<PAGE> 1
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 0-11560
- -------------------------------- ------------------------------
WESTERN MICRO TECHNOLOGY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2414428
-------------- --------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
12900 Saratoga Avenue, Saratoga, CA 95070
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(408) 725-1660 N/A
------------------ -------
(Registrant's telephone number, (Former name, former address
including area code) and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
YES [x] NO [ ]
Indicate by number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
----- -----------------------------
Common Shares, without par value 3,703,007
1 of 13
<PAGE> 2
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Statements of Income (Loss) for the Three Months Ended
March 31, 1995 and 1994 3
Consolidated Balance Sheets at March 31, 1995 and December 31, 1994 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
PART II - OTHER INFORMATION 11
Signatures 12
Index to Exhibits 13
</TABLE>
2 of 13
<PAGE> 3
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------
1995 1994
---- ----
<S> <C> <C>
Net sales $ 33,497 $ 30,083
Cost of goods sold 29,454 26,394
-------- --------
Gross profit 4,043 3,689
-------- --------
Gross profit as % of net sales 12.07% 12.26%
Selling, general and administrative expenses 4,550 3,621
-------- --------
Operating (loss) income (507) 68
Interest expense (net) 275 158
Other income (expense) 31 (3)
-------- --------
(Loss) from operations before income taxes (751) (93)
Provision for income taxes - 27
-------- --------
(Loss) from continuing operations (751) (120)
Discontinued operations, net of taxes:
Income from discontinued operations - 167
-------- --------
Net (loss) income $ (751) $ .47
======== ========
Net (loss) income per common share:
Continuing operations $ (0.20) $ (0.03)
Discontinued operations $ $ 0.04
-------- --------
Net (loss) income per common share $ (0.20) $ 0.01
======== ========
Number of shares used in per share calculation 3,759 3,467
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3 of 13
<PAGE> 4
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
-------- ------------
<S> <C> <C>
Current Assets:
Cash $ 237 $ 138
Trade accounts receivable, net of allowance for
doubtful accounts of $443 at March 31, 1995 and $393
at December 31, 1994 17,076 15,170
Inventories, net 19,208 18,959
Other current assets 1,107 1,095
------- -------
Total current assets 37,628 35,362
Property and equipment, net 1,023 889
Goodwill, net of accumulated amortization 1,371 1,389
Other assets 290 258
------- -------
TOTAL ASSETS $40,312 $37,898
======= =======
LIABILITIES
Current liabilities:
Notes payable $ 9,842 $ 9,175
Current portion of capital leases 112 86
Accounts payable 14,409 11,949
Accrued expenses 1,785 1,818
------- -------
Total current liabilities 26,148 23,028
Capital lease obligations, less current portion 111 65
Other 378 381
------- -------
TOTAL LIABILITIES 26,637 23,474
======= =======
Commitments and contingencies (Note 5)
SHAREHOLDERS' EQUITY
Preferred Stock, without par value, 10,000,000 shares
authorized; none issued and outstanding - -
Common Stock, without par value, 10,000,000 shares
authorized; issued and outstanding: 3,703,007 at
March 31, 1995 and 3,702,007 at December 31, 1994 13,911 13,909
Retained earnings (236) 515
-------- -------
Total shareholders' equity 13,675 14,424
------- -------
TOTAL LIABILITIES & EQUITY $40,312 $37,898
======= =======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4 of 13
<PAGE> 5
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (751) $ 47
Adjustments to reconcile net income (loss) to net cash (used) by
operating activities:
Disposal of property and equipment - 1
Depreciation and amortization 140 103
Provision for doubtful accounts receivable 68 212
Change in assets and liabilities:
Accounts receivable (1,974) (3,047)
Inventories (248) (865)
Other current assets (13) 321
Other assets (33) (24)
Accounts payable 2,460 1,476
Accrued expenses and other (36) 874
------- --------
Net cash (used) by operating activities (387) (902)
Cash flows from investing activities:
Net acquisition of property and equipment (257) (92)
------- --------
Net cash (used) by investing activities (257) (92)
Cash flows from financing activities:
Proceeds from short-term borrowings 29,148 29,081
Repayments of short-term borrowings (28,479) (28,221)
Payments on lease obligations (29) (14)
Proceeds from exercise of stock options 2 116
Proceeds from equipment loan 101 0
------- --------
Net cash provided by financing activities 743 962
Net increase (decrease) in cash 99 (32)
Cash--beginning of period 138 414
Cash--end of period $ 237 $ 382
======= ========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5 of 13
<PAGE> 6
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
Note 1: The unaudited consolidated financial statements which include the
accounts of Western Micro Technology, Inc. and its subsidiaries have
been prepared in accordance with the instructions to Form 10-Q and do
not include all information and footnotes necessary to comply with
generally accepted accounting principles. In the opinion of
management, all normal recurring adjustments considered necessary for a
fair presentation have been included. The consolidated statements of
income (loss) for the three months ended March 31, 1995 are not
necessarily indicative of the results to be expected for a full year or
for any other period. It is suggested that these financial statements
be read in conjunction with the financial statements and the notes
thereto included in the Company's latest audited financial statements
for the year ended December 31, 1994.
Note 2: The December 31, 1994 balance sheet was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
Note 3: Inventories, consisting primarily of purchased product held for resale,
are stated at the lower of cost (first- in, first-out) or net
realizable value.
Note 4: Supplemental Cash Flow Information:
Cash paid for interest in the three-month period ended March 31, 1995
and 1994 was $254,000 and $142,000, respectively.
Note 5: In the course of its business, the Company is sometimes named as a
defendant in litigation. The Company is currently a defendant in a
lawsuit and could incur an uninsured liability. However, it is the
opinion of management that the outcome of such litigation will not have
a material adverse effect on the results of operations or financial
condition of the Company.
Note 6: As of September 30, 1994, the Company discontinued its Testing
Division. Operating results of this division are included in the
Consolidated Statements of Income (Loss) for the three months ended
March 31, 1994, under the caption, "Discontinued Operations, net of
taxes." Revenues applicable to the Testing Division were $712,000 for
the quarter ended March 30, 1994. As of September 30, 1994, remaining
assets of the Testing Division amounted to $193,000 and liabilities
amounted to $510,000.
6 of 13
<PAGE> 7
Note 7: The Consolidated Statement of Income (Loss) and Consolidated Statement
of Cash Flows for the quarter ended March 31, 1994 have been restated
to reflect the acquisition of First Computer Corporation as a pooling
of interests in the fourth calendar quarter of 1994.
7 of 13
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Recent Events
On May 5, 1995, the Company signed a definitive agreement to sell the assets
of its electronic semiconductor components distribution business to Reptron
Electronics, Inc. (Nasdaq National Market - "REPT"), subject to shareholder
approval. Reptron will be purchasing all of the Company's inventory and
receivables related to its semiconductor components distribution business as
well as certain machinery, furniture, fixtures and equipment for approximately
book value and will also assume certain trade payables and branch lease
obligations. The purchase price payable at Closing will be the sum of the net
book value of the assets less trade payables and other components-related
liabilities. Although the exact amounts will not be known until the closing of
the transaction, Western Micro expects to receive cash proceeds of
approximately $13.0 million, of which $1.0 million will be held in escrow for
approximately six months. The company plans to use the net proceeds from the
sale to retire all of its short-term debt after which the Company expects to
hold approximately $3.0 million in cash. In conjunction with the completion of
the transaction, the Company expects to take a restructuring charge for the
quarter ended June 30, 1995 of approximately $2.8 million. Of this amount,
approximately $1.9 million will be a non-cash charge the majority of which
represents the elimination of goodwill associated with prior components related
business acquisitions. The remainder of the charge will be comprised of
severance and other related exit costs.
Effective March 31, 1995, the Company was notified by OKI Semiconductor that
it had terminated its franchise agreement with the Company. OKI Semiconductor
represented approximately $7.5 million of the Company's 1994 revenues and
approximately $1.2 million of the Company's 1994 gross profit. In the three
months ended March 31, 1995, OKI Semiconductor represented close to $1.6
million of the Company's revenues and approximately $270,000 of gross profit.
There can be no assurance that this event will not have an adverse effect on
the Company's net profit for the fiscal year.
In April 1995, the Company was notified by Fujitsu Microelectronics, Inc.
that, effective May 25, 1995, it will terminate its franchise agreement with
the Company. Fujitsu Microelectronics, Inc. represented approximately $7.4
million of the Company's 1994 revenues and approximately $1.2 million of the
Company's 1994 gross profit. In the three months ended March 31, 1995, Fujitsu
Microelectronics, Inc. represented approximately $3.5 million of the Company's
revenues and approximately $390,000 of gross profit. There can be no assurance
that this event will not have an adverse effect on the Company's net profit for
the fiscal year.
In April 1995, the Company was notified by Cirrus Logic, Inc. that,
effective May 28, 1995, it will terminate its franchise agreement with the
Company. Cirrus Logic, Inc. represented approximately $1.1 million of the
Company's 1994 revenues and approximately $230,000 of the Company's 1994 gross
profit. In the three months ended March 31, 1995, Cirrus Logic, Inc.
represented approximately $580,000 of the Company's revenues and
8 of 13
<PAGE> 9
approximately $90,000 of gross profit. There can be no assurance that this
event will not have an adverse effect on the Company's net profit for the
fiscal year.
In the 15 month period ending March 31, 1995, the Company has lost six
franchise lines relating to its electronic semiconductor component distribution
business. As of May 1, 1995, the Company had remaining approximately 20
franchise lines relating to this business. As described above, the Company has
entered into an Asset Purchase Agreement dated May 5, 1995 with Reptron
Electronics, Inc. pursuant to which Reptron will acquire the Company's
electronic components distribution business and negotiate new agreements with
the Company's existing franchisors. However, in the event the asset sale to
Reptron is not consummated, there can be no assurance that the number of
franchise lines relating to the Company's electronic component distribution
business will not continue to decline during the balance of 1995 or thereafter.
