EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
Among
WESTERN MICRO TECHNOLOGY, INC.,
INTERNATIONAL PARTS, INC.
AND THE SHAREHOLDERS OF
INTERNATIONAL PARTS, INC.
November 18, 1995
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . 2
2.5 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . 3
2.6 Taking of Necessary Action; Further Action . . . . . . . . . . . . 3
2.7 Escrow of Shares . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Delivery of Certificates . . . . . . . . . . . . . . . . . . . . . 3
2.9 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF IPI AND THE IPI SHAREHOLDERS . . 4
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Obligations With Respect to Capital Stock . . . . . . . . . . . . 5
3.4 Equity Investments . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 Business Changes . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Accounts Receivable; Notes Receivable . . . . . . . . . . . . . . 9
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 10
3.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.16 Business and Customers . . . . . . . . . . . . . . . . . . . . . 11
3.17 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . 12
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.20 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Related Parties . . . . . . . . . . . . . . . . . . . . . . . . 13
3.23 Certain Advances . . . . . . . . . . . . . . . . . . . . . . . . 14
3.24 Union Activities . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.25 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.26 Underlying Documents . . . . . . . . . . . . . . . . . . . . . . 14
3.27 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 14
3.28 Compliance with MIR and DOU Agreements . . . . . . . . . . . . . 14
3.29 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . 15
3.30 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF WMT . . . . . . . . . . . . . 15
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 16
4.5 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.6 Information Supplied . . . . . . . . . . . . . . . . . . . . . . 17
4.7 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . 17
4.9 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . 17
4.10 Business Changes . . . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . 18
4.13 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 18
4.14 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 5 COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . 19
5.1 Conduct of Business in Normal Course . . . . . . . . . . . . . . 19
5.2 Preservation of Business and Relationships . . . . . . . . . . . 19
5.3 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 19
5.4 Employees and Compensation . . . . . . . . . . . . . . . . . . . 19
5.5 Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . 19
5.6 Issuance of Securities . . . . . . . . . . . . . . . . . . . . . 20
5.7 Governing Documents . . . . . . . . . . . . . . . . . . . . . . 20
5.8 No Other Bids . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.9 No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . 20
5.10 No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . 20
5.11 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.12 Spin-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 21
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . 21
6.2 Legal Conditions . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 3(a)(10) Fairness Hearing . . . . . . . . . . . . . . . . . . . 21
6.4 Good Faith . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.5 WMT Governing Documents . . . . . . . . . . . . . . . . . . . . 22
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6.6 IPI Corporate Tax Returns . . . . . . . . . . . . . . . . . . . 22
6.7 Lock-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Current Available Information . . . . . . . . . . . . . . . . . 22
6.9 Limited Resales . . . . . . . . . . . . . . . . . . . . . . . . 22
6.10 Legend; Stop Transfer Instructions . . . . . . . . . . . . . . . 23
6.11 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.12 Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.13 WMT as Exclusive Supplier . . . . . . . . . . . . . . . . . . . 23
6.14 Monthly Reports . . . . . . . . . . . . . . . . . . . . . . . . 23
6.15 Restrictions on Sales . . . . . . . . . . . . . . . . . . . . . 24
6.16 San Antonio Office . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Conditions to Obligations of WMT and IPI . . . . . . . . . . . . 24
(a) Government Approvals . . . . . . . . . . . . . . . . . . . 24
(b) Shareholder Approval . . . . . . . . . . . . . . . . . . . 24
(c) Third-Party Approvals . . . . . . . . . . . . . . . . . . . 24
(d) Legal Action . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Securities Laws . . . . . . . . . . . . . . . . . . . . . . 24
(f) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Conditions to Obligations of WMT . . . . . . . . . . . . . . . . 25
(a) Representations and Warranties . . . . . . . . . . . . . . 25
(b) Performance of Obligations . . . . . . . . . . . . . . . . 25
(c) Opinion of IPI's Counsel . . . . . . . . . . . . . . . . . 25
(f) October 31, 1995 Financial Statements . . . . . . . . . . . 25
(g) No Material Adverse Change . . . . . . . . . . . . . . . . 26
(h) Non-Compete Arrangements . . . . . . . . . . . . . . . . . 26
(l) Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . 26
(m) Spin-Off . . . . . . . . . . . . . . . . . . . . . . . . . 26
(n) Further Assurances and Indemnification Agreement . . . . . 26
7.3 Conditions to Obligations of the IPI Parties . . . . . . . . . . 26
(a) Representations and Warranties . . . . . . . . . . . . . . 26
(b) Performance of Obligations of WMT . . . . . . . . . . . . . 26
(c) Opinion of WMT's Counsel . . . . . . . . . . . . . . . . . 27
(d) No Material Adverse Change . . . . . . . . . . . . . . . . 27
(e) Nasdaq Listing Application. . . . . . . . . . . . . . . . . 27
(f) Escrow Agreement. . . . . . . . . . . . . . . . . . . . . . 27
7.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 8 INDEMNIFICATION AND ESCROW . . . . . . . . . . . . . . . . . . . 27
8.1 Indemnification by IPI and the IPI Shareholders . . . . . . . . 27
8.2 Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Escrow Period . . . . . . . . . . . . . . . . . . . . . . . . . 29
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8.4 Protection of Escrow Fund . . . . . . . . . . . . . . . . . . . 29
8.5 Distributions; Voting . . . . . . . . . . . . . . . . . . . . . 29
8.6 Claims Upon Escrow Fund . . . . . . . . . . . . . . . . . . . . 29
8.7 Objections to Claims . . . . . . . . . . . . . . . . . . . . . . 30
8.8 Resolution of Conflicts; Arbitration . . . . . . . . . . . . . . 30
8.9 Distribution upon Termination of Escrow Period . . . . . . . . . 31
8.10 Escrow Agent's Duties . . . . . . . . . . . . . . . . . . . . . 31
8.11 Indemnification by WMT . . . . . . . . . . . . . . . . . . . . . 31
8.12 Indemnification Procedure . . . . . . . . . . . . . . . . . . . 32
ARTICLE 9 PAYMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . 33
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . 34
10.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 11 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.2 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.3 Entire Understanding . . . . . . . . . . . . . . . . . . . . . . 36
11.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.5 Binding Nature . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.6 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 36
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Exhibits
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Exhibit A IPI and the IPI Shareholders' Disclosure Schedule
Exhibit 7.2(c) Opinion of IPI's Counsel
Exhibit 7.2(g) Covenant Not to Compete
Exhibit 7.2(n) Further Assurances and Indemnification Agreement
Exhibit 7.3(c) Opinion of WMT's Counsel
Exhibit 8.2 Escrow Agreement
Schedules
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Schedule 2.10 IPI Customers and Sales Staff
Schedule 3.2 IPI Shareholders
Schedule 3.8 Properties and Fixed Assets
Schedule 3.9 Accounts Receivable; Notes Receivable
Schedule 3.11 Compensation
Schedule 3.14 Contracts
Schedule 3.16 Customers
Schedule 3.17 Inventory
Schedule 3.18 Proprietary Rights
Schedule 3.19 Insurance
Schedule 3.20 Bank Accounts
Schedule 3.25 ERISA
Schedule 3.29 Accounts Payable
Schedule 3.30 Liabilities
Schedule 5.2 IRAs
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AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION, made and entered into as of the
18th day of November, 1995 by and among WESTERN MICRO TECHNOLOGY, INC., a
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California corporation ("WMT"), INTERNATIONAL PARTS, INC., a Texas corporation
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doing business as IPI*GrammTech ("IPI"), and XXXXXXX X. XXXXXXX, XXXXX X.
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XXXXXXXXXXXX and XXXX X. XXXXX (the "IPI Shareholders," and when referred to
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herein together with IPI, the "IPI Parties"),
W I T N E S S E T H:
WHEREAS, the IPI Shareholders are the holders of all of the outstanding
shares (the "Shares") of common stock ("IPI Common") of IPI; and
WHEREAS, IPI has certain businesses that WMT does not wish to acquire; and
WHEREAS, IPI is transferring those businesses which WMT does not wish to
acquire to a wholly-owned subsidiary of IPI, IPI*GrammTech, Inc., and the stock
of IPI*GrammTech, Inc. is being distributed to the IPI Shareholders prior to
consummation of the transaction described in this Agreement and Plan of
Reorganization; and
WHEREAS, the IPI Shareholders desire to exchange all of the Shares of IPI
in exchange for shares of common stock of WMT ("WMT Common") in accordance with
the terms hereof;
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, WMT and the IPI Share-
holders agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 Certain Definitions. The terms defined in this Section 1.1 shall, for
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all purposes of this Agreement, have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
(a) "SEC" shall mean the Securities and Exchange Commission.
(b) "Subsidiary" means a corporation whose voting securities are
owned directly or indirectly by the "parent" corporation in such amounts as are
sufficient to elect at least a majority of the Board of Directors.
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1.2 Other Definitions. In addition to the terms defined in Section 1.1,
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certain other terms are defined elsewhere in this Agreement, and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings, unless the context expressly or by necessary implication otherwise
requires.
ARTICLE 2
CLOSING
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2.1 Closing Date. The Closing under this Agreement (the "Closing") shall
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be held not more than two (2) business days following the satisfaction of all
conditions specified in this Agreement, unless duly waived by the party entitled
to satisfaction thereof. In any event, if the Closing has not occurred on or
before December 1, 1995, this Agreement may be terminated as provided in Section
10.1(c). Such date on which the Closing is to be held is herein referred to as
the "Closing Date." The Closing shall be held at the offices of Pillsbury
Madison & Sutro, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, at 10:00 A.M. on
such date, or at such other time and place as WMT and IPI may agree upon in
writing. The Closing may be accomplished by exchange of counterparts signed by
the parties.
2.2 The Merger. At the Effective Time (as defined in Section 2.4 hereof),
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in accordance with the Agreement of Merger and the General Corporation Law of
the State of California ("California Law"), IPI shall be merged with and into
WMT (the "Merger"), the separate existence of IPI (except as may be continued by
operation of law) shall cease, and WMT shall continue as the surviving
corporation under the corporate name it possesses immediately prior to the
Effective Time. (WMT is sometimes hereinafter referred to as the "Surviving
Corporation.")
2.3 Effect of the Merger. The Surviving Corporation shall possess all the
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rights, powers, franchises and authority, both public and private, and be
subject to all the restrictions, disabilities and duties, of IPI and WMT (the
"Constituent Corporations"); shall be vested with all assets and property, real,
personal and mixed, and every interest therein, wherever located, belonging to
each of the Constituent Corporations; and shall be liable for all the
obligations and liabilities of each of the Constituent Corporations, all with
the effect set forth in California Law.
2.4 Consummation of the Merger. As soon as practicable after the Closing,
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the parties hereto will cause the Merger to be consummated by filing with the
Secretary of State of the State of California the Agreement of Merger and with
the Secretary of State of the State of Texas the requisite documents (the time
of such filing being the "Effective Time").
The Articles and Bylaws of WMT, as in effect immediately prior to the
Effective Time, shall be the Articles and Bylaws of the Surviving corporation
and thereafter shall
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continue to be its Articles and Bylaws (until amended as provided therein and
under California law).
2.5 Conversion of Securities. At the Effective Time, by virtue of the
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Merger and without any action on the part of IPI or the IPI Shareholders, the
IPI Shareholders shall receive pro rata, in exchange for their shares of IPI
Common, an aggregate of 300,000 shares of newly issued WMT Common, so long as
the average closing price of WMT Common during the ten (10) day trading period
ending on the second day prior to the Closing Date is not less than $5.00 nor
more than $6.00 (the "Collar"). If the average closing price is not within the
Collar, the IPI Shareholders shall receive the number of shares of WMT Common
equal to $1,600,000, divided by the WMT average closing price; provided that in
no event will WMT issue more than 10% of its currently outstanding stock in
exchange for the outstanding shares of IPI Common. No fractional shares shall
be issued by WMT in the Merger.
2.6 Taking of Necessary Action; Further Action. WMT and IPI shall take
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all such lawful action as may be necessary or appropriate in order to effectuate
the Merger. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of either of the Constituent
Corporations, the officers and directors of such corporation are fully autho-
rized in the name of their corporation or otherwise to take, and shall take, all
such lawful and necessary action.
2.7 Escrow of Shares. The IPI shareholders agree that 10% of the WMT
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Common issued to the IPI Shareholders under Section 2.5 will be placed in
escrow, as described in Article 8 hereto, as security for indemnification as
provided in Article 8 until August 15, 1996. On such date WMT shall instruct
the Escrow Agent to promptly deliver the escrowed share certificates to the IPI
Shareholders.
2.8 Delivery of Certificates. At the Closing, the IPI Shareholders shall
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deliver to WMT the certificates representing all of the issued and outstanding
IPI Shares, together with duly executed stock powers, and WMT shall deliver to
each of the IPI Shareholders the number of shares of WMT Common provided for
pursuant to 2.5 hereof.
2.9 Tax Treatment. The parties intend that the purchase and sale of the
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shares will be a reorganization within the meaning of section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
2.10 Earn-Out. On a pro rata basis, the IPI Shareholders shall receive an
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earn-out payment equal to thirty percent (30%) of the gross profit dollars
generated in excess of $1,674,200 gross profit dollars on (i) sales to the IPI
Customers identified in SCHEDULE 2.10 in the years ended December 31, 1996, and
December 31, 1997, and (ii) sales by the IPI Sales Staff identified in SCHEDULE
2.10 in the years ended December 31, 1996, and December 31, 1997. For purposes
of this Section 2.10, gross profit is defined as the
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difference between a product's cost and its sales price; a product's cost shall
be adjusted and reduced for rebates, special manufacturer's programs, or
promotional discounts, but not adjusted for freight or shipping charges. Gross
profit dollars shall not include market development funds or co-op funds from
vendors. Earn-out amounts will be calculated on a quarterly basis, based on
gross profit in excess of $418,550 per calendar quarter beginning with the
calendar quarter ending March 31, 1996. Earn-out amounts will be paid in WMT
Common quarterly, forty-five (45) days after the end of each calendar quarter.
The value of the WMT Common will be calculated based on the ten day simple
average of the closing prices of WMT Common in the ten trading days preceding
the payment date. IPI Shareholders will be entitled to reasonable rights to
audit the earn-out rights. If the IPI Shareholders and WMT cannot agree on the
appropriate earn-out amounts, the parties shall choose a nationally recognized
accounting firm who shall calculate the amount in accordance herewith. The
decision of such accountants shall be conclusive and binding on both parties.
