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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
April 1, 1999
Date of Report (Date of earliest event reported)
PH GROUP INC.
(Exact name of Registrant as specified in its charter)
Ohio 0-8115 31-0737351
(State or other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2365 Scioto Harper Drive, Columbus, OH 43204
(Address of Principal Executive Offices) (Zip Code)
(614) 279-8877
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Effective April 1, 1999 (the "Closing Date"), the Registrant, PH
Group Inc. ("PHHH"), purchased substantially all of the assets of Vertech
Systems, LLC, a Delaware limited liability company with operations based at 6125
West Sam Houston Parkway, North, Suite 406, Houston, Texas ("Seller"), pursuant
to an Amended and Restated Asset Purchase Agreement between the Seller and PHHH
dated April 1, 1999 (the "Agreement"). Prior to the Closing Date, the Seller was
engaged in the design, manufacture and sale of small insert injection molding
machines (the "Business").
PHHH purchased, among other things, all of the Seller's licenses and
permits, deposits, inventory, equipment, accounts receivable and purchase orders
including all work in progress. Under the Agreement, Seller licensed to PHHH
certain intangible assets relating to the Business including all of Seller's
trademarks, trade names, trade secrets, corporate names, designs, patents and
other intellectual property related to the Business. Upon payment in full of the
promissory notes described below, title to the intangible assets transfers to
PHHH.
As consideration for the sale and purchase of the assets and the
license of the intangible assets, PHHH:
(i) delivered a promissory note in the principal amount
of $650,000 payable over approximately four years,
(ii) assumed certain contractual obligations of the Seller
including certain trade payables not exceeding
$100,000 in the aggregate,
(iii) delivered a promissory note in the principal amount
of $350,000 payable over two years,
(iv) paid the Seller $25,000 at closing in addition to the
$25,000 already paid the Seller,
(v) issued 50,000 shares of common stock of PHHH to the
members of the Seller,
(vi) agreed under Section 3.2 of the Agreement to make
certain contingent payments to the Seller in the
future based on a certain percentage of the gross
revenue (less deductions) derived from the sale of
Vertech machines (as defined in the Agreement), and
(vii) agreed under Section 3.3 of the Agreement to make
certain royalty payments to the Seller in the future
based on a certain percentage of the gross revenue
(less deductions) derived from the sale of Vertech
machines (as defined in the Agreement).
The cash paid at or prior to closing by PHHH was derived from cash on
hand.
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(b) Certain of the assets purchased by PHHH constitute equipment and
other physical property. Such assets were used by Seller in the operation of the
Business. Any assets not needed by PHHH in the continued operation of the
Business will be sold.
The Agreement between Seller and PHHH is attached hereto as Exhibit 2.1
and is incorporated herein by reference. The foregoing description of the
acquisition is qualified in its entirety by reference to the Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. The required
financial statements are not included in this initial report and will be filed
not later than June 15, 1999.
(b) Pro Forma Financial Information. The required pro forma
financial information is not included in this initial report and will be filed
not later than June 15, 1999.
(c) Exhibits.
The following exhibits are filed as part of this Report:
Exhibit No. Description
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2.1 Amended and Restated Asset Purchase
Agreement, dated as of April 1,
1999, by and between PH Group Inc.
and Vertech Systems, LLC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PH GROUP INC.
April 13, 1999 By: /s/ Charles T. Sherman
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Name: Charles T. Sherman
Title: President
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Amended and Restated Asset Purchase Agreement, dated
as of April 1, 1999, by and between PH Group Inc. and
Vertech Systems, LLC
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EXHIBIT 2.1
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement") is
dated as of the 1st day of April, 1999 by and between PH GROUP INC., an Ohio
corporation (the "Buyer"), and VERTECH SYSTEMS, LLC, a Delaware limited
liability company (the "Seller") and amends and restates in its entirety that
certain Asset Purchase Agreement between the Buyer and the Seller dated March 5,
1999.
WHEREAS, the Seller is engaged in the business (the "Business") of
manufacturing and marketing "Vertech Machines", which are insert injection
molding machines containing a Veer system and/or using Hydrascrew technology or
proprietary components from the Seller's bills of material; and
WHEREAS, the Seller desires to sell certain of its assets, subject to
certain obligations, to the Buyer in exchange for the consideration provided for
herein, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the Buyer and the Seller agree as follows:
1. SALE OF ASSETS.
1.1. Sold Acquired Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing referred to in Section 4
hereof, the Seller shall sell, assign, transfer and deliver to the Buyer, and
the Buyer shall acquire and take assignment and delivery of all of the following
assets (other than the Excluded Assets specified in Section 1.4) of the Seller
(all of which assets are hereinafter referred to collectively as the "Sold
Acquired Assets"), including without limitation the following assets:
(a) All of the Seller's transferable rights
under the licenses, permits and approvals, both public and private, described on
Schedule 1.1(a) hereto (the "Permits");
(b) All payments, deposits and prepaid expenses
of the Seller, including those listed on Schedule 1.1(b); and
(c) All claims, causes of action, choses in
action, rights of recovery, insurance proceeds and rights of set-off of whatever
kind or description against any Person arising out of or relating to the Sold
Acquired Assets.
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1.2. Secured Acquired Assets. Subject to the terms and
conditions set forth in this Agreement, at the Closing, the Seller shall sell,
assign, transfer and deliver to the Buyer, and the Buyer shall acquire and take
assignment and delivery of, all of the following assets (other than the Excluded
Assets specified in Section 1.4) of the Seller (all of which assets are
hereinafter referred to collectively as the "Secured Acquired Assets"),
including without limitation the following assets:
(a) All of the Seller's inventories, including
raw materials, parts, shop supplies, work in process and finished goods (the
"Inventories");
(b) All of the Seller's rights under the
quotations or bids, purchase orders, contracts and agreements described on
Schedule 1.2(b) hereto, for the purchase or sale of utilities, goods, materials
and services, and under all other contracts, commitments and agreements of the
Seller entered into in the ordinary course of business prior to the Closing
consistent with the Seller's obligations under Section 7 hereof (the quotations
or bids, purchase orders, contracts, commitments and agreements referred to in
this paragraph (b) being referred to collectively as the "Other Contracts");
(c) All of the Seller's trade accounts
receivable, notes receivable and miscellaneous receivables (the "Accounts
Receivable");
(d) Any and all fixtures (which are not to
become the property of any landlord under any existing lease), machinery,
installations, equipment, furniture, tools, computers and related equipment,
peripherals, software and programs, spare parts, supplies, materials, molds,
dies and other personal property used in conjunction with the Seller's
operations, including without limitation, those items described on Schedule
1.2(d) hereto, with such additions thereto and deletions therefrom as may
hereafter arise in the ordinary course of business prior to the Closing
consistent with the Seller's obligations under Section 7 hereof (the
"Equipment");
(e) All of the Seller's accounting books,
records and ledgers, information systems and all other documents and records
relating to the Sold Acquired Assets, the Secured Assets and the Intangibles
(collectively the "Acquired Assets") and the gross profit history of the Vertech
Machines; and
(f) All claims, causes of action, choses in
action, rights of recovery, insurance proceeds and rights of set-off of whatever
kind or description against any Person arising out of or relating to the Secured
Acquired Assets.
1.3. Licensed Assets. Subject to the terms and condition
set forth in this Agreement, at the Closing, the Seller shall enter into the
license pursuant to the terms set forth in Section 10.5 hereof, with respect to
all of the Seller's trademarks, trade names, trade secrets, corporate names
(including, without limitation, the name "Vertech" and all variations thereof),
copyrights, designs, patents, licenses (as licensee or licensor), other
agreements and applications
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with respect to the foregoing, production records, technical information,
manufacturing know-how, inventions, schematics, customer records, quoting
information, bills of material, routers, engineering drawings, blueprints,
product development information, processes, trade secrets, customer lists,
telephone numbers and other intangible assets, including, without limitation,
those described on Schedule 1.3 hereto (the "Intangibles").
1.4. Excluded Assets. Notwithstanding the foregoing, the
Seller is not selling to the Buyer, and the Buyer is not acquiring, pursuant to
this Agreement, and the term "Acquired Assets" shall not include, any of the
following assets (the "Excluded Assets"):
(a) The consideration received by the Seller
pursuant to this Agreement;
(b) The rights of the Seller under this
Agreement;
(c) Those agreements of Seller not included in
the Accounts Receivable or the Other Contracts; and
(d) The assets described on Schedule 1.4(d)
hereto.
2. ASSUMPTION OF CERTAIN OBLIGATIONS. At the Closing, the Buyer shall
assume, and agree to pay, perform, fulfill and discharge, only the following
liabilities and obligations of the Seller which arise on and relate to periods,
circumstances and events after the Closing Date and the incurrence or existence
of which does not breach any representation or warranty of the Seller contained
in this Agreement (the "Assumed Obligations"):
2.1. The Other Contracts;
2.2. Those accounts payable of the Seller set forth on
Schedule 2.2 (which Schedule 2.2 shall be updated within thirty (30) days after
Closing to include any accounts payable of which Seller receives notice by such
post-Closing date), up to an aggregate amount of $100,000 (the "Assumed
Payables");
2.3. The obligation to repair or replace those Vertech
Machines sold by the Seller prior to the Closing Date listed on Schedule 2.3 in
accordance with Seller's standard warranty in effect at the time of sale of such
machine (the "Seller's Warranty Expense"); and
2.4. Buyer shall pay the rent and utilities payable by the
Seller pursuant to the terms of its existing lease for the property at 6125 W.
