Exhibit 10.1
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("AGREEMENT") dated as of October 13, 2003
between TOTAL IDENTITY SYSTEMS CORP., a New York corporation (the "COMPANY"),
TOTAL IDENTITY CORP., a Florida corporation (the "PURCHASER") and XXXXXX XXXXX,
an individual resident of the State of New York ("XXXXX").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchaser, and
the Purchaser desires to purchase from the Company, 120 shares of the Company's
common stock, $1.00 par value per share (the "COMMON SHARES"); and
WHEREAS, upon completion of the sale and issuance of the Common Shares
to the Purchaser, the Purchaser will own 60% of the then issued and outstanding
capital stock of the Company; and
WHEREAS, Xxxxx is currently the sole shareholder of the Company and,
following the sale of the Common Shares to the Purchaser, Xxxxx will own 40% of
the then issued and outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON SHARES
Section 1.1 ISSUANCE OF COMMON SHARES. Upon the following terms and
conditions, the Company shall issue and sell the Common Shares to the Purchaser,
and the Purchaser shall purchase the Common Shares from the Company.
Section 1.2 PURCHASE PRICE. The purchase price for the Common Shares
shall be the sum of $1,000,000 (the "PURCHASE PRICE"). The Purchase Price shall
be paid $150,000 at the Closing (as hereinafter defined), $250,000 on or before
November 7, 2003, $250,000 on or before November 30, 2003 and $350,000 on or
before December 31, 2003. The Purchase Price shall be used by the Company for
the purposes identified on Schedule A attached hereto and incorporated by
reference herein. The parties agree that until such time as the Purchase Price
has been paid in full, all expenditures by the Company shall require the dual
signatures of Xxxxx Xxxxxx or Xxx Xxxx, on the one hand, and the Chief Executive
Officer of Purchaser or his designee, on the other hand.
Section 1.3 THE CLOSING.
(a) Timing. The purchase and sale of the Common Shares shall
take place at a closing (the "CLOSING") to occur on the date hereof or on such
other date and at such other time and place as is mutually agreed upon by the
Company and the Purchaser (the "CLOSING DATE") not more than five days following
satisfaction or waiver of all conditions set forth Article III of this
Agreement.
(b) Form of Payment and Closing. On the Closing Date, (i) the
Company shall deliver to the Purchaser certificates evidencing the Common
Shares, registered to the Purchaser and (ii) the Purchaser shall deliver by wire
transfer to the account of Company, the sum of $150,000. The balance of the
Purchase Price shall be paid in like manner, in the amounts and on or prior to
the dates set forth in Section 1.2. In addition, on the Closing Date, each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing. The Common
Shares shall be fully owned and paid for by the Purchaser as of the Closing
Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND XXXXX.
Except as otherwise set forth on a Disclosure Schedule delivered by the Company
to the Purchaser at the time this Agreement is executed, the Company and Xxxxx,
jointly and severally, hereby make the following representations and warranties
to the Purchaser as of the date hereof (except as otherwise specified) and the
Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of New York and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries, except that the
Company owns all of the interests in The Markham Company, LLC, a New York
limited liability company, and Awnex, LLC, a New York limited liability company
(each, a "Subsidiary" and collectively, the "Subsidiaries"). The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means (i) any adverse effect on the business, operations,
properties, prospects or financial condition of the Company and which is (either
alone or together with all other adverse effects) material to the Company, taken
as a whole, and (ii) any material adverse effect on the transactions
contemplated under this Agreement or any other agreement or document
contemplated hereby.
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(b) Subsidiaries. Each Subsidiary is a limited liability
company, duly organized and validly existing under the laws of its jurisdiction
of organization. The Company owns 100% of the membership interests in each
Subsidiary free and clear of all liens, charges, encumbrances or security
interests. Neither the Company nor any Subsidiary has entered into any agreement
or understanding relating to the issuance of additional membership interests or
the transfer of currently outstanding membership interests. All the issued and
outstanding shares of membership interests of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.
The only evidence of ownership of each Subsidiary is its outstanding membership
interests.
