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[VIRGINIA SYSTEMS]
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ALERT CENTRE, INC.
AND
MASADA SECURITY, INC.
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TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF ASSETS 1
1.1 Assets to be Acquired 1
1.2 Access to Books and Records 2
1.3 Assumed Liabilities 2
1.4 Excluded Liabilities 2
ARTICLE II PURCHASE PRICE AND CLOSING 2
2.1 Purchase Price 2
2.2 Recurring Monthly Revenue 3
2.3 Escrow 4
2.4 Accounts Receivable 5
2.5 Closing Date and Location 5
2.6 Nonsolicitation Agreement 5
2.7 Delinquent Accounts 5
2.8 Allocation of Purchase Price 6
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER 6
3.1 Organization of Seller 6
3.2 Authority of Seller 6
3.3 WIP; Proposals and Bids 7
3.4 Intentionally omitted. 7
3.5 Real Property 7
3.6 Business Documents 7
3.7 Title to Property 7
3.8 Compliance with Laws; Litigation 7
3.9 Condition of Assets 8
3.10 Adverse Developments 8
3.11 Customer and Systems Information 9
3.12 Broker or Finder 10
3.13 No Employees; Agreements with Subcontractors 10
3.14 Tax Returns and Payments 11
3.15 Appraisal Rights 11
3.16 Burdensome Agreements 11
3.17 Options, Warrants and Rights of First Refusal 11
3.18 Environmental Matters 11
3.19 Disclosure 11
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER 12
4.1 Organization of Buyer 12
4.2 Authority of Buyer 12
4.3 Broker or Finder 12
4.4 Compliance with Law 12
4.5 Financing 12
4.6 Disclosure 13
ARTICLE V ACTIONS PRIOR TO THE CLOSING DATE 13
5.1 Investigation 13
5.2 Preservation of Representations and Warranties 13
5.3 Consents and Approvals 13
5.4 Public Announcements 13
5.5 Exclusive Dealing 14
5.6 Lien Searches 14
5.7 Maintenance of Business 14
5.8 Insurance 14
5.9 Organization and Transition 14
5.10 Consummation of Agreement 15
5.11 Accounts Receivable 15
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TABLE OF CONTENTS (Continued)
Page
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ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER 15
6.1 Covenants and Warranties 15
6.2 Corporate Action 16
6.3 No Restraint or Litigation 16
6.4 Necessary Consents and Permits 16
6.5 Opinion of Counsel 16
6.6 Adverse Change 16
6.7 Documents and Certificates 16
6.8 Satisfaction of Debts 16
6.9 Accounts Receivable 17
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 17
7.1 Covenants and Warranties 17
7.2 Corporate Action 17
7.3 Delivery of Purchase Price 17
7.4 No Restraint or Litigation 17
7.5 Documents and Certificates 17
7.6 Minimum Purchase Price 17
ARTICLE VIII INDEMNIFICATION 18
8.1 Indemnification by Seller 18
8.2 Indemnification by Buyer 18
8.3 Notice of Claims 18
8.4 Survival 19
8.5 Waiver of Bulk Sales Compliance 19
8.6 Resolution of Claims 19
ARTICLE IX DAMAGE TO PROPERTY AND RISK OF LOSS 19
ARTICLE X CERTAIN POST CLOSING COVENANTS 20
10.1 Seller's Monitoring Obligations 20
10.2 Buyer's Monitoring Obligations 20
ARTICLE XI TERMINATION OF AGREEMENT 20
ARTICLE XII GENERAL PROVISIONS 21
12.1 Survival of Obligations 21
12.2 Transfer Charges and Taxes 21
12.3 Arbitration 21
12.4 Confidentiality 21
12.5 Governing Law 22
12.6 Notices 22
12.7 Assignment 22
12.8 Entire Agreement; Amendments 22
12.9 Interpretation 23
12.10 Waivers 23
12.11 Expenses 23
12.12 Partial Invalidity 23
12.13 Further Assurances 23
12.14 Counterparts 24
12.15 Intended Beneficiary 24
12.16 Consent to Jurisdiction, Service and Venue 24
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 9th day of June, 1995, by and between
Alert Centre, Inc., a Delaware corporation ("Seller"), and Masada Security,
Inc., a Delaware corporation ("Buyer").
BACKGROUND:
WHEREAS, Seller owns and operates certain alarm accounts in Richmond,
Virginia and its environs as more specifically identified in Section 1.1.
hereof (the "Security Business"); and
WHEREAS, Seller desires to sell, and Buyer desires to purchase, certain of
the assets of Seller used or useful in connection with the operation of the
Security Business, all on the following terms and conditions.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, and intending to be
legally bound, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets to be Acquired.
Upon the terms and subject to the conditions of this Agreement, Seller
shall, on the Closing Date (as defined in Section 2.5), sell, transfer, assign
and deliver to Buyer all of Seller's right, title, interest and benefit in and
to the following assets (the "Assets to be Acquired"):
(a) All of Seller's rights in, to and under all alarm systems
relating to the Security Business;
(b) All of Seller's rights in, to and under all alarm lease,
maintenance, repair, service and monitoring agreements with customers whose
balances at Closing are outstanding 90 days or less from the invoice date, all
of which are set forth on Schedule A;
(c) Any leases of equipment that are related to and used by
Seller in the Security Business, telephone book listing agreements and all
other agreements (including noncompetition and nonsolicitation agreements, if
any), permits (including permits relating to installations which are pending,
currently in process or completed) and manufacturer's warranties on tangible
property that are related to Seller's conduct of the Security Business, all of
which are set forth in Schedule B. The agreements listed on Schedules A and B
are referred to individually as a "Business Document" and collectively as the
"Business Documents";
(d) All of Seller's rights in, to and under the following assets,
intangibles and rights that are related to, and presently owned by Seller and
used in, the Security Business: (i) system designs and drawings (to the extent
relating to the tangible assets being acquired by Buyer);(ii) Accounts
Receivable as defined in Section 2.4;(iii) customer lists and files; (iv)
telephone lines and numbers (including WATS lines and "ring-down" lines), all
of which are listed on Schedule C; and (v) goodwill.
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1.2 Access to Books and Records.
Seller shall provide Buyer with access, upon reasonable request and during
normal business hours, to any of the books and records relating to the Security
Business which are not transferred to Buyer hereunder, and Seller agrees to
retain such books and records for a period of 3 years from the Closing Date.
1.3 Assumed Liabilities.
Buyer agrees to assume all liability for the performance of all
obligations arising after the Closing Date with respect to the Business
Documents assigned to Buyer by Seller (including the obligation to pay line
charges and sales taxes arising after the Closing Date), to the extent, and
only to the extent, listed on Schedules A and B. Buyer also agrees to assume
all liability for the performance of all obligations under any accounts listed
under Section 2.2(b) arising from and after the six month anniversary of the
Closing Date for those accounts that sign Acceptable Contracts during the first
six months after Closing.
1.4 Excluded Liabilities.
Except for the liabilities that Buyer will assume pursuant to Section 1.4,
Buyer will not assume or be obligated for any other liability, obligation or
commitment of Seller, direct or indirect, known or unknown, absolute or
contingent, including any of the following:
(a) any foreign, federal, state, county or local income or other
tax arising from the operation of the Security Business or the ownership of the
Assets to be Acquired on or prior to the Closing Date;
(b) any liability, obligation or commitment of Seller to its
creditors, whether arising out of contract or tort, or to any party holding a
lien on any of Seller's assets;
(c) any employee obligation, including any obligation for wages,
commissions, vacation and holiday pay, sick pay, bonuses, severance pay,
pensions, or any obligation under any collective bargaining agreement,
employment agreement or employment at-will relationship, or any obligation to
hire any employee of Seller after the Closing Date;
(d) any liability, obligation or commitment incurred by Seller
after the Closing Date;
(e) any liability the existence of which would constitute a
breach of any of the representations, warranties and covenants of Seller
hereunder; or
(f) any other liability, obligation or commitment not expressly
assumed by Buyer hereunder.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 Purchase Price.
