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Exhibit 2.1
STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 2nd day of October, 2006 by and among
HENRY BROS.
ELECTRONICS, INC. ("Buyer"), a Virginia corporation, having an
address at 280
Midland Avenue, Saddle Brook, New Jersey 07663, HENRY BROS.
ELECTRONICS, INC.
("Parent"), a Delaware corporation, having an address at 280
Midland Avenue,
Saddle Brook, New Jersey 07663, CIS SECURITY SYSTEMS CORPORATION
("Company"), a
Virginia corporation, having an address at 8350-D Terminal Road,
Newington,
Virginia 22122 and JAMES R. WILLIAMS, JR. ("Seller"), an individual
having an
address at 4900 Bentonbrook Drive, Fairfax, Virginia 22030.
W I T N E S S E T H:
WHEREAS, Seller is the owner of 600 shares of the capital stock,
$1.00 par
value, of the Company (the "Shares"), which Shares constitute all
of the
presently issued and outstanding securities of the Company of every
class;
WHEREAS, Seller has agreed to sell, and Buyer has agreed to
purchase, all
of the Shares upon the terms, subject to the conditions and in
reliance on the
representations and warranties hereinafter set forth;
NOW,
THEREFORE, in consideration of the respective agreements
hereinafter
set forth, the parties agree as follows:
ARTICLE ONE
SALE OF SHARES, CONSIDERATION, PAYMENT AND RELATED MATTERS
On
the basis of the representations and warranties contained in and
subject
to the terms and conditions of this Agreement:
1.1
Sale. Seller shall at the Closing (as hereinafter defined)
sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase, the
Shares, free and clear of all liens, claims, charges, equities,
encumbrances,
restrictions and voting agreements of every kind, for the
consideration, and
payable as hereinafter provided. Certificates for the Shares shall
be delivered
by Seller to Buyer at the Closing duly endorsed, or accompanied by
stock powers
duly endorsed, in blank. The certificates for the Shares and stock
powers, if
any, shall be delivered at the Closing to the Company which shall
promptly issue
new certificates for the Shares, in the amounts the Buyer shall
request, in the
name of Buyer.
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1.2
Purchase Price and Payment.
(a) The aggregate purchase price for the Shares shall be determined
as
specified in Sections 1.2(b) and 1.2(c) (the "Purchase Price").
(b) Closing Events:
(i) At the Closing, Buyer shall pay the sum of $850,000 to
Seller, subject to reduction by the amount, if any, that
Company's
total indebtedness upon Closing, as scheduled on Seller schedule
1.2
(b)(i), exceeds $625,000. Payment to Seller of said amount shall
be
made in accordance with wiring instructions provided to the Buyer
by
the Seller, by wire transfer in immediately available funds. For
the
purposes of this section 1.2(b)(i), indebtedness shall not include
any
trade debt incurred by the Company in the ordinary course of
business.
(ii) On the Closing or as soon thereafter as may be
practicable,
Buyer shall, or shall cause the Company to, repay the existing
bank
and other debt on the balance sheet of the Company pursuant to
Seller
Schedule 1.2(b)(i), and shall assume, or shall cause the Company
to
assume, and cause Seller to be released therefrom, to the
extent
permitted by obligee(s), any and all guarantees of Seller which
may
relate to such indebtedness, given by Seller on behalf of Company
and
both said indebtedness and any such guarantees shall be disclosed
on
Seller Schedule 1.2. Seller shall promptly, without
compensation,
execute all documents reasonably necessary to accomplish the
foregoing. If any obligee(s) under any Company indebtedness assumed
by
Buyer refuses to permit Seller to be released from such
indebtedness,
Buyer shall indemnify and hold Seller harmless from any claims
arising
from such indebtedness.
(iii) On or within fifteen days of Closing, Parent shall issue
in
the name of Seller, twenty thousand (20,000) shares of common
stock
($.01 par value) of Parent ("HBE Shares").
(c) Post-Closing Payments:
(i) The "Revenue Goal" shall be the achievement by the Company
or
the Buyer (in the event that Company shall have been merged
into
Buyer), of average quarterly revenue (calculated pursuant to
United
States
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generally accepted accounting principles as in effect from time
to
time ("GAAP")) equal to or greater than $900,000 at each
quarterly
period beginning from the Closing.
