Exhibit 2.1
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Merger Agreement
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MERGER AGREEMENT
BETWEEN
XXXX SECURITY INTERNATIONAL, INC.
And
The Shareholders of
AMERICAN WASH SERVICES, INC.
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SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.3(c) Plan of Merger
1.6(c) Purchaser Opinion Letter
1.6(d) Registration Rights Agreement
1.7(f) Release
1.7(h) Sellers Opinion Letter
ATTACHED AS PART OF DISCLOSURE BINDER
1.3(b) Stock Allocation
2.2 Permitted Exceptions
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental violations
3.6(f) Definition of "Hazardous Materials" and Environmental Conditions
3.6(h) Mechanic's liens
3.6(j) Exceptions to proceedings which would affect use of the Property
3.7(a) List of Company's Leased Personalty and Permitted Encumbrances
3.10 Fiscal Condition of Company
3.11 Tax Deficiencies
3.12 Insurance Policies, etc.
3.13(a) Employment Agreements
3.13(b) Employee Information
3.13(c) Employee Benefit Plans, Funds or Programs
3.14(a) Exceptions to Company's operation in compliance with laws, etc.
3.14(b) Exceptions relating to environmental issues and liability
3.14(c) Notices of Violation
3.16 Exceptions to right of Sellers and Company to enter this Agreement
3.17 Transaction Intermediaries
3.19 Investments in Competing Companies
3.22 List of Litigation and Summaries
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MERGER AGREEMENT
This Merger Agreement ("Agreement") is made as of March 26, 1999, by
and between Xxxxx X. Xxxxxxx, Xx. and Red Mountain Holding, Ltd.
("Shareholders") on the one hand, and Xxxx Security International, Inc.
("Purchaser") on the other hand. Shareholders may sometimes be referred to as
"Sellers" in this Agreement.
RECITALS
The Shareholders are the owners of all of the outstanding shares of stock
("Company Shares") of American Wash Services, Inc. (the "Company"), which is in
the business of operating a car wash company (the "Business") throughout the
United States. The Company, through a wholly-owned subsidiary, owns and/or
operates certain car wash locations ("Business") and has entered into two
contracts to purchase additional multi-location car wash businesses
("Acquisition Contracts"). Purchaser owns all of the outstanding stock of Xxxx
Anti Crime Bureau, Inc. ("Subsidiary"). In accordance with the provisions of
this Agreement, the parties desire to merge Company into Subsidiary in exchange
for common stock of Purchaser, all on the terms contained herein. The parties
intend that the transactions contemplated hereby qualify as a reorganization,
within the meaning of Section 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by the Sellers. The
Disclosure Binder is organized under subheadings which correspond to the various
Schedules described in this Agreement. For purposes of identification, the
Disclosure Binder has been identified by the parties by a written statement
executed by the parties and appearing as the first page of the Disclosure
Binder. For purposes of this Agreement, a disclosure by Sellers of any fact on
a Schedule shall be deemed a disclosure on every Schedule of Sellers to the
extent such disclosure properly could have been made thereon but was not made,
provided a cross-reference thereon sets forth the Schedule where disclosure is
made.
ARTICLE I
ACQUISITION; CLOSING
SECTION 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
SECTION 1.2 Time and Place for Closing. Closing under this Agreement
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shall take place within fifteen days of the conditions set forth in Article VII
and Article VIII being satisfied or waived, time being of the essence, at the
offices of Company, 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxx Xxxxxx, or
such other place as the parties hereto may agree upon. The date that Closing
occurs is referred to hereinafter as the "Closing Date" and the act of closing
as "Closing." The exact Closing Date shall be established by a written notice
sent by Purchaser to Sellers.
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SECTION 1.3 Merger; Consideration.
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(a) At the Closing, pursuant to the provisions of the General Corporation
Law of Delaware, effective on the Closing Date, Company shall be merged with
Subsidiary, with the survivor of the merger being Subsidiary. At the Closing,
(i) the outstanding common stock of Company shall be automatically converted
into the common stock of Subsidiary and delivered to Purchaser, (ii) all of the
Company Shares previously outstanding shall be delivered to Purchaser, and (iii)
Purchaser shall deliver to Sellers (1) immediately available funds in the amount
of Four Million Six Hundred Eighty Seven Thousand Five Hundred and 00/100
Dollars ($4,687,500.), plus (2) Six Hundred Twenty Eight Thousand Three Hundred
Sixty Two (628,362) shares of unregistered shares of Purchaser's common stock,
par value $.01 per share (the " Xxxx Stock").
(b) The Xxxx Stock shall be allocated in the same proportions that the
Sellers own shares in the Company, as set forth on Schedule 1.3(b).
(c) At Closing, Subsidiary and Company shall execute the certificate of
merger attached hereto as Schedule 1.3(c) ("Certificate of Merger"), and the
parties shall file the Certificate of Merger with the Secretary of State of
Delaware.
SECTION 1.4 Closing. Following execution of this Agreement, Purchaser and
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Sellers shall be obligated to conclude the transaction strictly in accordance
with its terms within fifteen (15) days after the conditions of Closing set
forth in Article VII and Article VIII have been satisfied or waived, time being
of the essence. If the failure to conclude this transaction is due to the
refusal and failure of Sellers to perform their obligations under this
Agreement, Purchaser may seek to enforce this Agreement with an action of
specific performance, in addition to, and not in limitation of, any other rights
and remedies available to the Purchaser under this Agreement, or at law or in
equity, including, without limitation an action to recover their actual damages
resulting from the default of Sellers. If the failure to conclude this
transaction is due to the refusal and failure of Purchaser to perform its
obligations under this Agreement, Sellers may, in addition to and not in
limitation of any other rights and remedies available to the Sellers under this
Agreement, or at law or in equity, bring legal action to recover their actual
damages resulting from the default of Purchaser.
SECTION 1.5 Termination. This Agreement and the transactions contemplated
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hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Purchaser and the Sellers;
(b) by the Sellers, or by Purchaser in the event Purchaser or the Sellers,
as applicable, makes a material misrepresentation under this Agreement or
breaches a material covenant or agreement under this Agreement, and fails to
cure such misrepresentation or breach within ten (10) business days from the
date of written notice of the existence of such misrepresentation or breach; or
(c) by the Sellers or Purchaser, if the Closing shall not have occurred by
July 31, 1999, or such other date as may be agreed to by the parties hereto in
writing, due to the non-fulfillment of a condition precedent to such party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating party).
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All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that this Section 1.5, Article IX, Section 10.1, Section 10.2 and
Section 10.17 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement.
