EXHIBIT 10(A)
STOCK PURCHASE AGREEMENT
AGREEMENT effective as of April 17, 1998 by and among Guardian
International, Inc., a Nevada corporation (the "Buyer"), and Xxxxxxx Xxxxx
("Xxxxx"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxx Xxxxxxx ("Xxxxxxx") and Xxxx Xxxxx
("Xxxxx" and together with Xxxxx, Xxxxxx and Xxxxxxx, the "Sellers" or each, a
"Seller"). Xxxxx and Weston are hereinafter collectively referred to as the
"Principal Shareholders" or each, as a "Principal Shareholder."
RECITALS
A. Sellers are the owners of all of the outstanding shares (the
"Shares") of common stock, $.15 par value per share (the "Common Stock"), of
Precision Security Systems, Inc., a Florida corporation (the "Company").
B. Buyer desires to buy from Sellers, and Sellers desire to sell to
Buyer, all of the Shares, at the price and subject to the terms and conditions
as more fully described in this Agreement.
C. In connection with the purchase and sale of the Shares pursuant to
this Agreement, each of Sellers shall enter into a Noncompetition and
Nonsolicitation Agreement with the Buyer.
AGREEMENT
1. PURCHASE AND SALE OF SHARES.
1.1 CLOSING. The consummation of the transaction contemplated
by this Agreement (the "Closing") shall take place at the offices of Steel
Xxxxxx & Xxxxx LLP at 0000 Xxxxxxxx Xxxxx Xxxx, 000 Xxxxx Xxxxxxx Xxxxx, Xxxx
Xxxx Xxxxx, XX 00000 on April 27, 1998 (the "Closing Date") or on such earlier
date as the parties may agree.
1.2 PURCHASED SHARES. The Sellers agree to sell and transfer
to the Buyer, and the Buyer agrees to purchase all of the Sellers' right, title
and interest in the Shares for an aggregate purchase price (the "Purchase
Price") of $3,500,000, which shall consist of the sum of (i) $2,800,000 in
payment for the Shares and (ii) $200,000 in payment for the notes listed on
Schedule 1.2 attached hereto, which cash sums shall be paid to Xxxxxxx Xxxxx,
Xxxxxx and Xxxxxxx by certified or cashier's check at the Closing (collectively,
the "Cash Purchase Price") in the amounts set forth on Schedule 1.2 and (iii) a
number of newly-issued shares ("Guardian Shares") of Class A Voting Common
Stock, $.001 par value, of Buyer ("Guardian Common Stock") issued to Weston
equal to $500,000 as determined by dividing $500,000 by the average of the last
trade price of the Guardian Common Stock for the twenty trading days preceding
the Closing Date; PROVIDED, HOWEVER, the foregoing
formula shall permit rounding (whether up or down) so that Weston shall not
receive a fractional share of Guardian Common Stock.
1.3 DELIVERIES. At the Closing, the Sellers shall deliver the Shares to
the Buyer, free and clear of all liens, encumbrances, claims, pledges, security
interests, options and other agreements or restrictions (collectively, "Liens"),
either duly endorsed in blank or accompanied by duly executed stock powers. At
the Closing, the Sellers shall also deliver to the Buyer the books and records
of the Company. At the Closing, Buyer shall deliver to each of Clark, Weston,
Xxxxxxx and Xxxxx a certified check in an amount equal to the applicable portion
of the Cash Purchase Price due in accordance with Schedule 1.2 and shall deliver
a stock certificate for the Guardian Shares issued to Weston determined pursuant
to the formula and subject to the stipulations in Section 1.2 above.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
The Principal Shareholders, and, to the extent expressly
provided herein, the Sellers, jointly and severally, hereby represent and
warrant to the Buyer as follows:
2.1 CORPORATE ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and has full corporate power and authority to carry on
its business as it is now being conducted (the "Business") and to own the
properties and assets it now owns. Except as set forth on Schedule 2.1, the
Company is duly qualified as a foreign corporation or authorized to transact
business in and is in good standing under the laws of each jurisdiction in which
the conduct of its Business or the ownership of its assets requires such
qualification or authorization, unless non-qualification or lack of
authorization to transact business in any jurisdiction will not have a material
adverse effect on the Company, which jurisdictions are set forth in Schedule
2.1. The Principal Shareholders, simultaneously herewith shall deliver to Buyer
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company as presently in effect. True, complete and correct copies of the minute
books of the Company have been previously delivered to the Buyer. Except as set
forth on Schedule 2.1, the minute books are current as required by law, contain
the minutes of all meetings of the incorporators, Board of Directors and the
shareholders of the Company from the respective dates of incorporation to the
date hereof, and accurately reflect all material actions taken by the Board of
Directors and shareholders of the Company. Except as set forth on Schedule 2.1,
the Company has no subsidiaries and owns no capital stock or other securities or
interests of or in any other entity, partnership or joint venture. The
transactions contemplated herein have been approved by all necessary corporate
action on the part of the Company and its shareholders.
2.2 CAPITALIZATION. The authorized capital stock of the
Company consists of (i) 10,000 shares of Common Stock, par value $.15 per share,
of which 10,000 shares are issued and outstanding and (ii) 1,000 shares of
preferred stock, par value $1.50 per share (the "Preferred Stock"), of which
1,000 shares are issued and outstanding. All of the issued and outstanding
shares of Preferred Stock will be redeemed by the Company prior to the Closing
Date. Schedule 2.2 sets forth a true, accurate and complete listing of the
shareholders of the Company and the number of shares of Common Stock held by
each of them.
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All issued and outstanding shares of capital stock of the
Company are validly issued, fully paid, non-assessable, free of preemptive
rights and are not subject to any restriction on transfer under the Articles of
Incorporation or Bylaws of the Company or under any agreement or otherwise,
except as otherwise set forth on Schedule 2.2. Except as set forth on Schedule
2.2, no shares of capital stock of the Company are held in the treasury of the
Company, and there are no outstanding (i) securities convertible into or
exchangeable for any of the capital stock of the Company; (ii) options, warrants
or other rights to purchase or subscribe to capital stock of the Company; or
(iii) commitments, agreements or understandings of any kind relating to the
issuance, redemption or repurchase by the Company or others of any capital stock
thereof, any such convertible or exchangeable securities or any options,
warrants or rights. Except as listed on Schedule 2.2, neither the Sellers nor
the Company have entered into any agreement or commitment to register its equity
or debt securities under the Securities Act of 1933, as amended (the "Securities
Act").
2.3 TITLE OF STOCK. The Sellers are the record and beneficial
owners of the Shares, free and clear of any and all Liens, which Shares
represent one hundred percent (100%) of the authorized, issued and outstanding
Common Stock of the Company and, upon the sale of the Shares in accordance with
this Agreement, the Buyer will acquire good, valid and indefeasible title to the
Shares, free and clear of any and all Liens.
2.4 AUTHORIZATION; VALIDITY. Each of the Sellers has full
power, capacity and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of the Sellers and is the legal, valid and
binding obligation of each of the Sellers, enforceable in accordance with its
terms, except as such terms may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws of general application affecting the
enforcement of creditors' rights generally and by the availability of equitable
remedies.
2.5 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the performance by the Sellers of their obligations hereunder will
(a) violate any provision of the Articles of Incorporation or By-laws of the
Company, (b) with or without the giving of notice or the passage of time,
violate, or be in conflict with, or constitute a breach or default under (or
would constitute a default or result in a breach with the giving of notice,
lapse of time or both), or require the consent of any other party to, or result
in the creation or imposition of any Lien upon any of the assets of the Company
under, any agreement or commitment to which the Company is a party or by which
it is bound, or (c) violate any material authorization, consent, approval or
license or any statute, law, judgment, decree, order, regulation or rule of any
court, administrative agency or any federal, state, local, municipal, or foreign
government, governmental or quasi-governmental agency or authority, or body
exercising any administrative, executive, or regulatory authority (each, a
"Governmental Authority") or arbitrator to which the Company, the Sellers or the
Shares is subject. Without limiting the generality of the foregoing, to the
knowledge of the Principal Shareholders, the sale and delivery of the Shares is
exempt from the registration requirements of the Securities Act and any
applicable state securities laws.
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2.6 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of, or declaration, filing or registration
with, any federal, state, local or other Governmental Authority (including,
based in part upon representations of the Buyer, the Federal Trade Commission
and the Antitrust Division of the Department of Justice pursuant to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended) is required to
be made or obtained by the Company or the Sellers in connection with the
execution, delivery and performance of this Agreement.
2.7 BROKERS. No broker, finder or other similar intermediary
has been engaged by the Company in connection with the transaction contemplated
by this Agreement.
