MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
TMCI ELECTRONICS, INC.
TMCI/TRINITY ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
TMCI ELECTRONICS, INC.
TRINITY ELECTRONICS, INC.
AND
XXXXXXX XXXXXXX
TABLE OF CONTENTS
TO
MERGER AGREEMENT AND PLAN OF REORGANIZATION
MERGER AGREEMENT AND PLAN OF REORGANIZATION
Article I. Definitions 1
Article II. Agreement to Merge 5
Article III. Representations and Warranties of the Target
and the Shareholder 9
Article IV. Representations and Warranties of the Acquiror 17
Article V. Conditions Precedent to the Merger 20
Article VI. Closing 22
Article VII. Post-Merger Covenants 22
Article VIII. Survival; Indemnification 24
Article IX. Miscellaneous 27
EXHIBITS AND SCHEDULES
Exhibit 2.2(a) - Articles of Incorporation of Subsidiary
Exhibit 2.2(b) - Bylaws of Subsidiary
Exhibit 2.3(b)(ii)A -TMCI Note to Xxxxxxx XxXxxxx
Exhibit 2.3(b)(ii)B - Guaranty
Exhibit 2.3(b)(ii)C - Deed of Trust
Exhibit 2.3(b)(iv) - Escrow Agreement
Exhibit 3.8 - Unaudited Financial Statements
Exhibit 3.9 - Trinity Note to Xxxxxxx XxXxxxx
Exhibit 3.17-1 - Leases
Exhibit 3.17-2 - Amendments to Leases
Exhibit 3.22 - Employee Benefit Plans
Exhibit 5.1(b) - Employment Agreement
Exhibit 5.1(e) - Consent of Spouse
Exhibit 5.1(f) - Opinion of Target's Counsel
Exhibit 5.2(d) - Opinion of Counsel to Acquiror
Exhibit 6.1(c)-1 - Executed Agreement of Merger
Exhibit 6.1(c)-2 - Executed Certificate of Approval of Agreement of Merger
Schedule 3.3 - Target's Debt
Schedule 3.5 - No Conflict
Schedule 3.10 - No Material Adverse Change
Schedule 3.12 - Material Contracts
Schedule 3.13 - Customers and Sales
Schedule 3.15 - Tangible Property
Schedule 3.17 - Real Property
Schedule 3.18 - Accounts Receivable
Schedule 3.19 - Insurance Policies
Schedule 3.21 - Litigation
Schedule 3.23 - Entire Business
Schedule 3.25 - Compliance with Laws
Schedule 4.9 - Acquiror Litigation
MERGER AGREEMENT AND PLAN OF REORGANIZATION
This Merger Agreement and Plan of Reorganization (this "Agreement"),
is entered into effective October 1, 1997 (the "Effective Date"), by and among
TMCI Electronics, Inc., a Delaware corporation (the "Acquiror"), the Acquiror's
wholly-owned subsidiary TMCI/Trinity Acquisition Corp., a California
corporation (the "Subsidiary"), Trinity Electronics, Inc., a California
corporation (the "Target"), and Xxxxxxx XxXxxxx (the "Shareholder")
(collectively the "Parties").
AGREEMENT
The Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
"Acquiror" has the meaning specified in the first paragraph of this
Agreement.
"Acquiror's Basket Amount" has the meaning specified in Section 8.2.
"Acquiror's Counsel" has the meaning specified in Section 5.1(f).
"Act" has the meaning specified in Section 2.5(a).
"Action or Proceeding" means any action, suit, proceeding, claim
threatened, pending, or filed or arbitration by any Person or any investigation
or audit by any Governmental or Regulatory Body.
"Affiliate" with respect to any Person, means any other Person
controlling, controlled by or under common control with such Person, except
that the Acquiror and the Target shall not be deemed to be affiliates of each
other after the Merger.
"Agreement" means this Merger Agreement and Plan of Reorganization.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has
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the same home as such Person or any child or sibling of such Person or such
Person's spouse.
"Benefits" has the meaning specified in Section 7.1(b)(ii).
"best knowledge", "knowledge" or words to that effect shall mean, as
to any Person, to the best knowledge of such Person after due inquiry and
investigation with Target's personnel, accountants, and attorneys.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
conditions of (financial or other), results of operations and assets and
properties of such Person, including without limitation, financial statements,
Tax Returns and related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies, minute books,
stock certificates and books, stock transfer ledgers, contracts and other
agreements, licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"Business Day" means those days as defined in California Civil Code
Section 9.
"Cash Payment" has the meaning specified in Section 2.3(b)(i).
"Claim Notice" has the meaning specified in Section 8.5(a).
"Closing" has the meaning specified in Section 6.1.
"Closing Date" has the meaning specified in Section 6.1.
"Common Stock" has the meaning specified in Section 2.3(b)(ii).
"Confidential Target Information" has the meaning specified in Section
7.1(a)(ii).
"Contracts and other Agreements" means all executory contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, mortgages, franchises, licenses, commitments or other legally binding
arrangements which pertain to the Target.
"Delivery Date" has the meaning specified in Section 2.3(b)(iv).
"Demotion" has the meaning specified in Section 2.3(b)(ii).
"Disability" means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which has been in existence for ninety (90) days and can be expected to result
in death or can be expected to last for a continuous period of not less than
twelve (12) months. An individual shall not be considered permanently and
totally disabled unless the individual furnishes proof of the existence of the
disability in such form and manner and
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at such times as the Acquiror may reasonably require, provided, however, that
the determination by the Acquiror that any individual has a Disability shall
not be an acknowledgement by the Acquiror that the individual is "disabled"
within the meaning of the Americans with Disabilities Act and the provision of
benefits to a person who the Acquiror finds to have a disability for purposes
of this agreement shall not in any way limit the ability of the Acquiror to
contest or dispute that the individual is not "disabled" within the mean of the
Americans with Disabilities Act.
"document or other papers" means any document, agreement, instrument,
certificate, notice, consent, affidavit, letter, telegram, telex, statement,
schedule (including any Schedule to this Agreement) or exhibit (including any
Exhibit to this Agreement).
"Effective Date" has the meaning specified in the first paragraph of
this Agreement.
"Employment Agreement" has the meaning specified in Section 2.3(b)(v).
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings,
and charges thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"Escrow Agent" has the meaning specified in Section 2.3(b)(iv).
"Escrow Agreement" has the meaning specified in Section 2.3(b)(iv).
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Governmental or Regulatory Body" means court, tribunal, arbitrator or
any government or political subdivision thereof, whether federal, state,
county, local or foreign, or any agency, authority, official or instrumentality
of any such government or political subdivision.
"Indemnified Party" has the meaning specified in Section 8.5.
"Indemnifying Party" has the meaning specified in Section 8.5.
"Inventory" has the meaning specified in Section 3.14
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"IRS" means the Internal Revenue Service.
"JAMS" has the meaning specified in Section 9.15.
"Law" means any law, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Body.
"Liability" or "Liabilities" means any direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, xxxxxx or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise.
"Lien" means any lien, pledge, hypothecation, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Loss" or "Losses" has the meaning specified in Section 8.2.
"Material Adverse Effect" means, in the case of any Person, any change
or changes or effect or effects that individually or in the aggregate are or
may reasonably be expected to be materially adverse to (i) the assets,
properties, business, operations, income, prospects or condition (financial or
otherwise) of such Person or the transactions contemplated by this Agreement or
(ii) the ability of such Person to perform its obligations under this
Agreement.
"Material Contracts" has the meaning specified in Section 3.12.
"Merger" has the meaning specified in Section 2.1.
"Merger Date" has the meaning specified in Section 2.1.
"Net Equity" has the meaning specified in Section 3.2(c).
"Note Payment" has the meaning specified in Section 2.3(b)(ii).
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Body, in each case whether preliminary or
final.
"Per-Share Value" has the meaning specified in Section 2.3(b)(iii).
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental or Regulatory Body or other
entity.
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"Promissory Note" has the meaning specified in Section 2.3(b)(iv).
"Purchase Price" has the meaning specified in Section 2.2.
"Relocation" has the meaning specified in Section 2.3(b)(iii).
"Restrictive Covenants" has the meaning specified in Section 7.1(b).
"Rule 144 Date" has the meaning specified in Section 2.6.
"Shareholder" has the meaning specified in the first paragraph of this
Agreement.
"Shareholder's Basket Amount" has the meaning specified in Section 8.2.
"Shares" has the meaning specified in Section 3.2(a).
"Subsidiary" has the meaning specified in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning specified in Section 2.1.
"Tangible Property" has the meaning specified in Section 3.15.
"Target" has the meaning specified in the first paragraph of this
Agreement.
"Target's Counsel" has the meaning specified in Section 5.1(e).
"Target's Debt" has the meaning specified in Section 3.3.
"Tax Return" means any return, report, information return, or other
document (including any related or supporting information) filed or required to
be filed with any federal, state, local or foreign governmental entity or other
authority in connection with the determination, assessment or collection of any
Tax (whether or not such Tax is imposed on the Target) or the administration of
any laws, regulations or administrative requirements relating to any Tax.
