ASSET PURCHASE AGREEMENT BY AND AMONG SENTINEL OPERATING, L.P. TIDEL TECHNOLOGIES, INC. AND TIDEL ENGINEERING, L.P. DATED AS OF JANUARY 12, 2006
Exhibit
10.1
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BY
AND AMONG
SENTINEL
OPERATING, L.P.
TIDEL
TECHNOLOGIES, INC.
AND
TIDEL
ENGINEERING, L.P.
DATED
AS OF JANUARY 12, 2006
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§1.
Definitions.
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4
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§2.
Basic Transaction.
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12
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(a)
Purchase and Sale of Assets.
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12
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(b)
Assumption of Liabilities.
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12
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(c)
Purchase Price.
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12
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(d)
Closing.
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12
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(e)
Deliveries at Closing.
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12
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(f)
Preparation of Final December Balance Sheet.
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12
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(g)
Pre-Closing Cash Adjustment.
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13
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(h)
Post-Closing Cash Adjustment.
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14
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(i)
Purchase Price Allocation.
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15
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§3.
Sellers’ Representations and Warranties.
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16
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(a)
Organization.
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16
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(b)
Authorization of Transaction.
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16
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(c)
Non-contravention.
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17
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(d)
Brokers’ Fees and Fairness Opinion.
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17
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(e)
Title to Assets.
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17
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(f)
Subsidiaries.
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17
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(g)
SEC Filings and Financial Statements.
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18
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(h)
Events Subsequent to Most Recent Balance Sheet.
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19
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(i)
Undisclosed Liabilities.
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20
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(j)
Legal Compliance.
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21
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(k)
Tax Matters.
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21
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(l)
Real Property.
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22
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(m)
Intellectual Property.
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24
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(n)
Tangible Assets.
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26
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(o)
Inventory.
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26
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(p)
Contracts.
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26
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(q)
Notes and Accounts Receivable.
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27
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(r)
Powers of Attorney.
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28
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(s)
Insurance.
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28
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(t)
Litigation.
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28
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(u)
Product Warranty.
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28
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(v)
Product Liability.
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28
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(w)
Employees.
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29
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(x)
Employee Benefit Plans.
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29
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(y)
Guaranties.
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31
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(z)
Environmental, Health, and Safety Matters.
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31
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(aa)
Certain Business Relationships.
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32
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(bb)
Customers and Suppliers.
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32
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§4.
Buyer’s Representations and Warranties.
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32
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(a)
Organization of Buyer.
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32
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(b)
Authorization of Transaction.
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33
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(c)
Non-contravention.
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33
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(d)
Brokers’ Fees.
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33
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§5.
Pre-Closing Covenants.
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33
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(a)
General.
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33
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(b)
Notices and Consents.
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33
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(c)
Operation of Business.
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34
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(d)
Preservation of Business.
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34
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(e)
Full Access.
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34
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(f)
Notice of Developments.
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34
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(g)
Exclusivity.
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34
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(h)
Maintenance of Acquired Assets.
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35
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(i)
Parent Stockholders Meeting
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36
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(j)
Name Change.
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36
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(k)
Perfection of Ownership of Intellectual Property.
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37
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(l)
Maintenance of Leased Real Property.
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37
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(m)
Leases.
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37
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(n)
Claim.
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37
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§6.
Post-Closing Covenants.
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37
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(a)
General.
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37
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(b)
Litigation Support.
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37
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(c)
Transition.
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38
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(d)
Confidentiality.
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38
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(e)
Covenant Not to Compete or Solicit.
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38
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(f)
Defense of CSS Claim.
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39
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(g)
Indemnification.
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39
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(h)
Directors’ and Officers’ Insurance.
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40
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(i)
Employee Non-competition and Confidentiality Agreements.
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40
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§7.
Conditions to Obligation to Close.
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40
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(a)
Conditions to Buyer’s Obligation.
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40
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(b)
Conditions to Sellers’ Obligation.
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42
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§8.
Survival and Termination.
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43
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(a)
Survival of Representations and Warranties.
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43
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(b)
Termination of Agreement.
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43
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(c)
Effect of Termination.
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44
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§9.
Miscellaneous.
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44
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(a)
Press Releases and Public Announcements.
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44
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(b)
No Third-Party Beneficiaries.
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44
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(c)
Entire Agreement.
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44
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(d)
Succession and Assignment.
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44
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(e)
Counterparts.
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45
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(f)
Headings.
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45
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(g)
Notices.
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45
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(h)
Governing Law.
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46
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(i)
Amendments and Waivers.
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46
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(j)
Severability.
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46
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(k)
Expenses.
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46
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(l)
Construction.
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47
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(m)
Incorporation of Exhibits and Schedules.
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47
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(n)
Specific Performance.
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47
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(o)
Submission to Jurisdiction.
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48
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(p)
Tax Matters.
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48
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(q)
Tax Disclosure Authorization.
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48
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Exhibit
A—Forms of Assignments
Exhibit
B—Form of Opinion of Sellers’ Counsel
Disclosure
Schedule—Exceptions to Sellers’ Representations and Warranties
3
This
Asset Purchase Agreement (this “Agreement”)
is
entered into as of January 12, 2006, by and among Sentinel Operating, L.P.,
a
Texas limited partnership (“Buyer”),
Tidel
Technologies, Inc., a Delaware corporation (“Parent”),
and
Tidel Engineering, L.P., a Delaware limited partnership (“Target”,
and
collectively with Parent, “Sellers”,
and
individually, a “Seller”).
Buyer, Parent and Target are referred to collectively herein as the
“Parties”
and
individually as a “Party”.
This
Agreement contemplates a transaction in which Buyer will purchase all of the
Acquired Assets (and assume only the Assumed Liabilities) of Division in
consideration for the Purchase Price.
Now,
therefore, in consideration of the premises and the mutual promises herein
made,
and in consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows:
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§1.
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Definitions.
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“Acquired
Assets”
means
all right, title, and interest in and to all of the assets constituting
Division, including
all of
the assets of Target and Division’s (a) tangible personal property including,
but not limited to, computers, servers, office equipment, machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles, trucks, tractors,
trailers, tools, jigs, and dies, (b) Intellectual Property (including all rights
of Sellers to the names “Tidel” and “Sentinel”), goodwill associated therewith,
trademarks, service marks and all other marks (whether registered or
unregistered), licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection of interests therein under the laws of all jurisdictions,
(c) leases, subleases, and rights thereunder, (d) agreements, contracts,
indentures, mortgages, instruments, Liens, guaranties, other similar
arrangements, and rights thereunder, (e) accounts, notes, and other receivables,
(f) securities, (g) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set-off, and rights of
recoupment (including any such item relating to the payment of Taxes), (h)
franchises, approvals, permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and governmental
agencies, (i) books, records, ledgers, files, documents, correspondence, lists,
plats, architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed
or
written materials, and (j) the Key Man Policy; provided,
however,
that
the Acquired Assets shall not include (i) the Excluded Assets, (ii) the
organizational documents and charters, qualifications to conduct business as
a
foreign entity, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating
to
the organization, maintenance, and existence of Sellers’ legal entities, (iii)
any of the rights of Sellers under this Agreement (or under any side agreement
between Sellers and Buyer entered into on or after the date of this Agreement),
or (iv) commercial liability insurance contracts and policies.
“Acquisition
Proposal”
means,
other than the transactions contemplated by this Agreement or the NCR Purchase
Agreement or the exercise of warrants or conversion of debt by Laurus Master
Fund, Ltd. and its Affiliates pursuant to the Voting Agreements, any offer,
proposal or inquiry relating to, or any third party indication of interest
in,
(a) any acquisition or purchase, direct or indirect, of any assets of Target
or
Division or over five percent (5%) of any class of equity or voting securities
of Parent or any equity or voting securities of any Subsidiaries of Parent
other
than AnyCard International, Inc., (b) any tender offer (including a self-tender
offer) or exchange offer that, if consummated, would result in such third
party’s beneficially owning five percent (5%) or more of any class of equity or
voting securities of Parent or any equity or voting securities of any
Subsidiaries of Parent other than AnyCard International, Inc., (c) a merger,
consolidation, share exchange, business combination, sale of substantially
all
the assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving Sellers or any Subsidiaries of Parent other than
AnyCard International, Inc., or (d) any other transaction the consummation
of
which could reasonably be expected to impede, interfere with, prevent or
materially delay the transaction contemplated hereby or that could reasonably
be
expected to dilute materially the benefits to Buyer of the transactions
contemplated hereby.
4
“Actual
Cash”
has
the
meaning set forth in §2(g)(v)(A) below
“Actual
Cash Value”
has
the
meaning set forth in §2(g)(iii)(C) below.
"Adverse
Consequences"
means
all damages, penalties, fines, costs, reasonable amounts paid in settlement,
losses, expenses, and fees, including court costs and reasonable attorneys'
fees
and expenses.
“Actual
Value”
has
the
meaning set forth in §2(f)(iii)(C) below.
“Affiliate”
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
“Affiliated
Group”
means
any affiliated group within the meaning of Code §1504(a) or any similar group
defined under a similar provision of state, local, or foreign law.
“Agreement”
has
the
meaning set forth in the preface above.
“Amendment”
has
the
meaning set forth in §5(i)(i) below.
“Asbestos
Liabilities”
means
any Liabilities arising from, relating to, or based on the presence or alleged
presence of asbestos or asbestos-containing materials in any product or item
designed, manufactured, sold, marketed, installed, stored, transported, handled,
or distributed at any time, or otherwise based on the presence or alleged
presence of asbestos or asbestos-containing materials at any property or
facility or in any structure, including without limitation, any Liabilities
arising from, relating to or based on any personal or bodily injury or
illness.
“Assumed
Liabilities”
means
any Liabilities set forth in §1of the Disclosure Schedule under the heading of
“Assumed Liabilities”; provided,
however,
that
the Assumed Liabilities shall not include (a) any Liability of Sellers for
Taxes
(with respect to Division or otherwise), (b) any Liability of Sellers for
income, transfer, sales, use, and other Taxes arising in connection with the
consummation of the transactions contemplated hereby (including any income
Taxes
arising because of Sellers transferring the Acquired Assets and Seller’s
obligations under §9(k) below with respect to Taxes), (c) any Liability of
Sellers for the unpaid Taxes of any Person under Treasury Regulation §1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee
or
successor, by contract or otherwise, (d) any obligation of Sellers to indemnify
any Person (including any of partners of Target or stockholders of Parent)
by
reason of the fact that such Person was a director, officer, employee, manager,
partner or agent of Sellers or any of their respective Subsidiaries or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification
is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant
to
any statute, charter document, bylaw, agreement, or otherwise), (e) any
Liability of Sellers for costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, (f) any Liability or
obligation of Sellers under this Agreement (or under any side agreement between
Sellers and Buyer entered into on or after the date of this Agreement), (g)
any
Liabilities for Leases, other than Liabilities for Leases specifically
identified in §1of the Disclosure Schedule, (h) other than the Termination
Payments, any Liabilities for payroll, withholdings tax, severance or any other
payments or compensation owed to employees of Sellers or any Subsidiaries of
Parent including any payments that are not deductible under Code §280G, and (i)
any Liabilities arising out of Employee Benefit Plans, Employee Pension Plans
or
Employee Welfare Benefit Plans.
5
“Basis”
means
any past or present fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction that forms or could form the basis for any specified
consequence.
“Buyer”
has
the
meaning set forth in the preface above.
“Cash
Adjustment”
has
the
meaning set forth in §2(g)(v) below
“Cash
Threshold”
means
the December Balance Sheet Cash plus $352,000.
“Closing”
has
the
meaning set forth in §2(d) below.
“Closing
Date”
has
the
meaning set forth in §2(d) below.
“COBRA”
means
the requirements of Part 6 of Subtitle B of Title I of ERISA and Code §4980B and
of any similar state law.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Confidential
Information”
means
any information concerning the business and affairs of Division that is not
already generally available to the public.
“CSS
Claim”
has
the
meaning set forth in §3(m)(ii) below.
“December
Balance Sheet Cash” means
the
amount of cash and cash equivalents set forth on the Final December Balance
Sheet.
“Disclosure
Schedule”
has
the
meaning set forth in §3 below.
“Division”
means
Sellers’ electronic cash security systems business, consisting of (a) timed
access cash controllers (b) the Sentinel products, (c) the servicing,
maintenance and repair of the timed access cash controllers or Sentinel products
and (d) all other assets and business operations associated with the
foregoing.
“Division
Subsidiary”
has
the
meaning set forth in §3(f) below.
“Draft
Allocation”
has
the
meaning set forth in §2(i)(i) below.
“Draft
Closing Balance Sheet”
has
the
meaning set forth in §2(h)(i) below.
“Draft
December Balance Sheet”
has
the
meaning set forth in §2(f)(i) below.
“Employee
Benefit Plan”
means
any “employee benefit plan” (as such term is defined in ERISA §3(3)) and any
other employee benefit plan, program or arrangement of any kind.
“Employee
Pension Benefit Plan”
has
the
meaning set forth in ERISA §3(2).
“Employee
Welfare Benefit Plan”
has
the
meaning set forth in ERISA §3(1).
6
“Employment
Agreements”
means
(a) the Employment Agreement by and between Target and ▇▇▇▇ ▇▇▇▇▇▇▇▇ dated
January 1, 2000, (b) the Employment Agreement by and between Target and ▇.
▇▇▇▇▇
▇▇▇▇▇▇▇▇ dated January 1, 2000, (c) the Employment Agreement by and between
Target and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ dated June 26, 2002, and (d) the Employment Agreement
by and between Target and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ dated January 1,
2000.
“Environmental,
Health, and Safety Requirements”
shall
mean, as amended and as now and hereafter in effect, all federal, state, local,
and foreign statutes, regulations, ordinances, and other provisions having
the
force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations, and all common law concerning
public health and safety, worker health and safety, pollution, or protection
of
the environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances, or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means
each entity that is treated as a single employer with Sellers for purposes
of
Code §414.
“Estimated
Actual Cash”
has
the
meaning set forth in §2(g)(ii) below.
“Estimated
Cash Adjustment”
has
the
meaning set forth in §2(g)(ii) below
“Estimated
February Balance Sheet”
has
the
meaning set forth in §2(g)(i) below.
