SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 19, 1997
TRIO-TECH INTERNATIONAL
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
0-13914 95-2086631
(Commission File Number) (I.R.S. Employer Identification No.)
355 PARKSIDE DRIVE 91340
SAN FERNANDO, CALIFORNIA (Zip Code)
(Address of principal executive offices)
(818) 365-9200
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On November 19, 1997, Trio-Tech International (the "Company") acquired KTS
Incorporated, doing business as Universal Systems ("Universal"). Universal
designs, manufactures, sells and services wafer cleaning work stations and
related equipment used in the production and assembly of semiconductor products.
The work stations and equipment perform cleaning, rinsing and drying functions
required for processing of silicon wafers and other micro-electronic substrates
in the semiconductor industry. Universal was organized and commenced operations
in July 1996.
The acquisition was structured as a purchase of stock. The aggregate
purchase price consisted of $250,000 in cash, together with 37,500 shares of
Common Stock of the Company. Tony DiPiero, the founder, sole shareholder and
chief executive officer of Universal, has entered into a six-year employment
contract with the Company. The Company has also granted a stock option to Mr.
DiPiero to purchase 75,000 shares of Common Stock of the Company at a price of
$6.67 per share. The acquisition agreement obligates the Company to make
available to Universal $1,000,000 not later than January 18, 1998 for purposes
of expanding Universal's business; an additional $1,000,000 not later than March
31, 1998 to be used in accordance with an agreed capital spending plan; and an
additional $1,000,000 not later than March 31, 1999 provided Universal is
achieving certain business objectives. In each case, such funds may be derived
from cash reserves of the Company, borrowings, sales of stock or securities,
equipment financing or leasing, or other sources. If the Company fails to
provide the first $2,000,000 of such funds when and as specified, Mr. DiPiero
will have the right to rescind his sale of Universal to the Company and to
retain the $250,000 cash portion of the purchase price.
Achievement of Universal's long-term objectives requires the development of
automated wafer cleaning technologies. This will require the manufacture of an
automated prototype and the establishment of a Beta Site work station with a
customer. There can be no assurance that Universal will achieve these
objectives or that it will generate a meaningful level of revenues and earnings.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following exhibits included with this report are made part hereof:
10.1 Stock Purchase Agreement, dated November 19, 1997, by and between
Trio-Tech International and Tony DiPiero.
<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 hereunto duly authorized.
TRIO-TECH INTERNATIONAL
Date: December 3, 1997 By /s/ A. Charles Wilson
A. Charles Wilson
Chairman of the Board
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Description Page No.
No.
10.1 Stock Purchase Agreement, dated November 19,
1997, by and between Trio-Tech International and
Tony DiPiero.
<PAGE>
STOCK PURCHASE AGREEMENT
dated as of November 19, 1997
between
TONY DiPIERO
and
TRIO-TECH INTERNATIONAL
<PAGE>
This STOCK PURCHASE AGREEMENT is entered into as of November 19, 1997 by
and between TONY DiPIERO ("Seller") and TRIO-TECH INTERNATIONAL, a California
corporation ("Buyer"), with reference to the following facts:{PRIVATE }
A. Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of KTS, Inc. (doing business as Universal
Systems), a California corporation (the "Company").
B. Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, 100% of the capital stock of the Company (referred to herein as the
"Shares"), on the Closing Date and upon the terms and subject to the conditions
set forth herein.
C. In conjunction with the purchase and sale of the Shares hereunder,
Buyer has agreed to enter into a noncompetition agreement substantially in the
form of Exhibit A attached hereto (the "Noncompetition Agreement"), which is a
material inducement to Buyer's willingness to purchase the Shares.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants hereinafter set forth, Buyer and Seller hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION I.1 Certain Defined. As used in this Agreement, the following
terms have the following meanings:
"Action" means any action, suit, claim, proceeding, governmental
investigation or arbitration of any nature or kind whatsoever, whether civil,
criminal or administrative, by or before any Governmental Authority or
arbitrator or other alternative dispute resolution forum.
"Affiliate" means, when used with respect to a specified Person, another
Person that, either directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified.
"Agreement" means this Stock Purchase Agreement including the Exhibits
hereto, the Disclosure Schedule and all amendments hereto made in accordance
with Section 10.9.
"Book Value" means the shareholders' equity of the Company as determined
in accordance with GAAP.
"Books and Records" means all books of account and other financial
records pertaining to the Company.
"Business" means the design, manufacture and sale of wafer cleaning work
stations and related equipment used for the production and assembly of
electronic products and components, and related activities as conducted by the
Company heretofore or as of the date of this Agreement .
"Business Day" means any day that is not a Saturday, Sunday or other day
on which banks are required or authorized by law to be closed in the State of
California.
<PAGE>
"Buyer Material Adverse Effect" means any change or effect that is
materially adverse to the consolidated results of operations or the consolidated
financial condition of the Buyer and its Affiliates taken as a whole, except for
any such changes or effects resulting from (i) changes in general economic
conditions or (ii) this Agreement or the transactions contemplated hereby.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List pursuant to Superfund.
"Disclosure Schedule" means the disclosure schedule dated as of the date
of this Agreement delivered by Seller to Buyer.
"Encumbrance" means any liability, debt, mortgage, deed of trust, pledge,
security interest, encumbrance, option, right of first refusal, agreement of
sale, easement, lien, assessment, restrictive covenant, encroachment, burden or
charge of any kind or nature whatsoever.
"Environmental Law" means any applicable Law relating to public health
and safety or protection of the environment, including, without limitation,
common law nuisance, property damage and similar common law theories.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
"GAAP" means U.S. generally accepted accounting principles in effect from
time to time applied consistently throughout the period or periods involved.
"GCL" means the California General Corporations Law.
"Governmental Authority" means any government, any governmental entity,
department, commission, board, agency or instrumentality, and any court,
tribunal, or judicial or arbitral body, whether federal, state, local or
foreign.
"Governmental Order" means any order, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Internal Revenue Code" means the U.S. Internal Revenue Code of 1986, as
amended.
"IRS" means the U.S. Internal Revenue Service.
"knowledge" or "known" means, with respect to any matter in question, the
actual knowledge of Seller and the Specified Officers after due investigation.
"Specified Officers" means the executive officers and managing members of the
Person making the knowledge statement. For purposes of this Agreement, use by
Seller herein of the term "knowledge" of, or "known" with respect to, Seller
shall include the knowledge of the Specified Officers of the Company.
"Law" means any applicable federal, state, municipal, local or foreign
statute, law, ordinance, rule, regulation or order of any Governmental Authority
or principle of common law.
<PAGE>
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable.
"Licenses" means all of the licenses, permits, certificates, franchises,
approvals, registrations and authorizations and other governmental
authorizations required for the operation of the Business as conducted as of the
date of this Agreement.
"Losses" of a Person means any and all claims, actions or causes of
action, assessments, losses, damages, deficiencies, liabilities, costs and
expenses (including reasonable legal fees, interest, penalties, and all
reasonable amounts paid in investigation, defense or settlement of any of the
foregoing) actually suffered or incurred by such Person.
"Material Adverse Effect" means any change or effect that is materially
adverse to the operations, assets, employee relationships, customer
relationships or financial condition of the Company, except for any such changes
or effects resulting from this Agreement or the transactions contemplated hereby
or the cancellation of the intercompany arrangements referred to in Section
5.1(c).
"Other Agreement" means each other agreement or document contemplated
hereby to be executed and delivered in connection with the transactions
contemplated by this Agreement on or before Closing, including, without
limitation, the Employment Agreement, the Noncompetition Agreement and the
Option Agreement.
"Permitted Encumbrances" means (i) Encumbrances for inchoate mechanics'
and materialmen's liens for construction in progress and workmen's, repairmen's,
warehousemen's and carriers' liens arising in the ordinary course of the
Business relating to invoices not yet due or invoices not in excess of $5,000
being contested in good faith, (ii) Encumbrances for Taxes not yet due and for
Taxes not in excess of $5,000 being contested in good faith, and (iii)
Encumbrances and imperfections of title the existence of which would not in any
material respect affect the use of the property subject thereto.
"Person" means any natural person, individual, partnership, firm,
corporation, association, trust, limited liability company, unincorporated
organization, Governmental Authority or other entity.
"Regulated Material" means any hazardous substance as defined by any
applicable Environmental Law and any other material regulated by any applicable
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls, petroleum, petroleum-related material, crude oil or any fraction
thereof.
"Related Party" means (i) Seller, (ii) any Affiliate of Seller, and (iii)
any officer or director of any such Affiliate of Seller.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the U.S. Securities Act of 1933, as amended, and
the rules and regulations thereunder, as in effect from time to time.
"Security Right" means, with respect to any stock or other security, any
option, warrant, subscription right, preemptive right, proxy, put, call, demand,
commitment, agreement, understanding or arrangement of any kind relating to such
security, whether issued or unissued, or any other security convertible into or
exchangeable for any such security. "Security Right" includes any right
relating to issuance, sale, assignment, transfer, purchase, redemption,
conversion, exchange, registration or voting and includes rights conferred by
statute, by the issuer's organic documents or by agreement.
<PAGE>
"Superfund" means the U.S. Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Sections 6901 et seq., as
amended.
"Tax" or "Taxes" means all foreign or domestic income, gross receipts,
stamp, sales, use, employment, franchise, excise, profits, property or other
taxes, fees, duties, assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"Tax Return" means any tax return, statement, form, election or report
required to be filed by or on behalf of Seller or the Company with any taxing
authority relating to any Tax with respect to any period.
"Trio-Tech Common Stock" means the Buyer's Common Stock.
