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SECURITIES AND EXCHANGE COMMISSION Execution Copy
WASHINGTON D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 11, 1996
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POWER DESIGNS INC.
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(Exact Name of Registrant as Specified in Charter)
New York 0-1921 11-1708714
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(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification Number)
250 Executive Drive, Edgewood, New York 11717
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(Address of principal executive offices) (Zip Code)
(516) 586-0200
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Exhibit Index at Page 3
October 28, 1996
Page l
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ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS.
(a) and (b) On October 11, 1996 the registrant's wholly-owned subsidiary,
PDIXF Acquisition Corp. ("PAC"), entered into an Asset Purchase Agreement with
Technipower, Inc. ("TPI"), Constant Power, Inc. ("CPI") and Penril Datacomm
Networks, Inc. ("Penril"), parent of both TPI and CPI. The registrant acquired
all of the TPI and CPI assets employed in the manufacture of three product lines
(the "Business"): "Variac" autotransformers, "Mil Spec" power supplies and AC
power protection devices.
The registrant intends to continue the present use of all of the
assets acquired.
CONSIDERATION
Total consideration, which was determined through arms-length
negotiations, consisted of $1,586,085 in cash, a $2,750,000 Term Note issued to
Penril by PAC, a royalty equal to 2% of the Business's gross sales during the
period from July 1, 1997 through June 30, 2001, and various assumed liabilities
related to the acquired lines of business, valued at approximately $632,600.
The Term Note bears annual interest of 2% above prime rate, and a maturity date
of December 31, 1996.
SOURCE OF FUNDS
Funds for the transaction under the Asset Purchase Agreement were
raised through borrowings and nonpublic sales of the registrant's securities to
the Inverness Corporation; Equitas, L.P.; and six individuals.
MATERIAL RELATIONSHIPS
There are no material relationships between any of the persons from
whom the assets were acquired and the registrant, PAC, any of their affiliates,
directors, or officers, or any associates of any such director or officer.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) It is impracticable to provide the required financial statements for
the acquired businesses at this time. Such statements will be filed no later
than December 10, 1996.
October 28, 1996
Page 2
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(c) Exhibits
Page in
consecutively
Exhibit Page numbered copy
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(10) MATERIAL CONTRACTS
(i) Asset Purchase Agreement A-1
(ii) $2,750,000 Term Note B-1
SIGNATURES
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 hereunto duly authorized.
Date: OCTOBER 25, 1996 By: /s/ H. Rudolf Zeidler
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H. Rudolf Zeidler
President
October 28, 1996
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ASSET PURCHASE AGREEMENT
DATED
OCTOBER ___, 1996
AMONG
PDIXF ACQUISITION CORP.
TECHNIPOWER, INC.,
CONSTANT POWER, INC.
AND
PENRIL DATACOMM NETWORKS, INC.
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TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS............................ 1
1.01 "Acquired Assets"...................................................1
1.02 "Affiliate" ........................................................2
1.03 "Assumed Liabilities" ..............................................2
1.04 "Excluded Assets"...................................................3
1.05 "Gross Sales".......................................................3
1.06 "Limited Assignment Assets".........................................3
1.07 "Retained Liabilities"............................................. 3
1.08 "Accounting Terms"..................................................4
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES........................ 4
2.01 PURCHASE AND SALE OF ASSETS.........................................4
2.02 CONSIDERATION.......................................................4
2.03 DEPOSIT.............................................................4
ARTICLE III
THE CLOSING................................. 5
3.01 TIME AND PLACE......................................................5
3.02 DELIVERIES BY THE SELLER ...........................................5
3.03 DELIVERIES BY PURCHASER.............................................5
3.04 LIMITED ASSIGNMENT ASSETS ..........................................5
3.05 FURTHER ASSURANCES .................................................6
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ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS..................... 6
4.01 HOLD HARMLESS.......................................................6
4.02 BULK SALES LAWS.....................................................6
4.03 MAIL RECEIVED AFTER CLOSING........................................ 6
4.04 SELLER'S RECORDS; ACCESS BY SELLER................................. 7
4.05 EMPLOYEE MATTERS .................................................. 7
4.06 ALLOCATION AGREEMENT............................................... 8
4.07 COVENANT OF NON-COMPETITION: NO POACHING OF EMPLOYEES.............. 8
4.08 ROYALTY.............................................................9
4.09 CHANGE OF NAME.....................................................10
4.10 POST-CLOSING ADJUSTMENT............................................10
4.11 LEASE OF PREMISES..................................................11
4.12 INVERNESS..........................................................11
4.13 CONFESSION OF JUDGMENT.............................................11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER.................................. 11
5.01 CORPORATE ORGANIZATION; ETC. ......................................11
5.02 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES.................12
5.03 CREDITOR'S ARRANGEMENT.............................................12
5.04 NO SUBSIDIARIES....................................................12
5.05 NO VIOLATION.......................................................12
5.06 FINANCIAL STATEMENTS...............................................12
5.07 INTERIM OPERATIONS.................................................13
5.08 NO UNDISCLOSED LIABILITIES; ETC....................................13
5.09 TITLE TO ASSETS; LIENS.............................................13
5.10 EQUIPMENT..........................................................13
5.11 LEASES.............................................................13
5.12 PATENTS, TRADEMARKS, TRADE NAME PROVISION..........................13
5.13 LITIGATION.........................................................14
5.14 LABOR MATTERS; ERISA...............................................14
5.15 PRODUCT WARRANTIES.................................................14
5.16 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS............14
5.17 PERSONNEL..........................................................14
5.18 ACCOUNTS RECEIVABLE................................................15
5.19 CONTRACTS..........................................................15
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5.20 CUSTOMERS AND SUPPLIERS............................................15
5.21 NO OTHER REPRESENTATIONS OR WARRANTIES.............................15
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
6.01 CORPORATE ORGANIZATION: ETC........................................16
6.02 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES.................16
6.03 CREDITOR'S ARRANGEMENT.............................................16
6.04 NO VIOLATION.......................................................16
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........................17
7.02 INDEMNIFICATION BY SELLER AND PENRIL...............................17
7.03 INDEMNIFICATION BY PURCHASER.......................................17
7.04 LIMITATIONS ON INDEMNIFICATION; ADJUSTMENTS........................17
7.05 CONDITIONS OF INDEMNIFICATION......................................18
7.06 DEFENSE OF ENVIRONMENTAL CLAIMS....................................18
ARTICLE VIII
MISCELLANEOUS PROVISIONS...........................19
8.01 COMMISSIONS AND FINDERS' FEES......................................19
8.02 AMENDMENT AND MODIFICATION.........................................20
8.03 WAIVER OF COMPLIANCE...............................................20
8.04 EXPENSES...........................................................20
8.05 NOTICES............................................................20
8.06 ASSIGNMENT.........................................................20
8.07 GOVERNING LAW......................................................21
8.08 COUNTERPARTS.......................................................21
8.09 HEADINGS...........................................................21
8.10 ENTIRE AGREEMENT...................................................21
8.11 THIRD PARTIES......................................................21
8.12 MUTUAL AGREEMENT...................................................21
8.13 SEVERABILITY.......................................................21
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EXHIBITS AND SCHEDULES
Exhibit A Instrument of Assumption
of Liabilities
Exhibit B Indenture and Bill of Sale
Schedule 1.01(a) Real Property Lease
Schedule 1.01(b) Machinery and Equipment
Schedule 1.01(d) Accounts Receivable
Schedule 1.01(e) Contracts, Etc.
Schedule 1.01(f) Intellectual Property
Schedule 1.01(h) Government Permits
Schedule 1.03(a) Accounts Payable
Schedule 4.05 Covered Employees
Schedule 5.05 Consents
Schedule 5.11 Leases
Schedule 5.14 Pension Plans
Schedule 5.15 Product Warranties
Schedule 5.16 Compliance
Schedule 5.17 Personnel, Benefit Plans
Schedule 5.19 Material Contracts
Schedule 5.20 Customers and Suppliers
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated October ___, 1996 among PDIXF Acquisition
Corp., a New York corporation ("Purchaser"), Technipower, Inc., a Delaware
corporation ("TPI"), Constant Power, Inc., a Delaware corporation ("CPI"), and
Penril Datacomm Networks, Inc., a Delaware corporation and the parent entity of
TPI and CPI ("Penril"). TPI and CPI are hereinafter sometimes collectively
referred to as "Sellers" and individually as "Seller."
This Agreement sets forth the terms and conditions upon which Sellers will
sell to Purchaser, and Purchaser will purchase from Sellers, all of the assets
of Sellers employed in the manufacture of the "Variac" autotransformer line,
"Mil Spec" power supply line and AC power protection line, as hereinafter set
forth.
In consideration of the mutual agreements contained herein, intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement each of the following terms shall have the
following meaning:
1.01 "Acquired Assets" shall mean all of Sellers' and/or Penril's right,
title and interest in all of the assets employed in the "Variac"
autotransformer, "Mil Spec" power supply and AC power protection businesses
currently conducted by Sellers (collectively the "Business"), including, without
limitation, each of the following, but expressly excluding the "Excluded Assets"
(as hereinafter defined):
(a) the leasehold interest in real property held by TPI, including
leasehold improvements thereon, which is described in Schedule 1.01(a) hereto
(the "Premises").
(b) all machinery, equipment and other items of tangible personal
property owned by either Seller and all leasehold interests in tangible personal
property held by Seller, which are used by the Business, including those listed
on Schedule 1.01(b) hereto;
(c) all inventories of raw materials, work-in-process, finished
products, supplies, spare parts and packaging materials used in the Business;
(d) all accounts and notes receivable of either Seller relating to
the Business, including those listed on Schedule 1.01(d) hereto (the "Accounts
Receivable");
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(e) all rights and interests of either Seller in, to and under all
contracts, leases, commitments, licenses and agreements relating to the
Business, including those listed on Schedule 1.01(e) hereto;
(f) all rights and interest of either Seller in, to and under all
patents, trademarks, patent and trademark applications, trade names, licenses,
copyrights and inventions used in the Business, including the trade names
"Technipower", the trademark "Variac", the trademark and tradename "Constant
Power", and those listed on Schedule 1.01(f) hereto;
(g) all of the books and records of either Seller relating to the
Business, including those which pertain to the purchase of materials, supplies
or services, production and sale of products, personnel, customers, customer
credit, collections, or maintenance.
