Exhibit 10.28
ASSET PURCHASE AGREEMENT
between
KILOVAC CORPORATION
("Buyer")
and
WILMAR ELECTRONICS, INC.
("Seller")
▇▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇") ▇▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
("Shareholders")
May 6, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 SALE AND PURCHASE OF ASSETS.................................................1
Section 1.1. Agreement to Sell Assets...........................................1
Section 1.2. Excluded Assets....................................................3
Section 1.3. Total Consideration................................................3
Section 1.4. Purchase Price, Purchase Price Adjustment and Escrow...............3
Section 1.5. Assumption of Certain Liabilities; Other Liabilities Not Assumed...4
Section 1.6. Allocation of Consideration........................................5
ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLER AND SHAREHOLDERS...........................................................5
Section 2.1. Organization and Standing of Seller................................5
Section 2.2. Financial Statements...............................................5
Section 2.3. Absence of Undisclosed Liabilities, Accounts Payable...............6
Section 2.4. Taxes..............................................................6
Section 2.5. Absence of Certain Changes or Events...............................6
Section 2.6. Employee Relations.................................................7
Section 2.7. Employee Benefit Plans.............................................7
Section 2.8. Owned and Leased Personal Property; Real Property..................9
Section 2.9. Litigation.........................................................9
Section 2.10. No Conflict with Other Instruments or Proceedings.................10
Section 2.11. Authorization and Enforceability..................................10
Section 2.12. Ownership of Assets...............................................10
Section 2.13. Material Contracts................................................10
Section 2.14. Intellectual Property. ..........................................11
Section 2.15. Environmental Matters.............................................11
Section 2.16. Insurance.........................................................13
Section 2.17. Brokers' Fees.....................................................13
Section 2.18. Customers and Suppliers...........................................13
Section 2.19. Product Liabilities and Warranties................................13
Section 2.20. Permits and Licenses..............................................14
Section 2.21. Compliance with Law and Other Regulations.........................14
Section 2.22. Accuracy of Statements............................................14
Section 2.23. Bank and Investment Accounts......................................14
i
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.........................15
Section 3.1. Organization and Standing of Buyer................................15
Section 3.2. Authorization and Enforceability..................................15
Section 3.3. Brokers' Fees.....................................................15
Section 3.4. No Conflict with Other Instruments or Proceedings.................15
Section 3.5. Accuracy of Statements............................................15
ARTICLE 4 CLOSING....................................................................15
Section 4.1. Closing...........................................................15
Section 4.2. Obligations of Seller and each of Shareholders....................16
Section 4.3. Obligations of Buyer..............................................16
Section 4.4. Further Documents or Necessary Action.............................17
ARTICLE 5 COVENANTS..................................................................17
Section 5.1. Conduct of Business Pending the Closing...........................17
Section 5.2. Access............................................................18
Section 5.3. Investigation by Buyer............................................18
Section 5.4. Notice of Breach or Failure of Condition..........................18
Section 5.5. Best Efforts......................................................18
Section 5.6. Employees and Employee Benefit Plans..............................18
Section 5.7. Delivery of Property Received After Closing.......................19
Section 5.8. Transfer Taxes....................................................19
Section 5.9. Competition.......................................................19
Section 5.10. Proration of Personal Property Taxes..............................20
Section 5.11. Preservation of Records; Cooperation..............................20
Section 5.12. Confidentiality...................................................20
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER...............................21
Section 6.1. Representations, Warranties and Covenants True at Closing;
Investigation.....................................................21
Section 6.2. Performance.......................................................21
Section 6.3. Seller's Certificate..............................................21
Section 6.4. No Adverse Changes................................................21
Section 6.5. Litigation........................................................22
Section 6.6. Opinion of Counsel for Seller and each of Shareholders............22
Section 6.7. Necessary Consents; Notices.......................................22
Section 6.8. Consulting Agreement..............................................22
Section 6.9. Lease.............................................................22
Section 6.10. Net Asset Value...................................................22
Section 6.11. Board Approval....................................................22
Section 6.12. Financing.........................................................22
Section 6.13 Proceedings Satisfactory..........................................22
ii
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER AND EACH OF SHAREHOLDERS.....................................................23
Section 7.1. Representations, Warranties and Covenants True at Closing.........23
Section 7.2. Performance.......................................................23
Section 7.3. Certificate of Buyer..............................................23
Section 7.4. Litigation........................................................23
Section 7.5. Proceedings Satisfactory..........................................23
ARTICLE 8 INDEMNIFICATION............................................................24
Section 8.1. Indemnification by Seller.........................................24
Section 8.2. Indemnification by Buyer..........................................24
Section 8.3. Environmental Liabilities.........................................25
Section 8.4. Limitations on Indemnification....................................25
Section 8.5. Third Party Claims................................................26
Section 8.6. Claims by Indemnified Party.......................................27
ARTICLE 9 TERMINATION................................................................28
Section 9.1. Termination by Mutual Consent.....................................28
Section 9.2. Termination Upon Default or Breach................................28
Section 9.3. Termination Based Upon Failure of Conditions......................28
Section 9.4. Final Expiration..................................................28
ARTICLE 10 GENERAL....................................................................28
Section 10.1. Risk of Loss......................................................28
Section 10.2. Survival of Representations, Warranties and Covenants.............28
Section 10.3. Binding Effect; Benefits; Assignment..............................28
Section 10.4. Definition of "Ordinary and Usual Course".........................29
Section 10.5. Public Disclosure.................................................29
Section 10.6. Notices...........................................................29
Section 10.7. Counterparts......................................................30
Section 10.8. Expenses..........................................................30
Section 10.9. Entire Agreement..................................................31
Section 10.10. Amendment and Waiver................................................31
Section 10.11. Severability........................................................31
Section 10.12. Headings............................................................31
Section 10.13. Governing Law.......................................................31
Section 10.14. Bulk Sales Law......................................................31
iii
EXHIBITS
Exhibit A Machinery, Equipment and Leasehold Improvements
Exhibit B Assigned Contracts
Exhibit C Intellectual Property
Exhibit D Permits and Licenses
Exhibit E Escrow Agreement
Exhibit F Allocation
Exhibit G Seller's Certificate
Exhibit H Opinion of Counsel for Seller
Exhibit I Consulting Agreements
Exhibit J Lease
Exhibit K Buyers' Certificate
DISCLOSURE SCHEDULES
Schedule 2.1 Organization and Standing of Seller
Schedule 2.2 Financial Statements
Schedule 2.3 Absence of Undisclosed Liabilities, Accounts Payable
Schedule 2.4 Taxes
Schedule 2.5 Absence of Certain Changes or Events
Schedule 2.6 Employee Relations
Schedule 2.7 Employee Benefit Plans
Schedule 2.8 Owned and Leased Personal Property; Real Property
Schedule 2.9 Litigation
Schedule 2.10 No Conflict with Other Instruments or Proceedings
Schedule 2.13 Material Contracts
Schedule 2.14 Intellectual Property
Schedule 2.15 Environmental Matters
Schedule 2.16 Insurance
Schedule 2.18 Customers and Suppliers
Schedule 2.19 Product Liabilities and Warranties
Schedule 2.20 Permits and Licenses
Schedule 2.21 Compliance with Law and Other Regulations
Schedule 2.23 Bank and Investment Accounts
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of May 6,
1998, by and between KILOVAC CORPORATION, a California corporation ("Buyer"),
and Zerubavel ("▇▇▇") ▇▇▇▇▇▇▇, a resident of Beverly Hills, California and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, a resident of Santa Ana, California (the "Shareholders'), and
WILMAR ELECTRONICS, INC., a California corporation ("Seller").
P R E A M B L E
Seller has its corporate headquarters and its operating facility at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (the "Premises") and is engaged in the
design, manufacturing, marketing and sale of protective relays, digital timers,
event recorders and test equipment (the "Business"). Shareholders each own fifty
percent (50%) of the stock of Seller and will benefit directly from this
transaction. Buyer is an affiliate of Communications Instruments, Inc., a North
Carolina corporation. Buyer desires to purchase from Seller, and Seller desires
to sell to Buyer, substantially all of the assets of Seller on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF ASSETS
Section 1.1. Agreement to Sell Assets. On the terms and subject to the
conditions of this Agreement, Seller agrees to sell, convey, assign, transfer
and deliver to Buyer (as specified below), and Buyer agrees to purchase and
acquire from Seller (as specified below), all of Seller's right, title and
interest in and to all of the assets and property owned by Seller (collectively,
the "Purchased Assets"), including without limitation, the following:
(a) all cash and cash equivalents, including marketable
securities, on hand or in bank or investment accounts;
(b) all machinery, equipment, tooling, dies, tools, furniture
and fixtures, computer terminals, office equipment, patterns, showroom
models and displays, vehicles, spare parts, leasehold improvements and
all other personal property of Seller, wherever located, including
without limitation those items listed on Exhibit A to this Agreement
and those items tagged or otherwise identified on the Closing Date as
part of the Purchased Assets, together with all express and implied
warranties by the manufacturers or sellers thereof, and all maintenance
records, brochures, catalogues and other documents relating thereto or
to the installation or functioning thereof;
(c) all inventories of raw materials, work-in-process,
finished goods (including all inventories consigned to dealers, sales
representatives, vendors and others, or in transit), materials and
supplies, wherever located;
(d) all accounts receivable of Seller and all security and
other deposits, credits and other current assets of Seller;
(e) all of Seller's right, title and interest in and to the
contracts (including exclusive supply contracts), agreements, leases,
licenses and commitments, as well as any notes or other instruments
evidencing sums owed Seller and any related security instruments or
agreements, including without limitation those identified on Exhibit B
to this Agreement;
(f) all of the trademarks and trademark applications,
including without limitation those listed on Exhibit C, along with
associated goodwill and all rights and interests of Seller therein, all
patents and patent applications, including without limitation those
listed on Exhibit C, along with associated goodwill and all rights and
interests of Seller therein, all know-how and trade secrets used or
owned by Seller and all drawings, prints, test reports, engineering
designs, assembly instructions, operations, and other technical
documentation, and all know-how, trade secrets and other intellectual
property not otherwise set forth owned by Seller (the "Intellectual
Property");
(g) all records, customer and supplier lists, pertinent
payroll information and summary of relevant information of each
employee, product information, product drawings, production
documentation, material specifications, equipment lists, formulae,
specifications, drawings, plans, reports, data, notes, correspondence,
contracts, labels, catalogues, brochures, art work, photographs,
advertising materials, marketing and production literature, files and
other records and documents, including the books of account, ledgers
and other financial records of Seller, but excluding Seller's corporate
records, tax records and minute books;
(h) to the extent transferrable, all permits, licenses,
orders, franchises and approvals maintained by Seller, including
without limitation those identified on Exhibit D to this Agreement;
(i) all choses in action, claims, causes or rights of action
and intangible property rights of Seller, including without limitation
restrictive covenants, confidentiality obligations and similar
obligations of present and former employees;
(j) the goodwill of Seller.