SECTION 1.6 Deliveries by Purchaser. At the Closing, Purchaser shall
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deliver, all duly and properly executed (where applicable):
(a) The Xxxx Stock due on the Closing Date, as provided in Section 1.3
above to be delivered to the Sellers;
(b) Immediately available funds in the amount of Four Million Six Hundred
Eighty Seven Thousand Five Hundred and 00/100 Dollars ($4,687,500.00) as
provided in Section 1.3 above to be delivered to Sellers;
(c) A copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution and delivery of this Agreement and each other
agreement to be executed in connection herewith (collectively, the "Collateral
Documents") and the consummation of the transactions contemplated herein,
certified by the secretary of Purchaser;
(d) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.6(c);
(e) Two assignable warrants to purchase an aggregate of 1,575,000 shares of
Purchaser's common stock, par value $.01 per share ("Common Stock") with a term
of 64 months, exercisable 120 days following the Closing hereunder, with an
exercise price of $1.375 (the "1,575,000 Warrants"), shall be issued for
1,500,000 shares to Xxxxx Xxxxxxx and 75,000 shares to Xxxxxx Xxxxxx;
(f) An assignable warrant to purchase 250,000 shares of Common Stock with
a term of 64 months, exercisable 120 days following the Closing hereunder, with
an exercise price of $2.50 (the "250,000 Warrant"), shall be issued to Xxxxx
Xxxxxxx.
(g) Evidence that a certificate of name change of Subsidiary has been
filed with the Secretary of State of the State of Delaware, which name shall be
reasonably acceptable to Sellers.
SECTION 1.7 Deliveries by Sellers. At the Closing, each of the Sellers,
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as applicable, shall deliver to Purchaser, all duly executed, the following:
(a) Duly executed certificates in valid form evidencing all of the Company
Shares owned by each Seller, duly endorsed in blank or accompanied by duly
executed stock powers attached or otherwise executed in the presence of
authorized representatives of Purchaser;
(b) The written resignations of all officers and directors of the Company
as of the time of Closing,
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if required by Purchaser;
(c) A certified copy of resolutions of the directors of the Company and
the Shareholders authorizing the execution and delivery of this Agreement and
each of the Collateral Documents;
(d) The Certificate described at Section 7.1;
(e) A release from each Seller, in a form and substance attached as
Schedule 1.7(e);
(f) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.7(g);
(g) The books and records of the Company, including, without limitation,
all original financial and operating records, the corporate minute book and
seal, the corporate stock ledger, and all title documents; and
(h) Other documents and instruments required by this Agreement, if any.
ARTICLE II
TITLE INSURANCE
SECTION 2.1 Owners Title Policy. The Company is foreclosing upon the
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assets and real property utilized in operating car washes at Flourtown and
Norristown, Pennsylvania ("Foreclosure Real Property"). The Company owns the
real property utilized in operating a car wash in Berlin, New Jersey ("Owned
Real Property"). The Company leases the real property utilized in operating car
washes at Bryn Mawr and West Chester, Pennsylvania, and Cherry Hill, New Jersey
("Leased Real Property"). If the Company has completed foreclosure on the
Foreclosure Real Property by Closing, the Company shall own, with respect to the
Foreclosure Real Property, an extended coverage owners policy of title insurance
from a title company selected by Sellers (the "Title Company"), dated as of the
Closing Date, in the amount equal to the fair market value of the Foreclosure
Real Property. At Closing, the Company shall own, with respect to the Owned
Real Property, an extended coverage owners policy of title insurance from the
Title Company for the Owned Real Property. At Closing, the Company shall own,
with respect to the Leased Real Property, an extended coverage tenant's policy.
The title policies shall include access and contiguity endorsements, and shall
insure title to the Foreclosure Real Property to be in fee simple in Company (or
with respect to the Leased Real Property, an unencumbered leasehold interest)
subject only to the Permitted Exceptions permitted by Section 2.2 hereof (the
"Owners Policy"). Seller shall bear the cost of the Owners Policy.
SECTION 2.2 Permitted Exceptions. The Owners Policy shall insure
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Company's interest in the Owned Real Property and, if applicable, the
Foreclosure Real Property to be free and clear of all encumbrances and
exceptions whatsoever except those listed on Schedule 2.2 attached hereto
("Permitted Exceptions"). Schedule 2.2 sets forth all encumbrances and
exceptions by separate parcel of real estate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein
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contained, Sellers represent and warrant to Purchaser and make the following
covenants for Purchaser's benefit. When the phrase "to Sellers' knowledge" or
any equivalent phrase is used in this Agreement, the phrase shall mean the
actual knowledge of any Seller.
SECTION 3.1 Organization and Standing. The Company is duly organized,
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legally existing and in good standing under the laws of the state of Delaware,
with full power and authority to own its properties and conduct its business as
now being conducted. The Company does not own any stock or interest in any
other corporation, partnership, or other business organization, except as listed
on Schedule 3.1.
SECTION 3.2 Company Stock. All of the authorized, issued, and outstanding
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shares of capital stock and other securities of the Company are owned by the
Shareholders, including without limitation equity securities, debt securities
and options. At Closing, the Shareholders will be the only owners of the
securities of the Company. The Company Shares each Seller owns are legally and
validly authorized and issued, fully paid and nonassessable and free and clear
of all liens, claims and encumbrances of every kind and nature and are not
subject to any agreement or instrument relating to the transfer, disposition or
voting of such securities. At Closing, all of the Company Shares will be
conveyed and assigned to Purchaser free and clear of all liens, claims and
encumbrances of every kind. There are no outstanding rights of any kind to
acquire additional shares of any class from the Company nor has any person
claimed any such rights. All of the outstanding shares of the Company's capital
stock have been duly authorized, issued, and are fully and validly paid and non-
assessable.
SECTION 3.3 Contracts, Permits and Material Documents. The items listed
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and included in Schedule 3.3, attached hereto, are all of the following with
respect to the Company ("Material Documents"): (i) leases and purchase
agreements for real property, and leases and purchase agreements for personal
property and businesses, including the Acquisition Contracts, (ii) licenses,
(iii) franchises, (iv) promissory notes, guarantees, bonds, letters of credit,
mortgages, liens, pledges, and security agreements under which the Company is,
or any of its assets are, bound or under which the Company is a beneficiary,
(v) collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of the Company's
businesses, and (viii) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement which are binding on the Company or
any of its property or pursuant to which the Company derives any material
benefit or has imposed upon it any material detriment. For purposes of this
Section 3.3 a material benefit or material detriment shall be anything which
provides a benefit or imposes a detriment having a value of $10,000 or more.
The Material Documents listed and included in Schedule 3.3 are organized under
subheadings for each of the different type of documents provided. Neither the
Company nor, to Sellers' knowledge, any person or party to the any of the
Material Documents or bound thereby is in material or knowing default under any
of the Material Documents, and no act or event has occurred which with notice or
lapse of time, or both, would constitute such a default. The Company is not a
party to, and the Company's property is not bound by any agreement or instrument
which is material to the continued conduct of its business operations as now
being conducted or with respect to which a default might materially and
adversely affect its properties, business operations, or financial condition of
the Company, except as listed in Schedule 3.3. To Seller's knowledge, the
documents listed on Schedule 3.3 confer on the Company all rights necessary to
enable the Company to conduct its operations as now being conducted.
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SECTION 3.4 Personal Property. All of the following items of personal
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property used in the business operations of the Company are owned by the Company
by good and marketable title free of all liens, and are now and at closing will
be in operable condition, normal wear and tear excepted.
