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XXXXX XXXXXXXX AGREEMENT
THIS AGREEMENT is made and entered into as of March 19, 1996 (the
"Effective Date") by and between DYNACO ACQUISITION CORP., a Delaware
corporation (the "Purchaser"), and COMTEL ELECTRONICS, INC., a California
corporation (the "Company"), and XXXXX X. XXXXX and XXXXX XXXXX (herein
collectively referred to as the "Shareholders"), and PALOMAR ELECTRONICS, INC.,
a Delaware corporation ("Palomar Electronics") (hereinafter collectively
referred to as the "Parties").
RECITALS
WHEREAS, Palomar Electronics is a wholly owned subsidiary of Palomar
Medical, Inc., a Delaware corporation, and Dynaco is a wholly owned subsidiary
of Palomar Electronics;
WHEREAS, the Company is engaged in the assembly of circuit boards and
electronic components;
WHEREAS, the Purchaser currently owns 10% of the issued and outstanding
common stock of the Company and the Shareholders, collectively, own the
remaining 90% of the Company;
WHEREAS, the Purchaser wishes to acquire additional shares of the common
stock of the Company, which together with Purchaser's present share ownership,
will constitute an ownership of 80.32% of the issued and outstanding stock of
the Company;
WHEREAS, the Parties contemplate that such acquisition will be effected by
means of the purchase of 1,325 shares by Xxxxx X. Xxxxx ("Green"),the purchase
of 23,675 shares by Xxxxx Xxxxx ("Xxxxx") and the simultaneous purchase by
Purchaser from the Company, pursuant to this Agreement, of 500,000 shares of the
currently authorized and unissued common stock of the Company no par value
(collectively, the "Shares"), at a price of $0.055 per share, which the Parties
agree is fair market value; and
WHEREAS, the Parties hereto desire to enter into this Agreement for the
purpose of setting forth certain, representations, warranties, and covenants
made by each to the other as an inducement to the execution and delivery of the
Agreement and as conditions precedent to the consummation of the Agreement;
NOW, THEREFORE, in consideration of the mutual promises and mutual
covenants contained herein, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
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ARTICLE 1
TERMS OF SALE
1.1 Agreement to Sell and Purchase. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, 500,000 shares of the currently
authorized and unissued no par value common stock of the Company, for the
purchase price of $0.055 per share (or an aggregate purchase price of
$27,500.00), payable in cash or cashiered funds at the Closing Date, as defined
in Section 1.2 herein.
1.2. Closing Date. The sale and purchase provided for herein shall be
consummated and closed at the offices of XxXxxxx & Xxxxx, L.L.P., 000 Xxxxx
Xxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 at 11:59 P.M. (local time) on March
19, 1996 (the "Closing Date"), or at such other place as the parties mutually
agree.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
As an inducement for the Purchaser to enter into and perform this
Agreement, the Company and its Shareholders represent and warrant to Purchaser,
as of the Effective Date and as of the Closing Date, as if made on the Closing
Date, as follows:
2.1 The Company has provided to the Purchaser true, correct and complete
copies of the Company's financial statements, federal and state tax returns,
filings, creditor lists, accounts payable, books and records, material
contracts, and all other material information.
2.2 The Company is a duly organized and validly existing corporation in
good standing under the laws of the State of California and in each other
jurisdiction in which it transacts business, and each officer executing the
Agreement on behalf of the Company has all power and authority to enter into and
execute and deliver such Agreement.
2.3 All actions required by the Company or the Shareholders necessary to
authorize and approve the Agreement and the issuance of the Shares have been
taken and are in full force and effect and have not been rescinded, modified or
revoked.
2.4 The Shares, when issued to the Purchaser pursuant to this Agreement,
are free and clear of all liens, pledges, security interests, encumbrances or
adverse claims, other than rights created under that certain Restricted Share
Agreement dated even date herewith, and the Company has all right, power and
authority to issue such Shares, and the Shares, when issued, will be validly
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issued and outstanding and non-assessable. The 10,000 Shares currently owned by
Purchaser are duly and validly issued and outstanding Shares.
2.5 The assets of the Company, both real and personal, mixed, tangible and
intangible, necessary or useful for the operation of the Company's business (the
"Assets") are in good condition and repair, ordinary wear and tear excepted and
suitable for the uses intended. The Assets materially comply with and are
operated in conformity with all applicable laws, ordinances, regulations,
orders, permits and other requirements.
2.6 All consents and approvals required to be obtained by the Company from
its shareholders or any other person in order to consummate the transactions
contemplated herein have been obtained and are in full force and effect,
including without limitation all leases of real, personal, or mixed property.