The Purchased Assets shall be transferred to Buyer free and clear of any and all
claims, liens, security interests, encumbrances, charges, obligations and other
restrictions, other than Permitted
2
Encumbrances. For purposes of this Agreement, "Permitted Encumbrances" shall
mean liens for current taxes that are not yet due and payable.
Section 1.2. Excluded Assets. Notwithstanding the provisions of Section
1.1 of this Agreement, the Purchased Assets shall not include (i) any lease by
the Seller from the owners of the Premises, and (ii) the life insurance policies
on ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ Marastaing, respectively (collectively, the "Excluded
Assets").
Section 1.3. Total Consideration. The total consideration to be paid
by Buyer to Seller for the Purchased Assets and the covenants of Seller in this
Agreement shall be as follows (the "Purchase Price"):
(a) Payment by Buyer of the Purchase Price (as defined in this
Agreement); and
(b) Assumption by Buyer of the Assumed Liabilities (as defined
in this Agreement).
Section 1.4. Purchase Price, Purchase Price Adjustment and Escrow.
(a) Buyer agrees to pay an amount equal to Two Million Two
Hundred Thousand Dollars ($2,200,000.00), subject to adjustment based
on the terms set forth in Sections 1.4 (b) and (c) (the "Purchase
Price"). The parties agrees that Fifty Thousand Dollars ($50,000.00) of
the Purchase Price shall be allocated as consideration for the
non-competition covenant set forth in Section 5.9 of this Agreement.
(b) The Purchase Price shall be increased or decreased on a
dollar-for-dollar basis by the amount by which Seller's Net Asset Value
(defined below) shall exceed or be less than, as the case may be,
$775,000.00 less the cash value of life insurance owned by the Seller
on ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ and on ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇. "Net Asset Value"
shall mean the Seller's current assets plus fixed assets plus goodwill
less current liabilities as of the Closing Date, all according to
generally accepted accounting principles applied on a consistent basis
with past periods. As of the Closing Date, Seller has provided Buyer
its April 30, 1998 balance sheet, and the parties have established a
tentative Net Asset Value which shall be used for disbursement of funds
at Closing. Within thirty (30) days after Closing, Buyer shall either
elect to accept the tentative Net Asset Value, which shall then be
deemed to be the Net Asset Value as of the Closing Date, or Buyer shall
have had Seller's financial records reviewed or audited, at Buyer's
expense, in order to establish a Net Asset Value as of the Closing
Date. If an audit or review is performed, the Net Asset Value
determined in such audit or review shall be deemed the Net Asset Value
as of the Closing for purposes of this Agreement. The amount by which
the Net Asset Value as of the Closing Date exceeds the tentative Net
Asset Value shall be paid within thirty (30) days to Seller by Buyer
and if the amount is below the tentative Net Asset Value shall be paid
within thirty (30) days to Buyer by Seller.
(c) Buyer shall pay at the Closing the Purchase Price as
follows: (i) Two Hundred Fifteen Thousand Dollars ($215,000.00) of the
Purchase Price shall be paid to U. S. Bank Trust National Association
("Escrow Agent") to be held and disbursed according the
2
Escrow Agreement attached as Exhibit E to this Agreement; and (ii) the
remainder shall be paid to Seller. All payments shall be by wire
transfer of immediately available funds in accordance with wire
transfer instructions provided by Seller and Escrow Agent,
respectively.
(d) The Escrow Amount (as defined in the Escrow Agreement)
shall be applied toward any claims for indemnification made by Buyer
pursuant to Article 8 during the Eighteen (18) months after the Closing
Date. If Seller notifies Buyer pursuant to Section 8.6 that it will
reimburse Buyer, both Buyer and Seller shall execute a Joint
Instruction (as defined in the Escrow Agreement) to the Escrow Agent
directing payment of such claim to Buyer. If any claims of Buyer are
disputed during such eighteen (18) month period, the amount of the
claim shall be held by the Escrow Agent (during and after the 18 month
period) until the conditions for disbursement under Section 2(B) of the
Escrow Agreement are satisfied. At the end of such eighteen (18) months
if the remaining Escrow Amount exceeds the total of all disputed
claims, the Buyer and Seller will execute a Joint Instruction to the
Escrow Agent directing payment of such excess to Seller. Buyer hereby
guarantees to Seller than all funds held by the Escrow Agent hereunder
shall accrue interest at a minimum rate of eight percent (8%) per
annum, and Buyer agrees to pay Seller for any deficiency resulting from
the failure of the funds to accrue such interest. For example
$215,000.00, compounded annually at 8%, would result in $241,488.00
after 18 months.
Section 1.5. Assumption of Certain Liabilities; Other Liabilities Not
Assumed.
(a) At the Closing Buyer shall assume and agree to pay,
perform and discharge, when due (i) the liabilities and obligations of
Seller arising with respect to periods from and after the Closing Date
under the contracts listed on Exhibit B to this Agreement and (ii) all
accounts payable of Seller up to a maximum aggregate of $40,000.00 (for
all payables) and (iii) and all product warranty (but not product
liability) claims, up to a maximum aggregate of $20,000.00 (for all
claims), relating to products shipped by Seller within the one (1) year
period immediately preceding the Closing (collectively, subsections
1.5(a)(i), (ii) and (iii) are hereinafter referred to as the "Assumed
Liabilities").
(b) Except for the Assumed Liabilities, Buyer shall not assume
or be obligated to pay, perform or discharge any liability, obligation,
debt, charge or expense of Seller of any kind, description or
character, whether accrued, absolute, contingent or otherwise, and
whether or not disclosed to Buyer in the Disclosure Schedule (defined
below) or otherwise. Without limiting the generality of the foregoing,
and notwithstanding anything to the contrary contained in this
Agreement, except for the Assumed Liabilities, Buyer shall not assume
or be obligated to pay, perform or discharge any liability, obligation,
debt, charge or expense of Seller, even if imposed upon Buyer as a
successor to Seller, with respect to any action, suit, proceeding or
claim arising out of or relating to any event occurring, or with
respect to any cause of action arising, before the Closing Date,
whether or not asserted before or after the Closing Date, including
without limitation any liability, obligation, debt, charge or expense
related to: taxes; Employee Benefit Plans (as defined in Section 2.7
4
below) or other employee benefits, environmental matters; agreements
with sales representatives; obligations or policies; termination and
severance pay; judgments; product warranty claims; product liability
claims; and contractual claims. Seller shall be liable for all product
liability claims arising from products shipped by Seller on or before
the Closing Date. Seller shall be liable for all costs and expenses
relating to or arising from the presence of any Hazardous Material
(defined below) present before or after the Closing Date at, in or
under any real property now or previously owned, leased or used by
Seller (including, without limitation, the Premises), and for any
violations of Environmental Laws by Seller, and Buyer reserves all of
its rights, including those under CERCLA (defined below), to seek
reimbursement of any such costs or expenses.
Section 1.6. Allocation of Consideration. The Purchase Price has been
agreed upon by the parties and the values assigned to the various assets which
constitute the Purchased Assets are listed on Exhibit F attached hereto. The
parties agree that Fifty Thousand Dollars ($50,000.00) of the Purchase Price
shall be allocated as consideration for the non-competition covenant set forth
in Section 5.9 of this Agreement. The parties agree to furnish each other and
the Internal Revenue Service with such applicable information as may be required
by Section 1060 of the Internal Revenue Code or the Regulations thereunder and
to cooperate in the completion and timely filing of IRS Form 8594 (Asset
Acquisition Statement).
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLER AND SHAREHOLDERS
Seller and Shareholders, jointly and severally, represent, warrant and
covenant to Buyer as follows:
Section 2.1. Organization and Standing of Seller. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California. Seller has all requisite corporate power and
authority to own, lease and operate its properties now owned or leased by Seller
and to carry on the Business as presently conducted. Neither the character of
the Purchased Assets nor the nature of the business transacted by Seller make
the licensing or qualification of Seller as a corporation necessary in any state
or jurisdiction other than those states and jurisdictions identified on Schedule
2.1 of the Disclosure Schedule delivered to Buyer by Seller simultaneously with
the execution of this Agreement (the "Disclosure Schedule"). Seller is duly
qualified to do business as a corporation in each of the jurisdictions
identified on Schedule 2.1 of the Disclosure Schedule and is in good standing in
all of those states and jurisdictions.
Section 2.2. Financial Statements. A copy of the financial statements,
including a balance sheet and statement of income, of Seller as of and for the
fiscal years ended September 30, 1995, September 30, 1996, and September 30,
1997 (the "Financial Statements") has been provided by Seller to Buyer. The
Financial Statements are in accordance with the books and records of Seller,
5
have been prepared in conformity with generally accepted accounting principles
applied on a basis consistent throughout such periods and consistent with prior
periods, and, except as set forth in Schedule 2.2 of the Disclosure Schedule,
present fairly the financial condition of the Seller as of the dates indicated
and the results of operations and changes in financial position for the periods
then ended. Seller has also provided to Buyer copies of the interim balance
sheet and interim statement of income of the Seller as of and for each month-end
during the current fiscal year to and including March 31, 1998 and April 30,
1998, in each case prepared internally by Seller (collectively, the "Interim
Financial Statements"). The Interim Financial Statements are in accordance with
the books and records of Seller, have been prepared in conformity with generally
accepted accounting principles applied on a basis consistent with similar
statements for prior periods, and, except as set forth in Schedule 2.2 of the
Disclosure Schedule, present fairly the financial condition of the Seller as of
the dates indicated and its results of operations and changes in financial
position for the periods then ended.
Section 2.3. Absence of Undisclosed Liabilities, Accounts Payable.
