Exhibit 2-1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of May 7, 1997
(herein, together with the Schedules and Exhibits attached
hereto, referred to as the "Agreement"), among Detection
Systems, Inc., a New York corporation (the "Buyer" or "DSI"),
and Numerex Corp., a Pennsylvania corporation (the "Seller").
Capitalized terms used in this Agreement which are not defined
in context shall have the meanings ascribed to them in Section
8.1 hereof.
WHEREAS, the Seller owns all of the issued and
outstanding capital stock of Digital Audio Limited, a company
incorporated in England and Wales with limited liability having
registered number 2865840 and having its registered office at
Cranleigh Gardens, Southall Middlesex England (the "Company");
and
WHEREAS, upon the terms and conditions set forth
herein, the Buyer and the Seller desire that, at the Closing
(as defined in Section 2.1), the Buyer purchase all of the
issued and outstanding shares of the Company in exchange for
shares of common stock, par value $.05 per share, of the Buyer
("DSI Stock");
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and
conditions contained herein, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. The Stock Purchase.
1.1 Sale and Purchase of Common Stock of the
Company. Subject to the terms and conditions of this
Agreement, at the Closing, the Seller shall sell, transfer and
deliver to the Buyer or its agent a certificate or certificates
representing 100 ordinary shares of 1 pound per share of the Company
owned by the Seller (the "Company Stock"), accompanied by stock
transfer forms and a power of attorney authorizing the Buyer to
vote the Company Stock, each duly executed by the Seller, and
the Buyer shall purchase and accept such shares of Company
Stock.
1.2 Purchase Price. In consideration for the sale,
transfer and delivery of the Company Stock to the Buyer by the
Seller pursuant to Section 1.1, the Buyer shall pay to the
Seller, in the manner provided in Section 1.4, an amount equal
to the net capital employed in the Company as of the Closing
Date less 350,000 pounds (the "Final Purchase Price"). The net
capital employed in the Company means the assets of the
Company, excluding any cash distributed or otherwise paid to
the Seller or its Affiliates immediately prior to the Closing,
less the liabilities of the Company (the "Net Capital
Employed"), as set forth on Schedule 1.2 hereto.
1.3 Determination of Purchase Price.
(a) Attached hereto as Exhibit 1.3(a) is an
unaudited Balance Sheet of the Company as of April 30, 1997
(the "Preliminary Balance Sheet"). A preliminary Purchase
Price shall be calculated which shall be equal to the Net
Capital Employed as set forth on the Preliminary Balance Sheet
less 350,000 pounds (the "Preliminary Purchase Price"), and the
number of shares of DSI Stock issued by the Buyer to the Seller
at the Closing shall be based on the Preliminary Purchase
Price.
(b) As soon as practicable after the Closing
Date as defined in Section 1.4 hereof, but in no event later
than forty-five (45) calendar days after the Closing Date, the
Seller shall prepare an audited Balance Sheet of the Company as
at the Closing Date, after taking into account any cash
distributed or otherwise paid to the Seller or its Affiliates
immediately prior to the Closing (the "Final Balance Sheet"),
and shall deliver it to the Buyer with an audit report thereon.
The Final Purchase Price shall be computed based on the Final
Balance Sheet. The Final Balance Sheet shall be prepared in
accordance with all relevant financial reporting standards
and/or Statements of Standard Accounting Practice or, where
there are none, in accordance with UK generally accepted
accounting principles, and shall be prepared on a consistent
basis and in accordance with the same accounting policies as
have been used for the corresponding accounts for the last
three (3) years. In connection with the preparation of the
Final Balance Sheet, no adjustments to write-off any inventory
or other assets during or with respect to any prior accounting
period may be reversed. The Final Balance Sheet shall be
audited by Deloitte & Touche LLP (the "Auditor"), and the audit
report delivered by the Auditor shall be addressed to the
Seller and the Buyer. The expense of the Auditor in preparing
or auditing the Final Balance Sheet shall be borne by the
Seller; provided, however, the Buyer shall reimburse the Seller
for one-half of such costs up to a maximum reimbursement by the
Buyer of 7,000 pounds. If requested by the Buyer, the Seller and the
Auditor shall afford the Buyer's accountants access to the
information and accounting procedure involved in preparation of
the Final Balance Sheet.
1.4 Payment of the Purchase Price.
(a) On the Closing Date, the Preliminary
Purchase Price shall be converted from British pounds sterling
to United States dollars by using the United States dollar
equivalent exchange rate relating to British pounds sterling
published in the Wall Street Journal for the most recent date
for which such a rate has been so published prior to the
Closing Date. The Preliminary Purchase Price stated in United
States dollars shall be divided by $17 to determine the number
of shares of DSI Stock to be delivered by the Buyer to the
Seller at the Closing (the "Preliminary Share Amount"). On the
Closing Date, the Buyer shall deliver to the Seller a stock
certificate registered in the Seller's name representing a
number of shares of DSI Stock equal to the Preliminary Share
Amount.
(b) After the Final Balance Sheet is delivered,
the difference between the Final Purchase Price and the
Preliminary Purchase Price (the "Price Adjustment") shall be
determined and the Price Adjustment shall be converted from
British pounds sterling to United States dollars by using the
United States dollar equivalent exchange rate relating to
British pounds sterling published in the Wall Street Journal
for the most recent date for which such a rate has been so
published on or prior to the date on which the Final Balance
Sheet is delivered to the Buyer (the "Determination Date").
The Price Adjustment as stated in U.S. Dollars shall be divided
by $17 to determine the number of shares of DSI Stock by which
the Preliminary Share Amount should be increased or decreased
(the "Share Adjustment"). If the Final Purchase Price is
greater than the Preliminary Purchase Price, the Buyer shall
deliver to the Seller a stock certificate registered in the
Seller's name representing a number of shares of DSI Stock
equal to the Share Adjustment. If the Final Purchase Price is
less than the Preliminary Purchase Price, the Seller shall
deliver to the Buyer a stock certificate representing the
shares of DSI Stock delivered by the Buyer to the Seller at the
Closing together with a stock power, duly executed in blank
with the signature of the Seller guaranteed by a financial
institution reasonably acceptable to the Buyer, which conveys
to the Buyer the number of shares of DSI Stock equal to the
Share Adjustment. The deliveries required by this Section
1.4(b) shall be made within ten (10) days following the
Determination Date.
(c) No fractional shares of DSI Stock shall be
issued in connection with this Agreement. In connection with
all calculations hereunder, all fractional numbers equal to or
greater than .5 shall be rounded up to the next highest whole
number and all fractional numbers below .5 shall be rounded
down to the next lowest whole number.
1.5 Repurchase of DSI Stock.
(a) Until June 30, 1998, the Buyer shall have
the right to buy, and the Seller shall be obligated to sell,
any or all shares of DSI Stock acquired pursuant to this
Agreement (the "Acquired Shares"). The purchase price per
share for any Acquired Shares purchased by the Buyer pursuant
to this Section 1.5 shall be equal to $17 plus interest thereon
at the rate of 8.25% per annum from the Closing Date through
the date on which such Acquired Shares are purchased based on
the actual number of days elapsed during such period (the
"Call/Put Price"). The Buyer may exercise its right under this
Section 1.5(a) from time to time with respect to any or all of
the Acquired Shares by notifying the Seller in writing, on or
prior to June 30, 1998, that it is exercising such right. The
purchase price for any Acquired Shares pursuant to this Section
1.5(a) shall be paid in cash, and the parties shall close any
transaction contemplated by this Section 1.5(a) within fifteen
(15) days after the date on which the Buyer notifies the Seller
it is exercising its right.
(b) If, on or prior to June 30, 1998, the
Seller sells Acquired Shares at a sale price per share before
deducting any applicable sales commissions (the "Gross Sale
Price") greater than the Call/Put Price computed as of the date
of sale divided by .93 (the "Maximum Price"), the Seller shall
refund consideration to the Buyer in an amount equal to the
Gross Sale Price minus the Maximum Price and then multiplied by
the number of Acquired Shares sold for such Gross Sale Price.
(c) For a period of thirty (30) days commencing
on July 1, 1998, the Seller shall have the right to require the
Buyer to buy any or all of the Acquired Shares then owned by
the Seller for cash in the amount equal to the number of
Acquired Shares purchased multiplied by the Call/Put Price. To
exercise such right, the Seller shall notify the Buyer in
writing, on or prior to July 30, 1998, that it is exercising
such right. The parties shall close any transaction
contemplated by this Section 1.5(c) within fifteen (15) days
after the date on which the Seller notifies the Buyer it is
exercising its right. Notwithstanding the foregoing, the Buyer
shall not be required to buy any Acquired Shares which, prior
to June 30, 1998, the Seller could have sold, but decided not
to sell, in a registered public offering or private placement
at a sale price per share (after deducting any sales
commissions) equal to or greater than the Call/Put Price as of
the date of such public offering or private placement.
(d) Until June 30, 1998 and to the extent that
the Seller then owns Acquired Shares, if the Buyer conducts or
participates in a public offering or private placement the
Buyer shall purchase, upon the same terms and conditions as set
forth in Section 1.5(a), the whole number of Acquired Shares
which the Buyer can purchase from the Seller with (i) twenty-
five percent (25%) of the aggregate net proceeds received by
the Buyer, its Affiliates and the Seller from such public
offering or private placement, minus (ii) the amount of net
proceeds, if any, received by the Seller from participating in
such public offering or private placement.
(e) To the extent that the Buyer has not
exercised its right to purchase any Acquired Shares by June 30,
1998 and the Seller has not exercised its right to require the
Buyer to purchase any Acquired Shares by July 30, 1998, the
Buyer shall not have the right to, and shall not be obligated
to, purchase any such Acquired Shares. The Seller shall be
entitled to any and all proceeds in connection with any sale of
the Acquired Shares after June 30, 1998. Following such date,
the Buyer will remain subject to its obligations to register
the Acquired Shares pursuant to the terms of the Registration
Rights Agreement between the Buyer and the Seller entered into
pursuant to this Agreement.
2. Closing; Termination of Agreement.
2.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Nixon, Hargrave, Devans & Xxxxx XXX, Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (or at such other place as
the parties may jointly designate in writing) on May 7, 1997
(the "Closing Date"), or on such other date as the parties may
jointly designate in writing (and for all purposes shall be
effective as of the close of business on such date).
2.2 Termination of Agreement. This Agreement may be
terminated prior to the Closing as follows:
(a) at the election of either the Buyer or the
Seller if the Closing shall not have occurred by June 30, 1997;
(b) by mutual written consent of the Buyer and
the Seller;
(c) by either the Buyer or the Seller if there
shall be in effect a final nonappealable Order of a
Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the
parties hereto shall promptly appeal, and shall diligently
pursue, any adverse determination which is not nonappealable;
(d) by the Buyer if any of the conditions set
forth in Section 6.1 hereof becomes incapable of fulfillment
and is not waived by the Buyer; or
(e) by the Seller if any of the conditions set
forth in Section 6.2 hereof becomes incapable of fulfillment
and is not waived by the Seller.
2.3 Survival After Termination. If this Agreement
is terminated in accordance with Section 2.2 and the
transactions contemplated hereby are not consummated, this
Agreement shall become null and void and of no further force
and effect, except (i) for this Section 2.3, (ii) for the
provisions of Section 5.1(c) and (iii) that the termination of
this Agreement for any reason shall not relieve any party
hereto from any liability the benefit of which at the time of
termination had already accrued to any other party hereto or
which thereafter may accrue in respect of any act or omission
of such party prior to such termination.
3. Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyer that:
3.1 Organization and Good Standing. The Company is
a private limited company duly incorporated under the laws of
England and Wales and has the requisite corporate power and
authority to own, lease and operate its properties and to carry
on its business as now conducted, it being acknowledged that
the Company's present operational facilities are being leased
by its subsidiary Systemcredit Trading Limited (the
"Subsidiary"). The Company is not and is not required to be
qualified or authorized to do business as a foreign corporation
under the laws of any other jurisdiction. The Subsidiary is a
private limited company duly incorporated under the laws of
England and Wales, having registered number 1287937 and its
registered office at Cranleigh Gardens, Southall Middlesex
England, and has the requisite corporate power and authority to
own, lease and operate its properties but has been dormant
since December 31, 1993. The Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has the requisite power
and authority to own, lease and operate its properties and to
carry on its business as now conducted.
3.2 Authorization of Agreement. The Seller has all
requisite power and authority to execute and deliver this
Agreement and each other Contract, document or certificate
contemplated by this Agreement to be executed by the Seller in
connection with the consummation of the transactions
contemplated by this Agreement (collectively, the "Seller
Documents") and to perform duly its obligations hereunder and
thereunder. The execution, delivery and performance by the
Seller of this Agreement and the Seller Documents to which it
is a party have been duly authorized by all necessary
corporate, including stockholder, action on the part of the
Seller. This Agreement has been, and each of the Seller
Documents will be at or prior to the Closing, duly and validly
executed and delivered by the Seller and this Agreement
constitutes, and each of the Seller Documents when so executed
and delivered, and assuming due authorization, execution and
delivery by DSI, will constitute, legal, valid and binding
obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to
general principles of equity.
3.3 Subsidiaries. Except as set forth on Schedule
3.3, the Company does not (i) own beneficially or of record any
shares of capital stock or any other security or other
proprietary or equity interest of or in any other Person or
(ii)have any other investment in any other Person.
3.4 Corporate Records.
(a) The copies of the Certificate of
Incorporation and Memorandum and Articles of Association of the
Company previously delivered to the Buyer are complete, correct
and up to date.
(b) The minute books of the Company previously
delivered or made available to the Buyer contain complete and
accurate records of all meetings and accurately reflect all
other corporate action of the Stockholders and Board of
Directors (including committees thereof) of the Company. All
stock transfer taxes levied or payable with respect to all
transfers of shares of capital stock of the Company prior to
the date hereof have been paid and appropriate transfer tax
stamps affixed.
3.5 Consents of Third Parties. The execution and
delivery by the Seller of this Agreement and the Seller
Documents, the consummation of the transactions contemplated
hereby or thereby, and compliance by the Seller with the
provisions hereof and thereof will not (i) conflict with, or
result in the breach of, any provision of the articles of
incorporation or by-laws of the Seller or the Memorandum and
Articles of Association of the Company; (ii) except as set
forth on Schedule 3.5 conflict with, violate, result in the
breach or termination of, or constitute a default or give rise
to any right of termination or acceleration or right to
increase the obligations or otherwise modify the terms thereof
under any Contract, Permit or Order to which the Seller or the
Company is a party or by which either of them or any of their
respective properties or assets is bound; (iii) constitute a
violation of any Law applicable to the Seller or the Company;
or (iv) result in the creation of any Lien upon the properties
or assets of the Seller or the Company. Except as set forth on
Schedule 3.5, no consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on
the part of the Seller or the Company in connection with the
execution and delivery of this Agreement or the Seller
Documents, or the compliance by the Seller or the Company, as
the case may be, with any of the provisions hereof or thereof.
