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Exhibit 10.13
ASSET PURCHASE AGREEMENT
Between
ALL-SECURITY MONITORING SERVICES, L.L.C.
as
PURCHASER
and
NORTHERN CENTRAL STATION, INC.
as
SELLER
Dated February 25, 1997
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of February 25, 1997, is entered
into by and between All-Security Monitoring Services, L.L.C., an Illinois
limited liability company ("Purchaser"), and Northern Central Station, Inc., a
New Jersey corporation ("Seller").
Purchaser and Seller hereby agree as follows:
1. DEFINITIONS AND USE OF TERMS
Definitions. The following terms shall have the meanings assigned below
when used in this Agreement:
1.1. "Account" shall mean an agreement between a Subscriber and Seller
pursuant to which the Central Monitoring Station monitors on a remote basis the
security alarm system of a Subscriber;
1.2. "Adjustment" has the meaning assigned in Section 3.2.2 (c);
1.3. "Applicable Law" shall include any law, rule, regulation, order,
injunction, notice, approval or judgment of any federal, state, or local
government or governmental department, agency, board or the like, which applies
to any of the Assets or the Purchased Business, and any agreement with any such
government or governmental department, agency or board relating to compliance
with any of the foregoing;
1.4. "Assets" has the meaning assigned in Section 2.1;
1.5. "Assumed Liabilities" has the meaning assigned in Section 2.5;
1.6. "Be-Protected" has the meaning assigned in Section 2.3;
1.7. "Be-Protected Accounts Receivable" has the meaning assigned in
Section 2.4.3 (a);
1.8. "Be-Protected Acknowledgment" has the meaning assigned in Section
2.4.3 (a);
1.9. "Central Monitoring Station" shall mean the central monitoring
station which is owned by Seller as of the Execution Date and the Closing Date
and which monitors on a remote basis the security alarm systems of the
Subscribers;
1.10. "Closing" has the meaning assigned in Section 3.1;
1.11. "Closing Date" has the meaning assigned in Section 3.1;
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1.12. "Contract" means Assets of the type described in Section 2.1(a), (c)
and (g);
1.13. "Contract Assignment Agreement" has the meaning assigned in Section
4.10;
1.14. "Dealer" means a customer of Seller who has designated Seller to
monitor on a remote basis the security alarm systems of those Subscribers who
have contracted with Dealer to obtain such monitoring services from Seller;
1.15."Deferred Accounts" has the meaning assigned in Section 2.4.3 (b).
1.16. "Effective Time" means the opening of business on the Closing Date;
1.17. "Eligible Receivables" means all of Seller's accounts receivable
purchased hereunder less all of the accounts receivable of account debtors whose
accounts receivable were in excess of $2,000.00 and over 60 days past due as of
the Closing Date;
1.18. "Employee" means a person employed by Seller immediately prior to
the Effective Time;
1.19. "Excluded Assets" means all assets other than the Assets purchased
hereunder as described in Section 2.1 hereof.
1.20. "Execution Date" means the date first written above;
1.21. "Financial Statements" means Seller's unaudited statement of income
and balance sheet compiled but not audited by Seller's Accountant for the twelve
month period ending on October 31, 1996 (presented on an accrual basis);
1.22. "FSS" has the meaning assigned in Section 2.4.3 (b);
1.23. "FSS Agreements" has the meaning assigned in Section 2.4.3 (b);
1.24. "Income Tax Returns" means Seller's federal income tax returns for
the periods ending October 31, 1993, October 31, 1994 and October 31, 1995;
1.25. "Intellectual Property" means all of the patents, trademarks, trade
names (including "Northern Central Station" and the corporate name "Northern
Central Station, Inc."), service marks, trade secrets, designs, know-how,
copyrights, computer programs and software, registrations and applications and
rights relating to any of the foregoing, and all other proprietary rights and
information relating to or used by Seller;
1.26. "Intercreditor Agreement" has the meaning assigned in Section 2.4.3
(c).
1.27. "Interim Period" means the period beginning on the Execution Date
and ending on the Closing Date;
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1.28. "License Assignment Agreement" has the meaning assigned in Section
4.9;
1.29. "Loss" shall mean any liability, loss, damage, claim, cost,
deficiency, obligation, or expense (including penalties and reasonable legal
fees and costs) incurred by a party;
1.30. "Permits" means all governmental licenses, registrations and
permits, and applications therefor;
1.31. "Personal Property Lease Assignment Agreements" has the meaning
assigned in Section 4.8;
1.32. "Purchased Business" means the entire remote alarm monitoring
business conducted by Seller as of the Execution Date and the Closing Date;
1.33. "Purchaser's Accountants" means the independent public accounting
firm of Xxxxxx Xxxxxxxx & Co.;
1.34. "Reliable Hawk Accounts" has the meaning assigned in Section 2.3;
1.35. "Reliable Hawk Purchase Price" has the meaning assigned in Section
2.4.2 (b);
1.36. "RMR" shall mean the recurring monthly gross revenue contracted for
by the Purchased Business in consideration for the monitoring services provided
to Subscribers;
1.37. "RMR Reports" means the reports prepared by Seller and delivered to
Purchaser detailing the RMR due from each Dealer as of November 30, 1996,
December 31, 1996 and January 31, 1997;
1.38. "Sellers' Accountant" means the independent public accounting firm
of Xxxx X. Xxxxxx;
1.39. "Seller's Principals" means Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxx.
1.40. "Subscriber" means a customer to whom Seller is entitled by contract
to provide remote monitoring services for the security alarm system installed on
that customer's premises;
1.41."UL Certificates" has the meaning assigned in Section 4.11
1.42. "United Federated Letter" means a letter from Seller to United
Federated Security, Inc. stating that commencing March 1, 1997 United Federated
Security, Inc. will pay for monitoring services for its Subscribers' Accounts on
a current basis, which letter will be acknowledged and agreed in writing by
United Federated Security, Inc..
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1.43. "Unrelated Party" means any person who is not a shareholder, officer
or director of Seller or is not a business entity controlled by or under common
control with any such person(s); and
1.44. "Waste Material" means any pollutant, contaminant, hazardous or
toxic material or other material now or in the past produced, discharged, stored
or emitted by the Purchased Business or on the real estate occupied by the
Purchased Business.
1.45. Other Terms. In this Agreement:
(a) any representation or warranty made "to the knowledge" of a
party shall mean that the party is making the representation on the basis
of the actual knowledge of the party or, in the case of a corporation, its
officers and directors, in either event, after due inquiry; and
(b) "including" shall indicate examples of a foregoing general
statement and is not a limitation on that general statement.
2. SALE AND PURCHASE OF ASSETS; PURCHASE PRICE.
2.1. Sale and Purchase of Assets. Upon the terms and subject to the
conditions contained in this Agreement, Seller hereby agrees to sell, and
Purchaser hereby agrees to purchase, all of Seller's assets and properties,
tangible and intangible, real, personal or mixed, of and pertaining to or used
in the Purchased Business, wherever located, whether known or unknown, and
whether or not reflected on the books and records of Seller (the "Assets"). The
Assets do not include any of Seller's right, title or interest in the real
estate on which the Central Monitoring Station is located. The Assets include,
but are not limited to, the following:
(a) all right, title and interest in all of Seller's Accounts;
(b) the tangible personal property of Seller listed on Schedule
2.1(b) ;
(c) all leases relating to the tangible personal property and
Intellectual Property which are listed on Schedule 2.1(c), under which
Seller is lessee or conditional buyer;
(d) all right, title and interest in the telephone lines related
to the Accounts and Seller's general telephone line, all of which are
listed on Schedule 2.1(d);
(e) all accounts receivable listed on Schedule 2.1(e) in the
amounts set forth on Schedule 2.1(e);
(f) all prepaid expenses and deposits related to the Assets;
(g) all Intellectual Property;
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(h) all Permits;
(i) copies of all records of sales, Dealer lists, Subscriber
lists, customer lists and supplier lists;
(j) copies of all books, documents, records and files relating to
the Assets, including but limited to, the accounts receivable purchased
hereunder and the Assumed Liabilities (as defined below), including all
related financial and accounting records and all computer programs;
(k) the goodwill of Seller as a going concern;
2.2. Title. Title to the Assets shall be conveyed to Purchaser free and
clear of all liens, claims, encumbrances or restrictions except for such liens
as are specifically listed on Schedule 2.2 hereto.
2.3. Purchase Price. The purchase price ("Purchase Price") of the Assets
shall be____________________________ Dollars ($______________). In addition,
Purchaser shall assume those (but only those) liabilities and obligations of
Seller stated in Section 2.5. The parties acknowledge and agree that the
Purchase Price as set forth herein does not include payment for the Accounts
monitored for Subscribers who are the customers of Reliable Hawk, Inc.