“Excluded
Assets”
means
any of Sellers’ (a) cash and cash equivalents on hand or on deposit in banks,
(including, without limitation, certificates of deposit, commercial paper,
treasury bills, and money market accounts), marketable securities, or
inter-company or inter-affiliate accounts, and any similar accounts, (b) life
insurance contracts or policies (other than the Key Man Policy) and any
insurance proceeds or insurance claims made by Sellers relating to Acquired
Assets that are repaired, replaced or restored to substantially the same or
an
improved condition as compared to their respective conditions prior to the
casualty by Sellers prior to the Closing and conveyed to Buyer hereunder; (c)
promissory notes, amounts due from employees, bonds, letters of credit,
certificates of deposit, other similar items, and any cash surrender value
in
regard thereto; (d) any Employee Benefit Plan, Employee Pension Benefit Plan
and
any Employee Welfare Benefit Plan; (e) all tax returns and supporting materials,
all original financial statements and supporting materials, all books and
records that Sellers are required by law to retain, and all records relating
to
the sale of the Acquired Assets; (f) any interest in and to any refunds or
overpayments of federal, or local franchise, income, or other taxes for periods
prior to the Closing Date; (g) all claims, rights and interest in and to any
refunds of federal, state or local franchise, income or other taxes or fees
for
any period prior to the Closing Date; (h) any contract, lease, or agreement
other than the agreements set forth on §1 of the Disclosure Schedule (excluding
the Employment Agreements, which are Excluded Assets); (i) duplicate copies
of
the books and records necessary to enable Sellers to file their tax returns
and
reports; and (j) assets to be sold pursuant to the NCR Purchase
Agreement.
“Expenses”
has
the
meaning set forth in §9(k)(ii) below.
“Fiduciary”
has
the
meaning set forth in ERISA §3(21).
“Final
Allocation”
has
the
meaning set forth in §2(i)(ii) below.
7
“Final
December Balance Sheet”
has
the
meaning set forth in §2(f)(ii) below.
“Final
Closing Balance Sheet”
has
the
meaning set forth in §2(h)(ii) below.
“Financial
Statements”
has
the
meaning set forth in §3(g)(ii)(A) below.
“GAAP”
means
United States generally accepted accounting principles as in effect from time
to
time, consistently applied.
“High
Cash Value”
has
the
meaning set forth in §2(g)(iii)(B) below.
“High
Value”
has
the
meaning set forth in §2(f)(iii)(B) below.
“Improvements”
has
the
meaning set forth in §3(l)(iv) below.
“Indemnity
Period”
has
the
meaning set forth in §6(g)(i) below.
“Intellectual
Property”
means
all of the following used by, or relating to, Division in any jurisdiction
throughout the world: (a) all inventions (whether patentable or unpatentable
and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names and subdomains (including
“▇▇▇▇▇.▇▇▇”), and rights in telephone numbers, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all
mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and
business and marketing plans and proposals), (f) all computer software, firmware
and applications (including source code, executable code, data, databases,
and
related documentation), (g) all advertising and promotional materials, (h)
all
other proprietary rights, and (i) all copies and tangible embodiments thereof
(in whatever form or medium).
“Intercompany
Transfers”
means,
for purposes of calculating cash and cash equivalents, distributions of cash
and
cash equivalents to or from Target which are to or from Target’s Affiliates
during the period from January 1, 2006 through February 28, 2006.
“Key
Man Policy”
means
Sellers’ key man life insurance policy insuring the life of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇.
“Knowledge”
means
actual knowledge after reasonable investigation.
“Leased
Real Property”
means
all leasehold or subleasehold estates and other rights to use or occupy any
land, buildings, structures, improvements, fixtures, or other interest in real
property held by Division.
“Leases”
means
all leases, subleases, licenses, concessions and other agreements (written
or
oral), including all amendments, extensions, renewals, guaranties, and other
agreements with respect thereto, pursuant to which Division holds any Leased
Real Property, including the right to all security deposits and other amounts
and instruments deposited by or on behalf of Sellers
thereunder.
8
“Liability”
means
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.
“Lien”
means
any mortgage, pledge, lien, charge, conditional sales contract, interests of
third parties, attachment, hypothecation, liability, judgment, easement, other
security interest or any encumbrance of any kind.
“Low
Cash Value”
has
the
meaning set forth in §2(g)(iii)(A) below.
“Low
Value”
has
the
meaning set forth in §2(f)(iii)(A) below.
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect or change that would be (or could be reasonably expected to be)
materially adverse to the business, assets, condition (financial or otherwise),
operating results, operations, or business prospects of Sellers or Division
(regardless of whether or not such adverse effect or change can be or has been
cured at any time or whether Buyer has knowledge of such effect or change on
the
date hereof).
“Most
Recent Balance Sheet”
means
the balance sheet contained in the quarterly report filed by Parent on Form
10-Q
for the quarter ended June 30, 2005.
“Motion”
has
the
meaning set forth in §5(i)(i) below.
“Net
Working Capital”
means
(i) the current assets of Division, excluding cash and cash equivalents, as
set
forth on the Final December Balance Sheet, minus (ii) the current liabilities
of
Division, excluding accrued liabilities for Termination Payments, as set forth
on the Final December Balance Sheet, minus (iii) the aggregate amount of the
Termination Payments.
“NCR
Purchase Agreement”
means
the Asset Purchase Agreement entered into on February 19, 2005 by and among
NCR
EasyPoint LLC (f/k/a NCR Texas LLC), ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Parent and Target, as
amended.
“Non-Affiliated
Directors”
means
directors of Parent who are not Affiliates of Buyer.
“Ordinary
Course of Business”
means
the ordinary course of business of Sellers and Division consistent with past
custom and practice (including with respect to quantity and
frequency).
“Owned
Real Property”
means
all land, together with all buildings, structures, improvements and fixtures
located thereon, including all electrical, mechanical, plumbing and other
building systems, fire protection, security and surveillance systems,
telecommunications, computer wiring, and cable installations, utility
installations, water distribution systems, and landscaping, together with all
easements and other rights and interests appurtenant thereto (including air,
oil, gas, mineral, and water rights), owned by Division or Sellers.
“Parent”
has
the
meaning set forth in the preface above.
“Parent
Indemnified Parties”
has
the
meaning set forth in §6(g)(i) below.
“Parent
Payment Event”
means
(a) the termination of this Agreement pursuant to §8(b)(iv) or §8(b)(v), or (b)
Sellers consummate, publicly announce, or execute documentation providing for
any Acquisition Proposal; provided
that
such consummation, announcement or execution occurs prior to the 18 month
anniversary of the date of the termination of this Agreement pursuant to
§8(b)(ii) or §8(b)(iii)(B).
9
“Parent
Proxy Statement”
has
the
meaning set forth in §3(g)(i)(C) below.
“Parent
Stockholders Meeting”
has
the
meaning set forth in §5(i)(i) below.
“Party”
has
the
meaning set forth in the preface above.
“Patent
Agencies”
has
the
meaning set forth in §5(k) below.
“Person”
means
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity (or any
department, agency, or political subdivision thereof).
“Prohibited
Transaction”
has
the
meaning set forth in ERISA §406 and Code §4975.
“Purchase
Price”
has
the
meaning set forth in §2(f)(i) below.
“Real
Property Laws”
has
the
meaning set forth in §3(l)(vi) below.
“Real
Property Permits”
has
the
meaning set forth in §3(l)(vii) below.
“Reimbursement
Amount”
has
the
meaning set forth in §9(k)(ii) below.
“Representatives”
has
the
meaning set forth in §5(g)(i) below
“SEC”
means
the United States Securities and Exchange Commission.
“SEC
Documents”
has
the
meaning set forth in §3(g)(i)(A) below.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Stockholder
Approval”
has
the
meaning set forth in §7(a)(xvii) below.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or business entity of which (a) if a corporation,
a
majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers, or trustees thereof is at the time owned or controlled, directly
or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof or (b) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of the partnership or other similar ownership interests thereof is
at
the time owned or controlled, directly or indirectly, by that Person or one
or
more Subsidiaries of that Person or a combination thereof and for this purpose,
a Person or Persons own a majority ownership interest in such a business entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of such business entity’s gains or losses or shall be or control any
managing director or general partner of such business entity (other than a
corporation). The term “Subsidiary”
shall
include all Subsidiaries of such Subsidiary.
10
“Superior
Proposal”
means
any bona fide, unsolicited written Acquisition Proposal on terms that a majority
of the Non-Affiliated Directors determine in good faith, after considering
the
written advice of the financial advisor and outside legal counsel to Parent’s
board of directors, and taking into account all of the terms and conditions
of
the Acquisition Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation, are more favorable and provide
greater value to all of the Parent’s stockholders than as provided under this
Agreement and which is reasonably likely to be consummated on such terms and
for
which financing, to the extent required, is then fully committed.
“Target”
has
the
meaning set forth in the preface above.
“Tax”
or
“Taxes”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code §59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, whether computed on a separate or consolidated,
unitary or combined basis or in any other manner, including any interest,
penalty, or addition thereto, whether disputed or not and including any
obligation to indemnify or otherwise assume or succeed to the Tax liability
of
any other Person.
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
“Termination
Payments”
means
the payments to be made by Buyer at Closing on behalf of and as directed by
Sellers as set forth by Sellers on §1 of the Disclosure Schedule under the
heading of “Termination Payments” to be paid as consideration on behalf of and
as directed by Sellers for termination of the Employment Agreements, but shall
include only the obligation to make such payments and shall not include any
other liabilities or obligations in connection therewith, including without
limitation tax or withholding liabilities or obligations.
“Third
Party”
means
any Person as defined in §13(d) of the Securities Exchange Act, other than
Parent, Target and their respective Subsidiaries and Affiliates.
“Transaction
Agreements”
has
the
meaning set forth in §3(b) below.
“Treasury
Regulations”
means
the Treasury Regulations promulgated under the Code.
“Voting
Agreements”
means
that certain Exercise and Conversion Agreement dated as of the date of this
Agreement by and among Buyer, Sentinel Technologies, Inc., a Delaware
corporation (“Sentinel
Technologies”),
Parent, and Laurus Master Fund, Ltd, a Cayman Islands company (“Laurus”);
that
certain Voting Agreement dated as of the date of this Agreement by and among
Buyer, Sentinel Technologies, Parent, and Laurus; and that certain Voting
Agreement dated as of the date of this Agreement by and among Buyer, Sentinel
Technologies, Parent and the officers and directors of Parent.
11
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§2.
|
Basic
Transaction.
|
|
(a)
|
Purchase
and Sale of Assets.
|
On
and
subject to the terms and conditions of this Agreement, Buyer agrees to purchase
from Sellers, and Sellers agree to sell, transfer, convey, and deliver to Buyer,
all of the Acquired Assets, free and clear of all Liens, at the Closing for
the
consideration specified below in this §2.
|
(b)
|
Assumption
of Liabilities.
|
On
and
subject to the terms and conditions of this Agreement, Buyer agrees to assume
and become responsible for only the Assumed Liabilities at the Closing. Buyer
will not assume or have any responsibility, however, with respect to any
Liability of Sellers or any Subsidiaries of Parent not included within the
definition of Assumed Liabilities.
|
(c)
|
Purchase
Price.
|
At
the
Closing, Buyer agrees to pay to Sellers a purchase price for the Acquired Assets
calculated as set forth below in this §2, payable in cash by wire transfer or
delivery of other immediately available funds (the “Purchase
Price”).
The
Purchase Price shall be an amount equal to $17,500,000 (i) minus $100,000 as
consideration for Buyer’s potential liability in connection with the CSS Claim
if the CSS Claim has not been dismissed pursuant to a final non-appealable
court
order prior to the Closing, and (ii) plus or minus, as the case may be, Net
Working Capital. In addition, the Estimated Cash Adjustment shall be paid by
Buyer or Sellers, as the case may be, to Buyer or Sellers, as the case may
be,
at the Closing as set forth in Section 2(g)(ii) below.
|
(d)
|
Closing.
|
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLC, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, commencing at 9:00 a.m. local time
on the business day following the satisfaction or waiver of all conditions
to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) and the determination of the Purchase Price
pursuant to this §2 or such other date as the Parties may mutually determine
(the “Closing
Date”).
|
(e)
|
Deliveries
at Closing.
|
At
the
Closing, (i) Sellers will deliver to Buyer the various certificates,
instruments, and documents referred to in §7(a) below; (ii) Buyer will deliver
to Sellers the various certificates, instruments, and documents referred to
in
§7(b) below; (iii) Sellers will execute, acknowledge (if appropriate), and
deliver to Buyer (A) assignments (including Intellectual Property transfer
documents) in the forms attached hereto as Exhibit A and (B) such other
instruments of sale, transfer, conveyance, and assignment as Buyer and its
counsel may reasonably request; (iv) Buyer will deliver to Sellers the Purchase
Price; and (v) Buyer will make the Termination Payments.
|
(f)
|
Preparation
of Final December Balance Sheet.
|
(i)
On or before February 14, 2006, Sellers will prepare, in accordance with
GAAP, and deliver to Buyer a written draft balance sheet of Division as of
the
close of business on December 31, 2005 (“Draft
December Balance Sheet”).
12
(ii)
If Buyer has any objections to the Draft December Balance Sheet, Buyer
shall deliver a written detailed statement describing its objections to Parent
within seven (7) days after receiving the Draft December Balance Sheet. Buyer
and Parent shall use reasonable efforts to resolve any such objections
themselves. If the Parties do not obtain a final resolution within seven (7)
days after Parent has received the statement of objections, however, Buyer
and
Parent shall select an accounting firm mutually acceptable to the Parties to
resolve any remaining objections. If Buyer and Parent are unable to agree on
the
choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding their respective regular outside
accounting firms). The determination of any accounting firm so selected shall
be
set forth in writing and shall be conclusive and binding upon the Parties.
Sellers shall revise the Draft December Balance Sheet in writing as appropriate
to reflect the resolution of any objections thereto pursuant to this §2(f)(ii).
The “Final
December Balance Sheet”
shall
mean the written Draft December Balance Sheet together with any revisions
thereto pursuant to this §2(f)(ii).
(iii)
In the event the Parties submit any unresolved objections to an accounting
firm for resolution as provided in §2(f)(ii) above, Buyer and Sellers shall
share responsibility for the fees and expenses of the accounting firm as
follows:
(A)
if the accounting firm resolves all of the remaining objections in favor
of Buyer (the working capital as determined on the Final December Balance Sheet
is referred to herein as the “Low
Value”),
Sellers shall be responsible for all of the fees and expenses of the accounting
firm;
(B)
if the accounting firm resolves all of the remaining objections in favor
of Parent (the working capital as so determined on the Final December Balance
Sheet is referred to herein as the “High
Value”),
Buyer
shall be responsible for all of the fees and expenses of the accounting firm;
and
(C)
if the accounting firm resolves some of the remaining objections in favor
of Buyer and some objections in favor of Parent (the working capital as so
determined on the Final December Balance Sheet is referred to herein as the
“Actual
Value”),
Sellers shall be responsible for that fraction of the fees and expenses of
the
accounting firm equal to (x) the difference between the High Value and the
Actual Value over (y) the difference between the High Value and the Low Value,
and Buyer shall be responsible for the remainder of the fees and
expenses.
