SVPC CIRCUIT SYSTEMS, INC.
PURCHASE OF ASSETS OF
H.O.T.L.R.T., INC.
d/b/a SILICON VALLEY PRINTED CIRCUITS
AS OF DECEMBER 1, 1998
ASSET PURCHASE AGREEMENT
BY AND AMONG
H.O.T.L.R.T., INC. d/b/a SILICON VALLEY PRINTED CIRCUITS,
XXXXXX X. XXXXXXXX,
XXXXXXX X. XXXXXXX, and
XXXXXXX X. XXXXX
AND
CIRCUIT SYSTEMS, INC., and
SVPC CIRCUIT SYSTEMS, INC.
DATED AS OF DECEMBER 1, 1998
TABLE OF CONTENTS
Page
RECITALS........................................................1
ARTICLE I - PURCHASE AND SALE
1.1 Purchased Assets.................................1
1.2 Excluded Assets..................................3
1.3 Assumed Liabilities..............................3
1.4 Excluded Liabilities.............................3
ARTICLE II - PURCHASE PRICE
2.1 Purchase Price...................................4
2.2 Allocation of Purchase Price.....................4
ARTICLE III - CLOSING
3.1 Closing Date.....................................4
3.2 Payment of the Purchase Price....................4
3.3 Buyer's Additional Deliveries....................5
3.4 SVPC's Deliveries................................5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SVPC AND THE
SHAREHOLDERS
4.1 Corporate Status.................................6
4.2 Power and Authority..............................7
4.3 Enforceability...................................7
4.4 No Restrictions..................................7
4.5 Capitalization of SVPC; Shareholders.............7
4.6 No Violation.....................................7
4.7 Records..........................................8
4.8 Financial Statements.............................8
4.9 Changes Since the Current Balance Sheet Date.....8
4.10 Liabilities......................................9
4.11 Litigation..................................... 10
4.12 Environmental Matters...........................10
4.13 Real Estate.....................................17
4.14 Good Title to, Condition of and Adequacy of
Purchased Assets....................................19
4.15 Compliance with Laws............................19
4.16 Labor and Employment Matters....................20
4.17 Employee Benefit Plans..........................20
4.18 Tax Matters.....................................23
4.19 Insurance.......................................24
4.20 Receivables.....................................24
4.21 Licenses and Permits............................25
4.22 Relationships with Customers and Suppliers;
Affiliated Transactions.........................25
4.23 Intellectual Property...........................25
4.24 Contracts.......................................26
4.25 Accuracy of Information Furnished to CSI........27
4.26 Business Locations..............................27
4.27 Names; Prior Acquisitions.......................27
4.28 No Commissions..................................27
4.29 Inventory.......................................27
4.30 Product Warranty................................28
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Corporate Status................................28
5.2 Corporate Power and Authority...................28
5.3 Enforceability..................................29
5.4 No Commissions..................................29
5.5 Financial Information...........................29
5.6 Capitalization..................................29
5.7 New Permits.....................................29
5.8 Waiver of Bulk Sales Compliance ................29
5.9 Reliance on Information Furnished...............30
ARTICLE VI - INDEMNIFICATION
6.1 Agreement by SVPC and the Shareholders to
Indemnify.......................................30
6.2 Conditions of Indemnification of Buyer..........32
6.3 Agreement by Buyer to Indemnify.................33
6.4 Conditions of Indemnification of SVPC and
Shareholders....................................34
6.5 Effect of Insurance and Taxes...................35
6.6 Minimum Threshold for Indemnification...........36
6.7 Security for Indemnification Obligation.........36
6.8 Collection of Receivables.......................36
ARTICLE VII - ADDITIONAL AGREEMENTS
7.1 Further Assurances..............................37
7.2 Compliance with Covenants.......................37
7.3 Cooperation.....................................37
7.4 Tax Treatment...................................37
7.5 Restrictive Covenants...........................37
7.6 Taxes and Transfer Taxes........................39
7.7 Other Agreements................................39
7.8 Employment Procedure............................39
7.9 Corporate Name Change...........................40
7.10 Payments of Accounts Receivable.................40
7.11 New Permits.....................................40
7.12 Environmental Covenants of SVPC.................40
7.13 Environmental Covenants of Buyer................40
7.14 Incentive Compensation Plan.....................41
7.15 Business Expansion Plan.........................41
7.16 Buyer's Promissory Notes and Guaranty ..........41
7.17 Notes Receivable from Shareholders .............41
ARTICLE VIII - DEFINITIONS
8.1 Defined Terms...................................42
8.2 Other Definitional Provisions...................46
ARTICLE IX - GENERAL PROVISIONS
9.1 Survival of Obligations........................46
9.2 Confidential Nature of Information.............47
9.3 No Public Announcement.........................47
9.4 Notices........................................47
9.5 Successors and Assigns.........................49
9.6 Access to Records after Closing................49
9.7 Entire Agreement; Amendments...................49
9.8 Interpretation.................................49
9.9 Waivers........................................50
9.10 Expenses.......................................50
9.11 Partial Invalidity.............................50
9.12 Execution in Counterparts......................50
9.13 Further Assurances.............................50
9.14 Destruction of Information.....................50
9.15 Time of Essence................................51
9.16 Governing Law; Submission to Jurisdiction......51
INDEX OF EXHIBITS
Exhibit A Opinion of Counsel to Buyer
Exhibit B Opinion of Counsel to SVPC and the Shareholders
Exhibit C Bill of Sale
Exhibit D Employment Agreements
Exhibit E Incentive Compensation Plan
Exhibit F Buyer's Promissory Notes and Guaranty
INDEX OF SCHEDULES
Schedule 1.2(c) Other Excluded Assets
Schedule 2.1 Subordinated Term Note and Guaranty
Schedule 4.5 Capitalization of SVPC; Shareholders
Schedule 4.6 Violations; Conflicts; etc.
Schedule 4.8 Financial Statements
Schedule 4.9 Changes since the Current Balance Sheet Date
Schedule 4.10 Liabilities
Schedule 4.11 Litigation
Schedule 4.12 Environmental Matters
Schedule 4.13(a) Owned Premises
Schedule 4.13(b) Leased Premises
Schedule 4.13(c) Additional Locations
Schedule 4.14 Title to and Condition of Assets
Schedule 4.15 Compliance with Laws
Schedule 4.16 Labor and Employment Matters
Schedule 4.17 Employee Benefit Plans
Schedule 4.18 Tax Matters
Schedule 4.19 Insurance
Schedule 4.20 Receivables
Schedule 4.21 Licenses and Permits
Schedule 4.22 Relationships with Customers and Suppliers
Schedule 4.23 Intellectual Property
Schedule 4.24 Purchased Contracts
Schedule 4.26 Accuracy of Information
Schedule 4.27 Names
Schedule 4.28 Commissions
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered
into effective as of December 1, 1998, by and among Circuit Systems,
Inc., an Illinois corporation ("CSI"), and SVPC Circuit Systems, Inc.,
a California corporation and a wholly-owned subsidiary of CSI ("SVCS")
("SVCS," together with "CSI," constitute "BUYER"); and H.O.T.L.R.T.,
Inc. d/b/a Silicon Valley Printed Circuits, a California Corporation
("SVPC"); Xxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxx, and Xxxxxxx X.
Xxxxx, being the shareholders of SVPC (Xxxxxxxx, Xxxxxxx, and Xxxxx
are hereinafter sometimes referred to individually as "SHAREHOLDER"
and collectively as "SHAREHOLDERS") ("SVPC," together with
"SHAREHOLDERS," constitute "SELLERS").
R E C I T A L S:
A. SVPC is engaged in the business of manufacturing printed
circuit boards with emphasis on quick turnaround production for both
prototype and low-to-medium volume orders (the "BUSINESS").
B. SVPC desires to sell to Buyer, and Xxxxx desires to purchase
from SVPC, on a going- concern basis, substantially all of SVPC's
assets, properties, and Business, other than certain excluded assets,
all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchased Assets. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, SVPC shall sell,
transfer, assign, convey, and deliver to Buyer, and Buyer shall
purchase from SVPC, on a going-concern basis, free and clear of all
Liens (except for Permitted Liens), all of the Business and operations
of SVPC related to the Business and, except for the Excluded Assets as
set forth in Section 1.2 hereof, all of the assets and properties of
SVPC of every kind and description, wherever located, real, personal
or mixed, tangible or intangible, used or useable in connection with
the Business as the same shall exist on the Closing Date
(collectively, the "PURCHASED ASSETS"), including, without limitation,
all right, title, and interest of SVPC in, to, and under:
(a) All of the assets reflected on the Balance Sheet,
including, without limitation, the Receivables identified on Schedule
4.20, and those assets acquired subsequent to the Balance Sheet Date
(as hereinafter defined), except those assets disposed of or converted
into cash after the Balance Sheet Date in the Ordinary Course of
Business;
(b) All cash and cash equivalents on hand and in banks,
including checks deposited for collection.
(c) All raw materials, supplies, parts, work-in progress,
finished goods and other materials (including all such materials
subject to a consignment relationship) included in the inventory of
the Business (the "INVENTORY");
(d) The Permits listed in Schedule 4.21;
(e) The Purchased Contracts identified in Schedule 4.24, as
well as all contracts-in-process;
(f) The real property parcels commonly known as 0000-0000
Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000; including any rights and
easements of SVPC related thereto, as more fully described or referred
to in Schedule 4.13(a) (the "OWNED PREMISES");
(g) The trademarks, trade names, service marks, and
copyrights, which SVPC owns or has the right to use (and all goodwill
associated therewith), registered or unregistered, and the
applications for registration thereof, and the patents and
applications therefor, and the licenses relating to any of the
foregoing listed in Schedule 4.23 (as further defined in Section 4.23,
the "INTELLECTUAL PROPERTY");
(h) All mailing lists, customer lists, subscriber lists,
processes, computer software, manuals or business procedures, trade
secrets, designs, engineering drawings and reports, know-how and other
proprietary or confidential information used in or relating to the
Business;
(i) All books and records (including all data and other
information stored on discs, tapes, or other media) of SVPC relating
to the assets, properties and operations of the Business;
(j) All of SVPC's rights, claims, or causes of action
against third parties relating to the assets, properties, or
operations of the Business arising out of transactions occurring prior
to the Closing Date;
(k) All of SVPC's interest in and to all telephone and
telephone facsimile numbers, Internet website, and other directory
listings of the Business and any assumed or fictitious names related
to the Business;
(l) All prepaid expenses and deposits that benefit the
Buyer after the Closing Date; and
(m) All other assets, properties and rights specifically
set forth in the Agreement as being sold, transferred or assigned to,
or purchased by, Buyer.
1.2 Excluded Assets. Notwithstanding the provisions of Section
1.1, the Purchased Assets shall not include the following (herein
referred to as the "EXCLUDED ASSETS"):
(a) All corporate minute books and stock transfer books and
the corporate seal of SVPC; and
(b) The assets listed on Schedule 1.2(b).
1.3 Assumed Liabilities. On the Closing Date, Xxxxx shall
assume and agree to discharge the following obligations and
liabilities SVPC:
(a) All of the accounts and notes payable and accrued
expenses of SVPC reflected on the Balance Sheet, except those
liabilities subsequently discharged, and all liabilities incurred in
the Ordinary Course of Business after the Balance Sheet Date
including, but not limited to, warranty work.
(b) All obligations of SVPC to be paid or performed on
or after the Closing Date under the Purchased Contracts; except: to
the extent such liabilities and obligations, but for a breach or
default by SVPC, would have been paid, performed, or otherwise
discharged on or prior to the Closing Date or to the extent such
liabilities and obligations arise out of any such breach or default;
and
(c) All sales, use and property transfer taxes, and other
costs (including, but not limited to, escrow charges, title fees and
the like) relating to the transfer of the Owned Premises, incurred by
SVPC as a result of this transaction.
All of the foregoing liabilities and obligations to be
assumed by Buyer hereunder (excluding any Excluded Liabilities) are
referred to herein as the "ASSUMED LIABILITIES."
1.4 Excluded Liabilities. Buyer shall not assume or be
obligated to pay, perform, or otherwise discharge any liability or
obligation of SVPC, direct or indirect, known or unknown, absolute or
contingent, not expressly assumed by Buyer (all such liabilities and
obligations not being assumed are herein referred to as the "EXCLUDED
LIABILITIES") and, notwithstanding anything to the contrary in Section
1.3, none of the following shall be "ASSUMED LIABILITIES" for purposes
of this Agreement:
(a) Any liabilities of SVPC in respect of taxes of SVPC for
which SVPC is liable pursuant to Section 4.18;
(b) Any legal and accounting firm costs and expenses
incurred by SVPC or the Shareholders in excess of $10,000 each
incident to its negotiation and preparation of this Agreement from and
after August 25, 1998 and its performance and compliance with the
agreements and conditions contained herein;
(c) Any liabilities or obligations in respect of any
Excluded Assets;
(d) Any other liabilities of any kind or nature whatsoever
other than those described in Section 1.3;
(e) Any federal or state tax liability of the Shareholders;
and
(f) Any liabilities of SVPC related to the Employer Benefit
Plans pursuant to Section 4.17 including, but not limited to,
premiums, claims, penalties for late ERISA filings and the like.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase price (the "PURCHASE PRICE")
for the Purchased Assets shall be $7,000,000, consisting of:
$3,000,000 in the form of a Short Term Note (the "Short Term Note) and
$4,000,000 in the form of a subordinated term note ("Subordinated
Note"), both guaranteed by CSI ("Guaranty") copies of which Short Term
Note, Subordinated Note, and Guaranty are attached hereto on Schedule
2.1.
2.2 Allocation of Purchase Price. The Purchase Price shall be
allocated for tax purposes among the Purchased Assets in such amounts
as Buyer may reasonably request, in accordance with generally accepted
accounting principles. Such allocations shall be accepted by the
parties in writing at Closing and shall be binding on the parties.
SVPC shall sign and submit all necessary forms to report this
transaction for federal and state income tax purposes in accordance
with that allocation and shall not take a position for tax purposes
inconsistent therewith.
ARTICLE III
CLOSING
3.1 Closing Date. The Closing of the transactions contemplated
by this Agreement shall be on the date hereof at the office of SVPC,
Santa Clara, California ("CLOSING DATE"). The Closing shall be deemed
to be effective as of 12:01 a.m. (Chicago time) on December 1, 1998
(the "EFFECTIVE TIME").
3.2 Payment of the Purchase Price. Subject to fulfillment or
waiver of the conditions set forth in Article VII, the Purchase Price
shall be payable by Buyer to SVPC at Closing as follows: Buyer shall:
(a) pay to SVPC $3,000,000 by certified check or by wire-
transfer of funds; and
(b) deliver to SVPC the Subordinated Note and Guaranty.