(approximately 2,200 Accounts) (the "Reliable Hawk Accounts"), payment for which
will be made as provided in Section 2.4.2 hereof or payment for the Deferred
Accounts (approximately 235 Accounts) monitored for Subscribers who are
customers of Be-Protected Alarm Company ("Be-Protected"), payment for which will
be made as provided in Section 2.4.3(c) and (d) hereof provided that the
conditions stated in those sections are satisfied.
2.4. Payment.
The Purchase Price shall be paid by Purchaser to Seller and Seller's
Principals at Closing, at Seller's option, by means of a certified or
cashier's check or wire by transfer in accordance with wire transfer
instructions to be provided by Seller. Schedule 2.4.1 sets forth the
allocation of the Purchase Price as between Seller and each of Seller's
Principals. Exhibit 2.4.1 is a letter of instruction from Seller and
Seller's Principals directing Purchaser to pay the entire Purchase Price
to the law firm of Williams, Caliri, Xxxxxx & Otley for distribution to
Seller and Seller's Principals.
2.5. Reliable Hawk.
(a) In addition to the payment of the Purchase Price as set forth
in Section 2.4.1 above, if Purchaser provides monitoring services to the
Reliable Hawk Accounts, Purchaser shall pay to Seller (or Seller's
Principals if so directed in writing by Seller), within thirty (30) days
of receipt thereof, __% of all cash receipts (regardless of when
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received) for providing monitoring services to the Reliable Hawk Accounts
(net of any refunds), for a period of three (3) years commencing on the
Closing Date.
(b) In the event that Purchaser (or any affiliate of Purchaser)
purchases the Reliable Hawk Accounts, the Purchase Price shall be
increased by an amount equal to two times (2X) the annualized RMR of the
Reliable Hawk Accounts purchased. Purchaser shall, within thirty (30) days
of the closing of such purchase, pay the increased amount of the Purchase
Price (the "Reliable Hawk Purchase Price") to Seller and Seller's
Principals, in such proportions as Purchaser is directed in writing by
Seller. Any amounts paid pursuant to Section 2.4.2 (a) shall be credited
against the Reliable Hawk Purchase Price. In addition, Purchaser may
setoff against the Reliable Hawk Purchase Price any amounts due Purchaser
from Seller or Seller's Principals pursuant to this Agreement.
2.6. Be-Protected Alarm Company.
(a) Be-Protected is indebted to Seller for an estimated Twenty One
Thousand Dollars ($21,000.00) in monitoring fees for service provided
prior to the Closing (the "Be-Protected Accounts Receivable"). Seller has
agreed, that at or prior to Closing, Seller will obtain from Be-Protected
and deliver to Purchaser, subject to Purchaser's reasonable approval,
Be-Protected's written acknowledgment of its obligation to pay to
Purchaser the entire amount of the Be-Protected Accounts Receivable over a
period of one year from Closing in twelve equal installments, as well as
its commitment to pay on a current basis all monitoring fees for all
Be-Protected Accounts other than the Deferred Accounts (the "Be-Protected
Acknowledgment"). The Be-Protected Acknowledgment will include
Be-Protected's agreement to pay one percent (1%) a month interest on all
amounts that are not paid when due. Seller agrees that if Seller does not
deliver the Be-Protected Acknowledgment at or prior to Closing, the
Purchase Price will be reduced by (i) the amount of the Be-Protected
Accounts Receivable, which shall remain the property of Seller and, (ii)
provided Purchaser elects to discontinue monitoring services with respect
to such Be-Protected Accounts (which will be evidenced by a writing to
that effect delivered to Seller at Closing and notice to Be-Protected to
be delivered as soon as practicable after the Closing two times (2X) the
annualized RMR of all Be-Protected Accounts included in the Accounts to be
purchased by Purchaser and such Be-Protected Accounts shall remain the
property of Seller.
(b) Schedule 2.4.3(b) is a true and complete list of all Accounts
for which Seller has agreed to accept payment from Be- Protected for
monitoring services on a deferred basis (the "Deferred Accounts"). All of
the Deferred Accounts are owned by Be- Protected Alarm Company. The
purchase of the Deferred Accounts by Be-Protected was financed by
Financial Security Services, Inc. ("FSS"), pursuant to certain loan and
security agreements (the "FSS Agreements").
(c) Purchaser agrees to Purchase the Deferred Accounts from
Seller, but only if all of the following conditions are met: (i) Purchaser
receives within ten (10) days of Closing, true and complete copies of the
FSS Agreements; (ii) there are no liens on any
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Accounts owned by Be-Protected other than those in connection with the FSS
Agreements; (iii) within sixty (60) day of Closing, Purchaser and
Be-Protected enter into an agreement governing the payment of the amounts
due with respect to the Deferred Accounts, which shall include a security
interest in all of Be-Protected's Accounts, ranking junior to only the
liens of FSS pursuant to the FSS Agreements, which agreement shall be
satisfactory to Purchaser in its sole discretion; and (iv) within sixty
(60) days of Closing, Purchaser and FSS enter into an intercreditor
agreement (the "Intercreditor Agreement"), satisfactory to Purchaser in
its sole discretion, pursuant to which Purchaser would receive notice of
and have the option to cure any defaults of Be-Protected under the FSS
Agreements and pursuant to which Purchaser would be assigned
Be-Protected's ownership interest in the Deferred Accounts upon such
default by Be-Protected and cure by Purchaser. If all of the conditions of
this Section 2.4.3(c) are satisfied, then Purchaser shall purchase the
Deferred Accounts from Seller at a purchase price equal to two times (2X)
the annualized RMR of the Deferred Accounts so purchased, payable ten (10)
business days following the satisfaction of all of the conditions
contained in this Section 2.4.3(c). The purchase price for the Deferred
Accounts shall be paid to Seller and/or Seller's Principals as directed by
Seller.
(d) In the event that all of the conditions contained in Section
2.4.3(c) are not satisfied or waived by Purchaser within ninety (90) day
of the Closing Date, Purchaser in its sole discretion may elect to either:
(i) not purchase the Deferred Accounts and discontinue
monitoring services for the Deferred Accounts, or
(ii) purchase the Deferred Accounts and continue to provide
monitoring services to those Accounts. If the Deferred Accounts are
purchased pursuant to this Section 2.4.3(d) the purchase price for
the Deferred Accounts so purchased shall be two times (2X) the
annualized RMR for such Accounts, provided, however, that such
purchase price shall only be payable out of monitoring fees received
by Purchaser for services provided to such Accounts, as follows:
Purchaser shall pay to Seller (or Seller's Principals if so directed
in writing by Seller), within thirty (30) days of receipt thereof,
fifty percent (50% ) of all cash receipts for providing monitoring
services to the Deferred Accounts (net of any refunds), until such
time as the purchase price of the Deferred Accounts has been paid in
full.
2.7. Assumption of Certain Liabilities
(a) Purchaser shall assume, pay, fulfill perform or otherwise
discharge only the following liabilities and obligations of Seller to
Unrelated Parties ("Assumed Liabilities") on the Closing Date:
(i) only those of Seller's liabilities set forth on schedule
2.5.1 (a) in the amount reflected on Schedule 2.5.1(a) as of the
Closing Date;
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(ii) all liabilities and obligations of the Purchased
Business accruing on and after the Closing Date under contracts,
agreements, licenses, leases and similar documents which are to be
transferred to Purchaser pursuant to this Agreement, specifically
including the obligation to provide, during the term of each
Subscriber's or Dealer's contract with Seller, continuing monitoring
services to all such Subscribers and Dealers; and
(iii) those liabilities and obligations of Seller otherwise
specifically assumed by Purchaser in this Agreement as set forth on
Schedule 2.5.1(c).
(b) Except as provided in Section 2.5.1, Purchaser shall not be
required to assume, pay, perform, defend or discharge any, and Seller
shall retain, pay, perform, defend and discharge all, of Seller's
liabilities and obligations of any and every kind whatsoever, whether
disclosed, undisclosed, direct, indirect, absolute, contingent, secured,
unsecured, accrued or otherwise, whether known or unknown. Further,
Purchaser shall not assume or agree to pay, perform or discharge, nor
shall Purchaser be, directly or indirectly responsible for, any obligation
or liability of Seller with respect to the breach of any contract or
commitment prior to the Closing Date, or any action, suit or proceeding
pending at the Closing which is asserted in respect of the conduct by
Seller of its business prior to the Closing Date.
