<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 1, 1995
Checkpoint Systems, Inc.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania
------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
1-11257 22-1895850
-------------- ---------------------
(Commission File Number) (I.R.S.Employer Identification No.)
101 Wolf Drive, PO Box 188 Thorofare, New Jersey 08086
-----------------------------------------------------------------------
(Address of principal executive offices)
(609) 848-1800
------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------------------------
(Former name or address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
------ -------------------------------------
On February 1, 1995, Registrant consummated its acquisition
of all of the issued and outstanding capital stock of Alarmex, Inc.
("Alarmex") and a related company, Bayport Controls, Inc. ("Bayport).
Pursuant to separate Stock Purchase Agreements the Registrant acquired
Alarmex and Bayport for a total combined purchase price of $13.5 million
($10 million in cash and 200,717 shares of unregistered Common Stock of
Checkpoint Systems, Inc.), subject to adjustment as set forth below.
Pursuant to the Stock Purchase Agreement pertaining to the
purchase of Alarmex, $3 million was placed in an interest-bearing escrow
account pending a post closing audit of the stockholders' equity of Alarmex
at December 31, 1994. To the extent that the stockholders' equity of
Alarmex at December 31, 1994 is less than $2,882,000., the purchase price
will be reduced by 50 cents for each $1.00 of deficiency until the
stockholders' equity reaches $2,722,000., at which point any additional
deficiency will be deducted dollar-for-dollar from the purchase price.
The purchase price was determined as a result of arms length
barganing between the parties taking into account the business and prospects
of each parties and the anticipated synergies between the businesses.
The source of funds for the acquisition was funded indebtedness
provided by an insurance company. There is no material relationship
between the registrant, its affiliates, officers or directors and any
affiliate, officer or director of Alarmex or Bayport.
Alarmex designs and provides CCTV, POS monitoring, burglar
and fire alarm systems and also provides related central station
monitoring services to over 9,000 retail sites in the United States.
Bayport designs and manufactures CCTV equipment. The Company believes
the combined acquisition of Alarmex and Bayport will complement
Checkpoint's current CCTV and POS monitoring products. With the
acquisition of Alarmex and Bayport, Checkpoint will be able to offer its
customers a broader and more sophisticated range of CCTV and POS
monitoring products. In addition, Alarmex will enable Checkpoint to
enter the burglar and fire alarm market with related central station
alarm monitoring capabilities.
<PAGE> 3
Item 7. Financial Statements and Exhibits
------ ----------------------------------
(a) Financial Statements of Business Acquired.
-----------------------------------------
Audited Financial Statements for the year ended
December 31, 1994 will be filed by amendment hereto as soon as practicable,
but not later than sixty (60) days after the date on which this Current
Report on Form 8-K must be filed.
(b) Proforma Financial Statements.
-----------------------------
Proforma Combined Financial Information and Historical
consolidated financial statements of the Company, Alarmex and Bayport as
of September 30, 1994, were filed with the Company's S-3 Registration
Statement, filed on January 25, 1995, and are incorporated herein by
reference.
(c) Exhibits.
--------
Filed herewith as Exhibit A and B to this Form 8-K are
Stock Purchase Agreements by and between the Registrant and Alarmex,
Inc. and Bayport Controls, Inc respectively.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
February 15, 1995
CHECKPOINT SYSTEMS, INC.
/s/Steven G. Selfridge
Steven G. Selfridge
Senior Vice President - Operations
and Chief Financial Officer
<PAGE> 4
CHECKPOINT SYSTEMS, INC.
FORM 8-K
INDEX TO EXHIBITS
------------------
The following documents are filed as part of this Form 8-K.
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGES
----------- -------------------------------------------- -----------
EXHIBIT 10 (a) Stock Purchase Agreement by and between (1)
Checkpoint Systems,Inc., Daniel J.
Frederick and Alarmex, Inc.
EXHIBIT 10 (b) Stock Purchase Agreement by and between (1)
Checkpoint Systems, Inc., Mary E.
Frederick and Bayport Controls, Inc.
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the 1st
day of February, 1995, among Checkpoint Systems, Inc., a Pennsylvania
corporation (the "Buyer"), Daniel J. Frederick ("DJF" or "Seller") and
Alarmex, Inc. ("Alarmex"), a Minnesota corporation.
Background
The Seller owns or will own on the Closing Date (hereafter defined) all
of the issued and outstanding shares of the capital stock of Alarmex,
whether voting or non-voting, (the "Stock") and desires to sell all of the
Stock to Buyer as hereinafter provided. Buyer desires to acquire the Stock
in exchange solely for the Purchase Price (hereafter defined) subject to the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the promises and
covenants set forth below and intending to be legally bound hereby, the
parties agree as follows:
1. PURCHASE OF SHARES OF ALARMEX
1.1. Transfer of Consideration The Seller agrees to deliver or
cause to be delivered to Buyer on the Closing Date 900 shares of Stock.
In consideration therefor, Buyer agrees to pay to Seller on the Closing Date
Ten Million Dollars ($10,000,000.) payable as follows: (i) Seven Million
Dollars ($7,000,000.) in immediately available funds by wire transfer to an
account designated by Seller at least two (2) business days prior to the
Closing Date and (ii) Three Million Dollars ($3,000,000.) in immediately
available funds on the Closing Date by wire transfer to an escrow account
established at First Fidelity Bank, N.A. (the "Escrow Agent") pursuant to a
form of escrow agreement attached as Exhibit A. Seller and Buyer agree
that such escrow amount shall be released to Buyer and Seller, as the
case may be, pursuant to the final calculation of the Purchase Price, as
adjusted if necessary in accordance with Section 1.3 below.
1.2. Delivery of Audited Financial Statements
(a) Not later than February 28, 1995, or as soon
thereafter as practicable, Seller shall deliver to Buyer an combined
balance sheet of Alarmex and Bayport Controls, Inc., ("Bayport") as at
December 31, 1994 together with the related combined statements of income,
retained earnings and changes in cash flows for the year then ended,
<PAGE> 1
showing elimination's between Alarmex and Bayport, together with the
related notes thereto (the "Combined Balance Sheet"). Coopers and Lybrand
L.L.P. shall audit the Combined Balance Sheet and shall furnish a report to
Buyer and Seller identifying audit adjustments, if any, to such
Combined Balance Sheet. The Combined Balance Sheet together with the
auditors' report are the "Audited 1994 Financials". The Audited 1994
Financials will be prepared in accordance with GAAP consistently applied.
The combined stockholders equity of Alarmex and Bayport as shown on the
Audited 1994 Financials is the "Audited Stockholders' Equity".
(b) Sellers shall examine the Audited 1994 Financials and
the Audited Stockholders' Equity and Seller and his representatives shall
be given access upon reasonable notice during business hours to the
workpapers used to prepare the Audited 1994 Financials. If there is
no dispute between Seller and Buyer with respect to the calculation of
the Audited Stockholders' Equity then they will, not later than March 10,
1995, deliver a letter signed by each of them (the "Escrow Letter") to
the Escrow Agent setting forth the amount of the Audited Stockholders'
Equity and the amount of the adjustment to the Purchase Price, if any,
as calculated pursuant to Section 1.3 below.
(c) Seller and Buyer and their accounting professionals
shall endeavor to resolve any dispute between them with respect to the
Audited 1994 Financials and the Audited Stockholders' Equity. If there
is a dispute which cannot be resolved by Seller and Buyer not later than
March 17, 1995 then they shall submit the dispute to Price Waterhouse
(the "Arbitrator") at its office in Minneapolis, MN. The Arbitrator
shall resolve the dispute not later than April 15, 1995. In settling
the dispute, the Arbitrator shall establish such procedures as it deems
appropriate giving due regard to the intention of the parties to resolve
the dispute as quickly, efficiently and inexpensively as possible. The
parties will submit facts in accordance with the procedures established
by the Arbitrator and the Arbitrator shall decide the dispute within the
timeframe set forth above. The Arbitrator's decision will be final,
binding and conclusive on Seller and Buyer. The fee shall be borne
equally between Buyer and Seller. After the Arbitrator has resolved the
dispute, the Arbitrator will then calculate the adjustment to the Purchase
Price, if any, pursuant to Section 1.3 below. The Arbitrator will
immediately thereafter (but not later than April 15, 1995) provide to both
Seller and Buyer a written report (the "Escrow Report") setting forth the
amount of the Audited Stockholders' Equity and the amount of the adjustment
to the Purchase Price, if any. Either Seller or Buyer may deliver the
Escrow Report to the Escrow Agent.
1.3 Adjustments to the Purchase Price After the final
determination of the Audited Stockholders' Equity in accordance with this
Section, the Purchase Price will be adjusted as follows: (i) if the Audited
Stockholders' Equity is equal to or greater than $2,822,000, then there
will be no adjustment, (ii) if the Audited Stockholders' Equity is equal to
or greater than $2,722,000, but less than $2,822,000, then the Purchase Price
will be reduced by one-half of such difference and (iii) if the Audited
Stockholders' Equity is less than $2,722,000, then the Purchase Price will be
reduced on a dollar-for-dollar basis by the amount of the deficiency less than
$2,722,000. Payment of the adjusted Purchase Price will be made by
<PAGE> 2
distribution of the amount of the adjustment, if any, together with the
pro rata share of interest earned thereon to Buyer from the amount held in
escrow pursuant to the Escrow Agreement, with the balance of the amount held
in escrow together with interest thereon distributed to the Seller, such
distributions to occur not later than ten (10) business days following
receipt by the Escrow Agent of the Escrow Letter or the Escrow Report.
2. CLOSING; TERMINATION OF AGREEMENT.
(a) The closing referred to in Section 1 hereof (the "Closing") shall take
place at the offices of Leonard, Street and Deinard, in Minneapolis,
Minnesota on February 1, 1995, or at such other time and date as Buyer and
Seller may in writing designate (the "Closing Date").
(b) This Agreement may be terminated (i) by the mutual written consent of
Buyer and Seller, (ii) by Buyer, if there has been a material
misrepresentation or breach of a warranty, covenant or other agreement by
the Seller or Alarmex contained herein or if any of the conditions
precedent to Buyer's obligations hereunder shall not have been satisfied
and not waived on or before the Closing Date, (iii) by the Seller if there
has been a material misrepresentation or breach of a warranty, covenant or
other agreement by Buyer contained herein or if any of the conditions
precedent to the Seller's obligations hereunder shall not have been
satisfied and not waived on or before the Closing Date. In the event of
termination, this Agreement shall be null and void, without further
liability on the part of any party provided that such party has made
its representations and warranties in good faith, used its reasonable best
efforts to perform its obligations hereunder and in the case of the Seller,
did not violate the provision contained in Section 5.4 hereof. Nothing
contained herein shall preclude any party from obtaining specific
performance or any other equitable remedy otherwise available to it for any
breach hereof.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND ALARMEX. In order
to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, the Seller and Alarmex,
jointly and severally, hereby make the following representations and
warranties to Buyer, all of which are intended to survive the consummation
of this transaction, subject to the limitations set forth in Section 6 of
this Agreement.
3.1. Stock; Authority
(a) All of the Stock is owned, and on the Closing Date will be
owned, by the Seller, free and clear of all liens, encumbrances,
claims, options, warrants, calls and commitments of every kind.
The Seller has full legal right, power and authority to enter into
this Agreement and the full legal right, power and authority to
exchange, assign and transfer the Stock to Buyer and, on the
closing Date, the delivery of the Stock to Buyer hereunder will
<PAGE> 3
transfer valid title thereto, free and clear of all liens, encumbrances,
claims, options, warrants, calls and commitments of any kind.
(b) (i) All of the Stock of Alarmex is owned of record and
beneficially by the Seller and no person or entity other than the
Seller has the contractual power to designate any members of
Alarmex's board of directors;
(ii) The Company has no ownership interests in any other corporation or
entity other than identified in Schedule 3.1.
3.2. Existence; Good Standing; Copies Complete; Validity.
Alarmex is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. Alarmex is duly
authorized and qualified to transact business in the State of Minnesota,
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the extent
that the failure to be so qualified or to be in good standing would not
have a material adverse effect on Alarmex and its subsidiary, taken as a
whole. Copies of the charter documents and by-laws of Alarmex and each
subsidiary, as amended to the date hereof, in each case certified as of
the date hereof by the Secretary of Alarmex have been delivered to Buyer.
The copies of all instruments, documents and certificates
referenced in the schedules and which have been delivered
to Buyer in connection with the transactions contemplated hereby are
complete and accurate and are true and correct copies of the originals
thereof. This Agreement, and the agreements delivered in connection
herewith, are the legal, valid and binding obligations of the Seller
and Alarmex, enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies and defenses. The execution, delivery and performance
of this Agreement and the agreements delivered in connection herewith by
the Seller and Alarmex will not (i) violate or result in a breach of, or
constitute a default under, Alarmex's charter or bylaws, as amended, any
agreement to which either is bound or any law, regulation, order or
judgment, or (ii) create or impose any lien or encumbrance upon any of
the assets of either the Seller or Alarmex.
3.3. Outstanding Stock. The authorized capital stock of Alarmex
consists solely of 2,500 shares of Stock, $.01 par value, of which 900
shares are issued and outstanding, all of which are voting shares. Each
share of Stock is duly and validly authorized and issued, fully paid
and non assessable, and to the best knowledge of Seller was not issued
in violation of the preemptive rights of any stockholder. No option,
warrant, call or commitment of any kind obligating Alarmex to issue any of
its authorized but unissued capital stock or other equity interest exists.
3.4. Subsidiaries. Alarmex has no subsidiaries and
owns no securities (i.e., stock, warrants, calls, options,
notes, bonds or other evidences of ownership or indebtedness)
<PAGE> 4
of any other person, firm or corporation except as set forth on
Schedule 3.4. Except as set forth on Schedule 3.4, no parent
company or subsidiary, nor any affiliated or non-affiliated company,
nor the Seller or any other person or entity, has any ownership
interest, legal or equitable, in any of the assets of Alarmex.
