UNITED STATES
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): August 17, 1998
TOROTEL, INC.
(Exact name of registrant as specified
in its charter)
MISSOURI
(State or other jurisdiction of incorporation)
2-33256 44-0610086
(Commission File Number) (IRS Employer
Identification No.)
13402 S 71 HIGHWAY, GRANDVIEW, MISSOURI 64030
(Address of principal executive offices,
including zip code)
(816) 761-6314
(Registrant's telephone number, including
area code)
N/A
(Former name or former address, if changed
since last report)
Item 5.Other Events.Torotel, Inc. announced
that it had entered into a definitive agreement
with Pico Electronics, Inc. of Pelham, New
York, which will purchase an ultra-miniature
transformer and inductor product line from
Torotel's wholly-owned subsidiary OPT
Industries for a cash price of $1.25 million.
The closing on the transaction will take place
about September 15, 1998, to allow for a smooth
transition for customers.
The statements contained herein are forward-
looking statements within the meaning of the
Private Securities Litigation Reform Act of
1995, and are subject to the safe harbor
created by that Act. There can be no assurance
that the parties will consummate the
transaction contemplated by the definitive
agreement.
Item 7.Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
1. Press Release dated August 17, 1998
2. Asset Purchase Agreement dated
August 13, 1998
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
TOROTEL, INC.
By:/s/ H. James Serrone
H. James Serrone
Vice President of
Finance and Chief
Financial Officer
Date: August 19, 1998
EXHIBIT INDEX
[S] [C] [C]
Exhibit Description
Pages
I Press Release dated August 17, 1998 1
II Asset Purchase Agreement
dated August 13, 1998 53
Exhibit
INEWS BULLETINTOROTEL, INCORPORATED
FOR IMMEDIATE RELEASEMONDAY, AUGUST 17, 1998
TOROTEL SIGNS DEFINITIVE AGREEMENT
TO SELL PRODUCT LINE FOR $1.25 MILLION
KANSAS CITY, MO, August 17 -- Torotel, Inc.
(AMEX:TTL), a manufacturer of power supplies
and magnetic components for power conversion,
today announced that it had entered into a
definitive agreement with Pico Electronics,
Inc. of Pelham, New York, which will purchase
an ultra-miniature transformer and inductor
product line from Torotel's wholly-owned
subsidiary OPT Industries for a cash price of
$1.25 million. The closing on the transaction
will take place about September 15, 1998, to
allow for a smooth transition for customers.
Chief Operating Officer Christian (Chris) T.
Hughes said, The decision to sell this product
line was driven mostly by the requirement for
additional capital to be used in the continued
development and marketing of OPT's new line of
power supplies, targeting the
telecommunications and DC (direct current)
systems markets.
Torotel, Inc. specializes in the design and
manufacture of high-power, high reliability,
high density switching power supplies, rack
mounted power systems, and a broad range of
precision magnetic components used in
commercial, industrial and military
electronics. Torotel's products are sold to
original equipment manufacturers for use in
computers, telecommunications systems, digital
control devices, and avionics equipment. The
company has a base of more than 700 customers,
most in the U.S.
This news release includes forward-looking
statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and
are subject to the safe harbor created by that
Act. These statements are based on assumptions
about a number of important factors and involve
risks and uncertainties that could cause actual
results to be different from what is stated
here. These risk factors include: decreased
demand for products, delays in developing new
products, expected orders that do not occur,
loss of key customers, and the U.S. Department
of Defense calling for payment of current
thermal testing penalties and assessing
additional fees. Other risk factors are
detailed from time to time in Torotel's
Securities and Exchange Commission filings.
Exhibit II
ASSET PURCHASE AGREEMENT
By, Between and Among
PICO ELECTRONICS, INC.
and
TOROTEL, INC.
and
OPT INDUSTRIES, INC.
Dated as of August 13, 1998
LIST OF EXHIBITS
Exhibit A Addendum
Exhibit B List of Assets
Exhibit C Assignment and Assumption Agreement
Exhibit D Contribution to Capital Statement
Exhibit E Operating Agreement
Exhibit F Restrictive Agreement
Exhibit G Assumed Liabilities
Exhibit H Disclosure Schedule
Exhibit I Allocation of Purchase Price
Exhibit J1 Legal Opinion of Counsel to OPT
and Torotel
Exhibit J2 Legal Opinion of Redmond, Pollio &
Pittoni, PC
Exhibit K Certificate of Formation
Exhibit L Sub-Contract Manufacturing and Non-
Compete Agreement
Exhibit M Non Disclosure and Confidentiality
Agreement
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (Agreement) is
made as of this 13th day of August, 1998 by and
among Pico Electronics, Inc. (PICO), a New
York corporation, having an office at 143
Sparks Avenue, Pelham, New York 10803
(Purchaser) and Torotel, Inc., a Missouri
corporation having an office at 13402 South 71
Highway, Grandview, Missouri 64030 (Torotel)
and OPT Industries, Inc., a New Jersey
corporation, having an office at 300 Red School
Lane, Phillipsburg, New Jersey 08865 (OPT).
RECITALS
WHEREAS, Torotel owns one hundred per cent
(100%) of all of the outstanding stock of OPT;
WHEREAS, OPT manufactures and sells a product
line known as the DOT Product Line;
WHEREAS, PICO desires to acquire control of the
DOT Product Line;
WHEREAS, on or prior to the Closing Date (as
hereinafter defined), OPT will transfer certain
of its assets and certain of its liabilities to
a New York limited liability company which will
be wholly owned by OPT; such assets
representing all of the Assets of the DOT
Product line of OPT;
WHEREAS, OPT desires to sell to PICO, and PICO
desires to acquire all of OPT's membership
interest in such limited liability company on
the terms and conditions set forth herein, so
that after giving effect to such acquisition,
PICO will own a 100% interest in such limited
liability company;
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and
agreements hereinafter set forth, and other
good and valuable consideration, the receipt of
which is hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.01 Definitions.The following terms, when used
in this Agreement, shall have the meanings set
forth in this Section 1.01:
Addendum has the meaning ascribed thereto in
Section 4.03(e) and in the form of Exhibit A
attached hereto.
Affiliate means any Person which is directly
or indirectly controlling, directly or
indirectly controlled by, or under direct or
indirect common control with, any Person which
is a party to this
Agreement. For purposes of this definition,
control (including controlled by and under
common control with) shall mean the power,
directly or indirectly, to direct or cause the
direction of the management and policies of
such Person whether through the ownership of
voting securities or by contract or otherwise.
Agreement means this Asset Purchase Agreement
dated August 13, 1998, by and among PICO,
Torotel and OPT.
Assets shall mean the specific assets
including inventory, raw materials, work in
process, finished goods, backlog, fixed assets,
intellectual property, goodwill, contracts and
rights, whether tangible and intangible of
every kind and description, on the closing date
directly relating to the DOT Product Line of
OPT as identified by the parties hereto on
Exhibit B. Assets shall not include any
accounts receivable or other amounts due from
customers
Assignment and Assumption Agreement shall
mean an Assignment and Assumption Agreement in
the form attached hereto as Exhibit C.
Assumed Liabilities shall have the meaning
ascribed thereto in subsection 2.03.
Balance of Purchase Price has the meaning
ascribed thereto in subsection 3.01(c).
CERCLA means the Comprehensive Environmental
Response, Compensation and Liability Act of
1980, 42 U.S.C. 9601-9657, and any amendments
thereto.
Certificate of Formation means the
certificate of formation of the LLC filed with
the secretary of State of New York in
accordance with the NYLLCA in the form attached
hereto as Exhibit K.Claims means any and all
allegations, charges, claims, demands, actions,
causes of action, suits, proceedings or
administrative proceedings asserted,
threatened, imposed or incurred resulting in or
threatened to result in any assessments,
losses (excluding loss of profits), damages,
liabilities, judgments, decrees, debts, costs
and expenses, including, without limitation,
interest, penalties, reasonable attorneys' or
other professional fees and expenses resulting
from, relating to or arising out of a
particular act or omission by one party
hereunder.
Closing means the consummation on the Closing
Date of the transactions contemplated in this
Agreement, which shall be effective for all
purposes as of the close of business on
September ___, 1998.
Closing Date means (a) the close of business
on September ___, 1998, or (b) such other date
and time as shall be mutually agreed by the
parties hereto; provided however, that the
Closing shall be effective for all purposes as
of the close of business on September ___,
1998.
Code means the Internal Revenue Code of 1986,
as amended.
Non- Disclosure and Confidentiality Agreement
means the Non-Disclosure and Confidentiality
Agreement previously executed by the parties
and attached hereto as Exhibit M.
Consents means waivers, approvals,
allowances, authorizations, declarations,
filings, registrations and notifications.
Contract means any agreements,
understandings, promises (whether written or
oral and whether express or implied), and
including in each case, all amendments,
modifications and supplements thereto and
waivers and consents by and among the parties
hereto.Contribution to Capital Statement
means the form attached hereto as Exhibit D.
Damages all losses, liabilities, claims,
damages, deficiencies, obligations, fines,
payments (including incidental and
consequential damages), expenses (including
costs of investigation and defense and
reasonable attorneys' fees and expenses),
actions, causes of action, assessments,
judgments, amounts paid in settlement or
diminutions in value, whether or not involving
a Third Party Claim.
DOT Product Line means the line of products
designed, manufactured and sold by OPT (said
product lines being set forth on pages A2366,
A2367, A1278 and A1358 of the 1998 EEM catalog,
pages A2478 through A2493, inclusive of the
1996 EEM catalog, pages 5 and 12 through 15,
inclusive of OPT's 1997 product catalog and
pages 6 through 12, inclusive of OPT's 1988
product catalog, said pages being attached to
the Restrictive Agreement collectively as
Exhibit A), the LL series of inductors,
including any inductor set forth on page A1358
of the 1998 EEM catalog, all product lines of
the following designations (which are believed
to be all of the designations used to identify
the product lines set forth in the pages
comprising Exhibit A attached to the
Restrictive Agreement): DO-T, DI-T, BIT LL,
CLL, TOP, PIP, PIL, STB, MTB, ATC, ATE, STE,
ATF, STF, ATG, STG, ATH, ATJ, ATB, STH, STJ,
TSM and 28000 and all assets including
inventory, raw materials, work in process,
finished goods, backlog, to the extent assumed
by PICO, fixed assets, intellectual property,
goodwill, contracts, to the extent assumed by
PICO and rights and heretofore related to the
DOT Product Line.
Disclosure Schedule means the disclosure
schedule prepared by OPT and Torotel delivered
to PICO pursuant to the provisions of Article 5
hereof.
Hazardous Materials means materials defined
as hazardous substances, hazardous wastes
or solid wastes in (i) CERCLA, (ii) RCRA, or
(iii) any similar federal, state or local
environmental statute.
Indemnification Notice means a notice of
claim for indemnification pursuant to Article
10A.
Indemnifying Party or Parties means PICO, OPT
and Torotel set forth in Article 10 hereof as
the context requires.
Indemnitee means PICO, OPT and Torotel set
forth in Article 10 hereof as the context
requires.
