UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended: April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________to________________
____________________________________________
Commission File:# 0-14754
ELECTRIC & GAS TECHNOLOGY, INC.
(Exact Name of Registrant as specified in its Charter)
TEXAS 75-2059193
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13636 Neutron Road, Dallas, Texas 75244-4410
(Address of Principal Executive Offices) (Zip Code)
(214) 934-8797
(Registrant's telephone number, including area code)
____________________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
The number of shares outstanding of each of the Issuer's Classes
of Common Stock, as of the close of the period covered by this
report:
Common - $0.01 Par Value - 7,905,416 shares at June 9, 1995.
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
Index to Form 10-Q
For the Quarter Ended April 30, 1995
Page
Part I - Financial Information
1. Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as
of April 30, 1995 and July 31, 1994 3
(b) Condensed Consolidated Statements of
Operations for the three and nine months
ended April 30, 1995 and 1994 4
(c) Condensed Consolidated Statements of
Cash Flows for the nine months ended
April 30, 1995 and 1994 5
(d) Notes to Condensed Consolidated
Financial Statements 6-9
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
Part II - Other Information
Item 1 - Legal Proceedings 15
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 16
Signature (pursuant to General Instruction E) 17
All other items called for by the instructions are
omitted as they are either inapplicable, not required,
or the information is included in the Condensed
Financial Statements or Notes thereto.
2
<PAGE>
<TABLE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, 1995 and July 31, 1994
ASSETS
April 30, July 31,
1995 1994
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 596,456 $ 638,245
Accounts receivable 7,004,474 6,541,832
Inventories 9,440,037 11,902,684
Note receivable ACB 654,129 -
Prepaid expenses 120,653 222,815
Total current assets 17,815,749 19,305,576
PROPERTY, PLANT AND EQUIPMENT, net 9,534,425 10,223,493
OTHER ASSETS
Discontinued operations 481,832 508,914
Other assets 2,291,887 1,042,125
Total other assets 2,773,719 1,551,039
TOTAL ASSETS $30,123,893 $31,080,108
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 6,225,406 $ 6,605,442
Accounts payable 4,118,725 4,815,477
Accrued liabilities 1,466,406 2,152,330
Current maturities of long-term
obligations 1,699,335 1,482,163
Total current liabilities 13,509,872 15,055,412
LONG-TERM OBLIGATIONS
Long-term obligations, less current
maturities 5,703,809 6,014,513
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 30,000,000
shares authorized and issued 7,905,416 79,054 79,054
Additional paid-in capital 9,843,734 9,843,734
Retained earnings 2,830,718 1,961,482
Pension liability adjustment (473,823) (473,823)
Cumulative translation adjustment (412,554) (460,847)
11,867,129 10,949,600
Less treasury stock, 294,992 shares in
1995 and 289,992 shares in 1994,
at cost (956,917) (939,417)
Total stockholders' equity 10,910,212 10,010,183
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,123,893 $31,080,108
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended April 30, 1995 and 1994
(Unaudited)
Three months ended Nine months ended
April 30, April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $9,417,905 $11,222,694 $32,035,855 $34,344,632
Cost of goods sold 6,772,843 8,307,879 23,782,953 25,122,262
Gross profit 2,645,062 2,914,815 8,252,902 9,222,370
Selling, general and
administrative expenses 2,340,294 2,854,907 7,593,853 8,311,994
Operating profit (loss) 304,768 59,908 659,049 910,376
Other income and (expenses)
Interest, net (298,013) (199,169) (793,669) (709,520)
Other, net 247,379 189,143 907,764 221,245
(50,634) (10,026) 114,095 (488,275)
Earning before income taxes 254,134 49,882 773,144 422,101
Provision (credit) for
income taxes (56,081) 1,675 (96,092) 34,873
NET EARNINGS $ 310,215 $ 48,207 $ 869,236 $ 387,228
Earnings per common share:
Net earnings $ 0.04 $ 0.01 $ 0.11 $ 0.05
Weighted average number of
common shares outstanding 7,610,424 7,576,347 7,610,424 7,484,347
See accompanying notes.
4
</TABLE>
<PAGE>
<TABLE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended April 30, 1995 and 1994
(Unaudited) Nine months ended
April 30,
1995 1994
<S> <C> <C>
Increase (decrease) in cash:
Cash flows from operating activities:
Net earnings $ 869,236 $ 387,228
Adjustments to reconcile net earnings ( loss)
to net cash provided by operating activities:
Depreciation and amortization 853,422 832,323
Gain on sale of assets (826,210) -
Changes in assets and liabilities:
Accounts receivable 1,237,358 (624,118)
Inventories (831,339) (525,719)
Prepaid expenses 102,162 (163,916)
Other assets (561,919) 214,130
Accounts payable (648,459) (312,099)
Accrued liabilities (685,924) 79,447
Other liabilities - (192,103)
Net cash provided by (used in) operating activities (491,673) (304,827)
Cash flows from investing activities:
Proceeds from sale of assets 4,752,854 -
Less receivables from sale of assets (3,014,890) -
Purchase of property, plant and equipment (797,012) (1,636,373)
Net cash provided by (used in) investing activities 940,952 (1,636,373)
Cash flows from financing activities:
Purchase of treasury stock (17,500) -
Increase (decrease) in notes payable and
long-term obligations (473,568) 466,450
Proceeds from issuance of common stock - 112,840
Net cash provided by (used in) financing activities (491,068) 579,290
NET INCREASE (DECREASE) IN CASH (41,789) (1,361,910)
Cash - beginning of period 638,245 2,240,075
Cash - end of period $ 596,456 $ 878,165
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interets $ 893,500 $ 804,246
See accompanying notes.
5
</TABLE>
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1995
(Unaudited)
NOTE A - GENERAL
Electric & Gas Technology, Inc., (the "Company") was organized
under the laws of the State of Texas on March 18, 1985, to serve
as a holding company for operating subsidiary corporations. The
Company presently is the owner of Test Switch Technology, Inc.
(formerly Superior Technology, Inc.-"Superior")(Test Switch)
(100%), which currently owns 80% of ABI and Hydel Enterprises
Inc. (formerly Stelpro Limited)(Hydel Enterprises) (100%), which
currently owns 100% of Hydel Engineering Limited)(HYDEL); and the
Company owns Logic (100%), Reynolds (100%), Fridcorp (100%) and
SMI (100%), and, through such subsidiaries, operates in five
distinct business segments: (1) the manufacture and sale of
electrical switching devices, electric meter enclosures, and
pole-line hardware for the electric utility industry and the
general public (Test Switch, Hydel Enterprises and Hydel); (2)
the design and manufacture of defense electronic components
(SMI); (3) the manufacture and sale of natural gas measurement,
metering and odorization equipment (Reynolds); (4) the
manufacture and sale of precision metal enclosures for
telecommunication and computer equipment (Logic); and (5) the
manufacture of vacuum-form and injection-mold products
(Fridcorp). Effective January 31, 1993, the Company
discontinued the operations of its 80% owned ABI which previously
was engaged in the manufacture and sale of brass and bronze
ingots.
The accompanying condensed financial statements have been
prepared in accordance with the regulations of the Securities and
Exchange Commission (SEC) for inclusion in the Company's
Quarterly Report on Form 10-Q. They are subject to year-end
audit adjustments; however, they reflect all adjustments of a
normal recurring nature which are, in the opinion of Management,
necessary for a fair statement of the results of operations for
the interim periods.
The statements were prepared using generally accepted
accounting principles. As permitted by the SEC, the statements
depart from generally accepted accounting disclosure principles
in that certain data is combined, condensed or summarized that
would otherwise be reported separately and certain disclosures of
the type that were made in the Notes to Financial Statements for
the year ended July 31, 1994 have been omitted, even though they
are necessary for a fair presentation of the financial position
at April 30, 1995 and 1994 and the results of operations and cash
flows for the periods then ended.
6
<PAGE>
ELECTRIC & GAS TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 30, 1995
(Unaudited)
NOTE B - INVENTORIES
Inventories are comprised as follows:
<TABLE>
April 30, 1995 July 31, 1994
<S> <C> <C>
Raw Materials $4,540,239 $5,668,279
Work in process 2,066,825 2,598,930
Finished Goods 2,832,973 3,635,475
$9,440,037 $11,902,684
</TABLE>
NOTE C - COMMON STOCK AND EARNINGS PER COMMON SHARE
Earnings per common share is based on the average weighted
shares outstanding during the periods reported on.
NOTE D - SALE OF ASSETS
Effective April 30, 1995, the Company sold inventory,
machinery and equipment and the business operations of the Meter
Socket Division of Superior. Proceeds amounted to approximately
$3,064,000 of which approximately $1,750,000 was for cash and the
balance in a note and receivable of approximately $1,315,000.
The note is due in equal monthly installments over a twenty-four
month period commencing September 1995. Such transaction
resulted in a gain of approximately $210,000 and is included in
other income. On December 30, 1994, the Company sold inventory,
machinery and equipment and the business operations of the
heating division of its Canadian subsidiary, Stelpro for cash.
Proceeds from the sale amounted to $1,688,963 which resulted in a
gain of approximately $610,000 and is included in other income.
Sales for the Meter Socket Division amounted to approximately
$4,472,000 and $4,834,000 for the nine months ended April 30,
1995 and 1994, respectively. Superior renamed itself, Test
Switch Technology, Inc. and will continue its Test Switch
business. Sales for the heating division amounted to
approximately $2,268,000 and $3,410,000 for the nine months ended
April 30, 1995 and 1994, respectively. Stelpro will continue its
electrical division operations and was renamed Hydel Enterprises
Inc..
7
<PAGE>
NOTE E - INDUSTRY SEGMENT DATA:
<TABLE>
The Company's business is primarily comprised of five industry segments: i. electrical
components and enclosures (Test Switch, Hydel Enterprises and Hydel); ii. defense
electronics (SMI); iii. natural gas measurement and recording devices and odorization
(Reynolds); iv. customized metal fabrication (Logic); and v. injection molding and
thermoforming plastic components (Fridcorp) as set forth below. Operating profits
represent total sales less cost of sales and general and administrative expenses.
Three Months Ended April 30, 1995
Defense Metal General
Electrical Electronics Gas Fabrication Plastics Corporate Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $2,953,430 $1,799,910 $794,237 $3,524,205 $346,123 $ - $ 9,417,905
Cost of goods sold 2,096,581 974,195 422,623 2,979,374 300,070 - 6,772,843
Selling, gen. & adm. 690,676 705,869 312,244 373,485 38,854 219,166 2,340,294
Operating profit(loss) 166,173 119,846 59,370 171,346 7,199 (219,166) 304,768
Interest, net (84,659) (73,163) (16,757) (133,993) (3,210) 13,769 (298,013)
Other income(expense) 244,471 - 83 2,425 400 - 247,379
Net earnings (loss)
before income taxes $ 325,985 $ 46,683 $ 42,696 $ 39,778 $ 4,389 $(205,397) $ 254,134
Assets:
Receivables $3,973,096 $599,293 $306,944 $1,926,690 $196,094 $2,357 $7,004,474
Inventory $4,264,813 $2,130,471 $1,114,794 $1,863,374 $66,585 $ - $9,440,037
Total assets $11,221,463 $3,983,109 $2,399,180 $9,435,864 $851,267 $2,233,010 $30,123,893
Depreciation $49,965 $72,564 $37,210 $110,934 $12,634 $3,925 $287,232
Additions PP&E $9,734 $13,198 $9,721 $236,156 $ 991 $ - $269,800
</TABLE>
8
<PAGE>
NOTE E - INDUSTRY SEGMENT DATA, Continued:
<TABLE>
Nine Months Ended April 30, 1995
Defense Metal General
Electrical Electronics Gas Fabrication Plastics Corporate Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $13,043,478 $5,097,985 $2,357,491 $10,531,631 $1,005,270 $ - $32,035,855
Cost of goods sold 10,115,728 2,868,344 1,279,660 8,658,031 861,031 - 23,782,953
Selling, gen. & adm. 2,496,263 2,248,591 996,883 882,502 177,383 792,231 7,593,853
Operating profit(loss) 431,487 (18,950) 80,948 991,098 (33,144) (792,231) 659,049
Interest, net (291,178) (199,353) (46,005) (279,956) (7,884) 30,707 (793,669)
Other income(expense) 858,789 - 283 2,425 13,331 32,936 907,764
Net earnings (loss)
before income taxes $ 999,098 $ (218,303) $ 35,226 $ 713,567 $(27,697) $(728,588) $ 773,144
Depreciation $179,951 $217,693 $110,354 $287,224 $46,426 $11,774 $853,422
Additions PP&E $56,114 $102,739 $80,280 $513,160 $44,719 $ - $797,012
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company, through its subsidiaries, operates within five
separate industries. These are: (i)the manufacture and sale of
electrical switching devices and metal enclosures for use in the
electric utility industry, (ii)the manufacture and sale of
defense electronics, (iii)the manufacture of natural gas
measurement and gas odorization products, (iv)the manufacture and
sale of precision, customized metal enclosures for electronic
equipment; and (v)the manufacture and sale of vacuum-form and
injection-mold plastic products. The Company's former metal
extraction segment has been treated as a discontinued operation.
