Exhibit 10.38
 

(cabb logo) [rhf140643001_v1.jpg]
California Association of Business Brokers
Professional Service since 1987
www.cabb.org
         
Asset Purchase Agreement
 

   
INTRODUCTION: This is an offer and an agreement to buy and sell business assets,
dated June 20, 2014.
   
1.
DEFINITIONS: The following definitions and designations shall apply regardless
of number or gender:

       
BUSINESS
     Huber Precision

       
Address
  585 Taylor Way # 5

             
BUYER
  Pro-Dex, Inc. A Calif. Corporation
 
SELLER 
Hans Huber, an individual

     
SIGNING: Signing of this Agreement by both Buyer and Seller.
     
CLOSING: Transfer of ownership of business assets from Seller to Buyer.
     
COP: Change of possession of business assets from Seller to Buyer.
     
DAYS: Calendar days.
     
INVENTORY: Current raw material, work in process, saleable finished goods and
consumable supplies valued at lower of cost or market. Work in process and
finished goods shall be valued at the actual cost of material and direct labor
incurred by Seller.
     
ASSETS: Assets of the Business include, but are not limited to, Inventory,
equipment, trade fixtures, leasehold, leasehold improvements, contract rights,
business records (with Seller retaining a reasonable right of inspection),
software and software licenses, transferable governmental licenses and permits,
other licenses, franchises, goodwill, covenant not to compete, trade secrets,
patents, intellectual property, trade name, customer lists, marketing materials,
telephone and fax numbers, web sites, URL’s, email addresses, sales order
backlog and N/A. Assets being sold shall not include bank accounts, deposits,
cash, accounts receivable (unless specified in paragraph 4), financial records
(but Buyer shall have a right to make copies prior to Closing), or N/A.
   
2.
SALE OF BUSINESS ASSETS: Seller agrees to sell to Buyer and Buyer agrees to buy
from Seller the Assets for the price and on the terms and conditions set forth
below.
   
3.
CONSIDERATION: The Consideration shall be $ 225,000 paid or credited as follows:

           
a. $
      10,000
 
as a deposit by Buyer upon signing this Agreement and included as part of the
down payment, Broker is authorized to: (Broker is not in possession of check
which will be given upon
o hold deposit check uncashed until escrow instructions are signed, or
acceptance)
x deposit check Into escrow trust account or broker trust account upon
acceptance of offer.
                           
b. $
     10,000
 
additional cash deposited in escrow upon signing of escrow Instructions.
           
c. $
   205,000
 
additional cash deposited in escrow 10 days before Closing.
           
d. $
      N/A
 
additional down payment provided from third party financing as described in
paragraph 5.d.
           
e. $
   225,000
 
Total down payment o See attached addendum for details of the down payment.
   
(a + b + c +d)
               
f. $
         N/A
 
assumption of specified liabilities, as detailed in attached addendum. If the
actual balance differs at Closing, the o Seller note, or o down payment, shall
be adjusted accordingly.
                   
g. $
         N/A
 
approximate balance of a non-negotiable Seller note payable in equal monthly
installments, including N/A % per annum interest computed from COP, so as to
fully amortize over N/A months (i.e., $ N/A per month), with payments to begin
one month from COP. Note shall be secured by a security agreement on the Assets,
contain a right to prepay without penalty and be assumable with Seller’s
consent, which shall not be unreasonably withheld. Seller note shall be
subordinated to any third-party financing described in 5.d. If Buyer is a
corporation or other entity, its owners shall personally guarantee this note.
                                       
o See attached addendum for details of the Seller note.
           
h. $
     225,000
 
Total
   
(e + f + g)
   

 

Page 1 of 6

 

 

 
Business
 
   Pro-Dex, Inc.
 
Buyer
 
   Huber Precision
 
Date
6/20/2014

     
4.
INVENTORY AND ACCOUNTS RECEIVABLE:
       
x
The Consideration shall include inventory of $ 23,000 and collectable accounts
receivable of $ N/A. If the actual amount of inventory and accounts receivable
at COP is less than the tolal of these figures, the Consideration shall be
decreased accordingly, and if the actual amount is more than these figures, then
the Consideration shall be increased accordingly.
       
o
At Closing, the Consideration and o cash down payment or o Seller note, shall be
increased by the cost of inventory.
       
