SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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):
March 7, 1998
ORYX TECHNOLOGY CORP.
(Exact name of registrant as specified in its charter)
Delaware 1-12680 22-2115841
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
1100 Auburn Street, Fremont, California 94538
(Address of principal executive offices)
Registrant's telephone number, including area code: (510) 249-1144
_____________________________________________________________
This report on form 8-K, including all exhibits, contains 41 pages
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On March 7, 1998, Todd Power Corporation, a New York corporation, ("Todd")
acquired substantially all of the properties, assets, rights and business of
Oryx Power Products Corporation ("OPPC") including all but one share of Oryx De
Mexico, S.A. de C.V., a Mexican Corporation (the "Sale") for a purchase price of
$2,000,000 cash and an additional amount up to $4,000,000 to be calculated based
upon sales of certain of OPPC's specified products to certain specified
customers during the fourteen month period immediately following the Sale. As
part of the Sale, Todd also assumed certain of Power Products' liabilities.
A copy of the press release issued by the Registrant on March 9, 1998
concerning the Sale is filed herewith as Exhibit 99 and is incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not applicable.
(b) Pro forma financial information
INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Balance Sheet
The following unaudited Pro Forma Condensed Balance Sheet reflects the
historical consolidated condensed balance sheet of Oryx Technology Corporation
("Oryx" and together with its subsidiaries, the "Company") at November 30, 1997
adjusted to give effect to two separate agreements. The first agreement, the
Stock Purchase and Reorganization Agreement ("Instruments Disposition") dated
February 27, 1998, was by and between Oryx and Corus Investment Ltd., and Oryx
Instruments and Materials Corporation (I&M), whereby I&M distributed certain
assets and liabilities to Oryx and redeemed 8,000,000 shares of I&M Class A
Common Stock held by Oryx. The second agreement, the Asset Purchase Agreement
("Power Products Disposition"), which closed on March 7, 1998 was by and between
Oryx Power Products Corporation and Todd Power Corporation ("Todd") whereby Todd
acquired substantially all of the assets and assumed certain liabilities of Oryx
Power Products Corporation ("Power Products").
The unaudited Pro Forma Condensed Balance Sheet should be read in
conjunction with historical financial statements and notes thereto and the
narrative sections included elsewhere herein. Because these transactions
occurred subsequent to November 30, 1997, actual adjustments and balances will
vary from those presented in the Pro Forma Condensed Balance Sheet. However,
management believes that any differences between actual adjustments and pro
forma adjustments will not have a material effect on the pro forma financial
statement.
Pro Forma Condensed Statement of Operations
The unaudited Pro Forma Condensed Statements of Operations for the three
years ended February 28, 1997 and the nine months ended November 30, 1997 are
based upon the historical condensed consolidated statements of operations of the
Company for the respective periods after giving effect to pro forma adjustments
described in the notes thereto as if the Instruments Disposition and Power
Products Disposition had been consummated on March 1, 1998.
The unaudited Pro Forma Condensed Statements of Operations should be read
in conjunction with the historical financial statements and notes thereto of the
Company and the narrative sections included elsewhere herein. The Pro Forma
Condensed Statements of Operations are not necessarily indicative of what actual
results of operations would have been for the period had the transaction
occurred on March 1, 1998 and do not purport to indicate the results of future
operations.
<TABLE>
ORYX TECHNOLOGY CORP.
PRO FORMA CONDENSED BALANCE SHEET
November 30, 1997
(UNAUDITED)
Pro Forma Pro Forma
Adjustments Adjustments
Reflecting Reflecting
Instruments Power Products Pro Forma
Historical Disposition Disposition As Adjusted
--------------- ---------------- --------------- -----------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 761,000 $500,000 (A) $2,000,000 (1) $ 3,260,000
(1,000) (3)
Accounts receivable,net 1,832,000 (157,000) (3) 1,675,000
Inventories 4,274,000 (1,182,000) (B) (2,797,000) (3) 295,000
Other current assets (B) (3) 381,000
Total current assets 508,000 (31,000) (96,000) 5,611,000
7,375,000
Property and equipment, net 2,395,000 (541,000) (B) (1,157,000) (3) 697,000
Intangible assets, net 632,000 (609,000) (3) 23,000
Other assets 272,000 1,000,000 (A) (60,000) (3) 1,152,000
(60,000) (B)
--------------- -----------------
$ 10,674,000 $ 7,483,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings $ 1,063,000 (472,000) (3) $ 591,000
Capital lease obligations 20,000 (7,000) (B) - 13,000
Accounts payable 2,257,000 (265,000) (B) (1,960,000) (3) 32,000
Accrued liabilities (707,000) (B) 1,075,000 (2) 2,196,000
2,078,000 (250,000) (3)
------------ ------------ -------------- -------------
Total current liabilities 5,418,000 2,832,000
Deferred Gain 665,000 (C) - 665,000
Capital lease obligations, less current portion 38,000 (23,000) (3) 15,000
Borrowings, less current portion (259,000) (3)
259,000 -
Total liabilities 3,512,000
5,715,000
Mandatorily redeemable securities (778,000) (3)
778,000 -
Stockholders' equity:
Series A 2% Convertible Cumulative
Preferred Stock, 4,500 shares issued and
outstanding 107,000 107,000
Common Stock, 13,124,821 shares issued and
outstanding, 15,000 15,000
Additional paid in capital 19,617,000 19,617,000
Accumulated deficit (210,000) (4) (15,768,000)
(15,558,000)
Total stockholders' equity 3,971,000
4,181,000
$ $ 7,483,000
10,674,000
</TABLE>
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(Unaudited)
The Oryx Instruments Disposition stock purchase and reorganization pro
forma adjustments have been made to reflect the following:
(A) Redemption by I&M of 8,000,000 shares of I&M Class A Stock held by Oryx
for $500,000 in cash and $1,000,000 in a non-interest bearing promissory.
(B) Elimination of I&M assets and liabilities less certain assets and
liabilities distributed to Oryx prior to the redemption and estimated
transaction costs.
(C) Deferred gain on sale of Oryx's 8,000,000 shares of Class A Stock of
I&M.
The Power Products Disposition pro forma adjustments have been made to
reflect the following:
1) Consideration of $2,000,000 received upon disposition of substantially
all of the assets and certain liabilities of Power Products.
2) Transactions costs associated with the Power Products Disposition.
3) Elimination of substantially all of the assets and certain liabilities
of Power Products.
4) Loss on Power Products Disposition
<TABLE>
ORYX TECHNOLOGY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months ended November 30, 1997
(UNAUDITED)
Pro Forma Pro Forma
Adjustments Adjustments
Reflecting Reflecting
Instruments Power Products Pro Forma
Historical Disposition Disposition As Adjusted
------------------ ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $13,811,000 $(2,945,000) (A) $(6,988,000) (1) $3,878,000
Cost of sales 11,714,000 (2,307,000) (B) (6,912,000) (2) 2,495,000
------------------ ----------------
Gross profit 2,097,000 1,383,000
------------------ ----------------
Operating expenses:
Marketing and selling 1,522,000 (866,000) (C) (580,000) (3) 76,000
General and administrative 3,298,000 (317,000) (D) (1,134,000) (4) 1,847,000
Research and development 3,624,000 (1,300,000) (E) (937,000) (5) 1,387,000
------------------ ----------------
Total operating expenses 8,444,000 3,310,000
------------------ ----------------
Loss from operations (6,347,000) (1,927,000)
Interest expense, net 166,000 (19,000) (6) 147,000
Equity loss on investment
Net gain on sale of investment (1,383,000) (1,383,000)
------------------ -----------------
Loss before income taxes (5,130,000) (691,000)
Provision for income taxes 42,000 (31,000) (7) 11,000
------------------ ----------------
Net loss (5,172,000) (702,000)
Dividends and accretion (143,000) 141,000 (8) (2,000)
------------------ ----------------
Net loss attributable to
common shares $(5,315,000) $(704,000)
================== ================
Basic loss per common share: $(0.40) $(0.05)
================== ================
Shares used in basic loss calculation: 13,124,821 13,124,821
================== ================
</TABLE>
<TABLE>
ORYX TECHNOLOGY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended February 28, 1997
(UNAUDITED)
Pro Forma Pro Forma
Adjustments Adjustments
Reflecting Reflecting
Instruments Power Products Pro Forma
Historical Disposition Disposition As Adjusted
---------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $26,860,000 $(2,194,000) (A) $(20,390,000) (1) $4,276,000
Cost of sales 18,475,000 (1,423,000) (B) (13,870,000) (2) 3,182,000
---------------- --------------
Gross profit 8,385,000 1,094,000
---------------- --------------
Operating expenses:
Marketing and selling 2,010,000 (978,000) (C) (901,000) (3) 131 ,000
General and administrative 4,499,000 (625,000) (D) (1,560,000) (4) 2,314,000
Research and development 3,101,000 (1,819,000) (E) (944,000) (5) 338,000
Acquired in-process research and 670,000 (670,000) (5) -
development
---------------- --------------
Total operating expenses 10,280,000 2,783,000
---------------- --------------
Loss from operations (1,895,000) (1,689,000)
Interest expense, net 10,000 10,000
Equity loss on investment 20,000 20,000
---------------- --------------
Loss before income taxes (1,925,000) (1,719,000)
Provision for income taxes 40,000 (40,000) (7) -
---------------- --------------
Net loss (1,965,000) (1,719,000)
Dividends and accretion (47,000) (38,000) (8) (9,000)
---------------- --------------
Net loss attributable to
common shares $(2,012,000) $(1,728,000)
================ ==============
Basic loss per common share: $(0.19) $(0.16)
Shares used in basic loss 10,650,000 10,650,000
calculations
==================== ==================
</TABLE>
<TABLE>
ORYX TECHNOLOGY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended February 29, 1996
(UNAUDITED)
Pro Forma Pro Forma
Adjustments Adjustments
Reflecting Reflecting
Instruments Power Products Pro Forma
Historical Disposition Disposition As Adjusted
-------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $16,136,000 $(858,000) (A) $(12,014,000) (1) $3,264,000
Cost of sales 13,020,000 (1,017,000) (B) (9,947,000) (2) 2,056,000
-------------- --------------
Gross profit 3,116,000 1,208,000
-------------- --------------
Operating expenses:
Marketing and selling 1,387,000 (454,000) (C) (756,000) (3) 177,000
General and administrative 2,541,000 (373,000) (D) (918,000) (4) 1,250,000
Research and development 2,823,000 (739,000) (E) (937,000) (5) 1,147,000
-------------- --------------
Total operating expenses 6,751,000 2,574,000
-------------- --------------
Loss from operations (3,635,000) (1,366,000)
Interest expense, net 320,000 (129,000) (6) 191,000
Equity loss on investment 195,000 195,000
-------------- --------------
Loss before income taxes and extraordinary gain (4,150,000) (1,752,000)
Provision for income taxes 42,000 (40,000) (7) 2,000
-------------- --------------
Loss before extraordinary gain (4,192,000) (1,754,000)
Extraordinary gain from debt restructuring (1,433,000) 1,433,000 (6) -
-------------- --------------
Net loss (2,759,000) (1,754,000)
Dividends and accretion (20,000) (20,000)
-------------- --------------
Net loss attributable to
common shares ($2,779,000) ($1,774,000)
============== ==============
Basic loss per common share before
extraordinary gain: $ (0.73) $ (0.31)
Extraordinary gain from debt restructuring 0.25 -
-------------- ------------------
Basic loss per common share $ (0.48) $ (0.31)
============== ==================
Shares used in basic loss calculations: 5,789,642 5,789,642
============== ==================
</TABLE>
<TABLE>
ORYX TECHNOLOGY CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended February 28, 1995
(UNAUDITED)
Pro Forma
Pro Forma Adjustments
Adjustments Reflecting
Reflecting Power Products Pro Forma
Instruments Disposition As Adjusted
Historical Disposition
-------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $11,352,000 $(494,000) (A) $(8,500,000) (1) $2,358,000
Cost of sales 8,172,000 (605,000) (B) (6,046,000) (2) 1,521,000
-------------------- ---------------
Gross profit 3,180,000 837,000
-------------------- ---------------
Operating expenses:
Marketing and selling 972,000 (308,000) (C) (664,000) (3) -
General and administrative 1,738,000 (457,000) (4) 1,281,000
Research and development 1,986,000 (910,000) (E) (552,000) (5) 524,000
Acquired in-process research and development 1,275,000 (1,275,000) (5) -
-------------------- ---------------
Total operating expenses 5,971,000 1,805,000
-------------------- ---------------
Loss from operations (2,791,000) (968,000)
Interest expense, net 154,000 (105,000) (6) 49,000
Equity loss on investment 336,000 336,000
-------------------- ---------------
Loss before income taxes (3,281,000) (1,353,000)
Provision for income taxes 8,000 (8,000) (7) -
-------------------- ---------------
Net loss (3,289,000) (1,353,000)
Dividends and accretion (27,000) (27,000)
-------------------- -------------------
Net loss attributable to
common shares ($3,316,000) ($1,380,000)
==================== ===================
Basic loss per common share: ($1.02) ($0.43)
==================== ===================
Shares used in basic loss calculations: 3,238,900 3,238,900
==================== ===================
</TABLE>
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
The Oryx Instruments Disposition purchase and reorganization pro forma
adjustments have been made to reflect the following:
(A) Reduction in revenues of I&M due to the redemption by I&M of 8,000,000
shares of I&M Class A Stock held by Oryx.
