligated to perform any obligations of
Seller of any kind or manner, except by reason of contracts expressly
assumed by Buyer hereunder, and with respect to such contracts, only
such obligations which arise subsequent to the Closing Date, or as
herein provided. For a period of one (1) year following the Closing,
Seller hereby agrees to indemnify, defend and hold harmless Buyer and
WEINER, and its successors and assigns, from and against, and shall
reimburse them for:
(i) Any and all claims, demands, liabilities, obligations,
actions, suits, proceedings, losses, damages, costs, expenses,
assessments, judgments, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees and expenses,
of any kind and description, contingent or otherwise (the
foregoing hereinafter collectively referred to as "Damages"),
occasioned by, arising out of or resulting from the operation of
the Business prior to the Closing under any contract, agreement
or lease assumed by Buyer hereunder or otherwise, and any claim
relating to the issuance of the Shares to Buyer pursuant to this
Agreement.
(ii) Any and all Damages occasioned by, arising out of or
resulting from any misrepresentation, breach of warranty or
nonfulfillment of any covenant, or default or nonfulfillment of
any agreement on the part of Seller under this Agreement, or from
any certificate, agreement, appendix, schedule or other
instrument furnished to Buyer pursuant to this Agreement or in
connection with any of the transactions contemplated hereby.
(b) Buyer shall notify Seller in writing within thirty (30)
days of the occurrence of any event, or of its discovery of any
facts, which in the opinion of its counsel would entitle or may
entitle it to indemnification under this Paragraph 9; provided,
however, that failure to give such notice within such thirty (30)
day period shall not affect the liability of Seller under this
Paragraph 9 unless the failure to give such notice within such
time period adversely affects to a material degree Seller's
ability to defend itself against a claim of Buyer or to cure the
default giving rise to the claim for indemnification on account
thereof. With respect to threatened or asserted claims of third
parties, Seller shall promptly defend such claim by counsel of
its own choosing;
(c) If Seller, within reasonable time after notice of a
claim, fails to defend Buyer, Buyer shall be entitled to
undertake the defense, compromise or settlement of such claim at
the expense of and for the account and risks of Seller, subject
to the right of Seller to assume the defense of such claim at any
time prior to the settlement, compromise or final determination
thereof;
(d) Anything in this section to the contrary
notwithstanding, (i) if there is a reasonable probability that a
claim may materially and adversely affect Buyer, Buyer will have
the right, at its own cost and expense, to defend, compromise or
settle such claim; and (ii) Seller will not, without Buyer's
written consent, settle or compromise any claim or consent to any
entry of judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to Buyer of a
release from all liability in respect to such claim; and
19
(e) This indemnity is intended by Seller to cover all acts,
suits, proceedings, claims, demands, assessments, adjustments,
interest, penalties, costs, and expenses (including, without
limitation, reasonable fees and disbursements of counsel),
arising within said one (1) year following the Closing whether
suit is instituted or not and, if instituted, whether at the
trial or appellate level, with respect to any and all of the
specific matters set forth in this indemnity.
10. Indemnification by Buyer.
(a) For a period of one (1) year following the Closing,
Buyer herewith agrees to indemnify and hold Seller and its
successors and assigns harmless against:
(i) Any and all claims, demands, liabilities, obligations,
actions, suits, proceedings, losses, damages, costs, expenses,
assessments, judgments, recoveries and deficiencies, including
interest, penalties, and reasonable attorneys' fees, of any kind
and description, contingent or otherwise (the foregoing
hereinafter collectively referred to as "Damages"), occasioned
by, arising out of or resulting from the operation of the
Business subsequent to the Closing under any lease, contract, or
agreement assumed by Buyer hereunder or otherwise. (This
paragraph shall not apply to any acts of Seller or Seller's
representatives; i.e., Buyer shall not indemnify Seller from such
acts.)
(ii) Any and all Damages occasioned by, arising out of or
resulting from any misrepresentation, breach of warranty, or
nonfulfillment of any covenant, or default or nonfulfillment of
any agreement on the part of Buyer under this Agreement, or from
any certificate, agreement, appendix, schedule or other
instrument furnished to Seller pursuant to this Agreement or in
connection with any of the transactions contemplated hereby.