Notwithstanding the above, the inventory shall not exceed $ 25,000 (and Buyer
can reject any part of the inventory over that amount) or be less than $ 20,000.
The inventory count shall be made on COP x by Buyer and Seller, or o by an
independent inventory service with the fees to be divided equally between Buyer
and Seller.
     
5.
CONDITIONS: This Agreement is subject to the following conditions:

         
a.
Buyer’s due diligence:
   
i.
Within 5 days of Signing, Buyer shall request in writing any and all information
and appointment(s) for access to inspect the premises as may reasonably be
required to evaluate the Business.
   
ii.
Within 5 days of Buyer’s request, Seller shall provide all requested information
and access.
   
iii.
Within 20 days of Buyer’s receipt, Buyer shall review and approve in writing the
information requested and provided, and the condition of the Assets and
premises.
         
b.
Seller’s due diligence:
   
i.
Within 5 days of Signing, Seller shall request in writing any and all
information as may reasonably be required to evaluate Buyer’s qualifications to
purchase and operate the Business.
   
ii.
Within 5 days of Seller’s request, Buyer shall provide all requested
information.
   
iii.
Within 20 days of Seller’s receipt, Seller shall review and approve in writing
information requested and provided.
  Should either party not approve in writing, as provided in 5.a.iii or 5.b.iii,
as applicable, within 20 days from Signing, the other party may terminate this
Agreement with written notice and failure to cure within 48 hours of such
notice, and the Buyer’s total deposit will be returned less any escrow costs.  
       
c.
Lease contingency: Within 15 days from Signing or upon COP if sooner.
   
x
Written consent of the landlord to assignment of the existing premises lease or
   
o
The making of a new lease between the landlord and Buyer which is acceptable to
Buyer.
         
d.
Financing contingency: N/A
   
i.
Buyer submitting complete loan application(s) to N/A lenders within N/A days
from Signing.
   
ii.
Buyer receiving a commitment letter for third party financing in the amount of
$ N/A within N/A days from Signing.
   
iii.
Buyer receiving funding in the amount indicated in 5.d.ii within N/A days after
Signing.
   
Buyer shall use its best efforts to obtain said financing and Seller shall fully
and promptly comply with lender requests for information and access to the
Business.
         
e.
Licenses: Closing is contingent upon the transfer or issuance of any necessary
permits and licenses.
       
f.
Other contingencies: Seller’s delivery to Buyer of all third party consents and
approvals: truth and accuracy of Seller representations and warranties at
Closing. An assignment & assumption agreement & Management Consulting Agreement
with Hans Huber in form in substance reasonably acceptable to Buyer.
 
If Buyer is unable to satisfy conditions 5.c, 5.d, 5.e or 5.f within the
specified time limits, either party may terminate this Agreement by giving
written notice to the other party or his or her Broker, and the Buyer’s deposit
will be returned less any escrow costs.
       
6.
ESCROW: The Consideration, closing costs and closing adjustments shall be paid
through an escrow to be established with Business and Escrow Service Center, the
escrow holder. Upon removal of conditions 5.a, 5.b and 5.c, Buyer and Seller
agree to sign separate escrow instructions that define the duties of the parties
and the escrow holder. All parties shall cooperate with the escrow holder in
completing any documents and performing any acts necessary to complete the
transfer of the Business Assets, including compliance with the Bulk Sale law if
applicable. The Broker(s) is/are a party to the escrow as to the payment of any
broker’s fees and an irrevocable assignee(s) of the sale proceeds to the extent
of such fees.

 

Page 2 of 6

 

 

               
Business
   Huber Precision
 
Buyer 
Pro-Dex, Inc.
 
Date 
6/20/2014

 

       
7.
CLOSING: The estimated date for Closing is July 31, 2014. Buyer and Seller shall
make their best efforts to complete Closing on or before that date. COP shall
occur at Closing.
   
8.
PURCHASE PRICE ALLOCATION: Before Closing, Buyer and Seller shall endeavor to
allocate the purchase price among the Assets purchased and submit the allocation
to escrow.
   
