EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BETWEEN
THE SHAREHOLDERS OF
EAGER BEAVER CAR WASH, INC.
And
MACE SECURITY INTERNATIONAL, INC.
TABLE OF CONTENTS
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PAGE
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RECITALS.................................................................... 1
ARTICLE I ACQUISITION; CLOSING........................................... 2
ARTICLE II TITLE INSURANCE................................................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS.................. 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................ 20
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS............................... 23
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER............................. 28
ARTICLE VII CONDITIONS OF PURCHASER........................................ 30
ARTICLE VIII CONDITIONS OF SELLERS.......................................... 32
ARTICLE IX INDEMNIFICATION................................................ 33
ARTICLE X OTHER PROVISIONS............................................... 38
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SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
Defined Terms
Purchaser Resolutions
Purchaser Opinion Letter
CPA Letter
Registration Rights Agreement
Noncompetition Agreement
Purchaser's Release
Purchaser's Certificate
1.7(d) Sellers' Resolutions
1.7(e) Sellers' Certificate
1.7(f) Sellers' Release
1.7(h) Sellers' Opinion Letter
ATTACHED AS PART OF DISCLOSURE BINDER
1.3(a) Company Debt
1.3(b) Stock Allocation
1.6(h) Purchaser Governance Documents
1.6(j) Lease
1.7(e) Company Governance Documents
2.1 Real Property Descriptions
2.3 Permitted Exceptions
3.2 Company Share Encumbrances
3.3 Material Documents
3.4(a) Office and Other Equipment
3.5 Customer List and Contracts
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental violations
3.6(f) Definition of "Hazardous Material" and Environmental Conditions
3.6(h) Wetlands
3.6(i) Mechanic's liens
3.6(k) Exceptions to proceedings which would affect use of the Property
3.7(a) List of Company's Leased Personalty and Permitted Encumbrances
3.9(c) Working Capital Calculation
3.10 Fiscal Condition of Company
3.11 Tax Deficiencies
3.12 Insurance Policies, etc.
3.13(a) Employment Agreements
3.13(b) Employee Information
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3.13(c) Employee Benefit Plans, Funds or Programs
3.14(a) Exceptions to Company's operation in compliance with laws, etc.
3.14(b) Exceptions relating to environmental issues and liability
3.14(d) Notices of Violation
3.14(f) Exception to Approvals
3.16 Exceptions to right of Sellers and Company to enter this Agreement
3.17 Transaction Intermediaries
3.19 Investments in Competing Companies
3 List of Litigation and Summaries
3.23 Changes in Company Share Ownership
4.3 List of Purchaser's Subsidiaries
4.4(b) Purchaser Third Party Consents
4.8 Purchaser Litigation
4.9 Purchaser Violation of Laws
4.14 Purchaser Environmental Matters
4.15 Purchaser Real Property
4.17 Fiscal Condition Exceptions
4.18 Purchaser Acquisitions
5.2(e) Schedule For Sale of Consideration Stock
6.3 Daniel Warmbier and Diane Warmbier Employment Terms
6.6 Schedule of Ownership of Company Warrants
8.6 Opinion of Counsel
8.7 Tax Opinion
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of June 21, 1999, by
and between Ken H. Bachman, as Trustee under the Kenneth H. Bachman Revocable
Trust under agreement dated 9/12/94, Claudia Bachman, as Trustee under the
Claudia Bachman Revocable Trust under agreement dated 9/12/94 Carolyn Schmidt,
Daniel Warmbier, and Diane Warmbier ("Shareholders") on the one hand, and Mace
Security International, Inc. ("Purchaser") on the other hand. Shareholders may
sometimes be referred to as "Sellers" in this Agreement.
RECITALS
The Shareholders are the owners of all of the outstanding shares of stock
("Company Shares") of Eager Beaver Car Wash, Inc. (the "Company"), which is in
the business of operating car wash facilities (the "Business") in Bradenton,
Fort Myers, Venice, and Sarasota, Florida. The Company owns certain parcels of
real property upon which Company conducts a portion of its operations.
In accordance with the provisions of this Agreement, Sellers desire to sell
all of the outstanding shares of stock of the Company in exchange for common
stock of Purchaser, all on the terms contained herein. The Parties intend that
the transactions contemplated hereby be treated as a "pooling of interests" for
accounting purposes under generally accepted accounting principals ("GAAP") and
as a tax free reorganization for income tax purposes.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead will appear in a Disclosure Binder prepared and completed
by each of the Parties as promptly as possible following the execution of this
Agreement. The Disclosure Binder will be organized under subheadings which
correspond to the various Schedules described in this Agreement. For purposes of
identification, each Disclosure Binder and Schedule will be identified by the
Parties by a written statement executed by the Parties and appearing as the
first page of the Disclosure Binder. Each Disclosure Binder is incorporated
herein by reference and made a part of this Agreement. All Schedules not
attached hereto as of the date of execution of this Agreement will be attached
hereto as of the Closing Date.
Capitalized terms used in this Agreement and not elsewhere defined shall
have the respective meaning set forth in Schedule A annexed hereto.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, the
receipt and sufficiency of which is mutually acknowledged and intending to be
legally bound hereby, the Sellers and Purchaser agree, as follows:
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ARTICLE I
Acquisition; Closing
Section 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this Agreement shall
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take place as soon as possible after the conditions set forth in Article VII and
Article VIII being satisfied or waived, time being of the essence, at the
offices of Purchaser, 1000 Crawford Place, Suite 400, Mount Laurel, New Jersey,
or such other place as the parties hereto may agree upon, but in no event later
than July 31, 1999. The date that Closing occurs is referred to hereinafter as
the "Closing Date" and the act as "Closing". The exact Closing Date shall be
established by a written notice sent by Purchaser to Sellers, subject to such
date being reasonably acceptable to Sellers.
Section 1.3 Stock Purchase; Consideration.
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(a) At the Closing, (i) all of the Company Shares shall be delivered by
Shareholders to Purchaser, and (ii) Purchaser shall deliver to Sellers, subject
to adjustment as provided in this Section 1.3, 651,400 shares of Purchaser's
common stock ("Consideration Stock"), as adjusted as provided for in this
section below. For purpose of this Agreement, "Company Debt" shall include
long-term debt, including the current portion of the principal and interest
accrued through the Closing Date and short-term debt. At the Closing, Company
shall have total Company Debt in the amount of $3,810,475.79. The number of
shares constituting Consideration Stock at Closing shall be increased or
decreased, as the case may be, by the amount that the Company Debt at Closing
differs from $3,810,475.79, with such adjustment based on a per share value
equal to the closing price of the Purchaser's common stock as reported on NASDAQ
National Market on the close of trading on the day before the Closing Date (the
"Per Share Value") with no fractional shares to be issued.
(b) The Consideration Stock shall be allocated among the Shareholders in
the same proportions that the Shareholders own shares in the Company, as set
forth on Schedule 1.3(b) (the "Allocation Schedule").
Section 1.4 Closing. Following execution of this Agreement, Purchaser and
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Sellers shall be obligated to conclude the transaction strictly in accordance
with its terms as soon as possible after the conditions of Closing set forth in
Article VII and Article VIII have been satisfied or waived, but in no event
later than July 20, 1999, time being of the essence. If the failure to conclude
this transaction is due to the refusal and failure of Sellers to perform their
obligations under this Agreement, Purchaser may seek to enforce this Agreement
with a proceeding in arbitration for specific performance, in addition to, and
not in limitation of, any other right and remedy available to the Purchaser
under this Agreement, or at law or in equity, including, without limitation a
proceeding in arbitration to recover their actual damages resulting from the
default of Sellers. If the failure to conclude this transaction is due to the
refusal and failure of Purchaser to perform its obligations under this
Agreement, Sellers may, in addition to and not limitation of
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any other rights and remedies available to the Sellers under this Agreement, or
at law or in equity, bring a proceeding in arbitration to recover their actual
damages resulting from the default of Purchaser.
Section 1.5 Termination. This Agreement and the transactions contemplated
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hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Purchaser and Sellers;
(b) by Purchaser without liability to either Party, if Sellers have not
delivered its Disclosure Binder to Purchaser;
(c) by Sellers without liability to either Party, if Purchaser has not
delivered its Disclosure Binder to Sellers;
(d) by Purchaser if Purchaser is not satisfied, in its sole discretion,
with the due diligence it has conducted on the Company;
(e) by Seller if Sellers are not satisfied, in their sole discretion, with
the due diligence they have conducted on Purchaser;
(f) by the Sellers or by Purchaser in the event Purchaser or the Sellers,
as applicable, makes a material misrepresentation under this Agreement or
breaches a material covenant or agreement under this Agreement, and fails to
cure such misrepresentation or breach within ten (10) business days from the
date of written notice of the existence of such misrepresentation or breach; or
(g) by the Sellers or Purchaser, if the Closing shall not have occurred by
July 20, 1999, or such other date as may be agreed to by the Parties hereto in
writing, due to the non-fulfillment of a condition precedent to such Party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating Party).
All terminations shall be exercised by sending the other Parties a written
notice of the termination. In the event this Agreement is terminated as provided
herein, this Agreement shall become void and be of no further force and effect
and no Party hereto shall have any further liability to any other Party hereto,
except that this Section 1.5, Article IX, Section 10.1, Section 10.2, Section
10.17 and the Confidentiality Agreement shall survive and continue in full force
and effect, notwithstanding termination. The termination of this Agreement shall
not limit, waive or prejudice the remedies available to the Parties, at law or
in equity, for a breach of this Agreement.
Section 1.6 Deliveries by Purchaser. At Closing,the Purchaser shall
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deliver to Sellers, all duly and properly executed (where applicable), the
following:
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(a) The Consideration Stock due on the Closing Date, as provided in
Section 1.3 above to be delivered to the Sellers;
(b) A copy of the resolutions of the Board of Directors of Purchaser
authorizing the execution and delivery of this Agreement and each other
agreement to be executed in connection herewith (collectively, the "Collateral
Documents") and the consummation of the transactions contemplated herein, in
form and substance as attached hereto as Schedule 1.6(b);
(c) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.6(c);
(d) A registration rights agreement in form and substance mutually
agreeable to the parties and which will be attached hereto as Schedule 1.6(e)
("Registration Rights Agreement");
(e) A noncompetition agreement with Sellers in form and substance mutually
agreeable to the Parties which will be attached hereto as Schedule 1.6(f)
("Noncompetition Agreement");
(f) A release from Purchaser, in a form and substance mutually agreeable
to the Parties which will be attached hereto as Schedule 1.6(f);
(g) A current certificate of good standing for the Purchaser and
certificate of incorporation, attached hereto as Schedule 1.6(g);
(h) The Certificate described at Section 8.1 in form and substance as
attached hereto as Schedule 1.6(h); and
(i) Such other documents and instruments required by this Agreement, if
any.
Section 1.7 Deliveries by Sellers. At the Closing, each of the Sellers, as
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applicable, shall deliver to Purchaser, all duly executed, the following:
(a) Duly executed certificates in valid form evidencing all of the Company
Shares owned by each Seller, duly endorsed in blank or accompanied by duly
executed stock powers attached or otherwise executed in the presence of
authorized representatives of Purchaser. Purchaser will pay all Florida
documentary stamps or any other attributable to transferring the Company shares
to Purchaser;
(b) The written resignations of all officers and directors of the Company
as of the time of Closing;
(c) A current certificate of good standing for the Company and certified
charter documents from each applicable jurisdiction of admittance and
incorporation attached hereto as Schedule 1.7(c);
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(d) A certified copy of resolutions of the directors of the Company and
the Shareholders authorizing the execution and delivery of this Agreement and
each of the Collateral Documents in form and substance as attached hereto as
Schedule 1.7(d);
(e) The Certificate described at Section 7.1 in form and substance as
attached hereto as Schedule 1.7(e);
(f) A release from each Seller, in a form and substance attached as
Schedule 1.7(f);
(g) The Noncompetition Agreement;
(h) A favorable opinion from counsel for Sellers, dated the day of the
Closing, in form and substance as attached hereto as Schedule 1.7(h);
(i) The books and records of the Company, including, without limitation,
all original financial and operating records, the corporate minute book and
seal, the corporation stock ledger, and all title documents;
(j) The Owners Policy, as defined hereinafter;
(k) Other documents and instruments required by this Agreement, if any.