3.6 Capitalization. The authorized share capital of
the Company consists of 1,000 ordinary shares of 1 pound per share,
and the Company Stock constitutes all of the issued or
outstanding shares or stock of the Company. All outstanding
shares of the Company Stock are duly authorized, validly
issued, fully paid and nonassessable. Except for the Company
Stock, there are no issued or outstanding proprietary or equity
interests in the Company. There are no outstanding options,
warrants or other rights of any kind to acquire any additional
shares or stock of the Company or other proprietary or equity
interests in the Company or securities convertible into or
exchangeable for, or which otherwise confer on the holder
thereof any right to directly or indirectly acquire, any shares
or stock of the Company or other proprietary or equity
interests in the Company, nor is the Company committed to issue
any such option, warrant, right or security.
3.7 Ownership of Shares. The Seller is the
registered holder and beneficial owner of the Company Stock
free and clear of any and all Liens, except for Liens set forth
in Schedule 3.7 which shall be satisfied or otherwise released
on or before the Closing Date. The Company is the registered
holder and beneficial owner of all of the issued and
outstanding shares or stock of the Subsidiary, free and clear
of any and all Liens, except as set forth in Schedule 3.7. The
Seller sells the Company Stock with full title guarantee.
3.8 Financial Statements. The Seller has delivered
to the Buyer copies of (i) the audited balance sheets of the
Company as at October 31, 1995 and 1996 and the related audited
statements of income and retained earnings, and cash flows of
the Company for the years then ended and the unaudited balance
sheet of the Company as at April 30, 1997 and the related
unaudited statements of income and retained earnings, and cash
flows of the Company for the period then ended (such audited
and unaudited financial statements of the Company, including
the related notes and schedules thereto, are referred to herein
as the "Financial Statements"). Each of the Financial
Statements: (i) fairly represents the financial position and
of the state of affairs of the Company as at their date and
have not been affected by any unusual, extraordinary,
exceptional or non-recurring event; (ii) complies with all
relevant statutory requirements; (iii) were prepared in
accordance with all relevant financial reporting standards
and/or Statements of Standard Accounting Practice or, where
there are none, in accordance with UK generally accepted
accounting principles, and (iv) were prepared on a consistent
basis and in accordance with the same accounting policies as
have been used for the corresponding accounts for the last
three (3) years, except that the audited balance sheet and the
statements of income and retained earnings and cash flows for
the year ended October 31, 1996 will be adjusted by 350,000 pounds to
reflect a decrease in royalty expense and inter-company debt.
For the purposes hereof, the audited balance sheet of
the Company as at October 31, 1996 is referred to as the
"Balance Sheet" and October 31, 1996 is referred to as the
"Balance Sheet Date."
3.9 No Undisclosed Liabilities. The audited
accounts of the Company for the period ending on the Balance
Sheet Date disclose or contain proper provisions and/or
reserves for all material liabilities (actual, contingent or
otherwise including, without limitation, deferred taxation) of
the Company as at the Balance Sheet Date, and since the Balance
Sheet Date the Company has not incurred or entered into any
material debt, obligation or liability of any kind other than
those incurred in the ordinary course of business consistent
with past practice or otherwise expressly disclosed herein or
in a schedule hereto. The Seller and the Company know of no
facts (other than facts of a general economic or political
nature or facts generally known within the industry) which have
caused or in the future are reasonably likely to cause a
Material Adverse Change to the Company which have not been set
forth in the Financial Statements or expressly disclosed herein
or in a schedule hereto. Where not otherwise stated in the
audited accounts of the Company, the Seller has disclosed in
Schedule 3.9 full details of all deferred taxation liability.
There are no conditions or circumstances existing as of the
Closing Date which could give rise to liabilities which are not
reflected as liabilities in the Financial Statements.
3.10 Absence of Certain Developments. Except as set
forth on Schedule 3.10 or as expressly contemplated by this
Agreement, since the Balance Sheet Date:
(i) there has not been any Material Adverse
Change to the Company nor, to the knowledge of the
Seller or the Company has any event occurred which is
reasonably likely to result in any Material Adverse
Change to the Company;
(ii) there has not been any material damage,
destruction or loss, whether or not covered by
insurance, with respect to the property and assets of
the Company;
(iii) there has not been any declaration,
setting aside or payment of any dividend or other
distribution in respect of any shares of capital
stock of the Company or any repurchase, redemption or
other acquisition by the Company of any outstanding
shares of capital stock, or other securities of, or
other proprietary or equity interest in, the Company;
(iv) there has not been any transfer, issue,
sale or other disposition by the Seller or the
Company of any shares of capital stock, proprietary
or equity interests or other securities of the
Company or any grant of options, warrants, rights or
other securities to purchase or otherwise acquire
shares of such capital stock, proprietary or equity
interests or such other securities;
(v) the Company has not awarded or paid any
bonuses to employees of the Company except in the
ordinary course of business consistent with past
practice or to the extent accrued on the Balance
Sheet, or entered into any employment, deferred
compensation, severance or similar agreement (nor
amended any such agreement) or agreed to increase the
compensation payable or to become payable by it to
the Company's directors, officers, employees, agents
or representatives or agreed to increase the coverage
or benefits available under any severance pay,
termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation,
insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such
directors, officers, employees, agents or
representatives;
(vi) there has not been any change by the
Company in its accounting principles, methods or
policies;
(vii) the Company has not entered into any
transaction or Contract or conducted its business
other than in the ordinary course of its business
consistent with past practice;
(viii) other than in the ordinary course of
business consistent with past practice, the Company
has not failed to promptly pay and discharge current
liabilities of the Company except where disputed in
good faith by appropriate proceedings;
(ix) the Company has not made any loans,
advances or capital contributions to, or investments
in, any Person or paid any fees or expenses to the
Seller or any Affiliate of the Seller (other than the
Company);
(x) the Company has not mortgaged, pledged or
subjected to any Lien any of its assets, or acquired
any assets or sold, assigned, transferred, conveyed,
leased or otherwise disposed of any assets of the
Company except for assets of the Company acquired or
sold, assigned, transferred, conveyed, leased or
otherwise disposed of in the ordinary course of
business consistent with past practice;
(xi) the Company has not discharged or
satisfied any Lien, or paid any obligation or
liability (fixed or contingent) of the Company,
except in the ordinary course of business consistent
with past practice and which, in the aggregate, would
not be material to the Company taken as a whole;
(xii) the Company has not cancelled or
compromised any debt or claim of the Company or
amended, cancelled, terminated, relinquished, waived
or released any Contract or right of the Company
except in the ordinary course of business consistent
with past practice and which, in the aggregate, would
not be material to the Company taken as a whole;
(xiii) neither the Seller nor the Company has
transferred or granted any rights under any
concessions, leases, licenses or agreements of the
Company or Intangible Property used by the Company in
its business;
(xiv) the Company has not made or committed to
make any capital expenditures or capital additions or
betterments in excess of $5,000 individually or
$25,000 in the aggregate;
(xv) the Company has not instituted or settled
any material Legal Proceeding to which the Company is
a party; and
(xvi) the Company has agreed to do anything set
forth in this Section 3.10 and the Seller has not
agreed to cause the Company to do anything set forth
in this Section 3.10.
3.11 Taxes.
(a) Except as provided on Schedule 3.11, the
Company has timely filed with the appropriate Governmental
Bodies all Tax Returns required to be filed by or with respect
to the Company, its operations and assets, and all such Tax
Returns are true, complete and correct and are not being
disputed by any Governmental Body.
(b) Except as provided on Schedule 3.11, the
Company has timely paid (and until the Closing Date will timely
pay) all Taxes that are due and payable on or before the
Closing Date with respect to the Company, its operations and
assets, except for Taxes that are being contested in good faith
by appropriate proceedings disclosed on Schedule 3.11 and as to
which adequate reserves have been or will be, as applicable,
reflected on the Balance Sheet, the Preliminary Balance Sheet
or the Final Balance Sheet.
(c) Except as provided on Schedule 3.11, the
Company has complied (and through and including the Closing
Date will comply) with all applicable Laws relating to the
payment and withholding of Taxes, and has timely deducted from
employee wages and paid over (and through and including the
Closing Date will timely deduct and pay over) to the Inland
Revenue of England or other proper Governmental Bodies all
amounts required to be so deducted and paid over for all
periods under all applicable Laws.
(d) Except as provided on Schedule 3.11,
neither the Company nor the Seller has requested any extension
of time within which to file any Tax Return covering any Tax
for which the Company would be liable, which Tax Return has not
since been filed.
(e) The income Tax Returns of the Company have
been examined by the appropriate Governmental Bodies, or the
period covered by such Tax Returns has been closed by an
applicable statute of limitations, for all periods through
October 31, 1993. All deficiencies asserted as a result of
such examinations or otherwise have been paid, fully settled or
adequately provided for in the Balance Sheet, and no issue has
been raised by a Governmental Body in any such examination
which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for
any subsequent taxable period.
(f) Except as provided on Schedule 3.11, the
Company has not executed or filed (and prior to the close of
business on the Closing Date will not execute or file) with any
Governmental Body any agreement or other document extending or
having the effect of extending the period for assessment or
collection of any Taxes for which the Company would be liable.
(g) Except as described on Schedule 3.11, no
audit, examination or other administrative proceeding or court
proceeding is presently pending or been conducted since January
1, 1994 or, to the knowledge of the Seller or the Company,
threatened with regard to any Taxes for which the Company would
be liable.
(h) Except as described on Schedule 3.11, the
Company (i) has not agreed to and is not required to make any
adjustment by reason of a change in accounting method initiated
by the Company, (ii) has no knowledge that a Governmental Body
has proposed any such adjustment or change in accounting method
and (iii) has no application pending with any Governmental Body
requesting permission for any change in accounting methods that
relates to the business and operations of the Company.
(i) The Seller is not a "foreign person"
within the meaning of Section 1445 of the Code.
3.12 Real Property.
(a) Neither the Company nor the Subsidiary
owns any freehold real property. Schedule 3.12 contains a
correct and complete schedule of the documents under which the
Company or the Subsidiary uses or occupies or has the right to
use or occupy, now or in the future, any real property (the
"Real Property Leases"). Neither the Company nor the
Subsidiary is a party to any lease, sublease, license or other
agreement for the use or occupancy of any real property other
than the Real Property Leases. There exists no reciprocal
easement or operating agreements relating to the Real Property
Leases between the Company or the Subsidiary and any third
party and, to the knowledge of the Seller and the Company,
between the lessors under the Real Property Leases and any
third party. The Subsidiary is the sole lessee under the Real
Property Leases and the Subsidiary has not assigned, sublet,
mortgaged or otherwise encumbered in any respect whatsoever its
respective leasehold estate under the Real Property Leases.
Neither the Company nor the Subsidiary owns or holds, or is
obligated under or a party to, any option, right of first
refusal or other contractual right to purchase, acquire, sell,
assign or dispose of any real estate or any portion thereof or
interest therein.
(b) Each of the Real Property Leases is a
valid and binding obligation enforceable by and against the
Subsidiary in accordance with its terms, and there is no
default under any of the Real Property Leases by the Company or
the Subsidiary or, to the knowledge of the Seller and the
Company, by any other party thereto and, to the knowledge of
the Seller and the Company, no event has occurred that with the
lapse of time or the giving of notice or both would constitute
a default thereunder. No previous or current party to the Real
Property Leases has given written notice of or made a Claim
against the Company or the Subsidiary with respect to any
breach or default thereunder which remains uncured or otherwise
in existence as of the date hereof. All rent and other sums
and charges payable by the Subsidiary under or in respect of
the Real Property Leases have been paid. Each of the Real
Property Leases covers the entire estate it purports to cover
and, upon the consummation of the transactions contemplated by
this Agreement, will continue to entitle the Company and/or the
Subsidiary to the use, occupancy and possession of the real
property specified in the Real Property Leases (the "Leased
Property") and for the purposes such property is now being or
is contemplated to be used by the Company or the Subsidiary.
Complete and correct copies of the Real Property Leases,
together with all amendments, modifications, supplements or
side letters affecting the obligations of any party thereunder,
have been delivered to the Buyer. None of the rights of the
Company or the Subsidiary under any of the Real Property Leases
will be subject to termination or modification as a result of
the transactions contemplated by this Agreement. The Leased
Property complies in all material respects with all applicable
Laws and no notice of violation of any such Law has been
received by any of the Seller, the Company or the Subsidiary
or, to the knowledge of the Seller, the Company or the
Subsidiary, no such notice has been issued by any Governmental
Body with respect to such property. To the knowledge of the
Seller, the Company and the Subsidiary, no part of the Leased
Property is subject to any conditional limitation imposed by
virtue of any permission, notice or order under the Town &
Country Planning Xxx 0000 and preceding Planning and Town &
Country Planning Acts (collectively, the "Planning Acts") that
would restrict or prevent the present use and operation of such
property, that no development has been undertaken on or at any
part of the Leased Property otherwise than in accordance with
the provisions of the Planning Acts, the current use of the
Leased Property is lawful for the purposes of the Planning Acts
and there is no proposal or dispute that could negatively
impact on the use and operation of a Leased Property. Except
as set forth on Schedule 3.12, no labor has been performed or
material furnished for any portion of the Leased Property for
which any Lien having a value in excess of $5,000 in the
aggregate can be claimed.
(c) No portion of the Leased Property is
dependent for its access, operation or utility on any land,
building or other improvement not part of the Leased Property.
The Leased Property has direct, unobstructed access, both
pedestrian and vehicular, to public rights of way. All utility
systems required in connection with use, occupancy and
operation of the Leased Property are supplied directly to the
Leased Property by facilities of public utilities, are
sufficient for their present purposes, are fully operational
and in working order, and are benefitted by customary utility
easements providing for the continued use and maintenance of
such systems.
3.13 Tangible Personal Property.
(a) The Company owns or leases all tangible
personal property necessary for or used in the conduct of its
business as now conducted. The Subsidiary does not own or
lease any tangible personal property except to the extent that
fixtures covered by the Real Property Leases may constitute
tangible personal property.
(b) Schedule 3.13 sets forth all leases of
personal property involving annual payments in excess of $5,000
relating to personal property used in the business of the
Company or to which the Company is a party or by which the
Company or any of its properties or assets is bound ("Personal
Property Leases"), as well as a brief description of each such
Personal Property Lease (including the date and substance of
any amendments or modifications thereto), the parties thereto,
the amount of annual payments in respect thereof and the
termination date and the conditions of renewal thereof.
Complete and correct copies of the Personal Property Leases,
together with all amendments, modifications, supplements or
side letters affecting the obligations of any party thereunder,
have been delivered or otherwise made available to the Buyer.
