ASSET PURCHASE AGREEMENT
between
PEN INTERCONNECT, INC.
and
PEN CABLING TECHNOLOGIES, LLC
dated as of January 29, 1999
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE.....................................................1
1.1 Inventory. .................................................1
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1.2 Customer List. .............................................1
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1.3 Intellectual Property. .....................................1
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1.4 Intangibles. ...............................................1
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1.5 Fixed Assets. ...........................................1
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1.6 Contracts. .................................................1
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1.7 Receivables. ...............................................2
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1.8 Licenses and Permits. ......................................2
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2. EXCLUDED ASSETS. ....................................................2
3. ASSUMED LIABILITIES. ................................................2
4. EXCLUDED LIABILITIES. ...............................................2
5. PURCHASE PRICE. ......................................................2
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5.1 Purchase Price at Closing. ...............................2
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5.2 Adjustment to Purchase Price. ..............................2
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5.3 Taxes. .....................................................3
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5.4 Allocation. ................................................3
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6. CONSIGNMENT OF INVENTORY. ............................................3
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6.1 Consignment of Certain Inventory. ..........................3
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6.2 Title. .....................................................3
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6.3 Sale of Consigned Inventory. ...............................3
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6.4 Accounting and Payment. ....................................4
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6.5 Return of Consigned Inventory. .............................4
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6.6 Risk of Loss; Insurance. ...................................4
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6.7 Financing Statement. .......................................4
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6.8 Setoff. ....................................................4
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7. REPRESENTATIONS AND WARRANTIES OF SELLER. ...........................4
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7.1 Organization and Qualification. ............................4
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7.2 Authority. .................................................5
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7.3 Validity. ..................................................5
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7.4 Conflict with Other Instruments. ...........................5
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7.5 Compliance with Laws. ......................................5
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7.6 Licenses and Permits. ......................................5
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7.7 Litigation. ................................................5
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7.8 Inventory. .................................................6
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7.9 Intellectual Property........................................6
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7.10 Fixed Assets. ..............................................7
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7.11 Customers. .................................................7
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7.12 Books and Records. .........................................7
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7.13 Absence of Changes. ........................................7
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7.14 Title to Assets. ...........................................8
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7.15 Taxes. .....................................................8
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7.16 Brokers and Finders. .......................................9
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7.17 Approvals or Consents. .....................................9
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7.18 Receivables. ...............................................9
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7.19 Financial Statements. ......................................9
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7.20 Liabilities. ...............................................9
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7.21 Contracts. .................................................9
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7.22 Employee Benefit Plans. ....................................10
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7.23 Insurance. ................................................11
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7.24 Environmental Protection....................................11
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7.25 Labor Relations. ..........................................12
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7.26 Real Property. ............................................12
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8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. .......................12
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8.1 Organization and Standing. ................................12
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8.2 Authority. ................................................13
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8.3 Validity. .................................................13
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8.4 Conflict with Other Instruments. ..........................13
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8.5 Approvals or Consents. ....................................13
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8.6 Brokers and Finders. ......................................13
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9. COVENANTS OF SELLER AND PURCHASER. .................................13
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9.1 Conduct of Business Prior to Closing. .....................13
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9.2 Notification of Material Adverse Changes. .................14
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9.3 Other Transactions. .......................................14
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9.4 Consents, Waivers and Approvals. ..........................14
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9.5 Supplemental Disclosure. ..................................14
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9.6 Additional Reports. .......................................15
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9.7 Conditions Precedent. .....................................15
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9.8 Purchaser's Due Diligence. ................................15
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9.9 Further Assurances. .......................................15
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9.10 Satisfaction of Obligations. ..............................15
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. ..................15
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10.1 Representations True at Closing. ..........................15
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10.2 Covenants of Seller. ......................................16
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10.3 No Injunction, Etc. .......................................16