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign taxing authority,
whether disputed or not, including, without limitation, income, capital,
estimated, excise, property, sales, transfer, withholding employment, payroll,
and franchise taxes and such terms shall include any interest, penalties or
additions attributable to or imposed on or with respect to such assessments.
"Unaudited Financial Statements" has the meaning specified in Section
3.8.
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ARTICLE II
AGREEMENT TO MERGE
2.1 Agreement to Merge. On or before December 22, 1997 (the "Merger
Date"), a merger (the "Merger") will take place whereby the Target will merge
with and into the Subsidiary, and the Subsidiary will be the surviving
corporation. (The term "Surviving Corporation" appearing in this Agreement
denotes the Subsidiary after consummation of the Merger.) The Surviving
Corporation will succeed to all of the Target's rights, assets, liabilities,
and obligations in accordance with the California General Corporation Law. It
is intended by the Parties that the Merger shall constitute a reorganization
within the meaning of Section 368(a) of the Code. Without limiting the
generality of the foregoing, the Surviving Corporation shall be responsible for
all income taxes of Target and/or Shareholder on earnings of the Target that
accrued on or after the Effective Date.
2.2 Governance of the Surviving Corporation. On the Merger Date:
(a) Articles of Incorporation. The Articles of Incorporation of
the Subsidiary in the form attached hereto as Exhibit 2.2(a) will be the
Articles of Incorporation of the Surviving Corporation. From and after the
Merger Date, said Articles of Incorporation, as they may be amended from time
to time as provided by law, will be, and may be separately certified as, the
Articles of Incorporation of the Surviving Corporation.
(b) Bylaws. The Bylaws of the Subsidiary attached hereto as
Exhibit 2.2(b) will be the Bylaws of the Surviving Corporation until they are
thereafter duly altered, amended, or repealed.
(c) Directors and Officers. The directors of the Subsidiary on
the Merger Date will be the directors of the Surviving Corporation. They will
hold office until their successors have been elected and qualified. The
officers of the Target on the Merger Date will be the officers of the Surviving
Corporation. Each will hold office subject to the Bylaws and the pleasure of
the directors of the Surviving Corporation.
2.3 Conversion of Shares. On the Merger Date:
(a) Each share of the Subsidiary's common stock issued and
outstanding immediately before the Merger Date will be converted into one share
of common stock of the Surviving Corporation.
(b) Each share of the Target's common stock issued and
outstanding immediately before the Merger Date will by virtue of the merger and
without action on the part of the Shareholder be converted into the right to
receive from and to be paid by the Acquiror the following amounts
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divided equally among the outstanding shares of the Target:
(i) Cash Payment. The amount of one million dollars
($1,000,000) (the "Cash Payment").
(ii) Note Payment. The amount of one million dollars
($1,000,000) evidenced by a note in the form attached as Exhibit 2.3(b)(ii)(A)
hereto (the "Note Payment"). The Note Payment will be guaranteed by Xxxxxxx
Xxxxx pursuant to the guarantee attached as Exhibit 2.3(b)(ii)(B). The
guarantee will be secured as set forth in the Deed of Trust attached hereto as
Exhibit 2.3(b)(ii)(C).
(iii) Shares of Acquiror's Common Stock. Shares of the
Acquiror's common stock equal to two million dollars ($2,000,000) computed as
follows: that number of shares of the Acquiror's common stock determined by
dividing the agreed per-share value of Acquiror's common stock into two million
dollars ($2,000,000) (the "Common Stock"). The agreed per-share value of the
Common Stock shall be the average of the closing prices of the Common Stock
listed in The Wall Street Journal for the ten (10) trading days ending
immediately prior to September 4, 1997 (the "Per-Share Value"). The number of
shares of Acquiror's Common Stock that are to be issued shall be reduced by the
adjustment, if any, described in Section 8.2 hereof that is to be made if Net
Equity is less than Two Hundred Ninety Five Thousand Dollars ($295,000).
(iv) Common Stock Holdback. As security for the Target's and
the Shareholder's representations and warranties set forth in Article III and
the Target's and the Shareholder's indemnities set forth in Article VIII, but
without limitation of their liabilities under those articles, the Acquiror
shall retain, and transfer the Common Stock to an escrow agent of the
Acquiror's choosing (the "Escrow Agent") pursuant to the Escrow Agreement (the
"Escrow Agreement") attached hereto as Exhibit 2.3(b)(iv). The Common Stock
held in escrow shall be delivered to the Shareholder as follows: thirty-five
percent (35%) of the Common Stock shall be delivered on the day one (1) year
after the Merger Date, an additional twenty-five percent (25%) of the Common
Stock shall be delivered on the day two (2) years after the Merger Date, an
additional twenty-five percent (25%) of the Common Stock shall be delivered on
the day three (3) years after the Merger Date, and the remaining fifteen
percent (15%) of the Common Stock shall be delivered on the day four (4) years
after the Merger Date (each such date hereinafter being referred to as a
"Delivery Date"). The Shareholder shall have full voting, dividend and other
distribution rights for the Common Stock when it is in escrow. The Common Stock
so held in escrow shall be subject to the following reduction in the number of
shares: if the Target or the Shareholder become liable to the Acquiror in any
amount under Article III or Article VIII, the amount of Common Stock to be
delivered shall be reduced by that number of shares determined by dividing the
Per-Share Value into the aggregate amount that the Target and the Shareholder
are obligated to indemnify the Acquiror Excluding any Common Stock subject to
the reduction provided for in the preceding sentence, the Acquiror shall
reimburse the Shareholder for any difference between the market value of Common
Stock on the Merger Date, as determined by multiplying the number of shares of
Common Stock issued on the Merger Date by the Per-Share Value, and the market
value of the Common Stock to
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be delivered on any Delivery Date under this Section 2.3(b)(iv) or 2.3(b)2(v),
as determined by multiplying the number of shares of Common Stock issued on the
Merger Date by the average of the closing prices of the Acquiror's common stock
listed in The Wall Street Journal for the ten (10) trading days immediately
prior to any Delivery Date, such reimbursement to be made in the form of a
promissory note (the "Promissory Note") in the principal amount of such
difference, bearing ten percent (10%) interest per annum, payable in equal
monthly installments of principal and interest for a term of five (5) year
period commencing on the Delivery Date, or alternatively, at the sole and
absolute discretion of the Acquiror, such reimbursement may be made in the form
of that number of shares of the Acquiror's common stock equal to the amount of
such difference as determined by dividing the amount of such difference by the
average of the closing prices of the Acquiror's common stock listed in The Wall
Street Journal for the ten (10) trading days ending three (3) days immediately
prior to the Delivery Date, such amount to be rounded to the nearest whole
number.
(v) Forfeiture of Common Stock Upon Cessation of Employment
of the Shareholder. If the Shareholder's employment, as set forth in the
Employment Agreement, of equal date hereto, by and between the Shareholder and
the Surviving Corporation (the "Employment Agreement"), by the Surviving
Corporation is terminated for cause or malfeasance as defined in Section 9.1 of
the Employment Agreement, or voluntarily at the Shareholder's election, within
four (4) years of the Merger Date, any Common Stock that has not been delivered
from escrow as set forth in Section 2.3(c)(iii) above shall be forfeited;
provided, however, that (1) in the event of the death of the Shareholder, the
Common Stock in Escrow shall not be forfeited and the Aquiror shall promptly
deliver to the estate of the deceased Shareholder all of the Shares then held
in escrow; and (2) in the event of any Disability of the Shareholder, one half
of the shares of Common Stock in Escrow shall not be forfeited and the Acquiror
shall promptly deliver to the Shareholder one half of the Shares then held in
escrow and the remaining Shares held in escrow shall be forfeited. For the
purposes of the preceding sentence voluntary termination shall not include
termination, at the Shareholder's election as a result of (1) a relocation
related to the Shareholder's employment with the Surviving Corporation
requiring a change of the principal place of business at which the Shareholder
performs substantially all of his services outside of the California counties
of San Mateo, Santa Xxxxx, Santa Xxxx or the southern part of Contra Costa, for
a period lasting more than ninety (90) consecutive days (a "Relocation"); or
(2) a material reduction of the Shareholder's duties as an officer of the
Surviving Corporation or other material change in the principal nature of the
Shareholder's roles in serving as the chief executive officer and general
manager of the Target, not otherwise consented to by the Shareholder (a
"Demotion"). If the Shareholder's employment by the Surviving Corporation is
terminated without cause, or as a result of a Relocation, or a Demotion, the
Common Stock will be delivered promptly to the Shareholder. Each of the dates
upon which shares of Common Stock are to be delivered to the Shareholder under
this Section 2.3(b)(v) is also referred to herein as a "Delivery Date".
2.4 Revenues and Expenses; Effective Date. All revenues received by
the Target and all expenses incurred by the Target after the Effective Date,
will be assigned to the Surviving Corporation and shall be allocated to the
Surviving Corporation for all purposes, including federal and state taxation.
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2.5 Registration Rights.
