EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
BETWEEN
XXXX SECURITY INTERNATIONAL, INC.
And
THE SHAREHOLDERS OF
50'S CLASSIC CAR WASH OF LUBBOCK, INC.,
AND CRCD, INC.,
TABLE OF CONTENTS
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PAGE
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RECITALS............................................................... 1
ARTICLE I ACQUISITION; CLOSING......................................... 1
ARTICLE II TITLE INSURANCE............................................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SELLERS........................................................ 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER...................................................... 11
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS............................. 12
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER.......................... 15
ARTICLE VII CONDITIONS OF PURCHASER.................................... 16
ARTICLE VIII CONDITIONS OF SELLERS..................................... 17
ARTICLE IX INDEMNIFICATION............................................. 17
ARTICLE X OTHER PROVISIONS............................................. 20
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EXHIBITS
Exhibit A Noncompetition Agreement
Exhibit B Release
Exhibit C Interests in Real Property - Legal Descriptions and Permitted
Exceptions
Exhibit D Inventory - Definition & List. Definition: Items held for
resale, spare parts and supplies in raw forms (i.e., detergents,
etc.), fuel.
Exhibit E Permits
Exhibit F Intangibles
Exhibit G Trade Names, Trademarks, DBAs, Logos (Documents)
Exhibit H Service Contracts Exceeding 30 Days
Exhibit I Company Liabilities
Exhibit J Spousal Consent Form
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STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement ("Agreement") is made as of August 13, 1999,
by and between Xxx Xxxxxxxx, Xxx Xxxxx, Xxxxxx Xxxxxx, Jr., and First National
Bank of Abilene, as Trustee of the Xxxxx X. Xxxxxx, Xx., and Mira Xxxxx Xxxxxx
Family Trust No.2 ("Shareholders") on the one hand, and Xxxx Security
International, Inc. ("Acquiror") on the other hand.
RECITALS
Shareholders each own 25% of the outstanding shares of stock ("Company
Shares") of each of 50's Classic Car Wash of Lubbock, Inc. and CRCD, Inc.
(collectively, the "Companies"). 50's Classic Car Wash of Lubbock, Inc. ("50's
Classic") is in the business of operating a car wash company (the "Business") at
0000 00xx Xxxxxx, Xxxxxxx, Xxxxx ("Location"). CRCD, Inc. ("CRCD") owns the real
property upon which 50's Classic conducts its operations at the Location.
In accordance with the provisions of the Agreement, Shareholders desire to
exchange all of the outstanding shares of stock of the Companies for common
voting stock of Acquiror, all on the terms contained in the Agreement. The
parties desire that the transactions contemplated hereby qualify as a
reorganization, within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended, and be treated as a "pooling of interests" for
accounting purposes.
ARTICLE I
Acquisition; Closing
Section 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Close of Escrow under this
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Agreement shall take place on or before August 18, 1999, at the offices of
Arizona Escrow, 0000 Xxxxx 00xx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxx ("Escrow
Company"). The date that Close of Escrow occurs is referred to hereinafter as
the "Closing Date" and the act of closing as "Closing."
Section 1.3 Stock Purchase; Consideration; Company Debt.
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(a) At the Closing, (i) all of the Company Shares shall be delivered by
Shareholders to Acquiror, and (ii) Acquiror shall deliver to Shareholders a
number of shares of Acquiror's common voting stock ("Consideration Stock")
having a value of $819,364.00, each share being valued at $8.9375 per share
("Per Share Value").
(b) The Consideration Stock shall be allocated between the Shareholders in
the same proportions that the Shareholders own shares in the Companies.
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(c) At the Closing, Acquiror shall pay the unpaid principal balance of the
Company Debt, as hereinafter defined. For purposes of this Agreement, "Company
Debt" shall mean the long-term debt owed to First National Bank of Abilene
("Lender"), including the current portion of the principal (which was 608,338.81
as of May 30, 1999) and interest accrued through the Closing Date.
Section 1.4 Closing. Following execution of this Agreement, Acquiror and
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Shareholders shall be obligated to conclude the transaction strictly in
accordance with its terms. If the failure to conclude this transaction is due to
the refusal and failure of Shareholders to perform their obligations under this
Agreement, Acquiror may seek to enforce this Agreement with an action of
specific performance, in addition to, and not in limitation of, any other rights
and remedies available to the Acquiror under this Agreement, or at law or in
equity, including, without limitation an action to recover their actual damages
resulting from the default of Shareholders. If the failure to conclude this
transaction is due to the refusal and failure of Acquiror to perform its
obligations under this Agreement, Shareholders shall be paid the amount of
$10,000.00 that is currently on deposit with the Escrow Company and may, in
addition to and not in limitation of any other rights and remedies available to
the Shareholders under this Agreement, or at law or in equity, bring legal
action to recover their actual damages resulting from the default of Acquiror.
Section 1.5 Termination. This Agreement and the transactions contemplated
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hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Acquiror and the Shareholders;
(b) by the Shareholders, or by Acquiror in the event Acquiror or the
Shareholders, as applicable, makes a material misrepresentation under this
Agreement or breaches a material covenant or agreement under this Agreement, and
fails to cure such misrepresentation or breach within three (3) business days
from the date of written notice of the existence of such misrepresentation or
breach; or
(c) by the Shareholders or Acquiror, if the Closing shall not have occurred
by August 31, 1999, or such other date as may be agreed to by the parties hereto
in writing, due to the non-fulfillment of a condition precedent to such party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating party).
All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as provided
herein, this Agreement shall become void and be of no further force and effect
and no party hereto shall have any further liability to any other party hereto,
except that this Section 1.5, Article IX, Section 10.1, Section and 10.2 shall
survive and continue in full force and effect, notwithstanding termination. The
termination of this Agreement shall not limit, waive or prejudice the remedies
available to the parties, at law or in equity, for a breach of this Agreement.
