Exhibit 2(i)
STOCK PURCHASE AGREEMENT
THIS AGREEMENT made between XXXXXXXX XXXXXXXX residing at 00 Xxxxxxxx
Xxxxx, Xxxxxxxxxx, Xxxxxxxxx (the "Seller"); LYTTON INCORPORATED, a Delaware
corporation with offices located at 0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx 00000
(the "Company"); and TECHDYNE, INC., a Florida corporation with its principal
offices located at 0000 Xxxx 00xx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 (the
"Buyer");
WHEREAS, Seller has heretofore operated the Company engaged in the
manufacture and assembly of printed circuit boards and other electronic
products for commercial customers;
WHEREAS, Seller is the owner of 100% of the Company's shares of no par
value common stock (the "Common Stock") which Common Stock represents all of
the issued and outstanding shares of the Company; and
WHEREAS, Seller desires to sell, and Buyer desires to purchase from
Seller all shares of the Common Stock (the "Shares") upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein set forth and subject to the terms and conditions hereof, all based on
the representations, warranties and agreements of the parties hereto, the
Company, Seller and Buyer, intending to be legally bound, agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 Sale and Transfer of Shares. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date (as defined in Section 2.1
hereunder) the Seller shall sell, transfer, assign, convey and deliver all
the Shares of the Company to the Buyer free and clear of all liens,
mortgages, charges, pledges, encumbrances, agreements, claims, security
interests, taxes, conditions or restrictions of any nature whatsoever
(collectively "Liens or Encumbrances") for the consideration hereinafter
provided, and the Buyer shall purchase and acquire the Shares from the Seller
as set forth herein, free and clear of all Liens or Encumbrances.
1.2 Payment of Purchase Price of the Shares. As full payment and
complete consideration for the sale and transfer of all the Shares by the
Seller to the Buyer (the "Purchase Price") and subject to the terms of this
Agreement and in reliance upon the representations of the Seller, the Buyer
shall pay to the Seller and otherwise as provided in Section 3.13 hereof the
following consideration as the Purchase Price for the Shares:
(i) on the Closing Date, 300,000 shares of common stock, $.01 par
value of Techdyne, Inc. (the "Techdyne Common Stock") which Techdyne Common
Stock shall be restricted from further public transfer, sale or other
disposition; provided Buyer agrees prior to or immediately from the Closing
Date, to file the appropriate registration statement and related qualifying
documents with the federal and state securities commissions and agencies in
order to enable the Seller to offer and sell the Techdyne Common Stock
publicly and in those states the Seller reasonably requests, and the Buyer
agrees to use its best efforts to have such
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registration statement and related qualifying documents declared effective
by the federal and state securities omissions and agencies as soon as is
practicable but no later than 120 days from the Closing Date.
In the event the Buyer is unable to register the Techdyne Common Stock
within 120 days from the Closing Date, the Buyer shall, upon the Seller's
request, redeem any or all of the Techdyne Common Stock transferred to the
Seller pursuant to this Agreement, for the closing price of the Techdyne
Common Stock as reported by Nasdaq on the date redemption is so requested.
(ii) on the Closing Date, Two Million Five Hundred Thousand
($2,500,000) Dollars by check or wired funds;
(iii) Buyer Guarantee:
(a) Provided the Seller sells or has the Techdyne Common Stock
redeemed as per Section 1.2(i) within twelve (12) months from the
Closing Date, if the Seller realizes less than Four Million Nine
Hundred Thousand ($4,900,000) Dollars of the aggregate Purchase Price
as provided in Section 1.2(i) and (ii) hereinabove (Two Million Five
Hundred Thousand ($2,500,000) Dollars plus the proceeds from the sale
of the Techdyne Common Stock), then the Buyer will make up the
difference between such aggregate proceeds realized by the Seller and
the $4,900,000, in either or any combination of, at the discretion of
the Buyer, cash and/or Additional Techdyne Common Stock; provided such
Additional Techdyne Common Stock is registered by the Buyer as soon as
is practicable from but no later than 120 days from issuance, under
federal and state securities laws, and if not so registered said
guaranteed difference shall be paid in cash.
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Provided, however, that Buyer's Guarantee as set forth in this
Section 1.2 (iii) is only effective and valid if the Company for its
fiscal year ended March 31, 1998 reflects pre-tax earnings of no less
than One Million One Hundred Twenty-Two Thousand ($1,122,000) Dollars
calculated as a stand-alone entity with no imputed charges from the
Buyer added to the Company's expenses ("Pre-Tax Earnings Condition");
or alternatively
(b) Provided the Seller sells or has the Techdyne Common Stock
redeemed as per Section 1.2(i) within twelve (12) months from the
Closing Date, but the Company does not satisfy the Pre-Tax Earnings
Condition, then the Buyer's Guarantee shall be that the Seller shall
realize no less than Four Million Five Hundred Thousand ($4,500,000)
Dollars of the aggregate Purchase Price as provided in Sections 1.2(i)
and (ii) hereinabove (Two Million Five Hundred Thousand ($2,5000,000)
Dollars plus the proceeds from the sale or redemption of the Techdyne
Common Stock), and to that extent, then the Buyer will make up the
difference between the aggregate proceeds realized by the Seller and
the $4,500,000, in either or any combination of, at the discretion of
the Buyer, cash and/or Additional Techdyne Common Stock, provided such
Additional Techdyne Common Stock is registered by the Buyer as soon as
is practicable from but not later than 120 days from issuance, under
federal and state securities laws, and if not registered said
guaranteed difference shall be paid in cash.
In either of the Buyer's Guarantees as provided in Sections 1.2(iii)(a) or
(b) hereof, should the Seller realize a sum greater than the applicable
guaranteed amount, then the Seller shall keep any and all such excess sums.
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It is understood and agreed that the Buyer's Guarantee as provided in this
Section 1.2(iii) is only valid and effective if the Seller elects, at the
Seller's sole option and discretion, to sell the Techdyne Common Stock within
the twelve (12) month period from the Closing Date; and the failure of the
Seller to so timely sell the Techdyne Common Stock will render the Buyer's
Guarantee as provided in this Section 1.2(iii) null and void.
(iv) Incentive Consideration: For a period of three years from the
Closing Date, measured upon the three fiscal years or the same 12 month
periods of the Company, to wit, March 31, 1998, 1999 and 2000, the Buyer
shall pay to the Seller in cash on or prior to April 15 of each such year:
(a) Four percent (4%) of Company sales over $14,000,000 up to
$20,000,000; and
(b) Five percent (5%) of Company sales over $20,000,000.
Sales and Pre-Tax Earnings as contemplated herein shall be audited,
prepared in accordance with generally accepted auditing principles and in
accordance with Section 3.5 of this Agreement.
1.3 Directors and Officers of the Company. In further consideration
of this Agreement, the officers and directors of the Company on the Closing Date
shall be:
Name Officer Directorships
---- ------- -------------
Xxxxx Xxxxxx Chief Executive Officer Chairman of the Board
Xxxxxx Xxxxxxxx President Director
Xxxxx Xxxxx Vice President ------
Chief Financial Officer and
Secretary-Treasurer
Xxxx Xxxxxxxxxx Vice President and Chief ------
Operating Officer
Xxxxxx X. Xxxxxxxx ------ Director
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1.4 Further Assurances. If at any time after the Closing Date, the Buyer
shall consider or be advised that any deeds, bills of sale, assignments or
assurances or any other acts or things are necessary, desirable, or proper (i)
to vest, perfect or confirm, of record or otherwise, in the Buyer or in the
Company, the right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of the Company, or (ii)
otherwise to carry out the purposes of this Agreement, the Seller and the
Company and its proper officers and directors or their designees shall be
authorized to execute and deliver, in the name and on behalf of either of the
Buyer or the Company, all such deeds, bills of sale, assignments and assurances
and do, in the name and on behalf of the Buyer and/or the Company all such other
acts and things necessary, desirable or proper to vest, perfect or confirm the
right, title or interest in, to or under any of the rights, privileges, powers,
franchises properties, assets or Shares of the Company in the Buyer or the
Company and otherwise to carry out the purposes of this Agreement.
ARTICLE II
CLOSING
2.1 Closing Date. The Closing of the transactions contemplated by this
Agreement shall take place at the offices of the Company a 0000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxx 00000 on such date within sixty (60) days after the Buyer's receipt
of the Audited Financial Statements of the Company as referred to in Section 3.5
hereof, but in no event later than the close of business on August 31, 1997,
except as the parties shall mutually agree in writing or as otherwise designated
by the Buyer and the Seller if the conditions to the obligations of the Buyer or
the Seller hereunder have not been fulfilled or waived in writing
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at or prior to such time. The date of Closing so determined is herein
sometimes called the "Closing Date."
