STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("Agreement") is dated as of January 30,
1998 by and between AMERICAN CUSTOM COMPONENTS, INC., a Nevada corporation
(hereinafter called "ACC"), K5 PLASTICS, INC., a California corporation ("K5" or
the "Company"), and XXXXX XXXXX ("Xxxxx"), XXXXX XXXXX, XXXXXXXXX X. XXXXXX,
XXXXXXX X. XXXXX, and XXXXXXXX XXXXXXXXX as the holders of 100% of the issued
and outstanding shares of common stock of K5 (each a "Shareholder" and
collectively the "Shareholders"). Each of ACC, K5 and the Shareholders shall
hereafter be referred to as a "Party" and collectively as the "Parties."
W I T N E S S E T H
WHEREAS, the Shareholders desire to sell 100% of the issued and
outstanding shares of the common stock of K5 (the "K5 Shares") to ACC on the
terms and conditions set forth in this Stock Purchase Agreement; and
WHEREAS, ACC desires to acquire the K5 Shares pursuant to the terms and
conditions set forth in this Stock Purchase Agreement.
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed between the parties hereto as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 SALE OF THE K5 SHARES. At the date of the Closing as provided in
Section 3.1 hereto (the "Closing"), subject to the terms and conditions herein
set forth, and on the basis of the representations, warranties and agreements
herein contained, the Shareholders shall sell to ACC and ACC shall purchase from
the Shareholders, the K5 Shares.
1.2 INSTRUMENTS OF CONVEYANCE AND TRANSFER. At the Closing, the
Shareholders shall deliver a certificate or certificates representing the K5
Shares, together with appropriate stock powers sufficient to transfer the K5
Shares into ACC's name, in form and substance satisfactory to ACC as shall be
effective to vest in ACC all right, title and interest in and to all of the K5
Shares.
1.3 CONSIDERATION TO BE PAID FOR THE K5 SHARES. At the Closing, ACC
shall pay and deliver the following consideration:
1.3.1 CASH CONSIDERATION. At the Closing, ACC will pay the sum
of Forty Two Thousand Dollars ($42,000.00) in immediately available
funds to the Shareholders, or their designee (the "Cash
Consideration"). The Parties hereto agree that Five Thousand Dollars
($5,000.00) of the Cash Consideration shall be allocated as payment for
the Covenant Not to Compete contained in Article 5 hereof.
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1.3.2 NOTE CONSIDERATION. At the Closing, ACC will execute and
deliver a note payable (the "Note Consideration") to the Shareholders
or their designee, in form and substance substantially similar to
Exhibit "A" attached hereto, in the principal amount of Fifty Thousand
Dollars ($50,000.00), said principal due and payable on or before July
31, 1998, and bearing interest at the rate of ten percent (10%) per
annum.
1.3.3 ASSUMPTION OF DEBT.
1.3.3.1 Effective as of the Closing, ACC will assume
and undertake to make payments on all of K5's obligations to
Union Bank of California (the "UBOC Debt"), which currently
have an aggregate outstanding principal balance of not more
than Fifty Two Thousand Dollars ($52,000.00). ACC will take
reasonable steps to cause Union Bank of California to release
K5 and/or Xxxxx from any and all liability relating to the
UBOC Debt.
1.3.3.2 Effective as of the Closing, ACC will assume
all obligations under K5's existing lease of the premises
located at 00000 Xxxxxxxx Xxxx, Xxxxxxxxxx Xxxxx, Xxxxxxxxxx
(the "Premises"). ACC will take reasonable steps to cause the
lessor of the Premises to release K5 and/or Xxxxx from any and
all liability relating to the lease thereof.
1.3.4 STOCK CONSIDERATION. Effective as of the Closing, ACC
shall cause to be delivered to MRC Legal Services Corporation, as
escrow agent, an aggregate of Twenty Five Thousand (25,000) shares of
the "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock of ACC (the "ACC Shares") to be
held and delivered according to the terms of that certain Escrow
Agreement ("Escrow Agreement") of even date herewith, a copy of which
is attached hereto as Exhibit "B".
1.3.5 WARRANT CONSIDERATION. At the Closing, ACC shall execute
and deliver to the Shareholders, or their designee, warrants to
purchase an aggregate of Sixty Thousand (60,000) shares of the
"restricted" shares of Common Stock of ACC (the "Warrants"). One- half
(1/2) of the Warrants shall be exercisable during that period which is
between one (1) and four (4) years from the date hereof, and the other
half of the Warrants shall be exercisable during that period which is
between two (2) and five (5) years from the date hereof. The Warrants
shall have an exercise price of Three Dollars ($3.00) per share. Two
forms of warrant have been attached hereto as Exhibits "C" and "D",
respectively.
1.4 ACCOUNTS RECEIVABLE. Effective as of the Closing, ACC will assume
all of K5's accounts receivable, which total an aggregate of not less than
Twenty Five Thousand Dollars ($25,000.00).
1.5 EMPLOYMENT AGREEMENT. Effective as of the Closing, Xxxxx and ACC
shall enter into an employment agreement (the "Employment Agreement"), in form
and substance substantially similar to the Employment Agreement attached hereto
as Exhibit "E", wherein Xxxxx shall receive an annual salary of Seventy Two
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Thousand Dollars ($72,000.00) for a period of three (3) years from the Closing.
