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):
April 19, 1999
TOROTEL, INC.
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction of incorporation)
1-8125 44-0610086
(Commission File Number) (IRS Employer Identification No.)
13402 South 71 Highway, Grandview, Missouri 64030
(Address of principal executive of offices) (Zip Code)
Registrants telephone number,
including area code (816) 761-6314
N/A
(Former name or former address,
if changed since last report)
Item 2. Disposition of Assets.
On April 19, 1999, Torotel, Inc. sold substantially all of
the assets of its wholly owned subsidiary, OPT Industries,
Inc., to an investor group led by Peter B. Caloyeras, for
approximately $2.7 million.
The assets sold included the land, buildings, equipment,
inventories, order backlog and intellectual property, such
as company name, patents, and product designs. The
Caloyeras investor group presently controls and operates
other companies in the magnetic component and power
conversion field. The OPT products will continue to be
manufactured by the Caloyeras Group of companies, including
facilities in New Jersey and California.
Mr. Caloyeras is the beneficial owner, as defined in Rule
13d-3(a) under the Securities Exchange Act of 1934, of
198,900 shares of Torotel Common Stock. Mr. Caloyeras also
served as Torotels Chief Executive Officer for a short time
in February and March, 1999, until such time the
contemplated merger with Electronika, Inc. was terminated.
Item 5. Other Events.
The proceeds from the asset sale were used to pay most of
Torotels bank borrowings with Phillipsburg National Bank &
Trust Company. With the sale completed, Torotel is no
longer in default with the bank.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
I News Release dated April 26, 1999
II Asset Purchase Agreement dated April 19, 1999
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.
Date: April 27, 1999 By: /s/ H. James Serrone
H. James Serrone
Vice President of
Finance and Chief
Financial Officer
EXHIBIT INDEX
Exhibit Description
I News Release dated April 26, 1999
II Asset Purchase Agreement dated April 19, 1999
Exhibit I
NEWS RELEASE
FOR IMMEDIATE RELEASE
MONDAY, APRIL 26, 1999
TOROTEL SELLS OPT ASSETS TO CALOYERAS GROUP
KANSAS CITY, MO, April 26 Torotel, Inc. (OTC:TTLO)
announced that it has sold substantially all of the assets
of its wholly owned subsidiary, OPT Industries, Inc., to an
investor group led by Peter B. Caloyeras, for approximately
$2.7 million.
The assets sold included the land, buildings, equipment,
inventories, order backlog and intellectual property, such
as company name, patents, and product designs. The
Caloyeras investor group presently controls and operates
other companies in the magnetic component and power
conversion field. The OPT products will continue to be
manufactured by the Caloyeras Group of companies, including
facilities in New Jersey and California.
The proceeds from the sale were used to pay most of Torotels
bank borrowings with Phillipsburg National Bank & Trust
Company. With the sale completed, Torotel is no longer in
default with the bank.
Torotel, Inc. specializes in the design and manufacture of a
broad range of precision magnetic components, consisting of
transformers, inductors, chokes and toroidal coils, which
are used in commercial, industrial and military electronics
to modify and control electrical voltages and currents.
Torotels products are sold to original equipment
manufacturers for use in computers, telecommunications
systems, digital control devices, conventional missile
guidance systems, and avionics equipment.
Exhibit II
ASSET PURCHASE AGREEMENT
among
SHARED INFORMATION GROUP MANAGEMENT ASSOCIATES, LLC
as Buyer
OPT INDUSTRIES, INC.
as Seller
and
TOROTEL, INC.
as Stockholder
APRIL 19, 1999
TABLE OF CONTENTS
Page
1. Purchase and Sale of Assets
1.1 Transferred Assets
1.2 Excluded Assets
2. Purchase Price and Payment
2.1 Aggregate Consideration
2.2 Payment
3. Noncompetition Agreements
4. Assumption of Liabilities
4.1 Obligations Assumed
4.2 Obligations Not Assumed
4.3 No Obligation to Third Parties
5. Business Employees
6. Representations and Warranties of Seller and Stockholder
6.1 Organization and Good Standing
6.2 Authority
6.3 No Conflicts or Violations
6.4 Investment in Other Entities
6.5 Stockholder SEC Documents
6.6 Seller Financial Statements
6.7 Absence of Certain Changes
6.8 Contracts
6.9 Title to Transferred Assets
6.10 Real Property
6.11 Condition and Location of the Transferred Assets
6.12 Hazardous Substances
6.13 Intellectual Property
6.14 Absence of Undisclosed Liabilities
6.15 Legal Proceedings
6.16 Permits and Licenses; Compliance with Laws
6.17 Taxes
6.18 Insurance
6.19 Inventories
6.20 Interests in Competitors and Suppliers
6.21 Labor Relations
6.22 Personnel
6.23 Employee Benefit Plans
6.24 Suppliers and Customers
6.25 All Rights Assignable
6.26 Brokerage and Finder s Fees
6.27 Material Misstatements or Omissions
7. Representations and Warranties of Buyer
7.1 Organization and Good Standing
7.2 Authority
7.3 No Conflicts or Violations
7.4 Litigation
7.5 Brokerage and Finder s Fees
8. Conditions Precedent to Obligations of Buyer
8.1 Representations and Warranties of Seller and
Stockholder
8.2 Consents
8.3 Adverse Changes
8.4 Noncompetition Agreements
8.5 Financing
8.6 Liens and Indebtedness
8.7 Title Insurance
8.8 Business Closure
8.9 Occupancy Permit
8.10 Other Legal matters
9. Conditions Precedent to Obligations of Seller and
Stockholder
9.1 Representations and Warranties of Buyer
9.2 Consents
9.3 Financing
9.4 Other Legal Matters
10. Closing
10.1 Time and Place
10.2 Delivery of Documentation by Buyer
10.3 Delivery of Documents by Seller and Stockholder
10.4 Other Documents and Actions
11. Additional Agreements of the Parties
11.1 Further Documentation or Action
11.2 Cooperation
11.3 Access to Records
11.4 Confidential Information
11.5 Name Change
11.5 Computer Services
12. Survival of Representations
13. Indemnification
13.1 By Seller and Stockholder
13.2 By Buyer
13.3 Indemnification Procedures
13.4 Limitations of Liability
13.5 Affiliates
13.6 Interest
14. Notices
15. Amendment and Waiver
16. Assignment
17. No Third Party Beneficiary Rights
18. Entire Understanding
19. Expenses
20. Remedies Not Exclusive
21. Captions
22. Severability
23. Definitions
24. Attorneys Fees
25. Choice of Law
26. Number and Gender
27. Counterparts; Facsimile Signatures
List of Schedules
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the Agreement) is made and
entered into as of April 19, 1999, by and among SHARED
INFORMATION GROUP MANAGEMENT ASSOCIATES, LLC, a California
limited liability company (Buyer), OPT INDUSTRIES, INC., a
New Jersey corporation (Seller), and TOROTEL, INC., a
Missouri corporation (Stockholder), with reference to the
following facts:
A. Seller engages in the manufacture and sale of electronic
components, including transformers, conductors, power
supplies, inductive devices and filters, primarily to
contractors in the defense industry (the Business).
B. Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, substantially all of the assets of
Seller used in the operation of the Business, in each case
upon the terms and subject to the conditions contained
herein.
C. Stockholder owns all of the outstanding capital stock of
Seller and is entering into this Agreement to give Buyer,
among other things, the benefit of certain representations,
warranties and covenants upon which Buyer is relying in
consummating the transactions described herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and in reliance upon the
mutual representations and warranties herein contained, the
parties agree as follows:
1. Purchase and Sale of Assets
1.1 Transferred Assets. For the consideration herein
provided, and on the terms and subject to the conditions
hereinafter set forth, at the Closing (as defined in
paragraph 10), Seller shall sell, transfer, convey and
assign to Buyer, and Buyer shall purchase from Seller, all
right, title and interest of Seller in and to all of the
business, properties and assets of Seller relating to the
Business, excluding only the Excluded Assets (as defined in
paragraph 1.2). The business, properties and assets to be
so transferred are hereinafter referred to as the
Transferred Assets. Unless otherwise stated in paragraph
1.2, the Transferred Assets include, without limitation, the
following:
(a) All of Sellers interest in the real property described
on Schedule 1.1(a)(1) (the Real Property) and the Real
Property improvements (whether owned or leased) thereon;
(b) All furniture, fixtures, equipment (including office
and computer equipment), tools, tooling, trucks and vans (if
any), and other tangible personal property owned or leased
by Seller and used in connection with the Business,
including, without limitation, the furniture, fixtures,
equipment and other tangible personal property described on
Schedule 1.1(b) (the Equipment);
(c) The raw materials, work-in-process, finished goods and
supplies inventory of Seller that are held for sale or use
in connection with the Business and that are existing as of
the Closing Date (as defined in paragraph 10) (the
Inventory);
(d) All interest of Seller in and to the contracts and open
orders set forth on Schedule 1.1(d), to the extent assumed
by Buyer at the Closing, including the capitalized leases
set forth on Schedule 1.1(d) (the Capitalized Leases);
(e) To the extent lawfully transferable, all permits,
licenses, certificates, authorizations, approvals and other
rights granted by any Governmental Entity (as defined in
paragraph 23) to Seller to the extent used or held for use
by Seller in connection with the Business, as distinct from
general corporate or other similar authorizations not
specific to the Business (such as qualifications to transact
business);
(f) All advance payments, prepayments, prepaid expenses,
deposits and the like which are recorded on the books and
records of Seller, or in which Seller otherwise has an
interest (to the extent of such interest), as of the Closing
Date, which relate solely to the Business and which are
useable by Buyer after the Closing, the categories and
amounts of which are set forth on Schedule 1.1(f) as of the
date specified thereon (the Prepaids);
(g) All of Sellers right, title and interest in and to the
name OPT Industries, and any variations thereof ;
(h) All of Sellers right, title and interest in and to any
tradenames, service marks, trademarks, patents, patent
applications, Trade Secrets (as defined in paragraph 23),
secret processes, confidential information, know-how, show-
how, inventions, designs, improvements, or any other
intellectual property rights, including customer and
supplier lists, and all files, drawings, specifications,
bills of material, material specifications, memoranda,
notes, notebooks, documents, papers and the like (including,
but not limited to, those contained in computerized storage
media) created, written, developed, made, used by Seller in
the Business (the Intellectual Property);
(i) All goodwill and going concern value of the Business;
(j) All of Sellers interest under any warranties covering
any machinery, equipment or other items included in the
Transferred Assets, and any other claims, causes of action
or rights of recovery that relate to the Business or any
Transferred Assets; and
(k) All books and records, agreements, documents, papers,
correspondence and files of whatever nature and wherever
located that relate to the Business or the Transferred
Assets (whether recorded on paper, computer disks, computer
tapes or other media), including, without limitation, sales
records, customer data, supplier data and policy and
procedure manuals now or at any time used in the Business
and all telephone numbers and telephone listings used by
Seller in connection with the Business (collectively, the
Business Records).
Buyer and Seller acknowledge and agree that it is their
intent that the Transferred Assets shall include all of the
right, title and interest of Seller in and to any personal
property owned by Seller (other than the Excluded Assets)
that is currently being used or held for use in connection
with the operation of the Business. If, after the Closing
Date, Seller or Buyer discover that the assets transferred
to Buyer at Closing did not include any personal property
interests that the parties intended to be a part of the
Transferred Assets, Seller and Buyer agree to execute such
additional conveyances or other instruments, and take such
other action, as may be necessary to cause such personal
property interests to be conveyed to Buyer.
1.2 Excluded Assets . Notwithstanding any other provision
of this Agreement, the following assets (the Excluded
Assets) shall be excluded from the Transferred Assets:
(a) Sellers rights under this Agreement, including the
consideration to be received hereunder;
(b) All accounts receivable, billed and unbilled, relating
to the Business prior to the Closing Date, together with
Sellers right, title and interest in and to all chooses in
action and negotiable instruments related thereto (each, a
Receivable); and
(c) All cash, cash items, bank accounts and deposits
therein, and records with respect thereto, held by Seller
with respect to the Business as of the Closing.
2. Purchase Price and Payment.
2.1 Aggregate Consideration. The aggregate consideration
to be paid by Buyer (the Purchase Price) for the Transferred
Assets shall be Two Million Seven Hundred Thousand Dollars
($2,700,000).
2.2 Payment. At the Closing, the Purchase Price shall be
paid as follows:
(a) By either (i) the wire transfer of immediately
available funds to one or more accounts designated by Seller
in an amount equal to Two Million Two Hundred Thousand
Dollars ($2,200,000), or (ii) book entries made by
Phillipsburg National Bank & Trust Company (the Bank)
against amounts owing by Seller or Stockholder to Bank;
(b) By the delivery to Seller of the promissory note of
Buyer in the principal amount of [Four Hundred Forty-One
Thousand Five Hundred Forty-Five Dollars ($441,545)] and
substantially in the form of Schedule 2.2(b)(1) the
Purchase Note), with the Purchase Note to be secured by a
security interest in the inventory and accounts receivable
of Buyer pursuant to the terms of a Commercial Security
Agreement substantially in the form of Schedule 2.2(b)(2)
(the Security Agreement); and
(b) By the assumption of buyer of the Assumed Liabilities
(as defined in paragraph 4.1) by delivering to Seller an
assumption of the Assumed Liabilities in form and substance
reasonably satisfactory to counsel for Buyer and Seller (the
Assumption).
3. Noncompetition Agreements. On the Closing Date, as a
necessary incident of the sale and purchase of the
Transferred Assets, Seller and Stockholder will execute and
deliver a noncompetition agreement substantially in the form
of Schedule 3.1(a) and Schedule 3.1(b), respectively (the
Noncompetition Agreements). No additional consideration
shall be payable to either Seller or Stockholder in
connection with the execution and delivery of the
Noncompetition Agreements.
4. Assumption of Liabilities.
4.1 Obligations Assumed. Buyer shall assume, effective as
of the Closing and as part of the Purchase Price, and shall
pay, discharge and perform as and when due the obligations
and liabilities of Seller under the contracts and other
agreements included in the Transferred Assets, including the
Capitalized Leases, provided that each such contract or
other agreement has been specifically set forth on Schedule
1.1(d), to the extent such obligations and liabilities
pertain to or are to be performed during any period
commencing on or after the Closing Date (the Assumed
Liabilities). The assumption by Buyer of the Assumed
Liabilities shall not serve or be deemed to expand,
increase, or enlarge the rights or remedies of third parties
over those rights or remedies such third parties would have
had against Seller if Buyer had not acquired the Transferred
Assets, and nothing contained herein shall be deemed to
foreclose Buyer from contesting in good faith any
obligations, including the performance of duties, claimed by
a third party to exist in its favor.
