AGREEMENT
AND
PLAN
OF
REORGANIZATION
BY AND BETWEEN
SENTRY ACCOUNTING, INC.,
AND
XXXXXXXXX.XXX INC.
Date: July 23, 1999
Agreement and Plan of Reorganization ("Agreement"), dated as of July 23,
1999, by and between Sentry Accounting, Inc., a Florida corporation ("Sentry"),
and XxxxxxXxx.xxx Inc., a Missouri corporation (the "Acquiree").
RECITALS
A. As of the date hereof, there are an aggregate of 50,000,000 shares of
Sentry's Common Stock, no par value (the "Sentry Shares") authorized, of which
2,491,000 shares are issued and outstanding. Upon the Effective Date as defined
below, 1,475,533 shares are to be issued as herein below more fully described in
Section 4 of this Agreement.
B. XxxxxxXxx.xxx Inc. is a Missouri corporation, with 2,906,800 shares of
issued and outstanding common stock (the "XxxxxxXxx.xxx Stock").
C. The parties hereto intend that the issuance of the Sentry Shares in
exchange for the XxxxxxXxx.xxx Stock shall be in accordance with the applicable
statutes of the State of Florida and shall qualify as a "tax-free"
reorganization within the meaning of Section 368 and applicable subsections of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing promises and the mutual
covenants, agreements and representations contained herein, the parties hereto
agree as follows:
OPERATIVE PROVISIONS
ARTICLE 1
MERGER
1.1 Transfer of Property and Liabilities. Upon the Effective Date (as defined in
Article 4 hereof) of the merger, the separate existence of Acquiree shall cease;
all of the outstanding shares of stock of Acquiree shall be exchanged for and
converted into the Sentry Shares; and upon the filing of a Certificate of Merger
with the Secretary of State of the State of Florida, Sentry shall possess all
the rights, privileges, immunities, powers and purposes, and all property,
causes of action and every other asset of Acquiree and shall assume and be
liable for all the liabilities, obligations and penalties of Acquiree, in
accordance with Florida law.
1.2 Surviving Corporation. Following the merger, the existence of Sentry shall
continue unaffected and unimpaired by the merger, with all the rights,
privileges, immunities and powers, and subject to all the duties and liabilities
of a corporation organized under the laws of Florida. The Certificate of
Incorporation and Bylaws of Sentry, as in effect immediately prior to the
Effective Date, shall continue in full force and effect, and, except as provided
otherwise in this document, shall not be changed in any manner by the merger.
2
ARTICLE 2
CONVERSION OF SHARES
2.1 Conversion Ratio. Sentry and Acquiree hereby adopt the Plan of
Reorganization by this Agreement and hereby agree that Acquiree shall merge into
Sentry on the terms and conditions set forth herein. Upon surrender of
certificates representing Acquiree Common Stock, Sentry will issue and deliver
as herein provided certificates representing a number of whole shares of its
Common Stock determined by the following exchange rate: 1 share of Sentry Common
Stock shall be issued in exchange for each 1.97 shares of Acquiree Common Stock
issued and outstanding on the Effective Date. No fractional shares of Sentry's
Common Stock will be issued to Acquiree. Accordingly, any fractional shares of
Sentry's Stock will, upon surrender of the certificates representing the
fractional shares of Acquiree's Stock, will receive a full share if the
fractional share equals or exceeds fifty percent (50%), and if the fractional
share is less than fifty percent (50%) the fractional share shall be canceled.
All persons holding shares of Acquiree Common Stock shall surrender the
certificates representing the shares of Acquiree Common Stock, either by
certified mail, return receipt requested, or in person to: Xxxx Xxxxxx,
XxxxxxXxx.xxx Inc., 000 Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxx
00000, or such other location as Acquiree shall advise such holders in writing.
Upon receipt of the surrendered share certificate of Acquiree Common Stock, a
replacement certificate reflecting shares of Sentry Common Stock subject to the
exchange rate set forth in this paragraph 2.1 shall be issued and caused to be
delivered in accordance with this Agreement. Notwithstanding proposed exchanges
of certificates, each certificate representing shares of Acquiree Common Stock
not physically surrendered pursuant to this section shall be deemed to represent
shares of Sentry Common Stock and subject to the exchange rate set forth in this
paragraph 2.1.
2.2 Shares of Sentry. On the date of the Closing, Sentry represents that
2,491,000 shares of its common stock, no par value per share, are issued and
outstanding. None of the issued and outstanding shares of Sentry shall be
converted as a result of the merger and all of such shares shall remain issued
and outstanding shares of capital stock of Sentry.
2.3 Assets of Acquiree. Prior to the Effective Date, Acquiree will retain all
the assets, properties, business and goodwill of Acquiree of every kind and
description, wherever located, including without limitation, all property,
tangible or intangible, real, personal, or mixed, accounts receivable, patent
rights, trademarks, trade names, bank accounts, cash and securities, claims and
rights under contracts of Acquiree, rights to use its corporate name and all
other names or slogans used by Acquiree in connection with its business or
products and all books and records of Acquiree relating to its business
(collectively referred to as the "Assets"), all as the same shall exist at the
date of this Agreement. Such Assets shall, without limitation, include all
Assets of Acquiree shown on the Interim Balance Sheet referenced in Section 5.8
below, and all Assets thereafter acquired by Acquiree prior to the Effective
Date, except such of those Assets of Acquiree as (1) may have been disposed of
prior to the Effective Date in the ordinary course of business, and (2) may have
been otherwise disposed of prior to the Closing Date at the request or with
Sentry's written consent.
3
2.4 Dissenters' Rights. Provided the number of shares voted against this Plan of
Reorganization is twenty-five thousand (25,000) or less then those shareholders
of Acquiree that voted against the merger may elect to either (i) receive a cash
payment equal to Four Dollars ($4.00) per share ("Exchange Rate")for each share
of Acquiree held on the Effective Date; or, (ii) they may deliver a written
demand for appraisal of their shares in the manner provided for in Section
351.447 and 351.445 of the Revised Statutes of Missouri (X.X.Xx.). Shareholders
presenting a written demand under ss. 351.447 and 351.445 X.X.Xx. shall have no
right to any cash payment under Missouri law. If a shareholder fails to perfect
his/her/their rights under ss. 351.447 and 351.445 X.X.Xx. or shall effectively
withdrawn or lost such rights, that shareholder shares of Acquiree Common Stock
shall thereupon be deemed to have been canceled and converted as provided in
Section 2.1 at the Effective Date, and each such share shall represent the right
to receive the appropriate cash payment based on the Exchange Rate.
2.5 Dissenters' Shares. Not more than twenty-five thousand (25,000) of the
outstanding shares of the Acquiree's Stock shall be Dissenters' Shares as
defined in Chapter 351 of the Revised Statutes of Missouri. In the event
Dissenters' Shares exceed five thousand (5,000), this Agreement shall terminate.
Thus, all rights, duties and obligations hereunder shall be treated as void ab
initio.
ARTICLE 3
RELATED TRANSACTIONS; ADDITIONAL AGREEMENTS
3.1 Change in Corporate Name. The Board of Directors of Sentry shall authorize
the change of its name to "XxxxxxXxx.xxx Inc.", or such other name approved by
the Acquiree, on the Effective Date and shall file an amendment to its Articles
of Incorporation to reflect such change.
3.2 Shares of Sentry to be Retired. TBC Investments, Inc., is control
shareholder of Sentry, and is solely owned by Xxxxxx X. Xxxxxxx, who serves as
Chief Executive Officer, President, Sentry and sole director of Sentry. At the
Closing, or before the end of the 45 day period thereafter, TBC Investments,
Inc. and/or Xx. Xxxxxxx agree to retire to the treasury of Sentry, the 2,000,000
restricted shares owned by TBC Investments, Inc., in exchange for $2,000.00 and
the transfer to TBC Investments, Inc. of the operating business of Sentry owned
by Sentry prior to the Merger.
3.3 Change in Board of Directors of Sentry. At the Closing, the current sole
Director of Sentry shall elect Xxxx Xxxxxx as Chairman of the Board and Xxxxx
Xxxxx as a member of the Board of Directors of Sentry and immediately
thereafter, Xxxxxx X. Xxxxxxx shall resign as the Chairman of Sentry, but at the
request of Xxxx Xxxxxx and Xxxxx Xxxxx, will continue to serve as a Director of
Sentry until ten (10) days after the Closing Date. Messrs. Xxxxxx and Noble
shall serve as members of the Board of Directors of Sentry until the next annual
meeting of the shareholders of Sentry, or until their successors are duly
elected and seated. Copies of the Meeting of the Board of Directors of Sentry
and Xx. Xxxxxxx'x resignation are attached hereto as Composite Schedule 3.3.