2.8 LICENSES; COMPLIANCE. Schedule 2.8 sets forth separately
as to the Company all material authorizations, consents, approvals, licenses and
permits required under applicable law or regulation for the ownership or
operation of the assets owned or operated by the Company or for the conduct of
the Business of the Company. All such authorizations, consents, approvals,
licenses and permits (collectively, the "Authorizations") have been duly issued
or obtained, are in full force and effect and are in accordance therewith in all
material respects. Except as otherwise set forth in Schedule 2.8, the Company is
in compliance with (i) the terms and conditions of all such Authorizations, (ii)
all laws, statutes, regulations and ordinances affecting the Company and its
Business and assets, the lack of compliance with which will have a material
adverse effect on the Company, and (iii) all judgments, orders, decrees, rulings
or other decisions of any Governmental Authority, court or arbitrator having
jurisdiction over the Company. The Principal Shareholders have no reason to
believe that such Authorizations will not be renewed by the issuing Governmental
Authority in the ordinary course. None of such Authorizations is subject to any
restriction or condition which would limit in any material respect the Business
and operations of the Company.
2.9 FINANCIAL STATEMENTS. The unaudited financial statements
of the Company for the fiscal years ending as of March 31, 1998 and March 31,
1997 including, without limitation, the balance sheets, statements of income,
changes in financial position and shareholders' equity of the Company, including
related notes, if any, (collectively, the "Financial Statements"), are complete
and correct and fairly present the financial condition of the Company and the
results of its operations for the periods ending on such dates, respectively.
True and complete copies of the Financial Statements are attached as Schedule
2.9. Except as provided in the Financial Statements, or as fully disclosed in
Schedule 2.9, the Company has no material liabilities or obligations (whether
accrued, absolute, contingent, mature, unmatured, whether due or to become due
or otherwise) which might be or become a charge against the Company or its
assets, including any "loss contingencies" considered "probable" or "reasonably
possible" within the meaning of the Financial Accounting Standard Board's
Statement of Financial Accounting Standards No. 5, except trade payables and
similar liabilities and obligations incurred in the ordinary course of business
since the date of the Financial Statements. The Company has maintained its books
and records in accordance with sound business practices including, without
limitation, the maintenance of an adequate system of internal controls.
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2.10 ABSENCE OF CHANGES. Except as set forth in Schedule 2.10,
since March 31, 1998, the Company has not suffered or taken any of the following
actions: (i) suffered any material adverse effect in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
Business or operations; (ii) incurred any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise), except items incurred in
the ordinary course of business; (iii) increased, or experienced any material
change in any assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserves; (iv) permitted or allowed any of its assets to be
subjected to any Liens of any kind, except for Liens for Taxes not yet due or
other minor encumbrances; (v) leased, sold, transferred or otherwise disposed of
any of its assets except in the ordinary course of business; (vi) made any
capital expenditure or commitment for replacements or additions or structural
improvements or maintenance to property, plant, equipment or other capital
assets in excess of $50,000; (vii) declared, paid or set aside for payment any
dividend or other distribution with respect to its capital stock, or redeemed,
purchased or otherwise acquired, directly or indirectly, any shares of capital
stock or other securities of the Company; (viii) made any change in its method
of accounting or accounting practice; (ix) issued, sold or delivered or agreed
to issue, sell or deliver any shares of capital stock of the Company or any
options, warrants or rights to acquire capital stock or securities convertible
into or exchangeable for capital stock; (x) increased the salaries,
compensation, pension or other benefits payable to any manager or employee of
the Company or entered into any employment agreement with any officer or
salaried employee that is not terminable by the employer, without cause and
without penalty on 30 days notice or less, except in the ordinary course of
business; (xi) forgiven or canceled any claims or waived any rights of material
value; (xii) suffered any casualty, damage, destruction or property loss
(whether or not covered by insurance) materially adversely affecting the
Company; (xiii) suffered any loss of employees due to resignation or customers
that materially adversely affect the Company, except in the ordinary course of
business; or (xiv) agreed, whether in writing or otherwise, to take any of the
actions described in this Section 2.10.
2.11 UNDISCLOSED LIABILITIES. Except as set forth in Schedule
2.11, the Company has no liabilities, obligations or unrealized or anticipated
losses (whether accrued, absolute, contingent, mature, unmatured, whether due or
to become due or otherwise) that are not fairly and adequately reflected or
reserved against on the Financial Statements in excess of $5,000, and, to the
knowledge of the Principal Shareholders, there is no circumstance, condition,
event or arrangement that hereafter is likely to give rise to any such
liabilities, obligations or losses.
2.12 LITIGATION; DISPUTES. Except as set forth in Schedule
2.12, there is no action, suit, proceeding, mediation or investigation pending,
or to the knowledge of the Principal Shareholders, threatened against or
relating to the Company or its assets or against the Sellers relating to the
Company before any court, Governmental Authority, mediator or arbitrator, nor,
to the knowledge of the Principal Shareholders, are there any facts or
circumstances creating a factual basis for the institution of any such action,
suit, proceeding, mediation or investigation. All the actions, suits,
proceedings, mediation or investigations described on Schedule 2.12 are being
diligently prosecuted and, except as set forth in Schedule 2.12, are adequately
covered by insurance or adequate reserves have been set aside therefor on the
Financial Statements.
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2.13 TAXES; TAX ELECTIONS. "Tax" as used herein shall mean any
tax (including any income tax, capital gains tax, value-added tax, sales tax,
property tax, gift tax or estate tax), levy, assessment, tariff, duty,
deficiency, or other fee, and any related charge or amount (including any fine,
penalty, interest, or addition to tax), imposed, assessed, or collected by or
under the authority of any Governmental Authority. The Company has filed, caused
to be filed or has obtained extensions to file all foreign, federal, state and
local Tax returns which are required to be filed by it, and which returns are
true, complete and correct, and has paid or caused to be paid, or has reserved
on its books amounts sufficient for the payment of, all Taxes as shown on said
returns or on any assessment received by it and all penalties and interest. The
federal income Tax returns of the Company have never been examined by the United
States Internal Revenue Service or any successor agency (the "IRS"). The Tax
returns of the Company are not presently being audited by any foreign, federal,
state or local authorities, nor are there currently in effect with respect to
the Company any agreements for the extension or waiver of any statute of
limitations on the assessment or collection of any Tax. No Tax liens have been
filed against the assets of the Company, no claim for any additional Tax or
assessment is being asserted against the Company by any Tax authority, and
neither the Sellers nor the Company has been notified of, and, to the knowledge
of the Principal Shareholders, there are no facts or circumstances that could
result in, any claim being asserted with respect to any Taxes. There is no
action, suit, proceeding, investigation or audit pending or, to the best
knowledge of the Principal Shareholders, threatened against the Company in
respect of any Tax or assessment. All foreign, federal, state, county and local
Taxes and assessments or contributions (including interest and penalties, if
any) payable by the Company on or prior to the date hereof were paid when due,
and will be paid to the extent they become due and payable after the date
hereof, and there are no unpaid Taxes which are or could become a Lien on the
properties, Business or assets of the Company. The Company has not filed a
consent to the application of Section 341(f)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), with regard to any property held, acquired or to
be acquired at any time. The Company has not been a member of an affiliated
group filing a consolidated income Tax return nor has any liability for Taxes of
any Person under Treasury Regulation Section 1-1502-6 or any similar provision
of state, local or foreign law. The Company is not obligated nor is it a party
under any agreements pursuant to which it may be obligated to make payments
which are not deductible under Section 280G of the Code. To the knowledge of the
Principal Shareholders, all individuals that the Company treats as independent
contractors are not "employees" (within the meaning of Section 3121(d)(2)(1) of
the Code or Section 3(6) of the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law (collectively, "ERISA") for purposes of any federal, state or
local Taxes.
2.14 BANK ACCOUNTS. Attached hereto as Schedule 2.14 is a true
and complete list of the names and addresses of all banks and other financial
institutions in which the Company has any accounts, deposits or safe deposit
boxes, and the names of all persons authorized to draw on such accounts or
deposits or to have access to such safe deposit boxes. Except as listed on
Schedule 2.14, as of the Closing, no person will hold a power of attorney on
behalf of the Company. The books of account of the Company show all checks and
drafts outstanding, and, except as disclosed on Schedule 2.14, there are
sufficient funds in the accounts listed on Schedule 2.14 to pay any and all
checks or drafts presented or outstanding but not yet presented on said
accounts.
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2.15 REAL PROPERTY. The Company owns no real property.
