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STOCK PURCHASE AGREEMENT
AMONG
MASADA SECURITY, INC.
AND
XXXXXXX X. XXXXX, XXXXXX X. XXXXX, XXXXX X. XXXXXXXX
AND XXXXXX X. XXXXXXX
DATED MAY 31, 1996
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TABLE OF CONTENTS
PAGE NO.
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND TRANSFER OF SHARES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Closing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Allowances and Adjustment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Over 90 RMR Purchase Price and Holdback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Title to Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Condition and Sufficiency of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Compliance With Legal Requirements; Governmental Authorizations. . . . . . . . . . . . . . . . . . . 19
3.16 Legal Proceedings, Orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.17 Absence of Certain Changes and Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.18 Contracts; No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.20 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.21 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.22 Labor Disputes; Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.23 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Product Warranties and Medical Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.25 Business Position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.26 Certain Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.27 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.28 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.3 Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Certain Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.5 Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Access and Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Operation of the Businesses of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.3 Negative Covenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.4 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5 No Negotiation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Notification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Sellers' Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4 Additional Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5 Monitoring Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Payoff of Bank Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Payoff of Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 No Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.10 No Claim Regarding Stock Ownership or Sale Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 33
7.11 No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.13 Merger with Secure America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Accuracy of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Buyer's Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.4 No Injunction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Termination Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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9.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10. INDEMNIFICATION; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Indemnification and Reimbursement by Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Indemnifications and Reimbursement by Sellers - Environmental Matters. . . . . . . . . . . . . . . . 36
10.4 Indemnification and Reimbursement by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.5 Procedure for Indemnification - Third Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . 37
11. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 American Arbitration Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.3 Selection of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.4 Decision of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.5 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.7 Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.8 Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12. POST CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1 Collection of Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.2 Tax Election. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.3 Alarm Accounts Included in Lost RMR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.4 Business and Tax Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
13.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.6 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.7 Entire Agreement and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.8 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.9 Assignments, Successors, and No Third-Party Rights. . . . . . . . . . . . . . . . . . . . . . . . . 44
13.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.11 Section Headings, Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.12 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.14 Direction of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of May 31,
1996 by and between MASADA SECURITY, INC., a Delaware corporation ("Buyer");
XXXXXXX X. XXXXX, an individual residing in Miami, Florida ("Xxxxx"); XXXXXX X.
XXXXX, an individual residing in Miami Beach, Florida ("Moses"), XXXXX X.
XXXXXXXX, an individual residing in Miami, Florida ("Xxxxxxxx"), and XXXXXX X.
XXXXXXX, an individual residing in Ft. Lauderdale, Florida ("Xxxxxxx") (Jones,
Moses, Xxxxxxxx and, Xxxxxxx are collectively referred to as the "Sellers").
RECITALS
Sellers own 100 shares of the common stock, $50.00 par value, of
Alarms by HRD, Inc., a Florida corporation (the "Company"), (all of such shares
in the Company are collectively referred to as the "Shares") which constitutes
all of the issued and outstanding shares of capital stock of the Company.
Sellers desire to sell, and Buyer desires to purchase, the Shares for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACCOUNTS RECEIVABLE" OR "A/R" -- as defined in Section 3.9.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.6.
"ALARM ACCOUNT" -- as defined in Section 3.18.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"ATTRITION HOLDBACK" -- as defined in Section 2.5.
"APPLICABLE CONTRACT" -- any Contract excluding Alarm Accounts (a)
under which Company has or may acquire any rights, (b) under which Company has
or may become subject to any obligation or liability, or (c) by which Company
or any of the assets owned or used by Company is or may become bound.
"BALANCE SHEET" -- as defined in Section 3.4.
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"BEST EFFORTS" -- the obligation of a Person to take affirmative steps
in good faith and in a commercially reasonable manner while using its total
capabilities to fulfill the required act.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.4.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CODE" -- 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.
"COMPANY" -- as defined in the second paragraph 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 sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the
Nonsolicitation and Nonacceptance Agreement and the
Escrow Agreement.
(c) the performance by Buyer and Sellers 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.
"CONTINGENT LIABILITIES HOLDBACK" -- as defined in Section 2.5.
"DAMAGES" -- as defined in Section 10.2.
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"ENCUMBRANCE" -- any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest,
condition precedent, right of first refusal, restriction contained in an
agreement among the shareholders of the Company, or restriction of any kind,
including any restriction on use, voting (in the case of any security),
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENTAL REQUIREMENT" -- requirements pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended and any other Legal Requirement
designed:
(a) to advise appropriate authorities, employees, and the
public of intended or actual Releases of pollutants
or hazardous substances or Hazardous Materials,
violations or discharge limits, or other prohibitions
and of the commencements of activities, such as
resource extraction or construction, that could have
significant impact on the environment;
(b) to prevent or acceptably minimize the Release of
pollutants or hazardous substances or materials into
the environment;
(c) to reduce the quantities, prevent the Release, and
minimize the hazardous characteristics of wastes that
are generated;
(d) to assure that products are designed, formulated,
packaged, or used so that they do not present
unreasonable risks to human health or the environment
when used or disposed of;
(e) to protect resources, species, or ecological
amenities;
(f) to acceptably minimize the risks inherent in
transportation of hazardous substances, pollutants,
oil, or other potentially harmful substances; or
(g) to clean up pollutants that have been Released,
prevent the threat of Release, or pay the costs of
such clean up or prevention.
"ESCROW ACCOUNT" -- as defined in Exhibit 2.5(c).
"ESCROW AGENT" -- as defined in Exhibit 2.5(c)
"ESCROW AGREEMENT" -- as defined in Section 2.5.
"EXCEPTION PAYMENT" -- See Lost RMR
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"ESCROW AMOUNT" -- the "Deposit" as defined in Exhibit 2.5(c).
"EXCLUDED ASSETS" -- means the Accounts Receivable, as detailed on
Schedule 3.9, and the Loans Receivable.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company (or any predecessor
Person) and any buildings, plants, structures, or equipment currently or
formerly owned, leased, or operated by the Company (or any predecessor Person).
"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 federal, state, local, municipal, foreign,
or other government.
"HAZARDOUS MATERIALS" -- any substance that is listed, defined,
designated, or classified as, or otherwise determined to be hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Legal Requirement, including any admixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HOLDBACK PERIOD I" -- the nine month period immediately following the
Closing Date.
"HOLDBACK PERIOD II" -- the one year period immediately following the
Closing Date.
"INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.23.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"INVOICE DUE DATE" -- ten (10) days after the commencement of the
service period covered by such invoice.
"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
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(a) such individual is actually aware of such or other
matter; or
(b) assuming a reasonably comprehensive investigation has
been performed, a prudent individual could be
expected to discover or otherwise become aware of
such fact or other matter.
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 constitution, law, ordinance, principle
of common law, regulation, statute, or treaty.
"LOANS RECEIVABLE" -- means the amounts listed on Schedule 1.
"LOST RMR" -- means as of the end of the Holdback Period I, the Alarm
Account customers which were included in RMR (a) whose accounts receivable
balances (whether attributable to RMR or otherwise) are more than 90 days past
due from the Invoice Due Date; (b) who have canceled or failed to renew their
Contract for any reason (other than acts of God or as a direct result of
Buyer's failure to perform in accordance with the Service Policy); or (c) who
have been reasonably canceled or terminated by Buyer for excessive false alarms
or other customer abuses. The Purchase Price Deduct for (b) above shall be
subject to the following exception: if an Alarm Account (inclusive of the
location as well as the customer) that would otherwise be subject to inclusion
in Lost RMR either (i) executes a new Contract with Buyer or the Company at a
new location or (ii) a new customer executes a new Contract with Buyer or the
Company at the Alarm Account location listed on Schedule 3.18(a), then the
Purchase Price Deduct for such Alarm Account shall be $75.00 (the "Exception
Payment"). Buyer shall provide prior written notice to Sellers if the Company
or the Buyer increases the recurring monthly revenue of the Alarm Account of a
customer which was included in RMR during Holdback I. No Lost RMR shall arise
with respect to any customer whose recurring monthly revenue has been increased
by the Buyer or the Company after the Closing Date or if the Buyer fails to
give the Sellers written notice of such increase as provided above.