Initial Purchase Price means the sum of
$125,000.00 to be paid by PICO to OPT upon the
execution of this Asset Purchase Agreement as
set forth in subsection 3.01(b).
Intellectual Property means all patents,
trademarks, service marks, trade names, logos,
copyrights, technologies, computer software,
know-how, processes and other similar
materials, information and data directly
related to the DOT Product Line of OPT in which
OPT claims a proprietary interest.
LLC means Electronic Products LLC to be
formed as a New York Limited Liability Company.
NYLLCA means the New York Limited Liability
Company Act.
Operating Agreement means the operating
agreement of the LLC, which shall be
substantially in the form of Exhibit E attached
hereto.
Person means any individual, corporation,
partnership, limited liability company, joint
venture, trust, bank, unincorporated
organization or government or any department,
agency or political subdivision thereof.
Purchase Price means the amount of
$1,250,000.00 to be paid by PICO to OPT
representing the sum of the Initial Purchase
Price and the Balance of Purchase Price as set
forth in subsections 3.01(b) and (c).
RCRA means the Resource Conservation and
Recovery Act, 42 U. S.C. 6901 -6987, and any
amendments thereto.
Restrictive Agreements mean the Non-
Competition, Non-Solicitation, restrictive and
referral agreements executed by OPT and Torotel
substantially in the form of Exhibit F
attached hereto.
Sub-Contract Manufacturing and Non-Compete
Agreement means the Agreement between PICO and
the Sub-Contractor in HAITI substantially in
the form of Exhibit L attached hereto.
Sub-Contractor in HAITI means Somon Tel.
Taxes means all taxes, charges, duties, fees,
levies, imposts or other assessments,
including, without limitation, income, excise,
property, sales, use, gross, receipts,
recording, insurance, value added, profits,
license, withholding, payroll, employment,
employer health, capital, net worth, capital
gains, alternative, transfer, stamp, social
security, environmental, occupation and
franchise taxes, and
any other taxes, customs duties, fees,
assessments or similar charges in the nature of
a tax, including contributions, employment
insurance payments and workers compensation
premiums together with any installments with
respect thereto, imposed by any Governmental
Entity, and including any interest, penalties
and additions attributable thereto, whether
disputed or not.
Transfer Date means the date on which the
Assets are transferred and conveyed to the LLC
by OPT as provided in Section 2.02 of this
Agreement.
1.02Certain Interpretations.The definitions set
forth in Section 1.01 shall be equally
applicable to both the singular and plural
forms of the terms defined thereby. The words
herein, hereof and words of similar import
as used in this Agreement shall refer to this
Agreement as a whole and not to any particular
provision of this Agreement. Unless
specifically stated to the contrary, all
references to Sections, subsections,
paragraphs, Exhibits and Schedules in
this Agreement shall refer to Sections,
subsections, paragraphs, Exhibits and Schedules
of this Agreement; references to Persons
include their respective permitted successors
and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant
functions of such Persons; and all references
to statutes and related regulations shall
include any amendments to such statutes and
regulations and any successor statutes and
regulations.
ARTICLE 2
FORMATION OF LIMITED LIABILITY COMPANY
2.01 Formation. On or before the Closing
Date, OPT shall have formed a limited liability
company under the NYLLCA, to be called
Electronic Products LLC (the LLC). The LLC
shall be treated as a single member LLC under
the Code. OPT shall take all action, and
execute, deliver, record and file all
instruments, documents and agreements, as may
be reasonably necessary to form the LLC under
the NYLLCA, including, without limitation,
filing the Certificate of Formation with the
Secretary of State of New York.
2.02 Transfer of Assets. On or before the
Closing on the terms and subject to the
conditions set forth in this Agreement, OPT
will transfer, convey and assign and deliver to
the LLC free and clear of all mortgages, liens,
security interests, and similar encumbrances,
claims, charges and restrictions (collectively
liens) all of OPT's right, title and interests
in to and under all of the Assets. A list of
the Assets is set forth on Exhibit B to this
agreement. Such transfer shall be effected by
OPT's executing and delivering to the LLC a
Contribution to Capital Statement,
substantially in the form attached hereto as
Exhibit F, and such other endorsements,
assignments and other good and sufficient
instruments of transfer and conveyance, in form
and substance reasonably satisfactory to PICO,
as shall be effective to vest in the LLC good
and marketable title in and to the Assets.
2.03 Liabilities to be Assumed. The LLC and
PICO shall assume only the liabilities
specificallyset forth on Exhibit G (Assumed
Liabilities). On the Closing Date, the LLC
and PICO shall execute and deliver to OPT an
Assignment and Assumption Agreement
substantially in the form attached hereto as
Exhibit G to reflect the LLC's and PICO's
assumption of the Assumed Liabilities. The
assumption by the LLC and PICO of any contract,
lease or other agreement of OPT, except as set
forth on Exhibit G, shall include only the
payment and performance obligations thereunder
which accrue or arise after the Closing Date;
in no event shall the LLC or PICO assume or be
deemed to assume any liability of any nature
(whether known, unknown, absolute, accrued,
contingent or otherwise) relating to the
performance under any such contract, lease or
agreement which accrued prior to the Closing
Date, except as set forth on Exhibit G. Except
as expressly set forth in this Section 2.03, or
on Exhibit G, the LLC and PICO shall not assume
or be obligated to perform any liabilities of
any nature (whether known, unknown, absolute,
accrued, contingent, inchoate or otherwise)
relating to the operations, property or Assets
of OPT prior to on or after the Closing Date,
including, but not limited to, (a) any
liability or obligation for any Taxes, accrued
salaries, workers' compensation, medical or
sick pay, (b) obligations under any contracts
with employees or consultants, (c) pension,
profit sharing or other employee benefit
liabilities or severance liabilities, and (d)
any liability or obligation arising out of or
resulting from OPT 's breach of any contract or
other agreement prior to the Transfer Date or
from any violation by OPT of any federal, state
or local laws or regulations prior to the
Transfer Date. The LLC and PICO shall not
offer employment to any employee of the DOT
Product Line or to any employee of OPT or
Torotel. PICO shall not assume any obligation
or liability for any employee benefit plan,
qualified or non qualified. In the event that
any employee of OPT or Torotel shall be deemed
to have been terminated by reason of the
consummation of this Agreement, all liability
for severance benefits shall be borne by OPT or
Torotel. The parties agree to the terms,
conditions and obligations set forth in Exhibit
G attached hereto
2.04 Further Assurances Regarding Transfer.
From time to time after the Closing Date, OPT,
at the reasonable request by the LLC or PICO
but without further consideration, shall
execute and deliver such other and further
instruments of sale, assignment, transfer and
conveyance and take such other and further
action as the LLC or PICO reasonably may
request in order to vest in the LLC and put the
LLC in possession of the Assets and to transfer
to the LLC all Intellectual Property, contracts
and rights included in the Assets.
ARTICLE 3
SALE AND PURCHASE OF MEMBERSHIP INTEREST
3.01 (a)Purchase of Membership Interest.
Subject to the provisions and conditions of
this Agreement, and in reliance upon the
representations, warranties and covenants
herein contained, on the Closing Date, OPT
shall sell to PICO, and PICO shall purchase
from OPT, in exchange for the Purchase Price
described in subsections (b) and (c), a
membership interest in the LLC equal to 100% of
the aggregate membership interest in the LLC,
and PICO shall purchase such membership
interest from OPT, so that, after giving effect
to the purchase of the membership interest
described in this subsection 3.01(a), PICO
shall have acquired a 100% membership interest
in the LLC.
(b)Initial Purchase Price. On the
execution of this Asset Purchase Agreement PICO
shall pay to OPT the sum of One Hundred and
Twenty Five Thousand Dollars ($125,000.00).
Such sum shall be non-refundable except upon
default or breach of this Agreement by OPT or
Torotel or upon the failure of the Boards of
Directors of OPT and Torotel or their
shareholders to approve this Agreement or upon
the failure of OPT's Lenders to release their
security interests in the Assets. In addition
except for the conditions set forth in sub
sections 4.03(a), 4.03(c), 4.03(f) and 4.03(l),
any failure on the part of OPT or Torotel to
satisfy the conditions set forth in Article 4
hereof shall cause OPT or Torotel to refund to
PICO immediately upon demand by PICO the
initial purchase price of $125,000. Such sum
shall represent part of the consideration for
the execution, delivery and performance of OPT
to enter into this Agreement and to allow PICO
access to certain information
(c)Balance of Purchase Price. In
consideration of its purchase of the membership
interest in the LLC from OPT, PICO shall pay to
OPT: (i) on the Closing Date in immediately
available funds, the amount of One Million One
Hundred and Twenty Five Thousand Dollars
($1,125,000.00).
3.02 Allocation of Purchase Price. The
Purchase Price shall be allocated to each item
of the Assets and other items as set forth on
Exhibit I hereto. Each party hereto agrees to
report this transaction for federal and state
tax purposes in accordance with the allocation
set forth on Exhibit I.
ARTICLE 4
CLOSING; CONDITIONS TO CLOSING
4.01 Closing. Unless this Agreement shall
have been terminated pursuant to the provisions
of Article 9 hereof, the Closing shall be held
on the Closing Date at the offices of Redmond,
Pollio & Pittoni pc, 1461 Franklin Avenue,
Garden City, New York, or at such other place
as shall be mutually agreed by the parties
hereto. On the Closing Date, (a) the documents
referred to in this Article 4 shall be
exchanged by the parties and (b) OPT shall sell
its membership interest in the LLC to PICO in
exchange for the Balance of the Purchase Price
(as provided in Section 3.01(c)) and (c) all
other actions contemplated by this Agreement to
be completed at the Closing shall be completed.
4.02 General Condition. The obligations of
the parties to effect the Closing shall be
subject to the following conditions unless
waived in writing by all parties:
(a) No Orders: Legal Proceedings. No law
or order shall have been enacted, entered,
issued, promulgated or enforced by any
governmental entity, nor shall any action have
been instituted and remain pending or have been
threatened and remain so by any governmental
entity at what otherwise would be the Closing
Date, which prohibits or restricts or would (if
successful) prohibit or restrict the
transactions contemplated by this Agreement or
which would not permit the business and
operations of OPT with respect to the DOT
Product Line as presently conducted to continue
unimpaired as the business and operations of
the LLC following the Closing
Date. No governmental entity shall have
notified any party to this Agreement that
consummation of the transactions contemplated
by this Agreement would constitute a violation
of any laws of any jurisdiction or that it
intends to commence proceedings to restrain or
prohibit such transactions or force divestiture
or rescission, unless such governmental entity
shall have withdrawn such notice and abandoned
any such proceeding prior to the time which
otherwise would have been the Closing Date.
4.03 Conditions to Obligations of PICO. The
obligations of PICO to effect the Closing shall
be subject to fulfillment, at or prior to the
Closing Date, of each of the following
conditions, except to the extent waived in
writing by PICO:
(a)Formation of LLC. The Certificate of
Formation shall have been filed with the
Secretary of State of New York and all other
acts necessary to form the LLC shall have been
taken.
