Exhibit 10.1
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT ("Agreement") dated as of
February 23, 2004, by and 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 parties are all of the parties to a Stock Purchase
Agreement dated October 13, 2003 (the "Original Agreement"); and
WHEREAS, a dispute has arisen between the parties to the Original
Agreement as to alleged breaches, non-performance, interpretation and
indemnification obligations thereunder (the "Disputed Items"); and
WHEREAS, the parties desire to settle the Disputed Items and amend the
Original Agreement upon the terms and conditions set forth herein
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:
1. Section 1.2 of the Original Agreement is hereby deleted in its
entirety and the following shall be inserted in its place and stead:
"Section 1.2 Purchase Price. The purchase price for the Common
Shares shall be the sum of $700,000 (the "Purchase Price"), of which
(a) $150,000 has been paid, the receipt of which is hereby acknowledged
by the Company and Xxxxx and (b) $75,000 of which shall be allocated as
a credit to the Purchaser for its expenses in connection with a
financing to benefit the Company. The $475,000 balance of the Purchase
Price shall be paid in five equal monthly installments, each in the
amount of $95,000, with the first installment being due and payable on
March 8, 2004, and on or before the same day of each month thereafter
until the $475,000 balance has been paid. The $475,000 balance of the
Purchase Price shall be used by the Company to reduce trade payables
and other indebtedness of the Company (other than indebtedness to the
Purchaser), and, thereafter, for working capital. The parties agree
that until such time as the Purchase Price has been paid in full, (y)
for so long as either Xxx Xxxx ("Cass") or Xxxxx Xxxxxx ("Xxxxxx") are
employed by the Company, all expenditures by the Company shall require
the dual signatures of Cass or Xxxxxx, on the one hand, and the chief
executive officer of Purchaser or his designee, on the other hand and
(z) Purchaser shall provide Xxxxx with documentary proof of the making
of each installment payment required by this Section, which proof shall
be deemed satisfied by providing a copy of the deposit slip or wire
transfer to the Company's account."
2. The representations and warranties contained in Section 2.1 of the
Original Agreement are hereby qualified, as of the date hereof, to the extent
disclosed on the Schedule of Exceptions attached hereto as Schedule A and
incorporated by reference herein ("Schedule of Exceptions").
3. Section 2.1(g) of the Original Agreement is hereby deleted in its
entirety and the following shall be inserted in its place and stead:
"(g) Statement of Liabilities. The Statement of Liabilities
attached to this Agreement as Schedule B reflects the categories of
liabilities to which the Company was subject as of October 31, 2003.
There are no categories of liabilities of the Company, absolute or
contingent, incurred prior to October 13, 2003, except as set forth on
the Statement of Liabilities. The Company and Xxxxx represent and
warrant to the Purchaser that there were no asserted or threatened
customer warranty claims and/or product liability claims against the
Company as of October 13, 2003."
4. Section 2.2(e) of the Original Agreement is hereby deleted in its
entirety and the following shall be inserted in its place and stead:
"(e) Information. The Purchaser acknowledges that it has been
furnished with all materials relating to the business, finances and
operations of the Company that have been requested and materials
relating to the offer and sale of the Common Shares which have been
requested by the Purchaser. Further, the Purchaser has, since October
13, 2003, the date of the Original Agreement, assumed responsibility
for the day-to-day operations and finances of the Company. Therefore,
Purchaser acknowledges that it has not relied upon any representations
and warranties other than those contained in the Original Agreement, as
amended by Amendment No. 1 to the Original Agreement. The Purchaser
understands that its purchase of the Common Shares involves a high
degree of risk. The Purchaser has obtained 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."
5. Section 3.2(h) of the Original Agreement is hereby deleted in its
entirety and, upon execution of this Agreement, Xxxxx shall deliver to the
Company a Xxxx of Sale conveying to the Company good and marketable title to the
equipment described on the Schedule of Equipment attached hereto as Schedule C,
free and clear of all liens, charges, encumbrances and security interests,
subject however to the security interest of M&T Bank; and, as consideration for
the delivery of such Xxxx of Sale, the Company hereby assumes the payment
obligation to M&T Bank for such equipment to the extent of $178,000.
6. Section 6.1(a) of the Original Agreement is hereby deleted in its
entirety and the following is inserted in its place and stead:
"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, after giving effect to the information disclosed on the
Schedule of Exceptions, (b) the Company's failure to perform any
covenant or obligation required to be performed by it hereunder, and/or
(c) categories of liabilities or obligations of the Company not
disclosed on the Statement of Liabilities."
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7. Section 6.4 of the Original Agreement is hereby deleted in its
entirety and the following shall be inserted in its place and stead:
"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
unless the amount of the claim for which indemnification is being
sought exceeds $10,000; and
(b) No claim for indemnification may be sought by a party
after six months from the date hereof."
8. Section 7.1 of the Original Agreement is hereby deleted in its
entirety and the following shall be inserted in its place and stead:
"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 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 at such location
as the AAA determines, 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.
Any witness residing outside of the state in which the arbitration is
heard may testify by affidavit, and such affidavit shall be admissible
at any arbitration hearing. 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."
9. Section 7.6 of the Original Agreement is hereby deleted in its
entirety and the following is inserted in its place and stead:
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"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 courier, mail
or hand delivery, and will be deemed to have been delivered upon
receipt. The addresses for such communications shall be:
If to the Purchaser:
Total Identity Corp.
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
With a copy to:
Xxxxxxxxx Xxxxxxxxxx LLP
Suite 108
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
If to the Company:
Total Identity Systems Corp.
