ASSET PURCHASE AGREEMENT by and among COMMAND SECURITY CORPORATION, EXPERT SECURITY SERVICES, INC., and THE SHAREHOLDERS OF EXPERT SECURITY SERVICES, INC.
EXECUTION
COPY
by
and
among
COMMAND
SECURITY CORPORATION,
EXPERT
SECURITY SERVICES, INC.,
and
THE
SHAREHOLDERS OF EXPERT SECURITY SERVICES, INC.
January
1, 2008
ASSET
PURCHASE AGREEMENT, dated as of January 1, 2008 (the “Effective
Date”),
by
and among COMMAND
SECURITY CORPORATION,
a New
York corporation (the “Purchaser”),
EXPERT SECURITY SERVICES, INC., a Maryland corporation (the “Seller”),
and
the Shareholders of the Seller listed on Schedule
1
(each, a
“Shareholder,”
and
collectively, the “Shareholders”
and,
together with the Seller, the “Seller
Parties”)).
The
foregoing parties to this Agreement are hereinafter sometimes referred to
individually as a “Party”
and
collectively as the “Parties.”
RECITALS
The
Seller is the business of providing armed and unarmed uniformed security guard
services and motorized patrol services, with existing operations in the State
of
Maryland (the “Business”).
The
Purchaser wishes to purchase from the Seller, and the Shareholders desire to
cause the Seller to sell to the Purchaser, the Acquired Assets (as defined
herein), all in exchange for the payment of the Purchase Price (as defined
herein) and the assumption of the Assumed Liabilities (as defined herein) by
the
Purchaser, upon the terms and subject to the conditions hereinafter set
forth.
Accordingly,
in consideration of the mutual agreements contained herein, intending to be
legally bound hereby, the Parties agree as follows:
CERTAIN
DEFINITIONS
As
used
in this Agreement each of the following terms shall have the following
meaning:
“Accounts
Receivable”
means
any and all amounts and other obligations owed to the Seller by reason of a
sale
of a good or provision of a service in the ordinary course of the
Business.
“Acquired
Assets”
means
all of the assets, properties and right, whether real, personal, tangible or
intangible, of every kind, nature and description of the Seller with respect
to,
or used in connection with, the Business, other than the Excluded Assets,
including without limitation:
all
Computer Equipment, machinery, furniture, fixtures, equipment and other tangible
personal property owned by the Seller (the “Owned
Tangible Property”),
including without limitation that listed and described on Schedule
1.02(a)
and the
Seller’s rights under all related warranties;
all
of
the Seller’s right, title and interest in and to the Leased Tangible Property,
including without limitation that listed and described on Schedule
1.02(b);
all
of
the Seller’s right, title and interest in, to and under the Contracts, including
without limitation those listed on Schedule
5.11(a);
all
of
the Seller’s right, title and interest in, to and under the Leases listed on
Schedule
5.11(b);
all
client, customer, lead, mailing, circulation and related lists, and all other
lists, accounts, books and records of the Seller (including without limitation
those relating to (i) proprietary research and other databases, (ii) the
purchase of materials, supplies or services, and (iii) the production and sale
of products or services, including all correspondence and other files), and
all
other existing records of the Seller, and all computerized records, together
with the related documentation used in connection therewith;
all
Governmental Authorizations, including without limitation those listed and
described on Schedule
5.24;
any
sales, excise or other licenses or registrations issued to or held by the Seller
necessary for the operation of the Business, all of which are listed on
Schedule
1.02(i);
and
all
goodwill of the Seller specific to the Business.
“Actual
Billed Revenues”
shall
mean the aggregate amount of revenues of the Business under Customer Contracts
and from New Clients as reflected on the Purchaser’s internal accounting books
and records (either as having been received or as Accounts Receivable),
determined in accordance with GAAP and in a manner consistent with the
preparation of the Financial Statements.
“Actual
Revenue Surplus”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(A).
“Actual
Revenue Shortfall”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(B).
“Adjudication”
has
the
meaning ascribed to such term in Section 2.08(c).
“Affiliate”
means
an affiliate of an individual or entity as the term “affiliate” is defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
“Agreement”
means
this Asset Purchase Agreement and all schedules and exhibits
hereto.
“Annualized
Revenue Run Rate”
shall
mean (a) for the Interim Measurement Period, the product of (i) the Actual
Billed Revenues during the final two-week billing period in the sixth month
following the Closing, and
(ii)
26,
and (b) for the Annual Measurement Period, the product of (i) the Actual Billed
Revenues during the final two-week billing period in the 12th
month
following the Closing, and
(ii)
26.
“Annual
Measurement Period”
has
the
meaning ascribed to such term in Section 2.07(b).
“Annual
Measurement Date”
has
the
meaning ascribed to such term in Section 2.07(b).
“Annual
Statement Challenge”
has
the
meaning ascribed to such term in Section 2.07(b).
“Annual
Target”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(A).
“Assignment
and Assumption Agreement”
means
an assignment and assumption agreement providing for the assumption by the
Purchaser of the Assumed Liabilities and the transfer to the Purchaser of the
Contracts, in the form attached hereto as Exhibit
A.
2
“Assumed
Liabilities”
has
the
meaning ascribed to such term in Section 2.03(a).
“Benefit
Plans”
has
the
meaning ascribed to such term in Section 5.20(a).
“Business”
has
the
meaning ascribed to such term in the first Recital clause of this
Agreement.
“Business
Personnel”
has
the
meaning ascribed to such term in Section 4.01(a)(iii).
“Claims”
has
the
meaning ascribed to such term in Section 7.02.
“Closing”
has
the
meaning ascribed to such term in Section 3.01.
“Closing
Date”
has
the
meaning ascribed to such term in Section 3.01.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Computer
Equipment”
means
all computer equipment, devices and accessories (including, but not limited
to,
personal computers, workstations, servers, data processing hardware and related
telecommunications equipment, media and tools) used in the
Business.
“Confidential
Information”
has
the
meaning ascribed to such term in Section 4.01(b).
“Contract”
means
any contract, understanding, license, agreement, commitment, lease, or
contractual restriction of any kind relating to the Business to which the Seller
is a party or, in respect of the Business, by which the Seller is bound or
to
which any of the Acquired Assets are subject, including without limitation
Customer Contracts, but does not include any contract or commitment in respect
of Benefit Plans.
“Customer
Contracts”
means
those Contracts in effect on the Closing Date pursuant to which the Seller
has
agreed to (a) provide the Services to the Customers and/or (b) maintain and/or
support Services for the Customers.
“Customers”
has
the
meaning ascribed to such term in Section 5.21(a).
“Damages”
has
the
meaning ascribed to such term in Section 7.03(a).
“Database”
means
any compilation of Proprietary Information or any other data or information
that
can be electronically searched, organized or otherwise manipulated using
software or otherwise.
“Employee”
and
“Employees”
has
the
meaning ascribed to such term in Section 5.17(a).
“Employment
and Non-Competition Agreement”
means
the employment and non-competition agreement between the Purchaser or an
Affiliate of the Purchaser and ▇▇▇▇▇▇ ▇▇▇▇▇▇, substantially in the form attached
hereto as Exhibit
B.
“Encumbrance”
means
any claim, mortgage, pledge, lien, security or other third party right or
interest of any kind whatsoever, conditional sales agreement, option,
encumbrance or charge of any kind affecting real or personal
property.
3
“Environmental
Claims”
means
any and all claims, actions, causes of action, or other written notices by
any
Person or entity alleging potential liability (including, but not limited to,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or civil or criminal penalties) arising out of or resulting from (i)
circumstances forming the basis of any violation of any Environmental Laws
or
(ii) any releases of Hazardous Materials at any real or personal property
presently or formerly owned, leased or managed by the Seller in the conduct
of
the Business or at any disposal facility which may have received Hazardous
Materials generated by the Seller in the conduct of the Business.
“Environmental
Laws”
means
any applicable federal, state, local or foreign law, treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction, each as in effect on or prior to the Closing Date, relating to
the
environment or health.
“Environmental
Permits”
means
Permits required by Environmental Laws.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Escrow
Agent”
has
the
meaning ascribed to such term in Section 2.05.
“Escrow
Agreement”
has
the
meaning ascribed to such term in Section 2.05.
“Escrow
Amount”
has
the
meaning ascribed to such term in Section 2.05.
“Escrow
Balance”
has
the
meaning ascribed to such term in Section 2.08(b).
“Excluded
Assets”
has
the
meaning ascribed to such term in Section 2.02.
“Excluded
Liabilities”
has
the
meaning ascribed to such term in Section 2.03(b).
“Filed
Purchaser SEC Documents”
has
the
meaning ascribed to such term in Section 6.05.
“Final
Allocation Schedule”
has
the
meaning ascribed to such term in Section 2.06.
“Financial
Statements”
has
the
meaning ascribed to such term in Section 5.06.
“GAAP”
means
United States generally accepted accounting principles, consistently
applied.
“Governmental
Authority”
means
any government, regulatory authority, governmental department, agency,
commission, board, tribunal, dispute settlement panel or body, bureau, official
or court or other law, rule or regulation-making entity having or purporting
to
have jurisdiction on behalf of any nation or state or other geographical or
political subdivision thereof.
“Governmental
Authorizations”
means
all governmental approvals, authorizations, certifications, consents, variances,
permissions, licenses, directives, and permits to or from, or filings, notices,
or recordings to or with United States federal, state, and local governmental
authorities.
4
“Hazardous
Materials”
shall
include (a) any element, compound, or chemical that is defined, listed or
otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substance, extremely hazardous substance or chemical, hazardous waste,
biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (b) petroleum, petroleum-based or petroleum-derived
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic including but not limited to corrosivity,
ignitability, toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any asbestos-containing materials.
“INA”
has
the
meaning ascribed to such term in Section 5.17(g).
“Indemnification
Notice”
has
the
meaning ascribed to such term in Section 7.02.
“Indemnified
Party”
has
the
meaning ascribed to such term in Section 7.02.
“Indemnitor”
has
the
meaning ascribed to such term in Section 7.02.
“Interim
Measurement Period”
has
the
meaning ascribed to such term in Section 2.07(a).
“Interim
Measurement Date”
has
the
meaning ascribed to such term in Section 2.07(a).
“Interim
Statement Challenge”
has
the
meaning ascribed to such term in Section 2.07(a).
“Interim
Target”
has
the
meaning ascribed to such term in Section 2.07(a).
“Knowledge”
means
(i) as to the Seller, the actual knowledge, after due inquiry, of ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ and (ii) as to the Purchaser, the actual knowledge, after
due
inquiry, of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
“Lease”
or
“Leases”
has
the
meaning ascribed to such term in Section 5.11(b).
“Leased
Tangible Property”
means
all Computer Equipment, machinery, furniture, equipment and other tangible
personal property, in each case which is subject to a leasehold interest held
by
the Seller and which is used by the Seller exclusively in the conduct of the
Business.
“Material
Adverse Effect”
means
a
material adverse effect, either individually or when aggregated with other
such
effects, on the assets, business, operations, condition (financial or otherwise)
or results of operations of the Business.
“Neutral
Auditors”
has
the
meaning ascribed to such term in Section 2.08(a).
“New
Clients”
shall
mean persons or entities initially identified by ▇▇▇▇▇▇ ▇▇▇▇▇▇ that have agreed
to engage services of the Business after the Closing Date under arrangements
providing for a term of not less than one year.
5
“OSHA”
means
the Occupational Safety and Health Administration.
“Owned
Tangible Property”
has
the
meaning ascribed to such term in Section 1.02(a).
“Partial
Actual Revenue Shortfall”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(D).
“Partial
Run Rate Shortfall”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(E).
“Permit”
means
any license, franchise, permit, consent, order, approval, authorization or
registration from, of or with a Governmental Authority.
“Permitted
Encumbrances”
means
(i) Encumbrances for current Taxes not yet due and payable or Taxes which are
being disputed in good faith where no lien has yet been filed, (ii) mechanics,
warehousemen and materialmen liens not material in nature or amount, (iii)
Encumbrances consisting of zoning or planning restrictions, easements, permits
and other restrictions or limitations on the use of real property or
irregularities in title thereto which do not materially detract from the value
of, or materially impair the use of, such property, and (iv) statutory
Encumbrances in favor of lessors arising in connection with any property leased
to the Seller in connection with its business.
“Person”
means
an individual, partnership, corporation, limited liability company, association,
joint stock company, trust, joint venture, unincorporated organization or
governmental entity or any department, agency or political subdivision
thereof.
“Proposed
Annual Statement”
has
the
meaning ascribed to such term in Section 2.07(b).
“Proposed
Interim Statement”
has
the
meaning ascribed to such term in Section 2.07(a).
“Proprietary
Information”
means
technical, commercial, marketing and other information, data and material of
the
kind which is or can be used in the operation of a business and which is
normally considered to be confidential or proprietary in nature including,
but
not limited to, any procedure; idea; concept; strategic, business and other
plan; research; invention or invention disclosure (whether patentable or
unpatentable); test, engineering and technical data and materials, know-how,
show-how or methodology; trade secret, process, design, formula, or other
information or data which has not entered the public domain, and all records
thereof.
“Purchase
Price”
has
the
meaning ascribed to such term in Section 2.04.
“Purchase
Price Adjustment”
has
the
meaning ascribed to such term in Section 2.07.
“Purchaser”
has
the
meaning ascribed to such term in the preamble of this Agreement.
“Purchaser
401(k) Plan”
has
the
meaning ascribed to such term in Section 4.03(e).
“Purchaser
Indemnified Parties”
has
the
meaning ascribed to such term in Section 7.03(a).
6
“Purchaser
SEC Documents”
has
the
meaning ascribed to such term in Section 6.05.
“Real
Property”
means
all fee or leasehold interests, easements, real estate licenses, rights of
access and other rights with respect to real property.
“Related
Documents”
means
all agreements, instruments, documents and certificates to be executed and
delivered pursuant to this Agreement.
“Representatives”
of
any
Person means the attorneys, accountants or other agents or employees of such
Person.
“Restricted
Persons”
has
the
meaning ascribed to such term in Section 4.01(a).
“Run
Rate Shortfall”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(B).
“Run
Rate Surplus”
has
the
meaning ascribed to such term in Section 2.07(b)(i)(C).
“Scheduled
Contracts”
has
the
meaning ascribed to such term in Section 5.11(a).
“SEC”
means
the United States Securities and Exchange Commission.
“Seller”
has
the
meaning ascribed to such term in the preamble of this Agreement.
“Seller
Parties”
has
the
meaning ascribed to such term in the preamble of this Agreement.
“Seller
Indemnified Parties”
has
the
meaning ascribed to such term in Section 7.03(b).
“Seller’s
Disclosure Letter”
has
the
meaning ascribed to such term in the introductory paragraph of Article
V.
“Seller’s
License” has the meaning ascribed to such term in
Section 7.03(b).
“Services”
means
services offered or provided by the Seller in the conduct of the
Business.
“Survival
Period”
has
the
meaning ascribed to such term in Section 2.08(b).
“Tangible
Property”
means
the Owned Tangible Property and the Leased Tangible Property.
“Tax”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
wage, employment, excise, utility, communications, production, occupancy,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, capital levy, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, real property
gains, recordation, business license, workers’ compensation, personal property,
sales, use, transfer, registration, value added, ad valorem, alternative or
add-on minimum, estimated, or other tax, fee, charge, premium, imposition of
any
kind whatsoever in the nature of taxes, however denominated, imposed by any
Tax
Authority, together with any interest, penalties or other additions to tax
and
any interest on any such interest, penalties and additions to tax that may
become payable in respect thereof.
7
“Tax
Authority”
means
the Internal Revenue Service (“IRS”)
and
any other federal, state, local or foreign government and any agency, authority
or political subdivision of any of the foregoing.
“Tax
Laws”
means
the Code, any federal, state, county, local or foreign laws related to Taxes
and
any regulations or official administrative pronouncements released under any
such laws.
“Tax
Returns”
means
all reports, estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding
and
other payments to third parties.
“Taxable
Period”
means
any taxable year or any other period that is treated as a taxable year with
respect to which any Tax may be imposed under any Tax Law.
“Third
Party Claim”
has
the
meaning ascribed to such term in Section 7.04.
“Transferred
Employee”
means
any Employee who receives and accepts an offer of employment by the Purchaser
on
the Closing Date pursuant to Section 4.03.
“Treasury
Regulations”
means
the regulations of the United States Treasury promulgated under the
Code.
“Vendor”
has
the
meaning ascribed to such term in Section 5.21(b).
“Website”
means
the website ▇▇▇▇://▇▇▇.▇▇▇▇▇▇.▇▇▇
and
content available thereon.
PURCHASE
AND SALE OF ASSETS; PURCHASE PRICE
Sale
of the Acquired Assets.
At
the
Closing, subject to the terms and conditions of this Agreement, the Seller
shall
sell, transfer, convey, assign and deliver to the Purchaser, all right, title
and interest of the Seller of every kind and description in and to the Acquired
Assets, free of any Encumbrances except for Permitted Encumbrances.
Anything
to the contrary herein notwithstanding, if any Contract which constitutes an
Acquired Asset being acquired by the Purchaser hereunder by its terms is not
assignable without the consent of the other Party or Parties thereto, such
assignment shall be deemed effective only upon receipt of such consent. With
respect to each such Contract, after the Closing Date and until such time as
such assignment has become effective, the Seller shall use its commercially
reasonable efforts (including the payment by the Seller of any fee required
to
be paid to the landlord under the Lease or any other reasonable fee to a third
party to obtain consent to assignment or any similar fee) to obtain the consent
of all required parties thereto to the assignment of such Contract after the
Closing Date.
8
Subject
to the obligations under the Contracts and to the Permitted Encumbrances, the
Seller’s right, title and interest in and to the Acquired Assets, all of which
are being conveyed hereunder to the Purchaser, include all rights pertaining
to
the Acquired Assets, including, but not limited to, the right to institute
and
prosecute all suits and proceedings and take all actions as may be necessary
to
collect, assert, or enforce any claim, right or title of any kind in and to
any
and all of the Acquired Assets.
Excluded
Assets. Notwithstanding
any provision in this Agreement or in any Related Document to the contrary,
the
following properties, assets and contracts of the Seller (collectively, the
“Excluded
Assets”)
are
not part of the sale and purchase contemplated by this Agreement, are excluded
from the Acquired Assets and shall remain the properties, assets and contracts
of the Seller after the Closing:
all
cash
on hand and in banks and other cash items and equivalents of the
Seller;
the
Seller’s corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, corporate
minute books, and other books and records relating to internal corporate matters
and any other books and records of the Seller (i) not related to the Business
(which shall not include financial and taxation books and records of the Seller
related to the Business), (ii) relating to financial relationships with the
Seller’s lenders or Affiliates, or (iii) that the Seller is required by law to
retain;
all
employee benefit plans, programs and arrangements, and all assets, rights and
claims thereunder, and other commitments of the Seller relating to employees,
whether written or oral, express or implied including, without limitation,
the
Benefit Plans;
any
claims, rights and interest in and to any refunds of federal or local franchise,
income or other Taxes or fees of any nature whatsoever which relate solely
to
the period up to and including the Closing Date;
all
capital stock of the Seller;
that
certain 1999 Toyota model RAV 4 heretofore used by Seller in the
Business;
all
claims of the Seller against third Persons relating to the Excluded Assets,
whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or non-contingent,
or
otherwise arising from or relating to periods prior to the Closing Date;
and
all
rights of the Seller under this Agreement or any Related Document;
all
insurance policies relating to the Business;
all
prepaid expenses and deposits of the Seller with third parties in respect of
the
Business;
all
claims of the Seller, including but not limited to claims under the Seller’s
insurance policies, causes of action and choses in action; and
all
Accounts Receivable.