"LOST RMR OFFSET" -- means as of the end of Holdback Period I, the RMR
associated with properly executed security monitoring Contracts which Sellers
have presented to Buyer during the Holdback Period I on a form of Contract
substantially similar to the Contract attached hereto as Exhibit 1. In no
event shall the Lost RMR Offset exceed the Lost RMR.
"NONSOLICITATION AND NONACCEPTANCE AGREEMENT" -- as defined in
Section 2.5.
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"NET ASSET VALUE" -- means the sum of the following amounts as of the
Closing Date:
(a) cash or cash equivalents acceptable to Buyer, in its
sole discretion, valued at one hundred percent
(100%);
(b) prepaid expenses which arise in the Ordinary Course
of Business, valued at zero;
(c) any Contract listed on Schedule 3.18(a) for the
providing of security monitoring services that does
not include an evergreen renewal provision or that
expires within 37 months of the Closing Date and that
is not included in RMR, at 32 times the recurring
monthly revenue;
(d) rental revenue that relates to "lease-to-own"
Contracts listed on Schedule 3.18(b) providing for
nominal buy-out of an alarm system upon lease
expiration and that is not included in RMR, at a
mutually agreed upon value.
The following will be excluded from the calculation of Net Asset
Value: (a) receivables from employees, officers and directors; (b) intercompany
transactions involving other entities owned fully or partially by Sellers; and
(c) the Excluded Assets.
"NINETY DAY PERIOD" -- the ninety day period immediately following the
Closing Date.
"NONQUALIFYING OVER 90 RMR" -- means with respect to each Over 90 RMR
Alarm Account acquired as of the Closing, each such Alarm Account that has any
remaining accounts receivable balance upon the expiration of the Ninety Day
Period related to the accounts receivable balance existing as of the Closing
Date.
"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
does not require any other separate or special
authorization of any nature; and
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(c) such action is similar in nature and
magnitude to actions customarily taken,
without any separate or special
authorization, 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" -- the articles of incorporation, the
bylaws and any amendments thereto.
"OVER 90 RMR" -- means amounts which would qualify as RMR except that
the corresponding accounts receivable balance is more than 90 days past due
from the oldest applicable invoice due date.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"PURCHASE PRICE DEDUCT" -- means the aggregate of: (i) 37 multiplied
by the difference between the Lost RMR and the Lost RMR Offset; (ii) reduced by
5% of the RMR Purchase Price; and (iii) plus the Exception Payment.
"RMR" means the amount of the Company's recurring monthly revenue (net
of any finance, communication, utility company or third party pass-through
charges, assessments, taxes or customer discounts) from Alarm Account customers
as of the day immediately preceding the Closing Date and which is derived
solely from open/close, perpetual lease, maintenance and repair service
agreements acceptable to Buyer. RMR shall not include any revenue: (i) from
customers whose Accounts Receivable balances (whether attributable to RMR or
otherwise) are more than 90 days past due from the oldest applicable invoice
due date; (ii) that is not periodic in nature but relates to installation
purchase payments or one-time assessments or charges; (iii) from Alarm Account
customers of which Sellers or the Company have received notice of a pending
termination (iv) from third-party monitoring agreements; (v) from Alarm Account
customers who were recently added as a result of extraordinary marketing
efforts, an amnesty program or other such sales efforts not usually employed in
the Ordinary Course of Business [this provision (v) shall not include Alarm
Accounts purchased by the Company in the Ordinary Course of Business prior to
the Closing Date]; (vi) that pertains to any security monitoring services
Contract that does not include an evergreen renewal provision or that expires
within 37 months of the Closing Date; or (vii) from finance Contracts that
provide for finance installation and/or equipment charges which terminate at a
given date in the future.
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"RELEASE" -- any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
environment.
"REPROGRAMMING ALLOWANCE" -- as defined in Section 2.6.
"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.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS" -- as defined in the first paragraph of this Agreement.
"SERVICE POLICY" --
(a) Emergency service -- (defined as situation in which
customer cannot arm the alarm system) service
technician is dispatched to customer location within
twenty-four hours and such technician reasonably
attempts to resolve the customer's alarm system
related problems.
(b) Non-emergency service (e.g., aesthetic repair
problems) service -- technician is dispatched at
mutually convenient time and such technician
reasonably attempts to resolve the customer's alarm
system related problems.
(c) Central station alarm monitoring services rendered by
an entity other than Central Alarm Control, Inc. --
provided by an entity which utilizes U.L. certified
monitoring services.
"SHARES" -- as defined in the second paragraph of this Agreement.
"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
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other
fee, and any related charge or amount (including any fine, penalty, interest,
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or addition to tax), imposed assessed, or collected by or under the authority
of any Governmental Body.
"TAIL END INSURANCE POLICY" -- as defined in Section 7.4.
"UNDISCLOSED LIABILITIES ALLOWANCE" -- as defined in Section 2.6.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this
Agreement, at the Closing, Sellers will sell and transfer to Buyer, and Buyer
will purchase from Sellers, the Shares free and clear from any Encumbrance.
2.2 PURCHASE PRICE. The purchase price for the Shares will be:
(a) 37 times RMR (the "RMR Purchase Price"); (b) plus, 37 times Over 90 RMR
(the "Over 90 RMR Purchase Price"); (c) plus or minus, as appropriate, the
Adjustment Amount; (d) plus or minus, as appropriate, other liabilities or
credits, prepaid items and deferred charges relating to the Company existing on
the Closing Date prorated in accordance with generally accepted accounting
principles; and (e) minus, one-half of the cost of the Escrow Agent (a, b, c,
d and e collectively the "Purchase Price").
2.3 ASSUMED LIABILITIES. Except as set forth on Schedule 2.3 (the
"Assumed Liabilities"), Buyer shall not assume, take subject to, pay, discharge
or in any manner be obligated for, any debts, liabilities or obligations of the
Company or the Sellers incurred prior to Closing, whether such liabilities
become due and payable prior to or subsequent to Closing. In the event the
Company does not pay and fully satisfy at or before Closing, any liabilities
other than as specifically set forth on Schedule 2.3, then Sellers shall assume
personal responsibility for payment of such liabilities and Buyer shall be
able: (a) to set off such unpaid liability against the Holdback or the
Undisclosed Liabilities Allowance; or (b) to proceed directly against the
Sellers.
2.4 CLOSING. The purchase and sale (the "Closing") provided for
in this Agreement will take place at Zack, Xxxxxxx, Xxxxxxxxx, Xxxxxx & Xxxxxx
in Miami, Florida on May 30, 1996, or at such other time and place as the
parties may mutually 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 2.4 will not result
in the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.5 CLOSING OBLIGATIONS. At the Closing:
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(a) Sellers will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed
(or accompanied by duly executed stock powers), for
transfer to Buyer;
(ii) nonsolicitation agreement in the form of Exhibit
2.5(a)(iii), executed by Sellers (the
"Nonsolicitation Agreement"), and
(iii) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers'
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
(b) Buyer will deliver:
(i) to Sellers Seventy-seven and one-half percent (77
1/2%) of the RMR Purchase Price plus or minus, as
appropriate, (A) the Reprogramming Allowance, (B) the
Undisclosed Liabilities Allowance, (C) the Adjustment
Amount, (D) the amount specified in Section 2.2(d),
(E) the broker fees payable to Xxxxxxxx & Associates
in the amount of three and one-half percent (3 1/2%)
of the RMR Purchase Price which shall be paid by the
Buyers directly to Xxxxxxxx & Associates by wire
transfer of immediately available funds, and (F)
one-half of the cost of the Escrow Agent; provided
however that if there is any Encumbrance to the
Shares at Closing then Buyer, at its option, may pay
such amounts required to remove the Encumbrance
directly to the appropriate party in accordance with
Section 2.5(d);
(ii) the Over 90 RMR Purchase Price and twenty-two and
one-half percent (22 1/2%) of the RMR Purchase Price
(12 1/2% of such 22 1/2% shall be referred to as the
"Attrition Holdback" and 10% of such 22 1/2% shall be
referred to as the "Contingent Liabilities Holdback")
(the "Attrition Holdback" and the "Contingent
Liabilities Holdback" shall collectively be referred
to as the "Holdback") to the escrow agent referred to
in the Escrow Agreement by wire transfer;
(iii) a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, 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
(c) Buyer and Sellers will enter into an escrow agreement in the
form of Exhibit 2.5(c) (the "Escrow Agreement").