2.7 The Company has all requisite franchises, permits, licenses,
authorizations, variances, and approvals of governmental or administrative
authorities necessary to conduct its business as presently conducted, and all
such approvals and permits are in full force and effect, and no condition exists
that, with the giving of notice or passage of time, or both, would result in
either a violation or revocation of any approval or permit necessary for the
Company to conducts its business.
2.8 The Company and the Shareholders have made available for inspection
and/or caused to be delivered to the Purchaser all information and documents
material to its decision to purchase the Shares, including without limitation
all financial statements and state and federal tax returns concerning the
Company for the periods January 1, 1995 through February 29, 1996 (the
"Financial Statements"), all books and records of the Company, all financial
data of the Company since its inception, and physical inspection of the offices
and facilities; provided, however, that Purchaser acknowledges that although the
Financial Statements list MIDOCS as an asset of the Company, it has not
considered such asset in its due diligence review of the Company and that such
asset shall be transferred after the Closing Date to Comtel Security Systems,
Inc. The Company and the Shareholders, after due investigation, represent and
warrant that: (i) the Financial Statements are true and correct in all material
respects and fairly present the financial position and results of operation of
the Company as of the Closing Date; and (ii) the Company's books and records are
true and correct in all material respects and fairly and accurately reflect the
income, expenses, Assets and liabilities of the Company, including the nature
thereof and the transactions giving rise thereto, and provide a fair and
accurate basis for the preparation of Financial Statements.
2.9 The Company does not have any liabilities or obligations, either
absolute, accrued, contingent or otherwise, which individually or in the
aggregate are material to the financial condition of the Company for the
operation of its business that have not been reflected in the Financial
Statements provided to the Purchaser.
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2.10 Except as disclosed on Schedule 2.10, there has been no (i) material
changes in the financial condition, Assets or liabilities, management, results
of operations or prospects of the Company or its business, other than changes in
the ordinary course, which either individually or in the aggregate, have been
and are materially adverse; (ii) damage, destruction or loss to the Company's
Assets which was not fully insured; (iii) except as disclosed in Schedules to
this Agreement, sale, transfer, assignment, lease, pledge or mortgage of any
Assets having a value in excess of $2,000, individually, or $5,000, in the
aggregate; (iv) material contract or right (including any letter of intent or
similar rights, whether or not binding as a contract) modified, amended,
canceled, revoked, rescinded or waived; and (v) obligation or liability
undertaken or incurred (whether absolute, accrued, contingent or otherwise, and
whether or not due) which has not been disclosed to the Purchaser in writing
prior to the Closing Date.
2.11 Except as set forth in Schedule 2.11, the Company has no obligation
for borrowed money and has not guaranteed or entered into any agreement to
guaranty borrowed money or any other indebtedness. The Company's liabilities and
accounts payable as of December 31, 1995, and February 29, 1996, are set forth
in Schedule 2.11. Except as set forth in Schedule 2.11, the Company has no other
accounts payable or liabilities and no accounts payable that are past due as of
the Closing Date.
2.12 The Company's accounts receivable, except as set forth in Schedule
2.12, are accurate and collectible and, except for any reserve for bad debts or
unrecoverable losses that is disclosed in the Financial Statements, have a value
equal to the face amount of such accounts receivable.
2.13 None of the Company's accounts receivable, except as shown on Schedule
2.13, are owing from a debtor, that, to the knowledge of the Company or either
of the Shareholders, has become bankrupt or is insolvent or have been pledged to
any third party.
2.14 All returns, reports, and other forms related to income and any other
taxes (including, without limitation, sales, use and excise taxes) required to
be filed or paid by the Company have been timely filed and paid in accordance
with applicable law (after taking into account any extensions properly
obtained), and no penalties, interest or other charges are due or will become
due with respect to such returns. The Company has paid all taxes due any
governmental authority and no audit is pending with respect to any tax return,
report, form or other amount due.
2.15 The books and records and other financial information concerning the
Company are true, complete and accurate in all material respects and maintained
in accordance with sound business practices. The minute books and other records
of the Company reflect accurately the record of all meetings and other actions
taken by the Company and its Shareholders.
2.16 Except for those benefit plans listed on Schedule 2.16, the Company
has no employee or other benefit plans, including, without limitation, medical
plans, retirement plans,
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disability plans, and deferred compensation agreements, and the Company is not
in default under any such plan and is in full compliance with applicable law
(regulatory or otherwise) with respect to such plans.
2.17 Except as disclosed in Schedule 2.17, there is no action, suit, or
proceeding (legal, equitable or administrative) pending or, to the Shareholders'
knowledge, threatened against either the Company or either or both of the
Shareholders which, if adversely determined, could materially affect either the
Company, its Assets, business or prospects or the Assets, business or prospects
of the Shareholders.