9.
SELLER AND BUYER DISCLOSURE STATEMENTS:
         
a.
o
Buyer has received and read the completed Seller’s Disclosure Statement, or
   
x
Seller shall provide to Buyer the completed Seller’s Disclosure Statement within
3 days from Signing.
         
b.
o
Seller has received and read the completed Buyer’s Disclosure Statement, or
   
x
Buyer shall provide to Seller the completed Buyer’s Disclosure Statement within
3 days from Signing.
         
The parties warrant the accuracy and completeness of their respective Disclosure
Statements. The parties warrant that these representations are true, shall be
true as of Closing and shall survive Closing.
     
10.
SELLER REPRESENTATIONS & WARRANTIES: Except as noted in paragraph 10.j, Seller
and its owners acknowledge and represent as follows:
       
a.
Seller is operating the Business in compliance with all applicable laws and
environmental regulations. This compliance will not be violated by this sale and
the Business will pass all applicable inspections upon COP. If any inspection by
a government agency is required to complete Closing, Seller shall make whatever
remedies are required to satisfy said inspection, and if remedies are not
complete and paid for by Closing, then sufficient monies shall be held in Escrow
to pay for the completion of such remedies.
       
b.
There are no claims, legal proceedings or investigations pending which would
affect the Business or Assets being sold or do any facts or circumstances exist
that could give rise to any such claim, legal proceedings or investigation.
       
c.
The Business is in compliance with all material contracts relevant to the
ownership and operation of the Business. All such contracts have been furnished
to Buyer and are complete and in effect, and there are no undisclosed
amendments.
       
d.
All financial information and statements furnished or to be furnished to Buyer
are complete, accurate, prepared in a manner consistent with prior statements
and fairly present the financial condition of the Business as of the dates
stated on them. Since the date of the last financial statements furnished, there
have been no material adverse changes in the aggregate in the assets,
liabilities, revenues, expenses or any other items shown on such statements.
       
e.
All accounts receivable of the Business, if included in the sale, arose from the
normal course of business, none have been previously assigned and they are fully
collectable.
       
f.
All Inventory of the Business is marketable and in good condition.
       
g.
All Assets currently used in the Business are owned by Seller free from liens
and encumbrances, and they are in good working condition, except as otherwise
noted in 10.j.
       
h.
(see “j.” below)
       
i.
There are no liabilities of the Business for which Buyer will be liable, except
as stated herein or in a further written agreement of the parties. Seller will
honor and discharge when due, all excluded liabilities.
       
j.
Seller’s relationship with its employees is good. There are no facts or
circumstances that could give rise to a claim by any current or former employee
of Seller against seller, the Business or the Assets. Seller understands that,
except as may be set forth in a separate written agreement, Buyer does not
intend to hire any of the employees of the business.
       
Seller warrants that these representations are true, shall be true as of Closing
and shall survive Closing. Prompt notice will be given to Buyer of any event
which materially alters the accuracy of the above Seller Representations &
Warranties or the Seller’s Disclosure Statement. Seller shall indemnity and hold
Buyer and Broker harmless from any damage resulting from their falsity.
     
11.
CONTINUITY: Pending Closing, Seller shall continue to operate the Business in
the usual way, protect and preserve its Assets and goodwill, maintain the
equipment in good working order, maintain good relations with suppliers,
customers and employees and allow Buyer to make reasonable inspections.
   
12.
PRORATIONS, CREDITS, TAXES and EXPENSES:
       
a.
Except as otherwise noted in this Agreement, each party shall pay when due all
operating costs and taxes incurred while that party is in possession and hold
the other party harmless therefrom.
       
b.
Seller shall pay all wages, salaries and benefits, including without limitation,
vacation, sick leave and other paid time off, payable to its employees prior,
and after Closing. Except as may be set forth in a separate written agreement,
Buyer does not intend to hire any employees of the Business.
       
c.
Prorations: Utilities, personal property taxes, other taxes, insurances, rents,
and other prepaid and accrued expenses of the Business transferred to Buyer
shall be prorated to COP.
       
d.
Credits: Buyer shall credit Seller at Closing for lease deposits and other
deposits transferred to Buyer, and Seller shall credit Buyer at Closing for
customer deposits, unredeemed gift certificates and warranty claims assumed by
Buyer.

