Exhibit 10(g)
ASSET PURCHASE AGREEMENT
TRIPLE-A SECURITY SYSTEMS, INC.
TO
UNITED SECURITY SYSTEMS, INC.
TABLE OF CONTENTS
1. Sale and Purchase of Assets.................................... 1
1.1 Purchase of Assets................................. 1
1.2 Excluded Assets.................................... 2
1.3 Included Liabilities............................... 3
1.4 Excluded Liabilities............................... 3
2. Purchase Price................................................. 4
2.1 Amount............................................. 4
2.2 Allocation......................................... 5
3. Payment of the Purchase Price.................................. 5
3.1 At Closing......................................... 5
3.2 Adjustment of Cash Portion of the Purchase Price... 6
3.3 Adjustments to Response Share Portion of the
Purchase Price..................................... 7
3.4 Due Diligence...................................... 7
4. Representations, Warranties and Covenants of Seller and
Shareholder.................................................... 8
4.1 Organization....................................... 8
4.3 Financial Statements............................... 9
4.4 No Material Adverse Change......................... 9
4.5 Tax Matters........................................ 9
4.6 Compliance with Laws; Etc.......................... 10
4.7 Permits and Approvals.............................. 10
4.8 Judgments and Litigation........................... 10
4.9 Employee Relations................................. 10
4.10 COBRA.............................................. 11
4.11 ADA................................................ 11
4.12 Title, Liens, Name. ............................... 11
4.14 Seller Contracts................................... 12
4.15 Warranty of Merchantability........................ 12
4.16 Agreement Not in Breach of Other Instruments
Affecting Seller or Shareholder;
Governmental Consent............................... 12
4.17 Information Not Misleading......................... 12
4.18 Customer Contracts................................. 13
4.19 Insurance; Customer Claims......................... 14
4.20 Patents, Trademarks, Copyrights, Corporate Names... 15
4.21 Interest in Competitors, Suppliers and Customers... 15
4.22 Buyer's Title...................................... 15
4.23 ERISA.............................................. 16
4.24 Restrictive Covenant of Confidentiality............ 16
4.26 Exclusive Dealing.................................. 16
4.27 Announcement Letter................................ 16
4.28 Environmental Representations...................... 16
4.29 Payables........................................... 17
5. Representations, Warranties and Covenants of Buyer............. 17
5.1 Organization....................................... 18
5.2 Conflict as to Buyer............................... 18
5.3 Consents and Approvals of Governmental Authorities. 18
5.4 Intentionally Blank................................ 18
5.5 Litigation......................................... 18
5.6 Disclosure......................................... 18
5.7 Intentionally Blank................................ 19
5.8 No Actions to Make Representations and
Warranties Untrue ................................. 19
5.9 Additional Insured................................. 19
5.10 Access to Records.................................. 19
5.11 Confidentiality.................................... 19
5.12 Delivering of Announcement Letter.................. 20
5.13 Delivery of Response Shares........................ 20
6. Conduct of Business Prior to Closing........................... 20
6.1 Conduct of Business................................ 20
6.2 Buyer's Consent.................................... 21
7. Indemnification................................................ 22
7.1 Indemnification of Buyer........................... 22
7.2 Indemnification of Seller.......................... 23
7.3 Minimum and Maximum Amounts of Indemnity........... 23
7.4 Time Limit on Indemnity............................ 24
7.5 Notice............................................. 24
7.6 Third-Party Actions................................ 25
7.7 Waiver of Subrogation.............................. 25
7.8 Set-Off Rights..................................... 25
7.9 Exclusive Remedy................................... 26
8. Absence of Liabilities......................................... 26
9. Further Assurances After Closing............................... 26
10. Restrictive Covenant........................................... 26
10.1 Covenant Not to Compete............................ 26
10.2 Equitable Remedies................................. 27
10.3 Enforceability of Covenants........................ 27
11. Joinder of Response............................................ 28
12. Indemnity Against Brokerage Commissions........................ 28
13. Intentionally Blank............................................ 28
14. Transfer Taxes. ............................................... 28
15. Fees and Expenses.............................................. 28
17. Breach......................................................... 28
18. Break-Up Fee................................................... 28
19. Closing........................................................ 29
19.1 Date and Place..................................... 29
19.2 Delivery by Seller to Buyer At Closing............. 29
19.3 Delivery by Buyer to Seller at Closing............. 31
20. Destruction of Assets.......................................... 32
21. Continuation and Survival of Representations and Warranties.... 32
22. Conditions Precedent to Buyer's Obligation to Close............ 32
22.1 Accuracy of Representations........................ 32
22.2 Performance of Obligations......................... 32
22.3 No Litigation...................................... 32
22.4 Delivery of Documents.............................. 33
22.5 No Material Change................................. 33
22.6 Approval of Counsel................................ 33
22.7 Satisfactory Review................................ 33
22.8 Closing of the Jupiter Agreement................... 33
22.9 Delivery of Customer Contracts..................... 33
22.10 Intentionally Blank................................ 33
22.11 Delivery of Financial Statements and Tax Returns... 33
22.12 Delivery of Certificate of Insurance............... 33
22.13 Liabilities........................................ 33
22.14 Delivery of Non-Solicitation, Non-Competition
and/or Non-Disclosure Agreements of Employees...... 33
22.15 Approval of Accountants............................ 34
22.16 Escrow Agreement. ................................ 34
23. Conditions Precedent to Seller's Obligation to Close........... 34
23.1 Accuracy of Representations........................ 34
23.2 Performance of Obligations......................... 34
23.3 No Litigation...................................... 34
23.4 Delivery of Documents.............................. 34
23.5 Approval of Counsel................................ 34
23.6 Delivery of Certificate of Insurance............... 34
24. Waiver; Reasonable Efforts..................................... 34
24.1 Waiver............................................. 35
24.2 Reasonable Efforts................................. 35
25. Miscellaneous.................................................. 35
25.1 Notices............................................ 35
25.2 Entire Agreement................................... 36
25.3 Provisions Separable............................... 36
25.4 Waivers, Amendments and Indulgences................ 36
25.5 Binding Nature of Agreement; Assignment............ 36
25.6 Variations in Pronouns............................. 36
25.7 Exhibits........................................... 36
25.8 Time of the Essence................................ 37
25.9 Number of Days..................................... 37
25.10 Execution in Counterparts.......................... 37
25.11 Section Headings................................... 37
25.12 Jurisdiction and Venue............................. 37
25.13 Governing Law...................................... 37
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated the ___________ day of
September, 1997, by and between UNITED SECURITY SYSTEMS, INC., a New Jersey
corporation ("Buyer"), RESPONSE USA, INC., a Delaware corporation ("Response"),
and TRIPLE A SECURITY SYSTEMS, INC., a Pennsylvania corporation ("Seller") and
XXXXXX X. MAY, an individual ("Shareholder") (as it may be amended or
supplemented from time to time, this "Agreement"). Buyer, Seller and Shareholder
are sometimes individually called a "Party" and collectively called the
"Parties".
B A C K G R O U N D:
Shareholder is the sole shareholder of the Seller. Seller is
engaged, inter alia, in the business of the sale, installation, service,
inspection, testing and monitoring of fire, intrusion and other detection alarm
security devices and systems for customers (the "Business").
Buyer desires to acquire substantially all of the assets of Seller
(the "Assets") and Seller desires to sell such Assets to Buyer, all upon the
terms and subject to the conditions hereinafter set forth. Response is the
parent company of the Buyer.
Simultaneously with the execution of this Agreement, Response is
entering into a Stock Purchase Agreement with Xxxxxx X. May and Xxxx Xxxxx for
the Stock of The Jupiter Group, Inc., T/A Triple A Security Patrol (the "Jupiter
Agreement").
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein and intending to be legally bound, the Parties agree
as follows:
1. Sale and Purchase of Assets.
1.1 Purchase of Assets. On the Closing Date (as that term is defined in
Section 19.1), subject to and upon the terms and conditions contained herein,
Seller shall sell, transfer, convey, assign and deliver to Buyer and Buyer shall
purchase and acquire from Seller all of Seller's right, title and interest in
and to all of the Assets. The assets being conveyed hereunder (the "Assets")
shall be more particularly described in Exhibit 1.1, and shall include but not
be limited to: all of Seller's assets listed in the Closing Financial Statement
(defined below); all assets owned by, leased or licensed to the Seller, or
otherwise used by the Seller in connection with its business; all of Seller's
alarm monitoring and servicing accounts (the "Alarm Accounts"), all of Seller's
local service accounts (the "Local
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Accounts") and all of Seller's sub-contract monitoring accounts (the
"Sub-contract Accounts") with the customers of Seller (the "Customers") all of
Seller's right, title and interest in and to all office equipment, furniture,
fixtures, inventory, computer hardware and software, central station equipment
and telephone system; all of Seller's right, title and interest in any
monitoring equipment, alarm equipment, or other equipment necessary for the
purpose of sending an alarm monitoring signal to a central monitoring station;
all telephone lines owned or leased by Seller and used in connection with the
Alarm Accounts (including any lines into the central station(s) used by Seller
and any lines used for Seller's customer service); all computer software
programs licensed to or used by Seller (including the data base connected
thereto) relating to billing, customer service and/or uploading and downloading
any of the Customer's alarm equipment; all Customer lists (including lists of
any non-monitored accounts installed or serviced by Seller); all licenses and
permits which are required for the conduct of Seller's business; all contracts
and agreements between Seller and the Customers; all Customer files; all
tradenames owned by Seller, including but not limited to "Triple A Security
Systems"; and all of Seller's right, title, and interest in all logos used by
Seller including but not limited to "AAA". Such conveyance shall be confirmed by
a Xxxx of Sale in the form attached hereto as Exhibit 1.1. Notwithstanding
anything contained in this Section 1.1 to the contrary, the Assets being
conveyed pursuant to this Agreement shall be limited to those that are
assignable by Seller as a matter of right or for which a consent to assignment
is delivered at Closing; provided, however, that in the event that an Asset
which is materially required to operate the Business as a going concern is not
assignable as a matter of right and the Seller is unable to obtain a consent to
assignment, the following provision(s) shall apply:
1.1.1 Consents. To the extent that the transfer of any of the Assets
to Buyer shall require the consent of any other party or parties thereto, and
such consent shall not have been obtained prior to the Closing Date, the Seller
and Shareholder agree that they will use commercially reasonable efforts to
obtain all consents to the transactions contemplated by this Agreement of any
party to any contract, agreement, arrangement or commitment to which the Seller
is a party or to which the Seller is subject or by which any of its property is
bound and to continue their best efforts after the Closing Date. If any such
consent is not obtained, the Seller and Shareholder agree to cooperate with
Buyer in any reasonable arrangement (such as subcontracting, sublicensing or
subleasing) designed to provide for Buyer the benefits of the Seller under any
applicable contract, agreement, arrangement or commitment, including, without
limitation, enforcement, for the benefit of Buyer, of any and all rights of the
Buyer and against any other party thereto arising out of the breach or
cancellation thereof by such party or otherwise.
1.2 Excluded Assets. Notwithstanding any provision of this Agreement to
the contrary, there is excluded from the sale and purchase contemplated by this
Section 1 the following assets of Seller (collectively, the "Excluded Assets"),
including:
1.2.1 All assets of a personal nature identified on Exhibit 1.2.1;
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1.2.2 All amounts owed to Seller by Shareholder identified on
Exhibit 1.2.2; and
1.2.3 All amounts included in prepaid expenses in the Closing
Statement which benefit the Seller only ("Prepaid Expenses").