Except as expressly disclosed or reserved against on the most recent balance
sheet included in the Interim Financial Statements or as specifically set forth
in Schedule 2.3 of the Disclosure Schedule, Seller does not have any debts,
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, whether due or to become due, including without limitation
guarantees, liabilities or obligations on account of taxes, other governmental
charges, duties, penalties, interest or fines, other than current liabilities
for trade payables incurred in the ordinary and usual course of business since
the date of the most recent balance sheet included in the Interim Financial
Statements. As of the date of this Agreement, Seller's accounts payable do not,
and as of the Closing Date Seller's accounts payable shall not, exceed
$40,000.00.
Section 2.4. Taxes. Except as disclosed in Schedule 2.4 of the
Disclosure Schedule: (i) Seller has filed all federal, state, local and foreign
tax returns when and as Seller has been or is required by law to file and such
returns are true and correct in all material respects; (ii) Seller has paid, and
will pay for all periods ending on or before the Closing Date, all taxes and
assessments when and as the same shall be due and payable by Seller, including
without limitation income, excise, unemployment, social security, occupation,
franchise, property, sales and use taxes and all penalties and interest in
respect thereof; (iii) Seller has withheld and paid over, and will withhold and
pay over for all periods ending on or before the Closing Date, all federal,
state, local and foreign withholdings required by law; and (iv) no tax
incentive, abatement or other similar credit exists which in any way relates to
the Purchased Assets, the Business, or the employees of Seller which contains
provisions for the repayment of any tax benefit.
Section 2.5. Absence of Certain Changes or Events. Except as disclosed
in Schedule 2.5 of the Disclosure Schedule, since February 28, 1998, Seller has:
(i) conducted Seller's business in the ordinary and usual course; and (ii)
maintained Seller's records and books of account in a manner that fairly and
accurately reflects Seller's transactions, assets and liabilities in accordance
with generally accepted accounting practices consistently applied. Except as set
forth in Schedule 2.5 of the Disclosure Schedule, since February 28, 1998, there
has been no adverse change in Seller's
6
condition, financial or otherwise, the Purchased Assets or in Seller's business
or properties which is not reflected in the Interim Financial Statements.
Section 2.6. Employee Relations. Seller has identified on Schedule
2.6(a) all of the officers and employees of Seller ("Employees") which for each
listed individual gives his or her salary or wage rate and fringe benefits and,
for each Key Employee (defined below), his or her position. Except as disclosed
in Schedule 2.6 (b) of the Disclosure Schedule: (i) to the knowledge of Seller,
there is not now in existence or pending, nor has there been at any time, any
strike, slowdown, work stoppage, organizational effort, grievance, arbitration,
administrative hearing, claim of unfair labor practice, wrongful discharge,
employment discrimination or sexual harassment, or other employment dispute of
any nature, pending or threatened, against Seller; (ii) Seller is, and during
all applicable limitation periods has been, in compliance with all applicable
federal, state, local and foreign laws, executive orders and regulations
respecting employment and employment practices, terms and conditions of
employment, occupational health and safety, wages and hours; (iii) Seller is not
a party to any written or oral, express or implied, collective bargaining
agreement or other contract, agreement or arrangement with any labor union or
any other similar arrangement that is not terminable at will by Seller without
cost, liability or penalty and Seller has no knowledge of any current union
organizing activity; (iv) Seller is not a party to any written or oral, express
or implied, contract, agreement or arrangement with any of Seller's present or
former officers, employees or consultants with respect to length, duration or
conditions of employment (or the termination thereof), salaries, bonuses,
percentage compensation, deferred compensation or any other form of remuneration
which is not terminable at will by Seller without penalty; and (v) there is no
pending or threatened claim against Seller for violation of any contract,
agreement or arrangement described in (iii) or (iv) above, nor is there any
factual basis upon which a claim could be sustained. A copy of each employee
policy manual and handbook provided to or governing the Employees is attached as
Schedule 2.6 (c). Except for ▇▇. ▇▇▇▇▇▇▇▇ who has expressed his intent not to
work with the Buyer after the end of six months after Closing, no Key Employee
of Seller has notified Seller of an intention to terminate employment. In this
Section, "Key Employee" means any Employee who is presently, or during Seller's
last fiscal year was, compensated (including bonuses) at an annual rate of more
than Forty Thousand Dollars ($40,000) per year.
Section 2.7. Employee Benefit Plans.
(a) Set forth in Schedule 2.7 is an accurate and complete list
of all Employee Benefit Plans (as defined below) established,
maintained or contributed to by Seller (including, for this purpose and
for the purpose of all of the representations in this Section 2.7, all
employers (whether or not incorporated) which by reason of common
control are treated together with the Seller as a single employer
within the meaning of Section 414 of the Internal Revenue Code (the
"Code")). The term "Employee Benefit Plan" shall include all employee
benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not any such Employee Benefit Plans are otherwise exempt from the
provisions of ERISA, and also shall include, without limitation, any
nonqualified deferred compensation plans, employee benefit plans for
former employees, any employment arrangement, and any other pension,
stock, vacation,
7
disability or other benefit plan, policy or arrangement, whether or not
covered by ERISA, whether written or oral, whether funded or unfunded,
covering Employees or former employees of the Seller.
(b) Seller does not maintained or contributed to any Employee
Benefit Plan which is not in compliance with its terms, ERISA, the Code
and any other applicable laws and regulations, and Seller is not liable
for any material fine, excise tax or loss of income tax deduction with
respect to the operation of any Employee Benefit Plan. Seller does not
maintain or contribute to, and has never maintained or contributed to,
an Employee Benefit Plan which is subject to Title IV or ERISA or which
is a "multiemployer plan" as defined in ERISA Section 4001. Seller does
not maintain or contribute to any Employee Benefit Plan which has
incurred any accumulated funding deficiency within the meaning of Code
Section 412 or 418B, or which has applied for or obtained a waiver from
the IRS of any minimum funding requirement under Code Section 412.
(c) Except as disclosed on Schedule 2.7, each Employee Benefit
Plan established, maintained or contributed to by the Seller that is
intended to be qualified under Section 401(a) of the Code has been
determined to be so qualified by the Internal Revenue Service and
nothing has occurred since the date of the last such determination
which resulted or is likely to result in the revocation of such
determination.
(d) No promise has been made nor any liability incurred by
Seller for post-retirement health or life insurance or other
post-retirement benefits.
(e) Seller has been and is now in compliance with the "COBRA"
health care continuation requirements of ERISA Sections 601-608 and
Code Section 4980B and any applicable state continuation coverage laws.
(f) Seller has delivered or caused to be delivered or made
available to Buyer or its counsel true and complete copies of (i) all
Employee Benefit Plans established, maintained or contributed to by the
Seller, together with all amendments thereto including those which will
become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such
Employee Benefit Plan qualified under Section 401 or 501 of the Code
and (ii) Form 5500 or Form 5500-C/R, as applicable, for the three most
recently completed fiscal years for each such Employee Benefit Plan
required to file such form, and (iii) the most recent Summary Plan
Description (plus all subsequent Summaries of Material Modification)
for each such Employee Benefit Plan subject to the Summary Plan
Description requirements of ERISA Section 104(b).
(g) Seller has not engaged in any transaction with respect to
the Employee Benefit Plan which could subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code, nor has
Seller or any of its officers or employees, to the extent it or any of
them are fiduciaries with respect to such plans, breached any
responsibilities or obligations imposed upon fiduciaries under Title I
of ERISA which may result in any claim
8
being made under or by or on behalf of any such plans by any party with
standing to make such claim.
(h) All amounts which Seller is required to have paid as
contributions to any Employee Benefit Plan have been paid within the
time prescribed by applicable law or under the Employee Benefit Plan or
any agreement relating to any Employee Benefit Plan to which Seller is
a party. Seller has made adequate provision for reserves to meet any
such contributions that have not been made and such reserves are shown
on Seller's financial statements. Benefits under all Employee Benefit
Plans are as represented and have not been increased or decreased
subsequent to the date as of which documents have been provided to
Buyer.
(i) There are no pending or threatened claims (other than
routine claims for benefits) or lawsuits, and no facts or events exist
that reasonably could be expected to give rise to any claims (other
than routine claims for benefits) or lawsuits with respect to any
Employee Benefit Plan.
Section 2.8. Owned and Leased Personal Property; Real Property.
Schedule 2.8 of the Disclosure Schedule identifies all tangible personal
property that Seller owns or leases other than immaterial items of tangible
personal property (the "Personal Property"). Except for Permitted Encumbrances
and as set forth in Schedule 2.8 of the Disclosure Schedule, Seller owns all of
the Personal Property (other than leased Personal Property) free and clear of
all claims, liens, security interests, encumbrances, charges, obligations and
other restrictions. Except as disclosed on Schedule 2.8 of the Disclosure
Schedule, neither Seller nor any other party is in default under the terms of
any lease with respect to Personal Property, and all such leases are in full
force and effect. Schedule 2.8 of the Disclosure Schedule includes an attached
copy of each such written lease or a description of each such oral lease.
Schedule 2.8 of the Disclosure Schedule describes all tangible personal property
that Seller uses or possesses but does not own or lease, and all tangible
personal property that Seller owns or leases but does not possess and, in the
latter case, gives the location of the property. All personal property that
Seller owns or leases will be in the possession of Seller on the Closing Date or
at the location specified on Schedule 2.8. Except as disclosed on Schedule 2.8
of the Disclosure Schedule, all of the Purchased Assets which are tangible
property are in good-operating condition and, in the case of inventory, in good,
salable condition. No tangible personal property other than the Personal
Property will be needed by Buyer to operate the Business after the Closing in
the manner in which the Business was operated immediately prior to the Closing.
Except as identified on Schedule 2.8 of the Disclosure Schedule, Seller does not
now and has never in the past owned or leased any real property or premises and
does not know and has never in the past operated from any real property or
premises, other than Seller's current lease of the Premises. As of the Closing,
the Seller's lease of the Premises has been terminated.
Section 2.9. Litigation. Except as set forth in Schedule 2.9 of the
Disclosure Schedule, there is no suit, action, proceeding (legal, administrative
or otherwise), claim, investigation or inquiry (by an administrative agency,
governmental body or otherwise) pending or, to the knowledge of Seller,
threatened against Seller or any of the properties, assets, or business
prospects of Seller,
9
or to which Seller is or, to the knowledge of Seller, is reasonably likely to
become, a party, and Seller knows of no factual basis upon which any such suit,
action, proceeding, claim, investigation or inquiry could reasonably likely be
sustained. There is no outstanding judgment, order, writ, injunction or decree
of any court, administrative agency, governmental body or arbitration tribunal
against or affecting Seller or any of the properties, assets or business
prospects of Seller, except as disclosed in Schedule 2.9 of the Disclosure
Schedule.