Results of Operations
Summary. The Company reported net earnings of $310,215 and
$869,236 for the three and nine months ended April 30, 1995
compared to $48,207 and $387,228 for the three and nine months
ended April 30, 1994, respectively. Operating income increased
by $244,860 and decreased by $251,327 for the three and nine
months periods, when compared to the same prior periods. Net
earnings increased for the three and six month periods by
$262,008 and $482,008 primarily the result of a gain on the sale
of inventory and machinery and equipment constituting the heating
division of Hydel Enterprises Inc. (formerly Stelpro Limited) and
a similar sale of these assets from Superior Technology's meter
socket division, each part of the Electrical segment. The
improved operating profits also contributed to the improved
performance. Revenues for the three month period declined in the
Electrical, Defense and Gas segments by $1,876,971 and for the
nine months declined in the Electrical, Defense, Gas and Metal
Fabrication by $2,331,181. Overall gross margins increased and
decreased respectively by 2.11% and 1.09% to 28.09% and 25.76%
for the three and nine month periods.
Increases(decreases) for the nine and three months period
ended April 30, 1995, as compared with the similar period of
1994, for key operating data were as follows:
<TABLE>
Three Months Ended Nine Months Ended
April 30, 1995 April 30,1995
Increase Percent Increase Percent
(Decrease) Change (Decrease) Change
<S> <C> <C> <C> <C>
Operating Revenues $(1,804,789) (16.08) $(2,308,777) (6.72)
Operating Income 244,860 408.73 (251,327) (27.61)
Earnings (Loss) from
continuing operations
before income taxes 204,252 409.47 351,043 83.17
Net Earnings Per Share .03 300.00 .06 120.00
</TABLE>
10
<PAGE>
The following table represents the changes
[increase/(decrease)] in operating revenues, operating income and
earnings from continuing operations before income taxes by the
respective industry segments when compared to the previous
period:
<TABLE>
Increase Increase
(Decrease) Percent (Decrease) Percent
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $(1,526,928) (84.60) $(1,301,754) (56.38)
Defense electronics (75,193) (4.17) (264,637) (11.46)
Gas (274,850) (15.23) (425,316) (18.42)
Metal fabrication 57,448 3.18 (339,474) (14.71)
Plastics 14,734 .82 22,404 .97
$(1,804,789) 100.00 $(2,308,777) 100.00
Operating Income (Loss):
Electric $ 87,147 35.45 $ (45,207) (80.91)
Defense electronics 252,254 102.62 5,525 9.89
Gas (49,601) (20.18) (204,035) (365.15)
Metal fabrication (29,602) (12.04) 371,139 664.21
Plastics (14,393) ( 5.85) (183,299) (328.04)
245,805 100.00 (55,877) 100.00
General Corporate (945) (195,450)
Other Income (Expense) (40,608) 602,370
Earnings before Income
Taxes $204,252 $351,043
</TABLE>
11
<PAGE>
Electrical revenues were down for the three and nine months
ended April 30, 1995 by $1,526,928 and $1,301,754, respectively.
Canadian revenues declined by $2,126,068 offset by an increase of
$824,314 in the U.S. operations for the nine months ended April
30, 1995. These decreases in revenues were the result of the
sale of the Canadian heating division and a soft Canadian market
for electrical product. Gross margins for the three months
increased significantly by 8.80% to 29.01% after having declined
significantly by 5.22% during the previous three month period as
result of the sale of the heating division with the additional
costs associated with lay-offs and other operating costs. For
the nine months, the gross margins remained relatively unchanged
at 22.64%. Revenues will decline substantially during the fourth
quarter reflecting the sale of the U.S. meter socket division
effective April 30, 1995. Gains of approximately $210,000 and
$825,000 are reflected in other income from these sales for the
three and nine months ended April 30, 1995.
Defense electronics revenues for the quarter ended April 30,
1995 amounted to $1,799,910 with operating profit of $119,846.
This compares with revenues of $1,875,103 and operating losses of
$132,408 for the quarter ended April 30, 1994. Revenues for the
nine months ended April 30, 1995 amounted to $5,097,985 with
operating losses of $18,950. This compares with revenues of
$5,362,622 and operating losses of $24,475 for the nine months
ended April 30, 1994. Gross margins increased slightly for the
current nine month period by .12% to 43.74%. Selling, general
and administrative expenses as a percentage of the declining
revenues remained relatively unchanged at 44.11%. Steps have
been taken to reduce the aggregate selling, general and
administrative expenses to better match the lower than
anticipated revenues. With the declining defense market this
segment is actively seeking to expand its customer base and build
on its foundation of business with Texas Instruments
Incorporated.
Gas revenues declined by $274,850 and $425,316 for the three
and nine months ended April 30, 1995. Operating income declined
by $49,601 and $204,035 for the three and nine months ended April
30, 1995, resulting in operating income of $59,370 and $80,948,
respectively. This decline in operating income was the result of
declining revenue and increases in selling, general and
administrative expenses of 4.62% to 39.31% and 5.48% to 42.29% of
revenues, respectively. The warmer than usual 1995 winter
conditions have had an unfavorable effect on revenues do to
deferred gas company purchases. Selling, general and
administrative expenses increased substantially due to additions
to technical staff and salary increases based on higher expected
revenues which have not yet materialized.
Metal fabrication revenues increased slightly for the third
quarter of fiscal 1995, netting to a decrease of $339,474 or
$10,531,631 for the nine months ended April 30, 1995. Gross
margins decreased by .49% to 17.79% for the nine months ended
April 30, 1995. Selling, general and administrative expenses
declined substantially due to an one time adjustment of
approximately $280,000 in commission owed to its manufacturer
representative. Overall operating profits increased by $371,139
for the nine months ended April 30, 1995, after having declined
slightly by 29,602 for the three months ended April 30, 1995. In
February 1995, a new painting operation was purchased for this
segment.
12
<PAGE>
Plastics revenues increased by $14,734 and $22,404 for the
three and nine months ended April 30, 1995, respectively. With
revenues remaining relatively unchanged for the nine months ended
April 30, 1995, operating profits declining by $14,393 and
$183,299 for the three and nine months then ended. The major
decreases in operating profits are due to declining margins,
changes in sales product mix, and production problems with one of
the molding machines. Selling, general and administrative
expenses decreased by 6.37% for the three months ended April 30,
1995 or a 1.51% decrease to 17.65% for the nine months ended
April 30, 1995. The product mix has shifted to the molding side
which has lower margins than the forming business.
With the exception of expense relationships discussed above
in the specific segment discussion, such other relationships
remain consistent. Operating profits increased by .14%, the
effect of lower margins, 1.09%, discussed above and improved
selling, general and administrative expense, 1.23%, for the nine
months ended April 30, 1995. Net earning increased by 124.48%
due to improved operating performance and gains included in other
income (See electrical segment discussion) for the nine months
ended April 30, 1995.
Liquidity and Capital Resources
Liquidity. Current assets of the Company totaled
$17,815,749 at April 30, 1995, down from current assets of
$19,305,576 at July 31, 1994, or a decrease of $1,489,827,
primarily reflecting the sale of heating inventory. Current
liabilities decreased by $1,545,540, resulting in a slight
increase in working capital (current assets less current
liabilities) to $4,305,877 at April 30, 1995, from $4,250,164 at
July 31, 1994. The Company believes that is operations will
generate cash sufficient to meet its working capital requirements
and debt obligations.
The sale of the Superior meter socket division resulted in
immediate cash proceeds of approximately $1,750,000 which will be
used to repay certain secured debt and provide additional working
capital. Commencing in September, the remaining proceeds of
approximately $1,250,000 will be paid in equal monthly
installments over a twenty-four month period.
As result of the sale of the heating division assets of
Stelpro, Hydel Emterprises and Hydel renegotiate its working
capital line-of-credit with a Canadian bank in the amount of
$3,000,000. The Canadian credit facility is secured by the
remaining receivables, inventories and equipment of Hydel
Enterprises and Hydel.
The Company received $1,000,000 in proceeds from an SBA
mortgage loan which was funded on September 23, 1994. Such
proceeds were added to working capital.
On January 3, 1995, the Company closed the purchase of its
new building for Logic with a $2,000,000 ten year, twenty year
amortization, mortgage loan from a institutional investor.
The Company has repaid approximately $720,000 in advances
made by its affiliates since August 1, 1994.
13
<PAGE>
Substantially all of the Company's assets, including
certificates of deposit are pledged as collateral for the
Company's long-term and short-term indebtedness.
Capital Expenditures
For Fiscal 1995, the Company (and its subsidiaries) does not
anticipate any significant capital expenditures, other than in
the ordinary course of replacing worn-out or obsolete machinery
and equipment utilized by its subsidiaries.
Dividend Policy
No cash dividends have been declared by the Company's Board
of Directors since the Company's inception. The Company does not
contemplate paying cash dividends on its common stock in the
foreseeable future since it intends to utilize it cash flow to
invest in its businesses.
Other Business Matters
Accounting for Post-Retirement Benefits. The Company
provides no post-retirement benefits; therefore, FASB No. 106
will have no impact on the Company's financial position or result
of operations.
Inflation. The Company does not expect the current effects
of inflation to have any effect on its operations in the
foreseeable future. The largest single impact affecting the
Company's overall operations is the general state of the economy
and principally the home construction sector.
14
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
American Brass, Inc. (ABI) discontinued its operation in
January 1993 and is involved in several lawsuits arising
principally out of secured and unsecured creditors' claims
against ABI. Under most of these cases the courts have awarded
judgements against ABI for the amounts owed such creditors plus
costs. Although ABI has not declared bankruptcy, there are
insufficient assets to satisfy any of the unsecured creditor
claims. The secured creditor currently is owed approximately
$1,450,000; however, there are remaining assets which could be
sufficient enough to satisfy its claim. Superior is the
guarantor of this debt to the secured creditor. Accordingly, if
there were insufficient assets to satisfy its claim, the Company
could be liable for this deficiency. Effective March 23, 1995,
the United States District Court for the Northern District of
Georgia will enter a summary judgement in the amount of
approximately $1,449,000 in favor of the secured lender against
Superior Technology, Inc., a wholly-owned subsidiary of the
Company and which is now being appealed. In addition, ABI is
suing the lender and others for interfering with the
Environmental Protection Agency agreement made by ABI relating to
its inventory of "Ball Mill Residue" and claiming damages in
excess of $2,000,000 which could offset said judgement. This
summary judgement is not reflected on the books of the Company.
The Company believes that a settlement can be achieved with the
secured lender for an amount less than the judgement. Further,
that there are assets available which if sold could reduce the
exposure of the guarantor, Superior. We are currently unable to
reasonable estimate the effect of the judgement on the Company.
The Company and its subsidiaries are involved in various
routine litigation incident to its business operations.
Management does not believe that any of such litigation will have
a material adverse effect on the consolidated financial position
of the Company.
ITEM 5. OTHER INFORMATION
The Company sold the meter socket division of Superior
Technology, Inc. effective April 30, 1995 for cash and a note for
approximately $3,000,000. Such transaction resulted in a gain of
approximately $210,000 during the third quarter of fiscal 1995.
Approximately $1,750,000 was received in cash which was first
applied to repay the secured debt of Superior as it related to
the inventory and machinery and equipment sold of approximately
$350,000. The balance was used to pay current obligation and as
additional working capital. The balance of the proceeds is
represented by a note of approximately $1,250,000 which will be
paid out over twenty-four equal monthly installments starting in
September 1995.
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Exhibits and Financial
Statement Schedules
10.32 "Asset Purchase
Agreement"
dated as of
April 28,1995
by and between
S u p e r i o r
Technology,
I n c . a n d
A m e r i c a n
Circuit Breaker
Corporation.
(b) Reports on Form 8-K.
None
16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ELECTRIC & GAS TECHNOLOGY, INC.
