ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
the 10th day of September, 1997 (the "Effective Date"), by and among XXXX
SECURITY INTERNATIONAL, INC., a Delaware corporation with a principal place of
business in Bennington, Vermont ("MSI"), MSP RETAIL, INC., a Colorado
corporation and a wholly-owned subsidiary of MSI with a principal place of
business in Aurora, Colorado ("MSPR"), TODAYS SECURITY, INC., a Colorado
corporation with a principal place of business in Arvada, Colorado ("TSI"), and
XXXXX X. XXXXX and XXXXXX XXXXX, natural persons of Arvada, Colorado
(collectively "Xxxxx") (all sometimes referred to individually as a "Party" and
all collectively referred to as the "Parties").
PRELIMINARY STATEMENT
WHEREAS, MSI is engaged in the manufacture, distribution, marketing and
sales of personal security devices and services;
WHEREAS, Xxxxx owns or controls all the outstanding stock of TSI which
owns two personal security stores (the "Stores") located at the Westminster Mall
Shopping Center in Westminster, Colorado under a lease agreement with the
Westminster Mall Company and at the Southwest Plaza Mall in Littleton, Colorado,
under a lease agreement with Xxxxxx Xxxxxxxxxx & Co. (collectively "Real
Property") (collectively "Leases");
WHEREAS, MSPR desires to acquire all of the assets of TSI (excluding cash
and receivables) and TSI desires to sell such assets to MSPR in order to enable
MSPR to operate the Stores, as defined below, all in accordance with this
Agreement;
WHEREAS, all of such assets will be transferred or assigned to MSPR in
consideration for cash and for shares of MSI common stock ("MSI Shares");
WHEREAS, it is desired that the cash payment, the transfer of the MSI
Shares and MSPR's attendant acquisition of the assets of TSI be contingent upon
the Stores' performance over a one-year period commencing September 10, 1997,
and certain other conditions as set forth herein; and
WHEREAS, MSPR and Xxxxx X. Xxxxx desire to enter into an employment
agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein and in consideration of the representations, warranties and
covenants stated below, the parties, intending to be legally bound, agree as
follows:
1. Purchased Assets. TSI agrees to sell and, at the Effective Date, will
transfer and deliver to MSPR all of the assets (excluding cash and receivables)
owned by TSI (hereinafter the "Purchased Assets"), including but not limited to
the following:
a. All right, title and interest of TSI in and to the improvements
located on the Real Property, including but not limited to, the Stores
located thereon, subject to all rights of the lessors to such assets in
accordance with the Leases;
b. All furniture, fixtures, appliances, equipment, computerized cash
registers, and supplies owned by TSI and on hand at the Stores as of the
Effective Date, all as set forth on the Schedule of Equipment that is
attached hereto as Exhibit A and made a part hereof by reference
(collectively, the "Equipment");
c. All inventory located in the Stores on the Effective Date, all as
set forth on the Schedule of Inventory that is attached hereto as Exhibit
B and made a part hereof by reference (collectively, the "Inventory");
d. All right, title and interest of TSI in or under the Leases, a
list of which are attached hereto as Exhibit C and made a part hereof by
reference; and
e. All right, title and interest of TSI in or under all contracts,
agreements, instruments, certificates, permits and licenses which relate
to the Equipment, Inventory or Stores, all as set forth on the Schedule of
Contracts that is attached hereto as Exhibit D and made a part hereof by
reference (collectively, the "Contracts").
TSI agrees to pay and be responsible for all sales or use taxes connected with
the sale of the Purchased Assets.
2. Prorations. The following prorations shall be made as of the Effective
Date and shall be paid in cash to MSPR or TSI, whichever is entitled thereto,
unless the amount of any such proration cannot be established, in which event
such proration shall be paid within thirty (30) days after the amount thereof is
established.
a. Real property taxes, if required to be paid by TSI under the
Leases, and personal property taxes related to the Purchased Assets shall
be prorated to the Effective Date based on the most recent official
information as of the Effective Date that is obtainable in the office of
the particular taxing authority. If actual tax figures for 1997 are not
available on the Effective Date, an estimated, tentative proration of
taxes shall be made using tax figures from 1996; however, when actual
taxes for 1997 are available, a correct proration of taxes shall be made.
If such taxes for 1997 increase over those for 1996, TSI shall pay to MSPR
a pro rata portion of such increase, computed to the Effective Date, any
such payment to be made within thirty (30) business days after
notification by either MSPR or TSI that such adjustment is necessary.
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b. TSI will cause all utility bills to be closed and billed by the
respective utility companies as of the Effective Date in order that
utility charges may be separately billed and paid by TSI for the period
prior to the Effective Date and separately billed and paid by MSPR for the
period after the Effective Date.
c. Any and all prepaid expenses shall be prorated to the Effective
Date. TSI shall provide MSPR with a list of the categories of such prepaid
expenses on the Effective Date.
3. Inventory Valuation. The value of the inventory and other tangible
assets in the Stores shall be determined by physical inspection by
representatives of MSPR and TSI on the Effective Date, or on any other date as
is mutually agreed to in writing by the Parties. Any increase in the value of
the inventory or tangible assets in the Stores over $71,311 shall be paid to TSI
on the Effective Date. MSPR shall have the right to verify the value of the
inventory and tangible assets on or before September 30, 1997. Any differences
in such value shall be paid by TSI to MSPR or by MSPR to TSI, respectively, on
September 30, 1997.
4. No Liabilities Assumed. MSPR does not and shall not assume, agree to
pay, pay, or have any responsibility for any debts, obligations, duties,
responsibilities or liabilities of any nature of TSI and TSI's business,
including, but not limited to, any debts, obligations, duties, responsibilities
or liabilities relating to TSI's employees or employee benefit plans, regardless
of whether any such debt, obligation, duty, responsibility, or liability arises
under any contract, agreement, practice, arrangement, statute, law, ordinance,
rule, regulation or otherwise. Notwithstanding the aforementioned to the
contrary, MSPR shall be responsible for and shall fulfill all obligations
associated with the Leases and Contracts.
5. Xxxx of Sale. On or before September 30, 1997, a Xxxx of Sale for all
of the Purchased Assets, properly acknowledged, and executed assignments for the
Leases and Contracts, executed and acknowledged, and consents signed by the
other parties hereto in such forms as MSPR may reasonably request, and such
other instruments of sale, transfer, conveyance and assignment ("Purchase
Documents") as MSPR may reasonably request shall be delivered to MSPR.
6. Consideration and Escrow Agreement.
a. On September 11, 1997, MSI shall pay TSI $35,000 plus any
amount due pursuant to Paragraph 3 hereof. On or before September
30, 1997, MSI and TSI shall execute an Escrow Agreement in the form
that is attached hereto as Exhibit E and made a part hereof by
reference and there shall be delivered to the Escrow Agent a stock
certificate issued to TSI to which TSI shall have an attached stock
power endorsed by TSI in blank for the MSI Shares. The MSI Shares
shall consist of 176,666 shares of MSI common stock minus such
number of shares of MSI common stock as is determined by subtracting
the value of the Inventory on the Effective Date, if it is less that
$60,000, from $60,000 and dividing the result thereof by $1.50. The
number of shares so determined shall be subtracted from the 176,666
shares, to
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determine the number of shares of MSI common stock that will
comprise the MSI Shares. The Inventory value shall be based on the
lower of cost or market. TSI shall have all the privileges and
restrictions of ownership, including the right to vote such MSI
Shares and to collect any dividends thereon.
b. On or before September 30, 1997, a stock certificate
representing all of the issued and outstanding shares of MSPR common
stock ("MSPR Shares") shall be delivered by MSI to the Escrow Agent
with stock power endorsed in blank attached to the certificate. MSI
shall have all of the privileges and restrictions of ownership,
including the right to vote such MSI Shares and to collect any
dividends thereon.