(a) Notice of Registration. If, but without any obligation to do
so, the Acquiror proposes to register any of its stock or other securities
under the Securities Act of 1933, as amended (the "Act") in connection with the
public offering of such securities solely for cash, other than (i) a
registration relating solely to the sale of securities to employees of the
Acquiror or any Affiliate of the Acquiror pursuant to a stock option, stock
purchase, or similar plan, (ii) a registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Common Stock, or (iii) a
registration relating solely to U.S. Securities and Exchange Commission Rule
145, the Acquiror shall each such time,
(1) promptly give the Shareholder written notice of the
registration; and
(2) include in the registration and in any underwriting
involved therein any of the Common Stock specified in a written request or
requests of the Shareholder made within thirty (30) days after the written
notice was given by the Acquiror to the Shareholder.
(b) Underwriting Requirements. If the registration of which the
Acquiror gives notice pursuant to Section 2.5(a) above is for a registered
public offering involving an underwriting, the Acquiror shall so advise the
Shareholder as part of the written notice. In connection with any offering
involving an underwriting of shares initiated by the Acquiror or by other
shareholders of the Acquiror having registration rights, the Acquiror shall not
be required under Section 2.5(a) to include any of the Common Stock in the
underwriting unless the Shareholder accepts the terms of the underwriting as
agreed upon between the Acquiror and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Acquiror or the Acquiror's
shareholders demanding such registration, subject to apportionment among
selling shareholders as provided in the final sentence of this Section 2.5(b).
If the total amount of securities that all shareholders of the Acquiror request
to be included in such offering, when combined with the securities being
offered by the Acquiror or the Acquiror's shareholders demanding such
registration, exceeds the amount of securities that the underwriters reasonably
believe will not jeopardize the success of the offering, then the amount of
shares to be sold by each selling shareholders shall be allocated, as nearly as
is practicable, to each selling shareholder in proportion to the amount of
Common Stock held by each selling shareholder at the time of the filing of the
Registration Statement. The securities so included pursuant to piggyback
registration rights shall be apportioned among the selling shareholders,
including the Shareholder, according to the total number of securities which
each selling shareholder shall have elected to include in the registration or
in such other proportions as shall mutually be agreed to by the selling
shareholders.
2.6 Guaranty of Per-Share Value. The Acquiror shall reimburse the
Shareholder for any difference between the market value of Common Stock on the
Merger Date, as determined by multiplying the number of shares of Common Stock
issued on the Merger Date by the Per-Share Value, and the market value of the
Common Stock on the date on which any of the Common Stock
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becomes freely tradable without restriction under Rule 144 promulgated under
the Act (the "Rule 144 Date"), as determined by multiplying the number of
shares of Common Stock issued on the Merger Date by the average of the closing
prices of the Acquiror's common stock listed in The Wall Street Journal for the
ten (10) trading days immediately prior to any Rule 144 Date, such
reimbursement to be made in the form of a promissory note (the "Promissory
Note") in the principal amount of such difference, bearing ten percent (10%)
interest per annum, payable in equal monthly payments of principal and interest
over a five (5) year period commencing on any Rule 144 Date, or alternatively,
at the sole and absolute discretion of the Acquiror, such reimbursement may be
made in the form of that number of shares of the Acquiror's common stock equal
to the amount of such difference as determined by dividing the amount of such
difference by the average of the closing prices of the Acquiror's common stock
listed in The Wall Street Journal for the ten (10) trading days ending three
(3) days immediately prior to any Rule 144 Date, such amount to be rounded to
the nearest whole number.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET AND THE
SHAREHOLDERS
The Target and the Shareholder, jointly and severally, represent and
warrant to the Acquiror and the Subsidiary with the knowledge that the Acquiror
and the Subsidiary are relying on such representations and warranties in
entering into this Agreement, and that the statements contained in this Article
III are true, complete, and correct as of the date of this Agreement.
3.1 Organization and Qualification. The Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to (a) enter
into this Agreement and to perform its obligations hereunder, (b) own, lease
and operate its properties and assets used by the Target as they are now owned,
leased and operated and (c) carry on its business as now presently conducted.
The Target is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification necessary, except where the failure to do so would not have a
Material Adverse Effect after the Effective Date.
3.2 Stock of Target.
(a) Capital Structure. The authorized capital stock of the Target
consists solely of one hundred thousand (100,000) shares of common stock no par
value, of which only fifteen thousand (15,000) shares (the "Shares") are issued
and outstanding. All the Shares are validly issued, fully paid, and
nonassessable, and such shares have been issued in full compliance with all
federal and state securities laws. There are no outstanding subscriptions,
options, rights, warrants, convertible equity or debt, or other agreements or
commitments obligating the Target to issue or to transfer from treasury any
additional shares of its capital stock of any class.
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(b) Title to Shares. The Shareholder is the sole owner,
beneficially and of record, of all right, title, and interest to the Shares
free and clear of all liens, encumbrances, security agreements, equities,
options, claims, charges, and restrictions. The Shareholder has full power to
transfer the Shares to the Acquiror without obtaining the consent or approval
of any other person or governmental authority.
(c) Net Equity. Net Equity (as defined in the last sentence of
this subsection) shall be at least two hundred ninety-five thousand dollars
($295,000), excluding the distributions of retained earnings and amounts to be
used for payment of income taxes described in Section 3.9 below. Net Equity
shall be computed in a manner consistent with the Target's Unaudited Financial
Statements, attached hereto as Exhibit 3.8. Net Equity shall be defined as the
book value of the total assets (exclusive of good will), less total
liabilities.
3.3 Target's Debt. The Target's indebtedness from borrowing is set
forth on Schedule 3.3 (the "Target Debt"). The Target has no other indebtedness
from borrowing except as set forth on Schedule 3.3.
3.4 Validity and Execution of Agreement. The Target and the
Shareholder have the full legal right, capacity and power (and the Target has
all requisite corporate authority and approval) required to enter into, execute
and deliver this Agreement and to perform fully their obligations hereunder.
This Agreement constitutes the valid and binding obligation of the Target and
the Shareholder and is enforceable against them in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity.
3.5 No Conflict. Except as set forth on Schedule 3.5, neither the
execution and delivery of this Agreement by the Target and the Shareholder nor
the performance by the Target and the Shareholder of the transactions
contemplated hereby will: (a) violate or conflict with any of the provisions of
any agreement to which the Target, or the Shareholder, are a party; (b) except
as would not have a Material Adverse Effect after the Effective Date on the
Target, the Acquiror, or the Subsidiary, violate, conflict with, result in the
acceleration of, or entitle any party to accelerate the maturity or the
cancellation of the performance of any obligation under, or result in the
creation or imposition of any lien in or upon any of the Target's assets or
constitute a default (or an event which might, with the passage of time or the
giving of notice, or both, constitute a default) under any mortgage, indenture,
deed of trust, lease, contract, loan or credit agreement, license or other
instrument to which the Target or the Shareholder is a party or by which its or
any of its properties or assets may be bound or affected; or (c) except as
would not have a Material Adverse Effect after the Effective Date on the
Target, or the Acquiror, violate or conflict with any provision of any Law or
Order applicable to the Target or the Shareholder or require any consent or
approval of or filing or notice with any Governmental or Regulatory Body.
3.6 Books and Records. The Records of the Target as supplied to the
Acquiror and the Subsidiary are true, complete, and correct in all material
respects.
11
3.7 Certificate of Incorporation and Bylaws. The Target has heretofore
delivered to Acquiror true, correct, complete and current copies of its
Articles of Incorporation and Bylaws or similar governing documents of the
Target as in full force and effect on the date hereof.
3.8 Unaudited Financial Statements. The unaudited financial statements
(the "Unaudited Financial Statements") of the Target dated September 30, 1997,
attached hereto as Exhibit 3.8 were prepared in accordance with GAAP and GAAS
consistently applied for the periods covered thereby. Subject to Section 3.14,
inventory is accurately reflected on the Financial Statements. The Unaudited
Financial Statements as a whole accurately reflect the financial condition of
the Target as of September 30, 1997.
3.9 No Dividends. The Target has not declared, set aside, or paid any
dividend or made any distribution in respect to the Shares within the one
hundred eighty (180) days preceding the Effective Date, other than the
distribution of the amount of four hundred forty-one thousand dollars
($441,000) reflected as retained earnings on the Target's Unaudited Financial
Statements and a note for Two Hundred Ninety Thousand Dollars ($290,000) for
payment of income taxes on earnings of the Target accrued through September 30,
1997, a copy of which is attached hereto as Exhibit 3.9.
3.10 No Material Adverse Change. Except as set forth on Schedule 3.10,
since the date of the Unaudited Financial Statements there has been no material
adverse change in the assets, properties, business, operations, income or
condition (financial or otherwise) of the Target, nor is any such change
threatened, nor has there been any damage, destruction or loss which could have
a Material Adverse Effect after the Effective Date on the Target, the Acquiror,
or the Surviving Corporation, whether or not covered by insurance.