Three Months Ended March 31, 1995 Compared to Three Months Ended March 31, 1994
The Company's revenues and gross profits for the quarter were generated
entirely from the distribution business, a result of the discontinuance of the
Company's Testing Division in the quarter ended September 30, 1994 (see Note
6). The Consolidated Statement of Income (Loss) and Consolidated Statement of
Cash Flows for the quarter ended March 31, 1994 have been restated to reflect
this change as well as to reflect the acquisition of First Computer
Corporation, as a pooling of interests, in the fourth calendar quarter of 1994.
Net sales for the three months ended March 31, 1995 were 11.4% higher than
for the comparable fiscal 1994 period due principally due to increased computer
systems revenues. Gross profit as a percentage of sales for the three months
ended March 31, 1995 was 12.1% compared to 12.3% for the same period one year
ago. The decrease in gross profit was primarily due to lower average selling
prices for memory components products.
Selling, general and administrative expenses increased 25.7% in the three
months ended March 31, 1995 from the same period a year ago due to several
factors. For the quarter ended March 31, 1994 the Company had not yet hired a
Chief Executive Officer or a Senior Vice-President to run its components group.
In addition, operating expenses associated with National Information Systems,
Inc. (NIS) are not included as the NIS acquisition, accounted for as a stock
purchase, did not occur until June 1, 1994. Also, during the quarter ended
March 31, 1995 the Company incurred significant development and promotional
expense related to its new on-line Internet service, DesignShop, which provides
engineers and other electronic industry professionals with detailed product
information on over 500,000 electronic components.
Interest expense, net, increased 74.1% in the three months ended March 31,
1995 versus March 31, 1994 due to increased bank borrowings and higher interest
rate.
As of March 31, 1995 the Company was violation of a profitability covenant
required by its line of credit provider. The Company has received a waiver for
such covenant and has completed negotiation of a new line of credit on terms
substantially similar to those in place on March 31, 1995.
9 of 13
<PAGE> 10
Liquidity and Capital Resources
Net cash used by operating activities during the three months ended March
31, 1995 totaled $387,000, compared to the net cash used by operating activities
of $902,000 for the three months ended March 31, 1994.
The increase in the accounts receivable of $1,974,000 was primarily due to
increased sales volumes, in particular increased volume during the last weeks
of the quarter. This was offset by an increase in accounts payable of
$2,460,000 which was due to increased inventory purchases required to meet the
sales demand during the same period and to satisfy sales backorder demands for
the beginning of the subsequent quarter.
The Company has required substantial working capital to finance inventories,
accounts receivable and capital expenditures and has financed its working
capital requirements, software development and equipment acquisition
requirements primarily through bank borrowings.
Based on Western Micro's current rate of orders and business plans, the
Company believes that its $15.0 million line of credit, collateralized by trade
accounts receivable and inventory, should provide sufficient resources to fund
its operations through the fiscal year ended December 31, 1995. Borrowings of
$9,842,000 were outstanding under this line of credit at March 31, 1995.
Although there can be no assurances that the transaction with Reptron
Electronics, Inc. described above will occur, if it does Western Micro will
use the estimated $13.0 million proceeds from such sale to retire all of its
line of credit and expects that there will be approximately $3.0 million in
cash remaining to fund ongoing operations. The Company has negotiated an
arrangement with its current lender to provide a $10 million line of credit
available to fund working capital requirements immediately subsequent to the
transaction on terms substantially similar to those currently in effect.
Factors Affecting Future Results
The Company's past operating results have been and its future operating
results will be, subject to the variety of uncertainties. The Company's
quarterly operating results may be subject to fluctuations as a result of a
number of factors, including the addition or loss of key suppliers or customers,
price competition and changes in the supply and demand for semiconductors and
computer products. Price competition in the industries in which the Company
competes is intense and could result in gross margin declines, which could have
a material adverse impact on the Company's profitability. The Company's future
success depends in part on the continued service of its key personnel, and its
ability to identify and hire additional personnel. There is intense competition
for qualified personnel in the areas of the Company's activities and there can
be no assurance that the Company will be able to continue to attract and retain
qualified personnel necessary for the development of its business. Loss of the
services of, or failure to recruit, key sales and management personnel could be
significantly detrimental to the Company.
10 of 13
<PAGE> 11
PART II. OTHER INFORMATION
Item 1 Legal proceedings. In the course of its business, the Company is
sometimes named as a defendant in litigation. The Company is currently
a defendant in a lawsuit and could incur an uninsured liability.
However, it is the opinion of management that the outcome of such
litigation will not have a material adverse effect on the results of
operations or financial condition of the Company.
Item 2 Changes in Securities. None.
Item 3 Defaults on Senior Securities. None.
Item 4 Submission of Matters to a Vote of Security Holders. None.
Item 5 Other Information. None.
Item 6 Exhibits and Reports on Form 8-K.
A - Exhibit 10.31. Asset Purchase Agreement dated May 5, 1995,
between the Company and Reptron Electronics, Inc.
- Exhibit - 11.1. Computation of (Loss) Income Per Share
- Exhibit - 27. Financial Data Schedule.
B - Reports on Form 8-K. None.
11 of 13
<PAGE> 12
SIGNATURES
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 thereunto duly authorized.
Registrant:
WESTERN MICRO TECHNOLOGY, INC.
Dated: May 15, 1995 By /s/ RONALD H. MABRY
-----------------------------------
Ronald H. Mabry
Chief Executive Officer, President
and Secretary
Dated: May 15, 1995 By /s/ JAMES W. DORST
-----------------------------------
James W. Dorst
Chief Financial Officer
12 of 13
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
------- ----
<S> <C> <C>
10.31 Asset Purchase Agreement dated May 5, 1995, between the
Company and Reptron Electronics, Inc.
11.1 Computation of (Loss) Income Per Share for the Three Months
Ended March 31, 1995 and 1994
27 Financial Data Schedule
</TABLE>
13 of 13
<PAGE> 1
EXHIBIT 10.31
<PAGE> 2
ASSET PURCHASE AGREEMENT
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement to Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price and Allocation Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Delivery of the Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Payment of the Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Escrow Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Representations and Warranties of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . 6
(c) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Location of Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) No Third Party Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i) Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(j) Completeness of Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Pending, Threatened or Potential Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(l) Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(m) Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(n) Non-Competition, Confidentiality and Indemnification Agreements . . . . . . . . . . . . . . . . 9
(o) Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Validity of Contemplated Transactions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Indemnification by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Indemnification by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Notice and Defense of Third-Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Survival of Covenants and Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV FURTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Seller's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE V CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Conditions Precedent to the Purchaser's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Conditions Precedent to the Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS AND FURTHER ASSURANCES . . . . . . . . . . . . . . . . 16
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Items to be Delivered at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Post Closing Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Contents of Agreement: Parties in Interest. etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.5 Assignment and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.8 California Law to Govern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.9 No Benefit to Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.10 Headings, Gender and Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.11 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE
--------
<S> <C>
Preliminary Schedule 1.1(a) Accounts Receivable
Final Schedule 1.1(a) Accounts Receivable (To be delivered at Closing)
Preliminary Schedule 1.1(b) Inventory
Final Schedule 1.1(b) Inventory (To be delivered at Closing)
Schedule 1.1(d) Machinery, Equipment, Furniture and Fixtures (To be delivered
at Closing)
Schedule 1.1(f) Real Estate and Personal Property Leases
Preliminary Schedule 1.1(g) Backlog
Final Schedule 1.1(g) Backlog (To be delivered at Closing)
Schedule 1.1(h) Request for Quotations (To be delivered at Closing)
Preliminary Schedule 1.4(c) Accounts Payable
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C>
Final Schedule 1.4(c) Accounts Payable (To be delivered at Closing)
Preliminary Schedule 1.6(a) Designated Accounts Receivable
Final Schedule 1.6(a) Designated Accounts Receivable (To be delivered at Closing)
Preliminary Schedule 1.6(b) Designated Inventory
Final Schedule 1.6(b) Designated Inventory (To be delivered at Closing)
Schedule 2.1(k) Litigation
Schedule 2.1(l)(iii) Volume Discounts
Schedule 5.1(j) Franchise Product Lines
</TABLE>
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Non-Competition/Royalty/No-Solicitation Agreement
-iii-
<PAGE> 6
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into on this 5th day of May 1995 by and among WESTERN MICRO TECHNOLOGY, INC. a
California corporation (the "Seller"), and REPTRON ELECTRONICS, INC., a Florida
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, a portion of the Seller's business is the wholesale
distribution of electronic semiconductor components (the "Electronic Component
Distribution Business" or the "ECDB.") The Seller desires to sell to the
Purchaser and the Purchaser desires to buy from the Seller all of the operating
assets, properties and rights of the Seller comprising the ECDB for the
purchase price and upon and subject to the other terms and conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing, as defined in Article VI
hereof, the Seller will grant, sell, convey and assign to the Purchaser, upon,
and subject to the terms and conditions of this Agreement, all of the Seller's
right, title and interest in and to the following, which comprise the ECDB
(collectively the "Assets"):
(a) all accounts receivable relating to the ECDB as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Accounts Receivable") (for reference purposes only all accounts
receivable relating to the ECDB as of the date hereof are set forth on Schedule
1.1(a) attached hereto (the "Preliminary Schedule 1.1(a)"), which will be
updated on the close of business on the last business day immediately preceding
the Date of Closing to identify the Accounts Receivable and such updated
Schedule will constitute the Accounts Receivable (the "Final Schedule 1.1(a)");
(b) all inventories relating to the ECDB existing as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Inventory") (for reference purposes only all inventory relating to the
ECDB as of the date
-1-
<PAGE> 7
hereof is set forth on Schedule 1.1(b) attached hereto (the "Preliminary
Schedule 1.1(b)"), which will be updated on the close of business on the last
business day immediately preceding the Date of Closing to identify the
Inventory and such updated Schedule will constitute the Inventory (the "Final
Schedule 1.1(b)");
(c) all documents and materials, whether stored in electronic memory
or otherwise, possessed by the Seller representing or relating to ECDB customer
and supplier lists and leads to prospective ECDB customers and credit files of
current and former ECDB customers;
(d) all machinery, equipment, furniture and fixtures listed on
Schedule 1.1(d) to be delivered on the Date of Closing;
(e) all product and technical information possessed by the Seller of
every nature relating to the design, manufacture and distribution of the
products presently or formerly sold by the ECDB, including all sales and
promotional literature, product warranties, marketing data, technical
literature and data, engineering drawings, manufacturing drawings, prototypes,
plans, manufacturing process sheets, computer programs and software, test data,
production data, purchasing data, parts lists, instruction manuals, and other
data and material, whether in written form or in other reproducible form, which
is as of the date hereof and at the Date of Closing used or useful or
contemplated to be used or useful at a future date in the ECDB;
(f) all real estate and personal property leases listed on Schedule
1.1(f) attached hereto;
(g) all purchase or sales orders as of the close of business on the
last business day immediately preceding the Date of Closing (the "Backlog")
(for reference purposes only all backlog relating to the ECDB as of May 4, 1995
is set forth on Schedule 1.1(g) attached hereto (the "Preliminary Schedule
1.1(g)"), which will be updated on the close of business on the last business
day immediately preceding the Date of Closing and such updated Schedule will
constitute the Backlog (the "Final Schedule 1.1(g)");
(h) all requests for quotation relating to the ECDB as of the close
of business on the last business day immediately preceding the Date of Closing
(the "Request for Quotations") set forth on Schedule 1.1(h) to be delivered on
the Date of Closing);
(i) all insurance contracts which are assignable and cover property
or liabilities of the ECDB;
-2-
<PAGE> 8
(j) only with each such employee's prior written consent, copies of
the personnel records of those consenting employees of Seller who are hired by
Purchaser as of or subsequent to the Date of Closing;
(k) the interests of Seller in any and all claims of Seller attendant
to the ECDB against any other person, whether now or hereafter accrued,
contingent or otherwise, known or unknown, including, but not limited to claims
for collection or indemnity, claims in bankruptcy, claims for contribution and
choses in action; and
(l) all documents, records and files possessed by the Seller relating
to the Assets or the ECDB, which are necessary to conduct the business of the
ECDB.