3.5. Financial Statements.
(a) The Estimated Alarmex Consolidated Balance Sheet and the Closing
Alarmex Consolidated Balance Sheet and notes accompanying each are
collectively referred to as the "Financial Statements". The Financial
Statements will present fairly, in all material respects, the financial
position of Alarmex and its consolidated subsidiary as at their
respective dates in conformity with generally accepted United States
accounting principles, as modified, if at all, by the provisions of this
Agreement, applied on a basis consistent with the accounting principles,
practices and the application thereof heretofore followed by Alarmex.
The Closing Balance Sheet will be accompanied by a report from Deloitte &
Touche LLP, which will not contain a disclaimer of opinion or a qualified or
adverse opinion.
(b) The audited consolidated financial statements of Alarmex and its
subsidiary as of December 31, 1993 and 1992, and for the periods then ended
("Audited Financial Statements"), copies of which are attached hereto as
Schedule 3.5 (b), containing balance sheets, statement of operations and
related statement of cash flows, present fairly, in all material respects,
the consolidated financial condition of Alarmex and its subsidiary at
December 31, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted United
States accounting principles consistently applied throughout the periods
indicated.
(c) The unaudited consolidated financial statements of Alarmex and its
subsidiary as at September 30, 1994, and for the period then ended
("Interim Financial Statements"), copies of which are attached hereto as
Schedule 3.5 (c), containing a balance sheet, operating statement, and
related supporting schedules, present fairly, in all material respects,
the financial condition and results of operations of Alarmex and its
subsidiary at the date and for the period indicated. Except for the
absence of footnotes and annual year end adjustments (which in the
aggregate would not be material), such unaudited financial statements
were prepared in accordance with generally accepted United States
accounting principles consistently applied.
3.6. Liabilities. Other than shown on Schedule 3.6, there
are no material liabilities or obligations with respect to Alarmex and
its subsidiary or its business of any nature (absolute, accrued, contingent
or otherwise), except (i) to the extent reflected or reserved for on the
Interim Financial Statements; (ii) liabilities or obligations arising
or incurred in the ordinary course of business since the date of the
Interim Financial Statements; and (iii) liabilities and obligations
disclosed in the Schedules hereto or pursuant to or in this Agreement.
<PAGE> 5
3.7. Permits, Licenses, etc.
(a) The Seller has delivered to Buyer a list, summary description
(Schedule 3.7 (a)) and copies, as of the date hereof, of all permits and
permit applications, approvals, consents and authorizations, licenses and
license applications, franchises, certificates, trademarks, tradenames,
patents, patent applications and copyrights owned or held by Alarmex and
used in the operation of Alarmex's business as presently conducted.
Except as disclosed in Schedule 3.7 (a), all of the permits, licenses,
applications, franchises and other items set forth in Schedule 3.7 (a) are
valid and in full force and effect and, in the reasonable judgment of the
Seller, adequate for the operation of Alarmex's business as presently
conducted.
(b) All United States and foreign patents and pending patent applications
(either granted, issued or applied for) licensed to, owned by or assigned
to Alarmex relating to or used in the business of Alarmex are listed and
briefly described in Schedule 3.7 (b).
(c) All United States and foreign trademarks and service marks (either
registered or registration applied for) in which Alarmex has any
contractual or ownership interest are listed and briefly described in
Schedule 3.7 (c). Alarmex does not currently have in effect any license
to any third party to use any trademark, service mark or trade name.
(d) Except as set forth in Schedule 3.7 (d), there are no actions,
suits, proceedings or investigations pending, or to the knowledge of the
Seller or Alarmex, threatened against, or affecting Alarmex or its
subsidiary relating to any patent, patent application, trade name,
trade secret,trademark, trademark application, service mark, service
mark application, copyright, process, design, computer program, invention,
know-how or technology in any court or before or by any governmental agency
or instrumentality, domestic or foreign, or before any arbitrator. There
is no pending or, to the knowledge of the Seller and Alarmex, threatened,
litigation against Alarmex's making, using and selling all of the products
which it is presently making, using or selling. To the knowledge of the
Seller and Alarmex, Alarmex's making, using and selling of its present
products does not infringe any patents of others and neither the Seller
nor Alarmex have any knowledge that any other person has infringed upon or
is infringing upon any patent or other proprietary right of Alarmex.
3.8. Fixed Assets. The Seller has delivered to Buyer a list and
summary description (Schedule 3.8), as of the date hereof, of the fixed
assets of Alarmex. All of Alarmex's fixed assets currently used in the
business are in good working order, condition and repair, subject to
ordinary wear and tear and normal ongoing repair and maintenance from
time to time. The fixed assets used by Alarmex in the operation of its
business are listed on Schedule 3.8 and are either owned by Alarmex or
leased under an agreement reflected in Schedule 3.8. Schedule 3.8
also sets forth the book value of the accumulated depreciation of such
fixed assets, determined in accordance with generally accepted United
States accounting principles, consistently applied, as modified, if at
all, by the provisions of this Agreement.
<PAGE> 6
3.9. Leases. The Seller has delivered to Buyer a full and
complete list (Schedule 3.9), together with true and correct copies, as
of the date hereof, of all leases requiring payments per annum of more than
Five Thousand Dollars ($5,000), whether or not reflected on the books of
Alarmex as operating leases or capital leases, to which Alarmex is a party
and which relate to any property, real or personal, used by Alarmex in the
conduct of its business.
3.10. Contracts and Agreements; Adverse Restrictions.
(a) The Seller has delivered to Buyer a full and complete list
(Schedule 3.10), together with true and correct copies, as of the date
hereof, of all contracts and agreements (other than the leases included
on Schedule 3.9) to which Alarmex is a party or by which it or any of its
property is bound and which provide for aggregate future payments by or
to the Company of more than $10,000 and are not cancelable by Alarmex
on ninety (90) days' notice or less (including, without limitation, sales
representative agreements, equipment purchase agreements, equipment
service agreements, joint venture or partnership agreements, contracts with
any labor organizations, loan agreements, bonds, mortgages, liens, pledges
or other security agreements). To the knowledge of the Seller and
Alarmex all such contracts and agreements included in Schedule 3.10 are
in full force and effect and are binding upon the parties thereto and
none of the parties thereto is in breach of any of the material provisions
thereof.
(b) Except as disclosed in Schedule 3.10, Alarmex is not a party
to any contract, agreement or other commitment or instrument or
subject to any charter or other corporate restriction or subject to any
restriction or condition contained in any permit, license, judgment,
order, writ, injunction, decree or award which, singly or in the
aggregate, materially and adversely affects the business, operations,
properties, assets or condition (financial or otherwise) of Alarmex as
currently conducted.
3.11 Title and Liens.
(a) Alarmex has good and marketable title to all properties and assets
owned and used in its business (the "Assets"), and as of the Closing Date,
such Assets will be subject to no mortgage, lease, pledge, lien, security
interest, conditional or installment sales agreement, encumbrance or
charge, except for:
(i) those disclosed in the title report and UCC lien search report(s)
made available to Buyer;
(ii) liens for current taxes and assessments that are not yet due and
payable;
(iii) leases listed on Schedule 3.9;
<PAGE> 7
(iv) the rights of customers of Alarmex with respect
to inventory under orders or contracts entered into by Alarmex in the
ordinary course of business;
(v) such imperfections or irregularities of title,
liens, easements, charges or encumbrances as do not materially impair the
use, occupancy or value of the Assets, or otherwise materially impair
business operations;
(vi) any liens disclosed in Schedule 3.11.
(b) Since December 20, 1994, there have not been any security interests
or any other consensual encumbrances of any nature imposed upon any of the
Assets (other than those permitted pursuant to subsections (a)(i) through
(vi) above), nor have any Uniform Commercial Code financing statements
been executed by Alarmex regarding the Assets.
3.12. Insurance. The Seller has delivered to Buyer a list
(Schedule 3.12) and has made available to Buyer copies as of the date hereof,
of all insurance policies presently carried by Alarmex. Such list shall
specify, for each policy, the name of the insurer, the name of the insured,
the expiration date and whether the premiums are paid and current, a summary
description of the property or interest insured and the type of risks
insured, the deductible and limits of coverage, whether such coverage is
on an occurrence or a claims made basis and the annual premium therefor.
Such policies are presently in full force and effect and shall remain in
effect through the Closing Date. For each insurer providing coverage for
any of the insurable fixed, contingent or other liabilities listed in
Schedule 3.12, each such insurer has been properly and timely notified
of such matter, no reservation of rights letters have been received by
Alarmex and the insurer has assumed the defense of each suit or legal
proceeding.
3.13. Personnel. Schedule 3.13 contains a true and correct
list of (i) all of Alarmex's employees, their names, dates of birth, dates of
hire credited by Alarmex, job classifications and present hourly rates or
salaries, (ii) all employees terminated by Alarmex since January 1, 1994
along with the seniority of each such employee for recall purposes, and
(iii) any affirmative action plan(s) maintained by Alarmex and whether such
plan(s) have ever been audited by the Equal Employment Opportunity Commission.
3.14. Collective Bargaining Agreement; Benefit Plans.
(a) Alarmex is a party to only six (6) collective bargaining agreements,
which are with Locals #292, #134, #150, #701, #176, and #117 of the
International Brotherhood of Electrical Workers -AFL-CIO, the only union
representing Alarmex's employees and which expire on February 1997, June
1996, October 1996, November 1995, November, 1995 and June 1995
respectivly. Alarmex has never been a party to any collective bargaining
agreement other than those indicated in the previous sentence and the
predecessors thereto. To the knowledge of Seller, except as set forth on
Schedule 3.14 (a) Alarmex is in compliance with all Federal, State
<PAGE> 8
or local laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including, without
limitation, all such laws related to union agreements, the violation of
which would have a material adverse effect on Alarmex.
(b) Alarmex does not maintain or contribute to any employee benefit plan
("Employee Benefit Plan"), as that term is defined in Section 3(3) of
ERISA, other than as set forth in Schedule 3.14(b). Except as set forth
in Section 3.14(b) no Employee Benefit Plan is a multiemployer plan as
described in Section 4001(a)(3) of ERISA or a multiple employer plan as
described in Sections 4063 and 4064 of ERISA. Other than as set forth in
Schedule 3.14(b), there are no employment or consulting agreements,
severance agreements, plans or arrangements providing for the payment
of "excess parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), employee pension
or retirement plans, profit-sharing plans, savings plans, deferred
compensation plans (either funded or unfunded), bonus, stock option,
stock purchase, restricted stock, incentive, supplemental retirement,
retiree medical, disability or life insurance plans, or any other plans,
programs or arrangements providing similar benefits to directors, officers,
employees, former employees or retired employees of Alarmex.
Schedule 3.14(b) also sets forth (i) each employee benefit plan for which
Alarmex could incur liability under Section 4069 of ERISA in the event such
plan has been or were to be terminated and (ii) any plan in respect of
which Alarmex could incur liability under Section 4212(c) of ERISA, and
each such plan shall also be considered an Employee Benefit Plan for
purposes of this Agreement. To the extent that Alarmex has such documents
in its possession, Alarmex has made available true and complete copy of
each such plan, a copy of each trust or other funding arrangement, the
most recently filed Internal Revenue Service ("IRS") Form 5500, the most
recently received IRS determination letter for each such plan, the
most recently completed actuarial valuation for each plan and the
applicable summary plan description, if any.
(c) To the knowledge of the Seller and Alarmex, and except as described
in Schedule 3.14(c) each Employee Benefit Plan has been maintained in
compliance (including all material filing requirements) with the
requirements of ERISA and the Code, the violation of which would have a
material adverse effect on Alarmex.
(d) Except as described in Schedule 3.14(d) each employee pension benefit
plan, as defined in Section 3(2) of ERISA, and related trust maintained
by Alarmex is qualified as to its written form under Sections 401(a) and
501(a) of the Code.
(e) No employee pension benefit plan maintained by Alarmex has incurred
an "accumulated funding deficiency" as such term is defined in Section 302
of ERISA and Section 412 of the Code (whether or not waived). A true and
correct copy of the most recent actuarial report for any defined benefit
pension plan maintained by Alarmex has been made available to Buyer.
<PAGE> 9
(f) No reportable event, as such term is defined in Title IV of ERISA,
for which the PBGC has not waived the thirty (30) day notice requirement,
has occurred with respect to any defined benefit pension plan maintained
by Alarmex. To the knowledge of the Seller and Alarmex no prohibited
transaction, as such term is defined in Section 406 of ERISA or Section
4975 of the Code, has occurred with respect to any Employee Benefit Plan.
Except as disclosed on Schedule 3.14(f), no complete or partial termination
has occurred within the five years preceding the date hereof with respect
to any employee pension benefit plan; all contributions, premiums or
payments required to be made with respect to any Employee Benefit Plan have
been made on or before their due dates; and Alarmex has not incurred any
liability under, arising out of or by operation of Title IV of ERISA
(other than liability for premiums arising in the ordinary course).
(g) Except as disclosed on Schedule 3.14(g), there are no actions, suits
or claims pending, other than routine claims for benefits, with respect to
the Employee Benefit Plans and, to the knowledge of the Seller or Alarmex,
there are no such actions, suits or claims threatened, arising out of, or
in connection with, the existence, operation, maintenance or administration
of such Employee Benefit Plans.
(h) Schedule 3.14(h) sets forth a complete and accurate list of each
Employee Benefit Plan which provides or promises retiree medical,
disability or life insurance benefits to any current or former employee,
officer or director of Alarmex, and a list of each employee to whom
such benefits are provided, specifying which benefits are
provided to each employee so listed.
(i) No event has occurred with respect to any Employee Benefit Plan
maintained by any individual or entity that is or has been a member of any
group of organizations described in Section 414(b) or (c) of the Code of
which Alarmex is a member which would result in a liability of Alarmex
by virtue of Alarmex's membership in such group.
3.15. Operations. Alarmex owns, leases or has licenses
to use all Assets being used in and necessary to the operation of Alarmex's
business as currently conducted.
