MEMBERSHIP INTEREST PURCHASE AGREEMENT AMONG WPCS INTERNATIONAL INCORPORATED MAX ENGINEERING LLC AND HAK-FONG MA AND ROBERT WINTERHALTER Dated August 2, 2007
Exhibit
10.6
AMONG
WPCS
INTERNATIONAL INCORPORATED
MAX
ENGINEERING LLC
AND
XXX-XXXX
MA
AND
XXXXXX
XXXXXXXXXXXX
Dated
August 2, 2007
TABLE
OF
CONTENTS
| Section | Page | |||
| ARTICLE I SALE AND PURCHASE OF MEMBERSHIP INTERESTS | ||||
|
1.1
|
Sale
and Purchase of Membership Interests
|
1
|
||
| ARTICLE II PURCHASE PRICE AND PAYMENT | ||||
|
2.1
|
Amount
of Purchase Price1
|
|||
|
2.2
|
Payment
of Purchase Price
|
1
|
||
|
2.3
|
Net
Tangible Asset Value Adjustment
|
2
|
||
| ARTICLE III CLOSING AND TERMINATION | ||||
|
3.1
|
Closing
Date
|
3
|
||
|
3.2
|
Termination
of Agreement
|
3
|
||
|
3.3
|
Procedure
Upon Termination
|
3
|
||
|
3.4
|
Effect
of Termination
|
3
|
||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS | ||||
|
4.1
|
Organization
and Good Standing
|
4
|
||
|
4.2
|
Authority
|
4
|
||
|
4.3
|
Membership
Interests
|
5
|
||
|
4.4
|
Basic
Corporate Records
|
5
|
||
|
4.5
|
Minute
Books
|
5
|
||
|
4.6
|
Subsidiaries
and Affiliates
|
5
|
||
|
4.7
|
Consents
|
6
|
||
|
4.8
|
Financial
Statements
|
6
|
||
|
4.9
|
Records
and Books Account
|
6
|
||
|
4.10
|
Absence
of Undisclosed Liabilities
|
6
|
||
|
4.11
|
Taxes
|
7
|
||
|
4.12
|
Account
Receivable
|
9
|
||
|
4.13
|
Inventory
|
9
|
||
|
4.14
|
Machinery
and Equipment
|
9
|
||
|
4.15
|
Real
Property Matters
|
10
|
||
|
4.16
|
Leases
|
10
|
||
|
4.17
|
Patents,
Software, Trademarks, Etc
|
10
|
||
|
4.18
|
Insurance
Policies
|
11
|
||
|
4.19
|
Banking
and Personnel Lists
|
11
|
||
|
4.20
|
Lists
of Contracts, Etc
|
12
|
||
|
4.21
|
Compliance
With the Law
|
13
|
||
|
4.22
|
Litigation,
Pending Labor Disputes
|
13
|
||
|
4.23
|
Absence
of Certain Changes or Events
|
14
|
||
|
4.24
|
Employee
Benefit Plans
|
15
|
||
|
4.25
|
Product
Warranties and Product Liabilities
|
16
|
||
i
|
4.26
|
Assets
|
17
|
||
|
4.27
|
Absence
of Certain Commercial
Practices
|
17 | ||
|
4.28
|
Licenses,
Permits, Consents and Approvals
|
17 | ||
|
4.29
|
Environmental
Matters
|
17 | ||
|
4.30
|
Broker
|
18 | ||
|
4.31
|
Related
Party Transactions
|
18
|
||
|
4.32
|
Patriot
Act
|
18 | ||
|
4.33
|
Investment
Intent
|
19
|
||
|
4.34
|
Investment
Experience; Suitability
|
19 | ||
|
4.35
|
Accreditation
|
19
|
||
|
4.36
|
Disclosure
|
20 | ||
| ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER | ||||
|
5.1
|
Organization
and Good Standing
|
20
|
||
|
5.2
|
Authority
|
20
|
||
|
5.3
|
Conflicts;
Consents of Third Parties
|
20
|
||
|
5.4
|
Litigation
|
21
|
||
|
5.5
|
Investment
Intention
|
21
|
||
|
5.6
|
Broker
|
21
|
||
|
5.7
|
Patriot
Act
|
21
|
||
|
5.8
|
Due
Authorization of Purchaser Common Stock
|
21
|
||
| ARTICLE VI COVENANTS | ||||
|
6.1
|
Access
to Information
|
22 |
|
|
|
6.2
|
Conduct
of the Business Pending the Closing
|
22
|
||
|
6.3
|
Consents
|
24
|
||
|
6.4
|
Other
Actions
|
24
|
||
|
6.5
|
No
Solicitation
|
25
|
||
|
6.6
|
Preservation
of Records
|
25
|
||
|
6.7
|
Publicity
|
25
|
||
|
6.8
|
Use
of Name
|
25
|
||
|
6.9
|
Employment
Agreements
|
26
|
||
|
6.10
|
Board
of Directors
|
26 | ||
|
6.11
|
Financial
Statements
|
26 | ||
|
6.12
|
Tax
Election
|
26 | ||
|
6.13
|
Tax
Matters
|
27 | ||
|
6.14
|
Non-Competition
|
28
|
||
|
6.15
|
Registration
of Shares of Purchaser Common Stock
|
29
|
||
|
6.16
|
Employee
Matters.
|
29
|
||
ii
| ARTICLE VII CONDITIONS TO CLOSING | ||||
|
7.1
|
Conditions
Precedent to Obligations of Purchaser
|
29
|
||
|
7.2
|
Conditions
Precedent to Obligations of the Seller
|
30
|
||
| ARTICLE VIII DOCUMENTS TO BE DELIVERED | ||||
|
8.1
|
Documents
to be Delivered by the Sellers
|
31
|
||
|
8.2
|
Documents
to be Delivered by the Purchaser
|
32 |
|
|
| ARTICLE IX INDEMNIFICATION | ||||
|
9.1
|
Indemnification
|
32
|
||
|
9.2
|
Limitations
on Indemnification for Breaches of Representations and
Warranties
|
33
|
||
|
9.3
|
Indemnification
Procedures
|
34
|
||
|
9.4
|
Tax
Treatment of Indemnity Payments
|
36
|
||
| ARTICLE X MISCELLANEOUS | ||||
|
10.1
|
Payment
of Sales, Use or Similar Taxes
|
34
|
||
|
10.2
|
Survival
of Representations and Warranties
|
35
|
||
|
10.3
|
Expenses
|
35
|
||
|
10.4
|
Specific
Performance
|
35
|
||
|
10.5
|
Further
Assurances
|
35
|
||
|
10.6
|
Submission
to Jurisdiction; Consent to Service of Process
|
35
|
||
|
10.7
|
Entire
Agreement; Amendments and Waivers
|
36
|
||
|
10.8
|
Governing
Law
|
36
|
||
|
10.9
|
Table
of Contents and Headings
|
36
|
||
|
10.10
|
Notices
|
36
|
||
|
10.11
|
Severability | 37 | ||
|
10.12
|
Binding
Effect; Assignment
|
37 | ||
iii
THIS
MEMBERSHIP INTEREST PURCHASE AGREEMENT is made as of August 2, 2007 (the
“Agreement”), among WPCS International Incorporated, a corporation existing
under the laws of Delaware (the “Purchaser”), Max Engineering LLC, a Texas
limited liability company (the “Company”), and the members of the Company listed
on the signature pages hereof (collectively the “Sellers”).
ARTICLE
I
SALE
AND
PURCHASE OF MEMBERSHIP INTERESTS
1.1 Sale
and
Purchase of Membership Interests.
Upon
the
terms and subject to the conditions contained herein, on the Closing Date each
Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and
the Purchaser shall purchase from each Seller, all Membership Interests of
the
Company owned by such Seller set forth opposite such Seller's name on
Annex A attached hereto.
ARTICLE
II
PURCHASE
PRICE AND PAYMENT
2.1 Amount
of Purchase Price.
The
purchase price for the Membership Interests shall be an amount equal to up
to
One Million Five Hundred Twenty Five Thousand dollars ($1,525,000) (the
“Purchase Price”), subject to adjustment as set forth herein.
2.2 Payment
of Purchase Price.
On
the
Closing Date, the Purchaser shall pay Eight Hundred Thousand dollars ($800,000)
of the Purchase Price to the Sellers (the “Closing Payment”), which shall be
paid as follows:
(i) $600,000
(the “Cash Purchase Price”) which shall be paid by wire transfer of immediately
available funds into an account designated by the Sellers; and
(ii) issuance
of such number of shares of Purchaser common stock (the “Common Stock”) as
equals $200,000, divided by the closing price of the Common Stock on the date
which is one day prior to the Closing Date (the “Closing
Shares”). The Purchaser Shares shall be delivered within five (5)
business days of the Closing Date.
An
additional (i) $350,000 (the “First Twelve Month Payment”) will be
payable to the Sellers in the event the Company’s earnings before interest and
taxes (“EBIT”) for the period ending twelve months from the Closing Date, shall
equal or exceed $275,000 (the “First Twelve Month Target EBIT”), and (ii)
$375,000 (the “Second Twelve Month Payment”) will be payable to the Sellers in
the event the Company’s EBIT for the second twelve month period ending two years
from the Closing Date shall equal or exceed $375,000 (the “Second Twelve Month
Target EBIT”). Determination of the Company’s EBIT for the First and
Second Twelve Month Target shall be made by the independent accounting firm
regularly engaged by the Purchaser (the “Auditor”), and shall be completed
within 90 days after the end of each respective twelve month
period. To the extent the actual EBIT for either of the two
successive twelve month periods from the Closing Date shall be less than the
First Twelve Month Target EBIT or the Second Twelve Month Target EBIT,
respectively, the First Twelve Month Payment or the Second Twelve Month Payment
shall be reduced by the percent of shortfall from the respective
targets. It is understood that each year shall be calculated
independently and shortfalls or surpluses of target amounts shall not be carried
between the years. At the option of the Purchaser, any amounts due to
be paid for the First and Second Twelve Month Payment may be paid in cash or
shares of Purchaser Common Stock, (valued at the closing price of the Purchaser
Common Stock on the date prior to date on which the amount of the payment is
determined). The First Twelve Month Payment and Second Twelve Month
Payment shall be paid within ten days after receipt, review and acceptance
of
the financial statements of the Company for each of such years.
2.3 Net
Tangible Asset Value Adjustment.
(a)
Within 90 days after the Closing Date, the Purchaser shall cause to be prepared
and delivered to Sellers a calculation of the Company’s net tangible asset value
as of the Closing Date. Net tangible asset value is defined as total
assets minus total liabilities minus intangible assets (“NTAV”). The Sellers
shall have a period of 20 days to review the NTAV calculation. In the
event the Sellers and the Purchaser are unable to agree upon the NTAV after
good
faith negotiations for a period of 20 days, the Sellers and the Purchaser shall
submit such dispute for resolution to an independent accounting firm chosen
mutually by the Purchaser and the Sellers, which shall determine and report
to
the parties and such report shall be final, binding and conclusive on the
parties hereto. If the independent accounting firm determines that
the NTAV is more than five percent (5%) below the NTAV determined by the
Purchaser, then the party whose NTAV calculation is furthest from that of the
independent accounting firm shall pay the legal fees and expenses of the other
party. If the independent accounting firm determines that the NTAV is
equal to or less than five percent (5%) above the NTAV determined by the
Purchaser, then the Sellers shall pay the legal fees and expenses of the
Purchaser. The parties shall cooperate with one another and provide
reasonable access of all pertinent books and records to the other
party. In the event the NTAV as of the Closing Date shall be less
than $288,000, the Cash Purchase Price shall be reduced by the amount of the
shortfall. In the event the NTAV as of the Closing Date shall be
greater than $288,000, the Closing Payment shall be increased by the amount
of
the excess. At the option of the Purchaser, any amounts due to be
paid to the Sellers as a result of a NTAV in excess of $288,000 may be paid
in
cash or shares of Common Stock valued at the closing price
of
the common stock on the date prior to date on which the amount of the payment
is
determined.
