SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 0-11691
ELEXSYS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3534864
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4405 Fortran Court, San Jose, California 95134
(Address of principal executive offices) (Zip Code)
(408) 935-6300
(Registrant's telephone number, including area code)
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 the past 90 days.
Yes X No__
At May 1, 1997 there were 9,459,795 outstanding shares of common stock.
This report consists of 11 pages
<PAGE>
ELEXSYS INTERNATIONAL, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information: ------
<S> <C> <C>
Item 1.
Consolidated Balance Sheets as of March 29, 1997 and September 30, 1996....... 3
Consolidated Statements of Operations for the Three and Six Months
Ended March 29, 1997 and March 30, 1996....................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended March 29, 1997 and March 30, 1996....................................... 5
Notes to the Consolidated Financial Statements................................ 6
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 8
Part II. Other Information:
Item 6a.
Exhibits...................................................................... 10
</TABLE>
2
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
March 29, September 30,
1997 1996
---------------- ----------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 644 $ 1,075
Accounts receivable, net 23,814 20,463
Inventories 17,383 10,690
Prepaid expenses and other current assets 1,865 1,447
---------------- ----------------
Total current assets 43,706 33,675
---------------- ----------------
Property, plant and equipment, net 31,028 24,818
Other assets 3,274 3,612
---------------- ----------------
Total assets $ 78,008 $ 62,105
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,089 $ 12,629
Accrued payroll and related costs 2,628 2,611
Other current liabilities 1,222 1,321
Short-term borrowings 7,172 5,310
Current portion of long-term debt 1,424 1,234
---------------- ----------------
Total current liabilities 29,535 23,105
---------------- ----------------
Long-term debt 8,005 2,448
Convertible subordinated debentures 12,000 12,000
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued and outstanding at
March 29, 1997 and September 30, 1996 Common
stock, $1.00 par value, 20,000,000 shares
authorized, 9,453,795 shares issued and
outstanding at March 29, 1997 and 9,300,810
shares issued and outstanding at September 30, 1996 9,454 9,301
Additional paid-in capital 7,521 7,294
Cumulative foreign currency translation adjustment 107 (22)
Retained earnings 11,386 7,979
---------------- ----------------
Total stockholders' equity 28,468 24,552
---------------- ----------------
Total liabilities and stockholders' equity $ 78,008 $ 62,105
================ ================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
-------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 37,475 $ 30,388 $ 73,976 $ 59,299
Cost of sales 32,144 24,682 61,857 48,215
-------------- ---------------- --------------- ----------------
Gross profit 5,331 5,706 12,119 11,084
Operating expenses:
Selling, general and administrative 3,900 3,133 7,371 6,074
Research and development 61 97 110 140
-------------- ---------------- --------------- ----------------
Total operating expenses 3,961 3,230 7,481 6,214
-------------- ---------------- --------------- ----------------
Income from operations 1,370 2,476 4,638 4,870
Interest expense, net 529 263 994 628
-------------- ---------------- --------------- ----------------
Income before income taxes 841 2,213 3,644 4,242
Provision for income taxes 73 (16) 237 3
-------------- ---------------- --------------- ----------------
Net Income $ 768 $ 2,229 $ 3,407 $ 4,239
============== ================ =============== ================
Earnings per share:
Primary $ 0.08 $ 0.23 $ 0.35 $ 0.44
Fully Diluted $ 0.08 $ 0.23 $ 0.35 $ 0.44
-------------- ---------------- --------------- ----------------
Weighted average common shares and
common equivalent shares outstanding:
Primary 9,870 9,552 9,824 9,513
Fully Diluted 9,870 9,552 9,824 9,513
============== ================ =============== ================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
ELEXSYS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
March 29, March 30,
1997 1996
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,407 $ 4,239
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,199 2,374
Increase in accounts receivable (3,304) (1,144)
Increase in inventories (6,667) (843)
Increase in prepaid expenses and other current assets (412) (405)
Increase in accounts payable 4,421 2,020
Increase (decrease) in accrued payroll and related taxes 11 (112)
Decrease in restructuring reserve - (79)
Decrease in other current liabilities (104) (702)
Other 41 (54)
----------------- -----------------
Net cash provided by operating activities 592 5,294
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (8,250) (4,358)
Proceeds from sale of property, plant and equipment 22 -
Decrease other long-term assets 243 -
----------------- -----------------
Net cash used by investing activities (7,985) (4,358)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 380 471
Net change in short-term borrowings 1,862 (2,129)
Borrowings under long term debt 5,023 288
Principal payments on debt (329) (184)
----------------- -----------------
Net cash provided by (used by) financing activities 6,936 (1,554)
----------------- -----------------
Effects of exchange rate changes on cash and cash equivalents 26 -
----------------- -----------------
Net decrease in cash and cash equivalents (431) (618)
Cash and cash equivalents, beginning of period 1,075 903
----------------- -----------------
Cash and cash equivalents, end of period $ 644 $ 285
================= =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest payments $ 617 $ 421
================= =================
Income tax payments $ 257 $ 206
================= =================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of Elexsys
International, Inc. and its subsidiaries (the "Company") contain all
adjustments, consisting of only normal recurring adjustments, which, in
the opinion of management, are necessary to present fairly the
financial position of the Company as of March 29, 1997 and September
30, 1996 and the results of its operations and cash flows for the three
and six months ended March 29, 1997 and March 30, 1996. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to rules and
regulations of the Securities and Exchange Commission, although the
Company believes that the disclosures in the consolidated financial
statements are adequate to make the information presented not
misleading.
The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements of the Company
included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1996.
Note 2 - Inventories
Inventories consist of the following (in thousands):
March 29, September 30,
1997 1996
---------------- ----------------
(Unaudited)
Raw materials $ 8,719 $ 5,434
Work in progress 8,664 5,256
---------------- ----------------
Totals $ 17,383 $ 10,690
================ ================
Note 3 - Earnings Per Share
Primary and fully diluted earnings per common share for the three and
six months ended March 29, 1997 and March 30, 1996 have been computed
based on weighted average common shares outstanding and common stock
equivalents (stock options) as of the above dates and do not include
the assumed conversion of the 5 1/2 percent Convertible Subordinated
Debentures due 2012 into common stock as such effect would have been
antidilutive.
Note 4 - Recently Issued Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company is required to adopt SFAS 128 in the
fourth quarter of fiscal 1997 and will restate at that time earnings
per share (EPS) data for the prior periods to conform with SFAS 128.
Earlier application is not permitted.
6
<PAGE>
ELEXSYS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 4 - Recently Issued Accounting Standard (continued)
SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes dilution
and is computed by dividing net income, available to common
stockholders, by the weighted average of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
If SFAS had been in effect during the current and prior year periods,
basic EPS would have been $.08 and $.24 for the quarters ended March
29, 1997 and March 30, 1996 respectively, and $.36 and $.46 for the six
month period ending March 29, 1997 and March 30, 1996, respectively.
Diluted EPS under SFAS 128 would not have been significantly different
than fully diluted EPS currently reported for the periods.
Note 5 - Income Taxes
In the first six months of fiscal 1997, the Company provided $237,000
for income taxes. This tax provision primarily relates to federal
alternative minimum tax and state taxes. As of September 30, 1996, the
Company had net operating loss carryforwards for federal, state, and
foreign income tax purposes of approximately $24,416,000, $19,402,000,
and $672,000, respectively. These carryforwards, for which future
benefits are not assured, expire in various amounts through 2008.
Note 6 - Subsequent Event
In April 1997, the Company acquired, pursuant to a Stock Purchase
Agreement, Neutronic Stampings, Inc. including the remaining 50%
interest not already owned by the Company in two partnerships,
Neutronic Plating Services and H&V Services, plus other production
equipment leased by the above entities for approximately $4.6 million.
The purchase price includes $2.0 million in cash and promissory notes
payable over one year for $2.3 million. The acquisition will be
accounted for using the purchase method with the purchase price
allocated to assets and goodwill upon completion of an appraisal of the
assets acquired. The entities above are engaged in stamping spools of
metal to create parts and/or plating spools of metal parts used in
various industries such as backplane assemblies.
7
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained elsewhere
within this Report on Form 10-Q. Except for the historical information
contained herein, the following discussion contains forward-looking
statements that involve risks and uncertainties. The actual future
results of the Company could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but
are not limited to, those discussed in this section and those discussed
in the Company's Form 10-K for the year ended September 30, 1996.
Results of Operations
Net Sales
Net sales for the three months ended March 29, 1997 were $37.5 million,
an increase of 23%, compared to the three months ended March 30, 1996.
This increase resulted primarily from an increase in demand in the
Company's assembly business.
Net sales for the six months ended March 29, 1997 were $74.0 million, an
increase of 25%, compared to the six months ended March 30, 1996. This
increase resulted from an increase in demand for the Company's
manufacturing services and the acquisition of the Company's Anetec
subsidiary on May 3, 1996.
Gross Margin
Gross margin, as a percentage of net sales for the three months ended
March 29, 1997 was 14.2% versus 18.8% for the comparable time period in
1996. This reduction in gross margin was primarily due to higher costs
and lower efficiencies resulting from materials related issues that lead
to higher production costs to replace and rebuild products.
Gross margin, as a percentage of net sales for the first six months ended
March 29, 1997 was 16.4% versus 18.7% for the comparable time period in
1996. This reduction in gross margin was due primarily to the decrease in
margins in the three months ended March 29, 1997, for the reasons noted
above.
Selling, General and Administrative
SG&A was 10.3% and 10.4% of net sales for the three month period ended
March 29, 1997 and March 30, 1996 respectively. SG&A was 10.0% and 10.2%
of net sales for the six month period ended March 29, 1997 and March 30,
1996, respectively.
Interest Expense, Net
Net Interest expense for the three and six month period ended March 29,
1997 increased 101% and 58%, respectively, over the same period of the
prior year. The increase is mainly attributable to increased borrowings
to finance working capital needs and long term debt borrowings of $2.3
million to purchase the Company's New Hampshire facility and adjacent
space in November 1996.
8
<PAGE>
ELEXSYS INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Factors That May Affect Future Results
The Company's future operating results may be adversely affected by a
number of factors, including general economic conditions, foreign
competition, industry consolidation, the Company's ability to develop,
manufacture, and sell its products profitably, and the cyclical nature of
the business of some of the Company's customers.
The Company participates in a highly competitive industry. The printed
circuit board industry has been characterized by stringent customer
demands for timely deliveries, service and quality of products and by
aggressive pricing practices. The Company's operating results could be
materially adversely affected should the Company be unable to meet any
one of these customer demands.
Liquidity and Capital Resources
The Company had cash flows from operating activities of $0.6 million
during the first six months of fiscal 1997 compared to $5.3 million
during the same period of the previous year. This decrease was primarily
attributable to additional working capital required to support the growth
in revenues. The increase in inventories of $6.7 million in the first
half of fiscal 1997 was primarily due to the build-up of the assembly
inventory to support additional customers on a turn key basis. Accounts
receivable grew $3.3 million due to higher sales levels. Working capital
during the first half of fiscal 1997 was positively impacted by an
aggregate increase of $4.3 million for accounts payable, accrued
expenses, and other current liabilities.
Cash provided by operating activities of $.6 million during the first six
months of fiscal 1997 was offset by cash used by investing activities of
$8.0 million during the same period. Cash from investing activities was
used for the purchase of $6.0 million of capital equipment and for a $2.3
million purchase of the Company's Nashua, New Hampshire facility and
adjacent space. Capital equipment was purchased for the enhancement of
manufacturing capabilities and for normal replacement of equipment.
Investing activities were funded by cash provided by financing activities
of $6.9 million with the bank borrowings, capital leases and tax exempt
bonds were the primary sources of borrowings. As of March 29, 1997, the
Company's ratio of current assets to current liabilities was 1.5 to 1.0.
The additional cash requirements to meet the obligations of the April 14,
1997 Neutronic Stampings, Inc. acquisition, see Note 6, were provided for
by a draw down under the Company's Term Loan Credit Agreement which had a
remaining capacity of $4.7 million at March 29, 1997 and is designated
for Company acquisitions.
As of March 29, 1997, the Company had borrowed $7.2 million with an
additional $4.4 million pledged or to be pledged under letters of credit
with an asset based lender under the Company's Accounts Receivable Credit
Agreement. The remaining borrowing capacity under this line is
approximately $1.4 million. As of March 29, 1997 the Company was in
compliance with all of the covenants as defined within the agreement.
The Company has begun discussions with its major lender and additional
banks to add additional participants in its bank lines and to increase
its borrowing capacity both for working capital and to finance its
capital expenditures. The Company believes that the completion of the
changes contemplated above will be sufficient to meet its projected
working capital requirements and other cash requirements through fiscal
1997.
9
<PAGE>
Part II. OTHER INFORMATION
Item 6 a. Exhibits
10.49 Neutronic Stampings, Inc. Stock Purchase Agreement dated April
14, 1997
11.1 Computions of Earnings Per Share and Common Equivalent Share
for the Three and Six Month Periods Ending March 29, 1997 and
March 30, 1996
27 Financial Data Schedule
b. Current reports on Form 8-K
None
10
<PAGE>
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.
ELEXSYS INTERNATIONAL, INC.
--------------------------------------
(Registrant)
Date: May 9, 1997 By: W.F. Hegarty
----------- ------------
W.F. Hegarty
President and Chief Operating Officer
By: Robert DeLaurentis
------------------
Robert DeLaurentis
Chief Financial Officer
11
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of April 7,
1997 by and between Hector Regner, Vanna Regner and the Regner Family Trust
dated September 10, 1984 (the "Trust") as the selling shareholders
(collectively, the "Shareholders") of Neutronic Stampings, Inc., a California
corporation (the "Corporation"), and Elexsys International, Inc., a Delaware
corporation (the "Buyer"). The Corporation is a party to this Agreement solely
for purposes of being bound by the provisions of Section 1.3.
Recitals
A. The Trust owns fourteen thousand (14,000) shares of the common
capital stock (the "Stock") of the Corporation. The Trust is a revocable trust
and the Shareholders are the beneficiaries of the Trust.
B. The Corporation is engaged in the business of metal stamping and
related activities and is located at 10535 and 10550 Lawson River Avenue,
Fountain Valley, CA 92708, although no business activities have commenced at the
10550 Lawson River Avenue site as of the date of this Agreement.
C. The Shareholders desire to sell fourteen thousand (14,000) shares of
the Stock to the Buyer, and the Buyer desires to purchase a total of fourteen
thousand (14,000) shares of the Stock from the Shareholders (the "Purchased
Stock") pursuant to the terms, covenants, and conditions contained herein.
Now, Therefore, in consideration of the mutual covenants and agreements
set forth herein, the parties agree as follows:
Article 1. Sale and Transfer of Purchased Stock.
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, the closing (the "Closing") of the sale and purchase of the Purchased
Stock will take place as set forth in Article 7 of this Agreement. On the
closing date specified in Article 7 herein (the "Closing Date"), the
Shareholders shall sell, transfer, convey, and deliver the Purchased Stock to
the Buyer, and the Buyer shall purchase the Purchased Stock from the
Shareholders for consideration equal to the sum of (i) Four Million Three
Hundred Thousand Dollars ($4,300,000) and (ii) the Incremental Note Amount (as
defined in Section 1.2(b)) (collectively, the "Purchase Price"). The Purchase
Price shall be payable in cash and promissory notes as specified in this
Agreement.
1.2 Payment. The Purchase Price shall be payable as follows:
(a) Two (2) cashier's checks, each in the amount of Nine
Hundred Sixty
1.
<PAGE>
Thousand Dollars ($960,000).
(b) Two (2) promissory notes in the form attached hereto as
Exhibit 1.2(b) (the "Notes"), each in the principal amount equal to the sum of
(i) Six Hundred Fifty Thousand Dollars ($650,000), and (ii) the result of the
multiplication of Two Thousand Five Hundred Dollars ($2,500) by the number of
Payment Days. As used in this Agreement, "Payment Day" shall mean each day
commencing with, and including, April 8, 1997 and every day thereafter up to,
but not including, the date the Buyer specifies that it is prepared to close.
The aggregate amount resulting from the application of clause (ii) above in
respect of both Notes shall be referred to in this Agreement as the "Incremental
Note Amount." The Notes shall also provide the following terms:
(i) The Notes shall be of a one-year term and bear
interest at the rate of eight percent (8%) per annum.
(ii) Payments of principal and interest shall be made in
arrears one (1) year after the Closing Date.
(iii) The Buyer shall have the right to make payment on
the principal balance, in whole or in part, at any time and from time to time
without penalty.
(iv) Each Note shall be secured by seven thousand (7,000)
shares of Purchased Stock. The Buyer shall enter into a security agreement with
each of Hector Regner and Vanna Regner in the form attached hereto as Exhibit
1.2(b)(iv) and hereby incorporated by reference.
(c) Two (2) promissory notes in the form attached hereto as
Exhibit 1.2(c) (the "Short-Term Notes"), each in the principal sum of Five
Hundred Thousand Dollars ($500,000) dated as of the Closing, and providing for
terms as follows:
(i) The Short-Term Notes shall bear interest at the rate
of eight percent (8%) per annum.
(ii) The entire principal balance and all accrued
interest shall be due and payable thirty (30) days after the Closing Date.
(iii) The Buyer shall have the right to make payment on
the principal balance, in whole or in part, at any time and from time to time
without penalty.