3.16. Laws and Regulations; Litigation. Except as set
forth in Schedule 3.16, Alarmex has not violated and is not in violation
of or default under any law or regulation, or under any order of any court
or Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over Alarmex,
violation of which would have a material adverse effect on Alarmex or its
business or operations, and there are no claims, actions, suits or
proceedings pending, or to the knowledge of the Seller and Alarmex,
threatened against or affecting Alarmex, at law or in equity, before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction
over Alarmex.
<PAGE> 10
3.17. Taxes. Alarmex has filed or will file, on a timely
basis, all requisite tax and information returns with respect to all
Federal, state or local taxes imposed upon Alarmex and all taxes due
(whether or not shown on such returns) for all applicable periods ended
on or before the date hereof have been or will be paid in full when due or
are or will be reserved for on the financial statements. There is
no basis for any claims against Alarmex for any such taxes for any period
or periods prior to and including the date hereof that have not been
reflected as provisions and reserves for taxes on the Interim Financial
Statements. All provisions and reserves are sufficient for the payment of
all such taxes for all fiscal periods ended on or before that date. Copies
of the Federal income, and state franchise, income and sales tax returns
related directly to Alarmex for its fiscal years ended December 31, 1993
and December 31, 1992 have been or prior to the Closing will be, delivered
to Buyer. Copies of all other Federal, state, local and other tax and
information returns related directly to Alarmex have been made available
to Buyer and are among the records of Alarmex, possession of which will
accrue to Buyer at Closing. Alarmex's Federal income tax returns have
not been audited since 1987. Alarmex has not granted any waiver or
extension of applicable statutes of limitation with respect to the
examination of any tax return. Seller reserves the right to challenge
any tax deficiencies assessed and subject to this provision. Seller agrees
to pay all professional fees it directly incurs as part of this right.
3.18. No Change. Except as shown on Schedule 3.18, from
September 30, 1994 through the date hereof there has not been, except as
disclosed in the Schedules hereto or as contemplated by this Agreement:
(a) any material adverse change in the Assets, operations or business
of Alarmex;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the Assets, operations or business of Alarmex;
(c) any change in, or agreement to change, (i)ownership of the authorized
capital or outstanding securities of Alarmex, or (ii) the securities of
Alarmex;
(d) any declaration or payment of, or any agreement to declare or pay,
any dividend or distribution in respect of an equity interest in or any
direct or indirect redemption, purchase or other acquisition of any of
the Stock;
(e) except for amendments to the collective bargaining agreements
and bonuses to employees in a manner consistent with past practice, any
increase in the compensation payable or to become payable by Alarmex to
any of its directors, officers or agents, or any severance or termination
pay paid to any present or former officer of Alarmex, except in the
ordinary course of business and consistent with past practices of the
Company and which do not exceed $5,000 in the aggregate;
<PAGE> 11
(f) any labor dispute materially adversely affecting the operations,
business or future prospects of Alarmex;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets (other than inventory in the ordinary course), property
or rights of Alarmex to any other person, including, without limitation,
the Seller, their affiliates or any entity owned or controlled by the
Seller, or their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to Alarmex, including, without limitation, any
indebtedness or obligation of the Seller, or any affiliate or any entity
owned or controlled by the Seller, or their affiliates;
(i) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, property or
rights of Alarmex or requiring the consent of any party to the transfer
and assignment of any such assets, property or rights;
(j) any purchase or acquisition, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets, except in the
ordinary course of business;
(k) any waiver of any material rights or claims of Alarmex which
would materially adversely affect the operations, business or future
prospects of Alarmex;
(l) any amendment or termination of any material contract, agreement,
license, permit or other right to which Alarmex is a party which would
materially adversely affect the operations, business or future prospects
of Alarmex; or
(m) any other transaction by Alarmex outside the ordinary
course of its business.
3.19. Bank Accounts. The Seller has delivered to Buyer
a list (Schedule 3.19), as of the Closing Date, of:
(a) the name of each bank in which Alarmex has accounts or
safe deposit boxes,
(b) the names in which the accounts or boxes are held,
(c) the type of account, and
(d) the name of each person authorized to draw thereon or
have access thereto.
<PAGE> 12
3.20. Environmental Matters.
(a) To the best of its knowledge, Alarmex has complied in all material
respects and is not in violation of any, foreign, Federal, state, or
local law, regulation, permit provision, order or ordinance relating to
environmental protection including, without limitation, standards related
to air, water, land and the generation, maintenance, storage,
transportation, treatment, or disposal of petroleum products, toxic
substances, solid wastes and hazardous wastes or requiring the removal,
treatment, containment or other disposition of hazardous substances,
hazardous wastes, pollutants or contaminants, as defined in any of said
laws ("Hazardous Wastes") except where any non-compliance would not have a
material adverse effect on Alarmex.
(b) To the best of Alarmex's knowledge, there are no locations on the
properties ("Premises") owned or leased by Alarmex where (A) Hazardous
Wastes or other harmful substances have entered into the soil and/or ground
water due to the acts or omissions of Alarmex, its employees,
affiliates, agents or invitees irrespective of when such action took
place or (B) there are any underground tanks whether or not presently in
use.
(c) Schedule 3.20 (c) contains a complete statement of the location of all
substances which Alarmex currently uses which it believes may constitute
Hazardous Wastes. Except as indicated in Schedule 3.20 (c), there are no
Hazardous Waste ponds, disposal areas or storage facilities currently
in use by Alarmex or any other person at or in connection with the Premises.
(d) To the best of Alarmex's knowledge, there are no on-site or off-site
disposal sites or locations to which Alarmex has transported or is now
transporting Hazardous Wastes or has arranged for the transportation of
Hazardous Wastes, which site, to Alarmex's knowledge is the subject
of foreign, Federal, state, or local enforcement actions or other
investigations which may lead to claims under any Federal, state, local
or foreign statute, rule or regulation. All manifests utilized by Alarmex
for the transportation of Hazardous Wastes have been made available
to Buyer for inspection.
(e) There is attached hereto as Schedule 3.20 (e) a
complete statement of the inventory of raw materials, chemicals, products
and waste materials which to the best of Alarmex's knowledge are included
within the definitions of "Hazardous Substances," as defined in Minn.
Stat. 116.06 and all "Hazardous Wastes" as defined earlier or as defined
in 42 U.S.C. 6903(5), processed, generated, produced, stored or maintained
at the Premises; all on-site spills, leaks, releases at the Premises that
occurred while the Premises was owned or used by Alarmex; and notices of
waste disposal, if any, filed pursuant to Section 103(C) of the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601, et seq. ("CERCLA").
<PAGE> 13
3.21. Accurate and Complete Records. The books, ledgers,
financial records and other records of Alarmex:
(a) are in the possession of Alarmex;
(b) accurately reflect as of the dates shown thereon all items of income
and expense and all assets, liabilities and accruals of Alarmex required
to be reflected therein in accordance with generally accepted United States
accounting principles.
Alarmex has not received any advice from its independent
public accountants that there are any material weaknesses in its system
of internal controls. Alarmex has provided Buyer with copies of all (i)
management letters received from its independent public accountants and
management's responses thereto for Alarmex's three most recent fiscal years
and (ii) responses from its legal counsel to auditor's requests for
information in conjunction with Alarmex's annual audit for Alarmex's
three most recent fiscal years.
3.22. Accuracy, Completeness, No Misleading Statements. The
representations and warranties of the Seller and Alarmex contained in this
Agreement, and the Exhibits and Schedules hereto are complete and accurate
and do not and will not include any misstatements of fact or untrue
statements or facts and do not and will not omit any material facts or
statements.
3.23. Approval and Authorization. This Agreement has been
duly and validly executed and delivered by the Seller and Alarmex.
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND OBLIGATIONS OF BUYER.
Buyer represents, warrants, covenants and agrees as follows:
4.1. Existence and Good Standing. Buyer has been duly
incorporated and is validly existing in good standing under the laws of
the Commonwealth of Pennsylvania.
4.2. No Default. The execution of this Agreement by Buyer and
the performance of its obligations hereunder will not (i) violate or result
in a breach of or constitute a default under Buyer's charter or bylaws, as
amended, any agreement to which it is a party or by which it is bound or
any law, regulation, order or judgment, or (ii) create or impose any lien
or encumbrance upon any of Buyer's assets.
4.3. Approval of Board of Directors; Validity. The execution
and delivery of this Agreement and the other documents
and instruments to be executed and delivered by Buyer pursuant hereto
and the consummation of the transactions contemplated hereby and thereby
by Buyer has been duly authorized by the Board of Directors of Buyer. No
other corporate act or proceeding on the part of Buyer, or its stockholders
is necessary to authorize this Agreement and the other documents and
instruments to be executed and delivered by Buyer pursuant hereto, or
<PAGE> 14
the transactions contemplated hereby or thereby, including the payment of
the Purchase Price to the Seller. This Agreement has been duly and validly
executed and delivered by Buyer and is a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, subject to
the laws of bankruptcy and other equitable principles affecting the rights
of creditors generally.
4.4 Financial Statements. The consolidated balance sheet of
the Buyer as at December 26, 1993, and the related consolidated earnings
statements, and statements of cash flows for the fiscal year ended on such
date and for the nine-month period ended September 25, 1994, including
in each case the related schedules and notes, if any, copies of each of
which have been delivered to Seller, are each correct and complete and
present fairly, in all material respects, the consolidated financial
position, results of operations and cash flows of Buyer as of the
respective date of such balance sheet and for such fiscal year and period
in accordance with generally accepted accounting principles consistently
maintained throughout the periods involved, except as specifically noted
therein.
4.5. No Material Change. Since September 25, 1994, there has
been no material adverse change in the assets, operations or business of
the Buyer taken as a whole.
4.6. No Misleading Statements. The representations and
warranties of the Buyer contained in this Agreement are complete and
accurate in all material respects and do not include any misstatements
of fact or untrue statements and do not omit any material facts or
statements.
5. COVENANTS OF THE SELLER AND ALARMEX PRIOR TO CLOSING. Between
the date of this Agreement and the Closing Date:
5.1. Access; Confidential Information. Alarmex and the Seller
will afford to the officers and authorized representatives of Buyer access
to the plants, properties, books and records of Alarmex and will furnish
Buyer with such additional financial and operating data and other
information as to the business and properties of Alarmex as Buyer may from
time to time reasonably request for all reasonable purposes including,
without limitation, verifying the accuracy of the representations and
warranties made herein. Alarmex and the Seller will cooperate with Buyer,
its representatives and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by any governmental agency. Buyer will cause all
information obtained from the Seller and Alarmex in connection with the
negotiation and performance of this Agreement to be treated as confidential
under the terms of the confidentiality agreement dated October 20, 1994
referenced in the letter of intent among the parties hereto.
5.2. Operations. The Seller will cause Alarmex to:
<PAGE> 15
(a) carry on its business in substantially the same manneras it has
heretofore and not introduce any material new method or discontinue any
existing material method of management, operation or accounting;
(b) maintain its properties and facilities in as good working order and
condition as at present, ordinary wear and tear excepted;
(c) perform all its material obligations under all agreements relating
to or affecting its assets, properties, business operations and rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships with suppliers, customers and others having business
relations with it;
(f) advise Buyer promptly in writing of any material change or inaccuracy
in any document, schedule or other information delivered pursuant to this
Agreement;
(g) file on a timely basis all material notices, reports
or other filings required to be filed with or reported to any federal,
state, municipal or other governmental department, commission, board,
bureau, agency or any instrumentality of any of the foregoing
wherever located with respect to the continuing operations of
Alarmex; and
(h) file on a timely basis all complete and correct applications or
other documents necessary to maintain, renew or extend any permit,
license, variance or any other approval required by any governmental
authority necessary and/or required for the continuing operation of
Alarmex, whether or not such approval would expire before or after
the Closing.
5.3 No Change. Except as contemplated by this Agreement,
through the Closing Date, the Seller will not permit Alarmex without the
prior written consent of Buyer, to:
(a) make any change in its charter documents or bylaws;
(b) authorize, issue, transfer or distribute any securities of Alarmex;
(c) declare or pay any dividend, except in the ordinary course of
business and consistent with past practices, or make any distribution in
respect of its Stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its Stock;
<PAGE> 16
(d) except as described in Section 3.6, enter into any contract or
commitment or incur or agree to incur any liability or make any capital
expenditures, except for sales and purchase orders in the ordinary course
of business and except for expenditures for machinery and equipment
necessary for the continued operation of Alarmex's business not exceeding
Ten Thousand Dollars ($10,000) in the aggregate.
(e) create, assume or otherwise permit the imposition of any mortgage,
pledge or other lien or encumbrance upon any assets or properties of Alarmex
whether now owned or hereafter acquired;
(f) sell, assign, lease or otherwise transfer or dispose of any property
or equipment that are fixed assets without first having notified Buyer and
received Buyer's consent thereto;
(g) merge or consolidate or agree to merge or consolidate with or
into any firm, corporation or other entity;
(h) waive any material rights or claims of Alarmex without first having
notified Buyer and received Buyer's consent thereto;
(i) except as contemplated by this Agreement or any agreement incidental
hereto, amend or terminate any material contract, agreement, permit,
license or other right of Alarmex without first having notified Buyer and
received Buyer's consent thereto; or
(j) enter into any other transaction outside the ordinary course of its
business or prohibited hereunder.
5.4. No Shop Provision. The Seller agrees that, upon the
execution of this Agreement and through the earlier of the termination
date under Section 2(b) or the Closing Date, unless otherwise extended by
mutual consent, it will not engage in any discussions or negotiations with
any other party to acquire any of the Stock or the assets of Alarmex
(other than inventory sold in the ordinary course of business), or sell,
transfer or agree to sell or transfer any of the Stock or such assets of
Alarmex.
5.5. Consents. The Seller shall cause Alarmex to give all
notices and make requests for all consents, if any, which may be required
in connection with the sale of the Stock, and shall deliver each such
consent or other document so obtained to Buyer on or prior to the Closing
Date.
