Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of December 8, 2014,
is entered into by and among Fineline Molds, a California corporation
(“Seller”), the shareholders of Seller set forth on the signature pages hereto
(each, a “Shareholder” and collectively, the “Shareholders”), and Pro-Dex, Inc.,
a Colorado corporation (“Buyer”). Seller and the Shareholders are sometimes
referred to in this Agreement together as the “Seller Parties” or individually
as a “Seller Party”. Buyer, Seller and the Shareholders are sometimes referred
to in this Agreement together as the “Parties” or individually as a “Party”.
Unless the context otherwise requires, terms used in this Agreement that are
capitalized and not otherwise defined in context will have the meanings set
forth in Article 1.

RECITALS

A.    Seller is engaged in the business of manufacturing plastic injection molds
and related activities (the “Business”).

B.    The Shareholders are the registered and beneficial owners of all of the
issued and outstanding capital stock of Seller.

C.    Buyer desires to purchase from Seller, and the Shareholders desire to
cause Seller to sell (and Seller desires to sell) to Buyer, all of Seller’s
right, title and interest in, to and under the Purchased Assets. The
Shareholders desire to cause Seller to transfer (and Seller desires to transfer)
to Buyer, and Buyer desires to accept and assume from Seller, the Assumed
Liabilities.

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, hereby agree as follows:

ARTICLE 1
DEFINITIONS

“Affiliate” means with respect to any Person, a Person that directly or
indirectly controls, is controlled by, or is under common control with, any such
Person. The term “Affiliate” also includes any family member, including adoptive
relationships, of such Person.

“Buyer Fundamental Representations” means the representations and warranties of
Buyer set forth in Sections 7.1, 7.2, 7.3 and 7.4.

“Code” means the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder.

“Contracts” means all contracts, agreements (including employment agreements and
non-competition agreements), leases (whether real or personal property),
licenses, commitments, arrangements, instruments, guarantees, bids, orders and
proposals, in each case oral or written.

“Controlled Group” means any trade or business (whether or not incorporated) (a)
under common control within the meaning of section 4001(b)(1) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) with Seller or (b)
which together with Seller is treated as a single employer under section 414(t)
of the Code.

“Environmental Laws” means all Laws that govern or relate to pollution,
protection of the environment, public health and safety, air emissions, water
discharges, waste disposal, hazardous or toxic substances, solid or hazardous
waste or occupational, health and safety.

“Excluded Contracts” means all Contracts other than the Purchased Contracts.

 

 

“Governmental Authority” means any government or political subdivision or
regulatory authority, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision or regulatory
authority, or any federal state, local or foreign court or arbitrator.

“Indebtedness” of means any and all indebtedness of any kind (including purchase
money indebtedness), whether a direct obligation or an indirect obligation
(including as a guarantor).

“Law” means any law, common law, statute, code, ordinance, rule, regulation or
other requirement of any Governmental Authority.

“Liens” means any mortgage, pledge, hypothecation, rights of others, claim,
security interest, encumbrance, title defect, title retention agreement, voting
trust agreement, interest, option, lien, charge or similar restrictions or
limitations.

“Order” means any order, judgment, injunction, award, decree, ruling, charge or
writ of any Governmental Authority.

“Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice (including with respect to quantity and
frequency).

“Permits” means any license, permit, authorization, certificate of authority,
accreditation, qualification or similar document or authority that has been
issued or granted by any Governmental Authority.

“Permitted Exceptions” means Liens for current Taxes, assessments, fees and
other charges by Governmental Authorities that are not due and payable as of the
Closing Date.

“Person” means any individual, sole proprietorship, partnership, corporation,
limited liability company, unincorporated society or association, trust or other
entity, or any division of such Person.

“Pre-Closing Tax Period” means any Tax period (or portion thereof) ending on or
before the Closing Date.

“Seller Fundamental Representations” means the representations and warranties of
the Seller Parties set forth in Sections 6.1, 6.2, 6.3, 6.4, 6.6, 6.8, 6.9,
6.10, 6.16 and 6.20.

“Tax” means any foreign, United States federal, state or local tax, custom,
duty, levy or other like assessment or charge of any kind whatsoever, including
net income, gross income, gross receipts, capital gain, sales, use, ad valorem,
value added, transfer, franchise, payroll, employment, property or environmental
tax.

“Tax Returns” means all Tax returns, statements, reports, elections, schedules,
claims for refund, and forms (including estimated Tax or information returns and
reports), including any supplement or attachment thereto and any amendment
thereof.

“Taxing Authority” means any Governmental Authority responsible for the
administration or imposition of any Tax.

ARTICLE 2
ASSETS

2.1              Purchased Assets. At the Closing, Buyer will purchase (or cause
to be purchased) from Seller, and Seller will sell, transfer, assign, convey and
deliver to Buyer, free and clear of all Liens other than Permitted Exceptions,
all of Seller’s right, title and interest in, to and under all assets, rights
and properties used in or held for use in the Business and of every nature, kind
and description, whether tangible or intangible, owned leased or licensed, real,
personal or mixed, excluding the Excluded Assets (collectively, the “Purchased
Assets”), including the following: (a) all furniture, fixtures and equipment,
(b) all inventory, (c) all credits, prepaid expenses, advance payments,
deposits, surety accounts and other similar deposits, (d) all Purchased
Intellectual Property (defined in Section 6.13(a)) and trade secrets, (e) the
contracts and

 

 

agreements listed on Schedule 2.1(e) (the “Purchased Contracts”), (f) all
documents, files, records, reports, customer lists, supplier lists, data, plans
and technical documentation (whether in written, electronic or any other medium
or format), (g) Permits, to the extent transferrable, (h) all rights and claims
against third parties, and (i) all goodwill associated with the Business.

2.2              Excluded Assets. Seller will retain only those assets, rights
and properties set forth in this Section 2.2 (collectively, the “Excluded
Assets”). Buyer will in no way be construed to have purchased or otherwise
acquired (or to be obligated to purchase or otherwise acquire) any right, title
or interest in any of the Excluded Assets. The Excluded Assets are:

(a)                all cash and cash equivalents of Seller as of the Closing
Date;

(b)               all accounts receivables and notes receivables of Seller or
otherwise related to the Business as of the Closing Date (the “Accounts
Receivable”);

(c)                the Excluded Contracts;

(d)               the automobiles owned by Seller, including those listed on
Schedule 2.2(d);

(e)                all minute books, organizational documents, stock registers
and such other books and records of Seller that pertain to ownership,
organization or existence of Seller and duplicate copies of such records as are
necessary to enable Seller to file Tax Returns;

(f)                all Employee Plans (including any Contracts related thereto)
and all assets held with respect to the Employee Plans; and

(g)                all rights that accrue to Seller under this Agreement or any
agreement, document, instrument or certificate executed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
the “Ancillary Agreement”).