ARTICLE II
Title Insurance
Section 2.1 Real Property. All parcels of real property used in the
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Business are owned by the Company and are listed on Schedule 2.1 ("Real
Property"), together with the legal description of each such parcel. For
purposes of this Agreement, "Real Property" shall also include: (i) any and all
of Sellers' right, title and interest in and to all easements, rights-of-way,
privileges and appurtenances thereto, (ii) any and all of Sellers' right, title
and interest in and to the beds of all streets, roads, avenues or highways, open
or proposed, abutting the Real Property, (iii) any and all of Sellers' right,
title and interest, in and to any award in condemnation, or damages of any kind,
to which Sellers may have become entitled or may hereafter be entitled, by
reason of any exercise of the power of eminent domain with respect to the Real
Property or any other right, title or interest to be sold hereunder or any part
thereof, and (iv) any and all of Sellers' right, title and interest in and to
all surveys, architectural and engineering plans, specifications, drawings,
reports, etc., presently existing or hereafter prepared prior to Closing, with
respect to the Real Property.
Section 2.2 Owners Title Policy. At Closing, the Company shall own, with
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respect to the Real Property, (i) one or more extended coverage owners policies
of title insurance from a title company acceptable to Purchaser (the "Title
Company"), dated as of the Closing Date, in an amount equal to the fair market
value of the Real Property; or (ii) a letter from the insurance
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underwriters representing that the insurance for all current title policies will
remain in effect for the benefit of the Company post-closing so long as the
current insurance is at least equal to the fair market value. The title policies
shall to the extent permitted by Florida law include comprehensive, zoning,
access, non-imputation and contiguity endorsements, and shall insure title to
the Real Property to be in fee simple in Company subject only to the Permitted
Exceptions permitted by Section 2.3 hereof (the "Owners Policy"). Company shall
pay the cost of the Owners Policy post-closing.
Section 2.3 Permitted Exceptions. The Owners Policy shall insure
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Company's interest in the Real Property to be free and clear of all encumbrances
and exceptions whatsoever except those listed on Schedule 2.3 attached hereto
("Permitted Exceptions"), Schedule 2.3 sets forth all encumbrances and
exceptions by separate parcel of real estate.
Section 2.4 Survey. The Company shall furnish, at its cost to be paid
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post-closing. Purchaser with a survey relating to the Real Property that is
sufficiently current that the Title Company shall not have included a survey
exception in the Owner's Policy.
ARTICLE III
Representations and Warranties of the Sellers
With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, except as set forth in the Sellers'
Disclosure Binder, as amended, Sellers, each individually, jointly and
severally, represent and warrant to the Purchaser the following, it being agreed
that disclosure of any item on the Sellers' Disclosure Binder shall be deemed to
be with respect to all Sections of this Agreement and schedules annexed hereto.
Section 3.1 Organization and Standing. The Company is duly organized,
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legally existing and in good standing under the laws of the state of its
incorporation, with full power and authority to own its properties and conduct
its business as now being conducted. The Company does not own any stock or
interest in any other corporation, partnership, or other business organization.
Section 3.2 Company Stock. All of the authorized, issued, and
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outstanding shares of capital stock and other securities of the Company are
owned by the Shareholders, including without limitation equity securities, debt
securities and options. The Shareholders are the only owners of the securities
of the Company. The Company Shares each Seller owns are legally and validly
authorized and issued, fully paid and nonassessable and on Closing will be free
and clear of all liens, claims and encumbrances of every kind and nature and
will not be subject to any agreement or instrument relating to the transfer,
disposition or voting of such securities. At Closing, all of the Company Shares
will be conveyed and assigned to Purchaser free and clear of all liens, claims
and encumbrances of every kind. There are no outstanding options or rights of
any kind to acquire additional shares of any class from the Company nor has any
Person claimed any such rights. All of the outstanding shares of the Company's
capital stock have been duly authorized, issued, and are
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fully and validly paid and non-assessable. Schedule 3.2 attached hereto sets
forth any exceptions to the foregoing.
Section 3.3 Contracts, Permits and Material Documents. The items listed
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and included in Schedule 3.3, attached hereto, are all of the following material
documents with respect to the Company ("Material Documents"): (i) leases and
purchase agreements for real property, and leases and purchase agreements for
personal property, (ii) licenses, (iii) franchises, (iv) promissory notes,
guarantees, bonds, letters of credit, mortgages, liens, pledges, and security
agreements under which the Company is bound or under which the Company is a
beneficiary, (v) collective bargaining agreements, (vi) patents, trademarks,
trade names, copyrights, trade secrets, proprietary rights, symbols, service
marks, and logos, (vii) all permits, consents and other approvals from a
Governmental Entity, and/or third parties relating to or used in or required by
a Governmental Entity for the operation of the Company's businesses, and (viii)
other contracts, agreements and instruments not listed on another Schedule
attached to this Agreement (such as the customer contracts listed on Schedule
3.5) which are binding on the Company or any of its property or pursuant to
which the Company derives any material benefit or has imposed upon it any
material detriment. For purposes of this Agreement, a material document is
"material" if it (i) has an initial term of more than one year, (ii) cannot be
terminated by the Company without penalty upon notice of thirty (30) days or
less, or (iii) requires the payment by or to the Company of more than Ten
Thousand Dollars ($10,000) during any twelve (12) month period. The Material
Documents listed and included in Schedule 3.3 are organized under subheadings
for each of the different type of documents provided. Neither the Company nor,
to the Sellers' Knowledge, any person or party to the any of the Material
Documents are bound thereby is in material default under any of the Material
Documents, and no act or event has occurred which with notice or lapse of time,
or both, would constitute a default. The Company is not a party to, and the
Company's property is not bound by any agreement or instrument which is material
to the continued conduct of its business operations as now being conducted with
respect to which a default might adversely affect its properties, business or
operations, or financial condition of the Company, except as listed in Schedule
3.3. To Sellers' knowledge, the Material Documents listed on Schedule 3.3 confer
on the Company all rights necessary to enable the Company to conduct its
operations as now being conducted.
Section 3.4 Personal Property. All items of personal property used in
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the business operations of the Company are listed on the schedules set forth
below, are owned by the Company by good and marketable title free of all liens,
and are now and at closing will be in working condition, normal wear and tear,
obsolescence, depreciation and insurable losses expected, except as noted on the
applicable Schedule. Where the personal property is in different physical
locations, the Schedules have been organized with subheadings which set forth
the physical locations of the listed personal property.
(a) All equipment, computers, printers, vending machines, appliances,
machinery and parts, vehicles, tools, hoses, brushes, heating, ventilation, air
conditioning, plumbing, electrical, drainage, fire alarm, communications,
sprinkler, security, security and exhaust equipment and their component parts;
auto wash equipment, auto wash conveyor, auto drying equipment and similar
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items in Company's possession or control, used in connection with, located in or
on, or otherwise pertaining to the Business (collectively, the "Equipment"), are
listed on Schedule 3.4(a);
(b) All of the inventory of retail items, operating supplies, parts and
accessories owned by the Company and used in connection with the Business, are
listed on Schedule 3.4(b);
(c) All office or other equipment, furnishings, supplies, brochures, sales
and promotional materials, catalogues and advertising literature, business
files, customer lists, customer records and information, and all pictures and
photographs, computer programs and software (with applicable documentation and
source codes), construction and "as-built" drawings, plans and specifications,
finish plans and other personal property of every nature and description in
Company's possession or control, are listed on Schedule 3.4(c);
(d) All intellectual property used in connection with the Business or any
other asset, including, without limitation, trade secrets, trademarks, trade
names, and the exclusive right to use the names under which any of the Business,
locations are currently operated (collectively, the "Intellectual Property"),
are listed on Schedule 3.4(d);
(e) All of the accounts receivable, prepaid deposits, cash (limited to
working capital pursuant to Section 3.9(c)), goodwill (if any) and all other
tangible assets of the Company, are included in the assets listed on Schedule
3.9(c); and
(f) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (e) above.
Sellers represent and warrant that, in the aggregate, the personal property of
the Company is sufficient for the Company to carry on its Business in the
Ordinary Course of Business, and that the personal property is all in operable
condition, except as noted to the contrary in Schedule 3.4(f).
Section 3.5 Customers. Schedule 3.5 attached hereto lists the name and
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address of each customer representing five percent (5%) or more of the Company's
annual revenues ("Material Customer") for the period covered by the Most Recent
Income Statement that the Company serves, together with copies of all customer
contracts, and the information supplied thereon is true, correct, and complete,
in all material aspects. Neither the Company nor, to the Sellers' knowledge,
any person to any of the customer contracts is in material default under any of
the customer contracts, and no act or event has occurred which with notice or
lapse of time, or both, would constitute a default. The Company has received no
notice that any Material Customer intends to not renew any contract or otherwise
cease or curtail doing business with the Company.
Section 3.6 Real Property. All real property the Company has ever owned,
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leased or otherwise occupied, had an interest in or operated is listed on
Schedule 2.1 attached hereto. The Company has or will have at Closing good,
marketable and insurable title to all of the Real Property, except for the
Permitted Exceptions.
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(a) In all material respects, except as set forth in Schedule 3.6(a)
attached hereto and incorporated herein, the Real Property is, and at all times
during operation of the Company's business thereon has been licensed, permitted
and authorized for the operation of such business under all applicable federal,
state and local statutes, laws, rules, regulations, orders, permits (including,
without limitation, zoning restrictions and land use requirements) and licenses
and all administrative and judicial judgments, rulings, decisions and orders
affecting or otherwise applicable to the protection of the environment, the Real
Property and the conduct of such business thereon (collectively, the "Applicable
Laws")
(b) Except as set forth in Schedule 3.6(b) attached hereto and
incorporated herein by reference, the Real Property is legally usable for its
current uses, and the Real Property can be used by the Purchaser after the
Closing to operate such business as is currently operated, without violating any
Applicable Law or private restriction disclosed in the Owner's Policy, and such
uses are legal, conforming uses.
(c) Except as set forth in Schedule 3.6(c), all activities and operations
conducted on the Real Property, whether by Sellers or by third parties, are now
being conducted and have always been conducted by Company in compliance with all
Applicable Laws.
(d) The Sellers and Company shall make available on Purchaser's reasonable
request all engineering, geologic and other similar reports, documentation and
maps, if any, relating to the Real Property in the possession or control of the
Sellers or the Company or its or their consultants or employed professional
firms.
(e) Except as set forth in Schedule 3.6(e), neither Sellers nor the
Company nor the Real Property now is or ever has been involved in any litigation
or administrative proceeding seeking to impose fines, penalties or other
liabilities or seeking injunctive relief for violation of any Applicable Laws
relating to the environment.
(f) No polluting, toxic or hazardous substances were used, generated,
treated, stored, released, discharged or disposed of by the businesses conducted
on the Real Property in excess of levels permitted by applicable Environmental
Laws by Sellers or, to Sellers' knowledge, without any obligation of inquiry, by
others, at any time, other than as disclosed on Schedule 3.6(f). Schedule 3.6(f)
lists all chemicals used in the Business. No notification of release of a
"hazardous substance," "hazardous waste," pollutant or contaminant regulated
under the Clean Air Act, 42 U.S.C (S) 7401 et seq.; the Clean Water Act, 33
U.S.C (S) 1251 et seq.; and the Water Quality Act of 1987; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C (S) 136 et seq.; the Marine
Protection, Research, and Sanctuaries Act, 33 U.S.C (S) 1401 et seq.; the
National Environmental Policy Act, 42 U.S.C (S) 4321 et seq.; the Noise Control
Act, 42 U.S.C (S) 4901 et seq.; the Occupational Safety and Health Act, 29 U.S.C
(S) 651 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C (S) 6901
et seq.; as amended by the Hazardous and Solid Waste Amendments of 1984; the
Safe Drinking Water Act, 42 U.S.C (S) 300f et seq.; the Comprehensive
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Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C
(S)9601 et seq., as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning and Community Right-to-Know Act, the Toxic Substance
Control Act, 15 U.S.C. (S)2601 et seq.; and the Atomic Energy Act, 42 U.S.C.
