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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 1, 1999
(Date of Earliest Event Reported)
MACE SECURITY INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State of Incorporation)
0-22810
(Commission File Number)
03-0311630
(IRS Employer Identification No.)
160 Benmont Avenue, Bennington, Vermont 05201
(Address of Principal Executive Offices)
(802) 447-1503
(Registrant's Telephone Number)
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Item 1. Not Applicable.
Item 2. Acquisition of Stephen B. Properties, Inc.
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On July 1, 1999, Mace Security International, Inc., a Delaware corporation
(the "Company" or "Registrant"), through a wholly owned subsidiary, acquired all
of the car wash related assets of Stephen Bulboff and Stephen B. Properties,
Inc. ("Shammy Shine") pursuant to the terms of a Real Estate and Asset Purchase
Agreement dated March 8, 1999 (collectively the "Agreement"), by and between the
Registrant, and Stephen Bulboff and Stephen B. Properties, Inc. (the "Sellers").
Pursuant to the terms and conditions of the Agreement, the Registrant purchased
all of the assets of the Sellers used in the business of operating 10 full
service car washes in Pennsylvania, Delaware and New Jersey. The Registrant
will use the acquired assets in connection with the operating of the 10 car
washes formerly owned by the Sellers. Sellers are not affiliated with the
Registrant nor with any of the Registrant's subsidiaries. The description of
the acquisition transaction set forth herein is qualified in its entirety by
reference to the Agreement which is filed herewith as Exhibit 2.1.
At Closing under the Agreement, the Company paid to Sellers an aggregate
purchase price of 1,060,000 unregistered shares of the Company's common stock,
par value $.01 per share plus cash of $1,900,000 from working capital. The
acquisition is accounted for using the "purchase" method of accounting.
Additionally, on the date of closing the Stock Purchase Agreement, the
Registrant assumed the leases for the real estate with respect to three of the
car wash locations operated by Shammy Shine. The description of these lease
assignments is set forth herein in its entirety by reference to the lease
assignment and assumption agreement, which is incorporated as exhibit 2.2.
Items 3-6 Not Applicable.
Item 7 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial statements
of Stephen B. Properties, Inc. ("Properties") at the time of the
filing of this report. The required financial statements of
Properties will be filed within the time period required in
accordance with applicable regulations and the Securities and
Exchange Act of 1934.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma financial
information of Mace Security International, Inc. at the time of
the filing of this report. The required pro forma financial
information of Mace Security International, Inc. will be filed
within the time period required
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in accordance with applicable regulations and the Securities and
Exchange Act of 1934.
(c) The following Exhibits are hereby filed as part of this
Current Report on Form 8-K.
2.1 The Real Estate and Asset Purchase Agreement dated as of
March 8, 1999, among Stephen B. Properties, Inc., Stephen
Bulboff, and American Wash Services, Inc.
2.2 Lease Assignment and Assumption Agreement dated July 1, 1999
among Mace Wash, Inc., a wholly-owned subsidiary of Mace
Security International, Inc., Stephen B. Properties, Inc.,
Stephen Bulboff and American Wash Services, Inc.
99 Press Release dated July 7, 1999.
Items 8-9. Not applicable.
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SIGNATURES
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.
Date: July 14, 1999 MACE SECURITY INTERNATIONAL, INC.
By:/s/ Gregory M. Krzemien
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Gregory M. Krzemien
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
Exhibit Description
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No.
- ---
2.1 The Real Estate and Asset Purchase Agreement dated as of March 8,
1999, among Stephen B. Properties, Inc., Stephen Bulboff, and
American Wash Services, Inc.
2.2 Lease Assignment and Assumption Agreement dated July 1, 1999 among
Mace Wash, Inc., a wholly-owned subsidiary of Mace Security
International, Inc., Stephen B. Properties, Inc., Stephen Bulboff and
American Wash Services, Inc.
99 Press Release dated July 7, 1999.
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REAL ESTATE AND ASSET PURCHASE AGREEMENT
Between
STEPHEN B. PROPERTIES, INC.
STEPHEN BULBOFF
And
AMERICAN WASH SERVICES, INC.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
RECITALS................................................. 1
ARTICLE I REAL PROPERTY AND ASSET TRANSFER; CLOSING...... 1
ARTICLE II TITLE......................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS.... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER... 17
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS............... 18
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER............ 21
ARTICLE VII CONDITIONS OF PURCHASER...................... 22
ARTICLE VIII CONDITIONS OF SELLERS....................... 23
ARTICLE IX INDEMNIFICATION............................... 24
ARTICLE X OTHER PROVISIONS............................... 27
</TABLE>
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SCHEDULES
ATTACHED TO THIS AGREEMENT
1.9(c) Opinion of Counsel for Purchaser
1.10(a) Bill of Sale
1.10(d) Assignment and Assumption Agreement
1.10(e) Noncompetition Agreement
1.10(f) Opinion of Counsel for Sellers
ENCLOSED IN DISCLOSURE BINDER
1.3 Company Debt
1.4(a) Equipment
1.4(c) Operating Contracts and Leases
1.4(d) Permits
1.11(b) Allocation of Purchase Price to Assets
2.1 Real Property Description
2.3 Permitted Real Property Exceptions
3.3 Contracts, Permits, Mortgages and Material Documents
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Real Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental
violations
3.6(f) Definition of "Hazardous Materials" and Environmental Conditions
3.6(h) Wetlands
3.6(i) Mechanic's liens
3.6(k) Exceptions to proceedings which would affect use of the Real
Property
3.8 Insurance Policies, Performance Bonds and Letters of Credit
3.10(a) Employees
3.10(b) Benefit Plans
3.11(a) Violations of federal, state or local law
3.11(b) Environmental violations
3.11(c) Landfills and disposal facilities
3.11(f) List and Synopsis of All Litigation
3.13 Required Consents
ii
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REAL ESTATE AND ASSET PURCHASE AGREEMENT
This Real Estate and Asset Purchase Agreement ("Agreement") is made as of
March 8, 1999, by and among Stephen B. Properties, Inc. ("Company"), Stephen
Bulboff ("Shareholder"), and American Wash Services, Inc. ("AWS"). For
purposes of this Agreement, AWS is sometimes referred to as the "Purchaser," and
the Company and the Shareholder are collectively referred to as the "Sellers."
RECITALS
Company is in the business of operating full service and self-service car
wash facilities ("Business") at the following locations: (i) 601 W. Girard
Avenue, Philadelphia, Pennsylvania, (ii) Route 41, Deptford, New Jersey, (iii)
327 Burnt Mill Road, Voorhees, New Jersey, (iv) 325 N. White Horse Pike,
Magnolia, New Jersey, (v) 2322 Island Avenue, Philadelphia, Pennsylvania, (vi)
230 MacDade Boulevard, Yeadon, Pennsylvania, (vii) New Freedom Road,
Sicklerville, New Jersey, (viii) 2575 Mt. Ephraim Avenue, Camden, New Jersey,
and (ix) 240 N. DuPont Highway, Smyrna, Delaware (collectively, the
"Locations"). Company owns the parcels of real property upon which the Business
is conducted at the Locations in Voorhees and Sicklerville (the "Company Real
Property") and possesses valid leasehold interests in the remaining Locations
(the "Leased Real Property"). Shareholder owns the parcels of real property
upon which the Business is conducted at the Locations in Deptford, Camden and
Magnolia, New Jersey, and on Island Avenue in Philadelphia (the "Shareholder
Real Property"). Shareholder is the owner of all of the outstanding stock of
Company.
Purchaser is negotiating a Merger Agreement ("Merger Agreement"), upon the
closing of which it will merge with a subsidiary of Mace Security International,
Inc. ("Successor Corporation"). The parties desire that the Owned Real Property,
the Shareholder Real Property and substantially all of the other assets of the
Company be acquired by Purchaser in exchange for common stock of Successor
Corporation, all on the terms contained herein.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by the Sellers. The
Disclosure Binder is organized under subheadings which correspond to the various
Schedules described in this Agreement. For purposes of identification, the
Disclosure Binder has been identified by the parties by a written statement
executed by the parties and appearing as the first page of the Disclosure
Binder.
1
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ARTICLE I
Asset transfer; Closing
Section 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2 Place for Closing. Subject to Section 1.9 hereof, closing
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under this Agreement shall take place at the offices of Purchaser, 1000 Crawford
Place, Mount Laurel, New Jersey, or such other place as the parties hereto may
agree upon. The date that Closing occurs is referred to hereinafter as the
"Closing Date" and the act of closing as "Closing."