9
Liabilities.
Assumed
Liabilities.
At the
Closing, the Purchaser shall assume, and from and after the Closing the
Purchaser shall pay, honor, discharge and perform promptly when due, the
liabilities set forth below in this Section 2.03 but excluding the Excluded
Liabilities (collectively, the “Assumed
Liabilities”):
(i)
all of the liabilities and obligations of the Seller under the Contracts that
are included in the Acquired Assets to be performed after the Closing Date
and
(ii) all other liabilities of the Seller specifically reflected on Schedule
2.03(a).
Excluded
Liabilities.
Notwithstanding the foregoing or anything to the contrary set forth in this
Agreement or in any Related Document, neither the Purchaser nor any of its
Affiliates shall assume or otherwise be liable in respect of, or be deemed
to
have assumed or otherwise be liable in respect of, and the Seller shall remain
solely liable for, all liabilities except for the Assumed Liabilities including,
without limitation, the following liabilities (the “Excluded
Liabilities”):
any
Taxes
of Seller resulting from the conduct of the Business up to and including the
Closing Date;
any
outstanding debt and related accrued interest thereon of the Seller or the
Business on the Closing Date;
any
shareholder or equity related distributions accrued or payable by the Seller
on
the Closing Date;
any
obligations, whether under any lease or otherwise, with respect to that certain
1999 Toyota model RAV 4 heretofore used by Seller in the Business;
any
management or employee bonus accrued or payable by the Seller on the Closing
Date; and
any
other
debt, claim, Action, obligation or other liability of the Seller (regardless
or
whether such debt, claim, obligation, or other liability is matured or
unmatured, contingent or fixed, known or unknown) that relates solely to the
Excluded Assets.
The
Seller agrees that it shall pay promptly when due any and all Excluded
Liabilities not discharged by it at or prior to Closing including, without
limitation, any liabilities related to the Seller’s Employees during the period
they are employed by the Seller and any liabilities under the Benefit Plans.
Upon receipt of any invoices for obligations relating to the Business which
were
incurred prior to the Closing Date, the Purchaser shall forward such invoices
to
the Seller, whereupon the Seller shall promptly pay or otherwise dispose of
such
invoices.
Purchase
Price.
The
purchase price for the Acquired Assets shall be the sum of four hundred thirty
seven thousand dollars ($437,000) (the “Purchase
Price”),
subject to adjustment after the Closing as provided in
Section 2.07.
Payment
of the Purchase Price.
At the
Closing, the Purchaser shall (a) pay to the Seller, by wire transfer in
immediately available funds to such account of the Seller as shall be designated
by the Seller in writing to the Purchaser at least two (2) business days in
advance of the Closing, an amount equal to (i) four hundred thirty seven
thousand dollars ($437,000) less
(ii) the
amount of the Accrued Employee Liability (as defined and described in this
Section 2.05 below) and (b) deliver to the Escrow Agent the sum of (i)
seventy-five thousand dollars ($75,000) (as such amount shall have been modified
from time to time in accordance with the terms hereof, the “Escrow
Amount”)
plus
(ii) an amount, if any, equal to the aggregate amount owed to the Transferred
Employees in respect of the liability and obligation of the Seller to such
Transferred Employees (the “Accrued
Employee Liability”)
in
connection with any accrued and unused vacation leave or time of such
Transferred Employees as of the Closing Date (such amount due to the Transferred
Employees in respect of such unused vacation leave or time is referred to herein
as the “Accrued
Employee Liability Amount”)),
which amount is set forth on Schedule
2.05,
and is
estimated to be an aggregate of six thousand nine hundred seventy dollars
($6,970) on the Closing Date. The Escrow Amount and the Accrued Employee
Liability Amount shall be held by Deutch as escrow agent (the “Escrow
Agent”),
in an
interest-bearing escrow account pursuant to an escrow agreement substantially
in
the form attached hereto as Exhibit C
(the
“Escrow
Agreement”).
The
Escrow Amount shall be held by the Escrow Agent and shall be disbursed to the
Seller or the Purchaser, as the case may be, in accordance with the terms
thereof and Section 2.07.
Each
Transferred Employee shall be paid his or her respective portion of the Accrued
Employee Liability Amount if, when and to the extent that such Transferred
Employee is entitled to be paid such amount, and the balance of the Accrued
Employee Liability Amount, if any, shall be delivered to the Seller within
90
days following the first anniversary of the Closing Date. Notwithstanding the
foregoing, the Parties acknowledge and agree that the Purchaser is not assuming
such Accrued Employee Liability, and that such Accrued Employee Liability is
an
Excluded Liability.
10
Allocation
of Purchase Price.
Attached
hereto as Schedule
2.06
is a
schedule (the “Final
Allocation Schedule”)
that
sets forth the allocation of that portion of the Purchase Price paid for the
Acquired Assets among the various categories of Acquired Assets and the
covenants contained in Section 4.01, which allocation has been made in the
manner required by Section 1060 of the Code. The Purchaser and the Seller agree
to prepare and file an IRS Form 8594 in a timely fashion in accordance with
the
rules under Section 1060 of the Code. The determination as set forth on the
Final Allocation Schedule shall be binding on the Purchaser and the Seller
for
all Tax reporting purposes. Each of the Parties shall report on all Tax Returns
consistent with and based upon the Final Allocation Schedule.
Purchase
Price Adjustments.
The
Purchase Price shall be subject to adjustment (the “Purchase
Price Adjustment”)
after
the Closing Date as follows:
Interim
Period Adjustment.
Within
45 days after the six-month period immediately following the Closing Date (such
six-month period is referred to herein as the “Interim
Measurement Period,”
and
the last day of the Interim Measurement Period is referred to herein as the
“Interim
Measurement Date”),
the
Purchaser shall deliver to the Seller a proposed statement (the “Proposed
Interim Statement”)
that
sets forth the Seller’s determination of the Annualized Revenue Run Rate for the
Interim Measurement Period. The Proposed Interim Statement shall not be audited,
but shall be otherwise prepared on a basis consistent with the accounting
practices and policies used in connection with the preparation of the Financial
Statements, as adjusted to solely reflect Actual Billed Revenues and to exclude
Excluded Assets and Excluded Liabilities. The Seller shall cooperate with the
Purchaser, at no cost to the Purchaser, in the preparation of the Proposed
Interim Statement, including but not limited to providing access to any
appropriate work papers or to the Seller’s accountants and auditors. The Seller
shall have the right, exercisable within 15 days following its receipt of the
Proposed Interim Statement, to deliver to the Purchaser a detailed statement
(an
“Interim
Statement Challenge”)
describing all of its objections (if any) thereto including a reasonably
detailed explanation of such objections. If the Purchaser has not received
an
Interim Statement Challenge within 15 days following the Seller’s receipt of the
Proposed Interim Statement, the Seller shall be deemed for all intents and
purposes to have accepted and agreed in full to the Proposed Interim Statement.
If, however, the Purchaser shall have received an Interim Statement Challenge
within 15 days following the Seller’s receipt of the Proposed Interim Statement,
there shall be no Purchase Price Adjustment in respect of the Interim
Measurement Period until resolution of the disagreement between the Seller
and
the Purchaser in accordance with Section 2.08 hereof, and the Escrow Agent
shall
make no disbursement of the Escrow Amount until such dispute has been so
resolved. Notwithstanding the foregoing, if the Purchaser shall fail to deliver
to the Seller the Proposed Interim Statement within 45 days after the Interim
Measurement Date, then the Seller shall have the right in its sole discretion
to
declare that the Interim Target has been reached, which declaration shall be
final and binding upon the Purchaser and the Escrow Agent. Subject to the
foregoing, if the Annualized Revenue Run Rate for the Interim Measurement Period
is equal to or greater than two million four hundred thousand dollars
($2,400,000) (the “Interim
Target”),
the
Escrow Agent shall deduct from the Escrow Amount, and release to the Seller
within 45 days following the Interim Measurement Date (or as soon thereafter
as
practicable, following resolution of any disputes in accordance with the terms
of this Section 2.07 and Section 2.08), an amount equal to twenty five thousand
dollars ($25,000).
11
Annual
Period Adjustments.
Within
45
days after the one-year period immediately following the Closing Date (such
one-
year period is referred to herein as the “Annual
Measurement Period,”
and
the last day of the Annual Measurement Period is referred to herein as the
“Annual
Measurement Date”),
the
Purchaser shall deliver to the Seller a proposed statement (the “Proposed
Annual Statement”)
of (x)
the Annualized Revenue Run Rate for the Annual Measurement Period and (y) the
Actual Billed Revenues for the Annual Measurement Period. The Proposed Annual
Statement shall not be audited, but shall be otherwise prepared on a basis
consistent with the accounting practices and policies used in connection with
the preparation of the Financial Statements, as adjusted to solely reflect
Actual Billed Revenues and to exclude Excluded Assets and Excluded Liabilities
The Seller shall cooperate with the Purchaser, at no cost to the Purchaser,
in
the preparation of the Proposed Annual Statement, including but not limited
to
providing access to any appropriate work papers or to the Seller’s accountants
and auditors. The Seller shall have the right, exercisable within 15 days
following its receipt of the Proposed Annual Statement, to deliver to the
Purchaser a detailed statement (an “Annual
Statement Challenge”)
describing all of its objections (if any) thereto including a reasonably
detailed explanation of such objections. If the Purchaser has not received
an
Annual Statement Challenge within 15 days following the Seller’s receipt of the
Proposed Annual Statement, the Seller shall be deemed for all intents and
purposes to have accepted and agreed in full to the Proposed Annual Statement.
If, however, the Purchaser shall have received an Annual Statement Challenge
within 15 days following the Seller’s receipt of the Proposed Annual Statement,
there shall be no Purchase Price Adjustment in respect of the Annual Measurement
Period until resolution of the disagreement between the Seller and the Purchaser
in accordance with Section 2.08 hereof, and the Escrow Agent shall make no
disbursement of the Escrow Amount until such dispute has been so resolved.
Notwithstanding the foregoing, if the Purchaser shall fail to deliver to the
Seller the Proposed Annual Statement within 45 days after the Annual Measurement
Date, then the Seller shall have the right in its sole discretion to declare
that the Annual Target has been reached, which declaration shall be final and
binding upon the Purchaser and the Escrow Agent. Subject to the
foregoing:
If
the
(i) Annualized Revenue Run Rate for the Annual Measurement Period is equal
to or
greater than two million dollars ($2,000,000) (the “Annual
Target”)
and
(ii)
Actual Billed Revenues for the Annual Measurement Period are equal to or greater
than the Annual Target (the amount by which Actual Billed Revenues exceed the
Annual Target is referred to herein as the “Actual
Revenue Surplus”),
then
the Purchase Price shall not be further adjusted, and the Escrow Agent shall
release the entire balance of the Escrow Amount to the Seller within 45 days
following the Annual Measurement Date (or
as
soon thereafter as practicable, following resolution of any disputes in
accordance with the terms of this Section 2.07 and Section 2.08).
12
If,
at
the end of the Annual Measurement Period, the (i) Annualized Revenue Run Rate
during the Annual Measurement Period is less than the Annual Target (the amount
by which the Annual Target exceeds the Annualized Revenue Run Rate is referred
to herein as the “Run
Rate Shortfall”)
and
(ii)
Actual Billed Revenues during the Annual Measurement Period are less than the
Annual Target (the amount by which the Annual Target exceeds the Actual Billed
Revenues is referred to herein as the “Actual
Revenue Shortfall”),
then
the Purchase Price shall be reduced by the
product of
(A) the
average of (x) the Run Rate Shortfall and (y) the Actual Revenue Shortfall
and
(B)
twenty two percent (22%), and the Escrow Agent shall release such amount from
the Escrow Amount to the Purchaser within 45 days following the end of the
Annual Measurement Period (or as soon thereafter as practicable, following
resolution of any disputes in accordance with the terms of this Section 2.07
and
Section 2.08). For
example,
if at
the end of the Annual Measurement Period the Run Rate Shortfall was $300,000
and
the Actual Revenue Shortfall was $200,000, the Purchase Price would be reduced
by $55,000 pursuant to this clause (B) [(($300,000+$200,000) ¸
2)
X
0.22 =
$55,000].
If,
at
the end of the Annual Measurement Period, (i) the Annualized Revenue Run Rate
for such Annual Measurement Period is equal to or greater than the Annual Target
(the amount by which the Annualized Revenue Run Rate during the Annual
Measurement Period exceeds the Annual Target is referred to herein as the
“Run
Rate Surplus”),
but
(ii)
there is an Actual Revenue Shortfall during the Annual Measurement Period
and
(iii)
the Run Rate Surplus exceeds the Actual Revenue Shortfall (assuming such Actual
Revenue Shortfall is a positive, and not a negative, number) then the Purchase
Price shall not be further adjusted, and the Escrow Agent shall release the
entire balance of the Escrow Amount to the Seller within 45 days following
the
Annual Measurement Date (or as soon thereafter as practicable, following
resolution of any disputes in accordance with the terms of this Section 2.07
and
Section 2.08). For
example,
if at
the end of the Annual Measurement Period the Run Rate Surplus was $300,000
and
the Actual Revenue Shortfall was $200,000, the Purchase Price would not be
further adjusted.
If,
at
the end of the Annual Measurement Period, there is both (i) a Run Rate Surplus
and (ii) an Actual Revenue Shortfall for such Annual Measurement Period
and
(iii)
the Run Rate Surplus is less than the Actual Revenue Shortfall (assuming such
Actual Revenue Shortfall is a positive, and not a negative, number) (such
difference being referred to herein as a “Partial
Actual Revenue Shortfall”),
then
the Purchase Price shall be reduced by the
product of
(x) the
Partial Actual Revenue Shortfall and (y) eleven percent (11%), and the Escrow
Agent shall release such amount from the Escrow Amount to the Purchaser within
45 days following the end of the Annual Measurement Period (or as soon
thereafter as practicable, following resolution of any disputes in accordance
with the terms of this Section 2.07 and Section 2.08). For
example,
if at
the end of the Annual Measurement Period the Run Rate Surplus was $200,000
and
the Actual Revenue Shortfall was $300,000, the Purchase Price would be reduced
by $11,000 pursuant to this clause (b) [(($200,000-$300,000) X
0.11 =
$11,000].
If,
at
the end of the Annual Measurement Period, (i) there is and Actual Revenue
Surplus and a Run Rate Shortfall and (ii) the Actual Revenue Surplus is less
than the Run Rate Shortfall (assuming such Run Rate Shortfall is a positive,
and
not a negative, number) (such difference being referred to herein as a
“Partial
Run Rate Shortfall”),
then
the Purchase Price shall be reduced by the
product of
(x) the
Partial Run Rate Shortfall and (y) twenty-two percent (22%), and the Escrow
Agent shall release such amount from the Escrow Amount to the Purchaser within
45 days following the end of the Annual Measurement Period (or as soon
thereafter as practicable, following resolution of any disputes in accordance
with the terms of this Section 2.07 and Section 2.08). For example, if at the
end of the Annual Measurement Period the Actual Revenue Surplus was $200,000
and
the Run Rate Shortfall was $300,000, the Purchase Price would be reduced by
$22,000 pursuant to this clause (E) [(($300,000-$200,000) X 0.22 =
$22,000].
13
Dispute
Resolution Procedures; Set-Off Rights.
The
Purchaser and the Seller shall use reasonable good faith efforts to resolve
any
such objections, but if they do not reach a final resolution within 30 days
after the Purchaser has received the statement of objections, the Purchaser
and
the Seller shall select a regional accounting firm in good standing, other
than
their respective regular independent accounting firms, mutually acceptable
to
them (the “Neutral
Auditors”)
to
resolve any remaining objections. If the Purchaser and the Seller are unable
to
agree on the choice of Neutral Auditors they shall select as Neutral Auditors
a
regional accounting firm in good standing by lot (after excluding their
respective regular independent accounting firms). Notwithstanding the foregoing,
the Parties agree that ▇▇▇▇▇▇ ▇▇▇▇▇ Company LLP shall be mutually acceptable
to
serve as the Neutral Auditors. The Neutral Auditors shall determine, within
30
days after their appointment, whether the objections raised by the Seller are
valid. Any such resolution by the Neutral Auditors shall be made on a basis
otherwise consistent with the methodologies and principles used in the
preparation of the Seller’s income statement included in the Financial
Statements dated September 30, 2007, as adjusted to solely reflect Actual Billed
Revenues and to exclude Excluded Assets and Excluded Liabilities. Subject to
the
foregoing, the Proposed Statements that are the subject of objections by the
Seller shall be adjusted in accordance with the Neutral Auditors’ determination
and, as so adjusted, shall be conclusive and final and binding upon the Parties.
The fees and expenses of the Neutral Auditors shall be paid one-half by the
Seller and one-half by the Purchaser.
On
the
date that is 18 months following the Closing Date (the period between the
Closing and such date is referred to herein as the “Survival
Period”),
in
accordance with the terms of the Escrow Agreement, the Escrow Agent shall
release from the Escrow Account and deliver to the Seller an amount equal to
the
Escrow Amount together with any interest earned thereon, minus the amount of
(i)
any distributions of the Escrow Fund in accordance with Section 2.07 and (ii)
any Claim or Claims that have been set forth in an Indemnification Notice
pursuant to Article VII of this Agreement (whether or not such Claim or Claims
have been determined to be valid as of such date (the portion of the Escrow
Amount that has not been released to the Seller is referred to as the
“Escrow
Balance”),
and
the Escrow Balance shall be retained in escrow pending Adjudication of such
Claim(s).
If
the
Purchaser delivers an Indemnification Notice pursuant to Article VII of this
Agreement, the Purchaser may, but it shall not be required to, deliver a notice
to the Escrow Agent in accordance with the terms of the Escrow Agreement,
instructing the Escrow Agent to retain in escrow from the Escrow Amount and/or
a
notice to the Seller advising the Seller that the Purchaser has elected to
set-off from the Escrow Amount such amounts (which shall be specified in such
notice(s) to the Escrow Agent and/or the Seller) as the Purchaser reasonably
determines may be necessary to satisfy the Claim(s) set forth in such
Indemnification Notice (including reasonable costs and attorneys fees and
disbursements in respect thereof) pending Adjudication of such Claim(s).
“Adjudication”
means,
unless otherwise agreed among the Parties, a final judgment or order of a court
of competent jurisdiction not subject to any further appeals.
Upon
the
Adjudication of a Claim, (i) if the amount set-off pursuant to this Section
2.08
by the Purchaser exceeds the aggregate amount of all remaining unresolved
Claims, at such time the Purchaser shall pay, or (ii) if the amount retained
by
the Escrow Agent from the Escrow Amount exceeds the aggregate amount of all
remaining unresolved Claims, the Purchaser shall instruct the Escrow Agent
to
pay in accordance with the terms of the Escrow Agreement, to the Seller (to
an
account or accounts designated by the Seller in writing) any such excess from
amounts retained by the Escrow Agent or set-off by the Purchaser, subject,
in
all cases, to such adjustments as may be required to be made pursuant to Section
2.07; it being understood that if at such time the aggregate amount being
retained by the Escrow Agent or set-off by the Purchaser is less than or equal
to the aggregate amount of all Claims pending at such time, the Purchaser shall
not be obligated to pay any amounts to the Seller, subject,
however,
to the
Adjudication of such Claims.