2.2 Supplemental Schedule. Five (5) days prior to the Closing Date, the
Seller and the Company shall provide the Buyer with Supplemental Schedule I
which shall provide an update of all the information as required in Exhibits
A, C through E and H through R, and in the representations and warranties of
the Seller and the Company as per Article III hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Seller and the Company, jointly and severally, make the following
representations and warranties to the Buyer, each of which shall be deemed to be
independently material and to have been relied upon by the Buyer.
3.1 Corporate Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all the requisite corporate power and authority and Licenses (as defined
in Section 3.21 hereof) to carry on its business as now conducted and to own its
property in the manner and in the place where such property is presently
located, and is qualified as a foreign corporation in such jurisdictions in
which the character of its business or the nature of its property requires such
qualification.
3.2 Subsidiaries. The Company has no subsidiaries and owns no interest or
securities in any other person or entity, nor does it control, directly or
indirectly, any corporate, association or other business organization.
3.3 Corporate Structure and Title to Shares. The Company has authorized
capital consisting of 1,000 shares of common stock, no par value, of which 51
shares of
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Common Stock are presently issued and outstanding, all of which are fully
paid, validly issued and non-assessable, free and clear of any Liens or
Encumbrances of any kind and nature other than restrictions on transfer
imposed by applicable state and federal securities laws; and all such capital
stock is owned, of record and beneficially, by and with all voting,
investment and disposition power and rights solely in the Seller.
No other class of capital stock of the Company is authorized or
outstanding. There are no outstanding options, subscriptions, rights, warrants
or contracts to issue, nor any securities convertible into or contracts, or any
other rights or commitments obligating the Seller or the Company to issue or
entitling anyone to acquire, make investment decisions for, vote or otherwise
deal with or have an interest in the Common Stock of the Company, whether
issued, unissued, held in treasury or otherwise.
The officers and directors of the Company are listed on Exhibit A, certain
of whom as indicated on Exhibit A, shall resign effective the Closing Date, such
resignations to be provided at the Closing as part of Exhibit A.
3.4 Seller's Authority. The Seller has the full and unrestricted legal
right, power and authority to enter into this Agreement and to carry out the
terms hereof and to sell, transfer and deliver the Shares to the Buyer in
accordance with the terms of this Agreement and upon the sale, transfer and
delivery of the Shares to the Buyer pursuant to this Agreement, the Buyer will
be vested with good and marketable title thereto, free and clear of all Liens or
Encumbrances of any kind, other than restrictions on transfer imposed by
applicable state and federal securities laws. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by the Seller, the sole record and beneficial security
holder of the Company, and do not and will not constitute a material breach or
default of or violate any provisions of the terms of any agreement or violate or
conflict with any other restrictions of any kind or
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character to which the Seller or the Company is a party or by which any of
them is bound. The execution of this Agreement shall constitute the legal,
valid and binding obligation of the Seller enforceable in accordance with its
terms. Neither the Seller nor the Company has made any other agreement with
any other party with respect to the sale or encumbrance of the Shares, the
Company or a substantial portion of its Assets (as defined on Section 3.8
hereof), or merger or consolidation of the Company.
3.5 Financial Statements. The Seller has furnished to the Buyer the
Company's audited balance sheet for the year ended March 31, 1997 and related
statements of revenues, expenses and retained earnings, stockholder's equity
and cash flows ("Audited Financial Statements"), Exhibit B hereto. The
Audited Financial Statements, together with the notes thereto, are and shall
(i) be initialed by the Seller; (ii) be in accordance with the Company's
books and records; (iii) present completely, fairly and accurately the
financial position of the Company as of such date and its results of
operations for the periods represented thereby; (iv) be prepared in
accordance with generally accepted accounting principles and practices
applied on a consistent basis; (v) contain and reflect all necessary
adjustments for a fair presentation of the results of operations and
financial condition for and as of the periods covered by said financial
statements; (vi) reflect that all sales are and were bona fide and made on
normal terms; (vii) reflect that allowances and adjustments for doubtful
accounts are adequate based on past experience and no circumstances exist at
year end or on the Closing Date which require the establishment of additional
allowances for doubtful accounts; (viii) reflect inventories that are
adequate for its operations and provide an adequate obsolence reserve for
slow moving and/or obsolete materials and inventory based on past experience
and no circumstances exist at year end or on the Closing Date that require
the establishment of additional allowances for slow moving inventory or
require the write-off of any material inventory; and (ix) be true, correct
and complete.
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The Seller shall be responsible for all the fees and expenses of its
independent auditors in connection with the preparation of any and all the
financial statements as provided for in this Agreement, audited or otherwise, as
well as its opinions, reports and comfort letters.
3.6 Absence of Undisclosed Liabilities. The Company shall have no debt,
obligation or liability not reflected in the Audited Financial Statements, which
Audited Financial Statements set forth all of the liabilities and obligations,
direct and indirect, contingent and accrued of any nature whatsoever, whether
arising out of contract, tort, statute or otherwise, except with respect to the
liabilities and obligations incurred in the ordinary course of business
subsequent to March 31, 1997 up through the Closing Date. The Seller does not
know of any potential liability of the Company not reflected in the Audited
Financial Statements required to be reflected therein in accordance with the
generally accepted accounting principles.
3.7 Approvals and Restrictions. The execution and delivery of this
Agreement and the performance of the covenants and agreements herein contained
and the consummation of the transactions provided hereunder do not require any
third party consent, approval or authorization and do not violate, conflict with
nor will result in the breach or default under or cause the acceleration of any
liability or debt or the creation of any Lien or Encumbrance upon any of the
assets or capital stock of the Company under the provision of (a) the
certificate of incorporation or by-laws of the Company, as the same may have
been amended from time to time, or (b) any obligation, lien, lease, agreement,
instrument, License, permit, statute, rule, regulation, law, order, arbitration
award, judgment, decree or any other restriction or instrument to which the
Seller or the Company are parties or by which any of them or the Company's
assets are subject or bound.
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3.8 Title to Assets. The Company has good, marketable and indefeasible
title to all of its personal and real property, tangible and intangible,
including without limitation, the properties and assets as reflected in its
Audited Financial Statements, and acquired after the date hereof up to the
Closing Date (the "Assets"), which Assets are to remain with the Company upon
purchase of the Shares by the Buyer and are sufficient for the Company to
continue to conduct its business in the same manner as it has been conducted in
the past, and which Assets are free and clear of all liabilities, conditional
sales agreements, security interests, leases, Liens or Encumbrances or other
imperfections of title whatsoever. Such Assets are in the possession and/or
control of the Company and such Assets have the value as represented in the
Audited Financial Statements, and are in good operating order and condition in
accordance with industry usage.
3.9 Leases. Exhibit C contains a true and complete listing of all
leases, whether for real or personal property, including equipment, machinery
and vehicles under and through which the Company's operations are conducted
and to which the Company is a party and with regard to each lease sets forth
the following: (i) the name and address of the lessor and lessee; (ii) the
expiration date of the lease; (iii) the monthly rent and any additional rent
called for under the lease; and (iv) any other material terms which affect
possession or occupancy thereunder. True, correct and complete copies of
such leases and amendments thereto are attached to Exhibit C. All of the
leases are valid and binding lease obligations, enforceable in accordance
with their terms and shall continue upon the Buyer's acquisition of the
Shares, and shall not be terminated, are not voidable or otherwise materially
adversely affected by the acquisition by the Buyer of the Shares or any of
the transactions contemplated by this Agreement and shall remain valid and
binding lease agreements enforceable in accordance with their terms. The
Company is in good standing under each lease and neither the Seller nor the
Company has received any official written notice of non-
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compliance with applicable federal, state or municipal regulations. The
Company has no material obligation as lessor or lessee which it has not fully
performed, nor is the Seller or the Company aware of any material
expenditures which are likely to be required under the provision of any such
lease for any purpose other than the payment of rent. Neither the Seller nor
the Company knows of any default by any lessor or lessee thereunder or have
any knowledge of a fact which might reflect interference with or materially
affect the use, enjoyment or operation of the property subject to the leases.
3.10 Contracts and Commitments. Exhibit D constitutes a full and complete
list as at the date hereof with respect to the Company of each contract or
agreement, including without limiting the generality of the foregoing: (a) the
new Manufacturer's Representative Agreement with E-MEK Technologies, Inc. (b)
all contracts and agreements for the purchase, sale or lease of capital assets
involving more than $25,000 and extending more than two months; (c) all
management (including all directors and officers), shareholders or employee
contracts or agreements or collective bargaining agreements; (d) all notes, loan
agreements, guarantees and other evidences of indebtedness together with
evidence of all forms of security given in connection therewith; and (e) all
pension, life insurance profit sharing, bonus, retirement or other employee
benefit plans and arrangements. As used herein, the terms "contract" and
"agreement" mean and include every contract, agreement, commitment,
understanding and promise, whether written or oral, executed or executory.