4.2 Obligations Not Assumed. Except for the Assumed
Liabilities, Seller shall retain all liability for, and
neither Buyer nor any of its Affiliates shall assume or have
any obligation or liability with respect to, any obligations
or liabilities of Seller or the Business (all such
obligations and liabilities being herein referred to as the
Excluded Liabilities), including, without limitation, all
obligations and liabilities attributable to the following:
(a) Obligations or liabilities arising from the
performance, nonperformance or breach by Seller of any term,
provision or covenant of any contract, lease or other
agreement or obligation of Seller;
(b) Any indebtedness, liabilities or obligations, including
royalty obligations, of Seller which have been or may be,
from time to time, directly or indirectly, incurred by
Seller, including, without limitation, any negotiable
instruments evidencing the same, trade payables, accrued
expenses and all guaranties, debts, demands, monies,
liabilities and obligations owed or to become owing,
including interest, principal, costs and other charges, and
all claims, rights, causes of actions, judgments, decrees,
remedies, security interests or other obligations of any
kind whatsoever and howsoever arising, whether voluntary,
involuntary, absolute, contingent or by operation of law;
(c) Any and all obligations arising under law or contract
with respect to any Person (as defined in paragraph 23) in
connection with such Persons employment or engagement by
Seller, or in connection with Sellers termination of such
Persons employment or engagement with Seller at any time,
regardless of whether such obligations would not have arisen
had Buyer chosen to employ or engage any such Person
following the Closing, including, without limitation, any
and all claims for wrongful termination, retaliation,
discrimination or harassment, severance benefits, claims for
medical or other insurance coverages, retirement benefits or
any other benefits or obligations of any nature whatsoever
arising out of the employment or independent contractor
relationship between Seller and such Person;
(d) Any accrued or other liability for contributions or
payments in respect of service under any Plan (as defined in
paragraph 23), or any other liability to any Person or
Governmental Entity whatsoever arising out of, or in
connection with, any Plan;
(e) Any and all liabilities for the payment of workers
compensation or other disability benefits to any individual
in connection with his or her employment by Seller;
(f) The violation by Seller of any Legal Requirement (as
defined in paragraph 23) to which it is subject relating to
the ownership, use or operation of the Business or the
Transferred Assets;
(g) Obligations now existing or which hereafter may exist
by reason of, or in connection with, any alleged misfeasance
or malfeasance by Seller in the conduct of the Business,
including, without limitation, obligations for personal
injury, property damage and product liability claims,
whether or not any claim has been made or any litigation has
been instituted with respect thereto;
(h) Any liabilities or obligations based upon or arising
out of the environmental condition of the Transferred Assets
or the Real Property at the Closing (or any time prior
thereto) or the violation at any time prior to the Closing
of any Environmental Legal Requirements (as defined in
paragraph 23) relating to the ownership, use or operation of
the Business, the Transferred Assets or any property now or
previously owned or leased by Seller, including, without
limitation, liabilities or obligations arising out of the
presence of Hazardous Materials (as defined in paragraph 23)
on any such property;
(i) Liabilities of Seller or Stockholder incurred in
connection with or related to the transfer of the
Transferred Assets pursuant to this Agreement (including,
without limitation, any Taxes or Transfer Taxes (as such
terms are defined in paragraph 23) fees, costs or expenses
and any brokerage fee, finders fee or commission); and
(j) Any and all liabilities to accept returns of product or
to repair or replace product under applicable warranties, to
the extent such products were shipped by Seller on or before
the Closing Date.
4.3 No Obligation to Third Parties. The execution and
delivery of this Agreement shall not be deemed to confer any
rights upon any Person other than the parties hereto or to
obligate any of the parties hereto to any Person other than
the other parties hereto.
5. Business Employees. Schedule 5 is a listing of all
employees and independent contractors of Seller as of the
date of this Agreement (the Business Employees), including
all employees currently on a leave of absence or temporary
layoff status, date of hire and job title. Buyer shall be
given the opportunity to offer employment to any such
Business Employees in Buyers sole discretion, but shall be
under no obligation to offer employment to any Business
Employee. Seller will be responsible for all obligations
owed to the Business Employees to and including the Closing
Date, including, without limitation, salary, bonus,
vacation, severance, paid time off and sick pay, retirement
benefits and amounts owed under employee benefit plans, and
shall defend, indemnify and hold harmless Buyer and its
Affiliates from any liability with respect thereto. For a
period of five years after the Closing Date, neither Seller
nor any of its Affiliates will induce or influence (or
attempt to induce or influence) any of the Business
Employees that have entered into the employ of Buyer, or any
of its Affiliates, to terminate such employment.
6. Representations and Warranties of Seller and
Stockholder. With such exceptions as are set forth on the
referenced schedules to this Agreement, Seller and
Stockholder hereby jointly and severally represent and
warrant to Buyer as follows:
6.1 Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey, has full
corporate power and authority to carry on its business as
now conducted by it and is entitled to own or lease and
operate its properties and assets now owned or leased and
operated by it. Seller is qualified to do business only in
the State of New Jersey, and there is no other jurisdiction
in which the character and location of any of Sellers assets
or the nature of the business transacted by it or both
require qualification, except where the failure to be so
qualified would not have a material adverse effect on the
Transferred Assets or on the financial condition, results of
operations or business of Seller. The Business is conducted
directly by Seller, and no Affiliate of Seller has any
interest in any business, properties or assets which, if
they were owned by Seller, would be included in the
Transferred Assets or which otherwise are necessary or
useful for the conduct of the Business.
6.2 Authority. Seller has the full corporate power and
authority, and Stockholder has full legal capacity and
authority, to execute and deliver this Agreement, to perform
the obligations and covenants set forth in this Agreement
and to carry out the transactions contemplated hereby. The
execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby have
been duly authorized by Stockholder and the Board of
Directors of Seller, and no further corporate action is
necessary on the part of Seller to make this Agreement
binding upon Seller in accordance with its terms.
Stockholder owns all right, title and interest in and to all
of the outstanding capital stock of Seller, free and clear
of all Liens (as defined in paragraph 23). This Agreement
has been duly executed and delivered by Seller and
Stockholder and constitutes the valid and binding agreement
of Seller and Stockholder, enforceable against them in
accordance with its terms, subject to the Bankruptcy
Exception (as defined in paragraph 23).
6.3 No Conflicts or Violations. Except as set forth on
Schedule 6.3, neither the execution and delivery of this
Agreement by Seller and Stockholder nor the consummation by
Seller and Stockholder of the transactions contemplated
hereby will violate or conflict with, constitute a breach of
or default under, result in the loss of any material benefit
under, permit the acceleration of any obligation under or
result in the creation of a Lien under: (a) any term or
provision of the Articles of Incorporation or Bylaws of
Seller or Stockholder; (b) any judgment, decree or order of
any Governmental Entity or, to the best of Sellers
knowledge, any material agreement, contract or instrument to
which Seller or Stockholder is a party or by which either of
them or any of their properties is bound; or (c) any Legal
Requirement applicable to Seller or Stockholder. Except for
the consent of the New Jersey Department of Environmental
Protection, no consent, approval, order or authorization of,
or registration, declaration or filing with, any
governmental agency or regulatory authority is required with
respect to Seller or Stockholder in connection with the
execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
6.4 Investment in Other Entities. Seller does not have any
debt interest (other than trade accounts receivable) or
equity interest or right or option to acquire any debt or
equity interest in any other person, and Seller is not
engaged in any joint venture or partnership with any other
person.
6.5 Stockholder SEC Documents. Stockholder has heretofore
delivered to Buyer (a) its Form 10-KSB for the fiscal year
ended April 30, 1998 (the Form 10-KSB), as filed with the
Securities and Exchange Commission (the SEC) and (b) its
Forms 10-QSB for the fiscal quarters ended July 31, 1998,
October 31, 1998 and January 31, 1999 (the Forms 10-QSB), as
filed with the SEC. The Form 10-KSB and the Forms 10-QSB,
together with all reports, forms and other documents filed
by Stockholder with the SEC are referred to herein,
collectively as the SEC Documents. As of their respective
dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended,
as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Documents. The SEC
Documents do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The consolidated financial statements of
Stockholder included in the SEC Documents: (i) are true and
complete as of the respective dates thereof; (ii) fairly and
accurately present the financial condition of Stockholder
and its subsidiaries, including Seller, as of the respective
dates thereof, and the results of the operations of
Stockholder and such subsidiaries for the respective periods
covered thereby; (iii) disclose all liabilities required to
be disclosed therein; and (iv) have been prepared in
accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and except as the
application may be modified in accordance with generally
accepted accounting principles for interim reporting.
6.6 Seller Financial Statements. Schedule 6.6 contains
correct and complete copies of (a) the unaudited balance
sheets of Seller as of January 31, 1999 and February 28,
1999 and the statements of income and cash flows of Seller
for the nine and ten month periods then ended and (b) an
unaudited summary of debt of Seller, Stockholder and its
Affiliates as of January 31, 1999, February 28, 1999 and
March 31, 1999. (All of the foregoing statements are
hereinafter collectively referred to as the Financial
Statements). Except as disclosed in Schedule 6.6, the
Financial Statements: (i) are true and complete as of the
respective dates thereof; (ii) fairly and accurately present
the financial condition of Seller as of the respective dates
thereof, and the results of the operations of Seller for the
respective periods covered thereby; (iii) disclose all
liabilities required to be disclosed therein; and (iv) have
been prepared in accordance with generally accepted
accounting principles applied on a consistent basis.
6.7 Absence of Certain Changes. Except as disclosed in
Schedule 6.7, since January 31, 1999, there has not been:
(a) Any material adverse change in the Transferred Assets
or in their condition or value, or any material adverse
change in the Business or in the financial condition,
liabilities, net worth or prospects of Seller related to the
Business, in each case other than changes resulting from
sales of Inventory in the ordinary course of business;
(b) Any sale, lease, license, transfer or other disposition
by Seller of any of the Transferred Assets or any
cancellation of any claims or debts due Seller related to
the Business, except for sales of inventory in the ordinary
course of business;
(c) Any orders placed by Seller with respect to the
Business for inventory, merchandise or supplies in
exceptional or unusual quantities based on past operating
practices, any orders accepted with respect to the Business
from customers of Seller under conditions relating to price,
terms of payment or like matters materially different from
the conditions regularly and usually specified, or any
change in the credit policies of Seller;
(d) Any amendment or termination of any contract or
agreement which is material to the Business, other than as a
result of the expiration of any such contract or agreement
in accordance with its terms and without any default by
Seller;
(e) Any incurrence of any Liens on any of the Transferred
Assets, any borrowing of any funds, except for borrowings
under existing lines of credit made in the ordinary course
of business, or any incurrence of any other obligations or
liabilities (absolute or contingent), except for liabilities
and obligations incurred in the ordinary course of the
Business;
(f) Any capital expenditures (including leases in the
nature of a conditional purchase of capital equipment)
related to the Business, except for expenditures for
ordinary repairs and maintenance;
(g) Any payment by Seller of any obligation or liability,
fixed or contingent, related to the Business, other than
liabilities incurred in the ordinary course of business;
(h) Any change in the accounting methods or principles of
Seller with respect to the Business; or
(i) Any other transaction entered into by Seller which is
material to the Business, other than transactions entered
into in the ordinary course of business.
6.8 Contracts.
(a) Schedule 6.8 sets forth a complete list of all
contracts, commitments and agreements relating to the
Business, whether oral or written, to which Seller is a
party or by which any of the Transferred Assets are bound
that are in existence as of the date hereof and are material
to the operation of the Business (the Material Contracts).
A true and complete copy of each Material Contract has been
furnished by Seller to Buyer prior to the date hereof. As
used in this Agreement, the term Material Contracts shall
include, whether oral or written, to the extent they relate
to the Business, all (i) contracts or commitments entered
into out of the ordinary course of business; (ii) bonus,
incentive compensation, pension, profit sharing, stock
option, group insurance, medical reimbursement or employee
welfare or benefit plans of any nature whatsoever; (iii)
collective bargaining agreements or other contracts or
commitments to or with labor unions or other employee
groups; (iv) leases, contracts or commitments affecting
ownership of, title to, use of or any interest in real
property; (v) employment contracts and other contracts,
agreements or commitments to or with individual employees,
consultants or agents extending for a period of more than
one month from the date hereof or providing for earlier
termination only upon payment of a penalty or the equivalent
thereof; (vi) contracts, commitments, sales orders or
purchase orders, whether or not entered into in the ordinary
course of business, which individually involve future
payments, performance of services or delivery of goods to or
by Seller of an amount or value in excess of $10,000; (vii)
contracts or commitments providing for payments based in any
manner upon the revenues, purchases or profits of Seller, or
obligating Seller to make payments, contingent or otherwise,
arising out of the prior acquisition of the business of any
other person; (viii) bank credit, factoring and loan
agreements, indentures, bonds, promissory notes and other
documents representing indebtedness for borrowed money,
together with any other agreements or instruments securing
or otherwise pertaining to the obligations evidenced
thereby; (ix) guarantees by Seller of the obligations of any
other person; (x) agreements and commitments with respect to
trademarks, service marks, trade names, patents, patent
applications, copyrights, Trade Secrets, technology,
computer software or other like items; (xi) contracts or
commitments to which Seller, on the one hand, and
Stockholder or any of its Affiliates or any other Affiliates
of Seller, on the other hand, are a party; and (xii)
covenants not to compete given or received by Seller,
Stockholder or any of their Affiliates which in any way
relate to the Business.
(b) Except as set forth on Schedule 6.8, (i) all Material
Contracts are in full force and effect, and there have been
no written or oral amendments to or modifications of any
Material Contract, (ii) no event has occurred which is, or,
following any grace period or required notice, would become
a material default by Seller or any other party thereto
under the terms of any Material Contract, (iii) Seller has
not received written notice that any person intends to
cancel or terminate any Material Contract or exercise or not
exercise any right, remedy or other option thereunder, (iv)
Seller has not waived any material right under any Material
Contract, and (v) none of the Material Contracts is with
Stockholder or a party who is an Affiliate of Seller or
Stockholder.
6.9 Title to Transferred Assets. Except for the Liens
described on Schedule 6.9(a) (which shall be released at or
prior to the Closing) and the Liens described on Schedule
6.9(b) (the Permitted Exceptions), Seller has, and on the
Closing Date will have, good and marketable title to the
Transferred Assets, free and clear of all Liens.
6.10 Real Property.
(a) Each item of Real Property is owned by the Company free
and clear of all Liens (except for Liens which shall be
released at or prior to the Closing and which are set forth
on Schedule 6.9(a)), charges, interests, encumbrances,
leases, covenants, conditions, restrictions and easements,
other than (i) governmental land use, building and zoning
regulations which do not conflict with the present use of
the Real Property and do not involve taxes or other
payments, (ii) real property taxes which are not in default
or which are being contested in good faith and (iii) such
other items and exceptions agreed to be Buyer and which are
set forth on Schedule 6.9(b).
(b) Seller has received no notice of pending or claimed
violations of any Legal Requirements pertaining to any Real
Property or the operations of Seller conducted thereon, and
no commitments or agreements have been made to alter the
Real Property, or the operations of Seller thereon, to
comply with any such Legal Requirements or any purported
interpretations thereof. To the best knowledge of Seller
and Stockholder, there are no condemnation, zoning, special
assessment or other land use proceedings, investigations or
studies pending or threatened against or affecting the Real
Property. Certificates of occupancy have been issued for
all improvements on the Real Property (the Improvements)
permitting the Improvements to be used and occupied for the
uses for which they are currently being used. Other than
Seller, there are no parties in possession of any portion of
the Real Property, whether as lessees, sublessees, tenants
at sufferance or otherwise. To the best knowledge of
Seller, except as set forth in Schedule 6.10(b): (i) none of
the Improvements encroach onto adjoining land or onto any
easements or violate any setback requirements, and there are
no encroachments of improvements from adjoining land onto
the Real Property, (ii) the Improvements and the current use
and operation of the Improvements and the Business
(including the disposal of waste) on the Real Property are
authorized under existing zoning and other land use
regulations applicable to the Real Property, and (iii) the
Real Property and the Improvements are in compliance in all
material respects with all Legal Requirements applicable
thereto (other than Environmental Legal Requirements, the
compliance with which is governed by paragraph 6.12),
including, but not limited to, those pertaining to building
standards, public access and fire and safety.
6.11 Condition and Location of the Transferred Assets. The
Improvements are free of material structural or engineering
defects and are in good condition and repair, subject to
ordinary wear and tear and routine maintenance, and the
tangible personal property owned or leased by Seller and
included in the Transferred Assets is in good operating
condition and repair, subject only to ordinary wear and
tear. The Improvements and the items of tangible personal
property included in the Transferred Assets comprise all the
fixed tangible assets necessary for the operation of the
Business in accordance with Sellers current methods of
operation. All tangible properties and assets included in
the Transferred Assets are held and located on or in the
Real Property. No Person has any Lien on or other interest
in or claim to any equipment or other personal property
included in the Transferred Assets, whether to secure the
payment of unpaid rentals or otherwise, except for the
Permitted Exceptions and the Assumed Liabilities.
6.12 Hazardous Substances. Schedule 6.12 contains a list
of all surveys or reports obtained by or otherwise in the
possession of Seller or Stockholder which relate to the
environmental condition of the Real Property or any real
property owned or leased by Seller prior to the date hereof,
and Seller has provided to Buyer copies of all such reports
and surveys and any related correspondence to or from
environmental consultants or Governmental Entities. Except
as disclosed in Schedule 6.12:
(a) The operations of Seller on the Real Property are in
compliance in all material respects with all Environmental
Legal Requirements. Seller has obtained and maintains in
effect all permits, licenses and other authorizations
required to be issued to Seller by any Governmental Entity
with respect to Environmental Legal Requirements, and Seller
is in compliance in all material respects with the terms and
conditions of all such permits, licenses and authorizations.
