ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement"), is entered into
effective July 15, 1998, among ACCURATE THERMOPLASTICS, INC., an Arizona
corporation (the "Company"), DIAMOND EQUITIES, INC., a Nevada Corporation
("Diamond"), PRECISION PLASTICS, INC., a Nevada Corporation ("Precision"), a
majority-owned subsidiary of Diamond, and Xxx X. Xxxxxxxx who is the holder of
all of the capital stock of the Company (the "Selling Shareholder").
RECITALS:
WHEREAS, the Company is engaged in the plastic injection molding business;
and
WHEREAS, Diamond, through Precision, desires to purchase and the Company
desires to sell all of its right, title and interest in and to all or
substantially all of the tangible and intangible assets utilized in the
Company's business as now conducted (die "Assets").
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company, Diamond, Precision and the Selling Shareholder hereby agree as
follows:
COVENANTS:
Subject to the terms and conditions of this Agreement, on the Closing Date,
as defined in Paragraph 3, "Closing Date," the Company shall sell, convey,
transfer and assign to Precision and Precision shall purchase from the Company,
all of the Company's right, title and interest in and to the Assets, as
described in Schedule 1.1, accounts receivable as of July 15, 1998 are set forth
in Schedule 1. 1. 1. Precision shall assume the liabilities set forth in
Paragraph 1, "Assumption of Liabilities" and pay the consideration set forth in
Xxxxxxxxx 0, "Xxxxxxxx Price and Payment for Assets," to purchase the Assets.
All of the Exhibits and Schedules referred to in this Agreement are made a part
of this Agreement by this reference.
1. ASSUMPTION OF LIABILITIES. Subject to the terms and conditions of this
Agreement, Precision shall assume certain specified liabilities and obligations
of the Company and the Selling Shareholder as set forth in Schedule 2. 1, all
outstanding purchase orders, all accounts payable as of July 15, 1998, as set
forth in Schedule 2. 1. 1, and all liabilities incurred in the ordinary course
of business, including employment responsibilities for the Company's employees,
who become employees of Precision with the execution of this Agreement . Except
as set forth in Paragraph 1, Precision shall not assume any other liabilities or
obligations in connection with its purchase of the Assets
2. PURCHASE PRICE AND PAYMENT FOR ASSETS. Precision will acquire the Assets
in consideration for payment of Five Hundred Sixty Thousand Dollars ($560,000)
consisting of cash and a promissory note (the "Note") as set forth in Paragraph
2.1, and in consideration for the assumption by Precision of certain
-1-
liabilities as set forth in Paragraph 1. The purchase price ("Purchase Price")
shall be allocated among the Assets according to Schedule 2.2. The Purchase
Price will be subject to reduction as set forth in Paragraph 2.1.2.
2.1. Precision will pay the cash and issue the Note to the Selling
Shareholder and the Company as follows:
2.1.1. Three Hundred Seventy Five Thousand Dollars ($375,000) in cash
in the form of two cashiers checks, one in the amount of $300,000 made payable
to Xxxxxxxx Xxxxxxxxxxx and one in the amount of $75,000 made payable to the
Company; and
2.1.2. The Note, attached hereto as Exhibit A, in the principal amount
of One Hundred Eighty Five Thousand Dollars ($185,000) bearing interest at the
rate of 8.0% per annum. The principal and accrued interest thereon will be due
and payable in one installment of One Hundred Five Thousand Dollars ($105,000)
and one installment of Eighty Thousand Dollars ($80,000). The first payment will
be made Ninety (90) days from the Closing ("Initial Maturity Date") and the
second payment will be made One Hundred Eighty (180) days from the Closing
("Final Maturity Date"). The Note will be secured by the Assets. The security
agreement securing the Note ("Security Agreement") will be in the form set forth
as Exhibit B. The Purchase Price will be reduced and the principal amount of the
Note will be subject to offset or reduction, as specified in the Note, to the
extent any pre-existing security interests, liens, encumbrances, mortgages or
charges of any nature whatsoever remain outstanding on the Final Maturity Date
(or if a court of competent jurisdiction finds liability on behalf of Precision
or Diamond for any amounts owed to Xxxxx Xxxxxxx relating to the December 22,
1995 Agreement), and if Precision agrees to and does satisfy any such liability.
2.2. The Company will transfer title to the Assets to Precision
subject to any pre-existing security interests, liens, encumbrances, mortgages,
or charges as disclosed on Schedule 2.1 on the Closing. Further, the Company
shall maintain its Corporate Records within Maricopa County for two years after
the Closing. The term "Corporate Records" shall mean any and all records kept by
the Company in its current and prior operations, including, but not limited to,
the financial records, inventory records, all magnetic media, any transferable
licenses issued by the federal government or any state or municipal government
acquired by the Company in its current or prior operations and its tax returns.
3. CLOSING DATE.
3.1. As of the execution of this Agreement (the "Closing") the following
shall occur or shall have occurred:
3.1.1 Consent of the Selling Shareholder and the Company to the
transactions contemplated in this Agreement;
3.1.2 Receipt of a lease in a form satisfactory to Precision for the
building in which the Assets are located;
-2-
3.1.3. Satisfaction of all conditions to closing set forth in
Paragraph 6, "Conditions Precedent to Obligations of Diamond and Precision," and
Paragraph 7, "Conditions Precedent to the Obligations of the Company and the
Selling Shareholder."
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDER. The acceptance of the Purchase Price by the Company and the Selling
Shareholder shall constitute an affirmation by the Company and the Selling
Shareholder of the truth, as of the Closing, of the representations and
warranties made by the Selling Shareholder in this Agreement and the Selling
Shareholder and the Company represent and warrant to Diamond and Precision that:
4.1. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized and existing in good standing under the laws of the State of Arizona.