2
(b)
In order to satisfy any amounts which the Sellers may be required to deliver
to
the Purchaser as a result of a deficiency in the NTAV, $120,000 of the Cash
Purchase Price shall be deposited into an escrow account until the NTAV as
of
the Closing Date shall be determined and any deficiency in the NTAV shall have
been paid from the escrow account to the Purchaser (the “Escrowed
Funds”). The Escrowed Funds shall be held for the benefit of the
Sellers in accordance with their pro rata ownership of the Membership Interests
as set forth on Schedule 1.1. The Escrowed Funds shall be held in
accordance with the terms and conditions set forth in the escrow agreement
attached hereto as Exhibit 2.3 (the “Escrow Agreement”).
ARTICLE
III
CLOSING
AND TERMINATION
3.1 Closing
Date.
Subject
to the satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof
(or the waiver thereof by the party entitled to waive that condition), the
closing of the sale and purchase of the Membership Interests provided for in
Section 1.1 hereof (the "Closing") shall take place at the offices of Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP, 00 Xxxxxxxx, Xxx Xxxx, XX 00000 (or at such other
place as the parties may designate in writing) on such date as the Sellers
and
the Purchaser may designate. The Closing may also take place through
the delivery of documents in electronic of telefaxed format or through courier
delivery of actual signatures to counsel for the parties.
3.1 Termination
of Agreement.
This
Agreement may be terminated prior to the Closing as follows:
(a) At
the
election of the Sellers or the Purchaser on or after August 31, 2007, if the
Closing shall not have occurred by the close of business on such date, provided
that the terminating party is not in default of any of its obligations
hereunder;
(b) by
mutual
written consent of the Sellers' and the Purchaser; or
(c) by
the
Sellers or the Purchaser if there shall be in effect a final nonappealable
order
of a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
it being agreed that the parties hereto shall promptly appeal any adverse
determination which is not nonappealable (and pursue such appeal with reasonable
diligence).
3.2 Procedure
Upon Termination.
In
the
event of termination and abandonment by the Purchaser or the Sellers, or both,
pursuant to Section 3.2 hereof, written notice thereof shall forthwith be given
to the other party or parties, and this Agreement shall terminate, and the
purchase of the Membership Interests hereunder shall be abandoned, without
further action by the Purchaser or the Sellers. If this Agreement is
terminated as provided herein, each party shall redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same.
3
3.3 Effect
of Termination.
In
the
event that this Agreement is validly terminated as provided herein, then each
of
the parties shall be relieved of their duties and obligations arising under
this
Agreement after the date of such termination and such termination shall be
without liability to the Purchaser, the Company or any Seller; provided,
further, however, that nothing in this Section 3.4 shall relieve the Purchaser
or any Seller of any liability for a breach of this Agreement.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
The
Sellers hereby jointly and severally represent and warrant to the Purchaser
that:
4.1. Organization
and Good Standing of the Company. The Company is a company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation as set forth above. Except as otherwise
provided herein, the Company is not required to be qualified to transact
business in any other jurisdiction where the failure to so qualify would have
an
adverse effect on the business of the Company.
4.2. Authority.
(a) The
Company has full power and authority (corporate and otherwise) to carry on
its
business and has all permits and licenses that are necessary to the conduct
of
its business or to the ownership, lease or operation of its properties and
assets, except where the failure to have such permits and licenses would not
have a material adverse effect on the Company’s business or operations
(“Material Adverse Effect”).
(b) The
execution of this Agreement and the delivery hereof to the Purchaser and the
sale contemplated herein have been, or will be prior to Closing, duly authorized
by the Company’s Board of Directors and by the Company’s stockholders having
full power and authority to authorize such actions.
(c) Subject
to any consents required under Section 4.7 below, the Sellers and the Company
have the full legal right, power and authority to execute, deliver and carry
out
the terms and provisions of this Agreement; and this Agreement has been duly
and
validly executed and delivered on behalf of Sellers and the Company and
constitutes a valid and binding obligation of each Seller and the Company
enforceable in accordance with its terms.
4
(d) Except
as set forth in Schedule 4.2, neither the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated, nor
compliance with the terms of this Agreement will violate, conflict with, result
in a breach of, or constitute a default under any statute, regulation,
indenture, mortgage, loan agreement, or other agreement or instrument to which
the Company or any Seller is a party or by which it or any of them is bound,
any
charter, regulation, or bylaw provision of the Company, or any decree, order,
or
rule of any court or governmental authority or arbitrator that is binding on
the
Company or any Seller in any way, except where such would not have a Material
Adverse Effect.
4.3. Membership
Interests.
(a) The
Sellers are the lawful record and beneficial owner of the Membership Interests
set forth opposite their respective names on Schedule A hereto, free and clear
of any liens, pledges, encumbrances, charges, claims or restrictions of any
kind, and each of the Sellers has, or will have on the Closing Date, the
absolute, unilateral right, power, authority and capacity to enter into and
perform this Agreement without any other or further authorization, action or
proceeding, except as specified herein. Upon the delivery to
Purchaser on the Closing Date of the Membership Interests, Purchaser will have
good, legal, valid, marketable and indefeasible title to a 100% interest in
the
Company, free and clear of any liens, pledges, encumbrances, charges,
agreements, options, claims or other arrangements or restrictions of any
kind.
(b) There
are no authorized or outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other agreements
or
arrangements of any character or nature whatever under which any Seller or
the
Company are or may become obligated to issue, assign or transfer any membership
interests of the Company.
4.4. Basic
Corporate Records. The copies of the Certificate of Formation of
the Company, (certified by the Secretary of State or other authorized official
of the jurisdiction of incorporation), and the Operating Agreement of the
Company, as the case may be (certified as of the date of this Agreement as
true,
correct and complete by the Company’s secretary or assistant secretary), all of
which have been delivered to the Purchaser, are true, correct and complete
as of
the date of this Agreement.
4.5. Minute
Books. The minute books of the Company, which shall be exhibited
to the Purchaser between the date hereof and the Closing Date, each contain
true, correct and complete minutes and records of all meetings, proceedings
and
other actions of the shareholders, Boards of Directors and committees of such
Boards of Directors of the Company, if any, except where such would not have
a
Material Adverse Effect and, on the Closing Date, will, to the best of Sellers’
knowledge, contain true, correct and complete minutes and records of any
meetings, proceedings and other actions of the shareholders, respective Boards
of Directors and committees of such Boards of Directors of each such
corporation.
4.6. Subsidiaries
and Affiliates. Any and all businesses, entities, enterprises and
organizations in which the Company has any ownership, voting or profit and
loss
sharing percentage interest (the “Subsidiaries”) are identified in Schedule 4.6
hereto, together with the Company’s interest therein. Unless the
context requires otherwise or specifically designated to the contrary on
Schedule 4.6 hereto, “Company” as used in this Agreement shall include all such
Subsidiaries. Except as set forth in Schedule 4.6 or 4.31, (i) the
Company has made no advances to, or investments in, nor owns beneficially or
of
record, any securities of or other interest in, any business, entity, enterprise
or organization, (ii) there are no arrangements through which the Company
has acquired from, or provided to, any of the Sellers or their affiliates any
goods, properties or services, (iii) there are no rights, privileges or
advantages now enjoyed by the Company as a result of the ownership of the
Company by the Sellers which, to the knowledge of the Sellers or the Company,
might be lost as a result of the consummation of the transactions contemplated
by this Agreement. Each entity shown on Schedule 4.6 is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has full corporate power to own all
of
its property and to carry on its business as it is now being
conducted. Also set forth on Schedule 4.6 is a list of jurisdictions
in which each Subsidiary is qualified as a foreign corporation. Such
jurisdictions are the only jurisdictions in which the ownership or leasing
of
property by each Subsidiary or the conduct of its business requires it to be
so
qualified. All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, and, except as set forth on Schedule 4.6, are owned, of record
and beneficially, by the Company, and on the Closing Date will be owned by
the
Company, free and clear of all liens, encumbrances, equities, options or claims
whatsoever. No Subsidiary has outstanding any other equity securities
or securities options, warrants or rights of any kind that are convertible
into
equity securities of such Subsidiary, except as set forth on Schedule
4.6.
5
4.7. Consents. Except
as set forth in Schedule 4.7, no consents or approvals of any public body or
authority and no consents or waivers from other parties to leases, licenses,
franchises, permits, indentures, agreements or other instruments are
(i) required for the lawful consummation of the transactions contemplated
hereby, or (ii) necessary in order that the business currently conducted by
the Company can be conducted by the Purchaser in the same manner after the
Closing as heretofore conducted by the Company, nor will the consummation of
the
transactions contemplated hereby result in creating, accelerating or increasing
any liability of the Company, except where the failure of any of the foregoing
would not have a Material Adverse Effect.
4.8. Financial
Statements. The Sellers have delivered, or will deliver prior to
Closing, to the Purchaser copies of the following financial statements (which
include all notes and schedules attached thereto), all of which are true,
complete and correct, have been prepared from the books and records of the
Company in accordance with generally accepted accounting principles (“GAAP”)
consistently applied with past practice and fairly present the financial
condition, assets, liabilities and results of operations of the Company as
of
the dates thereof and for the periods covered thereby:
|
|
the
compiled balance sheet of the Company at December 31, 2006 and 2005,
and
the related statements of operations, and of cash flows of the Company
for
the period then ended and (ii) the unaudited balance sheet of the
Company
as of June 30, 2007 and the related compiled statement of operations
of
the Company for the six month period then ended (such statements,
including the related notes and schedules thereto, are referred to
herein
as the “Financial Statements.”)
|
In
such Financial Statements, the
statements of operations do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of business except
as set forth in Schedule 4.8, and the financial statements for the interim
periods indicated include all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentation. There are
no facts known to any of the Sellers or the Company that, under generally
accepted accounting principles consistently applied, would alter the information
contained in the foregoing Financial Statements in any material
way.
6
The
Final Closing Balance Sheet will be
complete and correct in all material respects determined in accordance with
GAAP.
For
the purposes hereof, the balance
sheet of the Company as of June 30, 2007 is referred to as the “Balance Sheet”
and June 30, 2007 is referred to as the “Balance Sheet Date”.
4.9. Records
and Books of Account. The records and books of account of the
Company reflect all material items of income and expense and all material
assets, liabilities and accruals, have been, and to the Closing Date will be,
regularly kept and maintained in conformity with GAAP applied on a consistent
basis with preceding years.
