SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report:
July 15, 1997
PACER TECHNOLOGY
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or organization)
0-8864 77-0080305
Commission File No. IRS Employer
Identification No.
9420 Santa Anita Avenue, Rancho Cucamonga, California 91730
(Address of principal executive office) (Zip Code)
909-987-0550
(Issuer's telephone number,
including area code)
Item 2. Acquisition or Disposition of Assets
On July 15, 1997, Pacer Technology ("Pacer") completed the
acquisition of substantially all of the assets of California
Chemical Specialties, Inc. ("Cal. Chem"). The assets purchased
from Cal. Chem primarily consisted of trade accounts receivable,
inventory, fixed assets, and proprietary formulas. In addition,
Pacer assumed the liability for trade accounts payable as of the
closing date. The total purchase price consisted of approximately
$2,575,000 cash. The purchase price was based on the estimated
value of future cash flows from operations. The transaction was
financed by Comerica Bank utilizing Pacer's existing line of credit
facility. The final costs for this acquisition have not been
finalized. However, these will be reported on Form 8-KA when
submitted.
Cal. Chem. is known for its high quality and extensive research and
development capabilities. The company has a dominant market
position in the domestic acrylic nail care industry. This
acquisition substantially enhances Pacer's competitive position in
the nail care market and brings many synergies to the core
business.
Cal. Chem. has annual revenues of approximately $2.8 million and
leases a 4500 square foot facility in Corona, California. Pacer
intends to operate this facility for approximately one year, and
subsequently plans to relocate the operation to an existing Pacer
location. There can be no assurance that actions to integrate the
operation will materially improve Cal Chem's results of operation.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired - California
Chemical Specialties, Inc.
Audited financial statements will be submitted with the
amended Form 8-K on Form 8-KA on or before September 13, 1997.
(b) Proforma Financial Statements
Audited pro forma financial statements will be submitted with
the amended Form 8-K on Form 8-KA, on or before September 13,
1997.
(c) Exhibits:
2.1 Asset Purchase Agreement
AGREEMENT
between
CALIFORNIA CHEMICAL SPECIALTIES, INC. - SELLER
and
PACER TECHNOLOGY - PURCHASER
re
SALE OF GOING BUSINESS AND ASSETS OF ENTIRE BUSINESS
This agreement (Agreement) is made by and between PACER TECHNOLOGY
(Purchaser), a California Corporation having its principal office at 9420
Santa Anita Avenue, Rancho Cucamonga, California 91730, and CALIFORNIA
CHEMICAL SPECIALTIES, INC., (Seller or CCS), a California Corporation
having its principal office at 1805 Sampson Ave., Corona, California 91719
(Business Premises), the transactional subject-matter of which is the
sale to Purchaser of the entirety of the assets, good-will and going
concern value of Seller. For reference purposes only, this Agreement is
dated June 27, 1997.
Recitals
A. Seller conducts a business (Business) under the name California
Chemical Specialties which primarily engages in the business of formulating,
producing, and selling, in bulk, liquids and powders to customers in the
nail care industry. All business of Seller is conducted at and from the
Business Premises.
B. Eugene Packer (Packer) is the principle shareholder and employee
of Seller and has all of the essential the skill, knowledge and expertise
relative to creating the formulizations that are the basis for the goods
produced and sold by Seller. As used herein, the term Seller includes
Packer wherever the context requires. Further, any intangible or tangible
property associated with the Seller's business operations which is owned or
controlled by Packer is being sold hereunder to Purchaser.
C. Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser, on the terms and subject to the conditions of this
Agreement, all of Seller's business and properties.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained in this Agreement, the parties
agree as follows:
Agreement
1. PURCHASE AND SALE OF ASSETS: Subject to the terms and conditions
set forth in this Agreement, on the Closing Date and through the Escrow
hereafter identified, for the purchase price hereafter specified, Seller
agrees to sell, assign, transfer, convey, set over and deliver to Purchaser,
and Purchaser agrees to purchase from Seller, all of the assets, properties,
goodwill and business of Seller's business, of every nature, kind, character and
description, whether tangible, intangible, real, personal, or mixed, and
wherever located (all of which are sometimes collectively referred to as the
Assets), including, without limitation:
(i) all property and rights listed as assets of Seller in the
schedules attached to this Agreement;
plus
(ii) Inventory as defined in Section 1.1 existing as of Closing;
plus
(iii) all fixed assets located at, about or within the Business
Premises as well as the supplies, equipment, machinery,
furniture, fixtures, motor vehicles, claims and rights under
leases, contracts, notes, evidences of indebtedness,
purchase and sales orders, goodwill of any nature, business
name [California Chemical, California Chemical
Specialties, or any name similar thereto], copyrights,
service marks, trademarks, trade names, trade secrets,
patents, patent applications, licenses, royalty rights,
deposits, and rights and claims to refunds and adjustments
of any kind;
plus
(iv) all of the processes, formulas, formulizations, recipes, and
accurate instructions relating to production and manufacture
of same, whether or not actually used by Seller or Packer
in the Business;
plus
(v) all receivables, as defined in Section 1.2 as they exist at
Closing;
plus
(vi) all assets and property acquired by, on behalf of, or for the
benefit of the Business through the Closing;
but
(vii) excepting therefrom assets disposed of in the ordinary
course of business of the Business or as permitted by this
Agreement which occur prior to Closing.
1.1 Inventory Assets: Inventory shall mean at Closing, all raw materials,
work-in-progress, finished goods, stock -in-trade, and merchandise but
excluding obsolete and slow moving items as determined by Purchaser
when the Inventory is taken for Closing. A written itemization of the
Inventory will be prepared and attached hereto as Schedule 1.1. by
Escrow Agent [Section 5].
1.1.1 Taking Inventory: Representatives of Seller and Purchaser
shall meet at the Business Premises after the close of
business on the day prior to the Closing and take a physical
inventory associated with the Business. The Inventory of the
Business shall be a written itemization of those items
constituting Inventory as defined in Section 1.1 immediately
above with the Seller's most recent purchase price for each
item being specified opposite each such listed item. Seller
shall not utilize or consume any of the inventory after
compiling Schedule 1.1 through Closing.
1.2 Cash and Receivables: Seller will retain all cash and close cash
equivalents. Purchaser will purchase the good receivables of the
Business as they exist at Closing. Good receivables shall mean
those accounts receivable of Seller exclusive of uncollectible
receivables as determined by Purchaser determined as of the close of
business on the day immediately prior to the Closing Date and an
Accounts Receivable Report showing the amount of each good Receivable
acceptable to Purchaser shall be attached hereto as Schedule 1.2 by
Escrow Agent
[Section 5]. After compiling Schedule 1.2, all Receivables of the
Business shall be held for delivery to Purchaser at Closing.
1.3 Working Capital Amount: Working Capital Amount shall mean: (i) the
Inventory value as listed in Schedule 1.1; plus (ii) the value of all
Receivables as listed on Schedule 1.2; minus (iii) all accounts payable
as listed on Schedule 3.
1.4 Assets to be Sold Free of Encumbrances: Except as may be specified
herein, the Assets are sold by the Seller to Purchaser free and clear
of any and all liens, encumbrances, or claims of any third person, firm
or entity whatsoever.
1.5 Deposits and Prepayments: It is understood, acknowledged and agreed
that Purchaser shall be entitled to receive, as they become due, all
security and other deposits, pre-paid rent and the like at such time as
they would have otherwise been refunded or paid to Seller on account of
its Business operations.
2. PURCHASE PRICE - PAYMENT: As full payment for the sale and
transfer of the Assets by Seller to Purchaser, Purchaser shall pay to Seller
a total consideration (Total Purchase Price) equal to Two Million Three
Hundred Four Thousand and 00/100 Dollars ($2,304,000.00) plus an amount
equal to the Working Capital Amount at Closing.
2.1 Payment: The entirety of the total Purchase Price shall be paid either:
(i) pursuant to a bank cashier's check payable to the order of Seller;
or (ii) by electronic fund transfer to the account of Seller pursuant
to instructions provided by Seller.
2.2 Allocation of Purchase Price: The Total Purchase Price of the Assets
shall be allocated as set forth in Schedule 2.2. Each of the Parties
agrees to report this transaction for Federal tax purposes in accordance
with the allocation of the Total Purchase Price set forth in said
Schedule 2.2.
3. ASSUMPTION OF CONTRACTS AND OBLIGATIONS: Purchaser agrees
to assume and pay those accounts payable of Seller at Closing listed in
Schedule 3. It is expressly understood and agreed that Purchaser shall not
be liable for any of the obligations or liabilities of Seller of any nature,
kind or character other than those specifically assumed by Purchaser under
Section 3, Section 3.1 and 3.1.2.
3.1 Payment of Outstanding Purchase Orders and Contracts: Seller's purchase
orders which relate to goods, supplies and materials to be received by
the Seller in the ordinary course of operating the Business, and which
are not included in the Schedule 1.1 Inventory list, and which are
outstanding (not received or paid for) as of Closing (Outstanding
Purchase Orders) will be assumed and paid for by Purchaser, and the
following process will be applicable relative thereto:
3.1.1 Review of Purchase Records: At Closing [or a time sufficiently
close to the time thereof that a material deviation will not
occur], Purchaser shall review the Seller's purchase records
in order to determine: (i) the identity of the vendors
associated with each Outstanding Purchase Order; (ii) the
method committed to by Seller for payment thereof; and (iii)
the status relative to the delivery of those supplies and
goods to be received by Seller under the Outstanding Purchase
Orders [e.g. not shipped, shipped but not received, received
but not processed, etc.]. An itemization of such materials,
supplies and goods (Outstanding Purchase Order Items) shall
be compiled indicating: (i) the identity of all such goods,
supplies and materials; (ii) the identity of, and all contact
information for, the vendor associated with each such item or
group of items; (iii) the Outstanding Purchase Order associated
therewith; (iv) the amount to be paid on account of all such
items and the terms for the payment thereof; (v) the
methodology expected for the payment of such item or items; and
(vi) the execution of such listing by both Seller and Purchaser.
The compiled listing of Outstanding Purchase Order Items will be
attached hereto as Schedule 3.1.1.
3.1.2 Assumption of Contracts: In addition to the above, Purchaser
will assume and pay those of Seller's contract obligations
(e.g. equipment leases, service and maintenance contracts,
etc.) as listed on Schedule 3.1.2.
4. TRANSACTION RELATED TAXES: Seller shall pay all sales and
use taxes arising out of the transfer of the Assets and shall pay its
portion, prorated as of the Closing Date, of any state and local real and
personal property taxes associated with the Business of Seller. Purchaser
shall not be responsible for any business, occupation, withholding, or similar
tax, or any taxes of any kind related to any period before the Closing Date
[Section 5.3].
