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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated effective as of
January 1, 1997 (the "Effective Date"), by and among TMCI Electronics, Inc., a
Delaware corporation (the "Purchaser"), and the Shareholders of Enterprise
Industries, Inc., a California corporation (the "Company").
RECITALS
WHEREAS, the Shareholders represent that they own all of the issued and
outstanding shares of the Company's common stock (the "Shares"); and
WHEREAS, Purchaser desires to purchase the Shares from the Shareholders
and the Shareholders desire to sell the Shares to the Purchaser; and
WHEREAS, the Company desires that this transaction be consummated.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein the Purchaser and the Shareholders hereby
agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
"Act" has the meaning specified in Section 3.28.
"Action or Proceeding" means any action, suit, proceeding, claim
threatened, pending, or filed or arbitration by any Person or any investigation
or audit by any Governmental or Regulatory Body.
"Affiliate" with respect to any Person, means any other Person
controlling, controlled by or under common control with such Person, except that
the Purchaser and the Company shall not be deemed to be affiliates of each other
after the Closing.
"Agreement" means this Stock Purchase Agreement.
"Associate" means, with respect to any Person, any corporation or other
business organization of which such Person is an officer or partner or is the
beneficial owner, directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person or any child or
sibling of such Person or such Person's spouse.
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"Benefits" has the meaning specified in Section 7.3(b)(ii).
"Best Knowledge", "Knowledge" or words to that effect shall mean, as to
any Person, to the best knowledge of such Person after due inquiry and
investigation.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
conditions of (financial or other), results of operations and assets and
properties of such Person, including without limitation, financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, contracts and other
agreements, licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"Business" means all right, title and interest of the Company in and to
all of the assets, properties, and rights owned by the Company, and used
primarily by the Company in its business and operations as such business is
conducted on the date hereof.
"Business Day" means those days as defined in California Civil Code
Section 9.
"Cash Payment" has the meaning specified in Section 2.2(a).
"Claim Notice" has the meaning specified in Section 8.4(a).
"Closing" has the meaning specified in Section 6.1.
"Closing Date" has the meaning specified in Section 6.1.
"Common Stock" has the meaning specified in Section 2.2(b).
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Company Liquidation" has the meaning specified in Section 2.2(d).
"Company's Debt" has the meaning specified in Section 3.3(a).
"Confidential Company Information" has the meaning specified in Section
7.3(a)(ii).
"Contracts and other Agreements" means all executory contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, franchises, licenses, commitments or other legally binding
arrangements which pertain to the Business.
"Delivery Date" has the meaning specified in Section 2.2(c).
"document or other papers" means any document, agreement, instrument,
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any Schedule to this Agreement) or exhibit (including any
Exhibit to this Agreement).
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"Effective Date" has the meaning specified in the first paragraph of
this Agreement.
"Employment Agreement" has the meaning specified in Section 2.2(d).
"Environmental, Health and Safely Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"Escrow Agent" has the meaning specified in Section 2.2(c).
"Escrow Agreement" has the meaning specified in Section 2.2(c).
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Governmental or Regulatory Body" means court, tribunal, arbitrator or
any government or political subdivision thereof, whether federal, state, county,
local or foreign, or any agency, authority, official or instrumentality of any
such government or political subdivision.
"Guaranty" has the meaning set forth in Section 2.2(c).
"Indemnified Party" has the meaning specified in Section 8.4.
"Indemnifying Party" has the meaning specified in Section 8.4.
"IRS" means the Internal Revenue Service.
"JAMS" has the meaning specified in Section 9.15.
"Law" means any law, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political subdivision or
of any Governmental or Regulatory Body.
"Liability" or "Liabilities" means any direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise.
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"Lien" means any lien, pledge, hypothecation, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Loss" or "Losses" has the meaning specified in Section 8.2.
"Material Adverse Effect" means, in the case of any Person, any change
or changes or effect or effects that individually or in the aggregate are or may
reasonably be expected to be materially adverse to (i) the assets, properties,
business, operations, income, prospects or condition (financial or otherwise) of
such Person or the transactions contemplated by this Agreement or (ii) the
ability of such Person to perform its obligations under this Agreement.
"Material Contracts" has the meaning specified in Section 3.12.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Body, in each case whether preliminary or
final.
"Pen" has the meaning specified in Section 4.8.
"Pen Acquisition" has the meaning specified in Section 4.8.
"Per-Share Value" has the meaning specified in Section 2.2(b).
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental or Regulatory Body or other entity.
"Personal Guaranties" has the meaning set forth in Section 3.1 (a)
"Promissory Note" has the meaning specified in Section 2.2(c).
"Purchase Price" has the meaning specified in Section 2.2.
"Purchaser" has the meaning specified in the first paragraph of this
Agreement.
"Purchaser's Counsel" has the meaning specified in Section 5.1 (f).
"Relocation" has the meaning set forth in Section 7.3.
"Restrictive Covenants" has the meaning specified in Section 7.3(b).
"Shareholders' Counsel" has the meaning specified in Section 5.1(e).
"Shareholders" means all holders of the Shares, whose identities are as
follows: Xxxxxxx Xxxxxxx, and the Xxxxxxx and Xxxxx Xxxxxxx Living Trust, dated
November 14, 1989.
"Shares" has the meaning specified in Section 3.2(a).
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"Tangible Property" has the meaning specified in Section 3.15.
"Target Equity" has the meaning specified in Section 3.2(c).
"Tax Return" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any federal, state, local or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax (whether or not such Tax is imposed on the Company) or the administration of
any laws, regulations or administrative requirements relating to any Tax.
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign taxing authority,
whether disputed or not, including, without limitation, income, capital,
estimated, excise, property, sales, transfer, withholding employment, payroll,
and franchise taxes and such terms shall include any interest, penalties or
additions attributable to or imposed on or with respect to such assessments.
"Unaudited Financial Statements" has the meaning specified in Section
3.8.
ARTICLE 11. PURCHASE AND SALE OF THE SHARES
2.1 Sale and Transfer of Shares. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date, the Shareholders will transfer
and convey the Shares to Purchaser, and Purchaser will acquire the Shares from
the Shareholder.
2.2 Purchase Price. As full payment for the transfer of the Shares by
Shareholder to Purchaser, Purchaser shall deliver to the Shareholders at the
Closing, one million five hundred thousand dollars ($1,500,000) (the "Purchase
Price"), in accordance with the provisions of Section 2.2(c) and Section 2.2(d),
as follows:
(a) Wire Transfer. A wire transfer in the amount of one
million dollars ($1,000,000) (the "Cash Payment"). The Cash Payment shall be
paid as follows: (i) four hundred eight thousand dollars ($408,000) to Xxxxxxx
Xxxxxxx, and (ii) five hundred ninety-two thousand dollars ($592,000) to the
Xxxxxxx and Xxxxx Xxxxxxx Living Trust, dated November 14, 1989.