4.10. Absence
of Undisclosed Liabilities. Except as and to the extent reflected
or reserved against in the Company’s Financial Statements or disclosed in
Schedule 4.10, there are no liabilities or obligations of the Company of any
kind whatsoever, whether accrued, fixed, absolute, contingent, determined or
determinable, and including without limitation (i) liabilities to former,
retired or active employees of the Company under any pension, health and welfare
benefit plan, vacation plan or other plan of the Company, (ii) tax
liabilities incurred in respect of or measured by income for any period prior
to
the close of business on the Balance Sheet Date, or arising out of transactions
entered into, or any state of facts existing, on or prior to said date, and
(iii) contingent liabilities in the nature of an endorsement, guarantee,
indemnity or warranty, and there is no condition, situation or circumstance
existing or which has existed that could reasonably be expected to result in
any
liability of the Company which is of a nature that would be required to be
disclosed on its Financial Statements in accordance with GAAP, other than
liabilities and contingent liabilities incurred in the ordinary course of
business since the Balance Sheet Date consistent with the Company’s recent
customary business practice, none of which is materially adverse to the
Company.
4.11 Taxes.
(a) For
purposes of this Agreement, “Tax” or “Taxes” refers to: (i) any and
all federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes and escheatment
payments, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being or ceasing
to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of foreign, state or local
law); and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
7
(b) (i) The
Company has timely filed all federal, state, local and foreign returns,
estimates, information statements and reports (“Returns”) relating to Taxes
required to be filed by the Company with any Tax authority effective through
the
Closing Date. All such Returns are true, correct and complete in all
respects, except for immaterial amounts where such would not have a Material
Adverse Effect. The Company has paid all Taxes shown to be due on
such Returns. Except as listed on Schedule 4.11 hereto, the Company
is not currently the beneficiary of any extensions of time within which to
file
any Returns. The Sellers and the Company have furnished and made available
to
the Purchaser complete and accurate copies of all income and other Tax Returns
and any amendments thereto filed by the Company in the last three (3)
years.
(ii) The
Company, as of the Closing Date, will have withheld and accrued or paid to
the
proper authority all Taxes required to have been withheld and accrued or paid,
except for immaterial amounts where such would not have a Material Adverse
Effect.
(iii) The
Company has not been delinquent in the payment of any Tax nor is there any
Tax
deficiency outstanding or assessed against the Company. The Company
has not executed any unexpired waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) There
is
no dispute, claim, or proposed adjustment concerning any Tax liability of the
Company either (A) claimed or raised by any Tax authority in writing or (B)
based upon personal contact with any agent of such Tax authority, and there
is
no claim for assessment, deficiency, or collection of Taxes, or proposed
assessment, deficiency or collection from the Internal Revenue Service or any
other governmental authority against the Company which has not been
satisfied. The Company is not a party to nor has it been notified in
writing that it is the subject of any pending, proposed, or threatened action,
investigation, proceeding, audit, claim or assessment by or before the Internal
Revenue Service or any other governmental authority, nor does the Company have
any reason to believe that any such notice will be received in the future.
Except as set forth on Schedule 4.11, neither the Internal Revenue Service
nor
any state or local taxation authority has ever audited any income tax return
of
the Company. The Company has not filed any requests for rulings with
the Internal Revenue Service. Except as provided to the Company’s
accountants, no power of attorney has been granted by the Company or its
Affiliates with respect to any matter relating to Taxes of the
Company. There are no Tax liens of any kind upon any property or
assets of the Company, except for inchoate liens for Taxes not yet due and
payable.
8
(v) Except
for immaterial amounts which would not have a Material Adverse Effect, the
Company has no liability for any unpaid Taxes which has not been paid or accrued
for or reserved on the Financial Statements in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise.
(vi) There
is
no contract, agreement, plan or arrangement to which the Company is a party
as
of the date of this Agreement, including but not limited to the provisions
of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, would reasonably be expected to give rise to
the
payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”). There is no contract, agreement, plan or arrangement to
which the Company is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the
Code.
(vii) The
Company has not filed any consent agreement under Section 341(f) of the
Code or agreed to have Section 341(f)(2) of the Code apply to any disposition
of
a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned
by
the Company.
(viii) The
Company is not a party to, nor has any obligation under any tax-sharing, tax
indemnity or tax allocation agreement or arrangement.
(ix) None
of
the Company’s assets are tax exempt use property within the meaning of
Section 168(h) of the Code.
4.12. Accounts
Receivable. The accounts receivable of the Company shown on the
Balance Sheet Date, and those to be shown in the Financial Statements, are,
and
will be, actual bona fide receivables from transactions in the ordinary course
of business representing valid and binding obligations of others for the total
dollar amount shown thereon, and as of the Balance Sheet Date were not (and
presently are not) subject to any recoupments, set-offs, or counterclaims.
To
the best of Seller’s knowledge, except as set forth on Schedule 4.12, all such
accounts receivable are, and will be collectible in amounts not less than the
amounts (net of reserves) carried on the books of the Company, including
the Financial Statements, and will be paid in accordance with their
terms. Except as listed on Schedule 4.12 hereto, all such accounts
receivable are and will be actual bona fide receivables from transactions in
the
ordinary course of business.
4.13. Inventory. The
inventories of the Company are located at the locations listed on Schedule
4.13
attached hereto. Except as disclosed in Schedule 4.8, the inventories of the
Company shown on its Balance Sheet (net of reserves) are carried at values
which
reflect the normal inventory valuation policy of the Company of stating the
items of inventory at average cost in accordance with generally accepted
accounting principles consistently applied. Inventory acquired since
the Balance Sheet Date has been acquired in the ordinary course of business
and
valued as set forth above. The Company will maintain the inventory in
the normal and ordinary course of business from the date hereof through the
Closing Date.
9
4.14. Machinery
and Equipment. Except for items disposed of in the ordinary
course of business, all machinery, tools, furniture, fixtures, equipment,
vehicles, leasehold improvements and all other tangible personal property
(hereinafter “Fixed Assets”) of the Company currently being used in the conduct
of its business, or included in determining the net book value of the Company
on
the Balance Sheet Date, together with any machinery or equipment that is leased
or operated by the Company, are in fully serviceable working condition and
repair. Said Fixed Assets shall be maintained in such condition from
the date hereof through the Closing Date. Except as described on
Schedule 4.14 hereto, all Fixed Assets owned, used or held by the Company are
situated at its business premises and are currently used in its
business. Schedule 4.14 describes all Fixed Assets owned by or an
interest in which is claimed by any other person (whether a customer, supplier
or other person) for which the Company is responsible (copies of all agreements
relating thereto being attached to said Schedule 4.14), and all such property
is
in the Company’s actual possession and is in such condition that upon the return
of such property in its present condition to its owner, the Company will not
be
liable in any amount to such owner. There are no outstanding
requirements or recommendations by any insurance company that has issued a
policy covering either (i) such Fixed Assets or (ii) any liabilities
of the Company relating to operation of the Business, or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any Fixed Assets or any changes
in the operations of the Business, any equipment or machinery used therein,
or
any procedures relating to such operations, equipment or
machinery. All Fixed Assets of the Company are set forth on Schedule
4.14 hereto.
4.15. Real
Property Matters. The Company does not own any real property as
of the date hereof and has not owned any real property during the three years
preceding the date hereof.
4.16. Leases. All
leases of real and personal property of the Company are described in Schedule
4.16, are in full force and effect and constitute legal, valid and binding
obligations of the respective parties thereto enforceable in accordance with
their terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting generally the enforcement
of
creditor’s rights, and have not been assigned or encumbered. The
Company has performed in all material respects the obligations required to
be
performed by it under all such leases to date and it is not in default in any
material respect under any of said leases, except as set forth in Schedule
4.16,
nor has it made any leasehold improvements required to be removed at the
termination of any lease, except signs. No other party to any such
lease is in material default thereunder. Except as noted on Schedule
4.16, none of the leases listed thereon require the consent of a third party
in
connection with the transfer of the Membership Interests. The lease
for the Company’s real property shall be terminated upon the Closing and a new
lease shall be entered into.
4.17. Patents,
Software, Trademarks, Etc. The Company owns, or possesses
adequate licenses or other rights to use, all patents, software, trademarks,
service marks, trade names and copyrights and trade secrets, if any, necessary
to conduct its business as now operated by it. The patents, software,
trademarks, service marks, copyrights, trade names and trade secrets, if any,
registered in the name of or owned or used by or licensed to the Company and
applications for any thereof (hereinafter the “Intangibles”) are described or
referenced in Schedule 4.17. Sellers hereby specifically acknowledge
that all right, title and interest in and to all patents and software listed
on
Schedule 4.17 as patents owned by the Company are owned by the Company or the
Company has a right to use same and that the ownership of such patents and
software will be transferred as part of the Company to Purchaser as part of
the
transaction contemplated hereby. No officer, director, shareholder or
employee of the Company or any relative or spouse of any such person owns any
patents or patent applications or any inventions, software, secret formulae
or
processes, trade secrets or other similar rights, nor is any of them a party
to
any license agreement, used by or useful to the Company or related to its
business except as listed in Schedule 4.17. All of said Intangibles
are valid and in good standing to the best of Sellers’ knowledge, and are free
and clear of all liens, security interests, charges, restrictions and
encumbrances of any kind whatsoever, and have not been licensed to any third
party except as described in Schedule 4.17. The Company has not been
charged with, nor has it infringed, nor to the Sellers’ knowledge is it
threatened to be charged with infringement of, any patent, proprietary rights
or
trade secrets of others in the conduct of its business, and, to the date hereof,
neither the Sellers nor the Company has received any notice of conflict with
or
violation of the asserted rights in intangibles or trade secrets of
others. The Company is not now manufacturing any goods under a
present permit, franchise or license, except as set forth in said Schedule
4.17. The consummation of the transactions contemplated hereby will
not alter or impair any rights of the Company in any such Intangibles or in
any
such permit, franchise or license, except as described in Schedule
4.17. The Intangibles and the Company’s tooling, manufacturing and
engineering drawings, process sheets, specifications, bills of material and
other like information and data are in such form and of such quality and will
be
maintained in such a manner that the Company can, following the Closing, design,
produce, manufacture, assemble and sell the products and provide the services
heretofore provided by it so that such products and services meet applicable
specifications and conform with the standards of quality and cost of production
standards heretofore met by it. The Company has the sole and
exclusive right to use its corporate and trade names in the jurisdictions where
it transacts business.
10
4.18. Insurance
Policies. There is set forth in Schedule 4.18 a list and brief
description of all insurance policies on the date hereof held by the Company
or
on which it pays premiums, including, without limitation, life insurance and
title insurance policies, which description includes the premiums payable by
it
thereunder. Schedule 4.18 also sets forth, in the case of any life
insurance policy held by the Company, the name of the insured under such policy,
the cash surrender value thereof and any loans thereunder. All such
insurance premiums in respect of such coverage have been, and to the Closing
Date will be, paid in full, if due and owing. All claims, if any,
made against the Company which are covered by such policies have been, or are
being, settled or defended by the insurance companies that have issued such
policies. Up to the Closing Date, such insurance coverage will be
maintained in full force and effect and will not be cancelled, modified or
changed without the express written consent of the Purchaser, except to the
extent the maturity dates of any such insurance policies expiring prior to
the
Closing Date. No such policy has been, or to the Closing Date will
be, cancelled by the issuer thereof, and, to the knowledge of the Sellers and
the Company, between the date hereof and the Closing Date, there shall be no
increase in the premiums with respect to any such insurance policy caused by
any
action or omission of the Sellers or of the Company. Upon the Closing
Date, all life insurance policies maintained by the Company shall be assigned
to
each respective Seller.
4.19. Banking
and Personnel Lists. The Sellers and the Company will deliver to
the Purchaser prior to the Closing Date the following accurate lists and summary
descriptions relating to the Company:
(i) The
name of each bank in which the Company has an account or safe deposit box and
the names of all persons authorized to draw thereon or have access
thereto.