3.11 Absence of Undisclosed Liabilities. To the best of the Target's
knowledge, and to the best of the Shareholder's knowledge, the Target has no
debt, liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not
reflected or reserved against in the Target's balance sheet included in the
Unaudited Financial Statements, except for (1) all debts, liabilities, and
obligations incurred after that date were incurred in the ordinary course of
business and are usual and normal in amount both individually and in the
aggregate and (2) those that are not required by generally accepted accounting
principles to be included in a balance sheet.
3.12 Contracts and Other Agreements. True, complete, and correct
copies of all contracts, the termination of which, in any manner whatsoever,
could have a Material Adverse Effect on the operations of the Target (the
"Material Contracts") have been delivered to the Acquiror except as indicated
in Schedule 3.12. A list of all Material Contracts are attached hereto as
Schedule 3.12. All of the Material Contracts are valid, subsisting, in full
force and effect and binding in accordance with their terms upon the Target and
the Target has satisfied in full or provided for all of its liabilities and
obligations thereunder requiring performance prior to the date hereof in all
material respects, is not in default under any of them, nor does any condition
exist that with notice or lapse of time or both would constitute such a
default. To the best of the Target's knowledge and to the best
12
of the Shareholder's knowledge, no other party to any such Material Contract is
in default thereunder, nor does any condition exist that with notice or lapse
of time or both would constitute such a default. Except as separately
identified on Schedule 3.12, no approval or consent of any Person is needed for
the Material Contracts to continue to be in full force and effect, and all
rights thereunder remain unaltered. To the best of the Target's knowledge and
to the best of the Shareholder's knowledge, the Target is not a party to any
employment or consulting agreements.
3.13 Customers and Sales. Schedule 3.13 is a correct and current list
of all customers of the Target together with summaries of the sales made to
each customer during the most recent calendar year. Except as indicated on
Schedule 3.13, to the best of the Target's knowledge, and to the best of the
Shareholder's knowledge, without inquiry of the Target's customers, none of the
Target's customers intend to cease doing business with the Target or materially
alter the amount of the business they are presently doing with the Target.
3.14 Inventory. Except for inventory costing in the aggregate no more
than ten thousand dollars ($10,000), the inventories of raw materials, work in
process, and finished goods (the "Inventory") as reflected on the Unaudited
Financial Statements, consist of items of a quality and quantity usable and
salable in the ordinary course of business by the Target. All items included in
the inventories are the property of the Target, except for sales made in the
ordinary course of business since the date of the balance sheet; for each of
these sales, either the purchaser has made full payment or the purchaser's
liability to make payment is reflected in the books of the Target. No items
included in the inventories have been pledged as collateral or are held by the
Target on consignment from others. The inventories shown on all the balance
sheets included in the Unaudited Financial Statements are based on quantities
determined by physical count or measurement, taken within the preceding 12
months, and are valued at the lower of cost (determined on a first-in,
first-out basis) or market value.
3.15 Tangible Property. Schedule 3.15 sets forth a true, complete,
correct and current list of all categories of tangible personal property (other
than Inventory and cash), including, without limitation, equipment, furniture,
leasehold improvements, fixtures, vehicles, structures, any related capitalized
items and other similar tangible property, in each case owned or leased by the
Target and material to the Target (collective, the "Tangible Property")
together with a description of all leases or subleases of Tangible Property to
which the Target is the lessor, sublessor, lessee or sublessee and all options
to purchase or sell the underlying property. To the best of Target and
Shareholder's knowledge, the Tangible Property is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
3.16 Intellectual Property. No patents, trademarks, or copyrights are
necessary for the conduct of the Target's business. No litigation is pending or
threatened, that challenges the Target's right to conduct its business without
such patents, trademarks, or copyrights, and no valid grounds exist for any
such claim.
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3.17 Real Property - Description. Schedule 3.17 to this Agreement is a
true, complete and correct legal description of each parcel of real property
leased to the Target. Schedule 3.17 contains a description of all buildings,
fixtures and other improvements located on the properties and a list of the
insurance policies issued to the Target for these properties. All the leases
listed in Schedule 3.17 are valid and in full force, and there does not exist
any default or event that with notice or lapse of time, or both, would
constitute a default under any of these leases. Attached as Exhibit 3.17-1 to
this Agreement are copies of all leases for each parcel of real property leased
to the Target. Attached as Exhibit 3.17-2 to this Agreement are copies of all
amendments to leases for each parcel of real property leased to the Target.
3.18 Accounts Receivable. Schedule 3.18 is a complete and accurate
schedule of the accounts receivable of the Target as reflected on the Unaudited
Financial Statements. These accounts receivable, and all accounts receivable of
the Target were created after that date and arose from valid sales in the
ordinary course of business. These accounts have been collected in full since
that date, or are collectible at their full amount, except for bad debt not to
exceed five thousand dollars ($5,000).
3.19 Insurance Policies. Schedule 3.19 is a description of all
insurance policies held by the Target concerning its businesses and properties.
All these policies are in the respective principal amounts set forth in
Schedule 3.19. The Target has maintained and now maintains (1) insurance on all
its assets and businesses of a type customarily insured, covering property
damage and loss of income by fire or other casualty, and (2) to the best of the
Target's and Shareholder's knowledge, adequate insurance protection against all
liabilities, claims, and risks against which it is customary to insure. The
Target is not in default with respect to payment of premiums on any such
policy. Except as set forth in Schedule 3.19, no claim is pending under any
such policy.
3.20 Tax Matters. All Tax Returns required to be filed with respect to
the Target have been timely filed and all such Tax Returns were correct and
complete in all respects. The Target has timely paid to the appropriate tax
authorities all Taxes due or claimed to be due from it by any Tax authority. No
adjustment relating to any Tax Return required to be filed with respect to the
Target has been proposed formally or informally by any Tax authority, and no
basis exists for any such adjustment. The Target is not currently the
beneficiary of any extension of time within which to file any Tax Return. There
are no liens for Taxes upon assets or properties of the Target. There is no
examination or proceeding pending or threatened by any tax authority relating
to the determination, assessment or collection of, or any delinquencies in
filing related to any Taxes of the Target. Notwithstanding anything contained
herein to the contrary contained herein, the Target shall not be deemed to be
in breach of this Section 3.20 if the breach of any of the statements contained
in this Section 3.20 does not have a Material Adverse Effect after the
Effective Date upon the Target, the Acquiror, or the Surviving Corporation. The
Target holds a valid California resale certificate.
3.21 Litigation. To the best of the Target's knowledge and to the best
of the Shareholder's knowledge, except as set forth on Schedule 3.21, there are
no outstanding Orders by which the Target, or any of its securities, assets,
properties or businesses, or the Shareholder, are bound.
14
Except as set forth on Schedule 3.21, there is no Action or Proceeding
threatened, pending, or filed (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against or affecting
the Target or any of its assets, properties or businesses, or the Shareholder,
which, if adversely decided, would have a Material Adverse Effect after the
Effective Date on the Target, the Acquiror, or Surviving Corporation, nor are
there any facts which are likely to give rise to any such Action or Proceeding,
which, if adversely decided, would have a Material Adverse Effect after the
Merger on the Surviving Corporation or the Acquiror.
3.22 ERISA. Except as disclosed on Exhibit 3.22, the Target has no
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended and the Internal Revenue
Code of 1986, as amended. As a result of the transactions contemplated by this
Agreement, the Acquiror shall have no liability with respect to any employee
pursuant to any employee benefit plan.
3.23 Entire Business. The Merger of the Target with and into the
Surviving Corporation pursuant to this Agreement will convey to the Surviving
Corporation the Target's entire business and all of the tangible and intangible
property used by the Target (whether owned, leased or held under license by the
Target, by any of the Target's Affiliates, Associates or by others, including,
without limitation, any of the assets of the Target) in connection with the
conduct of its business as heretofore conducted by the Target except for
changes in the ordinary course of business between the Effective Date and the
date of the Merger and the distributions discussed in Section 3.9. Except as
disclosed in Schedule 3.23, there are no material facilities, services, assets
or properties shared with any other Person which are used or useful to the
Target. There are no material facilities, services, assets or properties owned
by the Target or any third party that will not be conveyed at the Closing by
the execution of this Agreement, other than the retained earnings distributed
by the Target to the Shareholder as described in Section 3.9 above.
3.24 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Target directly
with Acquiror without the intervention of any person on behalf of the Target in
such manner as to give rise to any valid claim by any Person against Acquiror
for a finder's fee, brokerage commission, or similar payment. Any brokers or
finders retained by the Target shall be entitled to a fee only upon completion
of the transactions contemplated by this Agreement. The Target agrees that it
shall be solely responsible to pay the fees and costs of any broker or finder
which it has retained.
3.25 Compliance with Laws. To the best of the Target's knowledge, and
to the best of the Shareholder's knowledge, except as set forth in Schedule
3.25, the Target (a) is in compliance with all, and not in violation of any,
and has not received any claim or notice that it is not in compliance in any
material respect with, or that it is in violation in any material respect of,
any Law or Order to which the Target is subject and (b) has not failed to
obtain or to adhere to the requirements of any governmental permit, license,
registration and other governmental consent or authorization necessary in
connection with the Target's business, which failure would have a Material
Adverse Effect after the Effective Date on the Target, the Acquiror, or the
Surviving Corporation. The Target has advised
15
the Acquiror in writing of any proposed health or other law, rule or regulation
which could reasonably be expected to have a Material Adverse Effect on the
Surviving Corporation or the Acquiror on or which could reasonably be expected
to require substantial new capital investments by the Acquiror in the Surviving
Corporation.