2.18 The Company has provided to the Purchaser a true and complete list of
all patents, applications for patents, trademarks, trade names, service marks,
copyrights and other applications owned by the Company or material to the
conduct of its business ("Intellectual Property"). The Company represents and
warrants, and, to the best knowledge of the Shareholders, the Shareholders,
individually, represent and warrant, that all such Intellectual Property is
owned by the Company or the Company has the right, pursuant to written license
or other valid or enforceable agreements, to use such Intellectual Property in
the conduct of its business, free and clear of all liens, charges, security
interests, adverse claims, pledges, encumbrances, and demands of any nature or
kind whatsoever, of all right, title and interest in and to the Intellectual
Property. The Company is not in default under any contracts or agreements
relating to the Intellectual Property, and no event has occurred that, with the
passage of time or the giving of notice, or both, would constitute a default
under any contract or agreement relating to the Intellectual Property.
2.19 There is no person who has challenged or might have a valid basis for
a challenge against the use by the Company of the Intellectual Property, and
there is no person who, as of the Effective Date, has any right or title to,
interest in, or claim, lien, charge, or encumbrance against the Intellectual
Property (whether by virtue of contract, decree, operation of law, or
otherwise), and there are no applications for or registrations of any patent,
trade-xxxx, trade name, industrial design, copyright or other similar
industrial, intellectual or proprietary protection in respect of the
Intellectual Property;
2.20 The operations of the Company do not conflict with or infringe upon,
and no one has asserted that the Company's operations conflict or infringe upon,
any proprietary rights, trademarks, trade names, service marks or patents held
by any other person, and there are no claims, disputes, actions, proceedings,
suits, appeals or other matters pending or threatened against the Company with
respect to any such other marks.
2.21 The Company is not in violation of any local, state or federal law or
regulation and has received no notice of any alleged violation of any such law
or regulation.
2.22 The Company has disclosed to the Purchaser all material contracts,
obligations, commitments, agreements, contracts, and leases, whether written or
oral, to which the
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Company is a party or to which its properties and Assets are subject or by which
it is bound (collectively, the "Commitments"), and the Company is not in default
under any of the Commitments and no event has occurred that, with the passage of
time or the giving of notice, or both, would constitute a default under any
Commitment, except as disclosed in Schedule 2.22.
2.23 Neither the Company nor the Shareholders have knowledge of any
existing facts or conditions which have not been disclosed in writing to the
Purchaser, which are material or which may give rise to any charge, lien,
litigation, proceeding or investigation by any third party against the Company
or which, if adversely determined to the Company, would materially and adversely
affect the business, prospects or financial condition of the Company.
2.24 Neither this Agreement nor any Schedule hereto, nor any other
agreement, schedule or information furnished the Purchaser (or their attorneys
or agents) contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained therein not misleading.
2.25 To the knowledge of the Shareholders and the Company, the Company is,
and at all times has been, in full compliance with, and has not been and is not
presently in violation of or liable under, any federal, state, county or local
statues, laws, regulations, rules, ordinances, codes, licenses and permits
relating in any way to the protection of the environment, including, without
limitation, the Clean Air Act, the Clean Water Act, the Federal Water Pollution
Control Act of 1972, the Resource Conservation and Recovery Act of 1976
("RCRA"), the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), and the Toxic Substances Control Act, and any amendments
or extensions of the foregoing and the regulations promulgated thereunder
(collectively, the "Environmental Laws"). To the knowledge of the Shareholders
and the Company, the Company has not received any notice of any actual or
potential violation of or failure to comply with any Environmental Law or of any
actual or threatened obligation to undertake or bear the cost of any expense,
liability, or other liability arising from or under any Environmental Law with
respect to any of the properties or Assets or with respect to any property or
facility at or to which any "hazardous materials" were generated, manufactured,
refined, transferred, imported, used or processed by the Company or from which
hazardous materials have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
2.25.1 The Company and the Shareholders have no knowledge that any of its
owned or leased properties is contaminated by or contains any toxic substance,
as defined in RCRA. No claim, action, suit or proceeding is pending or, to the
Company's or the Shareholders' knowledge, threatened against the Company, before
any court or other governmental authority or arbitration tribunal, relating to
hazardous substances, pollution or the environment, and there is no outstanding
judgement, order, writ, injunction, decree, or award against or affecting the
Company or its Assets or properties with respect to the same. To the knowledge,
information and belief of the Company and the Shareholders, there has never
been, and there is not presently occurring, any release, a threatened release or
clean up of chemicals produced by, or resulting from, any business,
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commercial or industrial activities, operations, or processes, including without
limitation hazardous substances, as defined under CERCLA, and has not received
any information requests under CERCLA from any government agency. Neither the
Company nor any of the Shareholders have any knowledge of a violation of the
Environmental Laws in connection with the ownership, use, maintenance, or
operation of any of the Company's leased or owned properties by the owner
thereof or any other person. The Company and the Shareholders have no knowledge
of any facts or circumstances which the Company reasonably expects could form
the basis for the assertion of any "claim" against the Company relating to
environmental matters including, without limitation, any claim arising from past
or present environmental practices asserted under the Environmental Laws, which
the Company or the Shareholders believe might have a material adverse effect on
the business, results of operations, financial condition or prospects of the
Company taken as a whole.