(b) Seller shall notify Buyer in writing, within thirty (30)
days of the occurrence of any event, or of the discovery of any
facts, which in the opinion of counsel entitles or may entitle it
to indemnification under this Paragraph 10; provided, however,
that failure to give such notice within such thirty (30) day
period shall not affect the liability of Buyer under this
Paragraph 10 unless the failure to give such notice within such
time period adversely affects to a material degree Buyer's
ability to defend itself against a claim of Seller or to cure the
default giving rise to the claim for indemnification on account
thereof. With respect to threatened or asserted claims of third
parties, Buyer shall promptly defend such claim by counsel of its
own choosing;
(c) If Buyer within a reasonable time after notice of claim
fails to defend Seller, Seller shall be entitled to undertake the
defense, compromise or settlement of such claim at the expense of
and for the account and risk of Buyer, subject to the right of
Buyer to assume the defense of such claim at any time prior to
the settlement, compromise or final determination thereof;
(d) Anything in this section to the contrary
notwithstanding, (i) if there is a reasonable probability that a
claim may materially and adversely affect Seller, Seller will
have the right, at its own cost and expense, to defend such claim
but not to compromise or settle such claim without Buyer's prior
written consent; and (ii) Buyer will not, without Seller's
written consent, settle or compromise any claim or consent to any
entry of judgment which does not include as an unconditional term
20
thereof the giving by the claimant or the plaintiff to Seller of a
release from all liability in respect of such claim; and
(e) Anything in this section to the contrary
notwithstanding, (i) if there is a reasonable probability that a
claim may materially and adversely affect Buyer, Buyer will have
the right, at its own cost and expense, to defend such claim but
not to compromise or settle such claim without Seller's prior
written consent; and (ii) Seller will not, without Buyer's
written consent, settle or compromise any claim or consent to any
entry of judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to Buyer of a
release from all liability in respect of such claim.
11. Bulk Sales Law. Buyer hereby waives compliance by Seller
with the provisions of the Utah Bulk Sales Law, if applicable,
and Seller warrants and agrees to pay and discharge when due all
claims of creditors which could be asserted against Buyer by
reason of such noncompliance to the extent that such liabilities
arise before the Closing and are not specifically assumed by
Buyer under this Agreement, and agrees to protect, defend, save
harmless and indemnify Buyer from and against any and all such
claims and demands pursuant to the procedures set forth in
Paragraph 9 hereof which shall apply thereto in all respects.
12. Seller's Performance at Closing. On the Closing Date at
the Closing Place, Seller shall execute and deliver or cause to
be delivered to Buyer, in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) A Bill of Sale conveying to Buyer all of the Personal
Tangible Assets to be acquired by Buyer hereunder;
(b) An assignment assigning to Buyer the contracts, leases
and agreements to be assigned to Buyer hereunder, together with
necessary consents thereto and the original copies of said
contracts, agreements, leases and consents;
(c) A certificate of an officer of Seller stating that: (i)
all representations, warranties and covenants of Seller as set
forth in this Agreement and in the other instruments delivered by
Seller are true and correct as of the Closing Date; or (ii)
Seller has, in all material respects, performed and complied with
all covenants, agreements and conditions required by this
Agreement to be performed or complied with by Seller at or prior
to the Closing Date;
(d) A share certificate representing 750,000 Shares in
Seller with ownership in the name of Buyer;
(e) Copies of the files and records referred to in Paragraph
1(e) hereof; and
(f) Such other assignments, bills of sale or instruments of
conveyance, certificates of officers and other documents as
reasonably may be requested by Buyer to consummate this Agreement
and the transactions contemplated thereby.
13. Buyer's Performance at Closing. On the Closing Date at
the Closing Place, Buyer shall execute and deliver or cause to be
delivered to Seller, in form and substance
21
reasonably satisfactory to Seller and its counsel:
(a) The purchase price as set forth in Paragraph 3 hereof
payable by bank cashier's check, certified check, or by wire
transfer;
(b) Such other documents as reasonably may be requested by
Seller to consummate this Agreement and the transactions
contemplated hereby.
14. Survival of Covenants, Representations and Warranties.
All representations and warranties of the Seller contained in
this Agreement shall survive the Closing Date. The
representations and warranties of Buyer shall not survive the
Closing Date. In no event will Buyer have any liability for
compensation payments, benefits, accrued vacation obligations or
any other obligations of Seller to its employees with respect to
any period ending on or prior to the Closing Date, whether or not
any of such employees shall be retained by Buyer.
15. Finders, Consultants and Brokers. The Parties hereto
hereby represent and warrant to one another that there are no
brokers or finders involved in this transaction.
16. Restrictive Covenants.
(a) Post-Closing Confidentiality. The Seller acknowledges
intent to fully and effectively convey to the Buyer all
proprietary rights, including the Intellectual Property Rights of
Business, to be transferred to the Buyer pursuant hereto.
