Exhibit 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT entered into as of October 13, 2003, by
and between TOTAL IDENTITY CORP., a Florida corporation (the "Buyer") and ROBERT
DAVID, an individual resident of the State of New York (the "Seller").
W I T N E S S E T H:
WHEREAS, the Buyer and Total Identity Systems, Inc., a New York
corporation ("Total New York") have entered into an agreement of even date
herewith pursuant to which the Buyer proposes to acquire 60% of the issued and
outstanding shares of Total New York (the "Corporate Stock Purchase Agreement");
and
WHEREAS, the Seller owns 40% of the issued and outstanding shares of
capital stock of Total New York (the "Minority Interest"); and
WHEREAS, the Minority Interest is evidenced by 80 shares of the common
stock of Total New York (the "Shares") registered in the name of the Seller; and
WHEREAS, the Buyer desire to purchase the Shares from the Seller, and
the Seller desires to sell the Shares to the Buyer, upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties, the parties hereto,
intending to be legally bound, agree as follows:
1. PURCHASE AND SALE OF SHARES. The Seller hereby sells, assigns,
transfers and conveys the Shares to the Buyer, and the Buyer hereby purchases
the Shares from the Seller, free and clear of all liens, charges, encumbrances
and security interests ("Liens"), upon the terms and conditions set forth
herein.
2. PURCHASE PRICE. The purchase price for the Shares (the "Purchase
Price") shall be the sum of eight hundred thousand dollars ($800,000.00). The
Purchase Price shall be paid by the Buyer's delivery of its promissory note to
the Seller in the principal amount of $800,000 (the "Note"). The Note, which
shall be in the form of Exhibit A hereto, shall be paid in ten equal quarterly
installments of principal, with interest on the outstanding amount of the Note
at the rate of 8% per annum. The initial installment of the Purchase Price shall
be due and payable six months following the date of the closing of the Corporate
Stock Purchase Agreement (the "Corporate Closing"). There shall be offset
against the Note, (a) an amount equal to the excess, if any, over $75,000 that
Total New York becomes obligated to pay, whether by judgment or settlement, in
that certain lawsuit pending against Total New York, under the caption "CJP
Enterprises vs. Total Identity Systems Corp." and (b) an amount equal to the
excess, if any, over $10,000 that Total New York becomes obligated to pay,
whether by judgment or settlement, in that certain lawsuit pending against Total
New York under the caption "Grand Image Inc.".
3. SECURITY. In order to secure payment of the Note, the Shares, as
well as the shares of common stock of Total New York being acquired by the Buyer
pursuant to the Corporate Stock Purchase Agreement (the "Corporate Shares") and,
together with the Shares, the "Pledged Shares") shall be pledged to the Buyer
pursuant to the terms of a pledge agreement substantially in the form of Exhibit
A hereto (the "Pledge Agreement"). At such time as the purchase price for the
Corporate Shares under the Corporate Stock Purchase Agreement has been paid in
full, 49% of the Pledged Shares (currently 98 shares) shall be delivered to the
Buyer and shall be released from the provisions of the Pledge Agreement. The
remainder of the Pledged Shares shall continue to be pledged as security under
the Pledge Agreement until the Note has been paid in full; provided, however,
that (a) in the event that the Buyer defaults in the payment of the purchase
price for the Corporate Shares, at the Seller's election, either (a) the Seller
may retain all of the Pledged Shares then subject to the Pledge Agreement upon
payment to Buyer of all amounts theretofore paid against the purchase price for
the Corporate Shares or (b) the Seller shall release to the Buyer a percentage
of the Pledged Shares equal to the percentage of the purchase price for the
Corporate Shares theretofore paid by the Buyer. In the event the Buyer defaults
in the payment of the Note due to circumstances beyond its control (which
circumstances shall be limited to wars, strikes, acts of god, terrorism and
other customary force majeure events), at the Seller's election, either (y) the
Seller may retain all of the Pledged Shares upon payment to the Buyer of all
amounts theretofore paid under the Note or (z) the Seller shall release to the
Buyer a percentage of the Pledged Shares equal to the percentage of the Note
theretofore paid by the Buyer. Unless and until the Buyer shall default under
the Note, the Buyer shall be entitled to exercise all voting rights over the
Pledged Shares.
4. CLOSING. A closing of the transactions contemplated by this
Agreement (the "Closing") shall take place immediately following the Corporate
Closing. At the Closing (a) the Seller shall deliver one or more certificates
evidencing the Shares, accompanied by Stock Powers duly endorsed for transfer in
blank and (b) the Buyer shall deliver the Note to the Seller. In addition, at
the Closing each party shall deliver all such other documents, instruments and
writings reasonably necessary in order to consummate the transactions
contemplated by this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER TO THE BUYER. The
Seller, in order to induce the Buyer to enter into this Agreement and deliver
the Purchase Price to the Seller, hereby represent and warrant to the Buyer as
follows:
(a) ENFORCEABILITY. This Agreement and the Pledge Agreement
contain the binding obligations of the Seller, enforceable against the Seller in
accordance with the terms and conditions hereof and thereof.