(iv) Each Short-Term Note shall be secured by the
collateral and the security agreement referenced in Subsection 1.2(b)(iv) above.
(d) Two (2) checks drawn on the account of the Buyer, each in
the amount of Forty Thousand Dollars ($40,000).
2.
<PAGE>
1.3 Sale of Automobiles. In order to facilitate the transactions
contemplated herein, the Corporation agrees to transfer title to Vanna Regner to
a 1997 Mercedes automobile described as a Model E320, VIN: WDBJF55F5VJ025148,
with a California vehicle license of 3SES615. The Corporation further agrees to
transfer title to Hector Regner to a 1997 Mercedes automobile described as a
Model E420, VIN: WDBJF72F9VA104869 with a California vehicle license of 3RSP605
(the two cars together are hereinafter referred to as the "Automobiles"). Each
such Shareholder shall pay for his or her Automobile by endorsing the check made
payable to the Shareholder under Section 1.2(d) above to the Corporation at the
Closing. Neither the Buyer nor the Corporation makes any representations or
warranties to the Shareholders of any kind, express or implied, in fact or by
law, with respect to the Automobiles, including without limitation any
representation or warranty as to the merchantability, fitness for any particular
purpose, condition, value, or use of the Automobiles. The Shareholders
acknowledge that they are acquiring the Automobiles "AS IS," without any
representation or warranty in respect thereof whatsoever.
1.4 Share Certificates. At the Closing, the Shareholders shall deliver
to the Buyer the share certificates representing ownership of the Purchased
Stock, duly endorsed for transfer, free and clear of all Encumbrances (as
defined below in Section 2.5), dated as of the Closing Date.
1.5 Income Tax Matters.
(a) Effective upon and after the Closing:
(i) At the request of the Buyer, the Shareholders agree
to make an election under Section 338(h)(10) of the Internal Revenue Code of
1986 (a "338(h)(10) Election") to treat the sale of the Purchased Stock by the
Shareholders to the Buyer as a sale of assets by the Corporation to the Buyer.
(ii) At the request of the Buyer, the Shareholders shall
complete and execute Internal Revenue Service Form 8023-A "Corporate Qualified
Stock Purchases," designating in Section E of such form that an election under
Section 338(h)(10) of the Internal Revenue Code is being made, and complete and
execute such additional forms and documents and take such actions as are
necessary to make an Income Tax (as defined in Section 2.18(a)) election under
the laws of the State of California and any other applicable states which is
comparable to the 338(h)(10) Election hereunder.
(iii) The Shareholders shall cooperate with and assist
the Corporation and the Buyer in preparing, filing and defending (before the
Internal Revenue Service, any State Tax authority and any court) the 338(h)(10)
Election and any Income Tax return filed by or in respect of the Corporation or
either Partnership.
(iv) The Buyer covenants that any such 338(h)(10)
Election shall not adversely affect the liability of the Shareholders for Income
or any other Taxes, when
3.
<PAGE>
compared to their liability in the absence of a 338(h)(10) Election. The Buyer
covenants that the Corporation shall compensate and reimburse the Shareholders
for any Income or other Taxes, liabilities, interest, penalties, fines and
reasonable costs or expenses they shall incur in cooperating with and assisting
the Corporation and the Buyer in preparing, filing or defending the 338(h)(10)
Election or any Income or other Tax return filed by or in respect of the
Corporation or either Partnership relating to the 338(h)(10) Election. The Buyer
agrees that the covenants set forth in this clause (iv) of Section 1.5(a) are
subject to Section 11.2.
(b) If the Closing occurs, the Buyer shall determine the
identity of the person who prepares the final Subchapter S return of the
Corporation.
(c) The Shareholders shall have the right to participate in
any audit of the federal or California Income Tax returns of the Corporation
filed under Subchapter S of the Internal Revenue Code at their own expense.
Neither the Buyer nor the Corporation will pay any Income Tax, interest,
penalties or fines or reach any other settlement with the Internal Revenue
Service or the California Franchise Tax Board relating to such returns that
might increase the liability of the Corporation or Shareholders to the Internal
Revenue Service or the California Franchise Tax Board without the written
consent of the Shareholders, which consent shall not be unreasonably withheld.
If one or both Shareholders do not respond in a reasonable period of time to
notice of such audit, payment or settlement, such consent shall be deemed to
have been given.
(d) As a post-Closing distribution to the Shareholders, the
Corporation shall pay to each Shareholder the amount resulting from the
following formula:
P = I x 0.105212 x 0.5
------------------
0.65304
Where "P" equals the amount of the payment to each Shareholder under this
Section 1.5(d) and "I" equals (i) the amount of the income of the Corporation
subject to Income Taxes to be paid by the Shareholders under Subchapter S of the
Internal Revenue Code for the period commencing March 1, 1997 and ending on the
Closing Date less (ii) the result of the multiplication of the number of Payment
Days by $5,000.
Article 2. Representations and Warranties by the Shareholders.
The Shareholders represent and warrant to the Buyer as follows:
2.1 Due Organization; No Subsidiaries, Etc.
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. The
Corporation is not required to be qualified to do business under the laws of any
jurisdiction other than the State of California.
(b) The Corporation has no subsidiaries.
4.
<PAGE>
(c) The Corporation has the power and authority to own and
operate its properties and to carry on its business as now being conducted, and
to perform its obligations described herein, except for certain permits and/or
requirements to conduct business at the 10550 Lawson River Avenue site.
(d) The directors and officers of the Corporation are as
follows: Hector Regner, President and Chief Financial Officer (or Treasurer);
Vanna Regner, Vice President and Secretary.
(e) The Partnerships are general partnerships under the
Uniform Partnership Act of the Corporations Code of the State of California.
2.2 Articles of Incorporation and Bylaws; Records. The Shareholders
have delivered to the Buyer accurate and complete copies of: (i) the
Corporation's articles of incorporation and bylaws, including all amendments
thereto; (ii) the stock records of the Corporation; (iii) the minutes and other
records of the meetings and other proceedings (including any actions taken by
written consent or otherwise without a meeting) of the shareholders, board of
directors and all committees of the board of directors of the Corporation; and
(iv) the Partnership agreement and other foundation documents of the
Partnerships. The Corporation has not taken any action that is inconsistent in
any material respect with any resolution adopted by the Corporation's
shareholders, board of directors or any committee of the board of directors. The
books, accounts, stock records, minute books and other records of the
Corporation and the Partnerships are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 Capitalization.
(a) The authorized capital stock of the Corporation consists
of one million (1,000,000) shares of common stock with no par value, of which
fourteen thousand (14,000) shares are issued and outstanding. All of the shares
of Stock have been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding rights, subscriptions, options,
warrants, calls, commitments or agreements to which the Corporation is a party
or by which it is bound relating to its authorized or issued capital stock.
(b) The Corporation owns, free and clear of any Encumbrances:
Fifty Percent (50%) of the outstanding partnership interests of H&V Services and
Fifty Percent (50%) of the outstanding partnership interests of Neutronic
Plating Services (as used herein, H&V Services and Neutronic Plating Services
are collectively referred to as the "Partnerships").
2.4 Financial Statements.
(a) The Shareholders have delivered to the Buyer (i) financial
statements (consisting of balance sheets and income statements) of the
Corporation and the Partnerships for
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the three years ended December 31, 1996 (collectively, the "Historical Financial
Statements"), (ii) the unaudited balance sheets of the Corporation and the
Partnerships at March 29, 1997 (the "Unaudited Base Balance Sheets") and (iii)
statements of operations of the Corporation and the Partnerships for the two
months ended March 29, 1997 (collectively, with the Unaudited Base Balance
Sheets, the "Unaudited Financial Statements"). (The Historical Financial
Statements and the Unaudited Financial Statements shall collectively referred to
as the "Financial Statements".) Where available, the Shareholders shall,
pursuant to this Section 2.4, deliver audited Historical Financial Statements to
the Buyer.
(b) The Financial Statements are accurate and complete, are in
accordance with the books and records of the Corporation and the Partnerships,
and present fairly the financial position of the Corporation and the
Partnerships as of the respective dates thereof and the results of operations
for the periods therein specified. The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered, except that the Financial
Statements do not include the footnotes or the statement of cash flows generally
accepted accounting principles would require. The Unaudited Base Balance Sheets
disclose all of the debts, liabilities and obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due) of
the Corporation and the Partnerships at March 29, 1997 which must be disclosed
on balance sheets in accordance with generally accepted accounting principles,
except that the Unaudited Base Balance Sheets do not include the footnotes
generally accepted accounting principles would require. All of the records of
the Corporation and the Partnerships are in the actual possession and control of
the Corporation and the Partnerships. Adequate and appropriate systems of
internal control are in place at the Corporation and the Partnerships which are
at least as comprehensive and effective as the systems of internal control
customarily maintained by similarly situated companies and partnerships. All
accounts receivable reflected in the Financial Statements represent valid
obligations of customers arising from bona fide transactions entered into in the
ordinary course of business.
(c) Neither the Corporation nor either Partnership has made
any change in accounting practice, policy or procedure since December 31, 1995.
Since December 31, 1995 neither the Corporation nor either Partnership has taken
any actions outside the ordinary course of business or inconsistent with past
practices, including without limitation (i) accelerating or delaying the
recognition of revenue, (ii) accelerating, delaying or otherwise changing any
depreciation or amortization or (iii) otherwise taking any action that alone, or
in conjunction with other actions, would have, or has had, the effect of
altering the balance sheets, statements of operation or other books or records
of the Corporation or either Partnership as of, and for the periods ended,
December 31, 1996 and March 29, 1997 from what would have been set forth therein
in the ordinary course of business conducted consistent with past practices.
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2.5 Absence of Changes. Since March 29, 1997:
(a) There have not been any material adverse changes in the
Corporation's or either Partnership's business, condition, assets, liabilities,
intellectual property rights, operations, financial performance or prospects,
and, to the Knowledge of the Shareholders, no event has occurred that will, or
could reasonably be expected to, have a material adverse effect on the
Corporation or either Partnership (As used in this Agreement, the "Knowledge of
the Shareholders" shall include knowledge of a particular fact or other matter
if any Shareholder is aware of such fact or other matter.);
(b) There has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of the assets of
the Corporation or either Partnership (whether or not covered by insurance);
(c) The Corporation has not declared, accrued, set aside or
paid any dividend or made any other distribution in respect of any shares of
capital stock, and has not repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities, and neither Partnership has made
any distribution in respect of the partnership interests;
(d) There has been no amendment to the Corporation's articles
of incorporation or bylaws, and the Corporation has not effected or been a party
to any acquisition transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(e) Except as set forth in Exhibit 2.5(e), neither the
Corporation nor either Partnership has made any capital expenditure;
(f) Except as set forth in Exhibit 2.5(f), neither the
Corporation nor either Partnership has (i) entered into or permitted any of the
assets owned or used by it to become bound by any Material Contract (as defined
in Section 2.8) or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any such Material Contract;
(g) Neither the Corporation nor either Partnership has made
any pledge of any of their respective assets or otherwise permitted any of their
respective assets to become subject to any Encumbrance, except for pledges of
immaterial assets made in the ordinary course of business and consistent with
their respective past practices;
(h) Neither the Corporation nor either Partnership has (i)
established or adopted any employee benefit plan, (ii) except as set forth in
Exhibit 2.5(h), paid any bonus or made any profit-sharing or similar payment to,
or increased the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, partners,
officers or employees, or (iii) hired any new employee;
(i) Neither the Corporation nor either Partnership has changed
any of its
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methods of accounting or accounting practices in any respect;
(j) Except as set forth in Exhibit 2.5(f), neither the
Corporation nor either Partnership has entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices;
(k) Except as set forth in Exhibit 2.5(k), other than pursuant
to the Leases (as defined in Section 2.7) and health insurance premiums paid on
their behalf, the Shareholders have not received any compensation or fringe
benefit from, or entered into any transaction with, the Corporation or either
Partnership; nor has the Corporation paid any expenses relating to the
Automobiles; and
(l) Except as set forth in Exhibit 2.5(l), neither the
Corporation nor either Partnership has agreed or committed to take any of the
actions referred to in clauses "(c)" through "(k)" above.
For purposes of this Agreement, the term "Encumbrance" shall mean any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature.
2.6 Title.
(a) Each of the Corporation and the Partnerships owns, and has
good, valid and marketable title to, all assets purported to be owned by it,
including all assets reflected on its Unaudited Base Balance Sheet and all other
assets reflected in its books and records as being owned by it. All of said
assets are owned by the Corporation and the Partnerships free and clear of any
Encumbrances, except for minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the Corporation or either Partnership or materially impair
their respective operations.
(b) Exhibit 2.6(b) identifies all assets that are material to
the businesses of the Corporation or the Partnerships and that are being leased,
licensed or loaned to the Corporation or either Partnership by persons other
than the Shareholders.
(c) Exhibit 2.6(c) identifies all assets that are material to
the businesses of the Corporation or the Partnerships and that are owned by one
or more Shareholders.
(d) The Shareholders collectively own, beneficially and of
record, and have good, valid and marketable title to the shares of Purchased
Stock. All of the shares of Purchased Stock are owned by the Shareholders free
and clear of any Encumbrances. The Shareholders have full and unrestricted right
and power to sell and deliver the Purchased Stock pursuant to the provisions of
this Agreement without the consent or approval of any other person.
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(e) The Purchased Stock constitutes one hundred percent (100%)
of the outstanding capital stock of the Corporation.
(f) Except for U.S. Patent No. 4,606,589 dated August 19, 1986
and as set forth in Exhibit 2.6(f), neither the Corporation nor either
Partnership owns or uses any patents, trademarks, mask work rights, copyrights,
trade secrets or other intellectual property rights, except for duly licensed
software readily available to the public.
2.7 Equipment; Leasehold; Inventory.
(a) The equipment and other tangible assets owned by or leased
to the Corporation or either Partnership constitute all of the assets necessary
for the conduct of their respective businesses in the manner in which such
businesses are currently being conducted. Exhibit 2.7(a)(1) provides an accurate
and complete list of all items of equipment, materials, prototypes, tools,
vehicles, furniture and other tangible assets owned by or leased to the
Corporation or either Partnership with an original value in excess of $10,000,
and identifies which such assets are owned and which are leased. The dies
identified on Exhibit 2.7(a)(2) are owned by the Corporation, free and clear of
any Encumbrances and are located at the Corporation's facilities at 10535 Lawson
River Avenue, Fountain Valley, California. All assets used in the business of
operations of the Corporation or the Partnerships are owned by the Corporation
or the Partnerships, except for the Automobiles, the real property subject to
the Leases and the items listed in Exhibit 2.6(b) and 2.6(c). No Shareholder has
removed any asset used in the business or operations of the Corporation or the
Partnerships from the facilities of the Corporation and the Partnerships located
at 10535 and 10550 Lawson River Avenue, Fountain Valley, California since
September 30, 1996, except for cash distributions to the Shareholders prior to
March 29, 1997 aggregating (i) $1,550,000 in dividends and (ii) $150,000 in
salary.
(b) Neither the Corporation nor either Partnership owns any
real property or any interest in real property, except for the leaseholds
created under the real property leases dated January 20, 1997 between V.R.
Enterprises and Neutronic Stampings, Inc. and dated September 18, 1995 between
Hector Regner, Vanna Regner and Neutronic Stampings, Inc. (the "Leases").
2.8 Contracts. Except as set forth in Exhibit 2.8:
(a) The Shareholders have delivered to the Buyer accurate and
complete copies of each contract (including all amendments thereto)
(collectively, the "Material Contracts") to which the Corporation or either
Partnership is a party or by which the Corporation or either Partnership is
otherwise bound and which is material to any of their respective businesses,
properties, assets or operations. For purposes of this Agreement, the Material
Contracts shall include without limitation: (i) all contracts having a term of
more than 60 days and that may not be terminated by the Corporation or a
Partnership (without penalty) within 60 days after the delivery of a termination
notice by the Corporation or a Partnership; and (ii) and any other contract that
contemplates or involves the payment or delivery of cash or other
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consideration, or the performance of services, in an amount or having a value in
excess of $10,000. Each Material Contract is valid and in full force and effect,
and, to the Knowledge of the Shareholders, is enforceable by the Corporation or
a Partnership in accordance with its terms.
(b) Neither the Corporation nor either Partnership has
violated or breached, or committed any default under, any Material Contract,
and, to the Knowledge of the Shareholders, no other person has violated or
breached, or committed any default under, any Material Contract, which
violation, breach or default has not been waived or satisfied as of the date of
this Agreement.
(c) To the Knowledge of the Shareholders, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time) will, or could reasonably be expected to, (i) result in a
violation or breach of any of the provisions of any Material Contract, (ii) give
any person the right to declare a default or exercise any remedy under any
Material Contract, (iii) give any person the right to accelerate the maturity or
performance of any Material Contract, or (iv) give any person the right to
cancel, terminate or modify any Material Contract.
2.9 Employees; Pension Plans.
(a) Neither the Corporation nor either Partnership has entered
into a contract with a labor union and, to the Knowledge of the Shareholders,
there is no union activity at or involving the Corporation or either
Partnership. Neither the Corporation nor either Partnership is a party to any
contract of employment or consulting with any person.
