STOCK PURCHASE AGREEMENT BY AND BETWEEN SYS AND THE SOLE STOCKHOLDER OF REALITY BASED IT SERVICES, LTD. APRIL 2, 2006
Exhibit
2.9
BY
AND BETWEEN
AND
THE SOLE STOCKHOLDER OF
REALITY
BASED IT SERVICES, LTD.
APRIL
2, 2006
TABLE
OF CONTENTS
ARTICLE
I THE
ACQUISITION
1.1
The
Acquisition
1.2 The
Closing
ARTICLE
II CONVERSION
OF SECURITIES AND ESCROW
2.1
Acquisition
Consideration; Transfer of Capital Stock
2.2 Earnout
Consideration
2.3 SYS
Stock
2.4 Fractional
Shares; Adjustments
2.5 Exchange
of Certificates
2.6 Escrow
Accounts
2.7 Internal
Revenue Code Election
ARTICLE
III REPRESENTATIONS
AND WARRANTIES OF SYS
3.1
Organization
and Standing
3.2 Corporate
Power and Authority
3.3 Conflicts;
Consents and Approvals
3.4 Actions
3.5 Financial
Ability
3.6 Capitalization
of SYS
3.7 Brokerage
and Finders’ Fees
3.8 Board
Recommendation; Required Vote
3.9 SYS
SEC
Documents
3.10 Books
and
Records
3.11 No
Undisclosed Liabilities
3.12 No
Material Adverse Change
ARTICLE
IV REPRESENTATIONS
AND WARRANTIES OF THE STOCKHOLDER
4.1
Organization
and Standing
4.2 Subsidiaries
4.3 Power
and
Authority
4.4 Capitalization
of RBIS, Ltd.
4.5 Conflicts;
Consents and Approvals
4.6 Brokerage
and Finders’ Fees
4.7 Books
and
Records; Financial Statements
4.8 Compliance
with Law
4.9 Actions
4.10 No
Material Adverse Change
4.11 Taxes
4.12 Intellectual
Property
4.13 Title
to
Assets and Properties
4.14 Employee
Benefit Plans
4.15 Contracts
4.16 Labor
Matters
4.17 Undisclosed
Liabilities
4.18 Operation
of RBIS, Ltd.’s Business; Relationships
4.19 Permits
4.20 Real
Property
4.21 Environmental
Matters
4.22 Accounts
Receivable
4.23 Insurance
4.24 Product
or Service Warranty
4.25 Data
Protection Matters
4.26 Foreign
Corrupt Practices Act
4.27 Government
Contracts
4.28 Relations
with Governments
4.29 No
Existing Discussions
4.30 Review
of
SYS SEC Documents
4.31 Interested
Party Transactions
4.32 Payments
to Stockholder and Others
4.33 Disclosure
ARTICLE
V COVENANTS
OF THE PARTIES
5.1
Mutual
Covenants
5.2 Covenants
of SYS
5.3 Covenants
of the Stockholder
ARTICLE
VI CONDITIONS
6.1
Conditions
to the Obligations of Each Party
6.2 Conditions
to Obligations of the Stockholder
6.3 Conditions
to Obligations of SYS
ARTICLE
VII GENERAL
SURVIVAL AND INDEMNIFICATION
7.1
Survival
of Representations and Warranties
7.2 Indemnification
7.3 Limitations
ARTICLE
VIII MISCELLANEOUS
8.1
Notices
8.2 Interpretation
8.3 Counterparts
8.4 Entire
Agreement
8.5 Third-Party
Beneficiaries
8.6 Governing
Law; Venue
8.7 Arbitration
8.8 Specific
Performance
8.9 Assignment
8.10 Expenses
8.11 Severability
8.12 Amendment
8.13 Attorneys’
Fees
EXHIBITS
|
Escrow
Agreement
|
Exhibit
A
|
|
Investment
Representation Certificate
|
Exhibit
B
|
|
General
Release of Claims
|
Exhibit
C
|
|
Indemnification
Agreement
|
Exhibit
D
|
SCHEDULES
|
RBIS,
Ltd. Disclosure Schedule
|
Attached
|
This
Stock Purchase Agreement (this “Agreement”) is made and entered into as of
April 2, 2006 by and among SYS, a California corporation (“Buyer” or
“SYS”), and ▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual residing in the State of
Maryland, who is the sole shareholder of Reality Based IT Services, Ltd.
(“RBIS,
Ltd.”) and is referred to herein as the “Stockholder,” the “Shareholder,” or the
“RBIS, Ltd. Stockholder.”
PRELIMINARY
STATEMENTS
WHEREAS,
the Boards of Directors of SYS and Stockholder have determined that the
acquisition of RBIS, Ltd. by SYS in the manner contemplated herein (the
“Acquisition”), is desirable and in the best interests of Stockholder and the
stockholders of SYS;
WHEREAS,
SYS and the Stockholder desire to make certain representations, warranties,
covenants and agreements in connection with the Acquisition and also to
prescribe various conditions to the Acquisition.
NOW,
THEREFORE, in consideration of these premises and their promises hereinafter
set
forth, the parties hereto agree as follows:
ARTICLE
I
THE
ACQUISITION
1.1 The
Acquisition.
Upon
the terms and subject to the conditions set forth in this Agreement, SYS
shall
acquire from Shareholder all of the issued and outstanding shares of the
capital
stock of RBIS, Ltd. at the Closing.
1.2 The
Closing.
A
closing (the “Closing”) shall be held at the offices of SYS’s counsel, ▇▇▇▇,
Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP (“▇▇▇▇ ▇▇▇▇▇▇▇”), ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on April 3,
2006, or at such other date as SYS and the Stockholder may agree, provided
that
the conditions set forth in Article VI have been satisfied or waived on or
prior to such date. The date on which the Closing takes place is referred
to
herein as the “Closing Date.” For all purposes, the Closing shall be deemed to
be effective as of 6:00 p.m., Eastern Daylight Time, on April 2,
2006.
ARTICLE
II
CONVERSION
OF SECURITIES
AND ESCROW
2.1 Acquisition
Consideration; Transfer of Capital Stock.
2.1.1 At
the
Closing, the Stockholder shall sell to SYS, and SYS shall purchase from the
Stockholder, each share of RBIS, Ltd. Capital Stock issued and outstanding
on
the Closing Date free and clear of any and all liens and encumbrances, and
in
consideration thereof, and subject to Sections 2.2 and 2.6, SYS shall pay
Stockholder $9,476,462 (the “Closing Consideration”), with $5,635,877 (subject
to Section 2.6) payable in cash (the “Cash Consideration”), and $3,840,585
(subject to Section 2.6), payable in the form of shares of restricted SYS
Common Stock (valued at $3.987 per share, which is the average closing price
of
SYS Common Stock on the American Stock Exchange over the ten (10) trading
days
immediately preceding and including the trading day immediately preceding
the
Closing Date (the “Stock Consideration”).
2.1.2 Within
forty-five (45) days after the Closing Date or as soon as practicable
thereafter, and following notice to and discussions with Shareholder, SYS
shall
deliver to the Stockholder a Closing Date Balance Sheet for RBIS, Ltd. If
the
Working Capital of RBIS, Ltd. (total assets less total liabilities) reflected
on
the Closing Date Balance Sheet is more than $1,869,447, SYS shall pay the
Stockholder one dollar for each such dollar of excess (the “Closing Date Balance
Sheet Consideration”). The Closing Consideration and the Closing Date Balance
Sheet Consideration are referred to in this Agreement collectively as the
“Acquisition Consideration.” If the Working Capital reflected on the Closing
Date Balance Sheet is less than $1,869,447 then, for each dollar of such
deficit, SYS shall be paid from Escrow one dollar, first from the Escrow
Cash
Consideration and then from the Escrow Stock Consideration, as those terms
are
defined in Section 2.6.2. If in preparing the Closing Date Balance Sheet,
Buyer creates a reserve for the past due accounts receivable in the aggregate
amount of $306,677.08 from Integic Corporation under call 8 and from FEDSIM
under GSA Schedule Number GS35F0219M and subsequently RBIS, Ltd. collects
any
portion of that receivable, RBIS, Ltd. will pay Stockholder the lesser of
the
amount so collected or the reserve in cash and shares of SYS Common Stock,
to
the extent each was paid to SYS pursuant to the Escrow Agreement, within
five
(5) business days of its receipt of the collection.
2.2 Earnout
Consideration.
2.2.1 If
the
Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) of RBIS,
Ltd. for the period beginning with the Closing and ending June 30, 2006
exceeds $300,000, then Buyer shall pay the Stockholder on October 15, 2006
up to an additional $250,000 based on the following formula: the payment
amount
shall equal $250,000 multiplied by ((EBITDA achieved - $300,000)/$100,000)
where
the payment amount shall not be less than $0 or more than $250,000.
2.2.2 If
the
EBITDA of RBIS, Ltd. for the fiscal year ending June 30, 2007 exceeds
$1,500,000, then Buyer shall pay the Stockholder on October 15, 2007 up to
an additional $2,500,000 based on the following formula: the payment amount
shall equal $2,500,000 multiplied by ((EBITDA achieved - $1,500,000)/$500,000)
where the payment amount shall not be less than $0 or more than
$2,500,000.
2.2.3 Any
payment required by Sections 2.2.1 or 2.2.2 may be in cash and/or SYS
Common Stock at the discretion of SYS. SYS Common Stock issued as part of
any
such payment shall be valued based on the average closing price of SYS Common
Stock on its principal trading market over the last ten trading days of the
applicable fiscal year.
2.2.4 Payments
required by this Section 2.2 shall be referred to in this Agreement as
Earnout Consideration.
2.2.5 For
the
purposes of this Section 2.2, the determination of EBITDA shall be made
following notice to and discussions with Stockholder as if RBIS, Ltd. were
a
stand-alone business. Accordingly, EBITDA shall be determined without regard
to
the expenses of negotiating, documenting, and closing the Acquisition, or
the
general and administrative expense charge customarily applied to the business
units of SYS, nor shall any costs related to RBIS, Ltd. be paid or assumed
by
SYS. As the operator of RBIS, Ltd. following the Closing, Buyer, at its sole
discretion, may effect changes in the business of RBIS, Ltd., which may have
an
impact on the EBITDA of RBIS, Ltd. for the periods referenced in
Sections 2.2.1 and 2.2.2. Such changes may include, without limitation,
increases or decreases in salaries, the employment or dismissal of personnel,
the acceleration or delay of payments to creditors, the purchase or sale
of
inventory, the retention of independent contractors, the conduct of research
and
development, or any other business matter. Stockholder agrees that Buyer’s
exercise of discretion in this regard in good faith shall not be a basis
for
challenging the determination of whether or not RBIS, Ltd. has achieved the
EBITDA goals set forth in Sections 2.2.1 and 2.2.2. A change in the
business of RBIS, Ltd. shall be deemed to be in good faith if it is not made
primarily to prevent RBIS, Ltd. from achieving the earnout period goals.
Buyer
may also, in its discretion, create a new operating plan for RBIS, Ltd. to
reflect changes in the business of RBIS, including changes in
revenue.
2.3 SYS
Stock.
Each
share of capital stock of SYS outstanding on the Closing Date shall remain
issued and outstanding following the Closing Date.
2.4 Fractional
Shares; Adjustments.
2.4.1 No
certificates for fractional SYS Common Shares shall be issued as a result
of the
Acquisition, and such fractional share interests will not entitle the owner
thereof to vote or have any rights of a holder of SYS Common Shares.
2.4.2 In
lieu
of any such fractional SYS Common Shares, the Stockholder shall be entitled
to
receive a cash payment therefore, in an amount equal to the value of such
fractional interest, with an SYS Common Share being valued for this purpose
as
described in Section 2.1. Such payment with respect to fractional shares is
intended to avoid the expense and inconvenience of issuing fractional shares
and
to provide a mechanical rounding off of, and is not a separately bargained
for,
consideration. If more than one Certificate shall be surrendered, the number
of
shares of RBIS, Ltd. Capital Stock for which Certificates have been surrendered
shall be appropriately adjusted to provide to the Stockholder the same economic
effect as contemplated by this Agreement. The fractional share interests
of the
Stockholder will be aggregated, and the Stockholder will not receive cash
in an
amount greater than the value of one full SYS Common Share for such fractional
share interest.
2.5 Exchange
of Certificates.
2.5.1 Exchange
at Closing and Possible Subsequent Delivery of SYS Shares.
At the
Closing, the Stockholder shall deliver the Certificate or Certificates
representing the Stockholder’s shares of RBIS, Ltd. Capital Stock (or affidavits
of lost certificates in lieu thereof), duly endorsed in blank or accompanied
by
stock powers duly executed in blank and in exchange for such delivery shall
receive (i) the Cash Consideration to which the Stockholder is then
entitled, and (ii) the Stock Consideration to which such Stockholder is
entitled.
2.5.2 No
Liability.
SYS
shall not be liable to any person in respect of any Acquisition Consideration
(or dividends, distributions, or interest with respect thereto) delivered
to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to
seven
years after the Closing Date or immediately prior to such earlier date on
which
any Acquisition Consideration (or any dividends, distributions, or interest
with
respect thereto) would otherwise escheat to or become the property of any
Governmental Authority, any such Acquisition Consideration (or dividends,
distributions, or interest with respect thereto) shall, to the extent permitted
by Applicable Law, become the property of SYS, free and clear of all claims
or
interest of any person previously entitled thereto. For purposes of this
Agreement, “Governmental Authority” means any (A) nation, region, state,
county, city, town, village, district or other jurisdiction, (B) federal,
state, local, municipal, foreign or other government, (C) federal, state,
local municipal, foreign or multi-national court, arbitral tribunal,
administrative agency or commission, (D) other governmental,
quasi-governmental, public, or regulatory body, agency, instrumentality or
authority of any nature, (E) multi-national organization, (F) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, policy, regulatory or taxing authority or power of any nature
or
(G) official of any of the foregoing.
2.5.3 Withholding
Rights.
Upon
written notice to Stockholder, SYS shall be entitled to deduct and withhold
from
the Cash Consideration otherwise payable pursuant to this Agreement such
amounts
as it is required to deduct and withhold with respect to the making of such
payment, or any other payment by RBIS, Ltd. or SYS, under the United States
Internal Revenue Code of 1986, as amended (the “Code”) or any provision of
state, local or foreign Tax law. To the extent that amounts are so withheld
by
SYS, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of RBIS, Ltd. Capital Stock
in
respect of which such deduction and withholding was made by SYS. Any Tax
withheld by SYS shall be paid by SYS to the appropriate Governmental Authority
when due in accordance with Applicable Law; and SYS shall within 30 days
of the
payment of such Tax deliver to Stockholder evidence reasonably satisfactory
to
Stockholder that payment was duly remitted to the appropriate Governmental
Authority.
2.5.4 Restrictive
Legend.
Each
certificate evidencing SYS Common Shares issued pursuant to this Agreement
shall
bear the following legend in conspicuous type:
THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY
STATE
SECURITIES LAWS. THE SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR QUALIFICATION WITHOUT AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION OR QUALIFICATION IS
NOT
REQUIRED.
2.6 Escrow
Accounts.
2.6.1 Escrow
Agreement.
On or
prior to the Closing Date, SYS and the Stockholder shall establish a one-year
escrow at Union Bank of California, N.A. (the “Escrow Account”), by the
execution and delivery of an Escrow Agreement substantially in the form attached
as Exhibit A
hereto
(the “Escrow Agreement”).
2.6.2 Deposit
of Escrow Consideration.
As soon
as possible after the Closing Date, SYS shall deliver to the Escrow Agent,
for
immediate deposit into the Escrow Account, One Hundred Eighty Thousand Dollars
($180,000) of the cash portion of the Closing Consideration and Five Hundred
Thousand Dollars ($500,000) of the stock portion of the Closing Consideration.
Such deposits shall be referred to herein as the “Escrow Cash Consideration” and
the “Escrow Stock Consideration,” respectively.
2.6.3 Disbursement
of Escrow Consideration.
