Stock Purchase Agreement
By and among
Quick Turn Circuits, Inc.,
Dynaco Corp.,
and
Palomar Electronics Corporation
Dated May 26, 1998
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into this 26th
day of May, 1998 by and between Quick Turn Circuits, Inc., ("Quick Turn
Circuits"), an Arizona corporation, hereinafter referred to as ("Purchaser") and
Dynaco Corp. ("Dynaco" or the "Company") a Delaware corporation by and through
its owner and Parent Company, Palomar Electronics Corporation ("PEC") a Delaware
corporation. The term "Sellers" refers to Dynaco and PEC. Quick Turn Circuits,
Dynaco, and PEC will be referred to collectively in this Agreement as the
"Parties".
The Purchaser has designated ▇.▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ to be its authorized
representatives. The Sellers have designated ▇▇▇▇ ▇. ▇▇▇▇▇▇ on the behalf of
Dynaco and ▇▇▇▇▇▇ ▇▇▇▇▇▇ on the behalf of PEC to be its authorized
representatives.
WHEREAS:
A. PEC is the owner of 100% of the issued and outstanding shares of the common
stock of Dynaco whose address is ▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
and the Board of Directors for the Sellers have determined it is in the
best interests of their respective shareholders to enter this agreement;
B. Quick Turn Circuits, whose address is ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ("Purchaser") desires to purchase 100% of the issued and outstanding
shares of common stock of Dynaco;
C. The Parties desire to enter this Agreement to set forth the terms and
conditions and the representations, warranties, and covenants made to
induce the execution and delivery of this Agreement.
NOW THEREFORE, the parties agree as follows:
1. SALE OF SHARES. The Sellers shall sell and transfer to the Purchaser and
the Purchaser shall purchase and acquire from the SellerS, all of the
outstanding shares of Dynaco Corp., consisting of all of the issued and
outstanding capital stock that Sellers now own.
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2. PURCHASE PRICE. The purchase price for all of such shares is Three Million
Two Hundred Thousand and No/100 Dollars ($3,200,000.00). At closing, the
Purchaser shall pay said amount, less a $300,000.00 escrow hold back, to
the Sellers by an authorized wire transfer from the escrow account
referenced herein to the following account of the Sellers:
Fleet Bank
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
ABA #: 011 000206
For further credit to:
Account Number: 0501395874
Account Name: Palomar Medical Technologies, Inc.
3. ▇▇▇▇▇▇▇ DEPOSIT/ESCROW. The Purchaser has deposited the total purchase
price into an Escrow account with the following stipulations:
1) 100% refundable if transaction does not continue as agreed
regardless of fault, including government, state, board of
directors, shareholders, etc.;
2) At the time of closing, a $300,000.00 balance will remain in
Escrow for ninety (90) days to allow for collection of risky or
non-collectable receivables. This balance will only be used after
the $350,000.00 reserve already on Dynaco's books has been used to
offset subject receivables.
3) Exhibit A is the accounts receivable listing at closing which will
be used as the collectability baseline. At the end of the ninety
days after closing, a reconciliation of the collectability
baseline will be prepared to determine those receivables deemed
uncollectable. Any excess escrow funds will then be transferred
via wire to the same instructions referenced in Paragraph 2 of
this Agreement.
4. CLOSING. It is agreed that for all purposes under this Agreement, time is
of the essence. Based upon the terms of the enclosed Agreement, the closing
will be scheduled for May 29, 1998. The Sellers agree to a reduction in the
purchase price of $40,000.00 per day for every work day (a day that a
transfer from Escrow can occur) the closing occurs prior to May 29, 1998
and the Purchaser agrees to pay the Sellers the purchase price plus
$40,000.00 per day for every workday (a day that a transfer from Escrow can
occur) the closing goes beyond May 29, 1998. If the closing is held up due
to any Sellers' delay, the additional $40,000.00 per day will be waived for
the days the closing is delayed by Sellers.
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As a condition of closing, the Sellers will have paid and brought current
all of the following prior to closing as shown in Exhibit B.
1) Payroll, Payroll related, Federal, and State Taxes;
2) Building Lease, and Utilities; and
3) All equipment leases
The Purchaser is acquiring the stock of Dynaco. Highlighted liabilities in
the balance sheet, as shown in Exhibit C, must be paid or removed prior to
closing and remain the liability of PEC. Those items are listed on Exhibit
D and summarized as:
1) All recorded, unrecorded, and accrued audit and tax liabilities.
2) All recorded, unrecorded, and accrued legal liabilities.
3) All recorded, unrecorded, and accrued property tax liabilities.
4) All recorded, unrecorded, and accrued bankruptcy related
liabilities.
5) All recorded, unrecorded, and accrued intercompany liabilities.