Sam Houston Parkway, North, Suite 406, Houston, Texas (the "Property") that
accrue during and relate to the period from the day of the Closing until 30 days
following the date on which the Buyer vacates the Property (the "Vacation
Date"), which date shall be no sooner than 60 days after the Buyer notifies the
Seller of its intent to vacate the Property (the "Rental Term"). The Buyer shall
also pay the payments due from the Seller that accrue during and relate to the
period of the Rental Term for the alarm monitoring
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system to ADP Security Systems servicing the Property. The rent, utilities
charges, and the ADP Security Systems alarm monitoring charges are referred to
herein as the "Lease Expenses." Except as may be provided in the Assumed
Obligations, the Buyer's obligations under this Section 2.4 relate only to the
Lease Expenses incurred during the Rental Term. The Buyer is not obligated to
pay any Lease Expenses incurred in, or relating to, a time period prior to the
date of Closing or after the Vacation Date. The Buyer's payment of the Lease
Expenses does not serve as evidence of the assignment of the Seller's
obligations under the lease to the Buyer. The Buyer hereby disclaims any
obligations under the lease other than the Lease Expenses as set forth in this
Section 2.4. The Seller hereby represents to the Buyer that Seller has the
unqualified right to sublet the Property to Buyer without the landlord's
consent. The Seller shall remain liable to perform all of the other terms and
conditions of the lease during the Rental Term. Any funds received by Seller in
connection with the Property after the Vacation Date shall belong to the Seller
unless the funds represent or constitute Acquired Assets in which case such
funds shall belong to the Buyer and Seller shall immediately turn over such
funds to Buyer.
2.5. All other liabilities and obligations of the Seller which
are not being assumed by the Buyer are referred to herein as the "Excluded
Liabilities".
3. PURCHASE PRICE.
3.1. Delivery of Purchase Price. At the Closing, the Seller
shall sell and deliver the Sold Acquired Assets and the Secured Acquired Assets
and License to the Buyer the Intangibles in exchange for (a) the assumption by
the Buyer of the Assumed Obligations, (b) $650,000 pursuant to the terms of a
promissory note in the form attached hereto as Exhibit A (the "Secured Acquired
Assets Promissory Note") which payments under the Secured Acquired Assets
Promissory Note shall be due and payable as set forth in Section 3.1.1 (the
"Secured Acquired Assets Promissory Note Payments"), (c) $400,000, of which
$25,000 has already been received by the Seller, and $25,000 shall be paid at
the Closing by wire transfer, $150,000 shall be paid by the Buyer to the Seller
on or prior to October 1, 1999, with the balance being paid in two equal
consecutive annual payments on the first and second anniversaries of the date of
this Agreement (the "Deferred Payment") pursuant to the terms of a promissory
note in the form attached hereto as Exhibit B (the "Deferred Payment Note"), (d)
50,000 shares of the Buyer's Common Shares, without par value (the "Shares"),
(e) the agreement of the Buyer to make any contingent payment that becomes due
under Section 3.2 (the "Contingent Payment"), and (f) the agreement of the Buyer
to make the royalty payments set forth in Section 3.3 and pursuant to the
license terms set forth in Section 10.5, (the "Royalty Payment"), and together
with the assumption by the Buyer of the Assumed Obligations, the Secured
Acquired Assets Promissory Note Payments, the Deferred Payment, the Shares, and
the Contingent Payment, the "Purchase Price"). The Shares shall be issued to the
Seller or the members of the Seller on the Closing Date and registered in the
Seller's name or the name of the members of the Seller in the records of the
Buyer subject to the provisions of Section 10.8. The Purchase Price shall be
allocated among the Acquired Assets in the manner set forth on Schedule 3.1
hereto.
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3.1.1. The term of the Secured Acquired
Assets Promissory Note (the "Secured Acquired Assets Promissory Note Term")
shall be for a term commencing on the Closing Date and ending on the last day of
the calendar month following the payment by the Buyer to the Seller (or Wells
Fargo Bank (Texas) N.A. (the "Bank"), as provided below) of an aggregate of
$650,000 (the "Principal") in Principal Payments (as hereinafter defined) plus
interest thereon pursuant to the terms of Secured Acquired Assets Promissory
Note, unless prepaid in accordance with the provisions of such note. Upon
execution of the Secured Acquired Assets Promissory Note, the Buyer shall, at
its sole cost and expense, cause each item of Secured Acquired Assets to be
packaged and removed from the Seller's premises prior to or on the Vacation
Date. The Secured Acquired Assets Promissory Note shall be secured by a security
interest in the Equipment in favor of the Seller granted pursuant to a security
agreement in form and substance satisfactory to Buyer and Seller in their
reasonable discretion (the "Security Agreement").
(i) The terms of the Secured Acquired Assets
Promissory Note shall provide for payments in an amount per month calculated as
of the first day of each month in the Secured Acquired Assets Promissory Note
Term equal to the sum of (a) the principal payments owed by the Seller for that
month under each loan agreement set forth on Schedule 3.1.1 (the "Loan
Agreements") that the Seller has in effect with Bank (collectively, the
"Principal Payments"), plus (b) an amount in interest on the Principal, less the
amount of Principal Payments made prior to the calculation of the monthly note
payment, equal to the interest rates charged the Seller on the applicable amount
of Seller's obligations under each Loan Agreement that equal portions of the
Principal, as set forth on Schedule 3.1.1, plus 150 basis points.
(ii) In the event the Buyer shall be in
default in the payment of any sum of money to be paid under the Secured Acquired
Assets Promissory Note, for a period of five days after receipt of written
notice from the Seller of such default, the Buyer shall pay, as a penalty, to
the extent permitted by law, interest on the unpaid payment from its due date to
the date of payment at the rate of 100 basis points per month, or, if less, the
maximum rate permitted by applicable law.
(iii) All payments under the Secured
Acquired Assets Promissory Note shall be due and payable on a monthly basis on
the 15th day of each calendar month during the Secured Acquired Assets
Promissory Note Term commencing on the 15th day of the first month following the
Closing Date.
(iv) If Seller fails to make payments to
Bank as required under the terms of the Loan Agreements, then Buyer shall make
all further payments due under the Secured Acquired Assets Promissory Note
directly to Bank and Seller shall forfeit its rights to receive payments under
the Secured Acquired Assets Promissory Note, as long as Buyer makes such
payments to Bank.
(v) At any time, the Buyer may elect to
prepay the remaining amounts due under the Secured Acquired Assets Promissory
Note directly to the Bank. Upon
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prepayment, Buyer shall provide Seller and Bank with instructions as to the Loan
Agreement where the prepayment should be applied (the "Prepayment
Instructions").
(vi) The Seller shall take all action
reasonably required to release any Encumbrances of Seller or Bank in each
Secured Acquired Asset upon payment or prepayment by the Buyer of the amount due
to Bank for such Secured Acquired Asset .
(vii) If there is any default in the payment
of or providing for any such amounts that is not cured within 10 days after
receipt of written notice of such default by the Buyer, then Seller may exercise
all rights and remedies available to it herein and under the Security Agreement,
as defined below.
(viii) During the term of the Secured
Acquired Assets Promissory Note, Seller shall direct Bank, and comply with all
procedures required by Bank, to allow an employee designated by Buyer to
verbally or in writing confirm with the Bank whether or not payments have been
or are being made as required under the Loan Documents and to inquire as to and
obtain other pertinent information with respect to Seller's obligations under
the Loan Documents including account status, principal balances, payment
application, loan pay offs, interest rates and status of liens.
3.2. Contingent Payment. The Buyer shall pay to the Seller for
each calendar year (except that the first year shall run from the Closing Date
until December 31, 1999) in the period from the Closing Date until December 31,
2004 (the "EBIT Period") a Contingent Payment equal to five percent of "EBIT".
"EBIT" shall mean for each year in the EBIT Period, the gross revenues (the
"Gross Revenues") received in such calendar year from the sale of Vertech
Machines, and associated injection molds and associated tooling (the "Products")
shipped during such calendar year minus the following: (a) the production costs
(the "Production Costs") incurred or paid by the Buyer for the Products
manufactured or in the process of being manufactured during such calendar year;
(b) an allocation for overhead (the "Overhead Allocation") which shall be a
percentage of Gross Revenues equal to the percentage that the Gross Revenues for
that calendar year bears to the total gross revenues of the Buyer for that
calendar year, (c) the travel expenses and commissions paid by the Buyer during
such calendar year to Michael Noggle in connection with proposed sales of
Products (the "Noggle Expenses"), (d) the fees and expenses incurred at any time
by the Buyer with respect to this transaction (the "Transaction Costs"),
including without limitation, the fees and expenses of lawyers and accountants,
travel costs and the expenses paid by the Buyer under Section 2.2, amortized
equally over the EBIT Period, (e) any royalties paid pursuant to Section 3.3
hereof by the Buyer to the Seller or its nominee or successors during such
calendar year, (f) the book value, as of the Closing Date, of any inventory
acquired by the Buyer from the Seller determined during that calendar year by
the Buyer in the exercise of its reasonable business judgment to be defective or
unusable inventory (the "Inventory Deduction"), (g) to the extent it exceeds a
total of $1,000, Seller's Warranty Expense paid or incurred during such calendar
year, and (h) any expenses incurred by or on behalf of Buyer to collect revenue
from the sale of the Products.
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3.3. Royalty Payments. Pursuant to the license terms in
Section 10.5, the Buyer shall pay to the Seller a royalty (the "Royalty") for
each Product sold by the Buyer equal to five percent of the Gross Revenues for
the period commencing on March 5, 1999 and ending on December 31, 2003, and two
and one-half percent of the Gross Revenues during the period starting on January
1, 2004 and ending on December 31, 2008. No Royalties shall be due for any
period after December 31, 2008. A Royalty shall otherwise only be due and
payable for Product sales between March 5, 1999 and the Closing only with
respect to those Product sales set forth on Schedule 3.3.
3.4. Manner of Payments, Reports. The Contingent Payment and
Royalty for each calendar year in the EBIT Period shall be paid in four equal
installments, with the first installment due no later than the earlier of the
10th day after the release by the Buyer of its audited annual financial
statements for such calendar year or June 1 of that year, and the balance of
such payments due no later than June 1, September 1 and December 1 of that year.
Simultaneously with the delivery of the first installment, the Buyer shall
deliver to the Seller, at the Buyer's sole cost and expense, a statement which
shall set forth with respect to the prior calendar year, in all material
respects, the number and description of the Products sold which were included in
Gross Revenues, the Gross Revenues, the Production Costs, the Overhead
Allocation, the Noggle Expenses, the Transaction Costs, Royalties and Inventory
Deductions. Such statement shall be prepared by the controller of the Buyer and
certified by such officer as being true and correct in all material respects.