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Section 1.6 Deliveries by Acquiror. At the Closing, Acquiror shall
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deliver, all duly and properly executed (where applicable):
(a) The Consideration Stock due on the Closing Date, as provided in Section
1.3 above to be delivered to the Shareholders;
(b) A noncompetition agreement with Shareholders in form and substance as
attached hereto as Exhibit A ("Noncompetition Agreement").
Section 1.7 Deliveries by Shareholders. At the Closing, the Shareholders
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shall deliver or cause to be delivered to Acquiror, all duly executed, the
following:
(a) Duly executed certificates in valid form evidencing all of the Company
Shares owned by each Shareholder, duly endorsed in blank or accompanied by duly
executed stock powers attached or otherwise executed in the presence of
authorized representatives of Acquiror;
(b) The written resignations of all officers and directors of the Companies
as of the time of Closing;
(c) A current certificate of good standing for the Companies and certified
charter documents from each applicable jurisdiction of admittance and
incorporation, certified by the secretary of state of such jurisdiction.
(d) The Certificate described at Section 7.1;
(e) A release from each Shareholder, in a form and substance attached as
Exhibit B;
(f) The Noncompetition Agreement;
(g) The books and records of the Companies, including, without limitation,
all original financial and operating records, the corporate minute book and
seal, the corporate stock ledger, and all title documents;
(h) The Owners Policy, as defined hereinafter;
(i) A spousal consent form from each Shareholder who is a married natural
person in the form of Exhibit J; and
(j) Other documents and instruments required by this Agreement, if any.
ARTICLE II
Title Insurance
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Section 2.1 Real Property. The only parcel of real property owned by the
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Companies is the Location, the legal description of which is listed on Exhibit C
("Real Property"). For purposes of this Agreement, "Real Property" shall also
include: (i) all of Companies' right, title and interest in and to all
easements, rights-of-way, privileges and appurtenances thereto, (ii) all of
Companies' right, title and interest in and to the beds of all streets, roads,
avenues or highways, open or proposed, abutting the Real Property, (iii) all of
Companies' right, title and interest, if any, in and to any award in
condemnation, or damages of any kind, to which Companies may have become
entitled or may hereafter be entitled, by reason of any exercise of the power of
eminent domain with respect to the Real Property or any other right, title or
interest to be sold hereunder or any part thereof, and (iv) all of Companies'
right, title and interest in and to all surveys, architectural and engineering
plans, specifications, drawings, reports, etc., if any, presently existing or
hereafter prepared, with respect to the Real Property.
Section 2.2 Owners Title Policy. At Closing, the Companies shall own,
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with respect to the Real Property, an extended coverage owners policy of title
insurance from a title company acceptable to Acquiror (the "Title Company"),
dated as of the Closing Date, in the amount equal to the appraised value of the
Real Property as reflected in the Central Appraisal District records for Lubbock
County, Texas. The title policies shall be in form reasonably satisfactory to
Acquiror, and shall insure title to the Real Property to be in fee simple in
Companies subject only to the Permitted Exceptions permitted by Section 2.3
hereof (the "Owners Policy"). Acquiror shall bear the cost of the Owners Policy.
Section 2.3 Permitted Exceptions. The Owners Policy shall insure
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Companies' interest in the Real Property to be free and clear of all
encumbrances and exceptions whatsoever except those listed on Exhibit C attached
hereto ("Permitted Exceptions").
Section 2.4 Survey. Acquiror shall obtain an ALTA survey or equivalent
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relating to the Real Property that is sufficiently current that the Title
Company shall not have included a survey exception in the Owner's Policy. If a
new survey is required, Acquiror shall pay the cost of such survey.
ARTICLE III
Representations and Warranties of the Shareholders
Each Shareholder, jointly and severally, hereby represents and warrants to
Acquiror that the statements contained in this Agreement and its Exhibits are
true, accurate, complete, and not misleading in any material respect, as of the
date of this Agreement and further hereby represents and warrants that each and
every one of the following shall be true and correct as of the Closing Date.
"Knowledge" or "known" as used in this Agreement means that a Shareholder is
actually aware, or should reasonably have been aware, of some fact or matter.
Section 3.1 Title. Shareholders have good, valid and freely transferable
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title to the Company Shares. Further, the Companies have good, valid and freely
transferable title to the Real
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Property and all of the Personal Property that is part of the Assets, as
hereinafter defined, and the Trade Names or Trademarks as described herein, free
and clear of all title defects and objections, security interests, liens,
pledges, claims, charges, restrictions and encumbrances (except as shown, and
approved by Acquiror, in the preliminary title report) of any nature whatsoever,
including without limitation, leases, mortgages, conditional sales agreements,
collateral security arrangements, and other title or interest retaining
arrangements, whether absolute, accrued, contingent or otherwise (collectively
"Encumbrances"), other than liens for taxes currently accrued but not yet due
and payable. As of May 30, 1999, all of the Assets were in operating order as
necessary to conduct the Business as conducted on May 30, 1999. The
representations and warranties in this Section apply to the following items
(collectively, the "Assets"):
(a) All of Companies' right, title and interest in and to all Inventory, as
defined and shown on Exhibit D attached hereto, equipment, machinery, tools,
appliances, furnishings, furniture, goods held for resale, receivables, customer
lists, supplies, telephone and computer equipment, and any other items used in
connection with the business of owning, operating, and managing the Business at
the Location (collectively, "Personal Property"), free and clear of any and all
liens, liabilities and encumbrances, and regardless of the location of such
Personal Property, whether on or off the premises of the Location.
(b) All of Companies' right, title and interest in, to and under all
transferable permits, licenses, approvals or authorizations obtained from any
governmental authority relating to the ownership, operation or management of the
Business ("Permits"), attached hereto as Exhibit E.