The Employment Agreement shall contain provisions for a one-time cash bonus in
the amount of Fifteen Thousand Dollars ($15,000.00) in the event that Xxxxx is
employed by ACC on January 31, 1999.
1.6 AUTOMOBILES. Prior to the closing, K5 shall transfer title to two
(2) automobiles which are currently owned by K5 to Xxxxx or his designee.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF K5 AND THE SHAREHOLDERS. To
induce ACC to enter into this Agreement and to consummate the transactions
contemplated hereby, K5 and the Shareholders represent and warrant, as of the
date hereof and as of the Closing, as follows:
2.1.1 CORPORATE EXISTENCE AND AUTHORITY OF K5. K5 is a
corporation duly organized, validly existing and in good standing under
the laws of the State of California. It has all requisite corporate
power, franchises, licenses, permits and authority to own its
properties and assets and to carry on its business as it has been and
is being conducted. It is in good standing in each state, nation or
other jurisdiction in each state, nation or other jurisdiction wherein
the character of the business transacted by it makes such qualification
necessary.
2.1.2 CAPITALIZATION OF K5. The authorized equity securities
of K5 consists of 1,000 shares of common stock, over all of which the
Shareholders have full power, control and voting rights. No other
shares of capital stock of K5 are issued and outstanding. All of the
issued and outstanding shares have been duly and validly issued in
accordance and compliance with all applicable laws, rules and
regulations and are fully paid and nonassessable. There are no options,
warrants, rights, calls, commitments, plans, contracts or other
agreements of any character granted or issued by K5 which provide for
the purchase, issuance or transfer of any shares of the capital stock
of K5 nor are there any outstanding securities granted or issued by K5
that are convertible into any shares of the equity securities of K5,
and none is authorized. K5 is not obligated or committed to purchase,
redeem or otherwise acquire any of its equity. All presently
exercisable voting rights in K5 are vested exclusively in its
outstanding shares of common stock, each share of which is entitled to
one vote on every matter to come before it's shareholders, and other
than as may be contemplated by this Agreement, there are no voting
trusts or other voting arrangements with respect to any of K5's equity
securities.
2.1.3 SUBSIDIARIES. "Subsidiary" or "Subsidiaries" means all
corporations, trusts, partnerships, associations, joint ventures or
other Persons, as defined below, of which a corporation or any other
Subsidiary of such corporation owns not less than twenty percent (20%)
of the voting securities or other equity or of which such corporation
or any other Subsidiary of such corporation possesses, directly or
indirectly, the power to direct or cause the direction of the
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management and policies, whether through ownership of voting shares,
management contracts or otherwise. "Person" means any individual,
corporation, trust, association, partnership, proprietorship, joint
venture or other entity. There are no Subsidiaries of K5.
2.1.4 EXECUTION OF AGREEMENT. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any right
to declare any default or acceleration upon notice or passage of time
or both), in whole or in part, any charter, article of incorporation,
bylaw, mortgage, lien, deed of trust, indenture, lease, agreement,
instrument, order, injunction, decree, judgment, law or any other
restriction of any kind to which either K5 or any of its shareholders
is a party or by which either of them or any of their properties are
bound; (b) result in the creation of any security interest, lien,
encumbrance, adverse claim, proscription or restriction on any property
or asset (whether real, personal, mixed, tangible or intangible),
right, contract, agreement or business of K5 or any of its
shareholders; (C) violate any law, rule or regulation of any federal or
state regulatory agency; or (d) permit any federal or state regulatory
agency to impose any restrictions or limitations of any nature on K5 or
any of its shareholders or any of their respective actions.
2.1.5 FINANCIAL STATEMENTS. Attached as Exhibit "F" hereto are
the consolidated financial statements of the Corporation and
Subsidiaries (including, without limitation, statements of earnings,
balance sheets, statements of changes in financial position, statements
of shareholders' equity, and all notes relating hereto) as of December
31, 1997 and the year then ended (the "Balance Sheet Date"). All of the
Financial Statements referred to in this Section and all consolidated
and unconsolidated financial statements of the Corporation and
Subsidiaries included in any filing with any government agency,
including, without limitation, the United States Securities and
Exchange Commission, are true, correct and complete and present fairly
the financial condition of the Company and Subsidiaries and the results
of their operations at the dates and for the periods covered thereby.
Such Financial Statements have been prepared in conformity with all
applicable regulatory requirements and generally accepted accounting
principles applied on a consistent basis throughout the periods
involved, except as otherwise expressly disclosed in such financial
statements. For the periods covered by the Financial Statements neither
the Company nor any Subsidiary had any nonrecurring items of income.
2.1.6 ABSENCE OF CERTAIN LIABILITIES. Since the Balance Sheet
Date, neither the Company nor any Subsidiary has incurred liabilities
or obligations of any nature other than in the ordinary course of
business and consistent with past practice. Neither the Company nor any
Subsidiary is directly or indirectly liable to (by discount, repurchase
agreement or otherwise), or obligated in any other way to provide funds
in respect of, or to guarantee or assume any debt or obligation of, any
person in any amount, except as arising in the normal course of
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business subsequent to the Balance Sheet Date. All liabilities of the
Company and the Subsidiaries can be prepaid in full without penalty at
any time.