2.16 LEASED PROPERTY. The Sellers have previously delivered to
Buyer true and complete copies of the leases of the Company with respect to both
leased real property and leased personal property (respectively, the "Real
Property Leases" and the "Personal Property Leases" and, collectively, the
"Leases" and such property, the "Leased Property"). Schedule 2.16 sets forth a
list of the Leases and separately designates which Leases contain change in
control provisions or otherwise require the consent, waiver or approval of the
other parties thereto with respect to the consummation of the transactions
contemplated by this Agreement. The Leases are the valid and legally binding
obligations of the Company and the lessors thereunder, enforceable in accordance
with their respective terms, and are in full force and effect. None of the real
property leased under the Real Property Leases (the "Leased Real Property") is
affected by, subject to or, to the knowledge of the Principal Shareholders,
threatened by any condemnation or eminent domain proceedings or any assessments
for public improvements. Except as set forth on Schedule 2.16 (which omits any
default or invalid leasehold interest which will not have a material adverse
effect on the Company), (a) the Company has valid leasehold interests in all of
the leased real and personal property subject to the Leases; and (b) neither the
Company nor the Principal Shareholders have received any notice of default or
breach under any of the Leases, (c) none of the Leases are in default, and (d)
no event has occurred which, with the passage of time or the giving of notice or
both, would constitute a default thereunder. The Company has, or will have on or
before the Closing Date, delivered all notices to, and obtained all consents,
waivers and approvals from, all parties that are required in connection with the
transactions contemplated by this Agreement including, without limitation,
estoppel letters from the landlords with respect to the Real Property Leases, in
form and substance satisfactory to the Buyer. The Company enjoys peaceful and
undisturbed possession of the Leased Property. None of the Leased Property is
affected or threatened by or subject to any condemnation or eminent domain
proceeding or any assessments for public improvements, which would have a
material adverse effect on the Business or operations of the Company.
2.17 TITLE. The Company has valid leasehold interests in all
of its leased property and assets, and good and marketable title to all of its
other property and assets, tangible or intangible, reflected in the Financial
Statements or purported to have been acquired by the Company subsequent to the
date of such statements. Except as set forth in Schedule 2.17 and in the
Financial Statements, such property and assets are free and clear of limitations
on transfer or assignment, and are free and clear of all Liens, other than Liens
for current Taxes not yet due and payable or which are being contested in good
faith by appropriate proceedings (and for which adequate reserves have been
established) and other minor encumbrances arising in the ordinary course of
business, that are not substantial in amount, do not, in any case or in the
aggregate, detract from or interfere in, the current or, to the knowledge of the
Principal Shareholders, future operations of the Company. Except as set forth on
Schedule 2.17, there are no shared or jointly owned assets or facilities between
or among the Company and those of the Sellers' Affiliates. "Affiliates" shall be
defined in this Agreement to mean, as to any person, any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such person. The term "control," as applied to any person, means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or other
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ownership interest, by contract or otherwise. A true, accurate and complete copy
of the asset list of the Company, setting forth a description of all the
tangible and intangible assets of the Company is attached hereto as Schedule
2.17. Such assets constitute all of the assets necessary to operate the Business
in the ordinary course consistent with past practices as of the Closing Date.
The Principal Shareholders shall deliver to the Buyer such additional assurances
as the Buyer may reasonably request with respect to the assets of the Company.
2.18 CONDITION OF PROPERTIES. The plants, structures, and
equipment of the Company and all other property and assets owned or used by the
Company are in good and operating condition, are in condition to pass safety and
health examinations under applicable laws and are available for immediate use in
the Business and operations of the Company or will be in such condition after
repairs or replacement, the total cost of which will not have a material adverse
effect on the Business or the operations of the Company. The Leased Real
Property and the plants, structures, equipment and other improvements located
thereon, and the present use thereof, comply with all material zoning, land use
and other laws, ordinances and regulations of all Governmental Authorities
having jurisdiction thereof. To the knowledge of the Principal Shareholders,
there is no asbestos-containing material in any of the buildings or facilities
on the Leased Real Property.
2.19 INTELLECTUAL PROPERTY; TRADE SECRETS. Except as set forth
in Schedule 2.19, the Company neither owns nor licenses Intellectual Property
(which is defined to include the name of the Company, all fictional business
names, trading names, registered and unregistered trademarks, service marks and
applications, all patents and patent applications, and all copyrights in both
published works and unpublished works) in the conduct of its Business. Neither
the Company nor the Principal Shareholders have received any notice of any
claims, controversies, lawsuits or judgments that affect the use or availability
of the Company's name. All account encryption codes and associated software
(collectively, "Trade Secrets") of the Company are current, accurate, and
sufficient in detail and content to identify and explain them and to allow their
full and proper use without reliance on the special knowledge or memory of
others. The Company has taken all reasonable precautions to protect the secrecy,
confidentiality, and value of its Trade Secrets. The Trade Secrets are not part
of the public knowledge or literature, and, to the knowledge of the Principal
Shareholders, have not been used, divulged, or appropriated either for the
benefit of any Person (other than the Company) or to the detriment of the
Company. "Person" shall mean any individual, corporation, general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization or other entity. To the knowledge of the Principal
Shareholders, no Trade Secret is subject to any adverse claim or has been
challenged or threatened in any way. The Company licenses all software used by
the Company pursuant to valid and binding license agreements. All license
agreements are in full force and effect and there are no defaults (or events
which with notice, lapse of time or both, could constitute defaults) under such
license agreements. The consummation of the transactions contemplated by this
Agreement will not alter, impact on or otherwise affect any of the rights
granted to the Company pursuant to such license agreements. None of the software
has manifested any significant operating problems, other than such problems that
have been corrected or are correctable in the ordinary course of business. To
the knowledge of the Principal Shareholders, all of the Company's computer
software and systems are Year 2000 compliant. No third party vendor with whom
the Company does business has given
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notice to the Company or the Principal Shareholders that such vendor will not be
Year 2000 compliant. "Year 2000 compliant" means that abnormal, invalid or
incorrect results are not produced by processing matters computed with reference
to calendar year 2000 and years thereafter including, but is not limited to,
date data century recognition (i.e., ability to properly recognize and address
the applicable century in any data that includes a date), calculations that
accommodate same-century and multi-century formulas, date-related user interface
values and data fields that in each case reflect the century, and date-related
functions that in each case reflect the century.
2.20 PATENTS. The Company neither owns nor licenses any
patents in the conduct of its Business.
2.21 CONTRACTS. Schedule 2.21 sets forth a complete and
correct list of each of the following types of contracts (whether oral or
written) to which the Company is a party (collectively, the "Contracts") each of
which is in excess of $5,000: (i) contracts for the employment of any officer or
employee; (ii) contracts for the purchase of materials, supplies, services,
merchandise or equipment; (iii) management agreements, franchise agreements,
license agreements, advertising agreements and contracts for the purchase and
sale of inventory; (iv) agreements or arrangements for the sale or lease of any
of the Company's assets other than in the ordinary course of business; (v)
mortgages, pledges, conditional sales contracts, security agreements or other
similar agreements; (vi) leases of machinery or equipment; (vii) loan
agreements, promissory notes, guarantees, letters of credit, subordination or
similar type agreements; (viii) agreements or arrangements for the acquisition
or sale of real or personal property; (ix) all consulting and independent
contractor contracts; (x) all contracts and policies for insurance coverage;
(xi) all joint venture, strategic alliance and partnership agreements; and (xii)
any contract not otherwise covered by clauses (i) through (xi) above which
involves annual or aggregate payments or receipts in excess of $5,000. Schedule
2.21 sets forth a complete and correct list of the customers with whom the
Company has agreements. The Company has materially performed all of the
obligations required to be performed by it to date under such Contracts, is not
in default under any such Contracts, and no event has occurred which with the
passage of time, the giving of notice or both would constitute a default under
any such Contracts. Except as set forth in Schedule 2.21, all of such Contracts
shall remain in full force and effect after the date of the Closing and none of
such Contracts contain change in control provisions. The Sellers will obtain all
necessary consents with respect to any change of control or other such
provisions from the other parties to the Contracts with respect to the
transactions contemplated by this Agreement. To the knowledge of the Principal
Shareholders, none of the agreements between the Company and its customers will
be terminated prior to their stated expiration date and all the agreements
between the Company and its customers will be renewed in the ordinary course of
business subject to nonrenewal rates customary in the business of the Company.