/s/ Edmund W. Bailey
Edmund W. Bailey
Vice President and
Chief Financial Officer
Dated: June 12, 1995
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1995 JUL-31-1995
<PERIOD-END> APR-30-1995 APR-30-1995
<CASH> 596,456 596,456
<SECURITIES> 0 0
<RECEIVABLES> 7,004,474 7,004,474
<ALLOWANCES> 0 0
<INVENTORY> 9,440,037 9,440,037
<CURRENT-ASSETS> 17,815,749 17,815,749
<PP&E> 9,534,425 9,534,425
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 30,123,893 30,123,893
<CURRENT-LIABILITIES> 13,509,872 13,509,872
<BONDS> 0 0
<COMMON> 79,054 79,054
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 30,123,893 30,123,893
<SALES> 9,417,905 32,035,855
<TOTAL-REVENUES> 9,417,905 32,035,855
<CGS> 6,772,843 23,782,953
<TOTAL-COSTS> 9,113,137 31,376,806
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 298,013 793,669
<INCOME-PRETAX> 254,134 773,144
<INCOME-TAX> (56,081) (96,092)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 310,215 869,236
<EPS-PRIMARY> .04 .11
<EPS-DILUTED> 0 0
</TABLE>
INDEX TO EXHIBIT
Sequentially
Numbered
Exhibit No. Description Page
10.32 Asset Purchase Agreement 1-37
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of April 28, 1995, by and between
SUPERIOR TECHNOLOGY, INC., a Texas corporation with offices at
13636 Neutron Road, Dallas, Texas 75244-4410 (the "Seller"), and
AMERICAN CIRCUIT BREAKER CORPORATION, a New York corporation with
offices at P.O. Box 1308, U.S. Highway 52 North, Albemarle, North
Carolina 28002 (the "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is engaged through an unincorporated
division in the manufacture and sale of electrical meter mounting
equipment, including without limitation, meter sockets and
accessories, and related products at plant facilities located in
Paris, Texas and Canton, Ohio, respectively (the "Business"); and
WHEREAS, Seller is a wholly-owned subsidiary of
ELECTRIC AND GAS TECHNOLOGY, INC., a Texas corporation (the "
Seller Parent Entity"); and
WHEREAS, THE PROVIDENT GROUP, INC., a Delaware
corporation ("PROVIDENT"), is an Affiliate (as hereinafter
defined in Section 11.9) of Purchaser; and
WHEREAS, Seller desires to sell, and Purchaser desires
to purchase, the Business and Purchased Assets (as hereinafter
defined), subject to the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and
the respective representations, warranties, covenants, agreements
and conditions contained herein, the parties hereto agree as
follows:
ARTICLE I. PURCHASE AND SALE OF THE BUSINESS.
1.1 The Transaction. Upon the terms and subject to the
conditions hereinafter set forth, at the Closing (as hereinafter
defined), Seller shall sell, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase, accept, assume and
receive, all of Seller's right, title and interest in, to or
arising from the Business as an operating business, including the
Purchased Assets (as hereinafter defined).
1.2 Purchased Assets. As used herein, the term "Purchased
Assets" shall mean and include all of the assets, properties,
rights and claims of any kind or nature (whether or not recorded
1
<PAGE>
on the books of Seller) used in, relating to or arising from the
conduct of the Business, whether tangible or intangible, whether
real, personal or mixed, whether accrued, contingent or
otherwise, and wherever located (whether at the Facilities (as
hereinafter defined) or at any other location), including without
limitation: (i) all of Seller's fixed assets relating to the
Business, including without limitation, leasehold improvements,
fixtures, machinery and equipment, tools, dies, furniture,
furnishings, plant and office equipment (including copying,
telecommunication, telefax and computer equipment) and
automobiles and other motor vehicles, except for the Excluded
Equipment (as hereinafter defined); (ii) all of Seller's
inventories relating to the Business, including supplies, raw
materials, work-in-process, finished goods and goods-in-transit
from suppliers or manufacturers, except for the Excluded
Inventory (as hereinafter defined); (iii) all of Seller's right,
title and interest in and under any contracts, agreements,
leases, general intangibles and trademark and other licenses
relating to the Business; (iv) all operating data and records of
Seller, including without limitation, books, records (including
any certifications or approvals of Underwriters Laboratory,
Canadian Standards Association, Norma Oficial Mexicana or other
similar organizations), ledgers, sales and promotional data,
advertising materials, customer lists, credit information, cost
and pricing information, supplier lists, purchase and sales
orders, quotations, business plans, reference catalogs, and all
rights relating to computer programs and software for the
Purchased Assets utilized by Seller in connection with the
Business (including all electronic data processing systems,
program specifications, service codes, input data, report layouts
and formats, record file layouts, diagrams, functional
specifications, narrative descriptions, flow charts and all
documentation relating thereto); (v) all engineering and
production designs, drawings, formulae, technology, proprietary
information, inventions, trade secrets, know-how and other
similar data owned by Seller; (vi) all issued patents,
trademarks, trademark registrations, copyrights, trade names
(including, without limitation, the right to use the names
"SUPERIOR", "SUPERIOR SWITCHBOARD AND DEVICES" and "SUPERIOR
TECHNOLOGY" and all simulations, variations or derivations
thereof), service marks, confidential information, slogans, logos
and similar rights, and any other intellectual properties owned
by Seller and used in connection with the Business, together with
all common law rights and good will associated with any of the
items set forth herein; (vii) all permits and licenses from all
governmental authorities held by Seller in connection with the
Business; (viii) all claims and rights under contracts of Seller,
causes of action, judgments, claims, demands and rights of
recovery or set-off of whatever nature; and (ix) all other assets
and properties relating to the operation of the Business,
together with all rights and claims derived therefrom, excluding,
2
<PAGE>
however, those assets, properties, rights and claims set forth in
Section 1.3 hereof.
1.3 Excluded Assets. Seller shall retain following the
Closing all of Seller's right, title and interest as at the
Closing in and to each of the following assets, properties,
rights and claims of Seller relating to the Business: (i) all
interests in real property owned or leased (whether written or
oral) by Seller in connection with the plant facilities of the
Business located at: (A) 2615 N.W. Loop 286, Paris, Texas 75461;
(B) 900 East Tuscarawas Street, Canton, Ohio 44701; and (C) 49
Howden Road, Scarborough, Ontario, Canada M1R 3C9, respectively
(the "Facilities"); (ii) the equipment and other assets located
at the Paris, Texas and Canton, Ohio Facilities and set forth on
Exhibit 1.3 annexed hereto (the "Excluded Equipment"); (iii) all
assets and properties owned by HYDEL (as hereinafter defined) and
located at the Scarborough, Ontario Facility, except as set forth
in the Ontario Assets Agree-ment (as hereinafter defined); (iv)
all finished goods inventory located at the remote warehouse
locations at 8520J Corridor Road, Savage, Maryland 20763 and 8570
N.W. 68th Drive, Miami, Florida 33613, respectively (the
"Excluded Inventory"); (v) all accounts receivable of Seller
relating to the Business; (vi) all cash on hand, cash equivalents
and bank deposits; and (vii) all insurance policies of Seller
relating to the Business (collectively, the "Excluded Assets").
Notwithstanding anything to the contrary contained in this
Agreement, Seller shall not sell, and Purchaser shall not
acquire, pursuant to the terms hereof any assets, properties or
facilities relating to Seller's Superior test switch
manufacturing business located in Canton, Ohio (the "Test Switch
Business").
1.4 Assumed Liabilities. Purchaser shall assume, as of
the Closing Date, and pay, perform and discharge all obligations
of Seller for future performance solely from and after the
Closing Date under only those contracts, agreements and
commitments (including purchase and sale orders) entered into by
Seller in connection with the Business and set forth in Exhibit
1.4 annexed hereto, as such assumed contracts, agreements or
commitments may be amended and modified subsequent to the Closing
(the "Assumed Liabilities"). The parties hereby acknowledge and
agree that Purchaser shall not assume any obligations under any
contract, agreement or commitment relating to the Business, and
any such contract, agreement or commitment shall not be included
as Assumed Liabilities hereunder, unless and until all consents
or approvals of third parties required as a condition to the
assignment thereof shall have been obtained.
1.5 Excluded Liabilities. Notwithstanding anything to
the contrary contained in this Agreement, except as expressly
provided in Section 1.4 hereof, Purchaser shall not assume, and
expressly disclaims responsibility for, any debts, liabilities,
3
<PAGE>
obligations or commitments of Seller, Seller Parent Entity or any
other party of any kind or nature whatsoever with respect to the
Business or Purchased Assets, including, without limitation, the
following:
(a) all liabilities and obligations relating to
the Business, whether or not set forth on Exhibit 3.5
annexed hereto, including without limitation, any
liabilities and obligations to creditors arising under
any applicable bulk transfer laws as set forth in
Section 10.6 hereof;
(b) all liabilities and obligations for taxes of
any kind for the period up to and including the Closing
Date, including without limitation, Federal, state and
local taxes, income, sales and use, ad valorem duties
and assessments, FICA, contributions and profit sharing
deductions relating to the operation of the Business or
otherwise, and all taxes related to or arising from the
transfers contemplated by this Agreement;
(c) all liabilities and obligations to employees
of the Business of any kind or nature, including those
for salaries and employment benefits, accident,
disability, health and workers' compensation insurance
or benefits, and all other liabilities and obligations
to employees, whether arising from events or occurrences
for any period either prior to or following the Closing
Date;
(d) all liabilities and obligations under any
pension, profit-sharing, employee stock ownership or
other employee benefit or welfare plans maintained or
contributed to by Seller;
(e) all liabilities and obligations with respect
to litigation, actions, proceedings, investigations or
legal, administrative, arbitration or other methods of
settling disputes or disagreements, or other
governmental investigations, if any, pending at the
Closing or threatened on or prior to the Closing or
arising after the Closing as a result of events
occurring prior to the Closing; and
(f) all liabilities and obligations arising from
or in connection with any regulation, administrative
ruling or other order or decree of any Federal, state or
local agency or commission, or the violation of any
Federal, state or local act, statute, rule or
regulation, decree or ordinance (including without
limitation, relating to environmental protection)
4
<PAGE>
pending at the Closing or arising after the Closing as a
result of events occurring prior to the Closing.
1.5.1 Notwithstanding anything to the contrary
herein contained, Seller shall fully pay, perform and discharge
each of the Excluded Liabilities relating exclusively to the
Business and/or Purchased Assets in accordance with the terms
thereof.
1.6 No Employees. Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall not offer, and shall
not, at any time, be deemed to offer, employment to any person
employed (or formerly employed) by the Business. Seller shall be
solely and exclusively responsible for all payments of any kind
or nature whatsoever in respect of any employees of the Business,
including without limitation, payroll or other compensation or
pursuant to any pension or welfare benefit plans maintained in
connection with the Business and any health or other insurance
benefits, in respect of any period prior to, at or following the
Closing. Purchaser shall have no responsibility of any kind or
nature whatsoever for any such payments in respect of any
employee of the Business, except for the Purchaser Severance
Obligation (as hereinafter defined), if any.
1.6.1 In the event that Seller shall elect to
terminate the employment of any person employed by the Business
on or at any time following the Closing Date, then Seller shall
be solely and exclusively responsible for such termination of
employees of the Business, including without limitation, any
severance payments relating thereto; provided, however, that, if
the termination of any such Business employee shall occur within
ninety (90) days following the Closing Date, then Purchaser shall
pay to Seller, or reimburse Seller for, an amount equal to the
lesser of: (i) fifty (50%) percent of the total out-of-pocket
costs and expenses actually incurred by Seller in connection with
the termination and severance of employees of the Business; and
(ii) $15,000.00 in the aggregate (the "Purchaser Severance
Obligation"). In addition, Seller shall be solely responsible to
comply with the provisions of the Worker Adjustment and
Retraining Notification Act of 1988, as amended, and any other
applicable Federal, state or local laws and regulations relating
to any termination of employees of the Business.
1.6.2 In addition, at the Closing, Purchaser shall not
assume any of Seller's obligations under the Collective
Bargaining Agreement, dated as of August 10, 1992, as amended
(the "CBA"), between Seller and Local 2192, International
Brotherhood of Electrical Workers (the "Union"). Purchaser shall
in no event be deemed to be a successor employer under the CBA or
applicable law in respect of the Business. Prior to the Closing,
Seller shall have duly complied with all of the terms and
provisions of the CBA, including without limitation, any notice
5
<PAGE>
requirements, applicable to the transactions contemplated under
this Agreement. In addition, Seller shall indemnify and hold
harmless Purchaser from any claims, liabilities or obligations
whatsoever arising out of or relating to the CBA or any
termination of employees of the Business, in accordance with the
provisions of Article IX hereof.
1.7 Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of JOHN W. CLARK, JR., ESQ., Glen Lakes Tower,
9400 North Central Expressway, Suite 1320, Dallas, Texas 75231,
at 10:00 A.M., local time, on April 28, 1995 (the "Closing
Date"), or such other date, time and place as shall be mutually
agreed to among the parties.