3.5. Books and Records. The Buyer shall prepare and maintain,
in accordance with GAAP (as defined in section 6.9 hereof) consistently applied
and the Buyer's normal business practices, complete and accurate books of
account and records covering all transactions arising out of or relating to
Royalties and Contingent Payments. The Seller and its duly authorized
representatives have the right during normal business hours and upon one week's
prior written notice, until December 31, 2009, to audit, in accordance with
generally accepted auditing standards, said books of account and records and all
other documents and material then in the possession or under the control of the
Buyer with respect to Royalties and Contingent Payments. At the request of the
Seller, the Buyer shall cause to be delivered to the Seller a certificate
executed by the public accountants for the Buyer setting forth the amount of
Royalties and Contingent Payments that should have been made during the course
of any calendar year in question.
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4. CLOSING.
4.1. Time and Place. The closing of the transactions
contemplated by this Agreement (the "Closing") shall occur on April 1, 1999 (the
"Closing Date").
4.2. Transactions at Closing. At the Closing, in addition
to any other instruments or documents referred to herein:
(a) The Seller shall duly execute and deliver
to the Buyer or its nominee or nominees such certificates of title or other
instruments of assignment and transfer with respect to the Sold Acquired Assets
and the Secured Acquired Assets as the Buyer may reasonably request and as may
be necessary to vest in the Buyer good and marketable title to all of the Sold
Acquired Assets, in each case subject to no Encumbrance (as defined in Section
5.8) except for the Encumbrances specified in Schedule 4.2(a) hereto (the
"Permitted Encumbrances").
(b) The Buyer shall duly execute and deliver to
the Seller such instruments of assumption and other documents with respect to
the Assumed Obligations as the Seller may reasonably request.
(c) The Buyer shall deliver to the Seller the
Shares subject to the provisions of Section 10.8.
(d) The Buyer shall deliver the $25,000 payable
at the Closing pursuant to Section 3.1(c) by wire transfer to the Seller or to
such other entity or entities as the Seller shall designate to the Buyer.
(e) The Seller shall deliver to the Buyer
pay-off letters and lien discharges (or agreements therefor) satisfactory to the
Buyer from each creditor listed on Schedule 2.2.
(f) Each of the parties hereto shall execute and
deliver, or cause to be executed and delivered, each of the agreements required
to be signed or delivered by such party pursuant to Sections 8 and 9.
(g) The Buyer shall deliver to the Seller the
Secured Acquired Assets Promissory Note and the Deferred Payment Note.
(h) The Seller shall execute and deliver to the
Buyer a certificate, prepared by the Buyer, in form for filing, changing the
name of the Seller, the costs for filing of which shall be the responsibility of
the Buyer.
(i) The Seller shall deliver to Buyer
documentation, in form and substance satisfactory to Buyer, in Buyer's sole
discretion, which shall (i) evidence the consent of Bank to the transfer to and
purchase by Buyer of the Secured Acquired Assets, and (ii)
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evidence Bank's consent to the lien on the Secured Acquired Assets in favor of
Seller as required by Section 3.1.1 of this Agreement.
(j) The Buyer and the Seller shall execute and
deliver the Security Agreement.
(k) That certain Release in the form of
Exhibit C.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer as follows:
5.1. Organization of Seller; Authority. The Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Seller is duly qualified and in
good standing as a foreign limited liability company in all jurisdictions in
which the character of the properties owned or leased or the nature of the
activities conducted by it makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Seller. The Seller has delivered to the Buyer complete and correct copies of its
Certificate of Formation and Operating Agreement and all amendments thereto. The
Seller has all requisite power and authority to own and hold the Acquired Assets
owned or held by it, to carry on the Business as such business is now conducted
and to execute and deliver this Agreement and the other documents and agreements
contemplated hereby or thereby (collectively, the "Transaction Documents") to
which it is a party and to carry out all actions required of it pursuant to the
terms of the Transaction Documents.
5.2. Approval; Binding Effect. The Seller has obtained all
necessary authorizations and approvals from its members required for the
execution and delivery of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby. Each of
the Transaction Documents to which the Seller is a party has been duly executed
and delivered by the Seller and constitutes the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms, except that the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws affecting creditors' rights
generally or by general principles of equity. The Non-Compete Agreement executed
by Michael Noggle and Dennis Noggle has been duly executed and delivered by
Michael Noggle and Dennis Noggle, respectively, and constitutes the legal, valid
and binding obligation of Michael Noggle and Dennis Noggle, as the case may be,
enforceable against Michael Noggle and Dennis Noggle, as the case may be, in
accordance with its terms, except that the enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency or other laws affecting
creditors' rights generally or by general principles of equity.
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5.3. Non-Contravention. Except as set forth on Schedule
5.3, the execution and delivery by the Seller of the Transaction Documents to
which it is a party and the consummation by the Seller of the transactions
contemplated hereby and thereby will not (a) violate or conflict with any
provision of the Certificate of Formation or Operating Agreement of the Seller,
each as amended to date; or (b) constitute a violation of or be in conflict
with, or constitute or create a default under, or result in the creation or
imposition of any Encumbrance other than Permitted Encumbrances upon any
property of the Seller (including, without limitation, any of the Acquired
Assets) pursuant to (i) any agreement or instrument to which the Seller is a
party or by which the Seller or any of its properties (including, without
limitation, any of the Acquired Assets) is bound or to which the Seller or any
of such properties is subject, or (ii) any statute, judgment, decree, order,
regulation or rule of any court or governmental or regulatory authority.
5.4. Governmental Consents; Transferability of Licenses,
Etc. Except as set forth on Schedule 5.4, no consent, approval or authorization
of or registration, qualification or filing with, any agency or authority is
required for the execution and delivery by the Seller of the Transaction
Documents to which it is a party or for the consummation by the Seller of the
transactions contemplated hereby or thereby. The Seller has and maintains, and
the Permits listed on Schedule 1.1(a) hereto include, all licenses, permits and
other authorizations from all governmental authorities as are necessary for the
conduct of the Business or in connection with the ownership or use of the
Acquired Assets as of the Closing Date. Except as expressly designated on
Schedule 5.4, all of the Permits are transferable to the Buyer (except where the
non-transferability of any such Permit will not have a material adverse effect
on the Business), and true and complete copies of such Permits have previously
been delivered to the Buyer.
5.5. Absence of Certain Changes. Except as set forth on
Schedule 5.5, since December 31, 1997, the Seller has carried on its business
only in the ordinary course, and there has not been (a) any change in the
assets, liabilities, sales, income or business of the Seller or in its
relationships with suppliers, customers or lessors, other than changes which
were both in the ordinary course of business and not, either in any case or in
the aggregate, materially adverse; (b) any acquisition or disposition by the
Seller of any asset or property other than in the ordinary course of business;
(c) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting, either in any case or in the aggregate, the
property or business of the Seller; (d) any declaration, setting aside or
payment of any dividend or any other distributions in respect of the Seller's
equity interests; (e) any entry by the Seller into any transaction other than in
the ordinary course of business; (f) any incurrence by the Seller of any
obligations or liabilities, whether absolute, accrued, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others), other than obligations and liabilities
incurred in the ordinary course of business; (g) any mortgage, pledge, lien,
lease, security interest or other charge or encumbrance on any of the assets,
tangible or intangible, of the Seller; or (h) any discharge or satisfaction by
the Seller of any lien or encumbrance or payment by the Seller of any obligation
or liability (fixed or contingent) other than in the ordinary course of
business.
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5.6. Litigation. Except as set forth on Schedule 5.6
hereto, the Seller has not received any notice that any action, suit, proceeding
or investigation is pending and, to the knowledge of the Seller, no action,
suit, proceeding or investigation is threatened, relating to or affecting any of
the Acquired Assets or the Seller, or which questions the validity of the
Transaction Documents or challenges any of the transactions contemplated hereby
or thereby.
5.7. Conformity to Law. Except as set forth on Schedule
5.7, the Seller has complied with, and is in compliance with (a) all laws,
statutes, governmental regulations and all judicial or administrative tribunal
orders, judgments, writs, injunctions, decrees or similar commands applicable to
the Seller, or any of the Acquired Assets (including, without limitation, any
labor, occupational health, zoning or other law, regulation or ordinance, and
(b) all unwaived terms and provisions of all contracts, agreements and
indentures to which the Seller is a party, or by which the Seller or any of the
Acquired Assets is subject. Except as set forth in Schedule 5.7 hereto, the
Seller has not committed, been charged with, or been under investigation with
respect to, nor does there exist, any violation of any provision of any federal,
state or local law or administrative regulation in respect of the Seller or any
of the Acquired Assets.
5.8. Title to Acquired Assets. Except as set forth on
Schedule 5.8 hereto, the Seller is the lawful owner of all of the Acquired
Assets, and has the full right to sell, convey, transfer, assign and deliver the
Acquired Assets, without the need to obtain the consent or approval of any third
party. Except for liens described on Schedule 5.8 hereto which secure
Indebtedness and which will, to the extent set forth on Schedule 5.8, be
discharged at or prior to the Closing, and except for Permitted Encumbrances,
all of the Acquired Assets are free and clear of any security interests, liens,
claims, charges, options, mortgages, debts, leases (or subleases), conditional
sales agreements, title retention agreements, encumbrances of any kind, material
defects as to title or restrictions against the transfer or assignment thereof
(collectively, "Encumbrances"). At and as of the Closing, the Seller will convey
the Sold Acquired Assets and the Secured Acquired Assets to the Buyer, and at
and as of the payment in full of the Deferred Payment Note and the Secured
Acquired Assets Promissory Note, the Seller will convey the Intangibles to the
Buyer by bills of sale, certificates of title and other certificate of
assignment and transfer effective in each case to vest in the Buyer, and the
Buyer will have good and valid title to all of the Acquired Assets, free and
clear of all Encumbrances other than Permitted Encumbrances and any other
Encumbrance arising as a result of any action by the Buyer. Except as set forth
on Schedule 5.8, all of the tangible Acquired Assets are located on the
Property. At and as of the payment in full of the Deferred Payment Note and the
Secured Acquired Assets Promissory Note, the Buyer will have good and valid
title to all of the Acquired Assets, free and clear of all Encumbrances other
than any Encumbrance arising as a result of any action by the Buyer.