The Sellers have delivered to the Buyer true and complete copies of the
Contracts described in Schedule 2.21 and all amendments thereto, PROVIDED,
HOWEVER, that in the case of customer agreements, the Sellers have delivered to
the Buyer true and complete copies of the forms of customer agreements and
hereby represent and warrant that all customer agreements conform to one of such
forms in all material respects. The Principal Shareholders represent and warrant
that all customer agreements which contain provisions giving the customer the
right to terminate as a result
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of the transactions contemplated hereby do not exceed recurring monthly revenue
(defined in Section 5.3 below) in excess of $5,000 in the aggregate.
2.22 INSURANCE POLICIES. The Company has in full force and
effect, with responsible insurance companies, policies of insurance with respect
to its employees, assets and Business insuring the Company against such
casualties and contingencies and of such types and amounts as are reasonably
adequate, as of the Closing Date, for the size and scope of the Business
conducted and properties held by the Company, and the Company maintains such
other insurance as may be required by law and by all contracts to which it is a
party. Schedule 2.22 sets forth a description of all policies of insurance that
the Company has and maintains in full force and effect, the annual premiums
therefor, the limits of liability, whether such policies are on an occurrence or
"claims made" basis and all performance bonds and letters of credit securing
such obligations. True and complete copies of all such policies have previously
been delivered to the Buyer. If the Company has any self-insurance arrangement
by or affecting the Company, such arrangement is also described on Schedule
2.22, including any reserves established thereunder. All premiums due on such
policies have been paid and, to the knowledge of the Principal Shareholders, the
aggregate amount of all claims under such policies do not exceed policy limits.
Neither the Company nor the Sellers have received any notification from any
insurance carrier denying or disputing any claim made by or on behalf of the
Company denying or disputing any coverage for any claim, denying or disputing
the amount of any claim, or regarding the possible cancellation of any policies.
Except as set forth in Schedule 2.22, neither Principal Shareholder has received
notice that any of such policies will not be renewed by the respective insurance
carriers with substantially the same coverage. The Company has not received (i)
any notice of cancellation of any policy, (ii) any notice that any issuer of
such policy has filed for protection under applicable bankruptcy laws or is
otherwise in the process of liquidating or has been liquidated, (iii) any other
indication that such policies are no longer in full force and effect or that the
issuer of any such policy is no longer willing or able to perform its
obligations thereunder, or (iv) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights. All premiums due on such
policies have been paid, and the aggregate amount of all claims under such
policies do not exceed policy limits. The Company has given notice to the
insurers of all material claims that may be insured thereunder.
2.23 CUSTOMERS. No customer of the Company accounts for more
than 5% of the Company's gross revenues during the year ended December 31, 1997,
ranked by revenues. The Principal Shareholders have not received notice that any
material relationship of the Company with customers will not continue to be
available to the Company or that any material relationship of the Company with
customers will be changed in an adverse manner as a result of the transactions
contemplated by this Agreement.
2.24 ERISA AND OTHER COMPENSATION PLANS. Except as set forth
in Schedule 2.24, the Company does not maintain or participate in any
arrangements or policies, deferred compensation arrangements, stock purchase,
stock option, employee benefit plan (as defined in Section 3(3) of ERISA), or
any other employee benefit policies, programs or arrangements maintained
currently or in the past by ERISA Employer (as defined under ERISA), under which
ERISA Employer has any current or future obligation or under which any former or
present
10
employee of ERISA Employer has any current or future rights to benefits (the
"Benefit Plans"). ERISA Employer does not contribute and has not contributed to
any multi-employer pension plan (as defined in Section 4001(a)(3) of ERISA). The
ERISA Employer does not participate and has not participated in any employee
benefit plan maintained, or subscribed to, by any other employer.
2.25 LABOR MATTERS. Except as set forth in Schedule 2.25(a),
the Company is not a party to or bound by any collective bargaining agreement or
any other agreement with a labor union relating to the Company's employees, and,
to the knowledge of the Sellers, there has been no effort by any labor union
during the twenty-four (24) months prior to the date of this Agreement to
organize any of such employees into one or more collective bargaining units.
Except as set forth in Schedule 2.25(b), to the knowledge of the Principal
Shareholders, (i) the Company is in compliance with all federal, state and local
laws regarding employment and employment practices, conditions of employment,
wages and hours (including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Sections 212(n) and 274A
of the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto), and the Company does not employ any
unauthorized aliens (as such term is defined under 8 CFR /Section/ 274a.1(a)),
(ii) the Company is not engaged in unfair labor practices, and there are no
unfair labor practice complaints pending or, to the knowledge of the Sellers,
threatened against the Company before the National Labor Relations Board or
otherwise, (iii) there are no EEOC violations or age, sex, racial
discrimination, occupation safety or health standards claims charged, pending
or, to the knowledge of the Sellers, threatened against the Company and, to the
knowledge of the Sellers, no actions have been taken or practices followed by
any employee of the Company that would give rise to any such claims, (iv) there
is no labor strike or dispute pending or, to the knowledge of the Sellers,
threatened against or involving the Company or at the current customer locations
that may affect the Business of the Company, and (v) none of the employees of
the Company are presently subject to collective bargaining agreements or are
engaged in organizing, or are members of, any union or other employee group that
is seeking recognition as a bargaining unit.
2.26 EMPLOYEES. The Company has 19 employees. Schedule 2.26
lists the names, job descriptions and annual salary rates, length of service,
commissions, benefits and other compensation for all present officers,
directors, managers, and employees of the Company and also contains a complete
and correct copy of the permanent payroll of the Company as of March 31, 1998.
None of the Company's employees has any employment agreement (written or oral).
2.27 ENVIRONMENTAL MATTERS. Except with respect to the matters
set forth in Schedule 2.27, (i) the Company is in compliance with (A) all legal
requirements designed to minimize, prevent, punish or remedy the consequences of
actions that damage or threaten the environment or public health and safety
("Environmental Laws") relating to the generation, management, handling,
transportation, treatment, disposal, storage, delivery, discharge, release or
emission of any waste, pollutant or toxic or hazardous substance (collectively,
"Hazardous Materials"), and (B) all regulations and requirements promulgated by
the Occupational Safety and Health Administration that may be applicable to the
Company; (ii) there is no proceeding, suit or investigation pending or, to the
knowledge of the Principal Shareholders, threatened with respect to any
violation or alleged violation of the Environmental Laws relating to the Leased
Real Property,
11
and there is no reasonable basis known to the Principal Shareholders for the
institution of any such proceeding, suit or investigation relating to the Leased
Real Property; (iii) there has been no spillage, leakage, contamination or
release of any Hazardous Materials in violation of Environmental Laws for which
appropriate remedial action has not been completed, and no transportation of
Hazardous Materials in violation of Environmental Laws to any other location;
(iv) the Leased Real Property is not contaminated with any Hazardous Materials
in violation of Environmental Laws, and the waters below and adjacent thereto
have not received any Hazardous Materials from the operations of the Company;
and (v) there are no underground storage tanks or, to the knowledge of the
Principal Shareholders, other underground facilities on the Leased Real
Property.
2.28 RECEIVABLES. All accounts, notes and mortgages receivable
and premiums due and uncollected as reflected on the latest balance sheet
included in the Financial Statements and all accounts, notes and mortgages
receivable and premiums due and uncollected arising subsequent to the date of
such balance sheet, (i) to the knowledge of the Principal Shareholders,
represent valid obligations due to the Company enforceable in accordance with
their respective terms and conditions, (ii) to the knowledge of the Principal
Shareholders, are not subject to any defense, offset or counterclaim, and (iii)
subject only to customary write-offs for bad debts in a manner consistent with
past practice, have been collected or are collectible in the ordinary course of
Business.
2.29 AFFILIATED TRANSACTIONS. Except as set forth on Schedule
2.29, to the knowledge of Sellers, none of the Sellers is an owner, partner,
officer, director, employee, agent, investor or consultant in any business
competitive with that of the Company. Except as set forth on Schedule 2.29,
there are no loans, guarantees, leases or commitments from or to any of the
Sellers or any Affiliate thereof, on the one hand, and the Company, on the other
hand. Except as set forth in Schedule 2.29, there are no outstanding
transactions between any of the Sellers or any Affiliate thereof and the
Company, nor do any of the Sellers or Affiliates have any interest in any
property (whether real, personal or mixed, tangible or intangible), used in or
pertaining to the Business. Except as set forth on Schedule 2.29, the Company
has at all times been operated as a separate business.
2.30 CONSENTS; APPROVALS. Except as set forth on Schedule
2.30, no consents, approvals, waivers or other authorizations of any
Governmental Authority or other third party are required to be obtained by the
Sellers to consummate the transactions contemplated hereby, nor is any
corporate, shareholder or board of directors action required.
