EXHIBIT 10.1
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made as of August 12,
2003, by and between iSecureTrac Corp., a Delaware corporation (the
"Buyer"), and Tracking Systems Corporation, a Pennsylvania corporation
(the "Company"). WHEREAS, Buyer desires to acquire, all of the issued and
outstanding shares (the "Shares") of capital stock of the Company for the
consideration and on the terms set forth in this Agreement.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"AFFILIATE"--shall have the meaning set forth in Rule 12b-2 of the Rules
and Regulations under the Exchange Act. "AGREEMENT WITH CONTROLLING
SHAREHOLDERS"--as defined in Section 2.4(c). "APPLICABLE CONTRACT"--any
Contract (a) under which the Company has or may acquire any rights, (b)
under which the Company has or may become subject to any obligation or
liability, or (c) by which the Company or any of the assets owned or used
by it is or may become bound.
"ARTICLES OF EXCHANGE"--as defined in Section 2.2(b). "BALANCE SHEET"--as
defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the
Person subject to that obligation to take actions that would result in a
materially adverse change in the benefits to such Person of this Agreement
and the Contemplated Transactions.
"BUSINESS DAY"--any day other than a Saturday, a Sunday or a day on which
commercial banks in the city specified by the parties (or, if a city is
not specified, Omaha, Nebraska) are required or authorized to be closed.
"BUYER"--as defined in the preamble of this Agreement.
"BUYER SHARES"--as defined in Section 2.1.
"CLOSING"--as defined in Section 2.3.
"CLOSING DATE"--the date and time as of which the Closing actually takes
place.
"COMPANY"--as defined in the preamble of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement, including: (a) the exchange of the Shares by Shareholders to
Buyer;
(b) the execution, delivery, and performance of the Employment Agreements,
the Agreement with Controlling Shareholders (and all agreements ancillary
thereto), the Plan of Exchange and the Articles of Exchange;
(c) the performance by Buyer and Company of their respective covenants and
obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Company.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"CONTROLLING SHAREHOLDERS"--collectively, Xxxx X. Xxxxxxxxx, Xxxxx X.
Xxxxxxxx Xxxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxxx.
"DISCLOSURE LETTER"--the disclosure letter delivered by Company to Buyer
concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS"--as defined in Section 2.4(a) (iii).
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other
attribute of ownership.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"EXCHANGE ACT"--the Securities Exchange Act of 1934, as amended, or any
successor law, and regulations and rules issued pursuant thereto.
"FACILITIES"--any real property, leaseholds, or other interests currently
operated by the Company and any buildings, plants, structures, or
equipment (including motor vehicles, tank cars, and rolling stock)
currently operated by the Company.
"GAAP"--generally accepted United States accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant
to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any
court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
and, to the extent relevant, the United States Department of the Treasury.
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"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of
such fact or other matter after reasonable investigation. A Person (other
than an individual) will be deemed to have "Knowledge" of a particular
fact or other matter if any individual who is serving, or who has at any
time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of
such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution,
law, ordinance, principle of common law, regulation, statute, or treaty.
"MATERIAL"-- shall have the meaning set forth in Rule 12b-2 of the Rules
and Regulations under the Exchange Act.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" -- any effect or
change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results, operations, or business
prospects of the specified Person and its Subsidiaries, taken as a whole,
or on the ability of any party to consummate timely the transactions
contemplated hereby; provided, however, that any change in or effect on
the person, directly or indirectly arising out of or attributable to any
changes in economic conditions, including without limitation, declines the
general economy or in any relevant securities market or segment thereof,
shall not be included.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) Such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) Such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
(c) Such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and any statement of partnership of a general partnership; (c)
the limited partnership agreement and the certificate of limited
partnership of a limited partnership; (d) any charter or similar document
adopted or filed in connection with the creation, formation, or
organization of a Person; and (e) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
joint venture, estate, trust, association, organization, labor union, or
other entity or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PLAN OF EXCHANGE"--as defined in Section 2.2(a).
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought,
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conducted, or heard by or before, or otherwise involving, any Governmental
Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) Each other member of such individual's Family;
(b) Any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) Any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) Any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) Any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) Any Person that holds a Material Interest in such specified Person;
(c) Each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) Any Person in which such specified Person holds a Material Interest;
(e) Any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) Any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former
spouses, (iii) any other natural person who is related to the individual
or the individual's spouse within the second degree, and (iv) any other
natural person who resides with such individual, and (b) "Material
Interest" means direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act) of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a
Person or equity securities or other equity interests representing at
least 5% of the outstanding equity securities or equity interests in a
Person.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of
such Person, including legal counsel, accountants, and financial advisors.
"REQUISITE SHAREHOLDER APPROVAL"--as defined in Section 7.3(b)
"SECURITIES ACT"--the Securities Act of 1933, as amended, or any successor
law, and regulations and rules issued pursuant to thereto.
"SHAREHOLDERS"-- the Persons set forth at Schedule "A" hereto,
collectively. A
"SHAREHOLDER" means any of the Shareholders individually.
"SHARES"--as defined in the recitals of this Agreement. A "Share" means a
share of capital stock of the Company issued and outstanding.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to
elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person
(other than securities or other interests having such power only upon the
happening of a
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contingency that has not occurred) are held by the Owner or one or more of
its Subsidiaries.