(a) All equipment, computers, printers, card readers, vending machines,
appliances, machinery and parts, vehicles, tools, hoses, brushes, heating,
ventilation, air conditioning, plumbing, electrical, drainage, fire alarm,
communications, sprinkler, security and exhaust equipment and their component
parts; auto wash equipment, auto wash conveyor, auto drying equipment and
similar items in Sellers' possession or control, used in connection with,
located in or on, or otherwise pertaining to the Business (collectively, the
"Equipment");
(b) All of the inventory of retail items, operating supplies, parts and
accessories owned by the Company and used or usable in connection with the
Business;
(c) All office or other equipment, furnishings, supplies, brochures, sales
and promotional materials, catalogues and advertising literature, business
files, customer lists, customer records and information, and all pictures and
photographs, computer programs and software (with applicable documentation and
source codes), construction and "as-built" drawings, plans and specifications,
finish plans and other personal property of every nature and description in
Sellers' possession or control;
(d) All intellectual property used in connection with the Business or any
other asset, including, without limitation, know-how, trade secrets, trademarks,
trade names, and the exclusive right to use the names under which any of the
Business' locations are currently operated (collectively, the "Intellectual
Property");
(e) All of the accounts receivable, prepaid deposits, cash, goodwill and
all other tangible and intangible assets of the Company; and
(f) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (e) above.
Sellers represent and warrant that, in the aggregate, the personal property of
the Company is sufficient for the Company to carry on its business as previously
conducted and as presently conducted, and that the personal property is all in
operable condition. .
SECTION 3.5 [This section intentionally omitted.]
SECTION 3.6 Real Property. Each parcel of Foreclosure Real Property,
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Owned Real Property and Leased Real Property is listed on Schedule 3.6 attached
hereto and incorporated herein by reference. Those parcels of Foreclosure Real
Property which have been foreclosed upon by Closing, together with each parcel
of Owned Real Property and Leased Real Property are referred to in this Section
3.6 as the "Real Property." The Company has or will have at Closing good,
marketable and insurable title to all of the Real Property and any of the
Foreclosed Property with respect to which the foreclosure actions have been
completed, free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement except for the Permitted Exceptions. The Company has or will have
at Closing good, marketable and insurable leasehold interest pursuant to the
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terms of the leases covering the Leased Property free and clear of any
mortgages, pledges, liens, encumbrances, charge claims, and all leases covering
the Leased Properly are valid and enforceable. The Company has no interest in
any real property other than the properties listed on Schedule 3.6. The Company
nor any of its predecessors has ever had an ownership interest in any other real
property, except as disclosed in schedule 3.6.
(a) To Sellers' knowledge, in all material respects, and except as set
forth in Schedule 3.6(a) attached hereto and incorporated herein, the Real
Property is, and at all times during operation of the Company's business thereon
has been, licensed, permitted and authorized for the operation of such business
under all applicable federal, state and local statutes, laws, rules,
regulations, orders, permits (including, without limitation, zoning restrictions
and land use requirements) and licenses and all administrative and judicial
judgments, rulings, decisions and orders affecting or otherwise applicable to
the protection of the environment, the Real Property and the conduct of such
business thereon (collectively, the "Applicable Laws").
(b) To Sellers' knowledge, except as set forth in Schedule 3.6(b) attached
hereto and incorporated herein by reference, the Real Property is legally usable
for its current uses, and the Real Property can be used by the Purchaser after
the Closing to operate such business as is currently operated, without violating
any Applicable Law or private restriction, and such uses are legal, conforming
uses.
(c) To Sellers' knowledge, except as set forth in Schedule 3.6(c) attached
hereto and incorporated herein by reference, all activities and operations
conducted on the Real Property, whether by Sellers or by third parties, are now
being conducted and have always been conducted in compliance with all Applicable
Laws.
(d) The Sellers and Company shall make available on Purchaser's reasonable
request all engineering, geologic, environmental and other similar reports,
documentation and maps relating to the Real Property in the possession of the
Shareholders.
(e) To Sellers' knowledge, except as set forth in Schedule 3.6(e) attached
hereto and incorporated herein by reference, neither Sellers nor the Company nor
the Real Property now is or ever has been involved in any litigation or
administrative proceeding seeking to impose fines, penalties or other
liabilities or seeking injunctive relief for violation of any Applicable Laws
relating to the environment.
(f) To Sellers' knowledge, there have been no spills, leaks, deposits or
other releases into the environment or onto or under the Real Property of any
Hazardous Materials as defined for purposes of this Agreement as any material or
substance which, by reason of its composition or characteristics, is (i) toxic
or hazardous waste ("Hazardous Waste") as defined in either (A) the Solid Waste
disposal Act, 42 U.S.C. (S)(S) 6901 et seq., or Section 6(c) of the Toxic
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Substance Control Act, 15 U.S.C. (S)2605(c), or the Resource Conservation and
Recovery Act, 42 USCA Section 6901 et seq., or any laws of similar purpose or
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effect, and any rules, regulations or policies promulgated thereunder, or (B)
any Environmental Law as hereinafter defined, or (ii) special nuclear or by-
products materials within the meaning of the Atomic Energy Act of 1954, or other
material environmental conditions in quantities that require remediation, other
than as disclosed on Schedule 3.6(f).
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(g) To Sellers' knowledge, no party, other than the Company, has a present
or future right to possession of all or any part of the Real Property, except
for any right defined in, under or by any of the Permitted Exceptions.
(h) To Sellers' knowledge, there are no mechanic's liens affecting the Real
Property and no work has been performed on the Real Property within twelve (12)
months of the date hereof for which a mechanic's lien could be filed, except as
set forth in Schedule 3.6(h) attached hereto and incorporated herein by
reference.
(i) To Sellers' knowledge, there are no levied or pending special
assessments affecting all or any part of the Real Property owed to any
governmental entity and none is threatened.
(j) To Sellers' knowledge, there are no proceedings or amendments pending
and brought by or threatened by, any third party which would result in a change
in the allowable uses of the Real Property or which would modify the right of
the Company or the Purchaser to use the Real Property for its present uses after
the Closing Date, except as set forth in Schedule 3.6(j) attached hereto and
incorporated herein by reference.
(k) To Sellers' knowledge, no portion of the Real Property contains any
areas that could be characterized as disturbed, undisturbed or man-made wetlands
or as "waters of the United States" pursuant to any Applicable Laws or the
procedural manuals of the Environmental Protection Agency, U.S. Army Corps of
Engineers or any applicable state agency whether such characterization reflects
current conditions or historic conditions which have been altered without the
necessary permits or approvals, except as listed on Schedule 3.6(k) attached
hereto and incorporated herein by reference.
SECTION 3.7 Title. To Sellers' knowledge, the Company has good and
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marketable title to all of its personal property, tangible and intangible,
including, without limitation, all of the assets reflected on the "Most Recent
Balance Sheet" (hereinafter defined), all personal property currently located on
its premises, all cash and accounts receivable, all items of personal property
set forth on the schedules attached hereto, and all trademarks and other
intellectual property used in the Company's business, except in each case, that
personal property which the Company leases. All leases of personal property
having a fair market value of $10,000 or more are listed on Schedule 3.7
attached hereto and incorporated herein by reference. All of such assets are
owned by the Company free and clear of any mortgage, pledge, lien, encumbrance,
charge, claim, security agreement, agreement regarding or restricting transfer
or title retention or other security arrangement, except the items set forth in
subparagraphs (a) through (c) below, and the items listed on Schedule 3.7
("Permitted Company Assets Encumbrances"). Schedule 3.7 identifies all liens by
amount and by the document, instrument or law under which it arises.