(h) all Federal, state and local governmental licenses, permits,
approvals and authorizations held by either Seller, relating to the Business,
including those listed on Schedule 1.01(h) hereto;
(i) all intangible assets of either Seller used in the Business,
including customer lists, trade secrets, drawings, designs, specifications, test
procedures, and similar information generally described as know-how, research,
marketing and other data, contract rights, manuals, rights as an unpaid vendor,
inventions, royalties, causes of action, rights of set off and credit balances,
and the good will of the Business as a going concern;
(j) employee receivables and temporary or permanent travel advances
to employees relating to the Business; and
(k) all computer software, databases and other information stored in
electronic or other form, including mechanical and CAD drawings and designs,
relating to the Business.
1.02 "Affiliate" shall mean a corporation or other legal or natural person
controlling, controlled by or under common control with another corporation or
other legal or natural person. "Control" means possessing the ability to
influence the management or policies of a corporation or other legal or natural
person.
1.03 "Assumed Liabilities" shall mean all of the following liabilities or
obligations of either Seller or Penril, but expressly excluding the Retained
Liabilities:
(a) all liabilities and obligations of either Seller for accounts
payable relating to the Business existing on the Closing Date, including those
listed on Schedule 1.03(a) hereto which, to the best knowledge of Sellers and
Penril, are all the accounts payable of either Seller as at September 30, 1996
(the "Accounts Payable");
(b) all obligations of either Seller to be performed or satisfied
after the Closing under all contracts, leases, commitments, licenses, product
warranties and agreements of either Seller, including, without limitation, the
lease of the Premises;
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(c) all liabilities and obligations of either Seller attributable to
the operation or ownership of the Acquired Assets by Purchaser after the
Closing; and
(d) all liabilities and obligations being assumed by Purchaser
pursuant to Section 4.05 hereof.
1.04 "Excluded Assets" shall mean all of the following assets of either
Seller which are not being transferred to Purchaser:
(a) all cash and cash equivalents, including cash on hand and in bank
accounts, certificates of deposit or other securities; and
(b) all corporate records of either Seller, including all minutes
books, stock books and stock ledgers; and
(c) all rights of Sellers under this Agreement or any related
agreements or instruments.
1.05 "Gross Sales" shall mean the gross receipts from sales of "Covered
Products" less freight, sales and use taxes, customary cash and quantity
discounts, returns and allowances to the extent such items are actually allowed
or paid. "Covered Products" shall include all AC to AC power source products,
commonly known as uninterruptable power supplies, and all power line
conditioning products utilizing any of the Acquired Assets referred to in
subsections 1.01(f), (i) or (k) hereof which constitute proprietary technology
of Sellers on the date hereof and all modifications and improvements of such
products, and shall not include products that do not utilize any of such
Acquired Assets.
1.06 "Limited Assignment Assets" shall mean Acquired Assets, if any, which
may not be transferred or assigned without the approval of, or waiver by, a
third party, or as to which the transfer or assignment thereof would otherwise
be deemed a breach of the agreement with a third party.
1.07 "Retained Liabilities" shall mean all liabilities and obligations of,
or claims against, Seller of whatever nature, whether accrued, absolute,
contingent or otherwise, other than the Assumed Liabilities, including, without
limitation, the following:
(a) all liabilities and obligations of either Seller to pay Federal,
state, local or foreign taxes (and any deficiencies, penalties or interest which
may be assessed thereon) accruing through the Closing Date (as hereinafter
defined) including without limitation, sales taxes (other than sales taxes
incurred in connection with the transactions contemplated hereby);
(b) any liabilities with respect to any actual or alleged employee or
former employee work-related injury which occurred on or prior to the Closing
Date;
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(c) any liability of either Seller under any litigation, proceeding
or claim of any nature by any person or entity arising out of or relating to any
event which occurred prior to the Closing Date;
(d) any liability or obligation of either Seller not related to the
Business; and
(e) all liabilities to Penril and its Affiliates and any liability
for borrowed money.
1.08 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles and practices.
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
2.01 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement and in reliance upon the representations, warranties and
covenants set forth herein, at the Closing Seller shall sell, transfer, convey,
assign and deliver to Purchaser, and Purchaser shall purchase, acquire and
accept the Acquired Assets.
2.02 CONSIDERATION. In consideration of the sale, assignment, transfer and
delivery of the Acquired Assets, Purchaser shall:
(a) pay to Seller in cash at the Closing, by certified or official
bank check or wire transfer of funds to an account designated by Seller,
$1,586,085 representing the sum of (i) $1,542,000 plus (ii) $44,085, the
mutually-agreed estimate of the amount equal to the remainder of (A) the product
of the Accounts Receivable as at the close of business on the Closing Date
multiplied by 90% minus (B) the Accounts Payable as at the close of business on
the Closing Date minus (C) the amount of vacation and holiday pay reflected on
Schedule 4.05 hereto, and which is subject to adjustment pursuant to Section
4.10 hereof and credit of the Deposits (as hereinafter defined).
(b) deliver to Sellers at the Closing a Term Note of Purchaser in the
form of Exhibit C hereto (the "Note"), in a principal amount of $2,750,000.
(c) pay to Sellers a royalty (the "Royalty") equal to two percent (2%)
of Gross Sales as provided in Section 4.08 hereof; and
(d) assume the Assumed Liabilities and deliver to Sellers at the
Closing an Instrument of Assumption in the form of Exhibit A hereto.
2.03 DEPOSITS. The "Deposit" (as defined in the Escrow Agreement dated
July 2, 1996 among Penril, TPI, Power Designs, Inc., the parent company of
Purchaser ("Parent") and Adair Law Firm, as Escrow Agent) and the "Deposit" (as
defined in the Escrow Agreement dated July 2, 1996 among Penril, CPI, Parent and
Adair Law Firm, as Escrow Agent) shall be paid in full
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to Sellers and shall be applied against and credited to the cash payable at
Closing pursuant to Section 2.02(a) hereof.
ARTICLE III
THE CLOSING
3.01 TIME AND PLACE. The Closing of the transactions contemplated by this
Agreement is taking place simultaneously with the execution and delivery of this
Agreement. The date upon which the Closing is occurring is sometimes herein
referred to as the "Closing Date".
3.02 DELIVERIES BY THE SELLER. As a condition to the obligations of
Purchaser hereunder, Sellers are delivering to Purchaser at the Closing the
following:
(a) a Bill of Sale in the form of Exhibit B hereto;
(b) all other documents and instruments as, in the reasonable opinion
of counsel for Purchaser, are necessary to transfer the Acquired Assets; and
(c) all other previously undelivered documents required to be
delivered by Sellers or Penril at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
3.03 DELIVERIES BY PURCHASER. As a condition to the obligations of Sellers
and Penril hereunder, Purchaser shall deliver to Sellers at the Closing the
following:
(a) the consideration set forth in subsections 2.02(a) and (d);
(b) the Note;
(c) a Guaranty of the Note in favor of Sellers executed and delivered
by Parent;
(d) a Pledge Agreement (the "Pledge Agreement") securing the
Guaranty;
(e) a Security Agreement (the "Security Agreement") granting Sellers
a security interest in all of Purchaser's assets, together with UCC financing
statements; and
(f) the agreement of Inverness Corporation ("Inverness") referred to
in Section 4.12 hereof; and
(g) all other previously undelivered documents required to be
delivered by Purchaser at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
3.04 LIMITED ASSIGNMENT ASSETS. If the Closing would cause any of the
Limited Assignment Assets automatically to revert to any third parties, or to
give rise to any right of
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purchase, or would cause the agreement pursuant to which Seller's rights in that
Limited Assignment Asset derive to be deemed terminated or otherwise breached,
or if a third party timely indicates its intention to exercise its right not to
consent to the transfer to Purchaser of a Limited Assignment Asset, then such
Limited Assignment Asset shall not be transferred hereby and Seller shall retain
the ownership of such Limited Assignment Asset but shall provide to Purchaser
substantially the same economic benefit in respect of such Limited Assignment
Asset as Purchaser would have received if such Limited Assignment were actually
an Acquired Asset, by means of subcontract, license or lease; provided that
neither Seller nor Penril shall have any liability to Purchaser arising out of
the post-Closing termination of any contract, lease, license or commitment.
3.05 FURTHER ASSURANCES. After the Closing, Purchaser and Sellers shall
from time to time, at the request of the other and without further consideration
(but at the expense of the requesting party), execute and deliver such other
documents and instruments and take such other actions as the other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby.
ARTICLE IV
RELATED AGREEMENTS AND TRANSACTIONS
4.01 HOLD HARMLESS.
(a) Sellers and Penril, jointly and severally, covenant and agree to
hold Purchaser and its Affiliates harmless from any liability and out-of-pocket
expenses, including attorneys' fees and disbursements, arising out of successful
claims made, or suits or proceedings brought, against Purchaser or its
Affiliates by any party relating to the Retained Liabilities or Sellers' or
Penril's acts or omissions (except those relating to or resulting in Assumed
Liabilities) arising or accruing prior to the Closing.
(b) Purchaser covenants and agrees to hold Sellers, Penril and their
Affiliates harmless from any liability and out-of-pocket expenses, including
attorneys' fees and disbursements, arising out of successful claims made, or
suits or proceedings brought, against Seller, Penril or their Affiliates by any
party relating to the Assumed Liabilities or Purchaser's acts or omissions
arising or accruing after the Closing.
4.02 BULK SALES LAWS. Sellers and Penril, jointly and severally, covenant
and agree to indemnify Purchaser from any and all successful claims made by
creditors of a Seller (other than creditors with respect to the Assumed
Liabilities) relating to provisions of the "bulk sales laws" of the State of
Connecticut which may be applicable to the transactions contemplated hereby and
from all reasonable out-of-pocket costs (including reasonable attorneys' fees)
incurred in the defense of any such claims made under such laws.