(b) AUTHORITY. The Seller has the power and authority to enter
into this Agreement and the Pledge Agreement and perform his obligations
hereunder and thereunder.
(c) NO CONFLICTS. The entering into of this Agreement and the
Pledge Agreement by the Seller, and the performance by the Seller of his
obligations hereunder and thereunder, will not conflict with or constitute a
breach of or default under any agreement to which the Seller is a party or any
order or decree of any court or regulatory body to which the Seller is subject.
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(d) NO CONSENTS. No consent of any third party, including
without limitation, any spousal consent, is necessary or required in order for
the Seller to enter into this Agreement or the Pledge Agreement and perform his
obligations hereunder and thereunder.
(e) NO LIENS. The Shares being conveyed by the Seller are and
at all times will be owned by the Seller, free and clear of all Liens, and at
the Closing, the Seller will deliver good and marketable title to the Shares to
the Buyer.
(f) CORPORATE STOCK PURCHASE AGREEMENT. The representations
and warranties of the Seller and Total New York set forth in Section 2.1 of the
Corporate Stock Purchase Agreement are true and correct in all material
respects.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER TO THE SELLER. The
Buyer, in order to induce the Seller to enter into this Agreement and deliver
the Shares to the Buyer, hereby represents and warrants to the Seller as
follows:
(a) ENFORCEABILITY. This Agreement, the Note and the Pledge
Agreement contain the binding obligations of the Buyer, enforceable against it
in accordance with the terms and conditions hereof and thereof.
(b) ORGANIZATION; AUTHORITY. The Buyer has been duly organized
and is validly existing and in good standing under the laws of the State of
Florida and has the power and authority to enter into this Agreement, the Note
and the Pledge Agreement and perform its obligations hereunder and thereunder.
(c) NO CONSENTS. No consent of any third party is necessary or
required in order for the Buyer to enter into this Agreement, the Note and the
Pledge Agreement and to perform its obligations hereunder and thereunder.
(d) NO CONFLICTS. The entering into this Agreement, the Note
and the Pledge Agreement by the Buyer, and the performance by the Buyer of its
obligations hereunder and thereunder, will not conflict with or constitute a
breach of or default under any agreement to which the Buyer is a party or any
order or decree of any court or regulatory body to which the Buyer is subject.
(e) SOPHISTICATED PURCHASER. The Buyer has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the purchase of the Shares.
(f) INVESTMENT REPRESENTATION. The Buyer is purchasing the
Common Shares for its own account and not with a view to distribution in
violation of any securities laws. The Buyer has been advised and understands
that the Shares have not been registered under the 1933 Act or under the "blue
sky" laws of any jurisdiction and may be resold only if registered pursuant to
the provisions of the 1933 Act or if an exemption from registration is
available.
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7. CONDITIONS TO CLOSING. The obligations of the Seller to sell the
Shares and the Buyer to purchase the Shares shall be subject to the occurrence
of the Corporate Closing and the following additional conditions precedent.
(a) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLER TO
SELL. The obligation of the Seller to sell the Shares to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Seller's sole benefit
and may be waived by the Seller at any time in his sole discretion.
(i) Accuracy of the Buyer's Representations and
Warranties. The representations and warranties of the Buyer
shall be true and correct in all material respects as of the
date when made and as of the date of Closing, as though made
at that time.
(ii) Performance by the Buyer. The Buyer shall have
performed all agreements and satisfied all conditions required
to be performed or satisfied by the Buyer at or prior to the
Closing.
(iii) No Injunction. No legal proceedings questioning
the validity of this Agreement shall have been commenced and
no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(b) CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BUYER TO
BUY. The obligation of the Buyer to purchase the Shares from the Seller at the
Closing is subject to the satisfaction, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Buyer's sole benefit
and may be waived by the Buyer at any time in his sole discretion.
(i) Accuracy of the Seller's Representations and
Warranties. The representations and warranties of the Seller
shall be true and correct in all material respects as of the
date when made and as of the date of Closing, as though made
at that time.
(ii) Performance by the Seller. The Seller shall have
performed all agreements and satisfied all conditions required
to be performed or satisfied by the Seller at or prior to the
Closing.
(iii) No Injunction. No legal proceedings questioning
the validity of this Agreement shall have been commenced and
no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
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jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
8. PRE-CLOSING COVENANTS. Commencing on the date hereof and continuing
until the Closing or the earlier termination of this Agreement, the Buyer shall
not:
(a) take any action, consent to the taking of any action or
permit any action within his control to be taken that could cause any of the
representations and warranties contained in Section 5 hereof to become
inaccurate in any material respect; and
(b) discuss or negotiate with any third party for the sale of
the Shares or any interest therein, or enter into any agreement to do so.
9. TERMINATION.
(a) TERMINATION BY MUTUAL CONSENT. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Seller and the Buyer.
(b) TERMINATION BY THE SELLER. This Agreement may be
terminated by the Seller in the event of the breach of any material
representation, warranty or covenant of the Buyer contained in this Agreement;
provided, however, that such termination shall not prejudice the rights of the
Seller to seek redress for any such breach on the part of the Buyer.