4
3.4 Change in Officers. As of the Closing Date, Xxxxxx X. Xxxxxxx, will resign
as Sentry's Chief Executive Officer, President and Secretary and Xxxxxx X.
Xxxxxxxxxxxx will resign as Sentry's Vice President and Treasurer, and the Board
of Directors of Sentry, shall as of the Closing Date appoint the following
officers: Xxxx Xxxxxx as Chief Executive Officer and President; and Xxxxx Xxxxx
as Executive Vice President and Secretary. Such persons shall serve at the
direction of the Board of Directors.
3.5 Books and Records. Acquiree shall have delivered to Sentry all of the books
and records of Acquiree in their possession.
3.6 Amendment to Articles of Incorporation. The Board of Directors of Sentry
shall authorize an amendment to its Articles of Incorporation to provide for
preferred stock and shall file an amendment to its Articles of Incorporation to
reflect such changes. A copy of the Articles of Amendment to the Articles of
Incorporation is attached as Schedule 3.6.
ARTICLE 4
CLOSING; CERTIFICATE OF MERGER
4.1 Closing. The Closing contemplated by Section 1.1 shall be held at the
offices of XxxxxxXxx.xxx Inc., 000 Xxxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxx 00000 at 6:00 P.M. on July 23, 1999, unless another place or date is
agreed upon in writing by the parties (the "Closing Date"). If the Closing fails
to occur by July 30, 1999, or by such later date to which the Closing may be
extended as provided herein above, this Agreement shall automatically terminate,
all parties shall pay their own expenses incurred in connection herewith, and no
party hereto shall have any further obligations hereunder; provided, however,
that no such termination shall constitute a waiver by any party or parties which
is/are not in default of any of its or their respective representations,
warranties or covenants if any other party or parties is in default of any of
its or their respective representations, warranties or covenants under this
Agreement. The Sentry Shares shall be issued according to Schedule 4.1 attached
hereto. At the Closing, as conditions thereto:
4.2 Deliveries by Sentry.
Sentry shall deliver, or cause to be delivered to Acquiree:
(a) As soon after the Closing as is feasibly possible and no later than
July 30, 1999, certificates for the shares of Sentry Stock being exchanged for
their respective accounts, in form and substance reasonably satisfactory to
Acquiree and its counsel;
5
(b) The certificates, resolutions, opinions and resignations specified in
Article 8 below;
(c) All of the books and records of Sentry.
4.3 Deliveries by Acquiree.
Acquiree shall deliver to Sentry:
(a) A stock certificate or certificates evidencing the ownership of each
and all shares of XxxxxxXxx.xxx Stock currently owned by them, respectively,
duly endorsed for transfer to Sentry; and
(b) The certificates, resolutions and opinions specified in Article 7
below.
4.4 Certificate of Merger. After the Closing provided for in Section 4.1 above,
the Certificate of Merger executed by the parties at Closing shall be submitted
for filing with the Secretary of State of Florida. The date of the latter of
such filing, or such other date as the parties may agree upon in writing
pursuant to applicable law, shall be the effective date of the Merger (the
"Effective Date").
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ACQUIREE
Acquiree represents and warrants to Sentry as follows:
5.1 Organization, Power, Standing and Qualification. Acquiree is a corporation
duly organized, validly existing, and in good standing under the laws in the
State of Missouri and has full corporate power and authority to carry on its
business as it is now being conducted and to own and operate the properties and
assets now owned and operated by it. Acquiree is duly qualified to do business
and is in good standing in each and every jurisdiction where the failure to
qualify or to be in good standing would have an adverse effect upon its
financial condition, the conduct of its business or the ownership of its assets.
5.2 Authority. Acquiree has the power and authority to execute, deliver and
perform this Agreement; and this Agreement is a valid and binding obligation,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally.
6
5.3 Validity of Contemplated Transactions; Interference. Other than as provided
in Schedule 5.3, the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (a)
contravene any provision of the Certificate of Incorporation or Bylaws of
Acquiree; (b) violate, be in conflict with, constitute a default under, cause
the acceleration of any payments pursuant to, or otherwise impair the good
standing, validity, or effectiveness of any material agreement, contract,
indenture, lease, or mortgage to which Acquiree is a party; (c) subject the
assets of Acquiree to any indenture, mortgage, contract, commitment, or
agreement, other than this Agreement; (d) reasonably interfere with any other
agreement to which Acquiree is a party; or (e) violate any material provision of
law, rule, regulation, order, permit, or license to which Acquiree is subject.
5.4 Capitalization of Acquiree. Acquiree's authorized capital stock consists of
3,000,000 shares of common stock, $0.01 par value per share, of which 2,906,800
shares are presently outstanding, validly issued, fully paid and non-assessable.
There are no outstanding options, warrants, conversion privileges,
subscriptions, calls, commitments or rights of any character relating to any
authorized but unissued capital stock of Acquiree.
5.5 Subsidiaries. Except as disclosed in Schedule 5.5 hereto, Acquiree owns no
shares of capital stock or other equity interest in any corporation,
partnership, joint venture or other business organization or enterprise.
5.6 Adoption of Merger. The requisite number of shares required for the approval
of this transaction by the Acquiree's shareholders have been cast in favor of
this transaction. A copy of the minutes from the shareholder's meeting is
attached as Schedule 5.6.
5.7 Title to Properties. Except as set forth in Schedule 5.7 hereto, Acquiree
has good, valid and marketable title to all of its assets, free and clear of all
mortgages, liens, pledges, security interests and other encumbrances, except (a)
mortgages, liens, pledges, security interests, and other encumbrances reflected
in the Interim Financial Statements or the notes thereto [as such term is
defined in Section 5.8 herein], (b) liens for current taxes not delinquent or
being contested in good faith by appropriate proceedings, (c) liens in
connection with workmen's compensation, unemployment insurance or other social
security obligations, (d) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of business, (e) mechanic's, workmen's, materialmen's or other
like liens arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith, and
(f) such imperfections of title, lien, easements and encumbrances, if any, as
are not substantial and do not materially detract from the value, or interfere
with the present use, of any of the properties subject thereto or affected
thereby, or otherwise impair the business, operations or prospects of Acquiree.
5.8 Financial Statements and Operating Information. Acquiree has delivered to
Sentry its compiled balance sheet as of March 31, 1999 (the "Interim Balance
Sheet") and its related statements of income and schedule of operating expenses
7
for the twelve month period then ended (collectively the "Interim Financial
Statements"). The financial statements are, to the best knowledge of Acquiree
consistent with the books and records of Acquiree and present fairly the
financial condition and results of operations as of the respective dates thereof
and the respective periods then ended, and there has been no material change in
such financial condition of Acquiree since March 31, 1999, other than as set
forth in Schedule 5.8.
5.9 Absence of Undisclosed Liabilities. Except as provided in Schedule 5.9,
Acquiree has no material liabilities or obligations except for those (i)
reflected on the Interim Balance Sheet; (ii) reflecting contractual liabilities
or obligations incurred in the ordinary course of business that are not required
by generally accepted accounting principles to be reflected in a balance sheet;
(iii) incurred in the ordinary course of business subsequent to the date of the
Interim Balance Sheet and not required to be disclosed pursuant to the terms of
this Agreement; and (iv) specifically disclosed in a schedule to this Agreement.
Except as otherwise provided in this Agreement, the term "liabilities or
obligations" as used in this Agreement shall include any direct or indirect
indebtedness, claim, loss, damage, deficiency (including deferred income tax and
other net tax deficiencies), cost, expense, obligation, guarantee, or
responsibility, whether accrued, absolute, or contingent, known or unknown,
fixed or unfixed, liquidated or unliquidated, secured or unsecured.