(b) Shares of Purchaser's Common Stock. Except as provided in
Section 2.2(c) below, that number of shares of Purchaser's common stock
determined by dividing the agreed per-share value of Purchaser's common stock
into five hundred thousand dollars ($500,000) (the "Common Stock"). The agreed
per-share value of the Common Stock shall be the average of the closing prices
of the Common Stock listed in The Wall Street Journal for the ten (10) trading
days immediately prior to the Effective Date (the "Per-Share Value").
(c) Common Stock Holdback. As security for Shareholders
representations and warranties set forth in Article III and the Shareholders
indemnities set forth in Article VIII, but without limitation of their
liabilities under those articles, Purchaser shall retain, and transfer the
Common Stock to an escrow agent of the Purchaser's choosing (the "Escrow Agent")
pursuant to the Escrow Agreement (the "Escrow Agreement") attached hereto as
Exhibit 2.2(c-1). The
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Common Stock held in escrow shall be delivered to the Shareholders as provided
in this Agreement on the day two (2) years after the Effective Date (the
"Delivery Date"), subject to the following reduction in the number of these
shares: if the Shareholders become liable to Purchaser in any amount under
Article III or Article VIII, the amount of Common Stock to be delivered shall be
reduced by that number of shares determined by dividing the Per-Share Value into
the aggregate amount that the Shareholders are obligated to indemnify Purchaser.
Excluding any Common Stock subject to the reduction provided for in the
preceding sentence, the Purchaser shall reimburse the Shareholders for any
difference between the market value of Common Stock on the Effective Date, as
determined by multiplying the number of shares of Common Stock issued on the
Effective Date by the Per-Share Value, and the market value of the Common Stock
on the Delivery Date, as determined by multiplying the number of shares of
Common Stock issued on the Effective Date by the average of the closing prices
of the Purchaser's common stock listed in The Wall Street Journal for the ten
(10) trading days immediately prior to the Delivery Date, such reimbursement to
be made in the form of a promissory note (the "Promissory Note") in the
principal amount of such difference, bearing ten percent (10%) interest per
annum, for a term of five (5) years, collateralized by the assets of the
Company, and personally guaranteed by Xxxxxxx Xxxxx, Chief Executive Officer of
the Purchaser pursuant to the personal guaranty (the "Guaranty") attached hereto
as Exhibit 2.2(c-2), or alternatively, at the sole and absolute discretion of
Xxxxxxx Xxxxxxx, such reimbursement may be made in the form of that number of
shares of the Purchaser's common stock equal to the amount of such difference as
determined by dividing the amount of such difference by the average of the
closing prices of the Purchaser's common stock listed in The Wall Street Journal
for the ten (10) trading days immediately prior to the Delivery Date, such
amount to be rounded to the nearest whole number. Any reduction of the Common
Stock resulting from the operation of this Section 2.2(c) shall be divided among
the Shareholders in proportion to their right, title, and interest in the
Shares.
(d) Offset of Common Stock Upon Termination of Xxxxxxx
Xxxxxxx and Liquidation of the Company. If the employment of Xxxxxxx Xxxxxxx is
terminated for any reason whatsoever within two (2) years of the Effective Date
the Purchaser may, at its sole and absolute discretion, at any time within the
six (6) months immediately following the date of such termination, (i) sell the
Shares to a third party, or sell all, or substantially all, of the Company's
assets to a third party (collectively a "Company Liquidation"), and (ii) offset
the Common Stock by the following amount: [(one million five hundred thousand
dollars ($1,500,000)) - (the net proceeds resulting from a Company Liquidation +
any amounts received by the Purchaser as Baseline as set forth on Schedule 5.01
of the Employment Agreement, dated effective as of January 1, 1997, by and
between the Purchaser and Xx. Xxxxxxx (the "Employment Agreement"), prior to a
Company Liquidation)]. In the event of a Company Liquidation, Xx. Xxxxxxx shall
be released from the covenant against competition set forth in Section 7.3 of
this Agreement, and such section shall cease to be operative. Any offset of the
Common Stock resulting from the operation of this Section 2.2(d) shall be
divided among the Shareholders in proportion to their right, title, and interest
in the Shares.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to the
Purchaser with the knowledge that the Purchaser is relying on such
representations and warranties in entering into
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this Agreement, and that the statements contained in this Article III are true,
correct, complete, and current as of the date of this Agreement.
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to (a) enter into
this Agreement and to perform its obligations hereunder, (b) own, lease and
operate its properties and assets used in the Business as they are now owned,
leased and operated and (c) carry on its business as now presently conducted.
The Company is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except where the failure to do so would not have a
Material Adverse Effect after the Closing Date.
3.2 Stock of Company.
(a) Capital Structure. The authorized capital stock of the Company
consists solely of one hundred thousand (100,000) shares of common stock with a
par value of one dollar ($1.00) per share, of which only seven thousand five
hundred (7,500) shares (the "Shares") are issued and outstanding. All the Shares
are validly issued, fully paid, and nonassessable, and such shares have been
issued in full compliance with all federal and state securities laws. There are
no outstanding subscriptions, options, rights, warrants, convertible equity or
debt, or other agreements or commitments obligating the Company to issue or to
transfer from treasury any additional shares of its capital stock of any class.
(b) Title to Shares. The Shareholders are the owners, beneficially and
of record, of all right, title, and interest to the Shares free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges,
and restrictions. The Shareholders have full power to transfer the Shares to the
Purchaser without obtaining the consent or approval of any other person or
governmental authority.
(c) Target Equity. The target equity (the "Target Equity") shall be
seven hundred sixty-four thousand seven hundred sixty-one dollars ($764,761),
computed in a manner consistent with the Company's Unaudited Financial
Statements.
3.3 Debt of Company.
(a) Company's Debt. The Company's debt is set forth on Schedule 3.3(a)
(the "Company's Debt"). The Company has no other debt. The Purchaser will not
assume any debts not set forth on Schedule 3.3(a), except that the Purchaser
will assume any debts not set forth on Schedule 3.3(a) which, cumulatively,
would not reduce Target Equity below seven hundred forty-one thousand three
hundred thirteen dollars ($741,313) on the Closing Date, except as otherwise
agreed to by the Purchaser. The Purchaser will be substituted as the guarantor
of any of the Company's Debt set forth on Schedule 3.3(a) for which the
Shareholders have executed personal guaranties (the "Personal Guaranties"). If
it is not possible for the Purchaser to be substituted as guarantor for the
Shareholders in such Personal Guaranties, then the Purchaser will indemnify the
Shareholders against any and all losses arising from such Personal Guaranties.
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3.4 Validity and Execution of Agreement. The Shareholders have the full
legal right, capacity and power (and the Company has all requisite corporate
authority and approval) required to enter into, execute and deliver this
Agreement and to perform fully their obligations hereunder. This Agreement
constitutes the valid and binding obligation of the Shareholders and is
enforceable against them in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights in general
and by general principles of equity.