Section 1.3 Agreement to Transfer Assets and Owned Real Property;
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Consideration.
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(a) At the Closing, the Company shall transfer, convey and deliver to
Purchaser the Company Real Property and the Assets as hereinafter defined and as
set forth in Section 1.4 below, Shareholder shall transfer, convey and deliver
to Purchaser the Shareholder Real Property, and Purchaser shall deliver to the
Sellers One Million Sixty Thousand (1,060,000) shares of the common stock of
Successor Corporation ("MSI Stock") and accept the Assets, Company Real Property
and Shareholder Real Property subject to liabilities in the amount of
$1,900,000.00 ("Seller Debt") as listed by creditor on Schedule 1.3 attached.
If the Seller Debt at Closing exceeds $1,900,000.00, the amount of the MSI Stock
to be delivered to Sellers at Closing shall be reduced, dollar for dollar and
share for share, by the amount of the excess, valuing the shares of MSI Stock at
$1.75 per share ("Per Share Value"). The Per Share Value has been calculated
based on the closing price of Purchaser's common stock on the Nasdaq National
Market on the date of this Agreement, which was Two Dollars and Fifty ($2.50)
Cents, less a Seventy Five ($.75) Cent discount due to the restrictions against
the sale of the MSI Stock contained in Section 5.1
Section 1.4 Description of Assets. Upon the terms and subject to the
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conditions set forth in this Agreement, on the Closing Date the Sellers shall
grant, convey, sell, transfer and assign to Purchaser the following assets,
properties and contractual rights of the Company and Shareholder, wherever
located, all as set forth in this Section 1.4 (the "Assets").
(a) All equipment, computers, printers, card readers, vending machines,
appliances, machinery and parts, vehicles, tools, hoses, brushes, heating,
ventilation, air conditioning, plumbing, electrical, drainage, fire alarm,
communications, sprinkler, security and exhaust equipment and their component
parts; auto wash equipment, auto wash conveyor, auto drying equipment and
similar items in Sellers' possession or control, used in connection with,
located in or on, or otherwise pertaining to the Business (collectively, the
"Equipment"), as listed on Schedule 1.4(a);
(b) All of the inventory of retail items, operating supplies, parts and
accessories owned by the Sellers and used in connection with the Business;
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(c) All contractual rights of the Company under its operating agreements
and other agreements with its customers, landlords and lessors (whether oral or
in writing), as listed on Schedule 1.4(c);
(d) All permits, licenses, franchises, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals") held by the Sellers relating to, used in or
required for the operation of the Business or any of the Assets, all of which
are listed on Schedule 1.4(d), to the extent such Consents and Approvals are
assignable;
(e) All office or other equipment, furnishings, supplies, brochures, sales
and promotional materials, catalogues and advertising literature, business
files, customer lists, customer records and information, and all pictures and
photographs, computer programs and software (with applicable documentation and
source codes), construction and "as-built" drawings, plans and specifications,
finish plans and other personal property of every nature and description in
Sellers' possession or control;
(f) All intellectual property used in connection with the Business or any
other Asset, including, without limitation, know-how, trade secrets, trademarks,
trade names, and the exclusive right to use the names under which any of the
Locations are currently operated (collectively, the "Intellectual Property");
(g) All of the accounts receivable, prepaid deposits, cash, goodwill and
all other tangible and intangible assets of the Company; and
(h) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (g) above.
At Closing, good and marketable title to the Assets will be conveyed to
Purchaser by the Sellers free and clear of all liens, encumbrances, security
interests and claims, except for the mortgages or security agreement securing
the Seller Debt, set forth on Schedule 1.3.
Section 1.5 Excluded Assets. All of the personal property used by the
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Sellers in the conduct of the Business is included among the Assets. The parties
agree that the only tangible and intangible property that is owned by the
Company, or that is owned by the Shareholder and used in the Business, and not
being sold to the Purchaser are the financial books and records of the Company
("Excluded Assets").
Section 1.6 Assumption of Obligations. From and after the Closing, the
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Purchaser agrees and to assume and perform: (i) all of the Company's obligations
under the operating agreements listed on Schedule 1.4(c), to the extent, and
only to the extent, such obligations first mature and are required to be
performed subsequent to the close of business on the Closing Date; and (ii) the
Seller Debt set forth on Schedule 1.3 ("Assumed Liabilities").
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Section 1.7 Non-Assumption of Liabilities. Purchaser shall not, by the
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execution and performance of this Agreement or otherwise, assume, become
responsible for, or incur any liability or obligation of any nature of the
Sellers, whether legal or equitable, matured or contingent, known or unknown,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, whether
arising out of occurrences prior to, at, or after the date of this Agreement,
including, without limiting the generality of the foregoing, any liability or
obligation arising out of or relating to: (a) any occurrence or circumstance
(whether known or unknown) which occurs or exists on or prior to the Closing
Date and constitutes, or which by the lapse of time or giving notice (or both)
would constitute, a breach or default under any lease, contract, or other
instrument or agreement or obligation (whether written or oral); (b) injury to
or death of any person or damage to or destruction of any property, whether
based on negligence, breach of warranty, or any other theory occurring prior to
the Closing Date; (c) violation of the requirements of any governmental
authority or of the rights of any third person, including, without limitation,
any requirements relating to the reporting and payment of federal, state, local
or other income, sales, use, franchise, excise or property tax liabilities of
Sellers; (d) the generation, collection, transportation, storage or disposal by
the Sellers of any materials, including, without limitation, municipal service
waste, special waste, construction and demolition debris, or hazardous
materials; (f) any compensation, severance pay, or accrued vacation pay
obligation of the Sellers owed to employees of the Company for periods prior to
the Closing Date, or any obligations under any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended) or any other fringe benefit program maintained or sponsored by
Company or to which any of the Sellers contributes or any contributions,
benefits or liabilities therefor or any liability for the withdrawal or partial
withdrawal from or termination of any such plan or program by the Company; (g)
the debts and obligations of the Sellers, except for the Assumed Liabilities;
(h) any violation by the Sellers of any law, including, without limitation, any
federal, state or local antitrust, racketeering or trade practice law; and (i)
liabilities or obligations of the Sellers for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder.
Section 1.8 Term And Time For Closing. Following execution of this
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Agreement, the Purchaser and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms within ten business days after
the conditions of Closing set forth in Article VII and Article VIII have been
satisfied or waived. If the failure to conclude this transaction is due to the
refusal and failure of Sellers to perform their obligations to close under this
Agreement, Purchaser may seek to enforce this Agreement with an action of
specific performance, in addition to, and not in limitation of, any other rights
and remedies available to the Purchaser, under this Agreement, or at law or in
equity, including, without limitation, an action to recover their actual damages
resulting from the default of the Sellers. If the failure to conclude this
transaction is due to the refusal and failure of Purchaser to perform its
obligations to close under this Agreement, the Sellers may, in addition to and
not in limitation of any other rights and remedies available to the Sellers
under this Agreement, or at law or in equity, bring legal action to recover
their actual damages resulting from the default of the Purchaser.
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This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of Purchaser and the Sellers;
(b) by Purchaser within 90 days after the date of this Agreement, if
Purchaser is not satisfied, in its sole discretion, with the due diligence it
has conducted on the Company, the Business, the Company Real Property, the
Shareholder Real Property, or the Assets.
(c) by the Sellers, or by Purchaser, in the event Purchaser or the
Sellers, as applicable, makes a material misrepresentation under this Agreement
or breaches a material covenant or agreement under this Agreement, and fails to
cure such misrepresentation or breach within ten (10) business days from the
date of written notice of the existence of such misrepresentation or breach; or
(d) by the Sellers or Purchaser, if the Closing shall not have occurred by
June 25, 1999, or such other date as may be agreed to by the parties hereto in
writing, due to the non-fulfillment of a condition precedent to such party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating party).
All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that this Section 1.8, Article IX, Section 10.1, Section 10.2 and
Section 10.15 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement.
Section 1.9 Deliveries by Purchaser. At the Closing, Purchaser shall
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deliver, all duly and properly executed, authorized and issued (where
applicable):
(a) The MSI Stock, as provided in Section 1.3 above;
(b) A copy of resolutions of the directors of Purchaser authorizing the
execution and delivery of this Agreement and each other agreement to be executed
in connection herewith (collectively, the "Collateral Documents") and the
consummation of the transactions contemplated herein and therein;
(c) A favorable opinion from counsel for Purchaser, dated the Closing
Date, in the form attached as Schedule 1.9; and
(d) Other documents and instruments required by this Agreement, if any.