(iv)
Sellers will make the work papers and back-up materials used in preparing
the Draft December Balance Sheet available to Buyer and its accountants and
other representatives at reasonable times and upon reasonable notice at any
time
during (A) the preparation by Sellers of the Draft December Balance Sheet,
(B)
the review by Buyer of the Draft December Balance Sheet, and (C) the resolution
by the Parties of any objections thereto.
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(g)
|
Pre-Closing
Cash Adjustment.
|
(i)
On or before February 28, 2006, Sellers will prepare in good faith, in
accordance with GAAP, and deliver to Buyer a written estimated balance sheet
of
Division as of the close of business on February 28, 2006, which estimated
balance sheet shall not take into account Intercompany Transfers but shall
take
into account issued and outstanding checks of Sellers related to Division which
have yet to clear Sellers’ bank accounts (“Estimated
February Balance Sheet”).
Solely by way of example of the calculation of the Estimated February Balance
Sheet, if $1,000,000 in cash and cash equivalents is held by Target on February
28, 2006, but subsequent to December 31, 2005 and prior to March 1, 2006 (i)
Tidel shall have transferred $300,000 in cash or cash equivalents to Target,
the
cash and cash equivalents balance on the Estimated February Balance Sheet shall
be adjusted to $700,000, or (ii) Target shall have transferred $300,000 in
cash
or cash equivalents from Target to Tidel, the cash and cash equivalent balance
on the Estimated February Balance Sheet shall be adjusted to $1,300,000. Buyer
and Sellers shall in good faith mutually agree to the amount of cash and cash
equivalents set forth on the Estimated February Balance Sheet.
13
(ii)
Once the Estimated February Balance Sheet has been mutually agreed upon in
good faith by Buyer and Sellers, (A) if the amount of cash and cash equivalents
set forth on the Estimated February Balance Sheet (the “Estimated
Actual Cash”)
is
greater than the Cash Threshold, Sellers shall pay to Buyer at the Closing
the
difference between the Estimated Actual Cash and the Cash Threshold, or (B)
if
the Estimated Actual Cash is less than the Cash Threshold, Buyer shall pay
to
Sellers the difference between the Cash Threshold and the Estimated Actual
Cash
(the “Estimated
Cash Adjustment”).
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(h)
|
Post-Closing
Cash Adjustment.
|
(i)
Within thirty (30) days following the Closing Date, Sellers will prepare,
in accordance with GAAP, and deliver to Buyer a written draft balance sheet
of
Division as of the close of business on the Closing Date, which draft balance
sheet shall not take into account Intercompany Transfers but shall take into
account issued and outstanding checks of Sellers related to Division which
have
yet to clear Sellers’ bank accounts (“Draft
Closing Balance Sheet”).
(ii)
If Buyer has any objections to the amount of cash and cash equivalents set
forth on the Draft Closing Balance Sheet, Buyer shall deliver a written detailed
statement describing its objections to Parent within fifteen (15) days after
receiving the Draft Closing Balance Sheet. Buyer and Parent shall use reasonable
efforts to resolve any such objections themselves. If the Parties do not obtain
a final resolution within fifteen (15) days after Parent has received the
statement of objections, however, Buyer and Parent shall select an accounting
firm mutually acceptable to the Parties to resolve any remaining objections.
If
Buyer and Parent are unable to agree on the choice of an accounting firm, they
will select a nationally-recognized accounting firm by lot (after excluding
their respective regular outside accounting firms). The determination of any
accounting firm so selected shall be set forth in writing and shall be
conclusive and binding upon the Parties. Sellers shall revise the Draft Closing
Balance Sheet in writing as appropriate to reflect the resolution of any
objections thereto pursuant to this §2(h)(ii). The “Final
Closing Balance Sheet”
shall
mean the written Draft Closing Balance Sheet together with any revisions thereto
pursuant to this §2(h)(ii).
(iii)
In the event the Parties submit any unresolved objections to an accounting
firm for resolution as provided in §2(h)(ii) above, Buyer and Sellers shall
share responsibility for the fees and expenses of the accounting firm as
follows:
(A)
if the accounting firm resolves all of the remaining objections in favor
of Parent (the cash and cash equivalents as determined on the Final Closing
Balance Sheet is referred to herein as the “Low
Cash Value”),
Buyer
shall be responsible for all of the fees and expenses of the accounting
firm;
(B)
if the accounting firm resolves all of the remaining objections in favor
of Buyer (the cash and cash equivalents as so determined on the Final Closing
Balance Sheet is referred to herein as the “High
Cash Value”),
Sellers shall be responsible for all of the fees and expenses of the accounting
firm; and
14
(C)
if the accounting firm resolves some of the remaining objections in favor
of Buyer and some objections in favor of Parent (the cash and cash equivalents
as so determined on the Final Closing Balance Sheet is referred to herein as
the
“Actual
Cash Value”),
Buyer
shall be responsible for that fraction of the fees and expenses of the
accounting firm equal to (x) the difference between the High Cash Value and
the
Actual Cash Value over (y) the difference between the High Cash Value and the
Low Cash Value, and Sellers shall be responsible for the remainder of the fees
and expenses.
(iv)
Sellers will make the work papers and back-up materials used in preparing
the Draft Closing Balance Sheet available to Buyer and its accountants and
other
representatives at reasonable times and upon reasonable notice at any time
during (A) the preparation by Sellers of the Draft Closing Balance Sheet, (B)
the review by Buyer of the Draft Closing Balance Sheet, and (C) the resolution
by the Parties of any objections thereto.
(v)
Once the Final Closing Balance Sheet has been determined, (A) if the
amount of cash and cash equivalents set forth on the Final Closing Balance
Sheet
(the “Actual
Cash”)
is
greater than the Estimated Actual Cash, Sellers shall promptly (but in any
event
within three (3) business days) pay to Buyer the difference between the Actual
Cash and the Estimated Actual Cash, or (B) if the Actual Cash is less than
the
Estimated Actual Cash, Buyer shall promptly (but in any event within three
(3)
business days) pay to Sellers the difference between the Estimated Actual Cash
and the Actual Cash.
|
(i)
|
Purchase
Price Allocation.
|
(i)
Within 60 days after the date of determination of the Final Closing
Balance Sheet, Buyer will prepare an allocation of the Purchase Price (and
all
other capitalized costs) among the Acquired Assets in accordance with Code
§1060
and the Treasury Regulations thereunder (and any similar provision of state,
local or foreign law, as appropriate), and deliver to Parent a written draft
of
the allocation (the “Draft
Allocation”).
Sellers shall timely and properly prepare, execute, file and deliver all such
documents, forms and other information as Buyer may reasonably request to
prepare the Draft Allocation.
(ii)
If Parent has any objections to the Draft Allocation, Parent shall deliver
a written detailed statement describing its objections to Buyer within 15 days
after receiving the Draft Allocation. Buyer and Parent shall use reasonable
efforts to resolve any such objections themselves. If the Parties do not obtain
a final resolution within 30 days after Buyer has received the statement of
objections, however, Buyer and Parent shall select an accounting firm mutually
acceptable to the Parties to resolve any remaining objections. If Buyer and
Parent are unable to agree on the choice of an accounting firm, they will select
a nationally-recognized accounting firm by lot (after excluding their respective
regular outside accounting firms). The determination of any accounting firm
so
selected shall be set forth in writing and shall be conclusive and binding
upon
the Parties. Buyer shall revise the Draft Allocation in writing as appropriate
to reflect the resolution of any objections thereto pursuant to this §2(i)(ii).
The “Final
Allocation”
shall
mean the written Draft Allocation together with any revisions thereto pursuant
to this §2(i)(ii).
(iii)
In the event the Parties submit any unresolved objections to an accounting
firm for resolution as provided in §2(i)(ii) above, Buyer and Sellers shall
equally share responsibility for the fees and expenses of the accounting
firm.
15
(iv)
Buyer and Sellers and their Affiliates shall report, act, and file Tax
Returns (including, but not limited to Internal Revenue Service Form 8594)
in
all respects and for all purposes consistent with the Final Allocation. Neither
Buyer nor Sellers shall take any position (whether in audits, tax returns or
otherwise) that is inconsistent with the Final Allocation unless required to
do
so by applicable law.
|
§3.
|
Sellers’
Representations and Warranties.
|
Each
of
Sellers jointly and severally represents and warrants to Buyer that the
statements contained in this §3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this §3), except as set forth in the disclosure schedule
accompanying this Agreement (the “Disclosure
Schedule”).
The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this §3.
|
(a)
|
Organization.
|
Other
than Target, each of Parent and Parent’s Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
Delaware. Target is a limited partnership duly organized, validly existing,
and
in good standing under the laws of the State of Delaware. Sellers are duly
authorized to conduct business and are in good standing under the laws of each
jurisdiction where such qualification is required except to the extent that
any
failure to be so qualified would not result in a Material Adverse Effect.
Sellers have full power and authority and all licenses, permits, consents,
approvals and authorizations necessary to carry on the businesses in which
they
are engaged and in which they presently propose to engage and to own and use
the
properties owned and used by them, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on
Sellers. §3(a) of the Disclosure Schedule lists the directors and officers each
of Sellers. Sellers have delivered or made available to Buyer correct and
complete copies of the certificate of incorporation and bylaws of Parent and
the
certificate of limited partnership and limited partnership agreement of Target
(each as amended to date). The minute books (containing the records of meetings
or actions of the stockholders, partners, board of directors, and any
committees), the stock certificate books, the stock record books and other
records detailing the actions of each of Sellers, as applicable, are correct
and
complete. Parent is not in violation of any provision of its certificate of
incorporation or bylaws. Target is not in violation of any provision of its
certificate of limited partnership or limited partnership
agreement.
|
(b)
|
Authorization
of Transaction.
|
Parent
has full power and authority (including full corporate power and authority)
to
execute and deliver this Agreement, the Voting Agreements and all other
agreements contemplated hereunder (collectively, the “Transaction
Agreements”)
and to
perform its obligations thereunder. Other than the Voting Agreements, Target
has
full power and authority (including full limited partnership power and
authority) to execute and deliver the Transaction Agreements and to perform
its
obligations thereunder. Other than compliance with any applicable requirements
of the Securities Act or the Securities Exchange Act and as set forth on §3(b)
of the Disclosure Schedule, Sellers need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government,
governmental agency or any third party in order to enter into the Transaction
Agreements or to consummate the transactions contemplated thereunder. Tidel
Cash
Systems, Inc. and Tidel Services, Inc. have full power and authority as the
partners of Target to approve and adopt this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of the Transaction
Agreements and the consummation of the transactions contemplated thereby have
been duly authorized by all necessary action on the part of Sellers and
Subsidiaries of Parent (including, without limitation, approval of Parent’s
board of directors and the approval Tidel Cash Systems, Inc. and Tidel Services,
Inc. as the partners of Target), subject only to the approval and adoption
of
this Agreement and the transactions contemplated hereby at the Parent
Stockholders Meeting. Each of the Transaction Agreements have been, or will
be,
duly executed and delivered by each of Sellers and constitute, or will
constitute when executed and delivered, the legal, valid and binding obligation
of each of Sellers, enforceable against each of Sellers in accordance with
their
terms, except that such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors’ rights
generally, and is subject to general principles of equity. The board of
directors of Parent has (A) declared this Agreement and the transactions
contemplated hereby advisable and fair to and in the best interest of Sellers
and stockholders of Parent, (B) approved this Agreement and the other
Transaction Agreements in accordance with the law of the State of Delaware,
(C) resolved to recommend the approval of this Agreement by stockholders of
Parent and (D) directed that this Agreement be submitted to the
stockholders of Parent for approval at the Parent Stockholders
Meeting.
16
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(c)
|
Non-contravention.
|
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in §2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Sellers
are subject or any provision of the certificate of incorporation or bylaws
of
Parent or the certificate of limited partnership or the limited partnership
agreement of Target or (ii) conflict with, result in a breach of, constitute
a
default under, result in the acceleration of, create in any party the right
to
accelerate, terminate, modify, or cancel, or require any notice under any
material agreement, contract, lease, license, instrument, or other arrangement
to which either of Sellers is party or by which either of Sellers is bound
or to
which any of their respective assets is subject (or result in the imposition
of
any Lien upon any of its assets).
|
(d)
|
Brokers’
Fees and Fairness Opinion.
|
Except
for Capitalink, L.C., a copy of whose engagement agreement has been provided
to
Buyer, there is no investment banker, broker, finder or other intermediary
that
has been retained by or is authorized to act on behalf of Sellers who might
be
entitled to any fee or commission from Sellers or any of their Affiliates in
connection with the transactions contemplated by this Agreement. Parent has
received the opinion of Capitalink, L.C., financial advisor to Sellers, to
the
effect that, as of the date of this Agreement, the transactions contemplated
by
this Agreement are fair to the stockholders of Parent from a financial point
of
view.
|
(e)
|
Title
to Assets.
|
Subject
to the approval of this Agreement and the transactions contemplated hereby
by
the stockholders of Parent and except as set forth on §3(e) of the Disclosure
Schedule, Sellers have good and marketable title to all of the Acquired Assets,
free and clear of any Liens or restrictions on transfer. The Acquired Assets
constitute all material assets required to operate, and currently used in the
operation of Division.
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(f)
|
Subsidiaries.
|
Other
than Target, each of Parent’s direct or indirect Subsidiaries other than AnyCard
International, Inc. (each a “Division
Subsidiary”)
is a
corporation or limited partnership duly organized, validly existing, and in
good
standing under the laws of the jurisdiction of its organization. Each Division
Subsidiary is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required except to
the
extent that the failure to be so qualified would not constitute a Material
Adverse Effect. Each Division Subsidiary has full corporate or limited
partnership power and authority and all licenses, permits, and authorizations
necessary to carry on the business in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used
by
it. Sellers have delivered to Buyer correct and complete copies of the charter,
bylaws, certificate of limited partnership and limited partnership agreement
of
each Division Subsidiary (as amended to date). Target has no Subsidiaries.