3.5 No Conflict. Except as set forth on Schedule 3.5, neither the
execution and delivery of this Agreement by the Shareholders nor the performance
by the Shareholders of the transactions contemplated hereby will: (a) violate or
conflict with any of the provisions of any agreement to which the Shareholders,
or the Company, are a party; (b) except as would not have a Material Adverse
Effect after the Closing Date on the Company, the Business or Purchaser,
violate, conflict with, result in the acceleration of, or entitle any party to
accelerate the maturity or the cancellation of the performance of any obligation
under, or result in the creation or imposition of any lien in or upon any of the
Company's assets or constitute a default (or an event which might, with the
passage of time or the giving of notice, or both, constitute a default) under
any mortgage, indenture, deed of trust, lease, contract, loan or credit
agreement, license or other instrument to which the Company is a party or by
which its or any of its properties or assets may be bound or affected; or (c)
except as would not have a Material Adverse Effect after the Closing Date on the
Company, the Business, or Purchaser, violate or conflict with any provision of
any Law or Order applicable to the Shareholders or require any consent or
approval of or filing or notice with any Governmental or Regulatory Body.
3.6 Books and Records. The Records of the Company as supplied to
Purchaser are true, correct, complete, and current in all material respects.
3.7 Certificate of Incorporation and Bylaws. The Company has heretofore
delivered to Purchaser true, correct, complete and current copies of its
Articles of Incorporation and Bylaws or similar governing documents of the
Company as in full force and effect on the date hereof.
3.8 Unaudited Financial Statements. The unaudited financial statements
(the "Unaudited Financial Statements") of the Company dated December 31, 1996,
attached hereto as Exhibit 3.8 are true, correct, complete, and current, and
accurately reflect the Company's financial condition as of the date thereof.
3.9 No Dividends. The Company has not declared, set aside, or paid any
dividend or made any distribution in respect to the Shares within the one
hundred eighty (180) days preceding the Closing Date.
3.10 No Material Adverse Change. Except as set forth on Schedule 3.10,
since the date of the Unaudited Financial Statements there has been no material
adverse change in the assets, properties, business, operations, income or
condition (financial or otherwise) of the Business, nor is any such change
threatened, nor has there been any damage, destruction or loss which could have
a Material Adverse Effect after the Closing Date on the Business, or Purchaser,
whether or not covered by insurance.
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3.11 Absence of Undisclosed Liabilities. The Company has no debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected or reserved
against in the Company's balance sheet included in the Unaudited Financial
Statements, except for (1) those that may have been incurred after the date of
that balance sheet and (2) those that are not required by generally accepted
accounting principles to be included in a balance sheet. All debts, liabilities,
and obligations incurred after that date were incurred in the ordinary course of
business and are usual and normal in amount both individually and in the
aggregate.
3.12 Contracts and Other Agreements. True, correct, complete, and
current copies of all contracts, the termination of which, in any manner
whatsoever, could have a Material Adverse Effect on the Business and operations
of the Company (the "Material Contracts") have been delivered to Purchaser. A
list of all Material Contracts are attached hereto as Schedule 3.12. All of the
Material Contracts are valid, subsisting, in full force and effect and binding
upon the Company and the Company has satisfied in full or provided for all of
its liabilities and obligations thereunder requiring performance prior to the
date hereof in all material respects, is not in default under any of them, nor
does any condition exist that with notice or lapse of time or both would
constitute such a default. No other party to any such Material Contract is in
default thereunder, nor does any condition exist that with notice or lapse of
time or both would constitute such a default. Except as separately identified on
Schedule 3.12, no approval or consent of any Person is needed for the Material
Contracts to continue to be in full force and effect, and all rights thereunder
remain unaltered. The Company is not a party to any employment or consulting
agreements.
3.13 Customers and Sales. Schedule 3.13 is a correct and current list
of all customers of the Company together with summaries of the sales made to
each customer during the most recent calendar year. Except as indicated in
Schedule 3.13, the Shareholders have no information, or is aware of any facts,
indicating that any of these customers intend to cease doing business with the
Company or materially alter the amount of the business they are presently doing
with the Company.
3.14 Inventory. The inventories of raw materials, work in process, and
finished goods (the "Inventory") as reflected on the Unaudited Financial
Statements, consist of items of a quality and quantity usable and salable in the
ordinary course of business by the Company. All items included in the
inventories are the property of the Company, except for sales made in the
ordinary course of business since the date of the balance sheet; for each of
these sales, either the purchaser has made full payment or the purchaser's
liability to make payment is reflected in the books of the Company. No items
included in the inventories have been pledged as collateral or are held by the
Company on consignment from others. The inventories shown on all the balance
sheets included in the Unaudited Financial Statements are based on quantities
determined by physical count or measurement, taken within the preceding 12
months, and are valued at the lower of cost (determined on a first-in, first-out
basis) or market value.
3.15 Tangible Property. Schedule 3.15 sets forth a true, complete,
correct and current list of all categories of tangible personal property (other
than Inventory), including, without limitation, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, any related capitalized items and
other similar tangible property, in each case owned or leased by the
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Company and material to the Business (collective, the "Tangible Property")
together with a description of all leases or subleases of Tangible Property to
which the Company (on behalf of the Business) is the lessor, sublessor, lessee
or sublessee and all options to purchase or sell the underlying property. The
Tangible Property is free from defects (patent and latent), has been maintained
in accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
3.16 Intellectual Property. No patents, trademarks, or copyrights are
necessary for the conduct of the Business by the Company. No litigation is
pending or threatened, that challenges the Company's right to conduct the
Business without such patents, trademarks, or copyrights, and no valid grounds
exist for any such claim.
3.17 Real Property - Description. Schedule 3.17 to this Agreement is a
complete and accurate legal description of each parcel of real property leased
to the Company. Schedule 3.17 contains a description of all buildings, fixtures
and other improvements located on the properties and a list of the insurance
policies issued to the Company for these properties. All the leases listed in
Schedule 3.17 are valid and in full force, and there does not exist any default
or event that with notice or lapse of time, or both, would constitute a default
under any of these leases. Attached as Exhibit 3.17-1 to this Agreement are
copies of all leases for each parcel of real property leased to the Company.
Attached as Exhibit 3.17-2 to this Agreement are copies of all amendments to
leases for each parcel of real property leased to the Company.
3.18 Accounts Receivable. Schedule 3.18 is a complete and accurate
schedule of the accounts receivable of the Company as as reflected on the
Unaudited Financial Statements. These accounts receivable, and all accounts
receivable of the Company were created after that date and arose from valid
sales in the ordinary course of business. These accounts have been collected in
full since that date, or are collectible at their full amount.