ARTICLE II. PURCHASE PRICE.
2.1 Purchase Price and Payment. The purchase price to be
paid by Purchaser to Seller for the Purchased Assets hereunder,
in addition to the Assumed Liabilities to be assumed by Purchaser
pursuant to Section 1.4 hereof, shall be Three Million Dollars
(U.S. $3,000,000.00) in the aggregate (the "Purchase Price"),
subject to adjustment as set forth in Section 2.2 hereof. The
Purchase Price shall be payable by delivery by Purchaser to
Seller at the Closing of each of the following: (i) $1,750,000.00
less the Downpayment (as hereinafter defined) and any interest
thereon, by wire transfer or immediately available funds to an
account (or accounts) designated by Seller (the "Cash Portion");
and (ii) a non-negotiable promissory note (the "Purchase Note"),
issued by Purchaser and payable to the order of Seller, in the
principal amount of $1,250,000.00, which principal sum shall be
payable in twenty-four (24) equal monthly installments of
$52,833.33 each, commencing on September 10, 1995 and thereafter
on the tenth day of each calendar month through August, 1997.
The Purchase Note shall not bear interest and shall otherwise be
in the form of Exhibit 2.1 annexed hereto. No payments shall be
due in respect of the Purchase Note during the period from and
after the Closing Date to August 31, 1995.
Pursuant to the Escrow Agreement, dated as of February 3,
1995 (the "Downpayment Escrow Agreement"), among Purchaser,
Seller and John W. Clark, Jr., Esq., as Escrow Agent, among other
matters, Purchaser deposited into escrow with the Escrow Agent a
downpayment in the amount of $50,000.00 (the "Downpayment"). On
April 27, 1995, the Downpayment Escrow Agreement was terminated
by the parties, and pursuant to the terms thereof, the Escrow
Agent released the Downpayment, together with all interest
thereon, to Seller. Following such release, Seller shall
continue to hold the Downpayment pending the Closing hereunder.
At the Closing, the Downpayment, together with any interest
thereon (from the date of original deposit thereof with the
6
<PAGE>
Escrow Agent), shall be released and deemed paid to Seller as
part of the Cash Portion of the Purchase Price hereunder.
2.1.1 Pursuant to the terms of the Loan Agreement, dated as
of November 24, 1993 (the "CIT Loan Agreement"), among THE CIT
GROUP/CREDIT FINANCE, INC., as Lender ("CIT"), and Seller and its
Affiliates, as Borrowers, CIT has made certain revolving loans to
Borrowers. As security for such loan obligations, Seller has
granted to CIT a security interest in, and lien on, its
inventory, equipment and other collateral, including without
limitation, the Purchased Assets. On or prior to the Closing
Date, Seller shall cause CIT to deliver to Purchaser Form UCC-3
financing statements duly executed and in form ready for
recordation and filing and such other documentation as may
reasonably be requested by Purchaser and its counsel evidencing
the termination of such security interest and liens on the
Purchased Assets (the "CIT Termination Documents"). The parties
hereby acknowledge that, in connection with the CIT Termination
Documents, Seller will pledge to CIT its rights under the
Purchase Note pursuant to the terms of a Note Pledge and Security
Agreement to be entered into between Seller and CIT.
2.1.2 Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall not be entitled to
setoff its obligation to pay any amounts due under the Purchase
Note against any claim for indemnification by Seller pursuant to
Section 9.2 hereof, except if such indemnification claim shall be
due to: (i) the failure of Seller to pay, perform or discharge
any Excluded Liabilities (including without limitation, any
liabilities to creditors under any applicable bulk transfer laws
pursuant to Section 10.6 hereof) in accordance with the terms
thereof; (ii) any termination of employees of the Business or in
connection with any obligations under the CBA as set forth in
Section 1.6.2 hereof; or (iii) any fraudulent or willful
misrepresentation or breach by Seller of the terms and provisions
hereof. In addition, Seller hereby covenants and agrees, on or
prior to the Closing Date, to execute and deliver, and to cause
CIT to duly execute and deliver, the Subordination and
Intercreditor Agreement (the "Intercreditor Agreement") requested
by Transamerica Business Credit Corporation ("TRANSAMERICA"),
Purchaser's lending institution, in respect of the Purchase Note.
The parties hereby acknowledge and agree that, if Purchaser shall
be unable to make any payment of principal or other amounts due
to Seller under the Purchase Note resulting from the terms and
provisions of the Subordination Agreement, then such failure to
pay shall not, in any manner, be deemed to constitute a default
or event of default by Purchaser under the Purchase Note.
2.1.3 In addition to the CIT Termination Documents,
on or prior to the Closing Date, Seller shall deliver or cause to
be delivered to Purchaser Form UCC-3 financing statements duly
executed and in form ready for recordation and filing and such
7
<PAGE>
other documentation as may reasonably be requested by Purchaser
and its counsel evidencing termination of all other security
interests and liens on the Purchased Assets, including without
limitation, the security interests and liens previously granted
by Seller and/or its Affiliates to Independence Funding Co.,
Ltd., Central Bank, National Business Finance, Inc. and the
Seller Parent Entity (the "Additional Termination Documents").
2.2 Adjustment to Purchase Price. The Cash Portion of the
Purchase Price set forth in Section 2.1 above shall be increased
or decreased on a dollar-for-dollar basis by the amount of the
increase or reduction, if any, in the aggregate value of Seller's
inventory relating to the Business (including raw materials, work
in process and finished goods) (the "Adjustment"). For purposes
hereof, all such inventory of Seller relating to the Business
shall be valued net of any applicable reserves maintained in
accordance with generally accepted accounting principles
consistently applied.
2.2.1 The parties hereby acknowledge and agree
that, within one (1) week prior to the Closing at a mutually
designated time, duly authorized representatives of Seller and
Purchaser shall jointly conduct, at Seller's sole expense (except
for any expenses relating to Purchaser's representatives), a
physical count of Seller's inventory relating to the Business.
Upon completion thereof, the parties will then, as an interim
matter, adjust payment of the Purchase Price based upon such
physical count (the "Interim Adjustment").
2.2.2 Promptly after the Closing, selected balance
sheet items of the Business consisting of Seller's inventory and
such other items as may be requested by Purchaser as of the
Closing Date (the "Closing Asset Schedule") shall be prepared by
Seller's accountants, at Seller's sole expense, in accordance
with generally accepted accounting principles consistently
applied. The Closing Asset Schedule shall be delivered by Seller
to Purchaser, together with a calculation of the Adjustment
(taking into account the Interim Adjustment), as soon as possible
following the Closing Date, but in no event later than sixty
(60) days thereafter. In the event that, within thirty (30) days
after delivery of the Closing Asset Schedule, Seller shall not
have received a written notice from Purchaser to the effect that
Purchaser objects to the determination of the Adjustment based
upon the Closing Asset Schedule (the "Objection Notice"), then
such determination of the Adjustment shall be final, binding and
conclusive upon all parties hereto. In the event, however, that
Purchaser shall have given the Objection Notice to Seller within
such thirty-day period, and the parties shall be unable to
resolve the objections set forth in the Objection Notice by good
faith negotiations within ten (10) business days after the
delivery thereof, then a final determination of the Adjustment
shall be made by arbitration in New York, New York under the
8
<PAGE>
rules of the American Arbitration Association then in effect, and
such arbitration shall be final, binding and conclusive upon all
parties hereto. The costs and expenses incurred in connection
with such arbitration shall be borne fifty (50%) percent each by
Purchaser and Seller.
2.3 Allocation of Purchase Price. The parties have agreed,
following arm's length negotiations, to allocate the Purchase
Price among the Purchased Assets and Non-Competition Agreements
set forth in Section 10.7 hereof on the basis set forth in
Schedule A annexed hereto (the "Allocation Statement").
2.3.1 Seller and Purchaser hereby agree to report
an allocation of such Purchase Price and Assumed Liabilities
among the Purchased Assets and Non-Competition Agreements in a
manner entirely consistent with the Allocation Statement, and
agree to act in accordance with such Allocation Statement in
connection with the preparation of financial statements and
filing of all tax returns, and in the course of any tax audit,
tax review or tax litigation relating thereto.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby makes the following representations and
warranties to Purchaser, each of which shall be deemed material
(and Purchaser, in executing, delivering and consummating this
Agreement, has relied and will rely upon the correctness and
completeness of each of such representations and warranties):
3.1 Valid Corporate Existence; Good Standing. Seller is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas, and has the
corporate power to carry on its business as now being conducted
and to own its assets. Seller is duly qualified to conduct
business and is in good standing as a foreign corporation in
those jurisdictions set forth on Exhibit 3.1, which are the only
jurisdictions in which Seller is required to qualify in order to
own the Purchased Assets or to carry on the Business as now
conducted. The copies of the Articles of Incorporation (as
certified by the Secretary of State of the State of Texas) and
By-Laws (as certified by the Secretary of Seller), as amended to
date, of Seller, which will be delivered to Purchaser at least
ten (10) days prior to the Closing, are true and complete copies
of those documents as now in effect.
3.2 Subsidiaries. Except as set forth in Exhibit 3.2,
Seller does not have any subsidiaries, nor does Seller own any
capital stock or proprietary interest in any corporation,
partnership or other business entity.
9
<PAGE>
3.3 Consents. Exhibit 3.3 sets forth a complete list of
all consents and approvals of governmental and other regulatory
agencies, foreign or domestic, and of other third parties which
are required to be obtained by or on behalf of Seller and/or the
Seller Parent Entity in order to enable each such party to enter
into and carry out this Agreement in all material respects. All
such requisite consents have been, or prior to the Closing will
have been, obtained.
3.4 Corporate Authority; Binding Nature of
Agreement. Seller has the full power and authority to enter into
this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
the Board of Directors and Seller Parent Entity, as the sole
stockholder of Seller, and no other corporate proceedings on the
part of Seller and/or Seller Parent Entity is necessary in order
to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of Seller
and is enforceable in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium or similar laws
relating to the enforcement of creditors' rights generally and
the application of general principles of equity. In connection
with the foregoing, Seller represents and warrants that the
Purchase Price, together with the assumption of the Assumed
Liabilities hereunder, constitutes fair consideration for, and a
reasonably equivalent value of, the Purchased Assets.
3.5 Liabilities. As of the date hereof, Seller, in
respect of the Business, has no debts, liabilities or
obligations, contingent or absolute, other than those debts,
liabilities and obligations set forth on Exhibit 3.5 annexed
hereto. As set forth in Section 1.4 above, Purchaser shall not
assume any debts, liabilities or obligations in respect of the
Business, except for the Assumed Liabilities set forth on Exhibit
1.4 hereto.
[Section 3.6 - intentionally omitted.]
[Section 3.7 - intentionally omitted.]
3.8 Adverse Developments. Except as set forth in Exhibit
3.8, since November 30, 1994, there have been no material adverse
changes in the assets, properties, operations or financial
condition or prospects of the Business. Seller, after reasonable
inquiry, does not know of any development or threatened
development of a nature that is, or which could be reasonably
expected to have, a material adverse effect upon the Business or
any Purchased Assets.
10
<PAGE>
3.9 Taxes. All Federal, state, local and foreign income,
gross receipts, profits, franchise, sales, goods and services,
use, occupancy, excise, and custom duties and other taxes and
assessments (including interest and penalties) (collectively, the
"Taxes") payable by, or due from, Seller and/or the Seller Parent
Entity in connection with the Business have been fully paid or
adequately disclosed and fully provided for. Except as set forth
on Exhibit 3.9, there are no tax deficiencies proposed or
threatened by any governmental or regulatory agency or authority
against Seller and/or the Seller Parent Entity in connection with
the Business.
3.9.1 Seller shall be solely liable for all of the
Taxes payable at any time in connection with the operations of
the Business and Purchased Assets during the period to and
including the Closing Date, and to the extent that all of such
Taxes are not fully satisfied, remain liable therefor following
the Closing Date. In addition, Seller shall be solely
responsible for the timely filing of all tax returns and reports
with respect to the operations of the Business and Purchased
Assets with respect to such period.
3.10 Ownership of Assets. Except as set forth in Exhibit
3.10, Seller owns outright, and has good, valid and marketable
title to, all of the assets, properties and businesses
constituting the Purchased Assets, free and clear of all liens,
mortgages, pledges, security interests, conditional sales
agreements, restrictions on transfer or other encumbrances,
claims or charges of any kind or nature whatsoever.