(c) All of Companies' right, title and interest in, to and under all
intangible personal property not otherwise described in this Section and
relating to the ownership, operation or management of the Business, including
without limitation (i) all warranties in favor of the Companies; (ii) all liens
and security interests in favor of the Companies, together with any instruments
or documents evidencing same; (iii) all telephone numbers associated with the
operations; and (iv) all goodwill relating to the ownership, operation or
management of the Business (collectively, "Intangibles"). Attached hereto as
Exhibit F is a list of all Intangibles.
(d) Acquiror shall have the exclusive use in Lubbock County, Texas, of the
Companies' trade names and trademarks, and other business names owned and used
by the Companies, relating to the business of owning, operating, and managing
car wash operations, for an indefinite period, which period shall terminate if,
and only if, Acquiror advises Shareholders in writing of Acquiror's
relinquishment of this right. Acquiror's rights include the use of any and all
derivatives and forms together with all trademarks, service marks, and logos of
the foregoing names, whether or not registered and whether now owned or
hereafter acquired, together with all trademark registrations of and trademark
registration applications for the foregoing names, and all good will associated
with any of the foregoing (collectively, "Trade Names & Trademarks"). Trade
Names and DBAs are set forth in Exhibit G, attached, which also contains all of
the documents relating to the use and entitlement of such Trade Names,
Trademarks, DBAs and logos.
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(e) Entitlement to any and all advertising campaigns and marketing or
promotional materials; and any and all guarantees and warranties relating to the
Inventory (collectively, "Entitlements").
(f) All Books and Records relating to the business of ownership, operation
or management of the Business, including without limitation all accounting,
financial, employment, sales and other records (collectively, "Books and
Records").
Section 3.2 Inventory. As of May 30, 1999, the Inventories that are part
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of the Assets were usable and saleable in the ordinary course of business, and
were accounted for by the Companies at the lower of cost or market, and in
accordance with generally accepted accounting principles applied on a consistent
basis.
Section 3.3 Litigation. To the best of any Shareholder's knowledge, there
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is no fact, circumstance or event that could result in claims, actions, suits,
disputes, investigations, arbitrations and other proceedings of any kind,
existing, pending or threatened, that involve, affect or relate to Companies or
Shareholders in connection with the operations, business and affairs of the
Companies. There are no agreements, decrees, orders, or injunctions of or with
any court or governmental entity outstanding against the Companies.
Section 3.4 Improvements. As of May 30, 1999, all structures and
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improvements on the Real Property had been constructed and installed in a good
and workmanlike manner and in full compliance with all applicable laws,
conditions and restrictions affecting the Real Property.
Section 3.5 Zoning. The Business operated upon the Real Property is a
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legal nonconforming use under the zoning ordinance of the city of Lubbock,
Texas.
Section 3.6 Prior Claims. To the best of any Shareholder's knowledge,
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there are no threatened, existing or pending litigation, judicial,
administrative, or arbitration hearings, claims, condemnations, or sales in lieu
thereof, contracts of sale, options to purchase or rights of first refusal with
respect to any aspect of the Assets or Real Property or the Company Shares, nor
have any such actions, suits, proceedings, claims, or other such matters been
threatened or asserted.
Section 3.7 Contracts. Other than as set forth on Exhibit H attached
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hereto, as of May 30, 1999, there were no service contracts relating to any
Assets which cannot be terminated within thirty (30) days notice.
Section 3.8 Notices. Shareholders have received no notice and has no
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knowledge of any pending improvements, liens, or special assessments to be made
against any Assets or the Real Property by any governmental authority.
Section 3.9 Mechanic's Liens. There are no unpaid bills or claims in
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connection with the construction of, or any repairs to, the Assets or Real
Property.
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Section 3.10 Environmental Claims. During the period of Shareholders'
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ownership of the Business, there has been no hazardous waste dumped or deposited
on the Real Property and no hazardous waste exists thereon. To the best of any
Shareholder's knowledge, there are no hazardous materials, including asbestos,
existing on the Real Property and each of the items (a) through (i) immediately
below are correct to the best of any Shareholder's knowledge.
(a) Shareholders have not received any notification from a governmental
agency pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, as amended (including without limitation, any amendments added by
the Superfund Amendment and Reauthorization Act of 1986), or pursuant to any
other law pertaining to waste materials, hazardous materials or substances,
pollutants or other such matters affecting the environment, and Shareholders are
not aware of any facts or circumstances which could give rise to a violation of
any such laws in the future.
(b) If this Agreement includes sites which do not currently have tanks on
them, Shareholders have not placed any underground tanks on such sites, and
Shareholders are not aware of any underground tanks existing on such sites.
(c) There has been no release, emission or discharge into the environment
of waste materials, hazardous substances, hazardous wastes, air pollutants, or
toxic pollutants, as defined under any applicable legal requirement (including,
without limitation, any leakage from any tank), and that none has occurred or is
occurring in connection with the business and operations of Shareholders, except
such that have been remedied and subsequently approved by the appropriate
governmental agency.
(d) No asbestos or asbestos-containing materials are installed on, used on,
or incorporated into the Real Property. No polychlorinated biphenyls are used in
any electrical transformers, capacitors, fluorescent light fixtures or in any
other manner whatsoever on any real property leased or used by the Companies.
(e) The Companies have at all times complied, and are currently in
compliance, with all requirements of the Safe Drinking Water and Toxic
Enforcement Act of 1986.
(f) Shareholders have not at any time, now or in the past, engaged in any
environmental cleanup, or any other remediation, except such that have been
approved by the appropriate governmental agency.
(g) Shareholders have never violated and are not currently in violation of
any applicable federal, state, county or local statutes, laws, regulations,
rules, ordinances, codes, licenses, or permits of any governmental authorities
relating to environmental matters, including radiation safety, in connection
with the ownership, use, maintenance, or operation of any of the Companies'
Assets or the conduct of the Business.
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(h) There are no statutes, laws, orders, ordinances, codes, licenses,
permits, rules or regulations relating to environmental matters, that would
require any work, repairs, construction or capital expenditures with respect to
any of the Assets or Real Property.
(i) Shareholders have not received any notices of any violation in
connection with any of the matters described in this section.