Section 1.10 Deliveries by Sellers. At the Closing, each of the Sellers,
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as applicable, shall deliver to Purchaser, all duly executed, the following:
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(a) A Bill of Sale for the Assets to be conveyed and assigned duly
executed by the Sellers in the form attached as Schedule 1.10(a);
(b) A certified copy of resolutions of the directors of the Company and
the Shareholder authorizing the execution and delivery of this Agreement and
each of the Collateral Documents;
(c) Shareholder shall execute and deliver the Certificate described at
Section 7.1;
(d) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(d) attached hereto;
(e) A favorable opinion from counsel for Sellers, dated the Closing Date,
in form and substance attached as Schedule 1.10(f);
(f) A Bargain and Sale Deed with Warranties Against Grantor's Acts
conveying each parcel of the Owned Real Property and the Shareholder Real
Property to Purchaser;
(g) Physical possession of all Assets; and
(h) Other documents and instruments required by this Agreement, if any.
Section 1.11 Transfer Tax, Allocation of Purchase Price and Bulk Sales
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(a) Sellers shall pay all sales, transfer taxes and fees imposed on the
conveyance of the Assets by all governments, state, local and federal, including
any deposits or fees required under the New Jersey bulk sales law.
(b) The parties agree that the consideration for the sale of the Assets,
the Company Real Property and the Shareholder Real Property shall be allocated
among the Assets and between the Sellers as set forth on Schedule 1.11(b)
attached hereto. The Sellers and the Purchaser acknowledge that the allocation
has been arrived at based upon their negotiations and shall be used by them for
all purposes, including, but not limited to, federal, state, and local tax and
financial reporting purposes, and they shall not take any position inconsistent
to the allocation. On the Closing Date, the Purchaser and the Sellers shall
execute Internal Revenue Form 8594 which form shall be binding on the Purchaser
and the Sellers and shall be filed with the income tax returns of the Purchaser
and the Sellers.
(c) Charges for water, electricity, sewer rental, gas, telephone and all
other utilities shall be pro rated on a per diem basis as of midnight of the day
preceding the date of Closing, disregarding any discount or penalty and on the
basis of the fiscal year or billing period of the authority, utility or other
person levying or charging for the same. If the consumption of any of the
foregoing is measured by meters, then in lieu of apportionment as aforesaid
Purchaser shall, not earlier than the day preceding the date of Closing, obtain
a reading of each such meter and Sellers shall pay all
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charges thereunder through the date of the meter readings. If there is no such
meter or if the bills for any of the foregoing have not been issued prior to the
date of the Closing, the charges therefor shall be adjusted at the Closing on
the basis of charges for the prior period for which bills were issued and shall
be further adjusted when the bills for the current period are issued. Sellers
and Purchaser shall cooperate to cause the transfer of the Business's utility
accounts and telephone numbers from Sellers to Purchaser.
ARTICLE II
Title
Section 2.1 Real Property. As set forth in the Recitals, Company owns the
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Company Real Property and Shareholder owns the Shareholder Real Property
(collectively, the "Owned Real Property"), a legal description of the metes and
bounds of each parcel of which is attached as Schedule 2.1. For purposes of
this Agreement, "Owned Real Property" shall also include (i) all of Sellers'
right, title and interest in and to all easements, rights-of-way, privileges and
appurtenances thereto, (ii) all of Sellers' right, title and interest in and to
the beds of all streets, roads, avenues or highways, open or proposed, abutting
the Owned Real Property, (iii) all of Sellers' right, title and interest, if
any, in and to any award in condemnation, or damages of any kind, to which
Sellers may have become entitled or may hereafter be entitled, by reason of any
exercise of the power of eminent domain with respect to the Owned Real Property
or any other right, title or interest to be sold hereunder or any part thereof,
and (iv) all of Sellers' right, title and interest in and to all surveys,
architectural and engineering plans, specifications, drawings, reports, etc., if
any, presently existing or hereafter prepared, with respect to the Owned Real
Property.
Section 2.2 Owners Title Policy. At Closing, Sellers shall obtain for
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Purchaser, at regular rates at Purchaser's expense, with respect to the Owned
Real Property, an extended coverage owners policy of title insurance from a
title company acceptable to Purchaser (the "Title Company"), dated as of the
Closing Date, in the amount equal to the allocated purchase price of the Owned
Real Property. The title policy shall include zoning, comprehensive, access and
contiguity endorsements, and shall insure title to the Owned Real Property to be
in fee simple in Purchaser, subject only to the Permitted Exceptions set forth
in Section 2.3 hereof (the "Owner's Policy"). Purchasers shall pay the cost of
the Owner's Policy and related title search, municipal lien search, judgement
search, UCC search and Title Company attendance fee.
Section 2.3 Permitted Exceptions. The Owners Policy shall insure
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Purchaser's interest in the Owned Real Property to be free and clear of all
encumbrances and exceptions whatsoever except those listed on Schedule 2.3
attached hereto ("Permitted Exceptions").
Section 2.4 Survey. Company shall furnish Purchaser with a survey
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relating to the Owned Real Property that is sufficiently current that the Title
Company shall not include a survey exception in the Owner's Policy. If Company
does not have such a survey available, Purchaser, at its election, may have a
survey of the Owned Real Property made at Purchaser's expense. Sellers will
cooperate and aid Purchaser's surveyor in preparing any survey commissioned by
Purchaser.
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ARTICLE III
Representations and Warranties of the Sellers
Whenever the phrase "to Sellers' knowledge" or a similar phrase is used in
this Agreement, the phrase means the actual knowledge of Shareholder and any
officer and director of Company and the knowledge such Shareholder or officer or
director would or should have had, if such Shareholder or officer or director
exercised reasonable diligence in the conduct of the business owned by the
Sellers. With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, the Sellers jointly and severally
represent and warrant to Purchaser and make the following covenants for the
Purchaser's benefit:
Section 3.1 Organization and Standing. The Company is a corporation duly
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organized, legally existing and in good standing under the laws of the state of
its incorporation, with full power and authority to own its properties and
conduct its business as now being conducted.
Section 3.2 Authorization. The Sellers have by proper corporate
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proceedings duly authorized the execution, delivery and performance of this
Agreement and each of the Collateral Documents to be entered into by Sellers and
no other corporate action is required by law or the certificate of incorporation
or by-laws of any Seller. Shareholder owns all of the outstanding capital stock
of Company.
Section 3.3 Contracts, Permits and Material Documents. The items
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provided under and listed in Schedule 3.3 attached hereto are all of the
following ("Material Documents") with respect to the Company, Business, Owned
Real Property or Assets which provide a benefit or impose a detriment of a value
of $10,000 or more: (i) leases for real and personal property, (ii) licenses,
(iii) franchises, (iv) promissory notes, guarantees, bonds, mortgages, liens,
pledges, and security agreements under which any of the Sellers or Assets are
bound or under which any of the Sellers or Assets are the beneficiary, (v)
collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of any of the Assets;
(viii) all surety bonds, closure bonds or any other obligation which the Sellers
have liability for with respect to the Business; and (ix) other contracts,
agreements and instruments not listed on another Schedule attached to this
Agreement (such as the operating agreements listed on Schedule 1.4(c)) which are
binding on the Sellers or any of the Assets and pursuant to which the Sellers
derive a benefit or incurs a detriment having a value of $10,000 or more. The
Material Documents listed on Schedule 3.3 are organized under separate headings
for each of the different type of documents listed. Except as set forth on
Schedule 3.3, neither the Sellers nor any person or party to any of the Material
Documents or bound thereby is in material or knowing default under any of the
Material Documents, and, to the knowledge of Sellers, no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default. The Sellers are not a party to, and none of Sellers' properties are
bound by, any agreement or instrument which is material to the continued conduct
of the Business, as now being conducted, except as listed in Schedule 3.3.
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Section 3.4 Personal Property; Title. All items of personal property used
------------------------
in the Business are included among the Assets described in Section 1.4 hereof
and will be transferred to Purchaser at Closing. All items of personal property
used in the Business are in good operating order, normal wear and tear excepted,
and are sufficient in type, quantity and quality to operate the business
currently conducted by the Company in an efficient manner. The Sellers at
Closing will have good and marketable title to all of the Assets, each free and
clear of any mortgages, pledges, liens, encumbrances, leases, charge, claim,
security agreement or title retention or other security arrangement, except for
Sellers Debt set forth on Schedule 1.3.