The Company has full corporate power and authority to carry on its business as
now conducted and to own or lease and operate the properties and assets now
owned or leased and operated by it. The Company is duly qualified to transact
business in the State of Arizona and in all states and jurisdictions in which
the business or ownership of its property makes it necessary so to qualify
(other than jurisdictions in which the nature of the property owned or business
conducted, when considered in relation to the absence of serious penalties,
renders qualification as a foreign corporation unnecessary as a practical
matter).
4.2. CAPITALIZATION. The authorized capital stock of the Company
consists solely of 400,000 shares of Common Stock, $1 par value per share, of
which 1,750 shares are issued and outstanding ("Company Shares"), all of which
shares are owned by the Selling Shareholder.
4.3. NO SUBSIDIARIES. The Company has no subsidiaries and does not own
five percent (5 %) or more of the securities having voting power of any
corporation (or would own such securities in such amount upon the closing of any
existing purchase obligations for securities).
4.4. OWNERSHIP AND AUTHORITY. Except as set forth in Schedule 4.4, the
Company is the sole owner of the Assets and has the requisite power and
authority to own and transfer the Assets, to enter into this Agreement and to
carry out the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company has been duly authorized by its
Board of Directors. This Agreement is valid and binding upon the Company, and is
enforceable against the Company in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium,
receivership or other similar laws relating to or affecting creditors' rights
generally. The execution, delivery and performance of this Agreement by the
Company will not result in the violation or breach of any term or provision of
charter instruments applicable to the Company or constitute a material default
under any indenture, mortgage, deed of trust or other contract or agreement to
which the Company is a party or by which the Company or the Assets are bound or
will not cause the creation of a lien or encumbrance on the Assets except that
contemplated under the Security Agreement.
4.5. LIABILITIES AND OBLIGATIONS. Except to the extent set forth in
Schedule 4.5, the Company has no liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) secured by a pledge or a
lien on the Assets. Precision shall assume only those obligations set forth in
Paragraph 1. Any obligations listed in Schedule 4.5 shall be discharged and
satisfied in full by the Company as of the Closing.
-3-
4.6. FINANCIAL STATEMENTS. The Financial Statements (i) have been prepared
from the books and records of the Company by Wheelwright Xxxxxxxx PLC, an
independent certified public accounting firm, (ii) fairly and accurately present
the financial condition of the Company as of the dates thereof in conformity
with federal tax accounting principals consistently applied, and (iii) contain
and reflect all necessary adjustments for fair and accurate presentation of the
financial condition as of such dates. Except as set forth in Schedule 4.6, there
has not been any change between the date of the Financial Statements (June 30,
1998) and the date of this Agreement which has had or will have a material
adverse effect on the financial position or results of operations of the
Company. Except as and to the extent reflected or reserved against in such
Financial Statements, or otherwise expressly disclosed therein, or except as
disclosed in Paragraph 1, the Company has no liabilities or obligations,
contingent or otherwise, of a nature required to be reflected in the Financial
Statements in accordance with federal tax accounting principles consistently
applied.
4.7. ABSENCE OF CERTAIN CHANGES. Except as disclosed on the Schedules
hereto, during the period from June 30, 1998 through and including the Closing,
the Company has not:
4.7.1. Suffered any material adverse change affecting its Assets,
liabilities, financial condition or business;
4.7.2. Made any increase in the compensation payable or to become
payable to any of its employees or agents except for increases which have
historically been made in the ordinary course of business, or made any bonus
payments, except for the bonuses which have historically been made in the
ordinary course of business and those approved by Diamond, or compensation
arrangements to or with any of its employees or agents, whether direct or
indirect;
4.7.3. Paid or declared any dividends, distributions or other payments
due or owing to the Selling Shareholder which will result in a reduction of the
book value of the Company, calculated as of June 30, 1998 in accordance with
federal tax accounting principles consistently applied, prior to or as of the
Closing;
4.7.4. Sold or transferred any of its assets or canceled any
indebtedness or claims owing to it, except in the ordinary course of business
and consistent with its past practices;
4.7.5. Sold, assigned or transferred any formulas, inventions,
patents, patent applications, trademarks, trade names, copyrights, licenses,
computer programs or software, know-how or other intangible assets;
4.7.6. Amended or terminated any contract, agreement or license to
which it is a party otherwise than in the ordinary course of business or as may
be necessary or appropriate for the consummation of the transactions described
herein;
4.7.7. Borrowed any money or incurred, directly or indirectly (as a
guarantor or otherwise), any indebtedness in excess of $2,500, except in the
ordinary course of business and consistent with its past practices;
-4-
4.7.8. Except for the items listed on Schedule 4.5, discharged or
satisfied any lien or encumbrance or paid any obligation or liability (absolute
or contingent), other than current liabilities shown in the Financial Statements
or current liabilities incurred since such date in the ordinary course of
business, consistent with its past practices;
4.7.9. Mortgaged, pledged or subjected to lien, charge or other
encumbrance any of its Assets, except in the ordinary course of business and
consistent with its past practices; or
4.7.10. Entered into or committed to any other transaction other than
in the ordinary course of business, consistent with past practices or as may be
necessary or appropriate for the consummation of the transactions described
herein.
4.8. TAXES. The Company (and any predecessor corporation or partnership as
to which either of them is the transferee or successor) has timely filed, or has
timely secured an extension and will (within the permitted extension) file, all
tax returns, including federal, state, local and foreign tax returns, tax
reports and forms, as to which the due date for filing is prior to the Closing;
has reported all reportable income on such returns; has adopted and followed in
the preparation of such returns methods of accounting accepted by law, and has
not changed any methods of accounting without compliance with procedures
required by law; has not deducted any expenses or charges or claimed any credits
which are not allowable; and except as set forth in Schedule 4.8. 1, has paid,
or accrued and reserved for, all taxes, penalties and interest shown to be due
or required to be paid pursuant to the returns as filed, or as adjusted pursuant
to amendment or correction. The Company shall also provide copies of all federal
and state income and sales tax returns filed, FICA and state income taxes
withholding returns filed and evidence of payment of such taxes as listed in
Schedule 4.8.2 hereto. The Selling Shareholder has (i) paid or will pay by the
Closing any property taxes owed with respect to the Assets through the Closing;
and (ii) no knowledge of any deficiency or assertion of any deficiency relating
to property taxes on the Assets. No examination, audit, or inquiry of any tax
return, federal, state or otherwise of the Company is currently in progress and
neither the Company nor the Selling Shareholder has received notice of intent to
commence any inquiry, audit or examination of any tax return from any taxing
authority. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of the Company.