(b)Representations, Warranties and
Covenants of OPT and Torotel. The
representations and warranties of OPT and
Torotel herein contained shall be true in all
material respects at the Closing Date with the
same effect as though made at such time. OPT
and Torotel shall have performed all
obligations and complied with all covenants and
conditions required by this Agreement to be
performed or complied with by them at or prior
to the Closing Date in all material respects.
(c)Consents. OPT and Torotel shall have
obtained and provided to PICO each approval,
consent and permits listed in the Disclosure
Schedule, each in form and substance reasonably
satisfactory to PICO. OPT shall use its
reasonable best efforts to secure the consents
of customers to the assignment of backlog
orders to PICO.
(d)The Restrictive Agreement shall have
been entered into by OPT and Torotel
substantially in the form of Exhibit F.
(e)The Addendum to the agreement of
November 2, 1995 shall have been entered into
by OPT and Torotel substantially in the form of
Exhibit A.
(f)The Sub-Contract Manufacturing and
Non-Compete Agreement shall have been entered
into between PICO and the Sub-Contractor entity
substantially in the form of Exhibit L.
(g)Contribution to Capital. OPT shall
have executed and delivered to the LLC and PICO
the Contribution to Capital Statement,
substantially in the form of Exhibit D attached
hereto.
(h)Assignment and Assumption Agreement.
OPT shall have executed and delivered to the
LLC and PICO the Assignment and Assumption
Agreement, substantially in the form of
Exhibit C.
(i)Delivery of Books and Records. OPT
shall have delivered to the LLC and PICO all
original contracts, books and records which
directly relate to the Assets and Assumed
Liabilities.
(j)Secretary's Certificate. OPT shall
have delivered to PICO (1) a true, correct and
complete copy of the Contribution to Capital
Statement; (2) a true, correct and complete
copy of the Assignment and Assumption
Agreement; and the other agreements, documents
and instruments contemplated hereby; and (y)
setting forth the name and title of, and
bearing the signature of, each officer of OPT
individually authorized to execute and deliver
this Agreement.
(k)Good Standing Certificates. OPT shall
have delivered to PICO certificates dated as of
a date reasonably close to the Closing Date
from the appropriate authorities as to the good
standing of, and payment of franchise taxes by,
OPT in the state of New Jersey.
(l)Due Diligence. PICO shall not have
discovered, in the course of its ongoing
investigation, information not previously
disclosed by OPT or Torotel which PICO
reasonably believes would have a material
adverse effect on the operations to be
conducted by the LLC with respect to the DOT
Product Line conducted by OPT. Such due
diligence shall be comprised of PICO's review
of the information and reports provided to PICO
by OPT and updated by OPT to bring such
information current. Prior to the execution of
this Agreement OPT shall have secured from its
lenders all required consents to and approvals
of the transaction contemplated by this
Agreement in each instance satisfactory to
PICO.
(m)Opinion of Counsel. PICO shall have
received from Polsinelli, White, Vardeman &
Shalton, counsel to OPT and Torotel, an opinion
dated the date of the Closing Date, containing
the legal opinions set forth in Exhibit J1.
(n)Resolutions. OPT and Torotel shall
have delivered to PICO certified resolutions of
the board of directors of OPT and Torotel
approving the consummation of the transactions
contemplated hereby.
(o)Absence of Liens. At or prior to the
Closing Date, PICO shall have received a UCC
search report currently dated issued by the
secretaries of the state of New Jersey and
Missouri and each of the counties within each
state where OPT and Torotel has offices
indicating that there are no filings under the
Uniform Commercial Code on file with each such
Secretary of State or County, which name OPT or
Torotel as debtors or otherwise indicating any
lien on the Assets, except for the liens with
respect to the Assumed Liabilities as set forth
in Section 2.04 and except for liens to be
terminated at or prior to the Closing Date.
(p)Closing Certificate. PICO shall have
received a certificate dated as of the Closing
Date, from a duly authorized executive officer
of OPT stating that, to the best of his
knowledge, each of the conditions required to
be performed by OPT set forth in Section 4.03
have been satisfied.
(q) No Adverse Changes. From the date of
this Agreement, to the Closing Date, there
shall have been no material adverse change in
the condition (financial or otherwise),of the
DOT Product Line, other than what is disclosed
on the Disclosure Schedule;
4.04 Conditions to Obligations of OPT. The
obligations of OPT to effect the transaction
contemplated hereby shall be subject to
fulfillment prior to or at the Closing Date, of
each of the following conditions, except to the
extent waived in writing by OPT.
(a)Representations. Warranties and
Covenants of PICO. The representations and
warranties of PICO herein contained shall be
true in all material respects as of the Closing
Date with the same effect as though made at
such time. PICO shall have performed all
obligations and complied with all covenants and
conditions required by this Agreement to be
performed or complied with by it at or prior to
the date of the Closing.
(b)Initial Purchase Price. PICO shall
have paid to OPT the Initial Purchase Price and
shall be ready to pay the Balance of the
Purchase Price.
(c)Closing Certificate. OPT shall have
received a certificate dated the date of the
Closing from an executive officer of PICO
stating that, to the best of his knowledge,
each of the conditions required to be performed
by PICO set forth in Section 4.04 has been
satisfied.
(d)Opinion of Counsel. OPT shall have
received from Redmond, Pollio & Pittoni PC,
counsel to PICO, an opinion dated the Closing
Date containing the legal opinions
substantially in the form of Exhibit J2.
(e)Assignment and Assumption Agreement.
The execution by the LLC and by PICO with
respect to certain of the Assumed Liabilities
of the Assignment and Assumption Agreement.
4.05 Simultaneous Transactions. All
transactions to be effected as of the Closing
shall be deemed to have taken place
simultaneously, and no such transaction shall
be deemed to have been completed until all
transactions are completed and all documents
delivered.
4.06 Removal of Assets. OPT shall provide
PICO with access to its premises at times
specified by PICO to allow PICO to remove the
Assets related to the DOT Product Line. PICO
shall be responsible to remove the Assets and
shall retain a bonded and insured rigger,
subject to approval by OPT, to conduct such
removal.
4.07 Bank Consent. OPT's Lenders shall have
consented in writing to the consummation of the
transactions provided herein and shall have
released any security interests claimed by such
Lenders with respect to the Assets.
4.08 Approvals. The Board of Directors and
Shareholders of Torotel and OPT shall have
approved the execution, delivery and
performance of the Agreements.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OPT
AND TOROTEL
OPT and Torotel represent and warrant to PICO
that the following statements are true and
correct in all respects.
5.01 Organization: Qualification: Good
Standing: Directors and Officers.
(a)OPT and Torotel are corporations duly
organized, validly existing and in good
standing under the laws of the States New
Jersey and Missouri. OPT and Torotel have full
corporate powers and authority to carry on
business as it is now being conducted and to
own the properties and assets each now owns.
The Disclosure Schedule correctly lists the
current directors and executive officers of
OPT.
5.02 Ownership and Transfer of LLC Membership
Interests. Upon formation of the LLC, the
membership interest in the LLC will have been
validly issued, fully paid and owned of record
and beneficially by OPT, free and clear of all
liens, encumbrances, pledges, hypothecations,
restrictions and adverse claims of any nature
whatsoever, except for liens to be released at
or prior to closing. Upon formation of the LLC,
OPT will own a 100% membership interest in the
LLC. OPT has the complete and unrestricted
power and authority to sell its membership
interest in the LLC, and there are no trust
arrangements, operating agreements, buy-sell
agreements, restrictive transfer agreements,
voting trusts, proxies or similar agreements
pertaining to the membership interest in the
LLC held by OPT that would preclude or require
the consent of any Person to the sale by OPT of
its respective membership interest in the LLC
contemplated by this Agreement or would give
any Person any right or interest in the LLC
after consummation of the transactions
contemplated hereby. Except as otherwise
contemplated by this Agreement, upon formation
of the LLC, the LLC will not have any
outstanding subscriptions, options, rights or
other agreements which may require it, now or
in the future, to issue any additional
membership interests to any Person. The sale
provided for herein will vest in PICO good
title to a 100% membership interest in the LLC,
free and clear of any and all liens,
encumbrances, restrictions, options,
agreements, conditions and adverse claims of
any nature whatsoever, other than the payment
of the Balance of the Purchase Price and the
Assumed Liabilities.
5.03 Authorization and Authority. OPT and
Torotel have all requisite corporate power and
authority to execute and deliver this Agreement
and the other agreements, instruments and
documents executed or delivered by them in
connection herewith and to consummate the
transactions contemplated hereby and thereby.
Upon approval of the Agreement by the Board of
Directors of each Corporation, OPT and Torotel
have taken all action required by law, its
certificate of incorporation, bylaws or
otherwise to authorize the execution and
delivery of this Agreement and the other
agreements, instruments and documents executed
or delivered by it in connection herewith and
to effect the transactions contemplated hereby
and thereby. Subject to Board approvals, this
Agreement and the other agreements, instruments
and documents executed or delivered by them in
connection herewith have been duly and validly
executed and delivered by OPT and Torotel and
constitute valid and binding agreements of OPT
and Torotel, enforceable against OPT and
Torotel in accordance with their terms. OPT
has full corporate power and authority to own,
lease and operate its assets, properties and
business and to carry on its business as it is
being currently conducted.
5.04 Restrictive Documents. Neither OPT nor
Torotel are subject to, or a party to, any
charter, bylaw, mortgage, lien, lease, license,
permit, agreement, contract, instrument, ,
judgment or decree, which materially and
adversely affects the business practices,
operations or condition of OPT or Torotel with
respect to the Assets, or which would prevent
consummation by OPT or Torotel of the
transactions contemplated by this Agreement.
5.05 Consents. Except as set forth in the
Disclosure Schedule, no consent or approval of
any Person is necessary for the consummation by
OPT and Torotel of the transactions
contemplated hereby, including, without
limitation, (i) consents and approval from
parties to loans, contracts, client contracts,
purchase orders, leases or other agreements and
(ii) consents and approvals from any federal,
state, local or municipal agency or of any
other political subdivision or administrative
body, and no party to any such agreement (other
than OPT or Torotel) has a right to terminate
any such agreement as a result of the
transactions contemplated hereby.
5.06 Books and Records. Records of OPT, as
previously made available to PICO and its
representatives, contain accurate information
as of the date specified therein. OPT does not
have any of its records, systems, controls,
data or information which are material to the
operation of the DOT Product Line recorded,
stored, maintained, operated or otherwise
wholly or partly dependent upon or held by any
means (including any electronic, mechanical or
photographic process, whether computerized or
not) which (including all means of access
thereto and therefrom) are not under the
exclusive ownership and direct control of OPT,
except for the operation of the Sub-Contractor.
5.07 Inventory. Opt has furnished PICO
detailed analysis of distributor inventory,
inventory on hand and purchase orders for the
DOT Product Line (collectively the
Inventory). OPT hereby represents and
warrants that such inventory analysis is
complete and accurate and fairly represents the
total inventory of the DOT Product Line as set
forth herein. OPT agrees to furnish on or
before the Closing Date an analysis of the
inventory to be dated at a date not more than
seven (7) days prior to the date of closing.