(a) The purchase price for the Assets to be Acquired (the "Purchase
Price") shall equal (i) a multiple of twenty-eight and one-half (28.5) times
the RMR (as defined in Section 2.2) provided by the Security Business for
accounts other than the Delinquent Accounts or the monthly connect fee for any
Emnet Accounts, as herein defined, plus (ii) a multiple of fourteen and
one-quarter (14.25) times the RMR for any accounts from customers whose
balances at Closing are outstanding more than 60 but less than 91 days
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from the invoice date (the "Delinquent Accounts"), plus (iii) a multiple of
twenty and four-fifths (20.8) times the RMR relating to the monthly connect fee
for any accounts acquired by Seller from Emnet and designated as such on
Schedule A (the "Emnet Accounts"), plus (iv) the value of accounts receivable
as determined in accordance with Section 2.4. In the event that the Purchase
Price as calculated hereunder exceeds $700,000, Buyer shall have the right, at
its option, to elect not to purchase certain of the Assets to be Acquired (to
be selected by Buyer) in order to reduce the Purchase Price to $700,000.
(b) At Closing, the Purchase Price shall be determined by Buyer and
Seller. Eighty seven and one-half percent (87.5%) of the Purchase Price, shall
be paid to Seller on the Closing Date by federal funds wire transfer or other
form of immediately available funds. Twelve and one-half percent (12.5%) of
the Purchase Price, shall be deposited by Buyer in escrow pursuant to an escrow
agreement in the form of Exhibit 1 (the "Escrow Agreement") and distributed in
accordance with Section 2.3 (the "Escrow").
(c) The Purchase Price shall be adjusted to reflect, in
accordance with generally accepted accounting principles, the principle that
all expenses of the Security Business attributable to the period after the
Closing Date are for the account of Buyer and all expenses attributable to the
period on or before the Closing Date are for the account of Seller.
Accordingly, Seller shall receive credit for all obligations prepaid by Seller
under the Business Documents and all other expenses prepaid by Seller relating
to the Security Business. Likewise, Buyer shall receive credit for (i)
customer deposits; (ii) customer prepayments for services to be provided by
Buyer after Closing; (iii) accrued expenses under the Business Documents; and
(iv) all other accrued expenses relating to the Security Business. Seller and
Buyer shall to calculate such adjustments at Closing and shall increase or
decrease the amount paid to Seller pursuant to Section 2.1(a) by the amount of
such adjustments. Any errors in any such adjustments shall be recalculated as
soon as possible after Closing and the parties agree to make such payments as
are required to settle such adjustments within thirty (30) days after Closing.
2.2 Recurring Monthly Revenue.
(a) The term "RMR" means the amount of recurring monthly revenue
(net of any direct wire telephone line charges or other communication, utility
company or third-party pass-through charges, assessments or taxes and net of
any customer discounts) of the Security Business as of the date immediately
preceding the Closing Date and which is derived, except as set forth in
paragraph (b) of this Section 2.2, solely from written, valid, complete and
properly executed monitoring agreements in a form meeting Buyer's underwriting
requirements and otherwise acceptable to Buyer ("Acceptable Contracts") and
which have not been repudiated by the customer. RMR shall not include any
revenue: (i) from customers who have not generated cash receipts representing
service charges for at least one full billing cycle or prepaid at least one
month of RMR; (ii) that is not periodic in nature, but rather relates to
installation, purchase payments or one-time assessments or charges; (iii) from
customers whom Seller has received notice of a pending termination; (iv) from
third-party monitoring agreements; or (v) from customers who were recently
added as a result of extraordinary marketing efforts or an amnesty program; For
purposes of calculating RMR, services or charges billed quarterly or annually
shall be recalculated to a monthly equivalent.
(b) All accounts without Acceptable Contracts at Closing shall not be
treated as RMR at Closing, however, Buyer shall pay to Seller at the end of the
first six (6) months after Closing a sum equal to the Purchase Price that would
have been paid to Seller at Closing for any such accounts
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which, during the first six (6) months after Closing, sign Acceptable
Contracts, and which otherwise meet the definition of RMR at the end of such
six (6) month period. Twelve and one-half percent (12.5%) of any amounts paid
pursuant to clause (ii) of this Section shall be deposited by Buyer in Escrow
and distributed in accordance with Section 2.3. Any accounts which do not sign
Acceptable Contracts during the first six (6) months after Closing shall remain
the property of Seller and shall be treated in accordance with Section 10.2.
2.3 Escrow.
(a) The Escrow shall be for a period of thirteen (13) months (the
"Escrow Period").The purpose of the Escrow shall be to provide a source of
funds for the payment of (i) any Purchase Price Deduct, as herein defined, (ii)
at Buyer's discretion, any indemnification obligation of Seller to Buyer under
Section 8.1 and (iii) any Chip Change Credit due to Buyer from time to time
under Section 5.9. Nothing in this Section 2.3 shall be construed to limit in
any way the amount of the indemnification obligation of Seller to Buyer under
Section 8.1 to be paid from sources other than the Escrow.
(b) At the end of the Escrow Period, a determination shall be
made of the RMR on the date immediately preceding the Closing Date (taking into
consideration any accounts added pursuant to Section 2.2(b)) attributable to
customers who have, during the first twelve (12) months of the Escrow Period,
(i) become more than sixty (60) days past due from the invoice date (and who
remain more than sixty (60) days past due from the invoice date as of the last
day of such twelve (12) month period), (ii) who have canceled or failed to
renew for any reason, or (iii) who are listed on Schedule M or who are
replacement accounts provided pursuant to this Section and in either case have
been canceled or terminated by Buyer for excessive false alarms (the "Lost
RMR"). During the first twelve (12) months of the Escrow Period, Buyer shall
notify Seller by the end of each calendar month of all customers who during the
prior calendar month went into default ("Defaulted Accounts") so that Seller
may have an opportunity to either rectify such accounts or repurchase such
accounts within thirty (30) days after notification. If Seller elects to
repurchase an account, the repurchase price shall be an amount equal to (i)
twenty-eight and one-half (28.5) times the RMR generated by such account at
Closing for accounts other than the Delinquent Accounts and the monthly connect
fee for any Emnet Accounts, (ii) fourteen and one-quarter (14.25) times the RMR
generated by any such Delinquent Account at Closing and (iii) twenty and four
fifths (20.8) times the RMR generated by the monthly connect fee for any Emnet
Account at Closing. An account will be deemed to be in default for purposes of
this Section 2.3 if it is canceled (by Buyer, if listed on Schedule M or if a
replacement account provided pursuant to this Section, for excessive false
alarms or by the customer for any reason), fails to renew or if any charges are
not paid within sixty (60) days from the invoice date. If Seller rectifies a
Defaulted Account, repurchases such account or provides a replacement account
acceptable to Buyer within thirty (30) days after notification by Buyer, such
Defaulted Account shall not be included in Lost RMR. In addition, any account
which becomes a Defaulted Account as a result of a failure to pay any charges
within sixty (60) days from the invoice date shall not be treated as Lost RMR
if, at the end of the twelve (12) month period, such account's balance is
outstanding 60 days or less from the invoice date. The Purchase Price shall be
reduced by a multiple of (i) twenty-eight and one-half (28.5) times the Lost
RMR relating to accounts other than the Delinquent Accounts or the monthly
connect fee for any Emnet Accounts, (ii) fourteen and one-quarter (14.25)
times the Lost RMR relating to the Delinquent Accounts, and (iii) twenty and
four-fifths (20.8)
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times the Lost RMR relating to the monthly connect fee for any Emnet Accounts
(the "Purchase Price Deduct"). As soon as possible after the end of the Escrow
Period and in any event within five (5) business days, the parties shall direct
the escrow agent, in writing, to pay Seller the difference between the amount
of the Escrow and the amount of the Purchase Price Deduct (provided that Seller
shall receive a credit for any amounts due Seller from Buyer pursuant to
Section 2.7). In the event Seller repurchases any accounts under this Section
2.3, Seller shall indemnify and hold Buyer harmless from and against any
Aggregate Net Loss (as defined in Section 8.1) incurred by Buyer in connection
with such account from and after the date of repurchase.
2.4 Accounts Receivable.
Buyer shall acquire all of Seller's accounts receivable, trade accounts,
notes receivable and other debts owed to Seller by customers of the Security
Business (collectively, the "Accounts Receivable") relating to the Security
Business for a purchase price equal to the lesser of $14,000 or the sum of (i)
95% of the face value of any Accounts Receivable for services provided on or
prior to the Closing Date from customers with balances outstanding, for any
reason, 30 days or less from the invoice date, (ii) 75% of the face value of
any Accounts Receivable for services provided on or prior to the Closing Date
from customers with balances outstanding, for any reason, more than 30 days but
60 days or less from the invoice date, and (iii) 25% of the face value of any
Accounts Receivable for services provided on or prior to the Closing Date from
customers with balances outstanding, for any reason, more than 60 days but 90
days or less from the invoice date. Any Accounts Receivable for services to be
provided after the Closing Date shall be transferred to Buyer hereunder but
shall not be taken into account in calculating the Purchase Price pursuant to
the foregoing sentence. It is the intent of this Section that all Accounts
Receivable due from a customer will be treated in accordance with the oldest
outstanding amounts due from such customer. For example, if a customer has an
outstanding balance of $100.00 of which $30.00 is outstanding less than 30
days, $40.00 is outstanding more than 30 days but less than 60 days and the
remainder is outstanding more than 60 days but less than 90 days, the purchase
price for such customer's Accounts Receivable would be $25.00 (25% x $100.00);
provided, however, that de minimis amounts of $5.00 or less and amounts which a
customer is disputing in good faith shall not be taken into account in making
the foregoing determination.