4.9. ASSETS. The Assets are located solely in the state of Arizona. Except
as listed on Schedule 4.9, the Assets are either in good working order and
condition or are marketable and will be delivered in the same state to Precision
on the Closing.
4.10. TITLE TO THE ASSETS. The Company has good and marketable title to all
of the Assets, free and clear of all security interests, liens, encumbrances,
mortgages or charges of any nature whatsoever other than those liabilities
disclosed on Schedule 2. 1. Any security interests, liens, encumbrances,
mortgages or charges not set forth in Schedule 2.1 shall be discharged in full
on or before the date of final payment under the Note ("Final Maturity Date")
and evidenced by UCC Releases delivered by the Company on the Final Maturity
Date.
4.11. ACCOUNTS RECEIVABLE. The Company is aware of no information that the
amount of all accounts receivable, unbilled invoices and other debts due as
recorded in the records and books of account of the Company as being due to the
Company as of the Closing (less the amount of any provision or reserve therefor
made in the records and books of the account of the Company) will not be good
and
-5-
collectible in full in the ordinary course of business in accordance with past
practices; and none of such accounts receivable or other debts is or will at the
Closing be subject to any counterclaim or offset except to the extent of any
such provision or reserve. There have been no material adverse changes since
June 30, 1998 in the amount of accounts receivable or other debts due the
Company or the allowances with respect thereto, or accounts payable of the
Company from that reflected in the Financial Statements.
4.12. MATERIAL DOCUMENTS. Set forth in Schedule 4.12 is a complete list of
all material documents to which the Company is a party. All such documents
listed on and attached to Schedule 4.12 are valid, enforceable and accurate and
complete copies of such material documents (or, with the consent of Precision,
forms thereof) as have been requested by Precision have been provided to the
Precision. Except as disclosed in Schedule 4.12, the Company is not or will not
be, merely with the passage of time, in default under any such material document
nor is there any requirement for any of such material documents to be novated or
to have the consent of the other contracting party in order for such material
documents to be valid, effective and enforceable by Precision after the Closing
as it was immediately prior thereto.
4.13. INTELLECTUAL PROPERTIES. The Company has no interest in and owns no
domestic and foreign letters, patent, patents, patent applications, patent
licenses, software licenses and know how licenses, trade names, trademarks,
copyrights, unpatented inventions, service xxxx registrations and applications
and copyright registrations and applications owned or used by the Company in the
operation of its business (collectively, the "Intellectual Property").
4.14. NO DEFAULT. Except as provided on Schedule 4.14, the Company and the
Selling Shareholder are not in default under any provision of any material
contract, commitment, or agreement respecting the Company, the Assets or the
capital stock of the Company to which the Company or the Selling Shareholder are
parties or by which they are bound.
4.15. LITIGATION. Except as set forth in Schedule 4.15, there are no
actions, claims or proceedings pending or threatened before any court,
administrative agency or governmental body against the Company, the Assets, or
the Company's employees which may have a material adverse effect on the Company,
the Assets, or the Company's financial condition.
4.16. EMPLOYEES. Schedule 4.16 hereto sets forth the name and current
monthly salary and any accrued benefit for each employee of the Company as of
the Closing.
4.17. COMPLIANCE WITH LAWS. The Company has conducted and is continuing to
conduct its business in compliance with, and is in compliance with, all
applicable statutes, orders, rules and regulations promulgated by governmental
authorities relating in any respect to its operations, conduct of business or
use of properties, including, without limitation, any applicable statute, order,
rule or regulation relating to (i) wages, hours, hiring, nondiscrimination,
retirement, benefits, pensions, working conditions, and worker safety and
health; (ii) air, water, toxic substances, noise, or solid, gaseous or liquid
waste generation, handling, storage, disposal or transportation; (iii) zoning
and building codes; (iv) the production, storage, processing, advertising, sale,
distribution, transportation, disposal, use and warranty of products; or (v)
trade and antitrust regulations. The execution, delivery and performance of this
Agreement by the Selling Shareholder and the Company and the consummation by the
Selling Shareholder and the Company of the transactions contemplated by this
Agreement will not, separately or jointly,
-6-
violate, contravene or constitute a default under any applicable statutes,
orders, rules and regulations promulgated by governmental authorities or cause a
lien on any property used, owned or leased by the Company to be created
thereunder. There are no proposed changes in any applicable statutes, orders,
rules and regulations promulgated by governmental authorities that would cause
any representation or warranty contained in this Paragraph 4.17 to be untrue or
have an adverse effect on its operations, conduct of business or use of
properties.
4.18. FILINGS. The Company and the Selling Shareholder have made all filings
and reports required under all local, state and federal laws with respect to its
business and of any predecessor entity or partnership, except filings and
reports in those jurisdictions in which the nature of the property owned or
business conducted, when considered in relation to the absence of serious
penalties, renders the required filings or reports unnecessary as a practical
matter.