5. ESCROW: Closing of the transactions contemplated by the
within agreement shall take place at 3233 Arlington Ave., Suite 203,
Riverside, California 92506. LARRY K. REYNOLDS, Attorney at Law, shall be
the Escrow Agent. Seller and Purchaser do hereby irrevocably instruct said
Escrow Agent to act in conformance with the following, and, except for any
act(s) of gross negligence or willful misconduct committed by Escrow Agent in
conjunction with Escrow Agent's handling of the within described Escrow, the
parties hereto agree to indemnify and hold Escrow Agent free and harmless
from any claims or demands which arise out of or are in any way related to
any of the matters addressed or referred to in the within Agreement. Seller
and Purchaser each acknowledge that LARRY K. REYNOLDS is a Partner in the law
firm of REYNOLDS & JENSEN, LLP, which firm represents Purchaser in this
Transaction and is therefore not neutral. The parties agree to utilize said
LARRY K. REYNOLDS to organize and facilitate the Closing in an orderly
fashion and both understand and agree that if a dispute arises between them
relative to the subject matter hereof, said LARRY K. REYNOLDS will not
proceed until they resolve their differences.
5.1 Seller's Deposits with Escrow Agent: Unless a different time is
specified, at or before Closing [Section 5.3], Seller shall deliver to
the Escrow Agent the following:
5.1.1 Agreement: Four (4) copies of the within Agreement originally
executed by Seller shall be deposited with the Escrow Agent no
later than five (5) business days after the signing thereof
and such deposit shall be deemed to be the Opening of Escrow.
5.1.2 Schedules: Copies of all schedules to the within Agreement
with a written statement that Seller has approved same for
attachment hereto or, in lieu of any particular schedule
required herein for the benefit of Seller, a written
statement of waiver of the requirement thereof.
5.1.3 Certificate of Products Liability Insurance: The certificate
of products liability insurance as required pursuant to
Section 12.2.2.
5.1.4 Certifications and Resolutions: Certified resolutions by
Seller's board of directors, in form satisfactory to counsel
for Purchaser, authorizing the execution and performance of
this Agreement and all actions to be taken by Seller under
this Agreement. Seller shall deposit with Escrow Agent the
following certifications and resolutions, each dated as of
Closing and indicating that they are valid as of that date:
(1) A certification that there are no agreements to which
Seller is a party or of which Seller is aware, whether
oral or written, under which there exists any rights of
any third party to purchase all or any portion of the
Assets or any of the outstanding shares of stock of Seller.
(2) A certification identifying all officers and members of
the board of directors of Seller.
(3) A certification executed by Packer and a duly authorized
officer of Seller certifying that all of Seller's
representations and warranties under this Agreement are
true as of the Closing Date, as though each of those
representations and warranties had been made on that date.
(4) A certification executed by a duly authorized officer of
Seller certifying that all shareholders action necessary
to effect the sale of Assets as contemplated herein has
been obtained, or, if not obtained, none was required.
5.1.5 Instruments of Transfer: Instruments of assignment and
transfer of all property of Seller being sold hereunder
including bills of sale, assignments of intellectual property
rights and licenses (or replacements therefore which specify
Purchaser as being the owner thereof), rights under agreements,
trademarks, trade names, patents, patent applications, patent
licenses, processes, formulas, formulizations, recipes, shop
rights, and other property, tangible or intangible.
Simultaneously with the consummation of the Closing, Seller,
through its officers, agents, and employees, will put Purchaser
into full possession and enjoyment of all properties and assets
to be conveyed and transferred by this Agreement.
5.1.6 Opinion Letter of Seller's Counsel: The opinion of Seller's
counsel described in Section 10.5.
5.1.7 Consulting Agreement: Two (2) copies of a fully executed copy
of a Consulting Agreement pursuant to which Packer becomes a
consultant to Purchaser for a period three (3) years from and
after the date of Closing [Section 13.2].
5.1.8 Further Documents: Seller, at any time before or after the
Closing Date, will execute, acknowledge, and deliver any
further deeds, assignments, conveyances, and other assurances,
documents, and instruments of transfer, reasonably requested
by Purchaser, and will take any other action consistent with
the terms of this Agreement that may reasonably be requested by
Purchaser for the purpose of assigning, transferring, granting,
conveying, and confirming to Purchaser, or reducing to
possession, any or all property to be conveyed and transferred
under this Agreement including accurate instructions associated
with reproducing formulas, formulizations, commercial recipes,
and the like, so that Purchaser can continue the Business. If
requested by Purchaser, Seller further agrees to prosecute or
otherwise enforce in its own name for the benefit of Purchaser
any claims, rights, or benefits that are transferred to
Purchaser under this Agreement and that require prosecution or
enforcement in Seller's name. Any prosecution or enforcement
of claims, rights, or benefits under this paragraph shall be
solely at Purchaser's expense, unless the prosecution or
enforcement is made necessary by a breach of this Agreement by
Seller.
5.2 Purchaser's Deposits with Escrow Agent: At or before Closing (as that
term is defined in Section 5.3), Purchaser shall deliver to the Escrow
Agent the following:
5.2.1 Agreement: Four (4) copies of the within Agreement originally
executed by Purchaser.
5.2.2 Cash - Purchase Price: A bank cashier's check in an amount
equal to the Total Purchase Price calculated in the manner
set forth in Section 2.1.
5.2.3 Schedules: Copies of all schedules to the within Agreement
with a written statement that Purchaser has approved same for
attachment hereto or, in lieu of any particular schedule
required herein for the benefit of Purchaser, a written
statement of waiver of the requirement thereof.
5.2.4 Certifications and Resolutions: Certified resolutions by
Purchaser's Board of Directors, in form satisfactory to
counsel for Seller, authorizing the execution and performance
of this Agreement and all actions to be taken by Purchaser
under this Agreement. Purchaser shall deposit with Escrow
Agent the following certifications and resolutions, each dated
as of Closing and indicating that they are valid as of that
date:
(1) A certification executed by a duly authorized officer of
Purchaser certifying that all of Purchaser's representat-
ions and warranties under this Agreement are true as of
the Closing Date, as though each of those representations
and warranties had been made on that date.
5.2.5 New Lease: Two (2) fully executed copies of the lease of the
Business Premises [Section 6.8.1(1)].
5.2.6 Consulting Agreement: Two (2) copies of a fully executed copy
of a Consulting Agreement pursuant to which Packer becomes a
consultant for Purchaser for a period three (3) years from and
after the date of Closing [Section 13.2].
5.2.7 Instruments of Assumption: Any instruments of assumption of
liabilities of Purchaser listed and marked by asterisk in
Schedule 3, fully executed by Purchaser.
5.2.8 Opinion Letter of Purchaser's Counsel: The opinion letter of
Purchaser's counsel described in Section 11.3.
5.2.9 Further Documents: Purchaser, at any time before or after the
Closing Date, will execute, acknowledge, and deliver any
further documents, assurances, and instruments, reasonably
requested by Seller, and will take any other action consistent
with the terms of this Agreement that may reasonably be
requested by Seller to carry out the terms hereof.
5.3 The Closing: The transfer of the Assets by Seller to Purchaser and the
consummation of any and all other transactions referenced herein (the
Closing) shall take place at the offices of the Escrow Agent above
specified at any time chosen by Escrow Agent on July 8, 1997 but only
if the following conditions exist: (i) all deposits required to be made
pursuant to Sections 5.1 and 5.2, or any other section hereof, have been
made; and (ii) all conditions precedent to Seller's and Purchaser's
performance have been met [as evidenced by receipt of certification
thereof by Escrow Agent] or any particular condition has been waived in
writing by the party in whose benefit such condition operates. As used
herein, the term "Closing Date" refers to the date that such conditions
are met and the Escrow Agent performs the Closing; or the date and time
agreed upon in writing between Seller and Purchaser; or the date to
which the Closing is advanced or postponed
under this section. The parties indicate that it is their desire that
the Closing Date be effective as of 12:01 a.m., July 8, 1997 even
though the physical actions required to effect the Closing may occur
during the business day of July 7 or July 8, 1997. If on the anticipat-
ed Closing Date of July 8, 1997, Seller has not been able to obtain all
waivers, consents, assignments and the like of any private parties and
governmental agencies which may be required by this Agreement, then
either Purchaser or Seller, on written notice to the other, may
postpone the Closing to a time not later than 10:00 A.M., July 31, 1997.
If through Seller's fault, Closing has not occurred by July 31, 1997,
then Purchaser may elect to extend the time for Closing through and
including August 15, 1997, in which event, all costs incurred by
Purchaser reasonably related to being prepared for Closing (audits,
opinions, attorney fees, finance charges and the like) shall be paid by
Seller through Escrow. For purposes hereof, an event preventing
Closing shall be deemed to be Seller's fault if the occurrence or
non-occurrence of that event was solely within the power of the Seller
and, through the action of Seller, could have occurred on or before July
31, 1997. At such time as Escrow Agent is in a position to do so, if at
all, and in conformance with the timing specified in this Section,
Escrow Agent shall close Escrow by doing the following:
5.3.1 Attach copies of required Schedules to the within Agreement to
the duplicate originals thereof and distribute one copy each to
the Purchaser and Purchaser's attorney and one copy each to
Seller and Seller's attorney.
5.3.2 Deliver to the Seller the cashier's check representing the cash
portion of the Purchase Price calculated in accordance with
Section 2.1.
5.3.3 Deliver the written certifications and resolutions deposited
by Seller to Purchaser.
5.3.4 Deliver the written certifications and resolutions deposited
by Purchaser to Seller.
5.3.5 Deliver the instruments of transfer to Purchaser.
5.3.6 Deliver the opinion letter of Seller's counsel to Purchaser.
5.3.7 Deliver the Certificate of Products Liability Insurance to
Seller.
5.3.8 Deliver one copy of the Consulting Agreement to Packer and one to
Purchaser.
5.3.9 Deliver the opinion letter of Purchaser's counsel to Seller.
5.3.10 Deliver a copy of the Lease to the owner and another to
Purchaser.
5.3.11 Deliver any other deposited documents as required.
If Escrow is not in a condition to be closed on or before July 31, 1997,
and if Escrow is not further extended through the mutual agreement of
Purchaser and Seller, then the Escrow shall be deemed to be cancelled,
all documents and funds deposited with the Escrow Agent shall be
returned to the party depositing such, and the within Agreement shall
be of no further force or effect as between the parties.
6. SELLER'S REPRESENTATIONS AND WARRANTIES: Seller and Packer
jointly and severally covenant and warrant to Purchaser that at the time of
execution of the within Agreement and continuously thereafter through and
including the Closing:
6.1 Validity of Corporation: Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California, has all necessary corporate powers to own its properties
and to carry on its business as now owned and operated by it, and is
duly qualified to do interstate and intrastate business and is in good
standing in all other jurisdictions in which it is required to be
qualified to conduct business therein.
6.2 Seller's Stock: Packer is the sole shareholder of Seller.
6.3 Seller Includes Shareholders: For purposes of making the within
representations and warranties, the term "Seller" shall refer to CCS
and all of its shareholders.
6.4 Financial Statements: Schedule 6.4 to this Agreement sets forth the
balance sheets of CCS as of the end of each of its three (3)
immediately prior fiscal years, and the related statements of income
and retained earnings for the three years ending on those date, and the
representation is made that such statements are unaudited but prepared
by Seller's independent public accountant, whose opinions with respect
to those financial statements are included in said Schedule 6.4. The
financial statements in Schedule 6.4 are herein referred to as the
"Financial Statements". The Financial Statements have been compiled on
a cash basis in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants consistently followed by Seller throughout the
periods indicated, and fairly present the financial position of Seller
on a cash basis as of the respective dates of the balance sheets
included in the Financial Statements, and the results of its operations
for the respective
periods indicated.