Accordingly, the Seller shall at all times keep confidential and
shall not disclose to others any proprietary rights, including
the Intellectual Property Rights, and shall not use or permit to
be used any proprietary rights or any Intellectual Property
Rights for any purpose other than the performance of obligations
to the Buyer.
(b) Non-Diversion. Until the second anniversary of the date
of Closing, the Seller shall not take advantage of, or attempt to
take advantage of, any actual or potential business or
opportunities of Seller of which Seller becomes aware as the
result of its affiliation with the Business or its relationship
with the Buyer and which relate specifically to A & A Medical
Supply, or any part thereof.
(c) Non-Recruitment. Until the second anniversary of the
date of Closing, the Seller shall not hire away, or cause any
other person to hire away, any employee of or consultant to the
Buyer (including, without limitation, persons employed or engaged
by the Buyer before the date of this Agreement, or directly or
indirectly entice or solicit or seek to include or influence any
of such employees or consultants to leave their employment or
engagement with the Seller, without the prior written consent of
the Seller, which may be withheld in the sole discretion of the
Buyer.
(d) Remedies. The covenants contained in this Paragraph 16
impose a reasonable restraint on the Seller in light of the
activities and business of the Buyer and future plans.
(e) Severability and Modification of Any Unenforceable
Covenant. Each of the Restrictive Covenants will be read and
interpreted with every reasonable inference given to its
enforceability. However, if any term, provision or condition of
the Restrictive Covenants is held by a court or arbitrator to be
invalid, void or unenforceable, the remainder of the provisions
thereof shall remain in full force and effect and shall in no way
be affected,
22
impaired or invalidated. If a court or arbitrator should
determine any of the Restrictive Covenants are unenforceable
because of overbreadth, then the court or arbitrator shall modify
such covenant so as to make it enforceable to the fullest extent
the court or arbitrator deems reasonable and enforceable under
the prevailing circumstances.
17. Notices. Any notice or other communication hereunder
must be given in writing and either (a) delivered in person, (b)
transmitted by telex, telefax or telecopy mechanism, provided
that any notice so given is also mailed as provided in clause
(c), or (c) mailed, postage prepaid, receipt requested, to the
addresses set forth below or to such other address or to such
other persons as either party shall have last designated by such
notice to the other party. Each such notice or other
communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number and
an appropriate answer back is received, (ii) if given by mail,
three days after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid, or
(iii) if given by any other means, when actually received at such
address.
If to Seller: David Weiner
A and A Medical
13743 Ventura Boulevard, #200
Sherman Oaks, CA 91423
With a copy to: Gary N. Schwartz, Esq.
NARVID SCOTT SCHWARTZ & FRANGIE LLP
15060 Ventura Boulevard, Suite 490
Sherman Oaks, CA 91403
Fax: (818) 907-9896
If to Buyer: Rick Bailey
500 E. Cheyenne Avenue
North Las Vegas, NV 89030
Fax: (702) 642-4991
23
or any such other addresses as the Parties may from time to time
designate in writing.
18. Confidentiality. The Parties agree to use their best
efforts to keep confidential any and all information furnished to
either of them by a party in the course of the negotiations and
the business, technical and legal reviews, except such
information as may be available to the public or to the other
party from another source not under an obligation of
confidentiality. In this regard, the Parties agree to execute and
be bound by such written confidentiality agreements as shall be
reasonably requested by either party.
19. Other Documents. The Parties shall execute and deliver
on a timely basis all such further and additional documents as
shall be convenient, necessary or desirable to the implementation
and consummations of this Agreement.
20. Waiver. No waiver by a party of any provision of this
Agreement shall be considered a waiver of any other provision or
any subsequent breach of the same or any other provision,
including the time for performance of any such provision. The
exercise by a party of any remedy provided in this Agreement or
at law shall not prevent the exercise by that party of any other
remedy provided in this Agreement or at law.
21. Business's Employees. Buyer shall have the right, but
not the obligation, to retain any and all employees of the
Seller.
22. Exhibits. All exhibits attached to this Agreement shall
be deemed part of this Agreement and incorporated herein, where
applicable, as if fully set forth therein.
24
23 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State
of California.
24 Entire Agreement. This Agreement, including the attached
exhibits and agreements, shall constitute the full and entire
understanding of the Parties with respect to the subject matter
hereof, and any prior agreement or understanding concerning the
same is hereby terminated and canceled in its entirety and is of
no further force and effect.