The right to receive earn-out shares shall not be assignable by the IPI
Shareholders. The aggregate amount of all shares issued for earn-out amounts
shall not exceed the number of shares issued at Closing (including the shares
placed in escrow).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF IPI AND
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THE IPI SHAREHOLDERS
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Except as otherwise set forth in the disclosure schedule attached hereto as
EXHIBIT A (the "Disclosure Schedule") or in any document expressly referenced in
the Disclosure Schedule, IPI and each of the IPI Shareholders represent and
warrant to WMT as of the date hereof as follows:
3.1 Organization. IPI is a corporation duly organized, validly existing
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and in good standing under the laws of the State of Texas, and is not required
to be qualified in any other jurisdiction except where the failure to be so
qualified will not have a material adverse effect on IPI and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
3.2 Capital Structure. The authorized capital stock of IPI consists of
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1,000,000 shares of Common Stock, par value $1.00 per share, and no shares of
Preferred Stock. As of the date hereof and as of the Closing Date, 1,000 shares
of Common Stock were issued and outstanding and no shares of Preferred Stock
were issued and outstanding. SCHEDULE 3.2 sets forth a true and complete list
of holders of IPI Common showing the number of shares held by each such
shareholder. Each IPI Shareholder has good and valid title to his or her shares
free and clear of all liens and encumbrances.
All of the outstanding IPI Common was issued in compliance with applicable
federal and state securities laws and regulations. All of the outstanding
shares of IPI Common are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive
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rights created by statute, IPI's Articles of Incorporation or Bylaws or any
agreement to which IPI or an IPI Shareholder is a party.
3.3 Obligations With Respect to Capital Stock. There are no options,
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warrants, calls, rights, commitments or agreements of any character to which IPI
is a party or by which it is bound obligating IPI to issue any shares of capital
stock of IPI or obligating IPI to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are no voting trusts,
proxies or other agreements with respect to the shares of capital stock of IPI.
3.4 Equity Investments. IPI does not own any equity stock or interest,
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directly or indirectly, in any corporation, partnership, joint venture, firm or
other entity. IPI has no subsidiaries, except IPI*GrammTech, Inc., a Texas
corporation, all of the outstanding stock of which will be distributed to the
IPI Shareholders prior to Closing.
3.5 Authority. IPI and each IPI Shareholder has all requisite corporate
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power and authority to enter into this Agreement and, subject to satisfaction of
the conditions set forth herein, to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of IPI. This Agreement has been
duly executed and delivered by IPI and the IPI Shareholders, and constitutes the
valid and binding obligation of IPI and the IPI Shareholders, enforceable in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the rights of
creditors and the effect or availability of rules of law governing specific
performance, injunctive relief or other equitable remedies. Provided the
conditions set forth in Article 7 are satisfied, the execution and delivery of
this Agreement do not or will not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation under
(a) any provision of the Articles of Incorporation or Bylaws of IPI or (b) any
material agreement or instrument, permit, franchise, license, judgment or order,
applicable to IPI or the IPI Shareholders or their respective properties or
assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority (a "Governmental Entity"), is required by or with
respect to IPI or the IPI Shareholders in connection with the execution and
delivery of this Agreement by IPI or the IPI Shareholders or the consummation by
IPI or the IPI Shareholders of the transactions contemplated hereby or thereby,
except for such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country.
3.6 Financial Statements. IPI has furnished to WMT its audited statement
--------------------
of income and retained earnings and statement of cash flows for the calendar
years ended, and balance
-5-
sheets at, December 31, 1992, 1993 and 1994, and its unaudited interim statement
of income and retained earnings for the period ended, and balance sheet at,
October 31, 1995. IPI has also furnished to WMT unaudited pro forma financial
statements for the calendar year ended, and at, December 31, 1994 and for the
nine (9) months ended, and at, September 30, 1995, reflecting only IPI's
commercial division. All IPI assets and liabilities shall be contributed to
IPI*GrammTech, Inc. and spun-off to the IPI Shareholders prior to the Closing
(the "Spin-Off"), with the exception of those assets and liabilities set forth
on Exhibit 2.02 to that certain Internal Reorganization Plan, by and between IPI
and IPI*GrammTech, Inc., dated as of November 14, 1995 (the "Internal
Reorganization Plan"), which shall remain with IPI and be reflected in the
Closing Balance Sheet. At Closing IPI shall deliver to WMT a balance sheet (the
"Closing Balance Sheet") dated as of the Closing Date and statement of income
and retained earnings for the period ended as of the Closing Date. The balance
sheet at October 31, 1995 is hereinafter referred to as the "October Balance
Sheet," and all such financial statements are hereinafter referred to
collectively as the "IPI Financial Statements." The IPI Financial Statements
have been and will be complete, true and accurate in all material respects and,
except for any interim financial statements, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved, and are and will be in
accordance with IPI's books and records, and fairly present the financial
position of IPI and the results of its operations as of the date and for the
periods indicated thereon, subject in the case of the unaudited portion of the
IPI Financial Statements to normal year-end audit adjustments which will not be
material and the absence of footnote disclosures. At the date of the October
Balance Sheet (the "October Balance Sheet Date") and as of the Closing Date,
IPI had and will have no liabilities or obligations, secured or unsecured
(whether accrued, absolute, contingent or otherwise) not reflected on the
October Balance Sheet or Closing Balance Sheet or the accompanying notes
thereto except for liabilities and obligations as may have arisen in the
ordinary course of business prior to the date of said Balance Sheet and which,
under GAAP, would not have been required to be reflected on such Balance Sheet
and except for liabilities incurred in the ordinary course of business since
the date of said Balance Sheet which are usual and normal in amount. The
Closing Balance Sheet will be prepared after the Spin-off and reflect the
effect of the Spin-off.
3.7 Business Changes. Since the October Balance Sheet Date, except as
----------------
otherwise contemplated by this Agreement, the Spin-off or as disclosed in
writing to WMT, IPI has conducted its business only in the ordinary and usual
course and, without limiting the generality of the foregoing:
(a) There have been no changes in the condition (financial or
otherwise), business, net worth, assets, properties, employees, operations,
obligations or liabilities of IPI which, in the aggregate, have had or may be
reasonably expected to have a materially adverse effect on the condition,
business, net worth, assets, prospects, properties or operations of IPI, other
than those proposed changes set forth on SCHEDULE 3.11.
-6-
(b) IPI has not issued, or authorized for issuance, or entered into
any commitment to issue, any equity security, bond, note or other security of
IPI.
(c) IPI has not incurred debt for borrowed money, nor incurred any
obligation or liability except in the ordinary and usual course of business and
in any event not in excess of $5,000 for any single occurrence; provided,
however, that IPI may, for normal inventory purchases, exceed the $5,000 limit
under its existing bank line of credit in the ordinary and usual course of
business.
(d) IPI has not paid any obligation or liability, or discharged,
settled or satisfied any claim, lien or encumbrance, except for current
liabilities in the ordinary and usual course of business and in any event not in
excess of $100,000 for any single occurrence.
(e) IPI has not declared or made any dividend, payment or other
distribution on or with respect to any share of capital stock of IPI.
(f) IPI has not purchased, redeemed or otherwise acquired or
committed itself to acquire, directly or indirectly, any share or shares of
capital stock of IPI.
(g) IPI has not mortgaged, pledged, or otherwise encumbered any of
its assets or properties, except for liens for current taxes which are not yet
delinquent and purchase-money liens arising out of the purchase or sale of
services or products made in the ordinary and usual course of business and in
any event not in excess of $5,000 for any single item or $50,000 in the
aggregate, other than inventory sold in the normal course of business or
accounts receivable.
(h) IPI has not disposed of, or agreed to dispose of, by sale, lease,
license or otherwise, any asset or property, tangible or intangible, except, in
the case of such other assets and property, in the ordinary and usual course of
business, and in each case for a consideration believed to be at least equal to
the fair value of such asset or property and in any event not in excess of
$5,000 for any single item or $25,000 in the aggregate other than inventory sold
or returned in the normal course of business.
(i) IPI has not purchased or agreed to purchase or otherwise acquire
any securities of any corporation, partnership, joint venture, firm or other
entity; IPI has not made any expenditure or commitment for the purchase,
acquisition, construction or improvement of a capital asset, except in the
ordinary and usual course of business and in any event not in excess of $5,000
for any single item or $25,000 in the aggregate.
(j) IPI has not entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of business.
(k) IPI has not sold, assigned, transferred or conveyed, or committed
itself to sell, assign, transfer or convey, any Proprietary Rights (as defined
in Section 3.18).
-7-
(l) IPI has not adopted or amended any bonus, incentive, profit-
sharing, stock option, stock purchase, pension, retirement, deferred-
compensation, severance, life insurance, medical or other benefit plan,
agreement, trust, fund or arrangement for the benefit of employees of any kind
whatsoever, nor entered into or amended any agreement relating to employment,
services as an independent contractor or consultant, or severance or termination
pay, nor agreed to do any of the foregoing.
(m) IPI has not effected or agreed to effect any change in its
directors, officers or key employees.
(n) IPI has not effected or committed itself to effect any amendment
or modification in its Articles of Incorporation or Bylaws, except as
contemplated in this Agreement.
3.8 Properties.
----------
(a) SCHEDULE 3.8 sets forth the real property owned by IPI, all of
which will be conveyed to IPI*GrammTech, Inc. prior to the Closing. The October
Balance Sheet reflects and the Closing Balance Sheet will reflect all of the
personal property owned or leased and used by IPI in its business or otherwise
held by IPI, except for (i) property acquired or disposed of in the ordinary and
usual course of the business of IPI since the date of such Balance Sheet, and
(ii) personal property not required under GAAP to be reflected thereon and (iii)
property conveyed pursuant to the Spin-off to IPI*GrammTech, Inc. Except as
reflected in the notes to the October and Closing Balance Sheets and except for
assets and liabilities conveyed to IPI*GrammTech, Inc. in the Spin-off, IPI has
good and marketable title to all assets and properties listed on the October and
Closing Balance Sheets and thereafter acquired, free and clear of any imperfec-
tions of title, lien, claim, encumbrance, restriction, charge or equity of any
nature whatsoever, except for the lien of current taxes not yet delinquent. The
fixed assets described in SCHEDULE 3.8 constitute all tangible personal property
(other than inventory) currently used in the business. To the best of the IPI
Parties' knowledge all of the fixed assets reflected on the October and Closing
Balance Sheets or thereafter acquired are in good condition and repair for the
requirements of the business as presently conducted by IPI.
(b) IPI has provided WMT with a full and complete list of all real
and personal property leased by IPI or under option to purchase by IPI. All
such property leased by IPI is held under valid, subsisting and enforceable
leases. To the best of the IPI Parties' knowledge, the operations of IPI
thereon do not violate any applicable material building code, zoning requirement
or classification, or pollution control ordinance or statute relating to the
property or to such operations.
(c) To the knowledge of the IPI Shareholders and management of IPI,
there are no Hazardous Substances in, under or about the soil, sediment, surface
water or groundwater on, under or around any properties at any time owned,
leased or occupied by IPI. IPI has not disposed of any Hazardous Substances on
or about such property. IPI has
-8-
not disposed of any materials at any site being investigated or remediated for
contamination or possible contamination of the environment. "Hazardous
Substances" shall mean any substance regulated or prohibited by any law or
designated by any governmental agency to be hazardous, toxic, radioactive,
regulated medical waste or otherwise a danger to health or the environment.
(d) IPI has conducted its business in accordance with all applicable
laws, regulations, orders and other requirements of governmental authorities
relating to Hazardous Substances and the use, storage, treatment, disposal,
transport, generation, release and exposure of others to Hazardous Substances.
IPI has not received any notice of any investigation, claim or proceeding
against IPI relating to Hazardous Substances and IPI is not aware of any fact or
circumstance which could involve IPI in any environmental litigation,
proceeding, investigation or claim or impose any environmental liability upon
IPI.
3.9 Accounts Receivable; Notes Receivable. SCHEDULE 3.9 contains a
-------------------------------------
summary of the accounts receivable of IPI as of October 31, 1995, together with
an accurate aging of such accounts receivable. The accounts receivable arose
out of the bona fide furnishing of goods and services, each in the operation of
the business of IPI, and require no additional performance by IPI. The accounts
receivable are collectible at their full amounts. Except as set forth on
SCHEDULE 3.9, the notes receivable are obligations of current customers of IPI
or employees of IPI, whether on an open account or cash on delivery basis, and
there are no disputes between IPI and any obligor under any such note receivable
with respect to the amount owing or the payment terms thereunder. IPI has pro-
vided WMT with accurate information concerning amounts and aging of accounts
receivable and with an accurate customer list of IPI. All of such notes
receivable will be transferred to IPI*GrammTech, Inc. prior to Closing.
3.10 Taxes. IPI has accurately and completely filed with the appropriate
-----
United States, state, local and foreign governmental agencies all tax returns
and reports required to be filed (subject to permitted extensions applicable to
such filings), and has paid or accrued in full all taxes shown as owing on such
tax returns, duties, charges, withholding obligations and other governmental
liabilities as well as any interest, penalties, assessments or deficiencies, if
any, due to, or claimed to be due by, any governmental authority (including
taxes on properties, income, franchises, licenses, sales and payrolls). (All
such items are collectively referred to herein as "Taxes"). The October and
Closing Balance Sheets fully accrue or reserve or will fully accrue or reserve
all current and deferred Taxes. IPI is not a party to any pending action or
proceeding, nor to the IPI Parties' knowledge is any such action or proceeding
threatened by any governmental authority for the assessment or collection of
Taxes. No liability for Taxes has been incurred other than in the ordinary
course of business. There are no liens for Taxes except for liens for property
taxes not yet delinquent. IPI is not a party to any Tax sharing, Tax
allocation, Tax indemnity or statute of limitations extension or waiver
agreement and in the past five (5) years has not been included on any
consolidated combined or unitary return with any entity other than IPI.
-9-
3.11 Compensation. Since October 31, 1995, IPI has not paid or committed
------------
itself to pay to or for the benefit of any of its directors, officers, employees
or shareholders any compensation of any kind other than wages, salaries and
benefits at times and rates in effect on SCHEDULE 3.11, nor has it effected or
agreed to effect any amendment or supplement to any employee profit sharing,
stock option, stock purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any other employee
benefit plan or arrangement except as set forth on SCHEDULE 3.11. IPI does not
have any bonus plan or obligations with respect to any bonus plan, except as set
forth in SCHEDULE 3.11. IPI has provided in SCHEDULE 3.11 a full and complete
list of all directors, officers, employees or consultants of IPI as of the date
set forth thereon, specifying their names and job designations, their dates of
hire, the total amount paid or payable as wages, salaries or other forms of
direct compensation, and the basis of such compensation, whether fixed or
commission or a combination thereof.
