ASSET PURCHASE AND SALE AGREEMENT
by and between
MARIS EQUIPMENT COMPANY, INC.
as Seller
and
SECURITY TECHNOLOGIES GROUP, INC.
as Buyer
Effective June 1, 1998
TABLE OF CONTENTS
1. PURCHASE PRICE AND TERMS.........................................................................................1
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1.1 Fixed Payment...........................................................................................1
1.2 Asset Amount............................................................................................1
1.3 Price Adjustment........................................................................................1
1.4 Contingent Payments.....................................................................................2
2. PURCHASE AND SALE OF ASSETS......................................................................................2
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2.1 Transferred Assets......................................................................................2
2.2 Excluded Assets.........................................................................................5
3. LIABILITIES......................................................................................................5
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3.1 Accounts Payable........................................................................................6
3.2 Obligations under Assigned Contracts....................................................................6
3.3 Warranty Obligations....................................................................................6
3.4 Miscellaneous...........................................................................................6
4. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER......................................................6
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4.1 Organization; Standing..................................................................................6
4.2 Authority; Binding Obligation...........................................................................7
4.3 No Violation............................................................................................7
4.4 Licenses and Permits....................................................................................7
4.5 Financial Statements....................................................................................8
4.6 Records.................................................................................................8
4.7 Absence of Certain Changes..............................................................................9
4.8 Title to and Condition of the Assets....................................................................9
4.9 Customers and Suppliers................................................................................10
4.10 Employees - Consultants................................................................................10
4.11 Litigation.............................................................................................10
4.12 Contracts..............................................................................................11
4.13 No Bankruptcy..........................................................................................11
4.14 Tax Returns............................................................................................11
4.15 Environmental Liability................................................................................11
4.16 Compliance With Zoning, Planning and Safety Regulations................................................12
4.17 Employment and Employment Practices....................................................................12
4.18 Receivables............................................................................................12
4.19 Inventory and Supplies.................................................................................12
4.20 Intellectual Property..................................................................................12
4.21 Insurance..............................................................................................13
4.22 Employee Benefit Plans.................................................................................13
4.23 Warranty Claims........................................................................................14
4.24 Computer Programs......................................................................................14
4.25 No Finder's Fee........................................................................................15
4.26 Conduct of Business of Seller..........................................................................15
4.27 Full Disclosure........................................................................................15
4.28 No Other Representations or Warranties.................................................................16
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER..............................................................16
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5.1 Good Standing; Organization............................................................................16
5.2 Authority; Binding Obligation..........................................................................16
5.3 Governmental Consents..................................................................................16
5.4 Employment Offers......................................................................................16
5.5 No Finder's Fee........................................................................................17
5.6 Knowledge; No Reliance.................................................................................17
5.7 Conduct of Business by Buyer...........................................................................17
6. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE.....................................................................17
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6.1 Representations and Warranties True....................................................................17
6.2 Covenants and Agreements Performed.....................................................................17
6.3 Financing..............................................................................................18
6.4 Approval of Counsel to Buyer...........................................................................18
6.5 Business Plan..........................................................................................18
6.6 Due Diligence..........................................................................................18
6.7 Interim Services and Consulting........................................................................18
6.8 Guaranty...............................................................................................18
6.9 Legal Proceedings......................................................................................18
6.10 Consents...............................................................................................19
7. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE....................................................................19
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7.1 Representations and Warranties True....................................................................19
7.2 Covenants and Agreements Performed.....................................................................19
7.3 Approval of Counsel to Seller..........................................................................19
7.4 Legal Proceedings......................................................................................19
7.5 Consents...............................................................................................19
8. RISK OF LOSS....................................................................................................19
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9. PRICE ALLOCATION................................................................................................20
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10. TAX REPORTING...................................................................................................20
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11. PRORATION.......................................................................................................20
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12. CLOSING.........................................................................................................20
12.1 General................................................................................................20
12.2 Closing Transactions...................................................................................20
13. EXPENSES OF SALE................................................................................................21
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14. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION....................................................................21
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14.1 Survival...............................................................................................21
14.2 Indemnification by Seller..............................................................................21
14.3 Indemnification by Buyer...............................................................................22
14.4 Indemnity Threshold; Limitations.......................................................................23
15. COVENANTS NOT TO COMPETE........................................................................................24
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16. MISCELLANEOUS...................................................................................................24
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16.1 Notices...............................................................................................24
16.2 Governing Law.........................................................................................25
16.3 Succession............................................................................................25
16.4 Entireties............................................................................................25
16.5 Severability..........................................................................................25
16.6 Cooperation...........................................................................................25
16.7 Paragraph Headings....................................................................................25
16.8 Press Releases and Public Announcements...............................................................25
16.9 Personal Jurisdiction.................................................................................25
16.10 Counterparts..........................................................................................26
16.11 Remedies - Attorneys' Fees............................................................................26
16.12 Time..................................................................................................26
Exhibits:
A. Financial Statements
B. Interim Services Agreement
C. Guaranty Agreement
D. General Assignment/Xxxx of Sale
E. Opinion of Buyer's Counsel
F. Opinion of Seller's Counsel
G. Non-Competition and Confidentiality Agreement
Schedules:
1.2(a) Asset Amount
1.2(b) Deferred Payment
1.3 Contingent Payments
2.1.1 Tangible Personal Property
2.1.2 Inventory
2.1.2(A) Accounts Receivable
2.1.3 Computer Programs
2.1.4 Contracts and Agreements
2.1.6 Goodwill
2.1.7 Copyrights, etc.
2.1.8 Insurance Policies
2.2.3 Other Excluded Property
3.1 Assumed Accounts Payable
3.2 Assigned Contracts
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4.3 No Violation
4.4 Licenses and Permits
4.8 Asset Liens and Encumbrances
4.9 Customers and Suppliers
4.10 Employees - Consultants
4.11 Litigation
4.12 Contracts
4.14 Unfiled Tax Returns
4.15 Hazardous Materials
4.17 Employment Matters
4.18 Receivables
4.20 Intellectual Property
4.21 Insurance
4.22 Employee Benefit Plans
4.23 Warranty Claims
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This Asset Purchase and Sale Agreement (the "Agreement") is made and
entered this 8th day of June, 1998, effective June 1, 1998 (the "Effective
Date"), by and between MARIS EQUIPMENT COMPANY, INC., a Delaware corporation
("Seller"), and SECURITY TECHNOLOGIES GROUP, INC., a New Jersey corporation
("Buyer").
R E C I T A L S:
----------------
A. Seller is a corporation engaged in the business of electronic security
systems integration (the "Business").
B. Seller wishes to sell to Buyer and Buyer wishes to purchase from Seller,
substantially all of the assets of Seller used in its business under the terms
and subject to the conditions of this Agreement.
NOW THEREFORE, in consideration of the Recitals, the mutual promises,
covenants, agreements, representations, and warranties contained in this
Agreement, and the monetary consideration described below, the receipt and
sufficiency of which are acknowledged, the parties, intending to be bound, agree
as follows:
1. PURCHASE PRICE AND TERMS. Buyer shall purchase the Assets, as defined
in Section 2 below, for the following consideration:
1.1 Fixed Payment. $1,100,000.00 in cash or other good funds,
delivered to Seller at Closing, as defined in Section 12.
1.2 An amount equal to (a) the aggregate book value of the fixed
assets, plus (b) the book value of accounts receivable and unbilled work
in process, plus (c) the agreed value of the inventory, minus (d) the
aggregate book value of the accounts payable and liabilities assumed by
Buyer pursuant to Section 3 (the "Asset Amount"), all determined as of the
Effective Date. The procedure for calculating the Asset Amount is set
forth on Schedule 1.2(a), and will be based upon Seller's Estimated
Closing Balance Sheet delivered by Seller as required by Section 4.5.
Seven Hundred Fifty Thousand Dollars ($750,000.00) of the Asset Amount
shall be deferred (the "Deferred Payment") and shall be subject to the
Adjustments described in Section 1.3, and shall be paid as set forth on
Schedule 1.2(a). No portion of the Deferred Payment obligation shall be
subordinated to any of Buyer's obligations to third parties for borrowed
money.