SECTION I.2 Other Defined Terms The following terms have the meanings
defined for such terms in the sections set forth below:
Term Section
Audited Financial Statements 3.5
Benefit Plans 3.15(a)
Buyer Preamble
Buyer's Threshold Amount 8.2(b)
Closing 2.3(a)
Closing Date 2.3(a)
Contest 6.4(b)
Employment Agreement 7.1(f)
ERISA Affiliate 3.15(b)
Financial Statements 3.5
Intellectual Property 3.17
Intercompany Agreement 7.1(g)
Material Contracts 3.21(a)
Multiemployer Plan 3.15(c)
Noncompetition Agreement 7.2(g)
Option Agreement 7.1(h)
Purchase Price 2.2
Real Property 3.14
Receivables 3.22
Seller Preamble
Seller's Threshold Amount 8.3(b)
Shares Preamble
Specified Officers 1.1 (under "knowledge")
Trio-Tech Shares 2.2
Welfare Plan 3.15(d)
ARTICLE II
PURCHASE AND SALE
SECTION II.1 Purchase and Sale Upon the terms and subject to the
conditions set forth in
<PAGE>
this Agreement, Seller agrees to sell to Buyer, and Buyer agrees to purchase
from Seller, the Shares of the Company, free and clear of all Encumbrances, at
the Closing.
SECTION II.2 Purchase Price The aggregate purchase price (the "Purchase
Price") for the Shares shall be (i) $250,000 in cash and (ii) shares of Trio-
Tech Common Stock (the "Trio-Tech Shares") having an aggregate market value of
$250,000, calculated in the manner specified in this Section 2.2, but no higher
than $10 per share. For purposes of clause (ii) of the preceding sentence, the
market value per share of the Trio-Tech Shares shall be the average of the
closing sale prices of Trio-Tech Common Stock on the Nasdaq Small Cap Market on
each trading day during a period of 30 consecutive calendar days ending on the
fifth calendar day prior to the Closing Date, as such prices are reported in The
Wall Street Journal; provided, that if no closing sale price is reported in The
Wall Street Journal for any trading day during such period, the closing sale
price on such trading day shall be deemed to be the same as the most recent
closing price prior to such day that has been reported in The Wall Street
Journal.
SECTION II.3 Closing (a) Subject to the terms and conditions of this
Agreement, the sale and purchase of the Shares and the other transactions
contemplated hereby shall take place at a closing (the "Closing") to be held at
10:00 a.m. local time on the later of November 19, 1997 or the day that is not
more than four Business Days after the fulfillment (or waiver) of all the
conditions specified in Section 7.1 and 7.2 hereof, at the offices of Troy &
Gould Professional Corporation, 1801 Century Park East, Los Angeles, California
or at such other time or on such other date or at such other place as Seller and
Buyer may mutually agree upon in writing (the day on which the Closing takes
place being the "Closing Date").
(b) At the Closing, Seller shall deliver to Buyer stock
certificates evidencing all of the Shares of the Company duly endorsed or
accompanied by duly executed stock powers.
(c) At the Closing, Buyer shall deliver to Seller (i) $250,000
by check or by wire transfer to an account designated at least four Business
Days prior to the Closing Date by Seller in a written notice to the Buyer and
(ii) stock certificates evidencing the Trio-Tech Shares registered in the name
of Seller. Such stock certificates shall bear the following legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. These
shares may not be transferred in the absence of such
registration or an exemption therefrom under said Act."
(ii) "The shares represented by this certificate are
subject to cancellation in accordance with Section 2.4 of
the Stock Purchase Agreement dated as of November 19, 1997
by and between Tony DiPiero and the Company. A copy of
such agreement is available for inspection at the offices
of the Company by any person establishing a legitimate
interest therein."
SECTION II.4 Surrender of Trio-Tech Shares. Notwithstanding anything to
the contrary in this Agreement, if Seller leaves the employ of the Company or
Trio-Tech within the first year following the Closing Date for any reason other
than death, permanent disability or discharge without cause, Seller shall
forthwith forfeit and surrender to Buyer, for cancellation, 100% of the Trio-
Tech shares that he has received pursuant to Section 2.2 of this Agreement; and
if Seller leaves the employ of the Company or Trio-Tech after the first year but
before the end of the second year following the Closing Date for any reason
other than death, permanent disability or discharge without cause, Seller shall
forfeit and surrender to Buyer, for cancellation, 50% of the Trio-Tech Shares
that he has received pursuant to Section 2.2 of this Agreement. The provisions
of this Section 2.4 shall terminate upon the death, permanent disability of
Seller requiring Seller to leave the employ of the Company, or discharge without
cause by the Company; and in
<PAGE>
all events, the provisions of this Section 2.4 shall end on the second
anniversary of the Closing Date, and Seller or his representatives shall be
entitled to exchange any stock certificates evidencing the Trio-Tech Shares for
new stock certificates that do not bear the legend set forth in clause (ii) of
Section 2.3(c) above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer as
follows:
SECTION III.1 Organization and Qualification of the Company. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, and has the requisite power
and authority to own, operate or lease the properties and assets now owned,
operated or leased by it and to carry on its business in all material respects
as currently conducted by it. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary. True and complete copies of the
Company's articles of incorporation and bylaws, as amended, have been delivered
to Buyer.
SECTION III.2 Capital Stock of the Company. The authorized capital stock
of the Company consists solely of 10,000 shares of Common Stock, all of
which shares are issued and outstanding and are owned beneficially and of record
by Seller. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation of any preemptive
rights or securities laws. There are no Security Rights relating to the Shares
or other shares of capital stock of the Company. The Shares are free and clear
of all Encumbrances except as set forth on the Disclosure Schedule, which
Encumbrances shall be released on or prior to Closing.
SECTION III.3 Subsidiaries. There are no corporations, partnerships,
joint ventures, associations or other entities in which the Company owns, of
record or beneficially, any direct or indirect equity or other interest or any
right (contingent or otherwise) to acquire the same. The Company is not a
member of (nor is any part of the Business conducted through) any partnership,
nor is the Company a participant in any joint venture, profit sharing or similar
arrangement. No Affiliate of the Seller engages in any activities similar to
those of the Business.
SECTION III.4 No Conflict. Assuming all consents, approvals,
authorizations and other actions described in Section 3.12 have been obtained
and all filings and notifications listed in the Disclosure Schedule have been
made, and except as described in the Disclosure Schedule, the execution,
delivery and performance of this Agreement and the Other Agreements by Seller
does not and will not (a) violate or conflict with the Articles of Incorporation
or by-laws of the Company, (b) conflict with or violate any Law or Governmental
Order applicable to Seller or the Company, (c) result in the creation,
maturation or acceleration of any liability or obligation of Seller or the
Company (or give to any other Person the right to cause such a creation,
maturation or acceleration), (d) result in the creation or imposition of any
Encumbrance upon any of the Shares or any of the assets or properties of the
Company, or give to any other Person any interest or right therein, or (e)
result in any breach of, or constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any note, bond, mortgage, indenture, contract, agreement, lease, License,
permit, franchise or other instrument to which Seller or the Company is a party
or by which any of their assets or properties is bound or affected.
SECTION III.5 Financial Statements. Attached as Section 3.5 of the
Disclosure Schedule are
<PAGE>
the unaudited balance sheet, statement of operations and statement of cash
flows of the Company for the year ended May 31, 1997 (the Financial
Statements"). The Financial Statements have been prepared from the books of
account and records of the Company in accordance with GAAP and present fairly
the financial condition, assets and liabilities and results of operation of the
Company at the dates and for the relevant periods indicated in accordance with
GAAP. Deloitte & Touche LLP shall make an examination of the accounts and
records of the Company as of October 31, 1997 in order to determine the Book
Value of the Company as of such date.
SECTION III.6 Book Value. As of October 31, 1997, the Book Value of the
Company was not less than $200,000.
SECTION III.7 Undisclosed Liabilities. Seller has no knowledge of any
Liabilities of the Company other than Liabilities (a) reflected or reserved
against on the Financial Statements, (b) disclosed in the Disclosure Schedule or
otherwise disclosed in, or permitted as expressly contemplated by, this
Agreement, or (c) incurred in the ordinary course of business, consistent in
nature and amounts in all material respects with past practice, after the date
hereof and prior to the Closing.
SECTION III.8 Labor Matters (a) Except as disclosed in the Disclosure
Schedule, there is no (i) collective bargaining agreement or other labor
agreement affecting the persons employed in the Business to which the Company is
a party or by which it is bound, (ii) labor organization or union which has the
right to, or claims to have the right to, represent any person employed in the
Business, (iii) employment, consulting, loan-out, profit sharing, deferred
compensation, bonus, stock option, stock purchase, retainer, retirement,
welfare, severance or incentive plan or contract involving any person employed
in the Business as an employee or independent contractor to which the Company is
a party or by which it is bound, or (iv) plan, agreement or practice under which
"fringe benefits" (including, without limitation, health, dental or vision
insurance plans or practices for current or retired employees, severance plans
or practices, vacation plans or practices, sick leave plans or practices or any
other such benefits) are afforded any of such employees. Neither Seller nor, to
the knowledge of Seller, any other party is in default with respect to any
material term or condition of any such agreement, plan, contract or practice
(including the making of contributions and recording reserves therefor), nor has
any event occurred which through the passage of time or the giving of notice, or
both, would constitute a default thereunder or would cause the acceleration of
any obligation of any party thereto. The Company has complied in all material
respects with all currently applicable Laws, administrative interpretations,
contracts, settlement agreements and arbitration awards, and orders, decisions
and decrees of any Governmental Authority relating to the employment of labor,
including, without limitation, those related to immigration, privacy, actual or
alleged breach of any employment contract (whether written, oral or implied),
wages, hours, Worker Adjustment and Retraining Notification Act, COBRA,
occupational health and safety, civil rights, discrimination, harassment,
workers' compensation, child labor, collective bargaining and the payment and
withholding of taxes and other sums as required by appropriate governmental
entities, and have withheld and paid to the appropriate governmental entities,
or are holding for payment not yet due to such governmental entities all amounts
required to be withheld from such employees, and are not liable for any
arrearage of benefits, wages, taxes, penalties or other sums for failure to
comply with any of the foregoing and no pending or threatened action alleges
failure to comply with any of the foregoing.