(c) Each of the Personal Property Leases is
valid and enforceable against the Company and the other party
or parties thereto in accordance with its terms, and there is
no default under any Personal Property Lease either by the
Company or, to the knowledge of the Seller and the Company, by
any other party thereto, and to the knowledge of the Seller and
the Company, no event has occurred that with the lapse of time
or the giving of notice or both would constitute a default
thereunder. To the knowledge of the Seller and the Company, no
previous or current party to any such Personal Property Lease
has given notice of or made a claim with respect to any breach
or default thereunder. With respect to those Personal Property
Leases that were assigned or subleased to the Company by a
third party, all necessary consents to such assignments or
subleases have been obtained. Except as set forth on Schedule
3.13, none of the rights of the Company under any of the
Personal Property Leases will be subject to termination or
modification as a result of the transactions contemplated by
this Agreement.
(d) The Company has good title to all of the
items of tangible personal property reflected in the Balance
Sheet (except as sold or disposed of subsequent to the date
thereof in the ordinary course of business consistent with past
practice), free and clear of any and all Liens. All such items
of tangible personal property which, individually or in the
aggregate, are material to the operation of the business of the
Company are in good condition and in a state of good
maintenance and repair (ordinary wear and tear excepted) and
are suitable for the purposes used for the operation of the
business of the Company. All of the items of tangible personal
property used by the Company under the Personal Property Leases
are in good condition and in a state of good maintenance and
repair (ordinary wear and tear excepted) and are suitable for
the purposes used.
3.14 Intangible Property.
(a) Schedule 3.14 sets forth a complete and
correct list of each material patent, trademark, trade name,
service xxxx, brand xxxx, brand name, invention, industrial
design, computer software developed by or specifically for the
Company and copyright owned or, if material, used in the
business of the Company as well as all registrations thereof
and pending applications therefor, and each material license or
other material Contract relating thereto (collectively, the
"Intangible Property") and indicates, with respect to each item
of Intangible Property, the owner thereof and, if applicable,
the name of the licensor and licensee thereof and the basic
material terms of such license or other Contract relating
thereto. Except as set forth on Schedule 3.14, each of the
foregoing is owned by the party shown on such Schedule as
owning the same free and clear of any and all Liens and is in
good standing, no other Person or entity has any claim of
ownership with respect thereto and, where applicable, all
registrations or other required filings have been timely made.
To the knowledge of the Seller and the Company, the use of the
Intangible Property by the Company does not conflict with,
infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right,
patent, trademark, trade name, service xxxx, brand xxxx, brand
name, invention, industrial design, computer software,
copyright or any pending application therefor of any other
Person. Except as set forth on Schedule 3.14, there have been
no Legal Proceedings initiated to which the Company is a party
or of which the Seller or the Company is aware, and neither the
Seller nor the Company has received any notice or otherwise
knows that any of the Intangible Property is invalid or
conflicts with the asserted rights of other Persons or have
failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of the
Intangible Property.
(b) The Company owns or licenses all
Intangible Property, trade secrets, know-how, formulae and
other proprietary and trade rights necessary for the conduct of
its business as now conducted or relating to products or
processes under development. Except as set forth on Schedule
3.14, the Company has not forfeited or otherwise relinquished
any such Intangible Property, trade secrets, know-how, formulae
or other proprietary right used in and necessary for the
conduct of its business as now conducted or relating to
products or processes under development.
(c) Each of the licenses or other Contracts
relating to the Intangible Property ("Intangible Property
Licenses") is valid and enforceable by or against the Company
in accordance with its terms, and there is no default under any
Intangible Property License by the Company or, to the knowledge
of the Seller and the Company, by any other party thereto, and
no event has occurred that with the lapse of time or the giving
of notice or both would constitute a default thereunder.
Complete and correct copies of the Intangible Property
Licenses, together with all amendments, modifications,
supplements or side letters affecting the obligations of any
party thereunder have been delivered or otherwise made
available to the Buyer. Except as set forth on Schedule 3.14,
no previous or current party to any such Intangible Property
License has given notice of or initiated a Legal Proceeding
with respect to any breach or default thereunder. With respect
to those Intangible Property Licenses that were assigned or
sublicensed to the Company by a third party, all necessary
consents to such assignments or sublicenses have been obtained.
Except as set forth on Schedule 3.14, none of the rights of the
Company under any of the Intangible Property Licenses will be
subject to termination or modification as a result of the
transactions contemplated by this Agreement.
(d) To the Seller's and Company's knowledge,
except as set forth in Schedule 3.14, no third party is
infringing upon any rights of the Company to the Intangible
Property. Neither the Seller nor the Company is aware that any
of Company's employees is obligated under any Contract or
covenants or commitments of any nature, or subject to any
judgment, decree or order of any court or administrative
agency, that would interfere with the use of his best efforts
to promote the interests of the Company or that would conflict
with the Company's business as presently conducted. Neither
the execution nor delivery of this Agreement, nor the carrying
on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as presently
conducted, will, to the Seller's or the Company's knowledge,
conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under any Contract,
covenant or commitment under which any of such employees is now
obligated. Neither the Seller nor the Company believes that it
is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior
to their employment by the Company.
3.15 Material Contracts.
(a) Except as set forth on Schedules 3.12,
3.13 and 3.14 or as set forth on Schedule 3.15, neither the
Company nor any of its properties or assets is a party to,
bound by or subject to any (i) Contract not made in the
ordinary course of business, the performance of which will
extend over a period greater than thirty (30) days; (ii)
Contract, whether or not made in the ordinary course of
business, which as of or after the Closing Date will obligate
the Company to sell or deliver any product or service, taken as
a whole, at a price which does not cover the aggregate cost
(including labor, materials and production overhead) thereof
plus the customary profit margin associated with such product
or service, which is not terminable by the Company within
thirty (30) days after written notice thereof and without
liability to the Company; (iii) employment, consulting, non-
competition, severance, golden parachute or indemnification
Contract (including, without limitation, in each case any
Contract to which the Company is a party involving employees of
the Company), which is not terminable by the Company, as the
case may be, within thirty (30) days after written notice
thereof and without liability to the Company; (iv) advertising,
public relations, franchise, distributorship, sales
representative or sales agency Contract, which is not
terminable by the Company, as the case may be, within thirty
(30) days after written notice thereof and without liability to
the Company; (v) Contract (including, without limitation,
purchase orders issued by customers or to suppliers of the
Company which remain open as of the date of this Agreement)
involving the commitment or payment in excess of $10,000 for
the future purchase of services or equipment; (vi) Contract
among stockholders or granting a right of first refusal or for
a partnership or a joint venture or for the acquisition, sale
or lease of any assets, partnership interests or capital stock
of the Company or any other Person or involving a sharing of
profits; (vii) mortgage, pledge, conditional sales contract,
security agreement, factoring agreement or other similar
Contract with respect to any real or tangible personal property
of the Company involving an amount in excess of $10,000; (viii)
loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar
type of Contract involving an amount in excess of $10,000; (ix)
confidentiality agreement, non-solicitation agreement, non-
competition agreement or other similar Contract restricting in
any way the scope or nature of business which may be conducted
by the Company or any of its affiliates; (x) Contract with any
Governmental Body except standard purchase orders with any
Governmental Body in the ordinary course of business; (xi)
Contract with respect to the discharge, storage or removal of
Hazardous Materials; (xii) retainer Contract with attorneys,
accountants, actuaries, appraisers, investment bankers or other
professional advisers; or (xiii) commitment or agreement to
enter into any of the foregoing. Except as set forth on
Schedule 3.15, the Company is not a party to or bound by any
distributorship, sales representative or sales agency Contract
with any Person in respect of products and/or services
manufactured, sold or marketed by the Company. There has been
delivered or otherwise made available to the Buyer complete and
correct copies of the Contracts listed on Schedule 3.15,
together with all amendments, modifications, supplements or
side letters affecting the obligations of any party thereunder.
With respect to (x) certain Contracts of the type described in
clause (v) above and (y) Contracts which are not in writing,
Schedule 3.15 contains a description of the material terms
thereof (including, without limitation, the parties thereto,
the amount of consideration thereunder and any termination
provisions contained therein or pertaining thereto).
(b) Each of the Contracts listed on Schedule
3.15 is valid and binding obligation enforceable by and against
the Company in accordance with its terms, and there is no
material or known default under any Contract listed or
described on Schedule 3.15 either by the Company or, to the
knowledge of the Seller and the Company, by any other party
thereto, and no event has occurred that with the lapse of time
or the giving of notice or both would constitute a default
thereunder. No party to any Contract set forth on Schedule
3.15 has given notice of or initiated a Legal Proceeding with
respect to any breach or default thereunder.
(c) With respect to any Contract listed or
described on Schedule 3.15 that was assigned or subleased to
the Company by a third party, all necessary consents to such
assignments or subleases have been obtained. Except as set
forth on Schedule 3.15, none of the rights of the Company under
any of the Contracts listed or described on Schedule 3.15 will
be subject to termination or modification as a result of the
transactions contemplated by this Agreement.
3.16 Employees; Employee Benefits.
(a) Schedule 3.16(a) sets forth a complete and
correct list of all employees of the Company, together with
their job descriptions and rates of pay.
(b) Other than under or in respect to the
Digital Audio Group Personal Pension Scheme and the Digital
Audio Xxxxxxxxx Group Personal Pension Scheme (collectively,
the "GPPs"), no obligations, liabilities or promises have been
created or made by the Company to pay any gratuity, or to
provide retirement, death, disability, sickness, accident,
termination of employment, or other like benefit, or to
contribute to or participate in any scheme or any arrangement
providing any such benefits for or in respect of any past or
present employee of the Company. There is no contribution due
but unpaid in respect of the GPPs which has not been accrued
for in the Financial Statements. The GPPs are group personal
pension plans and no assurance, promise or guarantee (either
written or oral) has been made or given to any member of the
GPPs of any particular level or amount of benefits (other than
insured lump sum death in service benefits) to be provided for
or in respect of him under the GPPs on retirement death or
leaving service.
3.17 Labor.
(a) The Company is not a party to any labor or
collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of
the Company.
(b) No employees of the Company are
represented by any labor organization. No labor organization
or group of employees of the Company has made a pending demand
for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending
or, to the knowledge of the Seller or the Company, threatened
to be brought or filed, with any Governmental Body. There is
no organizing activity involving the Company pending or, to the
knowledge of the Seller or the Company, threatened by any labor
organization or group of employees of the Company.
(c) Neither the Seller nor the Company has any
knowledge of any (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) grievances or other labor
disputes pending or, to the knowledge of the Seller or the
Company, threatened against or involving the Company. Except
as set forth on Schedule 3.17, there are no unfair labor
practice charges, grievances or complaints pending or, to the
knowledge of the Seller or the Company, threatened by or on
behalf of any employee or group of employees of the Company nor
are the Seller or the Company aware of any circumstances which
might give rise to such charges, grievances or complaints.
(d) Except as set forth on Schedule 3.17,
there are no complaints, charges or claims of any kind against
the Company pending or, to the knowledge of the Seller or the
Company, threatened to be brought or filed, with any
Governmental Body based on, arising out of, in connection with,
or otherwise relating to the employment or engagement by the
Company of any individual as an employee or independent
contractor. Hours worked by and payments made to employees of
the Company have not been in violation of any Law dealing with
such matters. The Company is in compliance with all Laws and
Orders relating to employment, including all such Laws and
Orders relating to wages, hours, pay practices, benefits,
collective bargaining, discrimination, retaliations, civil
rights, sexual and other types of unlawful harassment, safety
and health, leaves of absence, accommodation of individuals
with disabilities, pay equity and the collection and payment of
PAYE and National Insurance.
(e) Except as set forth on Schedule 3.17, all
employees of the Company are employed on an at-will basis and
are terminable upon giving notice without any liability or
obligation to them except as provided by Law.
3.18 Litigation. There are no Legal Proceedings
pending or, to the knowledge of the Seller or the Company,
threatened (or any basis therefor known to the Seller or the
Company) that question the validity of this Agreement or the
Seller Documents or any action taken or to be taken by the
Seller or the Company in connection with the consummation of
the transactions contemplated hereby or thereby. Schedule 3.18
sets forth a list of all Legal Proceedings pending or, to the
knowledge of the Seller or the Company, threatened against (or
any basis therefor known to the Seller or the Company) or
involving the Company or any properties or assets of the
Company, at law or in equity. There is no outstanding or, to
the knowledge of the Seller or the Company, threatened (or any
basis therefor known to the Seller or the Company) Order of any
Governmental Body against, involving or naming the Company or
involving any of its properties or assets. Schedule 3.18 sets
forth a list of all Legal Proceedings pending or contemplated
in which the Company is the plaintiff.
3.19 Compliance with Laws; Permits.
(a) Except as set forth on Schedule 3.19, the
Company is and at all times has been in compliance with all
Laws and Orders promulgated by any Governmental Body applicable
to the Company or to the conduct of the business or operations
of Company or the use of any of its properties (including the
Leased Properties) and assets. Except as set forth on Schedule
3.19, neither the Seller nor the Company has received, or knows
of the issuance of, any notices of any violation or alleged
violation of any such Law or Order of any Governmental Body.
Except as set forth on Schedule 3.19, any products
manufactured, sold, marketed, distributed or delivered by the
Company ("Products") are and at all times have been in
compliance with all Laws and Orders promulgated by any
Governmental Body applicable to the Products, there are no
product recalls by any Governmental Body pending or, to the
knowledge of the Seller and the Company, contemplated or
threatened, with respect to any of the Products and, to the
knowledge of the Seller and the Company, there are no pending
or threatened investigations by any Governmental Body with
respect to any of the Products.
(b) Schedule 3.19 lists all Permits of the
Company issued or granted by all Governmental Bodies,
indicating, in each case, the expiration date thereof. The
Company has all Permits that are required to be obtained by the
Company to permit the operations of its business in the manner
in which such operations are currently conducted. To the
knowledge of the Seller and the Company, such Permits have been
validly issued to the Company by the appropriate Governmental
Bodies in compliance, in all material respects, with all
applicable Laws, and the Company has complied with all
conditions of such Permits applicable to it. No default or
violation, or event that with the lapse of time or giving of
notice or both would become a default or violation, has
occurred in the due observance of any such Permit. All such
Permits are in full force and effect without further consent or
approval of any Person. Schedule 3.19 also lists all Permits
applied for or expected to be applied for by the Company.