(B) Reduction in cost of revenues associated with I&M revenues.
(C) Reduction in marketing costs associated with the marketing and sale of I&M
products.
(D) Reduction in general and adminstative costs associated with I&M
operations.
(E) Reduction in research and development associated with the development of
I&M products.
(F) Inclusion of dilutive common stock equivalents previously considered
anti-dilutive in a loss period.
The Power Products Disposition pro forma adjustments have been made to reflect
the following:
1) Reduction in revenues due to Power Products Disposition.
2) Reduction in cost of revenues associated with Power Products revenues.
3) Reduction in marketing costs associated with the marketing and sale of
Power Products products.
4) Reduction in general and administrative costs associated with Power
Products operations.
5) Reduction in research and development associated with the development of
Power Products products.
6) Reduction in interest expense and extraordinary gain from debt
restructuring related to borrowings directly related to Power Products.
7) Reduction in income taxes related to operations of Power Products.
8) Reduction in accretion related to the elimination of the mandatorily
redeemable securities.
(c) Exhibits
2.1 Asset Purchase Agreement(1) by and among the
Registrant, Todd Power Corporation and Oryx Power
Products Corporation.(2)
99.1 Press release dated March 9, 1998, regarding the sale
of the Oryx Power Products Corporation business to
Todd Power Corporation.
(1) Although dated as of March 2, 1998, agreement among the parties on
material terms of the transaction was not reached until March 7, 1998
(2) Confidential treatment of certain portions of this agreement has been
applied for with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 23, 1998 ORYX TECHNOLOGY CORPORATION
By: /s/ Philip J. Micciche
Philip J. Micciche
President and Chief Executive Officer
<PAGE>
Exhibit Index
Exhibit Number Description of Document
2.1 Asset Purchase Agreement by and among the Registrant,
Todd Power Corporation and Oryx Power Products
Corporation.(1)
99.1 Press release dated March 9, 1998, regarding the sale
of the Oryx Power Products Corporation business to
Todd Power Corporation.
(1) Confidential treatment of certain portions of this agreement has been
applied for with the Securities and Exchange Commission, including the
Schedules referenced in the agreement.
CONFIDENTIAL TREATMENT REQUESTED
(*) Denotes information for which confidential treatment has been requested.
Confidential portions omitted have been filed separately with the Commission.
ASSET PURCHASE AGREEMENT
BY AND AMONG
TODD POWER CORPORATION
AND
ORYX POWER PRODUCTS CORPORATION
AND
ORYX TECHNOLOGY CORP.
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement") dated March 2, 1998, by and among
TODD POWER CORPORATION, a New York corporation ("Purchaser"), with offices at 50
Emjay Boulevard, Brentwood, New York 11717, ORYX POWER PRODUCTS CORPORATION, a
Delaware corporation ("Seller"), with offices at 1601 Feehanville Drive, Suite
300, Mount Prospect, Illinois 60056 and ORYX TECHNOLOGY CORP., a Delaware
Corporation ("OTC"), having offices located at 47341 Bayside, Fremont,
California, 94538. Purchaser, Seller and OTC are sometimes referred to
collectively herein as the "Parties."
WITNESSETH:
WHEREAS, Seller is engaged in the business of the sale and distribution of
power supply units and parts for use in electronic goods (the "Business"); and
WHEREAS, Seller owns all but one share of the capital stock of Oryx De
Mexico, S.A. de C.V., a Mexican corporation ("ODM"); and
WHEREAS, ODM is in the business of manufacturing and assembling said power
supply units and parts at a Maquiladora plant in Reynosa, Mexico for shipment to
Seller's facility for distribution and sale pursuant to a certain Maquila
Services Agreement between ODM and OTC; and
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser the entire Business of Seller by purchasing and selling, as
the case may be, substantially all of Seller's assets of the Business, including
but not limited to, all but one share of the capital stock of ODM (the "ODM
Stock"), and by assigning, and assuming as the case may be, certain liabilities
of Seller, all upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, covenants, representations and warranties hereinafter contained, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
1.1 Purchase and Sale of Assets. Subject to and upon the terms and
conditions set forth in this Agreement, Seller shall sell, assign, transfer,
convey and deliver to Purchaser and Purchaser shall purchase from Seller, at the
"Closing" (as hereinafter defined), all of the properties, assets, rights and
business of Seller of every type and description, real, personal and mixed,
tangible and intangible, related to, derived from or used in the operation of
the Business, wherever located and whether or not reflected on the books and
records of Seller (all of such assets, properties, rights and business being
hereinafter sometimes collectively referred to herein as the "Acquired Assets")
including, without limitation, the following:
(a) all inventory, including, without limitation, the finished goods,
work in progress, components, parts and supplies related thereto identified on
Schedule 1.1(a) hereto ("Seller's Inventory");
(b) all accounts receivable (the "Transferred Receivables");
(c) all furniture, fixtures, equipment, tools, machinery, vehicles,
supplies, signs, leasehold improvements and other tangible personal property of
Seller;
(d) all of Seller's right, title and interest in, to and under (i) any
agreements (other than any agreement or arrangement with any distributor or
manufacturers' representative and those certain Severance Agreements with Thomas
Landgraf, Gary Sollner and Charles Ray and Separation Agreement with Ronald
Spaight, leases and contracts, including, but not limited to, those described in
Schedule 1.1(d)(i) hereto; (collectively the "Transferred Agreements"), and (ii)
any and all prepayments, deposits and similar assets (including but not limited
to cash reserves) relating to or associated with the Transferred Agreements;
(e) all intellectual property owned or licensed by Seller or used in
the operation of the Business (the "Intellectual Property"), including, without
limitation, (i) trade names, trademarks, service names, service marks,
copyrights, private labels, logos or designs, whether registered or not,
including, without limitation, the names and marks set forth in Schedule 1.1(e)
hereto and a perpetual, royalty free license to use the name "Oryx" in
combination or in connection with the sale of power supplies; and (ii) all trade
secrets, confidential and/or proprietary information, know-how, patents,
processes, procedures, devices, techniques, programs, software, creations,
methods, formulas, designs, drawings, and technical information related to,
derived from or used in the operation of the Business;
(f) books, records and documents of Seller related to, derived from or
used in the operation of the Business, including, without limitation, all
customer lists, supplier lists, price lists, telephone numbers and listings,
advertising materials and marketing plans, internet web pages, business files,
regulatory files and approvals, business plans, financial data, operations
manuals, repair or service manuals, fire, safety or environmental reports and
all data related to inventory, sales and accounts receivable and similar books
and records used in or relating to the Business and all stock and minute books
of ODM;
(g) all permits, licenses, orders, consents and approvals of any
governmental or regulatory authority used in or related to the Business, or the
operation of the Business; (h) all existing and prospective business
relationships, reputation, and other intangibles which may be characterized as
"good will" or "going concern value" of Seller's Business including, without
limitation, the name "Oryx Power Products";
(i) all choses in action, causes of action, claims and rights of
recovery or setoff of every kind or character arising out of or attributable to
any of the Acquired Assets or the Business which is purchased hereunder
(hereinafter defined), irrespective of the date on which any such chose in
action, cause of action, claim or right may arise or accrue;
(j) all but one share of the capital stock of ODM; and
(k) any and all other properties, assets, rights and businesses of
every kind and nature owned or held by Seller on the Closing Date, known or
unknown, fixed or unfixed, choate or inchoate, accrued, absolute, contingent or
otherwise, whether or not specifically referred to in this Agreement.
1.2 Assumption of Liabilities. Purchaser shall assume only those
liabilities specifically described on Schedule 1.2 (the "Assumed Liabilities").
Except for the Assumed Liabilities specifically described in the immediately
preceding sentence, Purchaser has not assumed or undertaken, and is not assuming
or undertaking, to discharge or perform, any obligation or liability of Seller,
all of which obligations and liabilities Seller and OTC hereby undertake to
fully discharge, pay and/or satisfy as and when the same may become due. Without
limiting the generality of the foregoing, Purchaser shall not be deemed to have
assumed, nor shall Purchaser assume, any liability based upon or arising out of
any tortious or wrongful actions of Seller or any liability for the payment of
(i) any liability or obligation of Seller arising out of or in connection with
the negotiation and preparation of this Agreement and the consummation and the
performance of the transactions contemplated hereby including, without
limitation, any tax liability so arising; (ii) any liability or obligation of
Seller for any foreign, federal, state, county or local taxes, or any interest
or penalties thereon, accrued for, applicable to or arising from any period
ending on or prior to the date of Closing other than the Mexican Value Added Tax
(the "VAT") on the assets of Seller located at the facility in Reynosa,
Tamaulipas, Mexico, which will be shared in accordance with Section 8.2 hereof;
(iii) any salary, wage, benefit, bonus, vacation pay, sick leave, insurance,
employment tax or similar liability of Seller to any employee, officer, director
or other person or entity allocable to services performed on or prior to the
date hereof; or (iv) any contributions to any pension, employee benefit or
profit sharing plan of Seller, ODM or OTC for the benefit of any of Seller's
employees, officers or directors.
1.3 Excluded Assets. Notwithstanding any other provision of this Agreement
the Acquired Assets shall not include and Seller shall retain: (a) cash and cash
equivalents of Seller (other than any cash received by (*) ("*") after February
28, 1998 with respect to accounts receivable); (b) stock books, minute books and
corporate seals of Seller (but the Acquired Assets shall include such books and
seals of ODM); and (c) Seller's right to enforce this Agreement.
1.4 Notwithstanding anything in this Agreement to the contrary, title to
Seller's Inventory shall, without any further action by or on behalf of Seller,
pass to Purchaser upon delivery thereof to Purchaser from time to time at
Purchaser's facility located in McAllen, Texas. Purchaser shall have the right
to process and complete all unfinished inventory and shall pay all costs of
delivery to Purchaser's facility in McAllen, Texas.
ARTICLE 2
PURCHASE PRICE AND TERMS OF PAYMENT
2.1 Purchase Price. In consideration of the sale, assignment, transfer,
conveyance and delivery of the Acquired Assets to Purchaser, and in reliance
upon the representations, warranties, covenants and agreements made herein,
Purchaser shall pay Seller the following amounts (the "Purchase Price"):
(a) At the closing, the sum of Two Million Dollars ($2,000,000.00) by
wire transfer or certified or bank check, payable to the order of Seller.