Other
than Target, none of the Acquired Assets are owned or held by any Subsidiaries
of Parent. Other than administrative functions, the business and operations
of
Division have been solely conducted through Target.
17
|
(g)
|
SEC
Filings and Financial Statements.
|
|
(i)
|
SEC
Filings.
|
(A)
Parent has delivered or made available to Buyer true and complete copies
of Parent’s (i) combined annual report on Form 10-K for its fiscal years ended
September 30, 2004 and 2003, (ii) quarterly reports on Form 10-Q for its fiscal
quarters ended June 30, 2005, March 31, 2005 and ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) its
proxy or information statements relating to meetings of, or actions taken
without a meeting by, the stockholders of Parent held since June 30, 2002,
and
(iv) all of its other reports, statements, schedules and registration statements
(and all exhibits, attachments, schedules and appendixes filed with the
foregoing) filed with the SEC since September 30, 2004 (collectively, the
“SEC
Documents”).
(B)
As of its filing date (or, if amended or superseded by a filing prior to
the date hereof, on the date of such filing), each SEC Document filed pursuant
to the Securities Exchange Act did not, and each such SEC Document filed
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the
statements made therein, in the light of the circumstances under which they
were
made, not misleading.
(C)
The proxy statement of Parent to be filed with the SEC in connection with
the Parent Stockholders Meeting (the “Parent
Proxy Statement”)
and
any amendments or supplements thereto will, when filed, comply as to form in
all
material respects with the applicable requirements of the Securities Exchange
Act. At the time the Parent Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of Parent, and at the time such
stockholders vote on the approval and adoption of this Agreement and the
transactions contemplated hereby, the Amendment and the Motion, and at the
Closing, the Parent Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties contained in this subsection will not apply
to
statements or omissions included in the Parent Proxy Statement based upon
information furnished to Parent in writing by Buyer specifically for use
therein.
|
(ii)
|
Financial
Statements.
|
(A)
The audited consolidated financial statements and unaudited consolidated
interim financial statements of Parent included in the SEC Documents (the
“Financial
Statements”)
complied as to form in all material respects with the applicable rules and
regulations of the SEC with respect thereto and fairly present, in conformity
with GAAP applied on a consistent basis (except as may be indicated in the
notes
thereto), the consolidated financial position of Parent and its consolidated
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal year-end
adjustments in the case of any unaudited interim financial
statements).
18
(B)
Except as set forth in the SEC Documents, the books and records of Parent
(i) have been maintained in accordance with good business practices on a
basis consistent with prior years, (ii) state in reasonable detail the
material transactions and dispositions of the assets of Parent and Parent’s
Subsidiaries and (iii) accurately and fairly reflect the basis for the
consolidated financial statements of Parent filed with the SEC with each of
Parent’s reports on Forms 10-K and 10-Q set forth in §3(g)(i) above.
|
(h)
|
Events
Subsequent to Most Recent Balance Sheet.
|
Since
the
date of the Most Recent Balance Sheet, there has not been any Material Adverse
Change. Without limiting the generality of the foregoing and solely with respect
to the Division and except as set forth on §3(h) of the Disclosure Schedule,
since that date:
(i)
Sellers have not sold, leased, transferred, or assigned any of their
assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(ii)
Sellers have not entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) either
involving more than $10,000 or outside the Ordinary Course of
Business;
(iii)
no party (including Sellers) has accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $10,000 to
which either of Sellers is a party or by which either of them is
bound;
(iv)
Sellers have not imposed or permitted to exist any Lien upon any of its
assets, tangible or intangible;
(v)
Sellers have not made any capital expenditure (or series of related
capital expenditures) either involving more than $10,000 or outside the Ordinary
Course of Business;
(vi)
Sellers have not made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) either involving more
than
$10,000 or outside the Ordinary Course of Business;
(vii)
Sellers have not delayed or postponed the payment of accounts payable and
other Liabilities outside the Ordinary Course of Business;
(viii)
Sellers have not cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$10,000 or outside the Ordinary Course of Business;
(ix)
Sellers have not transferred, assigned, or granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
19
(x)
there has been no change made or authorized in the certificate of
incorporation or bylaws of Parent or the certificate of limited partnership
or
limited partnership agreement of Target;
(xi)
Sellers have not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to their property;
(xii)
other than the termination of the Employment Agreements, Sellers have not
made any loan to, or entered into any other transaction with, any of the
directors, officers, and employees of Sellers or any Subsidiaries of
Parent;
(xiii)
other than the termination of the Employment Agreements, Sellers have not
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any such existing contract or
agreement;
(xiv)
other than the payment of reasonable and customary end of year holiday
bonuses, Sellers have not granted any increase in the base compensation of
any
of the directors, officers, and employees of Sellers outside the Ordinary Course
of Business;
(xv)
other than the termination of the Employment Agreements, Sellers have not
adopted, amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of
the
directors, officers, and employees of Sellers (or taken any such action with
respect to any other Employee Benefit Plan);
(xvi)
other than the termination of the Employment Agreements, Sellers have not
made any other change in employment terms for any of the directors, officers,
and employees of Sellers outside the Ordinary Course of Business;
(xvii)
there has not been any other material occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of
Business;
(xviii)
Sellers have not discharged a material Liability or Lien outside the
Ordinary Course of Business;
(xix)
Sellers have not disclosed any Confidential Information except pursuant to
a valid, binding and enforceable non-disclosure agreement;
(xx)
there has not been any change in any method of accounting or accounting
principles or practice by Sellers, except for any such change required by reason
of a concurrent change in GAAP or Regulation S-X under the Securities Exchange
Act;
(xxi)
there has not been any Tax election made or changed, any annual Tax
accounting period changed, any method of Tax accounting adopted or changed,
any
amended Tax Returns or claims for Tax refunds filed, any closing agreement
entered into, any Tax claim, audit or assessment settled, or any right to claim
a Tax refund, offset or other reduction in Tax liability surrendered;
and
(xxii)
Sellers have not committed to any of the foregoing.
|
(i)
|
Undisclosed
Liabilities.
|
Except
as
set forth on §3(i) of the Disclosure Schedule, Sellers do not have any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of
them
giving rise to any Liability) relating to Division, except for (i) Liabilities
set forth on the face of the Most Recent Balance Sheet (rather than in any
notes
thereto) and (ii) Liabilities that have arisen after the date of the Most Recent
Balance Sheet in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach
of
contract, breach of warranty, tort, infringement, or violation of law).
20
|
(j)
|
Legal
Compliance.
|
Each
of
Sellers, and their respective predecessors and Affiliates has complied in all
material respects with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder
and including the Foreign Corrupt ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. §▇▇▇▇-▇, et seq.) of
federal, state, local, and foreign governments (and all agencies thereof),
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging
any
failure so to comply.
|
(k)
|
Tax
Matters.
|
(i)
Sellers have timely filed all Tax Returns that Sellers were required to
file. All such Tax Returns were correct and complete in all material respects.
All Taxes owed by Sellers (whether or not shown on any Tax Return) have been
paid unless they are currently being contested in good faith as set forth on
§3(k)(i) of the Disclosure Schedule and a reserve therefore is set forth on
the
Most Recent Balance Sheet. Sellers are not beneficiaries of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction in which Sellers do not file Tax Returns that
Sellers are or may be subject to taxation by that jurisdiction. There are no
Liens on any of the assets of Division or Sellers that arose in connection
with
any failure (or alleged failure) to pay any Tax.
(ii)
Sellers have withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party and all Forms W-2 and
1099 required with respect thereto have been properly completed and timely
filed.
(iii)
Sellers do not, and no officer or director of Sellers or any Subsidiaries
of Parent (or any employee responsible for Tax matters expect any authority
to
assess any additional Taxes with respect to Sellers for any period for which
Tax
Returns have been filed. There is no dispute or claim concerning any Tax
Liability of Sellers either (A) claimed or raised by any authority in writing
or
(B) as to which Sellers, or any officer or director of Sellers or any
Subsidiaries of Parent (or employees responsible for Tax matters), has Knowledge
based upon personal contact with any agent of such authority. §3(k)(iii) of the
Disclosure Schedule lists all federal, state, local, and foreign income Tax
Returns filed by Sellers for taxable periods ended on or after September 30,
2002, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Sellers have delivered
or
made available to Buyer correct and complete copies of all income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by Sellers since September 30, 2002.
(iv)
Sellers have not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(v)
None of the Assumed Liabilities or the Termination Payments is, or will
become, an obligation to make a payment that is not deductible under Code §280G.
21
|
(l)
|
Real
Property.
|
(i)
Sellers have no Owned Real Property and no Owned Real Property or any
interest therein is used by Division in operating its business as currently
conducted or as proposed to be conducted. Division is not a party to any
agreement or option to purchase any real property or interest
therein.
(ii)
§3(l)(ii) of the Disclosure Schedule sets forth the address of each parcel
of Leased Real Property, and a true and complete list of all Leases for each
such Leased Real Property (including the date and name of the parties to such
Lease document). Sellers have delivered to Buyer a true and complete copy of
each such Lease document, and in the case of any oral Lease, a written summary
of the material terms of such Lease. With respect to each of the Leases:
(A)
such Lease is legal, valid, binding, enforceable and in full force and
effect;
(B)
the transactions contemplated by this Agreement do not require the consent
of any other party to such Lease, will not result in a breach of or default
under such Lease, and will not otherwise cause such Lease to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing;
(C)
Sellers’ possession and quiet enjoyment of the Leased Real Property under
such Lease has not been disturbed and there are no disputes with respect to
such
Lease;
(D)
Neither Sellers, nor any other party to the Lease is in breach of or
default under such Lease, and no event has occurred or circumstance exists
that,
with the delivery of notice, the passage of time or both, would constitute
such
a breach or default, or permit the termination, modification or acceleration
of
rent under such Lease;
(E)
no security deposit or portion thereof deposited with respect to such
Lease has been applied in respect of a breach of or default under such Lease
that has not been redeposited in full;
(F)
Sellers do not owe, and will not owe in the future, any brokerage
commissions or finder's fees with respect to such Lease;
(G)
the other party to such Lease is not an Affiliate of, and otherwise does not
have any economic interest in, Sellers;
(H)
Sellers have not subleased, licensed or otherwise granted any Person the
right to use or occupy the Leased Real Property or any portion
thereof;
(I)
Sellers have not collaterally assigned or granted any other Lien in such Lease
or any interest therein; and
(J)
there are no Liens on the estate or interest created by such Lease.
(iii)
The Leased Real Property identified in §3(l)(iii) of the Disclosure
Schedule comprises all of the real property used or intended to be used in
Division's business.
(iv)
To Sellers’ Knowledge, all buildings, structures, fixtures, building systems and
equipment, and all components thereof, including the roof, foundation,
load-bearing walls and other structural elements thereof, heating, ventilation,
air conditioning, mechanical, electrical, plumbing and other building systems,
environmental control, remediation and abatement systems, sewer, storm and
waste
water systems, irrigation and other water distribution systems, parking
facilities, fire protection, security and surveillance systems, and
telecommunications, computer wiring, and cable installations, included in the
Leased Real Property (the “Improvements”)
are in
good condition and repair and sufficient for the operation of Division's
business. To Sellers’ Knowledge, there are no structural deficiencies or latent
defects affecting any of the Improvements and there are no facts or conditions
affecting any of the Improvements that would, individually or in the aggregate,
interfere in any respect with the use or occupancy of the Improvements or any
portion thereof in the operation of Division's business as currently conducted
thereon.
22
(v)
To Sellers’ Knowledge, there is no condemnation, expropriation or other
proceeding in eminent domain, pending or threatened, affecting any parcel of
Leased Real Property or any portion thereof or interest therein. To Sellers’
Knowledge, there is no injunction, decree, order, writ or judgment outstanding,
nor any claim, litigation, administrative action or similar proceeding, pending
or threatened, relating to the ownership, lease, use or occupancy of the Leased
Real Property or any portion thereof, or the operation of Division's business
as
currently conducted thereon.
(vi)
The Leased Real Property is in material compliance with all applicable building,
zoning, subdivision, health and safety and other land use laws, including the
Americans with Disabilities Act of 1990, as amended, and all insurance
requirements affecting the Leased Real Property (collectively, the “Real
Property Laws”),
and
the current use and occupancy of the Leased Real Property and operation of
Division's business thereon does not materially violate any Real Property Laws.
Sellers have not received any notice of violation of any Real Property Law
and,
to Sellers’ Knowledge, there is no Basis for the issuance of any such notice or
the taking of any action for such violation.
(vii)
To Sellers’ Knowledge, all material water, oil, gas, electrical, steam,
compressed air, telecommunications, sewer, storm and waste water systems and
other utility services or systems for the Leased Real Property have been
installed and are operational and sufficient for the operation of Division's
business as currently conducted thereon.
(viii)
All material certificates of occupancy, permits, licenses, franchises, approvals
and authorizations (collectively, the “Real
Property Permits”)
of all
governmental authorities, board of fire underwriters, association or any other
entity having jurisdiction over the Leased Real Property that are required
or
appropriate to use or occupy the Leased Real Property or operate Division's
business as currently conducted thereon, have been issued and are in full force
and effect. §3(l)(viii) of the Disclosure Schedule lists all material Real
Property Permits held by Sellers with respect to each parcel of Leased Real
Property. Sellers have delivered to Buyer a true and complete copy of all Real
Property Permits. Sellers have not received any notice from any governmental
authority or other entity having jurisdiction over the Leased Real Property
threatening a suspension, revocation, modification or cancellation of any Real
Property Permit and, to Sellers’ Knowledge, there is no Basis for the issuance
of any such notice or the taking of any such action. The Real Property Permits
are transferable to Buyer without the consent or approval of the issuing
governmental authority or entity; no disclosure, filing or other action by
Sellers is required in connection with such transfer, and Buyer shall not be
required to assume any additional liabilities or obligations under the Real
Property Permits as a result of such transfer.
(ix)
To Sellers’ Knowledge, the classification of each parcel of Leased Real Property
under applicable zoning laws, ordinances and regulations permits the use and
occupancy of such parcel and the operation of Division's business as currently
conducted thereon, and permits the Improvements located thereon as currently
constructed, used and occupied.
23
|
(m)
|
Intellectual
Property.
|
(i)
Sellers own and possess or have the right to use pursuant to a valid and
enforceable written license, sublicense, agreement, or permission all
Intellectual Property necessary or desirable for the operation of Division
as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by Sellers immediately prior to the Closing
will be owned or available for use by Buyer on identical terms and conditions
immediately subsequent to the Closing. Sellers have taken all necessary and
desirable action to maintain and protect each item of Intellectual Property
that
it owns or uses.
