STOCK PURCHASE AND SALE AGREEMENT
This Stock Purchase and Sale Agreement (the "Agreement") is entered
into as of this 31st day of January, 2002 by and among Cambex Corporation, a
Massachusetts corporation (the "Buyer"), Super PC Memory, Inc., a California
corporation (the "Company") and the persons identified on the signature page
hereto as Sellers (each individually a "Seller" and collectively, the
"Sellers").
W I T N E S E T H :
WHEREAS the Sellers are the owners of all of the issued and outstanding
shares of capital stock of every kind and description of the Company (said
shares being herein referred to as the "Shares");
WHEREAS the Sellers desire to sell the Shares and the Buyer desires to
purchase the Shares upon the terms and conditions set forth herein; and
WHEREAS the Buyer and the Sellers desire to enter into certain other
agreements for their mutual benefit;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby mutually
acknowledged, intending to be legally bound the parties hereby agree as
follows:
ARTICLE I PURCHASE AND SALE OF THE SHARES
SECTION 1.01 Purchase and Sale of the Shares. On the basis of the
representations, warranties and undertakings set forth in this Agreement, and
on the terms and subject to the conditions set forth in this Agreement, at
the Closing (as defined in Section 1.04), each Seller shall sell his Shares
to the Buyer, and the Buyer shall purchase such Shares from each Seller, free
and clear of all claims, charges, liens, contracts, rights, options, security
interests, mortgages, encumbrances and restrictions of every kind and nature
(together, the "Claims"). Those Shares being delivered by each of the
Sellers is set forth on Schedule 1.01.
SECTION 1.02 Purchase Price. Subject to the provisions of Section
1.03, the total consideration to be delivered to the Sellers, collectively,
in exchange for the Shares (the "Purchase Price") is (i) 560,000 shares of
unregistered common stock, par value $0.10 per share (the "Common Stock") of
the Buyer (the "Cambex Shares"), and (ii) fifteen percent (15%) of the
Company's gross profit for the period extending from the Closing Date
through December 31, 2004, payable in installment payments (the
"Installment Payments"), which Installment Payments are more fully described
in Exhibit 1.02 hereto. The Purchase Price will be paid to the Sellers,
with each Seller being provided with his pro rata share of the Purchase
Price based on his ownership interest in the Company, as follows: (a) the
Cambex Shares will be delivered at the Closing to the
Sellers, and (b) the Installment Payments will be delivered to the Sellers
over three (3) years as more fully described in Exhibit 1.02 hereto.
SECTION 1.03 Purchase Price Adjustments.
(a) Offsets Against the Purchase Price. The parties acknowledge
and agree that the Purchase Price has been established in part in reliance
upon the representations, warranties and covenants of the Company and the
Sellers. In the event of any damages to the Buyer as a result of any
misrepresentations made in, or omissions from, the representations and
warranties, or breach of warranties or covenants, of the Company or the
Sellers, the Buyer shall notify the Sellers in writing of such damages (the
"Damages Notice"), including a description of the misrepresentation or
omission or breach and the estimated dollar amount of Buyer's damages arising
therefrom (the "Offsetting Damages"). If Sellers have disputed Buyer's right
to claim damages or the amount of such damages, then the dispute between
Sellers and Buyer shall be submitted to binding arbitration before
one arbitrator in the Orange County, California office of the American
Arbitration Association in accordance with its Commercial Arbitration Rules.
The arbitrator shall have the right to first determine whether any
misrepresentation or any omission to represent occurred and, if so, shall
have the right to establish the amount of the Offsetting Damages.
If the arbitrator's determination of the amount of the Offsetting Damages is
at least fifty percent (50%) of the amount claimed by the Buyer in the
Damages Notice, then the fees and expenses of the arbitrator shall be borne
by the Sellers. If such amount is less than fifty percent (50%) of the
amount claimed by Buyer in the Damages Notice, then the fees and
expenses of the arbitrator shall be borne by Buyer.
Buyer shall not be limited as to the number of times that it may assert a
claim for Offsetting Damages pursuant to this Section 1.03(a). The parties
agree that notwithstanding any determination of Offsetting Damages, the
relief available to the Buyer pursuant to this Section 1.03(a) shall be
limited to the return of the Cambex Shares plus offset against the
aggregate amount of the Installment Payments. At Buyer's discretion, the
Offsetting Damages may be applied against the Installment Payments pursuant
to this Section 1.03(a), in which case they shall be applied against and
offset the next occurring Installment Payments owing hereunder.
(b) Net Assets on the Closing Date. Within 60 days of Closing, Sellers
shall deliver to Buyer an audited balance sheet of the Company as of the
Closing Date prepared by ▇▇▇▇▇▇▇▇ & Co., S.E.C. qualified accountants (the
"Closing Date Balance Sheet"), prepared in accordance with generally accepted
accounting principles, prepared on a basis consistent with the preparation of
the Balance Sheet (as defined in Section 2.08 hereof).
The Purchase Price to be paid by Buyer to Sellers for the Shares is premised
upon the Company having total assets minus liabilities ("Net Assets") as of
the Closing Date of at least Two Million One Hundred Thousand Dollars
($2,100,000.00) (the "Minimum Net Asset Amount") as set forth on the
Company's Closing Date Balance Sheet. For purposes of this determination,
Net Assets shall be the sum of all current assets plus other assets all as
set forth in the Closing Date Balance Sheet, reduced by the amount of all
current liabilities and long term liabilities as set forth in the Closing
Date Balance Sheet.
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In the event that the Company does not have Net Assets on the Closing
Date of at least the Minimum Net Asset Amount, then Buyer shall have the
right to reduce the monies owing to the officers of the Company pursuant to
the "Loan to Officers" referred to on the Closing Date Balance Sheet (the
"Officers' Loan") by the difference between the Minimum Net Asset Amount and
the Net Assets (such difference, the "Net Asset Shortfall"). Son ▇.
▇▇▇▇, who is the sole creditor under the Officers' Loan, hereby agrees to any
such reduction in the payments owing to him in connection with the Officers'
Loan in accordance with the terms of this Section 1.03(b). If the Net Asset
Shortfall exceeds the amount of the Officers' Loan, then the Purchase Price
shall be reduced by such excess by offsetting such excess against the
Installment Payments (beginning with the next occurring Installment Payment).
(c) Shortfall in the Company's Assets. In the event that the assets
of the Company are not, in kind or amount, as reflected on the Closing Date
Balance Sheet, then the Buyer shall have the right to be compensated for any
shortfall in such assets (the "Shortfall"). First, the Officers' Loan shall
be reduced by the Shortfall. Son ▇. ▇▇▇▇, who is the sole creditor under the
Officers' Loan, hereby agrees to any such reduction in the payments owing to
him in connection with the Officers' Loan in accordance with the terms
of this Section 1.03(c). If the Shortfall exceeds the amount of the
Officers' Loan (such excess, the "Excess Shortfall"), then the Purchase Price
shall be reduced by the Excess Shortfall. This reduction in the Purchase
Price shall be accomplished, at Sellers' unanimous discretion, by one or a
combination of the following: (i) offset against the Installment Payments,
and (ii) return of the Cambex Shares, based on the fair market value of such
shares at the time they are returned to Buyer. In the event that Buyer has a
claim pursuant to this Section 1.03(c), Buyer shall first provide written
notice to the Sellers setting forth in such notice a description of the
claim, and if within ten (10) business days Buyer has not received a response
from the Sellers, then Buyer shall be permitted to setoff such amount
immediately against the balance then owing under the Officers' Loan and
recover the balance by reducing or recovering the Purchase Price as provided
in the preceding sentence. If the Sellers do dispute in a timely manner
Buyer's claim, then the dispute between Sellers and Buyer shall be submitted
to binding arbitration before one arbitrator in a California
office of the American Arbitration Association in accordance with its
Commercial Arbitration Rules. The fees and expenses of the arbitrator shall
be borne one-half by Sellers and one-half by Buyer. For as long as the
Sellers may have any liability to the Buyer pursuant to this Section 1.03,
the Sellers agree that the Cambex Shares shall not be sold,
transferred or otherwise encumbered by Sellers, and further that the Cambex
Shares shall be pledged by Sellers and retained in escrow pursuant to a
Pledge Agreement in substantially the form of Exhibit 1.03A hereto and an
Escrow Agreement in substantially the form of Exhibit 1.03B hereto.
Buyer's rights under each of subsections 1.03(a), (b) and (c) are exclusive
and separate from each other and Buyer's enforcement of its rights under one
such subsection shall not limit Buyer's right to enforce any of its rights
under any other such subsection of this Section 1.03. Subject to the
limitations on survival contained elsewhere in this Agreement, the terms of
this Section 1.03 shall survive the Closing.
Buyer shall not be entitled to offset any amounts under this Section
1.03 until such time as claims for offsets hereunder shall exceed $10,000
(the "Offset Basket") however Sellers shall be subject to the provisions of
this Section 1.03 in respect of all claims which make up the Offset
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Basket once the Offset Basket has been reached. The Offset Basket need not
thereafter be reached again by Buyer in order to assert additional claims
under this Section 1.03.
SECTION 1.04 Closing. Subject to the satisfaction or waiver of each
of the conditions set forth in Articles VI and VII of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing")
shall take place within five (5) business days of receipt of a firm
commitment letter from an approved lender, the form of which letter and the
identity of which lender shall be satisfactory to Buyer in its sole
discretion, or on such other date as the parties shall agree (the "Closing
Date").
At the Closing:
A. The Sellers shall deliver or cause to be delivered to the
Buyer the following:
(i) Certificates for the Shares in the names of the Sellers duly
endorsed to the Buyer, or accompanied by separate stock
assignments;
(ii) The certificates required by Sections 6.04 and 6.05;
(iii) The opinion of counsel required by Section 6.07;
(iv) The resignations referred to in Section 6.09;
(v) A copy of the resolutions of the Company, certified by its
Secretary, authorizing and approving the execution, delivery
and performance of this Agreement and the transactions
contemplated hereby and the acts of the officers and
employees of the Company in carrying out the terms and
provisions hereof;
(vi) A certified copy of the Articles of Incorporation of the
Company, a copy of the By-laws of the Company, and a
Certificate of Good Standing of the Company in California,
all as certified by the Secretary of the Company to be true
and complete as of the date of the Closing, provided that if
the Certificate of Good Standing is not available by the
Closing due to the scheduling procedures (i.e., backlog) of
California State offices, this Certificate will be delivered as
shortly after the Closing as it is available;
(vii) A waiver or consent from the Company and each of the
Sellers waiving any rights of first refusal to acquire the
Shares;
(viii) All of the books, data, documents, instruments and other
records relating to the Company including without limitation
the original incorporation documents, foreign qualifications,
By-laws, minute book, stock record book, contracts and
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agreements referred to in Section 2.34 which delivery shall
be deemed to have occurred if all the foregoing are located at
the Company's offices;
(ix) The Employment and Non-Competition Agreements of
Simon Le and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in substantially the forms of
Exhibits 1.04A(1) and 1.04A(2) and the Non-Competition
Agreements referenced in Section 4.13; and
(x) A mutually satisfactory agreement by and between Buyer and
Stracon which may provide for, among other items, a
continuation of the Company's lease with Stracon, non-
competition provisions, and a services arrangement with
Stracon, all on terms and conditions satisfactory to Buyer in
its sole discretion (the "Stracon Agreement"), in substantially
the form of Exhibit 1.04A(3) hereto.
B. The Buyer shall deliver or cause to be delivered to the
Sellers the following:
(i) The Cambex Shares;
(ii) The certificates required by Sections 7.01 and 7.02; and
(iii) A copy of the resolutions of the Buyer certified by its
Secretary, authorizing and approving the execution, delivery
and performance of this Agreement and the transactions
contemplated hereby and the acts of the officers and
employees of the Buyer in carrying out the terms and
provisions hereof; and
(iv) A Uniform Commercial Code financing statement (UCC-1)
securing performance by Buyer of its obligations to Seller
under this Agreement with the stock and assets of the
Company, including, but not limited to, Company's
receivables and inventory. Seller's rights thereunder shall be
subject to the terms of a Security Agreement in substantially
the form of Exhibit 1.04B hereto, a Pledge Agreement in
substantially the form of Exhibit 1.04C hereto (the "Pledge
Agreement") and an Escrow Agreement in substantially the
form of Exhibit 1.04D hereto (the "Escrow Agreement") and
junior and subordinated to any security interest or other liens
then existing and/or thereafter arising in favor of any bank,
other institutional lenders to the Company or other third party
provider(s) of financing to the Company.
C. The parties agree to deliver such further documents, resolutions,
certificates and instruments as any party or his, her or its counsel
reasonably requests to facilitate the consummation of the transactions
contemplated hereby.