(b) An additional amount not to exceed Four Million Dollars
($4,000,000.00) (the "Earn Out") calculated and adjusted pursuant to Section 2.3
hereof.
(c) At the Closing, Purchaser shall repay or cause to be repaid the
aggregate outstanding loan advances (the "(*) Advances") made by (*) and set
forth on Schedule 2.1(c).
2.2 Allocation of Purchase Price. The Parties agree that the Purchase Price
shall be allocated among Acquired Assets in conformance with the provisions of
Section 1060 of the Internal Revenue Code, as amended (the "Code") and in
accordance with an appraisal and allocation prepared by American Appraisal. The
Parties agree to accept the allocation prepared by American Appraisal and to
report the allocation of the Purchase Price in Code Form 8594 and, where
required, in their respective Federal and State income tax returns in accordance
therewith.
2.3 Calculation and Adjustment of Earn Out.
(a) Subject to adjustment pursuant to Section 2.3(b) hereof, Seller
shall be entitled to receive additional consideration based on attaining certain
levels of "Oryx Sales" (as hereinafter defined) during the fourteen month period
immediately following the Closing (the "Earn Out Period"). Oryx Sales shall mean
sales by Purchaser or any affiliate of Purchaser (i) of the specific products
and derivatives of such products listed on Schedule 2.3(a)(1) to the specific
customers designated to that product on said Schedule; (ii) of any products
(other than standard and modified standard products of Todd Products Corp.) to
the customers identified on Schedule 2.3(a)(2); and (iii) of identified products
listed on Schedule 2.3(a)(3), reduced by the amount of all taxes, shipping and
insurance charges, commissions payable to certain manufacturers representatives
identified as item 13 on Schedule 1.2, and all amounts attributable to returns
and adjustments accepted in accordance with customary industry practice.
Payments ("Earn Out Payments") shall be paid only with respect to Oryx Sales for
which payment is actually received and will be computed in accordance with the
table set forth below. Earn Out Payments will be paid on the last day of the
month immediately following the month during which Purchaser actually receives
payment with respect to accounts receivable attributable to Oryx Sales.
<TABLE>
<S> <C> <C>
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Earn Out Payment Calculation at and within
Level Aggregate Payments Received (*) each Level including all prior Levels (*)
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I.
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II.
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III.
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IV.
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V.
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VI.
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VII.
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VIII.
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</TABLE>
For purposes of computing aggregate payments received, amounts received for
shipping, insurance, non-recurring engineering charges and other ancillary costs
will be excluded and credits for returns and adjustments will be netted against
Oryx Sales. For any shipment of products with respect to Oryx Sales initially
made within the Earn Out Period which is returned to Purchaser and re-shipped
within 90 days after the end of the Earn Out Period, such re-shipment shall be
treated as made during the Earn Out Period. Purchaser, in its sole discretion,
shall have the right to accept or reject any Oryx Sale to any customer
whatsoever, and no such rejected or potential Oryx Sale shall be included in the
calculation of any Earn Out Payment.
(b) Earn Out Payments shall be reduced dollar for dollar by the sum of
the following:
(i) the amount of any accounts receivable, (net of any reserve
for bad debt, returns, allowances and warranty claims) reflected on the audited
consolidated balance sheet (the "Closing Balance Sheet") of ODM and Seller dated
February 28, 1998 ("Balance Sheet Date"), not collected in the ordinary course
of business during the 180-day period immediately following the Closing;
(ii) to the extent not previously paid to Purchaser pursuant to
Section 4.3(b), the amount, if any, by which the Seller's Net Asset Value (as
hereafter defined) is less than $1,400,000.00. For purposes of this Agreement,
Net Asset Value shall mean (a) the amount of Seller's assets, excluding cash,
cash equivalents, and amounts attributable to goodwill, all as reflected on the
Closing Balance Sheet, minus (b) the amount of Seller's liabilities, as
reflected on the Closing Balance Sheet excluding inter-company debt, obligations
with respect to certain redeemable convertible common stock, and accounts
payable in excess of $1,800,000, all as reflected on the Closing Balance Sheet,
plus the (*) Advances at February 28, 1998;
(iii)the amount of any inventory in excess of any reserve for
obsolete inventory reflected on the Closing Balance Sheet that remains unsold at
the end of the Earn Out Period. If, at the end of the Earn Out Period, any IBM
Inventory exists, Purchaser may in its sole discretion, elect to purchase such
remaining IBM inventory by applying any Earn Out adjustments pursuant to this
Section 2.3(b) at cost or, if it does not purchase said IBM Inventory, Purchaser
shall return said Inventory to Seller and Purchaser shall have no further
obligation with respect to the IBM Inventory. IBM Inventory means those items
and the quantities thereof listed on Schedule 2.3(b)(iii);
(iv) the amount by which the (*) Advances exceed $1,500,00.00;
(v) to the extent not previously paid to Purchaser pursuant to
Section 4.3(b), the amount by which the aggregate accounts payable ("Accounts
Payable") of Seller as set forth in the Audited Financial Statement, as
hereinafter defined exceeds $1,800,000.00;
(vi) the amount of any Earn Out Payments (calculated at the
applicable Earn Out level) previously paid with respect to Oryx Sales for which
products are returned for any reason and for which no re-shipment is made during
the 90 day period following the Earn Out Period;
(vii) the amount of any raw materials subject to outstanding
purchase orders for purchased goods on the Closing Date which remain in
inventory as raw materials at the end of the Earn Out Period and any and all
amounts paid by Purchaser in connection with canceling, adjusting or changing
the terms of any such purchase order in the ordinary course of business; and
(viii) the aggregate amount of any increase in the wages and
salaries effective at any time before February 28, 1999 to be paid to employees
working at the ODM facility located in Reynosa, Tamaulipas, Mexico in excess of
five (5%) percent (on an annualized basis) above the wages and salaries in
effect on March 1, 1998 with respect to the number of employees covered by the
union contract in effect at such facility on February 28, 1998.
(c) If Purchaser receives payment of an amount for accounts
receivables or inventory pursuant to Sections 2.3(b)(i) or (iii) hereof in
excess of the amount required under such subsection (each a "Surplus") then the
amount of such Surplus may be applied against any shortfall in the other
subsection. This provision shall only apply to surpluses and shortfalls under
Sections 2.3(b)(i) and (iii) and shall not affect, in any way, any Surplus or
shortfall under any other provision of Section 2.3 or other Section of this
Agreement.
(d) To the extent any adjustment pursuant to Section 2.3(b) exceeds
any Earn Out Payment to which it has been applied, such shortfall shall be
carried forward on a dollar for dollar basis and applied against any future Earn
Out Payments.
2.4 Guaranty of Todd Products. Purchaser's payment and other obligations
hereunder shall be guaranteed by Todd Products Corporation in the form of
guaranty (the "Todd Guaranty") attached hereto as Exhibit A.
2.5 Audit Rights. Each month of the Earn Out Period, Purchaser shall
provide Seller and OTC with a written statement setting forth shipments of
products with respect to Oryx Sales subject to the Earn Out in the prior month.
If no shipments with respect to Oryx Sales subject to the Earn Out were made in
such month, that fact shall be stated. For each such month, Purchaser shall
provide Seller and OTC with a statement of cumulative shipments of products made
through such month and the amount of Earn Out Payments owed for such period.
Such report shall be made within fifteen (15) days of the end of such month. If
no payments are owed, such fact shall be so stated. Purchaser shall keep full,
complete, and accurate records relating to all payments and shipments. Seller
and OTC shall together have the right, at their own expense, through an
independent Certified Public Accountant (the "Auditor") to audit records in
Purchaser's actual or constructive possession relating to information bearing
upon the amount of payments owed Seller and shipments of products with respect
to Oryx Sales subject to the Earn Out. Such an audit shall occur upon not less
than ten (10) days' prior written notice, shall not take place more than two
times, and shall occur during Purchaser's ordinary business hours. The Auditor
shall disclose to all parties whether a discrepancy exists and, if so, the basis
and amount thereof. Prompt adjustment shall be made by Purchaser to compensate
for any shortfall disclosed by the audit. If any audit discloses a shortfall in
payments owed for more than five percent (5%) for any period being audited,
Purchaser shall bear the reasonable costs of such audit. No audit shall occur
later than twelve (12) months after the end of the Earn Out Period.
ARTICLE 3
CLOSING
3.1 The closing of the transactions hereunder (the "Closing") shall take
place at the offices of Purchaser's counsel located at 170 Old Country Road,
Mineola, New York. Such date is herein sometimes referred to as the "Closing
Date."
ARTICLE 4
CLOSING CONDITIONS
4.1 Obligations of Seller. Concurrently with the execution of this
Agreement, Seller or OTC shall deliver to Purchaser the following:
(a) a Bill of Sale, duly executed by Seller, together with such other
documents of conveyance, assignment and transfer, all in form and substance
satisfactory to Purchaser and its counsel, as shall be required to vest in
Purchaser good and marketable title to the Acquired Assets and shall provide for
delivery of specific Acquired Assets to be delivered at such locations within
the United States of America as the parties agree;
(b) Seller's customer list;
(c) assignments to Purchaser of the Transferred Agreements, in form
and substance satisfactory to Purchaser and its counsel and all required
consents to such assignments;
(d) all of the original Transferred Agreements, files, computer
records (including programs and software) and other data and documents
pertaining to the Business including, without limitation, accounting books and
records of Seller and ODM, all of which may be delivered to the Purchaser at
Seller's Texas or Mexican facilities, or such other facilities of Seller as the
parties agree.
(e) a non-competition agreement, in form and substance satisfactory to
Purchaser and its counsel, duly executed by each of the following:
(i) Philip Micciche;
(ii) Mitchel Underseth;
(iii) Oryx Technology Corp.; and
(iv) Oryx Power Products Corporation.
(f) a true and complete copy of Seller's Certificate of Incorporation
(and any amendments thereto), certified as of a recent date by the Secretary of
State of Delaware;
(g) a true and complete copy of ODM's Articles of Organization and any
amendments thereto (or the Mexican equivalent thereof).
(h) a Certificate of Amendment to Seller's Certificate of
Incorporation pursuant to which the name of Seller is changed to a name that is
dissimilar to its present name and which does not contain the words "Power
Products", or any derivative thereof;
(i) a certificate of good standing of Seller issued by the Secretary
of State of Delaware dated within thirty (30) days of the Closing Date;
(j) a certificate of good standing (or the Mexican equivalent thereof)
of ODM issued by the appropriate governmental official in Mexico or any
political subdivision thereof, and dated within thirty (30) days of the Closing
Date;
(k) a certificate, dated the Closing Date, from each of the Secretary
of Seller and the Secretary of OTC, as the case may be, certifying the
resolutions adopted by (i) the stockholders of Seller and Board of Directors of
Seller and (ii) the Board of Directors of OTC, authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement;
(l) a current franchise tax letter issued by the Delaware Department
of Taxation stating that Seller is current in its franchise tax filings and
payments;
(m) a written opinion of counsel for each of Seller and ODM, dated the
Closing Date, in form and substance satisfactory to Purchaser and its counsel;
(n) the stock book (to the extent it exists), all unissued, cancelled
and redeemed stock certificates and all stock certificates representing 49,999
shares of ODM shares issued to Seller and the minute book (to the extent it
exists) of ODM;
(o) binding and effective lease to the premises occupied by ODM in
Reynosa, Tamaulipas, Mexico with an expiration date of 2003 or later or an
estoppel letter from the landlord confirming among other things that the current
lease is effective until at least December 31, 1998; and
(p) forms UCC-3 Termination Statements (or the Mexican equivalent)
with respect to all liens of record against any of the Acquired Assets and any
of the assets of ODM;
(q) all consents, orders and approvals of third-parties required for
Seller or ODM to enter into this Agreement or to perform their respective
obligations hereunder or to give Purchaser the benefit of the bargain
contemplated herein;
(r) any and all such other documents, agreements, certificates and
instruments required to be executed and/or delivered by Seller, OTC or ODM or
any shareholder of Seller, OTC or ODM to Purchaser, and all payments (if any)
required to be made, pursuant to the terms and provisions of this Agreement;
(s) Texas tax form signed by Seller; and
(t) a letter agreement from Seller regarding the withholding of
$15,000 from the purchase price for payment of stock transfer gains tax.