(ii) Each of March 31, June 30, September 30 and December 31 in
each of the five (5) calendar years 2007, 2008, 2009, 2010 and
2011
shall be deemed a "Cash Determination Date." With respect to each
Cash
Determination Date where the Revenue Goal is achieved, Buyer shall
pay
Seller the amount of $12,500, plus the total, if any, of prior
cash
payments pursuant to this sub-clause that had not been paid to
Seller,
due to failure to achieve the Revenue Goal on a prior Cash
Determination Date.
(iii) Each of March 31, June 30, September 30 and December 31
in
each of the four (4) calendar years 2007, 2008, 2009 and 2010 shall
be
deemed a "Share Determination Date." With respect to each Share
Determination Date where the Revenue Goal is achieved, Buyer
shall
cause Parent to issue to Seller five thousand (5,000) HBE Shares,
plus
the total, if any, of prior share issuances pursuant to this
sub-clause that had not been made to Seller, due to failure to
achieve
the Revenue Goal on a prior Share Determination Date.
(iv) Any cash payments not made pursuant to 1.2(c)(ii) at the
final Cash Determination Date or HBE Shares not issued pursuant
to
1.2(c)(iii) at the final Share Determination Date shall be
forfeited.
(v) Promptly after the completion of Buyer's and Parent's
quarterly accounting process for each fiscal quarter ending upon
a
Cash Determination Date, but no later than 30 days after the end
of
the quarter, Buyer shall provide Seller with a calculation of
the
Buyer's average quarterly revenue since the Closing Date and a
determination as to whether the Revenue Goal had been achieved as
of
said date. Upon a determination that a payment under either or both
of
Sections 1.2(c)(ii) or 1.2(c)(iii) are payable, Buyer shall
promptly
remit the same to Seller. If Seller objects to the
aforementioned
calculation within five (5) business days of Buyer providing him
with
such calculation, Seller shall meet with a representative of Buyer
and
Parent to attempt to resolve any such disagreement and shall
thereafter have an additional twenty (20) business days, at
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Seller's cost and expense, to have an independent certified
public
accountant review the calculation, and Buyer and Parent shall
cooperate with such review by making books and records available.
If,
following the review by the independent certified public
accountant, a
disagreement continues to exist with respect to the calculation,
the
matter may be submitted to binding arbitration in accordance
with
Section 1.2(d).
(d) If there is a dispute between the parties with respect to
any
matter in Sections 1.2(c), such dispute shall be submitted to
binding
arbitration within the City of New York, before a single arbitrator
agreed
upon
by the parties, or if they cannot agree, appointed by JAMS. The
arbitrator shall award costs (including, but not limited to, travel
costs)
and
attorneys' fees to the prevailing party as a part of his
judgment.
1.3
Additional Closing Transaction.
(a) At the Closing or as soon thereafter as may be practicable,
the
Buyer shall transfer to Seller the 2001 Lexus LS430 automobile
owned by
Company in exchange for Seller's payment therefor to Buyer of $1.00
and
Seller's assumption of all taxes and transfer fees associated with
such
transfer and Seller's assumption of future registration and
insurance costs
associated therewith.
ARTICLE TWO
CLOSING AND RELATED MATTERS
2.1
Closing. The consummation of the transactions contemplated by
this
Agreement (the "Closing") will take place at such date, location
and time as may
be mutually agreeable to the parties hereto.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to and agrees with Parent and Buyer
that,
except as otherwise set forth or referred to in this Agreement or
enumerated
upon a separate schedule dated and executed contemporaneously
herewith from the
Seller (hereinafter referred to as the "Seller Schedule"):
3.1
Corporate Organization, Standing and Subsidiaries. The Company is
a
corporation duly organized, validly existing and in good standing
under the laws
of Virginia and
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has all requisite corporate power and authority to conduct its
business and own,
lease and operate its properties as and in the places where such
business is now
conducted and such properties are now owned, leased or operated.
Copies of the
Articles of Incorporation, By Laws and minutes of the Company
heretofore
delivered to Buyer are true, correct and complete copies of each
thereof, in the
case of the Articles of Incorporation and By Laws each as amended
to date and
presently in full force and effect. At the Closing, Seller shall
deliver to
Buyer a certificate to the foregoing effect executed by the
Company's Secretary.
The Company is duly qualified and in good standing under the laws
of each
jurisdiction where the failure to be so qualified reasonably could
be expected
to have a material adverse effect on the Company. Seller shall
deliver to Buyer
current certificates from each such jurisdiction confirming good
standing. The
Company has no subsidiaries. The Company has no interest in any
partnership,
corporation or other entity, other than as set forth in the Seller
Schedule 3.1.
