STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
THE SHAREHOLDERS OF
INNOVATIVE CONTROL SYSTEMS, INC.
And
XXXX SECURITY INTERNATIONAL, INC
TABLE OF CONTENTS
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PAGE
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RECITALS................................................................. 1
ARTICLE I ACQUISITION; CLOSING........................................... 2
ARTICLE II [INTENTIONALLY OMITTED]
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SELLERS.......................................................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER........................................................ 19
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS............................... 20
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER............................ 24
ARTICLE VII CONDITIONS OF PURCHASER...................................... 24
ARTICLE VIII CONDITIONS OF SELLERS....................................... 25
ARTICLE IX INDEMNIFICATION............................................... 26
ARTICLE X OTHER PROVISIONS............................................... 29
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SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.6(c) Purchaser Opinion Letter
1.6(d) Employment Agreements
1.6(e) Registration Rights Agreement
1.7(g) Sellers Opinion Letter
1.7(f) Release
ATTACHED AS PART OF DISCLOSURE BINDER
1.3(a) Company Debt
1.3(b) Stock Allocation
3.3 Material Documents
3.4(a) Office and Other Equipment
3.5 Customer List and Contracts
3.6 Real Property Interests
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) Notices of Violation
3.14(d) Exceptions to Approvals
3.16 Exceptions to right of Sellers and Company to enter this Agreement
3.17 Transaction Intermediaries
3.18(a) Intellectual Property Rights
3.18(b) Proprietary Information
3.18(c) Licenses and Royalties
3.19 Investments in Competing Companies
3.22 List of Litigation and Summaries
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STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
This Stock Purchase Agreement and Plan or Reorganization ("Agreement") is
made as of June 1, 1999, by and between Xxxxx Xxxxxxx, Xxxxx Bath, Xxxxxxx Xxxx,
and Xxxxxxx Xxxxxxx ("Shareholders") on the one hand, and Xxxx Security
International, Inc., a Delaware corporation ("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 Innovative Control Systems, Inc., a Pennsylvania
corporation (the "Company"), which is in the business of the development and
sale of computer application software for car wash control and management (the
"Business").
In accordance with the provisions of this Agreement, Sellers desire to sell
all of the outstanding shares of stock of the Company 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)(1)(B) of the Internal Revenue Code of 1986, as
amended, and be treated as a "pooling of interests" for accounting purposes.
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.
ARTICLE I
Acquisition; Closing
Section 1.1 Incorporation of Recitals. The recitals set forth above
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are incorporated herein by reference and are a part of this Agreement.
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Section 1.2 Time and Place for Closing. Closing under this Agreement shall
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take place within fifteen days of the conditions set forth in Article VII and
Article VIII being satisfied or waived in writing, time being of the essence, at
the offices of Purchaser, 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. The Closing Date established by Purchaser
shall be reasonably satisfactory to the Sellers.
Section 1.3 Stock Purchase; Consideration.
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(a) At the Closing, (i) all of the Company Shares shall be delivered by
Shareholders to Purchaser, and (ii) Purchaser shall deliver to Sellers, subject
to adjustment as provided herein in this Section 1.3, a number of shares of
Purchaser's common stock ("Consideration Stock") having a value of Five Million
Dollars ($5,000,000.00) ("Purchase Price"), as adjusted as provided for in this
section below, each share being valued at $7.875 ("Per Share Value"). For
purpose of this Agreement, "Company Debt" shall include the long term and
current debt of the Company as determined by applying generally accepted
accounting principles ("GAAP"). At the Closing, Company shall have total
Company Debt in the amount set forth on Schedule 1.3(a) attached. The Purchase
Price to be paid in Consideration Stock at Closing shall be increased, dollar
for dollar, by the amount, if any, by which the Company Debt at Closing is less
then $460,000.00. The Purchase Price to be paid in Consideration Stock at
Closing shall be decreased, dollar for dollar, by the amount, if any, by which
the Company Debt at Closing is greater then $460,000.00. The Purchase Price
shall also be decreased by the amount by which the current accounts receivable
of the Company at Closing are less than the trade payables of the Company at
Closing, as provided in Section 3.9(c) below. The Purchase price shall also be
decreased by the amount the Northeast Tier Ben Franklin Technology Center ("Ben
Franklin Center") agrees to accept in writing as an extinguishment of all
obligations owed by the Company to the Ben Franklin Center ("Ben Franklin
Obligation"). The decreases, if any, shall be calculated by valuing the
Consideration Stock at the Per Share Value.