(b) Neither the Corporation nor either Partnership maintains
or makes any contribution to any pension, profit sharing or other employee
retirement benefit plan. Neither the Corporation nor either Partnership has any
material liability with respect to any such plan (including, without limitation,
any unfunded liability or any accumulated funding deficiency) or any material
liability to the Pension Benefit Guaranty Corporation or under Title IV of the
Employee Retirement Income Security Act of 1974, as amended, with respect to a
multi-employer pension benefit plan; nor would the Corporation or either
Partnership have any such liability if any such plan were terminated or if the
Corporation or a Partnership withdrew, in whole or in part, from any
multi-employer plan.
2.10 Liabilities. Neither the Corporation nor either Partnership has
any accrued, contingent or other liabilities of any nature, either matured or
unmatured (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles, and whether due or to
become due), except for: (a) liabilities identified as such in the "liabilities"
column of the Unaudited Base Balance Sheets; and (b) accounts payable or accrued
salaries (including accrued vacation) that have been incurred by the Corporation
or a Partnership since March 29, 1997 in the ordinary course of business and
consistent with the past practices of the Corporation and the Partnerships.
10.
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2.11 Compliance with Legal Requirements. Except as set forth in Exhibit
2.11, the Corporation and the Partnerships are, and have at all times been, in
compliance in all material respects with all applicable laws, rulings, or other
legal requirements. Except as set forth in Exhibit 2.11, neither the Corporation
nor either Partnership has received any notice or other communication from any
governmental body regarding any actual or possible violation of, or failure to
comply with, any such law, ruling or other legal requirement.
2.12 Environmental Matters. Except as set forth in Exhibit 2.12:
(a) To the Knowledge of the Shareholders, the Corporation and
the Partnerships are, and at all times have been, in compliance in all material
respects with all applicable Environmental Laws, which compliance includes (i)
the possession by the Corporation and the Partnerships of all permits and other
governmental authorizations required under applicable Environmental Laws, and
(ii) compliance with the terms and conditions thereof.
(b) To the Knowledge of the Shareholders, neither the
Corporation nor either Partnership has received any notice or other
communication (in writing or otherwise), whether from a governmental body,
citizens group, employee or otherwise, that alleges that the Corporation or a
Partnership is not in compliance with any Environmental Law or are or may be
required to undertake or bear any Environmental Liabilities. To the Knowledge of
the Shareholders, there are no circumstances that may prevent or interfere with
the compliance by the Corporation or a Partnership with any Environmental Law or
that may require the Corporation or a Partnership to undertake or bear any
Environmental Liabilities in the future (other than routine, immaterial
Environmental Liabilities incurred in the ordinary course of business consistent
with past practices in order to comply with Environmental Law) with respect to
any of the Property or otherwise. To the Knowledge of the Shareholders, no
current or prior owner of any of the Property has received any notice or other
communication (in writing or otherwise), whether from a government body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Corporation or a Partnership has not been or is not in compliance
with any Environmental Law or is or may be required to undertake or bear any
Environmental Liabilities.
(c) To the Knowledge of the Shareholders, all of the Property
and all surface water, groundwater and soil associated with such Property is in
clean and healthful condition and is free of any material environmental
contamination of any nature, including free of the presence of any Material of
Environmental Concern in any concentration that may require any costs of
investigation, response, removal or remedial action.
(d) The Shareholders have delivered to the Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Corporation, either Partnership or the
Shareholders pertaining to Materials of Environmental Concern in, on, or under
any Property, or concerning compliance by the Corporation or either Partnership,
or any other person for whose conduct any of them is or may be held responsible,
with Environmental Laws.
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(e) For purposes of this Agreement: (i) "Environmental Law"
means any law, rule, regulation or other legal requirement relating to pollution
or protection of human health or the environment, including any law or
regulation relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern; (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
asbestos, petroleum and petroleum products and any other substance that is now
or hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment; (iii) "Environmental Liabilities"
include any cost, damages, expense, liability, obligation, loss or other
responsibility arising from or under Environmental Law, including financial
responsibility under Environmental Law for investigation, removal, containment,
remediation, response or other cleanup costs or corrective action; and (iv)
"Property" shall include any property, parcel or facility now or heretofore
owned, leased, used or controlled by the Corporation or geologically or
hydrologically adjoining such property, parcel or facility.
2.13 Related Party Transactions. Other than the Leases, no officer,
director, shareholder or employee of the Corporation or either Partnership or
any affiliate or associate of any such person or entity has or has had, either
directly or indirectly, (a) an interest in any person or entity which (i)
furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by the Corporation or either Partnership, or
(ii) purchases from or sells or furnishes to the Corporation or either
Partnership, any goods or services, or (b) a beneficial interest in any contract
or agreement to which the Corporation or either Partnership is a party or by
which any of their respective properties or assets may be bound. There is no
outstanding indebtedness for borrowed money (i) owed by the Corporation to any
Shareholder or either Partnership, (ii) owed by any Shareholder or either
Partnership to the Corporation, (iii) owed by any Shareholder to either
Partnership, or (iv) owed by either Partnership to any Shareholder.
2.14 Legal Proceedings; Orders. There is no pending action, arbitration
or any other legal proceeding, inquiry or investigation and (to the Knowledge of
the Shareholders) no person has threatened to commence any such action,
arbitration, other legal proceeding, inquiry or investigation: (i) that involves
the Corporation or either Partnership or any of the assets owned or used by the
Corporation or either Partnership; or (ii) that challenges or otherwise
interferes with the transactions contemplated by this Agreement. To the
Knowledge of the Shareholders, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
event. There is no order, writ, injunction, judgment or decree to which either
Shareholder, the Corporation, either Partnership or any of the assets owned or
used by the Corporation or either Partnership, is subject. To the Knowledge of
the Shareholders, no officer of the Corporation or employee of the Corporation
or either Partnership is subject to any order, writ, injunction, judgment or
decree that prohibits such officer or employee from engaging in or continuing
any conduct, activity or practice relating to the Corporation's or either
Partnership's
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business.
2.15 Authority; Binding Nature of Agreement. The Shareholders have the
absolute and unrestricted right, power and authority to enter into and to
perform their respective obligations under this Agreement. This Agreement
constitutes the legal, valid and binding obligation of the Shareholders,
enforceable against each of them in accordance with its terms.
2.16 Non-Contravention; Consents. The execution and delivery of this
Agreement and the performance by the Shareholders of their obligations hereunder
do not and will not (a) violate, conflict with or result in a default under any
provision of (i) to the Knowledge of the Shareholders, any law, rule or
regulation, or (ii) the articles of incorporation or bylaws of the Corporation
or (iii) the partnership agreement or other foundation document of either
Partnership, or (iv) any agreement, contract, judgment, license, order or permit
applicable to or binding upon the Corporation or either Partnership, or (v) any
provision of any Material Contract, or (b) give any person the right to exercise
any remedy under, or accelerate the maturity or performance of, any Material
Contract. The lien held by State Street Bank & Trust Co., as evidenced by UCC-1
#93045428, relates to a loan for real property unrelated to the Corporation, the
Partnerships or the Properties and the execution and delivery of this Agreement
and the performance by the Shareholders of their obligations hereunder do not
violate, conflict with or result in a default under such lien or any contract
related thereto. None of the Shareholders, the Corporation, or the Partnerships
are required to make any filings with, give any notice to, or obtain any consent
from any person in connection with the execution, delivery or performance of the
Agreement or any of the transactions contemplated herein.
2.17 Full Disclosure. To the Knowledge of the Shareholders, the
Agreement does not, will not, (i) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein (in the light of the circumstances under which such representations,
warranties and information were or will be made or provided) not false or
misleading.
2.18 Taxes.
(a) The Corporation and the Partnerships have each filed all
federal and California Income Tax returns and all other state and foreign Income
Tax returns required to be filed, and have each paid, or have each made adequate
provision or set up an adequate accrual or reserve for the payment of, all
Income Taxes required to be paid in respect of all periods for which returns
have been made or are due, and have each established an adequate accrual or
reserve for the payment of all Income Taxes payable in respect of the period
subsequent to the last of said periods required to be so accrued and reserved
(except in either case in an amount not material), and have no material
liability for Income Taxes in excess of the amount so paid or accruals or
reserves so established. Neither the Corporation nor either Partnership is
delinquent in the payment of any material Income Tax or is delinquent in the
filing of any Income Tax return, and no material deficiencies for any Income Tax
have been threatened, claimed, proposed
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or assessed. Since January 1, 1994, the Corporation's and the Partnerships'
United States, state and foreign Income Tax returns, respectively, have not been
audited by the Internal Revenue Service ("IRS") or comparable state or foreign
agencies. At all times since January 1, 1992, the Corporation has duly filed the
necessary documents required by, and has reported to the IRS and state Tax
authorities under, Subchapter S of the Internal Revenue Code and the
corresponding provisions of state law. The amount of Built-In Gain, as set forth
on the tax returns of the Corporation was determined in good faith. "Built-In
Gain" shall mean the amount of net unrealized gain on the assets of the
Corporation within the meaning of Section 1374(d)(1) of the Internal Revenue
Code of 1986. As used in this Agreement, "Income Tax" (and its plural "Income
Taxes") shall mean any tax upon the income of the Corporation or either
Partnership.
(b) The Corporation and the Partnerships have each filed all
federal and California Tax returns and all other state and foreign Tax returns
required to be filed, and have each paid, or have each made adequate provision
or set up an adequate accrual or reserve for the payment of, all Taxes required
to be paid in respect of all periods for which returns have been made or are
due, and have each established an adequate accrual or reserve for the payment of
all Taxes payable in respect of the period subsequent to the last of said
periods required to be so accrued and reserved (except in either case in an
amount not material), and have no material liability for Taxes in excess of the
amount so paid or accruals or reserves so established. Neither the Corporation
nor either Partnership is delinquent in the payment of any material Tax or is
delinquent in the filing of any Tax return, and no material deficiencies for any
Tax have been threatened, claimed, proposed or assessed. As used herein, "Tax"
(and its plural "Taxes") shall mean any tax, levy or assessment (including any
sales tax, property tax or payroll tax), excluding any Income Tax.
2.19 Certain Securities Matters. The Shareholders have such knowledge
and experience in financial and business matters and are capable of evaluating
the merits and risks associated with the Notes and the Short-Term Notes. Each
Shareholder is acquiring the Note and Short-Term Note for investment and for
such Shareholder's own account and not with a view to, or for resale in
connection with, any unregistered distribution thereof, and has no present
intention to sell or otherwise dispose of any interest in or risk related to
such Notes.
2.20 Intellectual Property. Except as set forth in Exhibit 2.20, none
of the Shareholders, the Corporation or the Partnerships are infringing,
misappropriating or making any unlawful use of, and, none of them has received
any notice or other communications (in writing or otherwise) of any actual,
alleged, possible or potential infringement, misappropriation or unlawful use
of, any patent, trademark, copyright, service mark, trade secret or other
intellectual property right owned or used by any other person.
Article 3. Representations and Warranties by the Buyer.
The Buyer represents and warrants to the Shareholders that:
3.1 Authority. Subject to approval by the Buyer's board of directors,
each person
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signing this Agreement on behalf of the Buyer has been duly authorized to do so
by all necessary actions and has the power and authority to execute this
Agreement on the Buyer's behalf.
3.2 Due Authorization. Subject to approval by the Buyer's board of
directors, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and effectively authorized
by all necessary action of the Buyer. This Agreement constitutes a legal, valid
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with the terms described in this Agreement.
3.3 No Conflicts. The execution and delivery of this Agreement and the
performance by the Buyer of its obligations hereunder do not and will not
conflict with any provision of (i) to the Buyer's knowledge, any law, statute,
rule or regulation, or (ii) the Certificate of Incorporation of the Buyer or
(iii) subject to the receipt of the consent of the Buyer's bank, any agreement,
contract, judgment, license, order or permit applicable to or binding upon the
Buyer.
3.4 Corporate Income Tax. The Buyer shall be completely and solely
responsible for any and all corporate income taxes from and after the Closing
Date that the Corporation may owe.
Article 4. Conduct of the Corporation's and the Partnerships' Businesses Prior
to Closing.
The Shareholders covenant, agree, represent and warrant to the Buyer
that, except as otherwise consented to in writing by the Buyer, pending the
Closing the Shareholders shall ensure the following:
4.1 Conduct. The Corporation and the Partnerships will each carry on
their respective businesses in a good and diligent manner consistent with prior
practice, and will use their best efforts to preserve their respective business
organizations and businesses intact, and to keep available the services and
goodwill of all of their respective present suppliers, customers, landlords,
creditors, employees, agents, and representatives.
4.2 Equity. No change will be made in the authorized or issued capital
stock of the Corporation, nor shall any rights, warrants or options relating
thereto or any instrument convertible or exchangeable for capital stock be
issued or authorized. No alteration, transfer or issuance of any interest in
either Partnership will occur nor shall any agreement related to any of the
foregoing be signed.
4.3 Distributions. No dividend or other distribution will be declared,
set aside, accrued or paid on or in respect of the capital stock of the
Corporation, nor will the Corporation directly redeem, retire, purchase or
otherwise reacquire any of its stock. No distribution will be set aside, accrued
or paid in respect of either Partnership.
4.4 Dispositions. Neither the Corporation nor either Partnership will
sell or
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otherwise dispose of any properties or assets, purchase or otherwise acquire any
properties or assets, incur any liabilities or enter into any transactions,
except in the ordinary course of business or lend money except in the ordinary
course of business.
4.5 Compensation. Except for a bonus to be paid Anthony Ravlich in an
amount equivalent to 2% of the profits of the Corporation from January 1, 1997
to the Closing Date, no changes will be made to compensation paid to any of the
salaried employees of the Corporation or either Partnership prior to the
Closing. The Buyer acknowledges that an employee, Terry Yoneato, has recently
received an increase in his salary with the Corporation of Twelve Thousand
Dollars ($12,000) per year.
4.6 Amendments. No amendment shall be made to the Corporation's
Articles of Incorporation or bylaws.
4.7 Legal Proceedings. Neither the Corporation nor either Partnership
shall commence or settle any action, arbitration or any other legal proceeding,
inquiry or investigation.
4.8 Notifications. Prior to the Closing, the Shareholders shall
promptly notify the Buyer in writing of any event, condition or circumstance
that, if it had occurred or existed on or prior to the date of this Agreement,
would have constituted an inaccuracy in or breach of any representation or
warranty made herein.
4.9 Access. From and after the execution of this Agreement, the
Corporation and the Partnerships will permit the Buyer and its duly authorized
agents to have access, on a seven day a week basis, to the offices, properties,
managerial and accounting employees, books, and records of the Corporation and
the Partnerships for the purpose of investigating the business and examining the
records of the Corporation and the Partnerships, verifying the representations
made in this Agreement and the performance of the conditions set forth in this
Agreement at any time of any day up to and including the Closing Date. To
facilitate such access, the Shareholders shall make themselves available to
answer questions and provide such access on a seven day a week basis. The
Shareholders acknowledge that the Buyer may, at Buyer's cost, engage its
accountants to review or audit the financial books and records of the
Corporation or either Partnership and that, in connection therewith, such
accountants may require access to the properties of the Corporation or the
Partnerships, the books and records of the Corporation or the Partnerships, and
the outside accountants engaged by the Corporation or the Partnerships; and the
Shareholders agree to provide such access.
4.10 Transfer of Assets. Prior to the Closing, the Shareholders shall
transfer any and all assets owned by either of them and used in the businesses
or operations of the Corporation or either Partnership to the Corporation (the
"Shareholder Owned Assets"), other than the real property leased pursuant to the
Leases. The Shareholder Owned Assets shall include, without limitation, the
assets listed on Exhibit 2.6(c). Any such transfer shall vest in the Corporation
good and marketable title to such assets, free and clear of any Encumbrances.
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4.11 No Shareholder Transactions. From February 28, 1997 to the Closing
Date, the Shareholders will not receive any compensation or fringe benefit from,
or enter into any transaction with, the Corporation or either Partnership, nor
will the Corporation or either Partnership be liable for, or pay, any expenses
relating to the Automobiles; provided, however, that the Corporation may make
payments under the Leases and health insurance premium payments for the
Shareholders in the ordinary course of business consistent with past practices.
4.12 Best Efforts. The Shareholders shall use their best efforts to
cause the closing conditions set forth in Article 5 to be satisfied.
Article 5. Conditions Precedent To Obligations Of The Buyer
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or prior to
Closing, of each of the following conditions:
5.1 Accuracy of Representations. Each of the representations and
warranties made by the Shareholders in this Agreement shall have been accurate
in all material respects as of the date of this Agreement, and shall be accurate
in all material respects as of the Closing (in each case, without giving effect
to any materiality qualifications contained therein) as if made at the Closing.
5.2 Performance of Covenants. All of the obligations that the
Shareholders are required to comply with or to perform prior to the Closing
shall have been complied with and performed in all respects.