3.2
Capital Stock, Ownership, Etc.
(a) The authorized securities of the Company consists of 5,000
shares
of
Common Stock, $1.00 par value, of which the Shares are the only
issued
and
outstanding securities. The Shares are duly and validly issued
and
outstanding, fully paid and non-assessable, with no personal
liability
attaching to the ownership thereof. The Company has no
outstanding
subscriptions, options, warrants, rights, calls or other
agreements,
obligations or commitments of any kind to issue, sell or purchase,
or
convert any obligations into, any securities of any kind or
class.
(b) The Seller is the sole record and beneficial owners of the
Shares,
free
and clear of all liens, claims, charges, equities,
encumbrances,
restrictions, options and voting and other agreements of every
kind, and
Seller has full and unrestricted right and authority to sell and
transfer
his
Shares to Buyer in accordance with this Agreement and is conveying
to
Buyer good and unencumbered title thereto.
3.3
Financial Statements; Financial Condition and Changes.
(a) The compiled financial statements of the Company at and for
the
fiscal year ended May 31, 2006, and the interim financial
statements at and
for
the quarter ended August 31, 2006, including balance sheet and
statement of operations and retained earnings heretofore delivered
by the
Seller to Buyer (the "Compiled Financial Statements") are true,
correct and
complete in all material respects and in conformity with
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the
books and records of the Company, consistently applied through
the
periods covered (except as otherwise stated therein) and fairly
present in
all
material respects the financial condition and results of operations
of
the
Company as at the date thereof and for the period covered
thereby.
Except as set forth in the Seller Schedule 3.3(a), there have been
no
occurrences or developments since August 31, 2006, which would
require any
material adverse changes to be made in the Compiled Financial
Statements.
(b) Except as set forth in Seller Schedule 3.3(b), as of the date
of
this
Agreement, the Company has no liabilities or obligations of any
kind,
whether absolute, accrued, contingent, or otherwise, other than
those (i)
set
forth or referred to in the Compiled Financial Statements, (ii)
incurred since August 31, 2006 in the ordinary course of business,
and
(iii) to be performed under (A) executory agreements entered into
in each
case
in the ordinary course of business and of a type not required
under
generally accepted accounting principles to be included in
financial
statements, and (B) the other agreements listed or referred to in
the
Seller Schedules or elsewhere in this Agreement (but excluding any
claim of
or
liability for breach by the Company of any such agreements), but
only to
the
extent that the liabilities and obligations referred to in the
preceding clauses (i) through (iii) inclusive do not otherwise
constitute a
breach of any of the other representations or warranties of the
Seller in
this
Article Three or elsewhere in this Agreement.
(c) Except as set forth in Seller Schedule 3.3(c), since August
31,
2006, there have been no changes in the financial condition,
assets,
liabilities, operating results or business of the Company, other
than
changes in the ordinary course of business, none of which has
been,
individually or in the
aggregate, materially adverse, nor any material
damage, destruction or loss of any of its property, and the
business and
operations of the Company have been conducted only in the usual,
regular
and
ordinary course. Without limiting the generality of the
foregoing,
since August 31, 2006, the Company has not (i) declared or paid, or
set
aside for payment, any dividend or other distribution in respect of
its
outstanding securities, (ii) entered into any material agreements
or
transactions or incurred any material liabilities or obligations
other
than, in each case, in the ordinary course of business and none of
which,
individually or in the aggregate, has been or to the best of the
Seller's
knowledge and belief, will be materially adverse; (iii) borrowed or
agreed
to
borrow any money or loaned or agreed to loan to, or guaranteed or
agreed
to
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guarantee the obligations of, any person; (iv) canceled,
compromised or
waived any amounts owing to or any claims heretofore made by it
except for
immaterial amounts in the ordinary course of business or otherwise
waived,
surrendered or released any material rights, contractual or other;
(v)
acquired any assets, tangible or intangible, subject to, or
subjected any
of
its assets, tangible or intangible, to, any mortgage, pledge,
lien,
security interest or other encumbrance; (vi) sold, leased,
abandoned or
otherwise disposed of any of its property, tangible or intangible,
or
interests therein, other than in the ordinary course of business;
(vii)
made
any increase in the compensation payable to any of its employees
or
agents, or agreed so to do, or paid or agreed to pay any
deferred
compensation or bonus to any such person, or entered into any
employment
agreement with any such person, other than in the ordinary course
of
business, or established any incentive, deferred compensation or
other
employee benefit plans or arrangements, other than in each case
those
terminable by the Company without payment or penalty on not more
than
fourteen days notice or those required by any collective
bargaining
agreements referred to in the Seller Schedule or elsewhere in
this
Agreement; (viii) terminated or agreed to terminate any material
contract,
agreement or other arrangement or relationship with any of its
major
suppliers or customers or lost, or received information that it may
lose,
the
business of any customer or customers; (ix) made or entered into
any
agreement or commitment to make any capital expenditures requiring
the
payment after the date of this Agreement of more than $1,000 in
the
aggregate; (x) experienced any material labor troubles or disputes;
or (xi)
to
the best of the Seller's knowledge, experienced any other event
or
condition of any character which has materially adversely affected
or may
in
the future be anticipated to materially adversely affect its
assets,
business, operations or prospects.