1.3 No later than fifteen (15) days after Buyer's receipt of Seller's
Closing Balance Sheet delivered as required by Section 4.5, the parties
will compare the Asset Amount calculated using the Estimated
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Closing Balance Sheet with the Asset Amount calculated using the Closing
Balance Sheet. Any refund due to the Buyer, or any additional payment due
to the Seller as a result of this comparison, shall be paid to the party
entitled to such payment no later than twenty-five (25) days after delivery
of the Closing Balance Sheet unless the parties cannot agree on the amount
payable. In such event, Buyer shall be entitled, upon providing advance
written notice to the Seller, to engage its accounting firm to perform and
deliver to Buyer the results of an unqualified audit of the Business, the
Assets and the Assumed Liabilities as of the Effective Date, on or before
one hundred eighty (180) days after Seller delivers to Buyer the Closing
Balance Sheet pursuant to Section 4.5 below (the "Post-Closing Audit"). The
results of the Post-Closing Audit shall be compared to the Estimated
Closing Balance Sheet. If the Asset Amount calculated based upon the
Post-Closing Audit is less than the Asset Amount calculated based upon the
Estimated Closing Balance Sheet, the difference, together with all other
amounts owed by the Seller to the Buyer, pursuant to the terms of this
Agreement shall reduce the Deferred Payment, and shall be retained by the
Buyer. If any amounts retained by Buyer are due to uncollectible Seller
Accounts Receivable as defined in Schedule l.2(a), such accounts shall be
reassigned to Seller. If the Asset Amount calculated based upon the
Post-Closing Audit is more than the Asset Amount calculated based upon the
Estimated Closing Balance Sheet, Buyer shall pay the difference to Seller
upon ten (10) days' written demand. Notwithstanding the foregoing, Buyer
shall have no obligation to pay any amount of the Deferred Payment to
Seller if Seller fails to perform its obligations under the Interim
Services Agreement required by Section 6.7 and such failure is not cured
within thirty (30) days after written notice of such failure has been
furnished to Seller.
1.4 Contingent Payments. Contingent payments not to exceed
$500,000.00 in the aggregate, payable in the manner and upon the
conditions set forth in Schedule 1.4.
2. PURCHASE AND SALE OF ASSETS.
2.1 Transferred Assets. On the terms and subject to the conditions
set forth in this Agreement, at the Closing, as defined below, Seller
shall sell, assign, transfer, and deliver to Buyer, and Buyer shall
purchase from Seller all of the right, title, and interest of Seller in
and to all of the assets (the "Assets") of Seller, including but not
limited to the following, subject to the exclusions set forth in Section
2.2:
2.1.1 Tangible Personal Property. All tangible personal property
including, without limitation,
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furniture, fixtures, motor vehicles, equipment, machinery, product
displays, advertising materials, merchandise, tools, supplies and
computer hardware, software and related equipment, specifically
described in Schedule 2.1.1. Buyer shall accept all tangible personal
property in its condition on the Effective Date on an "as is-where is"
basis.
2.1.2 Inventory. All inventories of raw materials, supplies,
parts, work-in-progress, and finished goods of Seller, as described
on Schedule 2.1.2, all as the same exists on the date of Closing.
2.1.2(A) Accounts Receivable. All of Seller's accounts
receivable, as described on Schedule 2.1.2(A).
2.1.3 Computer Programs. Seller's rights in and to all computer
programs and systems owned by Seller, in which Seller has any rights
or which are used in its business, including data bases and their
contents, operating specifications, magnetic tapes, discs, cards,
records, files and documentation, and sets of statements or
instructions, which may be used directly or indirectly in or with a
computer in order to bring about a certain result (the "Computer
Programs"). All such Computer Programs are described on Schedule
2.1.3.
2.1.4 Contracts and Agreements. Seller's rights under all open
purchase and sales orders, contracts, agreements, understandings,
leases, and licenses relating to the operation of the Business,
including, but not limited to, maintenance and service agreements for
equipment and agreements to maintain and update Seller's computer
hardware and software, license and support agreements, premises
leases for Seller's New York, New York, San Antonio, Texas, and
Austin, Texas locations (and any related security deposits). All such
contracts and agreements are described on Schedule 2.1.4.
2.1.5 Rights in Name. All of Seller's ownership, possession, and
rights in and to the name "Maris" and any variation thereof.
2.1.6 Goodwill. The goodwill of the Business and the right to use
of all telephone lines, telephone numbers, and e-mail addresses used
in connection with the Business. All such items are described on
Schedule 2.1.6.
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2.1.7 Copyrights and Similar Property. Seller's ownership of or
rights under copyrights, licenses, trade names, trademarks, name
registrations, patents, and other intangible assets, including
pending applications for same, all of which are specifically
described in Schedule 2.1.7.
2.1.8 Insurance Policies. To the fullest extent assignable,
Seller's insurance policies covering the Business, Seller's
employees, and the Assets, as described in Schedule 2.1.8. Buyer
acknowledges that insurance policies owned by Seller's Parent Company
(as defined in Section 4.1) will not be transferred or assigned to
Buyer.
2.1.9 Books and Records. Originals or true copies of all books,
records, books of account, ledgers, outside auditors' reports and
workpapers, and other documents and information relating to the
Business, including, without limitation, accounting books and
records, tax records, sales literature, customer and supplier lists,
orders, project data, quotations and bids, credit files,
correspondence, commission records, catalogues and product
information of every kind. To the extent the foregoing records are in
the possession of Seller's Parent, Seller shall provide true copies
of such records, or immediate access to them upon request. Buyer
shall afford Seller reasonable access to, and the right to make
copies of all such records described in this Section 2.1.9 in
connection with the preparation of its tax returns, the exercise of
its rights or performance of its obligations in respect of retained
liabilities, the exercise of its rights or performance of its
obligations under this Agreement, and other bona fide business
purposes.
2.1.10 Actions Regarding Seller's Assets. All choses in action
and causes of action, claims and rights of recovery or setoff of
every kind or character arising out of or attributable to any of the
Assets on or prior to the Closing Date, including deposits, prepaid
insurance and similar rights, irrespective of the date on which any
such cause of action, claim or right may arise or accrue.
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2.1.11 Other Assets or Rights. Any other tangible personal
property located at Seller's places of business as of the Closing
Date and reasonably necessary for the operation of the Business.
2.2 Excluded Assets. The Assets shall not include any real property
or the following items of personal property (collectively, the "Excluded
Assets"):
2.2.1 Caltran Contract. All of Seller's accounts receivable or
other rights related to Seller's Caltran/Xxxxx Electric contracts
described as follows:
Job #00-00-000000/Contract #08368704;
Job #00-00-000000/Contract #08460724; and,
Job #00-00-000000/Contract #08369004.
2.2.2 Cash. All cash or cash equivalents, including marketable
securities, notes receivable and investments.
2.2.3 Exton Lease. The Seller's rights and obligations under the
premises lease for Exton, Pennsylvania except to the extent necessary
to ensure performance of Seller's obligations under the Interim
Services Agreement required by Section 6.7.
2.2.4 Other Excluded Property. All other assets listed in
Schedule 2.2.4.
2.2.5 Actions Regarding Excluded Assets. All choses in action and
causes of action, claims and rights of recovery or setoff of every
kind or character arising out of or attributable to any of the
Excluded Assets on or prior to the Closing Date, irrespective of the
date on which any such cause of action, claim or right may arise or
accrue.