1.2 Purchase Price and Allocation Thereof.
(a) The purchase price (the "Purchase Price") for the Assets shall be
the sum of:
(i) One Hundred Thousand ($100,000) dollars, and
(ii) the sum of the net book value (determined under GAAP) of
the following:
(A) The Accounts Receivable;
(B) The Inventory; and
(C) All machinery, equipment, furniture and fixtures
listed on Schedule 1.1(d).
(b) At Closing, the parties shall execute a schedule allocating the
Purchase Price among the Assets. The Purchase Price allocation shall be
utilized by each of the Seller and Purchaser for Federal Income Tax reporting
purposes.
1.3 Delivery of the Assets. At Closing, the Seller shall transfer
and deliver to Purchaser possession of and title to the Assets along with such
instruments of transfer and title as are required by Purchaser.
1.4 Assumption of Liabilities. Except as specifically set forth
below, Purchaser shall not assume and does not agree to pay, perform or
discharge any debt, expense or liability of the Seller of any nature
whatsoever, whether fixed or contingent, known or unknown, on the Date of
Closing;
(a) Purchaser agrees to complete and deliver such product or service
as is required by the Backlog, unless such Backlog is canceled by the customer;
-3-
<PAGE> 9
(b) Purchaser assumes and agrees to perform all of Seller's
obligations accruing on and after the Date of Closing under all real estate and
personal property leases described in Schedule 1.1(f) attached hereto;
(c) Purchaser assumes and agrees to pay, as and when due, Seller's
accounts payable and liabilities of the ECDB accrued as of the close of
business on the last business day immediately preceding the Date of Closing
(the "Accounts Payable") (for reference purposes only Seller's accounts payable
and liabilities of the ECDB accrued as of the date hereof are set forth on
Schedule 1.4(c) attached hereto (the "Preliminary Schedule 1.4(c)"), which will
be updated on the close of business on the last business day on the Date of
Closing to identify the Accounts Payable, the sum of which shall not exceed the
Purchase Price, and such updated Schedule will constitute the Accounts Payable
(the "Final Schedule 1.4(c)");
(d) Purchaser assumes and agrees to pay Seller's obligations under
Seller's open purchase orders for ECDB inventory purchases identified on
Schedule 1.4(d) attached hereto provided that such inventory is not of a
character wherein: (i) Seller is not a franchisee of the manufacturer thereof,
(ii) is not subject to price protection or stock rotation rights, (iii) is
nonreturnable or noncancellable or, (iv) was manufactured by Mitsubishi;
1.5 Payment of the Purchase Price.
(a) On the Date of Closing, Purchaser shall:
(i) Wire transfer to Seller an amount equal to the difference
between:
(A) The Purchase Price, and
(B) The sum of:
(1) The amount deposited in escrow as described in
Paragraph 1.6 below; and
(2) The Accounts Payable.
1.6 Escrow Deposit. On the Date of Closing, Purchaser shall deposit
in escrow with an escrow agent mutually acceptable to both parties, and
pursuant to the Escrow Agreement in substantially the form attached hereto as
Exhibit A, an amount equal to the greater of $1,000,000 or the sum of:
(a) all accounts receivable included on the Final Schedule 1.1(a) to
be delivered at Closing of any customer account any portion of which is aged
over ninety days as of the Date of
-4-
<PAGE> 10
Closing (the "Designated Accounts Receivable") (for reference purposes only all
such designated accounts receivable relating to the ECDB as of the date hereof
are set forth on Schedule 1.6(a) attached hereto (the "Preliminary Schedule
1.6(a)"), which will be updated on the close of business on the last business
day immediately preceding the Date of Closing, and such updated schedule will
constitute the Designated Accounts Receivable (the "Final Schedule 1.6(a)");
and
(b) all Inventory included on the Final Schedule 1.1(b) to be
delivered at Closing:
(i) for which Seller does not have in effect a franchise
agreement as of the Date of Closing (except product manufactured by Fujitsu
unless covered by paragraph (ii) or (iii) of this Section 1.6(b)); or
(ii) for which Seller has no price or stock rotation
protection rights; or
(iii) which is nonreturnable or noncancellable; or
(iv) which represents products manufactured by Mitsubishi;
(the "Designated Inventory") (for reference purposes only all such designated
inventory as of the date hereof is set forth on Schedule 1.6(b) attached hereto
(the "Preliminary Schedule 1.6(b)"), which will be updated on the close of
business on the last business day immediately preceding the Date of Closing and
such updated schedule will constitute the Designated Inventory (the "Final
Schedule 1.6(b)").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Seller. The Seller hereby
represents and warrants to Purchaser as follows:
(a) Corporate Existence. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. The Seller has all requisite power and authority to carry on the
ECDB as it has been and is now being conducted and to own, lease and operate
the properties used in connection therewith. The Seller is duly qualified to
do business and is in good standing in each jurisdiction where the ECDB
requires it to be so qualified.
-5-
<PAGE> 11
(b) Corporate Power; Authorization; Enforceable Obligations.
(i) The Seller has the corporate power, authority and legal
right to execute, deliver and perform this Agreement. This Agreement
has been, and the instruments of conveyance, assignment, transfer and
all other documents delivered as required herein will be, duly
executed and delivered by a duly authorized officer of the Seller, and
this Agreement constitutes, and such instruments when executed and
delivered will constitute, legal and binding obligations of the Seller
enforceable against the Seller in accordance with their respective
terms except as may be limited by bankruptcy, insolvency and other
similar laws affecting creditor's rights generally and by general
equity principles.
(ii) The execution, delivery and performance of this
Agreement by Seller does not and will not contravene, violate or
breach (with or without the giving of notice or lapse of time, or
both): (A) any law, rule, regulation, license or permit to which the
Seller is subject, (B) any judgment, order, writ, injunction, decree
or award or any court, arbitrator or governmental or regulatory
official, body or authority which is applicable to the Seller, (C) the
charter documents or Bylaws of the Seller; (D) with the consent of
CoastFed Business Credit Corporation of any term, condition or
provision of, or any indenture, agreement, contract, commitment, lease
or understanding, oral or written, to which the Seller is a party, or
by which any of the Assets may be bound or affected, or which give any
party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of
the Seller thereunder, or (E) require the consent of any other party
except for Seller's shareholders, CoastFed Business Credit
Corporation, Seller's landlords to its premises, lessors to its
equipment leases, and governmental agency approval or regulatory
requirement having jurisdiction thereof.
(c) Accounts Receivable. The Accounts Receivable set forth on the
Final Schedule 1.1(a) to be delivered at Closing will be the result of sales of
electronic semiconductor components made in the ordinary course of business and
will not be subject to defenses, rights of set off or counterclaims and for
which Seller has not received by the Date of Closing notice of rejection or
revocation of acceptance, and to the best of Seller's knowledge, will
constitute on the Date of Closing the total amount due Seller on account of
goods sold or services
-6-
<PAGE> 12
delivered in the ECDB as of the close of business immediately preceding the
Date of Closing.
(d) Inventory. Since March 31, 1995, the Seller has not changed its
method of accounting for, or valuing, its inventory, and the Inventory listed
on the Final Schedule 1.1(b) to be delivered at Closing to the best of Seller's
knowledge will represent on the Date of Closing all inventory of the Seller in
the ECDB as of the close of business on the last business day immediately
preceding the Date of Closing.