3.20 Environmental Matters. (i) The operations of
the Company have been and, as of the Closing Date, will be in
compliance with all Environmental Laws; (ii) the Company has
obtained, currently maintains and, as of the Closing Date, will
have all Environmental Permits required for its operations; all
such Environmental Permits are and, as of the Closing Date,
will be, in full force and effect and in good standing; there
are no Legal Proceedings pending or, to the knowledge of the
Seller or the Company, threatened with respect to any such
Environmental Permit; the Company is, and as of the Closing
Date will be, in material compliance with such Environmental
Permits; and neither the Seller nor the Company has received
any notice from any source, or has otherwise obtained
knowledge, to the effect that there is lacking any
Environmental Permit required in connection with the current
operations of the Company or the current use or operation of
the Leased Property or any real property previously leased or
owned by the Company; (iii) the Company and all of their past
and current Facilities and operations are not (x) subject to
any outstanding written Order or Contract, including
Environmental Liens, with or in favor of any Regulatory
Authority or (y) to the knowledge of the Seller or the Company,
subject to any investigation respecting (A) Environmental Laws,
(B) any Remedial Action or (C) any Environmental Claim; (iv)
the Company is not subject to any Legal Proceeding alleging the
violation of any Environmental Law or Environmental Permit; (v)
neither the Seller nor the Company has received (nor, to the
knowledge of the Seller or the Company, has there been issued)
any written communication that alleges that the Company is not
in compliance with any Environmental Law or Environmental
Permit; (vi) the Company has not caused or permitted any
Hazardous Materials to remain or be disposed of, either on or
under real property legally or beneficially owned or operated
by the Company or on any real property not permitted to accept,
store or dispose of such Hazardous Materials other than in
compliance with Environmental Laws and Permits; (vii) the
Company has no liabilities (other than those related to its
disposal obligations) with respect to Hazardous Materials;
(viii) none of the operations of the Company involve the
generation, transportation, treatment, storage or disposal of
hazardous waste or controlled waste other than in compliance
with Environmental Laws and Permits; and (ix) to the knowledge
of the Seller and the Company, there is not now on or in the
Leased Property, nor have there been, (A) any underground
storage tanks or surface tanks, dikes or impoundments; (B) any
asbestos-containing materials or (C) any polychlorinated
biphenyls.
3.21 Investment Company Act. The Seller is not, and
is not directly or indirectly controlled by or acting on behalf
of any Person that is, an investment company within the meaning
of the Investment Company Act of 1940, as amended (an
"Investment Company"), and, immediately following the
consummation of the transactions contemplated by this
Agreement, the Seller will not be, and will not be directly or
indirectly controlled by or acting on behalf of any Person that
will be, an Investment Company.
3.22 Insurance. Schedule 3.22 sets forth a list of
all policies of insurance of any kind or nature covering the
Company or any of its employees, properties or assets,
including, without limitation, policies of life, disability,
fire, theft, workers compensation, employee fidelity and other
casualty and liability insurance. All such policies are in
full force and effect. The Seller or the Company have
delivered or otherwise made available to the Buyer complete and
correct copies of each such policy, together with all
amendments, modifications, supplements or side letters
affecting the obligations of any party thereunder.
3.23 Receivables; Payables. Subject to the Final
Balance Sheet:
(a) All accounts receivable of the Company
have arisen from bona fide transactions in the ordinary course
of business consistent with past practice and are legally
binding. All accounts receivable of the Company reflected on
the Financial Statements or arising after the date thereof are
good and collectible at the aggregate recorded amounts thereof,
net of any applicable reserve for returns or doubtful accounts
reflected thereon, which reserves are adequate and were
calculated in a manner consistent with past practice and in
accordance with generally accepted accounting principles
consistently applied.
(b) All accounts payable of the Company
reflected on the Balance Sheet, or arising after the date
thereof, are the result of bona fide transactions in the
ordinary course of business and have been paid or, in the
ordinary course of business consistent with the Company's past
practices, have not yet been paid.
(c) Except for customer pre-payments in the
ordinary course of business which are or will be reflected on
the Balance Sheet, the Preliminary Balance Sheet or the Final
Balance Sheet, the Company has not received any advance
payments, deposits or similar payments in respect of any goods
sold or to be sold or services performed or to be performed
after the Closing Date.
3.24 Customers and Suppliers. Schedule 3.24 lists
(on a dollar amount basis) the fifteen (15) largest customers
in terms of sales and the twenty (20) largest suppliers in
terms of purchases of the Company taken as a whole during the
year ended October 31, 1996 and the approximate amount of sales
to each such customer and purchases from each such supplier
during such year. Except as expressly set forth on Schedule
3.24, (i) the relationships of the Company taken as a whole
with its customers and suppliers have been entered into and are
conducted pursuant to arms' length transactions, and (ii) since
January 1, 1996 no customer or supplier of the Company set
forth on Schedule 3.24 or other material customer or supplier
of the Company has cancelled, otherwise terminated, materially
altered, or threatened in writing to cancel, otherwise
terminate or materially alter, its relationship with the
Company or withheld or materially delayed payment for, or
shipment of, any products or threatened in writing to do so.
3.25 Related Party Transactions. Except as set forth
on Schedule 3.25, since the Balance Sheet Date and as of the
date hereof, neither the Seller nor any of its Affiliates has
entered into any transaction with or is a party to any Contract
with the Company. Except as set forth on Schedule 3.25,
neither the Seller nor any of its Affiliates owns any direct or
indirect interest of any kind in, or controls or is a director,
officer, employee or partner of, or consultant to, or lender to
or borrower from or has the right to participate in the profits
of, any Person which is a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Company.
3.26 Banks; Powers of Attorney and Proxies. Schedule
3.26 sets forth a complete and correct list of the names and
locations of all banks in which the Company has accounts or
safe deposit boxes, the account numbers of all such accounts
and the names of all Persons authorized to draw thereon or to
have access thereto. Except as set forth on Schedule 3.26, no
Person holds a power of attorney, proxy or similar instrument
to act on behalf of the Company.
3.27 Special Terms; Product Warranties. Except as
set forth on Schedule 3.27, the Company has not provided any
customer with any special credit, discount or other terms
outside the ordinary course of business consistent with past
practice. Except in the ordinary course of business consistent
with past practices and within industry norms, no express
product or service warranties or guarantees have been given by
the Company.
3.28 Entire Business. The assets, properties and
rights which will be owned or leased by the Company or the
Subsidiary as of the Closing Date will constitute all of the
tangible and intangible property used by and necessary to the
Company in connection with the conduct of its businesses as now
conducted.
3.29 Investment in DSI Stock.
(a) The Seller has (i) received and reviewed
this Agreement, including all schedules and exhibits hereto,
the Buyer Disclosure Documents (as defined in Section 4.5), the
Certificate of Incorporation, as amended, of the Buyer, and the
By-laws of the Buyer, as amended, and (ii) had, during the
course of the transactions contemplated hereby and prior to the
Seller's receipt of DSI Stock, the opportunity to ask questions
of, and has received answers from, the Buyer concerning the
transactions contemplated hereby and to obtain any additional
information which the Buyer possesses or could acquire without
unreasonable effort or expense; provided, however, that no such
investigation by the Seller shall limit or modify any
representation or warranty made under this Agreement by the
Buyer or rights which the Seller may have with respect thereto.
(b) The Seller is acquiring DSI Stock for its
own account, for investment, and not with a view to any resale
or "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
(c) The Seller understands that because DSI
Stock to be received by it pursuant to this Agreement has not
been registered under the Securities Act, the Seller cannot
dispose of any of such DSI Stock until such DSI Stock is
subsequently registered under the Securities Act or an
exemption from such registration is available. The Seller
understands that each certificate representing such DSI Stock
will bear the following legend or one substantially similar
thereto:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE OR FOREIGN
SECURITIES LAWS. THESE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT AND ANY APPLICABLE
STATE AND FOREIGN SECURITIES LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
(d) The Seller is sufficiently knowledgeable
and experienced in financial matters so as to be able to
evaluate the risks and merits of its investment in DSI Stock
and is able to bear the economic risk of loss of its entire
investment in DSI Stock. The Seller is an "accredited
investor" as such term is defined in Rules 215 and 501
promulgated under the Securities Act.
(e) If the Seller desires to dispose of DSI
Stock pursuant to Rule 144A under the Securities Act, the
Seller will re-offer and resell DSI Stock only to persons whom
such Stockholder reasonably believes to be "qualified
institutional buyers" as defined in Rule 144A under the
Securities Act in reliance on the exemption from the
registration requirements of the Securities Act provided by
Rule 144A, and each of whom, in purchasing such DSI Stock will
be deemed to have represented and agreed that (i) it is
purchasing DSI Stock for its own account or an account with
respect to which it exercises sole investment discretion and it
or such accounts are "qualified institutional buyers", (ii)
such DSI Stock will not have been registered under the
Securities Act and may be resold, pledged or otherwise
transferred, only (A)(1) inside the United States to a person
who the Stockholder reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of
Rule 144A, or in accordance with Rule 144 under the Securities
Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion
of counsel if the Buyer so requests), (2) to the Buyer, (3)
outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act,
or (4) pursuant to an effective registration statement under
the Securities Act and (B) in each case, in accordance with any
applicable securities laws of any State of the United States or
any other applicable jurisdiction, and (iii) the holder will,
and each subsequent holder is required to, notify any purchaser
from it of the DSI Stock of the resale restrictions set forth
in (ii) above.
(f) The Seller has been advised that the DSI
Stock to be received by it pursuant to the transactions
contemplated by this Agreement has not been registered under
the Securities Act or under the "blue sky" laws of any
jurisdiction and that the Buyer in issuing DSI Stock to such
Stockholder pursuant to this Agreement in reliance upon, among
other things, the representations and warranties of the Seller
contained in this Section 3.29.
3.30 Financial Advisors. Except as set forth on
Schedule 3.30, no Person has acted directly or indirectly as a
broker, finder or financial advisor for the Seller or the
Company in connection with the negotiations relating to or the
transactions contemplated by this Agreement and no Person is
entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Seller or the
Company. The Seller shall be solely responsible for the
obligations described in Schedule 3.30.
3.31 Disclosure. No representation or warranty made
by the Seller in this Agreement, or in the Seller Documents or
other instruments or certificates delivered pursuant to this
Agreement, contains at the time made and of the respective
dates or will contain as of the Closing Date any untrue
statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts
contained herein or therein, in light of the circumstances
under which they were made, taken as a whole, not misleading
except as the accuracy and/or completeness thereof may be
affected by this Agreement and the transactions contemplated
hereby.
4. Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Seller that:
4.1 Organization and Good Standing. The Buyer is a
corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has full
corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted. Each
of the Buyer and each Subsidiary of the Buyer is duly qualified
or authorized to do business as a foreign corporation, and is
in good standing under the laws of (i) each jurisdiction in
which it owns or leases real property and (ii) each other
jurisdiction in which the conduct of its business or the
ownership of its properties requires such qualification or
authorization, other than in such jurisdictions where the
failure to be so qualified or licensed would not cause a
Material Adverse Change to the Buyer.
4.2 Authorization of Agreement. The Buyer has all
requisite corporate power and authority to execute and deliver
this Agreement and each other Contract, document or certificate
contemplated by this Agreement to be executed by it in
connection with the consummation of the transactions
contemplated hereby and thereby (collectively, the "Buyer
Documents") and to perform fully its obligations hereunder and
thereunder. The execution, delivery and performance by the
Buyer of this Agreement and the Buyer Documents have been duly
authorized by all necessary corporate, including stockholder,
action on the part of the Buyer. This Agreement has been, and
each of the Buyer Documents will be at or prior to the Closing,
duly executed and delivered by the Buyer, and this Agreement
constitutes, and each of the Buyer Documents when so executed
and delivered will constitute, legal, valid and binding
obligations of the Buyer, enforceable against it in accordance
with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium and
similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of
equity.
4.3 Consents of Third Parties. The execution and
delivery by the Buyer of this Agreement and the Buyer
Documents, the consummation of the transactions contemplated
hereby or thereby, and compliance by the Buyer with the
provisions hereof and thereof will not (i)conflict with, or
result in the breach of, any provision of the certificate of
incorporation or By-laws of the Buyer; (ii) conflict with,
violate, result in the breach of, or constitute a default or
give rise to a right of termination or acceleration under any
Contract or Order to which the Buyer is a party or by which it
or any its properties or assets is bound, which, either
individually or in the aggregate, could result in a Material
Adverse Change to the Buyer; (iii) constitute a violation of
any Law applicable to the Buyer; or (iv) result in the creation
of any Lien upon the properties or assets of the Buyer. Except
as set forth on Schedule 4.3, no consent, waiver, approval,
Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is
required on the part of the Buyer in connection with the
execution and delivery of this Agreement or the Buyer Documents
or the compliance by the Buyer with any of the provisions
hereof or thereof.
4.4 Litigation. There are no Legal Proceedings
pending or, to the knowledge of the Buyer, threatened that
question the validity of this Agreement or any of the Buyer
Documents or any action taken or to be taken by the Buyer in
connection with the consummation of the transactions
contemplated hereby or thereby.
4.5 The Buyer Disclosure Documents. The Buyer has
previously delivered to the Seller, and the Seller hereby
acknowledges receipt of, complete and correct copies of (i)the
Buyer's Annual Report on Form 10-K for the year ended Xxxxx 00,
0000, (xx) the Buyer's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1996, September 30, 1996, and December
31, 1996, (iii)the Buyer's Certificate of Incorporation, as
amended, (iv) the Buyer's By-laws, as amended (collectively
with the documents referred to in clauses (i), (ii), (iii) and
(iv) of this Section 4.5 and the additional documents referred
to in Section 5.8(b), the "Buyer Disclosure Documents"). The
Buyer Disclosure Documents are incorporated herein by reference
and made a part hereof. No representation or warranty of the
Buyer contained in this Agreement or any of the Buyer Documents
and no statement contained in any document, certificate or
schedule furnished or to be furnished on or prior to the
Closing Date by or on behalf of the Buyer contains or will
contain as of the Closing Date, and none of the Buyer
Disclosure Documents as of the respective dates thereof
contained, any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which
they were made, taken as a whole, not misleading except as the
accuracy and/or completeness thereof may be affected by this
Agreement and the transactions contemplated hereby.
4.6 Capitalization.
(a) The authorized capital stock of the Buyer
consists of 12,000,000 shares of Common Stock, par value $.05
per share, of which 4,473,820 shares are issued and
outstanding. All of the issued and outstanding shares of
capital stock of the Buyer are duly authorized, validly issued,
fully paid and nonassessable, except as provided in Section 630
of the New York Business Corporation Law, and none of such
shares is subject to any preemptive or subscription rights.
(b) On the Closing Date, the shares of DSI
Stock delivered to the Seller will be duly authorized, validly
issued, fully paid and nonassessable, except as provided in
Section 630 of the New York Business Corporation Law, not
subject to any Lien.
4.7 Absence of Certain Developments. Since March
31, 1997, there has not been any Material Adverse Change to the
Buyer nor has any event occurred which is reasonably likely to
result in a Material Adverse Change to the Buyer.
4.8 SEC Reports. The Buyer is subject to the
reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and has
filed on a timely basis all reports required to be filed by it
under Section 13 or 15(d) at all times since the Buyer has been
subject to such reporting requirements.
4.9 Financial Advisors. No Person has acted
directly or indirectly as a broker, finder or financial advisor
for the Buyer in connection with the negotiations relating to
or the transactions contemplated by this Agreement and no
Person is entitled to any fee or commission or like payment in
respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of the Buyer.
