Exhibit 2
STOCK PURCHASE AGREEMENT
This Agreement is entered into this 31St day of October 2001, by and between
Circuit Source International Inc., a Nevada corporation (hereinafter the
"Purchaser") as the acquiring corporation, Avanti Circuits, Inc., an Arizona
corporation. (hereinafter "ACI") as the acquired corporation and Xxxxxxx X
Xxxxxx in his capacity as the sole shareholder of ACI (hereinafter the
"Shareholder").
RECITALS
WHEREAS, the respective Boards of Directors of the Purchaser and ACI deem
it advisable and in the best interests of Purchaser and ACI and their respective
shareholders that Purchaser acquire all of the issued and outstanding shares of
common stock of ACI in exchange for cash and a promissory note pursuant to the
terms and conditions of this agreement (hereinafter the "Agreement")
WHEREAS, the Shareholder is the owner of record of Six Thousand Twenty
(6,020) shares of ACI common stock (hereinafter the ACI Shares"), which
represents all of the issued and outstanding shares of common stock in ACI, and
WHEREAS, the Shareholder desires to sell to the Purchaser and the Purchaser
desires to purchase from the Shareholder all of the ACI Shares and has approved
this Agreement and, by signature below, agrees to be bound by such provisions
hereof as are applicable to him,
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and in consideration of the mutual
representations, warranties and covenants set forth below. the parties hereby
agree as follows
ARTICLE I
1.01 The Sale of ACI Shares. Subject to the terms and conditions and in the
manner hereinafter set forth the Shareholder hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to acquire from the Shareholder the
ACI Shares, which represents all of the issued and outstanding shares of ACI
common stock for the purchase price of Two Million Five Hundred Thousand and
no/100 Dollars ($2,500,000) The purchase price for the ACI Shares shall be
payable as hereinafter provided.
1.02 Payment of the Purchase Price. The total consideration for the ACI
Shares delineated herein shall be payable Five Hundred Thousand and no/ 00
Dollars ($500,000) on the day of closing as hereinafter defined and the
remaining balance of the purchase price in the amount of Two Million and no/I 00
Dollars ($2,000,000; shall be payable pursuant to the terms and conditions of
Purchaser's Promissory Note dated and executed or the day of closing, where such
terms and conditions of said Promissory Note shall be acceptable to the
Stockholder and by this reference incorporated herein Terms of the Promissory
Note shall include but not be limited to: (i) interest at the rate of 10% per
annum; (ii) payment of the remaining principal balance of Two Million Dollars
($2,000,000) and all accrued interest on January 31, 2002, (iii) said Promissory
Note Exhibit "A-i") shall be secured by the ACI Shares being sold hereunder, and
all of the assets of ACI and the Personal Guarantee of Xxxxx Xxxxxx On the day
of closing Purchaser shall execute in favor of the Shareholder and deliver all
required UCC-1 Financing Statements (Exhibit "A-2"), Security Agreement (Pledge)
(Exhibit "A-3") Security Agreement (Assets) (Exhibit "A-4") and the Xxxxx Xxxxxx
Personal Guaranty (Exhibit "A-5"), all o which are attached hereto and by this
reference incorporated herein, (iv) for the period between the day of closing
and January 31, 2002 the Shareholder agrees to subordinate his Promissory Note
and Security Agreement (Assets) to a Loan in favor of Heritage Bank upon such
terms as are acceptable to Purchaser Shareholder and Heritage Bank, secured only
by the assets of ACI in an amount not to exceed, at any time prior to the
pay-off of the Promissory Note, Six Hundred Thousand Dollars ($600,000), the
proceeds o which shall be used to satisfy all monetary obligations of ACI and
Shareholder to Heritage Bank as of the day of closing and partially fund the
Five Hundred Thousand Dollar ($500,000) down payment to Shareholder however,
such subordination shall not include the Shareholder's first lien position on
the ACI Shares.