(b) Neither Seller nor, to the best knowledge of Seller and
Stockholder, any previous owner, lessee, tenant, occupant or
user of any real property owned or leased on or prior to the
date hereof by Seller (such real property and any and all
buildings and other improvements thereon being referred to
as the Property) has used, generated, manufactured, treated,
handled, refined, processed, released, discharged, stored or
disposed of any Hazardous Materials on, under, in or from
the Property, or transported any Hazardous Materials to or
from the Property, in a manner or to an extent that resulted
or could be reasonably expected to result in a violation in
any material respect of any Environmental Legal
Requirements. To the best knowledge of Seller and
Stockholder, no underground tanks or Hazardous Materials the
existence of which could have a material adverse effect on
the business, results of operations or financial condition
of Seller exists or existed on, under, in or about any
Property on or prior to the date that fee or leasehold title
to such Property was transferred to a third party by Seller.
(c) As of the date hereof, except as set forth on Schedule
6.12, to the best knowledge of Seller and Stockholder, there
are no (i) enforcement, clean-up, removal, monitoring,
mitigation or other governmental or regulatory actions
instituted, contemplated or threatened pursuant to any
Environmental Legal Requirements against Seller or regarding
any Property, (ii) pending or threatened claims, actions or
proceedings by any person against Seller or any Property
relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous
Materials or any alleged or suspected violations of
Environmental Legal Requirements, (iii) occurrences or
conditions on any Property that could reasonably be expected
to result in the assertion against Seller of any claims,
actions or proceedings of a type described in clause (i) or
clause (ii) of this paragraph, or (iv) occurrences or
conditions on any Property that could reasonably be expected
to subject Seller or such Property to any material
restrictions on occupancy, transferability or use of such
property under any Environmental Legal Requirements.
Schedule 6.12 includes copies of all complaints, notices of
violation and claims relating to Environmental Legal
Requirements which, to the best knowledge of Seller and
Stockholder, have been received by or asserted against
Seller.
6.13 Intellectual Property.
(a) The Intellectual Property constitutes all of the
patents, trademarks, trade names, service marks, copyrights,
technology, Trade Secrets and other intellectual property
rights which are used or held for use by Seller in
connection with the operation of the Business. Schedule
6.13 sets forth a true and complete list of all patents,
copyrights, trademarks, trade names and service marks owned
or used by Seller, whether registered or unregistered, all
registrations thereof with any Governmental Entity and all
pending applications with respect thereto filed with any
Governmental Entity.
(b) Except as disclosed on Schedule 6.13, Seller owns all
right, title and interest in and to the Intellectual
Property, Seller has not assigned, transferred or licensed,
or purported to assign, transfer or license, to any person
any of the Intellectual Property or any registrations
therefor or any rights included therein, and there are no
patents, trademarks, trade names, service marks, copyrights,
technology, Trade Secrets or other intellectual property
rights (other than computer programs generally available to
the public) which are used by Seller pursuant to licenses or
other rights granted by a third party. Seller is not
obligated to pay any royalties or other fees to any third
party with respect to any of the Intellectual Property.
There are no claims pending or, to the best knowledge of
Seller and Stockholder, threatened against Seller by any
person with respect to Sellers use of any of the
Intellectual Property or challenging or questioning the
validity or effectiveness of any of the Intellectual
Property, or any facts or prior acts known to Seller or
Stockholder which could reasonably be expected to serve as
the basis for any such claim. To the best knowledge of
Seller and Stockholder, (i) the Intellectual Property does
not infringe on or conflict with the rights of any other
person, (ii) there is no infringement by others of any
rights included in the Intellectual Property, and (iii)
there are no intellectual property rights owned by any other
person which could reasonably be expected to materially and
adversely affect the Transferred Assets or the Business.
6.14 Absence of Undisclosed Liabilities. Except for
liabilities and obligations reflected on the schedules to
this Agreement or arising in the ordinary course of business
since March 31, 1999, Seller does not have with respect to
the Business, and none of the Transferred Assets are subject
to, any debts, liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise,
regardless of whether such debts, liabilities or obligations
are normally shown or reflected on financial statements
prepared in a manner consistent with generally accepted
accounting principles. There are no facts known to Seller
or Stockholder which might reasonably serve as the basis, in
whole or in part, for the assertion against the Business or
the Transferred Assets of any material liabilities or
obligations pertaining to Seller which are not reflected in
the schedules to this Agreement, other than liabilities and
obligations arising in the ordinary course of business since
March 31, 1999. Except as reflected on the schedules to
this Agreement, Seller is not in default with respect to any
term or condition of any indebtedness or liability
(including trade payables).
6.15 Legal Proceedings. Except as set forth on Schedule
6.15, there are no suits, actions, claims, proceedings or
investigations pending or, to the best knowledge of Seller
and Stockholder, threatened against, relating to or
involving the Business or the Transferred Assets (or any
officer, director or employee of Seller or Stockholder in
connection with the Business) before any court, arbitrator
or administrative or governmental body, and Seller is not
subject to any judgement, decree, injunction, rule or order
of any court, arbitrator or administrative or governmental
body which could have a material adverse effect on the
Transferred Assets or Buyers ability to operate the Business
after the Closing.
6.16 Permits and Licenses; Compliance With Laws.
(a) Seller has obtained and maintains in effect all
permits, licenses and other governmental authorizations that
are required by any Governmental Entity to enable Seller to
conduct the Business in all material respects as conducted
on the date hereof (the Permits), and all of the Permits are
transferable to Buyer or may be reissued to Buyer without
difficulty or expense, other than routine filing fees and
customary financial responsibility and bonding requirements.
Schedule 6.16 contains a true and complete list of all of
the Permits, and Seller is in full compliance in all
material respects with the terms and conditions of each
Permit.
(b) Seller is in compliance in all material respects with
all Legal Requirements applicable to the Business other than
Environmental Legal Requirements (the compliance with which
is governed by paragraph 6.12), Legal Requirements
applicable to the Real Property (the compliance with which
is governed by paragraph 6.10) and Legal Requirements
applicable to labor relations (the compliance with which is
governed by paragraph 6.21).
6.17 Taxes. Seller has duly filed all Tax Returns (as
defined in paragraph 23) that were required to be filed and
were due prior to the date of this Agreement (all of which
were, at the time of filing, true and correct in all
material respects) and has paid all Taxes that are due
pursuant to such returns. Without limiting the generality
of the foregoing, all contributions due from Seller pursuant
to any unemployment insurance or workers compensation laws
and all sales or use Taxes which are due or payable by
Seller have been paid in full. Seller has withheld and paid
to, or will cause to be paid to, the appropriate taxing
authorities all amounts required to be withheld from the
wages of its employees under state law and the applicable
provisions of the Internal Revenue Code of 1986, as amended
(the Code). Seller has timely paid or will pay prior to the
due date thereof all Taxes which, if not paid, could result
in the imposition of a lien or encumbrance on any of the
Transferred Assets (except for liens for Taxes not yet due)
or otherwise interfere with Buyers ability to own and
operate the Transferred Assets after the Closing.
6.18 Insurance. Seller maintains policies of insurance
covering its businesses, properties and assets in amounts,
and against such losses and risks, as are generally
maintained for comparable businesses and properties.
Schedule 6.18 contains a complete list of all insurance
policies maintained by Seller as of the date of this
Agreement with respect to the Business, indicating risks
insured against, carrier, policy number, amount of coverage,
deductibles, annual premiums and expiration dates. All
policies of insurance, and any fidelity or surety bonds
maintained by Seller with respect to the Business, are in
full force and effect. Schedule 6.18 also contains a list
of all open general liability claims with respect to the
Business. Except as set forth on Schedule 6.18, no claims
are pending with respect to the Business or the Transferred
Assets under any insurance policy maintained by or on behalf
of Seller other than claims under group health or life
insurance policies maintained for the benefit of Sellers
employees, and, to the best knowledge of Seller and
Stockholder, all necessary notifications of claims have been
made to insurance carriers.
6.19 Inventories. All inventories included in the latest
balance sheet included in the Financial Statements or
acquired since that date consist of (or until disposed of in
the ordinary course of business consisted of) items actually
on hand of a quality and quantity usable and salable in the
normal course of business. The values at which all
inventories are carried reflect the normal inventory
valuation policy of Seller, which is to state inventory at
cost or market, whichever is lower, on a first-in, first-out
basis. Except as disclosed on Schedule 6.19, Seller is not
under any obligation to accept the return of inventory or
merchandise in the possession of wholesalers, distributors,
retailers or other customers.
6.20 Interests in Competitors and Suppliers. Except as set
forth in Schedule 6.20, neither Seller, Stockholder nor any
of their Affiliates own, directly or indirectly,
individually or collectively, any interest in any person
which: (a) is a competitor, customer or supplier of the
Business, or (b) has an existing contractual relationship
with Seller with respect to the Business. Ownership of not
more than one percent of any class of capital stock of any
publicly traded corporation shall not constitute a breach of
the representations and warranties contained in this
paragraph.
6.21 Labor Relations. There is no unfair labor practice
charge or complaint pending or, to the best knowledge of
Seller and Stockholder, threatened against Seller related to
the Business. Seller is in compliance in all material
respects with all Legal Requirements respecting employment
and employment practices (including, without limitation,
those with respect to age, race, sex or religious
discrimination), health and safety, terms and conditions of
employment, family and medical leave obligations, wages and
hours and the payment of social security and similar Taxes
related to the Business. Seller is not liable for any
arrears in wages or any Taxes or penalties for failure to
comply with any of the foregoing. Except as set forth in
Schedule 6.21, (a) there is no unlawful employment practice
or discrimination charge pending against Seller before the
EEOC or any EEOC recognized state referral agency, and (b)
there is no employee complaint of wrongful discrimination,
wrongful discharge or violation of public policy pending
before any court or arbitrator. There is no labor strike,
slowdown or work stoppage in existence or threatened against
or involving or affecting the Business, and Seller has not
experienced any material work stoppages initiated by
employees at any time during the past three years with
respect to the Business. Except as set forth on Schedule
6.21, no grievance or arbitration proceeding is pending and
no written claim therefor exists with respect to any of the
Business Employees, and, to the best knowledge of Seller and
Stockholder, no such proceedings or claims are threatened.
Seller has provided to its union employees notice that it
intends to close its facilities and to terminate the
employment of all its employees effective immediately prior
to the Closing, and, if requested by the union, Seller has
engaged and will engage in good faith bargaining with the
union regarding the effects of such facility closure.
Seller is not subject to the Worker Adjustment and
Retraining Notification Act.
6.22 Personnel. Except as set forth on Schedule 6.22,
there are no written employment agreements between Seller
and any of the Business Employees, and all Business
Employees are employed on an at-will basis and are not
entitled to any severance benefits. Except as set forth on
Schedule 6.22, none of the Business Employees participate in
any bonus, profit-sharing or similar plan, no bonus,
incentive or similar compensation has been paid to any such
employees during the past three years, and no such
compensation is payable for the current calendar or fiscal
year.
6.23 Employee Benefit Plans.
(a) Existence of Plans. Except as is disclosed on Schedule
6.23, (i) neither Seller nor any of its ERISA Affiliates (as
defined in paragraph 23) maintains or sponsors (or ever
maintained or sponsored), or makes or is required to make
contributions to, any Plans, (ii) none of the Plans is or
was a multi-employer plan, as defined in Section 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended (ERISA), (iii) none of the Plans is or was a defined
benefit pension plan within the meaning of ERISA Section
3(35), (iv) none of the Plans provides or provided post-
retirement medical or health benefits, (v) none of the Plans
is or was a welfare benefit fund, as defined in Code Section
419(e), or an organization described in Code Sections
501(c)(9) or 501(c)(20), and (vi) neither Seller nor any
ERISA Affiliate has announced or otherwise made any
commitment to create or amend any Plan. Notwithstanding any
statement or indication in this Agreement to the contrary,
there are no Plans (i) as to which Buyer will be required to
make any contributions or with respect to which Buyer shall
have any obligation or liability whatsoever, whether on
behalf of any of the current employees of Seller or on
behalf of any other person, after the Closing, or (ii) which
Buyer will not be able to terminate immediately after the
Closing in accordance with their terms and ERISA. With
respect to each of such Plans, at the Closing, there will be
no unrecorded liabilities with respect to the establishment,
implementation, operation, administration or termination of
any such Plan, or the termination of the participation in
any such Plan by Seller or any of its ERISA Affiliates.
Seller has delivered to Buyer true and complete copies of:
(i) each of the Plans and any related funding agreements
thereto (including insurance contracts and all amendments),
all of which are legally valid and binding and in full force
and effect and there are no defaults thereunder, (ii) the
currently effective Summary Plan Description pertaining to
each of the Plans, (iii) the three most recent annual
reports for each of the Plans (including all relevant
schedules), (iv) the most recently filed PBGC Form 1 (if
applicable), (v) the most recent Internal Revenue Service
determination letter for each Plan which is intended to
constitute a qualified plan under Code Section 401, and (vi)
for each funded Plan, financial statements consisting of (A)
the consolidated statement of assets and liabilities of such
Plan as of its most recent valuation date, and (B) the
statement of changes in fund balance and in financial
position or the statement of changes in net assets available
for benefits under such Plan for the most recently-ended
plan year, which financial statements shall fairly present
the financial condition and the results of operations of
such Plan in accordance with generally accepted accounting
principles as of such dates.
(b) Present Value of Benefits. The present value of all
accrued benefits under any Plans subject to Title IV of
ERISA shall not, as of the Closing Date, exceed the value of
the assets of such Plans allocated to such accrued benefits,
based upon the applicable provisions of the Code and ERISA,
and each such Plan shall be capable of being terminated as
of the Closing Date in a standard termination under ERISA
Section 4041(b). With respect to each Plan that is subject
to Title IV of ERISA, (i) no amount is due or owing from
Seller or its ERISA Affiliates to the Pension Benefit
Guaranty Corporation (PBGC) or to any multi-employer plan on
account of any withdrawal therefrom, and (ii) no such Plan
has been terminated other than in accordance with ERISA or
at a time when the plan was not sufficiently funded. The
transactions contemplated hereunder, including, without
limitation, any termination of the Plans at or prior to the
Closing, shall not result in any such withdrawal or other
liability under any applicable Legal Requirements.
(c) Penalties; Reportable Events. Neither Seller nor any
ERISA Affiliate is subject to any material liability, tax or
penalty whatsoever to any person as a result of engaging in
a prohibited transaction under ERISA or the Code, and
neither Seller nor any ERISA Affiliate has any knowledge of
any circumstances which reasonably might result in any
material liability, tax or penalty, including, but not
limited to, a penalty under ERISA Section 502, as a result
of a breach of any duty under ERISA or under other Legal
Requirements. Each Plan which is required to comply with
the provisions of Code Section 4980B has complied in all
material respects. No event has occurred which could
subject any Plan to tax under Code Section 511. None of the
Plans subject to Title IV of ERISA has, since September 2,
1974, been completely or partially terminated nor has there
been any reportable event, as such term is defined in ERISA
Section 4043(b), with respect to any of the Plans since the
effective date of ERISA, nor has any notice of intent to
terminate been filed or given with respect to any such Plan.
There has been no (i) withdrawal by Seller or any of its
ERISA Affiliates that is a substantial employer from a
single-employer plan which is a Plan and which has two or
more contributing sponsors at least two of whom are not
under common control, as referred to in ERISA Section
4063(b), or (ii) cessation by Seller or any of its ERISA
Affiliates of operations at a facility causing more than 20%
of Plan participants to be separated from employment, as
referred to in ERISA Section 4062(f). Neither Seller nor
any ERISA Affiliate, nor any other organization of which any
of them are a successor or parent corporation as defined in
ERISA Section 4069(b), have engaged in any transaction
described in ERISA Section 4069(a).