4.19. CERTAIN ACTIVITIES. The Company has not, directly or indirectly,
engaged in or been a party to any of the following activities:
4.19.1 Bribes, kickbacks or gratuities to any person or entity,
including domestic or foreign government officials or any other payments to any
such persons or entity, whether legal or not legal, to obtain or retain business
or to receive favorable treatment of any nature with regard to business
(excluding commissions or gratuities paid or given in full compliance with
applicable law and constituting ordinary and necessary expenses incurred in
carrying on its business in the ordinary course);
4.19.2 Contributions (including gifts), whether legal or not legal,
made to any domestic or foreign political party, political candidate or holder
of political office;
4.19.3 Holding of or participation in bank accounts, funds or pools of
funds created or maintained in the United States or any foreign country, without
being reflected on the corporate books of account, or as to which receipts or
disbursements therefrom have not been reflected on such books, the purpose of
which is to obtain or retain business or to receive favorable treatment with
regard to business;
4.19.4 Receiving or disbursing monies, the actual nature of which has
been improperly disguised or intentionally misrecorded on or improperly omitted
from the corporate books of account;
4.19.5 Paying fees to domestic or foreign consultants or commercial
agents which exceed the reasonable value of the ordinary and customary
consulting and agency services purported to have been rendered;
4.19.6 Paying or reimbursing (including gifts) personnel of the
Company for the purpose of enabling them to expend time or to make contributions
or payments of the kind or for the purposes referred to in Paragraphs 4.19.1
through 4.19.5 above;
4.19.7 Participating in any manner in any activity which is illegal
under the international boycott provisions of the Export Administration Act, as
amended, or the international boycott provisions of the Internal Revenue Code,
or guidelines or regulations thereunder; and
-7-
4.19.8 Making or permitting unlawful charges, mischarges or defective
or fraudulent pricing under any contract or subcontract under a contract with
any department, agency or subdivision thereof, of the United States government,
state or municipal government or foreign government.
4.20. EMPLOYMENT RELATIONS. The Company is in compliance with all federal,
state or other applicable laws, domestic or foreign, respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and has not and is not engaged in any unfair labor practice which would result
in a material adverse effect on the Company; no unfair labor practice complaint
against the Company is pending before the National Labor Relations Board; there
is no labor strike, dispute, slow down or stoppage actually pending or
threatened against or involving the Company; no labor representation question
exists respecting the employees of the Company; no grievance which might have an
adverse effect upon the Company or the conduct of its business exists; no
arbitration proceeding arising out of or under any collective bargaining
agreement is currently being negotiated by the Company; and the Company has not
experienced any material labor difficulty during the last three (3) years.
4.21. INSURANCE COVERAGE. The policies of fire, liability or other forms of
insurance of the Company are described in Schedule 4.21.
4.22. CHARTER AND BYLAWS. The Company has heretofore delivered to Precision
true, accurate and complete copies of the Articles of Incorporation and Bylaws
of the Company, together with all amendments to each of the same as of the date
hereof.
4.23. CORPORATE MINUTES. The minute books of the Company made available to
Precision at the Closing are the correct and only such minute books and do and
will contain complete and accurate records of any and all proceedings and
actions at all meetings, including written consents executed in lieu of meetings
of its shareholders, Board of Directors and committees thereof through the
Closing. The stock records of the Company delivered to Precision at the Closing
are the correct and only such stock records and accurately reflect all issues
and transfers of record of the capital stock of the Company.
4.24. DEFAULT ON INDEBTEDNESS. The Company is not in monetary default or in
material default in any other respect under any evidence of indebtedness for
borrowed money.
4.25. INDEBTEDNESS. Except as described in Schedule 4.25, the Selling
Shareholder and any corporation or entity with which he is affiliated are not
indebted to the Company, and the Company has no indebtedness or liability to the
Selling Shareholder or any corporation or entity with which he is affiliated.
4.26. AGREEMENTS, JUDGMENT AND DECREES AFFECTING THE COMPANY AND THE SELLING
SHAREHOLDER. The Company and the Selling Shareholder jointly and severally
represent and warrant that the Selling Shareholder and the Company are not
subject to any agreement, judgment or decree adversely affecting their or its
ability to enter into this Agreement, to consummate the transactions
contemplated herein, or, to continue as employees or consultants of the Company
after Closing. The Company and the Selling Shareholder further represent and
warrant that there are no laws or regulations prohibiting the consummation of
the transactions contemplated by this Agreement.
-8-
4.27. GOVERNMENTAL APPROVALS. No consent, approval or authorization of, or
notification to or registration with, any governmental authority, either
federal, state or local, is required in connection with the execution, delivery
and performance of this Agreement by the Selling Shareholder or the Company.
4.28. COMPLETENESS OF REPRESENTATIONS AND SCHEDULES. The Schedules hereto,
where applicable to the Selling Shareholder and the Company, completely and
correctly present in all material respects the information required by this
Agreement. This Agreement, the certificates to be delivered by the Company and
the Selling Shareholder at the Closing, the Schedules and the representations
and warranties contained in this Paragraph 4, and the documents and written
information pertaining to the Company furnished to Precision or its agents by or
on behalf of the Selling Shareholder or the Company, do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make this Agreement, or such certificates, schedules, documents or written
information not misleading.
5. REPRESENTATIONS AND WARRANTIES OF DIAMOND AND PRECISION. Diamond and
Precision represent and warrant to the Selling Shareholder and the Company that:
5.1. ORGANIZATION AND GOOD STANDING.
5.1.1. Precision is a corporation duly organized and existing in good
standing under the laws of the State of Nevada. Precision has full corporate
power and authority to carry on its business as now conducted. Precision is duly
qualified to transact business in the States of Arizona and Nevada and in all
states and jurisdictions in which the business or ownership of the Assets makes
it necessary so to qualify (other than jurisdictions in which the nature of the
property owned or business conducted, when considered in relation to the absence
of serious penalties, renders qualification as a foreign corporation unnecessary
as a practical matter).
5.1.2. Diamond is a publicly held company and is a reporting company
under the Securities Exchange Act of 1934 as amended ("Exchange Act"). All
reports due under the Exchange Act have been filed as of the date of this
Agreement and are true, correct and complete in all material respects.