Neither the Seller nor the Company or its affiliates have violated any of
the material terms of any such agreements or contracts nor has any claim been
made by any party thereto nor is there any default thereunder nor has the Seller
or the Company or its affiliates received official written notice nor do they
have any belief that any such contract or agreement is in default or that there
is a claim accrued or accruing thereunder.
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The Company guaranteed Citywide Development Corporation's ("Citywide")
mortgage on the property located at 0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxx
("Citywide Guaranty"), which mortgage was originally in the amount of
$200,000 and was assumed on September 14, 1996 by Xxxxxxx Avenue Properties
LTD., owned by the Seller and Xxxxxx X. Xxxxxxxx, President and director of
the Company, which Citywide mortgage at June 30, 1997 amounted to $164,650
with interest at 7.08% per annum. The Citywide Guaranty shall be removed
within 12 months of the Closing Date. If the Citywide Guaranty is not
removed and eliminated within 12 months of the Closing Date, then the Seller
agrees to pay-off the Citywide mortgage upon demand of the Buyer, or at the
option of the Buyer, to have any Buyer Guarantee or Incentive Consideration
as provided in Sections 1.2(iii) and (iv), respectively, paid to Citywide,
with the balance of the Citywide note and mortgage remaining, if any, to be
paid by the Seller.
The Seller shall cause Xxxxxxx Avenue Properties LTD. to issue a mortgage
to the Buyer on the Closing Date as security for removal of the Citywide
Guaranty; provided that said mortgage may only be foreclosed should prior demand
upon the Seller for repayment of the Citywide mortgage and payment to Citywide,
if any, of the Buyer Guarantee and/or Incentive Consideration as provided in
Sections 1.2(iii) and (iv), respectively, not fully and completely satisfy the
Citywide mortgage and removal of the Citywide Guaranty. Upon removal of the
Citywide Guaranty, the Buyer shall provide and file a satisfaction of mortgage
removing its security interest in the property.
Except as set forth herein or in the Audited Financial Statements:
(a) The Company has no contracts or commitments which are essential
to the business, operations or financial condition of the Company other
than those described in, or incurred in the ordinary course of business,
and not required to be described in this Agreement or any of the Exhibits
annexed hereto;
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(b) Neither the Seller nor the Company knows nor do either of them
have any reason to believe that there are any purchase commitments by the
Company in excess of the normal, ordinary and usual requirements of the
business of the Company or at any excessive price;
(c) Neither the Seller nor the Company knows nor has any reason to
believe that there are any outstanding contracts or commitments which in
the aggregate will result in any material loss to the Company upon
completion of performance thereof, after allowance for direct distribution
expenses. The Seller does not know nor has any reason to believe that
there are any outstanding contracts, bids or sales or service proposals
quoting prices which in the aggregate will not result in a normal profit to
the Company;
(d) Neither the Seller nor the Company does not know, nor does either
of them have any reason not to believe that all accounts receivable as set
forth in the Audited Financial Statements are current and collectible net
of any reserves set forth on such audited balance sheets;
(e) There are no product liability claims (other than fully insured)
of which the Company or the Seller has received notice, and neither the
Seller nor the Company knows or has any reason to believe that any such
claims are or may be threatened;
(f) Neither the Company nor the Seller has given any irrevocable
power of attorney to any person, firm or corporation for any purpose
whatsoever;
(g) The Company has no employment agreements, or any agreements that
contain any severance or termination pay liabilities or obligations;
(h) The Company is not presently paying any pension, deferred
compensation or retirement allowance to anyone except as set forth in
Exhibit E;
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(i) The Company is not restricted by agreement from carrying on its
business anywhere in the world;
(j) Neither the Company nor the Seller has received any notice of any
claim that the Company is under any liability or obligation with respect to
the return of inventory or merchandise in the possession of wholesalers,
retailers or other customers, other than returns of unsalable merchandise
or inventory in the aggregate not exceeding $25,000.
3.11 Inventory. The aggregate fair market value of the inventory of the
Company on March 31, 1997, and as of the date hereof, are not less than the
aggregate book value of the inventory of the Company on March 31, 1997 as
reflected in the Audited Financial Statements and on the books of the Company as
of the date hereof, respectively. In the Seller's and the Company's opinion,
such inventory consists of a quality and quantity usable and salable in the
ordinary course of business of the Company, except for items of obsolete
materials and materials of below standard quality, all of which have been
written down in such audited balance sheets of the Audited Financial Statements
and on such books to realizable market value, or for which adequate reserves
have been provided in such audited balance sheets and on such Company books.
3.12 Claims. As of the date hereof, neither the Seller nor the Company
knows of any claims to return in excess of an aggregate of $25,000 of
merchandise by reason of alleged overshipments, defective merchandise, or any
other reason, or of merchandise in the hands of customers of the Company under
an understanding that such merchandise would be returnable.
3.13 Litigation and Claims. There is no litigation, investigation,
proceeding, suit, action, judgment, controversy or claim, by or before any
court, governmental board, department, bureau, instrumentality or agency,
existing, pending or, to the best knowledge of
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the Seller, threatened against the Company which might adversely affect its
business or the conduct thereof, or which challenges the validity or
propriety of the transactions contemplated by this Agreement, or which affect
its condition, financially or otherwise; and there is no fact known to Seller
or the Company which could form the basis for any litigation, investigation,
proceeding, suit, action, judgment, controversy or claim. There are no
judgments, orders, laws or regulations existing against the Company, which
have or might affect its business, the Assets and/or the continuation of its
business as now conducted.
The two judgments for $255,404.94 obtained by Dayton Securities Associates
against the Company in the Court of Common Pleas, County of Xxxxxxxxxx, one
listed as Case No. 1996 CJ 88160 and the other listed as Case No. 1997 CJ 90186
are one and the same judgment which has been settled for $125,000 and included
and recorded in accrued expenses and explained in Note L to the Audited
Financial Statements and there is no further exposure to any claims, damages or
any other liability or charges whatsoever by or on behalf of the Company,
directly or indirectly, relating to this matter.
The Seller and the Company are contractually obligated pursuant to a stock
redemption agreement respecting shares of the Company formerly held by
Electrolert, Inc. ("Electrolert") to pay the balance of the proceeds due
pursuant to that agreement, as subsequently modified, to Electrolert upon the
sale of the Assets or Common Stock of the Company pursuant to Option 1 ("Option
1") of the Confirmation of the Plan of Reorganization of the sole shareholder of
Electrolert, Xxxx X. Xxxxx, Case No. 96-31427 ("Confirmed Plan"). Pursuant to
Option 1 of the Confirmed Plan to settle and compromise the claims of
Fifth-Third Bank, Xxxxx Xxxxx ("Black"), Porter, Wright, et al., and other
creditors (collectively "Creditors") the Seller and the Company are obligated to
pay Electrolert from the Purchase Price hereunder, a sum equal to fifty percent
(50%) of the net
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cash received by the Seller at Closing (reduced by expenses incurred in
negotiating and completing this Agreement and the transactions contemplated
herein) and one-half of the net cash received from the sale of the Techdyne
Common Stock up to the sum of $1,000,000. It is the intention of
Electrolert, the Company and the Seller, that Electrolert not participate in
the incentives provided pursuant to Buyer's Guarantee at Section 1.2(iii) or
Incentive Consideration provided pursuant to Section 1.2(iv) hereof.
Pursuant to Option 1, the Seller, the Company and Electrolert will enter into
a Motion and Agreed Order, Exhibit F to be delivered to the Buyer as soon as
possible but no later than five (5) days prior to Closing which shall be
agreed to and accepted by the Creditors of Electrolert and Xxxx X. Xxxxx and
approved by the United States Bankruptcy Court for the Southern District of
Ohio, Western Division, relating to the Confirmed Plan. Such Motion and
Agreed Order shall be the complete release and satisfaction of any and all
obligations of the Company to any of the Creditors arising under the
Confirmed Plan and any related proceedings and will terminate with prejudice
any and all litigation against the Company relating to the stock redemption
agreement and any matters relating thereto and the Conformed Plan. Such
Motion and Agreed Order, Exhibit F will set forth the distribution described
herein and obligate the Seller to cause the distributions to Electrolert to
be made from the Purchase Price in accordance with this provision and the
terms of this Agreement, provided the purchase of the Shares as contemplated
herein is completed. Without limiting the other indemnities in favor of the
Buyer contained in this Agreement, the Seller hereby indemnifies, defends
(with counsel acceptable to the Buyer) and holds the Buyer harmless from and
against any loss, damage, costs and expenses, including without limitation,
attorneys' fees, sustained or incurred by the Buyer or the Company as result
of, or arising out of or in connection with any claims made by any Creditor,
or any issues under the Confirmed Plan, or any failure of satisfactory
conclusion of the stock redemption agreement.