5.10 Certain Tax Matters. Acquiree has duly filed all federal, state, and local
tax returns and reports required to be filed by Acquiree for all periods ending
on or prior to June 30, 1999 and all taxes, including income, gross receipts,
and other taxes and any penalties with respect thereto, shown thereon to be due
and payable, have been paid, withheld, or reserved for or are reflected as a
liability in the Interim Balance Sheet. Except as provided in Schedule 5.10,
Acquiree has not entered into any agreements for the extension of time for the
assessment of any tax or tax delinquency, has received no outstanding or
unresolved notices from the Internal Revenue Service or any taxing body of any
proposed examination or of any proposed deficiency or assessment, and has
properly withheld all amounts required by law to be withheld for income taxes
and unemployment taxes, including without limitation social security and
unemployment compensation, relating to its employees, and remitted such withheld
amounts to the appropriate taxing authority as required by law. Acquiree has no
permanent establishment located in any tax jurisdiction other than in the United
States and is not liable for the payment of any taxes levied by any foreign tax
jurisdiction.
5.11 Litigation; Compliance with Laws. Except as set forth in Schedule 5.11
attached hereto, there is no suit, action, claim, arbitration, administrative or
legal or other proceeding, or governmental investigation pending or threatened
against or related to Acquiree. Except as set forth in Schedule 5.11 attached
hereto, there has been no failure to comply with, nor any default under, any
law, ordinance, requirement, regulation, or order applicable to Acquiree or its
business operations, nor any violation of or default with respect to any order,
writ, injunction, judgment, or decree of any court or federal, state or local
department, official, commission, authority, board, bureau, agency, or other
instrumentality issued or pending against Acquiree which in any such case would
8
reasonably be expected to have a material adverse effect on the financial
condition, business, results of operations, properties or assets of Acquiree.
Except as set forth in Schedule 5.11 attached hereto, Acquiree has obtained all
permits, licenses, zoning variances, approvals, and other authorization for
which the failure to so obtain would have a material adverse effect on
Acquiree's operations. All such material permits, licenses, approvals and
authorizations are currently valid and in full force and no revocation,
cancellation or withdrawal thereof has been effected or threatened. The
execution of this Agreement and the performance of the transactions contemplated
hereby have not and will not change in any respect, or result in the termination
of, any such material permits, licenses, certificates, zoning variances and
authorizations. There have been no illegal kickbacks, bribes or political
contributions made by Acquiree.
5.12 ERISA Matters. Schedule 5.12 attached hereto contains a complete and
accurate list of all Benefit Plans (as defined in Section 3 of the Employee
Retirement Income Security Act of 1974, as amended) and insurance policies
relating thereto sponsored by Acquiree or to which Acquiree is making
contributions as of the date hereof with respect to employees of Acquiree.
Acquiree has timely paid, or will timely pay as soon as practicable, all
employee benefits due and owing under the Benefit Plans sponsored by Acquiree in
accordance with the terms of each such Benefit Plan.
5.13 Insurance. All inventories, machinery, equipment, buildings, improvements,
and other tangible assets owned or leased by Acquiree are insured against fire
and casualty under the policies and in the amounts and types of coverage set
forth in Schedule 5.13 attached hereto (the "Policies") and between the date
hereof and the Effective Date, Acquiree shall use commercially reasonable
efforts to maintain all of the Policies, or policies which are substantially
equivalent to the Policies. The Policies are outstanding and duly in force and
the premiums thereon fully paid when and as the same are due and payable.
Schedule 5.13 is a true and correct schedule of all policies of fire, liability,
and other forms of insurance, excluding the Benefit Plans listed in Schedule
5.12 pursuant to which the assets of Acquiree are insured (whether or not held
by Acquiree) or with respect to which Acquiree pays all or part of the premium.
5.14 Proprietary Information. Acquiree owns, possesses or lawfully uses all
patents, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, trade dress, franchises, copyrights,
copyright applications and similar intangible rights used in its business and
trade secrets or other proprietary information similarly used (collectively, the
"Patents and Trademarks"), each item of which is listed in Schedule 5.14
attached hereto, and those Patents and Trademarks designated on Schedule 5.14
are owned exclusively by Acquiree, are valid and enforceable, and none infringe
(nor has any claim been made that there is any such infringement) the patents,
trademarks, service marks, trade names, copyrights or similar intangible rights
of others. After due inquiry, to the best of Acquiree's knowledge, there is no
claim against Acquiree that either is or may be infringing on or otherwise
acting adversely to the rights of any person under or in respect of any patent,
9
trademark, service xxxx, trade name, trade dress, copyright, license, franchise,
permission, or other intangible right. Acquiree is not obligated or under any
liability to make any payments by way of royalties, fees, or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, trade name,
trade dress, copyright, or other intangible asset with respect to the use
thereof, in connection with the conduct of its business or otherwise.
5.15 Labor Disputes. Except as set forth in Schedule 5.15, Acquiree is not a
party to any contract or other agreement with any labor union nor is Acquiree
experiencing or the subject of or, to Acquiree's knowledge, threatened by, any
union organization campaign or any strike, slowdown, picketing, work stoppage,
or other labor disturbance by any labor union or group of employees.
5.16 Contracts. Except as set forth in Schedule 5.16 or in another Schedule to
this Agreement, Acquiree is not a party to any material contract, agreement,
commitment, lease, indenture, fringe benefit or other plan. For purposes of this
Section 5.16 "material" shall mean any contract, agreement, commitment, lease,
indenture, fringe benefit or other plan entered into which is not in the
ordinary course of business or, if entered into in the ordinary course of
business, which involves a payment, commitment or entitlement in excess of
$40,000. True and correct copies of all of the contracts, agreements,
commitments, leases, indentures, fringe benefits or other plans, documents and
instruments identified in Schedule 5.16, have been supplied to Sentry.
5.17 Other Transactions. Acquiree has not, since inception, (a) operated its
business except in the ordinary course of business, (b) incurred any debts,
liabilities or obligations except in the ordinary course of business, (c)
discharged or satisfied any liens or encumbrances, or paid any liens or
encumbrances, or paid any material debts, liabilities or obligations, except in
the ordinary course of business, (d) mortgaged, pledged or subjected to lien or
other encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business and except those permitted by Section 5.7 hereof,
(e) sold or transferred any of its tangible assets having a book value of
$25,000 or more, or canceled any debts or claims, except, in each case, in the
ordinary course of business, or (f) suffered any extraordinary losses or waived
any rights of substantial value.
5.18 Product Liability Insurance Claims. Acquiree is identified as an insured
party under all policies of insurance relating to product liability listed on
Schedule 5.18 for and against any claim for product liability on an occurrence
basis for events occurring prior to the Closing Date.
5.19 Bank Accounts. Schedule 5.19 attached hereto lists the names and addresses
of every bank and other financial institution in which Acquiree maintains an
account (whether checking, savings or otherwise), lock box or safe deposit box,
and the account numbers and names of persons having signing authority or other
access thereto.
5.20 No Changes. Except as provided in Schedule 5.20, since March 31, 1999,
there has not been:
10
(a) Any change in the financial or other condition, assets, liabilities or
business of Acquiree, except changes described in Schedule 5.20 hereto, none of
which individually or in the aggregate has been materially adverse to Acquiree;
(b) Any damage, destruction or loss (whether or not covered by insurance)
or any condemnation by governmental authorities which has or would reasonably
have an adverse affect on the business or assets of Acquiree to a material
degree;
(c) Any strike, lockout, labor trouble or any similar event or condition of
any character adversely affecting the business of Acquiree;
(d) Except as disclosed in writing to Sentry from time to time, any
declaration, setting aside or payment of any dividend or other distribution in
respect of any of the shares of capital stock of Acquiree or any direct or
indirect redemption, purchase or other acquisition of the shares of capital
stock of Acquiree or any direct or indirect payment or incurring of management
fees or other transactions between Acquiree and any affiliate of Acquiree; or
(e) Any increase in the compensation payable or to become payable by
Acquiree to any of its officers, employees or agents, or any known payment or
arrangement made to or with any thereof, except in the ordinary course of
business as disclosed to Sentry.
5.21 Veracity of Statements. To the knowledge of Acquiree, no representation or
warranty by Acquiree contained in this Agreement and no statement contained in
any certificate, schedule or other instrument furnished to Sentry pursuant
hereto or in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
to make it not misleading.
5.22 Copies of Articles and Bylaws and Stock Records. A copy of Acquiree's
Certificate of Incorporation (certified by the Secretary of State of Missouri),
Bylaws and stock records (certified by the Secretary of Acquiree) has been
delivered to Sentry and each is correct and in effect as at the date of this
Agreement. Such books and records have been regularly and properly kept and are
complete, accurate and legally sufficient under applicable law.
5.23 Condition of Tangible Assets. All material tangible portions of Acquiree's
assets are in a condition sufficient for Acquiree's operations.