3.12 Compliance with Law. To the IPI Parties knowledge, all material
-------------------
licenses, franchises, permits, clearances, consents, certificates and other
evidences of authority of IPI which are necessary to the conduct of IPI's
business ("Permits") are in full force and effect and IPI is not in violation of
any Permit in any material respect. Except for possible exceptions, the curing
or non-curing of which would not have a material adverse effect on the condition
(financial or otherwise), business, net worth, assets, prospects, properties or
operations of IPI, the business of IPI has been, to the IPI Parties' knowledge,
conducted in accordance with all applicable laws, regulations, orders and other
requirements of governmental authorities.
3.13 Litigation. Except for litigation initiated by IPI relating to
----------
collections, there is no claim, dispute, action, proceeding, notice, order,
suit, appeal or investigation, at law or in equity, pending against IPI, or
involving any of its assets or properties, before any court, agency, authority,
arbitration panel or other tribunal (other than those, if any, with respect to
which service of process or similar notice has not yet been made on IPI), and to
the knowledge of the IPI Shareholders and management of IPI none have been
threatened. The IPI Shareholders and management of IPI are aware of no facts
which, if known to shareholders, customers, governmental authorities or other
persons, would result in any such claim, dispute, action, proceeding, suit or
appeal or investigation which would have a material adverse effect on the condi-
tion (financial or otherwise), business, net worth, assets, prospects,
properties or operations of IPI. IPI is not subject to any order, writ,
injunction or decree of any court, agency, authority, arbitration panel or other
tribunal, nor is it in default with respect to any notice, order, writ,
injunction or decree.
3.14 Contracts. IPI has provided WMT with a complete list in SCHEDULE
---------
3.14 of each executory contract and agreement in the following categories to
which IPI is a party, or by which it is bound in any respect, (a) agreements for
the purchase, sale, lease or other disposition of equipment, goods, materials,
research and development, supplies, studies or capital assets, or for the
performance of services, in any case involving more than $5,000; (b) contracts
or agreements for the joint performance of work or services, and all other joint
venture agreements; (c) management or employment contracts, consulting
contracts, collec-
-10-
tive bargaining contracts, termination and severance agreements; (d) notes,
mortgages, deeds of trust, loan agreements, security guarantees, debentures,
indentures, credit agreements and other evidences of indebtedness; (e) pension,
retirement, profit-sharing, deferred compensation, bonus, incentive, life
insurance, hospitalization or other employee benefit plans or arrangements
(including, without limitation, any contracts or agreements with trustees,
insurance companies or others relating to any such employee benefit plan or
arrangement); (f) stock option, stock purchase, warrant, repurchase or other
contracts or agreements relating to any share of capital stock of IPI; (g)
contracts or agreements with agents, brokers, consignees, sale representatives
or distributors; (h) contracts or agreements with any director, officer,
employee, consultant or shareholder; (i) powers of attorney or similar
authorizations granted by IPI to third parties; (j) licenses, sublicenses,
royalty agreements and other contracts or agreements to which IPI is a party, or
otherwise subject, relating to technical assistance or to Proprietary Rights as
defined below; and (k) other material contracts.
IPI has not entered into any contract or agreement containing covenants
limiting the right of IPI or the IPI Shareholders to compete in any business or
with any person. As used in this Agreement, the terms "contract" and
"agreement" include every contract, agreement, commitment, understanding and
promise, whether written or oral.
3.15 No Default.
----------
(a) Each of the contracts, agreements or other instruments referred
to in Section 3.14 of this Agreement and each of the standard customer
agreements or contracts of IPI is a legal, binding and enforceable obligation by
or against IPI, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
rights of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity).
To the IPI Parties' knowledge, no party with whom IPI has an agreement or
contract is in default thereunder or has breached any terms or provisions
thereof which is material to the conduct of IPI's business.
(b) IPI has performed, or is now performing, the obligations of, and
IPI is not in material default (or would by the lapse of time and/or the giving
of notice be in material default) in respect of, any contract, agreement or
commitment binding upon it or its assets or properties and material to the
conduct of its business. No third party has raised any claim, dispute or
controversy with respect to any of the executory contracts of IPI, nor has IPI
received written notice or warning of alleged nonperformance, delay in delivery
or other noncompliance by IPI with respect to its obligations under any of those
contracts, nor are there any facts which exist indicating that any of those
contracts may be totally or partially terminated or suspended by the other
parties thereto.
-11-
3.16 Business and Customers. SCHEDULE 3.16 is a list of all of IPI's
----------------------
commercial division customers from whom more than $10,000 in revenues were
received in the ten (10) months ended October 31, 1995.
3.17 Inventories. The inventories of IPI consist of items of a quality
-----------
and quantity usable and salable in the normal course of the business, subject to
reserves on balance sheet. A summary of inventory on hand as of October 31,
1995 is set forth in SCHEDULE 3.17. All inventory on hand at Closing will be
set forth on the Closing Balance Sheet. All items included in such inventories
are owned by IPI. No items included in the inventories have been pledged as
collateral (except under the bank line of credit and normal vendor security
agreements in place until IPI pays for the inventory) or are held by IPI on
consignment from others. All the inventories reflected on the balance sheets
included in the Financial Statements and on the books of IPI are based on
quantities determined from month-end physical count, and are valued in the
Financial Statements at the lower of cost (last-in, first-out) or market and on
a basis consistent with that of prior periods.
3.18 Proprietary Rights.
------------------
(a) IPI has provided WMT a complete list in writing in SCHEDULE 3.18
of all computer software, software programs, patents and applications for
patents, trademarks, trade names, service marks, and copyrights, and
applications therefor, owned or used by IPI or in which it has any rights or
licenses, except for software used by IPI and generally available on the
commercial market. IPI has provided WMT with a complete and accurate
description in SCHEDULE 3.18 of all agreements of IPI with each officer,
employee or consultant of IPI providing IPI with title and ownership to patents,
patent applications, trade secrets and inventions developed or used by IPI in
its business. All of such agreements so described are valid, enforceable and
legally binding, subject to the effect of applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the rights of creditors or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies (regardless of whether any such remedy is considered
in a proceeding at law or in equity).
(b) IPI owns or possesses licenses or other rights to use all
computer software, software programs, patents, patent applications, trademarks,
trademark applications, trade secrets, service marks, trade names, copyrights,
inventions, drawings, designs, customer lists, proprietary know-how or
information, or other rights with respect thereto (collectively referred to as
"Proprietary Rights"), used in the business of IPI, and the same are sufficient
to conduct IPI's business as it has been and is now being conducted.
(c) The operations of IPI do not conflict with or infringe, and no
one has asserted to IPI or any IPI Shareholder that such operations conflict
with or infringe on any Proprietary Rights, owned, possessed or used by any
third party. There are no claims, disputes, actions, proceedings, suits or
appeals pending against IPI with respect to any Proprietary Rights (other than
those, if any, with respect to which service of process or similar notice may
not yet have been made on IPI), and to the knowledge of the IPI
-12-
Shareholders and management of IPI none has been threatened against IPI. To the
knowledge of the IPI Shareholders and management of IPI there are no facts or
alleged facts which would reasonably serve as a basis for any claim that IPI
does not have the right to use, free of any rights or claims of others, all
Proprietary Rights in the development, manufacture, use, sale or other
disposition of any or all products or services presently being used, furnished
or sold in the conduct of the business of IPI as it has been and is now being
conducted.
(d) To the IPI Parties' knowledge, no employee of IPI is in violation
of any term of any employment contract, proprietary information and inventions
agreement, non-competition agreement, or any other contract or agreement
relating to the relationship of any such employee with IPI or any previous
employer.
3.19 Insurance. IPI has provided WMT with a complete list in SCHEDULE
---------
3.19 of all policies of insurance to which IPI is a party or is a beneficiary or
named insured. IPI has in full force and effect, with all premiums due thereon
paid, the policies of insurance set forth therein. All the insurable properties
of IPI are insured in amounts and coverage and against risks and losses which
are adequate and usually insured against by persons holding or operating similar
properties in similar businesses. There were no claims in excess of $10,000
asserted under any of the insurance policies of IPI in respect of all motor
vehicle, general liability, professional liability, errors and omissions, and
worker's compensation claims, nor medical claims in excess of $25,000 for the
period from January 1, 1992 to the date of this Agreement.
3.20 Bank Accounts. IPI has furnished to WMT a true and correct list in
-------------
SCHEDULE 3.20 setting forth the names and addresses of all banks, other
institutions and state governmental departments at which IPI has accounts,
deposits or safety deposit boxes, or special deposits required to be held by
such state governmental departments with the nature of such account and the
names of all persons authorized to draw on or give instructions with respect to
such accounts or deposits, or to have access thereto, and the names and
addresses of all persons, if any, holding a power-of-attorney on behalf of IPI.
All cash in such accounts is held in demand deposits and is not subject to any
restriction or limitation as to withdrawal.
3.21 Brokers or Finders. Except for dealings with Xxx Xxxx International,
------------------
which was retained by WMT, IPI has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement. IPI has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.22 Related Parties. Except for IPI*GrammTech,Inc., no officer or
---------------
director of IPI, or any Affiliate of any such person, has, either directly or
indirectly, (a) an interest in any corporation, partnership, firm or other
person or entity which currently furnishes or sells services or products which
are similar to those furnished or sold by IPI, or (b) a beneficial
-13-
interest in any contract or agreement to which IPI is a party or by which IPI
may be bound. For purposes of this Section 3.22, there shall be disregarded any
interest which arose solely from the ownership of less than a two percent (2%)
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market. The IPI Shareholders
will own all of the outstanding IPI*GrammTech Stock at Closing.
3.23 Certain Advances. There are no receivables of IPI owing from
----------------
directors, officers, employees, consultants or shareholders of IPI, or owing by
any affiliate of any director or officer of IPI, other than advances in the
ordinary and usual course of business to officers and employees for reimbursable
business expenses which are not in excess of $2,500 for any one individual and
those notes receivable attached to the Disclosure Schedule attached hereto as
Exhibit A.
3.24 Union Activities. None of the employees of IPI are represented by
----------------
any union or are parties to any collective bargaining arrangement, and no
attempts are being made to organize or unionize any of the IPI employees.
3.25 ERISA. SCHEDULE 3.25 hereto lists all employee pension benefit
-----
plans, multi-employer plans and employee welfare benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) covering active, former or retired employees of IPI. IPI has
furnished to WMT copies or descriptions of each employment, severance or other
similar contract, arrangement or policy and each plan, agreement, policy or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), vacation benefits, severance benefits, disability
benefits, early retirement benefits, death benefits, hospitalization benefits,
retirement benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
compensation or post-retirement benefits.
3.26 Underlying Documents. Copies of any underlying documents listed or
--------------------
described as having been disclosed to WMT pursuant to this Agreement have been
furnished to WMT. All such documents furnished to WMT are true and correct
copies, and there are no amendments or modifications thereto, that have not been
disclosed to WMT. The minute books of IPI contain complete and accurate records
of all meetings and other corporate actions taken by the directors and
shareholders of IPI.
3.27 Full Disclosure. Any information furnished by IPI to WMT in writing
---------------
pursuant to this Agreement (including the Schedules hereto), at any time prior
to the Closing Date, does not and will not contain any untrue statement of a
material fact and does not and will not omit to state any material fact
necessary to make any statement, in light of the circumstances under which such
statement is made, not misleading.
3.28 Compliance with MIR and DOU Agreements. Each of IPI and, to the
--------------------------------------
best of the IPI Parties' knowledge, its IRAs is in compliance with IPI's MIR
agreement with IBM
-14-
and with each DOU with IBM, and has conducted its business at all times in
compliance with such agreements. IPI has not been notified in writing by IBM of
any such noncompliance.
3.29 Accounts Payable. SCHEDULE 3.29 contains a summary of the accounts
----------------
payable of IPI as of October 31, 1995, together with an accurate aging of such
accounts payable. The accounts payable arose in the normal and ordinary course
of the business of IPI. Except as set forth on SCHEDULE 3.29, the accounts
payable are not past due and there are no collection actions currently pending
with respect to such accounts payable.
3.30 Liabilities. Except as disclosed in the IPI Financial Statements or
-----------
in SCHEDULE 3.30, there are no liabilities or obligations of any nature to which
IPI is subject, whether absolute, accrued, contingent or otherwise and whether
due or to become due. Furthermore, IPI and the IPI Shareholders know of no
basis for any assertion against IPI of any such liability or obligation not
fully disclosed in the IPI Financial Statements or in SCHEDULE 3.30. Except as
otherwise disclosed in SCHEDULE 3.30, the IPI Financial Statements do not
contain any items of special or nonrecurring income or any other income not
earned in the ordinary course of business except as expressly disclosed therein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WMT
-------------------------------------
Except as contemplated by this Agreement, WMT represents and warrants to
IPI and the IPI Shareholders as of the date hereof as follows:
4.1 Organization. WMT is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of California. WMT is duly
qualified to do business and is in good standing in its state of incorporation
and in each other jurisdiction in which it owns or leases property or conducts
business, except where the failure to be so qualified would not have a material
adverse effect on the business of WMT. WMT has all requisite power and author-
ity to own, lease and operate its properties and to carry on its business as now
being conducted, and possesses all licenses, franchises, rights and privileges
material to the conduct of its business.
4.2 Authority. WMT has all requisite corporate power and authority to
---------
enter into this Agreement and the related agreements contemplated herein, and,
subject to satisfaction of the conditions set forth herein, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of WMT. This Agreement
has been duly executed and delivered by WMT and constitutes the valid and
binding obligation of WMT enforceable in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law
-15-
governing specific performance, injunctive relief or other equitable remedies.
Provided the conditions set forth in Article 7 are satisfied, the execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation under
(a) any provision of the Articles of Incorporation or Bylaws of WMT, or (b) any
material agreement or instrument, permit, license, judgment, order, statute,
law, ordinance, rule or regulation applicable to WMT or its properties or
assets, other than any such conflicts, violations, defaults, terminations,
cancelations or accelerations which individually or in the aggregate would not
have a material adverse effect on WMT.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required by or with
respect to WMT in connection with the execution and delivery of this Agreement
by WMT or the consummation by WMT of the transactions contemplated hereby or
thereby, except for (i) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws, (ii) the approval of the California Department of
Corporations and (iii) the listing of the WMT Common on The Nasdaq Stock Market.
4.3 Capital Structure. The authorized capital stock of WMT consists of
-----------------
10,000,000 shares of Common Stock, no par value, and 10,000,000 shares of
Preferred Stock, no par value. As of October 31, 1995 3,708,738 shares of WMT
Common were issued and outstanding. No shares of Preferred Stock are
outstanding.
All of the outstanding shares of WMT Common are, and any shares of WMT
Common issuable upon exercise of any WMT Option, when issued pursuant to such
exercise, will be duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, WMT's Articles of
Incorporation or Bylaws or any agreement to which WMT is a party or is bound.