 

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Business
   Huber Precision
 
Buyer 
Pro-Dex, Inc.
 
Date 
6/20/2014

 

       
e.
Buyer shall pay any transfer or issue fees for permits and licenses required.
 
f.
Franchise transfer fee, if applicable, shall be paid by ____________, and
training fee, if applicable, by ____________.
 
g.
Each party shall pay its own accountants, attorneys and other advisors.
 
h.
Buyer shall pay at Closing any sales taxes assessed on the sale of the Business
Assets.
 
i.
Seller shall obtain and pay for any smog certificates needed and Buyer shall pay
DMV fees assessed on registered vehicles included in the sale.
 
j.
Buyer and Seller shall pay equally all escrow fees and costs and other transfer
costs except ____________________________________
_________________________________________________________________
_______________________________________________.
 
k.
Seller shall be responsible for any warranty obligations arising from products
manufactured or delivered prior to the Closing, which includes, without
limitation, to the extent such warranty  
 
l.
After COP, Buyer shall remit to Seller upon receipt any refund of overpayments
of worker’s compensation premiums, taxes, trade payables or the like which
relate to the period prior to COP.
 
m.
Seller shall defend and indemnify Buyer from any liability to the California
Employment Development Department, the California Franchise Tax Board or the
California State Board of Equalization arising from the operation of the
Business until COP. Prior to the receipt by the escrow holder of releases of
transferee liability from these agencies, the Buyer shall be protected from the
possible imposition of transferee liability by a reserve set by the taxing
agencies or approved by the Buyer and retained in escrow until such releases are
obtained.
     
13.
MATERIAL CONTRACTS: Seller shall transfer to Buyer the following contracts used
in the operation of the Business, and the Buyer shall assume obligation for
them:

           
o
Advertising contracts, including yellow pages
o
Vehicle agreements
 
o
Alarm system agreements
o
Web site agreements
 
o
Copier agreements
x
Real Property Lease
 
o
Telephone agreements
x
All contracts lists on Exhibit , which Exhibit may be modified by Buyer
 
o
Other equipment leases
o
(by either adding or deleting contracts) up to two days prior to Closing.
 
o
Other equipment service agreements
o
   
o
Software maintenance agreements
o
   
(“k” cont’d) obligation is traceable to work in progress prior to the Closing.

           
14.
BROKER: Buyer acknowledges that Broker has furnished to Buyer financial and
other information obtained from Seller and other sources, the accuracy and
completeness of which have not been verified by Broker, and that Buyer without
limiting the representations, warranties and obligations of Seller under this
Agreement, Buyer is relying solely on his own inspection of the Business, its
Assets, financial statements, business records, contracts, any assumed
liabilities, operational history, future profitability and the representations
by the Seller, and not on any representations of the Broker. Seller acknowledges
that he is relying solely on his own investigation of the Buyer’s
creditworthiness and ability to complete this transaction and to successfully
operate the Business, and not on any representations of the Broker. Should any
such representations of Seller or Buyer be untrue, Buyer and Seller agree to
look solely to each other for relief and shall release, hold harmless, indemnify
and defend the Broker from any such claims. Buyer and Seller acknowledge and
agree that Broker may receive a referral fee, from an institutional lender.
   
15.
AGENCY RELATIONSHIP CONFIRMATION: The following agency relationships are hereby
confirmed for this transaction, and supersede any prior agency relationships:
             
BUYER’S BROKER  
Business Team
 
SELLER’S BROKER   
Business Team
 
Agent for o Buyer only or x both Buyer and Seller
 
Agent for o Seller only or x both Buyer and Seller

 
Phone 
408-385-0402
 
Fax 
408-246-2219
 
Phone 
408-385-0515
 
Fax 
408-246-2219
 
Email
     farley@business-team.com
 
Email
hiren@business-team.com

 
Broker’s Agent
Farley Gouner DRE # 01271117
 
Broker’s Agent
Hiren Dave 01381381

 

   
16.
TRAINING: Seller and N/A, individually, shall train Buyer in the operation of
the Business for a period of 2 consecutive weeks from COP, for 40 hours per
week, without additional cost to Buyer.
   