5.2. CAPACITY. Precision represents and warrants to the Company and the
Selling Shareholder that Precision has read and understands this Agreement, has
consulted legal and accounting representatives to the extent deemed necessary
and has the capacity to enter into this Agreement and to carry out the
transactions contemplated hereby without the consent of any third party.
5.3. FINDERS. No agent, broker, person or firm acting on behalf of Diamond
or Precision is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties to this Agreement, or from any person controlling,
controlled by or under common control with any of the parties to this Agreement,
in connection with any of the transactions contemplated in this Agreement.
5.4. AUTHORITY AND CONSENT. The execution, delivery and performance of this
Agreement by Diamond and Precision have been duly authorized by their respective
Boards of Directors. This Agreement is valid and binding upon Diamond and
Precision, and is enforceable against Diamond and Precision in accordance with
its terms, subject to bankruptcy, reorganization, insolvency, fraudulent
-9-
conveyance, moratorium, receivership or other similar laws relating to or
affecting creditors' rights generally.
5.5. VALIDITY OF AGREEMENT. Neither the execution nor the delivery of this
Agreement by Diamond and Precision, nor the performance by Diamond and Precision
of any of the respective covenants or obligations to be performed by Diamond and
Precision hereunder, will result in any violation of any order, decree or
judgment of any court or other governmental body, or statute or law applicable
to Diamond or Precision, or in any breach of any terms or provisions of either
the Articles of Incorporation or Bylaws of Diamond or Precision, or constitute a
default under any indenture, mortgage, deed of trust or other contract to which
Diamond or Precision is a party or by which Diamond or Precision is bound.
5.6. GOVERNMENT APPROVALS. No consent, approval or authorization of, or
notification to or registration with, any governmental authority, either
federal, state or local, is required in connection with the execution, delivery
and performance of this Agreement by Diamond or Precision.
5.7. FINANCIAL STATEMENTS AND PUBLIC REPORTS. The audited consolidated
financial statements of Diamond for the fiscal years ended June 30, 1997 and
1996, with accompanying notes, all as contained in Diamond's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1997, and the financial
statements contained in Diamond's Quarterly Reports on Form 10-QSB for the three
months and nine month periods ended March 31, 1998, delivered to the Selling
Shareholder, fairly and accurately present, in all material respects, the
financial position of Diamond at such dates, the results of its operation and
changes in its financial position for the periods and years ended on such dates,
in conformity with generally accepted accounting principles consistently
applied. Such financial statements will contain and reflect all necessary
adjustments for a fair and accurate presentation of the financial condition as
of the date of such statements.
5.8. SUBSIDIARIES. Precision is Diamond's only subsidiary as of the date of
this Agreement. Diamond owns a majority of the outstanding capital stock of
Precision.
5.9. COMPLETENESS OF REPRESENTATIONS AND SCHEDULES. The Schedules and
Exhibits hereto completely and correctly present in all material respects the
information required by this Agreement. This Agreement, the certificates to be
delivered by the officers of Diamond and Precision at the Closing, any Schedules
and Exhibits to be delivered under this Agreement and the representations and
warranties of this Paragraph 5, and the documents and written information
pertaining to Diamond furnished to the Company or its agents and the Selling
Shareholder by or on behalf of Diamond, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make this
Agreement, or such certificates, schedules, documents or written information,
not misleading.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DIAMOND AND PRECISION . The
Closing of this Agreement by Diamond and Precision is in recognition that the
following conditions have been, or will be, fulfilled:
-10-
6.1. TITLE.
6.1.1 At or prior to the Closing, there shall have been delivered to
Precision appropriate bills of sales, assignments and other instruments giving
and conveying to Diamond all right, title and interest in and to the Assets
described or referred to in Schedule 1.1.
6.1.2 At or prior to the Final Maturity Date, there shall have been
delivered to Precision, duly executed UCC-2 Releases, as described in Paragraph
4.10, "Title to the Assets," of this Agreement, or evidence that no liens have
been recorded against the Assets and consents to the assignment and transfer by
the Company to Precision of all rights of the Company in and to all contracts,
agreements, commitments and other assets to be assigned and transferred to
Precision hereunder in all instances in which the same may be necessary to vest
in Precision all of Company's right title and interest therein and thereto.
6.2. CONSENT OF PRINCIPAL CUSTOMERS. Prior to Closing, the Company shall
have obtained all approvals in conjunction with the transfer of the Assets to
Precision as may be required by any contracts between the Company and any of its
principal customers and such approvals shall be issued in written form and
substance satisfactory to Diamond and their counsel or Diamond shall have waived
such requirements.
6.3. POSSESSION. The Company and the Selling Shareholder shall deliver to
Precision possession of the Assets, including any consents of any third parties
required to the sale and transfer of the Assets.
6.4. CONSULTING AGREEMENT. As of the Closing, Xxx X. Xxxxxxxx shall have
entered into a consulting and non-compete agreement with Precision in the form
attached hereto as Exhibit C.
6.5. PRIVATE PLACEMENT. The Company will provide Diamond with all the
information regarding the Company required by Diamond in connection with
Diamond's preparation of any private placement of Diamond's debt or equity
securities.
6.6. FINANCIAL AND OTHER CONDITIONS. The Company shall have no contingent or
other liabilities connected with its business, except as disclosed in the
Financial Statements and as described in Paragraph 1. The review of the
business, premises and operations of the Company and the Financial Statements by
Precision at its expense shall not have revealed any matter which, in the sole
judgment of Precision, makes the acquisition on the terms herein set forth
inadvisable for Precision.
6.7. LEGAL PROHIBITION. There are no injunctions or final judgments, laws or
regulations prohibiting the consummation of the transactions contemplated by
this Agreement.