1.3 Included Liabilities. At the Closing, Buyer shall assume and be
responsible to pay the liabilities of the Seller described below (the "Included
Liabilities"):
1.3.1 Buyer agrees to the continuation of those operating leases
listed on Schedule 1.3.1 hereto relating to the leased equipment used by the
Seller for the operation of its Business. With the exception of those leases
listed on Schedule 1.3.1, at or prior to Closing all outstanding liabilities of
the Seller, including but not limited to, all accounts payable, notes payable,
loans, federal, state and local payroll or other taxes will be fully satisfied
or adequately reserved for by the Seller.
1.3.2 Seller's obligations to provide services to the Customers
after the Closing.
1.3.3 Seller's obligations pursuant to all leases of real property,
identified below:
1.3.3.1 A Sub-Lease between Buyer and Seller in accordance
with the terms set forth on Exhibit 1.3.3.1 whereby Buyer subleases all of the
real property covered by the Agreement of Lease, as Amended, between Seller and
Shareholder dated October 27, 1995 covering the premises and improvements
located at 00 Xxxxx Xxxxxx, Xxxxxx-Xxxxx, XX 00000, as the same may be amended
by Shareholder and Buyer.
1.3.3.2 Xxxxxxxx, Pennsylvania Lease.
1.3.3.3 Scranton, Pennsylvania Lease.
1.3.3.4 Stroudsburg, Pennsylvania Lease.
1.3.4 Seller's obligations pursuant to agreements set forth in
Exhibit 1.3.4.
1.3.5 Seller's obligations to provide (or pay for) unused accrued
vacations, personal days and sick time as of the Closing Date to employees of
Seller who are hired by Buyer in accordance with Exhibit 1.3.5.
1.4 Excluded Liabilities. It is understood and agreed between Seller and
Buyer that Buyer shall not assume or be responsible to pay any of the excluded
liabilities (the "Excluded Liabilities"), all of which shall remain Seller's
liabilities and responsibilities as
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between Seller and Buyer. Excluded Liabilities consist of the liabilities and
obligations of the following type:
1.4.1 All liabilities of the Seller (except for liabilities
specifically identified in Section 1.3., above) whether known or unknown, and
including but not limited to any liabilities set forth on the Financial
Statements. Seller agrees to pay, or adequately reserve, out of the proceeds of
the Purchase Price, all liabilities set forth in the Closing Financial Statement
simultaneously with the Closing. Taxes on services payable by Seller, payments
made or to be made as of the Closing Date under all Seller agreements, and
similar periodic charges shall be prorated between Seller and Buyer as of the
Closing Date based on the applicable period. Following the Closing, Seller shall
pay for any utilities, services or equipment provided to Seller prior to the
Closing but not billed until after the Closing Date.
1.4.2 Liabilities arising out of the relationship between Seller and
its employees, including, but not limited to, liabilities for payroll, payroll
withholding taxes, unfunded pension liabilities, liabilities under health and
welfare plans, and employment termination liabilities as of the Closing Date.
1.4.3 Taxes payable by Seller as of the Closing Date.
1.4.4 Tort liabilities including liabilities arising from the
manufacture, operation or sale of defective products prior to the Closing.
1.4.5 Criminal claims for conduct prior to the Closing Date.
1.4.6 Liabilities for underpaid or underfunded insurance premiums
including workers compensation and general liability insurance for periods prior
to the Closing Date.
1.4.7 Claims or liabilities arising out of actual or alleged
pollution of the environment for periods prior to the Closing Date.
1.4.8 Any liabilities or obligations for pre-Closing services.
1.4.9 Any liabilities or obligations of Seller to any related party.
2. Purchase Price.
2.1 Amount. In consideration of the sale, transfer, conveyance, assignment
and delivery of the Assets by Seller to Buyer, and in reliance upon the
representations and warranties made herein, Buyer shall pay to Seller a purchase
price equal to the sum of the following: the Cash Portion of the Purchase Price
described in Section 3.1.1 below plus the Response Shares described in Sections
3.1.2 and 3.1.3 below, as adjusted in accordance with the provisions of Sections
3.2 and 3.3 (the "Purchase Price") in the aggregate amount of
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____________________________________________________________________________
($_______________________________).
2.2 Allocation. The Purchase Price shall be allocated among the Assets as
set forth in Exhibit 2.2. Each of the Parties agrees to report the purchase and
sale of the Assets for tax purposes in accordance with the allocation of the
Purchase Price as set forth in Exhibit 2.2.
3. Payment of the Purchase Price. Subject to the conditions set forth in this
Agreement, Buyer shall pay the Purchase Price as follows:
3.1 At Closing:
3.1.1 Buyer shall deliver to Seller an amount equal to
__________________________________ ($__________________) plus or minus the
Adjustments of Cash Portion of the Purchase Price (as defined in Subsection
3.2), by certified or bank cashier's check, or wire transfer of immediately
available federal funds, in Seller's sole and absolute discretion;
3.1.2 In consideration of the Current Assets being assigned to Buyer
hereunder, Buyer shall deliver to Seller an amount of shares of Common Stock in
Response (NASDAQ: RUOK) (the "Current Asset Shares") equal in value to the
amount of the Current Assets set forth on the Closing Financial Statement (now
estimated to be
____________________________________________________________________________
($___________________________________) based on the lesser of: (i) the average
closing bid price of such Response Shares on the ten (10) trading days prior to
Closing, or (ii) the price of the secondary public offering of Response Stock
expected to be completed immediately prior to the Closing Date (the "Agreed
Value").
3.1.3 In further consideration of the Customer Contracts being
assigned to Buyer hereunder, Buyer shall deliver to Seller an amount of shares
of Common Stock in Response (the "Additional Shares") equal in value to
__________________________________________________ ($__________________) based
on the Agreed Value. The Current Asset Shares together with the Additional
Shares are collectively called the "Response Shares".
3.1.4 The Response Shares shall be: (i) Securities and Exchange
Commission ("SEC") Rule 144 Stock, (ii) subject to a "lock-up" period in
accordance with the terms and conditions of the "Lock-Up Agreement" required by
Hampshire Security Corporation, attached hereto as Exhibit 3.1.4, and (iii)
subject to an orderly selling of the Response Shares by providing that no more
than forty thousand (40,000) of the Response Shares may be sold in any thirty
(30) day period and not more than two thousand (2,000) of the Response Shares
may be sold in any given trading day.
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3.1.5 Buyer has previously furnished to Stockholder (a) the most
recent 10-K Report as filed with the Securities and Exchange Commission (the
"SEC"); (b) all subsequent 10-Q's as filed with the SEC; (c) any subsequent
Reports on Form 8-K as filed with the SEC; (d) definitive proxy statements
relating to all meetings of its stockholders (whether annual or special) since
January 1, 1997; and (e) all other reports and registration statements filed by
Buyer with the SEC since January 1, 1997 (all of the foregoing, the "SEC
Filings"). As of their respective dates, the SEC Filings (including all
documents incorporated by reference therein) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except, in the case of
any SEC Filing, any statement or omission therein that has been corrected or
otherwise disclosed or updated in a subsequent SEC Filing. Since January 1, 1997
Buyer has timely filed with the SEC all reports, documents, registration
statements, definitive proxy statements and all other filings required to be
filed with the SEC under the rules and regulations of the SEC, and all such
reports, documents, registration statements, definitive proxy statements and
other filings complied in all material respects with all applicable requirements
of the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, as applicable.
3.1.6 Buyer agrees that in the event that any of the Response Shares
are sold by Seller in open market transactions in accordance with the provisions
of Section 3.1.4 above within four (4) years from the Closing Date, and the
average gross sale price per share obtained by Seller is less than the Agreed
Value (as evidenced by copies of appropriate brokerage account statements or any
other manner reasonably acceptable to Buyer) (the "Shortfall Amount"), the Buyer
shall, at its option, either:
(a) Pay to the Seller within thirty (30) days after notice of
such sale an amount equal to the difference between the Agreed Value
per share and Seller's gross sale price per share (the
"Difference"); or
(b) Deliver to Seller within thirty (30) days after notice of
such sale such additional shares of Response Common Stock (the
"Additional Shares") with an aggregate market value (based on the
average closing bid price of the Common Stock during the ten (10)
trading days immediately preceding the date of delivery) equal to
such Difference, which shares shall be registered and freely
transferrable without restriction under the Securities Act, other
than any restriction arising from the holders status as an
"affiliate", as defined in Rule 144 under the Securities Act.
3.2 Adjustment of Cash Portion of the Purchase Price.
3.2.1 The cash portion of the purchase price described in Section
3.1.1 shall be reduced by an amount equal to the Deferred Revenue as set forth
on the Closing Financial Statement.
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3.2.1.1 Such other adjustments as Buyer and Seller may mutually
agree.
3.3 Adjustments to Response Share Portion of the Purchase Price.
3.3.1 The Response Share portion of the purchase price described in
Section 3.1.2 shall be reduced by the amount equal to the total of the
following:
3.3.1.1 The value of the Current Assets set forth in the
Closing Financial Statement shall be reduced by Prepaid Expenses and by any
amounts due from the Shareholder or any affiliate or related party (except for
the loan due and owing from The Jupiter Group, Inc., as reflected on the Closing
Financial Statement).
3.3.1.2 The value of the accounts receivable set forth in the
Current Assets section of the Closing Financial Statement shall be reduced by an
allowance for doubtful accounts in accordance with generally accepted accounting
principles and based on Seller's actual average write-off experience of 5.956%
for the years ending 12/31/94, 12/31/95, and 12/31/96, as confirmed by Buyer.
3.3.1.3 Such other adjustments as Buyer and Seller may
mutually agree.
3.4 Due Diligence.
3.4.1 Due Diligence Review by Buyer. Commencing on the date hereof
and continuing until fifty-one (51) calendar days (less ten (10) business days)
from the date that Response files its Registration Statement pertaining to the
financing of this transaction (the "Due Diligence Period"), Seller shall allow
Buyer to conduct a complete and thorough financial, legal and operational due
diligence review of the Seller. Between the Due Diligence Period and the Closing
Date, Seller shall continue to provide Buyer with such information as Buyer may
reasonably request to plan for an orderly operational transition after the
Closing and to prepare, with Seller, the Closing Financial Statement. In order
to conduct such due diligence, Seller will provide reasonable access (during
normal business hours) to its facilities, books, records, contracts, Customer
files and Customer premises for Buyer's representatives. Buyer agrees to conduct
its due diligence review in a manner that will not unreasonably interfere with
Seller's Customers or Seller's business and operations. Buyer agrees (i) the
Confidentiality Agreement between Seller and Buyer dated October 18, 1996 shall
survive the execution of this Agreement, and (ii) pursuant to the
Confidentiality Agreement to treat as confidential and to advise its
representatives to treat as confidential all information of the Seller provided
to Buyer in due diligence, and Buyer hereby agrees and acknowledges that this
covenant of confidentiality shall survive the execution (and termination) of
this Agreement and, if this Agreement is not terminated, shall remain in full
force and effect until the Closing of this transaction.
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3.4.2 On or before ten (10) business days prior to the Closing Date,
Buyer shall deliver a written notice to Seller specifying whether Buyer has
elected to terminate this Agreement and, if so, the factual basis for such
termination shall be set forth with specificity and in detail (the "Notice"). In
the event Buyer timely delivers the Notice to Seller, Seller shall have eight
(8) business days to substantially cure the factual basis for termination.
