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): May 28, 1997
WESTWOOD CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 0-19381 87-0430944
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
12437 East 60th Street, Tulsa, Oklahoma 74146
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 918/252-1774
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N/A
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(Former name or former address if changed since last report.)
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WESTWOOD CORPORATION
CURRENT REPORT
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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(a) On May 28, 1997, Westwood Corporation (the "Company")
acquired 100% of the issued and outstanding shares of Common
Stock (the "Shares") of MC II Electric Company, Inc., a Texas
corporation ("MC II"). Total consideration of $2,000,000 for the
shares is as follows: (a) $400,000 in cash, paid at closing to
Mr. Herschel P. McCullough, the former majority shareholder of
MC II, and $100,000 in cash, paid at closing to a sole minority
shareholder; and (b) three additional installments of $500,000
each, in cash, paid to Mr. McCullough on the next three
anniversary dates of closing. Additionally, the Company
delivered 125,000 newly issued restricted shares of its Common
Stock to Mr. McCullough at closing (such sum, plus the shares of
the Company's Common Stock, are hereinafter referred to as the
"Purchase Price"). The Purchase Price is subject to adjustments,
as provided in Schedule 1.2 to the Stock Purchase Agreement, by
and among the Company and Seller (the "Agreement").
Pursuant to the terms of the Agreement, Mr. McCullough will
receive one half (1/2) of the gross sales proceeds if the Company
contracts to sell the TQG Army Contract within 90 days of
closing. The Company has no present intent of selling the TQG
Army Contract in the foreseeable future. Additionally,
Mr. McCullough shall receive a royalty fee upon the sale or
license and application of the Wally Digital Control system
software for applications other than current and existing
military application, as more specifically described in the
Agreement.
There was no material relationship between MC II and the
Company, or any of its affiliates, any director or officer of the
Company, or any associate of any such director or officer.
The Company utilized funds from its existing credit line for
payment of the Purchase Price paid at closing. The Company
anticipates that its acquisition of MC II will contribute to
earnings in the current fiscal year.
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(b) MC II will continue as a separate, wholly-owned Texas
subsidiary engaged in the design, manufacture and distribution of
electrical generator equipment for military and commercial use.
Mr. McCullough has entered into a new three year employment
agreement with MC II as its President. Ernest H. McKee and
Paul R. Carolus, Chief Executive Officer and Chief Financial
Officer of the Company, respectively, will serve on the Board of
Directors of MC II along with Mr. McCullough.
The Company manufactures and markets a diversified line of
products for the military and commercial marine industries in
addition to its main line of signal switching and power
switchboard equipment, firestop products and marine hardware.
The Company intends to maintain the assets acquired from MC II as
a subsidiary within the Company consolidated group, with its
business operations in Dallas, Texas, and will employ
approximately fifty-five persons.
ITEM 5. OTHER EVENTS.
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On June 10, 1997, John H. Williams, of Tulsa, Oklahoma, was
appointed to the Company's Board of Directors, bringing the
number of Directors for the Company to five. Mr. Williams will
serve as Director until the next Annual Meeting of Shareholders,
when each of the Company's five Directors will stand for re-
election.
Mr. Williams is an honorary director of The Williams
Companies, Inc. (NYSE: WMB), of Tulsa, Oklahoma, having resigned
as Chairman of the Board and Chief Executive Officer in late
1978. Mr. Williams joined the Williams Brothers Company in 1946,
and was elected President and Chief Executive Officer in 1950.
In 1971, the name of the company was changed to The Williams
Companies, Inc. Mr. Williams received his civil engineering
degree from Yale University in 1940, and was presented with
Honorary Doctor of Laws Degrees from Oklahoma Christian College
and Oral Roberts University in April, 1974, and May, 1982,
respectively. Additionally, Mr. Williams presently serves on
the board of directors of Apco Argentina Inc., Unit Corporation
(NYSE: UNT) and Willbros Group, Inc. (NYSE: WG).
As an outside Director, Mr. Williams will receive a
Director's fee of $1,500 for attendance at each regular and
special Board meeting of the Company, and will participate in the
Company's Directors' Stock Option Plan, dated March 20, 1992, as
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amended September, 1996 (the "Directors' Plan"). Accordingly,
subject to approval at the next Annual Meeting of Shareholders,
to be held in the fall of 1997, Mr. Williams has received a one-
time grant of an option to acquire 50,000 shares of the Company's
Common Stock at the NASDAQ closing price on June 10, 1997 ($2.125
share), pursuant to the Directors' Plan. Under the terms of the
Directors' Plan and grant, the option granted to Mr. Williams
will vest in 20% (10,00 shares) of the optioned shares of the
one-time grant on June 10, 1998, and on the four successive
anniversary dates of the grant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(c) Exhibits: Attached as Exhibit A is a copy of the
Stock Purchase Agreement, dated May 28, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
DATED: June 12, 1997. WESTWOOD CORPORATION
By: /s/ Paul R. Carolus
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Paul R. Carolus,
Chief Financial Officer
and Treasurer
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EXHIBIT "A"
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STOCK PURCHASE AGREEMENT
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This Agreement ("Agreement") is entered into this date,
by and between WESTWOOD CORPORATION, a Nevada corporation
("Purchaser"), and HERSCHEL P. McCULLOUGH, an individual
("Seller").
WHEREAS, MC II ELECTRIC COMPANY, INC., a Texas
corporation, ("Corporation") presently has outstanding one single
class of common stock ("Shares"), of which 37,958 Shares have been
issued and are currently outstanding; and
WHEREAS, said Shares are the only issued and outstanding
capital stock of the Corporation; and
WHEREAS, Purchaser desires to purchase from Seller, and
Seller desires to sell to Purchaser, all of the Shares owned by
Seller on the terms and subject to the conditions set forth
herein; and
WHEREAS, upon completion of the Share purchase
transaction as contemplated by the parties, except as otherwise
provided herein Purchaser shall own and control all business
assets of the Corporation including, without limitation, the existing
military and commercial contracts of the Corporation and all related
options thereto; all business equipment, inventory,
supplies, engineering, drawings, technical manuals, plans, tools,
dies, jigs and all other assets and documentation relating to
such contracts, subject to all scheduled liabilities on such
business assets and the existing contracts, all scheduled costs
in connection with the continued completion of the contracts,
existing leases on equipment and real property. All assets
acquired by the Corporation or any affiliate from the City of
Seymour, Wisconsin and Joseph Platano, Winco, Inc.; the rights of
the Corporation or any of its affiliates to use the names "Kurz
and Root Company," "MCII Generator & Electrical Services, Inc."
and MCII Government Systems and Services; all assets located at
1745 Hinton, Dallas, Texas, 75235, and all assets of the
Corporation supplied to any third party for purpose of loan and
which are otherwise validly owned by Corporation.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
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SECTION 1.
PURCHASE OF SHARES
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1.1 PURCHASE OF SHARES. Subject to the terms and
conditions set forth herein, at the Closing (as hereinafter
defined) Seller will cause all of the Shares owned by Seller and
Ridgewood United Methodist Church to be transferred to Purchaser,
and Purchaser will purchase all of the Shares, said Shares
constituting one hundred percent (100%) of all of the issued and
outstanding capital stock of the Corporation as of Closing.
1.2 PURCHASE PRICE. In exchange for the Shares,
Purchaser will pay the consideration set forth in Section 1.3.1,
up to the total sum of Two Million Dollars ($2,000,000), subject
to adjustments as agreed to by the parties on Schedule 1.2, plus
delivery of One Hundred Twenty-five Thousand (125,000) shares of
the common stock of Purchaser (such sum, as so adjusted, plus the
shares of common stock of Purchaser, are together referred to
herein as the "Purchase Price").
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price
will be paid as follows:
1.3.1 Four Hundred Thousand Dollars ($400,000) in
cash paid to Seller, and One Hundred Thousand Dollars
($100,000) paid at Closing to Ridgewood United
Methodist Church.