14
Nothing
in this Section 2.08 shall limit or impair, in any way, the rights of the
Purchaser set forth in Article VII of this Agreement.
CLOSING
AND PAYMENT OBLIGATION
Closing.
The
consummation of the purchase and sale contemplated by this Agreement (the
“Closing”)
shall
be held at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, 1301 Avenue of the Americas,
New York, New York, simultaneously with the execution of this Agreement. The
date of the Closing is sometimes herein referred to as the “Closing
Date”.
At the
Closing, all of the transactions contemplated hereby shall be deemed to have
been consummated as of 12:01 a.m. on the Effective Date. By mutual agreement
of
the Parties, the Closing may be alternatively accomplished by facsimile
transmission to the respective offices of legal counsel for the Parties of
the
requisite documents, duly executed where required, with originals to be
delivered by overnight courier service on the next business day following the
Closing.
Deliveries
by the Seller Parties.
Upon
the terms and subject to the conditions of this Agreement, in reliance on the
representations, warranties, covenants and agreements of the Purchaser contained
herein, and in consideration of the Purchase Price and the assumption of the
Assumed Liabilities, the Seller agrees to deliver (or cause to be delivered)
to
the Purchaser at the Closing the following agreements and documents, all
reasonably satisfactory in form and substance to the Purchaser and its legal
counsel (the delivery of which may be waived in writing by the
Purchaser):
a
duly
executed Escrow Agreement in the form attached hereto as Exhibit
C;
a
duly
executed ▇▇▇▇ of sale for all of the Acquired Assets in the form attached hereto
as Exhibit
D;
a
duly
executed Assignment and Assumption Agreement in the form attached hereto as
Exhibit
A;
all
documents necessary to transfer to the Purchaser the registered domain name
related to the Website;
all
documents of title, if any, necessary to transfer to the Purchaser any of the
Owned Tangible Property included within the Acquired Assets;
evidence
satisfactory to the Purchaser that any and all Encumbrances on the Acquired
Assets (other than Permitted Encumbrances) have been released;
evidence
of receipt of all consents set forth on Schedule
3.02(g)
and any
related filings having been made;
15
certified
copies of all resolutions of the Board of Directors of the Seller approving
the
transactions contemplated by the Agreement;
the
Employment and Non-Competition Agreement, duly executed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ in
the
form attached hereto as Exhibit
B;
such
other deeds, endorsements, assignments and other instruments as, in the opinion
of counsel for the Purchaser, may be reasonably required to vest in the
Purchaser all right, title and interest of every kind and description in and
to
any of the Acquired Assets, free of any Encumbrances (other than Permitted
Encumbrances) and to cause the Purchaser to assume all of the Assumed
Liabilities.
Deliveries
by the Purchaser.
Upon
the terms and subject to the conditions of this Agreement, in reliance on the
representations, warranties, covenants and agreements of the Seller contained
herein, and in consideration of the transfer and sale of the Acquired Assets,
the Purchaser agrees to deliver at the Closing the following, all satisfactory
in form and substance to the Seller and its legal counsel (the delivery of
which
may be waived in writing by the Seller):
the
wire
transfer of the Purchase Price as set forth in Section 2.04;
a
duly
executed Escrow Agreement and a duly executed Assignment and Assumption
Agreement;
the
Employment and Non-Competition Agreement duly executed by the Purchaser or
an
Affiliate of the Purchaser; and
such
other documents and instruments as in the opinion of counsel for the Seller
may
be reasonably required to effectuate the terms of this Agreement and to comply
with the terms hereof.
ADDITIONAL
AGREEMENTS
Agreement
Not to Compete and to Maintain Confidentiality.
For
good
and valuable consideration and in furtherance of the sale of the Acquired Assets
and the Business to the Purchaser hereunder, in order to induce the Purchaser
to
enter into and perform this Agreement, to ensure that the Purchaser obtains
the
benefits it reasonably expects to obtain hereunder and to more effectively
protect the value and goodwill of the Acquired Assets and the Business, each
of
the Seller Parties covenants and agrees that for a period commencing on the
Closing Date and ending on the third (3rd)
anniversary of the Closing Date, it shall not, and shall use commercially
reasonable efforts to ensure that any agents, representatives and other Persons
acting on behalf of the Seller (the Seller and such agents, representatives,
and
other Persons being collectively referred to as the “Restricted
Persons”)
do
not, directly or indirectly, for the benefit of the Seller, its Affiliates,
or
themselves:
(whether
as principal, agent, independent contractor, partner or otherwise or by any
other means) own, manage, operate, control, invest in or otherwise establish,
operate, or carry on any business which engages in a business competitive with
the Services offered by the Seller as part of the Business as of the Closing
Date in any geographic area in which the Business, or the business of the
Purchaser; provided,
however,
that it
will not be deemed a breach of this Agreement:
if
the
Restricted Persons and their respective Affiliates acquire an interest in,
or
make any investment in, any Person (i) where the amount invested was less than
$50,000, (ii) in which such Restricted Persons and such Affiliates do not have
the right to designate a majority of the members of the board of directors
(or
similar governing body) of such Person, (iii) in which such Restricted Persons
and such Affiliates own less than 10% of the outstanding voting securities
or
(iv) that derives no more than 10% or less of its gross revenues from the sale
or provision of services that are competitive with the Business; or
16
for
any
of the Restricted Persons to conduct any businesses other than the Business;
induce
or
attempt to persuade any customer of the Business to terminate the relationship
of such customer with the Business;
induce
or
attempt to persuade any Business Personnel (as defined below) to terminate
or to
refuse to enter into any employment, agency or other business relationship
with
the Purchaser. For purposes of this clause (iii), “Business
Personnel”
means
any person (A) who is an employee, consultant, independent contractor or
free-▇▇▇▇▇ worker of the Seller or an Affiliate of the Seller on the Closing
Date and who becomes employed or engaged by the Purchaser or an Affiliate of
the
Purchaser in connection with the transactions contemplated hereby, or (B) who
is
an employee, consultant, independent contractor or free-▇▇▇▇▇ worker of the
Purchaser or an Affiliate of the Purchaser employed or engaged in the Business
or (C) who within one (1) year prior to the prohibited contact by a Restricted
Person was an employee, consultant, independent contractor or free-▇▇▇▇▇ worker
employed or engaged in the Business for or on behalf of the Seller, the
Purchaser or an Affiliate of the Purchaser or the Seller; or
Each
of
the Seller Parties hereby expressly represents and warrants that it has or
may
have knowledge of certain commercial and marketing information and material
regarding the Acquired Assets and the Business (including, but not limited
to,
the Services, lists of customers, product documentation, development work,
lead
lists, trade secrets and other Proprietary Information of the Seller relating
to
the Business) (the “Confidential
Information”).
The
Seller acknowledges and agrees that all such Confidential Information is
confidential and proprietary and that a substantial portion of the Purchase
Price is being paid for such Confidential Information and that it represents
a
substantial investment having economic value to the Purchaser, and constitutes
a
substantial part of the value to the Purchaser of the Business and the Acquired
Assets. The Seller acknowledges and agrees that the Purchaser would be
irreparably damaged if any of the Confidential Information was disclosed to,
or
used or exploited on behalf of, any Person other than the Purchaser or any
of
its Affiliates to compete with the Purchaser’s operation of the Business after
the Closing Date. Accordingly, each of the Seller Parties covenants and agrees
that it shall not, and shall use its reasonable best efforts to ensure that
each
other Restricted Person does not, without the prior written consent of the
Purchaser, disclose, use or exploit any such Confidential Information, for
the
benefit of the Seller, any other Restricted Persons or of any third-party;
provided,
that
the term “Confidential Information” shall not include any information or
material that:
is
or
becomes publicly known through no act of any Restricted Person;
is
required to be disclosed to or by order of a governmental agency or a court
of
law or otherwise as required by law or legal process; provided,
that
prior to any such disclosure notice of such requirement of disclosure is
provided to the Purchaser and the Purchaser is afforded the reasonable
opportunity to object to such disclosure; or
17
becomes
available to the Seller on a non-confidential basis from a third party source;
provided,
that
such
source is not bound by a confidential, legal or fiduciary duty of
confidentiality to the Purchaser or any Affiliate thereof with respect to such
information or material.
Each
of
the Seller Parties expressly acknowledges that (i) each of the covenants
contained in this Section 4.01 are integral to the sale to the Purchaser of
the Acquired Assets and the Business, (ii) without the protection of such
covenants, the Purchaser would not have entered into this Agreement, (iii)
the
consideration paid by the Purchaser bears no relationship to the damages the
Purchaser may suffer in the event of any breach of any of the covenants of
this
Section 4.01, and (iv) such covenants contain limitations as to time,
geographical area and/or scope of activity to be restrained which are reasonable
and necessary to protect the Purchaser’s business interests. If this
Section 4.01 shall nevertheless for any reason be held to be excessively
broad as to time, duration, geographical scope, activity or subject, it shall
be
enforceable to the fullest extent compatible with applicable laws that shall
then apply. The Seller hereby further acknowledges that money damages will
be
impossible to calculate and may not adequately compensate the Purchaser in
connection with an actual or threatened breach by the Seller of any of the
provisions of this Section 4.01. Accordingly, each of the Seller Parties,
on its own behalf and on behalf of each of the other Restricted Persons, hereby
expressly waives all rights to raise the adequacy of the Purchaser’s remedies at
law as a defense if the Purchaser seeks to enforce by injunction or other
equitable relief the due and proper performance and observance of the provisions
of this Section 4.01. In addition, the Purchaser shall be entitled to
pursue any other available remedies at law or equity, including the recovery
of
money damages, in respect of the actual or threatened breach of the provisions
of this Section 4.01.
Each
of
the Seller Parties hereby expressly waives any right to assert inadequacy of
consideration as a defense to enforcement of the non-competition and
confidentiality covenants in this Section 4.01 should such enforcement ever
become necessary.
Taxes,
Fees and Expenses.
The
Seller shall pay all sales, use, transfer and purchase taxes and fees, if any,
arising out of the transfer of the Acquired Assets pursuant to this
Agreement.
Employees;
Employee Benefits.
The
Purchaser may, in its sole discretion, make an offer of employment to, and
employ, certain Employees of Seller, but shall not be obligated to do so. Those
Employees to whom the Purchaser makes an offer of employment, and who become
employed by the Purchaser, are referred to herein individually as a
“Transferred
Employee”
and
collectively as the “Transferred
Employees.”
The
Seller shall be responsible for, and shall indemnify and hold harmless (as
set
forth in Article VII of this Agreement) the Purchaser from and against, any
and
all severance, termination, retention, “golden parachute,” unemployment
compensation or any similar payment or other liabilities or obligations with
respect to any Employee, whether or not the Purchaser extends an offer of
employment to such Employee, whether or not such Employee accepts employment
with the Purchaser, whether pursuant to any corporate policy, plan, agreement,
or arrangement of Seller with respect to such Employee, any Benefit Plan, or
by
law (domestic or foreign and including, but not limited to, any liability under
the Workers Adjustment and Retraining Notification Act as it may be amended
from
time to time and the provisions of Section 4980B of the Code and Part 6 of
the Subtitle B of Title I of ERISA), and whether or not pursuant to individual
agreement or commitment or group plan. No agreement, understanding or
arrangement entered into by a Transferred Employee and the Seller prohibits
or
restricts (or shall prohibit or restrict) any Employee from disclosing
Proprietary Information of the Seller to the Purchaser or its Affiliates after
the Closing.
18
The
Purchaser shall not assume any of the Seller’s Benefit Plans. To the extent
required by the terms of any such plan or program, the Purchaser shall give
each
Transferred
Employee credit
for such employee’s service with the
Seller
and any of its Affiliates and any of their respective predecessors prior
to
the Closing
for
all
purposes, including participation requirements, vesting and benefit accrual
(except for purposes of benefit accrual under any defined benefit pension plan
sponsored by the Purchaser or any of its Affiliates) under any benefit plan
or
program of the
Purchaser and
any
of its Affiliates in which Transferred Employees are eligible to participate,
except to the extent that such credited service would result in a duplication
of
benefits.
Subject
to applicable law, except as forth in this Section 4.03, as of and after
the Closing Date, the Purchaser shall not assume any obligation or liability
for
and the Seller shall remain responsible for (i) any vested benefits accrued
by
Transferred Employees, Employees and former employees under any Benefit Plans,
whether or not set forth in any employment agreement with the Seller, including,
without limitation, under any equity appreciation or stock option plans of
the
Seller and (ii) any and all obligations and liabilities to Transferred
Employees, Employees and former employees of the Seller related to any
employment or service performed or otherwise, which were incurred or accrued
prior to the Closing, including, without limitation, under any Benefit Plans
that the Seller is or becomes obligated to provide prior to or after the
Closing, including, without limitation, retirement benefits, disability payments
and the obligation to provide COBRA continuation coverage to such former
employees and their beneficiaries, whether payable prior to or after the
Closing.
The
Purchaser shall be solely responsible for all severance, termination and other
liabilities pursuant to the Purchaser’s plans or policies related to the
termination of employment of each Transferred Employee whose employment is
terminated by the Purchaser after the Closing Date and shall be responsible
for
all other liabilities relating to the Transferred Employees that arise after
the
Closing Date.
As
soon
as practicable on or after the Closing Date, the Purchaser shall take any and
all action necessary to cause the trustee of any tax-qualified defined
contribution plan of the Purchaser or any of its Affiliates to which any
Transferred Employee becomes a participant (“Purchaser
401(k) Plan”)
to
accept a direct rollover of all of such Transferred Employee's “eligible
rollover distribution” within the meaning of Section 402 of the Code from
the Seller’s 401(k) plan,
which
shall consist of only cash and any outstanding qualifying 401(k) plan loan
notes. Any such qualifying 401(k) plan loan notes shall not be treated as due
and payable immediately as of the date such rollover occurs and instead shall
be
transferred to the Purchaser 401(k) Plan.
Maintenance
of Books and Records.
Each of
the Parties shall preserve, until at least the seventh (7th)
anniversary of the Closing Date, all pre-closing records possessed or to be
possessed by such Party relating to the Acquired Assets, the Assumed Liabilities
or the Business. After the Closing Date and up until at least the seventh
(7th)
anniversary of the Closing Date, upon any reasonable request from a Party or
its
Representatives, the Party holding or controlling such records shall, or shall
cause its Affiliates to, (x) provide to the requesting Party or its
representatives reasonable access to inspect and audit such records during
normal business hours and (y) permit the requesting Party or its Representatives
to make copies of such records, in each case at no cost to the requesting Party
or its Representatives (other than for reasonable out-of-pocket expenses).
Such
records may be sought under this Section 4.04 for any reasonable purpose,
including, but not limited to, to the extent reasonably required in connection
with the Audit, accounting, Tax, litigation, federal securities disclosure
or
other similar needs of the Party seeking such records. Without limiting the
foregoing, each Party shall cause, and (as applicable) shall cause each of
its
Affiliates to cause, its employees to cooperate to the fullest extent
practicable, with the Seller and its Affiliates and any agents, representatives
and other Persons acting on behalf of such purchaser or successor), in each
case
with respect to the foregoing, to the extent that such access may be reasonably
required by the other Party or Parties or any of their respective Affiliates
for
any lawful business purpose, including without limitation the investigation,
defense, prosecution, litigation and final disposition of any claims that might
have been or might be made by or against such Party or any Affiliate of such
Party in connection with the Business. Such cooperation shall include, without
limitation, the execution of affidavits, appearances, testimony and production
of documents pursuant to federal and state criminal and civil subpoenas,
depositions, interrogatories and other requests.
19
Bulk
Sales Law.
The
Purchaser hereby waives compliance by the Seller with the provisions of all
applicable state bulk sales laws, and the Seller Parties warrant and agree
to
pay and discharge when due all claims of creditors which could be asserted
against the Purchaser by reason of such noncompliance to the extent that the
liabilities to such creditors arise before or as a result of the
Closing.
[intentionally
omitted]
Further
Assurances; Email and Website.
After
the Closing, each Party shall, at the request of the other Party and without
further conditions or consideration, execute and deliver from time to time
such
other instruments of conveyance and transfer and take such other actions as
such
other Party may reasonably request in order to more effectively consummate
the
transactions contemplated hereby.
4.08 Accounts
Receivable. The
Seller shall instruct its customers to remit payments in respect of the Accounts
Receivable to the Purchaser in accordance with written instructions of the
Purchaser. The Seller shall maintain its current billing systems for the benefit
of the Purchaser for a period of thirty (30) days after the Closing at the
Seller’s sole cost and expense.
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
PARTIES
Except
as
set forth in the letter, dated the date hereof, delivered by the Seller to
the
Purchaser concurrently with the execution and delivery of this Agreement (the
“Seller’s
Disclosure Letter”)
(with
specific reference to the particular Section or subsection of the Agreement
to which the information set forth in such letter relates, each of the Seller
Parties, jointly and severally, represents and warrants to the Purchaser as
follows:
Organization.
The
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland. The Seller has all requisite corporate
power and authority to enable it to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. The Seller
is
duly qualified to do business and in good standing in each jurisdiction in
which
the nature of the Business or the ownership, leasing or holding of the Acquired
Assets makes such qualification necessary, except for those jurisdictions where
the failure to be so qualified or to be in good standing would not reasonably
be
expected to have a Material Adverse Effect or adversely affect the ability
of
the Seller to consummate the transactions contemplated by this Agreement. A
list
of the jurisdictions in which the Seller is so qualified is set forth on
Schedule
5.01.
Authorization.
The
Seller has all requisite power and authority to enter into this Agreement and
the Related Documents to be executed and delivered by the Seller pursuant hereto
or in connection with the transactions contemplated hereby or thereby, and
to
consummate the transactions contemplated hereby and thereby. All acts and other
proceedings required to be taken by the Seller to authorize the execution,
delivery and performance of this Agreement and the Related Documents to which
it
is a Party, and the consummation of the transactions contemplated hereby and
thereby, have been duly and properly taken.
20
Valid
and Binding.
This
Agreement and each Related Document, to the extent any Seller Party is a party
thereto, constitutes a valid and binding obligation of such Seller Party,
enforceable against such Seller Party in accordance with its terms (assuming
this Agreement each Related Document constitutes the valid and binding agreement
of the Purchaser or such other party), except that (i) such enforcement may
be
limited by or subject to bankruptcy, insolvency, reorganization, moratorium
or
similar laws now or hereafter in effect relating to or limiting creditors’
rights generally and (ii) the remedy of specific performance and injunctive
and
other forms of equitable relief are subject to certain equitable defenses and
to
the discretion of the court before which any proceeding therefor may be
brought.
No
Violation.