4.03 MAIL RECEIVED AFTER CLOSING. Following the Closing, Purchaser may
receive and open all mail addressed to Sellers and deal with the contents
thereof in its discretion to the extent that such mail and the contents thereof
relate to the Acquired Assets or the Assumed Liabilities.
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Purchaser agrees to deliver or cause to be delivered to Sellers all other mail
received addressed to a Seller which does not relate to the Acquired Assets or
the Assumed Liabilities; and Sellers agree to deliver or cause to be delivered
to Purchaser all mail received by a Seller or Penril relating to the Acquired
Assets or the Assumed Liabilities.
4.04 SELLERS' RECORDS; ACCESS BY SELLERS. After the Closing, Purchaser
shall afford Sellers, Penril, their counsel, accountants and other
representatives access to and assistance with such books and records acquired by
Purchaser pursuant hereto as may be reasonably necessary in order for Sellers
and Penril to prepare tax reports and returns required to be filed by it, to
respond to inquiries by governmental authorities, to deal with Retained
Liabilities or for other appropriate reasons. Purchaser shall not dispose of
any such books or records of Sellers until it has given reasonable notice to
Penril of its intention to do so and given Penril a reasonable opportunity to
take possession of such books and records to be disposed of.
4.05 EMPLOYEE MATTERS. (a) Effective as of the Closing, Purchaser shall
offer employment to all persons employed by Sellers listed on Schedule 4.05
hereto (the "Covered Employees") at substantially the same wages, salary,
benefits, hours and conditions of employment as in effect immediately prior to
the Closing.
(b) The cash purchase price to be paid at the Closing has been
reduced by the amount of vacation and holiday pay reflected on Schedule 4.05
hereto. Therefore, Purchaser shall be responsible for and cause to be paid in
the normal course of business the vacation and holiday pay for Covered Employees
reflected on Schedule 4.05 hereof.
(c) Purchaser shall be responsible and liable for any payment in
the nature of severance pay due to any Covered Employee by reason of any
action taken by Purchaser after the Closing.
(d) Sellers shall be responsible for payment of all claims made by
Covered Employees and their covered dependents under Sellers' group health and
dental benefit plans prior to the Closing Date. Purchaser shall provide group
health and dental benefit plans for the Covered Employers and their covered
dependents as soon as practical after the Closing. As an interim measure,
Sellers shall, for a period not to exceed 90 days from the Closing Date, provide
medical and dental coverage to the Covered Employees and their covered
dependents under Sellers' group health and dental benefit plans. Purchaser
understands that Sellers' plans are self-insured and agrees to reimburse Sellers
for the full cost to Seller of providing such coverage, I.E., allocable premiums
plus the cost of (i) direct out of pocket expenses and (ii) all claims initiated
by Covered Employees or their covered dependents after the Closing Date in
excess of such premiums. Purchaser shall reimburse Sellers on a monthly basis,
within ten days of Seller's invoice setting forth in reasonable detail the cost
of such coverage. Purchaser's group health and dental plans shall take into
account in the plan year in which the Closing occurs any expenses incurred by
such Employees and their covered dependents during such plan year but prior to
the change-over to Purchaser's plans for the purpose of satisfying deductible or
coinsurance requirements to the same extent as if such expenses had been
incurred after such change-over.
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(e) As soon as is practicable after the Closing Date, Purchaser shall
establish a defined contribution savings plan qualified under Section 401(k) of
the Internal Revenue Code of 1986, as amended (the "Code"), in which the Covered
Employees shall be eligible to participate as of the Closing Date (the
"Purchaser's Successor Plan"). Purchaser shall, as soon as practicable after
the Closing Date provide Sellers with a copy of a favorable Internal Revenue
Service determination letter covering the Purchaser's Successor Plan. Within 60
days following Seller's receipt of such letter, Sellers shall cause the trustee
of Sellers' 401(k) plan in which the Covered Employees participate prior to the
Closing to transfer assets equal to the account values of all such Covered
Employees on a fully vested basis to the trustee of Purchaser's Successor Plan.
Purchaser's Successor Plan shall recognize service with Seller and participation
in Sellers' plan for purposes of determining vesting, eligibility to receive
benefits and other service-related rights in Purchaser's Successor Plan, and in
no event shall any Employee's vested interest in his account (including in
respect of future accruals or allocations) under Purchaser's Successor Plan be
less than his vested interest in his account in Seller's plan.
(f) Purchaser shall be responsible and liable for any claim in
respect of the Covered Employee arising under any state worker's compensation or
similar law which is based on any occurrence on or after the Closing Date.
(g) Purchaser agrees that for a period of 60 days following the
Closing Date, Purchaser shall not undertake a "plant closing" or a "mass layoff"
(as such terms are defined in the Worker Adjustment and Retraining Notification
Act ["WARN"]) or undertake any other actions requiring notification pursuant to
any similar state or local law or regulation to any person or entity. Purchaser
further agrees and acknowledges that on and after the Closing Date, Purchaser
shall be solely responsible for compliance with any federal, state, or local
laws and regulations relating to plant closing or a substantial layoff of
personnel.
(h) Notwithstanding anything to the contrary contained herein,
Purchaser agrees that it shall, as soon as practicable after the Closing but in
any event within 90 days of the Closing Date, put in place medical and health
care benefit programs covering the Covered Employees so that no such Covered
Employee will suffer a break in coverage under such types of programs and so
that Sellers shall have no responsibility or liability in respect of such
Covered Employees under the "continuation coverage" provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), or
Part 6 of Title I of ERISA or Section 4980B of the Code.
4.06 ALLOCATION AGREEMENT. At the Closing, Purchaser and Sellers are
entering into an allocation agreement satisfying the requirements of Section
1060 of the Code and the regulations promulgated pursuant thereto. Neither
Purchaser nor Sellers shall take a reporting position contrary to the allocation
agreement.
4.07 COVENANT OF NON-COMPETITION; NO POACHING OF EMPLOYEES. (a) Sellers
and Penril hereby acknowledge the competitive nature of the Business and, in
consideration of the purchase by Purchaser of the Acquired Assets, Sellers and
Penril therefore, jointly and severally, agree that for a period of three (3)
years after the Closing Date, neither Sellers, Penril or any Affiliate thereof
shall, for itself, or as an agent of, or on behalf of, or in conjunction with,
any person,
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firm or corporation, or as a partner of any partnership, or as a shareholder of
any corporation (excluding the ownership of fewer than 5% of the outstanding
voting shares of any publicly traded corporation), own, manage, acquire,
operate, control or participate in the ownership, management, operation or
control of, any business which competes with the Business.
(b) Purchaser agrees that for a period of three (3) years after the
Closing neither Purchaser nor any Affiliate thereof shall solicit for
employment, offer employment to, or employ any employee of Sellers or Penril
other than the Covered Employees. Sellers and Penril jointly and severally
agree that for a period of three (3) years after the Closing neither Sellers,
Penril nor any Affiliate thereof shall solicit for employment, offer employment
to or employ any employee of Purchaser.
(c) Sellers and Penril jointly and severally agree to hold all
proprietary information which is included in the Acquired Assets in confidence
and not to disclose or use any such information. The foregoing shall not apply
to information which is or becomes generally available to the public other than
as a result of disclosure by Seller or its Affiliates.
(d) In addition to any other remedy or relief available for any
breach or threatened breach of any of the provisions of this Section 4.07, the
non-breaching party shall be entitled to seek injunctive relief for any such
breach, and the breaching party waives the making of a bond in connection
therewith.
4.08 ROYALTY. (a) The payment of the Royalty shall be made within
forty-five (45) days after the end of each calendar quarter with respect to
Gross Sales in the immediately preceding quarter, commencing with the quarter
ending September 30, 1997 through and including the quarter ending June 30, 2001
(the "Royalty Period"). Payment shall be accompanied by a statement in the form
set forth in subsection 4.08 (g) hereof.
(b) Payments shall be made in United States dollars, by check sent to
Sellers at the address specified by Sellers from time to time in accordance with
Section 13.05 hereof.
(c) Receipt or acceptance by Sellers of any Royalty payments made by
Purchaser which are less than the total amount due Sellers pursuant to this
Agreement shall not be deemed to be a waiver of Seller's rights in or to the
balance of the amounts due Sellers.
(d) Without limiting the other rights of Seller in the event of a
default if any payment required by this Agreement is not made on or before the
due date, such late payment shall bear interest from the due date to the date of
payment at a rate of interest equal to one percent per month.
(e) Until the Royalty has been paid in full, Purchaser shall not
transfer any of the Acquired Assets to any other person or entity without the
prior written consent of Seller, except that the foregoing shall not prohibit
Purchaser from (a) selling inventory in the ordinary course of business or (b)
subject to the terms of the Note, transferring Acquired Assets to an Affiliate
of Purchaser, provided such Affiliate shall agree in writing to assume the
obligations of Purchaser under this Agreement, including, without limitation,
its obligations under this
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Section 4.08, and Purchaser shall give prior written notice of such transfer
accompanied by a copy of such written agreement, which shall be satisfactory to
Seller in form and substance.
(f) Purchaser shall maintain for four (4) years following the close
of each calendar year during the Royalty Period accurate books and records which
disclose: all sales of AC power protection products; Gross Sales; and the
amount of Royalty payable hereunder by Purchaser and the manner in which such
Royalty was determined.
(g) Purchaser shall deliver to Sellers within forty-five (45) days of
the close of each quarter during the Royalty Period, a statement certified to be
true and correct by Purchaser's Chief Financial Officer, which discloses: the
total Gross Sales during the quarter; and a computation of the amount of Royalty
payable in respect thereto for the quarter. The statement shall be in
sufficient detail to be audited from the books of Purchaser.