(c) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this Agreement
and the agreements contemplated hereby ("TRANSACTION DOCUMENTS") and to issue
the Common Shares in accordance with the terms hereof, (ii) the execution and
delivery of this Agreement and the other Transaction Documents and the Common
Shares by the Company, and the consummation by it of the transactions
contemplated hereby, including the issuance of the Common Shares, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required or, if required, will have
been received on or before the Closing Date, (iii) this Agreement and the Common
Shares have been duly executed and delivered by the Company, (iv) this Agreement
and the other Transaction Documents constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement may be limited by
applicable federal or state securities laws and (v) the Common Shares have been
duly authorized and, upon issuance thereof and payment therefor in accordance
with the terms of this Agreement will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances.
(d) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 200 shares of Common Stock, of which as
of the date hereof, 80 shares are issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. As of the date hereof, (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company, other than preemptive
rights held by Xxxxx which will be unconditionally and irrevocably waived on or
prior to the Closing Date (ii) there are no outstanding debt securities, (iii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company, or contracts,
commitments, understandings or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company or
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options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company, except for a non-statutory stock option
granted to Xxxxx Xxxxxx to acquire 10% of the capital stock of the Company which
option will be terminated on or prior to the Closing Date, (iv) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the Securities Act of 1933, as amended
("SECURITIES ACT" or "1933 ACT"), (v) there are no outstanding securities of the
Company which contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company, (vi) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Common Shares as described in this
Agreement and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished to the Purchaser true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS").
(e) Issuance of Shares. The Common Shares have been duly
authorized and upon issuance in accordance with the terms hereof, the Common
Shares will (i) be validly issued and non-assessable, and upon payment of the
Purchase Price will be fully paid, (ii) be free from all taxes, liens and
charges with respect to the issue thereof, and (iii) not be subject to the
preemptive rights of any person, other than preemptive rights held by Xxxxx
which will be unconditionally and irrevocably waived on or prior to the Closing
Date.
(f) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby and issuance of the Common
Shares will not (i) result in a violation of the Certificate of Incorporation or
the By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of any principal
securities exchange or trading market on which the Common Stock is traded or
listed) applicable to the Company or by which any property or asset of the
Company is bound or affected. Neither the Company nor any Subsidiary is in
violation of any term of, or in default under, (x) its Certificate of
Incorporation, By-laws or other organizational documents, (y) any material
contract, agreement, mortgage, indebtedness, indenture, instrument, or (z)(i)
any judgment, decree or order or (ii) any statute, rule or regulation applicable
to the Company or any Subsidiary, the non-compliance with which (in the case of
(z)(i) only), would be material to the Company or interfere with the performance
of its obligations under the Transaction Documents. Except as specifically
contemplated by this Agreement and as required under the 1933 Act, the Company
is not required to obtain any consent, authorization or order of, or make any
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filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents or the issuance
of the Common Shares in accordance with the terms hereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.
(g) Financial Statements. The Company has delivered or will
deliver to Purchaser (i) the balance sheets of the Company as at January 31,
2003 and 2002, and the related statements of operations, stockholders' equity
and cash flows for each the two fiscal years then ended, including the notes
thereto, compiled by Xxxxxx Xxxx CPA and (ii) the balance sheet of the Company
as at August 31, 2003 and the related statement of operations for the seven
months then ended, prepared by management (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). There are no
liabilities of the Company, absolute or contingent, except as set forth on the
Company Financial Statements. The Company has no reason to believe that its
financial statements cannot be audited in accordance with generally accepted
accounting principles and the rules and regulations of the United States
Securities and Exchange Commission.
(h) Absence of Certain Changes. Since the date of the most
recent balance sheet included in the Company Financial Statements, there has
been no adverse change or adverse development in the business, properties,
assets, operations, financial condition, prospects, liabilities or results of
operations of the Company which has had or, to the knowledge of the Company, is
reasonably likely to have a Material Adverse Effect. Neither the Company nor any
Subsidiary has taken any steps, and does not currently expect to take any steps,
to seek protection pursuant to any bankruptcy law nor does the Company or any
Subsidiary have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings.
(i) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its properties or assets.
(j) Material Agreements. The Company and each Subsidiary is in
compliance with the terms and conditions of each material agreement to which it
is a party. No party to any material agreement to which the Company or any
Subsidiary is a party is in breach of any material obligation thereunder.
(k) Acknowledgment Regarding Purchaser's Purchase of Common
Shares. The Company acknowledges and agrees that the Purchaser is acting solely
in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
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Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by the Purchaser or any of its respective representatives or
agents in connection with the Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Purchaser's purchase
of the Common Shares. The Company further represents to the Purchaser that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
(l) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of Common
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable shareholder approval provisions, nor will the Company
take any action or steps that would cause the offering of the Common Shares to
be integrated with other offerings.