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(d) The funds payable by Buyer to Sellers, the Escrow Agent or
other appropriate parties shall be made by wire transfer of
immediately available funds to the Persons listed on Exhibit
2.5(d) attached hereto and incorporated herein by this
reference (the "Disbursement Letter").
2.6 ALLOWANCES AND ADJUSTMENT AMOUNT.
(a) The "Reprogramming Allowance" shall equal $62.50 per Alarm
Account that Buyer reasonably believes will require a post-closing site visit
to reprogram the customer's alarm panel to a telephone line listed on Schedule
3.8 or a telephone line otherwise owned by Buyer. Schedule 2.6 contains a list
of all of the Alarm Accounts included in the Reprogramming Allowance.
(b) The "Undisclosed Liabilities Allowance" shall equal
$100,000.00. The purpose of the Undisclosed Liabilities Allowance is to create
an allowance for liabilities of the Company paid or discovered by the Company
post- Closing which arose prior to Closing or on the Closing Date and were not
Assumed Liabilities.
(c) Within four months of Closing, Buyer shall pay Sellers by wire
transfer or other mutually agreeable means the difference resulting from (A)
the Undisclosed Liabilities Allowance and (B) the sum of all liabilities of the
Company arising prior to Closing or on the Closing Date paid or discovered by
the Company post-Closing which were not Assumed Liabilities; provided, however,
that after the closing Buyer agrees to notify Sellers promptly by telefacsimile
of any amounts subject to the Undisclosed Liabilities Allowance and Buyer
agrees to allow Sellers two weeks after such notification to settle such
liabilities prior to payment by Buyer. Buyer and Company agree not to make any
such payments during the period in which the Sellers are in good faith
disputing the amount of such liability provided that Buyer shall defer making
payment with respect to such disputed liability from the Undisclosed
Liabilities Allowance until such disputed liability is settled.
(d) The "Adjustment Amount" shall equal the difference between the
Net Asset Value as of the Closing Date and the Assumed Liabilities as of the
Closing Date. If the Net Asset Value exceeds the Assumed Liabilities, the
Purchase Price will be increased by the amount of such excess, subject to a
maximum increase of One Hundred Twenty Five Thousand and no/100 Dollars
($125,000.00). If the Net Asset Value is less than the Assumed Liabilities,
the Purchase Price will be decreased by the amount of such difference.
2.7 OVER 90 RMR PURCHASE PRICE AND HOLDBACK.
(a) Within 30 days after the end of the Ninety Day Period, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(a) along with all appropriate supporting documentation, a report
reflecting: (i) the Over 90 RMR Purchase Price; (ii) 37 times the Nonqualifying
Over 90 RMR; and (iii) the resulting difference between 2.7(a)(i) less the
credits associated with Section 2.7(a)(ii) (the "Resulting Difference"). If
Sellers do not notify
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Buyer of a dispute regarding such report within ten business days from the date
such report is submitted by Buyer to Sellers or if Sellers notify Buyer of its
acceptance of such report, such report shall be deemed complete and accurate
and Sellers and Buyer shall notify Escrow Agent to pay the sums computed above
to Sellers or Buyer, as the case may be. If the Resulting Difference is a
positive amount then Sellers and Buyer shall instruct the Escrow Agent to first
pay the Sellers the Resulting Difference and the remainder of the Over 90 RMR
Purchase Price shall be paid by Escrow Agent to Buyer. If the Resulting
Difference is equal to zero or is a negative amount, then Sellers and Buyer
shall instruct the Escrow Agent to pay Buyer the entire Over 90 RMR Purchase
Price and Sellers shall owe no further amount to Buyer due to the Over 90 RMR
Alarm Accounts.
(b) Within 30 days after the end of the Holdback Period I, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(b) along with all appropriate supporting documentation, a report
reflecting: (i) the Attrition Holdback;(ii) the Purchase Price Deduct; (iii)
the liabilities of the Company accruing on or before the Closing which were not
Assumed Liabilities but which have been paid or discovered by the Buyer or the
Company after the Closing Date and were not deducted from the Undisclosed
Liabilities Allowance; provided, however that Buyer agrees to notify Sellers of
any liabilities referenced in (iii) prior to payment by Buyer. Buyer agrees to
allow Sellers ninety (90) days to satisfy in full any such liabilities and if
such liability is not settled at the end of such ninety (90) day period then a
reserve shall continue to be held in the Escrow Account until Buyer and Sellers
agree in good faith that the liability has been fully satisfied; and (iv) the
resulting difference between the Attrition Holdback less the credits associated
with Section 2.7(b)(ii) and (iii) (the "Resulting Difference"). If Sellers do
not notify Buyer of a dispute regarding such report within ten business days
from the date such report is submitted by Buyer to Sellers or if Sellers notify
Buyer of its acceptance of such report, such report shall be deemed complete
and accurate and Sellers and Buyer shall notify Escrow Agent to pay the sums
computed below to Sellers or Buyer, as the case may be. If the Resulting
Difference is a positive amount then Sellers and Buyer shall instruct the
Escrow Agent to first pay the Sellers the Resulting Difference and the
remainder of the Attrition Holdback shall be paid by Escrow Agent to Buyer in
full and final satisfaction of all claims by Buyer against Sellers with respect
to the Purchase Price Deduct. If the Resulting Difference is equal to zero or
is a negative amount, then Sellers and Buyer shall instruct the Escrow Agent to
pay Buyer the entire Attrition Holdback amount in full and final satisfaction
of all claims by Buyer against Sellers with respect to the Purchase Price
Deduct.
(c) Within 30 days after the end of the Holdback Period II, Buyer
shall submit to Sellers substantially in the form attached hereto as Exhibit
2.7(c) along with all appropriate supporting documentation, a report
reflecting: (i) the Holdback; (ii) the amount disbursed to Buyer and Sellers in
accordance with Section 2.7(a) and Section 2.7(b); (iii) the liabilities of the
Company accruing on or before the Closing which were not Assumed Liabilities
but which have been paid or discovered by the Buyer or the Company after the
Closing Date and which were not deducted from the Undisclosed Liabilities
Allowance or the Attrition Holdback; provided, however that Buyer agrees to
notify Sellers of any liabilities referenced in (iii) prior to payment
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by Buyer. Buyer agrees to allow Sellers ninety (90) days to satisfy in full
any such liabilities and if such liability is not settled at the end of such
ninety (90) day period then a reserve shall continue to be held in the Escrow
Account until Buyer and Sellers agree in good faith that the liability has been
fully satisfied; and (iv) the resulting difference between the Holdback less
the credits associated with Section 2.7(c)(ii), (iii) and (iv) (the "Resulting
Difference"). If Sellers do not notify Buyer of a dispute regarding such
report within ten business days from the date such report is submitted by Buyer
to Sellers or if Sellers notify Buyer of its acceptance of such report, such
report shall be deemed complete and accurate and Sellers and Buyer shall notify
Escrow Agent to pay the sums computed below to Sellers or Buyer, as the case
may be, and the Escrow Account shall then be closed after payment by the Escrow
Agent of all funds held by it in the Escrow Account. If the Resulting
Difference is a positive amount then Sellers and Buyer shall instruct the
Escrow Agent to first pay the Sellers the Resulting Difference and the
remainder of the Escrow Amount shall be paid by Escrow Agent to Buyer. If the
Resulting Difference is equal to zero or is a negative amount, then Sellers and
Buyer shall instruct the Escrow Agent to pay Buyer the entire Escrow Amount and
Sellers shall owe no further amount to Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to the Buyer that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date except as
detailed in a schedule related to this Section 3 and delivered by the Sellers
to the Buyer on the date hereof. Nothing in any such schedules shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless such schedules identify the exception with reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
representation or warranty has to do with the existence of the document or
other item itself. Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING.
(a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida, 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 the Alarm Accounts and the
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 jurisdictions 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) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
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3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its
terms. Upon the execution and delivery by Sellers of the Escrow Agreement and
the Nonsolicitation and Nonacceptance Agreement (collectively, the "Sellers'
Closing Documents"), the Sellers' Closing Documents will constitute the legal,
valid, and binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents.