(h) Sellers shall have the right at any time during regular business
hours, upon ten (10) days notice to Purchaser, to examine or audit the books and
accounts and records of Purchaser which pertain to the manufacture and sale of
AC power protection products and any other books and records that may be
reasonably required by Sellers' accountants in order to verify the figures
reported in any statements furnished to Sellers pursuant to this Section. Such
books of account and records shall be made available to Sellers and their
accountants at Purchaser's office located as herein stated. If the examination
or audit reveals the underpayment of the Royalty by five (5%) percent or more,
Purchaser shall pay the amount of such underpayment with interest as provided in
subsection 4.08(d) and the cost of the examination or audit.
4.09 CHANGE OF NAME. Promptly following the Closing, each Seller shall
amend its Certificate of Incorporation so as to change its name to a name not
including "Technipower", "Constant Power" or any derivative thereof. Thereafter
neither Seller nor any Affiliate thereof shall use the name "Technipower" or any
derivative thereof.
4.10 POST-CLOSING ADJUSTMENT. (a) No sooner than 30 days after the
Closing, Sellers shall prepare and deliver to Purchaser a statement (the
"Closing Statement") of the Accounts Receivable and the Accounts Payable as at
the close of business on the Closing Date.
(b) Purchaser shall have 20 days from the date of delivery of the Closing
Statement during which to review and dispute the Closing Statement. In
connection with such review, Purchaser and its accountants shall be given access
to the books, records and work papers of Sellers. Within such 20-day period,
Purchaser must advise Sellers if it disputes the Closing Statement. If
Purchaser does not timely advise Sellers, the Closing Statement shall become
final for all purposes of this Agreement. If Purchaser so advises Sellers, the
parties shall use their best efforts to resolve such dispute in good faith. If
such dispute is not resolved by negotiations within 30 days of Purchaser's
advice to Sellers of the dispute, the dispute shall be submitted as promptly as
practicable to Arthur Andersen and Co. (the "Review Firm"). The decision of the
Review Firm shall be final and binding upon all parties and the Closing
Statement, as modified by the decision of the Review Firm, shall be final for
all purposes of this Agreement. The fees and expenses of the Review Firm shall
be borne equally by Purchaser and Sellers.
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(c) As soon as practicable, but in no case more than 10 days after the
Closing Statement has become final in accordance with subsection 4.10(c) above,
the parties shall hold a post-closing (the "Post-Closing"). At the
Post-Closing, the parties shall compute the cash portion of the purchase price
using the formulas set forth in Section 2.02(a) hereof on the basis of the
figures contained in the Closing Statement. If the cash portion of the purchase
price as so computed is less than the amount of cash paid to Seller at the
Closing, then at the Post-Closing Seller shall refund such difference to
Purchaser without interest, by certified or official bank check or wire transfer
of funds. If the cash portion of the purchase price as so computed is more than
the amount of cash paid to Seller at the Closing, then at the Post-Closing
Purchaser shall pay such additional amount to Seller, without interest, by
certified or official bank check or wire transfer of funds.
4.11 LEASE OF PREMISES. Any provisions of the Lease dated January 10,
1978, as extended (the "Lease"), relating to the Premises to the contrary
notwithstanding, Purchaser shall have no right to, and shall not, extend the
Lease beyond its current expiration date of February 28, 1998 unless Purchaser
first provides Sellers and Penril with a release from or security against
liability arising from the Lease, which shall be deemed adequate by Penril in
its sole discretion.
4.12 INVERNESS. Part of the cash consideration paid by Purchaser pursuant
to Section 2.02(a) hereof was obtained through Inverness. In addition, a line
of credit with Inverness may be used to satisfy the working capital requirements
of Purchaser. At the Closing, Sellers and Purchaser are entering into an
agreement with Inverness providing that if an Event of Default (as defined in
the Note) occurs, Sellers may purchase Inverness' promissory note from Purchaser
and the related security agreement and first priority lien on the assets of
Purchaser for amount equal to the lesser of (a) the amount of principal and
interest then outstanding under Inverness' promissory note from Purchaser or (b)
$1,500,000.
4.13 CONFESSION OF JUDGMENT. At the Closing, Purchaser is executing and
delivering to Inverness a Confession of Judgment on the Note. The Confession of
Judgment shall be held by Inverness pursuant to the agreement referred to in
Section 4.12.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLERS AND PENRIL
Sellers and Penril jointly and severally represent and warrant to Purchaser
as follows:
5.01 CORPORATE ORGANIZATION; ETC. Each Seller and Penril is a corporation
duly organized, validly existing and in good standing under the laws of its
State of incorporation and has full corporate power and authority to carry on
its business as it is now being conducted and to own the properties and assets
it now owns. Each Seller and Penril has full corporate power and authority to
execute, deliver and carry out the terms of this Agreement and any and all
related documents and instruments and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement and any
and all related documents or
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instruments to be executed and delivered by Sellers and/or Penril pursuant
hereto. This Agreement and any and all related documents or instruments to be
executed and delivered by Sellers and/or Penril have been duly and validly
authorized, and this Agreement constitutes a valid and binding agreement of
Sellers and Penril, and any and all such related documents or instruments, when
executed and delivered by Sellers and/or Penril, will constitute valid and
binding obligations thereof, enforceable in accordance with their terms. TPI
was organized under the name "Technipower, Inc." in July 1990. CPI was
organized under the name "Penril Power Systems, Inc." in May, 1995. Since their
respective dates of organization, the principal place of business of each Seller
has been the Premises.
5.02 CONSENTS AND APPROVALS OF GOVERNMENTAL AUTHORITIES. No consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required on the part of Sellers or
Penril in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
5.03 CREDITOR'S ARRANGEMENT. Neither Seller nor Penril has made an
assignment for the benefit of creditors, nor does either Seller or Penril
presently have any plans or intentions to do so, nor has any involuntary or
voluntary petition in bankruptcy been filed by or against either Seller or
Penril.
5.04 NO SUBSIDIARIES. Neither Seller has any subsidiaries, and neither
Seller owns, directly or indirectly, any capital stock or other equity
securities of any corporation or has direct or indirect equity or ownership
interest in any other business.
5.05 NO VIOLATION. Except as set forth on Schedule 5.05, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any provision of the Certificate
of Incorporation or By-Laws of either Seller or Penril, or violate, or be in
conflict with, or constitute a default under, or cause the acceleration of the
maturity of any debt or obligation pursuant to, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of the Acquired Assets, under any agreement or commitment to which a Seller or
Penril is a party or by which a Seller or Penril is bound, or to which the
property of Sellers or Penril is subject, or violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority applicable to a Seller or Penril.
5.06 FINANCIAL STATEMENTS. Each Seller has heretofore delivered to
Purchaser an unaudited balance sheet of such Seller as at July 31, 1996 (the
"Balance Sheet" or collectively the "Balance Sheets") and an unaudited statement
of operations of such Seller for the fiscal year then ended. The Balance Sheet
of such Seller presents fairly, in all material respects, the financial
condition of such Seller as at the date thereof, and such statement of
operations presents fairly, in all material respects, the results of operation
of such Seller for the period therein referred to; all in accordance with
generally accepted accounting principles consistently applied through the
periods involved, subject to the absence of notes. The parties acknowledge that
the purchase price for the Business represents the mutually agreed value of the
Business as a whole based on arms-length negotiation and not its book value.
Therefore, the parties agree that
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nothing in Section 5.06 or elsewhere in the Agreement shall be construed as a
representation or a warranty that any of the Acquired Assets has a market or
realizable value equal to that reflected on the Balance Sheets for such Acquired
Asset.
5.07 INTERIM OPERATIONS. Since the date of the Balance Sheets, the
Business has been conducted only in the ordinary and usual course. Since the
date of the Balance Sheets, there have not been any material adverse changes in
the financial condition, results of operation, business or prospects of the
Business. Since such date, none of the Acquired Assets has been affected by
fire, explosion or other casualty (whether or not covered by insurance).
5.08 NO UNDISCLOSED LIABILITIES; ETC. There are no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) relating
to the Business which were not reflected or reserved against in the Balance
Sheet, except for liabilities and obligations incurred in the ordinary course of
business since the date thereof.
5.09 TITLE TO ASSETS; LIENS. Each Seller has good and valid title to the
Acquired Assets owned by it. None of the Acquired Assets are subject to any
mortgage, pledge, lien, security interest, encumbrance or charge (collectively
"liens") of any kind except (a) liens reflected on the Balance Sheet; (b)
statutory liens of landlords and liens imposed by law, such as carriers',
warehousemen's, mechanics', material men's and vendors' liens, incurred in the
ordinary course of business; (c) purchase money liens arising or created in the
ordinary course of business; (d) minor imperfections of title, if any, none of
which are substantial in amount, materially detract from the value or impair the
use of the property subject thereto, or impair the operation of the Business;
and (e) liens for taxes not yet due. The Acquired Assets include all rights,
properties and other assets necessary to permit Purchaser to conduct the
Business in all material respects in the same manner as the Business was
conducted immediately prior to the Closing.
5.10 EQUIPMENT. To the best knowledge of Sellers, all material items of
equipment of Sellers relating to the Business are structurally sound and in
operating condition and are adequate for the uses to which they are being put,
and none of such equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs which are not material in nature.
5.11 LEASES. Schedule 5.11 hereto contains an accurate and complete list
of all leases pursuant to which either Seller leases real or personal property
used in the Business, copies of which have heretofore been delivered to
Purchaser. All such leases are valid and binding on such Seller and, to the
best knowledge of Sellers, on the other party thereto in accordance with their
terms; and to the best knowledge of Sellers there are no existing defaults by a
Seller or the other party thereunder and no event has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default thereunder. Neither Seller has received
any notice of default under any such lease. Except as set forth on Schedule
5.11 hereto, no consent is required for the assignment or transfer of any such
lease to Purchaser.
5.12 PATENTS, TRADEMARKS, TRADE NAME PROVISION. Schedule 1.01(f) sets
forth a list of all material copyrights, patents, trademarks and trade names
owned by either Seller or under which either Seller is licensed or franchised
which relate to the Business. To the best knowledge
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of Sellers, Sellers possesses adequate rights, licenses or other authority to
use such copyrights, patents, trademarks and trade names. To the best knowledge
of Sellers, no products manufactured by the Business nor any formulae,
processes, know-how, trade secrets, trade names, assumed names or designations
used in the Business, infringe on any patents, trademarks, trade names,
copyrights, technology, know-how or processes of any other person or corporate
entity and no claims have been made against Seller in such connection.