(b) The Consideration Stock shall be allocated between the Shareholders in
the same proportions that the Shareholders own shares in the Company, as set
forth on Schedule 1.3(b).
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, in writing,
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
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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 Purchaser within twenty (20) days after the date of this Agreement,
if Purchaser is not satisfied, in its sole discretion, with the due diligence it
has conducted on the Company.
(c) by Sellers within twenty (20) days after the date of this Agreement, if
Sellers are not satisfied, in their sole discretion, with the due diligence they
have conducted on the Purchaser.
(d) 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
(e) by the Sellers or Purchaser, if the Closing shall not have occurred by
August 1, 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).
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
otherwise 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 Consideration Stock due on the Closing Date, as provided in
Section 1.3 above to be delivered to the Sellers;
(b) 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
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herewith (collectively, the "Collateral Documents") and the consummation of the
transactions contemplated herein;
(c) 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);
(d) A registration rights agreement with Sellers in form and substance as
attached hereto as Schedule 1.6(e) ("Registration Rights Agreement"); and
(e) Other documents and instruments required by this Agreement, if any.
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;
(c) A current certificate of good standing for the Company and certified
charter documents from each applicable jurisdiction of admittance and
incorporation;
(d) 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;
(e) The Certificate described at Section 7.1;
(f) A release from each Seller, in a form and substance attached as
Schedule 1.7(f);
(g) A favorable opinion from counsel for Seller, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.7(g);
(h) The Registration Rights Agreement;
(i) 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
(j) Other documents and instruments required by this Agreement, if any.
ARTICLE II
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[This article intentionally omitted.]
ARTICLE III
Representations and Warranties of the Sellers
With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, Sellers each individually, jointly
and severally 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 or the information and/or knowledge of any Seller
who is or was a director, officer, or employee of the Company would actually
possess had such Seller acted with due diligence in the conduct of his or her
duties as an officer, director or employee.
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 its
incorporation, 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.
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. The Shareholders are 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, (ii) licenses, licensing agreements, and royalty agreements, including
without limitation all documents evidencing the Company's grant from the Ben
Franklin Partnership, (iii) franchises, (iv) promissory notes, guarantees,
bonds, letters of credit, mortgages, liens, pledges, and security agreements
under which the Company is 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
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Company's businesses, and (viii) other contracts, agreements and instruments not
listed on another Schedule attached to this Agreement (such as the customer
contracts listed on Schedule 3.5) 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 $25,000 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 the Sellers' 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.
Section 3.4 Personal Property. All items of personal property used in the
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business operations of the Company are listed on the Schedules set forth below,
are owned by the Company or leased by the Company, as identified on each
Schedule, and the Company, except as noted on the Schedule has good and
marketable title to each of the items, free of all liens. Each item of personal
property of the Company owned or leased by the Company are now and at Closing
will be in good condition, normal wear and tear excepted, except as noted on the
applicable Schedule. Where the personal property is in different physical
locations, the Schedules have been organized with subheadings which set forth
the physical locations of the listed personal property.
(a) All electronic equipment, computers, printers, servers, peripheral
devices, power supply devices, connecting cables and devices, monitors,
information transfer and storage devices and media, and related items in
Sellers' possession or control, used in connection with, located in or on, or
otherwise pertaining to the Business (collectively, the "Equipment"), as listed
on Schedule 3.4(a);
(b) All appliances, machinery and parts, vehicles, tools and related items
in Sellers' possession or control, used in connection with the Business;
(c) All office or other equipment, telephone and telecommunication devices
and 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 license, documentation and in
the case of third-party software, source codes where licensed), and other
personal property of every nature and description in Sellers' possession or
control;
(d) All intellectual property owned by the Company or contributed to,
produced by or used in connection with the Business or any other Asset,
including, without limitation, all code to
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software developed by the Company, all copyrightable information, whether or not
copyrighted, all patentable information, whether or not patented, know-how,
trade secrets, service marks, trademarks, trade names, and the exclusive right
to use the names under which the Business or its products are currently operated
or promoted or advertised (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 that the personal property is all in operable condition, except
as noted to the contrary on the applicable schedule.