3. LIABILITIES. Except for the Assumed Liabilities, as defined below,
Buyer is not assuming or undertaking any liability of Seller. Subject to the
terms, conditions and limitations set forth in Section 14, below, Seller shall
indemnify and hold Buyer harmless from any claims, demands, costs or liabilities
(including attorneys' fees and disbursements) relating to any liability of
Seller other than the Assumed Liabilities. Buyer assumes and agrees to pay,
perform and discharge only the following liabilities of Seller (the "Assumed
Liabilities"), when and if due, and shall hold Seller harmless therefrom:
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3.1 Accounts Payable. Seller's accounts payable listed in Schedule
3.1 on the condition that Buyer receives satisfactory evidence prior to
Closing that each past due account creditor with a balance due of
$40,000.00 or more has agreed that (a) Buyer shall have the right to pay
each such account payable in no less than four (4) monthly installments
commencing no sooner than the month in which the Effective Date occurs,
(b) each installment shall be no greater than 25% of the total account
payable, (c) no additional interest or other charges will accrue on any
account payable, provided that all payments on such account payable are
timely made, (d) Buyer shall have all of Seller's rights to return
equipment, inventory or other materials for credit, (e) Buyer shall
continue to be entitled to all of the benefits of the account creditor's
warranties, and (f) Seller's distributorship/dealership arrangements with
Westinghouse/Schlage and EST shall remain in force and shall be
transferred to Buyer. In the event that Seller does not provide evidence
to the Buyer on or before sixty (60) days after Closing that the
Westinghouse/Schlage and EST distributorship/dealership arrangements will
remain in force and will be transferred to Buyer on or before such date,
the Deferred Payment provided for in Section 1.2 shall be reduced by
$5,000.00 for Westinghouse/Schlage and $45,000.00 for EST.
3.2 Obligations under Assigned Contracts. Seller's obligations
arising and to be performed after the Effective Date under the contracts
listed in Schedule 3.2 (the "Assigned Contracts"), provided however, that
Buyer is not assuming any obligation to pay commissions due or to become
due under the Assigned Contracts base upon percentage of job completion
through the Effective Date. Seller shall be responsible to pay any and all
such commissions.
3.3 Warranty Obligations. All warranty obligations of
Seller.ligations
3.4 Miscellaneous. All progress or similar xxxxxxxx in excess of
costs and customer deposits reflected on and properly reserved in the
Financial Statements as adjusted by the Closing Balance Sheet or the
Post-Closing Audit.
4. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. The
Seller represents, warrants and covenants to Buyer as follows:
4.1 Organization; Standing. Seller is a corporation duly organized
and in good standing under the laws of the state of Delaware and (a) has
all requisite corporate power and authority to carry on its business as
now conducted, (b) has all governmental and other authorizations,
licenses, or permits necessary to carry on its business as now
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conducted, (c) except for Seller's Parent Company, has no subsidiaries or
affiliates and owns no security or similar interests in any corporation or
other entity, (d) has delivered to Buyer complete and correct copies of its
Certificate of Incorporation and Bylaws as currently in effect, and (e)
that it and its agents executing this Agreement have corporate and legal
authority to enter into and consummate the transaction contemplated by this
Agreement. Seller is a 100%-owned subsidiary of Core Technologies, Inc.
(Pennsylvania), a Delaware corporation (the "Seller's Parent Company").
4.2 Authority; Binding Obligation. Seller has taken all necessary
corporate action to authorize the execution and performance of this
Agreement by Seller. This Agreement, and each document executed by Seller
in connection herewith, constitute the valid and binding obligations of
Seller, enforceable in accordance with its terms, subject only to
applicable bankruptcy, insolvency, and other laws affecting the rights of
creditors generally, and the discretion of the courts in granting
equitable remedies.
4.3 No Violation. Except as set forth on Schedule 4.3, the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby by Seller will not conflict with or
result in a breach of any provision of or default under, or give rise to
any right of termination, cancellation or acceleration under the terms of,
as the case may be, (a) Seller's Certificate of Incorporation or Bylaws;
(b) any mortgage, lien, lease, note, agreement, contract, commitment,
license, permit or other instrument to which Seller is a party, or by
which any of its Assets is bound, (c) any law, rule or regulation, or (d)
any judgment, order, writ, injunction or decree of any court,
administrative agency or governmental body, domestic or foreign, nor is
Seller aware of any violation of the above.
4.4 Licenses and Permits. Seller has the licenses, permits, and
authorizations shown on Schedule 4.4 and all governmental licenses,
permits, and authorizations (federal, state and local) necessary to
conduct its business, including all state authorizations to transact
business as a foreign corporation, and such licenses or permits are in
full force and effect, no violations are or have been recorded in respect
of any of such licenses or permits, and no proceeding is pending or, to
the best of Seller's knowledge, threatened looking toward the revocation
or limitation of any of such licenses or permits and Seller has complied
in all material respects with the antitrust laws as they relate to the
purchase, distribution and sale of its products and services,
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and with all other material laws, rules, regulations and orders applicable
to its business.
4.5 Financial Statements. Seller has delivered to Buyer accurate and
complete copies of Seller's audited balance sheet as of December 31, 1997,
(as reflected on Seller's Parent Company's audited consolidated and
consolidating financial statements) and the related audited statements of
income, stockholder equity and cash flows for the year then ended, and the
notes and schedules thereto, together with the unqualified report thereon
of KPMG Peat Marwick, certified public accountants (the "Audited Financial
Statements") and Seller's unaudited balance sheet as of March 31, 1998
(the "Latest Balance Sheet"), and the related unaudited statements of
income, stockholder equity and cash flows for the three-month period then
ended (the "Unaudited Financial Statements"), certified by Seller's chief
financial officer, (collectively the "Financial Statements"), copies of
which are attached hereto as Exhibit A. The Financial Statements (a)
represent actual bona fide transactions, (b) have been prepared from the
books and records of Seller in conformity with generally accepted
accounting principles in the United States, and (c) accurately,
completely, and fairly present, in all material respects, the financial
position of Seller as of the respective dates thereof and the results of
operations and cash flows for the periods then ended, subject to year-end
adjustments, which will not be material in the aggregate. The statements
of income included in the Financial Statements do not contain any items of
special or nonrecurring income or any other income not earned in the
ordinary course of business except as expressly specified therein, and
include all adjustments, which consist only of normal recurring accruals,
necessary for such fair presentation. All financial projections,
forecasts, and other forward looking information provided by Seller to
Buyer were, as of their respective dates, prepared in good faith and on
the basis that Seller believed to be reasonable. Seller also shall deliver
at Closing an estimated balance sheet (the "Estimated Closing Balance
Sheet") as of the Effective Date, and shall provide to Buyer a final
unaudited balance sheet and related statements of income, stockholder
equity and cash flows as of the Effective Closing Date no later than
thirty (30) days after Closing ("Closing Balance Sheet").
4.6 Records. All of Seller's accounts, books, ledgers, financial and
other records of any kind ("Records") (a) have been fully, properly and
accurately maintained to a standard appropriate for such Records, (b) are
in the possession of Seller, (c) do not contain or reflect any material
inaccuracies or discrepancies, and (d) provide a
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fair and accurate representation of Seller's business in all material
respects.
4.7 Absence of Certain Changes. Since the date of the Latest Balance
Sheet there has not been (a) any sale, purchase, transfer, or distribution
of any material asset, or any other transaction, except in the regular
course of business, or except for distributions of cash from bank accounts
which do not have a material adverse effect on Seller's ability to
continue operating its business, and which do not and will not impair
Seller's ability to deliver to Buyer the Assets required by Section 2
above, (b) any increase in the compensation payable or to become payable
by Seller to any of its officers, employees, or agents or any bonus
payment or arrangement made to or with any officers, employees, or agents,
(c) any mortgage, pledge or other voluntary encumbrance of any asset of
Seller, (d) any cancellation of debt or waiver or release of any right or
claim of Seller, except in the ordinary course of business, or (e) any
labor dispute, or any event or condition of any character, materially and
adversely affecting Seller's business or prospects. To the best of
Seller's knowledge after investigation and diligent inquiry, since the
date of the Latest Balance Sheet there has not been (i) any material
adverse change in Seller's financial condition, Assets, liabilities or the
Business, (ii) any obligation or liability incurred by Seller except in
the ordinary course of business, or (iii) any damage, destruction or loss,
whether or not covered by insurance, materially affecting Seller's
financial condition, Assets, or business prospects. To the best of
Seller's knowledge after investigation and diligent inquiry, Seller has
disclosed to Buyer all other events or conditions of any character that
have or could reasonably be expected to have a material adverse effect on
its condition, Business, Assets, or prospects. From the date of this
Agreement until and through Closing, Seller will carry on its business and
activities diligently and in substantially the same manner as it has
previously, with no material changes.