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxxx Xxxxxxxxx
With a copy to:
Xxxxxxx, Xxxxxxxxx & Xxxxxx, P.C.
0 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
If to Xxxxx:
Xxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
With a copy to:
Shapiro, Rosenbaum, Liebschutz & Xxxxxx, LLP
0000 Xxxxxxxxxx Xxxxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
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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, or (B) provided by a
nationally recognized overnight delivery service, shall be rebuttable
evidence of personal service or receipt from a nationally recognized
overnight delivery service."
10. Contemporaneously herewith (a) the lease described in Section
3.1(e) of the Original Agreement is being modified by the parties thereto, (b)
the Stock Purchase Agreement referred to in Sections 3.1(f) and 3.2(e) of the
Original Agreement, and the promissory note and pledge agreement referred to
therein and executed in connection therewith, are being modified by the parties
thereto, (c) the employment agreement with Xxxxx referred to in Sections 3.1(g)
and 3.2(f) of the Original Agreement is being terminated and the parties thereto
are entering into a consulting agreement (the "Xxxxx Consulting Agreement;" and
the agreements and transactions referred to in subsections (a) through (c) of
this Section being collectively referred to as the "Other Agreements"), and (d)
the parties hereto are entering into mutual releases, releasing each other from
all claims and obligations, including the Disputed Items, except as otherwise
provided in this Agreement and the Other Agreements.
11. Purchaser covenants and agrees that on or prior to the end of the
term of the Xxxxx Consulting Agreement, or the earlier termination date of the
Xxxxx Consulting Agreement if it is terminated by the Company without cause (as
such term is defined in the Xxxxx Consulting Agreement), Purchaser shall take
such action as may be necessary, to pay, cause the payment of, replace, or
otherwise with respect to the Company's indebtedness ("Institutional
Indebtedness") to the US Small Business Administration ("SBA"), Mercantile Bank
and M&T Bank ("Institutions"), such that (a) Xxxxx and Xxxx Xxxxx shall have no
further personal liability for the Company's indebtedness to such institutions
and (b) any collateral pledged by Xxxxx and/or Xxxx Xxxxx solely to secure the
Institutional Indebtedness shall be released to Xxxxx and/or Xxxx Xxxxx, as the
case may be.
12. In addition to Purchaser's obligation under Section 11, above, in
the event that one or more of the Institutions declares the Company to be in
default under Institutional Indebtedness due to (a) consummation of the
transactions contemplated by the Original Agreement without the consent of an
Institution or (b) due to any other default by the Company occurring subsequent
to October 13, 2003, then in either such event, Purchaser shall take such action
as may be necessary, to pay, cause the payment of, replace, or otherwise with
respect to the Institutional Indebtedness such that (y) Xxxxx shall have no
further personal liability for the Company's indebtedness to such Institution(s)
and (z) any collateral pledged by Xxxxx and/or Xxxx Xxxxx solely to secure such
Institutional Indebtedness shall be released to Xxxxx; provided, however, that
the Purchaser's obligations under Section 12(b) shall not apply to the extent
that an Institution alleges a default by the Company triggered by the acts or
omissions of Xxxxxx Xxxxx, Xxxx Xxxxx, RJD Leasing Corp., 2340
Brighton-Xxxxxxxxx Corp. and/or any of their respective affiliates
(collectively, the "Xxxxx Affiliates").
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13. Without intending to limit or qualify Purchaser's obligations in
the immediately preceding Sections, Purchaser also covenants and agrees that, in
its capacity as shareholder of the Company, it (a) will take such action as is
reasonably necessary in order to perform its obligations under the preceding
Section, including without limitation, voting its shares of the Company so as to
do so, and (b) will not act in a manner that would prevent or impair the Company
to perform its obligations to the Institutions.
14. Xxxxx, on his behalf and on behalf of the Xxxxx Affiliates, hereby
covenants and agrees that he and they (a) will take such action as is reasonably
necessary in order to cause each of them to perform their respective obligations
to the Institutions, including without limitation, voting shares of any
corporate Xxxxx Affiliate to do so, and (b) will not act in a manner that could
cause the Company to default under any Institutional Indebtedness or prevent the
Company from performing any of its obligations to the Institutions; provided,
however, that nothing herein contained shall require Xxxxx or the Xxxxx
Affiliates to amend, waive, release, defer, subordinate or relinquish any rights
set forth in the Original Agreement, as modified by the terms of this Agreement,
the Other Agreements, and a certain Lease and Amended Lease for the business
premises of the Company executed contemporaneously herewith, in order to comply
with this Section 14.
15. Purchaser shall, to the extent required by the SBA, guarantee the
Company's obligation to pay 10% of its "pre-tax profits" to the SBA.
16. Each of the parties hereby agrees that its covenants and agreements
under this Agreement shall be within the scope of the indemnification provisions
of Sections 6.1(a) and 6.2(b) of the Original Agreement, as the case may be.
17. It is understood and agreed that Xxxxx is a party to this Agreement
and the Original Agreement as well as an intended beneficiary thereof and has
the power and standing to seek enforcement of this Agreement and of the Original
Agreement as modified hereby.
18. Except as modified hereby, the Original Agreement shall remain in
full force and effect.
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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/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxx, President
TOTAL IDENTITY SYSTEMS CORP., a
New York corporation
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxx, Chairman and
Chief Executive Officer
/s/ Xxxxxx Xxxxx
------------------------------------
Xxxxxx Xxxxx
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