(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or materialmen
and the like;
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation; and
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment.
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SECTION 3.8 Financial Statements. Prior to Closing, Sellers will deliver
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to Purchaser true and correct copies of the following financial statements of
the Company (the "Financial Statements"):
(a) Balance Sheets for the Company as of December 31, 1998, and statements
of income, cash flow and retained earnings for the same period, all prepared on
an accrual basis and reviewed by Company's regular accountants (the "1998
Financial Statements" ).
(b) A balance sheet for the Company as of March 31, 1999 ("Most Recent
Balance Sheet"), and a statements of income, cash flow and retained earnings for
the period ended March 31, 1999 ("Most Recent Income Statement"), all prepared
on an accrual basis by the Company. The Most Recent Balance Sheet and Most
Recent Income Statement are hereafter referred to as the "Most Recent Financial
Statements."
The Financial Statements have been prepared by the regular accountants of
the Company, in accordance with generally accepted accounting principles
("GAAP"). All notes and contingent liabilities required to be stated and
reflected under GAAP are stated and reflected on the Financial Statements.
Each of the Financial Statements (including all footnotes thereto) is true,
complete and correct in all material respects. The balance sheets present fairly
and accurately the financial condition of the Company as of the dates indicated
thereon and the statements of income present fairly and accurately on an accrual
basis the results of the operations of the Company for the periods indicated
thereon. The Company has not (i) made any material change in its accounting
policies or (ii) effected any prior period adjustment to, or other restatement
of, its financial statements for any period. The Financial Statements are
consistent with the books and records of the Company (which books and records
are correct and complete).
SECTION 3.9 Liabilities; Accounts Receivable
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(a) To Sellers' knowledge, the Company does not have any liabilities,
fixed or contingent, other than:
(i) liabilities fully reflected in the Most Recent Balance Sheet; and
(ii) accounts payable arising since the date of the Most Recent Balance
Sheet in the normal course of business consistent with past custom and practice.
(b) To Sellers' knowledge, all accounts receivable of the Company, less a
bad accounts reserve as set forth on the Most Recent Balance Sheet , are valid
accounts receivable, have been generated in the ordinary course of the Company's
business and all services required to be rendered for the accounts receivable to
be due have been rendered. To Sellers' knowledge, there are no defenses or set-
offs to any of the accounts receivable..
SECTION 3.10 Fiscal Condition of Company. Since the date of the 1998
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Financial Statements, except as set forth on Schedule 3.10, there has not
(except as otherwise specifically permitted by this Agreement) been:
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(a) Any material change in the financial condition, liabilities, business
organization or personnel of the Company or in the relationships of the Company
with suppliers, customers or others, other than changes occurring in the
ordinary course of business;
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock;
(c) Any sale or other disposition of any asset owned by the Company at the
close of business on the date of the Most Recent Balance Sheet, or acquired by
it since that date, other than in the ordinary course of business or which
individually do not exceed $10,000 or in the aggregate, do not exceed $20,000;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset having an acquisition price of $50,000 or more;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $100,000 in the aggregate, and which
is not covered by insurance;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee;
(g) Any loans or advances to the Company other than renewals or extensions
of existing indebtedness; or
(h) Any change in accounting method or practice.
SECTION 3.11 Tax Returns. The Company has filed all Federal and other
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tax returns for all periods on or before the due date of such return (as may
have been extended by any valid extension of time) and has paid all taxes due
for the periods covered by the said returns. The Company has no liability for
taxes incurred by its operations prior to Closing, except for taxes for the
current fiscal year plus any tax reserve reflected on the Most Recent Balance
Sheet. The Company is a Subchapter C corporation under the Internal Revenue
Service Code. The Company has filed, and will file in a timely manner, all
requisite federal, state, local and other tax returns due for all fiscal periods
ended on or before the date hereof and as of the Closing shall have filed in a
timely manner all such returns due for all periods ended on or before the
Closing Date. The Company has duly withheld and collected all taxes which the
Company is required to withhold or collect by law, has paid over to the proper
authorities all such amounts required to be paid, and has in reserve all amounts
so withheld or collected which have not yet been required to be paid. No taxing
authority has asserted any deficiency for any prior tax period of the Company,
and the Sellers are not aware of any facts which would constitute the basis for
the assertion of such a deficiency, except as listed on Schedule 3.11 attached
hereto..
SECTION 3.12 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company or which the Company has had
issued and which has not expired are listed on Schedule 3.12 attached hereto.
Schedule 3.12 includes, the names and addresses of the beneficiaries,
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insurers and sureties, policy and bond numbers, types of coverage or bond, time
periods or projects covered and the names and addresses of all known agents or
agencies, issuing banks, and beneficiaries, with respect to each listed
insurance policy, performance bond and letter of credit. The Company's current
insurance policies, performance bonds and letters of credits are still in force
and effect and the premiums thereon are not delinquent. The Company has not
received notification from any insurance carrier denying or disputing any claim
made by the Company or denying or disputing any coverage for any such claim or
denying or disputing the amount of any claim. The Company does not have any
claim against any of its insurance carriers under any policies insuring it
pending or anticipated and there has been no occurrence of any kind which would
give rise to any such claim.
SECTION 3.13 Employees, Pensions and, ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee that is not terminable without penalty on notice of two weeks
or less, except as listed on Schedule 3.13(a).
(b) No employee of the Company is represented by any union. The name,
social security number and current rate of compensation of each of the Company's
employees and department in which each person is employed is listed on Schedule
3.13(b) attached. There is no pending or threatened dispute between the Company
and any of its employees which might materially and adversely affect the
continuance of any Company's business operations.
(c) Attached hereto, made a part hereof and marked Schedule 3.13(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) which are currently
maintained and/or were established or sponsored by the Company (whether or not
they are now terminated) or to which the Company currently contributes, or has
an obligation to contribute in the future, including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions ("Plans"), whether or not the Plans are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable law, (ii)
written or oral, (iii) funded or unfunded, or (iv) generally available to all
employees of the Company.
(d) The Company has delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii)
accurate and complete detailed summaries of all oral Plans, (iii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iv) true and complete copies of all annual reports for any Plan prepared
within the past 5 years, and (v) all filings submitted to and any correspondence
received from any government agency relating to any Plan within the past 5
years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA except as set forth on Schedule 3.13 (e), attached hereto made a part
hereof. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
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(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other law applicable to such Plans, and, in all material respects, have
been administered, operated and managed in substantial accordance with the
governing documents of the Plan and the requirements of ERISA. The Company has
no unfunded obligations or liabilities with respect to any Plan and the present
value of the benefit liabilities of each Plan which is a Pension Plan is less
than the fair market value of the assets of such Plan.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, after due inquiry of the Company, threatened relating
to any Plan, fiduciary of any Plan or assets of any Plan, before any court,
tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no material adverse
change in the condition of the Plan since the date of the most recent Form 5500,
audited annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
(j) The Company has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.