Section 3.5 Operating Agreements. The name and address of each party to
--------------------
each operating agreement under which the Company operates at any of the
Locations is listed on Schedule 1.4(c) attached hereto. Neither the Sellers nor
to the Sellers' knowledge any other person or party to any of the operating
agreements is in material or knowing default thereunder, and to Sellers'
knowledge no act or event has occurred which with notice or lapse of time, or
both, would constitute such a default. The purchase of the Assets by Purchaser
will not create a default under any operating Agreement.
Section 3.6 Real Property. The Company has never owned, leased or
-------------
otherwise occupied, had an interest in or operated any real property other than
(i) the Owned Real Property and (ii) the parcels of real property leased by the
Company from persons other than Shareholder as listed on Schedule 3.6 attached
hereto (the "Leased Real Property") (with the Owned Real Property, the "Real
Property"). The Sellers have a valid leasehold in each parcel of the Leased
Real Property and have good, marketable and insurable title to the Owned Real
Property except for the Permitted Exceptions.
(a) In all material respects, except as set forth in Schedule 3.6(a)
attached hereto and incorporated herein, the Real Property is, and at all times
during operation of the Business thereon has been, licensed, permitted and
authorized for the operation of such Business under all applicable federal,
state and local statutes, laws, rules, regulations, orders, permits (including,
without limitation, zoning restrictions and land use requirements) and licenses
and all administrative and judicial judgments, rulings, decisions and orders
affecting or otherwise applicable to the protection of the environment, the Real
Property and the conduct of such Business thereon (collectively, the "Applicable
Laws").
(b) Except as set forth in Schedule 3.6(b) attached hereto and
incorporated herein by reference, the Real Property is legally usable for its
current uses, and the Real Property can be used by the Purchasers after the
Closing to operate such business as is currently operated, without violating any
Applicable Law or private restriction, and such uses are currently legal,
conforming uses.
(c) Except as set forth in Schedule 3.6(c) attached hereto and
incorporated herein by reference, all activities and operations conducted on the
Real Property, whether by Sellers or by third
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parties, are now being conducted and to Sellers' knowledge have always been
conducted in compliance with all Applicable Laws.
(d) The Sellers shall make available on Purchaser's reasonable request all
engineering, geologic and other similar reports, documentation and maps relating
to the Real Property in the possession or control of the Sellers or their
consultants or employed professional firms.
(e) Except as set forth in Schedule 3.6(e) attached hereto and
incorporated herein by reference, neither Sellers nor the Real Property now is
or has been during Sellers' use or ownership thereof involved in any litigation
or administrative proceeding seeking to impose fines, penalties or other
liabilities or seeking injunctive relief for violation of any Applicable Laws
relating to the environment.
(f) No polluting, toxic or hazardous substances were used, generated,
treated, stored, released, discharged or disposed of by the businesses conducted
on the Real Property by Sellers or, to Sellers' knowledge, by others, at any
time other than as disclosed on Schedule 3.6(f). No notification of release of
a "hazardous substance", "hazardous waste", pollutant or contaminant regulated
under the Clean Air Act, 42 U.S.C. (S)7401 et seq.; the Clean Water Act, 33
U.S.C. (S) 1251 et seq., and the Water Quality Act of 1987; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S)136 et seq.; the Marine
Protection, Research, and Sanctuaries Act, 33 U.S.C. (S) 1401 et seq., the
National Environmental Policy Act, 42 U.S.C. (S) 4321 et seq.; the Noise Control
Act, 42 U.S.C. (S) 4901 et seq.; the Occupational Safety and Health Act, 29
U.S.C. (S)651 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
(S)6901 et seq., as amended by the Hazardous and Solid Waste Amendments of 1984;
the Safe Drinking Water Act, 42 U.S.C. (S)300 et seq.; the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C.
(S)9601 et seq., as amended by the Superfund Amendments and Reauthorization Act,
and the Emergency Planning, and Community Right-to-Know Act; the Toxic Substance
Control Act, 15 U.S.C. (S)2601 et seq.; and the Atomic Energy Act, 42 U.S.C.
(S)2011 et seq.; all as may be amended, with implementing regulations and
guidelines, or any state or local environmental law, regulation or ordinance,
has been received by Sellers and, to Sellers' knowledge, none has been filed as
to the Real Property, and the Real Property is not listed or formally proposed
for listing on the National Priority List promulgated pursuant to CERCLA or on
any state list of hazardous substance sites requiring investigation or clean-up
other than as disclosed on Schedule 3.6(f). No PCB-contamination, friable
asbestos or formaldehyde-based insulation items are present on the real Property
other than as disclosed on Schedule 3.6(f).
(g) No party, other than Sellers and the records owners of each parcel of
the Real Property, has a present or future right to possession of all or any
part of the Real Property, except for any right defined in, under or by any of
the Permitted Exceptions.
(h) To Sellers' knowledge, except as set forth on Schedule 3.6(h) no
portion of the Real Property contains any areas that could be characterized as
disturbed, undisturbed or man-made wetlands or as "waters of the United States"
pursuant to any Applicable Laws or the procedural
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manuals of the Environmental Protection Agency or the U.S. Army Corps of
Engineers, whether such characterization reflects current conditions or historic
conditions which have been altered without the necessary permits or approvals,
except as listed on Schedule 3.6(h) attached hereto and incorporated herein by
reference.
(i) There are no mechanic's liens affecting the Real Property and no work
has been performed on the Real Property within twelve (12) months of the date
hereof for which a mechanic's lien could be filed, except as set forth in
Schedule 3.6(i) attached hereto and incorporated herein by reference.
(j) There are no levied or pending special assessments affecting all or
any part of the Real Property owed to any governmental entity and to Sellers'
knowledge none is threatened.
(k) There are no proceedings or amendments pending and brought by or to
Sellers' knowledge threatened by, any third party which would result in a change
in the allowable uses of the Real Property or which would modify the right of
the Purchasers to use the Real Property for its present uses after the Closing
Date, except as set forth in Schedule 3.6(k) attached hereto and incorporated
herein by reference.
Section 3.7 Liabilities. The Company does not have any liabilities, fixed
-----------
or contingent, other than the liabilities listed on Schedule 1.3 attached
hereto.
Section 3.8 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Assets or which the Sellers have had
issued regarding the Assets and which have not expired are listed on Schedule
3.8 attached hereto. Schedule 3.8 includes the names and addresses of the
beneficiaries, insurers and sureties, policy and bond numbers, types of coverage
or bond, time periods or projects covered and the names and addresses of all
known agents or agencies, issuing banks and beneficiaries with respect to each
listed insurance policy, performance bond and letter of credit. The Sellers'
current insurance policies, performance bonds and letters of credit relating to
any Asset are in force and effect and the premiums thereon are not delinquent.
The Sellers have not received any written notification from any insurance
carrier denying or disputing any claim made by the Sellers or denying or
disputing any coverage for any such claim or denying or disputing the amount of
any claim. Except as set forth on Schedule 3.8, the Sellers have no claims
against any of their insurance carriers under any of policies insuring the
Assets pending or anticipated and there has been no occurrence of any kind which
would give rise to any such claim.
Section 3.9 Tax Returns. The Sellers have filed all Federal and other tax
-----------
returns for all periods on or before the due date of such return (as may have
been extended by any valid extension of time) and has paid all taxes due for the
periods covered by the said returns. The Company is a Subchapter "C"
corporation under the Internal Revenue Code of 1986, as amended (the "Code").
The Sellers have filed, and will file (if due), in a timely manner all requisite
federal, state, local, payroll, property and other tax returns due for all
fiscal periods ended on or before the date hereof,
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and as of the Closing shall have filed in a timely manner all such returns due
for all periods ended on or before the Closing Date.
Section 3.10 Employees, Pensions and ERISA.
-----------------------------
(a) Except as set forth on Schedule 3.10(a), no employee of the Company is
represented by any union. Except as set forth on Schedule 3.10(a), no employee
of the Company has a written employment agreement with the Company. There is no
pending or, to the knowledge of the Sellers, threatened dispute between the
Company and any of its employees which might materially and adversely affect the
customer contracts being assigned to Purchaser. The Company is not deficient or
in arrears in contributing to any trust funds the Company is required to
contribute to in accordance with any contracts with unions, including, without
limitation, scholarship funds, legal aid funds, pension funds and health,
welfare or benefit funds ("Trust Funds"). There is no matter, action, audit,
suit or claim pending or to Sellers' knowledge threatened relating to
contributions of the Company to any Trust Fund, before any court, tribunal or
government agency.