3.3 Buyer's Additional Deliveries. At Closing Buyer shall
deliver to SVPC all the following:
(a) A certificate of the Secretary or an Assistant
Secretary of each of CSI and SVCS, dated as of the Closing Date, in
form and substance reasonably satisfactory to SVPC, as to:
(i) the resolutions of the Board of Directors of CSI
or SVCS, as applicable, authorizing the execution and performance of
this Agreement, the Other Agreements and the transactions contemplated
thereby; and
(ii) incumbency and signatures of the officers of CSI
or SVCS, as applicable, executing this Agreement and the Other
Agreements;
(b) The Other Agreements, each duly executed by each of CSI
and SVCS, as applicable;
(c) Such other documents as SVPC may reasonably request or
as may be otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets
to Buyer;
(d) A Certificate of Good Standing and Certificate of
Status Domestic Corporation, issued by the Secretary of State of
Illinois and California, with respect to each of CSI and SVCS,
respectively, dated no earlier than thirty (30) days prior to the
Closing Date;
(e) An opinion of counsel to Buyer in substantially the
form contained in Exhibit A;
(f) The Employment Agreement for each of the Shareholders
executed by an authorized officer of SVCS in substantially the form
contained in Exhibit D; and
(g) Promissory Notes (and Guaranty) for the Shareholders in
substantially the form contained in Exhibit F, in exchange for
existing notes to Shareholders in the same amount.
3.4 SVPC's Deliveries. At Closing SVPC and the Shareholders
shall deliver to Buyer the following:
(a) A certificate of the Secretary or an Assistant
Secretary of SVPC, dated as of the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to:
(i) the resolutions of the Board of Directors and
shareholders of SVPC authorizing the execution and performance of this
Agreement, the Other Agreements and the transactions contemplated
thereby; and
(ii) incumbency and signatures of the officers of
SVPC executing this Agreement and the Other Agreements.
(b) Opinions of counsel to SVPC and the Shareholders
substantially in the form contained in Exhibit B;
(c) The Bill of Sale duly executed by SVPC in substantially
the form contained in Exhibit C;
(d) The Employment Agreements executed by each of the
Shareholders in substantially the form contained in Exhibit D;
(e) Certificates of title or origin (or like documents)
with respect to any vehicles or equipment included in the Purchased
Assets for which a certificate of title or origin is required in order
to transfer title;
(f) The consents, waivers or approvals obtained by SVPC
with respect to the Purchased Assets or the consummation of the
transactions contemplated by this Agreement, if any;
(g) Certificate of Status Domestic Corporation issued by
the Secretary of State of California with respect to SVPC, dated no
more than thirty (30) days prior to the Closing Date;
(h) UCC-3 termination statements or other applicable
releases relating to any Liens other than Permitted Liens; and
(i) Landlord's waiver and consent forms for the Leased
Premises, if required by Xxxxx's lender;
(j) Existing notes to Shareholders, in exchange for Xxxxx's
Promissory Notes (and Guaranty) in the same amount; and
(k) Such other bills of sale, assignments and other
instruments of transfer or conveyance as Buyer may reasonably request
or as may be otherwise necessary to evidence and effect the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets
to Buyer.
In addition to the above deliveries, SVPC and the
Shareholders shall take all steps and actions as Buyer may reasonably
request or as may otherwise be necessary to put Buyer in actual
possession or control of the Purchased Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SVPC AND THE SHAREHOLDERS
As a material inducement to CSI and SVCS to enter into this
Agreement and to consummate the transactions contemplated hereby, the
Shareholders and SVPC hereby jointly and severally make the following
representations and warranties to CSI and SVCS:
4.1 Corporate Status. SVPC is a corporation duly organized,
legally existing and in good standing, and has filed all required
annual reports and paid all required franchise and other taxes and
fees, under the laws of the State of California. SVPC has the
requisite power and authority to own or lease its property and to
carry on its Business as now being conducted. SVPC has not qualified
to transact business as a foreign corporation in any other
jurisdiction. There is no pending or threatened proceeding for the
dissolution, liquidation, insolvency, or rehabilitation of SVPC.
4.2 Power and Authority. SVPC and each of the Shareholders have
the power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. SVPC has taken all action necessary
to authorize the execution and delivery of this Agreement, the
performance of its respective obligations hereunder and the
consummation of the transactions contemplated hereby. Each of the
Shareholders is a resident of the State of California and has the
requisite competence to execute and deliver this Agreement and to
perform his obligations hereunder and to consummate the transactions
contemplated hereby.
4.3 Enforceability. This Agreement and each of the Other
Agreements has been or will have been at the time of Closing duly
executed and delivered by SVPC and the Shareholders and constitutes or
will constitute the legal, valid, and binding obligation of each of
them, enforceable against them in accordance with their respective
terms.
4.4 No Restrictions. There are no proxies, voting rights,
Contracts, or other agreements or understandings with respect to the
voting of shares in SVPC or the transfer of the Purchased Assets other
than as set forth in this Agreement.
4.5 Capitalization of SVPC; Shareholders. The Shareholders are
the holders beneficially and of record of all issued and outstanding
shares of capital stock of SVPC, and the Shareholders own such shares
as set forth on Schedule 4.5, free and clear of all Liens,
restrictions and claims of any kind, except as set forth on Schedule
4.5.
4.6 No Violation. Except as set forth on Schedule 4.6, the
execution and delivery of this Agreement by SVPC and each of the
Shareholders, the performance by each of them of their respective
obligations hereunder and the consummation by them of the transactions
contemplated by this Agreement will not:
(a) contravene any provision of the Articles of
Incorporation or Bylaws of SVPC;
(b) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment or order of any
Governmental Authority or of any arbitration award which is either
applicable to, binding upon or enforceable against SVPC or the
Shareholders;
(c) conflict with, result in any breach of, or constitute a
default (or an event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to
a right to terminate, amend, modify, abandon or accelerate, any
Contract which is applicable to, binding upon or enforceable against
SVPC or the Shareholders;
(d) result in or require the creation or imposition of any
Lien upon or with respect to any of the property or assets of SVPC; or
(e) require the consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except any SEC and other
securities or exchange filings required to be made by CSI.
4.7 Records. The copies of the respective certificate of
incorporation and bylaws of SVPC which were provided to CSI are true,
accurate, and contained all written minutes of meetings and reflect
all amendments made through the date of this Agreement. The minute
books for SVPC provided to CSI for review were correct and complete as
of the date of such review, no further entries have been made through
the date of this Agreement, such minute books contain the true
signatures of the persons purporting to have signed them, and such
minute books contain an accurate record of all corporate actions of
the shareholders and directors (and any committees thereof) of SVPC
taken by written consent or at a meeting within five (5) years prior
to the date hereof. All material corporate actions taken by SVPC have
been duly authorized or ratified. All accounts, books, ledgers, and
official and other records of SVPC within five (5) years of the date
hereof have been fully, properly and accurately kept and completed in
all material respects, and there are no material inaccuracies or
discrepancies of any kind contained therein, and no meeting of the
shareholders, directors, or any committee has been held for which
minutes have not been prepared and are not contained in such minute
books.
4.8 Financial Statements. The Shareholders have delivered to
CSI the financial statements of SVPC, as of December 31, 1996 and
1997, including the notes thereto, reviewed by Xxxxxxxx, Xxxxxxx &
Co., and the internally prepared unaudited financial statements of
SVPC as of July 31, 1998 (collectively, the "FINANCIAL STATEMENTS"),
copies of which are attached as Schedule 4.8 hereto. The balance
sheet dated as of July 31, 1998, included in the Financial Statements
is referred to herein as the "CURRENT BALANCE SHEET." The Financial
Statements fairly present the financial position of SVPC at each of
the balance sheet dates and the results of operations for the periods
covered thereby and, except as set forth in Schedule 4.8, have been
prepared in accordance with GAAP consistently applied throughout the
periods indicated. Except as set forth in Schedule 4.8, the books and
records of SVPC fully and fairly reflect the transactions, properties,
assets, and liabilities of SVPC. Except as set forth in Schedule 4.8,
there are no material special or non-recurring items of income or
expense during the periods covered by the Financial Statements, and
the balance sheets included in the Financial Statements do not reflect
any writeup or revaluation increasing the book value of any assets,
except as specifically disclosed in the notes thereto. Except as set
forth in Schedule 4.8, the Financial Statements reflect all
adjustments necessary for a fair presentation of the financial
information contained therein.
4.9 Changes Since the Current Balance Sheet Date. Except as
disclosed in Schedule 4.9, since the date of the Current Balance
Sheet, SVPC has not:
(a) sold, leased or transferred any of its properties or
assets other than in the Ordinary Course of Business consistent with
past practice;
(b) made any payment in respect of its liabilities other
than in the Ordinary Course of Business consistent with past practice;
(c) incurred any obligations or liabilities (including any
indebtedness) or entered into any transaction or series of
transactions involving in excess of $10,000 in the aggregate out of
the Ordinary Course of Business, except for this Agreement and the
transactions contemplated hereby;
(d) suffered any theft, damage, destruction or casualty
loss not covered by insurance and for which a timely claim was filed,
in excess of $10,000 in the aggregate;
(e) suffered any extraordinary loss (whether or not covered
by insurance);
(f) waived, canceled, compromised, or released any rights
having a value in excess of $10,000 in the aggregate;
(g) made or adopted any change in its accounting practices
or policies;
(h) made any adjustment to its books and records other than
in respect of the conduct of its Business activities in the Ordinary
Course of Business consistent with past practice;
(i) entered into any employment agreement not previously
disclosed to CSI;
(j) terminated, amended or modified any agreement involving
an amount in excess of $10,000;
(k) imposed any security interest or other Lien on any of
its assets other than in the Ordinary Course of Business consistent
with past practice;
(l) delayed paying any account payable which is due and
payable except to the extent being contested in good faith and except
in the ordinary course of its Business consistent with past practice;
(m) made or pledged any charitable contribution other than
in the Ordinary Course of Business consistent with past practice; or
(n) made any Shareholder distributions.
4.10 Liabilities. Except as set forth on Schedule 4.10, SVPC
does not have any liabilities or obligations, whether accrued,
absolute, contingent, or otherwise, except:
(a) to the extent reflected or taken into account in the
Current Balance Sheet and not heretofore paid or discharged;
(b) to the extent specifically set forth in or incorporated
by express reference in any of the Schedules attached hereto;
(c) liabilities incurred in the Ordinary Course of Business
consistent with past practice since the date of the Current Balance
Sheet (none of which relates to breach of contract, breach of
warranty, tort, infringement, or violation of law, or which arose out
of any action, suit, claim, governmental investigation or arbitration
proceeding); and
(d) normal accruals, reclassifications, and audit
adjustments which would be reflected on an audited financial statement
and which would not be material in the aggregate.
4.11 Litigation. Except as set forth on Schedule 4.11 or
Schedule 4.12, there is no action, suit, or other legal or
administrative proceeding or governmental investigation pending or
threatened by or against SVPC or the Shareholders or anticipated or
contemplated by SVPC or the Shareholders, nor, to the best knowledge
of SVPC and the Shareholders, is there any such action, suit, or other
legal or administrative proceeding or governmental investigation
anticipated or contemplated against SVPC or the Shareholders,
affecting SVPC or any of its respective properties or assets, or the
Shareholders, or which question the validity or enforceability of this
Agreement or the transactions contemplated hereby, and to the best
knowledge of each of the Shareholders and SVPC, there is no basis for
any of the foregoing. Except as set forth in Schedule 4.11 or
Schedule 4.12, there are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to
which SVPC is or was a party which have not been complied with in full
or which continue to impose any material obligations on SVPC.
4.12 Environmental Matters.
(a) Green Environment, Inc. ("GEI") performed subsurface
investigations of the properties located at 0000-0000 Xxxxxx Xxxx,
Xxxxx Xxxxx, Xxxxxxxxxx (previously defined in this Agreement as the
"Owned Premises") and 0000-0000 Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxxx
(hereinafter defined in this Agreement as the "Leased Premises"), and
has prepared Environmental Site Assessments for the Owned Premises and
the Leased Premises (collectively, the AGEI "ssessments"). The
findings and conclusions of the GEI Assessments are attached hereto as
part of this Schedule 4.12 and are incorporated herein by reference.
The GEI and Assessments contain certain conclusions of fact and
recommendations, including, but not limited to, the following:
0000-0000 Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxxx (the Owned
Premises)
As a result of subsurface investigation activities on and
off the Owned Premises performed by XXX as documented in its report
entitled "Environmental Site Assessment, 3571-0000 Xxxxxx Xxxx, Xxxxx
Xxxxx, Xxxxxxxxxx," and dated November 6, 1998, the following
substances were detected in groundwater beneath the eastern area of
the Owned Premises:
Substance Range of Concentration
--------- ----------------------
Trichloroethene 3.4 to 22 parts per billion (ppb)
1,1-dichloroethene 2.2 to 25.0 ppb
1,1,1-trichloroethane 1.4 to 14.0 ppb
0000-0000 Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxxx (the Leased
Premises)
As a result of subsurface investigation activities on and
off the Leased Premises at 0000-0000 Xxxxxx Xxxx, Xxxxx Xxxxx,
Xxxxxxxxxx, performed by GEI as documented in its report entitled
"Environmental Site Assessment, 0000-0000 Xxxxxx Xxxx, Xxxxx Xxxxx,
Xxxxxxxxxx," and dated November 6, 1998, trichloroethene was detected
in groundwater beneath the eastern area of the Leased Premises at 11.0
ppb, and the following substances were detected in groundwater beneath
the eastern area of the Owned Premises, and within a few feet of the
property line of the Leased Premises, leading GEI to conclude those
substances may also exist in the groundwater beneath the Leased
Premises, even though the water samples taken did not detect the
presence of those substances:
Substance Range of Concentration
--------- ----------------------
1,1-dichloroethene 2.2 to 25.0 ppb
1,1,1-trichloroethane 1.4 to 14.0 ppb
Established Groundwater Cleanup Standards
The California Regional Water Quality Control Board has
established the following final groundwater cleanup standards at a
nearby property: 5 ppb trichloroethene, 6 ppb 1,1-dichloroethene, and
200 ppb 1,1,1-trichloroethane. Therefore, trichloroethene and 1,1-
dichloroethene have been detected in groundwater beneath the Owned
Premises at concentrations that may require future groundwater
remediation, and trichloroethene has been detected in groundwater
beneath the Leased Premises at concentrations that may require future
groundwater remediation. In addition, GEI has reason to believe that
1,1-dichloroethene may be present in groundwater beneath the Leased
Premises at a concentration that may require future groundwater
remediation. The California Regional Water Quality Control Board
and/or another public or private entity may require additional
subsurface investigations on the properties.