2.25.2 To the knowledge of the Shareholders and the Company, there are no
hazardous materials present on any of the Company's leased properties, including
hazardous materials contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, sumps, or any other part of such properties, or incorporated into any
structure therein or thereon. To the knowledge of the Shareholders and the
Company, none of the Shareholders, the Company nor any other person for whose
conduct they are or may be held responsible has permitted or conducted or is
aware of, any "hazardous activity" conducted with respect to any properties or
assets (whether real, person or mixed) in which the Company has or had an
interest except in full compliance with all applicable Environmental Laws.
2.25.3 The Company has delivered to the Purchaser true and complete copies
and results of any reports, studies, analyses, tests or monitoring, to the
extent such items exist and are in the possession of Company or of which Company
has knowledge, by the Company pertaining to hazardous materials or hazardous
activities in, on, or under the Company's properties or concerning compliance by
the Company or any other person for whose conduct they are or may be held
responsible with all Environmental Laws.
2.25.4 As used herein, the terms "hazardous substance(s)" or "hazardous
material(s)" shall include any pollutants, dangerous substances, toxic
substances, hazardous wastes, hazardous materials, or hazardous substances as
defined in or pursuant to RCRA and CERCLA, or any other federal, state, or local
environmental law, ordinance, rule or regulation, except that, for purposes of
this Agreement, "petroleum" (including crude oil or any faction thereof) shall
be deemed a "hazardous substance". "Release" shall have the same meaning as
defined in CERCLA. "Claim" shall mean any and all claims, demands, causes of
actions, suits, proceedings, administrative proceedings, losses, judgements,
attorney' fees, and any other expenses incurred, assessed or sustained by or
against the Company or the Shareholders. "Hazardous activity" shall mean the
distribution, generation, handling, importing, management, manufacturing,
processing, production, refinement, release, storage, transfer, treatment or use
of hazardous materials in, on, under, about or from any properties or assets in
which the Company has or had an interest. As used in this Section 2.25,
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the term "knowledge" shall refer to the actual knowledge of the Company and/or
the Shareholders.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Company to enter into and perform this Agreement,
the Purchaser represents and warrants to the Company as follows:
3.1 Organization of the Purchaser. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with adequate corporate power and authority to own its property and
conduct its business and to enter into and perform this Agreement.
3.2 Corporate Authorization. The execution, delivery and performance of
this Agreement by the Purchaser have been duly and validly authorized by the
Purchaser's Board of Directors. Such execution, delivery and performance, and
the acquisition of Shares contemplated hereby, do not and will not violate or
conflict with or result in any default or loss of a material benefit under the
Purchaser's Certificate of Incorporation or By-laws or any mortgage, indenture,
lease, agreement or other instrument or any court or governmental agency order,
judgment or decree to which the Purchaser is a party or subject or by which the
Purchaser is bound.
3.3 No Broker's or Finder's Fee. No agent, broker, financial adviser or
other firm or person is or will be entitled to any broker's or finder's fee or
similar payment by the Purchaser in connection with this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR
As an inducement to the Company to enter into and perform this Agreement,
Dynaco and Palomar Electronics (collectively, the "Guarantor") represents and
warrants to the Company as follows:
4.1 Organization of the Guarantor. The Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with adequate corporate power and authority to own its property and
conduct its business and to enter into and perform this Agreement.
4.2 Corporate Authorization. The execution, delivery and performance of
this Agreement by the Guarantor have been duly and validly authorized by the
Guarantor's Boards of
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Directors. Such execution, delivery and performance as provided under the
Guaranty contemplated hereby, do not and will not violate or conflict with or
result in any default or loss of a material benefit under the Guarantor's
Certificates of Incorporation or By-laws or any mortgage, indenture, lease,
agreement or other instrument or any court or governmental agency order,
judgment or decree to which the Guarantor is a party or subject or by which the
Guarantor is bound.