Section 3.5 Customers. Schedule 3.5 attached hereto lists the name and
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address of each customer the Company serves, together with copies of all
customer contracts, and the information supplied thereon is true, correct, and
complete, in all material aspects. Neither the Company nor, to the Sellers'
knowledge, any person or party to the any of the customer contracts is in
material or knowing default under any of the customer contracts, and no act or
event has occurred which with notice or lapse of time, or both, would constitute
such a default except as may be disclosed in Schedule 3.5. The Company has
received no notice that any material customer intends to not renew any contract
or otherwise cease or curtail doing business with the Company.
Section 3.6 Real Property. The Company owns no real property. All real
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property the Company has ever owned, leased or otherwise occupied, had an
interest in or operated is listed on Schedule 3.6 attached hereto and
incorporated herein by reference ("Real Property"). The Company has or will
have at Closing a valid and enforceable leasehold interest in, all of the Real
Property.
Section 3.7 Title. The Company has good and marketable title to all of
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its assets, both real property and 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 of which is listed on Schedule
3.7(a) 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(a) ("Permitted Company Assets Encumbrances"). Schedule 3.7(a)
identifies all liens by amount and by the document, instrument or law under
which it arises.
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(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 workmen's compensation
laws or similar legislation; and
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment.
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, 1996, as of December
31, 1997, and as of December 31, 1998, and statements of income, cash flow and
retained earnings for the same periods, all prepared on an accrual basis and
compiled by Company's regular accountants.
(b) A balance sheet for the Company as of March 31, 1999 ("Most Recent
Balance Sheet"), and a statement of income, cash flow and retained earnings for
the period ended March 31, 1999 ("Most Recent Income Statement"), both 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 contingent labilities required to be stated and reflected under
GAAP are stated and reflected on the Financial Statements. Each of the
Financial Statements is true, complete and correct in all material respects. The
balance sheets present fairly and accurately, as a whole, the financial
condition of the Company, as of the dates indicated thereon and the statements
of income present fairly and accurately, as a whole, 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, except as may be stated in the Financial
Statements. The Financial Statements are consistent with the books and records
of the Company (which books and records are correct and complete). Since the
date of the Most Recent Financial Statements, there has not been any material
adverse change in the income, expenses, assets, liabilities or financial
condition of the Company.
Section 3.9 Liabilities; Accounts Receivable.
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(a) The Company does not have any liabilities, fixed or contingent, except
for:
(i) liabilities fully reflected in the Most Recent Balance Sheet,
except for liabilities not required to be disclosed therein in accordance with
GAAP;
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(ii) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice;
(iii) the Company Debt; and
(iv) the Ben Franklin Obligation owed under agreements listed on
Schedule 3.3.
(b) All accounts receivable of the Company less a bad account reserve of
three (3%) percent of amount of the accounts receivable of the Company, as set
forth on the Most Recent Balance Sheet, are valid accounts receivable, and will
be fully collectible within 120 days of Closing. All 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.
(c) On the Closing Date, the accounts receivable of the Company, less the
bad accounts reserve, shall exceed the trade accounts payable of the Company.
If the trade accounts payable of the Company at Closing exceed the accounts
receivable of the Company at closing, less the bad accounts reserve, the
Purchase Price payable in Consideration Stock at Closing shall be reduced,
dollar for dollar, by the amount of the excess. At Closing, Company shall have
no long-term liabilities other than the Company Debt.
(d) The Company's current assets exceed the Company's current liabilities
after excluding the Ben Franklin Obligation and the Company's current debt.