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in
writing), or if any other event has occurred or any other circumstances
exist, that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
SECTION 2. ISSUANCE AND EXCHANGE OF SHARES; CLOSING
2.1 ISSUANCE
Subject to the terms and conditions of this Agreement, at the Closing, the
Buyer shall issue and deliver to each of the Shareholders the number of
authorized and newly issued shares of Buyer's common stock (the "Buyer's
Shares") in the denomination set forth opposite each Shareholder's name on
Schedule "A" hereto, in exchange for all of the Shares held by such
Shareholder. The number of Buyer's shares is subject to adjustment as
provided in the Plan of Exchange.
2.2 PLAN OF EXCHANGE; ARTICLES OF EXCHANGE
(a) The parties hereby adopt as of the date of this Agreement a plan
of exchange, a copy of which is attached hereto as Exhibit "2.2(a)" (the
"Plan of Exchange").
(b) At the Closing, the parties shall cause the execution and
delivery of articles of exchange, a copy of which is attached hereto as
Exhibit "2.2(b)" (the "Articles of Exchange"). The Articles of Exchange
shall be filed with the Department of State of the Commonwealth of
Pennsylvania on the Closing Date in accordance with Section 1931(e) of the
Pennsylvania Business Corporation Law (15 Pa.C.S. ss. 1931(e)).
2.3 CLOSING
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The issuance and exchange (the "Closing") provided for in this Agreement
will take place at the offices of Buyer's counsel at 00000 Xxxxxxx Xxxxxxx
Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxx 00000, at 10:00 a.m. (local time) August
28, 2003 or at such other time and place as the parties may agree. Subject
to the provisions of Section 9, failure to consummate the purchase and
sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 will not result in the termination
of this Agreement and will not relieve any party of any obligation under
this Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) The Company will deliver to Buyer:
(i) All duly executed instruments required under the Plan of
Exchange;
(ii) An employment agreement executed by Xxxx X. Xxxxxxxxx and
a consulting agreement with Xxxxx X. Xxxxxxxx Xxxxxxxxx in such form as may be
mutually satisfactory to the respective parties thereto (collectively,
"Employment Agreements"); and
(iii) A certificate executed by a duly authorized officer of
the Company representing and warranting to Buyer that each of Company's
representations and warranties in this Agreement was accurate in all respects as
of the date of this Agreement and is accurate in all respects as of the Closing
Date as if made on the Closing Date (giving full effect to any supplements to
the Disclosure Letter that were delivered by the Company to Buyer prior to the
Closing Date in accordance with Section 5.5); and
(b) Buyer will deliver to the Company:
(i) A certificate executed by Buyer to the effect that each of
Buyer's representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date; and
(ii) The Employment Agreements, executed by Buyer.
(c) Buyer and Controlling Shareholders will execute and deliver an
agreement in the form of Exhibit "2.4(c)" (the "Agreement with Controlling
Shareholders").
(d) Buyer and certain named principal investors in the Company will
execute and deliver a release and settlement agreement, including
substitute debentures (the "General Release and Settlement Agreement").
(e) Buyer will deliver to each of the Shareholders a certificate or
certificates representing the number of Buyer's Shares to which such
Shareholder is entitled under Section 2.1 hereof in the manner provided in
the Plan of Exchange.
SECTION 3. REPRESENTATIONS AND WARRANTIES
OF COMPANY
The Company represents and warrants to Buyer as follows:
3.1 ORGANIZATION; GOOD STANDING; SUBSIDIARIES
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(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for the Company of its name, its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). The Company is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) The Company has delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
(c) The Company has no Subsidiaries or predecessors.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Company, enforceable against Company in accordance with its terms. Upon the
execution and delivery by Company of the Plan of Exchange and the Articles of
Exchange (collectively, the "Company's Closing Documents"), the Company's
Closing Documents will constitute the legal, valid, and binding obligations of
Company, enforceable against Company in accordance with their respective terms.
Company has the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and the Company's Closing Documents and to
perform their obligations under this Agreement and the Company's Closing
Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Company, or (B) any resolution
adopted by the board of directors of the Company;
(ii) contravene, conflict with, or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company, or any of the assets
owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the business of, or any
of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be reassessed or
revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
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(vii) Result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company.
(c) Except as set forth in Part 3.2 of the Disclosure Letter, the Company
is not or will not be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of (a) 1,000,000
shares of common stock, par value $1.00 per share, (b) 100,000 shares of
Class A Preferred Stock, par value $25.00 per share, (c) 285,000 shares of
Class B Preferred Stock, par value $10.38 per share, and (d) 170,000
shares of Class C Preferred Stock, par value $8.40 per share. There are
issued and outstanding (i) 234,232 shares of common stock, (ii) 29,480
shares of Class A Preferred Stock, (iii) 277,531 shares of Class B
Preferred Stock, and (iv) 160,145 shares of Class C Preferred Stock, all
of which constitute the Shares. To the Company's Knowledge, the
Shareholders are the record and beneficial owners and holders of the
Shares as set forth at Schedule "A" hereto. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and
are fully paid and nonassessable. Except as described in Part 3.3 of the
Disclosure Letter, there are no Contracts relating to the issuance, sale,
or transfer of any equity securities or other securities of the Company.