4.3 No Broker's or Finder's Fee. No agent, broker, financial adviser or
other firm or person is or will be entitled to any broker's or finder's fee or
similar payment by the Guarantor in connection with this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Investigation. The Company shall:
5.1.1 Afford to the Purchaser, and its accountants, counsel and other
representatives, full access, at any time or times during the period prior
to the Closing Date, to all of the properties, books, contracts, leases,
tax returns and other records of the Company; and
5.1.2 At any time or times during such period, furnish promptly to the
Purchaser all information concerning the business, Assets, properties,
personnel and any other information or documentation with respect to the
Company as the Purchaser may request.
5.2 Confidentiality. The Purchaser shall use its best efforts to maintain
as confidential any information obtained pursuant to negotiations with the
Company, except that this restriction shall not apply to any such information
which is or comes into the public domain is required to be disclosed, or at any
time comes into its possession from third parties who have the right to disclose
such information otherwise than in connection with this Agreement.
5.3 Certain Consents. In the event of a request by the Company for written
consent from the Purchaser for purposes of Article 2 hereof, the Purchaser shall
use reasonable efforts to respond to such request promptly; the Company shall be
entitled to rely, for purposes of any of such clauses, on a written consent
signed on behalf of the Purchaser by its President, or by any other authorized
officer of the Purchaser.
5.4 Name; Location. The Company and the Shareholders, individually and
collectively, hereby agree to use best efforts to take all actions, or shall
cause such actions to be taken, including without limitation execution of all
appropriate documentation, necessary to relocate the Company's main office to
Irvine, California as soon as reasonably possible, unless the Parties agree in
writing otherwise. The Company and the Shareholders further hereby covenant
that, after consummation of the transaction as contemplated herein, the Company
shall retain the name
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"Comtel Electronics, Inc.", unless such name shall be changed as provided under
the amended Bylaws of the Company dated even date herewith.
5.5 Operating Capital. Upon the Closing Date (subject to the satisfaction
of all conditions set forth herein), Palomar Electronics shall provide to
Company standby letters of credit to secure payments to vendors by Company in
the total amount of One Million and No/100 Dollars ($1,000,000.00), from which
Company may draw funds as needed solely to pay the bona fide claims of third
party vendors of Company; provided that such funds shall not be drawn to pay
vendors that are controlled or affiliated in any way with Company or the
Shareholders. Upon the Closing Date (subject to the satisfaction of all
conditions set forth herein), Palomar Electronics shall further provide to
Company cash in the total amount of Five Hundred Fifty Thousand and No/100
Dollars ($550,000) as follows: (i) $150,000.00 to be used to purchase equipment
from New Media, Inc.; and (ii) $400,000.00 to be used as working capital solely
to finance operations of Company; provided that such funds shall be drawn by
Company, as needed, during the first 45 days after the Closing Date, upon
presentation to Palomar Electronics' Board of Directors of a reasonable basis
for the request for such funds, the uses to which requested funds are to be put,
and approval of Palomar's Board of Directors.
5.6 Release of Green Guaranty. At the Closing Date, Purchaser hereby agrees
to release Green from his personal guaranty of the loan dated January 29, 1996
between Purchaser, as lender, and Company, as borrower.
5.7 Purchaser's Agreement to Finance Capital Equipment of Company.
Purchaser hereby agrees to use reasonable efforts to obtain financing for
purchases of capital equipment by Company, upon presentation to Purchaser's
Board of Directors of a reasonable basis for the request for such funds, the use
of such funds, and the approval of the Board of Directors, with such approval to
be based on determination of a reasonable return of investment on said capital
expenditure of Company; provided, however, that such obligation shall be
suspended at any time as Palomar Electronics shall be unable to fund such
purchases due to its insolvency, bankruptcy, appointment of a receiver, or
inability to pay its obligations as they become due.
5.8 Preemptive Rights. Each of the Shareholders waives any preemptive
rights he may have in connection with the issuance of the Shares to Purchaser
pursuant to this Agreement. Green and Xxxxx hereby agree to cause a written
waiver of preemptive rights to be executed and delivered to Purchaser on the
Closing Date. Any Shares issued by the Company after the Closing Date shall be
subject to preemptive rights for each of the shareholders, unless a Registration
Statement has been filed within the Securities and Exchange Commission, in which
event no shareholder shall be entitled to preemptive rights.