5.08 Machinery. OPT has furnished PICO with a
complete listing of the machinery and equipment
on hand for the DOT Product Line (collectively
the Machinery and Equipment). OPT hereby
represents and warrants that such listing is
complete and accurate, that the machinery and
equipment is in reasonably good working
condition and repair and represents the total
machinery and equipment of the DOT Product Line
as set forth herein. OPT agrees to furnish on
or before the Closing Date an analysis of the
machinery to be dated at a date not more than
seven (7) days prior to the date of Closing,
except for machinery and equipment in the
possession of the Sub-Contractor.
5.09 Backlog. OPT has furnished PICO detailed
analysis of customer purchase orders that have
been accepted by OPT (the Backlog). OPT
hereby represents and warrants that such
backlog represents legally enforceable
obligations of the customers enforceable in
accordance with their terms, and that such
backlog analysis is complete and accurate and
fairly represents the total customer Backlog of
the DOT Product Line as set forth herein. OPT
agrees to furnish on or before the Closing Date
an analysis of the backlog dated at a date not
more than seven (7) days prior to at the date
of Closing.
5.10 Title to Assets: Encumbrances. Upon the
transfer of the Assets to the LLC, the LLC will
have good and marketable title to all the
Assets Except for the Assumed Liabilities and
Liens to be released at or prior to Closing,
the Assets are free and clear of all mortgages,
liens, pledges, charges, encumbrances,
equities, Claims, covenants, conditions or
restrictions, or the Claims of materialmen,
except minor imperfections of title or
circumstances, if any, which do not materially
detract from the value of the property subject
thereto or impair its use by the LLC. Neither
any officer, nor any director or employee of
OPT, nor any spouse, child or other relative of
any such person, owns, or has any interest,
directly or indirectly, in any of the Assets
owned by or leased to OPT. OPT and Torotel
represent to the LLC and PICO that except as
disclosed in the Disclosure Schedule there are
no actions pending against either of then in
any court; nor are there any replivens,
judgments or executions outstanding against
either of them now in force; nor has any
petition in bankruptcy or arrangement been
filed by or against either of them nor has
either of them taken advantage of any law
relating to insolvency.
5.11 Absence of Certain Changes. Except as
and to the extent set forth in the Disclosure
Schedule since January 1, 1998, each of OPT and
the LLC has not with respect to the DOT Product
Line:
(a)conducted the DOT Product Line other
than in the ordinary course of business,
including making all regularly scheduled
payments and commitments (i.e., payroll, taxes,
rent and lease payments) coming due through the
Closing Date;
(b)written down the value of any
inventory;
(c)waived any claims or rights of OPT of
substantial value;
(d)sold, transferred, or otherwise
disposed of any of the Assets related to the
DOT Product Line, except in the ordinary course
of business and consistent with past practice;
(e)except for contracts made known to
PICO, terminated or failed to renew, or
received any threat to terminate or fail to
renew, any contract or agreement (including,
without limitation, contracts and agreements
with clients) that is material to the DOT
Product Line;
(f)disposed of or disclosed to any Person
other than representatives of PICO any trade
secret, formula, process or know-how of OPT not
previously a matter of public knowledge, the
disclosure of which would have a material
adverse affect on the DOT Product Line;
(g)permitted any of the Assets to be
subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or
charge of any kind, other than those to be
released at or prior to Closing;
(h)agreed, whether in writing or
otherwise. to take any action described in this
Section 5.11.
5.12Patents. Trademarks. Trade Names.
With respect to the DOT Product Line, the
Disclosure Schedule sets forth Intellectual
Property of OPT, and all applications therefor,
and all permits, grants, licenses and
agreements relating thereto to or from OPT,
owned, used or available to OPT or in which OPT
has an interest, other than licenses, consents
or rights held by OPT on behalf of clients in
the ordinary course of business. OPT owns or
has the right to use, free and clear of any
claims or rights of others, all Intellectual
Property utilized in the conduct of its DOT
Product Line as currently conducted, including
those listed in the Disclosure
Schedule. OPT has not received any notice of
any adversely held patent, invention,
trademark, copyright, service mark, trade name,
fictitious name or logo of any other person or
notice of any claim relating thereto and
neither OPT nor Torotel know of any reasonable
basis for any such charge or claim.
5.13 Contracts and Commitments.
With the respect to the DOT Product Line to the
best knowledge of OPT and Torotel, OPT and
Torotel each has performed all material
obligations, if any, required to be performed
by it under the Contracts and is not (with or
without the giving of notice, or the lapse of
time or both) in breach or default in any
material respect thereunder. A true, correct,
accurate and complete copy of each written
Contract previously has been delivered to PICO
and the salient terms and provisions of all
material oral Contracts have been summarized
and disclosed in the Disclosure Schedule.
5.14 Litigation. Except as disclosed on the
Disclosure Schedule, there is no pending
action, suit, inquiry, proceeding or, to the
best knowledge of OPT and Torotel,
investigation by or before any court or
governmental or other regulatory or
administrative agency or commission pending or,
to the best knowledge of OPT and Torotel,
threatened against or involving OPT or Torotel,
which questions or challenges the validity of
this Agreement.
5.15 Permits With Respect to the DOT Product
Line. OPT has all permits of, and has made all
required registrations with, all governmental
agencies or authorities to enable OPT to
conduct its business as currently conducted,
except to the extent such failure to obtain
such permits or make such registrations would
not have a material adverse effect on OPT. Each
such permit is valid and in full force and
effect. To the best knowledge, information and
belief of OPT and Torotel, no suspension,
cancellation or termination of any of such
permit is threatened or imminent.
5.16 Taxes. With respect to the DOT Product
Line, OPT and Torotel has filed or has caused
to be filed, in a timely manner (within any
applicable extension periods) all Tax Returns
required to be filed by the Code or by
applicable state or local tax laws with respect
to OPT and Torotel; all Taxes shown to be due
on such Tax Returns have been timely paid in
full, and no tax liens have been filed and no
material claims are being asserted with respect
to any such Taxes; there is no agreement for
the extension of the time of any assessment of
any Taxes which can affect OPT and Torotel
except as set forth in the Disclosure
Schedule.
5.17 Environmental Laws and Regulations. OPT
is in material compliance with all applicable
federal, state and local laws and regulations
relating to product registration, pollution
control and environmental contamination
including, but not limited to, all laws and
regulations governing the generation, use,
collection, discharge or disposal of Hazardous
Materials and all laws and regulations with
regard to record keeping, notification and
reporting requirements respecting Hazardous
Materials. OPT has not been alleged to be in
violation of or been subject to any
administrative or judicial proceeding pursuant
to such laws or regulations either now or any
time during the past three years. To the best
knowledge of OPT and Torotel there are no facts
or circumstances which could form the basis for
the assertion of any Claim against OPT relating
to environmental practices asserted under
CERCLA or RCRA or any other federal, state,
municipal or local environmental statute.
5.18 Brokers and Finders. Neither OPT,
Torotel nor any of its officers, directors or
employees has employed any broker or finder or
incurred any liability for any brokerage fees,
commissions or finders' fees in connection with
the transactions contemplated by this
Agreement.
5.19 Customer or Third Party Approval. With
respect to the DOT Product Line, the work to be
completed by OPT prior to the Closing Date
(with respect to OPT's contracts and agreements
to provide products or services) will meet all
requirements and specifications of such
contracts as modified through the Closing Date
in all material respects.
5.20 Referrals. From the date of the public
announcement of this Asset Purchase Agreement
for a period of 36 months as provided in the
Restrictive Agreement attached hereto as
Exhibit F, unless and until this Asset Purchase
Agreement is terminated, OPT and Torotel has
and shall continue to refer any and all
potential purchasers and orders for the
electronic products within the DOT Product Line
to PICO, except for thirty (30) days thereafter
during which period OPT may be required by
reason of a distributorship agreement with
Peerless Radio Corporation (PEERLESS) to
refer orders for 200 pieces or less to
PEERLESS.
5.21 Acquired Business. Upon the acquisition
by PICO of its 100% membership interest in the
LLC, and the consummation of the other
transactions contemplated hereby, PICO, through
its ownership of such membership interest, will
have acquired an interest in the entire DOT
Product Line as heretofore conducted.
5.22 Disclosure. Other than as disclosed on
the Disclosure Schedule attached hereto as
Exhibit H or the assumed liabilities, there are
no liabilities or encumbrances of any kind
attaching to the Assets transferred to the LLC.
Other than disclosed on the Disclosure
Schedule, no part of this Agreement, any
financial statements, any Schedule, Exhibit,
agreement or certificate attached hereto or
delivered in accordance with the terms hereof
or any document or statement in writing which
has been supplied by or on behalf of OPT or
Torotel in connection with the transactions
contemplated by this Agreement contains any
untrue statement of a material fact, or omits
any statement of a material fact necessary in
order to make the statements contained herein
or therein not misleading. There is no fact
known to OPT or Torotel, other than general
business and industry conditions, which
materially and adversely that affects the
Assets which has not been set forth in this
Agreement, any Schedule, Exhibit, agreement or
attached hereto or delivered in
accordance with the terms hereof or any
document or statement in writing which has been
supplied by or on behalf of OPT or Torotel in
connection with the transactions contemplated
by this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PICO
PICO represents and warrants to OPT as follows:
6.01 Corporate Organization; Qualification:
Good Standing. PICO is a corporation duly
organized, validly existing and in good
standing under the laws of the State of New
York. PICO has full corporate power and
authority to carry on its business as it is now
being conducted and to own the properties and
assets it now owns. PICO is qualified or
licensed to do business and is in good standing
in each jurisdiction in which the character or
location of the properties owned or leased by
PICO or the nature of the business conducted by
PICO makes such qualification or license
necessary.
6.02 Authorization: Authority. PICO has full
corporate power and authority to execute and
deliver this Agreement and the other
agreements, instruments and documents executed
or delivered by it in connection herewith and
to consummate the transactions contemplated
hereby and thereby. PICO has taken all action
required by law, its certificate of
incorporation, bylaws or otherwise to authorize
the execution and delivery each of this
Agreement and the other agreements, instruments
and documents executed and delivered by it in
connection herewith and to effect the
transactions contemplated hereby and thereby.
This Agreement and the other agreements,
instruments and documents executed or delivered
by it in connection herewith is a valid and
binding agreement of PICO enforceable in
accordance with its terms.
6.03 Restrictive Documents. PICO is not
subject to, or a party to, any charter, by law,
mortgage, lien, lease, license, permit,
agreement, contract, instrument, law, rule,
ordinance, regulation, order, judgment or
decree which would prevent consummation by PICO
of the transactions contemplated by this
Agreement.
6.04 Consents. No consent or approval of any
Person is necessary for the consummation by
PICO of the transactions contemplated hereby,
including, without limitation, (i) consents and
approvals from parties to loans, contracts,
purchase orders, leases or other agreements and
(ii) consents and approvals from any federal,
state, local or municipal agency or of any
other political subdivision or administrative
body.