c. The certificates are to be held in escrow with the Escrow
Agent until the first to occur of (i) the date MSPR's pre-tax net
profit for the period from September 10, 1997, to September 10,
1998, is determined and the Escrow Agent is notified that such
pre-tax net profit exceeds $50,000 or MSI exercises the Put
described in Paragraph 6(f), (ii) such date, if ever, prior to
September 10, 1998, MSPR notifies TSI that neither MSPR nor MSI nor
their affiliates will offer franchises or (iii) such date, if ever,
prior to September 10, 1998, the employment agreement that is
attached hereto as Exhibit F and made a part hereof by reference is
terminated pursuant to Paragraph 4(b)(5) thereof and, in the case of
Paragraphs 6(c)(ii) and (iii), TSI exercises the Call described in
Paragraph 6(e). The determination of MSPR's pre-tax net profit shall
be by audit if MSI so elects. In such event, the determination of
MSPR's pre-tax net profit shall be performed by MSI's then auditor
in accordance with MSI's standard accounting practices. For purposes
of this Agreement, the term "pre-tax net profit" shall mean pre-tax
income determined in accordance with generally accepted accounting
principles ("GAAP"), excluding (i) the salary paid or payable to
Xxxxx, if any, (ii) any and all expenses (such as the cost of
telephone listing changes, store signage changes, mall fees or
charges and equipment purchases by the Stores to consummate
merchandising or system modifications) resulting from MSPR's
acquisition of the Stores, pursuant to this Agreement and (iii)
sales of assets of MSPR other than in the ordinary course of
business.
d. Provided all the terms and conditions of this Agreement are
met and if MSPR's pre-tax net profit as determined pursuant to
Paragraph 6(c) is more than $50,000 or if MSI does not exercise the
Put described in Paragraph 6(f) or if TSI does not exercise the Call
defined below, the Escrow Agent, in accordance with the escrow
agreement, shall deliver the MSPR Shares to MSI and deliver the MSI
Shares to TSI. In addition, to the extent the market value
(determined based on the per share closing sale price of the MSI
Shares as quoted on the principal trading market of the MSI common
stock on September 10, 1998, or the last preceding trading day for
which a closing sale price is reported) per share of the MSI common
stock is less than $1.50 per share, the number of MSI Shares to be
delivered to TSI shall be increased by a number of shares of MSI
common stock that is determined by subtracting the total market
value of 176,666 shares of MSI common stock from $265,000 and
dividing the
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result thereof by the market value of a share of MSI common stock on
September 10, 1998.
e. If MSPR notifies TSI that neither MSPR nor MSI nor their
affiliates will offer franchises as described in Paragraph 6(c)(ii)
or if the employment agreement is terminated as provided in
Paragraph 6(c)(iii), TSI will have the option to acquire all of the
MSPR Shares which shall reflect the Purchased Assets purchased by
MSI under this Agreement (the "Call"). The Call may be exercised by
TSI only within the thirty (30) day period after the giving of
notice by MSPR or after the termination of the employment agreement,
as applicable, and by TSI giving notice of the exercise of the Call
to MSI and the Escrow Agent.
f. MSI shall have the option to acquire all of the MSI Shares
(the "Put"). The Put shall be exercisable if, and only if, the
pre-tax net profit of MSPR as determined pursuant to Paragraph 6(c)
is $50,000 or less. The Put shall be exercised within thirty (30)
days of receipt by MSI of the calculation of pre-tax net profit as
is provided herein, by MSI providing written notice of the exercise
thereof to TSI and the Escrow Agent.
g. Upon exercise of either the Put or Call, funds loaned by
MSI to MSPR shall be repaid upon the terms and conditions set forth
in such loans (which shall bear annual interest at no greater than
the prime rate as in effect from time to time plus one percent) and,
in addition, MSPR shall pay the amount of any pre-tax profit earned
by MSPR during the one-year period to MSI within six months of the
exercise of the Put or Call or, if MSPR sustains a pre-tax net loss,
MSI shall pay the same to MSPR within such six months. In addition,
upon exercise of the Put or Call, MSPR shall pay MSI $35,000 plus
any amount paid pursuant to Paragraph 3 hereof, within six months of
the exercise of the Put or Call. Such payment may be reduced, at the
option of MSPR, by the cost of signage with the "XXXX" name thereon
added by MSPR between the Effective Date and the Put or Call date.
Further, upon exercise of either the Put or Call, MSPR shall
immediately discontinue the use of the word "XXXX" in its corporate
name and shall immediately discontinue the use of any MSI trade
names or trademarks except in advertising or promoting MSI products.
h. If MSI provides funds to MSPR, other than by loan, during
the period of combined operations and if the Put or Call is
exercised, all tangible assets of MSPR then in existence (for
example, and not by way of limitation, cash, accounts receivable and
equipment, except for the recorded value of the Purchased Assets at
the Effective Date), shall be conveyed, transferred and paid to MSI
within six months of the exercise of said Put or Call. In lieu of
receiving all of such tangible assets, MSI, in its sole discretion,
may elect to accept the cash value of said tangible assets.
i. Notwithstanding any term, condition, representation or
warranty contained herein to the contrary, the MSI Shares and the
MSPR Shares shall be issued,
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transferred and assigned in accordance with all federal and state
laws, regulations, and restrictions.
j. If the Put or the Call is exercised, the Escrow Agent, in
accordance with the escrow agreement, shall deliver the certificate
and stock power for the MSPR Shares to TSI and shall deliver the
certificate and stock power for the MSI Shares to MSI.
7. Option to Franchise. Until September 10, 1999, if MSPR, MSI or their
affiliates decide to offer franchises for any stores owned by MSPR and located
in Xxxxx, Arapahoe, Boulder, Denver, Xxxxxxx or Jefferson Counties, Colorado,
Xxxxx X. Xxxxx shall have the option to franchise any or all of such stores. The
following additional terms shall apply to Xxxxx X. Xxxxx'x exercise of this
option:
a. MSPR shall, as soon as possible, give Xxxxx X. Xxxxx notice
of MSPR's, MSI's or their affiliates' intention to franchise a store
and the terms and conditions of such franchise (other than the
payment of an initial franchise fee which shall not be required of
Xxxxx X. Xxxxx; provided, however, neither MSI, MSPR nor their
affiliates shall, in turn, be required to incur any out-of-pocket
costs as would customarily be covered by payment of the initial
franchise fee) as set forth in MSI's, MSPR's or their affiliates'
Uniform Franchise Offering Circular.
b. Xxxxx X. Xxxxx'x option shall be exercisable by Xxxxx X.
Xxxxx by Xxxxx X. Xxxxx entering into a franchise agreement no later
than 30 days after Xxxxx X. Xxxxx is given such notice.
In the event Xxxxx X. Xxxxx does not enter into the franchise agreement as set
forth above, MSI, MSPR or their affiliates will be free to enter into a
franchise agreement for the store.
8. Employment Agreement and Pay Periods. On the Effective Date, MSPR and
Xxxxx X. Xxxxx will enter into an employment agreement in the form that is
attached hereto as Exhibit F and made a part hereof by reference. Further, MSPR
agrees that all MSPR employees will be paid on a bi-weekly basis.
9. Confidentiality and Non-compete Agreement. On the Effective Date, TSI
and Xxxxx will execute a confidentiality and non-compete agreement in the form
that is attached hereto as Exhibit G and made a part hereof by reference.
10. Representations and Warranties by TSI and Xxxxx. TSI and Xxxxx jointly
and severally represent and warrant to MSI and MSPR, from the date hereof as
follows:
a. TSI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado and is
qualified to conduct business as it is presently conducted. TSI has
the corporate power and is duly authorized to carry on its business
where and as now conducted and to own, lease, use and operate its
properties as it now does.