2.1.7 ABSENCE OF CHANGES. Since the Balance Sheet Date and
through the Closing, except as set forth in Schedule 2.1.7 attached
hereto, there has not been and there will not be:
2.1.7.1 Any change or aggregate of changes in the
condition (financial or otherwise), business, operations,
liquidity, property, assets, liabilities, obligations or
prospects of the Company and Subsidiaries resulting in a
reduction of five percent (5%) of the net worth of the Company
or any Subsidiary or three percent (3%) of the net income of
the Company or any Subsidiary, whichever is lesser at the time
of change;
2.1.7.2 Any change in the capitalization of the
Company or any Subsidiary, including, without limitation, the
issuance by the Company or any Subsidiary of any shares of
stock of any class, any subscriptions, options, warrants,
convertible securities, rights, calls, agreements, commitments
or rights affecting or relating in any manner whatsoever to
any equitable interest in the Company or any Subsidiary;
2.1.7.3 Any direct or indirect purchase, redemption
or other acquisition by the Company or any Subsidiary, or any
commitment, plan or agreement by the Company or any Subsidiary
to purchase, redeem or otherwise acquire any shares of its
capital stock or other equitable interest;
2.1.7.4 Any merger or consolidation or agreement to
merge or consolidate by the Company or any Subsidiary with
another Person, or any purchase of or investment in or
agreement in the business of another Person;
2.1.7.5 Any declaration, payment or setting aside by
the Company or any Subsidiary of any dividends or other
distributions of any assets of any kind whatsoever to its
shareholders or other equitable owners, except for ordinary
salary payments for services actually rendered;
2.1.7.6 Any amendment to the Articles of
Incorporation or Bylaws of the Company or any Subsidiary;
2.1.7.7 Any increase in the compensation or rate of
compensation or commission payable or to become payable by the
Company or any Subsidiary to any of their directors, officers,
salaried employees earning more that $20,000 per annum,
salesmen or agents, or any general increase in the
compensation or rate of compensation payable or to become
payable to any of their hourly employees or salaried employees
earning $20,000 per annum or less ("general increase" for
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purposes hereof shall mean any increase applicable to a class
or group of employees and does not include increases granted
to individual employees for merit, length of service, change
in position or responsibility or other reasons applicable to
specified employees and not generally to a class or group
thereof), or any hiring of any employee at a salary in excess
of $20,000 per annum, or any termination of any key employee
or any employee whose compensation was in excess of $20,000
per annum;
2.1.7.8 Any changes in any existing, or adoption of
or entering into any new, benefit plan or arrangement (whether
written or oral) affecting any of the officers, directors,
employees, salesmen or agents of the Company and the
Subsidiaries, including, without limitation, any bonus, profit
sharing, pension, deferred compensation, severance or
termination pay benefit, stock option, group life or health
insurance or other similar plans, agreements or arrangements;
2.1.7.9 Any release, cancellation, modification or
waiver of any obligation, indebtedness, liability, lien or
encumbrance held by the Company or any Subsidiary, unless such
obligation, indebtedness, liability, lien or encumbrance has
been paid in full at the time of release;
2.1.7.10 Any waiver, compromise or settlement by the
Company or any Subsidiary of any right or claim in excess of
ten thousand dollars ($10,000.00); or any institution or
settlement of or agreement to settle, any litigation, action
or proceeding before any court or governmental body relating
to the Company or any of its properties;
2.1.7.11 Any mortgage, pledge or other subjection to
any lien, claim, charge, option or encumbrance of any
property, asset, right or business of the Company or any
Subsidiary, other than liens for taxes not yet due and payable
and any continuing statutory landlord's lien;
2.1.7.12 Any incurrence of any indebtedness,
obligations or liabilities (whether absolute, accrued,
contingent, known or unknown, due or to become due) by the
Company or any Subsidiary except those arising in the ordinary
course of business and consistent with past practice, but in
no event in excess of ten thousand dollars ($10,000.00) when
all such indebtedness, obligations and liabilities are
aggregated;
2.1.7.13 Any assumptions, guarantees or endorsements
by the Company or any Subsidiary of the obligations of any
Person, except in the ordinary course of business and
consistent with past practice, but in no event in excess of
ten thousand dollars ($10,000.00) when all such assumptions,
guarantees and endorsements are aggregated;
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2.1.7.14 Any payment or satisfaction by the Company
or any Subsidiary of any liability, obligation or
indebtedness, other than those incurred since the Balance
Sheet Date in the ordinary course of business and consistent
with past practice;
2.1.7.15 Any loan or advance, any commitment to loan
or advance, or any renewal, refunding or extension of any
existing loan, made by the Company or any Subsidiary to any
Person, except in the ordinary course of business and
consistent with past practice, but in no event any loan or
advance, any commitment to loan or advance, or any renewal,
refunding or extension of any existing loan, by the Company or
any Subsidiary to any of its officers, directors or holders or
five percent (5%) or more of the capital stock or equitable
interest, or to any affiliate of any such officer, director or
holder, as the term "affiliate" is defined for purposes of the
1933 Act and the rules and regulations thereunder;