The
Escrow Stock Consideration deposited in the Escrow Account shall be available,
in accordance with this Agreement and the Escrow Agreement, to provide for
payment to SYS pursuant to Section 2.1.2 and to provide recourse to SYS for
any breach of the representations and warranties of the RBIS, Ltd. Stockholder
under Article IV hereof and pursuant to Article VIII hereof. The
Escrow Cash Consideration shall be available, in accordance with this Agreement
and the Escrow Agreement, to provide for payment to SYS pursuant to
Section 2.1.2. The Escrow Stock Consideration and the Escrow Cash
Consideration shall be paid to the RBIS, Ltd. Stockholder only in accordance
with and subject to the terms and conditions set forth herein and in the
Escrow
Agreement.
2.7 Internal
Revenue Code Election.
At its
option, following the effective date of the Registration Statement described
in
Section 5.2.2, SYS may make an election under Section 338(h)(10) of
the Internal Revenue Code of 1986, as amended, with regard to the Acquisition.
In the event of any such election, SYS agrees that it shall reimburse the
RBIS,
Ltd. Stockholder for all federal, state and local tax consequences incurred
as a
result of such election. Such reimbursement shall be made on a “grossed-up”
basis taking into account any tax obligations which will be incurred by the
RBIS, Ltd. Stockholder on account of receiving such reimbursement. Any such
grossed up reimbursement shall be made within 30 days of the determination
of
all federal, state and local tax consequences which will be incurred by the
RBIS, Ltd. Stockholder as a result of such election, shall not exceed $375,000
in amount, and shall be made in the form of restricted shares of SYS Common
Stock with a per share value based on the average closing price of SYS Common
Stock on its principal trading market over the last ten trading days immediately
preceding the issuance of the shares.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF SYS
In
order
to induce the Stockholder to enter into this Agreement, SYS hereby represents
and warrants to the Stockholder that the statements contained in this
Article III are true, correct and complete, except as otherwise expressly
set forth in this Article III as of the date hereof unless another date is
expressly stated below.
3.1 Organization
and Standing.
SYS and
each subsidiary of SYS is a corporation duly organized, validly existing
and,
where applicable, in good standing under the laws of its state of incorporation
with corporate power and authority to own, lease, use and operate its properties
and to conduct its business as and where now owned, leased, used, operated
and
conducted. Each of SYS and each subsidiary of SYS is duly qualified to do
business and in good standing in each jurisdiction in which the nature of
the
business conducted by it or the property it owns, leases or operates, requires
it to so qualify, except where the failure to be so qualified or in good
standing in such jurisdiction would not have a Material Adverse Effect on
SYS
and its subsidiaries taken as a whole. SYS is not in default in the performance,
observance or fulfillment of any provision of the SYS Articles of
Incorporation, as amended (the “SYS Articles”), or the SYS Amended and Restated
Bylaws, as amended, as in effect on the date hereof (the “SYS Bylaws”). SYS has
heretofore furnished to the Stockholder complete and correct copies of the
SYS
Articles and the SYS Bylaws.
3.2 Corporate
Power and Authority.
SYS has
all requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this
Agreement and the consummation of the transactions contemplated hereby by
SYS
have been duly authorized by all necessary corporate action on the part of
SYS.
This Agreement has been duly executed and delivered by SYS and constitutes
the
legal, valid and binding obligation of SYS enforceable against it in accordance
with its terms, except to the extent that such enforceability may be subject
to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws
affecting the enforcement of creditors’ rights generally or by general equitable
principles.
3.3 Conflicts;
Consents and Approvals.
Neither
the execution and delivery of this Agreement by SYS nor the consummation
of the
transactions contemplated hereby or thereby will:
3.3.1 conflict
with, or result in a breach of any provision of, the SYS Articles or the
SYS
Bylaws or the governing documents of any subsidiary of SYS;
3.3.2 materially
violate, or conflict with, or result in a material breach of any provision
of,
or constitute a material default (or an event that, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time or otherwise) to
terminate, accelerate, modify or call a material default under, or result
in the
creation of any material Encumbrance upon any of the properties or assets
of SYS
or any of its subsidiaries under, any of the terms, conditions or provisions
of
any material note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
SYS or
any of its subsidiaries is a party (for purposes of this Agreement,
“Encumbrance” means any charge, claim, mortgage, servitude, easement, right of
way, equitable interest, lease or other possessory interest, conditional
sale or
other title retention arrangement, lien, pledge, security interest, preference,
priority, right of first refusal or similar restriction);
3.3.3 materially
violate any (i) order, writ, injunction, decree, statute, ruling,
assessment, or arbitration or award of any Governmental Authority or
(ii) to the Knowledge of SYS, Applicable Laws relating to SYS or any of its
subsidiaries or their respective properties or assets; or
3.3.4 require
any action or consent or approval of, or review by, or registration or filing
by
SYS or any of its affiliates with, any third party or any Governmental
Authority, other than registrations or other actions required under federal
and
state securities laws as are contemplated by this Agreement.
3.4 Actions.
There
is no Action against SYS which questions the validity of this Agreement or
any
action taken or to be taken pursuant hereto. For purposes of this Agreement,
“Action” means any action, arbitration, audit, examination, suit, proceeding,
hearing or litigation, whether formal or informal, and whether public or
private, commenced, brought, conducted or heard by or before, pending or
threatened, or otherwise. Since July 1, 2001, neither SYS nor any of its
subsidiaries has been subject to any order, writ, injunction or decree relating
to its method of doing business or its relationship with past, existing or
future users or purchasers of any goods or services.
3.5 Financial
Ability.
SYS
will have a sufficient number of SYS Common Shares and sufficient cash funds
to
pay the Acquisition Consideration.
3.6 Capitalization
of SYS.
3.6.1 The
authorized capital stock of SYS consists of 48,000,000 common shares (the
“SYS
Common Stock”), 250,000 preferred shares (the “SYS Preferred Stock”), and
2,000,000 preference shares (the “SYS Preference Stock”). At the date of this
Agreement, (i) 13,915,596 shares of SYS Common Stock are issued and
outstanding, (ii) 4,535,086 shares of SYS Common Stock are reserved for
issuance upon the exercise or conversion of options, warrants or convertible
securities granted or issuable by SYS, not including SYS’s Stock Option and
Stock Purchase Plans, (iii) 1,714,159 shares of SYS Common Stock are
reserved for issuance under SYS’s Stock Option and Stock Purchase Plans,
(iv) no shares of SYS Preferred Stock are issued and outstanding, and
(v) no shares of SYS Preference Stock are issued and outstanding. The SYS
Common Stock, the SYS Preferred Stock, and the SYS Preference Stock are referred
to herein collectively as the “SYS Capital Stock.” Each outstanding share of SYS
Capital Stock is duly authorized and validly issued, fully paid and
nonassessable and has not been issued in violation of any preemptive or similar
rights. The issuance and sale of all of the shares of SYS Capital Stock
described in this Section 3.6.1 have been in compliance in all material
respects with applicable federal and state securities laws.
3.7 Brokerage
and Finders’ Fees.
Neither
SYS nor any stockholder, director, officer or employee thereof, has incurred
or
will incur on behalf of SYS or any of its affiliates, any brokerage, finders’ or
similar fee in connection with the transactions contemplated by this Agreement
other than USBX Advisory Services, LLC.
3.8 Board
Recommendation; Required Vote.
The
board of directors of SYS, at a meeting duly called and held, has by majority
vote of those directors present and constituting a quorum of the directors
then
in office determined that this Agreement and the transactions contemplated
hereby, are fair to and in the best interests of SYS and the SYS Stockholders.
No vote of any holder of SYS Capital Stock is required under the SYS Articles,
SYS Bylaws or Applicable Law with respect to this Agreement or the transactions
contemplated hereby.
3.9 SYS
SEC Documents.
SYS has
filed with the U.S. Securities and Exchange Commission (the “Commission”) all
forms, reports, schedules, statements and other documents (including exhibits
and other information incorporated therein) required to be filed by it since
July 1, 2003 under the Securities Act of 1933, as amended (the “Securities
Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
(such documents, as supplemented and amended since the time of filing,
collectively, the “SYS SEC Documents”). No subsidiary of SYS is required to file
any form, report, registration statement, prospectus or other document with
the
Commission. To the Knowledge of SYS, the SYS SEC Documents, including, without
limitation, any financial statements or schedules included in the SYS SEC
Documents, at the time filed (and, in the case of registration statements
and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any SYS SEC Document amended or superseded
by a
filing prior to the date of this Agreement, then on the date of such amending
or
superseding filing): (a) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of SYS (including the related
notes) included in the SYS SEC Documents at the time filed (and, in the case
of
registration statements and proxy statements, on the dates of effectiveness
and
the dates of mailing, respectively, and, in the case of any SYS SEC Document
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such amending or superseding filing) complied in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-QSB
or
Form 10-Q of the Commission), and fairly present (subject, in the case of
unaudited statements, to normal, recurring audit adjustments not material
in
amount) in all material respects the consolidated financial position of SYS
and
its consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. Since
July 1, 2003, SYS has maintained its books of account in accordance in all
material respects with Applicable Law and all books and records are complete
and
correct in all material respects, fairly and accurately reflect the income,
expenses, assets and liabilities of SYS and its subsidiaries in all material
respects, including the nature thereof and the transactions giving rise thereto,
and provide a fair and accurate basis for the preparation of the financial
statements of SYS included in the SYS SEC Documents.
3.10 Books
and Records.
Since
July 1, 2003, SYS and its subsidiaries have, in all material respects,
maintained their minute books, stock books, stock ledgers, quota registers
and
other local equivalents in accordance in all material respects with Applicable
Law. The minute books of SYS and its subsidiaries contain accurate and complete
records of all proceedings, consents and meetings held of, and corporate
action
taken by, their stockholders, the boards of directors, and committees of
the
boards of directors, and other governing bodies, as applicable, and no meeting
of any such stockholders, board of directors, committee or other governing
body
has been held for which minutes have not been prepared and are not contained
in
such minute books. The books of account of SYS and its subsidiaries are complete
and correct in all material respects, have been maintained in accordance
with
Applicable Law, fairly and accurately reflect the income, expenses, assets
and
liabilities of SYS and its subsidiaries, including the nature thereof and
the
transactions giving rise thereto, and provide a fair and accurate basis for
the
preparation of the SYS financial statements set forth in the SYS SEC Documents.
The signatures appearing on all documents contained in such books of account
are
the true signatures of the persons purporting to have signed the
same.
3.11 No
Undisclosed Liabilities.
Except
(a) as and to the extent disclosed or reserved against on the audited
balance sheet of SYS as of June 30, 2005, or (b) as incurred after the
date thereof in the ordinary course of business consistent with past practice,
SYS and its subsidiaries do not have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent, ▇▇▇▇▇▇,
inchoate or otherwise and whether due or to become due, that, individually
or in
the aggregate, have or would reasonably be expected to have a Material Adverse
Effect on SYS and its subsidiaries taken as a whole.
3.12 No
Material Adverse Change.
Since
June 30, 2005, there has been no material adverse change in the assets,
liabilities, results of operations, business prospects, or financial condition
of SYS or any event, occurrence or development that would reasonably be expected
to have a Material Adverse Effect on SYS and its subsidiaries taken as a
whole.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE
STOCKHOLDER
In
order
to induce SYS to enter into this Agreement, the Stockholder represents and
warrants to SYS that the statements contained in this Article IV are true,
correct, and complete, in each case except as otherwise expressly set forth
in
this Article IV or in the disclosure schedule previously delivered by the
Stockholder to SYS and incorporated herein by reference (the “RBIS, Ltd.
Disclosure Schedule”), as of the date hereof and as of the Closing Date unless
another date is expressly stated below or in the RBIS, Ltd. Disclosure
Schedule.
4.1 Organization
and Standing.
RBIS,
Ltd. is an S-corporation duly organized and validly existing under the laws
of
the State of Maryland with full corporate power and authority to own, lease,
use
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. RBIS, Ltd. is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the
nature
of the business conducted by it or the property it owns, leases, uses, or
operates requires it to so qualify, be licensed or be in good standing except
where the failure to be so qualified, licensed or in good standing in such
jurisdiction would not have a Material Adverse Effect on RBIS, Ltd. or its
business or properties taken as a whole, and except as disclosed in
Section 4.1 of the RBIS, Ltd. Disclosure Schedule. RBIS, Ltd. is not in
default in the performance, observance or fulfillment of any provision of
its
Articles of Incorporation (the “RBIS, Ltd. Articles”) or its Bylaws (the “RBIS,
Ltd. Bylaws”), as in effect on the date hereof. RBIS, Ltd. has previously
furnished to SYS complete and correct copies of the RBIS, Ltd. Articles and
the
RBIS, Ltd. Bylaws, each as in effect on the date hereof. Listed in
Section 4.1 in the RBIS, Ltd. Disclosure Schedule is each jurisdiction in
which RBIS, Ltd. is qualified or licensed to do business and whether RBIS,
Ltd.
is in good standing in each applicable jurisdiction as of the date of the
Closing Date.
4.2 Subsidiaries.
RBIS,
Ltd. does not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, joint venture or other entity or
enterprise. RBIS, Ltd. is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any person.
4.3 Power
and Authority.
This
Agreement has been duly executed and delivered by the Stockholder and
constitutes the legal, valid and binding obligation of the Stockholder,
enforceable against him in accordance with its terms, except to the extent
that
such enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors’ rights generally or by general equitable principles.
4.4 Capitalization
of RBIS,
Ltd..
The
authorized capital stock of RBIS, Ltd. consists of 50,000 common shares (the
“RBIS, Ltd. Common Stock”). At the date of this Agreement, (i) ten (10)
shares of RBIS, Ltd. Common Stock are issued and outstanding, and (ii) no
shares of RBIS, Ltd. Common Stock are reserved for issuance upon the exercise
or
conversion of options, warrants or convertible securities. The RBIS, Ltd.
Common
Stock is also referred to herein the “RBIS, Ltd. Capital Stock.” Each
outstanding share of RBIS, Ltd. Capital Stock is duly authorized and validly
issued, fully paid and nonassessable, and has not been issued in violation
of
any preemptive or similar rights.
4.4.1 As
of the
date hereof, other than as set forth in clause 4.4(ii) above, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating
to
the issuance, sale, repurchase or transfer by RBIS, Ltd. of any securities
of
RBIS, Ltd., nor are there outstanding any securities which are convertible
into
or exchangeable for any shares of RBIS, Ltd. Capital Stock, and RBIS, Ltd. has
no obligation of any kind to issue any additional securities or to pay for
or
repurchase any securities of RBIS, Ltd. or any predecessor. Set forth in
Section 4.4.1 of the RBIS, Ltd. Disclosure Schedule is an accurate and
complete list of the names of all holders of RBIS, Ltd. Capital Stock, and
the
number and class of shares held by each such RBIS, Ltd. stockholder. Set
forth
in Section 4.4.1 of the RBIS, Ltd. Disclosure Schedule is an accurate and
complete list of the names of all holders of options, warrants or convertible
instruments to purchase RBIS, Ltd. Capital Stock, the number of shares issuable
to each such holder upon exercise of such option or warrant, and the exercise
price and vesting schedule with respect thereto.
4.4.2 RBIS,
Ltd. has not agreed to register any securities of RBIS, Ltd. under the
Securities Act or under any applicable securities law or granted registration
rights to any person or entity.
4.5 Conflicts;
Consents and Approvals.
Neither
the execution and delivery of this Agreement by the Stockholder, nor the
consummation of the transactions contemplated hereby will:
4.5.1 conflict
with, or result in a breach of any provision of, the RBIS, Ltd. Articles
or the
RBIS, Ltd. Bylaws;
4.5.2 violate
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event that, with the giving of notice, the passage of time
or
otherwise, would constitute a default) under, or entitle any party (with
the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the creation of any Encumbrance
upon any of the properties or assets of RBIS, Ltd. under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of
trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which any Stockholder or RBIS, Ltd. is a party, including without
limitation, any Contract;
4.5.3 violate
any (i) order, writ, injunction, decree, ruling, assessment, arbitration,
or award of any Governmental Authority or arbitrator or (ii) to the
Knowledge of the Stockholder, any Applicable Laws relating to the Stockholder
or
to RBIS, Ltd. or any of its properties or assets; or
4.5.4 require
any action or consent or approval of, or review by, or registration or filing
by
the Stockholder or RBIS, Ltd. or any of its affiliates with, any third party
or
any Governmental Authority, other than registrations or other actions required
under federal and state securities laws as are contemplated by this
Agreement.