3.19 Insurance Policies. Schedule 3.19 is a description of all
insurance policies held by the Company concerning their businesses and
properties. All these policies are in the respective principal amounts set forth
in Schedule 3.19. The Company has maintained and now maintains (1) insurance on
all its assets and businesses of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (2) adequate insurance
protection against all liabilities, claims, and risks against which it is
customary to insure. The Company is not in default with respect to payment of
premiums on any such policy. Except as set forth in Schedule 3.19, no claim is
pending under any such policy.
3.20 Tax Matters. All Tax Returns required to be filed with respect to
the Company have been timely filed and all such Tax Returns were correct and
complete in all respects. The Company has timely paid to the appropriate tax
authorities all Taxes due or claimed to be due from it by any Tax authority. No
adjustment relating to any Tax Return required to be filed with respect to the
Company has been proposed formally or informally by any Tax authority, and no
basis exists for any such adjustment. The Company is not currently the
beneficiary of any extension of time within which to file any Tax Return. There
are no liens for Taxes upon assets or properties of the Company. There is no
examination or proceeding pending or threatened by any tax authority relating to
the determination, assessment or collection of, or any delinquencies in filing
related to any Taxes of the Company. Notwithstanding anything contained herein
to the
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contrary contained herein, the Company shall not be deemed to be in breach of
this Section 3.8 if the breach of any of the statements contained in this
Section 3.8 does not have a Material Adverse Effect after the Closing Date upon
the Business or the Purchaser. The Company holds a valid California resale
certificate.
3.21 Litigation. Except as set forth on Schedule 3.21, there are no
outstanding Orders by which the Company, or any of its securities, assets,
properties or businesses, or the Shareholders, are bound. Except as set forth on
Schedule 3.21, there is no Action or Proceeding threatened, pending, or filed
(whether or not the defense thereof or liabilities in respect thereof are
covered by insurance) against or affecting the Company or any of its assets,
properties or businesses, including the Business, or the Shareholders, which, if
adversely decided, would have a Material Adverse Effect after the Closing on the
Company, the Purchaser, or the Business, nor are there any facts which are
likely to give rise to any such Action or Proceeding, which, if adversely
decided, would have a Material Adverse Effect after the Closing on the Company,
the Purchaser, or the Business.
3.22 ERISA. The Company has no "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended and the Internal Revenue Code of 1986, as amended. As a result of the
transactions contemplated by this Agreement, the Purchaser shall have no
liability with respect to any employee pursuant to any employee benefit plan.
3.23 Entire Business. The sale of the Shares to be sold by the
Shareholders to Purchaser pursuant to this Agreement will convey to Purchaser
the entire Business and all of the tangible and intangible property used by the
Company (whether owned, leased or held under license by the Company, by any of
the Company's Affiliates, Associates or by others, including, without
limitation, any of the assets of the Business) in connection with the conduct of
the Business as heretofore conducted by the Company. Except as disclosed in
Schedule 3.23, there are no material facilities, services, assets or properties
shared with any other Person which are used or useful to the Company in the
Business. There are no material facilities, services, assets or properties owned
by the Shareholders or any third party that will not be conveyed at the Closing
by the execution of this Agreement.
3.24 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Shareholders
directly with Purchaser without the intervention of any person on behalf of the
Shareholders in such manner as to give rise to any valid claim by any Person
against Purchaser for a finder's fee, brokerage commission, or similar payment.
Any brokers or finders retained by the Shareholders shall be entitled to a fee
only upon completion of the transactions contemplated by this Agreement. The
Shareholders agree that they shall be solely responsible to pay the fees and
costs of any broker or finder which they have retained.
3.25 Compliance with Laws. Except as set forth in Schedule 3.25, the
Company (a) is in compliance with all, and not in violation of any, and has not
received any claim or notice that it is not in compliance in any material
respect with, or that it is in violation in any material respect of, any Law or
Order to which the Business is subject and (b) has not failed to obtain or to
adhere to the requirements of any governmental permit, license, registration and
other
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governmental consent or authorization necessary in connection with the Business,
which failure would have a Material Adverse Effect after the Closing Date on the
Business or Purchaser. The Company has advised Purchaser in writing of any
proposed health or other law, rule or regulation which could reasonably be
expected to have a Material Adverse Effect on the Business or Purchaser on or
which could reasonably be expected to require substantial new capital
investments by Purchaser in the Business.
3.26 Environmental, Health and Safety Laws.
(a) Each of the Company, and it's predecessors and Affiliates has
complied with all Environmental, Health and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply. Without limiting the generality of the preceding sentence, each of the
Company, and its predecessors and Affiliates has obtained and been in compliance
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health and Safety Laws.
(b) None of the Company or its Affiliates has any Liability (and
none of the Company, and its respective predecessors and Affiliates has handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or owned
or operated any property or facility in any manner that could form the basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of the Company and its Affiliates giving
rise to any Liability) for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to any employee
or other individual, or for any reason under any Environmental, Health, and
Safety Law.
(c) All properties and equipment used in the business of the
Company; and its predecessors and Affiliates have been and are free of asbestos,
PCB's, methylene chloride, trichloroethylene, 1,2-transdichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(d) Notwithstanding anything contained herein to the contrary, the
Company shall not be deemed to be in breach of this Section 3.26 if the breach
of any of the representations and warranties contained in Section 3.26(a), (b)
and (c) does not have a Material Adverse Effect after the Closing upon the
Business or the Purchaser.
3.27 Restrictions on Common Shares. The Common Stock when issued to the
Shareholders, will constitute "restricted securities" as that term is defined in
Rule 144, as promulgated under the Securities Act of 1933, as amended (the
"Act"), and as such may not be transferred except pursuant to an effective
registration statement filed under the Act, or pursuant to a valid exemption
from the registration requirements of the Act. The Purchaser has no obligation,
whatsoever, to register the Cornmon Stock under the Act and has no present
intention to so register the Common Stock. The Common Stock is being acquired by
the Shareholders for investment purposes only, solely for their own accounts,
and without any present intention of
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participating directly or indirectly in the distribution or resale of all or
any portion of the Common Stock then being acquired. The following legend shall
be placed upon the certificate or certificates representing the Common Stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR QUALIFIED UNDER THE CALIFORNIA
CORPORATE SECURITIES LAW OF 1968, AS AMENDED, OR THE LAW OF
ANY OTHER STATE OR NATION (THE "LAWS"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND CONSTITUTE RESTRICTED SECURITIES
FOR PURPOSES OF RULE 144. THE SHARES MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT AND QUALIFIED UNDER THE LAWS,
OR IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SHARES, SUCH OFFER, SALE,
TRANSFER, PLEDGE, OR HYPOTHECATION IS IN COMPLIANCE WITH THE
ACT, THE LAWS, OR BOTH, AS THE CASE MAY BE. THE SHARES ARE
SUBJECT TO RESTRICTION ON TRANSFER AND FORFEITURE PURSUANT TO
A STOCK PURCHASE AGREEMENT, DATED EFFECTIVE JANUARY 1, 1997,
BY AND BETWEEN THE ISSUER AND THE SHAREHOLDER.