(m) Employee Relations. Neither the Company nor any Subsidiary
is involved in any labor dispute nor, to the knowledge of the Company, is any
such dispute threatened, the effect of which would be reasonably likely to
result in a Material Adverse Effect. Niether the Company nor any Subsidiary is a
party to a collective bargaining agreement. The Company believes that relations
between the Company and its employees are good. No officer or significant
employee whose departure would be adverse to the Company, taken as a whole, has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment.
(n) Intellectual Property Rights. The Company owns or
possesses adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two (2) years from the date of
this Agreement. The Company does not have any knowledge of any infringement by
the Company or any Subsidiary of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
any Subsidiary regarding trademarks, trade name rights, patents, patent rights,
inventions, copyrights, licenses, service names, service marks, service xxxx
registrations, trade secrets or other infringement. The Company has taken
reasonable security measures to protect the secrecy, confidentiality and value
of all of its intellectual properties.
(o) Environmental Laws. The Company and each Subsidiary (i) is
in compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
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environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval where such noncompliance or failure to receive
permits, licenses or approvals referred to in clauses (i), (ii) or (iii) above
could have, individually or in the aggregate, a Material Adverse Effect.
(p) Title. Neither the Company nor ay Subsidiary owns any real
property and the Company and each Subsidiary has good and marketable title to
all personal property owned by them which is material to the business of the
Company, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Company Financial Statements or such as do
not materially and adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property. Any real
property and facilities held under lease by the Company or any Subsidiary are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings.
(q) Insurance. The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has not been refused any
insurance coverage sought or applied for, nor does the Company have any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the Company taken as a whole.
(r) Regulatory Permits. The Company and each Subsidiary
possesses all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities, necessary to
conduct its business, and neither the Company nor any Subsidiary has received
any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(s) Internal Accounting Controls. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) Foreign Corrupt Practices Act. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company has, in the course of acting for, or on behalf of, the Company, directly
or indirectly used any corporate funds for any unlawful contribution, gift,
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entertainment or other unlawful expenses relating to political activity;
directly or indirectly made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or any similar treaties of the United States;
or directly or indirectly made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government or
party official or employee.
(u) Tax Status. The Company and each Subsidiary has made or
filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
(i) has paid all taxes and other governmental assessments and charges, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (ii) has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes claimed to be due by the taxing authority of any jurisdiction, and
the Company is not aware of any basis for any such claim.
(v) Certain Transactions. Except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties,
none of the officers, directors or employees of the Company or any Subsidiary is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(w) Application of Takeover Protections. There are no
anti-takeover provisions contained in the Company's Certificate of Incorporation
or any Subsidiary's organizational documents or otherwise which will or could be
triggered as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Common Shares and
the Purchaser's ownership of the Common Shares.
(x) Rights Plan. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company. The Company
confirms that no provision of such plan will, under any present or future
circumstances, delay, prevent or interfere with the performance of any of the
Company's obligations under the Transaction Documents and such plan will not be
"triggered" by such performance.
(y) Obligations Absolute. The Company understands and
acknowledges that, subject only to the conditions, qualifications and exceptions
(if any) specifically set forth in the Transaction Documents, its obligations
under the Transaction Documents are unconditional and absolute. Except to the
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extent (if any) specifically set forth in the Transaction Documents, the
Company's obligations thereunder are not subject to any right of set off,
counterclaim, delay or reduction.
(z) Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Purchaser relating to this Agreement or
the transactions contemplated hereby, provided that any such fees shall be paid
by the Company.
(aa) Accuracy of Disclosure. Neither the Company Financial
Statements, the representations and warranties of the Company contained herein
nor any other written information provided by or on behalf of the Company to the
Purchaser, contains any untrue statement of a material fact or omits to state
any material fact or omits to state any fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each
Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:
(a) Organization and Qualification; Material Adverse Effect.
The Purchaser is a corporation duly incorporated and existing in good standing
under the laws of the State of Florida and has the requisite corporate power to
own its properties and to carry on its business as now being conducted.