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b. Each of TSI and Xxxxx has full authority and capacity to
enter into and to perform this Agreement in accordance with its
terms and is not bound by or subject to any contractual or other
obligation that would be violated by the execution or performance of
this Agreement, and this Agreement is valid and binding upon TSI and
Xxxxx in accordance with its terms.
c. TSI and each of the Stores has filed all federal, state and
local income, employment and other tax returns required to be filed
by them on or before the dates on which such returns were due to be
filed. TSI and each of the Stores has paid all taxes of any nature
for which each is responsible, except for taxes which are not yet
due and payable as of the date hereof. There are no claims pending
or threatened against TSI or any of the Stores for unpaid taxes and
there are no outstanding waivers or agreements by TSI or any of the
Stores for the extension of time for the assessment of any tax.
Neither the Internal Revenue Service nor any state agency has
conducted a tax audit or examination of TSI or any of the Stores for
any past year and no deficiencies in taxes or any other governmental
charges have been claimed, proposed or assessed against TSI or any
of the Stores and no facts exist or have existed which would
constitute a basis for assessment of liability for any tax or any
other governmental charges against TSI or any of the Stores.
d. As of the date hereof or such additional time as is
agreeable to MSI, Xxxxx will cause to have TSI transfer to MSPR all
right, title and interest to the Purchased Assets, free and clear of
all claims, liens or other encumbrances.
e. MSPR will acquire all right, title and interest to the
Purchased Assets, free and clear of all claims, liens or other
encumbrances in forms and upon terms and conditions acceptable to
MSI.
f. All of the Purchased Assets set forth in paragraphs (a),
(b) and (c) of Paragraph 1 herein, are in good operating condition
and the operation and use of such Purchased Assets in TSI's business
conform in all material respects to all applicable laws, ordinances,
regulations, permits, licenses and certificates. None of such
Purchased Assets owned by TSI are obsolete and all such Purchased
Assets are suitable for the purpose for which they are presently
used. All of the Inventory consists of items of a quantity and
quality useable or saleable without discount in the ordinary and
regular course of business.
g. The transactions to be effected pursuant to this Agreement
give no customer or supplier of TSI the right to terminate any
agreement with TSI and the attitude and actions of suppliers,
customers and employees and other persons with regard to the
operations of TSI will not be directly or indirectly affected by
this Agreement.
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h. No party with whom TSI has any contractual arrangements or
understandings (including without limitation any licenses or
franchises) in relation to the Purchased Assets, is in material
default (without regard to any requirement of notice or grace
period, or both) in the observance or performance of any term,
condition or provision of any such contractual arrangements or
understandings as at the date of this Agreement nor will they be as
of the Effective Date in any manner which will materially adversely
affect the proper conduct of the operations and business of TSI.
i. MSPR will enter into an employment contract with Xxxxx X.
Xxxxx and a confidentiality and noncompete agreement with Xxxxx, in
the forms that are attached hereto as Exhibits F and G,
respectively, and made a part hereof by reference.
j. Except as is set forth on the Schedule of Litigation that
is attached hereto as Exhibit H and made a part hereof by reference,
there is no litigation, proceeding or governmental investigation
pending or threatened and there is no order, injunction or decree
outstanding against or relating to TSI, any of the Stores or Xxxxx,
or the property, assets or businesses of TSI, any of the Stores or
Xxxxx which could have an adverse affect on the transactions
contemplated by this Agreement or which seeks to enjoin or prohibit
the consummation of all or any of the transactions contemplated by
this Agreement. Neither TSI, any of the Stores nor Xxxxx, knows or
has reasonable grounds to know of any basis for any such litigation,
proceeding or governmental investigation. Neither TSI, any of the
Stores, nor Xxxxx is in violation of any applicable law, regulation,
ordinance, order, injunction or decree, or any other requirement of
any governmental body or court relating to the property, assets or
business of TSI, any of the Stores or Xxxxx. Neither TSI, any of the
Stores, nor Xxxxx knows or has reasonable grounds to know of any
factors or the occurrence of any event which might form the basis
for any claim against TSI, any of the Stores or Xxxxx.
k. All statements contained in any exhibit, schedule,
certificate or other document delivered by or on behalf of TSI, any
and all of the Stores or Xxxxx pursuant to this Agreement or in
connection with the transaction contemplated hereby shall be deemed
representations and warranties hereunder by TSI and Xxxxx. No
representation or warranty by TSI or Xxxxx in this Agreement or in
any schedule, exhibit, certificate or other document, in whatever
form, delivered or to be delivered by TSI, any of the Stores or
Xxxxx pursuant to this Agreement, or in connection with the
transaction contemplated hereby contains or will contain any untrue
statement of material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not
misleading.
l. Neither Xxxxx nor TSI has employed any financial advisor,
broker or finder, and none of them has incurred or will incur any
broker's, finder's, investment
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banking or similar fees, commissions or expenses in connection with
the transactions contemplated by this Agreement.
m. TSI has title to all of the Purchased Assets, subject only
to the Lessor's rights to the improvements at the end of the Leases.
TSI and Xxxxx have no knowledge of any other security interests or
liens on the Purchased Assets except security interests represented
by financing statements filed by CGF Sign, Inc. on June 24, 1996 and
Southwest Properties Venture on April 13, 1994 and refiled on April
15, 1997, which will be released by September 30, 1997. TSI and
Xxxxx have no knowledge of any restriction on transfer that would
limit TSI's right to transfer the Purchased Assets hereunder.
n. TSI and Xxxxx have no knowledge of any latent defects with
respect to the Real Property.
o. There are no controversies pending between TSI or Xxxxx and
any of TSI's or Xxxxx'x respective employees who work at the Stores.
There are no employment agreements between TSI or Xxxxx and any of
TSI's or Xxxxx'x respective employees who work at the Stores and no
employee of TSI or Xxxxx who is employed at the Stores is
represented by any labor union.
p. None of the entities or individuals comprising TSI or any
real property, previously or currently owned by any of them, has
been or is in violation of, or liable for remediation costs or any
other damages or penalties under any Environmental Law (as defined
below); and to the best knowledge of TSI, there are no actions,
suits, demands, notices, claims, investigations or proceedings under
any Environmental Law pending or threatened against TSI and Xxxxx or
relating to any real property previously or currently owned or
occupied by TSI. For purposes of this Agreement, "Environmental Law"
means any applicable federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction, or agreement
with any governmental entity related to (i) the protection,
preservation or restoration of the environment and/or (ii) the use,
storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Substances (as defined below). The term Environmental Law
includes, without limitation: the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 USC xx.xx.
9601 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 USC xx.xx. 6901 et seq.; the Clean Air Act, as amended,
42 USC xx.xx. 7401 et seq.; the Federal Water Pollution Control Act,
as amended, 33 USC xx.xx. 2151 et seq.; the Toxic Substances Control
Act, as amended, 15 USC xx.xx. 2601 et seq.; the Emergency Planning
and Community Right to Know Act, 42 USC xx.xx. 11001, et seq.; the
Safe Drinking Water Act, 42 USC xx.xx. 300f, et seq.; all comparable
state and local laws and any common law that may impose liability or
obligations for injuries or damages due to or threatened as a result
of the presence of or exposure to any hazardous substance. As used
in this Agreement,
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"Hazardous Substance" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated under any environmental law,
whether by type or by quantity, including all material containing
any such substance as a component.
q. The financial statements of TSI that are attached hereto as
Exhibit I and made a part hereof by reference fairly reflect the
financial condition of TSI as of December 31, 1996, and June 30,
1997, and the results of its operations, changes in stockholders'
equity and cash flows for the twelve and six months then ended,
respectively.
r. TSI has no liabilities or obligations except for (i) those
reflected or reserved against (which reserves are adequate) in the
financial statements, (ii) those incurred, consistent with past
business practices, in the ordinary course of TSI's business since
June 30, 1997 and (iii) those which are specifically disclosed in
this Agreement. For purposes of this Agreement, the term
"liabilities or obligations" shall include any direct or indirect
indebtedness, claim, loss, damage, deficiency (including deferred
income tax and other net tax deficiencies), cost, expense,
obligation, guarantee, warranty or responsibility, whether approved,
absolute, or contingent, fixed or unfixed, liquidated or
unliquidated, secured or unsecured.
s. TSI has obtained all permits, licenses, zoning variances,
approvals and other authorizations (collectively "Permits")
necessary for the operation of its business as presently operated.