4.4 Financial Statements. WMT has furnished to IPI its audited
--------------------
consolidated statement of operations, statement of stockholders' equity and
statement of cash flows for the three (3) fiscal years ended December 31, 1994
and WMT's audited consolidated balance sheet at December 31, 1994; and the
unaudited consolidated statement of operations and statement of cash flows for
the nine (9) months ended September 30, 1995 and the unaudited consolidated
balance sheet at September 30, 1995. WMT will furnish to IPI as soon as
available its audited consolidated financial statements for the fiscal year
ended December 31, 1995. The balance sheet at September 30, 1995 is hereinafter
referred to as the "WMT Balance Sheet," and all such financial statements are
hereinafter referred to collectively as the "WMT Financial Statements." The WMT
Financial Statements have been and will be prepared in accordance with GAAP
applied on a consistent basis during the periods involved, and fairly present
and will present the consolidated financial position of WMT and the results of
its operations as of the date and for the periods indicated thereon. At the
date of the WMT Balance Sheet (the "WMT Balance Sheet Date"), neither WMT nor
its consolidated subsidiaries had any liabilities or obligations, secured or
-16-
unsecured (whether accrued, absolute, contingent or otherwise) not reflected on
the WMT Balance Sheet or the accompanying notes thereto except for liabilities
and obligations as may have arisen in the ordinary course of business a result
of the sale of the semiconductor business and resultant reorganization prior to
the date of said Balance Sheet and which, under GAAP, would not have been
required to be reflected on such Balance Sheet and except for liabilities
incurred in the ordinary course of business since the date of said balance sheet
which are usual and normal in amount and type.
4.5 SEC Documents. WMT has furnished to the IPI Shareholders, a true and
-------------
complete copy of WMT's Form 10-K for the year ended December 31, 1994, Form 10-Q
for each of the quarters ended March 31, 1995 and June 30, 1995, a draft of the
Form 10-Q for the quarter ended September 30, 1995 and Notice of Annual Meeting
and Proxy Statement for the Company's 1995 Annual Meeting and Notice of Special
Meeting and Proxy Statement for the Company's special meeting related to the
sale of its electronic semiconductor components distribution business to Reptron
Electronics, Inc. (the "WMT SEC Documents"). As of their respective filing
dates, the WMT SEC Documents comply or will comply in all material respects with
the requirements of the Securities Exchange Act of 1934 or the Securities Act of
1933, and none of the WMT SEC Documents contain or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading, except to
the extent corrected by a subsequently filed WMT SEC Document.
4.6 Information Supplied. None of the information supplied or to be
--------------------
supplied by WMT at the date such information is supplied contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
4.7 No Conflict. The execution and delivery of this Agreement by WMT and
-----------
the performance of WMT's obligations hereunder, (i) are not in violation or
breach of, and will not conflict with or constitute a default under, any of the
terms of the Articles of Incorporation or Bylaws of WMT or any of its
Subsidiaries, or any material contract, agreement or commitment binding upon WMT
or any of its assets or properties; (ii) will not result in the creation or
imposition of any lien, encumbrance, equity or restriction in favor of any third
party upon any of the assets or properties of WMT; and (iii) will not to the
actual knowledge of WMT conflict with or violate any applicable law, rule, regu-
lation, judgment, order or decree of any government, governmental instru-
mentality or court having jurisdiction over WMT or any of its assets or
properties. The consent of WMT's lenders is required to consummate the
transactions contemplated herein pursuant to the terms of its existing credit
agreement.
4.8 Shares of Common Stock. The shares of WMT Common will, when issued
----------------------
and delivered to the shareholders of IPI in accordance with this Agreement, be
duly authorized, validly issued, fully paid and nonassessable.
-17-
4.9 Brokers or Finders. Except for Xxx Xxxx International, WMT has not
------------------
dealt with any broker or finder in connection with the transactions contemplated
by this Agreement. WMT has not incurred, and shall not incur, directly or
indirectly, any liability for any brokerage or finders' fees or agents
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby, except to Xxx Xxxx International.
4.10 Business Changes. Since September 30, 1995, there have been no
----------------
changes in the condition (financial or otherwise), business, net worth, assets,
properties, employees, operations, obligations or liabilities of WMT which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the condition, business, net worth, assets, prospects,
properties or operations of WMT.
4.11 Taxes. WMT has accurately and completely filed with the appropriate
-----
United States, state, local and foreign governmental agencies all tax returns
and reports required to be filed (subject to permitted extensions applicable to
such filings), and has paid or accrued in full all taxes, duties, charges,
withholding obligations and other governmental liabilities as well as any inter-
est, penalties, assessments or deficiencies, if any, due to, or claimed to be
due by, any governmental authority (including taxes on properties, income,
franchises, licenses, sales and payrolls). (All such items are collectively
referred to herein as "Taxes"). WMT is not a party to any pending action or
proceeding, nor is any such action or proceeding threatened by any governmental
authority for the assessment or collection of Taxes (except the pending sales
tax audits). No liability for Taxes has been incurred other than in the
ordinary course of business. There are no liens for Taxes except for liens for
property taxes not yet delinquent. WMT is not a party to any Tax sharing, Tax
allocation, Tax indemnity or statute of limitations extension or waiver
agreement and in the past five (5) years has not been included on any
consolidated combined or unitary return with any entity other than WMT.
4.12 Compliance with Law. All material licenses, franchises, permits,
-------------------
clearances, consents, certificates and other evidences of authority of WMT which
are necessary to the conduct of WMT's business ("Permits") are in full force and
effect and WMT is not in violation of any Permit in any material respect.
Except for possible exceptions, the curing or non-curing of which would not have
a material adverse effect on the condition (financial or otherwise), business,
net worth, assets, prospects, properties or operations of WMT, the business of
WMT has been conducted in accordance with all applicable laws, regulations,
orders and other requirements of governmental authorities.
4.13 Full Disclosure. Any information furnished by WMT to the IPI
---------------
Shareholders in writing pursuant to this Agreement, at any time prior to the
Closing Date, does not and will not contain any untrue statement of a material
fact and does not and will not omit to state any material fact necessary to make
any statement, in light of the circumstances under which such statement is made,
not misleading.
4.14 Rule 144. Subject to Section 6.7 hereof, the IPI shareholders will
--------
have the right to sell the shares of WMT Common received by them under this
Agreement pursuant
-18-
to the terms and conditions of Rule 144 under the Securities Act of 1933 and the
holding period requirement of Rule 144(d) shall not apply to such shares. WMT
will provide a letter from its counsel addressed to the IPI Shareholders
specifying the method and requirements for transfer of the WMT Common pursuant
to Rule 144.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
During the period from the date hereof, and continuing until the Closing
Date, unless earlier terminated in accordance with Section 10.1, IPI and the IPI
Shareholders (except as expressly contemplated by this Agreement, as done in
relation to the Spin-off or to the extent that WMT shall otherwise consent in
writing) covenant, and agree with WMT that:
5.1 Conduct of Business in Normal Course. IPI shall carry on the business
------------------------------------
and its activities diligently and in the ordinary course and shall not make or
institute any unusual or novel methods of purchase, sale, lease, management,
accounting or operation that will vary materially from the methods used by IPI
as of October 31, 1995. IPI shall maintain the nature and quantities of
inventories for the business in a normal and customary manner consistent with
prior practice.
5.2 Preservation of Business and Relationships. IPI shall use its best
------------------------------------------
efforts to preserve its business organization intact, to keep available its
present employees, to preserve its present relationships with suppliers,
customers and others having business relationships with it, to obtain IBM's
consent to the transaction contemplated by this Agreement and to obtain hereby
executed documents of understanding from each XXX set forth in SCHEDULE 5.2
(individually, an "XXX" and collectively "IRAs").
5.3 Maintenance of Insurance. Prior to the Closing, IPI shall maintain in
------------------------
effect all insurance covering the business. If the Closing shall occur after a
renewal date for any such insurance, IPI shall renew the insurance on the same
or substantially similar terms, limits of liability and other conditions.
5.4 Employees and Compensation. IPI shall not do, or agree to do, any of
--------------------------
the following acts: (a) grant any increase in salaries payable or to become
payable to any employee, sales agent or representative; or (b) except as set
forth on SCHEDULE 3.11, increase benefits payable to any employee, sales agent
or representative under any executive compensation, bonus, pension,
profit-sharing, retirement, deferred compensation, severance, employee stock
option or stock purchase, group life, health and other employee benefit plans,
arrangements, practices or commitments. IPI shall provide WMT with reasonable
access to its employees during normal business hours.
5.5 Dividends; Changes in Stock. IPI shall not and shall not propose to
---------------------------
(a) declare or pay any dividends on or make other distributions in respect of
any of its capital stock,
-19-
(b) split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of IPI, or (c) repurchase or
otherwise acquire any shares of its capital stock or rights to acquire any
shares of its capital stock, other than those contemplated in the "Spin-Off."
5.6 Issuance of Securities. IPI shall not issue, deliver, or sell or
----------------------
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities, other than those contemplated in the "Spin-Off."
5.7 Governing Documents. IPI shall not amend its Articles of
-------------------
Incorporation or Bylaws other than that contemplated in the Spin-Off.
5.8 No Other Bids. Neither the IPI Shareholders, IPI nor any of their
-------------
respective directors, officers or agents, will, directly or indirectly, solicit
or initiate or encourage any discussions or negotiations with, or participate in
any negotiations with or provide any information to or otherwise cooperate in
any other way with any corporation, partnership, person or other entity or group
(other than WMT) concerning any merger, sale of substantial assets, sale of
shares of capital stock or any division of IPI or control thereof (collectively
an "Acquisition Transaction"). WMT shall be promptly notified in writing by IPI
of any of the events referred to in this Section 5.8 including a summary of the
material terms of any other bid.
5.9 No Acquisitions. IPI shall not (a) acquire or agree to acquire by
---------------
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or (b) otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to IPI except in the ordinary course of business consistent with
prior practice.
5.10 No Dispositions. Except with contemporaneous notice to WMT, IPI
---------------
shall not lease or otherwise dispose of any of its assets (other than the sale
of inventory in the ordinary course of business), individually or in the
aggregate, except in the ordinary course of business consistent with prior
practice and in any event not in excess of $5,000 for any single item or more
than $25,000 in the aggregate, other than those contemplated in the Spin-Off.
5.11 Indebtedness. Except with contemporaneous notice to WMT, IPI shall
------------
not incur any indebtedness for borrowed money in an amount exceeding $5,000 or
guarantee any such indebtedness or issue or sell any debt securities of IPI or
guarantee any debt securities of others except in connection with the purchase
of inventory pursuant to the existing bank line of credit.
-20-
5.12 Spin-Off. Immediately prior to the Closing, IPI*GrammTech, Inc.
--------
shall acquire all of the assets and assume all of the liabilities of IPI, with
the exception of those assets and liabilities set forth on Exhibit 2.02 to the
Internal Reorganization Plan, which shall remain with IPI and be reflected in
the Closing Balance Sheet. IPI shall be completely released from all
liabilities assumed by IPI*GrammTech, Inc. without recourse to IPI or WMT,
including without limitation, accounts payable and any conveyed or leased real
estate or equipment. Accordingly, IPI shall use its best reasonable efforts to
obtain applicable consents of the appropriate third parties providing a novation
to IPI with respect to such liabilities. IPI and WMT shall have no liability to
IPI*GrammTech, Inc. with respect to any such asset or liability.
ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1 Access to Information. IPI shall afford to WMT and shall cause its
---------------------
independent accountants to afford to WMT, and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing Date to IPI's properties, books, contracts,
commitments and records and to the independent accountants reasonable access to
the audit work papers and other records of IPI's accountants. During such
period, IPI shall use reasonable efforts to furnish promptly to WMT (a) a copy
of each report, schedule and other document filed or received by IPI during such
period pursuant to the requirements of federal and state securities laws and (b)
all other information concerning the business, properties and personnel of IPI
as WMT may reasonably request. WMT will not use such information for purposes
other than this Agreement and will otherwise hold such information in confidence
(and WMT will cause its consultants and advisors also to hold such information
in confidence).
6.2 Legal Conditions. Each party will take all reasonable actions
----------------
necessary to comply promptly with all legal requirements which may be imposed on
such party with respect to this Agreement and will promptly cooperate with and
furnish information to the other party in connection with any such requirements
imposed upon such other party or any Subsidiary of such other party in
connection with this Agreement. Each party will take, and will cause its
Subsidiaries to take, all reasonable actions to obtain (and to cooperate with
the other party and its Subsidiaries in obtaining) any consent, authorization,
order or approval of, or any exemption by, any governmental authority, or other
third party, required to be obtained or made by such party or its Subsidiaries
(or by the other party or its Subsidiaries) in connection with this Agreement or
the taking of any action contemplated thereby.
6.3 3(a)(10) Fairness Hearing. As promptly as practicable WMT, with the
-------------------------
cooperation of IPI, shall prepare and file a permit application under Section
25113 of the California Corporations Code with the California Department of
Corporations with respect to the transactions contemplated by this Agreement and
WMT shall request a fairness hearing pursuant to Section 25142 of the California
Corporations Code. WMT shall pay all
-21-
of the costs and expenses associated with the fairness hearing, other than the
legal expenses and disbursements of counsel which are discussed at Article 9.
WMT shall also take any action required to be taken to cause the WMT Common to
be issued in this transaction to be listed on The Nasdaq Stock Market. IPI
shall use its best efforts to furnish to WMT all information concerning IPI and
the holders of its outstanding securities as may be reasonably requested in
connection with any action contemplated by this Section 6.3.
6.4 Good Faith. Each party shall act in good faith in an attempt to cause
----------
to be satisfied all the conditions precedent to its obligations and those of the
other parties to this Agreement over which it has control or influence. Each
party will act in good faith and take all reasonable action within its
capability necessary to render accurate as of the Closing Date its
representations and warranties contained in this Agreement.
6.5 WMT Governing Documents. WMT agrees that, prior to the Closing, it
-----------------------
will give the IPI Shareholders prompt notice of any amendment to its Articles of
Incorporation or Bylaws.
6.6 IPI Corporate Tax Returns. IPI shall file and pay for all necessary
-------------------------
corporate federal, state, local or foreign tax returns for the period ending on
the Closing Date. WMT shall be provided a reasonable opportunity to review and
approve such tax return prior to filing.
6.7 Lock-up. Each of the IPI Shareholders will not sell, transfer,
-------
exchange, pledge or otherwise dispose of, or in any other way reduce such
Shareholder's risk of ownership or investment in, or make any offer or agreement
relating to any of the foregoing with respect to any IPI Common, or any WMT
Common or other securities of WMT (including the Earn-Out Shares) for a period
of ninety (90) days from the Closing Date (or the date of issuance for the
Earn-Out Shares described in Section 2.10); provided, however that the IPI
Shareholders may transfer the shares among themselves or to any affiliate who
agrees to be bound by the terms of this Sections 6.7 and 6.9. After such ninety
(90) day period, the IPI Shareholders may in the aggregate sell up to 1-1/2% of
the total outstanding Shares of WMT Common during any three (3) month period.