(b) Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Purchaser and is
a valid and binding agreement of the Purchaser enforceable against the Purchaser
in accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies. The Purchaser has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(c) No Conflicts. The execution, delivery and performance of
this Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the certificate of incorporation, by-laws or other documents of organization
of the Purchaser, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Purchaser is bound, or (iii)
result in a violation of any law, rule, regulation or decree applicable to the
Purchaser.
(d) Sophisticated Purchaser. The Purchaser has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Common Shares.
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(e) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials relating to
the offer and sale of the Common Shares which have been requested by the
Purchaser. The Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by the Purchaser or its advisors,
if any, or its representatives shall modify, amend or affect the Purchaser's
right to rely on the Company's representations and warranties contained in
Section 2.1 above. The Purchaser understands that its purchase of the Common
Shares involves a high degree of risk. The Purchaser has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Common Shares.
(f) No Governmental Review. The Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Common
Shares or the fairness or suitability of the investment in the Common Shares nor
have such authorities passed upon or endorsed the merits thereof.
(g) Investment Representation. The Purchaser is purchasing the
Common Shares for its own account and not with a view to distribution in
violation of any securities laws. The Purchaser has been advised and understands
that the Common Shares have not been registered under the 1933 Act or under the
"blue sky" laws of any jurisdiction and may be resold only if registered
pursuant to the provisions of the 1933 Act or if an exemption from registration
is available. The Purchaser has been advised and understands that the Company,
in issuing the Common Shares is relying upon, among other things, the
representations and warranties of the Purchaser contained in this Section 2.2 in
concluding that such issuance is a "private offering" and is exempt from the
registration provisions of the 1933 Act.
(h) No Market for Common Shares. The Purchaser understands
that there is no public trading market for the Common Shares, that none is
expected to develop, and that the Common Shares must be held indefinitely unless
and until registered under the 1933 Act or an exemption from registration is
available.
(i) Brokers. The Purchaser has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Purchaser relating to this Agreement or
the transactions contemplated hereby.
ARTICLE III
CONDITIONS TO CLOSINGS
Section 3.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL. The obligation of the Company to issue and sell the Common Shares to the
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
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Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser will be true and
correct in all material respects as of the date when made and as of the Closing
Date, as though made at that time.
(b) Performance by the Purchaser. The Purchaser shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Purchaser at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) Officer's Certificate. The Purchaser shall have delivered
a certificate to the Company certifying as to the accuracy of the matters
described in subsections (a) through (c) of this Section 3.1 as of the Closing
Date.
(e) Real Property Lease. The Company shall have entered into a
lease with 0000 Xxxxxxxx Xxxx Corporation covering the facilities located at
2340 Brighton-Xxxxxxxxx Town Line Road , substantially in the form attached
hereto as EXHIBIT A.
(f) Acquisition of Minority Interest. Xxxxx and the Purchaser
shall have entered into an agreement for the Purchaser to acquire the 40% equity
interest in the Company owned by Xxxxx substantially in the form attached hereto
as EXHIBIT B.
(g) Employment Agreements. Xxxxx shall have entered into an
employment agreement with the Purchaser substantially in the form attached
hereto as EXHIBIT C and Xxxxx Xxxxxx shall have entered into an employment
agreement with the Company substantially in the form attached hereto as EXHIBIT
D.
(h) Miscellaneous. The Purchaser shall have delivered to the
Company such other documents relating to the transactions contemplated by this
Agreement or the Company or its counsel may reasonable request.
Section 3.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
PURCHASE. The obligation of the Purchaser to acquire and pay for the Common
Shares at the Closing is subject to the satisfaction, at or before the Closing,
of each of the conditions set forth below. These conditions are for the
Purchaser's sole benefit and may be waived by the Purchaser at any time in its
sole discretion.
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(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time.
(b) Performance by the Company. The Company shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) No Material Adverse Event. No event shall have taken place
that, with or without the lapse of time, could reasonably result in a Material
Adverse Effect on the Company.
(e) Acquisition of Minority Interest. Xxxxx and the Purchaser
shall have entered into an agreement for the Purchaser to acquire the 40% equity
interest in the Company owned by Xxxxx substantially in the form attached hereto
as EXHIBIT B.
(f) Employment Agreements. Xxxxx shall have entered into an
employment agreement with the Purchaser substantially in the form attached
hereto as EXHIBIT C and Xxxxx Xxxxxx shall have entered into an employment
agreement with the Company substantially in the form attached hereto as EXHIBIT
D.