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10.4 Incumbency. ...............................................16
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10.5 Consents, Waivers and Approvals. ..........................16
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10.6 Absence of Material Adverse Changes. ......................16
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10.7 Certified Resolutions. ....................................16
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10.8 Retention of Employees. ....................................16
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10.9 Completion of Due Diligence. ..............................16
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10.10 Covenants Not to Compete. ................................16
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10.11 Outstanding Obligations. ..................................16
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11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. .....................17
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11.1 Representations True at Closing. ..........................17
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11.2 Covenants of Purchaser. ...................................17
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11.3 No Injunction, Etc. .......................................17
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11.4 Incumbency. ...............................................17
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11.5 Certified Resolutions. ....................................17
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12. CLOSING DATE.........................................................17
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12.1 Time and Place. ...........................................17
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12.2 Transactions at the Closing. ..............................17
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12.3 Default at Closing. .......................................19
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13. CONSULTING AGREEMENT. ...............................................19
14. COVENANTS NOT TO COMPETE.............................................19
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14.1 Covenants. ................................................19
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14.2 Remedies. .................................................19
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14.3 Seller's Board of Directors. ..............................19
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15. CONFIDENTIALITY OF INFORMATION. ....................................19
16. INDEMNIFICATION. ...................................................20
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16.1 Agreement of Seller to Indemnify. .........................20
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16.2 Agreement of Purchaser to Indemnify. ......................20
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16.3 Procedures for Indemnification. ...........................20
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16.4 Defense of Third Party Claims. ............................21
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16.5 Non-exclusive Remedy. ......................................21
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17. SURVIVAL. ..........................................................22
18. EMPLOYEES. .........................................................22
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18.1 Evaluation of Personnel. ..................................22
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18.2 Employee Liabilities. .....................................22
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18.3 Employment Agreements. ....................................22
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19. TERMINATION. .......................................................22
20. TRANSACTION EXPENSES.................................................22
20.1 Brokers. ..................................................22
20.2 Expenses. .................................................22
21. MISCELLANEOUS........................................................22
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21.1 Notice. ...................................................23
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21.2 Assignment; Binding Effect. ...............................23
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21.3 Headings; Exhibits and Schedules. .........................24
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21.4 Counterparts. .............................................24
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21.5 Integration of Agreement. .................................24
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21.6 Time of Essence. ..........................................24
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21.7 Governing Law. ............................................24
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21.8 Partial Illegality or Unenforceability. ...................24
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21.9 Right to Proceed. .........................................24
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21.10 Effect of Investigation. ..................................25
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21.11 Arbitration.................................................25
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LIST OF EXHIBITS
Exhibit 1.2 Customer List
Exhibit 1.3 Intellectual Property
Exhibit 1.5 Fixed Assets
Exhibit 1.6 Contracts
Exhibit 1.7 Receivables
Exhibit 1.8 Licenses and Permits
Exhibit 3 Assumed Liabilities
Exhibit 5.1 Accounting Methodology
Exhibit 5.2 Inventory Procedures
Exhibit 5.4 Purchase Price Allocation
Exhibit 6.1 Consigned Inventory
Exhibit 7.1 Foreign Jurisdictions
Exhibit 7.7 Litigation
Exhibit 7.9 Intellectual Property
Exhibit 7.10 Fixed Assets
Exhibit 7.13 Absence of Changes
Exhibit 7.15 Taxes
Exhibit 7.18 Receivables
Exhibit 7.19 Financial Statements
Exhibit 7.20 Liabilities
Exhibit 7.21 Contracts
Exhibit 7.22 Employee Benefit Plans
Exhibit 7.23 Insurance
Exhibit 7.24 Environmental Protection
Exhibit 7.25 Labor Relations
Exhibit 7.26 Real Property
ASSET PURCHASE AGREEMENT
PEN INTERCONNECT, INC., a Utah corporation ("Seller") and PEN CABLING
TECHNOLOGIES, LLC, an Ohio limited liability company ("Purchaser"), agree as
follows:
RECITALS
Seller is engaged, through its Pen Technology division (the "Pen
Technology Division"), in the design and manufacture of internal and external
custom cable and harness interconnections (the "Business").
Seller desires to sell, and Purchaser desires to purchase,
substantially all of the assets in which Seller has an interest (ownership or
otherwise) used or useful in the operation of the Business, all on the following
terms and conditions.
1. PURCHASE AND SALE...Purchaser agrees to purchase and Seller agrees to sell to
Purchaser, all of Seller's right, title and interest in and to the assets used
or useful in the Business, including without limitation, the following (to the
extent any of the exhibits pursuant to Section 1 reflect a date prior to the
Closing Date (as defined below), such exhibits will be deemed to include all
items as of the Closing Date):
1.1 Inventory. All inventory relating to the Business, except as set
forth in Section 6, wherever located (the "Inventory"), together with all rights
of Seller against suppliers of Inventory, including without limitation, Seller's
rights to receive refunds in connection with Seller's purchase of the Inventory.
1.2 Customer List. The customer list relating to the Business (the
"Customer List"), a copy of which is attached as Exhibit 1.2.
1.3 Intellectual Property. The intellectual property relating to the
Business, including without limitation, the "Pen Technology" and "Pen
Technologies" names, copyrights, trade secrets, patents, software and related
intellectual property, trade names, trademarks (the "Intellectual Property") and
all goodwill associated therewith, all of which is identified in Exhibit 1.3.
1.4 Intangibles. All intangible assets of the Seller relating to the
Business, including originals (or copies) of all customer files, order files,
product history records, advertising and mailing lists, marketing materials and
all historical business and financial records necessary to operate the Business
(the "Intangibles").