(e) Title to Properties. The Seller has good and valid title to the
Assets, which on the Date of Closing will be free and clear of all liens,
pledges, security interests, charges, claims, restrictions and other
encumbrance or defects of title of any nature. Subject to satisfaction or
waiver of the conditions precedent described in Article V, on the Date of
Closing, the Seller will have the unrestricted right to sell the Assets as
herein provided. The Seller does not know of any liabilities or obligations,
whether accrued, absolute, contingent or otherwise, existing or arising out of
any transaction entered into, or state of facts existing, on or prior to the
date of this Agreement, which might give rise to a lien or claim against the
Assets.
(f) Location of Tangible Assets. The machinery, equipment, furniture
and fixtures to be set forth on Schedule 1.1(d) to be delivered at Closing will
be located at the Seller's leased premises identified on such Schedule.
(g) Compliance with Law. The Seller has complied with or, following
notice, has timely complied under such notice, with each law, rule or
regulation to which the Assets or the ECDB business is subject, and has not
failed to obtain or to adhere to, or following notice, then timely adhered to,
the requirements of any license, permit or authorization necessary to the
ownership of the Assets or to the conduct of the ECDB. On the Date of Closing,
Seller shall be in compliance with such laws, rules, regulations, licenses,
permits or authorizations necessary to the ownership and operation of Seller's
Assets and the conduct of Seller's ECDB.
(h) No Third Party Options. Except as contemplated by this
Agreement, there are no existing agreements, options, commitments or rights
with, to, or in any person or entity to acquire any of the Assets or any
interest therein, except for those contracts entered into in the ordinary
course of business consistent with past practice.
(i) Third Party Claims. The Seller has no knowledge of any liability
on account of product warranty or personal injury arising out of the sales of
the ECDB.
-7-
<PAGE> 13
(j) Completeness of Disclosure. Neither this Agreement, or any
schedule or exhibit attached hereto or to be delivered at Closing contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein necessary to make
any statement herein or therein contained not misleading.
(k) Pending, Threatened or Potential Litigation. Except as disclosed
on Schedule 2.1(k) attached hereto, there is no litigation, arbitration,
investigation or other proceeding before any court, arbitrator or governmental
or regulatory official, pending or threatened against the Seller which relates
to any of the Assets or the ECDB or the transactions contemplated by this
Agreement, nor is there any basis for any such litigation, arbitration,
investigation or other proceeding. The Seller is not a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of the
court, arbitrator or governmental or regulatory official body or authority
which affects the Assets or the business of the Seller or the transactions
contemplated by this Agreement.
(l) Contracts and Commitments.
(i) The Seller is not a party to any written or oral
agreement, contract or commitment to sell or supply products or to
perform services from the ECDB, excepting the Backlog listed on the
Preliminary Schedule 1.1(g), and to be listed on the Final Schedule
1.1(g).
(ii) To the best of Seller's knowledge, all Backlog listed on
the Preliminary Schedule 1.1(g) represent, and to be listed on the
Final Schedule 1.1(g) will represent, orders made in the ordinary
course of business of the ECDB and Seller has not received any
prepayments or credits with respect thereto. Seller has no knowledge
of a default in the performance, of any material obligation, covenant
or condition contained therein or to be contained therein, and no
event has occurred which, with or without the giving of notice or
lapse of time, or both, would constitute a default thereunder.
(iii) Except as disclosed on Schedule 2.1(l)(iii), Seller is
not a party to any volume price discount or rebate arrangements with
any customer.
(m) Warranty Claims. There are no known facts which would cause
post-Closing warranty claim experience to be greater than historical levels
experienced by Seller pre-Closing.
-8-
<PAGE> 14
(n) Non-Competition, Confidentiality and Indemnification
Agreements. The Seller has no material non- competition, confidentiality or
indemnification agreements or covenants running to the benefit of Seller
relating to the ECDB.
(o) Broker's and Finder's Fees. Seller has retained only Von Gehr
International as its agent in the negotiation relative to the Agreement and
that no other person will be entitled to any brokerage or finder's fee or other
commission in respect of the Agreement or the consummation of the transaction
contemplated hereby.
2.2 Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller as follows:
(a) Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida.
(b) Corporate Power and Authorization. The Purchaser has the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by the
Purchaser have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered and constitutes the legal, valid
and binding obligation of the Purchaser enforceable against it in accordance
with its terms, except as may be limited by bankruptcy, insolvency and other
similar laws affecting creditor's rights generally and by general equity
principles.
(c) Validity of Contemplated Transactions, etc. The execution,
delivery and performance of this Agreement by Purchaser does not and will not
contravene, violate or breach (with or without the giving of notice or lapse of
time, or both): (i) to Purchaser's knowledge any law, rule, regulation,
license or permit to which the Purchaser is subject, (ii) any judgment, order,
writ, injunction, decree or award or any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to the Purchaser,
(iii) the charter documents or Bylaws of the Purchaser, (iv) with the consent
of NationsBank, any term, condition or provision of any indenture, agreement,
contract, commitment, or understanding, oral or written, to which the Purchaser
is a party, or (v) require the consent of any other party except for approval
by NationsBank by way of waiver of various loan covenants, Seller's
shareholders, Seller's landlords to its premises, lessors to its equipment
leases, and governmental agency approval having jurisdiction thereof.
(d) Broker's and Finder's Fees. All negotiations relative to this
Agreement have been carried on by Purchaser directly
-9-
<PAGE> 15
without the intervention of any person who may be entitled to any brokerage and
finder's fees or other commission in respect to this Agreement or the
consummation of the transaction contemplated hereby.
ARTICLE III
INDEMNIFICATION
3.1 Indemnification by the Seller.
(a) Except as otherwise expressly provided in this Article III,
Seller shall defend, indemnify and hold harmless Purchaser, and shall reimburse
Purchaser, for, from and against each and every claim, loss (which shall
include any diminution in value), liability, judgment, damage, cost and expense
(including, without limitation, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors) (collectively, "Loss"
or "Losses") imposed on or incurred by Purchaser resulting from or arising out
of (including without limitation, resulting from or arising out of any claim
made by any third party): (A) a breach or inaccuracy of Seller's
representations, warranties or covenants in this Agreement or in any
certificate, instrument of transfer or other document or agreement executed in
connection with this Agreement; (B) any claim by any employee or former
employee of the Seller relating to discrimination, sexual harassment or other
failure by Seller to comply with the federal and state equal opportunity and
fair employment laws; and (C) any claim regarding an injury sustained by any
person as a result of the purchase or use of any product, either directly or
indirectly, sold by Seller prior to the Date of Closing; PROVIDED, HOWEVER,
THAT SELLER'S MAXIMUM LIABILITY FOR INDEMNIFICATION UNDER SUBPARAGRAPH (A) OF
THIS SECTION 3.1(A) (OTHER THAN CLAIMS BROUGHT FOR A BREACH OR INACCURACY OF A
REPRESENTATION CONTAINED IN SECTION 2.1(A), (B) OR (E)) SHALL BE LIMITED TO THE
AMOUNT SET ASIDE IN THE ESCROW ESTABLISHED PURSUANT TO SECTION 1.6 OF THIS
AGREEMENT, ALL SUCH CLAIMS MUST BE MADE WITHIN SIX MONTHS OF THE DATE OF
CLOSING AND WITH RESPECT TO SUCH CLAIMS THE ESCROW IS THE SOLE REMEDY;
PROVIDED, FURTHER ANY CLAIMS UNDER SUBPARAGRAPHS (B) OR (C) OF THIS SECTION
3.1(A) MUST BE MADE WITHIN TWO (2) YEARS OF THE DATE HEREOF.
3.2 Indemnification by the Purchaser. Except as otherwise expressly
provided in this Article III, Purchaser shall defend, indemnify and hold
harmless Seller, and shall reimburse Seller, for, from and against each and
every Loss imposed on or incurred by Seller resulting from or arising out of
(including without limitation, resulting from or arising out of any claim made
by any third party) a breach or inaccuracy of Purchaser's represen-
-10-
<PAGE> 16
tations, warranties or covenants in this Agreement or in any certificate,
instrument of transfer or other document or agreement executed in connection
with this Agreement.
3.3 Notice and Defense of Third-Party Claims. If any action, claim
or proceeding shall be brought or asserted against the Purchaser in respect of
any claim by a third party for which indemnity may be sought under Section
3.1(a) or if any action, claim or proceeding shall be brought or asserted
against the Seller in respect of any claim by a third party for which indemnity
may be sought under Section 3.2 (each an "Indemnified Person") from an
indemnifying person or any successor thereto (the "Indemnifying Person"), the
Indemnified Person shall give prompt written notice of such action or claim to
the Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all expenses; except that any delay or failure so to notify the
Indemnifying Person shall relieve the Indemnifying Person of its obligations
hereunder only to the extent, if at all, that (A) it is prejudiced by reason of
such delay or failure, or (B) the Indemnified Person fails to give notice of
its claim. The Indemnified Person shall have the right to employ separate
counsel in any of the foregoing actions, claims or proceedings and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnified Person unless both the Indemnified
Person and the Indemnifying Person are named as parties and the Indemnified
Person shall in good faith determine that representation by the same counsel is
inappropriate, in which case the reasonable costs of the separate counsel for
the Indemnified Party shall be paid by the Indemnifying Party. In the event
that the Indemnifying Person, within thirty (30) days after notice of any such
action or claim or such shorter period as is necessary to timely respond, fails
to assume the defense thereof, the Indemnified Person shall have the right to
undertake the good faith defense of such action, claim or proceeding for the
account of and at the expense of the Indemnifying Person, subject to the right
of the Indemnifying Person to assume the defense of such action, claim or
proceeding at any time prior to the settlement, compromise or final
determination thereof. Anything in this Article III to the contrary
notwithstanding, (a) the Indemnifying Person shall not, without the Indemnified
Person's prior written consent, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying
Person, and (b) the Indemnified Party shall not settle or compromise any action
or claim or consent to the entry of any judgment, except, where the
Indemnifying Person has failed to assume the defense of such action or claim,
and then only with the prior consent of the Indemnifying Party, which shall not
be unreasonably withheld. The Indemnifying Person may, without the Indemnified
Person's
-11-
<PAGE> 17
prior consent, settle or compromise any such action, claim or proceeding or
consent to entry of any judgment with respect to any such action or claim that
requires solely the payment of money damages by the Indemnifying Person.