(ii)
Sellers have not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties.
Other
than the complaint filed by Corporate Safe Specialists, Inc. against Sellers
on
June 9, 2005 (the “CSS
Claim”),
none
of Sellers, any Subsidiaries of Parent or any of their officers and directors
(and employees with responsibility for Intellectual Property matters) have
ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that Sellers must license or refrain from using any Intellectual Property rights
of any third party) that has not been resolved pursuant to a final
non-appealable court order or binding effective settlement and release agreement
that does not have a Material Adverse Effect. To Sellers’ Knowledge, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of Sellers.
(iii)
§3(m)(iii) of the Disclosure Schedule identifies each patent or registration
which has been issued to Sellers with respect to any of their Intellectual
Property, identifies each pending patent application or application for
registration Sellers have made with respect to any of their Intellectual
Property, and identifies each license, sublicense, agreement, or other
permission that Sellers have granted to any third party with respect to any
of
their Intellectual Property (together with any exceptions). Sellers have
delivered or made available to Buyer correct and complete copies of all such
patents, registrations, applications, licenses, sublicenses, agreements, and
permissions (as amended to date) and have made available to Buyer correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. §3(m)(iii) of the Disclosure
Schedule also identifies each registered or unregistered trademark, service
▇▇▇▇, trade name, corporate name or Internet domain name, computer software
item
(other than commercially available off-the-shelf software purchased or licensed
for less than a total cost of $10,000 in the aggregate) and each material
registered or unregistered copyright used by Sellers in connection with the
business of Division. With respect to each item of Intellectual Property
required to be identified in §3(m)(iii) of the Disclosure Schedule:
(A)
Sellers own and possess all right, title, and interest in and to the item,
free
and clear of any Lien, license, or other restriction or limitation regarding
use
or disclosure;
(B)
the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(C)
except for the CSS Claim, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to Sellers’ Knowledge, is
threatened that challenges the legality, validity, enforceability, use, or
ownership of the item, and there are no grounds for the same;
24
(D)
Sellers have not agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item;
and
(E)
no loss or expiration of the item is threatened, pending, or reasonably
foreseeable, except for patents or copyrights expiring at the end of their
statutory terms (and not as a result of any act or omission by Sellers,
including, without limitation, a failure by Sellers to pay any required
maintenance fees).
(iv)
§3(m)(iv) of the Disclosure Schedule identifies each item of Intellectual
Property that any third party owns and that Division uses pursuant to license,
sublicense, agreement, or permission. Sellers have delivered or made available
to Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each item
of
Intellectual Property required to be identified in §3(m)(iv) of the Disclosure
Schedule:
(A)
the license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;
(B)
the license, sublicense, agreement, or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby (including
the assignments and assumptions referred to in §2 above);
(C)
Sellers are not and, to Sellers’ Knowledge, no other party to the license,
sublicense, agreement, or permission is in breach or default, and no event
has
occurred that with notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
(D)
no party to the license, sublicense, agreement, or permission has repudiated
any
provision thereof;
(E)
with respect to each sublicense, the representations and warranties set forth
in
subsections (A) through (D) above are true and correct with respect to the
underlying license;
(F)
to Sellers’ Knowledge, the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G)
no action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to Seller’s Knowledge, is threatened that
challenges the legality, validity, or enforceability of the underlying item
of
Intellectual Property, and, to Sellers’ Knowledge, there are no grounds for the
same; and
(H)
Sellers have not granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(v)
Except for the CSS Claim, to Sellers’ Knowledge: (A) Sellers have not in
the past nor will interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any Intellectual Property rights of third parties
as a
result of the continued operation of the business of Division as presently
conducted and as presently proposed to be conducted; (B) there are no facts
that
indicate a likelihood of any of the foregoing; and (C) no notices regarding
any
of the foregoing (including, without limitation, any demands or offers to
license any Intellectual Property from any third party) have been
received.
25
(vi)
Sellers have taken all necessary and desirable actions to maintain and
protect all of the Intellectual Property and will continue to maintain and
protect all of the Intellectual Property so as not to adversely affect the
validity or enforceability thereof. To the Knowledge of Sellers, the owners
of
any of the Intellectual Property licensed to Sellers in connection with the
business of Division have taken all necessary and desirable actions to maintain
and protect the Intellectual Property covered by such license.
(vii)
Sellers have complied with and are presently in compliance in all material
respects with all foreign, federal, state, local, governmental (including,
but
not limited to, the Federal Trade Commission and State Attorneys General),
administrative or regulatory laws, regulations, guidelines and rules applicable
to any Intellectual Property and Sellers shall take all steps necessary to
ensure such compliance until the Closing.
|
(n)
|
Tangible
Assets.
|
Sellers
own or lease all buildings, machinery, equipment, and other tangible assets
necessary for the conduct of the business of Division as presently conducted
and
as presently proposed to be conducted. Each such tangible asset is free from
all
defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is
used
and presently is proposed to be used.
|
(o)
|
Inventory.
|
The
inventory of Division is owned by Sellers and consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth
on
the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as
adjusted for the passage of time through the Closing Date in accordance with
the
past custom and practice of Division.
|
(p)
|
Contracts.
|
§3(p)
of the Disclosure Schedule lists the following contracts and other agreements
relating to Division:
(i)
any agreement (or group of related agreements) for the lease of personal
property to or from any Person providing for lease payments in excess of $10,000
per annum;
(ii)
any agreement (or group of related agreements) for the purchase or sale of
raw materials, commodities, supplies, products, or other personal property,
or
for the furnishing or receipt of services, the performance of which will extend
over a period of more than one year, result in a loss to Division, or involve
consideration in excess of $10,000;
(iii)
any agreement concerning a partnership or joint venture;
(iv)
any agreement (or group of related agreements) under which it has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $10,000 or under which it has imposed
a Lien on any of its assets, tangible or intangible;
(v)
any agreement concerning confidentiality or
non-competition;
26
(vi)
any material agreement involving either Seller on the one hand and any
Affiliate of Parent or Parent’s Subsidiaries on the other hand;
(vii)
any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other plan or arrangement for the benefit
of the current or former directors, officers, and employees of Sellers or any
Subsidiaries of Parent;
(viii)
any collective bargaining agreement;
(ix)
any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess
of
$50,000 or providing any severance benefits;
(x)
any agreement under which it has advanced or loaned any amount to any of the
directors, officers, and employees of Sellers or Subsidiaries of Parent outside
the Ordinary Course of Business;
(xi)
any agreement under which the consequences of a default or termination could
have a Material Adverse Effect;
(xii)
any settlement, conciliation or similar agreement, the performance of which
will
involve payment after the Closing Date of consideration in excess of
$10,000;
(xiii)
any agreement under which Sellers have advanced or loaned any other Person
amounts in the aggregate exceeding $10,000; or
(xiv)
any other agreement (or group of related agreements) the performance of
which involves consideration in excess of $10,000.
Sellers
have delivered or made available to Buyer a correct and complete copy of each
agreement (as amended to date) listed in §3(p) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue
to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in §2 above); (C) no
party is in breach or default, and no event has occurred that with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement. Other than as explicitly identified
in §3(p) of the Disclosure Schedule, all such contracts are freely assignable to
Buyer.
|
(q)
|
Notes
and Accounts Receivable.
|
All
notes
and accounts receivable of Sellers relating to Division are reflected properly
on their books and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and will be collected in accordance
with their terms at their recorded amounts except as set forth on §3(q) of the
Disclosure Schedule, subject only to the reserve for bad debts set forth on
the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with
the
past custom and practice of Division.
|
(r)
|
Powers
of Attorney.
|
There
are
no outstanding powers of attorney executed on behalf of
Sellers.
27
|
(s)
|
Insurance.
|
Sellers
have in full force and effect insurance policies insuring the properties and
assets of Division (including the Acquired Assets). With respect to each such
insurance policy: (A) the policy is legal, valid, binding, enforceable, and
in
full force and effect; (B) neither Sellers nor, to Sellers’ Knowledge, any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred that,
with notice or the lapse of time, would constitute such a breach or default,
or
permit termination, modification, or acceleration, under the policy; and (C)
neither Sellers nor, to Sellers’ Knowledge, any other party to the policy has
repudiated any provision thereof. Sellers currently are covered, and have been
covered during the past five (5) years, by insurance in scope and amount
customary and reasonable for the business in which it has engaged during the
aforementioned period.
|
(t)
|
Litigation.
|
§3(t)
of the Disclosure Schedule sets forth each instance in which Sellers (i) are
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge relating to Division or (ii) are a party or, to Sellers’ Knowledge, are
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in §3(t) of the Disclosure Schedule would reasonably be
expected to result in any Material Adverse Change. None of Sellers or the
directors and officers of Sellers or any Subsidiaries of Parent (and employees
with responsibility for litigation matters) have any reason to believe that
any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against Sellers.
|
(u)
|
Product
Warranty.
|
Each
product manufactured, sold, leased, or delivered by Division has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and Sellers do not have any Liability (and there is no
Basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth
on
the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as
adjusted for the passage of time through the Closing Date in accordance with
the
past custom and practice of Division. No product manufactured, sold, leased,
or
delivered by Division is subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale or lease.
|
(v)
|
Product
Liability.
|
Sellers
do not have any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand against any of them giving rise to any Liability) arising out of any
injury to individuals or property as a result of the ownership, possession,
or
use of any product manufactured, sold, leased, or delivered by
Division.
|
(w)
|
Employees.
|
|
(i)
|
With
respect to the business of Division:
|
(A)
there is no collective bargaining agreement or relationship with any labor
organization;
28
(B)
to the Knowledge of Sellers, no executive or manager of Division (1) has any
present intention to terminate his or her employment, or (2) is a party to
any
confidentiality, non-competition, proprietary rights or other such agreement
between such employee and any Person besides Sellers that would be material
to
the performance of such employee’s employment duties, or the ability of Sellers
or Buyer to conduct the business of Division;
(C)
no labor organization or group of employees has filed any representation
petition or made any written or oral demand for recognition;
(D)
to the Knowledge of Sellers, no union organizing or decertification efforts
are
underway or threatened and no other question concerning representation
exists;
(E)
no labor strike, work stoppage, slowdown, or other material labor dispute has
occurred, and none is underway or, to the Knowledge of Sellers,
threatened;
(F)
there is no ▇▇▇▇▇▇▇’▇ compensation liability, experience or matter that
would reasonably be expected to have a Material Adverse Effect;
(G)
there is no employment-related charge, complaint, grievance, investigation,
inquiry or obligation of any kind, pending or, to Sellers’ Knowledge, threatened
in any forum, relating to an alleged violation or breach by Sellers (or their
officers or directors) of any law, regulation or contract; and
(H)
no employee or agent of Sellers has committed any act or omission giving rise
to
material liability for any violation or breach identified in subsection (G)
above.
(ii)
Except as set forth in §3(w)(ii) of the Disclosure Schedule, (A) there are no
employment contracts or severance agreements with any employees of Sellers
engaged in the operation of Division, and (B) there are no written personnel
policies, rules or procedures applicable to employees of Sellers engaged in
the
operation of Division.
(iii)
With respect to this transaction, any notice required under any law or
collective bargaining agreement has been given, and all bargaining obligations
with any employee representative have been, or prior to the Closing Date will
be, satisfied. Sellers have not implemented any plant closing or layoff of
employees that could implicate the Worker Adjustment and Retraining Notification
Act of 1988, as amended, or any similar foreign, state, or local law, regulation
or ordinance, and no such action will be implemented without advance
notification to Buyer.
(iv)
Buyer will not have as a consequence of any transaction contemplated by the
Transaction Agreements, any liability or obligation with respect to or under
any
agreement between either of Sellers and any employee.
|
(x)
|
Employee
Benefit Plans.
|
(i)
§3(x)(i) of the Disclosure Schedule lists each Employee Benefit Plan that
Sellers maintain, to which Sellers contribute or have any obligation to
contribute, or with respect to which Sellers have any Liability. Sellers have
not, nor has any Subsidiary or Affiliate of Parent, been parties to a
multi-employer defined benefit plan within the meaning of ERISA.
(A)
Each such Employee Benefit Plan (and each related trust, insurance contract,
or
fund) has been maintained, funded and administered in accordance with the terms
of such Employee Benefit Plan and the terms of any applicable collective
bargaining agreement and complies in form and in operation in all respects
with
the applicable requirements of ERISA, the Code, and other applicable
laws.
29
(B)
All required reports and descriptions (including Form 5500 annual reports,
summary annual reports, and summary plan descriptions) have been timely filed
and/or distributed in accordance with the applicable requirements of ERISA
and
the Code with respect to each such Employee Benefit Plan. The requirements
of
COBRA have been met with respect to each such Employee Benefit Plan and each
Employee Benefit Plan maintained by Sellers or an ERISA Affiliate that is an
Employee Welfare Benefit Plan subject to COBRA.
(C)
All contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time periods
prescribed by ERISA and the Code to each such Employee Benefit Plan that is
an
Employee Pension Benefit Plan and all contributions for any period ending on
or
before the Closing Date that are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom
and
practice of Sellers. All premiums or other payments for all periods ending
on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan that is an Employee Welfare Benefit Plan.
(D)
Each such Employee Benefit Plan that is intended to meet the requirements of
a
“qualified plan” under Code §401(a) has received a determination from the
Internal Revenue Service that such Employee Benefit Plan is so qualified, and
nothing has occurred since the date of such determination that could adversely
affect the qualified status of any such Employee Benefit Plan. All such Employee
Benefit Plans have been or will be timely amended for the requirements of the
Tax legislation commonly known as “GUST” and “EGTRRA” and have been or will be
submitted to the Internal Revenue Service for a favorable determination letter
on the GUST requirements within the remedial amendment period prescribed by
GUST.
(E)
There have been no Prohibited Transactions with respect to any such Employee
Benefit Plan or any Employee Benefit Plan maintained by Sellers or an ERISA
Affiliate. No Fiduciary has any Liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or
the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to Sellers’ Knowledge, threatened.
(F)
Sellers have delivered or made available to Buyer correct and complete copies
of
the plan documents and summary plan descriptions, the most recent determination
letter received from the Internal Revenue Service, the most recent annual report
(Form 5500, with all applicable attachments), and all related trust agreements,
insurance contracts, and other funding arrangements that implement each such
Employee Benefit Plan.