5.9. Equipment. Schedule 1.2(d) hereto sets forth a
complete and accurate list of all of the Equipment other than (a) items having a
book or market value individually of less than $1,000, (b) items acquired by the
Seller in the ordinary course of business from the date hereof through the
Closing Date, and (c) items disposed of in the ordinary course of business from
the date hereof through the Closing Date. The Seller will identify in writing to
the Buyer,
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prior to the Closing, each item so acquired or disposed of and which has a value
of $2,000 or more. To the knowledge of the Seller, there are no material defects
as to condition in the Equipment.
5.10. Inventories. The Inventories consist solely of, and the
Inventories to be purchased by the Buyer hereunder will consist solely of,
material and goods of a quality and quantity which are usable or saleable in the
normal course of the Business. The Inventories are adequate for the present
needs of the Business, are fairly reflected on the books of account of the
Seller, stating items of Inventory at the lower of cost or market value in
accordance with GAAP.
5.11. Contracts. Schedule 1.2(b) sets forth a complete and
accurate list of all of the Other Contracts, except contracts entered into in
the ordinary course of business after the date hereof and prior to the Closing,
which will be identified to the Buyer in writing prior to the Closing. The
Seller has delivered to the Buyer true, correct and complete copies of all the
Other Contracts, together with all modifications and supplements thereto. Each
of the Other Contracts is in full force and effect, the Seller is not in breach
of any of the provisions of any such contract, nor, to the knowledge of the
Seller, is any other party to any such contract in default thereunder, nor does
any event or condition exist which with notice or the passage of time or both
would constitute a default hereunder. The Seller has in all material respects
performed all obligations required to be performed by it to date under each such
contract. Subject to obtaining any necessary consents by the other party or
parties to any such contract (the requirement of any such consent being
reflected on Schedule 5.11), no Other Contract includes any provision the effect
of which may be to enlarge or accelerate any obligations of the Buyer to be
assumed thereunder or give additional rights to any other party thereto nor will
in any other way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.
5.12. Trademarks, Patents, Etc. Schedule 1.3 hereto sets forth
a complete and accurate list of (a) all patents, trademarks, trade names and
copyrights registered in the name of the Seller or used or proposed to be used
by the Seller, all applications therefor, and all licenses (as licensee or
licensor) and other agreements relating thereto, and (b) all written agreements
relating to other technology, know-how and processes which the Seller is
licensed or authorized by others to use or which the Seller has licensed or
authorized for use by others. Except to the extent set forth in Schedule 1.3,
the Seller owns or has the sole and exclusive right to use all patents,
trademarks, trade names and copyrights described in clause (a) of the preceding
sentence for the uses set forth in the registrations relating thereto, and has
the right to use all technology, know-how and processes, used or necessary for
the ordinary course of business as presently conducted or proposed to be
conducted, and the consummation of the transactions contemplated hereby will not
alter or impair any such right. No claims have been asserted, and the Seller has
received no notice that any claims are pending, by any Person regarding the use
of any such patents, trademarks, trade names, copyrights, technology, know-how
or processes, or challenging or questioning the validity or effectiveness of any
license or agreement. To the knowledge of the Seller, the use by the Seller of
such patents, trademarks, trade names, copyrights, technology, know-how or
processes in the ordinary course of business does not infringe on the rights of
any Person.
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5.13. Broker. The Seller has not retained, utilized or been
represented by any broker, agent, finder or intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
5.14. Potential Conflicts of Interest. Except as set forth on
Schedule 5.14, no officer or member (or affiliate thereof) of the Seller (a)
owns, directly or indirectly, any interest in (excepting not more than 1%
stockholdings for investment purposes in securities of publicly held and traded
companies) or is an officer, director, employee or consultant of any Person
which is a competitor, lessor, lessee, customer or supplier of the Seller; (b)
owns, directly or indirectly, in whole or in part, any tangible or intangible
property which the Seller is using or the use of which is necessary for the
business of the Seller; or (c) has any cause of action or other claim whatsoever
against, or owes any amount to, the Seller, except for claims in the ordinary
course of business, such as for accrued vacation pay, accrued benefits under
employee benefit plans and similar matters and agreements.
5.15. Disclosure. No representation or warranty by the Seller
in this Agreement or in any exhibit, schedule, written statement, certificate or
other document delivered or to be delivered to the Buyer pursuant hereto or in
connection with the consummation of the transactions hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary to make the
statements contained herein or therein not misleading.
5.16. Investment Representations.
(a) The Seller represents that the Shares are
being acquired by it for its own account for investment and not with a view to
the distribution thereof. The Seller understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
grounds that the offer and sale of the Shares to it are exempt from the
registration requirements of the Act under Section 4(2) thereof as a transaction
not involving any public offering of the Shares. The Seller understands that the
Buyer's reliance on such exemption is predicated in part on the representations
of the Seller which are contained herein.
(b) The Seller understands that, except as
expressly provided herein, it must bear the economic risk of its investment in
the Shares for an indefinite period of time because the Shares have not been
registered under the Act and, therefore, cannot be sold unless they are
subsequently registered under the Act or an exemption from such registration is
available. The Seller agrees that it will not offer to transfer any of the
Shares except as expressly permitted by this Agreement and then only after the
Buyer has received an opinion of its counsel that such offer or transfer is not
in violation of the registration requirements of the Act or other applicable
law.
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(c) The Seller understands and consents that the
certificates representing the Shares issued to the Seller or its members
hereunder shall be endorsed with a legend, substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED; AND (B) MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT."
(d) The Seller has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment in the Shares as contemplated by this Agreement, and
is able to bear the economic risk of such investment for an indefinite period of
time. The Seller has been furnished access to such information and documents as
the Seller has requested and has been afforded an opportunity to ask questions
of and receive answers from representatives of the Buyer concerning the Buyer.
5.17 The principal amount of the outstanding obligations due
by Seller to Bank under the terms of the Loan Agreements described on Schedule
3.1.1, and all instruments, documents and agreements related thereto
(collectively, the "Loan Documents"), that are secured directly or indirectly by
the Acquired Assets, total the amount set forth on Schedule 3.1.1 (the "Seller
Loan Obligations").
5.18. The payment terms for the Loan Documents, attached
hereto as Schedule 3.1.1, are true, accurate and complete, provided, however
that Seller shall provide Buyer with true, accurate and complete copies of the
Loan Documents, in their entirety, within 30 days after the date hereof, along
with complete amortization schedules for such Loan Documents. If such copies
reflect any inconsistencies or errors in terms of Schedule 3.1.1, then Seller
and Buyer shall revise Schedule 3.1.1, and Schedule A to the Secured Acquired
Assets Promissory Note to reflect the payment terms of the Loan Documents.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller as follows:
6.1. Organization of Buyer; Authority. The Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. The Buyer has all requisite power and authority to execute
and deliver the Transaction Documents to which it is a party and to issue the
Shares and to carry out all of the actions required of it pursuant to the terms
thereof. The Buyer is duly qualified and in good standing as a foreign
corporation in all jurisdictions in which the character of the properties owned
or leased or the nature of the activities conducted by it makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the Buyer.
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6.2. Corporate Approval. The Buyer has obtained all necessary
authorizations and approvals from its Board of Directors and shareholders
required for the execution and delivery of the Transaction Documents to which it
is a party and to issue the Shares and the consummation of the transactions
contemplated hereby and thereby. Each of the Transaction Documents to which the
Buyer is a party has been duly executed and delivered by the Buyer and
constitutes the legal, valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except as enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors rights generally or by general principles of equity.
6.3. Non-Contravention. The execution and delivery by the
Buyer of the Transaction Documents to which it is a party and the issuance of
the Shares and the consummation by the Buyer of the transactions contemplated
hereby and thereby will not (a) violate or conflict with any provisions of the
Articles of Incorporation or Code of Regulations of the Buyer, each as amended
to date; or (b) constitute a violation of or be in conflict with, constitute or
create a default under, or result in the creation or imposition of any lien upon
any property of the Buyer pursuant to (i) any agreement or instrument to which
the Buyer is a party or by which the Buyer or any of its properties is bound or
to which the Buyer or any of its properties is subject, or (ii) any statute,
judgment, decree, order, regulation or rule of any court or governmental
authority to which the Buyer is subject.
6.4. Governmental Consents. Except as set forth in Schedule
6.4 hereto, no consent, approval or authorization of or registration,
qualification or filing with, any governmental agency or authority is required
for the execution and delivery by the Buyer of the Transaction Documents to
which it is a party or the issuance of the Shares or for the consummation by the
Buyer of the transactions contemplated hereby or thereby.
6.5. Broker. The Buyer has not retained, utilized or been
represented by any broker, agent, finder or other intermediary in connection
with the negotiation or consummation of the transactions contemplated by this
Agreement.
6.6. Litigation. The Buyer has not received any notice that
any action, suit, proceeding or investigation is pending and, to the knowledge
of the Buyer, no action, suit, proceeding or investigation is threatened,
relating to or affecting the business of the Buyer, or which questions the
validity of the Transaction Documents or challenges any of the transactions
contemplated hereby or thereby.
6.7. Conformity to Law. The Buyer has complied with, and is in
compliance with (a) all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to the Buyer, or any of its assets
(including, without limitation, any labor, occupational health, zoning or other
law, regulation or ordinance, and (b) all unwaived terms and provisions of all
contracts, agreements and indentures to which the Buyer is a party, or by which
the Buyer or any of its
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assets is subject. The Buyer has not committed, been charged with, or been under
investigation with respect to, nor does there exist, any violation of any
provision of any federal, state or local law or administrative regulation in
respect of the Buyer or any of its assets.