5. SELLERS' REPRESENTATIONS AND WARRANTIES. The Sellers represent, covenant,
and warrant the following:
A. Dynaco Corp., and Palomar Electronics Corporation are
corporations, duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all the
corporate power and authority necessary to enter into this
Agreement and to consummate the transactions contemplated under
this Agreement.
B. The execution and delivery of this Agreement has been duly
authorized by the Board of Directors of Dynaco and PEC, including
all authorizations and ratifications necessary to authorize the
execution and delivery of this Agreement. The obligations of
Dynaco and PEC under this Agreement are binding and enforceable
according to their terms.
▇. ▇▇▇▇▇▇▇ own good and marketable title to the Dynaco Shares free
and clear of liens, encumbrances, or adverse claims.
▇. ▇▇▇▇▇▇▇ have filed all returns or legal extensions with respect to
state and federal income, franchise, and corporation taxes of
Dynaco, which, to the knowledge, and belief of the Sellers, are
required to be filed, for and with respect to all previous years
since incorporation up to the present and current fiscal year
which commenced January 1, 1998. Sellers have or will pay all
taxes due on such returns or filed extensions of such returns.
E. No actions, suits, or proceedings involving Dynaco Corp. or
Palomar Electronics Corporation are pending, or to the knowledge
of the sellers, are threatened against or affecting the Sellers or
its property, except as listed in Exhibit E attached hereto.
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F. The financial statements provided by Seller (attached hereto as
Exhibit C), or have been supplied to Purchaser are true and
correct and fairly present the financial condition of Dynaco in
all material respects on the date and for the period covered
thereby and were prepared in accordance with generally accepted
accounting principles.
G. Dynaco is the owner or lessee of the assets and liabilities more
fully described in Exhibit C attached hereto. There will be no
material change in the assets, liabilities or financial condition
of Dynaco nor shall any contractual arrangement or obligation,
other than in the ordinary and usual course of business be
undertaken prior to closing except as may be otherwise listed and
provided for in this Agreement.
H. All information relating to or concerning the Company set forth in
this Agreement or provided to the Purchasers in connection with
the transactions contemplated hereby is true and correct in all
material respects and the Sellers have not omitted to state any
material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they
were made, not misleading.
6. PURCHASERS REPRESENTATION AND WARRANTIES. The Purchaser represents
covenants and warrants the following:
A. Quick Turn Circuits is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Arizona, with all the corporate power and authority necessary to
enter into this Agreement and to consummate the transactions
contemplated under this Agreement.
B. The execution and delivery of this Agreement has been duly
authorized by the Board of Directors of Quick Turn Circuits,
including all authorizations and notifications necessary to
authorize the execution and delivery of this Agreement. The
obligations of Quick Turn Circuits under this Agreement are
binding and enforceable according to their terms.
C. Quick Turn Circuits knows of no litigation, pending or threatened
that, if adversely resolved, would materially affect Quick Turn
Circuits' ability to consummate the transactions contemplated by
this Agreement.
D. The Purchaser will use its best efforts, in the first ninety (90)
days after the closing, to remove Palomar Medical Technologies
Inc. from any parent company guarantee of Dynaco by either a
payment or substitution of a new parent guarantee. Exhibit F lists
known parent company guarantees.
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E. Purchaser has been furnished all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Company which have been
specifically requested by Purchaser. Purchaser has been afforded
the opportunity to ask questions of the Company and have received
what Purchaser believes to be complete and satisfactory answers to
any such inquiries. Neither such inquiries nor any other due
diligence investigation conducted by Purchaser shall modify, amend
or affect Purchaser's right to rely on the Company's
representations and warranties.
7. BUILDING LEASE. The existing building will be re-negotiated to include a
ten year lease with an option for an additional ten years as enclosed
hereto as Exhibit G. Prior or concurrent signature of this revised lease is
a condition of closing.
8. ENVIRONMENTAL. Environmental core suppliers and all reports from current
sampling and previous sampling have been provided to establish a baseline
for initial parameters. ▇▇▇▇▇▇▇ Engineering has supplied details of the
locations of the samples and information on existing water table and
detailed findings. Any issues or contamination found prior to closing of
this Agreement will be the sole responsibility of Palomar Electronics
Corporation.
9. PERMITS, LICENSES AND PATENTS. Sellers will use their best efforts in the
first ninety days after the closing to transfer all of Dynaco's permits,
licenses and patents to Purchaser to the extent not automatically
transferred as a matter of law.
10. DOCUMENTS AT CLOSING. The Sellers shall deliver or cause to be delivered to
the Purchaser at the closing the following:
A. A certificate from the Secretary of the Company, certified by the
Sellers, listing all shareholders of the Company and setting forth
the number of shares owned by each and likewise setting forth the
names of all officers and directors of the Company.
B. The original or copy of the Certificate of Incorporation of the
Company, minute books, stock books, and all books, records,
documents pertaining to the Company and its affairs.