4.10 Exempt Status. Subject to the accuracy of the
Seller's representations and warranties in Section 3.29, the
shares of DSI's common stock issuable to the Seller pursuant to
this Agreement will be exempt from registration under
applicable federal and state securities laws.
4.11 Corporate Records. The copies of the
Certificate of Incorporation and By-laws of the Buyer
previously delivered to the Seller are complete, correct and up
to date.
4.12 No Undisclosed Liabilities. The financial
statements of the Buyer included in the Buyer Disclosure
Documents disclose or contain proper provisions and/or reserves
for all material liabilities (actual, contingent or otherwise
including, without limitation, deferred taxation) of the Buyer
as at the dates presented, and since December 31, 1996 the
Buyer has not incurred or entered into any material debt,
obligation or liability of any kind other than those incurred
in the ordinary course of business consistent with past
practice or otherwise expressly disclosed herein or in a
schedule hereto. The Buyer knows of no facts (other than facts
of a general economic or political nature or facts generally
known within the industry) which have caused or in the future
are reasonably likely to cause a Material Adverse Change to the
Buyer which have not been set forth in the Buyer Disclosure
Documents or expressly disclosed herein or in a schedule
hereto. There are no conditions or circumstances existing as
of the Closing Date which could give rise to liabilities which
are not reflected as liabilities in the Buyer Disclosure
Documents.
4.13 Compliance with Laws; Permits.
(a) The Buyer is and at all times has been in
compliance with all Laws and Orders promulgated by any
Governmental Body applicable to the Buyer or to the conduct of
the business or operations of Buyer or the use of any of its
properties and assets. The Buyer has not received, and does
not know of the issuance of, any notices of any violation or
alleged violation of any such Law or Order of any Governmental
Body. Except as set forth on Schedule 4.13, any products
manufactured, sold, marketed, distributed or delivered by the
Buyer ("Buyer Products") are and at all times have been in
compliance with all Laws and Orders promulgated by any
Governmental Body applicable to the Buyer Products, there are
no product recalls by any Governmental Body pending or, to the
knowledge of the Buyer, contemplated or threatened, with
respect to any of the Buyer Products and, to the knowledge of
the Buyer, there are no pending or threatened investigations by
any Governmental Body with respect to any of the Buyer
Products.
(b) The Buyer has all Permits that are
required to be obtained by the Buyer to permit the operations
of its business in the manner in which such operations are
currently conducted. To the knowledge of the Buyer, such
Permits have been validly issued to the Buyer by the
appropriate Governmental Bodies in compliance, in all material
respects, with all applicable Laws, and the Buyer has complied
with all conditions of such Permits applicable to it. No
default or violation, or event that with the lapse of time or
giving of notice or both would become a default or violation,
has occurred in the due observance of any such Permit. All
such Permits are in full force and effect without further
consent or approval of any Person.
4.14 Environmental Matters. (i) The operations of
the Buyer have been and, as of the Closing Date, will be in
compliance with all Environmental Laws; (ii) the Buyer has
obtained, currently maintains and, as of the Closing Date, will
have all Environmental Permits required for its operations; all
such Environmental Permits are and, as of the Closing Date,
will be, in full force and effect and in good standing; there
are no Legal Proceedings pending or, to the knowledge of the
Buyer, threatened with respect to any such Environmental
Permit; the Buyer is, and as of the Closing Date will be, in
material compliance with such Environmental Permits; and the
Buyer has not received any notice from any source, or has
otherwise obtained knowledge, to the effect that there is
lacking any Environmental Permit required in connection with
the current operations of the Buyer or any real property
presently or previously leased or owned by the Buyer; (iii) the
Buyer and all of its past and current properties and operations
are not (x) subject to any outstanding written Order or
Contract, including Environmental Liens, with or in favor of
any Governmental Body or (y) to the knowledge of the Buyer,
subject to any investigation respecting (A) U.S. Environmental
Laws, (B) any Remedial Action or (C) any Environmental Claim;
(iv) the Buyer is not subject to any Legal Proceeding alleging
the violation of any U.S. Environmental Law or Environmental
Permit; (v) the Buyer has not received (and to the knowledge of
the Buyer, there has not been issued) any written communication
that alleges that the Buyer is not in compliance with any U.S.
Environmental Law or Environmental Permit; (vi) the Buyer has
not caused or permitted any Hazardous Materials to remain or be
disposed of, either on or under real property legally or
beneficially owned or operated by the Buyer or on any real
property not permitted to accept, store or dispose of such
Hazardous Materials other than in compliance with U.S.
Environmental Laws and Permits; (vii) the Buyer has no
liabilities (other than those related to its disposal
obligations) with respect to Hazardous Materials; (viii) none
of the operations of the Buyer involve the generation,
transportation, treatment, storage or disposal of hazardous
waste or controlled waste other than in compliance with U.S.
Environmental Laws and Permits; and (ix) to the knowledge of
the Seller and the Buyer, there is not now on or in the
property owned or leased by the Buyer, nor have there been, (A)
any underground storage tanks or surface tanks, dikes or
impoundments; (B) any asbestos-containing materials or (C) any
polychlorinated biphenyls.
4.15 Investment in Company Stock.
(a) The Buyer has (i)received and reviewed
this Agreement, including all schedules and exhibits hereto,
certain documents relating to the Company as have been
requested by the Seller, the Certificate of Incorporation, as
amended, of the Company, and the Memorandum and Articles of
Association of the Company, and (ii) had, during the course of
the transactions contemplated hereby and prior to the Buyer's
receipt of Company Stock, the opportunity to ask questions of,
and has received answers from, the Seller and the Company
concerning the transactions contemplated hereby and to obtain
any additional information which the Seller or the Company
possesses or could acquire without unreasonable effort or
expense; provided, however, that no such investigation by the
Buyer shall limit or modify any representation or warranty made
under this Agreement by the Seller or rights which the Buyer
may have with respect thereto.
(b) The Buyer is acquiring the Company Stock
for its own account, for investment, and not with a view to any
resale or "distribution" thereof within the meaning of the
Securities Act.
5. Further Agreements of the Parties.
5.1 Access to Information; Confidentiality.
(a) The Seller agrees that, prior to the
Closing Date, the Buyer shall be entitled, through its
officers, employees and representatives (including, without
limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of
the Company and such examination of the books, records and
financial condition of the Company as it reasonably requests
and to make extracts and copies of such books and records. Any
such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and
the Seller shall cooperate, and shall cause the Company to
cooperate, fully therein. No investigation by the Buyer prior
to or after the date of this Agreement shall diminish or
obviate any of the representations, warranties, covenants or
agreements of the Seller or the Company contained in this
Agreement or the Seller Documents. In order that the Buyer may
have full opportunity to make such physical, business,
accounting and legal review, examination or investigation as it
may reasonably request of the affairs of the Company, the
Seller shall, and shall cause the Company to, use reasonable
efforts to cause the officers, employees, consultants, agents,
accountants, attorneys and other representatives of the Seller
or the Company to cooperate fully with the Buyer and its
representatives in connection with such review and examination.
In addition, the Buyer and its officers, employees and
representatives with the consent of the Seller, which shall not
be unreasonably withheld, may contact and communicate with the
customers and suppliers of the Company so long as such
communications do not interfere with the business or operations
of the Company and so long as the information obtained from
such communications is only used in connection with the
transactions contemplated by this Agreement.
(b) The Buyer agrees that, prior to the
Closing Date, the Seller shall be entitled, through its
officers, employees and representatives (including, without
limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations of
the Buyer and such examination of the books, records and
financial condition of the Buyer as it reasonably requests and
to make extracts and copies of such books and records. Any
such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances, and
the Buyer shall cooperate, and shall cause its officers,
employees, consultants, agents, accountants, attorneys and
other representatives to cooperate, fully therein. No
investigation by the Seller shall diminish or obviate any of
the representations, warranties, covenants or agreements of the
Buyer contained in this Agreement or the Buyer Documents.
(c) Any information provided to the Buyer, the
Seller or their respective officers, employees or
representatives pursuant to this Agreement shall be held by the
Buyer, the Seller and such officers, employees or
representatives in strict confidence, and used by them only for
purposes of the transactions contemplated by this Agreement.
If the Closing does not occur, all copies of such information
in whatever form shall be returned to the party providing the
information, and all copies of documents prepared by the Buyer,
the Seller or their officers, employees or representatives
incorporating any such information, in whatever form, shall be
destroyed.
5.2 Conduct of the Business Pending the Closing.
Except as otherwise expressly contemplated by this Agreement or
with the prior written consent of the Buyer, which shall not be
unreasonably withheld, conditioned or delayed, the Seller shall
and shall cause the Company to:
(i) conduct the business of the Company only in
the ordinary course consistent with past practice;
(ii) not (A) declare, set aside, make or pay
any dividend or other distribution in respect of the
capital stock of the Company (other than to
distribute as a dividend or repayment of inter-
company advances cash of the Company as of the
Closing Date to the extent that the amount of such
cash does not exceed 1,008,000 pounds); (B) repurchase,
redeem or otherwise acquire any outstanding shares of
the capital stock or other securities of, or other
proprietary or equity interests in, the Company; (C)
transfer, issue, sell or dispose of any shares of
capital stock, or other proprietary or equity
interests in, or other securities of the Company or
grant options, warrants, calls or other rights to
directly or indirectly purchase or otherwise acquire
shares of capital stock or other securities of, or
other proprietary or equity interests in, the
Company;
(iii) not issue or agree to issue any more
shares or stock nor effect any recapitalization,
reclassification, division, consolidation or like
change in the capitalization of the Company;
(iv) not amend the Memorandum and Articles of
Association of the Company;
(v) use its best efforts to (A) preserve its
present business operations, organization (including,
without limitation, management other than Xxxxx
Xxxxxxxxx) and goodwill of the Company and (B)
preserve its present relationship with Persons having
business dealings with the Company;
(vi) maintain insurance upon all of the
properties and assets of the Company in such amounts
and of such kinds comparable to that in effect on the
date of this Agreement (with insurers of
substantially the same or better financial
condition);
(vii) (A) maintain the books, accounts and
records of the Company in the ordinary course of
business consistent with past practices, (B) continue
to collect accounts receivable and pay accounts
payable utilizing normal procedures and without
discounting or accelerating payment of such accounts,
and (C) comply in all material respects with all
contractual and other obligations applicable to the
operations of the Company;
(viii) not, other than in the ordinary course
of business consistent with past practice and without
materially increasing the benefits or the costs
thereof, (A) increase the compensation payable or to
become payable by the Company to any of their
respective directors, officers, employees, agents or
representatives, (B) increase the coverage or
benefits available under any (or create any new)
severance pay, termination pay, vacation pay, company
awards, salary continuation for disability, sick
leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made
to, for, or with any of the directors, officers,
employees, agents or representatives of the Company
or (C) enter into any employment, deferred
compensation, severance, consulting, non-competition
or similar agreement (or amend any such agreement) to
which the Company is a party or involving a director,
officer or employee of the Company in his or her
capacity as a director, officer or employee of the
Company, except as provided under Section 5.14;
(ix) except for trade payables incurred in the
ordinary course of business consistent with past
practice and for indebtedness for borrowed money
incurred in the ordinary course of business from the
existing revolving credit facility of the Company and
consistent with past practice, not create, incur,
acquire or assume or become subject to, or agree to
incur or become subject to, any debt, obligation or
liability (contingent or otherwise) on behalf of the
Company;
(x) not acquire any material properties or
assets and not sell, assign, transfer, convey, lease
or otherwise dispose of any of the material
properties or assets of the Company (except for fair
consideration in the ordinary course of business
consistent with past practice);
(xi) not cancel or compromise any debt or claim
or waive or release any material right of the Company
except in the ordinary course of business consistent
with past practice;
(xii) not enter into any commitment for capital
expenditures of the Company in excess of $5,000 for
any individual commitment and $25,000 for all
commitments in the aggregate;
(xiii) not enter into, modify or terminate any
labor or collective bargaining agreement of the
Company or, through negotiation or otherwise, make
any commitment or incur any liability to any labor
organization with respect to the Company;
(xiv) not introduce any material change with
respect to the operations of the Company;
(xv) not permit the Company to enter into any
transaction or to make or enter into any Contract
which by reason of its size, subject matter or
otherwise is not in the ordinary course of business
consistent with past practice;
(xvi) promptly notify the Buyer of (A) any
Extraordinary Loss or Extraordinary Losses suffered
by the Company, (B) any casualty losses or damages
suffered by the Company with respect to property and
assets having an individual replacement cost of more
than $10,000 or aggregate replacement cost of more
than $50,000 or which could cause a Material Adverse
Change, whether or not such losses or damages are
covered by insurance, and (C) (i) any Legal
Proceeding commenced or threatened by or against the
Company or (ii) any Legal Proceeding commenced or
threatened against the Seller relating to the
transactions contemplated by this Agreement;
(xvii) not permit the Company to enter into or
agree to enter into any merger or consolidation with,
any corporation or other entity, and not engage in
any new area of business or invest in, make a loan,
advance or capital contribution to, or otherwise
acquire the securities of any other Person;
(xviii) not permit the Company to make any
investments in or loans to, or pay any fees or
expenses to, or enter into or modify any Contract
with, the Seller or any of its Affiliates (other than
the Company);
(xix) promptly and accurately record in the
appropriate records and books of account and minute
books of the Company, all material corporate action
taken on or after the date hereof by the Company or
the Board of Directors (including committees thereof)
of the Company and promptly following such
recordation deliver true, correct and complete copies
thereof to the Buyer;
(xx) unless the Buyer has given written notice
to the Company that it is abandoning the transactions
contemplated by this Agreement, not permit any of
their respective directors, officers, employees,
Affiliates, representatives or agents to, directly or
indirectly, (A) discuss, negotiate, undertake,
authorize, recommend, propose or enter into any
transaction involving a merger, consolidation,
business combination, purchase or disposition of any
amount of the assets, or capital stock or securities
of, or other proprietary or equity interest in, the
Company other than the transactions contemplated by
this Agreement (an "Acquisition Transaction"), (B)
facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals
or offers in respect of an Acquisition Transaction,
(C) furnish or cause to be furnished, to any Person
any information, other than any information furnished
prior to April 25, 1997, the date of the letter of
intent among the Seller and the Buyer, concerning the
business, operations, properties or assets of the
Company in connection with an Acquisition
Transaction, or (D) otherwise cooperate in any way
with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person
to do or seek any of the foregoing; and
(xxi) not agree to do anything prohibited by
this Section 5.2 or anything which would make any of
the representations and warranties of the Seller in
this Agreement or the Seller Documents untrue or
incorrect in any material respect.
5.3 Records of the Company. The originals or
complete and correct copies of all of the books, records,
accounts, files, logs, ledgers, journals, advertising material,
Contracts and other documents (including such of the foregoing
as are stored electronically in computer data bases) held by
the Seller and used by the Company in connection with the
conduct of its business as of the Closing Date and any stock
records it is obligated to hold shall be delivered or made
available to the Buyer at the Closing in form and format
reasonably satisfactory to the Buyer.