4.8 Title to and Condition of the Assets. Seller has good and
marketable title to all of its Assets being sold under this Agreement, all
free and clear of all liens, pledges, charges, interests, encumbrances or
title retention agreements of any kind or nature, except as set forth in
Schedule 4.8. Except as set forth in Schedule 4.8, the properties owned,
leased or used by Seller, are (a) to the best of Seller's knowledge, after
diligent investigation, in the case of tangible assets and properties, in
good operating condition and repair (ordinary wear and tear excepted) and
have been maintained in accordance with industry practice, and (b)
suitable for the purposes used, and adequate for the normal operation of
the Business as presently conducted.
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Seller does not have any existing or contingent liabilities in respect of
any properties previously occupied by it or in which it owned or held any
interest, including, without limitation, leasehold premises assigned or
otherwise disposed of.
4.9 Customers and Suppliers. Schedule 4.9 contains a true and
complete list of Seller's customers and suppliers for Seller's fiscal year
ended December 31, 1997, and for the period ending on the Effective Date.
To the best of Seller's knowledge, no customer and no such supplier has
given Seller any indication of its desire to cancel or otherwise terminate
or materially alter its relationship with Seller. Seller will use all
reasonable efforts to preserve the present relationship with suppliers,
customers, and others having business relationships with Seller prior to
Closing. Seller's employees will use all reasonable efforts to preserve
the present relationship with suppliers, customers, and others having
business relationships with Seller during any time they are employed by or
in a consulting relationship with Buyer.
4.10 Employees - Consultants. Attached as Schedule 4.10 is a true and
complete list of Seller's current employees and consultants, including
their names, addresses, telephone numbers, job descriptions, and
compensation arrangements. Any employees employed, or consultants
retained, pursuant to a written contract, covered by any collective
bargaining agreement or who are members of any labor union or are
represented by any collective bargaining agent are identified on Schedule
4.10 and copies of the current contracts or bargaining agreements have
been furnished to Buyer. Except as set forth in Schedule 4.10, to the best
of Seller's knowledge, no employee or consultant, who is material to the
operation of the Business, has given notice or other indication to Seller
of the desire or intent to terminate employment or consultation with
Seller.
4.11 Litgation. Except as set forth on Schedule 4.11, there is no:
(a) action, suit, claim, proceeding, or investigation pending of which
Seller has received notice, or, to the best of Seller's knowledge,
threatened against or affecting Seller or any of the Assets to be
transferred, or before any governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, or (b)
governmental investigation or inquiry pending or threatened against or
affecting Seller, and to the best of Seller's knowledge, there is no basis
for any of the foregoing which could reasonably be expected to give rise
thereto. Except as set forth on Schedule 4.11, each of the claims,
actions, suits, proceedings and investigations listed on Schedule 4.11 has
been reported to the proper insurance carrier in accordance with the
applicable insurance policy,
10
if any, and as necessary to ensure coverage thereof and has been accepted
for coverage by the applicable insurer.
4.12 Contracts. Schedule 4.12 contains a list of every material
agreement, contract, lease, commitment, note, arrangement or understanding
(the "Contracts") to which Seller is a party or by which Seller is bound
and pertaining in any manner to any of the Assets. Each Contract is valid,
in full force and effect, and enforceable in accordance with its terms.
Seller is not aware of any event that would give rise to a breach or
default under any of the Contracts. There is no outstanding notice of
default, breach, cancellation, or termination in connection with any of
the Contracts, and no other party has asserted any claims arising out of
or in connection with the Contracts. Correct and complete copies of the
Contracts have been furnished to Buyer. Seller expressly warrants to Buyer
that the gross profit to be realized on the Boston Control Tunnel contract
will be no less than $51,468.00 (the "Boston Tunnel Profit"), as such
amount is adjusted on Seller's work in process report for the period
ending on the Effective Date, which report shall be delivered to Buyer at
Closing. If the actual gross profit on the Boston Control Tunnel contract
is less than the Boston Tunnel Profit, the Deferred Payment shall be
reduced by the difference without regard for the limitations set forth in
Section 14.4.
4.13 No Bankruptcy. Neither Seller nor Seller's Parent Company have
filed and neither will within 180 days after closing file for any form of
relief under the United States Bankruptcy Code or analogous state laws,
nor has either made a general assignment or composition with respect to
creditors. No order, execution or other process has been levied against
Seller in any action taken to repossess goods in any material amount. No
steps have been taken for the appointment of a receiver of any part of
Seller's property.
4.14 Tax Returns. Except as set forth on Schedule 4.14, Seller has
filed all tax returns and reports, each of which is accurate, required to
be filed by it with all taxing authorities to which it is subject and paid
or provided for all taxes shown to be due on such returns or otherwise.
Seller has no knowledge of any deficiency or additional tax or charge
proposed to be assessed against it or its Assets. Seller has not executed
any agreements for extension of time for the assessment or payment of any
tax, nor is Seller aware of any action, pending or contemplated, by any
taxing authority to collect any outstanding taxes due.
4.15 Environmental Liability. To the best of Seller's knowledge,
Seller has no responsibility for the use, discharge, clean-up, abatement
or other responsibility under
11
any applicable federal, state or local environmental protection statute or
regulation. Except as set forth on Schedule 4.15, Seller does not use and
has never used or stored hazardous or environmentally regulated substances
in the conduct of its Business except in accordance with all applicable
laws, rules and regulations.
4.16 Compliance With Zoning, Planning and Safety Regulations. The use
of all of the properties in or on which Seller conducts the Business, and
all machinery and equipment therein and the conduct of any business
therein complies in all material respects with all applicable zoning,
planning and safety statutes, regulations and rules.
4.17 Employment and Employment Practices. Except as set forth on
Schedule 4.17, Seller is in material compliance with all applicable
material laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and nondiscrimination in
employment and is not engaged in any prohibited unfair labor practice.
There is no labor strike, dispute, slowdown or work stoppage actually
pending or, to the best of Seller's knowledge, threatened against or
involving Seller, nor has Seller experienced any work stoppage or any
other material labor dispute during the last three years.
4.18 Receivables. Except as set forth on Schedule 4.18, all accounts
receivable being transferred to Buyer have arisen in the ordinary course
of business, represent valid obligations to Seller, and, subject only to
consistently recorded reserves or provisions for bad or doubtful debts,
have been collected or are presently collectible in the aggregate recorded
amounts thereof in accordance with their terms. Seller shall have no
indemnification liability to the Buyer or any other person for breach of
the warranties and representations contained in this Section 4.18 if and
to the extent that the Deferred Payment contemplated by Section 3 has been
reduced as a result of any such breach.
4.19 Inventory and Supplies. Seller's inventory and supplies to be
transferred to Buyer are in usable or saleable condition in the ordinary
course of business, subject only to reserves for obsolescence reflected on
the Latest Balance Sheet or in Seller's other books and records.
4.20 Intellectual Property. Except as set forth on Schedule 4.20,
Seller has no patents, patent rights, patent applications, licenses of
intellectual property as licensee, trademarks, trademark rights, trade
names, trade name rights, service xxxx rights, copyrights, unpatented
discoveries, processes, or inventions or similar rights (collectively the
"Intellectual Property"), nor requires any such rights in
12
order to conduct its business. Unless otherwise indicated on Schedule 4.20,
Seller owns the entire right, title, and interest in and to the
Intellectual Property and technology used in its business (including,
without limitation, the exclusive right to use and license same) and each
item constituting part of the Intellectual Property which is owned by
Seller, has been, to the extent indicated on Schedule 4.20, duly registered
with, filed in or issued by the trademark or patent office or such other
governmental entity, domestic or foreign, as are indicated on Schedule
4.20, and such registrations, filings and issuances remain in full force
and effect. Except as stated on Schedule 4.20, there are no pending or, to
the best of Seller's knowledge, threatened proceedings or litigation or
other adverse claims affecting or with respect to the Intellectual
Property. Seller's rights to its proprietary software are free and clear of
any claims of any employees, consultants, or outside programmers. Schedule
4.20 lists all notices of or claims currently pending or received by Seller
during the past two years that assert infringement, contributory
infringement, inducement to infringe, misappropriation or breach by Seller
of any domestic or foreign patent, patent application, patent, software or
know-how license, trade name, trademark, copyright, service xxxx, trademark
registration or application, service xxxx registration or application,
copyright registration or application, trade secret or other confidential
proprietary information. Except as disclosed on Schedule 4.20, to the best
of Seller's knowledge after due investigation and inquiry, Seller is not
infringing, or otherwise acting adversely to, the right of any person under
or in respect to any patent, license, trademark, trade name, service xxxx,
copyright or similar intangible right.