6.5 Absence of Specified Changes: Except as may be otherwise expressly set
forth in the attached Schedule 6.5, since the last compiled Financial
Statements relative to the Seller referred to in the immediate
preceding Section 6.4, there has not been any:
6.5.1 Transaction by Seller except in the ordinary course of its
Business;
6.5.2 Capital expenditure by Seller exceeding $1,000.00;
6.5.3 Material adverse change in the financial condition, liabilit-
ies, assets, business, or prospects of Seller;
6.5.4 Destruction, damage to, or loss of any asset of the Business
(whether or not covered by insurance) that materially and
adversely affects the financial condition, business or
prospects of Seller's Business;
6.5.5 Change in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies
or rates) by Seller relative to its Business;
6.5.6 Revaluation by Seller of any of Assets associated with its
Business;
6.5.7 Sale or transfer of any asset of Seller's Business except in
the ordinary course of business;
6.5.8 Amendment or termination of any contract, agreement, or license
relative to Seller's Business to which Seller is a party,
except in the ordinary course of business;
6.5.9 Loan by Seller to any person or entity, or guaranty by Seller
of any loans relative to its Business or otherwise;
6.5.10 Mortgage, pledge, or other encumbrance of any asset of Seller
relative to its Business;
6.5.11 Waiver or release of any right or claim of Seller except in
the ordinary course of its Business;
6.5.12 Commencement or notice or threat of commencement of any civil
litigation or any governmental proceeding against or invest-
igation of the affairs of Seller relative to its Business;
6.5.13 Labor trouble or claim of wrongful discharge or other unlawful
labor practice or action relative to the Seller's Business;
6.5.14 Agreement by any party encompassed by the term "Seller" as
broadly defined for the within representations and warranties,
to do any of the things described in the preceding Sections
6.5.1 through 6.5.13; or
6.5.15 Other event or condition of any character that has, or might
reasonably have, a material and adverse effect on the financial
condition, business, assets, liabilities, or prospects of
Seller and its Business.
6.6 Sales Tax: All sales and use tax liabilities of Seller accruing before
the Closing Date have been fully satisfied or provided for.
6.7 Employee Taxes and Contributions: Except for employee wages, salaries
and bonuses to be paid by Seller for the payroll period during which
the Closing Date occurs, no employee withholding, contributions,
interest, or penalties are due to the labor department for each state
in which Seller has employees, and as such items which have accrued as
of the date of Closing, Seller will pay the same.
6.8 State Taxes: Seller has filed all income tax returns required to be
filed prior to the Closing Date and has paid all taxes and/or estimates
of taxes required to paid on account of income to Seller for the periods
covered by such returns. With regard to income tax liabilities accru-
ing prior to Closing, Seller will pay the same.
6.9 Assets Being Sold by Seller: The following specifies the assets of
Seller being sold hereunder to Purchaser:
6.9.1 Real Property: Schedule 6.9.1 to this Agreement is a complete
and accurate list of all real property leased or occupied by
Seller which relate to its Business operations, together with
an accurate general and legal description of each such proper-
ty. Such Schedule also sets forth brief descriptions of all
buildings and other major improvements located on such proper-
ties. The zoning for each parcel of property described in said
Schedule permits the presently existing improvements and the
continuation of the business presently being conducted on such
parcel. Seller has not commenced, nor has Seller received
notice of the commencement of, any proceeding that would affect
the present zoning classification of any such parcel. There
are no underground storage tanks located on any real property
described in said Schedule in which any Hazardous Material, as
defined below, has been in the past five (5) years, or is
being, stored, nor has there been any spill, disposal, dis-
charge, or release of any Hazardous Material into, upon, from,
or over such parcel or into or upon ground or service water
thereon. There are no asbestos containing materials incor-
porated into the buildings or interior improvements that are
part of any parcel of real property described in said Schedule
or into other Assets which are to be sold hereunder, nor is
there any electrical transformer, fluorescent light fixture
with ballast, or other equipment containing PCB's thereon. As
used in this Section, Hazardous Material means any hazardous
or toxic substance, material, or waste that is regulated by any
federal authority or by any state or local governmental author-
ity where the substance, material, or waste is located.
6.9.2 Inventory: The inventories of raw materials, work-in-progress,
and finished goods as evidenced by the written inventory to be
attached hereto as Schedule 1.1 (collectively "Inventories")
are the property of Seller, except for sales made in the
ordinary course of business since the date of the applicable
balance sheet; for each of these sales, either the purchaser
has made full payment or the purchaser's liability to make pay-
ment is reflected in the books of Seller. No items included
in the Inventories have been pledged as collateral or are held
by Seller on consignment from others except as may be set forth
in Schedule 6.9.2.
6.9.3 Tangible Personal Property: Schedule 6.9.3 to this Agreement
is a complete and accurate schedule describing, and specifying
the location of, all trucks, automobiles, machinery, equipment,
furniture, supplies, tools, dies, rigs, molds, patterns,
drawings, computer systems (including all hardware and software
associated therewith), films, plates and artwork, and all other
tangible personal property owned by, in the possession of, or
used by Seller in connection with the Business, except invent-
ories of raw materials, work-in-progress, and finished goods.
The property listed in Schedule 6.9.3 constitutes all such
tangible personal property necessary for the conduct by Seller
of its Business as now conducted. All of the motor vehicles
listed in Schedule 6.9.3 are in operating condition and repair.
Except as stated in Schedule 6.9.3, no personal property used
by Seller in connection with its Business is held under any
lease, security agreement, conditional sales contract, or other
title retention or security arrangement, or is located other
than in the possession of Seller.
6.9.4 Trade Names, Trademarks and Copyrights: Schedule 6.9.4 to this
Agreement is a schedule of all trade names, trademarks, service
marks and copyrights and their registrations, owned by Seller
relative to its Business Operations, or in which it has any
rights or licenses, together with a brief description of each.
Seller has taken all steps necessary to create and maintain in
full force and effect all proprietary rights in such trade names,
trademarks, servicemarks and copyrights, including but not
necessarily limited to the registration thereof as well as any
subsequent required filings with appropriate State and/or
Federal regulatory agencies. Seller has not infringed, and is
not now infringing, on any trade name, trademark, servicemark, or
copyright belonging to any other person, firm or corporation.
Except as set forth in Schedule 6.9.4, Seller is not a party to
any license, agreement, or arrangement, whether as licensor,
licensee, franchisor, franchisee, or otherwise, with respect to
any trademarks, servicemarks, trade names, or applications for
them, or any copyrights relative to its Business operations.
Seller owns, or holds, adequate licenses or other rights to
use, all trademarks, servicemarks, trade names, and copyrights
necessary for its Business as now conducted by it (including,
without limitation, those listed in Schedule 6.9.4), and such
use does not, and will not, conflict with, infringe on, or
otherwise violate any rights of others. Seller has the right
to sell or assign to Purchaser all owned trademarks, trade
names, servicemarks, and all such licenses and other rights
associated with its Business.
6.9.5 Patents and Patent Rights: Schedule 6.9.5 to this Agreement is
a complete schedule of all patents, inventions, industrial
models, processes, designs, and applications for patents owned
by Seller or in which it has any rights, licenses, or immunit-
ies relative to its Business. The patents and applications
for patents listed in Schedule 6.9.5 are valid and in full
force and effect and are not subject to any taxes, maintenance
fees, or actions falling due within ninety (90) days after the
Closing Date. There have been no interference actions or other
judicial, arbitration, or other adversary proceedings concern-
ing the patents or applications for patents listed in Schedule
6.9.5. Each patent application is awaiting action by its
respective patent office except as otherwise indicated in
Schedule 6.9.5. The manufacture, use, or sale of the invent-
ions, models, designs and systems covered by the patents and
applications for patents listed in Schedule 6.9.5 do not
violate or infringe on any patent or any proprietary or person-
al right of any person, firm or corporation; and Seller has
not infringed, nor is it now infringing, on any patent or other
right belonging to any person, firm or corporation. Except as
set forth in Schedule 6.9.5, Seller is not a party to any
license, agreement, or arrangement, whether as licensee,
licensor, or otherwise, with respect to any patent, applicat-
ion for patent, invention, design, model, process, trade
secret, or formula relative to its Business. Seller has the
right and authority to use and to transfer to Purchaser such
inventions, trade secrets, processes, models, designs and
formulas as are necessary to enable it to conduct, and to
continue to conduct, all phases of its Business in the manner
presently conducted by it, and such use does not, and will not,
conflict with, infringe on, or violate any patent or other
rights of others.
6.9.6 Trade Secrets and Proprietary Information: Schedule 6.9.6 to
this Agreement is a true and complete itemization showing
relative to Seller's Business: (i) in general terms by product
name or other identifier all of Seller's secret or non-secret
formulas, recipes and processes, know-how, and other technical
data; and (ii) customer lists, computer programs and routines.
Such are referred to collectively herein as Trade Secrets.
At Closing, each Trade Secret's documentation required to be
given to Purchaser through Escrow (Section 10.11) is current,
accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use by Purchaser
without reliance on the specific knowledge or memory of others.
(1) Seller is the sole owner of each of these Trade Secrets,
free and clear of any liens, encumbrances, restrictions,
or legal or equitable claims of others. Seller has taken
all reasonable security measures to protect the secrecy,
confidentiality, and value of these Trade Secrets; any of
its employees and other persons who, either alone or in
concert with others, developed, invented, discovered,
derived, programmed or designed these secrets, or have
knowledge of or access to information relating to them,
have been put on notice and, if appropriate, have entered
into agreements that these Trade Secrets are proprietary
to Seller and not to be divulged or misused.
(2) After the signing hereof and continuing after Closing,
neither Seller nor Packer will disclose and of the Trade
Secrets to any person, firm or entity unless pursuant to
written consent from Purchaser, or Purchaser's successor
in interest. All of the Trade Secrets in the form kept
by Seller are, to the best of Seller's and Packer's know-
ledge, not part of the public knowledge or literature; nor
to Seller's and Packer's knowledge have they been used,
divulged, or appropriated for the benefit of any past or
present employees or other persons, or to the detriment
of Seller.
(3) The documentation associated with the Trade Secrets is by
this reference made a part of the within Agreement.
6.9.7 Business Name: Seller represents, warrants, and covenants that
except for possible rights of unrelated third parties to use
similar business names, Seller has the right, in perpetuity, to
use the name "California Chemical Specialties" for and in con-
nection with all Business of whatever kind and character con-
ducted previously or in the future by Seller, and that Seller
has not granted and will not grant to any other person, firm,
or for Seller, the right to use, and that Seller will not
itself use such name or names, or any names similar thereto,
in any capacity whatsoever after Closing; it being specifically
acknowledged, understood and agreed that such is one of the
Assets being sold by Seller to Purchaser hereunder.
6.9.8 Intangibles - Licenses: A true and complete list of all
intangible assets and licenses, other than those specifically
referred to or described elsewhere in this Agreement, and the
location of any evidences of ownership thereof, are set forth
in Schedule 6.9.8 to this Agreement.