(S)2011 et seq.; all as may be amended, with implementing regulations and
guidelines, or any state or local environmental law, regulation or ordinance,
has been received by Sellers and, to Sellers' Knowledge, none has been filed as
to the Real Property, and the Real Property is not listed or formally proposed
for listing on the National Priority List promulgated pursuant to CERCLA or on
any state list of hazardous substance sites requiring investigation or clean-up
other than as disclosed on Schedule 3.6(f). No PCB-contamination, friable
asbestos or formaldehyde-based insulation items are present on the Real Property
other than as disclosed on Schedule 3.6(f). With respect to any polluting, toxic
or hazardous substances or hazardous substance, hazardous waste, pollutant or
contaminate which is described in any of the foregoing Environmental Laws, the
meaning thereof shall be defined as of the date of this Agreement.
(g) No party, other than the Company, has a present or future right to
possession of all or any part of the Real Property, except for any right defined
in, under or by any of the Permitted Exceptions.
(h) No portion of the Real Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any Applicable Laws or the procedural manuals of
the Environmental Protection Agency, U.S. Army Corps of Engineers or any Florida
state agency whether such characterization reflects current conditions or
historic conditions which have been altered without the necessary permits or
approvals, except as listed on Schedule 3.6(h) attached hereto and incorporated
herein by reference.
(i) There are no mechanic's liens affecting the Real Property and no work
has been performed on the Real Property within twelve (12) months of the date
hereof for which a mechanic's lien could be filed, except as set forth in
Schedule 3.6(i).
(j) There are no levied or pending special assessments affecting all or
any part of the Real Property owed to any Governmental Entity and none is
threatened, except Permitted Exceptions.
(k) There are no proceedings or amendments pending and brought by or, to
Sellers' knowledge, threatened by, any third party which would result in a
change in the allowable uses of the Real Property or which would modify the
right of the Company or the Purchaser to use the Real Property for its present
uses after the Closing Date, except as set forth in Schedule 3.6(k).
Section 3.7 Title.
-----
(a) The Assets. The Company has good and marketable title to all of its
----------
tangible assets, both real property and personal property, tangible and
intangible, including, without limitation, all of the assets reflected on the
"Most Recent Balance Sheet" (hereinafter defined), all
10
personal property currently located on its premises, all cash, cash equivalents
and accounts receivable set forth in Schedule 3.9(a), all items of personal
property set forth on the schedules attached hereto, and all trademarks and
other intellectual property used in the Company's business, except in each
case, that personal property which the Company leases, all of which is listed on
Schedule 3.7(a) and except for properties that have been disposed of in the
Ordinary Course of Business since the date of this Agreement, free and clear of
all liens of any nature whatsoever, except for (i) any lien for current Taxes,
payment of which is not yet delinquent, and (ii) Permitted Exceptions. All of
such assets are owned by the Company free and clear of any mortgage, pledge,
lien, encumbrance, charge, claim, security agreement, agreement regarding or
restricting transfer or title retention or other security arrangement, except
the items set forth in subparagraphs (i) through (iii) below, and the items
listed on Schedule 3.7(a) ("Permitted Company Assets Encumbrances"). Schedule
3.7(a) identifies all such liens and encumbrances by amount and by the document,
instrument or law under which it arises."
(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(ii) Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation; and
(iii) Liens for Taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment.
(b) The Real Property. At Closing, the Company will have good, marketable
-----------------
and insurable title to the Real Property free and clear of any mortgages,
pledges, liens, encumbrances, charge, claim, security agreement or title
retention or other security arrangement, except for the Permitted Exceptions.
Section 3.8 Financial Statements. Prior to Closing, Sellers will
--------------------
deliver to Purchaser true and correct copies of the following financial
---------
statements of the Company (the "Financial Statements"):
---------
(a) Balance Sheets for the Company as of January 31, 1997, as of January
31, 1998, and as of January 31, 1999, and statements of income, cash flow and
retained earnings for the same periods, all prepared on an accrual basis and
reviewed by Company's regular accountants.
(b) A balance sheet for the Company as of May 31, 1999 ("Most Recent
Balance Sheet"), and a statement of income, cash flow and retained earnings for
the period ended May 31, 1999 ("Most Recent Income Statement"), both prepared on
an accrual basis by the Company. The Most Recent Balance Sheet and Most Recent
Income Statement are hereafter referred to as the "Most Recent Financial
Statements." The Most Recent Financial Statements are subject to normal
year-end adjustments, footnotes and other presentation items.
11
The Financial Statements have been prepared by the Company and reviewed by
the Company's regular accountants, in accordance with generally accepted
accounting principles ("GAAP"). All notes and contingent liabilities required
to be stated and reflected under GAAP are stated and reflected on the Financial
Statements. Each of the Financial Statements (including all footnotes thereto)
is true, complete and correct in all material respects. The balance sheets
present fairly and accurately the financial condition of the Company as of the
dates indicated thereon and the statements of income resent fairly and
accurately on an accrual basis the results of the operations of the Company for
the periods indicated thereon. The Company has not (i) made any material change
in its accounting policies or (ii) effected any prior period adjustment to, or
other restatement of, its financial statements for any period. The Financial
Statements are consistent with the books and records of the Company (which books
and records are correct and complete). Since the date of the Most Recent
Financial Statements there has not been any material adverse change in the
income, expenses, assets, liabilities or financial condition of the Company.
Section 3.9 Liabilities: Accounts Receivable; Working Capital; Revenue.
----------------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) liabilities fully reflected in the Most Recent Balance Sheet,
except for liabilities not required to be disclosed therein in accordance with
GAAP and which were incurred in the Ordinary Course of Business;
(ii) liabilities, obligations or contingencies which have been or
will be discharged or paid in full prior to the Closing Date;
(iii) liabilities, obligations contingencies or accounts payable
arising since the date of the Most Recent Balance Sheet arising in the Ordinary
Course of Business; and
(iv) the Company Debt
(b) All accounts receivable of the Company, less a bad accounts reserve as
set forth on the Most Recent Balance Sheet, are valid accounts receivable, and
will be fully collectable within 120 days of Closing. All accounts receivable
have been generated in the Ordinary Course of Business and all services required
to be rendered for the accounts receivable to be due have been rendered. To
Sellers' Knowledge, there are no defenses or set-offs to any of the accounts
receivable.
(c) At Closing, the Company shall have working capital consisting of
current assets equal to current liabilities (each determined in accordance with
GAAP). It is acknowledged that, for purposes of determining the Company's
working capital at Closing, current assets and current liabilities shall be
calculated in accordance with Schedule 3.9(c).
Section 3.10 Fiscal Condition of Company. Since the date of the Most
---------------------------
Recent Balance
12
Sheet, except as set forth on Schedule 3.10 there has not (except as otherwise
specifically permitted by this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others, other than changes occurring in the Ordinary
Course of Business;
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock;
(c) Any sale or other disposition of any asset owned by the Company at the
close of business on the date of the Most Recent Balance Sheet, or acquired by
it since that date, other than in the Ordinary Course of Business or which
individually do not exceed $10,000 or in the aggregate, do not exceed $25,000;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset having an acquisition price of $25,000 or more;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $50,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee, except that paid or
declared in the Ordinary Course of Business;
(g) Any loans or advances to the Company other than renewals or extensions
of existing indebtedness; or
(h) Any change in accounting method or practice.
Section 3.11 Tax Returns. The Company has filed all Federal and other Tax
-----------
Returns for all periods on or before the due date of such return ( as may have
been extended by any valid extension of time) and has paid all such Taxes. The
Company will have no liability for Taxes incurred by its operations prior to
Closing, except for Taxes for the current fiscal year in an amount not
exceeding the reserve therefor on the Most Recent Balance Sheet or incurred in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet.
The Company is a Subchapter S corporation under the Internal Revenue Service
Code. Subject to the provisions of Article IX, Sellers covenant that they will
pay with their own funds any and all Taxes due and payable by the Sellers with
respect to all periods prior to the Closing relating to Subchapter S Income.
The reserves for all Taxes reflected in the Most Recent Balance Sheet, if any,
are adequate
13
to cover all Taxes, in connection therewith that may be assessed with respect to
the property and business operations for the period(s) ending on the Closing
Date and for all prior periods. The Company has filed, and will file in a timely
manner, all requisite Tax Returns due for all fiscal periods ended on or before
the date hereof and as of the Closing shall have filed in a timely manner all
such returns due for all periods ended on or before the Closing Date. No Tax
Returns or reports filed by the Company (whether filed prior to, on, or after
the date hereof), will result in any Taxes in excess of the amounts reserved for
on the Most Recent Balance Sheet. The Company has duly withheld and collected
all Taxes which the Company is required to withhold or collect by law, has paid
over to the proper authorities all such amounts required to be paid and has in
reserve all amounts so withheld or collected which have not yet been required to
be paid. Except as listed on Schedule 3.11 attached hereto, there are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing authority
with respect to Taxes of Company. The Company has not waived any statute of
limitations in respect to Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency other than waivers and extensions of time
which are no longer in effect.
Section 3.12 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company are issued, and are not
expired and are listed on Schedule 3.12 attached hereto. Schedule 3.12 includes
the names and addresses of the beneficiaries, insurers and sureties, policy and
bond numbers, types of coverage or bond, time periods or projects covered and
the names and addresses of all known agents of agencies, issuing banks, and
beneficiaries, with respect to each listed insurance policy, performance bond
and letter of credit. The Company's current insurance policies, performance
bonds and letters of credits are still in force and effect and the premiums
thereon are not delinquent. The Company has not received notification from any
insurance carrier denying or disputing any claim made by the Company or denying
or disputing any coverage for any such claim or denying or disputing the amount
of any claim. The Company does not have any claim against any of its insurance
carriers under any policies insuring it pending or anticipated and there has
been no occurrence of any kind which would give rise to any such claim.
Section 3.13 Employees, Pensions and ERISA
-----------------------------
(a) The Company does not have any contract of employment with an officer
or other employee that is not terminable without penalty on notice of two weeks
or less, except as listed on Schedule 3.13(a).
(b) No employee of the Company is represented by any union. The name,
social security number and current rate of compensation of each of the Company's
employees and department in which each person is employed is listed on Schedule
3.13(b) attached. There is no pending or, to Sellers' knowledge, threatened
dispute between the Company and any of its employees which might materially and
adversely affect the continuance of any Company's business operations.
(c) Attached hereto made a part hereof and marked Schedule 3.13(c) lists
all employees
14
benefit plans, funds or programs (within the meaning of the Code) or the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) which are
currently maintained and/or were established or sponsored by the Company
(whether or not they are now terminated) or to which the Company currently
contributes, or has an obligation to contribute in the future, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions ("Plans"), whether or not the Plans are or are
intended to be (i) covered or qualified under the Code, ERISA or any other
applicable law, (ii) written or oral, (iii) funded or unfunded, or (iv)
generally available to all employees of the Company.
(d) The Company has delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii)
accurate and complete detailed summaries of all oral Plans, (iii) true and
complete copies of the most recent financial statements with respect to the
plans, (iv) true and complete copies of all annual reports for any Plan prepared
within the past 5 years, and (v) all filings submitted to and any correspondence
received from any government agency relating to any Plan within the past 5
years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which may
adversely affect such qualification or exemption, or result in the imposition of
excise taxes or tax on unrelated business income under the Code or ERISA except
as set forth on Schedule 3.13(e). No Plan is funded through a trust intended to
be exempt from tax under Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other law applicable to such Plans, and, in all material respects, have
been administered, operated and managed in substantial accordance with the
governing documents of the Plan and the requirements of ERISA. The Company has
no unfunded obligations or liabilities with respect to any Plan and the present
value of the benefit liabilities of each Plan which is a Pension Plan is less
than the fair market value of the assets of such Plan.