2.5 Closing Date and Location.
The consummation of the transfer and delivery of the Security Business to
Buyer and the receipt of the consideration therefor by Seller shall constitute
the "Closing." Unless otherwise mutually agreed to by the parties, the Closing
shall take place at 9:00 A.M., local time, at the offices of Seller, ▇▇▇▇ ▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on June 13, 1995, or upon the
satisfaction by Seller of all of the conditions precedent to Buyer's obligation
to consummate this transaction, whichever shall later occur, which date and
time shall constitute the "Closing Date" but in any event shall not be later
than June 15, 1995 (the "Termination Date"). The effective date of the sale of
the Security Business shall be at 11:59:59 p.m. on the day prior to the Closing
Date and all prorations and allocations provided for in Section 2.1(c) shall be
made as of such date.
2.6 Nonsolicitation Agreement.
In connection with the consummation of these transactions, Seller shall
have executed a nonsolicitation agreement in the form of Exhibit 2 (the
"Nonsolicitation Agreement").
2.7 Delinquent Accounts
Buyer shall pay to Seller (or credit to Seller against the amount of any
Purchase Price Deduct), concurrent with
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the release of funds from Escrow, an amount equal to fourteen and one-quarter
(14.25) times the RMR generated at Closing by each Delinquent Account which, at
the end of the twelve-month period after Closing, has no balance outstanding in
excess of 60 days from the invoice date; provided, however, that de minimis
amounts of $5.00 or less and amounts which a customer is disputing in good
faith shall not be taken into account in making the foregoing determination.
2.8 Allocation of Purchase Price.
Buyer and Seller agree to the allocation of the Purchase Price set forth
on Schedule D hereto, and agree to be bound by such allocation and to file all
federal, state and local tax returns based on such allocation. Any adjustment
in the Purchase Price shall be allocated in accordance with the proportionate
allocation reflected on Schedule D.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
these transactions, Seller represents, warrants and covenants to Buyer and
agrees that as of this date and through and including the Closing Date:
3.1 Organization of Seller.
(a) Seller is a corporation duly incorporated and organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authority to own or lease all of the
Assets to be Acquired, to own and operate the Security Business, to carry on its
business as now conducted, to enter into this Agreement and to perform the
terms of this Agreement. Seller is qualified as a foreign corporation in all
jurisdictions in which it is required to be so qualified.
(b) Schedule F sets forth all of the names and fictitious names
under which Seller or the predecessors of Seller have conducted the Security
Business.
3.2 Authority of Seller.
Seller has full power and authority to enter into this Agreement, to
consummate these transactions and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Seller and is, and each other agreement or instrument of Seller
contemplated hereby will be, the legal, valid and binding agreement of Seller,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and the other agreements of Seller contemplated
hereby have been duly authorized and approved by the board of directors of
Seller and do not require any further authorization or the consent of any third
party, except as set forth on Schedule F. Neither the execution and delivery
of this Agreement nor the consummation of these transactions will (a) conflict
with or result in any violation of or constitute a default under any term of
(i) the Amended and Restated Certificate of Incorporation or By-laws of Seller,
or (ii) to Seller's knowledge, any agreement, mortgage, debt instrument,
indenture, or other instrument, judgment, decree, order, award, law or
regulation by which Seller is bound, or (b) result in the creation of any lien,
security interest, charge or encumbrance upon any of the Assets to be Acquired,
except as set forth on Schedule F.
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3.3 WIP; Proposals and Bids.
Seller does not now have, and at Closing will not have, any work in
process or proposals and bids relating to the Security Business.
3.4 Intentionally omitted.
3.5 Real Property.
Other than in connection with Seller's central station located in the
State of Colorado, Seller does not own, lease or otherwise use any real
property in connection with the operation of the Security Business.
3.6 Business Documents.
Except for the Business Documents and except for oral agreements set forth
on Schedule H, Seller has no presently existing material contract, agreement,
lease, permit, consent, license or commitment, whether written or oral,
affecting or relating to the Security Business. All of the Business Documents
are validly existing, legally enforceable obligations of Seller and, to
Seller's knowledge, of the other parties thereto, and are in full force and
effect in accordance with their terms. Seller has delivered copies of all of
the Business Documents set forth on Schedule B to Buyer as of the date hereof.
Without limiting the foregoing, Seller represents that, to the best of its
knowledge, the Security Business and all equipment used in connection therewith
are now being, and at all times have been, utilized, operated and maintained,
in all material respects, in conformity with the Business Documents, with all
other applicable laws and regulations (including zoning regulations), and with
the orders, rules and regulations of any government or governmental agency or
authority having jurisdiction with respect thereto. Seller has not defaulted
in its obligations pursuant to any of the Business Documents, which default
could result in the cancellation of any Business Document or adversely affect
the rights of Seller thereunder. Seller is not a party to any franchise,
license, distributor or other similar type of agreement. Seller has provided
to Buyer prior to the date hereof copies of or access to all noncompetition and
nonsolicitation agreements entered into by Seller or Seller's predecessors
(whether still in existence or having expired in accordance with their terms).
3.7 Title to Property.
Except as described on Schedule E (which shall have been satisfied or
released at or prior to Closing), Seller has good and marketable title to all
of the Assets to be Acquired, free and clear of all liens, claims, charges,
encumbrances, leases, pledges, security interests, mortgages, defects in title,
equities, covenants and other restrictions of any nature whatsoever. Seller
owns each of the Assets to be Acquired in fee title and not under lease.
3.8 Compliance with Laws; Litigation.
(a) Seller has complied with all laws, regulations, rules, writs,
injunctions, ordinances, franchises, decrees or orders of any federal or state
court or of any municipal or governmental department, commission, board,
bureau, agency or instrumentality which are applicable to the Assets to be
Acquired or the Security Business, except where the failure to so comply would
not have a material adverse effect on the Assets to be Acquired or the Security
Business.
(b) All material reports, schedules and/or returns of any
administrative agency of the federal or any state or local government required
to be filed by Seller have been filed.
(c) Except as set forth on Schedule F, there are no lawsuits,
claims, suits, proceedings or investigations pending or, to the best
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knowledge of Seller, threatened, against or affecting Seller, nor are there any
lawsuits, claims, suits or proceedings pending in which Seller is the plaintiff
or claimant, that relate to the Assets to be Acquired or the Security Business
and which involve the possibility of any judgment, order, award or other
decision that might impair the ability of Seller to perform this Agreement, or
might impair the quality of title of the Assets to be Acquired, or might
adversely affect the normal operation of the Security Business, or might result
in liability for damages or might otherwise adversely affect Seller's right,
title or interest in the Assets to be Acquired or the Security Business,
except, in each case, where it would not have a material adverse effect on the
Assets to be Acquired or the Security Business.
(d) There is no action, suit or proceeding pending or, to the best
knowledge of Seller, threatened, which questions the legality or propriety of
the transactions contemplated by this Agreement.
3.9 Condition of Assets.
(a) The tangible assets included in the Assets to be Acquired (the
"Tangible Assets") are in good operating condition, ordinary wear and tear
excepted. The Tangible Assets are available for immediate use in the Security
Business except for those items being serviced in the ordinary course of
business. To Seller's knowledge, all of the Tangible Assets and the state of
maintenance thereof are in compliance in all material respects with the rules
and regulations of all applicable statutes, ordinances, rules and regulations.
The Assets to be Acquired include all assets and properties which Seller
currently uses to conduct the Security Business.
(b) Seller does not own any inventory, spare parts or equipment
for use in connection with the Security Business.