1.3.2 Three (3) additional installment payments
of Five Hundred Thousand Dollars ($500,000) each, in
cash paid to Seller on the next three anniversary dates
of the Closing.
1.3.3 One Hundred Twenty-five Thousand (125,000)
shares of the common stock of Purchaser, to be issued
to Seller at Closing.
1.4 DELIVERY OF THE SHARES. Upon compliance with the
terms set forth in Section 1.3.1, Seller shall deliver to
Purchaser the certificate(s) evidencing the Shares, duly endorsed
for transfer.
1.5 TQG ARMY CONTRACTS. Herschel P. McCullough will
receive one-half of the gross sales price if Purchaser contracts
within ninety (90) days after Closing to sell the TQG Army
Contract.
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1.6 WALLY DIGITAL CONTROL SYSTEMS SOFTWARE. Upon
Closing, the Purchaser shall own all rights, title and interest
in the Wally Software and all intellectual assets of the
Corporation and Seller. Herschel P. McCullough shall receive a
royalty fee upon sales or licenses and applications of the Wally
Digital Control System Software for applications other than
current and existing applications. Herschel P. McCullough shall
receive a royalty fee of three percent (3%) of the gross sales
price attributed to the Wally Software for direct product sales
of the Purchaser, the Corporation or an affiliated corporation,
up to a total royalty fee of Five Million Dollars ($5,000,000).
Herschel P. McCullough will receive ten percent (10%) of any
licensing or royalty fee received by the Corporation, Purchaser
or an affiliated corporation, as a result of the licensing or
sale of rights to manufacture the product to an unrelated third
party, up to a total of Five Million Dollars ($5,000,000). The
total limitation of the royalty fee, or the percentage share of
any licensing or development fee, is intended to be in the
aggregate. When Herschel P. McCullough receives an aggregate of
$5,000,000 from sales of the Wally Software or from licensing
fees, the royalty fee to Herschel P. McCullough shall terminate.
The decisions in regard to the marketing of the Wally Digital
Control System Software shall be purely within the discretion of
the Corporation or Purchaser and Herschel P. McCullough shall
have no rights to approve any such agreements or to require the
Corporation or Purchaser to enter into any such agreements.
SECTION 2.
REPRESENTATIONS AND WARRANTIES OF SELLER
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As a material inducement to Purchaser to enter into
this Agreement and to purchase the Shares, Seller represents and
warrants that:
2.1 ORGANIZATION AND CORPORATE POWER. The Corporation
is a corporation duly incorporated and validly existing under the
laws of Texas, and the Corporation is qualified to do business in
every jurisdiction in which the ownership of property or conduct
of business requires it to qualify. The Corporation has all
requisite corporate power and authority and all material
licenses, permits, and authorizations necessary to own and
operate its properties and to carry on its business as now
conducted. The copies of the Corporation's charter documents and
bylaws have been furnished to Purchaser's counsel, reflect all
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amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
2.2 CAPITAL STOCK AND RELATED MATTERS. The authorized
capital stock of the Corporation consists of One Million
(1,000,000) shares of common stock, Thirty-seven Thousand, Nine
Hundred and Fifty-eight (37,958) of which are issued and
outstanding and are owned, beneficially and of record, by Seller
and no other stock of the Corporation is issued and outstanding.
The Corporation has no other stock outstanding, and has
not agreed, orally or in writing, to issue any stock or
securities convertible or exchangeable for any shares of stock,
nor does it have outstanding, or has agreed, orally or in
writing, to issue any options or rights to purchase or otherwise
acquire stock. The Corporation is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its stock. The Corporation has not violated
any applicable securities laws or regulations in connection with
the offer or sale of its securities. All of the outstanding
shares of the Corporation's capital stock are validly issued,
fully paid, and nonassessable. Seller (in regard to the
Corporation) and the Corporation, has, and upon purchase thereof
pursuant to the terms of this Agreement, Purchaser will have,
good and marketable title to the Shares, free and clear of all
security interests, liens, encumbrances, or other restrictions or
claims, subject only to restrictions as to marketability imposed
by securities laws. Assuming that the representations in
Section 3.6 are true and correct, Seller has not violated or will
violate any applicable securities laws in connection with the
offer or sale of the Shares to Purchaser hereunder.
2.3 SUBSIDIARIES. The Corporation does not own or
hold any rights to acquire any shares of stock or any other
security or interest in any other corporation or entity.
Corporations formally affiliated by common ownership by Seller
with Corporation including: Kurz & Root, Inc.; and MCII
Government Systems and Services have never been formally
organized or done business, are dormant and no assets are
currently held by them, any assets previously held by those
affiliated corporations have been lawfully assigned to the
Corporation. Seller warrants that the Corporation has marketable
title to those assets and has the power and ability to transfer
marketable title of those assets to Purchaser.
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2.4 CONDUCT OF BUSINESS; LIABILITIES. Except as set
forth in Schedule 2.4, the Corporation is not in default under,
and no condition exists that, with notice or lapse of time, or
both, would constitute a default of the Corporation under
(i) any mortgage, loan agreement, evidence of indebtedness, or
other instrument evidencing borrowed money to which the
Corporation is a party, or by which the Corporation, or the
properties of the Corporation are bound or (ii) any judgment,
order, or injunction of any court, arbitrator, or governmental
agency that would reasonably be expected to affect materially and
adversely the business, financial condition, or results of
operations of the Corporation taken as a whole.
2.5 FINANCIAL STATEMENTS. The financial statements of
the Corporation as of December 31, 1996, and March 31, 1997 in
the form attached to this Agreement as Exhibit 2.5 (the
"Financial Statements"), fairly present the financial position of
the Corporation as at December 31, 1996, and March 31, 1997 and
have been prepared in accordance with generally accepted
accounting principles, consistently applied, and in a manner
substantially consistent with prior financial statements of the
Corporation, except for footnotes which may be required. Except
as contemplated by or permitted under this Agreement, and such
adjustments as may be required as a result of the Closing Return
as set forth in Section 5.4 and Amended Tax Returns or claims for
tax refunds for periods ending up to Closing, there are no
adjustments that would be required on review of the Financial
Statements that would, individually or in the aggregate, have a
material adverse effect upon the Corporation's reported financial
condition consistent with generally accepted accounting
principles.
2.6 No Undisclosed Liabilities. Except for
(i) liabilities and obligations incurred in the ordinary course
of business since March 31, 1997 ("Statement Date"), and
(ii) liabilities or obligations described in Schedule 2.6,
neither the Corporation, nor any of its property is subject to
any material liability or obligation that was required to be
included or adequately reserved against in the Financial
Statements or described in the notes thereto and was not so
included, reserved against, or described.
2.7 ABSENCE OF CERTAIN CHANGES. Except as
contemplated or permitted by this Agreement or as described in
Schedule 2.7, since the Statement Date there has not been:
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2.7.1 Any material adverse change in the
business, financial condition, operations, or assets of the
Corporation;
2.7.2 Any damage, destruction, or loss,
whether covered by insurance or not, materially adversely
affecting the properties or business of the Corporation;
2.7.3 Any sale or transfer by the Corporation
of any tangible or intangible asset, other than in the
ordinary course of business, any mortgage or pledge or the
creation of any security interest, lien, or encumbrance on
any such asset, or any lease of property, including
equipment, other than tax liens with respect to taxes not
yet due and contract rights of customers in inventory;
2.7.4 Any declaration, setting aside, or
payment of a distribution in respect of or the redemption or
other repurchase by the Corporation of any stock of the
Corporation;
2.7.5 Any material transaction not in the
ordinary course of business of the Corporation;
2.7.6 The lapse of any material trademark,
assumed name, trade name, service mark, copyright, or
license or any application with respect to the foregoing;
2.7.7 The grant of any increase in the
compensation of officers or employees (including any such
increase pursuant to any bonus, pension, profit-sharing, or
other plan) other than customary increases on a periodic
basis or required by agreement or understanding in the
ordinary course of business and in accordance with past
practice;
2.7.8 The discharge or satisfaction of any
material lien or encumbrance or the payment of any material
liability other than current liabilities in the ordinary
course of business;
2.7.9 The making of any material loan,
advance, or guaranty to or for the benefit of any person
except the creation of accounts receivable in the ordinary
course of business; or
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2.7.10 An agreement, whether or not in writing,
to do any of the foregoing.