Section 3.11 Condemnation. There are no known condemnation or eminent
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domain proceedings pending or contemplated against the Real Property or any part
of the Real Property and Shareholders have received no notice, oral, written or
constructive, of the desire of any public authority or any other entity to take
or use the Real Property or any part of the Real Property.
Section 3.12 FIRPTA. Each Shareholder is not a "foreign person" within
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the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended.
Section 3.13 Authority; Consents. Each Shareholder is fully empowered to
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enter into this transaction and execute all of the documents related to this
transaction as such pertains to its respective Company Shares. To the best of
any Shareholder's knowledge, the exchange of stock contemplated hereby will not
conflict with or violate any agreement or law to which Shareholders, the stock,
if any, which is part of this transaction, or the operations are subject. To the
best of any Shareholder's knowledge, neither the execution and delivery of this
Agreement, nor the transfer of the Company Shares, nor the consummation of any
of the transactions contemplated by this Agreement, nor compliance by the
Shareholders with any of the provisions hereof, will require any consent,
approval, authorization or permit from, or any notice, registration or filing to
or with, any governmental or regulatory authority or any other third party,
except as specifically set forth herein. Shareholders have the complete and
unrestricted right, power, authority and capacity to (a) execute and deliver
this Agreement and every other document to be executed and delivered by
Shareholders in connection with this Agreement ("Other Documents"); (b) sell and
transfer the Company Shares to Acquiror; and (c) carry out and perform each of
Shareholders' obligations pursuant to this Agreement and the Other Documents.
Section 3.14 Corporate Existence. Each of the Companies is organized,
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existing and in good standing under the laws of the State in which it was formed
and is in good standing and qualified to conduct business in the state in which
it is doing business.
Section 3.15 Company Shares. The Companies have no subsidiaries and own no
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interest in any corporation, partnership, limited liability company or other
entity. Each has previously delivered, or made, or will make immediately
available, to the Acquiror complete and correct copies of the Articles of
Incorporation, By-laws and Minute books, each as currently in effect. The
authorized capital stock of each Company consists entirely of shares of Common
Stock, of which 1,000 shares in each corporation are issued and outstanding. The
Shareholders are the only stockholders of the Companies. There exist no (i)
outstanding options, warrants or other rights to
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purchase or subscribe for any equity securities or other ownership interests of
either corporation, (ii) indebtedness or securities directly or indirectly
convertible into or exchangeable for any equity securities of or ownership
interest in either of the Companies, or (iii) any outstanding subscriptions,
rights (including any preemptive rights, voting trusts or agreements, rights of
first refusal or offer, co-sale rights, or other restrictions on transfer),
stock appreciation rights, calls or commitments of any character whatsoever to
which either of the Companies is a party or may be bound requiring the issuance,
sale or repurchase of any shares of capital stock of either of the Companies.
All of the issued and outstanding shares of capital stock of each Company are
duly authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereto, and were issued in compliance with all
applicable federal and state laws, rules and regulations. Each Shareholder is
transferring good, valid and marketable title to the stock free and clear of all
encumbrances, where marketable title means that the shares are capable of being
marketed and not necessarily that there is a market for such shares.
Section 3.16 Liabilities. As of May 30, 1999, the Companies had no
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material undischarged obligations affecting the operations or assets being sold
pursuant to this Agreement, other than the Company Debt and obligations arising
in the usual and regular course of business and listed in Exhibit I attached
hereto. Shareholders have no knowledge of any new liabilities incurred in the
name of the Companies since May 30, 1999.
Section 3.17 Taxes. Each Company has prepared and filed when due all Tax
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Returns required by law to be filed and has paid all taxes shown to be due by
such returns or on any assessments received by a corporation. No claim or
liability is pending or has been assessed or threatened against any Company in
connection with any taxes except as reflected in the Financial Statements. No
United States federal income tax returns of either corporation have been audited
or examined by the IRS. There are no outstanding agreements executed or filed by
either Company extending the statutory period of limitations applicable to any
claim for income taxes due from either corporation. Neither Company nor any
Shareholder has knowledge of any unassessed tax deficiency that has been
proposed or threatened against a Company by any taxing authority. All taxes or
other assessments and levies which each Company is or was required by law to
withhold or collect have been duly withheld and collected, and have been paid
over to the proper governmental authorities or are held by the respective
Company in separate bank accounts for such payment and all such withholders and
collections and other payments due in connection therewith are duly set forth on
the books of each Company. As of May 30, 1999, Shareholders closed the books of
the Companies preserving a cash account balance equal to 5/12ths of the property
tax liability for the Companies based on 1998 tax certificates.
Section 3.18 Financial Statements. The financial statements of the
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Companies which have been provided to Acquiror, in all material respects, fairly
present the consolidated financial position of each corporation as of their
respective dates, and the other related statements included in the financial
statements, in all material respects, fairly present the results of their
consolidated operations and cash flows for the years indicated, in each case in
accordance with GAAP applied on a consistent basis, with only such deviations
from such accounting principles and/or their consistent application
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as are referred to in the notes to the financial statements and subject, in the
case of the unaudited financial statements, to the absence of related notes.
Each corporation has no liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, and whether known or
unknown) except as disclosed in the financial statements or as disclosed in
Exhibit I to this Agreement.
Section 3.19 Authority. All corporate, limited liability company,
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partnership, member, partner and shareholder authority, approvals, actions or
proceedings necessary on the part of Shareholders to authorize this Agreement or
any of the transactions contemplated hereby, will have been obtained by the
Closing Date. This Agreement and the Other Documents have been or will be duly
and validly executed and delivered by Shareholders; and when executed and
delivered constitute legal, valid and binding obligations of Shareholders,
enforceable in accordance with their terms. Neither the execution and delivery
of this Agreement or the Other Documents, nor the consummation of any of the
transactions contemplated by this Agreement or the Other Documents, nor
compliance by Shareholders with any of the provisions thereof, will:
(a) Violate, conflict with, or result in a breach of any of the provisions
of; constitute a default (or an event which, upon notice or lapse of time or
both, would constitute a default) under; result in the termination or
cancellation of; accelerate the performance required by; or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
assets under any provision of the Articles, the Bylaws, the Operating Agreement,
or any note, bond, mortgage, indenture, deed of trust, lease, license or any
other agreement or obligation to which Shareholders are a party, or by which
Companies or any of their assets may be bound or affected; and
(b) Violate or conflict with any order, writ, injunction, decree, judgment,
permit, license, law, rule, regulation or ordinance applicable to Company or the
Real Property or any of the Assets.