(g) Officer's Certificate. The Company shall have delivered to
the Purchaser a certificate in form and substance satisfactory to the Purchaser
and the Purchaser's counsel, executed by an officer of the Company certifying as
to the accuracy of the matters described in subsections (a) through (c) of this
Section 3.2, as well as the true, correct and complete nature of the Certificate
of Incorporation, By-Laws, good standing and authorizing resolutions of the
Company.
(h) Equipment Lease. The equipment finance lease between M&T
Bank, as lessor, and RJD Leasing, as lessee, shall have been assigned to the
Company with the consent of M&T Bank, and the Company shall have succeeded to
all of the rights of the lessee under such lease, subject to the rights of the
SBA in connection with a loan agreement and related documents between the SBA
and the Company. The assignment and assumption agreement shall be in form and
substance reasonably satisfactory to the Purchaser. The Purchaser agrees that
the assignment described in this Section 3.2(h) may be provided by the Company
within two business days following the Closing.
(i) Waiver of Preemptive Rights. The Company shall have
received from Xxxxx a waiver, in form and substance satisfactory to the
Purchaser, waiving any and all preemptive rights that Xxxxx has or may have
arising by reason of the transactions contemplated by this Agreement, or
otherwise.
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(j) Termination of Options. The Company shall have received a
termination agreement, in form and substance reasonably satisfactory to the
Purchaser, terminating any right of Xxxxx Xxxxxx to receive and/or exercise any
option(s) to purchase shares of capital stock of the Company.
(k) Termination of Rights of Trustee. The Company shall have
received a termination agreement, in form and substance reasonably satisfactory
to the Purchaser, terminating the obligation of Xxxxx to sell his shares of the
Company to any third person, including an insurance trust of which Xxxxxx Xxxx
in the trustee.
(l) Indebtedness to Affiliates. As of the Closing Date, there
shall be no indebtedness of the Company to any affiliate, and the promissory
note in the approximate amount of $591,000 of the Company to Xxxxx shall have
been cancelled.
(m) Resignations. The Purchaser shall have received the
resignations of all officers and directors of the Company.
(n) Miscellaneous. The Company shall have delivered to the
Purchaser such other documents relating to the transactions contemplated by this
Agreement or the Purchaser or its counsel may reasonable request.
ARTICLE IV
TERMINATION
Section 4.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Purchaser.
Section 4.2 TERMINATION BY THE COMPANY. This Agreement may be
terminated by the Company in the event of the breach of any material
representation, warranty or covenant of the Purchaser contained in this
Agreement; provided, however, that such termination shall not prejudice the
rights of the Company to seek redress for any such breach on the part of the
Purchaser.
Section 4.3 TERMINATION BY THE PURCHASER. This Agreement may be
terminated by the Purchaser in the event of the breach of any material
representation, warranty or covenant of the Company contained in this Agreement;
provided, however, that such termination shall not prejudice the rights of the
Purchaser to seek redress for any such breach on the part of the Company.
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ARTICLE V
PRE-CLOSING COVENANTS
Commencing on the date hereof and continuing through the Closing Date,
the Company shall:
(a) operate only in the ordinary course of business consistent
with past practice;
(b) take such action as is reasonably necessary to cause the
conditions set forth in Article III to be satisfied on or prior to the Closing
Date;
(c) not take any action, consent to the taking of any action
or permit any action within its control to be taken that could cause any of the
representations and warranties contained in Section 2.1 to become inaccurate in
any material respect; and
(d) not discuss or negotiate with any third party for the
issuance of securities of the Company or entering into a business combination
with any .
ARTICLE VI
INDEMNIFICATION
Section 6.1 INDEMNIFICATION BY THE COMPANY AND XXXXX. The Company and
Xxxxx, jointly and severally, hereby indemnify and hold the Purchaser harmless
from and against any and all damages, losses, liabilities, obligations, costs or
expenses, including reasonable attorneys fees, incurred by the Purchaser and
arising out of (a) the breach of any representation or warranty of the Company
and/or Xxxxx hereunder, (b) the Company's failure to perform any covenant or
obligation required to be performed by it hereunder, and/or (c) liabilities or
obligations of the Company not disclosed on the Company Financial Statements.