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1.03 Building Lease. The Parties hereto acknowledge that the real property
and improvements located thereon, which houses the corporate headquarters and
manufacturing facilities of ACI located at 00000 Xxxxx 00xx Xxxxxx, Xxxxxxx,
Xxxxxxx 00000 (hereinafter the "Premises"), is owned by the Shareholder or
Shareholder's LLC designee and leased to ACI. On the day of Closing Purchaser or
Shareholder's LLC designee agrees to enter into a lease and option to purchase
agreements, in the form attached hereto as Exhibit "B-I" and "B-2" and by this
reference both incorporated herein, to lease the Premises On the day o closing
Shareholder shall cause Avanti Enterprises AZ, LLC to pay to ACI in cash,
pursuant to an existing promissory note, the adjusted then current principal and
interest balance due ACI with an outstanding balance on May 31, 2001 of
$13,446.39, which shall be marked "paid in full" on the day of Closing
1.04 Financial Statement Adjustments. On the day of Closing Shareholder
agrees to assume and pay adjusted to the day of closing, any and all liability
associated with the promissory notes then due from ACI to Xxx Xxxxxx, Xxxxx
Xxxxxx and Xxxx Xxxxxx totaling an outstanding principal and interest balance
due as 01 May 31, 2001 of $64,853.52 The assumption of said promissory notes
shall be in consideration of AC forgiving an existing promissory note currently
payable to ACI from the Shareholder with a principal and interest balance due as
of May 31, 2001 of $77,913.64, which note, on the day of Closing, shall be
marked "paid in full" The difference of the two amounts shall be adjusted as a
reduction in earnings for the yea' ending September 30, 2001 resulting from a
loss in the sale of an asset From and after the day of Closing Purchaser agrees
to operate ACI in the ordinary course of business and hereby assumes and agrees
to pay when due all obligations of ACI as and when same shall be come due and
payable
1.05 Closing and Effective Date. The closing date of the transaction
contemplated hereby and of all other transactions contemplated in this Agreement
snail be October 31, 2001 (the "Closing Date") The effective date for all
accounting and transactions contemplated hereby (the "Effective Date") shall be
October 1, 2001
1.06 Directors and Officers. On the Closing Date the current members of the
ACI Board of Directors shall appoint Xxxxx Xxxxxx and Xxx Xxxxxxxx as additional
directors and following the appointment of the additional directors all of the
current members of the ACI Board of Directors and Officers of ACI shall resign
1.07 Life Insurance. On the Closing Date, Purchaser shall deliver to
Shareholder a valid binder for Life Insurance on the life of Xxxxx Xxxxxx in the
amount of Two Million Dollars ($2,000,000.00) naming Shareholder as beneficiary,
which policy shall be paid for by Purchaser and kept in full force and effect
until such time as the Promissory Note is paid in full Upon issuance and receipt
of the policy by Purchaser it shall immediately deliver such policy to
Shareholder
ARTICLE II
REPRESENTATIONS AND WARRANTIES
ACI and the Shareholder, collectively and individually, hereby represent
and warrant to the Purchaser that
2.01 Organization and Good Standing. On the Closing Date, ACI will be duly
organized, validly existing and In good standing under the laws of the State of
Arizona ACI has full power and authority to carry on its business as currently
being conducted, is duly qualified and properly licensed to do business and is
in good standing as a foreign corporation in every jurisdiction where the nature
of its activities requires such qualification or licensing
2.02 Authorized Capitalization. As provided in its articles of
incorporation, as amended to date, the authorized capital stock of ACI consists
of 1,000,000 shares of common stock, $1 00 par value, of which 6,0220 shares of
common stock have been duly issued and are currently outstanding, all of which
are standing in the name of and beneficially owned by the Shareholder, and no
ACI Shares of preferred stock are authorized issued or outstanding All of the
ACI Shares have been duly authorized, validly issued in accordance with lay and
are fully paid and non-assessable.
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2.03 Outstanding Options Warrants or Other Rights. ACI has no outstanding
warrants, options or similar rights to subscribe for or purchase ACI Shares of
its common or preferred stock, nor are there any other securities outstanding
which are convertible into or exchangeable for its common or preferred stock,
and there are no contracts or commitments pursuant to which any person may
acquire or ACI may become bound to issue any ACI Shares of such common or
preferred stock.
2.04 Subsidiaries. ACI will have no subsidiaries on the Closing Date
2.05 This Agreement Binding. The Shareholder and ACI have the full right,
power and authority to execute consummate and perform this Agreement and every
other document to be delivered In connection with this Agreement, subject only
to the approval of its Shareholder, and all necessary approvals and consents of
ACI's Board of Directors therefor have been duly obtained Upon due execution,
this Agreement and every such ancillary document shall be valid and binding upon
the Shareholder and ACI enforceable in accordance with their respective terms
except as enforceability may be limited by applicable federal or state laws,
including but not limited to bankruptcy, insolvency, reorganization or other
laws or court decisions relating to or affecting generally the enforcement or
creditors rights or the availability of equitable remedies and neither the
execution delivery, consummation or performance of this Agreement or such
ancillary documents shall conflict with constitute a breach of ACI's respective
articles of incorporation or bylaws, as amended to date, or any note mortgage,
indenture, deed of trust or other agreement or instrument to which either the
Shareholder or ACI is party or by which either may be bound nor, to the best of
the Shareholder's and ACI's knowledge and belief any existing law, rule,
regulation, any decree of any union, or any order, judgment injunction, writ or
decree of any Court or governmental department, agency, commission, board or
bureau, domestic or foreign, having jurisdiction over the Shareholder or ACI or
its properties, nor result in the creation or any lien or other encumbrance upon
any of ACI's assets or property regardless of nature
2.06 Consents and Approvals. Except for the consent of the Shareholder and
compliance with applicable federal and state securities laws, no consent,
approval, authorization or order of any court or governmental agency or other
body is required for the Shareholder or ACI to consummate the transactions
contemplated in this Agreement and any ancillary documents executed herewith
2.07 Compliance with Laws and Permits. To the best of their knowledge and
belief, the Shareholder and ACI have (i) complied in all material respects with
the ACI articles of incorporation and bylaws, all applicable laws regulations,
rules, orders, judgments, writs, decrees or injunctions or federal, sate and
municipal governments or any department, agency or other instrumentality
thereof, domestic or foreign, applicable to its business or properties, and (ii)
have not done or omitted to do any act or acts which singly or in the aggregate
are in violation of any of the foregoing. To the best of their knowledge and
belief, the Shareholder and ACI have obtained or applied for all federal, state
and municipal licenses and permits necessary to ACI's assets and properties and
ACI's business as conducted and to the best of their knowledge and belief, ACI
is not in violation of any such license or permit and has not received any
notification that any revocation or limitation thereof is pending or threatened,
2.08 Financial Statements. ACI, prior to the Closing Date, shall have
furnished to Purchaser its unaudited Balance Sheets, Statements of Income and
Retained Earnings, Statements of Cash Flows as of September 30, 2001 and Notes
to the Financial Statements relevant thereto (hereinafter Jointly referred to as
the AC Financial Statements" The ACI Financial Statements were prepared on a
Accrual Accounting Basis applied on a consistent basis and present fairly the
financial condition of ACI as of the date indicated therein pursuant to
generally accepted accounting standards Further, the accounts receivable
reflected in the ACI Financial Statements, except for the accounts receivable
reserved therein as amounts not collectable, are fully collectible and will be
collected.