2.31 DISCLOSURE. No representation or warranty of the
Principal Shareholders or the Sellers herein and no information disclosed by the
Sellers to the Buyer in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading. Except as otherwise disclosed in
this Agreement or the Schedules to this Agreement, there is no fact presently
known to the Principal Shareholders that would or could reasonably be expected
to have a material adverse effect on the Business, financial condition or
results of the Company.
12
2.32 NO DISTRIBUTION. Weston is acquiring the Guardian Shares
for his own account with the present intention of holding such securities for
purposes of investment, and he has no intention of selling such securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws. Weston understands that the Guardian Shares
are "restricted securities" as defined in Rule 144 under the Securities Act, and
have not been registered pursuant to the provisions of the Securities Act,
inasmuch as the proposed purchase of the Guardian Shares is taking place in a
transaction not involving any public offering.
2.33 SOPHISTICATION. Weston is knowledgeable, experienced and
sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Guardian Shares.
2.34 ECONOMIC RISK. Weston is able to bear the economic risk
of the investment in the Guardian Shares for an indefinite period of time
because the Guardian Shares have not been registered under the Securities Act
and, therefore, cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
2.35 ACCESS TO INFORMATION. Weston has been furnished or
otherwise had full access to such other information concerning Buyer and its
subsidiaries as he has requested and that was necessary to enable him to
evaluate the merits and risks of an investment in Buyer, and after a review of
this information, has had an opportunity to ask questions and receive answers
concerning the financial condition and business of Buyer and the terms and
conditions of the securities purchased hereunder, and has had access to and has
obtained such additional information concerning Buyer and the securities as he
deemed necessary.
2.36 ACCREDITED INVESTOR. Weston represents and warrants that
he is an "accredited investor" as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
Each of the representations and warranties shall survive
Closing for a period of one (1) year, and each of which shall be deemed to be
material and relied upon by the Buyer regardless of any investigation made by or
information known to the Buyer, PROVIDED, HOWEVER, that the representation
contained in Section 2.13 (Taxes; Tax Election) shall survive for the applicable
statute of limitations, and any tolling or extensions thereof. If any claim for
indemnification under Section 4 in connection with any representation or
warranty is made prior to the termination of its period of survival, the
termination of such survival period for such representation or warranty shall be
tolled until the final resolution of such claim.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
3.1 CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Buyer has full corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. The Board of
Directors of Buyer has duly authorized the execution and delivery of this
Agreement and the performance by the Buyer of its obligations hereunder. No
other corporate proceedings
13
on the part of Buyer are necessary to authorize the execution and delivery of
this Agreement and the performance by Buyer of its obligations hereunder.
3.2 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate any provisions of the Certificate of Incorporation or Bylaws of Buyer,
(b) violate or be in conflict with, or constitute a default under, or require
the consent of any other party to, any agreement or commitment to which Buyer is
a party or by which Buyer is bound, or (c) to the best knowledge of Buyer
violate any statute or law or any judgment, decree, order, regulation or rule of
any court or Governmental Authority to which Buyer is subject.
3.3 BROKERS. No broker, finder or other similar intermediary
has been engaged by Buyer in connection with the transaction contemplated by
this Agreement.
3.4 CONSENT AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No
consent, approval or authorization of or declaration, filing or registration
with, any Governmental Authority (including, based in part upon representations
of the Sellers, the Federal Trade Commission and the Antitrust Division of the
Department of Justice pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended) is required to be made or obtained by the Buyer in
connection with the execution, delivery and performance of this Agreement.
3.5 NO DISTRIBUTION. The Buyer is acquiring the Shares for its
own account with the present intention of holding such securities for purposes
of investment, and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws. The Buyer understands that the Shares are "restricted
securities" as defined in Rule 144 under the Securities Act and have not been
registered pursuant to the provisions of the Securities Act, inasmuch as the
proposed purchase of the Shares is taking place in a transaction not involving
any public offering.
3.6 SOPHISTICATION. The Buyer is knowledgeable, experienced
and sophisticated in financial and business matters and is able to evaluate the
risks and benefits of the investment in the Shares.
3.7 ECONOMIC RISK. The Buyer is able to bear the economic risk
of its investment in the Shares for an indefinite period of time because the
Shares have not been registered under the Securities Act and, therefore, cannot
be sold unless subsequently registered under the Securities Act or an exemption
from such registration is available.
3.8 ACCESS TO INFORMATION. The Buyer has been furnished or
otherwise had full access to such other information concerning the Company and
its subsidiaries as it has requested and that was necessary to enable the Buyer
to evaluate the merits and risks of an investment in the Company, and after a
review of this information, has had an opportunity to ask questions and receive
answers concerning the financial condition and business of the Company and the
terms and
14
conditions of the securities purchased hereunder, and has had access to and has
obtained such additional information concerning the Company and the securities
as it deemed necessary.
3.9 ACCREDITED INVESTOR. The Buyer is an "accredited investor"
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. INDEMNIFICATION.
4.1 GENERAL INDEMNITY. The Principal Shareholders, jointly and
severally, agree to indemnify and hold harmless the Buyer from and against any
and all liabilities, damages, claims, deficiencies, assessments, losses, suits,
proceedings, actions, investigations, penalties, interest, costs and expenses
including, without limitation, reasonable fees and expenses of counsel, amounts
paid in settlement and reasonable costs of investigation (whether suit is
instituted or not and, if instituted, whether at the trial or appellate level)
(collectively, the "Liabilities"), whether in law or equity, arising from or in
connection with (A) the failure of any representation of the Principal
Shareholders contained in this Agreement or in any document delivered in
connection herewith to be true and correct, (B) any breach or violation of any
of the warranties, covenants or agreements of the Principal Shareholders
contained in this Agreement or in any document delivered in connection herewith
or (C) any acts of the Company or the Principal Shareholders taken or omitted
prior to Closing. The Principal Shareholders shall indemnify the Buyer up to $7
million for Liabilities for which Buyer is entitled to indemnification from the
Principal Shareholders under this Section.
The Sellers, jointly and severally, agree to
indemnify and hold harmless the Buyer from and against any and all Liabilities,
whether in law or equity, arising from or in connection with (A) the failure of
any representation of the Sellers (as opposed to the Principal Shareholders)
contained in this Agreement or in any document delivered in connection herewith
to be true and correct, (B) any breach or violation of any of the warranties,
covenants or agreements of the Sellers (as opposed to the Principal
Shareholders) contained in this Agreement or in any document delivered in
connection herewith or (C) any acts of the Sellers (as opposed to the Principal
Shareholders) taken or omitted prior to Closing. The Sellers shall indemnify the
Buyer up to $7 million for Liabilities for which Buyer is entitled to
indemnification from Sellers under this Section.
Notwithstanding anything to the contrary contained herein, the
first $25,000 (the "Basket") in aggregate amount for all Liabilities under this
Section 4.1 for which the Principal Shareholders or the Sellers, as the case may
be, would be liable will be borne by Buyer; PROVIDED, HOWEVER, that the Basket
shall not apply to (i) any Liabilities arising from or relating to Taxes (as
such term is defined in Section 2.13 hereof), and (ii) the extent that any such
Liability is found, in a final unappealable judgment by a court of competent
jurisdiction, to have arisen from or related to one or more of the Principal
Shareholders' or Sellers', as the case may be, willful bad faith, willful
misconduct or gross negligence with an intent to defraud. A materiality
qualification in any representation or warranty will not be taken into account
in determining whether the Basket has been met.
15
4.2 SURVIVAL OF INDEMNIFICATION. The indemnification covenant
contained in Section 4.1 shall survive the consummation of the transactions
contemplated hereby for a period of one year from the Closing Date; PROVIDED,
HOWEVER, in the case of Liabilities arising from or in connection with the
representations contained in Section 2.13 (Taxes; Tax Election), such
indemnification covenant shall survive for the applicable statute of
limitations, and any tolling or extensions thereof.