Section 3.10 Fiscal Condition of Company. Since the date of the Most
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Recent Balance Sheet, except as set forth on Schedule 3.10, there has not
(except as otherwise specifically permitted by this Agreement) been:
(a) Any material change in the financial condition, 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 $25,000 or in the aggregate, do not exceed $25,000;
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(d) Any expenditure or commitment by the Company for the acquisition of
any single asset having an acquisition price of $25,000 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 $25,000 in the aggregate;
(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 tax
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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 in an amount not exceeding the reserve therefor on the Most Recent
Balance Sheet. The Company is a Subchapter S corporation under the Internal
Revenue Service Code. Sellers warrant that they will pay with their own funds
any and all federal, state and local taxes due and payable by the Company with
respect to all periods prior to the Closing, to the extent such taxes exceed the
reserves for taxes established on the Company's Most Recent Balance Sheet,
including, without limiting the generality of the foregoing, all federal, state
and local income, sales, use, payroll, franchise, excise and property taxes.
The reserves for all taxes reflected in the Most Recent Balance Sheet, if any,
are adequate to cover all taxes, interest and penalties in connection therewith
that may be assessed with respect to the property and business operations for
the period(s) ending on the Date of Closing and for all prior periods. 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. No
federal, state, local or other tax returns or reports filed by the Company
(whether filed prior to, on, or after the date hereof), will result in any
taxes, assessments, fees or other governmental charges in excess of the amounts
reserved for on the Most Recent Balance Sheet. 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
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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
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beneficiaries, 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.
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(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
11
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.
(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.
Section 3.14 Legality of Operation. In regard to the Company:
---------------------
(a) Except as disclosed in Schedule 3.14(a) to this Agreement and except
for tax matters which are represented to in Section 3.11, 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; all Federal, state and local laws,
rules and regulations relating to environmental issues of any kind and/or the
generation, receipt, transport or
12
disposal of any hazardous or non-hazardous waste materials from any source; 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 set forth on Schedule 3.14(a), with respect to any Law,
there are no claims, actions, suits or proceedings pending, or, to the knowledge
of the Sellers threatened against or affecting the Company, at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, wherever located, which
would result in an adverse change in the financial condition or business of the
Company or which would invalidate this Agreement or any action taken in
connection with this Agreement. Except as disclosed in Schedule 3.14(a), the
Company has received no notification of any past or present failure by the
Company to comply with any Law applicable to it or its assets. The parties to
this Agreement agree that for purposes of this Section 3.14(a), the Company
shall not be in Material Compliance with a Law or a permit, franchise, license,
or order issued with respect to a Law, if the Company's non-compliance results
in a liability, obligation or expense to the Company of One Hundred Thousand
($100,000) or greater, either individually or in the aggregate.
(b) Attached hereto as Schedule 3.14(b) is a list of all Notice of
Violations issued to the Company in the past three 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.
(c) No Seller is under investigation by any District Attorney or similar
state or local official or agency or the Justice Department of the United States
of America for the violation of any Laws, including, without limitation,
racketeering, unfair competition, or anti-trust laws. No facts or circumstances
exist which would cause the Company to be liable for the violation of any Laws
including, without limitation, racketeering, unfair competition, or anti-trust.
(d) Except as set forth in Schedule 3.14(d), all licenses, approvals,
permits and certificates ("Government Authorizations") 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 is in compliance
with all such Government Approvals, and all such Government Approvals have been
validly and legally obtained by the Company.
Section 3.15 Corrupt Practices. To the 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 to any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
13
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 Seller 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 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. Except as listed on Schedule
--------------------------
3.17, no agent or broker or other person acting pursuant to the authority of the
Company or any of the Sellers is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 3.18 Trademarks, Patents, Etc.
------------------------
(a) Schedule 3.18(a) attached hereto contains a true and complete list of
all letters patent, patent applications, trade names, trademarks, service marks,
trademark and service xxxx registrations and applications, copyrights, copyright
registrations and applications, grants of a license or right to the Company with
respect to the foregoing, both domestic and foreign, claimed by Company or used
or proposed to be used by the Company in the conduct of the Business, whether
registered or not (collectively herein, "Registered Rights").