3.26 Environmental, Health and Safety Laws.
(a) Each of the Target, and it's predecessors and Affiliates has
complied with all Environmental, Health and Safety Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply. Without limiting the generality of the preceding sentence, each of the
Target, and its predecessors and Affiliates has obtained and been in compliance
with all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in, all
Environmental, Health and Safety Laws.
(b) None of the Target or its Affiliates has any Liability (and
none of the Target, and its respective predecessors and Affiliates has handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that could form the
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of the Target
and its Affiliates giving rise to any Liability) for damage to any site,
location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual, or for any reason under
any Environmental, Health, and Safety Law.
(c) All properties and equipment used in the business of the
Target, and its predecessors and Affiliates have been and are free of asbestos,
PCBs, methylene chloride, trichloroethylene, 1,2-transdichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(d) Notwithstanding anything contained herein to the contrary,
the Target shall not be deemed to be in breach of this Section 3.26 if the
breach of any of the representations and warranties contained in Section
3.26(a), (b) and (c) does not have a Material Adverse Effect after the Merger
upon the Surviving Corporation or the Acquiror.
3.27 Restrictions on Common Stock; Investment Representations. The
Common Stock has not been qualified under the California Corporate Securities
Law of 1968, as amended (the "Blue Sky Law"), and has not been registered under
the federal Securities Act of 1933, as amended (the "Securities Act"), and when
issued to the Shareholder, will constitute "restricted securities" as that term
is defined in Rule 144, as promulgated under the Securities Act, and as such
may not be transferred except pursuant to an effective registration statement
filed under the Securities Act, or pursuant to a valid exemption from the
registration requirements of the Securities Act. The
16
following legend shall be placed upon the certificate or certificates
representing the Common Stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SHARES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") OR QUALIFIED UNDER THE
CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS AMENDED, OR
THE LAW OF ANY OTHER STATE OR NATION (THE "LAWS"). THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND CONSTITUTE
RESTRICTED SECURITIES FOR PURPOSES OF RULE 144. THE SHARES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED,
OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
AND QUALIFIED UNDER THE LAWS, OR IN THE OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THE
SHARES, SUCH OFFER, SALE, TRANSFER, PLEDGE, OR HYPOTHECATION
IS IN COMPLIANCE WITH THE ACT, THE LAWS, OR BOTH, AS THE
CASE MAY BE. THE SHARES ARE SUBJECT TO RESTRICTION ON
TRANSFER AND FORFEITURE PURSUANT TO A MERGER AGREEMENT AND
PLAN OF REORGANIZATION, EFFECTIVE OCTOBER 1, 1997.
The Acquiror may place a "stop transfer order" regarding the Common Stock with
its transfer agent as appropriate to comply with the requirements of this
Section 3.27. The Acquiror has no obligation, whatsoever, to register the
Common Stock under the Securities Act and has no present intention to so
register the Common Stock.
The Common Stock is being acquired by the Shareholder for investment
purposes only, solely for his own account, and without any present intention of
participating directly or indirectly in the distribution or resale of all or
any portion of the Common Stock then being acquired. The Shareholder has had
the opportunity to review and discuss with the Acquiror the documents provided
by the Acquiror pursuant to Section 3.28 below and has had the opportunity to
ask questions and make inquiries of representatives of the Acquiror regarding
the Acquiror's financial condition, assets and operations, and any material
changes in the Acquiror's affairs that are not disclosed in the documents
delivered pursuant to Section 3.28, and the Shareholder has received
satisfactory answers to such questions and inquiries. The Shareholder is
relying solely upon such review, investigations, and answers in making his
decision to invest in the Acquiror and represents he has thereby acquired all
of the information he believes necessary to make an informed decision to so
invest. The Shareholder has such knowledge and experience in business and
financial matters that it is capable of evaluating the merits and risks of
investing in the Shareholder and of protecting the Shareholder's own interest
in connection with the sale and purchase of the Common Stock. The Shareholder
is acquiring the Common Stock for the Shareholder's own account and not with a
view to or for sale
17
in connection with any distribution of the Common Stock. The offer and sale of
the Common Stock was not accomplished by the publication of any advertisement.
3.28 Financial Information. The Shareholder acknowledges that the
Acquiror has delivered to him its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996, and its Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1997. The Shareholder has had the opportunity to review
and discuss the above-referenced documents with the Acquiror and has had the
opportunity to ask questions and make inquiries of representatives of the
Acquiror regarding the Acquiror's financial condition, assets and operations,
and any material changes in the Acquiror's affairs that are not disclosed in
the documents delivered pursuant to this section, and the Shareholder has
received satisfactory answers to such questions and inquiries. The Shareholder
ac knowledges that he is relying solely upon such review, investigations, and
answers in making his decision to invest in the Acquiror and represents he has
thereby acquired all of the information he believes is necessary to make an
informed decision to so invest. The Shareholder hereby further represents that
he has such knowledge and experience in business and financial matters that he
is capable of evaluating the merits and risks of investing in the Acquiror and
of protecting his own interest in connection with the sale and purchase of the
Common Stock.
3.29 Residency. The Shareholder represents that he is a resident of
the State of California or is otherwise not a resident or citizen of the United
States.
3.30 Disclosure. None of the representations, warranties or covenants
contained in this Agreement, nor in any Schedule or Exhibit hereto contains or
will contain an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR AND THE SUBSIDIARY
The Acquiror and the Subsidiary represent and warrant to the Target
and the Shareholder with knowledge that the Target and the Shareholder are
relying upon such representations and warranties in entering into this
Agreement, and that the statements contained in this Article IV are true,
complete, and correct as of the date of this Agreement.
4.1 Organization of the Acquiror and the Subsidiary. The Acquiror is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to (a) enter into this Agreement and to perform its obligations
hereunder, (b) own, lease and operate its properties and assets as they are now
owned, leased and operated and (c) carry on its business as now conducted. The
Subsidiary is a corporation duly organized and validly existing and in good
standing under the laws of the State of California and has all requisite
corporate power and authority to (a) enter into this Agreement and to perform
its obligations hereunder, (b) own, lease and operate its properties and assets
as they are now owned,
18
leased and operated and (c) carry on its business as now conducted.
4.2 Validity and Execution of Agreement. The Acquiror and the
Subsidiary have the full legal right, capacity and power and have all requisite
corporate authority and approval required to enter into, execute and deliver
this Agreement and to perform fully their obligations hereunder. The boards of
directors of the Acquiror and the Subsidiary have approved the transactions
contemplated pursuant to this Agreement and each of the other documents
contemplated by this Agreement. This Agreement constitutes the valid and
binding obligation of the Acquiror and the Subsidiary, enforceable against each
in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and by general
principles of equity.
4.3 No Conflict. Neither the execution and delivery of this Agreement
by the Acquiror and the Subsidiary nor the performance by the Acquiror and the
Subsidiary of the transactions contemplated hereby will: (a) violate or
conflict with any of the provisions of the Certificate of Incorporation or
Bylaws of the Acquiror, or the Articles of Incorporation or Bylaws of the
Subsidiary, (b) violate or conflict with any provisions of any Law or Order
applicable to the Acquiror or the Subsidiary; or (c) require any consent or
approval by or filing or notice with any Governmental or Regulatory Body.
4.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Acquiror and the
Subsidiary directly with the Target without the intervention of any Person on
behalf of the Acquiror and the Subsidiary in such manner as to give rise to any
valid claim by any Person against the Target for a finder's fee, brokerage
commission or similar payment, except to Xxxx Xxxxxxxxx d.b.a. California
Business Opportunities. All amounts so payable shall be paid by the Acquiror or
the Subsidiary.
4.5 Articles of Incorporation and Bylaws. The Acquiror has heretofore
delivered to the Target and the Shareholder true, complete, and correct copies
of its Certificate of Incorporation and Bylaws as in full force and effect on
the date hereof. The Subsidiary has heretofore delivered to the Target and the
Shareholder true, complete, and correct copies of its Articles of Incorporation
and Bylaws as in full force and effect on the date hereof.
4.6 Delivery of Documents. The Acquiror has delivered to the
Shareholder its true, complete, and correct Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, and its quarterly report on Form
10-QSB for the quarter ended June 30, 1997. Each of these documents contains
the information required to be included therein by applicable law and as to
such required information do not contain any untrue statements of material fact
or omit a material fact necessary to make the statements contained thereof not
misleading. Each audited and unaudited financial statement (and the notes
relating thereto) contained in such reports was prepared in accordance with
generally accepted accounting principles consistently applied (except as
otherwise indicated therein) and fairly presents the consolidated financial
condition of Acquiror and its subsidiaries as of the respective date thereof
and the related consolidated results of operations,
19
stockholders' equity, and cash flows or changes in financial position, as
applicable, of the Acquiror and its subsidiaries for and during the respective
period covered thereby.