4.6 Brokerage
and Finders’ Fees.
Neither
RBIS, Ltd. nor any stockholder, director, officer or employee thereof, has
incurred or will incur on behalf of RBIS, Ltd. or the Stockholder, any
brokerage, finders’ or similar fee in connection with the transactions
contemplated by this Agreement, other than the fee which is the subject of
the
General Release of Claims described in Section 6.1.3.
4.7 Books
and Records; Financial Statements.
4.7.1 From
its
date of incorporation, the minute books, stock books, stock ledgers, bank
accounts, and powers of attorney of RBIS, Ltd. (the “Books of Account”) have
been maintained, in all respects, in accordance with Applicable Law. The
signatures of RBIS, Ltd. personnel appearing on all documents contained in
such
Books of Account are the true signatures of the persons purporting to have
signed the same, and complete and correct copies of such Books of Account
have
been provided to SYS. RBIS, Ltd. maintains a process designed to provide
reasonable assurance regarding the preparation of financial statements in
accordance with generally accepted accounting principles. This process includes
policies and procedures that (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of RBIS, Ltd., (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and
that
receipts and expenditures of RBIS, Ltd. are being made only in accordance
with
authorizations of management and the Board of Directors, (iii) provide
reasonable assurance regarding the prevention or timely detection of the
unauthorized acquisition, use, or disposition of the assets of RBIS, Ltd.
that
could have a material effect on its financial statements, and (iv) provide
reasonable assurance that the accounting records of RBIS, Ltd. are maintained
in
accordance with the standards and requirements of the Defense Contract Audit
Agency.
4.7.2 Attached
to Section 4.7.2 of the RBIS, Ltd. Disclosure Schedule are complete and
correct copies of (i) the audited balance sheet of RBIS, Ltd. as of
December 31, 2005, and the related statements of income and sources and
uses of cash for the 12-month period then ended and (ii) the unaudited
balance sheet of RBIS, Ltd. as of March 31, 2006, and the related
statements of income and sources and uses of cash for the three-month period
then ended (collectively, the “RBIS, Ltd. Financial Statements”). Except as
provided in Section 4.7.2 of the RBIS, Ltd. Disclosure Schedule, the RBIS,
Ltd. Financial Statements (including the related notes) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the period involved and fairly present the financial position
of
RBIS, Ltd. as at the date thereof and the results of its operations and cash
flows for the period then ended.
4.8 Compliance
with Law.
Except
with respect to Applicable Laws discussed elsewhere in this Article IV,
RBIS, Ltd. is in compliance, in all respects, and at all times since its
incorporation has been in compliance, in all respects, with all Applicable
Laws
relating to RBIS, Ltd. or its businesses or properties, except where the
failure
to be in compliance with such Applicable Laws (individually or in the aggregate)
would not have a Material Adverse Effect on RBIS, Ltd., or where such
noncompliance has been cured and is reasonably expected to have no Material
Adverse Effect on the future business or operations of RBIS, Ltd. RBIS, Ltd.
has
received no notice of any pending investigation or review by any Governmental
Authority with respect to RBIS, Ltd., and no such investigation or review
is
overtly threatened, nor has any Governmental Authority indicated to RBIS,
Ltd.
an intention to conduct the same.
4.9 Actions.
Section 4.9 in the RBIS, Ltd. Disclosure Schedule sets forth each
instance in which RBIS, Ltd. has filed, or received written notice of, an
Action
pending and each instance in which any Action has been overtly threatened
against or by RBIS, Ltd. Since its incorporation, RBIS, Ltd. has not been
subject to any order, writ, injunction or decree relating to its method of
doing
business or its relationship with past, existing or future users or purchasers
of any goods or services.
4.10 No
Material Adverse Change.
Since
January 1, 2005, there has been no material adverse change in the assets,
liabilities, results of operations, business prospects, or financial condition
of RBIS, Ltd. or any event, occurrence or development that would reasonably
be
expected to have a Material Adverse Effect on RBIS, Ltd.
4.11 Taxes.
4.11.1 With
regard to federal and state taxes:
(i) RBIS,
Ltd. has filed all Tax Returns (including, but not limited to, those filed
on a
consolidated, combined or unitary basis) required to have been filed by RBIS,
Ltd. prior to the date hereof;
(ii) All
such
Tax Returns referred to in clause 4.11.1(i) above were true and correct
(except for such inaccuracies which are individually, and in the aggregate,
not
material) and RBIS, Ltd. and/or the Shareholder paid or, prior to the Closing
Date, will pay within the time and manner prescribed by Applicable Law, all
Taxes, interest and penalties required to be paid in respect of the periods
covered by such Tax Returns (whether or not shown any Tax Return) due to
any
federal, state, foreign, local or other Tax authority;
(iii) RBIS,
Ltd. has no liability for Taxes that is in excess of the amount reserved
on the
RBIS, Ltd. Financial Statements;
(iv) RBIS,
Ltd. has not requested or filed any document having the effect of causing
any
extension of time within which to file any Tax Returns in respect of any
fiscal
year which have not since been filed;
(v) RBIS,
Ltd. has not received written notice of any currently due and payable deficiency
for any Tax from any Tax authority;
(vi) RBIS,
Ltd. has not received written notice that it is the subject of any currently
ongoing Tax audit;
(vii) As
of the
date of this Agreement, RBIS, Ltd. has not received written notice from any
Tax
authority of any pending requests for waivers of the time to assess any Tax,
other than those made in the ordinary course and for which payment has been
made;
(viii) RBIS,
Ltd. has not expressly waived any statute of limitations in respect of Taxes
or
expressly agreed to any extension of time with respect to a Tax assessment
or
deficiency;
(ix) There
are
no recorded Encumbrances with respect to Taxes upon any of the properties
or
assets, real or personal, tangible or intangible of RBIS, Ltd. (other than
liens
for Taxes not yet due and/or delinquent);
(x) No
written claim has ever been received by RBIS, Ltd. from a Governmental Authority
in a jurisdiction where RBIS, Ltd. does not file Tax Returns that RBIS, Ltd.
is
or may be subject to taxation by that jurisdiction; and
(xi) RBIS,
Ltd. (and any predecessor of RBIS, Ltd.) has been a validly electing
S-corporation within the meaning of Internal Revenue Code Sections 1361 and
1362
at all times during its existence, and RBIS, Ltd. will be an S corporation
up to
and including the Closing Date.
(xii) RBIS,
Ltd. has properly classified each person providing services to it as either
an
employee or an independent contractor and has withheld all amounts required
to
be withheld by it.
4.11.2 RBIS,
Ltd. is not obligated by any Contract, agreement or other arrangement to
indemnify any other person with respect to Taxes. RBIS, Ltd. is not now or
has
ever been a party to or bound by any agreement or arrangement (whether or
not
written and including, without limitation, any arrangement required or permitted
by law) binding RBIS, Ltd. that (i) requires RBIS, Ltd. to make any Tax
payment to or for the account of any other person, (ii) affords any other
person the benefit of any net operating loss, net capital loss, investment
Tax
credit, foreign Tax credit, charitable deduction or any other credit or Tax
attribute which could reduce Taxes (including, without limitation, deductions
and credits related to alternative minimum Taxes) of RBIS, Ltd., or
(iii) requires or permits the transfer or assignment of income, revenues,
receipts or gains to RBIS, Ltd., from any other person.
4.11.3 Except
as
set forth in Section 4.11.3 of the RBIS, Ltd. Disclosure Schedule, RBIS,
Ltd. has withheld and paid over all Taxes required to have been withheld
and
paid over in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
4.11.4 RBIS,
Ltd. has not agreed to make, or has received any written notice from the
Internal Revenue Service proposing that RBIS, Ltd. make, any adjustments
pursuant to Sections 263A or 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by RBIS, Ltd., and RBIS, Ltd. has no application pending
with
any Governmental Authority requesting permission for any changes in accounting
methods that relate to the business or operations of RBIS, Ltd.
4.11.5 RBIS,
Ltd. has not requested any private letter ruling of the Internal Revenue
Service
or comparable ruling of other Governmental Authorities.
4.11.6 The
Tax
Returns of RBIS, Ltd. for the years ended 2003 and 2004, complete and correct
copies of which are attached to Section 4.11.6 of the RBIS, Ltd. Disclosure
Schedule, list all deductions giving rise to any current-year Tax loss set
forth
on the applicable Tax Returns and the amount of each such Tax loss in each
jurisdiction.
4.11.7 RBIS,
Ltd. has never been a member of an affiliated group of corporations, within
the
meaning of Section 1504 of the Code, other than as a common parent
corporation, within the meaning of Section 1504 of the Code (or any similar
provision of state or local law), except where RBIS, Ltd. was the common
parent
corporation of such affiliated group.
4.11.8 RBIS,
Ltd. has no liability for the Taxes of any person other than RBIS, Ltd. under
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
4.11.9 All
elections with respect to the Tax Returns are reflected in the Tax Returns.
4.11.10 RBIS,
Ltd. is not and has not been a United States real property holding corporation
(as defined in section 897(c)(2) of the Code) during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code.
4.11.11 RBIS,
Ltd. is not and has not been a party to any joint venture, partnership, or
other
agreement that would be treated as a partnership for U.S. federal income
tax
purposes.
4.11.12 RBIS,
Ltd. has not participated in an international boycott as defined in
Section 999 of the Code (or any similar provision of state, local or
foreign law).
4.11.13 RBIS,
Ltd. is not a party to any agreement, contract, arrangement or plan that
has
resulted or would result, separately or in the aggregate, in the payment
of any
“excess parachute payment” within the meaning of Internal Revenue Code Section
280G (or any corresponding provision of state, local or foreign
law).
4.11.14 RBIS,
Ltd. is not a party to or bound by any tax allocation or sharing
agreement.
4.11.15 RBIS,
Ltd. will not be required to include any item of income in, or exclude any
item
of deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any:
(i) “Closing
Agreement” as described in Internal Revenue Code Section 7121 (or any
corresponding or similar provision of state, local or foreign law) executed
on
or prior to the Closing Date;
(ii) Intercompany
transactions or any excess loss account described in Treasury Regulations
under
Internal Revenue Code Section 1502 (or any corresponding or similar
provision of state, local or foreign law);
(iii) Installment
sale or open transaction disposition made on or prior to the Closing Date;
or
(iv) Prepaid
amount received on or prior to the Closing Date.
4.11.16 RBIS,
Ltd. has not distributed stock of another corporation, or has had its stock
distributed by another corporation, in a transaction that was purported or
intended to be governed in whole or in part by Internal Revenue Code
Section 355.
4.11.17 As
used
in this Agreement, “Tax Returns” means all federal, state, local and foreign Tax
returns, declarations, schedules, information returns, reports and forms,
and
any amendments to any of the foregoing relating to Taxes, required to be
filed
with any Governmental Authority responsible for the imposition or collection
of
Taxes.
4.11.18 As
used
in this Agreement, “Tax” or “Taxes” means (i) any federal, state, county,
local or foreign taxes, charges, fees, levies or other assessments, including
all net income, gross income, premium, sales and use, ad valorem, transfer,
gains, profit, windfall profits, excise, franchise, real and personal property,
gross receipts, capital stock, production, business and occupation, employment,
disability, payroll, license, estimated, customs duties, severance or
withholding taxes, other taxes or similar charges of any kind imposed by
a
Governmental Authority and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a failure to
comply
with any requirement relating to any Tax Return and any expenses incurred
in
connection with the determination, settlement or litigation of any tax
liability.
4.11.19 The
following provisions shall govern the allocation of responsibility as between
RBIS, Ltd. and Buyer for certain tax matters following the Closing
Date:
(i) The
Shareholder shall indemnify RBIS, Ltd. and Buyer and hold them harmless from
and
against (a) all Taxes (or the nonpayment thereof) of RBIS, Ltd. for all
taxable periods ending on or before the Closing Date and the portion through
the
end of the Closing Date for any taxable period that includes (but does not
end
on) the Closing Date (“Pre-closing Tax Period”), (b) any and all Taxes of
any member of any affiliated, consolidated, combined, or unitary group of
which
RBIS, Ltd. (or any predecessor) is or was a member on or prior to the Closing
Date, and (c) any and all Taxes of any person (other than RBIS, Ltd.)
imposed on RBIS, Ltd. as a transferee or successor, by contract or pursuant
to
any law, ruling or regulation which Taxes relate to any event or transaction
occurring before the Closing; provided, however, that in the case of the
amounts
referenced in this paragraph, the Shareholder shall be liable only to the
extent
that such Taxes are in excess of the amount, if any, reserved for such Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the most recent balance
sheet (rather than any notes thereto), as such reserve is adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of RBIS, Ltd. in filing its tax returns.
(ii) In
the
case of any taxable period that includes (but does not end on) the Closing
Date
(a “Straddle Period”), the amount of any Taxes for the Pre-closing Tax Period
shall be determined based on an interim closing of the books as of the close
of
business on the Closing Date (and for such purpose, the taxable period of
any
partnership or other pass-through entity in which RBIS, Ltd. holds, a beneficial
interest shall be deemed to terminate at such time).
(iii) Any
Tax
refunds that are received by RBIS, Ltd. and any amounts credited against
Taxes
to which RBIS, Ltd. become entitled, that relate to Tax periods or portions
thereof ending on or before the Closing Date shall be for the account of
the
Shareholder, and RBIS, Ltd. shall pay over to the Shareholder any such refund
or
the amount of any such credit within fifteen (15) days after receipt of
entitlement thereto. In addition, to the extent that a claim for refund or
a
proceeding results in a payment or credit against Taxes by a taxing authority
to
RBIS, Ltd. of any amount accrued on the closing balance sheet, RBIS, Ltd.
shall
pay such amount to the Shareholder within fifteen (15) days after receipt
or
entitlement thereto.
(iv) Buyer
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for RBIS, Ltd. for the period beginning January 1, 2006 and ending
on the Closing Date that are filed after the Closing Date. Buyer shall permit
the Shareholder to review and comment on each such Tax Return described in
the
preceding sentence prior to filing and shall make such revisions to such
Tax
Returns as are reasonably requested by the Shareholder. To the extent permitted
by applicable law, the Stockholder shall include any gain, loss, deduction
or
other tax items for such periods on his Tax Returns in a manner consistent
with
the Schedule K-1s furnished by RBIS, Ltd. to the Shareholder for such
period. Any such tax return shall be prepared by an accounting firm selected
by
Stockholder and acceptable to Buyer.
(v) Buyer,
RBIS, Ltd., and the Shareholder shall cooperate fully, as and to the extent
reasonably required by the other party, in connection with the filing of
Tax
Returns and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party’s
request) the provision of records and information reasonably relevant to
any
such audit, litigation, or other proceeding and making employees available
on a
mutually convenience basis to provide additional information and explanation
of
any material provided hereunder. RBIS, Ltd., the Shareholder, and Buyer agree
(A) to retain all books and records with respect to Tax matters pertinent
to RBIS, Ltd. relating to any taxable period beginning before the Closing
Date
until expiration of the statute of limitations (and, to the extent notified
by
Buyer or the Shareholder, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any
taxing authority, and (B) to give the other party reasonable written notice
prior to transferring, destroying or discarding any such books and records
and,
if the other party so requests, RBIS, Ltd. or the Shareholder, as the case
may
be, shall allow the other party to take possession of such books and
records.
(vi) Buyer
and
the Shareholder further agree, upon request, to use commercially reasonable
efforts to obtain any certificate or other document from any governmental
authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby).