3.4 Remedy. Except as described in Section 3.1(a), the rights of
indemnification provided in this Article III shall be in addition to all other
remedies for all matters arising out of this Agreement.
3.5 Survival of Covenants and Representations and Warranties. All
covenants and representations and warranties made herein or in any certificate,
schedule, statement, document or instrument furnished pursuant to this
Agreement shall be true at the Date of Closing and except for Sections 2.1(a),
(b) and (e), 2.2(a) and (b), 6.3, and 7.3 which shall survive the Closing, all
covenants and representations and warranties made herein or in any certificate,
schedule, statement, document or instrument furnished pursuant to this
Agreement shall survive for a period of six months. Notwithstanding any
investigation or audit conducted before or after the Date of Closing or the
decision of any party to complete the Closing, each party shall be entitled to
rely upon the representations, warranties, covenants and agreements set forth
herein.
ARTICLE IV
FURTHER COVENANTS
4.1 Seller's Covenants. The Seller covenants and agrees that after
the date hereof until the Date of Closing and in connection with the ECDB that
it shall:
(a) carry on that business in a manner consistent with prior practice
in the usual and ordinary course, and will use its best efforts to preserve its
business organization and conserve the good will and relationships of its
customers, suppliers, employees and others having business relations with it;
(b) maintain its corporate existence in good standing in its
jurisdiction of incorporation and in each jurisdiction in which it is qualified
or required to be qualified to do business, and it will not amend its Articles
or Bylaws from the forms delivered to Purchaser in a manner which would prevent
or adversely affect the consummation of the transaction contemplated herein,
and the continued operation by Purchaser of the ECDB from and after the Date of
Closing;
(c) not waive any material right or cancel any material contract,
debt or claim, nor assume or enter into any contract,
-12-
<PAGE> 18
lease, license, obligation, indebtedness, commitment, purchase or sale except
in the usual and ordinary course of business;
(d) duly and timely file all reports and returns required to be filed
with governmental agencies and promptly pay when due all taxes, assessments and
governmental charges including interest and penalties levied or assessed,
unless: (i) diligently contested in good faith by appropriate proceedings; or
(ii) the same constitutes a liability assumed by Purchaser as provided in
Paragraph 1.4 above;
(e) maintain and keep in good order, consistent with past practice,
all buildings, offices, and other structures, and keep all machinery, tools,
equipment, furniture, fixtures and other property in good condition, repair and
working order, excepting therefrom normal wear from regular use;
(f) maintain in full force and effect all policies of insurance now
in effect;
(g) not merge or consolidate with any other corporation, business or
other entity or acquire any assets of any other corporation, business or other
person, except in the ordinary course of business;
(h) not intentionally do any act or omit to do any act or permit any
omission to act which will cause a breach or default in any of its contracts,
commitments or obligations;
(i) from the date hereof, afford the Purchaser, its counsel,
accountants, and other agents and representatives full access during normal
business to all of its offices, properties and records attendant to the ECDB,
including such access as may be necessary to allow the Purchaser to make an
audit or otherwise satisfy itself of the accuracy of the representations and
warranties contained in this Agreement and that the conditions contained in
this Agreement have been complied with, and Seller will furnish documents and
all such other information, and access to the Seller and the Seller's officers
and employees for interviews, concerning its properties and business as the
Purchaser may reasonably request; provided, however, that any investigation or
inquiry made by the Purchaser shall not in any way affect the representations
and warranties contained in this Agreement or their survival of the Closing;
(j) not take any action or omit to take any action within its control
to the extent such action or omission might result in any of the
representations or warranties of the Seller set forth in this Agreement being
inaccurate or incorrect on and as of the Closing Date;
-13-
<PAGE> 19
(k) not directly or indirectly, through any director, officer, agent,
financial advisor or otherwise, solicit, initiate, consider, entertain or
encourage submissions of proposals, offers, or letters of intent from any
person or entity related to:
(i) any acquisition or purchase of all or any portion of the
Assets, out of the ordinary course of business; or
(ii) to the extent approval is required by Seller, the
purchase from Seller, by way of merger or otherwise, of voting shares
or instruments through which voting shares may be acquired, other than
through employee or director stock options;
(l) will not knowingly fail to comply with all laws, rules,
regulations licenses, permits or authorizations applicable to the ECDB and
material to the operation thereof;
(m) not enter into any transaction other than in the ordinary course
of business consistent with past practice;
(n) from and after the date hereof Seller will sell, if at all, the
Designated Inventory only upon receipt of a written acknowledgement by the
customer that the products sold are noncancellable and nonreturnable;
(o) from and after the date hereof Seller agrees to use its best
efforts to sell products manufactured by Fujitsu in its inventory and prior to
returning the same to Fujitsu will advise Purchaser of Seller's plans regarding
returns to Fujitsu of such inventory. If Purchaser so requests, Seller will
not return the same and in such event, Purchaser will indemnify Seller for the
credit Seller would have received had it returned the product in the event the
transactions contemplated hereby are not consummated and Seller delivers said
inventory to Purchaser in return for such indemnification; and
(p) from and after the date hereof, Seller agrees to use its best
efforts to prepare and file with the Securities and Exchange Commission within
10 business days of the date hereof and to distribute to its shareholders, a
proxy statement requesting the shareholders to approve the transactions
contemplated hereby.
-14-
<PAGE> 20
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Purchaser's Obligations. All
obligations of the Purchaser to perform under this Agreement are subject to the
fulfillment or satisfaction, or written waiver by Purchaser on or before the
Date of Closing of each of the following conditions precedent. Purchaser
covenants to use reasonable effort in satisfying those conditions precedent the
fulfillment of which are within the control of Purchaser.
(a) Any security interest shall be discharged with respect to any
property comprising the Assets or the Seller's name.
(b) Seller's representations and warranties shall remain valid and
Seller shall have fully performed its covenants as herein contained.
(c) Receipt of the consent from each governmental agency having
jurisdiction over the transaction contemplated by the Agreement, or expiration
of the applicable statutory or regulatory waiting period, and approval or
consent from each third party which is necessary or required in order for
Purchaser to acquire the Assets and conduct the ECDB as currently conducted by
Seller.
(d) Purchaser shall receive assignments of the real and personal
property leases set forth on Schedule 1.1(f) as signed by the Seller and the
landlords or lessors for which consent is required.
(e) Purchaser shall have received fully executed and delivered by
Seller the Non-Competition/Royalty/No- Solicitation Agreement in substantially
the form attached hereto as Exhibit B.
(f) Purchaser shall have received the written waiver by NationsBank
of applicable covenants contained in agreements as between that bank and
Purchaser.
(g) Approval of the shareholders of Seller, as required by the
California General Corporation Law.
(h) Purchaser shall have received fully executed and delivered by
Ronald Mabry an Employment Agreement with terms and conditions in substantially
the form set forth in a letter agreement between Purchaser and Mr. Mabry.
(i) No litigation shall have been commenced or threatened, the effect
of which could restrain or prevent the carrying out of the transaction
contemplated in the Agreement, or in which an
-15-
<PAGE> 21
unfavorable result could have a material adverse affect on the ECDB.
5.2 Conditions Precedent to the Seller's Obligations. All
obligations of the Seller to perform under this Agreement are subject to the
fulfillment or satisfaction, or written waiver by Seller on or before the Date
of Closing, of each of the following conditions precedent. Seller covenants to
use reasonable effort in satisfying those conditions precedent the fulfillment
of which are within the control of Seller.
(a) Purchaser's representations and warranties shall remain valid and
Purchaser shall have fully performed its covenants as herein contained.
(b) Seller shall have received fully executed and delivered by
Purchaser the Non-Competition/Royalty/No- Solicitation Agreement in
substantially the form attached hereto as Exhibit B.
(c) No litigation shall have been commenced or threatened, the effect
of which could restrain or prevent the carrying out of the transaction
contemplated in the Agreement, or in which an unfavorable result could have a
material adverse affect on the ECDB.
(d) Receipt of the consent from each governmental agency having
jurisdiction over the transaction contemplated by the Agreement, or expiration
of the applicable statutory or regulatory waiting period, and approval or
consent from each third party which is necessary or required in order for
Seller to sell or Purchaser to acquire the Assets and conduct the ECDB.
(e) Approval of the shareholders of Seller, as required by the
California General Corporation Law.
(f) Seller shall have obtained the consent of CoastFed Business
Credit Corporation.
ARTICLE VI
CLOSING, ITEMS TO BE DELIVERED,
THIRD PARTY CONSENTS AND FURTHER ASSURANCES
6.1 Closing. The closing ("Closing") of the sale and purchase of the
Assets shall take place after satisfaction or written waiver of all conditions
precedent described in Article V and within ten business days of the last of
said conditions precedent being so satisfied or waived or as soon thereafter as
may be mutually designated (the "Date of Closing"), and shall take place at the
offices of Pillsbury
-16-
<PAGE> 22
Madison & Sutro, 2700 Sand Hill Road, Menlo Park, California, 94025.