6.8. Capitalization. The authorized capital stock of the Buyer
consists solely of (i) 10,000,000 Common Shares, without par value, of which
there are 1,588,731 shares outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable, and (ii) 2,500,000 Preferred
Shares, without par value, none of which is outstanding. There are no
commitments for the purchase or sale of and no options, warrants or other rights
to subscribe for or purchase, any securities of the Buyer other than as set
forth on Schedule 6.8 hereto. All of the Shares to be issued and delivered to
the Seller hereunder will be free and clear of any Encumbrance (except those
relating to the resale thereof under applicable law) and will be duly authorized
and validly issued, fully paid and nonassessable.
6.9. SEC Documents. The Buyer has furnished the Seller with
each registration statement, Quarterly Report on Form 10-QSB, Current Report on
Form 8-K, proxy statement or information statement, including all exhibits
thereto, prepared or filed by the Buyer since January 1, 1997, including,
without limitation, (a) its Annual Reports on Form 10-KSB for its fiscal years
ended December 31, 1997 (the "Buyer Balance Sheet Date") and 1996 which include
the balance sheets of the Buyer (the "Buyer Balance Sheet") as of such dates and
the Buyer's Quarterly Reports on Form 10-QSB, and Reports on Form 8-K filed
since the filing of such Annual Reports and (b) its proxy statements for its
annual meetings of Stockholders held on April 30, 1998 and April 22, 1997, each
of (a) and (b) in the form (including exhibits and any amendments thereto) filed
with the Securities and Exchange Commission (the "SEC") and the items in (a) and
(b), the "Buyer Reports." As of their respective dates, the Buyer Reports
(including, without limitation, any financial statement or schedules included or
incorporated by reference therein) (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Exchange Act of
1934 (the "Exchange Act"), and the respective rules and regulations thereunder,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The 1996 and 1997 financial statements of the Buyer
included in or incorporated by reference into the Buyer Reports (including the
related notes and schedules) present fairly, in all material respects the
financial position of the Buyer as of December 31, 1997 and 1996 and the results
of its operations and its cash flows for such fiscal periods, in conformity with
generally accepted accounting principles ("GAAP"), consistently applied during
the periods involved. Except as and to the extent set forth on the Buyer Balance
Sheet, including all notes thereto, or as set forth in the Buyer Reports, the
Buyer has no material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) whether or not required to be reflected on,
or reserved against in, a balance sheet of the Buyer, prepared in accordance
with GAAP, consistently applied, except liabilities arising in the ordinary
course of business since such date which would not reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the Buyer.
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6.10. Disclosure. No representation or warranty by the Buyer
in this Agreement or in any exhibit, schedule, written statement, certificate or
other document delivered or to be delivered to the Seller pursuant hereto or in
connection with the consummation of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading.
7. CONDUCT OF BUSINESS BY THE SELLER PENDING CLOSING. The Seller
covenants and agrees that, from and after the date of this Agreement and until
the Closing, except as otherwise specifically consented to or approved by the
Buyer in writing:
7.1. Full Access. The Seller shall afford to the Buyer and its
authorized representatives full access during normal business hours to all
properties, books, records, contracts and documents of the Seller and a full
opportunity to make such reasonable investigations as it shall desire to make of
the Seller, the Business or with respect to the Acquired Assets, and the Seller
shall furnish or cause to be furnished to the Buyer and its authorized
representatives all such information with respect to the affairs and business of
the Seller and with respect to the Acquired Assets as the Buyer may reasonably
request.
7.2. Carry on in Regular Course. The Seller shall maintain the
Acquired Assets in good operating condition and repair, and make all necessary
renewals, additions and replacements thereto, and shall carry on its business
diligently and substantially in the same manner as heretofore and shall not make
or institute any unusual or novel methods of purchase, sale, lease, management,
accounting or operation.
7.3. Contracts and Commitments. The Seller shall not enter
into any contract or commitment or engage in any transaction outside the
ordinary course of business, except that no expenditures shall be made for any
capital assets or new purchase orders accepted without the prior written consent
of the Buyer.
7.4. Purchase and Sale of Capital Assets. Other than pursuant
to this Agreement, the Seller shall not purchase or sell or otherwise dispose of
any capital asset with a market value in excess of $2,000, or of capital assets
of market value aggregating in excess of $5,000 without the prior written
consent of the Buyer, and in no event shall purchase, sell or otherwise dispose
of any capital asset other than in the ordinary course of business.
7.5. Insurance. The Seller shall maintain with financially
sound and reputable insurance companies, funds or underwriters adequate
insurance of the kinds, covering such risks and in such amounts and with such
deductibles and exclusions as are consistent with prudent business practice.
7.6. Preservation of Business. The Seller shall use its best
efforts to preserve for the Buyer the present relationships of the Seller's
suppliers and customers and others having business relations with the Seller.
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7.7. No Default. Except as expressly described herein, the
Seller shall not do any act or omit to do any act, or permit any act or omission
to act, which will cause a material breach of any of the Other Contracts.
7.8. Compliance with Laws. The Seller shall use its best
efforts to comply in all material respects with all laws, regulations and orders
applicable with respect to the Seller or the Acquired Assets or as may be
required for the valid and effective transfer of the Acquired Assets.
7.9. Advice of Change. The Seller will promptly advise the
Buyer in writing of any loss of a customer or order cancellation, or other
material adverse change in the condition of any of the Acquired Assets or the
Business.
7.10. No Shopping. The Seller shall not negotiate for, solicit
or enter into any agreement with respect to the sale of the Business or any
substantial portion of the Acquired Assets, or any merger, recapitalization or
other business combination of the Seller, to or with any entity other than the
Buyer.
7.11. Consents of Third Parties. The Seller will employ its
best efforts to secure, before the Closing Date, the consent, in form and
substance satisfactory to the Buyer and the Buyer's counsel, to the consummation
of the transactions contemplated by this Agreement by each party to any of the
Other Contracts and Permits under which such transactions would constitute a
default, would accelerate obligations of the Seller or would permit cancellation
of any such contract or permit.
7.12. Satisfaction of Conditions Precedent. The Seller will
use its best efforts to cause the satisfaction of the conditions precedent
contained herein.
7.13. Truman Stegmaier. The Seller acknowledges that the Buyer
and Seller have executed a letter of intent which provides Truman Stegmaier was
released by the Seller from any provision contained in the operating agreement
of the Seller which would prohibit Mr. Stegmaier from being employed by the
Buyer; provided that Mr. Stegmaier maintains his duties with the Seller until
the Closing, except for mutually agreed special assignments.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of
the Buyer to consummate the Closing shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions (to the extent
noncompliance is not waived in writing by the Buyer):
8.1. Representations and Warranties. The representations and
warranties made by the Seller in or pursuant to this Agreement shall be true and
correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date.
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8.2. Compliance with Agreement. The Seller shall have
performed and complied with all of its obligations under this Agreement to be
performed or complied with by it on or prior to the Closing Date.
8.3. No Change. The Acquired Assets shall not have been, and
shall not be threatened to be, adversely affected in any way as a result of
fire, explosion, earthquake, disaster, labor trouble or dispute, change in
business organization, any action by the United States or any other governmental
authority, change in technology, obsolescence or product, flood, drought,
embargo, riot, civil disturbance, uprising, activity of armed forces or act of
God or public enemy. There shall not have occurred, or threatened to be, any
imposition of any laws, rules or regulations which would materially adversely
affect the condition (financial or otherwise), operations, business, prospects
or assets of the Seller.
8.4. Certificate of the Seller. The Seller shall have
delivered to the Buyer in writing, at and as of the Closing, a certificate duly
executed by the Seller, in form and substance satisfactory to the Buyer and the
Buyer's counsel, certifying that the condition in each of Section 8.1, 8.2 and
8.3 has been satisfied.
8.5. Opinion of Counsel. Bond & Taylor, L.L.P., counsel to the
Seller, shall have delivered to the Buyer a written opinion, addressed to the
Buyer and dated the Closing Date, substantially in the form of Exhibit D hereto.
8.6. Proceedings and Documents Satisfactory. All proceedings
in connection with the transactions contemplated by this Agreement and all
records, certificates, consents and documents delivered to the Buyer in
connection with the transactions contemplated by this Agreement shall be
satisfactory in all reasonable respects to the Buyer and the Buyer's counsel,
and the Buyer shall have received the originals or certified or other copies of
all such records, certificates, consents and documents as the Buyer may
reasonably request.
8.7. No Litigation. No restraining order or injunction shall
prevent the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body (a) in which it will be or is sought to restrain or prohibit or obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby, or (b) in connection with any claim for
damages in excess of $5,000 against the Seller (except for the matters disclosed
on Schedule 5.6 hereto).
8.8. Non-Compete Agreements. Each of Messrs. Michael Noggle
and Dennis Noggle shall have executed and delivered to the Buyer the non-compete
agreement in the form of Exhibit E (the "Non-Compete Agreement"), and such
Non-Compete Agreement shall be in full force and effect.
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8.9. Assumed Payables. The Seller shall have prepared and
delivered to the Buyer a certificate (the "Certificate of Indebtedness") as to
the amount of Indebtedness of the Seller outstanding on the Closing Date under
the Assumed Payables, and specifying the amount owed to each creditor listed
thereon. The Seller shall have caused such creditors to deliver pay-off letters
and lien discharges, each in form satisfactory to the Buyer, with respect to
such Indebtedness.
8.10. Discharge of Liens. The Seller shall have discharged
each lien on the Acquired Assets described on Schedule 5.8 hereto.
8.11. Consents of Third Parties. The Seller will have obtained
the consent, in form and substance satisfactory to the Buyer and the Buyer's
counsel, to the consummation of the transactions contemplated by this Agreement
by each party to any of the Other Contracts, and Permits under which such
transactions would constitute a default, would accelerate obligations of the
Seller or the Buyer or would permit cancellation of any such contract or permit.