4.7 Consents and Approvals. Except for Form 8-K, no consent approval
or authorization of, or declaration, filing or registration with, any third
party, including any governmental or regulatory authority, United States or
foreign, is required in connection with the execution, delivery and performance
of this Agreement by the Acquiror and the Subsidiary.
4.8 Absence of Certain Changes or Events. Since the date of the Form
10-KSB for the fiscal quarter ended June 30, 1997, to the Acquiror's knowledge,
there has been no material adverse change in the assets, properties, business,
operations, income or condition (financial or otherwise) of the Acquiror nor is
any such change threatened, nor has there been any damage, destruction or loss
which could have a Material Adverse Effect after the Effective Date on the
Acquiror, whether or not covered by insurance. The Acquiror has not (i)
declared any dividend or made any payment or other distribution with respect to
its shares of capital stock, (ii) acquired or disposed of any shares of its
capital stock or granted any options, warrants or other rights to acquire or
convert any obligation into any shares of its capital stock, (iii) sold,
assigned, transferred, conveyed or otherwise disposed of, or agreed to sell or
dispose of, a substantial portion of its assets, except for sales of inventory
in the ordinary course of business, (iv) entered into any transaction of merger
or consolidation with any other entity, or (v) agreed or entered into any
commitment to take any of the above actions.
4.9 Litigation. Except as set forth on Schedule 4.9, there are no
outstanding Orders by which the Acquiror, or any of its securities, assets,
properties or businesses are bound. Except as set forth on Schedule 4.9, there
is no Action or Proceeding pending or, to the knowledge of the Acquiror
threatened (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) against or affecting the Acquiror or any of
its assets, properties or businesses, which if adversely decided would have a
Material Adverse Effect after the Effective Date on the Target, the Acquiror,
or the Surviving Corporation, nor are there any facts which are likely to give
rise to any such Action or Proceeding which if adversely decided, would have a
Material Adverse Effect after the Merger on the Acquiror or the Surviving
Corporation.
4.10 Status of Common Stock. The Common Stock when issued in
accordance with the terms of this Agreement will be duly authorized, validly
issued, fully paid and nonassessable and free of liens, encumbrances or
preemptive rights except as contained in the Certificate of Incorporation or
Bylaws of Acquiror; provided, however, that the Common Stock may be subject to
restrictions on transfer under state and/or federal securities laws.
4.11 Disclosure. None of the representations, warranties or covenants
contained in this Agreement, nor in any Schedule or Exhibit hereto made by the
Acquiror or the Subsidiary, contains or will contain any untrue statement of
material fact or omits or will omit a material fact necessary to make the
statements contained herein or therein not misleading up to the date of the
Closing.
20
ARTICLE V
CONDITIONS PRECEDENT TO THE MERGER
5.1 Conditions Precedent to the Obligations of the Acquiror and the
Subsidiary to Complete the Merger. The obligations of the Acquiror and the
Subsidiary to enter into and complete the Merger are subject to the fulfillment
at or prior to the Closing of the following conditions, any one or more of
which may be waived by the Acquiror or the Subsidiary:
Net Equity. Net Equity on the Effective Date shall not be less
than two hundred ninety-five thousand dollars ($295,000), computed in a manner
consistent with the Target's Unaudited Financial Statements.
Employment Agreement. The Shareholder shall have entered into the
employment agreement attached hereto as Exhibit 5.1(b).
Representations, Warranties, and Covenants. The representations
and warranties of the Target and the Shareholder contained in this Agreement
shall be true, complete, correct, and current in all material respects.
Consents, Waivers, Licenses, Filings, etc. The consents,
approvals, authorizations, licenses, registrations, declarations or filings
listed on Schedule 3.25, if any, hereto shall have been obtained or made, as
the case may be.
Third Party Consents. Except as otherwise waived by the Acquiror,
all consents, permits and approvals from parties to contracts or other
agreements with the Target set forth on any Schedule or Exhibit to this
Agreement, including, but not limited to, the Assignable Contracts, and any
other material consent, permit or approval that may be required in connection
with the performance by the Target and the Shareholder of their obligations
under this Agreement or the consummation of the transactions contemplated by
this Agreement or the continuance of the Target's contracts or other agreements
with the Surviving Corporation after the Merger shall have been obtained.
Injunction, etc. At the Closing, there shall not be any Order
outstanding against any party hereto or Law promulgated that prevents
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of the transactions contemplated by this
Agreement or would be likely to have any Material Adverse Effect on the
Surviving Corporation.
Opinion of Counsel to the Target. The Acquiror shall have been
provided with the opinion of Xxxxxx, Xxxxxxxx, Xxxxxx, Xxxxxx & Xxxx (the
"Target's Counsel"), in form and substance as set forth in Exhibit 5.1(f)
attached hereto and dated the date of the Merger.
21
Approval of Counsel to Acquiror. All actions and proceedings
hereunder and all documents and other papers required to be delivered by the
Target or the Shareholder hereunder or in connection with the consummation of
the transaction contemplated hereby and all other related matters shall have
been approved by Xxxxxxxxx, Parish & Xxxxxx, P.C., counsel to the Acquiror (the
"Acquiror's Counsel"), as to their form and substance, which approval shall not
be unreasonably withheld.
Target Records. The Target and the Shareholder shall have
delivered to the Acquiror all records relating to the Target in their
possession.
Resignations of Target's Directors. The Target's directors shall
have delivered to the Acquiror resignations from their positions as directors
of the Target.
5.2 Conditions Precedent to the Obligations of the Target and the
Shareholder to Complete the Merger. The obligations of the Target and the
Shareholder to enter into and complete the Merger are subject to the
fulfillment on or prior to the Merger, of the following conditions, any one or
more of which may be waived by the Target:
(a) Representations, Warranties and Covenants. The
representations, warranties and covenants of the Acquiror and the Subsidiary
shall be true, complete, correct, and current in all material respects.
(b) Title Insurance Shareholder shall receive evidence of a title
insurance policy from Old Republic Title Company insuring the deed of trust
which acts as security for the Guaranty in the amount of One Million Dollars
($1,000,000).
(c) Injunction, etc. At the Closing, there shall not be any Order
outstanding against any party hereto or Law promulgated that prevents
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of the transaction contemplated by this
Agreement or would be likely to have any Material Adverse Effect on the
Surviving Corporation.
(d) Opinion of Counsel to the Acquiror. The Target shall have
been provided with an opinion of the Acquiror's Counsel, in form and substance
satisfactory to the Target and dated the date of the Merger.
(e) Title Insurance. The Acquiror and the Subsidiary shall have
delivered to Shareholder (i ) title insurance in the amount of One Million
Dollars ($1,000,000) in form satisfactory to Shareholder insuring the validity
of the Deed of Trust securing the Guaranty; (ii) certified resolutions of the
Board of Directors and Shareholders of Touche Properties, Inc. authorizing the
encumbrance of the Real Property by the Deed of Trust that secures the
Guaranty; and (iii) such other documentation as Counsel to the Shareholder may
reasonably request to establish
22
that the transfer is not fraud on the creditors.
(f) Resolutions. The Acquiror and the Subsidiary shall have
delivered to the Target a copy of the resolution of their boards of directors
authorizing and approving the execution of this Agreement and the consummation
of the transactions contemplated hereby.
ARTICLE VI
CLOSING
6.1 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of the Acquiror's
Counsel, 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxxxxxxxxx 00000,
on December 22, 1997 (the "Closing Date"). In addition to complying with the
conditions set forth in Article V, the Acquiror, the Subsidiary, the Target,
and the Shareholder shall deliver the following at the Closing:
(a) Conversion of the Common Stock. The Acquiror shall deliver to
the Shareholder the Cash Payment and a copy of the letter to American Stock
Transfer, the Acquiror's transfer agent, which letter shall direct American
Stock Transfer, to deliver the Common Stock to the Shareholder in accordance
with Section 2.3(b)(ii) and 2.3(b)(iv) hereof.
(b) Delivery of the Shares. The Shareholder shall deliver to the
Acquiror the certificates representing the Shares together with stock powers,
in form and substance satisfactory to the Acquiror and the Subsidiary, executed
by the Shareholder transferring all right, title, and interest to the Shares to
the Acquiror, free and clear of all liens and encumbrances.
(c) Agreement of Merger; Certificate of Approval of Agreement of
Merger. The Target shall deliver to the Acquiror and the Surviving Corporation
a duly executed Agreement of Merger in the form attached as Exhibit 6.1(c)-1
hereto, together with a duly executed Certificate of Approval of Agreement of
Merger in the form attached as Exhibit 6.1(c)-2 hereto.