2.1.7.16 Any creation, renewal, change or
termination, or any notice of any proposed renewal, change or
termination of any contract, agreement, commitment,
obligation, lease or license involving more than five thousand
dollars ($5,000.00) or extending beyond six (6) months from
the date of this Agreement, to which the Company or any
Subsidiary is a party or by which the Company or any
Subsidiary or any of their property is bound;
2.1.7.17 Any action or inaction which has caused or
will cause a breach or default in any contract, agreement,
obligation, lease or license to which the Company or any
Subsidiary is a party or by which the Company or any
Subsidiary or any of their property is bound;
2.1.7.18 Any sale, assignment, lease, abandonment or
other disposition by the Company or any Subsidiary of any real
property, or any sale, assignment, transfer, license, lease or
other disposition by the Company or any Subsidiary of any
patent, trademark, trade name, brand name, copyright (or
pending application for any patent, trademark or copyright),
invention, process, know-how, formula, trade secret or other
intangible asset;
2.1.7.19 Any sale, assignment or transfer of
contract, agreement, lease, of an asset by the Company or any
Subsidiary, except in the ordinary course of business and
consistent with past practice;
2.1.7.20 Any violation by the Company or any
Subsidiary of, or any charge against the Company or any
Subsidiary for alleged violations of, governmental laws,
regulations or standards, including, without limitation,
unlawful employment practices, occupational health and safety
standards, and environmental control standards;
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2.1.7.21 Any labor dispute, or threat of a labor
dispute, or any attempt or threat of any attempt by a union to
organize any employee of the Company or any Subsidiary who are
not now covered under an existing union or collective
bargaining agreement;
2.1.7.22 Any lapse in any insurance policy or
coverage of the Company or any Subsidiary;
2.1.7.23 Any damage, destruction or loss to the
business or properties of the Company or any Subsidiary;
whether or not covered by insurance, including, without
limitation, any damage, destruction or loss as a result of
fire, explosion, accident, earthquake, lightening, frost,
aircraft, vehicle, smoke, hail, flood, drought, storm, strike,
work stoppage, lockout, sabotage, embargo, condemnation, riot,
civil disturbance, vandalism or act of God or public enemy;
2.1.7.24 Any granting of powers of attorney by the
Company or any Subsidiary; any change in their banking or safe
deposit arrangements; any writing up or writing down of the
carrying value of any of their assets; any change in their
depreciation or amortization policies or rates heretofore
adopted; or any change in any basic policy or practice by the
Company or any Subsidiary with respect to liquidity management
and cash flow planning, lending, budgeting, pricing, profit
and tax planning, personnel practices and accounting
practices; and,
2.1.7.25 Any action or transaction entered into by
the Company or any Subsidiary other than in the ordinary
course of business.
2.1.8 TAXES. Except as set forth in Schedule 2.1.8
attached to this Agreement;
2.1.8.1 The Company and all Subsidiaries have duly
filed all required federal, state, local, foreign and other
tax returns, notices and reports (including, without
limitation, income, property, sales, use, franchise, capital
stock, excise, added value, employees' income withholding,
social security and unemployment tax returns, notices and
reports) heretofore due, and all such returns, notices and
reports are correct, accurate and complete in all respects;
2.1.8.2 All deposits required to be made by the
Company and all Subsidiaries with respect to any tax
(including, without limitation, estimated income, franchise
and employee withholding taxes) have been duly made;
2.1.8.3 All taxes, assessments, fees, penalties,
interest and other governmental charges with respect to each
of the Company and all Subsidiaries which have become due and
payable by its Balance Sheet Date have been paid in full or
adequately reserved against by the Company or the applicable
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Subsidiary, and all taxes, assessments, fees, penalties,
interest and other governmental charges which have become due
and payable subsequent to the Balance Sheet Date have been
paid in full or adequately reserved against on its books of
account and such books are sufficient for the payment of all
unpaid federal, state, local, foreign and other taxes, fees
and assessments (including without limitation, income,
property, sales, use, franchise, capital stock, excise, added
value, employees' income withholding, social security and
unemployment taxes), and all interest and penalties thereon
with respect to the periods then ended and for all periods
thereto;
2.1.8.4 There are no agreements, waivers or other
arrangements providing for an extension of time with respect
to the assessment of any tax or deficiency against the Company
or any Subsidiary, nor are there any actions, suits,
proceedings, investigations or claims now pending against the
Company or any Subsidiary, nor are there any actions, suits,
proceedings, investigations or claims now pending against the
Company or any Subsidiary in respect of any tax or assessment,
or any matters under discussion with any federal, state, local
or foreign authority relating to any taxes or assessments, or
any claims for additional taxes or assessments asserted by any
such authority, and there is no basis for the assertion of any
additional taxes or assessments against the Company or any
Subsidiary; and
2.1.8.5 The consummation of the transactions
contemplated by this Agreement will not result in the
imposition of any additional taxes on or assessments against
the Company or any Subsidiary.