Section 2.10. No Conflict with Other Instruments or Proceedings. Except
as disclosed in Schedule 2.10 of the Disclosure Schedule, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement will not: (i) result in the breach of any of the terms or
conditions of, or constitute a default under, the Articles of Incorporation or
the Bylaws of Seller or any contract, agreement, lease, commitment, indenture,
mortgage, pledge, note, bond, license or other instrument or obligation of
Seller and to which Seller is now a party or by which Seller or any of Seller's
properties or assets may be bound or affected; or (ii) violate any law, rule or
regulation of any administrative agency or governmental body or any order, writ,
injunction or decree of any court, administrative agency or governmental body.
All consents, approvals or authorizations of, or declarations, filings or
registrations with, any third parties or governmental or regulatory authorities
required of Seller in connection with the execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated by this
Agreement are set forth in Schedule 2.10 of the Disclosure Schedule. Seller
shall obtain or make, as applicable, all such consents, approvals,
authorizations, declaration, filings and registrations before the Closing Date.
Section 2.11. Authorization and Enforceability. Seller has full
capacity, power and authority to enter into this Agreement and all ancillary
agreements and to carry out the transactions contemplated by this Agreement, and
this Agreement and all ancillary agreements are binding upon Seller and are
enforceable against Seller in accordance with their respective terms.
Section 2.12. Ownership of Assets. Seller owns the Purchased Assets
free and clear of all liens, charges, pledges, security interests, encumbrances
or other claims whatsoever, save and except Permitted Encumbrances and those
liens, charges, pledges, security interests and encumbrances existing on the
date hereof as set forth in Schedule 2.8 of the Disclosure Schedule, all of
which (other than Permitted Encumbrances) shall be discharged by Seller at or
before the Closing.
Section 2.13. Material Contracts. Schedule 2.13 of the Disclosure
Schedule contains a list of (i) the ten (10) largest customers, by dollar volume
of sales, of Seller for the twelve (12) months ended September 30, 1998 and
September 30, 1997 and the approximate total sales to each customer for each of
those periods; (ii) the ten (10) largest suppliers, by dollar volume of
purchases, of Seller for each of the twelve (12) month periods ended September
30, 1998 and September 30, 1997; (iii) a list of all other contracts (including
without limitation product sales or service documentation), leases and other
obligations of Seller which involve amounts greater than $10,000.00 or with a
term of greater than two (2) years; and (iv) any contract out of the ordinary
and usual course of business (collectively, the "Material Contracts"). Except as
disclosed in Schedule 2.13 of the Disclosure Schedule, Seller has not given any
power of attorney to any person, firm or corporation for any
10
purpose whatsoever. All of the Material Contracts are valid and enforceable in
accordance with their terms, and Seller and all other parties to each of the
Material Contracts have performed in all respects all obligations required to be
performed in connection therewith. Neither Seller nor any other party is in
default or in arrears under the terms of any of the Material Contracts, and no
condition exists or event has occurred that, with the giving of notice or the
lapse of time or both, would constitute a default under any of them. No person,
firm or corporation has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming an agreement, for the
purchase from Seller of any of the Purchased Assets. Schedule 2.13 of the
Disclosure Schedule also contains a complete and current list of all purchase
orders of Seller.
Section 2.14. Intellectual Property. Schedule 2.14 of the Disclosure
Schedule describes all patents, patent applications, inventions upon which
patent applications have not yet been filed, service marks, trade names,
trademarks, trademark registrations and applications, copyrighted works and
copyright registrations and applications that Seller owns, possesses or uses,
and, unless otherwise indicated in Schedule 2.14, Seller will own the entire
right, title and interest in and to the same on the Closing Date, free and clear
of all claims, liens, licenses, sublicenses, charges or encumbrances. To the
knowledge of Seller, there is no infringement or unlawful use by any person or
entity of any such patents, service marks, trade names, trademarks or
copyrights. Except as set forth in Schedule 2.14 of the Disclosure Schedule,
Seller has not infringed or unlawfully used the patents, service marks, trade
names, trademarks, copyrights or other proprietary rights of any other person or
entity. Schedule 2.14 of the Disclosure Schedule also sets forth a list of all
licenses that were granted to Seller by others or to others by Seller. Schedule
2.14 of the Disclosure Schedule also sets forth all agreements relating to
technology, know-how or procedures that Seller is licensed or authorized to use
by others. No patents, patent applications, service marks, trade names,
trademarks, trademark registrations or applications, copyrighted works,
copyright registrations or applications or grants of licenses set forth in
Schedule 2.14 of the Disclosure Schedule are subject to any pending or, to the
knowledge of Seller, threatened, claim or challenge, and, to the knowledge of
Seller, there is no valid basis for sustaining any claim or challenge, except as
set forth in Schedule 2.14 of the Disclosure Schedule. The manufacturing and
engineering drawings, process sheets, specifications, bills of material, trade
secrets, "know how," and other like data of Seller are in such form and of such
quality that Buyer can, following the Closing, design, produce, manufacture,
assemble and sell the products and provide the services heretofore provided by
Seller in a manner that meets the applicable specifications and conforms with
the quality standards heretofore met by Seller. Except for the licenses and
rights listed in Schedule 2.14 of the Disclosure Schedule, Seller does not
require a license or other proprietary right to operate the Business or to
manufacture or sell the products or perform any services associated with the
Purchased Assets or the Business.
Section 2.15. Environmental Matters. For purposes of this Section 2.15:
(i) "Seller" shall mean Seller and each prior or subsequent owner or operator of
the Premises; (ii) "Environmental Law" shall mean any federal, state or local
law (including common law), statute, regulation, ordinance, published guideline
or standard, or order, or agreement or consent order to which Seller is or has
been party, including a permit issued pursuant to any of the foregoing, related
to air quality, water quality, solid waste management, hazardous or toxic
substances or the protection of public health, natural resources or the
environment, including without limitation the Comprehensive
11
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"); and (iii) the term "Hazardous Material" shall mean any hazardous
substances as defined by CERCLA, petroleum or any petroleum derivative or
by-product, and any pollutant, contaminant, solid waste or hazardous or toxic
waste or substance which is defined or regulated as such by any Environmental
Law.
(a) Except as set forth in Schedule 2.15 of the Disclosure
Schedule, Seller is presently and at all times has been in compliance
with all applicable Environmental Laws;
(b) Except as set forth in Schedule 2.15 of the Disclosure
Schedule, Seller has not treated, stored or disposed of, or knowingly
permitted the treatment, storage or disposal of, Hazardous Materials on
real property owned, leased or used by Seller at any time;
(c) Except as set forth on Schedule 2.15 of the Disclosure
Schedule, there are no writs, injunctions, decrees, orders or judgments
outstanding, and no lawsuits, claims, or other proceedings pending or
threatened, relating to Seller or its ownership, use, maintenance or
operation of the Purchased Assets under any Environmental Law, nor is
there any agreement or consent order to which Seller is a party in
relation to any environmental matter, nor is any such agreement or
order necessary for the continued compliance by Seller with any
Environmental Law. In addition, except as set forth in Schedule 2.15 of
the Disclosure Schedule, there are no investigations or inquiries
pending or threatened relating to Seller or Seller's ownership, use,
maintenance or operation of the Purchased Assets under any
Environmental Law;
(d) Except as set forth on Schedule 2.15 of the Disclosure
Schedule, the real and personal property owned or leased at any time by
Seller does not contain any underground storage tanks ("USTs"),
receptacles or other similar underground containers or depositories;
(e) Except as described on Schedule 2.15 of the Disclosure
Schedule, the operations of Seller or its employees, agents or
contractors have not caused and will not cause: (i) environmental
contamination of any real or personal property currently or previously
owned, leased, or used by Seller; or (ii) any other condition that
could give rise to a claim against Seller or Buyer under any
Environmental Law. Except as described on Schedule 2.15 of the
Disclosure Schedule, to the knowledge of Seller, all such real or
personal property is free of environmental contamination. For purposes
of this Agreement, "environmental contamination" shall mean the release
or presence of Hazardous Materials to, on, or in the air, soil,
groundwater or surface waters at times or in concentrations or
quantities sufficient to result in the assertion of any reporting
requirements, cleanup liabilities, claims, obligations, fines or
penalties under any Environmental Laws.
Schedule 2.15 of the Disclosure Schedule contains a complete list of
all of Seller's environmental emission or discharge, waste transportation,
storage and disposal licenses, permits, regulatory plans, identification numbers
and compliance schedules that are required for the operation of the Business
under any Environmental Law, together with the durations and renewal dates
12
thereof, complete copies of each of which are located at Seller's facilities.
Schedule 2.15 of the Disclosure Schedule also contains a complete list of all
on-site treatment, storage and disposal facilities presently, or at any time in
the past, used by Seller. Except as disclosed on Schedule 2.15 of the Disclosure
Schedule: (i) none of the sites listed on Schedule 2.15 of the Disclosure
Schedule is a priority site or proposed priority site (or a site under
consideration for proposal) on the United States National Priorities List under
CERCLA, or has been designated as a Superfund site thereunder or a site to which
moneys authorized under CERCLA are being spent or applied, or is listed on, or
is being considered for listing on, any priority list maintained under any state
or foreign law similar to CERCLA or is subject to, or being considered for, any
enforcement action under any other Environmental Law, and none of the real
property that Seller owns, leases or uses has been designated as such a site.
Section 2.16. Insurance. Schedule 2.16 of the Disclosure Schedule
contains a list of all policies of liability, crime, fidelity, life, fire,
product liability, workers' compensation, health, director and officer
liability, and all other forms of insurance that Seller owns or holds, including
without limitation those that relate to the Purchased Assets, the Business, or
the Employees, including for each policy the name of the insurer, the amount of
coverage, the type of insurance, the policy number, the renewal or expiration
date, and all pending claims thereunder. All of the insurance policies listed in
Schedule 2.16 of the Disclosure Schedule are outstanding and in full force, all
premiums with respect to those policies are currently paid and all duties of the
insured under those policies have been fully discharged. The present insurance
coverage of Seller, as set forth in Schedule 2.16 of the Disclosure Schedule,
currently is and will remain in full force and effect through the Closing Date.