17.
COVENANT NOT TO COMPETE: Seller and N/A, individually, shall not directly or
indirectly carry on a similar business x within a radius of 100 miles of the
present location of the Business, or x within five years, attempt to hire any
existing employees of the Business, solicit any customers of the Business or
assist anyone else except the Buyer to do so within these limits, or have any
interest, directly or indirectly, in such business, except as an employee of the
Buyer, for a period of five consecutive years from COP. This covenant shall
become an asset of the Business and may be transferred as part of any future
transfer of the Business.

 

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Business
  Huber Precision, Inc.
 
Buyer
  Pro-Dex, Inc.
 
Date
  6/20/2014

18.
 
MEDIATION OF DISPUTES: Except as reasonably necessary for a party to seek
equitable relief from a Court, such as an injunction or other expedited relief
(writ of attachment, specific performance, appointment of a receiver or similar
remedies), as a condition precedent to initiation of any legal action or
arbitration proceeding by either party, Buyer and Seller shall mediate any
dispute or claim between them arising out of this Agreement or any resulting
relationship or transaction between such parties. Either party may demand
mediation by notice to the other party, which notice shall state the nature of
the dispute to be resolved. From the date such notice is given, the parties
shall agree upon a mediator not later than the tenth business day thereafter. If
the parties cannot agree upon a mediator, the matter shall be submitted to the
JAMS for appointment of a mediator and to conduct the mediation. Mediation shall
occur in the county in which the Seller’s Broker’s office is located. The
parties shall have 45 days from the selection of the mediator to commence the
first mediation session. The parties shall share all mediation costs equally.
The parties agree that any mediated settlement agreement may be converted to an
arbitration award or judgment (or both) and enforced according to the governing
rules of civil procedure. Should either party fail to participate timely and in
good faith in the selection process for the mediator, or in the mediation
process, such party will be deemed to have refused mediation, and that party
shall not be entitled to attorney fees that might be otherwise available to it
in any subsequent court action or arbitration.
     
19.
 
BROKER FEES and LIQUIDATED DAMAGES: The Broker(s) identified In paragraph 15
has/have acted as the only Broker(s) for this sale and earned a broker fee.
Seller agrees to pay Broker Fee(s) for services as follows:
   
o  _________ percent of the Consideration to
______________________________________________, Broker, and
   
o  _________ percent of the Consideration to
______________________________________________, Broker, or
   
x as per representation agreement between Seller and Seller’s Broker.
   
Broker Fees shall be payable (a) at Closing, or (b) if Closing is prevented by
default of Seller, upon Seller’s default, with the deposit returned to Buyer. If
Buyer fails to complete this purchase because of Buyer’s default, Buyer shall
relinquish and Seller shall retain, as liquidated damages, the entire sum of
deposits paid under 3.a and 3.b, payable first to the Broker Fees and any
remaining amount released to Seller. Buyer and Seller agree that this amount is
a reasonable sum given that it is impractical or extremely difficult to
establish the amount of damages that would actually be suffered by Seller in the
event Buyer were to default under this Agreement. In any action, proceeding or
arbitration relating to the payment of such a fee, the prevailing party shall be
entitled to reasonable attorney’s fees and costs.
     
20.
 
SUMMARY: The entire agreement of the parties relating to the sale of the
Business is set forth in this Agreement and can only be modified in writing
signed by the parties. There are no other representations, agreements,
arrangements or understandings, either oral or written, between or among the
parties hereto relating to the subject matter of this Agreement that are not
fully expressed herein. This Agreement shall bind and benefit the parties and
their legal successors and shall supersede any prior written or oral agreements.
Buyer may not assign any rights under this Agreement without prior consent of
Seller, except to an entity owned and controlled by the Buyer. Any unauthorized
assignment will be void and unenforceable. Any assignment shall not relive Buyer
of Buyer’s obligations pursuant to this Agreement. This Agreement may be signed
in counterparts and faxed and electronic signatures may be considered as
originals. Captions in this Agreement are for convenience only and shall not be
considered in construing its meaning. This Agreement shall be governed by the
laws of the State of California. In any action, proceeding or arbitration
between Buyer and Seller arising out of this Agreement, the prevailing party
shall be entitled to reasonable attorney’s fees and costs, except as provided in
paragraph 18. Venue shall be the county in which the Seller’s Broker’s office is
located.
     