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SECTION 1.05 Further Assurances. At any time and from time to time
after the Closing Date, at the request of any party hereto and without
further consideration, the Buyer and each Seller will execute and deliver
such other instruments of sale, transfer, conveyance, assignment and
confirmation as may be reasonably requested in order to more effectively
evidence the consummation of the transactions contemplated herein, including,
without limitation, to transfer, convey and assign to the Buyer, and to
confirm the Buyer's title to, the Shares.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLERS
As an inducement to the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the Sellers,
jointly and severally, hereby represent and warrant to the Buyer as follows:
SECTION 2.01 Title to Shares. Each Seller owns his or her respective
Shares beneficially and of record, free and clear of all Claims, in the
manner specified on Schedule 2.01 hereto. There is no restriction that at the
Closing will not have been waived or for which a consent will not have
been obtained affecting the ability of each Seller to transfer the legal and
beneficial title and ownership of the Shares to the Buyer and, upon delivery
thereof to the Buyer pursuant to the terms of this Agreement and of delivery
of the Cambex Shares at the Closing in accordance with the terms
of Section 1.02 hereto, the Buyer will acquire record and beneficial title to
the Shares free and clear of all Claims.
SECTION 2.02 Sellers' Authority to Execute and Perform Agreement.
Each Seller has the full legal right and power and all authority and approval
required by law to enter into this Agreement and to perform his or her
obligations hereunder. Each Seller has duly executed and delivered this
Agreement, and this Agreement is the legal, valid and binding
obligation of each Seller enforceable in accordance with its terms. On the
Closing Date, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor the performance of
this Agreement in compliance with its terms and conditions by each Seller
will (a) conflict with or result in any violation of any trust agreement,
certificate of incorporation, By-law, judgment, decree, order, statute or
regulation applicable to each Seller or to the Shares of each Seller, or any
breach of any agreement to which any Seller is a party or by which each
Seller or his or her Shares is bound, or constitute a default thereunder, or
result in the creation of any Claim of any kind or nature on, or with respect
to, his or her Shares, or (b) result in any violation of, or be in conflict
with, or constitute a default under, any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to any
Seller.
SECTION 2.03 Capitalization. The authorized, issued and outstanding
capital stock of the Company consists on the date hereof, and will on the
Closing Date consist solely of 100,000 shares of Common Stock, par value
$1.00 per share, of which 68,628 shares are issued and outstanding
and owned by the Sellers, free and clear of all Claims except as set forth on
Schedule 2.03, in each case with no personal liability attaching to the
ownership thereof. All of such shares are duly authorized, validly issued,
fully paid and non-assessable and were issued in full compliance with all
federal, state and local rules, laws and regulations. The designations,
powers, preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the Company
are as set forth in the Company's Articles of Incorporation, as amended, a
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copy of which has been provided to the Buyer and is attached hereto as
Exhibit 2.03, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and
enforceable in accordance with all applicable laws. There are,
and at the Closing Date there will be, no shares of the Company reserved for
issuance. As of the date hereof there are, and as of the Closing Date there
will be, no outstanding subscriptions, options, warrants, rights, calls or
convertible securities, stock appreciation rights (phantom or otherwise),
joint venture, partnership or other commitments of any nature relating to
shares of the capital stock of the Company. As of the date hereof there is,
and as of the Closing Date the Company will have, no obligation (contingent
or other) to purchase, redeem or otherwise acquire any of its equity
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
SECTION 2.04 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and is duly licensed or
qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the failure to be licensed or
qualified would have a material adverse effect on the Company.
SECTION 2.05 Subsidiaries. The Company does not (a) own of record or
beneficially, directly or indirectly, (i) any shares of capital stock or
securities convertible into capital stock of any other corporation or (ii)
any participating interest in any partnership, joint venture or other
non-corporate business enterprise or (b) control, directly or indirectly, any
other entity.
SECTION 2.06 Corporate Power and Authority; Ownership. The Company
has the corporate power and authority to own and hold its properties and to
carry on its business as presently conducted and contemplated, by the
Sellers, to be conducted. The Company has the corporate power and authority
to execute, deliver and perform this Agreement and the other documents and
instruments contemplated hereby. The execution, delivery and performance of
this Agreement and the documents contemplated hereby and the consummation of
the transactions contemplated hereby and thereby have been duly authorized
and approved by the Company. This Agreement, and each of the other
agreements, documents and instruments to be executed and delivered by the
Company have been duly executed and delivered by, and constitute the legal,
valid and binding obligation of, the Company enforceable against the Company
in accordance with their terms.
SECTION 2.07 Validity, Etc. Except as set forth in Schedule 2.07, the
execution and delivery of this Agreement and the other documents and
instruments contemplated hereby, the consummation of the transactions
contemplated hereby or thereby, and the performance of this Agreement and
such other agreements in compliance with the terms and conditions hereof and
thereof will not (i) violate, conflict with or result in any breach of any
trust agreement, Articles of Incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to the Sellers or the Company, (ii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, (iii) violate,
conflict with or result in a breach, default or termination or give rise to
any right of termination, cancellation or acceleration of the maturity of
any payment date of any of the obligations of the Company or increase or
otherwise offset the obligations of the Company under any law, rule,
regulation, judgment, decree, order, governmental permit, license or order
or any of the terms, conditions or provisions of any mortgage, indenture,
note, license, agreement or other instrument or obligation related to
the Company or any of its assets or the consummation of the
transactions contemplated hereby or thereby, except for such defaults
(or rights of termination, cancellation or acceleration) as
to which requisite waivers or consents have
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been obtained in writing and provided to the Buyer, (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company, (v) result in the creation of any Claim upon the Shares or any
assets of the Company or (vi) require the authorization or consent of any
third parties.
SECTION 2.08 Financial Statements. The Company has previously
furnished to the Buyer, and attached hereto as Schedule 2.08, the balance
sheet and income statement of the Company as at August 31, 2001 (the "Balance
Sheet") and the Balance Sheet and related statements of income and
cash flow and notes thereto for the fiscal years ended December 31, 2000, and
December 31, 1999, and the Company shall furnish to Buyer the Closing Date
Balance Sheet in accordance with Section 1.03(b) hereto. All such financial
statements (the "Financial Statements") have been prepared in
accordance with generally accepted accounting principles consistently applied
with prior periods (with the exception of the lack of notes thereto for the
interim Financial Statements) and were prepared from the books and records of
the Company which books and records are complete and correct in all respects
and accurately reflect all transactions of the Company's business. The
Financial Statements fairly present the financial position of the Company as
of the dates thereof, and the results of its operations and cash flows for
the periods ended on the dates thereof. The Financial Statements reflect
reserves appropriate and adequate for all known material liabilities and
reasonably anticipated losses as required by generally accepted accounting
principles. Except as set forth in Schedule 2.10, since the date of the
Balance Sheet, (a) there has been no change in the assets, liabilities or
financial condition of the assets of the Company from that reflected in the
Balance Sheet except for changes in the ordinary course of business
consistent with past practice and which have not been materially adverse and
(b) none of the business, financial condition, operations, property or
affairs of the Company has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against. The Company has disclosed to the Buyer the basis of
accounting for affiliated transactions, and the Company has delivered to the
Buyer complete and correct copies of all letters of representation
from the Company delivered to the accountants in connection with the
preparation of such Financial Statements, and all management letters from the
accountants to the Company.
SECTION 2.09 Absence of Undisclosed Liabilities. Except as and to the
extent of the amounts specifically reflected or reserved against in the
Balance Sheet, the Company does not have any liabilities or obligations of
any nature whatsoever, due or to become due, accrued, absolute,
contingent or otherwise except for liabilities and obligations incurred since
the date of the Balance Sheet in the ordinary course of business and
consistent with past practice. Except as set forth on Schedule 2.09, to the
best of the Sellers' knowledge there is no basis for the assertion against
the Company of any liability or obligation not fully reflected or reserved
against in the Balance Sheet or incurred in the ordinary course of business
and consistent with past practice since the date thereof. Except as set forth
on Schedule 2.09, the Company is not bound by any agreement, or subject to
any charter or other corporate restriction or any legal requirement, which
has, or in the future can reasonably be expected to have, a material adverse
effect on the Company's business.
SECTION 2.10 Absence of Adverse Change; Conduct of Business. Except
as set forth on Schedule 2.10, since December 31, 2000, the Company has
conducted its business only in the ordinary course of business consistent
with past practice, there has been no material adverse change
in the business of the Company and there is no known condition or development
or contingency of any kind existing or which, so far as reasonably can be
foreseen by the Sellers, may result in any such change and the Company shall
continue to operate its business in the ordinary course of business from the
date hereof through the Closing Date. Over such period, the Company shall
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not redeem any stock or make any capital expenditures in excess of an
aggregate of $25,000 or do any other acts outside the ordinary course of
business, unless such acts or expenditures are explicitly agreed to in
writing by Buyer. Without limiting the foregoing, except as set forth on
Schedule 2.10, since December 31, 2000, there has not been, occurred or
arisen:
(i) any material adverse change in the business or any material
change in the operations of the business of the Company, or sale or other
disposition of any right, title or interest in or to any assets or properties
used in the business or any revenues derived therefrom;
(ii) any material adverse change in the working capital,
financial condition, assets, liabilities or business of the Company;
(iii) any loan, advance, agreement, arrangement or transaction
between the Company and any employees of the Company or its affiliates, or
any business or entity in which the Company, its affiliates, or an employee
of either has any direct or indirect interest, except for compensation at
rates not exceeding the rates of compensation in effect as of December 31,
2000 and advances made to employees of the Company for ordinary and customary
business expenses in reasonable amounts in the ordinary course of business
consistent with past practice;
(iv) any sale, assignment, transfer or grant of any license or
sublicense with respect to any patent, trademark, trade name, service ▇▇▇▇,
copyright, trade secret or other intangible asset used or useful in the
business of the Company;
(v) any grant, incurrence, discharge or satisfaction of any
lien or encumbrance affecting or relating to any asset of the Company;
(vi) any incurrence or payment of any material obligation or
liability (absolute, accrued or contingent) other than current liabilities
shown on the Balance Sheet and current liabilities incurred since the date of
the Balance Sheet in the ordinary course of business consistent with past
practice;
(vii) any mortgage or pledge of, or any lien placed on, any
assets of the Company, tangible or intangible, other than liens for current
real property taxes not yet due and payable, except for (a) warehousemen's
mechanics', materialmen's, repairmen's or other like liens arising in the
ordinary course of business consistent with past practice securing sums which
are not overdue, (b) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation, (c) deposits to secure
public or statutory obligations of the Company or (d) deposits to secure
surety, appeal or customs bonds in the ordinary course of business consistent
with past practice (collectively "Permitted Liens");
(viii) any material transaction (which shall mean any
transaction or series of transactions totaling $25,000 or more) except in the
ordinary course of business consistent with past practice;
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(ix) other than in the ordinary course of business, any
execution, amendment or modification of any material contract, agreement,
franchise, permit, or license;
(x) any declaration, setting aside or payment of any dividend
or other distribution on or in respect of any shares of the Company's capital
stock, or any issuance or direct or indirect redemption, retirement, purchase
or other acquisition by the Company of any shares of its capital stock or
other securities;
(xi) any change by the Company in accounting methods, principles
or practices or any change in depreciation or amortization policies or rates
therefore adopted by it;
(xii) any material adverse change in, relating to, or affecting
the condition, assets, personnel, properties, liabilities or business of the
Company, including, without limitation, any material decline in sales volume
from the prior year period, any material loss, through resignation,
incapacity or otherwise, of the services of any key personnel, any loss of a
material source of supply, or any material loss, damage or destruction to any
assets of the Company;
(xiii) any change in the charter or By-laws of the Company;
(xiv) any waiver by the Company of any right or rights (alleged,
contingent or otherwise), or of any payment, direct or indirect, of any
liability of the Company in excess of $1,000 in any single instance or
$10,000 in aggregate (i) before the same became due in accordance with its
terms and (ii) otherwise than in the ordinary and usual course of business
consistent with past practice;
(xv) any payment or commitment entered into since December 31,
2000 by the Company to pay any bonus, severance, pension, termination or
special compensation of any kind to any of its officers, directors,
consultants, agents, or employees, any increase in the rate of compensation
payable or to become payable to any of its officers, directors, consultants,
agents or employees, except for increases in the ordinary course of business
consistent with past practice, which increases (a) with respect to employees
subject to collective bargaining agreements, were in accordance with such
agreements and (b) with respect to all other employees, were not in excess of
an average of 5% per annum in the aggregate or 7% per annum for any
individual;
(xvi) any purchase, sale, transfer, abandonment or other
disposition of assets by the Company, other than purchases, sales, or leases
of property in the ordinary course of business consistent with past practice;
(xvii) any merger or consolidation of or by the Company with
any other corporation, or any acquisition by it of all or any part of the
stock or the business or assets, other than inventory or equipment in the
ordinary course
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of business consistent with past practice, of any other person, firm,
association, corporation or business organization;
(xviii) any material damage, destruction or loss (whether or
not covered by insurance) to any properties or assets of the Company;
(xix) any execution, termination or amendment of any material
contract, agreement, franchise, permit, license or other instrument by the
Company except in the ordinary course of business consistent with past
practice or any loss or termination or threatened loss or termination, of any
material customer or supplier of the Company;
(xx) any charitable contributions or any nonbusiness expense
incurred or agreed to be incurred by the Company otherwise than in the
ordinary course of business;
(xxi) any charge-off of any bad debt by the Company except in the
ordinary course of business consistent with past practice and which was
covered by reserves;
(xxii) any increase in any bad debt reserve of the Company
except in the ordinary course of business consistent with past practice;
(xxiii) any other event or condition materially and adversely
affecting the properties, assets or business of the Company; or
(xxiv) any understanding entered into since December 31,
2000, with respect to any commitment (contingent or otherwise) to do any of
the foregoing.