Purchaser may place a "stop transfer order" regarding the Common Stock with its
transfer agent as appropriate to comply with the requirements of this Section
3.27. The Purchaser will cooperate with the Shareholders to register the Common
Stock, to the extent such cooperation results in no expense to the Purchaser.
3.28 Financial Information. The Shareholders acknowledge that the
Purchaser has delivered to them its Prospectus dated March 5, 1996, Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995, and its
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1996. The
Shareholders have had the opportunity to review and discuss the above-referenced
documents with Purchaser and have had the opportunity to ask questions and make
inquiries of representatives of Purchaser regarding Purchaser's financial
condition, assets and operations, and any material changes in the issuer's
affairs that are not disclosed in the issuer's affairs that are not disclosed in
the documents delivered pursuant to this section, and the Shareholders have
received satisfactory answers to such questions and inquiries. The Shareholders
acknowledge that they are relying solely upon such review, investigations, and
answers in making their decisions to invest in the Purchaser and represent they
have thereby acquired all of the information they believe necessary to make an
informed decision to so invest. Each of such Shareholders hereby further
represents that he or she has such knowledge and experience in business and
financial matters that he or she is capable of evaluating the merits and risks
of investing in the Purchaser and of protecting his or her own interest in
connection with the sale and purchase of the Common Stock.
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3.29 Investment Letter. Each of the Shareholders has completed and
signed a copy of the Investor Letter attached as Exhibit 3.29 hereto, and
represents that the information pursuant thereto is true, complete, correct, and
current.
3.30 Residency. Each of the Shareholders represents that he or she is a
resident of the State of California or is otherwise not a resident or citizen of
the United States.
3.31 Disclosure. None of the representations, warranties or covenants
contained in this Agreement, nor in any Schedule or Exhibit hereto contains or
will contain an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser represents and warrants to the Shareholders with knowledge
that the Shareholders are relying upon such representations and warranties in
entering into this Agreement, and that the statements contained in this Article
IV are true, correct, complete, and current as of the date of this Agreement.
4.1 Organization and Capitalization. Purchaser is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to (a) enter
into this Agreement and to perform its obligations hereunder, (b) own, lease and
operate its properties and assets as they are now owned, leased and operated and
(c) carry on its business as now conducted.
4.2 Validity and Execution of Agreement. Purchaser has the full legal
right, capacity and power and has all requisite corporate authority and approval
required to enter into, execute and deliver this Agreement and to perform fully
its obligations hereunder. The board of directors of Purchaser has approved the
transactions contemplated pursuant to this Agreement and each of the other
documents contemplated by this Agreement. This Agreement constitutes the valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of equity.
4.3 No Conflict. Neither the execution and delivery of this Agreement
by Purchaser nor the performance by Purchaser of the transactions contemplated
hereby will: (a) violate or conflict with any of the provisions of the
Certificate of Incorporation or Bylaws of Purchaser (or similar governing
documents), (b) violate or conflict with any provisions of any Law or Order
applicable to Purchaser; or (c) require any consent or approval by or filing or
notice with any Governmental or Regulatory Body.
4.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with the Shareholders without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by any Person
against the Shareholders for a finder's fee, brokerage commission or similar
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payment, except to Global Capital Markets, Incorporated. All amounts so payable
shall be paid by the Purchaser.
4.5 Articles of Incorporation and Bylaws. The Purchaser has heretofore
delivered to the Shareholders true, correct, complete, and current copies of its
Certificate of Incorporation and Bylaws or similar governing documents of the
Purchaser as in full force and effect on the date hereof.
4.6 Delivery of Documents. The Purchaser has delivered to the
Shareholders its true, complete, and current Prospectus dated March 5, 1995, its
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1995, and
its quarterly report on Form 10-QSB for the quarter ended September 30, 1996.
Each of these documents contains the information required to be included therein
by applicable law and as to such required information do not contain any untrue
statements of material fact or omit a material fact necessary to make the
statements contained thereof not misleading. Each audited and unaudited
financial statement (and the notes relating thereto) contained in such reports
was prepared in accordance with generally accepted accounting principles
consistently applied (except as otherwise indicated therein) and fairly presents
the consolidated financial condition of Purchaser and its subsidiaries as of the
respective date thereof and the related consolidated results of operations,
stockholders' equity, and cash flows or changes in financial position, as
applicable, of Purchaser and its subsidiaries for and during the respective
period covered thereby.
4.7 Consents and Approvals. Except for Form 8-K, no consent approval or
authorization of, or declaration, filing or registration with, any third party,
including any governmental or regulatory authority, United States or foreign, is
required in connection with the execution, delivery and performance of this
Agreement by Purchaser.
4.8 Absence of Certain Changes or Events. Since the date of the
Unaudited Financial Statements, to the Purchaser's knowledge, there has been no
material adverse change in the assets, properties, business, operations, income
or condition (financial or otherwise) of the Purchaser nor is any such change
threaten, nor has there been any damage, destruction or loss which could have a
Material Adverse Effect after the Closing Date on the Purchaser, whether or not
covered by insurance, except for the acquisition of the assets and business of
the San Xxxx Division of Pen InterConnect, Inc., a Utah corporation ("Pen"),
pursuant to the Asset Purchase Agreement, dated as of November 1, 1996, by and
among Pen, the Purchaser, and Touche Electronics, Inc., a California corporation
and wholly-owned subsidiary of the Purchaser (the "Pen Acquisition"). Other than
in connection with the Pen Acquisition, the Purchaser has not (i) declared any
dividend or made any payment or other distribution with respect to its shares of
capital stock, (ii) acquired or disposed of any shares of its capital stock or
granted any options, warrants or other rights to acquire or convert any
obligation into any shares of its capital stock, (iii) sold, assigned,
transferred, conveyed or otherwise disposed of, or agreed to sell or dispose of,
a substantial portion of its assets, except for sales of inventory in the
ordinary course of business, (iv) entered into any transaction of merger or
consolidation with any other entity, or (v) agreed or entered into any
commitment to take any of the above actions.
4.9 Litigation. Except as set forth on Schedule 4.9, there are no
outstanding Orders by which the Purchaser, or any of its securities, assets,
properties or businesses are bound.
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Except as set forth on Schedule 4.9, there is no Action or Proceeding pending
or, to the knowledge of the Purchaser threatened (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance) against or
affecting the Purchaser or any of its assets, properties or businesses,
including the Business, which if adversely decided would have a Material Adverse
Effect after the Closing on the Purchaser, nor are there any facts which are
likely to give rise to any such Action or Proceeding which if adversely decided,
would have a Material Adverse Effect after the Closing on the Purchaser or the
Business.