5.24 Directors and Officers. Acquiree has delivered to Sentry a true and
complete list as of the date of this Agreement showing the names of Acquiree's
directors and officers, each of whom has been duly elected and/or appointed.
5.25 Accounts Receivable. The accounts receivable of Acquiree reflected on the
Interim Balance Sheet and those acquired and accrued thereafter through the date
of this Agreement are valid and bona fide accounts receivable, created in the
11
ordinary course of business, and, except as provided in Schedule 5.25, the
allowance for doubtful accounts with respect thereto has been prepared in
accordance with generally accepted accounting principles. No part of such
accounts receivable is contingent upon performance by Acquiree of any
obligation, other than any warranty obligation, and no agreements for deductions
or discounts have been made with respect to any part of such receivables.
5.26 Inventories. All material portions of the inventories of Acquiree are fit
for their intended use and the net finished goods portion thereof is saleable in
the ordinary course of business, and the provision for slow and obsolete
inventories has been made in accordance with generally accepted accounting
principles.
5.27 Environmental Matters.
(a) Schedule 5.27 attached hereto sets forth:
(1) all facts regarding hazardous substances, hazardous wastes and
constituents used, handled, stored or disposed of on the Premises (as
herein defined) by Acquiree, and to the knowledge of Acquiree of all
predecessors in interest and all prior occupants of the Premises,
where such use, handling, storage or disposal may reasonably be
expected to cause an adverse effect on the business, assets, or the
financial condition of Acquiree;
(2) all reports, studies or documents regarding releases of hazardous
substances and hazardous wastes and constituents in, on, under or
above the Premises filed with any governmental agency by Acquiree, and
to the knowledge of Acquiree by all predecessors in interest and all
prior occupants of the Premises; and
(3) all studies or reports authorized by Acquiree, and to the
knowledge of Acquiree by all predecessors in interest and all prior
occupants of the Premises regarding environmental conditions of the
Premises.
(b) Except as set forth in Schedule 5.27 attached hereto, Acquiree is not
aware of, nor has received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
reasonably be expected to interfere with or adversely affect its business, its
assets or the financial condition of Acquiree or prevent compliance or continued
compliance with Environmental Laws (as herein defined), or may reasonably be
expected to give rise to any liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation, based
on or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, of any hazardous substance or
hazardous wastes or constituents by Acquiree, all predecessors in interest and
all prior occupants of the Premises.
12
(c) Acquiree has used due diligence to discover the existence of the
information to be disclosed as itemized in Paragraphs (a) and (b).
(d)
(1) Sentry reserves the right prior to closing, but is not hereby
obligated, to undertake an investigation of the Premises and Acquiree
shall cooperate in providing reasonable access to the Premises and any
documents deemed by Sentry necessary for such investigation; provided,
however, that such investigation shall not interfere with or cause any
damage to the business or the assets of Acquiree. All fees, costs and
expenses concerning such investigation shall be paid by Sentry.
(2) If Sentry discovers that any of the representations or warranties
of Acquiree contained in Section 5.28(a) of this Agreement are
inaccurate in any material respect and that, except as previously
disclosed by Acquiree to Sentry, hazardous wastes, hazardous
substances or constituents, are present in, on, under or above the
Premises, the presence of which has or may reasonably be expected to
have a material adverse effect on the business, the assets or the
financial condition of Acquiree, upon notice to Acquiree to that
effect Sentry may terminate this Agreement and shall have no further
obligations under this Agreement.
(e) For purposes of Section 5.27 of this Agreement:
(1) The term "hazardous substance" has the definition set forth in 42
USC ss.9601(1);
(2) The term "hazardous wastes and/or constituents" has the definition
set forth in 42 USC ss.6903(5) and 40 CFR part 261;
(3) The term "Environmental Laws" means the collective federal, state,
and local statutes, rules, regulations, ordinances and laws relating
to environmental conditions or hazardous substances as currently in
effect, including but not limited to the Solid Waste Disposal Act, 42
USC ss.6901-6991i; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 USC ss.
9601-9675, as amended by the Superfund Amendments and Reauthorization
Act of 1986 ("XXXX"); the Hazardous Materials Transportation Act, 49
USC ss.6901 et seq.; the Federal Water Pollution Control Act, 33 USC
ss.1251 et seq.; the Clean Air Act, 42 USC ss.7401 et seq.; the Toxic
Substance Control Act, 15 USC ss.2601-2629; the Safe Drinking Water
Act, 42 USC ss.300f-300j, all as amended; all similar state statutes
and local ordinances; and the regulations, orders, judicial and
administrative decisions presently in effect thereunder; and
13
The term "Premises" shall mean all of the leasehold interests held by or
property owned by Acquiree, together with any improvements thereon located at or
any other property where the business is or had been operated (the "Premises").
5.28 Acquisition of Sentry Shares for Investment. At a duly called and held
special meeting of shareholders of Acquiree the shareholders of Acquiree agreed
they were (1) acquiring the Sentry Shares for investment purposes, for their own
account and not with a view to the resale or distribution thereof in violation
of any state or federal securities laws (2) would not sell, transfer, pledge or
hypothecate any of the Sentry Shares in the absence of registration under or
pursuant to an applicable exception from federal and all applicable state
securities laws and (3) agreed that the certificates representing the Sentry
Shares shall bear a restrictive legend, in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 AS
AMENDED (THE "ACT"), ARE RESTRICTED SECURITIES, AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY, IS NOT REQUIRED TO BE REGISTERED UNDER THE
ACT."
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SENTRY
Sentry represents and warrants to Acquiree as follows:
6.1 Organization, Power, Standing and Qualification. Sentry is a corporation
duly organized, validly existing and in good standing under the laws in the
State of Florida and has full corporate power and authority to carry on its
business as it is now being conducted and to own and operate the properties and
assets now owned and operated by it. Sentry is duly qualified to do business and
is in good standing in each and every jurisdiction where the failure to qualify
or to be in good standing would have an adverse effect upon its financial
condition, the conduct of its business or the ownership of its assets.
6.2 Authority. Sentry has the power and authority to execute, deliver and
perform this Agreement; and this Agreement is a valid and binding obligation of
Sentry, enforceable in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally.
14
6.3 Validity of Contemplated Transactions; Interference. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (a) contravene any provision of the
Certificate of Incorporation or Bylaws of Sentry; (b) violate, be in conflict
with, constitute a default under, cause the acceleration of any payments
pursuant to, or otherwise impair the good standing, validity, or effectiveness
of any material agreement, contract, indenture, lease, or mortgage to which
Sentry is a party; (c) subject the assets of Sentry to any indenture, mortgage,
contract, commitment, or agreement, other than this Agreement; (d) reasonably
interfere with any other agreement to which Sentry is a party; or (e) violate
any material provision of law, rule, regulation, order, permit, or license to
which Sentry is subject.
6.4 Capitalization of Sentry. Sentry's authorized capital stock consists of
50,000,000 shares of common stock, no par value, 2,491,000 of which shares are
presently outstanding, validly issued, fully paid and non-assessable. The Sentry
Shares to be issued pursuant to this Agreement, when issued and delivered as
provided herein will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive or similar rights. There currently are no
rights, agreements, commitments, option or warrants of any character obligating
Sentry, contingently or otherwise, to issue any additional shares of Sentry
stock or to register any shares of its capital stock under any applicable
federal or state securities laws.
6.5 Subsidiaries. Except as disclosed in Schedule 6.5 hereto, Sentry owns no
shares of capital stock or other equity interest in any corporation,
partnership, joint venture or other business organization or enterprise.
6.6 Financial Statements. Sentry has delivered to Acquiree its balance sheets
for each of the last two full fiscal years ending before the date of this
Agreement as well as its statement of income and loss for the same periods. In
addition, Sentry has delivered to Acquiree its audited financial statements for
the twelve-month period ending December 31, 1998 and unaudited balance sheet and
income statement for the six month period ending June 30, 1999 (the "Sentry
Interim Balance Sheet") which has been prepared in accordance with the
applicable books and records of Sentry and presents fairly the financial
condition of Sentry as of June 30, 1999, and represents there has been no
material change in such financial condition of Sentry since June 30, 1999.