(b) Except as described in Schedule 3.18(b) attached hereto, the Sellers
and the Company own and have the unrestricted right to use the Registered
Rights. The Sellers to the best of their knowledge have the unrestricted right
to use every trade secret, know-how, process, discovery, development, design,
technique, program, code, customer and supplier list, promotional idea,
marketing and purchasing strategy, invention, process, confidential data and or
other information (collectively herein, "Proprietary Information") required for
or incident of the design, development, manufacture, operation, sale and use of
all products and services sold or rendered or proposed to be sold or rendered by
the Company, free and clear of any right, equity or claim of others. The
Sellers and the Company have taken reasonable security measures to protect the
secrecy, confidentiality and value of all Proprietary Information.
14
(c) Schedule 3.18(c) attached hereto contains a true and complete list and
description of all licenses of or rights to Proprietary Information granted by
the Sellers or the Company to others or by others to the Sellers or the Company.
Except as described in Schedule 3.18(c), (i) the Sellers and the Company have
not sold, transferred, assigned, licensed or subjected to any Lien, any
Registered Right or Proprietary Information or any interest therein, and (ii)
the Sellers and the Company are not obligated or under any liability whatever to
make any payments by way of royalties, fees or otherwise to any owner or
licensor of, or other claimant to, any Registered Right or Proprietary
Information.
(d) There is no claim or demand of any Person pertaining to, or any Action
that is pending or, to the knowledge of the Sellers, threatened, which
challenges the rights of the Company and the Sellers in respect of any
Registered Right or any Proprietary Information.
(e) The Company owns or has legally licensed all third-party computer
software used in connection with the Business and has not infringed, and is not
now infringing, on the rights of any third parties by its use of computer
software.
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, except for the
Sparkle Car Wash in Stroudsburg, Pennsylvania, 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, or, to Sellers'
knowledge, 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 at or prior to Closing any representation or warranty
which Purchaser shall have found to be untrue or incorrect.
Section 3.21 Continuation of Legal Status. To Seller's knowledge, 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 its Property or
assets, liabilities or the Company Shares, together with a
15
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 Real Property, assets, liabilities or the Company Shares, except as listed
on Schedule 3.22.
Section 3.23 Pooling Requirements. The Sellers do not own any software
--------------------
development businesses other than the Company. For the 24-month period ending on
the date of this Agreement, there has been no change of ownership of the Company
Shares, except pursuant to binding agreements entered into prior to January 1,
1997. There will be no change in the ownership of the Company Shares from the
date of this Agreement to the Closing Date. During the most recent 24 calendar
months prior to the date of this Agreement, the Company has not paid any
dividends or distributions to its shareholder other than dividends and
distributions consistent in amount and kind to the dividends and distributions
paid by the Company during the three-year period immediately preceding the 24-
month period.
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.
Section 4.2 Legal Authority and Compliance. Purchaser has the right,
------------------------------
power, legal capacity and authority to enter into, and perform its respective
obligations under this Agreement, and no approvals or consents of any other
persons are necessary in connection with the transactions contemplated by this
Agreement. The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action of the directors 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 Purchaser is
a party or by which the Purchaser 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 Purchaser or the property of the Purchaser.
Section 4.3 Continuation of Legal Status. No written agreement between
----------------------------
the Purchaser and any third party shall be impaired or in any way limited by the
transactions contemplated by this Agreement.
16
Section 4.4 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against the Company or against the Sellers for any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 4.5 Commission Filings. Purchaser will have delivered to Sellers
------------------
by the Closing Date current and all historical filings made by the Purchaser on
Forms 8-K, 10-K, 10-Q and Proxy Statements timely filed with the Securities and
Exchange Commission ("SEC") through May 31, 1999 (the "Public Reports"). The
Public Reports accurately and completely describe, in all material respects,
Purchaser's financial status, business operations and prospects 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.