This lock-up shall lapse two (2) years from the Closing Date (or two (2) years
from the date of issuance for the Earn-Out Shares).
6.8 Current Available Information. From and after the Closing Date, and
-----------------------------
for so long as is necessary in order to permit the IPI Shareholders to sell the
WMT Common pursuant to Rule 144 under the Securities Act of 1933, WMT will use
its best efforts to file on a timely basis all reports required to be filed by
it pursuant to Section 13 of the Securities Exchange Act of 1934, as amended,
referred to in paragraph (c)(1) of Rule 144 under the Securities Act of 1933.
WMT is under no obligation to register the sale, transfer or other disposition
of any WMT Common by or on behalf of the IPI Shareholders or to take any other
action necessary in order to make compliance with an exemption from registration
available.
-22-
6.9 Limited Resales. Subject to Section 6.7, each of the IPI Shareholders
---------------
agrees to sell the WMT Common in accordance with the terms and conditions of
paragraphs (c), (e)(1), (f), (g) and (h) of Rule 144.
6.10 Legend; Stop Transfer Instructions. Each of the IPI Shareholders
----------------------------------
understands and agrees that:
(1) the WMT Common will bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER AS SET FORTH IN THAT CERTAIN AGREEMENT AND PLAN OF
REORGANIZATION DATED AS OF NOVEMBER 18, 1995 BY AND AMONG WESTERN
MICRO TECHNOLOGY, INC, INTERNATIONAL PARTS, INC. ("IPI") AND THE
SHAREHOLDERS OF IPI.
; and
(2) stop transfer instructions will be given to WMT's transfer
agent with respect to certificates evidencing the WMT Common. WMT
agrees to remove promptly such stop transfer instructions and legend
upon full compliance with this Agreement by the undersigned, includ-
ing, without limitation, a sale or transfer of WMT Common in
accordance with Rule 144 following the expiration of the period set
forth in Section 6.7.
6.11 Facilities. IPI will provide WMT with the use of its facilities
----------
until December 31, 1995 and shall provide reasonable assistance in facilitating
any relocations resulting from the transaction described in this Agreement,
provided that WMT shall pay rent on a pro rata basis for the space so used and
that WMT will pay expenses incurred for long-distance telephone charges,
facsimiles, shipping and other normal business expenses of WMT, including
reimbursement to IPI*GrammTech, Inc. therefore, if appropriate.
6.12 Use of Names. IPI will provide consents, for no further
------------
consideration, that will permit WMT to use the name "IPI/Western" and further
designate that WMT is "successor to the commercial division of International
Parts, Inc.," or language of similar effect, for a period of one (1) year
following the Closing Date in those jurisdictions in which IPI currently
conducts its business.
6.13 WMT as Exclusive Supplier. For a period of two (2) years commencing
-------------------------
from the date of the Closing Date, IPI*GrammTech, Inc. shall utilize WMT as its
exclusive supplier with respect to those products and/or services carried or
supplied by WMT, provided that WMT's product lines, services, prices and terms
are more favorable to those of any other option available to IPI*GrammTech, Inc.
-23-
6.14 Monthly Reports. WMT agrees to provide monthly sales reports to the
---------------
IPI Shareholders detailing all sales by the IPI Sales Staff identified on
SCHEDULE 2.10 and all sales to IPI Customers identified on SCHEDULE 2.10, within
twenty days of the end of each monthly period.
6.15 Restrictions on Sales. Through the period ending December 31, 1997,
---------------------
WMT agrees to not sell to any IPI Customer listed on SCHEDULE 2.10, which
customers are separately identified to WMT as being delinquent on obligations
held by IPI*GrammTech, Inc. that arose prior to the Closing Date, until such
customers are no longer delinquent.
6.16 San Antonio Office. It is the current intention of WMT to maintain
------------------
an office in San Antonio, Texas; however, WMT may alter its plans at any time.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
7.1 Conditions to Obligations of WMT and IPI. The obligations of WMT and
----------------------------------------
the IPI Parties (but no other party to this Agreement) to consummate this
Agreement shall be subject to the satisfaction on or prior to the Closing Date
of the following conditions unless waived by both WMT and IPI:
(a) Government Approvals. All authorizations, consents, orders or
--------------------
approvals of, or declarations or filings with, or expiration of waiting periods
imposed by, any governmental authority necessary for the consummation of the
transactions contemplated by this Agreement including, but not limited to, the
approval of the California Department of Corporations and the requirements of
applicable federal or state securities laws and The Nasdaq Stock Market, shall
have been filed, occurred or been obtained.
(b) Shareholder Approval. The consent of the IPI Shareholders to the
--------------------
consummation of the transactions contemplated by this Agreement shall have been
obtained.
(c) Third-Party Approvals. Any and all consents or approvals
---------------------
required from third parties relating to contracts, agreements, licenses, leases
and other instruments, material to the respective businesses of WMT and IPI
shall have been obtained including, without limitation, IBM's consent and the
XXX documents of understanding described in Section 5.2 hereof.
(d) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
this Agreement shall have been issued by any federal or state court and remain
in effect, and no litigation seeking the issuance of such an order or
injunction, shall be pending which, in the good faith judgment of IPI or WMT has
a reasonable probability of resulting in such order, injunction or damages.
-24-
(e) Securities Laws. WMT shall have received any and all permits,
---------------
authorizations, approvals and orders under federal and state securities laws for
the issuance of the WMT Common, including, without limitation, approval of the
California Commissioner of Corporations pursuant to Sections 25110 and 25142 of
the California Corporate Securities Laws without the imposition of any
conditions adverse to WMT or which would require WMT to amend its Articles of
Incorporation, Bylaws or any contract. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTIONS 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
(f) Due Diligence. WMT shall have completed its due diligence
-------------
investigation of IPI to its good faith satisfaction.
7.2 Conditions to Obligations of WMT. The obligations of WMT to
--------------------------------
consummate this Agreement are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless waived by WMT:
(a) Representations and Warranties. The representations and
------------------------------
warranties of IPI and the IPI Shareholders set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as if made at and as of the Closing Date, except as otherwise contemplated by
this Agreement, and WMT shall have received a certificate or certificates signed
by the chief executive officer of IPI to such effect.
(b) Performance of Obligations. IPI and the IPI Shareholders shall
--------------------------
have performed in all material respects all obligations required to be performed
by each under this Agreement prior to the Closing Date, and WMT shall have
received a certificate signed by the chief executive officer of IPI to such
effect.
(c) Opinion of IPI's Counsel. WMT shall have received an opinion
------------------------
dated the Closing Date of Xxxxxx & Xxxxxxx, counsel to IPI, in substantially the
form attached hereto as EXHIBIT 7.2(C).
(d) Resignation of IPI Directors and Officers. Each director and
-----------------------------------------
officer of IPI shall have resigned effective as of the Closing Date.
(e) Dissenting Shares. All of the IPI Shareholders shall have
-----------------
executed and delivered this Agreement, approved the transactions contemplated
hereby and by all of the attached Exhibits and waived any dissenter's rights
they might otherwise be entitled to.
-25-
(f) October 31, 1995 Financial Statements. Until the Closing Date,
-------------------------------------
IPI's Financial Statements for each month after October 31, 1995, shall be
delivered to WMT as soon as practicable thereafter.
(g) No Material Adverse Change. The Closing Balance Sheet shall
--------------------------
reflect that since October 31, 1995, there shall have been no changes in the
condition (financial or otherwise), business, prospects, employees, operations,
obligations or liabilities of IPI which, in the aggregate, have had or may be
reasonably expected to have a materially adverse effect on the financial
condition, business, or operations of IPI on a consolidated basis.
(h) Non-Compete Arrangements. WMT and each of the IPI Shareholders
------------------------
shall have entered into covenants not to compete in the form attached hereto as
EXHIBIT 7.2(G).
(i) IBM Consent. IPI shall have received the written consent of IBM
-----------
to the transaction contemplated by this Agreement.
(j) Dedicated Staff. WMT shall have received reasonable assurances
---------------
from IPI, subject to WMT's discretion, that WMT will be able to employ a
dedicated staff after the Closing Date.
(k) Approval of Distributors. WMT shall have received executed
------------------------
documents of understanding from each of the IRAs set forth in SCHEDULE 5.2, to
the effect that each such agreement shall remain in effect for one (1) year
after the Closing Date.
(l) Escrow Agreement. IPI and the IPI Shareholders shall have signed
----------------
the Escrow Agreement.
(m) Spin-Off. The Spin-Off shall have occurred or occur
--------
simultaneously with Closing in a manner consistent with Section 5.12.
(n) Further Assurances and Indemnification Agreement. WMT, IPI,
------------------------------------------------
IPI*Grammtech, Inc. and each of the IPI Shareholders shall have entered into the
Further Assurances and Indemnification Agreement in the form attached hereto as
EXHIBIT 7.2(N).
7.3 Conditions to Obligations of the IPI Parties. The obligations of the
--------------------------------------------
IPI Parties to consummate the transactions contemplated hereby are subject to
the satisfaction on or prior to the Closing Date of the following additional
conditions unless waived by IPI:
(a) Representations and Warranties. The representations and
------------------------------
warranties of WMT set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as if made at and as of
the Closing Date, except as otherwise contemplated by this Agreement, and IPI
shall have received a certificate signed by the chief executive officer and the
chief financial officer of WMT to such effect.
-26-
(b) Performance of Obligations of WMT. WMT shall have performed in
---------------------------------
all material respects all obligations required to be performed by it under this
Agreement prior to the Closing Date, and IPI shall have received a certificate
signed by the chief financial officer of WMT to such effect.
(c) Opinion of WMT's Counsel. IPI shall have received an opinion
------------------------
dated the Closing Date of Pillsbury Madison & Sutro, outside counsel to WMT, in
substantially the form attached hereto as EXHIBIT 7.3(C).
(d) No Material Adverse Change. Since September 30, 1995 there shall
--------------------------
have been no changes in the condition (financial or otherwise), business,
prospects, employees, operations, obligations or liabilities of WMT which, in
the aggregate, have had or may be reasonably expected to have a materially
adverse effect on the financial condition, business or operations of WMT.
(e) Nasdaq Listing Application. The additional listing application
--------------------------
filed with The Nasdaq Stock Market with respect to the WMT shares to be issued
at the Closing shall have been approved and such shares listed for trading on
The Nasdaq Stock Market.
(f) Escrow Agreement. WMT shall have signed the Escrow Agreement.
----------------
7.4 Best Efforts. All the parties hereto shall use their respective best
------------
efforts to cause the Closing Date to be not later than December 1, 1995.
ARTICLE 8
INDEMNIFICATION AND ESCROW
--------------------------
8.1 Indemnification by IPI and the IPI Shareholders.
-----------------------------------------------
(a) IPI, in the event the transactions contemplated hereby do not
close, and each IPI Shareholder, severally and not jointly, after the Closing,
agrees to defend and indemnify WMT and their respective affiliates, directors,
officers and shareholders, and their respective successors and assigns
(collectively, the "WMT Indemnitees"), against and hold each of them harmless
from any and all losses, liabilities, taxes, claims, suits, proceedings,
demands, judgments, damages, expenses and costs, including, without limitation,
reasonable counsel fees, costs and expenses incurred in the investigation,
defense or settlement of any claims covered by this indemnity (in this Section
8.1 collectively, the "Indemnifiable Damages") which any such indemnified person
may suffer or incur by reason of (i) the inaccuracy or breach of any of the
representations, warranties and covenants of IPI or the IPI Shareholders
contained in this Agreement or any documents, certificate or agreement delivered
pursuant hereto; (ii) any claim by any person under any provision of any federal
or state securities law relating to any transaction, event, act or omission of
or by IPI occurring prior to the Closing Date, (iii) any claim by any person
relating to assets or
-27-
liabilities contributed to or assumed by IPI*GrammTech, Inc. in connection with
the Spin-Off (which assets and liabilities include all of the assets and
liabilities of IPI, with the exception of those assets and liabilities set forth
on Exhibit 2.02 to the Internal Reorganization Plan); (iv) any claim by or
relating to an audit by IBM or an alleged breach of a contract with IBM by IPI
or any XXX for events that occurred prior to Closing (each an "IBM Claim"), or
(v) any claim, relating to or arising out of the pending tax audit of IPI for
the year ended December 31, 1993. IPI or the IPI Shareholders, as the case may
be, are hereinafter referred to as the "IPI Indemnitor." The total indemnity
shall not exceed 10% of the total shares of WMT Common received by the IPI
Shareholders (except with respect to any matters for which indemnity may be
sought under (iii), (iv) or (v) above, with respect to which no limit on the
amount of indemnity shall apply); provided, however, that nothing herein shall
limit in any way WMT's remedies in the event of breach by the IPI Shareholders
of any of their covenants or agreements hereunder which are not also a
representation or warranty or for willful fraud or intentionally deceptive
material misrepresentation or omission by any of the IPI Shareholders in
connection herewith or with the transactions contemplated hereby.
Notwithstanding the foregoing, the IPI Shareholders shall be notified by WMT of
any IBM Claim and the IPI Shareholders are authorized to negotiate any IBM Claim
directly with IBM. WMT shall not settle any IBM Claim without first giving the
IPI Shareholders not less than sixty days in which to settle or resolve said IBM
Claim directly with IBM.
(b) Without limiting the generality of the foregoing, with respect to
the measurement of Indemnifiable Damages, WMT and, after the Closing Date, WMT,
IPI and the affiliates of any of them shall have the right to be put in the same
financial position as they would have been in had each of the representations,
warranties and covenants of IPI and the IPI Shareholders been true and accurate
or the same said parties had not breached any such covenants or had any of the
events, claims or liabilities referred to in clause (a)(ii) or (a)(iii) of this
Section 8.1 not occurred or been made or incurred.
(c) The indemnity referred to in Sections 8.1 and 8.11 below shall
only apply to Indemnifiable Damages claimed by the party seeking indemnification
prior to the expiration of the Escrow Period defined below under Section 8.3,
except for indemnity claimed under subparagraphs 8.1(iii), (iv) or (v) for which
the indemnity shall apply to Indemnifiable Damages Claimed by WMT prior to
January 1, 1998. Any indemnitee under this Agreement may not seek recovery
under the indemnities set forth herein unless and until the Indemnifiable
Damages of such party are greater than $10,000 in which case such indemnity
shall apply to all Indemnifiable Damages.