6.7 Absence of Undisclosed Liabilities. Sentry has no liabilities or obligations
except for those (i) reflected on the Sentry Interim Balance Sheet; (ii)
reflecting contractual liabilities or obligations incurred in the ordinary
course of business that are not required by generally accepted accounting
principles to be reflected in a balance sheet; (iii) incurred in the ordinary
course of business subsequent to the date of the Sentry Interim Balance Sheet
and not required to be disclosed pursuant to the terms of this Agreement; and
(iv) specifically disclosed in Schedule 6.7 attached hereto. Except as otherwise
provided in this Agreement, the term "liabilities or obligations" as used in
15
this Agreement shall include any direct or indirect indebtedness, claim, loss,
damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility, whether
accrued, absolute, or contingent, known or unknown, fixed or unfixed, liquidated
or unliquidated, secured or unsecured.
6.8 Certain Tax Matters. Sentry has duly filed all federal, state, and local tax
returns and reports required to be filed by Sentry for all periods ending on or
prior to June 30, 1999 and all taxes, including income, gross receipts, and
other taxes and any penalties with respect thereto, shown thereon to be due and
payable, have been paid, withheld, or reserved for or are reflected as a
liability in the Sentry Interim Balance Sheet. The returns and reports are, to
the best knowledge of Sentry, correct and complete. Sentry has not entered into
any agreements for the extension of time for the assessment of any tax or tax
delinquency, has received no outstanding or unresolved notices from the Internal
Revenue Service or any taxing body of any proposed examination or of any
proposed deficiency or assessment, and has properly withheld all amounts
required by law to be withheld for income taxes and unemployment taxes,
including without limitation social security and unemployment compensation,
relating to its employees, and remitted such withheld amounts to the appropriate
taxing authority as required by law. Sentry does not have a permanent
establishment located in any tax jurisdiction other than in the United States
and is not liable for the payment of any taxes levied by any foreign tax
jurisdiction.
6.9 Litigation; Compliance with Laws. There is no suit, action, claim,
arbitration, administrative or legal or other proceeding, or governmental
investigation pending or, to the knowledge of Sentry threatened against or
related to Sentry. There has been no failure to comply with, nor any default
under, any law, ordinance, requirement, regulation, or order applicable to
Sentry or its business operations, nor any violation of or default with respect
to any order, writ, injunction, judgment, or decree of any court or federal,
state or local department, official, commission, authority, board, bureau,
agency, or other instrumentality issued or pending against Sentry which might
have a material adverse effect on the financial condition, its business, results
of operations, properties or assets of Sentry. There have been no illegal
kickbacks, bribes or political contributions made by Sentry.
6.10 No Changes. Since June 30, 1999, there has not been:
(a) Any change in the financial or other condition, assets, liabilities or
business of Sentry, except changes described in Schedule 6.10 hereto, none of
which individually or in the aggregate has been materially adverse to Sentry;
(b) Any damage, destruction or loss (whether or not covered by insurance)
or any condemnation by governmental authorities which has or may adversely
affect the business or assets of Sentry to a material degree;
(c) Any strike, lockout, labor trouble or any similar event or condition of
any character adversely affecting the business of Sentry;
16
(d) Except as disclosed in writing to Acquiree from time to time, any
declaration, setting aside or payment of any dividend or other distribution in
respect of any of Sentry's shares or any direct or indirect redemption, purchase
or other acquisition of Sentry's shares or any direct or indirect payment or
incurring of management fees or other transactions between the shareholders of
Sentry; or
(e) Any increase in the compensation payable or to become payable by Sentry
to any of its officers, employees or agents, or any known payment or arrangement
made to or with any thereof, except in the ordinary course of business as
disclosed to Acquiree.
6.11 Veracity of Statements. No representation or warranty by Sentry contained
in this Agreement and no statement contained in any certificate, schedule or
other instrument furnished to Acquiree pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary to make it not misleading.
6.12 Copies of Articles of Incorporation, Bylaws and Stock Records. A copy of
Sentry's Certificate of Incorporation, Bylaws and stock records (certified by
the Secretary of Sentry) has been delivered to Acquiree and each is correct and
in effect as at the date of this Agreement. Such books and records have been
regularly and properly kept and are complete, accurate and legally sufficient
under applicable law.
6.13 Directors and Officers. Schedule 6.13 attached hereto is a true and
complete list as of the date of this Agreement showing the names of Sentry's
Directors and officers, each of whom has been duly elected.
6.14 ERISA Matters. Sentry has no Benefit Plans (as defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended).
6.15 OTC - Bulletin Board. Sentry has filed a Form 15c-211 with the National
Association of Securities Dealers ("NASD") and has received clearance to be
listed on the OTC-Bulletin Board under the symbol "SNTY". The filing with the
NASD was true and complete and contained no misleading or false information. On
the Effective Date, the common stock of Sentry will be listed on the
OTC-Bulletin Board with at last one market maker publishing a quotation for the
Sentry Common Stock. Sentry has also filed a Form 10-SB12G/A with the Securities
and Exchange Commission which has reached the "no further comment" stage which
makes Sentry a fully reporting company, subject to all the rules and regulations
inherent therewith.
17
ARTICLE 7
CONDITIONS TO SENTRY'S OBLIGATIONS
The exchange of the Acquiree's Shares by Sentry on the Closing Date is
conditioned upon satisfaction, on or prior to such date, of the following
conditions:
7.1 Good Standing and Other Certificates. Acquiree and each of its subsidiaries
shall have delivered to Sentry:
(a) copies of certificates of incorporation, all amendments thereto, in
each case certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation;
(b) a certificate from the Secretary of State or other appropriate official
of their respective jurisdictions of incorporation to the effect that Acquiree
and each of its subsidiaries are in good standing or subsisting in such
jurisdiction and listing all charter documents including all amendments thereto,
on file;
(c) a copy of the By-Laws each of Acquiree and each of its subsidiaries,
certified by the respective Secretary of each entity as being true and correct
and in effect on the Closing Date.
(d) a resolution of Acquiree's Board of Directors certified by their
respective Secretary approving the transactions contemplated hereby and
authorizing the President and Secretary of each entity to execute this Agreement
and all documents necessary to consummate the exchange of the Shares.
7.2 Officer Certificate. Acquiree shall deliver a certificate of its President,
see Schedule 7.2, stating the following:
(a) Certain Agreements. There are no management or consulting agreements
with any third parties to provide these services to Acquiree or any of its
subsidiaries.
(b) No Material Adverse Change. Prior to the Closing Date, there shall be
no material adverse change in the assets or liabilities, the business or
condition, financial or otherwise, the results of operations, or prospects of
Acquiree or any of its subsidiaries, whether as a result of any legislative or
regulatory change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise.
(c) Truth of Representations and Warranties. The representations and
warranties of Acquiree contained in this Agreement or in any Schedule attached
hereto shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
18
(d) Performance of Agreements. All of the agreements of each of Acquiree or
any of its subsidiaries to be performed on or before the Closing Date pursuant
to the terms hereof shall have been duly performed.
(e) No Litigation Threatened. No action or proceedings shall have been
instituted or threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby.
7.3 Acquiree's Letter. Sentry shall have received a letter, dated the Closing
Date, from Acquiree, in form and substance satisfactory to it, to the effect set
forth in Schedule 7.3 attached hereto.
7.4 Governmental Approvals. All governmental and other consents and approvals,
if any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received.
7.5 Proceedings. All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in form and substance to Sentry and their counsel, and Sentry shall
have received copies of all such documents and other evidences as they or their
counsel may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
ARTICLE 8
CONDITIONS TO ACQUIREE'S OBLIGATIONS
The obligations Acquiree on the Closing Date are conditioned upon satisfaction,
on or prior to such date, of the following conditions:
8.1 Good Standing Certificates. Sentry shall have delivered to Acquiree:
(a) copies of the Certificate of Incorporation of Sentry, including all
amendments thereto, certified by the Secretary of State of the State of Florida;
and
(b) certificates from the Secretary of State of the State of Florida to the
effect that Sentry is in good standing in such State and listing all charter
documents, including all amendments thereto, of Sentry on file.
19
8.2 Truth of Representations and Warranties. The representations and warranties
of Sentry contained in this Agreement shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date, and Sentry shall have delivered to
Acquiree a certificate, dated the Closing Date, to such effect.
8.3 Governmental Approvals. All governmental consents and approvals, if any,
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been received.
8.4 Performance of Agreements. All of the agreements of Sentry to be performed
on or before the Closing Date pursuant to the terms hereof shall have been duly
performed, and Sentry shall have delivered to Acquiree a certificate, dated the
Closing Date, to such effect.
8.5 Proceedings. All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to Acquiree and its counsel, and
Acquiree shall have received copies of all such documents and other evidences as
it or its counsel may reasonably request in order to establish the consummation
of such transactions and the taking of all proceedings in connection therewith.
