Agreement for Purchase of Sale of Assets - Stratesec Inc. and Certified Security Integrators Inc.
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AGREEMENT FOR PURCHASE OF SALE OF ASSETS
OF
STRATESEC, INCORPORATED
BY
CERTIFIED SECURITY INTEGRATORS, INC.
January 9, 2003
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<PAGE>
This Agreement for Purchase and Sale of Assets (this "Agreement")
is entered into as of January 9, 2003 between STRATESEC INCORPORATED, a Delaware
corporation (the "Seller"), and CERTIFIED SECURITY INTEGRATORS, INC., a
California corporation (the "Buyer").
This Agreement sets forth all of the terms and conditions upon
which Buyer hereby purchases and Seller hereby sells certain assets and related
equipment of Seller.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. All words and phrases that are initially capitalized shall have
the meanings given them in Section 1 of this Agreement or at such other place in
this Agreement as such terms are defined.
1.1 "Accounts" means those installed or pending integrated system contracts for
the provision of intrusion detection, fire alarm, access control, closed circuit
television, repair or maintenance, and/or related services owned or serviced by
Seller, and any and all related agreements for communications services
(collectively, "Account Agreements") between Seller and Customers which are
assigned to Buyer and are accepted by Buyer within the sixty day (60) Acceptance
Period, hereinafter provided . The Accounts are more specifically defined on
Schedule 1.1 (a).
1.2 "Assets means the Accounts and any and all materials and equipment related
thereto being sold to Buyer pursuant to this Agreement and any other related
assets to be delivered at Closing; all of Seller's right title and interest in
and to all rights to bill for, and collect revenue arising from services
rendered by Seller prior to Closing for which Seller has not invoiced Customers;
all of Seller's right title and interest in and to the Sacramento, CA and the
Pleasanton, CA real property leases; certain specified tangible personal
property; existing telephone numbers, facsimile numbers, intellectual property
addresses and e-mail addresses; and goodwill. The Assets are more specifically
defined on Schedules 1.2 is more fully described on Schedules 1.2 (a) through
(g).
1.3 "Closing" means the consummation of purchase and sale of the Assets which is
contemplated to be on January 9, 2003, or as soon as possible prior to this date
with Buyer and Seller working cooperatively to close as soon as possible (the
"Closing Date") unless otherwise extended by the mutual consent of the parties.
The Assets shall be transferred to Buyer upon execution of closing documents
accept for those Accounts which are subject to the Acceptance Period, which will
be transferred upon acceptance. The effective time of the transfer of the Assets
shall be as of 11:59:58 p.m. on the Closing Date.
1.4 "Equipment" means any and all installations, equipment and materials of
Seller located at Customers' places of business relating to the Accounts that is
not owned by the Customer.
1.5 "Customer" means any person, corporation, partnership, limited liability
company, business trust or other entity that has an Account with Seller.
.