5.3 Agreements and Documents. The Buyer shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) all documents required to evidence the transfer of the
Purchased Stock reasonably requested by the Buyer;
(b) a legal opinion from the Shareholders' legal counsel in
the form attached hereto as Exhibit 5.3(b);
(c) employment agreements between the Corporation and each of
Anthony Ravlich and Terry Yoneato in form and substance satisfactory to the
Buyer in its sole and unfettered discretion, which employment agreements will be
in full force and effect upon Closing;
(d) releases (the "Releases") executed by each Shareholder
releasing such Shareholders rights against the Corporation in the form attached
hereto as Exhibit 5.3(d);
(e) certificate of the Corporation's Secretary certifying the
accuracy and
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completeness of the Corporation's articles of incorporation and bylaws;
(f) a bill of sale in the form of Exhibit 5.3(f); and
(g) a certificate from each of the Shareholders dated the
Closing Date stating that (i) all of the representations and warranties made by
the Shareholders in this Agreement are accurate in all material respects as of
the Closing (without giving effect to any materiality qualifications contained
therein) as if made at the Closing and (ii) all covenants to be complied with or
performed by the Shareholders at or prior to Closing have been duly complied
with and performed in all material respects.
5.4 Amendment of Lease Agreements. The Corporation shall have entered
into amendments to the Leases (the "Amendments to the Leases") in the forms
attached hereto as Exhibit 5.4A and Exhibit 5.4B. Such amendments shall be in
full force and effect at the time of the Closing.
5.5 Inspection of Premises. The Buyer shall have inspected the premises
of the Corporation and the Partnerships and shall be reasonably satisfied with
the condition of their respective businesses and assets.
5.6 No Legal Proceedings. No person shall have commenced or threatened
to commence any action, arbitration or any other legal proceeding, inquiry or
investigation against the Corporation or either Partnership.
5.7 Pre-Closing Review. The Buyer shall be satisfied, in its sole and
unfettered discretion, with the assets, liabilities, business, condition,
operations, financial performance and prospects of the Corporation and the
Partnerships.
5.8 Board Approval. The transaction contemplated herein shall have been
duly authorized by the Buyer's Board of Directors.
5.9 Bank Consent. The Buyer shall have received all necessary consents
from its lending institution to enter into the transactions contemplated herein
and shall have received funds from such lending institution on terms and in an
amount satisfactory to the Buyer.
Article 6. Conditions Precedent To Obligations Of The Shareholders And The
Corporation
The obligations of the Shareholders and the Corporation to consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to Closing, of each of the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made
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by the Buyer in this Agreement shall have been accurate in all material respects
as of the date of this Agreement, and shall be accurate in all material respects
as of the Closing (in each case, without giving effect to any materiality
qualifications contained therein) as if made at the Closing.
6.2 Performance of Covenants. All of the obligations that the Buyer is
required to comply with or to perform prior to the Closing shall have been
complied with and performed in all respects.
Article 7. Closing and Transfer Date.
The transfer of the Purchased Stock by the Shareholders to the Buyer
shall take place at the offices of Cooley Godward llp, Five Palo Alto Square,
3000 El Camino Real, Palo Alto, California 94306, on such date and time as the
Buyer shall determine on seventy-two (72) hours notice to the Shareholders;
provided, however, that the Buyer may determine to close on April 21, 1997
without providing such notice.
7.1 Obligations of Shareholders.
(a) At the Closing, the Shareholders shall deliver to the
Buyer the share certificates representing the Purchased Stock, duly endorsed for
transfer, free and clear of all Encumbrances, dated as of the Closing Date. At
the Closing, each Shareholder shall endorse his or her respective check
identified in Section 1.2(e) to the Corporation in payment for his or her
respective Automobile.
(b) From and after the Closing, the Shareholders shall
cooperate with the Buyer and shall execute and deliver such documents and take
such other actions as the Buyer may reasonably request for the purpose of
putting the Buyer in possession and control of the Purchased Stock and any
assets of the Corporation or either Partnership (including without limitation
the Shareholder Owned Assets). The Shareholders hereby irrevocably nominate,
constitute and appoint the Buyer as the true and lawful attorney-in-fact of the
Shareholders (with full power of substitution) and hereby authorize the Buyer,
in the name and on behalf of the Shareholders, to take any action that the Buyer
deems appropriate to enforce, assert or perfect any claim, right or interest
that relates to the Purchased Stock, any assets of the Corporation or either
Partnership or any assets used in the businesses of the Corporation or the
Partnerships, or otherwise to carry out or facilitate the transaction
contemplated herein.
7.2 Obligations of the Buyer. At the Closing, the Buyer shall deliver
to the Shareholders:
(a) Two (2) cashier's checks, each in the amount of Nine
Hundred Sixty Thousand Dollars ($960,000), one payable to Hector Regner and the
other payable to Vanna Regner.
(b) Two (2) executed Notes as described in Section 1.2(b), one
payable to
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Hector Regner and one payable to Vanna Regner.
(c) Two (2) executed Short-Term Notes as described in Section
1.2(c), one payable to Hector Regner and one payable to Vanna Regner.
(d) Two (2) checks drawn on the account of the Buyer, one
payable to Hector Regner and one payable to Vanna Regner, each in the amount of
Forty Thousand Dollars ($40,000).
(e) Executed security agreements as described in Section
1.2(b)4.
Article 8. Expenses.
8.1 Responsibility for Expenses. Subject to the provisions of Article
11, all costs and expenses incurred in conducting the purchase and sale
described in this Agreement in the manner prescribed by this Agreement shall be
borne by the Buyer and the Shareholders in the following manner:
(a) Each party shall pay their own attorneys' fees;
(b) The cost of any environmental impact study performed prior
to the date of this Agreement shall be borne by the parties equally;
(c) The sales tax imposed on the transfer of the Automobiles
shall be borne by the Shareholders;
(d) Any and all other costs and expenses arising from the
performance of this Agreement and the purchase and sale described in this
Agreement shall be borne by the party incurring such costs or expenses or on
whose behalf or for whose benefit such costs or expenses are incurred.
8.2 Corporation Expenses. Notwithstanding Section 8.1, if the Closing
occurs, the Corporation shall pay (i) the attorneys fees, costs and expenses of
the Law Offices of Gary B. Ross, the Shareholders' counsel, incurred in respect
of the transactions contemplated by this Agreement, in an amount not to exceed
$50,000 and (ii) fifty percent (50%) of the cost of the environmental impact
study.
20.
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Article 9. Covenant Not to Compete.
9.1 Covenant. The Shareholders hereby agree that for a period of three
(3) years after the Closing, the Shareholders shall not directly or indirectly
own an interest in, operate, join, control, finance or participate in, render
services or advice to, or be connected as an officer, employee, agent,
independent contractor, partner, shareholder, or principal of any corporation,
partnership, proprietorship, firm, association, person, or other entity directly
or indirectly producing, designing, providing, soliciting orders for, selling,
distributing, or marketing any product, good, or service that directly or
indirectly competes with any product, good, service, or business of the
Corporation or either Partnership anywhere in the United States.
9.2 Nonsolicitation. The Shareholders further agree that for a period
of three (3) years after the Closing, they will not, either individually or
jointly:
(a) directly or indirectly, personally or through others,
encourage, induce, attempt to induce, solicit or attempt to solicit (on the
behalf of a Shareholder or on behalf of any other person or entity) any employee
of the Corporation or either Partnership to leave his or her employment with the
Corporation or a Partnership;
(b) employ, or permit any entity over which either Shareholder
exercises any control, to employ such employee who has terminated his or her
employment with the Corporation or a Partnership during such three-year period;
or
(c) directly or indirectly, personally or through others,
approach, contact, solicit, advise or do (or attempt to do) business with, or
otherwise interfere with the relationship of the Corporation or either
Partnership with, any person or entity who is, was or is reasonably anticipated
to become a customer or client of the Corporation or a Partnership.
9.3 Reasonable Scope. Each Shareholder agrees that the covenants
contained in this Article 9 are reasonable with respect to duration,
geographical area and scope.
9.4 Injunctive Relief. The parties agree that the remedy at law for any
breach of this Article would be inadequate and that, in addition to any other
remedies the Buyer may have, the Buyer shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages.
9.5 Confidential Information. Each Shareholder agrees that all
non-public information about or related to the Corporation or either Partnership
known or obtained by such Shareholder is the property of the Corporation or a
Partnership (as the case may be), and that such information shall not at any
time be disclosed to any person or used by such Shareholder for any purpose,
without the written consent of the Buyer. If any Shareholder is not present in
Orange County, California he or she shall keep the Buyer informed as to his or
her whereabouts.
Article 10. Shareholders' Consultation Services.
21.
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For a period of time not to exceed six (6) months after the Closing,
the Shareholders shall make themselves available, as requested by the Buyer,
upon reasonable notice, to provide consulting services to the Buyer, as
requested by the Buyer, at a charge rate of no more than One Hundred and Fifty
Dollars ($150.00) per hour and otherwise on terms and conditions to be mutually
agreed upon by the parties. Each Shareholder agrees to notify the Buyer of the
address at which the Shareholder may promptly be contacted during such six month
period. The Buyer acknowledges that Hector Regner will be unavailable for
consulting from May 14, 1997 through July 2, 1997. The Buyer shall cause the
Corporation to reimburse a Shareholder for his or her reasonable travel and
lodging expenses in the event the Buyer requests that such Shareholder perform
consulting services at the Corporation's or the Buyer's facilities.
Article 11. Indemnification.
11.1 Indemnification by the Shareholders. Each Shareholder shall hold
harmless and indemnify the Buyer, the Corporation and the Partnerships from and
against, and shall compensate and reimburse the Buyer, the Corporation and the
Partnerships for, any loss, damage, liability, decline in value, claim, award,
tax, penalty, fee, cost or expense of any nature ("Damages") that are directly
or indirectly suffered or incurred by the Buyer, the Corporation or either
Partnership (regardless of whether or not such Damages relate to a third party
claim) and that arise directly or indirectly from or as a direct or indirect
result of:
(a) any breach of any representation or warranty of any
Shareholder under this Agreement or any instrument delivered pursuant to this
Agreement (but only if the Closing occurs); or
(b) any breach of any covenant or obligation of any
Shareholder under this Agreement or any instrument delivered pursuant to this
Agreement.
In each clause (a) and (b) above, there shall be included (without limitation)
within the scope thereof, any action, suit or other legal proceeding directly or
indirectly related to any such breach (including without limitation any action
commenced to enforce rights under this Agreement).
11.2 Indemnification by the Buyer. The Buyer shall hold harmless and
indemnify the Shareholders from and against, and shall compensate and reimburse
the Shareholders for, any Damages that are directly or indirectly suffered or
incurred by the Shareholders (regardless of whether or not such Damages relate
to a third party claim) and that arise directly or indirectly from or as a
direct or indirect result of any breach of any representation or warranty of the
Buyer under this Agreement or any instrument delivered pursuant to this
Agreement or any breach of any covenant or obligation of the Buyer under this
Agreement or any instrument delivered pursuant to this Agreement (in each case
including without limitation any action, suit or other legal proceeding directly
or indirectly related to any such breach (including without limitation any
action commenced to enforce rights under this Agreement)).
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11.3 Setoff. The Buyer shall have the right to withhold and deduct any
sum that may be owed to a Shareholder pursuant to this Article 11 from any
amount otherwise payable by the Buyer to the Shareholder, including without
limitation the Notes, provided, however, that the maximum setoff shall be
limited to the Ceiling provided under Section 11.6 of the Agreement. The
exercise of any right of setoff, whether or not ultimately determined to be
permitted, shall not constitute a default under the Notes.
11.4 Conduct of Claim or Other Legal Proceeding. Other than a claim or
legal proceeding by one party against another party, in the event of the
assertion or commencement by any person of any claim or legal proceeding
(whether against the Buyer or any other person) with respect to which a party
(the "Indemnifying Party") may become obligated to indemnify, hold harmless,
compensate or reimburse, any other party (the "Indemnified Party") pursuant to
this Article 11, the Indemnified Party may designate the Indemnifying Party to
assume the defense of such claim or other legal proceeding at the expense of the
Indemnifying Party or the Indemnified Party may elect to assume the defense of
such claim or legal proceeding at the sole expense of the Indemnifying Party.
The Indemnified Party shall have the right to settle any such claim or
proceeding with the consent of the Indemnifying Party; provided, however, that
such consent shall not be unreasonably withheld.
11.5 Survival.
(a) Except as set forth in Section 11.5(b), (c), (d), (e) and
(f), the representations, warranties, covenants and obligations of each party to
this Agreement shall survive until the close of business on the date one (1)
year after the Closing Date and shall remain in full force and effect and
survive thereafter only with respect to any claims made prior to such date.
(b) The Identified Representations shall not survive the
Closing and no claim of indemnification under this Article 11 may be brought in
respect thereof. As used herein, the "Identified Representations" shall mean
Sections 2.4, 2.5, 2.6(a), 2.6(b), 2.6(c), 2.6(f), 2.7, 2.8, 2.9, 2.10, 2.11,
2.12, 2.14 and 2.20.
(c) The representations and warranties of the Shareholders set
forth in Section 2.18(a) of this Agreement shall survive the Closing for an
indefinite period of time.
(d) The covenants and obligations of each party to this
Agreement under Sections 1.5, 11.5, 11.6 and 11.7 and Articles 8, 13 and 16
shall survive the Closing for an indefinite period of time.
(e) The covenants and obligations of each party to this
Agreement under Article 9 shall survive the Closing for a three-year period of
time.
(f) The covenants and obligations of each party to this
Agreement under Sections 11.1, 11.2, 11.3 and 11.4 shall survive the Closing as
follows:
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(i) in respect of any claims relating to Articles 8 or 9,
until the close of business on the date three (3) years after the Closing Date
and shall remain in full force and effect and survive thereafter only with
respect to claims made prior to such date;
(ii) in respect of any claims relating to Section
2.18(a), for an indefinite period of time; and
(iii) in respect of any other claims, until the close of
business on the date one (1) year after the Closing Date and shall remain in
full force and effect thereafter only with respect to any claims made prior to
such date.
11.6 Ceiling. Excluding any claim relating to Section 2.18(a) of this
Agreement, if the Closing occurs, the maximum aggregate liability of each
Shareholder under Section 11.1 shall be an amount equal to the lesser of One
Hundred Thousand Dollars ($100,000) or the principal of, and accrued interest
on, the Note, payable to such Shareholder, which amount shall include, but not
be limited to, attorneys fees and costs. Excluding any claim relating to Section
2.18(a) of this Agreement, in addition, the liability of each Shareholder,
insofar as a claim of indemnification arises solely as a breach of one of the
Ceiling Representations in respect of one of the Partnerships (not, by way of
example and not limitation, in respect of the Corporation or the Shareholders),
under Section 11.1(a) above shall be further limited (but not increased) to the
sum of (a) twenty-five percent (25%) of the Damages (excluding the Damages
covered by clause (b) below) and (b) the amounts of any attorney and paralegal
fees, court costs and related costs and expenses incurred in connection with any
action commenced to enforce the Buyer's rights under this Agreement. As used in
this Agreement, the "Ceiling Representations" shall be the representations
contained in Section 2.1(e), 2.2, and 2.18. The maximum liability of the Buyer
under Section 11.2 shall be an amount equal to the greater of One Million
Dollars ($1,000,000) or the principal amount of, and accrued interest on, the
Note payable to both Shareholders.
11.7 Exclusive Remedy. If the Closing occurs, the provisions of this
Article 11 shall be the sole and exclusive remedy of any party for any breach of
any representation, warranty, covenant or obligation under this Agreement.
Article 12. Brokers.
Each party to this Agreement represents and warrants that no broker or
finder has acted for it in connection with this Agreement or the transactions
contemplated hereby and that no broker or finder is entitled to any brokerage or
finder's fee or other commission. Each party to this Agreement agrees to
indemnify and hold harmless the other parties hereto with respect to any claim
for any brokerage or finder's fee or other commission.
Article 13. Notices.
All notices, requests, demands and other communications required or
permitted to be
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given hereunder shall be in writing and shall be deemed to have been duly given
if delivered personally, given by prepaid telegram or facsimile or mailed first
class, postage prepaid, registered or certified mail as follows:
If to Buyer: Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Tel. (408) 743-5400
Fax (408) 743-5401
If to the Shareholders: Hector Regner
#6 LeVanto
Irvine, CA 92606
Telephone: (714) 857-1869
Facsimile: (714) 857-1869
Pager: (714) 536-0812
Vanna Regner
17 Harbor Ridge Drive
Newport Beach,CA 92660
Telephone: (714) 760-1012
Facsimile: (714) 760-1012
If to the Trust: The Regner Family Trust dated September 10, 1984
c/o Law Offices of Gary B. Ross
8001 Irvine Center Drive, Suite 1500
Irvine, CA 92618
Telephone: (714) 753-1999
Facsimile: (714) 753-1998
If to the Corporation: Neutronic Stampings,Inc.
c/o Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Tel. (408) 743-5400
Fax (408) 743-5401
Article 14. Termination or Failure to Close.
14.1 Termination Events. This Agreement may be terminated prior to
Closing:
25.
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(a) By the Buyer at any time in its sole and unfettered
discretion;
(b) By the Shareholders if the Shareholders reasonably
determine that the satisfaction of any of the provisions of Article 6 has become
impossible (other than as a result of a failure on the part of the
Shareholders).
(c) By the Shareholders if the Closing has not taken place by
the close of business on April 21, 1997.
(d) By the mutual consent of the Buyer and the Shareholders.
14.2 Effect of Termination. In the event of termination pursuant to
this Article 14, the parties shall not be relieved of liabilities arising from
any prior breach of any covenant or obligation under this Agreement that relates
to a failure to consummate the transactions contemplated hereby; and the parties
shall remain bound by the provisions set forth in Articles 8, 11, 13 and 16
(excluding Sections 16.3 and 16.4 thereof).