(d) Deficiencies; Qualification. None of the Plans nor any
trust created thereunder has incurred any accumulated
funding deficiency as such term is defined in Code Section
412, whether or not waived, since the effective date of said
Section 412, and no condition has occurred or exists which
by the passage of time could be expected to result in an
accumulated funding deficiency as of the last day of the
current plan year of any such Plan. Furthermore, neither
Seller nor any ERISA Affiliate has any unfunded liability
under ERISA in respect of any of the Plans. Each of the
Plans which is intended to be a qualified plan under Code
Section 401(a) has received a favorable determination letter
from the Internal Revenue Service, and Seller knows of no
fact which could adversely affect the qualified status of
any such Plan. All of the Plans have been administered and
maintained in substantial compliance with ERISA, the Code
and all other applicable Legal Requirements. All
contributions required to be made to each of the Plans under
the terms of that Plan, ERISA, the Code or any other
applicable Legal Requirements have been timely made. Each
Plan intended to meet the requirements for tax-favored
treatment under Subchapter B of Chapter 1 of the Code meets
such requirements. There are no liens against the property
of Seller (including the Transferred Assets) or any ERISA
Affiliate under Code Section 412(n) or ERISA Sections 302(f)
or 4068. The Seller Financial Statements properly reflect
all amounts required to be accrued as liabilities to date
under each of the Plans. The execution and performance of
this Agreement will not (i) result in any obligation or
liability (with respect to accrued benefits or otherwise) of
Buyer to the PBGC, any Plan or any present or former
employee of Buyer, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or
otherwise) becoming due to any present or former employee,
officer, director, shareholder, contractor or consultant, or
any of their dependents, or (iii) accelerate the time of
payment or vesting, or increase the amount, of compensation
due to any employee, officer, director, shareholder,
contractor or consultant of Seller. With respect to any
insurance policy which provides, or has provided, funding
for benefits under any Plan, there is and will be no
liability of Seller or Buyer in the nature of a retroactive
or retrospective rate adjustment, loss sharing arrangement
or actual or contingent liability as of the Closing Date,
nor would there be any such liability if such insurance
policy were terminated as of the Closing Date.
(e) Litigation. Other than routine claims for benefits
under the Plans, there are no pending or, to the best
knowledge of Seller and Stockholder, threatened
investigations, proceedings, claims, lawsuits, disputes,
actions, audits or controversies involving the Plans, or the
fiduciaries, administrators or trustees of any of the Plans
or Seller or any ERISA Affiliate as the employer or sponsor
under any Plan, with any of the Internal Revenue Service,
the Department of Labor, the PBGC, any participant in or
beneficiary of any Plan or any other person. Seller knows
of no reasonable basis for any such claim, lawsuit, dispute,
action or controversy.
6.24 Suppliers and Customers. Seller has satisfactory
relationships with its customers and suppliers of the
Business and has no reason to expect any material adverse
change in such relationships. No customer or supplier of
the Business has given notice of or otherwise indicated any
intent to cease doing business with Seller, and neither
Seller nor Stockholder has any knowledge or belief that the
transactions contemplated by this Agreement will adversely
affect relations with any customer or supplier of the
Business.
6.25 All Rights Assignable. Except as set forth on
Schedule 6.3, Seller may transfer and assign all of its
right, title and interest in and to the Transferred Assets
without obtaining the consent or approval of any other
person.
6.26 Brokerage and Finders Fees. Neither Seller,
Stockholder or any of its Affiliates, nor any of the
directors or officers of Seller or any of their Affiliates,
has employed any broker, finder or investment banker or
incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees, finders fees or
commissions in connection with the transactions contemplated
by this Agreement.
6.27 Material Misstatements or Omissions. No
representation or warranty of Seller or Stockholder in this
Agreement, or in any exhibit, document, statement,
certificate or schedule furnished or to be furnished by
Seller or Stockholder to Buyer pursuant hereto, or in
connection with the transactions contemplated hereby,
contains or will contain an untrue statement of a material
fact or omits or will omit to state a material fact
necessary to make the statements contained herein and
therein not misleading.
7. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller and Stockholder as
follows:
7.1 Organization and Good Standing. Buyer is a limited
liability company duly organized and in good standing under
the laws of the State of California and has full power and
authority to carry on the Business and to own or lease and
operate the Transferred Assets.
7.2 Authority. Buyer has the full power and authority to
execute and deliver this Agreement, to perform the
obligations and covenants set forth herein and to consummate
the transactions contemplated hereby. The execution and
delivery of this Agreement by Buyer and the consummation by
Buyer of the transactions contemplated hereby have been duly
authorized by the members of Buyer. No further action is
necessary on the part of Buyer to make this Agreement
binding upon it in accordance with its terms. This
Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms,
subject to the Bankruptcy Exception.
7.3 No Conflicts or Violations. Neither the execution and
delivery of this Agreement by Buyer, nor the consummation of
the transactions contemplated hereby, will violate or
conflict with, constitute a breach of or default under,
result in the loss of any material benefit under or permit
the acceleration of any obligation under: (a) any term or
provision of the Articles of Organization or Operating
Agreement of Buyer; (c) any judgment, decree or order of any
Governmental Entity or any material agreement, contract or
instrument to which Buyer is a party or by which it or any
of its properties is bound; or (c) any Legal Requirements
applicable to Buyer. No consent, approval, order or
authorization of, or registration, declaration or filing
with, any Governmental Entity is required with respect to
Buyer in connection with the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby.
7.4 Litigation. There are no civil, administrative,
arbitration or other proceedings or governmental
investigations pending, or, to the best knowledge of Buyer,
threatened against Buyer that could jeopardize or adversely
affect any of the transactions contemplated by this
Agreement.
7.5 Brokerage and Finders Fees. Buyer has not incurred any
liability to any broker, finder or agent for any brokerage
fees, finders fees or commissions with respect to the
transactions contemplated by this Agreement.
8. Conditions Precedent to Obligations of Buyer. The
obligations of Buyer under this Agreement shall be subject
to the satisfaction on or prior to the Closing of each of
the following conditions, except to the extent Buyer may
waive any such conditions in writing:
8.1 Representations and Warranties of Seller and
Stockholder. All representations and warranties of Seller
and Stockholder contained in or made under or in connection
with this Agreement shall be true and correct in all
material respects, and Seller and Stockholder shall have
performed all agreements and covenants required by this
Agreement to be performed by them on or prior to the
Closing.
8.2 Consents. There shall have been obtained (a) all
consents or approvals of any third party required under the
terms of any Material Contract as a result of or in
connection with the consummation of the transactions
contemplated by this Agreement, and (b) all other consents
or approvals of any person required for the consummation of
the transactions contemplated by this Agreement, except
where, in the case of the condition set forth in clause (b),
the failure to have obtained any such consent or approval
would not have a material adverse effect on the ability of
Buyer to operate the Business following the Closing.
8.3 Adverse Changes. There shall not have occurred after
March 31, 1999, any material adverse change in the business,
assets (tangible and intangible), liabilities, financial
condition, results of operations or prospects of Seller with
respect to the Business.
8.4 Noncompetition Agreements. Seller and Stockholder
shall have each entered into its respective Noncompetition
Agreement.
8.5 Financing. Buyer shall have obtained, at or prior to
the Closing, the debt financing from the Bank, on terms and
in amounts acceptable to Buyer, as may be necessary to
enable Buyer to fund the cash portion of the Purchase Price.
8.6 Liens and Indebtedness. All Liens on or affecting the
Transferred Assets other than the Permitted Exceptions shall
have been released, terminated or otherwise removed, and
Seller shall have paid in full all of the obligations and
liabilities described on Schedule 6.9(a).
8.7 Title Insurance. At the Closing, Buyer shall have
received either (a) an ALTA (or the local equivalent
thereof) extended coverage owners policy of title insurance
issued by the Title Company to Buyer insuring title to the
Real Property with a liability limit equal to the estimated
market value of the Real Property, showing good and
indefeasible title to the Real Property vested in Buyer,
free and clear of all Liens except statutory liens not yet
delinquent, (ii) the Permitted Exceptions and all documents
or instruments recorded against the Real Property in
connection with the transactions contemplated hereby (the
Title Policy), or (b) the written commitments or binders of
the title company to issue the Title Policy in the
aforementioned condition within a reasonable time after the
Closing Date.
8.8 Business Closure. Except as otherwise specifically
instructed by Buyer in writing, effective on the close of
business on the Closing Date, Seller shall have terminated
the employment of all of the Business Employees, including
all union employees, and closed down the Business.
8.9 Occupancy Permit. The appropriate agency of Lopatcong
Township shall have issued a Permit for Continuing Occupancy
in connection with the transfer of the Real Property to
Buyer, and such Permit shall indicate that the Improvements
comply in all material respects with all applicable codes
and regulations of such Township.
8.10 Other Legal Matters. All legal matters in connection
with this Agreement and the transactions contemplated hereby
shall have been approved by counsel for Buyer, and there
shall have been furnished to such counsel by Seller and
Stockholder certified copies of such corporate records of
Seller and Stockholder and copies of such other documents as
such counsel may reasonably have requested.
9. Conditions Precedent to Obligations of Seller and
Stockholder. The obligations of Seller and Stockholder
under this Agreement shall be subject to the satisfaction on
or prior to the date hereof of each of the following
conditions, except to the extent Seller and Stockholder may
waive any such conditions in writing:
9.1 Representations and Warranties of Buyer. All
epresentations and warranties of Buyer contained in or made
under or in connection with this Agreement shall be true and
correct in all material respects, and Buyer shall have
performed all agreements and covenants required by this
Agreement to be performed by it on or prior to the Closing.
9.2 Consents. There shall have been obtained (a) all
consents or approvals of any third party required under the
terms of any Material Contract as a result of or in
connection with the consummation of the transactions
contemplated by this Agreement, and (b) all other consents
or approvals of any person required for the consummation of
the transactions contemplated by this Agreement, except
where, in the case of the condition set forth in clause (b),
the failure to have obtained any such consent or approval
would not have a material adverse effect on Seller or
Stockholder.
9.3 Financing. Buyer shall have obtained, at or prior to
the Closing, the debt financing from the Bank, on terms and
in amounts acceptable to Buyer, as may be necessary to
enable Buyer to fund the cash portion of the Purchase Price.
9.4 Other Legal Matters. All legal matters in connection
with this Agreement and the transactions contemplated hereby
shall have been approved by counsel for Seller and
Stockholder, and there shall have been furnished to such
counsel by Buyer certified copies of such records of Buyer
and copies of such other documents as such counsel may
reasonably have requested.
10. Closing.
10.1 Time and Place. The consummation of the transactions
contemplated by this Agreement is referred to as the
Closing, and the date on which the Closing occurs is
referred to as the Closing Date. The Closing shall take
place on the date hereof at the executive offices of Meyner
and Landis, Newark, New Jersey. Regardless of the actual
time of the Closing, the Closing shall be effective for all
purposes as of the opening of business on the Closing Date.
Unless the context indicates otherwise, all references
herein to the Closing Date and the Closing shall mean the
date on which and the time at which the Closing is
effective.
10.2 Delivery of Documents by Buyer. At the Closing, and
Buyer shall deliver to Seller (or to Seller and Stockholder,
as appropriate) the following documents, instruments and
other items, each dated, unless otherwise indicated, as of
the Closing Date:
(a) The cash portion of the purchase price referred to in
paragraph 2.2(a);
(b) The assumption of liabilities referred to in paragraph
2.2(b);
(c) A certificate, dated as of a recent date, from the
California Secretary of State, certifying that Buyer is in
good standing in California; and
(d) A favorable opinion of Ervin, Cohen & Jessup LLP,
counsel for Buyer, regarding such matters as may be
reasonable specified by Seller and Stockholder, subject to
customary conditions and limitations.
10.3 Delivery of Documents by Seller and Stockholder. At
the Closing, Seller and Stockholder shall deliver to Buyer
the following documents, instruments and other items, each
dated, unless otherwise indicated, as of the Closing Date:
(a) General Warranty Deeds, bills of sale and assignments
of contracts, and other good and sufficient instruments of
transfer, conveyance and assignment, as, in the reasonable
opinion of counsel for Buyer, shall be effective to vest in
Buyer good and marketable title to the Transferred Assets;
(b) Evidence, in form and substance satisfactory to Buyers
counsel, that there are no Liens on any of the Transferred
Assets other than the Permitted Exceptions and that Seller
has repaid in full the indebtedness described on Schedule
6.9(a);
(c) A certificate, dated as of a recent date, from the New
Jersey Secretary of State, certifying as true and correct a
copy of Sellers Articles of Incorporation;
(d) A certificate, dated as of a recent date, from the
Missouri Secretary of State, certifying as true and correct
a copy of Stockholders Articles of Incorporation;
(e) A certificate, dated as of a recent date, from the New
Jersey Secretary of State, certifying that Seller is in good
standing in New Jersey;
(f) A certificate, dated as of a recent date, from the
Missouri Secretary of State, certifying that Seller is in
good standing in Missouri;
(g) A copy of the resolutions of the Board of Directors and
stockholder of Seller approving the execution, delivery and
performance of this Agreement, certified by the Secretary or
Assistant Secretary of Seller;
(h) A favorable opinion of Polsinelli, White, Vardeman &
Shalton, counsel for Seller and Stockholder, regarding such
matters as may be reasonable specified by Buyer, subject to
customary conditions and limitations; and
(i) The Noncompetition Agreements, duly executed by Seller
and Stockholder.
10.4 Other Documents and Actions. In addition to the
documents and other items specified in paragraph 10.2 and
paragraph 10.3, at the Closing, the parties shall execute
and deliver, or cause the appropriate parties to execute and
deliver, such other documents and instruments as may be
necessary to carry out the obligations of the parties under
this Agreement.
11. Additional Agreements of the Parties. The following
provisions shall apply, and the following actions shall be
taken, prior to and subsequent to the Closing:
11.1 Further Documentation or Action. From time to time,
at the request of Buyer, Seller or Stockholder, as the case
may be, whether on or after the Closing and without further
consideration, the other parties shall, within a reasonable
amount of time after request is made hereunder, execute and
deliver to the requesting party such further instruments of
conveyance and transfer and take such other actions as may
be required to more effectively convey and transfer the
Transferred Assets to Buyer and otherwise to carry out the
purposes or intent of this Agreement.
11.2 Cooperation. After the Closing, upon request, each
party shall, subject to applicable Legal Requirements,
contractual restrictions and the attorney-client privilege,
cooperate with the other, at the requesting partys expense
(but including only out-of-pocket expenses and not the costs
incurred by any party for the wages or other benefits paid
to its officers, directors or employees), in furnishing
information, testimony and other assistance in connection
with any actions, audits, proceedings, arrangements or
disputes involving any of the parties hereto or their
Affiliates (other than in connection with disputes between
the parties hereto) and which relate to the Transferred
Assets or the Business.
11.3 Access to Records. At the Closing, Seller shall be
entitled to retain copies of any of the Business Records,
and Buyer shall make available to Seller and its authorized
representatives (including the right to make copies) any of
the Business Records for which copies were not retained.
After the Closing, Seller shall make available to Buyer and
its authorized representatives (including the right to make
copies), any of the non-privileged business records of
Seller not included in the Transferred Assets which relate
to the Business and periods prior to the Closing, including
accounting and financial records and personnel and labor
records. Access to records pursuant to this paragraph shall
be during normal business hours and with reasonable prior
written notice of the time when such access shall be needed.
Any employees, representatives or agents of a party that
engage in any review and inspection of the records of the
other party shall conduct themselves in such a manner so
that the normal business activities of the party whose
records are being reviewed are not unduly or unnecessarily
disrupted.
11.4 Confidential Information. Subject to the requirements
of any applicable law, order or decree, at all times
following the Closing, except with Buyers prior written
consent, (a) Seller and Stockholder shall, and shall cause
their Affiliates and Representatives (as defined in
paragraph 23) to, keep in confidence and not disclose to any
other person any confidential or proprietary information, no
matter when or how acquired, concerning the Transferred
Assets or the Business, including, without limitation, names
of customers, terms of contracts, Trade Secrets, methods of
operation, marketing methods, pricing and other policies;
and (b) Seller and Stockholder shall not, and shall use
reasonable efforts to cause their respective Representatives
not to, issue any public announcements or statements with
respect to, or otherwise disclose to any person other than
Sellers Representatives, the terms of, or any other
information pertaining to, this Agreement or the
transactions contemplated hereby. Notwithstanding the
foregoing, the obligations of Seller and Stockholder under
this paragraph shall not apply to information which is
ascertainable from public or trade sources or published
information or which is or becomes generally available to
the public other than as a result of a disclosure by Seller,
Stockholder or their Affiliates or Representatives in
violation of this Agreement.