SECTION 2.11 Inventories. All of the Company's inventory reflected on
the Balance Sheet or thereafter acquired (and not subsequently sold in the
ordinary course of business) consist of items of a quality and quantity
usable or saleable in the ordinary course of the Company's business
as first quality goods at prices having a value equal to the amounts
reflected on the Balance Sheet or, with respect to after-acquired inventory,
at least equal to the cost thereof plus markups consistent with past
practice. Each item of such inventory is valued on the Balance
Sheet at the lower of cost or market, by the first-in first-out method, in
accordance with generally accepted accounting principles. The Company's
inventories and supplies are on the date hereof, and will be on the
Closing Date, at normal and adequate levels for the continuation of such
business in the ordinary course of business consistent with past practice.
SECTION 2.12 Receivables. All accounts receivable and amounts due
(whether notes, accounts or otherwise) of the Company (a) have arisen only
from bona fide transactions in the ordinary course of business consistent
with past practice, (b) represent valid obligations, (c) shall be
fully collected in the aggregate face amounts thereof within a reasonable
time after the issuance thereof assuming collection efforts of the nature
applied before the Closing are utilized after the Closing, except to the
extent of the normal allowance for doubtful accounts with respect to accounts
receivable computed in a manner consistent with generally accepted accounting
principles and as covered by reasonable reserves reflected in the Balance
Sheet, and (d) are owned by the Company free of all Claims, but are subject
to the provisions of the line of credit with the Company's bank(s).
11
No discount or allowance from any receivable has been made or agreed to
(other than contingency payment discounts in the ordinary course of business
consistent with past practice), and no receivable represents ▇▇▇▇▇▇▇▇ prior
to actual sale of goods or provision of services.
SECTION 2.13 Taxes. The Company has filed on a timely basis all
returns, declarations, registrations, reports, claims for refunds and
information returns or statements relating to Taxes (which shall mean all
taxes including, without limitation, any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not), including all schedules or attachments thereto, and
including any amendment thereof (collectively, the "Tax Returns") and tax
reports required to be filed on or before the date hereof with the
appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed and all such Tax Returns were
correct and complete in all respects. All Taxes, assessments and other
charges which have become due or payable or are claimed to be due or payable
to any governmental authority or required to be collected by the
Company or are otherwise attributable to any periods ending on or before the
date hereof or the Closing Date and all interest and penalties thereon,
whether disputed or not, have been paid or will be paid in full on or prior
to the Closing Date (whether or not shown on any Tax Return).
The Company is not currently the beneficiary of any extension of time
within which to file any Tax Return. No claim has been made by an authority
in a jurisdiction where the Company does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no tax
liens pending or threatened against the assets, properties or business of the
Company. The Company has not taken or failed to take any action which could
create any tax lien on any of its assets.
The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party.
No Seller or director or officer (or employee responsible for tax
matters) of the Company expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability (which shall mean any liability, whether
known or unknown, whether assessed or unassessed, whether accrued or
unaccrued, and whether due or to become due) of the Company either (A)
claimed or raised by any authority in writing or (B) as to which any of the
Sellers and the directors and officers (and employees responsible for tax
matters) of the Company has knowledge. Schedule 2.13 lists all
federal, state, local and foreign income tax returns filed with respect to
the Company for taxable periods ended on or after December 31, 1995,
indicates those tax returns that have been audited, and indicates those tax
returns that currently are the subject of audit. The Sellers have delivered
or made available to the Buyer correct and complete copies of all federal and
state income tax returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company since December 31, 1995.
Schedule 2.13 lists all tax agreements which now exist or have existed
within the past five years between the Company and any taxing jurisdiction.
The Company has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a tax assessment or
deficiency.
12
The Company has not filed a consent under Code Sec. 341(f) concerning
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate it to make any payments that will
not be deductible under Code Sec. 280G. The Company has not been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Code Sec. 6661.
The Company is not a party to any tax allocation or sharing agreement. The
Company has never been (nor has any liability for unpaid Taxes because it
once was) a member of an affiliated group.
SECTION 2.14 [Intentionally Deleted]
SECTION 2.15 Litigation. Except as set forth in Schedule 2.15, there
is no (a) action, suit, claim, proceeding or investigation pending or, to the
best of the Sellers' knowledge, threatened against or affecting the Company
(whether or not the Company is a party or prospective party thereto), at law
or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (b) arbitration proceeding relating to
the Company or (c) governmental inquiry pending or, to the best of the
Sellers' knowledge, threatened against, involving or affecting the Company,
and, to the best of the Sellers' knowledge, there is no basis for any of the
foregoing. The Company has not received any opinion or memorandum or advice
from legal counsel to the effect that it is exposed, from a legal standpoint,
to any liability or disadvantage which may be material to the business,
prospects, financial condition, operations, property or affairs of its
business. There are no outstanding orders, writs, judgments, injunctions or
decrees of any court, governmental agency or arbitration tribunal against,
involving or affecting the Company, and there are no facts or circumstances
which may result in institution of any action, suit, claim or legal,
administrative or arbitration proceeding or investigation against, involving
or affecting the Company or the transactions contemplated hereby. There is
no litigation, action, suit, claim or legal, administrative or arbitration
proceeding or investigation pending or to the Sellers' knowledge threatened
which would involve, affect or impair the ability of the Company or of any
Seller to perform its obligations under and pursuant to this Agreement or any
of the transactions contemplated hereby or which could or would materially
adverse affect the value of the Shares of the Company. The Company is not in
default with respect to any order, writ, injunction or decree known to or
served upon it from any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the
Company pending or threatened against others.
SECTION 2.16 Certain Practices. Neither the Company nor any of its
directors, officers' or employees has, directly or indirectly, given or
agreed to give any rebate, gift or similar benefit to any supplier, customer,
governmental employee or other person who was, is or may be in a position to
help or hinder the Company (or assist in connection with any actual or
proposed transaction) which (i) could subject the Company or the Buyer to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (ii) if not continued in the future, could have an adverse
effect on the Company.
SECTION 2.17 Compliance with Law. the Company is not subject to any
judgment, order, writ, injunction, or decree that adversely affects,
individually or in the aggregate, its businesses,
13
operations, properties, assets or condition (financial or otherwise). The
Company has complied with all, and is not in material default under any,
laws, ordinances, legal requirements, rules, regulations and orders
applicable to it, its operations, properties, assets, products and services.
To the best of the Sellers' knowledge, there is no existing law, rule,
regulation or order, and the Sellers are not aware of any proposed law, rule,
regulation or order, whether Federal or state, which would prohibit or
materially restrict the Company or the Buyer from, or otherwise materially
adversely affect the Company or the Buyer in, conducting the Company's
business in any jurisdiction in which such business is now conducted or
proposed to be conducted.
SECTION 2.18 Licenses and Permits. Schedule 2.18 lists all licenses,
permits, pending applications, consents, approvals and authorizations of or
from any public or governmental agency, used in or otherwise necessary in the
conduct of the Company's business, (collectively, the "Permits") each of
which will remain in full force and effect following the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby. A description of the Permits is set forth on Schedule
2.18, including the agency or other governmental body issuing such permits,
licenses and authorizations, the expiration date of such permits, licenses
and authorizations, the process by which each permit, license and
authorization may be renewed and, to the best of the Sellers' knowledge, the
likelihood of such renewal. The Company has complied with all conditions and
requirements imposed by the Permits and neither the Company nor the Sellers
have received any notice of, or have reason to believe, that any appropriate
authority intends to cancel or terminate any of the Permits or that valid
grounds for such cancellation or termination exist. To the best of the
Sellers' knowledge, no other permits, licenses, variances, certificates or
authorizations of a material nature are necessary or required by any
governmental authority to operate the Company's business. The Company owns
or has the right to use the Permits in accordance with the terms thereof
without any conflict or alleged conflict or infringement with the rights of
others and subject to no Claim, and each Permit is valid and in full force
and effect, and, to the best of the Sellers' knowledge, will not be
terminated or adversely affected by the transactions contemplated hereby.
The Company is in compliance with all applicable laws, rules and regulations,
including, without limitation, those pertaining to the environment, hazardous
waste and toxic materials, discrimination, employment and health and safety,
the failure to comply with which could have a material adverse effect on the
Company.
SECTION 2.19 Labor and Employee Relations. The Company is not a party
to or bound by any collective bargaining agreement with any labor
organization, group or association covering any of its employees, and neither
the Company nor any Seller has knowledge of any attempt to organize any of
the Company's employees by any person, unit or group seeking to act as their
bargaining agent. There are no pending or, to the Sellers' knowledge,
threatened charges (by employees, their representatives or governmental
authorities) of unfair labor practices or of employment discrimination or of
any other wrongful action with respect to any aspect of employment of any
person employed or formerly employed by the Company. No union representation
elections relating to employees of the Company have been scheduled by any
governmental agency or authority, to the Sellers' knowledge no organizational
effort is being made with respect to any of such employees, and to the best
of the Sellers' knowledge, there is no investigation of the Company's
employment policies or practices by any governmental agency or authority
pending or threatened. The Company is not currently, and has not within the
last three years been, involved in labor negotiations with any unit or group
seeking to become the bargaining unit for any of the Company's employees.
The Company has not experienced any work stoppages during the last three
years, and to the best of the Sellers' knowledge, no work stoppage is
planned.
14
SECTION 2.20 Certain Employees. Set forth in Schedule 2.20 is a list
of the names of all of the Company's employees and consultants, together with
the title or job classification of each such person and the base annual and
the total compensation paid to each such person in fiscal year 2000 and
anticipated to be paid in fiscal year 2001. Except as specifically described
on Schedule 2.20, none of such persons has an employment agreement or
understanding, whether oral or written, with the Company which is not
terminable on notice by the Company without cost or other liability to the
Company. No person listed on Schedule 2.20 has given written or oral notice
that he or she intends to terminate his or her employment with the Company or
seek a material change in his or her duties or status; and, additionally,
none of the persons whose name is starred on Schedule 2.20 has indicated to
Sellers or otherwise in writing such an intention in any other manner.
SECTION 2.21 Employee Benefits. Set forth on Schedule 2.21 is a list
of all pension, profit sharing, retirement, deferred compensation, stock
purchase, stock option, incentive, bonus, vacation, severance, disability,
hospitalization, medical insurance, life insurance, fringe benefit, welfare
and other employee benefit plans, programs or arrangements to which employees
of the Company are entitled. All compensation and employment arrangements,
pension plans, profit sharing plans, deferred compensation and the like are
in full force and effect and are fully funded as of the date hereof, and will
be on the Closing Date and the Company has no withdrawal liability with
respect to any thereof.
Each employee plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") conforms to, and its operation and
administration are in compliance with, all applicable requirements of ERISA.
There are no actions, suits or claims pending (other than routine claims for
benefits) or threatened against any employee plan or against the assets of
any employee plan.
(a) Employee Benefit Plans. Schedule 2.21(a) contains a
complete and correct list of each "employee benefit plan" (as defined in
Section 3(3) of ERISA) covering any present or former employee of the Company
and each other plan or arrangement providing for severance benefits, deferred
compensation, fringe benefits, insurance benefits or any similar type of
benefit or compensation covering any present or former Corporation employee
(an "Employee Plan"), whether or not such Employee Plan has been terminated.
The Company has provided the Buyer with complete and correct copies of the
documents comprising each Employee Plan and (where applicable) the summary
plan description for each Employee Plan. Each Employee Plan which is subject
to ERISA conforms to, and its operation and administration are in all
material respects in compliance with, all applicable requirements of ERISA
including, without limitation, all funding, reporting, disclosure and
fiduciary requirements. Each Employee Plan which is maintained outside of
the United States and is a tax exempt approved plan has been operated in all
material respects in conformance with the applicable statutes or governmental
regulations and rulings relating to such plans in the jurisdictions and, to
the extent relevant, the United States. There has been no prohibited
transaction under Section 406 of ERISA or Section 4975 of the Internal
Revenue Code with respect to any Employee Plan. There are no actions, suits
or claims pending (other than routine claims for benefits) or threatened
against any Employee Plan or against the assets of any Employee Plan.
(b) Pension Plans. The Company does not maintain an Employee Plan which
is intended to be qualified under Section 401(a) of the Internal
Revenue Code ("Pension Plan")
15
nor any Employee Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA).
(c) Welfare Plans. Schedule 2.21(a) identifies each Employee Plan
which is an employee welfare benefit plan (as defined in Section 3(1) of
ERISA) ("Welfare Plan"). No Welfare Plan involves benefits to retired
employees. Each Welfare Plan subject to the requirements of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") has complied with all
requirements for continuation coverage under group health benefit plans under
COBRA and there are no claims against the Company for a failure or alleged
failure to comply with the COBRA continuation requirements.