2.8. Subsequent Documentation. At any time and from time to time after
the Closing, upon the request of Seller or Purchaser and without further
consideration and at no cost to the other party, but with Purchaser and Seller
bearing their own respective expenses incident thereto, Seller and Purchase
shall do, execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such further acts, assignments, transfers,
conveyances, assumptions, powers of attorney and assurances:
(a) as may be required for assigning transferring, granting and
conveying to Purchaser or its successors and assigns, or for aiding and
assisting in collecting and reducing to possession and control of
Purchaser or its successors and assigns, all of the Assets; or
(b) as may be required for the better assigning, assuming,
obligating, assuring and confirming to Seller that the Assumed Liabilities
are assumed and to provide to Seller evidence of such undertaking and the
discharge of such undertaking by Purchaser.
2.9. Allocations. The Purchase Price shall be allocated among the Assets
in accordance with Schedule 2.7. In filing their respective income tax returns
in any jurisdiction, the parties shall use the allocations of the Purchase Price
set out in Schedule 2.7.
2.10. Transfer Instruments and Taxes. The sale, transfer, assignment and
delivery of the Assets by Seller to Purchaser shall be effected at the Closing
by instruments of transfer and conveyance (with any necessary transfer and
documentary stamps) sufficient in form and
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substance to vest in Purchaser good, valid and marketable title to all of the
Assets. Seller shall take all other steps as may be reasonably necessary to
put Purchaser in actual possession and operating control of the Assets. To the
extent any sale, transfer, use or other similar taxes may be imposed by reason
of such sale, transfer, assignment and delivery of the Assets, Seller shall pay
all such taxes. Seller shall make any filings required as a result of the
transactions contemplated by this Agreement with the New Jersey taxing
authorities.
2.11. Consent to Assignment. To the extent that the assignment of any
Contract, Permit or Intellectual Property shall require the consent of another
person, this Agreement shall not constitute an agreement to assign the Contract,
Permit or Intellectual Property if an attempted assignment would constitute a
breach thereof. Seller and Purchaser shall cooperate with each other in
obtaining and shall jointly attempt to obtain the consent of any other party to
a Contract, or the issuer of a Permit for the assignment thereof to Purchaser.
If any such consent is not obtained, to the extent permitted by applicable law,
Seller shall cooperate with Purchaser to provide for Purchaser the benefits
under such Contract, Permit or Intellectual Property, including enforcement, for
the benefit of Purchaser, of any and all rights of Seller against any other
party. Purchaser, at its option, may elect to buy out any personal property
lease where the lessor does not consent to the assignment of such lease to
Purchaser on its then existing terms.
2.12. Original Documents. Seller shall deliver to Purchaser at Closing and
Purchaser shall thereafter retain all the original books, records, files,
contracts and other documents referred to in Section 2.1 hereof arising out of
or related to Seller's business prior to Closing (collectively, the "Original
Records") except for Seller's corporate minute books and records of
shareholders' and directors' meetings; provided, however, that Seller shall have
the right for a period of four (4) years after Closing, to copy any and all such
Original Records during normal business hours and upon reasonable notice to
Purchaser.
3. CLOSING AND POST CLOSING ADJUSTMENTS.
3.1. Closing. The consummation of the sale and purchase hereunder (the
"Closing") shall be effected by facsimile transfer of documents and by wire
transfer of funds at 10:00 a.m. Chicago time on February 28, 1997 (the "Closing
Date") or at such other place and time as the parties may agree.
3.2. At or prior to Closing, Seller shall execute and deliver to
Purchaser: (i) this Agreement; (ii) a xxxx of sale evidencing the transfer to
Purchaser of the Assets (the "Xxxx of Sale"); (iii) the Assumption Agreement;
(iv) the Personal Property Lease Assignment Agreements; (v) the Contract
Assignment Agreements; (vi) the License Assignment Agreements; (vii) the Permit
Assignment Agreements; (viii) certified copies of Seller's Certificate of
Incorporation, By-laws and the corporate proceedings authorizing the
transactions contemplated by this Agreement; (ix) a Certificate of Good Standing
dated as of a recent date issued by the Secretary of State of the State of New
Jersey; (x) the form of amendment to Seller's Certificate of Incorporation
pursuant to which Seller's name will be changed immediately following the
Closing as provided in Section 4.9 and (xi) Seller's Opinion of Counsel. In
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addition, Seller shall obtain and deliver to Purchaser at Closing: (xii) the
Be-Protected Acknowledgment ; and (xiii) the United Federated Letter;
3.3. At or prior to Closing Purchaser shall execute and deliver to
Seller: (i) this Agreement; (ii) the Purchase Price, payable by means of a
certified check, cashier's check or wire transfer, as directed by Seller; (iii)
the Assumption Agreement; (iv) the Personal Property Lease Assignment
Agreements; (v) the Contract Assignment Agreements; (vi) the License Assignment
Agreements; (vii) the Permit Assignment Agreements; (viii) certified copies of
Purchaser's Articles of Organization, Operating Agreement and the proceedings
authorizing the transactions contemplated by this Agreement.
3.4. Adjustments. Purchaser and Seller have agreed that the Purchase
Price as set forth in Section 2.1 shall be subject to the following post-closing
adjustments:
3.5. February Month End Adjustment.
Schedule 3.2.1 contains the parties' estimate, as of the Closing
Date, of the net difference between the value of Seller's accounts
receivable (excluding those of Be-Protected) to be purchased by Purchaser
and Seller's liabilities to be assumed by Purchaser pursuant to this
Agreement. Seller will deliver to Purchaser by no later than five (5)
business days following the Closing, the actual amounts for each of the
items listed on Schedule 3.2.1. Within five (5) business days of delivery
of the revised amounts, Purchaser or Seller, as appropriate, shall pay to
the other, as directed by the receiving party, the amount of the
difference between the estimate contained on Schedule 3.2.1 and the
revised net difference as determined pursuant to this Section 3.2.1.
3.6. Sixty Day Adjustment.
Purchaser and Seller have agreed that sixty (60) days following the
Closing there shall be a final adjustment of the Purchase Price based on a
post-closing review of the accounts receivable purchased pursuant to this
Agreement and the RMR of the Accounts purchased pursuant to this
Agreement, as of the Closing Date.
3.7. Accounts Receivable Adjustment. Seller has agreed that within ten
(10) days following the Closing, Seller's Accountant will survey all of the
Dealers who are the account debtors on the Eligible Accounts Receivable to
confirm their respective accounts receivable as of the Closing Date. Within five
(5) days of the completion of the survey, Seller's Accountant will deliver to
Seller and Purchaser a written report of the results of its survey. The value of
the accounts receivable being purchased hereunder (which was calculated as the
sum of Seller's Eligible Receivables) as reflected on Schedule 3.2.1 (as revised
pursuant to Section 3.2.1) shall be adjusted to reflect the Eligible Receivables
so confirmed. Any increase in the amount of such Eligible Receivables shall be
paid by Purchaser to Seller and any decrease shall be paid by Seller to
Purchaser as provided in Section 3.2.2(c).
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3.8. RMR Adjustment. Seller and Purchaser have agreed that within ten
(10) days following the Closing Purchaser will survey each of the Dealers listed
on Schedule 4.20, to determine that on the Closing Date each such Dealer had a
continuing agreement with Seller for Seller to provide monitoring services for
their Accounts and to confirm the contracted amount of RMR for which such
agreements existed as of the Closing Date. Within five (5) days of the
completion of the survey, Purchaser will deliver to Seller a report detailing
the results of the survey. The Purchase Price hereunder shall be increased or
decreased , as appropriate, by two times (2X) the difference in the RMR of the
Accounts to be purchased as determined pursuant to this Section 3.2.2(b) and the
RMR reflected on Schedule 4.20. In making the adjustment calculation required by
this Section 3.2.2(b) the RMR of the Reliable Hawk Accounts, the Deferred
Accounts and any Be-Protected Accounts excluded from the purchase and sale
hereunder pursuant to Section 2.4.3(a) shall be excluded.
3.9. The net adjustments pursuant to Sections 3.2.2(a) and 3.2.2(b) shall
be reflected in an adjustment report to be prepared by Purchaser (the
"Adjustment Report") and delivered to Seller no later than ten (10) days
following the receipt of the survey reports pursuant to Section 3.2.2(a) and
3.2.2(b). Provided that there is no dispute among the parties, sixty (60) days
following the Closing Date the net amount of the adjustments shall be paid to
Purchaser or Seller (and Seller's Principals, if so directed by Seller), as
appropriate, as directed by the party to which payment is due. Any payments due
from Seller hereunder shall be paid by Seller and Seller's principals in the
same proportions as they received their respective shares of the Purchase Price
pursuant to Section 2.4.1.