<PAGE> 17
6. INDEMNIFICATION.
6.1. Indemnification.
(a) The Seller and Alarmex jointly and severally covenant and agree that
they will indemnify and hold harmless Buyer, its subsidiary and affiliates
and their respective officers and directors from and after the Closing
Date, from and against any and all losses, damages, liabilities, claims,
deficiencies, costs, expenses or expenditures which any of the indemnified
parties may suffer or incur with respect to any of the contingencies
described below; provided that an indemnified party shall have given a
written notice of claim to the Seller setting forth with particularity the
specific indemnity event for which indemnity is sought by an indemnified
party or an indemnified party shall have asserted its claim for indemnity
in a litigation commenced against the Seller and/or Alarmex:
(i) any direct, accrued, deferred, absolute or contingent liability or
claim against Alarmex, arising out of or incurred in connection with:
(A) the breach of any covenant or agreement made by the
Seller or Alarmex in this Agreement;
(B) the breach of any representation or warranty, whether intentional
or otherwise, made by the Seller or Alarmex in this Agreement or any
misrepresentation in or omission from any schedule or certificate
furnished or to be furnished to Buyer pursuant to the terms of this
Agreement;
(C) except to the extent reserved for on the Closing Balance Sheet,
any Federal, state or local tax liability, interest or filing penalties
of Alarmex, or any subsidiary or affiliate of Alarmex, for any period
through the Closing Date, for any period before or after the Closing Date,
including but not limited to any tax liability arising out of the
transactions contemplated hereby; and
(ii) all actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses of investigation) incident to any of the foregoing.
(b) Seller agrees to indemnify Buyer and hold Buyer
harmless against all claims, suits or liabilities (hereinafter referred to
as a "claim"), including settlements, and expenses, and further including
reasonable attorney fees, arising out of or relating to any infringement
of those patents listed on Schedule 6.1 (b) based upon any product
previously produced and/or sold by Seller or Alarmex as well as any
current product of Alarmex which Buyer may choose to produce and/or
sell, provided that written notice of any such claim is
<PAGE> 18
delivered by Buyer to Seller within thirty days after any such claim first
becomes known to Buyer. The parties indemnified under this clause shall
include Buyer, its affiliates and their officers, directors, employees and
agents as well as all Buyer's customers. Seller has the right to defend, or
at its option to settle any such claim and Buyer and all other parties
indemnified agree to provide proper and full information, testimony and other
non-financial assistance to Seller in the defense or settlement of any such
claim, at no expense to Seller. Notwithstanding any clause in this
Agreement to the contrary, the indemnification provided Buyer in this
clause shall be valid for a term of five (5) years beginning on the Closing
Date, and in the event that any claim or suit is brought for which this
indemnity applies, and in the course of defense of such suit or claim, the
patent rights being claimed against Buyer are held to be invalid or that
there was no infringement, then Seller shall be released from the obligation
to indemnify Buyer under this clause.
(c) The Buyer covenants and agrees that it will indemnify
and hold harmless Seller, Alarmex, their respective subsidiary and
affiliates, and their respective officers and directors from and after
the Closing Date, from and against any and all losses, damages,
liabilities, claims, deficiencies, costs, expenses or expenditures which
any of the indemnified parties may suffer or incur with respect to any of
the contingencies described below; provided that an indemnified party shall
have given a written notice of claim to the Buyer setting forth with
particularity the specific indemnity event for which indemnity is sought by
an indemnified party or an indemnified party shall have asserted its claim
for indemnity in a litigation commenced against the Buyer:
(i) any direct, accrued, deferred, absolute or
contingent liability or claim against an indemnified party, arising out of
or incurred in connection with:
(A) the breach of any covenant made by the
Buyer in this Agreement;
(B) the breach of any representation or warranty,
whether intentional or otherwise, made by Buyer in this Agreement; and
(C) any acts or omissions by Alarmex or Buyer
after the Closing, including plant closure, if such acts or omissions
cause the indemnified party to incur a substantive liability beyond the
cost of defending against such liability; and
(ii) all actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
(d) The indemnity obligation of an indemnifying party
under this Section 6.1 shall be (i) net of any insurance proceeds actually
received by the indemnified party in connection with the facts giving rise
to the right of indemnification under any policy of
<PAGE> 19
insurance maintained by the indemnified party (other than under a
program of self insurance) and (ii) net of any tax benefit realized
or to be realized by the indemnified party by reason of the facts and
circumstances giving rise to the indemnifying party's liability.
(e) The indemnity obligations of the parties hereunder
and any liability for breach of a party's representations and warranties
hereunder shall expire automatically on the date eighteen (18) months after
the Closing Date, except with respect to (i) the obligations described in
Section 6.1(a)(i)(C) and (ii) a breach of the representations and
warranties in Section 3.20, both of which shall survive for the applicable
statute of limitations, respectively, and Section 6.1 (b) which shall
survive for a term of five (5) years beginning on the Closing Date.
(f) The Seller and Alarmex shall not be required to make
any indemnification payments under Section 6.1(a) with respect to any
breach of any of their representations and warranties set forth herein,
in the schedules or in any certificate delivered pursuant hereto, except
to the extent that the cumulative amount of the damages actually incurred
by the indemnified parties hereto as a result of all breaches of such
representations and warranties actually exceeds the sum of $100,000. This
$100,000 exception shall not apply to any claims related to the low
income housing investment represented on the balance sheet.
6.2. Notice of Indemnity Claim.
(a) In respect of any indemnity event as to which
indemnity is sought hereunder, an indemnified party shall (i) within
five (5) days after receipt of written notice of commencement of any
third party litigation for which indemnity is claimed, (ii) within fifteen
(15) days after receipt by such indemnified party of written notice
of any third party claim (i.e., invoice, notice of claim or assessment,
etc.) against such indemnified party, or (iii) within a reasonable time
after such indemnified party becomes aware of the existence of any other
indemnity event, in respect of which indemnification may be sought
from an indemnifying party under this Section 6, notify the indemnifying
party in writing thereof.
(b) If the indemnifying party, within a reasonable time
after notice of any such claim, fails to defend such claim, the indemnified
party will (upon further notice to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the indemnifying party, subject to the
right of the indemnifying party to assume the defense of such claim at any
time prior to settlement, compromise or final determination thereof. If
there is a reasonable probability that a claim may materially and
adversely affect the indemnified party other than as a result of money
damages or other money payments, the indemnified party shall have the
right, at its own cost and expense, to defend, compromise or settle such
claim. The indemnifying party shall not, without the written consent of
the indemnified party, settle or compromise any claim or consent to the
entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the indemnified
party a release from all liability in respect of such claim.
<PAGE> 20
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer hereunder, including, without limitation, the obligation to
consummate this transaction, are, at its option, subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
7.1. Accuracy of Representations; Performance of Covenants.
The representations and warranties of the Seller and Alarmex contained in
this Agreement shall have been true when made and shall be true in all
material respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of
such date; each and all of the agreements of the Seller and Alarmex to be
performed on or before the Closing Date pursuant to the terms hereof shall
have been performed in all material respects; and the Seller and Alarmex
shall have delivered to Buyer a certificate dated the Closing Date and
signed by them to such effect.
7.2. Changes to Schedules. Except as required or permitted in
this Agreement there shall have been no material change to any of the
Schedules presently attached to this Agreement between the date hereof
and the Closing Date, and the Seller and Alarmex shall have delivered a
certificate dated the Closing Date and signed by them to such effect.
7.3. Governmental Consents; No Litigation. No action or
proceeding before a court or any other governmental agency or body shall
have been instituted or threatened to restrain or prohibit Buyer's
acquisition of the Stock and no governmental agency or body shall have
taken any other action as a result of which the management of Buyer deems
it advisable to proceed with the transactions hereunder.
7.4. No Material Adverse Change. To the best knowledge of
Seller, since the date hereof, no material adverse change in the assets,
operations or business of Alarmex shall have occurred, and Alarmex shall
not have suffered any material loss or damage to any of its assets,
whether or not covered by insurance, which change, loss or damage
materially affects or impairs the ability of Alarmex to conduct its
business and Buyer shall have received a certificate signed by Alarmex
and the Seller dated the Closing Date to such effect.
7.5. Approval By Counsel. All actions, proceedings,
instruments, documents and related legal matters which are required to
carry out this Agreement and consummate this transaction and which are
reasonably necessary in order for Buyer to obtain the essential benefit
of its bargain hereunder shall have been approved by counsel to Buyer,
whose approval shall not be unreasonably withheld.
7.6. Good Standing. The Seller shall have delivered to
Buyer (a) a true and correct copy of the charter documents of
Alarmex, as amended to a date no more than thirty (30) days
prior to the Closing Date, certified by the Secretary of State
of the State of Minnesota, and a certified statement of the Secretary
of Alarmex to the effect that such charter documents have not
<PAGE> 21
been amended since the date thereof, and (b) a certificate, dated as
of a recent date, duly issued by the appropriate governmental authority in
Alarmex's state of incorporation and in each state in which the Company
is authorized to do business showing that Alarmex is in good standing and
authorized to do business.
7.7. Resignations. The Seller shall have delivered to Buyer the
resignations effective as of the Closing Date of all officers and directors
of Alarmex, unless otherwise requested by Buyer.
7.8. Consents. All consents obtained pursuant to Section 5.5
shall have been delivered to Buyer.
7.9. Release of Security Interest. Alarmex's lenders shall
have released any and all security interests in the assets of Alarmex.
7.10. Board Resolutions. Buyer shall have received
certified resolutions of the Board of Directors of Alarmex duly approving
this transaction.
7.11. Non-Compete. DJF and Buyer shall have executed and
delivered a non competition agreement in the form attached as Exhibit B.
7.12. Guaranty. Buyer shall have received the guaranty,
in a form satisfactory to Buyer's counsel, of Mary E. Frederick which
shall guaranty the obligations of Daniel J. Frederick and Alarmex in this
Agreement.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER. The obligations
of the Seller hereunder, including, without limitation, the obligation to
consummate this transaction, are, at his option, subject to satisfaction,
on or prior to the Closing Date, of the following conditions:
8.1. Accuracy of Representations; Performance of Covenants.
The representations and warranties of Buyer contained in Section 4 shall be
accurate as of the Closing Date as though such representations and
warranties had been made at and as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by Buyer on or before the Closing Date shall have been duly
complied with and performed; and a certificate to the foregoing effect
dated the Closing Date and signed by Buyer to such effect, shall have been
delivered to the Seller.
8.2. Release of Guarantors. Contemporaneously with the Closing,
the Seller, shall be released as a contingent obligor (whether under
guarantees, comfort letters, letters of credit or
<PAGE> 22
otherwise) of Alarmex's funded indebtedness or obligations which are set
forth on Schedule 8.2, and such releases shall be satisfactory in form
and substance to Seller and Seller's counsel.
8.3. Related-Party Debt. On the Closing Date, Seller shall
repay any indebtedness to Alarmex then outstanding, plus accrued interest.
8.4. Governmental Consents; No Litigation No action or
proceeding before a court or any other governmental agency or body shall
have been instituted or threatened to restrain or prohibit the Seller's
sale of the Stock, and no governmental agency or body shall have taken
any other action as a result of which the Seller deems it inadvisable to
proceed with the transactions hereunder.
8.5. Board Resolutions. The Seller shall have received
certified resolutions of the Board of Directors of the Buyer duly
approving this transaction.
8.6. Payment of Purchase Price. Buyer shall have paid to
Seller the Purchase Price required to be paid in cash at the Closing
pursuant to Section 1 hereof.
9. EMPLOYEE MATTERS.
9.1. Welfare Plans. Neither Alarmex nor Buyer shall have
any obligation or liability to install, maintain or keep in force any
welfare or other plans for any of Alarmex's employees, including, but not
limited to, pension, severance, medical, retiree medical, health, dental,
accident, life, retiree life, short and long term disability or non
occupational disability after the Closing.
9.2. No Third Party Rights.
(a) Except as limited by the Agreements set forth in Schedule 3.14,
nothing herein expressed or implied shall confer upon any employee of
Alarmex, Buyer, an affiliate of Alarmex or Buyer or any legal
representative or any collective bargaining agent of any of the foregoing,
any rights or remedies, including any right to employment, or continued
employment for any specified period, of any nature or kind whatsoever under
or by reason of this Agreement or elsewhere.
(b) Nothing in this Agreement shall be deemed to confer upon any person
(or any beneficiary thereof) any rights under or with respect to any plan,
program or arrangement described in or contemplated by this Agreement, and
each person (and any beneficiary thereof) shall be entitled to look only
to the express terms of any such plan, program or arrangement for his
rights thereunder.
<PAGE> 23
(c) Buyer retains and shall not be deemed to waive any of its rights or
abilities to control the use and operation of Alarmex on or after the
Closing or to take any other actions it deems appropriate with respect
thereto including, but not limited to, reorganization of Alarmex,
divestiture of the assets of Alarmex, reduction or relocation of employees
or plant locations or reassignment of personnel and/or duties.
9.3. Indemnification of the Seller. Buyer shall indemnify and
hold harmless the Seller from any obligation or liability (including
attorney's fees and expenses) arising out of the Buyer's exercise of
its rights as aforesaid relating to employees, employee benefits or
management of Alarmex's business following the Closing, including decisions
to close plants if such action(s) by Buyer cause Seller to incur any
liability whatsoever.
10. SURVIVAL OF REPRESENTATIONS. The representations, warranties,
covenants and agreements of the parties contained in this Agreement or
in any writing delivered pursuant to the provisions of this Agreement shall
survive the consummation of the transactions contemplated hereby and
any examination on behalf of the parties; provided that claims for
breaches of representations and warranties made pursuant to Section 3
hereof shall be subject to the limitations of Section 6 hereof.