All such Permits are listed in Exhibit J that is attached hereto and
made a part hereof by reference. All such Permits are presently
valid and in full force and effect and no renovation, cancellation,
or withdrawal thereof has been effective or, to the best knowledge
of TSI or Xxxxx threatened. The execution, delivery and performance
of this Agreement and the consummation of the transaction
contemplated hereby, will not result in the termination of, or
change in, any such Permits.
t. TSI does not own a controlling ownership interest in any
other corporation and has no subsidiaries, including, without
limitation, any subsidiaries which would be deemed to be a part of
any affiliated group within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, and is not a partner, owner or joint
venturer in any partnership, limited liability company or joint
venture.
11. Securities Representations and Warranties. Xxxxx on behalf of TSI and
on behalf of Xxxxx, as the sole shareholder of TSI, hereby acknowledges,
represents and warrants to, and agrees with, MSI and MSPR as follows:
x. Xxxxx understands that the sale of the MSI Shares is
intended to be exempt from registration under the Securities Act of
1933, as amended ("Act"), by
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virtue of ss. 4(2) of the Act and, in accordance therewith and in
furtherance thereof, Xxxxx represents and warrants to and agrees
with MSI as follows:
(1) Xxxxx has received MSI's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996 and
Quarterly Reports on Form 10-QSB for the quarters ended March
31, 1997 and June 30, 1997 ("Reports") and has carefully
reviewed them and understands and has relied on the
information contained therein relating to MSI and information
otherwise provided to Xxxxx in writing by MSI relating to this
transaction;
(2) Xxxxx understands that all documents, records and
books pertaining to this transaction (including, without
limitation, the Reports and the exhibits thereto) have been
made available for inspection by Xxxxx, Xxxxx'x attorney
and/or accountant;
(3) Xxxxx and/or Xxxxx'x advisor(s) have had a
reasonable opportunity to ask questions of and receive answers
from a person or persons acting on behalf of MSI concerning
the acquisition of the MSI Shares and all such questions have
been answered to the full satisfaction of Xxxxx;
(4) No oral or written representations have been made or
oral or written information furnished to Xxxxx or Xxxxx'x
advisor(s) in connection with the acquisition of the MSI
Shares which were in any way inconsistent with the information
relating to MSI in the Reports;
(5) Xxxxx is not acquiring the MSI Shares as a result of
or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general
solicitation or general advertising, or any solicitation of a
subscription by a person not previously known to Xxxxx in
connection with investments in securities generally;
(6) Xxxxx has adequate means of providing for Xxxxx'x
current needs and personal contingencies, is able to bear the
substantial economic risks of an investment in the MSI Shares
for an indefinite period of time, has no need for liquidity in
such investment and, at the present time, could afford a
complete loss of such investment;
(7) Xxxxx has or together with Xxxxx'x advisor(s) has
such knowledge and experience in financial, tax and business
matters so as to enable Xxxxx to utilize the information made
available to Xxxxx in connection with the acquisition by Xxxxx
of the MSI Shares in order to evaluate the merits and
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risks of an investment in the MSI Shares and to make an
informed investment decision with respect thereto;
(8) Xxxxx is acquiring the MSI Shares solely for Xxxxx'x
own account as principal, for investment purposes only and not
with a view to the resale or dis tribution thereof, in whole
or in part, and no other person has a direct or indirect
beneficial interest in such MSI Shares;
(9) Xxxxx will not sell or otherwise transfer the MSI
Shares without registration under the Act or an exemption
therefrom and fully understands and agrees that Xxxxx must
bear the economic risk of Xxxxx'x acquisition of the MSI
Shares for an indefinite period of time because, among other
reasons, the MSI Shares have not been registered under the Act
or under the securities laws of any state and, therefore,
cannot be resold, pledged, assigned or otherwise disposed of
unless the MSI Shares are subsequently registered under the
Act and under the applicable securities laws of such states or
unless an exemption from such regis tration is available;
(10) Xxxxx understands that MSI is under no obligation
to register the MSI Shares on Xxxxx'x behalf or to assist
Xxxxx in complying with any exemption from registration under
the Act; and
(11) Xxxxx understands that sales or transfers of the
MSI Shares are further restricted by certain state securities
laws.
x. Xxxxx recognizes that Xxxxx'x acquisition of the MSI Shares
involves some risks.
x. Xxxxx agrees to indemnify and hold harmless MSI and MSPR
and their officers, directors and affiliates and each other person,
if any, who controls any thereof, within the meaning of Section 15
of the Act, against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing or
defending against any litigation commenced or threatened or any
claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by Xxxxx to comply
with any covenant or agreement made by Xxxxx in this Agreement or in
any other document furnished by Xxxxx to any of the foregoing in
connection with Xxxxx'x acquisition of the MSI Shares.
12. Representations and Warranties by MSI. MSI represents and warrants to
TSI and Xxxxx as follows:
a. MSI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is
qualified to conduct its
12
business as it is presently conducted. MSI has the corporate power
and is duly authorized to carry on its business where and as now
conducted and to own, lease, use and operate its properties as it
now does.
b. MSI has full authority and capacity to enter into and to
perform this Agreement in accordance with its terms and is not bound
by or subject to any contractual or other obligation that would be
violated by the execution or performance of this Agree ment, and
this Agreement is valid and binding upon MSI in accordance with its
terms.
c. All statements contained in any exhibit, schedule,
certificate or other document delivered by or on behalf of MSI
pursuant to this Agreement or in connection with the transactions
contemplated hereby shall be deemed to be representations and
warranties hereunder by MSI. No representation or warranty by MSI in
this Agreement or any exhibit, schedule, certificate or other
document to be delivered by MSI pursuant to this Agreement or in
connection with the transactions contemplated hereby contains or
will contain any untrue statement of material fact or omits or will
omit to state a material fact necessary to make the statements
contained therein not misleading.
d. For so long as the MSI Shares are held by the Escrow Agent,
unless MSI is authorized in writing by Xxxxx X. Xxxxx, MSI will not
permit MSPR to dispose of the assets of the Stores other than in the
ordinary course of business.
13. Conditions to Delivery of the Escrowed Certificates.
a. Unless waived in writing by MSI, the delivery of the
certificate for the MSI Shares held in escrow and all obligations of
MSI and MSPR pursuant to this Agreement shall be conditioned upon
all representations and warranties of TSI, the Stores and Xxxxx in
Paragraphs 10 and 11 as stated above, being true in all material
respects as of September 10, 1998, and MSI shall have received a
confirmation from Xxxxx X. Xxxxx as President of TSI in form
acceptable to MSI and its counsel to that affect.
b. Unless waived in writing by TSI, the delivery of the
certificate for the MSPR Shares held in escrow and all obligations
of TSI and Xxxxx pursuant to this Agreement shall be conditioned
upon all representations and warranties of MSI set forth herein
being true as of September 10, 1998.
14. Deliveries to be Made By the Parties. Unless waived in writing by MSI
or TSI, MSI and TSI and Xxxxx shall deliver documents, certificates and other
instructions set forth in this section:
13
a. MSI's Deliveries. MSI shall deliver the following:
(1) On or before September 30, 1997, copies of the
resolutions of the directors of MSI and MSPR certified by
their corporate secretaries or assistant secretaries as having
been duly and validly adopted and as being in full force and
effect as of the date of this Agreement authorizing the
execution and delivery by MSI and MSPR of this Agreement and
other agreements and instruments to be executed and delivered
by MSI and MSPR as provided herein and the performance by MSI
and MSPR of the transactions contemplated hereby.