Seller's complete workers' compensation and general liability claim experience
for the past three (3) years is accurately summarized in Schedule 2.16 of the
Disclosure Schedule.
Section 2.17. Brokers' Fees. Except for compensation which Seller must
pay to ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., Seller has not incurred any liability for
brokers' fees, finders' fees, agents' commissions, financial advisory fees or
other similar forms of compensation in connection with this Agreement or any
transaction contemplated by this Agreement.
Section 2.18. Customers and Suppliers. Except as set forth on Schedule
2.18 of the Disclosure Schedule, there has not been any adverse change in the
business relationship of Seller with any customer or supplier listed on Schedule
2.13 of the Disclosure Schedule, nor, to the knowledge of Seller, could an
adverse change be anticipated as a result of the consummation of the
transactions contemplated by this Agreement. Except as disclosed in Schedule
2.18 of the Disclosure Schedule, all orders and commitments were made in the
ordinary and usual course of business. Except as disclosed on Schedule 2.18 of
the Disclosure Schedule, there are no pending or, to the knowledge of Seller,
threatened claims against Seller to return products or to require repairs or
replacement to products sold or services rendered, by reason of alleged
overshipments, defective products or services or otherwise.
Section 2.19. Product Liabilities and Warranties. There are no express
or implied warranties applicable to products sold or services provided by
Seller, except as disclosed on
13
Schedule 2.19 of the Disclosure Schedule. Except as disclosed on Schedule 2.19
of the Disclosure Schedule, there is no action, suit, proceeding or claim
pending or, to the knowledge of Seller, threatened against Seller with respect
to products sold or services provided by Seller under any warranty, express or
implied, and, to the knowledge of Seller, there is no basis upon which any claim
could be sustained. Schedule 2.19 of the Disclosure Schedule also summarizes all
product liability claims that have been asserted against Seller with respect to
products sold or services provided during the five (5) years preceding the date
of this Agreement. For each of the products sold by Seller, the last Product
Date Code (identifying the last product sold by Seller) as of the Closing Date
is set forth on Schedule 2.19.
Section 2.20. Permits and Licenses. All permits, licenses, orders and
approvals necessary for Seller to operate the Purchased Assets and carry on the
Business as presently conducted are identified on Schedule 2.20 of the
Disclosure Schedule, are in full force and effect, and have been complied with
by Seller in all material respects. All fees and charges incident to those
permits, licenses, orders and approvals have been fully paid and are current,
and, to the knowledge of Seller, no suspension or cancellation of any such
permit, license, order, or approval has been threatened or is reasonably likely
to result by reason of the transactions contemplated by this Agreement.
Section 2.21. Compliance with Law and Other Regulations. Except as set
forth on Schedule 2.21 of the Disclosure Schedule, Seller is in material
compliance with all foreign, federal, state and local laws, statutes,
regulations, ordinances, policy, guideline and standard. Except as set forth on
Schedule 2.21 of the Disclosure Schedule, Seller is not subject to nor, to
Seller's knowledge, has Seller been threatened with, any fine, penalty,
liability or disability as the result of a failure to comply with any
requirement of foreign, federal, state and local law, statute, regulation,
ordinance, policy, guideline or standard or any requirement of any governmental
body or agency having jurisdiction over Seller, the conduct of the Business, the
use of the Purchased Assets or any premises occupied by Seller. There are no
outstanding work orders relating to the Purchased Assets or the Business from or
required by any police or fire department, sanitation, health or factory
authorities or from any foreign, federal, state or local department or authority
or any matters under discussion with any such departments or authorities
relating to work orders.
Section 2.22. Accuracy of Statements. The Confidential Report of Wilmar
Electronics, Inc., dated December 1997 (the "Report"), has been provided to
Buyer and is incorporated herein by reference. No representation or warranty
made by Seller in this Agreement, the Report, the Disclosure Schedule, or any
statement, certificate or schedule furnished, or to be furnished, to Buyer
pursuant to this Agreement, or in connection with the transactions contemplated
by this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained therein not misleading. The foregoing representations,
warranties and covenants shall be deemed to be made as of the date of this
Agreement and again as of the Closing Date.
Section 2.23. Bank and Investment Accounts. Schedule 2.23 sets forth a
list of all bank and investment accounts and safe deposit boxes in the name of
or controlled by the Seller and details about the persons having access thereto.
14
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents, warrants and covenants to Seller and Shareholders as
follows:
Section 3.1. Organization and Standing of Buyer. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina.
Section 3.2. Authorization and Enforceability. Buyer has full capacity,
power and authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement, and this Agreement and all
ancillary agreements are binding upon Buyer and are enforceable against Buyer in
accordance with their terms.
Section 3.3. Brokers' Fees. Buyer has not incurred any liability for
brokers' fees, finders' fees, agents' commissions, financial advisory fees or
other similar forms of compensation in connection with this Agreement or any
transaction contemplated by this Agreement.
Section 3.4. No Conflict with Other Instruments or Proceedings. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement will not : (i) result in the breach
of any of the terms or conditions of, or constitute a default under, the
Articles of Incorporation or the Bylaws of Buyer; or (ii) violate any law, rule
or regulation of any administrative agency or governmental body or any order,
writ, injunction or decree of any court, administrative agency or governmental
body. No consents, approvals, or authorizations of, or declarations, filings or
registrations with, any third parties or governmental or regulatory authorities
are required of Buyer in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated by this
Agreement.
Section 3.5. Accuracy of Statements. No representation or warranty made
by Buyer in this Agreement, or any statement, certificate or schedule furnished,
or to be furnished, to Seller pursuant to this Agreement, or in connection with
the transactions contemplated by this Agreement, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading. The
foregoing representations, warranties and covenants shall be deemed to be made
as of the date of this Agreement and again as of the Closing Date.
ARTICLE 4
CLOSING
Section 4.1. Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Seller in
Torrance, California, at 10:00 a.m., local time,
15
on May 6, 1998, or at such other place, time and date as the parties may agree
(the "Closing Date"), and the closing shall be effective as of 12:01 a.m. May 6,
1998.
Section 4.2. Obligations of Seller and each of Shareholders. At the
Closing, Seller and each of Shareholders shall deliver to Buyer:
(a) Bills of sale, endorsements, assignments and such other
instruments of transfer as are sufficient, in the judgment of Buyer and
its counsel, to vest in Buyer ownership of the Purchased Assets (as
contemplated by this Agreement), free and clear of any and all claims,
liens, security interests, encumbrances, charges, obligations and other
restrictions, other than Permitted Encumbrances;
(b) All records and other documents to be acquired by Buyer
pursuant to this Agreement;
(c) The certificate of Seller and Shareholders described in
Section 6.3 of this Agreement;
(d) The opinion of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., counsel to Seller
and Shareholders, as described in Section 6.6 of this Agreement; and
(e) A certified copy of resolutions of Seller's Shareholders
and Board of Directors authorizing the consummation of the transactions
contemplated by this Agreement.
In addition to the documents and other items specifically described above,
Seller and Shareholders shall execute and deliver other instruments at the
Closing as described in Articles 6 and 7 of this Agreement.
Section 4.3. Obligations of Buyer. At the Closing, Buyer shall deliver
to Seller and Shareholders:
(a) Such assumption documents and agreements as are
sufficient, in the reasonable judgment of Seller and its counsel, for
the assumption by Buyer of the Assumed Liabilities;
(b) The certificate of Buyer described in Section 7.3 of this
Agreement;
(c) The Purchase Price, by wire transfer of immediately
available funds in accordance with wire transfer instructions provided
by Seller to Buyer; and
(d) A certified copy of resolutions of Buyer's Board of
Directors authorizing the consummation of the transactions contemplated
by this Agreement.
16
In addition to the documents and other items specifically described above, Buyer
shall also execute and deliver other instruments at the Closing as described in
Articles 6 and 7 of this Agreement.
Section 4.4. Further Documents or Necessary Action. Buyer, Seller and
each of Shareholders agree to take all such further actions on or after the
Closing Date as Buyer or Seller may deem to be reasonably necessary, desirable
or appropriate to effectuate the transactions contemplated in this Agreement.
ARTICLE 5
COVENANTS
Seller and Shareholders agree with Buyer, and Buyer agrees with Seller
and each of Shareholders to the following covenants, each of which shall survive
the Closing pursuant to their terms:
Section 5.1. Conduct of Business Pending the Closing. During the period
from the date of this Agreement to the Closing Date, Seller shall act, and shall
conduct the Business, in the ordinary and usual course and maintain Seller's
records and books of account in a manner that fairly and accurately reflects
Seller's transactions, assets, liabilities, income and expense, in accordance
with generally accepted accounting principles applied on a basis consistent with
prior periods. Seller shall preserve intact the present business organization
and personnel of Seller, preserve the present goodwill of Seller with all
persons having business dealings with Seller and comply with all laws applicable
to Seller and to the Purchased Assets and the conduct of the Business. Without
limiting the foregoing, Seller agrees that from the date of this Agreement to
the Closing Date, Seller shall not without the written consent of Buyer:
(a) entertain, enter into or continue any negotiations,
discussions or agreements with anyone other than Buyer contemplating or
respecting the acquisition by such other person or entity of all or
part of the Seller, the Purchased Assets or the Business, whatever the
form such purchase transaction may contemplate;
(b) take any action that would interfere with or prevent
performance of this Agreement;
(c) do or suffer to be done any act or event described in
Section 2.5 of this Agreement or otherwise engage in any activity or
enter into any transaction that would be inconsistent in any respect
with any of the representations, warranties or covenants of Seller set
forth in this Agreement, as if those representations, warranties and
covenants were made after the activity or transaction and all
references to the date of this Agreement were deemed to be the later
date; and
17
(d) make or allow to be made any dividend or distribution to
the shareholders of Seller.
Section 5.2. Access. During the period from the date of this Agreement
to the Closing Date, Seller shall cause Buyer and its designated representatives
and agents to be given reasonable access to the buildings, offices, records,
files, insurance policies, and any and all other records of the Seller, for the
purpose of conducting an investigation of the Purchased Assets, litigation and
all other matters relating to the Business; provided, however, that the
investigation shall be conducted in a manner that does not unreasonably
interfere with the normal operations and employee relationships of Seller.