5.13 LITIGATION. To the best knowledge of Sellers, there is no action,
proceeding or investigation pending or threatened against Seller relating to the
Business.
5.14 LABOR MATTERS; ERISA. (a) Neither Seller is obligated by or subject
to any collective bargaining agreement or collective bargaining obligation,
selection of a collective bargaining representative for employees or on-going
organizing activity, order of the NLRB or other labor board or administration,
or any unfair labor practice decision, nor is either Seller a party or subject
to any pending or threatened labor, human rights or civil rights, dispute,
controversy or grievance or any unfair labor practice proceeding with respect to
claims of, or obligations to, any employee of a Seller.
(b) Except as set forth on Schedule 5.14 hereto, there are no pension
plans (as defined in Section 3(2) of ERISA) which Seller either maintains or to
which either Seller is, directly or indirectly, required to contribute. Neither
Seller is subject to any withdrawal liability with respect to the transactions
contemplated hereby and has made all required contributions under such pension
plans.
5.15 PRODUCT WARRANTIES. Except as set forth on Schedule 5.15 attached
hereto, neither Seller has given any third party any product warranties relating
to products manufactured or sold by the Business.
5.16 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Except as
set forth on Schedule 5.16, to the best knowledge of Sellers, neither Seller has
failed to comply in any respect material with any law, ordinance, regulation, or
order applicable to the Acquired Assets, including those relating to the
environment, the failure to comply with which would have a material adverse
effect on the Business, or received written notice alleging any such
noncompliance with any thereof, except for any such noncompliance which has been
cured or otherwise no longer exists. Except as set forth on Schedule 5.16, (a)
to the best knowledge of Sellers, all licenses, franchises, permits and other
governmental authorizations held by either Seller in respect of the Business are
valid and sufficient to permit the operations thereof except where the failure
to hold such licenses, franchises, permits and other governmental authorizations
would not have a material adverse effect on the Business, and (b) to the best
knowledge of Sellers, there are no violations of any such licenses, franchises,
permits and other governmental authorizations, nor are there any proceedings
pending or threatened against either Seller to revoke or limit any thereof.
5.17 PERSONNEL. Schedule 5.17 hereto sets forth a true and complete list
of: (a) the names and current salaries of all salaried employees of either
Seller employed in the Business; (b) the wage rates for non-salaried and
non-executive salaried employees of either Seller
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employed in the Business by classification; (c) accrued vacation pay for all
such employees; and (d) all benefit and insurance programs in effect for
employees of either Seller.
5.18 ACCOUNTS RECEIVABLE. All of the Accounts Receivable are valid and
represent sales made in the ordinary course of business. In no event shall this
Section 5.18 be construed as a representation, warranty or guaranty of the
collectability of any of the Accounts Receivable, and Sellers and Penril hereby
expressly disclaim any such representation, warranty or guaranty.
5.19 CONTRACTS. Schedule 5.19 sets forth a complete and correct list of
each material contract, agreement or commitment of either Seller (each of which
is herein referred to as a "Material Contract"), relating to the Business, other
than leases referred to in Section 5.11. Except as set forth in Schedule 5.19,
to the best knowledge of Sellers, there is not, with respect to the Material
Contracts, any existing default, or event of default, or event which with or
without due notice or lapse of time or both would constitute a default or event
of default, on the part of a Seller or, to the best knowledge of Sellers, the
other party thereto, except such defaults, events of default and other events
which would not have a material adverse effect on the Business. Complete copies
of all the contracts, agreements or commitments listed on Schedule 5.19 have
been delivered to Purchaser. Neither Seller has received any notice of default
under any Material Contract. Except as set forth on Schedule 5.19, no consent
is required for the assignment of any Material Contract to Purchaser.
5.20 CUSTOMERS AND SUPPLIERS. Schedule 5.20 sets forth; (a) a list of the
ten largest customers of each Seller in terms of sales during the last fiscal
year showing the approximate total sales by such Seller to each such customer:
and (b) a list of the ten largest suppliers of each Seller in terms of purchases
during the last fiscal year, showing the approximate total purchases by such
Seller from each such supplier. Except as set forth on Schedule 5.20, neither
Seller has been advised by any customer or supplier of a refusal to deal with a
Seller in the future based upon past actions or performance of a Seller or a
refusal to extend credit in accordance with terms previously extended to a
Seller due to such Seller's past payment history.
5.21 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article V, neither Sellers,
Penril nor any other person acting on behalf thereof (including any of their
respective officers, directors, employees, agents or representatives) makes any
other representation or warranty, express or implied, and Sellers and Penril
hereby disclaim any such representation or warranty, whether by Sellers, Penril
or any of their respective officers, directors, employees, agents or
representatives or any other person with respect to the execution, delivery or
performance by Sellers or Penril of this Agreement or with respect to the
transactions contemplated hereby, notwithstanding the delivery or disclosure to
Purchaser or any of its Affiliates, officers, directors, employees, agents or
representatives or any other person of any documentation or other information by
Sellers, Penril or any of their respective officers, directors, employees,
agents or representatives or any other person with respect to any one or more of
the foregoing.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers and Penril as follows:
6.01 CORPORATE ORGANIZATION: ETC. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its State of
incorporation and has full corporate power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns. Purchaser has full corporate power and authority to execute, deliver
and carry out the terms of this Agreement, the Note and all related documents
and instruments and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, the Note and any and all
related documents or instruments to be executed and delivered by Purchaser.
This Agreement and all related documents or instruments to be executed and
delivered by Purchaser have been duly and validly authorized, and this Agreement
constitutes a valid and binding agreement of Purchaser, the Note and all such
related documents or instruments constitute valid and binding obligations
thereof, enforceable in accordance with their terms.
6.02 CONSENTS AND APPROVALS OF GOVERNMENTAL. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
authority is required on the part of Purchaser in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
6.03 CREDITOR'S ARRANGEMENT. Purchaser has not since 1994 made any
assignment for the benefit of creditors, nor does Purchaser presently have any
plans or intentions to do so, nor since 1994 has any involuntary or voluntary
petition in bankruptcy been filed by or against Purchaser. Purchaser is a
reorganized debtor pursuant to a Chapter 11 Petition and Plan of Reorganization
confirmed on June 9, 1994 (the "Plan"). Purchaser is in full compliance with
its obligations under the Plan and is under no legal impediment posed by the
Plan or otherwise, to enter into this Agreement, and to perform the transactions
contemplated hereby.
6.04 NO VIOLATION. Neither the execution and delivery of this Agreement or
the Note nor the consummation of the transactions contemplated hereby will
violate any provision of the Certificate of Incorporation or By-Laws of
Purchaser, or violate, or be in conflict with, or constitute a default under, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of Purchaser under any agreement or
commitment to which Purchaser is a party or by which Purchaser is bound, or to
which the property of Purchaser is subject, or violate any statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by any party in this Agreement shall survive the Closing
hereunder and any investigation at any time made by or on behalf of any other
party for a period of twelve months following the Closing. Anything in this
Agreement to the contrary notwithstanding, no claim based upon misrepresentation
or breach or representation or warranty shall be made, no litigation with
respect thereto commenced, and no remedy shall be available unless written
notice specifying with particularity the misrepresentation or breach claimed
shall have been delivered on or prior to the expiration of such period.
7.02 INDEMNIFICATION BY SELLERS AND PENRIL. Subject to the limitations,
conditions and adjustments set forth in this Article VII, Sellers and Penril,
jointly and severally, agree to indemnify, defend and hold Purchaser harmless
from and against any demands, claims, losses, damages, costs and expenses,
including, without limitation, interest, costs, penalties and reasonable
attorneys' fees (collectively, "Damages") asserted against, resulting to,
imposed upon or incurred or suffered by Purchaser as a result of or arising from
any breach of any representation, warranty, covenant or agreement of Sellers or
Penril contained in this Agreement.
7.03 INDEMNIFICATION BY PURCHASER. Subject to the limitations, conditions
and adjustments set forth in this Article VII, Purchaser agrees to indemnify,
defend and hold Sellers and Penril harmless from and against any and all Damages
asserted against, resulting to, imposed upon or incurred or suffered by a Seller
or Penril as a result of or arising from any breach of any representation,
warranty, covenant or agreement of Purchaser contained in this Agreement.
7.04 LIMITATIONS ON INDEMNIFICATION; ADJUSTMENTS. (a) The remedies
provided in this Article VII shall be exclusive and shall preclude assertion by
any party of any other rights or the seeking of any and all other remedies
against any other for claims based on this Agreement.
(b) Any claims for indemnity under this Agreement shall be subject to
the following limitations and adjustments: (i) the provisions of Section 7.02
shall be effective only when the aggregate amount of all Damages for which
Sellers and Penril may be liable under this Article VII exceeds $75,000 (the
"Threshold"), in which case Sellers and Penril shall be liable for only such
amounts as exceed $75,000; (ii) the amount of any claim by any party for
indemnification shall be subject to adjustment to reflect (A) any actual direct
or indirect income tax benefit (taking into account the amount of any
indemnification actually received) resulting therefrom to the indemnified party,
(B) any insurance coverage with respect thereto and (C) any amounts recoverable
from third parties based on claims the indemnified party has against such third
parties which would reduce the damages that could otherwise be sustained; and
(iii) in no event shall Sellers and Penril be liable, in the aggregate, for
indemnification hereunder in an amount greater than $400,000 (the "Cap").
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(c) Purchaser agrees that its obligations to make payments pursuant
to this Agreement and the Note are absolute, unconditional and irrevocable.
Purchaser shall have no defense, right to withhold, or right of offset or
recoupment with respect to, any payment to be made by Purchaser to Seller
pursuant to this Agreement or the Note, and Purchaser shall not withhold any
such payment or claim any such defense, right of setoff, recoupment or any
similar right.
(d) No party hereto shall be liable to any other party for special,
incidental, consequential or punitive damages, however arising, whether based on
contract, tort or otherwise.