6.9.9 Title, Condition and Status of Assets: Seller has good and
marketable title to all the respective Assets and interests in
Assets, whether real, personal, mixed, tangible or intangible,
which constitute all the assets and interests in assets that
are used in the business, and which are being sold pursuant to
the terms of this Agreement. All these Assets are free and
clear of restrictions on or conditions to transfer or assign-
ment, and free and clear of mortgages, liens, pledges, charges,
encumbrances, equities, claims, easements, rights of way,
covenants, conditions or restrictions, except for: (i) those
disclosed in Seller's consolidated balance sheets included in
the Financial Statements; (ii) the lien of current taxes not
yet due and payable; and (iii) possible minor matters that, in
the aggregate, are not substantial in amount and do not mater-
ially detract from or interfere with the present or intended
use of any of these assets or materially impair the Business
operations conducted by Seller. Seller is not in default or
in arrears in any material respect under any lease associated
with its Business operations, the interest of which will be
assigned and sold under the terms of this Agreement. All real
property and tangible personal property associated with the
Business of Seller, or which may be otherwise sold under the
terms of the within Agreement, is in good operating condition
and repair, ordinary wear and tear excepted. Seller is in
possession of all premises leased to them from others relative
to its Business operations. Any copyrights, patents, trade-
marks, tradenames, or trade secrets in which a shareholder,
officer, director or employee of Seller, of any spouse, child, or
other relative of any of these persons owns or has any direct
or indirect interest, is being sold to Purchaser under the
terms of the within Agreement and by affixing their signatures
thereto, such persons join in the within Agreement and sell
such assets to Purchaser. Seller does not occupy any real
property in violation of any law, regulation or decree.
6.9.10 Customers and Sales: Schedule 6.9.10 to this Agreement is a
correct and current list of the twenty highest gross sales
customers of Seller, together with summaries of the sales made
to each such customer during the most recent fiscal year and
thereafter through the date of the last interim profit and loss
statement contained within the Financial Statements. Except
as indicated in said Schedule 6.9.10, Seller has no informat-
ion, or is it aware of any facts,indicating that any of these
customers intend to cease doing business with Seller or mater-
ially alter the amount of the business they are presently doing
with Seller.
6.9.11 Insurance Policies: Schedule 6.9.11 to this Agreement is a
description of all insurance policies held by Seller concern-
ing its Business and properties. All these policies are in
the respective principal amounts set forth in said Schedule
6.9.11. Seller has maintained, and now maintains: (i) insur-
ance on all its assets and businesses of the type customarily
insured, covering property damage and loss of income by fire
or other casualty; and (ii) adequate insurance protection
against all liabilities, claims, and risks against which it
is customary to insure. Seller is not in default with respect
to payment of premiums on any such policies. Except as may be
set forth in Schedule 6.9.11, no claim is pending under any
such policy.
6.9.12 Representative, Output, Requirements, and Other Contracts:
Relative to the Business conducted by Seller, Seller is not a
party to, nor is any of its property bound by, any distribut-
or's or manufacturer's representative or agency agreement; any
output or requirements agreement; any agreement not entered
into in the ordinary course of business; any indenture, mort-
gage, deed of trust, or lease; or any agreement that is un-
usual in nature, duration, or amount (including, without limit-
ation, any agreement requiring the performance by Seller of any
obligation for a period of time extending beyond one (1) year
from the Closing Date or calling for consideration of more than
$10,000.00); except the agreements listed in Schedule 6.9.12,
copies of which have been furnished to Purchaser. There is no
default or event that, with notice or lapse of time, or both,
would constitute a default by any party to any of these agree-
ments. Seller has not received notice that any party to any of
these agreements intends to cancel or terminate any of these
agreements or to exercise or not exercise any options under any
of these agreements. Seller is not a party to, nor is its
property bound by, any agreement that is materially adverse to
its Business, properties, or financial condition.
6.10 Compliance With Laws: Seller hereby represents and warrants with regard
to all federal, state, and local laws that:
6.10.1 Environmental Issues: To the best of Seller's knowledge,
information and belief after diligent inquiry, Seller has
complied in all material respects with all federal, state,
local environmental protections laws or regulations and have
not been cited for any violation of any such law or regulation.
No material capital expenditures will be required for compli-
ance with any applicable federal, state, or local laws or
regulations now in force relating to the protection of the en-
vironment. There is no pending audit known to Seller, or any
of Seller's officers or employees, by any federal, state, or
local governmental authority with respect to ground water,
soil, or air monitoring; the storage, burial, release, trans-
portation or disposal of hazardous substances; or the use of
underground storage tanks by Seller, or relating to the facili-
ties of either. Seller has no agreement with any third party
or federal, state, or local governmental authority relating to
any such environmental matter or any environmental cleanup.
6.10.2 Compliance with OSHA: To the best of Seller's knowledge, in-
formation and belief after diligent inquiry, Seller has comp-
lied with all requirements of the Occupational Safety and
Health Act and any state equivalent and regulations promulgated
under any such legislation where Seller may do business, the
consequences of a violation of which would have a material ad-
verse effect on its Business operations, and with all orders,
judgments, and decrees of any tribunal under such legislation
that applies to its Business or properties.
6.10.3 Export Administration Amendments: To the best of Seller's
knowledge, information and belief after diligent inquiry,
Seller is not in violation of any provision of the Export
Administration Amendments of 1977 or the Foreign Corrupt Prac-
tices Act of 1977 as the same may have been amended from time
to time.
6.10.4 No Payments to Governmental Officials: Seller has not direct-
ly or indirectly paid or delivered any fee, commission, or
other money or property, however characterized, to any finder,
agent, governmental official, or other party, in the United
States or any other country, that is in any manner related
to the business operations of Seller, and that Seller knows or
has reason to believe to have been illegal under any federal,
state, or local law of the United States or any other country
having jurisdiction. Seller has not participated, directly or
indirectly, in any boycott or similar practice affecting any of
its actual or potential customers. Seller has, at all times,
done business in an open and ethical manner.
6.10.5 Other Laws: To the best of Seller's knowledge, information and
belief after diligent inquiry, Seller has complied with, and is
not in violation of, any other applicable federal, state, or
local statute, law, or regulation (including, without limitat-
ion, any applicable building, zoning, environmental protection,
or other law, ordinance or regulation) affecting its propert-
ies and its Business operation.
6.11 Litigation: Except as may be set forth in Schedule 6.11, there is not
pending, or, to the best knowledge of Seller, threatened, any suit, act-
ion, arbitration, or legal, administrative, or other proceeding, or
governmental investigation against or affecting Seller's Business,
assets, or financial condition. The matters set forth in Schedule 6.11
(if any) if decided adversely to Seller will not result in a material
adverse change in the business, assets, or financial condition of
Seller. Seller has furnished or made available to Purchaser copies of
all relevant court papers and other documents relating to the matters
set forth in Schedule 6.11. Seller is not in default with respect to
any order, writ, injunction, or decree of any federal, state, local or
foreign court, department, agency, or instrumentality. Except as set
forth in said Schedule 6.11, Seller is not presently engaged in a legal
action to recover monies due to it.
6.12 Agreement Will Not Cause Breach or Violation: The consummation of the
transactions contemplated by this Agreement will not result in or cons-
titute any of the following:
6.12.1 A breach of any term or provision of this Agreement;
6.12.2 A default or an event that, with notice or lapse of time, or
both, would be a default, breach, or violation of the Charter,
Articles of Incorporation or Code of Regulations of Seller, or
any lease, license, promissory note, conditional sales con-
tract, commitment, indenture, mortgage, deed of trust, or other
agreement, instrument or arrangement to which Seller is a
party, or by which either of them or the property of either is
bound;
6.12.3 An event that would permit any party to terminate any agreement
or to accelerate the maturity of any indebtedness or obligat-
ion of Seller; or
6.12.4 The creation or imposition of any lien, charge or encumbrance
on any of the properties of Seller being sold hereunder.
6.13 Authorities and Consents: Seller has the right, power, legal capacity,
and authority to enter into, and perform, its obligations under this
Agreement, and no approvals or consents of any persons are necessary in
connection with the sale of the Assets contemplated hereby. The execut-
ion and delivery of this Agreement by Seller has been duly authorized
by all necessary corporate and shareholder actions.
6.14 Interest in Customers, Suppliers and Competitors: Except as may be set
forth in Schedule 6.14, neither Seller, nor any officer, director, or
employee of Seller, nor any spouse or child of such officer, director or
employee, has any direct or indirect interest in any competitor, sup-
plier, or customer of Seller, or in any person from whom or to whom such
Seller leases any real or personal property, or in any other person with
whom Seller is doing business.
6.15 Management and Personnel: Seller also makes the following representat-
ions and warranties relative to management and personnel:
6.15.1 Identification and Compensation: Schedule 6.15.1 sets forth a
list of names, addresses, and social security numbers of all
officers, directors, employees, agents, manufacturers repre-
sentatives, sales representatives and the like of Seller sta-
ting the rates of compensation payable to each.
6.15.2 Employment Contracts and Benefits: Schedule 6.15.2 to this
Agreement sets forth a list of all of Seller's material employ-
ment contracts, collective bargaining agreements, and pension,
bonus, profit sharing, stock option, or other agreements pro-
viding for employee remuneration or benefits. All these con-
tracts and arrangements are in full force and effect, and
neither Seller nor any other party is in default under them.
There have been no claims of defaults and, to the best know-
ledge of Seller, there are no facts or conditions that if con-
tinued, or on notice, will result in a default under these
contracts or arrangements. There is no pending or, to Seller's
knowledge, any threatened labor disputes, strikes, or work
stoppages affecting or impacting on the Seller's Business.
Seller has complied with all applicable laws for each of their
respective employee benefit plans, including the provisions of
the Employee Retirement Income Security Act (ERISA) if and to
the extent applicable. There are no threatened or pending
claims by or on behalf of any such benefit plan, by or on be-
half of any employee covered under any such plan, or otherwise
involving any such benefit plan, that allege a breach of fidu-
ciary duties or violation of other applicable state or federal
law, nor is there, to Seller's knowledge, any basis for such a
claim.
6.15.3 Power of Attorney Authority: Schedule 6.15.3 lists: (i) the
names and addresses of all persons holding a power of attorney
on behalf of Seller; and (ii) the names and addresses of all
banks or other financial institutions in which Seller has an
account, deposit, or safe deposit box, with the names of all
persons authorized to draw on those accounts or deposits or to
have access to such boxes.
6.16 Full Disclosure: None of the representations and warranties made by
Seller (as broadly defined), or made in any certificate or memorandum
furnished or to be furnished by any of them or on their behalf, contains
or will contain any materially untrue statement of a material fact or
omits to state any material fact necessary to make the statements made,
in light of the circumstances under which they are made, not misleading.
7. PURCHASER'S REPRESENTATIONS AND WARRANTIES: Purchaser
represents and warrants to Seller that:
7.1 Organization: Purchaser is a corporation duly organized, existing, and
in good standing under the laws of the State of California. The execut-
ion and delivery of this Agreement and the consummation of this trans-
action by Purchaser has been duly authorized, and no further corporate
authorization is necessary on the part of Purchaser.
7.2 Further Consents and Approvals: No consent, approval, or authorization
of, or declaration, filing, or registration with, any United States
federal or state government regulatory authority is required to be made
or obtained by Purchaser in connection with the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated by this Agreement. It is acknowledged that disclosure of
the within acquisition and the terms associated therewith to the SEC
within the appropriate time period after closing will be required.