Subject to the foregoing, Seller shall cause its officers and other employees to
assist Buyer in making the investigation and shall cause the accountants (both
internal and independent), officers and other employees and representatives of
Seller to be available to, cooperate with, and assist Buyer. During the
investigation, Buyer shall have the right to make copies of such records, files,
tax returns and other materials as Buyer may deem advisable at Buyer's expense.
Seller shall respond fully to all inquiries.
Section 5.3. Investigation by Buyer. Notwithstanding any other
provision of this Agreement, no investigation by Buyer or its employees,
attorneys, independent accountants, business consultants or other
representatives or agents shall affect in any manner the representations,
warranties or covenants of Seller and each of Shareholders set forth in this
Agreement (or in any document to be delivered in connection with the
consummation of the transactions contemplated by this Agreement) or Buyer's
right to rely thereon, and those representations, warranties and covenants shall
survive the investigation.
Section 5.4. Notice of Breach or Failure of Condition. Buyer and Seller
shall give prompt notice to the other party of the occurrence of any event or
the failure of any event to occur that might preclude or interfere with the
satisfaction of any condition precedent to the obligations of such other party
under this Agreement.
Section 5.5. Best Efforts. Seller and each of Shareholders shall use
its best efforts to obtain all consents and approvals necessary to transfer the
Purchased Assets to Buyer in accordance with the terms of this Agreement, and to
bring about the satisfaction of the conditions required to be performed,
fulfilled and complied with by Seller and each of Shareholders pursuant to this
Agreement and to take or cause to be taken all action, and to do or cause to be
done all things, necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement as expeditiously as practicable. Without limiting the generality
of the foregoing, Seller and each of Shareholders shall, to the extent
requested, cooperate with and assist Buyer in obtaining all licenses, permits
and the authorizations required to be obtained by Buyer in connection with the
ownership of the Purchased Assets and operation of the Business, which licenses,
permits and authorizations are not included in the Purchased Assets.
Section 5.6. Employees and Employee Benefit Plans. Seller will continue
to maintain responsibility for and comply with any applicable state continuation
coverage laws following the
18
Closing Date with respect to its Employees and former employees. Buyer shall not
assume nor in any way be liable for any Employee Benefit Plan or for any other
obligations of Seller to Employees or former employees of Seller. Seller shall
retain all liability and responsibility for its Employees Benefit Plans. Seller
will treat its termination of Employees as a "termination" of its Employees
Benefit Plans under Code Section 411(d)(3), thereby resulting in the 100%
vesting of Employees who have become participants under those plans.
Section 5.7. Delivery of Property Received After Closing. From and
after the Closing, Seller and each of Shareholders shall promptly transfer to
Buyer, from time to time, any cash or other property received by Seller and each
of Shareholders (including without limitation any payments on accounts
receivables) that is associated with or relates to the Purchased Assets.
Section 5.8. Transfer Taxes. Buyer shall pay all federal and local
sales/transfer taxes incurred in connection with the transfer to Buyer of the
Purchased Assets under this Agreement. Buyer shall also pay all transfer taxes,
recording fees and title transfer fees incurred in connection with the transfer
of the Intellectual Property under this Agreement.
Section 5.9. Competition. The parties are entering into this Section
5.9 to protect and preserve the goodwill acquired by Buyer pursuant to this
Agreement. For a period of five (5) years after the Closing Date, Seller and
each of the Shareholders separately shall not, in any manner, directly or
indirectly, on its behalf or as an agent of, on behalf of, or in conjunction
with any other person, firm or corporation, or as a partner of any partnership,
or as a shareholder of any corporation, own, manage, acquire, operate, control
or participate in the ownership, management, operation or control of, or have
any financial interest in, any person, firm, business, corporation, or other
organization that competes with Buyer in the protective relay business (a
"Competitor") within the Territory. "Territory" means the United States, Canada
and Mexico; the United States; and the state of California. Notwithstanding the
foregoing, nothing contained in this Agreement shall prohibit Seller or each
Shareholder from acquiring not more than five percent (5%) of the outstanding
shares of any equity security of a Competitor or an affiliate of a Competitor
listed for trading on the New York Stock Exchange or the American Stock Exchange
or quoted on the National Association of Securities Dealers Automated Quotation
System. In addition, for a five (5) year period after the Closing Date, Seller
and each of the Shareholders separately agree not to induce any person who is
then an employee of Buyer to leave Buyer's (or any successor's or assign's)
employment or directly or indirectly assist any other person or entity in
requesting or inducing any such employee to leave Buyer, and Seller and each of
the Shareholders separately agree not to offer to employ or employ any person
who is then an employee of Buyer. Buyer shall be entitled (without limitation of
any other remedy and without posting bond) to specific performance and/or
injunctive relief with respect to any breach or threatened breach of the
foregoing covenants. If any court of competent jurisdiction shall at any time
deem the foregoing time periods too lengthy, the Territory to broad or the scope
of the covenants too broad, the restrictive time period shall be deemed to be
the longest period permissible by law, the Territory shall be the broadest
permissible by law and the scope shall be deemed to comprise the largest scope
permissible by law under the circumstances. It is the intent of the parties to
protect and preserve the business and goodwill acquired by Buyer and therefore
the
19
parties agree and direct that the time period, Territory and scope of the
foregoing covenants shall be the maximum permissible duration and size.
Section 5.10. Proration of Personal Property Taxes. Seller shall
provide to Buyer a list of personal property that is being transferred to Buyer
pursuant to this Agreement (the "Business Property Listing for 1998") upon which
the local taxing authority based its assessment of personal property taxes that
became a lien against such personal property on or after January 1, 1998.
Personal property taxes that have become a lien against the personal property
but which are not yet due and payable shall be prorated between Buyer and Seller
on the basis of a 365-day calendar year using as an estimated tax rate the tax
rate applied to such property in 1997. Such taxes shall be deemed to accrue
proportionately throughout the calendar year in which such taxes first become
due and payable. Seller shall be responsible for that portion of such taxes that
has become a lien against the personal property and accrued on or before the
Closing Date. Buyer shall be responsible for that portion of such taxes that has
become a lien against the personal property but will accrue after the Closing
Date. Buyer shall pay all such taxes when the same become due and shall receive
credit at the Closing for the amount for which Seller assumes responsibility
pursuant to this Section, which credit shall reduce the Purchase Price.
Following the issuance of the 1998 bills for personal property taxes, the
parties shall reconcile the estimated and actual tax rates and the party who
underpaid its share shall promptly reimburse the amount underpaid to the other
party.
Section 5.11. Preservation of Records; Cooperation. From and after the
Closing Date, all books, records and documents acquired pursuant to this
Agreement by Buyer shall be available during regular business hours for review
and/or copying to the officers, attorneys, accountants and other authorized
representatives of Seller as may be necessary in connection with its year-end
accounting requirements, the preparation of tax returns and reports or documents
to be filed with any regulatory agency or for any other reasonable purpose,
provided that access to such books, records and documents shall not unreasonably
interfere with the business operation of Buyer. Buyer will for a period of seven
(7) years from and after the Closing Date maintain and preserve all such books,
records and documents. After the end of such seven (7) year period, Buyer may
destroy and/or dispose of any such books, records and documents unless Seller
shall give to Buyer written notice not more than ninety (90) and not less than
thirty (30) days before the end of such seven (7) year period of Seller's desire
to preserve such books, records or documents. If Seller gives such notice to
Buyer, Seller shall have reasonable access during Buyer's normal business hours
to inspect such books, records or documents and may remove any such books,
records or documents that it wishes to retain. Seller shall remove any such
books, records or documents within ninety (90) days of the date that such notice
is mailed to Buyer. Buyer may dispose of any such books, records or documents
not removed by Seller within such ninety (90) day period.
Section 5.12. Confidentiality. Seller and each of the Shareholders
separately agree, that prior to and after the closing Date, with respect to
information of Buyer and any of its affiliates which is not generally known to
the public or which would constitute a trade secret under the Uniform Trade
Secrets Act (the "Confidential Information"), as follows: (i) that the
Confidential Information is an integral and key part of the assets of Buyer and
that the unauthorized use or disclosure of the Confidential Information would
seriously damage Buyer and its business, (ii) all
20
Confidential Information shall remain the exclusive property of Buyer, (iii)
Seller and each of the Shareholders separately shall not use, disseminate, copy
or otherwise disclose any Confidential Information and Seller shall restrict
access to such Confidential Information to those of its employees who have a
need to know and are bound by obligations of confidentiality and non-use
equivalent to those set forth herein. The term "Confidential Information" as
used in this Agreement shall not include information which: (i) is or becomes a
matter of public knowledge through no fault of Seller, either Shareholder or
Seller's employees or (ii) is disclosed to Seller by a person who is not subject
to any confidentiality obligation. This Section 5.12 shall survive the Closing
Date and any termination of this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
All obligations of Buyer under this Agreement are, except to the extent
expressly waived in writing by Buyer, subject to the satisfaction by Seller and
each of Shareholders at or before the Closing of all of the following
conditions:
Section 6.1. Representations, Warranties and Covenants True at Closing;
Investigation. The representations, warranties and covenants of Seller and each
of Shareholders contained in this Agreement and in any document to be delivered
in connection with the consummation of the transactions contemplated by this
Agreement, specifically including without limitation the Disclosure Schedule,
shall be true and correct when made and shall be true and correct on the Closing
Date as though those representations, warranties and covenants were made again
on the Closing Date.
Section 6.2. Performance. Seller and each of Shareholders shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by Seller and each of Shareholders
before or at the Closing.
Section 6.3. Seller's Certificate. Buyer shall have received a
certificate substantially in the form of attached Exhibit G, signed by Seller
and each of Shareholders and dated as of the Closing Date, to the effect that
all representations, warranties and covenants made in this Agreement by Seller
and each of Shareholders are on the Closing Date true and correct in all
respects and that Seller and each of Shareholders have performed in all respects
the obligations, agreements and covenants undertaken by Seller and each of
Shareholders in this Agreement to be performed on or before the Closing Date.
Section 6.4. No Adverse Changes. Except as contemplated by this
Agreement, there shall have been no material adverse change in the condition,
business or operations, financial or otherwise, of the Seller, the Purchased
Assets or the Business, in each case taken as a whole, from the date of this
Agreement to the Closing Date.