(g) There is no matter, action, audit, suit or claim pending or, to the
knowledge of Sellers, threatened relating to any Plan, fiduciary of any Plan or
assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the
15
financial condition of the Plan as at the date thereof and the results of
operations of the Plan for the plan year reflected therein and, subject to
changes in amounts attributable to investment performance and normal employee
turnover, there has been no material adverse change in the condition of the Plan
since the date of the most recent Form $500, audited annual financial statement
or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
(j) The Company has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.
Section 3.14 Legality of Operation. In regard to the Company:
---------------------
(a) Except as disclosed in Schedule 3.14(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in compliance
with all Federal, state and local laws, rules and regulations (as of the Closing
Date) including, without limitations, the following laws: land use laws;
payroll, employment, labor, or safety laws; or federal, state or local
"anti-trust" or "unfair competition" or "racketeering" laws such as but not
limited to the Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act ("Law").
Except as disclosed in Schedule 3.14(a), the Company is in compliance with all
permits, franchises, licenses, and orders that have been issued with respect to
the Laws and are or may be applicable to the Company's property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
3.14(a), with respect to any Law, there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting the Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which, would result in an adverse change in
the financial condition or business of the Company or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 3.14(a), the Company has received no notification of any
past or present failure by the Company to comply with any Law applicable to it
or its assets.
(b) Except as disclosed in Schedule 3.14(b) to this Agreement, the Company
is in compliance with all Federal, state and local laws, rules and regulations
in effect as of the Closing Date relating to environmental issues of any kind
and/or the receipt, transport or disposal of any hazardous or non-hazardous
waste materials from any source ("Environmental Law"). Except as disclosed in
Schedule 3.14(b), with respect to any Environmental Law, the Company is in
compliance with all permits, licenses, and orders related thereto or issued
thereunder with respect to Environmental Laws, as are or may be applicable to
the Company's property and operations,
16
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located. Except as set forth on
Schedule 3.14(b) there are no Environmental Law, related claims, actions, suits
or proceedings pending, or, to the knowledge of the Sellers, threatened against
or affecting the Company, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, wherever located, which would result in an adverse
change in the financial condition or business of the Company of $50,000 or more
or which would invalidate this Agreement or any action taken in connection with
this Agreement. Except as set forth on Schedule 3.14(b) the Company has not
transported, stored, treated or disposed, nor has the Company, to the Sellers'
knowledge, allowed any third persons, on its behalf, to transport, store, treat
or dispose waste to or at (i) any location other than a site lawfully permitted
to receive such waste for such purpose or, (ii) any location currently
designated for remedial action pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar federal or
state statue; nor has the Company performed, arranged for or allowed by any
method or procedure such transportation or disposal in contravention of state or
federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and the Company has not
disposed, nor has the Company knowingly allowed third parties to dispose of
waste upon property owned or leased by the Company other than as permitted by,
and in conformity with, applicable Environmental Law. Except as disclosed in
Schedule 3.14(b), the Company has not received notification of any past or
present failure by the Company to comply with any Environmental Law applicable
to it or its operations or its assets. Without limiting the generality of the
foregoing, the Company has not received any notification (including requests for
information directed to the Company or an owner thereof) from any governmental
agency asserting that the business is or may be a "potentially responsible
person" for a remedial action at a waste storage, treatment or disposal
facility, pursuant to the provisions of CERCLA, or any similar federal or state
stature assigning responsibility for the costs of investigating or remediating
releases of contaminants into the environment. The Company has not received
hazardous waste as defined in the Resource Conservation and Recovery Act, 42
USCA Section 6901 et seq., or in any similar federal or state statute.
-- ---
(c) No employee, contractor or agent of the Company has, in the course and
scope of employment with the Company, been harmed by exposure to hazardous
materials, as defined under the Laws. No liens with respect to environmental
liability have been imposed against the Company under CERCLA, any comparable
Florida statute or other applicable Law, and to Sellers' knowledge, no facts or
circumstances exist which would give rise to the same.
(d) Attached hereto as Schedule 3.14(d) is a list of all Notice of
Violations issued to the Company in the past ten years by any federal, state
or local regulatory agency. There are no outstanding or unremedied notices of
violation either from a federal, state or local authority.
(e) No Seller has received any written notice that such Seller is under
investigation by any District Attorney or similar state or local official or
agency or the Justice Department of the United States of America for the
violation of any Laws, including, without limitation, racketeering,
17
unfair competition, or anti-trust. No facts or circumstances exist which would
cause the Company to be liable for the violation of any Laws including, without
limitation racketeering, unfair competition, or anti-trust.
(f) Except as set forth in Schedule 3.14(f), all licenses, approvals,
permits and certificates ("Government Authorizations") needed or required for
the operation of the Company's Business are set forth on Schedule 3.3. All such
Government Authorizations are in full force and effect, the Company is in
compliance with all such Government Authorizations, and all such Government
Authorizations have been validly and legally obtained by the Company.
Section 3.15 Corrupt Practices. To the Sellers' knowledge, the Company
-----------------
has not made, offered or agreed to offer anything of value to any employees of
any customers of the Company for the purpose of attracting business to the
Company or any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
representatives, nor has the Company otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
Section 3.16 Legal Authority and Compliance. Except as listed in Schedule
------------------------------
3.16 attached hereto and incorporated herein, each Seller and the Company have
the right, power, legal capacity and authority to enter into, and perform their
respective obligations under this Agreement, and no approvals or consents of any
other Persons are necessary in connection with the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action of the directors and shareholders
of the Company. The execution, delivery and performance of this Agreement will
not result in a breach of or constitute a default or result in the loss of any
material right or benefit under:
(a) Any charter, by-law, agreement or other document to which any Seller
or the Company is a party or by which the Company or any of its property is
bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Sellers, the Company, or the property of the Company.
Section 3.17 Transaction Intermediaries. Except as listed on Schedule
--------------------------
3.17, no agent or broker or other person acting pursuant to the authority of the
Company or any of the Sellers is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 3.18 Intellectual Property. The Company has not infringed and
---------------------
is not now infringing, on any trade name, trademark, service mark, copyright,
trade secret or patent belonging to any person, firm or corporation
("Intellectual Property") and no one has or is infringing any Intellectual
Property right of the Company.
Section 3.19 Competition. No salaried officer, or shareholder of the
-----------
Company, nor any
18
spouse, child or other relative of any of them, has any direct or indirect
interest in any competitor of the Company within the geographical area in which
the Company currently conducts business, or an interest in any supplier or
customer of the Company or in any person from whom or to whom the Company leases
any real or personal property, or in any other person with whom the Company is
doing business which interest adversely or materially affects the business of
the Company, excepting only those investments of not more than five percent of
the capital stock of a business, the stock of which is traded on a national
securities exchange or over-the-counter, where such investments are set forth on
Schedule 3.19 attached hereto and incorporated herein by reference.
Section 3.20 Disclosure. Neither the representations and warranties of
----------
the Sellers contained in this Agreement nor any information contained in any
Exhibit or Schedule or other document delivered by the Sellers or the Company to
Purchaser contains any untrue statement of a material fact, or, to Sellers'
knowledge, omits to state any statement of a material fact necessary to make the
statements contained therein or herein not misleading. Purchaser shall disclose
to Sellers at or prior to Closing any representation or warranty which Purchaser
shall have found to be untrue or incorrect. If, prior to the Closing, any Seller
becomes aware of any fact or circumstance which would effect the accuracy of a
representation or warranty of the Sellers in this Agreement in any material
respect, the Sellers shall immediately give notice of such fact or circumstance
to Purchaser and such change shall constitute an amendment to this Agreement and
Disclosure Binder.
Section 3.21 Continuation of Legal Status. To Seller's Knowledge, no
----------------------------
written agreement between the Company and any third party shall be impaired or
in any way limited by the transactions contemplated by this Agreement.
Section 3.22 Litigation. All pending or, to Seller's knowledge,
----------
threatened litigation, administrative or judicial proceedings or investigations
by any governmental agency or officials involving the Company or its Real
Property or assets, liabilities or the Company Shares, together with a
description of each such proceedings, is set forth on Schedule 3.22. There is no
pending or, to Sellers' knowledge, threatened litigation, administrative or
judicial proceedings or investigation involving the Company or its Real
Property, assets, liabilities or the Company Shares, except as listed on
Schedule 3.22.
Section 3.23 Pooling Requirements. The Sellers do not own any car wash
--------------------
businesses other than the Company. For the 60-month period ending on the date of
this Agreement, there has been no change of ownership of the Company Shares,
except for gifts of shares by Ken H. Bachman and Claudia Bachman to their
children as listed on Schedule 3.23 attached hereto. There will be no change in
the ownership of the Company Shares from the date of this Agreement to the
Closing Date. During the most recent 24 calendar months prior to the date of
this Agreement, the Company has not paid any dividends or distributions to its
shareholder other than dividends and distributions consistent in amount and kind
to the dividends and distributions paid by the Company in accordance with the
Ordinary Course of Business of Company.
ARTICLE IV
19
Representations and Warranties of Purchaser
With knowledge that Sellers are relying upon the representations,
warranties and covenants herein contained, Purchaser represents and warrants to
Sellers and makes the following covenants for Sellers' benefit which
representations and warranties are true on the date hereof and shall be true on
the Closing Date.
Section 4.1 Organization and Qualification. Purchase is duly organized,
------------------------------
legally existing and in good standing under the laws of the state of its
incorporation, with full power and authority to own, lease and operate its
assets and properties and conduct its business as now being conducted. Purchaser
is qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it make such qualification necessary, except for the
failure to be so qualified and in good standing would not, when taken together
with all other such failures, have a material adverse effect on Purchaser. True,
accurate and complete copies of Purchaser's Articles of Incorporation and By-
Laws are filed as exhibits to Purchaser SEC Reports.
Section 4.2 Subsidiaries. Each direct and indirect corporate subsidiary
------------
of Purchaser is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and had direct corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each subsidiary of Purchaser is
qualified to do business and is in good standing in each jurisdiction in which
its property is owned, leased or operated by it or the nature of the business
conducted by it make such qualification necessary, except for the failure to be
so qualified and in good standing would not, when taken together with all such
other failures, have a material adverse effect on Purchaser.
Section 4.3 Authority; Noncontravention; Approvals.
--------------------------------------
(a) Purchaser has full corporate power and authority to enter into
this Agreement and, to consummate the transactions contemplated hereby. This
Agreement will be approved on or before the Closing Date by the Board of
Directors of Purchaser, and no other corporate proceedings on part of Purchaser
are necessary to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement. The forms of
all documents that are to be executed pursuant to this Agreement will be
approved on or before the Closing Date by the Board of Directors of Purchaser.
This Agreement has been duly executed and delivered by Purchaser.
(b) The execution and delivery of this Agreement and the consummation
thereof by Purchaser does not violate, conflict with, result in a breach of any
provision of, or constitute a default (or an event which with notice of lapse
time or both would constitute a default) under, and will not result in a
termination or, accelerate the performance required by, result in a right of
termination or acceleration under or result in the creation of any lien or
encumbrance upon any of the properties or assets of Purchaser or any of its
subsidiaries under, any of the terms, conditions, or
20
provisions of (i) its respective charters or by-laws of Purchaser or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
degree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Purchaser or any of its subsidiaries or any of the
respective properties or assets (including without limitation Environmental
Laws), or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Purchaser or any of its subsidiaries is a
party or by which Purchaser or any of its subsidiaries or any other respective
properties or assets may be bound or affected. All consents required from
commercial lenders, lessors and third-parties are set forth in Schedule 4.4(b)
of the Purchaser Disclosure Binder. Excluded from the foregoing sentences of
this Paragraph (b), insofar as they apply to the terms, conditions and
provisions described in clauses (ii) and (iii) of the first sentence of this
Paragraph (b), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens or encumbrances that would not have a
material adverse effect on the Purchaser and its subsidiaries.