(c) Schedule G sets forth a true and complete list of all insurance
policies insuring any of the Assets to be Acquired or relating to the Security
Business. All such policies have been in full force and effect during the past
five (5) years with claims payable on an "occurrence basis," which means, for
example, that if a claim arose after the Closing Date for an event which
occurred prior to the Closing Date, Seller's applicable insurance policy in
existence on the date such event occurred would cover such claim. All such
policies are in full force and effect and Seller has not received any notice of
cancellation with respect thereto. During the past five (5) years, no
application by Seller for insurance with respect to the Assets to be Acquired
has been denied for any reason. During the past five (5) years, Seller has not
had any claim made against it by any customer of the Security Business that
would materially adversely affect Seller's insurance rating. Attached as
Exhibit 8 is a copy of Seller's insurance claims history relating to the
Security Business for the past two (2) years.
(d) To the best of Seller's knowledge, all of the information
that Seller has delivered to Buyer in connection with this transaction is true,
correct and complete in all material respects.
3.10 Adverse Developments.
Since December 1, 1994, no event or condition has occurred which
materially adversely affected the Security Business or Assets to be Acquired,
including: (a) any material adverse change in the financial condition, assets
or liabilities of the Security Business, other than changes in the ordinary
course of business; or (b) any damage, destruction, loss or other casualty to
the Security Business, however arising and whether or not covered by insurance.
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3.11 Customer and Systems Information.
(a) Except as set forth on Schedule H, Seller has entered into
written agreements with all of the customers of the Security Business. All of
Seller's agreements with its customers are valid and enforceable. The forms of
all of Seller's monitoring agreements used in connection with the Security
Business have been made available to Buyer. Seller will deliver originals (or
copies, to the extent Seller does not have the originals in its possession) of
all of its contracts with the customers of the Security Business and all files
and documents relating thereto to Buyer at Closing. Schedule A sets forth a
true and accurate list of the amounts which Seller charges its customers for
monitoring, service, maintenance, repairs, open/close, refundable deposits,
reconnect fees and any other services provided by Seller. Seller has no
obligations or liabilities to customers or to other users of Seller's
electronic security services which are material to the Security Business,
except (i) with respect to deposits made by such customers or such other users,
if any; and (ii) the obligation to supply services to customers in the ordinary
course of business. Except as set forth on Schedule M, none of the customers
of the Security Business has a history of excessive false alarms. To the best
knowledge of Seller, there are no complaints by customers or other users of
Seller's electronic security services that, individually or in the aggregate,
could have a material adverse effect upon the Assets to be Acquired or the
financial condition or operation of the Security Business. Seller has no free
or discounted service liability to customers existing with respect to the
Security Business, other than as set forth in Schedule A, and nothing would
prohibit Buyer from discontinuing any such free service after Closing. Seller
has no obligation or liability for the refund of monies to its customers other
than obligations to refund deposits made by customers in the ordinary course of
business. Since December 1, 1994, neither Seller, nor any of Seller's
officers, directors, shareholders, employees or agents have paid directly or
indirectly any accounts receivable of customers (excluding credit adjustments
in the ordinary course consistent with past practice).
(b) To Seller's knowledge, all of the alarm systems are in good
working order and condition, failure of a customer to report to Seller any
problem with an alarm system known to the customer and customer non-use
excepted; and to Seller's knowledge have been installed and maintained in
accordance with good and workmanlike practices prevailing in the electronic
security industry, in accordance with any applicable specifications and
standards of Underwriters Laboratories, etc. and all local authorities,
including local telephone operating companies. To Seller's knowledge, all such
alarm systems conform in all material respects to the contracts pursuant to
which they were installed. In no case has an installation of such alarm systems
been made which at the time of installation was in violation of any applicable
law, code or regulation. To Seller's knowledge, all manufacturer's warranties
applicable to any such alarm systems are freely assignable to Buyer. Schedule
I contains a list of all acquisitions pursuant to which Seller acquired any
accounts of the Security Business, all of which acquisitions occurred prior to
the filing of Seller's bankruptcy petition.
(c) The Security Business has at least 735 accounts and $19,800 of
RMR. No one account of the Security Business represents more than two percent
(2%) of Seller's RMR. There has been no general, overall increase in Seller's
rates in the last six (6) months other than immaterial increases instituted in
the ordinary course, and Seller agrees that there shall be no such increase in
such rates prior to Closing. Seller is not aware of any legal impediments
which would prevent Buyer from instituting any rate
13
increases after the Closing Date, other than any specific contractual
provisions set forth in the customer contracts made available to Buyer by
Seller.
(d) Seller owns all of the telephone lines applicable to its
accounts and, except as set forth on Schedule J, can convert all such lines to
communicate with Buyer's central station by means of a line switch. Except as
set forth on Schedule J, none of the alarm systems of Seller require an on-site
visit in order to reprogram such system to communicate with Buyer's central
station.
(e) There is no law, rule, regulation or ordinance that limits
Seller's ability to provide monitoring services to customers from a central
station located outside of the State of Virginia.
(f) None of the accounts of the Security Business are monitored by
a third party except as set forth in Schedule A.
(g) To the best of Seller's knowledge, no communities in which the
Security Business is operated currently have or are contemplating passing false
alarm ordinances.
(h) All of the licenses and permits which Seller is required to
hold in connection with the operation of the Security Business are listed on
Schedule K. Seller has paid all necessary permit and/or license fees in
connection with such licenses and permits. To Seller's knowledge, no other
licenses or permits are required.
(i) To Seller's knowledge, no customer of the Security Business has
elected to receive "additional coverage at additional cost" under Seller's
customer agreements.
(j) To Seller's knowledge without inquiry, there are no pending
plans by utilities to change the dialing procedures or exchange numbers within
the areas servicing the Security Business such that Seller would need to
reprogram its customers' digital dialers.
(k) All of the accounts utilize standard digital communicators and
are currently monitored by Seller's Englewood, Colorado UL listed central
station except as set forth on Schedule A. To Seller's knowledge, equipment
installed in the field consists primarily of DSC panels.
3.12 Broker or Finder.
(a) Neither Seller nor any party acting on its behalf has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of these transactions.
3.13 No Employees; Agreements with Subcontractors.
(a) Seller does not now employ any employees in connection with the
operation of the Security Business and Seller is not a party to any employment
agreement, written or oral, in connection with the Security Business.
(b) Seller uses subcontractors to conduct the operations of the
Security Business. All such subcontractors are independent contractors.
(c) Except as set forth on Schedule L, Seller has entered into a
nonsolicitation/nondisclosure agreement with each subcontractor
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of the Security Business. In addition, except as set forth on Schedule L,
Seller has written agreements with each subcontractor which establish service
charges and which may be cancelled upon 30 days' notice.
3.14 Tax Returns and Payments.
All unemployment, social security, franchise, real property, personal
property and all other taxes levied, assessed or imposed upon Seller in
connection with Seller's operation of the Security Business by the United
States, or any state, or governmental subdivision of either, to the extent due
and payable, have been duly paid to date or are being contested through
appropriate administrative or judicial procedures, and no liability for
deficiencies with respect thereto exists. To Seller's best knowledge, no tax
deficiencies have been determined nor proposed tax assessments charged against
Seller in connection with Seller's operation of the Security Business (nor is
there any basis therefor). Seller has filed all federal, state, local, sales,
franchise, withholding, real and personal property tax returns required to be
filed in connection with Seller's operation of the Security Business. No
penalties or other charges are, or will become, due with respect to the late
filing of any such return by Seller.
3.15 Appraisal Rights.
Neither the sale and transfer of the Assets to be Acquired pursuant to
this Agreement, nor Buyer's possession and use thereof from and after Closing
because of such sale and transfer, will result in or be subject to the
imposition of any liability upon Buyer for appraisal rights or other liability
owing to any shareholder of Seller.
3.16 Burdensome Agreements.
Seller is not a party to any agreement or instrument nor subject to any
restriction which now has or, as far as Seller can foresee, may have a material
adverse effect, financial or otherwise, upon the Security Business or the
Assets to be Acquired.
3.17 Options, Warrants and Rights of First Refusal.
Seller represents that no person or entity has any option, warrant or
right of first refusal to purchase the Assets to be Acquired or the Security
Business.
3.18 Environmental Matters.
Neither Seller nor any of Seller's predecessors owns, operates or leases
or has owned, operated or leased any property in connection with the Security
Business that has used, generated, stored or disposed of any Hazardous
Materials, nor to the best of Seller's knowledge after due inquiry has there
been any Hazardous Materials disposed of by any third party on any property
owned, operated or leased by Seller and used in connection with the Security
Business. The term "Hazardous Materials" includes hazardous waste, hazardous
substances, toxic substances and all related materials, including all materials
and substances regulated by The Comprehensive Environmental Response,
Compensation and Liability Act of 1989, The Resource Conservation and Recovery
Act of 1976, The Superfund Amendments and Reauthorization Act of 1986, The
Clean Water Act, The Clean Air Act, The Toxic Substance Control Act, all as
amended from time to time, and/or any other applicable federal, state or local
environmental law, statute, rule, regulation or ordinance.