6.8. ALL CONTRACTS CONTINUED. All lines of credit, debts, fumcing
arrangements, leases and other contracts of the Company shall be acceptable to
Precision and shall continue under their present terms and conditions in
Precision's name after the Closing and all approvals relating to the sale of the
Assets, and to effect the transactions contemplated hereby, required by the
foregoing instruments and arrangements shall have been obtained by the Closing.
6.9. DISMISSAL OF BANKRUPTCY. Precision shall have received a copy of the
order from the bankruptcy court with jurisdiction over the Company's prior
bankruptcy of such bankruptcy's dismissal, closure or final decree.
-11-
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE SELLING
SHAREHOLDER. The Closing of this Agreement by the Company and the Selling
Shareholder is in recognition that the following conditions have been, or will
be, fulfilled:
7.1. EXECUTION AN APPROVAL OF AGREEMENT. Diamond and Precision shall have
duly executed and delivered this Agreement to the Company and the Selling
Shareholder.
7.2. PAYMENT. Subject to the terms and conditions hereof, Precision shall
have delivered the cash, executed the Note and assumed the Liabilities of the
Company and the Selling Shareholder in exchange for the Assets as described in
Xxxxxxxxx 0, "Xxxxxxxx Price. "
7.3. CONSULTING AGREEMENT. As of the Closing, Xxx X. Xxxxxxxx shall have
entered into a consulting and non-compete agreement with Precision in the form
attached hereto as Exhibit C.
7.4. REPRESENTATIONS AND WARRANTIES. The representations and warranties made
to the Company and the Selling Shareholder in this Agreement or in any document,
statement, list or certificate furnished pursuant hereto shall be true and
correct as of the Closing.
8. INDEMNIFICATION.
8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS. The
representations and warranties made by the parties in this Agreement and all of
the covenants of the parties in this Agreement, shall survive the execution and
delivery of this Agreement and the Closing and shall expire on the third
anniversary of the Closing. Any claim for indemnification shall be effective
only if notice of such claim is given by the party claiming indemnification or
other relief to the party against whom such indemnification or other relief is
claimed on or before the third anniversary of the Closing.
8.2. INDEMNIFICATION BY PRECISION.
8.2.1 Precision agrees to indemnify and hold the Company and the
Selling Shareholder harmless, from and after the Closing, against and in respect
of all matters in connection with any losses, liabilities, costs or damages
(including reasonable attorneys' fees) incurred by the Selling Shareholder that
result from Precision's business operations and/or any misrepresentation or
breach of the warranties by Diamond and Precision in Paragraph 5,
"Representations and Warranties of Diamond and Precision, " or any breach or
non-fulfillment of any agreement or covenant on the part of Precision contained
in this Agreement, and all suits, actions, proceedings, demands, judgments,
costs and expenses incident to the foregoing matters, including reasonable
attorneys' fees.
8.2.2. In no event shall Precision's liability under Paragraph 8.2.1
above to the Company and the Selling Shareholder (other than for costs and
reasonable attorneys' fees incurred by such Selling Shareholder to which they
may be entitled pursuant to Paragraph 8.4 or 9.3) collectively exceed the
Purchase Price. No claim for indemnification may be made under this Paragraph 9
after the third anniversary of the Closing.
-12-
8.3. INDEMNIFICATION BY THE SELLING SHAREHOLDER.
8.3.1. The Selling Shareholder agrees to indemnify and hold Diamond
and Precision harmless, from and after the Closing, against and in respect of
all matters in connection with any losses, liabilities or damages (including
reasonable attorneys' fees) incurred by Diamond or Precision resulting from any
misrepresentation or breach of their warranties in Paragraph 4, "Representations
and Warranties of the Company and the Selling Shareholder," or any breach or
non-fulfillment of any agreement or covenant on the part of the Company and the
Selling Shareholder contained in this Agreement and all suits, actions,
proceedings, demands, judgments, costs and expenses incident to the foregoing
matters, including reasonable attorneys' fees.
8.3.2. Notwithstanding the provisions of Paragraph 8.3. 1 above,
Precision shall be entitled to seek indemnification from the Selling Shareholder
pursuant to Paragraph 8.3.1 only for the portion of the aggregate of the losses,
liabilities, costs and damages (including reasonable attorneys' fees) incurred
by Precision which it would be entitled to claim under such Paragraph 8.3.1 that
in the aggregate exceeds $10,000. Upon such occurrence, the collective liability
of the Selling Shareholder under Paragraph 8.3.1 above to Precision (other than
for costs and reasonable attorneys' fees incurred by Precision to which it may
be entitled pursuant to Paragraphs 8.4 or 10.3) will not exceed the Purchase
Price paid to the Company and the Selling Shareholder. No claim for
indemnification may be made under this Paragraph 8 after the third anniversary
of the Closing
8.4. ARBITRATION. If Precision believes that a matter has occurred that
entitles it to indemnification under Paragraph 8.3, "Indemnification by the
Selling Shareholder," or the Selling Shareholder believes that a matter has
occurred that entitles them to indemnification under Paragraph 8.2,
"Indemnification by Precision," Precision or the Selling Shareholder, as the
case may be (the "Indemnified Party"), shall give written notice to the party or
parties against whom indemnification is sought (each of whom is referred to
herein as an "Indemnifying Party") describing such matter in reasonable detail.