Thereafter, in the event Buyer does not withdraw the Notice and reasonably
elects to terminate this Agreement, except for those provisions, terms,
conditions, etc. which specifically survive the termination of this Agreement,
this Agreement, and all transactions or documents taken or delivered pursuant to
the terms hereof, shall be deemed void and of no further force or effect. In the
event Buyer fails to deliver the Notice on or before ten (10) business days
prior to the Closing Date, or, in the event of timely delivery of the Notice,
Buyer elects, in writing, to waive the Notice and proceed pursuant to this
Agreement to Closing, or, in the event of timely delivery of the Notice, Seller
timely substantially cures the factual basis for termination, Buyer shall be
obligated to close pursuant to this Agreement except for a material breach by
Seller of Section 22 hereof [Conditions Precedent to Buyer's Obligation to
Close]. Notwithstanding anything contained in this Agreement to the contrary,
the sole factual basis for the Buyer's termination of this Agreement without
being liable for the Break-Up Fee described in Section 18 shall be limited to
the delivery of a proper Notice pursuant to this Section 3.4.2 or a material
breach by Seller of Section 22 hereof.
4. Representations, Warranties and Covenants of Seller and Shareholder. As a
material inducement to Buyer to enter into this Agreement and to proceed through
Closing ("Close") hereunder, Seller and Shareholder hereby make the following
representations, warranties and covenants to Buyer as of the date of this
Agreement and as of the Closing Date, all of which shall survive Closing
hereunder. Unless the context clearly indicates otherwise, all exhibits shall be
delivered on or before fifteen (15) business days prior to the Closing and all
such representations and warranties shall be true both as of the date of this
Agreement and as of the Closing Date. Any and all reference to Seller's or
Shareholder's "knowledge" including, without limitation, any and all references
to "the best of__________'s knowledge" shall mean, for both, the actual (not
legal or constructive) knowledge of Xxxxxx X. May only, without any duty to
investigate (knowledge does not include "should have known").
4.1 Organization. Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and all issued and outstanding shares of stock of Seller are owned
by Shareholder. Seller has the full power and authority to own, lease and
operate its assets, properties and business. Seller's Charter is valid and in
full force. Seller and Shareholder have full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
upon the terms and conditions herein provided. The execution, delivery and
performance by Seller of this Agreement have been duly authorized by all
necessary corporate action of Seller. This Agreement has been duly and validly
executed and delivered by the Shareholder and by an authorized officer on behalf
of Seller and constitutes a valid and binding obligation of Seller and
Shareholder, enforceable against Seller and Shareholder in accordance with its
terms.
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4.2 Conflict as to Seller. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or the
performance of the obligations of Seller hereunder will (a) violate any
provision of the Certificate of Incorporation or Bylaws of Seller; (b) violate,
be in conflict with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any agreement or
commitment to which Seller or the Shareholder is a party; or (c) violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or other governmental body applicable to Seller or Shareholder.
4.3 Financial Statements. The audited financial statements and notes
thereto of Seller (including the balance sheets and related statements of
income, retained earnings and changes in financial position) as, at and for the
fiscal years ended December 31, 1994, December 31, 1995, and December 31, 1996,
together with copies of all original accounting work papers for such fiscal
years which are available from Xxxxx X. Xxxxx, C.P.A., have been or will be made
available to Buyer (the "Audited Financial Statements"). In addition to the
Audited Financial Statements, Seller shall make available to Buyer unaudited
financial statements for the interim periods ending June 30, 1995, June 30,
1996, and June 30, 1997 (the "Unaudited Financial Statements"). In addition to
the Audited Financial Statements and the Unaudited Financial Statements, an
interim financial statement for fiscal 1997 through the month ending immediately
prior to the Closing Date (the "Closing Financial Statement) shall be jointly
prepared by Buyer and Seller prior to the Closing Date. The Audited Financial
Statements together with the Closing Financial Statement (but not including the
Unaudited Financial Statements) are collectively referred to as the "Financial
Statements". The Financial Statements were prepared in conformity with generally
accepted accounting principles, and fairly, in all material respects, present
the financial position of Seller as and at the respective dates of such balance
sheets and the results of operations of Seller for the applicable periods.
Except as set forth in Exhibit 4.3, the Financial Statements make adequate
provision for all material obligations and liabilities (whether fixed,
contingent, absolute, accrued or otherwise) of Seller as of the dates indicated.
4.4 No Material Adverse Change. To the best of Seller's and Shareholder's
knowledge, since the date of the latest Audited Financial Statements, there has
been no material adverse change in the Business, the prospects, conditions,
affairs, operations or financial condition of Seller. Neither Seller nor
Shareholder have any knowledge of any such change or event which is impending.
4.5 Tax Matters. Seller has duly and timely filed with the appropriate
governmental agencies (Federal, state and local) all tax returns required to be
filed by Seller. Seller shall deliver to Buyer a copy of Seller's Federal income
tax return for the years ending December 31, 1994, 1995 and 1996 and for 1997
(with a copy of all accountants' work papers which are reasonably available)
promptly after filing of the return(s). All Federal, state, local, profits,
income, unemployment, social security, sales, use, property, excise or other
taxes, assessments, interest, penalties and deficiencies whatsoever
(collectively the "Taxes") due, owing and payable, or which may be due, owing
and payable, fixed,
9
contingent, or otherwise, have been fully paid or duly provided for in the
Financial Statements. Seller is not a party to any action or proceeding or
investigation or audit by any governmental authority for review, assessment or
collection of any Taxes and no claims for assessment or collection of any Taxes
have been asserted or, to the best of Seller's or Shareholder's knowledge,
threatened against Seller. No claim for Taxes due is being contested by Seller.
4.6 Compliance with Laws; Etc. To the best of Seller's and Shareholder's
knowledge, except as set forth on Exhibit 4.6, Seller is in substantial
compliance in all material respects with all applicable Federal, state and local
statutes and ordinances (collectively, the "Laws") relating to the Business.
4.7 Permits and Approvals. To the best of Seller's and Shareholder's
knowledge, except as set forth on Exhibit 4.7, Seller has all material licenses
and permits of any governmental body (collectively the "Permits") material to
the conduct of the Business, all of which Permits are listed on Exhibit 4.7.
4.8 Judgments and Litigation. Except as set forth on Exhibit 4.8, there is
no outstanding order, writ, injunction, fine, citation, penalty, decree or
unsatisfied judgment of any court, governmental body or arbitrator, or any
litigation existing or, to the best of Seller's and Shareholder's knowledge,
pending against Seller affecting, in any material way, the Business. Neither
Seller nor Shareholder is contemplating the institution of any claim, suit,
action, arbitration, administrative or other proceeding which could result in a
material valid claim, suit, action, arbitration, administrative or other
proceeding against Seller or Shareholder, nor to their knowledge does there
exist any basis for any thereof. To the best of Seller's and Shareholder's
knowledge, the execution and delivery of this Agreement, the consummation of the
transactions provided for herein, and the fulfillment of the terms hereof shall
not at Closing or thereafter result in the material breach or violation of any
of the terms and provisions of, or constitute (with or without the giving of
notice or lack of time, or both) a material default under, or conflict with, any
agreement, indenture, mortgage, lien, lease, note, consent, license, franchise
or other instrument to which Seller is subject or by which it is bound, or any
judgment, decree, order or award of any court, governmental body or arbitrator.
Except for customer claims or to the extent set forth in Exhibit 4.8, Seller has
not for the last five (5) years been a party to, or the subject of, any action,
suit, litigation, claim, administrative proceeding or governmental or
quasi-governmental investigation relating to its operations, assets, properties
or Business or prospects, or to this Agreement or the consummation of the
transactions contemplated, or material to such transactions.
4.9 Employee Relations.
4.9.1 Seller is not a party to any collective bargaining agreement
with any union and, to the best of Seller's and Shareholder's knowledge, any
pending or threatened labor dispute. Seller has paid or shall pay (or adequately
reserve out of the proceeds of the Purchase Price) before the Closing Date all
employees all amounts due to them for salaries,
10
commissions and reimbursable expenses, (excluding unused and accrued vacations,
personal leave and sick pay) for all time up to and including the Closing Date.
Except as set forth on Exhibit 4.9.1, Seller does not have any employee whose
employment is not terminable at will. Any employee who has given notice to
Seller or indicated to Seller an intention to terminate employment with Seller
is set forth on Exhibit 4.9.1. Seller shall terminate all of its employees as of
the completion of Closing, and permit Buyer to make an offer of employment to
any employees of Seller that Buyer chooses.
4.9.2 There are no unfair employment or labor practice charges
presently pending affecting the Seller or its businesses or operations. Except
as set forth on Exhibit 4.9.2, to the best of Seller's and Shareholder's
knowledge, Seller does not have any employment-related litigation or
administrative proceedings presently pending, filed by or on behalf of any
employee or involving any employee.
4.9.3 Except as set forth on Exhibit 4.9.3, as of the date hereof,
to the best of Seller's and Shareholder's knowledge, there are no claims,
pending or threatened, by any governmental authority, labor organization or
employee of Seller alleging that Seller has violated any applicable laws
respecting employment practices. To the Seller's knowledge, it is in compliance
in all material respects with its obligations under all statutes, executive
orders and other governmental regulations governing its employment practices,
including, without limitation, provisions relating to wages, hours, equal
opportunity and payment of social security and other taxes.
4.10 COBRA. To the best of Seller's and Shareholder's knowledge, Seller
has complied in all material respects with Section 4980B(f) of the Internal
Revenue Code of 1986, as amended ("COBRA").
4.11 ADA. To the best of Seller's and Shareholder's knowledge and to the
extent it is applicable, if at all, Seller has complied in all material respects
with the Americans With Disabilities Act of 1990, as amended.
4.12 Title, Liens, Name.
4.12.1 Seller owns outright and has good, valid and marketable title
to all of its assets, which, as of the Closing, shall be free and clear of any
and all mortgages, liens, and ownership of pledges, security interests,
restrictions, prior assignments, encumbrances, claims or other restrictions of
every kind or character, including, without limitation, the claims or liens of
any bank or any taxing authority.
4.12.2 Except for the Excluded Assets, all of the property, real,
personal, tangible or intangible, including, without limitation, intellectual
property, which Seller owns is included in the Business (the "Included Assets").
11
4.12.3 Except as set forth on Exhibit 4.12.3, to the best of
Seller's and Shareholder's knowledge, all of the Included Assets are in good
operating condition and repair, and are free from all material defects and
damage ordinary wear and tear excepted. Except as set forth on Exhibit 4.12.3,
to the best of Seller's and Shareholder's knowledge, all of the equipment and
systems at Customer premises installed by Seller has/have been installed in a
good and workmanlike manner.
4.12.4 All of the Inventory is new or used and was acquired in the
ordinary course of the Business, and is substantially free from material defects
and damage.
4.12.5 Except as set forth in Exhibit 4.12.5, Seller owns or leases
all of the telephone line(s) or telephone numbers into its Central Station onto
which the digital dialers of Seller's Alarm Accounts are programmed. As part of
the purchase, Seller will convey these lines to Buyer.
4.13 Liabilities. To the best of Seller's and Shareholder's knowledge,
Seller does not have any material liabilities, other than liabilities fully and
adequately reflected in the Financial Statements or listed on Exhibit 4.13
attached hereto.
4.14 Seller Contracts. Except as indicated on Exhibit 4.14, to the best of
Seller's and Shareholder's knowledge, the execution and delivery of this
Agreement, the consummation of the transactions provided for herein, and the
fulfillment of the terms hereof shall not result in an impairment or termination
of any of Seller's rights under any Seller contract which will have a material
adverse effect on the Business.