(k) To Sellers knowledge, there are no ERISA, pension plan, profit sharing
plan or compensation claims against the Company by employees.
SECTION 3.14 Legality of Operation. In regard to the Company, and to
---------------------
Sellers' knowledge:
(a) Except as disclosed in Schedule 3.14(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in material
compliance with all Federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use laws; payroll,
employment, labor, or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not limited to the
Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act ("Law"). Except as disclosed
in Schedule 3.14(a), the Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to the Company's property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as disclosed in Schedule
3.14(a), the Company has received no notification of any past or present failure
by the Company
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to materially comply with any Law applicable to it or its assets.
(b) Except as disclosed in Schedule 3.14(b) to this Agreement, the
Company is in material compliance with all Federal, state and local laws, rules
and regulations relating to environmental issues of any kind ("Environmental
Law").
(c) Attached hereto as Schedule 3.14(c) is a list of all Notice of
Violations relating to Environmental Laws issued to the Company in the past two
years by any federal, state or local regulatory agency. There are no
outstanding or unremedied notices of violation either from a federal, state or
local authority.
(d) To Sellers' knowledge, no employee, contractor or agent of the Company
has, in the course and scope of employment with the Company, been harmed by
exposure to hazardous materials, as defined under the flaws.
(e) To Sellers' knowledge, except as set forth in Schedule 3.14(f), all
licenses, sewer hookups approvals, permits and certificates ("Government
Approvals") needed or required for the operation of the Company's business are
set forth on Schedule 3.3. All such Government Approvals are in full force and
effect, the Company.
SECTION 3.15 Corrupt Practices. To Sellers' knowledge, the Company has not
-----------------
made, offered or agreed to offer anything of value to any employees of any
customers of the Company for the purpose of attracting business to the Company
or any foreign or domestic governmental official, political party or candidate
for government office or any of their respective employees or representatives,
nor has the Company otherwise taken any action which would cause it to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 3.16 Legal Authority and Compliance. Except as listed in Schedule
------------------------------
3.16 attached hereto and incorporated herein, each Sellers and the Company have
the right, power, legal capacity and authority to enter into, and perform their
respective obligations under this Agreement, and no approvals or consents of any
other persons (including the consent of any mortgagee holding a mortgage on the
Owned Real Property or the Leased Property and any landlord of the Leased
Property) are necessary in connection with the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action of the directors and shareholders of the
Company. The execution, delivery and performance of this Agreement will not
result in a breach of or constitute a default or result in the loss of any
material right or benefit under:
(a) Any charter, by-law, agreement or other document to which any Seller
or the Company is a party or by which the Company or any of its property is
bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Sellers, the Company, or the property of the Company.
SECTION 3.17 Transaction Intermediaries. Seller has not employed or
--------------------------
retained the services of any financial advisor, broker, or finder with respect
to which the Seller will incur any broker's, finder's, investment banking or
similar fees, commissions or expenses, in connection with the transactions
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contemplated by this Agreement.
SECTION 3.18 Intellectual Property. To Sellers' knowledge, the Company has
---------------------
not infringed and is not now infringing, on any trade name, trademark, service
xxxx, copyright, trade secret or patent belonging to any person, firm or
corporation ("Intellectual Property") and no one has or is infringing any
Intellectual Property right of the Company.
SECTION 3.19 Competition. No salaried officer, shareholder or employee
-----------
of the Company, nor any spouse, child or other relative of any of them, has any
direct or indirect interest in any competitor of the Company within the
geographical area in which the Company currently conducts business, or an
interest in any supplier or customer of the Company or in any person from whom
or to whom the Company leases any real or personal property, or in any other
person with whom the Company is doing business which interest adversely or
materially affects the business of the Company, excepting only those investments
of not more than five percent of the capital stock of a business, the stock of
which is traded on a national securities exchange or over-the-counter, where
such investments are set forth on Schedule 3.19 attached hereto and incorporated
herein by reference.
SECTION 3.20 Disclosure. Neither the representations and warranties of
----------
the Sellers contained in this Agreement nor any information contained in any
Exhibit or Schedule or other document delivered by the Sellers or the Company to
Purchaser contains any untrue statement of a material fact, omits to state any
statement of a material fact necessary to make the statements contained therein
or herein not misleading. No investigation conducted by the Purchaser shall be
deemed to limit or vitiate in any way the effect of the representations and
warranties made herein; however, Purchaser shall disclose to Sellers prior to
Closing any representation or warranty that Purchaser shall have found to be
untrue or correct and provide Sellers the opportunity to cure such
misrepresentation.
SECTION 3.21 Continuation of Legal Status. No written agreement between
----------------------------
the Company and any third party shall be impaired or in any way limited by the
transactions contemplated by this Agreement.
SECTION 3.22 Litigation. All pending or, to Sellers' knowledge,
----------
threatened litigation, administrative or judicial proceedings or investigations
by any governmental agency or officials involving the Company or any of its
property (including personal or owned, foreclosed or leased real property) or
assets, liabilities or the Company Shares, together with a description of each
such proceedings, is set forth on Schedule 3.22 attached. There is no pending
or, to Sellers' knowledge, threatened litigation, administrative or judicial
proceedings or investigation involving the Company or its owned, leased or
foreclosed real property, assets, liabilities or the Company Shares, except as
listed on Schedule 3.22.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers that the representations
and warranties contained in this Article IV are true on the date hereof and
shall be true on the Closing Date.
SECTION 4.1 Structure. Purchaser is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
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SECTION 4.2 Authorization to Proceed with this Agreement. Purchaser has,
--------------------------------------------
by proper corporate proceedings, duly authorized the execution, delivery and
performance of this Agreement and the Collateral Documents.
SECTION 4.3 Absence of Intermediaries. Purchaser has not employed or
-------------------------
retained the services of any financial advisor, broker, or finder with respect
to which the Purchaser will incur any broker's, finder's, investment banking or
similar fees, commissions or expenses, in connection with the transactions
contemplated by this Agreement.
SECTION 4.4 Commission Filings. All Forms 8-K, 10-K, 10-Q and Proxy
------------------
Statements required to be filed by Purchaser have been timely filed with the
Securities and Exchange Commission ("SEC") for fiscal year ending December 31,
1998 (the "Public Reports") under the Electronic Data Gathering, Analysis and
Retrieval system and are available to Sellers. The Public Reports accurately and
completely describe, in all material respects, Purchaser's financial condition
and results of operations as of the date of such filings and as of the date
hereof, and do not omit any material fact(s) necessary to make the information
contained in the filings not misleading, in light of the circumstances under
which they were made.
SECTION 4.5 Issued Common Stock. The Xxxx Stock to be issued pursuant to
-------------------
this Agreement has been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable.
SECTION 4.6 NASDAQ Listing. Purchaser shall not have received any notice
--------------
from NASDAQ that threatens its continued listing on the NASDAQ National Market
System, and Purchase shall continue to be so listed.