The Indemnified Party shall be entitled to give such notice prior to the
establishment of the amount of its losses, liabilities, costs or damages and to
supplement its claim from time to time thereafter by further notices as they are
established. Each Indemnifying Party shall send a written response to such claim
for indemnification within thirty (30) days after receipt of the claim stating
its acceptance or objection to the indemnification claim, and explaining its
position in respect thereto in reasonable detail. If such Indemnifying Parry
does not timely so respond, it will be deemed to have accepted the Indemnified
Party's indemnification claim as specified in the notice given by the
Indemnified Party. If the Indemnifying Party gives a timely objection notice,
then the parties will negotiate in good faith to attempt to resolve the dispute,
and upon the expiration of an additional thirty (30) day period from the date of
the objection notice or such longer period as to which the Indemnified and
Indemnifying Parties may agree, any such dispute shall be submitted to
arbitration in Phoenix, Arizona to a member of the American Arbitration
Association mutually appointed by the Indemnified Party and Indemnifying Party
(or, in the event the Indemnified Party and Indemnifying Party cannot agree on a
single such member, to a panel of three members of such Association selected in
accordance with the rules of such Association), who shall promptly arbitrate
such dispute in accordance with the rules of such Association and report to the
parties upon such disputed items, and such report shall be final, binding and
conclusive on the parties. Judgment upon the award by the arbitrator(s) may be
entered in any court having jurisdiction. The prevailing party in any such
arbitration shall be entitled to recover from, and have paid by, the other party
hereto all fees and disbursements of
-13-
such arbitrator or arbitrators. For this purpose, a party shall be deemed to be
the prevailing party only if such party would be deemed to be a prevailing party
under Paragraph 10.1.3.
8.5. NO FINDERS. Precision represents and warrants to the Company and the
Selling Shareholder and the Company and the Selling Shareholder represent and
warrant that there are no obligations to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement. Precision agrees to indemnify and hold the
Selling Shareholder harmless from any breach of Precision's representation in
the previous sentence, and the Selling Shareholder agrees to indemnify and hold
Precision harmless from any breach of his representation in the previous
sentence. The parties acknowledge that Lerrin may seek a commission and Diamond
and Precision acknowledge that the Company and the Selling Shareholder deny that
such commission is owed. In the event that Lerrin seeks such a commission, the
Company and the Selling Shareholder agree to indemnify Diamond and Precision
against any fees claimed by Lerrin to be owed by Diamond or Precision. In
addition, the Company and the Selling Shareholder agree to pay all costs and
expenses, including without limitations any legal fees associated with the
defense of any suit or proceeding brought by Lerrin against Diamond or Precision
with respect to any finder's fee.
8.6. THIRD PERSON CLAIM PROCEDURES. If any third person asserts a claim
against an Indemnified Party for an indemnifiable event, the Indemnified Party
shall promptly (but in no event later than ten (10) days prior to the time at
which an answer or other responsive pleading or notice with respect to the claim
is required) notify the Indemnifying Party of such claim. The Indemnifying Party
shall have the right, at its election, to take over the defense or settlement of
such claim by giving prompt notice to the Indemnified Party that it will do so,
such election to be made and notice given in any event at least five (5) days
prior to the time at which an answer or other responsive pleading or notice with
respect thereto is required. If the Indemnifying Party makes such election, the
Indemnifying Party may conduct the defense of such claim through counsel of its
choosing (subject to the Indemnified Party's approval, not to be unreasonably
withheld), will be responsible for the expenses of such defense, and shall be
bound by the results of its defense or settlement of the claim to the extent it
produces damage or loss to the Indemnified Party. The Indemnifying Party shall
not settle such claims without prior notice to and consultation with the
Indemnified Party, and no such settlement involving any injunction or material
and adverse effect on the Indemnified Party may be agreed to without its
consent. As long as the Indemnifying Party is diligently contesting any such
claim in good faith, the Indemnified Party shall not pay or settle any such
claim. If the Indemnifying Party does not make such election, or having made
such election does not proceed diligently to defend such claim prior to the time
at which an answer or other responsive pleading or notice with respect thereto
is required, or does not continue diligently to contest such claim, then the
Indemnified Party may take over defense and proceed to handle such claim in its
exclusive discretion, and the Indemnifying Party shall be bound by any defense
or settlement that the Indemnified Party may make in good faith with respect to
such claim. The parties agree to cooperate in defending such third party claims,
an d the defending party shall have access to records, information and personnel
in control of the other part which are pertinent to the defense thereof.
8.7. LIMITATION OF REMEDIES. No party to this Agreement shall be liable to
any other party or parties or have any remedies against any other party or
parties under this Agreement other than as provided in Paragraph 8,
"Indemnification, " and Paragraph 9, "Termination." The parties understand that
this requires that all disputed claims shall be submitted to arbitration in
accordance with Paragraph 8.4, "Arbitration. "
-14-
8.8. INDEMNIFICATION LIMITS. The indemnification rights and obligations of
the parties shall cease with respect to any matter as to which notice has not
been given to the Indemnifying Parry prior to the third anniversary of the
Closing. The maximum amount for which an Indemnifying Party shall be liable for
is the Purchase Price paid to the Company and the Selling Shareholder under this
Agreement, as described under Xxxxxxxxx 0, "Xxxxxxxx Price."
9. EXPENSES AND TRANSFER TAXES.
9.1. Precision shall be solely responsible for paying its own expenses and
costs incident to the preparation of this Agreement and to the consummation of
the transactions contemplated by this Agreement, and shall have no obligation
for paying such expenses or costs of the other parties.
9.2. The Company and the Selling Shareholder shall be solely responsible for
paying their own expenses and costs incident to the preparation of this
Agreement and to the consununation of the transactions contemplated by this
Agreement. The Company and the Selling Shareholder shall have no obligation to
reimburse the expenses or costs of Precision.
9.3. Notwithstanding any of the other provisions hereof, in the event of
arbitration and/or litigation with respect to the interpretation or enforcement
of this Agreement or any provisions hereof, the prevailing party in any such
matter shall be entitled to recover from the other party their or its reasonable
costs and expense, including reasonable attorneys' fees, incurred in such
arbitration and/or litigation. For purposes of this subparagraph 9.3, a party
shall be deemed to be the prevailing party only if such party (A)(i) receives an
award or judgment in such arbitration and/or litigation for more than 50 % of
the disputed amount involved in such matter, or (ii) is ordered to pay the other
party less than 50 % of the disputed amount involved in such matter or (B)(i)
succeeds in having imposed a material equitable remedy on the other party (such
as an injunction or order compelling specific performance), or (ii) succeeds in
defeating the other party's request for such an equitable remedy.