(b) There is not and has not been since the inception of the Business
any (i) unfair labor practice complaint against Seller pending before the
National Labor Relations board or any other Governmental Authority, (ii) pending
or threatened strike, work stoppage, slowdown, interruption of work, or any
other type of labor dispute involving or affecting a person employed by the
Company, (iii) material labor grievance pending against the Company, (iv)
pending collective bargaining representation question respecting any persons
employed by the Company, (v) pending or threatened arbitration proceeding for
breach of any agreement involving any person employed in the Business to which
the Company is a party,
<PAGE>
(vi) charge or claim of discrimination under any federal, state or local civil
rights law pending before any Governmental Authority against or involving the
Company, (vii) any pending or threatened charges or citations relating to
occupational safety and health issues pending before any Governmental Authority
against or involving the Company, or (viii) any pending Actions involving any
employment matters or, to the best knowledge of Seller, oral or written threats
of or basis for such Actions, including but not limited to claims for wrongful
termination (including but not limited to claims for breach of express or
implied contract, breach of a covenant of good faith and fair dealing, fraud or
misrepresentation in connection with hiring or employment, and termination in
violation of public policy), against or involving the Company.
(c) The Disclosure Schedule sets forth a list of all persons
employed in the Business, together with their rates of compensation, employment
date and job title, file number or classification, and identifies each employee
who is not available fully to perform work because of disability, layoff, leave
or similar status.
(d) The Disclosure Schedule identifies all employee handbooks and
policies or procedures which have been used by Seller or the Company for any or
all present or former employees, and also identifies all written employment
practices, policies, procedures or related matters which have been used by
Seller or the Company in connection with any or all present or former employees.
(e) The Disclosure Schedule sets forth a list of each person who
has made a claim at any time for workers compensation as an employee of the
Company. Except as set forth in such list, Seller is not aware of any pending,
threatened or potential claim that may be made by any employee of the Company
for workers compensation.
SECTION III.9 Absence of Certain Changes or Events. Since the date of
the Financial Statements, and except as set forth in the Disclosure Schedule or
as expressly contemplated by this Agreement, the Company has operated the
Business in a manner consistent with past practice, and there has not been:
(a) any Material Adverse Effect;
(b) any damage, destruction or loss to any of the assets or
properties of the Company, which individually has a value in excess of $5,000;
(c) any Encumbrance of any kind created on any properties or
assets (whether tangible or intangible) of the Company, other than (i) Permitted
Encumbrances, (ii) Encumbrances that will be released at or prior to the Closing
or (iii) Encumbrances created in the ordinary course of business having an
individual value not exceeding $5,000;
(d) except for purchases and sales of assets in the ordinary
course of business, (i) any sale, assignment, transfer, lease or other
disposition of any asset of the Company, or (ii) any acquisition of any asset by
the Company, in the case of (i) and (ii) above, respectively, having an
individual value exceeding $5,000;
(e) the cancellation of any indebtedness owed to the Company
(other than settlement of accounts receivable in the ordinary course of
business);
(f) any acquisition (by merger, consolidation, or acquisition of
stock or assets) by Seller or the Company of any assets that constitute an
operating unit or division of the Company;
(g) (i) any incurrence by the Company of any indebtedness for
borrowed money,
<PAGE>
other than intercompany borrowings governed by Section 5.2, (ii) any issuance
by the Company of any debt securities, or (iii) any assumption, grant, guarantee
or endorsement, or other accommodation arrangement making the Company
responsible for the Liabilities of any Person;
(h) any material change in any method of accounting or accounting
practice used by the Company;
(i) any issuance or sale of any shares of the capital stock of, or
other equity interests in, the Company, or securities convertible into or
exchangeable for such shares or equity interests, or issuance or grant of any
Security Right with respect to any of the foregoing;
(j) any declaration or payment of any dividend or other
distribution on or with respect to, or any redemption of, the Shares;
(k) any amendment to the Articles of Incorporation or by-laws of
the Company;
(l) any increase in the base salary, wage or bonus of any employee
of the Company;
(m) any payment to or transaction with any Related Party, which
payment or transaction or arrangement relating to any payments or transactions
is not specifically disclosed on the Disclosure Schedule;
(n) any payment, prepayment or discharge of any liability other
than in the ordinary course of business;
(o) any sale or assignment of any Intellectual Property of the
Company; or
(p) any agreement to take any of the actions specified in this
Section 3.9, except as expressly contemplated by this Agreement.
SECTION III.10 Absence of Litigation. Except as set forth in the
Disclosure Schedule, (a) there are no Actions or investigations pending or
threatened against Seller or the Company or any of the assets or properties of
Seller or the Company, (b) there are no Actions or investigations pending or
threatened against Seller that, individually or in the aggregate, would prevent
Seller from consummating the transactions contemplated hereby, and (c) Seller,
the Company and their respective assets and properties are not subject to any
Governmental Order.
SECTION III.11 Compliance with Law. Seller and the Company and the
conduct of the Business are in compliance in all meaningful respects with all
applicable Laws, except as set forth in the Disclosure Schedule. Neither Seller
nor the Company has received any written notice to the effect that Seller or the
Company is not in compliance in any meaningful respect with any applicable Laws.
SECTION III.12 Consents, Approvals, Licenses, Etc. No consent, approval,
authorization, License, order or permit of, or declaration, filing or
registration with, or notification to, any Person is required to be made or
obtained by Seller or the Company in connection with the execution, delivery and
performance of this Agreement and the Other Agreements and the consummation of
the transactions contemplated hereby and thereby (including, without limitation,
any such actions under any state or federal Environmental Laws) except: (a) as
set forth on the Disclosure Schedule; (b) the applicable requirements, if any,
of the GCL; and (c) as may be necessary as a result of any facts or
circumstances relating solely to the Buyer. All of the Licenses of the Company
are in full force and effect and Seller and the Company are in
<PAGE>
compliance in all significant respects with, and have fulfilled and performed in
all significant respects its obligations under, each such License. Neither
Seller nor the Company has received any written notice of non-renewal or
cancellation of any License.
SECTION III.13 Personal Property: Business. Except as described in the
Disclosure Schedule, the Company has good and marketable title to all items of
tangible personal property included within the Financial Statements, free and
clear of all Encumbrances and defects of title, other than Permitted
Encumbrances. Except as set forth in the Disclosure Schedule, all significant
machinery, plants, vehicles and equipment of the Company currently in use are in
good repair and condition, ordinary wear and tear excepted, and are adequate for
the uses to which they are being put. The assets of the Company include all
assets that are necessary for use in and operation of the Business as the
Business is currently conducted by the Company.
SECTION III.14 Real and Leased Property. The Company owns no real
property. The Disclosure Schedule lists all real properties currently used or
leased by the Company or in which the Company has an interest (collectively, the
"Real Property"). The Company has the right to quiet enjoyment of all Real
Property in which it holds a leasehold interest for the full term of the lease
or similar agreement relating thereto. The use and operation of all Real
Property conform in all meaningful respects to all applicable building, zoning,
safety and subdivision Laws, and all restrictive covenants and restrictions and
conditions affecting title. Neither Seller nor the Company has received any
written notice of assessments for public improvements or condemnation against
any Real Property.
SECTION III.15 Employee Benefit . (a) There is not and has not been any
employee benefit plan, program, arrangement and contract (including, without
limitation, any pension plan, profit sharing plan or other "employee benefit
plan" as defined in Section 3(3) of ERISA) maintained or contributed to by the
Company ("Benefit Plans").
(b) Neither Seller nor the Company nor any ERISA Affiliate has
terminated a defined benefit pension plan or been a sponsor of, or contributor
to, a defined benefit pension plan that has been terminated as a distress
termination pursuant to Section 4041(c) of ERISA or by the Pension Benefit
Guaranty Corporation pursuant to Section 4042 of ERISA. For purposes of this
Section 3.15, "ERISA Affiliate" means any corporation, partnership or
proprietorship with which the Company is, or at any time within the five years
prior to the date of this Agreement was, a member of a (i) controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code,
(ii) group of commonly controlled trades or businesses within the meaning of
Section 414(c) of the Internal Revenue Code, or (iii) affiliated service group
within the meaning of Section 414(m) of the Internal Revenue Code and the
Treasury Regulations thereunder.
(c) Neither Seller nor the Company contributes to any
Multiemployer Plan. Seller and the Company (i) have not incurred liability for
complete or partial withdrawal, as defined in Sections 4203 and 4205 of ERISA,
by the Company or any ERISA Affiliate from a Multiemployer Plan, (ii) will not
incur any such liability as a result of the acquisition of the Shares by the
Buyer, and (iii) have not incurred any contingent liability under Section 4204
of ERISA with respect to any sale of assets by the Company or any ERISA
Affiliate within the last five years. For purposes of this paragraph,
"Multiemployer Plan" means any multiemployer plan defined in Section 4001(a)(3)
of ERISA (i) that maintains and contributes to or maintained and has contributed
to and (ii) that covers or has covered any employee of the Company.
(d) Each Welfare Plan has been maintained in all meaningful
respects in compliance with its terms and with the requirements prescribed by
ERISA, the Internal Revenue Code and other applicable law; and (A) each Welfare
Plan that is a "group health plan," as defined in Section 607(l) of ERISA, and
(B) each "group health plan" (as so defined) of any ERISA Affiliate has been
operated in all
<PAGE>
meaningful respects in compliance with the provisions of Part 6 of Title I of
ERISA and Sections 162(k) (prior to its amendment in 1988) and 4980B of the
Internal Revenue Code at all times. For purposes of this paragraph, "Welfare
Plan" means any employee welfare benefit plan as defined in Section 3(i) of
ERISA (i) that the Company maintains or contributes to or has maintained or
contributed to, and (ii) that covers or has covered any employee of the Company.