6.05 No Violation. Neither the execution and
delivery of this Agreement nor the consummation
of the transactions contemplated hereby will
violate any provisions of the certificate of
incorporation or bylaws of PICO, or violate, or
be in conflict with, or constitute a default
under, or cause the acceleration of the
maturity of any debt or obligation pursuant to,
any agreement or commitment to which PICO is a
party or by which PICO is bound, or violate any
statute or law or any judgment, decree, order,
regulation or rule of any court or governmental
authority.
6.06 Litigation. There is no action, suit,
inquiry, proceeding or, to the best knowledge
of PICO, investigation by or before any court
or governmental or other regulatory or
administrative agency or commission pending or,
to the best knowledge of PICO, threatened
against or involving PICO, which questions or
challenges the validity of this Agreement or
any action taken or to be taken by PICO
pursuant to this Agreement or in connection
with the transactions contemplated hereby; nor,
to the best knowledge of PICO, is there any
valid basis relating to PICO for any such
action, proceeding or investigation.
6.07 No Brokers. Neither PICO nor any of its
officers, directors, or employees has employed
any broker or finder or incurred any liability
for any brokerage fees, commissions, or
finder's fees in connection with the
transactions contemplated by this Agreement.
6.08 PICO Parts. PICO represents and warrants
that all products and parts provided to
customers or former customers of OPT as or for
backlog orders assumed by PICO under this
Agreement and all products and parts sold by
the LLC or PICO to OPT pursuant to Paragraph 5
of Exhibit G attached hereto will be good and
marketable and will meet all of the reasonable
performance requirements of OPT and such
customers. In addition, such products and
parts sold or provided to OPT and such backlog
customers shall be subject to the same express
and implied warranties as are customarily
provided by PICO and LLC to their other
customers.
ARTICLE 7
ADDITIONAL COVENANTS AND AGREEMENTS
7.01 Nondisclosure of Proprietary Data.
Neither the parties hereto nor any of their
respective directors, employees, agents or
representatives shall disclose or permit or
enable the disclosure of, at any time before or
after the Closing, directly or indirectly, any
trade secret or other proprietary client data
concerning the DOT Product Line (Proprietary
Data). The parties hereto shall take such
precautions as shall be necessary to keep
secret and confidential all such proprietary
data and to prevent the unauthorized disclosure
thereof; provided however that Proprietary Data
does not include information that (a) is or
becomes generally available to the public; (b)
was available to the parties on a non-
confidential basis; or (c) becomes available to
a party on a non-confidential basis from a
source who is not bound by a confidentiality
agreement or obligation with regard to such
information; or (d) is required to be disclosed
by law or legal process.
7.02 Special Remedies and Enforcement. Each
of the Parties hereto recognizes and agrees
that a breach by any one of the Parties of any
of the covenants set forth in Section 7.01
could cause irreparable harm to one another, as
the case may be, and the remedies at law in the
event of such breach would be inadequate, and
that, accordingly, in the event of such breach,
in addition to any other rights and remedies
which are available, a restraining order or
injunction or both may be issued against the
breaching party.
7.03 Cooperation in Contract Administration.
OPT agrees that in the event that it shall
receive payment from any customer of the LLC or
PICO for parts sold by LLC or PICO subsequent
to the Closing Date, OPT shall promptly forward
such payment to LLC or PICO, respectively.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS,WARRANTIES
AND AGREEMENTS
8.01 Survival of Representations, Warranties
and Agreements. All representations,
warranties and agreements of the parties
contained in this Agreement or in any
certificate or schedule delivered pursuant
hereto shall survive the closing hereunder and
any investigation made by or on behalf of any
parties hereto and shall be deemed to be made
as of the date of Closing and as of the Closing
Date and continue in full force and effect for
a period of twenty-four (24) months after the
Closing Date, except where such representations
or warranties were made with knowledge of its
falsehood in which case such representations
and warranties shall survive the Closing Date
for a period of seventy-two (72) months.
Nothing set forth herein is intended to limit
the time periods within which claims must be
asserted or the binding effect of the
Confidentiality and Non-Solicitation Agreement.
8.02 Statements of Representations. All
statements contained herein, in the Disclosure
schedule or in any schedule or certificate
executed or delivered pursuant to this
Agreement shall be deemed representations and
warranties within the meaning of this Article
8.
ARTICLE 9
TERMINATION OF OBLIGATIONS
9.01 Termination of Agreement. Regardless of
any provision in this Agreement to the
contrary, this Agreement and the transactions
contemplated by this Agreement shall terminate
if the Closing does not occur on or before the
close of business on September ___, 1998 unless
extended by mutual consent in writing by PICO,
OPT and Torotel and otherwise may be terminated
at any time before the Closing as follows:
(a)Mutual Consent. By mutual consent in
writing of PICO, OPT and Torotel.
(b)Failure of Conditions to PICO'
Obligations. By PICO by written notice to OPT
and Torotel if any event occurs which would
render impossible the satisfaction by July 31,
1998 of one or more conditions to PICO's
obligations to consummate the transactions
contemplated by this Agreement as set forth in
Section 4.02 or 4.03.
(c)Failure of Conditions to OPT's and
Torotel's Obligations. By OPT and Torotel by
written notice to PICO if any event which
occurs would render impossible the satisfaction
by September ___, 1998 of one or more
conditions to the obligations of OPT and
Torotel to consummate the transactions
contemplated by this Agreement as set forth in
Section 4.02 or 4.04.
9.02 Effect of Termination. In the event of a
termination of this Agreement by either PICO or
OPT and Torotel as provided in Section 9.01,
this Agreement shall forthwith no longer have
any force or effect and there shall be no
liability or obligation on the part of PICO or
OPT and Torotel, or their respective
Affiliates, officers or directors, other than
in accordance with the provisions of Section
3.01(b), 10.03 and Article 7 hereof; provided,
however, that any such termination shall not
relieve any party from liability for any breach
of this Agreement.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.01 Amendment and Modifications. Subject to
applicable law, this Agreement may be amended,
modified and supplemented only by written
agreement between the parties hereto which
states that it is intended to be a modification
of this Agreement.
10.02 Waiver of Compliance. Any failure of
OPT or Torotel, on the one hand, or PICO, on
the other, to comply with any obligation,
covenant, agreement or condition herein may be
expressly waived in writing by the other party,
but such waiver or failure to insist upon
strict compliance with such obligation,
covenant, agreement or condition shall not
operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.03 (a)Indemnification by OPT and Torotel.
OPT and Torotel (each an Indemnifying Party)
hereby jointly and severally agree promptly
upon the determination of Damages to indemnify
and hold harmless Electronic Products LLC, PICO
and their respective directors, officers,
employees, agents and representatives (each a
PICO Indemnitee) from and against any Claims
which have been asserted against or threatened,
imposed upon sought to be collected from or
received by a PICO Indemnitee to the extent
resulting from, relating to or arising out of
(i) any breach of any representation, warranty
statement or agreement of OPT or Torotel or any
representative thereof contained in or made
pursuant to this Agreement and the Exhibits
thereto or (ii) any certificate required to be
executed by OPT or Torotel pursuant to the
Agreement, or any facts or circumstances
constituting a breach or , any such Claim
arising out of any such event shall be referred
to as a PICO Indemnification claim.
10.03 (b)Indemnification By PICO.PICO (an
Indemnifying Party) hereby agrees promptly upon
the determination of Damages to indemnify and
hold harmless OPT, Torotel and their respective
directors, officers, employees, agents and
representatives (each an OPT Indemnitee) from
and against any Claims which have been asserted
against or threatened, imposed upon sought to
be collected from or received by an OPT
Indemnitee to the extent resulting from,
relating to or arising out of (i) any breach of
any representation, warranty statement or
Agreement of PICO or any representative thereof
or (ii) any certificate required to be executed
by PICO pursuant to the Agreement or any facts
or circumstances constituting a breach or any
such Claim arising out of such event shall be
referred to as an OPT Indemnification Claim.
10.04 Notice and Defense of Indemnification
Claims. If a Claim is made or brought against
an Indemnitee or an Indemnitee receives notice
of the assertion of any Claim and if the
Indemnitee reasonably believes that such Claim
if successful would give rise to a right of
indemnification under this Article 10, then
such Indemnitee shall give written notice to an
Indemnifying Party as soon as reasonably
practical but in no event more then ten (10)
days after the Indemnitee bas received written
notice or actual knowledge of such Claim
(provided that failure to give such notice
shall not limit the Indemnifying Party's
indemnification obligation hereunder except to
the extent that the delay in giving, or failure
to give, the Indemnification Notice adversely
affects the Indemnifying Party's ability to
defend against the Claim). To the extent
reasonably practicable, the notice will
describe the nature, basis and amount of the
indemnification Claim and include any relevant
supporting documentation. If the Indemnifying
Party does not object within ten (10) days
after receipt of the Indemnification Notice to
(i) the indemnification Claims described on the
notice as being subject to indemnification
pursuant to this Article and (ii) the amount of
Claims specified in the notice, the
indemnification Claims described in the
Indemnification Notice shall be deemed to be
final and binding upon the Indemnifying
Party(ies) (hereinafter, Permitted
Indemnification Claim).
(b)Defense of Claims. The Indemnitee
against whom a Claim is made or brought shall
give the Indemnifying Party an opportunity to
defend such Claim, at the Indemnifying Party's
own expense and with counsel selected by the
Indemnifying Party and reasonably satisfactory
to the Indemnitee, provided that such
Indemnitee at all times also shall have the
right to participate fully in the defense at
its own expense. Failure of an Indemnifying
Party to give the Indemnitee written notice of
its election to defend such Claim within thirty
(30) days after receipt of notice thereof shall
be deemed a waiver by such Indemnifying Party
of its right to defend such Claim. If the
Indemnifying Party shall elect not to assume
the defense of such Claim (or if such
Indemnifying Party shall be deemed to have
waived its right to defend such Claim), the
Indemnitee against whom such Claim is made
shall have the right, but not the obligation,
to undertake the sole defense of, and to
compromise or settle, the Claim on behalf, for
the account, and at the risk and expense, of
the Indemnifying Party (including without
limitation the payment by Indemnifying Party of
the attorneys fees of the Indemnitees);
provided, however, that if the Indemnitee
undertakes the sole defense of such Claim on
behalf of the account, and at the risk and
expense of the Indemnifying Party, it shall
defend such Claim in good faith and shall
apprise the Indemnifying Party from time to
time as the Indemnitee deems appropriate of
the progress of such defense. If one or more of
the Indemnifying Parties assumes the defense of
such Claim, the obligation of such Indemnifying
Party hereunder as to such Claim shall include
taking all steps reasonably necessary in the
defense or settlement of such Claim. The
Indemnifying Party, in the defense of such
Claim, shall not consent to the entry of any
judgment or enter into any settlement (except
with the written consent of the Indemnitee)
which does not include as an unconditional term
thereof the giving by the claimant to the
Indemnitee against whom such Claim is made, a
release from all liability in respect of such
Claim (which release shall exclude only any
obligations incurred in connection with any
such settlement). If the Claim is one that
cannot by its nature be defended solely by the
Indemnifying Party, then the Indemnitee shall
make available, at the Indemnifying Party's
expense, all information and assistance that
the Indemnifying Party reasonably may request.