(b) 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 or the stockholders 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 any of the Company or either the Sellers, 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 directly
resulting from the transfer of the Shares (excluding
State of Florida documentary stamp tax due upon the
issuance of shares of stock in the Company to Buyer);
(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
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under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify,
any Alarm Account or any Applicable Contract; or
(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.
Except as set forth in Schedule 3.2, neither the Sellers nor the Company is or
will 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 consists of 25,000 shares of common stock, par value of $50.00 per
share, of which 100 shares are issued and outstanding and constitute 100% of
the Shares. There are no outstanding stock options or rights to purchase
shares of stock of the Company. Sellers are and will be on the Closing Date
the recorded and beneficial owners and holders of the Shares, free and clear of
all Encumbrances. Xxxxx, Moses, Donnelly, and Xxxxxxx, collectively own 100%
of the issued and outstanding Shares of the Company. No legend or other
reference to any purported Encumbrance appears upon any certificate
representing equity securities of the Company. All of the outstanding equity
securities of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no Contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of the Company.
To the Knowledge of Sellers, 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 or any direct
or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
the unaudited balance sheet of the Company as at December 31, 1995 (the
"Balance Sheet"); (b) the unaudited balance sheets of the Company as at
December 31 for each of the years 1993 through 1994, and the related unaudited
statements of income, changes in stockholders' equity, and cash flow for each
of the fiscal years then ended, and (c) an unaudited balance sheet of the
Company as at April 30, 1996 (the "Interim Balance Sheet") and the related
unaudited statements of income, changes in stockholders' equity, and cash flow
for the four (4) months then ended, (the "Interim Financial Statements"). Such
financial statements referred to in (a)-(c) above 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 and were prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
that of preceding years, 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).
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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 practices and all Legal Requirements. The
minute books of the Company contain accurate and complete records of all
meetings held by, 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 including but not
limited to all of the Company's tax returns, will be in the possession of the
Company.
3.6 REAL PROPERTY. The Company does not own and has never owned
any real property. Schedule 3.6 contains a complete and accurate list of all
parcels of real property together with all buildings, structures, improvements
and fixtures thereon and all hereditaments appurtenant thereto, which are
leased by the Company. Sellers have delivered or made available to Buyer
copies of the instruments by which the Company acquired such interests.
Sellers will cause all leases to which the Company is bound to be canceled no
later than the Closing. However, Sellers will arrange for Buyer to continue to
lease the inventory storage facility of the Company on a month to month basis
at a monthly rent of $500.00 per month plus monthly association dues of $56.01
per month plus electricity, insurance and taxes.
3.7 TITLE TO PROPERTIES. The Company owns all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that it purports to own, including (a) all of the properties and assets
reflected in the Interim Balance Sheet (except for personal property sold since
the date of the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and (b) all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Interim Balance Sheet
(except for personal property acquired and sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business). The properties and assets
purchased or otherwise acquired by the Company since the date of the Interim
Balance Sheet (other than inventory purchased in the Ordinary Course of
Business) are listed in Schedule 3.7. The properties and assets (a) owned by
the Company which are reflected in the Interim Balance Sheet and Schedule 3.7
and (b) leased by the Company pursuant to a Contract listed in Schedules 3.6
and 3.18(b) comprise all of the assets and properties used by the Company in
the operation of its business as it is currently being conducted.
3.8 CONDITION AND SUFFICIENCY OF ASSETS. Other than a Chevrolet
Van with VIN 0XXXX00X0XX000000 and license NUP38X (the "Chevrolet Van"), the
equipment of the Company is in good operating condition and repair, and is
adequate for the uses to which they are being put, and none of such equipment
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost. The equipment of the
Company is sufficient for the continued conduct of the Company's business after
the Closing in substantially the same manner as conducted prior to the Closing.
Schedule 3.8 contains a complete and accurate list of the telephone lines owned
by the Company for sales and marketing,
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technical service, administration and monitoring (including digital dialer
telephone lines that transmit signals from customer locations to the Company's
central station and "ring-down" lines).
3.9 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" or "A/R") represent or will represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Sellers shall not themselves nor shall Sellers permit any
of the Company's Employees or agents to pay any of the Accounts Receivable
outstanding on the date of this Agreement or generated between the date of this
Agreement and the Closing Date. Except as set forth on Schedule 3.9, there is
no contest, claim, or right of set-off, other than returns in the Ordinary
Course of Business, under any Contract with any maker of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Schedule 3.9
contains a complete and accurate list of all Accounts Receivable which relate
to services provided on or prior to the Closing Date which list sets forth the
aging of such Accounts Receivable in the following categories ("Current" and
for Alarm Accounts that have A/R balances that are delinquent: "0-30 days past
due from the oldest applicable invoice due date"; "31-60 days past due from the
oldest applicable invoice due date"; "61-90 days past due from the oldest
applicable due date"; "Over 90 days past due from the oldest applicable invoice
due date").
3.10 INVENTORY. All inventory of the Company, whether or not
reflected in the Balance Sheet or the Interim Balance Sheet, consists of
equipment which is of a quality usable and saleable 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. The quantities of each
item of inventory are not excessive, but are reasonable in the present
circumstances of the Company. The inventory of the Company as of May 30, 1996
is listed on Schedule 3.10. Sellers shall update Schedule 3.10 to reflect all
inventory of the Company as of the day before Closing.
3.11 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.11, 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 date thereof.
3.12 TAXES.
(a) The Company has filed or caused to be filed all tax returns
that are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. Sellers have delivered or made available to
Buyer copies of, and Schedule 3.12 contains a complete and accurate list of,
all such tax returns relating to income or franchise taxes filed since December
31, 1994. The Company has paid, or made provision for the payment of, all
Taxes that have or may
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have become due pursuant to those tax returns or otherwise, or pursuant to any
assessment received by Sellers or any Company, except such Taxes, if any, as
are listed in Schedule 3.12 and are being contested in good faith and as to
which adequate reserves have been provided in the Balance Sheet and the Interim
Balance Sheet.
(b) Schedule 3.12 contains a complete and accurate list of all
audits of all tax returns of the Company, 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 Schedule 3.12 are being contested in good faith by appropriate
proceedings. Except as described in Schedule 3.12, neither the Sellers nor the
Company has 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 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 Schedule 3.12. 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 the Company are true, correct, and
complete. The Company will be a "C" corporation on or before the Closing.
(e) Prior to May 27, 1996, the Company has not previously elected
to have Code Section 341(f)(2) apply to the disposition of any of its assets.
3.13 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance
Sheet, there has not been any material adverse change (which for the purposes
of this Section 3.13 shall be defined as greater a than 5% change in RMR) in
the business, operations, properties, prospects, assets, or condition of the
Company, and, to Seller's Knowledge, no event has occurred or circumstance
exists that may result in such a material adverse change.
3.14 EMPLOYEE BENEFITS. Except as set forth in Schedule 3.14
attached hereto, the Company does not maintain, contribute to, sponsor or
participate in, and no past or present Employee of the Company participates in
or is benefited by any employee pension benefit or welfare plan as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"), or any other
plan, arrangement or commitment, whether oral or written, formal or informal,
relating to severance, sick pay, vacation, bonus, retirement, pension, profit
sharing, option, deferred compensation, life, medical or dental insurance or
other benefits (collectively "Employee Plan") covering any Employee or former
Employee of the Company, nor has the Company taken any action to institute any
such Employee Plan. Sellers have provided Buyer with (i) a copy of the
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current handbook given to each Employee which handbook describes the Employee
Plans and (ii) any other information given to any of the Employees which
describes the Employee Plans.
3.15 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Except as set forth in Schedule 3.15:
(i) the Company is, and at all times since its inception
has been , except for such noncompliance which does not have a
material adverse effect on the Company, in full compliance with each
Legal Requirement including, without limitation all truth-in-lending
requirements, 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;
(ii) to Company's or Sellers' Knowledge, 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) to Company's or Seller's Knowledge, the Company has
not received, at any time 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.
(b) Schedule 3.15 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
Schedule 3.15 is valid and in full force and effect. Except as set forth in
Schedule 3.15:
(i) the Company is, and at all times has been, except for
such noncompliance which does not have a material adverse effect on
the Company, in full compliance with all of the terms and requirements
of each Governmental Authorization identified or required to be
identified in Schedule 3.15;
(ii) to Company's or Sellers' Knowledge, no event has
occurred or circumstance exists that may (with or without notice or
lapse of time) (A) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of
any Governmental Authorization listed or required to be listed in
Schedule 3.15 or (B) result directly or indirectly in the revocation,
withdrawal, suspension,
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cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Schedule
3.15;
(iii) to the Company's or Seller's Knowledge, the Company
has not received, at any time 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 term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or
potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be
listed in Schedule 3.15 have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental
Bodies.