4.21 Insurance. Seller's properties and Business are and continuously
have been insured by licensed insurers. Seller will cooperate, to the
extent possible and subject to Buyer's acknowledgement in Section 2.1.8,
to assure that the insurance coverage provided by such insurance policies
will not in any respect be affected by, and will not terminate or lapse
merely by reason of, the execution and delivery of this Agreement or the
consummation of the transactions described herein. All such policies,
including the amounts and terms of coverage and an indication of whether
they are assignable are set forth on Schedule 4.21. Copies of such
policies have been furnished to Buyer. To the extent such policies are not
assignable, Seller will cooperate and assist Buyer in the transition from
the existing policies to new policies secured by Buyer.
4.22 Employee Benefit Plans. Except as listed on Schedule 4.22,
Seller has not adopted any retirement, profit sharing, deferred
compensation, stock option, bonus, group or
13
individual medical, dental, health, life insurance, survival benefit, or
similar plan or arrangement covering all or any of its employees. Copies of
such plans, identified on Schedule 4.22, have been furnished to Buyer. Each
of the arrangements set forth on Schedule 4.22 is referred to as an
"Employee Benefit Plan." Each Employee Benefit Plan is and has been
maintained and operated in compliance in all material respects with the
terms of the respective plans and with the requirements imposed by
applicable law. Except as set forth on Schedule 4.22, there is no pending
or, to the best of Seller's knowledge after diligent investigation,
threatened legal action, proceeding, or investigation, other than routine
claims for benefits, concerning any Employee Benefit Plan or any fiduciary
or service provider and to the best of Seller's knowledge, there is no
basis for any such legal action or proceeding. Except as set forth on
Schedule 4.22, there is no liability, contingent or otherwise, for any
Employee Benefit Plan other than insurance premiums satisfied in due
course. Each Employee Benefit Plan for which a separate fund is or is
required to be maintained, has been fully funded as required by the terms
of the Plan as of the end of the most recently completed plan year. The
execution of this Agreement and the consummation of the transactions
contemplated will not result in (a) any payment (whether severance pay or
otherwise) becoming due from any Employee Benefit Plan, or result in the
vesting, acceleration of payment, or increases in the amount of benefit, or
(b) the employees, officers, and/or directors of Buyer, as the owner of the
business of Seller, becoming eligible to receive benefits under such
Employee Benefit Plans pursuant to the terms of such Plans or under
applicable law.
4.23 Warranty Claims. There are no unresolved claims or claims
asserted or, to the best of Seller's knowledge, threatened by Seller's
customers for breach of express or implied warranty, misrepresentation, or
any other claims based on a defect in or failure of services or products
sold or leased by Seller, which, as of the date of Closing, exceed
$60,000.00 in the aggregate. All pending and, to the best of Seller's
knowledge, threatened warranty claims are described on Schedule 4.23.
4.24 Computer Programs. Seller will provide reasonable assistance
upon request by Buyer for the purpose of determining whether all computer
or computer related hardware or software transferred as part of the Assets
(the "Computer System") is millennium compliant. For purposes of this
section "millennium compliant" means that the Computer System (a) allows
for the input of all dates in a four-digit format; (b) provides date
output in a four-digit format; (c) accommodates same-century and
multi-century date related formulas and calculations (including leap year
calculations);
14
(d) function accurately and without interruption before, during, and after
January 1, 2000, and (e) responds to two-digit date input in a way that
resolves any ambiguity as to century.
4.25 No Finder's Fee. No finder, broker, agent or other intermediary
has acted for or on behalf of Seller in connection with the negotiation or
consummation of the transactions contemplated hereby.
4.26 Conduct of Business of Seller. The Seller's principal business
is not the sale or rental of merchandise from stock. During the period
from the date of this Agreement to the Closing Date, or the date, if any,
on which this Agreement is earlier terminated, Seller shall conduct its
Business only according to its ordinary and usual course and use its best
efforts to preserve intact its business organization, keep available the
services of its officers, employees, and consultants, and to maintain
satisfactory relationships with licensors, suppliers, distributors,
lessees, customers and others having business relationships with it.
Except as may be approved in advance by Buyer, or as is otherwise
permitted or required by this Agreement, Seller will refrain from making
any pension, retirement or insurance payment or arrangement, from agreeing
to pay any bonus to accrue after the Closing Date to or with any such
persons except those that may have already been accrued, and from entering
into any contract or commitment, or buy or sell inventory or equipment,
except in the ordinary course of business. During the period from the date
of this Agreement to the Closing Date, Buyer and Seller shall confer on a
regular and frequent basis regarding material operational matters and to
report the general status of ongoing operations. Seller shall notify Buyer
of any unexpected emergency or other change in the normal course of its
business or in the operation of its properties and of any governmental
complaints, investigations or hearings (or communications indicating that
the same may be contemplated), adjudicatory proceedings, budget meetings
or submissions involving any material property of Seller, and keep Buyer
fully informed of such events and permit its representatives prompt access
to all materials prepared in connection therewith.
4.27 Full Disclosure. Seller has provided Buyer with full access to
all Assets, books, accounts, records, and documents of or relating to
Seller, the Business and its Assets. No representation or warranty of
Seller contained in this Agreement contains any untrue statement of a
material fact or omits any material fact necessary to make the statements
contained herein or therein not false or misleading. There is no fact
known to Seller that materially
15
or adversely affects or in the future may materially or adversely affect
the Business, Assets to be transferred, or operations of Seller that has
not been set forth in this Agreement.
4.28 No Other Representations or Warranties. Seller has given the
Buyer, its agents, experts or other representatives full access to the
Assets and the Assumed Liabilities, and the Buyer has made, or caused to be
made, such investigations and inspections of the Assets and Assumed
Liabilities as the Buyer has deemed necessary and, with respect to the
Assets and Assumed Liabilities, such investigations and inspections are in
lieu of all warranties and representations of Seller, express or implied,
except those specifically set forth in this Section 4.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. Buyer
represents, covenants and warrants as follows:
5.1 Good Standing; Organization. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
state of New Jersey, and has the power and authority to execute and perform
this Agreement.
5.2 Authority; Binding Obligation. Buyer has, by all necessary
corporate actions, duly authorized the execution and performance of this
Agreement. This Agreement and each document executed by Buyer in connection
herewith constitute the valid and binding obligation of Buyer, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency
and other laws affecting the rights of creditors generally, and the
discretion of the courts in granting equitable remedies. Upon satisfaction
of the Conditions Precedent to Buyer's Performance described in Section 6,
Buyer's execution of this Agreement will not conflict with, result in a
breach of any provision of, or constitute a default under any contractual
or other obligation to which Buyer is a party or by which Buyer is bound,
and will not conflict with any provision of Buyer's Articles of
Incorporation or Bylaws.
5.3 Governmental Consents. No consent, approval or authorization of,
or registration, designation, or filing with any governmental authority,
federal or other, on the part of Buyer, is required in connection with the
acquisition of the Assets and the consummation of the transactions
contemplated by this Agreement.
5.4 Employment Offers. Buyer may, in its sole discretion, offer one
or more of Seller's employees the opportunity to become Buyer's employees,
subject to written employment, non-competition, and non-disclosure
agreements,
16
at compensation levels consistent with Buyer's policies, all as prescribed
by Buyer. All employees offered and who accept employment with Buyer shall
be provided the opportunity to participate in Buyer's standard fringe
benefit programs, consistent with participation of other similarly situated
employees of Buyer.