2.8 TITLE AND RELATED MATTERS. Except as set forth in
Schedule 2.8, the Corporation has good and marketable title to
all of its property, real and personal, and other assets included
in the Financial Statements (except properties and assets sold or
otherwise disposed of subsequent to the Statement Date in the
ordinary course of business or as contemplated in this
Agreement), free and clear of all security interests, mortgages,
liens, pledges, charges, claims, or encumbrances of any kind or
character, except (i) statutory liens for property taxes not yet
delinquent or payable subsequent to the date of this Agreement
and statutory or common law liens securing the payment or
performance of any obligation of the Corporation, the payment or
performance of which is not delinquent, or that is payable
without interest or penalty subsequent to the date on which this
representation is given, or the validity of which is being
contested in good faith by the Corporation; (ii) the rights of
customers of the Corporation with respect to inventory under
orders or contracts entered into by the Corporation in the
ordinary course of business; and (iii) claims, easements, liens,
and other encumbrances of record pursuant to filings under real
property recording statutes.
2.9 LITIGATION. Except as set forth in Schedule 2.9,
there are no material actions, suits, proceedings, orders,
investigations, or claims pending or, to the best of Seller's
knowledge, threatened against the Corporation, or any of its
property, at law or in equity, or before or by any governmental
department, commission, board, bureau, agency, or
instrumentality; the Corporation is not subject to any
arbitration proceedings under collective bargaining agreements or
otherwise or, to the best of Seller's knowledge, any governmental
investigations or inquiries; and, to the best knowledge of Seller
there is no basis for any of the foregoing.
2.10 TAX MATTERS. Except as set forth on
Schedule 2.10, (i) the Corporation has prepared in a
substantially correct manner and has filed all federal, state,
local, and foreign tax returns and reports heretofore required to
be filed by it and has paid all taxes shown as due thereon (or
has been adequately reserved for in the financial statements);
(ii) no taxing authority has asserted any deficiency in the
payment of any tax or informed the Corporation that it intends to
assert any such deficiency or to make any audit or other
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investigation of the Corporation for the purpose of determining
whether such a deficiency should be asserted against the
Corporation; (iii) there are no matters contained in, or
positions taken, on any prior federal, state, or local tax form
which will result in any tax authority asserting that a
deficiency or tax payment is due to the Corporation for prior
year reporting obligations; and (iv) the payment of all items of
compensation, other than dividends, paid to related parties by
the Corporation in prior years are ordinary business expenses
pursuant to Section 162 of the Internal Revenue Service Code and
not dividends.
2.11 COMPLIANCE WITH LAWS. Except as disclosed on
Schedule 2.11, to the best of Seller's knowledge, the Corporation
is, in the conduct of its business, in substantial compliance
with all laws, statutes, ordinances, regulations, orders,
judgments, or decrees applicable to it, the enforcement of which,
if the Corporation was not in compliance therewith, would have a
materially adverse effect on the business of the Corporation,
taken as a whole. Neither Seller nor the Corporation has
received any notice of any asserted present or past failure by
the Corporation to comply with such laws, statutes, ordinances,
regulations, orders, judgments, or decrees.
2.12 NO BROKERS. Except as set forth in Schedule 2.12,
there are no claims for brokerage commissions, finders' fees, or
similar compensation in connection with the purchase based on any
arrangement or agreement binding upon any of the parties hereto.
2.13 INSURANCE. Schedule 2.13 contains a list of each
insurance policy maintained by the Corporation with respect to
its properties, assets, and businesses, and each such policy is
in full force and effect. The Corporation is not in material
default with respect to its obligations under any such policy
maintained by it. Neither Seller nor the Corporation has been
notified of the cancellation of any of the insurance policies
listed on Schedule 2.13 or of any material increase in the
premiums to be charged for such insurance policies.
2.14 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as
set forth in Schedule 2.14 or as provided in this Agreement:
2.14.1 Seller is not, except as disclosed to
Purchasers, aware that any executive or key employee of the
Corporation, or any group of employees of the Corporation,
has any plans to terminate employment with the Corporation;
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2.14.2 To the best of Seller's knowledge, the
Corporation has substantially complied in all material
respects with all labor and employment laws, including
provisions thereof relating to wages, hours, equal
opportunity, collective bargaining, Americans With
Disabilities Act, and the payment of social security and
other taxes;
2.14.3 There is no unfair labor practice
charge, complaint, or other action against the Corporation
pending or, to Seller's best knowledge, threatened before
the National Labor Relations Board and the Corporation is
not subject to any order to bargain by the National Labor
Relations Board;
2.14.4 No questions concerning representation
have been raised or, to Seller's best knowledge, are
threatened with respect to employees of the Corporation;
2.14.5 No grievance that might have a material
adverse effect on the Corporation, and no arbitration
proceeding arising out of or under any collective bargaining
agreement is pending and, to the best knowledge of Seller no
basis exists for any such grievance or arbitration
proceeding;
2.14.6 To the best knowledge of Seller and the
directors and responsible officers of the Corporation, no
employee of the Corporation is subject to any
noncompetition, nondisclosure, confidentiality, employment,
consulting, or similar agreements with persons other than
the Corporation relating to the present business activities
of the Corporation;
2.14.7 The Corporation has complied in all
material respects with all requirements, rules, regulations
of the Occupational Safety and Health Act ("OSHA") and any
other federal, state, or local health and safety regulations
dealing with employees and/or employee working conditions;
2.14.8 There are currently no workers'
compensation claims existing, pending, or threatened by or
on behalf of any employee of the Corporation and, to the
best knowledge of Seller, no basis exists for any such
workers' compensation claim; and
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2.14.9 All employees of the Corporation are
employees at will.
2.15 DISCLOSURE. Neither this Agreement nor any of the
schedules, attachments, written statements, documents,
certificates, or other items prepared or supplied to Purchaser by
or on behalf of the Corporation or Seller with respect to this
purchase contain any untrue statement of a material fact or omit
a material fact necessary to make each statement contained herein
or therein not misleading. Seller has not intentionally
concealed any fact known by such person to have a material
adverse effect upon the Corporation's existing or expected
financial condition, operating results, assets, customer
relations, employee relations, or business prospects taken as a
whole.
2.16 POWER OF ATTORNEY. Except as set forth in
Schedule 2.16, no material power of attorney or similar
authorization given by the Corporation is presently in effect.
2.17 ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Corporation shown on the Referenced Balance
Sheet dated March 31, 1997 or that have arisen since the Balance
Sheet Date ("Accounts Receivable") have arisen in the ordinary
course of business. All Accounts Receivable either (i) have been
collected or (ii) are collectible on the respective due dates
thereof, or, if no due date is stated with respect thereto,
within ninety (90) days of their creation in the ordinary course
of business, or are owed by the United States Government or an
agency thereof, in each case in the aggregate recorded amounts
thereof, less the applicable reserves with respect thereto
reflected on the Reference Balance Sheet. The Corporation has
not factored or discounted or agreed to factor or discount any
Account Receivable. The values at which the Accounts Receivable
are carried reflect the accounts receivable valuation policy of
the Corporation which is consistent with the Corporation's past
practice and in accordance with generally accepted accounting
principles, consistently applied. Schedule 2.17 hereto sets
forth a true, correct and complete list of all Accounts
Receivable, except for $13,000 written off by the Corporation, in
whole or in part, as uncollectible during the two (2) years
preceding the date hereof. Schedule 2.17 hereto also sets forth
a true, correct and complete aging of the Accounts Receivable of
the Corporation as of the most recent practicable date.