(d) The books of account and other records of the Company are in
all
material respects complete and correct, have been maintained in
accordance
with
good business practices and accurately reflect the information
contained therein.
(e) Seller's Additional Balance Sheet Warranty. In addition to
any
other representation and warranty of Seller contained in this
Agreement,
the
Seller warrants that, at Closing and thereafter, the Company's
last
pre-Closing Balance Sheet delivered to Buyer shall be free of
errors,
inaccuracies, misrepresentations or omissions. Any negative
adjustments to
the
Balance Sheet that are required to be made in accordance
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with
GAAP by May 1, 2009 for matters that should have been reflected
at
Closing, exceeding in the aggregate the sum of $25,000, will result
in a
corresponding offset and reduction, against the next amount or
amounts that
become payable to Seller pursuant to Section 1.2(c)(ii), until the
amount
or
amounts of such adjustments shall have been repaid in full. If
amounts
payable pursuant to such Section 1.2(c)(ii) are determined to
be
insufficient to repay such adjustments, Seller shall repay the
remaining
amount due hereunder to Buyer.
3.4
Taxes; Tax Returns. Except as specified on Seller Schedule 3.4,
the
Company (i) has filed, or will file before the date due, as such
may be
extended, all applicable Federal, state, county and local tax and
franchise
returns and reports required to be filed by it as of August 31,
2006 and has
paid (or, as to taxes not currently due and payable, has made
adequate provision
for the payment of) all income and other taxes, assessments,
franchise fees and
other governmental charges required by law (including, without
limitation,
withholding, social security, payroll and similar taxes) and all
interest and
penalties, if any, thereon and (ii) is not a party to any pending
action or
proceeding by any governmental authority for the assessment or
collection of any
taxes, assessments, franchise fees or other governmental charges
and no claim
for any thereof is pending or to the best of Seller's knowledge
threatened.
Copies of the Company's Federal tax return for the fiscal year
ended May 31,
2006, heretofore delivered to Buyer, are true, correct and
complete.
3.5
Material Agreements. The Seller Schedule 3.5 contains a true,
correct,
and complete list of (and, except as therein set forth, the Company
is not a
party to nor is it or any of its properties or assets bound by or
subject to)
any material written or oral agreement, commitment or understanding
(i) not made
in the ordinary course of business; (ii) relating to loans, credits
and
guarantees, whether to or for the benefit of or made by the
Company; (iii) for
the purchase or leasing by or furnishing to the Company of any
merchandise,
supplies or services not to be performed within three months or
individually or
in the aggregate representing a commitment by the Company of more
than $1,000;
(iv) for the sale, leasing or furnishing by the Company of any
merchandise,
supplies or services; (v) relating to the employment of any person
or with any
labor union or association not terminable without penalty or
premium on notice
of fourteen days or less; (vi) involving incentive, bonus or
deferred
compensation plans or arrangements or stock option, stock purchase
or similar
plans or arrangements; (vii) for the
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leasing of any property, real or personal, whether as lessor or
lessee; (viii)
relating to the furnishing of brokerage, agency, dealer,
distributorship, sales
representative, consulting or advertising services, whether to, for
or by the
Company; (ix) relating to partnerships or joint ventures or
involving the
sharing of profits; (x) providing for the furnishing of services or
the sale of
property by the Company for less than the fair value thereof; or
(xi) providing
for expenditures, capital or otherwise, in excess of $1,000
individually or in
the aggregate. All such agreements are valid, binding, and
enforceable in
accordance with their respective provisions, performance by the
Company of any
thereof will not, individually or in the aggregate, have any
material adverse
effect on the business, assets, operations or financial condition
of the
Company, and true and complete copies of all such agreements which
are in
writing have been delivered or made available to Buyer except as
otherwise
indicated in Seller Schedule 3.5.