(e) Neither Seller nor the Company, nor any plan fiduciary of any
Welfare Plan or pension plan has engaged in any meaningful transaction in
violation of Sections 404 or 406 of ERISA or any "prohibited transaction," as
defined in Section 4975(c)(1) of the Internal Revenue Code, for which no
exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Internal Revenue Code for which Seller or the Company would be liable. There is
no pending or threatened assessment, complaint, proceeding, or investigation of
any kind in any court or government agency with respect to any employee benefit
plan of the Company. All (i) insurance premiums required to be paid with
respect to, (ii) benefits, expenses, and other amounts due and payable under,
and (iii) contributions, transfers, or payments required to be made to, any
employee benefit plan of the Company prior to the Closing will have been paid,
made or accrued on or before the Closing. With respect to any insurance policy
intended to provide for benefits under any employee benefit plan or funding
therefor, (i) there is no liability of the Company, in the nature of a
retroactive or retrospective rate adjustment, loss sharing arrangement, or other
actual or contingent liability, nor would there be any such liability if such
insurance policy was terminated on the date hereof, and (ii) no insurance
company issuing any such policy is in receivership, conservatorship, liquidation
or similar proceeding and, to the knowledge of Seller, no such proceedings with
respect to any insurer are imminent. All payments described in this subsection
shall be accounted for and accrued in accordance with current practices as in
effect as of the date of this Agreement with respect to Welfare Plans
administered in conjunction with one or more ERISA Affiliates. No employee
benefit plan provides benefits to any individual who is not a current or former
employee of the Company, or the dependents or other beneficiaries of any such
current or former employee.
SECTION III.16 Taxes. (a) Except as would not have a Material Adverse
Effect, Seller and the Company have filed or caused to be filed on a timely
basis, will file or cause to be filed on a timely basis, or has been or will be
included in, all Tax Returns that are required to be filed by it or in which it
is required to be included prior to or on the Closing Date, pursuant to the Law
of each Governmental Authority with taxing power over it. All such Tax Returns
were or will be, as the case may be, correct and complete. All Taxes, including
but not limited to amounts required to be withheld by the Company from the
employees, that the Company was required by law to withhold or collect have been
duly withheld and collected and have been paid over to the appropriate tax
authorities to the extent due and payable. All Taxes that have become due
including but not limited to Taxes shown on such Tax Returns or pursuant to any
assessment received as an adjustment to such Tax Returns have been paid by
either the Company or Seller, except (i) such Taxes, if any, as are being
contested in good faith and disclosed in the Disclosure Schedule and are
recorded as liabilities on the Financial Statements of the Company, and (ii)
Taxes accruing after the Closing Date that are not yet due. No claim has been
made by a taxing authority of a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation in that jurisdiction. True and
complete copies of all federal and California income tax returns filed with
respect to the Company for all periods since its incorporation have been
provided to Buyer. None of such tax returns has been audited by the Internal
Revenue Service or any California taxing authority.
(b) There is no pending, threatened or anticipated, assessment of
any additional Tax against Seller or the Company for any taxable period that has
not been recorded on the Financial Statements. Seller and the Company have not
waived any statute of limitations in respect of any Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency for any taxable
period. No Tax audit or examination is now pending or currently in progress
with respect to Seller or the Company. Neither the Seller nor the Company has
received notice of any deficiency with respect to Taxes paid for
<PAGE>
which a liability for such Taxes (including penalties and interest thereon) has
not been recorded.
(c) Seller and its Affiliates, on the one hand, and the Company,
on the other hand, are not parties to any income Tax allocation or sharing
agreement.
SECTION III.17 Intellectual Property Rights. The Disclosure Schedule
discloses all of the trademark and service mark rights, applications and
registrations, trade names, fictitious names, service marks, logos and brand
names, copyrights, copyright applications, letters patent, patent applications
and licenses of any of the foregoing owned or used in the Business. Except as
disclosed in the Disclosure Schedule, the Company has the entire right, title
and interest in and to, or has the exclusive perpetual royalty-free right to
use, the intellectual property rights disclosed in the Disclosure Schedule
("Intellectual Property"), free and clear of all Encumbrances. All proprietary
know-how and trade secrets are owned by the Company free and clear of any
Encumbrances. The Disclosure Schedule separately discloses all Intellectual
Property under license. To the knowledge of Seller, (i) the Intellectual
Property is not the subject of any interference, opposition, re-examination or
cancellation, (ii) no Person is infringing upon nor has any Person
misappropriated any Intellectual Property, and (iii) neither Seller nor the
Company is infringing upon the intellectual property rights of any other Person.
SECTION III.18 Transactions With Related. No Related Party is or has
been since January 1, 1996 a party to any transaction, agreement or
understanding with the Company except pursuant to arrangements disclosed in the
Disclosure Schedule. No Related Party uses any assets of the Company except
directly in connection with the Business, and no Related Party owns any asset
used in the Business. Except as identified in the Disclosure Schedule, no
Related Party has any claim of any nature against the Company, and neither
Seller nor the Company has any claim of any nature against or Liability to any
Related Party. Identified in the Disclosure Schedule are all assets of the
Company that have been or will be either retained by Seller or transferred to
Seller, other than cash, intercompany accounts and books and records.
SECTION III.19 Environmental Matters. Except as disclosed in the
Disclosure Schedule, and subject to the knowledge of Seller with respect to any
matter occurring prior to the date that the Company first acquired, leased or
used such real property:
(a) Seller and the Company have operated the Business and each
parcel of real property owned, used, operated, managed, possessed or leased by
them in compliance in all meaningful respects with all applicable Environmental
Laws. Neither Seller nor the Company is subject to any meaningful liability,
penalty or expense (including, without limitation, legal fees) by virtue of any
violation of any Environmental Law occurring prior to the Closing with respect
to any real property. All of the Licenses of Seller and the Company issued
under or pursuant to any Environmental Law are in full force and effect, and
Seller and the Company are in compliance in all meaningful respects with, and
have fulfilled and performed in all meaningful respects their obligations under,
each such License.
(b) Neither Seller nor the Company has treated, stored, recycled
or disposed of any Regulated Material on, in, under or about any real property,
and no other Person has treated, stored, recycled or disposed of any Regulated
Material on, in, under or about any part of the Real Property, in violation of
any applicable Environmental Law. There has been no release of any Regulated
Material at, on, in, under or about any Real Property in violation of any
applicable Environmental Law or in any quantity or amount which would require
any cleanup, renewal, treatment or remediation. Neither Seller nor the Company
has transported any Regulated Material or arranged for the transportation of any
Regulated Material to any location that is listed or proposed for listing on the
National Priorities List pursuant to Superfund,
<PAGE>
or on CERCLIS. None of the Real Property is listed, nor has the Seller
received any written notice that the Real Property is proposed for listing on,
the National Priorities List pursuant to Superfund, CERCLIS or any state or
local list of sites requiring investigation or cleanup.
(c) Neither Seller nor the Company has received any written notice
of claim, demand or other notification that it is or may be potentially
responsible with respect to any investigation, abatement or cleanup of any
threatened or actual release of any Regulated Material. Seller and the Company
have not placed any notice or restriction relating to the presence of any
Regulated Material at any Real Property or in any deed to any Real Property.
Seller and the Company have not transported any Regulated Material for
recycling, treatment, disposal, or other handling. There is no pending or
contemplated claim, by Seller or the Company under any Environmental Law
based on actions of others that may have impacted on the Real Property, and,
except as set forth in the Disclosure Schedule, neither Seller nor the Company
have entered into any agreement with any Person regarding any Environmental Law,
remedial action or other environmental liability or expense. No PCBs, friable
asbestos or underground storage tanks are present on or in any structure or
equipment located on any Real Property. Any and all storage tanks formerly
located on the Real Property, whether underground or aboveground, were properly
removed in compliance with applicable Environmental Laws.
SECTION III.20 Insurance. The Disclosure Schedule discloses all
insurance policies with respect to which the Company is the owner, insured or
beneficiary. All material properties and risks of the Company are covered by
valid and currently effective insurance policies or binders of insurance or
programs of self-insurance in such types and amounts as are consistent with
customary practices and standards of companies engaged in businesses and
operations similar to those of the Company. The Disclosure Schedule discloses
the manner in which the Company provides coverage for, or addresses the risks
of, workers' compensation claims and self-insured retentions and deductibles,
including, without limitation, self-insurance programs.
SECTION III.21 Material Contracts. (a) Section 3.21(a) of the
Disclosure Schedule lists the following contracts (collectively, with the leases
listed in the Disclosure Schedule, the "Material Contracts") to which the
Company is a party or by which its assets may be bound:
(i) any commitment, contract, agreement, note, loan, evidence
of indebtedness, purchase order or letter of credit (other than purchase orders
issued in the ordinary course of business) that Seller or the Company reasonably
anticipates will, in accordance with its terms, involve aggregate payments by or
to the Company of more than $5,000 within the 12 month period following the date
hereof;
(ii)any lease of personal property involving an annual expense
in excess of $3,000;
(iii) any contract or agreement containing covenants
limiting in any respect the freedom of Seller or the Company to engage in any
line of business or compete with any Person; and
(iv)any contract or agreement not entered into in the ordinary
course of the Business.
(b) The Company (and, to the knowledge of Seller, each other
party) is not in material breach or violation of, or default under, any of the
Material Contracts. Each Material Contract is a valid agreement, arrangement or
commitment of the Company, enforceable against the Company in accordance with
its terms. The Financial Statements reflect an accrual for the entire amount of
the estimated ultimate loss on each Material Contract as required by GAAP as of
the date of the Financial Statements.