2.09 Copies of Documents Genuine. All copies of ACI's articles of
incorporation and bylaws (each as amended to date) and all minutes of meetings
and written consents In lieu of meetings of shareholders directors and
committees of directors of ACI, which have been or will be furnished to
Purchaser, are true complete, correct and unmodified copies of such documents
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2.10 No Undisclosed Material Liabilities. Except as may be incurred in the
ordinary course of its business, ACI has not incurred any liabilities or
obligations whatever (whether direct, indirect, accrued, contingent, absolute,
secured or unsecured or otherwise), including liabilities as guarantor or surety
or otherwise for the obligations of others and tax liabilities due or to become
due, which singly or in the aggregate are material to the assets, operations or
financial condition of ACI except as described or reserved against in the ACI
Financial Statements dated September 30, 2001 and the Notes thereto or as set
forth in Exhibit "D" attached to this Agreement.
2.11 Material Transactions and Adverse Changes. Except as has been
disclosed in writing to the Purchaser prior to the Closing Date, since August
31, 2001, ACI has not and as of the Effective Date will not have
(a) Suffered any materially adverse change in its assets, liabilities or
financial condition taken as a whole: or
(b) Suffered any damage or destruction in the nature of a casualty loss to
any one or more of its properties, whether or not covered by insurance, which
singly or in the aggregate are materially adverse to the properties or business
of ACI, or
(c) Purchased or redeemed any of its common stock, authorized or paid any
stock or cash dividends or made any distribution of capital or earnings, or
authorized or effected any split, combination (reverse split) or other
reclassification of or affecting any of its common stock' or
(d) Made any change in any method of accounting or accounting practice,
including the revaluation of any asset: or
(e) Made any waiver, release or deferral (irrespective of any rights to
indemnification of any right which is material to ACI in light of its financial
condition; or
(f) Borrowed money or made any commitment to borrow money, nor has it
terminated or modified any existing loan or loan commitment to it, outside of
the ordinary course of business or as disclosed by ACI to Purchaser prior to the
Closing Date, or
(g) Except for the employment agreements, referenced in Section 7 05
herein, to be entered into or the Closing Date with Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxx and Xxxxx Xxxxxx, increased or made any commitment to increase the
salary, fees or other forms of compensation of any employee, officer or
director, or
(h) Paid or incurred any bonus, or made any commitment to pay any bonus, to
any director, officer or employee, or
(i) Created or entered into any new business: or
(j) Agreed in writing or otherwise to take any action described above in
this Section
2.12 Taxes. To the best knowledge and belief of the Shareholder and ACI and
its officers, directors, all income, excise, unemployment social security,
occupational, franchise and other taxes, duties, assessments or charges levied,
assessed or imposed upon ACI by the United States or by any state or municipal
government or subdivision or instrumentality thereof have been duly paid or
adequately provided for, and al required tax returns or reports concerning any
such items have been duly filed To the best knowledge and belief of the
Shareholder and ACI adequate reserves have been established for all income and
other tax liabilities on ACI's Financial Statements for the period ended
September 30, 2001 To the best knowledge and belief of the Shareholder and ACI,
ACI has not waived any statute of limitations with respect to any tax liability
whatever for any period prior to the date of this Agreement Further, no consents
have been filed by ACI or any predecessor company pursuant to Section 3419(f) of
the Code.
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2.13 Properties. Exhibit "E" attached to this Agreement lists and provides
a summary description of all significant properties and other assets owned of
record or beneficially by ACI as well as all leases of real property and
equipment to which ACI is a party To the best of the knowledge and belief of the
Shareholder and ACI all such leases are valid and binding agreements There is no
breach or violation of or default under any provision of any such leases and no
fact or event has occurred which would affect ACI's Interest in or under any
such lease To the best knowledge and belief of the Shareholder and ACI, ACI owns
all such properties and other assets free and clear of all mortgages liens
pledges, restrictions, charges or encumbrances or any nature whatever, except
(i) liens for taxes not yet delinquent or being contested in good faith by
appropriate proceedings, (ii) such imperfections of or burdens upon title and
encumbrances (If any; which singly or in the aggregate do not materially detract
from the value of, or materially interfere with the present or anticipated use
of, any such property or other assets, or (iii) as shown in the ACI Financial
Statements dated September 30, 2000
2.14 Contracts. Except as described in Exhibit "F" attached hereto and
incorporated herein as if set forth ACI is not party to any contract not made in
the ordinary course of business, nor is ACI a party to any (I) contract with any
union, (ii) bonus, deferred compensation, profit sharing, pension or retirement
arrangement (iii) partnership or joint venture agreement, or (iv) other material
contract or commitment not disclosed to Purchaser in writing by ACI prior to the
Date of Closing Contracts or commitments described in any other Schedule need
not be disclosed in Exhibit "F".