14.3 Ceiling. Notwithstanding anything in this Agreement to the
contrary, if the Closing does not occur for any reason, the maximum aggregate
liability of each Shareholder under this Agreement shall be an amount equal to
One Hundred Thousand Dollars ($100,000). Attorneys fees shall be included in the
meaning of the phrase, "maximum aggregate liability". Additionally, Shareholders
shall have no liability to Buyer for any consequential damages to Buyer
including, but not limited to, lost opportunity and/or lost profit, in the event
the Closing does not occur for any reason.
14.4 Sole and Exclusive Remedy. If the Closing does not occur for any
reason, the provisions of this Article 14 shall be the Sole and Exclusive Remedy
of any party for any breach of any representation, warranty, covenant, or
obligation under this Agreement.
26.
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Article 15. Pre-Closing Negotiations.
During the period between the date hereof and the Closing Date (the
"Pre-Closing Period"), the Buyer may identify to the Shareholders any inaccuracy
in any representation or problem related to the Corporation or either
Partnership (anything so identified shall be referred to herein as an
"Identified Problem"). With respect to any Identified Problem, the Buyer and the
Shareholders shall work together to develop a solution to the Identified Problem
and, where appropriate, a cost estimate for such solution. Whenever a solution
to an Identified Problem involves material cost, the parties shall negotiate in
good faith to determine how to share such cost. Any agreement resulting from any
such negotiation shall be evidenced in writing. Subject to Article 11 of this
Agreement, under no circumstances whatsoever shall the Shareholders be obligated
to pay any amount to solve an Identified Problem.
Article 16. Miscellaneous.
16.1 Severability. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c) such
invalidity of enforceability of such provision or part thereof shall not affect
the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
16.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California. If any legal action is
necessary to enforce the terms and conditions of this Agreement, the parties
hereby agree that the Superior Court of California, County of Orange, shall be
the sole jurisdiction and venue for the bringing of the action.
16.3 Attorneys' Fees. If any legal action is necessary to enforce the
terms and conditions of this Agreement, the prevailing party shall be entitled
to recover all costs of suit and reasonable attorneys' fees as determined by the
court.
16.4 Post-Judgment Attorneys' Fees. In addition to the provisions of
the immediately preceding paragraph, above, the prevailing party shall be
entitled to receive its reasonable attorneys' fees incurred in enforcing any
judgment. Said attorneys' fees incurred in enforcing any judgment are
recoverable as a separate item. Subject to Sections 11.6 and 11.7, the post-
judgment attorneys' fees provision herein is intended to be severable from the
other provisions of the Agreement and to survive any judgment and is not to be
deemed merged into the judgment.
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16.5 Waiver. Waiver of any default or breach of this Agreement or of
any warranty, representation, covenant or obligation contained herein shall not
be construed as a waiver of any subsequent breach or any other power, right,
privilege or remedy.
16.6 Entire Agreement. This Agreement supersedes any prior written or
oral agreement between them respecting the subject matter contained herein.
16.7 Amendment. This Agreement cannot be modified or amended except by
a writing signed by all the parties hereto.
16.8 Cumulative Remedies. No right or remedy herein conferred on or
reserved to either party is intended to be exclusive of any other remedy or
right, and each and every right or remedy shall be cumulative and in addition to
any right or remedy given hereunder or now or hereafter existing at law or in
equity or by statute.
16.9 Assignment. Neither this Agreement nor any interest therein shall
be assigned by the Buyer or the Shareholders without the written consent of the
other.
16.10 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, successors, representatives
and assigns.
16.11 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
16.12 Liens and Guaranties. The Shareholders acknowledge and agree
that, in connection with funding the Purchase Price and for other reasons, at or
after the Closing the Buyer may (i) cause the Corporation and the Partnerships
to grant security interests in any or all of the assets of the Corporation and
the Partnerships and (ii) cause the Corporation and the Partnerships to guaranty
any or all of the obligations of the Buyer to its lending institutions.
28.
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In Witness Whereof, the parties have executed this Agreement in one or
more counterparts, which, taken together shall constitute one agreement, which
agreement shall be effective as of and on the date first above written.
Buyer:
Elexsys International, Inc.
By:
------------------------------------
Milan Mandaric,
Chairman and Chief Executive Officer
Shareholders:
----------------------------------------
Hector Regner
----------------------------------------
Vanna Regner
The Regner Family Trust
By:
------------------------------------
Hector Regner, Trustee
By:
------------------------------------
Vanna Regner, Trustee
Corporation:
Neutronic Stampings, Inc.
By:
------------------------------------
<PAGE>
Law Office of Gary B. Ross
A Law Corporation
8001 Irvine Center Drive
Suite 1500
Irvine, CA 92618
April 14, 1997
Elexsys International, Inc.
4405 Fortran Court
San Jose, California 95134
Ladies and Gentlemen:
We have acted as counsel for Hector Regner, Vanna Regner and the Regner Family
Trust dated September 10, 1984 (the "Trust") in connection with the sale of all
outstanding shares of common stock of Neutronic Stampings, Inc., a California
corporation ("Neutronic"), pursuant to the Stock Purchase Agreement between
Hector Regner, Vanna Regner, the Trust, Elexsys International, Inc. and
Neutronic (as to Section 1.3) dated as of April 7, 1997 (the "Agreement"). We
are rendering this opinion pursuant to Section 5.3(b) of the Agreement. Except
as otherwise defined herein, the capitalized terms used but not defined herein
shall have the respective meanings given to them in the Agreement.
We are of the opinion that:
1. Neutronic has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
Neutronic has no subsidiaries.
2. Neutronic has the requisite corporate power and authority to own or
lease its property and assets and to conduct its business as it is currently
being conducted. To the best of our knowledge, Neutronic is not required to be
qualified to do business under the laws of any jurisdiction other than the State
of California.
3. Neutronic owns fifty percent (50%) of the outstanding partnership
interests of each of H&V Services and Neutronic Plating (collectively, the
"Partnerships"), free and clear of any Encumbrances.
4. Neutronic's authorized capital stock consists of one million
(1,000,000) shares of common stock, with no par value, fourteen thousand
(14,000) shares of which are issued and outstanding. The outstanding common
stock of Neutronic has been duly authorized and validly issued, and is fully
paid and nonassessable. To the best of our knowledge, there are no outstanding
rights, subscriptions, options, warrants, calls, commitments or agreements to
which
1.
<PAGE>
Neutronic is a party or by which it is bound relating to its authorized or
issued capital stock.
5. The Trust owns all of the issued and outstanding common stock of
Neutronic of record and beneficially, free and clear of any Encumbrances.
6. The Agreement has been duly and validly authorized, executed and
delivered by each of Hector Regner, Vanna Regner, the Trust and Neutronic and is
a valid and binding obligation of each of Hector Regner, Vanna Regner, the Trust
and Neutronic, enforceable against each in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
7. The Releases have been duly and validly authorized, executed and
delivered by each of Hector Regner, Vanna Regner and the Trust and are the valid
and binding obligation of each of Hector Regner, Vanna Regner and the Trust,
enforceable against each in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws affecting creditors' rights, and subject to
general equity principles and to limitations on availability of equitable
relief, including specific performance.
8. The Amendments to the Leases have been duly and validly authorized,
executed and delivered by each of Hector Regner, Vanna Regner and Neutronic and
are the valid and binding obligation of each of Hector Regner, Vanna Regner and
Neutronic, enforceable against each in accordance with their terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
9. The execution and delivery of the Agreement, the Amendments to the
Leases and the Releases by Hector Regner, Vanna Regner, the Trust and Neutronic
and the consummation of the transactions provided for in the Agreement will not
violate, conflict with or result in a default under the articles of
incorporation or bylaws of Neutronic or the provisions of the Trust, or, to the
best of our knowledge, (i) any statute, law, rule or regulation, or (ii) the
articles of incorporation or bylaws of Neutronic, or (iii) the partnership
agreement or other foundation document of either Partnership, or (iv) any order,
writ, judgment, injunction, decree, determination or award which has been
entered against Hector Regner, Vanna Regner, the Trust, Neutronic or either
Partnership, or (v) any agreement, contract, license or permit applicable to or
binding upon Hector Regner, Vanna Regner, the Trust, Neutronic or either
Partnership, or (vi) any provision of any Material Contract.
8. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened, before any court or administrative
agency: (i) that involves Hector Regner, Vanna Regner, the Trust, Neutronic or
either Partnership or any of the assets owned or
2.
<PAGE>
used by Neutronic or either Partnership; (ii) that calls into question the
validity or performance of the Agreement, the Amendments to the Leases or the
Releases; or (iii) that might result either individually or in the aggregate in
any material adverse change in the assets, financial condition or operations of
Neutronic or either Partnership. To the best of our knowledge, there is no
order, writ, injunction, judgment or decree to which Hector Regner, Vanna
Regner, the Trust, Neutronic or either Partnership is subject.
9. To the best of our knowledge, all consents, approvals,
authorizations, or orders of, and filings, registrations, and qualifications
with any regulatory authority or governmental body in the United States required
for the consummation by Hector Regner, Vanna Regner, the Trust and Neutronic of
the transactions contemplated by the Agreement, have been made or obtained.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Law Offices of Gary B. Ross, a Law Corporation
By:
------------------------------------
3.
<PAGE>
BILL OF SALE
This Bill of Sale is made April __, 1997 by Hector Regner, Vanna Regner
and the Regner Family Trust dated September 10, 1984 (the "Shareholders"), in
favor of Neutronic Stampings, Inc., a California corporation (the
"Corporation"). Capitalized terms used herein shall have the meanings ascribed
to them in the Stock Purchase Agreement between Shareholders, the Corporation
and Elexsys International, Inc. (the "Buyer") dated April 7, 1997 (the "Stock
Purchase Agreement"), unless otherwise defined.
W I T N E S S E T H :
Whereas, the Shareholders, the Buyer and the Corporation (as to Section
1.3 thereof) have entered into the Stock Purchase Agreement, pursuant to which
the Shareholders have agreed to sell their shares of capital stock of the
Corporation to the Buyer;
Whereas, pursuant to the Stock Purchase Agreement, the Shareholders
have agreed to transfer to the Corporation all assets owned by them and used in
the business or operations of the Corporation or the Partnerships, other than
the real property leased pursuant to the Leases (the "Assets"), which Assets
shall include without limitation the items identified on Schedule A attached
hereto.
Now, Therefore, for valuable consideration, receipt of which is hereby
acknowledged, the Shareholders hereby grant, sell, convey, transfer, assign,
release and deliver to the Corporation all right, title and interest in and to
the Assets.
To Have and To Hold the same unto the Corporation, its successors and
assigns forever.
The Shareholders represent and warrant to the Corporation that the
Assets are transferred hereby free and clear of any Encumbrances.
The Shareholders, at any time at or after the date hereof, will
execute, acknowledge and deliver any further deeds, assignments, conveyances and
other assurances, documents, and instruments of transfer reasonably requested by
the Corporation and will take any other action consistent with the terms of this
Bill of Sale that may reasonably be requested by the Corporation for the purpose
of assigning, transferring, granting, conveying and confirming to the
Corporation, or reducing to possession, any or all of the Assets. If requested
by the Corporation, each Shareholder further agrees to prosecute or otherwise
enforce in its own name for the benefit of the Corporation any claims, rights or
benefits included in the Assets that require prosecution or enforcement in such
Shareholder's name. Any prosecution or enforcement of claims, rights or
1.
<PAGE>
benefits under this paragraph shall be at the Corporation's expense, unless the
prosecution or enforcement occurs in connection with a breach of this Bill of
Sale by either Shareholder or a breach of an obligation of either Shareholder
contained in the Stock Purchase Agreement, in which case such prosecution or
enforcement shall be at the expense of the breaching Shareholder. Each
Shareholder agrees to notify the Corporation of the address at which the
Shareholder may promptly be contacted. Each Shareholder agrees to be responsible
for, and to compensate and reimburse the Corporation for, any damages,
liabilities, fees, costs or expenses incurred by the Corporation as a
consequence of such Shareholder not performing his or her obligations hereunder.
In Witness Whereof, this Bill of Sale has been executed by each
Shareholder as of the day and year first above written.
----------------------------------------
Hector Regner
----------------------------------------
Vanna Regner
The Regner Family Trust dated
September 10, 1984
By:
-------------------------------
Hector Regner, Trustee
By:
-------------------------------
Vanna Regner, Trustee
2.
<PAGE>
Schedule A
1. 618HA Hand Feed Surface Grinder (22305).
2. G-18 Jig Moore Grinder.
3. Bruderer 8011 BSTA 60.
4. Bruderer 7113 BSTA 30-I.
5. Bruderer 7321 BSTA 30-I.
6. Bruderer 6814 BSTA 30-I.
7. Bruderer 6818 BSTA 30-I.
8. Bruderer 6360 BSTA 30-I.
3.
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made by Elexsys International,
Inc., a Delaware corporation, with its principal place of business at 4405
Fortran Court, San Jose, California 95134 ("Debtor"), in favor of
______________________________, an individual currently residing in the State of
California ("Secured Party").
WHEREAS, Debtor, Secured Party and certain other parties have entered
into that certain Stock Purchase Agreement, dated as of April 7, 1997 (the
"Purchase Agreement");
WHEREAS, pursuant to the terms of the Purchase Agreement, Debtor has
executed and delivered to Secured Party two promissory notes, of even date
herewith, one in the amount of $500,000 and one in the amount of $665,000 (the
"Notes"), wherein Debtor promises to pay the outstanding principal balance of
the Notes in accordance with the terms and provisions thereof; and
WHEREAS, Secured Party is willing to make the loans evidenced by the
Notes, but only upon the condition, among others, that Debtor shall have
executed and delivered to Secured Party this Security Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Debtor hereby agrees as
follows:
1. As security for the full, prompt and complete payment and performance
when due (whether by stated maturity, by acceleration or otherwise) of all
indebtedness of Debtor to Secured Party created under the Notes (collectively,
the "Obligations"), Debtor hereby grants to Secured Party, a security interest
in all of the following investment property (as defined in the California
Uniform Commercial Code) (collectively, the "Collateral"): Seven Thousand
(7,000) shares of the common stock of Neutronic Stampings, Inc., a California
corporation ("Neutronic"), evidenced by the common stock certificate of
Neutronic numbered _____, and any equity securities from time to time received,
receivable, or otherwise distributed in respect of or in exchange for any or all
of the Collateral.
2. At any time that Debtor shall fail to perform its obligations under
any Note, Secured Party may, but shall not be obligated to: (1) insure, process
and preserve the Collateral; (2) subject to the rights of Sanwa Bank California
("Sanwa"), its successors or assigns (or any lender or lenders who provide
financing to refinance Debtor's indebtedness owing to Sanwa (the "Refinancing
Indebtedness")) instruct Debtor to deliver physical possession of the Collateral
to Secured Party or Secured Party's agent, and (3) exercise as to such
Collateral all the rights, powers and remedies of an owner; provided, however,
that, so long as no such default shall be continuing under such Note, Debtor
shall retain the Collateral in Debtor's possession, subject at all times to
Secured Party's perfected security interest in the Collateral. Such security
interest shall be evidenced by this agreement and a UCC-1 Financing Statement
regarding the Collateral filed with the California Secretary of State, pursuant
to Section 9115 of the California Uniform Commercial Code. Secured Party hereby
acknowledges and expressly consents to the first
<PAGE>
priority security interest in the Collateral held by Sanwa pursuant to an
Accounts Receivable Credit Agreement and a Term Loan Credit Agreement, each
dated as of January 27, 1997.
3. Debtor agrees to pay prior to delinquency all taxes, charges, liens
and assessments against the Collateral, and upon the failure of Debtor to do so,
Secured Party at its option may pay any of them and shall be the sole judge of
the legality or validity thereof and the amount necessary to discharge the same.
4. At the option of Secured Party, with prior written notice to Debtor,
all or any part of the obligations of Debtor shall immediately become due and
payable irrespective of any agreed maturity, upon the levy of any attachment,
execution or other process against the Collateral; or the insolvency, commission
of an act of bankruptcy, general assignment for the benefit of creditors, filing
of any petition in bankruptcy or for relief under the provisions of Title 11 of
the United States Code of, by, or against Debtor, which, in the case of an
involuntary proceeding, is not dismissed within sixty (60) days.
5. In the event of the nonpayment of any Obligations within thirty (30)
days of the date when due, subject to any applicable grace periods, whether by
acceleration or otherwise, Secured Party may then, or at any time thereafter if
such default has not been cured, at its election, upon 20 days' prior written
notice to Debtor exercise all the rights and remedies of a secured creditor
under the California Uniform Commercial Code or any other applicable laws,
subject to any restrictions found therein.
6. The proceeds of any sale of any of the Collateral permitted
hereunder and all sums received or collected by Secured Party from or on account
of such Collateral shall be applied by Secured Party to the payment of
reasonable expenses incurred or paid by Secured Party in connection with any
sale, transfer or delivery of the Collateral, to the payment of any other costs,
charges, reasonable attorneys' fees or expenses mentioned herein, and to the
payment of the indebtedness or any part hereof, all in such order and manner as
Secured Party in its discretion may determine. Secured Party shall then pay any
balance to Debtor.