SECTION 2.22 Tangible Properties. Schedule 2.22 contains a true and
complete list of each item of tangible personal property owned by or leased
to the Company (the "Tangible Personal Property") which has a value in excess
of $1,000. Except as shown on Schedule 2.22, the Company has good and
marketable title free and clear of all Claims to the Tangible Personal
Property listed as owned by it. With respect to Tangible Personal Property
leased by the Company as lessee, all leases, conditional sale contracts,
franchises or licenses pursuant to which the Company may hold or use (or
permit others to hold or use) such Tangible Personal Property are valid and
in full force and effect, and there is not under any of such instruments any
existing default or event of default or event which with notice or lapse of
time or both would constitute such a default. The Company's possession and
use of such property has not been disturbed and no claim has been asserted
against the Company adverse to its rights in such leasehold interests. All
Tangible Personal Property is adequate and usable for the purposes for which
it is currently used and has been properly maintained and repaired and each
item of Tangible Personal Property, whether owned or leased, is in good
operating condition and repair and has been properly maintained, subject to
ordinary wear and tear. During the past three (3) years, there has not been
any material interruption of the operations of the Company's business due to
the condition of any of the Tangible Personal Property.
SECTION 2.23 Owned Premises. The Company does not own any real
estate.
SECTION 2.24 Leased Premises. Schedule 2.24 sets forth the
description of all real property leased and/or subleased by the Company (the
"Leased Property"). The leases and subleases are in full force and effect
(there existing no default under such leases or subleases or event which,
with the lapse of time or notice or otherwise, would constitute a default),
convey the leased real estate purported to be conveyed thereunder, and are
and will be following the Closing enforceable by the Company in accordance
with their terms. The Company has the right to use the Leased Property in
accordance with the terms of such leases and subleases free and clear of all
Claims or other interests or rights of third parties, except those which do
not or would not have a material adverse effect on the Leased Property as
used by the Company. The possession of the Leased Property by the Company
has not been disturbed and no claim has been asserted against the Company
adverse to its rights in such leasehold interests. To the best of the
Sellers' knowledge, the structures it occupies which constitute the Leased
Property are structurally sound, adequately maintained and are in good
condition and repair consistent with the uses to which they are presently
being put or intended to be put. To the best of the Sellers' knowledge, all
structures, improvements and fixtures constituting the Leased Property and
the current uses of the Leased Property conform to any and all applicable
federal, state and local laws, building, health and safety and other
ordinances, laws, rules and regulations. No notice from any governmental
body or other person has been served upon, or received by, the Company or any
Seller claiming any violation of any such ordinance, law, rule or regulation,
or requiring any substantial work, repairs, reclamation, construction,
alterations
16
or installation on or in connection with the Leased Property or any
structure, improvement or fixture thereon which has not been complied with or
that any right of access or other right enjoyed by the Company is being
modified or terminated. There is no violation by the Company or to Sellers'
knowledge by any other party of any covenant, restriction or other agreement
or understanding, oral or written, affecting or relating to title or use of
the Leased Property. There are no pending or, to the best of the Sellers'
knowledge, threatened condemnation or similar proceedings or assessments
affecting the Leased Property, nor is any such condemnation or assessment
contemplated by any governmental authority.
SECTION 2.25 Environmental Matters. The Company and its activities in
all premises, and to the best knowledge of the Company and the Sellers, the
premises themselves, occupied and used by it are in compliance with all
applicable laws, rules, regulations, orders, ordinances, judgments and
decrees of all governmental authorities (federal, state, and local). The
Company has received no notice of, and the Sellers have no knowledge of, or
reason to suspect the existence of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
of the Company or the Company's predecessors, either collectively,
individually or severally, which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing, or
investigation, based on or related to the disposal, storage, handling,
manufacture, processing, distribution, use, treatment, or transport, or the
emission, discharge, release or threatened release into the environment, of
any Substance. As used in this Section 2.25, the term "Substance" shall mean
any pollutant, hazardous substance, hazardous material, hazardous waste or
toxic waste, as defined in any presently enacted federal, state or local
statute or any regulation that has been promulgated pursuant thereto.
SECTION 2.26 Insurance. The Company is, and will be through the
Closing, adequately insured in respect of its properties, assets and
businesses with financially sound and reputable insurers against such
casualties and contingencies with such types of insurance and in such amounts
as is customary for companies similarly situated. Schedule 2.26 correctly
describes (by type, carrier, policy number, limits, premium, and expiration
date) the insurance coverage carried by the Company, which insurance will
remain in full force and effect with respect to all events occurring prior to
the Closing. The Company has not failed to give any notice or present any
claim under any such policy or binder in due and timely fashion, has not
received notice of cancellation or non-renewal of any such policy or binder.
The Sellers are not aware of any threatened or proposed cancellation or non-
renewal of any such policy or binder. The Company has not received notice of
any insurance premiums which will be materially increased in the future, with
the exception of health insurance premiums. After due inquiry, the Sellers
are not aware of any insurance premiums which will be materially increased in
the future, with the exception of health insurance premiums and insurance
premiums that may increase as a result of no longer being billed under a
combined policy with the Company and Stracon. After due inquiry, the Sellers
are not aware of any insurance premiums which will be materially increased in
the future. There are no outstanding claims under any such policy which have
gone unpaid for more than 45 days, or as to which the insurer has disclaimed
liability.
SECTION 2.27 Outstanding Commitments. Schedule 2.27 sets forth a
description of all existing contracts, agreements, understandings,
commitments, licenses and franchises (collectively "Agreements"), whether
written or oral, relating to the Company which involve amounts in excess of
$10,000. The Company has delivered or made available to the Buyer true,
correct and complete copies of all of the material Agreements specified on
Schedule 2.27 which are in writing, and
17
Schedule 2.27 contains an accurate and complete description of all material
Agreements which are not in writing. The Company has paid in full all
amounts due as of the date hereof under each Agreement identified in Schedule
2.27 and as of the Closing Date will have satisfied in full all of its
liabilities and obligations thereunder due in the ordinary course of business
consistent with past practice prior to the Closing. All of the Agreements
described in Schedule 2.27 are in full force and effect. The Company and
each other party thereto have performed all the obligations required to be
performed by them to date, have received no notice of default and are not in
default (with due notice or lapse of time or both) under any Agreement. The
Company has no present expectation or intention of not fully performing all
its obligations under each Agreement, and the Company has no knowledge of any
breach or anticipated breach by the other party to any contract or commitment
to which the Company is a party. None of such Agreements has been
terminated, no notice has been given by any party thereto of any alleged
default by any party thereunder, and the Sellers are not aware of any
intention or right of any party to default another party to any such
Agreement. There exists no actual or, to the knowledge of the Company or the
Sellers, threatened termination, cancellation or limitation of the business
relationship of the Company with any party to any such Agreement.
Furthermore, Buyer has been informed that it is customary for the Company to
consistently be late with the payment of its accounts payable to Stracon,
which practice has been accepted as the normal course of business practice
between the Company and Stracon, and the Company is not considered in default
by reason of such late payments.
SECTION 2.28 Intellectual Property. Schedule 2.28 sets forth a list
of all customer lists, trade secret agreements with employees, training
materials, selling processes, trade secrets, trade names, designs,
copyrights, mask rights, trademarks, service marks, technology or the like,
and all applications for any of the foregoing, (collectively "Intellectual
Property") owned, controlled or used by the Company, or of which the Company
is a licensor or licensee, together in each case with a brief description of
the nature of such right.
The Company owns or possesses adequate licenses or other rights to use
all Intellectual Property necessary or desirable to the conduct of its
business as conducted and as Sellers have proposed that it be conducted, and,
except as set forth in Schedule 2.28, no Claim is pending or, to the best of
the Sellers' knowledge, threatened to the effect that the operations of the
Company infringe upon or conflict with the asserted rights of any other
person under any Intellectual Property, and to the best of the Sellers'
knowledge, there is no basis for any such claim (whether or not pending or
threatened) and, except as set forth in Schedule 2.10, to the best of
Sellers' knowledge, there is no Claim or basis for any Claim that a third
party is infringing upon or in conflict with the asserted rights of the
Company under any of its Intellectual Property. None of the Company's
Intellectual Property rights will be impaired by the consummation of the
transactions contemplated hereby, and to the extent enforceable prior thereto
all of such rights will be enforceable immediately after the Closing without
the consent or agreement of any other party. The Company has not granted any
person or entity any right to use any of the Intellectual Property for any
purpose.
SECTION 2.29 Proprietary Information of Third Parties. No third party
has claimed that any person employed by or affiliated with the Company has
violated or may be violating any of the terms or conditions of such person's
employment, non-competition or non-disclosure agreement with such third
party. No third party has claimed that any person employed or affiliated
with the Company has (a) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of
such third party, or (b) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees.
18
No third party has requested information from the Company which suggests that
such a claim might be contemplated.
Except for its arrangements with the Company's lending bank, or
otherwise as described on Schedule 2.29, none of the execution or delivery of
this Agreement, or the carrying on of the Company's business as officers,
employees or agents by any officer, director, employee or consultant of the
Company, or the conduct or proposed conduct of the Company's business, will
conflict with or result in a breach of the terms, conditions or provisions of
or constitute a default under any contract, covenant or instrument under
which any such person is obligated.
SECTION 2.30 Significant Customers and Suppliers. No one customer has
accounted for 10% or more of the Company's revenue in each of the last three
fiscal years. Set forth on Schedule 2.30 is a list of the ten largest
customers and ten largest suppliers of the Company for the ten-month period
ended January 31, 2002, together with the amount of sales or purchases
attributable to such customers or suppliers expressed in dollars and as a
percentage of total sales or purchases, as the case may be. Also set forth
on Schedule 2.30 is a list of all of the Company's customers. No supplier
which was significant to the Company during the past three years, has
terminated, materially reduced or, to Sellers' knowledge, threatened to
terminate or materially reduce its provision of products or services to the
Company as a result of the Company's failure to comply with the requirements
of such supplier. Copies of the standard forms of purchase or supply
contracts of the Company and sales contracts are set forth in Schedule 2.30.
SECTION 2.31 Banks, Brokers and Proxies. Schedule 2.31 sets forth:
(a) the name of each bank, investment manager, trust company
and stock or other broker with which the Company maintains an account or from
which it borrows money;
(b) the names of all persons authorized by the Company to
effect transactions therewith, or to have access to any safe deposit box or
vault; and
(c) all proxies, powers of attorney, agency agreements or other
like instruments to act on behalf of the Company or the Sellers in matters
concerning the business or affairs of the Company.
SECTION 2.32 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. The Company has not assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on any indebtedness of any other
person (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor, or otherwise to assure the
creditor against loss), except for guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
SECTION 2.33 Transactions With Affiliates. Except as set forth on
Schedule 2.33, to the best of the Sellers' knowledge, no director, officer or
employee of the Company, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or
any member of the family of any such person, has a substantial interest or is
an officer, director, trustee, partner or holder of any equity interest, is a
party to any transaction with the Company, including any contract, agreement
or other arrangement providing for the employment
19
of, furnishing of services by, rental of real or personal property from or
otherwise requiring payments or involving other obligations to any such
person or firm.
SECTION 2.34 Records. The minute books, stock certificate books and
stock transfer ledgers of the Company are complete and correct in all
material respects with respect to the matters set forth therein and have been
maintained in a manner consistent with good business practice. Complete and
correct copies of such records have been delivered or made available to the
Buyer.
SECTION 2.35 [Intentionally omitted.]
SECTION 2.36 Disclosure. Neither this Agreement, nor any Schedule or
Exhibit to this Agreement contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which made, not misleading.
SECTION 2.37 Cooperation and Assistance With the Transition. The Company
and the Sellers shall not take any action as of, and the Sellers shall not
take any action after, the Closing Date which would impair any relationships,
agreements and understandings between the Company and its licensors, vendors,
suppliers, customers, and employees notwithstanding the sale of all of the
Shares of the Company to Buyer. Prior to the Closing Date, the Company and
the Sellers, and from and following the Closing Date, the Sellers, shall
cooperate with and assist Buyer in arranging any meetings with the licensors,
vendors, suppliers, customers, and employees of the Company, either prior or
subsequent to the Closing Date, as Buyer may reasonably request.
SECTION 2.38 No Distributions. No dividends, distributions,
disbursements or payments have been made to any of the Sellers since April
16, 2001 and there have been no other disbursements by the Company since such
date, other than its payroll which was paid in the ordinary course of its
business.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as follows:
SECTION 3.01 Investment Intent. The Buyer is acquiring the Shares for
its own account and not with the view to the distribution thereof.
SECTION 3.02 Organization. Buyer is duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and is duly qualified to transact business as a foreign
corporation in each jurisdiction in which the failure to so qualify would
have a material adverse impact on the Buyer's ability to purchase the Shares.
SECTION 3.03 Buyer Power and Authority. Buyer has the corporate power
and authority to execute, deliver and perform this Agreement and the other
documents and instruments contemplated hereby. The execution, delivery and
performance of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized and approved by Buyer. This Agreement, and each of the other
agreements, documents and instruments to be executed and delivered by Buyer
have been duly
20
executed and delivered by, and constitute the valid and binding obligation of
Buyer enforceable against Buyer in accordance with their terms.
SECTION 3.04 Validity, Etc. Except as set forth in Schedule 3.04,
neither the execution and delivery of this Agreement and the other documents
and instruments contemplated hereby, the consummation of the transactions
contemplated hereby or thereby, nor the performance of this Agreement and
such other agreements in compliance with the terms and conditions hereof and
thereof will (i) conflict with or result in any breach of any trust
agreement, certificate of incorporation, bylaw, judgment, decree, order,
statute or regulation applicable to Buyer (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, or (iii) result in a breach of or
default (or give rise to any right of termination, cancellation or
acceleration) under any law, rule or regulation or any judgment, decree,
order, governmental permit, license or order or any of the terms, conditions
or provisions of any mortgage, indenture, note, license, agreement or other
instrument to which Buyer is a party.