3.19 Disclosure.
No representation or warranty by Seller in this Agreement or any Schedule
or Exhibit, or any statement, list or certificate furnished or to be furnished
by Seller pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents, warrants and
covenants to Seller and agrees that as of this date and through and including
the Closing Date:
4.1 Organization of Buyer.
Buyer is a corporation duly incorporated and organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
requisite corporate power and authority to own or lease all of the Assets to be
Acquired, to own and operate the Security Business, to carry on its business as
now conducted, to enter into this Agreement and to perform the terms of this
Agreement. Buyer is qualified as a foreign corporation in the State of
Virginia.
4.2 Authority of Buyer.
Buyer has full power and authority to enter into this Agreement, to
consummate these transactions and to comply with the terms, conditions and
provisions hereof. This Agreement has been duly authorized, executed and
delivered by Buyer and is, and each other agreement or instrument of Buyer
contemplated hereby will be, the legal, valid and binding agreement of Buyer,
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement and the other agreements of Buyer contemplated
hereby have been duly authorized and approved by the board of directors of
Buyer and do not require any further authorization or the consent of any third
party. Neither the execution and delivery of this Agreement nor the
consummation of these transactions by Buyer will conflict with or result in any
violation of or constitute a default under any term of (i) the Certificate of
Incorporation or By-laws of Buyer, or (ii) to Buyer's knowledge, any agreement,
mortgage, debt instrument, indenture, or other instrument, judgment, decree,
order, award, law or regulation by which Buyer is bound.
4.3 Broker or Finder.
Neither Buyer nor any party acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary
for or on account of the transactions contemplated by this Agreement.
4.4 Compliance with Law.
Buyer has complied with all laws, regulations, rules, writs, injunctions,
ordinances, franchises, decrees or orders of any Federal or state court or of
any municipal or governmental department, commission, board, bureau, agency or
instrumentality which are applicable to Buyer's operation of the Security
Business after Closing, except where the failure to so comply would not have a
material adverse effect on the operation of the Security Business after
Closing.
4.5 Financing.
Buyer has the availability of financing through State Street Bank & Trust
Company ("State Street") to complete the transactions contemplated by this
Agreement, subject to State Street's final right of approval of the general
form and substance of this Agreement.
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4.6 Disclosure.
No representation or warranty by Buyer in this Agreement or any Schedule
or Exhibit, or any statement, list or certificate furnished or to be furnished
by Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
ARTICLE V
ACTIONS PRIOR TO THE CLOSING DATE
The parties covenant and agree to take the following actions between the
date hereof and the Closing Date:
5.1 Investigation.
Seller shall afford Buyer and its representatives, so as not to interfere
with the conduct of Seller's business, reasonable access during normal business
hours to the properties, facilities and equipment, and books and records of the
Security Business necessary to conduct due diligence. Seller acknowledges that
Buyer also desires to contact a random sample of Seller's customers in order to
explore customer satisfaction with various aspects of Seller's service (e.g.,
alarm monitoring dispatch, technical service and billing). Seller acknowledges
that Buyer will conduct such survey as if on behalf of Seller and in accordance
with the script agreed to between Buyer and Seller and Seller agrees to
cooperate with Buyer in making such contact. Buyer agrees to make the results
of any such survey available to Seller. It is the parties' intent that Buyer
shall have full opportunity to investigate the business affairs of the Security
Business.
5.2 Preservation of Representations and Warranties.
(a) Buyer and Seller shall refrain from knowingly taking any
action which would render untrue any representation, warranty or covenant
contained in this Agreement, and shall not knowingly omit to take any action,
the omission of which would render untrue any such representation, warranty or
covenant. Promptly upon the occurrence of, or promptly upon Seller becoming
aware of the impending or threatened occurrence of, any material event which
would cause any of the representations or warranties of Seller contained
herein, or in any Schedule or Exhibit, to be materially inaccurate, Seller
shall give detailed written notice thereof to Buyer and Seller shall use its
best efforts to prevent or promptly remedy the same.
(b) Buyer and Seller shall promptly notify the other party of any
action, suit or proceeding that shall be instituted or threatened against such
party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Seller shall promptly notify Buyer
of any lawsuit, claim, proceeding or investigation that may be threatened,
brought, asserted or commenced against Seller, and of any damage, destruction
or other casualty, whether or not insured, to the Assets to be Acquired.
5.3 Consents and Approvals.
Promptly after the execution of this Agreement and in any event prior to
Closing, Seller shall obtain all necessary third-party consents and approvals.
5.4 Public Announcements.
Neither Buyer nor Seller shall, without the approval of the other party
(which may not be unreasonably withheld), make any press release or other
public announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that
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such party shall be so obligated by law, in which case the other party shall be
advised and Buyer and Seller shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
5.5 Exclusive Dealing.
Seller and its affiliates shall deal exclusively with Buyer with respect
to the transactions contemplated hereby and shall not solicit, encourage or
entertain offers of inquiry (nor shall Seller or any of its affiliates
authorize or permit any director, officer, employee, attorney, accountant or
other representative or agent to solicit, encourage or entertain offers or
inquiries) from other companies, persons or entities, provide information to or
participate in any discussions or negotiations with any companies, persons or
entities with a view to an acquisition of any of the Assets to be Acquired or
all or substantially all of the Security Business or any interest therein.
5.6 Lien Searches.
Seller shall have delivered to Buyer, at Seller's expense, at least one
(1) week prior to the Closing Date, lien searches performed by Seller against
Seller and any fictitious names used by Seller in connection with the Security
Business showing all UCC-1 financing statements, federal, state or local tax
liens, unsatisfied judgments and pending litigation filed against the Security
Business recorded with the Virginia Secretary of State's Office.
5.7 Maintenance of Business.
Seller shall continue to operate the Security Business, shall maintain the
Assets to be Acquired and shall keep all of its business books, records and
files in connection with the Security Business all in the ordinary course of
business in accordance with past practices consistently applied. Seller shall
not sell, transfer, assign or permit the creation of any lien, charge or
encumbrance on any of the Assets to be Acquired. Seller shall not permit the
amendment or cancellation of any of the Business Documents without the prior
written consent of Buyer except in the ordinary course of business consistent
with past practice. Seller shall not enter into any contract or commitment nor
incur any indebtedness or other liability or obligation of any kind relating to
the Security Business that is not in the ordinary course of business without
the prior written consent of Buyer. Seller shall not acquire any accounts or
any assets from any third party. Seller shall not itself, nor shall Seller
permit any of its officers, directors, shareholders, agents or employees to pay
any of Seller's accounts receivable from customers (excluding credit
adjustments in the ordinary course of business consistent with past practice).
Seller shall not decrease its customer rates or conduct any marketing programs,
including any amnesty programs, involving credits for free service or reduced
rates for service. Seller shall pay off and obtain title to any of the Assets
to be Acquired that are currently leased from third parties,if applicable
(other than any leases for the offices or other facilities of the Security
Business).
5.8 Insurance.
Seller shall maintain in full force and effect all existing insurance
policies to cover and protect the Assets to be Acquired against damage or
destruction.
5.9 Organization and Transition.
(a) Seller shall use all reasonable efforts consistent with sound
business judgment to preserve intact the present business or organization of
the Security Business, to retain the services of its present subcontractors, to
preserve its relationships with customers, suppliers and others having business
relationships with it and to maintain the goodwill enjoyed within the areas
served by the Security Business. Seller and Buyer shall provide each of the
customers of the Security Business with written
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notice of the transactions contemplated by this Agreement pursuant to a letter
in the form of Exhibit 6. Buyer and Seller shall share equally the cost of
such notice. Seller shall cooperate with Buyer to cause an expeditious
conversion of the accounts. Seller agrees to deliver to Buyer all information
reasonably requested by Buyer's central station, including the standard
emergency information for each customer. Seller will deliver originals of the
customers' contracts and all files and documents relating thereto to Buyer at
Closing. If requested to do so by Buyer, Seller will assist in the orderly
transition of the customer base after Closing by maintaining the billing
information for the accounts and mailing the customers' invoice for the month
of July, 1995 (with Buyer's return payment envelope included in such invoice)
and in consideration thereof, Buyer will pay to Seller the sum of $1.00 per
invoice. Seller shall thereafter transfer the billing information to Buyer and
provide Buyer with such reasonable assistance as may be necessary in order to
permit Buyer to mail invoices for the month of August, 1995.