7. Notwithstanding anything to the contrary herein, or in any other
document, at any time that the Obligations shall have been paid in full, Secured
Party shall (i) immediately return and release all Collateral, (ii) renounce all
claims thereto, and (iii) execute and file any documents or statements
reasonably requested by Debtor to establish the foregoing.
8. If any provision of this Security Agreement is held to be
unenforceable for any reason, it shall be modified to the extent necessary, if
possible, rather than voided, in order to achieve the intent of the parties. In
any event, all other provisions of this Security Agreement shall be deemed valid
and enforceable to the full extent possible.
9. This Security Agreement shall be governed by, and construed in accordance
with, the laws of the State of California as applied to contracts made and
performed entirely within the State of California by residents of such State.
2.
<PAGE>
Dated: April ___, 1997
Debtor
ELEXSYS INTERNATIONAL, INC.
---------------------------------------
Printed Name: Milan Mandaric
Title: Chairman and Chief Executive Officer
Secured Party
---------------------------------------
Printed Name:
3.
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is dated, for
reference purposes only, April 14, 1997 and is entered into by HECTOR REGNER and
VANNA REGNER (collectively, "Lessor") and NEUTRONIC STAMPINGS, INC., a
California corporation ("Lessee"), for the purpose of amending that certain
Industrial Lease dated September 18, 1995 (the "Lease") by and between Lessor
and Lessee concerning the lease of the property located at 10535 Lawson River
Avenue, Fountain Valley, CA, as more specifically described in the Lease (the
"Premises").
RECITALS
WHEREAS, Lessor and Lessee desire for their mutual benefit to amend
certain terms and provisions of the Lease as provided herein;
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Term. The term of this Lease shall expire on January 31, 2002, rather than
September 30, 2000.
2. Conditions to Effectiveness. The effectiveness of this First Amendment is
hereby conditioned upon the closing of the transactions contemplated by the
Stock Purchase Agreement dated April 7, 1997 (the "Stock Purchase Agreement") by
and among Hector Regner, Vanna Regner, Elexsys International, Inc., and
Neutronic Stampings, Inc. (but only as to section 1.3 of the Stock Purchase
Agreement). The Effective Date of this First Amendment (the "Effective Date")
shall be that date of the Closing contemplated by the Stock Purchase Agreement.
Until such Closing shall have been consummated, this First Amendment shall be of
no force or effect.
3. Definitions. All capitalized terms used but not defined herein shall have the
meanings assigned to them in the Lease.
4. Compliance With Law. Section 10 is amended by adding the following language
as the second sentence in section 10:
Notwithstanding the foregoing, Lessee shall not be responsible for compliance
with any laws, codes, ordinances, requirements or other governmental
directives respecting the Premises where such compliance is not related
specifically to the distinctive manner of use and occupancy by Lessee of the
Premises, as opposed to the use and occupancy of the Premises by any tenant.
For example, if any governmental authority should require the
1.
<PAGE>
Premises to be structurally strengthened against earthquake, or should
require the removal of asbestos from the Premises and such measures are
imposed as a general requirement applicable to all tenants rather than as a
condition to Lessee's specific use or occupancy of the Premises, such work
shall be performed by and at the sole cost of Lessor.
5. Improvements and Repairs. Section 12 is amended by adding the following
language at the end of section 12:
As of the Effective Date, Lessor represents and warrants that (i) it knows of
no material defects in the Premises or Building which would unreasonably
interfere with Lessee's use and enjoyment of the Premises; and (ii) the
mechanical, electrical, air conditioning, ventilating and plumbing system and
equipment serving the Premises are in good order and repair, provided,
however that the representations and warranties set forth in this sentence
shall not be deemed to imply that the Premises, the Building or the
mechanical, electrical, air conditioning, ventilating and plumbing systems
are suitable for any particular purpose. Each of the foregoing
representations and warranties contained herein shall be true and correct as
of the Effective Date and Lessor shall promptly correct any violation of the
foregoing representations and warranties at its sole cost and expense.
6. Liability for Injury. Section 16 of the Lease is amended by deleting the
first sentence of this section and replacing the same with the following
language:
Lessee agrees to save Lessor harmless and indemnify Lessor from all loss,
damage, liability or expense incurred or claimed by reason of any injury or
damage to any person or property which may be brought against Lessor or which
Lessor may pay or incur arising from or relating to the use, occupancy and
enjoyment of the Premises by Lessee, excluding those arising from or relating
to the negligence, willful misconduct or omissions of Lessor, its agents,
employees or contractors or a breach by Lessor of its obligations hereunder.
Lessor agrees to save Lessee harmless and indemnify Lessee from all loss,
damage, liability or expense incurred or claimed by reason of any injury or
damage to any person or property which may be brought against Lessee or which
Lessee may pay or incur to the extent such liabilities or matters arise from
or relate to the negligence, willful misconduct or omissions of Lessor, its
agents, employees or contractors. In the event that Lessor and Lessee shall
both be negligent in respect of a particular matter, the losses, damages,
liabilities or expenses incurred or claimed by any person in respect of such
matter shall be borne by the parties in proportion to their respective
relative negligence.
7. Subordination. Section 24 of the Lease is amended by adding the following
language at the end of this section:
Lessor represents to Lessee that as of the Effective Date there are no
mortgages or deeds of trust or other liens encumbering the demised premises.
Lessor agrees to provide Lessee with a commercially reasonable
non-disturbance, subordination and attornment
2.
<PAGE>
agreement in favor of Lessee from any mortgagee or beneficiary under a deed
of trust to whom Lessee is subordinating its leasehold interest as a
condition precedent to Lessee's agreement to be bound by this section 24.
Such agreement shall provide that Lessee's quiet possession, use and
enjoyment of the Premises during the Lease term (as the same may be extended)
shall not be disturbed as long as Lessee is not in default of its obligations
under the Lease.
8. Property Taxes and Insurance. Section 34 of the Lease is amended to read as
follows:
Lessee to pay Property Taxes and Insurance, as set forth in Section 16 of
this Lease, in addition to rent.
9. Maintenance. The following language is added at the end of Section 36:
Notwithstanding anything in this Lease to the contrary, Lessor shall keep,
repair and maintain in good condition the structural elements of the
Building, including but not limited to the roof, exterior walls and
foundation. Lessee shall be responsible for repair and maintenance of the
parking lot and shall reseal the parking lot every two years, but shall not
be obligated to repave the parking lot. Lessee shall be responsible for
electrical maintenance.
10. Option. The following language is added at the end of Section 37:
Lessee shall have the right to extend the Lease for one additional term of
five (5) years (the "Extended Term") upon the same terms and conditions of
this Lease, except Rent which shall be calculated as provided below. If
Lessee desires to so extend the term of this Lease, Lessee shall notify
Lessor in writing of its intention no later than three (3) months prior to
the expiration of the original Lease term. Within thirty (30) days of
Lessor's receipt of Lessee's election notice, Lessor shall notify Lessee in
writing of the "prevailing rent" for the premises during the Extended Term
(the "Prevailing Rent"). Within thirty (30) days of Lessee's receipt from
Lessor of the proposed rent for the Extended Term, Lessee shall have the
right to revoke its exercise of its extension option by providing notice
thereof to Lessor in writing.
For purposes hereof, Prevailing Rent for the Extended Term shall mean the
effective base rental rates (including periodic adjustments to such base
rental rates) then being received for premises of similar size and quality to
the Premises, located in industrial parks in the Fountain Valley area which
are similar in size and quality to the industrial park in which the Premises
are located, leased for terms of approximately five years, and otherwise
subject to leases containing substantially similar terms as those contained
in this Lease. Notwithstanding the foregoing, "Prevailing Rent" shall not
include any rental value attributable to improvements, alterations, fixtures,
equipment and personal property installed at the Premises at Lessee's
expense.
3.
<PAGE>
11. Environmental. The third paragraph of the Addendum to Lease dated December
1, 1996 ("Addendum") is deleted in its entirety and the following substituted
therefor:
Lessor shall defend, indemnify, and hold Lessee harmless from and against any
and all liability, loss, suits, claims, actions, costs and expenses,
including without limitation, any attorneys' fees, arising from any
contamination of the Premises (including the underlying land and ground
water) by any Hazardous Materials, where such contamination was not caused by
Lessee. The indemnity obligations of Lessor under the Lease shall survive the
expiration or termination of the Lease.
Notwithstanding anything to the contrary contained in the Lease, Lessee's
indemnification obligation contained herein shall apply only to the use,
manufacture, storage or disposal of Hazardous Materials by Lessee, its
employees, agents or contractors, on, under or about the Premises.
Notwithstanding anything to the contrary contained in the Lease, Lessee may
make use on the Premises of such Hazardous Materials as are connected with
the businesses of plating and stamping.
Upon termination of the Lease, at Lessee's sole expense, Lessee shall remove
the two in-ground sump tanks on the Premises and the related in-ground
plumbing and remediate Hazardous Materials in the ground of the Premises as a
consequence of leaks from such tanks and plumbing, so that soil contamination
is at or below levels acceptable to the relevant governmental authorities.
Lessee shall provide a written report from an independent service to evidence
compliance with the foregoing.
The provisions of this Section 11 shall survive the termination of the lease
for an indefinite period.
12. Improvements. The following language is added to the paragraph entitled
"Improvements" in the Addendum:
Notwithstanding anything to the contrary contained in this Lease, Lessee may
make alterations, improvements or changes to the Premises only with Lessor's
written consent, which consent will not be unreasonably withheld. Lessee
shall not be required to remove any alterations, additions or improvements
made to the Premises with Lessor's written consent.
13. Insurance. The phrase "paragraph 8.5" is hereby deleted from the second line
of the last paragraph of the Addendum and the phrase "herein" is substituted
therefor.
14. No Further Modification. Except as modified by this First Amendment, the
Lease remains unchanged and in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this First Amendment.
LESSOR:
________________________________
HECTOR REGNER
________________________________
VANNA REGNER
LESSEE:
NEUTRONIC STAMPINGS, INC.
By: __________________________
Name: __________________________
Title: __________________________
5.
<PAGE>
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("First Amendment") is dated, for
reference purposes only, April 14, 1997 and is entered into by V.R. ENTERPRISES
("Lessor") and NEUTRONIC STAMPINGS, INC., a California corporation ("Lessee"),
for the purpose of amending that certain Industrial Lease dated January 20, 1997
(the "Lease") by and between Lessor and Lessee concerning the lease of the
property located at 10550 Lawson River Avenue, Fountain Valley, CA, as more
specifically described in the Lease (the "Premises").
RECITALS
WHEREAS, Lessor and Lessee desire for their mutual benefit to amend
certain terms and provisions of the Lease as provided herein;
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
1. Conditions to Effectiveness. The effectiveness of this First Amendment
is hereby conditioned upon the closing of the transactions contemplated by the
Stock Purchase Agreement dated April 7, 1997 (the "Stock Purchase Agreement") by
and among Hector Regner, Vanna Regner, Elexsys International, Inc., and
Neutronic Stampings, Inc. (but only as to section 1.3 of the Stock Purchase
Agreement). The Effective Date of this First Amendment (the "Effective Date")
shall be that date of the Closing contemplated by the Stock Purchase Agreement.
Until such Closing shall have been consummated, this First Amendment shall be of
no force or effect.
2. Definitions. All capitalized terms used but not defined herein shall
have the meanings assigned to them in the Lease.
3. Compliance With Law. Section 10 is amended by adding the following
language as the second sentence in section 10:
Notwithstanding the foregoing, Lessee shall not be responsible for
compliance with any laws, codes, ordinances, requirements or other
governmental directives respecting the Premises where such compliance
is not related specifically to the distinctive manner of use and
occupancy by Lessee of the Premises, as opposed to the use and
occupancy of the Premises by any tenant. For example, if any
governmental authority should require the Premises to be structurally
strengthened against earthquake, or should require the removal of
asbestos from the Premises and such measures are imposed as a general
requirement applicable to all tenants rather than as a condition to
Lessee's specific use or occupancy of the Premises, such work shall be
performed by and at the sole cost of Lessor.
1.
<PAGE>
4. Improvements and Repairs. Section 12 is amended by adding the following
language at the end of section 12:
As of the Effective Date, Lessor represents and warrants that (i) it
knows of no material defects in the Premises or Building which would
unreasonably interfere with Lessee's use and enjoyment of the Premises;
and (ii) the mechanical, electrical, air conditioning, ventilating and
plumbing system and equipment serving the Premises are in good order
and repair, provided, however, that the representations and warranties
set forth in this sentence shall not be deemed to imply that the
Premises, the Building or the mechanical, electrical, air conditioning,
ventilating and plumbing systems are suitable for any particular
purpose. Each of the foregoing representations and warranties contained
herein shall be true and correct as of the Effective Date and Lessor
shall promptly correct any violation of the foregoing representations
and warranties at its sole cost and expense.
5. Liability for Injury. Section 16 of the Lease is amended by deleting
the first sentence of this section and replacing the same with the following
language:
Lessee agrees to save Lessor harmless and indemnify Lessor from all
loss, damage, liability or expense incurred or claimed by reason of any
injury or damage to any person or property which may be brought against
Lessor or which Lessor may pay or incur arising from or relating to the
use, occupancy and enjoyment of the Premises by Lessee, excluding those
arising from or relating to the negligence, willful misconduct or
omissions of Lessor, its agents, employees or contractors or a breach
by Lessor of its obligations hereunder. Lessor agrees to save Lessee
harmless and indemnify Lessee from all loss, damage, liability or
expense incurred or claimed by reason of any injury or damage to any
person or property which may be brought against Lessee or which Lessee
may pay or incur to the extent such liabilities or matters arise from
or relate to the negligence, willful misconduct or omissions of Lessor,
its agents, employees or contractors. In the event that Lessor and
Lessee shall both be negligent in respect of a particular matter, the
losses, damages, liabilities or expenses incurred or claimed by any
person in respect of such matter shall be borne by the parties in
proportion to their respective relative negligence.
6. Subordination. Section 24 of the Lease is amended by adding the
following language at the end of this section:
Lessor represents to Lessee that as of the Effective Date there are no
mortgages or deeds of trust or other liens encumbering the demised
premises. Lessor agrees to provide Lessee with a commercially
reasonable non-disturbance, subordination and attornment agreement in
favor of Lessee from any mortgagee or beneficiary under a deed of trust
to whom Lessee is subordinating its leasehold interest as a condition
precedent to Lessee's agreement to be bound by this section 24. Such
agreement shall provide that Lessee's quiet possession, use and
enjoyment of the Premises during the Lease term (as the same may be
extended) shall not be disturbed as long as Lessee is not in default of
its
2.
<PAGE>
obligations under the Lease.
7. Property Taxes and Insurance. Section 34 of the Lease is amended to
read as follows:
Lessee to pay Property Taxes and Insurance, as set forth in Section 16
of this Lease, in addition to rent.
8. Maintenance. The following language is added at the end of Section 36:
Notwithstanding anything in this Lease to the contrary, Lessor shall
keep, repair and maintain in good condition the structural elements of
the Building, including but not limited to the roof, exterior walls and
foundation. Lessee shall be responsible for repair and maintenance of
the parking lot and shall reseal the parking lot every two years, but
shall not be obligated to repave the parking lot. Lessee shall be
responsible for electrical maintenance.
9. Option. The following language is added at the end of Section 37:
Lessee shall have the right to extend the Lease for one additional term
of five (5) years (the "Extended Term") upon the same terms and
conditions of this Lease, except Rent which shall be calculated as
provided below. If Lessee desires to so extend the term of this Lease,
Lessee shall notify Lessor in writing of its intention no later than
three (3) months prior to the expiration of the original Lease term.
Within thirty (30) days of Lessor's receipt of Lessee's election
notice, Lessor shall notify Lessee in writing of the "prevailing rent"
for the premises during the Extended Term (the "Prevailing Rent").
Within thirty (30) days of Lessee's receipt from Lessor of the proposed
rent for the Extended Term, Lessee shall have the right to revoke its
exercise of its extension option by providing notice thereof to Lessor
in writing.
For purposes hereof, Prevailing Rent for the Extended Term shall mean
the effective base rental rates (including periodic adjustments to such
base rental rates) then being received for premises of similar size and
quality to the Premises, located in industrial parks in the Fountain
Valley area which are similar in size and quality to the industrial
park in which the Premises are located, leased for terms of
approximately five years, and otherwise subject to leases containing
substantially similar terms as those contained in this Lease.
Notwithstanding the foregoing, "Prevailing Rent" shall not include any
rental value attributable to improvements, alterations, fixtures,
equipment and personal property installed at the Premises at Lessee's
expense.
10. Environmental. The third paragraph of the Addendum to Lease dated
December 1, 1996 ("Addendum") is deleted in its entirety and the following
substituted therefor:
Lessor shall defend, indemnify, and hold Lessee harmless from and
against any and all liability, loss, suits, claims, actions, costs and
expenses, including without limitation, any
3.
<PAGE>
attorneys' fees, arising from any contamination of the Premises
(including the underlying land and ground water) by any Hazardous
Materials, where such contamination was not caused by Lessee. The
indemnity obligations of Lessor under the Lease shall survive the
expiration or termination of the Lease.
The Provisions of this Section 10 shall survive the termination of the
Lease for an indefinite period.