ARTICLE 9
ACTIVITIES PRIOR TO THE CLOSING DATE BY ACQUIREE
9.1 Operation of Business. Acquiree hereby agrees that from and after the date
hereof to the Effective Date, except as otherwise contemplated by this Agreement
or with Sentry's express written consent, Acquiree shall conduct its business
solely in the ordinary course and Acquiree shall:
(a) Not amend Acquiree's Certificate of Incorporation or Bylaws except as
may be necessary to carry out this Agreement or as required by law;
(b) Not change Acquiree's corporate name or consent to the use thereof by
any other corporation;
(c) Not pay or agree to pay to any employee, officer, or Director of
Acquiree, without the consent of Sentry, compensation that is in excess of the
current compensation level of such employee, officer, or Director except in the
ordinary course of business as disclosed from time to time to Sentry;
(d) Not make any changes in Acquiree's management without the consent of
Sentry;
20
(e) Not merge or consolidate Acquiree with any other corporation or allow
it to acquire or agree to acquire or be acquired by any corporation,
association, partnership, joint venture, or other entity;
(f) Not sell, transfer, or otherwise dispose of any material assets without
the prior written consent of Sentry, except in the ordinary course of business;
(g) Not create, incur, assume, or guarantee any indebtedness for money
borrowed except in the ordinary course of business; create or suffer to exist
any mortgage, lien, or other encumbrance on any of its properties or assets,
real or personal, except those in existence on the date hereof or permitted by
Section 5.7; or increase the amount of any indebtedness outstanding under any
loan agreement, mortgage, or other borrowing arrangement in existence on the
date hereof;
(h) Cause Acquiree to pay when due in accordance with historical practice
all accounts payable and trade obligations of Acquiree;
(i) Maintain all material tangible portions of the assets of Acquiree in
good operating repair, order, and condition, reasonable wear and tear excepted,
and notify Sentry immediately upon any loss of, damage to, or destruction of any
material tangible portion of the assets;
(j) Use their best efforts to maintain in full force and effect insurance
coverage of the types and in the amounts set forth in Schedule 5.13 attached
hereto and apply the proceeds received under any insurance policy or as a result
of any loss or destruction of or damage to any assets to the repair or
replacement of such assets;
(k) Use its best efforts to maintain in full force and effect all material
agreements, contracts, leases, licenses, permits, authorizations, and approvals
necessary for or related to the operation of the business of Acquiree in all
respects and in all places as the business is now conducted;
(l) Use its best efforts to preserve Acquiree's business organization
intact, to keep available the services of its present employees and to preserve
the good will of its customers and others having business relations with it;
(m) Timely pay in accordance with the terms of each Benefit Plan all bona
fide claims for Benefits thereunder; and
(n) Promptly advise Sentry in writing of the commencement of, and of any
known threat to commence any, suit, claim, action, arbitration, legal or
administrative proceeding, governmental investigation, or tax audit against
Acquiree.
21
9.2 Access to Information. Acquiree shall provide Sentry and its accountants,
counsel and other representatives, during normal business hours and upon
reasonable notice, access to the properties of Acquiree, including books,
records, equipment, real estate, contracts, and other assets, and upon
reasonable notice shall provide an opportunity to discuss the business and
assets with its officers, employees, and independent accountants, customers,
suppliers and sales representatives and furnish to Sentry and its
representatives copies of such documents, records, and information with respect
to the affairs of Acquiree as Sentry or its representatives may reasonably
request and Sentry shall afford such information confidential treatment.
9.3 Labor Disputes. Between the date hereof and the Effective Date, Acquiree
shall promptly advise Sentry of any actual or threatened union organization
campaign, strike, slowdown, work stoppage, or other labor disturbance ("Labor
Dispute") by any labor union or group of employees against Acquiree, and
Acquiree shall use its best efforts to resolve any and all Labor Disputes to the
mutual satisfaction of Sentry and Acquiree.
9.4 Best Efforts. Subject to the other provisions of this Agreement, Acquiree
shall use its best efforts to cause the conditions listed in Article 9.1 hereof
to be satisfied on the Effective Date.
ARTICLE 10
ACTIVITIES PRIOR TO CLOSING DATE BY SENTRY
10.1 Operation of Business. Sentry hereby agrees that from and after the date
hereof to the Effective Date, except as otherwise contemplated by this Agreement
or with Acquiree's express written consent, Sentry shall conduct its business
solely in the ordinary course and Sentry shall:
(a) Not amend Sentry's Certificate of Incorporation or Bylaws except as may
be necessary to carry out this Agreement or as required by law;
(b) Not merge or consolidate Sentry, or any subsidiary, with another
entity, acquire another entity or agree to be acquired by any other entity;
(c) Not sell, transfer, or otherwise dispose of any material assets without
the prior written consent of Acquiree, except in the ordinary course of
business; and
(d) Maintain in full force and effect all material agreements, contracts,
leases, licenses, permits, authorizations, and approvals necessary for or
related to the operation of the business of Sentry in all respects and in all
places as the business is now conducted.
10.2 Best Efforts. Subject to the other conditions of this Agreement, Sentry
shall use its best efforts to cause the conditions listed in Article 11.2 hereof
to be satisfied on the Closing Date.
22
ARTICLE 11
CONDITIONS PRECEDENT TO THE CLOSING
11.1 Obligation of Sentry to Close. The obligation of Sentry to consummate the
merger on the Effective Date shall be subject to the satisfaction or the waiver
by Sentry of the following conditions on or prior to the Closing Date:
(a) Representations and Warranties; Compliance with Agreement. The
representations and warranties of Acquiree set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date, and
Acquiree shall have performed all covenants and agreements to be performed by it
under this Agreement on or prior to the Effective Date, and Acquiree shall have
delivered to Sentry certificates to such effect dated the Effective Date signed
by Acquiree, which certificates shall be in the form attached hereto as Schedule
11.1(a);
(b) Litigation Affecting Closing. On the Effective Date, no proceeding
shall be pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might eventuate in any such suit,
action or proceeding shall be pending or threatened;
(c) Required Consents. The holders of any single debt obligation of
Acquiree exceeding $250,000, the lessors of any material real or property or
assets leased by Acquiree, the parties (other than Acquiree) to any other
material contract, commitment or agreement to which Acquiree is a party, any
governmental agency or body or any other individual or entity which owns or has
authority to grant any franchise, license, permit, easement, right or other
authorization necessary for the business of Acquiree and any governmental body
or regulatory agency having jurisdiction over Acquiree, to the extent that their
consent or approval is required under the pertinent debt, lease, contract,
commitment or agreement or other document or instrument or under applicable
laws, rules or regulations for the consummation of the merger contemplated
hereby in the manner herein provided, shall have granted such consent or
approval;
(d) No Material Damage to Business. The assets shall not have been and
shall not be threatened to be materially adversely affected in any way as a
result of fire, explosion, earthquake, disaster, accident, labor dispute, any
action by any governmental authority, flood, drought, embargo, riot, civil
disturbance, uprising, activity of armed forces or act of God or public enemy.
11.2 Obligation of Acquiree to Close. The obligation of Acquiree to consummate
the merger on the Effective Date shall be subject to the satisfaction of the
following conditions on or prior to the Effective Date:
23
(a) Representations and Warranties; Compliance with Agreement. The
representations and warranties of Sentry set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date, and
Sentry shall have performed all covenants and agreements to be performed by it
under this Agreement on or prior to the Effective Date, and Sentry shall have
delivered to Acquiree certificates to such effect dated the Effective Date and
signed by Sentry, which certificates shall be in the form attached hereto as
Schedule 11.2(a); or
(b) Litigation Affecting Closing. On the Effective Date, no proceeding
shall be pending or threatened before any court or governmental agency in which
it is sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transaction
contemplated hereby, and no investigation that might eventuate in any such suit,
action or proceeding shall be pending or threatened.
(c) No Material Damage to Business. The assets of Sentry shall not have
been and shall not be threatened to be materially adversely affected in any way
as a result of fire, explosion, earthquake, disaster, accident, labor dispute,
any action by any governmental authority, flood, drought, embargo, riot, civil
disturbance, uprising, activity of armed forces or act of God or public enemy.