(ii) The
names, current annual salary rates and total compensation for the preceding
fiscal year of all of the present directors and officers of the Company, and
any
other employees whose current base accrual salary or annualized hourly rate
equivalent is $20,000 or more, together with a summary of the bonuses,
percentage compensation and other like benefits, if any, paid or payable to
such
persons for the last full fiscal year completed, together with a schedule of
changes since that date, if any.
(iii) A
schedule of workers’ compensation payments of the Company over the past five
full fiscal years and the fiscal year to date, a schedule of claims by employees
of the Company against the workers’ compensation fund for any reason over such
period, identification of all compensation and medical benefits paid to date
on
each such claim and the estimated amount of compensation and medical benefits
to
be paid in the future on each such claim.
(iv) The
name of all pensioned employees of the Company whose pensions are unfunded
and
are not paid or payable pursuant to any formalized pension arrangements, their
agent and annual unfunded pension rates.
4.20. Lists
of Contracts, Etc. There is included in Schedule 4.20 a list of
the following items (whether written or oral) relating to the Company, which
list identifies and fairly summarizes each item:
(i) All
collective bargaining and other labor union agreements (if any); all employment
agreements with any officer, director, employee or consultant; and all employee
pension, health and welfare benefit plans, group insurance, bonus, profit
sharing, severance, vacation, hospitalization, and retirement plans,
post-retirement medical benefit plans, and any other plans, arrangements or
custom requiring payments or benefits to current or retiring
employees.
11
(ii) All
joint venture contracts of the Company or affiliates relating to the
Business;
(iii) All
contracts of the Company relating to (a) obligations for borrowed money,
(b) obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (d) obligations under capital leases, (e) debt of others
secured by a lien on any asset of the Company, and (f) debts of others
guaranteed by the Company.
(iv) All
agreements of the Company relating to the supply of raw materials for and the
distribution of the products of its business, including without limitation
all
sales agreements, manufacturer’s representative agreements and distribution
agreements of whatever magnitude and nature, and any commitments
therefor;
(v) All
contracts that individually provide for aggregate future payments to or from
the
Company of $25,000 or more, to the extent not included in (i) through (iv)
above;
(vi) All
contracts of the Company that have a term exceeding one year and that may not
be
cancelled without any liability, penalty or premium, to the extent not included
in (i) through (v) above;
(vii) A
complete list of all outstanding powers of attorney granted by the Company;
and
(viii) All
other contracts of the Company material to the business, assets, liabilities,
financial condition, results of operations or prospects of the Business taken
as
a whole to the extent not included above.
12
Except
as set forth in Schedule 4.20,
(i) all contracts, agreements and commitments of the Company set forth in
Schedule 4.20 are valid, binding and in full force and effect, and
(ii) neither the Company nor, to the best of Sellers’ knowledge, any other
party to any such contract, agreement, or commitment has materially breached
any
provision thereof or is in default thereunder. Except as set forth in
Schedule 4.20, the sale of the Membership Interests by the Sellers in accordance
with this Agreement will not result in the termination of any contract,
agreement or commitment of the Company set forth in Schedule 4.20, and
immediately after the Closing, each such contract, agreement or commitment
will
continue in full force and effect without the imposition or acceleration of
any
burdensome condition or other obligation on the Company resulting from the
sale
of the Membership Interests by the Sellers. True and complete copies
of the contracts, leases, licenses and other documents referred to in this
Schedule 4.20 will be delivered to the Purchaser, certified by the Secretary
or
Assistant Secretary of the Company as true, correct and complete copies, not
later than four weeks from the date hereof or ten business days before the
Closing Date, whichever is sooner.
There
are no pending disputes with
customers or vendors of the Company regarding quality or return of goods
involving amounts in dispute with any one customer or vendor, whether for
related or unrelated claims, in excess of $5,000 except as described on Schedule
4.20 hereto, all of which will be resolved to the reasonable satisfaction of
Purchaser prior to the Closing Date. To the best knowledge of Sellers
and the Company, there has not been any event, happening, threat or fact that
would lead them to believe that any of said customers or vendors will terminate
or materially alter their business relationship with the Company after
completion of the transactions contemplated by this Agreement.
4.21. Compliance
With the Law. The Company is not in violation of any applicable
federal, state, local or foreign law, regulation or order or any other, decree
or requirement of any governmental, regulatory or administrative agency or
authority or court or other tribunal (including, but not limited to, any law,
regulation order or requirement relating to securities, properties, business,
products, manufacturing processes, advertising, sales or employment practices,
terms and conditions of employment, occupational safety, health and welfare,
conditions of occupied premises, product safety and liability, civil rights,
or
environmental protection, including, but not limited to, those related to waste
management, air pollution control, waste water treatment or noise abatement),
except where such would not have a Material Adverse Effect. Except as
set forth in Schedule 4.21, the Company has not been and is not now charged
with, or to the best knowledge of the Sellers or the Company under investigation
with respect to, any violation of any applicable law, regulation, order or
requirement relating to any of the foregoing, nor, to the best knowledge of
any
Seller or the Company after due inquiry, are there any circumstances that would
or might give rise to any such violation. The Company has filed all
reports required to be filed with any governmental, regulatory or administrative
agency or authority.
13
4.22. Litigation;
Pending Labor Disputes. Except as specifically identified on the
Balance Sheet or footnotes thereto or set forth in Schedule 4.22:
(i) There
are no legal, administrative, arbitration or other proceedings or governmental
investigations pending or, to the best knowledge of Sellers or the Company,
threatened, against the Sellers or the Company, relating to its business or
the
Company or its properties (including leased property), or the transactions
contemplated by this Agreement, nor is there any basis known to the Company
or
any Seller for any such action.
(ii) There
are no judgments, decrees or orders of any court, or any governmental
department, commission, board, agency or instrumentality binding upon Sellers
or
the Company relating to its business or the Company the effect of which is
to
prohibit any business practice or the acquisition of any property or the conduct
of any business by the Company or which limit or control or otherwise adversely
affect its method or manner of doing business.
(iii) No
work stoppage has occurred and is continuing or, to the knowledge of Sellers
or
the Company, is threatened affecting its business, and to the best of Sellers’
knowledge, no question involving recognition of a collective bargaining agent
exists in respect of any employees of the Company.
(iv) There
are no pending labor negotiations or, to the best of Sellers’ knowledge, union
organization efforts relating to employees of the Company.
(v) There
are no charges of discrimination (relating to sex, age, race, national origin,
handicap or veteran status) or unfair labor practices pending or, to the best
knowledge of the Sellers or the Company, threatened before any governmental
or
regulatory agency or authority or any court relating to employees of the
Company.
4.23. Absence
of Certain Changes or Events. The Company has not, since the
Balance Sheet Date, and except in the ordinary course of business consistent
with past practice and/or except as described on Schedule 4.23:
(i) Incurred
any material obligation or liability (absolute, accrued, contingent or
otherwise), except in the ordinary course of its business consistent with past
practice or in connection with the performance of this Agreement, and
any such obligation or liability incurred in the ordinary course is not
materially adverse, except for claims, if any, that are adequately covered
by
insurance;
14
(ii) Discharged
or satisfied any lien or encumbrance, or paid or satisfied any obligations
or
liability (absolute, accrued, contingent or otherwise) other than
(a) liabilities shown or reflected on the Balance Sheet, and
(b) liabilities incurred since the Balance Sheet Date in the ordinary
course of business that were not materially adverse;
(iii) Increased
or established any reserve or accrual for taxes or other liability on its books
or otherwise provided therefor, except (a) as disclosed on the Balance
Sheet, or (b) as may have been required under generally accepted accounting
principles due to income earned or expense accrued since the Balance Sheet
Date
and as disclosed to the Purchaser in writing;
(iv) Mortgaged,
pledged or subjected to any lien, charge or other encumbrance any of its assets,
tangible or intangible;
(v) Sold
or transferred any of its assets or cancelled any debts or claims or waived
any
rights, except in the ordinary course of business and which has not been
materially adverse;
(vi) Disposed
of or permitted to lapse any patents or trademarks or any patent or trademark
applications material to the operation of its business;
(vii) Incurred
any significant labor trouble or granted any general or uniform increase in
salary or wages payable or to become payable by it to any director, officer,
employee or agent, or by means of any bonus or pension plan, contract or other
commitment increased the compensation of any director, officer, employee or
agent;
(viii) Authorized
any capital expenditure for real estate or leasehold improvements, machinery,
equipment or molds in excess of $5,000.00 in the aggregate;
(ix) Except
for this Agreement or as otherwise disclosed herein or in any schedule to this
Agreement, entered into any material transaction ;
15
(x) Issued
any stocks, bonds, or other corporate securities, or made any declaration or
payment of any dividend or any distribution in respect of its capital stock;
or
(xi) Experienced
damage, destruction or loss (whether or not covered by insurance) individually
or in the aggregate materially and adversely affecting any of its properties,
assets or business, or experienced any other material adverse change or changes
individually or in the aggregate affecting its financial condition, assets,
liabilities or business.
4.24. Employee
Benefit Plans.
(a) Schedule
4.24 lists a description of the only Employee Programs (as defined below) that
have been maintained (as such term is further defined below) by the Company
at
any time during the five (5) years prior to the date hereof.
(b) There
has not been any failure of any party to comply with any laws applicable with
respect to any Employee Program that has been maintained by the Company, except
where such would not have a Material Adverse Effect. With respect to
any Employee Programs now or heretofore maintained by the Company, there has
occurred no breach of any duty under the Employee Retirement Income Security
Act
of 1974, as amended (“ERISA”) or other applicable law which could result,
directly or indirectly in any taxes, penalties or other liability to the
Purchaser, the Company or any affiliate (as defined below), except for
immaterial exceptions which would not have a Material Adverse
Effect. No litigation, arbitration, or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating
to
routine claims for benefits) is pending or, to the best knowledge of the Company
and Seller, threatened with respect to any such Employee Program.
(c) Except
as set forth in Schedule 4.24 attached hereto, neither the Company nor any
affiliate has ever (i) provided health care or any other non-pension
benefits to any employees after their employment was terminated (other than
as
required by Part 6 of Subtitle B of Title I of ERISA) or has ever
promised to provide such post-termination benefits or (ii) maintained an
Employee Program provided to such employees subject to Title IV of ERISA,
Section 401(a) or Section 412 of Code, including, without limitation, any
Multiemployer Plan.
(d) For
purposes of this Section 4.24:
(i) “Employee
Program” means (A) all employee benefit plans within the meaning of ERISA
Section 3(3), including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes and employee benefit plans
(such
as foreign or excess benefit plans) which are not subject to ERISA; and
(B) all stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans, agreements,
and arrangements not described in (A) above. In the case of an
Employee Program funded through an organization described in Code Section
501(c)(9), each reference to such Employee Program shall include a reference
to
such organization;
16
(ii) An
entity “maintains” an Employee Program if such entity sponsors, contributes to,
or provides (or has promised to provide) benefits under such Employee Program,
or has any obligation (by agreement or under applicable law) to contribute
to or
provide benefits under such Employee Program, or if such Employee Program
provides benefits to or otherwise covers employees of such entity (or their
spouses, dependents, or beneficiaries);
(iii) An
entity is an “affiliate” of the Company for purposes of this Section 3.24
if it would have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same “controlled group” as the Company for
purposes of ERISA Section 302(d)(8)(C); and
(iv) “Multiemployer
Plan” means a (pension or non-pension) employee benefit plan to which more than
one employer contributes and which is maintained pursuant to one or more
collective bargaining agreements.