<PAGE>
SECTION III.22 Receivables. The Disclosure Schedule lists all trade and
other accounts receivable of the Company ("Receivables") outstanding as of
October 31, 1997. All Receivables, (whether reflected on the Financial
Statements, disclosed in the Disclosure Schedule or created after October 31,
1997) arose from bona fide sales and deliveries of goods, performance of
services and other business actions of the Company in the ordinary course of
business. On the Closing Date, no portion of any Receivable will be subject to
any counterclaim, defense or set-off, or otherwise be in dispute. Except to the
extent of the recorded reserve for doubtful accounts specified on the Balance
Sheet and set forth in the Disclosure Schedule, all of the Receivables are
collectible in the ordinary course of business and will be fully collected
within 120 days after having been created.
SECTION III.23 Customers. The Disclosure Schedule lists the five largest
customers of the Company in terms of revenues during the twelve months ended
August 31, 1997, showing the approximate total sales by the Company to each such
customer during such period. As of the date of this Agreement, Seller has no
knowledge of any condition or state of facts or circumstances involving the
customers or sales representatives that Seller or the Company can reasonably
foresee could adversely affect the Business after the Closing Date. Neither
Seller nor the Company has received written notice of any condition or state of
facts or circumstances involving customers or sales representatives that they
can reasonably foresee could adversely affect the Business after the Closing
Date.
SECTION III.24 Inventory. The finished goods inventory of the Company
consists only of items which are merchantable and fit for the purpose for which
they were produced. The inventory is valued on the Balance Sheet at the lower
of cost or market and is of such quality and in such quantities as are useable
and saleable within a reasonable period of time in the ordinary course of the
Business, except to the extent of reserves reflected in the Balance Sheet and
except for obsolete items and items of below standard quality, all of which have
been written off or written down to net realizable value on the Balance Sheet.
SECTION III.25 Warranties on Sales. The principal activity of the
Company is the manufacture and sale of wafer cleaning work stations and other
equipment for semiconductor manufacturing applications.
SECTION III.26 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement and Other Agreements based
upon arrangements made by or on behalf of Seller.
SECTION III.27 Investment Purpose. Seller is acquiring the Trio-Tech
Shares for investment only and not with a view to or in connection with any
distribution of such Trio-Tech Shares. Seller acknowledges that he understands
that he must bear the economic risk of investment for a substantial period of
time because the Trio-Tech Shares have not been registered under the Securities
Act of 1933 and such shares may not be sold or transferred in the absence of
such registration or an exemption therefrom under said Act.
SECTION III.28 Disclosure. To the knowledge of Seller, none of the
representations or warranties of Seller contained herein and none of the
information contained in the Disclosure Schedule is false or misleading in any
material respect or omits to state a fact herein or therein necessary to make
the statements herein or therein, in the light of the circumstances in which
they are made, not misleading in any material respect.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and consummate
the transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
SECTION IV.1 Incorporation and Authority of. The Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
California and has all necessary corporate power and authority to enter into
this Agreement and the Other Agreements to which it is or is to become a party,
to carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement and the Other Agreements to which Buyer is or is to
become a party, the performance by Buyer of its obligations hereunder and
thereunder and the consummation by Buyer of the transactions contemplated hereby
and thereunder have been duly authorized by all requisite corporate action on
the part of Buyer. This Agreement has been duly executed and delivered by the
Buyer, and (assuming due authorization, execution and delivery by Seller) this
Agreement constitutes, and, when delivered, each Other Agreement to which Buyer
shall become a party shall constitute, a legal, valid and binding obligation of
Buyer enforceable against Buyer in accordance with its terms subject to the
effect of any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION IV.2 No Conflict. Except as may result from any facts or
circumstances relating solely to Seller, the execution, delivery and performance
of this Agreement and the Other Agreements by Buyer does not and will not: (a)
violate or conflict with the articles of incorporation or by-laws of Buyer, (b)
conflict with or violate any Law or Governmental Order applicable to Buyer, (c)
result in the creation, maturation or acceleration of any liability or
obligation of Buyer (or give to any other Person the right to cause such a
creation, maturation or acceleration), (d) result in the creation or imposition
of any Encumbrance upon any of the Trio-Tech Shares or any of the assets or
properties of Buyer or give to any other Person any interest or right therein,
or (e) result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
lease, License, permit, franchise or other instrument to which Buyer is a party
or by which any of its assets or properties is bound or affected.
SECTION IV.3 Consents and Approvals. The execution and delivery of this
Agreement and the Other Agreements by Buyer does not, and the performance of
this Agreement by Buyer will not, require any consent, approval, authorization
or other action by, or filing with or notification to, any governmental or
regulatory authority (including, without limitation, any such actions required
to be taken after Closing), except (a) compliance with the applicable
requirements, if any, of the Exchange Act and the GCL and, (b) as may be
necessary as a result of any facts or circumstances relating solely to Seller.
SECTION IV.4 Investment Purpose. Buyer is acquiring the Shares solely
for the purpose of investment and not with a view to, or for offer or sale in
connection with, any distribution thereof.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION V.1Conduct of Business Prior to the Closing. (a) Unless Buyer
otherwise agrees in
<PAGE>
writing and except as otherwise set forth herein or in the Disclosure Schedule,
between the date of this Agreement and the Closing Date, Seller will cause the
Company to conduct the Business only in the ordinary course and to use
reasonable efforts to preserve the current relationships of the Company with its
customers, suppliers, officers and other employees and other Persons with which
the Company has significant business relationships. Nothing contained herein
shall be deemed to prevent Seller and the Company from (i) entering into such
contracts as they deem necessary or appropriate in order to conduct the Business
as presently conducted or contemplated to be conducted, and (ii) renewing (and
conducting such negotiations as are necessary to effect such renewal) any
contract, including, without limitation, leases for real and personal property,
to which any of them is currently a party and which is either (x) scheduled to
expire or (y) required to be renewed in accordance with the terms of such
contract or lease, on a date occurring between the date of this Agreement and
the Closing Date.
(b) Except as expressly provided in this Agreement or in the
Disclosure Schedule, between the date of this Agreement and the Closing Date,
Seller will cause the Company not to do any of the following without the prior
written consent of Buyer (such consent not to be unreasonably withheld):
(i) create any Encumbrance of any kind on any properties or
assets (whether tangible or intangible) of the Company, other than (i) Permitted
Encumbrances, (ii) Encumbrances that will be released at or prior to the Closing
or (iii) Encumbrances created in the ordinary course of business having an
individual value not in excess of $5,000;
(ii)except for purchases and sales of assets in the ordinary
course of business, (A) sell, assign, transfer, lease or otherwise dispose of
any assets of the Company, or (B) acquire any fixed asset, in the case of (A)
and (B) above, respectively, having an individual value exceeding $5,000;
(iii) cancel any indebtedness owed to the Company (other
than settlement of accounts receivable in the ordinary course of business);
(iv)acquire (by merger, consolidation, or acquisition of stock
or assets) any Person or any assets that constitute an operating unit or
division thereof;
(v) (A) incur any indebtedness for borrowed money, (B) issue
any debt securities or (C) assume, grant, guarantee or endorse, or enter into
any other accommodation arrangement making the Company responsible for the
Liabilities of any Person;
(vi)change any method of accounting or accounting practice
used by Seller or the Company;
(vii) issue or sell any shares of the capital stock of, or
other equity interests in, the Company, or securities convertible into or
exchangeable for such shares or equity interests, or issue or grant any Security
Right of any kind with respect to any of the foregoing;
(viii) declare, set aside or pay any dividend or other
distribution on or with respect to, or redeem, the Shares;
(ix)amend the Company's Articles of Incorporation or by-laws;
(x) increase the base salary, wage or bonus of any employee
of the Company;
(xi)pay to or effect any transaction with any Related Party,
which payment
<PAGE>
or transaction is not specifically described in the Disclosure Schedule;
(xii) pay, prepay or discharge any liability other than in
the ordinary course of business;
(xiii) pay any management fee;
(xiv) sell or assign any Intellectual Property of the
Company; or
(xv)agree to take any of the actions prohibited pursuant to
this Section 5.1(b).
(c) Seller shall cancel, prior to or at the Closing, the
intercompany arrangements identified in the Disclosure Schedule, copies of which
have been delivered to the Buyer, and Seller represents to Buyer that such
cancellations (including, without limitation, any consequences of such
cancellations) will not result in a breach of this Agreement; provided, however,
that all obligations of the Company under such agreements shall terminate
completely and the Company shall not have any Liability to any Person with
respect thereto.
SECTION V.2Access to Information. (a) From the date of this Agreement
until the Closing, upon reasonable notice, Seller shall, and shall cause the
officers, employees, auditors and agents of Seller and the Company to, (i)
afford the officers, employees and authorized agents and representatives of
Buyer reasonable access, during normal business hours, to the offices,
properties, books and records of Seller and the Company and (ii) furnish to the
officers, employees and authorized agents and representatives of Buyer such
additional financial and operating data and other information regarding the
assets, properties, goodwill and business of the Company as Buyer may from time
to time reasonably request in order to assist the Buyer in fulfilling its
obligations under this Agreement and to facilitate the consummation of the
transfers contemplated hereby.
(b) Buyer agrees that it shall preserve and keep all Books and
Records in Buyer's possession for a period of at least four years after the
Closing Date. Within 90 days after such four-year period, Seller upon written
notice to Buyer shall be given an opportunity, at its cost and expense, to copy
all or any part of such Books and Records at Seller's expense. Notwithstanding
anything else herein to the contrary, the obligations of Buyer under this
subsection (b) shall be assignable by Buyer in connection with the sale by Buyer
of all of the capital stock or substantially all of the assets of the Company
and any such effective assignment shall be deemed a novation of Buyer's
obligations under this subsection (b).