The Governmental Authorizations listed in Schedule 3.15 collectively constitute
all of the Governmental Authorizations necessary to permit the Company to
lawfully conduct and operate its business in the manner it currently conducts
and operates such business and to permit the Company to own and use its assets
in the manner in which it currently owns and uses such assets.
3.16 LEGAL PROCEEDINGS, ORDERS.
(a) Except as set forth in Schedule 3.16, 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.
To the Knowledge of Sellers and the 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.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Schedule 3.16;
The Proceedings listed in Schedule 3.16 will not have a material
adverse effect on the business, operations, assets, condition, or prospects of
the Company.
(b) Except as set forth in Schedule 3.16;
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(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) 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.
(c) Except as set forth in Schedule 3.16:
(i) the Company is, and at all times 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 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.
3.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 3.17, since the date of the Interim Balance Sheet, the Company has
conducted its 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
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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 Employee Plan;
(e) increase in the price and/or rate of any product or
service relating to the Alarm Accounts or any credits
given against any Accounts Receivable except in the
Ordinary Course of Business;
(f) 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 other than
the Chevrolet Van;
(g) 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
the Company of greater than $2,000.00;
(h) 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;
(i) material change in the accounting methods used by the
Company;
(j) capital investment in, any loan to, or any
acquisition of the securities or assets of, any other
Person (or series of related capital investments,
loans and acquisitions) either involving more than
$5,000 or outside the Ordinary Course of Business;
(k) delay or postponement in the payment of accounts
payable and other liabilities of the Company outside
the Ordinary Course of Business; or
(l) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.18 CONTRACTS; NO DEFAULTS.
(a) Schedule 3.18(a) contains a complete and accurate list of each
Contract for the rendering of security monitoring services to existing
customers (the "Alarm Accounts") which list
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is broken down according to those Contracts which meet the definition of RMR,
those that meet the definition of Over 90 RMR and those Contracts that do not
meet the definition of RMR or Over 90 RMR and such list indicates the Contracts
which are oral agreements. Schedule 3.18(a) also includes the sum of the RMR
used in the calculation of the RMR Purchase Price and the Over 90 RMR used in
the calculation of the Over 90 RMR Purchase Price. Sellers have provided
access to Buyer to true and complete copies of all such written Contracts.
(b) Schedule 3.18(b) contains a complete and accurate list, and
Sellers have delivered to Buyer true and complete copies of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials to the
Company of an amount or value in excess of $1,000.00;
(ii) each Applicable Contract that was not entered into in
the Ordinary Course of Business;
(iii) each lease, rental 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 personal property;
(iv) each collective bargaining agreement and other
Applicable Contract to or with any labor union or
other employee representative of a group of employees
relating to wages, hours, and other conditions of
employment;
(c) Except as set forth in Schedule 3.18(c):
(i) each Contract identified or required to be identified
in Schedules 3.18(a) and 3.18(b) is in full force and effect and is
valid and enforceable in accordance with its terms; and
(ii) to the Knowledge of Sellers, no Contract identified
or required to be identified in Schedules 3.18(a) and 3.18(b) contains
any term or requirement that is not in the Ordinary Course of
Business.
(d) To the Knowledge of Sellers, 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 having the contractual or statutory right to demand or require
such renegotiation and no such Person has made written demand for such
renegotiation.
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3.19 INSURANCE.
(a) Sellers have delivered to Buyer: true and complete copies of
all policies of insurance to which the Company is a party or under which the
Company is or has been covered at any time within the three (3) years
preceding the date of this Agreement.
(b) Schedule 3.19 sets forth, by year, for the current policy year
and each of the two (2) preceding policy years;
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $500.00, which sets
forth;
(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.
(c) Except as set forth in Schedule 3.19:
(i) All policies to which the Company is a party or that
provide coverage to the Company;
(A) are valid, outstanding, and enforceable;
(B) are issued by Illinois Insurance Exchange;
(C) taken together, provide "occurrence-based"
general liability insurance coverage of at
least $1,000,000 per single occurrence. For
purposes of this Agreement, "occurrence-
based" means if a claim arose after the
Closing Date for an event which occurred
prior to the Closing Date, the Company's
applicable insurance policy in existence on
the date such event occurred would cover such
claim;
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(D) are sufficient for compliance with
all Legal Requirements and Contracts
to which the Company is a party or
by which it is bound; and
(E) will continue in full force and
effect for one week following the
consummation of the Contemplated
Transactions.
(ii) The Sellers and 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 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 its respective obligations, under each
policy to which the Company is a party or that provides coverage to
the Company.
(iv) To Seller's Knowledge, the Company has given notice
to the insurer of all claims that may be insured thereby.
3.20 ENVIRONMENTAL MATTERS. The Company has at all times been in
full compliance with all Environmental Requirements. Sellers and the Company
have not at any time placed, located, disposed of, buried, stored or
accumulated any Hazardous Materials in, on or under the Facilities or any part
thereof. To the Knowledge of Sellers, no Person has at any time placed,
located, disposed of, buried, stored or accumulated any Hazardous Material in,
on or under the Facilities. To the Knowledge of Sellers, no portion of the
Facilities has been designated, listed or identified in any manner by any
Government Body or under or pursuant to Environmental Requirements as a
Hazardous Materials disposal or removal site, superfund or clean-up site or
candidate for removal or closure pursuant to any Environmental Requirement. No
lien arising under or in connection with any Environmental Requirements as
attached to any revenues or to the Facilities. Neither the Sellers nor the
Company has received a summons, citation, notice, directive, letter or other
communication, written or oral, from any Governmental Body pursuant to any
Environmental Requirement concerning any act or omission by the Company
resulting in a Release of Hazardous Materials. Neither Sellers nor the Company
has received notice of any nonconforming condition of the Facilities. If such
notice or citation is received or any such condition is found to exist which
existed prior to Closing, Sellers shall be obligated to correct such conditions
even if such conditions are discovered after the Closing Date.
3.21 EMPLOYEES.
(a) Schedule 3.21 contains a complete and accurate list of the
following information for each employee or director of the Company, including
each employee on leave of absence or layoff status; name; job title; employment
date; current compensation paid or payable and any
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change in compensation since January 1, 1995; most recent and next anticipated
salary review date; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under the Employee Plans.
(b) To the Knowledge of Sellers, no former or current employee or
current or former director of the Company is a party to, or is otherwise bound
by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other entity or person that in any way adversely affected,
affects, or will affect (i) the performance of his or her duties as an employee
or director of the Company, or (ii) the ability of the Company to conduct its
business. Sellers intend to cause other Persons to offer employment to some of
the individuals listed on Schedule 3.21 (including some of the Sellers) and
Schedule 3.21 includes a complete and accurate list of these individuals.
Otherwise, to Sellers' Knowledge, no employee of the Company intends to
terminate his or her employment with the Company.
(c) Schedule 3.21 also contains a complete and accurate list of
the following information for each retired employee or director of the Company,
or their dependents, receiving benefits or scheduled to receive benefits in the
future, name, pension benefit, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
(d) No employee of the Company has a written or oral employment
agreement with the Company.
3.22 LABOR DISPUTES; COMPLIANCE. To the Seller's Knowledge, the
Company has not been or is not a party to any collective bargaining or other
labor Contract. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. To the Seller's Knowledge, the Company is not
liable for the payment of any taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.23 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property Assets" includes:
(i) the Company's name, all fictional business names,
trading names, registered and unregistered
trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents and patent applications (collectively,
"Patents");
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(iii) all copyrights in both published works and unpublished
works that are material to the Company' businesses
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, software, technical information, process
technology, plans, drawings, and blue prints
(collectively, "Trade Secrets");
(b) Schedule 3.23 contains a complete and accurate list and
summary description, of all of the Company's Intellectual Property Assets.
(c) Sellers and the Company have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to
Sellers' Knowledge, have not been used, divulged, or appropriated either for
the benefit of any Person or to the detriment of the Company. To Sellers'
Knowledge, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way.