Asbestos-Containing Floor Tile
Approximately 400 square feet of asbestos-containing floor
tile are located within the Leased Premises.
(b) Except as set forth in and the GEI Assessments:
(i) SVPC is and has at all times been in material
compliance with all Environmental, Health and Safety Laws
(as defined herein) governing its Business, operations,
properties and assets, including, without limitation,
Environmental, Health and Safety Laws with respect to
discharges into the ground water, surface water and soil,
emissions into the ambient air, and generation,
accumulation, storage, treatment, transportation, transfer,
labeling, handling, manufacturing, use, spilling, leaking,
dumping, discharging, release or disposal of Hazardous
Substances (as defined herein), or other Waste (as defined
herein). SVPC is not currently liable for any penalties,
fines, or forfeitures for failure to comply with any
Environmental, Health and Safety Laws. SVPC is in material
compliance with all notice, record keeping, and reporting
requirements of all Environmental, Health and Safety Laws,
and has complied with all informational requests or demands
arising under the Environmental, Health and Safety Laws.
(ii) SVPC has obtained, or caused to be obtained,
and is in material compliance with, all licenses,
certificates, permits, approvals and registrations
(collectively the "LICENSES") required by the Environmental,
Health and Safety Laws for the ownership of its properties
and assets and the operation of its Business as presently
conducted, including, without limitation, all air emission,
water discharge, water use and solid waste, hazardous waste
and other Waste generation, transportation, transfer,
storage, treatment or disposal Licenses, and is in
compliance in all material respects with all the terms,
conditions, and requirements of such Licenses, and copies of
such Licenses have been provided to CSI. There are no
administrative or judicial investigations, notices, claims
or other proceedings pending or threatened by any
Governmental Authority or third parties against SVPC, its
Business, operations, properties, or assets, which question
the validity or entitlement of to any License required by
the Environmental, Health and Safety Laws for the ownership
of the properties and assets of SVPC and the operation of
its Business or wherein an unfavorable decision, ruling or
finding could have a Material Adverse Effect on the
Purchased Assets, the Business or SVPC, or which would
impose any liability upon CSI in the event that the
transaction contemplated by this Agreement closes.
(iii) SVPC has not received, nor is it aware of,
nor does it have any basis to expect to receive any non-
compliance order, warning letter, investigation, notice of
violation, claim, suit, action, judgment, or administrative
or judicial proceeding pending or threatened against or
involving SVPC, its Business, operations, properties, or
assets, issued by any Governmental Authority or third party
with respect to any Environmental, Health and Safety Laws in
connection with the ownership by SVPC of its properties or
assets or the operation of its Business, which has not been
resolved to the satisfaction of the issuing Governmental
Authority or third party in a manner that would not impose
any obligation, burden or continuing liability on CSI in the
event that the transaction contemplated by this Agreement
closes, or which could have a Material Adverse Effect on the
Purchased Assets, the Business, or SVPC.
(iv) SVPC is in full compliance with, and is not
in breach of or default under any applicable writ, order,
judgment, injunction, governmental communication or decree
issued pursuant to the Environmental, Health and Safety Laws
and no event has occurred or is continuing which, with the
passage of time or the giving of notice or both, would
constitute such non-compliance, breach or default
thereunder, or affect the Business or the Purchased Assets.
(v) SVPC has not generated, manufactured, used,
transported, transferred, stored, handled, treated, spilled,
leaked, dumped, discharged, released or disposed, nor has it
allowed or arranged for any third parties to generate,
manufacture, use, transport, transfer, store, handle, treat,
spill, leak, dump, discharge, release or dispose of,
Hazardous Substances or other waste to or at any location
other than a site lawfully permitted to receive such
Hazardous Substances or other waste for such purposes, nor
has it performed, arranged for or allowed by any method or
procedure such generation, manufacture, use, transportation,
transfer, storage, treatment, spillage, leakage, dumping,
discharge, release or disposal in contravention of any
Environmental, Health and Safety Laws. SVPC has not
generated, manufactured, used, stored, handled, treated,
spilled, leaked, dumped, discharged, released or disposed
of, or allowed or arranged for any third parties to
generate, manufacture, use, store, handle, treat, spill,
leak, dump, discharge, release or dispose of, Hazardous
Substances or other waste upon property currently or
previously owned or leased by it, except as permitted by
law. For purposes of this Agreement, the term "Hazardous
Substances" shall be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other
contaminant, pollutant or constituent thereof, whether
liquid, solid, semi-solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, metals, by-
products, pesticides, asbestos containing materials,
petroleum or petroleum products, and polychlorinated
biphenyls, the presence of which requires investigation or
remediation under any Environmental, Health and Safety Laws
or which are or become regulated, listed or controlled by,
under or pursuant to any Environmental Health and Safety
Laws, including, without limitation, the United States
Department of Transportation Table (49 CFR 172, 101) or by
the Environmental Protection Agency as hazardous substances
(40 CFR Part 302) and any amendments thereto; the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. Section 9601, et
seq. (hereinafter collectively "CERCLA"); the Solid Waste
Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976 and subsequent Hazardous and Solid
Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq.
(hereinafter, collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Section 1801, et
seq.; the Clean Water Act, as amended, 33 U.S.C. Section
1311, et seq.; the Clean Air Act, as amended (42 U.S.C.
Section 7401-7642); Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7
U.S.C. Section 136-136y ("FIFRA"); the Emergency Planning
and Community Right-to-Know Act of 1986 as amended, 42
U.S.C. Section 11001, et seq. (Title III of XXXX)
("EPCRA"); the Occupational Safety and Health Act of 1970,
as amended, 29 U.S.C. Section 651, et seq. ("OSHA"); any
similar state statute, or any future amendments to, or
regulations implementing such statutes, laws, ordinances,
codes, rules, regulations, orders, rulings, or decrees, or
which has been or shall be determined or interpreted at any
time by any Governmental Authority to be a hazardous or
toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree. For
purposes of this Section 4.12, the term "Waste" shall be
construed broadly to include agricultural wastes, biomedical
wastes, biological wastes, bulky wastes, construction and
demolition debris, garbage, household wastes, industrial
solid wastes, liquid wastes, recyclable materials, sludge,
solid wastes, special wastes, used oils, white goods, and
yard trash.
(vi) SVPC has not caused, allowed to be caused, or
permitted, either by action or inaction, a Release or
Discharge, or threatened Release or Discharge, of any
Hazardous Substance on, into or beneath the surface of any
parcel of the Purchased Assets, the Owned Premises or the
Leased Premises or to any properties adjacent thereto.
There has not occurred, nor is there presently occurring, a
Release or Discharge, or threatened Release or Discharge, of
any Hazardous Substance on, into or beneath the surface of
any portion of the Owned Premises or the Leased Premises or
to any properties adjacent thereto. For purposes of this
Section, the terms "release" and "Discharge" shall have the
meanings given them in the Environmental, Health and Safety
Laws.
(vii) SVPC has not generated, handled,
manufactured, treated, stored, used, shipped, transported,
transferred, or disposed of, nor has it allowed or arranged,
by contract, agreement, or otherwise, for any third parties
to generate, handle, manufacture, treat, store, use, ship,
transport, transfer, or dispose of, any Hazardous Substance
or other Waste to or at a site which, pursuant to CERCLA or
any similar state law:
(A) has been placed on the National Priorities
List or its state equivalent; or
(B) the Environmental Protection Agency or the
relevant state agency has notified that it has proposed
or is proposing to place on the National Priorities
List or its state equivalent. Neither SVPC nor the
Shareholders have received notice, and neither SVPC nor
the Shareholders have knowledge of any facts which
could give rise to any notice, that is a potentially
responsible party for a federal or state environmental
cleanup site or for corrective action under CERCLA,
RCRA or any other applicable Environmental Health and
Safety Laws. SVPC has not submitted nor was
required to submit any notice pursuant to Section
103(c) of CERCLA with respect to the Leased Premises,
the Owned Premises or the Purchased Assets. SVPC has
not received any written or oral request for
information in connection with any federal or state
environmental cleanup site, or in connection with any
of the real property or premises where SVPC has
transported, transferred or disposed of other Wastes.
SVPC has not been required to and has not undertaken
any response or remedial actions or cleanup actions of
any kind at the request of any Governmental Authorities
or at the request of any other third party. SVPC has no
liability under any Environmental, Health and Safety
Laws for personal injury, property damage, natural
resource damage, or cleanup obligations.
(viii) SVPC does not use, nor has it used, any
Aboveground Storage Tanks or Underground Storage Tanks, and
there are not now nor, to the best of its Knowledge and
belief, have there ever been any Aboveground Storage Tanks,
and/or Underground Storage Tanks in, on or under the Owned
Premises and Leased Premises. For purposes of this Section
4.12, the terms "Aboveground Storage Tanks" and "Underground
Storage Tanks" shall have the meanings given them in Section
6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation,
order ruling, or decree governing Aboveground Storage Tanks
or Underground Storage Tanks.
(ix) Schedule 4.12 identifies, regardless of their
materiality:
(A) all environmental audits, assessments or
occupational health studies undertaken by SVPC or its
respective agents, or by the Shareholders, or by any
Governmental Authority, or by any third party, relating
to or affecting SVPC or any of the Leased Premises, the
Owned Premises or the Purchased Assets;
(B) the results of any ground, water, soil, air
or asbestos monitoring undertaken by SVPC or its
agents, or by the Shareholders, or by any Governmental
Authority, or by any third party, relating to or
affecting SVPC or any of the Leased Premises, the Owned
Premises, or the Purchased Assets;
(C) all written communications between SVPC and
any Governmental Authority arising under or related to
Environmental, Health and Safety Laws; and
(D) all citations issued under OSHA, or similar
state or local statutes, laws, ordinances, codes,
rules, regulations, orders, rulings, or decrees,
relating to or affecting SVPC or any of the Leased
Premises, the Owned Premises or the Purchased Assets.
(x) Schedule 4.12 contains a recent survey, including
recommendations for management, of "friable asbestos" (as
such term is identified under the Environmental, Health and
Safety Laws) present on the Owned Premises and Leased
Premises. The recommendations have been fully implemented
as of the date of this Agreement. SVPC has operated and
continues to operate in compliance with all Environmental,
Health and Safety Laws governing the handling, use and
exposure to and disposal of asbestos or asbestos-containing
materials. There are no claims, actions, suits,
governmental investigations or proceedings before any
Governmental Authority or third party pending, or
threatened against or directly affecting SVPC, or any of
its assets or operations relating to the use, handling, or
exposure to and disposal of asbestos or asbestos-containing
materials in connection with its assets and operations.
(xi) As used in this Agreement, "Environmental,
Health and Safety Laws" means all federal, state, regional
or local statutes, laws, rules, regulations, codes, orders,
plans, injunctions, decrees, rulings, and changes or
ordinances or judicial or administrative interpretations
thereof, whether currently in existence or hereafter
enacted or promulgated, any of which govern (or purport to
govern) or relate to pollution, protection of the
environment, public health and safety, air emissions, water
discharges, hazardous or toxic substances, solid or
hazardous waste or occupational health and safety, as any
of these terms are or may be defined in such statutes,
laws, rules, regulations, codes, orders, plans,
injunctions, decrees, rulings and changes or ordinances, or
judicial or administrative interpretations thereof,
including, without limitation, RCRA, CERCLA, the Hazardous
Materials Transportation Act, the Toxic Substances Control
Act, the Clean Air Act, the Clean Water Act, FIFRA, EPCRA
and OSHA, as any of them may be or have been amended from
time to time, together with all regulations promulgated
thereunder. In the event any Environmental, Health and
Safety Law is amended to broaden the meaning of any term
defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment.
(xii) Schedule 4.12 identifies the operations and
activities, and locations thereof, which have been conducted
and are being conducted by SVPC on any of the Purchased
Assets, the Owned Premises, or the Leased Premises which
have involved the generation, accumulation, storage,
treatment, transportation, labeling, handling,
manufacturing, use, spilling, leaking, dumping, discharging,
release, or disposal of Hazardous Substances.
(xiii) Schedule 4.12 identifies the locations to
which SVPC has transferred, transported, hauled, moved, or
disposed of Waste over the past five years and the types and
volumes of Waste transferred, transported, hauled, moved, or
disposed of to each such location.
(xiv) None of the Purchased Assets, the Owned
Premises, or Leased Premises presently includes, or has been
constructed upon, any "wetlands" as defined under applicable
Environmental, Health and Safety Laws.
(xv) Schedule 4.12 identifies all Material:
(A) Remediation of any and all Hazardous
Substances Discharged or Released from the operations
of the Business and any other investigative, clean-up,
and corrective actions, and the planning thereof,
including without limitation, corrective, remedial or
removal actions, and pre- or post-remediation
monitoring, conducted with respect to any Environmental
Condition ("REMEDIAL ACTION"); or
(B) Claims, citations, notices of violation or
similar notices, actions, suits, orders, governmental
investigations or proceedings, whether administrative
or judicial and whether civil or criminal, alleging
the violation of any Environmental, Health or Safety
Laws ("LEGAL ACTION").
For purposes of this Section 4.12(xv), the term "MATERIAL"
when applied to a Remedial Action shall mean:
(A) any Remedial Action (excluding attorneys
fees) undertaken as a result of any Legal Action, and
for which the potential costs have exceeded or could
reasonably be expected to exceed $10,000; and
(B) any Remedial Action not undertaken as a
result of any Legal Action, and for which the potential
costs have exceeded or could reasonably be expected to
exceed $10,000.
For purposes of this Section 4.12(o), the term "MATERIAL"
when applied to a Legal Action shall mean:
(A) any Legal Action to which any Governmental
Authority is a party, and for which the potential
liability to SVPC or the Shareholders collectively has
exceeded or could reasonably be expected to exceed
$10,000; and
(B) any Legal Action to which any Governmental
Authority is not a party, and for which the potential
liability to SVPC or the Shareholders (excluding
attorneys fees) collectively has exceeded or could
reasonably be expected to exceed $10,000.
(xvi) During the previous five (5) years:
(A) no employees, agents or independent
contractors of SVPC have died or sustained severe
personal injuries on the Owned Premises or Leased
Premises or in the course of their employment or
engagement by SVPC; and
(B) Neither SVPC nor any of its properties has
been the subject of fines, penalties or charges issued
or assessed by OSHA in excess of $5,000.