4.15 Warranty of Merchantability. To the best of Seller's and
Shareholder's knowledge, all material, goods, equipment and services supplied,
sold, leased or performed by Seller to or for its Customers are of merchantable
quality and to the best of Seller's and Shareholder's knowledge, Seller has not
materially breached or substantially violated any applicable express or implied
warranty of merchantability in connection with such sales, leases or services.
4.16 Agreement Not in Breach of Other Instruments Affecting Seller or
Shareholder; Governmental Consent. To the best of Seller's and Shareholder's
knowledge, the execution and delivery of this Agreement, the consummation of the
transactions provided for herein, and the fulfillment of the terms hereof:
4.16.1 Shall not result in the imposition of any lien, security
interest or encumbrance of any nature whatsoever on any Included Asset or the
Assets; and
4.16.2 Does not require the consent of any governmental authority.
4.17 Information Not Misleading. No representation or warranty of Seller
or Shareholder in this Agreement, as of their respective dates, or any
certificate, document
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or other paper furnished by Seller or Shareholder to Buyer in connection with
the transactions contemplated hereby did not or will not contain any untrue
statement of any material fact or omit to state a material fact required to be
stated herein or necessary to make the statements made therein, in light of the
circumstances under which they were made, neither false nor misleading, except,
in the case of any document or other paper furnished by Seller or Shareholder,
any statement or omission therein that has been corrected or otherwise disclosed
or updated subsequently by Seller or Shareholder. There is no fact known by
Seller or Shareholder not disclosed in writing to Buyer by Seller or Shareholder
that materially and adversely affects, or, so far as may reasonably be foreseen
by Seller or Shareholder, will materially and adversely affect, the Business.
4.18 Customer Contracts.
4.18.1 Set forth on Exhibit 4.18.1 attached hereto is a true,
correct and complete list of substantially all Customers from whom Seller is
entitled to receive regular periodic payments. Said list sets forth at least the
following information, given separately as to each Customer:
4.18.1.1 Customer's name and address;
4.18.1.2 Type of contract (commercial, residential or
governmental);
4.18.1.3 Amount of monthly recurring revenue charged and the
billing cycle; and
4.18.1.4 Such other information requested by Buyer that is
readily available from Seller's computer software and data base.
4.18.2 Seller shall make available to Buyer true, correct and
complete copies of all written customer contracts (the "Customer Contracts") and
all amendments thereto and shall deliver the original executed Customer
Contracts to Buyer at the Closing.
4.18.2.1 To the best of Seller's knowledge, substantially all
Customer Contracts are in full force and effect.
4.18.2.2 To the best of Seller's and Shareholder's knowledge,
each Customer Contract is not in default in any material respect other than a
failure of the Customer party to such Contract to pay timely all amounts due
thereunder. To the best of Seller's and Shareholder's knowledge, each Alarm
Account is free from any material claim, defense or offset.
4.18.2.3 To the best of Seller's and Shareholder's knowledge,
each Customer Contract is currently insured at regular rates for broad form
comprehensive
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general liability insurance coverage including, without limitation, errors and
omissions, products liability and completed operations coverages.
4.18.2.4 To the best of Seller's and Shareholder's knowledge,
no condition exists or event has occurred which, with the giving of notice or
lapse of time or both, would constitute a material default under any Customer
Contract, other than a failure of the Customer party to such Contract to pay
timely all amounts due thereunder, and to the best of Seller's and Shareholder's
knowledge, except as listed on Exhibit 4.18.2.4 attached hereto, no Customer
intends to cancel or has given notice of its intention to cancel or modify its
contractual relationship with Seller, or not to renew any such Contract when its
term shall expire, or otherwise to decrease or limit its purchase of services
from Seller, or has moved, terminated its business, made an assignment for the
benefit of creditors or filed for bankruptcy or reorganization. To the best of
Seller's and Shareholder's knowledge, except as further listed on Exhibit
4.18.2.4. effective for the period after the date of this Agreement, no Customer
has been promised any reduction in any monthly rate or service fees, free or
barter service or any other tangible or intangible item of value, or payment
terms other than payment in arrears. Except in the ordinary course of business,
during the last twelve (12) months immediately preceding the date of this
Agreement, Seller has not increased any monthly service billing rate.
4.18.3 Except for Sub-Contract Accounts as set forth in Exhibit
4.18.3, Seller does not provide monitoring services to the customers of any
other entity, whether pursuant to a written agreement or otherwise.
4.18.4 Alarm equipment installed at any Customer's location is
hereinafter referred to as an "Alarm System". To the best of Seller's and
Shareholder's knowledge, all Alarm Systems related to the Alarm Accounts are in
good working order and condition, contain digital dialers to communicate to
Seller's Central Station, and have been installed and maintained in accordance
with manufacturer's specifications and good and workmanlike practices prevailing
in the industry at the time of such installation and maintenance.
4.18.5 To the best of Seller's and Shareholder's knowledge, Seller
has not disclosed to any third party, a Customer list, originals or copies of
Customer Contracts, or specific Customer information or data of any kind related
to the Alarm Accounts.
4.18.6 To the best of Seller's and Shareholder's knowledge, all
Alarm Accounts are programmed to Seller's central station.
4.19 Insurance; Customer Claims.
4.19.1 Copies of all insurance policies, and all endorsements
thereon or amendments thereto shall be made available to Buyer and a current
Certificate of Insurance shall be attached hereto as Exhibit 4.19.1. To the best
of Seller's and Shareholder's
14
knowledge, all such insurance policies are in full force and effect and, to the
best of Seller's or Shareholder's knowledge, Seller has complied with all of the
material conditions contained in such policies.
4.19.2 Exhibit 4.19.2 attached hereto is a true, correct and
complete summary of material Customer claims against Seller during the past
three (3) years and indicates the claims that are currently pending and those
that are being defended by Seller's insurance carriers.
4.19.3 Seller and Shareholder covenant to continuously maintain
comprehensive general liability insurance (including errors and omissions
coverage) in the amount of $10,000,000 per occurrence and in the aggregate for
the period of three (3) years from the Closing Date for (i) claims asserted
against the Seller after the Closing Date (ii) where the loss giving rise to
damages occurs after the Closing Date, and (iii) the act, error or omission
giving rise to the loss occurs before the Closing Date ("Runout Coverage"). If
permitted by the insurance policy or waived by the insurance company,
subrogation shall be waived as to the Buyer Indemnified Parties under such
Runout Coverage policy.
4.20 Patents, Trademarks, Copyrights, Corporate Names.
4.20.1 Within the past three (3) years, Seller has not done business
(a) under or been known by any name other than its present corporate name,
"Triple A Security Systems, Inc." or (b) at any location other than its present
location. No claim has been asserted against Seller involving any conflict or
claim of conflict of the name "Triple A Security Systems, Inc.", and, to the
best of Seller's and Shareholder's knowledge, of any basis for any such claim or
conflict.
4.20.2 Except as set forth in Exhibit 4.20.2, Seller does not
possess any patent, patent right, trademark or copyright and is not a party to
any license or royalty agreement with respect to any patent, trademark or
copyright.
4.20.3 To the best of Seller's and Shareholder's knowledge, no
equipment, system or service sold, leased or provided by Seller violates any
license or infringes any patent, copyright, trademark, service xxxx or trade
name of another.
4.21 Interest in Competitors, Suppliers and Customers. Except as set forth
in Exhibit 4.21, neither Seller nor Shareholder has any direct or indirect
interest in any corporation, partnership, firm or association which is a
competitor, potential competitor, customer or supplier of the Business.
4.22 Buyer's Title. Immediately after the Closing, Buyer shall receive
good and marketable title to the Assets and the Included Assets, free and clear
of all liens, security interests, mortgages, judgments, restrictions,
encumbrances or claims of any kind.
15
4.23 ERISA. Except as set forth on Exhibit 4.23, Seller is not a party to,
nor does it sponsor or contribute to, or maintain any "employee benefit plan"
(including, without limitation, any multiemployer plan), within the meaning of
Section 3(3) of the Employee Retirement Insurance Security Act of 1974, as
amended, or any other fringe benefit plan, program or arrangement.
4.24 Restrictive Covenant of Confidentiality. For an unlimited period of
time from the completion of Closing, Seller and Shareholder shall hold all
information relating to the Business as confidential, proprietary and trade
secret information to be held in trust and confidence and shall not use or
disclose such information for any purpose whatsoever without the prior written
consent of Buyer, which consent shall be in Buyer's sole and absolute
discretion; provided, however, that Seller and Shareholder may disclose or use
such information (i) required by law or upon a final and unappealable order of a
court of competent jurisdiction on the condition precedent that Seller and
Shareholder use reasonable efforts to give to Buyer reasonable notice of, and an
opportunity to participate in, the decision concerning disclosure of any such
information in any such litigation, suit or claim, (ii) to the extent required
to enforce or defend claims arising out of or from or in connection with this
Agreement, (iii) as required by a governmental body on the condition precedent
that Seller and Shareholder use reasonable efforts to give to Buyer reasonable
notice of, and an opportunity to participate in, the decision concerning
disclosure of any such information in any such governmental proceeding. (iv)
that has been rightfully received by Seller and Shareholder from another source
on a non-confidential basis, or (v) that is available to the industry or the
public at large.
4.25 No Other Agreement. Other than this Agreement, Seller and Shareholder
have no contract, arrangement or understanding with respect to a sale or other
disposition of any shares of capital stock of Seller or, except in the ordinary
cause of business, any assets of Seller.
4.26 Exclusive Dealing. Seller and Shareholder agree that from the date
hereof until (i) the Closing Date, (ii) breach of this Agreement by Buyer, or
(iii) agreement of the Parties, neither Seller nor Shareholder shall solicit,
negotiate with, or accept an offer from any person or entity to purchase either
any of the outstanding shares of capital stock of Seller or any material assets
of Seller (other than in the ordinary course of business).
4.27 Announcement Letter. Seller and Buyer shall jointly prepare the
announcement letter (the "Announcement Letter"), attached hereto as Exhibit
4.27, concerning the sale of the Assets pursuant to this Agreement.
4.28 Environmental Representations. Seller and Shareholder represent and
warrant that the Business and the Seller are being operated in substantial
compliance with all material and applicable Federal, state and local laws and
regulations in effect relating to pollution of the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, laws and
16
regulations, in effect relating to emissions, discharges, releases or threatened
releases or chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products or otherwise relating to the manufacture,
processing, distribution, uses, treatment, storage, disposal, transport or
handling of chemicals, pollutants, contaminates, wastes, toxic substances,
petroleum and petroleum products ("Environmental Law"). Neither Seller nor
Shareholder have received any written notice during the last five (5) years from
a governmental entity that alleges that either the Business or the Seller are
not in such full compliance with all applicable Environmental Laws. All material
permits or other governmental authorizations currently held by the Seller
relating to either the Business or the company pursuant to Environmental Laws
are identified in Exhibit 4.28 attached hereto.
4.29 Payables. Except as set forth on Exhibit 4.29, all accounts payable
owed by Seller to any creditors of Seller shall be paid prior to or at Closing
or reserved at Closing.
4.30 Seller Agreements. Except for agreements specifically identified in
this Agreement or listed on Exhibit 4.30 attached hereto, there are no Seller
agreements that Buyer will be responsible to perform after the Closing.