11.5 Name Change. Promptly following the Closing, Seller
shall amend its Articles of Incorporation (and provide to
Buyer a certified copy of such amendment) to change the name
of Seller to a name other than OPT Industries, Inc., or any
other name which is similar thereto or to any other
trademark or trade name heretofore used by Seller.
11.6 Computer Services. Stockholder has requested Buyer to
provide to Stockholder after the Closing Date certain
computer support services currently being provided by Seller
to Stockholder (collectively, the Computer Services). In
connection therewith, Buyer and Seller shall enter into a
Computer Services Agreement in the form attached hereto as
Schedule 11.6.
12. Survival of Representations. All statements contained
in any schedule, statement, certificate or other instrument
delivered pursuant hereto by or on behalf of any party shall
be deemed to be representations and warranties made pursuant
to this Agreement by such party. Subject to the provisions
of paragraph 13.4(b), all representations, warranties and
agreements made by a party shall survive the Closing and any
investigation made by or on behalf of any party.
13. Indemnification.
13.1 By Seller and Stockholder. Subject to the further
provisions of this paragraph 13, Seller and Stockholder
shall, jointly and severally, indemnify and hold harmless
Buyer against any and all losses, liabilities, claims,
damages, costs and expenses, including reasonable attorneys
fees, court costs, consultant fees and expert fees
(collectively the Damages), insofar as such Damages (or
actions in respect thereof) are based upon or arise out of
(a) any breach of any warranty, representation, covenant or
agreement made herein by Seller or Stockholder, (b) the
Excluded Liabilities or (c) any other obligations or
liabilities of Seller which are based upon events which
occurred or circumstances which existed on or before the
Closing Date, whether or not the existence of such
liabilities or obligations (or the facts, circumstances or
events underlying such liabilities or obligations) was
disclosed pursuant hereto or constitutes a breach of any
representation or warranty.
13.2 By Buyer. Subject to the further provisions of this
paragraph 13, Buyer shall indemnify and hold harmless Seller
and Stockholder against all Damages insofar as such Damages
(or actions in respect thereof) are based upon or arise out
of (a) any breach of any warranty, representation, covenant
or agreement made herein by Buyer, (b) the Assumed
Liabilities or (c) any obligations or liabilities relating
to the Transferred Assets which are based upon the operation
of the Transferred Assets by Buyer after the Closing Date.
13.3 Indemnification Procedures.
(a) Notice of Asserted Liability. Promptly after receipt
by an indemnified party of notice of any demand, claim or
circumstance which gives rise, or, with the lapse of time,
would give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or
investigation that may result in Damages (an Asserted
Liability), the party receiving such notice (the Indemnitee)
shall give notice thereof to the indemnifying party or
parties (the Indemnitor). The notice shall describe the
Asserted Liability in reasonable detail and, to the extent
practicable, shall indicate the amount (estimated, if
necessary) of the Damages that have been or may be suffered
by Indemnitee. The failure so to notify Indemnitor shall
not relieve it of any liability that it may have to
Indemnitee except the extent that Indemnitor demonstrates
that the defense of such action is materially prejudiced
thereby.
(b) Opportunity to Defend. Indemnitor may elect to
compromise or defend, at its own expense and by its own
counsel (subject to the reasonable approval of Indemnitee),
any Asserted Liability; provided, however, that Indemnitor
may not compromise or settle any Asserted Liability without
the consent of Indemnitee unless such compromise or
settlement requires no more than a monetary payment for
which Indemnitee and any other indemnifiable parties
hereunder are fully indemnified or involves other matters
not binding upon Indemnitee and such other indemnifiable
parties. If Indemnitor elects to compromise or defend such
Asserted Liability, it shall within 30 days (or sooner, if
the nature of the Asserted Liability so requires) notify
Indemnitee of its intent to do so, and, if it elects to
defend, shall select counsel reasonably satisfactory to
Indemnitee, and Indemnitee shall cooperate in the compromise
of, or defense against, such Asserted Liability. If
Indemnitor so elects, Indemnitor shall be obligated to
defend such Asserted Liability and pay all Damages incurred
in such defense until either (a) Indemnitor and Indemnitee
agree otherwise, or (b) a court of competent jurisdiction
finally determines that Indemnitor does not have an
obligation to indemnify Indemnitee. If Indemnitor elects
not to compromise or defend any Asserted Liability, fails to
notify Indemnitee of its election as provided herein or
contests its obligation to indemnify Indemnitee, Indemnitee
shall have the absolute right to pay, compromise or defend
such Asserted Liability in respect of any Asserted Liability
for which Indemnitor may have an indemnification obligation
hereunder, without prejudice to any right Indemnitee may
have hereunder. If Indemnitee elects to pay, compromise or
defend such Asserted Liability pursuant to the foregoing
provisions, all Damages incurred by Indemnitee in connection
therewith shall be paid by Indemnitor as incurred by
Indemnitee unless Indemnitor contests its obligation to
indemnify Indemnitee, in which case Indemnitor shall pay or
reimburse Indemnitee for such Damages if and when it is
finally determined that Indemnitee is entitled to
indemnification from Indemnitor hereunder. The party which
elects to compromise or defend any Asserted Liability
pursuant to the foregoing provisions shall control the
matter subject to such provisions. In any event, once
Indemnitor elects to defend any Asserted Liability,
Indemnitee may participate, at its own expense from that
point in time, in the defense of any Asserted Liability. If
any party chooses to defend or participate in the defense of
any Asserted Liability, it shall have the right to receive
from the other parties, subject to any restriction of
applicable law or that may be necessary to preserve the
privilege of attorney-client communications, any books,
records or other documents within such other parties control
that are necessary or appropriate for such defense.
13.4 Limitations on Liability.
(a) Buyer, on the one hand, and Seller and Stockholder, on
the other hand, shall not be liable pursuant hereto for any
breach of any warranty or representation contained herein,
except to the extent that the aggregate amount of the
Damages with respect thereto shall exceed $10,000.
(b) Seller and Stockholder shall not be liable for any
breach of any representation or warranty contained herein or
made by Seller or Stockholder under or in connection with
this Agreement unless Buyer shall have given written notice
to Seller and/or Stockholder of the basis of its claim: (i)
with respect to the representations and warranties set forth
in paragraphs 6.5, 6.6, 6.7, 6.8, 6.11, 6.18, 6.19, 6.20,
6.24 and 6.27, within one year after the Closing and (ii)
with respect to all other representation and warranties,
within the applicable period of limitations for the
commencement of actions with respect to the underlying
claim; provided, however, with respect to the
representations and warranties set forth in paragraphs 6.2
and 6.9, Buyer need only provide notice of claims to Seller
and/or Stockholder within two years after the discovery by
Buyer of the breach of such representation or warranty, but
there shall otherwise be no limit on the time during which
Buyer may provide notice of claims to Seller and/or
Stockholder.
(c) The limitations set forth in paragraphs 13.4(a) and (b)
are expressly made inapplicable to any liability for breach
of any covenants or agreements made herein by the parties,
including, without limitation, the obligations of Seller and
Stockholder to indemnify and hold harmless Buyer against any
and all Damages based upon or arising out of the Excluded
Liabilities.
(d) Nothing contained in this paragraph 13.4 shall relieve
a party from any liability based on fraudulent
misrepresentation, including, without limitation, the
delivery by a party of any certificate which contains any
statements known by the party at the time of such delivery
to be untrue in any material respect.
13.5 Affiliates. For purposes of this Agreement, any
Damages suffered by an Affiliate of Buyer, on the one hand,
or by an Affiliate of Seller or Stockholder, on the other
hand, shall be deemed to have been suffered by Buyer or by
Seller and/or Stockholder, as the case may be.
13.6 Interest. If an Indemnitor does not pay any Damages
incurred by an Indemnitee for which it is entitled to
indemnification hereunder as and when such Damages are
incurred by the Indemnitee, then any amounts due from the
Indemnitor shall bear interest from the date such amounts
originally should have been paid at the rate of 10% per
annum.
14. Notices. All notices, requests, demands, waivers,
consents and other communications hereunder shall be in
writing, shall be delivered either in person, by
telegraphic, facsimile or other electronic means, by
overnight air courier or by mail, and shall be deemed to
have been duly given and to have become effective (a) upon
receipt if delivered in person or by telegraphic, facsimile
or other electronic means calculated to arrive on any
business day prior to 6:00 p.m., local time, or on the next
succeeding business day if delivered on a non-business day
or after 6:00 p.m., local time, (b) one business day after
having been delivered to an air courier for overnight
delivery, or (c) three business days after having been
deposited in the mails as certified or registered mail,
return receipt requested, all fees prepaid, directed to the
parties or their assignees at the following address (or at
such other address as shall be given in writing by a party
hereto):
If to Buyer: Shared Information Group Management
Associates LLC
2041 W. 139th Street
Gardena, California 90247
Attn: Peter B. Caloyeras, Manager
Facsimile: (310) 527-8101
With a copy to: Howard Z. Berman, Esq.
Ervin, Cohen & Jessup LLP
9401 Wilshire Boulevard, 9th Floor
Beverly Hills, CA 90212-2974
Facsimile: (310) 859-2325
If to Seller
or Stockholder: Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attn: Dale H. Sizemore, President
Facsimile: (816) 763-2278
With a copy to: Steven C. Willman, Esq.
Polsinelli, White, Vardeman & Shalton
700 West 47th Street, Suite 100
Kansas City, Missouri 64112
Facsimile: (816) 753-1536
15. Amendment and Waiver. The parties may by mutual
agreement in writing signed by each party amend this
Agreement in any respect. In addition, any party may in
writing: (a) extend the time for the performance of any of
the acts or obligations of any other party; (b) waive any
inaccuracies in the representations or warranties of any
other party contained in this Agreement or in any document
or certificate delivered pursuant hereto; (c) waive
compliance or performance by any other party with any of the
covenants, agreements or obligations of such party contained
in this Agreement; and (d) waive the satisfaction of any
condition that is precedent to the performance by the party
so waiving of any of its obligations under this Agreement.
Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. A waiver by one
party of the performance of any covenant, agreement,
obligation, condition, representation or warranty shall not
be construed as a waiver of any other covenant, agreement,
obligation, condition, representation or warranty. A waiver
by any party of the performance of any act shall not
constitute a waiver of the performance of any other act or
an identical act required to be performed at a later date.
16. Assignment. Other than with respect to an assignment
by Buyer of its rights and obligations hereunder to an
Affiliate of Buyer which is nominated by Buyer to purchase
all or a portion of the Transferred Assets as contemplated
herein, this Agreement may not be assigned (by operation of
law or otherwise) by any party without the prior written
consent of the other parties. This Agreement and all of the
provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors
and assigns.
17. No Third Party Beneficiary Rights. This Agreement is
not intended to and shall not be construed to give any
person other than the parties signatory hereto any interest
or rights (including, without limitation, any third party
beneficiary rights) with respect to or in connection with
any agreement or provision contained herein or contemplated
hereby.
18. Entire Understanding. This Agreement and the other
documents and instruments specifically provided for in this
Agreement contain the entire understanding between the
parties concerning the subject matter of this Agreement and
such other documents and instruments and supersede all prior
understandings and agreements, whether oral or written,
between them with respect to the subject matter hereof and
thereof. There are no representations, agreements,
arrangements or understandings, oral or written, between or
among the parties hereto relating to the subject matter of
this Agreement and such other documents and instruments
which are not fully expressed herein or therein.
19. Expenses. Except as otherwise provided in this
Agreement, each party shall bear and pay its own costs and
expenses relating to the transactions contemplated by, or
the performance of or compliance with any condition or
covenant set forth in, this Agreement. In determining the
costs and expenses of each party hereunder, all Transfer
Taxes, if any, required to be paid in connection with the
sale pursuant to this Agreement of the Transferred Assets
shall be borne by Seller, and Seller shall be responsible
for the preparation and filing of any returns required in
connection therewith. The cost of the Title Policy shall be
paid by Seller, and all real property taxes, utilities and
similar costs shall be prorated in accordance with the
customs of the county in which the Real Property is located.
20. Remedies Not Exclusive. Except as otherwise expressly
set forth in this Agreement, no remedy conferred by any of
the specific provisions of this Agreement is intended to be
exclusive of any other remedy, and each and every remedy
shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law
or in equity or by statute or otherwise. The election of
any one or more remedies by a party shall not, except as
otherwise expressly provided for herein, constitute a waiver
of the right to pursue other available remedies.
21. Captions. The captions appearing at the beginning of
the various paragraphs of this Agreement are for convenience
of reference only and shall not be given any effect
whatsoever in the construction or interpretation of this
Agreement.
22. Severability. The provisions of this Agreement are
severable, and if any one or more provisions may be
determined to be judicially unenforceable, in whole or in
part, the remaining provisions, and any partially
unenforceable provisions to the extent enforceable, shall
nevertheless be binding and enforceable.
23. Definitions. As used in this Agreement, the terms set
forth below shall have the following meanings:
Affiliate of a specified person means any person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with
the person specified and, in the case of a natural person,
includes the spouse, siblings, ancestors and lineal
descendants of such person and the spouses of the siblings,
ancestors and lineal descendants of such person. The term
control means the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a person.
Bankruptcy Exception means the limitation on enforceability
imposed by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the
rights of creditors or by equitable principles, whether
enforcement is sought in equity or at law.
Environmental Legal Requirements means all Legal
Requirements relating to the use, handling, treatment,
storage, transportation, disposal, emission, discharge or
release of Hazardous Materials or otherwise relating to the
protection of the environment (including, without
limitation, ambient air, surface water, ground water, land
surface or subsurface strata) or industrial hygiene.
Governmental Entity means any court, governmental
department, commission, council, board, bureau, agency or
other judicial, administrative, regulatory, legislative or
other instrumentality of the United States of America or any
foreign country, or any state, county, municipality or local
governmental body or political subdivision of or within the
United States of America or any foreign country.
Hazardous Materials means any substances (including, without
limitation, any asbestos, formaldehyde, radioactive
substances, hydrocarbons, polychlorinated biphenyls,
industrial solvents, flammables, explosives and any other
hazardous substances, solid wastes or toxic materials) that
are defined as hazardous or toxic substances under Legal
Requirements relating to the protection of the environment
or industrial hygiene.
Legal Requirements means (a) any and all laws, statutes,
codes, rules, regulations, ordinances, judgments, orders,
writs, decrees, requirements or determinations of any
Governmental Entity, (b) to the extent not covered by clause
(a) immediately above, any and all requirements of permits,
licenses, certificates, authorizations, concessions,
franchises or other approvals granted by any Governmental
Entity, and (c) any and all duties arising under common law.
Liens means any liens, encumbrances, mortgages, covenants,
conditions, restrictions, easements, encroachments, rights
of way, charges or other rights, claims or interests of any
third party whatsoever.
Person or person means an individual, a corporation, a
partnership, a limited liability company, an association, a
trust or any other entity or organization, including,
without limitation, any Governmental Entity.
Plan means (a) any employee benefit plan (as such term is
defined in Section 3(3) of the ERISA), of which Seller or
any member of the same controlled group of businesses as
Seller within the meaning of Section 4001(a)(14) of ERISA
(an ERISA Affiliate) is a sponsor or participating employer
or as to which Seller or any of its ERISA Affiliates makes
contributions or is required to make contributions,
including, without limitation, a multi-employer plan, as
defined in Section 3(37) of ERISA, a defined benefit pension
plan within the meaning of ERISA Section 3(35), or a welfare
benefit fund, as defined in Code Section 419(e), or an
organization described in Code Sections 501(c)(9) or
501(c)(20), and (b) any employment, severance or other
arrangement or policy of Seller or of any of its ERISA
Affiliates (whether written or oral) providing for insurance
coverage (including self-insured arrangements), workers
compensation, disability benefits, supplemental unemployment
benefits, vacation benefits or retirement benefits, or for
profit sharing, deferred compensation, bonuses, stock
options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or
benefits.