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ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATION OF THE PURCHASER
The obligation of the Purchaser to consummate the sale and purchase
provided for herein is subject to the satisfaction on the Closing Date of the
following conditions precedent, unless (except in the case of the conditions set
forth in Section 6.3 hereof) waived in writing by the Purchaser:
6.1 Representations and Warranties. The representations and warranties of
the Company and the Shareholders contained in Article 2 of this Agreement shall
be true in all material respects as of the Effective Date and as of the Closing
Date as though made on and as of the Closing Date, and the Company shall have
duly performed and complied with, in all material respects, all agreements,
covenants and conditions required under this Agreement.
6.2 Adverse Changes. There shall have been no changes after February 29,
1996, in the results of operations, condition (financial or otherwise),
properties, Assets, business or prospects of the Company, which are materially
adverse.
6.3 Regulatory Approvals. All approvals and consents required by law to be
received in connection with the acquisition of Shares contemplated by this
Agreement or in connection with any of the matters or transactions contemplated
hereby, shall have been received, shall be satisfactory in all respects to the
Purchaser and shall be in effect. All conditions or requirements prescribed by
any such approval or consent (or by law in connection therewith) shall have been
satisfied.
6.4 Litigation. No litigation, proceeding or investigation shall be pending
or threatened, and no order, notice or regulation of any court or governmental
agency shall be in effect, which restrains or prohibits or which seeks to
restrain or prohibit or obtain damages or other relief in connection with the
acquisition of Shares contemplated by this Agreement, or which (in the opinion
of the Purchaser) makes consummation of such acquisition inadvisable.
6.5 New Company Directors and Officer. Concurrently with the consummation
of the sale and purchase provided for herein, the Shareholders shall validly and
lawfully elect an additional director of the Company to be designated by the
Purchaser, and the Board of Directors of the Company shall amend and execute the
Company's Bylaws to provide for five directors of the Company, and the
Shareholders shall have entered into a Shareholders Agreement providing for
three positions on the Board of Directors of the Company to be held by
representatives designated by the Purchaser. The Company further shall amend any
By-laws of the Company which, in the Purchaser's opinion, may be necessary or
appropriate to implement the terms and conditions of this Agreement.
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6.6 Legal Matters. All legal matters in connection with this Agreement and
the transactions contemplated hereby shall have been approved by counsel for the
Purchaser, and there shall have been furnished to such counsel by the Company
certified copies of such corporate records of the Company and copies of such
other documents as such counsel may reasonably have requested for such purpose.
6.7 No Other Conditions. The Purchaser specifically acknowledges that there
are no other conditions precedent to consummation of the sale of the Shares to
the Purchaser, as contemplated in this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to consummate the sale and purchase provided
for herein is subject to the satisfaction on the Closing Date of the following
conditions precedent, unless waived in writing by the Company:
7.1 Representations and Warranties. The representations and warranties of
the Purchaser contained in Article 3 of this Agreement shall be true in all
material respects as of the Effective Date and as of the Closing Date, as though
made on and as of the Closing Date, and the Purchaser shall have duly performed
and complied with, in all material respects, all agreements, covenants and
conditions required by this Agreement to be performed or complied with by it.
7.3 Legal Matters. All legal matters in connection with this Agreement and
the transactions contemplated hereby shall have been approved by counsel for the
Company, and there shall have been furnished to such counsel by the Purchaser
certified copies of such corporate records of the Purchaser and copies of such
other documents as Company's counsel may reasonably have requested for such
purpose.
7.4 Representations and Warranties. The representations and warranties of
the Guarantor contained in Articles 4 and 5 of this Agreement shall be true in
all material respects as of the Effective Date and as of the Closing Date, as
though made on and as of the Closing Date.
7.5 No Other Conditions. The Company and its Shareholders specifically
acknowledge that there are no other conditions precedent to consummation of the
sale of the Shares to the Purchaser, as contemplated in this Agreement.
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ARTICLE 8
CLOSING
8.1 Items to be Delivered to the Purchaser. Subject to the terms and
conditions of this Agreement, at the closing of the sale and purchase provided
for herein on the Closing Date, the Company shall deliver the following
documents to the Purchaser:
8.1.1 A duly issued stock certificate of the Company registered in the
name of the Purchaser, in proper form, and evidencing all of the Shares to
be issued and sold by the Company to the Purchaser as provided hereunder;
8.1.2 Such other documents and showings as shall be reasonably
requested by the Purchaser;
8.1.3 The fully executed Shareholders Agreement dated even date
herewith;
8.1.4 An executed Employment Agreement of even date herewith between
the Company and Green and an executed Independent Contractor Agreement of
even date herewith between the Company and DSI, Inc., an Arizona
corporation;
8.1.5 Certified resolutions by the Board of Directors and shareholders
of the Company authorizing all actions taken or authorized to be taken
hereunder; and
8.1.6 A waiver of preemptive rights, executed by all Shareholders with
respect to the Shares issued pursuant to this Agreement.