Except as described in Part 3.3 of the Disclosure Letter, none of the
outstanding equity securities or other securities of the Company was
issued in violation of the Securities Act or any other Legal Requirement.
The Company does not own, or have any Contract to acquire, any equity
securities or other securities of any Person (other than Company) or any
direct or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Company has delivered to Buyer: (a) balance sheets of the Company as at
December 31 in each of the years 2000 through 2001, and the related
statements of income, changes in stockholders' equity, and cash flow for
each of the fiscal years then ended, together with the report thereon of
XxXxxxx & Xxxxxx LLP, independent certified public accountants, (b) a
balance sheet of the Company as at December 31, 2002 (including the notes
thereto, the "Balance Sheet"), and the related statements of income,
changes in stockholders' equity, and cash flow for the fiscal year then
ended, together with the report thereon of XxXxxxx & Xxxxxx LLP,
independent certified public accountants, and (c) an unaudited balance
sheet of the Company as at June 30, 2003 (the "Interim Balance Sheet") and
the related unaudited statements of income, changes in stockholders'
equity, and cash flow for the six (6) months then ended, including in each
case the notes thereto. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective
dates of and for the periods referred to in such financial statements, all
in accordance with GAAP, subject, in the case of interim financial
statements, to normal recurring year-end adjustments (the effect of which
will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ
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materially from those included in the Balance Sheet); the financial
statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Company are required by
GAAP to be included in the financial statements of the Company.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records
of the Company, all of which have been made available to Buyer, are
complete and correct and have been maintained in accordance with sound
business, including the maintenance of an adequate system of internal
controls. The minute books of the Company contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of
Directors of the Company, and no meeting of any such stockholders, Board
of Directors, or committee has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all
of those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of
all real property, leaseholds, or other interests therein owned by the
Company. Company has delivered or made available to Buyer copies of the
deeds and other instruments (as recorded) by which the Company acquired
such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of Company or
the Company and relating to such property or interests. The Company owns
(with good and marketable title in the case of real property, subject only
to the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or
intangible) that they purport to own located in the facilities owned or
operated by the Company or located on the premises of the Company's
customers or reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the Balance Sheet
and the Interim Balance Sheet (except for assets held under capitalized
leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance
Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Balance Sheet
(except for personal property acquired and sold since the date of the
Balance Sheet in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 3.6
of the Disclosure Letter. All material properties and assets reflected in
the Balance Sheet and the Interim Balance Sheet are free and clear of all
Encumbrances, except as set forth in Part 3.6 of the Disclosure Letter.
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3.7 CONDITION AND SUFFICIENCY OF ASSETS
To the Knowledge of the Company the buildings, plants, structures, and
equipment of the Company are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is
in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Company are sufficient for the continued
conduct of the Company's businesses after the Closing in substantially the
same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales or lease
transactions actually made or services actually performed in the Ordinary
Course of Business. Unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible
net of the respective reserves shown on the Balance Sheet or the Interim
Balance Sheet or on the accounting records of the Company as of the
Closing Date (which reserves are adequate and calculated consistent with
past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the
Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not
represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, to the Company's
Knowledge, each of the Accounts Receivable either has been or will be
collected in full, without any set-off, within one hundred eighty (180)
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary
Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Part 3.8 of the Disclosure Letter contains a complete and accurate list of
all Accounts Receivable as of the date of the Interim Balance Sheet, which
list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
(a) All inventory of the Company, whether or not reflected in the
Balance Sheet or the Interim Balance Sheet, consists of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Balance Sheet
or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date, as the case may be. All inventories not written
off have been priced at the lower of cost or [market] [net realizable
value] on a [last in, first out] [first in, first out] basis. The
quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive, but are reasonable
in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
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Except as set forth in Part 3.10 of the Disclosure Letter, the Company has
no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance
Sheet or the Interim Balance Sheet and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely basis
since December 31, 1996) all Tax Returns that are or were required to be
filed by the Company pursuant to applicable Legal Requirements. Company
has delivered to Buyer copies of, and Part 3.11 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns filed since
December 31, 1996. The Company has paid, or made provision for the payment
of, all Taxes that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by Company,
except such Taxes, if any, as are listed in Part 3.11 of the Disclosure
Letter and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in the
Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of the
Company subject to such Taxes have been audited by the IRS or relevant
state tax authorities or are no longer subject to audit as determined by
the applicable statute of limitations for all taxable years through
December 31, 2002. Part 3.11 of the Disclosure Letter contains a complete
and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit.
All deficiencies proposed as a result of such audits have been paid,
reserved against, settled, or, as described in Part 3.11 of the Disclosure
Letter, are being contested in good faith by appropriate proceedings. Part
3.11 of the Disclosure Letter describes all adjustments to the United
States federal income Tax Returns filed by the Company for all taxable
years since December 31, 1996, and the resulting deficiencies proposed by
the IRS. Except as described in Part 3.11 of the Disclosure Letter, the
Company has not given or been requested to give waivers or extensions (or
is or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of the
Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance
with GAAP) and are at least equal to the Company's liability for Taxes.
There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.11 of the Disclosure Letter.