4.13 Real Estate.
(a) SVPC owns the real property set forth on Schedule
4.13(a), which Schedule sets forth the location and size of and
principal improvements and buildings on the Owned Premises.
(b) Schedule 4.13(b) sets forth a list of all leases,
licenses, or similar agreements with respect to interests in real
estate (the "LEASES") to which SVPC is a party (copies of which have
previously been furnished to CSI), in each case setting forth:
(i) the lessor and lessee thereof and the date and
term of each of the Leases;
(ii) the legal description or street address of
each property covered thereby; and
(iii) a brief description (including size and
function) of the principal improvements and buildings
thereon (the ALEASED PREMISES"), all of which are within the
property set-back and building lines of the respective
property. The Leases are in full force and effect and have
not been amended, except as set forth on Schedule 4.13(b),
and no party thereto is in default or breach under any such
Lease. No event has occurred that, with the passage of time
or the giving of notice or both, would cause a material
breach of or default under any of such Leases. To the best
knowledge of SVPC and the Shareholders, there is no breach
or anticipated breach by any other party to such Leases.
Except as set forth on Schedule 4.13(b), with respect to
each such Leased Premises:
(A) SVPC has valid leasehold interests in the
Leased Premises leased by it, which leasehold interests are free and
clear of any Liens, covenants, easements, or title defects of any
nature whatsoever;
(B) the portions of the buildings located on the
Leased Premises that are used in the Business of SVPC are in good
repair and condition, normal wear and tear excepted, and are in the
aggregate sufficient to satisfy SVPC's current and reasonably
anticipated normal business activities as conducted thereat;
(C) each of the Leased Premises:
(1) has direct access to public roads or
access to public roads by means of a perpetual access easement, such
access being sufficient to satisfy the current and reasonably
anticipated normal transportation requirements of SVPC's Business as
presently conducted at such parcel; and
(2) is served by all utilities in such
quantity and quality as are sufficient to satisfy the current normal
business activities as conducted at such parcel; and
(3) SVPC has not received notice of:
(a) any condemnation proceeding with
respect to any portion of the Leased Premises or any access thereto,
and to the best knowledge of SVPC and the Shareholders, no such
proceeding is contemplated by any Governmental Authority; or
(b) any special assessment which may
affect any of the Leased Premises and to the best knowledge of SVPC
and the Shareholders, no such special assessment is contemplated by
any Governmental Authority.
(c) all of the Purchased Assets are
located on the Owned Premises, the Leased Premises, or the other
locations identified on Schedule 4.13(c).
4.14 Good Title to, Condition of, and Adequacy of Purchased
Assets.
(a) Except as set forth on Schedule 4.14, SVPC has good and
marketable title to all of the Purchased Assets, free and clear of any
Liens (other than Permitted Liens) or restrictions on use.
(b) The Purchased Assets are in good operating condition,
normal wear and tear excepted, and have been maintained in accordance
with sound industry practices.
(c) The Purchased Assets constitute all of the assets and
properties necessary for the conduct of the Business of SVPC in the
manner in which and to the extent to which such Business is currently
being conducted.
4.15 Compliance with Laws.
(a) Except as set forth in Schedule 4.12 or Schedule 4.15,
SVPC is and has been in compliance in all material respects with all
laws, regulations, and orders applicable to it, its respective
Business and operations (as conducted by it now and in the past), and
the Purchased Assets. Except as set forth on Schedule 4.12 or
Schedule 4.15, SVPC has not been cited, fined, or otherwise notified
of any asserted past or present failure to comply with any laws,
regulations or orders which have not been permanently cured and no
proceeding with respect to any such violation is pending or
threatened.
(b) SVPC has not made any payment of funds in connection
with its Business that is prohibited by law, and no funds have been
set aside to be used in connection with its Business for any payment
prohibited by law.
(c) SVPC is not subject to any Contract, decree or
injunction which restricts the continued operation of any Business or
the expansion thereof to other geographical areas, customers and
suppliers, or lines of Business.
4.16 Labor and Employment Matters. Schedule 4.16 sets forth
the name, address, social security number and current rate of
compensation (base salary and bonus and/or commission) of each of the
employees of SVPC as of July 31, 1998 and his or her relationship, if
any, to any director, employee or officer of SVPC. Except as set
forth in Schedule 4.16, SVPC is not a party to or bound by any
collective bargaining agreement or any other agreement with a labor
union, and there have been no efforts by any labor union during the
twenty-four (24) months prior to the date hereof to organize any
employees of SVPC into one or more collective bargaining units. There
is no pending or threatened labor dispute, strike or work stoppage
that affects or that may affect the Business of SVPC or which may
interfere with its respective continued operations. SVPC has not
within the last twenty-four (24) months committed any unfair labor
practice as defined in the National Labor Relations Act, as amended,
and there is no pending or threatened charge or complaint against by
or with the National Labor Relations Board or any representative
thereof. There has been no strike, walkout, or work stoppage
involving any of the employees of SVPC during the twenty-four (24)
months prior to the date hereof. The Shareholders are not aware that
any executive or employee or group of employees has any plans to
terminate his, her, or their employment with SVPC as a result of this
Agreement or otherwise. Schedule 4.16 contains detailed information
about each contract, agreement or plan of the following nature,
whether formal or informal, and whether or not in writing, to which
SVPC is a party or under which it has an obligation:
(a) employment agreements;
(b) employee handbooks, policy statements and similar
plans;
(c) noncompetition agreements; and
(d) consulting agreements.
None of the parties to any of the contracts or agreements
listed on Schedule 4.16 is an Affiliate of a Shareholder, SVPC, or any
of their respective directors, employees, officers, relatives or
Affiliates, except by reason of the contract or agreement listed on
Schedule 4.16. SVPC has complied with applicable laws, rules, and
regulations relating to employment, civil rights and equal employment
opportunities, including but not limited to, the Civil Rights Act of
1964, the Fair Labor Standards Act and the Worker Adjustment and
Retraining Notification Act of 1988.
4.17 Employee Benefit Plans.
(a) Employee Benefit Plans. Schedule 4.17 contains a list
setting forth each employee benefit plan or arrangement of SVPC,
including, but not limited to, employee pension benefit plans, as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), employee welfare benefit plans, as
defined in Section 3(1) of ERISA, deferred compensation plans, stock
option plans, Section 125 Premium Only Plan, bonus plans, stock
purchase plans, hospitalization, disability and other insurance plans,
severance or termination pay plans and policies, whether or not
described in Section 3(3) of ERISA, in which employees, their spouses
or dependents, of SVPC participate (the "EMPLOYEE BENEFIT PLANS")
(true and accurate copies of which, together with the most recent
annual reports on Form 5500 and summary plan descriptions with respect
thereto, were provided to CSI).
(b) Compliance with Law. With respect to each Employee
Benefit Plan:
(i) each has been administered in all material
respects in compliance with its terms and with all applicable laws,
including, but not limited to, ERISA and the Internal Revenue Code of
1986, as amended (the "CODE");
(ii) no actions, suits, claims or disputes are pending
or threatened;
(iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or regulatory
agency;
(iv) there are no facts which could give rise to
any material liability in the event of any such investigation, claim,
action, suit, audit, review, or other proceeding;
(v) all reports, returns, and similar documents
required to be filed with any governmental agency or distributed
to any plan participant have been duly or timely filed or distributed;
and
(vi) no "prohibited transaction" has occurred
within the meaning of the applicable provisions of ERISA or the Code.
(c) Qualified Plans. With respect to each Employee Benefit
Plan intended to qualify under Code Section 401(a):
(i) the Internal Revenue Service has issued a
favorable determination letter, true and correct copies of which have
been furnished to CSI, that such plans are qualified and exempt from
federal income taxes;
(ii) no such determination letter has been revoked
nor has revocation been threatened, nor has any amendment or other
action or omission occurred with respect to any such plan since the
date of its most recent determination letter or application therefor
in any respect which would adversely affect its qualification or
materially increase its costs;
(iii) no such plan has been amended in a manner
that would require security to be provided in accordance with Section
401(a)(29) of the Code;
(iv) no reportable event (within the meaning of
Section 4043 of ERISA) has occurred, other than one for which the
thirty (30) day notice requirement has been waived; and
(v) as of the Effective Time, the present value of all
liabilities that would be "benefit liabilities" under Section
4001(a)(16) of ERISA if benefits described in Code Section
411(d)(6)(B) were included will not exceed the then current fair
market value of the assets of such plan (determined using the
actuarial assumptions used for the most recent actuarial valuation for
such plan);
(vi) except as disclosed on Schedule 4.17, all
contributions to, and payments from and with respect to such plans,
which may have been required to be made in accordance with such plans
and, when applicable, Section 302 of ERISA or Section 412 of the Code,
have been timely made;
(vii) all such contributions to the plans, and all
payments under the plans (except those to be made from a trust
qualified under Section 401(a) of the Code) and all payments with
respect to the plans (including, without limitation, PBGC and
insurance premiums) for any period ending before the Closing Date that
are not yet, but will be, required to be made are properly accrued and
reflected on the Current Balance Sheet or are disclosed on Schedule
4.17.
(d) Welfare Plans. Other than as disclosed in Schedule
4.17:
(i) SVPC is not obligated under any employee welfare
benefit plan as described in Section 3(1) of ERISA ("WELFARE PLAN"),
whether or not disclosed in Schedule 4.17, to provide medical or death
benefits with respect to any employee or former employee of SVPC or
its predecessors after termination of employment;
(ii) SVPC has complied in all material respects
with the notice and continuation coverage requirements of Section
4980B of the Code and the regulations thereunder with respect to each
Welfare Plan that is, or was during any taxable year for which the
statute of limitations on the assessment of federal income taxes
remains, open, by consent or otherwise, a group health plan within the
meaning of Section 5000(b)(1) of the Code; and
(iii) there are no reserves, assets, surplus or
prepaid premiums under any Welfare Plan which is an Employee Benefit
Plan. The consummation of the transactions contemplated by this
Agreement will not entitle any individual to severance pay, and, will
not accelerate the time of payment or vesting, or increase the amount
of compensation, due to any individual.
(e) Other Liabilities. Except as set forth on Schedule
4.17:
(i) none of the Employee Benefit Plans obligates SVPC
to pay separation, severance, termination, or similar benefits solely
as a result of any transaction contemplated by this Agreement;
(ii) all required or discretionary (in accordance with
historical practices) payments, premiums, contributions,
reimbursements, or accruals for all periods ending prior to or as of
the Effective Date shall have been made or properly accrued on the
Current Balance Sheet; and
(iii) none of the Employee Benefit Plans has any
unfunded liabilities which are not reflected on the Current Balance
Sheet or the books and records of SVPC.
4.18 Tax Matters. Except as set forth in Schedule 4.18 hereto,
all Tax returns required to be filed prior to the date hereof with
respect to SVPC or any of its respective income, properties,
franchises, or operations have been filed, each such Tax Return has
been prepared in compliance with all applicable laws and regulations,
and all such Tax Returns are true, complete, and accurate in all
respects. All Taxes due and payable by or with respect to SVPC have
been paid or accrued on the Current Balance Sheet or will be accrued
on its books and records as of the Closing. Except as set forth in
Schedule 4.18 hereto:
(a) with respect to each taxable period of SVPC, no taxable
period has been audited by the relevant taxing authority;
(b) no deficiency or proposed adjustment that has not been
settled or otherwise resolved for any amount of Taxes has been
asserted or assessed by any taxing authority against SVPC;
(c) SVPC has not consented to extend the time in which any
Taxes may be assessed or collected by any taxing authority;
(d) SVPC has not requested or been granted an extension of
the time for filing any Tax Return to a date later than the Closing
Date;
(e) there is no action, suit, taxing authority proceeding,
audit or claim for refund now in progress, pending, or threatened
against or with respect to SVPC regarding Taxes;
(f) there are no Liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of SVPC;
(g) SVPC will not be required:
(i) as a result of a change in method of accounting
for a taxable period ending on or prior to the Closing Date, to
include any adjustment under section 481(c) of the Code (or any
corresponding provision of state, local or foreign law) in taxable
income for any taxable period (or portion thereof) beginning after the
Closing Date; or
(ii) as a result of any "Closing Agreement,"as
described in Section 7121 of the Code (or any corresponding provision
of state, local, or foreign law), to include any item of income or
exclude any item of deduction from any taxable period (or portion
thereof) beginning after the Closing Date;
(h) SVPC is not a party to or bound by any tax allocation
or tax sharing agreement or has any current or potential contractual
obligation to indemnify any other Person with respect to Taxes;
(i) there is no basis for any assessment, deficiency
notice, thirty (30) day letter, or similar notice with respect to any
Tax to be issued to SVPC with respect to any period on or before the
Closing Date;
(j) true, correct and complete copies of all income and
sales Tax Returns filed by or with respect to SVPC for the past two
(2) years have been provided or made available to CSI;
(k) SVPC will not be subject to any Taxes, other than the
state income tax for the period ending at the Closing Date for any
period for which a Tax Return has not been filed pursuant to Section
1374 or Section 1375 of the Code (or any corresponding provision of
state, local or foreign law); and
(l) no sales or use tax or property transfer tax (other
than use tax on assets purchased), non-recurring intangibles tax,
documentary stamp tax, or other excise tax (or comparable tax imposed
by any Governmental Authority) will be payable by SVPC or CSI by
virtue of the transactions contemplated in this Agreement.
4.19 Insurance. SVPC is covered by valid, outstanding, and
enforceable policies of insurance issued to it by reputable insurers
covering its properties, assets, and business against risks of the
nature normally insured against by businesses in the same or similar
lines of business and in coverage amounts typically and reasonably
carried by such businesses (the "INSURANCE POLICIES"). Such Insurance
Policies are in full force and effect (to the Closing Date only), all
premiums due thereon have been paid, and SVPC has complied with the
provisions of such Insurance Policies. Schedule 4.19 contains:
(a) a complete and correct list of all Insurance Policies
and all amendments and riders thereto (copies of which have been
provided to CSI); and
(b) a detailed description of each pending claim under any
of the Insurance Policies for an amount in excess of $5,000 that
relates to loss or damage to the properties, assets, or Business of
SVPC. SVPC has not failed to give, in a timely manner, any notice
required under any of the Insurance Policies to preserve its rights
thereunder.