4.31 Access to Records. Subject to Section 4.24, for a period of six years
following the Closing Date, upon receipt of 48 hours prior written notice from
Buyer to Seller, Seller shall provide Buyer with reasonable access to its books,
records and personnel ("Information") relating to pre-Closing Date periods
during normal business hours (i) as required by any court or governmental body,
(ii) as necessary to respond to or defend against governmental bodies' requests
for information, audits, claims, administrative agency procedures or lawsuits,
(iii) as necessary to prepare, modify or defend tax returns, (iv) as necessary
to defend lawsuits and other dispute resolution alternatives (including
counterclaims, crossclaims, third-party claims, and other claims arising out of
or from, in connection with or as a result of such lawsuits), (vi) as necessary
to assert, pursue or defend rights, duties and obligations under this Agreement
(including access, as necessary, to Information relating to post-Closing Date
periods), (vii) as necessary for all tax disputes, and (viii) as necessary to
assert and pursue claims which Buyer certifies in writing to Buyer are material
to Buyer; provided, that Buyer requests for access to such Information shall be
in good faith. Notwithstanding anything to the contrary contained in this
Section 4.31, upon notice to Seller, any period of time set forth in this
Section 4.31, shall be extended for matters pending until such time as the
matter has been finally resolved.
5. Representations, Warranties and Covenants of Buyer. As a material inducement
to Seller to enter into this Agreement and to proceed through Closing ("Close")
hereunder, Buyer makes the following representations, warranties and covenants
to Seller and Shareholder as of the date of this Agreement and as of the Closing
Date, all of which shall survive Closing hereunder. Unless the context clearly
indicates otherwise, all exhibits shall be delivered fifteen (15) business days
prior to the Closing and all such representations and warranties shall be true
both as of the date of this Agreement and as of the Closing Date.
17
Any and all reference to Buyer's "knowledge" including, without limitation, any
and all references to "the best of Buyer's knowledge" shall mean the actual (not
legal or constructive) knowledge of Buyer only, without any duty to investigate
(knowledge does not include "should have known").
5.1 Organization. Buyer is duly incorporated, validly existing and in good
standing under the laws of the State of New Jersey. Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby upon the terms and conditions herein provided.
The execution, delivery and performance by Buyer of this Agreement have been
duly authorized by all necessary corporate action of Buyer. This Agreement has
been duly and validly executed and delivered by an authorized officer on behalf
of Buyer and constitutes a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
5.2 Conflict as to Buyer. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or the
performance of the obligations of Buyer hereunder will (a) violate any provision
of the Certificate of Incorporation or Bylaws of Buyer; (b) violate, be in
conflict with, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
to which Buyer is a party; or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other governmental body
applicable to Buyer.
5.3 Consents and Approvals of Governmental Authorities. To the best of
Buyer's knowledge, except for filings by Buyer's parent corporation, Response
USA, Inc. with the SEC, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental body is required to
be made or obtained by Buyer in connection with the execution and delivery by
Buyer of this Agreement or the performance of Buyer's obligations hereunder or
the consummation of the transactions contemplated herein.
5.4 Intentionally Blank.
5.5 Litigation. There is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental body pending or, to the
best of Buyer's knowledge, threatened against or involving Buyer, nor, to the
best of Buyer's knowledge, is there any reasonable basis therefor that would
prevent Buyer from consummating the transactions contemplated hereby.
5.6 Disclosure. No representation or warranty of Buyer in this Agreement
or any certificate, document or other paper furnished by Buyer to Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact required to be stated herein or necessary to make the statements
made therein, in the context in which made, neither false nor misleading. There
is no fact known by Buyer not disclosed in writing to Seller by Buyer
18
that materially and adversely affects, or, so far as may reasonably be foreseen
by Buyer, will materially and adversely affect, the ability of Buyer to perform
the transactions contemplated by this Agreement.
5.7 Intentionally Blank.
5.8 No Actions to Make Representations and Warranties Untrue. Buyer shall
not take or omit to take any action that would result in any of the
representations and warranties of Buyer set forth in this Agreement becoming
materially untrue or in any of the conditions to Closing set forth in Section 23
not being fully satisfied.
5.9 Additional Insured. As of the Closing Date and for six (6) years
thereafter, Buyer shall add Seller and Shareholder as additional insureds to its
comprehensive general liability insurance policy(ies) (including, without
limitation, errors and omissions coverage) which shall be continuously
maintained during such period by Buyer in the minimum amounts of $10,000,000 per
occurrence and in the aggregate (excluding products liability insurance, which
is limited to $5,000,000 per occurrence and in the aggregate). Certificates of
insurance shall be supplied by Buyer to Seller evidencing that (i) the said
insurance coverage is in force, (ii) Seller and Shareholder are additional
insureds, and (iii) if permitted by the insurance policy or waived by the
insurance company, subrogation is waived as to Seller and Shareholder.
5.10 Access to Records. Subject to Section 5.11, for a period of six years
following the Closing Date, upon receipt of 48 hours prior written notice from
Seller to Buyer, Buyer shall provide Seller with reasonable access to its books,
records and personnel ("Information") relating to pre-Closing Date periods
during normal business hours (i) as required by any court or governmental body,
(ii) as necessary to respond to or defend against governmental bodies' requests
for information, audits, claims, administrative agency procedures or lawsuits,
(iii) as necessary to prepare, modify or defend tax returns, (iv) as necessary
to defend lawsuits and other dispute resolution alternatives (including
counterclaims, crossclaims, third-party claims, and other claims arising out of
or from, in connection with or as a result of such lawsuits), (vi) as necessary
to assert, pursue or defend rights, duties and obligations under this Agreement
(including access, as necessary, to Information relating to post-Closing Date
periods), (vii) as necessary for all tax disputes, and (viii) as necessary to
assert and pursue claims which Seller certifies in writing to Buyer are material
to Seller; provided, that Seller requests for access to such Information shall
be in good faith. Notwithstanding anything to the contrary contained in this
Section 5.10., upon notice to Buyer, any period of time set forth in this
Section 5.10, shall be extended for matters pending until such time as the
matter has been finally resolved.
5.11 Confidentiality. Except for filings required to be made by Buyer's
parent corporation, Response USA, Inc., with the SEC, before or after the
Closing Date, for an unlimited period of time, Buyer shall hold in trust and
confidence and use its best efforts to keep strictly confidential the financial
and other terms and conditions of this Agreement,
19
and not disclose, publish, use or permit others to use the same, except that
Buyer may disclose such terms and conditions with its agents, representatives,
counsel, accountants, officers, directors and others with whom Buyer has a
business relationship where there is a need to know. The foregoing restriction
shall not, however, apply to any portion of the foregoing which (a) becomes
generally available to the public in any manner or form through no fault of
Buyer, or its employees, agents or representatives, or (b) is rightfully
received from another source on a non-confidential basis, or (c) is released for
disclosure with the consent of Seller, or (d) is required by a court or a
governmental agency to be disclosed or is otherwise required by law or is
necessary in order to establish rights under this Agreement or any other
agreements referred to herein; provided, that, with respect to clause (d) above,
the Buyer shall first notify Seller of such required disclosure and shall take
such steps at Seller's expense as Seller shall reasonably request to limit the
scope of such disclosure and otherwise protect the confidentiality of such
confidential and proprietary information. On and after the Closing Date, the
Confidentiality Agreement between Seller and Buyer dated October 18, 1996 shall
terminate and be of no further force and effect.
5.12 Delivering of Announcement Letter. Buyer shall deliver the
Announcement Letter to all of the Customers at any time after the Closing.
5.13 Delivery of Response Shares. Buyer shall deliver or cause its parent
corporation, Response USA, Inc., to deliver the Response Shares pursuant to
Subsections 3.1.2 and 3.1.3 of this Agreement.
6. Conduct of Business Prior to Closing.
6.1 Conduct of Business. From the date hereof through the Closing Date,
Seller shall:
6.1.1 Conduct the Business in the ordinary course of business
consistent with past practices, with the provisions contained in this Agreement,
and in substantial compliance in all material respects with all applicable
Federal, state and local statutes and ordinances (collectively, the "Laws")
relating to the Business. Seller shall not, without the prior written consent of
Buyer, change any business policies (including, without limitation, accounting,
advertising, marketing, pricing, purchasing, personnel, sales, returns, budget,
salary or product acquisition policies).
6.1.2 Maintain in force (including necessary renewals thereof)
insurance policies consistent with Seller's past practices in the ordinary
course of business and make no change in any insurance coverage without the
prior written consent of Buyer.
6.1.3 Subject to Section 3.4, allow, upon reasonable notice to
Seller and at such times and places as agreed by Seller in his reasonable
discretion, the employees, attorneys, accountants, and other representatives of
Buyer free and full access to the files, books and records of Seller. Seller
shall cooperate fully, and shall use reasonable efforts to
20
cause Seller's attorneys and accountants to cooperate fully with Buyer and
Buyer's employees, attorneys, accountants, and other representatives.
6.2 Buyer's Consent. Between the signing of this Agreement and the Closing
Date, without the prior written consent of Buyer, Seller shall:
6.2.1 Not take, suffer or permit any action which would (a)
materially interfere with or preclude the effectuation or consummation of the
transactions contemplated by this Agreement, or (b) result in any of the
representations and warranties of Seller set forth in this Agreement becoming
materially untrue or (c) result in any of the conditions to Closing set forth in
Section 22 not being fully satisfied.
6.2.2 Not omit to take any action, the omission of which would (a)
materially interfere with or preclude the effectuation or consummation of the
transactions contemplated by this Agreement, or (b) result in any of the
representations and warranties of Seller set forth in this Agreement becoming
materially untrue or (c) result in any of the conditions to Closing set forth in
Section 22 not being fully satisfied.
6.2.3 Not enter into any contract, agreement, commitment or
arrangement with any party, except with Customers and suppliers in the ordinary
course of Business.
6.2.4 Use its best efforts to preserve its business organization and
reputation intact, and to preserve its relationship with Customers, suppliers
and others with whom it deals.
6.2.5 Use reasonable efforts consistent with past practice to keep
its operating facilities and all of the Included Assets in good working order
and repair and perform all necessary and reasonable repairs and maintenance.
6.2.6 Continue to maintain all of its usual books and records
consistent with Seller's past practices in the ordinary course of business.
6.2.7 Except in the ordinary course of business, not waive any
material right or cancel any material claim.
6.2.8 Maintain its corporate existence and not merge or consolidate
with any other entity, nor make any amendment to its Charter or By-laws.
6.2.9 Substantially comply in all material respects with all
material provisions of the Customer Contracts and all material applicable laws,
rules and regulations.
6.2.10 File all required tax returns and pay all required taxes.
6.2.11 Not guaranty any obligation of any third party.
21
6.2.12 Except for sales in the ordinary course of business, not
sell, transfer, encumber or mortgage any of the Included Assets.
6.2.13 Give notice to Buyer of any unusual event or circumstance
which would materially adversely affect Seller, the Business or any of the
Included Assets.
6.2.14 Except in the ordinary course of business, make no change in
the rate of compensation to employees or hire any additional personnel.
6.2.15 Except in the ordinary course of business, not incur any
liability.
6.2.16 Except in the ordinary course of business, not amend or
terminate any of the Customer Contracts.
6.2.17 Except in the ordinary course of business, not change any of
the rates charged to Customers.
6.2.18 Give notice to Buyer immediately of any employee who gives
notice to Seller or indicates to Seller an intention to terminate employment
with Seller.
6.2.19 Not derogate or defame Buyer.
6.2.20 Not attempt to invoice, accelerate or collect for prebilled
(unearned) revenue for services to Customers except in the ordinary course of
business consistent with past practices.