ARTICLE 12
INDEMNIFICATION
12.1 By Acquiree. From and after the Effective Date, Acquiree shall indemnify
and hold harmless Sentry from and against (i) any and all damages, losses,
obligations, deficiencies, liabilities, claims, encumbrances, penalties, costs,
and expenses, including reasonable attorneys' fees (together, a "Loss"), and
which Sentry may suffer or incur, resulting from, related to, or arising out of
any misrepresentation, breach of warranty, or nonfulfillment of any of the
covenants or agreements of Acquiree in this Agreement or from any
misrepresentation in or omission from any schedule to this Agreement, and (ii)
any and all actions, suits, investigations, proceedings, demands, assessments,
audits, judgments and claims (including employment-related claims) arising out
of any of the foregoing; provided, however, that before Sentry may assert a
claim for indemnity under this Article, Sentry must give or cause to be given
written notice of such claim to Acquiree as provided in Section 12.4.
12.2 By Sentry. From and after the Effective Date, Sentry shall indemnify and
hold harmless Acquiree from and against (i) any and all Loss which Acquiree may
suffer or incur, resulting from, related to, or arising out of any
misrepresentation, breach of warranty, or nonfulfillment of any of the covenants
or agreements of Sentry in this Agreement or from any misrepresentation in or
omission from any certificate or document furnished or to be furnished to
Acquiree hereunder and (ii) any and all actions, suits, investigations,
proceedings, demands, assessments, audits, judgments, and claims (including
employment-related claims) arising out of any of the foregoing; provided,
however, that before Acquiree may assert a claim for indemnity under this
Section, Acquiree must give or cause to be given written notice of such claim to
Sentry as provided in Section 12.4.
24
12.3 Limitation of Indemnity. Notwithstanding any provisions herein to the
contrary:
(a) Neither party shall be liable to the other party for any
misrepresentation, the breach of any warranty or the failure to fulfill any
covenant or agreement herein if such other party shall have had "actual
knowledge" of the facts upon which such misrepresentation, breach or failure to
fulfill is based at or prior to the Effective Date. For purposes of this Section
12.3(a) "actual knowledge" on the part of Sentry or Acquiree, respectively,
shall mean the actual knowledge of one or more of its executive employees; and
(b) The liability of either party computed otherwise in accordance with
this Article 12 shall be limited to the after-tax consequence to the indemnified
party (or the affiliated group of which such indemnified party is a member) of
any such damage, loss, liability, deficiency cost or expense suffered or
incurred by such indemnified party and shall be computed after giving effect to
the recovery, if any, by the indemnified party of any applicable insurance
proceeds, the pursuit of which shall be mandatory by the indemnified party.
12.4 Notice. Promptly after acquiring knowledge of any loss or action, suit,
investigation, proceeding, demand, assessment, audit, judgment or claim against
which Acquiree has indemnified Sentry or against which Sentry has indemnified
Acquiree, either Acquiree or Sentry, as the case may be, shall give to the other
party written notice thereof. Each indemnifying party shall, at its own expense,
promptly defend, contest or otherwise protect against any Loss or action, suit,
investigation, proceeding, demand, assessment, audit, judgment, or claim against
which it or he has indemnified an indemnified party, and each indemnified party
shall receive from the other party all necessary and reasonable cooperation in
said defense including, but not limited to, the services of employees of the
other party who are familiar with the transactions out of which any such Loss or
action, suit, investigation, proceeding, demand, assessment, audit, judgment, or
claim may have arisen. The indemnifying party shall have the right to control
the defense of any such proceeding unless relieved of its or his liability
hereunder with respect to such defense by the indemnified party. The
indemnifying party shall have the right, at its option, and, unless so relieved,
to compromise or defend, at its own expense by its own counsel, any such matter
involving the asserted liability of the indemnified party. In the event that the
indemnifying party shall undertake to compromise or defend any such asserted
liability, it shall promptly notify the indemnified party of its intention to do
so. In the event that an indemnifying party, after written notice from an
indemnified party, fails to take timely action to defend the same, the
indemnified party shall have the right to defend the same by counsel of its own
choosing, but at the cost and expense of the indemnifying party.
25
12.5 Money Damages. If the Losses indemnified against pursuant to the provisions
of Articles 12.1 and 12.2 hereof can be compensated by the payment of money to
the other party, the indemnifying party shall, within 21 days after receipt of a
written notice of a claim pursuant to Article 12.4 deliver to the other party
either: (i) the amount of such claim by check or by wire transfer to the bank
account of that party's choosing, or (ii) a written notice stating that it
objects to the validity of such claim and setting forth in reasonable detail the
grounds on which it is contesting the validity of the claim.
ARTICLE 13
SURVIVAL OF REPRESENTATIONS,
WARRANTIES, GUARANTEES AND COVENANTS
13.1 Date Certain for Survival. All representations and warranties made by
Sentry or Acquiree in this Agreement or pursuant hereto shall survive the
closing hereunder for a period ending on the first anniversary of the Effective
Date.
ARTICLE 14
CONDUCT OF ACQUIREE AND SENTRY AFTER THE MERGER
14.1 Additional Actions and Cooperation. After the Effective Date, at the
request of either party and at the requesting party's expense, but without
additional consideration, the other party shall execute and deliver from time to
time such further instruments of assignment, conveyance and transfer, shall
cooperate in the conduct of litigation and the processing and collection of
insurance claims, and shall take such other actions as may reasonably be
required to accomplish the orderly transfer to Sentry of the assets and business
of Acquiree as contemplated by this Agreement.
14.2 Audit Access. Sentry will preserve the books, records, reports, documents
and lists obtained by it pursuant to this Agreement for a period of at least
seven years from the Effective Date, will not thereafter destroy or otherwise
dispose of such records without giving Acquiree notice and the opportunity to
take possession thereof, and, while in possession of such records, will permit
representatives of Acquiree to have access at reasonable times to such books,
records, reports, documents and files, to make such copies therefrom as such
representatives reasonably request. Sentry shall, subject to applicable law and
regulation, and the terms of any confidentiality agreement, hold in confidence
any nonpublic information concerning Acquiree obtained hereunder.
14.3 Insurance. On and after the Effective Date, Sentry shall cause Acquiree to
maintain liability insurance coverage customary for the business engaged in by
Acquiree and Sentry shall use its best efforts for a period of three years from
26
the Effective Date to cause Acquiree to be named as an additional insured
thereon. On the Effective Date, Sentry shall inform Acquiree as to the name of
the insurer and terms of the policy providing such coverage, including the
amount of any deductible, and shall inform Acquiree promptly upon any change in
the insurer or the terms of such policy.
ARTICLE 15
BROKERAGE; EXPENSES
15.1 Brokerage. None of the parties have employed or will employ any broker,
agent, finder, or consultant (collectively, "Broker") or has incurred or will
incur any liability for any brokerage fees, commissions, finders' fees, or other
fees, in connection with the negotiation or consummation of the transactions
contemplated by this Agreement, except as herein set forth on Schedule 15.1
hereto. Acquiree is responsible for and hereby indemnify and holds Sentry
harmless against and in respect of any claim for brokerage fees, commissions, or
other finder fees or commissions of any such Broker employed by Acquiree and any
additional such claims incurred by Acquiree relative to this Agreement and the
transactions contemplated hereby and any attorney fees incurred by any of these
parties in relation to any such claim by a Broker. Similarly, Sentry is
responsible for and hereby indemnify and holds Acquiree harmless against and in
respect of any claim for brokerage fees, commissions, or other finder fees or
commissions of any such Broker employed by Sentry and any additional such claims
incurred by Sentry relative to this Agreement and the transactions contemplated
hereby and any attorney fees incurred by Sentry in relation to any such claim by
a Broker. Except as otherwise expressly provided in this Agreement, Acquiree
shall bear the expenses of Acquiree in connection with this Agreement or the
transactions contemplated hereby, including without limitation, any brokerage
commission. Sentry shall bear its respective expenses incurred in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE 16
TERMINATION
16.1 Events of Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Effective Date only as follows:
(a) By mutual consent of Acquiree and Sentry within three (3) days of the
date of this Agreement;
(b) Provided that Sentry is not in material default hereunder, by Sentry
upon three (3) days' written notice to Acquiree, if all of the conditions
precedent set forth herein have not been met; or
27
(c) Provided that Acquiree are not in material default hereunder, by
Acquiree upon three (3) days' written notice to Sentry if all of the conditions
precedent set forth herein have not been met.
ARTICLE 17
CORPORATE NAME
17.1 Corporate Name. Sentry shall have the exclusive right to use the corporate
name "XxxxxxXxx.xxx Inc." after the Effective Date and Acquiree shall retain no
rights therein.