4.2 Obligations of Purchaser. Concurrently with the execution of this
Agreement, Purchaser shall deliver to Seller the following:
(a) Two Million ($2,000,000.00) Dollars by wire transfer or certified
or bank check payable to the order of Seller;
(b) an amount equal to the outstanding (*) Advances by wire transfer
directly to (*);
(c) the executed Todd Guaranty;
(d) a certificate dated the date hereof of the Secretary of Purchaser
and Todd Products certifying the resolutions adopted by the Board of Directors
of Purchaser approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement and with respect
to Todd Products further that the Guaranty has been duly approved by Todd
Products;
(e) any and all such other documents, agreements, certificates and
instruments required to be executed and/or delivered by Purchaser, and all
payments required to be made, pursuant to the terms and provisions of this
Agreement;
(f) certified good standing certificate of Todd Products and of
Purchaser;
(g) written opinion letter of counsel to Todd Products and Purchaser,
dated the Closing Date, in form and substance satisfactory to Seller and OTC and
their counsel; and
(h) Illinois tax form signed by Purchaser.
(i) a letter agreement from Purchaser regarding payment of certain
operating costs of Seller and ODM since February 28, 1998
4.3 Covenants and Further Assurances.
(a) Seller and OTC hereby covenant and agree to have Price Waterhouse
LLP, their independent auditors, prepare audited financial statements (the
"Audited Financial Statements"), including the Closing Balance Sheet for Seller
and ODM on a consolidated basis for the two year period ending February 28,
1998. Seller shall cause the Audited Financial Statements to be completed in
accordance with Generally Accepted Accounting Principles and delivered to
Purchaser on or before May 15, 1998. Purchaser agrees to share the additional
costs and expenses incurred by Seller to obtain the Audited Financial Statements
over and above the costs and expenses incurred to prepare the audited financial
statements of OTC, Seller, ODM and their affiliates on a consolidated basis.
Purchaser shall provide to Seller's independent auditors reasonable cooperation
and all necessary information and assistance to permit Seller to prepare such
Closing Balance Sheet.
(b) Within ninety (90) days after the Closing Date, Seller shall pay
to Purchaser an amount equal to the sum of (i) the amount, if any by which the
Net Asset Value is less than $1,400,000.00 and (ii) the amount, if any, by which
the Accounts Payable exceeds $1,800,000.00;
(c) Seller and OTC hereby covenant to remit to the appropriate Mexican
governmental authorities or pay or reimburse the Purchaser the amount of all
payroll and withholding taxes and deductions required to be withheld for or on
behalf of the employees of ODM for the period through and including February 28,
1998 in excess of the amount, if any, reflected therefor on the Closing Balance
Sheet.
(d) Seller will pay all earned, accrued and unpaid vacation
obligations (the "Oryx Vacation Pay") to its employees as of February 28, 1998.
Purchaser agrees to reimburse to Seller an amount equal to the Oryx Vacation Pay
not to exceed $102,506 and associated employer paid payroll taxes and an amount
equal to Seller's payroll for the period February 28, 1998 through March 4, 1998
not to exceed $19,168 and related employer paid payroll taxes, and medical and
life insurance benefit premiums not to exceed $10,000, in the aggregate, at the
end of the Earn Out Period, subject to offset for any available adjustments to
Earn Out Payments then and thereafter due based on Oryx Sales.
(e) Seller and OTC agree to pay to Purchaser at the end of the Earn
Out Period any amount pursuant to Section 2.3(b)(vi) which has not then been
offset by any available Earn Out Payment.
(f) If any payment obligation provided for under this Section 4.3 is
not paid when due or within ten (10) days after demand therefor (where no
specific due date is indicated), the amount of such payment obligation shall
bear interest at a rate equal to the prime rate of interest in effect at The
Chase Manhattan Bank plus three (3%) percent.
(g) At any time and from time to time after the Closing, at any
Party's request and without further consideration, the other Party or Parties,
as the case may be, will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and delivery and take such action as the
requesting Party may reasonably deem necessary or desirable in order to more
effectively transfer, convey, assign and deliver to such requesting Party what
it seeks in order to effectuate the transactions contemplated hereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER AND OTC
Seller and OTC, jointly and severally, represent and warrant to Purchaser
as follows:
5.1 Organization and Good Standing of Seller and ODM.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Seller has all requisite
corporate power and authority, licenses, permits and franchises to own, lease
and operate its properties and assets in Delaware, Texas and Illinois and to
carry on the Business as currently conducted in Texas, Illinois and California.
Seller is qualified to do business as a foreign corporation in Texas, Illinois
and California in such other jurisdictions in which the nature of its business
or assets makes such qualification necessary. Seller has not been notified by
any such state or country that it is required to qualify to do business in such
state or country. Seller maintains office facilities in McAllen, Texas and Mt.
Prospect Illinois. Seller has no other offices, does not lease or own real
property other than in McAllen, Texas and Mt. Prospect, Illinois. Seller has
heretofore delivered to Purchaser Schedule 5.1 which is a true and complete list
of all states in which Seller is qualified to do business.
(b) ODM is a corporation duly organized, validly existing and in good
standing under the laws of Mexico. ODM has all requisite corporate power and
authority, licenses, permits and franchises to own, lease and operate its
properties and assets in Reynosa, Mexico and to carry on the Business as
currently conducted in Reynosa, Mexico.
5.2 Authorization of Agreement and Enforceability. Seller has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly and validly
authorized, executed and delivered by Seller, OTC and (assuming the valid
execution and delivery of the Agreement by Purchaser) constitutes a legal, valid
and binding obligation of Seller and OTC, enforceable against Seller and OTC in
accordance with its terms.
5.3 Effect of Agreement. Neither the execution, delivery and performance of
this Agreement by Seller and OTC, nor the consummation by Seller and OTC of the
transactions contemplated hereby will: (a) conflict with or result in a breach
of any provision of the Certificate of Incorporation or By-laws of Seller, OTC
or ODM; (b) constitute or result in the breach of, conflict with or give rise to
a right of forfeiture, termination, cancellation or acceleration with respect
to, any term, condition or provision of, any note, bond, mortgage, indenture,
license or other contract or obligation to which Seller, OTC or ODM is a party
or by which any of them or any of their respective Assets may be bound, except
for such conflicts, breaches or defaults as to which written waivers or consents
have been obtained, or (c) violate in any material respect any law, statute,
regulation, judgment, order, writ, injunction, or decree applicable to Seller,
OTC, ODM, the Business, the Acquired Assets or any of the Assets of ODM.
5.4 Capitalization and Ownership of Capital Stock. The issued shares of
capital stock of ODM are duly authorized, validly issued, fully paid and
non-assessable. The presently authorized, issued and outstanding shares of
capital stock of ODM and the names and addresses of the record and beneficial
owners thereof are as set forth on Schedule 5.4 hereto. Each of such persons is
the lawful record and beneficial owner of the number of shares set forth
opposite his name, free and clear of any liens, claims, encumbrances or
restrictions of any kind. There are no outstanding subscriptions, options,
warrants, calls, contracts, demands, commitments, convertible securities or
other agreements or arrangements of any character or nature whatsoever under
which ODM or any other person is or may become obligated to issue, assign or
transfer any shares of its capital stock.
5.5 Government and Other Consents. No consent, order, authorization,
qualification, or approval of, or exemption by, or filing with, or notice to any
governmental, public, or regulatory body or authority is required in connection
with the execution, delivery and performance by Seller or OTC of this Agreement.
5.6 Books and Records. All financial, business and accounting books,
ledgers, accounts and official and other records relating to the Business have
been made available to Purchaser and its representatives. Such books and records
have been properly and accurately kept and are complete in all material
respects, and there are no material inaccuracies or discrepancies of any kind
contained or reflected therein.
5.7 No Subsidiaries or Investments. Seller does not own capital shares or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity, other than the
capital stock of ODM.
5.8 Financial Statements.
(a) Seller has previously delivered to Purchaser copies of: (i) the
Balance Sheet dated November 30, 1997 (the "November Balance Sheet") and the
related Profit and Loss Statement and Cash Flow Statement for the period ended
November 30, 1997 (collectively, the "November Financial Statements"). Within
fifteen (15) days of Closing, Seller shall deliver to Purchaser the unaudited
balance sheet and profit and loss statement and statement of cash flows for the
fiscal year ended February 28, 1998 (collectively with the November Financial
Statements, the Closing Balance Sheet and the Audited Financial Statements are
referred to herein as, the "Financial Statements"). The November Financial
Statements correctly and completely reflect Seller's books and records as of the
Balance Sheet Date, and upon delivery, the Financial Statements will correctly
and completely reflect the Seller's books and records as of the dates thereof.
The November Financial Statements fairly present (and upon delivery, the
Financial Statements) will fairly present the financial position and results of
operations of Seller and ODM as of the dates and for the periods indicated and
have been (and the Financial Statements will be) prepared in accordance with
generally accepted accounting principles consistent with prior periods.
(b) Other than the (*) Advances and the obligation to repay Texas
State Bank $362,666.53 principal plus accrued interest represented by a
promissory note (the "TSB Note") and, except for such claims, debts and
liabilities as are reflected or reserved against on the Closing Balance Sheet,
Seller and ODM do not have any outstanding indebtedness for money borrowed and
are not subject to any claims or liabilities, contingent or otherwise, other
than obligations incurred in the ordinary course of business since the Balance
Sheet Date, in amounts usual and customary, individually and in the aggregate.
(c) All of the Transferred Receivables resulted from the sale of
inventory, parts and services in the ordinary course of business and the
Transferred Receivables are collectible in full in the ordinary course of
business net of reserves in accordance with Seller's past practices in
accordance with GAAP, all of the Transferred Receivables are owned by Seller
free and clear of all liens, claims, charges, encumbrances and other interests
of third parties other than the lien thereon in favor of (*), except that the
account receivable from Micro Energy India was not obtained in the ordinary
course of business.
(d) Since the Balance Sheet Date, there has not been any material
adverse change in the condition, financial or otherwise, of the business,
assets, properties, liabilities, prospects or results of operations of the
Seller or ODM, and to the best of their knowledge no fact or condition exists or
is contemplated or threatened which might cause any such change at any time in
the future. Since the Balance Sheet Date, Seller and ODM have conducted the
Business only in the ordinary course of business.
5.9 Title to Properties; Encumbrances. Except as set forth in Schedule 5.9
hereto, neither Seller nor ODM owns any real property or has any lease or other
interest in real property. Neither Seller nor ODM uses any real estate or has
any interest in real estate, including, without limitation, any building,
office, plant, factory, warehouse, improvement or structure in connection with
its business other than pursuant to the leases identified on Schedule 5.9.