5.4 Consents. Each of the Seller and the Buyer
shall, and the Seller shall cause the Company to, use its best
efforts to obtain at the earliest practicable date all consents
and approvals required to consummate the transactions
contemplated by this Agreement, including, without limitation,
the consents and approvals referred to in Section 3.5 hereof;
provided, however, that none of the Company, the Seller or the
Buyer shall be obligated to pay any consideration therefor to
any third party from whom consent or approval is requested.
5.5 Other Actions. Each of the Seller and the Buyer
shall, and the Seller shall cause the Company to, use its best
efforts to (i) take all actions necessary or appropriate to
consummate the transactions contemplated by this Agreement,
(ii) cause the fulfillment at the earliest practicable date of
all of the conditions to their respective obligations to
consummate the transactions contemplated by this Agreement set
forth in Section 6, and (iii) provide the necessary time for
the accounting staff of the Company to assist the independent
auditors in connection with the preparation of the Final
Balance Sheet.
5.6 Preservation of Records. The Seller and the
Buyer agree that each of them shall preserve and keep the
records held by it relating to the business of the Company for
a period of seven years from the Closing Date and shall make
such records and personnel available to the other as may be
reasonably required by such party in connection with, among
other things, any insurance claims by, Legal Proceedings
against or governmental investigations of the Seller, the
Company or the Buyer or any of their Affiliates or in order to
enable the Seller, the Company or the Buyer to comply with
their respective obligations under this Agreement and each
other agreement, document or instrument contemplated hereby.
5.7 Publicity. None of the Seller, the Company, the
Buyer or their respective Affiliates shall issue any press
release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior
written approval of the other party hereto, which approval will
not be unreasonably withheld, conditioned or delayed, unless
otherwise required by applicable Law or by the applicable
rules, regulations and policies of the Nasdaq Stock Market.
5.8 Updating of Information.
(a) The Seller shall, or shall cause the
Company to, promptly deliver to the Buyer any information
concerning events subsequent to the date of this Agreement
which is necessary to supplement the information contained in
or made a part of the representations and warranties contained
herein, including the schedules hereto, or delivered by the
Seller or the Company pursuant to any of the covenants
contained herein in order that the information contained herein
or so delivered be complete and accurate in all material
respects; it being understood and agreed that the delivery of
such information shall not in any manner constitute a waiver by
the Buyer of any of the conditions precedent to the Closing
hereunder.
(b) The Buyer shall promptly deliver to the
Seller copies of any reports that the Buyer files prior to the
Closing Date with the Securities and Exchange Commission (the
"SEC") under the Exchange Act and, upon such delivery, for
purposes of this Agreement, such documents shall thereafter be
deemed to constitute "Buyer Disclosure Documents."
5.9 Certain Tax Matters.
(a) For all federal, state, local and foreign
Tax purposes, each of the parties hereto agrees to treat the
purchase of the Company Stock to be consummated pursuant to the
terms and conditions of this Agreement as a tax-free
reorganization described in Section 368(a) of the Code.
Neither the Seller nor the Buyer makes any representations or
warranties to the other as to whether the transaction
contemplated by this Agreement will in fact qualify as such tax-
free reorganization. Neither the Seller nor the Buyer shall
take any action, or permit the Company to take any action, that
could reasonably be expected to prevent such purchase of the
Company Stock from qualifying as such tax-free reorganization.
(b) The Buyer shall prepare and file or cause
to be prepared and filed all Tax Returns for the Company that
are due on or after the Closing Date.
(c) The Buyer shall promptly notify the Seller
in writing upon receipt by the Buyer or any Affiliate of the
Buyer of notice of (i) any pending or threatened federal,
state, local or foreign Tax audits or assessments of the
Company, so long as any Pre-Closing Period remains open, and
(ii) any pending or threatened federal, state, local or foreign
Tax audits or assessments of the Buyer or any Affiliate of the
Buyer which may affect the Tax liabilities of the Company for
any Pre-Closing Period. The Seller shall promptly notify the
Buyer in writing upon receipt by the Seller of notice
hereinafter received of any pending or threatened federal,
state, local or foreign Tax audits or assessments relating, in
whole or in part, to the income, properties or operations of
the Company.
(d) After the Closing Date, the Buyer and the
Seller shall provide each other, and the Buyer shall cause the
Company to provide the Seller, with such cooperation and
information relating to the Company as either party reasonably
may request in filing any Tax Return (or amended Tax Return) or
refund claim, determining any Tax liability or a right to a
refund, conducting or defending any audit or other proceeding
in respect of Taxes or effectuating the terms of this
Agreement. The parties shall retain, and the Buyer shall cause
the Company to retain, all Returns, schedules, work papers and
other material documents relating thereto, until the expiration
of any relevant statute of limitations (and, to the extent
notified by any party, any extensions thereof) and, unless such
Returns and other documents are offered and delivered to the
Seller or the Buyer, as applicable, until the final
determination of any Tax in respect of such years. Any
information obtained under this Section 5.9 shall be kept
confidential, except as may be otherwise necessary in
connection with filing any Tax Return (or amended Tax Return)
or refund claim, determining any Tax liability or a right to a
refund, conducting or defending any audit or other proceeding
in respect of Taxes or otherwise effectuating the terms of this
Agreement. Notwithstanding the foregoing, neither the Seller
nor the Buyer, nor any of their Affiliates, shall be required
unreasonably to prepare any document, or determine any
information not then in its possession, in response to a
request under this Section 5.9(d); provided, however, no
request shall be deemed unreasonable if made in response to the
request of a taxing authority for information or documents not
in the possession of the requested party nor otherwise
reasonably available to it.
(e) All registration, stamp, value-added or
other similar taxes that are payable by reason of the
transactions contemplated by this Agreement or attributable to
the sale, transfer or delivery of the Company Stock hereunder
shall be borne by the Seller, except that the stamp tax shall
be borne equally by the Buyer and the Seller, and all such
taxes payable or attributable to the sale, transfer or delivery
of the DSI Stock hereunder shall be borne by the Buyer. The
Seller and the Buyer, as the case may be, shall file, or shall
prepare and the Buyer shall cause the Company to file, all
necessary Tax Returns and other documentation with respect to
the Taxes described in this Section 5.9(e).
5.10 Preparation of Certain Financial Statements.
After the Closing, at the request of the Buyer, the Seller
shall reasonably cooperate with and assist the Buyer and its
independent public accountants, in the compilation and
preparation of all financial statements and financial statement
schedules of the Company (prepared in accordance with generally
accepted accounting principles) and reports and consents of the
Company's auditors prior to the Closing, as may be necessary
for the Buyer to comply in a timely manner with SEC reporting
requirements. If requested by the Buyer, the Seller shall
deliver to the independent public accountants of the Buyer and
the Company all engagement letters and management
representation letters, as may be reasonably requested by the
Buyer or such accountants, which shall cover the periods set
forth above and such other periods from the year ended October
31, 1994 through the Closing Date as the Buyer may reasonably
request. In connection with the foregoing, the Seller shall
use its best efforts to cause the Company's auditors to
cooperate with and assist the Buyer and its independent public
accountant in the preparation of the audited and unaudited
financial statements contemplated by this Section 5.10;
provided, however, that the Seller shall not be obligated to
pay any consideration in connection with the foregoing
undertaking.
5.11 Continuity of Business Enterprise. Following
the Closing and in connection with the business of the Company,
the Buyer will conduct its business in a manner that satisfies
the continuity of business enterprise requirement in Treasury
Regulation 1.368-1(d).
5.12 No Transfer. Following the Closing, the Seller
agrees that no shares of DSI Stock received by it pursuant to
this Agreement will be transferred except (a) in an offering in
which the Seller is entitled to participate pursuant to the
Registration Rights Agreement described in Section 6.1(i) or
(b) the first anniversary of the Closing Date; provided,
however, that the foregoing provision shall not prohibit a
pledge of such shares of DSI Stock prior to such dates. The
Buyer agrees that it will use all reasonable diligence to
continue to file with the SEC on a timely basis all reports
required to be filed by it under the Exchange Act.
5.13 Intercompany Debt. Prior to the Closing, the
Seller shall cause each of its Affiliates to assign or
otherwise transfer to the Seller any intercompany debt owed by
the Company to such Affiliates (the "Affiliate Intercompany
Debt") and shall contribute to the capital of the Company the
entire principal balance, plus all unpaid interest accrued
thereon, of the Affiliate Intercompany Debt and any other
intercompany debt owed by the Company to the Seller through the
Closing Date to the extent that such amounts exceed the amount
of cash, if any, permitted to be paid to the Seller by the
Company pursuant to Section 5.2(ii)(a).
5.14 Employee Severance Expenses. The
Seller shall cause the Company to terminate Xxxxx Xxxxxxxxx'x
employment and other relationships with the Company on or
before the Closing Date. The Seller shall bear all costs
associated with the termination of such relationships and shall
satisfy any and all other obligations the Company may have to
Xx. Xxxxxxxxx, all out of assets other than those of the
Company, and shall indemnify and hold harmless the Company from
and against such costs and other obligations. Except as
provided in this Section 5.14, the Company will bear any and
all employee separation costs incurred after the Closing,
satisfying any and all other obligations the Company may have
to its employees, and shall indemnify and hold harmless the
Seller from and against such costs and other obligations.
5.15 Covenants Against Competition. The Seller
acknowledges that (i) the Company has developed trade secrets
and confidential information concerning the intrusion alarm
business (the "Business"); (ii) the Company conducts the
Business in the United Kingdom, Ireland, Russia and Western
Europe (the "Territory") and (iii) the agreements and covenants
contained in this Section 5.15 are essential to protect the
Business following the consummation of the transactions
contemplated hereby. Accordingly, the Seller covenants and
agrees as follows:
(a) Non-Compete. For a period of one (1) year
following the Closing, the Seller (or any other entity 25% or
more of the beneficial ownership of which is held by the Seller
alone or together with any of its Affiliates (a "Controlled
Entity")) shall not anywhere in the Territory thereto (i)engage
in the Business for its own account, or (ii)become a partner,
owner, principal, employee, consultant or agent of any Person
engaged in the Business. Nothing in this Section 5.15(a) shall
be construed to prevent Versus Technology Ltd. from engaging in
the subscriber terminal units business.
(b) Confidential Information. The Seller and
any Controlled Entity shall keep secret and retain in strictest
confidence, and shall not use, in competition with or in a
manner otherwise detrimental to the interests of the Company,
for the benefit of itself or others other than the Company any
confidential information, including without limitation any
confidential "know-how," trade secrets, customer lists, details
of client or consultant contracts, pricing policies,
operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans and
new personnel acquisition plans related to the Business
("Confidential Information"). The term "Confidential
Information" does not include, and there shall be no obligation
hereunder with respect to, (i) information that becomes
generally available to the public other than as a result of a
disclosure by the Seller or a Controlled Entity or any agent or
other representative thereof and (ii) general business methods
applicable to the Business. Neither the Seller nor any
Controlled Entity shall have any obligation hereunder to keep
confidential any of the Confidential Information to the extent
disclosure of any thereof is required by law, or determined in
good faith by the Seller to be necessary or appropriate to
comply with any legal or regulatory order, regulation or
requirement; provided, however, that in the event disclosure is
required by law the Seller or the Controlled Entity concerned
shall provide the Buyer with prompt notice of such requirement
so that the Buyer may seek an appropriate protective order.
(c) Non-Solicitation. For a period of two (2)
years following the Closing, the Seller and any Controlled
Entity shall not, directly or indirectly, (i) hire or solicit
any employee of the Buyer or the Company or encourage any such
employee to leave such employment who is engaged in the alarm
business or the subscriber terminal units business, or (ii)
solicit, induce or influence any customer, supplier, lender,
lessor or any other person or entity which has a business
relationship with the Buyer or the Company to discontinue or
reduce the extent of such relationship with the Buyer or the
Company. Notwithstanding the above, this Section 5.15(c) shall
not apply to any employee of the Company who ceases to be
employed as a result of being terminated by the Company.
(d) Rights and Remedies Upon Breach. In the
event the Seller or any Controlled Entity breaches, or
threatens to commit a breach of, any of the provisions of this
Section 5.15 (the "Restrictive Covenants"), the Buyer shall
have the following rights and remedies, which shall be
independent of any others and severally enforceable, and shall
be in addition to, and not in lieu of, any other rights and
remedies available to the Buyer at law or in equity:
(i) the right and remedy to enjoin the
breaching party from violating or threatening to
violate the Restrictive Covenants and to have the
Restrictive Covenants specifically enforced by any
court of competent jurisdiction, it being agreed that
any breach or threatened breach of the Restrictive
Covenants would cause irreparable injury to the Buyer
and that money damages would not provide an adequate
remedy to the Buyer; and
(ii) the right and remedy to require the
breaching party to account for and pay over to the
Buyer all compensation, profits, monies, accruals,
increments or other benefits derived or received by
such party as the result of any transactions
constituting a breach of the Restrictive Covenants.
(e) Severability of Covenants. The Seller
acknowledges and agrees that the Restrictive Covenants are
reasonable in geographical scope and duration and in all other
respects. If any court determines that any of the Restrictive
Covenants, or any part thereof, are invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be
affected and shall be given full effect, without regard to the
invalid portions.
(f) Blue-Pencilling. If any court determines
that any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographic scope of
such provision, such court shall have the power to reduce the
duration or scope of such provision, as the case may be, and,
in its reduced form, such provision shall then be enforceable.
(g) Enforceability in Jurisdictions. The
parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any
jurisdiction within the geographical scope of such Restrictive
Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by
reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar
or in any way affect the Buyer's right to the relief provided
above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to
breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction being, for this purpose, severable into
diverse and independent covenants.
5.16 Reservation and Listing. The Buyer agrees to
promptly apply for and diligently pursue registration of the
DSI Stock on the Nasdaq Stock Market. The Buyer agrees to
reserve for issuance shares sufficient to cover the Final Share
Amount and any additional shares issued to the Seller pursuant
to Section 1.5 of this Agreement.
5.17 Insurance. The Buyer will use reasonable
efforts to maintain insurance coverage as described in Section
7.2(a)(iii).
5.18 Certain Contracts. On or prior to the Closing
Date, the Seller shall cause the Company to terminate any
contract or negotiations with Hans Einhell AG, Isar, Germany,
Transmit Security Ltd., London England and its managing
director, Xxxxx Xxxxxxx. The Seller shall indemnify and hold
harmless the Buyer and the Company from and against any and all
Losses or Expenses, as such terms are defined in Sections
7.2(a)(i) and 7.2(a)(iv), resulting from such termination, such
contracts or such negotiations including, but not limited to,
any commissions or other amounts payable to Xx. Xxxx Xxxxxx,
Surrey England as a result thereof. The Buyer shall not be
entitled to any indemnification under this Section 5.18 if it
enters into a transaction with one or more of Hans Einhell AG,
Transmit Security Ltd., or Xxxxx Xxxxxxx within twelve (12)
months following the Closing Date.