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2.18 AGREEMENTS AND COMMITMENTS. Schedule 2.18
contains a complete and accurate list of each agreement,
contract, instrument, and commitment (including license
agreements) to which the Corporation is a party that provides for
payments by the Corporation in excess of $10,000 per year or whose
term is in excess of one year and is not cancelable upon thirty (30)
or fewer days' notice without any liability, penalty, or premium,
other than a nominal cancellation fee or charge ("Third Party
Agreements"). Except as otherwise set forth in Schedule 2.18:
2.18.1 Corporation has no collective bargaining
or union contracts agreement in effect or being negotiated;
2.18.2 There is no labor strike, dispute,
request for representation, slowdown, or stoppage pending
or, to Seller's best knowledge, threatened against the
Corporation; and
2.18.3 Except as shown on Schedule 2.4, the
Corporation is not in material default under any Third Party
Agreements, nor, to Seller's best knowledge, does there
exist any event that, with notice or the passage of time, or
both, would constitute a material default or event of
default by the Corporation under any Third Party Agreements.
2.19 PERSONAL PROPERTY. Excluding assets set forth in
Schedule 2.19(B), Schedule 2.19(A) contains lists of all tangible
personal property and assets owned or held by the Corporation and
used or useful in the conduct of the business of the Corporation
with valuations in excess of $5,000 except as used in the
ordinary course of business since the date inventory was
compiled. Except as set forth in Schedule 2.19(A) or
Schedule 2.8, the Corporation owns and has good title to such
properties and none of such properties is subject to any security
interest, mortgage, pledge, conditional sales agreement, or other
lien or encumbrance (except for liens for current taxes,
assessments, charges, or other governmental levies not yet due
and payable). Seller has delivered to Purchaser copies of all
leases and other agreements relating to property described in
Schedule 2.19(A) (including any and all amendments and other
modifications to such leases and other agreements) all of which
are valid and binding, and the Corporation is not in material
default under any such leases or agreements. Except as set forth
in Schedule 2.19(A), and to the best of Seller's knowledge, all
material properties listed therein are performing satisfactorily,
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and are available for immediate use in the conduct of the
business and operations of the Corporation. To the best of
Seller's knowledge, all such tangible personal property is in
compliance in all material respects with all applicable statutes,
ordinances, rules, and regulations. The properties listed in
Schedule 2.19(A) (and the leased real property identified on
Schedule 2.20) include all such properties necessary to conduct
the business and operations of the Corporation as now conducted.
Schedule 2.19(B) contains a list of personal property
of the Corporation which will be retained by Seller. Each of the
items identified on Schedule 2.19(B) shall be transferred into
Seller's name, and all obligations and liabilities therefor shall
be retained by Seller.
2.20 REAL PROPERTY. Schedule 2.20 contains a list of
all real property currently leased by the Corporation and used or
useful in the conduct of the business operations of the
Corporation. Seller has delivered to Purchaser copies of all
leases listed in Schedule 2.20 (including any and all amendments
and other modifications of such leases), which leases are valid
and binding. To the best of Seller's knowledge, the Corporation
is not in default under any such leases. To the best of Seller's
knowledge, all property listed in Schedule 2.20 (including
improvements thereon) is in satisfactory condition and repair
consistent with its present use and is available for immediate
use in the conduct of the business of the Corporation. Except as
set forth in Schedule 2.20, and to the best of Seller's
knowledge, none of the property listed in Schedule 2.20 or
subject to leases listed in Schedule 2.20 violates in any
material respect any applicable building or zoning code or
regulation of any governmental authority having jurisdiction.
The property and leases described in Schedule 2.20 include all
such property or property interests necessary to conduct the
business and operations of the Corporation as they are presently
conducted.
2.21 PERSONNEL. Schedule 2.21 sets forth a true and
complete list of:
2.21.1 The names, title, and current salaries
of all officers of the Corporation;
2.21.2 The names of all directors of the
Corporation;
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2.21.3 The wage rates (or ranges, if
applicable) for each class of exempt and nonexempt, salaried
and hourly employees of the Corporation;
2.21.4 All scheduled or contemplated increases
in compensation or bonuses; and
2.21.5 All scheduled or contemplated employee
promotions.
2.22 PATENTS, TRADEMARKS, TRADE NAMES, ETC. Detailed
at Schedule 2.22 is an accurate and complete list of all patents,
trademarks, trade names, service marks, copyrights, and all
applications therefor, presently owned or held subject to license
by the Corporation, and to Seller's best knowledge, the use
thereof by the Corporation does not materially infringe on any
patents, trademarks, or copyrights or any other rights of any
person. To Seller's best knowledge, the Corporation has not
operated and is not operating its business in a manner that
infringes the proprietary rights of any other person in any
patents, trademarks, trade names, service marks, copyrights, or
confidential information. Except as set forth in Schedule 2.22,
the Corporation has not received any written notice of any
infringement or unlawful use of such property. Also included on
Schedule 2.22 is a complete and accurate description of any
preliminary research, feasibility studies or opinions of counsel
regarding possible future applications for patents or copyrights
by the Corporation.
2.23 ERISA AND RELATED MATTERS. Schedule 2.23 sets
forth a description of all "Employee Welfare Benefit Plans" and
"Employee Pension Benefit Plans," respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
existing on the date hereof that are or have been maintained or
contributed to by the Corporation. Except as listed on
Schedule 2.23, the Corporation does not maintain any retirement
or deferred compensation plan, savings, incentive, stock option
or stock purchase plan, unemployment compensation plan, vacation
pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangement
for any employee, consultant or agent of the Corporation, whether
pursuant to contract, arrangement, custom or informal
understanding, which constitutes an "Employee Benefit Plan" for
which the Corporation may have any ongoing material liability
after Closing. The Corporation does not maintain nor have they
ever contributed to any Multiemployer Plan as defined in ERISA.
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The Corporation does not currently maintain any Employee Pension
Benefit Plan subject to Title IV of ERISA. There have been no
"prohibited transactions" (as described in ERISA) with respect to
any Employee Pension Benefit Plan or Employee Welfare Benefit
Plan maintained by the Corporation as to which the Corporation
has been made a party. As to any employee pension benefit plan
listed on Schedule 2.23 and subject to Title IV of ERISA, there
have been no reportable events (as such term is defined in
ERISA).
2.24 ENVIRONMENTAL MATTERS. The Corporation has at
all times conducted its business activities in all material
respects in compliance with all federal, state, and local
environmental laws and regulations and there is no matter
relating to business operations carried on by the Corporation or
the discharge of contaminants by the Corporation in the air,
water, or soil for which a claim could be made by any federal,
state, or local environmental regulator. The current leased
property of the Corporation, and all other previous locations at
which the Corporation conducted business operations, are free
from any environmental contaminants that were placed there
through operations of the Corporation. No representation or
warranty is made herein with respect to operations carried on or
contaminants discharged or released by any predecessor of the
Corporation or any entity from which the Corporation acquired
assets; nor with respect to any conditions, including, without
limitation, the presence of hazardous waste or materials or
contaminants, at the current leased property or at previous
locations, except insofar as caused by the Corporation. Except
as disclosed in Schedule 2.6, Seller has no knowledge of any
environmental claims made by any federal, state, or local
environmental regulator or any third party relating to pending or
threatened claims against the Corporation.
2.25 RECORDS. The books, records and minutes kept by
the Corporation with respect to its business and assets,
including, but not limited to, all customer files, service
agreements, quotations, correspondence, route sheets, and
historic revenue data of the Corporation, have been kept properly
in accordance with such laws and contain records of all matters
required to be included therein by any governmental requirement
or by generally accepted accounting principles, and such books,
records and minutes are true, accurate and complete.
2.26 BANK ACCOUNTS. Schedule 2.26 hereto sets forth a
true and complete list of all bank or financial accounts and safe
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deposit boxes of the Corporation and of the credit and debit
balances of such bank and financial accounts as of the most
recent practicable date. Since the date of the balances set
forth on such list, there have been no payments out of or drafts
against any of the accounts included therein other than routine
payments and drafts in the ordinary course of business, and the
balances in such accounts as of the date hereof are not
materially different from those reflected in such list.