Except as disclosed on Schedule 5.9, Seller and/or ODM have good title to all of
their properties and assets, including, without limitation, all of the
properties and assets reflected in the Balance Sheet (except for properties and
assets sold since the Balance Sheet Date in the ordinary course of business and
consistent with the past practice), and all of the properties or assets
purchased by it since the Balance Sheet Date. Except as set forth on Schedule
5.9, none of such properties or assets is subject to any mortgage, pledge, lien,
security interest, encumbrance or charge of any kind except (a) liens shown on
the Balance Sheet as securing specified liabilities or obligations with respect
to which no default exists; (b) liens arising in the ordinary course of business
and consistent with past practice since the Balance Sheet Date and liens arising
by operation of law or minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or materially impairs
the use of the property subject thereof, or materially impairs Seller's
operations, and (c) liens for current taxes not yet due, or, if due, that are
being contested in good faith in the ordinary course of business. Except as
disclosed on Schedule 5.9, neither Seller nor ODM uses in their respective
Businesses any assets owned by any shareholder or affiliate of Seller or ODM
(not including assets owned by either Seller or ODM), as the case may be. For
purposes of this Agreement, "affiliate" shall have the meaning ascribed to that
term in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended.
5.10 Leases. Schedule 5.10 hereto contains an accurate and complete list
and description of the terms of all leases to which either Seller or ODM is a
party (as lessee or lessor) and to which OTC is a party, for or on behalf of
either Seller or ODM, copies of which have been previously delivered to
Purchaser. Except as disclosed on Schedule 5.10, each lease set forth in
Schedule 5.10 (or required to be set forth in Schedule 5.10) is in full force
and effect; all rents and additional rents due through the date hereof on each
such lease have been paid; no waiver, indulgence or postponement of the lessee's
obligations thereunder has been granted by the lessor; and there exists no event
of default or event, occurrence, condition or act (including the purchase of the
Acquired Assets hereunder) which, with the giving of notice, the lapse of time
or the happening of any further event or condition, would become a material
breach under such lease. Except as disclosed on Schedule 5.10, Seller, ODM and
OTC have not violated any of the terms or conditions under any such lease in any
material respect, and all of the covenants to be performed by any other party
under any such lease have been fully performed. The properties owned and leased
by Seller, ODM and OTC are in a state of good repair and are adequate and
suitable for the purposes for which they are presently being used.
5.11 Business Practices. None of Seller or ODM or OTC have made, offered or
agreed to offer anything of value to any government official, political party or
candidate for government office or taken any action which would be in violation
of the Foreign Corrupt Practices Act of 1977 or any anti-boycott or export laws.
5.12 Officers, Directors and Key Employees. Schedule 5.12 hereto is a
complete and correct list of (i) the officers and directors of each of Seller
and ODM immediately prior to the transaction contemplated by this Agreement; the
name, position and total compensation, including bonuses, of each officer and
director of ODM, (ii) the name of each employee, consultant, independent
contractor, agent or other representative of Seller and/or ODM who received
$20,000 or more in any form of compensation from Seller since January 1, 1997,
and (iii) all wage or salary increases or bonuses received by any such person
since the Balance Sheet Date, and any accruals for or commitment or agreement by
either Seller or ODM, as the case may be, to pay such increases or bonuses.
Except as set forth in Schedule 5.12, none of such persons has, in writing or
(to the knowledge of the Seller or OTC) orally, threatened, informed or
otherwise indicated to Seller or ODM or any officer or director of Seller or ODM
that he or she plans to cancel or otherwise terminate his or her relationship
with Seller or ODM, as the case may be, for any reason, including, without
limitation, the consummation of the transactions contemplated hereby.
5.13 Employment Arrangements. Neither Seller nor ODM has any material
obligation, contingent or otherwise, under any employment agreement, collective
bargaining or other labor agreement, any agreement containing severance or
termination pay arrangements, deferred compensation agreement, retainer or
consulting arrangement, pension or retirement plan, bonus or profit-sharing
plan, stock option or purchase plan or other employee contract or non-terminable
(whether with or without penalty) arrangement, group, life, health, medical or
hospitalization insurance plan or program or other employee or fringe benefit
plan, including vacation plans or programs and sick leave plans or programs,
other than those listed or described on Schedule 5.13 hereto true and complete
copies of which have heretofore been delivered to Purchaser. Seller and ODM have
each performed all of their respective obligations required to be performed by
it under all such agreements, plans and arrangements, and no party thereto is in
breach of or in default or arrears in any material respect under any of the
provisions thereof.
5.14 Employee Relations. Each of Seller and ODM is in compliance with all
Federal, state or other applicable laws, domestic or foreign (including the laws
of Mexico and/or any political subdivision thereof), as the case may be,
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice (or similar offense under Mexican law). No unfair labor practice
(or similar offense under Mexican law) complaint against Seller or ODM is
pending before the National Labor Relations Board or any equivalent governmental
agency in Mexico. No labor strike, picket, dispute, slowdown, stoppage or other
labor trouble has ever occurred or is pending or, to the knowledge of Seller or
OTC, is threatened against or involves Seller or ODM. No union representation
question exists respecting the employees of Seller or ODM, except as disclosed
on Schedule 5.14. No grievance or any arbitration proceeding is pending and, to
the knowledge of Seller or OTC, no such claim has been asserted or is
threatened. No collective bargaining agreement is currently being negotiated by
Seller or ODM, except as disclosed on Schedule 5.14. Except as disclosed on
Schedule 5.14, no claim of discrimination or harassment is pending or, to the
knowledge of Seller or OTC, threatened before the Equal Employment Opportunity
Commission (or equivalent Mexican agency), or any judicial or administrative
body or agency in the United States, Mexico or any other jurisdiction. There has
not been and, to the knowledge of Seller or OTC, there will not be any material
adverse change in relations with employees of Seller or ODM as a result of any
announcement of the transactions contemplated by this Agreement. Seller has paid
all accrued vacation pay for its employees. ODM has paid or reserved for all
vacations pay for its employees.
5.15 Contracts and Liabilities.
(a) Schedule 5.15 sets forth all of the contracts and commitments and
obligations described below (collectively, the "Agreements") of, or which relate
to the Business, written or otherwise, to which Seller or ODM is a party
pursuant to which either of them or their respective assets or properties are
bound or subject and which are material to the Business, the Acquired Assets or
ODM's assets:
(1) contracts, commitments and other agreements with any current
or former officer, director, employee, independent contractor, consultant, agent
or other representative of Seller or ODM;
(2) contracts and other agreements with any labor union or
association representing any employee;
(3) contracts, commitments and other agreements for the sale of
any of its assets or properties other than in the ordinary course of business or
for the grant to any person of any preferential rights to purchase any of its
assets or properties;
(4) joint venture or other agreements involving sharing of
profits or joint ownership of assets or sharing of obligations or liabilities;
(5) contracts or other agreements under which either agrees to
indemnify any party or to share tax liability of or with any party;
(6) loan, factoring, credit line, security, collateral assignment
or pledge agreement, guaranty, subordination or similar type agreement;
(7) contracts, commitments and other agreements with customers or
suppliers for the sharing of fees, the rebating of charges or other similar
arrangements;
(8) contracts, commitments and other agreements containing
obligations or liabilities of any kind to or with any of Seller, ODM or OTC or
any affiliate of any of them, as the case may be;
(9) contracts and other agreements containing covenants of either
Seller or ODM not to compete in any line of business or with any person in any
geographical area (or not to solicit or accept any business) or covenants of any
other person not to compete with Seller in any line of business or in any
geographical area (or not to solicit or accept any business);
(10) contracts and other agreements relating to the acquisition
by either Seller or ODM of any operating business or the capital shares of any
other person;
(11) options for the purchase of any asset, tangible or
intangible;
(12) contracts and other agreements requiring the payment to any
person of an incentive payment override or similar commission or fee;
(13) contracts and other agreements for the payment of fees or
other consideration to any officer or director of either Seller, ODM or OTC, or
to any other entity in which any of the foregoing has a direct or indirect
interest;
(14) contracts and other agreements relating to the borrowing of
money;
(15) purchase orders, contracts and commitments for the purchase
or sale of any goods or services to or by either Seller or ODM, except for those
orders, contracts and commitments which are less than $10,000 in amount or which
cannot be cancelled at will by Seller or ODM, as the case may be, without
penalty or premium;
(16) other contracts or business arrangements which are not made
in the ordinary course of business;
(17) any agreement or arrangements related to the business,
assets or operations of ODM or the Maquiladora Arrangement; and
(18) any quotations for the production or design of any product
or the rendering of any services.
(b) Except as set forth in Schedule 5.15, all such contracts are
valid, binding and enforceable and in full force and effect. Except as set forth
in Schedule 5.15, neither Seller nor ODM is in default under any such contract
and there have been no claims of defaults and there exist no factors or
conditions which with the passage of time or giving of notice or both would
constitute such a default or in any case in which such default would give rise
to a right of termination by the other party thereto or which would result in
any material cost, expense or penalty to Seller or ODM.
(c) There have been delivered to Purchaser complete and correct copies
of all of the Agreements and summaries of any Agreements that are not reduced to
writing.
5.16 Operation of Seller and ODM. Except as provided on Schedule 5.16
hereto, since November 30, 1997, each of Seller and ODM have conducted its
business and operations only in the ordinary and usual course of business,
consistent with past practice, has preserved intact its business, has maintained
its relationships with all customers and suppliers and has used its reasonable
best efforts to keep available the services of its officers and employees.
Except as set forth on Schedule 5.16, since November 30, 1997, neither Seller or
ODM has:
(a) amended its Certificate of Incorporation (other than as provided
in Section 4.1(h) hereof) or By-Laws or merged with or into or consolidated with
any other person, subdivided or in any way reclassified any of its shares of
capital stock or changed or agreed to change in any manner the rights of any
shares of its capital stock or the character of its Business;
(b) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock or any other securities;
(c) entered into or amended any employment agreement, entered into or
amended any agreement with any labor union or association representing any
employee, adopted, entered into, or amended any employee benefit plan, or made
any change in the actuarial methods or assumptions used in funding any defined
benefit pension plan, or made any change in the assumptions or factors used in
determining benefit equivalencies thereunder;
(d) incurred any indebtedness for borrowed money or increased the
outstanding indebtedness under any existing facility;
(e) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders (other than normal compensation)
or made any direct or indirect redemption, retirement, or any purchase or other
acquisition of any shares of its capital stock or any other securities
convertible into shares of its capital stock;
(f) reduced its cash or short-term investments or their equivalents,
other than to meet cash needs arising in the ordinary course of business,
consistent with past practices;
(g) made any change in its accounting methods or practices or made any
change in depreciation or amortization policies or rates adopted by it;
(h) changed any of its business policies in any material respect,
including, without limitation, advertising, marketing, pricing, purchasing,
credit, personnel, sales, returns, budget or product acquisition policies;
(i) except in the ordinary course of business, consistent with past
practices, made any wage or salary increase or bonus, or increased any other
direct or indirect compensation, for or to any of its officers, directors,
employees, consultants, agents or other representatives, or made any accrual for
or commitment or agreement to make or pay the same;
(j) made any loan or advance to any of its shareholders, officers,
directors, employees, consultants, agents or other representatives (other than
travel advances made in the ordinary course of business), or made any other loan
or advance otherwise than in the ordinary course of business;
(k) made any payment or commitment to pay any severance or termination
pay to any of its officers, directors, employees, consultants, agents or other
representatives, other than payments or commitments to pay persons other than
officers, directors or shareholders in the ordinary course of business;
(l) except in the ordinary course of business, entered into any lease
(as lessor or lessee); sold, abandoned or made any other disposition of any of
its assets or properties; granted or suffered any material lien or other
encumbrance on any of its assets or properties; entered into or amended any
material contract or other agreement to which it is a party, or by or to which
it or its assets or properties are bound or subject, or pursuant to which it
agrees to indemnify any party or to refrain from competing with any party (other
than pursuant to Section 4.1(e) hereof);
(m) except in the ordinary course of business, incurred or assumed any
material liability;
(n) except in the ordinary course of business, made any acquisition of
all or any part of the assets, properties, capital shares or business of any
other person;
(o) paid, directly or indirectly, any liabilities or obligations
before the same became due in accordance with its terms or otherwise than in the
ordinary course of business or consistent with prior practice or deferred the
payment of any liability or obligation;
(p) suffered or incurred any damage, destruction or loss (whether or
not covered by insurance) which materially adversely affected Seller's or ODM's
Assets;
(q) collected or billed any accounts receivable in advance of the
dates on which payments were due other than in the ordinary course of business
consistent with prior practice;
(r) gave or agreed to give any of its customers any discounts or
special payment terms or arrangements which were not consistent with prior
practice or which were outside the ordinary course of business;
(s) made any material change in the type, nature or composition of its
services, or made any material change relating to its fees, commissions or other
charges or terms for its services; or
(t) terminated or failed to renew, or received any information,
written or otherwise, threatening to terminate or fail to renew, any contract or
other agreement that materially affects the assets, properties, business,
operations or condition (financial or otherwise) of Seller or ODM, as the case
may be.