SECTION 3.05 Current Status of Buyer's Review Without waiving any of
its ongoing rights hereunder, nor releasing Sellers or the Company of any of
their ongoing obligations hereunder, Buyer acknowledges that neither the
Sellers nor the Company have, through the date hereof, stated that they
refuse to provide any item of due diligence information requested by Buyer.
ARTICLE IV COVENANTS OF THE SELLERS
The Sellers covenant and agree with the Buyer as follows:
SECTION 4.01 Fulfillment of Conditions and Obligations. The Sellers
shall perform and fulfill and cause the Company to perform and fulfill, all
conditions and obligations to be fulfilled or performed by them hereunder, to
the end that the transactions contemplated hereby will be fully and timely
consummated.
SECTION 4.02 Access. Until the Closing, the Sellers shall give and
shall cause the Company to give, the Buyer, its attorneys, accountants and
other authorized representatives complete access, upon reasonable notice and
at reasonable times, to the Company's offices, properties, customers,
suppliers, employees, products, technology, business and financial records,
contracts, business plans, budgets and projections, agreements, commitments
and other documents and information concerning the Company and persons
employed by or doing business with the Company, provided, however, that such
access does not interfere with the Company's operations or the relationship
it maintains with third parties. Following the Closing, the Sellers shall
provide the Buyer with access to any and all records relating to the Company
which remain in the possession of accountants, attorneys and other third
parties to the extent under Sellers' control. Prior to the Closing, in order
that the Buyer may have full opportunity to make such examination and
investigation as it may desire of the business and affairs of the Company,
the Company will, and the Sellers will cause the Company to furnish the Buyer
and its representatives during such period with all such information as such
representatives may reasonably request and cause the respective officers,
employees, consultants, agents, accountants and attorneys of the Company and
the Sellers to cooperate fully with the representatives of the Buyer in
connection with such review and examination and to make full disclosure to
the Buyer of all material facts affecting the Company's financial condition,
business operations, properties and prospects; provided, however, that the
Buyer will, through the Closing Date, hold the documents and information
concerning the Company
21
confidential in accordance with Section 10.17 hereof, and thereafter in the
event that the transaction contemplated hereby is not consummated.
SECTION 4.03 Insurance. Through the Closing, the Company shall
maintain with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated.
SECTION 4.04 Compliance with Laws. Through the Closing, the Company
shall conduct its business in compliance with all material applicable laws,
rules, regulations and orders.
SECTION 4.05 Keeping of Books and Records. The Company shall keep
adequate records and books of account, in which complete entries will be made
in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions and in which all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
SECTION 4.06 Actions Prior to Closing. The Company shall conduct its
Business pending the Closing only in the ordinary and usual course of
business consistent with past practice. Without limiting the generality of
the foregoing, the Sellers shall cause the Company to conduct its business in
a manner such that on the Closing Date the Company will have no obligations
or liabilities except (a) those set forth on the Balance Sheet, and (b) those
incurred in the ordinary course of business consistent with past practice
after the date of the Balance Sheet and prior to the Closing Date and
reflected accurately in its books and records. Except as expressly
contemplated by this Agreement or as consented to in writing by the Buyer,
during the period from the date of this Agreement to the Closing Date, the
Company shall not (i) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (A) additional shares of capital stock of any
class (including the Shares), or securities convertible into any such shares,
or any rights, warrants or options to acquire any such shares or other
convertible securities, or grant or accelerate any right to convert or
exchange any securities of the Company for shares of capital stock of the
Company, other than shares issuable pursuant to the terms of outstanding
options and commitments disclosed in Section 2.03, or (B) any other
securities in respect of, in lieu of or in substitution for shares
outstanding on the date thereof; (ii) redeem, purchase or otherwise acquire,
any of its outstanding securities (including the Shares); (iii) declare, set
aside, make or pay any dividend or distribution (whether in cash, stock or
property) on or in respect of any share of capital stock of the Company, make
any acquisition of assets or securities, any disposition of assets or
securities or any change in its capitalization, or enter into any contract or
release or relinquish any contract or other rights; (v) incur any long-term
debt for borrowed money or any short-term debt for borrowed money; (vi)
propose or adopt any amendments to the Articles of Incorporation or By-laws
of the Company; (vii) other than as contemplated or permitted by this
Agreement, enter into any new employment agreements with any officers,
directors or employees or grant any increases in the compensation or benefits
to, or agree to pay any bonus, severance or termination payment or other
special compensation to, officers, directors and employees; (viii) make any
loan or advance to any of its officers, directors, consultants, agents or
employees or to any member of their families or any other loan or advance
outside the normal course of the Company's business and in no case shall any
such loans or advances exceed ten thousand dollars ($10,000.00) in the
aggregate; (ix) make or incur any charitable contributions or any nonbusiness
expense; or (x) agree in writing or orally to take any of the foregoing
actions or any other action which would have made any representation or
warranty in this Agreement untrue.
22
SECTION 4.07 Notice of Changes. Until the Closing, the Sellers shall
notify the Buyer of any adverse change in the business of the Company as soon
as it becomes apparent to the Sellers that any such change has occurred or
may occur.
SECTION 4.08 Preservation of Business. Until the Closing, the Company
will, and the Sellers will cause the Company to, use its best efforts to
preserve its business organization intact, and to preserve its goodwill.
Without limiting the generality of the foregoing, the Company will, and the
Sellers will cause the Company to, timely perform all obligations required of
the Company or the Sellers under the contracts and permits listed on the
Schedules to this Agreement
SECTION 4.09 Litigation. The Sellers will promptly notify the Buyers
of any lawsuits, claims, proceedings or investigations which are threatened
or commenced against or by the Company, the Sellers or their affiliates, or
against any employee, consultant or director of the Company.
SECTION 4.10 Continued Effectiveness of Representations and
Warranties. From the date hereof up to and including the Closing Date, (i)
the Company will conduct its business in a manner such that the
representations and warranties contained herein shall continue to be true and
correct on and as of the Closing Date as if made on and as of the Closing
Date, except for changes and the consequences of events arising in the
ordinary and usual course of business consistent with past practice after the
date hereof and none of which would have an adverse effect on the properties,
assets, operations or condition (financial or otherwise) or prospects of the
Company or its business; and (ii) the Sellers will advise the Buyer promptly
in writing of any condition or circumstance occurring from the date hereof up
to and including the Closing Date which could cause any representations or
warranty of the Sellers to become untrue.
SECTION 4.11 Obligations of Affiliates. Except as specifically set
forth in this Agreement, on or before the Closing Date, the Company will, and
the Sellers will cause its affiliates to, (i) cause all debts, claims and
other obligations owed or required to be performed by any of the Sellers or
the Company's affiliates to the Company, to be paid or discharged in full and
(ii) terminate any ongoing agreements between it on the one hand and its
affiliates on the other, all without any expense to the Company (or any
reduction in the gross assets reflected on the Balance Sheet or acquired
since the date thereof) and so that following the Closing Date the Company
shall have no obligations of any kind or nature to the Sellers or their
affiliates except for those specified in this Agreement.
SECTION 4.12 No Negotiations. Until February 28, 2002 and absent
termination of this Agreement, the Sellers, the Company and the Company's
officers, directors, employees, agents, affiliates, advisors and
representatives, shall not, without Buyer's prior written consent, encourage,
solicit or initiate any discussions or negotiations with, or provide any
information to, any person or entity (or group thereof) other than Buyer and
its officers, directors, employees, agents or representatives and
professional advisors concerning the transactions contemplated herein for the
purpose of soliciting an alternate proposal, indication of interest or letter
of intent with respect to (i) the acquisition of the Shares, or any part
thereof, (ii) the sale of a substantial portion of the Company's assets,
(iii) the merger of the Company and any other entity, or (iv) any similar
transaction essentially designed to accomplish the goal(s) to be achieved
pursuant to this Agreement or any of the transactions described in clauses
(i), (ii), or (iii) above. Sellers and the Company shall promptly notify the
Buyer of the receipt of any such proposal, indication of interest or letter
of intent received by Sellers or the Company.
23
SECTION 4.13 Non-Competition. At the Closing, each of the Sellers
will enter into and thereafter will comply with the terms of a Noncompetition
and Confidentiality Agreement in substantially the form of Exhibit 4.13
hereto.
SECTION 4.14 Resignations. The Sellers will, to the extent that Buyer
so requests, cause the officers and directors of the Company and the trustees
and administrators of each Employee Plan to resign on or before the Closing
Date.
SECTION 4.15 General Release. Sellers hereby release and forever
discharge the Company and, as applicable, all of its directors, officers,
affiliates, successors and assigns, whether past, present or future
(collectively, the "Releasees"), from, on, and on account of any and all
claims and agreements, except as provided herein or in the documents
delivered herewith (collectively, the "Released Claims"), which the Sellers
had, now have, or may ever have or acquire against the Releasees, for or by
reason of any matter, act or action, omission, cause, happening or thing
whatsoever, from the beginning of the world to the Closing of this Agreement.
This general release of Releasees applies to all Released Claims, whether or
not such Released Claims are known or unknown, suspected or unsuspected,
patent or latent, in tort, contract, indemnity, or based on any other theory,
whether in law or equity. Sellers hereby represent that they have not
assigned or otherwise transferred any such Released Claims to any person or
entity.
SECTION 4.16 Investment Representations and Warranties of Sellers. hidden
Sellers represent and warrant to, and covenant and agree with, Buyer, as
follows:
(a) Investment Intent. Sellers acknowledge that none of the Cambex Shares
are registered under the Securities Act of 1933, as amended (the "Securities
Act") or any state securities laws. The Cambex Shares are being acquired by
Sellers for investment purposes only and not with a view to the distribution
or resale thereof. Sellers have no present intention to sell or otherwise
dispose of the Cambex Shares, except in compliance with the provisions of the
Securities Act.
(b) Information. Sellers (i) have such knowledge and experience in
financial and business affairs that they are capable of evaluating the merits
and risks involved in purchasing the Cambex Shares, (ii) are able to bear the
economic risks involved in purchasing the Cambex Shares, and (iii) have had
the opportunity to ask questions of, and receive answers from, the Buyer and
persons acting on the Buyer's behalf concerning the terms and conditions of
the Cambex Shares and to obtain any additional information in connection
therewith.
(c) Accreditation. Sellers are accredited investors within the meaning of
Regulation D of the Securities Act.
(d) Restrictions on Transfer.
(i) Sellers agree that they will not transfer or otherwise dispose of
(each, a "Disposition" or "Dispose") any of the Cambex Shares (or
any interest therein for at least twelve (12) months after the
Closing), and Sellers will cause any subsequent holder of
Sellers' Cambex Shares to agree to take and hold the Cambex
Shares subject to the terms and conditions of this Agreement, if
such Cambex Shares are required to include a legend pursuant to
the following
24
paragraph.
(ii) Each certificate representing the Cambex Shares issued to Sellers
or to any subsequent holder of Sellers' Cambex Shares shall include a legend
in the following form; provided, however, that such legend shall not be
required (and shall be removed) if a Disposition is being made in connection
with a sale of Cambex Shares registered under the Securities Act, or in
connection with a sale in compliance with Rule 144 under the Securities Act,
as such Rule may be amended from time to time:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT
BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION THEREOF OR A VALID EXEMPTION THEREFROM.
ARTICLE V COVENANTS OF THE BUYER; MUTUAL COVENANTS OF THE PARTIES
For purposes of Sections 5.01 through 5.08, the Buyer covenants and
agree with the Sellers as follows:
SECTION 5.01 Sellers' Designation of Board Member. Buyer agrees that
until the Purchase Price is paid in full, (i) the Sellers shall be entitled
to designate one of the members of the Board of Directors of the Company, who
shall serve as a Director through and until the date on which the Purchase
Price is paid in full, with all rights and privileges accorded to the other
members of the Board, including disclosure of important events, and (ii) no
more than five (5) directors shall serve on the Company's Board of Directors.
SECTION 5.02 Fulfillment of Conditions and Obligations. The Buyer
shall perform and fulfill all conditions and obligations to be fulfilled or
performed by it hereunder, to the end that the transactions contemplated
hereby will be fully and timely consummated.
SECTION 5.03 Access. From and after the Closing and until such date
as the Purchase Price is paid in full, upon written request of Seller, Buyer
shall give and shall cause the Company to give, to the Sellers, its
attorneys, accountants and other authorized representatives, access, upon
reasonable notice and at reasonable times, up to once each calendar quarter
as the Sellers deem necessary, to such of the Company's books and records, as
is necessary for Sellers to ensure that the Purchase Price is being properly
paid in accordance with the terms and conditions of this Agreement; provided
however, that such access does not interfere with the Company's operations or
the relationship that it maintains with third parties.
SECTION 5.04 Insurance. From and after the Closing, Buyer shall cause
the Company to maintain with financially sound and reputable insurers,
insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated until such date
as the Purchase Price is paid in full.
SECTION 5.05 Compliance with Laws. From and after the Closing and
until such date as the Purchase Price is paid in full, the Company shall
conduct its business in material compliance with all applicable laws, rules,
regulations and orders.