10.05 Payment of Permitted Indemnification
Claims. The Indemnifying Party shall pay to the
Indemnitee the entire amount of all Claims
associated with any Permitted Indemnification
Claim within ten (10) days after the amount of
such Claim is determined.
10.06 Setoffs. If the Indemnifying Party
fails to make timely payment and satisfaction
of any amounts due to The Indemnitee, then in
any such case, the Indemnitee shall be entitled
to, in addition to any other remedy available
to it under this Agreement, at law or
otherwise, set-off any such amount due to the
Indemnifying Party against any amounts owing
hereunder or thereunder, or in respect to any
payments due, by an Indemnitee.
10.07 Expenses. All fees and expenses
incurred by the parties in connection with this
Agreement and the transaction contemplated
hereby shall be borne by the party incurring
such fees and expenses, including, without
limitation, all fees of counsel, actuaries,
appraisers and accountants, with the exception
that all fees and expenses related to the
formation of the LLC shall be borne by PICO.
Any sales taxes due upon the transactions
contemplated by this Agreement shall be borne
by PICO.
10.08 Remedies: Waiver. To the maximum extent
permitted by law, all rights and remedies
existing under this Agreement are cumulative to
and not exclusive of, any rights or remedies
otherwise
available under applicable law. No failure on
the part of any party to exercise or delay in
exercising any right hereunder shall be deemed
a waiver thereof, nor shall any single or
partial exercise preclude any further or other
exercise of such or any other right.
10.09 Arbitration. All claims, disputes,
controversies and other matters in question
arising out of or relating to this Agreement
including, without limitation, the
interpretation or breach thereof, shall be
decided by arbitration in the city, county and
State of New York in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association in force at the time
the demand is filed, unless the parties
mutually agree otherwise. Such arbitration
shall be conducted in front of one or more
arbitrators who are qualified and experienced
in technical issues and who are acceptable to
the Parties hereto. In the event that either
Party elects, arbitration under this paragraph
shall be conducted in accordance with the
Expedited Procedures under such Commercial
arbitration Rules of the American arbitration
Association. it is further agreed that the
arbitrator(s) shall be empowered with
injunctive-type powers so that the
arbitrator(s) may order (in the final
arbitration award) injunctive-type relief as
may be necessary to effect justice in the case.
Each of the Parties shall bear its or his own
legal and other professional cost and expense,
except that the Arbitration fees shall be
shared equally by and among the Parties.
Should it be determined by the Arbitrator(s)
that any Party or Parties has not proceeded in
good faith, then in such case such Party or
Parties shall bear the full amount of such
Arbitration fees. Any award rendered by the
Arbitrator(s) shall be final and it is agreed
that judgment may be entered upon it in
accordance with the Federal Arbitration Act in
any court having competent jurisdiction.
10.10 Knowledge Convention. Whenever any
statement herein or in any schedule, exhibit,
certificate or other document delivered to any
party pursuant to this Agreement is made to
the knowledge or to the best knowledge or
words of similar intent or effect of any party
or its representative, such party shall make
such statement only after making reasonable
inquiry of all relevant officers, employees or
agents of such Person, and each such statement
shall be deemed to include a representation
that such inquiry has been made.
10.11 Notices. All notices, requests, demands
and other communications required or permitted
hereunder shall be in writing and sent by
facsimile and confirmed by regular, certified
or registered mail, return receipt requested,
or by hand delivery or by nationally recognized
air courier, postage prepaid and shall be
deemed to have been duly given if delivered, by
confirmed, facsimile or by hand or mailed,
certified or registered mail with postage
prepaid:
(a)if to OPT, to:
OPT Industries, Inc.
300 Red School Lane
Phillipsburg, NJ 08865
Attention: Chris Hughes,
President
Telecopy No. (908) 454-3742
with a copy to:
Polsinelli, White, Vardeman
& Shalton, P.C.
7500 College Blvd., Suite 750
Overland Park, KS 66210
Attention: Stanley N. Woodworth
Telecopy No.(913) 451-8788
(b)if to Torotel, to:
Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attention: Chris Hughes,
President
Telecopy No. (816) 763-2278
or to such other Person or address as OPT shall
furnish to PICO in writing;
(c)if to PICO, to:
PICO Electronics, Inc.
143 Sparks Avenue
Pelham, New York 10803
Attention: Joseph N. Sweeney,
President
Telecopy No. 914-738-8225
with a copy to:
Redmond, Pollio & Pittoni pc
1461 Franklin Avenue
Garden City, New York 11530
Attention: Ronald G. Caso,
Esq.
Telecopy No. (516) 248-2348
or to such other Person or address as PICO
shall furnish to OPT and Torotel in writing.
All notices, (a) when mailed as aforesaid,
shall be effective the earlier of (i) five
Business Days after being deposited in the
mails, and (ii) actual receipt, as indicated by
the return receipt; (b) when sent via facsimile
between 9:00 am and 5:00 pm on a business day,
shall be effective that day, and if sent after
5:00 pm on any day, shall be effective the next
business day; and (c) if given by personal
delivery or overnight courier, shall be
effective on the business day it is delivered
to the appropriate address.
No notice given to any party hereto shall be
effective unless notice given simultaneously to
such party's counsel.
10.12 Assignment. This Agreement and all of
the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto, but
neither this Agreement nor any of the rights,
interests or obligations hereunder shall be
assigned by any of the parties hereto without
the prior written consent of the other party or
parties; provided, however, that PICO may
assign its rights hereunder to an Affiliate of
PICO if, in PICO' sole discretion, such
assignment is in the financial interests of
PICO or any Affiliate of PICO; and provided
further that any such assignment by PICO shall
not increase any cost (including fees and
attorney's fees) to OPT and PICO shall still
remain liable for its obligations hereunder.
10.13 Publicity. Neither OPT, Torotel nor
PICO shall make or issue, or cause to be made
or issued, any announcement or written
statement for publication concerning this
Agreement or the transactions contemplated
hereby for dissemination to the general public
without the prior consent of the other party.
This provision shall not apply, however, to any
announcement or written statement required to
be made by law or the regulations of any
federal or state governmental agency, except
that the party required to make such
announcement shall, whenever practicable,
consult with the other party concerning the
timing and content of such announcement before
such announcement is made.
10.14 Governing Law. This Agreement and the
legal relations among the parties hereto shall
be governed by and construed in accordance with
the internal laws of New York.
10.15 Counterparts. This Agreement may be
executed simultaneously in two or more
counterparts, each of which shall be deemed an
original, but all of which together shall
constitute one and the same instrument.
Execution and delivery of this Agreement by
facsimile transmission shall be effective to
constitute valid execution and delivery.
10.16 Headings. The headings of the Sections
and Articles of this Agreement are inserted for
convenience only and shall not constitute a
part hereof or affect in any way the meaning or
interpretation of this Agreement.
10.17 Entire Agreement. This Agreement,
including the Exhibits and Schedules hereto,
the Disclosure Schedule and the other
agreements, documents and certificates
delivered pursuant to the terms hereof,
including the Confidentiality and Non-
Solicitation Agreement attached hereto, set
forth the entire agreement and understanding of
the parties hereto in respect of the subject
matter contained herein, and supersede all
prior or contemporaneous agreements, promises,
covenants, arrangements, communications,
representations or warranties, whether oral or
written, by any officer, employee or
representative of any party hereto. Each of the
Exhibits attached to this Agreement is
incorporated herein by this reference.
10.18 Third Parties. Except as specifically
set forth or referred to herein, nothing herein
expressed or implied is intended or shall be
construed to confer upon or give to any Person
other than the parties hereto and their
successors or assigns, any rights or remedies
under or by reason of this Agreement.
10.19 Further Assurances. Each of the parties
hereto agrees that from time to time, at the
request of any of the other parties hereto and
without further consideration, it shall execute
and deliver such other documents and take such
other action as such other party reasonably may
request in order to consummate more effectively
the transactions contemplated hereby without
increasing any obligation or liability of such
party.
IN WITNESS WHEREOF, the parties hereto have
caused this Purchase Agreement to be duly
executed as of August 13, 1998.
PICO ELECTRONICS, INC.
By: /s/ Joseph N. Sweeney
Joseph N. Sweeney, President
ELECTRONIC PRODUCTS LLC
By: /s/ Joseph N. Sweeney
Joseph N. Sweeney, President
OPT INDUSTRIES, INC.
By: /s/ Chris Hughes
Chris Hughes, President
TOROTEL, INC.
By: /s/ Chris Hughes
Chris Hughes, President
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK)
On the 13th day of August in the year 1998,
before me, the undersigned, a notary public in
and for said State, personally appeared Joseph
N. Sweeney, personally known to me or proved to
me on the basis of satisfactory evidence to be
the individual(s) whose name(s) is (are)
subscribed to the within instrument and
acknowledged to me that he/she/they executed
the same in his/her/their capacity(ies), and
that by his/her/their signature(s) on the
instrument, the individual(s), or the person on
behalf of which the individual(s) acted,
executed the instrument.
Notary Public
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK)
On the 13th day of August in the year 1998,
before me, the undersigned, a notary public in
and for said State, personally appeared Chris
Hughes, personally known to me or proved to me
on the basis of satisfactory evidence to be the
individual(s) whose name(s) is (are) subscribed
to the within instrument and acknowledged to me
that he/she/they executed the same in
his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument,
the individual(s), or the person on behalf of
which the individual(s) acted, executed the
instrument.
Notary Public
EXHIBIT A
ADDENDUM
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
The parties hereto agree that the AGREEMENT of
November 2, 1995 entered into between them in
settlement of the then pending action in the
U.S. District Court for the Southern District
of New York Entitled Pico Electronics, Inc. v.
Torotel Products Incorporated and Opt
Industries, Inc., 95 Civ. 3918 (CSH), shall be
modified in that the term set forth on page 2,
at line 4 of Article 1.1 is changed from a
period of five (5) years to a period of
twenty (20) years.
EXHIBIT B
LIST OF ASSETS
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
EXHIBIT C
ASSIGNMENT AND ASSUMPTION AGREEMENT
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
This Assignment and Assumption Agreement made
and entered into as of the 13th day of August,
1998 (this Agreement) by and between OPT
INDUSTRIES, INC., a corporation (hereinafter
referred to as Assignor) and ELECTRONIC
PRODUCTS LLC, a New York limited liability
company (hereinafter referred to as
Assignee), and PICO ELECTRONICS, INC., a New
York corporation (PICO).