The
execution and delivery of this Agreement and each Related Document by each
Seller Party, and the consummation of the transactions contemplated hereby
and
thereby and compliance with the terms hereof and thereof, do not and will not
(subject only to obtaining any required consents, approvals, authorizations,
exemptions or waivers set forth on Schedule
5.05)
(i)
conflict with, or result in any violation of, any provision of the Articles
of
Incorporation or By-laws of the Seller (as amended, if applicable), (ii)
conflict with, or result in any violation of or default on the part of any
Seller Party (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation,
or result in the creation of any Encumbrance upon any of the Acquired Assets,
under any material note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment or loan or other agreement to which such Seller
Party is a party or by which any of its properties or assets are bound, or
(iii)
conflict with, or result in any violation of any statute, regulation, rule,
injunction, judgment, order, law, ordinance, decree, ruling, charge or other
restriction of any government, governmental agency, or court applicable to
any
Seller Party, or its property or assets, except in the case of clauses (ii)
and
(iii) for any such conflicts, violations, breaches, defaults, rights of
termination, cancellation or acceleration or requirements which, individually
or
in the aggregate, would not reasonably be expected to have a Material Adverse
Affect or adversely affect the ability of the Seller Parties to consummate
the
transactions contemplated by this Agreement.
Consents
and Approvals.
Except
as set forth on Schedule
5.05,
no
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority or any court or other tribunal,
and no consent or waiver of any party to any Contract is required to be obtained
by any Seller Party in connection with the execution, delivery and performance
of this Agreement and each Related Document or the consummation of the
transactions contemplated hereby or thereby.
Financial
Statements.
The
Seller has furnished to the Purchaser complete copies of (i) unaudited balance
sheets of the Business as of December 31, 2004, December 31, 2005 and December
31, 2006, and an unaudited balance sheet of the Business as of September 30,
2007 and (ii) unaudited income statements of the Business for the years ended
December 31, 2004, December 31, 2005 and December 31, 2006 and an unaudited
income statement of the Business for the nine-month period ended September
30,
2007 (collectively, the “Financial
Statements”),
copies of which are attached hereto as Schedule
5.06.
The
Financial Statements have been prepared on the basis of the books and records
maintained by the Seller in the ordinary course of business in accordance with
the accounting policies and procedures of the Seller in a manner consistently
used and applied throughout the periods involved. Except as set forth on
Schedule
5.06,
the
Financial Statements have been prepared in accordance with GAAP and present
fairly in all material respects the assets, liabilities and the financial
condition of the Business as at the respective dates thereof and the results
of
operations of the Business for the periods then ended.
Interim
Operations.
Except
as set forth on Schedule
5.07(a),
since
December 31, 2006:
the
Business has been conducted by the Seller in the ordinary and usual course
and
in a manner consistent with past practice;
21
with
respect to the Business, the Seller has not:
suffered
any Material Adverse Effect;
incurred
any liabilities or obligations (absolute, accrued, contingent or otherwise),
except in the ordinary and usual course of business and consistent with past
practice and except for liabilities and obligations that have not, individually
or in the aggregate, been material to the Business;
increased,
or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves;
paid,
discharged or satisfied any claims, liabilities or obligations (absolute,
accrued, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary and usual course of business and consistent with
past practice of claims, liabilities and obligations reflected or reserved
against in the Financial Statements or incurred in the ordinary and usual course
of business and consistent with past practice;
permitted
or allowed any of the Acquired Assets to be subjected to any Encumbrance (except
Permitted Encumbrances);
canceled
any debt for borrowed money owing to the Seller or waived any material claims
or
rights;
sold,
transferred, or otherwise disposed of, or transferred or granted any rights
under any lease, license or agreement with respect to any of its assets, except
pursuant to Customer Contracts entered into in the ordinary course of business
consistent with past practice;
disposed
of, failed to take reasonable steps to protect, or permitted to lapse, any
rights for the use of, the Intellectual Property, other than Incidental
Intellectual Property, used in the Business;
made
any
change in any method of accounting or accounting practice, except insofar as
may
be required by GAAP;
made
any
single capital expenditure or future commitment in excess of $10,000 for
additions to property, plant, equipment or intangible capital assets, or made
capital expenditures or future commitments in excess of $25,000 in the aggregate
for additions to property, plant, equipment or intangible capital
assets;
made
any
single capital expenditure or future commitment in excess of $10,000 for
improvements, updates or fixes to its systems, Products or the development
of
new Software, or made aggregate capital expenditures or future commitments
in
excess of $25,000 for improvements, updates or fixes to its systems, Products
or
the development of new Software;
made
any
material change in development, marketing or pricing policies relating to
products or services of the Business (whether or not in the ordinary and usual
course of business);
22
had
any
significant labor dispute or received written notice of any
grievance;
borrowed
or agreed to borrow any funds;
paid
and/or declared any dividends (other than in cash) with respect to its shares
of
capital stock, whether in shares of capital stock or other
property;
granted
to any officer or employee any increase in compensation or
benefits;
paid
any
pension, retirement allowance or other employee benefit not required by any
plan, policy or program set forth on Schedule
5.20(a)
or any
employment agreement set forth on Schedule
5.20(a);
adopted,
agreed to adopt, or made any announcement regarding the adoption of (i) any
new
pension, retirement or other employee benefit plan, program or policy, or (ii)
any amendments to any existing pension, retirement or other employee benefit
plan, policy or program set forth on Schedule
5.20(a)
unless
otherwise required by applicable law;
except
as
set forth in the Financial Statements, written off as uncollectible any notes
or
Accounts Receivable, other than in the ordinary course of business;
changed
its practice or policy with respect to collection of Accounts Receivable;
or
suffered
or agreed to take any of the actions set forth in this subparagraph
(ii).
None
of
the assets of the Seller used in the Business have been affected in any way
as a
result of fire, explosion or other casualty (whether or not covered by
insurance).
Undisclosed
Liabilities.
To
Seller’s Knowledge, with respect to the Business, the Seller does not have any
liabilities or obligations (whether accrued, absolute, contingent or otherwise),
except for liabilities or obligations (i) disclosed on Schedule
5.08,
(ii)
disclosed in the Financial Statements in accordance with GAAP, (iii) arising
in
the ordinary course of business consistent with past practice under any Contract
or (iv) incurred in the ordinary course of business consistent with past
practice since December 31, 2006.
Taxes.
All
Tax
Returns required to be filed with any Tax Authority on or prior to the date
hereof by or with respect to the Seller have been filed, except Tax Returns
for
which requests for extensions have been timely filed, and all such filed Tax
Returns are complete in all material respects.
The
Seller has paid all Taxes shown as due and payable on Tax Returns that have
been
filed.
The
Seller has paid or accrued on its December 31, 2006 balance sheet included
in
the Financial Statements all Taxes payable by it for all Taxable Periods ending
on or before December 31, 2006 for which no Tax Return has yet been
filed.
23
No
federal, state, local or foreign audits, examinations or other administrative
or
court proceedings are presently pending with regard to any Tax Returns or Taxes
of the Seller.
There
are
no Encumbrances for Taxes on the assets of the Seller, other than Encumbrances
for Taxes not yet due.
The
Seller has withheld from each payment to any of its officers, directors,
employees or creditors all amounts which it is required by the laws to which
it
is subject to withhold or deduct, has timely remitted all amounts so withheld
or
deducted to the proper recipients thereof in the manner required by such laws
and has made adequate provision in its books for all such amounts which it
is
not yet required to remit.
No
claim
has ever been asserted by a Tax Authority in a jurisdiction where the Seller
has
not filed Tax Returns that the Seller is or may be subject to taxation by that
jurisdiction.
Schedule
5.09(h)
sets
forth all the states for which the Seller is required to file income or
franchise Tax Returns (or similar type of Tax Returns) for the Taxable Period
most recently ended, or for which the Seller expects to be required to file
for
the current Taxable Period.
The
Seller has provided the Purchaser copies of: (i) all income or franchise Tax
Returns filed by, or on behalf of, the Seller since its incorporation (the
“Tax
Period”);
(ii)
all material notices, protests or other correspondence issued by or filed with
a
Tax Authority relating to any Taxes for any Taxable Period beginning with the
Tax Period; (iii) any elections or disclosure of any controversial positions
filed by or on behalf of the Seller with any Tax Authority (whether or not
filed
with any Tax Return); (iv) any letter rulings, determination letters or similar
documents issued by any Tax Authority with respect to the Seller; (v) any
closing agreement entered into by the Seller with any Tax Authority; and (vi)
Tax Return work papers.
Condition
of Property.
Except
as set forth on Schedule
5.10,
all
Tangible Property included within the Acquired Assets is in good operating
condition and repair, reasonable wear and tear excepted, and all such Tangible
Property is adequate for the uses to which it is being put. None of such
Tangible Property is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs which are not material in nature or
cost.
Contracts
and Commitments.
Schedule
5.11(a)
lists
all Contracts (copies of which have heretofore been made available to the
Purchaser) and describes all currently effective oral agreements and
commitments, if any, to which the Seller is a party in respect of the Business
and involving annual payments by any party in excess of $10,000. The Contracts
listed on Schedule 5.11(a) are referred to herein as the “Scheduled
Contracts.”
Each
Scheduled Contract that is a Customer Contract was entered into in the ordinary
course of business. Except as set forth on Schedule
5.11(a),
(i) all
written Scheduled Contracts constitute valid and binding agreements of the
Seller party thereto, and, to the Seller’s Knowledge, each other party thereto,
enforceable in accordance with their terms except (A) as such enforcement may
be
limited by or subject to any bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to or limiting creditors’
rights generally and (B) that the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable defenses
and to the discretion of the court before which any proceeding therefor may
be
brought, (ii) with respect to the Scheduled Contracts (A) there are no
existing material defaults by the Seller or, to the Seller’s Knowledge, by any
other party thereto and (B) there is no event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a material default under the Scheduled Contracts by the Seller,
or by
any other party thereto and (iii) the Seller is not restricted under any
Scheduled Contract from carrying on the Business in any geographical
location.
24
The
Seller does not own any Real Property in respect of the Business. The only
leases for Real Property to which the Seller is a party in respect of the
Business are as set forth on Schedule
5.11(b)
(each, a
“Lease”
and
collectively, and together with all addenda, the “Leases”).
With
respect to each Lease, (i) such Lease is in full force and effect and is binding
and enforceable in accordance with its terms except (A) as such enforcement
may
be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or limiting
creditors’ rights generally, (B) that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought; (ii) all rental and other charges payable pursuant to the terms
and conditions of such Lease have been paid and no rent has been paid in advance
more than 30 days; (iii) to the Seller’s Knowledge, there are no charges,
offsets or defenses against the enforcement by the lessors thereunder of any
agreement, covenant or condition on the part of the Seller to be performed
or
observed pursuant to the terms of the Leases; (iv) there are no defaults by
the
Seller of any material agreement, covenant or condition on the part of the
Seller to be performed or observed pursuant to the terms of such Leases; (v)
there are no actions or proceedings pending or, to the Seller’s Knowledge,
threatened, by the lessor under such Leases; (vi) except for the security
deposits required by the Leases identified on Schedule
5.11(b),
the
lessor does not hold any deposits for the Seller’s accounts under such Leases;
(vii) except as set forth on Schedule
5.05,
the
consummation of the sale of the Acquired Assets will not constitute a prohibited
transfer or assignment under the Leases (or lessor’s consent to any such
transfer or assignment will have been obtained prior to Closing); and (viii)
to
the Seller’s Knowledge, there are no defaults by the lessor under each Lease of
any material agreement, covenant or condition on the part of the lessor to
be
performed or observed pursuant to the terms of the Lease. The current expiration
dates and remaining options to extend the Leases are as set forth on
Schedule
5.11(b).
Minimum
monthly rent and additional rent under the Leases are set forth on Schedule
5.11(b).
[intentionally
omitted]
Assets
of the Seller.
Except
as
described on Schedule
5.13(a),
the
Seller has valid, good and marketable title to, or has a valid leasehold
interest or valid license or other contractual rights in, the Acquired Assets,
free and clear of all Encumbrances, except for Permitted
Encumbrances.
The
Acquired Assets constitute all of the assets and properties that are necessary
or required for the operation or conduct of the Business in the manner presently
operated and conducted by the Seller as of the date hereof.
Land
Use Matters.
There
are no pending or, to the Seller’s Knowledge, threatened, legal actions or
proceedings in the nature of condemnation proceedings that might prohibit,
restrict or impair the use and occupancy of the property covered by the Lease,
or result in the suspension, revocation, impairment, forfeiture or non-renewal
of any required licenses, permits, certificates and approvals for the use and
occupancy and operation of the properties covered by the Leases, other than
such
prohibitions, restrictions, suspensions, revocations, impairments, forfeitures
and non-renewals that individually or in the aggregate would not result in
a
Material Adverse Effect.
Environmental
Matters.
To the
Seller’s Knowledge, the Seller is in compliance in all material respects with
all applicable Environmental Laws and Environmental Permits in respect of the
Business. There are no Environmental Claims pending or, to the Seller’s
Knowledge, threatened, against the Seller or against any of the Acquired Assets
and, to the Seller’s Knowledge, there exists no basis, facts or circumstances
which could reasonably be expected to give rise to an Environmental
Claim.
25
Insurance.
Schedule
5.16
(i)
lists the insurance policies currently maintained with respect to the Business
(summaries of which have been provided to the Purchaser) in such amounts, with
such deductibles as listed therein and (ii) specifically describes all claims
made by the Seller during the past three (3) years under
any
such insurance policies. All premiums due and payable with respect to the
insurance policies listed on Schedule
5.16
have
been paid, and the Seller has not received any written notice that (i) any
of
the policies listed on Schedule
5.16
are not
in full force and effect, or that any such policies have been cancelled or
terminated, except for policies that have been replaced on substantially similar
terms prior to the date of such cancellation.
Employees
and Labor Relations.
Schedule
5.17(a)
contains
the names of all persons employed or retained by the Seller, on a full-time,
part-time or temporary basis, relating to the Business, including those
employees of the Business on disability leave, parental leave or other absence
as of the date hereof (each, an “Employee”
and
collectively, the “Employees”),
and
lists which Employees are leased, part-time or temporary employees and lists
the
salary for each Employee. The Seller has provided the Purchaser with the
commission, bonus entitlement, profit sharing arrangements both contractual
and
discretionary, and current vacation accrual for each Employee, has indicated
which Employees are currently on short-term or long-term disability, and has
provided the date of each Employee's commencement of employment and a
description of each Employee's function in the Business. Except for the persons
listed on Schedule
5.17(a),
the
Seller does not have any employment, compensation, noncompetition,
nonsolicitation or other similar arrangements with any individuals who perform
services for the Seller in connection with the Business.
A
copy or
description of the standard terms of employment (including noncompetition and
nonsolicitation obligations) of the Employees is attached hereto as Schedule
5.17(b).
All
Employees employed on terms other than substantially in accordance with such
standard terms are employed pursuant to an employment agreement identified
on
Schedule
5.17(b).
All
Employees are “at will” employees, each of whom can be terminated at any time
without penalty or premium and whose employment terms are solely governed by
the
current policy manual of the Seller (a true and complete copy of which has
been
provided to the Purchaser), except as otherwise specified on Schedule
5.17(b).
Except
as
set forth on Schedule
5.17(c),
(i)
there is no current or pending labor strike or work stoppage or lockout against
the Seller or materially affecting the Business; during the past five (5) years
there has not been any such action against the Seller in respect of the
Business; and to the Seller’s Knowledge, there has not been, and is not now, any
such action threatened against the Seller or materially affecting the Business;
(ii) none of the Employees are represented by a union or subject to a collective
bargaining agreement and, to the Seller’s Knowledge, no union organizational
campaign is in progress with respect to the Employees and no question concerning
representation exists respecting such Employees; (iii) with respect to the
Employees, the Seller is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and is not engaged in any unfair
labor practice; and (iv) there are no written agreements or arrangements between
(x) the Seller and (y) any current or former employee, consultant, independent
contractor, or leased or contract employee obligating the Seller to make any
payment or increase compensation due to any such individual as a result of
the
transactions contemplated by this Agreement, nor will the transactions
contemplated by this Agreement result in any breach of any agreement with any
current or former employee, consultant, independent contractor, or leased or
contract employee.
26
Except
as
set forth on Schedule
5.17(d),
there
are no loans outstanding from the Seller to any of the Employees.
The
Seller is not in breach of any material terms of employment of any Employee
nor,
to the Seller’s Knowledge, is any Employee in breach of any material term of his
or her employment relationship.
As
of the
date hereof, no Employee has given or received written notice of termination
of
his or her employment.
With
respect to the Business and the Employees, the Seller (i) has complied in all
material respects with the employment eligibility verification form requirements
under the Immigration and Naturalization Act, as amended (“INA”),
in
recruiting, hiring, reviewing and documenting prospective employees for
employment eligibility verification purposes; (ii) has complied in all material
respects with the paperwork provisions and anti-discrimination provisions of
the
INA; (iii) has obtained and maintained the employee records and I-9 forms in
proper order as required by United States law; and (iv) does not employ any
workers unauthorized to work in the United States.
Litigation.
Except
as set forth on Schedule
5.18,
as of
the date hereof, there is no action, proceeding or investigation by or before
any court, governmental agency or arbitrator or other tribunal that is pending
or, to the Seller’s Knowledge, threatened (an “Action”)
which:
is
or may
be brought against or which involves the Seller in respect of the
Business;
questions
or challenges the validity of, or seeks damages or equitable relief on the
basis
of, this Agreement or any action taken or to be taken by the Seller pursuant
to
this Agreement or in connection with the transactions contemplated hereby;
or
is
likely
to affect the right of the Purchaser after the Closing Date to own all right,
title and interest in and to the Acquired Assets or to conduct the Business
as
presently conducted.
Court
Orders, Decrees, and Laws.
The
Seller is in compliance in all material respects with all applicable federal,
state or local laws, rules, regulations, ordinances, zoning requirements,
governmental restrictions, orders, judgments and decrees affecting, involving
or
relating to the Business, and the Seller has not received any written notices
alleging any such violation. The foregoing shall be deemed to include laws,
rules and regulations relating to the federal patent, copyright, and trademark
laws, state trade secret and unfair competition laws, and to all other
applicable laws, rules and regulations including, but not limited to, equal
opportunity, wage and hour, and other employment matters, and antitrust and
trade regulations, health product marketing, anti-bribery, anti-kickback,
physician self-referral and false claims, safety (including OSHA), building,
electronic signatures, import and export, zoning or health and privacy laws
(including, without limitation, HIPAA), ordinances and regulations.
Seller
has not made or agreed to make gifts of money, other property or similar
benefits, or provide any other remuneration directly or indirectly (other than
incidental gifts of articles of nominal value used in a practice) to any actual
or potential customer, supplier, governmental employee or any other person
in a
position to assist or hinder the Seller or the Business (or any of their
respective family members or affiliates) in connection with any actual or
proposed transaction.
Employee
Benefit Plans; ERISA.
Schedule
5.20(a)
contains
a list of employee benefit plans under Section 3(3) of ERISA and any other
employment, consulting, bonus, deferred compensation, incentive compensation,
severance, termination or post-employment pay, disability, hospitalization
or
other medical, dental, vision, life or other insurance, stock purchase, stock
option, stock appreciation, stock award, pension, profit sharing, 401(k) or
retirement plan, agreement or arrangement, and each other employee benefit
plan
or arrangement arising out of the employment or the termination of an Employee,
former employee, retiree or sales personnel, by the Seller, whether written
or
oral, tax-qualified under the Code or non-qualified, whether covered by ERISA
or
not, maintained or contributed to by the Seller, its Affiliates or any trade
or
business under common control with the Seller (as determined pursuant to
Section 414(b), (c), (m), (o) or (t) of the Code) covering any such person
(collectively, “Benefit
Plans”).