8. SELLER'S OBLIGATIONS BEFORE CLOSING: Seller covenants that
from the date it executes this Agreement and continuously thereafter through
Closing:
8.1 Purchaser's Access to Properties and Information: Purchaser, and its
accountants, counsel, and other representatives, shall have full access
during normal business hours to all properties (real or personal),
leaseholds, books, accounts, records, contracts, and documents of or
relating to Seller's Business. Seller shall furnish, or cause to be
furnished, to Purchaser and its representatives, all data and informat-
ion concerning the business, finances, any types of properties, lease-
hold interests, and the like, of Seller that may reasonably be request-
ed.
8.1.1 Confidential Information: Nothing in this Agreement shall
obligate Seller to disclose any confidential information or
provide any access to representatives of Purchaser prohibited
or not authorized by applicable governmental authority.
8.2 Conduct of Business in Normal Course: Seller will carry on its Bus-
iness and activities diligently and in substantially the same manner as
it previously has been carried out and shall not make or institute any
unusual or novel methods of manufacture, purchase, sale, lease, manage-
ment, accounting, or operation that varies materially from those methods
used by Seller as of the date of this Agreement.
8.3 Preservation of Business and Relationships: Seller will use its best
efforts, without making any commitments on behalf of Purchaser, to
preserve its Business organization intact, to keep available to Seller
its present officers and employees, and to preserve its present relat-
ionships with suppliers, customers, and others having business relation-
ships with it.
8.4 Corporate Matters: If it would impact adversely on the sale of the
Assets contemplated hereby, Seller will not: (i) amend its Charter,
Articles of Incorporation or Code of Regulations; (ii) issue any shares
of its capital stock; (iii) issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments
under which any additional shares of its capital stock of any class
might be directly or indirectly authorized, issued or transferred; or
(iv) agree to do any of the acts listed above.
8.5 Maintenance of Insurance: Seller will continue to carry its existing
insurance, subject to variations in amounts required by the ordinary
operations of its Business. At the request of Purchaser, and at Pur-
chaser's sole expense, the amount of insurance against fire or other
casualties that, as of the date of this Agreement, Seller carries on
any of its properties or in respect to its business operations shall
be increased by the amount or amounts Purchaser shall specify, provided,
however, that such increase is reasonable under the circumstances.
8.6 Employees and Compensation: Seller will not do, or agree to do, any of
the following acts relative to its Business: (i) make any change in
compensation payable, or to become payable, by it to any officer, emp-
loyee, sales agent, or representative; (ii) make any change in benefits
payable to any officer, employee, sales agent, or representative under
any bonus or pension plan or other contract or commitment; or
(iii) modify any collective bargaining agreement to which it is a party
or by which it may be bound.
8.7 No New Transactions: Relative to its Business, Seller will not do, nor
agree to do, without Purchaser's consent, any of the following acts:
8.7.1 Enter into any contract, commitment, or transaction not in the
usual and ordinary course of such business;
8.7.2 Enter into any contract, commitment, or transaction not in the
usual and ordinary course of its business involving an amount
exceeding $5,000.00, individually, or $25,000.00 in the aggre-
gate;
8.7.3 Make any capital expenditures or enter into any leases of cap-
ital equipment or property in an aggregate amount exceeding
$1,000.00; or
8.7.4 Disposition of any capital assets.
8.8 Dividends, Distributions and Acquisitions of Stock: To the extent that
such could adversely impact on the Assets being sold hereunder, Seller
will not do any of the following:
8.8.1 Declare, set aside, or pay any dividend or make any distribut-
ion in respect to its capital stock;
8.8.2 Directly or indirectly purchase, redeem, or otherwise acquire
any shares of its capital stock; or
8.8.3 Enter into any agreement obligating it to do any of the fore-
going prohibited acts.
8.9 Payment of Liabilities and Waiver of Claims: From and after the effect-
ive date hereof through Closing, relative to its Business, Seller will
not do, or agree to do any of the following acts: (i) pay any obligat-
ion or liability, fixed or contingent, other than current liabilities;
(ii) waive or compromise any right or claim; or (iii) cancel, without
full payment, any note, loan, or other obligation owing to Seller.
8.10 Existing Agreements: Relative to its Business, Seller will not modify,
amend, cancel, or terminate any of its existing contracts or agree-
ments, or agree to do any of those acts.
8.11 Consent of Others: As soon as reasonably practical after the execution
and delivery of this Agreement, and in any event on or before the Clos-
ing Date, Seller will obtain the written consent of the persons, firms
or entities identified in Schedule 8.11 to this Agreement with whom
Seller has binding contracts or licensing requirements relating to the
conduct of the operation of the Business and will furnish to Purchaser,
through Escrow, executed copies of those consents.
8.11.1 Purchaser will exercise its best efforts, and promptly execute
and deliver any documents and instruments that may be reason-
ably required, to assist Seller in obtaining such consents,
provided, however, that Purchaser shall not be obligated under
this Section to execute any guarantee, assumption of liability,
or other document or instrument requiring it to assume obligat-
ions not contemplated by this Agreement.
8.12 Representations and Warranties True at Closing: All representations and
warranties of Seller set forth in this Agreement and in any written
statements delivered to Purchaser by Seller under this Agreement will
also be true and correct as of the Closing Date as if made on that date.
9. PURCHASER'S OBLIGATIONS BEFORE CLOSING: Purchaser agrees that,
unless and until the Closing has been consummated, Purchaser and its officers,
directors, and other representatives will hold in strict confidence, and will
not use to the detriment of Seller any data and/or information with respect to
the Business of Seller obtained in connection with this transaction or Agree-
ment, except insofar as that data and information may be required by law to be
included in any proxy statement or other documentation required of Purchaser.
If the transactions contemplated by this Agreement are not consummated, Pur-
chaser will return to Seller all data and information that Seller may reason-
ably request, including, but not limited to, worksheets, test reports, man-
uals, lists, memoranda and other documents prepared by or made available to
Purchaser in connection with this transaction.
9.1 Purchaser's Assistance: Purchaser will use its best efforts to assist
Seller in obtaining the consent of all necessary persons and agencies to
the assignment and transfer to Purchaser of any and all properties,
assets, and agreements, including agreements with the United States
government or any of its agencies, to be assigned and transferred under
the terms of this Agreement.
9.2 Consents: As soon as reasonably practicable after the execution and
delivery of this Agreement, and in any event on or before the Closing
Date, Purchaser will obtain the consents of all necessary persons to
Purchaser's performance of this Agreement and to Purchaser's assumpt-
ion of any obligations under it.
9.3 Resale Certificate: Purchaser agrees to furnish any necessary resale
certificate or other documents reasonably requested by Seller to comply
with the provisions of any applicable sales and use tax laws, but, if
sales and/or use tax is applicable to any of the Assets being sold
hereunder, Seller shall pay same.
9.4 Waiver of Bulk Sales Notification: Purchaser waives compliance with
the provisions of the California Commercial Code relating to bulk trans-
fers in connection with the this sale of assets, subject to the indem-
nities of Seller contained in this Agreement. Such waiver shall in no
way be construed to operate as a release of Seller's obligation to pay
all debts associated with the Business which arise prior to Closing,
other than those specifically assumed by Purchaser. Seller agrees to
indemnify and hold Purchaser free and harmless from any claims made by
creditors of the Business arising prior to Closing except to the extent
that such may be assumed by Purchaser. Nothing in this Section will
estop or prevent Purchaser from asserting as a bar or defense to any
action or proceeding brought under that law that it does not apply to
the sale contemplated by this Agreement.
10. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE: The
obligations of Purchaser to purchase the Assets under this Agreement are
subject to the satisfaction, at or before the Closing, of all the conditions
set out below in this Section 10. Purchaser may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by Purchaser of any of
its other rights or remedies, at law or in equity, if Seller [including
Packer] shall be in default of any of their representations, warranties, or
covenants under this Agreement.
10.S Accuracy of Seller's Representations and Warranties: Except as other-
wise permitted by this Agreement, all representations and warranties by
Seller [used in its broadest sense], or in any written statement that
shall be delivered to Purchaser by any of them under this Agreement,
shall be true in all material respects on and as of the Closing Date as
though made at that time.
10.2 Performance by Seller: Seller [as used in its broadest sense] shall
have performed, satisfied, and complied in all material respects with
all covenants, agreements and conditions required by this Agreement to
be performed or complied with by them, or any of them, on or before the
Closing Date.
10.3 No Material Adverse Change: During the period from the most recent
balance sheet and profit and loss statements supplied with the Financial
Statements to the Closing Date, and during the period from the Effect-
ive Date through the Closing Date, there shall not have been any mat-
erial adverse change in the financial condition or the results of Sel-
ler's Business operations, and Seller shall not have sustained any
material loss or damage to its assets, whether or not insured, that
materially affects its ability to conduct a material part of its bus-
iness.
10.4 Certification by Seller: Purchaser shall have received a certificate,
dated or effective as of the Closing Date, signed and verified by Seller
and Sellers's President and Treasurer, in such detail as Purchaser and
its counsel may reasonably request that, to the best of their knowledge,
the conditions specified in Sections 10.1, 10.2 and 10.3 have been
fulfilled.
10.5 Opinion of Seller's Counsel: Purchaser shall have received from Sel-
ler's counsel an opinion dated as of the Closing Date, in form and
substance satisfactory to Purchaser and its counsel, that:
10.5.1 Seller is duly organized and validly existing and in good
standing under the laws of the State of California and has all
necessary corporate power to own its properties as now owned
and may operate its business as now operated.
10.5.2 To the best knowledge and belief of counsel, there are no out-
standing subscriptions, options, rights, warrants, etc., oblig-
ating Seller to issue or transfer any additional shares of its
capital stock of any class which would adversely impact on the
ability of Seller to sell the Assets.
10.5.3 This Agreement has been duly and validly authorized and, when
executed and delivered by Seller, will be valid and binding on
Seller [including Packer], except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of
creditors generally.
10.5.4 Except as set forth in Schedule 6.11 to this Agreement, such
counsel does not know of any suit, action, arbitration, or
legal, administrative or other proceeding or governmental
investigation pending or threatened against or affecting Sel-
ler Businesses or properties, or financial or other condition.
10.5.5 Neither the execution nor the delivery of this Agreement, nor
the consummation of the transaction contemplated in this Agree-
ment will constitute: (i) a default or an event that would,
with notice or lapse of time, or both, constitute a default
under, or violation or breach of, Seller's Charter, Articles of
Incorporation or Code of Regulations, or any indenture,
license, lease, franchise, mortgage, instrument, or other
agreement to which Seller [used to its broadest sense to in-
clude Packer] is a party or by which they or the properties of
Seller may be bound; or (ii) an event that would permit any
party to any Agreement or instrument to terminate it or to
accelerate the maturity of any indebtedness or other obligat-
ion of such Seller; or (iii) an event that would result in the
creation or imposition of any lien, charge, or encumbrance on
any Asset to be sold hereunder relative to the Seller's
Business.
In giving any opinion based on Counsel's knowledge, Counsel will be
entitled to rely on written representations or certifications of Seller
[including Packer], provided that such reliance is stated in the opinion
letter and copies of the writing upon which Counsel relies are attached
to such opinion letter.