Representatives of a party means the respective directors,
officers, employees, representatives, consultants, lenders
and advisors of the party and its Affiliates.
Taxes means any income, gross receipts, ad valorem, premium,
excise, value-added, sales, use, transfer, franchise,
license, severance, stamp, occupation, service, lease,
withholding, employment, payroll, premium, property or
windfall profits tax, alternative or add-on-minimum tax or
other tax, fee or assessment, and any interest, penalty,
addition to tax or additional amount imposed by any
Governmental Entity responsible for the imposition of any
such tax.
Tax Return means any return, report, statement, information
statement and the like required to be filed with any
Governmental Entity with respect to Taxes.
To the best knowledge and similar phrases referring to the
knowledge of a party mean the actual knowledge, or the
knowledge that a person would have after reasonable
investigation and inquiry, of such party or, in the case of
a corporation or other legal entity, of such partys
executive officers, including with respect to Seller and
Stockholder, Herb Sizemore, Chris T. Hughes, Jim Serrone and
Margaret E. Edinger.
Transfer Taxes means any sales, use, excise, stock, stamp,
document, filing, recording, authorization or similar taxes,
fees and charges.
Trade Secrets means all know-how, trade secrets,
confidential information, customer lists, software,
technical information, data, process technology, plans,
drawings and blueprints owned, used or licensed by Seller as
licensee or licensor.
24. Attorneys Fees. If any court proceeding is brought in
connection with this Agreement, or any document, agreement,
instrument or certificate delivered under or pursuant to
this Agreement, the prevailing party in such proceeding
(whether at trial or on appeal) shall be entitled to recover
from the other party all costs, expenses and reasonable
attorneys fees incidental to any such proceeding. The term
prevailing party as used herein shall mean the party in
whose favor a final judgment or award is entered in any such
judicial proceeding; provided, however, that if such
proceeding is resolved prior to a final judgment or award on
the merits, the party in whose favor the proceeding is
settled may by motion apply to the court for an award of the
aforementioned costs, fees and expenses, and may take
judgement therefor.
25. Choice of Law. This Agreement shall be construed,
interpreted and enforced in accordance with the internal
laws of the State of California without reference to its
choice of law rules.
26. Number and Gender. Terms used herein in any number or
gender include other numbers or genders, as the context may
require.
27. Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may
be executed by any party by delivery of a facsimile
signature, which signature shall have the same force and
effect as an original signature. Any party which delivers a
facsimile signature shall promptly thereafter deliver an
originally executed signature to the other party(ies);
provided, however, that the failure to deliver an original
signature page shall not affect the validity of any
signature delivered by facsimile.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
SELLER: BUYER:
OPT Industries, Inc. Shared Information Group
Management Associates, LLC
By: /s/ Christian T. Hughes By: /s/ Peter B. Caloyeras
Christian T. Hughes, Peter B. Caloyeras, Manager
President
STOCKHOLDER:
Torotel, Inc.
By: /s/ Christian T. Hughes
Christian T. Hughes, President
LIST OF SCHEDULES
Schedule Description
1.1(a)(1) Real Property
1.1(b) Equipment
1.1(d) Assumed Contracts
1.1(f) Prepaids
2.2(a) Purchase Note
2.2(b) Security Agreement
3.1(a) Seller Noncompetition Agreement
3.1(b) Stockholder Noncompetition Agreement
5 Business Employees
6.3 Conflicts and Required Consents
6.6 Seller Financial Statements
6.7 Adverse Changes
6.8 Material Contracts
6.9(a) Liens to be Removed
6.9(b) Permitted Exceptions
6.10(b) Other Real Property Exceptions
6.12 Environmental Matters
6.13 Intellectual Property
6.15 Legal Proceedings
6.16 Permits
6.18 Insurance
6.19 Return Obligations
6.20 Interest in Competitors and Suppliers
6.21 Labor Relations
6.22 Employment and Bonus Arrangements
6.23 Employee Benefit Plans
11.6 Computer Services Agreement
Schedule 1.1(a)(1)
Real Property Description
ALL that certain tract or parcel of land and premises,
situate, lying and being in the Township of Lopatcong, in
the County of Warren, and State of New Jersey, more
particularly described as follows:
BEGINNING at an iron pipe in the westerly boundary line of
Red School Lane, such pin being the southeast corner of Lot
4.1 of Block 85, Tax Sheet 2 and such pin being located 4.32
feet westerly of the face of curb of Red School Lane; thence
(A) Along the westerly boundary line of Red School Lane,
South 15 degrees 00 minutes East, 213.24 feet to an iron
pin; thence
(B) Through lands of grantor, of which this parcel is a
part, and along the line of a minor subdivision of such
lands, South 75 degrees 00 minutes West, 668.49 feet to an
iron pin in line of Lot 35, Block 85; thence
(C) By said Lot 35, and the eastern end of Edwards Street
and by line of Lot 36, North 16 degrees 10 minutes West,
84.88 feet to an iron pin a corner of Lot 36 and Lot 4;
thence
(D) By line of Lot 4, North 15 degrees 00 minutes West,
128.37 feet to an iron pin line of Lot 4.1; thence
(E) Around the periphery of Lot 4.1, as it is now, by the
following six courses and distances:
(1) By Lot 4, South 75 degrees 00 minutes West, 73.05
feet to a corner;
(2) By Lot 4, North 15 degrees 00 minutes West, 214.60
feet;
(3) By Lot 2, North 62 degrees 00 minutes East, 330.00
feet;
(4) By Lot 3, South 15 degrees 00 minutes East, 100.00
feet;
(5) By Lot 3 and Lot 3.1, North 62 degrees 00 minutes
East, 433.16 feet to a corner in the westerly boundary line
of Red School Lane, aforesaid;
(6) By said westerly boundary line of Red School Lane,
South 15 minutes 00 minutes East, 286.19 feet to the place
of BEGINNING.
FOR INFORMATION ONLY:
Being known as Lot 4.01 in Block 85 on the Official Tax Map
of the Township of Lopatcong in the County of Warren and
State of New Jersey. Being also known as 300 Red School
Lane.
Schedule 1.1(b)
Equipment and Other Tangible Personal Property
See attached lists.
Schedule 1.1(d)
Assumed Obligations
1. Lease between Seller and First Valley Leasing, Inc.,
dated 8/9/94 and designated as Lease No. 13012, pertaining
to certain Equipment, including a Mitel Digital SX-50
Telephone System.
2. Attached Backlog Report.
3. All customer contracts.
4. Capitalized lease pertaining to PNBT (Pro-Engineer
System).
5. Capitalized lease pertaining to PNBT (Optimized Devices
Automated Test Equipment).
6. Leases of fax machine and three copiers from Xerox.
7. Any obligations to pay commissions owed with respect to
open purchase orders for which products are shipped by Buyer
subsequent to Closing.
8. All purchase orders to the extent materials are to be
delivered after the date of Closing as set forth in the
attached schedule.
Schedule 1.1(f)
Prepaids
None.
Schedule 2.2(b)(1)
Purchase Note
Schedule 2.2(b)(2)
Security Agreement
Schedule 3.1(a)
Seller Noncompetition Agreement
THIS NONCOMPETITION AGREEMENT (the Agreement) is made and
entered into as of April 19, 1999, by and between OPT
INDUSTRIES, INC., a New Jersey corporation, (Covenantor) and
SHARED INFORMATION GROUP MANAGEMENT ASSOCIATES, LLC, a
California limited liability company (Buyer), ancillary to
and as required by the Asset Purchase Agreement (the
Purchase Agreement), dated as of April 19, 1999, by and
among Buyer, Seller and TOROTEL, INC., a Missouri
corporation (Torotel), pursuant to which substantially all
of the assets of Covenantor are being purchased by Buyer
(the Asset Purchase). Unless otherwise provided herein, all
terms used in this Agreement that are defined in the
Purchase Agreement shall have the same meanings herein as in
the Purchase Agreement.
In consideration of the foregoing, and in order to satisfy a
condition precedent to the consummation of the Asset
Purchase, Covenantor and Buyer hereby agree and covenant as
follows:
1. Certain Definitions. The following terms used herein
shall have the following meanings:
Affiliate or affiliate - A Person that directly or
indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person
specified. For purposes of this definition, control
(including the terms controlling, controlled by and under
common control with) of a Person means the possession,
directly or indirectly, of the power to (a) vote 50% or more
of the voting interests in such Person or (b) direct or
cause the direction of the management and policies of such
Person, whether by contract or otherwise.
Business - Any one or more of the following activities:
selling, manufacturing, producing, providing, installing,
marketing, or dealing in or with or otherwise soliciting
orders for any of the Products and Services (as defined
below) or any products, services, materials, supplies or
support activities that compete with or may be used to
replace any of those Products and Services.
Competitor - Any Person that, directly or indirectly,
engages in any aspect of the Business within any portion of
the Territory.
Person or person - Any individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or any agency or instrumentality thereof.
Products and Services - All products, services, materials,
supplies and support activities which are or have been
provided, sold, manufactured, installed, marketed or dealt
in or with by the Covenantor, and all competitive products,
services, materials, supplies and support activities.
The Territory - All or any part of the United States.
2. Noncompetition. Covenantor hereby agrees that it will
not, during the term of this Agreement, directly or
indirectly, or through one or more Affiliates, do any one or
more of the following: (a) engage in any aspect of the
Business, whether as an employee, agent, independent
contractor or otherwise; (b) own any interest in any
Competitor; (c) operate, join, control or otherwise
participate in any Competitor; (d) lend credit or money for
the purpose of assisting another to establish or operate any
Competitor; (e) request or advise any present or future
customer or supplier of the Covenantor or Buyer or any
affiliate of Buyer to withdraw, curtail or cancel its
business with Buyer; or (f) induce or influence (or attempt
to induce or influence) any person who is engaged (as an
employee, agent, independent contractor or otherwise) by
Buyer or any Affiliate of Buyer to terminate his or her
employment or engagement or to perform any services for a
Competitor; provided, that nothing herein shall prohibit
Covenantor from holding an equity interest of less than 2%
of the outstanding capital stock of any Competitor whose
equity securities are traded on a national stock exchange or
are quoted on Nasdaq. Notwithstanding the foregoing, it is
agreed that (i) Covenantor shall not be deemed in violation
of clauses (b), (c) or (d) above as a result of the fact
that it is a wholly-owned subsidiary of Torotel and an
Affiliate of Torotel Products, Inc. (TPI), and (ii)
Covenantors providing warranty work or providing products in
exchange for those previously sold by Covenantor on or
before the date hereof and which are returned as defective,
or engaging in activities in conjunction with or at the
request of Torotel or TPI which are not otherwise restricted
pursuant to the Noncompetition Agreement between Torotel and
Buyer (the Torotel Noncompetition Agreement), shall not be a
violation of this Agreement.
3. Confidentiality. Except for disclosures made to Torotel
or TPI with respect to activities engaged in by Torotel or
TPI which are not otherwise restricted pursuant to the
Torotel Noncompetition Agreement, Covenantor shall keep
secret and retain in confidence, and shall not use for the
benefit of Covenantor or others (except in connection with
any warranty or replacement work permitted hereunder), any
confidential information concerning the business of Buyer,
as successor to the Covenantor, or its affiliates
(Confidential Information) including, without limitation,
know-how, trade secrets, customer lists, details of client
or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, business acquisition
plans, technical processes and designs and design projects
of Buyer and its affiliates relating to the business of
Buyer, as successor to the Covenantor. Confidential
Information shall not include information which (a) is or
becomes generally available to the public other than as a
result of a disclosure by Covenantor or (b) becomes
available to Covenantor on a non-confidential basis from a
source other than Torotel or Buyer, provided that such
source is not bound by a confidentiality agreement with
either the Covenantor, Torotel or Buyer.
4. Term. The term of this Agreement commences on the date
hereof and shall continue for a period of sixty months.
Covenantor hereby acknowledges the receipt and sufficiency
of full consideration for this Agreement.
5. Injunctive Relief. Covenantor hereby stipulates and
agrees that any breach by Covenantor of this Agreement
cannot be reasonably or adequately compensated by damages in
an action at law and that, in the event of such breach,
Buyer shall be entitled to injunctive relief, which may
include but shall not be limited to restraining Covenantor
from engaging in any activity that would constitute a breach
of this Agreement.
6. Severability. Covenantor acknowledges that Covenantor
has carefully read and considered the provisions of
Paragraphs 1 through 4 of this Agreement and, having done
so, agrees that the restrictions set forth therein
(including but not limited to the time periods of
restriction and the geographical areas of restriction) are
fair and reasonable and are reasonably required to protect
the interests of Buyer. If, notwithstanding the foregoing,
any of the provisions of Paragraphs 1 through 4 shall be
held to be invalid or unenforceable, the remaining
provisions thereof shall nevertheless continue to be valid
and enforceable, as though the invalid or unenforceable
parts had not been included therein. If any provision of
Paragraphs 1 through 4 hereof relating to time periods or
areas of restriction or both shall be declared by a court of
competent jurisdiction to exceed the maximum time periods or
areas (or both) that such court deems reasonable and
enforceable, said time periods or areas of restriction or
both shall be deemed to become and thereafter shall be the
maximum time periods and areas which such court deems
reasonable and enforceable.
7. Entire Agreement. This Agreement constitutes the entire
agreement of Covenantor and Buyer with respect to the
subject matter hereof and supersedes all prior and
contemporaneous oral agreements, understandings,
negotiations and discussions of the parties. No supplement,
modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise
expressly provided. Any failure to insist on strict
compliance with any of the terms and conditions of this
Agreement shall not be deemed a waiver of any such terms or
conditions.
8. Nature of Obligations. All covenants and obligations of
Covenantor hereunder shall be binding on Covenantor,
Covenantors assigns, successors and legal representatives
and shall inure to the benefit of Buyer and all of Buyers
Affiliates that engage in any aspect of the Business in any
part of the Territory.
9. Law Governing. The provisions of this Agreement and all
rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State
of New Jersey applicable to contracts made and to be wholly
performed within the State of New Jersey.
10. Attorneys Fees. In any litigation relating to this
Agreement, including litigation with respect to any
supplement, modification or waiver of this Agreement or any
of its provisions, the prevailing party shall be entitled to
recover its costs and reasonable attorneys fees.
11. Notices. Any and all notices, demands, requests or
other communications hereunder shall be in writing and shall
be deemed duly given when personally delivered to or
transmitted by overnight express delivery or by facsimile to
and received by the party to whom such notice is intended,
or in lieu of such personal delivery or overnight express
delivery or facsimile transmission, 48 hours after deposit
in the United States mail, first-class, certified or
registered, postage prepaid, return receipt requested,
addressed to the applicable party at the address provided
below. Either party may change its address for the purpose
of this Paragraph 11 by giving notice of such change to the
other party in the manner which is provided in this
Paragraph 11.
Covenantor: OPT Industries, Inc.
c/o Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attention: Dale H. Sizemore, President
Facsimile: (816) 763-2278
Buyer: Shared Information Group Management
Associates, LLC
2041 W. 139th Street
Gardena, California 90247
Attention: Peter B. Caloyeras, Manager
Facsimile No.: (310) 859-2325
12. Captions. The captions in this Agreement are included
for convenience of reference only, do not constitute a part
hereof and shall be disregarded in the interpretation or
construction hereof.
13. Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may
be executed by any party by delivery of a facsimile
signature, which signature shall have the same force and
effect as an original signature. Any party which delivers a
facsimile signature shall promptly thereafter deliver an
originally executed signature to the other party(ies);
provided, however, that the failure to deliver an original
signature page shall not affect the validity of any
signature delivered by facsimile.
14. Warranty and Return Obligations. Nothing contained
herein is intended to create an obligation on the part of
Covenantor, Torotel or TPI to perform any warranty work,
accept return of products or perform any similar
obligations.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
OPT INDUSTRIES, INC.