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3.14 Governmental Compliance. The Company has complied in all material
respects with all applicable laws, rules, regulations and orders of all federal,
state or local authorities with respect to its business, the operation thereof,
and the use of its property and Assets. Neither the Seller nor the Company has
received any official written notice that the Company is claimed to be in
default with respect to any judgment, order, injunction, decree, rule or
regulation of any court, administrative agency or other governmental agency,
domestic or foreign, nor do any of them have any belief that the Company is in
default with respect to the same. All reports, returns and other documents
which have been filed by the Company with any administrative agency or
governmental authority are true, correct and complete in all material respects.
Neither the Seller nor the Company has received any official written notice that
any condemnation proceeding is contemplated or has been commenced against any of
the premises utilized by the Company or its business or that said premises, or
the use thereof or is in violation of any applicable building, zoning or other
law or regulation. The Company has all necessary occupancy certificates,
licenses and permits with respect to its use and occupancy of such premises, its
conduct of the business and its ownership and use of machinery and equipment
contained therein.
No notice has been received not heretofore complied with, from any federal,
state, county or municipal authority or agency having jurisdiction over the
property and Assets of the Company or its activities or any insurance or
inspection body, that the operations of the Company or its property, Assets,
facilities, equipment or business procedures or practices fail in any respect to
comply with any applicable law, ordinance, regulation or requirement of any
public or self-regulatory authority or body.
3.15 Hazardous Waste. The Buyer is willing to proceed with this
Agreement, the purchase of the Shares, and the transactions contemplated herein
provided that the Company is in compliance with applicable environmental laws,
including but not
18
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("XXXX"), the Resource Conservation and Recovery
Act ("RCRA"), and applicable state and local laws, and regulations and spill
and hazardous waste statutes, regulations and rules ("Environmental Laws").
The Company and the Seller represent that there are no violations of such
Environmental Laws, that the Company is in full compliance with all
Environmental Laws and has internal compliance programs governing such
compliance and the disposal of hazardous waste; and neither the Company nor
the Seller has received notice of any violation of the Environmental Laws nor
does either the Company or the Seller have any reasonable belief that any
such violations have occurred or are occurring or of any basis for threatened
litigation or a reporting problem with respect to the Company's compliance or
lack thereof with Environmental Laws or maintaining or disposing of hazardous
waste.
Notwithstanding the foregoing, the Company and Labinal Components and
Systems, Inc. ("Labinal"), the former owner of the real estate now owned by the
Xxxxxxx Avenue Properties LTD., of which limited liability company, Xxxxxx X.
Xxxxxxxx, President of the Company, is the general partner and controlling
person, and upon which property the Company conducts its operations, entered
into an environmental indemnification agreement, Exhibit G attached, relating to
Labinal's prior use of the facility. The Labinal environmental indemnification
agreement and its benefits shall continue unaffected by the sale of the Shares
to the Buyer, and the terms of this Agreement shall not otherwise alter, modify
or cancel the Labinal environmental indemnification agreement in favor of the
Company.
3.16 Labor Relations. The Company has complied with all applicable laws,
rules and regulations relating to the employment of labor, including those
related to wages, hours and payment of withholding taxes. The Company has
withheld all amounts required by law or agreement to be withheld from wages or
salaries of its employees and is not liable for any
19
arrearage of wages or any taxes or penalties for failure to comply with any
of the foregoing. The Company has no labor troubles and there are no
strikes, work stoppages, slowdowns, threatened labor unrest or any unfair
labor practices, charges of unlawful employment practices under federal or
local equal employment opportunity laws and similar regulations, or other
material controversies pending or threatened between itself and any of its
employees; and no union represents, or in the past twelve (12) months has
demanded or requested, to represent or is currently attempting to represent,
any of its employees. The Company has not promulgated any policy or entered
into any agreement relating to the payment of severance pay, vacation pay or
sick leave to employees now employed by them or whose employment may be
terminated or suspended, voluntarily or otherwise. Neither the Company nor
the Buyer shall be responsible for continuing any employment, agency, sales
representative or similar contract or relationship with any Company employee
or any other person, except that the Company shall continue the employment of
those individuals set forth in Exhibit H at their present salaries as set
forth in Exhibit H and shall also continue the employment of the following:
(i) Xxxxxx X. Xxxxxxxx, President
(ii) Xxxxx Xxxxx, Chief Financial Officer
(iii) Xxxx Xxxxxxxxxx, Chief Operating Officer
(iv) Xxxxxx Xxxxxxxx, Materials Manager
on terms mutually satisfactory pursuant to employment agreements (measured from
the Closing Date) as attached to H.
These persons agree not to compete with the Company as otherwise provided
in the non-compete provisions of their respective employment agreements which
are made a part hereof and which non-compete provisions are an inducement to the
Buyer to enter into this
20
Agreement and proceed with the purchase of the Shares and the transactions
contemplated herein.
3.17 Taxes. The Company has filed returns for and paid in full all of
state and local taxes (including without limitation, income, excise,
unemployment, employees' and employers' withholding, social security,
occupation, franchise, property, sales and use taxes, interests, penalties,
deficiencies or assessments claimed or shown to be due) to the extent such
filings and payments are required as of the date of this Agreement and up
through the Closing Date. All such returns were true and correct when filed and
are presently true and correct. The Company has reserved adequately on its
Audited Financial Statements with respect to taxes accrued but not payable prior
to the date of such statements, and has reserved and will continue to reserve
adequately on its books and records with respect to taxes accrued since the date
of the Audited Financial Statements but not payable prior to the date of this
Agreement and up through the Closing Date. The Company has no and will have no
liability for taxes, interest or penalties in excess of the amounts so paid or
the reserves so established. The Company has not had any tax deficiencies
proposed against it nor has it executed any waiver of the statute of limitations
on the assessment or collection of any tax. There are no federal or state tax
returns of the Company or its financial statements being audited or to the best
knowledge of the Company and the Seller considered or contemplated to be audited
by the Internal Revenue Service or state taxing authorities. Exhibit I provided
to the Buyer consists of the Company's federal, state and local tax returns for
the fiscal year ended March 31, 1997.
Any transfer or other taxes of the State of Delaware and of Ohio or any
other jurisdiction upon the sale of the Shares by the Seller to the Buyer shall
be at the sole responsibility of the Seller.
21
3.18 Absence of Specified Changes. With respect to the Company, since the
fiscal year ended March 31, 1997, there has not been and there shall not be to
the Closing Date:
(a) Any material adverse change in the financial condition, Assets,
liabilities, inventory or business;
(b) Any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Assets or business;
(c) Any transaction entered into or any liability or obligation
incurred, other than liabilities incurred in the ordinary course of
business and consistent with past practice, or any sale, transfer,
encumbrance or any contract to sell, transfer or encumber any of the
Assets, trade names, copyrights, Licenses, franchises or designs or to
waive any rights thereto;
(d) Any mortgage, pledge, grant, suffering to exist any recorded lien
or other recorded encumbrance or charge on any Assets or property, tangible
or intangible;
(e) Any payment or declaration of any bonus, salary increase or
adjustment or additional or extraordinary payment to any officer, employee
or agent beyond standard, normal payroll or review procedures and
guidelines;
(f) Any issuance, pledge or sale of any Shares or any option or right
to purchase the Shares;
(g) Any other event of any kind or character which would or could
adversely affect the business of the Company or the Assets;
(h) Any declaration, setting aside or payment of any dividend or
other distribution with respect to the Shares;
22
(i) Any write-down of the value of any inventory or writing off as
uncollectible notes or accounts receivable or any portion thereof, except
for write-offs or write-downs of such items in the ordinary course of
business and at a rate no greater than during the fiscal year ended March
31, 1996;
(j) Any cancellation of debt or claims or any waived rights of
substantial value except in the ordinary course of business and consistent
with past practice;
(k) Any disposition of or permitted lapse of any material patents or
trademarks or any material patent or trademark application, or any
disposition or disclosure to any person of any trade secrets, formulas,
processes or know-how;
(l) Any capital expenditures or commitments in excess of an aggregate
of $50,000 for the Company for additions or modifications for or to
property, plant or equipment without first obtaining the Buyer's consent
which shall not be unreasonably withheld;
(m) Any material change or application in the method of accounting or
accounting practice;
(n) Payments of any amounts to or in respect of, or sell or transfer
any Assets to, any company or business organization, a substantial portion
of the capital stock or other ownership interest which is owned by the
Company , its officers or directors or their affiliates, or by the Seller
or her affiliates;
(o) Any experiencing of material labor difficulty;
(p) Any agreement or commitment to do any of the things described in
the preceding clauses (a) through (o).