7. Indemnification.
7.1 Indemnification of Buyer. Seller will indemnify and hold harmless
Buyer and its officers, directors and shareholders (the "Buyer Indemnified
Parties"), from and against any claims, actions, damage, expense, liability,
loss or deficiency, including without limitation, reasonable attorneys' fees and
other costs and expenses incident to any suit, action, claim or proceeding
(collectively, "Damages"), arising out of or resulting from:
7.1.1 Any material inaccuracy in any representation or the material
breach of any warranty made by Seller in this Agreement or in any Exhibit or any
other document delivered pursuant hereto by Seller;
7.1.2 Any material failure of Seller to perform or observe any term
or covenant of this Agreement; or
7.1.3 the operation of the Business or the ownership of the Included
Assets prior to Closing.
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7.2 Indemnification of Seller. Buyer will indemnify and hold harmless
Seller and its officers, directors and shareholders (the "Seller Indemnified
Parties"), from and against any claims, actions, damage, expense, liability,
loss or deficiency including without limitation, reasonable attorneys' fees and
other costs and expenses incident to any suit, action, claim or proceeding,
arising out of or resulting from:
7.2.1 Any material inaccuracy in any representation or the material
breach of any warranty made by Buyer in this Agreement or any other document
delivered pursuant hereto by Buyer;
7.2.2 any material failure of Buyer to perform or observe any term
or covenant of this Agreement; or
7.2.3 the operation of the Business or the ownership of the Included
Assets after Closing.
7.3 Minimum and Maximum Amounts of Indemnity.
7.3.1 No amounts shall be payable by Seller for first-party claims
(i.e., claims against Seller by the Buyer Indemnified Parties) under Section
7.1. until such amounts exceed One Hundred Thousand Dollars ($100,000), (the
"Deductible") and then only amounts in excess of the Deductible shall be due and
payable. Notwithstanding anything to the contrary contained in this Section
7.3., liabilities for (i) breach of any of the representations and warranties in
Section 4.5. [Taxes], (ii) fraud, (iii) Section 4.29 [Payables], (iv) Section
22.13 [Liabilities], (v) Section 8 [Absence of Liabilities], or (vi) third-party
claims, shall be subject to indemnification without regard to any minimum
amount.
7.3.2 No amounts in excess of fifty percent (50%) of the Purchase
Price actually received by Seller (the "Maximum Indemnity") in the aggregate
shall be recoverable by the Buyer Indemnified Parties for first-party claims.
Seller may elect to satisfy its obligations under Section 7.1 by delivering to
Buyer either cash or the Response Shares or a combination thereof. In the event
Seller elects to deliver such Response Shares, the value of the Response Shares
delivered shall be the greater of the Agreed Value or the average closing bid
price of such Response Shares on the ten (10) trading days prior to delivery.
Notwithstanding anything to the contrary contained in this Section 7., (i)
liabilities for Taxes shall be subject to indemnification without regard to any
maximum amount, (ii) damages for fraud shall be limited to compensatory damages
only, (iii) each Party shall first submit claims which may be insured to its
insurance company and use all reasonable best efforts to obtain full payment, it
being the intention of the Parties that all claims for Damages for which a Party
receives the benefits of insurance payments to others or proceeds paid to itself
shall be waived to the extent of such payment and the other Party shall be
released to the extent of such payment including, without limitation,
subrogation claims, and in the event an insurance company fails or refuses to
honor a claim or denies coverage, the insured Party shall assign
23
its rights against the insurance company to the other Party, (iv) only the
substantially prevailing Party in any litigation between the Parties shall be
entitled to receive its attorneys' fees and other costs and expenses of suit,
(v) third-party claims subject to indemnification shall be reduced by the
proceeds received from each Party's insurance polic(ies) applicable to the claim
for Damages, and (vi) the indemnification obligation of the Seller for any
third-party claims that are not covered by the Seller's insurance policy(ies)
required to be carried after the Closing shall be limited to the Maximum
Indemnity, but the indemnification obligation of the Seller for any third party
claims that are covered by the Seller's insurance policy(ies) required to be
carried after the Closing shall be limited to the proceeds received from the
Seller's insurance policy(ies) applicable to the claim for Damages.
7.3.3 Any qualifying reference to Seller's or Shareholder's
knowledge contained in any of the representations or warranties set forth in
this Agreement shall not limit, reduce or modify Buyer's rights to
indemnification under this Agreement to the extent that such representations or
warranties were not so qualified. Notwithstanding anything contained in this
Sub-section 7.3.3 to the contrary, except for third-party claims, Buyer's right
to indemnification for breach of any Seller or Shareholder representation or
warranty qualified by knowledge shall be limited to fraud or intentional
misrepresentation by Seller or Shareholder.
7.4 Time Limit on Indemnity.
7.4.1 Notwithstanding any other provisions of this Section 7, no
claim for indemnification under Section 7.1. or 7.2. shall be made by Buyer
Indemnified Parties or Seller Indemnified Parties (i) with respect to First
Party claims pursuant to Section 7.1. or 7.2. after the first anniversary of the
Closing Date (except that in the case of a breach of Seller's representations
and warranties in Section 4.5. [Taxes], claims of indemnification may be made
until the expiration of the applicable statute of limitations; (ii) with respect
to claims for breach of Seller's covenants in Sections 4.24. [Confidentiality],
Section 5.10 [Access to Records] and Section 10. [Non-Compete], after the
expiration of the periods provided in such Sections; with respect to claims for
breach of Buyer's covenants in Section 5.9. [Additional Insured], Section 5.10.
[Access to Records], or Section 5.11 [Confidentiality], after the expiration of
the periods provided in such Sections.
7.4.2 No Claim for indemnification under Section 7.1 or 7.2 shall be
made by Buyer Indemnified Parties or Seller Indemnified Parties with respect to
or involving third-party actions, demands, claims or Damages after the third
anniversary of the Closing Date.
7.5 Notice. Any claim by an indemnified party for Damages under Sections
7.1. or 7.2. will be made in writing and will state in detail the basis on which
the claim for Damages is made. The indemnified party may not take (i) legal
action against the indemnifying party or (ii) offset Damages against payments
due the indemnified party under this Agreement unless such written claim has
been given and the indemnifying party has not given notice to the indemnified
party of a bona fide objection within twenty (20) days after
24
the indemnified party notice is given, in which event no offset shall be
permitted until after the entry of a final and unappealable judgement of a court
of competent jurisdiction.
7.6 Third-Party Actions.
7.6.1 All claims for indemnification under Section 7.1. or 7.2.
involving third-party actions or demands shall be made in accordance with the
procedure set forth in this Section 7.6.
7.6.2 Promptly after receipt by an indemnified party of notice of
any third-party action or demand which gives rise to Damages, such indemnified
party shall notify the indemnifying party. Failure so to notify the indemnifying
party shall relieve it of any liability that it may have to any indemnified
party to the extent that the defense of such action is materially prejudiced by
such failure, provided the indemnifying party did not receive or otherwise have
actual notice thereof.
7.6.3 The indemnifying party shall be entitled to participate in the
defense of the third-party action or demand and, at its option, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party
provided (i) that the indemnifying party confirm that the action or demand is
covered by its indemnification obligation or, if not, that the indemnified party
be entitled to participate in the defense, and (ii) Buyer reserves the right to
retain control of the defense of any action or demand which could reasonably be
expected to materially affect Buyer's on-going operations or materially exceed
the maximum indemnity amount payable by Seller under Section 7.1. hereof. If the
indemnifying party receives notice of any action or demand, it shall promptly
notify the indemnified party as to whether it intends to control the defense
thereof.
7.6.4 If notice is given to an indemnifying party of the
commencement of any action and it does not, within 20 days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense thereof, the indemnified party shall be entitled to assume
the defense thereof until such time as the indemnifying party elects to assume
the defense thereof. In such event, the indemnifying party shall not be bound by
any compromise or settlement thereof effected by the indemnified party without
its consent, which shall not be unreasonably withheld.
7.7 Waiver of Subrogation. To the extent permitted by each Party's general
liability insurance policy, subrogation for all claims, losses, damages, costs
and expenses is hereby waived. Evidence of such waiver shall be delivered to the
other Party upon written request.
7.8 Set-Off Rights. Either Party may, from time to time, set-off against
any amounts due to the other under this Agreement an amount equal to the
aggregate amount of the uncontested Damages. This right of set-off shall
continue unimpaired and shall not be exhausted by a single exercise thereof. The
right of set-off specified herein shall not be
25
deemed to impair or preclude the exercise by either Party of any other right or
remedy it/he might have on account of the existence of any Damages or breach or
violation of this Agreement by the other Party.
7.9 Exclusive Remedy. Except for Section 18 of this Agreement, the parties
agree that all claims for Damages shall be brought against the other Party
pursuant to this Article 7 only.
8. Absence of Liabilities. Seller has no material liabilities except as and to
the extent reflected on the Closing Financial Statement or in this Agreement or
in any Exhibit hereto. Seller shall have no material liabilities arising after
the Closing Financial Statement except those liabilities created in the ordinary
course of business of the Seller and not assumed by the Buyer hereunder, all of
which shall be paid or reserved for by Seller as of the Closing.
9. Further Assurances After Closing. At any time and from time to time after the
Closing Date, at Buyer's reasonable request and without further consideration,
Seller shall promptly execute and deliver all such further instruments or
documents or perform such acts as Buyer may reasonably request in order to more
fully consummate the transactions contemplated herein.
10. Restrictive Covenant.
10.1 Covenant Not to Compete. Seller and Shareholder jointly and severally
covenant and agree that they shall not, for a period of five (5) years after the
Closing Date in the counties of Carbon, Columbia, Lackawanna, Luzerne, Monroe,
Pike, Schuylkill, Xxxxxxxx, and Wyoming in the Commonwealth of Pennsylvania,
except with the express prior written consent of Buyer (the execution of which
shall be in Buyer's sole and absolute discretion) or except in connection with
Shareholder's employment with Buyer and for the sole benefit of Buyer, directly
or indirectly, whether as owner, principal, member, stockholder (registered or
beneficial), partner, joint venturer, trust, trustee, executor, administrator,
director, officer, employee, agent, representative, consultant, independent
contractor, investor, financier, lender, operator, manager, guarantor,
professional advisor, or in any other capacity, for his own account or for the
benefit of any other person or entity:
10.1.1 Participate in any entity involved in the retail electronic
security alarm business including, without limitation, the design, installation,
service, maintenance, lease, sale, marketing, inspection, testing and monitoring
of fire, intrusion, sprinkler or other detection alarm security services,
equipment, devices or systems for end-users of such services, equipment, devices
or systems;
10.1.2 Solicit, divert, accept business from or otherwise entice,
take away or interfere or attempt to entice, take away or interfere with any
Customer of the Business including, without limitation, any developer, builder
or contractor;
26
10.1.3 Solicit, entice, induce or interfere with any of Seller's
employees;
10.1.4 Otherwise interfere with the Business or the Customers or
Alarm Accounts or derogate or defame Buyer.
10.1.5 Notwithstanding anything contained herein to the contrary,
Seller's and Shareholder's covenants contained in Subsections 10.1.2., 10.1.3.
and 10.1.4. shall (i) be increased or decreased to the period of time that Buyer
is in contract with each such customer, employee or independent contractor, and
(ii) not apply to general advertising, marketing or other efforts that do not
specifically target particular Customers, employees, the Business, Alarm
Accounts or Buyer, provided that Seller and Shareholder shall continue to be
bound by the covenants of Subsections 10.1.2, 10.1.3 and 10.1.4 even as to
Customers who are the recipient of such general advertising, marketing or other
efforts.
10.1.6 Notwithstanding anything contained herein to the contrary,
Seller's and Shareholder's covenants contained in Subsection 10.1.1. shall not
be applicable to any passive financial investment (debt or equity), provided
that such investment does not exceed a five percent (5%) debt or equity interest
in such company or entity.