By: /s/ Christian T. Hughes
Name: Christian T. Hughes
Title: President
SHARED INFORMATION GROUP
MANAGEMENT ASSOCIATES, LLC
By: /s/ Peter B. Caloyeras
Peter B. Caloyeras, Manager
Schedule 3.1(b)
Stockholder Noncompetition Agreement
THIS NONCOMPETITION AGREEMENT (the Agreement) is made and
entered into as of April 19, 1999, by and between TOROTEL,
INC., a Missouri corporation (Covenantor) and SHARED
INFORMATION GROUP MANAGEMENT ASSOCIATES, LLC, a California
limited liability company (Buyer), ancillary to and as
required by the Asset Purchase Agreement (the Purchase
Agreement), dated as of April 19, 1999, by and among Buyer,
OPT INDUSTRIES, INC., a New Jersey corporation (the
Company), and Covenantor, the sole stockholder of the
Company, pursuant to which substantially all of the assets
of the Company are being purchased by Buyer (the Asset
Purchase). Unless otherwise provided herein, all terms used
in this Agreement that are defined in the Purchase Agreement
shall have the same meanings herein as in the Purchase
Agreement.
In consideration of the foregoing, and in order to satisfy a
condition precedent to the consummation of the Asset
Purchase, Covenantor and Buyer hereby agree and covenant as
follows:
1. Certain Definitions. The following terms used herein
shall have the following meanings:
Affiliate or affiliate - A Person that directly or
indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Person
specified. For purposes of this definition, control
(including the terms controlling, controlled by and under
common control with) of a Person means the possession,
directly or indirectly, of the power to (a) vote 50% or more
of the voting interests in such Person or (b) direct or
cause the direction of the management and policies of such
Person, whether by contract or otherwise.
Business - Any one or more of the following activities:
selling, manufacturing, providing, installing, marketing, or
dealing in or with or otherwise soliciting orders for any of
the Products and Services (defined below) or any products,
services, materials, supplies or support activities that
compete with or may be used to replace any of those Products
and Services.
Competitor - Any Person that, directly or indirectly,
engages in any aspect of the Business within any portion of
the Territory.
Person or person - Any individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political
subdivision or any agency or instrumentality thereof.
Products and Services - All products, services, materials,
supplies and support activities which are or have been
provided, sold, manufactured, installed, marketed or dealt
in or with by the Company prior to the date hereof.
The Territory - All or any part of the United States.
2. Noncompetition. Covenantor hereby agrees that
Covenantor will not, during the term of this Agreement,
directly or indirectly, or through one or more Affiliates,
do any one or more of the following: (a) engage in any
aspect of the Business, whether as an employee, agent,
independent contractor or otherwise; (b) own any interest in
any Competitor; (c) operate, join, control or otherwise
participate in any Competitor; (d) lend credit or money for
the purpose of assisting another to establish or operate any
Competitor; (e) request or advise any present or future
customer or supplier of the Company, Covenantor or Buyer to
withdraw, curtail or cancel its business with Buyer; or (f)
induce or influence (or attempt to induce or influence) any
person who is engaged (as an employee, agent, independent
contractor or otherwise) by Buyer or any Affiliate of Buyer
to terminate his or her employment or engagement or to
perform any services for a Competitor; provided, that
nothing herein shall prohibit Covenantor from holding an
equity interest of less than 2% of the outstanding capital
stock of any Competitor whose equity securities are traded
on a national stock exchange or are quoted on Nasdaq.
Notwithstanding the foregoing, it is agreed that (i)
Covenantor shall not be deemed in violation of clauses (a),
(b), (c), (d) or (e) (with respect to customers only and not
suppliers) with respect to products and services
manufactured and sold by Covenantor and Torotel Products,
Inc. (TPI) as of the date hereof which may be competitive
with the Products and Services sold by the Business, and
(ii) Covenantors providing warranty work or providing
products in exchange for those previously sold by Covenantor
or the Company on or before the date hereof and which are
returned as defective shall not be a violation of this
Agreement.
3. Confidentiality. Except for disclosures made with
respect to activities engaged in by Torotel or TPI which are
not otherwise restricted pursuant to this Agreement,
Covenantor shall keep secret and retain in confidence, and
shall not use for the benefit of Covenantor or others, any
confidential information concerning the business of Buyer,
as successor to the Company, or its affiliates (Confidential
Information) including, without limitation, know-how, trade
secrets, customer lists, details of client or consultant
contracts, pricing policies, operational methods, marketing
plans or strategies, business acquisition plans, technical
processes and designs and design projects of Buyer and its
affiliates relating to the business of Buyer, as successor
to the Company learned by Covenantor as a result of prior
and current business relationships with the Company or its
predecessors. Confidential Information shall not include
information which (a) is or becomes generally available to
the public other than as a result of a disclosure by
Covenantor or (b) becomes available to Covenantor on a non-
confidential basis from a source other than the Company or
Buyer, provided that such source is not bound by a
confidentiality agreement with either the Company or Buyer
known to Covenantor.
4. Term. The term of this Agreement commences on the date
hereof and shall continue for a period of eighteen months.
Covenantor hereby acknowledges the receipt and sufficiency
of full consideration for this Agreement.
5. Injunctive Relief. Covenantor hereby stipulates and
agrees that any breach by Covenantor of this Agreement
cannot be reasonably or adequately compensated by damages in
an action at law and that, in the event of such breach,
Buyer shall be entitled to injunctive relief, which may
include but shall not be limited to restraining Covenantor
from engaging in any activity that would constitute a breach
of this Agreement.
6. Severability. Covenantor acknowledges that Covenantor
has carefully read and considered the provisions of
Paragraphs 1 through 4 of this Agreement and, having done
so, agrees that the restrictions set forth therein
(including but not limited to the time periods of
restriction and the geographical areas of restriction) are
fair and reasonable and are reasonably required to protect
the interests of Buyer and Newpark and its stockholders.
If, notwithstanding the foregoing, any of the provisions of
Paragraphs 1 through 4 shall be held to be invalid or
unenforceable, the remaining provisions thereof shall
nevertheless continue to be valid and enforceable, as though
the invalid or unenforceable parts had not been included
therein. If any provision of Paragraphs 1 through 4 hereof
relating to time periods or areas of restriction or both
shall be declared by a court of competent jurisdiction to
exceed the maximum time periods or areas (or both) that such
court deems reasonable and enforceable, said time periods or
areas of restriction or both shall be deemed to become and
thereafter shall be the maximum time periods and areas which
such court deems reasonable and enforceable.
7. Entire Agreement. This Agreement constitutes the entire
agreement of Covenantor and Buyer with respect to the
subject matter hereof and supersedes all prior and
contemporaneous oral agreements, understandings,
negotiations and discussions of the parties. No supplement,
modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby.
No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise
expressly provided. Any failure to insist on strict
compliance with any of the terms and conditions of this
Agreement shall not be deemed a waiver of any such terms or
conditions.
8. Nature of Obligations. All covenants and obligations of
Covenantor hereunder shall be binding on Covenantor,
Covenantors assigns, successors and legal representatives
and shall inure to the benefit of Buyer and all of Buyers
Affiliates that engage in any aspect of the Business in any
part of the Territory.
9. Law Governing. The provisions of this Agreement and all
rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State
of New Jersey applicable to contracts made and to be wholly
performed within the State of New Jersey.
10. Attorneys Fees. In any litigation relating to this
Agreement, including litigation with respect to any
supplement, modification or waiver of this Agreement or any
of its provisions, the prevailing party shall be entitled to
recover its costs and reasonable attorneys fees.
11. Notices. Any and all notices, demands, requests or
other communications hereunder shall be in writing and shall
be deemed duly given when personally delivered to or
transmitted by overnight express delivery or by facsimile to
and received by the party to whom such notice is intended,
or in lieu of such personal delivery or overnight express
delivery or facsimile transmission, 48 hours after deposit
in the United States mail, first-class, certified or
registered, postage prepaid, return receipt requested,
addressed to the applicable party at the address provided
below. Either party may change its address for the purpose
of this Paragraph 11 by giving notice of such change to the
other party in the manner which is provided in this
Paragraph 11.
Covenantor: Torotel, Inc.
13402 South 71 Highway
Grandview, Missouri 64030
Attention: Dale H. Sizemore, President
Facsimile: (816) 763-2278
Buyer: Shared Information Group Management
Associates, LLC
2041 W. 139th Street
Gardena, California 90247
Attention: Peter B. Caloyeras, Manager
Facsimile No.: (310) 859-2325
13. Captions. The captions in this Agreement are included
for convenience of reference only, do not constitute a part
hereof and shall be disregarded in the interpretation or
construction hereof.
14. Counterparts; Facsimile Signatures. This Agreement may
be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may
be executed by any party by delivery of a facsimile
signature, which signature shall have the same force and
effect as an original signature. Any party which delivers a
facsimile signature shall promptly thereafter deliver an
originally executed signature to the other party(ies);
provided, however, that the failure to deliver an original
signature page shall not affect the validity of any
signature delivered by facsimile.
15. Warranty and Return Obligations. Nothing contained
herein is intended to create an obligation on the part of
Covenantor or any of its Affiliates to perform any warranty
work, accept return of products or perform any similar
obligations.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
TOROTEL, INC.
By: /s/ Christian T. Hughes
Name: Christian T. Hughes
Title: President
SHARED INFORMATION GROUP
MANAGEMENT ASSOCIATES, LLC
By: /s/ Peter B. Caloyeras
Peter B. Caloyeras, Manager
Schedule 5
Business Employees
See attached list.
Schedule 6.3
Contracts or Violations
1. Consents may be required in any instrument or contract
set forth in Schedule 6.8.
2. Governmental consent may be required for the manufacture
or sale of any QPL (qualified product list) products or the
assignment of such contracts assumed by Buyer.
Schedule 6.6
Financial Statements
The accompanying unaudited financial statements of OPT
Industries, Inc. reflect the normal recurring adjustments
which are, in the opinion of management, necessary to
present fairly OPTs financial position at January 31 and
February 28, 1999, and the results of operations for the
nine and ten month periods then ended.
Interim Financial Statements are prepared by calculating
Inventory on a perpetual basis. Financial Statements have
been adjusted on year end Financial Statements to state
inventory at cost or market, whichever is lower, on a first
in, first out basis.
In addition, Seller and Stockholder make no representation
that the Financial Statements reflect the net receivable
market value or the values of obsolete, below standard
quality or non-salable Inventory.
OPT INDUSTRIES, INC.
Balance Sheet
As of January 31, 1999
(Unaudited)
ASSETS
TABLE
[S] [C]
Current assets:
Cash $ 214,000
Accounts receivable, net 134,000
Inventories 1,741,000
2,089,000
Property, plant and equipment, net 732,000
Other assets 12,000
$ 2,833,000
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Short-term revolving credit line $ 450,000
Current maturities of long-term debt 64,000
Trade accounts payable 280,000
Accrued liabilities 153,000
947,000
Long-term debt, less current maturities 880,000
Due to affiliate 346,000
Stockholders equity:
Common stock, at par value 200,000
Capital in excess of par value 204,000
Retained earnings 256,000
660,000
$ 2,833,000
/TABLE
OPT INDUSTRIES, INC.
Statement of Operations
Nine Months Ended January 31, 1999
(Unaudited)
TABLE
[S] [C]
Net sales $ 2,357,000
Cost of goods sold 2,530,000
Gross loss (173,000)
Operating expenses:
Engineering 459,000
Selling, general and administrative 657,000
1,116,000
Loss from operations (1,289,000)
Other expense (income):
Interest expense 94,000
Other, net (984,000)
(890,000)
Loss before provision for income taxes (399,000)
Provision for income taxes -
Net loss $ (399,000)
/TABLE
OPT INDUSTRIES, INC.
Consolidated Statement of Cash Flows
Nine Months Ended January 31, 1999
(Unaudited)
TABLE
[S] [C]
Cash flows from operating activities:
Net loss $ (399,000)
Adjustments to reconcile net loss to net cash
provided by operations:
Gain on sale of product line (984,000)
Depreciation and amortization 126,000
Increase (decrease) in cash flows from
operations resulting from changes in:
Accounts receivable 337,000
Inventories (225,000)
Prepaid expenses and other assets 40,000
Trade accounts payable 7,000
Accrued liabilities (91,000)
Net cash used in operating activities (1,189,000)
Cash flows from investing activities:
Capital expenditures (10,000)
Proceeds from product line sale 1,250,000
Net cash provided by investing activities 1,240,000
Cash flows from financing activities:
Borrowings against credit line 1,420,000
Payments against credit line (1,250,000)
Principal payments on long-term debt (42,000)
Payments on capital lease obligations (6,000)
Proceeds from affiliate 22,000
Net cash provided by financing activities 144,000
Net increase in cash $ 195,000
Cash at beginning of year 19,000
Cash at end of January $ 214,000
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $ 94,000
Income taxes $ -
/TABLE
OPT INDUSTRIES, INC.
Balance Sheet
As of February 28, 1999
(Unaudited)
ASSETS
TABLE
[S] [C]
Current assets:
Cash $ 172,000
Accounts receivable, net 159,000
Inventories 1,691,000
2,022,000
Property, plant and equipment, net 722,000
Other assets 12,000
$ 2,756,000
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Short-term revolving credit line $ 450,000
Current maturities of long-term debt 64,000
Trade accounts payable 333,000
Accrued liabilities 143,000
990,000
Long-term debt, less current maturities 874,000
Due to affiliate 348,000
Stockholders equity:
Common stock, at par value 200,000
Capital in excess of par value 204,000
Retained earnings 140,000
544,000
$ 2,756,000
/TABLE
OPT INDUSTRIES, INC.
Statement of Operations
Ten Months Ended February 28, 1999
(Unaudited)
TABLE
[S] [C]
Net sales $ 2,602,000
Cost of goods sold 2,747,000
Gross loss (145,000)
Operating expenses:
Engineering 526,000
Selling, general and administrative 724,000
1,250,000
Loss from operations (1,395,000)
Other expense (income):
Interest expense 104,000
Other, net (984,000)
(880,000)
Loss before provision for income taxes (515,000)
Provision for income taxes -
Net loss $ (515,000)
/TABLE
OPT INDUSTRIES, INC.
Consolidated Statement of Cash Flows
Ten Months Ended February 28, 1999
(Unaudited)
TABLE
[S] [C]
Cash flows from operating activities:
Net loss $ (515,000)
Adjustments to reconcile net loss to
net cash provided by operations:
Gain on sale of product line (984,000)
Depreciation and amortization 136,000
Increase (decrease) in cash flows from
operations resulting from changes in:
Accounts receivable 312,000
Inventories (175,000)
Prepaid expenses and other assets 40,000
Trade accounts payable 60,000
Accrued liabilities (101,000)
Net cash used in operating activities (1,227,000)
Cash flows from investing activities:
Capital expenditures (10,000)
Proceeds from product line sale 1,250,000
Net cash provided by investing activities 1,240,000
Cash flows from financing activities:
Borrowings against credit line 1,420,000
Payments against credit line (1,250,000)
Principal payments on long-term debt (47,000)
Payments on capital lease obligations (7,000)
Proceeds from affiliate 24,000
Net cash provided by financing activities 140,000
Net increase in cash $ 153,000
Cash at beginning of year 19,000
Cash at end of February $ 172,000
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest $ 104,000
Income taxes $ -
/TABLE
Schedule 6.7
Adverse Changes
1. On September 18, 1998, Stockholders wholly-owned
subsidiary, OPT Industries, Inc., completed the sale of its
ultra-miniature transformer and inductor product line to
Pico Electronics, Inc. of Pelham, New York. OPT received
cash proceeds of $1,250,000 from the sale.
2. For the fiscal year ended April 30, 1998, Stockholder
incurred a pretax loss of $1,295,000. For the nine months
ended January 1999, Stockholder incurred an additional
operating loss of $1,978,000 (before the $984,000 gain
recognized from the product line sale discussed in Item 1).
At the present time, Stockholder expects to incur further
operating losses. Stockholders primary creditor
(Phillipsburg National Bank & Trust Company) has issued a
default notice with respect to indebtedness owed to such
lender (received on April 9, 1999). Without a further
extension of the credit line, and an infusion of cash,
and/or an increase in the borrowing limit, and/or a major
restructuring, the financial condition, results of
operations, business, properties, assets, liabilities, or
future prospects of Stockholder or any Stockholder
Subsidiary may be materially adversely affected.