(c) Except for (i) the filings required by the HSR Act, (ii) the
filing of any document with the SEC pursuant to the Securities Act or the
Exchange Act, and (iii) any required filings with or approvals from applicable
state environmental authorities, or other Governmental Entities, no declaration
filing or registration with or notice to, or authorization, consent or approval
of, any governmental or regulatory body is necessary for the execution and
delivery of this Agreement by Purchaser or the consummation by Purchaser or the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents and approvals which, if not
made or obtained, as the case may be, would not have a material adverse effect
on Purchaser and its subsidiaries.
Section 4.4 Reports and Financial Statements. Since January 1, 1997,
--------------------------------
Purchaser has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, amendments and supplements) required to be
filed by it under each of the Securities Act, the Exchange Act, and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
Attached hereto as Schedule 4.5 is a list of Purchaser's (a) Annual Reports on
Form 10-KSB for the fiscal year ended December 31, 1998 and for each of the two
immediately preceding fiscal years, as amended, as filed with SEC, (b) proxy and
information statements relating to (i) all meetings of its stockholders (whether
annual or special) held, and (ii) all actions by written consent in lieu of a
stockholders' meeting taken, since December 31, 1995 and prior to the date
hereof, and (c) all other reports, including quarterly reports filed by
Purchaser with the SEC since December 31, 1995 and prior to the date of Closing
(other than registration statements) (the documents referred to in clauses (a),
(b) and (c) are collectively referred to as the "Purchaser SEC Reports"). The
Purchaser SEC Reports were true, correct and complete in all material respects
as of the filing of each such Report. As of the respective filing dates, the
Purchaser SEC Reports do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated
21
financial statements and unaudited interim consolidated financial statements of
Purchaser included in such reports (collectively the "Purchaser Financial
Statements") have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Purchaser and its subsidiaries on a
consolidated basis as of the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of the unaudited
interim financial statements, to the normal year-end adjustments and any other
adjustments described therein.
Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in the
----------------------------------
Purchaser SEC Reports, Purchaser has not had at December 31, 1998, or has not
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against on the
Purchaser Financial Statements or reflected in the notes thereto or (ii) which
were incurred after December 31, 1998 (b) liabilities, obligations or
contingencies which (i) would not have a material adverse effect on Purchaser or
(ii) will have been discharged or paid in full prior to the Closing Date, and
(c) liabilities and obligations which are of a nature not required to be
reflected in the consolidated Purchaser Financial Statements prepared in
accordance with GAAP consistently applied and which were incurred in the
Ordinary Course of Business.
Section 4.6 Absence of Certain Changes or Events. Since the date of the
------------------------------------
filing of the most recent Purchaser SEC Report that contains consolidated
financial statements of Purchaser, except as disclosed in the Purchaser SEC
Reports and Schedule 4.6, there has not been any material adverse effect on the
business, operations, properties, assets, liabilities, conditions (financial or
other) or results of operation of Purchaser and its subsidiaries, taken as a
whole.
Section 4.7 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against the Company or against the Sellers for any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 4.8 Disclosure. This Agreement, including Schedules hereto, to the
----------
extent they relate to the Purchaser and its subsidiaries do not contain an
untrue statement of a material fact concerning the Purchaser or its subsidiaries
or, to Purchaser's knowledge, omits to state a material fact concerning the
Purchaser necessary to make the statements herein and therein, in light of the
circumstances under which they were made, not misleading. Seller shall disclose
to Purchaser at or prior to Closing any representation or warranty which Seller
shall have found to be untrue or incorrect. If, prior to the Closing, the
Purchaser and its subsidiaries become aware of any fact or circumstances which
would effect the accuracy of a representation or warranty of the Purchaser in
this Agreement in any material respect, the Purchaser shall immediately give
notice of such fact or circumstance to Sellers and such change shall constitute
an amendment to this Agreement and Disclosure Binder.
ARTICLE V
22
Additional Agreements of Sellers
The Sellers covenant and agree with Purchaser as follows:
Section 5.1 Pooling Restrictions. Purchaser and Sellers have agreed that a
--------------------
material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement be treated as a "pooling of interests" for
accounting purposes. If for any reason a provision in this Agreement would
prevent the transaction being accounted for as a "pooling of interests," the
parties agree to negotiate in good faith to modify the Agreement so the
transaction can be accounted for as a "pooling of interests" provided Sellers
receive the same economic benefit and tax treatment they would have received
under this Agreement as presently constituted. Notwithstanding any other
provision of this Agreement, prior to the publication and dissemination by
Purchaser of consolidated financial-results which include results of combined
operations of the Company and Purchaser for at least 30 days on a consolidated
basis following the Closing Date, Sellers shall not sell or otherwise transfer
or dispose of, or in any way reduce their risk relative to, any shares of the
Consideration Stock or shares underlying the Warrants received by Sellers
(including by way of example and not limitation, engaging in put, call,
short-sale, straddle or similar market transactions). The Securities Exchange
Commission ("SEC") has issued Accounting Series Release Nos. 130 and 135, as
amended (collectively, the "ASRs"), setting forth certain restrictions
applicable to the availability of "pooling-of-interests" accounting treatment in
transactions of the type contemplated by this Agreement. Sellers therefore
covenant and agree with Purchaser to hold the Consideration Stock and shares
underlying the Warrants and to comply with the ASRs until the requirements of
the ASRs have been met. In addition, the certificates evidencing the
Consideration Stock and the shares underlying the Warrants to be received by
Sellers will bear a legend substantially in the form set forth below:
"The shares represented by this certificate may not be sold,
transferred or assigned, and Mace Security International, Inc., shall
be required to give effect to any attempted sale, transfer or
assignment prior to the publication and dissemination of financial
statements by Mace Security International, Inc., which include the
results of at least 30 days of combined operations of Mace Security
International, Inc., and the Company acquired by Mace Security
International, Inc., for which these shares are issued. Upon the
written request of the holder hereof directed to Mace Security
International, Inc., the issuer agrees to remove this restrictive
legend (and any stop order places with the transfer agents) when the
requirements of Accounting Series Releases Nos. 130 and 135, as
amended, of the Securities Exchange Commission have been met."
Section 5.2 Restrictions on Transfer of Unregistered Stock. The Sellers
----------------------------------------------
understand and agree that the following restrictions and limitations are
applicable to the Sellers' purchase and resale or other transfer of the
Consideration Stock and the shares underlying the Warrants, pursuant to the
Securities Act of 1933 (the"Act") or otherwise:
23
(a) Sellers agree that the Consideration Stock, the Warrants and the
shares underlying the Warrants shall not be sold or otherwise transferred,
unless the Consideration Stock, the Warrants and the shares underlying the
Warrants, as applicable, are registered under the Act and state securities laws
or is exempt therefrom.
(b) A legend in substantially the following form will be placed on the
certificates evidencing the Consideration Stock, the Warrants and the shares
underlying the Warrants to be issued to the Sellers:
"The securities represented by the certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred,
pledged or hypothecated unless (i) they shall have been registered under
the Securities Act of 1933 and any applicable states securities act or
(ii) Mace Security International, Inc. shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Mace Security
International, Inc., that registration is not required under any such
acts."
(c) Stop transfer instructions will be imposed with respect to the
Consideration Stock and the Warrants issued to Sellers and the shares underlying
the Warrants to be issued to Sellers, if exercised, pursuant to this Agreement
so as to render resale or other transfer thereof exempt in accordance with the
foregoing provisions of this Agreement.
(d) Notwithstanding any other provision in this Agreement to the
contrary, Purchaser, or its sole cost and expense, as an inducement to Sellers
to enter into this Agreement, shall, within ninety (90) days after the Closing
Date, use its best efforts to file with the SEC a registration statement
covering the Consideration Stock in accordance with the Registration Rights
Agreement.
Section 5.3 Representations as to Private Offering. The Consideration
---------------------------------------
Stock and the Warrants is being, and the shares underlying the Warrants will be,
when exercised, delivered to the Sellers in a private placement under Section
4.2 of the Act. To induce Purchaser to issue the Consideration Stock, the
Sellers represent and warrant as follows:
(a) Ken H. Bachman, Claudia Bachman, Daniel Warmbier and Diane Warmbier
are each a resident of Florida and Carolyn Schmidt is a resident of Colorado and
that Ken H. Bachman and Claudia Bachman are accredited investors, as that term
is defined in Regulation D under the Act.
(b) Each Seller acknowledges that they have received a copy of the
Purchaser SEC Reports.
(c) The Sellers represent and warrant that the Consideration is being,
and the shares to be acquired under the Warrants will be, acquired for their own
account without a view to public
24
distribution or resale and that the Sellers have no contract, undertaking,
agreement or arrangement to sell or otherwise transfer or dispose of
Consideration Stock, or any portion thereof, to any other person.
(d) The Sellers represent and warrant that, in determining to acquire the
Consideration Stock and the Warrants, they have relied solely upon their
independent investigation, including the advice of their legal counsel and
accountants or other financial advisors or purchaser representatives, and have,
during the course of discussions concerning their acquisition of the
Consideration Stock and the Warrants, been offered the opportunity to ask such
questions and inspect such documents concerning Purchaser and its business and
affairs as they have requested so as to more fully understand the nature of the
investment and to verify the accuracy of the information supplied.
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE CONSIDERATION
STOCK, THE WARRANTS AND THE SHARES TO BE ACQUIRED UPON EXERCISE OF THE WARRANTS
INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can bear
the economic risk of the acquisition of the Consideration Stock and the shares
underlying the Warrants, if exercised, including the total loss of their
investment.
(f) The Sellers represent and warrant that (i) they have adequate means
of providing for their current needs and financial contingencies, (ii) they have
no need for liquidity in this investment, (iii) they have no debts or other
obligations, and cannot reasonably foresee any other circumstances, that are
likely in the future to require them to dispose of the Consideration Stock, and
(iv) all their investments in and commitments to non-liquid investments are, and
after their acquisition of the Consideration Stock, will be reasonable in
relation to their net worth and current needs.
(g) The Sellers understand that no federal or state agency has approved
or disapproved the Consideration Stock or made any finding or determination as
to the fairness of the Consideration Stock for investment.
(h) The Sellers understand that the Consideration Stock, the Warrants and
the shares underlying the Warrants, if exercised, are being offered and sold in
reliance on specific exemptions from the registration requirements of federal
and state securities laws and that Purchaser is relying upon the truth and
accuracy of the representations, warranties, agreements, acknowledgments and
understandings set forth herein in order to determine the applicability of such
exemption and the suitability of Sellers to acquire the Consideration Stock.
Section 5.4 Access to Records and the Real Property. The Sellers will
----------------------------------------
cause the Company to give to Purchaser and its representatives, experts and
advisors, from and after the date of execution of this Agreement and up until
Closing, full access to all of the properties (including the Real Property),
assets, books, contracts, documents, records, contracts and customer lists of
the
25
Company, and to make available to Purchaser and its representatives, experts and
advisors all additional financial statements of and all information with respect
to the business and affairs of the Company that Purchaser may reasonably
request. Purchaser and its representatives shall have the right to have Sellers'
copy any information or documentation the Purchaser is entitled to inspect under
this Section 5.4. Purchaser and its authorized representatives shall hold, and
shall use their best efforts to cause their representatives to hold, in strict
confidence, all non-public documents and information furnished to Purchaser in
connection with transactions contemplated by this Agreement and more
specifically shall keep and hold all such information confidential in accordance
with the Confidentiality Agreement. In the event that this Agreement is
terminated in accordance with its terms, Purchaser shall promptly redeliver to
Sellers all material provided pursuant to this Agreement and shall not retain
any copies, extracts or other reproductions in whole or in part of such written
material or any reports or calculations that it makes itself. In such event, all
documents, memoranda, notes and other writings prepared by Purchaser based on
the information and such material shall be destroyed (and Purchaser shall use
commercially reasonable efforts to cause all Purchaser representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction. The provisions of this Paragraph shall be
interpreted to compliment and not be in lieu of the provisions of the
Confidentiality Agreement.