4.10 Status of Shares. The Common Stock when issued in accordance with
the terms of this Agreement will be duly authorized, validly issued, fully paid
and nonassessable and free of liens, encumbrances or preemptive rights contained
in the Certificate of Incorporation or Bylaws of Purchaser; provided, however,
that the Common Stock may be subject to restrictions on transfer under state
and/or federal securities laws.
4.11 Disclosure. None of the representations, warranties or covenants
contained in this Agreement, nor in any Schedule or Exhibit hereto made by
Purchaser, contains or will contain any untrue statement of material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading.
ARTICLE V. CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to the Obligations of Purchaser to Complete
the Closing. The obligations of Purchaser to enter into and complete the Closing
are subject to the fulfillment at or prior to the Closing of the following
conditions, any one or more of which may be waived by Purchaser:
(a) Target Equity. Target Equity on the Closing Date shall not be
less than seven hundred forty-one thousand three hundred thirteen dollars
($741,313), computed in a manner consistent with the Company's Unaudited
Financial Statements.
(b) Representations, Warranties, and Covenants. The
representations and warranties of the Shareholders contained in this Agreement
shall be true, complete, correct, and current in all material respects.
(c) Consents, Waivers, Licenses, Filings, etc. The consents,
approvals, authorizations, licenses, registrations, declarations or filings
listed on Schedule 3.3, if any, hereto shall have been obtained or made, as the
case may be.
(d) Third Party Consents. Except as otherwise waived by
Purchaser, all consents, permits and approvals from parties to contracts or
other agreements with the Shareholders set forth on any Schedule to this
Agreement, including, but not limited to, the Assignable Contracts, and any
other material consent, permit or approval that may be required in connection
with the performance by the Shareholders of their obligations under this
Agreement or the consummation of the transactions contemplated by this Agreement
or the continuance of the Shareholders' contracts or other agreements with
Purchaser after the Closing shall have been obtained.
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(e) Injunction, etc. At the Closing, there shall not be any Order
outstanding against any party hereto or Law promulgated that prevents
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of the transactions contemplated by this
Agreement or would be likely to have any Material Adverse Effect on the Business
to be purchased hereunder.
(f) Opinion of Counsel to the Shareholders. Purchaser shall have
been provided with an opinion of the Law Offices of Xxxxx X. Xxxxxxx, counsel to
the Shareholders (the "Shareholders' Counsel"), in form and substance
satisfactory to Purchaser and dated the date of the Closing.
(g) Approval of Counsel to Purchaser. All actions and proceedings
hereunder and all documents and other papers required to be delivered by the
Shareholders hereunder or in connection with the consummation of the transaction
contemplated hereby and all other related matters shall have been approved by
Xxxxxxxxx, Parish & Xxxxxx, counsel to Purchaser (the "Purchaser's Counsel"), as
to their form and substance, which approval shall not be unreasonably withheld.
(h) Assumption of Leases. The Purchaser and the respective leasors
shall have executed a definitive agreement in form and substance satisfactory to
both parties relating to Purchaser's assumption of the Company's leases of the
space it currently occupies in connection with the Business.
(i) Company Records. The Shareholders shall have delivered to the
Purchaser all records relating to the Business, or the Company in their
possession.
(j) Resignations of Shareholders. The Shareholders shall have
delivered to the Purchaser resignations from their positions as officers and/or
directors of the Company.
5.2 Conditions Precedent to the Obligations of the Shareholders to
Complete the Closing. The obligations of the Shareholders to enter into and
complete the Closing are subject to the fulfillment on or prior to the Closing,
of the following conditions, any one or more of which may be waived by the
Company:
(a) Representations, Warranties and Covenants. The
representations, warranties and covenants of Purchaser shall be true, complete,
correct, and current in all material respects.
(b) Injunction, etc. At the Closing, there shall not be any Order
outstanding against any party hereto or Law promulgated that prevents
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of the transaction contemplated by this Agreement
or would be likely to have any Material Adverse Effect on the Business to be
purchased by Purchaser hereunder.
(C) Opinion of Counsel to Purchaser. The Shareholders shall have
been provided with an opinion of the Purchaser's Counsel, in form and substance
satisfactory to the Company and dated the date of the Closing.
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(d) Resolutions. Purchaser shall have delivered to the
Shareholders a copy of the resolution of its Board of Directors authorizing and
approving the execution of this Agreement and the consummation of the
transactions contemplated hereby.
ARTICLE VI. CLOSING
6.1 Closing; Closing-Date. The consummation of the purchase and sale of
the Shares (the "Closing") shall be held at the offices of Xxxxxxxxx, Parish &
Xxxxxx, 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxxxxxxxxx 00000, on
January 24, 1997, ("Closing Date"). In addition to complying with the conditions
set forth in Article V, the Purchaser and the Shareholders shall deliver the
following at the Closing:
(a) Delivery of Purchase Price. The Purchaser shall deliver to
the Shareholders the Cash Payment, and a copy of the letter to American Stock
Transfer, the Purchaser's transfer agent, which letter shall direct American
Stock Transfer, to deliver the Common Stock to the Company in accordance with
Section 2.2(b) and 2.2(c) hereof.
(b) Delivery of the Shares. The Shareholders shall deliver to
the Purchasers certificates representing the Shares together with stock powers,
in form and substance satisfactory to the Purchaser, executed by each of the
Shareholders and transferring all right, title, and interest to the Shares to
the Purchaser, free and clear of all liens and encumbrances.
ARTICLE VII. POST-CLOSING COVENANTS
The parties covenant to take the following actions after the Closing
Date:
7.1 Further Information. Following the Closing, each party will afford
to the other party, its counsel and its accountants, during normal business
hours, reasonable access to the books, records and other data of the Company or
relating to the Business, in its possession with respect to periods prior to the
Closing and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party (a) to facilitate
the investigation, litigation and final disposition of any claims which may have
been or may be made against any party or its Affiliates and (b) for any other
reasonable business purpose.
7.2 Post-Closing Assistance. The Shareholders, on the one hand, and
Purchaser, on the other hand, will provide each other with such assistance as
may reasonably be requested in connection with the preparation of any Tax
Return, any audit or other examination by any taxing authority, or any judicial
or administrative proceedings relating to liability for Taxes, and each will
retain and provide the requesting party with any records or information that may
be reasonably relevant to such return, audit or examination, proceedings or
determination. The party requesting assistance shall reimburse the other party
for such assistance at an hourly rate equal to that paid to such party on the
Closing Date and for reasonable out-of-pocket expenses incurred in providing
such assistance. Any information obtained pursuant to this Section 7.2 or
pursuant to any other Section hereof providing for the sharing of information or
the review of any Tax Return or other schedule relating to Taxes shall be kept
confidential by the parties hereto.