(vii) All
transfer, documentary, sales, use, stamp, registration and other such Taxes
and
fees (including any penalties and interest) incurred in connection with this
Agreement shall be paid by the Shareholder when due, and the Shareholder
shall,
at his own expense, file all necessary Tax Returns and other documentation
with
respect to all such transfer, documentary, sales, use, stamp, registration
and
other Taxes and fees, and, if required by applicable law, Buyer shall, join
in
the execution of any such Tax Returns and other documentation.
4.12 Intellectual
Property.
4.12.1 Set
forth
in Section 4.12.1 of the RBIS, Ltd. Disclosure Schedule is an accurate and
complete list of (i) all foreign and domestic patents, patent applications,
invention disclosures, trademarks, service marks, trade names, internet domain
names (and any registrations or applications for registration for any of
the
foregoing trademarks, service marks, trade names and internet domain names)
and
all copyright applications and registrations and all other material Intellectual
Property rights owned by RBIS, Ltd., (ii) all agreements with respect to
which RBIS, Ltd. received gross revenue of at least $5,000 during the 26-month
period from January 1, 2004 to February 28, 2006, which concern any of
its Intellectual Property, and (iii) all material non-customer agreements
to which RBIS, Ltd. is a party which concern any of its Intellectual
Property.
4.12.2 With
regard to Intellectual Property:
(i) RBIS,
Ltd. owns the Intellectual Property free and clear of any Encumbrances, or
has
sufficient rights to use the Intellectual Property as it is currently used
by
RBIS, Ltd. and as it is proposed to be used by RBIS, Ltd.;
(ii) No
written claim of invalidity or ownership with respect to the Intellectual
Property has been received by RBIS, Ltd. from any third party, and no
Intellectual Property is the subject of any pending or overtly threatened
Action;
(iii) No
person
or entity has asserted that, with respect to any Intellectual Property, RBIS,
Ltd. or any licensee of RBIS, Ltd. is infringing or has infringed any domestic
or foreign patent, trademark, service ▇▇▇▇, trade name, or copyright or design
right, or has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how;
(iv) All
fees,
annuities, royalties, honoraria and other payments which are due from RBIS,
Ltd.
on or before the date of this Agreement for any of the Intellectual Property
have been paid;
(v) Except
as
limited by the terms of any license relating thereto, the making, using,
selling, manufacturing, marketing, licensing, reproduction, distribution,
disposal, modification, display, transmission or publishing of any process,
machine, manufacture, composition of matter, or material related to any part
of
the Intellectual Property, does not and will not infringe in any material
respect any domestic or foreign patent, trademark, service ▇▇▇▇, trade name,
copyright, moral right or other intellectual property right of any third
party,
and does not and will not involve the misappropriation or improper use or
disclosure of any trade secrets, confidential information or know-how of
any
third party;
(vi) No
unexpired foreign or domestic patents or patent applications exist which,
if
enforced, would have a Material Adverse Effect on the business of RBIS, Ltd.;
(vii) To
the
Knowledge of the Stockholder, there exists no (A) prior act of RBIS, Ltd.
or any third party that would void or invalidate any of the Intellectual
Property or (B) conduct or use by RBIS, Ltd. or any third party that would
void or invalidate any of the Intellectual Property; and
(viii) The
execution, delivery and performance of this Agreement by RBIS, Ltd. and the
Stockholder, and the consummation of the transactions contemplated hereby,
will
not materially breach, violate or conflict with any instrument or agreement
relating to the Intellectual Property to which RBIS, Ltd. is a party, will
not
cause the forfeiture or termination or give rise to a right of forfeiture
or
termination of any of the Intellectual Property or in any way impair the
right
of RBIS, Ltd., to make, use, sell, license or dispose of, distribute, modify,
display or transmit or to bring any action for the infringement of, any
Intellectual Property.
4.12.3 RBIS,
Ltd. has taken commercially reasonable steps to safeguard and maintain the
secrecy and confidentiality of (i) all trade secrets and (ii) to the
extent required by Applicable Law, patent applications and their related
inventions prior to the issuance of a patent registration contained in the
Intellectual Property.
4.12.4 As
used
in this Agreement, “Intellectual Property” means all domestic or foreign
patents, patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks, logos, know-how, internet domain names,
copyrights, trademark registrations and applications, service marks, service
▇▇▇▇ registrations and applications, trade names, trade dress, copyright
registrations, customer lists, marketing and customer information, licenses,
technical information (whether confidential or otherwise), software, and
all
documentation thereof, in each case that is owned by, or licensed to RBIS,
Ltd.
(other than third-party “click wrap” or “shrink wrap” software licenses, as to
which RBIS, Ltd. makes no representations or warranties) on the date
hereof.
4.13 Title
to Assets and Properties.
RBIS,
Ltd. has good, valid, and marketable title to, or a valid leasehold interest
in,
and unrestricted possession (other than under the terms of relevant leases)
of,
the assets and properties used by RBIS, Ltd., located on its premises or
shown
on the RBIS, Ltd. Financial Statements, free and clear of all Encumbrances,
except for assets and properties disposed of in the ordinary course of business
since January 1, 2005. Such assets and properties are sufficient to carry
on the business of RBIS, Ltd. as it is currently being conducted and as it
is
proposed to be conducted.
4.14 Employee
Benefit Plans.
4.14.1 With
respect to each RBIS, Ltd. Plan, RBIS, Ltd. has made available to SYS a correct
and substantially complete copy of the following (where applicable):
(i) each writing constituting a part of such RBIS, Ltd. Plan, including
without limitation all plan documents, benefit schedules, trust agreements,
and
insurance contracts and other funding vehicles; (ii) the three most
recently filed Annual Reports (Form 5500 Series) and accompanying schedules,
if
any; (iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any; and (v) the most recent
determination letter from the Internal Revenue Service, if any.
4.14.2 The
Internal Revenue Service has issued a favorable determination letter with
respect to each RBIS, Ltd. Plan that is intended to be a Qualified Plan and,
to
the Knowledge of the Stockholder, there are no existing circumstances or
any
events that have occurred that could adversely affect the qualified status
of
any RBIS, Ltd. Plan that is a Qualified Plan or the related trust.
4.14.3 All
contributions required to be made by RBIS, Ltd. to any RBIS, Ltd. Plan by
Applicable Laws or by any RBIS, Ltd. Plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any RBIS, Ltd. Plan, for any period through the date hereof, have
been
made or paid in full.
4.14.4 To
the
Knowledge of the Stockholder, each RBIS, Ltd. Plan has been maintained and
administered in compliance with its terms and Applicable Law, including ERISA
and the Code. To the Knowledge of the Stockholder, there is not now, and
there
are no existing circumstances that could reasonably be expected to give rise
to,
any requirement for the posting of security with respect to a RBIS, Ltd.
Plan or
the imposition of any Encumbrance on the assets of RBIS, Ltd. under ERISA
or the
Code with respect to a RBIS, Ltd. Plan.
4.14.5 RBIS,
Ltd. has not, at any time within six years before the date hereof, maintained,
contributed to or been obligated to contribute to any Multiemployer Plan
or
Multiple Employer Plan or any plan covered by Section 412 of the Code or
Title IV of ERISA.
4.14.6 To
the
Knowledge of the Stockholder, there does not now exist, and there are no
existing circumstances that could reasonably be expected to result in, any
Controlled Group Liability that would be a liability of RBIS, Ltd. following
the
Closing. Without limiting the generality of the foregoing, RBIS, Ltd. has
not
engaged in any transaction described in Section 4069 or Section 4204
of ERISA.
4.14.7 Except
for health continuation coverage as required by Section 4980B of the Code
or Part 6 of Title I of ERISA (or other Applicable Law pertaining to
COBRA or Cal-COBRA), RBIS, Ltd. has no liability for life, health, medical
or
other welfare benefits to former employees or beneficiaries or dependents
thereof and there has been no communication to employees of RBIS, Ltd. that
promises or guarantees such employees retiree health or life insurance benefits
or other retiree death benefits.
4.14.8 Except
as
disclosed in Section 4.14.8 of the RBIS, Ltd. Disclosure Schedule, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in, cause the accelerated vesting
or delivery of, or increase the amount or value of, any payment or benefit
to
any employee, officer, director or consultant of RBIS, Ltd. (other than the
acceleration of vesting of stock options which will, however, terminate upon
the
Closing). Without limiting the generality of the foregoing, no amount paid
or
payable by RBIS, Ltd. in connection with the transactions contemplated hereby,
either solely as a result thereof or as a result of such transactions in
conjunction with any other events, will be an “excess parachute payment” within
the meaning of Section 280G of the Code.
4.14.9 RBIS,
Ltd. has not received written notice of any pending, and there are no overtly
threatened, claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations that have been asserted or instituted against the
RBIS,
Ltd. Plans, any fiduciaries thereof with respect to their duties to the RBIS,
Ltd. Plans, or the assets of any of the trusts under any of the RBIS, Ltd.
Plans
that would reasonably be expected to result in any material liability of
RBIS,
Ltd. to the Pension Benefit Guaranty Corporation, the US Department of Treasury,
the US Department of Labor or any Multiemployer Plan.
4.14.10 Section 4.14.10
of the RBIS, Ltd. Disclosure Schedule sets forth the names of all directors
and officers of RBIS, Ltd., the names of each employee of RBIS, Ltd., and
the
total current salary, bonus eligibility, and fringe benefits and perquisites
in
the aggregate that all such directors, officers and employees are expected
to
receive in the fiscal year ending December 31, 2006, based on current
compensation arrangements. Section 4.14.10 of the RBIS, Ltd. Disclosure
Schedule also sets forth the liability of RBIS, Ltd. for deferred
compensation under any deferred compensation plan, excess plan or similar
arrangement (other than pursuant to Qualified Plans) to each such director,
officer and employee, together with the value, as of the date specified thereon,
of the assets (if any) set aside in any grantor trust(s) to fund such
liabilities. There are no other forms of compensation paid to any such director,
officer or employee of RBIS, Ltd. No officer, director, or employee of RBIS,
Ltd., or any immediate family member of any of the foregoing, provides or
causes
to be provided to RBIS, Ltd. any assets, services or facilities and RBIS,
Ltd.
does not provide or cause to be provided to any such officer, director, or
employee, or any immediate family member of any of the foregoing, any assets,
services or facilities.
4.14.11 As
used
in this Agreement, the following terms have the meanings given
below:
(i) “Benefit
Obligation” means RBIS, Ltd.’s aggregate financial liability to provide all
current, projected and contingent benefits to an employee, or such employee’s
beneficiaries or dependents, as the case may be, under the terms of any of
the
RBIS, Ltd. Plans, regardless of whether an amount less than such aggregate
financial liability is reflected on RBIS, Ltd.’s financial statements under
applicable accounting rules.
(ii) “Controlled
Group Liability” means any and all liabilities (i) under Title IV of ERISA,
(ii) under section 302 of ERISA, (iii) under sections 412 and 4971 of
the Code, (iv) resulting from a violation of the continuation coverage
requirements of section 601 et seq. of ERISA and section 4980B of the Code
or
the group health plan requirements of Section 701 et seq. of ERISA, and
(v) under corresponding or similar provisions of foreign laws or
regulations, in each case other than pursuant to the RBIS, Ltd.
Plans.
(iii) “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
(iv) “ERISA
Affiliate” means, with respect to any entity, trade or business, any other
entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same “controlled group” as the first
entity, trade or business pursuant to Section 4001(a)(14) of ERISA. As of
the date hereof, RBIS, Ltd. has no ERISA Affiliates.
(v) “RBIS,
Ltd. Employee” means a person who is, as of the Closing Date, an active or
inactive employee of RBIS, Ltd.
(vi) “RBIS,
Ltd. Plans” means all employee benefit plans, programs and other arrangements
providing benefits to any current or former employee, officer, director or
consultant (or any beneficiary or dependent thereof) in respect of services
provided to RBIS, Ltd., and whether covering one person or more than one
person,
sponsored or maintained by RBIS, Ltd. or to which RBIS, Ltd. contributes
(or is
obligated to contribute) or has any liability. Without limiting the generality
of the foregoing, the term “RBIS, Ltd. Plans” includes each “employee pension
benefit plan” as defined in Section 3(2) of ERISA, each “employee
welfare benefit plan” as defined in Section 3(1) of ERISA, and each
agreement, plan, program, fund, policy, contract or arrangement (whether
written
or unwritten) providing compensation, benefits, pension, retirement,
superannuation, profit sharing, stock bonus, stock option, stock purchase,
phantom or stock equivalent, bonus, thirteenth month, incentive, deferred
compensation, hospitalization, medical, dental, vision, vacation, life
insurance, death benefit, sick pay, disability, severance, termination,
indemnity, redundancy pay, educational assistance, holiday pay, housing
assistance, moving expense reimbursement, fringe benefit or similar employee
benefits covering any employee, former employee, or the beneficiaries and
dependents of any employee or former employee, regardless of whether it is
mandated under local law, voluntary, private, funded, unfunded, financed
by the
purchase of insurance, contributory or non-contributory.
(vii) “Multiemployer
Plan” means a “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA. As of the date hereof, RBIS, Ltd. has no
Multiemployer Plans.
(viii) “Multiple
Employer Plan” means a plan that has two or more contributing sponsors at least
two of whom are not under “common control” within the meaning of
Section 4063 of ERISA. As of the date hereof, RBIS, Ltd. has no Multiple
Employer Plans.
(ix) “Qualified
Plan” means a “qualified plan” within the meaning of Section 401(a) of
the Code.
4.15 Contracts.
4.15.1 Section 4.15.1
of the RBIS, Ltd. Disclosure Schedule lists each, and RBIS, Ltd. has
provided SYS with correct and complete copies of each, Contract (“Contract”
means all written or oral contracts, agreements, guarantees, licenses and
executory commitments, other than RBIS, Ltd. Plans and real property leases)
to
which RBIS, Ltd. is a party as of the date hereof and which falls within
any one
or more of the following categories:
(i) Contracts
not entered into in the ordinary course of RBIS, Ltd.’s business and that
involve expenditures or receipts by RBIS, Ltd. of $5,000 per month;
(ii) joint
venture, partnership, strategic alliances and other Contracts (however named)
involving a sharing of profits, losses, costs or liabilities;
(iii) leases
for equipment or other personal property assets;
(iv) Contracts
with respect to which RBIS, Ltd. received gross revenue of at least $5,000
from
the date of its incorporation through December 31, 2005;
(v) Contracts
containing covenants purporting to limit the freedom of RBIS, Ltd. to compete
in
any line of business or in any geographic area or to hire any individual
or
group of individuals (including without limitation any software license
agreements that authorize or permit RBIS, Ltd. to use the applicable software
only in particular business lines, languages or geographic areas);
(vi) Contracts
providing for the settlement of disputed claims (including disputed dollar
amounts) with third parties;
(vii) powers
of
attorney that are currently outstanding;
(viii) Contracts
entered into other than in the ordinary course of business that contain or
provide for an express undertaking to be responsible for consequential
damages;
(ix) Contracts
which contain minimum purchase conditions in excess of $10,000 or requirements
or other terms that restrict or limit the purchasing relationships of RBIS,
Ltd.;
(x) Contracts
relating to any outstanding commitment for capital expenditures in excess
of
$25,000;
(xi) Contracts
with any labor organization, union, employee representative or group of
employees;
(xii) indentures,
mortgages, promissory notes, loan agreements, guarantees of borrowed money,
letters of credit or other agreements, instruments or commitments for the
borrowing or the lending of money;
(xiii) Contracts
providing for the creation of any Encumbrance upon any of the assets of RBIS,
Ltd.;
(xiv) Contracts
involving annual revenues to the business of RBIS, Ltd. in excess of 2.5%
of
RBIS, Ltd.’s annual revenues during either of its past two fiscal years;
(xv) Contracts
providing for “earn-outs,” “savings guarantees,” “performance guarantees,” or
other contingent payments involving more than $10,000 per year or $50,000
over
the term of the Contract;
(xvi) Contracts
with or for the benefit of (A) any corporate affiliate of RBIS, Ltd. or
(B) any immediate family member of any shareholder, director or officer of
RBIS, Ltd.;
(xvii) Contracts
involving payments by RBIS, Ltd. of more than $5,000 in any one month during
the
past 6 months;
(xviii) any
Contracts that purport to limit the ability of the directors, officers, agents
or employees of RBIS, Ltd. to engage in or continue any conduct, activity
or
practice relating to the business of RBIS, Ltd., or assign to RBIS, Ltd.
any
rights to any invention, improvement or discovery;
(xix) any
cost-sharing, tax-sharing or transfer pricing agreements between RBIS, Ltd.
and
any related or unrelated party;
(xx) each
amendment, supplement and modification with respect to any of the foregoing;
and
(xxi) any
proposal to enter into any of the foregoing.