4.25. Product
Warranties and Product Liabilities. The product warranties and
return policies of the Company in effect on the date hereof and the types of
products to which they apply are described on Schedule 4.25
hereto. Schedule 4.25 also sets forth all product liability claims
involving amounts in controversy in excess of $5,000 that are currently either
pending or, to the best of the Sellers’ and the Company’s knowledge, threatened
against the Company. The Sellers are not aware of any
reason why the future cost of performing all such obligations and paying all
such product liability claims with respect to goods manufactured, assembled
or
furnished prior to the Closing Date will not exceed the average annual cost
thereof for said past three year period.
4.26. Assets. The
assets of the Company are located at the locations listed on Schedule 4.26
attached hereto. Except as described in Schedule 4.26, the assets of the Company
are, and together with the additional assets to be acquired or otherwise
received by the Company prior to the Closing, will at the Closing Date be,
sufficient in all material respects to carry on the operations of the business
as now conducted by the Company. The Company is the only business
organization through which the Business is conducted. Except as set
forth in Schedule 4.16 or Schedule 4.26, all assets used by the Sellers and
the
Company to conduct the Business are, and will on the Closing Date be, owned
by
the Company.
4.27. Absence
of Certain Commercial Practices. Except as described on Schedule
4.27, neither the Company nor any Seller has made any payment (directly or
by
secret commissions, discounts, compensation or other payments) or given any
gifts to another business concern, to an agent or employee of another business
concern or of any governmental entity (domestic or foreign) or to a political
party or candidate for political office (domestic or foreign), to obtain or
retain business for the Company or to receive favorable or preferential
treatment, except for gifts and entertainment given to representatives of
customers or potential customers of sufficiently limited value and in a form
(other than cash) that would not be construed as a bribe or payoff.
17
4.28. Licenses,
Permits, Consents and Approvals. The Company has, and at the
Closing Date will have, all licenses, permits or other authorizations of
governmental, regulatory or administrative agencies or authorities
(collectively, “Licenses”) required to conduct the Business, except for any
failures of such which would not have a Material Adverse Effect. All Licenses
of
the Company are listed on Schedule 4.28 hereto. At the Closing, the
Company will have all such Licenses which are material to the conduct of the
Business and will have renewed all Licenses which would have expired in the
interim. Except as listed in Schedule 4.28, no registration, filing,
application, notice, transfer, consent, approval, order, qualification, waiver
or other action of any kind (collectively, a “Filing”) will be required as a
result of the sale of the Membership Interests by Sellers in accordance with
this Agreement (a) to avoid the loss of any License or the violation,
breach or termination of, or any default under, or the creation of any lien
on
any asset of the Company pursuant to the terms of, any law, regulation, order
or
other requirement or any contract binding upon the Company or to which any
such
asset may be subject, or (b) to enable Purchaser (directly or through any
designee) to continue the operation of the Company and the Business
substantially as conducted prior to the Closing Date. All such
Filings will be duly filed, given, obtained or taken on or prior to the Closing
Date and will be in full force and effect on the Closing Date.
4.29. Environmental
Matters. Except as set forth on Schedule 4.29 hereto:
(a) The
operations of the Company, to the best knowledge of Sellers, are in compliance
with all applicable Laws promulgated by any governmental entity which prohibit,
regulate or control any hazardous material or any hazardous material activity
(“Environmental Laws”) and all permits issued pursuant to Environmental Laws or
otherwise except for where noncompliance or the absence of such permits would
not, individually or in the aggregate, have a Material Adverse
Effect;
(b) The
Company has obtained all permits required under all applicable Environmental
Laws necessary to operate its business, except for any failures of such which
would not have a Material Adverse Effect;
(c) The
Company is not the subject of any outstanding written order or Contract with
any
governmental authority or person respecting Environmental Laws or any violation
or potential violations thereof; and,
(d) The
Company has not received any written communication alleging either or both
that
the Company may be in violation of any Environmental Law, or any permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law.
4.30 Broker. Except
as specified in Schedule 4.30, neither the Company nor any Seller has retained
any broker in connection with any transaction contemplated by this
Agreement. Purchaser and the Company shall not be obligated to pay
any fee or commission associated with the retention or engagement by the Company
or Sellers of any broker in connection with any transaction contemplated by
this
Agreement.
18
4.31. Related
Party Transactions. Except as described in Schedule 4.31, all
transactions during the past five years between the Company and any current
or
former shareholder or any entity in which the Company or any current or former
shareholder had or has a direct or indirect interest have been fair to the
Company as determined by the Board of Directors. No portion of the
sales or other on-going business relationships of the Company is dependent
upon
the friendship or the personal relationships (other than those customary within
business generally) of any Seller, except as described in Schedule
4.31. During the past five years, the Company has not forgiven or
cancelled, without receiving full consideration, any indebtedness owing to
it by
any Seller.
4.32 Patriot
Act. The Company and the Sellers certify that the Company has not
been designated, and is not owned or controlled, by a “suspected terrorist” as
defined in Executive Order 13224. The Company and the Sellers hereby
acknowledge that the Purchaser seeks to comply with all applicable laws
concerning money laundering and related activities. In furtherance of
those efforts, the Company and the Sellers hereby represent, warrant and agree
that: (i) none of the cash or property that the Sellers have
contributed or paid or will contribute and pay to the Company has been or shall
be derived from, or related to, any activity that is deemed criminal under
United States law; and (ii) no contribution or payment by the Company to the
Purchaser, to the extent that they are within the Company’s control shall cause
the Purchaser to be in violation of the United States Bank Secrecy Act, the
United States International Money Laundering Control Act of 1986 or the United
States International Money Laundering Abatement and Anti-Terrorist Financing
Act
of 2001. The Sellers shall promptly notify the Purchaser if any of
these representations ceases to be true and accurate regarding the Sellers
or
the Company. The Sellers agree to provide the Purchaser any
additional information regarding the Company that the Purchaser reasonably
requests to ensure compliance with all applicable laws concerning money
laundering and similar activities.
4.33 Investment
Intent.
The
Purchaser Shares are being acquired hereunder by the Sellers for investment
purposes only, for their own account, not as a nominee or agent and not with a
view to the distribution thereof. The Sellers have no present
intention to sell or otherwise dispose of the Purchaser Shares and they will
not
do so except in compliance with the provisions of the Securities Act of 1933,
as
amended (the “Securities Act”), and applicable law. The Sellers
understand that the Purchaser Shares which may be acquired hereunder must be
held by them indefinitely unless a subsequent disposition or transfer of any
of
said shares is registered under the Securities Act, or is exempt from
registration therefrom. The Sellers further understand that the
exemption from registration afforded by Rule 144 (the provisions of which are
known to such Seller) promulgated under the Securities Act , depends on the
satisfaction of various conditions, and that, if and when applicable, Rule
144
may afford the basis for sales only in limited amounts.
The
Sellers are each sophisticated investors familiar with the type of risks
inherent in the acquisition of securities such as the Purchaser Shares and
the
Sellers’ financial position is such that the Sellers can afford to retain the
shares of Purchaser Shares for an indefinite period of time without realizing
any direct or indirect cash return on its investment.
19
4.35 Accreditation.
Each
Seller is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act . The Sellers understand that the Purchaser Shares are
being offered to them in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Purchaser is relying upon the truth and accuracy of, and the Sellers’ compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Sellers set forth herein in order to determine the
availability of such exemptions and the eligibility of the Sellers to acquire
the Purchaser Shares.
4.36. Disclosure. All
statements contained in any schedule, certificate, opinion, instrument, or
other
document delivered by or on behalf of the Sellers or the Company pursuant hereto
shall be deemed representations and warranties by each Seller and the Company
herein. No statement, representation or warranty by the Sellers or
the Company in this Agreement or in any schedule, certificate, opinion,
instrument, or other document furnished or to be furnished to the Purchaser
pursuant hereto contains or will contain any untrue statement of a material
fact
or omits or will omit to state a material fact required to be stated therein
or
necessary to make the statements contained therein not misleading or necessary
in order to provide a prospective purchaser of the business of the Company
with
full and fair disclosure concerning the Company, its business, and the Company’s
affairs.
ARTICLE
V
5.1 Organization
and Good Standing.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2 Authority.
(a) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been, or will prior to Closing be, duly
and validly approved and acknowledged by all necessary corporate action on
the
part of the Purchaser.
(b) The
execution of this Agreement and the delivery hereof to the Sellers and the
purchase contemplated herein have been, or will be prior to Closing, duly
authorized by the Purchaser’s Board of Directors having full power and authority
to authorize such actions.
5.3 Conflicts;
Consents of Third Parties.
20
(a) The
execution and delivery of this Agreement, the acquisition of the Membership
Interests by Purchaser and the consummation of the transactions herein
contemplated, and the compliance with the provisions and terms of this
Agreement, are not prohibited by the Articles of Incorporation or Bylaws of
the
Purchaser and will not violate, conflict with or result in a breach of any
of
the terms or provisions of, or constitute a default under, any court order,
indenture, mortgage, loan agreement, or other agreement or instrument to which
the Purchaser is a party or by which it is bound.
(b) No
consent, waiver, approval, order, permit or authorization of, or declaration
or
filing with, or notification to, any person or governmental body is required
on
the part of the Purchaser in connection with the execution and delivery of
this
Agreement or the Purchaser Documents or the compliance by Purchaser with any
of
the provisions hereof or thereof.
5.4 Litigation.
There
are
no legal proceedings pending or, to the best knowledge of the Purchaser,
threatened that are reasonably likely to prohibit or restrain the ability of
the
Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.
5.5 Investment
Intention.
The
Purchaser is acquiring the Membership Interests for its own account, for
investment purposes only and not with a view to the distribution (as such term
is used in Section 2(11) of the Securities Act thereof. Purchaser
understands that the Membership Interests have not been registered under the
Securities Act and cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available.
5.6 Broker.
The
Purchaser has not retained any broker in connection with any transaction
contemplated by this Agreement. Sellers shall not be obligated to pay
any fee or commission associated with the retention or engagement by the
Purchaser of any broker in connection with any transaction contemplated by
this
Agreement.
5.7 Patriot
Act. The Purchaser certifies that neither the Purchaser nor any
of its subsidiaries has been designated, and is not owned or controlled, by
a
“suspected terrorist” as defined in Executive Order 13224. The
Purchaser hereby acknowledges that the Company and the Sellers seek to comply
with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, the Purchaser hereby
represent, warrant and agree that: (i) none of the cash or property
that the Purchaser has contributed or paid or will contribute and pay to the
Sellers has been or shall be derived from, or related to, any activity that
is
deemed criminal under United States law; and (ii) no contribution or payment
by
the Purchaser or any of its subsidiaries to the Sellers, to the extent that
they
are within the Purchaser’s control shall cause the Sellers or the Company to be
in violation of the United States Bank Secrecy Act, the United States
International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Purchaser shall promptly notify the Sellers if any of these
representations ceases to be true and accurate regarding the Purchaser or any
of
its subsidiaries. The Purchaser agrees to provide the Sellers any
additional information regarding the Purchaser or any of its subsidiaries that
the Sellers reasonably requests to ensure compliance with all applicable laws
concerning money laundering and similar activities.