C. All of the capital stock of the Company, duly endorsed by the
Sellers to the Purchaser.
D. The resignation in writing of all of the officers and directors of
the Company to be effective as of the date of the closing.
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11. INDEMNIFICATION BY SELLERS. The Sellers shall fully indemnify, protect,
reimburse, and hold harmless the Purchaser and its successors from and
against any and all material damages, liabilities, and claims which might
exist on account of and by reason of any material failure or default of any
of the covenants, agreements, or warranties of the Sellers hereunder, any
claims of sellers' stockholders, all known debts of the Company which are
not disclosed or set forth in this Agreement, or are not in the ordinary
course of business, and any and all amounts which might be claimed,
asserted, or established for as deficiencies in or with respect to federal
or state income taxes, or franchise and other taxes and charges against the
Company arising out of or related to the returns herein represented to have
been filed, and the operations of the Company for or during all fiscal
years of the Company, and all such deficiencies with respect to operations
and business of the Company during such current fiscal year up to the date
of the closing in excess of any amounts which have otherwise been herein
provided for. If any claim for which the Sellers shall be obligated to the
Purchaser pursuant to the foregoing provisions shall be asserted against
the Company, or the Purchaser or either of them, the Sellers shall, within
ten (10) days after receiving written notice of such claim, notify the
Purchaser in writing whether the Sellers do or do not have any obligation
to the payment of such claim. The Sellers shall not object to the payment
of any such claim unless the Sellers shall at the same time inform the
Purchaser in writing that the Sellers dispute such claim, in whole or in
part, and shall promptly initiate proper proceedings to contest the same or
undertake the appropriate defense thereof at the Sellers' sole cost and
expenses in a manner which will be effective fully to protect against any
liability and expense in connection therewith. If within such ten (10) day
notice period the Sellers have no objection to the payment of such claim,
the Sellers shall be obligated to pay such claim within five (5) days after
the expiration of the ten (10) day notice period and shall notify Escrow
Agent to pay such claim. The failure of the Sellers and Escrow Agent to pay
the claim and to obtain a full release of the Company and the Purchaser
shall constitute full authority to either contest the claim or pay the
claim and to obtain a release of the Company, the Purchaser, and the
Sellers. In such event the Purchaser shall be entitled to receive from the
Escrow Agent immediately the amount paid, and the Sellers shall, in such
event, have no right to contest the validity of the creditor's claim
against the Company or the Purchaser, as the case may be. In the event the
Seller shall, within the above mentioned ten (10) day period, object in
writing to the payment of such claim, and shall promptly initiate proper
proceedings to contest the same or undertake the appropriate defense
thereof. The Purchaser or Escrow Agent shall not have the authority to pay
such claims as hereinabove provided, unless and until the claim, in whole
or in part, is finally determined to be due and owing, in which event the
Purchaser and the Sellers shall be bound by the foregoing provisions with
respect to the payment of claims. Purchaser's only recourse to seek
indemnification from Sellers shall be under this Agreement. If Purchaser
knows that any representation or warranty of Sellers contained in this
Agreement is untrue or incorrect in any respect, or Purchaser knows that
Sellers have failed to perform any of their agreements required under this
Agreement, to be performed by Sellers prior to or at the closing, then, not
withstanding anything to the contrary contained in - this Agreement,
Purchaser shall not be entitled to make a claim for indemnification under
this Agreement with respect to any such matter.
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12. INDEMNIFICATION BY PURCHASERS. The Purchaser shall fully indemnify,
protect, reimburse, and hold harmless the Sellers and its successors from
and against any and all material damages, liabilities, and claims which
might exist on account of and by reason of any material failure or default
of any of the covenants, agreements, or warranties of the Purchaser
hereunder or arising out of or in connection with any of the guarantees
referenced in Section 6D, whether or not assumed by Purchaser. Sellers'
only recourse to seek indemnification from Purchaser shall be under this
Agreement. If Sellers know that any representation or warranty of Purchaser
is untrue or incorrect in any respect or that Sellers know that Purchaser
has failed to perform any of their agreements required under this
Agreement, to be performed by Purchaser, prior to or at the closing, then,
not withstanding - anything to the contrary contained in this Agreement,
Sellers shall not be entitled to make a claim for indemnification under
this Agreement with respect to any such matter.
13. DEPOSIT BY PURCHASER. Prior to closing, the Purchaser has concurrently with
the execution of the Letter of Intent put into escrow, the sum of Three
Million Two Hundred Thousand and no/100 Dollars ($3,200,000.00) cash, to be
paid and applied upon the consummation of the Stock Purchase Agreement
called for hereunder. The Purchaser and Seller have employed the following
Escrow Agent for the purpose of receiving and disbursing funds and
documents pursuant to the Escrow Agreement attached hereto as Exhibit H:
Norwest Bank Minnesota, N.A.