Section 4.6 Issued Common Stock. The Consideration Stock to be issued
-------------------
pursuant to this Agreement will be duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
ARTICLE V
Additional Agreements of Sellers
The Sellers covenant and agree with Purchaser as follows:
Section 5.1 Pooling Restrictions. Purchaser and Sellers have agreed that
--------------------
a material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement be treated as a "pooling of interests" for
accounting purposes. If for any reason a provision in this Agreement would
prevent the transaction being accounted for as a "pooling of interests," the
parties agree to negotiate in good faith to modify the Agreement so the
transaction can be accounted for as a "pooling of interests." Notwithstanding
any other provision of this Agreement, prior to the publication and
dissemination by Purchaser of consolidated financial results which include
results of combined operations of the Company and Purchaser for at least 30 days
on a consolidated basis following the Closing Date, Sellers shall not sell or
otherwise transfer or dispose of, or in any way reduce their risk relative to,
any shares of the Consideration Stock received by Sellers (including by way of
example and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). Purchaser agrees that such consolidated financial
results shall be published and disseminated no later than 135 days after the
Closing Date. The Securities Exchange Commission ("SEC") has issued Accounting
Series Release Nos. 130 and 135, as amended (collectively, the "ASRs"), setting
forth certain restrictions applicable to the availability of "pooling-of-
interests" accounting treatment in transactions of the type contemplated by this
Agreement. Sellers therefore covenant and agree with Purchaser to hold the
Consideration Stock and to comply with the ASRs until the requirements of the
ASRs have been met. In addition, the certificates evidencing the
17
Consideration Stock to be received by Sellers will bear a legend substantially
in the form set forth below:
"The shares represented by this certificate may not be sold, transferred or
assigned, and Xxxx Security International, Inc., shall not be required to
give effect to any attempted sale, transfer or assignment prior to the
publication and dissemination of financial statements by Xxxx Security
International, Inc., which include the results of at least 30 days of
combined operations of and the company acquired by Xxxx Security
International, Inc., for which these shares are issued. Upon the written
request of the holder hereof directed to Xxxx Security International, Inc.,
the issuer agrees to remove this restrictive legend (and any stop order
places with the transfer agents) when the requirements of Accounting Series
Releases Nos. 130 and 135, as amended, of the Securities Exchange
Commission have been met."
Section 5.2 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
Consideration Stock, pursuant to the Securities Act of 1933 (the "Act") or
otherwise:
(a) Sellers agree that the Consideration Stock shall not be sold or
otherwise transferred, unless the Consideration Stock is registered under the
Act and state securities laws or is exempt therefrom.
(b) A legend in substantially the following form will be placed on the
certificates evidencing the Consideration 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, reasonably satisfactory to counsel for Xxxx Security
International, Inc., that registration is not required under any such
acts."
Upon the request of the Sellers, legend certificates will be replaced by the
Purchaser, once the Consideration Stock has been registered. The replacement
certificates will have a legend in substantially the following form:
"The securities represented by this certificate have been registered on a
form S-3 Registration Statement, the holder of the certificate has a
prospectus delivery requirement when selling the shares represented by this
certificate."
18
(c) Each Seller agrees that he will not sell in any calendar month more
than one-tenth of the Consideration Stock issued to him pursuant to this
Agreement.
(d) Stop transfer instructions will be imposed with respect to the
Consideration 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 5.3 Representations as to Private Offering. The Consideration
--------------------------------------
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 Consideration Stock, each Seller represents and warrants
as follows:
(a) Each Seller represents and warrants that he or she is a resident of
Pennsylvania 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 Consideration Stock is
being acquired for their own account 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 Consideration Stock, or
any portion thereof, to any other person. The foregoing representation does not
limit or effect the rights the Sellers have under a Registration Agreement being
delivered to the Sellers at Closing.
(d) The Sellers represent and warrant that, in determining to acquire the
Consideration 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 Consideration 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 CONSIDERATION
STOCK INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can
bear the economic risk of the acquisition of the Consideration 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 Consideration Stock, and
(iv) all their investments in and commitments to non-liquid investments are,
and after their acquisition of the Consideration Stock will be reasonable in
relation to their net worth and current needs.
19
(g) The Sellers understand that no federal or state agency has approved or
disapproved the Consideration Stock or made any finding or determination as to
the fairness of the Consideration Stock for investment.