ARTICLE VII
POST-MERGER COVENANTS
7.1 Non-Compete.
(a) Covenants Against Competition. In consideration for the
payment by Acquiror of the Cash Payment and the Common Stock on the Closing
Date, the Shareholder agrees that he will not, at anytime within the five (5)
year period immediately following the Merger Date, directly or indirectly
engage in, or have any interest, other than an equity interest of five percent
(5%) or less in any publicly traded corporation, in any person, firm,
corporation, or business that engages in, in any way, the Target's business,
and will not sell to or solicit any customers to which
23
the Target is currently selling the Target's services, in any of the California
counties of Alameda, Contra Costa, Irvine, Los Angeles, Marin, Napa, Orange,
Riverside, San Diego, San Francisco, San Mateo, Santa Xxxxx, Santa Cruz,
Solano, Sonoma, and Ventura.
The Shareholder further agrees not to divulge, communicate, use to the
detriment of the Acquiror or the Surviving Corporation or for the benefit of
any other person or persons, or misuse in anyway, any confidential information
or trade secrets of the Target, including personnel information, secret
processes, know-how, customer lists, recipes, formulas, or other technical
data. The Shareholder acknowledges and agrees that any information or data he
has acquired on any of these matters or items was received in confidence and as
a fiduciary of the Acquiror.
The foregoing covenants against competition shall terminate in the
event that the Shareholder is terminated without cause (cause defined in the
Employment Agreement attached as Exhibit 5.1(a) hereto), by Relocation, or by
Demotion as described in Section 2.3(b)(v).
(b) Rights and Remedies Upon Breach. If the Shareholder breaches,
or threatens to commit a breach of, any of the provisions of this Section 7.1
(the "Restrictive Covenants"), the Acquiror and the Surviving Corporation shall
have the following rights and remedies (upon compliance with any necessary
prerequisites imposed by law upon the availability of such remedies), each of
which rights and remedies shall be independent of the other and severally
enforceable and shall not be affected by the provisions of Article VI, and all
of which rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Acquiror and the Surviving
Corporation under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced (without posting any bond) by any court having equity
jurisdiction, including, without limitation, the right to an entry against the
Shareholder of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether
or not then continuing, of such covenants, it being acknowledged and agreed
that any such breach or threatened breach will cause irreparable injury to the
Acquiror or the Surviving Corporation and that money damages will not provide
adequate remedy to the Acquiror or the Surviving Corporation.
(ii) The right and remedy to require the Shareholder to
account for and pay over to Acquiror all compensation, profits, monies,
accruals, increments or other benefits (collectively, "Benefits") derived or
received by such person the result of any transactions constituting a breach of
any of the Restrictive Covenants, and such person shall account for and pay
over such Benefits to the Acquiror or the Surviving Corporation.
(c) Severability of Covenants. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
24
(d) Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provisions and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
(e) Termination of the Employment of the Shareholder. If the
employment of the Shareholder is terminated by the Surviving Corporation
without cause or as a result of a Relocation or a Demotion this Section 7.1
will terminate.
7.2 Recording Costs. Acquiror agrees to pay all costs for the escrow
and those incurred in recording the Deed of Trust securing the Guaranty and
obtaining the title policy in connection with the Deed of Trust attached hereto
as Exhibit 2.3(b)(ii)C.
ARTICLE VIII
The Common Stock so held in escrow shall be subject to the following reduction
in the number of shares: if the Target or the Shareholder become liable to the
Acquiror in any amount under Article III or Article VIII, the amount of Common
Stock to be delivered shall be reduced by that number of shares determined by
dividing the Per-Share Value into the aggregate amount that the Target and the
Shareholder are obligated to indemnify the Acquiror
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements of the Acquiror, the
Target, and the Shareholder contained in this Agreement will survive the Merger
for four (4) years following the Merger Date.
8.2 Indemnification of the Acquiror. Subject to the limitations
contained in this Article VIII, the Shareholder agrees to indemnify, defend and
hold harmless the Acquiror and the Surviving Corporation, and their directors,
officers, shareholders, partners, employees, successors and assigns from and
against any and all losses, Liabilities (including punitive or exemplary
damages and fines or penalties and any interest thereon), expenses (including
fees and disbursements of counsel and expenses of investigation and defense),
claims, liens or other obligations of any nature whatsoever, other than
liabilities taken into account in determining Net Equity (hereinafter
individually, a "Loss" and collectively, "Losses"), which, directly or
indirectly, arise out of, result from or relate to (a) any inaccuracy in or any
breach of any representation and warranty, or any breach of any covenant or
agreement, of the Shareholder contained in this Agreement or in any document or
other papers delivered pursuant to this Agreement, (b) any liability or
obligation of the Shareholder which is not a Target Debt, (c) the Shareholder's
or the Target's misappropriation of trade secrets, or its infringement or
alleged infringement of any patent, copyright, trademark, servicemark, or any
other proprietary right of any Person, (d) any claims, acts or omissions which
arise from the operations of the Target prior to the Effective Date except for
(i) the liabilities shown in the balance sheet
25
included in the Unaudited Financial Statements, (ii) those incurred after the
date of the balance sheet included in the Unaudited Financial Statements that
were incurred in the ordinary course of business and are usual and normal in
amount both individually and in the aggregate, and (iii) those disclosed in
this Agreement or in disclosure statements provided by Target or the
Shareholder under this Agreement, (e) any obligations of the Target for claims
under ERISA, and (f) violations of the Environmental, Health and Safety Laws
prior to the Effective Date. If Net Equity as of the Effective Date is
calculated on the date ninety (90) days after the Effective Date to be less
than two hundred ninety five thousand dollars ($295,000) as computed in a
manner consistent with the Target's Unaudited Financial Statements, the Common
Stock holdback shall be reduced proportionally, dollar for dollar, by the
amount by which Net Equity is less than two hundred ninety-five thousand
dollars ($295,000). Notwithstanding any other provision of this Agreement, the
Shareholder (i) shall have no obligation hereunder to provide indemnification
for the first ten thousand dollars ($10,000) of Losses (the "Shareholder's
Basket Amount"), and (ii) shall have no liability for Losses from such claims
if such amount is equal to or less than two hundred fifty dollars ($250) for
any single item ("Immaterial Claims").
8.3 Limitation on Indemnification of the Acquiror. Notwithstanding
anything to the contrary in this Agreement, the maximum liability, expenditures
and obligations of the Shareholders under this Article VIII, including claims
that relate to the obligations to hold harmless, defend and indemnify the
Acquiror and Surviving Corporation and expenditures incurred in connection
therewith, shall not exceed the amount of cash, all amounts due under the Note,
and the Common Stock (valued at the Per Share Value plus any adjustments
thereto made under this Agreement) actually received by the Shareholder for his
Target Common Stock. Any claims against the Shareholder under Article VIII
shall solely and exclusively be asserted first against, and to the extent that
the Shareholder is liable be paid out of, the Shareholder's Common Stock that
is held in Escrow (valued at the Per Share Value), and only to the extent that
such claims exceed the value of such the Common Stock then in Escrow shall the
claims be asserted against the Shareholder and he be personally liable for such
claims, to the extent provided in this Section 8.3. In no event shall any
amount be claimed as an as an offset or defense to payment of the Note. Claims
shall be paid out of the Common Stock Holdback only after the Acquiror and the
Surviving Corporation have complied with the claims procedures set forth in
this Article VIII and in the Escrow Agreement.
8.4 Indemnification of the Shareholder. Subject to the limitations
contained in this Article VIII, the Acquiror agrees to indemnify, defend and
hold harmless the Shareholder from and against any and all Losses which,
directly or indirectly, arise out of, result from or relate to (a) any
inaccuracy in or any breach of any representation and warranty, or any breach
of any covenant or agreement, of the Acquiror or the Subsidiary contained in
this Agreement or in any documents or other papers delivered pursuant to this
Agreement, (b) operations of the Surviving Corporation subsequent to the
Effective Date, and (c) violations of the Environment, Health and Safety laws
subsequent to the Effective Date. Notwithstanding any other provision of this
Agreement, the Acquiror (i) shall have no obligation hereunder to provide
indemnification for the first ten thousand dollars ($10,000) of Losses (the
"Acquiror's Basket Amount"), and (ii) shall have no liability for any
Immaterial Claims.
26
8.5 Method of Asserting Claims. The party making a claim under this
Article VIII is referred to as the "Indemnified Party" and the party against
whom such claims are asserted under this Article VIII is referred to as the
"Indemnifying Party." All claims by any Indemnified Party under this Article
VIII shall be asserted and resolved as follows:
In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third party, said
Indemnified Party shall, with reasonable promptness, notify in writing the
Indemnifying Party of such claim or demand, specifying the basis for such claim
or demand, and the amount or the estimated amount thereof to the extent then
determinable (which estimate shall not be conclusive of the final amount of
such claim and demand; the "Claim Notice"); provided, however, that any failure
to give such Claim Notice will not be deemed a waiver of any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure. The Indemnifying Party, upon request of
the Indemnified Party, shall retain counsel (who shall be reasonably acceptable
to the Indemnified Party) to represent the Indemnified Party and shall pay the
reasonable fees and disbursements of such counsel with regard thereto provided,
however, that any Indemnified Party is hereby authorized prior to the date on
which it receives written notice from the Indemnifying Party designating such
counsel, to retain counsel, whose fees and expenses shall be at the expense of
the Indemnifying Party, to file any motion, answer or other pleading and take
such other action which it reasonably shall deem necessary to protect its
interests or those of the Indemnifying Party until the date on which the
Indemnified Party receives such notice from the Indemnifying Party. After the
Indemnifying Party shall retain such counsel, the Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (x) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the retention of
such counsel or (y) the named parties of any such proceeding (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. The
Indemnifying Party shall not, in connection with any proceedings or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one such firm for the Indemnified Party (except to the extent the
Indemnified Party retained counsel to protect its (or the Indemnifying Party's)
rights prior to the selection of counsel by the Indemnifying Party.) If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party defends. A claim or demand may not be settled by
the Indemnifying Party without the prior written consent of the Indemnified
Party (which consent will not be unreasonably withheld) unless, as part of such
settlement, the Indemnified Party shall receive a full and unconditional
release reasonably satisfactory to the Indemnified Party.