(2) On or before September 30, 1997, MSPR shall deliver
to the Escrow Agent a stock certificate for the MSI Shares and
MSI shall deliver to the Escrow Agent a stock certificate for
the MSPR Shares.
(3) If the conditions of Paragraph 13(a) are not
satisfied and all deliveries pursuant to Paragraphs 14(a) and
(b) are not completed on or before September 30, 1997, on
September 30, 1997, the MSPR Shares shall be delivered to TSI
upon payment by TSI to MSI of $35,000 plus any cash paid by
MSI to TSI pursuant to Paragraph 3 hereof and the MSI Shares
shall be returned to MSI and this Agreement shall terminate.
(4) On September 11, 1997, a wire transfer to TSI of
$35,000 plus any cash paid by MSI to TSI pursuant to Paragraph
3 hereof which total amount shall be returned by TSI to MSI
immediately if all conditions of Paragraph 13(a) are not
satisfied and all deliveries pursuant to Paragraph 14(b) are
not completed on or before September 30, 1997.
b. TSI and Xxxxx'x Deliveries. TSI and Xxxxx shall deliver to
MSI and MSPR the following documents.
(1) On or before September 30, 1997, Exhibits A through
D to be attached hereto.
(2) By September 30, 1997, in forms satisfactory to MSI
and MSPR, the Purchase Documents.
(3) By September 30, 1997, copies of the resolutions of
the shareholders and directors of TSI certified by its
corporate secretary or assistant secretary as having been duly
and validly adopted and as being in full force and effect and
authorizing the execution and delivery by TSI of this
Agreement and such other agreements and instruments to be
executed and delivered by TSI as provided herein and the
performance by TSI of the transactions contemplated hereby as
authorizing the sale, transfer and delivery of the Purchased
Assets.
14
(4) The employment agreement and confidentiality and
non-compete agreements identified in Exhibits F and G,
respectively.
(5) In a form satisfactory to MSI and MSPR,
documentation that all laws of the state of Colorado have been
complied with in respect to the sale of the Purchased Assets
to MSPR.
15. Indemnification by TSI and Xxxxx. In addition to the indemnification
provided for in Paragraph 11(c), each of TSI and Xxxxx shall jointly and
severally indemnify, defend and hold MSI and MSPR and their officers, directors,
stockholders, agents, employees, representa tives, successors and assigns
(collectively the "MSI Indemnified Parties") harmless from any and all damages,
losses, costs, obligations, claims, demands, assessments, judgments or
liabilities (whether based on contract, tort product liability, strict liability
or otherwise), including taxes and all expenses, including without limitation,
interest penalties and reasonable attorneys' and accountants' fees and
disbursements (collectively "Damages") incurred by any of the MSI Indemnified
Parties resulting from or in connection with any or more of the following:
a. Any misrepresentation, breach of warranty or failure to perform
any covenant or agreement made or undertaken by TSI, any of the Stores or
Xxxxx in this Agreement or in any other document delivered to MSI pursuant
to this Agreement;
b. Any and all commitments, agreements, debts, liabilities and other
obligations of TSI, the Stores (that arose prior to the Effective Date or
that arise out of an event that occurred prior to the Effective Date) or
Xxxxx, whether accrued, absolute contingent or otherwise, whether known or
unknown, and whether or not disclosed in this Agreement, except for those
expressly assumed by MSPR hereunder.
c. Any transaction, event, act or omission which occurred on or
prior to the execution of this Agreement which relates to the operation
and conduct of the businesses of TSI or either of the Stores;
d. Termination of any one or more of TSI's employees which occurred
on or prior to the Effective Date;
e. Any one or more benefit or retirement plans maintained by TSI or
the Stores and any claims under any such benefit or retirement plans;
f. Any failure of TSI or Xxxxx to pay all of its or their
liabilities or other failure of TSI to take appropriate action which would
make the transfers contemplated herein effective as against creditors of
TSI or Xxxxx and any claim by any creditor of TSI or Xxxxx challenging the
effectiveness of the transfers contemplated herein;
15
g. Any and all claims, actions, suits or proceedings brought or
commenced by any former employee, contractor, consultant or principal of
TSI, any of the Stores or Xxxxx that arise out of an event that occurred
prior to the Effective Date; and
h. Any action, suit, proceeding or claim incident to any of the
matters referred to in this paragraph.
16. Indemnification by MSI. MSI shall indemnify, defend and hold harmless
TSI and Xxxxx and TSI's officers, directors and shareholders and TSI's and
Xxxxx'x agents, employees, representatives, successors and assigns (collectively
the TSI Indemnified Parties") harmless from and against any and all damages
incurred by any of the TSI Indemnified Parties resulting from or in connection
with any misrepresentation, breach of warranty or failure to perform any
covenant or agreement made or taken by MSI in this Agreement or in any other
agreement delivered to TSI pursuant to this Agreement.
17. Survival. All of the representations, warranties and covenants of TSI,
Xxxxx, MSI and MSPR contained in this Agreement shall survive the Closing.
18. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
19. Assignment. The Parties may assign this Agreement and any of their
rights, interest or obligations hereunder without the prior written approval of
the other Parties.
20. Headings. The headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
21. Severability. If any provision of this Agreement shall be deemed by
any court having jurisdiction thereon to be invalid or unenforceable, the
balance of this Agreement shall remain in effect. If any provision of this
Agreement shall be deemed by any such court to be unenforceable because such
provision shall be too broad in scope, such provision shall be construed to be
limited in scope to the extent such court shall deem necessary to make it
enforceable. If any provision shall be deemed inapplicable by any such court to
any person or circumstances, it shall nevertheless be construed to apply to all
other persons and circumstances.
22. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
23. Entire Agreement. This Agreement contains a complete statement of the
undertakings between the Parties with respect to its subject matter, cannot be
changed
16
or terminated orally and supersedes all prior agreements and undertakings. There
is no representa tion not set forth in this Agreement, including the schedules
and exhibits hereto, which has been relied upon by the Parties.
24. Notice. Any notice, approval, consent or other communications under
this Agreement shall be in writing and shall be considered given when (1)
delivered personally, or (2) mailed by registered or certified mail, return
receipt requested, and (3) transmitted by facsimile to the parties at the
addresses and numbers indicated below, or at such other address as a party may
specify by notice to the others pursuant hereto. Notice given by a Party's
counsel shall be considered notice given by that Party.
If to MSI or MSPR, to them at:
Xxxx Security International, Incorporated
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to TSI or Xxxxx, to it or them at:
0000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
25. Modifications. This Agreement may not be modified except by a writing
signed by all of the Parties hereto.
26. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
17
27. Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws (and not the law of conflicts) of the state of
Vermont.
28. No Waiver. Each Party may, by written notice to the other Parties
hereto, (a) extend the time for performance of any obligation or other actions
of such other Party under this Agreement, (b) waive any inaccuracies in the
representations and warranties, conditions or covenants of any such Party
contained in this Agreement, or (c) waive or modify a performance of any of the
obligations of such other Party under this Agreement. Except as provided in the
foregoing sentence, no waiver of performance or breach of or default under any
condition or obligation here shall be deemed to be made a waiver of any
performance or breach of or default under the same or any condition or
obligation of this Agreement.
29. Expenses. Each of the Parties hereto will bear their own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
30. Construction. The language used in this Agreement will be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction will be applied against any Party. The Parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
31. Further Assurances. From time to time after the Closing, TSI and Xxxxx
shall, if reasonably requested by MSI or MSPR, make, execute and deliver to MSPR
such additional assignments, bills of sale, or other instruments of transfer as
may be necessary or proper to transfer to MSPR all of TSI's right, title and
interest in and to any of the Purchased Assets. MSI and MSPR shall likewise
execute and deliver to TSI and Xxxxx any instruments or documents necessary to
carry out the intent and purposes of this Agreement.