3.6
Property Leases.
(a) The Company has good and marketable title to all of its
assets,
real, personal and mixed, tangible and intangible, in each case
free and
clear of all liens, security interests, claims, charges and
encumbrances
except (i) as expressly set forth in Seller Schedule 3.6(a) and
(ii) the
lien, if any, of current taxes not yet due and payable. All
machinery,
fixtures, equipment and similar assets of, and all real property of
or
leased by the Company are in good operating condition and
repair.
(b) All leases to which the Company is a party are in good
standing,
are
valid, binding and enforceable in accordance with the
respective
provisions thereof and are listed on Seller Schedule 3.6(b).
3.7
Default. Except as set forth in Seller Schedule 3.7, neither
the
Company nor, to the best of Seller's knowledge, any other party
hereto is in
material violation of or default under, and no event (including,
without
limitation, execution of and consummation of the transactions
provided for in
this Agreement) has occurred which with the passage of time or
notice from or
action by any party thereto or otherwise could result in a material
breach of or
default under, or give any other person the right to terminate, as
the case may
be, any material indenture, mortgage, security, loan, lease or
other agreement
(including, without limitation, those listed or referred to in the
Seller
Schedules) to which the Company is a party or by which it is bound
or to which
any of its assets are subject or result in the creation, imposition
or
acceleration
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of any material lien, encumbrance, charge, equity or restriction of
any nature
in favor of any other person upon any of the assets of the
Company.
3.8
Permits; Compliance with Laws. The Company possesses all
necessary
valid licenses, permits, franchises, consents, authorizations and
approvals of
or from governmental departments, agencies and instrumentalities
for the
business and operations of the Company as presently conducted and
is not in
material default with respect to nor in violation of, and has not
received
notice of any violation of or of any proceedings for the
termination or
revocation of, any such license, permit, franchise, consent,
authorization or
approval or any applicable Federal, state, local or foreign law,
statute,
ordinance, regulation, order or requirement relating to its
business, operations
or assets, or the use thereof, which default or violation could
have a
materially adverse affect upon its business, operations or assets.
Seller
Schedule 3.8 includes a list (including expiration dates) of all
material
licenses, permits, consents, authorizations and approvals of or
from
governmental departments, agencies and instrumentalities held by
the Company in
the conduct of its business.
3.9
Employee Benefit Plans. Seller Schedule 3.9 includes a list of
all
Company Benefit Plans between the Company and any of its employees
whereby the
Company is obligated to provide any benefit to any employees
arising out of the
employment relationship. As used herein, the term "Benefit Plan"
shall mean any
"employee benefit plan" within the meaning of ERISA Section 3(3)
and the term
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as
amended. Except as set forth in Seller Schedule 3.9, the Company's
Benefit Plans
are fully funded, as of May 31, 2006, and each is maintained in
accordance with
its terms and Summary Plan Description.
3.10
Intangible Rights. Except as set forth in Seller Schedule 3.10,
the
Company does not own any Intangible Rights. As used herein, the
term "Intangible
Rights" means and includes all right, title and interest in, to and
under, any
United States and foreign patents, trademarks, trade names, trade
styles,
service marks, designs, copyrights, domain names and labels,
together in each
case with all registrations, applications, recordings, reissuances,
extensions,
renewals, licenses and rights, if any, and all books, records,
documents,
advertising materials, brochures, and instruments, thereof or
therefor or
relating thereto, the goodwill of the business symbolized thereby,
and all
claims against third parties for violation or infringement of any
thereof.
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3.11
Litigation. Except as set forth in Seller Schedule 3.11, there are
no
actions, suits, claims, arbitrations, administrative or other
proceedings or
governmental investigations pending or, to the best of the Seller's
knowledge,
threatened against, relating to or affecting the Company or its
business,
operations or assets, whether or not fully covered by insurance, or
which
question or seek to prevent consummation of the transactions
provided for in
this Agreement, whether at law or in equity, or before or by any
Federal, state,
local, foreign or other governmental department, agency or
instrumentality nor
to the best of Seller's knowledge is there any basis therefor. The
Company is
not bound or adversely affected by or in default with respect to
any judgment,
order, writ, injunction or decree of any court or of any
governmental
department, agency or instru