4.20 Receivables. All of the Receivables are valid and
legally binding, represent bona fide transactions and arose in the
Ordinary Course of Business of SVPC. All of the Receivables are good
and collectible receivables, without set-off or counterclaims. Except
as set forth in Section 6.6 (b) hereof, SVPC and the Shareholders
hereby absolutely and unconditionally guarantee and agree to be a
surety for the full and prompt payment to Buyer, no later than ninety
(90) days following the Closing, of all amounts owing under each of
the Receivables included in the Purchased Assets, as more fully
identified and described on Schedule 4.20. SVPC and the Shareholders
acknowledge that any failure to perform this guaranty obligation shall
constitute a breach of this Agreement and shall entitle the Buyer to
recover Indemnifiable Damages. SVPC and the Shareholders agree:
(a) to pay to Buyer, upon demand, all amounts owing under
any Receivables identified on Schedule 4.20 which have not been paid
by the applicable account debtor within ninety (90) days following the
Closing; and
(b) to promptly pay to Buyer any amount they may receive
and/or collect under any Receivables identified on Schedule 4.20,
except for those Receivables purchased from Buyer under Section (a)
above.
4.21 Licenses and Permits. SVPC possesses all environmental
licenses and permits and all other licenses and required governmental
or official approvals, permits or authorizations (collectively, the
"PERMITS") for its Business and operations, including the operation of
the Owned Premises and the Leased Premises, which Permits are listed
on Schedule 4.21. All such Permits are valid and in full force and
effect, SVPC is in full compliance with the requirements thereof, and
no proceeding is pending or threatened to revoke or amend any of them.
Schedule 4.21 specifies all Permits which must be obtained by SVPC in
order for SVPC to own the Purchased Assets and operate the Business of
SVPC consistent with past practice (the "NEW PERMITS"). Except for
the new Permits, none of the Permits is or will be impaired or in any
way affect the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby and are freely
transferable to SVPC and will be transferred to SVPC at Closing.
4.22 Relationships with Customers and Suppliers; Affiliated
Transactions. No current supplier to SVPC of any items essential to
the conduct of its Business has threatened to terminate its respective
business relationship with it for any reason. Except as set forth on
Schedule 4.22, none of SVPC or the Shareholders have any direct or
indirect interest in any customer, supplier, or competitor of SVPC, or
in any person from whom or to whom leases real or personal property.
Except as set forth on Schedule 4.22, no officer, director, or
shareholder of, nor any person related by blood or marriage to any
such person, nor any entity in which any such person owns any
beneficial interest, is a party to any Contract or transaction with
SVPC or has any interest in any property used by SVPC.
4.23 Intellectual Property. Schedule 4.23 sets forth a list of
all trademarks, service marks, trade names, copyrights, know-how,
patents, trade secrets, licenses (including licenses for the use of
computer software programs), all rights in mask works and other
intellectual property used in the conduct of SVPC's Business (the
"INTELLECTUAL PROPERTY") and all such rights, titles and interests
shall be transferred to SVPC at Closing, free and clear of any liens
or restrictions. SVPC has full legal right, title, and interest in
and to all Intellectual Property used in its Business. The conduct of
the Business of SVPC as presently conducted, and the unrestricted
conduct and the unrestricted use and exploitation of the Intellectual
Property, does not infringe or misappropriate any rights held or
asserted by any Person, and no Person is infringing on the
Intellectual property. No payments are required for the continued use
of the Intellectual Property, except as set forth in Schedule 4.23.
None of the Intellectual Property has ever been declared invalid or
unenforceable, or is the subject of any pending or threatened action
for opposition, cancellation, declaration, infringement, or
invalidity, unenforceability or misappropriation or like claim, action
or proceeding. Except as set forth in Part 3.22(c) of the Disclosure
Letter, all former and current employees of each Acquired Company have
executed written Contracts with one or more of the Acquired Companies
that assign to one or more of the Acquired Companies all rights to any
inventions, improvements, discoveries, or information relating to the
business of any Acquired Company. No employee of any Acquired Company
has entered into any Contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or requires
the employee to transfer, assign, or disclose information concerning
his work to anyone other than one or more of the Acquired Companies.
4.24 Contracts. Schedule 4.24 sets forth a list of each Contract
to which SVPC is a party or by which its properties or assets are
bound and which is material to its Business, assets, properties or
prospects (the "PURCHASED CONTRACTS"), true and correct copies of
which have been provided to CSI. The copy of each Purchased Contract
provided to CSI is a true and complete copy of the document it
purports to represent and reflects all amendments thereto made through
the date of this Agreement. Except as set forth on Schedule 4.24,
SVPC has not violated any of the material terms or conditions of any
Purchased Contract or any term or condition which would permit
termination or material modification of any Purchased Contract, and
all of the covenants to be performed by any other party thereto have
been fully performed and there are no claims for breach or
indemnification or notice of default or termination under any
Purchased Contract. Except as set forth on Schedule 4.24, no event
has occurred which constitutes, or after notice or the passage of
time, or both, would constitute, a material default by SVPC under any
Purchased Contract, and to the best knowledge of SVPC and the
Shareholders, no such event has occurred which constitutes or would
constitute a material default by any other party. Except as set forth
in Schedule 4.24, all Purchased Contracts are freely assignable to
SVPC without notice to or the consent of any third party and, SVPC is
not subject to any liability or payment resulting from renegotiation
of amounts paid it under any Purchased Contract. As used in this
Section, Purchased Contracts shall include, without limitation:
(a) loan agreements, indentures, mortgages, pledges,
hypothecations, deeds of trust, conditional sale or title retention
agreements, security agreements, equipment financing obligations or
guaranties, or other sources of contingent liability in respect of any
indebtedness or obligations to any other person, or letters of intent
or commitment letters with respect to same;
(b) contracts obligating SVPC to purchase or sell products
or services;
(c) leases of real property, and leases of personal
property not cancelable without penalty on notice of sixty (60) days
or less or calling for payment of an annual gross rental exceeding
$10,000.00;
(d) distribution, sales agency, or franchise or similar
agreements, or agreements providing for an independent contractor's
services, or letters of intent with respect to same;
(e) employment agreements, management service agreements,
consulting agreements, confidentiality agreements, noncompetition
agreements, and any other agreements relating to any employee, officer
or director of SVPC;
(f) licenses, assignments or transfers of trademarks, trade
names, service marks, patents, copyrights, trade secrets, or know how,
or other agreements regarding proprietary rights or intellectual
property;
(g) any Contract relating to pending capital expenditures
by SVPC; and
(h) other material Contracts or understandings,
irrespective of subject matter and whether in writing, not entered
into in the Ordinary Course of Business by SVPC and not otherwise
disclosed on the Schedules.
4.25 Accuracy of Information Furnished to CSI. No
representation, statement, or information made or furnished by the
Shareholders or SVPC to CSI or any of CSI's representatives, including
those contained in this Agreement and the various Schedules attached
hereto and the other information and statements referred to herein and
previously furnished by SVPC or the Shareholders, contains or shall
contain any untrue statement of a material fact or omits any material
fact necessary to make the information contained therein not
misleading; provided, however, that SVPC and the Shareholders make no
representations or warranties as to the accuracy or completeness of
the documents listed on Schedule 4.25, which have been prepared by
persons other than SVPC or the Shareholders, or their representatives.
The Shareholders and SVPC have provided CSI with true, accurate, and
complete copies of all documents listed or described in the various
Schedules attached hereto.
4.26 Business Locations. Except for the Owned Premises, and the
Leased Premises, as of the date hereof, SVPC has no office or place of
business other than as identified on Schedules 4.13(b) and 4.13(c) and
all locations where the equipment, inventory, chattel paper, and books
and records of SVPC are located as of the date hereof are fully
identified on Schedules 4.13(b) and 4.13(c).
4.27 Names; Prior Acquisitions. All names under which SVPC does
business as of the date hereof are specified on Schedule 4.27. Except
as set forth on Schedule 4.27, SVPC has not changed its name or used
any assumed or fictitious name, nor been the surviving entity in a
merger, acquired any business, nor changed its principal place of
business or chief executive office within the past five (5) years.
4.28 No Commissions. Except as specified on Schedule 4.28,
neither SVPC nor the Shareholders have incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar
compensation in connection with the transactions contemplated hereby.
4.29 Inventory. All Purchased Assets that consist of
Inventory (including raw materials and work-in-progress):
(a) were acquired in the Ordinary Course of Business
consistent with past practice;
(b) are of a quality, quantity, and condition useable or
saleable in the Ordinary Course of Business within SVPC's normal
inventory turnover experience; and
(c) are valued at the lower of cost or net realizable
market value. SVPC has no material liability with respect to the
return or repurchase of any goods in the possession of any customer.
4.30 Product Warranty. Except for product returned for repair or
replacement in the Ordinary Course of Business, SVPC has no liability
or obligation (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, or demand
against any of them giving rise to any liability or obligation) for
replacement or repair thereof or other damages in connection
therewith. No product sold, manufactured, or delivered by SVPC is
subject to any guaranty, warranty, or other indemnity other than the
obligation to repair or replace defective product prior to customers
"loading" or "populating" the circuit board (as those terms are
customarily used in the industry).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to the Shareholders and SVPC to
enter into this Agreement and to consummate the transactions
contemplated hereby, each of CSI and SVCS make the following
representations and warranties to the Shareholders and SVPC:
5.1 Corporate Status. Each of CSI and SVCS is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Illinois and California, respectively.
5.2 Corporate Power and Authority. Each of CSI and SVCS has, or
at the time Closing will have, the corporate power and authority to
execute and deliver this Agreement, to perform its respective
obligations hereunder, and consummate the transactions contemplated
hereby. CSI and SVCS have or will have taken at or prior to Closing
all action necessary to authorize the execution and delivery of this
Agreement, the performance of their respective obligations hereunder
and the consummation of the transactions contemplated hereby. The
execution and delivery of this Agreement by CSI and SVCS, the
performance by them of their respective obligations hereunder, and the
consummation by them of the transactions contemplated by this
Agreement will not:
(a) contravene any provision of the Articles of
Incorporation or Bylaws of either of them;
(b) in any material respect violate or conflict with any
law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment, or order of any Governmental Authority or of any arbitration
award which is either applicable to, binding upon, or enforceable
against either of them;
(c) conflict with, result in breach of, or constitute a
default (or any event which would, with the passage of time or the
giving of notice or both, constitute a default) under, or give rise to
a right to terminate, amend, modify, abandon or accelerate any
material Contract;
(d) result in or require the creation or imposition of any
lien upon or with respect to any property or assets of CSI or SVCS; or
(e) require the consent, approval, authorization, or permit
of, or filing with or notification to, any Governmental Authority, any
court or tribunal, or any other Person, except any SEC and other
securities or exchange filings required to be made by CSI following
the Closing Date.
5.3 Enforceability. Each of this Agreement and the Other
Agreements has been, or will have been at the time of Closing, duly
executed and delivered by each of CSI and SVCS and constitutes or will
constitute a legal, valid and binding obligation of each of CSI and
SVCS, enforceable against each of CSI and SVCS in accordance with
their respective terms.
5.4 No Commissions. Neither CSI nor SVCS has incurred any
obligation for any finder's or broker's or agent's fees or commissions
or similar compensation in connection with the transactions
contemplated hereby.
5.5 Financial Information. CSI has filed with the Securities
and Exchange Commission all required reports, including, but not
limited to, its Annual Report on Form 10-K for the year ended April
30, 1998, and its quarterly report on Form 10-Q for the quarter ended
July 31, 1998 (the "SEC Documents"). The SEC Documents, as of the
date of the filing thereof with the Commission, conformed in all
material respects with the requirements of the Exchange Act, and the
rules and regulations thereunder and, as of the date of such filing
or, if such SEC Document was subsequently amended, as of the date of
the filing of any amendment thereto with the Commission, such SEC
Document did not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
5.6 Capitalization. The authorized capital stock of CSI
consists of 20,000,000 shares of Common Stock. As of the date hereof,
approximately 4,200,000 shares of Common Stock are validly issued and
outstanding, fully paid and non-assessable. All issued and
outstanding shares of capital stock of SVPC are owned beneficially and
of record by CSI.
5.7 New Permits. There are no facts known to CSI or SVCS that
will materially and adversely affect their eligibility for the
transfer or re-issuance of any New Permits.
5.8 Waiver of Bulk Sales Compliance. In reliance on SVPC's and
Shareholders' representations and warranties and indemnification with
respect thereto as provided in Article VI hereof, Buyer waives and
shall not require compliance with applicable laws relating to or
affecting bulk transfers and sales.
5.9 Reliance on Information Furnished. Each of CSI and SVCS has
not relied upon any statement in representations of SVPC or the
Shareholders, employees, consultants and authorized agents other than
as contained in the representation and warranties contained in this
Agreement. Further, each of CSI and SVCS acknowledge that SVPC's
finders have not been authorized to make any representation on behalf
of SVPC and CSI and SVCS have not relied upon any representations of
SVPC's finders.
ARTICLE VI
INDEMNIFICATION
6.1 Agreement by SVPC and the Shareholders to Indemnify. SVPC
and the Shareholders agree, jointly and severally, to indemnify,
defend and hold Buyer harmless from and against the aggregate of all
Buyer Indemnifiable Damages (as defined below); provided, however,
that the aggregate indemnification liability of SVPC and the
Shareholders collectively shall not exceed the Purchase Price (plus
any costs of collection). The right to indemnification, payment of
Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation
conducted with respect to, or any Knowledge acquired (or capable of
being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, jointly and severally,
or diminution of value.