(ii)
Buyer will not have as a consequence of any transaction contemplated by the
Transaction Agreements, any liability or obligation with respect to or under
any
Employee Benefit Plan.
30
|
(y)
|
Guaranties.
|
Neither
of Sellers is a guarantor or otherwise is liable for any Liability (including
indebtedness) of any other Person.
|
(z)
|
Environmental,
Health, and Safety Matters.
|
(i)
Each of Sellers, and their respective predecessors and Affiliates has complied
and is in material compliance with all Environmental, Health, and Safety
Requirements.
(ii)
Without limiting the generality of the foregoing, each of Sellers and their
respective Affiliates has obtained and materially complied with, and is in
material compliance with, all permits, licenses and other authorizations that
are required pursuant to Environmental, Health, and Safety Requirements for
the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth in §3(z)(ii) of the
Disclosure Schedule.
(iii)
Neither Sellers nor their respective predecessors or Affiliates have received
any written or oral notice, report or other information regarding any actual
or
alleged violation of Environmental, Health, and Safety Requirements, or any
Liabilities, including any investigatory, remedial or corrective obligations,
relating to any of them or their facilities arising under Environmental, Health,
and Safety Requirements.
(iv)
None of the following exists at any property or facility owned or operated
by
Sellers: (1) underground storage tanks, (2) asbestos-containing material in
any
form or condition, (3) materials or equipment containing polychlorinated
biphenyls, or (4) landfills, surface impoundments, or disposal
areas.
(v)
Neither Sellers nor their respective predecessors or Affiliates have treated,
stored, disposed of, arranged for or permitted the disposal of, transported,
handled, manufactured, distributed, or released any substance, including without
limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) so as to give rise to any current or future Liabilities, including
any Liability for fines, penalties, response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney’s fees,
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Solid Waste Disposal Act, as amended, or any other
Environmental, Health, and Safety Requirements.
(vi)
Neither this Agreement nor the consummation of the transactions that are subject
of this Agreement will result in any obligations for site investigation or
cleanup, or notification to or consent of government agencies or third parties,
pursuant to any of the so-called “transaction-triggered” or “responsible
property transfer” Environmental, Health, and Safety Requirements.
(vii)
Neither Sellers nor any of their respective predecessors or Affiliates have
designed, manufactured, sold, marketed, installed, or distributed products
or
other items containing asbestos and none of such entities is or will become
subject to any Asbestos Liabilities.
(viii)
Neither Sellers nor any of their respective predecessors or Affiliates have
assumed or otherwise become subject to, any Liability including without
limitation any obligation for corrective or remedial action, of any other Person
relating to Environmental, Health, and Safety Requirements.
31
(ix)
To Sellers’ Knowledge, no facts, events or conditions relating to the past
or present facilities, properties or operations of Sellers or any of their
respective predecessors or Affiliates will prevent, hinder or limit continued
compliance with Environmental, Health, and Safety Requirements, give rise to
any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health, and Safety Requirements, or give rise to any other Liabilities pursuant
to Environmental, Health, and Safety Requirements, including without limitation
any Liability relating to on-site or off-site releases or threatened releases
of
hazardous materials, substances or wastes, personal injury, property damage
or
natural resources damage.
(x)
Sellers have furnished or made available to Buyer all environmental audits,
reports and other material environmental documents relating to their or their
respective predecessors’ or Affiliates’ past or current properties, facilities,
or operations that are in their possession or under their reasonable
control.
|
(aa)
|
Certain
Business Relationships.
|
Other
than this Agreement and the limited partnership agreement of Target, none of
Parent’s stockholders, Subsidiaries of Parent, directors and officers of Sellers
or any Subsidiaries of Parent, or any of their Affiliates has been involved
in
any business arrangement or relationship with Sellers or any Subsidiary of
Parent within the past 12 months, and other than Target, none of Parent’s
stockholders, Subsidiaries of Parent, directors and officers of Sellers or
any
Subsidiaries of Parent, or any of their Affiliates own any asset, tangible
or
intangible, that is used in the business of Division as currently conducted
or
as currently proposed to be conducted.
|
(bb)
|
Customers
and Suppliers.
|
Since
the
date of the Most Recent Balance Sheet, no material supplier of Division has
indicated that it shall stop, or decrease the rate of, supplying materials,
products or services to Division, and no customer of Division has indicated
that
it shall stop, or decrease the rate of, buying materials, products or services
from Division.
|
§4.
|
Buyer’s
Representations and Warranties.
|
Buyer
represents and warrants to Sellers that the statements contained in this §4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this §4).
|
(a)
|
Organization
of Buyer.
|
Buyer
is
a limited partnership duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
|
(b)
|
Authorization
of Transaction.
|
Buyer
has
full power and authority to execute and deliver this Agreement and the other
Transaction Agreements to which it is a party and to perform its obligations
thereunder. Buyer
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government, governmental agency or any third party
in order to enter into the Transaction Agreements or to consummate the
transactions contemplated thereunder. The execution, delivery and performance
of
the Transaction Agreements and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary action on the part of Buyer.
Each of the Transaction Agreements have been, or will be, duly executed and
delivered by Buyer and constitute, or will constitute when executed and
delivered, the legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with their terms, except that such enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or
relating to creditors’ rights generally, and is subject to general principles of
equity.
32
|
(c)
|
Non-contravention.
|
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby (including the assignments and assumptions
referred to in §2 above), will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Buyer
is
subject or its certificate of limited partnership or its limited partnership
agreement, or other governing documents or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create
in
any party the right to accelerate, terminate, modify, or cancel, or require
any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to which any
of
its assets are subject. Buyer does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in §2 above).
|
(d)
|
Brokers’
Fees.
|
There
is
no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Buyer who might be entitled
to
any fee or commission from Buyer or any of its Affiliates in connection with
the
transactions contemplated by this Agreement.
|
§5.
|
Pre-Closing
Covenants.
|
The
Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing:
|
(a)
|
General.
|
Each
of
the Parties will use, and will cause each of their respective Subsidiaries
to
use, their best efforts to take all actions and to do all things necessary
in
order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the Closing conditions
set
forth in §7 below).
|
(b)
|
Notices
and Consents.
|
Sellers
shall give any notices to third-parties, and Sellers shall use their best
efforts to obtain any third party consents that Buyer may request in connection
with the matters referred to in §3(c) above. Each of the Parties shall give any
notices to, make any filings with, and use their best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in §3(c) and §4(c)
above.
|
(c)
|
Operation
of Business.
|
Other
than the termination of the Employment Agreements, Sellers shall not engage
in
any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business. Without limiting the generality of the foregoing,
Sellers shall not otherwise engage in any practice, take any action, or enter
into any transaction of the sort described in §3(h) above.
33
|
(d)
|
Preservation
of Business.
|
Sellers
shall, and shall cause Division to, keep their business and properties
substantially intact, including their present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
|
(e)
|
Full
Access.
|
Sellers
shall permit representatives of Buyer to have full access at all reasonable
times upon reasonable notice, and in a manner so as not to interfere with the
normal business operations of Sellers, to all premises, properties, personnel,
books, records (including Tax records), contracts, and documents of
Sellers.
|
(f)
|
Notice
of Developments.
|
Each
Party will give prompt written notice to the other Parties of any material
adverse development causing a breach of any of its own representations and
warranties in §3 and §4 above. No disclosure by any Party pursuant to this
§5(f), however, shall be deemed to amend or supplement the Disclosure Schedule
or to prevent or cure any misrepresentation, breach of warranty, or breach
of
covenant.
|
(g)
|
Exclusivity.
|
(i)
Neither of Sellers shall, nor shall any of their officers, directors, employees,
partners, stockholders, Affiliates, Subsidiaries, investment bankers, attorneys,
accountants, consultants or other agents or advisors (the “Representatives”),
directly or indirectly, (A) solicit, initiate or take any action to facilitate
or encourage the submission of any Acquisition Proposal, (B) enter into or
participate in any discussions or negotiations with, furnish any information
relating to Sellers or Division or afford access to the business, properties,
assets, books or records of Sellers or Division or otherwise cooperate in any
way with, or knowingly assist, participate in, facilitate or encourage any
effort by any third party that is seeking to make, or has made, an Acquisition
Proposal, (C) grant any waiver or release under any standstill or similar
agreement with respect to any class of equity securities of Sellers or any
Subsidiary of Parent or (D) enter into any agreement with respect to an
Acquisition Proposal.
(ii)
Notwithstanding
§5(g)(i) above and subject to §5(g)(iv) below, if Sellers and the
Representatives have not breached or violated any provision of this §5(g), the
board of directors of Parent, directly or indirectly through the
Representatives, may engage in negotiations or discussions with any Third Party
that, without prior solicitation by or negotiation with Parent, has made a
Superior Proposal and furnish to such Third Party nonpublic information relating
to Parent or any of its Subsidiaries pursuant to a confidentiality agreement
(a
copy of such confidentiality agreement being provided for informational purposes
only to Buyer); provided
that
Buyer shall be furnished with such nonpublic information prior to or
simultaneously with the furnishing thereof to such Third Party (to the extent
such nonpublic information has not been previously furnished by Sellers to
Buyer). Following receipt of such Superior Proposal, Parent’s board of directors
may fail to make, withdraw or modify in a manner adverse to Buyer its
recommendation to its stockholders referred to in §5(i)(i) below, submit such
Superior Proposal to a vote of its stockholders, and/or take any non-appealable,
final action that any court of competent jurisdiction orders Parent to take,
but
in each case referred to in the foregoing subsections (A) through (D) of
§5(g)(i) above only if a majority of the Non-Affiliated Directors determine
in
good faith, after considering written advice of the outside legal counsel and
financial advisor to Parent’s board of directors that the board must take such
action to comply with its fiduciary duties under applicable law. Nothing
contained herein shall prevent Parent’s board of directors from complying with
Rule 14e-2(a) or Rule 14d-9 under the Securities Exchange Act with regard to
an
Acquisition Proposal or from making other disclosures to Parent’s stockholders
if required under applicable law; provided,
however,
that
any such actions shall comply with the other requirements of this §5(g).
34
(iii)
Parent’s
board of directors shall not take any of the actions referred to in subsections
(A) through (D) of §5(g)(i) above unless Parent shall have delivered to Buyer a
prior written notice advising Buyer that it intends to take such action, and
Parent shall continue to keep Buyer informed, on a current basis, with respect
to such Superior Proposal after taking such action. In addition, Parent shall
notify Buyer promptly (but in no event later than 24 hours) after receipt by
Parent (or any of its Representatives) of any Acquisition Proposal, any
indication that a third party is considering making an Acquisition Proposal
or
of any request for information relating to Parent or any of its Subsidiaries
or
for access to the business, properties, assets, books or records of Parent
or
any of its Subsidiaries by any third party that may be considering making,
or
has made, an Acquisition Proposal. Parent shall provide such notice orally
and
within one (1) business day in writing and shall identify the third party
making, and the terms and conditions of, any such Acquisition Proposal,
indication or request. Parent shall provide within one (1) business day of
receipt a copy of any documentation of the terms of any such inquiry, proposal
or offer, and thereafter shall keep Buyer informed, on a current basis, of
the
status and terms of any such proposals or offers and the status of any such
discussions or negotiations (including by delivering any further documentation
of the type referred to above). Parent shall, and shall cause the
Representatives to, cease immediately and cause to be terminated any and all
existing activities, discussions or negotiations, if any, with any third party
conducted prior to the date hereof with respect to any Acquisition Proposal
and
shall use all reasonable efforts to cause any such third party (or its agents
or
advisors) in possession of confidential information about Parent or its
Subsidiaries to return or destroy all such information.
(iv)
In
the
event Parent receives a Superior Proposal, Parent and its board of directors
shall not take any actions referred to under §5(g)(ii) above until Parent has
negotiated in good faith with Buyer with respect to the terms of the
transactions contemplated by this Agreement for a period of 10 business days
from the date Buyer receives written notice of all material terms and conditions
of the Superior Proposal (including any documents related thereto) as set forth
in §5(g)(iii) above. In the event Parent subsequently receives any amendments or
changes to such Superior Proposal, Parent and its board of directors shall
not
take any actions referred to under §5(g)(ii) above until Parent has negotiated
in good faith with Buyer with respect to the terms of the transactions
contemplated by this Agreement for a period of 10 business days from the date
Buyer receives written notice of all material terms and conditions of such
original Superior Proposal, as amended or changed (including any documents
related thereto) as set forth in §5(g)(iii) above and such written notice shall
specify if Parent and its board of directors intend to take any actions referred
to under §5(g)(ii) above.
|
(h)
|
Maintenance
of Acquired Assets.
|
Sellers
shall maintain the Acquired Assets in substantially the same condition as
existed on the date of this Agreement, ordinary wear and tear
excepted.
|
(i)
|
Parent
Stockholders Meeting
|
(i)
Parent shall cause a meeting of its stockholders (the “Parent
Stockholders Meeting”)
to be
duly called and held as soon as reasonably practicable for the purpose of voting
on the approval and adoption of (A) this Agreement and the transactions
contemplated hereby, (B) an amendment to Parent’s certificate of incorporation
to change Parent’s name such that it does not contain the terms “Tidel” or
“Sentinel” or any derivations thereof (the “Amendment”)
and
(C) any motion for adjournment or postponement of the Parent Stockholder Meeting
to another time or place to permit, among other things, further solicitation
of
proxies if necessary to establish a quorum or to obtain additional votes in
favor of this Agreement and the transactions contemplated hereby and the
Amendment (the “Motion”).
Subject to §5(g)(ii) above, the board of directors of Parent shall recommend
approval and adoption of the items set forth in subsections (A), (B) and (C)
of
this §5(i)(i). The only matters on the ballot at the Parent Stockholders Meeting
shall be the matters set forth above in subsections (A), (B) and (C) of this
§5(i)(i). In connection with the Parent Stockholders Meeting, Parent
shall (i)
promptly
prepare and file with the SEC, use its commercially reasonable best efforts
to
have cleared by the SEC and thereafter mail to its stockholders as promptly
as
practicable, the Parent Proxy Statement and all other proxy materials for such
meeting, (ii)
use its
commercially reasonable best efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby and
the
Amendment, (3) otherwise comply with all legal requirements applicable to such
meeting, and (4) hire MacKenzie Partners, Inc., or another proxy solicitor
of
equivalent stature, to assist Parent in the solicitation of votes and proxies
for the Parent Stockholder Meeting.