7.05 CONDITIONS OF INDEMNIFICATION. (a) Any party claiming a right to
indemnification hereunder (an "Indemnified Party") shall give prompt written
notice to the other party (the "Indemnifying Party") of the commencement of any
action, audit, investigation, suit or proceeding, the receipt of any demand or
the occurrence of any item or incident in connection with which the Indemnified
Party bases its claim for indemnification from the Indemnifying Party under this
Article VII.
(b) Upon notice from the Indemnified Party, the Indemnifying Party may
assume the defense of any such action, audit, investigation, suit, proceeding or
demand, including its compromise or settlement, and the Indemnifying Party shall
pay all reasonable costs and expenses thereof and shall be fully responsible for
the outcome thereof, subject to the provisions of Section 7.04. The
Indemnifying Party shall give notice to the Indemnified Party as to its
intention to assume the defense of any such action, audit, investigation, suit,
proceeding or demand within fifteen (15) days after the date of the Indemnified
Party's notice thereof. If the Indemnifying Party assumes the defense of such
action, audit, investigation, suit, proceeding or demand, (i) no compromise or
settlement thereof may be effected by the Indemnifying Party without the
Indemnified Party's consent (which shall not unreasonably be withheld) unless
the sole relief is monetary damages that are paid in full by the Indemnifying
Party and (ii) the Indemnifying Party shall have no liability with respect to
any compromise or settlement thereof effected without its consent (which shall
not unreasonably be withheld). If the Indemnifying Party does not, within
fifteen (15) days after the receipt of written notice from the Indemnified
Party, give notice to the Indemnified Party of its assumption of the defense of
the action, audit, investigation, suit, proceeding or demand in question, the
Indemnifying Party shall be bound by the Indemnified Party's control of the
defense thereof and by any determination made in such action, audit,
investigation, suit, proceeding or demand by a court or decision maker of
competent jurisdiction.
7.06 DEFENSE OF ENVIRONMENTAL CLAIMS.
(a) Sellers have delivered to Purchaser a Phase I Environmental Site
Assessment on the Premises dated May 12, 1996 by Tyree Organization Ltd., which
indicates that no "Environmental Conditions" (as hereinafter defined) were found
to exist on the Premises. Nonetheless, subject to the limitations and
conditions set forth in this Section 7.06, Sellers and Penril jointly and
severally agree to defend and hold harmless Purchaser from any losses or damages
resulting from claims, demands, actions, audits, investigations, suits or
proceedings
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brought by any federal or state agency having jurisdiction or any other person
(other than Purchaser or any Affiliate or associate thereof) without the urging
or complicity of Purchaser based upon the existence of any Environmental
Condition on the Premises prior to the Closing Date for which Seller is
responsible (collectively "Environmental Claims").
(b) Purchaser shall give prompt written notice to Sellers of any
Environmental Claim. Upon receipt of such notice, Sellers and Penril shall have
the sole right to defend the Environmental Claim with counsel of their own
choosing and shall have the sole right to compromise or settle the Environmental
Claim. Subject to the foregoing, Purchaser may participate in or monitor the
defense of any Environmental Claim with counsel of its own choosing at its own
expense, but in no case shall Seller or Penril have any responsibility for the
cost of such counsel.
(c) Sellers and Penril shall only be obligated to defend and hold
harmless Purchaser from Environmental Claims as to which notice pursuant to
subsection 7.06(b) has been given by Purchaser to Sellers and Penril prior to
the thirteenth anniversary of the Closing Date, and no remedy shall be available
to Purchaser for Environmental Claims notified to Sellers and Penril after that
date. Neither the Threshold nor the Cap shall apply to the obligations of Penril
and Sellers under this Section 7.06. This Section 7.06 shall be Purchaser's
exclusive remedy for Environmental Conditions and Environmental Claims.
(d) As used herein, "Environmental Condition" means the presence of
any "Hazardous Substances," "Pollutants," "Hazardous Constituents," or
"Contaminants," as such terms are used in the Comprehensive Environmental
Response and Liability Act of 1980, as amended ("CERCLA"), on or beneath the
Premises which violate or require remediation under any federal or state law
relating to protection of the environment, including, without limitation, CERCLA
, the Resource Conservation Recovery Act of 1976, as amended, the Federal Water
Pollution Control Act, as amended, and comparable Connecticut statutes.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 COMMISSIONS AND FINDERS' FEES. Each of the parties represents that
the negotiations relative to this Agreement and the transactions contemplated
hereby have been carried on by Sellers and Penril directly with Purchaser and in
such manner as not to give rise to any claims against any of the parties hereto
for a brokerage commission, finders' fee or other like payment, except the fee
payable to Leeson Associates, Ltd., which is the responsibility of Sellers.
Insofar as any such claims are made which are alleged to be based on an
agreement or arrangements made by, or on behalf of, a party, such party agrees
to indemnify and hold the other parties harmless from and against all liability,
loss, cost, charge or expense, including reasonable counsel fees, arising
therefrom.
8.02 AMENDMENT AND MODIFICATION. This Agreement may be amended, modified
and supplemented only by written agreement of all parties hereto.
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8.03 WAIVER OF COMPLIANCE. Any failure of Sellers or Penril, on the one
hand, or Purchaser on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by Purchaser or
Sellers and Penril, respectively, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
8.04 EXPENSES. Each of the parties hereto will pay its own expenses
incurred by it or on its behalf in connection with this Agreement or any
transaction contemplated by this Agreement, whether or not such transaction
shall be consummated, including, without limitation, all fees of their
respective counsel, and accountants. Purchaser shall pay all sales and transfer
taxes incurred in connection with the transactions contemplated by this
Agreement.
8.05 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail
with postage prepaid or delivered by express delivery or facsimile transmission
(with copy by mail):
(a) If to Sellers or Penril, to:
Penril DataComm Networks, Inc.
1300 Quince Orchard Blvd.
Gaithersburg, MD 20878-4106
Attention: President
Fax No. (301) 948-5761
or to such other person or address as Sellers or Penril shall furnish to
Purchaser in writing.
(b) If to Purchaser, to:
PDIXF Acquisition Corp.
c/o Venture Partners Ltd.
Mill Crossing
P.O. Box 9
Kensington, CT 06037
Attention: Gary M. Laskowski
Fax No. (203) 828-3320
or to such other person or address as Purchaser shall furnish to Sellers in
writing.
8.06 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party, except that (a) Purchaser
may, upon prior written notice to Sellers and Penril, assign its rights and
obligations under this Agreement to Parent, and (b) all rights, duties,
liabilities and obligations
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of Sellers and Penril hereunder may, without any additional consideration or any
action or approval of any other party, be assigned to and assumed by Access
Beyond, Inc., a Delaware corporation which is currently, but is not expected to
continue to be, a wholly-owned subsidiary of Penril, as a result of a spin-off
and related merger transaction, whereupon Access Beyond, Inc. shall have all the
rights, duties, liabilities and obligations of Sellers and Penril hereunder,
Sellers and Penril shall have no further rights (except that, without limiting
the rights of Access Beyond, Inc., Penril and Sellers shall continue to have the
rights provided in Section 7.03 of this Agreement), duties, liabilities or
obligations hereunder, and Sellers and Penril shall be automatically released
and discharged from and after the date of such assignment from any and all
duties, liabilities and obligations pursuant to this Agreement or any other
agreement or transaction contemplated hereby, including, without limitation, any
liabilities, obligations or duties under Article VII.
8.07 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York without regard to its conflicts of law doctrine.
8.08 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.09 HEADINGS. The headings of the Sections and Articles of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
8.10 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto and other documents and certificates delivered pursuant to the
terms hereof, set forth the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and supersede all
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto, including, without limitation, the Asset
Purchase Agreement dated July 2, 1996 among Parent, TPI and Penril and the Asset
Purchase Agreement dated July 2, 1996 among Parent, CPI and Penril.
8.11 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
8.12 MUTUAL AGREEMENT. This Agreement embodies the arms-length negotiation
and mutual agreement between the parties hereto and shall not be construed
against either party as having been drafted by it.
8.13 SEVERABILITY. If in any jurisdiction, any provision of this Agreement
or its application to any party or circumstance is restricted, prohibited or
unenforceable, such provision shall, as to such jurisdiction, be ineffective
only to the extent of such restriction, prohibition or unenforceability without
invalidating the remaining provisions hereof and without
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affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances. In addition,
if any one or more of the provisions contained in this agreement shall for any
reason in any jurisdiction be held to be excessively
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broad as to time, duration, geographical scope, activity or subject, it shall be
construed, by limiting and reducing it, so as to be enforceable to the extent
compatible with the application law of such jurisdiction as it shall then
appear.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, each
by its duly authorized officer, all as of the day and year first above written.
PDIXF ACQUISITION CORP.
By:
-------------------------
Title
TECHNIPOWER, INC.
By:
-------------------------
Title
CONSTANT POWER, INC.
By:
-------------------------
Title
PENRIL DATACOMM NETWORKS, INC.
By:
-------------------------
Title
Power Designs, Inc. hereby consents and agrees to Sections 2.03, and 8.10 of
this Agreement.
POWER DESIGNS, INC.
By:
-------------------------
Title
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TERM NOTE
$2,750,000 October ___, 1996
For value received, PDIXF Acquisition Corp., a New York corporation (the
"Borrower"), promises to pay Technipower, Inc. and Constant Power, Inc. (
collectively "Holder"), at their office located at c/o Penril DataComm Networks,
Inc., 1300 Quince Orchard Boulevard, Gaithersburg, MD 20878, the aggregate
principal sum of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000)
in lawful money of the United States, and to pay interest thereon from the date
hereof until the entire principal sum has been repaid in like money at said
office computed (on the basis of a year of 365 days and charged for the actual
number of days principal is outstanding, including any time extended by reason
of Saturdays, Sundays and holidays) at a rate of interest per annum which shall
from time to time increase or decrease so that at all times such rate shall
remain 2% per annum above the rate of interest at that time publicly announced
by Signet Bank/Maryland to be its prime rate (the "Prime Rate"), with changes in
interest rate resulting from changes in the Prime Rate to be effective on the
first day on which such change in the Prime Rate is effective. Any amount of
principal hereof which is not paid when due, whether at stated maturity, by
acceleration, or otherwise, shall bear interest from the date when due until
said principal amount is paid in full, payable on demand, at a rate per annum
equal at all time to 4 percent (4%) above the Prime Rate.