4.15.2 All
such
Contracts are valid, binding and enforceable obligations of RBIS, Ltd. and
each
other party thereto.
4.15.3 Except
as
provided in Section 4.15.3 of the RBIS, Ltd. Disclosure Schedule, neither
RBIS, Ltd. nor any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default under or
permit
the termination of, any such Contract. RBIS, Ltd. has not received a notice
or
other communication claiming a breach on its part of any Contract or a right
of
offset against amounts due it under any Contract or a right of termination
of
any Contract. RBIS, Ltd. is not currently performing services under any Contract
which is “at risk.” To the Knowledge of the Stockholder, no employee of RBIS,
Ltd. has attempted to direct any Contract to any third party.
4.15.4 As
of the
date hereof, RBIS, Ltd. is not engaged in any renegotiation of, and neither
RBIS, Ltd. nor, to the Knowledge of the Stockholder, any third party thereto
has
any outstanding rights to renegotiate, any material amounts to be paid or
payable under such Contracts.
4.16 Labor
Matters.
4.16.1 RBIS,
Ltd. is not a party to any collective bargaining agreement or labor union
contract and is not required to consult or negotiate with any local works
council, union, labor board or any Governmental Authority concerning the
transactions contemplated by the Agreement.
4.16.2 Set
forth
in Section 4.16.2 of the RBIS, Ltd. Disclosure Schedule is a list of each
agreement to which RBIS, Ltd. is a party pursuant to which any individual
employed by RBIS, Ltd. or otherwise performing services primarily for RBIS,
Ltd.
receives compensation in excess of $20,000 per annum, and RBIS, Ltd. has
furnished or made available to SYS complete and correct copies of any such
agreements in writing. RBIS, Ltd. has not breached or otherwise failed to
comply
with any provisions of any agreement set forth therein and there are no asserted
complaints or grievances outstanding thereunder. There is no labor strike,
dispute or stoppage pending or overtly threatened against RBIS, Ltd. No campaign
or other attempt for recognition is pending by any labor organization or
employee with respect to employees of RBIS, Ltd.
4.16.3 RBIS,
Ltd. is in compliance with Applicable Laws and its own policies respecting
employment and employment practices, terms and conditions of employment,
wages
and hours, equal opportunity, equal pay, civil rights, labor relations,
immigration, occupational health and safety, and payroll and wage
taxes.
4.16.4 As
of the
date of this Agreement and except as required by Applicable Law, (i) RBIS,
Ltd. is not a party to any outstanding employment agreements or contracts
with
officers, managers and directors (or foreign equivalents) or RBIS, Ltd.
Employees that are not terminable at will, or that provide for the payment
of
any bonus or commission; and (ii) RBIS, Ltd. is not a party to any
agreement, policy or practice that will require it to pay termination or
severance pay to salaried, non-exempt or hourly RBIS, Ltd. Employees after
the
Closing.
4.16.5 Except
as
disclosed in Section 4.16.5 of the RBIS, Ltd. Disclosure Schedule, to the
Knowledge of the Stockholder, no employee of RBIS, Ltd. currently intends
to
terminate his employment with RBIS, Ltd.
4.17 Undisclosed
Liabilities.
RBIS,
Ltd. has no liabilities or obligations of any nature, whether absolute, accrued,
contingent, ▇▇▇▇▇▇, inchoate or otherwise and whether due or to become due,
other than (a) liabilities disclosed to SYS in the RBIS, Ltd. Financial
Statements, including footnotes thereto, and (b) liabilities contemplated
by this Agreement and/or set forth in the RBIS, Ltd. Disclosure
Schedule.
4.18 Operation
of RBIS, Ltd.’s Business; Relationships.
4.18.1 Since
the
date of its incorporation, RBIS, Ltd. has not, except in the ordinary course
of
business consistent with past practice, engaged in any transaction which,
if
done after execution of this Agreement, would violate in any material respects
Section 5.3.1.
4.18.2 Since
January 1, 2005, no customer of RBIS, Ltd. has expressly indicated to RBIS,
Ltd. that such customer will stop or decrease purchasing materials, products
or
services from RBIS, Ltd. and no supplier of RBIS, Ltd. has expressly indicated
to RBIS, Ltd. that such supplier will stop or decrease the supply of materials,
products or services to RBIS, Ltd.
4.19 Permits.
RBIS,
Ltd. is in possession of all licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders legally required
in
each jurisdiction to own, lease and operate its properties and to carry on
its
business as currently conducted, including under any applicable Environmental
Laws (collectively, the “Permits”) except where the failure to have a Permit
would not have a material Adverse Effect on RBIS, Ltd. as a whole. RBIS,
Ltd.
has not received notice of any Action pending, and no Action is overtly
threatened, regarding any of the Permits which, if successful, would reasonably
be expected to have a Material Adverse Effect on RBIS, Ltd. RBIS, Ltd. is
not in
conflict with, or in default or violation of, any of the Permits, except
for any
such conflicts, defaults or violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on RBIS,
Ltd.
4.20 Real
Property.
4.20.1 RBIS,
Ltd. does not own any real property.
4.20.2 Section 4.20.2
in the RBIS, Ltd. Disclosure Schedule lists each lease for real property to
which RBIS, Ltd. is a party (each a “Lease”). Except as provided in
Section 4.20.2 of the RBIS, Ltd. Disclosure Schedule, RBIS, Ltd. does not
sublease any real property. RBIS, Ltd. has delivered to SYS a substantially
correct and complete copy of each Lease. With respect to each
Lease:
(i) the
Lease
is legal, valid, binding, enforceable, and in full force and effect with
respect
to RBIS, Ltd., and, to the Knowledge of Stockholder, with respect to the
other
party thereto, the Lease is legal, binding, enforceable, and in full force
and
effect;
(ii) no
party
to the Lease is in breach or default thereunder, and no event has occurred
which, with notice or lapse of time, would constitute a breach or default
or
permit termination, modification, or acceleration thereunder;
(iii) RBIS,
Ltd. has not, and to the Knowledge of the Stockholder no other party thereto
has, repudiated any provision thereof;
(iv) RBIS,
Ltd. has not received written notice of any disputes with respect thereto,
and
RBIS, Ltd. is not party to any oral agreements or forbearance programs in
effect
as to the Lease;
(v) RBIS,
Ltd. has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold; and
(vi) to
the
Knowledge of the Stockholder, the facility leased under the Lease has received
all approvals of Governmental Authorities (including Permits) required to
be
received by RBIS, Ltd. in connection with the operation thereof and have
been
operated and maintained by RBIS, Ltd. in accordance with Applicable
Laws.
4.21 Environmental
Matters.
With
regard to environmental matters:
4.21.1 The
properties, operations and activities of RBIS, Ltd. are in compliance in
all
material respects with all applicable Environmental Laws and all past
noncompliance of RBIS, Ltd. with any applicable Environmental Laws has been
resolved without any pending, ongoing or future obligation, cost or
liability;
4.21.2 RBIS,
Ltd. has not received notice of any pending Action by or before any court
or
Governmental Authority under any Environmental Law, and to the Knowledge
of the
Stockholder no such Action is pending or threatened and there is no basis
for
any present or future Action against it that may reasonably be likely to
lead to
any liability;
4.21.3 There
has
been no release, discharge or emission of any Hazardous Material into the
environment in material violation of applicable Environmental Laws by RBIS,
Ltd.
in connection with its currently leased or formerly leased properties or
operations that would be reasonably likely to have a Material Adverse Effect
on
RBIS, Ltd.; and
4.21.4 There
has
been no material exposure in violation of applicable Environmental Laws of
any
person or property to any Hazardous Material in connection with the properties,
operations and activities of RBIS, Ltd. that would be reasonably likely to
have
a Material Adverse Effect on RBIS, Ltd.
4.21.5 For
purposes of this Agreement, the term “Environmental Laws” means all federal,
state, local or foreign laws relating to pollution or protection of human
health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
Hazardous Materials into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices, orders, permits, plans or regulations issued, entered, promulgated
or
approved thereunder.
4.21.6 For
purposes of this Agreement, the term “Hazardous Materials” means chemicals,
pollutants, contaminants, or industrial, toxic or hazardous substances or
wastes
as those terms are defined or identified in any Environmental Law or regulated
by any Permit required by applicable Environmental Law, including but not
limited to petroleum products or by-products, asbestos, and polychlorinated
materials.
4.22 Accounts
Receivable.
Except
as disclosed in Section 4.22 of the RBIS, Ltd. Disclosure Schedule, the
accounts and notes receivable reflected in the RBIS, Ltd. Financial Statements
(i) arose from bona fide sales transactions in the ordinary course of
business and are payable on ordinary trade terms, (ii) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their terms, (iii) are not subject to valid set-off or counterclaim, and
(iv) are collectible in the ordinary course of business consistent with
past practice in the aggregate recorded amounts thereof.
4.23 Insurance.
Section 4.23 of the RBIS, Ltd. Disclosure Schedule lists all insurance
policies pursuant to which RBIS, Ltd. is presently insured and during each
of
the past three calendar years has been insured (each, an “Insurance Policy” and,
collectively, the “Insurance Policies”). Except as disclosed in
Section 4.23 of the RBIS, Ltd. Disclosure Schedule, each Insurance Policy
is, in all material respects, in full force and effect in accordance with
its
terms and all premiums reflected on invoices received by RBIS, Ltd. to date
have
been paid in full. No written notice of cancellation with respect to any
Insurance Policy has been received by RBIS, Ltd. and there is no existing
default or event which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. RBIS, Ltd. is a “named insured” or an
“insured” under each Insurance Policy. RBIS, Ltd. has not been refused any
insurance, nor has the coverage of RBIS, Ltd. been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past three years. The Insurance Policies insure
substantially all of the assets of RBIS and are of the type and in the amounts
that would reasonably be expected to be maintained in the ordinary course
of
business for similarly situated companies in the same or a similar industry.
Set
forth in Section 4.23 in the RBIS, Ltd. Disclosure Schedule is
(a) with respect to each Policy under which the annual premium amount is
fixed, the current amount of such premium, and (b) with respect to each
Policy under which the periodic or annual premium amount is variable, the
amount
of the most recent periodic payment made and the calculation formula with
respect to such premium.
4.24 Product
or Service Warranty.
Within
the three years prior to the date hereof: (a) each product or service sold
or delivered by RBIS, Ltd. has been in material conformity with any applicable
express and implied warranties, (b) RBIS, Ltd. has no current liability for
damages in connection with any such warranty (and there is no basis for any
present or future Action against it that may reasonably be likely to lead
to any
liability) and (c) no product or service sold or delivered by RBIS, Ltd. is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale given by RBIS, Ltd., if any, or as
required by Applicable Law.
4.25 Data
Protection Matters.
4.25.1 RBIS,
Ltd. has not received notice of any existing or pending or overtly threatened,
Action against RBIS, Ltd. by or before any court or Governmental Authority
under
any Data Protection Law.
4.25.2 As
used
in this Agreement, the term “Data Protection Laws” means all federal, state,
local or foreign laws, statutes, orders, rules, regulations, policies or
guidelines, or judgments, decisions or orders entered by any Governmental
Authority, relating to Personal Data.
4.25.3 As
used
in this Agreement, the term “Personal Data” means any and all information that
RBIS, Ltd. maintains or otherwise processes that relates to an identified
or
identifiable natural person, including employees, stockholders, customers,
customers of customers, vendors, contractors, and other business partners
of
RBIS, Ltd., and any employees of or contractors to any of the
foregoing.
4.26 Foreign
Corrupt Practices Act.
4.26.1 RBIS,
Ltd. has not, to secure any improper advantage in order to obtain or retain
business, directly or indirectly offered, paid, given, or promised to pay,
or
authorized the payment of, any money, offer, gift, or other thing of value,
to:
(i) an
officer or employee of any Governmental Authority, or any person acting in
an
official capacity for or on behalf of any Governmental Authority;
(ii) any
political party or official thereof;
(iii) any
candidate for political or political party office; or
(iv) any
other
individual or entity;
while
knowing or having reason to believe that all or any portion of such money
or
thing of value would be offered, given, or promised, directly or indirectly,
to
any person or entity listed in clauses (i) - (iii) above.
4.26.2 RBIS,
Ltd. maintains a system of internal accounting controls adequate to insure
that
it maintains no off-the-books accounts and that its assets are used only
in
accordance with its management’s directives.
4.26.3 No
product sold or service provided by RBIS, Ltd. has been directly or indirectly
sold to or performed on behalf of Cuba, Iraq, Iran, Libya, or
Sudan.
4.27 Government
Contracts.
With
respect to any Governmental Authority Contracts, whether entered into by
RBIS,
Ltd. as a prime contractor or as a subcontractor, there is, as of the date
of
this Agreement, no (a) civil fraud or criminal investigation by any
Governmental Authority that, individually or in the aggregate, has had or
would
reasonably be expected to have a Material Adverse Effect on RBIS, Ltd.,
(b) suspension or debarment proceeding (or equivalent proceeding) that,
individually or in the aggregate, has had or would reasonably be expected
to
have a Material Adverse Effect on RBIS, Ltd., (c) request by a Governmental
Authority for a contract price adjustment based on a claimed disallowance
by the
Defense Contract Audit Agency (or other applicable Governmental Authority)
or
claim of defective pricing, (d) dispute between RBIS, Ltd. or any prime
contractor of RBIS, Ltd. and a Governmental Authority which, since
January 1, 2001, has resulted in a government contracting officer’s final
decision where the amount in controversy exceeds or is expected to exceed
$50,000, (e) claim or request for equitable adjustment by RBIS, Ltd. or any
prime contractor of RBIS, Ltd. against a Governmental Authority in excess
of
$50,000, or (f) any claim or assertion by a Governmental Authority that
RBIS, Ltd. or any prime contractor of RBIS, Ltd. may have violated applicable
rules regarding conflicts of interest or statutes, rules or regulations
regarding the integrity of the purchase process. RBIS, Ltd. has verified
the
accuracy of the security clearances of each of its employees and independent
contractors. Each of its employees and independent contractors billing on
a time
and material contract with a Governmental Authority meets the labor category
criteria of such time and material contract.
4.28 Relations
with Governments.
Neither
RBIS, Ltd., nor any director, officer, agent or employee of RBIS, Ltd., has
(a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to political activity, (b) made any
unlawful payment or offered anything of value to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns,
(c) made any other unlawful payment, or (d) violated any applicable
export control, money laundering or anti-terrorism law or
regulation.
4.29 No
Existing Discussions.
As of
the date of this Agreement, RBIS, Ltd. is not engaged, directly or indirectly,
in any negotiations or discussions with any other party with respect to an
acquisition of a controlling interest in RBIS, Ltd. or the assets of RBIS,
Ltd.
4.30 Review
of SYS SEC Documents.
The
Stockholder has reviewed the SYS SEC Documents and has received from SYS
any
additional information which he has requested in connection with the execution,
delivery, and performance of this Agreement. The Stockholder, by reason of
his
business or financial experience, has the capacity to protect his or her
own
interests in connection with the transactions described in this
Agreement.
4.31 Interested
Party Transactions.