(b) Seller shall, at its expense, either (i) secure new telephone
numbers and/or lines for those customers which share telephone numbers and/or
lines with third parties, or (ii) Seller shall provide Buyer a credit against
the Purchase Price equal to $35.00 for each customer that requires a
post-closing "chip change" service call by Buyer (the "Chip Change Credit").
Accounts which may require a chip change are listed on Schedule J. Buyer
shall be entitled to payment of the Chip Change Credit from Escrow (on a
regular basis but no more often than monthly) from time to time as Buyer
incurs costs relating thereto, and Seller agrees to provide written notice to
the escrow agent in order to permit such amounts to be released to Buyer.
5.10 Consummation of Agreement.
Buyer and Seller shall use their best efforts to perform and fulfill all
obligations and conditions on their part to be performed and fulfilled under
this Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out.
5.11 Accounts Receivable.
At least three (3) days prior to the Closing Date, Seller shall deliver to
Buyer an accurate and complete listing of all of the Accounts Receivable which
existed as of a date which is not more than seven (7) days prior to the Closing
Date. Seller acknowledges that all of the Accounts Receivable existing on the
Closing Date are part of the Assets to be Acquired and shall be transferred to
Buyer on the Closing Date in accordance with the terms of Section 2.4.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
On or prior to the Closing Date, Seller shall have satisfied each of the
following conditions, unless waived in writing by Buyer:
6.1 Covenants and Warranties.
There shall have been no breach by Seller in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Seller contained or referred to herein shall be true and correct in all
material respects on the Closing Date as though made on the Closing Date, and
except for changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Buyer or
any transaction contemplated by this Agreement; and there shall have been
delivered to Buyer a certificate to that effect, dated the Closing Date, from
the President or a Vice President of Seller.
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6.2 Corporate Action.
Seller shall have taken all corporate action necessary to approve these
transactions, and Seller shall have furnished Buyer with a certification
relating thereto, in form and substance reasonably satisfactory to counsel for
Buyer.
6.3 No Restraint or Litigation.
No action, suit or proceeding shall be pending or threatened by any third
party or governmental or regulatory agency to restrain, prohibit or otherwise
challenge the legality or validity of these transactions or of any of the
Assets to be Acquired.
6.4 Necessary Consents and Permits.
The parties shall have received all of the consents listed on Schedule N
(or, in the case of subcontractors, Buyer shall have entered into separate
agreements with such subcontractors in a form acceptable to Buyer or shall have
received an assignment of a nonsolicitation agreement with each subcontractor
in a form acceptable to Buyer), including the consent or release of any lender
to Seller, and such consents shall be valid and enforceable on the Closing
Date.
6.5 Opinion of Counsel.
Seller shall have delivered to Buyer the legal opinion of local Virginia
counsel for Seller, duly executed and in the form of Exhibit 3 and the legal
opinion of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Seller's general counsel, duly executed and in the
form of Exhibit 4.
6.6 Adverse Change.
There shall not have occurred any material adverse change in the Security
Business or in the condition of the Assets to be Acquired.
6.7 Documents and Certificates.
Seller shall have delivered or caused to be delivered to Buyer:
(a) an Assignment and ▇▇▇▇ of Sale in the form of Exhibit 5, duly
executed;
(b) the Nonsolicitation Agreement described in Section 2.6, duly
executed;
(c) a recent Certificate of Good Standing issued by the
Secretaries of State of Delaware and Virginia evidencing Seller's corporate
good standing in such states, together with telephone confirmation on the date
of Closing;
(d) a certificate issued by the Department of Taxation and
Revenue of the State of Virginia certifying that there are no tax liens of
record against Seller;
(e) the certificate required pursuant to Section 6.1;
(f) the certificate of insurance required pursuant to Section
8.1; and
(g) all other documents and instruments reasonably requested by
Buyer in connection with the consummation of the transactions contemplated by
this Agreement.
6.8 Satisfaction of Debts.
Seller shall have made appropriate arrangements for the termination of any
liens and encumbrances on file against any of the Assets to be Acquired.
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6.9 Accounts Receivable.
Seller shall have delivered to Buyer the list of Accounts Receivable
described in Section 5.11.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
On or prior to the Closing Date, Buyer shall have satisfied each of the
conditions set forth in Sections 7.1 through 7.5 and the condition set forth in
Section 7.6 shall have been satisfied, unless waived in writing by Seller:
7.1 Covenants and Warranties.
There shall have been no breach by Buyer in the performance of any of its
covenants and agreements herein; each of the representations and warranties of
Buyer contained or referred to herein shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date, except for
changes therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Seller or any transaction
contemplated by this Agreement; and there shall have been delivered to Seller a
certificate to such effect, dated the Closing Date, and signed on behalf of
Buyer by the President or a Vice President.
7.2 Corporate Action.
Buyer shall have taken all corporate action necessary to approve these
transactions, and Buyer shall have provided Seller with certified copies of the
resolutions adopted by its Board of Directors in form and substance reasonably
satisfactory to counsel for Seller, in connection with such transactions.
7.3 Delivery of Purchase Price.
Buyer shall have delivered the Purchase Price to Seller, less the amount
of the Escrow and any adjustment made pursuant to Section 2.1(c).
7.4 No Restraint or Litigation.
No action, suit or proceeding shall be pending or threatened by any third
party or governmental or regulatory agency to restrain, prohibit or otherwise
challenge the legality or validity of these transactions.
7.5 Documents and Certificates.
Buyer shall have delivered or caused to be delivered to Seller:
(a) the certificate required pursuant to Section 7.1;
(b) an assumption agreement in a form reasonably satisfactory to
Seller; and
(c) all other documents and instruments reasonably requested by
Seller in connection with the consummation of the transactions contemplated by
this Agreement.
7.6 Minimum Purchase Price.
Seller's obligation to complete the transactions contemplated hereby is
conditioned upon a minimum Purchase Price, calculated at Closing in accordance
with Article 2, of at least $400,000. Seller shall not have the option under
this provision to rescind this transaction should the Closing occur, and Seller
acknowledges that post-closing adjustments could result in the Purchase Price
falling below this level.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller.
Seller shall indemnify, hold harmless, defend and bear all costs of
defending Buyer, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceedings, demand, assessment or judgment to or against Buyer
(collectively referred to as the "Aggregate Net Loss") arising out of or in
connection with:
(a) any debt, obligation, commitment or liability of Seller which
is not expressly assumed by Buyer herein or which is expressly assumed by
Seller herein, whether arising prior to, on or after the Closing Date and
whether or not disclosed to Buyer herein;
(b) any breach or violation of, or nonperformance by, Seller of
any of its representations, warranties, covenants or agreements contained in
this Agreement or in any document, certificate or schedule required to be
furnished pursuant to this Agreement;
(c) any liability incurred by Buyer as a result of the waiver of
compliance with the bulk transfer laws contained in Section 8.5.
Notwithstanding the foregoing, Seller shall have no liability to indemnify
Buyer (a) for any Aggregate Net Loss (other than in connection with a purchase
price adjustment as herein provided or as a result of fraud or willful
misconduct) until the total Aggregate Net Losses incurred by Buyer exceed
$6,000, and then only to the extent of such excess, and (b) for the amount of
any Aggregate Net Losses (other than as a result of fraud or willful
misconduct) exceeding the Purchase Price.
8.2 Indemnification by Buyer.
Buyer shall indemnify, hold harmless, defend and bear all costs of
defending Seller, together with its successors and assigns, from, against and
with respect to any and all damage, loss, deficiency, expense (including any
reasonable attorney and accountant fees, legal costs or expenses), action,
suit, proceeding, demand, assessment or judgment to or against Seller arising
out of or in connection with:
(a) any breach or violation of, or nonperformance by, Buyer of
any of its representations, warranties, covenants or agreements contained in
this Agreement or in any document, certificate or schedule required to be
furnished pursuant to this Agreement;
(b) any failure by Buyer to satisfy any of the liabilities assumed
pursuant to Section 1.3 in accordance with their terms.
8.3 Notice of Claims.
If any claim is made by or against a party which, if sustained, would give
rise to a liability of the other party hereunder, that party (the "Claiming
Party") shall promptly cause notice of the claim to be delivered to the other
party (the "Indemnifying Party") and shall afford the Indemnifying Party and
its counsel, at the Indemnifying Party's sole expense, the opportunity to
defend or settle the claim (and, with respect to claims made by third parties,
the Claiming Party shall have the right to participate at its sole expense).