Section 3.20 Pooling Requirements. The Shareholders do not together own
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any car wash businesses other than the Companies. For the 24-month period ending
on the date of this Agreement, there has been no change of ownership of the
Company Shares. There will be no change in the ownership of the Company Shares
from the date of this Agreement to the Closing Date. During the most recent 24
calendar months prior to the date of this Agreement and during the period from
the date of this Agreement to the Closing Date, the Companies have not paid and
will not pay any dividends or distributions to their shareholders that are
either (i) in excess of Company earnings, or (ii) inconsistent in amount and
kind to the dividends and distributions paid by the Companies during the three-
year period immediately preceding the 24-month period.
Section 3.21 Employees. Neither Company is a party to any labor agreement
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with respect to any of its employees with any labor organization, group or
association. Neither Company has experienced any attempt by organized labor or
its representatives to make either Company engage in collective bargaining. To
the best of any Shareholder's knowledge, each Company is in compliance with all
applicable laws respecting employment practices, terms and conditions of
employment, hiring, and wages and hours, including, without limitation, laws
relating to civil rights,
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safety and health, workers' compensation, the collection and payment of
withholding and/or social security taxes, and immigration. Neither Company is
engaged in any unfair labor practice. There is no unfair labor practices charge
or complaint against either Company pending before the National Labor Relations
Board or any other governmental agency arising out of either Company's
activities, and neither Company has knowledge of any facts or information which
would give rise thereto; there is no labor strike or labor disturbance pending
or, to the knowledge of Shareholders, threatened against either Company nor is
any grievance currently being asserted; and neither Company has experienced a
work stoppage or other similar labor difficulty.
Section 3.22 Insurance. To the best of any Shareholder's knowledge, as of
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the date hereof, there are no pending material claims under any material
insurance policies (the "Insurance Policies") with respect to the property,
assets, or business of each Company as to which the respective insurers have
denied coverage. To the best of any Shareholder's knowledge, as of the date
hereof, neither Company has received either a written notice or, to the
knowledge of the Shareholders, verbal notice that could reasonably be expected
to be followed by a written notice of cancellation or non-renewal of any
Insurance Policy. To the best of any Shareholder's knowledge, the Insurance
Policies are sufficient for compliance with all requirements of law and of all
contracts to which the respective Company is a party and are of a type and
dollar amount as is customary in the car wash/service station industry. To the
best of any Shareholder's knowledge, neither Company is in default under any
Insurance Policy and neither Company has failed to give any notice or to present
any claim under any such Insurance Policy in a due and timely manner where the
effect of such default or failure would be to render a material claim uninsured.
Each Shareholder has no knowledge of any notice from any insurer advising of
reduced coverage or increased premiums on existing Insurance Policies. To the
best of any Shareholder's knowledge, there are no outstanding unpaid claims
under any such Insurance Policies.
ARTICLE IV
Representations and Warranties of Acquiror
Acquiror represents and warrants to the Shareholders that the
representations and warranties contained in this Article IV are true on the date
hereof and shall be true on the Closing Date.
Section 4.1 Structure. Acquiror is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
Section 4.2 Authorization to Proceed with this Agreement. Acquiror has,
--------------------------------------------
by proper corporate proceedings, duly authorized the execution, delivery and
performance of this Agreement and the Collateral Documents.
Section 4.3 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Acquiror's authority will be entitled to make any claim
against the Companies or against the Shareholders for any commission or finder's
fee in connection with the transactions contemplated by this Agreement. Acquiror
will pay when due any finder's fee or commission agreed to by it.
11
Section 4.4 Commission Filings. Acquiror will have delivered to
------------------
Shareholders by the Closing Date current and all historical filings made by it
on Forms 8-K, 10-K, 10-Q and Proxy Statements timely filed with the Securities
and Exchange Commission ("SEC") for fiscal year ending December 31, 1998 and the
fiscal quarter ended March 31, 1999 (the "Public Reports"). The Public Reports
accurately and completely describe, in all material respects, Acquiror's
financial status, business operations and prospects as of the date of such
filings and as of the date hereof, and do not omit any material fact(s)
necessary to make the information contained in the filings not misleading.
Section 4.5 Issued Common Stock. The Consideration Stock to be issued
-------------------
pursuant to this Agreement has been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
ARTICLE V
Additional Agreements of Shareholders
The Shareholders covenant and agree with Acquiror as follows:
Section 5.1 Pooling Restrictions. Shareholders recognize and understand
--------------------
that a material factor in Acquiror's execution of this Agreement is that the
transactions contemplated by this Agreement be treated as a "pooling of
interests" for accounting purposes. If for any reason a provision in this
Agreement would prevent the transaction being accounted for as a "pooling of
interests," the parties agree to negotiate in good faith to modify the Agreement
so the transaction can be accounted for as a "pooling of interests."