11. GENERAL.
11.1. Additional Conveyances. Upon the execution of this
Agreement, Buyer and Seller mutually agree to promptly undertake, and to
pursue, cooperatively and diligently, the obtaining of all approvals,
consents and authorizations required to be given by third parties,
governmental or private, that are necessary or appropriate to effect the
transactions contemplated in this Agreement in an expeditious and prudent
manner without out-of-pocket expense to Alarmex. In addition, the Seller
shall deliver or cause to be delivered on the Closing Date, and at such
other times and places as shall be reasonably agreed on, such additional
instruments as Buyer may reasonably request for the purpose of carrying
out this Agreement. The parties will cooperate and use their best efforts
to have the officers, directors and employees of Alarmex cooperate
with both parties on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
11.2. Assignment. This Agreement and the rights of the
Seller hereunder may not be assigned by the Seller (except by operation
of law) and shall be binding upon and shall inure to the benefit of the
parties hereto, and the successors and permitted assigns of Buyer and the
successors of Seller. Buyer may assign this Agreement to any company
affiliated with Buyer, provided that following such assignment, Buyer
shall remain bound by its representations, warranties and agreements
herein.
<PAGE> 24
11.3. Counterparts/Telecopy Documents. This Agreement
may be executed simultaneously in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same instrument. Telecopy versions of signed documents shall be
deemed original documents for all purposes hereunder.
11.4. Brokers. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees
to indemnify the other against all loss, cost, damage or expense
(including, but not limited to, attorney's fees and expenses) arising
out of claims for fees or commissions of brokers or agents employed or
alleged to have been employed by such indemnifying party.
11.5. Fees and Expenses. Whether or not the transactions
herein contemplated shall be consummated, (i) Buyer will pay the fees,
expenses and disbursements of Buyer and its agents, representatives,
accountants and counsel incurred in connection with the subject matter of
this Agreement and any amendments thereto, and (ii) in the event that this
Agreement is terminated for any reason, Buyer will pay the fees, expenses
and disbursements of Alarmex and Seller and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of
this Agreement and any amendments hereto; and (iii) in the event that this
Agreement and the Closing herein contemplated occurs, then in such event
Seller shall pay all of the fees and expenses of Seller related to this
transaction.
11.6. Notices. Any notice or communication
required or permitted hereunder shall be sufficiently given
if sent by first class mail, postage prepaid or telefax:
(a) If to Buyer:
Checkpoint Systems, Inc.
101 Wolf Drive
Thorofare, New Jersey
Facsimile: (609) 848-2042
Attn: Neil D. Austin, Vice President
General Counsel and Secretary
With a copy to:
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Facsimile: (215) 564-8120
Attn: James M. Papada, III, Esquire
<PAGE> 25
(b) If to the Seller or Alarmex:
Daniel J. Fredrick, President
Alarmex, Inc.
6640 Shady Oak Road, Suite 300
Eden Prairie, MN 55344
Facsimile: (612) 943-3854
With a copy to:
Thomas D. Feinberg, Esquire
Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
Facsimile: (612) 335-1657
11.7. Applicable Law. This Agreement shall be construed
in accordance with the laws of the Commonwealth of Pennsylvania.
11.8. Captions. The captions in this Agreement are for
convenience only and shall not be considered a part hereof or affect the
construction or interpretation of any provisions of this Agreement.
11.9. Entire Agreement. This Agreement (including the
schedules and exhibits hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding between the Seller,
Alarmex and Buyer and, except as specifically required hereby, supersede
any prior agreement and understanding relating to the subject matter of
this Agreement. This Agreement may be modified or amended only by a
written instrument executed by the Seller, Alarmex and Buyer.
11.10. Announcements. The initial general notices,
releases, statements and communications with employees, suppliers,
distributors and customers of Alarmex's business and to the general
public and the press relating to the transactions contemplated by this
Agreement shall be made only at such time and in such manner as may
be mutually agreed upon by the Buyer and the Seller; provided, however,
that any party shall be entitled to make a public announcement about such
transactions if, in the opinion of its counsel, such announcement is
required to comply with any applicable law, rule or regulation.
Information provided by either party to third parties whose assistance
and cooperation may, in the judgment of such informing party, be required
for the successful consummation of the transactions contemplated by this
Agreement, shall not be construed as a general notice, release, statement
or communication within the meaning or intent of this section.
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed and delivered this
Stock Purchase Agreement as of the day and year first above written.
-------------------
Daniel J. Frederick
ALARMEX, INC. CHECKPOINT SYSTEMS, INC.
------------------- ------------------------
Daniel J. Frederick Steven G. Selfridge
President Senior Vice President-
Operations and Chief Financial
Officer
<PAGE> 27
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
1st day of February, 1995, among Checkpoint Systems, Inc., a
Pennsylvania corporation (the "Buyer"), Mary E. Frederick ("MEF" or
"Seller") and Bayport Controls, Inc. ("Bayport"), a Minnesota
corporation.
Background
The Seller owns or will own on the Closing Date (hereafter
defined) all of the issued and outstanding shares of the capital stock
of Bayport, whether voting or non-voting, (the "Stock") and desires to
sell all of the Stock to Buyer as hereinafter provided. Buyer desires
to acquire the Stock in exchange solely for the Purchase Price
(hereafter defined) subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the promises
and covenants set forth below and intending to be legally bound hereby,
the parties agree as follows:
1. PURCHASE OF SHARES OF BAYPORT
1.1. Transfer of Consideration The Seller agrees to
deliver or cause to be delivered to Buyer on the Closing Date 1000
shares of Stock. In consideration therefor, Buyer agrees to issue and
to deliver to Seller 200,717 shares (the "Shares") of Buyer's common
stock (the "Purchase Price") on the Closing Date.
1.2 Restrictions On Transfer Of Shares.
(a) Seller understands and agrees that the
certificate(s) evidencing the Shares shall be inscribed conspicuously on
the reverse side thereof with a restrictive legend as follows:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or
any applicable state securities laws, and no transfer, sale, assignment
or other disposition of such shares may be made except in compliance
with the requirements of or under an exemption from registration under
the Act or such other laws."
(b) Seller understands and agrees that the Shares to
be issued hereunder are not registered under the Act and notwithstanding
any exemption which may be available under the Act, Seller agrees not to
transfer, sell, assign or otherwise dispose of such shares for a period
of three (3) years from the date of issuance of such Shares.
<PAGE> 1
2. CLOSING; TERMINATION OF AGREEMENT
(a) The closing referred to in Section 1 hereof (the
"Closing") shall take place at the offices of Leonard, Street and
Deinard, in Minneapolis, Minnesota on January 30, 1995, or at such other
time and date as Buyer and Seller may in writing designate (the "Closing
Date").
(b) This Agreement may be terminated (i) by the mutual
written consent of Buyer and Seller, (ii) by Buyer, if there has been a
material misrepresentation or breach of a warranty, covenant or other
agreement by the Seller or Bayport contained herein or if any of the
conditions precedent to Buyer's obligations hereunder shall not have
been satisfied and not waived on or before the Closing Date, (iii) by
the Seller if there has been a material misrepresentation or breach of a
warranty, covenant or other agreement by Buyer contained herein or if
any of the conditions precedent to the Seller's obligations hereunder
shall not have been satisfied and not waived on or before the Closing
Date. In the event of termination, this Agreement shall be null and
void, without further liability on the part of any party provided that
such party has made its representations and warranties in good faith,
used its reasonable best efforts to perform its obligations hereunder
and in the case of the Seller, did not violate the provision contained
in Section 5.4 hereof. Nothing contained herein shall preclude any
party from obtaining specific performance or any other equitable remedy
otherwise available to it for any breach hereof.
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND BAYPORT. In
order to induce Buyer to enter into this Agreement and to consummate the
transactions contemplated by this Agreement, the Seller and Bayport,
jointly and severally, hereby make the following representations and
warranties to Buyer, all of which are intended to survive the
consummation of this transaction, subject to the limitations set forth
in Section 6 of this Agreement.
3.1. Stock; Authority
(a) All of the Stock is owned, and on the Closing
Date will be owned, by the Seller, free and clear of all liens,
encumbrances, claims, options, warrants, calls and commitments of every
kind. The Seller has full legal right, power and authority to enter
into this Agreement and the full legal right, power and authority to
exchange, assign and transfer the Stock to Buyer and, on the Closing
Date, the delivery of the Stock to Buyer hereunder will transfer valid
title thereto, free and clear of all liens, encumbrances, claims,
options, warrants, calls and commitments of any kind.
(b) (i) All of the Stock of Bayport is owned of
record and beneficially by the Seller and no person or entity other than
the Seller has the contractual power to designate any members of
Bayport's board of directors;
(ii) The Company has no ownership interests in
any other corporation or entity other than identified in Schedule 3.1.
<PAGE> 2
3.2. Existence; Good Standing; Copies Complete; Validity.
Bayport is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. Bayport is duly
authorized and qualified to transact business in the State of Minnesota,
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the extent
that the failure to be so qualified or to be in good standing would not
have a material adverse effect on Bayport. Copies of the charter
documents and by-laws of Bayport, as amended to the date hereof, in each
case certified as of the date hereof by the Secretary of Bayport have
been delivered to Buyer. The copies of all instruments, documents and
certificates referenced in the schedules and which have been delivered
to Buyer in connection with the transactions contemplated hereby are
complete and accurate and are true and correct copies of the originals
thereof. This Agreement, and the agreements delivered in connection
herewith, are the legal, valid and binding obligations of the Seller and
Bayport, enforceable in accordance with their terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies and defenses. The execution, delivery and
performance of this Agreement and the agreements delivered in connection
herewith by the Seller and Bayport will not (i) violate or result in a
breach of, or constitute a default under, Bayport's charter or bylaws,
as amended, any agreement to which either is bound or any law,
regulation, order or judgment, or (ii) create or impose any lien or
encumbrance upon any of the assets of either the Seller or Bayport.
3.3. Outstanding Stock The authorized capital stock of
Bayport consists solely of 1,000,000 shares of Stock, $.01 par value, of
which 1000 shares are issued and outstanding, all of which are voting
shares. Each share of Stock is duly and validly authorized and issued,
fully paid and non assessable, and to the best knowledge of Seller was
not issued in violation of the preemptive rights of any stockholder. No
option, warrant, call or commitment of any kind obligating Bayport to
issue any of its authorized but unissued capital stock or other equity
interest exists.
3.4. Subsidiaries Bayport has no subsidiaries and owns no
securities (i.e., stock, warrants, calls, options, notes, bonds or other
evidences of ownership or indebtedness) of any other person, firm or
corporation except as set forth on Schedule 3.4. Except as set forth on
Schedule 3.4, no parent company or subsidiary, nor any affiliated or
non-affiliated company, nor the Seller or any other person or entity,
has any ownership interest, legal or equitable, in any of the assets of
Bayport.
3.5. Financial Statements
(a) The Estimated Bayport Balance Sheet and the
Closing Bayport Balance Sheet and notes accompanying each are
collectively referred to as the "Financial Statements". The Financial
Statements will present fairly, in all material respects, the financial
<PAGE> 3
position of Bayport as at their respective dates in conformity with
generally accepted United States accounting principles, as modified, if
at all, by the provisions of this Agreement, applied on a basis
consistent with the accounting principles, practices and the application
thereof heretofore followed by Bayport. The Closing Balance Sheet will
be accompanied by a report from Blanski Peter Kronlage & Zoch, P.A.
which will not contain a disclaimer of opinion or a qualified or adverse
opinion.
(b) The audited financial statements of Bayport as
of December 31, 1993 and 1992, and for the periods then ended ("Audited
Financial Statements"), copies of which are attached hereto as Schedule
3.5 (b), containing balance sheets, statement of operations and related
statement of cash flows, present fairly, in all material respects, the
financial condition of Bayport at December 31, 1993 and 1992, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted United States accounting principles
consistently applied throughout the periods indicated.
(c) The unaudited financial statements of Bayport as
at September 30, 1994, and for the period then ended ("Interim Financial
Statements"), copies of which are attached hereto as Schedule 3.5 (c),
containing a balance sheet, operating statement, and related supporting
schedules, present fairly, in all material respects, the financial
condition and results of operations of Bayport at the date and for the
period indicated. Except for the absence of footnotes and annual year
end adjustments (which in the aggregate would not be material), such
unaudited financial statements were prepared in accordance with
generally accepted United States accounting principles consistently
applied.
3.6. Liabilities. Other than shown on Schedule 3.6, there
are no material liabilities or obligations with respect to Bayport or
its business of any nature (absolute, accrued, contingent or otherwise),
except (i) to the extent reflected or reserved for on the Interim
Financial Statements; (ii) liabilities or obligations arising or
incurred in the ordinary course of business since the date of the
Interim Financial Statements; and (iii) liabilities and obligations
disclosed in the Schedules hereto or pursuant to or in this Agreement.
3.7. Permits, Licenses, etc.
(a) The Seller has delivered to Buyer a list,
summary description (Schedule 3.7 (a)) and copies, as of the date
hereof, of all permits and permit applications, approvals, consents and
authorizations, licenses and license applications, franchises,
certificates, trademarks, tradenames, patents, patent applications and
copyrights owned or held by Bayport and used in the operation of
Bayport's business as presently conducted. Except as disclosed in
Schedule 3.7 (a), all of the permits, licenses, applications, franchises
and other items set forth in Schedule 3.7 (a) are valid and in full
force and effect and, in the reasonable judgment of the Seller, adequate
for the operation of Bayport's business as presently conducted.
<PAGE> 4
(b) All United States and foreign patents and
pending patent applications (either granted, issued or applied for)
licensed to, owned by or assigned to Bayport relating to or used in the
business of Bayport are listed and briefly described in Schedule 3.7
(b).
(c) All United States and foreign trademarks and
service marks (either registered or registration applied for) in which
Bayport has any contractual or ownership interest are listed and briefly
described in Schedule 3.7 (c). Bayport does not currently have in
effect any license to any third party to use any trademark, service mark
or trade name.
(d) Except as set forth in Schedule 3.7 (d), there
are no actions, suits, proceedings or investigations pending, or to the
knowledge of the Seller or Bayport, threatened against, or affecting
Bayport or its subsidiary relating to any patent, patent application,
trade name, trade secret, trademark, trademark application, service
mark, service mark application, copyright, process, design, computer
program, invention, know-how or technology in any court or before or by
any governmental agency or instrumentality, domestic or foreign, or
before any arbitrator. There is no pending or, to the knowledge of the
Seller and Bayport, threatened, litigation against Bayport's making,
using and selling all of the products which it is presently making,
using or selling. To the knowledge of the Seller and Bayport, Bayport's
making, using and selling of its present products does not infringe any
patents of others and neither the Seller nor Bayport have any knowledge
that any other person has infringed upon or is infringing upon any
patent or other proprietary right of Bayport.