3.19 Intellectual Property Except as set forth in Exhibit J hereto, the
Company does not own, license or use any patents, trademarks, tradenames or
copyrights or similar
23
rights; nor does it have any applications pending with respect thereto, nor
does it utilize any assumed names, nor is it a party to any patent,
trademark, tradename, copyright, license or franchise agreement. Neither the
Seller nor the Company is a party to, nor does any of them have knowledge of,
any patent, trademark, tradename, license, copyright or franchise
infringement, litigation or claim materially affecting or which might
materially affect the business of the Company or its ability to carry on its
business or any basis for any such claim.
3.20 Insurance. The Company has in full force and effect several insurance
policies including but not limited to liability of the types and in the amounts
necessary for its business operations and as described in Exhibit K hereto.
True, correct and complete copies of said policies will be delivered to the
Buyer prior to the Closing Date. Such policies are in full force and effect
with all premiums due to the date hereto paid in full, are in types, amounts,
scope and coverage to protect the Company against loss of its properties or
Assets and to protect against claims and all are deemed adequate in the business
and industry in which the Company is involved.
3.21 Licenses and Permits. The Company has been granted all
certificates, licenses, permits, franchises, variances and similar
authorizations from all federal, state, local or other governmental agencies
(collectively referred to as "Licenses"), which may be necessary to lawfully
carry on its business, produce and sell its products and services, and develop
and market its products and services. Such Licenses are listed in Exhibit L,
are in full force and effect and have not been revoked or suspended nor are they
subject to cancellation, violation, termination, expiration, or notice thereof,
and no action, proceeding or investigation has been instituted or threatened
with reference to said Licenses pursuant to all of which such Licenses the
Company is in compliance. The purchase of the Shares by the Buyer and the
transactions contemplated by this Agreement now and when completed shall
24
not in any way adversely affect the Licenses, whether singly or in
conjunction with others, which shall continue in full force and effect.
Attached to Exhibit L are all License applications, pending and granted, with
and by federal, state and local administrative agencies and governmental
authorities, corresponding to all Licenses essential to the Company, its
products, services and operations, and all such governmental and
administrative agency correspondence, including but not limited to inspection
reports and responses thereto. If necessary, the Seller shall use her best
efforts and cooperate fully with the Buyer to assure that the Company, by
virtue of the transactions contemplated by this Agreement, will be able to
continue operations under such Licenses.
3.22 Corporate Proceedings and Records. The Buyer shall be provided with
the certificate of incorporation, as amended, Exhibit M, and the by-laws of the
Company, Exhibit N, as are in effect as of the date hereof and which shall be in
effect on the Closing Date without amendments or modifications except as
required by the Buyer, and all the minutes and minute books of the Company,
together with transfer sheets, particularly the corporate minutes approving the
terms and provisions of this Agreement, and at the Closing the Company's
corporate seal.
The books of account and other records of the Company, including but not
limited to the records of directors' and shareholders' meetings of the Company,
are true and correct records of all corporate proceedings which comply in all
material respects with all statutes, laws, rules and regulations applicable to
them, and accurately present and reflect all of the transactions entered into by
the Company to which it has been a party or to which its property and Assets may
be subject.
3.23 Transition Cooperation. The Seller shall cooperate with the Buyer
and the Company in executing and filing any and all records, certificates,
documents and other memoranda and shall do and perform all necessary acts and
things necessary to maintain and
25
continue uninterrupted the business of the Company after the Closing Date
based upon and relating to the purchase of the Shares by the Buyer and the
other transactions contemplated by this Agreement.
3.24 Banking. Exhibit O hereto contains a complete list of all bank
accounts and bank account numbers owned by the Company with the name of all
individuals authorized to make withdrawals on such accounts. Exhibit O also
contains a complete list of all safe deposit boxes owned or leased by the
Company and the names of all the persons with access thereto.
3.25 Loan and Financing Agreements. Exhibit P hereto contains a complete
list of all loans and financing agreements between the Company and all lenders,
whether shareholders, creditors or otherwise. True, correct and complete copies
of such agreements have been provided to the Buyer. The Company is in good
standing under such agreements and neither the Company nor the Seller has
received any notice of default under such agreements.
The Company has also made two loans to Xxxxxx X. Xxxxxxxx, President and
director of the Company, which loans at June 30, 1997 amounted to $139,181.00 at
an annual interest rate of 7%, and the second loan for $155,000 at an annual
interest rate of 9.25%. These loans and accrued interest thereon shall be paid
by the Seller to the Company on the Closing Date from the Purchase Price.
3.26 General Warranty. Each of the Company and the Seller has herein
disclosed to the Buyer all facts material to the Assets and business of the
Company other than facts they do not have reason to know; and each of the
Company and the Seller has no knowledge of any matter, event, development or
transaction that would adversely affect the condition, financial or otherwise,
of the Shares, the Assets, existing business or business prospects of the
Company which have not been disclosed in this Agreement or in any of the
26
Exhibits provided to the Buyer in accordance with this Agreement nor does the
Seller have any knowledge of any fact, event or other circumstance that would
prevent the continued operation and business of the Company by virtue of the
purchase of the Shares by the Buyer and the other transactions as contemplated
in this Agreement. None of the information provided by the Seller or the
Company included in this Agreement, as well as in any of the Exhibits or
Supplemental Schedules or certificates provided to, or to be provided by them to
the Buyer pursuant to the terms hereof or in connection with the transactions
contemplated hereby, is false or misleading or contains or will contain any
untrue statement of material fact, or fails or will fail to state a material
fact necessary to make the statements contained or incorporated therein or
herein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer makes the following representations and warranties to the Seller
each of which shall be deemed to be independently material and to have been
relied on by the Seller.
4.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. The Buyer
has full corporate power and authority to own its properties and to carry on its
business as currently conducted and is qualified and in good standing as a
foreign corporation in all jurisdictions where the nature of the business
transacted by the Buyer requires such qualification.
4.2 Corporate Authority. The Buyer has full corporate power and
authority to enter into this Agreement. The Buyer has taken all such
corporate action as may be necessary or advisable and proper to authorize
this Agreement, the execution and delivery thereof, the consummation of the
transactions contemplated hereby and to perform all of its obligations under
this Agreement.
27
4.3 Consents. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby require the consent,
approval or authorization of any third party.
4.4 No Violation. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated herein violates or
conflicts with or constitutes a default under any term or provision of Buyer's
certificate of incorporation or by-laws or of any contract, or indenture to
which it is a party.
4.5 Validity of Shares. The Techdyne Common Stock to be delivered to the
Seller hereunder, when issued in accordance with this Agreement, will be validly
issued and outstanding, fully paid and nonassessable and free and clear of all
Liens or Encumbrances, but shall be restricted from resale or other disposition
under federal and state securities laws until registered thereunder. Such
Techdyne Common Stock will be included in a registration statement to be
prepared and filed by the Buyer with the Securities and Exchange Commission as
soon as possible subsequent to the Closing Date and with the appropriate state
securities commissions to enable the Seller to publicly sell the Techdyne Common
Stock, and the Buyer will use its best efforts to obtain effectiveness of such
registration statement within 120 days of the Closing Date.
4.6 Subsidiaries. Each of the Buyer's Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdictions of its
incorporation where each of them is incorporated and each has the corporate
power and authority to carry on its business as presently conducted. As used
herein, the term "Subsidiaries" means all corporations, a majority of the
outstanding capital stock of which is owned by the Buyer, excluding corporations
which are inactive or in the process of dissolution.
28
ARTICLE V
COVENANTS OF SELLER
The Seller further covenants and agrees as follows:
5.1 Conduct of Business. To cause the business of the Company during
the period from the date hereof to the Closing to be conducted in the normal and
usual manner and not to make without the prior written approval of Buyer any
change in the policies affecting the operation and conduct of the business of
the Company, nor to commence operations for, or enter into any contracts or
agreements out of the ordinary course of business or that would be material or
unusual and affect the business or the Assets of the Company or extend beyond
the Closing Date; and to use her best efforts to preserve the business
organization of the Company and maintain the services of such Company's officers
and the good will and patronage of suppliers, insurance carriers, customers and
others having a business relationship with the Company; and will maintain in
full force and effect insurance policies providing coverage and amounts of
coverage comprable with the policies of insurance now in effect; and to keep and
retain the Company as a going business with present personnel.