(b) Attached hereto, made a part hereof and marked Schedule 3.10(b) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which are currently
maintained and/or were established or sponsored by the Company (whether or not
they are now terminated) or to which the Company currently contribute, or have
an obligation to contribute in the future, including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions ("Plans"), whether or not the Plans are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable law, (ii)
written or oral, (iii) funded or unfunded, or (iv) generally available to all
employees of the Company.
(c) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA.
(d) There is no matter, action, audit, suit or claim pending or, to
Sellers' knowledge, threatened relating to any Plan, fiduciary of any Plan or
assets of any Plan, before any court, tribunal or government agency.
(e) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
12
<PAGE>
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(f) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
Section 3.11 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 3.11(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Sellers' use of the Assets
and Real Property is in compliance with all Federal, state and local laws, rules
and regulations including, without limitation, the following laws: land use
laws; payroll, employment, labor, or safety laws; or federal, state or local
"anti-trust" or "unfair competition" or "racketeering" laws such as but not
limited to the Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act ("Law").
Except as disclosed in Schedule 3.11(a), the Sellers are in compliance with all
permits, franchises, licenses, and orders that have been issued with respect to
the Laws and are or may be applicable to the Sellers' property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
3.11(a), with respect to any Law there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting the Assets or Real Property, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, wherever located, which would result in an
material change in how Purchaser may use the Assets or Real Property or which
would invalidate this Agreement or any action taken in connection with this
Agreement. Except as disclosed in Schedule 3.11(a), the Sellers have received
no notification of any past or present failure by the Sellers to comply with any
Law applicable to the Assets or Real Property or affecting the Sellers' use of
the Assets or Real Property.
(b) Except as disclosed in Schedule 3.11(b) to this Agreement, the Sellers
are in compliance with all Federal, state and local laws, rules and regulations
relating to environmental issues of any kind and/or the receipt, transport or
disposal of any hazardous or non-hazardous waste materials from any source
("Environmental Law"). Except as disclosed in Schedule 3.11(b), with respect to
any Environmental Law, the Sellers are in compliance with all permits, licenses,
and orders related thereto or issued thereunder with respect to Environmental
Laws, as are or may be applicable to the Sellers' property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located. Except as set forth on
Schedule 3.11(b), there are no Environmental Law related claims, actions, suits
or proceedings pending, or, to the knowledge of the Sellers, threatened against
or affecting the Sellers, at law or in equity, or before or by any federal,
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<PAGE>
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, wherever located, which would result in an adverse
change in the financial condition or business of the Sellers of $10,000 or more
or which would invalidate this Agreement or any action taken in connection with
this Agreement. To the knowledge of the Sellers, except as set forth on
Schedule 3.11(b), the Sellers have not transported, stored, treated or disposed,
nor has any Seller allowed any third persons, on its behalf, to transport,
store, treat or dispose waste to or at (i) any location other than a site
lawfully permitted to receive such waste for such purpose or, (ii) any location
currently designated for remedial action pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any similar
federal or state statute; nor has any Seller performed, arranged for or allowed
by any method or procedure such transportation or disposal in contravention of
state or federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and the Sellers have not
disposed, nor has any Seller knowingly allowed third parties to dispose of waste
upon property owned or leased by the Sellers other than as permitted by, and in
conformity with, applicable Environmental Law. Except as disclosed in Schedule
3.11(b), the Sellers have not received notification of any past or present
failure by the Sellers to comply with any Environmental Law applicable to them
or their operations or their assets. Without limiting the generality of the
foregoing, the Sellers have not received any notification (including requests
for information directed to the Sellers or, to the knowledge of the Sellers, an
owner thereof) from any governmental agency asserting that any Company is or may
be a "potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of CERCLA, or any
similar federal or state statute assigning responsibility for the costs of
investigating or remediating releases of contaminants into the environment. The
Sellers have not received any Hazardous Waste as hereinabove defined, except for
limited amounts that were contained in loads of non-hazardous waste in
quantities that would not require remediation.
(c) To the Sellers' knowledge, no employee, contractor or agent of the
Company has, in the course and scope of employment with the Company, been harmed
by exposure to hazardous materials, as defined under the Laws. No liens with
respect to environmental liability have been imposed against the Company under
CERCLA, any comparable state statute or other applicable Environmental Law, and
to Sellers' knowledge no facts or circumstances exist which would give rise to
the same.
(d) Schedules 3.11(a) and 3.11(b) list all remedied violations of Laws and
Environmental Laws which existed within the past five years and all outstanding
unremedied notice of violations issued to the Sellers by any federal, state or
local regulatory agency.
(e) To Sellers' knowledge, no Seller or employee, officer, director, or
shareholder of the Company is under investigation by the Attorney General of any
state, by the District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative agency for the violation
of any Laws, including, without limitation, the violation of any anti-trust,
racketeering, or unfair competition Laws.
14
<PAGE>
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Real Property or the
Sellers or the Assets is set forth on Schedule 3.11(f) attached, together with a
description of each such proceeding.
Section 3.12 Corrupt Practices. The Sellers have not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company for the purpose of attracting business to the Company or any foreign or
domestic governmental official, political party or candidate for government
office or any of their respective employees or representatives in any manner
which would result in the Sellers being in violation of any Law, nor have the
Sellers otherwise taken any action which would cause them to be in violation of
the Foreign Corrupt Practices Act of 1977, as amended.
Section 3.13 Legal Compliance. The Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and, except as set forth in Schedule 3.13, no approvals or
consents of any other persons or entities are necessary in connection with the
transactions contemplated by this Agreement. Except as disclosed in Schedule
3.13 to this Agreement, the execution and performance of this Agreement will not
result in a material breach of or constitute a material default or result in the
loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which the Sellers
are a party or by which the Sellers, or any of their property is bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Sellers or on any property of the Sellers.
Section 3.14 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Seller is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
Section 3.15 Intellectual Property. To the knowledge of the Sellers, the
---------------------
Company has not infringed and is not now infringing, on any Intellectual
Property belonging to any person, firm or corporation and to the knowledge of
the Sellers, no one has or is infringing any Intellectual Property right of the
Company. The Company owns or has legally licensed all computer software used
in connection with the Business and has not infringed, and is not now
infringing, on the rights of any third parties by its use of computer software.
Section 3.16 Disclosure. The representations and warranties of the
----------
Sellers contained in this Article III or in any Exhibit or Schedule or other
document delivered by the Sellers or the Company pursuant hereto, do not contain
any untrue statement of a material fact, or knowingly omit any statement of a
material fact necessary to make the statements contained not misleading. If,
prior to Closing, the Sellers become aware of any inaccuracy, or
misrepresentation or omission in any of the
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<PAGE>
Schedules, they shall immediately advise Purchaser in writing of the inaccuracy,
misrepresentation or omission, and Sellers shall have the right to update the
Disclosure Binder accordingly.
ARTICLE IV
Representations and Warranties of Purchaser
With knowledge that Sellers are relying upon the representations,
warranties and covenants herein contained, the Purchaser jointly and severally
represents and warrants to Sellers and makes the following covenants for the
Sellers' benefit:
Section 4.1 Structure. The Purchaser is duly organized and legally
---------
existing in good standing under the laws of its state of incorporation.
Section 4.2 Authorization to Proceed with this Agreement. Purchaser has
--------------------------------------------
by proper corporate proceedings and in accordance with law duly authorized the
execution, delivery and performance of this Agreement and each other agreement
contemplated to be entered into and no other corporate action is required by law
or the Certificate of Incorporation or by-laws of Purchaser. The Purchaser has
the right, power, legal capacity and authority to enter into, and perform its
obligations under this Agreement, and neither the execution nor performance of
this Agreement will result in a material breach of or constitute a material
default or result in the loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which the
Purchaser is a party or by which the Purchaser or any of its property is bound;
or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Purchaser or on any property of the Purchaser.
Section 4.3 Issued Common Stock. The MSI Stock to be issued pursuant to
-------------------
this Agreement has been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable.