3.11 Intellectual Property. Exhibit 3.11 sets forth a true
and complete list and brief description of all patents,
copyrights, trademarks, service marks, trade names, proprietary
know-how and other similar intangible assets which constitute a
portion of the Purchased Assets. Except as set forth in Exhibit
3.11, no other person, firm or corporation has any proprietary or
other interest in any such intangible assets, and Seller is not a
party to or bound by any license or other agreement requiring the
payment to any person, firm or corporation of any royalty with
respect thereto. Seller, after reasonable inquiry, does not know
of any violation by others of any such copyrights, trademarks,
service marks, trade names or patent rights. Seller is not
infringing upon any patent, copyright, trade name, trademark or
service mark or are otherwise misappropriating or violating the
rights of any third party with respect thereto, and no
proceedings have been instituted or, to the knowledge of Seller,
after reasonable inquiry, are threatened, and no claim has been
received by Seller alleging any such violation.
3.12 Insurance. Exhibit 3.12 sets forth a true and
complete list and brief description of all policies of fire,
liability and other forms of insurance held by Seller as of the
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date hereof in respect of the Business and Purchased Assets. All
such policies are valid, outstanding and enforceable policies, as
to which premiums have been paid currently.
3.13 Litigation. Except as set forth in Exhibit 3.13,
there are no actions, suits, proceedings or governmental
investigations relating to or involving Seller in respect of the
Business or any Purchased Assets by or before any court or
governmental or other regulatory agency or commission either
pending or, to the knowledge of Seller, after reasonable inquiry,
threatened, or any outstanding order, injunction, judgment, writ,
award or decree against Seller, the Business or any Purchased
Assets; and Seller, after reasonable inquiry, does not know of
any basis for any of the same.
3.14 Compliance with Laws. Except as set forth in Exhibit
3.14, the operation of the Business and the Purchased Assets has
been conducted in compliance with all applicable laws,
ordinances, rules, regulations and other requirements of all
Federal, state, municipal and other political subdivisions and
commissions, bureaus, agencies and instrumentalities thereof
having jurisdiction over the Business and Purchased Assets,
including, without limitation, with respect to wages, hours,
hiring, promotion, retirement, nondiscrimination, air and water
pollution, zoning, health, safety and other working conditions,
pension and other employee benefits, securities, antitrust, trade
regulation, warranties and consumer protection.
3.15 Environmental Protection. Except as set forth in
Exhibit 3.15, Seller, in connection with the Business, is in
compliance with all Federal, state, local and foreign laws and
guidelines relating to pollution or protection of the
environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation, ambient air,
surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants,
contaminants, chemicals, petroleum or petroleum products, or
industrial, toxic or hazardous substances or wastes
(collectively, the "Environmental Laws"), and has obtained all
permits, licenses and authorizations required thereunder. Except
as set forth in Exhibit 3.15, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice or
demand letter, notice of violation, investigation, proceeding
pending, or to the knowledge of Seller, after reasonable inquiry,
threatened, against Seller, the Business or Purchased Assets
relating in any manner to any such Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved
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thereunder, and Seller, after reasonable inquiry, is not aware of
any reasonable basis therefor.
3.16 Products Liability. Except as set forth in
Exhibit 3.16: (a) there is no claim, action, suit, inquiry,
proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or
commission pending, or to the knowledge of Seller, after
reasonable inquiry, threatened, against or involving Seller in
connection with any product relating to the Business or Purchased
Assets alleged to have been manufactured, shipped or sold by
Seller and alleged to have a defect in manufacture or design,
including without limitation, any failure to warn of the defect,
nor to the knowledge of Seller, after reasonable inquiry, is
there any reasonable basis therefor; (b) to the knowledge of
Seller, after reasonable inquiry, there has not been any
Occurrence (as defined below); (c) since April 1, 1994, to the
knowledge of Seller, after reasonable inquiry, there has not been
any product recall, rework or retrofit relating to any product
which has been manufactured, shipped or sold by the Business; and
(d) there are no design defects resulting in hazardous
conditions, including without limitation, any failure to warn of
any design defects, involving any product manufactured, shipped
or sold in connection with the Business. For purposes hereof,
"Occurrence" shall mean any accident, happening or event caused
or allegedly caused by any hazard or defect or alleged hazard or
alleged defect in the manufacture, design, materials or
workmanship, including without limitation, any failure or alleged
failure to warn of the hazard, defect or alleged hazard or
alleged defect, of any product (including any parts or components
thereof) relating to the Business which results or is alleged to
have resulted in injury or death to any person or damage to or
destruction of the product itself (or any parts or components
thereof) or other consequential damages.
3.17 Agreements and Obligations; Performance. Except as
listed and briefly described in Exhibit 3.17 annexed hereto (the
"Listed Agreements"), Seller is not a party to any written
agreement or other contractual commitment, understanding,
obligation, including any purchase or sale orders, relating to
the conduct of the Business or any of the Purchased Assets which
involves aggregate payments or receipts in excess of $10,000.00,
including without limitation: (i) contract for the purchase or
sale of any materials, products or supplies which contain, or
which commits or will commit Seller for a fixed term;
(ii) contract of employment with any officer or employee not ter-
minable at will without penalty or premium or any continuing
obligation or liability; (iii) marketing, distribution,
franchise, consignment, sales representative, advertising,
warehousing, distributorship, management, consulting, advisory,
agency or service agreement not terminable at will without
penalty or premium or any continuing obligation or liability;
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(iv) any contract or agreement relating to real property, any
lease for real or personal property (including borrowings
thereon), technical assistance, license or royalty agreement
relating to intellectual property or otherwise; (v) union or
other collective bargaining agreement; (vi) agreement, commitment
or understanding relating to indebtedness for borrowed money;
(vii) contract which, by its terms, requires the consent of any
party thereto to the consummation of the transactions
contemplated by this Agreement; (viii) contract containing
covenants limiting the freedom of Seller to engage or compete in
any line or business or with any person in any geographical area;
(ix) contract or option relating to the acquisition or sale of
any business; (x) option for the purchase of any real or personal
asset, tangible or intangible; or (xi) any other contract,
agreement, commitment or understanding which, directly or
indirectly, materially affects the operation of the Business or
any of the Purchased Assets. A true and correct copy of each of
the Listed Agreements has heretofore been delivered by Seller to
Purchaser. Each of the Listed Agreements is in full force and
effect and Seller has performed all obligations required to be
performed by such parties to date under all of the Listed
Agreements, is not in default in any material respect under any
of the Listed Agreements and have received no notice of any
default or alleged default thereunder which has not heretofore
been cured or which notice has not heretofore been withdrawn.
Seller, after reasonable inquiry, does not know of any default
under any of Listed Agreements by any other party thereto or
bound thereunder, or any event or circumstance which, after the
giving of notice and/or passage of time, would permit any party
thereto to terminate any such Listed Agreement.
3.18 Condition of Assets. Exhibit 3.18 sets forth a list
of all machinery, equipment, furniture, vehicles and other
personal property comprising a portion of the Purchased Assets.
All such machinery, equipment, vehicles and other personal
property are in operating condition and working order. Purchaser
hereby acknowledges that, on a date which shall be no more than
ten (10) days prior to the Closing Date (the "Equipment
Inspection Date"), it will inspect such machinery, equipment and
other personal property. All such machinery and equipment shall
be purchased by Purchaser hereunder on an "as is, where is"
basis, except for any changes to such personal property occurring
during the period from the Equipment Inspection Date to the
Closing Date.
3.19 Inventory. All inventory comprising a portion of
the Purchased Assets is, and on the Closing Date will be, owned
by Seller and is and will be valued at the lower of cost or
market determined in accordance with generally accepted
accounting principles consistently applied. Exhibit 3.19 sets
forth all unfilled orders, as of the date hereof, received by
Seller in connection with the Business, which unfilled orders
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have been accepted by Seller in the ordinary course and upon
terms and conditions substantially consistent with its past
practices.
3.19.1 Except as set forth on Exhibit 3.19, the
inventory constituting part of the Purchased Assets is not, and
on the Closing Date will not be, stored with, or held by, any
sales representative, bailee, warehouseman or other similar party
at any location other than the Facilities. All such items of
inventory stored or held at remote warehouse locations other than
the Facilities are owned outright by Seller free and clear of all
liens and encumbrances of any kind or nature whatsoever, and are
being held for sale by such sales representative or other party
on behalf of Seller in the ordinary course consistent with past
practices of the Business, and in a manner segregated from other
inventories at each such location.
3.20 Availability of Assets. The Purchased Assets include,
except for the Excluded Assets hereunder and any interests in
real property, all of the assets and properties necessary to the
conduct of the Business by Purchaser in the manner that said
Business is presently conducted by Seller.
3.21 Permits and Licenses. Exhibit 3.21 sets forth all
permits, licenses, orders, franchises and approvals
(collectively, the "Permits") from all Federal, state, local and
foreign governmental regulatory bodies held by Seller relating to
the Purchased Assets and the conduct of the Business. Seller has
all Permits of all Federal, state, local and foreign governmental
or regulatory bodies, respectively, required of it to carry on
the Business as presently conducted. All such Permits are in
full force and effect, and to the knowledge of Seller, after
reasonable inquiry, no suspension or cancellation of any such
Permits is threatened. To its knowledge, after reasonable
inquiry, Seller is in compliance with all requirements, standards
and procedures of the Federal, state, local and foreign
governmental authorities which have issued such Permits.
3.22 Underwriters Laboratories Certificates. All of the
products manufactured or sold by the Business during the past
three (3) years which require or carry the label, certification
or approval of Underwriters Laboratories ("UL"), Canadian
Standards Association ("CSA"), Norma Oficial Mexicana ("NOM")
and/or any other similar organization, have been properly and
validly certified or approved. All manufacturing standards
applied, testing procedures used, and product specifications
disclosed and utilized by Seller in connection with the Business
have, in each case, fully complied with all requirements
established by UL, CSA and/or NOM and all applicable Federal,
state or local electrical codes or regulations.
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3.23 Customers and Suppliers. Exhibit 3.23 sets forth a true
and correct list of: (a) the ten (10) largest customers of the
Business in terms of sales during the twelve-month period ended
January 31, 1995, setting forth the approximate total sales by
the Business to each such customer during such period; and (b)
the five (5) largest suppliers to the Business during the twelve-
month period ended January 31, 1995, measured by dollar volume of
purchases. In addition, Exhibit 3.23 sets forth all sales
representatives of the Business, setting forth the approximate
total dollar sales for the twelve-month period ended January 31,
1995. Except as set forth in Exhibit 3.23, Seller has received
no notice of termination or an intention to terminate the
relationship with the Business, from any customer, supplier or
sales representative set forth therein.
3.24 No Breach. Neither the execution and delivery of
this Agreement nor compliance by Seller with any of the
provisions hereof nor consummation of the transactions
contemplated hereby, will:
(a) violate or conflict with any provision of the
Articles of Incorporation or By-Laws of Seller;
(b) violate or, alone or with notice or the
passage of time, result in the material breach or
termination of, or otherwise give any contracting party
the right to terminate, or declare a default under, the
terms of any agreement or other document or
undertaking, oral or written, relating to the Purchased
Assets or the Business to which Seller is a party or by
which it may be bound (except for such violations,
conflicts, breaches or defaults as to which required
waivers or consents by other parties have been, or
will, prior to the Closing, be obtained);
(c) result in the creation of any lien, security
interest, charge or encumbrance upon any of the Purchased
Assets;
(d) violate any judgment, order, injunction, decree or
award against, or binding upon Seller, the Purchased Assets
or the Business; or
(e) violate any law or regulation of any jurisdiction
relating to Seller, the Purchased Assets or the Business.
3.25 No Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been
carried on directly with Purchaser by Seller without the
intervention of any broker, finder, investment banker or other
third party. Seller has not engaged, consented to, or authorized
any broker, finder, investment banker or other third party to act
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on its behalf, directly or indirectly, as a broker or finder in
connection with the transactions contemplated by this Agreement.
Seller hereby agrees to indemnify Purchaser, and to hold
Purchaser harmless, from and against any claim for brokerage or
similar commission or other compensation which may be made
against Purchaser by any third party in connection with any of
the transactions contemplated hereby, which claim shall be based
upon any action by or on behalf of Seller.
3.26 Untrue or Omitted Facts. No representation, warranty or
statement by Seller in this Agreement contains any untrue
statement of a material fact, or omits or will omit to state a
fact necessary in order to make such representations, warranties
or statements not materially misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby makes the following representations
and warranties to Seller, each of which shall be deemed material
(and Seller, in executing, delivering and consummating this
Agreement, have relied and will rely upon the correctness and
completeness of each of such representations and warranties):
4.1 Valid Corporate Existence; Good Standing. Purchaser
is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has the
corporate power to carry on its business as now being conducted
and to own its assets.