8.2 Items to be Delivered to the Company. Subject to the terms and
conditions of this Agreement, at the closing of the sale and purchase provided
for herein on the Closing Date, the Purchaser shall deliver the following
payment and documents to the Company:
8.2.1 Payment, in cash or other immediately available funds, in the
amount of the aggregate purchase price (referred to in Section 1.1 hereof)
payable to the Company for the Shares;
8.2.2 Executed Stock Grants between the Company and Green and the
Company and Xxxxx, dated even date herewith; and
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8.2.3 Such other documents and showings as shall be reasonably
requested by the Company.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 Amendment. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties hereto.
9.2 Termination.
9.2.1 This Agreement may be terminated at any time prior to the
consummation of the sale and purchase provided for herein by mutual consent
in writing of the Purchaser and the Company.
9.2.2 If this Agreement is terminated for any reason, neither party to
this Agreement shall have any liability hereunder of any nature whatsoever
to the other; provided, however, that (a) this paragraph 9.2.2 shall not
preclude liability from attaching to a party who has caused the termination
hereof by a willful act or a willful failure to act in violation of the
terms and provisions hereof, except that termination of this Agreement by
the Purchaser shall in no event result in any liability whatsoever on the
part of the Purchaser, and (ii) termination of this Agreement shall not
terminate or affect the agreements of the parties contained in this
paragraph 9.2.2 or in Section 5.2 hereof (with respect to confidentiality)
or Section 10.5 hereof (with respect to the payment of expenses).
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Survival of Representations and Warranties. The respective
representations, warranties and agreements of the parties hereto contained
herein and contained in any certificate or other document delivered pursuant to
this Agreement shall be deemed to be made at the Effective Date and at the
Closing Date, if any, and shall survive the Closing Date.
10.2 Indemnification.
10.2.1 The Company agrees to indemnify and hold the Purchaser harmless
from, for and against any claim, loss, damage, cost, or expense, including
without limitation attorneys' and accountants' fees and any and all costs
and expenses of litigation, which the Purchaser may incur or suffer by
reason of the inaccuracy of any representation or warranty of the Company
or the Shareholders, whether individually or collectively, set forth in
Article 2 or 5 herein or in any
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certificate or other document delivered by the Company or by the
Shareholders in accordance with the provisions hereof or the breach of any
of the agreements or covenants of the Company or the Shareholders contained
herein or in any certificate or other document delivered by the Company or
the Shareholders in accordance with the provisions hereof. The Purchaser
may contest any claim or liability which, if established, would be subject
to indemnification hereunder and, in such event, all legal fees,
disbursements and other costs and expenses of such contest shall also be an
item of indemnification hereunder.
10.2.2 The Guarantor further agrees to indemnify and hold Green
harmless from, for and against any claim, loss, damage, cost or expense,
including without limitation attorneys' and accountants' fees and any and
all costs and expenses of litigation, which Green may incur or suffer by
reason of: (i) default by Company on the Small Business Administration Loan
("SBA") dated November 1995 between Company and The Bank of Los Angeles
(the "SBA Loan"), including without limitation those incurred due to the
SBA exercising its rights against Green as personal guarantor of such SBA
loan; and (ii) default by Company on that certain lease dated December 7,
1995 between Xxxxxxx Xxxxx, as lessor, and Green, in his individual
capacity, as lessee. Purchaser shall use its best efforts to cause Xxxxx
Xxxxx to be released from any personal guaranty of the SBA Loan and, if
such release cannot be obtained, Purchaser and Guarantor shall indemnify
Xxxxx against any and all claims, suits or liabilities, including attorneys
fees and costs, that may be asserted against Xxxxx by reason of his
guaranty of the SBA Loan.
10.2.3 The Purchaser agrees to indemnify and hold the Company harmless
from, for and against any claim, loss, damage, cost or expense, including
without limitation attorneys' and accountants' fees and any and all costs
and expenses of litigation, which the Company may incur or suffer by reason
of the inaccuracy of any representation or warranty of the Purchaser set
forth in Article 3 hereof or in any certificate or other document delivered
by the Purchaser in accordance with the provisions hereof or the breach of
any of the agreements or covenants of the Purchaser contained herein or in
any certificate or other document delivered by the Purchaser in accordance
with the provisions hereof, excluding breach of any agreement as provided
in Sections 5.6, 5.7 and 5.8 herein.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed at the time delivered personally or, if mailed three
(3) days after placing in the U.S. Mails, by registered or certified mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(a) if to the Purchaser, at:
Dynaco Acquisition Corp
0000 X. Xxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn.: Xxxx Xxxxxx
with a copy to:
Palomar Electronics
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
with a copy to:
Xxxxx X. Xxxxxx III
Ryley, Xxxxxxx & Xxxxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxx. 0000
Xxxxxxx, Xxxxxxx 00000-0000
(b) if to the Company, at:
Comtel Electronics, Inc.