25 Attorneys' Fees for Actions Under This Agreement. If any
suit, action or proceeding is commenced by either party to this
Agreement against the other to obtain any relief by reason of any
alleged breach of the representations, warranties, indemnities or
covenants contained in this Agreement, or to enforce any of the
provisions of this Agreement, or to determine either or both of
the Parties' rights, duties or obligations hereunder, the
prevailing party shall be entitled to recover reasonable
attorneys' fees and all costs and expenses relating to such
suits, actions or proceedings.
26 Closing Date and Location. The Closing Date shall be on
February 6, 2002. The location of the Closing (the "Closing
Place") shall be at Buyer=s counsel's office, unless mutually
agreed otherwise.
27 Binding Effect. This Agreement is binding upon and shall
inure to the benefit of the Parties hereto, their respective
insurers, agents, administrators, employees, representatives,
partners, officers, directors, shareholders, affiliates, joint
venturers, attorneys, assigns, heirs and successors in interest.
28 Warranty of Signatories. Each of the persons signing this
Agreement on behalf of an entity warrants and represents that he
has the right, power, legal capacity and authority to execute
this Agreement on behalf of such entity, without the concurrence
or approval of
25
any other person, any entity or any Court, and to thereby bind
such entity to this Agreement.
29 Headings. The headings of the paragraphs of this
Agreement are inserted as a matter of convenience and for
reference purposes only and in no respect define, limit or
describe the scope of this Agreement or the intent of any
paragraph hereof.
30 Assignability. This Agreement cannot be assigned without
approval from the non-requesting party, and which consent shall
not be unreasonably withheld or delayed.
31 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signature on each
such counterpart were on the same instrument. Each fully executed
set of counterparts shall be deemed to be an original, and all of
the signed counterparts together shall be deemed to be one and
the same instrument.
32 Audit. Seller agrees to complete at its cost within sixty
(60) days post-Closing an audit (segment accounting/audit
purposes) of the operations of the Business through the time
period of December 31, 2001. Upon completion of the audit, Seller
shall provide the audit report at no cost to Buyer.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement on the day and year first above written.
"SELLER"
TRSG CORP.
A Delaware Corporation
By: /s/Richard Bailey
RICHARD BAILEY, President
26
"BUYER"
A and A MEDICAL COMPANY
A Nevada Limited Liability Company
By: /s/David Weiner
DAVID WEINER, Manager
27
Exhibit 10(vii)
BILL OF SALE AND ASSIGNMENT OF ASSETS
THIS BILL OF SALE AND ASSIGNMENT OF ASSETS is made as of
this 6th day of February, 2002, by TRSG CORP., a Delaware
corporation (hereinafter referred to as "Seller").
WHEREAS, Seller and A and A Medical Company, a Nevada
limited liability company ("Buyer"), have entered into an Asset
Purchase Agreement dated as of February 1, 2002 (the "Purchase
Agreement"), pursuant to which Seller has agreed to sell to
Buyer, and Buyer has agreed to purchase from Seller, the Personal
Tangible Assets (as defined therein), all in accordance with and
subject to the terms and conditions set forth in the Purchase
Agreement;
NOW, THEREFORE, for and in consideration of the payment by
Buyer of the purchase price pursuant to the Purchase Agreement,
the receipt and sufficiency of which are hereby acknowledged, and
in further consideration of the mutual covenants and agreements
contained in the Purchase Agreement, and pursuant to the terms of
the Purchase Agreement, Seller does hereby sell, transfer,
assign, convey and deliver to Buyer, its successors and assigns
the following, free and clear of all debts, liens, security
interests, mortgages, trusts, claims, liabilities and
encumbrances, except as specifically assumed by the terms of the
Purchase Agreement: all of the assets and rights of every kind
and nature, except as specifically excluded by Paragraph 2 of the
Purchase Agreement, used or useful r intended for use in the
28
operation of A & A Medical Supply (the "Business"), including
those assets used by Seller as of February 6, 2002, including but
not limited to:
(i) All of the physical assets, machinery, equipment and
other Personal Tangible Assets, as defined in the Purchase
Agreement, including but not limited to that listed in Appendix A
hereto;
(ii) All pertinent original files, records, documents, and
logs pertaining to the Business or its operations, including, but
not limited to, all contracts, leases and agreements to be
assigned under the Purchase Agreement which Buyer has expressly
agreed in writing to assume; and
(iii) All rights, licenses, permits, authorizations, and
other intangibles which are useful or intended to be used in the
operation of the Business.
TO HAVE AND TO HOLD the said described property to Buyer,
its successors and assigns, for its exclusive use and benefit
forever.