25
SECTION 5.06 Keeping of Books and Records. From and after the Closing
and until such date as the Purchase Price is paid in full, the Company shall
keep records and books of account, in accordance with generally accepted
accounting principles, to assure that calculation of the Installment Payments
may be accurately performed.
SECTION 5.07 Actions After Closing. Until such time as the Purchase
Price has been paid in full, unless it first obtains the written consent of
the Sellers, which shall not be withheld or delayed unreasonably, (a) the
Company shall not issue additional shares of stock of the Company; (b) the
Company shall not sell or encumber assets, other than in the ordinary course
of business, which ordinary course shall include, without limitation, sales
of assets to customers and encumbrances to a bank, other institutional
lenders to the Company or other third party provider(s) of financing; and (c)
Buyer will not sell, give, encumber or convey any of the Shares.
SECTION 5.08 Registration Statement. Buyer agrees that it shall file
a registration statement with the Securities and Exchange Commission, at any
time after twelve (12) months after the Closing, upon one hundred and twenty
(120) days prior written request of Sellers, covering the Cambex Shares
distributed to Sellers as part of the Purchase Price; and it shall diligently
prosecute such registration statement to effectiveness to the point that the
Cambex Shares issued as part of Purchase Price may be freely sold; provided
Sellers shall bear all costs and expenses, including, without limitation,
finance, accounting and legal, relating to such registration. Promptly upon
effectiveness of such registration statement, Buyer shall provide to Sellers
unlegended certificates in exchange for the legended certificates issued to
Sellers at the Closing. Notwithstanding the foregoing, if after the Closing
the Buyer has at least $10,000,000 in net income over any period of four (4)
consecutive quarters, then Buyer agrees, upon Sellers' unanimous request, to
register in a single registration all of the Cambex Shares not then
registered, with all such fees borne by the Buyer, except that each Seller
participating in such a registration shall bear such Seller's proportionate
share (based on the number of shares sold by such Seller over the total
number of shares included in such registration at the time it goes effective)
of all discounts, commissions or other amounts payable to underwriters or
brokers in connection with such offering and the fees and disbursements of
any counsel for the participating Sellers.
SECTION 5.09 Publicity. From the date hereof, the Buyer, the Company
and the Sellers agree that without the approval of the other parties hereto,
which approval shall not be unreasonably withheld, and except as required by
applicable Federal and state securities laws and regulations, each (a) will
make no public announcement of further progress regarding the transactions
contemplated hereby without the prior written consent of the other, (b) will
respond to all inquiries with respect to further progress regarding the
transactions contemplated hereby by stating that it is its policy not to
comment on such matters, (c) will institute procedures to restrict knowledge
of further progress regarding the transactions contemplated hereby to those
who need to know, (d) will use its best efforts to insure that no person who
has knowledge of further progress regarding the proposed transactions
contemplated hereby through it will trade in the securities of the Buyer or
the Sellers, and (e) will notify the other of any rumor with respect to the
transactions contemplated hereby received by it. In the event either the
Buyer or the Sellers determines that public disclosure of the progress of
transactions contemplated hereby is necessary in public documents required to
be filed by it or pursuant to the exception in the preceding sentence, it
agrees to notify the other of its intention to make such disclosure and
provide the other with the text of the disclosure in advance of its release
to the public.
26
SECTION 5.10 Employee Options. The Buyer shall grant stock options to
purchase up to 160,000 shares of its Common Stock subsequent to the Closing
to up to twelve (12) key employees of the Company who, and the number of
shares of which (provided that no employee be granted in excess of 25,000
options), shall be designated by the Sellers, subject to the Buyer's
reasonable discretion. Neither of the Sellers, nor ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, shall
be included among such twelve (12) key employees.
SECTION 5.11 Piggyback Registration.
(a) Sellers' Rights. The Buyer shall notify the Seller's in writing at
least 30 days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of securities of the Company
(excluding registration statements relating to any demand registration or to
any employee benefit plan or a corporate reorganization or other transaction
covered by Rule 145 promulgated under the Securities Act, or a registration
on any registration form which does not permit secondary sales or does not
include substantially the same information as would be required to be
included in a registration statement covering the sale of registrable
securities,) and will afford each Seller an opportunity to include in such
registration statement all or any part of the Cambex Shares then held by such
Seller. Each Seller desiring to include in any such registration statement
all or any part of the Cambex Shares held by such Seller shall, within 10
days after receipt of the above-described notice from the Buyer, so notify
the Buyer in writing, and in such notice shall inform the Buyer of the number
of Cambex Shares such Seller wishes to include in such registration
statement. If a Seller decides not to include all of its Cambex Shares in
any such registration statement filed by the Buyer, such Seller shall no
longer have the right to include any Cambex Shares in any subsequent
registration statement or registration statements as may be filed by the
Buyer with respect to offerings of its securities.
(b) Underwriting. If a registration statement under which the Company
gives notice under this Section 5.11 is for an underwritten
offering, then the Company shall so advise the Sellers selling
Cambex Shares. In such event, the right of any such Seller's Cambex
Shares to be included in a registration pursuant to this Section
5.11 shall be conditioned upon such Seller's participation in such
underwriting and the inclusion of such Seller's Cambex Shares in the
underwriting to the extent provided herein. All Sellers proposing
to distribute their Cambex Shares through such underwriting shall
enter into an underwriting agreement in customary form with the
managing underwriter or underwriter(s) selected for such
underwriting. Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determine(s) in good faith
that marketing factors require a limitation of the number of shares
to be underwritten, then the managing underwriter(s) may exclude
shares (including the Cambex Shares) from the registration and the
underwriting, and the number of shares that may be included in the
registration and the underwriting shall be allocated, first, to the
Buyer, and second to the Sellers and other holders requesting
inclusion of their securities in such registration statement on a
pro rata basis based on the number of securities each such holder
has requested to be included in the registration. If any Seller
disapproves of the terms of any such underwriting, such Seller may
elect to withdraw therefrom by written notice to the Buyer and the
underwriter, delivered at least 20 days prior to the effective date
of the registration statement. Any securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the
registration.
27
(c) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 5.11, including, without limitation all registration
and qualification fees, printers' and accounting fees, fees and disbursements
of counsel for the Buyer (but excluding underwriters' discounts and
commissions), shall be borne by the Buyer. Each Seller participating in such
a registration shall bear such Seller's proportionate share (based on the
number of shares sold by such Seller over the total number of shares included
in such registration at the time it goes effective) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering and the fees and disbursements of any counsel for the
participating sellers.
(d) Furnish Information. It shall be a condition precedent to the
obligations of the Buyer to take any action pursuant to this Section 5.11
that the Sellers shall furnish to the Buyer such information regarding
themselves, the Cambex Shares held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of their Cambex Shares.
(e) Delay of Registration. No Seller shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.11.
(f) "Market Stand-Off" Agreement. Each Seller hereby agrees that it shall
not, to the extent requested by the underwriter of securities of the Buyer,
sell or otherwise transfer or dispose of any Cambex Shares or other shares of
stock of the Buyer then owned by such Seller (other than to donees or
partners of the such Seller who agree to be similarly bound) for up to 180
days following the effective date of any registration statement of the Buyer
filed under the Securities Act; provided that Sellers shall not be required
to defer disposition of any greater percentage of their shares included in
the registration than is required of other persons included in the
registration who hold similar "Piggyback" rights.
For purposes of this Section 5.11, the term "Buyer" shall include any wholly-
owned subsidiary of the Buyer into which the Buyer merges or consolidates.
In order to enforce the foregoing covenant, the Buyer shall have the right to
place restrictive legends on the certificates representing the shares subject
to this Section and to impose stop transfer instructions with respect to the
Cambex Shares and such other shares of stock of each Seller until the end of
such period. Each Seller further agrees to enter into any agreement
reasonably required by the underwriters to implement the foregoing within any
reasonable timeframe so requested.
(g) Termination of the Buyer's Obligations. The Buyer shall have no
obligations pursuant to this Section 5.11 with respect to: (a) any request or
requests for registration made by any Seller on a date more than 3 years
after the date of the Closing; or (b) any Cambex Shares proposed to be sold
by a Seller in a registration pursuant to this Section 5.11 if, in the
opinion of counsel to the Buyer, all such Cambex Shares proposed to be sold
by a Seller may be sold in a 3-month period without registration under the
Securities Act pursuant to Rule 144 under the Securities Act.
28
SECTION 5.12 No Merger. The Buyer agrees not to merge the Company
with or into Buyer or any other entity prior to the earlier of (i) three (3)
years from the Closing Date, or (ii) Buyer's distribution of an aggregate of
Five Million Five Hundred Thousand Dollars ($5,500,000) in Purchase Price
payments. For purposes of determining whether this amount of Five Million
Five Hundred Thousand Dollars ($5,500,000) has been achieved at any time
there shall be included in such amount the market value of the saleable
Cambex Shares, all Installment Payments actually paid, and set offs against
the Purchase Price.
ARTICLE VI CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to deliver the Cambex Shares on the Closing
Date and to consummate the other transactions contemplated hereby is subject
to the satisfaction, on or before the Closing Date, of the following
conditions each of which may be waived by the Buyer in its sole discretion:
SECTION 6.01 Director/Shareholder Approval. The Board of Directors of
the Buyer shall have approved this Agreement and the transactions
contemplated hereby.
SECTION 6.02 [Intentionally omitted].
SECTION 6.03 Consents. All requisite governmental approvals and
consents of third parties identified on Schedule 6.03 or otherwise identified
by the Sellers as required to be received to prevent any material license,
permit or agreement relating to the Business from terminating prior to its
scheduled termination, or any indebtedness of the Company from becoming due
or being subject to becoming due as a result of the consummation of the
transactions contemplated hereby, shall have been obtained.
SECTION 6.04 Representations and Warranties True. All of the
representations and warranties of the Company and the Sellers contained in
this Agreement or in any Schedules or other documents attached hereto or
referred to herein or delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true, correct and complete on and
as of the date hereof and on and as of the Closing Date, as if made on and as
of the Closing Date. On the Closing Date, the Company and the Sellers shall
have executed and delivered to the Buyer a certificate, in form and substance
satisfactory to the Buyer and its counsel, to such effect.
SECTION 6.05 Performance. The Company and the Sellers shall have
performed and complied with all covenants, requirements and agreements
contained herein required to be performed or complied with by them prior to
or at the Closing Date. The Company and the Sellers shall have executed and
delivered to the Buyer a certificate, in form and substance satisfactory to
the Buyer, in writing to such effect and to the further effect that all of
the conditions set forth in this Article VI have been satisfied.
SECTION 6.06 No Adverse Change. No change shall have occurred or be
threatened in the condition (financial or other) of the Company the results
of its operations, properties, assets, liabilities or businesses which has
been or is or is reasonably likely to be materially adverse to its
operations, properties, prospects, assets or condition (financial or other)
except as otherwise disclosed in any schedules to this Agreement.
29
SECTION 6.07 Opinion of Counsel. The Buyer shall have received the
opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Attorney at Law, in substantially the form
attached hereto as Exhibit 6.07.
SECTION 6.08 Obligations of the Sellers. Except as contemplated by
this Agreement, all debts and other obligations owed or required to be
performed by the Sellers and their affiliates (or any business entity owned
or controlled by the Sellers or their affiliates) with respect to the Company
shall have been paid or discharged in full and performed on or before the
Closing Date. All agreements between the Company and the Sellers and their
affiliates shall have terminated on or before the Closing Date at no cost to
the Company.
SECTION 6.09 Resignations. The Company shall have received written
resignations from Simon Le as a director and Son ▇▇▇▇ as president of the
Company
SECTION 6.10 No Actions, Suits or Proceedings. As of the Closing
Date, no action, suit, investigation or proceeding brought by any person,
corporation, governmental agency or other entity shall be pending or, to the
knowledge of the parties to this Agreement, threatened, before any court or
governmental body (i) to restrain, prohibit, restrict or delay, or to obtain
damages or a discovery order in respect of this Agreement or the consummation
of the transactions contemplated hereby, or (ii) which has had or may have a
materially adverse effect on the condition, financial or otherwise, or
prospects of the Company. No order, decree or judgment of any court or
governmental body shall have been issued restraining, prohibiting,
restricting or delaying, the consummation of the transactions contemplated by
this Agreement. No insolvency proceeding of any character including without
limitation, bankruptcy, receivership, reorganization, dissolution or
arrangement with creditors, voluntary or involuntary, affecting the Company
or any Seller shall be pending, and neither the Company nor any Seller shall
have taken any action in contemplation of, or which would constitute the
basis for, the institution of any such proceedings.
SECTION 6.11 Investigation Satisfactory. The Buyer shall be satisfied
in all respects, in its sole and absolute discretion, with the results of its
investigation of the properties, prospects, financial condition and affairs
of the Company.
SECTION 6.12 Closing Date. The Closing shall have occurred on or
before February 28, 2002 or such later date as may be collectively agreed to
by all of the parties hereto
SECTION 6.13 Bank Consent. The Company's proposed primary lender, GE
Capital, shall have approved of the transaction set forth in this Agreement
or an equivalent lender, subject to Buyer's approval in its sole discretion,
shall have approved of such transaction and either GE Capital or such other
lender, as the case may be, shall have agreed to a line of credit on terms no
less favorable than the Company's existing line of credit, and the Company's
existing line of credit, or such replacement line of credit, shall continue
to be available to the Company through the Closing and thereafter.