Section 5.5 Continuation of Business. The Sellers will operate the
-------------------------
Company until the time of Closing, using prudent business judgment to conduct
its Business in the Ordinary Course of Business, including, without limitation,
cash management, so as to preserve its business organization intact, to assure,
to the extent possible, the availability to Purchaser of the present key
employees of the Company, and to reasonably preserve for Purchaser the
relationships of the Company with suppliers, customers, and others, all to the
end to use commercially reasonable efforts to preserve the ongoing business of
the Company so that it will not be impaired at the time of Closing.
Section 5.6 Continuation of Insurance. The Sellers will use commercially
--------------------------
reasonable efforts to cause the Company to keep in existence all policies of
insurance insuring the Company against liability and property damage, fire and
other casualty through the time of Closing.
Section 5.7 Standstill Agreement. Unless and until this Agreement is
---------------------
terminated without the Closing having taken place, the Shareholders will not
directly or indirectly solicit offers for the Real Property, the Company Shares
or the assets of the Company or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company's assets; nor
will the Shareholders permit the Company to do any of the foregoing.
Section 5.8 FIRPTA Certificate. Purchaser and Sellers acknowledge that
-------------------
the financial provisions of this Agreement are subject to the requirements of
the Foreign Investment in Real
26
Property Tax Act ("FIRPTA"), and that the Internal Revenue Code ("Code")
Sections 1445 and 6039C require Purchaser in certain circumstances to withhold
ten percent (10%) of the amount realized by the Sellers. Among other
circumstances, Purchaser is not required to withhold said amount if Sellers
furnish Purchaser with a certificate stating the Sellers' U.S. Taxpayer
Identification Numbers and that no Seller is a foreign person within the meaning
of the Code. Sellers agree to provide to Purchaser at Closing such certificate
as is reasonably necessary to insure that such withholding is not required under
FIRPTA.
Section 5.9 Consents. Sellers and Purchaser shall cooperate with each
---------
other and use their commercially reasonable efforts to obtain all approvals,
authorizations and consents required to be obtained to consummate the
transaction set forth in this Agreement, including, without limitation, (i) the
approval of the Federal Trade Commission pursuant to the provisions of the
HSRAct, and (ii) the approval of every regulatory agency of federal, state, or
local government that may be required in the opinion of either Purchaser or
Sellers.
Section 5.10 Audited Financial Statements. Before and after Closing,
-----------------------------
Sellers agree to cooperate with Purchaser in the preparation of audited balance
sheets for the Company as of December 31, 1996, December 31, 1997, and December
31, 1998, and statements of income, cash flow and retained earnings for the
Company for the twelve-month periods ended December 31, 1996, December 31, 1997,
and December 31, 1998 ("Historical Financial Statements"), as rapidly as
possible. Sellers' cooperation shall include, without limitation, the execution
of standard representation letters requested by Purchaser's auditors, reasonably
acceptable to Sellers. Sellers shall prepare a compiled stub balance sheet and
statements of income, cash flow and retained earnings for the period commencing
February 1, 1999, and ending on the last day of the last calendar quarter ending
prior to Closing ("Interim Financial Statements"). The Historical Financial
Statements and the Interim Financial Statements shall be prepared at Company's
expense post-closing. Sellers shall cause the Company's usual accountants to
cooperate with Purchaser's accountants.
Section 5.11 Company Hypothecation. The Company's Real Property at
----------------------
Route 41 and Stickney Point Road (the "South Sarasota Property") is encumbered
by mortgages in favor of Via and Wyhopen given as a pledge to secure
indebtedness of Bullseye Properties, Inc. (the "Bullseye Debt"). Sellers shall
cause the Bullseye Debt to be paid in accordance with its terms as rapidly as
possible without incurring prepayment penalties or fees. In the event a third
party commercial lender for Purchaser wishes to extend credit to Purchaser and
its subsidiaries and desires to place a first lien against the Company's South
Sarasota Property, and, if such lender requires that the Via and Wyhopen
mortgages be removed in order for such lender to obtain a first and best lien,
Sellers shall have the option of either, promptly on demand, causing such
mortgages to be satisfied or removed to other collateral owned or controlled by
Sellers (or any one or more of them), or providing such lender an irrevocable
letter of credit is the full amount of the remaining obligations outstanding
from time to time (including prepayment penalties and all interest due or to
become due) under the Bullseye Debt until such time as said mortgages have been
paid in full so long as the letter of credit option is acceptable to lender.
Such irrevocable letter of credit shall upon such terms
27
and conditions as are commercially reasonable and satisfactory to Purchaser,
Purchaser's lender and Sellers. If the letter of credit option is not acceptable
to Purchaser's lender, Sellers shall pay the Bullseye Debt in full.
ARTICLE VI
Additional Agreements of Purchaser
Section 6.1 Payment of Expenses. Purchaser will pay all expenses
--------------------
(including legal fees) incurred by it in connection with the negotiation,
execution and performance of this Agreement. The Sellers will pay all expenses
incurred by the Sellers (including legal fees) in connection with the
negotiation, execution and performance of this Agreement. Additionally, the cost
of obtaining any required approvals, including the filing fee under the HSR Act,
shall be paid by Purchaser.
Section 6.2 Books and Records. From the Closing Date to seven (7) years
------------------
after the Closing Date, the Purchaser shall allow the Sellers and their
professional advisors access to all business records and files of the Company
pertaining to the operation of the Company prior to the Closing Date which were
delivered to the Purchaser in accordance with this Agreement ("Records") where
the Shareholders or Sellers require access to the Records for the purpose of
preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchaser's business. For a period of seven (7) years after the Closing Date,
the Purchaser shall not dispose of or destroy any material Records without first
providing written notice to the Sellers at least sixty (60) days prior to the
proposed date of such disposition or destruction wherein Sellers, without cost,
shall have the right to acquire the same.
Section 6.3 Employment. Within five (5) working days after Purchaser
-----------
executes this Agreement, Purchaser will propose terms of employment for Daniel
Warmbier ("Dan") and Diane Warmbier ("Diane"), which terms must be acceptable to
Dan and Diane. If acceptable, such proposal will be reduced to writing and
attached hereto as Schedule 6.3 as soon as practicable after their acceptance,
and shall become effective on or promptly after the Closing Date. At Closing,
Purchaser shall extend an offer of employment to Gary Guenther on terms to be
mutually agreed upon by the parties which shall include at a minimum options to
purchase 10,000 shares of Purchaser common stock at the Per Share Value as
incentive stock options which shall vest over two years.
Section 6.4 Severance. Sellers represent and warrant that the employment
----------
agreements between the Company and each Seller listed on Schedule 3.13(a) were
entered into on January 1, 1996 ("Severance Agreements"), and provide for
payments to Sellers of an aggregate of $1,185,000 in the event of, among other
reasons, a change of control of the Company. Purchaser
28
acknowledges the existence of the Severance Agreements and that Closing of the
transactions contemplated by this Agreements will constitute a change of control
of the Company for purposes of the Severance Agreements. Purchaser agrees to
cause and provide to Company the funds, whether by debt or equity, to pay any
payments that are due under the Severance Agreements promptly upon Closing of
this Agreement.
Section 6.5 Company's Tax Returns. Sellers will file a Tax Return for the
----------------------
Company's Short Year. Purchaser may file an amended Tax Return for the Company
only if Purchaser reasonably determines under the recommendation of its regular
accountants that the preparation of the Tax Return was improper. In the event
that Sellers' usual accountants disagree that the preparation of the Tax Return
was improper, the master of such amended Tax Return shall be resolved through
the mediation/arbitration procedure of Section 10.17. On or before the Closing
Date, the Company shall distribute to the Sellers an amount of cash equal to the
earnings of the Company for 1999 up to the Closing date.
Section 6.6 Warrants. The parties acknowledge that the Company originally
---------
issued warrants, on December 31, 1996, to the Shareholders (collectively and as
subsequently assigned, hereinafter referred to as the "Company Warrants"), which
are exercisable for shares in the Company. Purchaser acknowledges and agrees
that it will exchange the Company Warrants for warrants to purchase 100,000
shares of Purchaser common stock (the "Warrants") at the same exercise price as
set forth in the Warrants. Purchaser will exchange the Company Warrants for
Warrants at the Closing in accordance with the ownership of the Company Warrants
as of the Closing Dates, which ownership is set forth on Schedule 6.6.
Section 6.7 Access to Records and the Real Property. The Purchaser will
----------------------------------------
give to Seller and its representatives, experts and advisors, from and after the
date of execution of this Agreement and up until Closing, full access to all of
the properties (including the Real Property), assets, books, contracts,
documents, records, contracts and customer lists of the Purchaser and its
subsidiaries, and to make available to Sellers and their representatives,
experts and advisors all additional financial statements of and all information
with respect to the business and affairs of the Purchaser, its subsidiaries and
Purchaser Acquisitions that Sellers may reasonably request. Sellers and their
representatives shall have the right to have Purchaser copy any information or
documentation the Sellers are entitled to inspect under this Section 6.7.
Sellers and their authorized representatives shall hold, and shall use their
best efforts to cause their representatives to hold, in strict confidence, all
non-public documents and information furnished to Sellers in connection with
transactions contemplated by this Agreement. In the event that this Agreement is
terminated in accordance with its terms, Sellers shall promptly redeliver to
Purchaser all material provided pursuant to this Section 6.7 and shall not
retain any copies, extracts or other reproductions in whole or in part of such
written material or any reports or calculations that it makes itself. In such
event, all documents, memoranda, notes and other writings prepared by Sellers
based on the information and such material shall be destroyed (and Sellers shall
use commercially reasonable efforts to cause all Sellers representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer
29
supervising such destruction.
Section 6.8 Continuation of Business. The Purchaser will operate
-------------------------
Purchaser and its subsidiaries until the time of Closing, using prudent business
judgment to conduct its business in the Ordinary Course of Business, including,
without limitation, cash management, so as to reasonably preserve its business
organization intact, to assure, to the extent possible, the business to which
Sellers have elected to make their investment.
ARTICLE VII
Conditions of Purchaser
The obligation of Purchaser to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or-prior to the time of
Closing of each of the following items which are conditions to the Closing:
Section 7.1 Compliance by Sellers. The Sellers and the Company shall
----------------------
have performed and complied with all of the obligations and conditions required
by this Agreement to be performed or complied with by the Sellers and Company at
or prior to the Closing Date. All representations and warranties of Sellers
contained in this Agreement shall be true and correct at and as of the Closing
Date, with the same force and effect as though made at and as of the Closing
Date, except for changes made to Sellers' Disclosure Binder no later than the
second day immediately preceding the Closing Date and otherwise expressly
permitted by this Agreement, unless Purchaser, in good faith, with regard to the
current status of Sellers' Disclosure Binder, determines it is inadvisable to
proceed with the transaction contemplated by this Agreement; and, Purchaser
shall have received a Certificate duly executed by each of the Sellers
representing and warranting the foregoing.
Section 7.2 Due Diligence Investigation. As a condition of Closing, the
----------------------------
Purchaser shall be satisfied with the results of the due diligence investigation
it has made concerning the Company and the transactions, as set forth in this
Agreement.
Section 7.3 Litigation Affecting This Transaction. There shall be no
--------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the assets of the Business, the Real Property, or the Business or which,
as a result of the transaction contemplated by this Agreement, might affect such
right as to Purchaser or any Affiliate thereof subsequent to the Closing Date
and which, in the judgment of the Board of Directors of Purchaser, made in good
faith and based upon advice of its counsel, makes it inadvisable to proceed with
the transaction contemplated by this Agreement.
Section 7.4 Fiscal Condition of Business. There shall have been no
-----------------------------
material adverse change in the results of operations, financial condition or
business of the Company, and the Company shall have not suffered any material
loss or damage to any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.