ARTICLE 3
LIABILITIES

3.1              Assumed Liabilities. At the Closing, Buyer will assume and
become responsible for, and will thereafter pay, perform and discharge as and
when due, only the Assumed Liabilities. “Assumed Liabilities” mean solely those
liabilities and obligations of Seller under the Purchased Contracts that arise
out of or relate to the period from and after the Closing Date to the extent
such liabilities and obligations arise in the Ordinary Course of Business and
are consistent with the representations and warranties set forth in this
Agreement; except, that, Buyer will not assume or be responsible for any such
liabilities or obligations that arise from any breach of or default under the
Purchased Contracts on or prior to the Closing Date or constitute trade or
account payables and accrued expenses, all of which liabilities and obligations
constitute Excluded Liabilities.

3.2              Excluded Liabilities. Any and all liabilities and obligations
of any kind or nature, known or unknown, and whether arising or existing prior
to, on or after the Closing Date, that are not expressly included in the
definition of Assumed Liabilities shall be “Excluded Liabilities”. All Excluded
Liabilities will be retained by and remain liabilities and obligations of
Seller.

ARTICLE 4
PURCHASE PRICE

4.1              Purchase Price.

(a)                In full consideration for the transfer of the Purchased
Assets, Buyer will: (i) pay or cause to be paid to Seller an amount in cash
equal to $650,000, (the “Closing Cash Payment”); (ii) issue or cause to be
issued to Seller a promissory note, substantially in the form of Exhibit A
hereto, in the aggregate principal amount of $100,000 (the “Note” and, together
with the Closing Cash Payment, the “Purchase Price”); and (iii) assume (or cause
to be assumed) the Assumed Liabilities; provided, however, that Buyer shall not
assume any Excluded Liabilities. The Note shall be secured

 

 

by a security agreement, substantially in the form attached as Exhibit B hereto,
providing a security interest in all of the Purchased Assets. The security
agreement shall be evidenced by the filing of any appropriate Form UCC-1 with
the Colorado Secretary of State’s Office.

(b)               At the Closing, Buyer will (i) pay (or cause to be paid) (A)
the Closing Cash Payment to New Century Escrow, as escrow agent (“Escrow
Agent”), by bank wire transfer of immediately available funds, for further
delivery to an account designated in writing by Seller, and (B) to Escrow Agent,
for further delivery to the Persons entitled thereto, the Indebtedness of Seller
as of the Closing Date, in each case, in accordance with Section 5.4; and (ii)
issue (or cause to be issued) the Note.

4.2              Allocation. The Purchase Price and the Assumed Liabilities (to
the extent included in the amount realized for income Tax purposes) will be
allocated among the Purchased Assets in accordance with section 1060 of the Code
and their fair market values using the methodology or values as set forth on
Schedule 4.4 (the “Allocation Schedule”). Each Party will report the purchase
and sale of the Purchased Assets on all Tax Returns (including Internal Revenue
Service (“IRS”) Form 8594) in accordance with such allocations and no Party will
take any position contrary to the Allocation Schedule unless required by Law.
The Parties agree to notify each other with respect to the initiation of any
action or proceeding by the IRS or any other Taxing Authority relating to such
allocations and agree to consult with each other with respect to any action or
proceeding by the IRS or any other Taxing Authority.

ARTICLE 5
CLOSING, DELIVERIES AND CERTAIN ACTIONS

5.1              Time and Place of Closing. The closing of the transactions
contemplated hereby (the “Closing”) will take place through Escrow Agent on the
date that each of the conditions to Closing set forth in this Agreement, the
“Escrow Agreement” (as defined below) or otherwise have been either satisfied or
waived in writing, or at such other time or in such other manner as the Parties
agree in writing (the date on which the Closing occurs, the “Closing Date”), and
may be carried out by the use of facsimile or e-mail exchange of .pdf documents
and signatures. For accounting and computational purposes, the Closing will be
deemed to have occurred at 12:01 a.m. (Pacific Time) on the Closing Date.

5.2              Deliveries by Seller Parties. At or prior to the Closing,
Seller Parties will deliver (or cause to be delivered) to Escrow Agent the
following items (collectively, the “Seller Parties’ Closing Deliverables”):

(a)                possession of the Purchased Assets;

(b)               reasonably current good standing certificate (or equivalent
document) for Seller issued by the Secretary of State of the State of California
and by the secretary of state (or equivalent Governmental Authority) of each
jurisdiction where Seller is qualified to do business, if any;

(c)                a general assignment and bill of sale, in the form attached
hereto as Exhibit C (the “Bill of Sale”), duly executed by Seller;

(d)               an assignment and assumption agreement, in the form attached
hereto as Exhibit D (the “Assignment and Assumption Agreement”), duly executed
by Seller;

(e)                a certificate pursuant to Treasury Regulations
Section 1.1445-2(b) that each Seller Party is not a foreign person within the
meaning of Section 1445 of the Code, in the form attached hereto as Exhibit E-1
(Seller) or Exhibit E-2 (Shareholders), duly executed by each such Seller Party;

(f)                appropriate payoff letters and termination statements under
the Uniform Commercial Code and other instruments as may be requested by Buyer
to extinguish all Liens (other than Permitted Exceptions) on the Purchased
Assets to the extent requested by Buyer; and

 

 

(g)                such other documents and instruments as Buyer may reasonably
request to consummate the transactions contemplated hereby.

5.3              Deliveries by Buyer. At or prior to the Closing, Buyer will
deliver (or cause to be delivered) to Escrow Agent the following items
(collectively, the “Buyer Closing Deliverables” and, together with the Seller
Parties’ Closing Deliverables, the “Closing Deliverables”):

(a)                the Closing Cash Payment, for further payment to Seller in
accordance with Article 4;

(b)               the Note, for further delivery to Seller, duly executed by
Buyer;

(c)                the Bill of Sale, duly executed by Buyer;

(d)               the Assignment and Assumption Agreement, duly executed by
Buyer; and

(e)                such other documents and instruments as Seller Parties may
reasonably request to consummate the transactions contemplated hereby.

5.4              Escrow Account. The Closing Deliverables shall be held and
disbursed by Escrow Agent, in each case, in accordance with the terms of an
agreement to be entered into by and among Buyer, Seller and the Escrow Agent
(the “Escrow Agreement”).

5.5              Termination. Buyer or Seller may, without liability (except in
the case of such Party’s fraud or willful misconduct), terminate this Agreement
at any time prior to the Closing.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES

Seller Parties, on a joint and several basis, represent and warrant to Buyer as
follows:

6.1              Authority, Validity and Effect. Each Seller Party has all
requisite authority and full legal capacity to enter into and perform its
obligations under this Agreement and all Ancillary Agreements to which it is a
party and to consummate the transactions contemplated herein and therein. This
Agreement and the applicable Ancillary Agreements have been duly executed and
delivered by each Seller Party pursuant to all necessary authorization and are
the legal, valid and binding obligation of each Seller Party, enforceable
against such Seller Party in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and other similar Laws and principles of equity affecting creditors’
rights and remedies generally (the “General Enforceability Exceptions”). No
further action on the part of any Seller Party is or will be required in
connection with the transactions contemplated by this Agreement or the Ancillary
Agreements.