6.2 Items to be Delivered at Closing. At Closing and subject to the
terms and conditions herein contained:
(a) The Seller will deliver, or cause to be delivered, to the
Purchaser in form acceptable to Purchaser the following:
(i) a general instrument of sale, conveyance, assignment,
transfer and delivery with respect to all of the Assets, such
instrument to be in a form mutually acceptable to the parties;
(ii) such specific instruments of sale, conveyance,
assignment, transfer and delivery with respect to any of the Assets as
the Purchaser shall reasonably request;
(iii) an opinion of counsel for the Seller dated the Closing
Date in a form mutually acceptable to the parties;
(iv) a good standing certificate for the Seller, dated not
more than thirty (30) business days prior to the Date of Closing
issued by the States of California, Washington, Oregon and
Massachusetts;
(v) a certificate of the Secretary of the Seller, in in a
form mutually acceptable to the parties;
(vi) Delivery of all or adequate arrangement therefore of the
Assets;
(vii) Such consents which will permit Purchaser to use the
name "Reptron/Western" and further designate that Purchaser is in part
the "successor to the electronic component division of Western Micro
Technology, Inc." or language of similar effect for a period of six
months following the Date of Closing in those jurisdictions in which
Seller currently conducts the ECDB;
(viii) Fully executed Non-Competition/Royalty/No-Solicitation
Agreement attached hereto as Exhibit B;
(ix) Written acknowledgment by Von Gehr International of full
payment and satisfaction of all amounts due it for the services
rendered by it on behalf of Seller in connection with the transaction.
-17-
<PAGE> 23
(b) The Purchaser shall deliver the following:
(i) wire transferred funds to the Seller in the amount
identified in subparagraph 1.5(a)(i);
(ii) wire transferred funds to the Escrow Agent in the amount
identified in paragraph 1.6;
(iii) An opinion of counsel for the Purchaser dated the Date
of Closing Date in a form mutually acceptable to the parties;
(iv) Certificate of the Secretary of the Purchaser in a form
mutually acceptable to the parties.
(c) Purchaser and Seller shall execute and exchange:
(i) a Closing Statement;
(ii) Escrow Agreement in substantially the form of Exhibit A;
(iii) a written statement allocating the Purchase Price among
the Assets shall include the information necessary for the Purchaser
and Seller to complete IRS Form 8594, "Asset Acquisition Statement
Under Section 1060," with respect to the sale and purchase of the
Assets hereunder;
(iv) copies of all federal or state agency approvals required
for the consummation of the transaction contemplated herein.
6.3 Other Documents. The Seller, from time to time after the Date of
Closing, at the Purchaser's request, will execute, acknowledge and deliver to
the Purchaser such other instruments of conveyance and transfer, and will
execute and deliver such other documents and certifications as the Purchaser
may reasonably request in order to vest more effectively in the Purchaser, or
to put the Purchaser more fully in possession of any of the Assets, or to
better enable the Purchaser to complete, perform or discharge any of the
obligations with respect to Purchase and Sales Orders at the sole cost and
expense of Purchaser.
-18-
<PAGE> 24
ARTICLE VII
MISCELLANEOUS
7.1 Termination.
(a) Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated by written notice of termination at any time
on or before the Date of Closing only as follows:
(i) by the Purchaser for the failure of the fulfillment or
satisfaction of any condition precedent described in Paragraph 5.1
unless waived by Purchaser in writing of each condition precedent so
unfulfilled or unsatisfied;
(ii) by the Seller for the failure of the fulfillment or
satisfaction of any condition precedent described in Paragraph 5.2
unless waived by Seller in writing of each condition precedent so
unfulfilled or unsatisfied;
7.2 Expenses. The parties hereto shall pay their own expenses,
including without limitation, their legal fees, incidental to the preparation
of this Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
7.3 Post Closing Administration.
(a) The Seller agrees that after the Date of Closing, it will hold in
trust and will promptly transfer and deliver to the Purchaser, from time to
time as and when received by it, any cash, checks (without converting such
checks into cash) or other property that it may receive on or after the Date of
Closing in respect of the Assets purchased hereunder or to post-Closing
invoices issued by Purchaser. On or about the Date of Closing, the Seller and
Purchaser will prepare and mail or deliver to customers, suppliers, creditors
and such other third parties as is reasonably appropriate, a joint notification
of the sale of the Assets to the Purchaser and such further direction as is
required.
(b) The Purchaser agrees that after the Date of Closing, it will hold
in trust and will promptly transfer and deliver to the Seller, from time to
time as and when received by it, any cash, checks (without converting such
checks into cash) or other property that it may receive on or after the Date of
Closing in respect of any of Seller's assets not purchased hereunder.
-19-
<PAGE> 25
(c) The Seller agrees that after the Date of Closing, it will
promptly pay all invoices for product or services delivered pre-Closing for
which the liability of which is not being assumed by Purchaser or is not set
forth on the Final Schedule 1.4(c).
7.4 Contents of Agreement: Parties in Interest. etc. This Agreement
sets forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except
by written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement.
7.5 Assignment and Binding Effect. All of the terms and provisions
of this Agreement to the extent applicable to the parties hereto shall be
binding upon and inure to the benefit of and are enforceable by the Seller and
Purchaser, and their respective personal representatives, successors and
assigns.
7.6 Waiver. Any term or provision of this Agreement may be waived at
any time by the party or parties entitled to the benefit thereof by a written
instrument duly executed by such party or parties. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any further occasion. All rights and remedies of the parties hereto shall be
cumulative and may be exercised separately or concurrently.
7.7 Notices. Any notice, request, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by
facsimile or by registered, certified mail, postage prepaid, or federal express
or other reputable third-party overnight courier, as follows:
If to the Purchaser to: With a required copy to:
Reptron Electronics, Inc. William L. Elson
14401 McCormick Drive 3000 Town Center
Tampa, Florida 33626 Suite 2690
Attn: Paul J. Plante, Southfield, Michigan 48075
Vice-President of Finance Fax No.: (810) 358-4425
Fax No.: (813) 855-1697
-20-
<PAGE> 26
If to the Seller, to: With a required copy to:
Western Micro Technology, Inc. Katharine A. Martin
12900 Saratoga Avenue Pillsbury Madison & Sutro
Saratoga, California 95070 2700 Sand Hill Road
Attn: James W. Dorst Menlo Park, CA 94025
Chief Financial Officer Fax No.: (415) 233-4545
Fax No.: (408) 255-5066
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
7.8 California Law to Govern. This Agreement shall be governed by
and interpreted and enforced in accordance with the laws of the State of
California.
7.9 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be
construed as conferring any rights on any other person whether or not any such
third person is specifically identified herein.
7.10 Headings, Gender and "Person." All section headings contained in
this Agreement are for convenience of reference only, do not form a part of
this Agreement and shall not affect in any way the meaning or interpretation of
this Agreement. Words used herein, regardless of the number or gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires. Any reference to a "person" herein shall include an
individual, firm, corporation, partnership, trust, governmental authority or
body, association, unincorporated organization or any other entity.
7.11 Exhibits and Schedules. All exhibits referred to herein are
intended to be and hereby are specifically made a part of this Agreement.
7.12 Severability. Any provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
7.13 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be
-21-
<PAGE> 27
deemed to be an original and all of which counterparts taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written above.
WESTERN MICRO TECHNOLOGY, INC.
By /s/ P. Scott Munro
Its President
REPTRON ELECTRONICS, INC.
By /s/ Paul Plante
Its Chief Financial Officer
-22-
<PAGE> 28
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of the ___ day of
__________, 1995 by and between WESTERN MICRO TECHNOLOGY, INC., a California
corporation (the "Seller"), REPTRON ELECTRONICS, INC., a Florida corporation
(the "Purchaser"), and BANK OF AMERICA, N.T. & S.A., San Francisco, California
(the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, concurrently with the execution hereof, Seller has sold and
conveyed its electronic component semiconductor distribution business to
Purchaser pursuant to an Asset Purchase Agreement dated ______________, 1995
(the "Agreement"). The Agreement provides for the establishment of an escrow
pursuant to the provisions hereinafter contained;
NOW, THEREFORE, in consideration of the covenants hereinafter
contained, the parties hereto agree as follows:
1. Establishment of the Escrow. On the date of this Agreement,
the Purchaser will deliver to the Escrow Agent $__________ (the "Escrow Fund").
The Escrow Fund shall be held by the Escrow Agent in escrow subject to the
terms and conditions set forth herein. Upon compliance with the terms hereof,
Purchaser shall be entitled to obtain indemnity from the Escrow Fund up to the
amount of the Escrow Fund for (i) all Losses covered by the indemnity provided
for in Section 3.1(a)(A) of the Agreement, (ii) the aggregate amount of the
unpaid balance due under the accounts receivable identified in Final Schedule
1.6(a) of the Agreement as of the date six (6) months after the date hereof and
(iii) the aggregate book value of the unsold inventory identified in Final
Schedule 1.6(b) of the Agreement as of the date six (6) months after the date
hereof.
2. Costs and Fees of Escrow Agent. Purchaser and Seller shall
each pay one-half of all costs and fees of the Escrow Agent in connection with
this Agreement, as set forth on the Depository Escrow Fee Schedule attached
hereto (the "Fee Schedule").
3. Escrow Period. The Escrow Fund shall remain in existence
until all assets are distributed as provided herein.
4. Protection of Escrow Fund. The Escrow Agent shall hold and
safeguard the Escrow Fund during the Escrow Period, shall treat such fund as a
trust fund in accordance with the terms of this Agreement and not as the
property of Seller, and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
-1-
<PAGE> 29
5. Claims Upon Escrow Fund. Purchaser shall if at all on or before
5:00 P.M., San Francisco time, _________, 1995 [six months from the date
hereof] (the "Claim Period") file with the Escrow Agent (i) a certificate
signed by the Chief Executive Officer or Chief Financial Officer of Purchaser
(an "Officer's Certificate") stating that Purchaser is entitled to indemnity
pursuant to Section 3.1(a)(A) of the Agreement, and specifying in reasonable
detail the individual items of Losses included in the amount so stated, and the
nature of the misrepresentation, breach of warranty or claim to which such item
is related, (ii) fully executed copies of each of the Accounts Receivable
Affidavit and Assignment of Accounts Receivable attached as Exhibits A and B
hereto, or (iii) fully executed copies of each of the Inventory Affidavit and
Inventory Assignment in the form attached hereto as Exhibits C and D (each of
the Officers Certificate, Accounts Receivable Affidavit and Inventory Affidavit
shall be a "Claim"), the Escrow Agent shall proceed as set forth in Section 6.