18
Executed as of the date set forth above.
XXXX SECURITY INTERNATIONAL, INC.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxx X. Xxxxxxxx
------------------------ -----------------------------------
Witness Xxx Xxxxxxxx, President
MSP RETAIL, INC.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxx X. Xxxxxxxx
------------------------ -----------------------------------
Witness Xxx Xxxxxxxx, Chairman
TODAYS SECURITY, INC.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxx
------------------------ -----------------------------------
Witness Xxxxx X. Xxxxx, President
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X. Xxxxx
------------------------ -----------------------------------
Witness Xxxxx X. Xxxxx, Individually
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxx
------------------------ -----------------------------------
Witness Xxxxxx Xxxxx, Individually
19
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("AGREEMENT") is made effective the 30th day of
September, 1997, by and between XXXX SECURITY INTERNATIONAL, a Delaware corpora
tion ("MSI"), MSP RETAIL, INC., a Colorado corporation and a wholly-owned
subsidiary of MSI ("MSPR"), TODAYS SECURITY, INC., a Colorado corporation
("TSI"), and XXXXX X. XXXXX and XXXXXX XXXXX, natural persons and residents of
Arvada, Colorado (collectively "Xxxxx") (all collectively referred to as "the
Parties").
PRELIMINARY STATEMENT
WHEREAS, the Parties entered into an Asset Purchase Agreement dated
September 10, 1997, pursuant to which MSPR will acquire all of the assets of TSI
(except cash and receivables) and TSI will receive 176,666 shares of MSI common
stock ("MSI Shares") that will be placed in escrow;
WHEREAS, Xxxx X. Xxxxxxxxxxx, Esq. of Rutland, Vermont, has agreed to
serve as the Xx xxxx Agent; and
WHEREAS, MSI has agreed to deposit with the Escrow Agent the MSI Shares
and all of the issued and outstanding shares of common stock of MSPR ("MSPR
Shares"), upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein and in consideration of the representations, warranties and
covenants stated below, the Parties, intending to be legally bound, agree as
follows:
1. Escrowed Documents.
a. Provided the Asset Purchase Agreement dated September 10, 1997,
is not terminated pursuant to Paragraph 14(a)(3) thereof, MSI and TSI will
deliver to the Escrow Agent:
(1) A certificate for the MSI Shares issued to TSI, with stock
power endorsed in blank attached; and
(2) A certificate for the MSPR Shares issued to MSI, with
stock power endorsed in blank attached;
2. Terms of Escrow. The Escrow Agent shall hold all the documents
mentioned in Par agraph 1 above until such time as it receives from MSI written
notification and directions for delivery. Each such notice shall contain a sworn
statement by MSI that the delivery is in accordance with the terms and
conditions of the aforementioned Asset Purchase Agreement and that
each and every condition precedent to the delivery specified in said
notification has been met or has been otherwise agreed to by the Parties.
Within 10 days of receipt of any such notice, the Escrow Agent shall
endorse the stock powers and deliver the certificates as directed in the
notification.
In the event that the Escrow Agent does not receive a notification from
MSI as provided her ein within two years of the date hereof, the Escrow Agent
shall deliver the certificate for the MSI Shares to Xxxxx X. Xxxxx and Xxxxxx
Xxxxx, with stock power attached, and shall deliver the certificate for the MSPR
Shares to MSI, with stock power attached, unless at that time there is an order
from a court of competent jurisdiction enjoining such delivery or there are
other written instructions by all of the Parties.
In discharging the Escrow Agent's duties hereunder, the Escrow Agent may
rely upon and shall be protected in acting upon any written notice, certificate,
waiver, consent or other instrument or document which the Escrow Agent believes
to be genuine; the Escrow Agent shall not be required to verify any statement or
information contained therein and all such statements and information shall, as
to the Escrow Agent, be conclusively presumed to be complete and accurate in all
respects. The Escrow Agent shall not be liable for any error of judgment or for
any act done or omitted in good faith, except that the Escrow Agent shall be
liable for the Escrow Agent's own willful misconduct. The Escrow Agent may
consult with and obtain legal advice from legal counsel in the event of any
dispute or question as to the construction of any of the provisions hereof or
the Escrow Agent's duties hereunder, and the Escrow Agent shall incur no
liability and shall be protected in acting in accordance with the opinion of
such counsel. The Escrow Agent shall have the right to seek instructions from a
court of competent jurisdiction if the Escrow Agent deems such course to be
appropriate. The Escrow Agent shall be entitled to reasonable compensation for
the Escrow Agent's services hereunder and reimbursement for any out-of-pocket
expenses incurred in connection with its duties hereunder, such compensation and
reimbursement to be paid equally by MSI and MSPR.
3. Designation of Escrow Agent. The Parties hereto agree that Xxxx X.
Xxxxxxxxxxx shall serve as the Escrow Agent under this Agreement. In the event
of Xxxx X. Xxxxxxxxxxx'x inability or unwillingness to serve, MSI shall select
an attorney licensed to practice in the State of Vermont who does not at the
time represent MSI, TSI, Xxxxx or Xxx Xxxxxxxx to serve as Xxxx X. Xxxxxxxxxxx'x
successor.
4. Notices. Any notice, approval, consent or other communication under
this Agreement shall be in writing and shall be considered given when (a)
delivered personally, or (b) mailed by registered or certified mail, return
receipt requested and (c) transmitted by telecopy to the Parties at the
addresses indicated below or at such other address as a Party may specify by
notice to the others pursuant hereto. Notice given by a Party's counsel shall be
considered notice given by that Party.
2
If to MSI, to it at:
Xxxx Security International Incorporated
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to TSI, Xxxxx X. Xxxxx or Xxxxxx Xxxxx, to them at:
0000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to the Escrow Agent, to the Escrow Agent at:
X.X. Xxx 000
Xxxxxxx, Xxxxxxx 00000
5. Amendments. This Agreement may not be amended or modified in any
respect whatsoever except by instrument in writing signed by the parties hereto
and without written notice to the Escrow Agent. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, discussions, writings and
agreements between them.
6. Successors. All the terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto.
7. Captions. Captions and headings of this Agreement are for the
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
3
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Vermont, without giving effect to the
conflicts or choice of law provisions of Vermont or any other jurisdiction.
a. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof and this
Agreement shall be construed in all respects as if the invalid or
unenforceable provisions were omitted.
b. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in
Bennington, Vermont, or such other location as the Parties may agree, in
accordance with the commercial rules then obtaining of the American
Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. Each Party shall pay his
or its own costs in connection with the arbitration. The expenses of the
arbitration itself shall be borne equally by the Parties.
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals as
of this date first written above.
XXXX SECURITY INTERNATIONAL, INC.
By: /s/ Xxx X. Xxxxxxxx
----------------------------
Xxx Xxxxxxxx, President
MSP RETAIL, INC.
By: /s/ Xxx X. Xxxxxxxx
----------------------------
Xxx Xxxxxxxx, Chairman
4
TODAYS SECURITY, INC.
By: /s/ Xxxxx X Xxxxx
----------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X Xxxxx
--------------------------------
Xxxxx X. Xxxxx, Individually
/s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx, Individually
/s/ Xxxx X Xxxxxxxxxxx
--------------------------------
Xxxx X. Xxxxxxxxxxx
5
EXHIBIT F
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made this 10th day of September, 1997, by and
between MSP RETAIL, INC. (hereinafter "MSPR") and XXXXX X. XXXXX (hereinafter
the "Employee").