5.2 Normal Course. Neither the Seller nor the Company shall, unless
authorized in writing by the Buyer or except as specifically permitted by the
terms of this Agreement:
(a) Issue, sell, hypothecate, pledge or otherwise encumber any Shares
of the Company or any option to purchase the same, or enter into any
agreement with respect thereto;
(b) Declare, set aside or issue any dividend or other distribution
with respect to the Common Stock or redeem, exchange, purchase or acquire
any shares thereof or enter into any agreement in respect of the foregoing;
29
(c) Other than in the ordinary course of business, sell, encumber by
pledge or grant of lien, assign, lease or transfer any of the Company's
Assets, Licenses, franchises, service agreements or agreements with
insurance carriers;
(d) Incur any obligation or liability except liabilities and
obligations incurred in the ordinary course of its business;
(e) Enter into any transaction other than in the ordinary course of
business and, in any event, any such transactions shall not involve an
amount in excess of $50,000 without first obtaining the Buyer's consent
which consent shall not be unreasonably withheld;
(f) Change, amend or otherwise modify the Company's certificate of
incorporation or by-laws; or
(g) Make any changes in compensation payable to officers, directors
or employees beyond standard normal payroll or review procedures and
guidelines; or enter into any employment agreements other than as provided
in Section 5.6 hereof without first obtaining the Buyer's consent which
consent shall not be unreasonably withheld.
5.3 Preservation of Assets, etc. The Assets and property of the Company
shall be kept in good repair, working order and condition (normal wear and tear
excepted) and the Seller and the Company shall use their best efforts to
preserve the business of the Company. The Seller and the Company shall keep
available to the Buyer the services of the Company's employees and the Company
shall comply with applicable laws material to its business.
5.4 Maintenance of Insurance Policies. All policies of fire, product
and service liability and other forms of insurance of the Company listed in
Exhibit K shall be maintained in full force and effect.
30
5.5 Notice. The Seller and/or the Company shall inform the Buyer of any
material developments or any unusual changes or problems affecting the Company
and its business, properties, financial status, the status of its liabilities,
obligations and relationships with its creditors, customers, suppliers and
insurance carriers.
5.6 Employment Agreements. The individuals listed in Section 3.16 of
this Agreement agree to and shall enter into and execute on or prior to the
Closing Date employment agreements in the forms of Exhibit H attached hereto to
become effective on the Closing Date provided this Agreement is then completed
and then in effect.
5.7 Banking Authority. The Company and the Seller agree to enter into
any new banking arrangements as requested by the Buyer on the Closing Date,
including but not limited to new signature cards for depositing, withdrawing and
effecting other banking transactions.
5.8 Quarterly Financials. The Company and the Seller shall provide to
the Buyer no less than twenty (20) days prior to the Closing with the unaudited
quarterly financial statements of the Company for the three months ended June
30, 1997 ("June 1997 Quarterly Financials"), Exhibit Q, which shall be prepared
and presented in accordance with the requirements of Section 3.5 hereof and
which June 1997 Quarterly Financials shall not reflect any material adverse
financial condition or results of operations of the Company.
ARTICLE VI
ACCESS TO INFORMATION
6.1 Access to the Company. The Seller and the Company covenant that prior
to the Closing (i) the Buyer and its counsel, accountants and other
representatives shall have reasonable access during normal business hours to all
properties, books, accounts, records, contracts and documents of or relating to
the Company and its operations, and (ii) the Buyer
31
and its representatives shall be furnished or caused to be furnished all data
and information concerning the business, Assets, finances and property of the
Company that may be reasonably necessary for the Buyer's appraisal of the
Company.
6.2 Confidentiality. All information provided by each party to the
other shall be governed by the Confidentiality Agreement, Exhibit R attached
hereto.
6.3 Effect of Investigation. Any investigation of the Company by the
Buyer shall not affect the representations and warranties hereunder and shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of the Company.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 Buyer's Conditions. The obligation of the Buyer to close hereunder
shall be subject to the satisfaction of the following conditions or the written
waiver thereof by the Buyer, failure of which shall enable the Buyer to
terminate this Agreement:
(a) Each of the agreements and covenants of the Seller and the
Company to be performed under this Agreement at or prior to the Closing
shall have been performed and complied with in all material respects,
including but not limited to a new agreement with Manufacturer's
Representation Agreement with E-MEK Technologies, Inc. on terms no less
favorable to E-MEK Technologies, Inc. as currently exist;
(b) The representations and warranties of the Seller and the Company
in this Agreement and the statements contained in any Schedule or Exhibit
attached hereto or in any instrument, list, certificate or writing
delivered pursuant hereto shall be true and correct in all material
respects when made and true and correct at and as of the Closing Date with
the same force and effect as though such representations
32
and warranties had been made on the Closing Date, and the Buyer shall
have received a certificate to that effect dated the Closing Date and
executed by the Seller and the Company by one of its officers;
(c) No injunction or restraining order shall be in effect to forbid
or enjoin the consummation of this Agreement;
(d) There shall not have occurred any adverse change in the financial
condition or business of the Company or of its Assets or Licenses from that
which existed at the end of the fiscal year March 31, 1997 or as set forth
in the Exhibits;
(e) The Buyer shall have received all such documents, certificates,
opinions and papers required of the Seller and the Company pursuant to the
terms of this Agreement, or which shall have been reasonably requested by
the Buyer, in form and substance as approved prior to or on the Closing
Date by the attorney for the Buyer, Xxxxxxxx X. Xxxxx, including but not
limited to the following:
(i) The Company and the Seller shall have delivered to the
Buyer certificates issued by the Delaware Secretary of State
evidencing the good standing of the Company as of the date not more
than five (5) days prior to the Closing Date as a corporation of the
State of Delaware and the Company's tax status, and by all other
governmental authorities of the foreign jurisdictions in which the
ownership of property or the nature of its business or other
activities have made qualification as a foreign corporation necessary
and the confirming telegram or written representation from a search or
title company confirming such good standing as of the date not more
than one (1) day prior to the Closing Date;
33
(ii) The Company and the Seller shall deliver the June 1997
Quarterly Financials as required under Section 5.8 no less than twenty
(20) days prior to the Closing Date;
(iii) The Company and the Seller shall deliver to the Buyer a
comfort letter from Kentner Sellers, the independent certified public
accountants for the Company, dated the Closing Date in form and
substance satisfactory to the Buyer, stating that on the basis of the
reading of the Audited Financial Statements and the June 1997
Quarterly Financials prepared by the Company, inquiries of the
Company's officers responsible for financial and accounting matters,
reading the minutes and other specified procedures, nothing has come
to their attention which caused them to believe that since the Audited
Financial Statements and as of the Closing Date there were any changes
in the capital stock, any increases in the bank borrowings or any
significant changes in the Assets or Asset valuation (which includes
the inventory), debt or liabilities of the Company, as compared with
the amounts shown in the Audited Financial Statements.
(iv) The Company and the Seller shall have delivered to the Buyer
the favorable written opinion of Messrs. Porter, Wright, Xxxxxx &
Xxxxxx, attorneys for the Seller and the Company dated as of the
Closing Date, in form and substance satisfactory to the Buyer covering
the following matters, provided that with respect to factual matters
counsel may rely upon the representations and certificates of the
Seller and the Company and upon public officials;
(a) The Company is a corporation duly organized, validly
existing and in good standing under the corporation and
34
franchise tax laws of the State of Delaware and has all the
requisite corporate power and authority and Licenses to carry on
its business as now conducted, and to own and to operate its
property and Assets in the manner and at the places where such
properties are presently located, and, to the best knowledge of
counsel, neither the nature of its business nor the character or
location of its respective properties requires it to be qualified
or licensed to do business in any other jurisdiction than in which
it is presently qualified;
(b) The authorized capital stock of the Company consists of
1,000 shares of common stock, no par value, of which there are 51
Shares presently issued and outstanding, all of which are validly
issued, fully paid and non-assessable, free and clear of any
Liens or Encumbrances or other security interests, which such
issued and outstanding Shares are owned of record and
beneficially solely by the Seller, to which such Shares there are
no options, warrants or other rights for their acquisition or
exchange or for the issuance or acquisition of additional
securities of the Company; and all rights of first refusal as
provided in the Company's Certificate of Incorporation have been
satisfied and there are no outstanding claims by any person or
entity relating to the right of first refusal and the acquisition
of any capital stock of the Company, nor to the best knowledge of
such counsel is there any basis for any claims under the right of
first refusal to acquire any capital stock of the Company nor is
there any threatened litigation to accomplish the same.