10.6 Absence of Litigation: No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement, or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
10.7 Letter Regarding Changes: Purchaser shall have received from Seller's
independent public accountant a letter dated as of the Closing Date,
stating that, on the basis of a limited review (not an audit) of the
latest available accounting records of Seller, consultations with res-
ponsible officers of Seller, and other pertinent inquiries that such
accountant may deem necessary, such accountant has no knowledge or
reason to suspect that during the period from the date of the latest
compiled financial statement to a specified date not more than two (2)
business days before the Closing Date, there was any change in the
financial condition or results of the operations of Seller except
changes incurred in the ordinary and usual course of its business
during that period that, in the aggregate, are not materially adverse,
and any other changes or transactions contemplated by this Agreement.
10.8 Satisfaction re Key Customer: Prior to Closing, Purchaser and Seller
shall have met with Tammy Taylor, a key customer of Seller, and Pur-
chaser is satisfied that such customer will continue to do business with
Purchaser after Closing to approximately the same extent as said cust-
omer did with Seller prior to Closing.
10.9 Corporate Approval - Seller: The execution and delivery of this Agree-
ment by Seller and the performance of its obligations and covenants
under it shall have been duly authorized by all necessary corporate
action, and Purchaser shall receive copies of all resolutions pertain-
ing to that authorization, certified by the Secretary of Seller.
10.10 Corporate Approval - Purchaser: The board of directors and holders of the
appropriate amount of shareholder voting power (if required) of Pur-
chaser shall have duly authorized and approved the execution and deli-
very of this Agreement, and all corporate action necessary or proper to
fulfill Purchaser's obligation to be performed under this Agreement on
or before the Closing Date.
10.11 Specific Trade Secret Information: The specific location of each Trade
Secret's documentation, including with specificity its complete des-
cription, specifications, formulization, charts, procedures, and other
material relating to it, will have been delivered to Purchaser through
Escrow at Closing but will not be attached hereto as a Schedule.
10.12 New Lease: Two (2) copies of a written Lease agreement ("Lease") under
the terms of which the Business Premises is leased to Purchaser, origin-
ally executed by the owner of the Business Premises as Lessor and by
Purchaser as Lessee, shall be deposited to Escrow for delivery to the
owner and Purchaser at Closing. The terms of the Lease shall include,
but not be limited to: (i) the term of the Lease shall be 12 months;
(ii) a provision that the Lease shall be valid, enforceable and ef-
fective only upon the successful Closing of the transaction contem-
plated by the within Agreement; and (iii) a provision that the Business
Premises must meet the standards imposed by all applicable laws, rules
and/or regulations for the conduct of the Business by Purchaser from the
Business Premises, and if such standards are not met, Purchaser will
give notice of that fact to the owner of the Business Premises who can
either elect to bring the Business Premises into compliance at his
expense, or Purchaser shall have the right to forthwith terminate the
Lease and remove itself from possession of the Business Premises.
10.13 Consents: All necessary agreements and consents of any parties to the
consummation of the transactions contemplated by this Agreement, or
otherwise, pertaining to the matters covered by it, shall have been
obtained by Seller and delivered to Purchaser.
10.14 Approval of Documentation: The form and substance of all certificates,
instruments, opinions and other documents delivered to Purchaser under
this Agreement shall be satisfactory in all reasonable respects to Pur-
chaser and its counsel.
11. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE: The obligations
of Seller to sell and transfer the Assets under this Agreement are subject to
the satisfaction, at or before the Closing, of all of the following condit-
ions. Seller may waive any or all of these conditions in whole or in part
without prior notice, provided, however, that no such waiver of a condition
shall constitute a waiver by Seller of any of its other rights or remedies,
at law or in equity, if Purchaser should be in default of any of its repre-
sentations, warranties or covenants under this Agreement.
11.1 Accuracy of Purchaser's Representations and Warranties: All represen-
tations and warranties by Purchaser contained in this Agreement or in
any written statement delivered by Purchaser under this Agreement shall be
true on and as of the Closing Date as if such representations and war-
ranties were made on and as of that date.
11.2 Purchaser's Performance: Purchaser shall have performed and complied
with all covenants and agreements and satisfied all conditions that it
is required by this Agreement to perform, comply with, or satisfy before
or at the Closing.
11.3 Opinion of Purchaser's Counsel: Purchaser shall have furnished Seller
with an opinion, dated as of the Closing Date, of counsel for Purchaser,
in form and substance satisfactory to Seller and its counsel, to the
effect that:
11.3.1 Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California,
and has all requisite corporate power to perform its obligat-
ions under this Agreement;
11.3.2 All corporate proceedings required by law or by the provisions
of this Agreement to be taken by Purchaser on or before the
Closing Date, in connection with the execution and delivery of
this Agreement and the consummation of the transactions con-
templated by this Agreement have been duly and validly taken;
11.3.3 Purchaser has the corporate power and authority to acquire the
Assets for the consideration set forth in this Agreement;
11.3.S Every consent, approval, authorization, or order of any court
or governmental agency or body that is required for the con-
summation by Purchaser of the transactions contemplated by this
Agreement has been obtained and will be in
effect on the Closing Date;
11.3.5 The consummation of the transactions contemplated by this
Agreement does not violate or contravene any provision of any
charter, bylaw, or resolution of Purchaser, or of any indent-
ure, agreement, judgment, or order to which Purchaser is a
party or by which Purchaser is bound.
In rendering his opinion, counsel for Purchaser may rely on certifi-
cates of governmental authorities and on opinions of associate counsel
or other counsel for Purchaser.
11.4 Purchaser's Corporate Approval: The board of directors and holders of
the appropriate amount of shareholder voting power (if required) of
Purchaser shall have duly authorized and approved the execution and
delivery of this Agreement, and all corporate action necessary or pro-
per to fulfill Purchaser's obligation to be performed under this
Agreement on or before the Closing Date.
11.5 Absence of Litigation: No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
11.6 Approval of Documentation: The form and substance of all certificates,
instruments, opinions and other documents delivered to Seller under this
Agreement shall be satisfactory in all reasonable respects to Seller
and its counsel.
12. SELLER'S OBLIGATIONS AFTER CLOSING: After Closing, Seller
[used in its broadest sense to include Packer] shall have the following
obligations:
12.1 Seller's Indemnification: Seller shall indemnify, defend, and hold
harmless Purchaser against and in respect of any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, including interest, penalties, and reason-
able attorney fees that it shall or may incur or suffer, which arise,
result from, or relate to: (i) any breach of, or failure by, Seller to
perform any of Seller's representations, warranties, covenants, or
agreements in this Agreement, or in any schedule, certificate, schedule,
or other instrument furnished or to be furnished by Seller under this
Agreement; (ii) liabilities claimed or established relative to the
manufacture, assembly, production, marketing, delivery, and/or placement
into the stream of commerce of any product of Seller at or prior to
Closing [Prior Products]; and (iii) any claim of environmental damage
from hazardous waste at any location occupied in any manner by Seller
or any predecessor occupant of such location, at or prior to Closing.
Purchaser shall promptly notify Seller of the existence of any claim,
demand, or other matter to which Seller's indemnification obligations
would apply and shall give reasonable opportunity to defend the same at
their own expense and with counsel of their own selection; provided that
Purchaser shall at all times also have the right to fully participate
in the defense at its own expense. If Seller shall, within a reasonable
time after such notice, fail to defend, Purchaser shall have the right,
but not the obligation, to undertake the defense of, and to compromise
or settle (exercising reasonable business judgment) the claim or other
matter on behalf, for the account, and at the risk, of Seller. If the
claim is one that cannot by its nature be defended solely by Seller
(including, without limitation, any federal or state tax proceeding),
then Purchaser shall make available all information and assistance that
Seller may reasonably request.
12.2 Seller's Non-Competition and Post Closing Agreements: In consideration
of the payment of the amount specified in Section 2, Seller [used in its
broadest sense to include Packer], agree that they will not, at any time
within the five (5) year period immediately following the Closing Date,
directly or indirectly, engage in, or have any interest in, any person,
firm, corporation or business (whether as an employee, officer, direct-
or, agent, security holder, creditor, consultant, or otherwise) that
engages in any activity anywhere in the world where Purchaser may now or
in the future conduct business, which activity is the same as, similar
to, or competitive with, any activity engaged in by Seller's Business.
The provisions of this non-competition covenant shall be assignable to
any successor in interest of all or any portion of all or any portion of
the Business as it may be conducted by Purchaser after Closing and may
be enforced by any such successor in interest against Seller.
12.2.1 Construction of Covenant Not to Compete: The parties intend
that the non-competition covenant contained immediately above
shall be construed as a series of separate covenants, one for
each county within the State of California and one for each
county in all other states of the United States of America, or
any governmental subdivision of any country within the rest of
the world. Except for geographic coverage, each such separate
non-competition covenant shall be deemed identical in terms to
the non-competition covenant contained immediately above. If,
in any judicial or arbitration proceeding, a court or arbi-
trator shall refuse to enforce any of the separate covenants
deemed included in this section, then such unenforceable
covenant shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to
permit the remaining separate non-competition covenants to be
enforced.
12.2.2 Products Liability Insurance: Seller will obtain and pay for
a runoff occurrence form product liability policy (also known
as "tail" coverage) with limits of at least $500,000 per occur-
rence/$1,000,000 aggregate with a deductible of $5,000 per
claim and an excess policy with a limit of a minimum of
$2,000,000. Such "runoff" occurrence policies will cover the
period from 12:01 a.m. of the Closing Date through 12:01 a.m.
of the day after the 3rd anniversary date of the Closing Date
and be in Seller's name with Purchaser and Packer being in-
cluded as additionally named insureds thereon. Any deductible
payment obligation under the "runoff" occurrence policies will
be paid by Seller. A certificate of insurance showing the
acquiring of such insurance will be deposited by Seller into
Escrow at or prior to Closing.
Irrespective of insurance coverage, Seller agrees to be res-
ponsible for real and alleged injuries involving all defense
expenses, indemnification expenses, settlement of claims pay-
ments, notices of injury, and all administrative proceedings
involving products sold by Seller prior to Closing for all
claims made relating to such products that occur on or before
the 3rd anniversary date of Closing.
12.2.3 Confidential Information: Seller further agrees not to
divulge, communicate, use to the detriment of Purchaser or for
the benefit of any other person or persons, or misuse in any
way, any confidential information or trade secrets of Pur-
chaser, including personnel information, secret processes, know-
how, customer lists, recipes, formulas, or other technical
data. Seller acknowledges and agrees that any information or
data that Seller may have acquired on any of these matters or
items was received in confidence and as a fiduciary of Pur-
chaser.
12.2.4 Change of Name: Seller agrees that immediately after the
Closing Date it will take all action required to change any
name under which it does business so that such do not include
the words "California Chemical" or "California Chemical
Specialties" or a name similar thereto and from and after the
Closing Date, Seller [used in its broadest sense] will not
engage in any business or activity which it previously conduct-
ed while it owned the Business.
12.3 Transition Facilitation by Seller: Commencing upon Closing, Seller
agrees to provide the following transition facilitations to Purchaser:
12.3.1 General Administration Support Services: For a period of up
to three (3) calendar months after Closing, Seller shall, to
the extent reasonably requested by Purchaser to facilitate the
business transition from Seller's management to Purchaser's
management, provide invoicing, check writing (except payroll),
purchasing, and related reports, and the like under the super-
vision and ultimate control of Purchaser. These services will
be provided at the expense of Purchaser; it being acknowledged
that Purchaser will not be obligated to pay any amounts to
Packer over and above the amounts Packer will receive under the
consulting agreement [Section 13.2].