Except
as disclosed in Section 4.31 of the RBIS, Ltd. Disclosure Schedule, no
officer of director of RBIS, Ltd. (nor any person related by blood or marriage
or other person in which any such person has or has had an interest) has
or has
had, directly or indirectly (i) any interest in any entity that furnished
or sold, or furnishes or sells, services or products that RBIS, Ltd. furnishes
or sells, or proposes to furnish or sell, or (ii) any interest in any
entity that purchases from or sells or furnishes to RBIS, Ltd. any goods
or
services, or (iii) any beneficial interest in any contract, agreement, or
commitment of RBIS, Ltd.; provided, however, that ownership of no more than
2.5%
of the outstanding voting stock of a publicly traded corporation and no more
than 5% of the outstanding equity of any other entity shall not be deemed
an
“interest in any entity” for purposes of this Section 4.31.
Schedule 4.31 of the RBIS, Ltd. Disclosure Schedule contains a description
of all indebtedness which currently exists, and any transactions which have
occurred since the incorporation of RBIS, Ltd., between RBIS, Ltd. and any
stockholder, director, or officer of RBIS, Ltd.
4.32 Payments
to Stockholder and Others.
Since
December 31, 2004, RBIS, Ltd. has not paid any bonus or made any other
payment (other than customary payments of salary, directors’ fees and business
expense reimbursements in the ordinary course of business) to any officer
or
director of RBIS, Ltd. Since December 31, 2004, RBIS, Ltd. has not made any
distribution to or for the benefit of any shareholder of RBIS, Ltd.
4.33 Disclosure.
This
Article IV, as modified by the RBIS, Ltd. Disclosure Schedule, does not
contain a material misstatement of fact or omit to state of fact necessary
to
make the facts which are stated herein not misleading.
ARTICLE
V
COVENANTS
OF THE PARTIES
5.1 Mutual
Covenants.
5.1.1 Reasonable
Efforts; Notification.
(i) Each
of
the parties agrees to use all commercially reasonable efforts to take, or
cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other party in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement, including
(A) the obtaining of all other necessary actions or nonactions, waivers,
consents, licenses, permits, authorizations, orders and approvals from
Governmental Authorities and the making of all other necessary registrations
and
filings (including other filings with Governmental Authorities, if any),
(B) the obtaining of all consents, approvals or waivers from third parties
set forth in Schedule 4.5 of the RBIS, Ltd. Disclosure Schedule, and
(C) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by this Agreement.
(ii) Notwithstanding
anything to the contrary in this Agreement, (A) neither SYS nor any of its
subsidiaries shall be required to hold separate (including by trust or
otherwise) or to divest any of their respective businesses or assets, or
to take
or agree to take any action or agree to any limitation that could reasonably
be
expected to have a Material Adverse Effect on SYS after the Closing,
(B) prior to the Closing, RBIS, Ltd. shall not be required to hold separate
(including by trust or otherwise) or to divest any of their respective
businesses or assets, or to take or agree to take any other action or agree
to
any limitation that could reasonably be expected to have a Material Adverse
Effect on RBIS, Ltd., (C) no party shall be required to take any action
that would reasonably be expected to substantially impair the benefits expected,
as of the date hereof, to be realized by such party from consummation of
the
Acquisition and (D) no party shall be required to waive any of the
conditions to the Closing set forth in Article VI as they apply to such
party.
5.1.2 Public
Announcements.
The
initial press release concerning the transactions contemplated hereby shall
be a
joint press release and shall be issued, upon the mutual agreement of the
Stockholder and SYS, on or after the date of this Agreement. SYS and the
Stockholder shall consult with each other before issuing, and give each other
the opportunity to review and comment upon, any other press release or public
statements with respect to the transactions contemplated by this Agreement,
and
shall not issue any such press release or make any such public statement
prior
to such consultation, except as may be required by Applicable Law, court
process
or by obligations pursuant to any listing agreement of SYS with any national
securities exchange or national securities quotation system.
5.1.3 Notices
of Certain Events.
Each
party hereto shall promptly notify the other parties in writing of:
(i) the
receipt by such party of any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) subject
to any applicable legal restrictions, the receipt by such party of any notice
or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement;
(iii) such
party’s obtaining knowledge of any Actions commenced or threatened against,
relating to or involving or otherwise affecting the other party hereto, as
the
case may be, which relate to the consummation of the transactions contemplated
by this Agreement; and
(iv) such
party’s obtaining knowledge of the occurrence, or failure to occur, of any event
which occurrence or failure to occur will be likely to cause the conditions
set
forth in Article VI not to be satisfied; provided,
however,
that no
such notification shall affect the representations, warranties or obligations
of
the parties or the conditions to the obligations of the parties hereunder,
or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.1.4 Notification.
Between
the date of this Agreement and the Closing Date, each party hereto shall
promptly notify the other parties hereto in writing if such party becomes
aware
of any fact or condition that causes or constitutes a breach in any of its
representations and warranties as of the date of this Agreement or any other
date applicable to a representation or warranty as set forth herein. Should
any
such fact or condition require any change in the RBIS, Ltd. Disclosure Schedule,
the Stockholder shall promptly deliver to SYS a written statement specifying
such change. Such delivery will not affect any rights of any party under
any
other provision of this Agreement. During the same period, each party shall
promptly notify the other parties in writing if such party becomes aware
of the
occurrence of any breach of any covenant of such party in this Agreement
or the
occurrence of any event that may make the satisfaction of the conditions
in
Article 6 impossible or unlikely.
5.1.5 Sale
of SYS Common Stock.
SYS and
the RBIS, Ltd. Stockholder agree that 50% of the shares transferred as the
Stock
Consideration may be sold, at the discretion of the RBIS, Ltd. Stockholder,
immediately upon registration of the resale of such shares. All shares
transferred as the Stock Consideration may be sold by the RBIS, Ltd. Stockholder
on or after September 1, 2006. Notwithstanding the foregoing, in the event
the RBIS, Ltd. Stockholder determines in his sole discretion that it is
advantageous to pledge any of his SYS Common Stock to secure any loan or
other
financial obligation following the effectiveness of the applicable Registration
Statement, SYS will waive the restrictions on the sale of such Common Stock
contained in this Section 5.1.5 to the extent required to allow such
pledge.
5.2 Covenants
of SYS.
5.2.1 Employees
and Employee Benefits.
From
and after the Closing, each continuing RBIS, Ltd. employee shall be entitled
to
participate in all SYS employee benefit plans in a manner and to the extent
consistent with their position. From and after the Closing, SYS shall exercise
commercially reasonable efforts to treat all service by RBIS, Ltd. Employees
with RBIS, Ltd. prior to the Closing for all purposes as service with SYS,
including but not limited to for purposes of vacation accrual (except for
purposes of benefit accrual under defined benefit pension plans or to the
extent
such treatment would result in duplicative accrual on or after the Closing
Date
of benefits for the same period of service), and, with respect to any medical
or
dental benefit plan in which RBIS, Ltd. Employees participate after the Closing
Date, SYS shall exercise commercially reasonable efforts to assure that the
deductibles paid by RBIS, Ltd. employees are not increased and to waive or
cause
to be waived any pre-existing condition exclusions and actively-at-work
requirements (provided,
however,
that no
such waiver shall apply to a pre-existing condition of any RBIS, Ltd. Employee
who was, as of the Closing, excluded from participation in a RBIS, Ltd. Plan
by
virtue of such pre-existing condition), and shall exercise commercially
reasonable efforts to provide that any covered expenses incurred on or before
the Closing during the plan year of the applicable RBIS, Ltd. Plan in which
the
Closing Date occurs
by
a RBIS, Ltd. Employee or a RBIS, Ltd. Employee’s covered dependent shall be
taken into account for purposes of satisfying applicable deductible, coinsurance
and maximum out-of-pocket provisions after the Closing Date to
the
same extent as such expenses are taken into account for the benefit of similarly
situated employees of SYS and subsidiaries of SYS.
5.2.2 Registration.
(i) SYS
shall
use commercially reasonable efforts to prepare and, by not later than
May 31, 2006, file with the SEC a Registration Statement covering the
resale of all the SYS shares issued or issuable pursuant hereto as part of
the
Acquisition Consideration (the “Registrable Securities”). SYS shall use
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as soon as practicable. SYS shall submit to the SEC,
within
three (3) business days after SYS learns that no review of such Registration
Statement will be made by the staff of the SEC or that the staff of the SEC
has
no further comments on such Registration Statement, as the case may be, a
request for acceleration of effectiveness of such Registration Statement
to a
time and date not later than three (3) business days after the submission
of
such request. SYS shall use commercially reasonable efforts to keep such
Registration Statement effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the RBIS, Ltd. Stockholder may sell
all of the Registrable Securities covered by such Registration Statement
without
restriction pursuant to Rule 144 (or successor thereto) promulgated under
the 1933 Act or (ii) the date on which the RBIS, Ltd. Stockholder has sold
all the Registrable Securities covered by such Registration Statement. To
the
extent that the registration statement or the prospectus which is a part
thereof
requires amendment or supplement under the Securities Act of 1933 and the
rules
adopted thereunder, SYS shall exercise commercially reasonable efforts to
expeditiously amend or supplement such registration statement, including
the
prospectus which is a part thereof.
(ii) At
any
time that (i) SYS determines to register any of its SYS Common Shares, or
to amend any filed registration which is not yet effective, either for its
own
account or for the account of a holder of SYS Common Shares or as a result
of a
holder of SYS Common Shares exercising demand registration rights, other
than a
registration (A) relating solely to SYS Common Shares registered on
Form S-4 or Form S-8 (or any successor forms), or (B) with
respect to which the SYS Common Shares held by the RBIS, Ltd. Stockholder
would
not be legally permitted to be included, and (ii) SYS Common Shares issued
pursuant to this Agreement and held by the Stockholder are not then the subject
of a filed registration statement or salable under Rule 144 of the SEC,
then SYS shall:
(A) at
least
15 days prior to the filing of a registration statement, other than as set
forth
in (ii)(A) or (B) above, promptly give the Stockholder written notice thereof
by
registered or certified mail, courier or personal delivery; provided that
no
such notice shall be required in a non-underwritten registration, and all
of
such stock shall be registered thereon; and
(B) use
its
commercially reasonable efforts to include in such registration (and any
related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities held by the Stockholder
specified in a written request or requests, made within ten (10) days after
receipt of such written notice from SYS by the Stockholder but only to the
extent that such inclusion does not diminish the number of securities included
by a holder of SYS Common Shares who has demanded such
registration.
(iii) If
the
registration of which SYS gives notice is for a registered public offering
involving an underwriting, SYS will so advise the Stockholder as part of
the
written notice given pursuant to subsection (ii)(A) above. In such event
the right of the Stockholder to registration pursuant to subsection
(ii) above shall be conditioned upon the Stockholder’s participation in
such underwriting and the inclusion of the Stockholder’s Registrable Securities
in the underwriting to the extent provided herein. The Stockholder shall
(together with SYS and the other holders of SYS Common Shares distributing
their
securities through such underwriting) enter into an underwriting agreement
in
customary form with the managing underwriter selected for such underwriting
by
SYS (or by the holders of SYS Common Shares who have demanded such
registration). Notwithstanding any other provision of this Section 5.2.2,
if the managing underwriter determines that marketing factors require a
limitation of the number of SYS Common Shares to be underwritten, the managing
underwriter may limit the number of SYS Common Shares to be included in such
registration. SYS will so advise the Stockholder and any other holder of
SYS
Common Shares distributing their SYS Common Shares through the underwriting
pursuant to registration rights, and the number of SYS Common Shares to be
registered and other securities that may be included in the registration
and
underwriting shall be allocated among all stockholders in proportion, as
nearly
as practicable, to the respective amounts of registrable securities held
by such
stockholders and other securities held by other holders at the time of filing
the registration statement. If the Stockholder disapproves of the terms of
any
such underwriting, he may elect to withdraw therefrom by written notice to
SYS
and the managing underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from registration, and shall not
be
transferred in a public distribution prior to ninety (90) days after the
effective date of the registration statement relating to the underwritten
offering.
(iv) SYS
shall
provide to the Stockholder a suitable number of prospectuses, and supplements
thereto, as soon as possible following the effectiveness of the registration
or
the filing of the supplement, as the case may be.
(v) SYS
shall
have the right to terminate or withdraw any registration initiated by it
under
Section 5.2.2(iii) prior to the effectiveness of such registration, but
without prejudice to its obligation pursuant to this
Section 5.2.2.
(vi) SYS
shall
bear the expenses associated with the registration of Registrable Securities
pursuant to this Section 5.2.2 exclusive of underwriters’ and brokers’
discounts and commissions and expenses of the Stockholder’s legal
counsel.
(vii) SYS
will,
and hereby does, indemnify, hold harmless and defend the Stockholder (an
“Indemnified Person”), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amount
paid in settlement or expenses (collectively, “Claims”), incurred investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is nor
may be
a party thereto (“Indemnified Damages”), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement or a material fact in a
Registration Statement or any post-effective amendment thereto or in any
filing
made in connection with the qualification of the offering under the securities
or other “blue sky” laws of any jurisdiction in which Registrable Securities are
offered (“Blue Sky Filing”), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained
in the
final prospectus (as amended or supplemented, if SYS files any amendment
thereof
or supplement thereto with the SEC) or the omission or alleged omission to
state
therein any material fact necessary to make the statements made therein,
in the
light of the circumstances under which the statements therein were made,
not
misleading, or (iii) any violation or alleged violation by SYS of the 1933
Act, the 1934 Act, or any other law, including, without limitation, any state
securities law, or any rule or regulation therein relating to the offer or
sale
of the Registrable Securities pursuant to a Registration Statement (the matters
in the foregoing clauses (i) through (iii) being, collectively, “Violations”).
SYS shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 5.2.2(vii):
(i) shall not apply to a Claim by an Indemnified Person arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to SYS by such Indemnified Person expressly
for
use in connection with the preparation of the Registration Statement or any
such
amendment thereof or supplement thereto; and (ii) shall not be available to
the extent such claim is based upon a failure of the RBIS, Ltd. Stockholder
to
deliver or to cause to be delivered the prospectus made available by
SYS.
(viii) With
a
view to making available to the Stockholder the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of
the
SEC that may at any time permit the Stockholder to sell securities of SYS
to the
public without registration (“Rule 144”), SYS agrees to use reasonable
commercial efforts to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144; and
(b) file
with
the SEC in a timely manner all reports and other documents required of SYS
under
the 1933 Act and the 1934 Act so long as SYS remains subject to such
requirements and the filing of such reports and other documents is required
for
the applicable provisions of Rule 144.
5.3 Covenants
of the Stockholder.
The
Stockholder agrees and warrants that:
5.3.1 Conduct
of RBIS, Ltd.’s Operations.