No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be
acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by the Company after the
date of this Agreement. The Company is not, or within the five-year period
preceding the Closing Date has been, an "S" corporation. During the
consistency period (as defined in Section 338(h)(4) of the IRC with
respect to the sale of the Shares to Buyer), neither the Company nor any
target affiliate (as defined in Section 338(h)(6) of the IRC with respect
to the sale of the Shares to Buyer) has sold or will sell any property or
assets to Buyer or to any member of the affiliated group (as defined in
Section 338(h)(5) of the IRC) that includes Buyer. Part 3.11 of the
Disclosure Letter lists all such target affiliates.
3.12 NO MATERIAL ADVERSE CHANGE
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Since the date of the Balance Sheet, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may result
in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) Except as set forth at Part 3.13(a) of the Disclosure Letter,
the Company has no defined benefit and defined contribution plan, stock
ownership plan, executive compensation program or arrangement, bonus plan,
incentive compensation plan or arrangement, profit sharing plan or
arrangement, deferred compensation agreement or arrangement, supplemental
retirement plan or arrangement, vacation pay, sickness, disability, or
death benefit plan (whether provided through insurance, on a funded or
unfunded basis, or otherwise), medical or life insurance plan providing
benefits to any of the Company's employees, retirees, or former employees
or any of their dependents, survivors, or beneficiaries, employee stock
option or stock purchase plan, severance pay, termination, salary
continuation or employee assistance plan, and each other employee benefit
plan, program, or arrangement, including without limitation an "employee
benefit plan" within the meaning of Section 3(3) of ERISA, that is
maintained by the Company for the benefit of or relating to any of the
Company's employees or former employees or their dependents, survivors, or
beneficiaries, whether or not legally binding, and for which the Company
could reasonably have any liabilities, all of which are hereinafter
referred to as the "Company Benefit Plans."
(b) Neither the Buyer nor the Company will incur any liability under
any severance agreement, deferred compensation agreement, employment
agreement, similar agreement, or Company Benefit Plan solely as a result
of the consummation of the transactions contemplated by this Agreement.
(c) The Company does not have any obligation to any former employee,
or any current employee upon retirement, under any Company Benefit Plan or
otherwise, other than those disclosed in Part 3.13(a) of the Disclosure
Letter, and any Company Benefit Plan can be terminated as of or after the
Closing Date without resulting in any liability to Buyer for any
additional contributions, penalties, premiums, fees, fines, excise taxes,
or any other charges or liabilities.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since December 31, 1999
has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets, including, but not limited to, the Health Insurance
Portability and Accountability Act of 1996, as amended, and any other Legal
Requirement regarding the privacy of medical records or health-related
information;
(ii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) (A) may constitute or result in a violation
by the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) The Company has not received, at any time since December
31, 1999, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
12
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter is
valid and in full force and effect.
(c) The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and
operate their businesses in the manner they currently conduct and operate
such businesses and to permit the Company to own and use their assets in
the manner in which they currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter, there
is no pending Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, the Company; or
(ii) That challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
(b) To the Knowledge of Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such
Proceeding. Company has delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Part 3.15 of the Disclosure Letter. The Proceedings listed in Part 3.15 of
the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) to the Knowledge of Company, no Shareholder is subject to
any Order that relates to the business of, or any of the assets owned or used
by, the Company; and
(iii) to the Knowledge of the Company, no officer, director,
agent, or employee of the Company is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of the Company.
(d) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times since December 31, 1999
has been, in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) The Company has not received, at any time since December
31, 1999, any notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used by the
Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
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Except as set forth in Part 3.16 of the Disclosure Letter, since the date
of the Balance Sheet, the Company has conducted their businesses only in
the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock;
grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock;
or declaration or payment of any dividend or other distribution or payment
in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in
the Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$5,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company, including
the sale, lease, or other disposition of any of the Intellectual Property
Assets;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $5,000;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Company has delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials to one or more Company of an amount
or value in excess of $25,000;
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more Company in excess of $5,000;
(iii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property;
(iv) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees,
14
consultants, or contractors regarding the appropriation or the non-disclosure of
any of the Intellectual Property Assets;
(v) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(vi) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or any Affiliate of
the Company or limit the freedom of the Company or any Affiliate of the Company
to engage in any line of business or to compete with any Person;
(vii) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments for
goods;
(viii) each power of attorney that is currently effective and
outstanding;
(ix) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(x) each Applicable Contract for capital expenditures in
excess of $5,000;
(xi) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business; and
(xii) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete
details concerning such Contracts, including the parties to the Contracts,
the amount of the remaining commitment of the Company under the Contracts,
and the Company's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) To the Knowledge of Company, no Shareholder (and no
Related Person of any Shareholder) has or may acquire any rights under, and no
Shareholder has or may become subject to any obligation or liability under, any
Contract that relates to the business of, or any of the assets owned or used by,
the Company; and
(ii) to the Knowledge of the Company, no officer, director,
agent, employee, consultant, or contractor of the Company is bound by any
Contract that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of the Company, or (B) assign to
the Company or to any other Person any rights to any invention, improvement, or
discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,
each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times since December 31, 1999
has been, in full compliance with all applicable terms and requirements of each
Contract under which the Company has or had any obligation or liability or by
which the Company or any of the assets owned or used by the Company is or was
bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any rights is,
and at all times since December 31, 1999 has been, in full compliance with all
applicable terms and requirements of such Contract;
15
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract; and
(iv) The Company has not given to or received from any other
Person, at any time since December 31, 1999, any notice or other communication
(whether oral or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) Except as described in Part 3.17(e) of the Disclosure Letter,
there are no renegotiations of, attempts to renegotiate, or outstanding
rights to renegotiate any material amounts paid or payable to the Company
under current or completed Contracts with any Person and, to the Knowledge
of Company and the Company, no such Person has made written demand for
such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company has been entered into in
the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in
violation of any Legal Requirement.