8.2 Escrow Fund. As security for the indemnity provided for in Section
-----------
8.1 hereof and for the collection of accounts receivable and sale of inventory,
as provided in paragraph 4 of the Further Assurances and Indemnification
Agreement, attached hereto as Exhibit 7.2(n), a total of 10% of the WMT Common
to be received by the IPI Shareholders pursuant to this Agreement (to be divided
pro rata, as nearly as possible, among the IPI Shareholders) shall be registered
in the name of such IPI Shareholder but be deposited (with an executed
assignment in blank) with First Trust of California, N.A. (or other institution
-28-
selected by WMT with the reasonable consent of IPI) as escrow agent (the "Escrow
Agent"), such deposit to constitute an escrow fund (the "Escrow Fund") to be
governed by the terms set forth herein and in the Escrow Agreement to be signed
by all parties thereto, the form of which is attached as EXHIBIT 8.2. In the
event of any conflict between the terms of this Agreement and the Escrow
Agreement, the terms of the Escrow Agreement shall govern. WMT shall pay all
costs and fees of the Escrow Agent for establishing and administering the Escrow
Fund. Upon compliance with the terms hereof, WMT shall be entitled to obtain
indemnity from the Escrow Fund for all Indemnifiable Damages covered by the
indemnity provided for in Section 8.1 hereof and for uncollected accounts
receivable and unsold inventory, as provided in paragraph 4 of the Further
Assurances and Indemnification Agreement (also referred to herein as
"Indemnifiable Damages").
8.3 Escrow Period. The Escrow Fund shall remain in existence until August
-------------
15, 1996.
8.4 Protection of Escrow Fund. The Escrow Agent shall hold and safeguard
-------------------------
the Escrow Fund during the Escrow Period, shall treat such fund as a trust fund
in accordance with the terms of this Agreement and not as the property of WMT,
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
8.5 Distributions; Voting.
---------------------
(a) Any dividends payable in securities or other distributions of any
kind (including any shares received upon a stock split, stock dividend or
recapitalization) made in respect of any securities in the Escrow Fund shall be
held in the Escrow Fund subject to the rights of WMT. Cash dividends, if any
shall be distributed to the IPI Shareholders.
(b) The IPI Shareholders shall have voting rights with respect to the
shares of stock in the Escrow Fund so long as such stock or other voting
securities are held in the Escrow Fund.
8.6 Claims Upon Escrow Fund.
-----------------------
(a) Upon receipt by the Escrow Agent on or before the last day of the
Escrow Period of a certificate signed by any officer of WMT (an "Officer's
Certificate") stating that WMT has paid or properly accrued Indemnifiable
Damages in an aggregate stated amount to which such party is entitled to
indemnity pursuant to this Agreement, and specifying in reasonable detail the
individual items of Indemnifiable Damages included in the amount so stated, the
date each such item was paid or properly accrued, and the nature of the
misrepresentation, breach of warranty or claim to which such item is related,
the Escrow Agent shall, subject to the provisions of Section 8.7 hereof, deliver
to WMT out of the Escrow Fund, as promptly as practicable, the number of WMT
Common or amount of other assets held in the Escrow Fund to indemnify WMT
against such Indemnifiable Damages.
-29-
(b) For the purpose of indemnity pursuant to this Agreement, each
share of WMT Common in the Escrow Fund shall be valued at an amount equal to the
closing price per share of WMT Common on The Nasdaq Stock Market on the business
day prior to the date on which the WMT Common is released from the Escrow as a
result of such indemnity.
8.7 Objections to Claims. Upon the time of delivery of an Officer's
--------------------
Certificate to the Escrow Agent, the Escrow Agent shall deliver a duplicate copy
of such certificate to each IPI Shareholder and for a period of thirty (30) days
after such delivery, the Escrow Agent shall make no delivery of WMT Common or
other property pursuant to Section 8.6 hereof unless the Escrow Agent shall have
received written authorization from the Spokesperson for the IPI Shareholders
("Spokesperson"), initially Xxxx X. Xxxxx, but also any successor as chosen by
the IPI Shareholders (or in the event of their inability to agree, by the Escrow
Agent), to make such delivery. After the expiration of such thirty (30) day
period, the Escrow Agent shall make delivery of the WMT Common or other property
in the Escrow Fund in accordance with Section 8.6 hereof, provided that no such
payment or delivery may be made if the Spokesperson shall object in a written
statement to the claim made in the Officer's Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30) day period.
8.8 Resolution of Conflicts; Arbitration.
------------------------------------
(a) If the Spokesperson shall object in writing to the indemnity of
the WMT Indemnitees in respect of any claim or claims made in any Officer's
Certificate, the Spokesperson and WMT shall attempt in good faith to agree upon
the rights of the respective parties with respect to each of such claims. If
the Spokesperson and WMT should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute the WMT Common or other property from the Escrow Fund
in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith negotiation
within sixty (60) days after objection by either the Spokesperson or WMT, either
WMT or the Spokesperson may demand arbitration of the matter and the matter
shall be settled by arbitration conducted by three arbitrators. WMT and the
Spokesperson shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators so
selected as to the validity and amount of any claim in such Officer's
Certificate or by the IPI Shareholders shall be final and binding and conclusive
upon the parties to this Agreement, and, notwithstanding anything in Section 8.7
hereof, the Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in accordance
therewith, if applicable.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
the City of San Jose, California under the rules then in effect of the American
Arbitration Association. A
-30-
claimant shall be deemed to be the non-prevailing party in the event that the
arbitrators award such claimant less than one-half (1/2) of the amount claimed
by it; otherwise, the other party shall be deemed to be the non-prevailing
party. The non-prevailing party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative fee of the American Arbitration
Association, and the reasonable attorneys' fees and costs incurred by the other
party to the arbitration as well as the amount of any Indemnifiable Damages
awarded and in addition interest thereon from the date of actual loss or
expenditure until the date paid at ten percent (10%) per annum, or at the
maximum rate permitted by applicable law if less than ten percent (10%) per
annum. In addition, if WMT is the non-prevailing party, it will pay for the
reasonable travel and lodging expenses of the IPI Shareholders.
8.9 Distribution upon Termination of Escrow Period. Immediately following
----------------------------------------------
termination of the Escrow Period, the Escrow Agent shall deliver to the IPI
Shareholders all of the WMT Common in the Escrow Fund in excess of any amount of
such WMT Common sufficient, in the reasonable judgment of WMT, to satisfy any
agreed upon claims specified in any Officer's Certificate theretofore properly
delivered to the Escrow Agent.
8.10 Escrow Agent's Duties.
---------------------
(a) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein or in the Escrow Agreement and
may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith.
(b) The Escrow Agent is hereby expressly authorized to disregard any
and all orders by any party who is not authorized to give orders under the
Escrow Agreement, excepting only orders or process of courts of law, and is
hereby expressly authorized to comply with and obey orders, judgments or decrees
of any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
-31-
8.11 Indemnification by WMT. After the Closing Date, WMT shall, as to
----------------------
those representations, warranties, covenants and agreements which are herein
made or agreed to by WMT, indemnify and hold harmless the IPI Shareholders and
IPI's officers and directors (prior to the Closing) and their heirs and assigns
against and in respect of:
(a) any damage, deficiency, losses or costs incurred by any IPI
Shareholder resulting from any material misrepresentation or breach of warranty
or any nonfulfillment of any covenant or agreement on the part of WMT under this
Agreement;
(b) any claim by any person under any provision of any federal or
state securities laws relating to any transaction, event, act or omission of or
by WMT (including, without limitation, any tender offer);
(c) any claim made by any person relating to or arising out of
transactions, events, acts or omissions of or by IPI after the Closing, except
with respect to assets and liabilities conveyed to or assumed by (or in
accordance with the Further Assurances and Indemnification Agreement, to be
conveyed or to be assumed by) IPI*GrammTech, Inc. in connection with the
Spin-Off;
(d) any claim, action, suit, proceeding, demand, judgment,
assessment, cost and expense, including reasonable counsel fees, incident to any
of the foregoing; provided that the total indemnity shall not exceed the fair
market value (as determined pursuant to Section 8.6) of the WMT Common received
by the IPI Shareholders.
WMT shall reimburse the IPI Shareholders for any liabilities, damages,
deficiencies, claims, actions, suits, proceedings, demands, judgments,
assessments, costs and expenses to which this Section 8.11 relates only if a
claim for indemnification is made by the IPI Shareholders within the period
ending at December 31, 1997. Without limiting the generality of the foregoing,
with respect to the measure of Indemnifiable Damages, the IPI Shareholders shall
have the right to be put in the same financial position as they would have been
in had each of the representations, warranties and covenants of WMT been true
and accurate or the same said parties had not breached any such covenants or had
any of the events, claims or liabilities referred to in clauses (b) or (c) of
this Section 8.11 not occurred or been made or incurred. Any dispute as to
indemnification shall be resolved by arbitration in accordance with Section 8.8.
8.12 Indemnification Procedure. A party seeking indemnification (the
-------------------------
"Indemnitee") shall use its best efforts to minimize any liabilities, damages,
deficiencies, claims, judgments, assessments, costs and expenses in respect of
which indemnity may be sought under this Agreement. The Indemnitee shall give
prompt written notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification, but in no event
longer than (i) thirty (30) days after service of process in the event
litigation is commenced against the Indemnitee by a third party, or (ii) sixty
(60) days after the assertion of such claim. No such notice of assertion of a
claim shall satisfy the requirements of this Section 8.12 unless it describes in
reasonable detail and in good faith the facts
-32-
and circumstances upon which the asserted claim for indemnification is based.
If any action or proceeding shall be brought in connection with any liability or
claim to be indemnified hereunder, the Indemnitee shall provide the Indemnitor
twenty (20) calendar days to decide whether to defend such liability or claim.
During such period, the Indemnitee shall take all necessary steps to protect the
interests of itself and the Indemnitor, including the filing of any necessary
responsive pleadings, the seeking of emergency relief or other action necessary
to maintain the status quo, subject to reimbursement from the Indemnitor of its
expenses in doing so. The Indemnitor shall (with, if necessary, reservation of
rights) defend such action or proceeding at its expense, using counsel selected
by the insurance company insuring against any such claim and undertaking to
defend such claim, or by other counsel selected by it and approved by the
Indemnitee, which approval shall not be unreasonably withheld or delayed. The
Indemnitor shall keep the Indemnitee fully apprised at all times of the status
of the defense and shall consult with the Indemnitee prior to the settlement of
any indemnified matter. Indemnitee agrees to use reasonable efforts to
cooperate with Indemnitor in connection with its defense of indemnifiable
claims. In the event the Indemnitee has a claim or claims against any third
party growing out of or connected with the indemnified matter, then upon receipt
of indemnification, the Indemnitee shall fully assign to the Indemnitor the
entire claim or claims to the extent of the indemnification actually paid by the
Indemnitor and the Indemnitor shall thereupon be subrogated with respect to such
claim or claims of the Indemnitee.
ARTICLE 9
PAYMENT OF EXPENSES
-------------------
Except as provided in Section 8.2, WMT, IPI and the IPI Shareholders shall
each pay their own fees and expenses incurred incident to the preparation and
carrying out of the transactions herein contemplated (including legal,
accounting and travel).
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
10.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) by mutual written consent of IPI and WMT;
(b) by either WMT or IPI if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of any party set forth in this Agreement and, if such breach is
curable, such breach has not been promptly cured after written notice of such
breach;
-33-
(c) by either WMT or IPI if the Closing shall not have occurred by
December 1, 1995;
(d) by either WMT or IPI if there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of this
Agreement;
(e) by WMT if any condition to WMT's obligation to consummate this
Agreement has not been satisfied or waived by WMT including, without limitation,
IBM's consent and the XXX documents of understanding described in Section 5.2
hereto; and
(f) by IPI if any condition to IPI's obligation to consummate this
Agreement has not been satisfied or waived by IPI.
10.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either IPI or WMT as provided in Section 10.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
parties hereto or their respective officers or directors except as set forth in
Article 9 and except to the extent that such termination results from the (a)
willful breach by a party hereto of any of its representations or warranties, or
(b) a breach by a party hereto of its covenants or agreements set forth in this
Agreement.
10.3 Amendment. This Agreement may not be amended except by an instrument
---------
in writing signed on behalf of each of the parties hereto.
10.4 Extension; Waiver. At any time prior to the Closing, WMT or the IPI
-----------------
Parties may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit thereof contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party.
ARTICLE 11
GENERAL
-------
11.1 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party to the other shall be in writing and delivered
personally or sent by certified mail, postage prepaid, by telecopy, or by
courier service, as follows:
-34-
Western Micro Technology, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxx
Chief Financial Officer
Fax: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx
Fax: (000) 000-0000
International Parts, Inc.
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Fax: (000) 000-0000
Xxxxxxx X. Xxxxxxx
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxx X. Xxxxx
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Xxxxx X. Xxxxxxxxxxxx
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
-35-
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Fax: (000) 000-0000
or to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
11.2 Headings. The headings of the several sections of this Agreement are
--------
inserted for convenience of reference only and are not intended to affect the
meaning or interpretation of this Agreement.
11.3 Entire Understanding. The terms set forth in this Agreement
--------------------
including its Schedules and Exhibits are intended by the parties as a final,
complete and exclusive expression of the terms of their agreement and may not be
contradicted, explained or supplemented by evidence of any prior agreement, any
contemporaneous oral agreement or any consistent additional terms. The
Schedules and Exhibits attached to this Agreement are made a part of this
Agreement.
11.4 Counterparts. This Agreement may be executed in counterparts, and
------------
when so executed each counterpart shall be deemed to be an original, and said
counterparts together shall constitute one and the same instrument.
11.5 Binding Nature. This Agreement shall be binding upon and inure to
--------------
the benefit of the parties hereto. No party may assign or transfer any rights
under this Agreement.
11.6 Applicable Law. This Agreement shall be governed by, construed and
--------------
enforced in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed,
all as of the date first above written.
WESTERN MICRO TECHNOLOGY, INC., a California
corporation
By /s/ Xxxxx Xxxxx
------------------------------------------
Title President, CEO
---------------------------------------
-36-
INTERNATIONAL PARTS, INC., a Texas corporation
By /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Title President
---------------------------------------
"IPI SHAREHOLDERS"
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxxxxxxx
/s/ Xxxx X. Xxxxx
---------------------------------------------
Xxxx X. Xxxxx
-37-
Exhibit 7.2(G)
AGREEMENT NOT TO COMPETE
------------------------
THIS AGREEMENT NOT TO COMPETE (the "Non-Compete"), made as of November 18,
1995 by and between WESTERN MICRO TECHNOLOGY, INC., a California corporation
------------------------------
("WMT"), and each of XXXXXXX X. XXXXXXX ("Xxxxxxx"), XXXXX X. XXXXXXXXXXXX
------------------ ---------------------
("Xxxxxxxxxxxx"), and XXXX X. XXXXX ("Xxxxx") (the parties to this Agreement are
-------------
hereinafter collectively referred to as the "Parties"),
W I T N E S S E T H:
WHEREAS, Xxxxxxx, Xxxxxxxxxxxx and Xxxxx are the Shareholders (the
"Shareholders") of International Parts, Inc., a Texas corporation (the
"Company"); and
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization dated as of November 18, 1995 (the "Agreement") by and among WMT,
the Company and the Shareholders, the Shareholders intend to sell, transfer and
convey their shares of common stock of the Company (the "Shares") to WMT in
exchange for certain consideration; and
WHEREAS, this Non-Compete is a condition precedent to the transaction
contemplated in the Agreement and WMT would not enter into the Agreement absent
the execution by the Shareholders of this Non-Compete:
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises contained in this Non-Compete and for other and further valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto agree as follows:
1. Term. WMT and each of the Shareholders hereby enter into this
----
Non-Compete for a term of two (2) years after the Closing Date (as defined in
the Agreement) or such earlier time as WMT becomes insolvent or terminates as a
going concern.