8.12. Guaranty. The Seller shall have delivered a guaranty
from Michael Noggle in the form of Exhibit F.
8.13. Consent to Transfer. The Seller shall have delivered to
Buyer documentation, in form and substance satisfactory to Buyer, in Buyer's
sole discretion, which shall (i) evidence the consent of Bank to the transfer to
and purchase by Buyer of the Secured Acquired Assets, and (ii) evidence Bank's
consent to the lien on the Secured Acquired Assets in favor of Seller as
required by Section 3.1.1 of this Agreement.
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. The obligation
of the Seller to consummate the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (to the extent
noncompliance is not waived in writing by the Seller):
9.1. Representations and Warranties True at Closing. The
representations and warranties made by the Buyer in this Agreement shall be true
and correct at and as of the Closing Date with the same effect as though such
representations and warranties had been made or given at and as of the Closing
Date.
9.2. Compliance with Agreement. The Buyer shall have performed
and complied with all of its obligations under this Agreement that are to be
performed or complied with by it at or prior to the Closing.
9.3. No Material Change. From the date of this Agreement
through the Closing Date, there shall not have occurred any change in the
financial condition, business, operations or prospects of the Buyer that would
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Buyer.
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9.4. Closing Certificate. The Buyer shall have delivered to
the Seller in writing, at and as of the Closing, a certificate duly executed by
the President of the Buyer, in form and substance satisfactory to the Seller and
the Seller's counsel, to the effect that the conditions in each of Sections 9.1
and 9.2 have been satisfied.
9.5. Opinion of Counsel. Kenneth J. Warren, counsel to the
Buyer, shall have delivered to the Seller a written opinion, dated the Closing
Date and addressed to the Seller, substantially in the form of Exhibit G hereto.
9.6. No Litigation. No restraining order or injunction shall
prevent the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be or is sought to restrain or prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
9.7. Agreements. The Buyer shall have executed and delivered
the Transaction Documents to which it is a party and such agreements shall be in
full force and effect.
9.8. Proceedings and Documents Satisfactory. All proceedings
in connection with the transactions contemplated by this Agreement and all
certificates and documents delivered to the Seller in connection with the
transactions contemplated by this Agreement shall be satisfactory in all
reasonable respects to the Seller and its counsel, and the Seller shall have
received the originals or certified or other copies of all such records and
documents as the Seller may reasonably request.
10. CERTAIN COVENANTS.
10.1. Confidential Information. Any and all information
disclosed by the Buyer to the Seller or by the Seller to the Buyer as a result
of the negotiations leading to the execution of this Agreement, or in
furtherance thereof, or in connection with the payment of Contingent Payments or
Royalties, which information was not already known to the Seller or to the Buyer
prior to the date hereof, as the case may be, shall remain confidential to the
Seller and the Buyer and their respective employees, agents and investors until
the Closing Date, with respect to the Buyer, and for a period of five years
after the last Royalty payment or Contingent Payment, with respect to the
Seller, except to the extent that the Buyer in its reasonable judgment must
disclose any such information to banks and other institutional lenders in the
process of procuring the loan or loans of funds for the purchase contemplated
herein. If the Closing does not take place for any reason, the Seller and the
Buyer agree not to further divulge or disclose or use for its benefit or
purposes any such information at any time in the future unless it has otherwise
become public. The information intended to be protected hereby shall include,
but not be limited to, financial information, customers, sales representatives,
business and marketing strategy plans, and anything else having an economic or
pecuniary benefit to the Buyer or the Seller, respectively.
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10.2. Non-Competition. The Seller acknowledges that the
covenants and agreements in this Section 10.2 are a condition precedent to the
Buyer's obligations to acquire the Acquired Assets under this Agreement, and
that the Buyer would not acquire the Acquired Assets but for the Seller's
agreements with the Buyer in this Section 10.2. Each of the Seller and the Buyer
acknowledges that from and after the Closing Date, the Buyer will sell products
to customers located in markets throughout the world and that engagement by the
Seller in the Designated Industry (as hereinafter defined) could cause the Buyer
irreparable damage. For a period from the date hereof until the third year
following the last Royalty payment or Contingent Payment, the Seller shall not,
without the prior written consent of the Buyer, (a) engage anywhere in the
world, directly or indirectly, alone or as a shareholder (other than as a holder
of less than 1% of the capital stock of any publicly-traded corporation),
member, partner, officer, director, employee or consultant, in any business
organization that is engaged or becomes engaged in the business of designing,
manufacturing or marketing of insert injection molding machines or in the
development of such machines (the "Designated Industry"), (b) divert to any
competitor of the Seller, the Buyer or any of its affiliates any customer of the
Seller, the Buyer or such affiliates, or (c) solicit or encourage any officer,
employee or consultant of the Seller, the Buyer or any of its affiliates to
leave its employ for employment by or with the Seller or any competitor of the
Seller or any of their affiliates. If at any time the provisions of this Section
10.2 shall be determined to be invalid or unenforceable, by reason of being
vague or unreasonable as to area, duration or scope of activity, this Section
10.2 shall be considered divisible and shall become and be immediately amended
to only such area, duration and scope of activity as shall be determined to be
reasonable and enforceable by a court or other body having jurisdiction over the
matter; and the Seller agrees that this Section 10.2 as so amended shall be
valid and binding as though any invalid or unenforceable provision had not been
included herein.
10.3. Patents. On or prior to the Closing Date, the Seller
shall cause each of Messrs. Michael Noggle and Truman Stegmaier to have assigned
to the Seller, pursuant to documentation satisfactory to the Buyer, all patents
or patent applications owned by either of them which relate to the Business,
which rights shall be included in the Intellectual Property. The Seller shall
cause each of Messrs. Noggle and Stegmaier to take all such reasonable actions,
at the sole cost and expense of the Buyer, as are necessary after the Closing
Date to carry out the provisions of the preceding sentence.
10.4. The Secured Acquired Assets. The Buyer shall use,
operate and store the Secured Acquired Assets in a careful and proper manner and
shall comply in all material respects with all applicable laws, ordinances and
regulations in any way relating to the possession, use or operation of the
Secured Acquired Assets. The Buyer shall not permit any liens, mortgages, or
encumbrances to attach to any of the Secured Acquired Assets in addition to
those existing as of the Closing Date. The Buyer may move any or all of the
Secured Acquired Assets. The Buyer may sell any of the Secured Acquired Assets
which are included in Inventories or Accounts Receivable in the ordinary course
of business as contemplated by the Uniform Commercial Code as in effect in the
State of Ohio, and the Seller shall take such action as is necessary to release
the lien of the Bank or any other creditor so that the Buyer may sell such
assets in such manner free from all Encumbrances. The Buyer may sell any other
Secured Acquired Assets if in the
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exercise of reasonable business judgment of the Buyer, the estimated proceeds of
the sale of the Secured Acquired Assets will exceed $5,000, only upon providing
at least 10 days written notice to Seller, which notice shall include an
itemization of the Secured Acquired Assets subject to the proposed sale, and the
estimated proceeds, so Seller may have an opportunity to obtain consent to the
sale from the Bank, or other creditors that may have a lien on the Secured
Assets. The Seller and Buyer will then cooperate and use best efforts to obtain
the consent of the Bank. The Buyer shall retain all of the proceeds arising from
the sale of the Secured Acquired Assets so long as the Buyer is current in its
obligations under the Secured Acquired Assets Promissory Note.
10.5. Exclusive License Agreement.
10.5.1. Upon the terms, royalty payments, and
conditions set forth herein, the Seller hereby grants to the Buyer an exclusive
worldwide license (the "License") to manufacture, use, sell, and distribute
machines produced under the patent (the "Licensed Patent") and trademarks (the
"Licensed Trademarks") and other Intangibles owned by the Seller as set forth in
Schedule 1.3 hereto. The Buyer is further granted the right to sublicense the
License to the extent necessary to carry out this grant upon the written consent
of the Seller, which consent will not be unreasonably or unseasonably withheld.
10.5.2. No license, immunity or other right is
granted by implication or otherwise with respect to any patent, trademark or
application thereto other than the Licensed Patent and the Licensed Trademarks
and the Intangibles.
10.5.3. All royalties and payments for the License
shall be the Royalty as set forth in Section 3.3 hereto.
10.5.4 The Buyer agrees during the term of the
License to affix to machines and packaging a legible notice reading "Licensed
under U.S. Patent" and followed by the number of the Licensed Patent. The Buyer
agrees to affix to each machine a legible notice reading "U.S. Patent" followed
by the number of the Licensed Patent.
10.5.5 The Buyer agrees during the term of the
License to affix to machines and packaging a legible trademark notice for any
names trademarked as provided on Schedule 1.3 hereto.
10.5.6 Unless otherwise terminated as hereinafter
set forth, or until the Seller assigns the Licensed Patent and the Licensed
Trademarks and the other Intangibles to the Buyer pursuant to the terms of this
Agreement, the License shall continue in full force for the earlier of the
completion of the payments under the Secured Acquired Assets Promissory Note or
the remaining life of the Licensed Patent and the Licensed Trademarks; provided
however, that the License granted herein shall terminate upon three days written
notice in the event the Buyer breaches this Agreement in any material respect,
and such breach is not cured within 30 days after receipt of notice specifying
such breach in reasonable detail by the Buyer.
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10.5.7. Each party hereto shall keep the other party
informed about violations of the Licensed Patent or Licensed Trademark. Within
30 days after the Buyer has obtained actual knowledge of any possible
infringement by a third party, related or unrelated, of the Licensed Patent or
the Licensed Trademarks, the Buyer shall notify the Seller in writing whether or
not the Buyer has sufficient information upon which to base a decision as to
whether to pursue such infringement, and if it has, whether the Buyer elects to
undertake all costs, including all attorneys fees and court costs, related to,
and in connection with, the defense of any infringement upon the Licensed Patent
or the Licensed Trademarks, including the pursuit of injunctions and emergency
restraining orders in the courts of law or equity as may be required to
adequately protect the Seller's interest in the Licensed Patent and the Licensed
Trademarks. If the Buyer has not obtained sufficient information, the Buyer may
delay any decision for a period not exceeding a further 60 days in which to
gather further information, but in no event shall the Buyer have more than an
aggregate of more than 90 days in which to give notice to the Seller of the
Buyer's intent to pursue such infringement. If the Buyer elects not to pursue
such action, the Seller may elect to do so upon giving the Buyer notice thereof.