21
5.8 Due
Authorization of Purchaser
Shares. The shares of Purchaser Common Stock, when delivered to
the Sellers, shall be validly issued and outstanding as fully paid and
non-assessable, free and clear of any liens, pledges, encumbrances, charges,
agreements, options, claims or other arrangements or restrictions of any
kind.
5.9 Exemption
for Purchase of the Membership Interests. The Purchaser
represents that it has a valid exemption under the Securities Act under which
to
purchase the Membership Interests and that such purchase will not violate the
Act or any applicable state securities law.
ARTICLE
VI
6.1 Access
to Information.
The
Sellers and the Company agree that, prior to the Closing Date, the Purchaser
shall be entitled, through its officers, employees and representatives
(including, without limitation, its legal advisors and accountants), to make
such investigation of the properties, businesses and operations of the Company
and its Subsidiaries and such examination of the books, records and financial
condition of the Company and its Subsidiaries as it reasonably requests and
to
make extracts and copies of such books and records. Any such
investigation and examination shall be conducted during regular business hours
and under reasonable circumstances, and the Sellers shall cooperate, and shall
cause the Company and its Subsidiaries to cooperate, fully
therein. No investigation by the Purchaser prior to or after the date
of this Agreement shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Sellers contained in this Agreement
or the Seller Documents. In order that the Purchaser may have full
opportunity to make such physical, business, accounting and legal review,
examination or investigation as it may reasonably request of the affairs of
the
Company and its Subsidiaries, the Sellers shall cause the officers, employees,
consultants, agents, accountants, attorneys and other representatives of the
Company and its Subsidiaries to cooperate fully with such representatives in
connection with such review and examination. It is agreed and
understood that all information provided pursuant to this Section 6.1 is subject
to the terms and conditions of the Confidentiality/Standstill Agreement executed
by the parties as of June 22, 2007.
6.2 Conduct
of the Business Pending the Closing.
(a) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, prior to the Closing the Sellers shall, and shall
cause the Company to:
22
(i) Conduct
the respective businesses of the Company only in the ordinary course consistent
with past practice;
(ii) Use
its
best efforts to (A) preserve its present business operations, organization
(including, without limitation, management and the sales force) and goodwill
of
the Company and (B) preserve its present relationship with Persons having
business dealings with the Company;
(iii) Maintain
(A) all of the assets and properties of the Company in their current condition,
ordinary wear and tear excepted and (B) insurance upon all of the properties
and
assets of the Company in such amounts and of such kinds com-parable to that
in
effect on the date of this Agreement;
(iv) (A)
maintain the books, accounts and records of the Company in the
ordinary course of business consistent with past practices, (B) continue to
collect accounts receivable and pay accounts payable utilizing normal procedures
and without discounting or accelerating payment of such accounts, and (C) comply
with all contractual and other obligations applicable to the operation of the
Company; and
(v) Comply
in
all material respects with applicable laws.
(b) Except
as
otherwise expressly contemplated by this Agreement or with the prior written
consent of the Purchaser, prior to the Closing the Sellers shall not, and shall
cause the Company not to:
(i) Declare,
set aside, make or pay any dividend or other distribution in respect of the
membership interests of the Company or repurchase, redeem or otherwise acquire
any outstanding membership interests or other securities of, or other ownership
interests in, the Company;
(ii) Transfer,
issue, sell or dispose of any membership interests or other securities of the
Company or grant options, warrants, calls or other rights to purchase or
otherwise acquire membership interests or other securities of the
Company;
(iii) Effect
any recapitalization, reclassification, like change in the capitalization of
the
Company;
(iv) Amend
the
articles of formation or operating agreement of the Company;
(v) (A)
materially increase the annual level of compensation of any employee of the
Company, (B) increase the annual level of compensation payable or to become
payable by the Company to any of its executive officers, (C) grant any unusual
or extraordinary bonus, benefit or other direct or indirect compensation to
any
employee, director or consultant, (D) increase the coverage or benefits
available under any (or create any new) severance pay, termination pay, vacation
pay, company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or
other
employee benefit plan or arrangement made to, for, or with any of the directors,
officers, employees, agents or representatives of the Company or otherwise
modify or amend or terminate any such plan or arrangement or (E) enter into
any
employment, deferred compensation, severance, consulting, non-competition or
similar agreement (or amend any such agreement) to which the Company is a party
or involving a director, officer or employee of the Company in his or her
capacity as a director, officer or employee of the Company;
23
(vi) Except
for trade payables and for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice, borrow monies
for
any reason or draw down on any line of credit or debt obligation, or become
the
guarantor, surety, endorser or otherwise liable for any debt, obligation or
liability (contingent or otherwise) of any other Person, or change the terms
of
payables or receivables;
(vii) Subject
to any lien (except for leases that do not materially impair the use of the
property subject thereto in their respective businesses as presently conducted),
any of the properties or assets (whether tangible or intangible) of the
Company;
(viii) Acquire
any material properties or assets or sell, assign, transfer, convey, lease
or
otherwise dispose of any of the material properties or assets (except for fair
consideration in the ordinary course of business consistent with past practice)
of the Company except, with respect to the items listed on Schedule 6.2(b)(viii)
hereto, as previously consented to by the Purchaser;
(ix) Cancel
or
compromise any debt or claim or waive or release any material right of the
Company except in the ordinary course of business consistent with past
practice;
(x) Enter
into any commitment for capital expenditures out of the ordinary
course;
(xi) Permit
the Company to enter into any transaction or to make or enter into any Contract
which by reason of its size or otherwise is not in the ordinary course of
business consistent with past practice;
(xii) Permit
the Company to enter into or agree to enter into any merger or consolidation
with, any corporation or other entity, and not engage in any new business or
invest in, make a loan, advance or capital contribution to, or otherwise acquire
the securities of any other Person;
(xiii) Except
for transfers of cash pursuant to normal cash management practices, permit
the
Company to make any investments in or loans to, or pay any fees or
expenses to, or enter into or modify any Contract with, any Seller or any
Affiliate of any Seller; or
(xiv) Agree
to
do anything prohibited by this Section 6.2 or anything which would make any
of
the representations and warranties of the Sellers in this Agreement or the
Seller Documents untrue or incorrect in any material respect as of any time
through and including the Effective Time.
24
6.3 Consents.
The
Sellers shall use their best efforts, and the Purchaser shall cooperate with
the
Sellers, to obtain at the earliest practicable date all consents and approvals
required to consummate the transactions contemplated by this Agreement,
including, without limitation, the consents and approvals referred to in Section
4.7 hereof; provided, however, that neither the Sellers nor the Purchaser shall
be obligated to pay any consideration therefor to any third party from whom
consent or approval is requested.
6.4 Other
Actions.
Each
of
the Sellers and the Purchaser shall use its best efforts to (i) take all actions
necessary or appropriate to consummate the transactions contemplated by this
Agreement, and (ii) cause the fulfillment at the earliest practicable date
of
all of the conditions to their respective obligations to consummate the
transactions contemplated by this Agreement.
6.5 No
Solicitation.
The
Sellers will not, and will not cause or permit the Company or any of the
Company's directors, officers, employees, representatives or agents
(collectively, the "Representatives") to, directly or indirectly, (i) discuss,
negotiate, undertake, authorize, recommend, propose or enter into, either as
the
proposed surviving, merged, acquiring or acquired corporation, any transaction
involving a merger, consolidation, business combination, purchase or disposition
of any amount of the assets or capital stock or other equity interest in the
Company other than the transactions contemplated by this Agreement (an
"Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate
discussions, negotiations or submissions of proposals or offers in respect
of an
Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person,
any information concerning the business, operations, properties or assets of
the
Company in connection with an Acquisition Transaction, or (iv) otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the
foregoing. The Sellers will inform the Purchaser in writing
immediately following the receipt by any Seller, the Company or any
Representative of any proposal or inquiry in respect of any Acquisition
Transaction.
6.6 Preservation
of Records.
Subject
to Section 9.4(e) hereof (relating to the preservation of Tax records), the
Sellers and the Purchaser agree that each of them shall preserve and keep the
records held by it relating to the business of the Company (including but not
limited to books, records and accounts, financial information, correspondence,
production records, employment records and other similar information) for a
period of six years from the Closing Date and shall make such records and
personnel available to the other as may be reasonably requested by such party
in
connection with, among other things, any insurance claims by, legal proceedings
against or governmental investigations of the Sellers or the Purchaser or any
of
their Affiliates or in order to enable the Sellers or the Purchaser to comply
with their respective obligations under this Agreement and each other agreement,
document or instrument contemplated hereby or thereby.
25
6.7 Publicity.
None
of
the Sellers nor the Purchaser shall issue any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other party hereto, which
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of the Purchaser or the Sellers, disclosure is otherwise required
by
applicable Law or by the applicable rules of any stock exchange on which the
Purchaser lists securities, provided that, to the extent required by applicable
law, the party intending to make such release shall use its best efforts
consistent with such applicable law to consult with the other party with respect
to the text thereof.
6.8 Use
of
Name.
The
Sellers hereby agrees that upon the consummation of the transactions
contemplated hereby, the Purchaser and the Company shall have the sole right
to
the use of the name "Max Engineering LLC" and the Sellers shall not, and shall
not cause or permit any Affiliate to, use such name or any variation or
simulation thereof.
6.9 Employment
Agreements.
On
or
prior to the Closing Date, each of Xxx-Xxxx Ma and Xxxxxx Xxxxxxxxxxxx shall
enter into an employment agreement with the Company, substantially in the form
of agreement attached hereto as Exhibit 6.9 (the “Employment
Agreements”).
6.10 Board
of Directors.
The
Board of Directors of the Company
as of the Closing Date shall consist of two members appointed by the Sellers
and
three members appointed by the Purchaser.
6.11 Fiscal
Projection; Confirmation of Financial Information.
On
or
prior to the Closing Date, the Company will provide (i) a fiscal projection
for
the twelve month period ending April 30, 2008, which projection shall be
mutually acceptable to the Company and the Purchaser, and (ii) confirmation
to
the Purchaser of information related to backlog, add-backs, key client
relationships and the tangibility of assets.
6.12 Financial
Statements.
If
required for Securities and Exchange Commission purposes, the Sellers shall
cooperate with the Purchaser, to provide all information required for the
completion of audited financial statements of the Company for the years ended
December 31, 2005 and 2006 and reviewed statements for the six month period
ended June 30, 2006 and 2007, and delivered no later than 60 days from the
Closing Date. The costs of such financial statements shall be borne
by the Purchaser.
6.13 Tax
Election.
At
the sole discretion of the
Purchaser, the Sellers agree to make a timely election under Internal Revenue
Code Section 338(h)(10) (“338(h)(10) election”), and Purchaser shall indemnify
and hold harmless Sellers from and against any Tax liabilities imposed on
Sellers as a result of having made any such 338(h)(10) election to the extent
that such Tax liabilities exceed the Tax liabilities that the Sellers would
incur in the absence of such election (the “Purchaser Tax
Payments”). In the event that the Sellers incur any Tax obligations
as a result of the 338(h)(10) election which are in excess of amounts due had
the transactions set forth herein been taxed as a stock sale, then the amount
that the Purchaser shall be required to reimburse Sellers under this paragraph
(1) shall be grossed up to assure that Sellers do not incur any Tax cost as
a
result of the 338(h)(10) election and the reimbursement payments under this
paragraph and (2) shall take into account the highest marginal income tax rate
applicable to payments of this type at the applicable times as applies to any
of
the Sellers. Any Purchaser Tax Payments shall be treated by the
parties as additional Purchase Price and shall be paid to Sellers not less
than
seven (7) days prior to the time Sellers are required to pay such amounts with
a
Federal tax return or estimate. Any amounts payable hereunder to the
Sellers shall be paid in cash unless otherwise agreed to in writing by the
Sellers.