35
(ii)
Notwithstanding anything to the contrary contained in this Agreement,
unless this Agreement shall be terminated in accordance with §8 hereof, and in
accordance with the applicable provisions of the law of the State of Delaware,
(A) Parent shall be obligated to call, give notice of and hold the Parent
Stockholders Meeting regardless of the commencement, disclosure, announcement
or
submission to it of any Acquisition Proposal, or of any failure to make,
withdrawal or modification by Parent’s board of directors of its recommendation
as required by §5(i)(i) above and (B) subject to §5(g) above, Parent shall not
submit to the vote of its stockholders any Acquisition Proposal, or propose
to
do so.
(iii)
The Parent Proxy Statement and any amendments or supplements thereto will,
when filed, comply as to form in all material respects with the applicable
requirements of the Securities Exchange Act. At the time the Parent Proxy
Statement or any amendment or supplement thereto is first mailed to stockholders
of Parent, and at the time such stockholders vote on the approval and adoption
of this Agreement and the transactions contemplated hereby, the Amendment and
the Motion, and at the Closing, the Parent Proxy Statement, as supplemented
or
amended, if applicable, will not contain any untrue statement of a material
fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not
misleading. The covenants contained in this subsection will not apply to
statements or omissions included in the Parent Proxy Statement based upon
information furnished to Parent in writing by Buyer specifically for use
therein.
|
(j)
|
Name
Change.
|
Parent
shall change its name and shall cause Tidel Cash Systems, Inc., Tidel Services,
Inc. and Target to change their respective names such that their respective
names do not contain the terms “Tidel” or “Sentinel” or any derivations thereof.
Parent and its subsidiaries shall amend any authorization to conduct business
as
foreign entity in any jurisdiction and any assumed names to reflect the
foregoing name changes.
|
(k)
|
Perfection
of Ownership of Intellectual
Property.
|
Sellers
shall take all necessary and advisable actions to perfect Sellers’ chain of
title and sole ownership of all rights, title and interests, free and clear
of
all interests of third parties and Liens, in all Intellectual Property,
including (i) obtaining and recording with the United States Patent and
Trademark Office or other similar agencies in foreign jurisdictions
(collectively, “Patent
Agencies”)
any
necessary and advisable assignments from any inventors or prior owners of any
Intellectual Property and (ii) recording the change of ownership with any
applicable Patent Agencies of any Intellectual Property to Target.
36
|
(l)
|
Maintenance
of Leased Real Property.
|
Sellers
will maintain the Leased Real Property, including all of the Improvements,
in
substantially the same condition as existed on the date of this Agreement,
ordinary wear and tear excepted, and shall not demolish or remove any of the
existing Improvements, or erect new improvements on the Leased Real Property
or
any portion thereof, without the prior written consent of Buyer.
|
(m)
|
Leases.
|
Sellers
will not amend, modify, extend, renew or terminate any Lease or enter into
any
new lease, sublease, license or other agreement for the use or occupancy of
any
real property without the prior written consent of Buyer.
|
(n)
|
Claim.
|
Sellers
shall take all actions that a reasonably prudent person would undertake with
respect to the CSS Claim and shall diligently defend the CSS Claim; provided,
however,
that
any material actions with respect to the CSS Claim shall require the prior
written consent of Buyer, which consent shall not be unreasonably withheld.
|
§6.
|
Post-Closing Covenants. |
The
Parties agree as follows with respect to the period following the
Closing:
|
(a)
|
General.
|
In
case
at any time after the Closing any further actions are necessary or desirable
to
carry out the purposes of the Transaction Agreements, each of the Parties will
take such further actions (including the execution and delivery of such further
instruments and documents) as another Party may reasonably request, all at
the
sole cost and expense of the requesting Party. Sellers shall not, and Parent
shall cause its Subsidiaries not to, use the term“Tidel”
or
“Sentinel” or any derivations thereof as part of their respective names. Sellers
acknowledge and agree that from and after the Closing, Buyer will be entitled
to
possession of all documents, books, records (including Tax records), agreements,
and financial data of any sort relating to Division.
|
(b)
|
Litigation
Support.
|
In
the
event and for so long as any Party is actively contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) the transactions contemplated under the
Transaction Agreements, (ii) the CSS Claim, or (iii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
Date
involving Sellers, the other Party will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party.
37
|
(c)
|
Transition.
|
Sellers
shall not, nor shall any of Parent’s Subsidiaries or any of their officers and
directors, take any action that is designed or intended to have the effect
of
discouraging any lessor, licensor, customer, supplier, vendor or other business
associate of Division from maintaining the same business relationships with
Buyer after the Closing as it maintained with Division prior to the Closing.
Sellers shall refer all customer inquiries relating to Division to Buyer from
and after the Closing. After the Closing, Sellers shall direct any inquiries
regarding payment of any accounts receivable that were included in the Acquired
Assets to Buyer and shall immediately remit any amounts received by Sellers
in
payment of such accounts receivable to Buyers by in cash by wire transfer or
other immediately available funds.
|
(d)
|
Confidentiality.
|
Sellers
shall treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to Buyer or destroy, at the request and option
of Buyer, all tangible embodiments (and all copies) of the Confidential
Information that are in its possession. In the event either of Sellers is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand,
or
similar process) to disclose any Confidential Information, Sellers will notify
Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
§6(d). If, in the absence of a protective order or the receipt of a waiver
hereunder, Sellers are, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt,
Sellers may disclose the Confidential Information to the tribunal; provided,
however,
that
Sellers shall use their best efforts to obtain, at the reasonable request of
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as
Buyer shall designate.
|
(e)
|
Covenant
Not to Compete or Solicit.
|
For
a
period of five years from and after the Closing Date, Sellers shall not, nor
allow any of their Subsidiaries to, engage directly or indirectly in any
business that Division conducts as of the Closing Date; provided,
however,
that no
owner of less than one percent (1%) of the outstanding stock of any publicly
traded corporation shall be deemed to engage solely by reason thereof in its
business. For a period of five years from and after the Closing Date, Sellers
shall not, nor allow any of their Subsidiaries, to solicit any employee of
Buyer
to leave the employment of Buyer or solicit any customer or potential customer
of Buyer to cease or reduce its business with Buyer; provided,
however,
that no
owner of less than one percent (1%) of the outstanding stock of any publicly
traded corporation shall be deemed to be soliciting any employees, customers
or
potential customers of Buyer solely by reason thereof. If the final judgment
of
a court of competent jurisdiction declares that any term or provision of this
§6(e) is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with
a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and
this Agreement shall be enforceable as so modified after the expiration of
the
time within which the judgment may be appealed.
|
(f)
|
Defense
of CSS Claim.
|
(i)
Buyer shall undertake, and shall have the sole right to direct on behalf
of itself and Sellers, the defense of the CSS Claim for Sellers with counsel
of
its choice.
(ii)
Sellers shall not take any action, consent to the entry of any judgment or
enter into any settlement with respect to the CSS Claim without the prior
written consent of Buyer.
38
(iii)
In
the
event Sellers shall incur any Adverse Consequences in connection with the CSS
Claim subsequent to the Closing Date, then Buyer shall indemnify Sellers from
and against the entirety of any such Adverse Consequences;
provided,
however,
that
Buyer shall not be obligated to indemnify Seller for any Adverse Consequences
incurred as a result of the breach of this Agreement or the negligent action
or
inaction of Sellers.
|
(g)
|
Indemnification.
|
(i)
Parent agrees that all rights to indemnification or exculpation now
existing in favor of the employees, agents, directors or officers of Parent
and
its Subsidiaries (the “Parent
Indemnified Parties”)
as
provided in their respective charter documents, bylaws, certificate of limited
partnership or limited partnership agreement as in effect on the date of this
Agreement shall continue in full force and effect for a period of six (6) years
from and after the Closing Date (the “Indemnity
Period”);
provided,
however,
that,
in the event any claim or claims are asserted or made within the Indemnity
Period, all rights to indemnification in respect of any such claim or claims
shall continue to final and non-appealable disposition of any and all such
claims. Any determination required to be made with respect to whether the Parent
Indemnified Party’s conduct complies with the standards set forth in such
charter documents, bylaws , certificate of limited partnership or limited
partnership agreement or otherwise shall be made by independent counsel selected
by the Parent Indemnified Parties, which counsel shall be reasonably
satisfactory to Parent (whose fees and expenses shall be paid by Parent), which
such determination shall be final and binding on the parties thereto.
(ii)
During the Indemnity Period, Parent shall indemnify and hold harmless the
Parent Indemnified Parties in respect of acts or omissions occurring at or
prior
to the Closing to the fullest extent permitted by Delaware law or any other
applicable laws or provided under Parent’s and its Subsidiaries’ charter,
bylaws, certificate of limited partnership or limited partnership agreement
in
effect on the date of this Agreement; provided
that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law.
(iii)
If Parent or any of its successors or assigns (A) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (B) transfers or
conveys all or substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary, proper provision shall
be
made so that the successors and assigns of Parent shall assume the obligations
set forth in this §6(g).
(iv)
The rights of each Parent Indemnified Party under this §6(g) shall be in
addition to any rights such Person may have under the charter, bylaws,
certificate of limited partnership or limited partnership agreement of Parent
or
any of its Subsidiaries, or under Delaware law or any other applicable laws
or
under any agreement of any Parent Indemnified Party with Parent or any of its
Subsidiaries. These rights shall survive consummation of the transactions
contemplated by this Agreement and are intended to benefit, and shall be
enforceable by, each Parent Indemnified Party.
|
(h)
|
Directors’
and Officers’ Insurance.
|
During
the Indemnity Period, Parent shall maintain in effect directors’ and officers’
and fiduciaries’ liability insurance covering the officers and directors of
Parent and its Subsidiaries as of the date of this Agreement on comparable
terms
and conditions and with comparable insurance coverage as is then in effect
for
the current officers and directors of Parent and its Subsidiaries. Parent agrees
that if Parent is dissolved or ceases to exist for any reason prior to the
termination of the Indemnity Period, prior to such dissolution or cessation
Parent shall extend Parent’s then in effect directors’ and officers’ and
fiduciaries’ liability insurance policy on commercially reasonable terms and
conditions and with insurance coverage as comparable as possible with the
insurance policy then in effect for the current officers and directors of Parent
and Subsidiaries, and such extension shall provide such insurance coverage
to
all directors and officers of Parent as of the date of this Agreement. Parent
shall prepay all premiums in connection with such extension. These rights shall
survive consummation of the transactions contemplated by this Agreement and
are
intended to benefit, and shall be enforceable by, each Parent Indemnified Party.
39
|
(i)
|
Employee
Non-competition and Confidentiality Agreements.
|
Sellers
agree that any and all non-competition and confidentiality agreements between
Sellers and their Affiliates on the one hand and employees of Sellers and their
Affiliates on the other hand shall be null and void and of no further force
and
effect with respect to such employees who become employees of Buyer and its
Affiliates.
|
§7
|
Conditions to Obligation to Close. |
|
(a)
|
Conditions
to Buyer’s Obligation.
|
Buyer’s
obligation to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i)
the representations and warranties set forth in §3 above shall be true and
correct in all material respects at and as of the Closing Date, except to the
extent that such representations and warranties are qualified by the term
“material,” or contain terms such as “Material Adverse Effect” or “Material
Adverse Change,” in which case such representations and warranties (as so
written, including the term “material” or “Material”) shall be true and correct
in all respects at and as of the Closing Date;
(ii)
Sellers shall have performed and complied with all of the covenants
hereunder in all material respects through the Closing, except to the extent
that such covenants are qualified by the term “material,” or contain terms such
as “Material Adverse Effect” or “Material Adverse Change,” in which case Sellers
shall have performed and complied with all of such covenants (as so written,
including the term “material” or “Material”) in all respects through the
Closing;
(iii)
Sellers and Division shall have procured all of the third-party consents
specified in §5(b) above;
(iv)
no action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) adversely affect the right of Buyer to own the
Acquired Assets and to operate the former business of Division, or (D) have
a
Material Adverse Effect;
(v)
there shall not have been, or the occurrence of any events which could
reasonably be expect to have, a Material Adverse Effect;
40
(vi)
there shall not have been, or the occurrence of any events which could
reasonably be expected to have, an adverse change or impact with respect to
Sellers or Buyer in connection with the CSS Claim;
(vii)
this Agreement and the transactions contemplated hereby and the Amendment
shall have been approved and adopted by the stockholders of Parent in accordance
with the laws of the State of Delaware (the “Stockholder
Approval”);
(viii)
Sellers shall have delivered to Buyer a certificate to the effect that
each of the conditions specified above in §7(a)(i)-(vii) is satisfied in all
respects;
(vix)
Sellers shall have executed and delivered the Assignments in substantially
the forms attached hereto as Exhibit A to Buyer;
(x)
Buyer shall have received from counsel to Sellers an opinion in form and
substance as set forth in Exhibit B attached hereto, addressed to Buyer and
on
which Buyer’s lenders shall be entitled to rely, and dated as of the Closing
Date;
(xi)
Sellers shall have provided to Buyer evidence of the release of the
following Liens, such evidence to be satisfactory to Buyer in its sole
discretion: (A) Lien of Laurus Master Fund Ltd. on all of the assets of Sellers,
Tidel Cash Systems, Inc. and Tidel Services, Inc. filed with the Secretary
of
State of the State of Delaware; (B) state tax Lien on Parent filed with the
Clerk of ▇▇▇▇▇▇ County, Texas; (C) Lien of Wallis State Bank on all accounts,
inventory, equipment, intangibles, cash, cash equivalents and other property
of
Sellers and Tidel Cash Systems, Inc. filed with the Secretary of State of the
State of Delaware; (D) Lien of ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank on all accounts, inventory,
equipment, intangibles, cash, cash equivalents and other property of Sellers
filed with the Clerk of ▇▇▇▇▇▇ County, Texas; and (E) Lien of Chase Bank of
Texas on all accounts, inventory, equipment, intangibles, cash and other
property of Tidel Cash Systems, Inc. filed with the Clerk of Dallas County,
Texas;
(xii)
Sellers shall have provided to Buyer evidence of the release, such
evidence to be satisfactory to Buyer in its sole discretion, of all liens
recorded at the United States Patent and Trademark Office on any Intellectual
Property, including, but not limited to the liens held by Saudi International
Bank, Al-Bank Al-Saudi ▇▇-▇▇▇▇▇ Limited; Wallis State Bank; The Frost National
Bank d/b/a Creekwood Capital Group; and Creekwood Capital
Corporation;
(xiii)
Sellers shall have provided to Buyer evidence of assignments perfecting
Sellers’ sole ownership of all rights, title and interests, free and clear of
all interests of third parties and Liens, in all Intellectual Property, such
evidence to be satisfactory to Buyer in its sole discretion, including (A)
evidence of recordation with Patent Agencies of any necessary and advisable
assignments from any inventors or prior owners of any Intellectual Property
(including without limitation all patent applications included in the
Intellectual Property) and (B) evidence of the recordation with any applicable
Patent Agencies of the change of ownership of any Intellectual Property to
Target;
(xiv)
Parent, Target, Tidel Cash Systems, Inc. and Tidel Services, Inc. shall
have changed their respective names such that they do not contain the terms
“Tidel” or “Sentinel” or any derivations thereof and shall have provided to
Buyer evidence thereof reasonably satisfactory to Buyer; and further shall
have
amended any authorizations to conduct business as foreign entity in any
jurisdiction and any assumed names to reflect the foregoing and provided to
Buyer evidence thereof reasonably satisfactory to Buyer;
41
(xv)
Sellers shall have terminated the Employment Agreements on terms
reasonably satisfactory to Buyer;
(xvi)
all actions to be taken by Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to Buyer;
(xvii)
Sellers shall deliver to Buyer a non-foreign affidavit dated as of the
Closing Date, sworn under penalty of perjury and in form and substance required
under the Treasury Regulations issued pursuant to Code §1445 stating that
neither of Sellers are a “foreign person” as defined in Code §1445;
and
(xviii)
Sellers shall have delivered to Buyer a certificate of the secretary or an
assistant secretary of each of Sellers, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to: (A) no amendments to the
certificate of incorporation and bylaws of Parent or the certificate of limited
partnership and limited partnership agreement of Target since the date of this
Agreement; (B) the resolutions of the board of directors (or other authorizing
body) (or a duly authorized committee thereof) of Sellers authorizing the
execution, delivery, and performance of this Agreement and the transactions
contemplated hereby; (C) incumbency and signatures of the officers of Sellers
executing this Agreement or any other agreement contemplated by this Agreement;
and (D) the requisite number of votes of the Parent’s stockholders approved and
adopted this Agreement, the transactions contemplated by this Agreement and
the
Amendment at the Parent Stockholders Meeting.