2. AssetsConsideration.
2.1 Assets Acquired Seller hereby agrees to sell and deliver to Buyer at the
Closing, and Buyer hereby agrees to purchase from Seller, the Assets. Seller
shall have provided Buyer with all Customer records and other information
(including all invoices, blueprints, summaries of work in progress, codes,
master codes, lock-out codes, up-load codes, down-load codes, communicator
identification numbers, operating software) necessary to permit Buyer to fully
perform Seller's contractual obligations relating to the Accounts. On the
Closing Date, eller shall: (i) Seller shall assist assignment of the Accounts to
Buyer, in delivering all necessary third party consents to those assignments
containing language releasing Buyer from any liability for preexisting material
breaches of the contracts consitituting the accounts, (ii) deliver all
contracts, documents and records related to the Assets, (iii) seller shall
assist assignment of any and all service agreements and ensure that Buyers have
all rights necessary to receive the benefits of those agreements, (iv) assign
all of Seller's right title and interest in and to the Sacramento, CA and the
Pleasanton, CA real property leases except if property is unassignable due to
delinquent lease payments and (iv) do all other things necessary to effectively
transfer the Assets into the possession and control of BuyerSeller shall assist
buyer in their endeavor to obtain assignments. In addition if buyer is unable to
obtain an assignment other methods may be utilized to obtain a contract in good
standing. In the event no assignment, assignment with addendum, or contract can
be procured, then that particular asset will remain the real property of
Stratesec, Inc.- (v) any Assets or Accounts to be expressly excluded from the
Assets acquired by Seller hereunder; shall remain the sole and exclusive
property of Seller; and Seller shall remain solely and exclusively responsible
for all liabilities and obligations with respect to said Assets or Accounts
2.2 Liabilities and Obligations Assumed.
(a) By Buyer. Subject to the terms and conditions set forth in this Agreement,
Buyer agrees that, commencing and effective from and after the Closing
Date, Buyer will assume and agree to pay, perform and discharge only the
following obligations of Seller (the "Assumed Liabilities") and no others:
(i) Seller's obligation to provide services arising after the Closing
pursuant to the Account Agreements (excluding any warranty obligation of
Seller as defined in 4.1 (o)), and to complete the work in progress
pursuant to the Account Agreements, which are specifically identified on
Schedule 1.1(a) hereto; and (ii) Seller obligations pursuant to the
Sacramento, CA and Pleasanton, CA real property leases, and no others. (ii)
Buyer agrees to use reasonable efforts to assist seller to collect seller's
open and unpaid receivables. Reasonable efforts include but are not limited
to performing maintenance and/or warranty work in accordance with Seller's
contract with customer. In addition, Buyers personnel with specific
knowledge of the jobs will provide assistance in responding to
questions/issues from customers.
(b) Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities relating to the Account
Agreements which are specifically identified on Schedule 1.1(a) hereto,
Buyer shall not assume, or otherwise be responsible for, and liabilities of
Seller, whether liquidated or unliquidated, or know or unknown, whether
arising out of occurrences prior to at or after the date hereof (the
"Excluded Liabilities"), which Excluded Liabilities shall include: i) any
of Seller's contracts, leases, agreements, or claims, liabilities, debts or
other obligations known or unknown to Seller at the time of Closing,
including but not limited to, any warranty obligation of Seller, as defined
in 4.1 (o), with respect to the Assets and the Account Agreements arising
prior to the Closing Date, whether or not disclosed to Buyer, except for
those Account Agreements identified on Schedule 1.1(a) hereto; (ii) any
past, present and future employment of any and all persons who were, are or
may be employed by Seller at any time and arising out of Seller's
employment of such person including, without limitation, any liabilities,
claims and obligations for employee benefits (including any ERISA right or
benefit, or any benefit or obligation under a Collective Bargaining
Agreement) unfair labor and discriminatory employment practices, employee
salaries, vacation pay, severance pay, sick pay, back pay, health
insurance, workers' compensation, employee contracts and other employee
payments and benefits, (iii) any known, or unknown, defective condition in
the design, material, workmanship or performance of any equipment and
services sold or furnished by or on behalf of Seller or by subcontractors
of Seller, (iii) any federal, state or local taxes, payroll taxes, payroll
withholding obligations, governmental charges, penalties, interest and
fines of Seller (whether due and payable before, on or after the Closing),
(iv) any acts or omissions of Seller relating to the conduct of its
business or otherwise, (v) any defaults by Seller under or breaches of any
agreement, including any Account Agreements; (vi) any past and present
litigation, suits, causes of action, arbitration, claim, demand or other
proceedings related to or arising out of the conduct of Seller's business;
and (vii) any liability or obligation of Seller to any lender of Seller,
including E.S. Bankest, pursuant to any Factoring Agreement or other
financing terms. In addition, if past due lease monies on the Sacramento
and Pleasanton properties prior to the close of the purchase agreement,
then those properties will be excluded from assumed liabilities.
(c) ERISA and Collective Bargaining Obligations. Buyer shall not assume, and
shall be specifically relieved of any liability of Seller resulting from or
otherwise relating to any Employee Plan or Benefit Arrangements, as that
term is more specifically defined on Schedule 2.2 (c)(i), or pursuant to
any Collective Bargaining Agreement or other Labor Union contract, as that
term is more specifically defined pursuant to Schedule 2.2 (c)(ii).
(d) By Seller. Seller shall make good faith efforts to assist Buyer in taking
immediate control of the Assets. Seller shall provide Buyer with all
contracts, work papers installation and service records and other documents
relating to the Assets and Customers.
2.3 Seller's Required Deliveries at Closing. At the Closing, Seller will deliver
or cause to be delivered to Buyer, all documents and instruments necessary to
transfer to Buyer all of right title and interest of Seller in and to the Assets
and to consummate the contemplated transaction. Such documents and instruments
shall include:
(a) A Bill of Sale in the form attached hereto as Schedule 2.3 (a);
(b) A Non-Competition Agreement, in the form attached hereto as Schedule
(c) A certificate executed by Seller to the effect that each of the
representations and warranties of Seller in this Agreement is accurate
as of the date of this Agreement, and is accurate as of the Closing,
Date, as if made on the Closing Date.