The
Seller has made available to the Purchaser true and complete copies of the
Benefit Plans. The Seller does not have any legally binding oral or written
plan
or other commitment, whether covered by ERISA or not, to create any additional
plan, agreement or arrangement or to modify or change any existing Benefit
Plan
in any manner that would affect any of the Transferred Employees.
27
The
Seller does not maintain, nor has it ever maintained or contributed to, a
“multiemployer plan,” as that term is defined in Section 3(37) of
ERISA.
All
contributions or other amounts which the Seller is required to make under the
terms of the Benefit Plans with respect to Transferred Employees on or prior
to
Closing have been paid.
There
are
no pending, or to the Seller’s Knowledge, threatened, claims, litigation,
administrative actions or proceedings against or otherwise involving any of
the
Benefit Plans by any Transferred Employee (other than routine claims for
benefits) that would reasonably be expected to have a Material Adverse Effect.
There is no judgment, decree, injunction, rule or order of any court,
governmental body, commission, agency or arbitrator outstanding against or
in
favor of any Benefit Plan or, to the Seller’s Knowledge, any fiduciary thereof
in that capacity, related to the Transferred Employees.
None
of
the Acquired Assets is subject to any Encumbrance under Section 302(f) of
ERISA or Section 412(n) of the Code.
Customers
and Vendors.
Set
forth
on Schedule
5.21(a)
is a
true, complete and current list of the Seller’s top 20 customers (the
“Customers”),
as
measured by revenues contributed to the Business for each of (i) the year ended
December 31, 2006 and (ii) the nine months ended September 30, 2007, including
the revenue received from such Customers in each of such 12-month and nine-month
periods.
Schedule
5.21(b)
is a
true, complete and current list of each vendor that is a supplier of any
significant material, product, component or service used in the Business during
each of the year ended December 31, 2006 and the nine months ended September
30,
2007 (each, a “Vendor”).
Except as set forth on Schedule
5.21(b),
the
Seller has written Contracts with each such Vendor, each of which Contract
is
included on Schedule
5.11(a).
Schedule
5.21(b)
identifies Vendors to whom the Seller paid in the aggregate $10,000 or more
during the most recently completed fiscal year, together with, in each case,
the
amount paid or billed during such period.
To
the
Seller’s Knowledge, no Customer has indicated in writing that it will stop, or
materially decrease the rate of, purchasing services from the Business, and
no
Vendor has indicated in writing that it will stop, or materially decrease the
rate of, supplying materials, products, components or services to the
Business.
Broker’s
Fees.
Except
for the fee owed to ▇▇▇▇▇ ▇▇▇▇▇▇ & Company, LLC (or its affiliates), which
the Seller shall pay at the Closing and be solely responsible for in full,
no
broker, investment banker, financial advisor or other Person is entitled to
any
broker’s, finder’s, financial advisor’s or similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Seller, except those for which the
Seller will be solely responsible.
28
Related-Party
Transactions.
Schedule
5.23
contains
a complete and correct list, and copy, of each contract, agreement, license,
lease, or arrangement between the Seller and (i) any Affiliate of the Seller;
(ii) any officer or employee of the Seller; (iii) any corporation, trust, or
other entity in which the Seller or any such officer or employee has a material
equity or participating interest; (iv) any partnership in which the Seller
or
any such officer or employee has a partnership or participating interest; or
(v)
any such officer or employee, in each case, relating to or involving the
Business.
Licenses;
Permits.
Schedule
5.24
sets
forth all Governmental Authorizations and Permits maintained by the Seller
in
respect of the Business. Such Governmental Authorizations and Permits constitute
all approvals, authorizations, certifications, consents, variances, permissions,
licenses, or permits to or from, or filings, notices, or recordings to or with,
federal, state, or local governmental authorities that are required for the
ownership and use of the Acquired Assets and the conduct of the Business as
currently conducted by the Seller under federal, state, and local law,
regulation, ordinance, zoning requirement, governmental restriction, order,
judgment, or decree. The Seller is in compliance in all material respects with
all terms and conditions of such Governmental Authorizations and Permits. All
of
such Governmental Authorizations and Permits are in full force and effect,
and
to the Seller’s Knowledge, no suspension or cancellation of any of them is being
threatened, nor will any of such Governmental Authorizations and/or Permits
be
affected by the consummation of the transactions described in this
Agreement.
Accounts
Receivable.
All
Accounts Receivable of the Seller have arisen in the ordinary course of business
in arm’s-length transactions for goods actually sold and services actually
performed or to be performed, represent valid obligations to the Seller,
collectible in full in accordance with their terms within 30 days after the
day
on which they first become payable, subject to any bad debt or similar reserves
reflected on Seller’s Financial Statements in accordance with GAAP, and are
subject to no known set-offs or counterclaims. The Seller has available in
its
records copies of invoices or electronic records of services performed and
all
existing Contracts with respect to all such Accounts Receivable.
Disclosure.
None of
the representations and warranties of the Seller in this Agreement, together
with statements contained in this Agreement or in any Related Document contain
any untrue statement of material fact or omit to state any material fact
necessary in order to make such representations, warranties or statements not
misleading.
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
The
Purchaser hereby represents and warrants to the Seller as follows:
Organization;
Due Authorization.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York and has full corporate power to execute,
deliver and perform this Agreement and each Related Document to which it is
a
party. The Purchaser has all requisite power and authority to enter into this
Agreement and the Related Documents to be executed and delivered by the
Purchaser pursuant hereto or in connection with the transactions contemplated
hereby or thereby, and to consummate the transactions contemplated hereby and
thereby. All acts and other proceedings required to be taken by the Purchaser
to
authorize the execution, delivery and performance of this Agreement and the
Related Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly and properly
taken.
29
Valid
and Binding.
This
Agreement and each Related Document, to the extent that the Purchaser is a
party
thereto, constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms (assuming this
Agreement each Related Document constitutes the valid and binding agreement
of
the Seller or such other party), except that (i) such enforcement may be limited
by or subject to any bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or limiting creditors’
rights generally and (ii) the remedy of specific performance and injunctive
and
other forms of equitable relief are subject to certain equitable defenses and
to
the discretion of the court before which any proceeding therefor may be
brought.
Consents
and Approvals.
No
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority is required to be obtained by the Purchaser
in
connection with the execution, delivery and performance of this Agreement or
the
consummation of the transactions contemplated hereby.
No
Violation.
The
execution and delivery of this Agreement and each Related Document by the
Purchaser, and the consummation of the transactions contemplated hereby and
thereby and compliance with the terms hereof and thereof does not and will
not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under or result in the creation of any Encumbrance of any kind upon any of
the
properties or assets of the Purchaser under, any provision of (i) the
Certificate of Incorporation or By-laws of the Purchaser, (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment or
loan
or other agreement to which the Purchaser is a party or by which any of its
properties or assets are bound, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Purchaser or its property
or assets. Purchaser possesses, or is the beneficiary of, a sufficient number
of
licenses from Microsoft Corporation to permit it to continue to utilize the
Microsoft general purpose office and operating system software installed on
the
Computer Equipment included within the Acquired Assets.
SEC
Documents.
The
Purchaser has filed all required reports, schedules, forms, statements and
other
documents with the SEC since January 1, 2005 (the “Purchaser
SEC Documents”).
As of
their respective dates, the Purchaser SEC Documents complied as to form in
all
material respects with the requirements of the Securities Act of 1933, as
amended, (the “Securities
Act”)
or the
Securities Exchange Act of 1934, as amended, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such Purchaser
SEC Documents, and none of the Purchaser SEC Documents contained any untrue
statement of a material fact or omitted 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. Except to the
extent that information contained in any Purchaser SEC Document has been revised
or superseded by a later-filed Purchaser SEC Document filed and publicly
available prior to the date of this Agreement (the “Filed
Purchaser SEC Documents”),
as of
the date of this Agreement, none of the Purchaser SEC Documents contains any
untrue statement of a material fact or omits to state any 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. The
financial statements of Purchaser included in the Purchaser SEC Documents
complied as of their respective dates of filing with the SEC as to form in
all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case
of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the
notes thereto) and fairly present the consolidated financial position of
Purchaser and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the Filed Purchaser SEC Documents, and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, neither Purchaser nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted accounting
principles to be set forth on a consolidated balance sheet of Purchaser and
its
consolidated subsidiaries or in the notes thereto which, individually or in
the
aggregate, could reasonably be expected to have a material adverse effect on
Purchaser.
30
Broker’s
Fees.
No
broker, investment banker, financial advisor or other Person is entitled to
any
broker’s, finder’s, financial advisor’s or similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Purchaser, except those for which
Purchaser will be solely responsible; provided,
that
Seller shall be solely responsible for the fee payable to ▇▇▇▇▇ ▇▇▇▇▇▇ &
Company, LLC (or its affiliates), as specified in Section 5.23.
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Survival
of Representations and Warranties.
All
representations and warranties made by any Party in this Agreement shall survive
the Closing until the expiration of the statute of limitations applicable
thereto (in
each
case, the “Survival
Period”).
No
investigation by, or Knowledge of, the Purchaser shall relieve the Seller from
any liability for any breach of a representation or warranty made in this
Agreement or in any Related Document. Covenants and agreements required to
be
performed after the Closing shall survive the Closing and shall expire in
accordance with their terms.
Notice
of Damages.
A Party
seeking indemnity hereunder (the “Indemnified
Party”)
shall
give the Party from which indemnity is sought hereunder (the “Indemnitor”)
prompt
written notice (hereinafter, the “Indemnification
Notice”)
of any
demands, claims, actions or causes of action (collectively, “Claims”)
asserted against the Indemnified Party. Failure to give such notice shall not
relieve the Indemnitor of any obligations which the Indemnitor may have to
the
Indemnified Party under this Article VII, except and only to the extent that
such failure has actually prejudiced the Indemnitor under the provisions for
indemnification contained in this Agreement or the Indemnitor’s ability to
defend such Claim. For purposes of this Article VII, the Purchaser or another
Purchaser Indemnified Party (as defined herein), on the one hand, and the Seller
or another Seller indemnified Party (as defined herein), on the other hand,
shall be deemed to be the “Indemnified Party” or the “Indemnitors”, as the case
may be. Each Indemnification Notice shall state that the Indemnified Party
has
paid or incurred Damages for which such Indemnified Party is entitled to
indemnification pursuant to this Agreement, and specify in reasonable detail
(and have annexed thereto all supporting documentation, including any
correspondence in connection with any Claims by persons not party to this
Agreement and paid invoices for claimed Damages) each individual item of Damages
included in the amount so stated, the date such item was paid or incurred,
the
basis for any anticipated liability and the nature of the misrepresentation,
breach of warranty, breach of covenant or claim to which each such item is
related and the computation of the estimated amount to which such Indemnified
Party claims to be entitled hereunder.
31
Agreements
to Indemnify.
Subject
to the terms and conditions of this Article VII, each of the Seller Parties,
jointly and severally, covenants and agrees to indemnify, defend and hold
harmless the Purchaser and its Affiliates (including any officer, director,
shareholder, partner, member, employee, agent or Representative of any thereof)
(each, a “Purchaser
Indemnified Party”
and
collectively, the “Purchaser
Indemnified Parties”)
from
and against all assessments, losses, damages, liabilities, costs and expenses,
including, but not limited to, interest, penalties, and reasonable fees and
expenses of legal counsel (collectively, “Damages”),
to
the extent incurred by a Purchaser Indemnified Party as a result of or relating
to:
any
breach of any representation or warranty of the Seller contained in Article
V of
this Agreement or in any Related Document to which the Seller is a
party;
any
breach or nonfulfillment of any covenant or agreement of the Seller contained
in
this Agreement or in any Related Document to which the Seller is a
party;
the
Excluded Liabilities; or
any
and
all claims made by creditors of the Seller relating to the provisions of any
“bulk sales” laws of any state or other jurisdiction that may be applicable to
the transactions contemplated hereby.
Subject
to the terms and conditions of this Article VII, the Purchaser covenants and
agrees to indemnify, defend and hold harmless the Seller and its Affiliates
(including any successor or assigns, officer, director, shareholder, partner,
member, employee, agent or Representative thereof) (each, a “Seller
Indemnified Party”
and
collectively, the “Seller
Indemnified Parties”)
from
and against all Damages to the extent incurred by a Seller Indemnified Party
as
a result of or relating to:
any
breach of any representation or warranty of the Purchaser contained in Article
VI of this Agreement or in any Related Document to which the Purchaser is a
party;
any
breach or nonfulfillment of any covenant or agreement of the Purchaser contained
in this Agreement or in any Related Document to which the Purchaser is a party;
the
Assumed Liabilities; or
any
breach or violation of the Maryland Security Guards Act (Title 19 of the
Business Occupations and Professions Article of the Annotated Code of Maryland),
or any related Federal statute or regulation, COMAR or other regulations
promulgated by the State of Maryland or regulation of any
local jurisdiction in which Seller's license to operate a Security
Guard firm (“Seller’s
License”)
is
utilized by Purchaser, until such time as Purchaser obtains its own Security
Guard license, whether on or after the Closing Date, at which time Purchaser
hereby expressly agrees that it shall no longer use, or have any rights with
respect to, Seller’s License.
Conditions
of Indemnification of Third-Party Claims.
The
obligations and liabilities of an Indemnitor under Section 7.03 hereof with
respect to Damages resulting from any Claim by a Person not party to this
Agreement (a “Third
Party Claim”)
shall
be subject to the following terms and conditions:
The
Indemnified Party agrees to give the Indemnitor notice of a Third Party Claim
in
respect of which indemnity may be sought under Section 7.03 in accordance
with the notice procedures set forth in Section 7.02 promptly after such
Indemnified party learns of the Third Party Claim; provided,
however,
that
failure to give such notice shall not affect the indemnification provided
hereunder, except to the extent the Indemnitor shall have been actually
prejudiced as a result of such failure. Thereafter, the Indemnified Party shall
deliver to the Indemnitor, within ten (10) calendar days after the Indemnified
Party’s receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim.
If
a Third Party Claim is made against an Indemnified Party, the Indemnitor will
be
entitled to participate in the defense thereof, and, subject to paragraph (c)
of
this Section 7.04, the Indemnitor may elect, by written notice to the
Indemnified Party, to undertake the defense and/or settlement thereof with
counsel reasonably approved by the Indemnified Party, at the sole cost and
expense of the Indemnitor; provided,
that
should the Indemnitor so elect to undertake the defense of a Third Party Claim,
the Indemnitor will not, as long as it conducts such defense, be liable to
the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof except as otherwise provided in
paragraph (c) of this Section 7.04. If the Indemnitor chooses to defend any
claim, the Indemnified Party shall cooperate in good faith with all reasonable
requests of the Indemnitor and shall retain and make available to the Indemnitor
any books, records or other documents within its control that are necessary
or
appropriate for such defense and make available its employees on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder.
32
In
the
event that the Indemnitor, within thirty (30) days after receipt of an
Indemnification Notice, does not so elect to defend such Third Party Claim,
the
Indemnified Party will have the right to undertake the defense of such Third
Party Claim at the sole cost and expense of the Indemnitor.
Anything
in this Section 7.04 to the contrary notwithstanding, (i) if the Indemnitor
assumes the defense of any Third Party Claim, any Indemnified Party shall be
entitled to participate in the defense, compromise or settlement of such Third
Party Claim with counsel of its own choice at its own expense; provided,
however,
that if
representation by the Indemnitor’s counsel would present a conflict of interest,
then such Indemnified Party shall be entitled to participate in the defense,
compromise or settlement of such Third Party Claim with counsel of its own
choice; provided,
further,
that
Indemnitor shall reimburse the Indemnified Party for the expenses of such
counsel if a court of competent jurisdiction determines that a conflict of
interest existed, (ii) no Person that has undertaken to defend a Third Party
Claim under Section 7.04(a) hereof shall, without written consent of all
Indemnified Parties, settle or compromise any Third Party Claim or consent
to
entry of any judgment, whether for monetary, injunctive or other non-monetary
relief which (A) does not include as an unconditional term thereof the general
release by the claimant or the plaintiff of all Indemnified Parties from all
liability arising from events which allegedly give rise to such Third Party
Claim or (B) imposes any restrictions of any kind on the continuing operations
of the Business. If the Indemnified Party shall in good faith determine that
the
conduct of the defense of any claim subject to indemnification hereunder or
any
proposed settlement of any such Third Party Claim by the Indemnitor might be
expected to affect adversely the ability of the Indemnified Party to conduct
its
business, or that the Indemnified Party may have available to it one or more
defenses or counterclaims that are inconsistent with one or more of those that
may be available to the Indemnitor in respect of such Third Party Claim or
any
litigation relating thereto, the Indemnified Party shall have the right at
all
times to take over and assume control over the defense, settlement, negotiations
or litigation relating to any such Third Party Claim at the sole cost of the
Indemnitor; provided,
however,
that
whether or not the Indemnitor or the Indemnified Party shall have control over
the defense, settlement, negotiations or litigation relating to any such Third
Party Claim, the Indemnified Party shall not admit any liability with respect
to, or settle, compromise or discharge, such Third Party Claim without the
Indemnitor’s prior written consent. Notwithstanding
the foregoing, if a settlement offer is made by a third party claimant and
such
settlement offer (x) is solely for money damages, (y) includes
as an
unconditional term thereof the general release by the claimant or the plaintiff
of all Indemnified Parties from all liability arising from events which
allegedly give rise to such Third Party Claim and (z) does not impose any
restrictions on the continuing operations of the Business, and
the
Indemnitor notifies in writing the Indemnified Party of the Indemnitor’s
willingness to accept the settlement offer and, subject to the applicable
limitations of this Article VII, pay the amount called for by such offer, and
the Indemnified Party declines to accept such offer, the Indemnified Party
may
continue to contest such Third Party Claim, free of any participation by the
Indemnitor, and the amount of any ultimate liability with respect to such Third
Party Claim that the Indemnitor has an obligation to pay hereunder shall be
limited to the lesser of (1) the amount of the settlement offer that the
Indemnified Party declined to accept plus the other Damages of the Indemnified
Party relating to such Third Party Claim prior to the date of its rejection
of
the settlement offer or (2) the aggregate Damages of the Indemnified Party
with respect to such Third Party Claim.
33
Conditions
of Indemnification of Non-Third-Party Claims.
With
respect to any Claim for indemnification hereunder which does not involve a
third party Claim, the Indemnified Party will give the Indemnitor written notice
of such Claim in accordance with Section 7.02. The Indemnitor may
acknowledge and agree by notice to the Indemnified Party in writing to satisfy
such Claim within forty-five (45) days of receipt of notice of such Claim from
the Indemnified Party. If the Indemnitor shall dispute such Claim, the
Indemnitor shall provide written notice of such dispute to the Indemnified
Party
within such 45-day period, setting forth in reasonable detail the basis of
such
dispute. Upon receipt of notice of any such dispute, the Indemnified Party
and
the Indemnitor shall use reasonable good faith efforts to resolve such dispute
within forty-five (45) days of the date such notice of dispute is received.