Any notice of a claim shall state, with reasonable specification, the alleged
basis for the claim and the amount of liability asserted by or against the
other party by reason of the claim.
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Alternatively, if notice is given and the Indemnifying Party fails to assume
the defense of the claim within ten (10) days thereof, the claim may be
defended, compromised or settled by the Claiming Party without the consent of
the Indemnifying Party and the Indemnifying Party shall remain liable under
this Article VIII.
8.4 Survival.
The rights of Buyer and Seller to assert indemnification claims for
breaches of representations and warranties shall survive the Closing Date and
shall expire: (a) with respect to claims for breaches of the representations
and warranties of Seller in Sections 3.1, 3.2, 3.6, 3.7, 3.8(a), 3.8(b),
3.8(c), 3.9(d), 3.12, 3.15, 3.16, 3.17, 3.18 and 3.19, on the third (3rd)
anniversary of the Closing Date; (b) with respect to claims for breaches of
the representations and warranties in Sections 3.3, 3.4, 3.5, 3.8(d), 3.9(a),
3.9(b), 3.9(c), 3.10, 3.11 and 3.13, at the end of the eighteenth (18th) month
after Closing; (c) with respect to claims for breaches of the representations
and warranties of Buyer, on the third (3rd) anniversary of the Closing Date.
The indemnification obligations of Seller and Buyer with respect to third-party
claims and claims relating to the nonpayment of taxes under any federal, state,
county, or other local taxing statutes, upon the expiration of ninety (90) days
following the date on which the running of the statute of limitations with
respect to any such tax or claim shall bar the assessment and collection of
such tax or claim. All other covenants and obligations of the parties
hereunder shall survive the Closing Date without limitation.
8.5 Waiver of Bulk Sales Compliance.
In reliance upon the indemnity of Seller in Section 8.1(c), Buyer hereby
waives compliance by Seller with any bulk sales or transfer law applicable to
Seller and/or this transaction.
8.6 Resolution of Claims.
Should Buyer and Seller be unable to agree as to the amount of any losses
under this Article VIII, , either Buyer or Seller may apply to the American
Arbitration Association under its Commercial Arbitration Rules for the
appointment of an Arbitrator for an arbitration to take place in either
Birmingham, Alabama or Denver, Colorado. Buyer and Seller agree that such
locations are the most convenient forum for both parties. Such arbitrator
shall proceed in accordance with the Commercial Arbitration Rules of the
American Arbitration Association to determine the Aggregate Net Loss and to
certify such loss to Buyer and Seller. Such arbitration and determination
shall be final and binding on Buyer and Seller, judgment may be entered upon
such determination and award in any court having jurisdiction thereof, and
Buyer and Seller agree that no appeals shall be taken therefrom. Buyer may
offset against amounts due under the Escrow Agreement any indemnification or
other obligations due to Buyer from Seller under or in connection with this
Agreement. Seller agrees to name Buyer as an additional insured or certificate
holder under its general liability insurance policy and to deliver a
certificate of insurance to Buyer evidencing such coverage at Closing.
ARTICLE IX
DAMAGE TO PROPERTY AND RISK OF LOSS
The risk of any loss or damage to the Assets to be Acquired and the
Security Business resulting from fire, theft or any other casualty (except
reasonable wear and tear) shall be borne by Seller at all times prior to
Closing and shall shift to Buyer upon transfer of title to the Assets to be
Acquired at Closing. In the event that any such loss or damage shall be
sufficiently substantial so as to preclude and prevent resumption of normal
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operations of any material portion of the Security Business within five (5)
days from the occurrence of the event resulting in such loss or damage, Seller
shall immediately notify Buyer in writing of Seller's inability to resume
normal operations or to replace or restore the lost or damaged property, and
Buyer, at any time within thirty (30) days after receipt of such notice, may
elect either (a) to waive such defect and proceed toward consummation of the
transaction in accordance with terms of this Agreement, or (b) to terminate
this Agreement. If Buyer elects to consummate this transaction despite such
loss or damage and does so, there shall be no diminution of the Purchase Price
on account of such loss or damage and all insurance proceeds payable as a
result of the occurrence of the event resulting in loss or damage to the
property, plus the amount of any deductible upon such insurance coverage, shall
be delivered to Buyer, or the rights thereto shall be assigned to Buyer if not
yet paid over to Seller.
ARTICLE X
CERTAIN POST CLOSING COVENANTS
10.1 Seller's Monitoring Obligations.
After Closing, Seller shall monitor the accounts listed on Schedule J
which are designated on such Schedule and agreed to by Buyer and Seller as
clearly requiring a chip change at the contract monitoring fees set forth on
such Schedule in accordance with a Third Party Monitoring Agreement in the form
of Exhibit 7A until changeover to Buyer's monitoring facilities has been
completed. In addition, Seller agrees that for a period of up to eighteen (18)
months from Closing, Seller will monitor at no charge to Buyer and otherwise in
accordance with the terms of the Third Party Monitoring Agreement any other
accounts sold to Buyer hereunder which are not transferred to Buyer's central
station as a result of the line swing at Closing, including any accounts on
Schedule J which are not designated as clearly requiring a chip change. Buyer
and Seller shall coordinate periodically to verify the transfer of the accounts
to Buyer's central station. Buyer agrees to name Seller as an additional
insured or certificate holder under Buyer's general liability insurance policy
with respect to accounts being monitored by Seller pursuant to this Section
10.1.
10.2 Buyer's Monitoring Obligations.
In the event that any accounts not acquired by Buyer hereunder are
transferred to Buyer's central station, Buyer shall monitor such accounts
pursuant to a Third Party Monitoring Agreement in the form of Exhibit 7B,
provided that Seller has provided Buyer with all necessary information in order
to conduct such monitoring, at Buyer's standard monitoring rates for up to
twelve (12) months after Closing; provided that Seller shall have the
obligation to transfer such accounts out of Buyer's central station as soon as
reasonably practical and in any event prior to the termination of such twelve
(12) month period.
ARTICLE XI
TERMINATION OF AGREEMENT
In the event Buyer fails to consummate the purchase of the Assets to be
Acquired on or before the Termination Date 5 and Seller has complied with all
of the material terms and conditions on its part contained herein, then this
Agreement shall be automatically terminated and Seller shall have the right to
seek monetary damages arising as a result of Buyer's breach. In the event
Seller fails to consummate the sale of the Assets to be Acquired on or before
the Termination Date and Buyer has complied with all of the material
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terms and conditions on its part contained herein, then this Agreement shall be
automatically terminated and Buyer shall have the right, in its discretion, to
seek either specific performance of Seller's obligations hereunder (without the
posting of a bond or other security) or monetary damages arising as a result of
Seller's breach.
ARTICLE XII
GENERAL PROVISIONS
12.1 Survival of Obligations.
Seller and Buyer acknowledge that the representations, warranties,
covenants and agreements of Seller and Buyer contained herein form an integral
part of the consideration given to Buyer in exchange for the Purchase Price and
to Seller in exchange for the Assets to be Acquired, without which Buyer would
be unwilling to purchase, and Seller would be unwilling to sell, the Assets to
be Acquired. Notwithstanding any investigation and review made by Buyer
pursuant to this Agreement, Seller and Buyer agree that all of the
representations, warranties, covenants and agreements of Seller and Buyer
contained in this Agreement or in any exhibit, schedule, statement, report,
certificate or other document or instrument required to be delivered pursuant
to this Agreement shall survive the making of this Agreement, any investigation
or review made by or on behalf of the parties hereto and the Closing and, with
respect to the representations and warranties referenced in Section 8.4, shall
survive in accordance with the terms of Section 8.4.
12.2 Transfer Charges and Taxes.
Seller shall pay all stamp, sales, transfer, use, excise, license income,
or other taxes or fees, federal, state or local imposed by law in respect of
any and all transfers pursuant to this Agreement.
12.3 Arbitration.
Except with respect to Buyer electing to bring an action for specific
performance of this Agreement (which action shall be commenced and settled in a
court of competent jurisdiction), any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in Birmingham, Alabama or Denver, Colorado, in accordance with the
Rules of the American Arbitration Association for Commercial Arbitration. IN
THE EVENT OF ANY COURT PROCEEDING HEREUNDER, THE PARTIES WAIVE THEIR RIGHT TO
TRIAL BY JURY.