(d) A schedule of Accounts, all open work orders on the Accounts, together
with a detailed break-down of all costs and fees charged or invoiced to
each of the Accounts as of the Closing Date (whether charged to the
Customer or to Seller' lender), as set forth on Schedule 2.3(d);
(e) An IRS Form W-9 duly execute by Seller;
(f) A sales tax clearance certificate or similar documents that may be
required by any state tax authority in order to relieve Buyer of any
obligation to withhold any portion of the consideration hereunder on
account of any outstanding sales, use or other tax liability of Seller,
with the understanding that Buyer will provide Seller with process or
procedure on how to accomplish this obligation;
(g) An assignment of all Account Agreements and real property leases,
including , in the form attached hereto as Schedule 2.3(g) (Assignment)
and Schedule 4.1(d) (Consent to Assignment)(2.1)
(h) A duly executed release of all claims of E.S. Bankest as to any right or
interest in or to any of the Assets, including but not limited to any
security interest in any of the Assets or the right to any income, revenue,
or accounts receivable pursuant to the Assets or any of the Account
Agreements, as set forth in that certain Collection Factoring Agreement
dated October 28, 2000, See Schedule 2.3H Letter, with schedule of jobs
purchased from Stratesec, from E. S. Bankest LLC
2.4 Bulk Sales. Buyer hereby waives compliance by Seller with respect to any
applicable Bulk Sales or similar laws of any jurisdiction in connection with the
sale of the Assets to Buyer, and Seller, jointly and severally, agrees to
indemnify Buyer and to save and hold Buyer harmless from, for and against any
liability, damage, loss or deficiency (including, without limitation, reasonable
attorneys' fees) which Buyer may suffer or sustain as a result of any claims
made by creditors of Seller against Buyer which could have been asserted under
the applicable Bulk Sales laws ("Creditor's Claim"). In the event of a
Creditor's Claim, Buyer shall so notify Seller in writing and Seller shall have
thirty (30) days in which to satisfy or discharge the Creditor's Claim, or, to
take appropriate defensive action to dispute the claim while holding Buyer
harmless from all consequences of the claim.
2.5 Closing Costs; Transfer Taxes; and Fees. Buyer shall be responsible for any
real property or other documentary and transfer taxes and any sales, use or
other taxes imposed by reason of the transfers of the Assets provided hereunder
Seller will be responsible for any deficiency, interest or penalty asserted with
respect thereto. Buyer will be responsible for any title searches or insurance
premiums for title insurance to be obtained by Buyer. Buyer shall pay the fees
and costs of recording or filing all applicable convincing instruments described
herein. Buyer shall pay all costs of applying for new Governmental
Authorizations and obtaining the transfer of existing Governmental
Authorizations, which may be lawfully transferred.
3. CONSIDERATION.
3.1 To Seller. Buyer agrees that it shall, consistent with the provisions of
paragraph 2.2 (a) hereof, relieve Seller of all liabilities and obligations with
respect to the Assumed Liabilities, as set forth herein. Seller acknowledges
that it has significant obligations pursuant to the Assumed Liabilities which it
cannot satisfy, and that Buyer's agreement to relieve Seller of the Assumed
Liabilities in exchange for the Assets constitutes a good and valuable
consideration for the Assets in accordance with the terms of this Agreement (the
"Purchase Price").
3.2 Allocation of Purchase Price. Buyer shall prepare the allocation of the
Purchase Price (the "Allocation") in accordance with the provisions of Section
1060 of the Internal Revenue Code and the regulations thereunder, upon
reasonable consultation with Seller, and with Seller's consent, which consent
shall not be unreasonably withheld or delayed. The Allocation shall be as set
forth on Schedule 3.2 attached to this Agreement on or within sixty (60) days
after the Closing Date. Each of the parties agrees to report this transaction
for federal tax purposes in accordance with the Allocation. Buyer and Seller
agree to (i) be bound by the Allocation, (ii) act in accordance with the
Allocation in the preparation of financial statements and filing of all Tax
Returns (including, without limitation, filing Form 8594 with their United
States federal income Tax Return for the taxable year that includes the date of
the Closing) and in the course of any Tax audit, Tax review or Tax litigation
relating thereto and (iii) take no position and cause their controlled
affiliates to take no position inconsistent with the Allocation for income Tax
purposes. Not later than 30 days prior to the filing of its Form 8594 relating
to this transaction, Seller shall deliver to Buyer a copy of such form.
4. REPRESENTATION AND WARRANTIES OF PARTIES.
4.1 Seller. Seller represents and warrants to Buyer as follows:
(a) Corporate Status. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Seller is qualified to do business in California as a foreign
corporation in accordance with all relevant State and local governmental
requirements. Seller has full power and authority to own the Assets and
to engage in the business in which it is presently engaged.