ARTICLE V
ADDITIONAL AGREEMENTS OF SELLERS
The Sellers covenant and agree with Purchaser as follows:
SECTION 5.1 Restrictions on Transfer of Unregistered Stock. The Sellers
----------------------------------------------
understand and agree that the following restrictions and limitations are
applicable to the Sellers' purchase and resale or other transfer of the Xxxx
Stock, pursuant to the Securities Act of 1933 (the "Act") or otherwise:
(a) Sellers agree that the Xxxx Stock shall not be sold or otherwise
transferred, unless the Xxxx Stock is registered under the Act and state
securities laws or such sale or transfer is exempt therefrom.
(b) A legend in substantially the following form will be placed on the
certificates evidencing the Xxxx Stock to be issued to the Sellers:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Xxxx Security International, Inc., shall have been furnished with an
opinion of counsel,
B-18
reasonably satisfactory to counsel for Xxxx Security International, Inc.,
that registration is not required under any such acts."
(c) Stop transfer instructions will be delivered to the Purchaser's
transfer agent with respect to the Xxxx Stock issued to Sellers pursuant to
this Agreement so as to restrict resale or other transfer thereof except in
accordance with the foregoing provisions of this Agreement.
SECTION 5.2 Representations as to Private Offering. The Xxxx Stock is
--------------------------------------
being delivered to the Sellers in a private placement under Section 4.2 of the
Act and under Regulation D promulgated under the Act. To induce Purchaser to
issue the Xxxx Stock, each Seller represents and warrants as follows:
(a) Each Seller represents and warrants that he or she is a resident of
New Jersey and is an accredited investor, as that term is defined in Regulation
D under the Act.
(b) Each Seller acknowledges that they have received a copy of the Public
Reports.
(c) The Sellers represent and warrant that the Xxxx Stock is being
acquired for their own account for investment purposes only without a view to
public distribution or resale and that the Sellers have no contract,
undertaking, agreement or arrangement to sell or otherwise transfer or dispose
of Xxxx Stock, or any portion thereof, to any other person.
(d) The Sellers represent and warrant that, in determining to acquire the
Xxxx Stock, they have relied solely upon their independent investigation,
including the advice of their legal counsel and accountants or other financial
advisers or purchaser representatives, and have, during the course of
discussions concerning their acquisition of the Xxxx Stock, been offered the
opportunity to ask such questions and inspect such documents concerning
Purchaser and its business and affairs as they have requested so as to more
fully understand the nature of the investment and to verify the accuracy of the
information supplied.
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE XXXX STOCK INVOLVES
A HIGH DEGREE OF RISK, and represents and warrants that they can bear the
economic risk of the acquisition of the Xxxx Stock, including the total loss of
their investment.
(f) The Sellers represent and warrant that (i) they have adequate means of
providing for their current needs and financial contingencies, (ii) they have no
need for liquidity in this investment, (iii) they have no debts or other
obligations, and cannot reasonably foresee any other circumstances, that are
likely in the future to require them to dispose of the Xxxx Stock, and (iv) all
their investments in and commitments to non-liquid investments are, and after
their acquisition of the Xxxx Stock will be, reasonable in relation to their net
worth and current needs.
(g) The Sellers understand that no federal or state agency has approved or
disapproved the Xxxx Stock or the issuance or sale thereof or made any finding
or determination as to the fairness of the Xxxx Stock for investment.
(h) The Sellers understand that the Xxxx Stock is being offered and sold
in reliance on specific exemptions from the registration requirements of federal
and state securities laws and that Purchaser is
B-19
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings set forth herein in order to
determine the applicability of such exemption and the suitability of Sellers to
acquire the Xxxx Stock.
SECTION 5.3 Access to Records. The Sellers will cause the Company to give
-----------------
to Purchaser and its representatives, experts and advisors, from and after the
date of execution of this Agreement and up until Closing, full access to all of
the properties, assets, books, contracts, documents, records, contracts and
customer lists of the Company, and to make available to Purchaser and its
representatives, experts and advisors all additional financial statements of and
all information with respect to the business and affairs of the Company that
Purchaser may reasonably request. Purchaser and its representatives shall have
the right to copy any information or documentation the Purchaser is entitled to
inspect under this Section 5.34.
SECTION 5.4 Continuation of Business. The Sellers will operate the Company
------------------------
until the time of Closing, using prudent business judgment so as to preserve its
business organization intact, to assure, to the extent possible, the
availability to Purchaser of the present key employees of the Company, and to
preserve for Purchaser the relationships of the Company with suppliers and
others, all to the end that every bona fide effort be made that the ongoing
---- ----
business of the Company will not be impaired at the time of Closing.
SECTION 5.5 Continuation of Insurance. The Sellers will cause the Company
-------------------------
to keep in existence all policies of insurance insuring the Company against
liability and property damage, fire and other casualty through the time of
Closing.
SECTION 5.6 Standstill Agreement. Unless and until this Agreement is
--------------------
terminated without the Closing having taken place, the Shareholders will not
directly or indirectly solicit offers for the Real Property, the Company Shares
or the assets of the Company or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company's assets; nor
will the Shareholders permit the Company to do any of the foregoing.
SECTION 5.7 FIRPTA Certificate. Purchaser and Sellers acknowledge that
------------------
the financial provisions of this Agreement are subject to the requirements of
the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Purchaser in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Sellers. Among other circumstances, Purchaser is not required to withhold
said amount if Sellers furnish Purchaser with a certificate stating the Sellers'
U.S. Taxpayer Identification Numbers and that no Seller is a foreign person
within the meaning of the Code. Sellers agree to provide to Purchaser at
Closing such certificate as is reasonably necessary to insure that such
withholding is not required under FIRPTA.
SECTION 5.8 Consents. Sellers and Purchaser shall cooperate with each
--------
other and use their best efforts to obtain all approvals, authorizations and
consents required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, (i) the approval of the Federal Trade
Commission pursuant to the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Acts of 1986, and (ii) the approval of every regulatory agency of
federal, state, or local government that may be required in the opinion of
either Purchaser or Sellers.
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SECTION 5.9 Audited Financial Statements. Before and after Closing,
----------------------------
Sellers agree to cooperate with Purchaser to have the Company prepare audited
balance sheets for the Company as of December 31, 1998, and statements of
income, cash flow and retained earnings for the Company for the twelve-month
period ended December 31, 1998 ("Historical Financial Statements"), as rapidly
as possible, but in no event later than one week prior to the date the Form 8-K
covering the transactions contemplated hereby must be filed with the SEC.
Sellers' cooperation shall include, without limitation, the execution of
standard representation letters requested by Purchaser's auditors. Sellers
shall prepare a compiled stub balance sheet and statements of income, cash flow
and retained earnings for the period commencing January 1, 1999, and ending on
the last day of the last calendar quarter ending prior to Closing ("Interim
Financial Statements"). The Historical Financial Statements and the Interim
Financial Statements shall be prepared at Purchaser's cost. Sellers shall cause
the Company's usual accountants to cooperate with Purchaser's accountants.