12.3.2 Collections Received by Seller: The Parties acknowledge the
likelihood that payments for invoicing by Purchaser in operat-
ing the Business from and after Closing may be received by
Seller. Within three (3) days of the receipt of any such pay-
ment, Seller is required to remit to Purchaser the amount thereof
with a complete accounting indicating all invoice numbers,
customer identification numbers, and any other reasonably re-
quired tracing information. Not more often than once every
month during the first six (6) calendar months after Closing,
and not more often than once every three (3) calendar months
thereafter, Purchaser, through its duly authorized represen-
tatives, shall have the right to audit Sellers' cash receipt
records to verify the accuracy of the accountings for payments
received by Seller which are to be turned over to Purchaser in
accordance with the terms of this Section.
12.3.3 Chargebacks and Other Adjustments from Pre-Closing Transactions:
Chargebacks from customers, pricing errors, returned goods
which are not reasonably capable of being resold, rebates,
promotions, and the like, which result in credits which may be
invoked against Purchaser in the operation of the Business
after Closing, but related to transactions occurring prior to
Closing, shall be compiled and periodically submitted by Pur-
chaser to Seller for review. To the extent that Seller does
not object in writing to Purchaser within ten (10) days after
the receipt of such compilation, Purchaser shall have the right
to deduct the amount associated therewith from the next ensuing
payment owing to Packer by Purchaser under the Consulting
Agreement [Section 13.2]. As to items to which Seller objects,
Seller and Purchaser will attempt in good faith to negotiate a
resolution of the dispute, and if unsuccessful, Purchaser shall
be left to its remedies set forth in Section 17.
12.4 Seller's Inability or Unwillingness to Perform: Packer agrees that he
will cause Seller to take all appropriate actions to fulfill its obli-
gations hereunder and to the extent that Seller does not or cannot,
Packer will undertake responsibility therefor.
13. PURCHASER'S OBLIGATIONS AFTER CLOSING: After Closing,
Purchaser shall have the following obligations:
13.1 Purchaser's Indemnity: Purchaser shall indemnify, defend, and hold
harmless Seller [used in its broadest sense to include Packer],against
and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries, and deficiencies, includ-
ing interest, penalties, and reasonable attorney fees that they shall or
may incur or suffer, which arise, result from, or relate to any breach
of, or failure by, Purchaser to perform any of their representations,
warranties, covenants, or agreements in this Agreement specifically in-
cluding the payment of Seller's obligations assumed by Purchaser here-
under as identified on Schedule 3, or in any schedule, certificate,
schedule, or other instrument furnished or to be furnished by Purchaser
under this Agreement. Seller shall promptly notify Purchaser of the
existence of any claim, demand, or other matter to which Purchaser's
indemnification obligations would apply and shall give them a reason-
able opportunity to defend the same at their own expense and with
counsel of their own selection; provided that Seller shall at all times
also have the right to fully participate in the defense at their own
expense. If Purchaser shall, within a reasonable time after such
notice, fail to defend, Seller shall have the right, but not the obli-
gation, to undertake the defense of, and to compromise or settle (exer-
cising reasonable business judgment) the claim or other matter on be-
half, for the account, and at the risk, of Purchaser. If the claim is
one that cannot by its nature be defended solely by Purchaser (includ-
ing, without limitation, any federal or state tax proceeding), then
Seller shall make available all information and assistance that Pur-
chaser may reasonably request.
13.2 Consulting Agreement: a Consulting Agreement in form and substance
satisfactory to each of them and which will provide, among other
things, that: (i) it shall be effective if, and only if, Closing occurs;
(ii) for a period of three years after Closing, Packer shall make his
services available to Seller on an "as needed" basis at all times
reasonable under the circumstances; and (iii) a consulting fee will be
paid by Purchaser to Packer in the amount of $100,000 per year payable
$8,333.33 per month payable as provided in the Consulting Agreement. A
copy of the Consulting Agreement is attached hereto as Schedule 13.2.
If Purchaser and Packer cannot come to mutual agreement as to the terms
of the Consulting Agreement, then Purchaser may, at its sole option
elect to continue with completion of the purchase of the Assets here-
under and waive the requirement of a Consulting Agreement with Packer.
14. PUBLICITY: All notices to third parties and all other public-
ity concerning the transactions contemplated by this Agreement shall be joint-
ly planned and coordinated by and between Purchaser and Seller. No party
shall act unilaterally in this regard without the prior written approval of
the other; however this approval shall not be unreasonably withheld.
15. COSTS:
15.1 Finder's or Broker's Fees: Purchaser and Seller each represent and
warrant to the other that neither has agreed to pay any broker and/or
finder in connection with the purchase of the Assets as contemplated
by this Agreement, and, as far as either knows, no broker or other per-
son is entitled to any commission or finder's fee on its account re-
lative thereto. Seller and Purchaser each agree to indemnify and hold
harmless one another against any loss, liability, damage, cost, claim
or expense incurred by reason of any brokerage, commission, or finder's
fee alleged to be payable because of any act, omission, or statement of
the indemnifying party.
15.2 Non-Escrow Expenses: Each party shall pay all non-escrow costs and ex-
penses incurred or to be incurred by it or them in negotiating and pre-
paring this Agreement and in closing and carrying out the transactions
contemplated by this Agreement.
15.3 Escrow Expenses: All costs and charges associated with conducting the
Escrow that may be charged by the Escrow Agent shall borne by Purchaser.
16. MISCELLANEOUS PROVISIONS: The following general and miscel-
laneous provisions shall be applicable relative to the within Agreement.
16.1 Parties in Interest - Assignment: Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to
it, nor is anything in this Agreement intended to relieve or discharge
the obligation or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this Agreement. No
party hereto may assign its interest under the within Agreement to any
third person, firm or entity without the prior written consent of the
other party.
16.2 Successors in Interest: Subject to any prohibition against assignment
contained herein, the within Agreement shall be binding on, and shall
enure to the benefit of, the parties to it and their respective heirs,
legal representatives, successors, and assigns.
16.3 Entire Agreement - Modification - Waiver: This Agreement constitutes
the entire agreement between the parties pertaining to the subject
matter contained in it and supersedes and replaces all prior and con-
temporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement
shall be binding unless executed in writing by all the parties. No
waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the
waiver.
16.4 Headings and References: The subject headings of the paragraphs and
subparagraphs of this Agreement are included for convenience only and
shall not affect the construction or interpretation of any of its pro-
visions.
16.5 Interpretations and Definitions: The language in all parts of this
Agreement shall in all cases be simply construed according to its fair
meaning and not strict before or against any one party hereto. Unless
otherwise provided for herein, or unless the context otherwise requires,
the following definition and rules of construction shall apply hereto:
16.5.1 Number and Gender: In this Agreement the neuter gender
includes the feminine and masculine and the singular number
includes the plural, and the word "Person" includes corpora-
tion, partnership, firm, or association where ever the context
so requires.
16.5.2 Mandatory and Permissive: "Shall," "Will" and "Agree" are
mandatory; "May" is permissive.
16.5.3 Captions: Captions of the articles, sections and paragraphs
hereof are for convenience and reference only, and the words
contained therein shall in no way be held to explain, modify,
amplify, or aid in the interpretation, construction, or mean-
ing thereof.
16.5.4 Parties: "Parties" shall refer to Seller and Purchaser above
identified and, if the context requires, the term "Seller"
shall refer to CCS and Packer.
16.6 Recovery of Litigation Costs: If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement,
or because of an alleged dispute, breach, default, or misrepresentation
in connection with any of the provisions of this Agreement, the success-
ful or prevailing party or parties shall be entitled to recover reason-
able attorneys' fees and other costs incurred in that action or proceed-
ing, in addition to any other relief to which it or they may be entitled.
16.7 Further Assurances: All of the Parties hereto agree to perform any and
all acts and to execute and deliver any and all documents which may be
necessary and convenient to carry out the provisions of this Agreement.
16.8 Venue - Governing Law: This Agreement shall be deemed to have been made
and entered into in the City of Rancho Cucamonga, County of San Bernard-
ino, State of California, and all legal actions or arbitrations pertain-
ing thereto shall occur with regard to such specification of venue.
This Agreement shall be construed in accordance with, and governed by,
the laws of the State of California as applied to contracts that are
executed and performed entirely in California.
16.9 Unique Obligations: Each party's obligation under this Agreement is
unique. If any party should default in its obligations under this
Agreement, the parties each acknowledge that it would be extremely im-
practicable to measure the resulting damages; accordingly, the non-
defaulting party or parties, in addition to any other available rights
or remedies, may sue in equity for specific performance, and the parties
each expressly waive the defense that a remedy in damages will be ade-
quate. Notwithstanding any breach or default by any of the parties of
any of their respective representations, warranties, covenants, or
agreements under this agreement, if the purchase and sale contemplated
by it shall be consummated at the Closing, each of the parties waives
any rights that it or they may have to rescind this Agreement or the
transaction consummated by it; provided, however, that this waiver
shall not affect any other rights or remedies available to the parties
under this Agreement or under the law.
16.10 Notices: All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to
whom notice is to be given, or on the day or actual delivery if mailed
by first-class mail, registered or certified, postage prepaid, return
receipt requested, or sent by expedited courier, and properly addressed
as follows:
To Seller: CALIFORNIA CHEMICAL SPECIALTIES, INC.
Eugene Packer
10871 Valley Dr.
Riverside, California 92505
with a copy to: George Atkinson III
Attorney at Law
500 N. State College Blvd., Suite 1200
Orange, California 92868
To Purchaser: PACER TECHNOLOGY
9420 Santa Anita Avenue
Rancho Cucamonga, California 91730
with a copy to: Larry K. Reynolds, Esq.
REYNOLDS & JENSEN, LLP
3233 Arlington Avenue, Suite 203
Riverside, California 92506
Any party may change its address for purposes of this section by giving
the other parties written notice of the new address in the manner set
forth above.
16.11 No Waiver of Breach: No failure by either of the parties hereto to
insist upon the strict performance by any of the other parties hereto
of any covenant, agreement, term, or condition hereof, or to exercise
any right or remedy consequent upon a breach thereof shall constitute
a waiver of any such breach or of such covenant, agreement, term, or
condition. No waiver of any breach shall affect or alter this Agree-
ment, but each and every covenant , condition, agreement and term of
this Agreement shall continue in full force and effect with respect to
any other then existing or subsequent breach.
16.12 Counterparts: This Agreement and any amendments hereto may be executed
in several counterparts, and all of such executed documents shall cons-
titute one agreement binding on all of the parties hereto, notwithstand-
ing that all of the parties are not signatory to the same original or
the same counterpart.
16.13 Invalidity of Any Term: In the event that any term or provision of this
Agreement shall be held by a court of competent jurisdiction to be in-
valid, the remainder of the terms and provisions of this Agreement
shall not be affected thereby in any respect.
16.14 Severability: If any provision of this Agreement is held invalid or
unenforceable by any court of final jurisdiction, it is the intent of
the parties that all other conditions of this Agreement be construed to
remain fully valid, enforceable, and binding on the parties.