(d) Each of the Intellectual Property Assets will be owned or
available for use by the Company after the Closing on terms and conditions
identical to the terms and conditions of the Company's use immediately
subsequent to the Closing.
(e) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any intellectual property
rights of third parties and none of the Sellers and the directors, officers and
employees of the Company has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation or violation. To Sellers' Knowledge, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any of the Intellectual Property Assets.
3.24 PRODUCT WARRANTIES AND MEDICAL INFORMATION. Except for the
standard warranties on installations detailed in Schedule 3.24, there are no
written warranties or oral warranties given by the Company applicable to any of
the Alarm Accounts. The Company has not entered into any Contract with any of
its customers which would require Buyer to provide any medical or health
information on its customers to any third party and the Company is not
obligated to keep or obtain medical or health information on any or all of its
customers.
3.25 BUSINESS POSITION.
The business position of the Company is as follows:
(a) the RMR of the Alarm Accounts is approximately $128,500.00;
(b) the Company monitors approximately 5,400 Alarm Account
customers;
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(c) the Company does not have more than 325 customers that have
Contracts which require "long range radio" monitoring;
(d) to the Knowledge of Sellers, except for the "long range radio"
and "derived channel accounts" as set forth on Schedule 3.25(d), as of the
Closing Date there is no Legal Requirement or technical limitation that would
preclude monitoring of the Alarm Accounts outside of the State of Florida;
(e) as of the Closing Date, with the exception of customers listed
on Schedule 3.25(e), all of the Alarm Account customers can be remote call
forwarded to Buyer's central monitoring station without the requirement of
either a site visit for alarm panel dialer number reprogramming or remote
reprogramming of the alarm panel dialer; and
(f) Within the six month period immediately preceding the Closing
Date, the Sellers and the Company have not (i) increased or decreased the
recurring monitoring or service rates and (ii) issued credits to outstanding
accounts receivable outside of the Ordinary Course of Business.
3.26 CERTAIN PAYMENTS. Neither the Company or any director,
officer, agent, or employee of the Company, or to Sellers' 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, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company, or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.27 DISCLOSURE.
(a) No representation or warranty of Sellers in this Agreement or
attachments thereto 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.
(b) No notice given pursuant to Section 5.4 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.
(c) There is no fact known to any of the Sellers that has specific
application to either the Sellers or the Company (other than general economic
or industry conditions) and that materially adversely affects or, as far as any
of the Sellers can reasonably foresee, materially threatens, the assets,
business, prospects, financial condition, or results of operations of the
Company that has not been set forth in this Agreement or the attachments
thereto.
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3.28 BROKERS OR FINDERS. With the exception of fees payable to
Xxxxxxxx & Associates, Inc. in an amount equal to 3 1/2% of the RMR Purchase
Price, the Sellers and their agents have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
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 Escrow Agreement, (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.
(b) 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 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.
Buyer is not and will not be required to 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.
4.3 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. Buyer is also acquiring the Shares for investment
purposes only and has substantial knowledge and experience in business and
financial matters which enables it to evaluate the merits and risks of
purchasing the Shares.
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4.4 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.
4.5 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.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement
and the Closing Date, Sellers after 24 hours advance written notice will, and
will cause the Company and its Representatives to, (a) afford Buyer and its
Representatives full and free access to the Company's personnel, properties,
contracts, books and records, and other documents and data, (b) furnish Buyer
and its Representatives 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 its Representatives with such additional financial,
operating, and other data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY. Between the date
of this Agreement and the Closing Date, Sellers will, and will cause the
Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business except that Sellers may cause the Company
to distribute or otherwise transfer the Excluded Assets to
Sellers or any other Person designated by Sellers;
(b) use their 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,
Sellers will not, and will cause the Company not to, without the prior consent
of Buyer, take any affirmative action, or fail to take
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any reasonable action within their or its control, as a result of which any of
the changes or events listed in Section 3.17 is likely to occur.
5.4 NOTIFICATION. Between the date of this Agreement and the
Closing Date, each Seller will promptly notify Buyer in writing if such Seller
or the Company becomes aware of any fact or condition that causes or
constitutes a Breach as of the date of this Agreement, or if such Seller or 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 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 any schedule to this Agreement, if such schedule were dated the
date of the occurrence or discovery of any such fact or condition, Sellers will
promptly deliver to Buyer a supplement to the appropriate schedule specifying
such change. During the same period, each Seller will promptly notify Buyer of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.5 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and its Representatives not to, 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.
5.6 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Sellers will use their Best Efforts to cause the conditions in
Sections 7 and 8 to be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 BEST EFFORTS. 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.
6.2 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Buyer will promptly notify Sellers in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach as of the
date of this Agreement, or if Buyer 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
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period Buyer will promptly notify Sellers of any event that may make the
satisfaction of the conditions in Section 8 impossible or unlikely.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase 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, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations
and warranties in this Agreement 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, without giving
effect to any supplement to the Schedules.
7.2 SELLERS' PERFORMANCE.
(a) All of the covenants and obligations that Sellers are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Each Seller must have delivered each of the documents required
to be delivered by such Seller pursuant to Section 2.5, and each of the other
covenants and obligations in this Agreement must have been performed and
complied with in all respects.
7.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
7.4 ADDITIONAL INSURANCE. In the event that the Company has not
maintained general liability insurance coverage of at least $1,000,000.00 per
single occurrence and workers compensation insurance equal to or greater than
that required by any Legal Requirement, in addition to and separate and apart
from the Holdback, Sellers shall purchase a $1,000,000.00 "tail end" liability
insurance policy reasonably satisfactory to Buyer (the "Tail End Insurance
Policy"). The Tail End Insurance Policy will name Buyer as beneficiary and
coverage will be prepaid for a period ending 42 months after the Closing Date.
The Tail End Insurance Policy will provide one source, but not the only source,
for the payment of any claims that Buyer may have.
7.5 MONITORING AGREEMENT. The Company shall enter into an
agreement with Central Alarms Controls, Inc., an entity under the control of
the Sellers, which provides for the monitoring of the Alarm Accounts at rates
and subject to terms reasonably acceptable to Buyer, the form of which
agreement is attached hereto as Exhibit 7.5 . The Alarm Accounts listed on
Schedule 3.25(e) will be monitored at no charge to the Company for a period
terminating upon the earlier of six months after Closing or immediately after a
reprogramming of such Alarm Accounts to Buyer's central monitoring station.
7.6 LEGAL OPINION. Sellers must have caused an opinion of
Sellers' counsel, dated the Closing Date, in a form acceptable to Buyer to be
delivered to Buyer.
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7.7 PAYOFF OF BANK LOAN. Sellers will cause any outstanding
indebtedness of the Company to Universal National Bank or its successors (the
"Lender") to be paid off at the Closing. Additionally, Sellers must have
forwarded to Buyer the firm commitment of the Lender to terminate any security
interests it may have in any of the Company's assets.
7.8 PAYOFF OF SETTLEMENT. Sellers must have caused any
outstanding indebtedness of the Company to Xxxxxx Xxxxxx Industries, Inc.,
d/b/a F.I.T.S. Electronics to be paid off prior to Closing. Additionally,
Sellers will forward to Buyer proof that Xxxxxx Xxxxxx Industries, Inc., d/b/a
F.I.T.S. Electronics has executed a full and complete release of all claims
against the Company (including without limitation execution of a UCC-3) which
release must be reasonably satisfactory to the Buyer's counsel.
7.9 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.
7.10 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There
must not have been made or threatened by any Person any claim asserting that
such Person (c) 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, or (d) is entitled to
all or any portion of the Purchase Price payable for the Shares.
7.11 NO PROHIBITION. Neither the consummation nor the performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse or 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, introduced, or otherwise proposed by or before any Governmental
Body.
7.12 RESIGNATIONS. Sellers must have delivered the resignations,
effective as of the Closing, of each director and officer of the Company.
7.13 MERGER WITH SECURE AMERICA. The Company must have merged with
Secure America, Inc., a Florida corporation, and the Company must be the
surviving corporation. A copy of the filed Certificate of Merger is attached
hereto as Exhibit 7.13.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
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Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers 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 Sellers, in whole or in part).