6.2              Existence and Good Standing; Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. Seller is duly authorized, qualified or licensed to do
business as a foreign corporation in any jurisdiction in which it is required to
be so qualified. Seller has the necessary power and authority to (a) own,
operate and lease its properties and assets as and where currently owned,
operated and leased and (b) carry on the Business as currently conducted. Seller
has not made any “doing business as” or “fictitious business name” filings for
the name “Fineline Molds”.

6.3              No Conflict; Consents. Neither the execution of this Agreement
or the applicable Ancillary Agreements, nor the performance by any Seller Party
of its obligations hereunder or thereunder, will (a) violate or conflict with
articles or organization, operating agreement or other organizational documents
of Seller, or any Law or Order, (b) violate, conflict with or result in a breach
or termination of, or otherwise give any Person additional rights or
compensation under, or the right to terminate or accelerate, or constitute (with
notice or lapse of time, or both) a default under the terms of any note, deed,
mortgage, or Contract or oral understanding to which any Seller Party is a party
or by which any of the Purchased Assets are bound, or (c) result in the creation
or imposition of any Lien with respect to, or otherwise have an adverse effect
upon,

 

 

the Purchased Assets or the Business. No consent or approval of any Person or
Governmental Authority is required in connection with the execution and delivery
by Seller Parties of this Agreement or the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby.

6.4              Title.

(a)                Seller does not own any real property. Other than the
Permitted Exceptions, Seller has good and marketable title to, valid and
enforceable leasehold interests in, or a valid and enforceable license to, all
of the Purchased Assets free and clear of any Liens. The Purchased Assets are in
good condition and repair (subject to normal wear and tear consistent with the
age of the assets and properties) and are sufficient for the operation of the
Business as it is currently conducted. All of the Purchased Assets have been
maintained, repaired and replaced consistent with past practice in a manner that
is appropriate for the continued operation of the Business. Seller is the only
operations through which the Business is conducted, and no similar business is
conducted by any of its Affiliates, including any Shareholder. The Purchased
Assets constitute all of the assets and properties used in or necessary to
conduct the Business as it is currently conducted.

(b)               Schedule 6.4(b) sets forth a true and complete description of
all real property leased, licensed to or otherwise used or occupied (but not
owned) in the Business or by Seller (collectively, the “Leased Real Property”),
including the address thereof, the annual fixed rental, the expiration of the
applicable lease term, any lease extension options and any security deposits. A
true and correct copy (or if oral, then a written description thereof) of the
lease with respect to the Leased Real Property (collectively, the “Real Property
Leases”) has been delivered to Buyer, and no changes have been made to any Real
Property Leases since the date of delivery. Each Real Property Lease is valid,
binding and enforceable in accordance with its terms and is in full force and
effect. There are no existing defaults by Seller or, to Seller’s knowledge, the
lessor under any of the Real Property Leases, and, to Seller’s knowledge, no
event has occurred which (with notice, lapse of time or both) could reasonably
be expected to constitute a breach or default under any of the Real Property
Leases by any Person or give any Person the right to terminate, accelerate or
modify any Real Property Lease. Except as set forth in Schedule 6.4(b), no
consent or approval is required from the lessor or any other Person under any of
the Real Property Leases to consummate the transactions contemplated by this
Agreement except for duly executed and enforceable consents that have been
obtained and provided to Buyer. Neither Seller nor any other Person has leased
or sublet as lessor or sublessor, and no Person (other than Seller) is in
possession of, any of the Leased Real Property.

(c)                All of the issued and outstanding capital stock of Seller is
owned beneficially and of record by the Shareholders.

6.5              Litigation. To the best of Seller’s knowledge, there is no
instance in which Seller, any of the Purchased Assets or, with respect to the
Business, any Shareholder is or has been prior to the Closing Date (a) subject
to any unsatisfied Order, or (b) a party, or is or was threatened to be made a
party, to any action or proceeding. To the best of Seller’s knowledge, there is
no Order and no action or proceeding pending or threatened that questions the
validity of this Agreement, the Ancillary Agreements or any of the transactions
contemplated hereby or thereby, or that would give any Person the right to
enjoin or rescind the transactions contemplated by this Agreement or the
Ancillary Agreements, or would otherwise prevent Seller or any Shareholder from
complying with the terms of this Agreement or any Ancillary Agreement.

6.6              Compliance with Laws. To the best of Seller’s knowledge, Seller
is now, and has been at all times, in compliance with all Laws and Orders
applicable to the Purchased Assets or the Business. To Seller’s knowledge, no
proposed Law or Order exists that would be applicable to the Purchased Assets or
the Business and that would adversely affect the Purchased Assets, the Business
or the liabilities, operations or prospects of Seller.

6.7              Conduct of Business. Since January 1, 2011, the Business has
been conducted in the Ordinary Course of Business and there has not been any
material adverse change in the Purchased Assets, the Business or the operation
thereof, or the performance or financial condition of Seller.

 

 

6.8              Labor Matters.

(a)                Union and Employee Contracts. Except as set forth in Schedule
6.8(a), (i) Seller is not a party to or bound by any employment contract,
independent contractor agreement, consultation agreement, union contract,
collective bargaining agreement, or other similar types of such Contracts; (ii)
Seller has not agreed to recognize any union or other collective bargaining
representative; and (iii) no union or collective bargaining representative has
been certified as representing any employees of Seller and no organizational
attempt has been made or threatened by or on behalf of any labor union or
collective bargaining representative with respect to any employees of Seller.

(b)               List of Employees, Etc. Schedule 6.8(b) sets forth a list of
all officers, directors, employees, consultants and independent contractors of
Seller, their rate of regular and special compensation and any regular or
special compensation that will be payable as of the Closing Date. Except as set
forth in Schedule 6.8(b), all employees, consultants and independent contractors
of Seller are terminable at will, in each case without further liability to
Seller.

6.9              Employee Plans. Schedule 6.9 sets forth a complete list of (a)
all “employee benefit plans”, as defined in section 3(3) of ERISA, (b) all other
severance pay, salary continuation, bonus, incentive, stock option, retirement,
pension, profit sharing or deferred compensation plans, contracts, programs,
funds or arrangements of any kind, and (c) all other employee benefit plans,
contracts, programs, funds or arrangements (whether written or oral, qualified
or nonqualified, funded or unfunded, foreign or domestic, currently effective or
terminated) and any trust, escrow or similar agreement related thereto, whether
or not funded, in respect of any present or former employees, directors,
officers, shareholders, consultants, or independent contractors of Seller or any
member of the Controlled Group that are sponsored or maintained by Seller or any
member of the Controlled Group or with respect to which Seller or any member of
the Controlled Group has made or is required to make payments, transfers, or
contributions (all of the above being hereinafter referred to collectively as,
“Employee Plans”). Seller does not have any liability with respect to any plan,
arrangement or practice of the type described in the preceding sentence other
than the Employee Plans. Buyer will not, by the execution and delivery of this
Agreement, any Ancillary Agreement or otherwise, become obligated to employ any
employee of Seller or assume any liabilities or contractual obligations with
respect to such employees or otherwise become liable for or obligated in any
manner (contractual or otherwise) to any employee of Seller, including any
liability or obligation pursuant to any Employee Plan.