If
the Indemnitor shall fail to provide written notice to the Indemnified Party
within forty-five (45) days of receipt of notice from the Indemnified Party
that
the Indemnitor either acknowledges and agrees to pay such Claim or disputes
such
Claim, the Indemnitor shall be deemed to have acknowledged and agreed to pay
such Claim in full and to have waived any right to dispute such Claim. If the
Indemnified Party and the Indemnitor shall succeed in reaching agreement on
their respective rights with respect to any of such claims, the Indemnified
Party and the Indemnitor shall promptly prepare and sign a memorandum setting
forth such agreement. Should the Indemnified Party and the Indemnitor be unable
to agree as to any particular item or items or amount or amounts within such
time period, then either the Indemnified Party or the Indemnitor Party shall
submit such dispute to a court of competent jurisdiction as set forth in
Section 8.05. Once (i) the Indemnitor has acknowledged and agreed to pay
any claim pursuant to this Section 7.05, (ii) any dispute under this
Section 7.05 has been resolved in favor of indemnification by mutual
agreement of the Indemnitor and the Indemnified Party or (iii) any dispute
under
this Section 7.05 has been finally resolved in favor of indemnification by
order of a court of competent jurisdiction having jurisdiction over such
dispute, then the Indemnitor shall pay the amount of such Claim to the
Indemnified Party within twenty (20) days after the date of acknowledgement
by
the Indemnitor or final resolution in favor of indemnification, as the case
may
be, to such account and in such manner as is designated in writing by the
Indemnified Party.
Limitations
on Indemnification.
Notwithstanding anything to the contrary provided elsewhere in this
Agreement:
Except
for any claim resulting from Seller’s fraud, to which the following limitations
shall not apply, the rights of the Purchaser Indemnified Parties to
indemnification under Section 7.03(a)(i) shall be limited as
follows:
The
amount of any Damages incurred by a Purchaser Indemnified Party shall be net
of
any (x) cash proceeds actually received by such Purchaser Indemnified Party
under such Party’s insurance policies (less deductibles or increased premiums)
in respect of such Damages and (y) the net amount of any income Tax benefits
actually realized by such Purchaser Indemnified Party by reason of such Damages
during the taxable period in which such Damages occurred.
34
In
any
event, the maximum amount for which the Seller Parties shall be liable in the
aggregate shall not exceed the Purchase Price.
Except
for any claim resulting from Purchaser’s fraud, to which the following
limitations shall not apply, the rights of the Seller Indemnified Parties to
indemnification under Section 7.03(b) shall be limited as
follows:
The
amount of any Damages incurred by a Seller Indemnified Party shall be net of
any
(x) cash proceeds actually received by such Seller Indemnified Party under
such
Party’s insurance policies (less deductibles or increased premiums) in respect
of such Damages and (y) the net amount of any income Tax benefits realized
by
such Seller Indemnified Party by reason of such Damages during the taxable
period in which such Damages occurred.
In
any
event, the maximum amount for which the Purchaser shall be liable in the
aggregate shall not exceed the Purchase Price.
Treatment
of Indemnification Payments.
All
indemnification payments made under this Agreement shall be treated by the
Parties as an adjustment to the Purchase Price. If, notwithstanding such
treatment by the Parties, any indemnity payment is determined to be taxable
income rather than an adjustment to Purchase Price by any Governmental
Authority, then the Indemnitor shall indemnify the Indemnified Party for any
Taxes payable by the Indemnified Party by reason of the receipt of such
indemnity payment (including payments under this Section 7.07), determined
at an assumed marginal tax rate equal to the highest marginal tax rate then
in
effect for corporate taxpayers in the relevant jurisdiction.
Termination,
etc.
The
indemnities provided in this Agreement shall survive the Closing as set forth
herein and subject to Section 7.01 of this Agreement. After the Closing,
the indemnities provided in Section 7.03(a) and 7.03(b) shall be the sole
and exclusive remedy at law or in equity for any breach of a representation,
warranty, covenant or agreement or other claim arising out of this Agreement
or
the transactions contemplated hereby other than for fraud.
The
Indemnified Party shall take and shall cause its Affiliates to take all
commercially reasonable steps to mitigate any Damages upon becoming aware of
any
event which would reasonably be expected to, or does, give rise thereto;
provided,
however,
that
the failure to take such steps shall not affect such Indemnified Party’s rights
to indemnification hereunder.
Subject
to the reasonable consent of the Indemnitor (which may be withheld if such
subrogation right would, in the reasonable judgment of the Indemnitor, adversely
affect the Indemnitor’s business), upon making any indemnification payment, the
Indemnitor will, to the extent of such payment, be subrogated to all rights
of
the Indemnified Party against any third party in respect of the Damages to
which
the payment relates. Without limiting any other provision hereof, each such
Indemnified Party and Indemnitor will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation
rights.
35
Except
as
set forth in Section 2.08, neither the Seller nor the Purchaser shall have
any right to set-off any Damages against any payments to be made by such Party
or Parties pursuant to this Agreement or any other agreement between the
Parties.
MISCELLANEOUS
PROVISIONS
Expenses.
Except
as otherwise provided herein, the Seller shall pay all expenses incurred by
or
on behalf of the Seller, and the Purchaser shall pay all expenses incurred
by or
on behalf of the Purchaser, in each case in connection with this Agreement
or
any transaction contemplated by this Agreement, including, but not limited
to,
all fees of their respective legal counsel and accountants.
Notices.
All
notices, requests, claims, demands, consents or waivers and other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, by telecopy (which is confirmed as provided below) or by nationally
recognized overnight courier (providing proof of delivery):
If
to the
Seller or any of the Seller Parties, to:
Expert
Security Services, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
with
a copy to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇, P.A.
▇▇▇
▇.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
If
to the
Purchaser, to:
▇.▇.
▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇ ▇ ▇▇
Email:
▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
36
with
a copy to:
▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇@▇▇.▇▇▇
or,
in
each case, to such other person or address as any Party shall furnish to the
other Parties in writing. Notice given by personal delivery or overnight courier
shall be effective upon actual receipt. Notice given by telecopy shall be
confirmed by appropriate answer back and shall be effective upon actual receipt
if received during the recipient’s normal business hours, or at the beginning of
the recipient’s next business day if not received during the recipient’s normal
business hours.
Binding;
No Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the Parties and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by the any of the Seller Parties without
the prior written consent of the Purchaser; provided,
that no
such assignment shall release any of the Seller Parties from their respective
duties and obligations hereunder and prior written notice of any such assignment
shall be provided to the Purchaser. The Purchaser may assign all or part of
this
Agreement and its rights and benefits hereunder to a Purchaser Affiliate;
provided,
that no
such assignment shall release the Purchaser from its duties and obligations
hereunder and prior written notice of any such assignment shall be provided
to
the Seller.
Severability.
If in
any jurisdiction, any provision of this Agreement or its application to any
Party or circumstance is restricted, prohibited or unenforceable, such provision
shall, as to such jurisdiction, be ineffective only to the extent of such
restriction, prohibition or unenforceability without invalidating the remaining
provisions hereof and without affecting the validity or enforceability of such
provision in any other jurisdiction or its application to other Parties or
circumstances. In addition, if any one or more of the provisions contained
in
this Agreement shall for any reason in any jurisdiction be held to be
excessively broad as to time, duration, geographical scope, activity or subject,
it shall be construed by limiting and reducing it, so as to be enforceable
to
the extent compatible with the applicable law of such jurisdiction as it shall
then appear.
Governing
Law; Consent to Jurisdiction and Venue.
The
Parties acknowledge and agree that this Agreement shall be governed by the
laws
of the State of New York as to all matters including matters of validity,
construction, effect, performance and liability, without consideration of
conflicts of laws provisions contained therein, and the courts of the State
of
New York have exclusive jurisdiction of all disputes with respect to an alleged
breach of any representation, warranty, agreement or covenant of this Agreement,
including any dispute relating to the construction or interpretation of the
rights and obligations of any Party, which is not resolved through discussion
between the Parties.
Each
of
the Parties hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any New York State or Federal court sitting in New York County
in any action or proceeding arising out of or relating to this Agreement, any
Related Document or any transaction contemplated in this Agreement. Each of
the
Parties hereby irrevocably waives, to the fullest extent it may effectively
do
so, the defense of an inconvenient forum to the maintenance of such action
or
proceeding. Each of the Parties also irrevocably and unconditionally consents
to
the service of any and all process in any such action or proceeding by the
mailing of copies of such process by certified mail to such Party and its
counsel at their respective addresses specified in Section 8.02. Each of
the Parties further irrevocably and unconditionally agrees that a final judgment
in any such action or proceeding (after exhaustion of all appeals or expiration
of the time for appeal) shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.
37
Counterparts.
This
Agreement may be executed simultaneously in counterparts, each of which shall
be
deemed an original, but both of which together shall constitute one and the
same
instrument.
Headings.
The
title of this Agreement and the headings of the Sections and Articles of this
Agreement are for reference purposes only and shall not be used in construing
or
interpreting this Agreement.
Entire
Agreement; Amendment; Waiver.
This
Agreement and the Related Documents delivered pursuant to the terms hereof
set
forth the entire agreement and understanding of the Parties in respect of the
subject matter hereof, and supersede all prior agreements, promises, covenants,
arrangements, representations or warranties, whether oral or written, by any
Party or any officer, director, employee or Representative of any Party. No
modification or waiver of any provision of this Agreement shall be valid unless
it is in writing and signed by the Party to be charged therewith. The waiver
of
breach of any term or condition of this Agreement shall not be deemed to
constitute a waiver of any other breach of the same or any other term or
condition.
Third
Parties.
Except
as otherwise provided in Article VII, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or
corporation other than the Parties and their respective successors or assigns
any rights or remedies under or by reason of this Agreement.
Publicity.
From
and after the date hereof, except as otherwise required by law or the rules
of
the American Stock Exchange (upon which the equity of the Purchaser is currently
being traded), neither the Seller nor the Purchaser shall make any announcement,
issue any press release or disseminate information to the press or any third
party regarding this Agreement or the transactions contemplated by this
Agreement without the prior written consent of the other Parties.
No
Presumption.
The
Seller and the Purchaser has each participated in the negotiation and drafting
of this Agreement and has each been represented throughout to its satisfaction
by legal counsel of its choosing. In the event any ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.
Gender;
Tense, Etc.
Where
the context or construction requires, all words applied in the plural shall
be
deemed to have been used in the singular, and vice versa; the masculine shall
include the feminine and neuter, and vice versa; and the present tense shall
include the past and future tense, and vice versa.
Reference
to Days.
All
references to days in this Agreement shall be deemed to refer to calendar days,
unless otherwise specified.
Waiver
of Jury Trial.
TO
THE
EXTENT NOT PROHIBITED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY CIVIL ACTION IN ANY FORUM
IN
RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT,
TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR
BASED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH
OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY.
[Remainder
of Page Intentionally Left Blank; Signature Page Follows.]
38
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and
delivered, all on the date first above written.
|
PURCHASER:
|
||
| |
|
|
| By: | ||
|
Name:
|
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇
|
|
| Title: |
President
|
|
|
SELLER:
|
||
|
EXPERT
SECURITY SERVICES, INC.
|
||
| By: | ||
| Name: |
|
|
| Title: | ||
39
EXHIBIT
A
ASSIGNMENT
AND ASSUMPTION AGREEMENT
ASSIGNMENT
AND ASSUMPTION AGREEMENT,
dated
as of January 1, 2008 (the “Agreement”),
by
and between Command Security Corporation, a New York corporation (“Assignee”),
and
Expert Security Services, Inc., a Maryland corporation (“Assignor”).
Capitalized terms used but not defined herein shall have the meaning given
to
such terms in the Purchase Agreement (as defined below).
WHEREAS,
Purchaser, Seller and the shareholders of Seller are parties to that certain
Asset Purchase Agreement (the “Purchase
Agreement”),
dated
as of January 1, 2008, pursuant to which, among other things, Purchaser will
purchase from Seller the Acquired Assets;
WHEREAS,
Assignor wishes to assign all of its rights in and to the Acquired Assets to
Assignee and Assignee wishes to assume all of Assumed Liabilities.
NOW,
THEREFORE,
for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and for the mutual agreements herein contained, the parties hereto
agree as follows:
1. Assignment
and Assumption.
Assignor hereby assigns, transfers and conveys to Assignee all of Assignor’s
right, title and interest in and to the Acquired Assets and Assignee hereby
accepts such assignment and assumes all of the Assumed Liabilities in all
respects.
2. Miscellaneous
Provisions.
Article
VIII of the Purchase Agreement is hereby incorporated herein by reference,
as if
set forth herein in full
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
and
delivered, all on the date first above written.
|
ASSIGNEE:
|
||
|
COMMAND
SECURITY CORPORATION
|
||
| |
|
|
| By: | ||
|
Name:
|
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
|
|
| Title: | President | |
|
ASSIGNOR:
|
||
|
EXPERT
SECURITY SERVICES, INC.
|
||
| |
|
|
| By: | ||
|
Name:
|
|
|
|
Title:
|
||
[REMAINDER
OF PAGE LEFT BLANK INTENTIONALLY]
NEITHER
THIS OPTION (THE "OPTION")
NOR THE SHARES OF COMMON STOCK OR OTHER SECURITIES RECEIVABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT")
OR ANY APPLICABLE STATE SECURITIES LAWS. THIS OPTION AND THE SHARES OF COMMON
STOCK OR OTHER SECURITIES RECEIVABLE UPON THE EXERCISE HEREOF MAY NOT BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED OR HYPOTHECATED, EXCEPT IN COMPLIANCE
WITH
THE ACT, THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE
LAWS.
Registered
Holder: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Certificate
Number: A7
Date
of Issuance: JANUARY
1, 2008
COMMAND
SECURITY CORPORATION
COMMON
STOCK OPTION
This
certifies that the Registered Holder is entitled to purchase from Command
Security Corporation, a New York corporation (the "Company"),
subject to the occurrence of certain specified time vesting criteria, at any
time commencing from the Date of Issuance and ending at 11:59 p.m., New York
City time, on the tenth (10th)
anniversary date of the Date of Issuance hereof, at the purchase price per
share
(the "Exercise
Price")
of
THREE DOLLARS AND THIRTY-FIVE CENTS ($3.35), an aggregate of twenty-five
thousand (25,000) shares (the “Shares”)
of
Common Stock, $.0001 par value, of the Company; provided that this Option shall
be exercisable only with respect to “Earned Options” as set forth in the
schedule contained in Section 2 of this Option. The number of Shares purchasable
upon exercise of this Option and the Exercise Price shall be subject to
adjustment from time to time as set forth herein.
This
Option may be exercised in whole or in part by presentation of this Option
with
the Exercise Agreement, a form of which is attached hereto as Exhibit I (the
"Exercise
Agreement"),
duly
executed and simultaneous payment of the Exercise Price (subject to any
adjustment) at the principal office of the Company. Payment of such price shall
be made at the option of the Holder hereof in cash or by certified check or
bank
cashier's check.
This
Option is subject to the terms and conditions of the Company's 2005 Stock
Incentive Plan (the "Plan"),
the
terms of which are hereby incorporated herein by reference. Terms used herein
and not otherwise defined shall have the meanings as set forth in the Plan.
In
the event of any conflict between the terms of this Option and those contained
in the Plan, the terms of the Plan shall determine the outcome of such conflict
and shall prevail. This Option is a Non-Qualified Stock Option as determined
under the Plan.
This
Option is subject to the following provisions:
Section
1. Certain
Definitions.
When
used in this Option, the following terms, when capitalized, shall have the
meanings set forth below. Certain other terms are defined in the text of this
Option.
1.1. "Act"
means
the Securities Act of 1933, as amended, and any successor law or statute
thereto.
1.2. "Common
Stock"
means
the Company's Common Stock, par value $.0001 per share.
1.3. "Company"
means
Command Security Corporation, a New York corporation, and any other corporation
or any other entity which shall succeed to or assume the obligations of the
Company.
1.4 “Conversion
Shares”
means
the Shares of Common Stock that have been purchased upon the exercise of this
Option.
1.5. "Date
of Issuance"
is the
date set forth on the first page of this Option.
1.6. "Earned
Options"
means
that portion of the Option Grant that has been earned as a result of the passage
of time as set forth in Section 2 hereto.
1.7. "Registered
Holder”
or
"Holder"
means
the person whom this Option was originally issued.
1.8. "Option
Grant"
means
the total number of Options granted to the Holder which are each convertible
into shares of Common Stock upon the attainment of specified vesting criteria
set forth herein.
Section
2. Vesting
Criteria.
2.1. This
Option, and the Shares of Common Stock that may be purchased hereunder, shall
vest with respect to one-twelfth (1/12) of the aggregate number of Shares on
the
Date of Issuance and on the same date of each succeeding month (and the balance,
if any of the Shares that is subject to this Option may be purchased in the
12th
month
from the Date of Issuance), so long as the Holder is still an employee of the
Company on such date. The portion of this Option that shall have so vested
and
become exercisable is referred to herein as the “Earned
Option.”
2.2. Notwithstanding
the foregoing, upon a Change of Control of the Company occurring during the
Holder’s employment by the Company or during a period of 30 days thereafter,
this entire Option shall vest and become exercisable. For purposes of this
Agreement, a "Change
in Control"
shall
mean:
(i) The
acquisition (other than by or from the Company), at any time after the date
hereof, by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the
"Exchange
Act"),
of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either the then outstanding shares of common
stock or the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors (together
with such common stock, "Voting
Securities");
or
(ii) If
the
six members who comprise the Company’s Board of Directors on the Issuance Date
cease for any reason to comprise a majority of the members of the Board;
or
(iii) Approval
by the shareholders of the Company of (x) a reorganization, merger or
consolidation with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation do
not, immediately thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated company's then outstanding voting securities, (y) a
liquidation or dissolution of the Company or (z) the sale of all or
substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.
Section
3. Adjustments.
In
order
to prevent dilution of the rights granted under this Option, the Exercise Price
and the number of shares of other securities to be received upon the exercise
hereof shall be adjusted as set forth in the Plan.
Section
4. Exercise
of Option.
Upon
any partial exercise of this Option, there shall be countersigned and issued
to
the Holder hereof a new Option in respect of the Shares as to which this Option
shall not have been exercised. This Option may be exchanged at the principal
office of the Company by surrender of this Option properly endorsed either
separately or in combination with one or more other Options for one or more
new
Options of the same aggregate number of shares of Common Stock evidenced by
the
Option or Options exchanged. No fractional Shares will be issued upon the
exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction of a Share upon the exercise of this Option.
Section
5. Registered
Holder Termination.
In the
event of the voluntary or involuntary termination (including by reason of death)
of employment of the original Registered Holder of the Option for any reason
whatsoever, all Options which have not vested pursuant to Sections 2.1 or 2.2
hereof shall expire and become void and shall no longer be exercisable, and
all
Shares of Common Stock received upon the exercise of this Option that are held
by the Holder on the date immediately preceding such Termination shall be
subject to the repurchase provisions of Section 11 hereof.
Section
6. No
Voting Rights.
This
Option will not entitle the Holder hereof to any voting rights or other rights
as a stockholder of the Company.
Section
7. Section
83(b) Election.
If as a
result of exercising all or any part of this Option, the Holder receives shares
that are subject to a "substantial risk of forfeiture" and are not
"transferable" as those terms are defined for purposes of Section 83(a) of
the
Internal Revenue Code, then such Holder may elect under Section 83(b) of the
Internal Revenue Code to include in the Holder's gross income, for the Holder's
taxable year in which the shares are transferred to the Holder, the excess
of
the fair market value of such shares at the time of transfer (determined without
regard to any restriction other than one that by its terms will never lapse),
over the amount paid for the shares. If the Holder makes the Section 83(b)
election described above, the Holder shall (i) make such election in a manner
that is satisfactory to the Committee, (ii) provide the Company with a copy
of
such election, (iii) agree to promptly notify the Company if any Internal
Revenue Service or state tax agent, on audit or otherwise, questions the
validity or correctness of such election or of the amount of income reportable
on account of such election, and (iv) agree to such tax withholding as the
Company may reasonably require in its sole and absolute discretion.