21
Section 6.5. Litigation. On the Closing Date, there shall not be any
pending or threatened litigation in any court or any proceedings by or before
any governmental commission, board, agency or other instrumentality with a view
to seeking, or in which it is sought, to restrain or prohibit the consummation
of the transactions contemplated by this Agreement or in which it is sought to
obtain divestiture, rescission or damages in connection with the transactions
contemplated by this Agreement, and no investigation by any governmental or
other agency shall be pending or threatened that might result in any such
litigation or other proceeding.
Section 6.6. Opinion of Counsel for Seller and each of Shareholders.
Buyer shall have received from counsel for Seller and each of Shareholders a
written opinion dated as of the Closing Date, substantially in the form of
attached Exhibit H.
Section 6.7. Necessary Consents; Notices. All authorizations, consents
and approvals shall have been received and shall be in full force and effect
from (i) federal, state, local and foreign regulatory bodies and officials that
are necessary in the opinion of Buyer for the consummation of the transactions
contemplated by this Agreement and (ii) any third parties that are necessary in
the opinion of Buyer for the transfer and assignment of any Purchased Assets or
Assumed liabilities.
Section 6.8. Consulting Agreement. Buyer shall have entered into a
Consulting Agreement, substantially in the form attached hereto as Exhibit I
with ▇▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇") ▇▇▇▇▇▇▇ and with ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (each the
"Consulting Agreement").
Section 6.9. Lease. Buyer shall have entered into a Lease substantially
in the form attached hereto as Exhibit J (the "Lease").
Section 6.10. Net Asset Value. Seller shall have a Net Asset Value (as
defined in Section 1.4) as of the Closing Date of $775,000.00 less the cash
value of life insurance owned by the Seller on ▇▇. ▇▇▇▇▇▇▇▇▇ ("▇▇▇") ▇▇▇▇▇▇▇ and
on ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇.
Section 6.11. Board Approval. Approval of this Agreement and the
ancillary documents by the Board of Directors of Buyer.
Section 6.12. Financing. Buyer's securing financing for the transaction
acceptable to Buyer, and Seller's making available financial statements required
by the financial institution.
Section 6.13 Proceedings Satisfactory. All proceedings taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance to Buyer
and its counsel, and Buyer and its counsel shall have received copies of all
such documents (executed or certified, as may be appropriate) as Buyer and its
counsel may reasonably request in connection with such transactions.
22
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER AND EACH OF SHAREHOLDERS
All obligations of Seller and each of Shareholders under this Agreement
are, except to the extent expressly waived in writing by Seller and each of
Shareholders, subject to the satisfaction by Buyer at or before the Closing of
all of the following conditions:
Section 7.1. Representations, Warranties and Covenants True at Closing.
The representations, warranties and covenants of Buyer contained in this
Agreement shall be true and correct when made and shall be true and correct on
the Closing Date as though the representations, warranties and covenants were
made again on the Closing Date.
Section 7.2. Performance. Buyer shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by Buyer before or at the Closing.
Section 7.3. Certificate of Buyer. Seller shall have received a
certificate substantially in the form of attached Exhibit K, signed by Buyer and
dated as of the Closing Date, to the effect that all representations, warranties
and covenants made in this Agreement by Buyer are on the Closing Date true and
correct in all respects and that Buyer has performed in all respects the
obligations, agreements and covenants undertaken by Buyer in this Agreement to
be performed on or prior to the Closing Date.
Section 7.4. Litigation. On the Closing Date, there shall not be any
pending or threatened litigation in any court or any proceedings by or before
any governmental commission, board, agency or other instrumentality with a view
to seeking, or in which it is sought, to restrain or prohibit the consummation
of the transactions contemplated by this Agreement or in which it is sought to
obtain divestiture, rescission or damages in connection with the transactions
contemplated by this Agreement, and no investigation by any governmental or
other agency shall be pending or threatened that might result in any such
litigation or other proceeding.
Section 7.5. Proceedings Satisfactory. All proceedings taken in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be satisfactory in form and substance to Seller
and its counsel, and Seller and its counsel shall have received copies of all
such documents (executed or certified, as may be appropriate) as Seller and its
counsel may reasonably request in connection with such transactions.
23
ARTICLE 8
INDEMNIFICATION
Section 8.1. Indemnification by Seller and each of Shareholders.
Subject to the limitations contained in this Article 8, Seller and each of
Shareholders shall, jointly and severally, defend, indemnify and hold harmless
Buyer (which for purposes of this Article 8 shall mean Buyer and its affiliates,
and their respective employees, representatives, officers, shareholders,
directors and agents) against and in respect of:
(a) Any and all liabilities or obligations of Seller of any
nature, whether accrued, absolute, contingent or otherwise, resulting
from, arising out of or in any way related to Seller's activities,
ownership of the Purchased Assets or conduct of the Business on or
before the Closing Date, even if imposed upon Buyer as a successor to
Seller, (i) other than the Assumed Liabilities and (ii) excluding any
liabilities or obligations for which Seller is entitled to seek
indemnification from Buyer under this Article 8;
(b) Any and all loss, cost, damage, liability, obligation,
expense and deficiency suffered by Buyer resulting from, arising out of
or in any way related to facts, circumstances, or events constituting a
misrepresentation, breach of warranty or nonfulfillment of any
warranty, covenant, representation, undertaking, condition or agreement
by Seller contained in this Agreement, the Disclosure Schedule, or any
other document delivered to Buyer in connection with the consummation
of the transactions contemplated by this Agreement, regardless of
whether the misrepresentation, breach or omission was deliberate,
reckless, negligent, innocent or unintentional;
(c) Any and all loss, cost, damage, liability, obligation and
expense resulting from, arising out of or in any way relating to
Seller's noncompliance with any applicable bulk sales laws and
provisions and from the assertion of claims (excluding Assumed
Liabilities) against Buyer by creditors of Seller with respect to
liabilities and obligations of Seller;
(d) Any and all loss, cost, damage, liability, obligation and
expense resulting from, arising out of or in any way relating to the
Lessor's (as defined in the Lease) breach of any warranties,
representations, covenants or other obligations of Lessor contained in
the Lease or to Lessor's activities at the Premises after the Closing
Date; and
(e) Any and all loss, cost, damage, liability, obligation and
expense incurred with respect to any claims, actions, suits,
proceedings or assessments arising out of matters described in
subsections (a) through (e) above, or the settlement thereof, including
without limitation legal fees and expenses.
Section 8.2. Indemnification by Buyer. Subject to the limitations
contained in this Article 8, Buyer shall defend, indemnify and hold harmless
Seller (which for purposes of this Article shall
24
mean Seller and its affiliates, and their respective employees, representatives,
officers, shareholders, (including each of Shareholders) directors and agents)
against and in respect of:
(a) Any and all liabilities or obligations of Buyer of any
nature, whether accrued, absolute, contingent or otherwise, resulting
from, arising out of or in any way relating to Buyer's ownership of the
Purchase Assets or assumption of the Assumed Liabilities or conduct of
the Business after the Closing Date, but excluding any liabilities for
which Buyer is entitled to seek indemnification from Seller or each of
Shareholders under this Article 8;
(b) Any and all loss, cost, damage, liability, obligation,
expense or deficiency suffered by Seller or each of Shareholders
resulting from, arising out of or relating to facts, circumstances or
events constituting a misrepresentation, breach of warranty or
nonfulfillment of any warranty, covenant, representation, undertaking,
condition or agreement by Buyer contained in this Agreement, or any
other document delivered to Seller or each of Shareholders in
connection with the consummation of the transactions contemplated by
this Agreement, regardless of whether the misrepresentation, breach or
omission was deliberate, reckless, negligent, innocent or
unintentional; and
(c) Any and all loss, cost, damage, liability, obligation or
expense incurred with respect to any claims, actions, suits,
proceedings or assessments resulting from, arising out of or relating
to matters described in subsections (a) and (b) above, or the
settlement thereof, including without limitation legal fees and
expenses.
Section 8.3. Environmental Liabilities. For purposes hereof, an
"Environmental Liability" shall mean any liability arising under or by reason of
any applicable federal, state or local laws or regulations or common law
relating to the protection of the environment or public health (collectively,
"Environmental Law"). Seller and each of Shareholders shall be, jointly and
severally, liable to Buyer for any Environmental Liability (a "Seller
Environmental Liability") (a) related to conditions (whether known or unknown)
existing at, in or under any real property now or previously owned, leased or
used by Seller (including without limitation the Premises) prior to or after the
Closing Date, and (b) related to the transportation or offsite disposal prior to
or after the Closing Date of Hazardous Materials generated by Seller. Seller and
each of Shareholders shall, jointly and severally, defend Buyer against,
indemnify Buyer for, and hold Buyer harmless from all loss, cost, damage,
liability, obligation and expense resulting from, arising out of or relating to
any Seller Environmental Liability.
Section 8.4. Limitations on Indemnification.
(a) Notwithstanding any other provision of this Agreement or
any applicable law, no Indemnified Party will be entitled to make a
claim against an Indemnifying Party under Section 8.1 or 8.2 of this
Agreement unless and until the aggregate amount of indemnifiable losses
incurred under such Section, as the case may be, exceeds $10,000.00
(the "Deductible"), in which event the Indemnified Party will be
entitled to make a claim against
25
the Indemnifying Party only to the extent the amount of such
indemnifiable losses exceeds such Deductible.
(b) Except with respect to a Seller Environmental Liability
and the indemnity obligations under Section 8.1(a), the representations
and warranties of Seller and each of Shareholders and of Buyer
contained in this Agreement shall survive the Closing until the
expiration of eighteen (18) months from the Closing Date. Any claim for
indemnification with respect to breach of a representation or warranty
which is not asserted by notice given as herein provided within such
specified period of survival may not be pursued and is hereby
irrevocably waived after such time.
Section 8.5. Third Party Claims. The obligation of each party to
indemnify the other party under the provisions of this Article with respect to
claims resulting from the assertion of liability by those not parties to this
Agreement (Including without limitation governmental claims for penalties, fines
and assessments) shall be subject to the following terms and conditions:
(a) The party seeking indemnification hereunder (the
"Indemnified Party") shall give written notice to the other party (the
"Indemnifying Party") within 30 days following any assertion of
liability by a third party which might give rise to a claim for
indemnification, which notice shall state the nature and basis of the
assertion and the amount thereof, in each case to the extent known;
provided, however, that no delay on the part of the Indemnified Party
in giving notice shall relieve the Indemnifying Party of any obligation
to indemnify unless (and then solely to the extent that) the
Indemnifying Party is prejudiced by such delay.