I. PAYMENT TERMS
SECTION 1.1 The principal shall be payable in one (1) installment
payable on December 31, 1996.
SECTION 1.2 Accrued interest shall be payable on the first day of each
month, commencing November 1, 1996, and upon payment of principal until
principal is paid in full.
SECTION 1.3 This Term Note is subject to partial or entire prepayment
without penalty.
II. PURCHASE AGREEMENT; GUARANTIES; COLLATERAL SECURITY
This Term Note is the Term Note referred to in the Asset Purchase Agreement
dated October ___, 1996 among Borrower, Holder and Penril DataComm Networks,
Inc.. The payment of this Term Note is (a) secured by a Security Agreement of
even date herewith (the "Security Agreement") between the Borrower and Holder
and (b) guaranteed by the sole
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stockholder of the Borrower (the "Guarantor") pursuant to a Guaranty of even
date herewith (the "Guaranty"). The Guaranty is secured by a pledge of all of
the outstanding capital stock of the Borrower by the execution and delivery of a
Pledge Agreement of even date herewith (the "Stock Pledge").
III. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Holder that:
SECTION 3.1 The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
has the corporate power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged in; and is duly
qualified as a foreign corporation and in good standing under the laws of each
jurisdiction in which such qualification is required.
SECTION 3.2 The execution, delivery and performance hereof and of every
other instrument executed and delivered by Borrower pursuant hereto, and of any
term, covenant or condition herein or therein provided for, are within its
corporate powers, have been duly authorized by all proper and necessary
stockholder and corporate action; and are not in conflict with its charter,
by-laws or any indenture, contract or agreement to which it is a party or by
which it is bound or with any statute, judgment, decree, rule or regulation
binding upon it and shall not result in the creation of any lien on any of
Borrower's assets to any person or entity; and this Term Note and all other
instruments, when executed and delivered herewith, will constitute legal,
authorized, valid and binding obligations of Borrower enforceable in accordance
with its and their terms.
SECTION 3.3 The financial statements of the Borrower for the period
ended _____________, 1996 together with all financial statements hereafter
furnished to the Holder by Borrower are and shall be complete and correct and
fairly present the financial condition and the results of operations of the
Borrower as at such dates; and have been and shall be prepared in accordance
with generally accepted accounting principles. Since the date of such financial
statements there has been no adverse change in the condition (financial or
otherwise), business, or operations of the Borrower. There are no liabilities
of the Borrower, fixed or contingent, which are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since the date of the financial statements.
SECTION 3.4 Neither the Borrower nor Guarantor is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate resolution which could have
an adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Borrower or Guarantor, or the ability
of the Borrower to carry out its obligations under this Term Note and all
documents executed and delivered in connection therewith. Neither the Borrower
nor Guarantor is in default in any
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respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or instrument
to which it is a party, which default will have an adverse effect on the ability
of the Borrower or Guarantor to carry out its obligations under this Term Note,
the Security Agreement, the Guaranty or the Stock Pledge, or any document
executed and delivered in connection herewith or therewith.
SECTION 3.5 There is no pending or threatened action or proceeding
against or affecting the Borrower or Guarantor before any court, governmental
agency, or arbitrator, which may, in any one case or in the aggregate, adversely
affect the financial condition, operations, properties, or business of the
Borrower or Guarantor or the ability of the Borrower or Guarantor to perform its
obligations under this Term Note and all documents executed and delivered in
connection therewith.
SECTION 3.6 The Borrower and Guarantor has satisfied all judgments, and
neither the Borrower nor Guarantor is in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, federal,
state, municipal, or other governmental authority, commission, board, bureau,
agency or instrumentality, domestic or foreign. No Event of Default as
described in Section 7 herein, and no condition, event or act which, with notice
or lapse of time or both would constitute an Event of Default, exists or will
exist upon the execution of this Term Note.
SECTION 3.7 The Borrower has title to, or valid leasehold interests in,
all of its properties and assets, real and personal, including the properties
and assets and leasehold interests reflected in the financial statements
referred to in Section 3.3 (other than any properties or assets disposed of
since that date in the ordinary course of business consistent with past
practice), and none of the properties and assets owned by the Borrower and none
of its leasehold interests is subject to any lien, except as such may be
permitted pursuant to Section 5.1 hereof.
SECTION 3.8 The Borrower possesses all licenses, permits, franchises,
patents, copyrights, trademarks, and trade names, or rights thereto, to conduct
its business substantially as now conducted and as presently proposed to be
conducted, and is not in violation of any valid rights of others with respect to
any of the foregoing.
SECTION 3.9 The Borrower has filed all tax returns (federal, state,
local, and foreign) required to be filed and has paid al taxes, assessments, and
governmental charges and levies due from it, including interest and penalties,
if any.
SECTION 3.10 Borrower is in compliance with all laws, ordinances, rules
or regulations applicable to it, of all Federal, state or local governments or
any instrumentality or agency thereof, including, without limitation, ERISA,
OSHA and all Federal, state and municipal laws, ordinances, rules and
regulations relating to the environment.
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IV. AFFIRMATIVE COVENANTS
Until payment in full of this Term Note, Borrower covenants and agrees to:
SECTION 4.1 Preserve and maintain, and cause each subsidiary to preserve
and maintain, its corporate existence and good standing in the jurisdiction of
its incorporation and qualify and remain qualified, and cause each subsidiary to
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required.
SECTION 4.2 Keep and cause each of its subsidiaries to keep adequate
records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Borrower and its subsidiaries.
SECTION 4.3 Maintain, keep, and preserve, and cause each subsidiary to
maintain, keep and preserve, all of its properties (tangible and intangible)
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear and tear excepted.
SECTION 4.4 Continue, and cause each subsidiary to continue, to engage
in an efficient and economical manner in a business of the same general type as
now conducted by it as of the date of this Term Note.
SECTION 4.5 Maintain and cause each subsidiary to maintain insurance
with financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or similar businesses and similarly situated.
SECTION 4.6 Comply and cause each subsidiary to comply, in all respects
wit all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments, and governmental charges imposed upon it or upon its property.
SECTION 4.7 At any reasonable time and from time to time, permit Holder
or any agent or representative thereof to examine and make copies of and
abstracts from the records and books of account of, and visit properties of, the
Borrower and any subsidiary and to discuss the affairs, finances, and accounts
of the Borrower and any subsidiary with any of their respective officers,
directors and the Borrower's independent accountants.
SECTION 4.8 Furnish to Holder:
(a) As soon as available and in any event no later than twenty (20) days
after the end of each month consolidated and consolidating financial statements
of the Borrower and its subsidiaries for such month, all in reasonable detail
and all prepared in accordance with
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generally accepted accounting principles consistently applied.
(b) As soon as available and in any event no later than ninety (90) days
after the end of the fiscal year of the Borrower, consolidated and consolidating
financial statements of the Borrower and its subsidiaries, all in reasonable
detail and stating in comparative form the respective consolidated and
consolidation figures for the corresponding date and period in the previous
fiscal year and all prepared in accordance with generally accepted accounting
principles consistently applied and as to the consolidated statements
accompanied by an opinion thereon acceptable to Holder by independent
accountants selected by the Borrower and acceptable to Holder.
(c) Promptly upon the receipt thereof, copies of any reports or management
letters submitted to the Borrower or any subsidiary by independent certified
public accountants in connection with the examination of the financial
statements of the Borrower or any subsidiary made by such accountants;
(d) Within twenty (20) days after the end of each month, a certificate of
the chief financial officer of the Borrower (a) certifying that to the best of
his knowledge no Event of Default has occurred and is continuing or, if an Event
of Default has occurred and is continuing, a statement as to the nature thereof
and the action which is proposed to be taken with respect thereto and (b) with
computations demonstrating compliance with the covenants contained in Section 6
hereof;
(e) Promptly after the commencement thereof, notice of all actions, suits,
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Borrower,
Guarantor or any subsidiary which, if determined adversely to the Borrower,
Guarantor or such subsidiary, could have an adverse effect on the financial
condition, properties, or operations of the Borrower, Guarantor or such
subsidiary;
(f) As soon as possible and in any event within five (5) days after the
occurrence of each Event of Default, a written notice setting forth the details
of such Event of Default and the action which is proposed to be taken by the
Borrower with respect thereto; and
(g) Such other information pertaining to the condition or operations,
financial or otherwise, of the Borrower, Guarantor or any subsidiary as Holder,
may from time to time reasonably be requested.
SECTION 4.9 Reimburse Holder on demand, or without demand in the case of
the occurrence of an Event of Default, any and all reasonably necessary
out-of-pocket expenses (including attorney's fees and expenses) paid or incurred
by Holder in connection with the collection, enforcement, preservation or
protection of this Term Note, the Guaranty, the Stock
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Pledge, any related document or instrument or any right or claim in connection
herewith or therewith.
V. NEGATIVE COVENANTS
Until payment in full of this Term Note, the Borrower shall not, without
the prior written consent of Holder:
SECTION 5.1 Create, incur, assume, or suffer to exist, or permit any
subsidiary to create, incur, assume, or suffer to exist, any lien upon or with
respect to any of its properties, now owned or hereafter acquired except:
(a) liens in favor of Inverness Corporation ("Inverness");
(b) liens in favor of Holder;
(c) liens for taxes or assessments or other governmental charges or levies
if not yet due and payable;
(d) liens imposed by law, such as mechanics', materialman's, landlords',
warehousemen's, and carriers' liens, and other similar statutory liens, securing
obligations incurred in the ordinary course of business;
(e) liens under workmen's compensation, unemployment insurance, social
security, or similar legislation;
(f) liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than for the payment of money), leases (permitted
under the terms of this Term Note), or public or statutory obligations;
(g) easements, rights-of-way, restrictions, and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation, use,
and enjoyment by the Borrower or any subsidiary of the property or assets
encumbered thereby in the normal course of its business or materially impair the
value of the property subject thereto;
(h) liens securing the obligations of a subsidiary to the Borrower or
another subsidiary; and
(i) purchase money liens on any property hereafter acquired or the
assumption of any lien on property existing at the time of such acquisition, or
a lien incurred in connection with any conditional sale or other title retention
agreement or capital lease; provided that such property is acquired in the
ordinary course of business and the obligation secured by such lien is permitted
under Section 6 hereof.