Purchaser shall pay for the reasonable costs of the Company's usual accountants
in the preparation of the Historical Financial Statements and the Interim
Financial Statements. Notwithstanding the foregoing, Sellers agree to cause the
preparation of audited financial statements for the period ended December 31,
1999 prior the Closing, and as rapidly as possible, in the event the SEC
requires audited financial statements to be included in the information
statement to be delivered to shareholders.
ARTICLE VI
ADDITIONAL AGREEMENTS OF PURCHASER
SECTION 6.1 Payment of Expenses. Purchaser will pay all expenses
-------------------
(including legal fees) incurred by it in connection with the negotiation,
execution and performance of this Agreement. The Sellers and Company will pay
all expenses incurred by the Sellers and Company (including legal fees) in
connection with the negotiation, execution and performance of this Agreement.
SECTION 6.2 Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchaser shall allow the Sellers and their professional
advisers access to all business records and files of the Company pertaining to
the operation of the Company prior to the Closing Date which were delivered to
the Purchaser in accordance with this Agreement ("Records") where the
Shareholders or Sellers require access to the Records for the purpose of
preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchaser's business. For a period of six years after the Closing Date, the
Purchaser shall not dispose of or destroy any material Records without first
providing written notice to the Sellers at least 30 days prior to the proposed
date of such disposition or destruction.
SECTION 6.3 Warrants. As additional consideration for the Company Shares
---------
to be acquired pursuant hereto, Purchaser agrees to issue on the Closing Date(a)
to Xxxxx Xxxxxxx an assignable warrant to purchase 1,575,000 shares of Common
Stock at an exercise price of $1.375, (b) to Xxxxxx Xxxxxx an assignable warrant
to purchase 75,000 shares of Common Stock at an exercise price of $1.375, and
(c) to Xxxxx Xxxxxxx an assignable warrant to purchase 250,000 shares of Common
Stock at an exercise price of $2.50 per share (the "250,000 Warrant"). Each
warrant shall have a term of 64 months and shall be exercisable 120 days
following the Closing hereunder.
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ARTICLE VII
CONDITIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing:
SECTION 7.1 Compliance by Sellers and the Company. The Sellers and the
-------------------------------------
Company shall have performed and complied with all of the obligations and
conditions required by this Agreement to be performed or complied with by the
Sellers and Company at or prior to the Closing Date. All representations and
warranties of Sellers contained in this Agreement shall be true and correct at
and as of the date made and the Date of Closing, with the same force and effect
as though made at and as of the Date of Closing, except for changes expressly
permitted by this Agreement, and Purchaser shall have received a Certificate
duly executed by each of the Sellers representing and warranting the foregoing.
SECTION 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the its assets or the Business or which, as a result of the transaction
contemplated by this Agreement, might affect such right as to Purchaser or any
affiliate thereof subsequent to the Date of Closing and which, in the judgment
of the Board of Directors of Purchaser, made in good faith and based upon advice
of its counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement.
SECTION 7.3 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Company, and the Company shall have not suffered any material
loss or damage or any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.
SECTION 7.4 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of the Federal Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act; and (iii) the approval of every regulatory agency of federal,
state, or local government that may be required in the reasonable opinion of
either Purchaser or Sellers. Purchaser shall have been furnished with
appropriate evidence, reasonably satisfactory to Purchaser and its counsel, of
the granting of such approvals, authorizations and consents.
SECTION 7.5 Opinion of Counsel. Sellers shall have delivered to the
------------------
Purchaser the opinion of counsel, dated the Closing Date, in the form and
substance of Schedule 1.7(i).
SECTION 7.6 Title Insurance. Purchaser shall receive comfort,
---------------
acceptable to it, that there has been issued an Owner's Policy on all Owned Real
Property, and that such Owner's Policies are in full force and effect and shall
remain in full force and effect following the Closing and shall inure to the
benefit of Purchaser.
SECTION 7.7 Stock Purchase Agreement. Closing shall have taken place
------------------------
under a stock purchase agreement dated the date hereof executed between Xxxxx X.
Xxxxxxx, Xx. and such persons as are designated
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by Xx. Xxxxxxx, if any, pursuant to which the Purchaser shall sell to such
individual(s) 3,675,000 shares of its Common Stock at a price of $1.375(the
"Stock Purchase Agreement").
SECTION 7.8 Due Diligence. As a condition of Closing, the Purchaser shall
-------------
be satisfied in its sole discretion with the results of the due diligence
investigation it has made concerning the Company and the transactions, as set
forth in this Agreement. Sellers acknowledge that the due diligence
investigation will not be complete until the later to occur of April 15 or
twenty business (20) days following receipt of both the 1998 Financial
Statements and the Most Recent Financial Statements; provided that the due
diligence period shall not expire until twenty (20) business days following the
date that Purchaser has received all of the information requested on the due
diligence request list provided to Seller's attorney, unless sooner terminated
by Purchaser, at its sole discretion.
SECTION 7.9 Fairness Opinion. Purchaser shall have received a favorable
----------------
opinion from a reputable investment banking firm selected by Purchaser to the
effect that the transaction is fair to the shareholders of Purchaser, from a
financial point of view.
SECTION 7.10 Shareholder and Board Approval. The shareholders owning at
------------------------------
least a majority of the outstanding shares of the Purchaser and the Board of
Directors of Purchaser shall approve the transactions contemplated hereby.
ARTICLE VIII
CONDITIONS OF SELLERS
The obligations of the Sellers to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
SECTION 8.1 Compliance by Purchaser. The Purchaser shall have performed
-----------------------
and complied with all of the obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to or at the
Closing Date. All representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Date of Closing, with the
same force and effect as though made at and as of the Date of Closing, except
for changes expressly permitted by this Agreement.
SECTION 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Assets *or the Business or which, as a result of the transaction
contemplated by this Agreement, might affect such right as to Purchaser or any
affiliate thereof subsequent to the Date of Closing and which, in the judgment
of the Sellers, made in good faith and based upon advice of their counsel, makes
it inadvisable to proceed with the transaction contemplated by this Agreement.
SECTION 8.4 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of the Federal Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act; and (iii) the approval of every regulatory agency of federal,
state, or local government that may be required in the reasonable opinion of
either Purchaser or Sellers. Sellers shall have been furnished with appropriate
evidence, reasonably satisfactory to Sellers and
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their counsel, of the granting of such approvals, authorizations and consents.
SECTION 8.5 Opinion of Counsel. Purchaser shall have delivered to the
------------------
Sellers the opinion of counsel, dated the Closing Date, in the form and
substance of Schedule 1.6(c).
SECTION 8.6 Stock Purchase Agreement. Closing shall have taken place
------------------------
under the Stock Purchase Agreement.
SECTION 8.7 Private Placement. The Purchaser shall have sold,
-----------------
substantially simultaneously with the Closing, 1,850,000 shares of its Common
Stock in a private placement at a purchase price of $2.00 per share to
individuals or entities designated by Xxxxx Xxxxxxx.