5.5 No Finder's Fee. No finder, broker, agent or other intermediary
has acted for or on behalf of Buyer in connection with the negotiation or
consummation of the transactions contemplated hereby.
5.6 Knowledge; No Reliance. As a result of the inspections,
investigations, and examinations heretofore conducted by the Buyer with
respect to the Assets and the Assumed Liabilities, Buyer acknowledges that
it possesses such information as it deems necessary to reach an informed
decision to purchase the Assets and otherwise perform pursuant to the terms
of this Agreement. Accordingly, the Buyer is not relying upon any
representations or warranties of any kind whatsoever, whether express or
implied by operation of law or otherwise, except for those representations
and warranties specifically set forth in Section 4 of this Agreement. As of
the date hereof, Buyer has no knowledge of any breach of any of Seller's
representations, warranties, or covenants contained herein which could give
rise to a claim for indemnification hereunder.
5.7 Conduct of Business by Buyer. During the period from the Closing
Date until the date on which all amounts due from Buyer to Seller for the
Deferred Payment and the Contingent Payment, if any, have been paid, Buyer
shall conduct the Business diligently and in good faith, and shall use
reasonable efforts to avoid taking any action which would diminish the
revenue, margins, and bookings of the Business.
6. CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE. The obligation of Buyer
to close the transactions described in this Agreement is subject to the
satisfaction of the following conditions at or before Closing except to the
extent waived in writing by Buyer at Closing:
6.1 Representations and Warranties True. Except as otherwise
permitted by this Agreement, all representations and warranties of Seller
contained herein shall be correct in all material respects on and as of the
Closing Date as though made at that time.
6.2 Covenants and Agreements Performed. Seller shall perform or cause
to be performed, satisfy, and comply with all covenants, agreements, and
conditions required by this
17
Agreement to be performed or complied with by it on or before Closing.
6.3 Financing. Buyer shall have obtained financing from its primary
lender on terms and conditions satisfactory to Buyer.
6.4 Approval of Counsel to Buyer. All legal matters in connection
with the consummation of the transactions contemplated hereby and all
agreements, instruments, and documents delivered in connection therewith
shall be reasonably satisfactory in form and substance to Xxxx, Xxxxxxx &
Xxxxxx, P.C., legal counsel to Buyer.
6.5 Business Plan. Seller shall have delivered to Buyer a detailed
business plan outlining its business prospects and projections for the
Business, and individually for each of its office locations, the sales
methodologies, operating requirements, and capital resources necessary to
achieve such business prospects and projections. The business plan shall
cover the 1998 calendar year .
6.6 Due Diligence. The due diligence review to be conducted by Buyer
with respect to Seller, and the representations, warranties, covenants, and
agreements made by Seller in this Agreement, shall have been completed and
the results thereof shall be reasonably satisfactory to Buyer and its
counsel. The representations and warranties of Seller shall remain binding
and enforceable, notwithstanding Buyer's satisfaction with its due
diligence review, and shall be unaffected by any information actually or
allegedly discovered, or able to be discovered, during such review.
6.7 Interim Services and Consulting. Seller and Seller's Parent
Company shall have executed an interim services agreement to provide
transitional accounting, management and related services to Buyer,
including without limitation, the services of Xxxxxx X. Xxxxxxxx and
Xxxxxxxxx Xxxxxx on an as needed basis. The Interim Services Agreement
shall be in the form specified by Exhibit B, and key employees of Seller,
as determined by Buyer in its sole discretion, shall have entered into
employment agreements with Buyer in form and substance satisfactory to
Buyer.
6.8 Guaranty. Seller's Parent Company shall have executed a guaranty
agreement in favor of Buyer substantially in the form attached as Exhibit C
hereto guaranteeing the Seller's performance of its obligations hereunder.
6.9 Legal Proceedings. No proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or
other relief in connection
18
with this Agreement or the consummation of the transactions contemplated
hereby.
6.10 Consents. Buyer shall have obtained all necessary approvals from
its directors, shareholders, lenders, and state, municipal, and other
governmental authorities.
7. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE. The obligation of
Seller to close the transactions described in this Agreement is subject to the
satisfaction of the following conditions at or before Closing except to the
extent waived in writing by Seller at Closing:
7.1 Representations and Warranties True. Except as otherwise
permitted by this Agreement, all representations and warranties of Buyer
contained herein shall be correct in all material respects on and as of the
Closing Date as though made at that time.
7.2 Covenants and Agreements Performed. Buyer shall perform or cause
to be performed, satisfy, and comply with all covenants, agreements, and
conditions required by this Agreement to be performed or complied with by
it on or before Closing.
7.3 Approval of Counsel to Seller. All legal matters in connection
with the consummation of the transactions contemplated hereby and all
agreements, instruments, and documents delivered in connection therewith
shall be reasonably satisfactory in form and substance to Xxxxxxx & Xxx,
P.C., legal counsel to Seller.
7.4 Legal Proceedings. No proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.5 Consents. Seller shall have obtained all necessary approvals from
its directors, shareholders, lenders, and state, municipal, and other
governmental authorities.
8. RISK OF LOSS. Seller shall assume all risk of loss, destruction,
damage or other casualty up to the date and time of Closing, other than normal
wear and tear and use in the normal course of business. If the loss, destruction
or damage due to fire or other casualty up to the date and time of closing is
not of such nature as to curtail or interrupt the business, as reasonably
determined by Buyer, the purchase price shall be adjusted to reflect such loss,
destruction or damage and shall be
19
subject to the further agreement of the parties, if any, as of the date and time
of Closing.
9. PRICE ALLOCATION. For purposes of this Agreement, and as required by
the Internal Revenue Code of 1986, as amended, the purchase price shall be
allocated to the Assets in accordance with the fair market value of the Assets
to be purchased. The price allocation shall be in the form of the allocation set
forth on Schedule 9 attached hereto as modified using the same principles,
within 45 business days after the final adjustment of the Asset Price.
10. TAX REPORTING. The parties agree that they each will report all
aspects of this sale for Internal Revenue Service, state and local sales and use
tax purposes in strict accordance with the allocation provided for in Section 9.
Seller shall pay any and all sales and/or use taxes assessed or assessable as a
result of this Agreement, including but not limited to any taxes or other
charges assessed or assessable under applicable Pennsylvania bulk sale
legislation and regulations.
11. PRORATION. Personal property taxes and the like shall be prorated
as of the effective date of Closing.
12. CLOSING.
12.1 General. Closing of the transfer of Seller's Assets shall take
place at the offices of Xxxx, Shaiman & Xxxxxx, P.C., 000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, or such other place as the
parties determine, on June 5, 1998, effective as of June 1, 1998 (the
"Closing"; the date of such Closing, the "Closing Date"). All actions
taken at Closing shall be considered to be taken simultaneously and no
document, agreement or instrument shall be considered to be delivered
until all items which are to be delivered have been delivered. Each
party shall take any and all actions reasonably requested by the other,
and shall cooperate in good faith so as to provide for the transfer of
the rights, benefits, duties, obligations and liabilities of the
Business from the Seller to the Buyer as of the Effective Date, as
provided by this Section 12.1.
12.2 Closing Transactions. At Closing, the following will
occur:
12.2.1 Seller and Buyer will execute a general assignment,
xxxx of sale and assumption substantially in the form attached as
Exhibit D hereto, whereby Seller conveys, transfers, assigns and
delivers the Assets to Buyer, and Buyer assumes the Assumed
Liabilities.
20
12.2.2 Seller shall deliver assignments of its premises
leases, together with any and all required landlord consents or
waivers to each such assignment.
12.2.3 Seller will execute and/or deliver to Buyer such other
deeds, bills of sale, assignments, endorsements and other
instruments of transfer in the form and substance satisfactory to
Buyer as shall be necessary to vest in Buyer title to the Assets.
12.2.4 Seller will deliver to Buyer a certified copy of the
resolutions adopted by its board of directors and shareholders
authorizing the execution and performance of this Agreement.