ABA #0910 00019
c/o Norwest Bank of Arizona
Arizona Escrow & Financial Corporation
Account #: 6324901371
Escrow #: 98-3794
Attention: ▇▇▇▇▇▇ ▇▇▇
14. EMPLOYEES AND EMPLOYMENT CONTRACTS. Purchaser and Sellers agree that
purchaser will not be obligated to any employment contracts of the Company
and Sellers will indemnify the Purchaser from any claims that may arise
from such employment contracts.
The Purchaser will provide the Sellers, two days prior to closing, a list
of Sellers' employees ("affected employees") that will not be eligible for
employment by the Purchaser after closing. The Sellers' will have made
provisions to pay such affected employees on the day of closing for all
compensation, accrued vacation, severance, and any employee benefits due as
the case may be.
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▇▇▇▇ ▇▇▇▇▇▇ will continue employment for a maximum of one hundred twenty
(120) days at a rate of $2,500.00 per week during the transition of
ownership and ▇▇▇▇ ▇▇▇▇▇▇ agrees to consult if needed at a rate of $75.00
per hour beyond the 120 day transition period.
15. BROKERAGE AND COMMISSION. Both the Purchaser and the Sellers agree that
there are no broker's fees or commissions, or finder's fees due as a result
of the consummation of this transaction. The Purchaser and Sellers further
agree that in the event there is any brokerage, finder's fee, or commission
due to any other person, firm, or corporation, then, and in the event of
any such claim, the Purchaser and/or Sellers shall defend or pay such claim
as it pertains to such party and hold the other party harmless in
connection with any liability or responsibility in connection therewith.
16. NOTICES. All notices permitted or required to be given hereunder shall be
considered to have been properly given if sent United States mail, postage
prepaid, certified mail, to the Purchaser or the Sellers, at the addresses
hereinafter set forth, as follows:
Sellers: Dynaco Corp.
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Palomar Medical Technologies Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Director of Finance
Attention: General Counsel
Purchaser: Quick Turn Circuits, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
17. CONSTRUCTION. This Agreement shall be construed in accordance with the laws
of the State of Arizona.
18. BOOKS AND RECORDS. For the period of seven (7) years from and after the
Closing Date, each party agrees that it will cooperate with and make
available to the other party, during normal business hours, all Books and
Records, information and access to employees (provided the same shall not
entail substantial disruption of employment and that a reasonable written
estimate of any such requirement shall have been furnished by the
requesting party at least five (5) Business Days prior to the date of the
requested provision of cooperation) which are retained and remain in
existence after the Closing Date that may be necessary or useful in
connection with any litigation or investigation or any other matter
relating to Dynaco requiring any such Books and Records, information or
employees or any reasonable business purpose. Sellers and Purchaser shall
(i) each provides the other with such assistance as may reasonably be
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requested by either of them in connection with the corporation of any Tax
return, or - Tax audit, or any other examination by any taxing authority or
judicial or administrative proceedings relating to liability for Taxes, or
any other legal proceedings or Environmental Claims, and shall (ii) each
retain and provide the other with any records or other information that may
be relevant to such Tax return, Tax audit or examination, proceeding, or
determination that affects any amount required to be shown on any return of
the others for any period or any such other legal proceedings or
Environmental Claims. Without limiting the generality of the foregoing,
Purchaser and Sellers shall retain, until the applicable statutes of
limitation (including any extensions) have expired, copies of all Tax
returns relating to Dynaco for all Tax periods or portions thereof ending
before or including the Closing Date and shall not destroy or otherwise
dispose of any such records without first providing the other party with a
reasonable opportunity to review and copy the same. The party requesting
any such - Books and Records, information or access to employees shall bear
all out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee
benefits) reasonably incurred by it in obtaining copies of any of such
Books and Records, or of any information or assistance of employees:
provided, however, that in the event any party requires the assistance of
any employee of any other party for a period of at least one half of the
work day for more than five (5) Business Days during any period of 30
consecutive days, the requesting party shall reimburse the providing party
for the reasonable cost of such employee's lost time from work in the form
of salary or wages.
19. SEC NOTIFICATION. The Sellers agree to file and report the appropriate
information referencing this Agreement to satisfy all SEC reporting
requirements. It is further agreed Purchaser will have no obligation to
file or report anything regarding this Agreement to the SEC.
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Thus done and signed by the respective parties hereto in the State of
Arizona, on the day of , 1998.
Purchaser:
Quick Turn Circuits, Inc.
BY: /s/ ▇.▇. ▇▇▇▇▇▇▇
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▇.▇. ▇▇▇▇▇▇▇, CEO
BY: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
Sellers:
Palomar Electronics Corporation
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, CFO
Dynaco Corp.
BY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇, President