Xxx Xxxxxxxxxx, Xxxx. X
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxx
with a copy to:
DSI, Inc.
Attn: Xx. Xxxxx Xxxxx
0000 Xxxx Xxxx Xxxx., X-X-0X, Xxxxx 000
Xxxxxxxxxx, XX 00000
and to:
Xx. Xxxxx Xxxxx
c/o Comtel Electronics
Xxx Xxxxxxxxxx, Xxxx. X
Xxxxxx, XX 00000
and to:
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Xxxxx X. Xxxxx, Xxx.
XxXxxxx & Xxxxx
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Written notice given by any other method shall be deemed effective
only when actually received by the party to whom given.
10.5 Knowledge. The term "knowledge" as used in this Agreement shall mean
all matters that are known or, in the exercise of reasonable diligence and after
due inquiry, should be known to the Company , the Shareholders, or as the case
may be, the Purchaser, including without limitation, due and proper inquiry of
the senior employees, agents, counsel and advisors of the Company and, as the
case may be, the Purchaser.
10.6 Expenses. Whether or not the sale and purchase provided for herein is
consummated, the Purchaser and the Company and the Shareholders shall each bear
their own legal, accounting and other expenses incurred in connection with this
Agreement and such sale and purchase.
10.8 Entire Agreement. This Agreement supersedes and abrogates all prior
understandings, communications and agreements (whether written or oral) between
the Company. the Shareholders and the Purchaser with respect to the subject
matter hereof, and this Agreement constitutes the entire agreement between the
Company, the Shareholders and the Purchaser with respect to such subject matter.
10.9 Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each and all of which shall be deemed for all purposes
to be one agreement.
10.10 Publicity. The Purchaser, the Company and the Shareholders shall not
issue or cause the publication of any press release or other announcement with
respect to this Agreement or the acquisition of Shares contemplated hereby or
otherwise make any disclosures relating thereto to the press or any third party
without the prior written consent of all other parties; provided, however, that
such consent shall not be required where such release, announcement or
disclosure is required by applicable law or the rules or regulations of a
securities exchange, other regulatory authority or governmental agency.
10.11 Assignment; Benefit of the Agreement. No rights under this Agreement
may be assigned by either party hereto, without the prior written consent of the
other parties hereto. This Agreement shall be binding upon and inure to the
benefit of the Purchaser, the Company and the Shareholders and their respective
successors and permitted assigns and is not intended to confer upon any other
person any rights or remedies hereunder.
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10.12 Further Assurances. After the Closing Date, the Company, at its own
expense, shall do, execute, acknowledge, and deliver all further acts, deeds,
conveyances, transfers, documents and assurances necessary or proper to vest in
the Purchaser good title to all Shares to be issued and sold by the Company
hereunder, free and clear of any liens, claims, charges, or encumbrances
whatsoever, and otherwise to effect the acquisition of the Shares contemplated
by this Agreement.
10.13 Governing Law. The parties hereby agree that this Agreement shall be
governed by, and construed in accordance with, the substantive laws of the State
of Arizona, without respect to conflict of laws principles, including all
matters of construction or interpretation of this Agreement.
10.14 Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Purchaser, the Company and Palomar Electronics (for
purposes of Article IV, Section 5.5 and Section 10.2.2 only) and the
Shareholders (for purposes of Section 2 only) have caused this Agreement to be
executed by their respective officers thereunto duly authorized and the
Shareholders shall have caused the Agreement to be executed all as of the
Effective Date.
"PURCHASER" "COMPANY"
DYNACO ACQUISITION CORP., COMTEL ELECTRONICS, INC.
a Delaware corporation a California corporation
By: /s/ By: /s/
------------------------------ ---------------------------
Xxxx X. Xxxxxx, its President Xxxxx X. Xxxxx, Its President
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For the sole purpose of Section 2 herein: For the sole purpose of Article IV, Section 5.5
and Section 10.2.2 herein
"SHAREHOLDERS" "PALOMAR ELECTRONICS"
--------------------------------- PALOMAR ELECTRONICS , INC.,
Xxxxx Xxxxx a Delaware corporation
--------------------------------- ----------------------------------
Xxxxx X. Xxxxx Xxxx X. Xxxxxx, Its Vice President