During
the period from the date of this Agreement to the Closing Date and except
as may
otherwise be agreed in writing by the parties, RBIS, Ltd. shall conduct its
operations in the ordinary course of business consistent with past practice,
except as expressly contemplated by this Agreement, and shall use its
commercially reasonable efforts to maintain and preserve its business
organization and its rights and franchises and to retain the services of
its
officers and key employees and maintain relationships with customers, suppliers,
lessees, licensees and other third parties, and to maintain all of its operating
assets in their current condition (normal wear and tear excepted). Without
limiting the generality of the foregoing, during the period from the date
of
this Agreement to the Closing Date, RBIS, Ltd. shall not, except as otherwise
expressly contemplated by this Agreement and the transactions contemplated
hereby or with the prior written consent of SYS:
(i) do
or
effect any of the following actions with respect to its securities:
(A) adjust, split, combine or reclassify its capital stock, (B) make,
declare or pay any dividend or distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or
any
securities or obligations convertible into or exchangeable for any shares
of its
capital stock, (C) grant any person any right or option to acquire any
shares of its capital stock, (D) issue, deliver or sell or agree to issue,
deliver or sell any additional shares of its capital stock or any securities
or
obligations convertible into or exchangeable or exercisable for any shares
of
its capital stock or such securities (except pursuant to the exercise of
RBIS,
Ltd. options that are outstanding as of the date hereof), (E) enter into
any agreement, understanding or arrangement with respect to the sale, voting,
registration or repurchase of its capital stock, provided,
however,
that
RBIS, Ltd. is hereby expressly permitted to take all lawful actions necessary
in
order to (x) cause all outstanding options to be exercised or cancelled,
(y) cause all outstanding warrants to be exercised or cancelled and
(z) cause any outstanding convertible debt instruments to become
non-convertible;
(ii) directly
or indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than in the ordinary course
of
business consistent with past practice;
(iii) adopt
or
propose any changes in the RBIS, Ltd. Articles or the RBIS, Ltd. Bylaws;
(iv) merge
or
consolidate with any other person;
(v) acquire
a
material amount of assets or capital stock of any other person outside of
the
ordinary course of business consistent with past practice;
(vi) make
any
borrowings, incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or otherwise
as an
accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity, other than in the ordinary course
of
business, consistent with past practice;
(vii) create
any subsidiaries;
(viii) enter
into or modify any employment, severance, termination or similar agreements
or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or employee other than
pursuant to Applicable Law or contractual commitments existing as of the
date
hereof in the ordinary course of business consistent with past practice
(provided past practices shall not be deemed to include actions taken in
connection with the Acquisition) or grant any increase in the compensation
or
benefits of directors, officers, employees, consultants or agents of RBIS,
Ltd.
or grant, re-price, or accelerate the exercise or payment of any RBIS, Ltd.
options or warrants or other equity-based awards other than increases in
the
ordinary course of business consistent with past practice;
(ix) enter
into, adopt or amend any RBIS, Ltd. Plan, except as may be required by
Applicable Law;
(x) take
any
action that could give rise to severance benefits payable to any officer
or
director of RBIS, Ltd. as a result of consummation of the transactions
contemplated by this Agreement;
(xi) change
any method or principle of accounting in a manner that is inconsistent with
past
practice except to the extent required by generally accepted accounting
principles as advised by RBIS, Ltd.’s regular independent accountants;
(xii) settle
any Actions, whether now pending or hereafter made or brought involving,
individually or in the aggregate, an amount in excess of $25,000 other than
settlement in the ordinary course of business or in accordance with their
terms,
of liabilities disclosed, reflected or reserved against in the most recent
RBIS,
Ltd. financial statements (or the notes thereto) or incurred since the date
of
such financial statements in the ordinary course of business;
(xiii) modify,
extend, amend or terminate, or waive, release or assign any rights or claims
with respect to, any Contract set forth in Section 4.15 in the RBIS, Ltd.
Disclosure Schedule;
(xiv) enter
into any confidentiality agreements or arrangements other than in the ordinary
course of business consistent with past practice;
(xv) write
up,
write down or write off the book value of any assets, individually or in
the
aggregate, in excess of $20,000 except for depreciation and amortization
in
accordance with generally accepted accounting principles consistently applied;
(xvi) incur
or
commit to any capital expenditures in excess of $25,000 in the aggregate
without
the prior written consent of SYS which shall not be unreasonably withheld;
(xvii) make
any
payments in respect of policies of directors’ and officers’ liability insurance
(premiums or otherwise) other than premiums paid in respect of its current
or
renewed or replacement policies;
(xviii) take
any
other action that could likely result in the representations and warranties
set
forth in Article IV becoming false or inaccurate in any material respect;
(xix) enter
into or carry out any other transaction other than in the ordinary and usual
course of business;
(xx) permit
or
cause any Subsidiary to do any of the foregoing or agree or commit to do
any of
the foregoing;
(xxi) make
or
revoke any Tax election, file any amended Tax Return, or settle any audit
or
other proceeding with any Tax authority;
(xxii) enter
into any agreement to purchase, or to lease for a term in excess of one year,
any real property, provided that RBIS, Ltd. (A) may, as a tenant, or a
landlord, renew any existing lease for a term not to exceed eighteen months
and
(B) nothing herein shall prevent RBIS, Ltd., in its capacity as landlord,
from renewing any lease pursuant to an option granted prior to the date
hereof;
(xxiii) make
any
distribution to or for the benefit of its shareholders; or
(xxiv) agree
in
writing or otherwise to take any of the foregoing actions.
5.3.2 Access
to Information; Confidentiality.
Upon
reasonable notice, the Stockholder shall cause RBIS, Ltd. to afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of SYS reasonable access during normal business hours, during
the period prior to the Closing Date, to such of its properties, books,
contracts, commitments, records, all other information and data, officers
and
employees as SYS may reasonably request and, during such period, RBIS, Ltd.
shall furnish promptly to SYS (a) a copy of each report, schedule, and
other document filed, published, announced or received by it during such
period
pursuant to the requirements of Applicable Laws (other than documents which
such
party is not permitted to disclose under Applicable Laws), and
(b) consistent with its legal obligations, all other information concerning
it and its business, properties and personnel as SYS may reasonably request;
provided,
however,
that
RBIS, Ltd. may restrict the foregoing access to the extent that it reasonably
concludes, after consultation with outside legal counsel, that (i) any
Applicable Law requires RBIS, Ltd. to restrict access to any properties or
information, (ii) providing such access would result in the loss of the
attorney-client privilege, (iii) such documents discuss the pricing or
dollar value of the transactions contemplated by this Agreement, (iv) such
documents contain competitively sensitive information, the sharing of which
could constitute a violation of any applicable antitrust laws or (v) such
disclosure is reasonably likely to result in a breach of or default under
any
contract or agreement to which RBIS, Ltd. is a party. Each party shall make
all
commercially reasonable efforts to minimize disruption to the business of
the
other party and its subsidiaries which may result from the requests for data
and
information hereunder. All requests for access and information shall be
coordinated through senior executives of the parties to be designated. The
terms
and provisions of the Reciprocal Non-Disclosure Agreement between RBIS, Ltd.
and
SYS dated November 1, 2005, shall apply to any information provided
pursuant to this section.
5.3.3 No
Solicitation.
Until
the Closing or the termination of this Agreement:
(i) RBIS,
Ltd. and the Stockholder will not, and will not permit or cause any Subsidiary
or any of the directors or officers of RBIS, Ltd. or any Subsidiary, and
will
direct RBIS, Ltd.’s employees, agents and representatives not to, directly or
indirectly, solicit, initiate, encourage, or furnish or disclose non-public
information in furtherance of, or otherwise facilitate any inquiries that
may be
reasonably expected to lead to, the making of any proposal or offer with
respect
to a merger, reorganization, share exchange, consolidation, or similar
transaction involving, or any purchase of 10% or more of the assets or any
equity of, RBIS, Ltd. or any Subsidiary or any other business combination
other
than the transactions contemplated by this Agreement (any such proposal or
offer, an “Acquisition Proposal”).
(ii) RBIS,
Ltd. and the Stockholder will not, and will not permit or cause any Subsidiary
or any of the officers or directors of it or any Subsidiary to, and shall
direct
its and such Subsidiary’s employees, agents and representatives not to, directly
or indirectly, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, whether such Acquisition Proposal arises
or
has arisen before or after the date of this Agreement, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal.
(iii) RBIS,
Ltd. and the Stockholder will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and request the return of all confidential
information regarding such party provided to any such parties prior to the
date
hereof pursuant to the terms of any confidentiality agreements or otherwise.
RBIS, Ltd. and the Stockholder will notify SYS immediately if any such
inquiries, proposals, or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such person and the material terms
and
conditions of any proposals or offers and thereafter shall keep SYS informed,
on
a reasonably current basis, on the status and terms of any such proposals
or
offers and the status of any such negotiations or discussions.
5.3.4 Release.
The
Stockholder (who for purposes of this Section 5.3.4 shall be referred to as
a “Releasor” on behalf of Releasor and Releasor’s successors, heirs, and
assigns, hereby fully and forever releases and discharges RBIS, Ltd. and
SYS and
their respective successors, heirs, and assigns, and their respective officers,
directors, agents, representatives, employees and attorneys from any and
all
claims, demands, actions, agreements, suits, causes of action, obligations,
controversies, debts, costs, attorneys’ fees, expenses, damages, judgments,
orders and liabilities of whatever kind or nature in law, equity or otherwise,
past, present or future, known or unknown, suspected or unsuspected, from
the
beginning of time through execution of this Agreement, excepting only any
claims
arising out of this Agreement and enforcement thereof (collectively, the
“Claims”).
The
Releasor acknowledges that there is a possibility that subsequent to the
execution of this Agreement, he will discover facts or incur or suffer claims
that were unknown or unsuspected at the time this Agreement was executed,
and
which if known by the Releasor at that time may have materially affected
the
Releasor’s decision to execute this Agreement. The Releasor acknowledges and
agrees that by reason of this Section 5.3.4, he is assuming any risk of
such unknown facts and such unknown and unsuspected claims.
The
Releasor has been advised of the existence of Section 1542 of the
California Civil Code (“Section 1542”), which provides:
A
GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO
EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
Notwithstanding
such provisions, this Section 5.3.4 shall constitute a full release in
accordance with its terms. Each Releasor hereby knowingly and voluntarily
waives
the provisions of Section 1542, as well as any other statute, law or rule
of similar effect.
5.3.5 Unfair
Competition.
For a
period of two (2) years after the date of the Closing of the Acquisition,
the
Stockholder agrees that he
will
not, directly or indirectly (whether on his own behalf or as an owner, parent,
stockholder, partner, joint venturer, investor, member, officer, director,
agent, independent contractor, associate, executive, consultant or licensor)
compete with SYS or its subsidiaries and affiliates anywhere within California,
Maryland, and all other states in which SYS has offices or customers as of
the
date of the Acquisition (the “Territory”) by carrying on, being engaged in, or
taking part in the business of secure network engineering contract services
for
the Department of Defense (the “Business”) in any manner.
(i) For
a
period of two (2) years after the date of Closing of the Acquisition, the
Stockholder agrees that he will not, directly or indirectly (whether on his
own
behalf or as an owner, parent, stockholder, partner, joint venturer, investor,
member, officer, director, agent, independent contractor, associate, executive,
consultant or licensor) (1) accept Business, whether solicited or not, from
any current or future customer or client of SYS or its subsidiaries and
affiliates, and (2) solicit, divert, take away, or attempt to solicit,
divert, take away, any prospective or current customer, client, supplier,
or
distributor of SYS or its subsidiaries and affiliates, with whom he had material
business contact, for the purpose of competing in the Business with SYS or
its
subsidiaries and affiliates.
(ii) For
a
period of two (2) years after the date of Closing of the Acquisition, the
Stockholder agrees that he will not, directly or indirectly (whether on his
own
behalf or as an owner, parent, stockholder, partner, joint venturer, investor,
member, officer, director, agent, independent contractor, associate, executive,
consultant or licensor) solicit or encourage to leave the employ of SYS or
its
subsidiaries any employee or independent contractor of SYS or its subsidiaries
and affiliates, excepting only ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇.
(iii) The
Stockholder acknowledges that the restrictions and covenants set forth above
are
reasonably necessary to protect the goodwill and other legitimate business
interests of SYS and its subsidiaries, including the goodwill acquired by
SYS as
a consequence of the closing of the Acquisition described in this Agreement,
and
are not overbroad, overlong, or unfair (including in duration and scope).
The
Stockholder also acknowledges that any breach of these covenants would cause
SYS
serious, irreparable injury or loss.
(iv) The
Stockholder agrees that SYS (or its subsidiaries or affiliates) will be entitled
to immediate injunctive relief for any breach of this Section 5.3.5, and
that a restraining order and/or an injunction may be issued against Stockholder,
in addition to any other rights or remedies at law SYS (or its subsidiaries
or
affiliates) may have.
(v) Notwithstanding
the above, Stockholder may acquire on the open market up to 5% of any company
a
class of equity securities of which is traded on the NASDAQ National Market
or a
national exchange and which has a market capitalization of at least $500
Million
Dollars.
5.3.6 Investment
Representations by RBIS, Ltd. Stockholder.
The
Stockholder shall deliver to SYS, on or prior to the Closing Date, a signed
certificate, substantially in the form attached as Exhibit B (the
“Investment Representation Certificate”).
ARTICLE
VI
CONDITIONS
6.1 Conditions
to the Obligations of Each Party.
The
obligations of SYS and the Stockholder to consummate this Agreement shall
be
subject to the satisfaction or waiver of the following conditions:
6.1.1 No
provision of any Applicable Law or regulation and no judgment, injunction,
order, decree, ruling, assessment or arbitration award of any Governmental
Authority or arbitrator and any Contract with any Governmental Authority
pertaining to compliance with Applicable Law shall prohibit or enjoin the
consummation of the transactions contemplated by this Agreement or limit
the
ownership or operation by SYS, RBIS, Ltd. or any of their respective
subsidiaries of any material portion of the businesses or assets of SYS or
RBIS,
Ltd.
6.1.2 There
shall not be pending any Action (i) challenging or seeking to restrain or
prohibit the consummation of transactions contemplated by this Agreement,
(ii) seeking to prohibit or limit the ownership or operation by SYS, RBIS,
Ltd. or any of their respective subsidiaries of, or to compel SYS, RBIS,
Ltd. or
any of their respective subsidiaries to dispose of or hold separate, any
material portion of the business or assets of SYS, RBIS, Ltd. or any of their
respective subsidiaries, as a result of the transactions contemplated by
this
Agreement, (iii) seeking to impose limitations on the ability of SYS to
acquire or hold, or exercise full rights of ownership of, any shares of capital
stock of RBIS, Ltd. or (iv) seeking to prohibit SYS or any Subsidiary of
SYS from effectively controlling in any material respect the business or
operations of SYS or the subsidiaries of SYS.
6.1.3 Buyer,
Stockholder, and Strategic Ventures shall have executed and delivered the
General Release of Claims attached hereto as Exhibit C.
6.2 Conditions
to Obligations of the Stockholder.
The
obligations of the Stockholder to consummate the transactions contemplated
hereby shall be subject to the fulfillment of the following conditions unless
waived by the Stockholder:
6.2.1 Each
of
the representations and warranties of SYS contained in this Agreement shall
be
true and correct in all material respects (but without regard to any materiality
qualifications or references to Material Adverse Effect contained in any
specific representation or warranty), in each case on the date of this Agreement
and on and as of the Closing Date as though made on and as of the Closing
Date
(except for representations and warranties made as of some other specified
date,
in which case as of such specified date), except where any such failure of
the
representations and warranties to be true and correct, individually or in
the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on
SYS, RBIS, Ltd. or the transactions contemplated by this Agreement.
6.2.2 SYS
(i) shall have performed or complied in all material respects with all
agreements and covenants required to be performed by it under this Agreement
at
or prior to the Closing Date that are qualified as to Material Adverse Effect
and (ii) shall have performed or complied in all material respects with all
agreements and covenants required to be performed by it under this Agreement
at
or prior to the Closing that are not qualified as to Material Adverse Effect
except where such non-performance or non-compliance individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect
on
SYS.
6.2.3 SYS
shall
have furnished the Stockholder with a certificate dated the Closing Date
signed
on behalf of it by the Chairman, President or any Vice President to the effect
that the conditions set forth in Sections 6.2.1 and 6.2.2 have been
satisfied.
6.3 Conditions
to Obligations of SYS.
The
obligations of SYS to consummate the transactions contemplated hereby shall
be
subject to the fulfillment of the following conditions unless waived by SYS:
6.3.1 Each
of
the representations and warranties of the Stockholder contained in this
Agreement shall be true and correct in all material respects (but without
regard
to any materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty), in each case, on the
date
of this Agreement and on and as of the Closing Date as though made on and
as of
the Closing Date (except for representations and warranties made as of some
other specified date, in which case, as of such specified date), except where
any such failure of the representations and warranties to be true and correct
would not reasonably be expected to have a Material Adverse Effect on RBIS,
Ltd., SYS or the transactions contemplated by this Agreement.
6.3.2 The
Stockholder (i) shall have performed or complied in all material respects
with all agreements and covenants required to be performed by each of them
under
this Agreement at or prior to the Closing that are qualified as to Material
Adverse Effect, and (ii) shall have performed or complied in all material
respects with all agreements and covenants required to be performed by them
under this Agreement at or prior to the Closing that are not qualified as
to
Material Adverse Effect except where such non-performance or non-compliance
would not reasonably be expected to have a Material Adverse Effect on RBIS,
Ltd.