ARTICLE V
Additional Agreements of Sellers
The parties hereto covenant and agree with the other, as applicable, as
follows:
Section 5.1 Restrictions on Transfer of Unregistered Stock. The Sellers
----------- ----------------------------------------------
understand and agree that the following restrictions and limitations are
applicable to the Sellers' purchase and resale or other transfer of the MSI
Stock (hereinafter, the "Consideration Stock"), pursuant to the Securities Act
of 1933 (the "Act") and in accordance with the agreement of the parties.
16
<PAGE>
(a) Sellers agree that the Consideration Stock shall not be sold or
otherwise transferred, unless the Consideration Stock is registered under the
Act and state securities laws or is exempt therefrom.
(b) Unless and until the Consideration Stock is registered under the Act,
a legend in substantially the following form will be placed on the certificates
evidencing the Consideration Stock to be issued to the Sellers:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Mace Security International, Inc., shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Mace Security
International, Inc., that registration is not required under any such
acts."
(c) The Shareholder shall not sell or transfer any of the MSI Stock from
the Closing Date to twelve months after the Closing Date, whether or not the MSI
Stock is registered under the Act. During the period commencing on the date
twelve months after the Closing Date and ending twenty four months after the
Closing Date, the Shareholder shall not sell or transfer more than one twenty
fourth (1/24) of the number of shares of MSI Stock received by Shareholder on
the Closing Date.
(d) Stop transfer instructions will be imposed with respect to the MSI
Stock issued to Sellers pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 5.2 Access to Records. The Sellers will cause the Company to give
-----------------
and the Company shall give Purchaser and its representatives, from the date
hereof until two years after the Closing Date, full access during normal
business hours upon reasonable notice to all of the properties, books,
contracts, documents and records of the Sellers pertaining to the Assets, and to
make available to Purchaser and its representatives all additional financial
statements of and all information with respect to the Assets that Purchaser may
reasonably request which are in Sellers possession or control.
Section 5.3 Continuation of Business. The Sellers will operate the Assets
------------------------
until the time of Closing, in the ordinary course of business, consistent with
past practice, so as to preserve their value intact, and to preserve for
Purchaser the relationships of the Company with suppliers, customers, employees
and others.
Section 5.4 Continuation of Insurance. The Sellers will cause the Company
-------------------------
to and the Company shall keep in existence all policies of insurance insuring
the Real Property and the Assets
17
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and the operation thereof against liability and property damage, fire and other
casualty through the time of Closing, consistent with the policies currently in
effect.
Section 5.5 Representations as to Private Offering. The Consideration
--------------------------------------
Stock is being delivered to the Sellers in a private placement under Section 4.2
of the Act and under Regulation D promulgated under the Act. To induce
Purchaser to deliver the Consideration Stock, each Seller represents and
warrants as follows:
(a) Each Seller is either a New Jersey corporation or a New Jersey
resident.
(b) Each Seller acknowledges that they have available to them complete
information regarding the financial condition of the Purchaser and the Successor
Corporation.
(c) The Sellers represent and warrant that the Consideration Stock is
being acquired for their own account without a view to public distribution or
resale and that the Sellers have no contract, undertaking, agreement or
arrangement to sell or otherwise transfer or dispose of Consideration Stock, or
any portion thereof, to any other person.
(d) The Sellers represent and warrant that, in determining to acquire the
Consideration Stock, they have relied solely upon their independent
investigation, including the advice of their legal counsel and accountants or
other financial advisers or purchaser representatives, and have, during the
course of discussions concerning their acquisition of the Consideration Stock,
been offered the opportunity to ask such questions and inspect such documents
concerning Purchaser and its business and affairs as they have requested so as
to more fully understand the nature of the investment and to verify the accuracy
of the information supplied.
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE CONSIDERATION STOCK
INVOLVES A HIGH DEGREE OF RISK, and represent and warrant that they can bear the
economic risk of the acquisition of the Consideration Stock, including the total
loss of their investment.
(f) The Sellers represent and warrant that (i) they have adequate means of
providing for their current needs and financial contingencies, (ii) they have no
need for liquidity in this investment, (iii) they cannot reasonably foresee any
other circumstances, that are likely in the future to require them to dispose of
the Consideration Stock, and (iv) all their investments in and commitments to
non-liquid investments are, and after their acquisition of the Consideration
Stock will be, reasonable in relation to their net worth and current needs.
(g) The Sellers understand that no federal or state agency has approved or
disapproved the Consideration Stock or made any finding or determination as to
the fairness of the Consideration Stock for investment.
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(h) The Sellers understand that the Consideration Stock is being offered
and sold in reliance on specific exemptions from the registration requirements
of federal and state securities laws and that Purchaser are relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
applicability of such exemption and the suitability of Sellers to acquire the
Consideration Stock.
(i) The Sellers represent and warrant that they are familiar with the
business and financial affairs of the Company, and have had access to all
financial statements prepared by the Company.
Section 5.6 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, Sellers will
not, directly or indirectly, solicit offers for the shares or the assets of the
Company or for a merger or consolidation involving the Company, or respond to
inquiries from, share information with, negotiate with or in any way facilitate
inquiries or offers from, third parties who express or who have heretofore
expressed an interest in acquiring the Company by merger, consolidation or other
combination or acquiring any of the Company's assets.
Section 5.7 FIRPTA Certificate. Purchasers and Sellers acknowledge that
------------------
the financial provisions of this Agreement are subject to the requirements of
the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Purchasers in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Sellers. Among other circumstances, Purchasers are not required to withhold
said amount if Sellers furnish Purchasers with a certificate stating Sellers'
U.S. Taxpayer Identification Numbers and that the Sellers are not a foreign
person within the meaning of the Code. Sellers agree to provide to Purchasers
at Closing such certificate as is reasonably necessary to insure that such
withholding is not required under FIRPTA.
Section 5.9 Financial Statements. Before and after Closing, Sellers agree
--------------------
to cooperate with Purchaser to have the Company prepare balance sheets for the
Company as of December 31, 1996, December 31, 1997, and December 31, 1998, and
statements of income, cash flow and retained earnings for the Company for the
twelve-month periods ended December 31, 1996, December 31, 1997, and December
31, 1998 ("Historical Financial Statements"), as rapidly as possible. Sellers'
cooperation shall include, without limitation, the execution of standard
representation letters requested by Purchaser's auditors. Sellers shall prepare
a compiled stub balance sheet and statements of income, cash flow and retained
earnings for the period commencing January 1, 1999, and ending on the last day
of the last calendar quarter ending prior to Closing ("Interim Financial
Statements"). The Historical Financial Statements and the interim Financial
Statements shall be prepared at Purchaser's cost. Sellers shall cause the
Company's usual accountants to cooperate with Purchaser's accountants.
Purchaser shall pay for the reasonable costs of the Company's usual accountants
in the preparation of the Historical Financial Statements and the Interim
Financial Statements.
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Section 5.10 Landlord's Estoppels. The Sellers shall deliver to Purchaser
--------------------
an estoppel certificate, in a form reasonably acceptable to Purchaser, signed by
each landlord (singularly a "Landlord" and collectively the "Landlords") under
each lease (singularly a "Lease" and collectively the "Leases") under which
Sellers lease the Leased Real Property, or any portion thereof, confirming:
(a) that a true, accurate and complete copy of the relevant Lease is
attached;
(b) that to the best of the Landlord's knowledge neither the Sellers nor
the Landlord is in breach of the Lease, or if there is a breach, setting forth
the nature of the breach;
(c) the date through which Sellers have paid rent under the Lease (both
basic or minimum rent and additional rent); and
(d) approving and consenting to the Purchaser's purchase of the Assets and
assumption of the Lease, if such consent or approval is required under the
relevant Lease.
The estoppel certificates which Sellers are required to deliver hereunder are
singularly referred to as a "Landlord's Estoppel" and are collectively referred
to as the "Landlords' Estoppels."
ARTICLE VI
Additional Agreements of Purchaser
Section 6.1 Payment of Expenses. Each party will pay all its own expenses
-------------------
incurred in connection with this Agreement and the transactions contemplated
hereby including, without limitation, (1) all costs and expenses stated herein
to be borne by a party, and (2) all of their respective accounting, legal and
appraisal fees. Sellers, in addition to their other expenses, shall pay one-
half of all transfer taxes and/or documentary stamps associated with the
transfer and conveyance of the Owned Real Property; Purchaser, in addition to
its other expenses, shall pay (1) one-half of all transfer taxes and/or
documentary stamps associated with the transfer and conveyance of the Owned Real
Property, (ii) the costs of any surveys prepared at Purchaser's request, (iii)
all title insurance premiums and charges associated with the transfer of the
Owned Real Property, and (iv) all recording charges for Owned Real Property
transfer documents.