2.15 Litigation.
(a) To the best knowledge and belief of the Shareholder and ACI, there are
no claims, actions suits, proceedings or investigations pending or threatened
against or affecting ACI or any of its properties in any court or by or before
any federal, state, municipal or other governmental department, commission,
board bureau, agency or other forum which, if determined adversely to ACI, would
materially affect its business prospects, properties or financial condition or
ACI's right to conduct its business as being conducted, except as described in
Exhibit "G" attached to this Agreement
(b) There are no judgments, decrees, injunctions, writs, orders or other
mandates outstanding to which ACI is a party or by which it is bound or
affected, which shall give a full and complete list of all such pending matters,
together with a synopsis of the issues and status of each. ACI is not in
violation of any judgment, decree, injunction, writ, order or other mandate
listed on such Schedule
2.16 Guarantees. There are no contracts or commitments by ACI directly or
indirectly guaranteeing the payment or performance (or both) of any obligations
of third parties or of the Shareholder, except as described in Exhibit "H",
attached to this Agreement
2.17 Patents Trademarks. Etc. ACI holds no letters patent, has made no
patent applications, holds no registered trademarks, service marks, copyrights
or licenses, and has registered no trade names other than as disclosed in
writing to the Purchaser
2.18 Indebtedness to Affiliates. ACI is not indebted to any officer,
director, employee or shareholder thereof as of the Closing Date except as
disclosed in the ACI Financial Statements dated September 30, 2001
2.19 Receivables from Affiliates. As of the Closing Date, no money or
property utilized in any aspect of ACI's business is owed by any officer,
director, employee or shareholder thereof, except the Premises, or as disclosed
in the ACI Financial Statements dated September 30, 2001.
2.20 Salaries. Exhibits "I" attached to this Agreement, sets forth the true
and correct description of the annual rate of compensation of all salaried
directors, officers and key employees of ACI There is no obligation commitment
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or past repetitive historical practice of ACI to pay bonuses, royalties or other
similar compensation designed to reward past performance, create incentive for
future performance or otherwise to any director or officer or other employee of
ACI except as set forth in such Exhibit "I" hereto.
2.21 Insurance. Exhibit "J" attached to this Agreement, lists all insurance
policies maintained by ACI, the nature of such policies, the amount and types of
coverage, and the names of the Insurers, expiration dates an amounts of premiums
2.22 Relationships. None of the officers, directors, or employees of ACI or
any of their respective spouses a children, or trusts or other entities owned or
controlled, either directly or indirectly, by any one or more of suck parties,
owns directly or indirectly, individually or collectively, any interest in any
corporation, partnership, firm or association Which (i) is a competitor, lender,
customer or supplier of ACI, or (ii) has any existing contractual relationship
with ACI or (iii) prior to the Closing Date, own any stock in Purchaser
2.23 Stock Plan. As of the Closing Date, ACI will not have authorized or
have in effect any incentive stock option plan, employee stock option or stock
purchase plan, dividend reinvestment plan or similar plan pursuant to which any
person Is entitled to acquire common stock of ACI or securities convertible into
or exchangeable for common stock of ACI.
2.24 Estoppel. All statements made in this Agreement, or in any Exhibit or
Schedule hereto, or in any document or certificate executed and delivered
herewith, by the Shareholder or ACI are true, correct and complete to the best
of their knowledge and belief as of the Closing Date All statements contained in
any certificate made by any officer or director of ACI and delivered to the
Purchaser on ACI's behalf shall be deemed representations and warranties of ACI
and the Shareholder
2.25 Environmental Compliance and Reports. To the best of the knowledge and
belief of ACI and the Shareholder ACI. (i) complies in all respects with all
environmental protection federal, state and local laws, statues, regulations and
ordinances; (ii) shall not cause or permit to exist, as a result of any
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by the Shareholder or ACI,
any environmental activity where damage may result to the environment, unless
such environmental activity to and in compliance with the conditions of a permit
issued by the appropriated federal, state, or local governmental authorities,
(iii) shall furnish to Purchaser, prior to the Closing Date, a cops of any
current or prior notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning any
intention or unintentional action or omission or Stockholder's or ACI's part in
connection with any environmental activity whether or not there is currently or
may have been previously, damage to the environment and/or other natural
resources
2.26 Equipment. The equipment, machinery, furniture, fixture, tenant
improvements and other persona property and fixed assets of ACI are in good
operating condition and repair and are suitable for the uses for which intended
and are all located on the Premises
2.27 Real Property. The real property located at 00000 Xxxxx 00xx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000 that AC currently leases as a tenant, to the best of the
knowledge and belief of Shareholder and ACI, is in substantial compliance with
applicable zoning and/or subdivision ordinances, and with applicable covenants,
conditions and restrictions, and that suitable ingress and egress thereto
exists. Further, that to the best of the knowledge and belief of Shareholder and
ACI, no underground fuel tank(s) and any septic tank(s) on or previously on the
Premises, has heretofore leaked or is currently leaking In addition, Neither
stockholder nor ACI has received any notice(s) to the effect that the Premises
or any portion thereof is to be condemned or that the Shareholder or ACI has any
knowledge of any possible threat of condemnation pertaining to the Premises or
any portion thereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to the Purchaser that:
3.01 Title to Stock. The issued and outstanding ACI Shares as of the
Closing Date will be free and clear of liens, mortgages, pledges, claims or
other rights or encumbrances whatever, disclosed or undisclosed. The Shareholder
is the registered owner of all the ACI Shares Specifically, there are no
beneficial owners of such ACI Shares or of any interest in or to any of such ACI
Shares other than the Shareholder, except as may be provided in the marital or
community property laws of the State of Arizona. Upon surrender of the ACI
Shares to Purchaser for the consideration set forth herein, the Purchaser will
obtain good and merchantable title thereto.