3.18 INSURANCE
(a) Company has delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time within the three (3) years preceding
the date of this Agreement;
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of the
reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for
the current policy year and each of the three (3) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of insurance, and
period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
16
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) All policies to which the Company is a party or that
provide coverage to the Company, or any director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for the
assets and the operations of the Company for all risks normally insured
against by a Person carrying on the same business or businesses as the
Company;
(D) are sufficient for compliance with all Legal Requirements and
Contracts to which the Company is a party or by which it is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Company.
(ii) The Company has not received (A) any refusal of coverage
or any notice that a defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the issuer of
any policy is not willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has otherwise
performed all of their respective obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director thereof.
(iv) The Company has given notice to the insurer of all claims
that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.19 of the Disclosure Letter:
(a) Hazardous Material. To the Company's Knowledge, the Company has
not released any amount of any substance that has been designated by any
Governmental Body or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, oil and
petroleum products, urea-formaldehyde and all substances listed as a
"hazardous substance," "hazardous waste," "hazardous material" or "toxic
substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended; the Resource Conservation and Recovery
Act of 1976, as amended; the Federal Water Pollution Control Act, as
amended; the Clean Air Act, as amended, and the regulations promulgated
pursuant to said laws, (a "Hazardous Material"). No Hazardous Materials
are present as a result of the actions or omissions of the Company, or, to
the Company's Knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees
or others to Hazardous Materials in
17
violation of any law in effect on or before the Closing Date, nor has the
Company disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "Hazardous Materials Activities") in violation
of any rule, regulation, treaty or statute promulgated by any Governmental
Body in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or
to the Company's Knowledge, Threatened concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of the
Company. The Company is not aware of any fact or circumstance which could
involve the Company in any environmental litigation or impose upon the
Company any environmental liability.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1999; vacation accrued; and
service credited for purposes of vesting and eligibility to participate
under any Company Benefit Plans.
(b) Except as set forth in Part 3.20 (b) of the Disclosure Letter,
no employee or director of the Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any
way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company
to conduct its business, including any Proprietary Rights Agreement with
the Company by any such employee or director. To Company's Knowledge, no
officer, or other key employee of the Company intends to terminate his
employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been nor is a party to any collective bargaining
or other labor Contract.
3.22 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--The term "Intellectual Property
Assets" includes:
(i) "Tracking Systems Corp.," all fictional business names,
trading names, registered and unregistered trademarks, service marks, logotypes,
commercial symbols and applications therefor (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished
works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
18
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets"); owned, used,
or licensed by the Company as licensee or licensor.
(b) Agreements--Part 3.22(b) of the Disclosure Letter contains a
complete and accurate list and summary description, including any
royalties paid or received by the Company, of all Contracts relating to
the Intellectual Property Assets to which the Company is a party or by
which the Company is bound, except for any license implied by the sale of
a product and perpetual, paid-up licenses for commonly available software
programs under which the Company is the licensee. Except as set forth in
Part 3.22(b) of the Disclosure Letter, there are no outstanding and, to
Company's Knowledge, no Threatened disputes or disagreements with respect
to any such agreement.
(c) Know-How Necessary for the Business
(i) The Intellectual Property Assets are all those necessary
for the operation of the Company's businesses as they are currently conducted.
The Company is the owner of all right, title, and interest in and to each of the
Intellectual Property Assets, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims, and has the right to
use without payment to a third party all of the Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure
Letter, all former and current employees of the Company have executed written
Contracts with the Company that assign to the Company all rights to any
inventions, improvements, discoveries, or information relating to the business
of the Company. No employee of the Company has entered into any Contract that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company.
(d) Patents
The Company does not own or license any Patents and does not have a
patent application outstanding with the U.S. Patent and Trademark Office
or the equivalent agency in any foreign country.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks, owned by or licensed to the
Company. The Company is either (1) the owner of all right, title, and interest
in and to each of the Marks, free and clear of all liens, security interests,
charges, encumbrances, equities, and other adverse claims; or, (2) the holder of
a transferable, non-exclusive, perpetual, royalty-free license to use the Marks.
(ii) All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance with all formal
legal requirements (including the timely post-registration filing of affidavits
of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to Company's Knowledge, no such action is
Threatened with the respect to any of the Marks.
(iv) To Company's Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to Company's Knowledge, has been
challenged or threatened in any way. None of the Marks used by the Company
infringes or is alleged to infringe any trade name, trademark, or service xxxx
of any third party.
(vi) All products and materials containing a Xxxx xxxx the
proper federal registration notice where permitted by law.
19
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a complete
and accurate list and summary description of all Copyrights. The Company is the
owner of all right, title, and interest in and to each of the Copyrights, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) All the Copyrights have been registered and are currently
in compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety days after the date of Closing.