(c) Subject to the provisions of Article VI herein, each party
agrees that it will cooperate with and make available to the other party, during
normal business hours, all Books and Records, information and employees (without
substantial disruption of employment) retained and remaining in existence after
the Closing Date which are necessary in connection with this Agreement and any
Tax inquiry, audit, investigation or dispute, any litigation or investigation or
any other matter requiring any such Books and Records, information or employees
for any reasonable business purpose. The party requesting any such Books and
Records, information or employees shall bear all of the out-of-pocket costs and
expenses (including, without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or employees.
Seller may require certain financial information relating to the Business for
periods prior to the Closing Date for the purpose of filing federal, state,
local and foreign Tax returns and other governmental reports, and Buyer agrees
to furnish such information to Seller at Seller's request and expense.
<PAGE>
SECTION V.3Regulatory and Other Authorizations and Consents. (a) Each
party hereto shall use its best efforts to obtain all authorizations, consents,
orders and approvals of, and to give all notices to and make all filings with,
all Governmental Authorities and other third parties that may be or become
necessary for the execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with the other
party in promptly seeking to obtain all such authorizations, consents, orders
and approvals, giving such notices, and making such filings. The parties hereto
acknowledge that time shall be of the essence in this Agreement and agree not to
take any action that will have the effect of unreasonably delaying, impairing or
impeding the receipt of any required authorizations, consents, orders or
approvals.
(b) Buyer will use its best efforts to assist Seller in obtaining
any consents of landlords necessary or advisable in connection with the
transactions contemplated by this Agreement, including, without limitation,
providing to such landlords such financial statements and other financial
information with respect to Buyer as such landlords may reasonably request.
SECTION V.4Further Action. Subject to the terms and conditions herein
provided, each of the parties hereto covenants and agrees to use its best
efforts to deliver or cause to be delivered such documents and other papers and
to take or cause to be taken such further actions as may be necessary, proper or
advisable under applicable Law to consummate and make effective the transactions
contemplated hereby.
SECTION V.5 Insurance Matters. All claims arising subsequent to the
Closing Date, whether or not covered by insurance, shall be for the account of
Buyer; provided, however, that nothing contained in this Section 5.5 shall be
deemed to impair Buyer's right to be indemnified for breaches of Seller's
representations and warranties pursuant to Article IX of this Agreement.
Following the Closing, Seller shall, to the extent that coverage under its
insurance policies extends to include the Company in respect of claims arising
out of accidents or occurrences concerning the Business or the Company prior to
the Closing, (i) take no action to eliminate or reduce such coverage and (ii)
pay when due any premiums and other charges under such policies applicable to
periods through the Closing Date. Following the Closing, each party will
cooperate with the insurance carrier in the defense and settlement of such
covered claims.
SECTION V.6Acquisition Proposals. Seller shall not, and Seller shall not
permit any of its Affiliates, officers, employees, agents or representatives to,
whether directly or indirectly, solicit or encourage (including by way of
furnishing information) any inquiries or proposals relating to, or engage in any
negotiations with respect to, the sale of the Shares (or of the assets of the
Company), or any part thereof, or any other business combination involving the
Company, except for inquiries or proposals from, or discussions or negotiations
with, Buyer and its authorized representatives.
SECTION V.7Notices in the Events of Suit or Breaches of Representations
and Warranties. Each of Seller and Buyer shall promptly notify the other of any
action, suit or proceeding that shall be instituted or threatened against it or
the Company to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Each of Seller and Buyer shall
promptly notify the other of any facts or circumstances as to which it obtains
knowledge that cause any of the representations and warranties made by it herein
to be untrue in any material respect.
SECTION V.8Interim Financial Statements. Seller shall promptly deliver
to Buyer copies of any monthly, quarterly or annual balance sheets, income
statements and statements of cash flows of the Company for each such period
after the date hereof through the Closing Date.
SECTION V.9 Post-Closing Board of Directors. Immediately following the
Closing, all necessary corporate actions shall be taken to establish a board of
directors of the Company consisting of
<PAGE>
Tony DiPiero and two persons who will be designated by Buyer. Seller
acknowledges that there is no agreement, understanding or expectation that
Seller will become a member of the Trio-Tech Board of Directors.
SECTION V.10 Post-Closing Capital Infusion. Not later than 60 days
following the Closing Date, Buyer shall make available to the Company $1,000,000
for purposes of expansion of the Company's business. Buyer shall make available
to the Company an additional $1,000,000 not later than March 31, 1998, to be
used as set forth in the capital spending plan which is included in the business
plan furnished by Seller to Buyer and attached hereto as Exhibit B (the
"Business Plan"). Thereafter, provided the Business, in the reasonable good
faith judgment of Buyer, is continuing to achieve all of its material objectives
as set forth in the Business Plan, Trio-Tech shall make additional amounts
available, not less than $1,000,000, not later than March 31, 1999. In each
case, such funds shall be provided or arranged by Buyer through such means as
Buyer may select in its sole discretion, including but not limited to borrowings
by Buyer or the Company, sales of stock or securities, and equipment financing
or leasing. Notwithstanding the foregoing, the first two increments of
$1,000,000 shall be treated as equity investments by Buyer, with no charge
against the Company for the cost of such funds, for purposes of making all
calculations affecting Seller's performance and the Company's pretax profits
under this Agreement, the Employment Agreement referred to in Section 7.1(d),
and all other matters affecting Seller. All uses of such funds for capital
expenditures shall require the prior approval of Buyer. In the event Buyer
fails to provide the first $2,000,000 of funds when and as specified in this
Section 5.10, Seller shall have the right, by written notice to Buyer not later
than six months following the Closing Date, to rescind Seller's sale of the
stock of the Company by returning to Buyer the stock portion of the Purchase
Price, but retaining the $250,000 referred to in clause (i) of Section 2.2
above, whereupon this Agreement, the Employment Agreement, the Option Agreement
and the Noncompetition Agreement shall be terminated and all rights and
obligations of the parties hereunder and thereunder shall cease and be of no
further force or effect.
SECTION 5.11 401(k) Plan. Buyer will use its best efforts to devise
and establish a 401(k) Plan in consultation with Buyer's Board of Directors and
Seller, that will include Seller and other designated employees of the Company.
ARTICLE VI
TAX MATTERS
SECTION VI.1 Tax Indemnities. (a) Seller shall indemnify Buyer and the
Company against all Taxes (i) imposed on Seller or any member of an affiliated
group with which Seller files a federal consolidated or combined income tax
return with respect to any taxable period that ends on or before the Closing
Date or includes the Closing Date or (ii) imposed on the Company with respect to
any taxable period or portion thereof that ends on or before the Closing Date.
Without limiting the foregoing, Seller shall also indemnify Buyer and the
Company against all Taxes arising out of a breach of any representation and
warranty contained in Section 3.16. Notwithstanding the foregoing, the Company
and Buyer shall pay and be responsible for the payment of all federal and state
income taxes arising from the operations of the Company (but not any tax
liabilities of Seller) for the period from June 1, 1997 through the Closing
Date.
(b) Buyer and the Company shall indemnify Seller against all
Taxes imposed on or with respect to the Company that are not subject to
indemnification pursuant to paragraph (a) of this Section 6.1, including but not
limited to Taxes with respect to any taxable period which begins after the
Closing Date.
(c) Any Taxes for a tax period beginning before the Closing
Date and ending after the Closing Date shall be apportioned between Seller and
Buyer, in the case of real and personal property
<PAGE>
taxes and franchise taxes not based on gross or net income, on a per diem basis
and, in the case of other Taxes (including, without limitation, sale and
transfer Taxes), shall be determined based on the actual operation of the
Company during the portion of such period ending on the Closing Date and the
portion of such period beginning on the day following the Closing Date. Each
such portion of such period shall be deemed to be a tax period subject to the
provisions of Section 6.1(a) and 6.1(b) above.
(d) Payment by the indemnitor of any amount due under this
Section 6.1 shall be made within ten days following written notice by the
indemnitee that payment of such amounts to the appropriate tax authority is due,
provided that the indemnitor shall not be required to make any payment earlier
than two days before it is due to the appropriate tax authority.
SECTION VI.2 Refunds and Tax Benefits. Buyer shall promptly pay to
Seller an amount equal to any refund, offset or credit (including, without
limitation, any interest paid or credited with respect thereto) received by
Buyer, or the Company or successor thereof, of Taxes relating to taxable periods
or portions thereof ending on or before the Closing Date or otherwise
attributable to an amount paid by Seller under Section 6.1 hereof, but only to
the extent such refund, offset or credit was not reflected in the Financial
Statements. Buyer shall, if Seller so requests and at Seller's expense, cause
the relevant entity to file a claim for and obtain any refund, offset or credit
in respect of which Seller is entitled to payment under this Section 6.2. Buyer
shall permit Seller to control (at Seller's expense) the prosecution of any such
claim, and shall cause the relevant entity to authorize by appropriate power of
attorney such persons as Seller shall designate to represent such entity with
respect to such refund claim.
SECTION VI.3 Preparation of Tax. Seller shall prepare and file any tax
returns and schedules relating to the Company for the period ending on or before
the Closing Date. Buyer shall prepare or cause the Company to prepare any tax
return relating to it for any period ending after the Closing Date.