Schedule 2.26 also lists all persons having signatory authority
over or access to such bank and financial accounts and safe
deposit boxes.
2.27 LICENSES AND PERMITS: COMPLIANCE WITH
GOVERNMENTAL REQUIREMENTS. Schedule 2.27 hereto sets forth a
true and complete list of all licenses and permits necessary for
the conduct of the Corporation's business. The Corporation has
all such licenses and permits validly issued to it and in its
name, and all such licenses and permits are in full force and
effect. True and correct copies of all such licenses and permits
necessary for the conduct of business are included in
Schedule 2.27 hereto. No violations are or have been recorded in
respect of such licenses or permits and no proceeding is pending
or, to the best knowledge of Seller (after due inquiry of the
Corporation), threatened seeking the revocation or limitations of
any of such licenses or permits. The Corporation has complied
with all material governmental requirements applicable to its
business, and all material governmental requirements with respect
to the distribution and sale of products and services by it.
2.28 NOTIFICATION OF PROPRIETARY INFORMATION TO
EMPLOYEES. Prior to Closing as provided in Section 9.1 below,
Seller shall cause the Corporation to provide written notice to
all employees (i) of the change of ownership, and (ii) that all
products, plans, specifications, engineering designs, and
manufacturing processes of the Corporation have been treated as
proprietary assets of the Corporation, and will remain
proprietary to the Corporation after Closing, and that such
products, plans, engineering specifications, and manufacturing
processes cannot be remanufactured or distributed by any employee
to any third party or entity.
2.29 ORGANIZATION; POWER. The Corporation is validly
existing under the laws of the State of Texas, and has all
requisite power and authority to enter into this Agreement and
perform its obligations hereunder.
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2.30 AUTHORIZATION. The execution, delivery, and
performance by Seller of this Agreement and all other agreements
contemplated hereby to which Seller is a party, when executed and
delivered by the parties thereto, will constitute the legal,
valid, and binding obligation of Seller enforceable against
Seller in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, and similar
statutes affecting creditors' rights generally and judicial
limits on equitable remedies.
2.31 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS.
The execution, delivery, and performance by Seller of this
Agreement and all other agreements contemplated hereby to which
Seller is a party will not result in a breach or violation of, or
constitute a default under, any material agreement to which
Seller is a party or by which Seller is bound.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
As a material inducement to Seller to enter into this
Agreement and sell the Shares, Purchaser hereby represents and
warrants to Seller as follows:
3.1 ORGANIZATION; POWER. Purchaser is a corporation
duly incorporated and validly existing under the laws of the
State of Nevada, and has all requisite corporate power and
authority to enter into this Agreement and perform its
obligations hereunder.
3.2 AUTHORIZATION. The execution, delivery, and
performance by Purchaser of this Agreement and all other
agreements contemplated hereby to which Purchaser is a party have
been duly and validly authorized by all necessary corporate
action of Purchaser, and this Agreement and each such other
agreement, when executed and delivered by the parties thereto,
will constitute the legal, valid, and binding obligation of
Purchaser enforceable against Purchaser in accordance with their
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, and similar statutes affecting creditors'
rights generally and judicial limits on equitable remedies.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS.
The execution, delivery, and performance by Purchaser of this
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Agreement and all other agreements contemplated hereby to which
Purchaser is a party will not result in a breach or violation of,
or constitute a default under, its Articles of Incorporation or
Bylaws or any material agreement to which Purchaser is a party or
by which Purchaser is bound.
3.4 GOVERNMENTAL AUTHORITIES. Except as set forth in
Schedule 3.4, (i) Purchaser is not required to submit any notice,
report, or other filing with any governmental or regulatory
authority in connection with the execution and delivery by
Purchaser of this Agreement and the consummation of the purchase,
and (ii) no consent, approval, or authorization of any
governmental or regulatory authority is required to be obtained
by Purchaser or any affiliate in connection with Purchaser's
execution, delivery, and performance of this Agreement and the
consummation of this purchase.
3.5 LITIGATION. There are no actions, suits,
proceedings, or governmental investigations or inquiries pending
or, to the knowledge of Purchaser, threatened against Purchaser
or its properties, assets, operations, or businesses that might
delay, prevent, or hinder the consummation of this purchase.
3.6 INVESTMENT REPRESENTATIONS.
3.6.1 Purchaser is acquiring the Shares for
its own account for purposes of investment and without
expectation, desire, or need for resale and not with the
view toward distribution, resale, subdivision, or
fractionalization of the Shares.
3.6.2 Purchaser understands that the Shares to
be purchased have not been registered under Securities Act
of 1933 ("1933 Act"), or under any state securities law.
3.6.3 Purchaser understands that the Shares
cannot be resold in a transaction to which the 1933 Act and
state securities laws apply unless (i) subsequently
registered under the 1933 Act and applicable state
securities laws, or (ii) exemptions from such registrations
are available. Purchaser is aware of the provisions of
Rule 144 promulgated under the 1933 Act which permit limited
resale of shares purchased in a private transaction subject
to the satisfaction of certain conditions.
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3.6.4 Purchaser understands that no public
market now exists for the Shares and that it is uncertain
that a public market will ever exist for the Shares.
3.7 NO BROKERS. There are no claims for brokerage
commissions, finders' fees, or similar compensation in connection
with this purchase based on any arrangement or agreement entered
into by Purchaser and binding upon any of the parties hereto.
SECTION 4.
CONDUCT OF THE CORPORATION'S
BUSINESS PENDING THE CLOSING
----------------------------
From the date hereof until the Closing, and except as
otherwise consented to or approved by Purchaser, Seller covenants
and agrees with Purchaser as follows:
4.1 REGULAR COURSE OF BUSINESS. Seller shall cause
the Corporation to operate its business in accordance with the
reasonable judgment of their management diligently and in good
faith, consistent with past management practices, and shall cause
the Corporation to continue to use reasonable efforts to keep
available the services of present officers and employees (other
than planned retirements or terminations) and to preserve present
relationships with persons having business dealings with them.
4.2 DISTRIBUTIONS. Seller shall prohibit the
Corporation from declaring, paying, or setting aside for payment
any dividend or other distribution in respect of its capital
stock.
4.3 CAPITAL CHANGES. Seller shall prohibit the
Corporation from issuing any shares of stock, or issuing or
selling any securities convertible into, or exchangeable for, or
options, warrants to purchase, or rights to subscribe to, any
shares of stock or subdividing or in any way reclassify any
shares of capital stock, or repurchasing reacquiring, canceling,
or redeeming any such shares.
4.4 ASSETS. Seller shall cause the assets, property,
and rights now owned by the Corporation to be used, preserved,
and maintained, as far as practicable, in the ordinary course of
business, to the same extent and in the same condition as said
assets, property, and rights are on the date of this Agreement,
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and no unusual or novel methods of manufacture, purchase, sale,
management, or operation of said properties or business or
accumulation or valuation of inventory will be made or
instituted. Without the prior consent of Purchaser, the Seller
shall not allow Corporation to encumber any assets or make any
commitments relating to such assets, property, or business,
except in the ordinary course of business.
4.5 INSURANCE. Seller shall cause the Corporation to
keep or cause to be kept in effect and undiminished the insurance
now in effect on various properties and assets, and will purchase
such additional insurance, at Purchaser's cost, as Purchaser may
request.
4.6 EMPLOYEES. Seller shall prohibit the Corporation
from granting to any employee any promotion, any increase in
compensation, or any bonus or other award.
4.7 NO VIOLATIONS. Seller shall cause the Corporation
to comply in all material respects with all statutes, laws,
ordinances, rules, and regulations applicable in the ordinary
course of business.