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SECTION 5.2 Create, incur, assume, or suffer to exist or permit any
subsidiary to create, incur, assume, or suffer to exist any indebtedness except:
(a) debt to Inverness;
(b) debt to Holder; and
(c) accounts payable to trade creditors for good and services which are
not overdue and are incurred in the ordinary course of business.
SECTION 5.3 Merge or consolidate with, or sell, assign, lease, or
otherwise dispose of all or substantially all of its assets (whether now owned
or hereafter acquired) to any person or entity, or acquire all or substantially
all of the assets or business of any person or entity, or permit any subsidiary
to do so.
SECTION 5.4 Sell, lease, assign, transfer, or otherwise dispose of, or
permit any subsidiary to sell, lease, assign, transfer, or otherwise dispose of,
any of its now owned or hereafter acquired assets except inventory in the
ordinary course of business consistent with past practice.
SECTION 5.5 Declare or pay any dividends, or purchase, redeem, retire,
or otherwise acquire for value any of its capital stock now or hereafter
outstanding or make any distribution of assets to its stockholders whether in
cash, assets, or obligations of the Borrower or pay any principal or interest on
any loan from shareholders.
SECTION 5.6 Make, or permit any subsidiary to make, any loan or advance
to any person or entity, or purchase or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any capital stock, assets,
obligations, or other securities of, or make capital contributions to, or
otherwise invest in or acquire any interest in, any person or entity.
SECTION 5.7 Assume, guaranty, endorse, or otherwise be or become
directly or contingently liable, or permit any subsidiary to assume, guaranty,
endorse, or otherwise be or become directly or contingently liable for
obligations of any person or entity, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
SECTION 5.8 Directly or indirectly, enter into or be a party to any
transaction with any of its officers, directors, stockholders or employees or
with any firm or entity in which any of the foregoing have a material interest
or with any affiliate or associate (as such terms are defined in Rule 405 under
the Securities Act of 1933, as amended) of any of the foregoing, or, directly or
indirectly, increase above the current level the salary or other cash
remuneration or perquisites of any of the officers and employees of the
Borrower, or otherwise, directly or
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indirectly, make any other payment to or on behalf of any such person, with
respect to stockholder loans or otherwise; provided that any transaction which
is on terms no less favorable to the Borrower than could generally be obtained
in negotiations with unaffiliated third parties on an arms' length basis shall
not be deemed to violate this Section 5.8.
SECTION 5.9 Organize or acquire any subsidiary.
SECTION 5.10 Make or permit to be made any material change in the
character of Borrower's business or operations.
VI. FINANCIAL COVENANTS
Until payment in full of this Term Note, the Borrower covenants and agrees
not to:
SECTION 6.1 Make any expenditures for fixed or capital assets
(including, without limitation, under capitalized leases) which would cause the
aggregate of all such expenditures made by the Borrower to exceed 100,000.
VII. EVENTS OF DEFAULT
SECTION 7.1 If any of the following events (Events of Default") shall
occur:
(a) Borrower fails to pay when due principal or interest on this Term Note
or any other obligation for the payment of money to Holder;
(b) There is any change in the management or direction of Borrower's
affairs (including but not limited to a change in its officers) or in the
ownership of its capital stock which effects a change of control of any such
affairs which is not satisfactory to Holder;
(c) Borrower or Guarantor shall fail in the observance of any term,
covenant or condition provided for herein or therein, and such failure shall
continue uncured for a period of ten (10) days after written notice to Borrower
by Holder;
(d) Any representation or warranty made by Borrower herein or in any
related document or instrument or any representation, warranty made by Guarantor
shall prove to be in any material respect false or misleading as of the time
made or furnished;
(e) Default shall be made with respect to any notes or other evidences of
indebtedness (including, without limitation, any capitalized lease) or
liabilities for borrowed money (other than this Term Note) of Borrower or of
Guarantor if the effect of such default or defaults is to accelerate or if the
holders thereof do accelerate the maturity of such notes or other evidences of
indebtedness or liabilities;
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(f) Default shall be made in the due observance or performance of any
covenant, condition or agreement hereunder under the Guaranty, the Stock Pledge,
or under any other document or instrument relating hereto or thereto on the part
of Borrower or Guarantor to be observed or performed (including, without
limitation, any such covenant to cause or not to permit another person to act in
any manner or to refrain from taking any action) which shall continue for a
period of ten (10) days of written notice from Holder;
(g) A final judgment or order for the payment of money shall be rendered
by a court of competent jurisdiction against Borrower or any subsidiary of
Borrower in an amount of $10,000 or more and Borrower or such subsidiary shall
not discharge the same or provide for its discharge in accordance with its terms
or procure a stay of execution thereof within thirty (30) days after the date of
entry thereof and within said thirty (30) days (or such longer period during
which execution of such judgment shall have been stayed) appeal therefrom and
cause the execution thereof to be stayed during such appeal;
(h) Borrower, or any subsidiary of Borrower, or Guarantor makes an
assignment for the benefit of creditors, commences (as the debtor) any case in
bankruptcy, or commences (as the debtor) any proceeding under any other
insolvency law;
(i) A case in bankruptcy or any proceeding under any insolvency law is
commenced against Borrower, any subsidiary of the Borrower, or Guarantor (as the
debtor in such case or proceeding) and a court having jurisdiction in such
matter enters an order for relief against such debtor in such case or
proceeding, or such case or proceeding is consented to by such debtor or remains
undismissed for thirty (30) days; or
(j) A trustee, receiver, agent or custodian is appointed or authorized to
take charge of any of the property of Borrower, any subsidiary of Borrower, or
Guarantor, for the purpose of enforcing a lien against such property for the
benefit of creditors, and such appointment or authorization is not revoked
within thirty (30) days thereafter,
then, and in any such event, Holder may, without notice to Borrower, declare
this Term Note, all interest hereon, and all other amounts payable under this
Term Note to be forthwith due and payable, provided that upon an event with
respect to Borrower, a subsidiary of Borrower or Guarantor described in
subsection (h), (i) or (j) above, this Term Note, all interest thereon and all
other amounts payable under this Term Note shall automatically become
immediately due and payable, in each case without presentment, demand, protest,
or notice of any kind, all of which are hereby expressly waived by Borrower.
VIII. MISCELLANEOUS
SECTION 8.1 This Term Note constitutes the entire agreement between the
parties with respect to the subject matter hereof. None of the terms or
provisions hereof may be waived,
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altered, modified, or amended except by an agreement in writing signed by both
parties.
SECTION 8.2 All notices or communications provided for under this Term
Note shall be in writing and sent by first class mail, telecopier (receipt
acknowledged), hand delivery or by overnight courier;
if to the Borrower at:
PDIXF Acquisition Corp.
c/o Venture Partners, Ltd.
Mill Crossing
P.O. Box 9
Kensington, CT 06037
Attention: Gary M. Laskowski
if to the Holder at the address set forth above, or as to each party, at such
other address as shall be designated by such party in a written notice to other
party in like manner. All such notices or communications shall be deemed
effective upon receipt by the other party.
SECTION 8.3 No failure or delay on the part of Holder in the exercise of
any power or right under this Term Note shall operate as a waiver thereof, and
no exercise or waiver of any single power or right, or the partial exercise
thereof, shall affect Holder rights with respect to any and all other rights and
powers.
SECTION 8.4 The covenants, representations, warranties and agreements
set forth herein shall be binding upon the Borrower, its successors and assigns
and shall inure to the benefit of Holder and its successors and assigns.
SECTION 8.5 All rights and remedies of Holder under this Term Note, the
Guaranty and the Stock Pledge or other documents and instruments relating to
this Term Note shall be cumulative.
SECTION 8.6 This Term Note and all rights and obligations of the parties
hereunder shall be construed under the laws of the State of New York without
regard to any choice of law rule.
SECTION 8.7 In the event of any litigation in connection with this Term
Note, the Guaranty, and the Stock Pledge or other documents and instruments
relating hereto, or any of the transactions contemplated herein or therein, the
Borrower waives all rights to a trial by jury and Borrower agrees not to assert
any set off or counterclaim of any nature in such litigation. Any action or
suit in connection with this Term Note may be brought by Holder in New York
County of the State of New York, the Borrower hereby consenting to the
jurisdiction thereof, and service of process may be made on the borrower by
mailing a copy of the summons to it to the address set forth in Section 8.2
hereof.
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SECTION 8.8 Any provision of this Term Note which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Term Note or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 8.9 Notwithstanding any other provision of this Term Note, the
Borrower shall not be required to pay interest pursuant to this Term Note which
is excess of the maximum amount permitted under applicable law. It is the
intention of the parties hereto to conform strictly to any applicable usury
laws, and it is agreed that if any interest contracted for, chargeable or
receivable under this Term Note shall exceed the maximum amount permitted under
any such law, any such excess shall be deemed a mistake and canceled
automatically and, if theretofore paid, shall be refunded to Borrower.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be executed
by its duly authorized officer on the day and year first above written.
PDIXF ACQUISITION CORP.
By:________________________________
Title:
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STATE OF )
: ss.
COUNTY OF )
On the ___ day of _____, 1996, before me personally came__________________
_________________________________to me known, who, being by me duly sworn, did
depose and say that s/he resides at___________________________________________
______________, that s/he is the _________________________of PDIXF Acquisition
Corp., the corporation described in and which executed the foregoing instrument;
that s/he signed his/her name on behalf of the corporation and by order of the
board of directors of said corporation.
_____________________________________
Notary Public
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