35
(c) The appropriate action by the directors and
shareholders of the Company to authorize and approve the sale of
the Shares to the Buyer and this Agreement and the execution,
delivery and performance hereof have been duly and validly taken,
and each of the Seller and the Company has the full right, power
and authority to enter into this Agreement and to carry out the
terms hereof;
(d) The Agreement has been duly executed and delivered by
the Seller and the Company and constitutes the valid and binding
obligation of the Seller and the Company in accordance with its
terms, and the execution of this Agreement, the sale of the
Shares and the performance of the covenants and agreements herein
contained and the transactions contemplated hereby do not and
will not result in the breach or violation of any of the terms,
covenants and provisions of, or default under, or in either the
acceleration of any debt or liability or the creation of any Lien
or Encumbrance upon any of the Shares or the Assets of the
Company pursuant to its certificate of incorporation or by-laws,
or any judgment, statute, rule or regulation or, to the knowledge
of such counsel, any agreement, License or other instrument or
restriction of any kind to which the Company or the Seller is a
party or may be bound or to which any of the Company's Assets may
be subject, nor does any provision of any of the foregoing
instruments invalidate any such instrument upon the consummation
of the transactions contemplated hereby, give any party any right
to cancel or terminate any such instrument, or prevent the Buyer
from purchasing the Shares in the manner contemplated by and in
accordance with the terms of this Agreement;
36
(e) To the best knowledge of such counsel there are no
claims, actions, suits or proceedings, pending or threatened
against the Seller or the Company, nor is the Company or the
Seller a party to or subject to any order, judgment, decree,
agreement, stipulation or consent of or with any court or
administrative agency, nor, to the best knowledge of counsel is
any investigation pending or threatened against the Company or
the Seller, that would materially adversely affect the business
of the Company or the consummation of the acquisition of the
Shares by the Buyer or any of the transactions contemplated
herein;
(f) To the best knowledge of such counsel no event has
occurred since the date of the certificate of good standing and
tax certificate furnished pursuant to Section 7.1(e)(i) which
would impair the good standing of the Company as set forth on
such certificates;
(g) The litigation initiated by Dayton Securities
Associates against the Company and others, reduced to a judgment
of $255,409.94, has been settled by the Company for $125,000,
pursuant to which litigation there is no further exposure for any
other claims, damages or judgments of any sort by or on behalf of
the Company, directly or indirectly;
37
(h) The Motion to Enter Into Stipulation ("Motion") for an
Order to authorize Xxxx X. Xxxxx ("Debtor") under the Confirmed
Plan has been approved and granted and the Order issued
authorizing the Debtor to complete Option 1 under the Confirmed
Plan, and there are no and there shall be no further claims,
actions, causes of action, suits, debts, and other reckonings,
controversies, damages, liabilities or demands whatsoever,
whether by Creditors or others, against or any other exposure of
the Company arising from or as a result of the stock redemption
agreement and Debtor's Confirmed Plan.
(i) The Labinal environmental indemnification agreement and
its benefits shall continue unaffected by the sale of the Shares
to the Buyer, and the terms of this Agreement shall not otherwise
alter, modify or cancel the Labinal environmental indemnification
agreement in favor of the Company.
(v) The Seller shall deliver to the Buyer prior to or at the
Closing all documents, Schedules and Exhibits required by this
Agreement to be provided to the Buyer, including the following:
(a) a certificate or certificates representing the Shares,
duly endorsed for transfer to the Buyer or accompanied by an
assignment of the Shares with appropriate stock powers and
signature guarantees (medallion program) duly executed;
(b) good standing and franchise tax certificates of the
Company and updating telegrams as to such good standing and
38
franchise tax status as of the Closing Date as required by
Section 7.1(e)(i);
(c) the Audited Financial Statements and prior two years
(1995 and 1996) audited financial statements, accountant's
comfort letter, leases, corporate records, lists of officers and
directors, employees, salaries, employment agreements, transfer
sheets, minutes, resolutions, certificate of incorporation, as
amended, by-laws, contracts, Licenses, insurance, patents,
trademarks, franchises, tax returns, bank accounts and corporate
seal as required by this Agreement;
(d) the resignations of certain officers and directors of
the Company as per Exhibit A effective as of the Closing Date, as
required by Section 3.3;
(e) new bank authorizations and signature cards as required
by Section 3.24;
(f) the employment agreements for the following individuals
as required pursuant to Sections 3.16 and 5.6;
(g) the new E-MEK Technologies, Inc. Manufacturer's
Representative Agreement as required pursuant to Section 7.1 (a)
hereof;
(h) the Xxxxx Motion and Agreed Order as required pursuant
to Section 3.13 hereof;
39
(i) the assignment of the Labinal environmental
indemnification agreement, Exhibit G, as per Section 3.15 hereof;
and
(j) the mortgage on the property located at 0000 Xxxxxxx
Xxxxxx, Xxxxxx, Xxxx as per Section 3.10 hereof.
(f) All actions, proceedings, certificates of officers, instruments
and documents required to carry out the transactions contemplated by this
Agreement and incidental hereto and all other related legal matters shall
have been satisfactory to and approved by Xxxxxxxx X. Xxxxx, counsel for
the Buyer, and such counsel shall have been furnished with such counterpart
originals that were certified or other copies of such certificates,
instruments and documents as he shall have reasonably requested.
7.2 Seller's Conditions. The obligation of the Seller to close hereunder
shall be subject to the satisfaction of the following conditions or the written
waiver thereof by the Seller, failure of which shall enable the Seller to
terminate this Agreement:
(a) Each of the agreements and covenants of the Buyer to be performed
under this Agreement at or prior to the Closing shall have been duly
performed in all material respects;
(b) The representations and warranties of the Buyer in this Agreement
and in any schedule, instrument, list, certificate or writing delivered by
the Buyer pursuant hereto shall be true and correct in all material
respects when made and true and correct at and as of the Closing Date with
the same force and effect as though
40
such representations and warranties had been made on the Closing Date
and the Seller shall have received a certificate to that effect dated
the Closing Date and executed by an officer of the Buyer;
(c) The Buyer shall have furnished the Seller with an opinion dated
the Closing Date of Xxxxxxxx X. Xxxxx, counsel for the Buyer in form and
substance satisfactory to the Seller covering the following matters,
provided that with respect to factual matters, counsel may rely upon the
representations and certificates of the Buyer and upon public officials:
(i) The Buyer is a corporation duly organized, validly existing
and in good standing under the corporation and franchise tax laws of
the State of Florida and has the requisite corporate power and
authority to carry in its business as now conducted;
(ii) All corporate proceedings required by law to be taken by the
Buyer to authorize and approve this Agreement and the execution,
delivery and performance of this Agreement have been duly and validly
taken and the Buyer has the full right, power and authority to enter
into this Agreement and to carry out the terms hereof;
(iii) The Agreement has been duly executed and delivered by
the Buyer and constitutes the valid and binding obligation of the
Buyer in accordance with its terms, and the execution of this
Agreement and the performance of the covenants and agreements herein
contained and the transactions contemplated hereby do not and will not
result in the breach or violation of any of the terms, covenants and
provisions of, or default under,
41
or in either the acceleration of any debt or liability or the creation
of any Lien or Encumbrance upon any of the Techdyne Common Stock to be
issued to the Seller, or pursuant to its certificate of incorporation
or by-laws or any judgment, statute, rule or regulation or, to the
knowledge of such counsel, any agreement or other instrument or
restriction of any kind to which the Buyer is a party or may be bound,
nor does any provision of any of the foregoing instruments give any
party any right to cancel or terminate any such instrument, or prevent
the Buyer from purchasing the Shares in the manner contemplated by and
in accordance with the terms of this Agreement; and
(iv) To the best knowledge of such counsel there are no claims,
actions, suits or proceedings, pending or threatened against the Buyer
nor is the Buyer a party to or subject to any order, judgment, decree,
agreement, stipulation or consent of or with any court or
administrative agency, nor, to the best knowledge of counsel is any
investigation pending or threatened against the Buyer that would
materially adversely affect the consummation of the acquisition of the
Shares by the Buyer or any of the transactions contemplated herein.
(d) The Buyer shall have furnished the Seller and the Company at the
Closing with the consideration as per Section 1.2(i) and (ii), except for
the Buyer's Guarantee required by Section 1.2 (iii) and the Incentive
Consideration as per Section 1.2(iv) which shall be paid, if applicable, at
such time and pursuant to the conditions as set forth therein.
42
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
8.1 Survival of Representations and Warranties. All representations,
warranties and agreements contained herein or in any writing delivered pursuant
hereto by all parties hereto shall survive the execution and delivery of this
Agreement, the Closing, any investigation made at any time, the sale of the
Shares to the Buyer, and the consummation of all transactions herein
contemplated ; provided, however, notwithstanding anything herein to the
contrary, no claim shall be initiated or raised after the passage of two years
from the Closing Date.