(b) Authorization. Seller has full corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement, the performance of Seller's obligations hereunder, and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors and shareholders of Seller,
and no other corporate proceedings or actions on the part of Seller are
necessary therefor. This Agreement constitutes a valid and binding
obligation of Seller, enforceable in accordance with its terms; provided,
however, that enforceability of this Agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws at the
time in effect affecting the rights of creditors generally and that a court
of competent jurisdiction may decline to grant specific performance or any
other equitable remedy with respect to the enforcement
(c) Non-Contravention; No Default. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
(a) do not and will not result in a breach of or a default under (i) the
governing documents of Seller, or (ii) any agreement, license or other
obligation of Seller; and (b) will not violate or contravene any law,
rule or regulation of any agency or governmental body applicable to
Seller or any judgment binding on Seller. In addition, Seller warrants
that it is not currently in default on any of the Account Agreements or
the Sacramento, CA or the Pleasanton, CA real property leases within 120
days of closing date of purchase.
(d) Marketable Title. Seller has good, valid and marketable title to the
Assets, free and clear of all security interests, demands, liens, claims,
or encumbrances of any nature or kind whatsoever. There exist no facts or
set of circumstances which would prevent Seller from performing under this
Agreement, or which would prevent or render Seller unable to deliver good
and marketable title to the Assets. Seller will provide reasonable efforts
to obtain these said assignments, which will include, but not be limited
to, a letter from Seller to buyer which outlines an introduction to all
customers, vendors, etc. In addition, assignments, contract, or assignment
with addendum cannot be procured, CSI will utilize other measures to obtain
a contractual relationship. In the event that any of the above stated does
not occur, those assets in question will remain the property of Stratesec,
Inc. .
(e) Condition of Assets . Except as explicitly excluded on Schedule 4.1 (e),
all of the Assets (including all equipment and materials included
therein) are in good working order and condition, ordinary wear and tear
excluded, and have been installed and maintained in accordance with good
workmanlike practices prevailing in the industry at the time of
installation and maintenance and conform in all respects to the Account
Agreements pursuant to which they were installed. To the best of
Seller's knowledge, in no case have any of the Assets been installed in
a manner, which was in material violation of any applicable law, code or
regulation when installed.
(f) Account Agreements. All of the Account Agreements are substantially in
the forms set forth on Schedule 4.1 (f) hereof. Seller has not entered
into any other type of contract with its Customers, nor is it presently
rendering services to any of its Customers other than pursuant to the
Account Agreements set forth on Schedule 4.1 (f) hereof. Each Account
Agreement which Seller has with its Customers is valid, not in material
breach, and in full force and effect and is validly assignable to Buyer
(whether in full force and effect or not) without the consent of any
other party. To the best of Seller's knowledge, there are no oral or
written agreements or representations entered into by Seller or made by
Seller that amend any Account Agreement, other those identified on
Schedule 4.1 (f) (i).
(g) Compliance with Laws. As of the Closing Date, Seller will have complied
with all material laws, rules, regulations and orders applicable to the
Assets. Seller has not taken any action, or failed to take any action
which action or failure will or would, in any way, preclude or prevent
Buyer from owning the Assets after the Closing in substantially the same
manner as theretofore used by Seller. As of the Closing Date, Seller and
its employees will have all governmental licenses and permits (federal,
state and local) necessary for the ownership and utilization of the
Assets as now carried on by Seller, and such licenses are in full force
and effect. No violations are or have been recorded in respect of any
such licenses or permits and no proceedings are pending or threatened,
concerning the revocation or limitation of any such license or permit.
(h) Litigation. Seller is not engaged in or, to Seller's best knowledge,
threatened with any legal claim, demand or proceeding and there are no
proceedings, claims or investigations of any kind pending or, to
Seller's best knowledge, threatened against Seller relating to or
affecting any of the Assets and Seller does not know of any basis or
grounds therefor. There are no outstanding adjudication orders of any
agency or tribunal against Seller relating to or affecting the Assets.
(i) Insurance. Seller is aware that it is required to have in full force and
effect a policy of general liability, worker's comp, errors & omissions,
and any other applicable insurance.. Seller has had such insurance
coverage in full force and effect for at least the immediately preceding
two (2) year period. . In the event, insurance lapses during the course
of purchase, seller assumes all liability any and all claims associated
with any insurance lapses.
(j) Brokerage Fees. Seller has not used a broker in connection with this
transaction and there are no claims for brokerage commissions, finders'
fees or similar compensation in connection with this Agreement that will
be paid by Buyer.