(a) For purposes of this Agreement, "BUYER INDEMNIFIABLE
DAMAGES" means, without limitation, the aggregate of all expenses,
losses, costs, claims, diminution in value, deficiencies, liabilities
and damages (including, without limitation as to type of expense,
related counsel and paralegal fees and expenses) incurred or suffered
by Buyer, to the extent:
(i) resulting from any material breach of a
representation or warranty made by SVPC or the Shareholders in or
pursuant to this Agreement;
(ii) resulting from any breach of the covenants or
agreements made by SVPC or the Shareholders pursuant to this
Agreement;
(iii) resulting from any inaccuracy in any
certificate or environmental report (except those listed in Schedule
4.25) delivered by SVPC or the Shareholders pursuant to this
Agreement;
(iv) resulting from any Excluded Liabilities;
(v) resulting from any remediation, cleanup, or other
actions required by applicable law, regulation, rule, or
ordinance or by this Agreement to be taken by SVPC or the
Shareholders to ensure that the Owned Premises and the
Leased Premises are in compliance or are made to comply with
all Environmental, Health and Safety Laws, or resulting from
any failure to act or omission, with respect to any
Environmental, Health and Safety Laws, including, without
limitation, any and all financial and legal liabilities
associated with any future subsurface investigations and
soil and/or groundwater remediation activities on the Owned
Premises and the Leased Premises, any private or public suit
that may be brought as a result of real or alleged public
health and/or environmental exposures caused by soil or
groundwater contamination on the Owned Premises and the
Leased Premises, and any private or public suit that may be
brought as a result of real or alleged public health and/or
environmental exposures caused by any soil or groundwater
contamination on or under the Owned Premises or the Leased
Premises that was a result of a release or releases of
Hazardous Substances or Wastes on or under the soils or
groundwater Owned Premises and the Leased Premises prior to
SVCS's ownership and occupancy of the Owned Premises and the
Leased Premises (the "CLEANUP LIABILITY"). Notwithstanding
the foregoing, it is the intention of SVPC and Sharheolders,
on the one hand, and Buyer, on the other hand, that the
liability of SVPC and/or the Shareholders is expressly
limited as set forth in this paragraph. To the extent any
future subsurface investigation and soil and/or groundwater
monitoring/testing reveals real or alleged public health or
environmental exposures caused by any soil or groundwater
contamination, other than or in combination with, the
trichloroethene, 1,1-dichloroethene and 1,1,1-
trichloroethane identified in the GEI Assessments ("GEI
Substances"), on or under the Owned Premises or the Leased
Premises, then in said event, Buyer acknowledges that SVPC
and/or the Shareholders will not be responsible for any
financial and legal liabilities associated with any non-GEI
Substances except for any non-GEI substances of which SVPC
and/or the Shareholders had Knowledge prior to closing. In
any investigation involving a combination of GEI and non-GEI
Substances, the parties agree to reasonably and in good
faith apportion on a pro-rata basis all related financial
and legal liabilities, taking into account all facts,
circumstances, levels and concentrations of substances in
comparison to state reported action levels, the particular
focus of any state administrative clean-up order and all
other reasonably associated factors;
(vi) resulting from any default or failure to pay by
the account debtors with respect to any of the Receivables
identified on Schedule 4.20;
(vii) resulting from repair or replacement of
defective product manufactured, sold and delivered by SVPC
prior to the Closing Date; or
(viii) resulting from any fact, condition, event,
act, omission, or other matter whose occurrence or failure
to occur would have constituted a breach of a representation
or warranty made by SVPC or the Shareholders in or pursuant
to this Agreement were not that representation or warranty
qualified by the words "to the best knowledge of SVPC and/or
the Shareholders" or other words of similar import.
(b) Each of the representations and warranties made by the
Shareholders and SVPC in this Agreement or pursuant hereto shall
survive for a period of twenty-four (24) months after the Closing
Date, except as follows:
(i) the representations and warranties of the
Shareholders to the extent relating to tax attributes or liabilities
with respect to Taxes of SVPC, shall expire at the time the period of
limitations (including any extensions thereof pursuant to the delivery
of waivers of the applicable period of limitations) expires for the
assessment by the taxing authority of additional Taxes with respect to
which the representations and warranties relate;
(ii) the representations and warranties of the
Shareholders and SVPC contained in Sections 4.12 and 4.15
shall expire at the time the latest period of limitations
expires for the enforcement by an applicable Governmental
Authority of any remedy with respect to which the particular
representations and warranties of the Shareholders related
and if there is no such period of limitations, then the
representations and warranties shall continue indefinitely;
and
(iii) the representations and warranties of the
Shareholders and SVPC contained in Sections 4.1, 4.2, 4.3,
4.4, 4.5, and 4.6 shall not expire, but shall continue
indefinitely, except for the representations and warranties
contained in section 4.1, which shall expire upon the
liquidation and dissolution of SVPC. No claim for the
recovery of Buyer Indemnifiable Damages may be asserted by
Buyer against or the Shareholders after such representations
and warranties shall thus expire; provided, however, that
claims for Buyer Indemnifiable Damages first asserted within
the applicable period shall not thereafter be barred.
Notwithstanding any knowledge of facts determined or
determinable by any party by investigation, each party shall
have the right to fully rely on the representations,
warranties, covenants and agreements of the other parties
contained in this Agreement or in any other documents or
papers delivered in connection herewith (except those
documents listed on Schedule 4.25). Each representation,
warranty, covenant, and agreement of the parties contained
in this Agreement is independent of each other
representation, warranty, covenant, and agreement.
(c) In the event that Xxxxx believes it is entitled to a
claim for any Buyer Indemnifiable Damages hereunder, Xxxxx shall
promptly give written notice to SVPC and the Shareholders of such
claim and the amount or the estimated amount of such claim, and the
basis for such claim. If neither SVPC nor the Shareholders pay the
amount of the claim for Buyer Indemnifiable Damages to Buyer within
fourteen (14) days, then Buyer may take any action or exercise any
remedy available to Buyer by appropriate legal proceedings to collect
the Buyer Indemnifiable Damages or make a claim for payment. However,
this Section will not apply to any breach of any of SVPC and
Shareholders' representations and warranties of which SVPC and
Shareholders had Knowledge at any time prior to the date on which such
representation and warranty is made or any intentional breach by SVPC
and Shareholders of any covenant or obligation, and SVPC and
Shareholders will be jointly and severally liable for all Damages with
respect to such breaches.
6.2 Conditions of Indemnification of Buyer. The obligations and
liabilities of SVPC and the Shareholders hereunder with respect to the
indemnities pursuant to this Article VI resulting from any claim or
other assertion of liabilities by third parties (hereinafter called
collectively the "BUYER CLAIMS") shall be subject to the following
terms and conditions:
(a) Buyer must give SVPC and the Shareholders notice of any
such Buyer Claim promptly after Xxxxx receives notice thereof;
(b) SVPC and the Shareholders shall have the right to
undertake, by counsel or other representatives of their own choosing,
the defense of such Buyer Claim; provided, however, if a Buyer Claim
is made against Buyer that exceeds the value of the Indemnification
Security at such time, Buyer shall have the right to control the
defense of the Buyer Claim;
(c) in the event SVPC and the Shareholders shall elect not
to undertake such defense, or within a reasonable time after notice of
any such Buyer Claim from Buyer shall fail to defend, Buyer (upon
further written notice to SVPC and the Shareholders) shall have the
right to undertake the defense, compromise, or settlement of such
Buyer Claim, by counsel or other representatives of its own choosing,
on behalf of and for the account and risk of SVPC and the Shareholders
(subject to the right of SVPC and the Shareholders to assume defense
of such Buyer Claim at any time prior to settlement, compromise or
final determination thereof);
(d) anything in this Section 6.2 to the contrary
notwithstanding:
(i) Buyer shall have the right, at its own cost and
expense, to have its own counsel to protect its own interests and
participate in the defense, compromise, or settlement of the Buyer
Claim;
(ii) neither SVPC nor any of the Shareholders shall,
without Xxxxx's written consent, settle, or compromise any Buyer Claim
or consent to entry of any judgement which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to Buyer of a release from all liability in respect of such Buyer
Claim; and
(iii) Buyer, by counsel or other representatives of
its own choosing and at its sole cost and expense, shall have the
right to consult with SVPC, the Shareholders and their respective
counsel or other representatives concerning such Buyer Claim, and
SVPC, the Shareholders and Buyer and their respective counsel shall
cooperate with respect to such Buyer Claim.
(e) Buyer may exercise the right of set-off for any amount
to which it may be entitled under this section against any amount due
SVPC or Shareholders under the promissory notes delivered to SVPC and
Shareholders at closing. The exercise of such right and set-off by
Buyer in good faith, whether or not ultimately determined to be
justified, will not constitute an event of default under the
promissory notes or any instrument securing a promissory note.
6.3 Agreement by Buyer to Indemnify. Each of CSI and SVCS
agrees jointly and severally to indemnify, defend, and hold SVPC and
the Shareholders harmless from and against the aggregate of all Seller
Indemnifiable Damages (as defined below); provided, however, that the
aggregate indemnification liability of CSI and SVCS collectively shall
not exceed the amount paid to SVPC pursuant to the Short Term Note
(plus any costs of collection).
(a) For purposes of this Agreement, "SELLER INDEMNIFIABLE
DAMAGES" means, without duplication, the aggregate of all expenses,
losses, costs, claims, deficiencies, liabilities, and damages
(including, without limitation, related counsel and paralegal fees and
expenses) incurred or suffered SVPC or the Shareholders to the extent:
(i) resulting from any breach of a representation or
warranty made by CSI or SVCS in or pursuant to this Agreement;
(ii) resulting from any breach of the covenants or
agreements made by CSI or SVCS pursuant to this Agreement;
(iii) resulting from any inaccuracy in any
certificate or report prepared by or on behalf of CSI or SVCS
delivered by CSI or SVCS pursuant to this Agreement; or
(iv) resulting from any default or failure to pay or
perform any of the Assumed Liabilities.
(b) Each of the representations and warranties made by CSI
and/or SVCS in this Agreement or pursuant hereto shall survive for a
period of twenty-four (24) months after the Closing Date. No claim
for the recovery of Seller Indemnifiable Damages may be asserted by
SVPC or the Shareholders against CSI or SVCS after such
representations and warranties shall thus expire; provided, however,
claims for Seller Indemnifiable Damages first asserted within the
applicable period shall not thereafter be barred. Notwithstanding any
knowledge of facts determined or determinable by any party by
investigation, each party shall have the right to fully rely on the
representations, warranties, covenants, and agreements of the other
parties contained in this Agreement or in any other documents or
papers delivered in connection herewith. Each representation,
warranty, covenant and agreement of the parties contained in this
Agreement is independent of each other representation, warranty,
covenant and agreement.
(c) In the event that SVPC or the Shareholders believes he
or it is entitled to a claim for any Seller Indemnifiable Damages
hereunder, the claimant shall promptly give written notice to CSI and
SVCS of such claim and the amount or the estimated amount of such
claim, and the basis for such claim. If neither CSI nor SVCS pays the
amount of the claim for Seller Indemnifiable Damages to the claimant
within ten (10) days, then the claimant may take any action or
exercise any remedy available to it by appropriate legal proceedings
to collect the Seller Indemnifiable Damages. However, this section
will not apply to any Breach of any of Buyer's representations and
warranties of which Buyer had Knowledge at any time prior to the date
on which such representation and warranty is made or any intentional
Breach by Buyer of any covenant or obligation, and Buyer will be
liable for all Damages with respect to such Breaches.
(d) Amount otherwise payable under the Promissory Notes.
The exercise of such right of set-off by Buyer in good faith, whether
or not ultimately determined to be justified, will not constitute an
event of default under the Promissory Notes or any instrument securing
a Promissory Note.
6.4 Conditions of Indemnification of SVPC and Shareholders. The
obligations and liabilities of CSI and SVCS hereunder with respect to
the indemnities pursuant to this Article VI resulting from any claim
or other assertion of liabilities by third parties (hereafter called
collectively "SELLER CLAIMS"), shall be subject to the following terms
and conditions:
(a) SVPC or the Shareholders asserting the claim for
indemnification, as the case may be (the "INDEMNIFIED PARTY"), must
give notice of any such Seller Claim promptly after the Indemnified
Party receives notice thereof;
(b) CSI and SVCS shall have the right to undertake, by
counsel or other representatives of their own choosing, the defense of
such Seller Claim; provided, however, if a Seller Claim is made that
exceeds $10,000, the Indemnified Party shall have the right to control
the defense of the Seller Claim;
(c) in the event that CSI and SVCS shall elect not to
undertake such defense, or within a reasonable time after notice of
any such Seller Claim from the Indemnified Party shall fail to defend,
the Indemnified Party (upon further written notice to CSI or SVCS)
shall have the right to undertake the defense, compromise, or
settlement of such Seller Claim, by counsel or other representatives
of its choosing, on behalf of and for the account and risk of CSI and
SVCS (subject to the right of CSI and SVCS to assume defense of such
Seller Claim at any time prior to settlement, compromise, or final
determination thereof);
(d) anything in this Section 6.4 to the contrary
notwithstanding:
(i) the Indemnified Party shall have the right, at its
cost and expense, to have its own counsel to protect its own interests
and participate in the defense, compromise or settlement of the Seller
Claim;
(ii) neither CSI nor SVCS shall, without the
Indemnified Party's written consent, settle or compromise any Seller
Claim or consent to entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such Seller Claim; and
(iii) the Indemnified Party, by counsel or other
representatives of its own choosing and at its cost and expense, shall
have the right to consult with CSI and SVCS and their respective
counsel or other representatives concerning such Seller Claim, and
CSI, SVCS and the Indemnified Party and their respective counsel shall
cooperate with respect to such Seller Claim.
6.5 Effect of Insurance and Taxes.
(a) Any party or parties shall be deemed to have suffered a
loss for which the other party or parties shall be liable for
indemnification only to the extent that the party or parties claiming
indemnification is or are unable to obtain monetary recovery with
respect thereto under an insurance policy or from any other third
party. If a party's entitlement to such a recovery is discovered
after payments of indemnification hereunder, then the amount of such
indemnification subject to such claim of entitlement against such
third party shall be refunded to the party or parties who paid it, but
only after and only to the extent of such recovery from such insurance
policy or third party. An indemnified party who has received a
recovery for a loss arising from a breach of a representation,
warranty, or covenant under the Agreement which is subject to
indemnification shall have no right to recover twice for the same loss
under the indemnification provided in this Agreement.
(b) In determining the amount of any loss to an indemnified
party, any available tax benefits to the indemnified party, such as,
for example, the ability to take any deduction of all or any part of
the amount on such party's tax returns or the ability to exclude from
income for tax purposes amounts which would have been includable in
such party's income absent the loss, damage, or expense, shall be
taken into account, such that only the net after tax effect of the
loss or expense to the indemnified party shall be considered a loss
subject to the indemnification provisions of this Agreement; provided,
however, if any indemnity payment is includable in the income of the
indemnified party, such payment shall be grossed up to the extent
required to fully compensate the indemnified party after taking into
account the associated tax liability.
(c) For purposes of this Section 6.5, the term "loss" means
any loss, liability, damage, cost, or expense indemnified against
under this Article VI.
6.6 Minimum Threshold for Indemnification by SVPC and the
Shareholders.
(a) No indemnification shall be paid by SVPC or the
Shareholders under Sections 6.1 (a)(i) through (v) and (viii) hereof
until such time as the amount for which indemnification would
otherwise be due to any and all parties entitled to indemnification
from SVPC and the Shareholders hereunder exceeds $10,000 in the
aggregate, and then only to the extent of the excess over $10,000;
(b) No indemnification shall be paid by SVPC or the
Shareholders under Section 6.1 (a)(vi) hereof until such time as the
amount for which indemnification would otherwise be due to any and all
parties entitled to indemnification from SVPC or the Shareholders
hereunder exceeds $25,000 in the aggregate, and then only to the
extent of the excess over $25,000.