8.2 Indemnification.
(a) The Seller hereby agrees to fully indemnify and hold harmless the
Buyer (the Buyer as used in this Article VIII refers to all of its
subsidiaries and affiliated companies), its directors, officers and
employees, from and against and in respect to:
(i) Any liabilities, claims, encumbrances, deficiencies,
demands, actions suits, proceedings, obligations, damages, losses,
judgments, costs and expenses, including claims of every kind and
nature, whether accrued, absolute, contingent or otherwise, and
including attorneys' and accountants' fees in the course of defense,
or incidental to any suit, action, investigation, claim or proceeding,
incurred by any of them as the result, incidental to or by reason of
the breach, falsity or failure of any of the Seller's or the Company's
representations, warranties, covenants, agreements or omissions
thereof contained in this Agreement or any of the Exhibits,
certificates,
43
supplemental schedules or other documents required hereunder, or
failure to perform as required by or delivery of any and all
Schedules, reports, Exhibits, documents, certificates and other
material information required hereunder, it being understood and
agreed to by all the parties hereto that the provisions of this
indemnification shall survive the Closing and may be enforced first by
the Buyer's offset against and reductions from the consideration to be
provided to the Seller pursuant to the provisions of this Agreement
without limiting in any respect any and all other rights which the
Buyer may have against the Seller and the Company, to enforce the
provisions of this Agreement and without any priority or order of
exercising such rights by the Buyer which the Buyer may, at its sole
discretion, determine to do and in whatever priority in its discretion
it feels appropriate and the exercise of one not being a waiver of any
other rights or remedies which the Buyer may have in the aggregate.
(ii) In the event the Seller or the Company breaches any of the
terms, representations, covenants, warranties or conditions of this
Agreement, or any of the certificates, documents, lists, Exhibits,
Schedules or other memoranda filed hereunder, or in the event that any
breach, suit, action, investigation, claim or proceeding ("Claim") is
begun, made or instituted as a result of which the Seller or the
Company may become obligated to the Buyer hereunder, then the Buyer
shall give written notice in sufficient detail to the Seller of said
Claim. The Seller shall have the right to defend any such Claim in
the Seller's or the Company's name, solely at the Seller's expense.
In the event the Seller, within a reasonable time after
45
written notice of any Claim, fails to defend, the Buyer shall have the
right to undertake the defense, compromise or settle the Claim on
behalf of and for the Seller, and the Seller will cooperate with the
Buyer in the defense thereof.
(iii) The Buyer shall have the right, but not the obligation to
defend, contest or otherwise protect against the same and recover the
entire costs thereof from the Seller and/or the Company including
without limitation, reasonable attorneys fees, disbursements and all
amounts paid a as result of such suit, action, investigation, claim or
proceeding.
(iv) Notwithstanding anything to the contrary set forth herein,
the Buyer at any time hereafter may institute a suit, action,
investigation, claim or proceeding against the Seller and the Company
or interplead the Seller and the Company in any proceeding or
litigation which may arise under this Agreement or as a result of any
breach on the part of the Seller or the Company under this Agreement.
(v) The Company or the Seller shall notify the Buyer, within 10
business days after receiving same, of each third-party claim received
by the Seller or the Company against the Company. The Buyer shall
have the option of either contesting the Claim or claiming indemnity
under this Agreement.
(vi) Notwithstanding anything to the contrary set forth herein,
the Seller shall only be obligated pursuant to this Section 8.2 for
indemnification of matters which exceed in the aggregate the sum of
$50,000 which such
45
sum shall include obligations, damages, losses, judgments, costs and
expenses including attorney's and accountant's fees in the course of
any defense or incidental to any suit, action, investigation, claim or
proceeding for which indemnification is sought hereunder.
ARTICLE IX
GENERAL PROVISIONS
9.1 Tax Status and Effect. It is understood and agreed that no party
hereto has made any representation to the other as to the tax status or tax
effect of the transactions contemplated by this Agreement, and each of the
parties hereto is therefore responsible for separately consulting counsel if it
so desires as to such matters and each is assuming as to herself or itself,
subject only to the express and specific provisions of this Agreement, foreign
or domestic, federal, state or local taxes, if any, which may be incurred by
such person by reason of the carrying out of the terms and provisions hereof.
9.2 Brokerage Commissions and Finders Fees. The Seller and the Company
represent that GWENT, INC. was the sole finder involved in this transaction and
any finder fees shall be the sole responsibility of the Seller. The Seller
hereby indemnifies the Buyer from and against any finder fees whatsoever.
9.3 Expenses of Parties. All expenses involved in the negotiation of the
transactions contemplated by this Agreement, and in the preparation,
authorization and consummation of this Agreement, including, without limitation,
all fees and expenses of agents, representatives, counsel and accountants, shall
be borne solely by parties retaining such agent, representative, counsel and
accountant, and the other party or parties shall bear
46
her, its (their) own expenses in preparing, authorizing and consummating this
Agreement except as otherwise specifically provided in this Agreement.
9.4 Notices. Any and all notices or communications required or desired
to be given in connection with this Agreement shall be made in writing, sent by
registered or certified mail, postage prepaid, return receipt requested, to the
respective parties as follows, or to such other address as any party hereto may
from time to time designate in writing to the other parties hereto:
If to Seller: Xxxxxxxx Xxx Xxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
If to the Company: Lytton Incorporated
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
With a copy to: Xxxxxx X. Xxxxxx, Esq.
Porter, Wright, Xxxxxx & Xxxxxx
0000 Xxx Xxxxxx Xxxxxx
Xxxxxx, Xxxx 00000
If to Buyer: Techdyne, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
ATTN: Xxxxx Xxxxxx, President
With a copy to: Xxxxxxxx X. Xxxxx, Esq.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, Xxx Xxxxxx 00000
9.5 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof. The
representations, warranties covenants and agreements set forth in this Agreement
and in any financial statements, disclosure statements, Schedules or Exhibits
delivered pursuant hereto, constitute all of the representations, warranties,
covenants and agreements among the parties hereto upon which
47
the parties have relied, and except as may be specifically provided herein,
no change, modification, addition or termination of the Agreement or any part
thereof shall be valid unless in writing and signed by all parties hereto.
9.6 Waiver. No waiver of the provisions hereof shall be effective
unless in writing and signed by the party waiving such rights denominating it
as a waiver. No waiver shall be deemed a continuing waiver or waiver in
respect of any subsequent breach or default, either of a similar or different
nature unless expressly so stated in writing. Except as otherwise
specifically provided for hereunder no delay or omission by any party in
exercising any right with respect to this Agreement shall operate as a waiver
of such right or of any other right. Inspection of documents or the receipt
of information pursuant to this Agreement shall not constitute a waiver of
any representation, warranty, covenant or condition hereunder. All rights
and remedies, whether evidenced hereby will be cumulative, and may be
exercised separately or concurrently.
9.7 Binding Nature. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective heirs, legal representatives
and successors; provided however, except as specifically set forth herein, this
Agreement may not be assigned by any party hereto. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement to any persons other than the parties hereto,
their respective heirs, legal representatives and successors, nor is anything in
this Agreement intended to relieve or discharge the obligations or liability of
any third persons to any party of this Agreement, nor shall any provision give
any third persons any right of subrogation or any other right against any party
to this Agreement.
9.8 Captions. The headings or captions under Sections of this Agreement
are for convenience and reference only, and do not in any way modify, interpret
or construe the intent of the parties or affect any of the provisions of this
Agreement.
48
9.9 Finality. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the other provisions, and the
Agreement shall be construed in all respects as if any invalid or unenforceable
provision were omitted.
9.10 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.
9.11 Interpretation. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida. Throughout this Agreement the
masculine gender shall be deemed to include the feminine and neuter, and the
singular shall be deemed to include the plural, and vice versa.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
July 31, 1997.
SELLER
XXXXXXXX XXX XXXXXXXX
By: /s/ XXXXXXXX XXX XXXXXXXX
------------------------------
XXXXXXXX XXX XXXXXXXX
TECHDYNE, INC.
By: /s/ XXXXXX X. XXXXXXXX
------------------------------
XXXXXX X. XXXXXXXX,
Chief Executive Officer
LYTTON INCORPORATED
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------
XXXXXX X. XXXXXXXX, President
49
EXHIBITS
STOCK PURCHASE AGREEMENT
A Officers and directors and resignations Section 3.3; 7.1(e)(v)(d)
B Audited Financial Statements Section 3.5
C Leases Section 3.9
D Contracts and commitments Section 3.10
E Payment of pension or retirement allowance Section 3.10(h)
F Xxxxx Motion and Agreed Order Section 3.13
G Labinal Environmental Agreement Section 3.15; 7.1(e)(xi)
H Employees, salaries & employment agreement Section 3.16; 5.6
I Federal, state and local tax returns Section 3.17
J Patents and trademarks Section 3.19
K Insurance Section 3.20; 5.4
L Licenses Section 3.21
M Certificate of Incorporation Section 3.22
N By-laws Section 3.22
O Bank accounts and safe deposit Section 3.24; 7.1(e)(v)(e)
P Loans and financing agreements Section 3.25
Q June 1997 Quarterly Financials Section 5.8; 7.1(e)(ii)
R Confidentiality Agreement Section 6.2
50