26
6.14 Tax
Matters.
(a) Tax
Periods Ending on or Before the Closing Date. The Sellers shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which
are
filed after the Closing Date as soon as practicable and prior to the date due
(including any proper extensions thereof). The Sellers shall permit
the Company and the Purchaser to review and provide comments, if any, on each
such Return described in the preceding sentence prior to
filing. Unless the Purchaser or the Company provides comments to the
Sellers, the Company shall deliver to the Sellers each such Return signed by
the
appropriate officer(s) of the Company for filing within ten (10) days following
the Seller’s delivery to the Company and the Purchaser of any such
Return. The Sellers shall deliver to the Company promptly after
filing each such Return a copy of the filed Return and evidence of its
filing. The Sellers shall pay the costs and expenses incurred in the
preparation and filing of the Tax Returns on or before the date such costs
and
expenses are due.
If
the Company provides comments to
the Sellers and at the end of such ten (10) day period the Company and the
Sellers have failed to reach written agreement with respect to all of such
disputed items, the parties shall submit the unresolved items to arbitration
for
final determination. Promptly, but no later than thirty (30) days after its
acceptance of its appointment as arbitrator, the arbitrator shall render an
opinion as to the disputed items. The determination of the arbitrator shall
be
conclusive and binding upon the parties. The Company and the Sellers (as a
group) shall each pay one half of the fees, costs and expenses of the
arbitrator. The prevailing party may be entitled to an award of pre- and
post-award interest as well as reasonable attorneys’ fees incurred in connection
with the arbitration and any judicial proceedings related thereto as determined
by the arbitrator.
(b) Tax
Periods Beginning Before and Ending After the Closing Date. The
Company or the Purchaser shall prepare or cause to be prepared and file or
cause
to be filed any Returns of the Company for Tax periods that begin before the
Closing Date and end after the Closing Date. To the extent such Taxes
are not fully reserved for in the Company’s financial statements, the Sellers
shall pay to the Company an amount equal to the unreserved portion of such
Taxes
that relates to the portion of the Tax period ending on the Closing
Date. Such payment, if any, shall be paid by the Sellers within
fifteen (15) days after receipt of written notice from the Company or the
Purchaser that such Taxes were paid by the Company or the Purchaser for a period
beginning prior to the Closing Date. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable
for a
Taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax that relates to the portion of such Tax period ending on the Closing
Date shall (i) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
Tax
period multiplied by a fraction the numerator of which is the number of days
in
the Tax period ending on the Closing Date and the denominator of which is the
number of days in the entire Tax period (the “Pro Rata Amount”), and (ii) in the
case of any Tax based upon or related to income or receipts, be deemed equal
to
the amount that would be payable if the relevant Tax period ended on the Closing
Date. The Sellers shall pay to the Company with the payment of any
taxes due hereunder, the Sellers’ Pro Rata Amount of the costs and expenses
incurred by the Purchaser or the Company in the preparation and filing of the
Tax Returns. Any net operating losses or credits relating to a Tax period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall
be
made in a reasonable manner as agreed to by the parties.
27
(c) Refunds
and Tax Benefits. Any Tax refunds that are received after the
Closing Date by the Sellers (other than tax refunds received in connection
with
such Sellers individual tax Returns), the Purchaser or the Company, and any
amounts credited against Tax to which the Sellers, the Purchaser or the Company
become entitled, shall be for the account of the Company, and the Sellers shall
pay over to the Company any such refund or the amount of any such credit within
fifteen (15) days after receipt or entitlement thereto. In addition,
to the extent that a claim for refund or a proceeding results in a payment
or
credit against Tax by a taxing authority to the Sellers, the Sellers shall
pay
such amount to the Company within fifteen (15) days after receipt or entitlement
thereto.
(d) Cooperation
on Tax Matters.
(i) The
Purchaser, the Company and the Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing
of
any Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Company and the Sellers agree (A) to retain all books
and records with respect to Tax matters pertinent to the Company relating to
any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by the Purchaser or the
Sellers, any extensions thereof) of the respective tax periods, and to abide
by
all record retention agreements entered into with any taxing authority, and
(B)
to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party
so
requests, the Company or the Sellers, as the case may be, shall allow the other
party to take possession of such books and records.
(ii) The
Purchaser and the Sellers further agree, upon request, to use their commercially
reasonable best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(iii) The
Purchaser and the Sellers further agree, upon request, to provide the other
party with all information that either party may be required to report pursuant
to §6043 of the Code and all Treasury Department Regulations promulgated
thereunder.
6.15 Non-Competition.
For a period of one year after the later of the Closing Date or the termination
of employment by the Company, Sellers agree not to engage in any of the
following competitive activities: (a) engaging directly or indirectly in any
business or activity substantially similar to any business or activity engaged
in (or scheduled to be engaged) by the Company or any business or activity
engaged in by the Purchaser in any areas where the Company or the Purchaser
engage in business; (b) engaging directly or indirectly in any business or
activity competitive with any business or activity engaged in (or scheduled
to
be engaged) by the Company or any business or activity engaged in by the
Purchaser in any areas where the Company or the Purchaser engage in business;
(c) soliciting or taking away any employee, agent, representative, contractor,
supplier, vendor, customer, franchisee, lender or investor of the Company or
the
Purchaser, or attempting to so solicit or take away; (d) interfering with any
contractual or other relationship between the Company or the Purchaser and
any
employee, agent, representative, contractor, supplier, vendor, customer,
franchisee, lender or investor; or (e) using, for the benefit of any person
or
entity other than the Company, any confidential information of the Company
or
the Purchaser. Nothing in this Section 6.15 shall be deemed, however, to prevent
a Seller from owning securities of any publicly-owned corporation engaged in
any
such business, provided that the total amount of securities of each class owned
by such Seller in such publicly-owned corporation (other than Purchaser) does
not exceed two percent (2%) of the outstanding securities of such class. In
addition, no Seller shall make any negative statement of any kind concerning
the
Company, the Purchaser or their affiliates, or their directors, officers or
agents, except as such may be compelled by legal proceeding or governmental
action or authority.
28
6.16 Registration
of Shares of Purchaser Common Stock. Sellers and the Purchaser
shall enter into the registration rights agreement substantially in the form
of
Exhibit 6.16 hereto.
6.17 Employee
Matters. The Company and the Purchaser agree that following the
Closing Date:
(i) the
Company shall convert its current 401(k) benefit plan into the plan maintained
by the Purchaser;
(ii) the
Company shall make a good faith effort to maintain the existing health and
life
insurance policies and will not change the terms and benefits of the existing
life and health insurance policies for a period of two years from the Closing
Date without the prior written consent of the Sellers;
(iii) the
Company’s employees shall be eligible for grants pursuant to the Purchaser’s
stock option plan, which shall be allocated as determined in good faith by
the
Company’s Bard f Directors.
6.18 Elimination
of Non-Business Financial Obligations.
On
or
prior to the Closing Date, the Company shall eliminate all financial obligations
which are not directly related to the business and operations of the
Company.
ARTICLE
VII
7.1 Conditions
Precedent to Obligations of Purchaser.
The
obligation of the Purchaser to consummate the transactions contemplated by
this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by the
Purchaser in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Sellers contained herein shall be true
and
correct as of the date hereof;
(b) all
representations and warranties of the Sellers contained herein qualified as
to
materiality shall be true and correct, and the representations and warranties
of
the Sellers contained herein not qualified as to materiality shall be true
and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that time;
(c) the
Sellers shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by them on or prior to the Closing Date;
29
(d) the
Purchaser shall have been furnished with certificates (dated the Closing Date
and in form and substance reasonably satisfactory to the Purchaser) executed
by
each Seller certifying as to the fulfillment of the conditions specified in
Sections 7.1(a), 7.1(b) and 7.1(c) hereof;
(e) Certificates
representing 100% of the Membership Interests shall have been, or shall at
the
Closing be, validly delivered and transferred to the Purchaser, free and clear
of any and all Liens;
(f) there
shall not have been or occurred any Material Adverse Change;
(g) the
Sellers shall have obtained all consents and waivers referred to in Section
4.7
hereof, in a form reasonably satisfactory to the Purchaser, with respect to
the
transactions contemplated by this Agreement;
(h) no
Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Sellers, the Company, or the Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation
of
the transactions contemplated hereby, and there shall not be in effect any
order
by a governmental body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
hereby;
(i) ;
(j) the
Employment Agreements shall have been executed by Xxx-Xxxx Ma and Xxxxxx
Xxxxxxxxxxxx and the Company; and
(k) the
Purchaser shall have received information satisfactory in its sole discretion
to
verify the accuracy of the backlog, add-backs, key client relationships and
the
tangibility of assets.
(l) Debt
of the Company shall have been extinguished or converted to terms acceptable
to
the Purchaser in its sole discretion.
7.2 Conditions
Precedent to Obligations of the Sellers.
The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date,
of
each of the following conditions (any or all of which may be waived by the
Sellers in whole or in part to the extent permitted by applicable
law):
(a) all
representations and warranties of the Purchaser contained herein shall be true
and correct as of the date hereof;
30
(b) all
representations and warranties of the Purchaser contained herein qualified
as to
materiality shall be true and correct, and all representations and warranties
of
the Purchaser contained herein not qualified as to materiality shall be true
and
correct in all material respects, at and as of the Closing Date with the same
effect as though those representations and warranties had been made again at
and
as of that date;
(c) the
Purchaser shall have performed and complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by Purchaser on or prior to the Closing Date;
(d) the
Sellers shall have been furnished with certificates (dated the Closing Date
and
in form and substance reasonably satisfactory to the Sellers) executed by the
Chief Executive Officer and Chief Financial Officer of the Purchaser certifying
as to the fulfillment of the conditions specified in Sections 7.2(a), 7.2(b)
and
7.2(c);
(e) no
Legal
Proceedings shall have been instituted or threatened or claim or demand made
against the Sellers, the Company, or the Purchaser seeking to restrain or
prohibit or to obtain substantial damages with respect to the consummation
of
the transactions contemplated hereby, and there shall not be in effect any
Order
by a Governmental Body of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby;
and
(f) the
Employment Agreements shall have been executed by Xxx-Xxxx Ma and Xxxxxx
Xxxxxxxxxxxx and the Company.
ARTICLE
VIII
DOCUMENTS
TO BE DELIVERED
8.1 Documents
to be Delivered by the Sellers.
At
the
Closing, the Sellers shall deliver, or cause to be delivered, to the Purchaser
the following:
(a) certificates
representing the Membership Interests, duly endorsed in blank or accompanied
by
stock transfer powers and with all requisite stock transfer tax stamps
attached;
(b) the
certificates referred to in Section 7.1(d) and 7.1(e) hereof;
(c) copies
of
all consents and waivers referred to in Section 7.1(g) hereof;
(d) Employment
Agreements, substantially in the form of Exhibit 6.9 hereto, duly executed
by
Xxx-Xxxx Ma and Xxxxxx Xxxxxxxxxxxx;
(e) certificate
of good standing with respect to the Company issued by the Secretary of State
of
the State of incorporation, and for each state in which the Company is qualified
to do business as a foreign corporation; and
(f) such
other documents as the Purchaser shall reasonably request.
8.2 Documents
to be Delivered by the Purchaser.