ARTICLE 18
COVENANTS OF OFFICERS AND DIRECTORS OF ACQUIREE
18.1 Non-Competition, Non-Interference. In consideration of the exchange of the
Sentry Stock by Acquiree, Xxxx Xxxxxx and Xxxxx Xxxxx, both being an officer
and/or Director of Acquiree (the "Acquiree Parties") will not, whether for their
own account or for the account of any other person, directly or indirectly:
(a) engage or invest in, own, manage, operate, control or participate in
the ownership, management, operation or control of, be employed by, associated
or in any manner connected with or render services or advise to, any business,
the products or services of which compete, in whole or in part, with the
products or activities of Acquiree within the geographical territories in which
Acquiree or its subsidiaries at the time up to the Closing Date has conducted
its business.
(b) solicit any potential customer or client to which Acquiree or its
subsidiaries has made a presentation, or with which Acquiree or its subsidiaries
has been in contact, not to hire Acquiree or its subsidiaries, or to hire
another company whether or not such Acquiree Party had personal contact with
such person during or by reason of his or its association with Acquiree or its
subsidiaries; or
(c) solicit the business of any company which is a customer or client of
Acquiree or its subsidiaries or was its customer or client within two years
prior to the date of this Agreement;
(d) persuade or attempt to persuade any employee of Acquiree or its
subsidiaries, or any individual who was its employee during the two years prior
to the date of this Agreement, to leave Acquiree or its subsidiaries' employ, or
to become employed by or otherwise be engaged as an independent consultant or
otherwise for, any person other than Acquiree or its subsidiaries; or
28
(e) disclosure or use any confidential information of Acquiree or any of
its clients and customers. For purposes of this section "confidential
information" with respect to any entity shall mean trade secrets concerning such
entity's operations, future plans, projected and historical sales, marketing,
costs, production growth and distribution, any customer lists, customer
information or other information relating to the products or services, whether
patentable or not, concerning the business of such entity as conducted prior to
the Closing Date.
(f) this section shall be construed in accordance with each individuals'
respective employment agreement. In case of a conflict, the individuals'
employment agreement will be controlling.
18.2 Construction. It is the desire and intent of the parties to this Agreement
that the provisions of Section 18.1 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of Section
18.1 shall be adjudicated to be invalid or unenforceable, for any reason,
including, without limitation, the geographic or business scope or duration
thereof, such provision shall be construed in such a way, with court approval,
as to make it valid and enforceable to the maximum extent possible. Any validity
or unenforceability of any provision of this Agreement shall attach only to such
provision and shall not effect or render invalid any other provision of this
Agreement or any other agreement or instrument.
18.3 Enforcement. The parties recognize that the performance of the obligations
under Section 18 by Acquiree Parties is special, unique and extraordinary in
character, and that in the event of the breach by such Acquiree Party of the
terms and conditions of Section 18.1 to be performed, Acquiree and/or Sentry
would suffer irreparable harm for which there would be no adequate remedy at
law. Accordingly, Acquiree Parties agree that in such event, in addition to any
other remedies which Acquiree and/or Sentry may have in law or equity for money
damages or other relief, Acquiree and Sentry shall be entitled to temporary
and/or injunctive relief, with the necessity of posting a bond therefor but
without proving damages, to enforce the provisions hereof.
ARTICLE 19
GENERAL
19.1 Conflicts between Documents. In the event of any conflict between the terms
of this Agreement and the terms of any other documents or instrument, the terms
of this Agreement shall control and such documents and instruments shall be
deemed amended and reformed to the extent required to eliminate any such
conflict or inconsistency.
19.2 Entire Agreement; Amendments. This Agreement constitutes the entire
understanding among the parties with respect to the subject matter contained
herein and supersedes any prior understandings and agreements among them
respecting such subject matter. This Agreement may be amended, supplemented, and
terminated only by a written instrument duly executed by all of the parties.
29
19.3 Headings. The headings in this Agreement are for convenience of reference
only and shall not affect its interpretation.
19.4 Gender; Number. Words of gender may be read as masculine, feminine, or
neuter, as required by context. Words of number may be read as singular or
plural, as required by context.
19.5 Exhibits and Schedules. Each Exhibit and Schedule referred to herein is
incorporated into this Agreement by such reference.
19.6 Severability. If any provision of this Agreement is held illegal, invalid,
or unenforceable, such illegality, invalidity, or unenforceability will not
affect any other provision hereof. This Agreement shall, in such circumstances,
be deemed modified to the extent necessary to render enforceable the provisions
hereof.
19.7 Notices. All notices and other communications hereunder shall be in writing
and shall be given to the person by sending a copy thereof by certified mail,
telecopy or facsimile. Notice shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or when transmitted by
telecopy or facsimile.
If to Sentry to:
Xx. Xxxxxx X. Xxxxxxx, President
Sentry Accounting, Inc.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxx, XX 00000
(000) 000-0000 (fax)
If to Acquiree:
Xx. Xxxx Xxxxxx, President
000 Xxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
(000) 000-0000 (fax)
With a copy to:
Xxxx Xxxxxxxxx, Esq.
Xxxxxx & Xxxxxxxxx, P.A.
000 Xxx Xxxxxxx Xx., Xxxxx 000
Xxxxxx Xxxx, XX 00000
(000) 000-0000 (fax)
30
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party entitled to receive such notice.
19.8 Waiver. The failure of any party to insist upon strict performance of any
of the terms or conditions of this Agreement will not constitute a waiver of any
of its rights hereunder.
19.9 Assignment. No party may assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of the other parties.
19.10 Successors and Assigns. This Agreement binds, inures to the benefit of,
and is enforceable by the successors and assigns of the parties, and does not
confer any rights on any other persons or entities.
19.11 Governing Law; Jurisdiction. The parties agree that, irrespective of any
wording that might be construed to be in conflict with this paragraph, this
Agreement is one for performance in Florida. The parties to this Agreement agree
that they waive any objection, constitutional, statutory or otherwise, to a
Florida court taking jurisdiction of any dispute between them. By entering into
this Agreement, the parties, and each of them understand that they might be
called upon to answer a claim asserted in a Florida court. This Agreement shall
be construed and enforced in accordance with laws of the State of Florida. Venue
for any such action shall be deemed proper in Polk County, Florida.
19.12 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and their successors and assigns, and they shall not be construed as
conferring and are not intended to confer any rights on any other persons.
19.13 Publicity. Prior to the Effective Date, all notices to third parties and
all other publicity relating to the transactions contemplated by this Agreement
shall be jointly planned, coordinated and agreed to by the Acquiree and Sentry.
Except as may be required by law, prior to the Effective Date none of the
parties hereto shall act unilaterally in this regard without the prior approval
of the Acquiree and Sentry; provided, however, that such approval shall not be
unreasonably withheld.
19.14 Counterparts. This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
The execution of this Agreement by any party hereto will not become effective
until counterparts hereof have been executed by all the parties hereto. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
31
19.15 Limitations Upon Consent. Whenever, under the terms of this Agreement, the
parties hereto are called upon to give their written consent, such written
consent will not be unreasonably withheld.
19.16 Form of Consent. All consents of any kind required under this Agreement
shall be in writing. Whenever, under the terms of this Agreement, Sentry, and/or
Acquiree are authorized to give consent, such consent may be given and shall be
conclusively evidenced by the Chairman of the Board of Directors or the
President of each respective corporation giving such consent.
19.17 Attorney Fees and Court Actions. If a legal action is initiated by any
party to this Agreement against another, arising out of or relating to the
alleged performance or non-performance of any right or obligation established
hereunder, or any dispute concerning the same, any and all fees, costs and
expenses reasonably incurred by each successful party or his or its legal
counsel in investigating, preparing for, prosecuting, defending against, or
providing evidence, producing documents or taking any other action in respect of
such action, shall be the joint and several obligation of and shall be paid or
reimbursed by the unsuccessful party.
19.18 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon Sentry and Acquiree, and their successors or assigns, including but
not limited to any corporation or other business entity which may acquire all or
substantially all of Sentry's and/or Acquiree's assets and business, or with, or
into which Acquiree and/or any Acquiree subsidiary may be consolidated or
merged, and upon the executors, administrators and legal representatives
thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SENTRY ACCOUNTING, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Xxxxxx X. Xxxxxxx, President
XXXXXXXXX.XXX INC.
By: /s/ Xxxx Xxxxxx
-------------------
Xxxx Xxxxxx, President
32