Notwithstanding anything to the contrary contained in the Lease,
Lessee's indemnification obligation contained herein shall apply only
to the use, manufacture, storage or disposal of Hazardous Materials by
Lessee, its employees, agents or contractors, on, under or about the
Premises. Notwithstanding anything to the contrary contained in the
Lease, Lessee may make use on the Premises of such Hazardous Materials
as are connected with the businesses of plating and stamping.
11. The following language is added to the paragraph entitled
"Improvements" in the Addendum:
Notwithstanding anything to the contrary contained in this Lease,
Lessee may make alterations, improvements or changes to the Premises
only with Lessor's written consent, which consent will not be
unreasonably withheld. Lessee shall not be required to remove any
alterations, additions or improvements made to the Premises with
Lessor's written consent.
12. Insurance. The phrase "paragraph 8.5" is hereby deleted from the second
line of the last paragraph of the Addendum and the phrase "herein" is
substituted therefor.
13. No Further Modification. Except as modified by this First Amendment,
the Lease remains unchanged and in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4.
<PAGE>
IN WITNESS WHEREOF, the undersigned have entered into this First Amendment.
V.R. Enterprises
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
Neutronic Stampings, Inc.
By:
---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
5.
<PAGE>
RELEASE
This Release ("Release") is being executed and delivered as of April
__, 1997, by _______________________ ("Releasor") in favor of, and for the
benefit of, Neutronic Stampings, Inc., a California corporation (the
"Corporation"), Elexsys International, Inc., a Delaware corporation ("Parent"),
and the other Releasees (as defined in Section 2).
Recitals
A. Contemporaneously with the execution and delivery of this Release,
pursuant to a Stock Purchase Agreement, dated as of April 7, 1997 (the
"Agreement"), among the Releasor, Hector Regner, the Regner Family Trust dated
September 10, 1984, the Corporation (as to Section 1.3 of the Agreement) and
Parent, Parent is purchasing all of the outstanding capital stock of the
Corporation (the "Acquisition"). As a result of the Acquisition, the Corporation
is becoming a wholly owned subsidiary of Parent.
B. Parent has required, as a condition to consummating the Acquisition,
that Releasor execute and deliver this Release.
Agreement
In order to induce Parent to consummate the Acquisition, and for other
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by Releasor), Releasor hereby covenants and agrees as follows:
1. Release. Releasor, for herself and for each of her Associated
Parties (as defined in Section 2), hereby generally, irrevocably,
unconditionally and completely releases and forever discharges each of the
Releasees (as defined in Section 2) from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, each of the Released
Claims (as defined in Section 2).
2. Definitions.
(a) The term "Associated Parties," when used herein with respect to
Releasor, shall mean and include: (i) Releasor's predecessors, successors,
executors, administrators, heirs and estate; (ii) Releasor's past, present and
future assigns, agents and representatives; (iii) each entity that Releasor has
the power to bind (by Releasor's acts or signature) or over which Releasor
directly or indirectly exercises control; and (iv) each entity of which Releasor
owns, directly or indirectly, at least 50% of the outstanding equity,
beneficial, proprietary, ownership or voting interests.
<PAGE>
(b) The term "Releasees" shall mean and include: (i) Parent; (ii)
the Corporation; (iii) each of the direct and indirect subsidiaries of Parent;
(iv) each other affiliate of Parent; and (v) the successors and past, present
and future assigns, directors, officers, employees, agents, attorneys and
representatives of the respective entities identified or otherwise referred to
in clauses "(i)" through "(iv)" of this sentence, other than Releasor.
(c) The term "Claims" shall mean and include all past, present and
future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; (ii) any claim or right that
may be asserted or exercised by Releasor in her capacity as a shareholder,
director, officer or employee of the Corporation or in any other capacity; and
(iii) any claim, right or cause of action based upon any breach of any express,
implied, oral or written contract or agreement; (iv) any tort claim; and (v) any
indemnification claim.
(d) The term "Released Claims" shall mean and include each and
every Claim that (i) Releasor or any Associated Party of Releasor may have had
in the past, may now have or may have in the future against any of the
Releasees, and (ii) has arisen or arises out of, or relates to, any
circumstance, agreement, activity, action, omission, event or matter occurring
or existing on or prior to the date of this Release provided, however, that the
Released Claims shall not include: (1) Releasor's rights, if any, against Parent
under the Agreement; or (2) any rights that Releasor may have pursuant to the
Leases, the Short Term Notes, the Notes, or the Security Agreements (as such
terms are defined in the Agreement).
3. Representations and Warranties. Releasor represents and warrants
that:
(a) Releasor has not assigned, transferred, conveyed or otherwise
disposed of any Claim against any of the Releasees, or any direct or indirect
interest in any such Claim, in whole or in part;
(b) to the best of Releasor's knowledge, no other person or entity
has any interest in any of the Released Claims;
(c) to the best of Releasor's knowledge, no Associated Party of
Releasor has or had any Claim against any of the Releasees;
(d) to the best of Releasor's knowledge, no Associated Party of
Releasor will in the future have any Claim against any Releasee that arises from
or relates to any circumstance, agreement, activity, action, omission, event or
matter occurring or existing on or prior to the date of this Release;
(e) this Release has been duly and validly executed and delivered
by Releasor;
(f) this Release is a valid and binding obligation of Releasor and
Releasor's
2.
<PAGE>
Associated Parties, and is enforceable against Releasor and each of her
Associated Parties in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance;
(g) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the best of the knowledge
of Releasor, threatened against Releasor or any of Releasor's Associated Parties
that challenges or would challenge the execution and delivery of this Release or
the taking of any of the actions required to be taken by Releasor under this
Release;
(h) neither the execution and delivery of this Release nor the
performance hereof will: (i) result in any violation or breach of any agreement
or other instrument to which Releasor or any of Releasor's Associated Parties is
a party or by which Releasor or any of Releasor's Associated Parties is bound;
or (ii) result in a violation or any law, rule, regulation, treaty, ruling,
directive, order, arbitration award, judgment or decree to which Releasor or any
of Releasor's Associated Parties is subject; and
(i) no authorization, instruction, consent or approval of any
person or entity is required to be obtained by Releasor or any of Releasor's
Associated Parties in connection with the execution and delivery of this Release
or the performance hereof.
4. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any Releasee, Releasor shall hold harmless and
indemnify each Releasee from and against, and shall compensate and reimburse
each Releasee for, any loss, damage, injury, decline in value, lost opportunity,
liability, exposure, claim, demand, settlement, judgment, award, fine, penalty,
tax, fee (including reasonable attorneys' fees) charge, cost (including costs of
investigation) or expense of any nature which are suffered or incurred at any
time by any Releasee, or to which any Releasee otherwise becomes subject at any
time, and that arises out of or by virtue of, or relates to: (a) any failure on
the part of Releasor to observe, perform or abide by, or any other breach of,
any restriction, covenant, obligation, representation, warranty or other
provision contained herein; (b) the assertion or purported assertion of any of
the Released Claims by Releasor or, at any time such Associated Party is under
the control of Releasor, any of Releasor's Associated Parties; or (c) any
inaccuracy in or breach of any representation or warranty set forth in this
Release.
5. Notices. Any notice or other communication required or permitted to
be delivered to Releasor, the Corporation or Parent under this Release shall be
in writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery service
or by facsimile) to the address or facsimile telephone number set forth beneath
the name of such party below (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the other
party
3.
<PAGE>
hereto):
4.
<PAGE>
if to the Corporation: Neutronic Stampings, Inc.
c/o Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Attention: Chief Financial Officer
Tel: (408) 743-5400
Fax: (408) 743-5401
if to Parent: Elexsys International, Inc.
4405 Fortran Court
San Jose, CA 95134
Attention: Chief Financial Officer
Tel: (408) 743-5400
Fax: (408) 743-5401
if to Releasor:
6. Severability. If any provision of this Release or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) the invalidity or
unenforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Release. Each provision of this
Release is separable from every other provision of this Release, and each part
of each provision of this Release is separable from every other part of such
provision.
7. Governing Law. This Release shall be construed in accordance with,
and governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
8. Waiver. No failure on the part of any Releasee to exercise any
power, right, privilege or remedy under this Release, and no delay on the part
of any Releasee in exercising any power, right, privilege or remedy under this
Release, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Releasee shall be deemed to have waived any claim
arising out of this Release, or any power, right, privilege or remedy under this
Release, unless the waiver of
<PAGE>
such claim, power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such party; and any
such waiver shall not be applicable or have any effect except in the specific
instance in which it is given.
9. Captions. The captions contained in this Release are for convenience
of reference only, shall not be deemed to be a part of this Release and shall
not be referred to in connection with the construction or interpretation of this
Release.
10. Further Assurances. Releasor shall execute and/or cause to be
delivered to the Corporation and Parent such instruments and other documents and
shall take such other actions as Corporation or Parent may reasonably request to
effectuate the intent and purposes of this Release.
11. Entire Agreement. This Release sets forth the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings between the parties relating to the subject matter
hereof.
12. Amendments. This Release may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Releasor, Parent and the Corporation.
13. Binding Nature. This Release will be binding upon Releasor and
Releasor's Associated Parties and will inure to the benefit of each of the
Releasees.
14. Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Release is
brought against Releasor, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
15. Construction.
(a) For purposes of this Release, whenever the context requires:
the singular number shall include the plural, and vice versa.
(b) Releasor agrees that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Release.
(c) As used in this Release, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Release
to "Sections" are intended to refer to Sections of this Release.
<PAGE>
Releasor has executed this Release as of the date first above written.
--------------------------------------------
<PAGE>
PROMISSORY NOTE
$_____________ San Jose, California
April __, 1997
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of , the holder, at San Jose, California, in lawful money of
the United States of America the principal sum of
___________________________________________ ($_________________) together with
interest accrued from the date hereof on the unpaid principal at the rate of
8.00% per annum, or the maximum rate permissible by law (which under the laws of
the State of California shall be deemed to be the laws relating to permissible
rates of interest on commercial loans), whichever is less, on the date one year
after the date hereof.
This promissory note (the "Note") shall be secured by certain shares of
common stock of Neutronic Stampings, Inc. ("Neutronic") in accordance with the
Security Agreement entered into on this date between holder and the undersigned.
This Note may be prepaid in whole or in part at any time without
penalty. All money paid toward the satisfaction of this Note shall be applied
first to the payment of interest as required hereunder and then to the
retirement of the principal.
Reference is made to that certain Stock Purchase Agreement dated April
7, 1997, among the holder, Vanna Regner, Hector Regner, the Regner Family Trust
(dated September 10, 1984), Neutronic and the undersigned, for additional terms
to which this Note is subject.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
ELEXSYS INTERNATIONAL, INC.,
a Delaware corporation
By: ___________________________
Name: ___________________________
Title:___________________________
<PAGE>
SHORT TERM
PROMISSORY NOTE
$500,000.00 San Jose, California
April __, 1997
For Value Received, the undersigned hereby unconditionally promises to
pay to the order of_____________________________, the holder, at San Jose,
California, in lawful money of the United States of America the principal sum of
Five Hundred Thousand Dollars ($500,000) together with interest accrued from the
date hereof on the unpaid principal at the rate of 8.00% per annum, or the
maximum rate permissible by law (which under the laws of the State of California
shall be deemed to be the laws relating to permissible rates of interest on
commercial loans), whichever is less, on the date thirty days after the date
hereof.
This promissory note (the "Note") shall be secured by certain shares of
common stock of Neutronic Stampings, Inc. ("Neutronic") in accordance with the
Security Agreement entered into on this date between holder and the undersigned.
This Note may be prepaid in whole or in part at any time without
penalty. All money paid toward the satisfaction of this Note shall be applied
first to the payment of interest as required hereunder and then to the
retirement of the principal.
Reference is made to that certain Stock Purchase Agreement dated April
7, 1997, among the holder, Vanna Regner, Hector Regner, the Regner Family Trust
(dated September 10, 1984), Neutronic and the undersigned, for additional terms
to which this Note is subject.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of California, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
Elexsys International, Inc.,
a Delaware corporation
By: ___________________________
Name: ___________________________
Title: ___________________________
<PAGE>
EXHIBIT 2.5(e)
1. A down payment of $12,000 was paid by James Tong / Quality Tool & Die
and received by the Corporation in connection with the Purchase order
identified as Item 2 of Exhibit 2.5(f).
<PAGE>
EXHIBIT 2.5(f)
1. Purchase order, dated 3/21/97, from Wearnes Hollingsworth to the
Corporation (Purchase Order No. 102316).
2. Purchase order, dated 3/21/97, from James Tong / Quality Tool & Die to
the Corporation (Purchase Order No. 002606).
3. Purchase order, dated 12/19/96, from Circuit Assembly Corp to the
Corporation (Purchase Order No. A30331).
<PAGE>
EXHIBIT 2.5(h)
1. See Section 4.5 of the Agreement
<PAGE>
EXHIBIT 2.5(k)
1. Personal gasoline and car wash expenses in an amount not to exceed
$300.
<PAGE>
EXHIBIT 2.5(l)
1. See Exhibits 2.5(e), 2.5(f), 2.5(h) and 2.5(k)
<PAGE>
EXHIBIT 2.6(b)
1. Bruderer BSTA 30-II High Speed Automatic Punch Press, including Roll
Feed Type 202/120 (Serial no. 1403) (leased from the Corporation to H &
V Services).
2. Bruderer BSTA 30-II High Speed Automatic Punch Press, including Roll
Feed Type 202/120 (Serial no. 1477) (leased from the Corporation to H &
V Services).
3. Plating machine leased from Symtron Corporation to Neutronic Plating.
4. Loaned dies:
DESCRIPTION QTY. P/N
----------- ---- ---
AMP
---
11-5431 1 Inactive last 3 years
11-622004 1 Inactive last 3 years
Burndy
------
89331 1 Inactive last 5 years
89332 1 Inactive last 5 years
Component Equipment Co., Inc.
-----------------------------
.100x.200 1 1001-X
.125x.250 1 1252-X
.156x.250 1 1562-X
Elexsys International
---------------------
Die 1 SSC 1020-550-725
Die 1 SSC 1225-550-725
Die 1 SSC 1562-460-725
Die 1 SKP 121880
ELCO
----
Die 1 5360-12 Inactive last 3 years
Circuit Assembly Corp.
----------------------
VDO die 1 Obsolete
Die #3025 1 11209-X
IDS2 die #3020 1 11247
Die #3028 1 11063-X
Die #3027 1 11046-X
<PAGE>
NFDP #3038 2 11243
NFDS #3036 1 11238
DESCRIPTION QTY. P/N
----------- ---- ---
Circuit Assembly Corp. (cont.)
------------------------------
NFS #3042 1
NFT #3034 1
Component Equipment Co., Inc.
-----------------------------
Die 1 PCF 1000-X
Die 1 PCF 4000-X
Die 1 PCF 3000-X
Die 1 PSH/PCH 2001-X
Dynatech
--------
Dynatech die 1 Obsolete
H & V Services
--------------
Die 2 SCP 100-370-500
Teledyne
--------
Die 1 412-170
Die 1 412-170 Obsolete
Viking (PCD Tools)
------------------
Die 1 215-410-200
Die 1 214-613
Die 1 002-61-007 Inactive last
2 years
Bechman
-------
Die 1 200-304-23
An additional eight (8) dies exist; six (6) of which are complete and two (2)
currently are in construction. Vanna Regner will identify all such dies prior to
the Closing.
<PAGE>
EXHIBIT 2.6(c)
Hector Regner & Vanna Regner
- ----------------------------
1. 618HA Hand Feed Surface Grinder (22305) (owned).
2. G-18 Jig Moore Grinder (owned).
3. Bruderer 8011 BSTA 60 (owned).
4. Bruderer 7113 BSTA 30-I (owned).
5. Bruderer 7321 BSTA 30-I (owned).
6. Bruderer 6814 BSTA 30-I (owned).
7. Bruderer 6818 BSTA 30-I (owned).
8. Bruderer 6360 BSTA 30-I (owned).
<PAGE>
EXHIBIT 2.6(f)
1. None.
<PAGE>
<TABLE>
Exhibit 2.7(a)(1)
<CAPTION>
<S> <C> <C> <C>
47 Dies Identified
6 To be Identified
2 in Consruction
- -------------------
55 Total
March 10, 1997
---------------
List of dies:
---------------
AMP
---
Description Qty. P/N
- ---------- --- ---
11-5431 1 Inactive last 3 years
11-622004 1 Inactive last 3 years
BURNDY
------
Description Qty. P/N
- ---------- --- ---
89331 1 Inactive last 3 years
893332 1 Inactive last 3 years
COMPONENT EQUIPMENT CO., INC.
-----------------------------
Description Qty. P/N
- ---------- --- ---
.100x.200 1 1001-X
.125X.250 1 1252-X
.156X.250 1 1562-X
ELEXSYS INTERNATIONAL
---------------------
Description Qty. P/N
- ---------- --- ---
Die 1 SSC 1020-550-725
Die 1 SSC 1225-550-725
Die 1 SSC 1562-460-725
Die 1 SKP 121880
<PAGE>
ELCO
----
Description Qty. P/N
- ---------- --- ---
Die 1 5360-12 Inactive last 3 years
CIRCUIT ASSEMBLY COPR.
----------------------
Description Qty. P/N
- ---------- --- ---
VDO die 1 Obsolete
Die #3025 1 11209-X
IDS2 die #3020 1 11247
Die #3028 1 11063-X
Die #3027 1 11046-X
NFDP #3038 2 11243
NFDS #3036 1 11238
NFS #3042 1
NFT #3034 1
COMPONENT EQUIPMENT CO, INC.