3.8. Fixed Assets The Seller has delivered to Buyer a list
and summary description (Schedule 3.8), as of the date hereof, of the
fixed assets of Bayport. All of Bayport's fixed assets currently used
in the business are in good working order, condition and repair, subject
to ordinary wear and tear and normal ongoing repair and maintenance from
time to time. The fixed assets used by Bayport in the operation of its
business are listed on Schedule 3.8 and are either owned by Bayport or
leased under an agreement reflected in Schedule 3.8. Schedule 3.8 also
sets forth the book value of the accumulated depreciation of such fixed
assets, determined in accordance with generally accepted United States
accounting principles, consistently applied, as modified, if at all, by
the provisions of this Agreement.
3.9. Leases The Seller has delivered to Buyer a full and
complete list (Schedule 3.9), together with true and correct copies, as
of the date hereof, of all leases requiring payments per annum of more
than Five Thousand Dollars ($5,000), whether or not reflected on the
books of Bayport as operating leases or capital leases, to which Bayport
is a party and which relate to any property, real or personal, used by
Bayport in the conduct of its business.
3.10. Contracts and Agreements; Adverse Restrictions
(a) The Seller has delivered to Buyer a full and complete
list (Schedule 3.10), together with true and correct copies,
as of the date hereof, of all contracts and agreements (other
than the leases included on Schedule 3.9) to which Bayport is
a party or by which it or any of its property is bound and
which provide for aggregate future payments by or to the Company
<PAGE> 5
of more than $10,000 and are not cancelable by Bayport on ninety
(90) days' notice or less (including, without limitation,
sales representative agreements, equipment purchase agreements,
equipment service agreements, joint venture or partnership
agreements, contracts with any labor organizations, loan agreements,
bonds, mortgages, liens, pledges or other security agreements). To the
knowledge of the Seller and Bayport all such contracts and agreements
included in Schedule 3.10 are in full force and effect and are binding
upon the parties thereto and none of the parties thereto is in breach of
any of the material provisions thereof.
(b) Except as disclosed in Schedule 3.10, Bayport is
not a party to any contract, agreement or other commitment or instrument
or subject to any charter or other corporate restriction or subject to
any restriction or condition contained in any permit, license, judgment,
order, writ, injunction, decree or award which, singly or in the
aggregate, materially and adversely affects the business, operations,
properties, assets or condition (financial or otherwise) of Bayport as
currently conducted.
3.11 Title and Liens
(a) Bayport has good and marketable title to all
properties and assets owned and used in its business (the "Assets"), and
as of the Closing Date, such Assets will be subject to no mortgage,
lease, pledge, lien, security interest, conditional or installment sales
agreement, encumbrance or charge, except for:
(i) those disclosed in the title report and
UCC lien search report(s) made available to Buyer;
(ii) liens for current taxes and assessments
that are not yet due and payable;
(iii) leases listed on Schedule 3.9;
(iv) the rights of customers of Bayport with
respect to inventory under orders or contracts entered into by Bayport
in the ordinary course of business;
(v) such imperfections or irregularities of
title, liens, easements, charges or encumbrances as do not materially
impair the use, occupancy or value of the Assets, or otherwise
materially impair business operations;
(vi) any liens disclosed in Schedule 3.11.
(b) Since December 20, 1994, there have not been
any security interests or any other consensual encumbrances
of any nature imposed upon any of the Assets
<PAGE> 6
(other than those permitted pursuant to subsections (a)(i) through
(vi) above), nor have any Uniform Commercial Code financing statements
been executed by Bayport regarding the Assets.
3.12. Insurance The Seller has delivered to Buyer a list
(Schedule 3.12) and has made available to Buyer copies as of the date
hereof, of all insurance policies presently carried by Bayport. Such
list shall specify, for each policy, the name of the insurer, the name
of the insured, the expiration date and whether the premiums are paid
and current, a summary description of the property or interest insured
and the type of risks insured, the deductible and limits of coverage,
whether such coverage is on an occurrence or a claims made basis and the
annual premium therefor. Such policies are presently in full force and
effect and shall remain in effect through the Closing Date. For each
insurer providing coverage for any of the insurable fixed, contingent or
other liabilities listed in Schedule 3.12, each such insurer has been
properly and timely notified of such matter, no reservation of rights
letters have been received by Bayport and the insurer has assumed the
defense of each suit or legal proceeding.
3.13. Personnel Schedule 3.13 contains a true and correct
list of (i) all of Bayport's employees, their names, dates of birth,
dates of hire credited by Bayport, job classifications and present
hourly rates or salaries, (ii) all employees terminated by Bayport since
January 1, 1994 along with the seniority of each such employee for
recall purposes, and (iii) any affirmative action plan(s) maintained by
Bayport and whether such plan(s) have ever been audited by the Equal
Employment Opportunity Commission.
3.14. Collective Bargaining Agreement; Benefit Plans
(a) Other than as set forth in Schedule 3.14(a),
Bayport has never been a party to any collective bargaining agreement.
To the knowledge of Seller, except as set forth on Schedule 3.14 (a)
Bayport is in compliance with all Federal, State or local laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, all such
laws related to union agreements, the violation of which would have a
material adverse effect on Bayport.
(b) Bayport does not maintain or contribute to any
employee benefit plan ("Employee Benefit Plan"), as that term is defined
in Section 3(3) of ERISA, other than as set forth in Schedule 3.14(b).
Except as set forth in Schedule 3.14(b) no Employee Benefit Plan is a
multiemployer plan as described in Section 4001(a)(3) of ERISA or a
multiple employer plan as described in Sections 4063 and 4064 of ERISA.
Other than as set forth in Schedule 3.14(b), there are no employment or
consulting agreements, severance agreements, plans or arrangements
providing for the payment of "excess parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), employee pension or retirement plans, profit-sharing
plans, savings plans, deferred compensation plans (either funded or
unfunded), bonus, stock option, stock purchase, restricted stock,
incentive, supplemental retirement, retiree medical, disability or life
insurance plans, or any other plans, programs or arrangements providing
similar benefits to directors, officers, employees, former employees or
<PAGE> 7
retired employees of Bayport. Schedule 3.14(b) also sets forth (i) each
employee benefit plan for which Bayport could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated and (ii) any plan in respect of which Bayport could incur
liability under Section 4212(c) of ERISA, and each such plan shall also
be considered an Employee Benefit Plan for purposes of this Agreement.
A copy of each trust or other funding arrangement, the most recently
filed Internal Revenue Service ("IRS") Form 5500, the most recently
received IRS determination letter for each such plan, the most recently
completed actuarial valuation for each plan and the applicable summary
plan description, if any, have been made available to Buyer.
(c) To the knowledge of the Seller and Bayport, and
except as described in Schedule 3.14(c) each Employee Benefit Plan has
been maintained in compliance (including all material filing
requirements) with the requirements of ERISA and the Code, the violation
of which would have a material adverse effect on Bayport.
(d) Each employee pension benefit plan, as defined
in Section 3(2) of ERISA, and related trust maintained by Bayport is
qualified as to its written form under Sections 401(a) and 501(a) of the
Code, except as shown on Schedule 3.14(d).
(e) No employee pension benefit plan maintained by
Bayport has incurred an "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA and Section 412 of the Code (whether or
not waived).
(f) No reportable event, as such term is defined in
Title IV of ERISA, for which the PBGC has not waived the thirty (30) day
notice requirement, has occurred with respect to any defined benefit
pension plan maintained by Bayport. To the knowledge of the Seller and
Bayport no prohibited transaction, as such term is defined in Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to
any Employee Benefit Plan. Except as disclosed on Schedule 3.14(f), no
complete or partial termination has occurred within the five years
preceding the date hereof with respect to any employee pension benefit
plan; all contributions, premiums or payments required to be made with
respect to any Employee Benefit Plan have been made on or before their
due dates; and Bayport has not incurred any liability under, arising out
of or by operation of Title IV of ERISA (other than liability for
premiums arising in the ordinary course).
(g) Except as disclosed on Schedule 3.14(g), there
are no actions, suits or claims pending, other than routine claims for
benefits, with respect to the Employee Benefit Plans and, to the
knowledge of the Seller or Bayport, there are no such actions, suits or
claims threatened, arising out of, or in connection with, the existence,
operation, maintenance or administration of such Employee Benefit Plans.
(h) Schedule 3.14(h) sets forth a complete and
accurate list of each Employee Benefit Plan which provides or promises
retiree medical, disability or life insurance benefits to any current or
former employee, officer or director of Bayport, and a list of each
<PAGE> 8
employee to whom such benefits are provided, specifying which benefits
are provided to each employee so listed.
(i) No event has occurred with respect to any
Employee Benefit Plan maintained by any individual or entity that is or
has been a member of any group of organizations described in Section
414(b) or (c) of the Code of which Bayport is a member which would
result in a liability of Bayport by virtue of Bayport's membership in
such group.
3.15. Operations Bayport owns, leases or has licenses to
use all Assets being used in and necessary to the operation of Bayport's
business as currently conducted.
3.16. Laws and Regulations; Litigation Except as set forth
in Schedule 3.16, Bayport has not violated and is not in violation of or
default under any law or regulation, or under any order of any court or
Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over
Bayport, violation of which would have a material adverse effect on
Bayport or its business or operations, and there are no claims, actions,
suits or proceedings pending, or to the knowledge of the Seller and
Bayport, threatened against or affecting Bayport, at law or in equity,
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Bayport.
3.17. Taxes Bayport has filed or will file, on a timely
basis, all requisite tax and information returns with respect to all
Federal, state or local taxes imposed upon Bayport and all taxes due
(whether or not shown on such returns) for all applicable periods ended
on or before the date hereof have been or will be paid in full when due
or are or will be reserved for on the financial statements. There is no
basis for any claims against Bayport for any such taxes for any period
or periods prior to and including the date hereof that have not been
reflected as provisions and reserves for taxes on the Interim Financial
Statements. All provisions and reserves are sufficient for the payment
of all such taxes for all fiscal periods ended on or before that date.
Copies of the Federal income, and state franchise, income and sales tax
returns related directly to Bayport for its fiscal years ended December
31, 1993 and December 31, 1992 have been or prior to the Closing will
be, delivered to Buyer. Copies of all other Federal, state, local and
other tax and information returns related directly to Bayport have been
made available to Buyer and are among the records of Bayport, possession
of which will accrue to Buyer at Closing. Bayport's Federal income tax
returns have not been audited since 1987. Bayport has not granted any
waiver or extension of applicable statutes of limitation with respect to
the examination of any tax return. Seller reserves the right to
challenge any tax deficiencies assessed and subject to this provision.
Seller agrees to pay all professional fees it directly incurs as part of
this right.
3.18. No Change Except as shown on Schedule 3.18, from
September 30,1994 through the date hereof there has not been, except as
disclosed in the Schedules hereto or as contemplated by this Agreement:
<PAGE> 9
(a) any material adverse change in the Assets,
operations or business of Bayport;
(b) any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting the Assets,
operations or business of Bayport;
(c) any change in, or agreement to change,
(i) ownership of the authorized capital or outstanding securities of
Bayport, or (ii) the securities of Bayport;
(d) any declaration or payment of, or any agreement
to declare or pay, any dividend or distribution in respect of an equity
interest in or any direct or indirect redemption, purchase or other
acquisition of any of the Stock;
(e) except for bonuses to employees in a manner
consistent with past practice, any increase in the compensation payable
or to become payable by Bayport to any of its directors, officers or
agents, or any severance or termination pay paid to any present or
former officer of Bayport, except in the ordinary course of business and
consistent with past practices of the Company and which do not exceed
$5,000 in the aggregate;
(f) any labor dispute materially adversely affecting
the operations, business or future prospects of Bayport;
(g) any sale or transfer, or any agreement to sell
or transfer, any material assets (other than inventory in the ordinary
course), property or rights of Bayport to any other person, including,
without limitation, the Seller, their affiliates or any entity owned or
controlled by the Seller, or their affiliates;
(h) any cancellation, or agreement to cancel, any
indebtedness or other obligation owing to Bayport, including, without
limitation, any indebtedness or obligation of the Seller, or any
affiliate or any entity owned or controlled by the Seller, or their
affiliates;
(i) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of Bayport or requiring the consent of any
party to the transfer and assignment of any such assets, property or
rights;
(j) any purchase or acquisition, or agreement, plan
or arrangement to purchase or acquire, any property, rights or assets,
except in the ordinary course of business;
(k) any waiver of any material rights or claims of
Bayport which would materially adversely affect the operations, business
or future prospects of Bayport;
<PAGE>10
(l) any amendment or termination of any material
contract, agreement, license, permit or other right to which Bayport is
a party which would materially adversely affect the operations, business
or future prospects of Bayport; or
(m) any other transaction by Bayport outside the
ordinary course of its business.
3.19. Bank Accounts The Seller has delivered to Buyer a
list (Schedule 3.19), as of the Closing Date, of:
(a) the name of each bank in which Bayport has
accounts or safe deposit boxes,
(b) the names in which the accounts or boxes are
held,
(c) the type of account, and
(d) the name of each person authorized to draw
thereon or have access thereto.
3.20. Environmental Matters
(a) To the best of its knowledge, Bayport has
complied in all material respects and is not in violation of any,
foreign, Federal, state, or local law, regulation, permit provision,
order or ordinance relating to environmental protection including,
without limitation, standards related to air, water, land and the
generation, maintenance, storage, transportation, treatment, or disposal
of petroleum products, toxic substances, solid wastes and hazardous
wastes or requiring the removal, treatment, containment or other
disposition of hazardous substances, hazardous wastes, pollutants or
contaminants, as defined in any of said laws ("Hazardous Wastes") except
where any non-compliance would not have a material adverse effect on
Bayport.