4.3 PROCEDURE. In the event any person or entity not a party
to this Agreement shall make any demand or claim or file or threaten to file or
continue any lawsuit, which demand, claim or lawsuit may result in Liabilities
to any party pursuant to the indemnification provisions of this Agreement, then,
in any such event, within 10 days after notice by the indemnified party (the
"Notice") to the indemnifying party of such demand, claim or lawsuit (provided,
however, that the failure to give such Notice shall not relieve the indemnifying
party of its obligations hereunder unless, and only to the extent that, such
failure caused the damages for which the indemnifying party is obligated to be
greater than they would otherwise have been had the indemnified party given
prompt notice hereunder), the indemnifying party shall have the option, at its
cost and expense, to retain counsel for the indemnified party (which counsel
shall be selected by or be reasonably satisfactory to the indemnified party), to
defend any such demand, claim or lawsuit. Thereafter, the indemnified party
shall be permitted to participate in such defense at its own expense, provided
that, if the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party or if the
indemnifying party proposes that the same counsel represent both the indemnified
party and the indemnifying party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then the indemnified party shall have the right to retain its own
counsel at the cost and expense of the indemnifying party. In the event that the
indemnifying party shall fail to respond within 10 days after receipt of the
Notice, the indemnified party may retain counsel and conduct the defense of such
demand, claim or lawsuit, as it may in its sole discretion deem proper, at the
sole cost and expense of the indemnifying party.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The obligation
of the Buyer to consummate the purchase and sale of the Shares is subject to the
fulfillment, at or before the Closing, of all of the following conditions:
5.1 DUE PERFORMANCE. The Sellers shall have fully performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them on or prior to the Closing.
5.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Principal Shareholders and the Sellers set
forth in this Agreement shall be true and correct at the Closing in all
respects, as though made at and as of the Closing.
5.3 RECURRING MONTHLY REVENUE. The Sellers shall have provided
evidence satisfactory to Buyer that recurring monthly revenue is a minimum of
$85,000. For purposes of this Section 5.3, the term "recurring monthly revenue"
shall mean the average monthly revenue during
16
the 12-month period ending on March 31, 1998 (net of any direct wire telephone
line charges and other direct pass-through charges) from customers for the
monitoring, leasing, inspection and maintenance of burglar, fire, sprinkler and
other monitoring systems (not to include guard, patrol or armed response
revenues) under valid, unmodified, standard form, written customer contracts and
valid, unmodified, standard form written municipal and governmental purchase
orders which are (i) assignable to Buyer without the consent of a third party
and (ii) reasonably acceptable to Buyer's counsel and the carrier of Buyer's
Errors and Omission insurance policy.
5.4 SUPPORTING DOCUMENTS. The Buyer shall have received and
approved:
(a) True copies of the Articles of Incorporation and current
Bylaws of the Company; a certificate of good standing with regard to the
Company, together with appropriate corporate resolutions (of the Board of
Directors and the shareholders) and incumbency certificates reasonably
satisfactory to Buyer's counsel;
(b) Certificate(s) evidencing the Shares, duly endorsed or
with appropriate stock powers;
(c) A certificate of each of the Principal Shareholders that
the conditions set forth in Sections 5.1 and 5.2 have been satisfied as of the
Closing; and
(d) Such other documents as the Buyer or its counsel may
reasonably request.
5.5 OPINION OF COUNSEL. The Buyer shall have received the
opinion of Sellers' counsel substantially in the form attached as Exhibit A.
5.6 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
5.7 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer (including the consent of Xxxxxx Financial, Inc. and Westar
Capital, Inc.) and Sellers (including the release by the landlord of the office
space leased by the Company) shall have been obtained by the Closing Date.
5.8 FINANCIAL STATEMENTS. Buyer shall have received from the
Company's accountant compiled financial statements for fiscal year ended March
31, 1998 and audited financial statements for the fiscal year ended March 31,
1997.
5.9 BOARD APPROVAL; SHAREHOLDER APPROVAL. The transactions
contemplated hereby shall have been approved the Board of Directors of Buyer and
such approvals shall not have been withdrawn or adversely modified. The
transactions contemplated hereby shall have been approved by the full Board of
Directors of the Company and its shareholders and such approvals shall not have
been withdrawn or adversely modified.
17
5.10 SECURITIES LAWS. Weston shall have completed and returned
to counsel to Buyer a Qualified Investor Questionnaire and the Representations
and Warranties of Shareholders substantially in the forms of Exhibit B and
Exhibit C, respectively, in a manner which does not adversely affect the
exemption from registration under Section 4(2) of the Securities Act.
5.11 AFFILIATE LOANS. Evidence that the Sellers have caused
the Company to collect all principal, interest and other amounts on all
outstanding loans made by the Company, except as set forth in Schedule 5.11, to
Affiliates of the Company as listed on Schedule 5.11 ("Affiliate Loans") such
that all such Affiliate Loans shall be repaid (and, if necessary, prepaid) in
full.
5.12 NON-COMPETITION AND NON-SOLICITATION AGREEMENT. The
Sellers, other than Weston, shall each have signed a four year non-competition
agreement limited to Dade County, Broward County and Palm Beach County, Florida,
and a perpetual non-solicitation agreement, including a prohibition on
acceptance, covering the customers transferred to Buyer under this Agreement. A
form of the Noncompetition and Nonsolicitation Agreement is attached hereto as
Exhibit D. The Noncompetition and Nonsolicitation Agreement for Xxxxx will
contain a covenant of Xxxxx to assist Buyer during a six-month transition period
commencing as of the Closing Date at a daily rate to be negotiated by the
parties prior to execution by Buyer and Xxxxx of Xxxxx'x Noncompetition and
Nonsolicitation Agreement.
5.13 EMPLOYMENT AGREEMENT. Weston shall have executed an
Employment Agreement substantially in the form of Exhibit E.
5.14 GENERAL RELEASES. Sellers shall have delivered to Buyer
General Releases in favor of the Company, the Buyer and the Sellers from Xxxxxxx
Xxxxx, Weston, Chivers, Xxxxx and Xxxxx.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The
obligation of the Sellers to consummate the purchase and sale of the Shares is
subject to the fulfillment, at or before the Closing, of all of the following
conditions:
6.1 DUE PERFORMANCE. The Buyer shall have fully performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
6.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Buyer set forth in this Agreement shall be
true and correct at the Closing, in all respects, as though made at and as of
the Closing.
6.3 SUPPORTING DOCUMENTS. Counsel for the Sellers shall have
received and approved:
18
(a) True copies of the Certificate of Incorporation and
current Bylaws of the Buyer; a certificate of good standing with regard to the
Buyer, together with appropriate corporate resolutions of the Board of Directors
and incumbency certificates reasonably satisfactory to Sellers' counsel;
(b) A stock certificate evidencing the Guardian Shares issued
to Weston;
(c) A certificate of the Buyer that the conditions set forth
in Sections 6.1 and 6.2 have been satisfied as of the Closing;
(d) Four certified checks in an amount equal to the Cash
Purchase Price as set forth in Section 1.2; and
(e) Such other documents as the counsel to the Sellers may
reasonably request.
6.4 OPINION OF COUNSEL. The Sellers shall have received the
opinion of Buyer's counsel substantially in the form attached as Exhibit F.
6.5 SATISFACTION OF COUNSEL. All actions, proceedings,
instruments, documents and other relevant legal matters in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory to
counsel for the Buyer.
6.6 THIRD PARTY CONSENTS. All necessary third party consents
of both Buyer and Sellers shall have been obtained by the Closing Date.
6.7 BOARD APPROVAL. The transactions contemplated hereby shall
have been approved by the full Board of Directors of the Company and its
shareholders and such approvals shall not have been withdrawn or adversely
modified.
7. WAIVER OF CONDITIONS. The Buyer and the Sellers shall have the right
to waive any part or all of any one or more of the conditions to their
performance set forth in this Agreement and, upon such waiver, the waiving party
may proceed with the consummation of the transactions contemplated hereby. It is
expressly understood that a waiver shall not constitute a waiver of any rights
which that party may have by reason of the breach by the other party of any
other warranty, covenant or agreement or by reason of any misrepresentation made
by the other party.
8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, but not later than the
Closing Date:
(i) by mutual written consent of the Buyer and the Sellers;
19
(ii) by the Buyer, in its sole discretion, if any of the
representations or warranties of the Sellers or the Principal Shareholders, as
the case may be, contained herein are not in all material respects true,
accurate and complete or if the Sellers or the Principal Shareholders breach any
covenant or agreement contained herein;
(iii) by the Buyer, if any required third party consents of
the Company or the Sellers are not obtained or become unobtainable;
(iv) by the Sellers, if any required third party consents of
the Buyer are not obtained or become unobtainable;
(v) by the Sellers, in their sole discretion, if any of the
representations or warranties of the Buyer contained herein are not in all
material respects true, accurate and complete or if the Buyer breaches any
covenant or agreement contained herein; or
(vi) by either the Buyer or the Sellers, if the Closing has
not taken place on or before April 30, 1998, unless the failure to consummate
the Closing on or prior to such date is solely due to such party's fault.
8.2 EFFECT OF TERMINATION. In the event of a termination of
this Agreement pursuant to Section 8.1, written notice thereof shall promptly be
given to the other party hereto and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
the other party hereto, and this Agreement shall forthwith become void and have
no further effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or shareholders, other than with respect to
Section 4 and Section 8.3 hereof. Notwithstanding such termination and anything
contained to the contrary herein, each party shall have the right to seek
damages in the event of a breach by the other party of its obligations under
this Agreement.