10.2 Equitable Remedies. The restrictive covenants contained in this
Section 10 are deemed essential parts of this Agreement and material to the
purchase of the Assets. Buyer is entitled to any and all equitable remedies, as
well as remedies in law, to enforce these covenants.
Seller and Shareholder each acknowledge that the restrictions
contained in this Section 10 and in Section 4.24 are reasonable and necessary in
order to protect Buyer's legitimate interest and that any violation thereof may
result in irreparable injury to Buyer. Seller and Shareholder, jointly and
individually, acknowledge and agree that in the event of any material violation
thereof, Buyer shall be authorized and entitled to request, from any court of
competent jurisdiction, preliminary and permanent injunctive relief as well as
an equitable accounting of all profits or benefits arising out of such
violation, which rights and remedies shall be cumulative and in addition to any
other rights or remedies to which Buyer may be entitled. The covenants and
agreements set forth in this Section 10 and in Section 4.24 are made solely in
consideration of the proceeds to be paid at the Closing pursuant to this
Agreement, and shall not be deemed to be waived, diminished, or affected in any
manner by any real or alleged breach by Buyer of this Agreement or any other
Agreement which is claimed by Seller or Shareholders after the Closing date.
10.3 Enforceability of Covenants. If any portion of the covenants or
agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenant(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be
27
unenforceable because of the area covered, the duration thereof, or the scope
thereof, then the court making such determination shall reduce the area and/or
duration and/or limit the scope thereof, and the covenant or agreement shall
then be enforceable in its reduced form.
11. Joinder of Response. Response acknowledges and agrees that Seller and
Shareholder are unwilling to enter into this Agreement with Buyer unless
Response is a surety, guarantor and accommodation party to Buyer's
representations, warranties, covenants, agreements, commitments and obligations
pursuant to this Agreement and all related documents (the "Obligations").
Response hereby joins in this Agreement to guarantee the full performance of the
Obligations of the Buyer, including but not limited to the obligations regarding
the Response Shares. This guarantee shall be immediately effective without any
notice to Response or Buyer, and will continue in full force and effect until
all of Buyer's Obligations have been fully and finally satisfied. Response
agrees that Seller and Buyer may, without notice to or consent of Response, from
time to time (i) modify this Agreement and any and all related documents, (ii)
compromise, waive, extend or accelerate the Buyer's Obligations, (iii) release,
substitute or agree not to xxx the Buyer, or (iv) assign or transfer this
guarantee to Seller's successor and to Shareholder and his personal
representatives, heirs and assigns. This guarantee is binding on the successors
of Response, but is not assignable by Response. This guarantee may not be
amended except in writing signed by Seller, Shareholder, and Response.
12. Indemnity Against Brokerage Commissions. Buyer represents and warrants to
Seller and Seller represents and warrants to Buyer, that there is no person or
entity entitled to receive any brokerage commission or finder's fee in
connection with this Agreement or the transactions provided for herein.
13. Intentionally Blank.
14. Transfer Taxes. The Parties shall share equally all transfer taxes due with
respect to, arising out of or from, or as a result of the execution of this
Agreement, the sale of the Assets and any and all other transactions
contemplated hereby.
15. Fees and Expenses. Except as provided in Section 17 hereof, each Party shall
bear its own costs, fees and expenses including, without limitation, attorneys'
fees, incurred in connection with the transactions contemplated hereby.
16. Intentionally Blank.
17. Breach. Notwithstanding anything contained herein to the contrary, each
Party shall bear its own costs, fees and expenses including, without limitation,
its own attorneys' fees.
18. Break-Up Fee. In the event that at any time following fifty-one (51) days
after the date that Shareholder informs Seller's employees of the existence of
this Agreement (and following the date that Response files the Registration
Statement pertaining to the financing of this Agreement), (i) Buyer elects to
terminate this Agreement for any reason other than the giving of Notice pursuant
to Section 3.4.2, (ii) Seller elects to terminate this Agreement
28
for material breach or violation by Buyer, or (iii) the Closing Date is not
extended by agreement of the Parties for any or no reason (the "Termination
Date"), Buyer shall pay Seller a "Break-up Fee" in the amount of Two Hundred
Thousand Dollars ($200,000) on, as and at the Termination Date. For each thirty
(30) day period of time following the initial fifty one (51) days as described
above that the Closing Date is extended pursuant to Section 19.1 below, the
Break-up Fee shall increase by Fifty Thousand Dollars ($50,000). At the election
of Buyer, this Break-up Fee may be paid in the form of Response Shares equal in
value to the Break-up Fee based on the average Closing Bid price of such
Response Shares on the ten (10) trading days prior to the Termination Date. In
such event, Response shall file a registration statement regarding such Response
Shares with all appropriate governmental agencies including, without limitation,
the Securities and Exchange Commission ("SEC"), on or before Ninety (90) days
after the Termination Date in order that such Response Shares become
unrestricted securities, able to be freely bought and sold without restriction
under all applicable statutes, laws, rules and regulations. The Agreed Value of
the Response Shares identified in this Section shall be guaranteed by Buyer for
a period of one (1) year following the effectiveness of the above described
registration statement pursuant to the procedures described in Section 3.1.6 of
this Agreement. No Break-up fee shall be due and owing in the event that Closing
actually occurs hereunder. This Break-up Fee shall be the sole and exclusive
obligation of Buyer to Seller in the event of a termination for any reason other
than the giving of a Notice pursuant to Section 3.4.2 (in which event there
shall be no Break-up Fee or liability owing from Buyer to Seller).
19. Closing.
19.1 Date and Place. Consummation of the transactions referred to in this
Agreement (the "Closing") shall take place on the "Closing Date". The term
"Closing Date" shall mean fifty-one (51) days following the date that Response
files the Registration Statement pertaining to the financing of this
transaction, or such earlier date as the Parties may agree in writing. The
Closing shall take place at the offices of Seller, at 10:00 a.m., on the Closing
Date or such other place as the Parties may agree in writing. The Closing Date
is of the essence of this Agreement. Notwithstanding anything contained herein
to the contrary, either party may, in its or his sole and absolute discretion,
postpone the Closing Date one time for a period up to thirty (30) days, by
giving notice to the other party at least two (2) days prior to the Closing Date
or any rescheduled Closing Date; provided, however, that the aggregate number of
days that the Closing Date is postponed by both parties does not exceed thirty
(30) days; and provided, further, Buyer's right to an extension hereunder shall
be subject to the occurrence of a delay in the closing of its secondary public
offering which is used to finance this transaction, and that such extension
shall not be longer than ten (10) days following the effective date of such
secondary public offering.
19.2 Delivery by Seller to Buyer At Closing. At Closing, Seller shall
deliver or cause to be delivered to Buyer the following:
19.2.1 The Assets and such bills of sale, instruments of assignment
and other instruments and documents as may be reasonably necessary, in the
reasonable opinion of Buyer's counsel, to transfer to Buyer good, valid and
marketable title to the Assets.
29
19.2.2 A certificate of Seller, dated as of the Closing Date of
Seller confirming the truth, correctness and completeness of all of the
representations and warranties of Seller contained herein as of the Closing Date
and as of all times between the date hereof and the Closing Date, and confirming
that all agreements, covenants and undertakings of Seller contained herein and
to be performed or fulfilled prior to Closing have been so performed or
fulfilled.
19.2.3 A good standing certificate dated within three (3) business
days before the Closing Date issued by the Secretary of the Commonwealth of
Pennsylvania indicating that Seller is a corporation in good standing with a
valid charter, accompanied by a certified copy of the Seller's Articles of
Incorporation and any amendments thereto.
19.2.4 All Permits and licenses of Seller.
19.2.5 Satisfactory proof of removal or no encumbrances filed
pursuant to the Uniform Commercial Code in all applicable jurisdictions and in
all applicable courts with respect to judgments and other liens.
19.2.6 Seller's UL Certificate for its Central Station, properly
transferred to Buyer's name or receipt by Buyer of a commitment from UL to
transfer such certificate to Buyer following the Closing.
19.2.7 Original signed copies of all Customer Contracts, and
original copies of all customer and supplier lists and Customer files. Each file
must also contain the Programming Codes for each Customer. Programming Codes
include all information necessary to perform maintenance and downloading on the
Alarm Accounts, including dealer lock-out codes, installation codes, pass-key
numbers, pass-words, communicator identification, programming information, and
such other information as Buyer may reasonably request.
19.2.8 All keys, codes and combinations needed to access and/or
utilize all or any part of the Business.
19.2.9 Alarm Registration Numbers for any accounts located within
the City of Philadelphia or any other jurisdictions requiring same.
19.2.10 The Certificate of Insurance referred to in Section 4.19.1
above.
19.2.11 A copy of Seller's billing database on tape or disk, a copy
of Seller's downloading database on tape or disk (including all required
passcodes as set forth in Subsection 19.2.8.) and a Masterfile of each Alarm
Account from Seller's Central Station on tape or disk (in ASCII comma delimited
form).
19.2.12 Unanimous Resolution of the Shareholders and Directors of
Seller approving this transaction.
30
19.2.13 Subleases or the Assignment of the written Leases referred
to in Section 1.3.3.
19.2.14 Telephone Transfer Agreements transferring the telephone
lines of Seller referred to herein to Buyer.
19.2.15 Transfers of Title to the vehicles being conveyed hereunder.
19.2.16 Non-solicitation, Non-competition and/or Non-disclosure
Agreements that are available and assignable from any key employees of the
Seller and any sellers of Alarm Accounts sold to the Seller.
19.2.17 The Runout Coverage Certificate of Insurance referred to in
Section 4.19.3 above.
19.2.18 An Employment Agreement between Buyer and Shareholder
executed by Shareholder.
19.2.19 Such additional certificates, proceedings, instruments and
other documents as Buyer or its counsel may reasonably request to evidence
substantial compliance in all material respects by Seller with legal
requirements, the truth, accuracy and completeness, as of the time of Closing,
of Seller's representations and warranties herein contained and due performance
or satisfaction by Seller at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by Seller.
19.3 Delivery by Buyer to Seller at Closing. At Closing, Buyer shall
deliver or cause to be delivered to Seller the following:
19.3.1 The amount required to be paid by Buyer to Seller pursuant to
the provisions of Section 3.1.
19.3.2 A Certificate dated as of the Closing Date of the appropriate
officers of Buyer confirming the truth and correctness of all of the
representations and warranties of Buyer contained herein as of the Closing Date
and as of all times between the date hereof and the Closing Date, and confirming
that all agreements, covenants and undertakings of Buyer contained herein and to
be performed or fulfilled prior to Closing have been so performed or fulfilled.
19.3.3 A Certificate (and certified copies of all necessary
resolutions) dated as of the Closing Date of the appropriate officers of Buyer
certifying that all necessary corporate action by Buyer has been taken to
authorize or ratify the making of this Agreement by Buyer and to authorize the
consummation of the transactions provided for herein.
19.3.4 Such additional certificates, proceedings, instruments and
other documents as Seller or its counsel may reasonably request to evidence
compliance by Buyer with legal requirements, the truth, accuracy and
completeness, as of the time of Closing, of
31
Buyer's representations and warranties herein contained and due performance or
satisfaction by Buyer at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by Buyer.
19.3.5 The Response Shares.
19.3.6 An Employment Agreement between Buyer and Shareholder
executed by Buyer.