3.02 Power and Authority. On the Closing Date, the Shareholder will have
full right, power and authority to convey the ACI Shares to the Purchaser,
unlimited by any marital or community property, corporate or other laws
whatsoever.
3.03 Estoppel. All statements made in this Agreement, or in any Exhibit or
Schedule hereto, or in any document, certificate or investment letter executed
and delivered herewith by the Shareholder are true, correct and complete to the
best of their knowledge and belief as of the Closing Date.
3.04 Representations Warranties and Covenants True. To the best of the
Shareholder's knowledge and belief, all of the representations and warranties
made herein by ACI are true, correct and complete, and none of the covenants of
ACI herein has been violated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to ACI and the Shareholder that:
4.01 Organization and Good Standing. On the Closing Date, the Purchaser
will be duly organized, validly existing and In good standing under the laws of
the State of Nevada
4.02 Agreement Binding. The Purchaser has the right, power and authority to
execute, consummate and perform this Agreement and every other document to be
delivered in connection with this Agreement, and all necessary approvals and
consents of the Purchaser's Board of Directors therefor have been duly obtained
Upon due execution, this Agreement and every such ancillary document shall be
valid and binding upon the Purchaser, enforceable in accordance with their
respective terms except as enforceability may be limited by applicable federal
or state laws, and neither the execution, delivery, consummation or performance
of this Agreement or such ancillary documents shall conflict with or constitute
a violation of the Purchaser's certificate of incorporation or bylaws, or, to
the best of Purchasers knowledge and belief, any existing law or regulation or
any order, judgment, injunction, writ or decree of any court or governmental
department or agency commission, board or bureau, domestic or foreign, having
jurisdiction over the Purchaser.
4.03 Consents and Approvals. Except for compliance with applicable federal
and state securities laws, no consent, approval, authorization or order of any
court or governmental agency or other body is required for the Purchaser to
consummate the transactions contemplated in this Agreement and any ancillary
documents executed herewith.
4.04 Compliance with Laws. To the best of its knowledge and belief, the
Purchaser has complied In all material respects with its respective articles of
incorporation and bylaws and all applicable laws, regulations, rules, orders,
judgments, writs, decrees or injunctions of federal, state and municipal
governments or any department, agency or other instrumentality thereof, domestic
or foreign.
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4.05 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or threatened against or affecting the Purchaser in any
court or by or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or other instrumentality, domestic
or foreign, or arbitration tribunal or other forum There are no judgments,
decrees, injunctions, writs, orders or other mandates outstanding to which the
Purchaser is a party or by which it is bound or affected.
4.06 Estoppel. All statements made in this Agreement, or in any Exhibit or
Schedule hereto, or in any document or certificate executed and delivered
herewith by the Purchaser are true, correct and complete as of the date of this
Agreement and will be so as of the Closing Date All statements contained in any
certificate made by any officer or director of the Purchaser and delivered to
ACI or the Shareholder shall be deemed representations and warranties of the
Purchaser.
ARTICLE V
COVENANTS OF ACI AND THE SHAREHOLDER
ACI and, insofar as he has the power to direct ACI by ownership of voting
securities or otherwise, the Shareholder (ACI and the Shareholder being
collectively referred to below as the "ACI Parties'), covenant and agree that,
prior to the Closing Date'
5.01 Effectuation of this Agreement. The ACI Parties will use their best
efforts to cause this Agreement to become effective, and all transactions herein
contemplated to be consummated, in accordance with their terms, to obtain all
required consents and authorizations of the ACI Parties, to make all filings and
give all notices to those regulatory authorities or other third parties which
may be necessary or reasonably required in order to effect the transactions
contemplated In this Agreement. and to comply with all federal and state
securities laws and other laws as may be applicable to the contemplated
transactions.
5.02 Transactions. The ACI Parties will carry on ACI's business diligently
and substantially in the same manner as heretofore conducted, and will not enter
into any transactions which are not in the ordinary course of ACI's business or
which would singly or in the aggregate be materially adverse to ACI's business,
prospects or financial conditions, taken as a whole.