Buyer
may
waive any condition specified in this §7(a) if it executes a writing so stating
at or prior to the Closing.
|
(b)
|
Conditions
to Sellers’ Obligation.
|
Sellers’
obligation to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i)
the representations and warranties set forth in §4 above shall be true and
correct in all material respects at and as of the Closing Date, except to the
extent that such representations and warranties are qualified by the term
“material,” or contain terms such as “Material Adverse Effect” or “Material
Adverse Change,” in which case such representations and warranties (as so
written, including the term “material” or “Material”) shall be true and correct
in all respects at and as of the Closing Date;
(ii)
Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing, except to the extent
that such covenants are qualified by the term “material,” or contain terms such
as “Material Adverse Effect” or “Material Adverse Change,” in which case Buyer
shall have performed and complied with all of such covenants (as so written,
including the term “material” or “Material”) in all respects through the
Closing;
(iii)
no action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation;
42
(v)
Buyer shall have delivered to Sellers a certificate to the effect that
each of the conditions specified above in §7(b)(i)-(iii) is satisfied in all
respects;
(vi)
the Stockholder Approval shall have been obtained; and
(vii)
all actions to be taken by Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to Sellers.
Sellers
may waive any condition specified in this §7(b) if they execute a writing so
stating at or prior to the Closing.
|
§8.
|
Survival and Termination. |
|
(a)
|
Survival
of Representations and Warranties.
|
None
of
the representations and warranties of Buyer and Sellers contained in this
Agreement shall survive the Closing.
|
(b)
|
Termination
of Agreement.
|
Subject
to §9(k) below, certain of the Parties may terminate this Agreement as provided
below:
(i)
Buyer and Sellers may terminate this Agreement by mutual written consent
at any time prior to the Closing;
(ii)
Buyer may terminate this Agreement by giving written notice to Sellers at
any time prior to the Closing (A) subject to §8(b)(iv) and §8(b)(v) below, in
the event either of Sellers have breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Buyer has notified
Sellers of the breach, and the breach has continued without cure for a period
of
30 days after the notice of breach or (B) if the Closing shall not have occurred
on or before the date that is the eight month anniversary of the date of this
Agreement (unless the failure results primarily from Buyer itself breaching
any
representation, warranty, or covenant contained in this Agreement);
(iii)
Sellers may terminate this Agreement by giving written notice to Buyer at
any time prior to the Closing (A) in the event Buyer has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Sellers have notified Buyer of the breach, and the breach
has
continued without cure for a period of 30 days after the notice of breach or
(B)
if the Closing shall not have occurred on or before the date that is the eight
month anniversary of the date of this Agreement (unless the failure results
primarily from Sellers breaching any representation, warranty, or covenant
contained in this Agreement);
(iv)
Buyer may terminate this Agreement by giving written notice to Sellers if
Sellers breach their obligations under §5(g) or §5(i) above; or
(v)
Buyer may terminate this Agreement by giving written notice to Sellers if a
majority of the Non-Affiliated Directors shall have failed to make or have
withdrawn, or modified in a manner adverse to Buyer, their approval or
recommendation of this Agreement or the transactions contemplated hereby, or
shall have failed to reaffirm their approval or recommendation of this Agreement
or the transactions contemplated hereby within five (5) business days after
a request
by Buyer to do so, or shall have approved or recommended an alternative
Acquisition Proposal.
43
|
(c)
|
Effect
of Termination.
|
If
any
Party terminates this Agreement pursuant to §8(b) above, all rights and
obligations of the Parties hereunder shall terminate without any Liability
of
any Party to the other Party (except for any Liability of any Party then in
breach and as set forth in §9(k) below). The provisions of this §8(c), §6(g),
§6(h) and §9 shall survive any termination of this Agreement pursuant to this
§8.
|
§9.
|
Miscellaneous. |
|
(a)
|
Press
Releases and Public Announcements.
|
No
Party
shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of the
other
Party;
provided,
however,
that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its publicly
traded securities (in which case the disclosing Party will use its reasonable
best efforts to advise the other Party prior to making the
disclosure).
|
(b)
|
No
Third-Party Beneficiaries.
|
Except
as
provided in §6(g) and §6(h) above, this Agreement shall not confer any rights or
remedies upon any Person other than the Parties and their respective successors
and permitted assigns.
|
(c)
|
Entire
Agreement.
|
This
Agreement (including the documents referred to herein) constitutes the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or oral,
to
the extent they relate in any way to the subject matter hereof.
|
(d)
|
Succession
and Assignment.
|
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Party; provided
however,
that
Buyer may (i) assign any or all of its rights and interests hereunder to one
or
more of its Affiliates, (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder),
or
(iii) assign its rights and benefits under this Agreement to its lender as
collateral for such its obligations to such lender and Sellers agree to execute
a consent and agreement to such assignment in a form reasonably satisfactory
to
Sellers.
|
(e)
|
Counterparts.
|
This
Agreement may be executed in two or more counterparts (including by means of
facsimile), each of which shall be deemed an original but all of which together
will constitute one and the same instrument.
|
(f)
|
Headings.
|
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
44
|
(g)
|
Notices.
|
All
notices, requests, demands, claims, and other communications hereunder shall
be
in writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given (i) when delivered personally to the recipient,
(ii)
one business day after being sent to the recipient by reputable overnight
courier service (charges prepaid), (iii) one business day after being sent
to
the recipient by facsimile transmission or electronic mail, or (iv) four
business days after being mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid, and addressed to the
intended recipient as set forth below:
If
to
Sellers:
Tidel
Technologies, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Facsimile
Number:
Attn:
Chief Executive Officer
Copy
to:
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Frome ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
Park
Avenue Tower
▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If
to
Buyer:
Sentinel
Operating, L.P.
c/o
LLG,
LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Financial Officer
Copy
to:
▇▇▇▇▇▇▇
▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLC
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile
Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇ ▇.▇. ▇▇▇, Esq.
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇ Esq.
Any
Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice
in
the manner herein set forth.
45
|
(h)
|
Governing
Law.
|
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Delaware
without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State
of
Delaware.
|
(i)
|
Amendments
and Waivers.
|
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by Buyer and Sellers. Parent may consent to
any
such amendment at any time prior to the Closing with the prior authorization
of
its board of directors; provided,
however,
that any
amendment effected after Parent’s stockholders have approved this Agreement will
be subject to the restrictions contained in the applicable provisions of the
laws of the State of Delaware. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of warranty
or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant.
|
(j)
|
Severability.
|
Any
term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of
the
offending term or provision in any other situation or in any other
jurisdiction.
|
(k)
|
Expenses.
|
(i)
Except as otherwise provided herein, each of Buyer and Sellers shall bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. Without
limiting the generality of the foregoing, all transfer, documentary, sales,
use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the transactions contemplated
by
this Agreement shall be paid by Sellers when due, and Sellers shall, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such Taxes, fees and charges, and, if required by applicable law, the
Parties will, and will cause their Affiliates to, join in the execution of
any
such Tax Returns and other documentation.
(ii)
If a Parent Payment Event occurs, Parent shall pay $400,000 to Buyer (by
wire transfer of immediately available funds) no later than two (2) business
days after the occurrence of such Parent Payment Event. Nothing contained in
this §9(k)(ii) shall limit or preclude Buyer from pursuing any other available
remedies it may have against Sellers.
(iii)
Sellers acknowledge that the agreement contained in §9(k)(ii) above is an
integral part of the transactions contemplated by this Agreement and that,
without this agreement, Buyer would not enter into this Agreement. Accordingly,
if Sellers fail to promptly pay the amount due pursuant to §9(k)(ii) above,
Sellers shall also pay any costs and expenses incurred by Buyer in connection
with a legal action to enforce this Agreement that results in a judgment against
a Seller for such amount; provided, however, that if such legal action results
in a judgment that neither Seller owes Buyer such amount, Buyer shall pay any
costs and expenses incurred by Seller in connection with the defense of such
legal action.
46
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(l)
|
Construction.
|
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an 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.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. Nothing in the Disclosure Schedule shall be deemed adequate
to disclose an exception to a representation or warranty made herein unless
the
Disclosure Schedule identifies the exception with reasonable particularity
and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception
to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The Parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the
Party
has not breached shall not detract from or mitigate the fact that the Party
is
in breach of the first representation, warranty, or covenant.
|
(m)
|
Incorporation
of Exhibits and Schedules.
|
The
Exhibits and Schedules identified in this Agreement are incorporated herein
by
reference and made a part hereof.
|
(n)
|
Specific
Performance.
|
Each
Party acknowledges and agrees that the other Party would be damaged irreparably
in the event any provision of this Agreement is not performed in accordance
with
its specific terms or otherwise breached, so that a Party shall be entitled
to
injunctive relief to prevent breaches of the provisions of this Agreement and
to
enforce specifically this Agreement and the terms and provisions hereof in
addition to any other remedy to which such Party may be entitled, at law or
in
equity. In particular, the Parties acknowledge that the business of Division
is
unique and recognize and affirm that in the event Sellers breach this Agreement,
money damages would be inadequate and Buyer would have no adequate remedy at
law, so that Buyer shall have the right, in addition to any other rights and
remedies existing in its favor, to enforce its rights and the other Parties’
obligations hereunder not only by action for damages but also by action for
specific performance, injunctive, and/or other equitable relief.
|
(o)
|
Submission
to Jurisdiction.
|
Each
of
the Parties submits to the jurisdiction of any state or federal court sitting
in
the State of Texas in any action or proceeding arising out of or relating to
this Agreement and agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to this Agreement
in
any other court. Each of the Parties waives any defense of inconvenient forum
to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with respect
thereto. Any Party may make service on the other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in §9(g) above. Nothing in this §9(o),
however, shall affect the right of any Party to serve legal process in any
other
manner permitted by law or in equity. Each Party agrees that a final judgment
in
any action or proceeding so brought shall be conclusive and may be enforced
by
suit on the judgment or in any other manner provided by law or in equity.
47
|
(p)
|
Tax
Matters.
|
(i)
Sellers shall be responsible for the preparation and filing of all Tax
Returns for Sellers for all periods as to which Tax Returns are due after the
Closing Date (including the consolidated, unitary, and combined Tax Returns
for
Sellers that include the operations of Division for any period ending on or
before the Closing Date). Sellers shall make all payments required with respect
to any such Tax Return.
(ii)
Buyer and Sellers agree to utilize, or cause their respective Affiliates
to utilize, the standard procedure set forth in Rev. Proc. 2004-53 with respect
to wage reporting.
|
(q)
|
Tax
Disclosure Authorization.
|
Notwithstanding
anything herein to the contrary, the Parties (and each Affiliate and Person
acting on behalf of any Party) agree that each Party (and each employee,
representative, and other agent of such Party) may disclose to any and all
Persons, without limitation of any kind, the transaction’s tax treatment and tax
structure (as such terms are used in Code §§6011 and 6112 and regulations
thereunder) contemplated by this agreement and all materials of any kind
(including opinions or other tax analyses) provided to such Party or such Person
relating to such tax treatment and tax structure, except to the extent necessary
to comply with any applicable federal or state securities laws; provided,
however,
that
such disclosure may not be made until the earlier of date of (A) public
announcement of discussions relating to the transaction, (B) public announcement
of the transaction, or (C) execution of an agreement to enter into the
transaction. This authorization is not intended to permit disclosure of any
other information including (without limitation) (A) any portion of any
materials to the extent not related to the transaction’s tax treatment or tax
structure, (B) the identities of participants or potential participants, (C)
the
existence or status of any negotiations, (D) any pricing or financial
information (except to the extent such pricing or financial information is
related to the transaction’s tax treatment or tax structure), or (E) any other
term or detail not relevant to the transaction’s tax treatment or the tax
structure.
*
* * *
48
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the
date first above written.
|
SENTINEL
OPERATING, L.P.
|
||||
|
By:
|
Sentinel
Cash Systems, L.L.C.
|
|||
|
Its:
|
General
Partner
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||||
|
President
|
||||
|
TIDEL
TECHNOLOGIES, INC.
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
|
|||
|
Title:
Director
|
|||
|
TIDEL
ENGINEERING, L.P.
|
||||
|
By:
|
Tidel
Cash Systems, Inc.
|
|||
|
Its:
|
Managing
General Partner
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇ | |||
|
Name:
|
▇▇▇▇▇▇▇ ▇▇▇▇ | |||
|
Title:
|
Vice President & Secretary | |||