4.8 PUBLIC ANNOUNCEMENTS. No press release or other
announcement to the employees, customers, or suppliers of the
Corporation related to this Agreement or this purchase will be
issued without the joint approval of the parties, unless required
by law, in which case Purchaser and Seller will consult with each
other regarding the announcement.
4.9 REVIEW OF CORPORATION AND CONTINUED DUE DILIGENCE.
Purchaser shall, prior to the Closing Date, through its
representatives, review the properties, books and records of the
Corporation, and its financial and legal condition as they deem
necessary or advisable to familiarize themselves with such
properties, to verify schedules, and other matters; such review
shall not, however, affect the representations and warranties by
the parties hereunder. The Seller shall permit Purchaser and its
representatives to have, after the date of execution hereof, full
access to the premises and to all the books and records of the
Corporation and to cause the officers of the Corporation to
furnish Purchaser with such financial and operating data and
other information with respect to the business and properties of
the Corporation as Purchaser shall from time to time reasonably
request.
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SECTION 5.
COVENANTS OF THE SELLER
-----------------------
Seller covenants and agrees with Purchaser as follows:
5.1 SATISFACTION OF CONDITIONS. Seller shall cause
the Corporation to use commercially reasonable efforts to obtain
as promptly as practicable the satisfaction of the conditions to
Closing set forth in Section 7 and any necessary consents or
waivers under or amendments to agreements by which the
Corporation is bound.
5.2 SUPPLEMENTS TO SCHEDULES. From time to time prior
to the Closing, Seller will promptly supplement or amend the
Schedules with respect to any matter hereafter arising that, if
existing or occurring at the date of this Agreement, would have
been required to be set forth or described in any Schedule and
will promptly notify Purchaser of any breach that it discovers of
any representation, warranty, or covenant contained in this
Agreement. No supplement or amendment of any Schedule made
pursuant to this section will be deemed to cure any breach of any
representation of or warranty made in this Agreement unless
Purchaser specifically agrees thereto in writing; provided,
however, that if this purchase is closed, Purchaser will be
deemed to have waived its rights with respect to any breach of a
representation, warranty, or covenant or any supplement to any
Schedule of which it shall have been notified pursuant to this
Section 5.2.
5.3 NO SOLICITATION. Until the Closing or termination
pursuant to Section 10 of this Agreement, Seller shall not and
shall not permit the Corporation and its directors, officers,
employees, or agents shall, directly or indirectly, encourage,
solicit, initiate, or enter into any discussions or negotiations
concerning any disposition of any of the capital stock or all or
substantially all of the assets of the Corporation (other than
pursuant to this Agreement), or any proposal therefor, or furnish
or cause to be furnished any information concerning the
Corporation to any party in connection with any transaction
involving the acquisition of the capital stock or assets of the
Corporation by any person other than Purchaser. Seller will
promptly inform Purchaser of any inquiry (including the terms
thereof and the person making such inquiry) received by any
responsible officer or director of the Corporation or Seller
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after the date hereof and believed by such person to be a bona
fide, serious inquiry relating to any such proposal.
5.4 COOPERATION WITH PURCHASER'S AUDITORS. Seller
shall provide such cooperation as required to Ernst & Young, LLP,
Purchaser's auditors, in connection with providing appropriate
financial information for purposes of Purchaser's due diligence
investigation and in regard to Ernst & Young's review of tax
matters and previous tax filings. Additionally, thirty (30) days
after Closing, or as soon as practical, Seller will prepare a
proposed Closing Tax Return for the Corporation in accordance
with Exhibit 5.4 hereto, reflecting the results of the
acquisition contemplated by this Agreement, and Seller and its
auditors shall have an opportunity to discuss the form and
content of such Closing Tax Return.
5.5 COVENANT NOT TO COMPETE. For a period of three
(3) years after the Closing date neither Seller nor any
affiliated company or individual shall engage or be actively
interested in any business which is competitive with the business
of Corporation as conveyed by Seller to Purchaser within the
geographic territory served by the Corporation immediately prior
to the Closing, and neither Seller, nor any affiliated companies
or individuals shall own, manage, operate, gain control of, or
otherwise participate in the ownership, management, operation, or
control of, any business which is competitive with the business
of the Corporation, nor shall Seller, or any affiliated companies
or individuals, directly or indirectly, take any action to
interfere with the good will of the Corporation, or tamper with
or induce any contractor, customer, supplier, manufacturer, or
dealer of Corporation to leave, to stop selling to, or stop
buying from Corporation, or to otherwise abandon the Corporation.
In the event of any breach of this Paragraph 5.5, in addition to
all other rights and remedies, Purchaser and its successors and
assigns shall be entitled to seek temporary, preliminary and/or
permanent injunctive relief. At closing, Purchaser shall cause
the Seller to enter into the Noncompetition and Confidentiality
Agreement attached as Exhibit 5.5.
5.6 ACTION AFTER THE CLOSING. Upon the reasonable
request of any party hereto after the Closing, any other party
will take all action and will execute all documents and
instruments necessary or desirable to consummate and give effect
to this purchase. These include, by way of illustration and not
by way of limitation, the following:
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5.6.1 Various conditions relating to filing,
payment, and collecting of refunds relating to taxes;
5.6.2 Resignations of each of the directors of
the Corporation;
5.6.3 Provisions relating to delivery of
corporate books and records;
5.6.4 Provisions relating to treatment of
confidential proprietary information obtained in the
acquisition process.
SECTION 6.
COVENANT OF PURCHASER
---------------------
Purchaser will use commercially reasonable efforts to
cause the conditions set forth in Section 8 to be satisfied.
SECTION 7.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser under this
Agreement is subject to the satisfaction, at or before the
Closing, of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each
of the representations and warranties made by the Seller herein
will be true and correct in all material respects as of the
Closing with the same effect as though made at that time except
for changes contemplated, permitted, or required by this
Agreement; Seller will have performed and complied with all
agreements, covenants, and conditions required by this Agreement
to be performed and complied with by Seller prior to the Closing;
and Purchaser will have received, at the Closing, a certificate
of the Corporation, signed by Seller, stating that each of the
representations and warranties made by it herein is true and
correct in all material respects as of the Closing except for
changes contemplated, permitted, or required by this Agreement
and that Seller has performed and complied with all agreements,
covenants, and conditions required by this Agreement to be
performed and complied with by them prior to the Closing.
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7.2 LITIGATION. No material action, suit, or
proceeding before any court, governmental or regulatory authority
will have been commenced and be continuing, and no investigation
by any governmental or regulatory authority will have been
commenced and be continuing, and no action, investigation, suit,
or proceeding will be threatened at the time of Closing, against
Seller, the Corporation or Purchaser, or any of their affiliates,
associates, officers, or directors, seeking to restrain, prevent,
or change this purchase, questioning the validity or legality of
this purchase, or seeking damages in connection with this
purchase.
7.3 LEGAL OPINION. Purchaser will have received an
opinion of Seller's counsel, in form and content reasonably
acceptable to Purchaser and its legal counsel, which can be
subject to the ABA Opinion Accord, to the effect that (i) the
Corporation's organization, existence, valid existence, and
authorized and issued stock are as stated herein, that this
Agreement and each agreement contemplated hereby have been duly
executed and delivered by Seller, are consistent with law and
that, except as specified in the opinion, such counsel does not
know of any litigation, claim, proceeding, or governmental
investigation pending or threatened against the Corporation, or
its properties; (ii) this Agreement and each other agreement
contemplated hereby, when executed and delivered by the parties
thereto, will constitute the legal, valid, and binding obligation
of the Seller, enforceable against Seller in accordance with its
terms except as the enforceability thereof may be limited by the
application of bankruptcy, insolvency, moratorium, or similar
laws affecting the rights of creditors generally or judicial
limits on the right of specific performance; and (iii) except as
set forth in Schedule 7.3, the execution and delivery by the
Seller of this Agreement, and all other agreements contemplated
hereby to which the Seller is a party, the offering and sale of
the Shares hereunder and the fulfillment of and compliance with
the respective terms hereof and thereof by the Seller, do not and
will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under,
(c) result in the creation of any lien, security interest,
charge, or encumbrance upon the capital stock or assets of Seller
or Corporation, (d) give any third party the right to accelerate
any obligation under, (e) result in a violation of, or
(f) require any authorization, consent, approval, exemption, or
other action by or notice to any court or administrative or
governmental body pursuant to the charter or bylaws of the
Corporation, or any law, statute, rule, or regulation to which
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Seller and the Corporation are subject, or any agreement,
instrument, order, judgment, or decree to which Seller or the
Corporation are subject.