If the Escrow Agent has not received a Claim within the Claim Period, the
entire Escrow Fund, together with all accrued earnings thereon, shall be
distributed to Seller as promptly as practicable.
6. Objections to Claims.
(a) Upon receipt by the Escrow Agent of a Claim filed during the
Claim Period, the Escrow Agent shall deliver a duplicate copy of same to each
of the Chief Executive Officer or President and Chief Financial Officer of
Seller (each a "Seller's Representative") and for a period of fifteen (15) days
after such delivery, the Escrow Agent shall make no delivery of assets or
documents to Purchaser or Seller. If Seller objects to all or a portion of a
claim, the amount of the Seller's objection shall constitute the "Disputed
Claim." To be timely filed a Seller's Representative shall have objected in a
written statement, such statement shall have been delivered to the Escrow Agent
and the Purchaser prior to the expiration of such fifteen (15) day period, and
shall set forth the amount of the Claim to which Seller objects and the basis
for the objection in reasonable detail.
(b) If no objection is filed by Seller before the expiration of
said fifteen (15) day period the Escrow Agent shall:
(i) deliver the amount of the Claim to Purchaser;
(ii) deliver the balance of the Escrow Fund to Seller;
(iii) deliver the original Exhibits A, B, C or D, if
applicable, to Seller.
-2-
<PAGE> 30
(c) If Seller has timely filed an objection, the Escrow Agent
shall:
(i) deliver to the Purchaser that amount of the Claim against
which no objection has been filed;
(ii) maintain in escrow the Disputed Claim;
(iii) distribute the balance of the Escrow Fund to the Seller;
(iv) deliver the original Exhibits A, B, C or D, if
applicable, to the extent that they do not relate to the disputed
Claim.
7. Resolution of Conflicts; Arbitration.
(a) The Seller's Representative and Purchaser shall attempt
in good faith to agree upon the rights of the respective parties with respect
to a Disputed Claim. If the Seller's Representative and Purchaser should so
agree, a memorandum setting forth such agreement, including distribution of
Escrow Fund and delivery of relevant document, shall be prepared and signed by
both parties and shall be furnished to the Escrow Agent. The Escrow Agent
shall be entitled to rely on any such memorandum and distribute the assets from
the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation within thirty (30) days after Seller's filing of its objection with
the Escrow Agent, either Purchaser or the Seller's Representative may demand
arbitration of the matter and the matter shall be settled by arbitration
conducted by three arbitrators. Purchaser and the Seller's Representative
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators so selected as to
the validity and amount of any Claim shall be final and binding and conclusive
upon the parties to this Agreement, and, notwithstanding anything in Section 6
hereof, the Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in accordance
therewith, if applicable.
(c) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be
held in the City of San Jose, California under the commercial arbitration rules
then in effect of the American Arbitration Association. If Purchaser receives
an award equal to or greater than fifty percent (50%) of the disputed claim,
the Seller shall be deemed the nonprevailing party. If Purchaser receives an
award less than fifty percent (50%) of the disputed claim, the Purchaser shall
be deemed the prevailing party. The non-
-3-
<PAGE> 31
prevailing party to an arbitration shall pay its own expenses, the fees of each
arbitrator, the administrative fee of the American Arbitration Association, and
the reasonable attorneys' fees and costs incurred by the other party to the
arbitration. In addition, if Seller is the non-prevailing party, it will pay
for the reasonable travel and lodging expenses of the Purchaser.
8. Issues Regarding Inventory Assignment. Subject to all of the
other provisions herein, to the extent a Claim includes an amount requested
under Exhibit C, the Escrow Agent shall not distribute to Purchaser the amount
so requested under Exhibit C until the Escrow Agent has received a bill of
lading, UPS delivery document or other evidence of delivery of the Inventory to
Seller being the subject matter of Exhibit C.
9. Distributions of Earnings. With respect to any distribution to
either Purchaser or Seller, the Escrow Agent shall distribute the pro rata
earnings related thereto.
10. Escrow Agent's Duties.
(a) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein or in the
Escrow Agreement and may rely and shall be protected in relying or refraining
from acting on any instrument reasonably believed to be genuine and to have
been signed or presented by the proper party or parties. The Escrow Agent
shall not be liable for any act done or omitted hereunder as Escrow Agent while
acting in good faith and in the exercise of reasonable judgment, and any act
done or omitted pursuant to the advice of counsel shall be conclusive evidence
of such good faith.
(b) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto, the
Spokesperson or by any other person, excepting only orders or process of courts
of law, and is hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court. In case the Escrow Agent obeys or complies
with any such order, judgment or decree of any court, the Escrow Agent shall
not be liable to any of the parties hereto or to any other person by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
-4-
<PAGE> 32
(d) The Escrow Agent shall not be liable for the outlawing of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
11. Escrow Provisions. The provisions of the escrow shall be as set
forth herein, the Fee Schedule and the "General Provisions for Corporate Escrow
Agreement" attached hereto (the "General Provisions"). In the event of any
conflict between this Agreement and the General Provisions or the Fee Schedule,
the General Provisions and the Fee Schedule shall govern.
12. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and shall be deemed to be
sufficiently given if delivered personally or by confirmed telefacsimile
transmission, on the date of such delivery, or if by certified or registered
mail, return receipt requested, postage prepaid, two days after such mailing,
addressed as follows:
(a) Western Micro Technology, Inc.
Attn.: Chief Financial Officer
12900 Saratoga Avenue
Saratoga, CA 95070
(408) 725-4745
(408) 255-5066 Fax
With copies to:
Katharine A. Martin
Pillsbury Madison & Sutro
2700 Sand Hill Road
Menlo Park, CA 94025
(415) 233-4500
(415) 233-4545 Fax
(b) Reptron Electronics, Inc.
Attention: Paul J. Plante
14401 McCormick Drive
Tampa, FL 33626
(813) 854-2351
(813) 855-1697 Fax
With a copy to:
William L. Elson, Esq.
3000 Town Center, Suite 2690
Southfield, Michigan 48075
(810) 353-6850
(810) 358-4425 Fax
-5-
<PAGE> 33
(c) BANK OF AMERICA, N.T. & S.A.
Global Escrow Depository Services
Attention: Mary Lou Fuette
One Embarcadero Center, Fifth Floor
San Francisco, CA 94111
(415) 622-8210
(415) 622-3778 Fax
Any of the parties hereto, by notice given as provided hereunder, may designate
any further or different address to which subsequent notices or communications
shall be sent.
13. Binding Agreement. This Escrow Agreement shall be binding
upon, and inure to the benefit of, the heirs, executors, successors and
assignees of the parties hereto, and no other person shall have any right,
benefit or obligations hereunder.
14. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the internal laws of the State of California.
15. Forum. Seller and Purchaser hereby absolutely and irrevocably
consent and submit to the jurisdiction of the courts of the State of California
and of any federal court located therein in connection with any actions or
proceedings brought against Seller and Purchaser by the Escrow Agent arising
out of or relating to this Escrow Agreement. In any such action or proceeding,
Seller and Purchaser hereby absolutely and irrevocably waive personal service
of any summons, complaint, declaration or other process and hereby absolutely
and irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Seller and Purchaser, as
-6-
<PAGE> 34
the case may be, at their respective addresses in accordance with Section 12
hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed under seal on its behalf as of the day and year first
above written.
WESTERN MICRO TECHNOLOGY, INC.
By ___________________________________
Its __________________________________
REPTRON ELECTRONICS, INC.
By ___________________________________
Its __________________________________
BANK OF AMERICA, N.T. & S.A.
Global Escrow Depository Services
By ___________________________________
Its __________________________________
-7-
<PAGE> 35
EXHIBIT A
State of Florida, )
) ss.
County of Hillsborough. )
ACCOUNTS RECEIVABLE AFFIDAVIT
AND ESCROW DISBURSEMENT REQUEST
The undersigned, being first duly sworn, states:
1. That the attached list initialed by the undersigned, represents
as of the date hereof all or a portion of the unpaid balance due under accounts
receivable identified in Final Schedule 1.6(a) of the Agreement.
2. That pursuant to Paragraph 5 of said Escrow Agreement, Reptron
Electronics, Inc. hereby requests disbursement of $________ to be remitted to
it as in said Escrow Agreement provided.
__________________________________
Paul J. Plante
Vice President of Finance
Reptron Electronics, Inc.
-8-
<PAGE> 36
State of Florida, )
) ss.
County of Hillsborough. )
On this, the _____ day of ____________, 1995, before me, personally
appeared Paul J. Plante, who acknowledged himself to be the Vice President of
Finance for Reptron Electronics, Inc., a Florida corporation, and that he, as
such officer, being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of said corporation by
himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________
______________________________
NOTARY PUBLIC
My Commission expires:
-9-
<PAGE> 37
EXHIBIT B
ASSIGNMENT OF ACCOUNTS RECEIVABLE
In consideration of the receipt of $___________________ from (Escrow
Agent), the undersigned hereby sells, assigns and transfers unto Western Micro
Technology, Inc. ("Western") all of its right, title and interest in and to the
accounts receivable limited to and represented by the invoices delineated on
attached Exhibit A. The undersigned represents and warrants that said accounts
receivable are free and clear of all security interests or other liens which
have or could have attached to the same as a consequence of any act of the
undersigned. The undersigned further represents and warrants that in the event
any payment is received by the undersigned for credit against any invoice
listed in Exhibit A, the undersigned will hold the same in trust and promptly
transfer and deliver said sums to Western.