2.1.9 DISPUTES AND LITIGATION. Except as set forth in Schedule
2.1.9 attached hereto, there is no suit, action, litigation,
proceeding, investigation, claim, complaint, or accusation pending,
threatened against or affecting the Company or any Subsidiary or any of
their properties, assets or business or to which the Company or any
Subsidiary is a party, in any court or before any arbitrator of any
kind or before or by any governmental agency (including, without
limitation, any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality), and
there is no basis for such suit, action, litigation, proceeding,
investigation, claim, complaint, or accusation; (b) there is no pending
or threatened change in any environmental, zoning or building laws,
regulations or ordinances which affect or could affect the Company or
any Subsidiary or any of their properties, assets or businesses; and
(c) there is no outstanding order, writ, injunction, decree, judgment
or award by any court, arbitrator or governmental body against or
affecting the Company or any Subsidiary or any of their properties,
assets or business. There is no litigation, proceeding, investigation,
claim, complaint or accusation, formal or informal, or arbitration
pending, or any of the aforesaid threatened, or any contingent
liability which would give rise to any right of indemnification or
similar right on the part of any director or officer of the Company or
any Subsidiary or any such person's heirs, executors or administrators
as against the Company or any Subsidiary.
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2.1.10 COMPLIANCE WITH LAWS. The Company and all Subsidiaries
have at all times been, and presently are, in full compliance with, and
have not received notice of any claimed violation of, any applicable
federal, state, local, foreign and other laws, rules and regulations.
The Company and all Subsidiaries have filed all returns, reports and
other documents and furnished all information required or requested by
any federal, state, local or foreign governmental agency and all such
returns, reports, documents and information are true and complete in
all respects. All permits, licenses, orders, franchises and approvals
of all federal, state, local or foreign governmental or regulatory
bodies required of the Company or any Subsidiary for the conduct of
each of their respective business have been obtained, no violations are
or have been recorded in respect of any such permits, licenses, orders,
franchises and approvals, and there is no litigation, proceeding,
investigation, arbitration, claim, complaint or accusation, formal or
informal, pending or threatened, which may revoke, limit, or question
the validity, sufficiency or continuance of any such permit, license,
order, franchise or approval. Such permits, licenses, orders,
franchises and approvals are valid and sufficient for all activities
presently carried on by the Company and all Subsidiaries.
2.1.11 TITLE TO PROPERTIES. The properties and assets of the
Company and Subsidiaries consist of all of the properties and assets
reflected on the Financial Statements. The Company and Subsidiaries
have good and marketable title to all of their respective properties
and assets (whether real, personal, mixed, tangible or intangible),
rights contracts, agreements, goodwill and business, free and clear of
all adverse interests, security, interests, liens, encumbrances,
claims, proscriptions, restrictions, conditions, covenants and
easements, other than liens for taxes not yet due and payable and minor
imperfections of title encumbrances, if any, which do not interfere
with the present of proposed use of such property or otherwise
adversely affect the Company or the Subsidiaries in the conduct of
their respective businesses. There have not been filed any liens,
mortgages or financing statements under the Uniform Commercial Code or
other similar statute on the properties or assets, whether real,
personal or mixed, of the Company or any Subsidiary, nor has the
Company or any Subsidiary signed any security agreement or similar
agreement authorizing any secured party thereunder to file any such
lien, mortgage or financing statement.
2.1.12 REAL PROPERTY AND REAL PROPERTY LEASES. The Company and
Subsidiaries have all easements and rights, including easements for
power lines, water lines, roadways and other access, necessary to
conduct business they now conduct and enjoy peaceful and undisturbed
possession of all properties occupied by them. Neither the whole nor
any portion of any real property owned, occupied or leased to or by the
Company or any Subsidiary has been rezoned or condemned or otherwise
taken by any public authority and no such rezoning, condemnation or
other taking is threatened or contemplated. None of the real properties
owned, occupied or leased to or by the Company or any Subsidiary, or
the occupancy thereof, constitutes a nuisance or violation of any law
or any building, zoning or other ordinance, code or regulation or any
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private or public covenant or restriction, and no notice from any
governmental body or other Person has been served upon the Company or
any Subsidiary claiming any violation of any such law, ordinance, code,
regulation, covenant or restriction, or requiring or calling attention
to the need for any work, repairs, construction, alterations or
installations on or in connection with any of such properties which has
not been complied with. All leases of real property to which the
Corporation or any Subsidiary is a party are valid, binding and in full
force and effect, and there exists no default thereunder by any party
thereto, nor any events which, with notice or laps of time, or both,
would constitute a default, and all amounts heretofore payable under
such leases have been paid in full.
2.1.13 CONDITION OF TANGIBLE PROPERTY. With the exception of
the inventory, all tangible properties owned or used by the Company and
Subsidiaries, including, without limitation, all buildings, offices,
shops and other structures owned or occupied by the Company and
Subsidiaries and all machinery, equipment, tools, fixtures and motor
vehicles owned or used by them are in good operating condition and
repair, fit and usable for the purposes for which they are being
utilized, and sufficient for all current operations of the Company and
the Subsidiaries.
2.1.14 INVENTORY. The inventories of each of the Company and
Subsidiaries shown on its Balance Sheet and inventories acquired by it
subsequent to its Balance Sheet Date consist solely of items of a
quality and quantity usable and salable in the normal course of its
business, with the exception of obsolete materials and materials below
standard quality. The values at which all inventories are carried
reflect the customary inventory valuation consistently applied by the
Company and Subsidiaries of stating inventory at the lower of cost or
estimated realizable market value on a first-in, first-out basis, all
in accordance with generally accepted accounting principles. No items
including in the inventories of the Company and Subsidiaries are
pledged as collateral or are held by the Company or any Subsidiary on
consignment from others. Neither the Company nor any Subsidiary is
committed to purchase inventories in amounts greater than are required
in the ordinary course of business and in no event in amounts greater
that are required for one year's operations of its business at current
manufacturing and selling levels.