20. Destruction of Assets. Damage to, or destruction or loss of any of the
Included Assets prior to the Closing Date shall be repaired or replaced by
Seller at its sole cost and expense and Seller shall retain insurance proceeds,
if any; provided, however, that if any such damage or destruction materially
adversely affects the ability or capacity of Seller to operate the Business as a
whole and cannot reasonably be restored or repaired at or before the Closing
Date, Seller shall give Buyer notice thereof and Buyer may, at its option,
exercised by notice in writing within ten (10) days after Seller's notice,
terminate this Agreement and, in such case, all agreements and obligations of
the Parties hereto shall cease. In the event Buyer elects not to so terminate
this Agreement, this Agreement shall continue in full force and effect.
21. Continuation and Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall continue to be true
and correct at and as of the Closing Date and at all times between the signing
of this Agreement and the Closing Date, as if made at each of such times. All
representations and warranties contained herein shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Party. All such representations and warranties shall survive the Closing for
a period of one (1) year from the Closing Date; provided, however, that the
representations and warranties set forth in Section 4.5 [Tax Matters] shall
survive until the applicable statute of limitations has run.
22. Conditions Precedent to Buyer's Obligation to Close. The following shall be
conditions precedent to the obligation of Buyer to Close hereunder, any of which
may be waived by Buyer in its sole and absolute discretion:
22.1 Accuracy of Representations. Each of the representations and
warranties of Seller contained in this Agreement is now and (except as to those
expressly limited to the date hereof or Closing Date) at all times after the
date of this Agreement, to and including the time of Closing, shall be true,
correct and complete in all material respects.
22.2 Performance of Obligations. Each of the agreements, covenants and
undertakings of Seller contained in this Agreement, except for those calling for
performance after Closing, will have been fully performed and complied with at
or before Closing.
22.3 No Litigation. No material litigation, governmental action or other
proceeding involving or potentially involving material liabilities, obligations
or losses on the
32
part of Seller, which have not been reasonably reserved by Seller, shall be
threatened in good faith or commenced against Seller or with respect to the
consummation of the transactions provided for herein.
22.4 Delivery of Documents. All documents required to be delivered by
Seller at or prior to Closing, shall be delivered or shall be tendered at the
time and place of Closing, except that the Exhibits to this Agreement shall be
delivered by Seller to Buyer at least fifteen (15) business days prior to the
Closing.
22.5 No Material Change. No material adverse change in the financial
condition, operations or prospects of Seller, the Business, or the Included
Assets shall have occurred between the date of the latest Financial Statements
and the Closing Date.
22.6 Approval of Counsel. All actions, proceedings, instruments and
documents required to be delivered to Buyer in connection with this Agreement,
and all other legal matters, shall have been reasonably approved by counsel for
Buyer.
22.7 Satisfactory Review. No Notice has been properly issued or, if
issued, not withdrawn, pursuant to Subsection 3.4.2.
22.8 Closing of the Jupiter Agreement. Response, Xxxxxx X. May and Xxxx
Xxxxx shall have completed the Closing (in escrow) of the Jupiter Agreement.
22.9 Delivery of Customer Contracts. All original Customer Contracts shall
have been delivered to Buyer.
22.10 Intentionally Blank.
22.11 Delivery of Financial Statements and Tax Returns. Copies of all
Audited Financial Statements, Unaudited Financial Statements and the Closing
Financial Statement and all Federal income tax returns of Seller for the years
ending September 30, 1994, 1995 and 1996 (with copies of all accountants' work
papers which are reasonably available from Xxxxx X. Xxxxx, C.P.A.) shall have
been delivered to Buyer.
22.12 Delivery of Certificate of Insurance. A certificate of insurance
from Seller's comprehensive general liability insurance company (E&O Carrier)
confirming that (i) Seller is insured for a minimum of $10,000,000 and (ii)
subrogation is waived as to the Buyer Indemnified Parties.
22.13 Liabilities. Except for bona fide disputes, all Excluded Liabilities
of Seller due or incurred on or prior to the Closing Date shall be paid in full
or reserved by Seller.
22.14 Delivery of Non-Solicitation, Non-Competition and/or Non-Disclosure
Agreements of Employees. All Non-Solicitation, Non-Competition and/or
Non-Solicitation Agreements signed by any Employees of the Seller (or signed by
any employees of
33
companies who sold accounts to the Buyer) that are assignable shall be delivered
at the Closing.
22.15 Approval of Accountants. All items identified in Sections 4.3. and
4.5. which are sufficient in the reasonable judgment of Buyer's accountants to
enable the Buyer to complete audited financial statements to comply with SEC
requirements shall be delivered to Buyer at the Closing.
22.16 Escrow Agreement. An Escrow agreement between the Parties hereto and
Seller's counsel pertaining to proceeds of sale that are to be reserved pursuant
to this Agreement.
23. Conditions Precedent to Seller's Obligation to Close. The following shall be
conditions precedent to the obligations of Seller to Close hereunder, any of
which may be waived by Seller in his sole and absolute discretion:
23.1 Accuracy of Representations. Each of the representations and
warranties of Buyer contained in this Agreement is now and (except as to those
expressly limited to the date hereof or the Closing Date) at all times after the
date of this Agreement, to and including the time of Closing, shall be true,
correct and complete in all respects.
23.2 Performance of Obligations. Each of the agreements, covenants and
undertakings of Buyer contained in this Agreement, except for those calling for
performance after Closing, shall have been fully performed and complied with at
or before Closing.
23.3 No Litigation. No material litigation, governmental action or other
proceeding involving or potentially involving liabilities, obligations or losses
on the part of Buyer shall be threatened in good faith or commenced against
Buyer or with respect to the consummation of the transactions provided for
herein.
23.4 Delivery of Documents. All documents, including all approvals and
consents required to be delivered by Buyer at or prior to Closing, shall be
delivered or shall be tendered at the time and place of Closing.
23.5 Approval of Counsel. All actions, proceedings, instruments and
documents required to be delivered to Seller in connection with this Agreement,
and all other legal matters, shall have been reasonably approved by counsel for
Seller.
23.6 Delivery of Certificate of Insurance. A certificate of insurance from
Buyer's comprehensive general liability insurance company (E&O Carrier)
confirming that (i) Buyer is insured for a minimum of $10,000,000 (Products
Liability $5,000,000) (ii) Seller and Shareholder are additional insureds, and
(iii) subrogation is waived as to Seller and Shareholder.
24. Waiver; Reasonable Efforts.
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24.1 Waiver. Buyer on the one hand, and Seller on the other hand, may
waive in writing any or all of the conditions precedent to their respective
obligations to Close hereunder, and such waiver shall release and relieve Seller
or Buyer, as the case may be, of any liability for breach of any representation,
warranty or covenant herein contained that has been waived.
24.2 Reasonable Efforts. Nothing herein contained shall be construed to
relieve either Party of their respective obligations to use reasonable efforts
to fulfill the conditions of Closing required herein and otherwise to consummate
the transactions contemplated herein.
25. Miscellaneous.
25.1 Notices. Any and all notices or other communications required or
permitted hereunder shall be in writing and either delivered personally to the
addressee, telexed or telecopied to the addressee, or mailed, certified or
registered mail, return receipt requested, or express mail, postage prepaid, and
shall be deemed to have been duly given on the day when so delivered personally,
telexed, or telecopied, or if by certified or registered mail, four (4) days
after the date of mailing, or if by express mail, two (2) days after the date of
mailing, as follows:
If to Buyer:
United Security Systems, Inc.
00-X Xxxxxxxx Xxxx
Xxxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx
FAX: (000) 000-0000
If to Seller:
Xxxxxx X. May
00 Xxxxx Xxxxxx
Xxxxxx-Xxxxx, XX 00000
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxxx & Xxxxxx, LLP
10th Floor,
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
FAX: (000) 000-0000
35
or to such other address or addresses as any Party may designate to the others
by notice in conformity with the provisions of this Section 25.1.
25.2 Entire Agreement. This Agreement (including the Exhibits hereto) and
the documents referred to herein contain the entire agreement among the Parties
with respect to the purchase of the Assets and related transactions and
supersede all prior and any other contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, with respect
thereto except as herein contained.
25.3 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provisions shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be held invalid or unenforceable in whole
or in part in any jurisdiction.
25.4 Waivers, Amendments and Indulgences. This Agreement may not be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may not be waived in any way, except by a written instrument
signed by all the Parties or, in the case of a waiver, by the Party waiving
compliance, in either case the execution of which shall be in each Party's sole
and absolute discretion. Neither the failure nor any delay on the part of any
Party to exercise, in full or in part, any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other or future occurrence. The rights and remedies granted
hereunder or under any other document delivered hereunder or in connection
herewith are cumulative and may be exercised concurrently or consecutively, and
are not exclusive of any rights or remedies otherwise provided at law or in
equity.
25.5 Binding Nature of Agreement; Assignment. All of the terms and
provisions of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by each of the Parties and their respective legal
representatives, heirs, executors, administrators, nominees, successors and
assigns. Prior to the completion of Closing, except for an assignment by Buyer
to a related party, neither Party shall assign, transfer, delegate or encumber
its rights or obligations under this Agreement without the prior written consent
of the other Party, which consent shall be in that Party's sole and absolute
discretion, and any purported assignment, transfer, delegation or encumbrance
without such consent shall be void.
25.6 Variations in Pronouns. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine, or
neuter, as the context indicates is appropriate.
25.7 Exhibits. All Exhibits attached hereto are hereby incorporated by
reference into, and made a part of, this Agreement.
36
25.8 Time of the Essence. The Parties agree that time is of the essence
with respect to all terms and provisions of this Agreement.
25.9 Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or holiday, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or holiday.
25.10 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any of the Parties whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the Parties reflected hereon as
the signatories. It is agreed by all parties that facsimile (faxed) forms,
agreements, signatures, and initials are acceptable and shall have the same
force and effect as originals.
25.11 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
25.12 Jurisdiction and Venue. The Parties irrevocably acknowledge and
agree that any suit, action, claim or other proceeding, legal or equitable (a
"Proceeding") arising out of or from, in connection with or as a result of this
Agreement or any of the transactions contemplated hereby shall be brought
exclusively in the state courts for the County of Luzerne, Pennsylvania or the
courts of the United States for the Middle District of Pennsylvania. Each Party
irrevocably assents and submits to the jurisdiction and venue of each such court
in any Proceeding, and unconditionally and irrevocably waives any objection that
it may now or hereafter have to jurisdiction or venue in any such Proceeding in
any of such courts. Each Party irrevocably consents to service of any complaint,
summons, notice or other process relating to any such Proceeding in accordance
with the provisions of Section 25.1 hereof.
25.13 Governing Law. Regardless of the place of contracting, place of
performance or otherwise, this Agreement and all amendments, modifications,
authorizations or supplements hereto, and all questions relating to its
validity, interpretation, performance and
37
enforcement shall be governed by and construed in accordance with the laws of,
the Commonwealth of Pennsylvania, without regard to the conflicts of law rules
governing in the Commonwealth of Pennsylvania and without regard to any rule of
construction as to which Party drafted this Agreement.
IN WITNESS WHEREOF, the Parties hereto, intending to be legally
bound hereby, have executed or caused a duly authorized officer to execute this
Agreement as of the day and year first above written.
ATTEST: UNITED SECURITY SYSTEMS, INC.
_________________________ By:______________________
, Secretary President
ATTEST: RESPONSE USA, INC.
_________________________ By:______________________
, Secretary President
WITNESS: TRIPLE A SECURITY SYSTEMS, INC.
_________________________ By:______________________
Xxxxxx X. May, President
WITNESS: SHAREHOLDER
_________________________ _________________________
Xxxxxx X. May
Individually
38