5.17 Insurance Policies. Schedule 5.17 hereto contains a complete and
correct list and description of all insurance polices with respect to each of
Seller's and ODM's business, properties, assets and employees. Such policies are
in full force and effect and insure adequately against risks to which each of
Seller and ODM and their respective assets, properties and employees are
normally exposed in the operation of their respective businesses. No notice of
cancellation, expiration or non-renewal of any such policy has been received by
Seller, or ODM or OTC and no cause for such termination exists.
5.18 Related-Party Transactions. Except as otherwise disclosed and clearly
identified as a related party transaction on Schedule 5.18 hereto, neither
Seller, nor ODM, nor any person controlling, controlled by or under common
control with any of the foregoing or any relative or spouse of any of the
foregoing has any interest, financial or otherwise, in any business, corporate
or otherwise (the value of which equals or exceeds $2,000), which is a party to,
or has an interest in any property which is the subject of, business
relationships or arrangements or any kind with Seller or ODM, including, without
limitation, any customer, supplier, competitor, or potential competitor or
lessor, but excluding OTC's holdings of stock in Seller and Seller's holdings of
stock in ODM.
5.19 Compliance with ERISA and Equivalent Mexican Statutes.
(a) Schedule 5.19 hereto sets forth a complete and correct list of all
"employee pension benefit plans" and "employee benefit plans" as defined
respectively in Sections 3(2) and 3(3) of ERISA, including "multiemployer plans"
as defined in Section 3(37) of ERISA, and any other pension, profit sharing,
retirement, deferred compensation, vacation, severance, disability,
hospitalization, medical insurance or other employee benefit plan or program, if
any, which Seller, ODM, OTC or any other entity which constitutes part of a
"controlled group" (within the meaning of Section 4001(b) of ERISA and/or
Sections 414(b)-(o) of the Code and the Treasury Regulations proposed
thereunder) which Seller, ODM or OTC maintains or to which Seller, ODM or OTC
has any present or future obligation to contribute (collectively, the "Seller
Plans"). Seller, ODM and OTC have delivered to Purchaser true and complete
copies of all Seller Plans (including other instruments relating thereto), if
any, as they may have been amended to the date hereof, embodying, relating to or
summarizing the Seller Plans. Seller and OTC have made available to Purchaser
the most recent annual report (Form 5500) filed and the most recent summary plan
description with respect to each Seller Plan.
(b) Other than those employee pension benefit plans set forth on
Schedule 5.19, none of Seller, ODM or OTC maintain any "employee pension benefit
plan" as defined in ERISA Section 3(2) for the benefit of Seller's and/or ODM's
employees and has maintained no such plan during any part of the past five (5)
years.
(c) Neither Seller or ODM have any obligation to contribute to any
"multiemployer" plan with respect to the employees of Seller or ODM, as defined
in Section 3(37) of ERISA.
(d) Seller, ODM and OTC are each in compliance with the requirements
prescribed by any and all statutes, orders, governmental rules or regulations
applicable to the Seller Plans, and all reports and disclosures relating to the
Seller Plans required to be filed with or furnished to governmental agencies,
participants or beneficiaries prior to the date of this Agreement have been
filed in accordance with applicable law.
(e) None of Seller, ODM or OTC, as of the date of this Agreement, has
completely or partially withdrawn from any "multiemployer plan" within the
meaning of the Multiemployer Pension Plan Amendments Act of 1990. Neither
Seller, ODM nor OTC have suffered a seventy (70%) percent decline in
"contribution base units" (within the meaning of ERISA Section 4205(b)(1)(A)) in
any plan year beginning after 1979.
(f) There are no actions, audits, suits or claims pending (other than
routine claims for benefits) or threatened, against any of the Seller Plans or
any fiduciary of any of the Seller Plans or against the assets of any of the
Seller Plans.
(g) The consummation of the transactions contemplated hereby will not
accelerate any liability under any of the benefit plans because of an
acceleration of any rights or benefits to which employees may be entitled
thereunder.
(h) With respect to any Seller Plan that is an "employee welfare
benefit plan" within the meaning of Section 3(1) of ERISA ("Seller Welfare
Plan") (i) each such Seller Welfare Plan, the contributions to which are claimed
as a deduction under any provision of the Code, is in compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to any
"welfare benefit fund" within the meaning of Section 419 of the Code that
comprises part of a Seller Welfare Plan, there is no disqualified benefit within
the meaning of Section 4976(a) of the Code, (iii) any such Seller Welfare Plan
that is a "group health plan" within the meaning of Section 162(i)(3) of the
Code meets all of the requirements of Section 162(k) of the Code.
(i) Except as disclosed on Schedule 5.19 hereto, neither Seller or ODM
have any obligation to any retired or former employee of Seller or ODM under any
disability (long or short term), hospitalization, medical, dental or life
insurance plans (whether insured or self-insured) or other employee welfare plan
as defined in ERISA Section 3(1) maintained by the Seller, ODM and/or OTC.
(j) ODM is in full compliance with all Mexican laws, rules and
regulations with respect to retirement, pension and other employee benefit
matters (collectively "Mexican Retirement Matters"), applicable to persons
employed or otherwise engaged by ODM or at the facility in Reynosa, Tamaulipas,
Mexico. Seller and ODM have made all payments required to be made in connection
with such Mexican Retirement Matters, including, but not limited to, all
payments to social security and the Mexican Retirement Fund, and there is no
unfunded liability under or in connection with any such Mexican Retirement
Matters.
5.20 Tax Matters. Seller, ODM and OTC have heretofore delivered to
Purchaser true, complete and correct copies of the Federal, state and local tax
returns filed by Seller for the year ended February 28, 1997, and in the case of
ODM, all returns or statements required by the Mexican Federal, state and local
governmental authorities, for the two (2) taxable years of ODM ended December
31, 1995 and 1996, any statement of audit adjustments applicable thereto and all
Federal, state and local returns (and the Mexican equivalent thereof) of
estimated taxes filed during 1996 and 1997. Seller and ODM have duly and timely
filed all federal, state, local and other tax and information returns (and the
Mexican equivalent thereof) required to be filed with regard to any income,
sales, use, gross receipts, property, employment and other taxes, charges,
levies or other assessments related to the Business, the Acquired Assets and/or
ODM's assets, and have duly paid in full or made adequate provision for all
taxes and other charges shown as due on such returns or which otherwise have
been accrued or have become due prior to the date hereof whether or not shown on
any such return. Neither Seller nor ODM have received any written notice of any
claim or claims for additional taxes which are claimed to be due from it by any
Federal, state or local taxing authority in the United States or Mexico, or
foreign taxing authorities in connection with such reports or returns or with
respect to the organization or operation of Seller's or ODM's business. Seller
has not filed any "S" Corporation or other consents or elections under the Code,
other than such consents and elections, if any, reflected in the tax reports and
returns furnished to Purchaser. There are no liens for Federal, state or local
taxes in the United States or Mexico, or foreign taxes, assessments or
government charges or levies upon any of either Seller's or ODM's properties or
assets. There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any income tax or other return of Seller or
ODM for any period and there are not, nor have there been, any audits of Seller
or ODM by any Federal, state or local governmental tax authority in the United
States or Mexico and no notice of any audit has been received by either Seller
or ODM.
5.21 Intellectual Property. Schedule 5.21 hereto contains a list of all
Patents, Patent Applications, Trademark Registrations and Trademark Applications
comprising a part of the Intellectual Property of the Seller and ODM. Seller and
ODM, as the case may be, have full ownership right, title and interest in and to
the Intellectual Property. The Intellectual Property constitutes valid and
enforceable rights of Seller or ODM as the case may be. Neither Seller, ODM nor
OTC have received any notice or have any reason to believe that the validity of
any Intellectual Property or Seller's or ODM's interest therein, can be or is
being challenged by any third party. Neither Seller nor ODM have heretofore
granted any licenses or conveyed any other rights or interests to any of the
Intellectual Property. The operation of the Business and the business of ODM as
currently conducted does not infringe upon any patents or other intellectual
property rights of any third party. The trade names and trademarks used by
Seller and ODM to identify their respective products and services are protected
by registration in the name of Seller or ODM, as the case may be, on the
principal register in the United States Patent and Trademark Office (or the
corresponding authority in Mexico) or are subject to pending applications before
such agency (or the corresponding authority in Mexico), state registrations
and/or by rights in the United States or Mexico, as the case may be, accorded to
Seller or ODM by virtue of the common law. Seller and ODM have taken or caused
to be taken all steps reasonably necessary or desirable and proper to protect
the Intellectual Property in Mexico.
5.22 Environmental Matters.
(a) Neither Seller nor ODM has received any notice from any
governmental agency or private or public entity (in the United States, Mexico or
otherwise) advising that such party is or may be responsible for response costs
or other costs with respect to a release or threatened release of any Hazardous
Substance (as defined herein) and neither Seller, ODM nor OTC, or any of their
respective predecessors in interest with respect to the Business or the business
of ODM have conducted activities which could reasonably be expected to result in
such a notice. No administrative, civil or criminal actions, including without
limitation third-party actions for personal injury or property damage, are
pending or threatened with respect to Environmental Laws or related to the
Business or the Business of ODM. No judgments, consent orders, consent decrees,
stipulations, or other restrictions have been entered or applied with respect to
Environmental Laws or related to the Business. None of Seller, ODM or OTC have
received notice or knowledge of any governmental orders, notifications, notices
of violation, or requests for information relating to environmental or health
and safety conditions at or related to the Business, or is aware of any past or
current violations of any Environmental Law related to the Business or of
environmental conditions related to the Business. Neither the operation of the
Business or the business of ODM, either as currently conducted or as conducted
in the past at any office space or other facility or real property owned,
leased, used or occupied by Seller or ODM, whether currently or at any time in
the past, violates nor has violated any Environmental Laws.
(b) For purposes of this Agreement, (i) "Environmental Laws" shall
mean any statute, law, ordinance, rule or regulation of any federal, state,
county, local governmental authority of the United States or Mexico, or any
other foreign governmental authority relating to the environment, including air,
water or noise pollution, emissions or discharges, the environment, public
health, employee health, safety or welfare, land use or the production,
processing, distribution, use, storage, labeling, handling, transportation,
treatment or disposition of any Hazardous Substance; and (ii) "Hazardous
Substance" shall mean asbestos, paints, solvents, ureaformaldehyde,
polychlorinated biphenyls, nuclear fuel or material, chemical waste, hazardous
waste, radioactive material, explosives, known carcinogens, petroleum products
and by-products and other dangerous, toxic, infectious or hazardous pollutants,
contaminants, chemicals, materials, wastes or substances listed or identified
in, or regulated by, any Environmental Laws.
5.23 Product Warranty. Each product manufactured, sold, or delivered by
Seller or ODM conforms with all material contractual specifications and all
express and implied warranties, and neither Seller nor ODM has any liability
(and to the knowledge of the Seller and OTC there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against Seller or ODM giving rise to any liability of either
Seller or ODM) for replacement or repair thereof or other damages in connection
therewith. No product manufactured, sold or delivered by either Seller or ODM is
subject to any guaranty, warranty, or other indemnity except as described on
Schedule 5.23 hereto. Schedule 5.23 contains a complete list of the entire
backlog for returned power supplies. Neither Seller or ODM leases any products
to others.