(c) TERMINATION BY THE BUYER. This Agreement may be terminated
by the Buyer in the event of the breach of any material representation, warranty
or covenant of the Seller contained in this Agreement; provided, however, that
such termination shall not prejudice the rights of the Buyer to seek redress for
any such breach on the part of the Seller.
(d) TERMINATION OF CORPORATE STOCK PURCHASE AGREEMENT. This
Agreement shall terminate in the event of termination of the Corporate Stock
Purchase Agreement prior to the closing thereof; provided, however, that such
termination shall not prejudice the rights of either the Buyer or the Seller to
seek redress for any breach of this Agreement on the part of the other.
10. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE SELLER. The Seller hereby indemnify
and hold the Buyer harmless from and against any and all damages, losses,
liabilities, obligations, costs or expenses, including reasonable attorneys
fees, incurred by the Buyer and arising out of (i) the breach of any
representation or warranty of the Seller hereunder, (ii) or the Seller's failure
to perform any covenant or obligation required to be performed by it hereunder.
(b) INDEMNIFICATION BY THE BUYER. The Buyer hereby indemnifies
and holds the Seller harmless from and against any and all damages, losses,
liabilities, obligations, costs or expenses incurred by the Seller and arising
out of (i) the breach of any representation or warranty of the Buyer hereunder,
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or (ii) the Buyer's failure to perform any covenant or obligation required to be
performed by it hereunder.
(c) PROCEDURE FOR INDEMNIFICATION. Any party entitled to
indemnification under this Section 10 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Section 10 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party, which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Section 10 to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the Indemnified Party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
(d) LIMITATIONS. The obligations of the parties to provide
indemnification under this Agreement shall be subject to the following
limitations:
(i) No claim for indemnification shall be asserted by
a party until such time, if any, as the aggregate amount for
which indemnification is being sought exceeds $10,000; and
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(ii) No claim for indemnification may be sought by a
party after 18 months from the Closing Date.
11. MISCELLANEOUS.
(a) FEES AND EXPENSES. Each of the parties to this Agreement
shall pay its own fees and expenses related to the transactions contemplated by
this Agreement.
(b) ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire understanding of the parties with respect to the subject matter hereof.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by each of the parties.
(c) NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (i) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of delivery to a reputable express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be as
follows:
If to the Seller: Robert David
2340 Brighton-Henrietta Town Line Road
Rochester, New York 14623
Telephone: (585) 427-9050
Facsimile: (585) 427-0199
With a copy to:
Trevett, Lenweaver & Salzer, P.C.
2 State Street, Suite 1000
Rochester, New York 14614
Telephone: (585) 454-2181
Facsimile: (585) 454-4026
Attention: Kenneth Bersani, Esq.
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If to the Buyer: Total Identity Corp.
11924 Forest Hill Blvd.
Suite 22-204
Wellington, FL 33414
Telephone: (561) 202-8184
Facsimile: (561) 202-8186
Attention: Richard R. Dwyer
President
With a copy to: Schneider Weinberger LLP
2499 Glades Road
Suite 108
Boca Raton, Florida 33431
Att: Steven I. Weinberger, Esq.
Fax: (561) 362-9612
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto in accordance
herewith.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their legal representatives,
successors and assigns.
(e) GOVERNING LAW; ARBITRATION. This Agreement shall be
governed by and interpreted in accordance with the laws of the state of Florida
without regard to the principles of conflict of laws. Each of the parties
irrevocably and unconditionally agrees that any suit, action or legal proceeding
arising out of or relating to this Agreement shall be settled by binding
arbitration conducted in accordance with the Commercial Rules of Arbitration of
the American Arbitration Association ("AAA"). The arbitration shall take place
in Palm Beach County, Florida, and shall be heard by three arbitrators selected
in accordance with AAA Rules of Commercial Arbitration. The Arbitrators shall
render a reasoned award and such award shall be signed and dated. The decision
of the arbitrators shall be final and binding upon the parties, and the
arbitration award may be entered in any court of competent jurisdiction.
Initially, each of the parties shall pay one-half of the fees of the AAA (other
than filing fees), including without limitation hearing and arbitrators' fees,
and the parties' obligation to pay such fees shall be enforceable in any court
of competent jurisdiction. The parties to any arbitration hereunder agree to
submit for determination by the arbitrators, the amount of fees and expenses,
including reasonable attorney's fees, to be borne by each party.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument.
(g) FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of a party, each other party shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm, carry out and effectuate fully the intent and
purposes of this Agreement.
(h) SURVIVAL. The representations, warranties and agreements
of the Buyer and the Seller contained in the Agreement shall survive the Closing
for a period of 18 months.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth in the first paragraph above.
SELLER:
/S/ ROBERT DAVID
----------------
Robert David
BUYER:
TOTAL IDENTITY CORP., a Florida corporation
By: /S/ RICHARD R. DWYER
---------------------
Richard R. Dwyer
President
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