6.10          Environmental. To the best of Seller’s knowledge, Seller is and
has at all times been in compliance in all respects with all Environmental Laws
governing the Business and the Purchased Assets. There are no (and there is no
basis for any) noncompliance Orders, warning letters or notices of actions or
proceedings of any nature pending or, to the knowledge of Seller, threatened
against or involving Seller, the Business or the Purchased Assets issued by any
Person or Governmental Authority with respect to any Environmental Laws. To the
knowledge of Seller, there are no environmental conditions or circumstances on
any current or former real property used or owned by Seller that pose a risk to
the environment or the health or safety of Persons.

6.11          Contracts. Schedule 6.11 sets forth all of the Contracts to which
Seller is a party or to which any of the Purchased Assets are bound that are
material to Seller, the Business or the Purchased Assets. Seller has provided to
Buyer true and complete copies of each such Contract, as amended to date. Each
Contract listed on Schedule 6.11 is a valid, binding and enforceable obligation
of Seller enforceable in accordance with its terms, subject to General
Enforceability Exceptions. With respect to the Contracts listed on Schedule
6.11: (i) neither Seller nor any other Person is in material default under or in
violation of any such Contract; (ii) no event has occurred which, with notice or
lapse of time or both, would constitute such a default or violation; and (iii)
Seller has not released any of its rights under any such Contract. Except as set
forth in Schedule 6.11, no product sold or service performed by Seller is
subject to any guaranty, warranty or other indemnity.

 

 

6.12          Permits. Schedule 6.12 sets forth a true and complete list and
description of all Permits issued to Seller and used in the Business, which are
the only Permits that are necessary or required for the conduct of the Business.
Seller is in compliance with the terms of such Permits, and all such Permits are
in full force and effect. There is no pending or, to Seller’s knowledge,
threatened termination, expiration or revocation of any such Permits. Buyer will
be responsible for obtaining any and all Permits necessary for Buyer’s
operations of the Business subsequent to the Closing.

6.13          Intellectual Property.

(a)                Schedule 6.13(a) sets forth a true, correct and complete list
of the following intellectual property owned or licensed by Seller or otherwise
used in the operation of the Business as currently conducted: patents, patent
applications, patent rights, trademarks, trademark applications, trademark
rights, trade names, trade name rights, service marks, service mark rights,
copyrights, copyright applications, software, domain name registrations and
domain name applications. Seller owns or has the right to use pursuant to a
written license agreement all intellectual property owned or licensed by Seller
or otherwise used in the operation of the Business as currently conducted (the
“Purchased Intellectual Property”), including the intellectual property set
forth on Schedule 6.13(a). Subject to any manufacturer limitation on
transferability included in any respective license agreement, each item of
Purchased Intellectual Property will be owned or available for use by Buyer
immediately following the Closing on identical terms and conditions as available
to Seller and/or the Business prior to the Closing. All software included in the
Purchased Intellectual Property is off-the-shelf software, subject to only
click-wrap or shrink-wrap license agreements. Seller has taken commercially
reasonable efforts to maintain and protect the Purchased Intellectual Property.
The Purchased Intellectual Property does not infringe or violate the rights of
any third party and, to Seller’s knowledge, the Purchased Intellectual Property
is not being infringed upon by any third party. Seller uses reasonable measures
to maintain the secrecy of all trade secrets of the Business.

(b)               All information systems used by Seller or the Business are
owned or licensed, controlled and operated by Seller and are not wholly or
partly dependent upon any information system of any other Person. All
information systems used by Seller or the Business are sufficient for the
conduct of the Business.

6.14          Financial Statements. Schedule 6.14 sets forth true and complete
copies of the unaudited balance sheets of Seller as of December 31, 2013 and
September 30, 2014 and the related unaudited statements of income, retained
earnings and cash flows for the year and six-month periods then ended
(collectively, the “Financial Statements”). The Financial Statements present
fairly, in all material respects, the financial position, results of operations,
shareholders’ equity and cash flows of Seller at the dates and for the time
periods indicated and have been prepared in accordance with a comprehensive
method of accounting, consistently applied throughout the periods indicated, and
reviewed by the management of Seller. The Financial Statements were derived from
the books and records of Seller, which are accurate and complete, and there are
no material inaccuracies or discrepancies of any kind contained or reflected
therein. All of the books and records of Seller have been maintained in the
Ordinary Course of Business and fairly reflect, in all material respects, all
transactions of the Business.

6.15          Undisclosed Liabilities. To the best of Seller’s knowledge, Seller
does not have any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, regardless of when asserted) arising out of transactions or events
entered into prior to the Closing Date, or any action or inaction, or any state
of facts existing, with respect to or based upon transactions or events
occurring prior to the Closing Date, except (a) liabilities reflected in the
unaudited balance sheet of Seller as of September 30, 2014 (the “Most Recent
Balance Sheet”); or (b) liabilities that have arisen after the date of the Most
Recent Balance Sheet in the Ordinary Course of Business, none of which relates
to (i) breach of Contract, (ii) breach of warranty, (iii) tort, (iv)
infringement, (v) violation of Law or (vi) any environmental liability; or (c)
those items included in Schedule 6.15.

 

 

6.16          Taxes. (a) Seller has filed with the proper Taxing Authorities all
Tax Returns required by Law; (b) all Tax Returns have been prepared in
compliance with all applicable Laws and are true and accurate in all respects;
(c) all Taxes, whether or not reported on those Tax Returns, have been fully
paid; (d) no agreement for the extension of time or waiver of any statute of
limitation has been given and is in effect with respect to the payment or
assessment of any Tax by or against Seller or the Purchased Assets; (e) no
unpaid Tax deficiency has been assessed or, to Seller’s knowledge, is proposed
against Seller or the Purchased Assets by any Taxing Authority; (f) to Seller’s
knowledge, no basis exists for any Taxing Authority to claim or assess any
additional Taxes against Seller or the Purchased Assets for any period; (g) the
Tax Returns of Seller have never been audited by any Taxing Authority, and no
such audit is pending, in progress, or, to Seller’s knowledge, threatened; (h)
Seller has not made any Tax election that reasonably could be expected to result
in Buyer being liable for any Tax as a result of the transactions contemplated
by this Agreement; and (i) Seller is not a party to or bound by any Tax
allocation or Tax sharing agreement and Seller does not have any current or
potential contractual obligation to indemnify any other Person with respect to
Taxes. There are no Liens on any of the Purchased Assets that arose in
connection with any failure (or alleged failure) to pay any Tax, and, to
Seller’s knowledge, there is no basis for assertion of any claims attributable
to Taxes that, if adversely determined, would result in any such Lien.