(iii) No Copyright is infringed or, to Company's Knowledge,
has been challenged or threatened in any way. None of the subject matter of any
of the Copyrights infringes or is alleged to infringe any copyright of any third
party or is a derivative work based on the work of a third party.
(iv) All works encompassed by the Copyrights have been marked
with the proper copyright notice.
(g) Trade Secrets
(i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient in detail and
content to identify and explain it and to allow its full and proper use without
reliance on the knowledge or memory of any individual.
(ii) The Company has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade Secrets.
(iii) The Company has good title and an absolute (but not
necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not
part of the public knowledge or literature, and, to Company's Knowledge, have
not been used, divulged, or appropriated either for the benefit of any Person
(other than one or more of the Company) or to the detriment of the Company. No
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way.
3.23 CERTAIN PAYMENTS
Since December 31, 2000, neither the Company nor any director, officer,
agent, or employee of the Company, or to Company's Knowledge any other
Person associated with or acting for or on behalf of the Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or
services (i) to obtain favorable treatment in securing business, (ii) to
pay for favorable treatment for business secured, (iii) to obtain special
concessions or for special concessions already obtained, for or in respect
of the Company or any Affiliate of the Company, or (iv) in violation of
any Legal Requirement, (b) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Company in this Agreement and no statement
in the Disclosure Letter omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not misleading.
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(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter: to the
Knowledge of the Company, no Shareholder or any Related Person of a
Shareholder has, or since the first day of the next to last completed
fiscal year of the Company has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to the Company's businesses. To the Knowledge of the Company,
no Shareholder or any Related Person of a Shareholder is, or since the
first day of the next to last completed fiscal year of the Company has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest's therein, a Person that has (i) had business
dealings or a material financial interest in any transaction with the
Company other than business dealings or transactions conducted in the
Ordinary Course of Business with the Company at substantially prevailing
market prices and on substantially prevailing market terms, or (ii)
engaged in competition with the Company with respect to any line of the
products or services of the Company (a "Competing Business") in any market
presently served by the Company except for less than one percent of the
outstanding capital stock of any Competing Business that is publicly
traded on any recognized exchange or in the over-the-counter market.
Except as set forth in Part 3.25 of the Disclosure Letter, no Shareholder
or any Related Person of a Shareholder is a party to any Contract with, or
has any claim or right against, the Company.
3.26 BROKERS OR FINDERS
Company and its agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Company as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Agreement with
Controlling Shareholders, the Escrow Agreement, the Plan of Exchange, the
General Release and Settlement Agreement, and the Employment Agreements
(collectively, the "Buyer's Closing Documents"), the Buyer's Closing
Documents will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective
terms. Buyer has the absolute and unrestricted right, power, and authority
to execute and deliver this Agreement and the Buyer's Closing Documents
and to perform its obligations under this Agreement and the Buyer's
Closing Documents.
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(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of
any of the Contemplated Transactions by Buyer will give any Person the
right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
4.3 CAPITALIZATION
The authorized securities of the Buyer consist of 100,000,000 shares of
common stock, par value $0.001 per share, and 1,000,000 shares of
preferred stock, par value $0.001 per share. The Buyer currently has
outstanding 40,935,192 shares of common stock, 8,685.78 shares of its
Series A Convertible Preferred Stock and 300 shares of its Series B
Convertible Preferred Stock. All such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable.
4.4 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities
Act.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened.
4.6 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Company harmless from any such
payment alleged to be due by or through Buyer as a result of the action of
Buyer or its officers or agents.
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4.7 REPORTING REQUIREMENTS OF THE BUYER
The Buyer is subject to the reporting and filing requirements of the
Exchange Act including (1) the periodic reporting requirements and (2) the
Proxy Rules set forth thereunder. The Buyer and its officers, directors,
and beneficial owners are subject to the provisions of Section 16 of the
Exchange Act relating to short-swing profit recapture, reports of
beneficial ownership and short sale prohibitions and the Buyer and its
officers, directors, and beneficial owners have timely complied in all
respects with the filing requirements of the Exchange Act.
4.8 SEC DOCUMENTS
Buyer has furnished or made available to the Company and each of the
Shareholders a true and complete copy of each report, schedule,
registration statement and proxy statement filed by Buyer with the SEC
since December 31, 2002 (as such documents have since the time of their
filing been amended, the "SEC Documents"), a list of which is attached as
Schedule 4.8. Buyer has timely filed with the SEC all documents required
to have been filed pursuant to the Securities Act and the Exchange Act. As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SEC Documents, and none of the SEC Documents contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.9 QUOTATION ON THE OTC BULLETIN BOARD
The Buyer's Common Stock is quoted on the OTC Bulletin Board under the
symbol "ISRE." The Buyer will take all necessary action to maintain its
eligibility for such quotation on the OTC Bulletin Board. The Buyer will
use its Best Efforts to cause not less than three (3) firms to make a
market for the Buyer's Common Stock.
4.10 APPROVAL OF THE EXCHANGE BY THE BUYER'S STOCKHOLDERS
The transactions contemplated by this Agreement do not require the
approval of the Buyer's stockholders and the Buyer is not required to file
a Schedule 14A or 14C with the SEC as a result of the transactions
contemplated herein.