5.24 Permits, Licenses, Compliance with Laws. Each of Seller and ODM has
all permits, licenses, orders, consents and approvals of federal, state and
local governmental or regulatory bodies (both in the United States and Mexico,
as the case may be) and any other domestic or foreign governmental or regulatory
bodies that are required in order to permit Seller and ODM to carry on their
respective Businesses as currently conducted, without having an adverse material
effect on the Business. Schedule 5.24 hereto sets forth a correct and complete
list of all such permits, licenses, orders and approvals, all of which are in
full force and effect, and no suspension or cancellation of any of them is
threatened, and to the best of OTC's and Seller's knowledge, no cause exists for
such suspension or cancellation. The Business and the business of ODM is and has
historically been conducted in compliance with all applicable federal, state and
local (both in the United States and Mexico, as the case may be) and other
applicable domestic and foreign laws, codes, ordinances, rules and regulations,
except for minor violations which do not have a material adverse effect on the
Business, the business or assets of ODM or the Acquired Assets.
5.25 Litigation. There is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending or threatened against Seller or ODM before any
federal, state, local, or other court or governmental, administrative, or
self-regulatory body or agency, or any private arbitration tribunal in the
United States or Mexico, relating to the Business, the business of ODM or any of
the assets of ODM or the Acquired Assets or the transactions contemplated by
this Agreement; nor to the best of their knowledge is there any basis for any
such claim, action, suit, proceeding, arbitration, investigation or inquiry.
Neither Seller nor ODM is in default under any order, license, regulation or
demand of any federal, state or local, or other court or governmental,
administrative or self-regulatory body or agency, in the United States, Mexico
or any other jurisdiction.
5.26 Inventories. The inventories of each of Seller and ODM as shown on the
Balance Sheet and the inventories acquired subsequent to the Balance Sheet Date
consist of items of a quality and quantity usable and saleable in the ordinary
course of its business.
5.27 Product Liability. Neither Seller nor ODM has any liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against Seller or ODM giving
rise to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Seller or ODM (a "Product Liability Claim"). Neither
Seller nor ODM has received notice or knowledge of any pending or threatened
Product Liability Claim.
5.28 Fixed Assets. Schedule 5.28 hereto sets forth a complete and correct
list of each of Seller's and ODM's fixed assets and their locations including,
but not limited to, all of their real property, equipment, fixtures and
furniture.
5.29 Broker. Other than Price Waterhouse LLP which acted as investment
banker for Seller, no broker, finder, agent or other intermediary has acted on
behalf of either Seller or ODM or otherwise assisted in bringing about the
transactions contemplated by this Agreement. No broker, finder, agent or other
intermediary is entitled to any commission or finder's fee in respect thereof
based in any way on agreements, understandings or arrangements with Seller or
ODM except that Seller or OTC shall be solely responsible to pay Price
Waterhouse the amount of any broker's or finder's fee or any other type of fee
or expense incurred in connection with the transaction.
5.30 Material Information; Full Disclosure. This Agreement and any other
certificate, document, agreement or information furnished (including, without
limitation, any schedule hereto) or to be furnished pursuant to this Agreement
by Seller or OTC to Purchaser do not and will not contain any untrue statement
of a material fact and do not and will not omit to state a material fact
required to be stated herein or therein necessary to make the statements herein
and therein not misleading. There is no fact, development or threatened
development (excluding general economic factors affecting businesses in general)
which has not been disclosed to Purchaser in writing which adversely affects or,
so far as Seller or OTC can now reasonably foresee, may adversely affect, the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of Seller or ODM.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
6.1 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and is duly qualified to do business in each jurisdiction where the
failure to so qualify would not have a material adverse effect on its business.
Purchaser has all requisite corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as currently
conducted.
6.2 Authorization of Agreement and Enforceability. Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly and validly
authorized, executed and delivered by Purchaser and (assuming the valid
execution and delivery of the Agreement by Seller and OTC) constitutes a legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms.
6.3 Effect of Agreement. Neither the execution, delivery and performance of
this Agreement by Purchaser, nor the consummation by Purchaser of the
transactions contemplated hereby will (a) conflict with or result in a breach of
any provision of Purchaser's Certificate of Incorporation or By-Laws, (b)
constitute or result in the breach of, conflict with or give rise to a right of
termination, cancellation or acceleration with respect to, any term, condition
or provision of, any note, bond, mortgage, indenture, license or other contract
or obligation to which Purchaser is a party or by which it or any of its
properties or assets may be bound, except for such conflicts, breaches or
defaults as to which written waivers or consents have been obtained, or (c)
violate any law, statute, regulation, judgment, order, writ, injunction, or
decree applicable to Purchaser or any of its properties or assets.
6.4 Government and Other Consents. No consent, order, authorization,
qualification, or approval of, or exemption by, or filing with any governmental,
public, or regulatory body or authority is required in connection with the
execution, delivery and performance by Purchaser of this Agreement.
6.5 Broker. No broker, finder, agent or other intermediary has acted on
behalf of Purchaser or otherwise assisted in bringing about the transactions
contemplated by this Agreement and no broker, finder, agent or other
intermediary is entitled to any commission or finder's fee in respect hereof
based in any way on agreements, understandings or arrangements with or the
conduct of Purchaser.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Seller and OTC.
(a) Notwithstanding the Closing and regardless of any investigation at
any time made by or on behalf of Purchaser or receipt of any information by
Purchaser in respect thereof, Seller and OTC, jointly and severally, shall
indemnify, defend and hold Purchaser (and any successors in interest) harmless
from and against any damage, liability, loss or deficiency (including, without
limitation, reasonable attorneys' fees and other costs and expenses incident to
any suit, action or proceeding) arising out of or resulting from, and shall pay
Purchaser on demand the full amount of any sum or sums which Purchaser pays or
becomes obligated to pay on account of: (i) any inaccuracy in any representation
or the breach of any warranty made by Seller or OTC herein or in any material
agreement, instrument or document delivered pursuant to this Agreement; (ii) any
failure of Seller or OTC to duly perform or observe any material term,
provision, covenant, or agreement herein or in any material agreement,
instrument or document delivered pursuant to or in connection with this
Agreement on the part of Seller or OTC to be performed or observed; (iii) any
liability or obligation with respect to the Acquired Assets or the conduct of
the Business arising with respect to any events or circumstances existing or
occurring prior to the Closing (other than the Assumed Liabilities); (iv) other
than one-half (1/2) of the VAT, any liability or obligation with respect to the
business or assets of ODM (including but not limited to all tax liabilities of
ODM for the fiscal year ending December 31, 1997 and thereafter whether the same
relates to income taxes, payroll taxes, social security taxes and value added
taxes or any other tax in the United States or Mexico relating to the
organization or operation of ODM prior to the Closing) arising with respect to
any events or circumstances existing or occurring prior to the Closing other
than those liabilities reflected on the ODM Balance Sheet; (v) any warranty
obligations attributable to sales of Seller's products prior to the Closing;
(vi) any warranty obligations attributable to design defects in products
comprising Oryx Sales; (vii) the amount on November 30, 1999 by which actual
aggregate Earn Out Payments paid to Seller exceeds the amount of aggregate Earn
Out Payments to which Seller is entitled after applying all adjustments under
Section 2.3(b); and (viii) until such time as Purchaser shall appoint a new
Board of Directors any and all actions taken by the members of the Board of
Directors or persons holding powers of attorney for ODM on or as of the Closing
Date, unless such action shall be authorized in writing by Purchaser prior to
the taking of such action. In no event will Seller or OTC be required to pay
damages or other indemnifiable costs or expenses pursuant to this Section 7 in
excess of $5,500,000.00.
(b) All statements of fact contained in any Schedule and the November
Balance Sheet delivered by or on behalf of Seller, ODM or OTC pursuant hereto or
in connection with the transactions contemplated hereby, shall be deemed
representations and warranties by Seller and OTC hereunder.
7.2 Indemnification by Purchaser.
(a) Notwithstanding the Closing and regardless of any investigation at
any time made by or on behalf of Seller or OTC or receipt of any information by
Seller or OTC in respect thereof, Purchaser shall indemnify, defend and hold
Seller and/or OTC, as the case may be, (and any successors in interest) harmless
from and against any damage, liability, loss or deficiency (including, without
limitation, reasonable attorneys' fees and other costs and expenses incident to
any suit, action or proceeding) arising out of or resulting from, and shall pay
Seller and/or OTC, as the case may be, on demand the full amount of any sum or
sums which Seller and/or OTC pays or becomes obligated to pay on account of: (i)
any inaccuracy in any representation or the breach of any warranty made by
Purchaser herein or in any material agreement, instrument or document delivered
pursuant to this Agreement, (ii) any failure of Purchaser to duly perform or
observe any material term, provision, covenant, or agreement herein or in any
material agreement, instrument or document delivered pursuant to or in
connection with this Agreement on the part of Purchaser to be performed or
observed, and (iii) the failure of Purchaser to pay or discharge any of the
Assumed Liabilities as provided in Section 1.2 hereof.
7.3 No Waiver. No failure or delay on the part of a Party in exercising any
right, power or remedy under this Agreement, or available to a Party at law or
in equity shall operate as a waiver of such right, power or remedy, nor shall
any single or partial exercise of any such right, power or remedy preclude any
further exercise thereof or the exercise of any other right, power or remedy
available to such Party, unless the waiver so provides by its terms. The
remedies provided in this Agreement are cumulative and not exclusive of any
remedies available to any Party at law or equity.
7.4 Third Party Claims.
For any written claim initiated or asserted by any person, firm,
governmental authority or corporation other than a Party (a "Third Party Claim")
or the commencement of any litigation asserting a Third Party Claim which may
give rise to any indemnification obligation of a Party (an "Indemnitor") to
another Party under the provisions of this Section, the Party receiving the
Third Party Claim and seeking indemnity (the "Indemnitee") shall give notice
thereof as provided hereunder to the Indemnitor as promptly as practicable after
receipt of such written assertion or the commencement of such litigation, unless
the failure to give such notice would not materially prejudice Indemnitor.
Indemnitor may at its sole cost and expense, upon written notice given to
Indemnitee within fifteen (15) days after its receipt of Indemnitee's notice
under this Section 7.4, assume the defense, with counsel reasonably satisfactory
to Indemnitee, of any such Third Party Claim or litigation, provided that
Indemnitor admits in writing to Indemnitee its obligation to indemnify
Indemnitee against liability for such claims. If Indemnitor assumes the defense
of any such claim or litigation, the obligations of Indemnitor hereunder as to
such claim or litigation shall be limited to taking all steps reasonably
necessary in the defense or settlement thereof and to holding Indemnitee
harmless from and against any and all losses, liabilities, expenses and damages
caused by or arising out of any settlement approved by Indemnitor or any
judgment in connection with such claim or litigation, and Indemnitee shall
cooperate with and make available to Indemnitor such books and records in
Indemnitee's possession as Indemnitor may reasonably require in connection with
such defense. Except with the express prior written consent of Indemnitee,
Indemnitor shall not consent to the settlement or entry of any judgment arising
from any such claim or litigation which in each case does not include as an
unconditional term thereof the giving by the claimant or plaintiff, as the case
may be, to Indemnitee of an unconditional release from all liability in respect
thereof unless Indemnitor shall have actually paid the full amount of any such
settlement or judgment. Indemnitee shall be entitled to be consulted about (but
not control) the defense of, and receive copies of all pleadings and other
material papers in connection with, any such claim or litigation. If Indemnitor
does not assume the defense of any such claim or litigation, Indemnitee may
defend the same in such reasonable manner as it may deem appropriate, including
but not limited to settling such claim or litigation after giving reasonable
notice of the same to Indemnitor on such terms as Indemnitee may deem
appropriate, and Indemnitor will promptly reimburse Indemnitee in accordance
with the provisions of this Section 7.4, provided that Indemnitee shall provide
Indemnitor with copies of all pleadings and other material documents in
connection with any such claim or litigation and that Indemnitor is consulted
about (albeit not in control of) such litigation. Anything contained in this
Section 7.4 to the contrary notwithstanding, (i) Indemnitor shall not be
entitled to assume the defense of any such claim or litigation if the Third
Party Claim seeks an order, injunction or other equitable relief against
Indemnitee which, if successful, might materially interfere with, or adversely
affect, the operation of the Business or the Acquired Assets or the business of
ODM; and (ii) Indemnitee may defend any Third Party Claim to which Indemnitee
may have a defense or counterclaim which Indemnitor is not entitled to assert to
the extent necessary to assert and maintain such defense or counterclaim
provided that Purchaser shall provide Indemnitor with copies of all pleadings
and other material documents in connection with any such claim or litigation and
that Indemnitor is consulted about (albeit not in control of) such litigation.