30
Section 7.5 Consents. All approvals, authorizations and consents
---------
required to be obtained shall have been obtained, including, without limitation,
(i) the consent of the Federal Trade Commission under the HSR Act, if necessary;
and (ii) the approval of every regulatory agency of federal, state, or local
government that may be required in the reasonable opinion of either Purchaser or
Sellers. Purchaser shall have been furnished with appropriate evidence,
reasonably satisfactory to Purchaser and its counsel, of the granting of such
approvals, authorizations and consents.
Section 7.6 Opinion of Counsel. Sellers shall have delivered to the
-------------------
Purchaser the opinion of counsel, dated the Closing Date, in the form and
substance of Schedule 1.7(b).
Section 7.7 Noncompetition Agreement. The Sellers shall have executed and
-------------------------
delivered to Purchaser the Noncompetition Agreement.
Section 7.8 Pooling Determination. Purchaser shall have received
----------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
ARTICLE VII
Conditions of Sellers
The obligations of the Sellers to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions which are conditions to the Closing:
Section 8.1 Compliance by Purchaser. The Purchaser shall have performed
------------------------
and complied with all of the obligations and conditions required by this
Agreement to be performed or complied with by it or prior to or at the Closing
Date. All representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Date of Closing, with the
same force and effect as though made at and as of the Date of Closing, except
for changes made to Purchaser's Disclosure Binder no later than the second day
immediately preceding the Closing Date and otherwise expressly permitted by this
Agreement, unless Sellers in good faith, with respect to the current status of
Purchaser's Disclosure Binder, determines it is inadvisable to proceed with the
transaction contemplated by this Agreement; and, Sellers shall have received a
certificate duly executed by the Chief Executive Officer of Purchaser
representing and warranting the foregoing.
Section 8.2 Litigation Affecting This Transaction. There shall be no
--------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser and its subsidiaries to own, operate in its
entirety or control any of its assets of the Business, the Real Property, or the
Business, or which, as a result of the transaction contemplated by this
Agreement, might affect such
31
right as to Purchaser and its subsidiaries or any Affiliate thereof subsequent
to the Closing Date and which, in the judgment of the Sellers, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 8.3 Registration Rights Agreement. The Purchaser shall have
------------------------------
executed and delivered to Sellers the Registration Rights Agreement.
Section 8.4 Fiscal Condition of Business. There shall have been no
-----------------------------
material adverse change in the results of operations, financial condition or
business of the Purchaser, and the Purchaser shall have not suffered any
material loss or damage to any of its properties or assets, whether or not
covered by insurance, since the date of the most recent Financial Statement.
Section 8.5 Consents. All approvals, authorizations and consents required
---------
to be obtained, that may be required under the reasonable opinion of Sellers,
shall have been obtained. Sellers shall have been furnished with appropriate
evidence, reasonably satisfactory to Sellers and its counsel, of the granting of
such approvals, authorizations and consents.
Section 8.6 Opinion of Counsel. Purchaser shall deliver to the Sellers
-------------------
the opinion of counsel, dated the Closing Date in the form and substance of
Schedule 1.6(e).
Section 8.7 Tax Opinion. Sellers shall have obtained a tax opinion
------------
acceptable to them to the effect that the transaction contemplated hereby will
qualify as a tax-free transaction wherein the Sellers will not recognize gain to
the extent of Sellers' exchange of Company Shares for Consideration Stock
pursuant to this Agreement, and purchaser shall have committed to the provider
of such opinion that it will pay $5,000.00 toward the cost of such opinion.
Section 8.8 Company Release of Sellers. The Company shall have delivered
---------------------------
to the Sellers an instrument dated the Closing Date, in form reasonably
satisfactory to the Sellers, which shall be effective only upon the occurrence
of the Closing Date releasing the Sellers from any and all claims of the Company
against the Sellers and obligations of the Sellers to the Company, except
obligations of the Sellers identified in this Agreement.
Section 8.9 Due Diligence Investigating. As a condition of Closing, the
----------------------------
Sellers shall be satisfied with the results of the due diligence investigation
they have made concerning the Purchaser and the transactions as set forth in
this Agreement.
ARTICLE IX
Indemnification
Section 9.1 Indemnification by Sellers. Each Seller, jointly and
---------------------------
severally, agrees that it will indemnify, defend, protect and hold harmless
Purchaser and its officers, shareholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parent, agents, employees, legal representatives,
successors and assigns from and against all claims, damages, actions, suits,
32
proceedings, demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) whether equitable or legal,
matured or contingent, known or unknown to such Seller, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, from: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition (to the extent such
condition could have been satisfied with commercially reasonable effort) on the
part of a Seller made in this Agreement and to be performed by a Seller before
or after the Closing Date; (c) violation of the requirements of any governmental
authority relating to the reporting and payment (to the extent payment exceeds
the amount reserved for in the Most Recent Balance Sheet) of Taxes of the
Company arising or accrued prior to the Closing Date; and (d) any claim by a
third party that, if true, would mean that a condition for indemnification set
forth in subsections (a), (b), or (c) of this Section 9.1 of this Agreement has
occurred.
Section 9.2 Indemnification by Purchaser. Purchaser agrees that it will
-----------------------------
indemnify, defend, protect and hold harmless Sellers and their agents,
employees, heirs, legal representatives, personal representatives, successors
and assigns, as applicable, form and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation and third-party claims against a
Shareholder in his or her capacity as an officer or director of the Company
which may be indemnifiable under Florida law) whether equitable or legal,
matured or contingent, known or unknown to Purchaser, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement from: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Purchaser set forth in this Agreement or in the Schedules attached
to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition (to the extent such
condition could have been satisfied with commercially reasonable effort) on the
part of Purchaser made in this Agreement and to be performed by Purchaser before
or after the Closing Date; (c) any claim by a third party that, if true, would
mean that a condition for indemnification set forth in subsections (a), (b), or
(c) of this Section 9.2 has occurred.
Section 9.3 Procedure for Indemnification with Respect to Third
---------------------------------------------------
Party Claims.
-------------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim"), that
may give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the
33
amount of the claim and the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within ten days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party pursuant to the provisions of Article IX, as
applicable, from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys' fees
and related expenses) the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Idemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only monetary
damages and does not seek an injunction or equitable relief, (iv) settlement of,
or adverse judgment with respect to the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim is accordance with Section 9.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in (but not control) the defense of the Third Party Claim, (ii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which will not be unreasonably
withheld), and (iii) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which will not be
unreasonably withheld). In the case of (c)(ii) or (c)(iii) above, any such
consent to judgment or settlement shall include, as an unconditional term
thereof, the release of the Indemnifying Party from all liability in connection
therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extend provided in
this Article IX.
Section 9.4 Procedure for Non-Third Party Claims. If Purchaser or
------------------------------------
any Seller wishes to make a claim for indemnity under Section 9.1 or Section
9.2, as applicable, and the claim does not
34
arise out of a third party notification which makes the provisions of Section
9.3 applicable, the party desiring indemnification ("Indemnified Party") shall
deliver to the party from which indemnification is sought ("Indemnifying Party")
a written demand for indemnification ("Indemnification Demand"). The
Indemnification Demand shall state: (a) the amount of losses, damages or
expenses to which the Indemnified Party has insurred or has suffered or is
expected to incur or suffer to which the Indemnified Party is entitled to
indemnification pursuant to Section 9.1 or Section 9.2, as applicable; (b) the
nature of the event or occurrence which entitles the Indemnified Party to
receive payment under Section 9.1 or Section 9.2, as applicable. If the
Indemnifying Party wishes to object to an Indemnification Demand, the
Indemnifying Party must send written notice to the Indemnified Party stating the
objections and the grounds for the objections ("Indemnification Objection"). If
no Indemnification Objection is sent within thirty (30) days after the
Indemnification Demand is sent, the Indemnifying Party shall be deemed to have
acknowledged the correctness of the claim or claims specified in the
Indemnification Demand and shall pay the full amount claimed in the
Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within forty-five
(45) days of the Indemnification Demand's date, the Indemnified Party may
institute legal proceedings to enforce payment of the indemnification claim
contained in the Indemnification Demand and any other claim for indemnification
that the Indemnified Party may have.
Section 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to Taxes, including, without
limitation, the representations, warranties, and covenants set forth in Section
3.11 shall survive until the third anniversary of the Closing Date on any claim
which can be brought against the Company by tax authorities or governmental
entities and (ii) all representations and warranties, other than set forth in
(i) above shall survive until one (1) year from the Closing Date.
Notwithstanding the prior sentence which provides that the representations,
warranties, and covenants expire after certain stated periods of time, if within
the stated period of time, a notice of a claim for indemnification or
Indemnification Demand is given in writing, or a suit or action based upon
representation or warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action by reason of the expiration of the representation or warranty. The
covenant set forth in Section 9.1 shall survive until the mortgage on the South
Sarasota Property is released.
Section 9.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX the Indeminfying Party shall, nevertheless, any when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be sabrogated to the rights of the Indemnified
35
Party against any person with respect to the subject matter of such claim.
Section 9.7 Limitation of Indemnification Obligation.
----------------------------------------
(a) Purchaser shall not assert any claim for indemnification
under this Article IX against the Sellers, other than a claim for Taxes, until
such time as the aggregate of all claims which Purchaser may have against the
Sellers shall exceed $100,000 ("Indemnification Threshold"), and then the
Purchaser shall be entitled to recover only the amount of such claims in excess
of $50,000. Sellers shall not assert any claim for indemnification hereunder
against Purchaser until such time as, and solely to the extent, the aggregate of
all claims which Sellers may have against Purchaser shall exceed the
Indemnification Threshold, and then the Sellers shall be entitled to recover
only the amount of such claims in excess of $50,000.
(b) In applying the foregoing and otherwise determining the
amount subject to any claim for indemnification, the amount of any related
insurance proceeds and tax benefits received by an Indemnified Party on a
consolidated basis shall be deducted from the amount of the required
indemnification payments.
(c) No Indemnified Party shall be entitled to indemnification
under this Article IX if and to the extent that such Indemnified Party's claim
for indemnification is directly related to a breach by such Indemnified Party of
any representation, warranty, covenant or other agreement set forth is this
Agreement.
(d) Notwithstanding any other provision of this Agreement,
Sellers shall not be liable under this Article IX for an amount which exceeds
the net after tax amount of the value of the Consideration Stock received by the
Sellers (valued at the Per Share Value).
(e) In determining the amount of any loss, liability or expense
for which any Indemnified Party is entitled for indemnification under this
Agreement, the gross amount thereof will be reduced by any correlative insurance
proceeds or other third party indemnity or reimbursement proceeds realized or to
be realized by Indemnified Party and such correlative insurance proceeds or
other third party or reimbursement proceeds shall be net of any insurance
premium or other instrumental cost or expense owed or payable to any third party
which becomes due as a result of such claim. Purchaser shall use commercially
reasonable efforts to pursue any available insurance coverage or other right of
indemnity or reimbursement from third parties with respect to any loss,
liability or expense before pursing any claim for indemnification against the
Representing Sellers.
(f) Any amount due an Indemnified Party pursuant to this
Article IX shall be paid with interest at a floating interest rate equal at all
times to the rate of interest publicly announced from time to time by SouthTrust
Bank of Sarasota, Florida, as its corporate base rate
36
from the date upon which such loss, damage, expense or liability was incurred to
the date of payment.