Section
8. No
Right to Employment.
This
Option shall not confer upon the Holder any right to employment.
Section
9. Compliance
with the Act; Transferability.
9.1. Compliance
with the Act.
The
Holder acknowledges that neither this Option nor the shares of Common Stock
issuable upon exercise of this Option have been registered under the Act or
the
securities laws of any state and agrees that this Option and all shares
purchased upon exercise hereof shall be disposed of only in accordance with
the
Act and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder and applicable state securities laws. Except as provided
herein, the Holder further agrees not to offer, sell, transfer or otherwise
dispose of this Option or any shares issuable upon exercise of this Option
to
any other person unless a registration statement covering the sale, transfer
or
other disposition shall then be effective under the Act and except in compliance
with any applicable state securities laws, or there shall have been delivered
to
the Company an opinion of counsel reasonably acceptable to the Company to the
effect that such offer, sale, transfer or other disposition may be effected
without compliance with the registration and prospectus delivery requirements
of
the Act and any applicable state securities laws. Each certificate evidencing
shares purchased upon exercise of this Option shall bear a legend to the
foregoing effect, and the Holder and any other Person to whom a certificate
for
shares or a new warrant is to be delivered shall be required, at or before
receipt of such certificate or warrant, to execute and deliver to the Company
a
letter to the effect that it is acquiring the shares evidenced by such
certificate or such warrant for its own account and not with a view to, or
for
resale in connection with, any distribution thereof.
9.2. Transferability
of Options.
This
Option shall be transferable only on the books of the Company maintained at
the
principal office of the Company. The transferability of the Option is limited
to
the Holder's estate or family trust for which the Holder is a
trustee.
Section
10. Notice
of Certain Events.
10.1. Adjustment
of Exercise Price.
Immediately upon any adjustment of the Exercise Price, the Company will give
written notice thereof to the Holder.
10.2. Dividend
Distributions, etc.
The
Company will give written notice to the Holder at least ten calendar days prior
to the date on which the Company closes its books or takes a record (i) with
respect to any dividend or distribution upon the Common Stock, and (ii) with
respect to any pro rata subscription offer to holders of Common Stock (although
the Company shall have no obligation to cause to occur any of the events set
forth in the foregoing subparagraphs (i) or (ii)).
10.3. Other
Events.
The
Company will give written notice to the Holder at least ten (10) calendar days
prior to the date on which any dissolution, liquidation, capital reorganization,
reclassification, consolidation or merger (in which the Company is not the
surviving corporation) or sale of all or substantially all of the Company's
assets will take place.
Section
11. Company
Repurchase Rights.
(a) In
the
event a Holder ceases to be employed by the Company or its subsidiaries (the
"Termination"),
the
Earned Option granted to such Holder and the Shares of Common Stock (or other
securities received upon exercise of this Option received upon the exercise
of
Earned Options (whether held by the Holder or otherwise) shall be subject to
repurchase by the Company on or after the Holder's Termination date pursuant
to
the terms and conditions set forth in this Section 11 (the "Repurchase
Option").
The
Company shall have the right, but not the obligation, to purchase all, but
not
less than all, the Earned Option granted or issued to the Holder for the Option
Repurchase Price (as defined below) multiplied by the number of Shares of Common
Stock represented by the Option(s) to be repurchased. The Company shall
concurrently therewith also have the right, but not the obligation, to purchase
all, but not less than all, of the Conversion Shares for the Stock Repurchase
Price (as defined below) multiplied by the number of Conversion Shares to be
repurchased.
(b) When
and
as permitted under paragraph (a) above, the Company may elect to purchase all
of
the Earned Options and Conversion Shares by delivering written notice (the
"Repurchase
Notice")
to the
Holder. The Repurchase Notice will set forth the number of Options and the
Conversion Shares to be acquired from such Holder, the aggregate consideration
to be paid for such securities and the time and place for the closing of the
transaction.
(c) The
closing of the purchase of the Options and Conversion Shares pursuant to the
Repurchase Option shall take place on the date designated by the Company in
the
Repurchase Notice, which date shall not be more than forty-five (45) days nor
less than two (2) business days after the delivery of the Repurchase Notice.
The
Company will pay for the Earned Option and Conversion Shares to be purchased
pursuant to the Repurchase Option by delivery of (i) a check or wire transfer
of
funds, (ii) a subordinated promissory note payable prior to the six (6) month
anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate of interest as announced
by Citibank, N.A. plus 1% or (iii) both (i) and (ii), in the aggregate amount
of
the Option Repurchase Price and/or Stock Repurchase Price for such Earned Option
or Conversion Shares. Any promissory note issued by the Company pursuant to
this
Section 11(c) shall be subject to any restrictive covenants under any credit
agreements to which the Company is subject at the time of such purchase. The
Company will be entitled to receive customary representations and warranties
as
to title from the sellers regarding such sale and to require all sellers'
signatures be guaranteed. The Company may elect to assign its right to purchase
hereunder to the shareholders of the Company (which right to purchase shall
be
distributed pro rata
to all
shareholders (other than the Holder), based upon the number of votes held by
such shareholders). The other shareholders (other than the Holder) shall have
the same rights and shall be subject to the same obligations as the Company
to
purchase the Earned Option or the Conversion Shares pursuant to the Repurchase
Notice.
(d) The
Option Repurchase Price and the Stock Repurchase Price shall be equal to the
fair market value of the Earned Options or Conversion Shares, as the case may
be, as determined by the Company’s Board of Directors in its sole and absolute
discretion.
Section
12. Supplements
and Amendments.
The
Board of Directors of Company may from time to time supplement or amend this
Option in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with the Company's
policies or operations.
Section
13. Notices.
Except
as otherwise expressly provided herein, all notices referred to in this Option
will be in writing and will be delivered personally, mailed by registered or
certified first class mail, return receipt requested, postage prepaid or
transmitted by telegram, telecopy or telex, and will be deemed to have been
given when so delivered, mailed or transmitted (a) to the Company, at its
principal executive offices and (b) to the Holder of this Option, at such
Holder's address as it appears in the records of the Company.
Section
14. Other.
The
Holder hereof may be treated by the Company and all other persons dealing with
this Option as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented hereby, or to the transfer hereof
on
the books of the Company any notice to the contrary notwithstanding, and until
such transfer on such books, the Company may treat the Holder hereof as the
owner for all purposes.
Section
15. Law
Governing.
This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of New York.
Section
16. Interpretation.
The
Holder accepts this Option subject to all the terms and provisions of the Plan
and this Agreement. The undersigned Holder hereby accepts as binding, conclusive
and final all decisions or interpretations of the Company’s Board of Directors
upon any questions arising under the Plan and this Agreement.
*
* *
*
IN
WITNESS WHEREOF, the Company has caused this Option to be signed and attested
by
its duly authorized officers under its corporate seal and to be dated the Date
of Issuance hereof.
EXHIBIT
I
COMMON
STOCK OPTION
EXERCISE
AGREEMENT
|
TO:
_____________________________
|
DATED:
_______________
|
The
undersigned, pursuant to the provisions set forth in the attached Option
(Certificate No. __________), hereby agrees to subscribe for the purchase of
________ shares of the Common Stock covered by such Option and makes payment
herewith in full therefor at the price per share provided by such
Option.
| By: | ||
|
Name:
|
|
|
|
Address:
|
|
|
|
|
||
|
|
||
Witness:
_______________________________
Name:
_______________________________
Address:
_______________________________
_______________________________
EXHIBIT
C
ESCROW
AGREEMENT
THIS
ESCROW AGREEMENT (this “Agreement”)
is
made as of January 1, 2008, by and among (i) Expert Security Services, Inc.,
a
Maryland corporation (the “Seller”),
(ii)
Command Security Corporation, a New York corporation (“Purchaser”)
and
(iii) Deutsche Bank, as Escrow Agent (the “Escrow
Agent”).
Capitalized terms used but not defined herein shall have the meaning given
to
such terms in the Purchase Agreement (as defined below).
WHEREAS,
Purchaser, Seller and the shareholders of Seller (each, a “Stockholder”
and
collectively, the “Stockholders”)
are
parties to that certain Asset Purchase Agreement (the “Purchase
Agreement”),
dated
as of January 1, 2008, pursuant to which, among other things, Purchaser will
purchase from Seller the Acquired Assets;
WHEREAS,
the
Purchase Agreement provides, among other things, that certain funds shall be
delivered by Purchaser to be held in escrow subject to the terms and conditions
of this Agreement; and
WHEREAS,
the
Escrow Agent is willing to maintain the assets held in escrow and distribute
them to the parties in accordance with the terms hereof;
NOW,
THEREFORE,
in
consideration of the mutual covenants of the parties as hereinafter set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Receipt
of Escrow Deposit.
Pursuant to Section
2.05
of the
Purchase Agreement, at the Closing Purchaser shall deliver to the Escrow Agent
by wire transfer of immediately available funds an aggregate sum of $81,970
(the
“Escrow
Amount”).
The
Escrow Amount, together with all gains, interest and other earnings realized
with respect thereto (“Escrow
Income”),
and
as subsequently adjusted as provided herein, shall be referred to herein as
the
“Escrow
Account.”
The
Escrow Agent agrees to hold the Escrow Account, in a separate and distinct
custodial arrangement, for the benefit of Purchaser and Seller in accordance
with the terms and conditions of this Agreement. The Escrow Account shall be
maintained by the Escrow Agent as part of a single investment account. The
Escrow Agent shall not distribute or release all or any portion of the Escrow
Account, except in accordance with the express terms and conditions of this
Agreement.
2. Permitted
Investments.
(a) In
accordance with the written instructions of Purchaser, the Escrow Agent shall
invest the Escrow Amount in investments that shall be limited to: (i) treasury
bills, treasury notes or any other direct obligations issued by or guaranteed
in
full as to principal and interest by the United States of America, (ii) accounts
of, and certificates of deposit issued by, the Escrow Agent (or any of its
Affiliates) or any other commercial bank having capital, surplus and undivided
profits of not less than $100,000,000.00 and having a rating of Baa-2 or better
by ▇▇▇▇▇’▇, or the equivalent, (iii) commercial paper rated no lower than “P-1”
by ▇▇▇▇▇’▇, or the equivalent, (iv) money market accounts and money market
mutual funds whose investments are substantially as described in clauses (i)
through (iii), and (v) such other investments as may be set forth in any written
agreement of Purchaser and Seller (the “Permitted
Investments”).
In
the event that the Escrow Agent does not receive written direction to invest
funds held in the Escrow Account, the Escrow Agent shall invest and reinvest
such funds in a money market deposit account offered by the Escrow Agent in
connection with its escrow-related services generally. None of the parties
hereto shall be liable or responsible in any manner for any loss or depreciation
resulting from any such Permitted Investment or any liquidation thereof, or
for
any costs in connection therewith, and all of said losses and costs shall be
borne by the Escrow Account.
1
(b) The
parties recognize and agree that the Escrow Agent will not provide supervision,
recommendations or advice relating to either the investment of moneys held
in
the Escrow Account or the purchase, sale, retention or other disposition of
any
Permitted Investment.
(c) Interest
and other earnings on Permitted Investments shall be added to the Escrow
Account. Any loss or expense incurred as a result of an investment will be
borne
by the Escrow Account.
(d) The
Escrow Agent is hereby authorized to execute purchases and sales of Permitted
Investments through the facilities of its own trading or capital markets
operations or those of any affiliated entity. The Escrow Agent shall send
statements to Purchaser and Seller on a monthly basis reflecting activity in
the
Escrow Account for the preceding month. Although Purchaser and Seller each
recognize that it may obtain a broker confirmation or written statement
containing comparable information at no additional cost, Purchaser and Seller
hereby agree that confirmations of Permitted Investments are not required to
be
issued by the Escrow Agent for each month in which a monthly statement is
rendered. No statement need be rendered for the Escrow Account if no activity
occurred for such month.
(e) Purchaser
and Seller each acknowledge and agree that the delivery of the escrowed property
is subject to the sale and final settlement of Permitted Investments. Proceeds
of a sale of Permitted Investments will be delivered on the business day on
which the appropriate instructions are delivered to the Escrow Agent if received
prior to the deadline for same day sale of such Permitted Investments. If such
instructions are received after the applicable deadline, proceeds will be
delivered on the next succeeding business day.
2
3. Claims
and Escrow Account.
The
purpose of the escrow established hereunder is to provide a source of funds
for
the payment of certain amounts to which (i) Purchaser may become entitled under
Article
VII
of the
Purchase Agreement, and (ii) Purchaser or Seller may become entitled under
Section
2.07
of the
Purchase Agreement. The procedures for payments to be made pursuant to such
sections of the Purchase Agreement are set forth in Section 4
below.
4. Payments
from the Escrow Account.
(a) If,
from
time to time, (i) Purchaser determines that it is entitled to payment pursuant
to Section
7.03(a) or Section 7.04
of the
Purchase Agreement (an “Indemnity
Claim”),
Purchaser may request payment from the Escrow Account by giving written notice
to the Escrow Agent and Seller (in each case in accordance with the provisions
of Section
8
below)
of such Indemnity Claim (any written notice of an Indemnity Claim being referred
to as an “Indemnity
Claim Notice”).
Each
Indemnity Claim Notice shall clearly state that a Purchaser Indemnified Party
has paid or incurred Losses for which such Person is entitled to indemnification
under the Purchase Agreement. The Indemnity Claim Notice shall state the method
of computation of such Indemnity Claim and the amount thereof, if ascertainable,
shall specify in reasonable detail each individual item of Loss included in
such
amount, the date such item was paid or incurred, and the basis for any
anticipated liability, and shall refer to the provisions of the Purchase
Agreement in respect of which such Indemnity Claim shall have occurred. It
is
understood by the parties hereto that the Escrow Agent shall have no duty or
obligation to verify or otherwise determine Purchaser’s rights under the
Purchase Agreement.
(b) If,
from
time to time, (i) Seller determines that it is entitled to payment pursuant
to
Section
2.07(a), Section 2.07(b)(i)(A) or Section 2.07(b)(i)(C)
of the
Purchase Agreement or (ii) Purchaser determines that it is entitled to payment
pursuant to Section
2.07(b)(i)(B), Section 2.07(b)(i)(D) or Section 2.07(b)(i)(E)
(such
claims are referred to herein individually as a “Section
2.07 Claim”),
Seller or Purchaser, as the case may be, may request payment from the Escrow
Account by giving written notice to the Escrow Agent and the other party (in
each case in accordance with the provisions of Section
8
below)
of such Section 2.07 Claim (any written notice of a Section 2.07 Claim being
referred to as an “Section
2.07 Claim Notice”).
Each
Section 2.07 Claim Notice shall (i) clearly state (A) the method of computation
of such Section 2.07 Claim, (B) the amount thereof and (C) the basis for the
determination of the Seller or the Purchaser, as the case may be, and (ii)
shall
either be (A) signed by both Seller and Purchaser or (B) if not signed by both
Seller and Purchaser, contain a statement of the Neutral Auditors that supports
the determination of the Seller or the Purchaser, as the case may be. It is
understood by the parties hereto that the Escrow Agent shall have no duty or
obligation to verify or otherwise determine Seller’s or Purchaser’s rights under
the Purchase Agreement.
3
(c) Seller
shall have the right to dispute any Indemnity Claim against the Escrow Account,
and each of Seller and Purchaser shall have the right to dispute any Section
2.07 Claim against the Escrow Account during the forty-five (45) calendar day
period following the date of its receipt of a copy of a Claim Notice (the
“Objection
Period”)
by
delivering to the Escrow Agent and Purchaser written notice (an “Objection
Notice”)
that
Seller disputes the matter(s) set forth in such Indemnity Claim Notice or
Section 2.07 Claim Notice, as the case may be, either with respect to the
validity or the amount of the Indemnity Claim or the Section 2.07 Claim, as
the
case may be (or both). The Objection Notice shall include the basis, with
reasonable detail, of the objection.
(d) If
on or
prior to the last day of the Objection Period, the Escrow Agent has not received
an Objection Notice (i) from Seller with respect to an Indemnity Claim made
by
Purchaser, or (ii) from either Seller or Purchaser, as the case may be, with
respect to a Section 2.07 Claim made by the other party, the Indemnity Claim
stated in the related Indemnity Claim Notice or the Section 2.07 Claim specified
in the related Section 2.07 Claim Notice shall be conclusively deemed to be
approved by Seller and the Purchaser and the Escrow Agent shall on the next
banking day thereafter pay to Purchaser, or its designee, or the Seller, or
its
designee, as the case may be, from the Escrow Amount the amount specified in
such Indemnity Claim Notice or Section 2.07 Claim Notice, as the case may
be.
(e) If
on or
prior to the last day of the Objection Period, the Escrow Agent shall have
received (i) from Seller an Objection Notice with respect to an Indemnity Claim
or portion of an Indemnity Claim made by Purchaser, or (ii) from Seller or
Purchaser, as the case may be, an Objection Notice with respect to a Section
2.07 Claim or portion of a Section 2.07 Claim made by Seller or Purchaser,
as
the case may be, then such Indemnity Claim or Section 2.07 Claim (or disputed
portion thereof) shall be deemed to be an “Open
Claim”,
and
the Escrow Agent shall reserve within the Escrow Amount an amount equal to
the
amount of the Open Claim (which amount for each Open Claim is referred to herein
as a “Claim
Reserve”).
The
Escrow Agent shall on the next banking day after receiving an Objection Notice
pay to Purchaser, or its designee, or the Seller, or its designee, from the
Escrow Amount the amount of the undisputed portion, if any, of such Indemnity
Claim or Section 2.07 Claim, as the case may be.
4
(f) The
amount constituting the Claim Reserve for each Open Claim shall be paid by
the
Escrow Agent from the Escrow Account only in accordance with (i) a joint written
instruction executed and delivered by Purchaser and Seller directing delivery
of
the Escrow Account or any portion thereof (a “Joint
Instruction”)
or
(ii) a final non-appealable order of a court of competent jurisdiction or a
ruling by an arbitrator, in either case directing delivery of the Claim Reserve
or any portion thereof (each a “Final
Determination”),
together with an opinion of counsel to the effect that such order is final
and
non-appealable and from a court of competent jurisdiction or that such
arbitration ruling is final and non-appealable.
(g) On
the
earlier of such date as (i) Purchaser and Seller deliver a joint written notice
to the Escrow Agent authorizing the immediate termination of the Escrow Account,
and (ii) the date of the 18th
month
anniversary of the date hereof (the “Indemnification
Escrow Amount Termination Date”),
the
Escrow Agent shall release from the Escrow Account and deliver to the Seller
an
amount equal to the Escrow Amount together with any interest earned thereon,
minus the amount of (i) any Indemnity Claim or Claims that have been set forth
in an Indemnification Notice pursuant to Article
VII
of the
Purchase Agreement and Section
4(a)
hereof
and (ii) any distributions of the Escrow Fund in accordance with Section 2.07
of
the Purchase Agreement and Section
4(b)
hereof
(whether or not such Indemnity Claim(s) or Section 2.07 Claim(s) have been
determined to be valid as of such date (the portion of the Escrow Amount that
has not been released to the Seller is referred to as the “Escrow
Balance”),
and
the Escrow Balance shall be retained in escrow pending Adjudication of such
Claim(s)in accordance with Section 2.08 of the Purchase Agreement and
Section
4(e)
hereof.