3.10. If either Purchaser or Seller disputes the amount reflected in the
reports of Seller's Accountant and/or Purchaser delivered pursuant to Sections
3.2.2(a) and 3.2.2(b) or the net adjustment reflected in the Adjustment Report,
the amount of the adjustment due under this Section 3.2.2 shall be determined by
arbitration as provided in Section 8. Notwithstanding the foregoing, if the net
amount in dispute is less than Five Thousand Dollars ($5,000.00) than the
adjustment amount shall be as reflected in the Adjustment Report.
4. REPRESENTATIONS WARRANTIES AND COVENANTS OF SELLER
As of the Execution Date (for all matters arising prior thereto) and as of
the Closing Date, Seller, Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx
represent and warrant to Purchaser as follows:
4.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Jersey and has
all requisite corporate power and authority to own its assets and to conduct its
business in the manner in which it is now conducted. Seller is duly qualified to
do business in, and is in good standing under the laws of, each jurisdiction in
which the ownership or leasing of the Assets or the conduct of the Purchased
Business requires such qualification, which jurisdiction are listed on Schedule
4.1. Seller has no equity interest in and does not control, through stock
ownership or otherwise, any corporation, partnership, joint venture or other
business entity. Attached hereto as Exhibits 4.1A, 4.1B and 4.1C, respectively,
are certified copies of Seller's Certificate of Incorporation and By-laws,
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including all amendments through the Closing Date and a Certificate of Good
Standing issued by the Secretary of State of New Jersey dated as of a recent
date. Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxx are the only
shareholders of Seller.
4.2. Power and Authority. Seller has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly authorized, executed and delivered by Seller and,
assuming the due authorization, execution and delivery by Purchaser, constitutes
the legal, valid and binding obligation of Seller enforceable against Seller in
accordance with its terms. The President of Seller has been duly authorized to
execute this Agreement on behalf of Seller. Attached hereto as Exhibit 4.2 is a
true and complete copy of the corporate actions taken by the Seller and its
shareholders authorizing the transactions contemplated by this Agreement.
4.3. Financial Condition.
(a) Seller has delivered to Purchaser its Financial Statement,
consisting of Seller's unaudited statements of income and balance sheets
compiled but not audited by Seller's Accountant for the twelve month
period ending on October 31, 1996, and its RMR Report for months of
November and December 1996 and January , 1997. The Financial Statement and
the RMR Reports fairly presents the financial condition, assets,
liabilities, equity and results of operations of Seller as of their
respective dates and periods and are correct in all material respects, and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved._
TC "Financial Condition." \f C \l "2" _
(b) Seller has delivered to Purchaser its Income Tax Returns for
calendar years 1992, 1993 and 1994, attached as Exhibit 4.3.2. The Income
Tax Returns are correct and complete in all material respects.
(c) The tangible property and Intellectual Property used in the
conduct of Seller's business included in the Assets are not damaged, are
fit for their particular use, and are not defective, such that they are of
a quantity and quality usable in the ordinary course of the business of
Seller, and are in the amounts reflected on the October 31, 1996 Financial
Statement, subject only to changes in the ordinary course of business. All
such property reflected on the October 31, 1996 Financial Statement are
stated at not more than cost, and have been adjusted to reflect damaged or
otherwise not readily usable items. All such property is located at
Seller's principal place of business.
(d) The accounts receivable included in the Assets and listed on
Schedule 4.3.4 are valid receivables, collectible to the extent of the
excess thereof over any reserves, discounts and allowances specifically
included in the October 31, 1996 Financial Statement and on Schedule
4.3.4, and are subject to no defenses, counterclaims or set-offs other
than those disclosed on Schedule 4.3.4. Schedule 4.3.4 also includes a
list of all prepaid accounts receivable and the amounts and periods of
prepayment for each such prepaid account.
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4.4. Absence of Undisclosed Liabilities. Seller has no liabilities or
obligations (whether absolute, accrued, contingent or otherwise and whether due
or to become due, including liabilities for taxes and interest and penalties
thereon) except (a) the Assumed Liabilities, and (b) the liabilities and
obligations set forth on Schedule 4.4 which will be retained by Seller. There
are no liabilities related to the telephone lines being acquired by Purchaser
pursuant to Section 2.1(d) (e.g., no ongoing Yellow Pages advertisements) other
than the obligation to pay the future line and usage charges for those telephone
lines.
4.5. Tax Returns. Seller has filed with the appropriate governmental
agencies all required tax returns, is not in default with respect to any such
filing, is not delinquent in payment of any taxes due to any taxing authority
and has paid or made adequate provision or reserves for all taxes (including all
federal, state and local income taxes, withholding, corporate and excise taxes,
sales taxes, real and personal property taxes, unemployment insurance,
occupation, social security and Medicare taxes, and interest and penalties
thereon) payable by it, or attributable to periods prior to the Closing Date.
Seller has not given any waiver or extension of any period of limitation
governing the time of assessment or collection of any tax. The federal income
tax returns of Seller have never been audited by the United States Internal
Revenue Service. No deficiency in tax payment is claimed by the United States
Internal Revenue Service or any other tax authority for any of Seller's taxable
years. There are no tax audits currently pending with respect to Seller. To the
best of Seller's knowledge, there is no basis for assessment of any deficiency
in federal or state income taxes or any other taxes or governmental charges
against Seller.
4.6. Absence of Certain Changes. Except as disclosed on Schedule 4.6,
since December 31, 1996 through the Closing Date there has not been and will not
be:
(a) any material adverse change in the financial condition,
assets, liabilities, equity, operations, business or prospects of Seller;
(b) any obligation or liability incurred by Seller other than
obligations and liabilities incurred in the ordinary course of business;
(c) any material damage, destruction or loss, whether or not
covered by insurance, adversely affecting any Assets;
(d) any mortgage, encumbrance or lien placed on any of the Assets;
(e) any purchase or sale or other disposition or any agreement or
other arrangement for the purchase or sale or other disposition of any
material assets;
(f) any change in the compensation or benefits payable or to
become payable by Seller to any of its officers, employees or agents or
any new bonus payment or arrangement or employee benefit made to or with
any of them;
(g) any change with respect to the management or supervisory
personnel of Seller; or
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(h) any other event or condition of any character materially and
adversely affecting the financial condition or business of Seller.
4.7. Real Estate. Seller does not own any real estate and does not lease
any real estate to others. Seller has valid leasehold interests in all real
estate that it leases from others and the improvements situated thereon. Seller
is not in default under the lease for Seller's Central Monitoring Station, nor
is there any event or occurrence which with notice or passage of time will
constitute a default under such lease. The lease for the real estate on which
the Central Monitoring Station is located is currently in effect and will stay
in effect for the entire Transition Period.
4.8. Tangible Personal Property. Seller has and will transfer to
Purchaser good title to all of the Assets, as reflected on Schedule 4.8. Seller
has valid leases for all tangible personal property which it leases from others,
all of which are identified on Schedule 4.8. On or prior to the Closing Date,
all leases with respect to the tangible personal property of Seller identified
on Schedule 4.8, including the lease with respect to the MAS System and all the
equipment related thereto, shall have been assigned to Purchaser pursuant to
agreements substantially in the form of Exhibit 4.8 hereto (the "Personal
Property Lease Assignment Agreements"). The machinery, equipment, furniture and
fixtures, computer hardware and software used by Seller are in good operating
condition and repair, normal wear and tear and required maintenance (which has
heretofore been regularly performed) excepted, and are suitable and fit for the
purposes for which they are currently being used.
4.9. Intellectual Property. Schedule 4.9 lists and briefly describes all
of the Intellectual Property owned or used under license, and specifies in each
case whether Seller is owner, licensor or licensee of any Intellectual Property.
All license agreements and all other instruments relating to licenses, including
the Monitoring Automation Systems license, are described in Schedule 4.9 and
true and complete copies thereof have been provided to Purchaser. None of the
Intellectual Property has been held or stipulated to be invalid in any
litigation which has been concluded and the validity of none of the Intellectual
Property has been questioned in any litigation currently pending or, to the best
knowledge of Seller, threatened. Seller owns or possesses under lease, license,
or otherwise all intellectual property necessary to sell its services and the
performance by Seller of such services does not infringe any rights of any other
person. Seller has not received any notice of conflict thereof with the asserted
rights of others, and Seller has the right to bring an action for any
infringement of its Intellectual Property. On or prior to the Closing Date, all
licenses with respect to Intellectual Property as to which Seller is licensee
shall be assigned to Purchaser pursuant to License Assignment Agreements in the
form of Exhibit 4.9 ("License Assignment Agreements"). Immediately following the
Closing Date Seller shall change its name from Northern Central Station, Inc. to
another name dissimilar to its present name and do such other things as shall be
necessary or desirable to permit Purchaser to assume and use the Seller's name
from and after the Closing Date.