Section 6.2 INDEMNIFICATION BY THE PURCHASER. The Purchaser hereby
indemnifies and holds the Company harmless from and against any and all damages,
losses, liabilities, obligations, costs or expenses, including reasonable
attorneys fees, incurred by the Company and arising out of (a) the breach of any
representation or warranty of the Purchaser hereunder, or (b) the Purchaser's
failure to perform any covenant or obligation required to be performed by it
hereunder.
Section 6.3 PROCEDURE FOR INDEMNIFICATION. Any party entitled to
indemnification under this Article VI (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VI except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
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reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party, which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VI to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnity agreements contained herein shall be in addition to
(a) any cause of action or similar rights of the Indemnified Party against the
indemnifying party or others, and (b) any liabilities the indemnifying party may
be subject to.
Section 6.4 Limitations. The obligations of the parties to provide
indemnification under this Agreement shall be subject to the following
limitations:
(a) No claim for indemnification shall be asserted by a party
until such time, if any, as the aggregate amount for which indemnification is
being sought exceeds $10,000; and
(b) No claim for indemnification may be sought by a party
after 18 months from the Closing Date.
ARTICLE VII
GOVERNING LAW; MISCELLANEOUS
Section 7.1 GOVERNING LAW; ARBITRATION. This agreement shall be
governed by and interpreted in accordance with the laws of the state of Florida
without regard to the principles of conflict of laws. Each of the parties
irrevocably and unconditionally agrees that any suit, action or legal proceeding
15
arising out of or relating to this Agreement shall be settled by binding
arbitration conducted in accordance with the Commercial Rules of Arbitration of
the American Arbitration Association ("AAA"). The arbitration shall take place
in Palm Beach County, Florida, and shall be heard by three arbitrators selected
in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall
render a reasoned award and such award shall be signed and dated. The decision
of the arbitrators shall be final and binding upon the parties, and the
arbitration award may be entered in any court of competent jurisdiction.
Initially, each of the parties shall pay one-half of the fees of the AAA (other
than filing fees), including without limitation hearing and arbitrators' fees,
and the parties' obligation to pay such fees shall be enforceable in any court
of competent jurisdiction. The parties to any arbitration hereunder agree to
submit for determination by the arbitrators, the amount of fees and expenses,
including reasonable attorney's fees, to be borne by each party.
Section 7.2 COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 7.3 HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 7.4 SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 7.5 ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement
supersedes all other prior oral or written agreements between the Purchaser, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein (including the other Transaction Documents) contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Purchaser, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
Section 7.6 NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
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If to the Purchaser:
Total Identity Corp.
00000 Xxxxxx Xxxx Xxxx.
Xxxxx 00-000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
President
With a copy to:
Xxxxxxxxx Xxxxxxxxxx LLP
Suite 108
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
If to the Company:
Total Identity Systems Corp.
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxx
President
With a copy to:
Xxxxxxx, Xxxxxxxxx & Xxxxxx, P.C.
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
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If to Xxxxx:
Xxxxxx Xxxxx
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx, Xxxxxxxxx & Xxxxxx, P.C.
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
Each party shall provide three days prior written notice to
the other party of any change in address, telephone number or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a nationally recognized overnight delivery service, shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 7.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. Neither party shall assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the other party.
Section 7.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 SURVIVAL. The representations, warranties and agreements of
the Company and the Purchaser contained in the Agreement shall survive the
Closing for a period of 18 months.
Section 7.10 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 7.11 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 7.12 DAYS. Unless the context refers to "business days", all
references herein to "days" shall mean calendar days. ----
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IN WITNESS WHEREOF, the parties hereto have caused this Stock
Purchase Agreement to be duly executed as of the date and year first above
written.
TOTAL IDENTITY CORP., A FLORIDA
CORPORATION
By: /S/ XXXXXXX X. XXXXX
------------------------------
Xxxxxxx X. Xxxxx, President
TOTAL IDENTITY SYSTEMS CORP., A
NEW YORK CORPORATION
By: /S/ XXXXXX XXXXX
-------------------------------
Xxxxxx Xxxxx, President
/S/ XXXXXX XXXXX
----------------
Xxxxxx Xxxxx
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SCHEDULE A - USE OF PROCEEDS
The proceeds of the Purchase Price for the Common Shares shall be used
by the Company solely for the following purposes:
o Up to $75,000 for the payment of expenses associated with the private
placement of $1 million being conducted by TIC;
o Reduction of indebtedness, including without limitation bank debt and
payments arising under legal proceedings; and
o Working capital.
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