(h) Any
amounts to be distributed by the Escrow Agent to either Purchaser or Seller
shall be distributed by wire transfer of immediately available funds to accounts
designated by the recipients. From time to time, the Escrow Agent may receive
written instructions from Purchaser and Seller regarding the disposition of
all
or a portion of the Specific Indemnity Escrow Amount. Once the entire balance
of
the Specific Indemnity Escrow Amount has been distributed, it shall be
terminated.
5. Duties
of Escrow Agent.
(a) The
Escrow Agent shall not be under any duty to give the Escrow Account held by
it
hereunder any greater degree of care than it gives other similar escrow property
and shall not be required to invest any funds held hereunder except as directed
in this Agreement. Un-invested funds held hereunder shall not earn or accrue
interest.
5
(b) The
Escrow Agent shall not be liable, except for its own gross negligence or willful
misconduct and, except with respect to claims based upon such gross negligence
or willful misconduct that are successfully asserted against the Escrow Agent,
the other parties hereto shall jointly and severally indemnify and hold harmless
the Escrow Agent (and any successor Escrow Agent) from and against any and
all
losses, liabilities, claims, actions, damages and expenses, including reasonable
attorneys’ fees and disbursements, arising out of and in connection with this
Agreement. Without limiting the foregoing, the Escrow Agent shall in no event
be
liable in connection with its investment or reinvestment of any cash held by
it
hereunder in good faith in accordance with the terms hereof, including, without
limitation, any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrow Account, or any loss of interest incident to any such delays. The
obligations of the other parties hereto to the Escrow Agent under this paragraph
shall survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.
(c) The
Escrow Agent shall be entitled to rely upon any order, judgment, certification,
demand, notice, instrument or other writing from any court or other governmental
authority delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety
or
validity of the service thereof, notwithstanding that such judgment or order
may
subsequently be reversed, modified, annulled, set aside or vacated. The Escrow
Agent shall have no responsibility to inquire into or determine the genuineness,
authenticity, or sufficiency of any securities, checks, or other documents
or
instruments submitted to it in connection with its duties hereunder. The Escrow
Agent shall also be entitled to deem the signatories of any documents or
instruments submitted to it hereunder as being those purported to be authorized
to sign such documents or instruments on behalf of the parties hereto, and
shall
be entitled to rely upon the genuineness of the signatures of such signatories
without inquiry and without requiring substantiating evidence of any
kind.
(d) The
Escrow Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Agreement and shall not be liable for any action taken
or omitted by it in good faith in accordance with such advice. If the Escrow
Agent becomes involved in litigation on account of this Agreement, it shall
have
the right to retain counsel and shall have a first lien on the property
deposited hereunder for any and all costs, attorneys’ fees, charges,
disbursements, and expenses in connection with such litigation; and shall be
entitled to reimburse itself therefor out of the property deposited hereunder,
and if it shall be unable to reimburse itself from the property deposited
hereunder, the other parties hereto jointly and severally agree to pay to the
Escrow Agent on demand its reasonable charges, reasonable attorneys’ fees,
disbursements, and out-of-pocket expenses in connection with such
litigation.
6
(e) The
Escrow Agent does not have any interest in the Escrow Account deposited
hereunder, except as otherwise provided in Sections
5(d)
and
5(j)
hereof,
but is serving as escrow holder only and having only possession thereof. Any
payments of income from the Escrow Account shall be subject to withholding
regulations then in force with respect to United States taxes. The parties
hereto will provide Escrow Agent with appropriate Internal Revenue Service
Forms
W-9 for tax identification number certification, or non-resident alien
certifications. This Section
5(e)
and
Section
5(b)
shall
survive notwithstanding any termination of this Agreement or the resignation
or
removal of the Escrow Agent.
(f) The
Escrow Agent makes no representation as to the validity, value, genuineness
or
the collectibility of any security or other document or instrument held by
or
delivered to it.
(g) The
Escrow Agent shall not be called upon to advise any party as to the wisdom
in
selling or retaining or taking or refraining from any action with respect to
any
securities or other property deposited hereunder.
(h) The
Escrow Agent (and any successor Escrow Agent) may at any time resign as such
by
delivering the Escrow Account to any successor Escrow Agent jointly designated
by the other parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of and from any
and
all further obligations arising in connection with this Agreement. The
resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent jurisdiction) or
(ii)
the day which is thirty (30) calendar days after the date of delivery of its
written notice of resignation to the other parties hereto. If at that time
the
Escrow Agent has not received a designation of a successor Escrow Agent, the
Escrow Agent’s sole responsibility after that time shall be to retain and
safeguard the Escrow Account until receipt of a designation of a successor
Escrow Agent or a Joint Instruction or Final Determination.
(i) In
the
event of any disagreement between the other parties hereto resulting in adverse
claims or demands being made in connection with the Escrow Account or in the
event that the Escrow Agent is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the Escrow Account
until
the Escrow Agent shall have received (i) a Final Determination or (ii) a Joint
Instruction, in which event the Escrow Agent shall disburse the Escrow Account
in accordance with such Final Determination or Joint Instruction. The Escrow
Agent shall act on such Final Determination or Joint Instruction without further
question.
7
(j) In
the
event that any escrow property shall be attached, garnished, or levied upon
by
any court order, or the delivery thereof shall be stayed or enjoined by an
order
of a court, or any order, judgment or decree shall be made or entered by any
court order affecting the property deposited under this Agreement, or any part
thereof, the Escrow Agent is hereby expressly authorized, in its sole
discretion, to obey and comply with all writs, orders or decrees so entered
or
issued, which it is advised by legal counsel of its own choosing is binding
upon
it, whether with or without jurisdiction, and in the event that the Escrow
Agent
obeys or complies with any such writ, order or decree it shall not be liable
to
any of the parties hereto or to any other person, firm or corporation, by reason
of such compliance notwithstanding such writ, order or decree be subsequently
reversed, modified annulled, set aside or vacated.
(k) Any
corporation or association into which the Escrow Agent may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer its corporate trust business and assets as a whole or in part, or
any
corporation or association resulting from any such conversion, sale, merger,
consolidation or transfer to which it is a party, shall be and become the
successor Escrow Agent hereunder and vested with all of the title to the whole
property or trust estate and all of the trusts, powers, immunities, privileges,
protections and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary
notwithstanding.
6. Limited
Responsibility.
This
Agreement expressly sets forth all the duties of the Escrow Agent with respect
to any and all matters pertinent hereto. No implied duties or obligations shall
be read into this agreement against the Escrow Agent. The Escrow Agent shall
not
be bound by the provisions of any agreement among the other parties hereto
except this Agreement.
7. Taxes;
Escrow Income.
(a) Purchaser
and Seller hereby acknowledge that, for federal and state income tax purposes,
all Escrow Income shall be deemed income of Seller. The Escrow Agent shall
be
entitled to request and receive appropriate forms executed by Seller with
respect to the Escrow Income. The Escrow Agent shall be responsible for
reporting any Escrow Income earned to the Internal Revenue Service. The Escrow
Agent shall add the Escrow Income to the Escrow Account as it accrues.
8
(b) Seller
is
required to prepare and file any and all income or other tax returns applicable
to the Escrow Account with the Internal Revenue Service and all required state
and local departments of revenue in all years income is earned in any particular
tax year as and to the extent required under the provisions of the
Code.
(c) Any
taxes
payable on income earned from the investment of any sums held in the Escrow
Account shall be paid by Seller, whether or not the income was distributed
by
the Escrow Agent during any particular year as and to the extent required under
the provisions of the Code.
(d) The
Escrow Agent shall have no responsibility for the preparation and/or filing
of
any tax or information return with respect to any transaction, whether or not
related to the Agreement that occurs outside the Escrow Account.
8. Bank
Accounts for Payment by Escrow Agent.
Any
payments by the Escrow Agent hereunder to Seller shall be made to such bank
account of which Seller shall have given written notice to the Escrow Agent
and
Purchaser. Any payments by the Escrow Agent hereunder to Purchaser shall be
made
to such bank account of which Purchaser shall have given written notice to
the
Escrow Agent and Seller.
9. Notices.
All
notices, demands and other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when personally delivered, (b) when transmitted
via telecopy (or other facsimile device) to the number set out below if the
sender on the same day sends a confirming copy of such notice by a recognized
international overnight air courier service (charges prepaid), or (c) the second
business day following the day (except if not a business day then the next
business day) on which the same has been delivered prepaid to a recognized
international overnight air courier service. Notices, demands and
communications, in each case to the respective parties, shall be sent to the
applicable address set forth below, unless another address has been previously
specified in writing:
If
to the
Seller, to:
Expert
Security Services, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
9
with
a copy to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇, P.A.
▇▇▇
▇.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
If
to the
Purchaser, to:
Command
Security Corp.
▇.▇.
▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, President
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇ ▇ ▇▇
Email:
▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
with
a copy to:
▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇▇▇▇▇@▇▇.▇▇▇
or,
in
each case, to such other person or address as any party shall furnish to the
other parties in writing. Notice given by personal delivery or overnight courier
shall be effective upon actual receipt. Notice given by telecopy shall be
confirmed by appropriate answer back and shall be effective upon actual receipt
if received during the recipient’s normal business hours, or at the beginning of
the recipient’s next business day if not received during the recipient’s normal
business hours.
10. Counterparts.
This
Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument.
11. Section
Headings.
The
headings and captions used in this Agreement are for convenience of reference
only and do not constitute a part of this Agreement and shall not be deemed
to
limit, characterize or in any way affect any provision of this Agreement, and
all provisions of this Agreement shall be enforced and construed as if no
caption or heading had been used herein or therein.
10
12. Banking
Days.
If any
date on which the Escrow Agent is required to make an investment or a delivery
pursuant to the provisions hereof is not a banking day, then the Escrow Agent
shall make such investment or delivery on the next succeeding banking
day.
13. Waiver.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
14. Exclusive
Agreement and Modification.
This
Agreement and the Purchase Agreement contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written
or
oral, relating to such subject matter in any way. The Escrow Agent shall have
only those duties as are specifically provided herein, which shall be deemed
purely ministerial in nature, and shall under no circumstance be deemed a
fiduciary for any of the parties to this Agreement. The Escrow Agent shall
neither be responsible for, nor chargeable with, knowledge of the terms and
conditions of any other agreement, instrument or document between the other
parties hereto, in connection herewith, including without limitation the
Purchase Agreement. This Agreement sets forth all matters pertinent to the
escrow contemplated hereunder, and no additional obligations of the Escrow
Agent
shall be inferred from the terms of this Agreement or any other Agreement.
IN NO
EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (i)
DAMAGES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN
DAMAGES WHICH RESULT FROM THE ESCROW AGENT’S FAILURE TO ACT IN ACCORDANCE WITH
THE STANDARDS SET FORTH IN THIS AGREEMENT, OR (ii) SPECIAL OR CONSEQUENTIAL
DAMAGES, EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
11
15. Assigns
and Assignment.
Neither
this Agreement nor any of the rights or obligations hereunder shall be assigned
by any of the parties hereto without the prior written consent of each of the
other parties, which consent shall not be unreasonably withheld, conditioned
or
delayed; provided that Purchaser shall have the right to assign all or certain
provisions of this Agreement, or any interest herein, and may delegate any
duty
or obligation hereunder, without the consent of any of the other parties, to
(i)
any Affiliate of Purchaser, (ii) any purchaser of any or all of the assets
or
capital stock (whether by merger, recapitalization, reorganization or otherwise)
of Purchaser or (iii) any of Purchaser’s financing sources as collateral;
provided further, that the Escrow Agent shall have the right to assign this
Agreement to a successor Escrow Agent hereunder; and provided, further, that
Seller shall have the right to assign all or certain provisions of this
Agreement, or any interest herein, and may delegate any duty or obligation
hereunder, without the consent of any of the other parties, to any Affiliate
of
Seller or any purchaser of any or all of the assets or capital stock (whether
by
merger, recapitalization, reorganization or otherwise) of Seller. This Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective heirs, successors and permitted assigns. Any
attempted assignment in violation of the terms of this Section 15 shall be
null
and void, ab
initio.
No
assignment of the interest of any of the parties hereto shall be binding upon
the Escrow Agent unless and until written evidence of such assignment in form
satisfactory to the Escrow Agent shall be filed with and acknowledged by the
Escrow Agent.
16. Governing
Law.
All
issues and questions concerning the construction, validity, interpretation
and
enforceability of this Agreement and the exhibits and schedules hereto shall
be
governed by, and construed in accordance with, the laws of the State of
Delaware, without giving effect to any choice of law or conflict of law rules
or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State
of New York.
17. Execution
by the Escrow Agent.
The
execution and delivery of this Agreement by the Escrow Agent shall constitute
a
receipt for the Escrow Amount.
18. Third-Party
Beneficiaries.
The
terms and provisions of this Agreement are intended solely for the benefit
of
the parties hereto, and their respective successors and assigns, and nothing
in
this Agreement is intended or shall be construed to give any other Person any
legal or equitable right, remedy or claim under, or in respect of, this
Agreement or any provision contained herein.
*
* * *
*
12
IN
WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on
the
date first written above.
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COMMAND
SECURITY CORPORATION
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Name:
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EXPERT
SECURITY SERVICES, INC.
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Name:
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| Title: | ||
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DEUTSCHE
BANK, as Escrow Agent
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Name:
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13
EXHIBIT
D
EXPERT
SECURITY SERVICES, INC.
▇▇▇▇
OF SALE AND ASSIGNMENT
This
▇▇▇▇
OF SALE AND ASSIGNMENT (this
“▇▇▇▇
of Sale”),
dated
as of January 1, 2008, is delivered by the undersigned pursuant to the Asset
Purchase Agreement, dated as of January 1, 2008 (the “Agreement”),
among
Command Security Corporation, a New York corporation, Expert Security Services,
Inc. a Maryland corporation, and the shareholders of Expert Security Services,
Inc. All terms used, but not defined, in this ▇▇▇▇ of Sale shall have the
meanings ascribed to such terms in the Agreement.
I. Acquired
Assets
For
good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Satco does hereby sell, transfer, convey, assign and deliver
to
Satco Purchaser, free and clear of all Liens, other than Permitted Exceptions,
all of the assets, properties and right, whether real, personal, tangible or
intangible, of every kind, nature and description of the Seller with respect
to,
or used in connection with, the Business, other than the Excluded Assets,
including without limitation:
1.
all
Computer Equipment, machinery, furniture, fixtures, equipment and other tangible
personal property owned by the Seller (the “Owned
Tangible Property”),
including without limitation that listed and described on Schedule
1.02(a)
and the
Seller’s rights under all related warranties;
2.
all of
the Seller’s right, title and interest in and to the Leased Tangible Property,
including without limitation that listed and described on Schedule
1.02(b);
3.
all of
the Seller’s right, title and interest in, to and under the Contracts, including
without limitation those listed on Schedule
5.11(a);
4.
all of
the Seller’s right, title and interest in, to and under the Leases listed on
Schedule
5.11(b);
5.
all
client, customer, lead, mailing, circulation and related lists, and all other
lists, accounts, books and records of the Seller (including without limitation
those relating to (i) proprietary research and other databases, (ii) the
purchase of materials, supplies or services, and (iii) the production and sale
of products or services, including all correspondence and other files), and
all
other existing records of the Seller, and all computerized records, together
with the related documentation used in connection therewith;
6.
all
Governmental Authorizations, including without limitation those listed and
described on Schedule
5.24;
7.
any
sales, excise or other licenses or registrations issued to or held by the Seller
necessary for the operation of the Business, all of which are listed on
Schedule
1.02(i);
and
all
goodwill of the Seller specific to the Business.
1
provided,
however,
that in
no event shall any Excluded Asset be an Acquired Asset.
TO
HAVE
AND TO HOLD said properties, rights, assets, business and goodwill, as a going
concern, unto the Purchaser, its successors and assigns, to and for its use
forever.
AND,
Seller does hereby warrant, covenant and agree that it:
(a) has
good
and marketable title to the Acquired Assets hereby sold, transferred, conveyed,
assigned and delivered, subject only to Permitted Encumbrances; and
(b) will
warrant and defend the sale of said properties, rights and assets against all
and every Person or Persons whomsoever claiming or to claim against any or
all
of the same, subject to the terms and provisions of the Agreement.
II. Excluded
Assets
Notwithstanding
anything to the contrary contained herein, the following properties, assets
and
contracts of Satco (collectively, the “Excluded
Assets”)
are
not part of the sale and purchase contemplated by this ▇▇▇▇ of Sale, are
excluded from the Acquired Assets and shall remain the properties and assets
of
Seller after the Closing:
1.
all
cash on hand and in banks and other cash items and equivalents of the
Seller;
2.
the
Seller’s corporate charters, qualifications to conduct business as a foreign
corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, corporate
minute books, and other books and records relating to internal corporate matters
and any other books and records of the Seller (i) not related to the Business
(which shall not include financial and taxation books and records of the Seller
related to the Business), (ii) relating to financial relationships with the
Seller’s lenders or Affiliates, or (iii) that the Seller is required by law to
retain;
3.
all
employee benefit plans, programs and arrangements, and all assets, rights and
claims thereunder, and other commitments of the Seller relating to employees,
whether written or oral, express or implied including, without limitation,
the
Benefit Plans;
4.
any
claims, rights and interest in and to any refunds of federal or local franchise,
income or other Taxes or fees of any nature whatsoever which relate solely
to
the period up to and including the Closing Date;
5.
all
capital stock of the Seller;
6.
that
certain 1999 Toyota model RAV 4 heretofore used by Seller in the
Business;
7.
all
claims of the Seller against third Persons relating to the Excluded Assets,
whether ▇▇▇▇▇▇ or inchoate, known or unknown, contingent or non-contingent,
or
otherwise arising from or relating to periods prior to the Closing Date;
and
2
8.
all
rights of the Seller under this Agreement or any Related Document;
9.
all
insurance policies relating to the Business;
10.
all
prepaid expenses and deposits of the Seller with third parties in respect of
the
Business;
11.
all
claims of the Seller, including but not limited to claims under the Seller’s
insurance policies, causes of action and choses in action; and
12.
all
Accounts Receivable.
This
▇▇▇▇
of Sale shall be binding upon Seller and its successors and permitted assigns
pursuant to the Agreement, and shall inure to the benefit of and be enforceable
by Purchaser and its successors and permitted assigns pursuant to the
Agreement.
This
▇▇▇▇
of Sale shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles.
From
time
to time following the date hereof, at the request of Purchaser, Seller shall
and
shall cause its Affiliates, directors, officers, employees, agents and
representatives to execute, deliver, file and record any and all agreements,
instruments, certificates or other documents and take such other actions as
may
be reasonably necessary to consummate or implement the transactions contemplated
by this ▇▇▇▇ of Sale.
3
IN
WITNESS WHEREOF,
Seller
has caused this ▇▇▇▇ of Sale to be executed and delivered by its duly authorized
representative as of the date first above written.
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EXPERT
SECURITY SERVICES, INC.
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| By: | ||
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Name:
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| Title: | ||
4