SECTION 6.14 [Intentionally Omitted].
SECTION 6.15 Closing Documents. The Sellers shall have delivered the
Certificates representing the Shares, duly endorsed to the Buyer, and all of
the resolutions, certificates, documents and instruments required by this
Agreement.
SECTION 6.16. [Intentionally Omitted].
30
SECTION 6.17 Approval of the Buyer. All actions, proceedings,
consents, instruments and documents required to be delivered by, or at the
behest or direction of, the Sellers hereunder or incident to its performance
hereunder, and all other related matters, shall be reasonably satisfactory as
to form and substance to the Buyer.
SECTION 6.18 Schedules. The Buyer shall have approved, in Buyer's
sole and absolute discretion, of all of the Sellers' and the Company's
Schedules to this Agreement and the terms and contents set forth therein,
which Schedules shall be delivered to the Buyer by the Sellers at least seven
(7) days prior to the Closing.
SECTION 6.19 Audited Financial Statements. The financial statements
of the Company for the two (2) most recent fiscal years shall have been
audited and the results thereof shall be satisfactory to Buyer, in its sole
and absolute discretion.
SECTION 6.20 Stracon Agreement. Sellers shall have delivered to the
Buyer the Stracon Agreement, the terms of which shall be acceptable to Buyer
in its sole discretion.
ARTICLE VII CONDITIONS TO THE SELLERS' OBLIGATIONS
The obligation of the Sellers to sell the Shares to Buyer and to
consummate the other transactions contemplated hereby is subject to the
satisfaction, on or before the Closing Date, of the following conditions,
each of which may be waived by the Sellers in their sole discretion:
SECTION 7.01 Representations and Warranties to be True and Correct.
The representations and warranties contained in Article III shall be true,
complete and correct, on and as of the Closing Date, as if made on and as of
such date.
SECTION 7.02 Performance. The Buyer shall have performed and complied
with all agreements contained herein required to be performed or complied
with by it prior to or at the Closing Date.
SECTION 7.03 No Actions, Suits or Proceedings. As of the Closing
Date, no action, suit, investigation or proceeding brought by any person,
corporation, governmental agency or other entity shall be pending or, to the
knowledge of the parties to this Agreement, threatened, before any court or
governmental body to restrain, prohibit, restrict or delay, or to obtain
damages or a discovery order in respect of this Agreement or the consummation
of the transactions contemplated hereby. No order, decree or judgment of any
court or governmental body shall have been issued restraining, prohibiting,
restricting or delaying, the consummation of the transactions contemplated by
this Agreement. No insolvency proceeding of any character including without
limitation, bankruptcy, receivership, reorganization, dissolution or
arrangement with creditors, voluntary or involuntary, affecting the Buyer
shall be pending, and the Buyer shall not have taken any action in
contemplation of, or which would constitute the basis for, the institution of
any such proceedings.
SECTION 7.04 Closing Documents. The Buyer shall have delivered the
Cambex Shares and all of the resolutions, certificates, documents and
instruments required by this Agreement.
SECTION 7.05 Closing Date. The Closing shall have occurred by
February 28, 2002 or such later date that Sellers and Buyer shall mutually
agree.
31
ARTICLE VIII INDEMNIFICATION
SECTION 8.01 Survival. All representations and warranties in this
Agreement, or in any instrument or document furnished in connection with this
Agreement or the transactions contemplated hereby, shall survive the Closing
for a period of three (3) years; provided, however, claims asserted under
Section 8.02, if any, which are environmental in nature, which are based upon
fraud by the Company or by any of the Sellers, which relate to title to the
Shares or which assert tax liability shall survive for the full period of the
applicable statute of limitations, and until finally resolved and satisfied
in full if asserted on or prior to such date. All covenants and agreements
contained herein shall survive until fully performed in accordance with their
terms.
SECTION 8.02 Indemnification by the Sellers. Without limitation of Buyer's
rights, or Sellers' obligations, set forth elsewhere in this Agreement, and
notwithstanding anything to the contrary set forth elsewhere in this
Agreement, the Sellers hereby jointly and severally agree to defend,
indemnify, hold harmless and reimburse the Company, Buyer and Buyer's
directors, officers, agents and employees from and against any and all
claims, liabilities, losses, damages and expenses incurred by them (including
reasonable attorneys' fees and disbursements) which shall be caused by or
related to or shall arise out of: (a) any breach (or breach in connection
with an actual written claim asserted by a third party) of any representation
or warranty of Sellers or the Company contained in this Agreement; and (b)
any breach of any covenant or agreement of Sellers or the Company contained
in the Agreement. Sellers shall reimburse the Buyer and the Company, as the
case may be (the "Indemnified Person") for all reasonable costs and expenses
(including reasonable attorneys' fees and disbursements) as shall be
incurred, in connection with paying, investigating, preparing for or
defending any action, claim, investigation, inquiry or other proceeding,
whether or not in connection with pending or threatened litigation, that
shall be caused by or related to or shall arise out of such breach (or
alleged breach in connection with a claim asserted by a third party), whether
or not any of such Indemnified Persons shall be named as a party thereto and
whether or not any liability shall result therefrom. Sellers further agree
that they shall not, without the prior written consent of the Buyer, which
consent shall not be unreasonably withheld, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
unless such settlement, compromise or consent shall include an unconditional
release of each Indemnified Person under this Section 8.02 from all liability
arising out of such claim, action, suit or proceeding.
SECTION 8.03 Notice, Etc. If any indemnifiable event under Section
8.02 entails litigation with parties other than the Sellers, the Sellers
shall be given prompt notice thereof and shall have the obligation, at their
expense, either through counsel of their choice (which counsel shall be
satisfactory to the Buyer) or otherwise through counsel chosen by the Buyer
to litigate, defend, settle or otherwise attempt to resolve such event. If
the Sellers fail or refuse to provide a defense, the Buyer shall have the
right to undertake the defense, compromise or settlement of the matter giving
rise to the event, through counsel of its choice, on behalf of and at the
risk of the Sellers and the Sellers shall be obligated to pay the costs,
expenses and attorneys' fees incurred by the Buyer in connection therewith.
In all cases, Buyer and the Sellers shall fully cooperate with any
litigation, defense, settlement or other attempted resolution of the matter
giving rise to the claim for indemnification hereunder. Claims for
indemnification hereunder shall be asserted prior to the expiration of the
survival period to which such indemnification claim relates.
32
SECTION 8.04 Limitation on Indemnification. Notwithstanding any
provision of this Article VIII to the contrary, Buyer shall not be entitled
to assert any claim for indemnification in respect of claims for breach of
representations or warranties or any other provision of this Agreement until
such time as claims for indemnification shall exceed $10,000 (the "Basket")
however Sellers shall be subject to the provisions of this Article VIII in
respect of all claims which make up the Basket once the Basket has been
reached; provided, however, that the dollar amount of such indemnification
obligations may not exceed, in the aggregate, the sum of (a) the return of
the Cambex Shares (or the fair market value thereof, as the case may be), (b)
the aggregate amount paid by Buyer to the Sellers hereunder, and (c) the
retention (or the return, as the case may be) of the Shares by, or to, the
Buyer (such sum, the "Cap"), unless any Seller shall have provided
information to Buyer, in connection herewith, or made representations or
warranties hereunder, which (i) directly related to claims for which
indemnification is sought and (ii) were fraudulent, in which event the Cap
shall not apply to such claims. Notwithstanding the foregoing, the Basket
shall not apply to any breach of the representations and warranties contained
in Section 2.13, 2.25 or 2.31 and the Cap shall not apply to any breach of
the representations and warranties contained in Section 2.13.
Notwithstanding anything to the contrary contained herein, Buyer's rights
pursuant to this Article VIII with respect to each of the individual Sellers,
and Buyer's right to collect money damages from each of the individual
Sellers elsewhere under this Agreement, shall be limited to the multiple of
(A x B), with A equal to the total amount of liability owing to Buyer and B
equal to an individual Shareholder's respective percentage ownership interest
in the Company as set forth in Schedule 1.01 hereto.
ARTICLE IX TERMINATION
SECTION 9.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
A. By mutual written consent duly authorized by the Boards of
Directors of the Buyer and the Sellers;
B. By the Buyer or the Sellers if
(i) any court of competent jurisdiction or other
governmental body shall have issued an order, decree or ruling, or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby, provided that this Agreement shall not be terminated
pursuant to this paragraph unless the party terminating this Agreement has
utilized its reasonable best efforts to oppose the issuance of such order,
decree or ruling or the taking of such action;
(ii) the Closing has not occurred on or prior to
March 31, 2001 for any reason other than the breach of any provision of
this Agreement by the party terminating this Agreement;
(ii) the other party breaches any of its representations, warranties
or covenants attached hereto in any material respect and such
33
breach is not promptly cured after receipt of written notice thereof by
such breaching party.
C. By the Buyer if:
(i) Any of the conditions set forth in Article VI
hereof has not been satisfied on or before the Closing Date or shall have
become incapable of fulfillment and shall not have been waived by the Buyer,
for any reason other than a breach by the Buyer of any of its
representations, warranties or agreements hereunder; or
(ii) If in the Buyer's good faith and reasonable
judgment there is any inaccuracy in any representations or breach of any
warranty contained herein, or any failure by the Seller to perform any
commitment, covenant or condition contained in this Agreement, or there
exists any material error, misstatement or omission with regard to any of the
Exhibits, Schedules or other documents referred to herein, or the Buyer in
its sole judgment is not satisfied with the contents of any of the Exhibits
or Schedules of the Company.
D. By the Sellers if any of the conditions set forth in
Article VII hereof has not been satisfied on or before the Closing Date or
shall have become incapable of fulfillment and shall not have been waived by
the Sellers, for any reason other than a breach by any Seller of any of the
representations, warranties or agreements hereunder;
Upon the occurrence of any of the events specified in this Section 9.01
(other than paragraph A hereof), written notice of such event shall forthwith
be given to the other parties to this Agreement, whereupon this Agreement
shall terminate.
SECTION 9.02 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 9.01, this Agreement,
except for the provisions of Articles VIII, IX and X, shall forthwith become
void and be of no effect, without any liability on the part of any party or
its directors, officers or shareholders. Nothing in this Section 9.02 shall
relieve any party to this Agreement of liability for breach of this
Agreement.
If the Sellers or the Company fails to fulfill its obligations
hereunder for any reason not excused by an express provision of this
Agreement, then the Buyer shall, in addition to any other remedies that it
may have, have the right to bring an action in any court of competent
jurisdiction to obtain specific performance of this Agreement, it being
understood that the parties agree that failure of the Sellers to consummate
the purchase and sale of the Shares or failure of the Sellers or the Company
to perform any of their obligations contemplated by this Agreement (except
for a failure excused by an express provision of this Agreement) would cause
irreparable injury to the Buyer and that money damages would not provide an
adequate remedy to the Buyer. The Sellers and the Company therefore waive
all objections to the award of equitable relief for such failure.
34
ARTICLE X MISCELLANEOUS
SECTION 10.01 Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telecopy or facsimile transmission, (iii) sent by recognized
overnight courier, or (iv) sent by registered or certified mail, return
receipt requested, postage prepaid.
If to the Buyer:
Cambex Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Sellers:
Son ▇. ▇▇▇▇
c/o Super PC Memory, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
Simon Le
c/o Super PC Memory, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o Super PC Memory, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
35
If to the Company:
Super PC Memory, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
All notices, requests, consents and other communications hereunder shall be
deemed to have been (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if
made by telecopy or facsimile transmission, at the time that receipt thereof
has been acknowledged by electronic confirmation or otherwise, (iii) if sent
by overnight courier, on the next business day following the day such notice
is delivered to the courier service, or (iv) if sent by registered or
certified mail, on the 5th business day following the day such mailing is
made.
SECTION 10.02 Entire Agreement. This Agreement together with the
Exhibits and Schedules hereto and the other documents executed in connection
herewith (together, the "Documents") embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof including, without limitation, that
certain letter of intent between the Buyer and the Company dated November 5,
2001. No statement, representation, warranty, covenant or agreement of any
kind not expressly set forth in the Documents shall affect, or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement.
SECTION 10.03 Modifications and Amendments. The terms and provisions
of this Agreement may be modified or amended only by written agreement
executed by all parties hereto.
SECTION 10.04 Waivers and Consents. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing between the parties hereto, shall operate as a waiver of
any such right, power or remedy of the party. No single or partial exercise
of any right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof
or the exercise of any other right, power or
36
remedy hereunder. The election of any remedy by a party hereto shall not
constitute a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly required under
this Agreement shall entitle the party receiving such notice or demand to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the party giving such notice or demand
to any other or further action in any circumstances without such notice or
demand. The terms and provisions of this Agreement may be waived, or consent
for the departure therefrom granted, only by written document executed by the
party entitled to the benefits of such terms or provisions. No such waiver
or consent shall be deemed to be or shall constitute a waiver or consent with
respect to any other terms or provisions of this Agreement, whether or not
similar. Each such waiver or consent shall be effective only in the specific
instance and for the purpose for which it was given, and shall not constitute
a continuing waiver or consent.
SECTION 10.05 Assignment. Neither this Agreement, nor any right
hereunder, may be assigned by any of the parties hereto without the prior
written consent of the other parties.