7.4 MATERIAL CHANGE. From the date of this Agreement
to the Closing, the Corporation shall not have suffered any
material adverse change (whether or not such change is referred
to or described in any supplement to any Exhibit or Schedule to
this Agreement) in business prospects, financial condition,
working capital, assets, liabilities (absolute, accrued,
contingent, or otherwise), or operations.
7.5 CORPORATE ACTION. Seller will have furnished to
Purchaser:
7.5.1 The corporate charters and all
amendments thereto and restatements thereof of the
Corporation, certified as to completeness and corporate good
standing by the Secretary of State of the State of Texas;
7.5.2 The current bylaws and minutes of all
meetings and consents of shareholders and directors of the
Corporation;
7.5.3 Each certificate of qualification to do
business as a foreign corporation of the Corporation;
7.5.4 All stock transaction records of the
Corporation; and
7.5.5 A certificate of the Secretary or Assistant
Secretary of the Corporation as to the accuracy, currency,
and completeness of each of the above documents, the
incumbency and signatures of officers of the Corporation,
the absence of any amendment to the charter documents of the
Corporation, and the absence of any proceeding for
dissolution or liquidation of the Corporation.
7.6 If requested by Purchaser, the written consent by
Robinette McCullough to this agreement and the transfer of shares
as set forth herein.
7.7 PROCEEDINGS. All proceedings to be taken in
connection with the transactions contemplated by this Agreement
and documents incident thereto shall be satisfactory in form and
substance to Purchaser and its counsel, and Purchaser shall have
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received copies of all such documents, and other evidences as it
or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all
proceedings in connection therewith.
SECTION 8.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE CORPORATION AND SELLER
-----------------------------------------
Each and every obligation of Seller under this
Agreement is subject to the satisfaction, at or before the
Closing, of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each
of the representations and warranties made by Purchaser herein
will be true and correct in all material respects as of the
Closing with the same effect as though made at that time except
for changes contemplated, permitted, or required by this
Agreement; Purchaser will have performed and complied with all
agreements, covenants, and conditions required by this Agreement
to be performed and complied with by it prior to the Closing; and
Seller will have received, at the Closing, a certificate of
Purchaser, signed by the President and the Chief Financial
Officer of Purchaser, stating that each of the representations
and warranties made by Purchaser herein is true and correct in
all material respects as of the Closing except for changes
contemplated, permitted, or required by this Agreement and that
Purchaser has performed and complied with all agreements,
covenants, and conditions required by this Agreement to be
performed and complied with by it prior to the Closing.
8.2 NO PROCEEDING OR LITIGATION. No action, suit, or
proceeding before any court (other than suits seeking monetary
damages only and in the aggregate sum of less than $10,000) and
any governmental or regulatory authority will have been commenced
and be continuing, and no investigation by any governmental or
regulatory authority will have been commenced and be continuing,
and no action, investigation, suit, or proceeding will be
threatened at the time of Closing, against Seller, the
Corporation, the Purchaser, or any of their affiliates,
associates, officers, or directors, seeking to restrain, prevent,
or change this purchase, questioning the validity or legality of
this purchase, or seeking damages in connection with this
purchase.
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8.3 CORPORATE ACTION. Purchaser will have furnished
to Seller a copy, certified by the Secretary or an Assistant
Secretary of Purchaser, of the resolutions of Purchaser
authorizing the execution, delivery, and performance of this
Agreement.
8.4 EMPLOYMENT AGREEMENT WITH SELLER. At Closing, or
Purchaser shall enter into an employment agreement with Seller,
to retain Seller's services as General Manager of the Corporation
for an initial term of three years. Such employment agreement
shall be set forth in Exhibit 8.4 to this Agreement.
8.5 CONFIRMATION AND MODIFICATION OF LEASES. At
Closing, Purchaser shall cause the Corporation to enter into the
Confirmation and Modification Agreement attached as Exhibit 8.5.
8.6 At closing all loans and indebtedness listed on
Schedule 8.6 will be paid.
SECTION 9.
CLOSING
-------
9.1 TIME, PLACE, AND MANNER OF CLOSING. Unless this
Agreement has been terminated and this purchase has been
abandoned pursuant to the provisions of Section 10, the closing
("Closing") will be held at the offices of the Corporation, or
such other place as the parties may agree, as of the close of
business on May 28, 1997, or as soon as practicable after the
satisfaction of the various conditions precedent to the Closing
set forth herein. At the Closing, the parties to this Agreement
will exchange certificates, and other instruments and documents
in order to determine whether the terms and conditions of this
Agreement have been satisfied. Upon the determination of each
party that its conditions to consummate this purchase have been
satisfied or waived, Seller shall deliver to Purchaser the
certificate(s) evidencing the Shares, duly endorsed for transfer,
and Purchaser shall deliver to Seller the Purchase Price referred
to in Section 1.2, in a manner to be agreed upon by the parties.
After the Closing, Seller, at Purchaser's cost, will execute,
deliver, and acknowledge all such further instruments of transfer
and conveyance and will perform all such other acts as Purchaser
may reasonably request to effectively transfer the Shares. The
parties understand and agree that Closing procedures can be
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accomplished by delivery of executed documents to counsel and
exchange of these documents through counsel for the parties.
9.2 CONSUMMATION OF CLOSING. All acts, deliveries,
and confirmations comprising the Closing regardless of
chronological sequence shall be deemed to occur contemporaneously
and simultaneously upon the occurrence of the last act, delivery,
or confirmation of the Closing and none of such acts, deliveries,
or confirmations shall be effective unless and until the last of
the same shall have occurred. The time of the Closing has been
scheduled to correspond with the close of business at the
principal office of the Corporation and, regardless of when the
last act, delivery, or confirmation of the Closing shall take
place, the transfer of the Shares shall be deemed to occur as of
the close of business at the principal office of the Corporation
on the date of the Closing.
SECTION 10.
TERMINATION OF AGREEMENT
------------------------
10.1 TERMINATION FOR CAUSE. If, pursuant to the
provisions of Section 7 or Section 8 of this Agreement, Seller or
Purchaser is not obligated at the Closing to consummate this
Agreement, then the party who is not so obligated may terminate
this Agreement.
10.2 TERMINATION WITHOUT CAUSE. Anything herein or
elsewhere to the contrary notwithstanding, this Agreement may be
terminated and abandoned at any time without further obligation
or liability on the part of any party in favor of any other by
mutual consent of Purchaser and Seller.
10.3 TERMINATION PROCEDURE. Any party having the right
to terminate this Agreement due to a failure of a condition
precedent contained in Section 7 or Section 8 hereto may
terminate this Agreement by delivering to the other party written
notice of termination, and thereupon, this Agreement will be
terminated without obligation or liability of any party.
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SECTION 11.
INDEMNIFICATION
---------------
11.1 RELIANCE ON REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Notwithstanding any right of Purchaser to
investigate the assets and the business of the Corporation,
Purchaser has the right to rely upon the representations,
warranties, covenants, and agreements of Seller contained in this
Agreement, subject to the provisions of Section 2.28.
11.2 SURVIVAL REPRESENTATIONS. The representations,
warranties, and agreements made by Seller shall survive Closing.