WITNESSETH:
WHEREAS, Assignor has organized Assignee under
the New York Limited Liability Company Act and
in connection therewith Assignor has agreed to
assign, transfer and convey to Assignee the
Assets described on Exhibit A attached hereto
and made a part and Assignee and PICO have
agreed to assume the obligations described on
Exhibit B attached hereto and made a part
hereof (the Assumed Liabilities);
NOW, THEREFORE, the parties hereto agree as
follows:
1.In consideration of the transactions and
mutual covenants set forth in the Asset
Purchase Agreement, dated as of the date
hereof, by and among PICO Electronics, Inc.,
and OPT Industries, Inc. and Torotel, Inc. for
$10.00 and other good and valuable
consideration, the receipt and sufficiency of
which are hereby acknowledged, Assignor hereby
assigns, transfers and conveys to Assignee, its
successors and assigns, all of the right, title
and interest of Assignor in all the Assets
directly related to the DOT Product Line as set
forth in the Asset Purchase Agreement (the
Assets).
2.In consideration of the transactions and
mutual covenants set forth in the Asset
Purchase Agreement and for $10.00 and other
good and valuable consideration, the receipt
and sufficiency of which are hereby
acknowledged, Assignee and PICO, jointly and
severally hereby accept such assignment of the
Assets and assume and agree to observe,
discharge and perform in a timely manner all of
the Assumed Liabilities provided, however, that
Assignee and PICO shall have no obligation for
the payment of any accounts payable or claims
resulting from materials or other items
received or sold or services rendered on or
before the date hereof except as set forth in
Exhibit G.
3.Assignee and PICO shall not assume or pay any
debt, obligation or liability of any kind or
nature (fixed or contingent, known or unknown)
of Assignor, except for the Assumed Liabilities
as specifically provided in Section 2 of this
Agreement.
4.PICO, Assignor and Assignee hereby agree,
from and after the date hereof upon the request
of the other and without any payment thereon,
to take all actions and to execute such other
documents and instruments as each may
reasonably require in order to obtain the full
benefit of, and effectively carry out the terms
and conditions of, this Agreement and the
rights and obligations created hereunder to the
extent contemplated by the Asset Purchase
Agreement.
5.This Agreement shall be binding upon and
shall inure to the benefit of the parties
hereto and their respective successors and
permitted assigns and may not be amended in any
way except by an instrument in writing executed
by PICO, Assignor and Assignee.
6.The validity, interpretation and effect of
this Agreement shall be governed exclusively by
the laws of the State of New York, excluding
the internal conflicts of laws rules thereof.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year
first above written.
OPT INDUSTRIES, INC.
By:
Chris Hughes, President
ELECTRONIC PRODUCTS LLC
By:
Joseph N. Sweeney
PICO ELECTRONICS INC.
By:
Joseph N. Sweeney, President
EXHIBIT D
CONTRIBUTION TO CAPITAL STATEMENT
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
For good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, OPT INDUSTRIES, INC., a
corporation (OPT), hereby does assign,
transfer and convey and contribute to
ELECTRONIC PRODUCTS LLC (LLC), a New York
Limited Liability Company (the Company), the
Assets directly related to the DOT Product Line
including and all of the personal property
described on Schedule I annexed hereto and made
a part hereof. All such Assets being hereby
transferred and conveyed by OPT to the Company
are collectively referred to herein as the
Transferred Assets.
OPT represents to the Company that it is the
sole owner of all of the Transferred Assets,
and that there are no mortgages, liens,
conditional sales agreement or other
encumbrances of whatever nature or description
affecting the Transferred Assets, except as set
forth in that certain Asset Purchase Agreement,
dated as of August 13, 1998 (the Asset
Purchase Agreement), by and among PICO
Electronics., OPT Industries, Inc. and Torotel,
Inc. (Torotel).
OPT hereby covenants that, from time to time
after delivery of this Document, at the request
of the Company and without further
consideration, OPT will do, execute,
acknowledge and deliver, or will cause to be
done, executed, acknowledged and delivered, all
and every such additional documents and acts as
reasonably may be required to more effectively
convey, transfer to and vest in the Company
title in and to the Transferred Assets to the
extent contemplated by the Asset Purchase
Agreement. OPT makes these representations for
the express purpose and with the intent of
inducing the Company to accept the Transferred
Assets and assume the disclosed liabilities
relating thereto, knowing full well that the
Company will rely upon these representations in
assuming the related disclosed liabilities.IN
WITNESS WHEREOF, the undersigned has caused
this Contribution To Capital Document dated as
of September ____, 1998.
OPT INDUSTRIES, INC.
By:_______________________________
TOROTEL, INC.
By:_______________________________
ELECTRONIC PRODUCTS LLC
By:_______________________________
EXHIBIT E
OPERATING AGREEMENT
(Attached to and forming a part of the Asset
Purchase Agreement dated as of August 13, 1998)
This Operating Agreement (this Agreement) of
Electronic Products LLC, pursuant to an Asset
Purchase Agreement by, between and among PICO
Electronics, Inc., OPT Industries, Inc. and
Torotel, Inc. dated as of August 13, 1998 (the
Purchase Agreement), is executed by OPT
Industries, Inc. as the sole member of LLC (the
Member).
The Member hereby forms a limited liability
company pursuant to and in accordance with the
Limited Liability Company Act of the State of
New York, as amended from time to time (the
LLCA), subject to the terms and conditions
set forth in this Agreement, and in
consideration of the foregoing and for other
good and valuable consideration, the Member
hereby agrees as follows:
1. Name. The name of the limited liability
company formed hereby is Electronic Products
LLC (the Company) and, for that purpose,
Articles of Organization have been prepared,
executed and filed with the New York Department
of State on August ___, 1998.
2. Term. The term of the Company shall
continue until the occurrence of an event of
dissolution set forth in Section 701 of the
LLCA, unless the Member elects to continue the
Company, or unless dissolved before such date
in accordance with the LLCA.
3. Purpose. The Company is formed for the
purpose of engaging in any lawful act or
activity for which limited liability companies
may be formed under the LLCA and engaging in
any and all activities necessary or incidental
to the foregoing.
4. Members. The name, present mailing
address, taxpayer identification number and the
percentage interest of the Member are as
follows:
Name and Taxpayer Identification
NumberAddressPercentage InterestOPT Industries,
Inc.100%
5. Powers. The business and affairs of the
Company shall be managed by the Member or its
assigns. The Member or its assigns shall have
the power to do any and all acts necessary or
convenient to or for the furtherance of the
purposes described herein, including all
powers, statutory or otherwise, possessed by
members under the LLCA.
6. Capital Contributions. The Member has
contributed to the Company the Assets as
defined in the Purchase Agreement.
7. Additional Contribution.The Member is not
required to make any additional capital
contribution to the Company.
8. Allocation of Profits and Losses. The
Company's profits and losses shall be allocated
to the Member or its assigns.
9. Distributions. Distributions shall be made
to the Member or its assigns at the times and
in the aggregate amounts determined by the
Member or its assigns.
10. Liquidation and Dissolution. If the
Company is liquidated, the assets of the
Company shall be distributed to the Member or
its assigns.
11. Transfers. The Member may transfer, sell
or assign in whole or in part its limited
liability company interest.
12. Withdrawal of a Member. The Member may
withdraw from the Company in accordance with
the LLCA.
13. Admission of Additional Members.Except as
otherwise permitted under Paragraph 11,
additional members of the Company may only be
admitted to the Company with the consent of the
Member.
14. Liability of Members. The Member shall
not have any liability for the obligations or
liabilities of the Company except to the extent
required in the LLCA.
15. Exculpation of Managers. A manager shall
not be liable for any breach of duty in such
capacity, except that if a judgment or other
final adjudication adverse to him establishes
that his acts or omissions were in bad faith or
involved intentional misconduct or a knowing
violation of law or that he personally gained
in fact a financial profit or other advantage
to which he was not legally entitled or that
with respect to a distribution to the Member
his acts were not performed in accordance with
the LLCA. As of the execution of this
Agreement, the Member shall participate in the
management of the Company.
16. Governing Law. This Agreement shall be
governed by, and construed under, the laws of
the State of New York, all rights and remedies
being governed by said laws.
IN WITNESS WHEREOF, the undersigned, intending
to be legally bound hereby, have duly executed
this Agreement as of the ___ day of August,
1998.
OPT INDUSTRIES, INC.
By:_________________________________
Chris Hughes, President
EXHIBIT F
RESTRICTIVE AGREEMENT
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
This Restrictive Agreement (the Agreement) is
made and entered into as of the ____ August,
1998 by, among and between:
PICO ELECTRONICS, INC., a corporation (PICO),
ELECTRONIC PRODUCTS, LLC, a limited liability
company (LLC) each with an office at 143
Sparks Avenue, Pelham, New York 10803; and
OPT INDUSTRIES, INC., a corporation with an
office at 300 Red School Lane, Phillipsburg,
New Jersey 08865;
TOROTEL, INC., a corporation with an office at
13402 South 71 Highway, Grandview, Missouri
64030.
RECITALS
WHEREAS, OPT and Torotel, each have extensive
and valuable know how and experience in the
design, manufacture and sale of electronic
products including without limitation the DOT
Product Line of OPT; and
WHEREAS, through a series of transactions the
LLC, and through ownership of the LLC, PICO now
owns and operates the DOT Product Line
previously owned and operated by OPT and
Torotel; and
WHEREAS, LLC and PICO desire to enter into a
Restrictive Agreement with OPT and Torotel so
that LLC and PICO may engage in the DOT Product
Line without competition from OPT and Torotel;
NOW THEREFORE, as an inducement for LLC and
PICO to enter in to this transaction and in
consideration of the recitals and of the
representations, warranties, covenants and
agreements contained and intending to be
legally bound.
ARTICLE I
RESTRICTIVE COVENANT
1.1 OPT and Torotel each agree that:
(a) neither it nor any related entity shall
produce any product of the DOT Product Line of
OPT and/or Torotel sold to PICO via PICO's
purchase of the LLC, (said product lines being
set forth on pages A2366, A2367, A1278 and
A1358 of the 1998 EEM catalog, pages A2478
through A2493, inclusive of the 1996 EEM
catalog, pages 5 and 12 through 16, inclusive
of OPT's 1997 product catalog and pages 6
through 12, inclusive of OPT's 1988 product
catalog, said pages being attached hereto
collectively as Exhibit A) nor shall OPT and/or
Torotel nor any related entity produce any
product that is the same electrically and
substantially the same mechanically so as to be
interchangeable with any product of the DOT
Product Line sold to PICO;
(b)(i) neither it nor any related entity shall
advertise, knowingly market or promote any
product as being substantially mechanically or
electrically interchangeable with, or as being
an acceptable replacement for, or being the
same as any product of the DOT Product Line
sold to PICO,
(ii) it will send a letter to each of its
customers who purchased, within the year
preceding the date of closing of the sale of
the LLC to PICO, any product of the DOT Product
Line of OPT and/or Torotel sold to PICO, such
letter to be in the form of the draft letter
attached hereto as Exhibit B and to be sent by
no later than the day following the closing;
(iii) it will refer to PICO, for a period of
thirty six (36) months following the date of
the public announcement of the execution of the
Asset Purchase Agreement , any inquiry (whether
written or oral) regarding any product of the
DOT Product Line or OPT and/or Torotel sold to
PICO; and
(c) neither it nor any related entity shall re-
establish for any of its present or future
products any designation that is the same as of
confusingly similar with the designations used
to identify the products of the DOT Product
Line sold to PICO as set forth attached hereto
as Exhibit A.