3. Failed merger transaction.
4. Pursuant to the notice of default received on April 9,
1999, as referenced above, the lender also declared due a
first mortgage loan in the principal amount of $582,251.03,
a second mortgage loan in the principal amount of
$382,959.31, an equipment loan designated as Loan 27438, and
an equipment loan designated as Loan 27395.
Schedule 6.8
Material Contracts
1. Collective Bargaining Agreement between OPT Industries,
Inc. and the United Steelworkers of America, AFL-CIO Local
5503.
2. Compensation Agreement between OPT Industries, Inc. and
Christian T. Hughes.
3. Commercial Guaranty of Torotel, Inc., Torotel Products,
Inc. and OPT Industries, Inc. as guarantors of the credit
agreement and other promissory notes with Phillipsburg
National Bank & Trust Company (PNBT). The name(s) of the
actual guarantor(s) varies depending on which company is
listed as the Borrower.
4. Business Loan Agreement between OPT and PNBT for
revolving line of credit in the original amount of
$2,500,000, subsequently reduced to $1,700,000 in September
1998.
5. Business Loan Agreement between OPT and PNBT for term
loan in the original amount of $475,000.
6. Business Loan Agreement between OPT and PNBT for
mortgage loan on OPTs facility in Phillipsburg, New Jersey,
in the original amount of $620,000.
7. Promissory Note between OPT and PNBT for equipment loan
in the original amount of $39,009.60.
8. Capitalized lease between OPT and First Valley Leasing
(Eastern Telephone).
9. Non-Compete restriction pursuant to Asset Purchase
Agreement between OPT Industries, inc. and Pico Electronics,
Inc.
10. Distributor Agreement between OPT and Peerless Radio
Corporation (a/k/a Peerless Electronics, Inc.).
11. Sales Representation Agreement between OPT and
Bennetron.
12. Sales Representation Agreement between OPT and DynoRep,
Inc.
13. Sales Representation Agreement between OPT and C.H. Horn
& Associates, Inc.
14. Sales Representation Agreement between OPT and Component
Marketing Associates, Inc.
15. Sales Representation Agreement between OPT and DynaTech,
a subsidiary of Shaham Electronics Ltd.
16. Sales Representation Agreement between OPT and
Electronics & Technology Sales, Inc.
17. Sales Representation Agreement between OPT and Advanced
Components Co.
18. Sales Representation Agreement between OPT and Gassner &
Clark Company (Arizona).
19. Sales Representation Agreement between OPT and Greye
Glass Equipment Inc.
20. Sales Representation Agreement between OPT and Johnson
Group.
21. Sales Representation Agreement between OPT and Kinetic
Sales, Inc.
22. Sales Representation Agreement between OPT and Mack
Electronic Sales Associates.
23. Sales Representation Agreement between OPT and Vector
Associates.
24. Confidentiality Agreement previously used by OPT and
signed by various employees.
25. Price Agreement between OPT and Lockheed Martin
Corporation, expiring April 30, 2000.
26. Price Agreement between OPT and Lockheed Martin, Camden,
New Jersey, expiring April 3, 2000.
27. Price Agreement between OPT and Rockwell International,
expiring April 14, 2000.
28. Letter from PNBT, dated December 11, 1998, extending the
expiration date of the revolving line of credit to February
29, 1999.
29. Exclusive Sale Agreement with William Lurie.
30. Non-Exclusive License Agreement with Ralph Pree.
31. Lease of one fax machine and three copy machines from
Xerox.
32. Capitalized lease pertaining to PNBT (Pro-Engineer
System).
33. Capitalized lease pertaining to PNBT (Optimized Devices
Automated Test Equipment).
34. All contracts included within backlog report.
Schedule 6.9(a)
Liens to be Removed
1. Mortgage:
BORROWER: OPT Industries, Inc.
LENDER: The Phillipsburg National Bank & Trust Company
AMOUNT: $620,000.00
DATED: March 19, 1996
RECORDED: March 20, 1996
BOOK: 1682
PAGE: 222
2. Mortgage:
BORROWER: OPT Industries, Inc.
LENDER: The Phillipsburg National Bank & Trust Company
AMOUNT: $475,000.00
DATED: July 5, 1996
RECORDED: July 9, 1996
BOOK: 1715
PAGE: 211
3. Mortgage:
BORROWER: OPT Industries, Inc.
LENDER: The Phillipsburg National Bank & Trust Company
AMOUNT: $2,500,000.00
DATED: July 5, 1996
RECORDED: July 11, 1996
BOOK: 1716
PAGE: 156
4. Security Interest:
--A security interest in business assets of OPT as
described in a UCC-1 No. 1710888 filed with the New Jersey
Secretary of State, securing The Phillipsburg National Bank
& Trust Company.
--A security interest in business assets of OPT as
described in a UCC-1 No. 1731791 filed with the New Jersey
Secretary of State, securing The Phillipsburg National Bank
& Trust Company.
--A security interest in business assets of OPT as
described in a UCC-1 No. 1723281 filed with the New Jersey
Secretary of State, securing The Phillipsburg National Bank
& Trust Company.
5. UCC-1 Financing Statements filed in favor of PNBT in
Warren County, New Jersey, as Nos. 24404, 24594, and 24702.
Schedule 6.9(b)
Permitted Exceptions
1. Lease between Seller and First Valley Leasing, Inc.,
dated 8/9/94 and designated as Lease No. 13012, pertaining
to certain Equipment, including a Mitel Digital SX-50
Telephone System.
2. The following matters may remain with respect to the
Real Property, as they are excepted under the title report
issued by Chicago Title Insurance Company:
a. Computed measure of the area and/or acreage is not
insured to be accurate.
b. As to Owners Policy only: Subject to sub-surface
conditions and/or encroachments not disclosed by an
instrument of record.
c. Subject to easements as set forth in Deed Book 230 page
196, Deed Book 500 page 311, Deed Book 512 page 1072, Deed
Book 513 page 245, Deed Book 517 page 962 and Deed Book 532
page 1024.
d. Subject to rights, public and private in and to Red
School Lane.
3. Lease between Seller and First Valley Leasing dated
December 15, 1994 and designated lease no. 13086 pertaining
to certain equipment including Automatic Transformer Tester,
Universal Connection Plate, and Connection Lead Set.
Schedule 6.10(b)
Other Real Property Exceptions
1. Buildings on the Real Property may not be compliant with
the provisions and/or requirements of the Americans With
Disabilities Act, related regulations, and cases, and Seller
has made no effort to determine or address such compliance
and/or noncompliance.
Schedule 6.12
Environmental Matters
1. Phase I report pertaining to the Real Property.
Schedule 6.13
Intellectual Property
1. The following tradenames are used in the business of
Seller.
OPT Industries
OPT
Seller is not aware of any trademark registrations.
2. Engineering designs and manufacturing print packages for
thousands of different products, some of which are
proprietary to certain customers.
3. Seller owns the following patents.
TABLE
[S] [C] [C] [C]
Patent No. Date Inventor Description
4,020,394 4/26/77 Potash Ground Fault Detector
4,409,569 11/11/83 Potash Filter Circuits having
Transformers as Filter
Elements
4,622,627 11/11/86 Rodriguez Switching Electrical
/Estrov Power Supply utilizing
Miniature Inductors
integrally in a PCB
(Theta-J)
4,843,301 6/27/89 Belanger Power Supply with
Switching Means
responsive to Line
Voltage
5,331,536 7/19/94 Lane Low Leakage High
Current Transformer
/TABLE
Schedule 6.15
Legal Proceedings
Pursuant to a notice of default received by Stockholder from
PNBT on April 9, 1999, as referenced in Schedule 6.7, the
lender declared due a first mortgage loan in the principal
amount of $582,251.03, a second mortgage loan in the
principal amount of $382,959.31, an equipment loan
designated as Loan 27438, and an equipment loan designated
as Loan 27395..
Schedule 6.16
Permits
1. Bench Grinder with Torist Dust Collector: A permit was
issued by the New Jersey State Department of Environmental
Protection (NJDEP) on February 21, 1992, but expired on
January 22, 1998. OPT applied for renewal on November 18,
1997.
2. Binks Spray Booths 1 and 2: Permits were issued by
NJDEP on June 3, 1991, and renewal invoices were sent to OPT
on November 15, 1997.
3. Curing Ovens #1, #2 and #3: Renewal permits were issued
by NJDEP on May 26, 1993, but expired August 16, 1998. OPT
applied for five year renewals on July 8, 1998.
4. Curing Ovens #5 and #6: Permits were issued by NJDEP on
February 3, 1993, but expired on October 30, 1998. OPT
applied for five year renewals on July 2, 1998.
5. Open Top Degreaser: A renewal permit was issued by
NJDEP on April 6, 1993, but expired June 14, 1998. OPT
applied for a five year renewal on May 5, 1998.
6. Preheating Oven: A renewal permit was issued by NJDEP
on May 26, 1993, but expired on August 16, 1998. OPT
applied for a five year renewal on July 8, 1998.
7. Vacuum Pump: A renewal permit was issued by NJDEP on
May 26, 1993, but expired August 16, 1998. OPT applied for
a five year renewal on July 8, 1998.
8. Vacuum Tank: A renewal permit was issued by NJDEP on
April 6, 1993, but expired June 20, 1998. OPT applied for a
five year renewal on May 5, 1998.
9. Occupancy Permits.
Schedule 6.18
Insurance
Policies:
Kemper National Insurance Multiperil Package
Term: 5/1/98 to 5/1/99
Kemper National Insurance Commercial Automobile
Term: 5/1/98 to 5/1/99
Missouri Retailers Trust Workers Compensation
Term: 4/1/98 to 4/1/99
Kemper National Insurance Umbrella
Term: 5/1/98 to 5/1/99
Kemper National Insurance Marine
Term: 5/1/98 to 5/1/99
Chubb Insurance Company Marine
Term: 5/1/97 to 5/1/00
Kemper National Insurance Foreign Liability
Term: 5/1/98 to 5/1/99
Seller has no open liability claims.
Schedule 6.19
Return Obligations
1. Pursuant to a Distributorship agreement with Peerless
Radio Corporation (a/k/a Peerless Electronics), Seller may
be claimed to have an obligation to accept returns of
equipment from Peerless provided that Peerless in return
purchases equipment of the same value.
2. Seller may be claimed to have the obligation to accept
returns from customers due to warranty obligations, either
express or implied. Notwithstanding any other term or
provision of this Agreement, Seller does not covenant,
warrant, represent or agree that it will accept any such
returns or perform any such warranty work, and nothing set
forth in this Agreement is intended to create any such
obligations on the part of Seller or Stockholder, or for
Seller to indemnify Buyer for any such obligations.
Schedule 6.20
Interests in Competitors and Suppliers
Seller, Stockholder, and Torotel Products, Inc. (TPI) are
affiliates, and Stockholder and TPI are in direct
competition with the Business. In addition, Stockholder and
TPI are suppliers of the Business, and have existing
contractual relationships with Seller under purchase orders
to be assumed by Buyer pursuant to this Agreement.
Schedule 6.21
Labor Relations
None.
Schedule 6.22
Employment and Bonus Arrangements
1. Collective Bargaining Agreement between OPT Industries,
Inc., and the United Steelworkers of America, AFL-CIO Local
5503.
2. Compensation Agreement with Chris Hughes, as set forth
in Schedule 6.8.
3. Various Sales Representative Agreements, as set forth in
Schedule 6.8.
4. Employment Plans set forth on Schedule 6.23.
Schedule 6.23
Employee Benefit Plans
Non-Union Employees
Group Health Insurance
Dental Insurance
Life Insurance
Long Term Disability Insurance
401(k) Plan
Cafeteria Plan
Torotel, Inc., Employee Stock Purchase Plan
Vacation Policy
Sick Day Policy (non-exempt employees)
Holiday Policy
Disability Policy (New Jersey State Program)
Workers Compensation
Union Employees
Group Health Insurance
Life Insurance
401(k) Plan
Vacation Policy
Sick Day Policy (non-exempt employees)
Holiday Policy
Disability Policy (New Jersey State Program)
Workers Compensation
Schedule 11.6
Computer Services Agreement
This Agreement is made and entered into as of the 19th day
of April, 1999, by and between Shared Information Group
Management Associates, LLC (Buyer) and OPT Industries, Inc.
(Seller), Torotel Products, Inc. (TPI), and Torotel, Inc.
(Torotel). For purposes of this Agreement, OPT, TPI and
Torotel shall be collectively referred to as Torotel Group.
The recitals are an integral part of this Agreement.
RECITALS
WHEREAS, Buyer, and Torotel Group have contemporaneously
herewith entered into an Asset Purchase Agreement providing,
among other things, for Buyer to purchase substantially all
the assets of Seller (the Purchase Agreement);
WHEREAS, among the assets to be sold by Seller to Buyer is
Sellers computer system (Computer System);
WHEREAS, prior to the closing of such Purchase Agreement,
Torotel has utilized such Computer System in Torotels
business;
WHEREAS, the lease line and multiplexer located at Sellers
place of business are the assets of Torotel and are not
being sold by Seller to Buyer pursuant to the Purchase
Agreement; and
WHEREAS, the parties desire to set forth their agreement
concerning the continued access and use by Torotel of the
Computer System previously owned by Seller and which is to
be sold to Buyer pursuant to the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as
follows:
1. Use of System. Buyer agrees to allow Torotel Group the
right to use the Computer System including hardware and
software during regular business hours in the same manner as
Torotel utilized such Computer System immediately prior to
the closing of the Purchase Agreement. Torotel recognizes
that it has no right title or interest in such Computer
System. Torotel Groups right to utilize such Computer
System shall commence on the date hereof and continue for a
period of six (6) months from the date of this Agreement at
no cost to Torotel Group.
2. Confidentiality. Parties recognize and agree that the
Computer System, as currently configured, will allow Buyer
to access data and other information which is input by
Torotel into such Computer System. Buyer recognizes that
such information and data constitutes confidential
information of Torotel. As a result, Buyer agrees that it
shall not, without the express written consent of Torotel,
review, utilize, read, or otherwise gain access to such
confidential information. Torotel Group also agrees that it
shall not, without the express written consent of Buyer,
review, utilize, read, or otherwise gain access to any data
or information of Buyer contained within such Computer
System. Further, the parties agree that as soon as
reasonably practicable after the request of Torotel Group,
that they shall endeavor to install a firewall program which
will allow access to the Confidential Information by Torotel
Group solely after input of a password at the cost of the
Torotel Group.
3. Computer Services. The parties agree that from time to
time Torotel Group may require the assistance of Buyers
employees with respect to the use and operation of such
Computer System by Torotel. In that regard, Buyer agrees to
use its commercially reasonable efforts to cause its
employees to provide computer support services to Torotel
Group for the period of six months from the date of this
Agreement. Torotel agrees to pay a fee to Buyer for any
such services requested by Torotel and rendered by Buyer
based on an hourly rate determined in accordance with the
following formula: the annual compensation of the employee
of Buyer performing computer services; multiplied by One
Hundred Twenty Five (125) percent; divided by One Thousand
Eight Hundred Twenty (1,820); and multiplied by the number
of hours or parts thereof billed in quarter-hour increments
of computer services performed by such employee.
All such fees shall be paid by Torotel to Buyer within ten
(10) days after receipt by Torotel of an invoice setting
forth the charges for such services for the period covered
by such invoice.
4. Further Assurances. The parties agree to take such
other and further action as may be necessary to carry out
the purposes and intent set forth in this Agreement.
5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New
Jersey.
6. Entire Agreement. This Agreement constitutes the entire
Agreement of the parties and shall not be modified or
amended except by a writing signed by Buyer and Torotel.
7. Time. Time is of the essence of this Agreement.
WHEREAS, the parties have executed this Agreement as of the
day herein first above written.
Shared Information Group
Management Associates, LLC
By: /s/ Peter B. Caloyeras
Manager
OPT Industries, Inc.
By: /s/ Christian T. Hughes
Christian T. Hughes, President
Torotel, Inc.
By: /s/ Christian T. Hughes
Christian T. Hughes, President
Torotel Products, Inc.
By: /s/ Christian T. Hughes
Christian T. Hughes, President