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations
and warrants in this Agreement, 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, 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 2.5 and must have made the cash payments
required to be made by Buyer pursuant to Sections 2.5(b)(i) and 2.5(b)(ii).
8.3 CONSENTS. Each of the Consents identified on Schedule 3.2
must have been obtained and must be in full force and effect.
8.4 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 Sellers to Buyer, and (b) has been adopted or issued, or has
otherwise become effective, since the date of this Agreement.
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 a majority of Sellers 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 a majority of Sellers, if any of the conditions in
Section 8 has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or
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becomes impossible (other than through the failure
of Sellers to comply with their obligations under
this Agreement) and Sellers have not waived such
condition on or before the Closing Date;
(c) by mutual consent of Buyer and a majority of Sellers; or
(d) by either Buyer or a majority of Sellers 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 June 30, 1996,
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, except that the obligations in Sections 13.1 and 13.3, will survive;
provided, however, that if this Agreement is terminated by a party because of
the Breach of this 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.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL. Except as provided in Section 12.4, all
representations, warranties, covenants, and obligations in this Agreement, the
attachments thereto, and any other document delivered pursuant to this
Agreement will survive the Closing for a period ending one year after the
Closing Date; the right to indemnification, reimbursement, or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) about the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS.
(a) To the extent that Buyer has not previously been paid or a
reserve established in the Holdback, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the
Company, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the
"Indemnified Persons"), and
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will reimburse the Indemnified Persons, for any loss,
liability, claim, damage, expense (including costs of
reasonable investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising from or
in connection with:
(i) any Breach of any representation or warranty made by
Sellers in this Agreement and attachments thereto, or
any other document delivered by Sellers pursuant to
this Agreement;
(ii) any Breach by any of the Sellers of any covenant or
obligation of the Sellers in this Agreement;
(iii) any service provided by or any omission in a service
which was required to be provided by the Company
prior to the Closing Date; provided, however any
service required to be provided by the Company
related to a warranty (that is listed on Schedule
3.24) on an installation of security monitoring
equipment which arises after the Closing Date shall
be the responsibility of the Buyer; or
(iv) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon
any agreement or understanding alleged to have been
made by any such Person with either Seller or the
Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
(b) With respect to any indemnification obligations of Sellers
arising under Section 10.2(a), the amount of such
indemnification obligation shall not exceed the sum of the
Holdback which has not been distributed to Sellers plus ten
percent (10%) of the Purchase Price and the claim for such
Damages must be made within two years of the Closing;
provided, however, there shall be no limitation (amount of
Damages or time period for bringing a claim) on Sellers'
indemnification obligations hereunder in the event of the
fraud on behalf of any or all of the Sellers or arising in
connection with title to the Shares or the payment of any Tax.
10.3 INDEMNIFICATIONS AND REIMBURSEMENT BY SELLERS - ENVIRONMENTAL
MATTERS. In addition to the provisions of Section 10.2, Sellers, jointly and
severally, will indemnify and hold harmless Buyer, the Company, and the other
Indemnified Persons, and will reimburse Buyer, the Company, and any other
Indemnified Person, for any Damages related to an Environmental Requirement
(including costs of cleanup, containment, or other remediation) arising from or
in connection with:
(a) any liability or claim arising out of or relating to: (i)(A)
the ownership, operation, or condition at any time on or prior
to the Closing Date of any properties and
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assets (whether real, personal, or mixed and whether tangible
or intangible) in which Sellers or the Company has or had an
interest, or (B) any Hazardous Materials or other contaminants
that were present on the properties and assets at any time on
or prior to the Closing Date; or (ii) any Hazardous Materials
or other contaminants, wherever located, that were, or were
allegedly, generated, transported, stored, treated, Released,
or otherwise handled by Sellers or the Company or by any other
Person for whose conduct they are or may be held responsible
at any time on or prior to the Closing Date.
(b) any bodily injury (including illness, disability, and death,
and regardless of when any such bodily injury occurred, was
incurred, or manifested itself), personal injury, property
damage (including trespass, nuisance, wrongful eviction, and
deprivation of the use of real property), or other damage of
or to any Person, including any employee or former employee of
Sellers or the Company or any other Person for whose conduct
they are or may be held responsible, in any way arising from
or allegedly arising from any Hazardous Material that was
Released or allegedly Released by Sellers or the Company or
any other Person for whose conduct they are or may be held
responsible, at any time on or prior to the Closing Date.
Buyer will be entitled to control any cleanup, any related Proceeding, and,
except as provided in the following sentence, any other Proceeding with respect
to which indemnity may be sought under this Section 10.3. The procedure
described in Section 10.5 will apply to any claim solely for monetary damages
relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will reimburse Sellers, for any
Damages arising from or in connection with (a) any Breach of any representation
or warranty made by Buyer in this Agreement or in any document delivered by
Buyer pursuant to this Agreement, (b) any Breach by Buyer of any covenant or
obligation of Buyer in this Agreement, (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions, or (d) any service provided by or any omission in a service which
was initially required to be provided by the Company or the Buyer after the
Closing Date.
10.5 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Within 10 days after receipt by an indemnified party of notice
of the commencement of any Proceeding against it, such indemnified party will,
if a claim is to be made against an indemnifying party under this Section 10,
give notice to the indemnifying party of the commencement of such claim, but
the failure to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party, except to the
extent
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that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding is brought against an indemnified party and
it gives notice to the indemnifying party of the commencement of such
Proceedings, the indemnifying party will, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to the indemnified
party of its financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), assume the defense of such
Proceeding with counsel satisfactory to the indemnified party and, after notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the
defense of a Proceeding, (i) it will be conclusively established for purposes
of this Agreement that the claims made in the Proceeding are within the scope
and/or subject to indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without the indemnified
party's consent (which consent may not be unreasonably withheld) unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (iii) the
indemnifying party will have no liability with respect to any compromise or
settlement of such claims effected without its consent (which consent may not
be unreasonably withheld). If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding
or any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
may be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters
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alleged therein, and agree that process may be served on Sellers with respect
to such a claim anywhere in the world.
11. ARBITRATION.
11.1 REMEDIES. To the extent permitted by applicable law, and
except for equitable relief which Buyer is entitled to seek under the
Nonsolicitation Agreement, in the event any dispute arises between the parties
under this Agreement, the parties hereto agree that arbitration shall
constitute the exclusive remedy for the resolution of any such dispute or
controversy. The arbitration proceedings shall be accomplished in accordance
with the provisions of this Section 11.
11.2 AMERICAN ARBITRATION ASSOCIATION. Except as expressly
provided herein to the contrary, the arbitration proceeding shall be conducted
under the Commercial Arbitration Rules of the American Arbitration Association
in effect at the time a demand for arbitration is made. To the extent that
there is any conflict between the rules of the American Arbitration Association
and this Section 11, this Section shall govern and determine the rights of the
parties hereto.
11.3 SELECTION OF ARBITRATOR. The arbitration will take place in
Miami, Florida before a single arbitrator selected as described in this Section
11.3 either party may request the American Arbitration Association to provide a
list of proposed arbitrators. Purchaser, on the one hand and Seller on the
other hand, shall then take turns crossing off one name at a time from such
list with the last remaining individual being appointed the arbitrator.
Purchaser and Seller shall select by lot which of them strikes the first name
from the list of proposed arbitrators. If the person selected in this method
to be the arbitrator declines or is otherwise unavailable to serve as the
arbitrator of the dispute, the arbitrator shall be selected from the same list
of proposed arbitrators selected in the reverse order to which those proposed
arbitrators' names were struck from the list until one of such individuals
selected to be the arbitrator accepts the appointment and is able to serve as
the arbitrator.
11.4 DECISION OF ARBITRATOR. The arbitrator selected in the manner
set forth in Section 11.3 hereof (the "Arbitrator") shall be requested to honor
the intention of the parties hereto to resolve the disputes quickly and
inexpensively. All decisions shall be made with this intention in mind.
Except as otherwise provided by applicable law, the decision of the Arbitrator,
shall be exclusive, final and binding of all parties, their successors and
assigns as applicable.
11.5 PROCEDURES. Except as expressly set forth in this Agreement,
the Arbitrator shall determine the manner in which the arbitration proceeding
is conducted, including the time and place of all hearings, the order of
presentation of evidence and all of the questions that arise with respect to
the arbitration proceeding.