For illustrative example (but not to limit the
scope of this provision) OPT and Torotel and
any related entity are precluded by this
covenant:
(A) from producing any miniaturized power
inductor with axial leads to be interchangeable
with any inductor of the LL series of
inductors;
(B) from advertising, marketing or promoting
any power inductor that it now produces or it
may produce in the future as being
substantially mechanically and electrically
interchangeable with or an acceptable
replacement for any inductor of the LL series
of inductors. That is, by this section,
Torotel is precluded from producing, in the
future any inductor set forth on page A1358 of
the 1998 EEM catalog; and.
(C) from using on any present or future product
line any of the following designations (which
are believed to be all of the designations used
to identify the product lines set forth in the
pages comprising Exhibit A attached hereto):
DO-T, DI-T, BIT LL, CLL, TOP, PIP, PIL, STB,
MTB, ATC, ATE, STE, ATF, STF, ATG, STG ATH,
ATJ, ATB, STH, STJ, TSM and 28000 or any
designation confusingly similar with the
preceding designations (with or without any
associated suffix or prefix).
For illustrative example, OPT and Torotel and
any related entity are NOT precluded by this
covenant:
(D) from producing a product with the same or
similar electrical performance, but
substantially different mechanical
configuration (as compared to the products of
the DOT Product Line sold to PICO) as
illustrated by any one or all of the products
shown on the RST/RSI series data sheet in
Exhibit C;
(E) from advertising, marketing or promoting a
product with the same or similar electrical
performance, but substantially different
mechanical configuration (as compared to the
products of the DOT Product Line sold to PICO)
as illustrated by any one or all of the
products shown on the RST/RSI series data sheet
in Exhibit C.
In the event that the provisions of this
Restrictive Agreement should ever be deemed to
exceed the time, geographic, product or other
limitations permitted by applicable law in any
jurisdiction, then such provisions shall be
deemed reformed in any such jurisdiction to the
maximum time, geographic, product or other
limitations permitted by the applicable law.
OPT and Torotel each specifically acknowledges
and agrees that the foregoing restrictions are
reasonable and necessary to protect the
legitimate interests of LLC, that the present
owner of the LLC, PICO would not have entered
into an Asset Purchase Agreement with OPT and
Torotel dated as of August 13, 1998, which
Asset Purchase Agreement provides for the
transfer of certain Assets of OPT and OPT's
Business to the LLC, followed by the sale of
OPT's interest in the LLC to PICO (the
Purchase Agreement) , in the absence of such
restrictions, that any violation of such
restrictions will result in irreparable injury
to PICO and the LLC, that the remedy at law for
any breach of the foregoing restrictions will
be inadequate, and that, in the event of any
such breach, LLC, in addition to any other
relief available to it, shall be entitled to
temporary and permanent injunctive relief
without the necessity of proving actual
damages. Upon a Breach hereof by OPT or Torotel
each further specifically acknowledges and
agrees to pay the reasonable legal fees and
expenses incurred by PICO or the LLC or any
successor assignee thereof in enforcing the
restrictions contained in this Section 1.1
1.2 Consideration of the Restrictive Covenant.
PICO, the owner of the LLC shall make the
payments required by the Asset Purchase
Agreement.
ARTICLE II
MISCELLANEOUS PROVISIONS
2.1 Assignment of Binding Effect. All of the
terms and provisions of this Agreement shall be
binding upon and inure to the benefit of and be
enforceable by the successors and assigns of
LLC, OPT and Torotel.
2.2 Waiver. Any terms or provision of this
Agreement may be waived at any time by the
party or parties entitled to the benefit
thereof by a written instrument duly executed
by such party or parties.
2.3 Notices. Any notice, request, demand,
waiver, consent, approval or other
communication which is required or permitted
hereunder shall be in writing and shall be
deemed given only if delivered personally or
sent by telegram or by fax or by registered or
certified mail, postage, prepaid, as follows:
If to the LLC to:
Electronic Products LLC
143 Sparks Avenue
Pelham, New York 10803
Attention:Joseph N. Sweeney,
President
With a required copy to:
Redmond, Pollio & Pittoni pc
1461 Franklin Avenue
Garden City, New York 11530
Attention:Ronald G. Caso,
Esq.
Telecopy No. 516-248-2348
If to OPT after closing, to:
OPT Industries, Inc.
300 Red School Lane
Phillipsburg, New Jersey 08865
Attention:
If to Torotel to:
Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attention:
or to such other address as the addressee may
have specified in a notice duly given to the
sender as provided herein. Such notice,
request, demand, waiver, consent, approval or
other communication will be deemed to have been
given as of the date so delivered, telegraphed,
faxed or mailed.
2.4 New York Law to Govern. This Agreement
shall be governed by and interpreted and
enforced in accordance with the laws of the
State of New York.
2.5 Arbitration. All claims, disputes,
controversies and other matters in question
arising out of or relating to this Agreement
including, without limitation, the
interpretation or breach thereof, shall be
decided by arbitration in the city, county and
State of New York in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association in force at the time
the demand is filed, unless the parties
mutually agree otherwise. Such arbitration
shall be conducted in front of one or more
arbitrators who are qualified and experienced
in technical issues and who are acceptable to
the Parties hereto. In the event that either
Party elects, arbitration under this paragraph
shall be conducted in accordance with the
Expedited Procedures under such Commercial
arbitration Rules of the American Arbitration
Association. It is further agreed that the
arbitrator(s) shall be empowered with
injunctive-type powers so that the
arbitrator(s) may order (in the final
arbitration award) injunctive-type relief as
may be necessary to effect justice in the case.
Each of the Parties shall bear its or his own
legal and other professional cost and expense,
except that the Arbitration fees shall be
shared equally by and among the Parties.
Should it be determined by the Arbitrator(s)
that any Party or Parties has not proceeded in
good faith, then in such case such Party or
Parties shall bear the full amount of such
Arbitration fees. Any award rendered by the
Arbitrator(s) shall be final and it is agreed
that judgment may be entered upon it in
accordance with the Federal Arbitration Act in
any court having competent jurisdiction.
2.6 No Benefit to Others. The
representations, warranties, covenants and
agreements contained in the Agreement are for
the sole benefit of the parties hereto and
their heirs, administrators, legal
representatives, successors and assigns, and
they shall not be construed as conferring any
rights on any other persons other than to PICO.
2.7 Headings, Gender and Person. All
section headings contained in this Agreement
are for convenience of reference only, do not
form a part of this Agreement and shall not
affect in any way the meaning or interpretation
of this Agreement. Words used herein,
regardless of the number and gender
specifically used, shall be deemed and
construed to include any other number, singular
or plural, and any other gender, masculine,
feminine or neuter, as the context requires.
Any reference to a person herein shall
include an individual, firm, corporation,
partnership, trust, governmental authority or
body, association, unincorporated organization
or any other entity.
2.8 Severability. Any provision of this
Agreement which is invalid or unenforceable in
any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability
without invalidating or rendering unenforceable
the remaining provision hereof, and any such
invalidity or unenforceability in any
jurisdiction shall not be invalidate or render
unenforceable such provision in any other
jurisdiction.
2.9 Counterparts. This Agreement may be
executed in any number of counterparts and any
parties hereto may execute any such
counterpart, each of which when executed and
delivered shall be deemed to be an original and
all of which counterparts taken together shall
constitute but one and the same instrument.
This Agreement shall become binding when one or
more counterparts taken together shall have
been executed and delivered by the parties. It
shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
IN WITNESS WHEREOF, the parties have duly
executed this Agreement dated as of August
____, 1998.
ELECTRONIC PRODUCTS LLC
By:
Joseph N. Sweeney, President
PICO ELECTRONICS, INC.
By:
Joseph N. Sweeney, President
OPT INDUSTRIES, INC.
By:
Chris Hughes, President
TOROTEL, INC.
By:
Chris Hughes, President
EXHIBIT G
ASSUMED LIABILITIES
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
The Assumed Liabilities of PICO shall be
limited to the following at the date of
Closing.
1. All open purchase orders of OPT relating to
the DOT Product Line in an aggregate amount not
to exceed $99,000.00;
2. The obligation of OPT to repurchase DOT
Product Line inventory from Peerless Radio
Corporation (PEERLESS) upon termination of
the Distributor Agreement dated
__________________ in an aggregate amount not
to exceed $156,000.00. A list of the inventory
products currently held by Peerless and subject
to the repurchase obligation is attached hereto
as Schedule A.;
3. OPT and Torotel will use its best efforts
to secure the consent of customers to an
Assignment or Sub-Contract to PICO for backlog
orders for DOT Product Line products. PICO
agrees to accept such assignment of a backlog
order at the same price specified in the
backlog order. If the customer does not consent
to the assignment, then PICO shall execute a
contract with such customer for the balance of
the backlog order at the same price specified
in the existing contract between OPT and such
customer. If such consent is not secured and
such customer does not contract directly with
PICO for such backlog order then PICO will
undertake to make such DOT Product Line
products available to OPT at the same price
specified in the backlog orders. At the time
of delivery of such product to OPT, OPT shall
pay to PICO the total price for the product in
cash or certified check.
4. All sales commissions to be due on backlog
orders for DOT Product Line products in an
aggregate amount not to exceed 4.0 % of the
total amount of such backlog. The obligation
of PICO shall be limited only to those backlog
orders that are filled and satisfied by PICO
and for which PICO has received payment. PICO
shall pay any such sales commissions owed by it
thirty (30) days after PICO has received
payment.
5. To the extent that OPT is required to
provide replacement DOT Product Line products
in satisfaction of replacement warranties on
prior orders for DOT Product Line product
filled by OPT, for the twelve (12) month period
following the Closing Date PICO shall provide
to OPT such replacement product at the greater
of the price charged by OPT to the customer for
the original order or the price charged by OPT
to the customer for the replacement product.
At the time of delivery of such product to OPT,
OPT shall pay to PICO the total price for the
product in cash or certified check.
EXHIBIT H
DISCLOSURE SCHEDULE
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
EXHIBIT I
ALLOCATION OF PURCHASE PRICE
Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
EXHIBIT J1
FORM OF LEGAL OPINION OF POLSINELLI,
WHITE, VARDEMAN & SHALTON
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
EXHIBIT J2
LEGAL OPINION OF REDMOND, POLLIO
& PITTONI, PC
COUNSEL TO PICO ELECTRONICS, INC.
AND ELECTRONIC PRODUCTS LLC
(Attached to and forming a part of the Asset
PurchaseAgreement dated as of August 13, 1998)
EXHIBIT K
Certificate of Formation - Electronic Products
(Attached to and forming a part of the Asset
Purchase Agreement dated as of August 13, 1998)
EXHIBIT L
Sub-Contract Manufacturing and
Non-Compete Agreement
(Attached to and forming a part of the Asset
Purchase Agreement dated as of August 13, 1998)
EXHIBIT M
Non-Disclosure and Confidentiality
Agreement
(Attached to and forming a part of the Asset
Purchase Agreement dated as of August 13, 1998)