12.2.5 Buyer will deliver to Seller, an opinion of Buyer's
legal counsel, substantially in the form attached as Exhibit E.
12.2.6 Seller, Seller's Parent, and Buyer will execute and
deliver the non-competition and confidentiality agreement required
by Section 15 and the Interim Services Agreement required by
Section 6.7.
12.2.7 Buyer will pay the purchase price to the extent due at
Closing as provided in Section 1.
12.2.8 Seller will deliver to Buyer, an opinion of Seller's
legal counsel, substantially in the form attached as Exhibit F.
12.2.9 The parties will execute and deliver such other
documents as may reasonably be required to carry out the intent of
the transaction contemplated by this Agreement.
13. EXPENSES OF SALE. Buyer and Seller shall each be responsible for
their own legal and accounting fees and other expenses incident to the Closing
of this transaction.
14. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION.
14.1 Survival. Subject to the terms, conditions, and limitations
set forth in this Section 14, the representations, warranties and
covenants of the parties contained in this Agreement or in any
certificate, instrument, or document delivered pursuant hereto shall
survive the Closing, regardless of any investigation made by or on
behalf of any party.
14.2 Indemnification by Seller. Seller shall defend, indemnify, and
hold harmless Buyer, each director, officer,
21
employee, or agent of Buyer, its subsidiaries, and each affiliate
thereof, and their respective heirs, legal representatives, successors,
and assigns from and against payment of any claim made by any creditor
or other person or entity (except for a claim for payment of the
Assumed Liabilities), and any loss, cost or expenses otherwise incurred
by Buyer, including but not limited to attorneys' fees, costs and
disbursements, in connection with (a) Seller's Business prior to the
Closing, (b) the assertion by any third party of any claim relating to
the Assets arising or incurred prior to the Closing, and (c) any and
all loss connected with any breach of Seller's warranties or
obligations hereunder (including claims made under any applicable bulk
sales laws). In the event of a claim by any creditor or other person or
entity subject to this section, Buyer shall provide Seller with written
notice of such claim in the manner set forth in paragraph 16.1 below,
within ten days after Buyer's receipt of the claim, provided however,
that failure to provide such notice shall not adversely affect Buyer's
right to indemnification hereunder subject only to Seller's right to
claim damages directly and solely attributable to Buyer's failure to
provide notice. Thereafter, Seller shall have a period of five days
within which to notify Buyer, in the manner provided for in paragraph
16.1, that Seller desires to intercede on Buyer's behalf and defend the
claim at its sole cost (including without limitation, payment of any
damages awarded or agreed to, interest, penalties, court costs and
attorneys' fees). If Seller fails to so notify Buyer and to defend the
claim, Buyer may defend such claim at its cost and maintain an action
against Seller to recover all damages, interest, penalties, court
costs, and attorneys' fees incurred.
14.3 Indemnification by Buyer. Buyer shall defend, indemnify, and
hold harmless Seller, each director, officer, employee, or agent of
Seller, its subsidiaries, and each affiliate thereof, and their
respective heirs, legal representatives, successors, and assigns, from
and against payment of any claim made by any creditor or other person
or entity in connection with (a) Buyer's operation of the Business on
or after the Closing, (b) the assertion by any third party of any claim
relating to the Assets arising or incurred on or after the Closing, and
(c) any and all loss connected with any breach of Buyer's warranties or
obligations hereunder (including obligations in respect of the Assumed
Liabilities). In the event of a claim by any creditor or other person
or entity subject to this section, Seller shall provide Buyer with
written notice of such claim in the manner set forth in paragraph 16.1
below, within ten days after its receipt of the claim, provided
however, that failure to provide such notice shall not adversely affect
Seller's right to indemnification hereunder subject only to
22
Buyer's right to claim damages directly and solely attributable to
Seller's failure to provide notice. Thereafter, Buyer shall have a
period of five days within which to notify Seller in the manner
provided for in paragraph 16.1 that it desires to intercede on Seller's
behalf and defend the claim at its sole cost (including without
limitation, payment of any damages awarded or agreed to, interest,
penalties, court costs and attorneys' fees). If Buyer fails to notify
Seller and to defend the claim, Seller may defend such claim at its
cost and maintain an action against Buyer to recover all damages,
interest, penalties, court costs, and attorneys' fees incurred.
14.4 Indemnity Threshold; Limitations. Except for claims by the
Buyer arising under the Non-Competition and Confidentiality Agreement
and the Guaranty, and the reduction of the Deferred Payment provided
for in Sections 3.1 and 4.12, the sole and exclusive remedy for all
claims by the parties hereto (whether or not related to claims by third
parties) relating to breaches of the warranties, representations, and
covenants in this Agreement or any related document or any other matter
otherwise directly or indirectly relating to the transactions herein
described, shall be an action for indemnity hereunder, which shall be
governed and limited by this Section 14 regardless or whether such
claim arises under contract, breach of warranty, tort or under any
other legal theory. Except for the obligation to pay sales and use tax,
and other charges provided for in Section 10, for which Seller is 100%
responsible, no claim for indemnity under this Section 14 shall be
asserted by or paid to either the Buyer or the Seller unless and until
the aggregate expense or loss incurred by such party exceeds
$25,000.00, and then only to the extent that such aggregate expense or
loss exceeds $25,000.00. There shall be no further monetary limitation
on claims for indemnity after the aggregate expense or loss to a party
exceeds $25,000.00. All claims for breach of Seller's warranties must
be asserted on or before two years after the Effective Date. The
liability of Seller and Seller's Parent Company for indemnity under
this Section 14 shall not exceed the Purchase Price described in
Section 1.1 through 1.4. Upon the occurrence of an event, at any time
when the full amounts of the Deferred Payment and the Contingent
Payment provided for in Sections 1.2 and 1.4 have not been paid, which
event does or may give rise to a claim by the Buyer for indemnification
under this Section 14, Buyer shall so notify Seller in writing, and the
parties shall attempt in good faith to evaluate the indemnification
claim and agree to an appropriate amount to withhold for or set off
against the Deferred Payment or Contingent Payment. If the parties fail
to agree on such amount, Buyer shall be entitled to deposit with an
independent escrow reasonably acceptable to both parties, an amount
sufficient to satisfy
23
such claim, not to exceed the sum of the then unpaid portion of the
Deferred Payment and the maximum unpaid amount of the Contingent
Payments, until the claim is resolved.
15. COVENANTS NOT TO COMPETE. Neither Seller nor Seller's Parent shall
engage in any business which in any way competes with Buyer's Business,
including the Business acquired hereby, for a period of five years after
Closing. At Closing, Seller and Seller's Parent will execute and deliver to
Buyer a non-competition and confidentiality agreement substantially in the form
attached as Exhibit G (the "Non-Competition and Confidentiality Agreement").
16. MISCELLANEOUS.
16.1 Notices. Any notices provided or required under the terms of
this Agreement shall be effective immediately when provided by verified
facsimile transmission or personal delivery, or five days after being
sent by first class mail or internationally recognized courier, and
addressed as follows:
If to Seller,
Maris Equipment Company, Inc.
Attention: Xx. Xxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxxx
Xxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
with a copy to,
Xxxxxx X. Xxxxxxxx
Xxxxxxx & Xxx, P.C.
0000 Xxxxxxxx Xxxx
X. X. Xxx 000
Xxxxx, Xxxxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
If to Buyer,
Security Technologies Group, Inc.
Attention: Xxxx Xxxxxx, CEO
000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
24
with a copy to
Xxxxxxx X. Xxxxxx
Xxxx, Shaiman & Xxxxxx, P.C.
000 X. Xxxxxx Xxxxxx, Xxx. 000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
16.2 Governing Law. THE LAWS OF THE STATE OF FLORIDA. VENUE FOR ANY
PROCEEDING BROUGHT TO ENFORCE THE TERMS OF THIS AGREEMENT SHALL BE
PROPER IN COUNTY OF BROWARD, STATE OF FLORIDA OR THE JURISDICTION IN
WHICH THE CLAIM ACCRUES.