----------------------------
Description Qty. P/N
- ---------- --- ---
Die 1 PCF 1000-X
Die 1 PCF 4000-X
Die 1 PCF 3000-X
Die 1 PSH/PCH 2001-X
DYNATECH
--------
Description Qty. P/N
- ---------- --- ---
Dynatech die 1 Obsolete
H & V SERVICES
--------------
Description Qty. P/N
- ---------- --- ---
Die 2 SCP 100-370-500
</TABLE>
<PAGE>
NEUTRONIC STAMPINGS, INC.
-------------------------
Description Qty. P/N
- ----------- --- ---
.100 SIC Complaint 1
.100 C-C .100 x .200 Cantilever 1 NS102-X
.100 C-C .100 x .200 -/- 2up die 1 NS102-X
.125 C-C .125 x .250 Cantilever 1 NS202-X
.100 C-C Bandolier P/N die 1 NS602-X
.125 C-C Bandolier P/N die 1 Obsolete
.200 C-C Bandolier P/N die 1 Obsolete
.100 C-C Pin die (SPK) 1 NS401-X
.100 C-C Socket din die 1 NS701-X
.100 C-C Complaint pin die 1 NS405-X
.100 C-C Bandolier bellow die 1 NS501-X
TELEDYNE
--------
Description Qty. P/N
- ----------- --- ---
Die 1 412-170
Die 1 412-170
Obsolete
VIKING (PCD TOOLS)
------------------
Description Qty. P/N
- ----------- --- ---
Die 1 215-410-200
Die 1 214-613
Die 1 002-61-007
Inactive last
2 years
BECHMAN
-------
Description Qty. P/N
- ----------- --- ---
Die 1 200-304-23
<PAGE>
ASSETS OWNED BY H & V SERVICES (BLUE)
Schedule of Assets - Machinery and Equipment
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
01 RAPID Air Reel 11/83 1,598
02 & 02A 2 Lazy Susan Uncoilers 12/83 928
03 Rapid Air Reel 1/84 1,023
04 Bruderer BSTA 30 II (S.N. 1069) 2/84 89,349
05 & 05A 2 Rapid Air Reels 5/84 3,175
06 & 06A 2 Lo-Boy De-Reelers 8/87 7,688
07 Traverse Wound De-Coiler 2/91 3,752
08 Scale 7/91 1,643
09 Traverse Wound De-Coiler 7/91 3,233
10 Traverse Wound De-Coiler 7/91 3,233
11 Traverse Wound De-Coiler 4/92 3,233
12 PR-TWR-LO-BOY 3/94 3,873
HECTOR & VANNA REGNER (Burgundy)
Schedule of Assets
------------------
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
001 618HA Hand Feed Surface 10/84 $ 18,000
Grinder (22305)
003 G-18 Jig Moore Grinder 5/82 89,814
004 Bruderer 8011 BSTA 60 6/82 141,976
005 Bruderer 7113 BSTA 30-I 12/84 44,202
006 Bruderer 7321 BSTA 30-I 12/84 44,202
007 Bruderer 6814 BSTA 30-I 12/83 44,212
008 Bruderer 6818 BSTA 30-I 12/83 44,212
<PAGE>
HECTOR & VANNA REGNER (Burgundy)
Schedule of Assets
------------------
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
009 Bruderer 6360 BSTA 30-I 4/83 43,311
<PAGE>
(Yellow)
ASSETS OWNED BY NEUTRONIC PLATING SERVICE
Schedule of Assets - Machinery and Equipment
--------------------------------------------
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
1
2 P H /Meter 6/83 $ 3,064
3
5
6
7
8 Equipto Beams for Existing Rack lpr. 3/84 680
9
10 Used Plating Line & Plating cells 9/84 37,672
WesternThermal-Parts (Elect) 1/85 2,130
Labor/ Elect. 1/85 3,648
Electrical 3/85 2,232
Electrical 5/85 1,250
New Add'l Equip/Attachments 6/86 8,100
New Add'l Equip/Attachments 8/86 7,914
Construction/ Refurbishing 6/86 750
Labor-Platic fabrication 9/86 2,980
Refurbishing 4/88 5,871
Syncro-Plat III Cells and Lids 8/67 5,830
11 Brush Plating Apparatus 4/85 45,224
12
13 Bausch & Lomb Stereo Zoom Microsc. 2/86 925
14 60" Selective Plating Cell 3/86 26,500
16 Tecton PDM-2040 1/87 7,928
17 Tecton PDM-2040 2/87 7,928
18 Tecton PDM-2040 7/87 7,928
19 IL 157 Atomic Absorption 9/87 8,331
Spectrophotometer
20 Double Take-up Assembly 8/87 5,714
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
21
22 Rotary Brush Plater 3/89 12,932
23 DEGREASING UNIT 5/94 3,117
24 CUSTOM HOR/VER TAKEUP 9/95 5,390
25 X-RAY SYSTEM 10/95 38,008
26 PERCULATOR FILTER SYSTEM 10/95 2,706
27 GEMSTONE FILTER PRESS 9/96 6,907
<PAGE>
ASSETS OWNED BY NEUTRONIC STAMPING
Schedule of Assets - Category 1
-------------------------------
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
3 Fosdick Drill Press 1972 912
5
6 Grob Band Saw 1975 2,597
7 Bruderer BSTA-I SN 4050 1975 28,624
8 Gage Block Set 1977 394
9 2-Torit-Dust Collector 1977 864
10 Bruderer BSTA-I SN 4167 1976 29,588
12 Big Joe Lift Truck 1976 897
13 Rapid Air Reel 1976 869
14 Drafting Table 1975 600
16/16-A Welding Equip./Sine Plate 1976 1,407
17
19 Heptell Torit-Dust Collector 12/79 1,164
20 Motorized Cylindrical Fixture 4/80 1,198
21
22 Gerney Harig Grinding Fixture 5/79 750
23 Rapid Air Reel 2/76 737
25 Rapid Air Reel 1/77 839
26 Lazy Susan 2/77 212
27 Rapid Air Reel 5/78 1,511
28 Rapid Air Reel 10/78 1,002
29 Rapid Air Reel 7/79 1,030
30
31 Lazy Susan 10/79 360
32 Rapid Air Reel 3/80 955
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
34 P G Optidress 4/80 5,745
36 Howe Richarson Scale 3/78 588
37 Nikon Microscope 2/76 647
38 Norton Truing Device 6/76 292
39 Econ/Elevating Table 2000 5/78 546
40 Econ/Shop Lifter CW -54 5/79 949
41 Econ/Elevating Table 2000 5/78 588
42 Bridgeport Milling Machine 8/78 6,493
44 Bruderer BSTA 30-I SN 5022 1/79 38,603
45 Bruderer BSTA 30-I SN 5163 4/79 37,780
46 Clark Forklift UT 2/79 4,240
47 Bruderer BSTA 30-I SN 5265 8/79 40,116
48 Shelving 10/79 680
49 Shelving 1/80 1,128
50
51 Bruderer BSTA 30-II SN 1403 12/79 81,520
52 Bruderer BSTA 30-II SN 1477 8/80 92,153
53 Brown & Sharpe 618 Grinder 9/80 21,702
54 Bruderer BSTA 30-I SN 5593 8/80 43,994
55 Econ/Elevating Table 2000 6/80 636
56
57
58 Rapid Air Reel 7/80 1,263
59 Lazy Susan 7/80 342
60 Rapid Air Reel 8/80 1,264
61 Rapid Air Reel 10/80 1,264
63 Toolmaker Microscope-Nikon 11/80 3,688
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
64 Unitron Microscope 11/80 1,328
65 Bruderer BSTA 30-I SN 5738 11/80 42,533
66 Reid Model 618-Grinder 11/80 12,699
67 Reid Model HR Grinder 11/80 11,983
68 P G Optidress 11/80 5,980
69 Bruderer BSTA 30-II SN 1573 2/81 91,096
70 Big Joe Lift Truck 5/81 1,429
71 Rapid Air Reel 4/81 1,370
72 Rapid Air Reel 5/81 1,299
73 Torit-Cabinet Filter Collector 5/81 1,250
74 Rapid Air Reel 8/81 1,554
75 Rapid Air Reel 8/81 1,533
80 Bruderer BSTA 30-II SN 1646 9/81 94,276
81
82 Rapid Air Reel 10/81 1,554
83 Econ/Elevating Table 2000 10/81 673
84 Econ/Elevating Table 2000 10/81 673
85
86 Bridgeport Milling Machine 3/82 8,934
87 Spool Rack 5/82 1,272
90 Parker-Majestic Surface Grinder 11/82 22,069
91 Parker-Majestic Surface Grinder 11/82 22,069
92 Opti-Comparator Gage Master 11/82 5,978
93 Fowler Gate Block Set 11/82 2,153
94 Econ/Elevating Table 2000 2/83 763
95 Lazy Susan 2/83 392
96 Lazy Susan 2/83 392
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
97 Nikon Microscope 2/83 1,307
98 Nikon Microscope 2/83 1,306
99 Big Joe Lift Truck 3/83 1,643
100
101 Gage Master Comparator 3/83 5,195
102
103
104 Pallet Racks 4/83 1,962
105 Mojave Granite Surface Plate 4/83 900
106 Mojave Granite Steel Base 4/83 900
107 Reid Model 618 Grinder 5/83 15,202
108
109
110
111
114 Torit-Dust Collector 11/83 1,018
115 Mitutoyo Gage Block 11/83 453
116 Surface Grinder 11/83 13,370
117 Harig Grind-All 11/83 1,933
120 Yale Forklift 5/84 3,500
121 Cam Roll Feed R-1029 10/83 7,261
121-A
121-B
122 Rapid Air Reel 7/84 1,587
122-A Rapid Air Reel 7/84 1,588
123 Lazy Susan 10/84 880
124 Big Joe Lift Truck 10/84 1,548
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
125 Cam Roll Feed-Bruderer 10/84 7,261
126 Econ/Elevating Table 2000 10/84 1,643
127 Opti-Comparator Gage Master 11/84 6,040
127-A Opti-Comparator Gage Master 11/84 6,041
128 Ingersoll-Rand Compressor 11/84 9,875
128-A Ingersoll-Rand Dryer 11/84 2,160
129
130 Agiecut EMT 1.10 7/85 44,211
132 2-Lyon Cabinet Benches 2/86 691
133 Grind-All #1 2/86 1,566
136 Ledge Inspection Surface Plate 2/86 315
138 Microscope SMZ-2B with 6/86 1,744
Accessories
141 Lo-Boy De-Reeler SN 21187 6/87 3,436
142 Air Compressor (from Universal 3/85 2,300
9/87)
143 Toyota Forklift 3/85 4,900
147 Air Compressor/Dryer 4/85 774
148 Bruderer Cam Feed For 3OT-I 11/87 7,632
149 Lo-Boy De-Reeler SN 12287 1/88 3,129
152 Traverse Wound De-Coiler S.N. 12/90 3,294
1021
153 Traverse Wound De-Coiler S.N. 12/90 3,294
1022
154 MTI 950-928 Comparator 1/91 11,368
w/attachments
155 Traverse Wound De-Coiler S.N. 4/92 3,232
1034
156 2 Takeup Machines/Tension 1/95 11,960
Control Dev.
<PAGE>
Asset Date
No. Name of Asset Acquired Cost
- ------ ------------- -------- -----
157 Ingersoll Rand Air Compressor 9/96 5,853
158
<PAGE>
EXHIBIT 2.7(a)(2)
Neutronic Stampings
- -------------------
Description Qty. P/N
- ----------- ---- ----
.100 SIC Compliant 1
.100 C-C .100 x .200 Cantilever 1 NS102-X
.100 C-C .100 x .200 -- 2-Up die 1 NS102-X
.125 C-C .125 x .250 Cantilever 1 NS 202-X
.100 C-C Bandolier P/N die 1 NS602-X
.125 C-C Bandolier P/N die 1 Obsolete
.200 C-C Bandolier P/N die 1 Obsolete
.100 C-C Pin die (SPK) 2 NS401-X
.100 C-C Socket din die 1 NS701-X
.100 C-C Compliant pin die 1 NS405-X
.100 C-C Bandolier bellow die 1 NS501-X
Burndy Form Die P/N 88758 1 Obsolete
An additional eight (8) dies exist; six (6) of which are complete and two (2)
currently are in construction. Vanna Regner will identify all such dies prior to
the Closing.
<PAGE>
EXHIBIT 2.8
1. Agreement, dated 12/14/95, by and between the Corporation and CECO for
the construction of a die. The Corporation completed construction of the
die, but to date, the Corporation has not received payment.
2. Consulting Fee Addendum, dated 4/5/94, by and between the Corporation,
Hector Regner, Dietronic Stampings, Inc. and Juergen Krogmann, entitling
Mr. Krogmann to five percent (5%) of gross proceeds billed to A.W.
Industries by the Corporation. To date, no such sales or commissions
have been paid.
3. See Exhibit 2.5(f)
<PAGE>
EXHIBIT 2.11
1. The Corporation is aware that two to five employees currently are
working with illegal social security numbers.
2. See Exhibit 2.12
<PAGE>
EXHIBIT 2.12
1. High speed presses located on company property lack sound enclosures to
bring noise levels to Osha Standards.
2. Notice of violation from Orange County Sanitation District ("Notice of
Violation"), dated 8/1/95, to Neutronic Plating and non-compliance bill
for $519.00.
3. Notice of Violation, dated 6/24/93, to Neutronic Plating.
4. Notice of Violation, dated 4/20/90, to Neutronic Plating and
non-compliance bill for $46.50.
5. Notice of Violation, dated 2/26/89, to Neutronic Plating and
non-compliance bill for $2.40.
6. Notice of Violation, dated 9/8/88, to Neutronic Plating and
non-compliance bill for $13.60.
7. Notice of Violation, dated 1/28/88, to Neutronic Plating and
non-compliance bill for $6.00.
8. Notice of Violation, dated 10/15/87, to Neutronic Plating and
non-compliance bill for $103.00.
9. Notice of Violation, dated 7/8/87, to Neutronic Plating and
non-compliance bill for $32.00.
10. Notice of Violation, dated 4/24/87, to Neutronic Plating and
non-compliance bill for $23.50.
11. Notice of Violation, dated 1/8/87, to Neutronic Plating and
non-compliance bill for $5.00.
12. Hazardous Waste Inspection Report, dated 1/27/97, by Orange County
Health Care Agency.
13. See Compliance Audit, dated 7/6/94, prepared by ATEC Associates, Inc.
14. See Report of Preliminary Site Investigation, dated 2/25/97, by Atlas
Environmental Engineering, Inc., as supplemented by Addendum dated March
24, 1997.
<PAGE>
15. Currently, neither the Corporation nor either Partnership has scrubbers
or permits to install such equipment for use in the plating process.
<PAGE>
EXHIBIT 2.20
1. Letter, dated September 22, 1986, from AMP Incorporated ("AMP") to
Symtron Corporation regarding infringement of U.S. Patent No. B1
4,186,982 held by AMP.
2. 1978 patent infringement suit by Custom Stamping against the
Corporation, Hector Regner and Vanna Regner. The case was settled and
only attorney costs were incurred.
<TABLE>
EXHIBIT 11.1
ELEXSYS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands of dollars, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income $ 768 $2,229 $3,407 $4,239
====== ====== ====== ======
Earnings per common share and common share
equivalents:
Primary $ 0.08 $ 0.23 $ 0.35 $ 0.44
Fully diluted $ 0.08 $ 0.23 $ 0.35 $ 0.44
====== ====== ====== ======
Weighted average common and dilutive common
equivalent shares outstanding:
Primary
Weighted average common shares outstanding 9,408 9,129 9,368 9,074
Common shares relating to stock options 462 423 456 439
------ ------ ------ ------
Weighted average common and common
equivalent shares outstanding 9,870 9,552 9,824 9,513
====== ====== ====== ======
Fully Diluted
Weighted average common shares outstanding 9,408 9,129 9,368 9,074
Common shares relating to stock options 462 423 456 439
------ ------ ------ ------
Weighted average common and common
equivalent shares outstanding 9,870 9,552 9,824 9,513
====== ====== ====== ======
<FN>
Refer to Note 3 captioned "Earnings Per Share" of Notes to Consolidated
Financial Statements in the Company's Form 10-Q for the quarterly period ended
March 29, 1997 for additional discussion of earnings per share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000727010
<NAME> Elexsys International, Inc.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-END> Mar-29-1997
<CASH> 644
<SECURITIES> 0
<RECEIVABLES> 24083
<ALLOWANCES> 269
<INVENTORY> 17383
<CURRENT-ASSETS> 43706
<PP&E> 91332
<DEPRECIATION> 60304
<TOTAL-ASSETS> 78008
<CURRENT-LIABILITIES> 29535
<BONDS> 20005
<COMMON> 9454
0
0
<OTHER-SE> 19014
<TOTAL-LIABILITY-AND-EQUITY> 78008
<SALES> 73976
<TOTAL-REVENUES> 73976
<CGS> 61857
<TOTAL-COSTS> 61857
<OTHER-EXPENSES> 110
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 995
<INCOME-PRETAX> 3644
<INCOME-TAX> 237
<INCOME-CONTINUING> 3407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3407
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