9.4. Precision, the Company and the Selling Shareholder do not believe any
sales or transfer taxes will be due as a result of the sale and transfer of the
Assets as contemplated in this Agreement. Precision shall, however, pay any
sales or transfer taxes which may become due on the sale or transfer of the
Assets under this Agreement.
10. RISK OF LOSS. The risk of loss or destruction of all or any part of the
Assets prior to the Closing from any cause (including, without limitations fire,
theft, acts of God or public enemy) shall be upon the Company and the Selling
Shareholder. Such risk shall be upon Precision if such loss occurs after the
Closing.
11. NODFICATION OF CLAIMS. Each party will promptly notify the other of any
third party claims against any party relating to the Company or the Assets of
which it receives knowledge or notice so as to permit such party an opportunity
to prepare a timely defense to such claim or to attempt settlement.
12. MISCELLANEOUS.
12.1 BINDING AGREEMENT. The parties covenant and agree that this
Agreement, when executed and delivered by the parties, will constitute a legal,
valid and binding agreement between the
-15-
parties and will be enforceable in accordance with its terms.
12.2. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, their legal
representatives, successors and assigns.
12.3. ENTIRE AGREEMENT. This Agreement and its exhibits and schedules
constitute the entire contract among the parties hereto with respect to the
subject matter thereof, superseding all prior communications and discussions and
no party hereto shall be bound by any communication on the subject matter hereof
unless such is in writing signed by any necessary party thereto and bears a date
subsequent to the date hereof. The exhibits and schedules shall be construed
with and deemed as an integral part of this Agreement to the same extent as if
the same had been set forth verbatim herein. Information set forth in any
exhibit, schedule or provision of this Agreement shall be deemed to be set forth
in every other exhibit, schedule or provision of this Agreement and therefore
shall be deemed to be disclosed for all purposes of this Agreement.
12.4. MODIFICATION. This Agreement may be waived, changed, amended,
discharged or terminated only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, amendment, discharge or
termination is sought.
12.5. NOTICES. All notices, requests, demands and other communications shall
be deemed to have been duly given three (3) days after postmark of deposit in
the United States mail, if mailed, certified or registered mail, postage
prepaid:
` If to the Company or the Selling Shareholder:
Xxx X. Xxxxxxxx
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
With copy to:
Xxxxxxx X. Xxxxx
Ronan & Firestone, PLC
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxxx Xxxxx
Meyer, Hendricks, Xxxxxx & Moyes, P.A.
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
If to Diamond or Precision:
Diamond Equities, Inc.
0000 X. Xxxxxxxxxx Xxxxx, Xxxxx #0
Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, President
-16-
With a copy to:
Xxxxxxxxx X. Xxxxxxxx, III
Xxxxxxx Xxxx, P.A.
Renaissance Xxx
Xxx X. Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
or to such other address as any party shall designate to the other in writing.
The parties shall promptly advise each other of changes in addresses for such
notices.
12.6. CHOICE OF LAW. This Agreement shall be governed by, construed,
interpreted and enforced according to the laws of the State of Arizona.
12.7. SEVERABILITY. If any portion of this Agreement shall be finally
determined by any court or governmental agency of competent jurisdiction to
violate applicable law or otherwise not to conform to requirements of law and,
therefore, to be invalid, the parties will cooperate to remedy or avoid the
invalidity, but, in any event, will not upset the general balance of
relationships created or intended to be created between them as manifested by
this Agreement and the instruments referred to herein. Except insofar as it
would be an abuse of the foregoing principle, the remaining provisions hereof
shall remain in full force and effect.
12.8. OTHER DOCUMENTS. The parties shall upon reasonable request of the
other, execute such documents as may be necessary or appropriate to carry out
the intent of this Agreement.
12.9. HEADINGS AND THE USE OF PRONOUNS. The paragraph headings hereof are
intended solely for convenience of reference and shall not be construed to
explain any of the provisions of this Agreement. All pronouns and any variations
thereof and other words, as applicable, shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the person or
matter may require.
12.10. TIME IS OF THE ESSENCE. Time is of the essence of this Agreement.
12.11. NO WAIVER AND REMEDIES. No failure or delay on a parties part to
exercise any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by a party of a right or remedy hereunder
preclude any other or further exercise. No remedy or election hereunder shall be
deemed exclusive but it shall, where ever possible, be cumulative with all other
remedies in law or equity.
12.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, and by the different parties hereto on separate counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
-17-
12.13. FURTHER ASSURANCES. Each of the parties hereto shall use commercially
practicable efforts to fulfill all of the conditions set forth in this Agreement
over which it has control or influence (including obtaining any consents
necessary for the performance of such party's obligations hereunder) and to
consummate the transactions contemplated hereby, and shall execute and deliver
such further instruments and provide such documents as necessary to effect this
Agreement.
12.14. RULES OF CONSTRUCTION. The normal rules of construction which require
the terms of an agreement to be construed most strictly against the drafter of
such agreement are hereby waived since each party have been represented by
counsel in the drafting and negotiation of this Agreement.
12.15 THIRD PARTY BENEFICIARIES. Each party hereto intends this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person other than the parties hereto.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
-18-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY: PRECISION:
ACCURATE THERMOPLASTICS, INC. PRECISION PLASTICS, INC.
a Florida Corporation a Nevada corporation
/s/ Xxx Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
------------------------------- ---------------------------------
By Xxx Xxxxxxxx By Xxxxx X. Xxxxxxxx
Its President Its President
Diamond:
SELLING SHAREHOLDER: DIAMOND EQUITIES, INC.
a Nevada corporation
/s/ Xxx Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
------------------------------- ---------------------------------
Xxx X. Xxxxxxxx By Xxxxx X. Xxxxxxxx
Its President
-19-