ARTICLE IX
Indemnification
SECTION 9.1 Indemnification by Sellers. Each Seller agrees that it will
--------------------------
indemnify, defend, protect and hold harmless Purchaser and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parent, agents, employees, legal representatives, successors and assigns from
and against all claims, adverse consequences, losses, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) whether equitable or legal,
matured or contingent, known or unknown to such Seller, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, from: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of a Seller
made in this Agreement and to be performed by a Seller before or after the
Closing Date; and (c) any claim by a third party that, if true, would mean that
a condition for indemnification set forth in subsections (a) or (b) of this
Section 9.1 of this Agreement has occurred.
SECTION 9.2 Indemnification by Purchaser. Purchaser agrees that it will
----------------------------
indemnify, defend, protect and hold harmless Sellers and their agents,
employees, heirs, legal representatives, successors and assigns, as applicable,
from and against all claims, adverse consequences, losses, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by it, as a result of or
incident to: (a) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties of Purchaser set forth in this Agreement
or in the Schedules attached to this Agreement or in the Collateral Documents;
(b) nonfulfillment or nonperformance of any agreement, covenant or condition on
the part of Purchaser made in this Agreement and to be performed by Purchaser
before or after the Closing Date; (c) any claim by a third party that, if true,
would mean that a condition for indemnification set forth in subsections (a),
(b), or (c) of this Section 9.2 has occurred.
SECTION 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect
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to any matter (a "Third Party Claim") that may give rise to a claim for
indemnification against any other party to this Agreement (the "Indemnifying
Party") under this Article IX, then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that no delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party is thereby prejudiced. Such notice
shall state the amount of the claim and the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Article IX.
SECTION 9.4 Procedure for Non-Third Party Claims. If Purchaser or any
------------------------------------
Seller wishes to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a
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third party notification which makes the provisions of Section 9.3 applicable,
the party desiring indemnification ("Indemnified Party") shall deliver to the
party from which indemnification is sought ("Indemnifying Party") a written
demand for indemnification ("Indemnification Demand"). The Indemnification
Demand shall state: (a) the amount of losses, damages or expenses to which the
Indemnified Party has incurred or has suffered or is expected to incur or suffer
to which the Indemnified Party is entitled to indemnification pursuant to
Section 9.1 or Section 9.2, as applicable; and (b) the nature of the event or
occurrence which entitles the Indemnified Party to receive payment under Section
9.1 or Section 9.2, as applicable. If the Indemnifying Party wishes to object to
an Indemnification Demand, the Indemnifying Party must send written notice to
the Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
thirty (30) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
SECTION 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 3.11 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought against the Company by tax
authorities or governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above shall survive
until one year from the Closing Date. Notwithstanding the prior sentence which
provides that the representations and warranties expire after certain stated
periods of time, if within the stated period of time, a notice of a claim for
indemnification or Indemnification Demand is given, or a suit or action based
upon representation or warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.
SECTION 9.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
SECTION 9.7 Limitation of Liability. Notwithstanding anything else to the
-----------------------
contrary contained herein, the obligations of Sellers and Purchaser pursuant to
the indemnifications contained in Section 9.1 and 9. 2, respectively, shall be
limited to Five Million Six Hundred Thousand Dollars ($5,600,000).
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ARTICLE X
OTHER PROVISIONS
SECTION 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of Purchaser such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Purchaser. Sellers agree that for a period of twelve (12) months from
the Closing Date or for a period of eighteen (18) months from the date hereof,
if the Closing does not take place they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of
Purchaser, unless (i) such information becomes known to the public generally
through no fault of any Seller, or (ii) a Seller is compelled to disclose such
information by a governmental entity or pursuant to a court proceeding. In the
event of a breach or threatened breach by any Seller of the provisions of this
Section, Purchaser shall be entitled to an injunction restraining such Seller
from disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Purchaser from pursuing any other
available remedy for such breach or threatened breach, including, without
limitation, the recovery of damages.
SECTION 10.2 Nondisclosure by Purchaser. Purchaser recognize and
--------------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchaser agree that it
will not utilize such information in the business or operation of Purchaser or
any of its affiliates or disclose such confidential information to any person,
firm, corporation, association, or other entity for any purpose or reason
whatsoever, unless (i) such information becomes known to the public generally
through no fault of Purchaser or any of its affiliates, (ii) Purchaser is
compelled to disclose such information by a governmental entity or pursuant to a
court proceeding, or (iii) Closing takes place. In the event of a breach or
threatened breach by Purchaser of the provisions of this Section, Sellers shall
be entitled to an injunction restraining Purchaser from utilizing or disclosing,
in whole or in part, such confidential information. Nothing contained herein
shall be construed as prohibiting Sellers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
SECTION 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, personal representatives and assigns.
This Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
SECTION 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
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SECTION 10.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
SECTION 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by reputable,
nationally recognized overnight courier or by delivering the same in person to
such party.
(a) If to Sellers, addressed to them at:
American Wash Services, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxx & Associates, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
(b) If to Purchaser, addressed to it at:
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx X Xxxxxxxx
With a copy to:
Xxxxxxxx Xxxxxx
Xxxxxx & Galt, LLP
00 Xxxxxxxxx Xxx.
Xxxxxx, XX 00000
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
SECTION 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
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SECTION 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
SECTION 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
SECTION 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
SECTION 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement, unless severing
such provision would result in an agreement that does not reflect the overall
intent of either of the parties. In either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
SECTION 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
SECTION 10.13 Extension or Waiver of Performance. Either the Sellers or
-----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
SECTION 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, legal representative and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any party to this Agreement, nor shall any provisions
give any third person any rights of subrogation or action over or against any
party to this Agreement.
SECTION 10.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
SECTION 10.16 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this
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Agreement shall issue any press release or otherwise make any statement with
respect to the transactions contemplated by this Agreement without the prior
consent of the other party, which shall not be unreasonably withheld.
SECTION 10.17 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in Philadelphia, Pennsylvania in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies in any Court having jurisdiction. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement,
and shall set forth in the same degree of particularity as required for
complaints under the Federal Rules of Civil Procedure the claims to be submitted
to arbitration. Additionally, the demand for arbitration shall be stated with
reasonable particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the date
when institution of legal or equitable proceedings based on such claim, dispute
or other matter in question would be barred by the applicable statutes of
limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to Sellers and Purchaser in connection with the negotiation of
and consummation of the transactions under this Agreement shall be entitled to
represent their respective party in any and all proceedings under this Section
or in any other proceeding (collectively, "Proceedings"). Sellers and
Purchaser, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such Proceedings for any reason, including
but not limited to the fact that such counsel or any member thereof may be a
witness in any such Proceedings or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to the
party represented by such counsel in any such Proceedings.
* * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement on this 26th
day of March, 1999.
SHAREHOLDERS PURCHASER
/s/ Xxxxx X. Xxxxxxx, Xx. XXXX SECURITY INTERNATIONAL, INC.
--------------------------------
Xxxxx X. Xxxxxxx, Xx.
By: /s/Xxx X. Xxxxxxxx
-------------------------------------
Red Mountain Holding, Ltd. Xxx X. Xxxxxxxx
Chief Executive Officer
By:/s/ Xxxxx Xxxxxxx
-----------------------------
Xxxxx Xxxxxxx, director
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