ARTICLE X
Other Provisions
Section 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of Purchaser such as lists of customers, operational
policies, pad pricing and cost policies that are valuable, special and unique
assets of Purchaser. Sellers agree that for a period of two (2) years from the
Closing Date they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatever, except to authorized representatives of Purchaser, unless (i) such
information becomes known to the public generally through no fault of any
Seller, (ii) a Seller is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) the Closing does
not take place. In the event of a breach or threatened breach by any Seller of
the provisions of this Section, Purchaser shall be entitled to an injunction
restraining such Seller from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Purchaser from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
Section 10.2 Nondisclosure by Purchaser. Except as otherwise provided in
--------------------------
the Confidentiality Agreement, Purchaser recognizes and acknowledges that it has
in the past, currently has, and prior to the Closing Date, will have access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company. In the event the Closing does not occur,
Purchaser agrees that for a period of two (2) years from the termination of this
Agreement (except as otherwise provided in the Confidentially Agreement) it will
not utilize such information in the business or operation of Purchaser or any of
its affiliates or disclose such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
unless (i) such information becomes known to the public generally through no
fault of Purchaser or any of its affiliates, (ii) Purchaser is compelled to
disclose such information by a governmental entity or pursuant to a court
proceeding. In the event of a breach or threatened breach by Purchaser of the
provisions of this Section, Sellers shall be entitled to an injunction
restraining Purchaser from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and the
-------------------------------------
rights of the Parties hereunder may not be assigned (except by operation of law)
and shall be binding upon and shall inure to the benefits of the Parties hereto,
and their respective successors, personal representatives and assigns. This
Agreement, upon execution and delivery, constitutes a valid, binding, and
enforceable agreement of the parties hereto and may be modified or amended only
by
37
a written instrument executed by all Parties hereto.
Section 10.4 Entire Agreement. This Agreement, is final, complete and
----------------
exclusive statement and expression of the agreement among the Parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
Parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
warranties contemplated hereby, except as provided herein.
Section 10.5 Counterparts. This Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
Section 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the Party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such Party.
(a) If to Purchaser, addressed to it at:
Mace Security International, Inc.
1000 Crawford Place, Suite 400
Mount Laurel, New Jersey 08054
with a copy to:
Robert M. Kramer & Associates, P.C.
1150 First Avenue, Suite 900
King of Prussia, Pennsylvania 19406
(b) If to Sellers, addressed to them at:
1254 Point Crisp Road
Sarasota, florida 34242
38
with a copy to:
John Patterson, Esq.
Livingston, Patterson, Strickland & Weiner, P.A.
46 North Washington Boulevard, Suite 1
Sarasota, Florida 34236
Bruce P. Chapnick, Esq.
Icard, Merrill, Cullis, Timm, Furea & Ginsberg, P.A.
2033 Main Street
Suite 600
Sarasota, Florida 34237
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier (overnight delivery requested) and three
business days after the deposit in the U.S. mail of a writing addressed as above
and sent first class mail, certified, return receipt requested, or when actually
received, if earlier. Any Party may change the address for notice by notifying
the other parties of such change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Florida, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida. Any action or
proceeding seeking to enforce any arbitration award, or based on any right
arising out of, this Agreement shall be brought against any of the Parties in
the courts of Miami, State of Florida, or, in a United States District Court for
the Southern District of Florida, and each of the Parties consent to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue late therein.
Service of process of any action or proceeding referred thereto in the preceding
sentence may be served on any Party anywhere in the world.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any Party as a result of any breach or
default by any other Party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 10.9. Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
Section 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision
39
hereof.
Section 10.11 Severability. In case any provision of this Agreement
------------
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but as most nearly
to retain the intent of the parties. If such modification is not possible, such
provision shall be severed from this Agreement. In either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 10.12 Construction. The Parties have participated jointly in
------------
the negotiation and drafting of this Agreement. In the event an ambiguity or
queries of intent of interpretation arises, this Agreement shall be construed as
if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included without limitation.
Section 10.13 Extension or Waiver of Performance. Either the Seller
----------------------------------
or Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
Section 10.14 Liabilities of Third Parties. Nothing in this
----------------------------
Agreement, whether expressed or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
Parties to it and their respective successors, legal representative and assigns,
nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any Party to this Agreement, nor
shall any provisions give any third person any rights of subrogation or action
over or against any Party to this Agreement.
Section 10.15 Agreement Not Binding Until Fully Executed. This
------------------------------------------
Agreement shall not be binding on any Party hereto until the Agreement has been
fully executed.
Section 10.16 Publicity. Prior to Closing, except as may be required
---------
by law, no Party to this Agreement shall issue any press release or otherwise
make any statement with respect to the transactions contemplated by this
Agreement without the prior consent of the other Party, which shall not be
unreasonably withheld.
Section 10.17 Mediation and Arbitration
-------------------------
(a) If a dispute arises out of or relates to this Agreement, or the
breach thereof, and said dispute cannot be settled through direct discussions,
the Parties will first endeavor to settle the dispute in an amicable manner
within sixty (60) days from a written notice of mediation by
40
mediation in Miami, Florida administered by the American Arbitration
Association under its then prevailing Commercial Mediation Rules, before
resorting to arbitration. Therefore, each and every unresolved controversy or
claim arising out or relating to this Agreement shall be settled by arbitration
in Miami, Florida.
(b) Each and every controversy or claim arising out of or relating
to this Agreement shall be settled by arbitration in Miami, Florida, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies as provided in Section 10.7. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement,
which such demand shall set forth in the same degree of particularity as
required for complaints under the Federal Rules of Civil Procedure the claims to
be submitted to arbitration. Additionally, the demand for arbitration shall be
stated with reasonable particularity with respect to such demand with documents
attached as appropriate. In no event shall the demand for arbitration be made
after the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred by the applicable
statutes of limitations. Within fifteen (15) days of delivery of the notice of
demand for arbitration, each Party shall select one arbitrator who is an
attorney with at least fifteen (15) years experience primarily engaged in
corporate and commercial business transactions and the two selected arbitrators
shall select a third arbitrator who is an attorney with at least experience
primarily engaged in corporate and commercial business transactions. Sellers and
Purchaser will pay the cost of their individual arbitrator and Sellers and
Purchaser shall pay one-half of the cost for the third arbitrator. Each party
shall be responsible for its respective attorneys' fees and all other costs of
arbitration.
(c) The arbitrators shall have the authority to enter any preliminary
awards that would aid and assist the conduct of the arbitration or preserve the
parties' rights with respect to the arbitration as the arbitrators shall deem
appropriate in their discretion. The award of the arbitrators shall be in
writing and it shall specify in detail the issues submitted to arbitration and
the award of the arbitrators with respect to each of the issues submitted.
(d) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, such party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The arbitrators
shall have the authority to modify, amend or change the discovery plans of the
parties upon application by either party, if good cause appears for doing so.
(e) The award pursuant to such arbitration will be final, binding and
conclusive to the fullest extent possible under applicable state law.
41
(f) Counsel to Sellers and Purchaser in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective Party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). Sellers
and Purchaser, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such Proceedings for any reason, including
but not limited to the fact that such counsel or any member thereof may be a
witness in any such Proceedings or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to the
Party represented by such counsel in any such Proceedings.
Section 10.18 Notification of Certain Matters; Amendment of Schedules.
-------------------------------------------------------
Each of the Parties shall give prompt notice to the other upon obtaining
knowledge of (i) the occurrence or non-occurrence of any event, the occurrence
or non-occurrence of which would be likely to cause a representation or warranty
of such party contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing, or (ii) any material failure of any Party to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder.
With respect to the representations and warranties of each Party
contained in this Agreement, each Party shall have the continuing obligation
until the second day immediately prior to the Closing Date to notify the other
Party with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in the applicable Party's Disclosure Binder or which have
been omitted from the Schedules in the applicable Party's Disclosure Binder
previously provided by such Party; such notice shall be deemed effective upon
[ILLEGIBLE] of such notice and this Agreement and all Schedules shall be deemed
[ILLEGIBLE] in order to reflect such amendment to any schedule in a Party's
Disclosure Binder. For all purposes of this Agreement, the Schedules hereto, as
amended or supplemented as provided herein, shall be deemed to be the Schedules
in this Agreement and the Disclosure Binder of the applicable Party.
Section 10.19 Post-Closing Payments by the Company. Where this
------------------------------------
Agreement provides for the payment of an item by the Company post-closing, the
expense of the item shall not be accounted for as being accrued on or prior to
the Closing Date.
Section 10.20 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[Remainder of page intentionally blank.]
42
IN WITNESS WHEREOF, the parties have excecuted this Agreement on the
date first above written.
SHAREHOLDERS
WITNESS: Ken H. Bachman
/s/ John Patterson /s/ Ken H. Bachman
- --------------------------- --------------------------------
WITNESS: Claudia Bachman
/s/ John Patterson /s/ Claudia Bachman
- --------------------------- --------------------------------
WITNESS: Carolyn Schmidt
/s/ John Patterson /s/ Carolyn Schmidt
- --------------------------- --------------------------------
WITNESS: Daniel Warmbier
/s/ John Patterson /s/ Daniel Warmbier
- --------------------------- --------------------------------
WITNESS: Diane Warmbier
/s/ John Patterson /s/ Diane Warmbier
- --------------------------- --------------------------------
PURCHASER MACE SECURITY INTERNATIONAL, INC.
By: /s/ Louis D. Paolino, Jr.
---------------------------------------
Louis D. Paolino, Jr., Executive Vice
President
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SCHEDULE A
DEFINED TERMS
Unless the contact otherwise requires, terms used in the Agreement or
any Schedule annexed hereto and not otherwise defined shall have the following
meanings for all purposes of this Agreement and all Schedules:
"Affiliate" of any person shall mean (except as otherwise specifically
defined), as to any person, any other person, which, directly or indirectly,
controls, is controlled by, or is under common control with, such person, where
"control" means the position, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a person, whether through
the ownership of securities or partnership or other ownership interest, by
contract or otherwise.
"Agreement" shall have this meaning set forth in the first paragraph.
"Assumed Liabilities" means all liabilities and obligations of the
Company, whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, except those liabilities
specifically assumed by the specific responsibility of the Sellers.
"Cash" means cash and cash equivalents including marketable securities
and short terms investments calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Company's Financial Statements.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" means the Internal Revenue Code of 1936, as amended.
"Company" has the meaning set forth in the Recitals of this Agreement.
"Company Shares" has the meaning set forth in the Recitals of this
Agreement.
"Confidential Information" means any information concerning the
business and affairs of the Company as defined in that certain confidentiality
letter agreement dated June 15, 1999 ("Confidential Agreement") signed by Greg
Krzemian, Chief Financial Officer of Purchaser.
"Disclosure Binder" shall mean the disclosure schedule, as amended,
delivered by each Party to the other setting forth (organized by the number and
letter of the corresponding section and paragraph in the Agreement provided,
that matters disclosed in any section of the Disclosure Binder
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shall be deemed to be disclosed for all purposes of such disclosure schedule and
the Agreement) the Parties' exceptions to the representations and warranties of
such Party contained in the Agreement and to the covenents of such Party set
forth in the Agreement; and, provided, further, that inclusion of an item in a
Disclosure Binder shall not be construed to mean that the item is required to be
disclosed or is material.
"Financial Statements" has the meaning set forth in Section 3.8 below.
"GAAP" means generally accepted accounting principals as consistently
applied in the United States.
"Govermental Entity" shall mean any court, tribunal or administrative,
governmental or regulatory body, agency, commission, division, department,
public body or other authority, whether federal, state, local or foreign.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" shall have the meaning set forth in Article IX.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" shall mean the actual knowledge of any such party.
"Ordinary Course of Business" means the ordinary course of business
consistent with past customary practice (including with respect to quantity and
frequency).
"Party" shall mean Sellers and the Purchaser individually and jointly as
the context so requires.
"Person" shall mean an individual, corporation, partnership,
association, limited liabilty, trust or any other entity or organization,
including, without limitation, a Governmental Entity.
"Purchaser" has the meaning set forth in the first paragraph and
includes all Persons in which it owns or controls more than fifty percent (50%)
of the equity or voting control of such Person.
"Schedule" shall mean each schedule, as amended, annexed hereto, or in a
Disclosure Binder, which shall reference the relevant sections of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
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"Taxes" shall mean any and all taxes, duties, levies, imposts or other
governmental charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any any taxing authority, including without limitation, taxes or other charges
on or with respect to income, net assets, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth, and
taxes or other charges in the nature of excise, withholding, ad valorem or value
added.
"Tax Returns" shall mean any return, report or similar statement
required to be filed with respect to any Taxes, including, without limitation,
any information returned, claim for refund, amended return or declaration of
estimated taxes.
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