4.2 Corporate Authority; Binding Nature of Agreement.
Purchaser has the power to enter into this Agreement and to carry
out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of
Directors of Purchaser. This Agreement constitutes the valid and
binding obligation of Purchaser and is enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization,
moratorium or similar laws relating to the enforcement of
creditors' rights generally and the application of general
principles of equity.
4.3 Consents. Exhibit 4.3 sets forth a complete list of
all consents and approvals of governmental and other regulatory
agencies, foreign or domestic, and of other third parties which
are required to be obtained by or on behalf of Purchaser in order
to enable such party to enter into and carry out this Agreement
in all material respects. All such requisite consents have been,
or prior to the Closing will have been, obtained.
4.4 No Breach. Neither the execution and delivery of
this Agreement nor compliance by Purchaser with any of the
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provisions hereof nor consummation of the transactions
contemplated hereby, will:
(a) violate or conflict with any provision of the
Certificate of Incorporation or By-Laws of Purchaser;
(b) violate or, alone or with notice or the
passage of time, result in the material breach or
termination of, or otherwise give any contracting party
the right to terminate, or declare a default under, the
terms of any agreement or other document or
undertaking, oral or written, to which Purchaser is a
party or by which it may be bound (except for such
violations, conflicts, breaches or defaults as to which
required waivers or consents by other parties have
been, or will, prior to the Closing, be obtained);
(c) violate any judgment, order, injunction,
decree or award against, or binding upon, Purchaser; or
(d) violate any law or regulation of any jurisdiction
relating to Purchaser.
4.5 No Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been
carried on directly with Seller by Purchaser without the
intervention of any broker, finder, investment banker or other
third party. Purchaser has not engaged, consented to, or
authorized any broker, finder, investment banker or other third
party to act on its behalf, directly or indirectly, as a broker
or finder in connection with the transactions contemplated by
this Agreement. Purchaser hereby agrees to indemnify Seller, and
to hold Seller harmless, from and against any claim for brokerage
or similar commission or other compensation which may be made
against Seller by any third party in connection with any of the
transactions contemplated hereby, which claim shall be based upon
any action by or on behalf of Purchaser.
4.6 Untrue or Omitted Facts. No representation, warranty or
statement by Purchaser in this Agreement contains any untrue
statement of a material fact, or omits or will omit to state a
fact necessary in order to make such representations, warranties
or statements not materially misleading.
ARTICLE V. PRE-CLOSING COVENANTS.
Seller hereby covenants and agrees that, from and after
the date hereof and until the Closing or earlier termination of
this Agreement (the "Pre-Closing Period"):
5.1 Access. Seller shall afford to the officers,
attorneys, accountants and other authorized representatives of
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Purchaser free and full access, during regular business hours and
upon reasonable notice, to all of the books, records, personnel
and properties of Seller and the Business in order that Purchaser
may have full opportunity to make such review, examinations and
investigations as it may desire of Seller, the Business and
Purchased Assets in preparation of the operation of the Business.
In addition, if and to the extent requested by any Regulatory
Authority (as defined below), Seller shall furnish to Purchaser,
promptly following Purchaser's request therefor, written
authorization addressed to any Federal, state, local or other
governmental agency or authority (the "Regulatory Authorities")
permitting the release to Purchaser or its representatives all
results of any inquiries, investigations or reports on file with
such authority relating to Seller and the Business.
5.2 Conduct of Business. Seller shall conduct the
Business only in the ordinary and usual course, and make no
material change in any of its policies without the prior written
consent of Purchaser. Seller shall not, without the prior
written consent of Purchaser: (i) make any commitments with
respect to the Business or Purchased Assets other than in the
ordinary course; provided, however, that no lease or capital
expenditure commitment shall exceed $5,000.00 individually and
all such leases and capital expenditure commitments shall not
exceed $20,000.00 in the aggregate; or (ii) sell, assign,
transfer or otherwise dispose of any of the Purchased Assets or
any rights with respect to the Business other than in the
ordinary course.
5.2.1 Seller shall not, other than in the ordinary
course: (i) dispose of any records relating to the Business or
Purchased Assets; (ii) permit or allow any of the Purchased
Assets to become subject to any mortgage, pledge, lien or
encumbrance; (iii) borrow or agree to borrow any funds or incur,
or assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability (absolute,
contingent or otherwise), except obligations and liabilities
incurred in the ordinary course and consistent with past
practices of the Business; (iv) pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, contingent or
otherwise) relating to the Business or Purchased Assets, other
than such payment, discharge or satisfaction in the ordinary
course and consistent with past practices of the Business; (v)
cancel any debts or waive any claims or rights of substantial
value included in the Business or Purchased Assets (including
settlement of any claims or litigation); (vi) dispose of or
permit to lapse, other than through expiration by operation of
law, any rights relating to the use of any patent, trademark,
service mark, trade name or copyright included as part of the
Purchased Assets or dispose of or disclose to any person other
than Purchaser (except as necessitated by normal business
practices under a confidentiality agreement) any trade secret,
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formula, process or know-how owned or used by or applicable to
the Business or Purchased Assets and not theretofore a matter of
public knowledge; (vii) lend or advance any amount to, or sell,
transfer or lease any properties or assets to, or enter into any
agreement or arrangement with, any officer, director or employee
of Seller or the Business; or (viii) permit the levels of
finished goods inventory held at remote warehouse locations other
than the Facilities to exceed the levels thereof customarily
maintained in connection with the Business and set forth in
Exhibit 3.19.
5.2.2 Seller will not in any manner attempt to
accelerate the receipt of income or profits or to defer the
incurring of items of expense or deduction during the Pre-Closing
Period, except in the ordinary course of business. In addition,
Seller shall continue to discount and pay all of its accounts
payable relating to the Business, together with all other
obligations of Seller relating to the Purchased Assets and
Business, as punctually as heretofore paid.
5.3 Preservation of Business. Seller shall use its best
efforts to preserve the Business intact and to keep available the
services of its present officers, employees and consultants in
connection therewith (except as Purchaser may otherwise approve)
and to preserve the good will and business relationships of
Seller with customers, suppliers, employees and others.
5.4 Insurance. Seller shall maintain in force the
insurance policies listed in Exhibit 3.12, except to the extent
that they may be replaced with equivalent policies at the same or
lower rates approved by Purchaser.
5.5 Consents and Approvals. Seller shall use its best
efforts to obtain at the earliest practicable date and prior to
the Closing, all requisite consents and approvals of governmental
and other regulatory agencies and of other third parties to the
consummation of this Agreement, including without limitation, the
CIT Termination Documents and Additional Termination Documents.
In addition, Seller shall furnish to Purchaser such receipts or
other evidence as may be requested by Purchaser from any sales
representative or other party at the remote warehouse locations
in respect of Seller's finished goods inventory set forth on
Exhibit 3.19.
5.6 Financial Information. Seller shall provide Purchaser
with such financial and other information relating to the
Business as Purchaser may from time to time reasonably request.
5.7 Supplements to Exhibits. Seller shall deliver to
Purchaser from time to time during the Pre-Closing Period
amendments and changes to the Exhibits under Article III of this
Agreement, disclosing therein all matters arising or discovered
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after the date hereof which, if existing or occurring or known as
of the date hereof, would have been required to be set forth or
described in such Exhibits. No supplement or amendment of the
Exhibits made pursuant to this Section 5.7 shall be deemed to
cure any breach of any representation or warranty made by Seller
hereunder.
5.8 No Breach. Seller shall: (i) use its best efforts
to assure that each of its representations and warranties
contained herein are true in all material respects as of the
Closing as if repeated at and as of such time, and that no
material breach or default shall occur with respect to any of its
covenants, representations or warranties contained herein that
has not been cured by the Closing; (ii) not voluntarily take any
action or do anything which will cause a breach of or default
respecting such covenants, representations or warranties; and
(iii) promptly notify Purchaser of any event or fact which
represents or is likely to cause such a breach or default.
5.9 No Negotiations. Upon execution hereof and for so
long as this Agreement shall remain in effect, neither Seller nor
the Seller Parent Entity nor any of their respective officers,
Directors, agents, stockholders or Affiliates shall enter into or
conduct negotiations, or enter into any agreement or
understanding, in connection with the sale or possible sale of
the Business or any Purchased Assets or the outstanding capital
stock of Seller with any person or entity other than Purchaser.
ARTICLE VI. CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF PURCHASER TO CLOSE.
The obligations of Purchaser to enter into and complete
the Closing are subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions, any one or
more of which may be waived by Purchaser (except when the
fulfillment of such condition is a requirement of law):
6.1 Truth of Representations and Warranties. All
representations and warranties of Seller contained in this
Agreement and in any written statement , Exhibit, certificate,
schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be
true and correct in all material respects as of the Closing Date,
as if made at the Closing and as of the Closing Date.
6.2 Compliance with Covenants. Seller shall have
performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
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performed or complied with by each such party prior to or at the
Closing.
6.3 No Actions. No action, suit, proceeding or
investigation shall have been instituted, and be continuing
before a court or before or by a governmental body or agency, or
shall have been threatened and be unresolved, to restrain or to
prevent or to obtain damages in respect of, the carrying out of
the transactions contemplated hereby, or which might materially
affect the rights of Purchaser to own the Purchased Assets or to
operate or control the Business following the Closing Date, or
which might have a materially adverse effect thereon.
6.4 Certificate. Purchaser shall have received a
certificate, dated as of the Closing Date, duly executed by the
President and Secretary of Seller as to the satisfaction of the
conditions contained in Sections 6.1 and 6.2 hereof.
6.5 Opinion. Purchaser shall have received the written
opinion of JOHN W. CLARK, JR., ESQ., counsel to Seller, dated as
of the Closing Date, in form and substance satisfactory to
Purchaser and its counsel.
6.6 Consents; Licenses and Permits. Seller and Purchaser
shall have each obtained all consents, approvals, licenses and
permits of governmental and regulatory authorities or other third
parties necessary for the performance by each of them of all of
their respective obligations under this Agreement.
6.7 Assignment of Agreements. Purchaser shall have
received duly executed assignments to all Listed Agreements set
forth in Exhibit 3.17 constituting Assumed Liabilities hereunder,
together with all consents and approvals to such assignments by
other parties thereto, to the extent required thereunder.
6.8 Bill of Sale and Other Assignments. Purchaser shall
have received a duly executed Bill of Sale, trademark assignments
and General Assignment and Assumption Agreement, all as set forth
in Section 8.1 hereof.
6.9 No Material Adverse Change. There shall have been no
material adverse change as of the Closing Date in the Business or
the Purchased Assets or the operations, financial status or
prospects of Seller relating to the Business as of November 30,
1994.
6.10 Due Diligence Investigations. All due diligence
investigations and examinations undertaken by Purchaser and its
attorneys, accountants and others in respect of the Business and
Purchased Assets and the operations, financial status or future
prospects thereof shall have been completed to the satisfaction
of Purchaser.
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6.11 Seller Parent Guaranty. Seller Parent Entity shall
have executed and delivered the Seller Parent Guaranty in favor
of Purchaser in the form annexed hereto as Exhibit 10.10.
6.12 Trademark License Agreement. Purchaser and Seller
shall have entered into the Trademark License Agreement set forth
in Section 10.4.
6.13 Non-Competition Agreements. Seller and Seller Parent
Entity shall have each entered into a Non-Competition Agreement
with Purchaser for a period of five (5) years following the
Closing Date in the form annexed hereto as Exhibit 10.7.
6.14 Ontario Assets Agreement. Seller Parent Entity,
Purchaser and HYDEL shall have entered into the Ontario Assets
Agreement set forth in Section 10.12 hereof.
6.15 CIT Termination Documents. CIT shall have executed and
delivered to Purchaser all of the CIT Termination Documents as
set forth in Section 2.1.1 hereof.
6.16 Additional Termination Documents. Seller shall have
delivered or caused to be delivered the Additional Termination
Documents as set forth in Section 2.1.3 hereof.
6.17 Intercreditor Agreement. Purchaser, Seller, CIT and
TRANSAMERICA shall have duly executed and delivered the
Intercreditor Agreement.
6.18 Additional Documents. Seller shall have delivered
all such other certificates and documents as Purchaser or its
counsel may have reasonably requested.
6.19 Approval of Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement,
or incidental thereto, and all other related legal matters shall
have been approved as to the form and substance by counsel to
Purchaser, which approval shall not be unreasonably withheld or
delayed.
ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF SELLER.