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4.10. Contracts. Schedule 4.10 is a true and complete list of all
Contracts (other than contracts with Dealers and Subscribers, all of which and
the related Accounts are listed on Schedule 4.20 and those Contracts listed on
Schedules 4.8 and 4.9) being purchased by Purchaser pursuant to this Agreement
which are not otherwise listed on Schedules 4.8 or 4.9. All such Contracts
(including those with the parties listed on Schedules 4.8, 4.9 and 4.20) are
enforceable against the parties thereto in accordance with their respective
terms. No default exists with respect to any such Contracts and no event or
occurrence exists which with notice or passage of time will result in a default.
On or prior to the Closing Date, all such Contracts shall be assigned to
Purchaser pursuant to Contract Assignment Agreements in the form of Exhibit 4.10
("Contract Assignment Agreements"). The contracts with the Dealers and
Subscribers reflected on Schedule 4.20 shall be assigned to Purchaser pursuant
to a single Contract Assignment Agreement assigning all such contracts which
shall be listed on a schedule thereto. Except for the Contracts listed on
Schedules 4.7, 4.9, 4.10 and 4.20, there is no Contract related to the Accounts
or other Assets being purchased hereunder:
(a) extending for a period of time longer than 12 months;
(b) involving expenditures or receipts in excess of $3,000;
(c) relating to the borrowing of money or guarantying any
obligation for borrowed money or otherwise, other than endorsements for
collection;
(d) with any insider or any affiliate;
(e) prohibiting or substantially restricting Seller from freely
engaging in business in any part of the world;
(f) with any Dealer; or
(g) any other contract, commitment or lease outside of the usual
and ordinary course of business.
4.11. Permits. There are no Permits required by Applicable Law for Seller
to own all of the Assets and to operate the Purchased Business as now conducted.
Schedule 4.11 contains a true and complete list of all Underwriters Laboratories
certifications issued to Seller in connection with its operation of the Central
Monitoring Station (the "UL Certificates"). All such UL Certificates are
currently in effect..
4.12. Compliance with Applicable Law and Permits. Seller is conducting,
and has conducted, the Purchased Business in compliance with all Applicable Laws
and the UL Certificates , and has received no notice that it is in breach of any
such Applicable Law or UL Certificate. Seller and to its knowledge its
predecessors in possession of the real estate on which Seller's Central
Monitoring Station is located have processed, stored, disposed, transported,
handled, emitted, discharged, and released any Waste Material, whether on or off
such real estate. No Waste Material, tanks, containers, cylinders, drums or cans
were buried on such real estate by Seller or to its knowledge, any other party
during or preceding Seller's leasing of such
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real estate. Seller has no internal or external environmental audit reports
prepared by or for Seller. There is no applicable state or local law, rule,
regulation which applies to any of the Accounts being purchased pursuant to
this Agreement that would prohibit or place any financial burden on Purchaser
were Purchaser to monitor such Accounts from a central monitoring station
located in the State of Illinois.
4.13. No Conflict. Neither the entering into nor the delivery of this
Agreement nor the completion of the transactions contemplated hereby by Seller
will result in the violation of the Certificate of Incorporation or By-laws of
Seller or any resolutions of its shareholders or board of directors; any
Contract; or any Applicable Law or Permit. Seller is not required to give prior
notice to, or obtain any consent, approval or authorization of, or make any
declaration or filing with, any governmental authority, creditor or other person
in connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby.
4.14. No Encumbrances. Except as set forth in Schedule 2.2, Seller has,
and upon consummation of the transaction contemplated by this Agreement
Purchaser will have, good title to all Assets which it owns, free and clear of
all liens, charges, security interests, encumbrances or any other rights or
interests of others.
4.15. No Defaults. Seller has taken all actions reasonably necessary to
enable it to perform when due all obligations under any Contracts or Permits,
all of which are in full force and effect, and there has not occurred any
default or other event which with the lapse of time or giving of notice or both
may become a default under any of the foregoing documents.
4.16. Litigation. There are no claims, actions, suits or proceedings
pending or, to the best knowledge of Seller, threatened by or against Seller or
affecting it in any court or before any governmental or administrative
authority, including but not limited to claims, actions or suits by Dealers
and/or Subscribers. Seller is subject to no decree, judgment, order or notice of
any kind which enjoins or restrains it from taking any action of any kind.
4.17. Employee and Labor Matters. Seller has not been, and is not, a party
to any collective bargaining or other union agreement. Seller is in compliance
in all material respects with all Applicable Laws respecting employment and
employment practices, immigration laws, terms and conditions of employment, and
wages and hours. None of Seller's employees is represented by a union nor are
there any applications for certification of a collective bargaining agent
pending. Within the last two years, Seller has experienced no, and there is not
presently pending or existing any, union organization attempts or work
stoppages. There has not been, and there is not presently pending or existing,
any unfair labor practice or discrimination charge or complaint against Seller
or, to the knowledge of Seller, threatened, before the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other similar
national, state or local body. There are no strikes, requests for
representation, slowdowns, picketing, work stoppages, or grievances actually
pending or threatened against or affecting Seller. No question concerning
representation as defined in the National Labor Relations Act has been raised
with Seller or, to the knowledge of Seller, is threatened against it. No consent
of any union or any other person or authority is required for, and no collective
bargaining agreement restricts, the
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execution of this Agreement, the consummation of any of the transactions
contemplated hereby, the termination of employment of any Employee, or the
closing or relocation of any facility including Seller's Central Monitoring
Station.
4.18. Employee Benefits.
(a) Seller has never been and is not a party to (i) any employee
benefit plans as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or to (ii) any employment,
consulting, agency, commission, retirement, stock, stock option, incentive
pay, severance pay or non-competition agreement or any profit-sharing,
vacation, deferred compensation or pension agreements or plans, or similar
arrangements, whether written or oral, or formal or informal, other than
the health insurance plan identified on Schedule 4.18 and defined herein
as the "Plan" (a true and correct copy of which has been delivered to
Purchaser). All obligations, whether arising by operation of law, by
contract or by past custom, for payments with respect to the Plan or with
respect to unemployment compensation benefits, social security benefits,
accrued vacation, or other benefits for Employees, arising as a result of
employment during periods prior to the Closing Date have been or shall be
paid by Seller.
(b) Upon termination of the employment of any Employee by Seller,
Purchaser shall not incur any liability for any severance or termination
pay or other similar payment related to that Employee's employment by
Seller (such liability being solely Seller's).
(c) The Plan is in compliance with its terms and with ERISA and
other applicable laws and all agreements and instruments applicable
to the Plan. No violation of ERISA has at any time occurred in
connection with the administration of the Plan, and there are no
actions, suits, or claims (other than routine, non-contested claims
for benefits) pending or threatened against the Plan, or any
administrator or fiduciary thereof, which could result in any
liability.
(d) Full payment as of the Effective Time has been made of all
amounts which Seller is required to have paid under the Plan up to
the Effective Time.
(e) The Seller does not provide, nor has it at any time provided,
coverage under any welfare benefit plan, as defined in Section 3(1)
of ERISA (including, but not limited to, life insurance, disability,
medical, dental, prescription drugs, or accidental death or
dismemberment) to any of its retirees, other than any continuation
or conversion coverage which any such retiree may have purchased at
his own expense.
4.19. Intentionally left blank.
4.20. Customers, Dealers, Distributors and Suppliers. Schedule 4.20
contains a true and complete list of all Dealers and the number of Subscribers
whose Accounts are monitored for
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each such Dealer and the RMR attributable to each such Dealer as of the Closing
Date. There are no problems in Seller's business relations with the foregoing
persons and, except as described in Schedule 4.20, there are no disputes
between Seller and any of such persons pending or, to the knowledge of Seller,
threatened. True and complete copies of all contracts with the foregoing
persons in effect as of the Execution Date as well as descriptions of all oral
contracts in effect have been delivered to Purchaser and are in full force and
effect in accordance with their terms, and there are no defaults or assertions
of default thereunder. True and complete copies of all such contracts executed
between the Execution Date and the Closing Date will be delivered to Purchaser
at the Closing and they will be in full force and effect in accordance with
their terms and there will be no defaults or assertions of default thereunder.
Seller is not aware of any Dealer that is planning to terminate its
relationship with Seller or the Purchased Business (except for Reliable Hawk).
One true and complete copy each of Seller's standard "Installer Contract" form
which it uses with Dealers and its standard "Alarm Monitoring Agreement" form
it uses with Subscribers are included as Exhibit 4.20. Seller has in force
with no less than fifteen percent (15%) of all Dealers and eighty percent
(80%) of all Subscribers a valid and enforceable contract utilizing said forms.