4.11 APPLICATION FOR STOCK REGISTRATION
Within 30 days of Closing, Buyer shall make application with the SEC
to register that number of shares of Buyer's common stock, par value
$0.001 per share, which Buyer shall exchange for all issued and
outstanding stock of the Company under the terms of the Plan of Exchange.
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SECTION 5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Company will, and
will cause the Company and its Representatives to, (a) afford Buyer and
its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties, contracts, books and records, and other documents
and data, (b) furnish Buyer and Buyer's Advisors with copies of all such
contracts, books and records, and other existing documents and data as
Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors
with such additional financial, operating, and other data and information
as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date, Company will:
(a) conduct the business of the Company only in the Ordinary Course
of Business;
(b) use its Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations
and good will with suppliers, customers, landlords, creditors, employees,
agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the
date of this Agreement and the Closing Date, Company will not, without the
prior consent of Buyer, take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the
changes or events listed in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Company will
make all filings required by Legal Requirements to be made by it in order
to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Company will cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and
take all actions necessary and expedient to obtain the Requisite
Shareholder Approval of the Plan of Exchange and the transactions
contemplated therein.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, the Company will
promptly notify Buyer in writing if the Company becomes aware of any fact
or condition that causes or constitutes a Breach of any of Company's
representations and warranties as of the date of this Agreement, or if the
Company becomes aware of the occurrence after the date of this Agreement
of any fact or condition that would (except as expressly contemplated by
this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure
Letter were dated the date of the occurrence or discovery of any such fact
or condition, Company will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Company will use its Best
Efforts to cause all indebtedness owed to the Company by any Shareholder
or any Related Person of any Shareholder to be paid in full prior to
Closing.
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5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 9, Company will not directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets
(other than in the Ordinary Course of Business) of the Company, or any of
the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, the Company will
use its Best Efforts to cause the conditions in Sections 7 and 8 to be
satisfied.
SECTION 6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required
by Legal Requirements to be made by them to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date,
Buyer will, and will cause each Related Person to, cooperate with Company
with respect to all filings that Company are required by Legal
Requirements to make in connection with the Contemplated Transactions, and
(ii) cooperate with Company in obtaining all consents identified in Part
3.2 of the Disclosure Letter; provided that this Agreement will not
require Buyer to dispose of or make any change in any portion of its
business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BID BONDS AND PERFORMANCE BONDS
As promptly as practicable after the date of this Agreement, Buyer
will arrange with each issuer of a bid bond or performance bond on behalf
of the Company to substitute Buyer for any Controlling Shareholder
guaranteeing the performance of the Company under such bond and to make
such substitution effective at or as soon as practicable after the
Closing. Buyer will indemnify any Controlling Shareholder for any and all
liability, costs and expenses incurred by such Controlling Shareholder
related to his or her guarantee on any of the Company's bid bond or
performance bond from the Closing Date to the date Buyer has been
substituted for the Controlling Shareholders on such bonds.
6.3 INSURANCE
As soon as practical following the Closing Date, but in no event
later than the date on which applicable insurance policies for the benefit
of the Company lapse, Buyer shall
25
cause the Company to be listed as an additional insured under its existing
Directors and Officers, General Liability, Errors and Omissions, and
Umbrella policies.
6.4 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use its Best Efforts to
cause the conditions in Sections 7 and 8 to be satisfied.
SECTION 7. CONDITIONS PRECEDENT TO
BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to acquire the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
(a) All of Company's representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement, and must be accurate
in all material respects as of the Closing Date as if made on the Closing
Date.
(b) Each of Company's representations and warranties in Sections
3.3, 3.4, 3.12, and 3.24 must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all respects as of the
Closing Date as if made on the Closing Date.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Company is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been delivered, and each of the other covenants and obligations
in Sections 5.4 and 5.8 must have been performed and complied with in all
respects.
7.3 CONSENTS
(a) Each of the Consents identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
(b) The Plan of Exchange and the transactions contemplated therein
shall have received the Requisite Shareholder Approval and no more than
five percent (5%) of the Shareholders shall have given notice of dissent
under the provisions of the Pennsylvania Business Corporation Law. The
term "Requisite Shareholder Approval" means the affirmative vote of the
majority of each class of capital stock of the Company.
26
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxxxx Xxxxxxxx, P.C., dated the Closing Date,
in the form of Exhibit 7.4(a);
(b) an estoppel certificate, agreement or letter evidencing the
landlord's obligation to continue the existing lease of the Company's
leasehold;
(c) such other documents as Buyer may reasonably request for the
purpose of (i) enabling its counsel to provide the opinion referred to in
Section 8.4(a), (ii) evidencing the accuracy of any of Company's
representations and warranties, (iii) evidencing the satisfaction of any
condition referred to in this Section 7, (iv) assigning to the Company,
without additional consideration, all rights and claims respecting the
Marks (including any trade names, trademarks, service marks, logotypes, or
commercial symbols identified at Part 3.22 of the Disclosure Letter), or
(v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP
There must not have been made or Threatened by any Person any claim
asserting that such Person is the holder or the beneficial owner of, or
has the right to acquire or to obtain beneficial ownership of, any stock
of, or any other voting, equity, or ownership interest in, the Company.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse
of time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer
any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published by any Governmental Body.