5.19 Director Resignation. The Seller shall be
responsible for, and shall indemnify the Company against, any
Losses and Expenses related to the board of director
resignations of Ash Xxxxxxxx, Xxxx Xxxx, Xxxxxx Xxxx and Xxxxx
Xxxxxxx, from the board of directors of the Company, based
solely upon a claim that such resignation, as a board director,
was an unfair dismissal.
6. Conditions to Closing.
6.1 Conditions Precedent to Obligations of the
Buyer. The obligations of the Buyer to consummate the
transactions contemplated by this Agreement are subject to the
fulfillment, on or prior to the Closing Date, of each of the
following conditions (any or all of which may be waived by the
Buyer in whole or in part to the extent permitted by applicable
Law):
(a) The Seller shall have executed and
delivered this Agreement and such other instruments, documents
and certificates as are required to be executed and delivered
by the Seller or the Company pursuant to this Agreement;
(b) all representations and warranties of the
Seller to the Buyer contained herein shall be true and correct
in all material respects at and as of the Closing Date with the
same effect as though those representations and warranties had
been made again at and as of that time;
(c) the Seller and the Company shall have
performed and complied in all material respects with all
obligations and covenants required by this Agreement to be
performed or complied with them on or prior to the Closing
Date;
(d) the Buyer shall have been furnished with
certificates (dated the Closing Date and in form and substance
reasonably satisfactory to the Buyer) executed by the Seller
certifying as to the fulfillment of the conditions specified in
Sections 6.1(b) and 6.1(c) hereof;
(e) the Buyer shall have been furnished with
an opinion of Blank Rome Xxxxxxx & XxXxxxxx, counsel to the
Seller and Clarks Solicitors, counsel to the Company,
substantially in the form of Exhibit 6.1(e) hereto;
(f) there shall not have been or occurred (i)
any change, destruction or loss, whether or not covered by
insurance, which would result in the loss of a material part of
the properties or assets of Company, (ii) any Legal Proceedings
instituted or threatened against the Seller or the Company
seeking to restrain or prohibit or to obtain substantial
damages with respect to the consummation of the transactions
contemplated hereby, or which might, in the reasonable opinion
of the Buyer, result in a Material Adverse Change to the
Company, (iii) any Order by a Governmental Body of competent
jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby, or
(iv) any other event or occurrence related to the Company which
could result in a Material Adverse Change to the Company;
(g) the Seller or the Company shall have
obtained all consents and waivers, in a form reasonably
satisfactory to the Buyer, described in Section 3.5 or listed
on Schedule 3.5;
(h) the Seller shall have delivered to the
Buyer a Registration Rights Agreement in the form of Exhibit
6.1(h)(i) hereto, duly executed by the Seller and a Technology
Licence in the form of Exhibit 6.1(h)(ii) hereto, duly executed
by the Seller and the Company.
(i) there shall have been delivered to the
Buyer (i) resignations of the members of the board of directors
and secretary of the Company as are reasonably requested by the
Buyer, and resolutions of the Company with respect to the
election of new directors and a new secretary effective on the
Closing Date to the extent requested in writing by the Buyer on
or prior to the Closing Date, (ii) documents evidencing the
transfer to such persons as the Buyer shall have requested in
writing at least three business days prior to the Closing Date,
of powers of attorney previously granted by the Company, and
(iii) revocations of such proxies and powers of attorney as the
Buyer may have requested in writing at least one business day
prior to the Closing Date;
(j) the Seller shall have delivered to the
Buyer such evidence, including appropriate certificates of the
Seller's authorized officers, as the Buyer may reasonably
request in order to establish the corporate or other legal
power and authority of the Seller to enter into and consummate
the transactions contemplated by this Agreement;
(k) the Seller shall have delivered to the
Buyer such evidence, including appropriate certificates of the
Company's authorized officers, as the Buyer may reasonably
request in order to establish the corporate existence and
authenticity of the governing documents of the Company; and
(l) the Seller shall have delivered to the
Buyer such other instruments, documents and certificates as the
Buyer may reasonably request in connection with the
consummation of the transactions contemplated by this
Agreement.
6.2 Conditions Precedent to Obligations of the
Seller. The obligations of the Seller to consummate the
transactions contemplated by this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the
following conditions (any or all of which may be waived by the
Seller in whole or in part to the extent permitted by
applicable Law):
(a) the Buyer shall have executed and
delivered this Agreement and such other instruments, documents
and certificates as are required to be executed and delivered
by the Buyer pursuant to this Agreement;
(b) all representations and warranties of the
Buyer contained herein shall be true and correct in all
material respects at and as of the Closing Date with the same
effect as though those representations and warranties had been
made again at and as of that date;
(c) the Buyer shall have performed and
complied in all material respects with all obligations and
covenants required by this Agreement to be performed or
complied with by the Buyer on or prior to the Closing Date;
(d) the Seller shall have been furnished with
certificates (dated the Closing Date and in form and substance
reasonably satisfactory to the Seller) executed by the Buyer
certifying as to the fulfillment of the conditions specified in
Sections 6.2(b) and 6.2(c);
(e) the Company and the Stockholders shall
have been furnished with an opinion of Nixon, Hargrave, Devans
& Xxxxx LLP, counsel for the Buyer, substantially in the form
of Exhibit 6.2(e) hereto;
(f) there shall not have been or occurred (i)
any change, destruction or loss, whether or not covered by
insurance, which would result in the loss of a material part of
the properties or assets of the Buyer, (ii) any Legal
Proceedings instituted or threatened against the Buyer seeking
to restrain or prohibit or to obtain substantial damages with
respect to the consummation of the transactions contemplated
hereby, or which might, in the reasonable opinion of the
Seller, result in a Material Adverse Change to the Buyer, (iii)
any Order by a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby, or (iv)
any other event or occurrence related to the Buyer which could
result in a Material Adverse Change to the Buyer;
(g) the Buyer shall have obtained all consents
and waivers, in a form reasonably satisfactory to the Seller,
described in Section 4.3 or listed on Schedule 4.3;
(h) the Buyer shall have delivered to the
Seller a Registration Rights Agreement in the form of Exhibit
6.1(h) hereto, duly executed by the Buyer;
(i) the Buyer shall have delivered to the
Seller such evidence, including appropriate certificates of the
Buyer's authorized officers, as the Seller may reasonably
request in order to establish the corporate power and authority
of the Buyer to consummate the transactions contemplated by
this Agreement and compliance with the conditions of Closing
set forth herein; and
(j) the Buyer shall have delivered to the
Seller such other instruments, documents and certificates as
the Seller may reasonably request in connection with the
consummation of the transactions contemplated by this
Agreement.
7. Survival and Indemnification.
7.1 Survival of Representations and Warranties. All
representations and warranties, covenants and agreements of the
Seller and the Buyer contained in this Agreement or in any of
the Seller Documents or Buyer Documents shall survive the
execution and delivery of this Agreement and, notwithstanding
any investigation by the Buyer or the Seller, shall continue in
full force and effect for a period of two (2) years after the
Closing Date; provided, however, that (i) the representations
and warranties of the Seller contained in Sections 3.6 and 3.7
and the first sentence of Section 3.13(d) shall continue in
full force and effect indefinitely, (ii) the representations
and warranties of the Seller contained in Sections 3.1, 3.2,
3.11 and 3.29 shall continue in full force and effect until 60
days after any applicable statute of limitations (taking into
account any waiver or tolling thereof) with respect to any
Legal Proceeding which may arise thereunder or relate thereto
shall have run, (iii) the representations and warranties of the
Seller contained in Sections 3.8 and 3.23 shall continue in
full force and effect until April 30, 1998, (iv) the
representations and warranties of the Buyer contained in
Section 4.6 shall continue in full force and effect
indefinitely, (v) the representations and warranties of the
Buyer contained in Sections 4.1, 4.2, 4.5 and 4.9 shall
continue in full force and effect until 60 days after any
applicable statute of limitations (taking into account any
waiver or tolling thereof) with respect to any Legal Proceeding
which may arise thereunder or relate thereto shall have run,
and (vi) any covenants or agreements contained herein or made
pursuant hereto by the Buyer or the Seller which by their terms
are to be performed after the Closing Date, shall survive until
fully discharged. The obligations of the parties pursuant to
Section 7.2 with respect to claims made pursuant to a
particular representation, warranty or covenant shall expire
simultaneously with such representation, warranty or covenant;
provided, however, that such obligations shall survive with
respect to any pending claim until the pending claim is settled
or otherwise satisfied if written notice of such claim,
specifying in reasonable detail the factual basis therefor, is
given to the party from whom indemnification is sought prior to
the expiration of the representation, warranty or covenant upon
which it is based. To the extent the survival periods
specified herein exceed an applicable statute of limitations,
the provisions of this Section 7.1 shall constitute a tolling
by the Seller or the Buyer, as applicable, of each such statute
of limitations for a period of time not to extend beyond the
termination of such survival periods.
7.2 Indemnification.
(a) Subject to the limitations contained in
this Section 7, the Seller hereby agrees to indemnify and hold
the Buyer, the Company and their respective directors,
officers, employees, Affiliates, agents, successors and assigns
(collectively, the "Buyer Indemnified Parties") harmless from
and against:
(i) any and all losses, liabilities,
obligations, damages, deficiencies, demands, claims,
actions, judgments, causes of action, assessments,
costs or expenses (including, without limitation,
reasonable attorneys' fees and other professionals'
fees and disbursements and costs of enforcing this
Section 7) (collectively, "Losses") based upon,
attributable to or resulting from any inaccuracy in
or breach of any representation or warranty on the
part of any of the Seller under this Agreement or any
one or more of the Seller Documents, except Losses
relating to inventory or fixed assets adjustments;
(ii) any and all Losses based upon,
attributable to or resulting from the breach of any
covenant or other agreement of the Seller under this
Agreement or any one or more of the Seller Documents;
(iii) any and all Losses based upon, arising
out of or otherwise in respect of any injury to
Persons or property occurring prior to the Closing
Date as a result of the ownership, possession or use
of any product manufactured, sold, marketed,
distributed or delivered by the Company which is
shipped by the Company prior to the Closing Date;
provided, however, that, subject to compliance by the
Seller with this Section 7.2(a)(iii), the Buyer will
pay over to the Seller any insurance proceeds
received in respect of any such Losses pursuant to
the Company's commercial general liability insurance
policy with St. Xxxx Insurance Company or any
replacement or substitute policy therefor to the
extent such Losses shall have been paid by the Seller
pursuant to this Section 7.2(a)(iii) and such
proceeds have not already been applied by the Buyer
Indemnified Parties to offset all or any portion of
such Losses; and provided, further, that, so long as
the Seller is obligated to indemnify the Buyer
Indemnified Parties under this Agreement, the Buyer
(x) shall keep such general commercial liability
insurance policy, or an equivalent replacement or
substitute therefor (the "Policy") in effect at all
times and (y) immediately after the Closing and on a
regular basis at least annually thereafter, shall
review the Policy in light of the Buyer's current and
past business experience and common industry
practices, and (z) if after any such review the Buyer
shall conclude exercising reasonable commercial
judgment that the coverage of the Policy with respect
to the types of risks insured and the dollar amount
of the losses or liability insured per occurrence is
inadequate, the Buyer shall use reasonable efforts to
procure, at the Buyer's or the Company's expense,
such additional insurance as the Buyer shall deem
necessary to cover any such inadequacy; and
(iv) any and all notices, actions, suits,
proceedings, demands, assessments, judgments, costs,
penalties and expenses, including reasonable
attorneys' and other professionals, fees and
disbursements (collectively, "Expenses") incident to
the foregoing.
(b) Subject to the limitations contained in
this Section 7, the Buyer hereby agrees to indemnify and hold
the Seller and its employees, Affiliates, agents, heirs,
successors and assigns (collectively, the "Seller Indemnified
Parties") harmless from and against:
(i) any and all Losses based upon, attributable
to or resulting from any inaccuracy in or breach of
any representation or warranty on the part of the
Buyer under this Agreement or any one or more of the
Buyer Documents;
(ii) any and all Losses based upon,
attributable to or resulting from the breach of any
covenant or other agreement on the part of the Buyer
under this Agreement or any one or more of the Buyer
Documents; and
(iii) any and all Expenses incident to the
foregoing.
(c) Neither the Seller nor the Buyer shall
have any liability under Section 7.2(a)(i), (iii) or (iv) or
Section 7.2(b)(i) or (iii) unless and until the aggregate
amount of Losses incurred by the respective indemnified parties
and related Expenses finally determined to arise thereunder
exceeds in the aggregate U.S. $300,000 (the "Basket") and, in
such event, the indemnifying party shall be required to pay to
the indemnified parties the entire amount of such Losses in
excess of the Basket, subject to the following limitation. The
indemnification obligation of the Seller under Section
7.2(a)(i), (iii) or (iv) and the indemnification obligation of
the Buyer under Section 7.2(b)(i) or (iii) shall be limited, in
each case, to forty percent (40%) of the Final Purchase Price.
(d) The Seller and the Buyer agree that any
indemnification payment made hereunder will be treated by the
parties on their respective Tax Returns as an adjustment to the
aggregate consideration for the shares of capital stock of the
Company. If, notwithstanding such treatment by the parties,
any such indemnification payment is determined to be taxable to
the indemnified party by any taxing authority, the indemnifying
party shall also indemnify the indemnified party for any Taxes
payable by the indemnified party by reason of the receipt of
such indemnification payment.
(e) In the event that the Buyer Indemnified
Parties are entitled to indemnification pursuant to this
Section 7, the sums due hereunder to which the Buyer
Indemnified Parties are entitled shall be paid: (i) first, by
the delivery of shares of DSI Stock from the Seller to the
Buyer Indemnified Parties to the extent that the Seller
continues to hold shares of DSI Stock obtained pursuant to this
Agreement, and (ii) then, by the payment of cash by the Seller
to the Buyer Indemnified Parties. For purposes of clause (i)
above, shares of DSI Stock shall be deemed to have a value
equal to $17.
(f) The Seller hereby agrees that if any
payment by it is made under the terms of this Agreement or
otherwise, it shall have no rights against the Company or any
director, officer, employee or agent thereof, whether by reason
of contribution, indemnification, subrogation or otherwise, in
respect of any such payments, and shall not take any action
against the Company with respect thereto. Any such rights
which the Seller may, by operation of law or otherwise, have
against the Company shall, at the Closing Date, be deemed to
hereby expressly and knowingly waived.
(g) No indemnifying party hereunder shall have
any liability with respect to any Losses if and to the extent
such Losses are covered by any policy of insurance by or for
the benefit of the party seeking indemnification or would have
been covered by insurance if all of the policies of insurance
in force at the Closing Date had been maintained in force
thereafter.