(b) To the best of Bayport's knowledge, there are no
locations on the properties ("Premises") owned or leased by Bayport
where (A) Hazardous Wastes or other harmful substances have entered into
the soil and/or ground water due to the acts or omissions of Bayport,
its employees, affiliates, agents or invitees irrespective of when such
action took place or (B) there are any underground tanks whether or not
presently in use.
(c) Schedule 3.20 (c) contains a complete statement
of the location of all substances which Bayport currently uses which it
believes may constitute Hazardous Wastes. Except as indicated in
Schedule 3.20 (c), there are no Hazardous Waste ponds, disposal areas or
storage facilities currently in use by Bayport or any other person at or
in connection with the Premises.
<PAGE> 11
(d) To the best of Bayport's knowledge, there are no
on-site or off-site disposal sites or locations to which Bayport has
transported or is now transporting Hazardous Wastes or has arranged for
the transportation of Hazardous Wastes, which site, to Bayport's
knowledge is the subject of foreign, Federal, state, or local
enforcement actions or other investigations which may lead to claims
under any Federal, state, local or foreign statute, rule or regulation.
All manifests utilized by Bayport for the transportation of Hazardous
Wastes have been made available to Buyer for inspection.
(e) There is attached hereto as Schedule 3.20 (e) a
complete statement of the inventory of raw materials, chemicals,
products and waste materials which to the best of Bayport's knowledge
are included within the definitions of "Hazardous Substances," as
defined in Minn. Stat. 116.06 and all "Hazardous Wastes" as defined
earlier or as defined in 42 U.S.C. 6903(5), processed, generated,
produced, stored or maintained at the Premises; all on-site spills,
leaks, releases at the Premises that occurred while the Premises was
owned or used by Bayport; and notices of waste disposal, if any, filed
pursuant to Section 103(C) of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq.
("CERCLA").
3.21. Accurate and Complete Records The books, ledgers,
financial records and other records of Bayport:
(a) are in the possession of Bayport;
(b) accurately reflect as of the dates shown thereon
all items of income and expense and all assets, liabilities and accruals
of Bayport required to be reflected therein in accordance with generally
accepted United States accounting principles.
Bayport has not received any advice from its
independent public accountants that there are any material weaknesses in
its system of internal controls. Bayport has provided Buyer with copies
of all (i) management letters received from its independent public
accountants and management's responses thereto for Bayport's three most
recent fiscal years and (ii) responses from its legal counsel to
auditor's requests for information in conjunction with Bayport's annual
audit for Bayport's three most recent fiscal years.
3.22. Accuracy, Completeness, No Misleading Statements The
representations and warranties of the Seller and Bayport contained in
this Agreement, and the Exhibits and Schedules hereto are complete and
accurate and do not and will not include any misstatements of fact or
untrue statements or facts and do not and will not omit any material
facts or statements.
3.23. Approval and Authorization This Agreement has been
duly and validly executed and delivered by the Seller and Bayport.
<PAGE> 12
4. REPRESENTATIONS, WARRANTIES, COVENANTS AND OBLIGATIONS OF
BUYER Buyer represents, warrants, covenants and agrees as follows:
4.1. Existence and Good Standing Buyer has been duly
incorporated and is validly existing in good standing under the laws of
the Commonwealth of Pennsylvania.
4.2. No Default The execution of this Agreement by Buyer
and the performance of its obligations hereunder will not (i) violate or
result in a breach of or constitute a default under Buyer's charter or
bylaws, as amended, any agreement to which it is a party or by which it
is bound or any law, regulation, order or judgment, or (ii) create or
impose any lien or encumbrance upon any of Buyer's assets.
4.3. Approval of Board of Directors; Validity The
execution and delivery of this Agreement and the other documents and
instruments to be executed and delivered by Buyer pursuant hereto and
the consummation of the transactions contemplated hereby and thereby by
Buyer has been duly authorized by the Board of Directors of Buyer. No
other corporate act or proceeding on the part of Buyer, or its
stockholders is necessary to authorize this Agreement and the other
documents and instruments to be executed and delivered by Buyer pursuant
hereto, or the transactions contemplated hereby or thereby, including
the payment of the Purchase Price to the Seller. This Agreement has
been duly and validly executed and delivered by Buyer and is a legal,
valid and binding obligation of Buyer enforceable in accordance with its
terms, subject to the laws of bankruptcy and other equitable principles
affecting the rights of creditors generally.
4.4 Financial Statements. The consolidated balance sheet
of the Buyer as at December 26, 1993, and the related consolidated
earnings statements, and statements of cash flows for the fiscal year
ended on such date and for the nine-month period ended September 25,
1994, including in each case the related schedules and notes, if any,
copies of each of which have been delivered to Seller, are each correct
and complete and present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of
Buyer as of the respective date of such balance sheet and for such
fiscal year and period in accordance with generally accepted accounting
principles consistently maintained throughout the periods involved,
except as specifically noted therein.
4.5. No Material Change. Since September 25, 1994, there
has been no material adverse change in the assets, operations or
business of the Buyer taken as a whole.
4.6. No Misleading Statements. The representations and
warranties of the Buyer contained in this Agreement are complete and
accurate in all material respects and do not include any misstatements
of fact or untrue statements and do not omit any material facts or
statements.
<PAGE> 13
5. COVENANTS OF THE SELLER AND BAYPORT PRIOR TO CLOSING
Between the date of this Agreement and the Closing Date:
5.1. Access; Confidential Information Bayport and the
Seller will afford to the officers and authorized representatives of
Buyer access to the plants, properties, books and records of Bayport and
will furnish Buyer with such additional financial and operating data and
other information as to the business and properties of Bayport as Buyer
may from time to time reasonably request for all reasonable purposes
including, without limitation, verifying the accuracy of the
representations and warranties made herein. Bayport and the Seller will
cooperate with Buyer, its representatives and counsel in the preparation
of any documents or other material which may be required in connection
with any documents or materials required by any governmental agency.
Buyer will cause all information obtained from the Seller and Bayport in
connection with the negotiation and performance of this Agreement to be
treated as confidential under the terms of the confidentiality agreement
dated October 20, 1994 referenced in the letter of intent among the
parties hereto.
5.2. Operations The Seller will cause Bayport to:
(a) carry on its business in substantially the same
manner as it has heretofore and not introduce any material new method or
discontinue any existing material method of management, operation or
accounting;
(b) maintain its properties and facilities in as
good working order and condition as at present, ordinary wear and tear
excepted;
(c) perform all its material obligations under all
agreements relating to or affecting its assets, properties, business
operations and rights;
(d) keep in full force and effect present insurance
policies or other comparable insurance coverage;
(e) use its best efforts to maintain and preserve
its business organization intact, retain its present employees and
maintain its relationships with suppliers, customers and others having
business relations with it;
(f) advise Buyer promptly in writing of any material
change or inaccuracy in any document, schedule or other information
delivered pursuant to this Agreement;
(g) file on a timely basis all material notices,
reports or other filings required to be filed with or reported to any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or any instrumentality of any of the foregoing
wherever located with respect to the continuing operations of Bayport;
and
<PAGE> 14
(h) file on a timely basis all complete and correct
applications or other documents necessary to maintain, renew or extend
any permit, license, variance or any other approval required by any
governmental authority necessary and/or required for the continuing
operation of Bayport, whether or not such approval would expire before
or after the Closing.
5.3 No Change Except as contemplated by this Agreement,
through the Closing Date, the Seller will not permit Bayport without the
prior written consent of Buyer, to:
(a) make any change in its charter documents or
bylaws;
(b) authorize, issue, transfer or distribute any
securities of Bayport;
(c) declare or pay any dividend, except in the
ordinary course of business and consistent with past practices, or make
any distribution in respect of its Stock whether now or hereafter
outstanding, or purchase, redeem or otherwise acquire or retire for
value any shares of its Stock;
(d) except as described in Section 3.6, enter into
any contract or commitment or incur or agree to incur any liability or
make any capital expenditures, except for sales and purchase orders in
the ordinary course of business and except for expenditures for
machinery and equipment necessary for the continued operation of
Bayport's business not exceeding Ten Thousand Dollars ($10,000) in the
aggregate.
(e) create, assume or otherwise permit the
imposition of any mortgage, pledge or other lien or encumbrance upon any
assets or properties of Bayport whether now owned or hereafter acquired;
(f) sell, assign, lease or otherwise transfer or
dispose of any property or equipment that are fixed assets without first
having notified Buyer and received Buyer's consent thereto;
(g) merge or consolidate or agree to merge or
consolidate with or into any firm, corporation or other entity;
(h) waive any material rights or claims of Bayport
without first having notified Buyer and received Buyer's consent
thereto;
(i) except as contemplated by this Agreement or any
agreement incidental hereto, amend or terminate any material contract,
agreement, permit, license or other right of Bayport without first
having notified Buyer and received Buyer's consent thereto; or
<PAGE> 15
(j) enter into any other transaction outside the
ordinary course of its business or prohibited hereunder.
5.4. No Shop Provision The Seller agrees that, upon the
execution of this Agreement and through the earlier of the termination
date under Section 2(b) or the Closing Date, unless otherwise extended
by mutual consent, it will not engage in any discussions or negotiations
with any other party to acquire any of the Stock or the assets of
Bayport (other than inventory sold in the ordinary course of business),
or sell, transfer or agree to sell or transfer any of the Stock or such
assets of Bayport.
5.5. Consents The Seller shall cause Bayport to give all
notices and make requests for all consents, if any, which may be
required in connection with the sale of the Stock, and shall deliver
each such consent or other document so obtained to Buyer on or prior to
the Closing Date.
6. INDEMNIFICATION
6.1. Indemnification
(a) The Seller and Bayport jointly and severally
covenant and agree that they will indemnify and hold harmless Buyer, its
subsidiary and affiliates and their respective officers and directors
from and after the Closing Date, from and against any and all losses,
damages, liabilities, claims, deficiencies, costs, expenses or
expenditures which any of the indemnified parties may suffer or incur
with respect to any of the contingencies described below; provided that
an indemnified party shall have given a written notice of claim to the
Seller setting forth with particularity the specific indemnity event for
which indemnity is sought by an indemnified party or an indemnified
party shall have asserted its claim for indemnity in a litigation
commenced against the Seller and/or Bayport:
(i) any direct, accrued, deferred, absolute or
contingent liability or claim against Bayport, arising out of or
incurred in connection with:
(A) the breach of any covenant or
agreement made by the Seller or Bayport in this Agreement;
(B) the breach of any representation or
warranty, whether intentional or otherwise, made by the Seller or
Bayport in this Agreement or any misrepresentation in or omission from
any schedule or certificate furnished or to be furnished to Buyer
pursuant to the terms of this Agreement;
<PAGE> 16
(C) except to the extent reserved for on
the Closing Balance Sheet, any Federal, state or local tax liability,
interest or filing penalties of Bayport, or any subsidiary or affiliate
of Bayport, for any period through the Closing Date, for any period
before or after the Closing Date, including but not limited to any tax
liability arising out of the transactions contemplated hereby; and
(ii) all actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
(b) Seller agrees to indemnify Buyer and hold Buyer
harmless against all claims, suits or liabilities (hereinafter referred
to as a "claim"), including settlements, and expenses, and further
including reasonable attorney fees, arising out of or relating to any
infringement of those patents listed on Schedule 6.1 (b) based upon any
product previously produced and/or sold by Seller or Bayport as well as
any current product of Bayport which Buyer may choose to produce and/or
sell, provided that written notice of any such claim is delivered by
Buyer to Seller within thirty days after any such claim first becomes
known to Buyer. The parties indemnified under this clause shall include
Buyer, its affiliates and their officers, directors, employees and
agents as well as all Buyer's customers. Seller has the right to defend,
or at its option to settle any such claim and Buyer and all other
parties indemnified agree to provide proper and full information,
testimony and other non-financial assistance to Seller in the defense or
settlement of any such claim, at no expense to Seller. Notwithstanding
any clause in this Agreement to the contrary, the indemnification
provided Buyer in this clause shall be valid for a term of five (5)
years beginning on the Closing Date, and in the event that any claim or
suit is brought for which this indemnity applies, and in the course of
defense of such suit or claim, the patent rights being claimed against
Buyer are held to be invalid or that there was no infringement, then
Seller shall be released from the obligation to indemnify Buyer under
this clause.
(c) The Buyer covenants and agrees that it will
indemnify and hold harmless Seller, Bayport, their respective subsidiary
and affiliates, and their respective officers and directors from and
after the Closing Date, from and against any and all losses, damages,
liabilities, claims, deficiencies, costs, expenses or expenditures which
any of the indemnified parties may suffer or incur with respect to any
of the contingencies described below; provided that an indemnified party
shall have given a written notice of claim to the Buyer setting forth
with particularity the specific indemnity event for which indemnity is
sought by an indemnified party or an indemnified party shall have
asserted its claim for indemnity in a litigation commenced against the
Buyer:
(i) any direct, accrued, deferred, absolute or
contingent liability or claim against an indemnified party, arising out
of or incurred in connection with:
<PAGE> 17
(A) the breach of any covenant made by
the Buyer in this Agreement;
(B) the breach of any representation or
warranty, whether intentional or otherwise, made by Buyer in this
Agreement; and
(C) any acts or omissions by Bayport or
Buyer after the Closing, including plant closure, if such acts or
omissions cause the indemnified party to incur a substantive liability
beyond the cost of defending against such liability; and
(ii) all actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses of investigation)
incident to any of the foregoing.
(d) The indemnity obligation of an indemnifying
party under this Section 6.1 shall be (i) net of any insurance proceeds
actually received by the indemnified party in connection with the facts
giving rise to the right of indemnification under any policy of
insurance maintained by the indemnified party (other than under a
program of self insurance) and (ii) net of any tax benefit realized or
to be realized by the indemnified party by reason of the facts and
circumstances giving rise to the indemnifying party's liability.