All such agreements are fully assignable to Purchaser by their terms. Seller
shall use its best efforts to renew, for Purchaser's account, each such
contract which expires during the Interim Period. Seller has neither agreed to
modify, nor modified, the preprinted text of either such form in contracts with
any of the Dealers or Subscribers in the twelve months ended on the Execution
Date and shall not agree to modify either form or use any other form of
agreement or modify any oral agreement from the Execution Date through the
Closing Date.
4.21. Related Party Transactions. Except as contemplated by this
Agreement, no shareholder, relative of a shareholder, partner, officer or
director of Seller has any interest in any of the Assets or is a party to any
Contract with Seller affecting the Purchased Business or the Assets.
4.22. Disclosure. No representation or warranty by Seller in this
Agreement, and no certificate or written statement furnished or to be furnished
to Purchaser pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact, or omits or shall omit to state a material fact necessary in order to make
the statements contained herein and therein not misleading. There is no fact
known to Seller which materially adversely affects or in the future would (so
far as can now be reasonably foreseen) materially adversely affect the Purchased
Business, its financial condition or its business which has not been set forth
in this Agreement, any Schedule, Exhibit, or other information or written
materials provided by Seller to Buyer.
4.23. Minimum Number of Subscribers. As of the Execution Date the Central
Monitoring Station is monitoring the security alarm systems of a minimum of
7,800 Subscribers and is earning a minimum of Thirty Nine Thousand Dollars
($39,000.00) in RMR from such monitoring activities.
4.24. Contracts and Policies of Insurance. Schedule 4.24 is a true and
complete list of all contracts and policies of insurance which Seller has in
force on the Execution Date all of
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which will remain in effect until the end of the Transition Period . Purchaser
will not become liable for any claims related to any occurrences prior to the
Closing Date, which would have been covered by such insurance policies, by
reason of the consummation of the transactions contemplated by this Agreement.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
As of the date hereof and as of the Closing Date, Purchaser represents and
warrants to, and agrees with, Seller as follows:
5.1. Organization. Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Illinois and Purchaser has provided or will provide Seller at Closing a
photocopy of its Articles of Organization and a photocopy of its Operating
Agreement.
5.2. Power of Authority. Purchaser has the power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement has been duly authorized, executed, and delivered by Purchaser and,
assuming the due authorization, execution and delivery hereof by Seller,
constitutes the legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms. The Manager of Purchaser has
been duly authorized to execute this Agreement on behalf of Purchaser. Attached
on Exhibit 5.2 is a true and complete copy of the resolutions authorizing the
transactions contemplated by this Agreement.
5.3. No Conflict. Neither the entering into nor the delivery of this
Agreement nor the completion of the transactions contemplated hereby by
Purchaser will result in the violation of or default under:
(a) any of the provisions of the Articles of Organization or
Operating Agreement of Purchaser;
(b) any agreement or other instrument to which Purchaser is a
party or by which Purchaser is bound; or
(c) any law, rule, regulation, order, judgment or decree
applicable to Purchaser.
5.4. Disclosure. No representation or warranty by Purchaser in this
Agreement, and no certificate or written statement furnished or to be furnished
to Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact, or omits or shall omit to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
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6. COVENANTS.
6.1. Continued Conduct of Business During Interim Period. During the
period beginning December 31, 1996 and ending on the Closing Date (the "Interim
Period"), Seller has and shall continue to:
(a) conduct the Purchased Business only in the usual and ordinary
course, consistent with past practice;
(b) refrain from making any material change in Seller's accounting
practices or procedures;
(c) refrain from incurring any obligations or liabilities other
than those that are usual and normal in the ordinary course of business,
consistent with past practice;
(d) have in effect and maintain at all times all insurance now in
force as described in Schedule 4.24, including third party liability
insurance for damages which may be suffered by any Subscriber, in the
amount of at least one million dollars ($1,000,000) per occurrence;
(e) use its best efforts to preserve the Purchased Business
intact, to preserve and maintain all Intellectual Property, to keep
available the services of the present officers and employees of Seller and
to make no changes therein, and to preserve the goodwill of all suppliers,
customers, licensors, sales representatives and others having business
relations with Seller;
(f) conduct the Purchased Business in accordance with Applicable
Law; and
(g) be solely responsible for the management of the Purchased
Business; provided however, that during said period Seller shall permit
Purchaser, at Purchaser's sole option and expense, to locate in Seller's
principal place of business from time to time during normal business hours
(on a full or part-time basis) not more than two (2) administrative and/or
technical managers ("Purchaser's Managers") for the purpose of consulting
with and assisting Seller's management personnel in the management of the
Purchased Business, it being understood that Purchaser's Managers shall
work in an advisory capacity only. Purchaser shall, to the best of its
ability, assist Seller in the conduct of the Purchased Business during the
Interim Period but shall incur no liability to Seller for advice given to
Seller.
6.2. Transition Period. Seller agrees to maintain the facility that
constitutes its Central Monitoring Station for such period, not to exceed twenty
one (21) days following the Closing Date (the "Transition Period"), as is
necessary for Purchaser to (i) transfer the monitoring of the purchased Accounts
to Purchaser's central monitoring station (or to a third-party central
monitoring station chosen by Purchaser), and (ii) to pack and ship (at
Purchaser's expense) those purchased Assets constituting tangible personal
property. During the Transition Period, Seller agrees to take such further
actions as may be reasonably necessary to assist in the timely transfer
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of the Assets to Purchaser. Purchaser covenants that it will undertake its
best efforts to accomplish the transition required by this Section 6.2 by the
close of business on Wednesday, March 5, 1997. In the event of any delay
beyond that date due to the fault of Purchaser, Purchaser agrees that it will
reimburse Seller for its payroll expenses for the Transition Period, provided
that such expenses shall be only for the personnel listed on Schedule 6.2, who
will be compensated at the rates as set forth thereon.
6.3. Access to Records. Purchaser's representatives, attorneys and
accountants have had, prior to the date hereof, and shall continue to have until
the Closing Date and thereafter, reasonable access to the records (including all
contracts with Dealers and Subscribers), audits and properties of Seller as well
as to all information relating to taxes, commitments, contracts, title to
properties and the financial condition of, or otherwise pertaining to, the
Seller. From the date hereof, Seller agrees to cause its accountants to
cooperate with Purchaser and its accountants in making available all financial
information concerning Seller, as is requested, and Purchaser and its
accountants shall have the right to examine all working papers pertaining to
examinations of Seller, or preparation of its reports, by its accountants.
Unless and until the purchase contemplated herein is consummated, Purchaser
shall hold in confidence, and shall use its best efforts to cause its
representatives, attorneys and accountants to hold in confidence, all
information obtained as aforesaid. During the Interim Period Purchaser shall
neither reproduce nor remove from Seller's premises, without Seller's prior
consent, any list of Dealers or Subscribers prepared by Seller. If the purchase
contemplated by this Agreement is not consummated, Purchaser shall return to
Seller or destroy (at Seller's option) all copies of documents received from
Seller as Seller may reasonably request and shall continue to be bound by the
terms of the confidentiality letter between the parties dated August 14, 1996.
6.4. Action by Seller. Seller shall use its best efforts to cause each of
the conditions set forth in Section 7.1 to be fulfilled on or prior to the
Closing Date.
6.5. Action by Purchaser. Purchaser shall use its best efforts to cause
each of the conditions set forth in Section 7.3 to be fulfilled on or prior to
the Closing Date.
6.6. Employees.
(a) The parties agree that none of Seller's Employees will be
employed by Purchaser. Purchaser shall not be deemed an employer of
any Employees or be responsible for any damage caused to any third
party or for any liability incurred by Seller or the Purchased
Business prior to the Closing Date. Seller shall be responsible for
the health care continuation requirements of all Employees and
former Employees of the Seller who worked in the Purchased Business,
such continuation to be made in accordance with the continuation
coverage requirements of Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code. All other obligations in respect of
the Employees arising prior to the Closing Date shall be paid by
Seller.
6.7. No Shop. From the Execution Date through the Closing Date, neither
Seller nor any of its officers, directors, affiliates, employees,
representatives or agents, shall, directly or
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indirectly, solicit, initiate or participate in any way in discussions or
negotiations with, or provide any information or assistance to, any
corporation, partnership, individual, person or other entity or group with
respect to the sale of Seller or the Assets (other than sales of inventory in
the ordinary course of business) or assist or participate in, facilitate or
encourage any effort or attempt by any other person to do or seek any of the
foregoing. Seller shall promptly communicate to Purchaser the terms of any
proposal or contact which it may receive in respect of any such transaction.