17. LITIGATION AND ARBITRATION OF DISPUTES: The parties hereby
agree to submit all controversies, claims and matters of difference between
them which arise under, or are related to, the within Agreement, to arbitra-
tion in Rancho Cucamonga, California except that as an adjunct to any such
arbitration, a legal action for any injunctive relief that may be necessary
may be obtained in the appropriate court in San Bernardino County, California.
Without limiting the generality of the foregoing, the following shall be con-
sidered controversies hereunder: (a) all questions relating to the breach of
any obligation, warranty or condition hereunder; (b) failure of any party to
deny or reject a claim or demand of any other party; and (c) all questions as
to whether the right to arbitrate any question exists. Arbitration may pro-
ceed in the absence of any party if written notice of the proceedings has been
given to such party. The parties agree to abide by all awards rendered in
such proceedings. Such award shall be final and binding on all parties to the
extent and in the manner provided by California statute. All awards may be
filed with the clerk of the appropriate court in the county in which Corpora-
tion's principal office is located, as a basis of judgment and for the issu-
ance of execution for its collection and, at the election of the party making
such filing, with the clerk of one or more other courts, state or federal,
having jurisdiction over the party against whom such an award is rendered or
that party's property.
17.1 Limited Pre-Hearing Discovery: The parties to any dispute hereunder
shall have the right to engage in limited pre-hearing discovery as fol-
lows: Each party to said dispute shall be entitled to one (1) request
for document production and shall be entitled to take the deposition,
under oath, of each other party to said dispute. Said discovery shall
proceed pursuant to the provisions of the California Code of Civil Pro-
cedure governing discovery in civil litigation and all conditions and
objections allowed under the rules of said California Code of Civil
Procedure shall be allowed with respect to such discovery. The arbi-
trator shall rule upon motions to compel or limit discovery and shall
have the authority to impose sanctions, including attorneys' fees and
costs, to the same extent as a court of law or equity should the arbi-
trator determine that discovery was sought without substantial jus-
tification or that discovery was refused or objected to without sub-
stantial justification.
17.2 Application of California Law: The arbitrator shall apply California
law as though he is bound by applicable statutes and precedents in case
law, and shall endeavor to decide the controversy as though he was a
judge in a California court of law. The arbitrator shall have the power
to issue any award, judgment, decree or order of relief that a court of
law or equity could issue under California law, including but not limit-
ed to money damages, specific performance, or injunctive relief; and
for such purposes it is hereby expressly acknowledged and agreed that
damages at law will be an inadequate remedy for a breach or threatened
breach of any provision of this Agreement, it being the intention of
this sentence to make clear the agreement of the parties that the res-
pective rights and obligations of the parties hereunder shall be enforc-
eable in any arbitration proceedings in accordance with principles of
equity as well as law except to the extent that a court of the State of
California may be required to given injunctive relief. The arbitrator
shall prepare a written decision that will be supported by written find-
ings of fact and conclusions which adequately set forth the basis of his
decision and which cites the statutes and precedents applied and relied
upon in reaching his decision. The award, judgment, decree or order,
and the findings of the arbitrator, shall be final, conclusive and bind-
ing upon the parties, and judgment upon the award and enforcement of any
other judgment, decree or order of relief granted by the arbitrator may
be entered or obtained in any court of competent jurisdiction upon the
application of any party to the dispute. This agreement to arbitrate
shall be self-executing without the necessity of filing any action in
any court and shall be specifically enforceable under the prevailing
arbitration law.
17.3 Commencement of Arbitration - Alternative Arbitrator: To commence
arbitration, the aggrieved party shall given written notice of demand
for arbitration to the other party, in writing, within thirty (30) days
after the events which have given rise to the controversy, claim or
dispute. Any such dispute or controversy submitted to arbitration shall
be decided by a single arbitrator selected by mutual agreement of the
parties that are involved in the dispute; provided, however, that no
agent, attorney, employee, relative of any party, or other person who
has a financial interest in said dispute may be appointed. In the event
within thirty (30) days after the demand for arbitration is received by
the non-complaining party, the parties associated with the dispute can-
not agree upon the selection of the arbitrator which satisfies the fore-
going requirements, then the arbitrator shall be a judge selected by
the Judicial Arbitration and Mediation Services (J A M S) Panel asso-
ciated with the San Bernardino office of J A M S; such selection by J A
M S to occur based upon the application to J A M S by any party to the
dispute.
The fees of the arbitrator shall be borne equally by the parties. Any
arbitrator shall be a person experienced in negotiating, making and
consummating acquisition agreements and if J A M S cannot accommodate
this requirement, then the arbitrator shall be chosen by the American
Arbitration Association in accordance with its rules.
18. CONDITIONS PERMITTING TERMINATION: Except upon the valid
postponement of the Closing Date, any party may, on the Closing Date,
terminate this Agreement, without liability to any other party:
18.1 Action or Proceeding: If any bona fide action or proceeding shall be
pending against any party on the Closing Date that could result in an
unfavorable judgment, decree, or order that would prevent or make unlaw-
ful the performance of this Agreement; or
18.2 Governmental Action: If any agency of the Federal or of any State govern-
ment shall have objected at or before the Closing Date to this acquisi-
tion or to any other action required by or in connection with this Agree-
ment; or
18.3 No Counsel Approval: If the legality and sufficiency of all steps
taken and to be taken by the parties and their shareholders in carrying
out this Agreement shall not have been approved by counsel as required
by this Agreement.
19. DEFAULTS PERMITTING TERMINATION: If either Purchaser or Sellers
materially defaults in the due and timely performance of any of their respect-
ive warranties, covenants, or agreements under this Agreement, the non-
defaulting party or parties may, on the Closing Date, give notice of termina-
tion of this Agreement, in the manner provided in Section 16.10. The notice
shall specify with particularity the default or defaults on which the notice
is based. Unless the event of default or defaults are incapable of being
cured (in which event termination of this Agreement shall occur forthwith),
the termination shall be effective five (5) business days after the Closing
Date, unless the specified default or defaults have been cured on or before
such effective date for termination.
20. NATURE AND SURVIVAL OF REPRESENTATIONS AND
OBLIGATIONS: No representations or warranties whatever are made by any party,
except as specifically set forth in this Agreement, or in an instrument,
certificate, opinion, or other writing provided for in this Agreement. All
statements contained in any of these instruments, certificates, opinions, or
other writings shall be deemed to be representations and warranties under
this Agreement. The representations and warranties made by the parties in
this Agreement or in instruments, certificates, opinions, or other writings
provided for in the covenants and agreements to be performed or complied with
by the respective parties under it before the Closing Date shall be deemed to
be continuing and surviving in the sense that they shall be enforceable after
Closing, but shall expire on the fourth (4th) anniversary date following the
Closing Date, unless a specific claim in writing with respect to these matters
shall have been made, or an action at law or in equity shall have been com-
menced or filed, before this anniversary date. Nothing in this section shall
affect the obligations and indemnities of the parties with respect to covenants
and agreements contained in this Agreement that are permitted to be performed,
in whole or in part, after the Closing Date. Any limitation period for the
survival of the above-specified representations and warranties of Seller shall
not apply to any fraudulent breach, representation, or warranty, or to any
breach or inaccuracy in any representation or warranty known to Seller on or
before the Closing Date.
21. COUNSEL: Each of the parties hereto has been represented by
independent legal counsel of his or its own choosing relative to the subject
matters of the within Agreement, and none of the parties is relying on any
advice or statements of counsel for any other party hereto in entering into
this Agreement. If any party executes this Agreement and has not sought
counsel relative thereto, that party affirmatively represents and warrants
that he, she or it is not relying on counsel for any other party hereto to
protect his, her or its legal interests relative to the subject matter hereof.
22. NO PRESUMPTIONS: Each party acknowledges that such party has
participated, with, at its option, the advice of counsel, in the preparation
of this Agreement. No party is entitled to any presumption with respect to
the interpretation of any provision hereof or the resolution of any alleged
ambiguity based on any claim that the other party drafted, or controlled the
drafting of this Agreement.
23. EFFECTIVE DATE: This Agreement shall be binding and enforce-
able in accordance with its terms as of the latest date specified opposite
the signatures of the parties hereto.
Execution by Seller
Dated: June 27, 1997 CALIFORNIA CHEMICAL
SPECIALTIES, INC.
By:
EUGENE PACKER, President
Execution by Purchaser
Dated: June 27, 1997 PACER TECHNOLOGY
By:
JAMES T. MUNN, President
Execution by Shareholder
The undersigned, to the extent they are included in making agreements
hereunder, hereby join in the above and foregoing Agreement.
Dated: June 27, 1997
EUGENE PACKER, Individually
AMENDMENTS AND MODIFICATIONS TO AGREEMENT
That certain Sale of Assets Agreement ("Agreement") entered into by and
between California Chemical Specialties, Inc. as "Seller" and Pacer Technology
as "Purchaser" dated for reference purposes June 27, 1997, is hereby amended
and modified as follows:
1. Section 1.1(i) - Excluded Assets: Section 1.1(i) is modified to read
in its entirety as follows:
(i) all property and rights listed as assets of Seller in the
schedules attached to this Agreement, other than property
and rights specifically excluded [the "Excluded Assets"] as
more specifically identified and set forth in Schedule 1(i)];
2. Section 4 - Transaction Related Taxes: Section 4 is hereby modified to
eliminate any requirement of proration and will read in full as follows:
4. TRANSACTION RELATED TAXES: Seller shall pay all sales and
use taxes arising out of the transfer of the Assets and shall pay any
state and local real and personal property taxes associated with the
Business of Seller which have accrued or which are due prior to Closing.
Purchaser shall not be responsible for any of business, occupation, with-
holding, or similar tax, or any taxes of any kind related to Seller, its
assets, and/or its Business, for any period before the Closing Date
[Section 5.3].
3. Financial Changes - Deletion of Section 10.7 - New Section 6.17: Section
10.7 is hereby deleted from the Agreement and a new Section 6.17 is added
to the Agreement which will read in full as follows:
6.17 Representations Regarding No Changes: Seller (including CCS
and Packer) represent and warrant that neither has any know-
ledge or reason to suspect that during the period from the date
of the latest compiled financial statement for CCS to the time
of Closing, there was any change in the financial condition or
results in the operations of CCS except: (i) changes incurred
in the ordinary and usual course of the business of CCS during
that period that, in the aggregate, are not materially adverse;
and/or (ii) any other changes or transactions contemplated by
this Agreement.
4. Section 10.7 - Letter Regarding Changes: Section 10.7 is deleted in its
entirety.
Execution by Seller
Dated: July 15, 1997 CALIFORNIA CHEMICAL
SPECIALTIES, INC.
By:
EUGENE PACKER, President
Execution by Purchaser
Dated: July 15, 1997 PACER TECHNOLOGY
By:
JAMES T. MUNN, President
Execution by Shareholder
The undersigned, to the extent he is included in making agreements under
the Agreement, hereby joins in the above and foregoing Agreement.
Dated: July 15, 1997
EUGENE PACKER, Individually
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Regist-
rant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
PACER TECHNOLOGY
Roberto J. Cavazos, Jr.
Chief Financial Officer
Date: July 28, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACER TECHNOLOGY
/s/Roberto J. Cavazos, Jr.
Roberto J. Cavazos, Jr.
Chief Financial Officer
Date: July 28, 1997