Seller does hereby agree, from and after the date hereof,
upon the request of Buyer, to execute such other documents as
Buyer may require in order to obtain the full benefit of this
Bill of Sale and Assignment of Assets and Seller's obligations
hereunder.
IN WITNESS WHEREOF, the undersigned have caused this
instrument to be duly executed as of the date first written
above.
29
"SELLER"
TRSG CORP.
A Delaware Corporation
By: /s/Rick Bailey
--------------------------------
RICK BAILEY, President
ASSIGNMENT ACCEPTED:
A and A MEDICAL COMPANY
A Nevada Limited Liability Company
By: /s/David Weiner
---------------------------------
DAVID WEINER, Manager
30
Exhibit 10(viii)
ASSIGNMENT OF CONTRACTS, LEASES, ETC.
AND ASSUMPTION AGREEMENT
This Assignment of Contracts, Leases, Etc., and Assumption
Agreement ("Assignment") is made as of this 6th day of February,
2002 by and between TRSG CORP., a Delaware corporation
("Assignor"), and A and A MEDICAL COMPANY, a Nevada Limited
Liability Company ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor and Assignee have entered into that
certain Asset Purchase Agreement dated as of February 1, 2002,
("Agreement"), for the purchase and sale of certain assets of the
business known as A & A Medical Supply, a division of Assignor
("Business"); and
WHEREAS, this Assignment is being made pursuant to the terms
of the Agreement for the purpose of assigning to Assignee all of
Assignor's rights, title and interest in and to those certain
contracts, leases, licenses, permits, approvals, and intangibles
and (if and to the extent assignable) described on Exhibit "B"
attached hereto (collectively, the "Contracts");
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Assignment of Contracts. Assignor, effective as of the
Closing Date, hereby grants, assigns, sells, transfers, conveys
and delivers to Assignee the Contracts and all of Assignor's
right, title, interest, benefits and privileges thereunder, and
Assignee hereby accepts such Assignment.
2. Assumption of Obligations. By acceptance of this
Assignment, Assignee from and after the Closing Date hereby
assumes and agrees to perform and to be bound by all of the
terms, covenants, conditions and obligations imposed upon or
assumed by Assignor under the Contracts. Said assumption and
agreement shall have application only to those obligations under
the Contracts. This Assignment shall have no application to
obligations accruing or arising prior to the Closing Date.
3. Indemnities. Assignor hereby indemnifies and holds
harmless Assignee from and against any and all claims, liens,
damages, demands, liabilities, obligations, lawsuits, and/or
causes of action, judgments, losses, costs and expenses
(including, without limitation, reasonable attorney's fees and
expenses) accruing or arising under the Contracts made or
expressed prior to the date of the close of escrow of the sale of
the Business by Assignor to Assignee pursuant to the Agreement
31
(the "Closing date"). Assignee hereby indemnifies and holds
harmless Assignor from and against any and all claims, liens,
damages, demands, liabilities, obligations, lawsuits, and/or
causes of action, judgments, losses, costs and expenses
(including, without limitation, reasonable attorney's fees and
expenses) accruing or arising under the Contracts on or after the
Closing Date.
4. Successors and Assigns. This Assignment shall be binding
upon and inure to the benefit of the successors, assigns,
personal representatives, heirs and legatees of the respective
parties hereto.
5. Further Assurances. Assignor does hereby agree, from and
after the date hereof, upon the request of Assignee, to execute,
acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances and assurances and such other
documents as Assignee may require in order to obtain the full
benefit of this Assignment and Assignor's obligations hereunder.
6. Attorneys' Fees. In the event of the bringing of any
action or suit by a party hereto against another party hereunder
by reason of any breach of any of the covenants, conditions,
agreements or provisions on the part of the other party, arising
out of this Assignment, then in that event the prevailing party
shall be entitled to have and recover of and from the other party
all costs and expenses of the action or suit, including
reasonable attorneys' fees.
7. Governing Law. This Assignment shall be governed by,
interpreted under, and construed and enforceable with, the laws
of the State of California.
8. Acknowledgment. Assignee is hereby acknowledge, affirm,
confirm and agree that collectively all obligations assumed
hereunder are done so individually, jointly and severally.
9.Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original, but all
of which, together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the date first written above.
"ASSIGNOR"
TRSG CORP.,
A Delaware Corporation
32
By: /s/Rick Bailey
----------------------------------
RICK BAILEY, President
"ASSIGNEE"
A and A MEDICAL COMPANY,
A Nevada Limited Liability Company
By: /s/David Weiner
-----------------------------------
DAVID WEINER, Manager
33