(h) Each party seeking indemnification
hereunder shall be required to take all reasonable steps to
mitigate Losses with respect to any claim hereunder. If any
party seeking indemnification hereunder subsequently recovers
from a third party, or otherwise mitigates its Losses, the
party so indemnified shall repay to the indemnifying party any
sums paid to it in connection with such indemnification
hereunder.
7.3 Determination of Losses and Expenses and Related
Matters.
(a) In the event that any Legal Proceedings
shall be instituted or asserted by any Person in respect of
which payment may be sought under Section 7.2 (regardless of
the Basket or the Cap referred to in Section 7.2(c)), the
indemnified party shall reasonably and promptly cause written
notice of the assertion of any Legal Proceeding of which it has
knowledge which is covered by the indemnities under this
Section 7 to be forwarded to the indemnifying party. The
indemnifying party shall have the right, at its sole option and
expense, to defend against, negotiate, settle or otherwise deal
with any Legal Proceeding which relates to any Losses and
Expenses indemnified against hereunder and to be represented by
counsel of its choice, which must be reasonably satisfactory to
the indemnified party; provided, however, that no settlement
shall be made without the prior written consent of the
indemnified party, which consent shall not be unreasonably
withheld, conditioned or delayed. If the indemnifying party
elects to defend against, negotiate, settle or otherwise deal
with any Legal Proceeding which relates to any Losses
indemnified against hereunder, it shall within thirty (30) days
(or sooner, if the nature of the Legal Proceeding so requires)
notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate,
settle or otherwise deal with any Legal Proceeding which
relates to any Losses and Expenses indemnified against
hereunder, fails to notify the indemnified party of its
election as herein provided or contests its obligation to
indemnify the indemnified party for such Losses and Expenses
under this Agreement, the indemnified party may defend against,
negotiate, settle or otherwise deal with such Legal Proceeding;
provided that the indemnified party may not settle any Legal
Proceeding without the prior written consent of the
indemnifying party, which consent shall not be unreasonably
withheld, conditioned or delayed. Subject to Section 7.2(c),
if the indemnified party defends any Legal Proceeding, then the
indemnifying party shall reimburse the indemnified party for
the Expenses of defending such Legal Proceeding upon submission
of periodic bills. If the indemnifying party shall assume the
defense of any Legal Proceeding, the indemnified party may
participate, at its own expense, in the defense of such Legal
Proceeding; provided, however, such indemnified party shall be
entitled to participate in any such defense with separate
counsel at the expense of the indemnifying party if (i) so
requested by the indemnifying party to participate or (ii) in
the reasonable opinion of counsel to the indemnified party, a
conflict exists between the indemnified party and the
indemnifying party that would make such separate representation
advisable; and provided, further, that the indemnifying party
shall not be required to pay for more than one such counsel for
all indemnified parties in connection with any Legal
Proceeding. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or
settlement of any such Legal Proceeding.
After any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency
of competent jurisdiction and the expiration of the time in
which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying
party shall have arrived at a mutually binding agreement with
respect to a Legal Proceeding hereunder, the indemnified party
shall forward to the indemnifying party written notice of any
sums due and owing by the indemnifying party pursuant to this
Agreement with respect to such matter and the indemnifying
party shall be required to pay all of the sums so due and owing
to the indemnified party by wire transfer of immediately
available funds within ten business days after the date of such
notice.
(b) The failure of the indemnified party to
give reasonably prompt notice of any Legal Proceeding shall not
release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the
indemnifying party can demonstrate actual loss or prejudice as
a result of such failure. The indemnified parties shall not be
deemed to have notice of any Legal Proceeding by virtue of
knowledge acquired on or prior to the Closing Date by an
employee of the Company.
7.4 Sole and Exclusive Remedy. The
indemnification provided under this Article 7 shall constitute
the sale and exclusive remedy of the parties hereto as a result
of any and all Losses based upon, attributable to or resulting
from any inaccuracy in or breach of any representation or
warranty.
8. Miscellaneous.
8.1 Certain Definitions. In addition to terms
defined elsewhere in this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" shall have the meaning specified by Rule
12(b) under the Exchange Act.
"Contract" means any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract,
mortgage, license, franchise, insurance policy, commitment or
other arrangement or agreement, whether written or oral.
"Environmental Claim" means any accusation,
allegation, notice of breach or violation, action, claim, Lien,
demand, abatement or other order or direction (conditional or
otherwise) by any Regulatory Authority or Governmental Body for
personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other
adverse effects on the environment, or for fines, penalties or
restrictions resulting from or based upon (i) the existence,
whether known or unknown, or the continuation of the existence,
of a Release (including, without limitation, sudden or non-
sudden accidental or non-accidental Releases) and/or threat of
a Release of, or exposure to, any Hazardous Material or other
substance, chemical, material, pollutant, contaminant, odor,
audible noise, or other Release in, into or onto the
environment (including, without limitation, the air, soil,
surface water or groundwater) at, in, by, from or related to
the Facilities or any activities conducted thereon; (ii) the
environmental aspects of the transportation, storage, treatment
or disposal of Hazardous Materials in connection with the
operation of the Facilities; or (iii) the violation, or alleged
violation, of any Environmental Laws, orders or Permits of or
from any Governmental Body arising out of or relating to
environmental matters connected with the Facilities.
"Environmental Law" means any Law concerning Releases
into any part of the natural environment, or activities that
might result in damage to the natural environment, or any Law
that is concerned in whole or in part with the natural
environment and with protecting or improving the quality of the
natural environment and protecting public and employee health
and safety and includes, but is not limited to, Part I and Part
II of the Control Pollution Xxx 0000, the Water Xxx 0000, the
Environmental Protection Xxx 0000, the Water Resources Xxx
0000, the Water Industry Xxx 0000, the Environment Xxx 0000,
the Control of Industrial Major Accidents Hazards Regulations
1984, the Xxxxxxxxx Xxx 0000, the Health & Safety at Work etc.
Xxx 0000, the Control of Substances Hazardous to Health
Regulations 1988, the Noise at Work Regulations 1989, the
Electricity at Work Regulations 1990, the Planning Acts and the
Public Health Acts, as such laws have been amended or
supplemented, and the regulations, codes of practice, circulars
and guidance notes promulgated pursuant thereto, and any and
all analogous laws and by-laws and the regulations promulgated
pursuant thereto.
"Environmental Matters" means any matter arising out
of or relating to the production, storage, keeping,
transportation, disposal or Release of any Hazardous Material
or otherwise arising out of or relating to safety, health or
the environment which could give rise to liability or require
the expenditure of money to address, and shall include, without
limitation, the costs of investigating and remediating any of
the foregoing matters, any fines and penalties arising in
connection therewith, and any claim in respect thereof for
damages or injunctive relief for alleged personal injury,
property damage or damage to natural resources under common law
or other Environmental Law.
"Environmental Permit" means any Permit, approval,
authorization, consent, license, variance, registration, or
permission required under any applicable Environmental Laws and
all supporting documents associated therewith.
"Facilities" means real property now or heretofore
owned, leased or operated by the Company, including, without
limitation, the Leased Property.
"Governmental Body" means any government or
governmental or regulatory body thereof, or political
subdivision thereof, whether federal, state, local or foreign,
or any agency, instrumentality or authority thereof, or any
court or arbitrator (public or private).
"Hazardous Materials" means any substance, material
or waste which is regulated by any Regulatory Authority,
Governmental Body or Environmental Law, including, without
limitation, any material or substance which is defined as a
"hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste,"
"controlled waste," "subject waste," "contaminant," "toxic
waste" or "toxic substance" under any provision of any
Environmental Law, including but not limited to, petroleum
products, asbestos and polychlorinated biphenyls.
"Law" means any federal, state, local or foreign
statute, code, ordinance, rule, regulation, code of practice,
circular and guidance note or other requirement.
"Legal Proceeding" means any judicial, civil,
criminal, equitable, administrative or arbitral actions, or
suits, charges, complaints, demands, investigations,
proceedings (public or private) or claims.
"Lien" means any lien, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, option, right
of first refusal, easement, servitude, transfer restriction
under any shareholder or similar agreement, obligation under
any voting agreement, voting trust or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Change" means any material adverse
change in and/or effect on the business, properties, results of
operations, prospects, condition (financial or otherwise) of
the Person to which such term relates and such Person's
subsidiaries, if any, taken as a whole.
"Order" means any order, injunction, judgment,
decree, ruling, writ, assessment or arbitration award.
"Permits" means any approvals, authorizations,
consents, licenses, permits, registrations or certificates.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Body
or other entity.
"Pre-Closing Period" means any Tax period ending on
or prior to the Closing Date.
"Release" means any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching, or migration into the indoor or outdoor
environment, or into or out of any of the Facilities, including
the movement of any Hazardous Material or other substance
through or in the air, soil, surface water, groundwater, or
property.
"Regulatory Authorities" means the Environment
Agency, a Unitary, County, District/Borough Authority and
Council, Agencies, Authorities and Bodies with statutory
functions relating to an Environmental Law, The Crown and its
agencies, departments and authorities.
"Remedial Action" means all actions, including,
without limitation, any capital expenditures, required or
voluntarily undertaken to (i) clean up, remove, treat, or in
any other way address any Hazardous Material or other substance
in the indoor or outdoor environment; (ii) prevent the Release
or threat of Release, or minimize the further Release of any
Hazardous Material or other substance so it does not migrate or
endanger or threaten to endanger public health or welfare of
the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations or post-remedial monitoring and
care; or (iv) bring any Facility into compliance with all
Environmental Laws and Environmental Permits.
"Software" means any electronic data processing
system, information system, computer software program
(exclusive of off-the-shelf computer software available in the
open market and related applications thereof), program
specification chart, procedure, source code, object code, input
data, routine, database, report layout, format, record file
layout, diagram, functional specification, narrative
description, flow chart or other related material.
"Tax Returns" means all returns, declarations,
reports, estimates, information returns and statements required
to be filed in respect of any Taxes.
"Tax or Taxes" means all taxes, charges, fees,
imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding (including its
U.K. equivalent), payroll (including its U.K. equivalent),
employment (including its U.K. equivalent), social security,
unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever, together with any interest and
any penalties, fines, additions to tax or additional amounts
imposed by any taxing authority (domestic or foreign) and shall
include any transferee liability in respect of Taxes.
"U.S. Environmental Law" means any Law concerning
Releases into any part of the natural environment, or
activities that might result in damage to the natural
environment, or any Law that is concerned in whole or in part
with the natural environment and with protecting or improving
the quality of the natural environment and protecting public
and employee health and safety and includes, but is not limited
to, the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA") (42 U.S.C. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C.
6901 et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.),
the Clean Air Act (33 U.S.C. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et
seq.) and the Occupational Safety and Health Act (29 U.S.C.
651 et seq.) ("OSHA"), as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto,
and any and all analogous state or local statutes, and the
regulations promulgated pursuant thereto.
8.2 Expenses. Except as otherwise provided herein,
all expenses incurred by the Buyer in connection with the
negotiation, authorization, preparation, execution and
performance of this Agreement and the transactions contemplated
herein shall be paid by the Buyer. Except as otherwise
provided herein, all expenses incurred by the Seller and the
Company in connection with the negotiation, authorization,
preparation, execution and performance of this Agreement and
the transactions contemplated herein shall be paid by the
Seller and shall not be paid from any of the assets of the
Company.
8.3 Further Assurances. The Seller and the Buyer
each agree to execute and deliver, and to cause the Company to
execute and deliver, such other documents or agreements as may
be necessary or desirable for the implementation of this
Agreement and the consummation of the transactions contemplated
hereby.
8.4 Submission to Jurisdiction; Consent to Service
of Process.
(a) The parties hereto hereby irrevocably
submit to the non-exclusive jurisdiction of any federal or
state court located within the State of New York over any
dispute arising out of or relating to this Agreement or any of
the transactions contemplated hereby and each party hereby
irrevocably agrees that all claims in respect of such dispute
or any suit, action proceeding related thereto may be heard and
determined in such courts. The parties hereby irrevocably
waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of
venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute.
Each of the parties hereto agrees that a judgment in any such
dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents
to process being served by any party to this Agreement in any
suit, action or proceeding by the mailing of a copy thereof in
accordance with the provisions of Section 8.8.
8.5 Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto)
represents the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and
can be amended, supplemented or changed, and any provision
hereof can be waived, only by written instrument making
specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement,
modification or waiver is sought. No action taken pursuant to
this Agreement, including without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained
herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver
of any other or subsequent breach. No failure on the part of
any party to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of such right, power
or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of
any other remedies provided by law.
8.6 Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
State of New York applicable to agreements made and to be
performed entirely within such State, without regard to
conflicts of law principles.
8.7 Table of Contents and Headings. The table of
contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
8.8 Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed
given when delivered personally or mailed by certified mail,
return receipt requested, to the parties (and shall also be
transmitted by facsimile to the Persons receiving copies
thereof) at the following addresses (or to such other address
as a party may have specified by notice given to the other
party pursuant to this provision):
If to the Seller, to:
Numerex Corp.
Rose Tree Corporate Center II
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxx
Chief Executive Officer
Facsimile: (000) 000-0000
With a copy to:
Blank Rome Xxxxxxx & XxXxxxxx
Four Xxxx Xxxxxx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Buyer, to:
Detection Systems, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx
Attention: Xx. Xxxx X. Xxxxxxxxx
President
Facsimile: (000) 000-0000
With a copy to:
Nixon, Hargrave, Devans & Xxxxx LLP
Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
8.9 Disclosure Schedules. Items required to be
disclosed on Schedules pursuant to Articles 3 and 4 shall be
deemed to be disclosed therein for all purposes of Articles 3
and 4 irrespective of whether they are disclosed with reference
to all of the subsections to which they relate; provided,
however, no item shall be deemed to be included on any specific
Schedule with respect to a particular subsection if its
omission therefrom would make such specific Schedule misleading
if such item is not specifically identified on such Schedule.
8.10 Severability of Provisions. If any provision or
any portion of any provision of this Agreement, or the
application of any such provision or any portion thereof to any
person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such
provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be
affected thereby.
8.11 Binding Effect; Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties
and their respective heirs, successors and permitted assigns.
Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not
a party to this Agreement other than the Company. No
assignment of this Agreement or of any rights or obligations
hereunder may be made by either the Seller or the Buyer (by
operation of law or otherwise) without the prior written
consent of the other party hereto and any attempted assignment
without the required consent shall be void; provided, however,
that the Buyer may assign this Agreement and any or all rights,
but not its obligations, hereunder to any Affiliate of the
Buyer. Upon any such permitted assignment, the references in
this Agreement to the Buyer shall also apply to any such
assignee unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first written above.
DETECTION SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx, President
NUMEREX CORP.
By:/s/ Xxxx X. Xxxx
Xxxx X. Xxxx, Chief Executive Office
Copies of Schedules 1.2, 3.3, 3.5, 3.7, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19, 3.22, 3.24, 3.25,
3.26, 3.27, 3.30, 4.3 and 4.13 will be provided to the SEC upon
request.