Notwithstanding any other provision of this Agreement, prior to the publication
and dissemination by Acquiror of consolidated financial results which include
results of combined operations of the Companies and Acquiror for at least 30
days on a consolidated basis following the Closing Date, Shareholders shall not
sell or otherwise transfer or dispose of, or in any way reduce their risk
relative to, any shares of the Consideration Stock received by Shareholders
(including by way of example and not limitation, engaging in put, call, short-
sale, straddle or similar market transactions). Acquiror agrees that such
consolidated financial results shall be published and disseminated as soon as
practicable after the Closing Date. The Securities Exchange Commission ("SEC")
has issued Accounting Series Release Nos. 130 and 135, as amended (collectively,
the "ASRs"), setting forth certain restrictions applicable to the availability
of "pooling-of-interests" accounting treatment in transactions of the type
contemplated by this Agreement. Shareholders therefore covenant and agree with
Acquiror to hold the Consideration Stock and to comply with the ASRs until the
requirements of the ASRs have been met. In addition, the certificates evidencing
the Consideration Stock to be received by Shareholders will bear a legend
substantially in the form set forth below:
"The shares represented by this certificate may not be sold,
transferred or assigned, and Xxxx Security International, Inc.,
shall not be required to give effect to any attempted sale,
transfer or assignment prior to the publication and dissemination
of
12
financial statements by Xxxx Security International, Inc., which
include the results of at least 30 days of combined operations of
Xxxx Security International, Inc., and the Companies acquired by
Xxxx Security International, Inc., for which these shares are
issued. Upon the written request of the holder hereof directed to
Xxxx Security International, Inc., the issuer agrees to remove
this restrictive legend (and any stop order places with the
transfer agents) when the requirements of Accounting Series
Releases Nos. 130 and 135, as amended, of the Securities Exchange
Commission have been met."
Section 5.2 Restrictions on Transfer of Unregistered Stock. The
----------------------------------------------
Shareholders understand and agree that the following restrictions and
limitations are applicable to the Shareholders' receipt and resale or other
transfer of the Consideration Stock, pursuant to the Securities Act of 1933 (the
"Act") or otherwise:
(a) Shareholders agree that the Consideration Stock shall not be sold or
otherwise transferred, unless the Consideration Stock is registered under the
Act and state securities laws or is exempt therefrom.
(b) A legend in substantially the following form will be placed on the
certificates evidencing the Consideration Stock to be issued to the
Shareholders:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state
securities act. These shares have been acquired for investment
and may not be sold, transferred, pledged or hypothecated unless
(i) they shall have been registered under the Securities Act of
1933 and any applicable states securities act or (ii) Xxxx
Security International, Inc., shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Xxxx
Security International, Inc., that registration is not required
under any such acts."
(c) Stop transfer instructions will be imposed with respect to the
Consideration Stock issued to Shareholders pursuant to this Agreement so as to
restrict resale or other transfer thereof except in accordance with the
foregoing provisions of this Agreement.
Section 5.3 Representations as to Private Offering. The Consideration
--------------------------------------
Stock is being delivered to the Shareholders in a private placement under
Section 4.2 of the Act and under Regulation D promulgated under the Act. To
induce Acquiror to issue the Consideration Stock, each Shareholder represents
and warrants as follows:
(a) Each Shareholder represents and warrants that he or she is a resident
of Texas and is an accredited investor, as that term is defined in Regulation D
under the Act.
(b) Each Shareholder acknowledges that they have received a copy of the
Public Reports.
13
(c) The Shareholders represent and warrant that the Consideration Stock is
being acquired for their own account without a view to public distribution or
resale and that the Shareholders have no contract, undertaking, agreement or
arrangement to sell or otherwise transfer or dispose of Consideration Stock, or
any portion thereof, to any other person.
(d) The Shareholders represent and warrant that, in determining to acquire
the Consideration Stock, they have relied solely upon their independent
investigation, including the advice of their legal counsel and accountants or
other financial advisers or purchaser representatives, and have, during the
course of discussions concerning their acquisition of the Consideration Stock,
been offered the opportunity to ask such questions and inspect such documents
concerning Successor Corporation and its business and affairs as they have
requested so as to more fully understand the nature of the investment and to
verify the accuracy of the information supplied.
(e) THE SHAREHOLDERS ACKNOWLEDGE THAT THE ACQUISITION OF THE CONSIDERATION
STOCK INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can
bear the economic risk of the acquisition of the Consideration Stock, including
the total loss of their investment.
(f) The Shareholders represent and warrant that (i) they have adequate
means of providing for their current needs and financial contingencies, (ii)
they have no need for liquidity in this investment, (iii) they have no debts or
other obligations, and cannot reasonably foresee any other circumstances, that
are likely in the future to require them to dispose of the Consideration Stock,
and (iv) all their investments in and commitments to non-liquid investments are,
and after their acquisition of the Consideration Stock will be reasonable in
relation to their net worth and current needs.
(g) The Shareholders understand that no federal or state agency has
approved or disapproved the Consideration Stock or made any finding or
determination as to the fairness of the Consideration Stock for investment.
(h) The Shareholders understand that the Consideration Stock is being
offered and sold in reliance on specific exemptions from the registration
requirements of federal and state securities laws and that Acquiror is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
applicability of such exemption and the suitability of Shareholders to acquire
the Consideration Stock.
Section 5.4 Access to Records and the Real Property. The Shareholders will
---------------------------------------
cause the Companies to give to Acquiror and its representatives, experts and
advisors, from and after the date of execution of this Agreement and up until
Closing, full access to all of the properties (including the Real Property),
assets, books, contracts, documents, records, contracts and customer lists of
the Companies, and to make available to Acquiror and its representatives,
experts and advisors all additional financial statements of and all information
with respect to the business and affairs of the
14
Companies that Acquiror may reasonably request. Acquiror and its representatives
shall have the right to copy any information or documentation the Acquiror is
entitled to inspect under this Section 5.4.
Section 5.5 Standstill Agreement. Unless and until this Agreement is
--------------------
terminated without the Closing having taken place, the Shareholders will not
directly or indirectly solicit offers for the Real Property, the Company Shares
or the assets of the Companies or for a merger or consolidation involving the
Companies, or respond to inquiries from, share information with, negotiate with
or in any way facilitate inquiries or offers from, third parties who express or
who have heretofore expressed an interest in acquiring the Companies by merger,
consolidation or other combination or acquiring any of Companies' assets; nor
will the Shareholders permit the Companies to do any of the foregoing.