(e) The indemnity obligations of the parties
hereunder and any liability for breach of a party's representations and
warranties hereunder shall expire automatically on the date eighteen
(18) months after the Closing Date, except with respect to (i) the
obligations described in Section 6.1(a)(i)(C) and (ii) a breach of the
representations and warranties in Section 3.20, both of which shall
survive for the applicable statute of limitations and (iii) Section 6.1
(b) which shall survive for a term of five (5) years beginning on the
Closing Date.
(f) The Seller and Bayport shall not be required to
make any indemnification payments under Section 6.1(a) with respect to
any breach of any of their representations and warranties set forth
herein, in the schedules or in any certificate delivered pursuant
hereto, except to the extent that the cumulative amount of the damages
actually incurred by the indemnified parties hereto as a result of all
breaches of such representations and warranties actually exceeds the sum
of $35,000.
6.2. Notice of Indemnity Claim
(a) In respect of any indemnity event as to which
indemnity is sought hereunder, an indemnified party shall (i) within
five (5) days after receipt of written notice of commencement of any
third party litigation for which indemnity is claimed, (ii) within fifteen
(15) days after receipt by such indemnified party of written notice of
any third party claim (i.e., invoice, notice of claim or assessment, etc.)
against such indemnified party, or (iii) within a reasonable time
after such indemnified party becomes aware of the existence of any other
<PAGE> 18
indemnity event, in respect of which indemnification may be sought
from an indemnifying party under this Section 6, notify the indemnifying
party in writing thereof.
(b) If the indemnifying party, within a reasonable
time after notice of any such claim, fails to defend such claim, the
indemnified party will (upon further notice to the indemnifying party)
have the right to undertake the defense, compromise or settlement of
such claim on behalf of and for the account and risk of the indemnifying
party, subject to the right of the indemnifying party to assume the
defense of such claim at any time prior to settlement, compromise or
final determination thereof. If there is a reasonable probability that
a claim may materially and adversely affect the indemnified party other
than as a result of money damages or other money payments, the
indemnified party shall have the right, at its own cost and expense, to
defend, compromise or settle such claim. The indemnifying party shall
not, without the written consent of the indemnified party, settle or
compromise any claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the indemnified party a release from all liability
in respect of such claim.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER The obligations
of Buyer hereunder, including, without limitation, the obligation to
consummate this transaction, are, at its option, subject to the
satisfaction, on or prior to the Closing Date, of the following
conditions:
7.1. Accuracy of Representations; Performance of Covenants
The representations and warranties of the Seller and Bayport contained
in this Agreement shall have been true when made and shall be true in
all material respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of
such date; each and all of the agreements of the Seller and Bayport to
be performed on or before the Closing Date pursuant to the terms hereof
shall have been performed in all material respects; and the Seller and
Bayport shall have delivered to Buyer a certificate dated the Closing
Date and signed by them to such effect.
7.2. Changes to Schedules Except as required or permitted
in this Agreement there shall have been no material change to any of the
Schedules presently attached to this Agreement between the date hereof
and the Closing Date, and the Seller and Bayport shall have delivered a
certificate dated the Closing Date and signed by them to such effect.
7.3. Governmental Consents; No Litigation No action or
proceeding before a court or any other governmental agency or body shall
have been instituted or threatened to restrain or prohibit Buyer's
acquisition of the Stock and no governmental agency or body shall have
taken any other action as a result of which the management of Buyer
deems it inadvisable to proceed with the transactions hereunder.
7.4. No Material Adverse Change To the best knowledge of Seller,
since the date hereof, no material adverse change in the assets,
operations or business of Bayport shall have occurred, and Bayport shall
<PAGE> 19
not have suffered any material loss or damage to any of its assets,
whether or not covered by insurance, which change, loss or damage
materially affects or impairs the ability of Bayport to conduct its
business and Buyer shall have received a certificate signed by Bayport
and the Seller dated the Closing Date to such effect.
7.5. Approval By Counsel. All actions, proceedings,
instruments, documents and related legal matters which are required to
carry out this Agreement and consummate this transaction and which are
reasonably necessary in order for Buyer to obtain the essential benefit
of its bargain hereunder shall have been approved by counsel to Buyer,
whose approval shall not be unreasonably withheld.
7.6. Good Standing The Seller shall have delivered to
Buyer (a) a true and correct copy of the charter documents of Bayport,
as amended to a date no more than thirty (30) days prior to the Closing
Date, certified by the Secretary of State of the State of Minnesota, and
a certified statement of the Secretary of Bayport to the effect that
such charter documents have not been amended since the date thereof, and
(b) a certificate, dated as of a recent date, duly issued by the
appropriate governmental authority in Bayport's state of incorporation
and in each state in which the Company is authorized to do business
showing that Bayport is in good standing and authorized to do business.
7.7. Resignations The Seller shall have delivered to Buyer
the resignations effective as of the Closing Date of all officers and
directors of Bayport, unless otherwise requested by Buyer.
7.8. Consents All consents obtained pursuant to Section
5.5 shall have been delivered to Buyer.
7.9.Release of Security Interest. Bayport's lenders shall
have released any and all security interests in the assets of Bayport.
7.10. Board Resolutions Buyer shall have received certified
resolutions of the Board of Directors of Bayport duly approving this
transaction.
7.11. Guaranty. Buyer shall have received the
guaranty, in a form satisfactory to Buyer's counsel, of Daniel J.
Frederick which shall guaranty the obligations of Mary E. Frederick and
Bayport in this Agreement.
7.12. Non-Distributive Investment. Seller shall deliver to
Buyer a non-distributive investment intent letter in form satisfactory
to Buyer.
<PAGE> 20
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER The
obligations of the Seller hereunder, including, without limitation, the
obligation to consummate this transaction, are, at her option, subject
to satisfaction, on or prior to the Closing Date, of the following
conditions:
8.1. Accuracy of Representations; Performance of Covenants
The representations and warranties of Buyer contained in Section 4 shall
be accurate as of the Closing Date as though such representations and
warranties had been made at and as of that time; all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by Buyer on or before the Closing Date shall have been duly
complied with and performed; and a certificate to the foregoing effect
dated the Closing Date and signed by Buyer to such effect, shall have
been delivered to the Seller.
8.2. Release of Guarantors Contemporaneously with the
Closing, the Seller shall be released as contingent obligor (whether
under guarantees, comfort letters, letters of credit or otherwise) of
Bayport's funded indebtedness or obligations which are set forth on
Schedule 8.2, and such releases shall be satisfactory in form and
substance to Seller and Seller's counsel.
8.3. Related-Party Debt On the Closing Date Bayport shall
pay to Daniel J. Frederick the balance of any loan outstanding, plus
accrued interest.
8.4. Governmental Consents; No Litigation No action or
proceeding before a court or any other governmental agency or body shall
have been instituted or threatened to restrain or prohibit the Seller's
sale of the Stock, and no governmental agency or body shall have taken
any other action as a result of which the Seller deems it inadvisable to
proceed with the transactions hereunder.
8.5. Board Resolutions The Seller shall have received
certified resolutions of the Board of Directors of the Buyer duly
approving this transaction.
8.6. Payment of Purchase Price Buyer shall have
transferred to Seller the Shares of Buyer s Common Stock required to be
transferred at the Closing pursuant to Section 1 hereof.
8.7 Opinion of Buyer s Counsel Seller shall have
received an opinion from counsel to Buyer, dated the Closing Date, in
form satisfactory to Seller s counsel.
9. EMPLOYEE MATTERS
9.1. Welfare Plans Neither Bayport nor Buyer shall have
any obligation or liability to install, maintain or keep in force any
welfare or other plans for any of Bayport's employees, including, but
not limited to, pension, severance, medical, retiree medical, health,
<PAGE> 21
dental, accident, life, retiree life, short and long term disability or
non occupational disability after the Closing.
9.2. No Third Party Rights
(a) Except as limited by the Agreements set forth in
Schedule 3.14, nothing herein expressed or implied shall confer upon any
employee of Bayport, Buyer, an affiliate of Bayport or Buyer or any
legal representative or any collective bargaining agent of any of the
foregoing, any rights or remedies, including any right to employment, or
continued employment for any specified period, of any nature or kind
whatsoever under or by reason of this Agreement or elsewhere.
(b) Nothing in this Agreement shall be deemed to
confer upon any person (or any beneficiary thereof) any rights under or
with respect to any plan, program or arrangement described in or
contemplated by this Agreement, and each person (and any beneficiary
thereof) shall be entitled to look only to the express terms of any such
plan, program or arrangement for his rights thereunder.
(c) Buyer retains and shall not be deemed to waive
any of its rights or abilities to control the use and operation of
Bayport on or after the Closing or to take any other actions it deems
appropriate with respect thereto including, but not limited to,
reorganization of Bayport, divestiture of the assets of Bayport,
reduction or relocation of employees or plant locations or reassignment
of personnel and/or duties.
9.3. Indemnification of the Seller Buyer shall indemnify
and hold harmless the Seller from any obligation or liability (including
attorney's fees and expenses) arising out of the Buyer's exercise of its
rights as aforesaid relating to employees, employee benefits or
management of Bayport's business following the Closing, including
decisions to close plants if such action(s) by Buyer cause Seller to
incur any liability whatsoever.
10. SURVIVAL OF REPRESENTATIONS The representations, warranties,
covenants and agreements of the parties contained in this Agreement or
in any writing delivered pursuant to the provisions of this Agreement
shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties; provided that claims for
breaches of representations and warranties made pursuant to Section 3
hereof shall be subject to the limitations of Section 6 hereof.
11. GENERAL.
11.1. Additional Conveyances Upon the execution of this
Agreement, Buyer and Seller mutually agree to promptly undertake, and
to pursue, cooperatively and diligently, the obtaining of all
approvals, consents and authorizations required to be given by
third parties, governmental or private, that are necessary or
appropriate to effect the transactions contemplated
<PAGE> 22
in this Agreement in an expeditious and prudent manner without
out-of-pocket expense to Bayport. In addition, the Seller
shall deliver or cause to be delivered on the Closing Date, and at such
other times and places as shall be reasonably agreed on, such additional
instruments as Buyer may reasonably request for the purpose of carrying out
this Agreement. The parties will cooperate and use their best efforts to
have the officers, directors and employees of Bayport cooperate with
both parties on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
11.2. Assignment This Agreement and the rights of the Seller
hereunder may not be assigned by the Seller (except by operation of law)
and shall be binding upon and shall inure to the benefit of the parties
hereto, and the successors and permitted assigns of Buyer and the
successors of Seller. Buyer may assign this Agreement to any company
affiliated with Buyer, provided that following such assignment, Buyer
shall remain bound by its representations, warranties and agreements
herein, including delivery of shares of Checkpoint.
11.3. Counterparts/Telecopy Documents This Agreement may be
executed simultaneously in two or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and
the same instrument. Telecopy versions of signed documents shall be
deemed original documents for all purposes hereunder.
11.4. Brokers Each party represents and warrants that it
employed no broker or agent in connection with this transaction and
agrees to indemnify the other against all loss, cost, damage or expense
(including, but not limited to, attorney's fees and expenses) arising
out of claims for fees or commissions of brokers or agents employed or
alleged to have been employed by such indemnifying party.
11.5. Fees and Expenses. Whether or not the transactions
herein contemplated shall be consummated, (i) Buyer will pay the fees,
expenses and disbursements of Buyer and its agents, representatives,
accountants and counsel incurred in connection with the subject matter
of this Agreement and any amendments thereto, and (ii) in the event that
this Agreement is terminated for any reason, Buyer will pay the fees,
expenses and disbursements of Bayport and Seller and their agents,
representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto; and (iii) in
the event that this Agreement and the Closing herein contemplated
occurs, then in such event Seller shall pay all of the fees and expenses
of Seller related to this transaction.
11.6. Notices. Any notice or communication required or
permitted hereunder shall be sufficiently given if sent by first class
mail, postage prepaid or telefax:
<PAGE> 23
(a) If to Buyer:
Checkpoint Systems, Inc.
101 Wolf Drive
Thorofare, New Jersey
Facsimile: (609) 848-2042
Attn: Neil D. Austin, Vice President
General Counsel and Secretary
With a copy to:
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103
Facsimile: (215) 564-8120
Attn: James M. Papada, III, Esquire
(b) If to the Seller or Bayport:
Mary E. Fredrick, President
Bayport Controls, Inc.
6640 Shady Oak Road, Suite 300
Eden Prairie, MN 55344
Facsimile: (612) 943-3854
With a copy to:
Thomas D. Feinberg, Esquire
Leonard, Street and Deinard
150 South Fifth Street
Suite 2300
Minneapolis, MN 55402
Facsimile: (612) 335-1657
11.7. Applicable Law This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania.
11.8. Captions The captions in this Agreement are for
convenience only and shall not be considered a part hereof or affect the
construction or interpretation of any provisions of this Agreement.
11.9. Entire Agreement This Agreement (including the
schedules and exhibits hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding between the
Seller, Bayport and Buyer and, except as specifically required hereby,
supersede any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement may be modified or amended
only by a written instrument executed by the Seller, Bayport and Buyer.
<PAGE> 24
11.10. Announcements The initial general notices, releases,
statements and communications with employees, suppliers, distributors
and customers of Bayport's business and to the general public and the
press relating to the transactions contemplated by this Agreement shall
be made only at such time and in such manner as may be mutually agreed
upon by the Buyer and the Seller; provided, however, that any party
shall be entitled to make a public announcement about such transactions
if, in the opinion of its counsel, such announcement is required to
comply with any applicable law, rule or regulation. Information
provided by either party to third parties whose assistance and
cooperation may, in the judgment of such informing party, be required
for the successful consummation of the transactions contemplated by this
Agreement, shall not be construed as a general notice, release,
statement or communication within the meaning or intent of this section.
IN WITNESS WHEREOF, the parties have executed and delivered this
Stock Purchase Agreement as of the day and year first above written.
-----------------
Mary E. Frederick
BAYPORT CONTROLS, INC. CHECKPOINT SYSTEMS, INC.
---------------------- --------------------------
Mary E. Frederick Steven G. Selfridge
President Senior Vice President-Operations
and Chief Financial Officer
<PAGE> 25