(h) The Sellers understand that the Consideration 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 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
Consideration Stock.
Section 5.4 Access to Records and the Real Property. 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 (including the Real Property),
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 5.4.
Section 5.5 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,
customers, 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 5.6 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 5.7 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 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 5.8 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, the approval
20
of every regulatory agency of federal, state, or local government that may be
required in the opinion of either Purchaser or Sellers.
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, 1996, December 31, 1997, and
December 31, 1998, and statements of income, cash flow and retained earnings for
the Company for the twelve-month periods ended December 31, 1996, December 31,
1997, and December 31, 1998 ("Historical Financial Statements"), as rapidly as
possible. 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.
Section 5.10 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all of the outstanding stock of the Company solely in exchange
for voting stock of Purchaser in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the Code, and shall
constitute a "plan of reorganization" within the meaning of the Code. The
parties hereto agree to take no action inconsistent with the treatment of such
exchange as a reorganization under Code Section 368(a)(1)(B) and to comply with
all IRS filing and other requirements for such exchange. Purchaser and Sellers
agree that a material factor in their execution of this Agreement is that the
transactions contemplated by this Agreement shall constitute a "plan of
reorganization" within the meaning of the Code. If for any reason a provision
in this Agreement would prevent the transaction from qualifying as a
reorganization within the meaning of the Code, the parties agree to negotiate
in good faith to modify the Agreement so the transaction can qualify as a
reorganization, as long as the economics of the transaction are not changed.
Section 5.11 Ben Franklin Obligation. Sellers shall use their best efforts
-----------------------
to obtain from the Ben Franklin Center a binding obligation of the Ben Franklin
Center to accept a lump sum monetary amount as an extinguishment of all
obligations owed by the Company to the Ben Franklin Center.
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 will personally pay
all expenses incurred by the Sellers and Company (including legal fees) in
connection with the Sellers negotiation, execution and performance of this
Agreement.
21
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 Access to Purchaser's Records. The Purchaser will give to
-----------------------------
Sellers and their 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 Purchaser, and to make available to Sellers and their
representatives, experts and advisors all additional financial statements of and
all information with respect to the business and affairs of the Purchaser that
Sellers may reasonably request. Sellers and their representatives shall have
the right to copy any information or documentation the Sellers are entitled to
inspect under this Section 6.3.
Section 6.4 Operation of Company. After Closing, Purchaser agrees that
--------------------
the Company will not be merged or combined with any subsidiary of the Purchaser
which owns or operates car washes. After Closing, the Purchaser shall make
available to the Company a minimum of One Million Five Hundred Thousand
($1,500,000) Dollars in working capital on an as-needed basis. After Closing,
the Company's President shall be Xxxxx Xxxxxxx who will be employed under the
terms of an Employment Agreement executed between the Purchaser and Xxxxx
Xxxxxxx, at Closing.
Section 6.5 Access to Company's Records. The Purchaser will give to
---------------------------
Sellers and their representatives, experts and advisors, from and after the date
of Closing to the fifth year anniversary of the Closing, full access to all of
the Company's, books, contracts, documents, and records, as are necessary for
the Sellers' to prepare tax filings and respond to inquires of taxing
authorities with respect to the Company's activities prior to Closing.
Section 6.6 Guaranties of the Sellers. The Purchaser shall use all
-------------------------
reasonable efforts to obtain the release of the Sellers and any relatives of the
Sellers from all the guarantees of the Company's obligations listed on Schedule
3.3. Purchaser agrees to offer its guaranty of the Company's obligations in
exchange for the release of the Seller's and their relatives' guaranties.
ARTICLE VII
Conditions of Purchaser
22
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. 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 Closing
Date, with the same force and effect as though made at and as of the Closing
Date, 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 Assets, the Real Property, 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 Closing Date 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, 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(g).
Section 7.6 Pooling Determination. Purchaser shall have received
---------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
Section 7.7 Ben Franklin Obligation. The receipt in writing from the Ben
------------------------
Franklin Center of a binding obligation of the Ben Franklin Center to accept a
lump sum monetary amount as an extinguishment of all obligations owed by the
Company to the Ben Franklin Center
23
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 Closing Date, with the same
force and effect as though made at and as of the Closing Date, 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, the Real Property, 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 Closing Date 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 8.3 Reports Current. Purchaser shall be current in its reporting
---------------
requirements to the SEC as of the Closing Date.