12.4 Confidentiality.
Buyer and Seller agree that they will treat in confidence all documents,
materials and other information which they have obtained regarding the other
party during the course of the negotiations leading to the consummation of
these transactions, the investigation provided for herein and the preparation
of this Agreement and other related documents. In the event these transactions
are not consummated, all copies of nonpublic documents and material which have
been furnished in connection therewith shall be promptly returned to the party
furnishing such documents and material, shall continue to be treated as
confidential information and shall not be used for the benefit of the party who
returned such confidential information. Neither Buyer nor Seller shall,
without the approval of the other party (which may not be unreasonably
withheld), make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that
such party shall be so obligated by law (including any legal obligation imposed
on Seller in connection with its status as a publicly-held corporation), in
which case the other party shall be advised and Buyer and Seller shall use
their reasonable efforts to cause a mutually agreeable release or announcement
to be issued. Notwithstanding the
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foregoing, in the event these transactions are consummated, Buyer shall have
the right without Seller's consent to announce the completion of such
transactions in the form of a "tombstone" announcement.
12.5 Governing Law.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Alabama, without regard to its
conflicts of law provisions.
12.6 Notices.
All notices or other communications required or permitted hereunder shall
be in writing and shall be deemed given or delivered when delivered personally,
by registered or certified mail, by legible facsimile transmission or by
overnight courier (fare prepaid) addressed as follows:
If to Buyer, to: with a copy to:
Masada Security, Inc. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Professional
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Corporation
Vice President Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇▇ 58th Floor, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇ Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to Seller, to: with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President General Counsel
Alert Centre, Inc. Alert Centre, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇ Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
or to such address as such party may indicate by a notice delivered to the
other parties hereto. Notice shall be deemed received the same day (when
delivered personally), five (5) days after mailing (when sent by registered or
certified mail), the same business day (when sent by facsimile) and the next
business day (when delivered by overnight courier). Any party to this
Agreement may change its address to which all communications and notices may be
sent by addressing notices of such change in the manner provided.
12.7 Assignment.
This Agreement may not be assigned by Seller without the prior written
consent of Buyer. Buyer shall have the right to assign this Agreement, the
Schedules and Exhibits and the rights and obligations hereunder without the
prior written consent of Seller to (i) its subsidiaries or affiliates,
successors and assigns, and (ii) to State Street Bank and Trust Company
collaterally as partial security for providing the financing for this
transaction. To the extent this Agreement is assigned by Buyer, which is a
corporation, to a subsidiary or affiliate of Buyer that is a partnership, all
direct and indirect references herein to Buyer's corporate standing shall be
deemed to refer to partnership standing. If Buyer is a partnership, this
Agreement is nonrecourse to the partners of Buyer.
12.8 Entire Agreement; Amendments.
This Agreement contains the entire agreement between the parties, wholly
cancels, terminates and supersedes any and all previous and/or contemporaneous
oral agreements, negotiations, commitments and writings between the parties
hereto with respect to such subject matter, including the Confidentiality
Agreement between Buyer and Seller dated December 7, 1994. No change,
modification, extension,
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termination, notice of termination, discharge, abandonment or waiver of this
Agreement or any of the provisions hereof, nor any representation, promise or
condition relating to this Agreement, shall be binding upon any party hereto
unless made in writing and signed by such party.
12.9 Interpretation.
Article titles and headings to Sections are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of any of the provisions of this Agreement. All references to
Sections and subsections contained in this Agreement refer to the Sections and
subsections of this Agreement. All references to Schedules or Exhibits
contained in this Agreement are references to the Schedules or Exhibits
described on the list immediately following the signature page hereto. All
references to the word "including" shall have the same meaning as the phrase
"including without limitation." Any and all Schedules, Exhibits, statements,
reports, certificates or other documents or instruments referred to herein or
attached hereto, including the "Background" portion of this Agreement, are
incorporated herein by reference as though fully set forth at the point
referred to in this Agreement. There shall be no presumption against any party
on the ground that such party was responsible for preparing this Agreement or
any part hereof.
12.10 Waivers.
Any term or provision of this Agreement may be waived, or the time for its
performance may be extended, by the party or parties entitled to the benefit
thereof, but any such waiver must be in writing and must comply with the notice
provisions contained in Section 12.6. The failure of any party to enforce at
any time any provision of this Agreement shall not be construed to be a waiver
of such provision, nor in any way to affect the validity of this Agreement or
any part hereof or the right of any party thereafter to enforce each and every
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
12.11 Expenses.
Buyer and Seller will each pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its performance and
compliance with all agreements and conditions herein on its part to be
performed or complied with, including the fees, expenses and disbursements of
its counsel and accountants; provided, however, that in any action to enforce
the terms of this Agreement, the substantially prevailing party in such action
shall be entitled to recover its reasonable attorneys' fees and costs incurred
in connection with such action.
12.12 Partial Invalidity.
Wherever possible, each provision hereof shall be interpreted in such
manner as to be effective and valid under applicable law, but in case any one
or more of these provisions shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein, unless the deletion of
such provision or provisions would result in such a material change as to cause
the completion of these transactions to be unreasonable.
12.13 Further Assurances.
From time to time following the Closing Date, Seller shall (a) on a weekly
basis deliver to Buyer any cash or other property that it may receive in
respect of receivables relating to the business and operations of the Security
Business (whether attributable to periods before or after the Closing Date),
and (b) at the request of Buyer and without further consideration, execute and
deliver to Buyer such other instruments of conveyance and transfer as Buyer may
reasonably request or as
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may be otherwise necessary to more effectively convey and transfer to, and vest
in, Buyer and put Buyer in possession of, any part of the Assets to be
Acquired. In the case of any agreement, contract, lease, easement or other
commitment which is included in the Assets to be Acquired but which cannot be
transferred or assigned effectively without the consent of a third party, whose
consent has not been obtained prior to Closing, Seller shall cooperate with
Buyer at Buyer's request in trying to promptly obtain such consent.
12.14 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be considered an original instrument and all of which together shall be
considered one and the same agreement, and shall become effective when
counterparts, which together contain the signatures of each party hereto, shall
have been delivered to Buyer and Seller. Delivery of executed signature pages
hereof by facsimile transmission shall constitute effective and binding
execution and delivery hereof.
12.15 Intended Beneficiary.
Buyer and Seller acknowledge that the Purchase Price will be funded from a
loan provided by State Street Bank and Trust Company to Buyer; therefore, Buyer
and Seller further acknowledge that State Street Bank and Trust Company is an
intended beneficiary of this Agreement and shall rely upon the representations,
warranties and agreements of Buyer and Seller contained herein.
12.16 Consent to Jurisdiction, Service and Venue.
For the purpose of any suit, action or proceeding arising out of or
relating to this Agreement, Seller hereby irrevocably consents and submits to
the jurisdiction and venue of any of the courts of the State of Alabama or of
any federal court located in the Southern District of Alabama and Buyer hereby
irrevocably consents and submits to the jurisdiction and venue of any of the
courts of the State of Colorado or of any Federal court located in the District
of Colorado. Seller and Buyer each waive any objections which they may now or
hereafter have to the venue of any such suit, action or proceeding brought in
such courts and any claim that such suit, action or proceeding brought in such
courts has been brought in an inconvenient forum. The provisions of this
Section shall not limit or otherwise affect the right of Buyer or Seller to
institute and conduct an action in any other appropriate manner, jurisdiction
or court.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
SELLER: ALERT CENTRE, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
By: President & CEO
-----------------------------
BUYER: MASADA SECURITY, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
and CEO
-----------------------------
29
List of Schedules
Schedule Description
A Customer Accounts, List of Services and Rates,
Free or Discounted Service, Third Party Monitoring
B Other Business Documents
C Telephone Lines and Numbers
D Allocation of Purchase Price
E Liens and Encumbrances
F Litigation and Claims
G Insurance
H Customers without Written Contracts
I Prior Acquisitions
J Chip Change Accounts
K Licenses and Permits
L Subcontractors without Nonsolicitation Agreements
or Written Agreements
M Accounts with Excessive False Alarms History
N Consents and Notices
List of Exhibits
Exhibit Description
1 Escrow Agreement
2 Nonsolicitation Agreement
3 Opinion of Seller's Virginia Counsel
4 Opinion of Seller's General Counsel
5 Assignment and ▇▇▇▇ of Sale
6 Customer Notice
7A Third Party Monitoring Agreement - Seller
7B Third Party Monitoring Agreement - Buyer
8 Insurance Summary