2. Consideration for Covenant Not to Compete. The sole consideration for
-----------------------------------------
the faithful performance of the obligations specified in Section 3 hereof by
each of the Shareholders shall be the consideration received by them under the
Agreement for the sale and transfer of their respective Shares.
3. Agreement Not to Compete.
------------------------
(a) The Parties hereto agree that for the term of this Non-Compete, each
of the Shareholders and their affiliates will not, in any of the jurisdictions
set forth in Exhibit A hereto, directly or indirectly: (i) except unsolicited
requests that come from government contractors or government system integrators
related to or in support of end-user sales under government contract, engage in
any business with value-added
-1-
resellers, resellers or system integrators, including, without limitation, the
two-tiered distribution of computer-related products or the provision of
software programming and networking services to value-added resellers, resellers
or system integrators (each a "Competing Business"); (ii) acquire an interest
exceeding a five percent (5%) equity interest in any entity which is engaged in
a Competing Business; (iii) assist any other person or entity to be so engaged;
or (iv) approach, contact or solicit any employee of WMT or any affiliate of WMT
to leave the employ of WMT or any of its affiliates except through general
employment advertising. Notwithstanding the foregoing, WMT agrees that
ownership of stock in and operation of IPI*GrammTech, Inc., by Xxxxxxx,
Xxxxxxxxxxxx and Xxxxx does not constitute a violation hereof, so long as
IPI*GrammTech, Inc. does not operate a Competing Business.
4. Interpretation.
--------------
(a) Each of the Shareholders recognizes that the foregoing covenant in
Section 3, and the territorial, time and other limitations with respect thereto,
are reasonable and properly required for the adequate protection of the
acquisition of the Shares by WMT, and agrees that such limitations are
reasonable with respect to the business activities of each of the Shareholders.
(b) The Parties recognize that the laws and public policies of the various
states of the United States and the District of Columbia may differ as to the
validity and enforceability of covenants similar to those contained in Section
3. It is the intention of the parties that the provisions of Section 3 shall be
enforced to the fullest extent permissible under the laws and public policies of
the States of California and Texas and of any other jurisdiction in which
enforcement may be sought, but that the unenforceability (or the modification to
conform with such laws or public policies) of any provisions hereof shall not
render unenforceable or impair the remainder of Section 3. To the extent that
Section 3 shall be declared unenforceable in any one or more of such
jurisdictions, such declaration shall not affect Section 3 with respect to each
other jurisdiction, as Section 3 shall be construed to be severable and
independent. If any provision of Section 3 shall be determined to be invalid or
unenforceable, either in whole or in part, Section 3 shall be deemed amended to
delete or modify, as necessary, the offending provisions and to alter the
balance of Section 3 in order to render the same valid and enforceable to the
fullest extent permissible as aforesaid.
5. Remedies. In the event of a breach or a threatened breach of any of
--------
the covenants contained in Section 3, WMT shall, in addition to the remedies
provided by law, have the right and remedy to have such covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any material breach of any of the covenants will
-2-
cause irreparable injury to WMT and that money damages will not provide an
adequate remedy to WMT.
6. Successors and Assigns. This Non-Compete shall inure to the benefit
----------------------
of the successors and assigns of WMT. The Shareholders may not assign their
individual obligations hereunder, and any such proposed assignment shall be
void. Subject to the foregoing, this Non-Compete shall inure to the benefit of,
and bind the successors and assigns of each of the Shareholders.
7. Waiver. The failure of any party to insist, in any instance, upon
------
performance of any of the terms or conditions of this Non-Compete shall not be
construed as a waiver of future performance of any such term or condition, and
the obligations of any party with respect thereto shall continue in full force
and effect.
8. Effectiveness. The effectiveness of this Non-Compete is expressly
-------------
conditioned on the closing of the transaction specified in the Agreement.
9. Entire Agreement. This Non-Compete and the Agreement set forth the
----------------
entire agreement between the Parties with respect to the subject matter hereof
and may be amended only by an agreement in writing signed by the party against
whom enforcement of any amendment is sought.
10. Notices. All notices and demands provided for by this Non-Compete
-------
shall be in writing and (unless otherwise specifically provided herein) shall be
deemed to have been given when mailed by first class mail enclosed in a
registered or certified post-paid envelope addressed to the address of the
parties in accordance with Section 11.1 of the Agreement or to such changed
address as such party may have fixed by notice; provided, however, that any
notice of change of address shall be effective only upon receipt.
11. Governing Law. This Non-Compete and its validity, construction and
-------------
performance shall be governed in all respects by the internal laws of the State
of California without giving effect to principles of conflict of laws.
12. Attorneys. Pillsbury Madison & Sutro has only represented WMT in
---------
connection with this transaction. Each of the Shareholders has had an
opportunity to consult with his counsel regarding the terms of this Non-Compete.
13. Counterparts. This Non-Compete may be executed in any number of coun-
------------
terparts, each of which shall be deemed to be an
-3-
original, but all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement as of
the date first written above.
WESTERN MICRO TECHNOLOGY, INC.
By /s/ Xxxxx Xxxxx
------------------------------------------
Name Xxxxx Xxxxx
----------------------------------------
Title President, CEO
---------------------------------------
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxxxxx
---------------------------------------------
Xxxxx X. Xxxxxxxxxxxx
/s/ Xxxx X. Xxxxx
---------------------------------------------
Xxxx X. Xxxxx
-4-
EXHIBIT A
I. California Counties:
-------------------
1. Alameda 22. Riverside
2. Alpine 23. Sacramento
3. Calaveras 24. San Xxxxxx
4. Xxxxxx Xxxxx 00. Xxx Xxxxxxxxxx
0. Xx Xxxxxx 00. San Diego
6. Fresno 27. San Francisco
7. Xxxxx 28. San Xxxxxxx
8. Xxxx 29. San Xxxx Obispo
9. Kings 30. San Mateo
10. Lake 31. Santa Xxxxxxx
11. Los Angeles 32. Santa Xxxxx
12. Madera 33. Santa Xxxx
13. Marin 34. Sierra
14. Mariposa 35. Siskiyou
15. Mendocino 36. Xxxxxx
16. Merced 37. Sonoma
17. Monterey 38. Stanislaus
18. Napa 39. Sutter
19. Nevada 40. Ventura
20. Orange 41. Yolo
21. Placer 42. Yuba
II. United States. All of the States of the United States other than
-------------
California.
III. Canada and Mexico.
-----------------
-5-
Exhibit 7.2(N)
FURTHER ASSURANCES AND INDEMNIFICATION AGREEMENT
------------------------------------------------
THIS FURTHER ASSURANCES AND INDEMNIFICATION AGREEMENT (this "Agreement"),
by and among WESTERN MICRO TECHNOLOGY, INC., a California corporation ("WMT"),
------------------------------
IPI*GRAMMTECH, INC., a Texas corporation ("IPIG"), INTERNATIONAL PARTS, INC., a
------------------- -------------------------
Texas corporation ("IPI") and XXXXXXX X. XXXXXXX, XXXXX X. XXXXXXXXXXXX and
------------------ ---------------------
XXXX X. XXXXX (the "IPI Shareholders"), dated as of the 18th day of November,
-------------
1995,
W I T N E S S E T H:
WHEREAS, WMT, IPI and the IPI Shareholders have entered into that certain
Agreement and Plan of Reorganization, dated as of November 18, 1995 (the "IPI
Agreement"), pursuant to which WMT will acquire all of the outstanding stock of
IPI; and
WHEREAS, IPI has certain businesses that WMT does not wish to acquire, and
IPI will transfer those businesses to IPIG, which is a wholly-owned subsidiary
of IPI, and all of the stock of which will be distributed to the IPI
Shareholders prior to consummation of the transaction described in the IPI
Agreement (the "Spin-Off"); and
WHEREAS, pursuant to the terms of the IPI Agreement, following the
Spin-Off, IPI will retain only those assets (the "IPI Assets") and only those
liabilities (the "IPI Liabilities") described in Exhibit 2.02 to the Internal
Reorganization Plan dated as of November 14, 1995 between IPI and IPIG and IPIG
will acquire all other assets of IPI (the "IPIG Assets") and assume all other
liabilities of IPI (the "IPIG Liabilities"), which are described in Exhibits
1.01 and 2.01 of the Internal Reorganization Plan; and
WHEREAS, as of the date hereof, which is the Closing Date under the IPI
Agreement, certain IPIG Assets and IPIG liabilities have not been transferred by
IPI to IPIG or assumed by IPIG due to the need to obtain certain third-party
consents and to provide advance notice; and
WHEREAS, IPIG acknowledges its obligations to give notice to and to acquire
consent from such third-parties; and
WHEREAS, as of the date hereof, certain IPI assets are not free and clear
of all liens and encumbrances including, without limitation a security interest
in favor of Bank of America Texas, N.A. ("Bank"); and
WHEREAS, IPIG acknowledges its obligations to clear the IPI Assets of all
such liens and encumbrances; and
WHEREAS, the parties to the IPI Agreement desire to reach additional
agreements with respect to certain of the IPI assets.
-1-
NOW THEREFORE, in return for good and adequate consideration, the receipt
and sufficiency of which are hereby specifically acknowledged, the undersigned
hereby agree as follows:
1. Representation and Warranty regarding the Giving of Notice and
--------------------------------------------------------------
Obtaining of Consents. IPIG and the IPIG Shareholders hereby represent and
---------------------
warrant to WMT that they have provided notice to and have taken all necessary
steps to acquire appropriate consent from all third-parties as is necessary in
order for IPI to convey and for IPIG to acquire the IPIG Assets and for IPI to
transfer and for IPIG to assume the IPIG liabilities, in compliance with the
terms of the various agreements relating thereto. With respect to Bank, Bank
has delivered the letter attached hereto, and the IPI Shareholders represent and
warrant that they know of no facts or conditions that exist that would preclude
the matters set forth in paragraphs (a) and (b) thereto from being fully
completed within a few days following the date hereof.
2. Transfer of IPIG Assets and Assumption of IPIG Liabilities. Upon
----------------------------------------------------------
receipt of reasonable assurances that notice has been provided to and the
necessary consents have been acquired from the third-parties in compliance with
the terms of the various agreements relating thereto, WMT shall transfer to
IPIG, and IPIG shall acquire, the IPIG Assets and IPI shall transfer, and IPIG
shall assume, the IPIG Liabilities.
3. Release of Security Interests. IPI and the IPI Shareholders shall
-----------------------------
perform any and all acts and execute and deliver any and all documents necessary
to remove all liens or encumbrances relating to the IPI Assets and shall use
their efforts to cause any necessary third-parties to do the same.
4. Accounts Receivable and Inventory. The IPI Assets include certain
---------------------------------
accounts receivable and inventory as reflected in Exhibit 2.02 to the Internal
Reorganization Agreement. To the extent that IPI (or WMT when IPI is merged
with an into WMT) has not collected all such accounts receivable or sold all
such inventory within six months of the Date of Closing, as defined under the
IPI Agreement, IPI (or WMT, as the case may be) shall be entitled to transfer to
IPIG up to $350,000 worth of such uncollected accounts receivable and up to
$50,000 of such unsold inventory to IPIG (valued at the amount such accounts
receivable and inventory are reflected on the Closing Balance Sheet (as defined
in the IPI Agreement)) in exchange for a cash payment equal to the amount of
such transferred inventory and accounts receivable. IPIG shall pay IPI by
certified check or wire transfer (or WMT, as the case may be) for such inventory
or accounts receivable within 10 days of the date of such transfer. WMT, in its
sole discretion, shall also be entitled to recover such amounts from the Escrow
(as defined in the IPI Agreement), if said certified check or wire transfer is
not received by WMT within said 10 day period.
-2-
5. Indemnification. IPIG and each IPI Shareholder jointly and severally
---------------
agree to defend and indemnify WMT and IPI and their respective affiliates,
directors, officers and shareholders, and their respective successors and
assigns (collectively, the "WMT Indemnitees"), against and hold all of them
harmless from any and all losses, liabilities, taxes, claims, suits,
proceedings, demands, judgments, damages, expenses and costs, including, without
limitation, reasonable counsel fees, costs and expenses incurred in the
investigation, defense or settlement of any claims covered by this indemnity
(collectively, the "Indemnifiable Damages") which any such WMT Indemnitee may
suffer or incur by reason of the breach of any of the representations of IPIG or
the IPI Shareholders contained in this Agreement or by their failure (i) to
assume the IPIG Liabilities, (ii) to acquire all of the necessary third-party
consents, (iii) to provide the necessary notice to third-parties or (iii) to
perform its or their obligations with respect to release the IPI Assets from all
liens or encumbrances.
6. IPI Agreement. This Further Assurances and Indemnification Agreement
-------------
is entered into in connection with the IPI Agreement and is intended to
supplement the representations and warranties, covenants and other terms and
conditions of the IPI Agreement, and nothing contained herein shall modify,
affect, limit or reduce any of the provisions contained therein, including
without limitation, waive any rights of WMT under the IPI Agreement, or restrict
or modify the representations of IPI and the IPI Shareholders contained therein.
7. Time of the Essence. The parties hereto acknowledge that time is of the
-------------------
essence with respect to the undertakings of the parties described herein.
8. Binding Effect. This Agreement shall be binding upon, and inure to the
--------------
benefit of, the Shareholders and their heirs, personal representatives,
executors and administrators.
9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original,
-3-
but all of which together shall constitute one and the same Termination
Agreement.
10. Governing Law. This Agreement shall be governed by, construed and
-------------
enforced in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
WESTERN MICRO TECHNOLOGY, INC.