(a) The ACI Parties will not (i) permit or do or cause to be done anything
which ACI has represented In Article 2 not to have been done, except as
otherwise permitted in this Agreement or consented to by the Purchaser in
advance and in writing, (ii) make or permit any amendment to ACI's articles of
incorporation or bylaws. (ill) cause or permit to be declared or paid any
dividend, stock split, combination (reverse split) or other recapitalization or
distribution in respect of ACI's stock, nor cause or permit the issuance of any
additional ACI common and/or preferred stock, (iv) permit the increase of
compensation of any type to any director or officer or other employee of ACI,
(v) to the best ability of the ACI Parties, permit to do any act or omission to
act the effect of which would be to breach or violate any contract or commitment
to which ACI is a party, (vi) to the best ability of the ACI Parties, permit or
cause the waiver of the provisions of any statute of limitations applicable to
the levy or assessment of any federal, state, municipal or foreign taxes payable
by ACI, or (vii) organize any subsidiary of ACI, or acquire or permit the
acquisition of any equity interest in any other business or entity
(b) To the best of their ability, the ACI Parties will (i) maintain ACI's
books, accounts, and records as now being maintained, on a consistent basis,
(ii) maintain ACI's properties in good repair, (iii) comply with and not violate
any law, rule, regulation, or ordinance whatever applicable to ACI or its
business or any license or permit issued to ACI, and (iv) take each and every
step necessary to preserve the Charter Issued by the State of Arizona, including
timely filing of corporate reports and current payment of all taxes now and
hereafter due and owing.
5.03 Issuance of Additional Securities. ACI shall not issue or permit the
issuance of any common stock of ACI or of any warrant, option or other right to
subscribe for or acquire common stock or any other securities whatever of ACI,
nor shall any stock option or stock purchase plan, incentive stock option plan
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or similar plan be adopted whereby persons could acquire securities of ACI or
any opinion or similar right to acquire such securities.
5.04 Publicity and Filings. All press releases, shareholder communications,
filings with the Securities and Exchange Commission or other governmental agency
or body and other information and publicity generated by ACI regarding the
transactions contemplated in this Agreement shall be reviewed and approved by
the Purchaser arid its counsel before release or dissemination to the public or
filing with any governmental agency body whatever.
5.05 Access. The ACI Parties agree that they will allow the Purchaser's
directors, officers, accountants, attorneys and other representatives full
access, during normal business hours throughout the term of applicability of
this Agreement, to all information whatever concerning ACI's respective affairs,
operations and properties as the Purchaser may reasonably request All
information provided herein is being furnished in strict accordance with the
confidentiality provisions of this Agreement
5.06 Stand-Still Agreement. Unless and until this Agreement is terminated,
the ACI Parties agree not to solicit from any third party an offer or expression
of interest in or with respect to any acquisition, combination or similar
transaction involving ACI or substantially all of its assets or securities
(whether outstanding or authorized but unissued) and further agree that they
will promptly inform the Purchaser of the existence of any such unsolicited
offer or expression of interest
ARTICLE VI
COVENANTS OF THE PURCHASER
The Purchaser covenants and agrees that, prior to the Closing Date:
6.01 Effectuation of this Agreement. The Purchaser will use its best
efforts to cause this Agreement to become effective, and all transactions herein
contemplated to be consummated, in accordance with their terms, to obtain all
required consents and authorizations of third parties, to make all filings and
give all notices to those regulatory authorities or other third parties which
may be necessary or reasonably required in order to effect the transactions
contemplated in this Agreement, and to comply with all federal and state
securities laws and/or any other laws as may be applicable to the contemplated
transactions.
6.02 Conduct.
(a) The Purchaser will not permit or do or cause to be done anything which
the Purchaser has represented in Article 4 not to have been done, except as
otherwise permitted in this Agreement or consented to by ACI in advance and in
writing.
(b) To the best of its ability, the Purchaser will (i) comply with and not
violate any law, rule, regulation or ordinance whatsoever applicable to
Purchaser and (ii) take each and every step necessary to preserve the charter
issued by the State of Nevada, including timely filing of corporate reports and
current payment of all taxes now and hereafter due and owing
6.03 Publicity and Filings. All press releases, shareholder communications,
filings with the Securities and Exchange Commission, if any, or other
governmental agency or body and other information and publicity generated by the
Purchaser regarding the transactions contemplated in this Agreement shall be
reviewed and approved by ACI and their counsel before release or dissemination
to the public or filing with any governmental agency or body whatever.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ACI AND THE SHAREHOLDER
The obligations of ACI and the Shareholder under this Agreement are subject
to the satisfaction of the following conditions, unless waived in writing on or
prior to the Closing Date.
7.01 Representations Correct. The representations and warranties of the
Purchaser contained in this Agreement shall be in all material respects true and
correct on and as of the Closing Date.
7.02 Compliance. Purchaser shall have performed all covenants, satisfied
all conditions and complied with all other terms and provisions of this
Agreement to be performed, satisfied or complied with by it as of the Closing
Date.
7.03 Resolutions. The Purchaser shall have delivered to ACI's counsel a
certified copy of resolutions adopted by Its Board of Directors authorizing the
execution, delivery and performance of this Agreement and authorizing the
transfer of the consideration as contemplated in this Agreement together with
all documents to be executed and delivered by it on the morning of the Closing
Date
7.04 Personal Guarantees. Purchaser shall be obligated, prior to the
Closing Date, to cause the Shareholder to be released from any and all written
personal guarantees associated with any and all liabilities, debt or obligations
directly associated with ACI.
7.05 Employment Contracts. On the Closing Date Purchaser shall enter into
not less than Five (5) year employment agreements with Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxx and Xxxxx Xxxxxx in the form attached hereto as Exhibits "K-1", "K-2",
and "K-3" and by this reference incorporated herein.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser under this Agreement are subject to the
satisfaction of the following conditions, unless waived in writing on or prior
to the Closing Date:
8.01 Representations Correct. The representations and warranties of ACI and
the Shareholder contained in this Agreement shall be in all material respects
true and correct on and as of the Closing Date.