6.3.3 The
Stockholder shall have furnished SYS with a certificate dated the Closing
Date
to the effect that the conditions set forth in Sections 6.3.1 and 6.3.2
have been satisfied.
6.3.4 Since
the
date of this Agreement, except as set forth in Section 4.10 of the RBIS,
Ltd. Disclosure Schedule delivered as of such date, there shall not have
been
any change in the assets, liabilities, business prospects, results of operations
or financial condition of RBIS, Ltd. that would constitute a Material Adverse
Effect on RBIS, Ltd. as of the Closing Date.
6.3.5 All
consents, novations, approvals, and waivers set forth in Section 4.5 of the
RBIS, Ltd. Disclosure Schedule shall have been obtained by RBIS, Ltd. or
waived by SYS.
6.3.6 Each
outstanding option or warrant to acquire, and each issued note or other security
convertible into, RBIS, Ltd. Capital Stock, whether or not exercisable, vested
or converted, shall have been exercised or cancelled so that as of the Closing
Date no person shall have any options, warrants, or other rights to buy,
or
convert into, any securities of RBIS, Ltd.
6.3.7 Completion
and delivery to SYS of an audit of RBIS, Ltd.’s financial statements covering
the fiscal year ended December 31, 2005, which audit shall be appropriate
and adequate for use in preparing reports and registration statements to
be
filed with the Securities and Exchange Commission.
6.3.8 The
Stockholder shall have delivered to SYS an opinion of ▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.C., counsel to the Stockholder, which opinion shall be in form
and
substance satisfactory to SYS.
6.3.9 The
Stockholder shall have executed and delivered to SYS the Indemnification
Agreement attached hereto as Exhibit D.
6.3.10 The
Stockholder shall have delivered to SYS a fully-executed employment letter
in
the form delivered to Shareholder by SYS and a fully-executed resignation
from
each officer and director of RBIS, Ltd. other than ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇.
ARTICLE
VII
GENERAL
SURVIVAL
AND INDEMNIFICATION
7.1 Survival
of Representations and Warranties.
7.1.1 Except
as
set forth in this Section 7.1.1, the representations, warranties, covenants
and agreements made herein by the Stockholder shall survive, irrespective of any
different survival period under any applicable statute of limitations, until
eighteen (18) months from the date of this Agreement (the “Cut-Off Date”). The
representations, warranties, covenants, and agreements made by the Stockholder
in Sections 4.3, 4.4, 4.11, and 4.21 shall survive the Closing,
irrespective of any different survival period under any applicable statute
of
limitation and shall not be subject to the Cut-Off Date.
7.1.2 Irrespective
of any different survival period under any applicable statute of limitations,
the representations, warranties, covenants and agreements made herein by
SYS
shall survive until the Cut-Off Date.
7.1.3 This
Section 7.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Closing or
after
the termination of this Agreement.
7.1.4 Notwithstanding
any right of SYS to investigate the affairs of RBIS, Ltd. or of the Stockholder
to investigate the affairs of SYS, SYS shall have the right to rely fully
upon
the representations, warranties, covenants and agreements contained in this
Agreement, or in any instrument required to be delivered pursuant to this
Agreement, and the Stockholder shall have the right to rely fully upon the
representations, warranties, covenants, and agreements of SYS contained in
this
Agreement or in any such instrument. No information or knowledge obtained
by a
party hereto in an investigation conducted by such party shall affect or
be
deemed to modify any representation or warranty of any other party contained
herein or the conditions to the obligations of the parties to consummate
the
transactions contemplated by this Agreement. The right to any remedy based
on a
breach of the representations, warranties, covenants, and obligations of
another
party, will not be affected by any investigation conducted by a party with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement
or
the Closing Date, about an accuracy or inaccuracy of or compliance with,
any
representation, warranty, covenant or obligation of any other
party.
7.2 Indemnification.
From
and after the Closing, the Stockholder shall indemnify, defend (with counsel
reasonably acceptable to SYS) and hold SYS and its subsidiaries and their
respective officers, directors, shareholders, affiliates, employees, agents
and
other representatives (the “SYS Indemnified Parties”), harmless from and against
any and all claims, demands, suits, actions, causes of actions, losses, damages,
obligations, liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and court costs) (collectively, the “Losses”)
arising as a result of or incurred in connection with (i) any breach by
RBIS, Ltd. and/or Stockholder of any of their representations or warranties
set
forth in this Agreement and (ii) any failure by RBIS, Ltd. and/or the
Stockholder to perform any of their covenants or agreements set forth in
this
Agreement. The first recourse of the SYS Indemnified Parties for Losses shall
be
from the Escrow Consideration and pursuant to the Escrow Agreement. Any Losses
remaining thereafter may be obtained from the Stockholder. Any Loss that
results
from a settlement of a third party claim against an SYS Indemnified Party
shall
be the subject of indemnification hereunder only if the settlement has been
approved by the Stockholder, which approval shall not be unreasonably denied.
The Stockholder may not settle any such claim unless the settlement provides
for
a full and complete release of the SYS Indemnified Parties and does not include
equitable relief against, or payment from, any SYS Indemnified
Party.
7.3 Limitations.
7.3.1 Notwithstanding
any provision of this Agreement to the contrary, except as set forth in the
next
sentence of this Section 7.3, an SYS Indemnified Party may not recover any
Losses under Section 7.2 unless and until the aggregate amount of Losses
exceeds Twenty-Five Thousand Dollars ($25,000) (the “Threshold Amount”), in
which case the SYS Indemnified Party shall be entitled to recover all Losses
without regard to the Threshold Amount from the first dollar of such Losses.
Notwithstanding the foregoing, an SYS Indemnified Party shall be entitled
to
recover for, and the Threshold Amount and the Indemnification Limitation
(as
defined herein) shall not apply as a threshold to, any and all claims or
payments made with respect to Losses arising from a breach of Sections 4.3,
4.4, 4.11, or 4.21 or from fraud, willful misconduct or intentional
misrepresentation.
7.3.2 Notwithstanding
anything to the contrary contained in this Article VII, in order for an
indemnity claim to be made for an indemnity obligation under Section 7.2,
the claim must have arisen by the Cut-Off Date and be asserted in writing
and
delivered to the indemnifying party on or before the Cut-Off Date.
7.3.3 Notwithstanding
anything to the contrary contained in this Article VII, the indemnity
contained in Section 7.2 shall be several with respect to those warrants
that are made severally.
7.3.4 Notwithstanding
anything to the contrary contained in this Article VII, the Stockholder’s
maximum aggregate indemnification obligation shall be limited to an amount
equal
to the Cash Consideration (the “Indemnification Limitation”).
ARTICLE
VIII
MISCELLANEOUS
8.1 Notices.
All
notices and other communications hereunder shall be in writing and shall
be
deemed given if delivered personally, sent by facsimile (with written
confirmation of successful delivery) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at
such
other address for a party as shall be specified by like notice from such
party
to the other parties hereto):
8.1.1 if
to
SYS:
SYS
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Secretary
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇,
Forward, ▇▇▇▇▇▇▇▇ & Scripps LLP
▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
8.1.2 if
to the
Stockholder:
▇▇▇▇
▇.
▇▇▇▇▇▇
Reality
Based IT Services, Ltd.
▇.▇.
▇▇▇
▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
with
a
copy to:
▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇
▇
▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
8.2 Interpretation.
8.2.1 When
a
reference is made in this Agreement to an Article or Section, such
reference shall be to an Article or Section of this Agreement unless
otherwise indicated. The headings, the table of contents and the index of
defined terms contained in this Agreement are for reference purposes only
and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes,” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.”
8.2.2 For
the
purposes of any provision of this Agreement, a “Material Adverse Effect” with
respect to any party shall be deemed to occur if any event, change or effect
has
occurred which has a material adverse effect on the business, assets (including
intangible assets), liabilities (contingent or otherwise), results of
operations, business prospects, or financial condition of such party taken
as a
whole, or a material adverse effect on the ability of such party to timely
perform its obligations under this Agreement and the other transaction documents
contemplated hereby; provided,
however,
none of
the following shall be deemed in themselves, either alone or in combination,
to
constitute, and none of the following shall be taken into account in determining
whether there has been, a Material Adverse Effect:
(i) with
respect to any party, any change in or effect upon the assets (including
intangible assets), liabilities (contingent or otherwise), financial condition,
business prospects, or results of operations of such party directly or
indirectly arising out of or attributable to any decrease in the market price
of
SYS Common Shares (but not any change or effect underlying such decrease
to the
extent such change or effect would otherwise constitute a Material Adverse
Effect on SYS);
(ii) with
respect to any party, any change in or effect upon the assets (including
intangible assets), liabilities (contingent or otherwise), financial condition,
business prospects, or results of operations of such party directly or
indirectly arising out of or attributable to (A) conditions, events, or
circumstances generally affecting the economy of the United States, or
(B) the general state of industries and market sectors in which such party
operates; and
(iii) with
respect to RBIS, Ltd., any change in or effect upon the assets (including
intangible assets), liabilities (contingent or otherwise), financial condition,
or results of operations of RBIS, Ltd. directly or indirectly arising out
of or
attributable to the loss by RBIS, Ltd. of any of its business prospects or
customers (including business of such business prospects or customers),
suppliers or employees (including, without limitation, any financial consequence
of such loss of customers (including business of such customers), suppliers
or
employees) due primarily to the transactions contemplated hereby or the public
announcement of this Agreement, in each case arising after the date of this
Agreement.
8.2.3 For
purposes of this Agreement, a “Subsidiary” when used with respect to any party
means any individual partnership, firm, corporation, association, trust,
unincorporated organization (including any representative office or branch)
or
other entity under the laws of any jurisdiction, (i) of which such party or
another subsidiary of such party is a general partner (excluding partnerships,
the general partnership interests of which held by such party or the Subsidiary
of such party do not have 50% or more of the voting interests in such
partnership) or (ii) 50% or more of the securities or other interests of
which having by their terms ordinary voting power to elect at least 50% of
the
board of directors or others performing similar functions with respect to
such
corporation or other organization is directly or indirectly owned or controlled
by such party or one or more of its subsidiaries (or if there are no such
voting
securities or interests, 50% or more of the equity interests of which is
directly or indirectly owned or controlled by such party or one or more of
its
subsidiaries).
8.2.4 For
purposes of this Agreement, “Affiliate” means a person that directly, or
indirectly through one or more intermediaries, controls, is controlled by
or is
under common control with another person or beneficially owns or has the
power
to vote or direct the vote of 10% of more of the voting stock (or of any
other
form of general partnership, limited partnership or voting equity interest
in
the case of a person that is not a corporation) of such other person. For
purposes of this definition, “control,” including the terms “controlling and
“controlled” means through the ownership of voting securities, by contract or
credit arrangement, as trustee, partner or executor or otherwise.
8.2.5 For
purposes of this Agreement, “Knowledge” means with respect to SYS, the actual
knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. Lake, and with respect to
RBIS, Ltd. or the Stockholder, the actual knowledge of the Stockholder and
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇.
8.3 Counterparts.
This
Agreement may be executed in counterparts, which together shall constitute
one
and the same Agreement. The parties may execute more than one copy of the
Agreement, each of which shall constitute an original.
8.4 Entire
Agreement.
This
Agreement (including the documents and the instruments referred to herein)
constitute the entire agreement among the parties and supersede all prior
agreements and understandings, agreements or representations by or among
the
parties, written and oral, with respect to the subject matter hereof and
thereof; provided, however, that the parties’ nondisclosure/nonuse agreement
shall survive, and shall also survive any termination of this
Agreement.
8.5 Third-Party
Beneficiaries.
Nothing
in this Agreement, express or implied, is intended or shall be construed
to
create any third-party beneficiaries.
8.6 Governing
Law; Venue.
8.6.1 This
Agreement shall be governed by the laws of the State of California without
regard to its conflict of laws rules, and any action arising out of or in
connection with this Agreement or the Acquisition shall be brought only in
San
Diego County, California. Each of the parties hereto agrees that a final
judgment in any action or proceeding shall be conclusive and may be enforced
in
other jurisdictions by suit on the judgment or in any other manner provided
by
law.
8.6.2 Each
of
the parties hereto irrevocably consents to the service of any summons and
complaint and any other process in any other action or proceeding relating
to
this Agreement, on behalf of itself or its property, by the personal delivery
of
copies of such process to such party. Nothing in this Section 8.6 shall
affect the right of any party hereto to serve legal process in any other
manner
permitted by law.
8.7 Arbitration.
The
parties to this Agreement shall submit to binding arbitration before a single,
neutral arbitrator of any dispute, controversy or claim arising out of, or
relating to, the transactions contemplated by this Agreement or any breach
hereof, provided,
however,
that
the parties retain their right to, and shall not be prohibited, limited or
in
any other way restricted from, seeking or obtaining equitable relief from
a
court having jurisdiction over the parties. Such arbitration shall be governed
by and conducted through the American Arbitration Association in accordance
with
the Commercial Dispute Resolution Procedures. The arbitration hearing shall
be
held in San Diego, California at a place to be designated by the parties
or, in the absence of their agreement, by the arbitrator.
8.8 Specific
Performance.
The
transactions contemplated by this Agreement are unique. Accordingly, each
of the
parties acknowledges and agrees that, in addition to all other remedies to
which
it may be entitled, each of the parties hereto is entitled to a decree of
specific performance, provided such party is not in material default hereunder.
The party prevailing in any proceeding seeking such a decree shall be entitled
to payment of all reasonable legal fees and expenses by the non-prevailing
party.
8.9 Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject
to
the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and
assigns. Additionally, notwithstanding the foregoing or anything to the contrary
contained in this Agreement, SYS is specifically permitted to adopt a holding
company structure pursuant to Section 251(g) of the Delaware General
Corporation Law and assign this Agreement to the holding company or consummate
SYS’s previously approved reincorporation into the State of Delaware, in which
case the references herein to receipt and registration of actual and underlying
SYS shares shall instead refer to the equivalent shares of the Delaware
corporation.
8.10 Expenses.
All
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses.
8.11 Severability.
The
invalidity or unenforceability in whole or in part of any covenant, promise
or
undertaking, or any section, subsection, sentence, clause, phrase, word,
or any
of the provisions of this Agreement will not affect the validity or
enforceability of the remaining portions of this Agreement. If for any reason,
any provision is determined to be invalid or in conflict with any existing,
or
future law or regulation by a court or agency having valid jurisdiction,
such
will not impair the operation or have any other effect upon such other
provisions of this Agreement as may remain otherwise valid, and the latter
will
continue to be given full force and effect and bind the parties
hereto.
8.12 Amendment.
This
Agreement may be amended prior to the Closing only by agreement in writing
executed by all of the parties hereto; provided,
however,
that
SYS and RBIS, Ltd. shall be entitled to provide written statements regarding
new
information as to the RBIS, Ltd. Disclosure Schedule, respectively, without
the
written consent of the other parties hereto.
8.13 Attorneys’
Fees.
If any
action or arbitration is commenced to enforce or interpret any provision
of this
Agreement, the prevailing party shall be entitled to recover from the other
party actual attorneys’ fees and costs incurred in connection with such action,
in addition to all other proper relief. Attorneys’ fees incurred in enforcing
any judgment are recoverable as a separate item, and this provision for
post-judgment attorneys’ fees shall survive any judgment and shall not be deemed
merged into the judgment.
[Signature
Page Follows]
IN
WITNESS WHEREOF,
SYS and
Stockholder have signed this Agreement as of the date first written above.
SYS
By: _____ /s/
▇▇▇▇▇▇▇ ▇. Cooke___________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Title: President
By: ______
/s/ ▇▇▇▇▇▇▇ ▇. Fink___________
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇
Title: Secretary
STOCKHOLDER
By: ______
/s/ ▇▇▇▇ ▇. Murphy___________
Name:
▇▇▇▇
▇.
▇▇▇▇▇▇