6.17          Customers and Suppliers. Since January 1, 2013, Seller has not
lost, had a material disagreement with, or experienced a material adverse change
in its relationship with (a) any customer of Seller representing more than five
percent (5%) of the revenues of Seller during the year ended December 31, 2013
or for the nine months ended September 30, 2014, or (b) any material supplier to
Seller. For purposes of this Section 6.17, a customer is considered “lost” if
(a) Seller believes it is more probable than not that there will be no future
orders from a customer, or (b) that more than three (3) years have elapsed since
a customer’s most recent order.

6.18          Related Party Transactions. Except as set forth on Schedule 6.18,
there are no Contracts or other arrangements relating to the operation of the
Business or the Purchased Assets involving Seller in which any Shareholder,
equity holder, director, officer or employee of Seller, or any Affiliate of any
Seller Party, has a financial interest (including indebtedness).

6.19          Disclosure. To the best of Seller’s knowledge, all documents,
exhibits, certificates and other materials delivered or to be delivered by or on
behalf of any Seller Party in connection with this Agreement, the Ancillary
Agreements or the transactions contemplated hereby or thereby are true and
complete in all respects. To the best of Seller’s knowledge, the information
furnished by or on behalf of each Seller Party in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.

6.20          Brokers. Except as set forth on Schedule 6.20, no Seller Party has
any liability or obligation to pay any compensation to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement. In no
event shall Buyer be responsible or liable for any of the obligations disclosed
on Schedule 6.20.

ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF THE BUYER

Buyer hereby represents and warrants to Seller Parties as follows:

7.1              Existence and Good Standing; Power. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado. Buyer has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and the Ancillary Agreements.

7.2              Validity and Enforceability. This Agreement and the Ancillary
Agreements have been duly executed and delivered by Buyer and, assuming due
authorization, execution and delivery by Seller or any

 

 

other party thereto, represent the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms, subject to
General Enforceability Exceptions.

7.3              No Conflict; Consents. Neither the execution of this Agreement
or the Ancillary Agreements, nor the performance by Buyer of its obligations
hereunder or thereunder will violate or conflict with Buyer’s articles of
incorporation or bylaws or any Law or Order. No consent or approval of any
Person or Governmental Authority is required to be obtained by Buyer in
connection with the execution and delivery by Buyer of this Agreement or the
Ancillary Agreements or the consummation of the transactions contemplated hereby
or thereby.

7.4              Brokers. Except as set forth on Schedule 7.4, Buyer has no any
liability or obligation to pay any compensation to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement. In no event
shall any Seller Party be responsible or liable for any of the obligations
disclosed on Schedule 7.4.

ARTICLE 8
TAX MATTERS

8.1              Transfer Taxes. All transfer, excise, franchise, property,
documentary, sales, use, stamp, registration, recording, value added and other
such Taxes and fees (including any penalties and interest) imposed on Buyer or
Seller Parties in connection with this Agreement and the Ancillary Agreements
(“Transfer Taxes”) will be borne and paid by Seller Parties when due.
Notwithstanding the foregoing, any sales tax imposed as a result of the
transactions contemplated by this Agreement shall be paid by Buyer either
directly or by reimbursement to Seller. Seller Parties will timely file all
necessary Tax Returns and other documentation with respect to all such Transfer
Taxes. Within 90 days after filing, Seller will provide Buyer with copies of all
such Tax Returns of Seller and evidence that all such Transfer Taxes have been
paid, if applicable. If, and to the extent, Buyer is required by Law to file Tax
Returns and other documentation relating to such Transfer Taxes, then Buyer will
timely file such Tax Returns and other documentation. If Buyer pays a Transfer
Tax at the Closing or pursuant to a post Closing assessment by a Taxing
Authority, then Seller Parties, jointly and severally, will reimburse Buyer for
such Transfer Taxes (together with any interest and penalties) and the costs of
preparation of any Tax Returns. Any reimbursement hereunder will be paid within
fifteen (15) days of Buyer’s demand therefor.

8.2              Cooperation; Audits. In connection with the preparation of Tax
Returns, audit examinations, and any administrative or judicial proceedings
relating to the Tax liabilities imposed on Seller, Buyer and Seller will
cooperate fully with each other, including the furnishing or making available
during normal business hours of records, personnel (as reasonably required),
books of account, powers of attorney or other materials necessary or helpful for
the preparation of such Tax Returns, the conduct of audit examinations or the
defense of claims by Taxing Authorities as to the imposition of Taxes. Seller
will within ten (10) days of Buyer’s request therefor deliver any information
required to be reported by Buyer or Seller pursuant to section 6043A of the
Code.

8.3              Prorations. Except with respect to sales tax, Seller will bear,
to the extent applicable, all Taxes with respect to the Purchased Assets if the
Tax period ends on or before the Closing Date, irrespective of the reporting and
payment dates of such Taxes. Except as otherwise set forth in Section 8.1, all
other Taxes on the Purchased Assets for taxable periods beginning on or before,
and ending after, the Closing Date, will be prorated between Buyer and Seller as
of the close of business on the Closing Date on a daily basis and such proration
will be deemed final. Seller will be responsible for all such Taxes on the
Purchased Assets accruing under such daily proration methodology during any
period up to and including the Closing Date. Except as otherwise set forth in
Section 8.1, Buyer will be responsible for all such Taxes on the Purchased
Assets accruing during any period after the Closing Date. Proration of such
Taxes will be made on the basis of the most recent officially certified Tax
valuation and assessment. With respect to Taxes described in this Section 8.3,
Seller will prepare and timely file all Tax Returns due on or before the Closing
Date with respect to such Taxes and Buyer will prepare and timely file all Tax
Returns due after the Closing Date with respect to such Taxes. If one Party
remits to the appropriate Taxing Authority payment for Taxes,

 

 

which are subject to proration under this Section 8.3 and such payment includes
the other Party’s share of such Taxes, then such other Party will promptly
reimburse the remitting Party for its share of such Taxes. Any such
reimbursements will be made within fifteen (15) days of the Party making such
payment to the appropriate Taxing Authority; provided that, the Party requesting
reimbursement of Taxes will provide the other Party with a notice indicating the
amount due and the computation thereof. The obligations of either Party arising
under or in connection with this Section 8.3 may be performed by the Escrow
Agent, if so provided in the Escrow Agreement.

ARTICLE 9
CERTAIN COVENANTS

9.1              Post Closing Consents; Non-Assignable Contracts.

(a)                Seller will use its best efforts after the Closing Date to
obtain all necessary consents and approvals from any Person necessary to
authorize, approve or permit the full and complete sale, conveyance, assignment,
sublease or transfer of the Purchased Assets and to make effective the
transactions contemplated by this Agreement as may be required that are not
obtained prior to the Closing Date.

(b)               This Agreement will not constitute an agreement to sell,
convey, assign, sublease or transfer any of the Purchased Assets if any
attempted sale, conveyance, assignment, sublease or transfer of such assets,
without the consent or approval of another Person to such transfer, would
constitute a breach by Seller or Buyer with respect to such Purchased Asset. If
any required consent or approval is not obtained on or prior to the Closing
Date, then either Party shall have the right to elect not to effect the Closing
without liability to any Party (provided that such election must be made in
writing on or prior to the Closing Date).