2.1.15 INTANGIBLE PERSONAL PROPERTY. Each of the Company and
Subsidiaries validly owns or is validly licensed under all intangible
properties which are required or necessary for the conduct of its
business as now conducted, and is the sole and exclusive owner of said
properties, free and clear of all liens and encumbrances of any nature
whatsoever, and has the unrestricted right to use said properties,
having not granted or entered into any agreement, covenant, license or
sublicense with respect thereto. No claims or demands have been
asserted against the Company or any Subsidiary with respect to any such
items of intangible property, and no proceedings have been instituted,
are pending or have been threatened which challenge the rights of the
Corporation or any Subsidiary with respect to any of such assets. The
businesses and operations of the Company and Subsidiaries, the
manufacture, use and sale by them of their products, the use of their
products by their customers for the purposes for which sold and
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the use or publication by them of their patents, trademarks, trade
names, brand names and advertising, technical or other literature and
other intangible personal properties do not involve infringement or
claimed infringement of any United States patent, trademark, trade
name, brand name or copyright.
2.1.16 AGREEMENTS. All material agreements of the Company and
Subsidiaries were entered into in the ordinary course of business, are
valid and binding, in full force and effect and enforceable in
accordance with their respective terms, and there exists no breach or
default, or any event which, with notice or laps of time or both, would
constitute a breach or default, by any party thereto.
2.1.17 RECEIVABLES. All notes and accounts receivable of the
Company and Subsidiaries shown on the Financial Statements and all
those arising since the Balance Sheet Date have arisen in the ordinary
course of business. As of the Closing, the notes and accounts
receivable of the Company and Subsidiaries will be collectible in the
ordinary course of business without resort to litigation or subjection
to counterclaim or offset in a total aggregate amount of not less than
as shown on the Financial Statements.
2.1.18 DEBTS TO AND FROM RELATED PARTIES. There presently are
not, and during the two years preceding the date of this Agreement
there have not been, any debts owing to the Company or any Subsidiary
by, or any contractual agreements or understandings between the Company
or any Subsidiary and, any shareholder, director or officer of the
corporation or of any Subsidiary, any member of their respective
families, or any affiliate or associate of any of the foregoing
individuals, as the term "affiliate" is defined for purposes of the
1933 Act and the rules and regulations thereunder, and none of the
foregoing individuals or any affiliate or associate of them owns any
property or rights, tangible or intangible (other than an equitable
interest), used in or related to the Company's or any Subsidiary's
business. Neither the Company nor any Subsidiary is indebted to any
shareholder, officer, director or employee of the Company or any
Subsidiary, or to any member of their respective families, or to any
affiliate or associate of any of the foregoing individuals, in any
amount whatsoever, other than for payment of salaries and compensation
for services actually rendered to the Company and Subsidiaries in the
ordinary course of their businesses.
2.1.19 GUARANTIES. Neither the Company nor any Subsidiary has
guaranteed any dividend, obligation or indebtedness of any Person; nor
has any Person guaranteed any dividend, obligation or indebtedness of
the Company or any Subsidiary.
2.1.20 BOOKS AND RECORDS. The Company and each Subsidiary
keeps its books, records and accounts (including, without limitation,
those kept for financial reporting purposes and for tax purposes) in
accordance with good business practice and in sufficient detail to
reflect the transactions and dispositions of its assets, liabilities
and equities. The minute books of the Company and each Subsidiary
contain records of its shareholders' and directors' meetings and of
12
action taken by such shareholders and directors. The meetings of
directors and shareholders referred to in such minute books were duly
called and held, and the resolutions appearing in such minute books
were duly adopted. The signatures appearing on all documents contained
in such minute books are the true signatures of the persons purporting
to have signed the same.
2.2 REPRESENTATIONS AND WARRANTIES OF ACC. To induce the Shareholders
to enter into this Agreement and to consummate the transactions contemplated
hereby, ACC represents and warrants, as of the date hereof and as of the
Closing, as follows:
2.2.1 CORPORATE EXISTENCE AND AUTHORITY OF ACC. ACC is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Nevada. It has all requisite corporate power,
franchises, licenses, permits and authority to own its properties and
assets and to carry on its business as it has been and is being
conducted. It is in good standing in each state, nation or other
jurisdiction in each state, nation or other jurisdiction wherein the
character of the business transacted by it makes such qualification
necessary.
2.2.2 EXECUTION OF AGREEMENT. The execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereby will not: (a) violate, conflict with, modify or
cause any default under or acceleration of (or give any party any right
to declare any default or acceleration upon notice or passage of time
or both), in whole or in part, any charter, article of incorporation,
bylaw, mortgage, lien, deed of trust, indenture, lease, agreement,
instrument, order, injunction, decree, judgment, law or any other
restriction of any kind to which ACC is a party or by which it or any
of its properties are bound; (b) result in the creation of any security
interest, lien, encumbrance, adverse claim, proscription or restriction
on any property or asset (whether real, personal, mixed, tangible or
intangible), right, contract, agreement or business of ACC; (c) violate
any law, rule or regulation of any federal or state regulatory agency;
or (d) permit any federal or state regulatory agency to impose any
restrictions or limitations of any nature on ACC or any of its actions.