8.02 Compliance. The ACI Parties shall have performed all covenants,
satisfied all conditions and complied with all other terms and provisions of
this Agreement to be respectively performed, satisfied or complied with by them
as of the Closing Date,
8.03 Officers Certificates. On the Closing Date, the Purchaser shall have
received a certificate, dated as o the Closing Date, signed by the President of
ACI, in form and substance satisfactory to the Purchaser, stating in effect
that, except as reflected in the Exhibits and Schedules to this Agreement or in
any other writin\gc provided to the Purchaser prior to the Closing Date (i) the
representations and warranties of ACI set forth in this Agreement and in all
Exhibits, Schedules and other documents furnished in connection herewith are in
a! material respects true and correct on the Closing Date in accordance with the
representations and warranties contained herein, (ii) ACI has performed all
covenants, satisfied all conditions, and complied with all other terms and
provisions of this Agreement to be performed, satisfied or complied with by it
as of the Closing Date (iii) since the date of ACI's Financial Statements, there
has not been any materially adverse change in the business, prospects,
properties or financial condition of ACI, (iv) since such date. ACI has not
entered into any material transaction other than transactions which are usual
and in the ordinary course of Its business, (v there are no pending or, to the
best of his or her knowledge, threatened actions, suits or proceedings of any
kind Known to such officer to which ACI is a party, or of which the property of
ACI is the subject, which could reasonably be expected to have a materially
adverse effect on the business, prospects, properties, operations or financial
condition of ACI.
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8.04 Due Diligence Review. Purchaser shall have completed a due diligence
review satisfactory to it covering all books, records and documents, and all
business and financial affairs of ACI
8.05 No Material Change, As of the Closing Date, ACI shall not have
incurred any liabilities or obligations direct or contingent, or entered into
any material transactions except those which are usual and in the ordinary
course of business or previously approved in writing by the Purchaser, and there
shall not have been any change in ACI's capital stock, or any materially adverse
change in the business, prospects, properties of financial condition of ACI.
8.06 All Consents Obtained. All consents, approvals, authorizations,
waivers or orders of any court, tribunal arbitrator, union, or governmental
agency or body required or necessary for the consummation of the transactions
contemplated in this Agreement shall have been obtained No federal, state or
municipal agency department or other instrumentality shall have threatened any
action against either the Purchaser or ACI to prevent this Agreement or any of
the transactions contemplated in this Agreement.
8.07 Resolutions. ACI shall have delivered to the Purchaser's counsel a
certified copy of resolutions adopted by its Board of Directors authorizing the
execution, delivery and performance of this Agreement and authorizing the
transfer of the ACI Shares as contemplated in this Agreement, together with all
documents to be executed and delivered by it on the morning of the Closing Date.
ARTICLE IX
TERMINATION OF THIS AGREEMENT
9.01 Grounds for Termination. This Agreement shall terminate
(a) By mutual consent of Purchaser and ACI,
(b) if Purchaser or its counsel shall determine in their sole discretion
that the transactions contemplated in this Agreement have become inadvisable by
reason of the institution or threat by any federal state or municipal
governmental authority or by any other person whatever of a formal investigation
or of any action, suit or proceedings of any kind against either or both parties
which in their reasonable belief, Is material in light of the other party's
business, prospects, properties or financial condition; provided that a written
request to a party by any governmental authority for information of a kind which
suggests the existence of all investigation or could be used in connection with
any such investigation, action, suit or proceedings may be deemed to be a threat
of an investigation or a material action, suit or litigation irrespective of
when such request is received,
(c) Upon election of the Purchaser, if in its opinion, or that of its
counsel, the transactions contemplated in this Agreement do not qualify for an
exemption from the registration requirements of the Securities Act of 1933 or
applicable state securities laws.
(d) By either party in the event this Agreement does not close on the
Closing Date pursuant to the terms hereof, or any mutually agreed written
extension thereof, or in the event of a material breach of this Agreement by the
other party.
9.02 Manner of Termination. Any termination of this Agreement shall be made
in accordance with the above listed grounds and shall be evidenced by written
resolution of the terminating party's Board of Directors Written notice of
termination shall be given to the other party as required in this Agreement as
promptly as is practicable under the circumstances Upon a party's receipt of
such termination notice, this Agreement shall terminate and the transactions
herein contemplated shall be abandoned without further action by the parties.
9.03 Effect of Termination. Upon a party's receipt of such termination
notice, this Agreement shall terminate (except as to covenants regarding
confidentiality of information) and the transactions herein contemplated shall
be abandoned without further liability to the parties, provided, that if a party
shall terminate this Agreement without lawful cause, such party shall be liable
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for all Termination Damages (defined below) suffered by the other party, or if a
party shall terminate this Agreement due to (i) the other party's default or
refusal to perform in respect to any covenant in this Agreement, or (ii) a
willful misstatement in or material omission from any representation or warranty
made by the other party, or (iii) the other party's failure or refusal to
consummate the contemplated transactions by the Closing Date (as may be
extended) without justification under the terms of this Agreement, then the
party terminating this Agreement for any of such reasons shall be entitled to
obtain all Termination Damages (defined below) suffered by it from the other
party,
For purpose of this Section, "Termination Damages" are defined as all
reasonable out-of-pocket costs and expenses and or other damages whatsoever
suffered by the Purchaser or the Shareholder in connection with negotiating,
drafting and performing under this Agreement and the conducting of due diligence
inquiries (which shall include review of documentation, inspection of properties
and other time and effort fairly characterized as due diligence), including but
not limited to travel and other out-of-pocket expenses, attorneys' fees, fees
and expenses paid to consultants and other advisors.