The obligations of Seller to enter into and complete
the Closing are subject to the fulfillment, on or prior to the
Closing Date, of each of the following conditions, any one or
more of which may be waived by Seller (except when the
fulfillment of such condition is a requirement of law):
7.1 Truth of Representations and Warranties. All
representations and warranties of Purchaser contained in this
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Agreement and in any written statement, Exhibit, schedule or
other document delivered pursuant hereto or in connection with
the transactions contemplated hereby shall be true and correct in
all material respects as at the Closing Date, as if made at the
Closing and as of the Closing Date.
7.2 Compliance with Covenants. Purchaser shall have
performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing.
7.3 No Actions. No action, suit, proceeding, or
investigation shall have been instituted, and be continuing,
before a court or before or by a governmental body or agency, or
have been threatened, and be unresolved, by any governmental body
or agency to restrain or prevent, or obtain damages in respect
of, the carrying out of the transactions contemplated hereby.
7.4 Certificate. Seller shall have received a certificate
duly executed by the President of Purchaser, dated as of the
Closing Date, as to the satisfaction of the conditions contained
in Sections 7.1 and 7.2.
7.5 Opinion. Seller shall have received the opinion of
Messrs. FRENKEL & HERSHKOWITZ, counsel to Purchaser, dated as of
the Closing Date, in form and substance satisfactory to Seller
and its counsel.
7.6 Consents; Licenses and Permits. Seller and Purchaser
shall have each obtained all consents, approvals, licenses and
permits of governmental and regulatory authorities or other third
parties necessary for the performance by each of them of all of
their respective obligations under this Agreement.
7.7 Trademark License Agreement. Purchaser and Seller have
entered into the Trademark License Agreement set forth in Section
10.4.
7.8 Purchaser Affiliate Guaranty. PROVIDENT shall have
executed and delivered to the Purchaser Affiliate Guaranty in
favor of Seller in form annexed hereto as Exhibit 10.11.
7.9 Ontario Assets Agreement. Purchaser, Seller Parent
Entity and HYDEL shall have entered into the Ontario Assets
Agreement set forth in Section 10.12 hereof.
7.10 Additional Documents. Purchaser shall have delivered
all such certified resolutions, certificates and documents with
respect to Purchaser as Seller or its counsel may have reasonably
requested.
7.11 Approval of Counsel. All actions, proceedings,
instruments and documents required to carry out this Agreement or
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incidental thereto, and all other related legal matters, shall
have been approved as to form and substance by counsel to Seller,
which approval shall not be unreasonably withheld or delayed.
ARTICLE VIII. ITEMS TO BE DELIVERED AT CLOSING.
8.1 Items to be Delivered by Seller. At the Closing,
Seller will deliver or cause to be delivered to Purchaser each of
the following instruments and documents:
(a) a Bill of Sale in the form annexed hereto as
Exhibit 8.1A;
(b) assignment of trade names in the form annexed
hereto as Exhibit 8.1B;
(c) General Assignment and Assumption Agreement in
the form annexed hereto as Exhibit 8.1C;
(d) such other deeds, instruments of conveyance,
assignment and transfer, in form and substance
satisfactory to Purchaser and its counsel, as shall be
necessary or appropriate to convey, transfer and assign
and to vest in, Purchaser good and marketable title to
the Purchased Assets, free and clear of all liabilities,
obligations, liens and encumbrances of any kind or
nature whatsoever;
(e) the certificate required by Section 6.4;
(f) the opinion required by Section 6.5;
(g) evidence that all of the consents and
approvals required by Sections 6.6 and 7.6 have been
obtained;
(h) all assignments of agreements, and all
applicable consents of other parties thereto, required
by Section 6.7;
(i) the Seller Parent Guaranty required by
Sections 6.11 and 10.10;
(j) the Trademark License Agreement required by
Sections 6.12 and 10.4;
(k) the Non-Competition Agreements required by
Sections 6.13 and 10.7;
(l) the Ontario Assets Agreement required by
Sections 6.15 and 10.12;
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(m) the CIT Termination Documents required by
Sections 2.1.1 and 6.16;
(n) the Additional Termination Documents required
by Sections 2.1.3 and 6.17;
(o) the Intercreditor Agreement required by
Sections 2.1.2 and 6.18;
(p) all keys and combinations to locks, safes and
security systems relating to the Purchased Assets;
(q) all contracts, files and other data and
documents pertaining to the Purchased Assets; and
(r) such other certified resolutions, documents
and certificates as are required to be delivered by
Seller pursuant to the provisions of this Agreement.
8.2 Items to be Delivered by Purchaser. At the Closing,
Purchaser will deliver or cause to be delivered to Seller each of
the following instruments and documents:
(a) immediately available funds in the amount of
the Cash Portion of the Purchase Price, together with
the release of the Downpayment to Seller, as required by
Section 2.1;
(b) The Purchase Note required by Section 2.1;
(c) the certificate required by Section 7.4;
(d) the opinion required by Section 7.5;
(e) the General Assignment and Assumption
Agreement in the form annexed hereto as Exhibit 8.1C;
(f) the Trademark License Agreement required by
Sections 7.7 and 10.11; and
(g) the Purchaser Affiliate Guaranty required by
Sections 7.8 and 10.11; and
(h) the Ontario Assets Agreement required by
Sections 7.9 and 10.12; and
(i) such other certified resolutions, documents
and certificates as are required to be delivered by
Purchaser pursuant to the provisions of this Agreement.
ARTICLE IX. SURVIVAL OF REPRESENTATIONS;
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INDEMNIFICATION; SECURITY.
9.1 Survival. The parties hereby agree that their
respective representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing for a
period of three (3) years; provided, however, that the
representations and warranties set forth in Sections 1.6.2 (union
agreement), 3.9 (taxes), 3.15 (environmental protection) and 3.16
(products liability), respectively, shall survive until the
expiration of the applicable statutes of limitation relating
thereto, and that no time limitation shall apply to the
representations and warranties set forth in Section 3.10 (title
to Purchased Assets).
9.2 Indemnification. Seller hereby agrees to save,
defend, indemnify and hold harmless Purchaser and its officers,
Directors, stockholders and agents (collectively, the
"Indemnified Parties") from and against any and all demands,
claims, losses, damages, liabilities, obligations, costs and
expenses of every kind, nature and description (including,
without limitation, reasonable attorneys' fees and expenses in
connection with any action, claim or proceeding relating to such
liabilities) (collectively, the "Liabilities"), suffered,
sustained, incurred or required to be paid at any time by any of
the Indemnified Parties resulting from, arising out of or
relating to: (a) the untruth, inaccuracy or breach of any
representation, warranty, covenant or agreement of Seller
contained in or made pursuant to this Agreement or in any
document, instrument or certificate delivered by or on behalf of
Seller pursuant hereto; (b) the failure of Seller to pay, perform
or discharge any liability or obligation of the Business which is
an Excluded Liability in accordance with the terms thereof, as
set forth in Section 1.5.1 hereof; or (c) any transaction, action
or event commencing or occurring on or prior to the Closing Date
which is not fully disclosed or provided for in this Agreement or
the several Exhibits hereto, whether absolute or contingent,
matured or unmatured or known or unknown (including without
limitation, any tax Liabilities).
9.3 Defense of Claims. Purchaser hereby agrees to notify
Seller with reasonable promptness of any claim asserted against
it by any third party which Seller may be obligated to indemnify
under this Agreement, which notification shall be accompanied by
a written statement setting forth the basis of such claim in
reasonable detail, and, if possible, the manner of calculation
thereof.
9.3.1 Seller shall have the right to assume the
defense of any such third-party claim asserted against Seller
and/or Purchaser, whereupon Seller shall defend such claim at its
own expense and with counsel of its choice, which counsel shall
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be reasonably satisfactory to Purchaser, and Seller shall not be
liable to Purchaser for any fees of other counsel, unless, in the
reasonable judgment of Purchaser, representation of both
Purchaser and Seller by the same counsel would be inappropriate
due to an actual or potential conflict of interest between such
parties. Notwithstanding the foregoing, Purchaser may, at its
sole option, employ counsel to represent it in such action, at
Purchaser's sole expense, and in such event, counsel selected by
Seller shall cooperate with Purchaser's counsel in the defense,
compromise or settlement of such claim. If, however, in the
reasonable opinion of Purchaser, any such claim shall involve a
matter which could have a material adverse effect upon the
Business or Purchased Assets, then Purchaser shall have the right
to assume the defense of such claim. In the event that Seller
fails or elects not to exercise its right to defend such claim or
Purchaser otherwise assumes the defense of such claim hereunder,
then Purchaser may take whatever action it deems appropriate, and
any final action with respect to such claim shall be binding and
conclusive upon Seller as to the amount of and the liability for
such claim; provided, however, that Purchaser will not settle
such action or claim without the prior consent of Seller, which
consent shall not be unreasonably withheld or delayed. The
parties hereby agree to cooperate to the fullest extent possible
in connection with any claim for which indemnification is or may
be sought hereunder.
9.4 Setoff Rights. Except as set forth in Section 2.1.2
hereof, Purchaser shall not be entitled to setoff its obligation
to pay any amounts due under the Purchase Note against the amount
of any claim for indemnification by Seller under Section 9.2
hereof.
9.5 Rights without Prejudice. The rights of Purchaser
under this Article IX are without prejudice to any other right or
remedies that they may have by reason of this Agreement or as
otherwise provided at law or in equity.
ARTICLE X. ACTIONS FOLLOWING THE CLOSING DATE.
10.1 Further Assurances. Following the Closing Date, each
party hereto shall execute and deliver, or cause to be executed
and delivered, such other documents and instruments, and will do
and perform all other acts as may reasonably be required by such
other party to evidence the validity of, or to perfect the full
and proper performance of this Agreement. Seller hereby agrees
that it will make available, without any cost, fee, expense or
charge, to Purchaser and its employees, agents, representatives,
attorneys and accountants, all books and records in the
possession or control of Seller and its Affiliates, to the extent
such books and records relate to the operation of the Business
and the Purchased Assets.
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10.2 Power of Attorney. Without limitation of any
provisions of this Agreement, effective upon the Closing, Seller
hereby duly constitutes and appoints Purchaser and any of
Purchaser's officers and their respective successors and assigns,
and each of them, as the true and lawful attorneys of Seller,
with full power of substitution, in their own names or in the
name of Seller, but for their own benefit and at their own
expense: (a) to institute and prosecute all proceedings which
any of them may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the assets
and properties comprising the Business and Purchased Assets and
to do all such acts and things in relation thereto as they shall
deem advisable; and (b) to take all actions which any of them may
deem proper in order to provide for them the licenses,
commitments, orders and other documents or instruments comprising
a part of the Business or Purchased Assets. Seller hereby
acknowledges that the foregoing powers are coupled with an
interest and, upon the Closing, shall not be revocable thereafter
in any manner or for any reason.
10.3 Preservation of Records. Purchaser hereby agrees
that it shall cause to be preserved and kept the records of
Seller related to the Business and Purchased Assets delivered to
it hereunder for a period of six (6) years following the Closing
Date, and shall make such records available to Seller as may be
reasonably required by Seller in connection with any legal
proceedings involving, or governmental investigations or tax
examinations of, Seller; provided, however, that: (i) any such
access shall not disrupt the normal operations of the Business
following the Closing; and (ii) Seller or its representatives
shall furnish Purchaser with written notice requesting such
access not less than five (5) business days prior thereto and
specifying the reasons therefor.
10.3.1 Purchaser hereby agrees that, for a period of
six (6) years following the Closing Date, it will give prior
written notice of not less than thirty (30) days to Seller of
Purchaser's intention to destroy any financial, tax or other
records acquired from Seller pursuant to this Agreement. In the
event that Seller notifies Purchaser of its intention to inspect
such records which Purchaser intends to destroy, then Purchaser
agrees to make such records available for Seller's inspection for
an additional thirty (30) days and shall deliver to Seller any
records which Seller desires to retain. Seller shall reimburse
Purchaser for its reasonable out-of-pocket expenses (which shall
not include salaries or overhead) in connection with such
delivery of records.
10.4 Trademark License Agreement. On or prior to the
Closing Date, Seller and Purchaser shall enter into an agreement
in the form of Exhibit 10.4 annexed hereto (the "Trademark
License Agreement") pursuant to which Purchaser, as Licensor,
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shall grant to Seller, as Licensee, a license on a perpetual and
royalty-free basis to utilize only those trade names and
trademarks constituting part of the Purchased Assets hereunder
which shall be designated by Seller prior to the Closing (the
"Licensed Marks") for use exclusively in connection with the Test
Switch Business following the Closing Date. The designation of
the Licensed Marks shall be made by written notice by Seller to
Purchaser, which notice shall be received prior to the Closing
Date. Pursuant to such Trademark License Agreement, Seller shall
not be permitted to utilize the Licensed Marks for any other
purpose whatsoever.