At
the
Closing, the Purchaser shall deliver to the Sellers the following:
(a) The
Purchase Price;
(b) the
certificates referred to in Section 7.2(d) hereof; and
(c) such
other documents as the Sellers shall reasonably request.
31
ARTICLE
IX
9.1 Indemnification.
(a) Subject
to Section 9.2 hereof, the Sellers hereby agrees to jointly and severally
indemnify and hold the Purchaser, the Company, and their respective directors,
officers, employees, Affiliates, agents, successors and assigns (collectively,
the "Purchaser Indemnified Parties") harmless from and against:
(i) any
and
all liabilities of the Company of every kind, nature and description, absolute
or contingent, existing as against the Company prior to and including the
Closing Date or thereafter coming into being or arising by reason of any state
of facts existing, or any transaction entered into, on or prior to the Closing
Date, except to the extent that the same have been fully provided for in the
Balance Sheet, or disclosed in the notes thereto or were incurred in the
ordinary course of business between the Balance Sheet date and the Closing
Date;
(ii) subject
to Section 10.3, any and all losses, liabilities, obligations, damages, costs
and expenses based upon, attributable to or resulting from the failure of any
representation or warranty of the Sellers set forth in Section 4 hereof, or
any
representation or warranty contained in any certificate delivered by or on
behalf of the Sellers pursuant to this Agreement, to be true and correct in
all
respects as of the date made;
(iii) any
and
all losses, liabilities, obligations, damages, costs and expenses based upon,
attributable to or resulting from the breach of any covenant or other agreement
on the part of the Sellers under this Agreement;
(iv) any
and
all notices, actions, suits, proceedings, claims, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys' and
other professionals' fees and disbursements (collectively, "Expenses") incident
to any and all losses, liabilities, obligations, damages, costs and expenses
with respect to which indemnification is provided hereunder (collectively,
"Losses").
(b) Subject
to Section 9.2, Purchaser hereby agrees to indemnify and hold the Sellers and
their respective Affiliates, agents, successors and assigns (collectively,
the
"Seller Indemnified Parties") harmless from and against:
(i) any
and
all Losses based upon, attributable to or resulting from the failure of any
representation or warranty of the Purchaser set forth in Section 5 hereof,
or
any representation or warranty contained in any certificate delivered by or
on
behalf of the Purchaser pursuant to this Agreement, to be true and correct
as of
the date made;
(ii) any
and
all Losses based upon, attributable to or resulting from the breach of any
covenant or other agreement on the part of the Purchaser under this Agreement
or
arising from the ownership or operation of the Company from and after the
Closing Date ; and
(iii) any
and
all Expenses incident to the foregoing.
32
An
indemnifying party shall not have any liability under Section 9.1(a)(ii) or
Section 9.1(b)(i) hereof unless the aggregate amount of Losses and Expenses
to
the indemnified parties finally determined to arise thereunder based upon,
attributable to or resulting from the failure of any representation or warranty
to be true and correct, other than the representations and warranties set forth
in Sections 4.3, 4.11, 4.24 and 4.29 hereof, exceeds $15,000 (the “Basket”) and,
in such event, the indemnifying party shall be required to pay the entire amount
of such Losses and Expenses. Notwithstanding else contained herein,
the maximum liability the Sellers in the aggregate shall be required to pay
hereunder shall be the amount of the Purchase Price.
(a) In
the
event that any Legal Proceedings shall be instituted or that any claim or demand
("Claim") shall be asserted by any Person in respect of which payment may be
sought under Section 9.1 hereof (regardless of the Basket referred to
above), the indemnified party shall reasonably and promptly cause written notice
of the assertion of any Claim of which it has knowledge which is covered by
this
indemnity to be forwarded to the indemnifying party. The indemnifying
party shall have the right, at its sole option and expense, to be represented
by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any
Claim
which relates to any Losses indemnified against hereunder. If the
indemnifying party elects to defend against, negotiate, settle or otherwise
deal
with any Claim which relates to any Losses indemnified against hereunder, it
shall within five (5) days (or sooner, if the nature of the Claim so requires)
notify the indemnified party of its intent to do so. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Claim which relates to any Losses indemnified against hereunder,
fails to notify the indemnified party of its election as herein provided or
contests its obligation to indemnify the indemnified party for such Losses
under
this Agreement, the indemnified party may defend against, negotiate, settle
or
otherwise deal with such Claim. If the indemnified party defends any
Claim, then the indemnifying party shall reimburse the indemnified party for
the
Expenses of defending such Claim upon submission of periodic
bills. If the indemnifying party shall assume the defense of any
Claim, the indemnified party may participate, at his or its own expense, in
the
defense of such Claim; provided, however, that such indemnified party shall
be
entitled to participate in any such defense with separate counsel at the expense
of the indemnifying party if, (i) so requested by the indemnifying party to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party, a conflict or potential conflict exists between the indemnified party
and
the indemnifying party that would make such separate representation advisable;
and provided, further, that the indemnifying party shall not be required to
pay
for more than one such counsel for all indemnified parties in connection with
any Claim. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
Claim.
(b) After
any
final judgment or award shall have been rendered by a court, arbitration board
or administrative agency of competent jurisdiction and the expiration of the
time in which to appeal therefrom, or a settlement shall have been consummated,
or the indemnified party and the indemnifying party shall have arrived at a
mutually binding agreement with respect to a Claim hereunder, the indemnified
party shall forward to the indemnifying party notice of any sums due and owing
by the indemnifying party pursuant to this Agreement with respect to such matter
and the indemnifying party shall be required to pay all of the sums so due
and
owing to the indemnified party by wire transfer of immediately available funds
within 10 business days after the date of such notice.
(c) The
failure of the indemnified party to give reasonably prompt notice of any Claim
shall not release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party can demonstrate actual loss and prejudice as a result of such
failure.
The
Sellers and the Purchaser agree to treat any indemnity payment made pursuant
to
this Article 9 as an adjustment to the Purchase Price for federal, state, local
and foreign income tax purposes.
33
ARTICLE
X
All
sales, use, transfer, intangible, recordation, documentary stamp or similar
Taxes or charges, of any nature whatsoever, applicable to, or resulting from,
the transactions contemplated by this Agreement shall be borne by the
Sellers.
The
parties hereto hereby agree that the representations and warranties contained
in
this Agreement or in any certificate, document or instrument delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
and the Closing hereunder, regardless of any investigation made by the parties
hereto; provided, however, that any claims or actions with respect thereto
(other than claims for indemnifications with respect to the representation
and
warranties contained in Sections 4.3, 4.11, 4.24, 4.29 and 5.8 which shall
survive for periods coterminous with any applicable statutes of limitation)
shall terminate unless within twenty four (24) months after the Closing Date
written notice of such claims is given to the Sellers or such actions are
commenced.
10.3 Expenses.
Except
as
otherwise provided in this Agreement, the Sellers and the Purchaser shall each
bear its own expenses incurred in connection with the negotiation and execution
of this Agreement and each other agreement, document and instrument contemplated
by this Agreement and the consummation of the transactions contemplated hereby
and thereby, it being understood that in no event shall the Company bear any
of
such costs and expenses.
10.4 Specific
Performance.
The
Sellers acknowledge and agree that the breach of this Agreement would cause
irreparable damage to the Purchaser and that the Purchaser will not have an
adequate remedy at law. Therefore, the obligations of the Sellers
under this Agreement, including, without limitation, the Sellers' obligation
to
sell the Membership Interests to the Purchaser, shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies shall, however, be cumulative and not
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
10.5 Further
Assurances.
The
Sellers and the Purchaser each agrees to execute and deliver such other
documents or agreements and to take such other action as may be reasonably
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
34
(a) The
parties hereto hereby irrevocably
submit to the non-exclusive jurisdiction of any federal or state court located
within the Commonwealth of Pennsylvania over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action proceeding related thereto may be heard and determined
in
such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum for the maintenance of such
dispute. Each of the parties hereto agrees that a judgment in any
such dispute may be enforced in other jurisdictions by suit on the judgment
or
in any other manner provided by law.
(b) Each
of
the parties hereto hereby consents to process being served by any party to
this
Agreement in any suit, action or proceeding by the mailing of a copy thereof
in
accordance with the provisions of Section 10.10.
(c)
If
any legal action or any arbitration or other proceeding is brought for the
enforcement or interpretation of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with or related
to
this Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs in connection with that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
This
Agreement (including the schedules
and exhibits hereto, together with the Confidentiality/Standstill Agreement
executed by the parties as of June 22, 2007) represents the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and can be amended, supplemented or changed, and any provision hereof
can
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation
by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant
or
agreement contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed
as a
further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by such party preclude any other or further exercise thereof
or
the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided
by
law.
10.8 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Pennsylvania.
The
table
of contents and section headings of this Agreement are for reference purposes
only and are to be given no effect in the construction or interpretation of
this
Agreement.
10.10 Notices.
All
notices and other communications under this Agreement shall be in writing and
shall be deemed given when delivered personally, mailed by certified mail,
return receipt requested, or via recognized overnight courier service with
all
charges prepaid or billed to the account of the sender to the parties (and
shall
also be transmitted by facsimile to the Persons receiving copies thereof) at
the
following addresses (or to such other address as a party may have specified
by
notice given to the other party pursuant to this provision):
|
(a)
|
Purchaser:
|
WPCS
International Incorporated
Xxx
Xxxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx,
Xxxxxxxxxxxx 00000
Attn: Xxxxxx
Xxxxxxx, Chief Executive Officer
Phone: (000)
000-0000
Facsimile:
(000) 000-0000
Copy
to:
Xxxxxx
X.
Xxxx, Esq.
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Phone: (000)
000-0000
Facsimile:
(000) 000-0000
35
|
(b)
|
Sellers
and Company:
|
Max
Engineering LLC
0000
XX
Xxxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn: Xxx-Xxxx
Ma, President
Phone: (000)
000-0000
Facsimile: (000)
000-0000
Copy
to:
Xxxxxxxx
PA
0000
Xxxxx Xxxxx
Xxxxx
000
Xxxxxx
Xxxx, XX 00000
Attn: Xxxx
X. Xxxxxxxx, Esq.
Phone:
(000) 000-0000
Fax: (000)
000-0000
10.11 Severability.
If
any
provision of this Agreement is invalid or unenforceable, the balance of this
Agreement shall remain in effect.
10.12 Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement except as provided
below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by either the Sellers or the Purchaser (by
operation of law or otherwise) without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void;
[intentionally
blank]
36
IN
WITNESS WHEREOF, the parties hereto
have executed or caused to be duly executed this Membership Interest Purchase
Agreement as of the date first set forth above.
| WPCS INTERNATIONAL INCORPORATED | |||
|
By:
|
/s/ XXXXXX XXXXXXX | ||
| Xxxxxx Xxxxxxx, | |||
| Chief Executive Officer | |||
| MAX ENGINEERING LLC | |||
|
|
By:
|
/s/ XXX-XXXX MA | |
| Xxx-Xxxx Ma, | |||
| President | |||
| SELLERS: | |||
|
|
By:
|
/s/ XXX-XXXX MA | |
|
Xxx-Xxxx
Ma
|
|||
|
|
By:
|
/s/ XXXXXX XXXXXXXXXXXX | |
| Xxxxxx Xxxxxxxxxxxx | |||
37
ANNEX
A
| Seller | Membership Interests |
| Xxx-Xxxx Ma | 66 2/3% |
| Xxxxxx Xxxxxxxxxxxx | 33 1/3% |
38