By /s/ Xxxxx Xxxxx
--------------------------------------
Its President, CEO
-------------------------------------
IPI*GRAMMTECH, INC.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Its President
-------------------------------------
IPIG SHAREHOLDERS
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------------
Xxxx X. Xxxxx
-4-
Exhibit 7.3(C)
Law Offices Of
PILLSBURY MADISON & SUTRO
0000 Xxxx Xxxx Xxxx
Xxx Xxxxxxxxx XXXXX XXXX, XXXXXXXXXX 00000-0000 San Diego
Los Angeles Telephone (000) 000-0000 Orange County
San Xxxx Telecopier (000) 000-0000 Sacramento
Washington, D.C. Tokyo
--------
Writer's Direct Dial Number
November 18, 1995
To the Shareholders of
International Parts, Inc.
Re: Western Micro Technology, Inc. - Acquisition of Common Stock
of International Parts, Inc. ("IPI")
Ladies and Gentlemen:
We have acted as counsel for Western Micro Technology, Inc. ("WMT") in
connection with the Agreement and Plan of Reorganization of even date herewith
(the "Agreement"), between WMT, IPI and each of you. This letter is provided to
you in satisfaction of the requirement set forth in Section 7.3(c) of the
Agreement. Terms not otherwise defined herein have the meanings given to them
in the Agreement.
In connection with the foregoing, we have examined the Agreement, the
exhibits and schedules to the Agreement, records of proceedings of the directors
and shareholders of WMT, the Articles of Incorporation (the "Articles") and
Bylaws of WMT, certificates of officers of WMT and public officials, and such
other documentation as we have deemed necessary or advisable in order to render
the opinions expressed herein.
Based upon the foregoing, it is our opinion that:
1. WMT is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of California. WMT has all requisite power
and authority to own, lease and operate its properties and to carry on its busi-
ness as now being conducted.
2. WMT has all requisite corporate power and authority to enter into the
Agreement and the related agreements contemplated therein, and, subject to
satisfaction of the conditions set forth in the Agreement, to consummate the
transactions contem-
To the Shareholders of
International Parts, Inc.
November 18, 1995
Page 2
plated thereby. The execution and delivery of the Agreement and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of WMT. The Agreement has been
duly executed and delivered by WMT and constitutes the valid and binding
obligation of WMT enforceable in accordance with its terms, subject to the
effect of applicable bankruptcy, insolvency, reorganization or other similar
federal or state laws affecting the rights of creditors and the effect or
availability of rules of law governing specific performance, injunctive relief
or other equitable remedies. Provided the conditions set forth in Article 7 to
the Agreement are satisfied, to our knowledge, the execution and delivery of the
Agreement do not, and the consummation of the transactions contemplated thereby
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation under any provision
of the Articles of Incorporation or Bylaws of WMT, or any contract identified as
a material contract in WMT's Form 10-K for the fiscal year ended December 31,
1994.
3. To our knowledge, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority is required
by or with respect to WMT in connection with the execution and delivery of the
Agreement by WMT or the consummation by WMT of the transactions contemplated
thereby, except for (a) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required by the Agreement, (b)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws, (c) the
approval of the California Department of Corporations and (d) the listing of the
WMT Common Stock on The Nasdaq Stock Market.
4. The authorized capital stock of WMT consists of 10,000,000 shares of
Common Stock, no par value, and 10,000,000 shares of Preferred Stock, no par
value.
5. The shares of WMT Common delivered to you in connection with the
Agreement are duly authorized, validly issued, and when paid for in accordance
with the Agreement, will be fully paid and nonassessable.
The foregoing opinion is subject to the following qualifications:
To the Shareholders of
International Parts, Inc.
November 18, 1995
Page 3
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as photostatic or telecopied originals, the legal
capacity of all natural persons, and as to documents executed by entities other
than WMT, that each such entity has complied with any applicable requirement to
file tax returns and pay taxes under California Franchise Tax law and had the
power to enter into and perform its obligations under such documents, and that
such documents have been duly authorized, executed and delivered by, and are
binding upon and enforceable against such entities. This opinion is limited in
all respects to matters governed by the laws of the State of California and the
laws of the United States, and we express no opinion concerning the laws or
regulations of any other jurisdiction or jurisdictions.
We assume that you know of no agreements, understandings or negotiations
between the parties not set forth in the Agreement that would modify the terms
or rights and obligations of the parties thereunder.
Whenever a statement herein is qualified by "to the best of our knowledge,"
"we are not aware" or similar phrase, it indicates that in the course of our
representation of WMT no information that would give us current actual knowledge
of the inaccuracy of such statement has come to the attention of the attorneys
in this firm who have rendered legal services in connection with this
transaction. We have not made any independent investigation to determine the
accuracy of such statement, except as expressly described herein.
This opinion is being delivered to you by us as counsel to WMT and may not
be delivered to or relied upon by any other person without our express written
approval.
Very truly yours,
/s/ Pillsbury Madison & Sutro
E-05573
Exhibit 8.2
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT, made as of the 18th day of November, 1995, by and
among WESTERN MICRO TECHNOLOGY, INC., a California corporation ("Purchaser"),
------------------------------
XXXXXXX X. XXXXXXX, XXXXX X. XXXXXXXXXXXX and XXXX X. XXXXX (each a "Seller" and
------------------ --------------------- -------------
collectively the "Sellers"), and FIRST TRUST OF CALIFORNIA, N.A., San Francisco,
-------------------------------
California ("Escrow Agent"),
W I T N E S S E T H:
WHEREAS, Purchaser and Sellers have entered into an Agreement and Plan of
Reorganization of even date herewith (the "Purchase Agreement"), a copy of which
has been delivered to the Escrow Agent; and
WHEREAS, Section 2.7 of the Purchase Agreement provides that Purchaser will
deposit ten percent (10%) of the shares of its Common Stock into an escrow for
the purpose of securing Purchaser's claims for indemnification pursuant to
Article 8 of the Purchase Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent for Purchaser
and Sellers on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants, agreements and
conditions set forth herein, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this Agreement
-----------
shall have the meanings set forth in the Purchase Agreement.
2. Establishment of Escrow. On the date of this Agreement Purchaser will
-----------------------
deliver to the Escrow Agent ten percent (10%) of the shares of its Common Stock
registered in the names of the Sellers in accordance with Section 2.7 of the
Purchase Agreement ("Escrow Fund"). The Escrow Fund shall be held by the Escrow
Agent in escrow subject to the terms and conditions set forth herein. Purchaser
shall pay all costs and fees of the Escrow Agent in connection with this
Agreement, as set forth on the Depository Escrow Fee Schedule attached hereto
(the "Fee Schedule").
3. Escrow Provisions. The provisions of the escrow shall be as set forth
-----------------
in Sections 8.1 through 8.12 of the Purchase Agreement, the Fee Schedule and the
"General Provisions for Corporate Escrow Agreement" attached hereto (the
"General Provisions"). In the event of any conflict between Sections 8.1
through 8.12 of the Purchase Agreement and the General Provisions or the Fee
Schedule, the General Provisions and the Fee Schedule shall govern, provided
that Purchaser shall pay all
-1-
costs and fees of the Escrow Agent in connection with this Agreement and the
Sellers shall have no liability therefor.
4. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of the State of
California without regard to principles of conflicts of laws.
(b) Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by certified mail, postage prepaid by telecopy, or by courier service,
as follows:
If to Purchaser:
Western Micro Technology, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Chief Financial Officer
Fax: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. del Xxxxx
Fax: (000) 000-0000
If to Sellers:
Xxxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxxxxxx
Xxxx X Xxxxx
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
c/o Xx. Xxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Fax: (000) 000-0000
-2-
If to Escrow Agent:
First Trust of California, N.A.
Global Escrow Depository Services #0000
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxx
FAX: (000) 000-0000
or to such other persons as may be designated in writing by the parties, by a
notice given as aforesaid.
(c) Attorneys' Fees. If any legal action is brought for the enforcement
---------------
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees and other costs incurred in such
action or proceeding, in addition to any other relief to which it may be
entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
------------------
date first written above.
WESTERN MICRO TECHNOLOGY, INC., a California
corporation
By /s/ Xxxxx Xxxxx
--------------------------------------------
Title President, CEO
-----------------------------------------
"SELLERS"
/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxxxxxxx
/s/ Xxxx X. Xxxxx
-----------------------------------------------
Xxxx X. Xxxxx
-3-
"ESCROW AGENT"
FIRST TRUST OF CALIFORNIA, N.A.
By /s/ Xxxx Xxxxx
------------------------------------------
Title Trust Officer
---------------------------------------
-4-
Global Escrow Depository Services
General Provisions for
Corporate Escrow Agreements
LIABILITY OF ESCROW SERVICES
----------------------------
In performing any duties under the Escrow Agreement ("Agreement"), Escrow
Agent ("Agent") shall not be liable to any Party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Agent. Agent shall not incur any such liability for (I) any act or failure to
act made or omitted in good faith, or (II) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that Agent shall in good faith believe to be
genuine, nor will Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, Agent may consult with legal counsel in connection with Agent's duties
under this Agreement and shall be fully protected in any act taken, suffered, or
permitted by him/her in good faith in accordance with the advice of counsel.
Agent is not responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to this Agreement.
FEES AND EXPENSES
-----------------
It is understood that the fees and usual charges agreed upon for services
of Agent shall be considered compensation for ordinary services as contemplated
by this Agreement. In the event that the conditions of this Agreement are not
promptly fulfilled, or if Agent renders any service not provided for in this
Agreement, or if the Parties request a substantial modification of its terms, or
if any controversy arises, or if Agent is made a Party to, or intervenes in, any
litigation pertaining to this escrow or its subject matter, Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation and Agent
shall have the right to retain all documents and/or other things of value at any
time held by Agent in this escrow until such compensation, fees, costs, and
expenses are paid. The Parties jointly and severally promise to pay these sums
upon demand. Unless otherwise provided, the Parties each will pay one-half of
all Agent's usual charges and Agent may deduct such sums from the funds
deposited.
CONTROVERSIES
-------------
If any controversy arises between the Parties to this Agreement, or with
any other Party, concerning the subject
-1-
matter of this Agreement, its terms or conditions, Agent will not be required to
determine the controversy or to take any action regarding it. Agent may hold
all documents and funds and may wait for settlement of any such controversy by
final appropriate legal proceedings or other means as, in Agent's discretion,
Agent may require, despite what may be set forth elsewhere in this Agreement.
In such event, Agent will not be liable for interest or damage. Furthermore,
Agent may at its option, file an action of interpleader requiring the Parties to
answer and litigate any claims and rights among themselves. Agent is authorized
to deposit with the clerk of the court all documents and funds held in escrow,
except all costs, expenses, charges and reasonable attorney fees incurred by
Agent due to the interpleader action and which the Parties jointly and severally
agree to pay. Upon initiating such action, Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
INDEMNIFICATION OF ESCROW AGENT
-------------------------------
The Parties and their respective successors and assigns agree jointly and
severally to indemnify and hold harmless against any and all losses, claims,
damages, liabilities, and expenses, including reasonable costs of investigation,
counsel fees, including allocated costs of in-house counsel and disbursements
that may be imposed on Agent or incurred by Agent in connection with the
performance of his/her duties under this Agreement, including but not limited to
any litigation arising from this Agreement or involving its subject matter.
Agent shall have a first lien on the property and papers held under this
Agreement for such compensation and expenses.
INVESTMENT INSTRUCTIONS
-----------------------
For the purpose of investing funds held in escrow, Agent may accept and act
upon the oral instructions of _________ ("Authorized Caller"). Agent will
confirm all oral investment instructions in writing within 3 business days. If
there is any discrepancy between any oral instructions and a written
confirmation of that instruction, Agent's records of the oral investment
instructions shall govern. The parties shall indemnify and hold Agent harmless
from any and all liability for acting on an oral investment instruction
purported to be given by an Authorized Caller. Agent shall not be responsible
for the authenticity of any instructions, or be in any way liable for any
unauthorized instruction or for acting on such an instruction, whether or not
the person giving the instructions was, in fact, an Authorized Caller. In no
event shall Agent be liable to the Parties for any consequential, special, or
exemplary damages, including but not limited to lost profits, from any cause
whatsoever arising out of, or in any way connected with acting upon oral
instructions believed by Agent to be genuine.
-2-
Agent will act upon investment instructions the day that such instructions
are received, provided the requests are communicated within a sufficient amount
of time to allow Agent to make the specified investment. Instructions received
after an applicable investment cutoff deadline will be treated as being received
by Agent on the next business day, and Agent shall not be liable for any loss
arising directly or indirectly, in whole or in part, from the inability to
invest funds on the day the instructions are received. Agent shall not be
liable for any loss incurred by the actions of third parties or by any loss
arising by error, failure, or delay in making of an investment which is caused
by circumstances beyond Agent's reasonable control.
FUNDS INVESTED DURING ESCROW
----------------------------
The Parties acknowledge that payment of any interest earned on the funds
invested in this escrow will be subject to backup withholding penalties unless a
properly completed Internal Revenue Service form W8 or W9 certification is
submitted to Escrow Agent.
RESIGNATION OF ESCROW AGENT
---------------------------
Agent may resign at any time upon giving at least thirty (30) days written
notice to the Parties; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: The Parties shall use their best efforts to mutually
agree on a successor escrow agent within thirty (30) days after receiving such
notice. If the Parties fail to agree upon a successor escrow agent within such
time, Agent shall have the right to appoint a successor escrow agent authorized
to do business in the state of California. The successor escrow agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. Agent shall be discharged from any further duties and liability
under this Agreement.
AUTOMATIC SUCCESSION
--------------------
Any company into which the Agent may be merged or with which it may be
consolidated, or any company to whom Agent may transfer a substantial amount of
its Global Escrow business, shall be the Successor to the Agent without the
execution or filing of any paper or any further act on the part of any of the
Parties, anything herein to the contrary notwithstanding.
GOVERNING LAW
-------------
This Agreement is to be construed and interpreted according to California
law.
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Prepared by First Trust of California, National Association, Global Escrow
Depository Services.
November 0000
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XXXXX XXXXX XX XXXXXXXXXX, National Association
Global Escrow Depository Services
Fee Schedule
for Corporate Holding (Stocks, Notes, Deeds of Trust) Escrows
ACCEPTANCE FEE: $1,500
Includes review of Agreement and
establishing procedures and control.
SUBSEQUENT YEAR ADMINISTRATION FEE: $750
(Minimum, non-proratable to commence on the
first anniversary date of the executed
agreement)
Off-site Closing (CA): $500
Out-of-State Closing: At Cost
OUT-OF-POCKET EXPENSES: Billed at
Expenses included but not limited to Cost
stationery, postage, telephone, insurance,
shipping, Telex/Telegram, services of
outside counsel and agents. (Plus indirect
out-of-pocket at 3% of annual administration
fees.)
NOTE: Charges for performing other escrow services not specifically covered in
this schedule will be determined by an appraisal of the services rendered. The
fees shown in this schedule may be increased upon thirty (30) days notice.
ALL ESCROW FEES ARE NON-PRORATABLE AND NON-REFUNDABLE
November 1995
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