7.3 Non-Compete.
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(a) Covenants Against Competition. In consideration for the payment by
Purchaser of the Purchase Price on the Closing Date, the Shareholders agree that
they will not, at anytime within the five (5) year period immediately following
the Closing Date, directly or indirectly engage in, or have any interest in any
person, firm, corporation, or business that engages in, in any way, metal
stamping, and will not sell to or solicit any customers to which the Company is
currently selling metal stamping services, in any of the California counties of
Alameda, Contra Costa, Irvine, Los Angeles, Marin, Napa, Orange, Riverside, San
Diego, San Francisco, San Mateo, Santa Xxxxx, Santa Cruz, Solano, Sonoma, and
Ventura.
The Shareholders further agree not to divulge, communicate, use to the
detriment of Purchaser or for the benefit of any other person or persons, or
misuse in anyway, any confidential information or trade secrets of the Company,
including personnel information, secret processes, knowhow, customer lists,
recipes, formulas, or other technical data. The Shareholders acknowledge and
agree that any information or data they have acquired on any of these matters or
items was received in confidence and as fiduciaries of Purchaser.
(b) Rights and Remedies Upon Breach. If the Shareholders breach, or
threaten to commit a breach of, any of the provisions of this Section 7.3 (the
"Restrictive Covenants"), Purchaser shall have the following rights and remedies
(upon compliance with any necessary prerequisites imposed by law upon the
availability of such remedies), each of which rights and remedies shall be
independent of the other and severally enforceable and shall not be affected by
the provisions of Article VI, and all of which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to
Purchaser under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced (without posting any bond) by any court having equity
jurisdiction, including, without limitation, the right to an entry against the
Shareholders of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether
or not then continuing, of such covenants, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury to Purchaser
and that money damages will not provide adequate remedy to Purchaser.
(ii) The right and remedy to require the Shareholders to
account for and pay over to Purchaser all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by such person the result of any transactions constituting a breach of
any of the Restrictive Covenants, and such person shall account for and pay over
such Benefits to Purchaser.
(c) Severability of Covenants. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
(d) Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such
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provisions and, in its reduced form, such provision shall then be enforceable
and shall be enforced.
(e) Termination of Xx. Xxxxxxx by the Purchaser without Cause. If
the employment of Xx. Xxxxxxx is terminated by the Purchaser without cause
pursuant to the Employment Agreement, this Section 7.3 will terminate.
ARTICLE VIII. SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements of the Shareholders
and Purchaser contained in this Agreement will survive the Closing.
8.2 Indemnification of Purchaser. Subject to the limitations contained
in this Article VII, the Shareholders agree to indemnify, defend and hold
harmless Purchaser and its directors, officers, shareholders, partners,
employees, successors and assigns from and against any and all losses,
Liabilities (including punitive or exemplary damages and fines or penalties and
any interest thereon), expenses (including fees and disbursements of counsel and
expenses of investigation and defense), claims, liens or other obligations of
any nature whatsoever (hereinafter individually, a "Loss" and collectively,
"Losses") which, directly or indirectly, arise out of, result from or relate to
(a) any inaccuracy in or any breach of any representation and warranty, or any
breach of any covenant or agreement, of the Shareholders contained in this
Agreement or in any document or other papers delivered pursuant to this
Agreement, (b) any liability or obligation of the Shareholders which is not a
Company Debt, (c) the Shareholders' misappropriation of trade secrets, or its
infringement or alleged infringement of any patent, copyright, trademark,
servicemark, or any other proprietary right of any Person, (d) any claims which
arise from the operations of the Business by the Shareholders prior to the
Closing Date, (e) any obligations of the Shareholders for claims under ERISA,
and (f) violations of the Environmental, Health and Safety Laws prior to the
Closing Date. In no event shall the liability of the Shareholders exceed that
which they would have incurred had they remained the owners of the Company.
Notwithstanding the foregoing, if Target Equity is calculated on the date ninety
(90) days after the Closing Date to be less than seven hundred forty-one
thousand three hundred thirteen dollars ($741,313), as computed in a manner
consistent with the Company's Unaudited Financial Statements (but excluding all
accounts receivable on the Closing Date from such computations), the Common
Stock holdback shall be reduced proportionally, dollar for dollar, by the amount
by which Target Equity is less than seven hundred forty-one thousand three
hundred thirteen dollars ($741,313). Thus, there shall be a twenty-three
thousand four hundred forty-eight dollar ($23,448) "cushion" below Target Equity
to allow for uncollectable accounts receivable that originated before the
Closing Date. Such reduction shall be computed using only the book values set
forth on the Unaudited Financial Statements.
8.3 Indemnification of the Shareholders. Subject to the limitations
contained in this Article VII, Purchaser agrees to indemnify, defend and hold
harmless the Shareholders from and against any and all Losses which, directly or
indirectly, arise out of, result from or relate to (a) any inaccuracy in or any
breach of any representation and warranty, or any breach of any covenant or
agreement, of Purchaser contained in this Agreement or in any documents or other
papers delivered pursuant to this Agreement, (b) any Assumed Liability assumed
by Purchaser
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pursuant to Section 2.2, (c) operations of the Business by the Purchaser
subsequent to the Closing Date, and (d) violations of the Environment, Health
and Safety laws subsequent to the Closing Date.
8.4 Method of Asserting Claims. The party making a claim under this
Article VII is referred to as the "Indemnified Party" and the party against whom
such claims are asserted under this Article VII is referred to as the
"Indemnifying Party." All claims by any Indemnified Party under this Article VII
shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall with reasonable promptness notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of such
claim and demand; the "Claim Notice"); provided, however, that any failure to
give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party, upon request of the
Indemnified Party, shall retain counsel (who shall be reasonably acceptable to
the Indemnified Party) to represent the Indemnified Party and shall pay the
reasonable fees and disbursements of such counsel with regard thereto' provided,
however, that any Indemnified Party is hereby authorized prior to the date on
which it receives written notice from the Indemnifying Party designating such
counsel, to retain counsel, whose fees and expenses shall be at the expense of
the Indemnifying Party, to file any motion, answer or other pleading and take
such other action which it reasonably shall deem necessary to protect its
interests or those of the Indemnifying Party until the date on which the
Indemnified Party receives such notice from the Indemnifying Party. After the
Indemnifying Party shall retain such counsel, the Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (x) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (y) the named parties of any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The Indemnifying
Party shall not, in connection with any proceedings or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one such
firm for the Indemnified Party (except to the extent the Indemnified Party
retained counsel to protect its (or the Indemnifying Party's) rights prior to
the selection of counsel by the Indemnifying Party.) If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand which the
Indemnifying Party defends. A claim or demand may not be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party
(which consent will not be unreasonably withheld) unless, as part of such
settlement, the Indemnified Party shall receive a full and unconditional release
reasonably satisfactory to the Indemnified Party.
(b) In the event any Indemnified Party shall have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against
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or sought to be collected from it by a third party, the Indemnified Party shall
send a Claim Notice with respect to such claim to the Indemnifying Party.