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and of other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Term and Job Description. MSPR will employ the Employee for a two year
period beginning on the date hereof to oversee the management for MSPR of two
existing stores, to assist in the development of a franchise program for MSPR,
its parent or its affiliates, and to perform such other tasks as MSPR deems in
the best interest of MSPR. All related materials, whether tangible or
intellectual property, developed by the Employee during the term of the
employment are solely for the benefit of MSPR and shall be the sole exclusive
property of MSPR.
2. Conditions. The Employee agrees to adhere to the policies of MSPR as
established from time to time by the board of directors of MSPR and to devote
his time, attention and energy during normal business hours to the business of
MSPR. He shall not, during the term of this Agreement, be engaged in any other
business activity, whether or not such business activity is pursued for gain,
profit or other pecuniary advantage, without the prior written consent of MSPR;
provided, however, that this paragraph shall not be construed to prevent the
Employee from personally and for his own account from trading in stocks, bonds,
securities, real estate, commodities or other forms of investment for his own
account and for his own benefit.
3. Compensation. For all services rendered by the Employee under this
Agreement, MSPR shall pay and the Employee agrees to accept the following:
a. The Employee shall be paid at a rate (unless otherwise agreed to
in writing by the Employee and MSPR) of $1,500 per week, payable in
bi-weekly installments. All payments shall be subject to withholding,
deductions for all applicable state and federal taxes and deductions
specified by Employee.
b. The Employee shall be entitled to receive any benefits which may
accrue or be paid to or with respect to the Employee under any employment
benefit plan; any group medical, hospitalization or insurance plan or
other plan for all employees of MSPR; including, but not limited to, any
employee retirement plan sponsored by MSPR pursuant to Section 401 of the
Internal Revenue Code of 1986, as currently enacted and as amended in the
future; provided, however, that participation
and the extent and manner of the Employee's participation in any and all
such benefit plans shall be subject to the sole discretion of the Board of
Directors of MSPR and the Employee's qualification therefor.
c. MSPR shall pay all reasonable out-of-pocket expenses incurred by
the Employee while on business for MSPR provided that same be approved in
writing in advance by MSPR.
d. MSPR may, but need not, offer the Employee shares or options to
purchase shares in Xxxx Security International, Inc. ("MSI") on such terms
and conditions and at such times as MSI's board of directors shall in its
sole discretion deem appropriate.
e. If five franchises are established pursuant to such franchise
program as the Employee shall develop and MSI shall implement, during the
Employee's employment under this Employment Agreement, then within thirty
(30) days of the establishment of the fifth such franchise, the terms and
conditions of this Employment Agreement shall be revised and amended as
MSPR and Employee may agree in writing. If within said thirty (30) day
period the parties do not agree to amend or revise this Employment
Agreement, the Employment Agreement will continue until its natural
expiration, in force and effect as it existed on the day prior to the
establishment of said fifth franchise.
4. Termination.
a. This agreement and the employment may be terminated upon the
mutual agreement of MSPR and the Employee or by MSPR if Todays Security,
Inc. ("TSI") or Employee breach any of TSI's or Employee's warranties to
MSPR or MSI set forth in that certain Asset Purchase Agreement dated
September 10, 1997, whereby MSPR has acquired all of the assets of TSI.
b. This agreement and the employment shall automatically terminate
without notice:
(1) Upon the death of the Employee;
(2) If Employee fails or refuses to faithfully and diligently
perform the duties of his employment and provisions of this
Agreement for whatever reason;
(3) Upon the exercise of either the Put or the Call as set
forth in Paragraph 6 of the Asset Purchase Agreement entered into
between MSI, TSI, MSPR and Employee dated September 10, 1997.
2
(4) Upon the commission of gross misconduct by the Employee;
or
(5) On September 10, 1999, except that MSPR may terminate this
agreement and the employment at any time prior to September 10,
1999, for no cause, provided that, in the event of such termination
MSPR shall continue to pay the Employee the compensation set forth
in Paragraph 3(a) hereof until September 10, 1999.
(6) If the Asset Purchase Agreement dated September 10, 1997,
terminates pursuant to Paragraph 14(a)(3) thereof.
5. Notices. Any notice or other communication to be given by any party
hereunder shall be in writing and shall be deemed to have been given when sent
by express, registered or certified mail, return receipt requested, postage
prepaid, addressed and sent by facsimile as follows:
If to MSPR, to it at:
MSP Retail, Inc.
00000 Xxxx 00xx Xxxxxx, Xxxx 0
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
With copy to:
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to the Employee, to him at:
Xxxxx X. Xxxxx
0000 Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
3
6. Miscellaneous.
a. This Agreement may not be amended or modified in any respect
whatsoever except by instrument in writing signed by the parties hereto.
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior
negotiations, discussions, writings and agreements between them.
b. Failure of MSPR to act upon any breach of any of the provisions
of this Agreement shall not constitute a waiver of the rights of MSPR to
act upon any other or future breach. Any and all rights and remedies
created for MSPR shall be cumulative and the resort to one remedy shall
not be taken to exclude the right to use any other.
c. This Agreement may be executed in any number of counterparts,
each of which shall be an original but such counterparts shall together
constitute but one and the same instrument.
d. This Agreement shall be governed and construed in accordance with
the laws of the State of Colorado, without giving effect to the conflicts
or choice of laws provisions of Colorado or any other jurisdiction.
e. All of the terms of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the heirs, successors,
assigns and legal representatives of the parties hereto.
7. Severability. The invalidity or unenforceability of any particular
provisions of this Agreement shall not affect the other provisions hereof and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
8. Scope. If this Agreement or any portion thereof shall be held by any
court having jurisdiction thereof to be unenforceable because it is too broad in
scope or for any other reason, then this Agreement or the respective provision
thereof shall be deemed limited in scope to the extent that such court deems
necessary to make it enforceable.
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9. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be settled by arbitration in Denver,
Colorado or such other location as the parties may agree, in accordance with the
rules then obtaining of the American Arbitration Association and judgment upon
the award rendered may be entered in any court having jurisdiction thereof. Each
party shall pay his or its own costs in connection with the arbitration. The
expenses of the arbitration itself shall be borne equally by the parties.
MSP RETAIL, INC.
/s/ Xxxxxx Xxxxxxx By: /s/ Xxx X. Xxxxxxxx
------------------------ -----------------------------------
Witness Xxx Xxxxxxxx, Chairman
/s/ Xxxxxx Xxxxxxx By: /s/ Xxxxx X Xxxxx
------------------------ -----------------------------------
Witness Xxxxx X. Xxxxx, Individually
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EXHIBIT G
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
THIS CONFIDENTIALITY AND NON-COMPETE AGREEMENT ("Agreement") made this
10th day of September, 1997, between XXXX SECURITY INTERNATIONAL, INC., a
Delaware corporation with a principal place of business in Bennington, Vermont
(hereinafter "MSI"), MSP RETAIL, INC., a Colorado corporation and a wholly-owned
subsidiary of MSI with a principal place of business in Aurora, Colorado
("MSPR"), TODAYS SECURITY, INC., a Colorado corporation with a principal place
of business in Arvada, Colorado ("TSI"), and XXXXX X. XXXXX AND XXXXXX XXXXX
(collectively "Xxxxx").
PRELIMINARY STATEMENT
WHEREAS, MSI is engaged in the business of manufacturing, developing,
marketing and selling products, and MSPR is engaged in the business of marketing
and selling products, in the personal security industry and police security
industry;
WHEREAS, MSPR is a wholly-owned subsidiary of MSI;
WHEREAS, TSI is engaged in the business of marketing and selling products
in the personal security industry and police security industry;
WHEREAS, Xxxxx X. Xxxxx is the President of TSI and all of the outstanding
stock of TSI is owned by Xxxxx;
WHEREAS, TSI has conveyed all of its assets related to its two stores
located at the Westminster Mall Shopping Center in Westminster, Colorado, and at
the Southwest Plaza Mall in Littleton, Colorado, to MSPR as set forth in an
Asset Purchase Agreement dated September 10, 1997;
WHEREAS, Xxxxx X. Xxxxx is to be an employee of MSPR pursuant to an
employment agreement dated September 10, 1997; and
WHEREAS, MSI's and MSPR's transaction of business involves the collection
and usage of confidential data as hereinafter defined, the unauthorized
disclosure of which may result in harm to MSI and MSPR.