6.8. Noncompetition and Nonsolicitation. During the period commencing
with the Execution Date and ending on the third (3rd) anniversary of the Closing
Date, neither Seller or any of its principal shareholders agreeing to be bound
by this Section 6.8 shall:
(a) enter into competition with Purchaser by establishing a remote
alarm system monitoring center in the State of New Jersey or providing
third party alarm system monitoring or similar services to those provided
by the Purchased Business from any location to any person within twenty
five (25) miles of any location where Purchaser or any affiliate or
subsidiary of Purchaser provides such services;
(b) solicit any Dealer or Subscriber for the purposes of providing
any services similar to those provided by the Purchased Business, either
by such party or by any other person or entity;
(c) reveal the customer list of Seller and the Purchased Business
to any person;
(d) employ any employee of Purchaser or its affiliates or
subsidiaries, or solicit or encourage any such employee to terminate his
employment with any of the foregoing; or
(e) take any other action which is intended to, or which would
reasonably be expected to:
(f) adversely affect Purchaser's interest in any Account;
(g) adversely affect Purchaser's interest in the Purchased
Business;
(h) adversely affect Purchaser's contractual relationship with any
Dealer or Subscriber; or
(i) discourage any Dealer, Subscriber or supplier from continuing
its business relationship with Purchaser after the Closing Date on the
same terms as were maintained with Seller.
Notwithstanding any other provision of this Agreement, Seller agrees that
neither money damages nor arbitration would be a sufficient remedy for breach of
this Section 6.8 and that the Purchaser shall be entitled to specific
performance, injunctive relief or other equitable relief as a
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remedy for breach of this Section 6.8. Such remedies shall be in addition to
any other remedies available at law or in equity. The parties agree that the
state and federal courts located in Xxxx County, Illinois are the proper venue
for seeking such relief, and no party shall attempt to have the venue of any
such action changed to any other court.
Notwithstanding the foregoing, the parties expressly agree that so long as
the provisions of this section 6.8 are not violated, Seller's principal
shareholders may be employed as supervisors or monitors at alarm stations not
owned by any of them.
6.9. Assistance in Transition. Seller agrees that commencing immediately
following the Closing Date and during the two (2) week period immediately
thereafter Seller will assist Purchaser in the process of transition. Such
assistance will include joint written announcements of the purchase by Purchaser
of the Purchased Business and of the ongoing services to be provided by
Purchaser. In addition, Seller's Principals will personally introduce Purchaser
and its President and operating personnel, as appropriate, to the ten (10)
Dealers representing the largest amount of RMR for Accounts being purchased
hereunder.
7. CONDITIONS TO OBLIGATIONS OF PURCHASER AND SELLER.
7.1. Conditions to Obligations of Purchaser. All obligations of Purchaser
hereunder are, at its option, subject to the fulfillment of each of the
following conditions on or before the Closing Date:
(a) The representations and warranties of Seller set forth in
Section 4 shall be true and correct on the Closing Date with the same
force and effect as if made at and as of such date;
(b) Seller shall have performed or complied with all of the terms,
covenants and conditions of this Agreement to be performed or complied
with by Seller at or prior to the Closing Date.
(c) No action or proceeding shall be pending by any person,
government, governmental, authority, regulatory body or agency to enjoin,
restrict or prohibit:
(d) the sale and purchase of the Assets contemplated hereby; or
(e) the right of Purchaser to own the Assets or conduct the
Purchased Business;
(f) No material Assets shall have been stolen, damaged or
destroyed and there shall have occurred no event or events having a
material adverse effect on the financial condition, assets, liabilities,
equity, results of operations, business or prospects of Seller, whether or
not in the ordinary course of business;
(g) Seller shall have delivered to Purchaser the opinion of
Seller's counsel substantially in the form of Exhibit 7.1(e);
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(h) Seller shall have delivered executed Personal Property Lease
Assignment Agreements, Contract Assignment Agreements, License Assignment
Agreements, and any and all other authorizations, permits and consents
necessary for Purchaser to lawfully own and operate the Purchased
Business, including executed consents where necessary to accomplish the
assignment in conformity with the underlying agreements, for all material
contracts, leases, agreements and permits to be acquired by Purchaser
pursuant to this Agreement;
(i) Seller shall have received any and all other authorizations,
permits and consents necessary to validly sell, assign and transfer the
Assets to Purchaser and for Purchaser's assumption of the Assumed
Liabilities; and
(j) Seller shall have completed and delivered all Schedules and
Exhibits to this Agreement in a manner reasonably satisfactory to
Purchaser and such Exhibits and Schedules as completed shall not contain
any material adverse information with respect to the economic value of the
transactions contemplated by this Agreement not previously disclosed to
Purchaser.
8. PURCHASER'S OPTION.
8.1. In case any condition referred to in Section 7.1 to be performed or
complied with at or prior to the Closing Date shall not have been so performed
or complied with, Purchaser may, without limiting any other right that Purchaser
may have, at its sole option, either:
(a) rescind this Agreement by notice to Seller, and in such event
Purchaser shall be released from all obligations hereunder; or
(b) waive compliance with any such term, covenant or condition in
whole or in part.
8.2. Conditions to Obligations of Seller. All Obligations of Seller
hereunder are, at its option, subject to the fulfillment of each of the
following conditions on or before the Closing Date.
(a) The representations and warranties of Purchaser set forth in
Section 5 shall be true and correct at the Closing Date with the force and
effect as if made at and as of such date;
(b) Purchaser shall have performed or complied with all of the
terms, covenants and conditions of this Agreement to be performed or
complied with by Purchaser at or prior to the Closing Date;
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(c) No action or proceeding shall be pending by an person,
government, governmental authority, regulatory body or agency to enjoin,
restrict, or prohibit the sale and purchase of the Assets contemplated
hereby; and
(d) Purchaser shall have received any and all other
authorizations, permits and consents necessary for Purchaser to purchase
the Assets and to assume the Assumed Liabilities.
8.3. Seller's Option. In case any condition referred to in Section 7.3 to
be performed or complied with as of the Closing Date shall not have been so
performed or complied with, Seller may, without limiting any other right that
Seller may have, at its sole option, either;
(a) rescind this Agreement by notice to Purchaser, and in such
event Seller shall be released from all obligations hereunder; or
(b) waive compliance with any such term, covenant or condition in
whole or in part.
9. INDEMNIFICATION.
Indemnification by Seller.
9.1. Seller and its principal shareholders, Xxxxxxx Xxxxxxxx, Xxxxxxx
Xxxxxxx and Xxxxxxx Xxxxx jointly and severally hereby agree to indemnify and
hold Purchaser harmless against any Loss arising out of or due to:
(a) breach of any representation or warranty by Seller contained
herein or in any document delivered hereunder;
(b) breach of any covenant or agreement by Seller contained herein
to be performed at, prior to or after the Closing Date.
(c) liabilities of Seller which relate to the ownership or use of
any of the Assets or the conduct of the Purchased Business prior to the
Closing Date which are not Assumed Liabilities including liabilities
arising from or relating to:
(i) taxes imposed on Seller, the Purchased Business or any
other Assets for any period prior to the Closing Date unless
disclosed, specifically assumed by Purchaser and reserved against;
(ii) injuries to, the death of, or the contraction of
diseases by, any person resulting from exposure to hazardous
substances or other materials prior to the Closing Date without
regard to when such injuries or diseases are first manifested;
(iii) the generation, processing, handling, storage or
disposition of or contamination by Waste Material prior to the
Closing Date, including costs and
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penalties incurred in the monitoring, cleanup or correction of any
such event or condition;
(iv) any pollution or other damage or injury to the
environment arising out of events occurring or conditions existing
prior to the Closing date, including costs and penalties incurred in
the monitoring, cleanup or correction of any such event or
condition; and
(v) any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses incidental to any of
the foregoing matters set forth in Section 8.1(a) through (d).
9.2. Indemnification by Purchaser. Purchaser shall indemnify and hold
Seller harmless against any Loss arising out of or resulting from:
(a) breach of any representation or warranty by Purchaser
contained herein or in any document delivered hereunder;
(b) breach of any covenant or agreement by Purchaser contained
herein to be performed at, prior to or after the Closing Date; or
(c) the Assumed Liabilities and any other liabilities with respect
to the conduct of the Purchased Business on and after the Closing Date,
including liabilities arising from or relating to:
(i) any taxes imposed on the Assets or the conduct by the
Purchaser of the Purchased Business for periods on or after the
Closing date;
(ii) injuries to, the death of or the contraction of any
diseases by, any person resulting from exposure to hazardous
substances or other materials on or after the Closing Date;
(iii) the generation, processing, handling, storage or
disposition of or contamination by any Waste Material on or after
the Closing Date, including costs and penalties incurred in the
monitoring, cleanup or correction of any such event; and
(iv) any pollution or other damage or injury to the
environment occurring on or after the Closing Date, and caused to by
Purchaser, including costs and penalties incurred in the monitoring,
cleanup or correction of any such event
(d) Providing monitoring services for the Accounts purchased
hereunder following the Closing Date.