SECTION 10.06 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and their permitted
assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement shall be
construed to create any rights or obligations except among the parties
hereto, and no person or entity shall be regarded as a third-party
beneficiary of this Agreement.
SECTION 10.07 Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with
and governed by the internal laws of The State of California, without giving
effect to the conflict of law principles thereof. Notwithstanding the
foregoing, all of the terms and provisions of this Agreement related to
employment and protection of information and restrictions thereon, including,
without limitation, all non-competition, confidentiality, trade secret and
non-solicitation provisions herein and in any other documents or agreements
executed in connection herewith, shall be construed in accordance with and
governed by the internal laws of The Commonwealth of Massachusetts, without
giving effect to the conflict of law principles thereof. In the event of any
confusion, disagreement or ambiguity as to which laws shall apply to a
particular matter or issue, the laws of The Commonwealth of Massachusetts
shall apply.
SECTION 10.08 Jurisdiction and Service of Process. Any legal action
or proceeding with respect to this Agreement may be brought in the courts of
the Commonwealth of Massachusetts or the State of California or the United
States of America. By execution and delivery of this Agreement, each of the
parties hereto accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The parties
hereby irrevocably waive any objection or defense that they may now or
hereafter have to the assertion of personal jurisdiction by any such court in
any such action or to the laying of the venue of any such action in any such
court, and hereby waive, to the extent not prohibited by law, and agree not
to assert, by way of motion, as a defense, or otherwise, in any such
proceeding, any claim that it is not subject to the jurisdiction of the
above-named courts for such proceedings. Each of the parties hereto
irrevocably consents to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered mail, postage prepaid, to the party at its address set forth in
Section 10.01 hereof and irrevocably waive any objection or defense that it
may now or hereafter have to the sufficiency of any such service of process
in any such action. Nothing in this Section
37
10.08 shall affect the rights of the parties to commence any such action in
any other forum or to serve process in any such action in any other manner
permitted by law.
SECTION 10.09 Severability. In the event that any court of competent
jurisdiction shall finally determine that any provision, or any portion
thereof, contained in this Agreement shall be void or unenforceable in any
respect, then such provision shall be deemed limited to the extent that such
court determines it enforceable, and as so limited shall remain in full force
and effect. In the event that such court shall determine any such provision,
or portion thereof, wholly unenforceable, the remaining provisions of this
Agreement shall nevertheless remain in full force and effect.
SECTION 10.10 Interpretation. The parties hereto acknowledge and
agree that: (i) each party and its counsel reviewed and negotiated the terms
and provisions of this Agreement (except with respect to the disclosure
schedules regarding the Business which are the sole responsibility of the
Seller) and have contributed to its revision; (ii) the rule of construction
to the effect that any ambiguities are resolved against the drafting party
shall not be employed in the interpretation of this Agreement; and (iii) the
terms and provisions of this Agreement shall be construed fairly as to all
parties hereto and not in favor of or against any party, regardless of which
party was generally responsible for the preparation of this Agreement.
SECTION 10.11 Headings and Captions. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only
and shall in no way modify, or affect, or be considered in construing or
interpreting the meaning or construction of any of the terms or provisions
hereof.
SECTION 10.12 Enforcement. Each of the parties hereto acknowledges
and agrees that the rights acquired by each party hereunder are unique and
that irreparable damage would occur in the event that any of the provisions
of this Agreement to be performed by the other party were not performed in
accordance with their specific terms or were otherwise breached.
Accordingly, in addition to any other remedy to which the parties hereto are
entitled at law or in equity, each party hereto shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement by the other
party and to enforce specifically the terms and provisions hereof in any
federal or state court to which the parties have agreed hereunder to submit
to jurisdiction.
SECTION 10.13 Reliance. The parties hereto agree that,
notwithstanding any right of any party to this Agreement to investigate the
affairs of any other party to this Agreement, the party having such right to
investigate shall have the right to rely fully upon the representations and
warranties of the other party expressly contained in this Agreement and on
the accuracy of any schedule or other document attached hereto or referred to
herein or delivered by such other party or pursuant to this Agreement.
SECTION 10.14 Expenses. Each of the parties hereto shall pay its own
fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated; provided, however, that all expenses
billed to or incurred by the Company and the Sellers combined, up to a
maximum of $25,000 (not including audit fees), in connection with this
Agreement and the transactions contemplated hereby, shall be borne by the
Company and, along with all audit fees, shall be offset against the Purchase
Price and treated as a shortfall as more fully set forth in Section 1.03(c).
38
SECTION 10.15 No Broker or Finder. Each party represents and warrants
to the other that it has not dealt with any broker or finder in connection
with this Agreement or the transactions provided for herein, and that no
person or entity is entitled to any brokerage or finder's fee, commission or
other compensation on account of any such dealings with the warranting party,
except that Sellers have retained Equico Capital Markets, LLC ("Equico") and
agree to pay all costs and fees owing to Equico in connection with the
transactions contemplated in this Agreement. Each party shall indemnify,
save and hold the other harmless from and against any and all loss, cost or
expense (including, without limitation, any and all attorneys' fees related
to suits, actions or judgments incident hereto), whether direct, contingent
or consequential, and no matter how arising, in any way related to or arising
from any breach of the representations and warranties contained in this
Section 10.15.
SECTION 10.16 [Intentionally Omitted].
SECTION 10.17 Confidentiality. Each party acknowledges and agrees
that any information or data it has acquired from the other party, not
otherwise properly in the public domain, was received in confidence. Each
party hereto agrees not to divulge, communicate or disclose, except as may be
required by law or for the performance of this Agreement (including obtaining
financing and conducting due diligence), or use to the detriment of the
disclosing party or for the benefit of any other person or persons, or misuse
in any way, any confidential information of the disclosing party concerning
the subject matter hereof, including any trade or business secrets of the
disclosing party and any technical or business materials that are treated by
the disclosing party as confidential or proprietary, including without
limitation information (whether in written, oral or machine-readable form)
concerning: general business operations; methods of doing business,
servicing clients, client relations, and of pricing and making charge for
services and products; financial information, including costs, profits and
sales; marketing strategies; business forms developed by or for the
disclosing party; names of suppliers, personnel, customers, clients and
potential clients; negotiations or other business contacts with suppliers,
personnel, customers, clients and potential clients; form and content of
bids, proposals and contracts; the disclosing party's internal reporting
methods; technical and business data, documentation and drawings; software
programs, however embodied; manufacturing processes; inventions; diagnostic
techniques; and information obtained by or given to the disclosing party
about or belonging to third parties.
SECTION 10.18 Counterparts. This Agreement may be executed in one or
more counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
SECTION 10.19 Definitions. For purposes of this Agreement, the
following terms shall have the following meanings when used herein:
"best knowledge of the Sellers" or "best of the Sellers' knowledge"
means the actual knowledge of each of the Sellers, individually and in his
respective capacity as an officer, director and/or shareholder of the
Company, as well as the actual knowledge of all other directors and officers
of the Company and any employee of the Company who is the head of, or
otherwise in charge of, a business unit or particular function of the
Company; written notice provided to the Company, regardless of any Seller's
receipt or actual knowledge thereof, shall nevertheless be deemed to be
within the scope of such knowledge; and the knowledge of any one Seller or
person referred to herein shall be imputed to all Sellers.
39
IN WITNESS WHEREOF, the Buyer and the Company have caused this Stock
Purchase and Sale Agreement to be executed by their authorized
representatives, and the Sellers have executed this Agreement, as of the day
and year first above written.
THE BUYER:
CAMBEX CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Its: President
THE COMPANY:
SUPER PC MEMORY, INC.
/s/ Son ▇. ▇▇▇▇
By: Son ▇. ▇▇▇▇
Its: President
THE SELLERS
/s/ Son ▇. ▇▇▇▇
SON ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇
▇▇▇▇▇ LE
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EXHIBIT 1.02
The installment portion of the Purchase Price will be determined by
multiplying the Gross Profit generated by the Company by 0.15 (resulting in
15% of the Gross Profit) for the period extending from the Closing Date
through December 31, 2004. The Gross Profit will be calculated by
subtracting the Cost of Sales from the Net Sales of the Company to customers.
The Net Sales will be determined by taking the Gross Sales of the Company and
subtracting therefrom returns, discounts, trade-ins, and all other customary
adjustments. Consistent with the foregoing, all calculations will be made
using standard accounting principles as applied to the audited financial
statements of the Company.
As an exception to the general rule provided above, for purposes of
determining Installment Payments, as well as the Net Income of the Company,
the Gross Profit on any products sold or transferred to the Company by the
Buyer (the "Cambex Products") will be calculated by multiplying the Net Sales
of Cambex Products by 0.30.
The Installment Payments shall be paid as follows: Payments based upon gross
profit for the most recent fiscal quarter (or in the case of the first
quarter of 2002, the gross profit for the period extending from the Closing
Date through the end of such quarter) will be due within ten (10) days after
the Buyer's Form 10-Q Statement or Form 10-K financial statement, as
appropriate, is filed with the Securities and Exchange Commission (but not
later than ten (10) days after the applicable due date thereof), provided,
however, if it is ever determined that a prior period's calculation of Gross
Profit is subject to adjustment, the adjustment will be offset against
subsequent payments; and, provided further, that cash payments will be
limited to the amount of the Company's Net Income calculated cumulatively
from the Closing Date through the most recent fiscal quarter, and the
remainder of the Installment Payment which would otherwise be due will be
deferred. Any portion of an Installment Payment which is not paid in cash and
is so deferred will be paid as soon as, and to the extent that, the Company
subsequently generates Net Income; but, in any event, all deferred amounts,
plus a Supplemental Payment (as defined below), will be paid within ten (10)
days after the Buyer's Form 10-K Statement for the year ended December 31,
2004 is filed with the Securities and Exchange Commission (but not later
than ten (10) days after the applicable due date thereof). The "Supplemental
Payment" shall mean a payment by Buyer equal to five percent (5%) of the
Gross Profit (as determined in the first paragraph of this Exhibit 1.02)
generated by the Company for its fourth quarter of fiscal year 2004.
The Installment Payments due from the Buyer, as calculated in accordance with
the foregoing three paragraphs, should total, for the period extending from
the Closing Date through December 31, 2004 (the "Cumulative Installment
Payments"), at least a targeted amount of $5,500,000 (the "Targeted Amount").
The Targeted Amount will be adjusted down as follows: $2,000,000 of such
amount is allocable to calendar year 2002; the Targeted Amount will be
adjusted down proportionately for that portion of calendar year 2002 that
preceded the Closing Date; the Targeted Amount shall also be reduced by the
value of the saleable Cambex Shares on December 31, 2004; and the Targeted
Amount shall also be reduced for any offsets which are provided for in this
Agreement (the Targeted Amount, as reduced by all of the reductions
described above, hereinafter referred to as the "Adjusted Targeted Amount").
No later than the date by which the Installment Payment for the fourth
quarter of fiscal year 2004 would otherwise be due (the "Q4 2004 Installment
Date"), Buyer will notify Sellers whether it will agree that the
Cumulative Installment Payments shall be deemed to be equal to the Adjusted
Targeted Amount. If Buyer does not deem the Cumulative Installment Payments
to be at least equal to the Adjusted Targeted Amount, either as a result of
electing in such notice not to deem them so or as a result of failing to
provide such notice, then Sellers, within 15 days of Buyer's notice regarding
same (or in the absence of such notice, then within 15 days of the Q4 2004
Installment Date), shall be entitled to notify Buyer that Sellers unanimously
elect to treat Buyer's failure to deem the Cumulative Installment Payments to
be equal to the Adjusted Targeted Amount as an event of default under Section
1.02 of this Agreement and under Section 2 of the Pledge Agreement. If
Sellers unanimously elect to treat this failure as an event of default, and
timely provide Buyer with written notice thereof as well as a request for
return of the Shares, they shall be entitled to a return of the Shares,
however in such event, Sellers shall not be entitled, and shall have no
further rights, to any additional payments from Buyer from and after such
date, under this Agreement or any other agreement which was executed or
contemplated in connection with this Agreement. If Sellers do not elect to
treat this failure as an event of default, then Buyer's obligations shall
continue in full force and effect as set forth in the foregoing three
paragraphs, but this provision and Sections 5.07 and 5.12 above shall be
deemed deleted from this Agreement, and this provision and such Sections
shall be of no further force or effect and the Shares shall be released from
escrow and immediately delivered to the Buyer. In determining Installment
Payments due from Buyer hereunder, Buyer shall always be credited for all
prior payments made by Buyer (except for the payment under Section 1.02(i),
except that when calculating the Cumulative Installment Payments and the
Adjusted Targeted Amount, Buyer shall be credited with the payment under
Section 1.02(i)) and for any offsets to which it is entitled under the
provisions of this Agreement.
Notwithstanding anything to the contrary set forth in this Exhibit 1.02, once
Buyer has distributed an aggregate of $5,500,000 in Purchase Price Payments
(as determined in accordance with Section 5.12), then the provisions in the
preceding paragraph requiring Buyer to make an election whether to deem the
Cumulative Installment Payments to be equal to the Adjusted Targeted Amount
and Sections 5.07 and 5.12, shall be void and of no further force or effect
and shall be deemed deleted from this Agreement and the Shares shall be
released from escrow and immediately delivered to the Buyer.