2.2.3 THE ACC SHARES. The ACC Shares have been duly authorized
by the appropriate corporate action of ACC. ACC shall transfer title,
in and to the ACC Shares, to the Shareholders free and clear of all
liens, security interests, pledges, encumbrances, charges,
restrictions, demands and claims, of any kind and nature whatsoever,
whether direct or indirect or contingent, except as set forth herein
and in the Escrow Agreement.
13
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 CLOSING. The Closing shall be deemed to have occurred on January
31, 1998. At or subsequent to the Closing, as the Parties shall agree, the
following shall occur as a single integrated transaction:
3.2 DELIVERY BY THE SHAREHOLDERS:
(a) The Shareholders shall deliver to ACC the stock
certificate or certificates and all instruments of conveyance and
transfer required by Section 1.2.
(b) The Shareholders shall deliver, or cause to be delivered,
to ACC such instruments, documents and certificates as are required to
be delivered by the Shareholders and or K5 or their representatives
pursuant to the provisions of this Agreement.
3.3 DELIVERY BY ACC:
(a) ACC shall deliver, or cause to be delivered, to the
Shareholders the Cash Consideration and the Note Consideration as
required by Sections 1.3.1 and 1.3.2. Within 45 days of the Closing
hereof, ACC shall deliver the ACC Shares as required by Section 1.3.4.
(b) ACC shall deliver, or cause to be delivered, to the
Shareholders such instruments, documents and certificates as are
required to be delivered by ACC or its representatives pursuant to the
provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 TERMINATION. Notwithstanding anything to the contrary contained in
this Agreement, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing by the
mutual consent of all of the parties;
4.2 WAIVER AND AMENDMENT. Any term, provision, covenant,
representation, warranty or condition of this Agreement may be waived, but only
by a written instrument signed by the party entitled to the benefits thereof.
The failure or delay of any party at any time or times to require performance of
any provision hereof or to exercise its rights with respect to any provision
hereof shall in no manner operate as a waiver of or affect such party's right at
a later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, provision, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or waiver of any other condition or of the breach of any other term, provision,
14
covenant, representationor warranty. No modification or amendment of this
Agreement shall be valid and binding unless it be in writing and signed by all
parties hereto.
ARTICLE 5
COVENANT NOT TO COMPETE
5.1 SCOPE. The parties hereto agree that during the period that Xxxxx
is the owner, either directly or beneficially through his designee, of the ACC
Shares, and for a period of two (2) years after Xxxxx ceases to be the owner of
the ACC Shares, either directly or beneficially through his designee, Xxxxx
shall not, directly or indirectly, either as an employee, consultant, agent,
principal, shareholder, corporate officer, director, or in any other individual
or representative capacity engage in or render services to any similar type of
business at any location within the State of California.
5.2 CONSTRUCTION. The parties intend that the Covenant Not To Compete
contained in this Article shall be construed as a series of separate covenants.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms of the covenant contained in said paragraphs. If, in any
judicial proceeding, a court shall refuse to enforce any such separate
covenants, such unenforceable covenant shall be deemed eliminated from these
provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
5.3 ENFORCEMENT. The parties agree that a violation by Xxxxx of any
covenant contained in this Article will cause such damage to ACC as will be
irreparable, and that ACC shall be entitled, as a matter of right, to any
injunction from any court of competent jurisdiction restraining any further
violation of said covenants by Xxxxx. Such right to injunctive remedies shall be
in addition to and cumulative with any other rights and remedies ACC may have
pursuant to this Article or law, including specifically the recovery of monetary
damages, whether compensatory or punitive. The parties acknowledge and agree
that the covenants and agreements contained herein are minimum and reasonable in
scope as to both area and time, and are necessary to protect the legitimate
interests of ACC. Xxxxx hereby waives any requirement for securing or posting a
bond in connection with the obtaining of injunctive or other equitable relief by
ACC hereunder.
ARTICLE 6
MISCELLANEOUS
6.1 EXPENSES. Except as otherwise specifically provided for herein,
whether or not the transactions contemplated hereby are consummated, each of the
parties hereto shall bear all taxes of any nature (including, without
limitation, income, franchise, transfer and sales taxes) and all fees and
expenses relating to or arising from its compliance with the various provisions
of this Agreement and such party's covenants to be performed hereunder, and
except as otherwise specifically provided for herein, each of the parties hereto
agrees to pay all of its own expenses (including, without limitation, attorneys
and accountants' fees and printing expenses) incurred in connection with this
Agreement, the transactions contemplated hereby, the negotiations leading to the
15
same and the preparations made for carrying the same into effect, and all such
taxes, fees and expenses of the parties hereto shall be paid prior to Closing.
6.2 NOTICES. Any notice, request, instruction or other document
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telegram, facsimile, or delivered or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the following addresses:
TO ACC:
American Custom Components, Inc.