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11.6 APPLICABLE LAW. The Arbitrator shall be required to determine
all issues in accordance with Florida law. The rules of evidence applicable to
proceedings at law in the State of Florida will be applicable to the
arbitration proceedings.
11.7 JUDGMENT. The Arbitrator shall issue a single judgment at the
close of the arbitration proceeding which shall dispose of all of the disputes
of the parties that are the subject of the arbitration. Any party to the
arbitration may seek a judgment from a court of competent jurisdiction to
enforce the award of the Arbitrator.
11.8 COSTS. The cost of arbitration, including administrative
fees, fees for a record and a transcript, and the Arbitrator's fees shall be
borne equally by the parties to the arbitration. Each party shall bear the
costs of the fees charged such party by its own counsel; provided, however, the
Arbitrator shall have the right to award reasonable attorneys' fees to the
party determined by the arbitrator to be the prevailing party.
12. POST CLOSING COVENANTS
12.1 COLLECTION OF ACCOUNTS RECEIVABLE. Buyer agrees to forward to
Sellers or their designees ninety percent (90%) of the payments associated with
any Accounts Receivable listed on Schedule 3.9 which the Company receives after
the Closing within twenty (20) days after the end of the calendar month in
which such payments were received. The Company shall be entitled to retain ten
percent (10%) of such payments associated with the accounts receivable as a
collection fee. Sellers agree not to directly or indirectly contact any of the
customers associated with the Accounts Receivable listed on Schedule 3.9.
Sellers acknowledge that Buyer and its designees shall have the exclusive
ability to contact such customers after the Closing unless Seller obtains
Buyer's prior written consent to contact such customers. All payments received
by Buyer or the Company associated with an Accounts Receivable listed on
Schedule 3.9 shall be applied by Buyer or the Company to the oldest amount past
due.
12.2 TAX ELECTION. Pursuant to Code Section 341(f) and Treasury
Regulation Section 1.341-7, the Company consents to have the provisions of
Code Section 341(f)(2) apply to any disposition by the Company of its
subsection (f) assets as defined therein. In addition, the Company agrees to
file the Code Section 341(f) consent, as attached hereto as Exhibit 12, with
the IRS prior to the Closing Date.
12.3 ALARM ACCOUNTS INCLUDED IN LOST RMR. If an Alarm Account is
included in Lost RMR or is included among the Non Qualifying Over 90 RMR, then
upon written request of at least three of the Sellers, Buyer shall transfer
ownership of such Alarm Account to Sellers or their designees and shall take
other action reasonably requested by at least three of the Sellers to
facilitate such transfer. Upon such transfer to the Sellers, Sellers agree to
indemnify and hold harmless Indemnified Persons for any Damages arising after
the date of such transfer other than with respect to any liabilities relating
solely to
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unpaid services rendered by Buyer or the Company. Sellers agree that there is
no limitation on their indemnification obligation, pursuant to this Section
12.3.
12.4 BUSINESS AND TAX RECORDS. Buyer and the Company shall
maintain the business and tax records provided to Buyer by Sellers at the
Closing Date for a period of seven years and shall allow Sellers the right to
access and copy such records from time to time during normal business hours
upon prior written notice by the Sellers to Buyer.
13. GENERAL PROVISIONS
13.1 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.
13.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity by Sellers with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as
shall be approved by Buyer in advance of any such announcement or similar
publicity. Unless consented to by the other party in advance prior to the
Closing, Buyer and Seller shall, and shall cause the Company to, keep the terms
of this Agreement strictly confidential and may not make any disclosure of the
terms of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Company' 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
and/or approve of any such communication.
13.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Seller will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company
to maintain in confidence, any written, oral or other information obtained in
confidence from another party or the Company 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 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.
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13.4 NOTICES. Any notice required or permitted to be delivered
pursuant to the terms of this Agreement shall be considered to have been
sufficiently delivered within five days after posting, if mailed by U.S. Mail,
certified or registered, return receipt requested, postage prepaid or, upon
receipt by overnight courier maintaining records of receipt by addressee or if
delivered by hand or telecopied with the original notice being mailed the same
day by one of the foregoing methods and addressed as follows:
IF TO MASADA AT:
Masada Security, Inc.
000 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx
FACSIMILE: 0-000-000-0000
TELEPHONE: (000) 000-0000
WITH COPY TO:
Xxxx & Xxxxxx
3100 SouthTrust Tower
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: W. Xxx Xxxxxxx, Esq.
FACSIMILE: (000) 000-0000
TELEPHONE: (000) 000-0000
IF TO SELLERS AT:
Xxxxxxx X. Xxxxx
00000 Xxxxxxxxx 000xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
FACSIMILE: (000) 000-0000
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TELEPHONE: (000) 000-0000
WITH COPY TO:
Zack, Xxxxxxx, Xxxxxxxxx, Xxxxxx & Xxxxxx, P.A.
One International Place
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
FACSIMILE: (000) 000-0000
TELEPHONE: (000) 000-0000
or at such address as the party may designate by ten days advance written
notice to the other party. Notice shall be effective when delivered to a
responsible person at the address of the addressee.
13.5 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 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.
13.6 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, 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.
13.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the
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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.
13.8 SCHEDULES.
(a) The disclosures in the Schedules to this Agreement, 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 Schedules, the statements in the
body of this Agreement will control.
13.9 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 except that Buyer may assign any of its rights
under this Agreement, the Nonsolicitation and Nonaccptance Agreement, the
Escrow Agreement and any other related agreement (i) to any Subsidiary or
affiliate of Buyer and/or (ii) to its lenders. 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.
13.10 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.
13.11 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 "Sections" refer to the
corresponding 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.
13.12 GOVERNING LAW. This Agreement will be governed by and
construed under the laws of the State of Florida without regard to conflicts of
laws principles.
13.13 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.
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13.14 DIRECTION OF SELLERS. Any consent or request provided herein
by the Sellers shall be deemed to have been given only if at least three of the
four Sellers make such request or give such consent in writing to Buyer.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Buyer: Sellers:
MASADA SECURITY, INC.
By: Xxxxxxx X. Xxxxxxxxx /s/ Xxxxxxx X. Xxxxx
--------------------------------- ----------------------------
Its: Vice President Xxxxxxx X. Xxxxx
--------------------------
/s/ Xxxxxx X. Xxxxx
----------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxx
---------------------------
Xxxxx X. Xxxxxxxx
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LIST OF EXHIBITS
Exhibit 1 Form of Contract
Exhibit 2.5(a)(iii) Nonsolicitation Agreement
Exhibit 2.5(c) Escrow Agreement
Exhibit 2.5(d) Disbursement Letter
Exhibit 2.7(a) Over 90 RMR Calculation
Exhibit 2.7(b) Holdback Period I Calculation
Exhibit 2.7(c) Holdback Period II Calculation
Exhibit 7.5 Monitoring Agreement
Exhibit 7.6 Seller's Legal Opinion
Exhibit 7.13 Certificate of Merger
Exhibit 12 Tax Consent
LIST OF SCHEDULES
Schedule 1 Loans Receivable
Schedule 2.3 Assumed Liabilities
Schedule 2.6 Alarm Accounts included in Reprogramming
Allowance
Schedule 3.2 Required Consents
Schedule 3.6 Real Property Leases
Schedule 3.7 Title to Property
Schedule 3.8 Telephone Lines
Schedule 3.9 Accounts Receivable
Schedule 3.10 Inventory
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12(a) Tax Returns Relating to income or franchise
taxes filed since December 31, 1994
Schedule 3.12(b) All Audits of tax return
Schedule 3.12(c) Proposed Assessments
Schedule 3.14 Employee Benefits
Schedule 3.15(a) Compliance with Legal Requirements
Schedule 3.15(b) Governmental Authorizations
Schedule 3.16 Legal Proceedings
Schedule 3.17 Absence of Changes
Schedule 3.18(a) Contracts (Alarm Accounts)
Schedule 3.18(b) Applicable Contracts
Schedule 3.18(c) Contracts - Miscellaneous Issues
Schedule 3.19 Insurance
Schedule 3.21 Employees
Schedule 3.23 Intellectual Property
Schedule 3.24 Product Warranties
Schedule 3.25 "Chip Change" Alarm Accounts
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