Section 6.2 Access to Records. The Purchaser shall give Sellers and their
-----------------
representatives, from the date hereof until six years after the Closing Date,
full access during normal business hours upon reasonable notice to all of the
properties, books, contracts, documents and records of the Purchaser pertaining
to the Assets, and to make available to Sellers and their representatives all
additional financial statements of and all information with respect to the
Assets that Sellers may reasonably request.
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ARTICLE VII
Conditions of Purchaser
The obligations of Purchaser to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the time of Closing
of each of the following items which are conditions to the Closing.
Section 7.1 Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers prior to or at the Closing Date.
All representations and warranties of Sellers contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement and the Purchaser shall have received a
Certificate duly executed by Shareholder as to the foregoing.
Section 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate or control the Assets
which, in the judgment of the Board of Directors of Purchaser, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 7.3 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, and the Purchaser shall have been
furnished with appropriate evidence, reasonably satisfactory to Purchaser, of
the granting of such approvals, authorizations and consents.
Section 7.4 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations or financial condition of
the Company or the Business, and the Company shall have not suffered any
material loss or damage to any of its properties or assets, whether or not
covered by insurance.
Section 7.5 Opinion of Counsel. Sellers shall have delivered to Purchaser
------------------
the opinion of counsel, dated the Closing Date, in the form annexed hereto as
Schedule 1.10(f).
Section 7.6 Noncompetition Agreement. Sellers shall have executed and
------------------------
delivered to Purchaser the Noncompetition Agreement.
Section 7.7 Due Diligence Investigation. As a condition of Closing,
---------------------------
Purchaser shall be satisfied with the results of the due diligence investigation
it has made concerning the Company, the Assets, and the Business.
Section 7.8 Title Policy. Purchaser shall have been provided with the
------------
Owner's Title Policy.
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Section 7.9 Merger Agreement. Closing shall have taken place under the
----------------
Merger Agreement.
ARTICLE VIII
Conditions of Sellers
The obligations of the Sellers to transfer the Assets and Owned Real Estate
in accordance with this Agreement shall be subject to the fulfillment at or
prior to the time of Closing of each of the following conditions:
Section 8.1 Payment. The Purchaser shall have delivered to the Company
-------
the MSI Stock in accordance with Section 1.3.
Section 8.2 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, and the Sellers shall have been
furnished with appropriate evidence, reasonably satisfactory to them and their
counsel, of the granting of such approvals, authorizations and consents.
Section 8.3 Opinion of Counsel. Purchaser shall have delivered to Sellers
------------------
the opinion of counsel, dated the Closing Date, in the form annexed hereto as
Schedule 1.9(c).
Section 8.4 Compliance by Purchaser. The Purchaser shall have performed
-----------------------
and complied with all material obligations and conditions required by this
Agreement to be performed or complied with by Purchaser prior to or at the
Closing Date. All representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement.
Section 8.5 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate or control the Assets
which, in the judgment of the Sellers, made in good faith and based upon advice
of their counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement.
ARTICLE IX
Indemnification
Section 9.1 Indemnification by Sellers. The Sellers each agree that they
--------------------------
will each, jointly and severally, indemnify, defend, protect and hold harmless
the Purchaser and its officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, legal
representatives, successors and assigns from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, penalties, costs
and expenses whatsoever
22
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(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, as a result of or incident to: (a) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Sellers
made in this Agreement or in the Collateral Documents and to be performed by
Sellers before or after the Closing Date; (c) the imposition upon, claim
against, or payment by the Purchaser of any liability or obligation of the
Company other than the Assumed Liabilities; (d) violation of the requirements of
any governmental authority relating to the reporting and payment of federal,
state, local or other income, sales, use, franchise, excise, payroll or property
tax liabilities of the Sellers arising or accrued prior to the Closing Date; and
(e) any claim by a third party that, if true, would mean that a condition for
indemnification set forth in subsections (a), (b), (c) or (d) of this Section
9.1 of this Agreement has occurred.
Section 9.2 Indemnification by Purchaser. The Purchaser agrees that it
----------------------------
will indemnify, defend, protect and hold harmless the Sellers and their
officers, shareholders, directors, divisions, subdivisions, affiliates,
subsidiaries, parents, agents, employees, legal representatives, successors and
assigns, as applicable, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) whether equitable or legal,
matured or contingent, known or unknown to the Purchaser, foreseen or
unforeseen, ordinary or extraordinary, patent or latent, whether arising out of
occurrences prior to, at, or after the date of this Agreement, as a result of or
incident to: (a) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties of Purchaser set forth in this Agreement
or in the Schedules attached to this Agreement or in the Collateral Documents;
(b) nonfulfillment of any agreement, covenant or condition on the part of
Purchaser made in this Agreement or in the Collateral Documents and to be
performed by Purchaser before or after the Closing Date; and (c) any claim by a
third party that, if true, would mean that a condition for indemnification set
forth in subsections (a) or (b) of this Section 9.2 has occurred.
Section 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
- ------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim
and the relevant details thereof.
23
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(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within fifteen business days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party pursuant to the provisions of Article IX, as
applicable, from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys' fees
and related expenses) the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If the conditions set forth in Section 9.3(b) above are or become
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
IX.
Section 9.4 Procedure for Non-Third Party Claims. If any Purchaser or
------------------------------------
Seller wishes to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 9.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
24
<PAGE>
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; and (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
forty-five (45) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within sixty (60) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 9.5 Survival of Claims.
------------------
(a) All of the respective representations, warranties and obligations of
the parties to this Agreement shall survive consummation of the transactions
contemplated by this Agreement as follows: (i) all representations and
warranties pertaining to federal, state and local taxes, including, without
limitation, the representations and warranties set forth in Section 3.9 shall
survive until the expiration of the applicable statute of limitations on any
claim which can be brought against the Company by tax authorities or
governmental agencies or governmental units and (ii) all representations and
warranties other than set forth in (i) above shall survive until two years from
the Closing Date.
(b) Notwithstanding the provisions of Section 9.5(a) above, which provide
that representations, warranties and obligations expire after certain stated
periods of time, if within the stated period of time, an Indemnification Demand
is given, or a suit or action based upon representation or warranty is
commenced, the Indemnified Party shall not be precluded from pursuing such claim
or action, or from recovering from the Indemnifying Party (whether through the
courts or otherwise) on the claim or action, by reason of the expiration of the
representation or warranty.
Section 9.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment
25
<PAGE>
in full of any claim, the Indemnifying Party shall be subrogated to the rights
of the Indemnified Party against any person with respect to the subject matter
of such claim.
ARTICLE X
Other Provisions
Section 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Company such as lists of customers, and pricing
and cost policies that are valuable, special and unique assets of the Company.
Sellers agree that for a period of two (2) years from the Closing Date and as to
any Records received by them under Section 6.2 of this Agreement, ten (10) years
from their receipt of the Records, they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of the
Sellers, unless (i) such information becomes known to the public generally
through no fault of Sellers, (ii) the Sellers are compelled to disclose such
information by a governmental entity or pursuant to a court proceeding, or (iii)
the Closing does not take place. In the event of a breach or threatened breach
by Sellers of the provisions of this Section, Purchaser shall be entitled to an
injunction restraining Sellers from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
Purchaser from pursuing any other available remedy for such breach or threatened
breach, including, without limitation, the recovery of damages.
Section 10.2 Nondisclosure by Purchaser. Purchaser recognize and
--------------------------
acknowledge that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchaser agrees that
it will not utilize such information in the business or operation of Purchaser,
or any of its affiliates or disclose such confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever, unless (i) such information becomes known to the public
generally through no fault of Purchaser or any of its affiliates (ii) Purchaser
is compelled to disclose such information by a governmental entity or pursuant
to a court proceeding or (iii) Closing takes place. In the event of a breach or
threatened breach by Purchaser of the provisions of this Section, the Sellers
shall be entitled to an injunction restraining Purchaser from utilizing or
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting Sellers from pursuing any
other available remedy for such breach or threatened breach, including, without
limitation, the recovery of damages.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of Purchaser) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of Purchaser, and the
Sellers. This Agreement, upon execution and delivery, constitutes a valid and
binding agreement of the parties hereto enforceable in accordance with its terms
and may be modified or amended only by a written instrument executed by all
parties hereto.
26
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Section 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 10.5 Counterparts. 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 but one and the same instrument.