(k) Taxes. All federal, state and local income, property, payroll, sales
and/or use taxes, payroll withholdings and all other taxes or charges
incurred by Seller during any period prior to and including the date of
the Closing which may relate to or affect the Assets in any way or may
affect or relate to their transfer pursuant to this Agreement, are the
obligation and liability of Seller and are to be paid or provided for in
full by Seller.
(l) Changes in Assets. Since November 1, 2002, there have not been any of the
following changes with respect to the Assets:
(i) Any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the Assets;
(ii) Any change in the accounting methods or practices followed by Seller;
(iii) Any sale, lease, abandonment or other disposition by Seller of any
Assets, except in the ordinary course of its business; or
(iv) Any transaction by Seller not in the ordinary course of business.
(m) No Material Misstatements. No representation or warranty by Seller
contained in this Agreement or made hereunder contains, or will contain,
any untrue statement of a material fact or omits, or will omit, to state
a material fact necessary to make the statements contained herein and
therein not misleading.
(n) Invoicing Status. Seller warrants that the invoicing status of each of the
Account Agreements, as set forth on Schedule 4.1(n)(i), are true and
correct as of the Closing Date; that Seller has not and will not invoice
any Customer pursuant to any of the Account Agreements subsequent to
November1, 2002; .and that Seller has invoiced Customers pursuant to the
Account Agreements. . In addition, Seller acknowledges that three contracts
in question be , with an actual dollar amount billed of $0; billed through
10/27/02 for the amount of $244,235.28 will stand as is; and with dollar
amount due Stratesec of $4290 retention. Seller acknowledges that Buyer
will have 100% ownership ; as well as complete ownership of the , minus
$4290. . Accordingly, with exception to the above stated contracts, Seller
releases all claims to any work which was, or may have been performed prior
to the Closing, and consents to the assignment to Buyer of all right to
render service, and all collect revenues, in accordance with the balances
set forth on Schedule 4.1(n)(ii).
(o) Seller agrees that all materials installed prior to purchase, and if the
manufacturers warranty cannot be obtained, Stratesec will provide
reasonable efforts in obtaining replacement parts through the
manufacturer in which they originally contracted parts.
4.2 Buyer. Buyer represents and warrants to Seller as follows:
(a) Corporate Status. Buyer is a corporation, duly organized, validly existing
and in good standing under the laws of the State of California. Buyer has
full power and authority to purchase and acquire the Assets as herein
provided.
(b) Authorization. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, and the subsequent
acquisition and retention of the Assets (i) are permissible under
Buyer's governing instruments, (ii) have been duly and validly
authorized by all necessary and appropriate action by Buyer, and (iii)
does not and will not result in a breach of or a default under any
agreement, license or other obligation of Buyer.
4.3 Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities made by Seller herein shall survive
the Closing for a period of one year in the event of any alleged or actual
breach, including the following representations, warranties, and indemnities:
(i) status, (ii) title, (iii) authority, (iv) tax and (v) employee benefits, in
which instance the survival period shall be the same as the applicable statute
of limitations.
5. INDEMNIFICATION.
5.1 By Seller. Seller covenants and agrees that, notwithstanding the Closing,
and the delivery of any instruments of conveyance, and regardless of any
investigation at any time made by or on behalf of Buyer or of any information
Buyer may have in respect thereof, Seller will indemnify and hold Buyer harmless
from, for and against any loss, damage, liability or deficiency (including
without limitation, attorneys' fees and other costs and expenses incident to any
suit, action, investigation or other proceeding) arising out of or resulting
from, and will pay Buyer on demand the full amount of any sum which Buyer may
pay or become obligated to pay on account of, or reimburse Buyer for any loss
suffered on account of: (a) any inaccuracy in any representation or the breach
of any warranty made by Seller; (b) any federal, state, local or other tax of
any nature related to the Assets arising out of any event or state of facts
occurring or existing on or prior to the Closing; (c) any failure of Seller duly
to perform or observe any term, provision, covenant, agreement or condition
hereunder; and (d) any claim or demand against Buyer relating to the Assets
resulting from any act, error or omission occurring on or prior to the Closing
Date made within one year after the Closing Date. Buyer shall notify Seller in
writing by registered or certified mail within sixty days after receipt of
notice of any potential claim arising pursuant to this Section 6.1. In addition,
if Buyer prevails in the indemnification claim, Seller will indemnify and hold
Buyer harmless from, for and against any and all reasonable and necessary costs
and expenses (including attorneys' fees) which it may suffer or sustain in
seeking to enforce the indemnification obligation of Seller hereunder.