Whichever party pursues such infringement under the terms herein set forth shall
be entitled to retain all of any recovery.
10.5.8. Upon payment in full of the Deferred Payment
Note and the Secured Acquired Assets Promissory Note, Seller shall assign,
transfer, convey and deliver good and valid title to all of the Intangibles,
free and clear of all Encumbrances other than any Encumbrance arising as a
result of any action by the Buyer.
10.6. Current and Periodic Reports. In order to permit the
Seller and its members to sell the Shares under Rule 144, the Buyer agrees to
use reasonable efforts in good faith to timely file all reports required to be
filed by it under the Act and the Exchange Act. Upon the request of the Seller,
the Buyer will deliver to the Seller a written statement as to whether it has
complied with such requirements.
10.7. Successors. In the event that the Buyer sells all or
substantially all of the Sold Acquired Assets, the Buyer shall cause the
purchaser thereof to be contractually bound by the provisions of this Agreement
under the Deferred Payment Note.
10.8. Transfers to Members. As a condition to the Seller
transferring any of the Shares to its members, or requesting any Shares be
issued in the name of any of its members, the Seller shall provide, and shall
cause its members to provide, such documentation as the Buyer may reasonably
request to enable the Buyer and its counsel to conclude that any such transfer
or issuance is in compliance with the applicable exemptions from registration
under the federal and applicable State securities laws then in effect.
10.9. No Additional Use of Assets as Collateral. Seller hereby
covenants and agrees that it will not attempt to transfer, pledge, sell or
assign any part or all of the Sold Acquired Assets, the Secured Acquired Assets
or the Intangibles directly or indirectly, to any person for any reason, other
than the Bank; provided, that Seller may not use the Secured
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Acquired Assets to secure any debt, loan, obligation or indebtedness other than
the Seller Loan Obligations, as defined in Section 5.17 herein.
10.10 No Additional Use of Assets as Collateral. Seller
hereby covenants and agrees that it will not attempt to transfer, pledge, sell
or assign the Sold Acquired Assets, the Secured Acquired Assets or the
Intangible directly or indirectly, to any person for any reason, other than the
Bank; provided, that Seller may not use the Secured Acquired Assets to secure
any debt, loan, obligation or indebtedness other than the Seller Loan
Obligations, as defined in Section 5.17 herein.
11. INDEMNIFICATION.
11.1. Indemnity by the Seller. Subject to the overall
limitations, minimum amounts and time limitations set forth in Section 11.5, the
Seller agrees to indemnify and hold the Buyer (and its directors, officers,
employees, counsel and affiliates) harmless from and with respect to any and all
claims, liabilities, losses, damages, costs and expenses, including, without
limitation, the reasonable fees and disbursements of counsel (collectively, the
"Losses"), related to or arising directly or indirectly out of any of the
following:
(a) Any failure or any breach by the Seller of
any representation or warranty, covenant, obligation or undertaking made by the
Seller in or pursuant to this Agreement (including the Schedules and Exhibits
hereto) or any other statement, certificate or other instrument delivered
pursuant hereto;
(b) Any claim, liability, obligation or damage
with respect to the Excluded Liabilities;
(c) except for the Assumed Obligations, any
claim or liability arising under the bulk sales laws of any jurisdiction in
connection with transactions contemplated by this Agreement (in view of such
indemnification obligation, the Buyer hereby waives the Seller's compliance with
any such bulk sales laws as a condition to the Closing hereunder); and
(d) any liability disclosed on Schedules 5.6,
5.7, or 5.8 hereto.
11.2. Indemnity by the Buyer. Subject to the overall
limitations, minimum amounts and time limitations set forth in Section 11.5
below, the Buyer agrees to indemnify and hold the Seller harmless from and with
respect to any and all Losses, related to or arising directly or indirectly out
of the Assumed Obligations or any failure or breach by the Buyer of any
representation or warranty, covenant, obligation or undertaking made by the
Buyer in this Agreement (including the Schedules and Exhibits hereto) or any
other statement, certificate or other instrument delivered pursuant hereto.
11.3. Claims.
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(a) Notice. Any party seeking indemnification
hereunder (the "Indemnified Party") shall promptly notify the other party hereto
(the "Indemnifying Party") of any action, suit, proceeding, demand or breach (a
"Claim") with respect to which the Indemnified Party claims indemnification
hereunder, provided that failure of the Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations under this Section
11 except to the extent, if at all, that such Indemnifying Party shall have been
prejudiced thereby.
(b) Third Party Claims. If such Claim relates to
any action, suit, proceeding or demand instituted against the Indemnified Party
by a third party (a "Third Party Claim"), the Indemnifying Party shall be
entitled to participate in the defense of such Third Party Claim after receipt
of notice of such claim from the Indemnified Party. Within 30 days after receipt
of notice of a particular matter from the Indemnified Party, the Indemnifying
Party may assume the defense of such Third Party Claim, in which case the
Indemnifying Party shall have the authority to negotiate, compromise and settle
such Third Party Claim, if and only if the following conditions are satisfied:
(i) The Indemnifying Party shall have
confirmed in writing that it is obliged hereunder to indemnify the Indemnified
Party with respect to such Third Party Claim;
(ii) The Indemnified Party shall not have
given the Indemnifying Party written notice that it has determined, in the
exercise of its reasonable discretion, that matters of corporate or management
policy or a conflict of interest make separate representation by the Indemnified
Party's own counsel advisable; and
(iii) Such Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief.
The Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation.
11.4. Method and Manner of Paying Claims. In the event of any
claims under this Section 11, the claimant shall advise the party or parties who
are required to provide indemnification therefor in writing of the amount and
circumstances surrounding such claim. With respect to liquidated claims, if
within 30 days the other party has not contested such claim in writing, the
other party will pay the full amount thereof within 10 days after the expiration
of such period. Any amount owed by an Indemnifying Party hereunder with respect
to any Claim may be set-off by the Indemnified Party against any amounts owed by
the Indemnified Party to any Indemnifying Party, including, without limitation,
amounts payable under the Deferred Payment Note, the Secured Acquired Assets
Promisory Note, the Royalty Payment or Contingent Payment. The unpaid balance of
a Claim shall bear interest at a rate per annum equal to the rate
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announced by the Buyer's senior lender as its prime or base rate plus 1% from
the date notice thereof is given by the Indemnified Party to the Indemnifying
Party.
11.5. Limitations on Indemnification.
(a) No Indemnifying Party shall be required to
indemnify an Indemnified Party hereunder except to the extent that the aggregate
amount of Losses for which the Indemnified Party is otherwise entitled to
indemnification pursuant to this Section 11 exceeds $10,000, whereupon the
Indemnified Party shall be entitled to be paid the aggregate amount of all such
Losses, subject to the limitations on maximum amount of recovery set forth in
Section 11.5(b); provided, that Losses (i) payable with respect to claims for
indemnification made with respect to Sections 11.1(b) through (d) hereof, or
(ii) payable with respect to claims for indemnification under Section 11.1(a) or
11.2 with respect to any breach of any covenants in this Agreement or any other
document delivered pursuant hereto (collectively, "Unlimited Claims") shall be
indemnified in their entirety by the Seller and shall not be subject to the
limitations set forth in this Section 11.5(a).
(b) The aggregate Losses payable by an
Indemnifying Party pursuant to this Section 11 with respect to all claims for
indemnification other than Unlimited Claims shall not exceed the Purchase Price
(with any Share being valued at (i) with respect to Shares that were sold prior
to the date a claim for indemnity is made hereunder the net consideration
received from the sale thereof, and (ii) with respect to Shares which have not
been sold at the time that a claim for indemnity is made hereunder, the closing
price of Share on the date immediately preceding the date on which a claim for
indemnity is made).
(c) No Indemnifying Party shall be liable for
any Losses pursuant to this Section 11 unless a written claim for
indemnification in accordance with Section 11.4 is given by the Indemnified
Party to the Indemnifying Party with respect thereto within three years after
the Closing, except that this time limitation shall not apply to any Losses
related to or arising directly or indirectly out of any Unlimited Claims, as to
which in each case the applicable statute of limitations shall apply.
(d) With respect to any claim for
indemnification under Section 11.1, the Buyer shall not be entitled to any
consequential, special or punitive damages under the provisions of this Section
11. This provision shall not limit the obligation of the Seller to Indemnify
Buyer with respect to any consequential, special or punitive damages actually
awarded or paid to a third party as a result of a claim for indemnification
under Section 11.3(b).
(e) The indemnification provided by Section 11.1
shall be the sole and exclusive remedy of the Buyer for any claim or cause of
action arising out of or relating to the negotiation, execution, delivery,
performance or breach of this Agreement (whether such claim or cause of action
is based on breach of contract, misrepresentation, tort or violation of statute)
other than claims for injunctive relief where appropriate, and claims arising
under Section 10.2 (Non-Competition) and other than as a consequence of fraud on
the part of the Seller.
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12. USE OF NAME. The Buyer is obtaining an exclusive right to all
of the Seller's rights to the name "Vertech" and therefore the Seller shall not
be entitled to use such name or variations thereof as its company and business
name or title anywhere in the world from and after the Closing Date.
13. GENERAL.
13.1. Survival of Representations and Warranties. The
representations and warranties of the parties hereto contained in this Agreement
or otherwise made in writing in connection with the transactions contemplated
hereby (in each case except as affected by the transactions contemplated by this
Agreement) shall be deemed material and, notwithstanding any investigation by
the Buyer, shall be deemed to have been relied on by the Buyer and shall survive
the Closing, and the consummation of the transactions contemplated hereby. Each
representation and warranty made by the Seller or the Buyer in this Agreement
shall expire on the last day, if any, that Claims for breaches of such
representation or warranty may be made pursuant to Section 11.5 hereof, except
that any such representation or warranty that has been made the subject of a
Claim prior to such expiration date shall survive with respect to such Claim
until the final resolution of such Claim pursuant to Section 11.