Section 5.6 FIRPTA Certificate. Acquiror and Shareholders acknowledge
------------------
that the financial provisions of this Agreement are subject to the requirements
of the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Acquiror in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Shareholders. Among other circumstances, Acquiror is not required to
withhold said amount if Shareholders furnish Acquiror with a certificate stating
the Shareholders' U.S. Taxpayer Identification Numbers and that no Shareholder
is a foreign person within the meaning of the Code. Shareholders agree to
provide to Acquiror at Closing such certificate as is reasonably necessary to
insure that such withholding is not required under FIRPTA.
Section 5.7 Consents. Shareholders and Acquiror shall cooperate with each
--------
other and use their best efforts to obtain all approvals, authorizations and
consents required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, (i) the consent of the Lender, and
(ii) the approval of every regulatory agency of federal, state, or local
government that may be required in the opinion of either Acquiror or
Shareholders.
Section 5.8 Audited Financial Statements. Before and after Closing,
----------------------------
Shareholders agree to cooperate with Acquiror to have the Companies prepare
audited balance sheets for the Companies as of December 31, 1996, December 31,
1997, and December 31, 1998, and statements of income, cash flow and retained
earnings for the Companies for the twelve-month periods ended December 31, 1996,
December 31, 1997, and December 31, 1998 ("Historical Financial Statements"), as
rapidly as possible. Shareholders' cooperation shall include, without
limitation, the execution of standard representation letters requested by
Acquiror's auditors. Shareholders shall prepare a compiled stub balance sheet
and statements of income, cash flow and retained earnings for the period
commencing January 1, 1999, and ending on the last day of the last calendar
quarter ending prior to Closing ("Interim Financial Statements"). The Historical
Financial Statements and the Interim Financial Statements shall be prepared at
Acquiror's cost. Shareholders shall cause the Companies' usual accountants to
cooperate with Acquiror's accountants. Acquiror shall pay for the reasonable
costs of the Companies' usual accountants in the preparation of the Historical
Financial Statements and the Interim Financial Statements.
15
ARTICLE VI
Additional Agreements of Acquiror
Section 6.1 Payment of Expenses. Acquiror will pay all expenses (including
-------------------
legal fees) incurred by it in connection with the negotiation, execution and
performance of this Agreement, in addition to the cost of the Owners Policy and
any service fees charged by the Escrow Company. The Shareholders and Companies
will pay all expenses incurred by the Shareholders and Companies (including
legal fees) in connection with the negotiation, execution and performance of
this Agreement.
Section 6.2 Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Acquiror shall allow the Shareholders and their
professional advisers access to all business records and files of the Companies
pertaining to the operation of the Companies prior to the Closing Date which
were delivered to the Acquiror in accordance with this Agreement ("Records")
where the Shareholders or Shareholders require access to the Records for the
purpose of preparing their tax returns, responding to any audit or informational
request regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The
Shareholders shall have the right, at their own expense, to make copies of any
Records provided, however, that any such access or copying shall be had or done
in such a manner so as not to interfere unreasonably with the normal conduct of
the Acquiror's business. For a period of six years after the Closing Date, the
Acquiror shall not dispose of or destroy any material Records without first
providing written notice to the Shareholders at least 30 days prior to the
proposed date of such disposition or destruction.
ARTICLE VII
Conditions of Acquiror
The obligations of Acquiror to effect the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the time of Closing
of each of the following items which are conditions to the Closing:
Section 7.1 Compliance by Shareholders. The Shareholders and the Companies
--------------------------
shall have performed and complied with all of the obligations and conditions
required by this Agreement to be performed or complied with by the Shareholders
and Companies at or prior to the Closing Date. All representations and
warranties of Shareholders contained in this Agreement shall be true and correct
at and as of the Date of Closing, with the same force and effect as though made
at and as of the Date of Closing, except for exclusions and changes expressly
permitted by this Agreement, and Acquiror shall have received a Certificate duly
executed by each of the Shareholders representing and warranting the foregoing.
16
Section 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Acquiror to own, operate in its entirety or control
any of the Assets, the Real Property, or the Business or which, as a result of
the transaction contemplated by this Agreement, might affect such right as to
Acquiror or any affiliate thereof subsequent to the Date of Closing and which,
in the judgment of the Board of Directors of Acquiror, made in good faith and
based upon advice of its counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.3 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of the Lender, and (ii) the approval of every regulatory agency of
federal, state, or local government that may be required in the reasonable
opinion of either Acquiror or Shareholders. Acquiror shall have been furnished
with appropriate evidence, reasonably satisfactory to Acquiror and its counsel,
of the granting of such approvals, authorizations and consents.
Section 7.4 Noncompetition Agreement. The Shareholders shall have executed
------------------------
and delivered to Acquiror the Noncompetition Agreement.
Section 7.5 Pooling Determination. Acquiror shall have received
---------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
ARTICLE VIII
Conditions of Shareholders
The obligations of the Shareholders to effect the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 8.1 Compliance by Acquiror. The Acquiror shall have performed and
----------------------
complied with all of the obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to or at the Closing Date.
All representations and warranties of Acquiror contained in this Agreement shall
be true and correct at and as of the Date of Closing, with the same force and
effect as though made at and as of the Date of Closing, except for changes
expressly permitted by this Agreement.
Section 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Acquiror to own, operate in its entirety or control
any of the Assets, the Real Property, or the Business or which, as a result of
the transaction contemplated by this Agreement, might affect such right as to
Acquiror or any affiliate thereof subsequent to the Date of Closing and which,
in the judgment of the Shareholders, made in
17
good faith and based upon advice of their counsel, makes it inadvisable to
proceed with the transaction contemplated by this Agreement.