(a) ERISA and Collective Bargaining Indemnification Obligations. Seller
shall also indemnify, defend and hold Buyer harmless from and against
any loss, damage, liability or deficiency (including without limitation,
attorneys' fees and other costs and expenses incident to any suit,
action, investigation or other proceeding) arising out of or resulting
from, (i) any Employee Plan or Benefit Arrangement, as that term is more
specifically defined on Schedule 2.2 (c)(i); or (ii) any Collective
Bargaining Agreement or other Labor Union contract, as that term is more
specifically defined pursuant to Schedule 2.2 (c)(ii).
5.2 By Buyer. Buyer covenants and agrees that it will indemnify and hold Seller
harmless from, for and against any loss, damage, liability or deficiency
(including without limitation, attorneys' fees and other costs and expenses
incident to any suit, action, investigation or other proceeding) arising out of
or resulting from, and will pay Seller on demand the full amount of any sum
which Seller may pay or become obligated to pay on account of, or reimburse
Seller for any loss suffered on account of (a) any inaccuracy in any
representation or the breach of any warranty made by Buyer; and (b) any failure
of Buyer duly to perform or observe any term, provision, covenant, agreement or
condition hereunder. Seller shall notify Buyer in writing by registered or
certified mail within thirty days after receipt of notice of any potential claim
arising pursuant to this Section 6.2. In addition, if Seller prevails in the
indemnification claim, Buyer will indemnify and hold Seller harmless from, for
and against any and all reasonable and necessary costs and expenses (including
attorneys' fees) which it may suffer or sustain in seeking to enforce the
indemnification obligation of Buyer hereunder.
6. BUYER'S CLOSING CONDITIONS. Buyer's obligation to consummate the purchase of
the Assets described herein will be subject to satisfaction of the following
conditions:
6.1 Due Diligence. Buyer shall have completed its due diligence review of the
Assets and Seller's business and shall be satisfied, in Buyer's sole discretion,
with the results of such review and investigation.
6.2 No Material Adverse Changes. No change in the Assets or Seller's business
shall have occurred from November 1, 2002, through the Closing Date, which would
have a material adverse effect on the transactions contemplated by this
Agreement or on the Assets.
6.3 Representations and Warranties; Covenants. The representations and
warranties contained in Section 4.1 hereof are true and correct in all material
respects and shall be true and correct in all material respects at the Closing
Date, with the same effect as though such representations and warranties had
been made on and as of such date, and the covenants and agreements of Seller to
be performed on or before the Closing Date shall have been duly performed in all
material respects.
6.4 Filings; Consents; Waiting Periods. All material registrations, filings,
applications, notices, consents, approvals, orders, qualifications and waivers
required in respect of the transactions contemplated hereby shall have been
filed, made or obtained, and all waiting periods applicable under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or been terminated and with respect to such
registrations, filings, applications, notices, consents, approvals, order,
qualifications and waivers, and Buyers shall have received at the Closing a
certificate to that effect dated the Closing Date from Seller.
6.5 No Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that restrains or prohibits the
consummation of the purchase of the Assets.
6.6 No Default. At the Closing Date, Seller shall not be in default of any of
the terms of the Account Agreements; the Sacramento, CA or the Pleasanton, CA
real property leases, .
6.8 E.S.Bankest agrees to continue to support the East Coast
operations of Stratesec, Inc to prevent the company from having to declare
bankruptcy. E.S. Bankest is the only secured creditor and if there were a
bankruptcy filing would submit a deposition to the court confirming that the
disposition of the California operations under the terms defined in this
document were a required for continued funding for Stratesec, Inc. E.S. Bankest
further confirm that it will not challenge the disposition of the California
operations under the bankruptcy provisions providing for the overturning of an
unfairly favorable payment or disposition of assets within the preceding three
months of the bankruptcy. Furthermore, E.S. Bankest confirms that it has
requested Stratesec, Inc., sell it shares equal to 51% of the company's
outstanding shares as additional evidence that E.S. Bankest is committed to the
continued funding of Stratesec, Inc.
7. SELLER'S CLOSING CONDITIONS. Seller's obligation to consummate the sale of
the Assets will be subject to satisfaction of the following conditions:
7.1 Representations and Warranties. The representations and warranties contained
in Section 4.2 are true and correct in all material respects, and shall be true
and correct in all material respects at the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date.
7.2 No Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that restrains or prohibits the
consummation of the purchase of the Assets.