9.2              Maintenance of, and Access to, Records. Seller will provide
Buyer with access (with an opportunity to make copies), during normal business
hours, and upon reasonable notice, to any records relating to the Business that
are retained by Seller. Seller will preserve and maintain any books and records
relating to the Business or the Purchased Assets and retained by Seller for a
period of seven (7) years after the Closing Date.

9.3              Further Assurances. From and after the Closing Date, at the
request of Buyer, Seller will execute and deliver or cause to be executed and
delivered to Buyer such deeds, bills of sale, assignments or other instruments
to Buyer in addition to those required by this Agreement, as Buyer may
reasonably request, in order to implement the transactions contemplated by this
Agreement. If any Purchased Asset subsists in or is not recorded in the name of
Seller as of the Closing Date, then Seller will promptly, at its sole cost and
expense, (a) correct and update the title to such Purchased Asset, and (b)
provide to Buyer the applicable documents pursuant to which such corrections and
updates have been made and evidence that each, as applicable, has been duly
recorded with the appropriate Governmental Authority.

9.4              Expenses. Each Party will bear its own expenses incurred or to
be incurred in connection with the execution and delivery of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby.

9.5              Use of Business Name. Following the Closing, Seller will not
directly or indirectly, use or do business, or allow any of its Affiliates to
use or do business, under the name “Fineline Molds” or any name that, in the
reasonable judgment of Buyer, is similar to such name. As soon as reasonable
possible after the Closing (and in any event before the fifteenth (15th) day
after the Closing Date), Seller will (a) amend or terminate (as appropriate) its
articles of incorporation to eliminate Seller’s right to use the name “Fineline
Molds” or any name that, in the reasonable judgment of Buyer, is similar to such
name, and (b) provide to Buyer any and all reasonably requested consents,
documents and instruments, executed and delivered in form acceptable to Buyer,
that are necessary or desirable for Buyer to claim, register or file to use the
“Fineline Molds” name or any name that, in the reasonable judgment of Buyer, is
similar to such name.

 

 

9.6              Employee Matters.

(a)                Employee Benefits. Seller will retain all liabilities and
obligations of any nature whatsoever in respect of its past, present and future
employees, including under the Employee Plans and applicable Laws. Without
limiting the generality of the foregoing or of Section 3.2, Buyer will have no
liability or obligation whatsoever under the Employee Plans, nor will Buyer have
any obligation to provide any employee benefits to any employees of Seller.
Seller will have sole responsibility for satisfying the continuation coverage
requirements for group health plans under Part 6 of Subtitle B of Title I of
ERISA and section 4980B of the Code (“COBRA”) and similar state Laws for all
employees and former employees of Seller and the Business and the “qualified
beneficiaries” of such employees and former employees for whom a “qualifying
event” occurs on or prior to the Closing Date. The terms “qualified
beneficiaries” and “qualifying event” have the meanings given to them under
COBRA. Seller shall be responsible for any liability under federal or state
“WARN” acts or any comparable laws with respect any termination or layoff of
employees in connection with the transactions contemplated by this Agreement.

(b)               Future Employment. Buyer may offer employment from and after
the Closing to any employee of Seller, on such terms and conditions as Buyer
may, in its sole discretion, determine, but Buyer will not be obligated to do so
pursuant to this Agreement or for any other reason.

9.7              Accounts Receivable. All collections from any particular
customer on Accounts Receivable after the Closing Date shall be applied first to
receivables of such customer owned by Seller, and only after all receivables of
such customer owned by Seller are paid in full will any payments received from
such customer be applied to Buyer’s receivables. Buyer agrees to cooperate in
reasonable collection efforts to collect all Closing Date Accounts Receivables.

ARTICLE 10
REMEDIES

10.1          General Indemnification Obligation.

(a)                Seller Indemnification. Seller Parties, jointly and
severally, will indemnify, defend and hold harmless Buyer and its stockholders,
officers, directors, employees, agents and Affiliates (each a “Buyer Indemnified
Party”) from and against any and all losses, liabilities, claims, damages,
penalties, fines, judgments, awards, settlements, Taxes, Transfer Taxes, costs,
fees, expenses (including reasonable attorneys’ fees) and disbursements (each, a
“Loss” and, collectively, the “Losses”) incurred or suffered by any Buyer
Indemnified Party based upon, arising out of, or otherwise in respect of (i) any
inaccuracies in or any breach of any representation, warranty, covenant or
agreement of Seller contained in this Agreement (including any Schedule or
Exhibit attached hereto), any certificate or other document delivered pursuant
hereto, or any Ancillary Agreement, (ii) any of the Excluded Liabilities, (iii)
any Indebtedness of Seller not fully paid on the Closing Date, (iv) violation or
failure to comply with any bulk sale or bulk transfer Law, and (v) except for
the Assumed Liabilities, the operation of the Business or the ownership and use
of the Purchased Assets on or prior to the Closing Date.

(b)               Buyer Indemnification. Buyer will indemnify, defend and hold
harmless Seller Parties from and against any and all Losses incurred or suffered
by such Seller Party based upon, arising out of, or otherwise in respect of (i)
any inaccuracies in or any breach of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement (including any Schedule or
Exhibit attached hereto), any certificate or other document delivered pursuant
hereto, or any Ancillary Agreement, (ii) any of the Assumed Liabilities, and
(iii) except for the Excluded Liabilities, Buyer’s operation of the Business or
the ownership and use of the Purchased Assets after the Closing Date, except to
the extent any such Losses are caused in whole or in part by any Shareholder.

 

 

10.2          Notice and Third Party Claims. As soon as is reasonably
practicable after any Seller Party or Buyer Indemnified Party becomes aware of
any event or condition that could reasonably be expected to result in a Loss for
which that party is entitled to indemnification under Section 10.1 (a “Liability
Claim”), such party (the “Beneficiary”) will give notice of such Liability Claim
(a “Claims Notice”) to the other party (the “Indemnifying Party”). A Claims
Notice must describe the Liability Claim in reasonable detail and must indicate
the amount (estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Beneficiary. No delay in or failure to give a
Claims Notice by the Beneficiary to the Indemnifying Party under this Section
10.2 will adversely affect any of the other rights or remedies that the
Beneficiary has under this Agreement or alter or relieve the Indemnifying Party
of its obligation to indemnify the Beneficiary except to the extent that such
delay or failure has materially prejudiced the Indemnifying Party. If any Claims
Notice identifies a Liability Claim brought by a third Person (a “Third Party
Claim” and together with Liability Claims, “Claims”), then the Indemnifying
Party has the right, exercisable by written notice to the Beneficiary within 10
days after receipt of such Claims Notice, to assume and conduct the defense of
such Third Party Claim with counsel reasonably acceptable to the Beneficiary so
long as (a) the Indemnifying Party acknowledges to the Beneficiary in writing
its obligations to indemnify the Beneficiary with respect to all elements of
such Third Party Claim, (b) such Claim seeks (and continues to seek) solely
monetary damages, and (c) such Claim, in the reasonable judgment of the
Beneficiary, could not have a material adverse effect on the Beneficiary.
Without the prior written consent of the Beneficiary, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that could lead to
liability or create any financial or other obligation on the part of the
Beneficiary for which the Beneficiary is not entitled to complete
indemnification hereunder, or that provides for injunctive or other non-monetary
relief applicable to the Beneficiary, or does not include an unconditional
release of all Beneficiaries. The Beneficiary shall be entitled to participate
in (but not control) the defense of any such Third Party Claim with its own
counsel and at its own expense. If the Indemnifying Party does not assume the
defense of a Third Party Claim pursuant to this Section 10.2, (i) the
Beneficiary may defend against such Claim in such manner as it may deem
appropriate, including, settling such Claim, after giving notice of the same to
the Indemnifying Party, on such terms as the Beneficiary may deem appropriate,
and (b) the Indemnifying Party shall be entitled to participate in (but not
control) the defense of such Claim with its counsel and at its own expense.