(c) After delivery of a Claim Notice, so long as any right to
indemnification exists pursuant to this Article VII, the affected parties each
agree to retain all Books and Records related to such Claim Notice. In each
instance, the Indemnified Party shall have the right to be kept fully informed
by the Indemnifying Party and its legal counsel with respect to any legal
proceedings. Any information or documents made available to any party hereunder
and designated as confidential by the party providing such information or
documents and which is not otherwise generally available to the public and not
already within the knowledge of the party to whom the information is provided
(unless otherwise covered by the confidentiality provision of any other
agreement among the parties hereto, or any of them), and except as may be
required by applicable law, shall not be disclosed to any third Person (except
for the representatives of the party being provided with information, in which
event the party being provided with the information shall request its
representatives not to disclose any such information which it otherwise required
hereunder to be kept confidential).
(d) The Indemnification of the Purchaser by the Shareholders
shall be limited to only those matters specifically provided in Section 8.3
above; Purchaser hereby releases, discharges and acquits the Shareholders from
any other damage, claim, liability, deficiency, loss, cost or expense, known or
unknown incurred by Purchaser arising out of or resulting from any other matter
not specifically covered or provided in Section 8.2 above.
(e) The Indemnification of the Shareholders by the Purchaser
shall be limited to only those matters specifically provided in Section 8.2
above; the Shareholders hereby release, discharge and acquit the Purchaser from
any other damage, claim, liability, deficiency, loss, cost or expense, known or
unknown incurred by the Shareholders arising out of or resulting from any other
matter not specifically covered or provided in Section 8.2 above.
ARTICLE IX. MISCELLANEOUS
9.1 Expenses. Each of the parties hereto shall pay its own expenses
(including, without limitation, attorney's and accountants' fees and
out-of-pocket expenses) incidental to this Agreement and the transactions
contemplated hereby.
9.2 Further Assurances. At any time and from time to time after the
Closing Date at the request of Purchaser, and without further consideration, the
Shareholders will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such other action as Purchaser
may reasonably deem necessary or desirable in order to put Purchaser in actual
possession and operating control of the Business and to assist Purchaser in
exercising all rights with respect thereto.
9.3 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telexed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission and
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confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 8.3):
If to the Purchaser:
TMCI Electronics, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx, CEO
With a copy to:
Xxxxxxxxx, Parish & Xxxxxx
000 Xxxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
If to the Shareholders:
Xxxxxxx Xxxxxxx
00000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxx & Green
00000 Xxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
9.4 Publicity. No public release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Purchaser and the Shareholders; provided, however, that
either party hereto may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable efforts to advise the other party prior to making the disclosure).
9.5 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
9.6 Waivers and Amendments. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the party in exercising any right, power
or privilege hereunder shall operate as a
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waiver thereof The rights and remedies of any parties based upon, arising out
of or otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant or agreement
contained in this Agreement (or in any other agreement between the parties as to
which there is no inaccuracy or breach).
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of law.
9.8 Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable by any party hereto without
the prior written consent of the other parties hereto except by operation of law
and any other purported assignment shall be null and void; however, that
Purchaser may assign this Agreement without the consent of the other parties
hereto to any lender to Purchaser.
9.9 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
9.10 Counterparts. This Agreement may be executed by the parties hereto
by facsimile transmission in separate counterparts, each of which when so
executed and delivered shall be an original, and all such counterparts shall
together constitute one and the same instrument. Each counterpart may constitute
a number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
9.11 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.12 Effect of Disclosure on Schedules. Any item disclosed on any
Schedule to this Agreement shall only be deemed to be disclosed in connection
with (a) the specific representation and warranty to which such Schedule is
expressly referenced, (b) any specific representation and warranty which
expressly cross-references such Schedule and (c) any specific representation and
warranty to which any other Schedule to this Agreement is expressly referenced
if such other Schedule expressly cross-references such Schedule.
9.13 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
9.14 Severability of Provisions. If any provision or any portion of any
provision of this Agreement or the application of such provision or any portion
thereof to any Person or circumstance, shall be held invalid or unenforceable,
the remaining portion of such provision and the remaining provisions of this
Agreement or the application of such provision or portion of
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such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
9.15 Arbitration. Any dispute arising under or pursuant to or affecting
the subject matter of this Agreement shall be submitted for resolution to
Judicial Arbitration and Mediation Services ("JAMS") in the County of Santa
Clara, California. The parties shall retain the right to a private trial by jury
before a JAMS employee. Such employee shall be a former judge of any court of
California. Such right to trial by jury shall apply only to the extent such
right would apply absent this Section 9.15. Discovery and other procedural
matters shall be governed as though the proceeding were an arbitration. The
purpose of this Section 9.15 is to provide a mechanism to quickly and
inexpensively resolve all disputes that may arise under this Agreement. Any
judgment upon the award may be confirmed and entered in any court having
jurisdiction thereof. The arbitrator(s) shall be required to, in all
determinations, apply California law. Further, the arbitrator(s) are afforded
the jurisdiction to provide and order all provisional remedies, including,
without limitation, injunctive relief, writs for recovery or possession or such
similar relief as may be necessary to protect the interests of either of the
parties or their property rights. In the event that it is determined that the
arbitrator(s) do not have the jurisdiction to grant those remedies conferred
upon them by this provision and requested by the parties, then such remedies
shall be reserved to a court of competent jurisdiction. The Purchaser and the
Shareholders shall divide evenly between themselves all reasonably anticipated
fees and other expenses associated with such arbitration, before submitting any
such matter to arbitration, and each shall make any and all reasonably
anticipated payments in equal proportion to the other party, before submitting
any such matter to arbitration. The parties stipulate that the JAMS employee may
be appointed as a judge pro tempore of the Superior Court of Santa Xxxxx County
if required to carry out the terms of this provision.
[The remainder of this page has been left blank intentionally.]
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AUTHORIZED SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMCI ELECTONICS, INC. SHAREHOLDERS
---------------------------- ---------------------------
Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx
Chief Executive Officer
---------------------------
Xxxxxxx Xxxxxxx,
Trustee of the
Xxxxxxx and Xxxxx
Xxxxxxx Living Trust
dated November 14, 1989
---------------------------
Xxxxx Xxxxxxx,
Trustee of the
Xxxxxxx and Xxxxx
Xxxxxxx Living Trust
dated November 14, 1989
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AUTHORIZED SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TMCI ELECTRONICS, INC. SHAREHOLDERS
---------------------------------- ------------------------
Xxxxxxx Xxxxx, Xxxxxxx Xxxxxxx
Chief Executive Officer
------------------------
Xxxxxxx Xxxxxxx,
Trustee of the
Xxxxxxx and Xxxxx
Xxxxxxx Living Trust
dated November 14, 1989
------------------------
Xxxxx Xxxxxxx,
Trustee of the
Xxxxxxx and Xxxxx
Xxxxxxx Living Trust
dated November 14, 1989
26