8.3 BREAKUP FEE. In the event of the termination of this
Agreement by the Buyer pursuant to Section 8.1(ii) or Section 8.1(iii), or the
Sellers' refusal to consummate the transactions contemplated hereby which
refusal is not permitted by Section 8.1, a breakup fee of $300,000 shall be
paid, within one business day following termination, by the Sellers to the
Buyer. In the event of the termination of this Agreement by the Sellers pursuant
to Section 8.1(iv) or Section 8.1(v), or the Buyer's refusal to consummate the
transactions contemplated hereby which refusal is not permitted by Section 8.1,
a breakup fee of $300,000 shall be paid, within one business day following
termination, by the Buyer to the Company.
9. COVENANTS OF THE SELLERS AND THE PRINCIPAL SHAREHOLDERS.
9.1 CONDUCT OF BUSINESS OF THE COMPANY PRIOR TO CLOSING.
Except as may otherwise be contemplated by this Agreement or otherwise consented
to or approved in writing by the Buyer, after the execution hereof: (a) the
Business of the Company shall be conducted only in the ordinary course of
business consistent with past practices; (b) the Sellers will (i) use their best
20
efforts to preserve the good will of and contractual relationships with their
respective customers, distributors, franchisors, dealers, licensees, suppliers
and others having business relations with the Company, and (ii) maintain the
Company's properties in customary repair, working order and condition; and (c)
the Sellers will not, and will cause the Company not to, (i) amend the Company's
Articles of Incorporation or Bylaws, (ii) issue or agree to issue any additional
shares of capital stock of any class or series or securities convertible into or
exchangeable for shares of capital stock or issue any options, warrants or other
rights to acquire any shares of capital stock, (iii) merge or consolidate with
or acquire all or substantially all of the assets or business of any other
company or entity, (iv) incur, assume or guarantee any indebtedness for money
borrowed other than in the ordinary course of business, (v) settle any claims,
actions or proceedings by paying an amount which, in the aggregate, is in excess
of $5,000, (vi) make any management fee, wage or salary increase not in the
ordinary course of business but in any event not in excess of $1,000 or agree to
pay any pension or retirement allowance not required by existing plans or
agreements or enter into any employment or consulting agreement (not terminable
at will), bonus or employee benefit plan, (vii) permit or allow any of the
Company's assets to be subjected to any Liens, except for Liens for Taxes not
yet due or as otherwise incurred in the ordinary course of business, (viii)
lease, sell, transfer or otherwise dispose of any of the Company's material
assets, except in the ordinary course of business and consistent with past
practice, (ix) make any material capital expenditure or commitment for
replacements or additions or structural improvements or maintenance to the
Company's property, plant, equipment or other capital assets, (x) declare, pay
or set aside for payment any dividend or other distribution in respect to the
Company's capital stock or redeem, purchase or otherwise acquire, directly or
indirectly, any shares of capital stock or other securities of the Company, (xi)
amend or revise any agreement the Company may have with any third party or (xii)
agree, whether in writing or otherwise, to take any action described in this
Section 9.1.
9.2 INSPECTIONS. Immediately subsequent to the execution of
this Agreement, the Sellers shall cause the Company to make available to Buyer
and its authorized employees and agents during normal business hours upon prior
notice and mutually convenient scheduling, for the purpose of facilitating
inspections by the Buyer of the Company's Business, affairs, properties, and
assets, all books and records and information, permits, licenses, approvals,
reports, studies and any and all other documents which the Company may have
pertaining to the Business and its assets including without limitation,
monitoring contracts. Buyer, its authorized agents and employees, shall have the
right of access to such books and records and all other documents and
instruments pertaining to the Company's Business and its assets at all
reasonable times subsequent to the date of the execution of this Agreement with
full right to: (i) inspect the assets and operations of the Company's Business;
and (ii) inspect on all books and records, and all other documents and
instruments, studies, surveys and tests on the assets and operations of the
Company's Business as Buyer, its authorized agents and employees shall deem
necessary or desirable (collectively, the foregoing are hereinafter referred to
as "Inspections"). Such rights of Inspections, or the exercise or non-exercise
of same, shall not constitute a waiver by Buyer of the breach of any
representation or warranty of the Principal Shareholders or the Sellers, as the
case may be, which were or might have been disclosed by such Inspections.
21
9.3 COMPANY AND SHAREHOLDER APPROVAL. As soon as practicable
following the date hereof, the Sellers shall cause the Company to take the steps
necessary to approve the transactions contemplated hereby. Each of the Sellers
covenants that, from the date of this Agreement to the Closing Date, he (i) will
vote all Shares as to which he has voting power against any other transaction
relating to the issuance or transfer of equity securities by, the sale of assets
by, or a change of control of, the Company and to grant proxies to designees of
the Buyer to that effect, and (ii) will not sell or otherwise dispose of any
interest in any Shares beneficially owned by him.
9.4 NOTICE OF CERTAIN EVENTS. The Sellers shall promptly
notify the Buyer of:
a. any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
b. any notice of other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and
c. any actions, suits, claims, investigations or
proceedings commenced or threatened against, relating to or involving or
otherwise affecting any party which, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to this Agreement or
which relate to the consummation of the transactions contemplated by this
Agreement.
10. RESTRICTION ON TRANSFER OF SHARES. Weston shall not sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily) any interest in his Guardian Shares to
a third party (a "Transfer"), except in compliance with the provisions of this
Section 10 and any other restrictions on Transfer contained in this Agreement.
10.1 FIRST OFFER RIGHT OF BUYER.
a. At least 15 days prior to effecting a Private Sale
(defined as any sale of Guardian Shares other than to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 promulgated under
the Securities Act) of any Guardian Shares to a third party, Weston shall
deliver a written notice (an "Offer Notice") to the President of Buyer who shall
forward it to an independent committee established by the Board of Directors of
Buyer (a "Committee"). The Offer Notice shall disclose in reasonable detail the
proposed number of Guardian Shares to be transferred, the proposed terms and
conditions of the Transfer and the identity of the prospective transferee(s) (if
known). Buyer shall have the sole responsibility for compliance with the
provisions of this Section 10.1(a) requiring Committee approval.
b. Buyer may, by recommendation of the Committee,
elect to purchase all, but not less than all, of the number of Guardian Shares
specified in the Offer Notice at the price
22
and on the terms specified therein by delivering written notice (the "Purchase
Notice") of such election to Weston as soon as practical but in any event within
15 days after the delivery of the Offer Notice (the "Election Period"). The
closing of such purchase by Buyer shall be held within 15 days after delivery of
the Purchase Notice to Weston.
10.2 TRANSFER TO THIRD PARTIES.
a. If Buyer has elected not to purchase all of the
Guardian Shares being offered in a Private Sale, Weston may, within 90 days
after the expiration of the Election Period, Transfer that number of Guardian
Shares that Buyer elected not to purchase to one or more third parties at a
price not less than 100% of the price per share offered to Buyer and on other
terms no more favorable to the transferees thereof than offered to Buyer in the
Offer Notice.
b. Any Shares not transferred within such 90-day
period shall be re-offered to Buyer under this Section 10 prior to any
subsequent Transfer.
10.3 PURCHASE PRICE. The purchase price specified in any Offer
Notice shall be payable solely in cash at the closing of the transaction or, if
provided in the Offer Notice, in installments over time.
10.4 PERMITTED TRANSFERS. The restrictions set forth in this
Section 10 shall not apply with respect to any Transfer of Guardian Shares by
Weston pursuant to applicable laws of descent and distribution or among Weston's
Family Group ("Permitted Transferees"). For purposes of this Agreement, "Family
Group" means Weston's spouse and descendants (whether natural or adopted) and
spouses of descendants and any trust, family limited partnership or similar
entity solely for the benefit of Weston and/or Weston's spouse and/or
descendants and/or spouses of their descendants. Except as set forth in Section
12 hereof, nothing in this Agreement shall prohibit a Public Sale (defined as
any sale of Guardian Shares to the public pursuant to an offering registered
under the Securities Act or to the public through a broker, dealer or market
maker pursuant to the provisions of Rule 144 promulgated under the Securities
Act) of Guardian Shares by Weston in accordance with applicable securities laws.