10.5 Change of Seller's Name. The parties hereby acknow-
ledge that Purchaser is acquiring the corporate name of Seller
(SUPERIOR TECHNOLOGY, INC.) as part of the Purchased Assets
hereunder. Accordingly, Seller agrees to duly amend its Articles
of Incorporation as of the Closing Date to change Seller's
corporate name to TEST SWITCH TECHNOLOGY, INC. In addition,
Seller hereby covenants and agrees to take all such actions
required to assign or transfer such corporate name to Purchaser
at the Closing.
10.6 Bulk Transfer Laws. Seller shall indemnify and hold
Purchaser harmless from and against any and all claims and
liabilities which may be asserted at any time by any third
parties against Purchaser or its successors and assigns resulting
from Seller's non-compliance with any such bulk transfer or
similar type of law applicable to the sale of the Purchased
Assets hereunder. Any such claims relating to applicable bulk
transfer laws shall be subject to Purchaser's setoff rights set
forth in Section 2.1.2 hereof. In addition, Seller hereby waives
any vendor liens on or attaching to the Purchased Assets.
10.7 Non-Competition Agreements. In order that Purchaser
shall possess and enjoy the full benefits of the Business and
Purchased Assets purchased hereunder, each of Seller and the
Seller Parent Entity and their respective Affiliates shall agree
not to compete, directly or indirectly, with the Business for a
period of five (5) years following the Closing Date and otherwise
in accordance with the terms of the Non-Competition Agreements to
be entered into between Purchaser and each of Seller and the
Seller Parent Entity on or prior to the Closing Date in the form
annexed hereto as Exhibit 10.7.
10.8 Collection of Accounts Receivable. On the Closing Date,
Seller shall deliver or cause to be deliver to Purchaser an
itemized list of all accounts receivable relating to the Business
outstanding as of the close of business of the business day
immediately preceding the Closing Date (the "Pre-Closing Accounts
Receivable"), which list shall be duly certified by an officer
of Seller. As set forth in Section 1.3 hereof, all accounts
receivable of the Business outstanding as of the Closing Date
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shall be Excluded Assets and retained by Seller. In addition, on
the Closing Date, Seller shall give written notice of the sale
and purchase of the Business hereunder to all of the customer
accounts of the Business, and shall direct that all payments
relating to the sale of Business products following the Closing
be made directly to Purchaser or its designee.
10.8.1 Following the Closing, Seller shall collect
the Pre-Closing Accounts Receivable at its sole expense. Seller
shall promptly remit to Purchaser or its designee any funds so
collected in respect of any accounts receivable of the Business
for the period following the Closing Date. In addition,
Purchaser shall promptly remit to Seller or its designee any
funds so collected in respect of any Pre-Closing Accounts
Receivable.
10.8.2 Seller shall have the right following the
Closing Date to pursue the collection of any Pre-Closing Accounts
Receivable; provided, however, that Seller shall not commence any
collection or other action against any customer of the Business
without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld or delayed. In addition,
Seller agrees to utilize its best efforts not to otherwise engage
in any action which could injure customer relationships of the
Business following the Closing Date.
10.9 Relocation of Purchased Assets. The parties hereby
acknowledge and agree that Purchaser intends to move and relocate
all of the Purchased Assets to its plant facility in Albemarle,
North Carolina and/or other locations designated solely by
Purchaser as promptly as practicable following the Closing Date.
Accordingly, Seller hereby grants to Purchaser a license to use
and occupy the Premises at the Facilities on a rent-free basis
for purposes of relocating the Purchased Assets for a period of
time not exceeding thirty (30) days following the Closing Date.
During such relocation period, Seller shall reasonably assist and
cooperate with Purchaser in connection with the shipment and
relocation of the Purchased Assets.
10.10 Seller Parent Guaranty. On the Closing Date, the
Seller Parent Entity shall duly execute and deliver a guaranty in
favor of Purchaser in the form of Exhibit 10.10 annexed hereto
("the Seller Parent Guaranty"). Pursuant to the Seller Parent
Guaranty, the Seller Parent Entity shall guarantee all of the
obligations of Seller under this Agreement, including without
limitation, any indemnification obligations hereunder.
10.11 Purchaser Affiliate Guaranty. On the Closing Date,
PROVIDENT shall duly execute and deliver a guaranty in favor of
Seller in the form of Exhibit 10.11 annexed hereto (the
"Purchaser Affiliate Guaranty"). Pursuant to the Purchaser
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Affiliate Guaranty, PROVIDENT shall guarantee all of the
obligations of Purchaser under this Agreement.
10.12 Ontario Assets Agreement. On the Closing Date, Seller
Parent Entity, Purchaser and HYDEL shall enter into an agreement
(the "Ontario Assets Agreement") providing that, during the
initial period following the Closing not exceeding 120 days
thereafter (the "Vendor Period"), HYDEL shall utilize its best
efforts to act as manufacturer of all of Purchaser's requirements
for certain component parts and sub-assemblies in connection with
the Business for the designated purchase price and otherwise in
the ordinary course. Promptly upon expiration of such Vendor
Period, subject to the terms and conditions set forth in the
Ontario Assets Agreement, Purchaser shall purchase all equipment
and inventory in respect of the Business which are then owned by
HYDEL and located at the Scarborough, Ontario Facility (the
"Ontario Assets"). The purchase price for the Ontario Assets
shall be an amount equal to $150,000.00 plus the aggregate value
of the inventory purchased thereunder, which purchase price shall
be payable in its entirety in cash at the closing thereof. For
purposes hereof, "HYDEL" shall mean HYDEL ENTERPRISES, INC.
(formerly Stelpro Limited), which is a corporation organized
under the laws of the Province of Ontario, Canada, and a wholly-
owned subsidiary of the Seller Parent Entity and an Affiliate of
Seller.
ARTICLE XI. MISCELLANEOUS PROVISIONS.
11.1 Expenses; Transfer Taxes. Except as otherwise
expressly provided in this Agreement, each of the parties hereto
shall bear its own expenses in connection with this Agreement and
the transactions contemplated hereby. Any transfer, documentary,
gross receipts, sales and use taxes or other similar taxes
resulting from the sale, assignment, transfer and delivery of the
Purchased Assets hereunder shall be borne exclusively by Seller.
11.2 Confidential Information. Each party hereby agrees
that such party and its or his representatives will hold in
strict confidence all information and documents received from the
other parties and, if the transaction herein contemplated shall
not be consummated, each party will continue to hold such
information and documents in strict confidence and will return to
such other parties all such documents (including the Exhibits
hereto) then in such receiving party's possession without
retaining copies thereof; provided, however, that each party's
obligations under this Section 11.2 to maintain such
confidentiality shall not apply to any information or documents
that are in the public domain at the time furnished by the others
or that become in the public domain thereafter through any means
other than as a result of any act of the receiving party or of
its agents, officers, directors or stockholders, as the case may
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be, which constitutes a breach of this Agreement, or that are
required by applicable law to be disclosed. The parties hereby
agree that the remedy at law for any breach of this Section 11.2
will be inadequate and a non-breaching party will be entitled to
injunctive relief to compel the breaching party to perform or
refrain from action required or prohibited hereunder. The
remedies set forth in this Section 11.2 shall not be deemed to be
exclusive of any rights or remedies which the non-breaching party
may be entitled to at law, in equity or otherwise.
11.3 Modification, Termination or Waiver. This Agreement
may be amended, modified, superseded or terminated, and any of
the terms, covenants, representations, warranties or conditions
hereof may be waived, but only by a written instrument executed
by the party waiving compliance. The failure of any party at any
time or times to require performance of any provision hereof
shall in no manner affect the right of such party at a later time
to enforce the same.
11.4 Publicity. The parties hereby agree that no
publicity, release or other public announcement concerning the
transactions contemplated by this Agreement shall be issued by
either party without the advance approval of both the form and
substance of the same by the other party and its counsel, which
approval, in the case of any publicity, release or other public
announcement required by applicable law, shall not be
unreasonably withheld or delayed.
11.5 Notices. Any notice or other communication required or
which may be given hereunder shall be in writing and either be
delivered personally or be mailed by certified or registered
mail, postage prepaid, and shall be deemed given when so
delivered personally, or if mailed, three (3) days after the date
of mailing, as follows:
if to Seller, at:
Superior Technology, Inc.
c/o Electric Gas and Technology, Inc.
13636 Neutron Road
Dallas, Texas 75244-4410
Attention: S. Mort Zimmerman, President
with a copy, to:
John W. Clark, Jr., Esq.
Glen Lakes Tower
9400 N. Central Expressway
Suite 1320
Dallas, Texas 75231
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if to Purchaser, at:
American Circuit Breaker Corporation
c/o The Provident Group, Inc.
122 East 42nd Street
Suite 1115
New York, New York 10017
Attention: Nathan J. Mazurek, President
with a copy to:
Frenkel & Hershkowitz
16 East 34th Street
New York, New York 10016
Attention: Joshua Glikman, Esq.
The parties may change the persons and addresses to which the
notices or other communications are to be sent by giving written
notice of any such change in the manner provided herein for
giving notice.
11.6 Binding Effect and Assignment. This Agreement shall
be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereto. No assignment of
any rights or delegation of any obligations provided for herein
may be made by any party hereto without the express written
consent of the other party; provided, however, that Purchaser may
at any time assign all or any portion of its right, title and
interest under this Agreement to any of its Affiliates without
the consent or approval of Seller.
11.7 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof, and merges and supersedes all prior agreements and
understandings, written or oral, with respect thereto.
11.8 Exhibits. All Exhibits annexed hereto and the documents
and instruments referred to herein or required to be delivered
simultaneously herewith or at the Closing are expressly made a
part of this Agreement as fully as though completely set forth
herein, and all references to this Agreement herein or in any of
such Exhibits, documents or instruments shall be deemed to refer
to and include all such Exhibits, documents and instruments.
11.9 Affiliates. For purposes of this Agreement, an
"Affiliate" of any party hereto is a person or entity that
directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such
party. As used in the foregoing sentence, the term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
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person or entity whether through the ownership of voting
securities by contract or otherwise.
11.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of
Delaware, without giving effect to principles of conflicts of
law.
11.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
but which together shall constitute one and the same instrument.
11.12 Section Headings. The section headings contained in
this Agreement are inserted for conveniences of reference only
and shall not affect the meaning or interpretation of this
Agreement. Any reference in this Agreement to the plural form
shall also be deemed to refer to the singular form when
appropriate.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
SUPERIOR TECHNOLOGY, INC.
By: /s/ S. Mort Zimmerman
S. Mort Zimmerman, President
AMERICAN CIRCUIT BREAKER CORPORATION
By: /s/ Nathan J. Mazurek
Nathan J. Mazurek, President
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EXHIBITS TO APA
Exhibit 1.3 - Excluded Equipment
Exhibit 1.4 - Assumed Liabilities
Exhibit 2.1 - Purchase Note
Exhibit 3.2 - Subsidiaries
Exhibit 3.3 - Consents - Seller
Exhibit 3.5 - Liabilities
Exhibit 3.8 - Adverse Developments
Exhibit 3.9 - Taxes
Exhibit 3.10 - Liens
Exhibit 3.11 - Intellectual Property
Exhibit 3.12 - Insurance Policies
Exhibit 3.13 - Litigation
Exhibit 3.14 - Violations
Exhibit 3.15 - Environmental Protection
Exhibit 3.16 - Products Liability
Exhibit 3.17 - Listed Agreements
Exhibit 3.18 - Personal Property
Exhibit 3.19 - Inventory
Exhibit 3.21 - Permits
Exhibit 3.23 - Customers; Suppliers
Exhibit 4.3 - Consents - Purchaser
Exhibit 8.1A - Bill of Sale
Exhibit 8.1B - Assignment of Trade Names
Exhibit 8.1C - General Assignment and Assumption Agreement
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Exhibit 10.4 - Trademark License Agreement
Exhibit 10.7 - Non-Competition Agreements
Exhibit 10.10 - Seller Parent Guaranty
Exhibit 10.11 - Purchaser Affiliate Guaranty
Exhibit 10.12 - Ontario Assets Agreement
Schedules
Schedule A - Allocation Statement
Additional Items
1. Officers' Certificates - Seller
2. Officers' Certificates - Purchaser
3. Opinion - Seller's Counsel
4. Opinion - Purchaser's Counsel
5. Amended Articles of Incorporation - Seller
6. CIT Termination Documents
7. Additional Termination Documents
8. Certified List of Pre-Closing Accounts Receivable
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