8. CERTAIN COVENANTS. Seller undertakes the following specific covenants:
8.1 Confidentiality of Certain Information. Seller acknowledges that all
Customer lists, sales data, financial data, and other information relating to
the Assets (collectively, the "Confidential Information") are valuable, special
and unique assets and are and will be owned exclusively by Buyer or an affiliate
thereof as of the Closing Date. Seller agrees to treat the Confidential
Information as confidential and not to disclose any Confidential Information
(including without limitation any information Seller has previously treated as
confidential) to any Person or after the Closing make use of any Confidential
Information for its own purposes or for the benefit of any other Person (other
than Buyer) except as it pertains to information required by the Securities and
Exchange Commission.Further Assurances. Each of the parties hereto agrees that,
from time to time, whether before, at or after the Closing Date, each of them
will execute and deliver such further instruments of conveyance and transfer and
take such other action as may be necessary to carry out the purposes and intents
of this Agreement.
8.2 Preservation of Assets. Seller shall use all commercially reasonable efforts
to (a) preserve the Assets, (b) preserve the good will of all Customers and
others having business relations with Seller, and (c) maintain business
practices consistent in all material respects with past practice.
8.3 Supplemental Disclosure. Seller will promptly supplement or amend each of
the Schedules hereto with respect to any matter that as of the date hereof would
have been required to be set forth or listed in the Schedules hereto; provided,
that, for purposes of determining the rights and obligations of the parties
hereunder, any such supplemental or amended disclosure of any matter will not be
deemed to have been disclosed to Buyer unless Buyer otherwise expressly consents
in writing. If any Schedule to this Agreement prepared by or on behalf of Seller
is supplemented or amended after the date hereof due to such matter(s) that,
individually or in the aggregate, results in a material adverse effect on the
Assets or on Seller's business, condition, assets, liabilities, operations or
prospects, or that materially impairs the performance, rights or obligations of
any party under this Agreement, Buyer may elect at its sole option to (a)
terminate this Agreement, (b) proceed with the Closing, or (c) negotiate with a
purchase price reduction which shall be determined by the parties in good faith,
regardless of whether such matter existed or was known as of the date hereof or
arose and became known thereafter.
"Material adverse effect" means, for purposes of this section
only, situations in which the event or consequence has an impact upon Buyer's
rights to enforce the terms of any of the Accounts, or to collect any sums due
to Buyer pursuant to any services performed by it after the Closing Date on any
Account. If any such supplemental disclosure impairs the performance or rights
of either party, or valuation of the Assets to be purchased under this
Agreement, but does not constitute a material adverse effect, the parties shall
in good faith attempt to negotiate an adjustment to the Purchase Price.
8.4 Expenses. Buyer and Seller shall each pay all of their own respective
expenses incurred by or on behalf of each of them in connection with this
Agreement and the transactions contemplated hereunder, with the exception for
expenses related to obtaining any required government approvals or consents,
which shall be shared equally between Seller and Buyer.
9. TERMINATION.
9.1 Rights to Terminate. This Agreement and the transactions contemplated hereby
may be terminated and abandoned (a) at any time prior to the Closing by mutual
written consent of Seller and Buyer; (b) by Buyer pursuant to Section 4.1,
Section 6, or Section 8.4; or (c) if a condition to performance by the
terminating party hereunder has not been satisfied or waived prior to January
15, 2003, including Seller's required deliveries pursuant to Section 2.3 hereof;
or (d) failure to timely complete the transaction set forth in Section 6.7
hereof. Notwithstanding the foregoing clause (c), (i) Buyer may not terminate
this Agreement if the event giving rise to its termination right results from
Buyer's willful failure to perform or observe any of its covenants or agreements
set forth herein or if Buyer is, at such time, in material breach of this
Agreement, and (ii) Seller may not terminate this Agreement if the event giving
rise to its termination right results from the willful failure of Seller to
perform or observe any of its covenants or agreements set forth herein or if
Seller is, at such time, in material breach of this Agreement.
9.2 Procedure and Effect on Termination. Any termination of this Agreement under
Section 9.1 hereof will be effective immediately upon the delivery of written
notice of the terminating party to the other parties hereto. In the event of
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 8.1,
Section 9.2 and Section 10.5, which will survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any willful breach of this Agreement.
10. MISCELLANEOUS.
10.1 Sales and/or Use Taxes. Buyer and Seller shall share equal responsibility
for paying any and all sales and/or use taxes resulting from the sale of the
Assets to Buyer as provided herein.
10.2 Notices. Any and all notices, demands or other communications required or
desired to be given hereunder by any party shall be in writing and signed by the
party giving notice. Notices shall be delivered personally or mailed, certified
or registered, postage prepaid, return receipt requested to the appropriate
party at the addresses indicated below:
If to Buyer: Scott Govers
With a copy to: Carolynn Winne
If to Seller:
With a copy to:
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner provided hereby to the other party or parties hereto.