NOW, THEREFORE, in consideration of Xxxxx X. Xxxxx'x employment, the
purchase of certain assets from TSI by MSPR and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Xxxxx, TSI, MSI and MSPR hereby agree as follows:
1. "Confidential Data" is any and all trade secrets and information (a)
not generally known by persons who are not employed by MSI or MSPR, or (b) which
give MSI or MSPR an advantage over competitors who do not know or use it, or (c)
disclosed to Xxxxx in confidence by MSI or MSPR, its agents or employees, or by
MSI's or MSPR's customers or suppliers. Confidential Data shall mean all
information relating to MSI's or MSPR's businesses that is provided either in
writing or orally to Xxxxx, or otherwise communicated to or obtained by Xxxxx,
including, without limitation, financial, marketing, technical information, all
information pertaining to MSI's or MSPR's proprietary mailing lists, all
information concerning services provided to customers, information concerning
contracts with customers, vendors and suppliers, all information concerning the
pricing and marketing strategies of MSI or MSPR and any and all information of
whatsoever nature and in whatsoever form which does or may give MSI or MSPR an
advantage over its competitors who do not then have such information. Excluded
from the foregoing definition of Confidential Data is:
a. Information in the public domain at the time of disclosure as
evidenced by printed publication, or which becomes part of the public
domain by a publication or otherwise through no fault of the recipient;
b. Information which the recipient can demonstrate was in his
possession at the time of disclosure; and
c. Information properly disclosed on a non-confidential basis by a
third party after the disclosure covered hereby.
2. During the term of Xxxxx X. Xxxxx'x employment with MSI and MSPR,
neither Xxxxx nor TSI shall directly or indirectly disclose to any person, firm,
corporation or any other entity without written authorization from the Boards of
Directors of MSI and MSPR any confidential data unless such disclosure is in
furtherance of MSI's or MSPR's business or is required by law.
3. Upon termination of Xxxxx X. Xxxxx'x employment with MSPR for any
reason, Xxxxx will immediately surrender to MSI all books, records, documents
and other writings and all computer disks and other recordings which may contain
confidential data.
4. During the term of Xxxxx X. Xxxxx'x employment with MSPR and after
termination of employment for any reason, Xxxxx and TSI shall not directly or
indirectly use, without written authorization from the Boards of Directors of
MSI and MSPR, any confidential data unless such use is in furtherance of MSI's
or MSPR's business or is required by law.
5. a. For a period of one year from the date of Xxxxx X. Xxxxx'x
termination of employment with MSPR by MSPR for Xxxxx X. Xxxxx failing or
refusing to
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faithfully and diligently perform the duties of his employment or as a
result of the gross misconduct of Xxxxx X. Xxxxx or for a period of one
year from the date of Xxxxx X. Xxxxx'x termination of employment with MSPR
as a result of the resignation of Xxxxx X. Xxxxx for any reason other than
as a result of a change in Xxxxx X. Xxxxx'x duties of managing MSPR's two
stores existing on the date hereof and of assisting in the development of
a franchise program for MSPR, MSI or their affiliates, as a result of MSPR
requiring Xxxxx X. Xxxxx to relocate his residence out of Xxxxx, Arapahoe,
Boulder, Denver, Xxxxxxx or Xxxxxxxxx County, Colorado, or as a result of
MSPR reducing Xxxxx X. Xxxxx'x salary below $78,000 per annum, Xxxxx and
TSI shall not directly or indirectly, individually or in combination with
others as employee, partner, agent, corporate officer, corporate
shareholder or otherwise in any manner be engaged or personally interested
in developing or carrying out a business substantially similar to, or
which competes with the business activities conducted by MSI and MSPR or
any of their subsidiaries, or franchisees, particularly such business
activities which involve:
(1) MSI and MSPR and past customers and suppliers of MSI and
MSPR, or their subsidiaries, which are engaged in activities
identical, similar to or which compete with the business activities
conducted by MSI and MSPR.
(2) Past and present customers and suppliers of MSI and MSPR,
their franchisees or their subsidiaries.
(3) Prospective customers to whom MSI and MSPR, or their
subsidiaries, have directly marketed or are presently marketing
their services or products.
b. If all of the MSPR stock is transferred, issued or assigned to
TSI or Xxxxx in accordance with the aforementioned Asset Purchase
Agreement, Xxxxx may directly or indirectly, individually or in
combination with others as employee, partner, agent, corporate officer,
corporate shareholder or otherwise in any manner be engaged or personally
interested in those operations of MSPR conducted on the day prior to the
date of such stock transfer, without regard to the provisions of
Paragraphs 5(a)(1), 5(a)(2) and 5(a)(3) insofar as they relate solely to
MSPR. Each and every provision of Paragraph 5(a) shall otherwise continue
to apply to Xxxxx.
6. In the event of any breach of this Agreement by Xxxxx or TSI, MSI and
MSPR shall be entitled to injunctive relief in addition to all other legal
remedies to enforce the provisions hereof.
7. This Agreement may not be amended or modified in any respect whatsoever
except by instrument in writing signed by the parties hereto. This Agreement
constitutes the
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entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, discussions, writings and
agreements between them.
8. Failure of MSI or MSPR to act upon any breach of any of the provisions
of this Agreement shall not constitute a waiver of the rights of MSI or MSPR to
act upon any other or future breach. Any and all rights and remedies created for
MSI or MSPR shall be cumulative and the resort to one remedy shall not be taken
to exclude the right to use any other.
9. This Agreement may be executed in any number of counterparts, each of
which shall be an original but such counterparts shall together constitute but
one and the same instrument.
10. This Agreement shall be governed and construed in accordance with the
laws of the State of Vermont without giving effect to the conflicts or choice of
laws provisions of Vermont or any other jurisdiction.
11. All of the terms of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the heirs, successors, assigns and legal
representatives of the parties hereto.
12. The invalidity or unenforceability of any particular provisions of
this Agreement shall not affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
13. If this Agreement or any portion thereof shall be held by any court
having jurisdic tion thereof to be unenforceable because it is too broad in
scope or for any other reason, then this Agreement or the respective provision
thereof shall be deemed to be limited in scope to the extent that such court
deems necessary to make it enforceable.
14. Any controversy or claim arising out of or relating to this Agreement
or the breach thereof shall be settled by arbitration in Bennington, Vermont or
such other location as the parties may agree, in accordance with the rules then
obtaining of the American Arbitration Association and judgment upon the award
rendered may be entered in any court having jurisdiction thereof. Each party
shall pay his, her or its own costs in connection with the arbitration. The
expenses of the arbitration itself shall be borne equally by the parties.
15. Xxxxx X. Xxxxx acknowledges receipt of a copy of this Agreement and
agrees to deliver a copy to each employer for whom Xxxxx X. Xxxxx may work at
any time within one year after the termination of his employment with MSPR and
hereby consents to MSI and MSPR corresponding with such employer concerning the
existence and terms of this Agreement.
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IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first written above.
XXXX SECURITY INTERNATIONAL, INC.
By: /s/ Xxx X. Xxxxxxxx
----------------------------
Xxx Xxxxxxxx, President
MSP RETAIL, INC.
By: /s/ Xxx X. Xxxxxxxx
----------------------------
Xxx Xxxxxxxx, Chairman
TODAYS SECURITY, INC.
By: /s/ Xxxxx X Xxxxx
----------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X Xxxxx
----------------------------
Xxxxx X. Xxxxx, Individually
/s/ Xxxxxx Xxxxx
----------------------------
Xxxxxx Xxxxx, Individually
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