Section 8.4 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, 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.
Seller shall have been furnished with appropriate evidence, reasonably
satisfactory to Seller and its counsel, of the granting of such approvals,
authorizations and consents.
Section 8.5 Opinion of Counsel. Purchaser shall have delivered to the
------------------
Seller the opinion of counsel, dated the Closing Date, in the form and substance
of Schedule 1.6(c).
Section 8.6 Ben Franklin Obligation. The receipt in writing from the Ben
------------------------
Franklin Center of a binding obligation of the Ben Franklin Center to accept a
lump sum monetary amount as an extinguishment of all obligations owed by the
Company to the Ben Franklin Center
Section 8.7 Employment Agreements. The Employment Agreements dated April
---------------------
8, 1999 between the Shareholders and the Purchaser shall be in full force and
effect.
24
ARTICLE IX
Indemnification
Section 9.1 Indemnification by Sellers. Each Seller, jointly and
--------------------------
severally, agrees that he 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, 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 or covenant on the part of a Seller made in this
Agreement and to be performed by a Seller before or after the Closing Date; (c)
violation of the requirements of any governmental authority relating to the
reporting and payment of federal, state, local or other income, sales, use,
franchise, excise or property tax liabilities of the Company arising or accrued
prior to the Closing Date, except for taxes for the current fiscal year in an
amount not exceeding the reserve therefor on the Most Recent Balance Sheet ; (d)
any violation prior to Closing of any federal, state or local "anti-trust" or
"racketeering" or "unfair competition law", including, without limitation, the
Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act; and (e) any claim by a third
party that, if true, would mean that a condition for indemnification set forth
in subsections (a), (b), (c) or (d) 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, 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 or covenant on the part of Purchaser made in
this Agreement and to be performed by Purchaser before or after the Closing
Date; (c) any and all liability of the Sellers or their relatives under any
guaranty executed by the Sellers or their relatives of any obligation of the
Company listed on Schedule 3.3; and (d) 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 to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification
25
against any other party to this Agreement (the "Indemnifying Party") under this
Article VIII, 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. The Indemnified Party
will co-operate with the Indemnifying Party in timely supplying the Indemnifying
Party with all relevant information concerning the Third Party Claim in the
Indemnified Party's possession.
(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'
26
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 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; (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
27
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. The cumulative aggregate liability
-----------------------
of each Seller to Purchaser for damages under this Agreement is limited to the
dollar value equal to the number of shares of Consideration Stock received by
the Seller at Closing times the per share closing price of Purchaser's common
stock on the Nasdaq National Market on the Closing Date.
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 Company such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Company. Sellers agree that for a period of five (5) years from the
Closing Date 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, (ii) a Seller is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) the Closing does
not take place. 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.
28
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.
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 overnight courier
or by delivering the same in person to such party.
(a) If to Purchaser, addressed to it at:
Xxxx Security International, 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 Sellers, addressed to them at:
000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
with a copy to:
29
Xxxxxx X. Xxxxxxxxx, Esq.
General Counsel Group, P.C.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 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 Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
Commonwealth of Pennsylvania.
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. 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
30
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 Seller 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 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. The parties hereby request that in
accordance with the Rules the arbitration be conducted by a panel of three
arbitrators. 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, which such demand 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.
31
(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 take, 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.
[Remainder of Page Intentionally Left Blank.]
32
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SHAREHOLDERS
/s/ Xxxxx Xxxxxxx /s/ Xxxxx Bath
---------------------------------- --------------------------------------
Xxxxx Xxxxxxx Xxxxx Bath
/s/ Xxxxxxx Xxxx /s/ Xxxxxxx Xxxxxxx
---------------------------------- --------------------------------------
Xxxxxxx Xxxx Xxxxxxx Xxxxxxx
PURCHASER XXXX SECURITY INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx, Executive Vice
President
33