Dated: __________, 199_
REPTRON ELECTRONICS, INC.
By ________________________________
Paul J. Plante,
Vice President of Finance
-10-
<PAGE> 38
EXHIBIT C
State of Florida, )
) ss.
County of Hillsborough. )
INVENTORY AFFIDAVIT
AND ESCROW DISBURSEMENT REQUEST
The undersigned, being first duly sworn, states:
1. That the attached list initialed by the undersigned, represents
as of the date hereof all or a portion of the unsold inventory identified in
Final Schedule 1.6(b).
2. That pursuant to Paragraph 5 of said Escrow Agreement, Reptron
Electronics, Inc. hereby requests disbursement of $________ to be remitted to
it as in said Escrow Agreement provided.
Dated: __________, 199_
__________________________________
Paul J. Plante
Vice President of Finance
Reptron Electronics, Inc.
-11-
<PAGE> 39
State of Florida, )
) ss.
County of Hillsborough. )
On this, the _____ day of ____________, 1995, before me, personally
appeared Paul J. Plante, who acknowledged himself to be the Vice President of
Finance for Reptron Electronics, Inc., a Florida corporation, and that he, as
such officer, being authorized to do so, executed the foregoing instrument for
the purposes therein contained by signing the name of said corporation by
himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________
______________________________
NOTARY PUBLIC
My Commission expires:
-12-
<PAGE> 40
EXHIBIT D
ASSIGNMENT OF INVENTORY
In consideration of the receipt of $________ from (Escrow Agent), the
undersigned hereby sells, assigns and transfers unto Western Micro Technology,
Inc., all of its right, title and interest in and to the Inventory listed on
attached Exhibit A. The undersigned represents and warrants that said
Inventory is true and clear of all security interests or other liens which have
or could have attached to the same as a consequence of any act of the
undersigned.
Dated: __________, 199_
REPTRON ELECTRONICS, INC.
By ___________________________
Paul J. Plante,
Vice President of Finance
-13-
<PAGE> 41
NON COMPETITION/ROYALTY/NO-SOLICITATION AGREEMENT
THIS NON-COMPETITION/ROYALTY/NO-SOLICITATION AGREEMENT is made and
entered into as of the ____ day of _________, 1995 by and between WESTERN MICRO
TECHNOLOGY, INC., a California Corporation (the "Seller"), and REPTRON
ELECTRONICS, INC., a Florida Corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, concurrently with the execution hereof, Seller has sold and
conveyed its electronic component semiconductor distribution business to
Purchaser pursuant to an Asset Purchase Agreement dated _________, 1995 (the
"Agreement"). The Agreement provides for the parties to make certain
agreements not to compete or hire employees and to pay a royalty pursuant to
the provisions hereafter contained,
NOW, THEREFORE, in consideration of the covenants hereinafter
contained, the parties hereto agree as follows:
1. Covenant Not to Compete. Seller agrees that during the period
commencing with the date hereof and ending two (2) years from the date hereof,
Seller will not sell anywhere in the United States, either directly or
indirectly, any semiconductor component products, electromechanical components
(other than power supplies) or passive electronic components; provided,
however, that Seller may sell, directly or indirectly, semiconductor component
products that are bundled with or incorporated on or in a board, card, module,
PC or other computer system or as a replacement part for any of the same. If
Seller breaches the foregoing covenant, Seller agrees to pay to Purchaser any
and all gross profit, as defined below, relating to the sale of product in
violation of this paragraph, in the same manner and to the same extent as set
forth in paragraph 2 below. Seller agrees that the assessment of the amount
described in the preceding sentence shall be without prejudice to the
concurrent or alternative resort to any other remedy including injunctive
relief.
2. Royalty. Purchaser agrees that during the period commencing with
the date hereof and ending two (2) years after the date hereof, Purchaser will
pay to Seller any and all gross profit, as defined below, relating to the sale,
directly or indirectly, by Purchaser of the following products to any of the
following customers (the "Royalty"):
-1-
<PAGE> 42
Customer Product
-------- -------
1. Automotive Diagnostics PCs, Monitors
2. Tektronix Winchester Disk Drives, Floppy
Drives and Optical Drives, I/O
Boards
3. Beckman Instruments Monitors, Terminals
4. C.A.S. PCs, Monitors
5. Kurzweil PCs, Monitors
For the purpose of this Agreement, "gross profit" shall equal the sale price of
each such product, exclusive of discounts, or other price concessions, less the
actual cost to Purchaser of such product.
Purchaser shall notify Seller in writing within two (2) business days of
any such sale. In addition, Purchaser shall, within ten (10) business days of
the end of the calendar month in which Purchaser recognizes as revenue the sale
of any such product, remit to Seller the Royalty and simultaneously deliver to
Seller a statement, signed by the Purchaser's Chief Financial Officer, setting
forth all information necessary to calculate the Royalty. Purchaser agrees to
keep complete and accurate records of all such sales, and Seller or a duly
authorized agent shall have the right, at Seller's expense, to examine such
records during regular business hours. In the event that Purchaser calculates
the Royalty in error by greater than plus or minus 10%, the costs of the audit
shall be borne by Purchaser.
3. Covenant Not to Solicit. Purchaser and Seller agree that, during
the period commencing on the date hereof and ending two (2) years from the date
hereof, (i) Purchaser and Seller will not, directly or indirectly, solicit for
hire employees of the other party, except as may be contemplated by the
Agreement, without the other party's prior written consent, and (ii) if either
party hires an employee or executive officer of the other party or any such
person who has terminated employment with either of such party within the prior
ninety (90) days, the party that hires such employee or executive officer agrees
to pay to the party who is the then former employer of such employee or
executive officer $25,000 (in the case of an employee being hired) or $100,000
(in the case of an executive officer being hired) within ten (10) business days
of the hire date of such employee or executive officer. For the purposes of
this Agreement, an executive officer shall be those persons identified as
executive officers in most current Annual Report on Form 10-K or Proxy Statement
filed with the Securities and Exchange Commission of either party.
-2-
<PAGE> 43
4. Miscellaneous.
(a) Termination. Unless earlier terminated as provided herein, the
obligations of Seller herein shall terminate immediately upon the first sale by
Purchaser that triggers the Royalty in Section 2 hereof and the obligations of
Purchaser shall terminate immediately upon a breach of Seller's covenant not to
compete.
(b) Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of California.
(c) Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally or sent by
facsimile or by registered, certified mail, postage prepaid, or federal express
or other reputable third-party overnight courier, as follows:
If to the Purchaser to: With a required copy to:
Reptron Electronics, Inc. William L. Elson
14401 McCormick Drive 3000 Town Center
Tampa, Florida 33626 Suite 2690
Attn: Paul J. Plante, Southfield, Michigan 48075
Vice-President of Finance Fax No.: (810) 358-4425
Fax No.: (813) 855-1697
If to the Seller, to: With a required copy to:
Western Micro Technology, Inc. Katharine A. Martin
12900 Saratoga Avenue Pillsbury Madison & Sutro
Saratoga, California 95070 2700 Sand Hill Road
Attn: James W. Dorst Menlo Park, CA 94025
Chief Financial Officer Fax No.: (415) 233-4545
Fax No.: (408) 255-5066
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as
of the date so delivered, telegraphed or mailed.
(d) Binding Agreement. This Agreement shall be binding upon, and inure
to the benefit of, the heirs, executors, successors and assignees of the
parties hereto, and no other person shall have any right, benefit or
obligations hereunder.
-3-
<PAGE> 44
(e) Forum. Seller and Purchaser hereby absolutely and irrevocably
consent and submit to the jurisdiction of the courts of the State of California
and of any federal court located therein in connection with any actions or
proceedings brought against Seller and Purchaser Agent arising out of or
relating to this Agreement. In any such action or proceeding, Seller and
Purchaser hereby absolutely and irrevocably waive personal service of any
summons, complaint, declaration or other process and hereby absolutely and
irrevocably agree that the service thereof may be made by certified or
registered first-class mail directed to Seller and Purchaser, as the case may
be, at their respective addresses in accordance with Section 3(b) hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed under seal on its behalf as of the day and year first
above written.
WESTERN MICRO TECHNOLOGY, INC.
By __________________________________
REPTRON ELECTRONICS, INC.
By __________________________________
-4-
<PAGE> 1
EXHIBIT 11.1
WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARIES
COMPUTATION OF (LOSS) INCOME PER SHARE
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------
1995 1994
---- ----
<S> <C> <C>
Weighted average shares outstanding for the period 3,703 3,290
Dilutive effect of stock options at average market price 56 177
Average shares for computing primary net (loss) income
per share 3,759 3,467
Adjustment for dilutive effect of stock options at ending
market price -- --
Average shares for computing fully diluted net (loss)
income per share 3,756 3,467
(Loss) from continuing operations ($751) ($120)
Income from discontinued operations -- $ 167
------- -------
Net (loss) income ($ 751) $ 47
======= =======
Net (loss) income per common share:
Continuing operations ($0.20) ($0.03)
Discontinued operations -- $ 0.04
Net (loss) income per primary share ($0.20) $ 0.01
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Western Micro
Technology's CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) AND CONSOLIDATED
BALANCE SHEETS and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 237
<SECURITIES> 0
<RECEIVABLES> 17,519
<ALLOWANCES> 443
<INVENTORY> 19,788
<CURRENT-ASSETS> 37,628
<PP&E> 4,295
<DEPRECIATION> 3,272
<TOTAL-ASSETS> 40,312
<CURRENT-LIABILITIES> 26,148
<BONDS> 0
<COMMON> 13,911
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,312
<SALES> 33,497
<TOTAL-REVENUES> 33,497
<CGS> 29,454
<TOTAL-COSTS> 29,454
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275
<INCOME-PRETAX> (751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (751)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