0000 X. XxxXxxxxx Xxxx.
Xxxxx Xxx, XX 00000
Attn: Xxxxxx Xxxx Walk
Facsimile No.: 000-000-0000
with a copy to:
The Law Offices of M. Xxxxxxx Xxxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: M. Xxxxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
TO THE XXXXXXXXXXXX XX X0:
Xxxxx Xxxxx
00000 Xxxxx Xxxxxx
Xxx Xxxx Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Lassleben & Xxxxxx, LLP
00000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: J. Xxxxxxxx Xxxxxxxxxxx
Facsimile No.: 000-000-0000
The persons and addresses set forth above may be changed from time to
time by a notice sent as aforesaid. If notice is given by delivery in accordance
with the provisions of this Section, said notice shall be conclusively deemed
given at the time of such delivery. If notice is given by mail in
16
accordance with the provisions of this Section, such notice shall be
conclusively deemed given forty-eight (48) hours after deposit thereof in the
United States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed given at
the time that the telegraphic agency shall confirm delivery thereof to the
addressee.
6.3 ENTIRE AGREEMENT. This Agreement together with the schedules and
exhibits hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings related to the
subject matter hereof. No understanding, promise, inducement, statement of
intention, representation, warranty, covenant or condition, written or oral,
express or implied, whether by statute or otherwise, has been made by any party
hereto which is not embodied in this Agreement, or in the Schedule 1 or exhibits
hereto or the written statements, certificates, or other documents delivered
pursuant hereto or in connection with the transactions contemplated hereby, and
no party hereto shall be bound by or liable for any alleged understanding,
promise, inducement, statement, representation, warranty, covenant or condition
not so set forth.
6.4 SURVIVAL OF REPRESENTATIONS. All statements of fact (including
financial statements) contained in the Schedule, the exhibits, the certificates
or any other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, shall be deemed
representations and warranties by the respective party hereunder. All
representation, warranties agreements and covenants hereunder shall survive the
Closing and remain effective regardless of any investigation or audit at any
time made by or on behalf of the parties or of any information a party may have
in respect thereto. Consummation of the transactions contemplated hereby shall
not be deemed or construed to be a waiver of any right or remedy possessed by
any party hereto, notwithstanding that such party knew or should have known at
the time of Closing that such right or remedy existed.
6.5 INCORPORATED BY REFERENCE. The Schedule, the exhibits and all
documents (including, without limitation, all financial statements) delivered as
part hereof or incident hereto are incorporated as a part of this Agreement by
reference.
6.6 REMEDIES CUMULATIVE. No remedy herein conferred upon Purchaser is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
6.7 EXECUTION OF ADDITIONAL DOCUMENTS. Each party hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and take
all such other actions as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.
6.8 FINDERS' AND RELATED FEES. Each of the parties hereto is
responsible for, and shall indemnify the other against, any claim by any third
party to a fee, commission, bonus or other remuneration arising by reason
17
of any services alleged to have been rendered to or at the instance of said
party to this Agreement with respect to this Agreement or to any of the
transactions contemplated hereby.
6.9 GOVERNING LAW. This Agreement has been negotiated and executed in
the State of California and shall be construed and enforced in accordance with
the laws of such state.
6.10 FORUM. Each of the parties hereto agrees that any action or suit
which may be brought by any party hereto against any other party hereto in
connection with this Agreement or the transactions contemplated hereby may be
brought only in a federal or state court in Orange County, California.
6.11 ARBITRATION. If a dispute or claim shall arise between the parties
with respect to any of the terms or provisions of this Agreement, or with
respect to the performance by any of the parties under this Agreement, then the
parties agree that the dispute shall be arbitrated in Orange County, California,
before a single arbitrator, in accordance with the rules of either the American
Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services,
Inc./Endispute ("JAMS/Endispute"). The selection between AAA and JAMS/Endispute
rules shall be made by the claimant first demanding arbitration. The arbitrator
shall have no power to alter or modify any express provisions of this Agreement
or to render any award which by its terms affects any such alteration or
modification. The parties to the arbitration may agree in writing to use
different rules and/or arbitrator(s). In all other respects, the arbitration
shall be conducted in accordance with Part III, Title 9 of the California Code
of Civil Procedure. The parties agree that the judgment award rendered by the
arbitrator shall be considered binding and may be entered in any court having
jurisdiction as stated in Paragraph 5.10 of this Agreement. The provisions of
this Paragraph shall survive the termination of this Agreement.
6.12 BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, legal representatives and assigns.
6.13 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. In making proof of this Agreement, it shall not be
necessary to produce or account for more than one such counterpart.
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first written hereinabove.
AMERICAN CUSTOM COMPONENTS, INC.
/S/ XXXXXX XXXX WALK
---------------------------------
By: Xxxxxx Xxxx Walk
Its: President
K5 PLASTICS, INC.
/S/ XXXXX XXXXX
---------------------------------
By: Xxxxx Xxxxx
Its: President
/S/ XXXXX XXXXX
---------------------------------- /S/ XXXXX XXXXX
XXXXX XXXXX, individually -----------------------------
XXXXX XXXXX, individually
/S/ XXXXXXXXX X. XXXXXX
---------------------------------- /S/ XXXXXXX X. XXXXX
XXXXXXXXX X. XXXXXX, individually -----------------------------
XXXXXXX X. XXXXX, individually
/S/ XXXXXXXX XXXXXXXXX
----------------------------------
XXXXXXXX XXXXXXXXX, individually
19
EXHIBIT "F"
K5 FINANCIAL STATEMENTS
20
SCHEDULE 2.1.7
CHANGES
NONE.
21
SCHEDULE 2.1.8
TAXES
NONE.
22
SCHEDULE 2.1.9
DISPUTES AND LITIGATION
NONE.
23