16.3 Succession. This Agreement shall be binding upon and shall
inure to the benefit of the parties, their successors, assigns and
legal representatives established by operation of law.
16.4 Entireties. This Agreement constitutes the entire agreement
between the parties. No modification of this Agreement shall be binding
unless in writing and signed by both parties, and recorded by a notary
if necessary.
16.5 Severability. If any provision of this Agreement is found to
be illegal, or unenforceable for any reason whatsoever, this Agreement
shall be interpreted and construed without reference to such provision,
and the balance of this Agreement shall remain in full force and
effect.
16.6 Cooperation. The parties agree to execute such additional
documents and take such actions as may be required to effectuate the
purposes of this Agreement.
16.7 Paragraph Headings. The paragraph headings are inserted in
this Agreement for convenience only and are not intended to affect the
terms of this Agreement.
16.8 Press Releases and Public Announcements. No party shall issue
any press release nor make any public announcements relating to the
subject matter of this Agreement prior to the Closing without the prior
written approval of Buyer.
16.9 Personal Jurisdiction. Seller hereby irrevocably submits to
the jurisdiction of the courts of the state of Florida and the federal
courts of the United States of America located in the state of Florida,
in respect to the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and
hereby waives and agrees not to assert as a defense in
25
any action, suit, or proceeding, for the interpretation or enforcement
hereof, or of any such document, that it is not subject thereto or such
action, suit, or proceeding not be brought or is not maintainable in
said courts, or that the venue thereof may not be appropriate or that
this Agreement or any such documents may not be enforced in or by said
courts.
16.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and which together shall
constitute a single instrument.
16.11 Remedies - Attorneys' Fees. If any party obtains or engages
an attorney or attorneys for the purpose of enforcing its rights under
the terms of this Agreement for negotiation, litigation, arbitration or
other alternative dispute resolution procedure, the prevailing party
shall be entitled to recover its attorneys' fees, costs, and
disbursements in addition to any other relief sought or awarded.
16.12 Time. Time is of the essence of this Agreement.
26
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
SELLER:
MARIS EQUIPMENT COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxx, Chairman
BUYER:
SECURITY TECHNOLOGIES GROUP, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx, CEO
27
Supplement to Schedule 1.2(a)
ASSET AMOUNT
The Asset Amount on Schedule 1.2(a) is calculated based upon Seller's Estimated
Closing Balance Sheet, and is subject to adjustment as provided in Sections 1.3,
3.1 and 4.12 of the Agreement.
Procedure for Payment of Deferred Payment.
(a) The term "Seller Accounts Receivable," includes only those accounts
receivable and unbilled work in process of the Seller reflected on the Closing
Balance Sheet (net of any reserve therefor). Any Seller Account Receivable shall
be deemed to have been collected when payment is actually received by Buyer, or
in the event any account debtor refuses to pay all or any portion of a Seller
Account Receivable based upon (i) the Buyer's failure to perform any of its
obligations under the Agreement, or (ii) the Buyer's failure to perform any of
its obligations to such account debtor (whether arising out of or relating to
the Seller Account Receivable in question).
(b) Buyer shall permit the Seller to take any and all action which the
Seller shall determine in consultation with the Buyer is reasonably necessary
from time to time to expedite the collection of any of the Seller Accounts
Receivable. The Seller shall not, however, take any action under this paragraph
(b) which materially interferes with the Business conducted by the Buyer after
the Closing Date or to which Buyer reasonably objects. Nothing contained herein
shall impose a duty or obligation, express or implied, upon the Seller to take
any action under this paragraph (b).
(b) When the balance of Seller Accounts Receivable has been reduced to
$750,000 i.e., the Deferred Payment amount, or such lesser amount based on the
reductions to the Deferred Payment provided for in Section 3.1 and 4.12 of the
Agreement, the Buyer shall make a weekly disbursement to the Seller in an amount
equal to the amount collected or deemed to be collected by the Buyer in respect
of any Seller Accounts Receivable through the end of the preceding week,
provided that the Deferred Payment shall not be reduced below $500,000 by reason
of disbursements under this paragraph (b) except as provided below.
(c) On or about January 15, 1999, Buyer will prepare an estimate of
Contingent Payments due to Seller, shall provide to Seller copies of all
supporting documentation, and shall afford Seller the opportunity to comment
thereon. If Seller is entitled to a Contingent Payment based upon the Buyer's
estimate calculated as of January 15, 1999, Buyer promptly shall pay to Seller
from the Deferred Payment an amount which will reduce the sum of the
Schedule 1.2(a) Supplement
Re: Maris - STG
Page 2
remaining Deferred Payment and the Contingent Payments to $500,000.00. The
balance of the Deferred Payment, if any, shall be retained by the Buyer, to be
disbursed to Seller on or after March 31, 1999, as provided by paragraph (d)
below.
(d) If any amount of the Deferred Payment or the Contingent Payments
remain due as of March 31, 1999, and any Seller Accounts Receivable remain
outstanding as of such date, Buyer shall have the option to (i) continue to pay
amounts in respect of such Seller Accounts Receivable as and when collected, or
(ii) reassign to Seller the remaining Seller's Accounts Receivable and retain
from the Deferred Payment and/or the Contingent Payments the amount of such
reassigned Seller's Accounts Receivable.
Dated this 8th day of June, 1998
MARIS EQUIPMENT COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------
Title: Chairman
--------------------------
2
Schedule 1.4
CONTINGENT PAYMENT
Subject to the provision of Section 14 of the Agreement, the following
Contingent Payments provided for in Section 1.4 of the Agreement will be paid by
Buyer to Seller based upon the performance of the Business for the calendar year
ending December 31, 1998. Payment will be made on or before March 31, 1999,
pursuant to the procedure set forth below:
a. Revenue: No Contingent Payment based upon gross revenue unless
the Business achieves a minimum gross margin of 22%
If the Business generates 1998 gross revenue of $13.5
million or more, $200,000;
If the Business generates 1998 gross revenue of
between $11.5 and $13.5 million, an amount equal to
$200,000 multiplied by a fraction the numerator of
which is the gross revenue in excess of $11.5
million, and the denominator of which is $2,000,000;
If the Business generates 1998 gross revenue of below
$11.5 million, no payment.
b. Margins: No Contingent Payment based upon gross
margins unless the Business achieves a minimum gross
revenue of $11.5 million
If the Business generates gross margins for 1998 of
24% or more, $200,000;
If the Business generates gross margins for 1998 of
between 22% and 24%, an amount equal to $200,000
multiplied by a fraction the numerator of which is
the gross margins achieved in excess of 22%, and the
denominator of which is 2%;
If the Business generates gross margins for 1998 of
below 22%, no payment.
Schedule 1.4
Re: Maris - STG
Page 2
c. Bookings: No Contingent Payment based upon bookings unless the
Business achieves a minimum gross margins of 22%
If the Business generates 1998 bookings of $13.5
million or more, $100,000;
If the Business generates 1998 bookings of between
$12.5 million and $13.5 million, an amount equal to
$100,000 multiplied by a fraction the numerator of
which is the bookings generated in excess of $12.5
million, and the denominator of which is $1,000,000;
If the Business generates 1998 bookings of below
$12.5 million, no payment.
Procedure for Payment. No later than March 15, 1999, Buyer shall prepare and
deliver to Seller a written calculation (with supporting documents) of the
Contingent Payment expected to be due to the Seller. The parties shall confer in
good faith during the period from March 15, 1999, through March 31, 1999, to
address any revisions suggested by the Seller, to adjust the calculation to take
account of the period from March 15 through March 31, 1999, and to resolve any
disputes about the Buyer's calculation. In the event the parties are unable to
agree on the proper amount to be paid as of March 31, 1999, Buyer shall deposit
with an escrow acceptable to both parties the amount it determines as the
Contingent Payment pending resolution of the dispute.
Dated this 8th day of June, 1998
MARIS EQUIPMENT COMPANY, INC.
2
Schedule 1.4
Re: Maris - STG
Page 3
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------
Title: Chairman
----------------------------
3