13.2. Expenses. All expenses of the preparation, execution and
consummation of this Agreement and of the transactions contemplated hereby,
including without limitation attorneys', accountants', and outside advisors',
fees and disbursements, shall be borne by the party incurring such expenses.
13.3. Notices. All notices, demands and other communications
hereunder shall be in writing or by written telecommunication, and shall be
deemed to have been duly given if delivered personally or if mailed by certified
mail, return receipt requested, postage prepaid, or if sent by overnight
courier, or sent by written telecommunication, as follows:
If to the Seller, marked confidential to:
Vertech Systems, LLC
c/o Michael Noggle
12934 Lake Center Run Court
Houston, Texas 77041
with a copy sent contemporaneously to:
Adrienne Randle Bond, Esq.
Bond & Taylor, L.L.P.
1021 Main, Suite 1220
Houston, Texas 77002-6505
Fax: (713) 759-1980
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If to the Buyer, to:
PH Group Inc.
2365 Scioto Harper Drive
Columbus, Ohio 43204
Attention: Charles T. Sherman, President
Fax: (614) 279-8774
with a copy sent contemporaneously to:
Kenneth J. Warren, Esq.
5920 Cromdale Drive, Suite 1
Dublin, Ohio 43017
Fax: (614) 766-1974
Any such notice shall be effective (a) if delivered personally, when
received, (b) if sent by overnight courier, when receipted for, (c) if mailed,
three days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched.
13.4. Entire Agreement. This Agreement contains the entire
understanding of the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except by a
written instrument hereafter signed by all of the parties hereto.
13.5. Governing Law. The validity and construction of this
Agreement shall be governed by the internal laws (and not the choice-of-law
rules) of the State of Ohio.
13.6. Sections and Section Headings. The headings of sections
and subsections are for reference only and shall not limit or control the
meaning thereof.
13.7. Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
contained in this Section 13.7 shall prevent the Buyer, without the consent of
the Seller, (a) from transferring or assigning this Agreement or its rights or
obligations hereunder to a wholly-owned Subsidiary of the Buyer, or (b) from
assigning all or part of its rights or obligations hereunder by way of
collateral assignment to any bank or financing institution providing financing
for the acquisition contemplated hereby, but no such transfer or assignment made
pursuant to clauses (a) or (b) shall relieve the Buyer of its obligation under
this Agreement
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13.8. Severability. In the event that any covenant, condition,
or other provision herein contained is held to be invalid, void, or illegal by
any court of competent jurisdiction, the same shall be deemed to be severable
from the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
13.9. Further Assurances. The parties agree, without further
consideration, to take such reasonable steps and execute and deliver promptly
such other and further documents as may be necessary, appropriate or reasonably
requested to cause the terms and conditions contained herein to be carried into
effect.
13.10. Tax Treatment. The Buyer and the Seller shall treat and
report the transactions contemplated by this Agreement in all respects
consistently for purposes of any federal, state or local tax, including without
limitation with respect to calculation of gain, loss and basis with reference to
the allocations of the Purchase Price made pursuant to Section 3 hereof. The
parties hereto shall not take any actions or positions inconsistent with the
obligations set forth herein.
13.11. No Implied Rights or Remedies. Except as otherwise
expressly provided herein, nothing herein expressed or implied is intended or
shall be construed to confer upon or to give any Person, other than the Seller
and the Buyer and their respective shareholders or members, any rights or
remedies under or by reason of this Agreement
13.12. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.13. Satisfaction of Conditions Precedent. Each of the
Seller and the Buyer will use its reasonable efforts in good faith to cause the
satisfaction of the conditions precedent contained in this Agreement; provided,
however, that nothing contained in this Section 13.13 shall obligate either
party hereto to waive any right or condition under this Agreement
13.14. Public Statements or Releases. Each of the parties
hereto agrees that prior to the consummation of the Closing, no party to this
Agreement will make, issue or release any public statement or acknowledgment of
the existence of, or reveal the status of, this Agreement or the transactions
provided for herein, without first obtaining the consent of the other party
hereto. Nothing contained in this Section 13.14 shall prevent either party from
making such disclosures as such party may consider necessary in order to obtain
financing for the transactions contemplated hereby or to satisfy such party's
legal or contractual obligations.
13.15. Business Records. The Buyer acknowledges that business
records of the Seller relating to the Seller's operations prior to the Closing
will be conveyed to the Buyer as part of the Acquired Assets, and that the
Seller may from time to time require access to or copies of such records in
connection with tax matters and claims arising with respect to their operations
prior to the Closing or the winding up of their affairs, and the Buyer agrees
that upon reasonable
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prior notice from the Seller, it will, during normal business hours, provide the
Seller with either access to or, at the Buyer's option, copies of such records
for such purposes and access to employees of the Buyer with knowledge of such
matters for such purposes. The Seller agrees to hold any confidential
information so provided in confidence and to use such information only for the
purposes described above. The Buyer agrees that it will not within three years
after the Closing Date destroy any business records prepared prior to the
Closing without first notifying the Seller and affording it the opportunity to
remove or copy them. For purposes of the preceding sentence, any notice from the
Buyer delivered in accordance with Section 13.3 shall be deemed to be adequate
notice if not responded to in writing by the Seller within 30 days.
13.16. Knowledge. Whenever the phrase "to the knowledge of the
Seller" or another similar qualification is used herein, with respect to the
Seller the relevant knowledge shall refer to the knowledge of Michael Noggle,
Truman Stegmaier, Dennis Noggle and Jerry Fulcher.
13.17. Joint Preparation. This Agreement is to be deemed to
have been prepared jointly by the parties hereto and any uncertainty or
ambiguity existing herein shall be interpreted according to the application of
the rules of interpretation for arm's length agreements.
13.18. Termination. This Agreement may be terminated by either
the Buyer or the Seller in writing, without liability to the terminating party
on account of such termination (provided the terminating party is not otherwise
in default or in breach of this Agreement), if the Closing shall not have
occurred on or before June 1, 1999, other than as a consequence of the
intentional breach or the intentional default by the terminating party.
13.19. Consents of Third Parties. This Agreement shall not
constitute an agreement to assign any interest in any instrument, contract,
lease, permit or other agreement or arrangement or any claim, right or benefit
arising thereunder or resulting therefrom, if an assignment without the consent
of a third party would constitute a breach or violation thereof or affect
adversely the rights of the Buyer or Seller thereunder. If the consent of a
third party is required in order to assign any such interest and such consent is
not obtained prior to the Closing Date, or if an attempted assignment would be
ineffective or would adversely affect Seller's ability to convey the benefit of
such instrument, etc. to Buyer, Seller will cooperate with Buyer in any lawful
arrangement so that Buyer shall receive Seller's interest in the benefits under
any such instrument, contract, lease, permit or other agreement or arrangement,
including performance by Seller or Buyer as agent for the other.
14. CERTAIN DEFINITIONS. As used herein the following terms not
otherwise defined have the following respective meanings:
"Indebtedness": As applied to any Person, (a) all indebtedness of such
Person for borrowed money, whether current or funded, or secured or unsecured,
(b) all indebtedness of such Person for the deferred purchase price of property
or services represented by a note, (c) all indebtedness of such Person created
or arising under any conditional sale or other title retention
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agreement with respect to property acquired by such Person (even though the
rights and remedies of the Seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (d) all
indebtedness of such Person secured by a purchase money mortgage or other lien
to secure all or part of the purchase price of property subject to such mortgage
or lien, (e) all obligations under leases which shall have been or must be, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which such Person is liable as lessee, (f) any liability of
such Person in respect of banker's acceptances or letters of credit, and (g) all
indebtedness referred to in clause (a), (b), (c), (d), (e) or (f) above which is
directly or indirectly guaranteed by such Person or which such Person has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise assured a creditor against loss.
"Person": A corporation, an association, a partnership, an
organization, a business, a limited liability company, an individual, a
government or political subdivision thereof or a government agency.
"Subsidiary": With respect to any Person, any corporation a majority
(by number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar function)
of the issuer thereof whether or not the right so to vote exists by reason of
the happening of a contingency.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
VERTECH SYSTEMS, LLC - SELLER
By: /s/ Michael Noggle
-------------------------------
Michael Noggle, President
PH GROUP INC. - BUYER
By: /s/ Charles T. Sherman
-------------------------------
Charles T. Sherman, President
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INDEX
of
SCHEDULES AND EXHIBITS
SCHEDULES
- ---------
Schedule 1.1(a) Permits
Schedule 1.1(b) Payments/Deposits
Schedule 1.2(b) Other Contracts
Schedule 1.2(d) Equipment
Schedule 1.3 Intangibles
Schedule 1.4(d) Excluded Assets
Schedule 2.2 Assumed Payables
Schedule 2.3 Seller's Warranty Expense
Schedule 3.1 Allocation of Purchase Price
Schedule 3.1.1 Loan Agreements
Schedule 3.3. Products Sold from March 5, 1999 through
March 31, 1999
Schedule 4.2(a) Permitted Encumbrances
Schedule 5.3 Non-Contravention
Schedule 5.4 Governmental Consents
Schedule 5.5 Certain Changes
Schedule 5.6 Litigation
Schedule 5.7 Conformity to Law
Schedule 5.8 Title to Acquired Assets
Schedule 5.11 Required Consents
Schedule 5.14 Potential Conflicts of Interest
Schedule 6.4 Governmental Consents
Schedule 6.8 Capitalization
EXHIBITS
- --------
Exhibit A Secured Acquired Assets Promissory Note
Exhibit B Deferred Payment Note
Exhibit C Release
Exhibit D Opinion of Bond & Taylor, L.L.P.
Exhibit E Non-Compete Agreement of Michael Noggle and
Dennis Noggle
Exhibit F Guaranty
Exhibit G Opinion of Kenneth J. Warren
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