(c) No indemnification shall be paid by SVPC or the
Shareholders under Section 6.1 (a) (vii) for repair a replacement of
defective product until such time as the amount for which
indemnification would otherwise be due to any and all parties entitled
to indemnification from SVPC and the Shareholders hereunder exceeds
$25,000 in the aggregate, and than only to the extent of the excess
over $25,000. SVPC's maximum liability hereunder for the repair or
replacement of the defective product shall not exceed the purchase
price of product for which repair or replacement is sought or SVCS's
actual out of pocket costs incurred in connection with the repair or
replacement, whichever is less. In no event shall SVPC or
Shareholders be liable for any special, indirect, incidental,
consequential, exemplary or punitive damages.
6.7 Security for Indemnification Obligation. As security (the
"INDEMNIFICATION SECURITY") for the agreement by SVPC and the
Shareholders to indemnify and hold Buyer harmless as described in
Section 6.1, CSI shall have the right to offset any Indemnifiable
Damages against the amounts due SVPC pursuant to the Subordinated
Note.
6.8 Collection of Receivables. SVCS agrees to use all
reasonable and normal efforts to collect the Receivables. Payments
received from customers after the Closing shall be applied as a
customer specifically directs in writing or as is reasonably implied
by reference to the remittance, otherwise against the oldest
Receivables first. Except as set forth in Section 6.6 (b) hereof,
SVPC agrees to pay to SVCS, promptly after SVCS delivers written
notice to SVPC, an amount equal to any reduction in the amount of a
Receivable due to a sales adjustment made by a customer after the
Closing. If SVPC subsequently collects any portion of a Receivable
for which SVPC and/or the Shareholders have paid SVCS pursuant to the
Section 4.20 guaranty of Receivables (whether directly or through a
deduction from the Subordinated Note), SVCS will reimburse SVPC and/or
the Shareholders by payment in the amount of such subsequent
collection to the source from which such indemnification payment came,
i.e., either SVPC and/or the Shareholders if they paid SVPC directly
or the Subordinated Note if the indemnification payment was deducted
therefrom. SVCS agrees that it will, at the request of SVPC and/or
the Shareholders, assign and transfer to SVPC any uncollected
Receivables for which SVCS has been paid indemnification pursuant to
Section 4.20, and upon such assignment SVPC will be free to use any
lawful means to collect such Receivable, without intentionally
damaging the ongoing business relationship by and between SVCS and the
customer.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Further Assurances. Each party shall execute and deliver
such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate,
carry out, and comply with all of the terms of this Agreement and the
transactions contemplated hereby.
7.2 Compliance with Covenants. The Shareholders shall cause
SVPC to comply with all of its respective covenants of SVPC under this
Agreement.
7.3 Cooperation. Each of the parties agrees to cooperate with
the other in the preparation and filing of all forms, notifications,
reports and information, if any, required or reasonably deemed
advisable pursuant to any law, rule or regulation or the rules of the
NASDAQ Stock Market in connection with the transactions contemplated
by this Agreement.
7.4 Tax Treatment. Each party to this Agreement has sought and
received its own advice as to the tax treatment of the transactions
covered by this Agreement and is not relying on any opinions of the
other parties or their respective advisers with respect thereto. All
parties hereto agree to fully and completely comply with the reporting
requirements of the Internal Revenue Service.
7.5 Restrictive Covenants. In order to assure that CSI and SVCS
will realize the benefits of this Agreement and in consideration of
the transactions set forth in this Agreement, SVPC and the
Shareholders agree with CSI and SVCS that they shall not, provided CSI
and SVCS are not in default of their obligations under the
Subordinated Note, and Guaranty, for a period of sixty (60) months
from the Closing Date:
(a) directly or indirectly, alone or as a partner, joint
venturer, officer, director, employee, consultant, agent, independent
contractor or stockholder of any company or business, engage in any
business activity in the Restricted Territory (as defined below), and
which is directly or indirectly in competition with the Business
conducted by SVPC at the Closing Date; provided, however, that, the
beneficial ownership of less than 5% of the shares of stock of any
corporation having a class of equity securities actively traded on a
national securities exchange or over-the-counter market shall not be
deemed, in and of itself, to violate the prohibitions of this Section.
As used in this Section 7.5, the term "Restricted Territory" means
the state of California;
(b) directly or indirectly:
(i) induce any Person who is a customer of SVPC at the
Closing Date to patronize any business directly or indirectly in
competition with the Business conducted by SVPC;
(ii) canvass, solicit or accept from any Person any
such competitive business; or
(iii) request or advise any Person which is a
customer of SVPC at the Closing Date to withdraw, curtail,
or cancel any such customer's business with SVCS.
(c) without the prior written consent of CSI, directly or
indirectly, employ, or knowingly permit any company or business
directly or indirectly controlled by SVPC or the Shareholders, to
employ, any person who was employed by SVPC at or within six (6)
months prior to the Closing Date, or in any manner seek to induce any
such Person to leave his or her employment;
(d) directly or indirectly, at any time following the
Closing Date, in any way utilize, disclose, copy, reproduce or retain
in their possession's any of SVPC proprietary rights or records,
including, but not limited to, any of their customer lists.
SVPC and the Shareholders agrees and acknowledges that the
restrictions contained in this Section 7.5 are reasonable in scope and
duration and are necessary to protect CSI after the Closing Date. If
any provision of this Section as applied to any party or to any
circumstance is adjudged by a court to be invalid or unenforceable,
the same will in no way affect any other circumstance or the validity
or enforceability of this Agreement. If any such provision, or any
part thereof, is held to be unenforceable because of the duration of
such provision or the area covered thereby, the parties agree that the
court making such determination shall have the power to reduce the
duration and/or area of such provision, and/or to delete specific
words or phrases, and in its reduced form, such provision shall then
be enforceable and shall be enforced. The parties agree and
acknowledge that the breach of this Section will cause irreparable
damage to CSI and upon breach of any provision of this Section, CSI
shall be entitled to injunctive relief, specific performance, or other
equitable relief; provided, however, that this shall in no way limit
any other remedies which CSI may have (including, without limitation,
the right to seek monetary damages).
7.6 Taxes and Transfer Taxes.
(a) SVPC shall be liable for and shall pay all Taxes
(whether assessed or unassessed) applicable to the Business or the
Purchased Assets, in each case attributable to periods (or portions
thereof) prior to the Closing Date. Buyer shall be liable for and
shall pay:
(i) all Taxes reflected as a liability on the Closing
Date Statement; and
(ii) all Taxes (whether assessed or unassessed)
applicable to the Business or the Purchased Assets, in each case
attributable to periods (or portions thereof) beginning on the Closing
Date. For purposes of this paragraph (a), any period beginning before
and ending after the Closing Date shall be treated as two partial
periods, one ending on the Closing Date and the other beginning after
the Closing Date.
(b) Notwithstanding Section 7.6(a), any Tax (including a
sales tax or gains tax) directly attributable to the sale or transfer
of the Purchased Assets, shall be paid by SVPC. Buyer, SVPC and the
Shareholders agree to timely sign and deliver such certificates or
forms as may be necessary or appropriate to establish an exemption
from (or otherwise reduce), or make a report with respect to, such
Taxes.
(c) SVCS shall pay to Shareholders on or before February
15, 1999 the amount of the DEEMED INCOME TAX LIABILITY. The Deemed
Income Tax Liability shall be the amount of federal and state income
tax liabilities of the Shareholders of SVPC for the taxable income of
SVPC, excluding the gain on the consummation of this transaction, from
January 1, 1998 to the Closing Date. The Shareholders shall prepare
the calculations of the Deemed Income Tax Liability using consistent
tax accounting methods and shall submit the calculation to Buyer for
approval, which approval shall not be unreasonably withheld.
7.7 Other Agreements. Upon the Closing, each party hereto that
is a signatory to any of Exhibits A through D (the "OTHER AGREEMENTS")
agrees to execute and deliver such Other Agreements, as appropriate,
to the other parties to such Other Agreements. The parties agree that
the non-competition covenants contained in the Employment Agreements
with the Shareholders attached as Exhibit D are an integral part of
this Agreement.
7.8 Employment Procedure.
(a) Pursuant to IRS Revenue Procedure 84-77, Buyer shall
assume SVPC's obligations to furnish Forms W-2 to Employees for the
calendar year in which the Closing Date occurs.
(b) Nothing in this Section 7.8, express or implied, shall
confer upon any Employee, any legal representative thereof or any
third party rights, benefits, or remedies, including any right to
employment, or continued employment for any specified period of any
nature or kind whatsoever under or by reason of this Agreement or any
of the Other Agreements.
(c) SVPC shall retain the right to amend or terminate any
Employee Benefit Plan, in accordance with the terms of such Employee
Benefit Plan.
7.9 Corporate Name Change. SVPC shall, immediately following
the Closing, execute and deliver to CSI for filing all documents or
certificates necessary to change the legal, trade or assumed names of
SVPC to names which do not, in the sole discretion of CSI, create any
likelihood of confusion with the names "H.O.T.L.R.T., Inc. d/b/a
Silicon Valley Printed Circuits," any abbreviations or derivations
thereof, or any other names which are included in the Intellectual
Property.
7.10 Payments of Accounts Receivable. In the event that the
Shareholders shall receive any instrument of payment of any of the
Receivables not repurchased from SVCS by SVPC or the Shareholders,
SVPC or the Shareholders, whichever the case may be, shall forthwith
deliver such payment or instrument to SVCS, endorsed where necessary,
without recourse, in favor of SVCS.
7.11 New Permits and Environmental Due Diligence. CSI or SVCS
shall duly file and diligently pursue all applications for New Permits
and pay all associated filing and permit transfer fees. SVPC shall
use its best efforts to assist the prompt transfer or assignment to
SVCS of all New Permits. Any application for the renewal of any
License due prior to the Closing Date has been, or will be, timely
filed prior to the Closing date. After execution of this Agreement,
SVPC will take all actions necessary to assist SVCS in obtaining all
New Permits.
7.12 Environmental Covenants of SVPC.
(a) At its sole cost and expense, SVPC or Shareholders
shall remove, within thirty (30) days after the Closing, the 400
square feet of asbestos-containing floor tile located within the
Leased Premises. Said removal shall be performed by a licensed
asbestos abatement contractor. SVPC shall provide copies of all
removal certifications and proof that the removed asbestos-containing
materials were disposed in accordance with all applicable
Environmental, Health and Safety Laws.
(b) At its sole cost and expense, SVPC or Shareholders
shall determine whether the existence of the substances noted in the
GEI Assessments must be reported to the Environmental Protection
Agency or the relevant state agency, and, if SVPC determines the
existence of such substances must be reported, SVPC or Shareholders
shall report such existence in accordance with all applicable
Environmental, Health and Safety Laws.
7.13 Environmental Covenants of Buyer.
(a) Buyer covenants that on and after the Closing Date, it
will comply with all applicable Environmental, Health and Safety Laws
and will maintain compliance in all material respects with the terms
and conditions of all Permits required for the ongoing operation of
the Business and its use and occupancy of the Owned Premises and
Leased Premises.
(b) Buyer covenants that on and after the Closing Date it
will continue to operate the Business and will use and occupy the
Owned Premises and Leased Premises in substantially the same manner
(as to type of Business) as SVPC currently operates the Business and
uses and occupies the Owned Premises and Leased Premises.
(c) Remediation of Environmental Conditions Arising After
Closing Date. Buyer covenants that it shall be responsible for
remediation of Environmental Conditions resulting from its operations
on the Owned Premises and the Leased Premises after the Closing Date.
(d) Off-Site Environmental Liabilities. Buyer covenants
that it shall be responsible for all actions brought or claims made
pursuant to any Environmental, Health and Safety Laws arising from the
alleged Discharge or Release or threatened Discharge or Release of
Hazardous Substances transported off the Owned Premises or Leased
Premises on or after the Closing Date. This provision shall not apply
to Hazardous Substances transported off site by SVPC or its agents in
connection with the Remediation of the Owned Premises and Leased
Premises conducted by SVPC under this Agreement.
7.14 Incentive Compensation Plan. Buyer covenants that it will
adopt an Incentive Compensation Plan for the employees of the Company
in substantially the form of the plan contained in Exhibit E.
7.15 Business Expansion Plan. Buyer represents that its strategy
for the Business includes the purchase of an adjacent building,
renovation to the Owned Premises and Leased Premises, and the purchase
and/or lease of equipment, all within the first year after the Closing
Date, and in the aggregate amount of approximately $1,800,000.
Notwithstanding the foregoing, there are risks and uncertainties
inherent in Xxxxx's anticipated business strategy that are not
foreseeable as of the date hereof. Accordingly, CSI and the Buyer
makes no warranty that Buyer will realize their business strategy and
SVPC and Shareholders acknowledge that Buyer is under no obligation
whatever to effectuate the aforestated business strategy.
7.16 Xxxxx's Promissory Notes. On the Closing Date, Xxxxx and
Shareholders Xxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxx agree to exchange
the subordinated notes payable to Shareholders as set forth in the
Current Balance Sheet for the promissory notes of SVPC in
substantially the form of the Promissory Notes (and Guaranty)
contained in Exhibit F.
7.17 Notes Receivable from Shareholders. Shareholders agree to
repay the notes receivable from Shareholders as set forth on the
Current Balance Sheet within forty-five (45) days after the Closing
Date, if not paid prior thereto.
ARTICLE VIII
DEFINITIONS
8.1 Defined Terms. As used herein, the following terms shall
have the following meanings:
"Aboveground Storage Tanks" defined in Section 4.12(h).
"Affiliate" shall have the meaning ascribed to it in Rule
12b-2 of the General Rules and Regulations under the Exchange Act, as
in effect on the date hereof.
"asbestos" or AAsbestos-containing material" defined in
Section 4.12(j).
"Assumed Liabilities" defined in Section 1.3.
"Balance Sheet" means the unaudited balance sheet of SVPC as
of July 31, 1998, included in Schedule 4.8.
"Balance Sheet Date" means July 31, 1998.
"Bill of Sale" means the Bill of Sale in the form attached
hereto as Exhibit C.
"Business" defined in the Recitals to this Agreement.
"Buyer Claims" as defined in Section 6.2.
"Buyer Indemnifiable Damages" defined in Section 6.1(a).
"CERCLA" defined in Section 4.12(e).
"Cleanup Liability" defined in Section 6.1(a).
"Closing Date" defined in Section 3.1.
"Code" defined in Section 4.17(b).
"Common Stock" means shares of CSI's common stock, no par
value per share.