ARTICLE 8
GENERAL
8.1 Expenses. Except as otherwise provided in Section 7 and 8.2 hereof,
Purchaser, Seller and OTC shall pay their own respective counsel, accountants
and other advisors' fees and expenses arising in connection with the negotiation
and preparation of this Agreement and the consummation of the transactions
contemplated hereby.
8.2 Sales, Transfer and Documentary Taxes, etc. Seller and OTC shall pay
one-half (1/2) and Purchaser shall pay one-half (1/2) of the VAT and all sales,
transfer and documentary taxes, if any, due as a result of the sale of Acquired
Assets to Purchaser and all other fees directly relating to the transfer of
Acquired Assets (including but not limited to the ODM stock) to Purchaser.
Nothing contained herein shall be deemed to affect the tax liability of any
person with respect to taxes attributable to any income or gain realized as a
result of the transaction contemplated by this Agreement, whether such income or
gain relates to the sale of the assets of Seller, the sale of the stock of ODM,
the assumption of the Assumed Liabilities or otherwise. Purchaser shall take
delivery of all Acquired Assets other than the equipment located on the Closing
Date at the facility located in Reynosa, Tamaulipas, Mexico at the facility
located in McAllen, Texas or such other place within the United States of
America as the Purchaser may designate.
8.3 Survival of Representations and Warranties. Each of the Parties
covenants and agrees that all of the representations warranties, covenants, and
agreements set forth in this Agreement shall survive the Closing for a period of
three (3) years and shall not be merged into any instruments of transfer or
other documents delivered by any of the Parties at Closing or at any other time.
This period of limitations shall not apply to the representations and warranties
set forth in Section 5.4 or 5.20 hereof with respect to which there shall be no
contractual period of limitation.
8.4 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the Parties or their
respective heirs, successors and assigns any rights, remedies, obligations, or
other liabilities under or by reason of this Agreement.
8.5 Notices. All notices permitted or required under this Agreement shall
be in writing and shall be either (a) delivered by personal service, (b)
delivered by courier service, (c) telecopied and confirmed immediately in
writing by a copy mailed by registered or certified mail, postage prepaid,
return receipt requested, or (d) sent by certified or registered mail, postage
prepaid, return receipt requested, to the parties hereto at their addresses set
forth below or at such other addresses and addressees which may be designated in
writing by the parties:
If to Seller to: Oryx Power Products Corporation
1100 Auburn
Fremont, CA 94538
with a copy to: J. F. Petruzzelli, Esq.
Wise & Shepard, LLP
3030 Hansen Way, Suite 100
Palo Alto, CA 94304
Telecopier No.: (650) 856-1344
If to OTC to: Oryx Technology Corp.
1100 Auburn
Fremont, CA 94538
with a copy to: J. F. Petruzzelli, Esq.
Wise & Shepard, LLP
3030 Hansen Way, Suite 100
Palo Alto, CA 94304
Telecopier No.: (650) 856-1344
If to Purchaser to: Todd Power Corporation
50 Emjay Boulevard
Brentwood, NY 11717
with a copy to: Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Attention: William A. Ubert, Esq.
Telecopier No.: (516) 663-6641
If to TPC to: Todd Products Corporation
50 Emjay Boulevard
Brentwood, NY 11717
with a Copy to: Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501
Attention: William A. Ubert, Esq.
Telecopier No.: (516) 663-6641
Such notices shall be effective upon receipt in the case of personal or
courier service or telecopier delivery (with confirming transmittal receipt) and
on the fifth (5th) day after posting in the U.S. mail.
8.6 Entire Agreement. This Agreement (including the Exhibits and Schedules
hereto) supersedes all prior agreements and understandings, oral and written,
among the parties with respect to the subject matter hereof, and this Agreement
constitutes the entire agreement of the parties.
8.7 Headings. The article, section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original,
and all of which together shall be deemed to be one and the same instrument.
8.9 Governing Law, Consent to Jurisdiction, Venue and Service of Process.
All questions, claims, controversies or other matters concerning this Agreement,
including, but not limited to, its execution, interpretation and performance,
shall be governed by the law of the State of New York without regard to any
principles of conflicts of laws. The parties hereto, for the purpose of
resolving any questions, claims, controversies or other matters arising
hereunder, hereby consent to the jurisdiction of any Federal Court located in
Nassau or Suffolk County in the State of New York and any Federal Court located
in Alameda County in the State of California. If Seller or OTC seek to enforce
any rights hereunder, any action with respect to such enforcement shall only be
brought in New York, and if Purchaser seeks to enforce any rights hereunder, any
action with respect to such enforcement shall only be brought in California. The
parties each waive the claim of forum non conveniens in connection with any
action arising hereunder brought therein, and agree that service of process may
be made upon them by certified mail, return receipt requested, to the address
set forth herein for delivery of notices.
8.10 Severability. If any term, covenant, condition, or provision of this
Agreement or the application thereof to any circumstance shall be invalid or
unenforceable to any extent, the remaining terms, covenants, conditions, and
provisions of this Agreement shall not be affected and each remaining term,
covenant, condition, and provision of this Agreement shall be valid and shall be
enforceable to the fullest extent permitted by law. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
8.11 Amendments. This Agreement may not be modified or changed orally but
only by an instrument or instruments in writing signed by all Parties.
8.12 Assignment. None of the Parties shall assign its rights or obligations
under this Agreement without the prior written consent of the other Parties,
except that Purchaser may assign this Agreement to any Affiliate of Purchaser
without the consent of Seller or OTC.
8.13 Successors and Assigns. The covenants, agreements, and conditions
contained or granted herein shall be binding upon and shall inure to the benefit
of Purchaser, Seller and OTC and their respective heirs, successors and
permitted assigns.
8.14 No Joint Venture. The Parties, by entering into this Agreement and
consummating the transactions contemplated in this Agreement, shall not be and
shall not be considered a partner or joint venturer of one another.
8.15 Construction of Agreement. This Agreement was negotiated at arm's
length by the Parties and their respective counsel. This Agreement shall not be
construed as having been "drafted" by any one Party and shall not be construed
against any Party as a drafting party.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase
Agreement as of the date first written above.
TODD POWER CORPORATION
By:____________________________________
Kathy Todd
ORYX POWER PRODUCTS CORPORATION
By:____________________________________
Mitchel Underseth, President
ORYX TECHNOLOGY CORP.
By:____________________________________
Philip Micciche, President
Monday March 9, 12:01 pm Eastern Time
Company Press Release
Oryx Sells Power Products Subsidiary and Instruments
Division
FREMONT, Calif.--(BUSINESS WIRE)--March 9, 1998--Oryx Technology Corp.
(NASDAQ:ORYX - news) today announced that it has signed definitive agreements to
sell its Oryx Power Products business and 80% of Oryx Instruments & Materials
Corporation (I&M), as part of its overall restructuring efforts.
The Power Products subsidiary was purchased by Todd Products Corp., a leading
designer and manufacturer of switching power supplies located in Long Island,
N.Y. Upon closing, Oryx will receive a $2 million cash payment. Thereafter,
based on certain performance criteria over a 14-month period, Oryx potentially
will receive an additional payout of $4 million. Todd Products will assume
certain liabilities of the business. Further terms were not disclosed.
For the fiscal year ended Feb. 28, 1998, the Power Products subsidiary, which
designs, manufactures, and markets custom and standard AC/DC switching power
supplies and high density DC/DC power conversion products for various
electronics products, and provides contract manufacturing services, lost
approximately $3.7 million on revenues of approximately $10 million.
Oryx also announced that it has completed the sale of 80% of its I&M subsidiary,
a manufacturer of process monitoring and simulation instrumentation for the
rigid disk and semiconductor industries, to a private investor group. Current
management will continue to run I&M under the new ownership. Oryx will retain a
seat on the Board of Directors.
Prior to the sale, Oryx separated the Materials portion of I&M and consolidated
those operations with Oryx's SurgX subsidiary. For the fiscal year ended Feb.
28, 1998, the Materials portion of I&M earned approximately $1.7 million on
revenues of approximately $5.0 million.
Oryx Technology Corp., the parent company, expects to report final financial
results for the fiscal year ended Feb. 28, 1998 on May 28, 1998.
Commenting on these transactions, Phil Micciche, president and Chief Executive
Officer of Oryx said, ``With the successful completion of these deals, the sale
of a portion of our holdings in DAS Devices, Inc., and other recent licensing
and matching funds agreements, we will have raised cash, notes, cash
equivalents, and other assets of approximately $7 million since last August.
Clearly, we are very pleased with the progress we have made to raise the
necessary funds to invest in further development of our SurgX ESD surge
protection technology.
``To date, this technology has received high marks from our corporate
manufacturing partners, and we are very excited about our potential opportunity
in the $1 billion electrostatic discharge protection devices market. Our
corporate resources can now be used to accelerate SurgX time-to-market. Based on
current estimates, we expect to benefit from the commercialization of this
product by calendar year-end.''
About the Companies
Oryx Technology Corp. is an advanced materials technology company focusing on
surge protection technology and specialized materials. Its proprietary SurgX
technology provides board test and integrated circuit level protection against
electrostatic discharge. The company also manufactures specialized materials
products based on its patented Intragene system for joining engineering
materials.
The company's customers include key OEM's in the fast growing information
industry including: Bussmann and Seagate. Oryx's common stock trades on the
NASDAQ Small Cap Issues Market under the symbol ORYX.
Todd Products Corp.
Founded in 1968 and headquartered in Brentwood, N.Y., Todd Products Corp. is a
leading designer and manufacturer of standard, modified standard, custom and
value-added switching power supplies for the Electronic Equipment Market (EOEM).
These power supplies are used in a wide variety of Original Equipment
Manufacturer (OEM) applications.
Market segments include telecommunication, computer, medical, bus systems, and
control instrumentation/test systems. Todd's products range is one of the
broadest available, with single and multiple outputs, from 150 watts to 1500
watts.
Forward-Looking Statements
Certain matters discussed in this release are forward-looking and involve a
number of risks and uncertainties. The company's actual results could differ
materially from those described for a variety of factors. Such factors could
include, but are not limited to, those discussed in ``Risk Factors'' and
``Management's Discussion and Analysis'' in the company's form 10-KSB, as
amended, filed for the fiscal year ended Feb. 28, 1997 with the Securities and
Exchange Commission and various other filings.
Among the factors that could cause actual results to differ materially are the
following: changes in customer commitments, maintenance of gross margin levels,
market acceptance of new products both technically and commercially, successful
product development efforts, inability to pass on price increase to customers,
unavailability of products, management of cost controls and cash resources, need
for additional financing, and strong competition.
For more information of Oryx via fax, at no cost, dial 1-800/PRO-INFO, ticker
symbol ORYX.