(b) In the event any Indemnified Party shall have a claim against
any Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with
27
respect to such claim to the Indemnifying Party.
After delivery of a Claim Notice, so long as any right to
indemnification exists pursuant to this Article VII, the affected parties each
agree to retain all Books and Records related to such Claim Notice. In each
instance, the Indemnified Party shall have the right to be kept fully informed
by the Indemnifying Party and its legal counsel with respect to any legal
proceedings. Any information or documents made available to any party hereunder
and designated as confidential by the party providing such information or
documents and which is not otherwise generally available to the public and not
already within the knowledge of the party to whom the information is provided
(unless otherwise covered by the confidentiality provision of any other
agreement among the parties hereto, or any of them), and except as may be
required by applicable law, shall not be disclosed to any third Person (except
for the representatives of the party being provided with information, in which
event the party being provided with the information shall request its
representatives not to disclose any such information which it otherwise
required hereunder to be kept confidential).
(d) The Indemnification of the Acquiror by the Shareholder shall
be limited to only those matters specifically provided in Section 8.3 above;
the Acquiror hereby releases, discharges and acquits the Shareholder from any
other damage, claim, liability, deficiency, loss, cost or expense, known or
unknown incurred by the Acquiror arising out of or resulting from any other
matter not specifically covered or provided in Section 8.2 above.
(e) The Indemnification of the Shareholder by the Acquiror shall
be limited to only those matters specifically provided in Section 8.2 above;
the Shareholder hereby releases, discharges and acquits the Acquiror from any
other damage, claim, liability, deficiency, loss, cost or expense, known or
unknown incurred by the Shareholder arising out of or resulting from any other
matter not specifically covered or provided in Section 8.2 above.
ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Each of the Parties shall pay its own expenses
(including, without limitation, attorneys' and accountants' fees and
out-of-pocket expenses) incidental to this Agreement and the transactions
contemplated hereby.
9.2 Further Assurances. At any time and from time to time after the
Effective Date at the request of the Acquiror or the Surviving Corporation, and
without further consideration, the Shareholder will execute and deliver such
other instruments of sale, transfer, conveyance, assignment and confirmation
and take such other action as the Acquiror or the Surviving Corporation may
reasonably deem necessary or desirable in order to put the Acquiror or the
Surviving Corporation in actual possession and operating control of the
Surviving Corporation's business and to assist the Acquiror and the Surviving
Corporation in exercising all rights with respect thereto.
28
9.3 Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
given personally, telegraphed, telexed, sent by facsimile transmission or sent
by prepaid air courier or certified, registered or express mail, postage
prepaid. Any such notice shall be deemed to have been given (a) when received,
if delivered in person, telegraphed, telexed, sent by facsimile transmission
and confirmed in writing within three (3) Business Days thereafter or sent by
prepaid air courier or (b) three (3) Business Days following the mailing
thereof, if mailed by certified first class mail, postage prepaid, return
receipt requested, in any such case as follows (or to such other address or
addresses as a party may have advised the other in the manner provided in this
Section 8.3):
If to the Acquiror:
TMCI Electronics, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
With a copy to:
Xxxxxxxxx, Parish & Xxxxxx, P.C.
000 Xxxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Surviving Corporation:
Trinity Electronics, Inc.
0000 Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
With a copy to:
Xxxxxxxxx, Parish & Xxxxxx, P.C.
000 Xxxx Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
29
If to the Shareholder:
Xxxxxxx XxXxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Tel: 408/000-0000
With a copy to:
Xxxxxx, Xxxxxxxx, Xxxxxx, Xxxxxx & Xxxx
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
9.4 Publicity. No public release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Acquiror and the Target; provided, however, that either
party hereto may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable efforts to advise the other party prior to making the disclosure).
9.5 Entire Agreement. This Agreement (including the Exhibits and
Schedules) and the agreements, certificates and other documents delivered
pursuant to this Agreement contain the entire agreement among the Parties with
respect to the transactions described herein, and supersede all prior
agreements, written or oral, with respect thereto.
9.6 Waivers and Amendments. This Agreement may be amended, superseded,
cancelled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof. The rights and
remedies of any parties based upon, arising out of, or otherwise in respect of
any inaccuracy in or breach of any representation, warranty, covenant or
agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties as to which there is
no inaccuracy or breach).
9.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without regard to
principles of conflicts of law.
9.8 Binding Effect; No Assignment. This Agreement shall be binding
upon and inure
30
to the benefit of the parties and their respective successors and permitted
assigns. This Agreement is not assignable by any party hereto without the prior
written consent of the other parties hereto except by operation of law and any
other purported assignment shall be null and void; however,
31
that Acquiror may assign this Agreement without the consent of the other
parties hereto to any lender to Acquiror.
9.9 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the context
may require.
9.10 Counterparts. This Agreement may be executed by the parties
hereto by facsimile transmission in separate counterparts, each of which when
so executed and delivered shall be an original, and all such counterparts shall
together constitute one and the same instrument. Each counterpart may
constitute a number of copies hereof each signed by less than all, but together
signed by all of the parties hereto.
9.11 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein. All references herein to Sections,
subsections, clauses, Exhibits and Schedules shall be deemed references to such
parts of this Agreement, unless the context shall otherwise require.
9.12 Effect of Disclosure on Schedules. Any item disclosed on any
Schedule to this Agreement shall only be deemed to be disclosed in connection
with (a) the specific representation and warranty to which such Schedule is
expressly referenced, (b) any specific representation and warranty which
expressly cross-references such Schedule and (c) any specific representation
and warranty to which any other Schedule to this Agreement is expressly
referenced if such other Schedule expressly cross-references such Schedule.
9.13 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.
9.14 Severability of Provisions. If any provision or any portion of
any provision of this Agreement or the application of such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement or the application of such provision or portion of
such provision as is held invalid or unenforceable to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby.
9.15 Arbitration. The Parties agree to negotiate in good faith in an
attempt to resolve any disputes or controversies arising out of or related to
or affecting the subject matter of this Agreement. Any dispute arising out of
or relating to or affecting the subject matter of this Agreement not resolved
by negotiation shall be submitted for resolution to JAMS/Endispute ("JAMS") in
the County of Santa Clara, California. The parties shall retain the right to a
private trial by jury before a JAMS employee. Such employee shall be a former
judge of any court of California. Such right to trial by jury shall apply only
to the extent such right would apply absent this Section 9.15. Discovery and
other procedural matters shall be governed as though the proceeding were an
32
arbitration. The purpose of this Section 9.15 is to provide a mechanism to
quickly and inexpensively resolve all disputes that may arise under this
Agreement. Any judgment upon the award may be confirmed and entered in any
court having jurisdiction thereof. The arbitrator(s) shall be required to, in
all determinations, apply California law. The arbitrator(s) are not afforded
the jurisdiction to provide and order any provisional remedies, including,
without limitation, injunctive relief. The Acquiror and the Shareholder shall
divide evenly between themselves all reasonably anticipated fees and other
expenses associated with such arbitration, before submitting any such matter to
arbitration, and each shall make any and all reasonably anticipated payments in
equal proportion to the other party, before submitting any such matter to
arbitration. The parties stipulate that the JAMS employee may be appointed as a
judge pro tempore of the Superior Court of Santa Xxxxx County if required to
carry out the terms of this provision.
[The remainder of this page has been left blank intentionally.]
33
AUTHORIZED SIGNATURES
IN WITNESS WHEREOF, the parties or their duly authorized
representatives have executed this Agreement as of the date first above
written.
TMCI ELECTRONICS, INC. TRINITY ELECTRONICS, Inc.
/s/ XXXXXXX XXXXX /s/ XXXXXXX XXXXXXX
----------------- -------------------
Xxxxxxx Xxxxx, Xxxxxxx XxXxxxx,
President and President and
Chief Executive Officer Chief Executive Officer
TMCI/TRINITY ACQUISITION CORP. SHAREHOLDER
/s/ XXXXXXX XXXXX /s/ XXXXXXX XXXXXXX
----------------- -------------------
Xxxxxxx Xxxxx, Xxxxxxx XxXxxxx
Chief Executive Officer
34