7.8 COMPANY INDEBTEDNESS
(a) All notes, loans and other obligations or encumbrances of any
kind (including the payment of performance based fees) by and between the
Company and Xxxxxxxx Media Capital (or any of its Affiliates), or under
which the Company's assets and properties may be bound, shall have been
refinanced, waived, released or terminated, as the case may be, to the
sole satisfaction of Buyer.
(b) All debentures, notes, loans and similar obligations of the
Company to any Shareholder shall have been refinanced, waived, released or
terminated to the sole satisfaction of Buyer, including, without
limitation, execution of the General Release and Settlement Agreement.
27
SECTION 8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Company's obligation to sell the Shares and to take the other actions
required to be taken by Company at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all
material respects as of the date of this Agreement and must be accurate in
all material respects as of the Closing Date as if made on the Closing
Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.
8.3 CONSENTS
(a) Each of the Consents identified in Part 3.2 of the Disclosure
Letter must have been obtained and must be in full force and effect.
(b) The Plan of Exchange and the transactions contemplated therein
shall have received the Requisite Shareholder Approval, subject to the
satisfaction of the terms and conditions set forth therein.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Company:
(a) an opinion of Xxxxxxxx & Xxxxxxxxxx, P.C., dated the Closing
Date, in the form of Exhibit 8.4(a);
(b) a reciprocal release of any and all claims related to the management
and operation of the Company and associated stock transactions ("General
Release") executed by Buyer and each exchanging shareholder of the Company
including the following: Keystone Venture IV, L.P; Odyssey Capital Group,
L.P. and Penn Janney Fund, Inc.;
(c) a copy of the loan commitment made by Xxxxxxxx Media Capital, L.P. to
Buyer on July 17, 2003 by letter ("Commitment Letter") and executed by
Buyer and the Waiver Letter from Xxxxxxxx Media Capital, L.P. to the
Company dated August 4, 2003; and,
28
(d) such other documents as Company may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to
in Section 7.4(a), (ii) evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of
any condition referred to in this Section 8, or (v) otherwise facilitating
the consummation of any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the sale of the Shares by Company to Buyer,
and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.
SECTION 9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer or Company if a material Breach of any provision
of this Agreement has been committed by the other party and such Breach
has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply
with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Company, if any of the
conditions in Section 8 has not been satisfied of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than
through the failure of Company to comply with their obligations under this
Agreement) and Company has not waived such condition on or before the
Closing Date;
(c) by mutual consent of Buyer and Company; or
(d) by either Buyer or Company if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before September 1, 2003, or such later date as the parties may agree
upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition
to any other rights it may have under this Agreement or otherwise, and the
exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement will terminate; provided,
however, that if this Agreement is terminated by a party because of the
Breach of the Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue
all legal remedies will survive such termination unimpaired.
SECTION 10. GENERAL PROVISIONS
29
10.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will
be subject to any rights of such party arising from a breach of this
Agreement by another party.
10.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines and after informing
counsel to the Company thereof. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Company shall keep
this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person. Company and Buyer will consult with each
other concerning the means by which the Company's employees, customers,
and suppliers and others having dealings with the Company will be informed
of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
10.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Company
will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Company to maintain in
confidence, and not use to the detriment of the Buyer or the Company any
written, oral, or other information obtained in confidence in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available
through no fault of such party, (b) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the Contemplated Transactions,
or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party
may reasonably request. Whether or not the Closing takes place, Company
waives any cause of action, right, or claim arising out of the access of
Buyer or its representatives to any trade secrets or other confidential
information of the Company except for the intentional competitive misuse
by Buyer of such trade secrets or confidential information.
10.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (i.e. facsimile machine) (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return
30
receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth
below (or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
If to the Company,
Tracking Systems Corporation
Attention: Xxxx Xxxxxxxxx
0000 Xxxx Xxxxx
Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxxxxxx, P.C.
Attention: Xxxxxxx Xxxxxx
0000 Xxxxxxx Xxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
If to Buyer,
iSecureTrac Corp.
Attention: Xxxx Xxxxx
0000 Xx. 000xx Xxxxxx
Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxxxxxxx, P.C.
Attention: Xxxxxx Xxxxxxx
00000 Xxxxxxx Xxxxxxx Xxxxx
Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
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10.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Nebraska, County of Xxxxxxx, or, if
it has or can acquire jurisdiction, in the United States District Court
for the District of Nebraska, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
10.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.
10.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power,
or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to
in this Agreement can be discharged by one party, in whole or in part, by
a waiver or renunciation of the claim or right unless in writing signed by
the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c)
no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
10.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter (including the Letter of Intent between
Buyer and Company dated April 21, 2003) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect
to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
10.9 DISCLOSURE LETTER
32
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to
any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with
respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
10.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties, which will not be
unreasonably withheld, except that Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon,
and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
10.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
10.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section
or Sections of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit
the preceding words or terms.
10.13 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
10.14 GOVERNING LAW
This Agreement will be governed by the laws of the State of Nebraska
without regard to conflicts of laws principles.
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10.15 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
ISECURETRAC CORP. TRACKING SYSTEMS CORPORATION
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxxxxx
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