10.3          Survivability. The representations and warranties of the
respective Parties contained in this Agreement or in any Ancillary Agreement
shall survive until (the “Expiration Date”): (a) the representations and
warranties of Seller Parties contained in this Agreement or in any Ancillary
Agreement will survive until the twenty four (24) month anniversary of Closing,
except: (i) the representations and warranties of Seller Parties in Section 6.16
shall survive for the applicable statute of limitations, and (ii) the Seller
Fundamental Representations (other than Section 6.16) shall survive
indefinitely, and (b) the Buyer Fundamental Representations shall survive
indefinitely. Any Claims pending on any Expiration Date for which notice has
been given in accordance with Section 10.2 on or before such Expiration Date may
continue to be asserted and indemnified against until finally resolved.

10.4          Limits.

(a)                Except for claims of indemnification in respect of breaches
of Seller Fundamental Representations or breaches of Section 9.5 or
Section 11.1, (x) the Seller Parties shall not be liable to indemnify the Buyer
Indemnified Parties pursuant to Section 10.1(a)(i) unless and until the Buyer
Indemnified Parties have collectively suffered Losses from breaches of
representations and warranties of the Seller Parties in excess of ten thousand
dollars ($10,000) in the aggregate (the “Seller Deductible”), in which case the
Buyer Indemnified Parties shall be entitled to indemnification for all Losses on
a dollar-for-dollar basis for the amount of Losses in excess of the Seller
Deductible, and (y) the Seller Parties shall not be liable to indemnify the
Buyer Indemnified Parties pursuant to Section 10.1(a)(i) in an amount in excess
of three hundred and fifty thousand dollars ($350,000) in the aggregate. The
Seller Parties shall not be liable to indemnify the Buyer Indemnified Parties
for any other Losses in an amount in excess of the Purchase Price.

 

 

(b)               Except for claims of indemnification in respect of breaches of
Buyer Fundamental Representations or breaches of covenant or agreement, (x)
Buyer shall not be liable to indemnify the Seller Parties pursuant to Section
10.1(b)(i) unless and until the Seller Parties have collectively suffered Losses
from breaches of representations and warranties of Buyer in excess of ten
thousand dollars ($10,000) in the aggregate (the “Buyer Deductible”), in which
case the Seller Parties shall be entitled to indemnification for all Losses on a
dollar-for-dollar basis for the amount of Losses in excess of the Buyer
Deductible, and (y) Buyer shall not be liable to indemnify the Seller Parties
pursuant to Section 10.1(b)(i) in an amount in excess of three hundred and fifty
thousand dollars ($350,000) in the aggregate. Buyer shall not be liable to
indemnify the Seller Parties for any other Losses in an amount in excess of the
Purchase Price.

(c)                The limitations in this Section 10.4 shall not apply if the
applicable Loss resulted from the fraud or willful misconduct of the Party
obligated to provide indemnification pursuant to Section 10.1.

10.5          Specific Performance. Each Party’s obligation under this Agreement
is unique. If any Party should breach its covenants under this Agreement, then
the Parties each acknowledge that it would be extremely impracticable to measure
the resulting damages; accordingly, the nonbreaching Party, in addition to any
other available rights or remedies, may sue in equity for specific performance,
and each Party expressly waives the defense that a remedy in damages will be
adequate.

10.6          Set-Off. If any Buyer Indemnified Party is entitled to
indemnification under this Section 10, such Buyer Indemnified Party may, in its
sole discretion, (a) proceed directly against one or more Seller Parties or (b)
(subject to Buyer’s written consent if Buyer Indemnified Party is a Person other
than Buyer) set off against amounts owning under the Note.

ARTICLE 11
MISCELLANEOUS

11.1          Competitive Activity; Non-solicitation; Confidentiality.

(a)                Non-competition. During the five-year period following the
Closing Date (the “Non-compete Period”), no Seller Party will, directly or
indirectly, without the prior written consent of Buyer, (i) enter into, engage
in, consult, manage or otherwise participate in the operation of any business
whose sole business is that of manufacturing plastic injection molds that
competes with the Business within the Restricted Territory; (ii) solicit
customers, business, patronage or orders for, or sell, any products and services
in competition with, or for any business that competes with, the Business within
the Restricted Territory; (iii) divert, entice or otherwise take away any
existing or potential customers, business, patronage or orders of Buyer or the
Business within the Restricted Territory, or attempt to do so; or (iv) promote
or assist, financially or otherwise, any Person engaged in any business that
competes with Buyer or the Business within the Restricted Territory, in each
case, if such would work to the prospective or actual disadvantage of Buyer
(which includes, without limitation, any loss of market share). For the purposes
of this Section 11.1, Buyer will also include any and all of its direct and
indirect subsidiaries, parents, Affiliates, or related companies of Buyer.
“Restricted Territory” means the geographic areas within (x) the United States
and its territories and (y) Mexico.

(b)               Non-Solicitation. During the Non-compete Period, no Seller
Party will, directly or indirectly, at any time solicit or induce or attempt to
solicit or induce any employees, sales representatives, agents or consultants of
Buyer to terminate their employment, representation or other association with
Buyer.