SECTION VI.4 Contests. (a) After the Closing Date, Buyer shall
promptly notify Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on Buyer or the
Company which, if determined adversely to the taxpayer or after the lapse of
time would be grounds for indemnification under Section 6.1. Such notice shall
contain factual information (to the extent known to Buyer or the Company)
describing the asserted Tax liability in reasonable detail and shall include
copies of any notice or other document received from any taxing authority in
respect of any such asserted Tax liability, and
(b) Seller may elect to direct, through counsel of its own
choosing and at its own expense, any audit, claim for refund and administrative
or judicial proceeding involving any asserted liability with respect to which
indemnity may be sought under Section 6.1 (any such audit, claim for refund or
proceeding relating to an asserted Tax liability is referred to herein as a
"Contest"). If Seller elects to direct a Contest, Buyer shall cooperate and
shall cause the Company or its successor or successors to cooperate, at Seller's
expense, in each phase of such Contest. If Seller elects not to direct the
Contest, or contests its obligation to indemnify under Section 6.1, Buyer or the
Company shall take such reasonable steps as may be prudent and within its
capacity (with due allowance being given to the circumstances) to preserve the
right of the relevant entity to contest such asserted Tax liability, shall
further take such reasonable steps as Seller may timely request to preserve the
right of the parties to contest such asserted Tax liability, may pay, compromise
or contest such asserted liability, and shall be reimbursed by Seller for
reasonable costs of outside tax advisors and related professionals and
reasonable out-of-pocket costs incurred pursuant to this sentence in connection
with a Tax liability indemnifiable by Seller hereunder. If Buyer or the Company
assumes control of a Contest with respect to Taxes pursuant to the foregoing,
Seller shall retain the right, at any time thereafter and immediately upon
notice to the entity that shall have assumed control of such Contest, itself to
assume, at Seller's expense, sole control of such Contest. In this event, each
of Buyer (or the Company) and Seller may participate, at Seller's expense, in
the Contest. If
<PAGE>
Seller chooses to direct the Contest, Buyer shall promptly empower and shall
cause the Company or their respective successors promptly to empower such
representatives of Seller as it may designate to represent Buyer and/or the
Company or their respective successors in the Contest insofar as the Contest
involves an asserted Tax liability for which Seller would be liable under
Section 6.1.
SECTION VI.5 Cooperation and Exchange of Information. Seller and Buyer
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Each party will retain all
returns, schedules and work papers and all material records or other documents
relating to Tax matters of the Company for the taxable period first ending after
the Closing Date and for all prior taxable periods until the later of (i) the
expiration of the statute of limitations of the taxable periods to which such
returns and other documents relate, without regard to extensions except to the
extent notified by the other party in writing of such extensions for the
respective Tax periods, or (ii) six years following the due date (without
extension) for such returns. Anything to the contrary in this Agreement
notwithstanding, Seller shall retain for the periods noted above all returns,
schedules and work papers and all material records or other documents relating
to Tax matters for all taxable periods of the Company ending on or prior to the
Closing Date. Any information obtained under this Section 6.5 shall be kept
confidential, except as may be otherwise necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
Buyer shall be given an opportunity at its cost and expense to remove and retain
all or any portion of such books and records as Buyer may select at the
expiration of such period.
SECTION VI.6 Conveyance Taxes. Seller and Buyer agree that
responsibility for all sales, transfer, stamp, stock transfer, real property
transfer and similar Taxes incurred as a result of the sale of the Shares
contemplated hereby shall be borne equally by Seller and Buyer. Notwithstanding
any limitation on indemnification for Taxes under this Article VI, each party
shall be entitled to indemnification from the other half of the amount of any
Tax of the type contemplated by the foregoing in this Section 6.6 assessed
against it. Seller and Buyer agree that responsibility for all real property
transfer gains taxes incurred as a result of the sale of the Shares contemplated
hereby shall be borne by Seller.
SECTION VI.7 Miscellaneous.
(a) The parties agree to treat all payments made under this
Article VI, under any other indemnity provision contained in this Agreement, and
for any misrepresentations or breach of warranties or covenants as adjustments
to the Purchase Price or as capital contributions for Tax purposes and that such
agreed treatment shall govern for purposes hereof.
(b) The covenants and agreements of the parties hereto
contained in this Article VI shall survive the Closing and shall remain in full
force and effect until the expiration of all statutes of limitations as extended
by agreement or otherwise with respect to any Taxes that would be indemnifiable
by Seller under Section 6.1(a) of this Agreement or by Buyer under Section
6.1(b) of this Agreement.
<PAGE>
ARTICLE VII
CONDITIONS TO CLOSING
SECTION VII.1 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver, at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the Closing, with the same force
and effect as if made on, as of and with reference to the Closing Date (or, in
the case of representations and warranties of Buyer which address matters only
as of a particular date, as of such date); (ii) the covenants and agreements
contained in this Agreement to be complied with by Buyer at or prior to the
Closing shall have been complied with in all material respects; and (iii) Seller
shall have received a certificate from Buyer as to the matters set forth in
clauses (i) and (ii) above signed by a duly authorized officer of Buyer;
(b) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Governmental Order which is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal or otherwise prohibiting consummation of such transactions;
provided, however, that the provisions of this Section 7.1(b) shall not apply if
Seller has directly or indirectly solicited or encouraged any such action;
(c) No Buyer Material Adverse Effect. There shall have been no
Buyer Material Adverse Effect after the date hereof and continuing through the
Closing Date;
(d) Employment Agreement. The Company shall have executed and
delivered an employment agreement with Seller (the "Employment Agreement")
substantially in the form annexed hereto as Exhibit C.
(e) Option Agreement. Buyer shall have executed and delivered
an option agreement with Seller (the "Option Agreement") substantially in the
form annexed hereto as Exhibit D.
SECTION VII.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or waiver at or prior to the Closing, of each of the
following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of the Closing, with the same force
and effect as if made on, as of and with reference to the Closing Date (or, in
the case of representations and warranties of Seller which address matters only
as of a particular date, as of such date); (ii) the covenants and agreements
contained in this Agreement to be complied with by Seller at or prior to the
Closing shall have been complied with in all material respects; and (iii) Buyer
shall have received a certificate of Seller as to the matters set forth in
clauses (i) and (ii) above signed by a duly authorized officer of Seller;
(b) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or otherwise
prohibiting consummation of such transactions; provided, however, that the
provisions of this
<PAGE>
Section 7.2(b) shall not apply if Buyer has directly or indirectly solicited or
encouraged any such action;
(c) Certain Closing Documents. Seller shall have delivered to
Buyer:
(i) Certificates of the appropriate public officials to
the effect the Company was a validly existing corporation in good standing in
the State of California as of a date not more than ten days prior to the Closing
Date;
(ii) True and correct copies of the Articles of
Incorporation of the Company as of a date not more than ten days prior to the
Closing Date, certified by the California Secretary of State, and the bylaws of
the Company as of the Closing Date, certified by its Secretary;
(iii) The minute books, stock ledgers and corporate
seal of the Company and certificates representing 100% of the outstanding shares
of capital stock of the Company; and
(iv) Resignations of each member of the Board of Directors
of the Company.
(d) Employment Agreement. Seller shall have executed and
delivered the Employment Agreement to Buyer.
(e) Noncompetition Agreement. Seller shall have executed and
delivered the Noncompetition Agreement to Buyer.
(f) No Material Adverse Effect. There shall have been no
Material Adverse Effect after the date hereof and continuing on the Closing
Date.
(g) Third Party Consents. Seller and the Company shall have
obtained all consents of third parties which are required as a consequence of
the sale of the Shares and the transfer of control of the Company to Buyer.
ARTICLE VIII
INDEMNIFICATION
SECTION VIII.1 Survival. Subject to the limitations and other
provisions of this Agreement, the representations, warranties, covenants and
agreements of the parties contained herein shall survive the Closing and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of Seller or Buyer, until November 19, 2001; provided, however, that the
covenants and agreements set forth in Article VI shall remain in full force and
effect for the periods specified in Article VI or, if no such period is
specified, indefinitely; provided further that the representation and warranty
set forth in Section 3.16 shall remain in full force and effect until the
expiration of all statutes of limitations as extended by agreement or otherwise
with respect to any Taxes discussed therein; and provided further that the
representations and warranties in Sections 3.2 and 3.3 shall survive the Closing
without limitation as to time.
SECTION VIII.2 Indemnification by Buyer.
(a) Buyer agrees, subject to the other terms and conditions of
this Agreement, to indemnify Seller and his Affiliates and agents (all such
Persons included within the definition of the "Seller" as an indemnified party
under this Section 8.2) against and hold Seller harmless from all Losses to
Seller arising out of the breach of any representation, warranty, covenant or
agreement of Buyer herein. Anything
<PAGE>
in Section 8.1 to the contrary notwithstanding, no claim may be asserted nor may
any action be commenced against Buyer for breach of any representation,
warranty, covenant or agreement contained herein, unless written notice of such
claim or action is received by Buyer describing in reasonable detail the facts
and circumstances with respect to the subject matter of such claim or action on
or prior to the date on which the representation, warranty, covenant or
agreement on which such claim or action is based ceases to survive as set forth
in Section 8.1.
(b) The indemnification obligations of Buyer pursuant to
Section 8.2(a) in respect of breaches of representations and warranties shall
not be effective until the aggregate dollar amount of all Losses which would
otherwise be indemnifiable pursuant to Section 8.2(a) exceeds $20,000 (the
"Buyer's Threshold Amount"), in which event Buyer shall be liable for the full
amount of such Losses. The aggregate indemnification obligations of Buyer
pursuant to Section 8.2(a) in respect of Losses for breaches of representations
and warranties shall not exceed $500,000. For the purposes of this Section
8.2(b), in computing such individual or aggregate amounts of claims, the amount
of each claim shall be net of any insurance proceeds and any indemnity,
contribution or other similar payment actually received by Seller or any
Affiliate of Seller from any third party with respect thereto.
(c) Seller agrees to give Buyer written notice of any claim,
assertion, event or proceeding by or in respect of a third party as to which he
may request indemnification hereunder or as to which Buyer's Threshold Amount
may be applied as soon as is practicable and in any event within 30 days of the
time that Seller learns of such claim, assertion, event or proceeding; provided,
however, that the failure to so notify Buyer shall not affect rights to
indemnification hereunder except to the extent that Buyer is actually prejudiced
by such failure. Buyer shall have the right to direct, through counsel of its
own choosing, the defense or settlement of any such claim or proceeding at its
own expense. If Buyer elects to assume the defense of any such claim or
proceeding, Seller may participate in such defense, but in such case the
expenses of Seller shall be paid by Seller. Seller shall cooperate with Buyer
in the defense or settlement thereof, and Buyer shall reimburse Seller for all
his reasonable out-of-pocket expenses in connection therewith. If Buyer elects
to direct the defense of any such claim or proceeding, Seller shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability, unless Buyer consents in writing to such payment or unless Buyer,
subject to the last sentence of this Section 8.2(c), withdraws from the defense
of such asserted liability, or unless a final judgment from which no appeal may
be taken by or on behalf of Buyer is entered against Seller for such liability.