9.04 Survival of Confidentiality Provisions. Upon termination of this
Agreement for any reason (i) the covenants of the parties concerning the
confidentiality and proprietary nature of a!! documents and other information
furnished hereunder shall remain in force except as to information which has
otherwise become public knowledge, and (ii) each party shall promptly return a!!
documents received from the other party in connection with this Agreement This
Section constitutes a mutual covenant of the parties, and either may judicially
enforce it.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 Notices. Every notice request and Instruction required or permitted
under this Agreement shall be in writing and, except as otherwise permitted
herein, shall be delivered by registered or certified mail, telegram cable or by
personal delivery (provided that a receipt for delivery is obtained) as follows
If to Purchaser: Circuit Source International
0000 Xxxx Xxxxx Xxxxxx
Xxxxx 00
Xxxxx, Xxxxxxx 00000
If to ACI: Avanti Circuits, Inc.
00000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
If to Shareholder: Xx Xxxxxxx X Xxxxxx
00000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
or to any subsequent address provided by a party in accordance with this Section
All notices sent to the Shareholder shall be sent to the address of ACI as
stated hereinabove.
10.02 Expenses. Each party shall bear its own expenses fees and costs
associated with this transaction.
10.03 Survival. All representations, warranties and covenants of the
parties shall survive the execution and consummation of this Agreement.
10.04 Benefit. This Agreement shall be binding upon and inure to the
benefit of the Purchaser and ACI and insofar as their interests appear, the
Shareholder, and their respective heirs, successors, assigns and legal
representatives Noting in this agreement is intended, expressly or impliedly, to
confer any benefit, right or remedy upon any person other than the parties and
as set forth in this Section, except as may otherwise be explicitly set forth in
this Agreement
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10.05 Litigation. This Agreement may be enforced by legal action for the
recovery of Termination Damages as provided above, or other damages, or by way
of specific performance The party prevailing in any such action hereunder shall
be entitled to recover from the party not prevailing therein all costs it incurs
in prosecuting or defending such action, including reasonable attorneys' fees
10.06 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona Headings appearing in this
Agreement are employed for convenience of reference only and shall not be
considered in interpreting this Agreement
10.07 Entire Agreement. This Agreement may not be amended or supplemented
except by an agreement in writing signed by both the Purchaser and ACI and, to
the extent their substantive rights hereunder are affected the Shareholder also
10.08 Waiver. Any party may waive the satisfaction of any one or more
conditions precedent to its obligations hereunder and may waive any other rights
hereunder Any such waiver shall be in writing, signed by the President of the
party making the waiver and shall clearly identity the condition precedent or
other right being waived. No such waiver shall operate as a subsequent waiver of
any other condition precedent or other right Nonetheless, If a party proceeds
with the consummation of the transactions contemplated in this Agreement such
action shall effect a waiver of all conditions precedent (but not of any other
rights) which the party knew remained unsatisfied
10.09 Severability. In the event any provision of this Agreement is deemed
to be unenforceable for any reason, such provision shall not invalidate the
remaining portion of this Agreement, which if possible shall be enforced as if
such unenforceable provision never was written.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.
10.11 No Brokers or Finders. Each party represents and warrants to the
other that it has not employed, and does not intend to employ, any person on its
behalf as a broker or finder in connection herewith and agrees to indemnify the
other party against any liability arising from the claims of any persons
claiming to have acted as brokers or finders and against any other damages
suffered as a consequence of the falsity or breach of this representation.
10.12 Attorney's Fees. If any action, suit or other proceedings is brought
to enforce or interpret any provision of this Agreement, the prevailing party
shall be entitled to recover such party's costs and expenses of suit including
but not limited to attorney's fees.
10.13 Execution by Facsimile. The parties hereto may exchange their
respective signatures of this Agreement by transmittal of the same through use
of a facsimile or telefax machine and the receipt of the same shall be
conclusive evidence of the acceptance of the terms by such transmitting party In
such event pages including the original signatures shall be forwarded to each
respective party within three (3) days of the Closing Date but for purposes of
effectiveness of this Agreement. the terms of this Agreement shall be deemed
binding upon receipt of the relevant transmission.
10.14 Confidential Information. The parties hereto mutually agree that any
and all information exchanged in connection with the transaction contemplated
hereby or this Agreement is confidential The parties further agree that neither
has not and will not distribute any information and has not nor will not use any
such information except for purposes of evaluating the transaction contemplated
herein or divulge the contents o any written or printed material or any oral
communication with each other in connection with the transaction contemplated
hereby, to anyone other than such legal or financial advisor(s) as either party
may deem necessary, from time to time, for purposes of evaluating the
transaction contemplated hereby.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as first
written above
Avanti Circuits, Inc Circuit Source International, Inc
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------------- --------------------------------
Xxxxxxx X. Malne, President Xxxxx Xxxxxx, President
Shareholder
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ Xxx Xxxxxxxx
-------------------------------- --------------------------------
Xxxxxxx X. Xxxxxx, lndividually Xxx Xxxxxxxx, Witness
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