(c)                Non-Disclosure. Each Seller Party will keep in strict
confidence, and will not, directly or indirectly, at any time, disclose,
furnish, disseminate, make available or use any trade secrets or confidential
business and technical information of the Business or Buyer or any of its
customers or vendors, whatever its nature and form and without limitation as to
when or how such

 

 

Seller Party may have acquired such information. Such confidential information
includes the unique selling, manufacturing and servicing methods and business
techniques, training, service and business manuals, promotional materials,
training courses and other training and instructional materials, vendor and
product information, customer and prospective customer lists, other customer and
prospective customer information and other business information with respect to
the Business. Each Seller Party specifically acknowledges that all such
confidential information, whether reduced to writing, maintained on any form of
electronic media, or maintained in any other manner and whether compiled by such
Seller Party, derives independent economic value from not being readily known to
or ascertainable by proper means by others who can obtain economic value from
its disclosure or use, that reasonable efforts have been made to maintain the
secrecy of such information, that such information is the sole property of Buyer
and that any retention and use of such information by such Seller Party will
constitute a misappropriation of Buyer’s trade secrets. At any time upon the
request of Buyer, each Seller Party will immediately return to Buyer, in good
condition, all property of Buyer (including any Purchased Assets) that may
inadvertently remain or otherwise be or come into the possession of such Seller
Party, including the originals and all copies of any materials that contain,
reflect, summarize, describe, analyze or refer or relate to any items of
information described in this Section 11.1(c). If such items are not immediately
returned, then Buyer will have the right to seek recovery from such Seller Party
for all reasonable damages, costs, attorneys’ fees and other expenses incurred
in searching for, taking, removing and/or recovering such property.

(d)               Nondisparagement. From and after the Closing Date, each Seller
Party will refrain from, in any manner, directly or indirectly, all conduct,
oral or otherwise, that disparages or damages or could disparage or damage the
reputation, goodwill, or standing in the community of Buyer or the Business.

(e)                Acknowledgment and Relief. Each Seller Party acknowledges
that (i) such Seller Party’s obligations under this Section 11.1, including the
region, scope and duration, are reasonable in the context of the nature of the
Business and the competitive injuries likely to be sustained by Buyer if such
Seller Party were to violate such obligations, and (ii) the covenants in this
Section 11.1 are adequately supported by consideration directly or indirectly
received by each Seller Party pursuant to this Agreement. Each Seller Party
acknowledges and agrees that the remedy at law available to Buyer for breach of
any of such Seller Party’s obligations under this Section 11.1 would be
inadequate; therefore, in addition to any other rights or remedies that Buyer
may have at law or in equity, temporary and permanent injunctive relief may be
granted in any proceeding which may be brought to enforce any provision
contained in this Section 11.1, without the necessity of proof of actual damage.
If it is judicially determined that a Seller Party has violated this Section
11.1, then the period applicable to each obligation that such Seller Party has
been determined to have violated will automatically be extended by a period of
time equal in length to the period during which such violation(s) occurred.

(f)                Other Agreements. The obligations and restrictions set forth
in this Section 11.1 are in addition to the provisions of any employment,
consulting or other agreement between Buyer and any Seller Party that may be
entered into from time to time and addresses the same or similar subject matter
covered by this Section 11.1.

11.2          Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Buyer shall determine in
its reasonable discretion.

11.3          No Assignment. No Party may assign its rights and obligations
under this Agreement without the prior written consent of the other Parties;
except, that, Buyer may, without the consent of Seller Parties, assign its
rights and obligations under this Agreement to any (a) subsidiary of Buyer, (b)
lender of Buyer or to any of its Affiliates, or (c) purchaser of substantially
all of the assets or business of Buyer that also assumes Buyer’s obligations
under this Agreement.

 

 

11.4          Headings; Construction. The headings contained in this Agreement
are included for purposes of convenience only, and do not affect the meaning or
interpretation of this Agreement. The Parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, then this Agreement will be construed as
drafted jointly by the Parties and no presumption or burden of proof will arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. When used in this
Agreement, the words “include,” “includes” and “including” shall be deemed in
each case to be followed by the words “without limitation.” When used in this
Agreement, the words “herein”, “hereinafter”, “hereof”, “hereto”, and
“hereunder” shall refer to this Agreement as a whole, unless the context clearly
requires otherwise. When used in this Agreement, the phrase “Seller’s knowledge”
or “knowledge of Seller” means the knowledge of each Seller Party after due
inquiry and reasonable investigation. The masculine, feminine or neuter gender
and the singular or plural number shall each be deemed to include the others
whenever the context so indicates. Unless specifically stated otherwise, all
references to “$” or dollar amounts are to lawful currency of the United States
of America.

11.5          Integration, Modification and Waiver. This Agreement, together
with the Ancillary Agreements, Exhibits, Schedules and certificates or other
instruments delivered under this Agreement, constitutes the entire agreement
among the Parties with respect to the subject matter hereof and supersedes all
prior understandings of the Parties. No supplement, modification or amendment of
this Agreement will be binding unless executed in writing by Buyer and Seller.
No waiver of any of the provisions of this Agreement will be deemed to be or
will constitute a continuing waiver. No waiver will be binding unless executed
in writing by the Party making the waiver.

11.6          Severability. If any provision of this Agreement or the
application of any provision of this Agreement to any Party or circumstance is,
to any extent, adjudged invalid or unenforceable, then the application of the
remainder of such provision to such Party or circumstance, the application of
such provision to other parties or circumstances, and the application of the
remainder of this Agreement will not be affected thereby.

11.7          Notices. All notices and other communications required or
permitted under this Agreement must be in writing and will be deemed to have
been duly given (a) when delivered in person, (b) when dispatched by electronic
facsimile transfer (if confirmed in writing by mail simultaneously dispatched)
or by electronic mail, (c) one business day after having been dispatched by a
nationally recognized overnight courier service or (d) five business days after
being sent by registered or certified mail, return receipt requested, postage
prepaid, to the appropriate Party at the address, electronic mail or facsimile
number set forth on the signature page to this Agreement. Any Person may change
its address or facsimile number for the purposes of this Section 11.7 by giving
notice as provided in this Agreement.

11.8          Governing Law; Venue; Submission to Jurisdiction. This Agreement
will be governed by and construed and enforced in accordance with the laws of
the State of California without regard to principles of conflicts of law. Each
Party irrevocably submits to the exclusive jurisdiction and venue of the federal
and state courts located in the State of California, County of Orange, in any
legal suit, action or proceeding arising out of or based upon this Agreement or
and Ancillary Agreement.

11.9          Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Delivery of an executed
signature page to this Agreement by facsimile or other electronic transmission
(including documents in pdf format) will be effective as delivery of a manually
executed counterpart to this Agreement.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and
year first written above.

 

          BUYER:   SELLER: PRO-DEX, INC.   FINELINE MOLDS                    
By: /s/ Harold Hurwitz   By: /s/ Bruce Kent Name:  Harold Hurwitz   Name: Bruce
Kent Title: Chief Executive Officer   Title: President           Address:  
Address:           2361 McGaw Ave.   210 West Arrow Highway, Suite C Irvine, CA
92614   San Dimas, CA 91773 Attn: Harold Hurwitz   Attn: Bruce Kent Email:
hal.hurwitz@pro-dex.com   Email: Facsimile: (866) 851-9339   Facsimile:        
  SHAREHOLDERS:                           /s/ Bruce Kent   Address: 210 W. Arrow
Hwy, C Bruce Kent       San Dimas, CA 91773                     /s/ Jean Kent  
Address: 210 W. Arrow Hwy, C Jean Kent       San Dimas, CA 91773