10.3 Schedules. All Schedules described in this Agreement, are delivered
herewith, unless expressly waived by Buyer. Each fact or statement recited or
contained in any Schedule, certificate or other instrument delivered by or on
behalf of the parties hereto, or in connection with the transactions
contemplated hereby, shall be deemed a representation and a warranty hereunder.
10.4 Applicable Law; Severability; Attorney's Fees. This Agreement shall, in all
respects, be governed by the laws of the State of California applicable to
agreements executed and to be wholly performed within the State of California.
The exclusive venue for any claim arising from or otherwise related to this
Agreement shall be the Courts of Contra Costa County, California. In the event
any action or arbitration is instituted by a party hereto regarding the
construction of any term or to recover damages resulting from the breach of any
term of this Agreement, the prevailing party in such action or arbitration shall
be entitled to such reasonable fees, costs and expenses (including, without
limitation, the costs of the arbitrator) as may be fixed by the court or
arbitrator.
10.5 Confidentiality. Each party shall hold in confidence the fact of the
existence of and all economic and other terms of this Agreement and the
transactions contemplated herein (collectively, "Confidential Terms") and no
party hereto shall, prior to or after the Closing, release any such information
to third parties without the other parties' prior written consent, which consent
shall not be unreasonably withheld or delayed, except (i) to its own agents,
advisors, representatives or lenders, (ii) pursuant to a court order requiring
such release, (iii) in connection with the filing of any federal or state tax
return or report which either party is required to file, (iv) to any arbitrator
or court in connection with any dispute among the parties hereto, or (v) as
otherwise may be required by law. In addition, Buyer is hereby authorized to
disclose the Confidential Terms in connection with any state or federal
securities filings, reports, offering circulars or registration statements, any
loan agreements of Buyer, its general partner, or any affiliate thereof.
Additionally, Buyer and Seller may make such disclosures as are necessary with
respect to a filing under the HSR Act. The parties hereto acknowledge and agree
that the remedy at law for any breach or threatened breach of any provision of
this section will be inadequate and, accordingly, each party hereto covenants
and agrees that the other parties hereto shall, in addition to any other rights
or remedies which they may have, be entitled to such equitable and injunctive
relief as may be available from any court of competent jurisdiction to prevent
the other party or parties hereto from violating any provision of this section.
Such right to obtain injunctive relief may be exercised, at the option of the
party seeking such relief, concurrently with, prior to, after or in lieu of the
exercise of any other rights or remedies which such party may have as a result
of any such breach or threatened breach. In the event that the transaction
contemplated herein is not consummated, Buyer shall promptly return (and retain
no copies) any and all economic, organizational and proprietary information,
which was provided by Seller to Buyer as part of Buyer's Due Diligence. Buyer
further covenants that it will not use any such information for its own benefit.
Except as described in section 8.1
10.6 Knowledge of Parties. Where any representation or warranty contained in
this Agreement is expressly qualified by a reference to knowledge, information
or belief of the party making such representation and warranty, such party shall
have made reasonable inquiry of those persons who are in a position to have
actual knowledge of the matters that are the subject of such representations and
warranties.
10.7 Arbitration. All controversies, claims and disputes arising out of or
relating to this Agreement or the breach thereof, except as otherwise provided
herein, shall be decided by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association JAMS Rules, then in
effect. In the event of a dispute relating to the amount owed by one of the
parties to the other, the party with the obligation of payment shall pay to the
other all sums that are not reasonably disputed by that party. Seller and Buyer
agree that the location of all arbitration hearings or other court appearances
related to this Agreement shall be in San Francisco County, California and
Seller and Buyer submit to the jurisdiction of the California courts for entry
of judgment on the arbitration award.
10.8 Entire Agreement; Construction; Waiver; Further Assurances. This Agreement,
together with any related documents referred to in this Agreement, constitutes
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement, and any and all prior agreements,
understandings or representations are hereby terminated and canceled in their
entirety. All of the terms and provisions contained herein shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns. No reliance upon or
waiver of one or more provisions of this Agreement shall constitute a waiver of
any other provisions hereof. All references herein to this Agreement include all
exhibits and schedules hereto, which are incorporated herein by reference. No
provision of this Agreement shall be construed against any party on the ground
that such party or its counsel drafted the provision. All headings and captions
and the table of contents have been inserted for convenience only and shall not
affect the interpretation of this Agreement. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
10.9 Separate Counterparts. This document may be executed in one or more
separate counterparts, each of which, when so executed, shall be deemed to be an
original. Such counterparts shall, together, constitute and shall be one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
SELLER:
By: /s/ Barry W. McDaniel
Name: Barry W. McDaniel
Title: CEO
BUYER:
By:
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Name:
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Title:
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