21.
 
NOTICES: All notices or approvals required or permitted by this Agreement shall
be in writing and shall be addressed to the parties, at the respective addresses
set forth below. Notice shall be sufficiently given for all purposes when: (a)
personally delivered to the recipient; (b) delivered by an overnight delivery
service, charges prepaid or charged to the sender’s account; or (c) delivered by
verifiable electronic transmission. Any party or Broker may change its address
by giving written notice of the change to the other parties and Brokers in
accordance with the provisions of this paragraph.
     
22.
 
ACKNOWLEDGMENT AND PERSONAL GUARANTEE: By signing below, Buyer and Seller each
acknowledge that they have carefully read and fully understand this Agreement
and have received a copy of it. The undersigned warrant that their signatures
are legally sufficient to bind the Buyer and Seller.
     
23.
 
ACCEPTANCE: This offer shall expire unless it is accepted in writing by Seller
and that acceptance is delivered to Buyer or Buyer’s agent by 6:00 o a.m. x p.m.
on Tuesday June 24, 2014. Any later acceptance shall constitute a counteroffer.
Any offer can be withdrawn or revoked before acceptance is delivered to Buyer or
Buyer’s agent. The undersigned Seller accepts and agrees to sell the Business on
the above terms and conditions.

 

Page 5 of 6

 

 

 
Business
  Huber Precision, Inc.
 
Buyer
  Pro-Dex, Inc.
 
Date
  6/20/2014

 
THE CALIFORNIA ASSOCIATION OF BUSINESS BROKERS MAKES NO REPRESENTATION AS TO THE
LEGAL VALIDITY OR ADEQUACY OF ANY PROVISION OF THIS FORM IN ANY SPECIFIC
TRANSACTION. A BUSINESS BROKER IS NOT LICENSED OR QUALIFIED TO PROVIDE LEGAL,
ACCOUNTING OR TAX ADVICE. SELLER AND BUYER ARE ADVISED TO CONSULT WITH
INDEPENDENT ATTORNEYS, ACCOUNTANTS AND OTHER COMPETENT PROFESSIONALS WHEN
ENTERING INTO AND COMPLETING THE TRANSACTION.

                           
x Subject to attached addendum
 
o Subject to attached counteroffer
     
BUYER
 
SELLER
      (signature) [rhf140643002_v1.jpg]  
Hans Huber, an individual dba Huber Precision
Print Name
 
Print Name
(signature) [rhf140643003_v1.jpg]  
  6/20/14
  (signature) [rhf140643004_v1.jpg]  
  6/23/14
Signature
 
Date
 
Signature
 
Date
     
Print Name
 
Print Name
             
Signature
 
Date
 
Signature
 
Date
         
Pro-Dex, Inc.
   
Corporation (or other entity)
 
Corporation (or other entity)
                     
by:
         
by:
       
Print Name and Title
 
Date
 
Print Name and Title
 
Date
             
Address
  2361 McGaw Avenue
 
Address
  585 Taylor Way # 5
                 
City, State Zip
   Irvine, CA 92614
 
City, State Zip
   San Carlos, CA 94070
(signature) [rhf140643005_v1.jpg]
DRE# 01271117
 
  6/23/14
  (signature) [rhf140643006_v1.jpg]  
  6/23/14
Signature of Broker’s Agent (for Buyer)
 
Date
 
Signature of Broker’s Agent (for Seller)
 
Date
           
DRE# 01381381
   

 
LIST OF ATTACHMENTS:
 
o
Equipment List
 
o
Seller’s Disclosure Statement
 
o
Buyer’s Disclosure Statement
 
o
Agency Disclosure
 
x
Management Consulting Agreement
 
o
   
o
   
o
   

 

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