"Contract" means any indenture, lease, sublease, license,
loan agreement, mortgage, note, indenture, restriction, will, trust,
commitment, obligation, or other contract, agreement or instrument,
whether written or oral.
"Current Balance Sheet" defined in Section 4.8.
"Deemed Income Tax Liability" defined in Section 7.6(c).
"Discharge" defined in Section 4.12(f).
"Effective Time" defined in Section 3.1.
"Employee Benefit Plans" defined in Section 4.17(a).
"Employment Agreements" means the Employment Agreements
between Buyer and each of the Shareholders in the forms attached
hereto as Exhibit D.
"Environmental, Health and Safety Laws" defined in Section
4.12(k).
"EPCRA" defined in Section 4.12(e).
"ERISA" defined in Section 4.17(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" defined in Section 1.2.
"Excluded Liabilities" defined in Section 1.4.
"FIFRA" defined in Section 4.12(e).
"Financial Statements" defined in Section 4.8.
"GAAP" means generally accepted accounting principles in
effect in the United States of America from time to time, consistently
applied.
"Governmental Authority" means any nation or government, any
state, regional, local, or other political subdivision thereof, and
any entity or official exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hazardous Substances" defined in Section 4.12(e).
"Indemnification Security" defined in Section 6.7.
"Indemnified Party" defined in Section 6.4(a).
"Insurance Policies" defined in Section 4.19.
"Intellectual Property" defined in Section 4.23.
"Knowledge" means an individual will be deemed to have
"knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or
other matter; or
(b) a prudent individual could be expected to discover
or otherwise become aware of such fact or other matter in the course
of conducting a reasonably comprehensive investigation concerning the
existence of such fact or other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who
is serving, or who has at any time served, as a director, officer,
partner, executor, or trustee of such person (or in any similar
capacity) has, or at any time had, knowledge of such fact or other
matter.
"Leased Premises" defined in Section 4.13(b).
"Leases" defined in Section 4.13(b).
"Licenses" defined in Section 4.12(b).
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, but not limited
to, any conditional sale or other title retention agreement, any lease
in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code or comparable
law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).
"Material Adverse Change (or Effect)" means a change (or
effect), in the condition (financial or otherwise), properties,
assets, liabilities, rights, obligations, operations, Business, or
prospects which change (or effect) individually or in the aggregate,
is materially adverse to such condition, properties, assets,
liabilities, rights, obligations, operations, Business or prospects.
"New Permits" defined in Section 4.21.
"Ordinary Course of Business" means an action taken by a
Person will deemed to have been taken in the "Ordinary Course of
Business" only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-
to-day operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of
Persons exercising similar authority)[and is not required to be
specifically authorized by the parent company (if any) of such
Person];and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations
of the Persons that are in the same line of business as such Person.
"OSHA" defined in Section 4.12(e).
"Other Agreements" defined in Section 7.7.
"Owned Premises" defined in Section 1.1(f).
"Permits" defined in Section 4.21.
"Permitted Liens" means: (a) liens for taxes and other
governmental charges and assessments which are not yet due and
payable; (b) liens of landlords and liens of carriers, warehousemen,
mechanics, and materialmen and other like liens arising in the
Ordinary Course of Business for sums not yet due and payable; and (c)
other liens or imperfections on property which are not material in
amount or do not materially detract from the value of or materially
impair the existing use of the property affected by such lien or
imperfection.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, estate, trust, unincorporated
association, joint venture, Governmental Authority, or other entity,
of whatever nature.
"Purchased Assets" defined in Section 1.1.
"Purchased Contracts" defined in Section 4.24.
"Purchase Price" defined in Section 2.1
"RCRA" defined in Section 4.12(e).
"Receivables" means all receivables of SVPC, including all
trade account receivables arising from the provision of services or
sale of inventory, notes receivable, notes receivable from
Shareholders and insurance proceeds receivable.
"Release" defined in Section 4.12(f).
"Restricted Territory" defined in Section 7.5(a).
"SEC" means the Securities and Exchange Commission.
"SEC Documents" defined in Section 5.5.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller Claims" as defined in Section 6.4.
"Seller Indemnifiable Damages" defined in Section 6.3(a).
"Shareholders" defined in the introductory paragraph of this
Agreement.
"Short Term Note" defined in Section 2.1(a).
"Tax Return" means any tax return, filing or information
statement required to be filed in connection with or with respect to
any Taxes; and
"Taxes" means all taxes, fees or other assessments,
including, but not limited to, income, excise, property, sales,
franchise, intangible, withholding, social security, and unemployment
taxes imposed by any federal, state, local or foreign governmental
agency, and any interest or penalties related thereto.
"Underground Storage Tanks" defined in Section 4.12(h).
"Waste" defined in Section 4.12(e).
"Welfare Plan" defined in Section 4.17(e).
8.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
defined meanings when used in any certificates, reports or other
documents made or delivered pursuant hereto or thereto, unless the
context otherwise requires.
(b) Terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) All matters of an accounting nature in connection with
this Agreement and the transactions contemplated hereby shall be
determined in accordance with GAAP applied on a basis consistent with
prior periods, where applicable.
(d) As used herein, the neuter gender shall also denote the
masculine and feminine, and the masculine gender shall also denote the
neuter and feminine, where the context so permits.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival of Obligations. All representations, warranties,
covenants and obligations contained in this Agreement shall survive
for such time as the indemnity for the breach thereof shall survive as
set forth in Sections 6.1, 6.2, and 6.3.
9.2 Confidential Nature of Information. Each party agrees that
it will treat in confidence all documents, materials, and other
information which it shall have obtained regarding the other party
during the course of the negotiations leading to the consummation of
the transactions contemplated hereby (whether obtained before or after
the date of this Agreement), the investigation provided for herein and
the preparation of this Agreement and other related documents. Such
documents, materials and information shall not be communicated to any
Person (other than, in the case of Buyer, to its counsel, accountants,
financial advisors or lenders, and in the case of SVPC and the
Shareholders, to their counsel, accountants or financial advisors).
No other party shall use any confidential information in any manner
whatsoever except solely for the purpose of evaluating the proposed
purchase and sale of the Purchased Assets; provided, however, after
the Closing buyer may use or disclose any confidential information
included in the purchased Assets. The obligation of each party to
treat such documents, materials and other information in confidence
shall not apply to any information which:
(a) is or becomes available to such party on a non-
confidential basis from a source other than such party;
(b) is or becomes available to the public other than as a
result of disclosure by such party or its agents;
(c) is required to be disclosed under applicable law or
judicial process, but only to the extent it must be disclosed; or
(d) such party reasonably deems necessary to disclose to
obtain any of the consents or approvals contemplated hereby, provided
that the disclosing party gives reasonable prior notice to the other
parties.
9.3 No Public Announcement. Neither Buyer nor SVPC, nor the
Shareholders, without approval of the other, shall make any press
release or other public announcement concerning the transactions
contemplated by this Agreement, except as and to the extent that any
such party shall be so obligated by law, in which case the other party
shall be advised and the parties shall use their best efforts to cause
a mutually agreeable release or announcement to be issued; provided
that the foregoing shall not:
(a) preclude communications or disclosures necessary to
implement the provisions of this agreement or to comply with any
accounting rules; or
(b) prevent CSI from making any public disclosure which CSI
believes in good faith is required by law or by the terms of any
listing agreement with or requirements of a securities exchange.
9.4 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given,
delivered, and received:
(a) when delivered, if delivered personally by a commercial
messenger delivery service with verification of delivery;
(b) four (4) days after mailing, when sent by registered or
certified mail, return receipt requested, and postage prepaid;
(c) one business day after delivery to a private courier
service, when delivered to a private courier service providing
documented overnight service;
(d) on the date of delivery if delivered by facsimile and
electronically confirmed before 5:00 p.m. (Chicago, Illinois time) on
any business day; or
(e) on the next business day if delivered by facsimile and
electronically confirmed either after 5:00 p.m. (Chicago, Illinois
time) or on a non-business day, in each case addressed as follows:
If to the Shareholders: Xx. Xxxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
With a copy to: Xxxxxxx X. Xxxxx, III, Esq.
Xxxxxxx & Xxxxx
000 Xxxxxxxx
Xxxxx 000
P.O. Box 840
Palo Alto, California 94302
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Buyer: Xx. X.X. Xxxxx
President and Chief Executive Officer
Circuit Systems, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Telephone: 000- 000-0000
Facsimile: 000- 000-0000
With a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxx and Xxxxxx, P.C.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or to such other address or addresses as may hereafter by specified by
notice given by any of the above to others.
9.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. The successors and permitted
assigns hereunder shall include, without limitation, in the case of
Buyer, any Affiliate as well as the successors in interest to such
Affiliate (whether by merger, liquidation [including successive
mergers or liquidations] or otherwise). Nothing in this Agreement,
expressed or implied, is intended or shall be construed to confer upon
any Person other than the parties and successors and assigns permitted
by this Section 9.5 any right, remedy, or claim under or by reason of
this Agreement.
9.6 Access to Records after Closing. For the period of the
survival of any indemnification obligations hereunder, SVPC and its
representatives shall have reasonable access to all of the books and
records of the Business transferred to Buyer hereunder to the extent
that such access may reasonably be required by or the Shareholders in
connection with matters relating to or affected by the operations of
the Business prior to the Closing Date or pursuant to any collections
of accounts receivable. Such access shall be afforded by Buyer upon
receipt of reasonable advance notice and during normal business hours.
SVPC shall be solely responsible for any costs or expenses incurred
by it pursuant to this Section 9.6. If Buyer shall desire to dispose
of any of such books and records prior to the expiration of such
period, Buyer shall, prior to such disposition, give SVPC a reasonable
opportunity, at SVPC's expense, to segregate and remove such books and
records as SVPC may select. For a period of three (3) years after the
Closing Date, Buyer and its representatives shall have reasonable
access to all of the books and records relating to the Business which
SVPC may retain after the Closing Date. Such access shall be afforded
by SVPC and its respective Affiliates upon receipt of reasonable
advance notice and during normal business hours. Buyer shall be
solely responsible for any costs and expenses incurred by it pursuant
to this Section 9.6. If SVPC or any of its Affiliates shall desire to
dispose of any of such books and records prior to the expiration of
such three (3) year period, such party shall, prior to such
disposition, give Buyer a reasonable opportunity, at Buyer's expense,
to segregate and remove such books and records as Buyer may select.
9.7 Entire Agreement; Amendments. This Agreement and the
Exhibits and Schedules referred to herein and the documents delivered
pursuant hereto contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and
supersede all prior agreements, understandings, or letters of intent
between or among any of the parties hereto. This Agreement shall not
be amended, modified, or supplemented except by a written instrument
signed by an authorized representative of each of the parties hereto.
9.8 Interpretation. Article titles and headings to sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of
this Agreement. The Schedules and Exhibits referred to herein shall
be construed with and as an integral part of this Agreement to the
same extent as if they were set forth verbatim herein.
9.9 Waivers. Any term or provision of this Agreement may be
waived or the time for its performance may be extended by the party or
parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this Agreement
if, as to any party, it is authorized in writing by an authorized
representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect
the validity of this Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No waiver
of any breach of this Agreement shall be held to constitute a waiver
of any other or subsequent breach.
9.10 Expenses. Except as otherwise set forth herein, each party
hereto will pay all costs and expenses incident to its negotiation and
preparation of this Agreement and to its performance and compliance
with all agreements and conditions contained herein on its part to be
performed or complied with, including the fees, expenses, and
disbursements of its counsel and accountants.
9.11 Partial Invalidity. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, such provision
shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality, or unenforceability without invalidating the
remainder of such invalid, illegal, or unenforceable provision or
provisions or any other provisions hereof, unless such a construction
would be unreasonable.
9.12 Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the
same agreement and shall become binding when one or more counterparts
have been signed by each of the parties hereto and delivered to SVPC,
the Shareholders, and Buyer.
9.13 Further Assurances. On the Closing Date, SVPC shall:
(a) deliver to Buyer such other bills of sale, deeds,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, in form reasonably satisfactory to Buyer and
its counsel, as Buyer may reasonably request or as may be otherwise
reasonably necessary to vest in Buyer all the right, title and
interest of SVPC in, to or under any or all of the purchased Assets;
and
(b) take all steps as may be reasonably necessary to put
Buyer in actual possession and control of all the Purchased Assets.
From time to time following the Closing, SVPC shall execute and
deliver, or cause to be executed and delivered, to Buyer such other
instruments of conveyance and transfer as Buyer may reasonably request
or as may be otherwise necessary to more effectively convey and
transfer to, and vest in, Buyer and put Buyer in possession of, any
part of the Purchased Assets.
9.14 Destruction of Information. If the contemplated
transactions are not consummated, each party will return or destroy as
much of such written information as the other party may reasonably
request.
9.15 Time of the Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the
essence.
9.16 Governing Law; Submission to Jurisdiction. This Agreement
shall be enforced in accordance with the laws of the State of
California and shall be construed in accordance therewith. The
parties hereto agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated
exclusively in the State and Federal courts located in the County of
Santa Xxxxx, State of California. The aforementioned choice of venue
is intended by the parties to be mandatory and not permissive in
nature, thereby precluding in the possibility of litigation between
the parties with respect to or arising out of this Agreement in any
jurisdiction other than that specified in this paragraph. Each party
hereby waives any right it may have to assert the doctrine of forum
non conveniens or similar doctrine or to object to venue with respect
to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal Courts located in the County of
Santa Xxxxx, State of California shall have in personam jurisdiction
and venue over each of them for the purpose of litigating any dispute,
controversy or proceeding arising out of or related to this Agreement.
Each Party hereby authorizes and accepts service of process
sufficient for personal mail, return receipt requested, postage
prepaid, to its address for the giving of notices as set forth in this
Agreement, Any final judgment rendered against a party in any action
or proceeding shall be conclusive as to the subject of such final
judgment and may be enforced in other jurisdictions in any manner
provided by law.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
BUYER: ___________________ __________________________
CIRCUIT SYSTEMS, INC., SVPC CIRCUIT SYSTEMS, INC.
an Illinois Corporation a California Corporation
By: /s/ By: /s/
_______________________ _________________________
Xxxxx X. Xxxxx Xxxxx X. Xxxxx
Vice President-Chief Financial Vice President-Finance
Officer
SELLER:
________________________
H.O.T.L.R.T., INC. d/b/a SILICON
VALLEY PRINTED CIRCUITS,
a California Corporation
SHAREHOLDERS:
By: /s/ /s/
______________________ _________________________
Xxxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxxx
President /s/
_________________________
Xxxxxxx X. Xxxxxxx
/s/
_________________________
Xxxxxxx X. Xxxxx