Section 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchaser, addressed to them at:
Louis Paolino, Jr., President
1000 Crawford Place
Mt. Laurel, NJ 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
(b) If to Sellers, addressed to them at:
Stephen Bulboff
10 Cresthaven Court
Sewell, New Jersey 08080
with a copy to:
Jeffrey I. Baron, Esquire
F-600
1307 Whitehorse Road
Voorhees, NJ 08043
27
<PAGE>
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New Jersey,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 10.9 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 10.10 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 10.11 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
Section 10.12 Extension or Waiver of Performance. Either the Sellers or
-----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
28
<PAGE>
Section 10.13 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 10.14 Disclosure on Schedules. The parties to this Agreement
-----------------------
shall have the obligation to supplement or amend the Schedules being delivered
concurrently with the execution of this Agreement and annexed hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules. The obligations of the parties to amend or
supplement the Schedules shall terminate on the Closing Date. Notwithstanding
any such amendment or supplementation, the condition to Closing set forth in
Section 7.1 shall not be satisfied, if the amendment or supplementation of any
Schedule by Sellers results in any of Sellers' representations and warranties
changing in a manner which the Purchaser in good faith believes is materially
adverse to the Purchaser or the Assets.
Section 10.15 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in Philadelphia, Pennsylvania, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies in any Court having jurisdiction if such party can
establish irreparable harm. Notice of the demand for arbitration shall be filed
in writing with the other party to this Agreement, which such demand shall set
forth in the same degree of particularity as required for complaints under the
Federal Rules of Civil Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with reasonable
particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statutes
of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
29
<PAGE>
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchaser and the Sellers in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). The
Purchaser and the Sellers, respectively, waive the right and agree they shall
not seek to disqualify any such counsel in any such Proceedings for any reason,
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
[Remainder of page intentionally blank.]
30
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
PURCHASER
AMERICAN WASH SERVICES, INC.
By /s/ Robert M Kramer
-------------------
Name: Robert M Kramer
Title: Vice President
COMPANY
STEPHEN B. PROPERTIES, INC.
By: /s/ Stephen Bulboff
-------------------
Name Stephen Bulboff
Title: President
SHAREHOLDER
/s/ Stephen Bulboff
- -------------------
Stephen Bulboff
31
<PAGE>
LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is made as of
July 1, 1999, by and among Stephen B. Properties, Inc., Stephen Bulboff
(collectively, "Sellers"), and Mace Wash, Inc., the successor by merger to
American Wash Services, Inc. ("Purchaser")
RECITALS
Sellers and Purchaser are parties to a Real Estate and Asset Purchase
Agreement dated March 8, 1999, ("Purchase Agreement"). In accordance with the
Purchase Agreement, certain of the assets of Sellers ("Assets") and certain of
the contractual liabilities of Sellers under leases will be conveyed to
Purchaser on the closing date of the Purchase Agreement.
The Sellers desire to assign and convey to Purchaser certain leases,
pursuant to the Purchase Agreement, and Purchaser desires to accept said
conveyance and assignment on the terms and conditions set forth herein and in
the Purchase Agreement.
AGREEMENT
NOW THEREFORE, the parties, intending to be bound thereby, and in
exchange for the consideration set forth in the Purchase Agreement, agree as
follows:
1. Assignment. The Sellers hereby assign all right, title and interest
----------
of Sellers under the leases set forth below ("Leases").
(a) Lease dated March 1, 1999 between Amoco Oil Company, a
Maryland Corporation and Stephen B. Properties, Inc. for premises known
as 4043 Germantown Avenue, Philadelphia, Pa.;
(b) Lease executed April 2, 1998 between Amoco Oil Company, a
Maryland Corporation and Stephen Bulboff for premises known as 601 West
Girard Avenue, Philadelphia, Pa;
(c) Lease dated January 31, 1999 between Robin Rae Colevas and
Stephen Bulboff for premises known as the Robo Carwash Site at 240 N.
Dupont Highway, Smyrna, Delaware;
(d) Lease executed May 15, 1989 between Second Philadelphia
Equities and Stephen Bulboff for the premises known as 200 MacDade
Boulevard, Yeadon, PA.
Sellers, to date, have been unable to locate originals or copies of the leases
in 1(b) and 1(d) above ("Missing Leases"). Sellers represent and warrant that
the Missing Leases do exist, and that Sellers are in possession of 601 West
Girard Avenue, Philadelphia, Pa and 200 MacDade Boulevard, Yeadon, PA. under the
terms of the Missing Leases. Sellers will use their best efforts to obtain
originals of the Missing Leases and deliver them to Purchaser. Sellers represent
and warrant that the Missing Leases have the same terms and provisions as the
leases for the same premises which Sellers have delivered to Purchaser but which
have Hanna Acceptance Corp. as the tenant of Girard Avenue
1
<PAGE>
and Soft Cloth Shammy Shine, Inc. as tenant of Yeadon, Pa.
2. Assumption. Purchaser accepts the assignment of the Leases and
----------
assumes all of the Sellers' obligations under the Leases arising after the date
of this Agreement. Purchaser shall be liable for payment and/or performance of
all the terms, conditions covenants, and warranties of the Leases arising after
the date of this Agreement.
3. No Waiver; Remedies Cumulative. No waiver by the parties hereto of
------------------------------
any default or breach of any term, condition or covenant of this Agreement shall
be deemed to be a waiver of any subsequent default or breach of the same or any
other term, condition or covenant contained herein. No right, remedy or election
given by any term of this Agreement shall be deemed exclusive but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
4. Assignment; Binding Effect. This Agreement is not assignable by the
--------------------------
Sellers. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and Purchaser's successors and assigns.
5. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of this
Agreement or of any part hereof.
6. Governing Law. This Agreement shall in all respects be construed in
-------------
accordance with the laws of the State of New Jersey.
2
<PAGE>
IN WITNESS WHEREOF, The parties hereto have caused this Assignment and
Assumption Agreement to be executed as of the day and year first above written.
PURCHASER MACE WASH, INC.
By: /s/ Robert M. Kramer
--------------------
Name: Robert M. Kramer
Title: Executive Vice President
SELLERS
Stephen B. Properties, Inc.
By: /s/ Stephen Bulboff
-------------------
Stephen Bulboff, President
/s/ Stephen Bulboff
-------------------
Stephen Bulboff, Personally
3
<PAGE>
[LETTERHEAD OF MACE SECURITY INTERNATIONAL APPEARS HERE]
Contact: Mace Security International, Inc.
1000 Crawford Place
Mount Laurel, New Jersey 08054
www.mace.com
------------
Louis D. Paolino, Jr., CEO, President & Chairman
Gregory Krzemien, CFO & Treasurer
Eduardo Nieves, Jr., Investor Relations
(609) 235-6009
FOR IMMEDIATE RELEASE
MACE SECURITY INTERNATIONAL ANNOUNCES COMPLETION
OF MERGER WITH AMERICAN WASH SERVICES
Mount Laurel, New Jersey, July 7, 1999 -- Mace Security International, Inc.
(MSI) (Nasdaq:MACE) today announced the completion of the previously announced
merger with American Wash Services, Inc. (AWS). Pursuant to the agreement,
Louis D. Paolino, Jr., the Company's President and CEO, will also become
Chairman of the Board. The merger consisted of AWS properties and Stephen B.
Properties, Inc. (Shammy Shine), that together represent 19 washes of which
seven are full service, nine are exterior and three are self service. These
washes are located in eastern Pennsylvania, southern New Jersey and northern
Delaware.
Louis D. Paolino, Jr., President, CEO and Chairman of MSI, said, "I am very
happy with the completion of the merger because it will give MSI the ability to
close additional transactions that are currently being negotiated." He added,
"These washes are well-managed, high-traffic operations that have operated
profitably for several years, and will significantly strengthen our East Coast
regional presence."
AWS operates full and self service car wash centers that provide a full
line of car care services including washing, waxing and detailing. Their
management team has over 20 years of experience in the car wash and car care
services industries, and is under agreement to stay with the Company.
<PAGE>
Mace Security International, Inc. is a publicly traded company which owns
and operates car washes and is also a leading producer of less lethal defense
sprays for the consumer market and a marketer of consumer safety and security
products.
This press release includes statements which may constitute forward-looking
statements made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. This information may involve risks and
uncertainties, including but not limitation, risks relating to the financial
outcomes of the planned business and growth strategies, that could cause actual
results to differ materially from the forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, such statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those projected.
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