11.3 INDEMNIFICATION.
11.3.1 Seller shall indemnify and hold harmless
Purchaser, Corporation and their respective officers,
directors, employees, agents, consultants, representatives
and affiliates ("Indemnified parties") against all loss,
liability, damage, or expense (including, without
limitation, interest, penalties, fines, and reasonable
attorney's fees) incurred by or adversely affecting any
Indemnified parties and arising from or in connection with
(a) any misrepresentation or breach of any warranty,
covenant, or agreement by Seller as set forth in this
Agreement, (b) to the extent not disclosed on any Schedules
contained with this Agreement or reflected in or reserved
for in the Financial Statements or arising in the ordinary
course of business after date of Financial Statements, any
claims of any person for any debt, liability, obligation,
account payable or tax due by the Corporation, (c) to the
extent not disclosed on any Schedules, any loss, damages,
liability, or claims arising in tort from conduct of the
Corporation in the operation of the business of Corporation
prior to Closing, including, but not limited to, claims of
defective and/or unreasonably dangerous products; and/or
matters involving violations of the Regulations of OSHA,
workers' compensation claims, and other employee matters,
(d) any liabilities, claims or causes of action, arising
from the conduct of Ridgewood United Methodist Church as a
result of its ownership and sale of the Corporation's stock,
and (e) any liabilities, claims, causes of action, debts,
obligations, accounts payable, or damages arising from the
default or breach of any Purchase Order Agreement entered
into by, or, on behalf of Seller or Corporation prior to
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Closing that occurs as a result of the United States Army's
failure to exercise purchase requirements or options under
the TQG Army Contract, including, but not limited to open
purchase orders with: Interstate Electronics (PO
No. 000478-00), Ampro Computers (PO No. 000507-00), Varity
Perkins, New England Keyboard Inc. (PO No. 000506-00), EPAC
Sales and Service, Governors America Corporation, and
America Acoustical Products, collectively "the open Purchase
Order Agreements".
11.4 LIMITATIONS ON INDEMNIFICATION. Seller shall
have no liability for indemnification until such time as any
potential indemnification claim, or all indemnification claims in
the aggregate, exceeds $100,000. Purchaser shall seek
satisfaction of damages or liability through existing insurance
policies, if coverage exists, prior to seeking indemnification
from Seller. Seller shall not be responsible for any
indemnification claim for tax matters or environmental matters if
made more than five (5) years after Closing. All other
indemnification claims for any other matters must be brought
within two (2) years after Closing. Seller may not seek any
other remedy available to it which could have been subject to a
claim for indemnification but for expiration of such periods.
Indemnification of claims brought by the Ridgewood United
Methodist Church are not subject to the $100,000 limitation on
indemnification set forth herein. Indemnification of claims
arising from the default or breach of the open Purchase Order
Agreements, as stated in Section 11.3, are not subject to the
$100,000 limitation on indemnification set forth herein.
11.5 NOTICE. Purchaser shall give prompt written
notice to Seller of any such indemnification claim. Notice shall
contain information adequate to apprise Seller of the nature and
extent of such claim. Such notice shall not be a condition
precedent to any liability of Seller under the indemnification
provisions contained in this Section 11 unless the failure to
give such notice prejudices Seller's ability to defend such claim
for indemnification.
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SECTION 12.
MISCELLANEOUS PROVISIONS
------------------------
12.1 AMENDMENT AND MODIFICATION. Subject to applicable
law, this Agreement may be amended, modified, or supplemented
only by a written agreement signed by Purchaser and Seller.
12.2 WAIVER OF COMPLIANCE; CONSENTS.
12.2.1 Any failure of any party to comply with
any obligation, covenant, agreement, or condition herein may
be waived by the party entitled to the performance of such
obligation, covenant, or agreement or who has the benefit of
such condition, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement,
or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
12.2.2 Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such
consent will be given in a manner consistent with the
requirements for a waiver of compliance as set forth above.
12.3 NOTICES. All notices, requests, demands, and
other communications required or permitted hereunder will be in
writing and will be deemed to have been duly given when delivered
by hand or two days after being mailed by certified or registered
mail, return receipt requested, with postage prepaid:
12.3.1 If to Purchaser, or to the Corporation
after the Closing, to:
Ernest H. McKee, President
Westwood Corporation
12437 East 60th Street
Tulsa, Oklahoma 74146
with copy to:
C. Raymond Patton, Jr., Esq.
Sneed Lang, P.C.
2300 Williams Center Tower II
Two West Second Street
Tulsa, Oklahoma 74103
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or to such other person or address as Purchaser furnishes to
Seller pursuant to the above.
12.3.2 If to Seller, or to the Corporation
prior to the Closing, to:
Herschel P. McCullough, Chairman
MC II ELECTRIC COMPANY, INC.
1745 Hinton Street
Dallas, Texas 75235
With copy to:
Thomas R. Hurtekant, Esq.
Brown, McCarroll & Oaks Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201
or to such other address as Seller furnishes to Purchaser
pursuant to the above.
12.4 TITLES AND CAPTIONS. All section titles or
captions contained in this Agreement are for convenience only and
shall not be deemed part of the context nor effect the
interpretation of this Agreement.
12.5 ENTIRE AGREEMENT. This Agreement contains the
entire understanding between and among the parties and supersedes
any prior understandings and agreements among them respecting the
subject matter of this Agreement.
12.6 AGREEMENT BINDING. This Agreement shall be
binding upon the heirs, executors, administrators, successors and
assigns of the parties hereto.
12.7 ATTORNEY FEES. In the event an arbitration, suit
or action is brought by any party under this Agreement to enforce
any of its terms, or in any appeal therefrom, it is agreed that
the prevailing party shall be entitled to reasonable attorneys
fees to be fixed by the arbitrator, trial court, and/or appellate
court.
12.8 COMPUTATION OF TIME. In computing any period of
time pursuant to this Agreement, the day of the act, event or
default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday, or a legal
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holiday, in which event the period shall begin to run on the next
day which is not a Saturday, Sunday, or legal holiday, in which
event the period shall run until the end of the next day
thereafter which is not a Saturday, Sunday, or legal holiday.
12.9 PRONOUNS AND PLURALS. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular, or plural as the identity of the
person or persons may require.
12.10 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Oklahoma, with the exception of Section 5.5, which will be
governed by and construed in accordance with the laws of the
State of Texas.
12.11 PRESUMPTION. This Agreement or any section
thereof shall not be construed against any party due to the fact
that said Agreement or any section thereof was drafted by said
party.
12.12 FURTHER ACTION. The parties hereto shall
execute and deliver all documents, provide all information and
take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of the Agreement.
12.13 PARTIES IN INTEREST. Nothing herein shall be
construed to be to the benefit of any third party, nor is it
intended that any provision shall be for the benefit of any third
party.
12.14 SAVINGS CLAUSE. If any provision of this
Agreement, or the application of such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid,
shall not be affected thereby. The parties agree that those
limitations contained in Section 5.5 with respect to geographic
area, duration and scope of activity are reasonable. However, if
any court shall determine that the geographic area, duration or
scope of activity of any restriction contained in Section 5.5 is
unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be
terminated but shall be deemed amended to the extent required to
render it valid and enforceable.
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12.15 TERMINATION OF AGREEMENT. All parties hereto
agree to use commercially reasonable efforts to fulfill the
requirements of Sections 7 and 8 as soon as practicable. This
Agreement shall be null and void and have no further effect if
(a) any pre-condition (as set forth in Sections 7 and 8 hereof)
to the completion of the transactions contemplated hereby is not
satisfied on or before May 30, 1997, or (b) at any time the
Corporation will be unable to satisfy any precondition set forth
in Section 7 hereof on or before May 30, 1997, or (c) the
Corporation suffers a material adverse change identified in
Section 12.15 hereof. If this Agreement is terminated as
provided by this Section 12.15, each party hereto shall maintain
the confidentiality of material information, and return all
written information, obtained from another party hereto.
DATED: May 28, 1997.
SELLER:
/s/
------------------------------
HERSCHEL P. McCULLOUGH,
an Individual
PURCHASER:
WESTWOOD CORPORATION, a Nevada
corporation
By: /s/
---------------------------
Ernest H. McKee, President
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