9.3. Indemnification Procedures.
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For the purposes of this Section 9.3, the term "Indemnitee" shall refer to the
person or persons entitled, or claiming to be entitled, to be indemnified,
pursuant to the provisions of Section 9.1 or 9.2. The term "Indemnitor" shall
refer to the person or persons having the obligation to indemnify pursuant to
such provisions.
(a) An Indemnitee shall promptly give the Indemnitor written
notice of any matter which an Indemnitee has determined has given or could
give rise to a right of indemnification under this Agreement, stating the
amount of the Loss, if known, and method of computation thereof, all with
reasonable particularity and containing a reference to the provisions of
this Agreement in respect of which such right of indemnification is
claimed or arises. If an Indemnitee shall receive notice of any claim by a
third party which is or may be subject to indemnification (a "Third Party
Claim"), the Indemnitee shall give the Indemnitor prompt written notice of
such Third Party Claim and shall permit the Indemnitor, at its option, to
participate in the defense of such Third Party Claim by counsel of its own
choice and at its expense. If, however, the Indemnitor acknowledges in
writing its obligation to indemnify the Indemnitee hereunder against all
Losses that may result from such Third Party Claim (subject to the
limitations set forth herein), then the Indemnitor shall be entitled, at
its option, to assume and control the defense of such Third Party Claim at
its expense and through counsel of its choice. In the event the Indemnitor
exercises its right to undertake the defense of any such Third Party
Claim, the Indemnitee shall co-operate with the Indemnitor in such defense
and make available to the Indemnitor, at the Indemnitor's expense, all
witnesses, pertinent records, materials and information in its possession
or under its control relating thereto as is reasonably required by the
Indemnitor. Similarly, in the event the Indemnitee is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Indemnitor shall co-operate with the Indemnitee in such defense and make
available to it all such witnesses, records, materials and information in
its possession or under its control relating thereto as is reasonably
required by the Indemnitee. No such Third Party Claim may be settled by
the Indemnitor without the written consent of the Indemnitee, unless the
settlement involves only the payment of money by the Indemnitor.
Similarly, no Third Party Claim which is being defended in good faith by
the Indemnitor shall be settled by the Indemnitee without the written
consent of the Indemnitor.
9.4. Survival of Representations, Warranties and Indemnity Obligations.
All representations, warranties, covenants and indemnification obligations
contained in this Agreement, shall survive the Closing and any investigation
made at any time by or on behalf of a party.
9.5. Calculation of Losses.
Losses shall be determined after taking into account any insurance
proceeds received by an Indemnitee or its affiliates from a non-affiliated
insurance company on account of such Losses (after taking into account any costs
incurred in obtaining such proceeds and any increase, determined in the
reasonable judgment of the Indemnitee and confirmed by insurance company, in
insurance premiums as a result of a claim with respect to such proceeds).
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10. MISCELLANEOUS.
10.1. Brokerage. Purchaser and Seller each represent and warrant to the
other that they have retained no broker or other person entitled to a
commission, finder's fee or other like payment in connection with the
transactions contemplated by this Agreement, other than Xxx Xxxxx whose fees
will be paid by Purchaser. Each party will indemnify the other for any claims
made against such other party for brokerage commissions which result from the
actions or agreements of the indemnifying party.
10.2. Assignment. The respective rights and obligations of Purchaser and
Seller under this Agreement shall not be assignable by Purchaser or Seller
without the prior written consent of the other; provided however, that Purchaser
shall not be required to obtain Seller's prior written consent for an assignment
of the rights and liabilities of Purchaser under this Agreement or of this
Agreement in its entirety to any subsidiary of Purchaser, to the parent company
of Purchaser, to a sister corporation of Purchaser, or to a sister limited
liability company of Purchaser. Upon such assignment and demonstration of the
requisite relationship by Purchaser, all the rights and powers of Purchaser and
remedies available to it hereunder shall extend to and be enforceable by such
subsidiary, parent, or sister company, and appropriate changes shall be made in
all appropriate documents and in applicable parts of this Agreement, reflecting
such assignment but no such assignment shall release Purchaser from its
obligations hereunder. Nothing herein expressed or implied shall confer upon any
person, other than the parties hereto or their respective successors, assigns,
heirs and legal representatives, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
10.3. Notices. Any notice, consent, request, claim, demand, instruction or
other communication to be given hereunder by Purchaser or Seller shall be in
writing and shall be deemed to have been given when actually received. Any such
notice, consent, request, claim, demand, instruction or other communication may
be given by mail, overnight courier service, telex, or telefax, and shall be
addressed as follows:
If to Purchaser, to:
Security Associates International, Inc..
0000 X. Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxx Xxxxxxx, XX 00000-0000
Attention: President
If to Seller, to:
Xxxxxxxx Xxxxxxx Xxxxxxx
Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: President
with a copy to:
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Williams, Caliri, Xxxxxx & Xxxxx
Xxxxx 00
Xxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
or to such other address as a party may from time to time designate by
notice to the other.
10.4. Costs. The expenses of each party in connection with this Agreement
shall be the sole responsibility of such party.
10.5. Incorporation by Reference. The Schedules, Exhibits, certificates
and other documents attached hereto or referred to herein are deemed to be a
part of this Agreement and are incorporated herein by this reference.
10.6. Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties relating to the
subject matter hereof and supersede all prior agreements, understandings, and
representations, whether oral or written. This Agreement shall not be modified,
amended or terminated except by written agreement of the parties. Captions
appearing in this Agreement are for convenience only and shall not be deemed to
explain, limit or amplify the provisions hereof. Unless and only to the extent
specified in this Agreement, Seller and Purchaser do not intend to confer any
rights or benefits on any third parties arising out of or related to this
Agreement or the transactions contemplated herein.
10.7. Set Off Rights. In addition to the rights of the parties to
indemnification pursuant to Section 8 hereunder, Seller and Purchaser shall each
have the right to set off against any debt owed to the other party any damages
or losses of any kind suffered as a result of the other party's failure to
perform its obligations under this Agreement, breach of warranty or covenant, or
any other act or failure to act in connection with this Agreement; provided that
such right of set off is not modified or prohibited by an award in arbitration
or a judgment by a court of competent jurisdiction.
10.8. Counterparts. This Agreement may be executed in two or more
identical counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
10.9. Arbitration. Except as provided in Section 6.8.5 or, any controversy
or claim arising out of or related to this Agreement, or the breach thereof,
shall be resolved by binding arbitration administered by the American
Arbitration Association in accordance with its Commercial Arbitration Rules. The
award rendered by the arbitrator may include attorneys' fees. Judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in Xxxx County, Illinois, or at any other
place selected by mutual agreement of Seller and Purchaser; shall be decided by
one neutral arbitrator who has been a member in good standing of the appropriate
state bar for at least 15 years, has expertise in the process of arbitration and
interpreting contracts in mergers and acquisitions and commercial transactions,
and is selected in accordance with the Commercial Arbitration Rules; and shall
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proceed under the Expedited Procedures of those rules, irrespective of the
amount in dispute. Except to the extent the arbitrator may award attorneys' fees
to a prevailing party, each party shall bear its own costs and expenses and an
equal share of the arbitrator's fee and the administrative fees of the
arbitration. Purchaser agrees that if the Seller prevails in any arbitration
action pursuant to this Section 9.9, Purchaser will pay to Seller the reasonable
incremental costs to Seller of conducting such arbitration in Xxxx County,
Illinois over the costs to Seller of conducting such arbitration in Passaic
County, New Jersey, as determined by the arbitrator.
10.10. Governing Law. This Agreement shall be construed in accordance with
the law of the State of Illinois excluding its conflict of laws rules.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
ATTEST: All-Security Monitoring Services, L.L.C..
By:/s/ Xxxxx X. Xxxxxxx
-------------------------------
As Its Manager
ATTEST: Northern Central Station, Inc.
By:/s/ Xxxxxxx Xxxxxxx, President
-------------------------------
As Its President
The undersigned, being all of the shareholders of Northern Central Station,
Inc. acknowledge that they will receive substantial economic benefits upon the
consummation of the transactions contemplated by this Agreement. In order to
induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated herein the undersigned hereby agrees to be bound by
Sections 6.9 and 8 hereof.
DATED: February 25, 1997
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxx
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Xxxxxxx Xxxxxxx
By: /s/ Xxxxxxx Xxxxx
-------------------------------
Xxxxxxx Xxxxx
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