If Buyer undertakes the conduct and control of any such claim or proceeding,
Buyer shall not thereby permit to exist any Encumbrance upon any asset of Seller
or any of its Affiliates, and Buyer shall not consent to any settlement that
does not include as an unconditional term thereof the giving of a complete
release from liability with respect to such action or suit to Seller. If Buyer
shall fail to defend, or, if after commencing or undertaking any such defense,
Buyer fails to prosecute or withdraws from such defense, Seller shall have the
right to undertake the defense or settlement thereof, at Buyer's expense.
(d) Seller hereby acknowledges and agrees that, from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article VIII. In furtherance of
the foregoing, Seller hereby waives, from and after the Closing, to the fullest
extent permitted under applicable law, any and all other rights, claims and
causes of action it may have against Buyer or its officers, directors,
employees, agents, representatives and Affiliates relating to the subject matter
of this Agreement, including without limitation any and all claims for damages
or for contribution arising under any Environmental Laws.
(e) Except as set forth in this Agreement, Buyer is not making
any representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained
<PAGE>
herein shall give rise to any right on the part of Seller, after the
consummation of the purchase and sale of the Shares contemplated hereby, to
rescind this Agreement or any of the transactions contemplated hereby.
SECTION VIII.3 Indemnification by Seller.
(a) Seller agrees, subject to the other terms and conditions of
this Agreement, to indemnify Buyer and its officers, directors, employees,
Affiliates and agents (all such Persons included within the definition of
"Buyer" as an indemnified party under this Section 8.3) against and hold it
harmless from all Losses to Buyer arising out of the breach of any
representation, warranty, covenant or agreement of Seller herein (other than
Section 3.16 and Article VI, it being understood that the sole remedy for breach
of such provisions shall be pursuant to Article VI). Anything in Section 8.1 to
the contrary notwithstanding, no claim may be asserted nor any action commenced
against Seller for breach of any representation, warranty, covenant or agreement
contained herein, unless written notice of such claim or action is received by
Seller describing in reasonable detail the facts and circumstances with respect
to the subject matter of such claim or action on or prior to the date on which
the representation, warranty, covenant or agreement on which such claim or
action is based ceases to survive as set forth in Section 8.1.
(b) Except with regard to the items specified in Sections 3.2,
3.3 and 3.16 and Article VI, the indemnification obligations of Seller pursuant
to this Section 8.3 in respect of (A) breaches of representations and warranties
and (B) breaches of Section 5.1(b) (other than knowing or willful breaches of
Section 5.1(b) by Seller) shall not be effective until the aggregate dollar
amount of all Losses which would otherwise be indemnifiable pursuant to this
Section 8.3 exceeds $20,000 (the "Seller's Threshold Amount"), in which event
Seller shall be liable for the full amount of all such Losses. Except with
regard to the items specified in Sections 3.2, 3.3 and 3.16 and Article VI, the
aggregate indemnification obligations of Seller in respect of (A) breaches of
representations and warranties and (B) breaches of Section 5.1(b) (other than
knowing or willful breaches of Section 5.1(b) by Seller) pursuant to this
Section 8.3 shall not exceed $500,000. For the purposes of this Section 8.3(b),
in computing such individual or aggregate amounts of claims, the amount of each
claim shall be net of any insurance proceeds and any indemnity, contribution or
other similar payment actually received by Buyer or any Affiliate of Buyer from
any third party with respect thereto.
(c) Buyer agrees to give Seller written notice of any claim,
assertion, event or proceeding by or in respect of a third party as to which it
may request indemnification hereunder or as to which Seller's Threshold Amount
may be applied as soon as is practicable and in any event within 30 days of the
time that Buyer learns of such claim, assertion, event or proceeding; provided,
however, that the failure to so notify Seller shall not affect rights to
indemnification hereunder except to the extent that Seller is actually
prejudiced by such failure. Seller shall have the right to direct, through
counsel of his own choosing, the defense or settlement of any such claim or
proceeding at his own expense. If Seller elects to assume the defense of any
such claim or proceeding, Buyer may participate in such defense, but in such
case the expenses of Buyer shall be paid by Buyer. Buyer shall provide Seller
with access to its records and personnel relating to any such claim, assertion,
event or proceeding during normal business hours and shall otherwise cooperate
with Seller in the defense or settlement thereof, and Seller shall reimburse
Buyer for all its reasonable out-of-pocket expenses in connection therewith. If
Seller elects to direct the defense of any such claim or proceeding, Buyer shall
not pay, or permit to be paid, any part of any claim or demand arising from such
asserted liability unless Seller consents in writing to such payment or unless
Seller, subject to the last sentence of this Section 8.3(c), withdraws from the
defense of such asserted liability or unless a final judgment from which no
appeal may be taken by or on behalf of Seller is entered against Buyer for such
liability. If Seller undertakes the conduct and control of any such claim or
proceeding, Seller shall not thereby permit to exist any Encumbrance upon any
asset of Buyer or any of its Affiliates, and Seller shall not consent to any
settlement that does not include as an unconditional term thereof the giving of
a complete release from liability with respect to such action or suit to Buyer.
If Seller shall fail to defend, or, if after commencing or undertaking any such
defense, Seller shall fail
<PAGE>
to prosecute or withdraws from such defense, Buyer shall have the right to
undertake the defense or settlement thereof, at Seller's expense.
(d) Buyer hereby acknowledges and agrees that, from and after
the Closing, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article VIII and in Article VI. In
furtherance of the foregoing, Buyer hereby waives, from and after the Closing,
to the fullest extent permitted under applicable law, any and all other rights,
claims and causes of action it (or, after the Closing, the Company) may have
against Seller or his agents, representatives and Affiliates relating to the
subject matter of this Agreement, including without limitation any and all
claims for damages or for contribution arising under any Environmental Laws.
(e) Except as set forth in this Agreement, Seller is not making
any representation, warranty, covenant or agreement with respect to the matters
contained herein. Anything herein to the contrary notwithstanding, no breach of
any representation, warranty, covenant or agreement contained herein shall give
rise to any right on the part of Buyer, after the consummation of the purchase
and sale of the Shares contemplated hereby, to rescind this Agreement or any of
the transactions contemplated hereby.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION IX.1 Termination. This Agreement may be terminated in writing
at any time prior to the Closing (i) by the mutual consent of Seller and Buyer;
or (ii) by either party if there has been a material misrepresentation or a
material breach of warranty by the other party with respect to this Agreement
which cannot be cured prior to the Closing; or (iii) by either Seller or Buyer,
if the Closing shall not have occurred prior to November 30, 1997, provided,
however, that the right to terminate this Agreement hereunder shall not be
available to any party whose deliberate failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur prior to such date. Time shall be of the
essence in this Agreement.
SECTION IX.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except (a)
as set forth in Section 5.3, Section 9.2(b) and Section 10.1, and (b) that
nothing herein shall relieve either party from liability for any willful breach
hereof.
SECTION IX.3 Waiver. At any time prior to the Closing, either party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby.
<PAGE>
ARTICLE X
GENERAL PROVISIONS
SECTION X.1 Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party hereto incurring such costs and
expenses, whether or not the Closing shall have occurred, and no such costs or
expenses shall be paid by the Company.
SECTION X.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.2):
(a) if to Seller:
Mr. Tony DiPiero
14527 Singing Hill Lane
Saratoga, California 95070
(b) if to Buyer:
Trio-Tech International
355 Parkside Drive
San Fernando, California 91340
SECTION X.3 Public Announcements. Unless otherwise required by
applicable Law, no party to this Agreement shall make any public announcements
in respect of this Agreement or the transactions contemplated hereby or
otherwise communicate with any news media without prior notification to the
other party, and the parties shall reasonably cooperate as to the timing and
contents of any such announcement.
SECTION X.4 Headings; Interpretation. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All "Exhibits" and "Schedules"
referred to herein are to Exhibits and schedules attached hereto and are
incorporated herein by reference and made a part hereof.
SECTION X.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.
SECTION X.6 Entire Agreement. This Agreement and each Other Agreement
constitute the
<PAGE>
entire agreement of the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and undertakings, both written and oral,
between Seller and Buyer with respect to the subject matter hereof, except as
otherwise expressly provided herein.
SECTION X.7 Assignment. This Agreement shall not be assigned by
operation of Law or otherwise.
SECTION X.8 No Third-Party Beneficiaries. Except as specifically
provided in Articles VI and VIII, this Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION X.9 Waivers and Amendments. This Agreement may be amended or
modified, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder,
nor any single or partial exercise of any other right, power or privilege
hereunder, preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. The rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies which
any party may otherwise have at Law or in equity.
SECTION X.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
required to be performed prior to the Closing was not performed in accordance
with the terms hereof and that, prior to the Closing, the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or in equity.
SECTION X.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts executed in and to be performed in that State. Any controversy,
dispute or claim arising out of the interpretation, performance or breach of
this Agreement shall be resolved by binding arbitration, at the request of the
Buyer and Seller, to be conducted in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association from time to
time in force.
SECTION X.12 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
Seller:
/s/ Tony DiPiero
TONY DiPIERO
Buyer:
TRIO-TECH INTERNATIONAL
By: /s/ A. Charles Wilson
A. Charles Wilson, Chairman
<PAGE>