(b) If any action, suit or proceeding (a "Legal Action") is
brought against the Indemnified Party with respect to which the
Indemnifying Party may have an obligation to indemnify the Indemnified
Party, the Legal Action shall be defended by the Indemnifying Party,
and such defense shall include all proceedings for appeal or review
which counsel for the Indemnified Party shall reasonably deem
appropriate.
(c) Notwithstanding the provisions of the previous subsection
of this Section 8.5, until the Indemnifying Party shall have assumed
the defense of any such Legal Action, the defense shall be handled by
the Indemnified Party. Furthermore, (A) if the Indemnified Party shall
have reasonably concluded that there are likely to be defenses
available to it that are different from or in addition to those
available to the Indemnifying Party; (B) if the Indemnifying Party
fails to provide the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party has
sufficient financial resources to defend and fulfill its
indemnification obligation with respect to the Legal Action; (C) if the
Legal Action involves other than money damages and seeks injunctive or
other equitable relief; or (D) if a judgment against the Indemnified
Party will, in the good faith opinion of the Indemnified Party,
establish a custom or precedent which will be materially adverse to the
best interests of its continuing business, the Indemnifying Party shall
not be entitled to assume the defense of the Legal Action and the
defense shall be
26
handled by the Indemnified Party. If the defense of the Legal Action is
handled by the Indemnified Party under the provisions of this
subsection, the Indemnifying Party shall pay all legal and other
expenses reasonably incurred by the Indemnified Party in conducting
such defense.
(d) In any Legal Action initiated by a third party and
defended by the Indemnifying Party (A) the Indemnified Party shall have
the right to be represented by advisory counsel and accountants, at its
own expense, (B) the Indemnifying Party shall keep the Indemnified
Party fully informed as to the status of such Legal Action at all
stages thereof, whether or not the Indemnified Party is represented by
its own counsel, (C) the Indemnifying Party shall make available to the
Indemnified Party and its attorneys, accountants and other
representatives, all books and records of the Indemnifying Party
relating to such Legal Action, and (D) the parties shall render to each
other such assistance as may be reasonably required in order to ensure
the proper and adequate defense of the Legal Action.
(e) In any Legal Action initiated by a third party and
defended by the Indemnifying Party, the Indemnifying Party shall not
make settlement of any claim without the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
Without limiting the generality of the foregoing, it shall not be
deemed unreasonable to withhold consent to a settlement involving
injunctive or other equitable relief against the Indemnified Party or
its assets, employees or business, or relief which the Indemnified
Party reasonably believes could establish a custom or precedent which
will be materially adverse to the best interests of its continuing
business.
Section 8.6. Claims by Indemnified Party. The Indemnified Party shall
notify the Indemnifying Party with reasonable promptness after the discovery of
any claim upon which the Indemnified Party will demand indemnification from the
Indemnifying Party under this Agreement (other than with respect to third party
claims which are addressed in Section 8.5 above). To the extent possible, the
notice shall include an itemized accounting of the claim from the Indemnified
Party. Within fifteen (15) after receipt of the notice, the Indemnifying Party
shall either reimburse the Indemnified Party for the amount of the claim or
notify the Indemnified Party of the Indemnifying Party's intent to dispute the
claim. If the Indemnifying Party does not notify the Indemnified Party within
such fifteen (15) days of its intent to dispute the claim, the Indemnifying
Party shall be deemed to have agreed to reimburse the Indemnified Party for the
claim. All claims by Buyer for indemnification may be paid out of the Escrow
Amount (as defined in the Escrow Agreement) held under the Escrow Agreement, but
Buyer's claims, and Seller's or each of Shareholders' obligation to pay, shall
not be limited to the Escrow Amount.
27
ARTICLE 9
TERMINATION
Section 9.1. Termination by Mutual Consent. At any time on or before
the Closing Date, this Agreement may be terminated by the mutual written consent
of Seller, each of Shareholders and Buyer without liability on the part of
Seller or either of Shareholders or Buyer or their respective directors,
officers or shareholders. If the Agreement is terminated pursuant to this
Section, the Agreement shall become null and void and shall be without effect.
Section 9.2. Termination Upon Default or Breach. If Seller or either of
Shareholders or Buyer shall default in the observance or in the due and timely
performance of any of the covenants contained in this Agreement, or if there
shall have been a breach by Seller or either of Sharheolders or Buyer of any of
the representations, warranties or covenants set forth in this Agreement, the
other party may terminate this Agreement without prejudice to its rights and
remedies available under law.
Section 9.3. Termination Based Upon Failure of Conditions. If any of
the conditions of this Agreement to be complied with or performed by Seller or
either of Sharheolders or Buyer on or before the Closing Date shall not have
been complied with or performed by that date and that noncompliance or
nonperformance shall not have been waived in writing by the other party, the
party to whom the benefit of that condition runs may terminate this Agreement
without prejudice to its rights and remedies available under law, including that
party's right to recover expenses and costs.
Section 9.4. Final Expiration. This Agreement shall automatically
expire if the Closing does not occur on or before May 8, 1998.
ARTICLE 10
GENERAL
Section 10.1. Risk of Loss. The risk of loss or destruction of, or
damage to, the Purchased Assets shall be on Seller at all times before the
Closing Date.
Section 10.2. Survival of Representations, Warranties and Covenants.
All representations, warranties and covenants made by any party to this
Agreement in Articles 2 and 3 above shall survive the Closing (and any
investigation at any time made by or on behalf of any party before or after the
Closing) and each of the covenants in Article 5 shall survive the Closing
according to their terms.
Section 10.3. Binding Effect; Benefits; Assignment. All of the terms of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by and against the successors and permitted assigns of Seller, each
of Shareholders and Buyer. Nothing in this Agreement, express
28
or implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement except as expressly indicated in this
Agreement. Neither Seller nor either of Shareholders shall assign this
Agreement, or any of its rights or obligations under this Agreement, to any
other person, firm or corporation without the prior written consent of Buyer.
Section 10.4. Definition of "Ordinary and Usual Course". For purposes
of this Agreement, an activity will be deemed to be in the "ordinary and usual
course of business" or "ordinary and usual course" if the activity is performed:
(i) in accordance with the customary business practices and usages of trade
prevailing in the industry or industries in which Seller operates the Business;
or (ii) in accordance with Seller's historical and customary practices with
respect to the activity.
Section 10.5. Public Disclosure. Unless otherwise required by law,
neither Seller nor either of Shareholders nor Buyer shall make any public
disclosure of the existence or terms of this Agreement or the transactions
contemplated by this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, each party may disclose the transactions contemplated by this
Agreement to its attorneys, accountants and other professional advisers, to its
institutional lenders, and to its management employees or to third parties, to
the extent that any of those persons or entities needs to know of the
transactions in connection with his, her or its relationship with the disclosing
party.
Section 10.6. Notices. All notices, requests, demands and other
communications to be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given if delivered, mailed by
certified or registered mail (postage prepaid), shipped and receipted by express
courier service (charges prepaid), mailed first class (postage prepaid), or
transmitted by telecopier or similar facsimile transmitter:
(a) If to Buyer:
Kilovac Corporation
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(facsimile: (▇▇▇) ▇▇▇-▇▇▇▇)
29
with a copy to:
Communications Instruments, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Parker, Poe, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ L.L.P.
First Union Capitol Center
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(facsimile: (▇▇▇) ▇▇▇-▇▇▇▇)
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to Seller:
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(facsimile: (▇▇▇) ▇▇▇-▇▇▇▇)
(c) If to Shareholders:
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (PH & FX)
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇ (PH)
Any party may change its address or telecopier number by prior written
notice to the other party.
Section 10.7. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be an original
and the counterparts shall together constitute one and the same instrument.
Section 10.8. Expenses. Buyer, Seller and each of Shareholders shall
pay their own respective expenses, costs and fees (including without limitation
attorneys' and accountants' fees)
30
incurred in connection with the negotiation, preparation, execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
Agreement. Seller shall pay all expenses, costs and fees of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇,
Inc.
Section 10.9. Entire Agreement. All exhibits and schedules referenced
herein are incorporated herein by reference. This Agreement, the exhibits and
schedules to this Agreement (including the Disclosure Schedule), and the
agreements referred to in this Agreement set forth the entire agreement and
understanding of Seller, each of Shareholders and Buyer in respect of the
transactions contemplated by this Agreement and supersede all prior agreements,
arrangements and understandings relating to the subject matter of this
Agreement.
Section 10.10. Amendment and Waiver. This Agreement may be amended,
modified, superseded or canceled and any of the terms, covenants,
representations, warranties or conditions of this Agreement may be waived only
by a written instrument executed by Seller, each of Shareholders and Buyer or,
in the case of a waiver, by or on behalf of the party waiving compliance. The
failure of any party at any time to require performance of any provision of this
Agreement shall not affect the right of that party at a later time to enforce
the same. No waiver by any party of any condition or of any breach of any term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of the condition or of any breach of the term, covenant, representation
or warranty or any other term, covenant, representation or warranty set forth in
this Agreement.
Section 10.11. Severability. Any provision, or clause thereof, of this
Agreement that shall be found to be contrary to applicable law or otherwise
unenforceable shall not affect the remaining terms of this Agreement, which
shall be construed as if the unenforceable provision, or clause thereof, were
absent from this Agreement.
Section 10.12. Headings. The headings of the sections and subsections
of this Agreement have been inserted for convenience of reference only and shall
not restrict or otherwise modify any of the terms or provisions of this
Agreement.
Section 10.13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina, excluding
its conflict of law principles.
Section 10.14. Bulk Sales Law. Subject to the provisions of Section
8.1(c), Buyer waives compliance by Seller with any Bulk Sales laws which may be
applicable to the transactions contemplated by this Agreement.
31
Signed as of the day and year first written above.
KILOVAC CORPORATION,
a California corporation
By:
---------------------------
Its: Chairman & CEO
"Buyer"
WILMAR ELECTRONICS, INC.,
a California corporation
By:
---------------------------
Its: President
"Seller"
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Zerubavel ("▇▇▇") Heifetz,
Shareholder of Seller
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
Shareholder of Seller