ARTICLE IX
Indemnification
Section 9.1 Indemnification by Shareholders. Each Shareholder agrees that
-------------------------------
it will indemnify, defend, protect and hold harmless Purchaser and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parent, agents, employees, legal representatives, successors and assigns from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) whether equitable or legal, matured or contingent, known or
unknown to such Shareholder, foreseen or unforeseen, ordinary or extraordinary,
patent or latent, whether arising out of occurrences prior to, at, or after the
date of this Agreement, from: (a) any breach of, misrepresentation in, untruth
in or inaccuracy in the representations and warranties by the Shareholders, set
forth in this Agreement or in the Exhibits attached to this Agreement or in the
Other Documents; (b) nonfulfillment or nonperformance of any agreement, covenant
or condition on the part of a Shareholder made in this Agreement and to be
performed by a Shareholder before or after the Closing Date; (c) violation of
the requirements of any governmental authority relating to the reporting and
payment (to the extent payment exceeds the amount reserved for in the Most
Recent Financial Statement) of federal, state, local or other income, sales,
use, franchise, excise or property tax liabilities of the Companies arising or
accrued prior to May 31, 1999; (d) any violation of any federal, state or local
"anti-trust" or "racketeering" or "unfair competition law", including, without
limitation, the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act; and (e)
any claim by a third party that, if true, would mean that a condition for
indemnification set forth in subsections (a), (b), (c) or (d) of this Section
9.1 of this Agreement has occurred.
Section 9.2 Indemnification by Acquiror. Acquiror agrees that it will
---------------------------
indemnify, defend, protect and hold harmless Shareholders and their agents,
employees, heirs, legal representatives, successors and assigns, as applicable,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by it, as a result of or incident to: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Acquiror set forth in this Agreement or in the Exhibits attached
to this Agreement or in the Other Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Acquiror
made in this Agreement and to be performed by Acquiror before or after the
Closing Date; (c) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a), (b), or (c) of this
Section 9.2 has occurred.
Section 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
------
18
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and
19
periodically for the cost of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (iii) the Indemnifying Party will
remain responsible for any adverse consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article IX.
Section 9.4 Procedure for Non-Third Party Claims. If Acquiror or any
------------------------------------
Shareholder wishes to make a claim for indemnity under Section 9.1 or Section
9.2, as applicable, and the claim does not arise out of a third party
notification which makes the provisions of Section 9.3 applicable, the party
desiring indemnification ("Indemnified Party") shall deliver to the party from
which indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
thirty (30) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 3.17 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought against the Companies by tax
authorities or governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above shall survive
until one year from the Closing Date. Notwithstanding the prior sentence which
provides that the representations and warranties expire after certain stated
periods of time, if within the stated period of time, a notice of a claim for
indemnification or Indemnification Demand is given, or a suit or action based
upon representation or warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.
20
Section 9.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
ARTICLE X
Other Provisions
Section 10.1 Nondisclosure by Shareholders. Shareholders recognize and
-----------------------------
acknowledge that they have in the past, currently have, and in the future will
have certain confidential information of Companies such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of Companies. Shareholders agree that for a period of ten (10)
years from the Closing Date they will not disclose such confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of Acquiror, unless (i)
such information becomes known to the public generally through no fault of any
Shareholder, (ii) a Shareholder is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) the Closing does
not take place. In the event of a breach or threatened breach by any Shareholder
of the provisions of this Section, Acquiror shall be entitled to an injunction
restraining such Shareholder from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Acquiror from pursuing any other available remedy for such breach or threatened
breach, including, without limitation, the recovery of damages.
Section 10.2 Nondisclosure by Acquiror. Acquiror recognize and
-------------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of the Companies. Acquiror agree
that for a period of ten (10) years from the Closing Date it will not utilize
such information in the business or operation of Acquiror or any of its
affiliates or disclose such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
unless (i) such information becomes known to the public generally through no
fault of Acquiror or any of its affiliates, (ii) Acquiror is compelled to
disclose such information by a governmental entity or pursuant to a court
proceeding, or (iii) Closing takes place. In the event of a breach or threatened
breach by Acquiror of the provisions of this Section, Shareholders shall be
entitled to an injunction restraining Acquiror from utilizing or disclosing, in
whole or in part, such confidential information. Nothing contained herein shall
be construed as prohibiting Shareholders from pursuing any other
21
available remedy for such breach or threatened breach, including, without
limitation, the recovery of damages.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and the
-------------------------------------
rights of the parties hereunder may not be assigned (except by operation of law)
and shall be binding upon and shall inure to the benefit of the parties hereto,
and their respective successors, personal representatives and assigns. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
Section 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 10.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
Section 10.6 Notices. All notices or other communications required or
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permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Acquiror, addressed to it at:
Xxxx Security International, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxx & Associates, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
(b) If to Shareholders, addressed to them at:
Xxx Xxxxx
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000 XX 000
Xxxxxx, Xxxxx 00000
with a copy to:
Xxxx X. Xxxxxx, Esq.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
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construed in accordance with the internal laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
Section 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 10.12 Construction. The parties have participated jointly in the
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negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the
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provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
Section 10.13 Extension or Waiver of Performance. Either the Shareholder
-----------------------------------
or Acquiror may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Shareholders and the
Acquiror.
Section 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, legal representative and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any party to this Agreement, nor shall any provisions
give any third person any rights of subrogation or action over or against any
party to this Agreement.
Section 10.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
Section 10.16 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this Agreement shall issue any press release or otherwise make
any statement with respect to the transactions contemplated by this Agreement
without the prior consent of the other party, which shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SHAREHOLDERS
/s/Xxx Xxxxxxxx /s/ Xxx Xxxxx
Xxx Xxxxxxxx Xxx Xxxxx
/s/ Xxxxxx Xxxxxx, Jr.
Xxxxxx Xxxxxx, Jr.
First National Bank of Abilene,
as Trustee of the Xxxxx X. Xxxxxx, Xx.
and Mira Xxxxx Xxxxxx Family Trust No.2
By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
Title: Sr. Vice President & Trust Officer
ACQUIROR
XXXX SECURITY INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Executive Vice President
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