11. LEGENDS.
11.1 RESTRICTIVE LEGEND. Each certificate evidencing Guardian
Shares or securities convertible into Guardian Shares and each certificate
issued in exchange for or upon the Transfer of any such securities (a
"Certificate" or "Certificates") (if such securities remain Guardian Shares or
remain convertible into Guardian Shares after such Transfer) shall be stamped or
otherwise imprinted with a legend in substantially the following form (the
"Restrictive Legend"):
Some or all of the securities represented by this certificate
may be subject to transfer restrictions and certain other
restrictions and obligations set forth in a Stock Purchase
Agreement effective as of April 15, 1998, by and among the
issuer of such securities (the
23
"Company") and the shareholders of Precision Security Systems,
Inc., as amended and modified from time to time (the "Stock
Purchase Agreement"). A copy of such Stock Purchase Agreement
shall be furnished without charge by the Company to the holder
hereof upon written request to the Company at its principal
executive office.
Buyer shall imprint the Restrictive Legend on Certificates outstanding as of the
Closing Date, in addition to imprinting on such Certificates a legend stating
that the Guardian Shares evidenced by such Certificate are not registered under
the Securities Act (the "Securities Law Legend").
11.2 TRANSFER OF UNREGISTERED GUARDIAN SHARES. Guardian Shares
are transferable in (i) a public offering registered under the Securities Act or
(ii) in a transaction pursuant to Rule 144 or any other legally available means
of Transfer after the Transferring holder of Guardian Shares (the "Transferring
Shareholder") has satisfied the conditions specified in Section 11.3 below.
11.3 REMOVAL OF SECURITIES LAW LEGEND. In connection with the
Transfer of any Guardian Shares (other than a Transfer in a public offering
registered under the Securities Act), a Transferring Shareholder shall deliver
(a) written notice to Buyer describing in reasonable detail the Transfer or
proposed Transfer (the "Notice of Transfer") and (b) an opinion (the "Opinion")
of counsel, which (to Buyer's reasonable satisfaction) is knowledgeable in
securities laws matters, to the effect that such Transfer of Guardian Shares may
be effected without registration of such Guardian Shares under the Securities
Act. Upon delivery of the Notice of Transfer and the Opinion to Buyer by a
Transferring Shareholder, Buyer shall instruct its transfer agent to remove the
Securities Law Legend from the Certificate(s) evidencing such Guardian Shares.
11.4 REMOVAL OF RESTRICTIVE LEGENDS. The Restrictive Legend
shall be removed from (i) certificates representing Guardian Shares sold in
accordance with the terms of this Agreement and (ii) all certificates
representing the Guardian Shares upon the third anniversary of the Closing Date.
11.5 TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Guardian Shares in violation of any provision of this
Agreement shall be void, and Buyer shall not record such Transfer on its books
or treat any purported Transferee of such Guardian Shares as the owner of such
Guardian Shares for any purpose.
12. LOCK-UP AND VOLUME CAP. Notwithstanding anything to the contrary
contained herein, (a) Weston agrees that he shall not Transfer (i) any of his
Guardian Shares for one year from the Closing Date, and (ii) beginning on the
first anniversary of the Closing Date and ending on the third anniversary of the
Closing Date, in excess of a one-half of his Guardian Shares during any one-year
period thereof, except that if Weston does not sell up to one-half of his
Guardian Shares in any given one-year period, he may cumulate the remainder of
the one-half of his unsold Guardian Shares with the amount permitted to be sold
during the following one-year period ("Volume Cap"), and (b) in the event
Transfers in any one-year period exceed the Volume Cap, such Transfers shall be
null and void and Buyer shall not record such Transfer on its books or treat any
purported Transferee of
24
such Guardian Shares as the owner of such Guardian Shares for any purpose. The
restrictions set forth in this Section 12 shall not restrict any Transfer of
Guardian Shares by Weston pursuant to applicable laws of descent and
distribution or among his Family Group.
13. USE OF LEASED REAL PROPERTY. The Buyer shall be entitled to use the
Leased Real Property at no charge for a period of 14 days after the losing Date
and for a period of up to 30 days thereafter at a rate of $150 per day.
14. MISCELLANEOUS PROVISIONS.
14.1 FEES AND EXPENSES. Except in the event of a default,
and/or as otherwise set forth herein, each party will pay its own expenses in
connection with the execution and delivery of this Agreement and the performance
of its obligations hereunder, including attorneys' fees whether or not the
transactions contemplated hereby are consummated.
14.2 RESERVED.
14.3 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by certified mail, return receipt
requested with postage prepaid, or by overnight guaranteed delivery service, or
by facsimile (upon confirmation of receipt):
(a) if to the Sellers, to:
Xxxxxxx Xxxxx
0000 X. X. 00xx Xxxxxx
Xxxxx, XX 00000
Xxxxx Xxxxxx
00000 X. X. 000xx Xxxxxx
Xxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Xxxx Xxxxxxx
0000 Xxxxxx Xxxxxxx
Xxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Xxxx Xxxxx
P. X. Xxx 0000
Xxxxxxxxxx, XX 00000
Phone: 000-000-0000
25
Fax: 000-000-0000
with copy to:
Xxxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxx Traurig et al.
0000 Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
(b) if to the Buyer, to:
Guardian International, Inc.
0000 X. 00xx Xxxxxxx
Xxxxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, President
with copy to:
Xxxxxx Xxxxxxx, Esq.
Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxxxx, XX 00000-0000
Phone: 000-000-0000
Fax: 000-000-0000
14.4 SUCCESSION OF AGREEMENT.This Agreement and the rights and
obligations contained herein shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
14.5 TIME IS OF THE ESSENCE. For purposes herein, the parties
agree that time shall be of the essence of this Agreement and the
representations and warranties made are all material and of the essence of this
Agreement.
14.6 CAPTIONS AND PARAGRAPH HEADINGS. Captions and paragraph
headings contained in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope or intent of this
Agreement, nor the intent of any provision hereof.
14.7 NO WAIVER. No waiver of any provision of this Agreement
shall be effective unless it is in writing, signed by the party against whom it
is asserted and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
26
14.8 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same Agreement.
14.9 GENDER. All terms and words used in this Agreement
regardless of the number and gender in which used, shall be deemed to include
any other gender or number as the context or the use thereof may require.
14.10 ENTIRE AGREEMENT AND MODIFICATION. This Agreement and
the exhibits and schedules constitute the entire understanding and agreement
between the parties and may not be changed, altered or modified except by an
instrument in writing signed by all parties against whom enforcement of such
change would be sought. In the event any term or provision of this Agreement be
determined by appropriate judicial authority to be illegal or otherwise invalid,
such provision shall be given its nearest legal meaning or be construed as
deleted as such authority determines, and the remainder of this Agreement shall
be construed to be in full force and effect.
14.11 EXHIBITS. All exhibits and schedules attached hereto
contain additional terms of this Agreement. Typewritten or handwritten
provisions inserted in this form or attached hereto shall control all printed
provisions in conflict therewith.
14.12 GOVERNING LAW. This Agreement shall be construed and
interpreted according to the laws of the State of Florida (conflict of laws
provisions notwithstanding), and venue with respect to any litigation shall be
Broward County, Florida.
14.13 FURTHER ASSURANCES. Each of the parties shall execute
all documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Each party shall use their respective best
efforts to fulfill or obtain the fulfillment of the conditions to the closing.
14.14 PUBLIC ANNOUNCEMENTS. Upon the closing of the
transactions contemplated by this Agreement, the Buyer and the Sellers may issue
a press release with respect to the consummation of the transactions
contemplated by this Agreement in a mutually acceptable form. Except with
respect to such press release and the information contained therein, each of the
Sellers, on the one hand, and the Buyer, on the other hand, will consult with
the other and mutually approve all public announcements before issuing any press
release or otherwise making any public statements with respect to this Agreement
and the transactions contemplated hereby, and shall not issue any such press
release or make any such public statement prior to such consultation.
Notwithstanding the above, any party required by law to disclose the existence
of or the terms of this Agreement shall use its best efforts to provide prior
notice to the other party giving such other party an opportunity to comment on
the content of such disclosure, but shall in any event be permitted to make such
disclosure.
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14.15 SURVIVAL. All agreements contained in Sections 2, 3, 4,
10, 11 and 12 shall survive the execution and delivery of this Agreement, the
delivery of the Shares and the issuance and delivery of the Guardian Shares.
14.16 REMEDIES. Buyer shall be entitled to enforce its rights
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the ____ day of April, 1998.
GUARDIAN INTERNATIONAL, INC.
By: __________________________
Xxxxxxx Xxxxxxxx, President
and Chief Executive Officer
__________________________
Xxxxxxx Xxxxx, Individually
__________________________
Xxxxx Xxxxxx, Individually
__________________________
Xxxx Xxxxxxx, Individually
__________________________
Xxxx Xxxxx, Individually