1.5 Fixed Assets......The fixed assets (the "Fixed Assets") set
forth in Exhibit 1.5.
1.6 Contracts. Those contracts, real and personal property leases,
purchase orders, supply orders, licenses and other agreements or commitments of
the Seller identified in Exhibit 1.6 (the "Contracts").
1.7 Receivables. All accounts receivable of the Seller relating to the
Business, other than inter-company accounts and accounts that have aged beyond
ninety (90) days (the "Receivables"). All Receivables as of January 19, 1999 are
identified in Exhibit 1.7 showing an aging of each account. Seller will deliver
within five (5) days after the Closing Date a revised Exhibit 1.7 reflecting all
Receivables as of the Closing Date.
1.8 Licenses and Permits. All licenses and permits relating to the
Business, all of which are identified in Exhibit 1.8, to the extent the same are
assignable under applicable law.
The foregoing assets are collectively referred to in this Agreement as
the "Acquired Assets".
2. EXCLUDED ASSETS. Purchaser shall not acquire any of the assets of Seller that
are not described in Section 1, including without limitation, the assets of
Seller that are not used in or related to the Pen Technology Division (the
"Excluded Assets").
3. ASSUMED LIABILITIES. Purchaser agrees to assume certain liabilities of Seller
as set forth in Exhibit 3: (i) under operating and capital leases not included
in the Acquired Assets and (ii) relating to raw materials that have not been
accounted for in accounts receivable or inventory ("Assumed Liabilities").
4. EXCLUDED LIABILITIES. Except as expressly assumed pursuant to Section 3,
Purchaser shall not assume or become responsible for any liabilities of Seller,
whether known or unknown, absolute, contingent or otherwise, whether arising
before or after the Closing Date, whether related to the Pen Technology
Division, the Business, the Acquired Assets or otherwise, including without
limitation, deferred taxes, long-term debt, revolving credit warranty
obligations, products liability, liability arising under any environmental law
and employee-related liabilities. Such liabilities shall be referred to as the
"Excluded Liabilities".
5. PURCHASE PRICE.
5.1 Purchase Price at Closing. The purchase price (the "Purchase
Price") shall be the net book value of the Acquired Assets ("Net Book Value") as
determined by mutual agreement of Purchaser and Seller in accordance with the
accounting methodology set forth in Exhibit 5.1 (the "Methodology"). At the
Closing, Purchaser shall (i) pay Seller by wire transfer or certified check
$1,075,000 for the Acquired Assets and the Covenants Not to Compete set forth in
Section 14 below (the "Estimated Purchase Price"), which amount will be subject
to adjustment in accordance with Section 5.2; plus (ii) assume the Assumed
Liabilities.
5.2 Adjustment to Purchase Price. Within thirty (30) days after the
Closing Date, Purchaser and Seller shall conduct a joint physical inspection of
the Inventory in accordance with the procedures set forth in Exhibit 5.2 and
shall jointly value the other Acquired Assets and Assumed Liabilities as of the
Closing Date using the Methodology. Based upon the results of the physical
inspection of Inventory and the valuation of the Acquired Assets and Assumed
Liabilities, Purchaser shall prepare and deliver to Seller a balance sheet of
the Pen Technology Division as of the Closing Date for the Acquired Assets and
the Assumed Liabilities (the "Closing Balance Sheet"), together with Purchaser's
determination of any adjustments required by this Section 5.2 (the "Closing
Adjustment"). For purposes of calculation of the Closing Adjustment, the
Purchase Price shall be (i) increased by any amount by which the Net Book Value
of the Acquired Assets reflected on the Closing Balance Sheet exceeds
$1,075,000, or (ii) decreased by any amount by which the Net Book Value of the
Acquired Assets reflected on the Closing Balance Sheet is less than $1,000,000.
Seller must dispute such Closing Adjustment by written notice to Purchaser
within thirty (30) days of receipt of its receipt or it will be deemed to be
accepted by Seller. If Seller disputes the Closing Adjustment within such time
period, it shall be submitted to the independent accounting firm of Deloitte &
Touche in Dayton, Ohio for final determination within thirty (30) days. Upon
final determination of the Closing Adjustment, whether by failure of Seller to
dispute such amount, by mutual agreement of the parties, or resolution by the
independent accounting firm, Seller or Purchaser, as appropriate, shall remit
payment of the Closing Adjustment to the other party by wire transfer or
certified check. Seller has the option to deduct such amounts from consulting
fees under the Consulting Agreement described in Section 13.
5.3 Taxes. Sellers shall pay all income or similar tax arising out of
the sale of the Acquired Assets. Purchaser will pay all applicable goods,
services and sales taxes arising out of the sale of the Acquired Assets.
5.4 Allocation. At the Closing, the parties shall execute an Allocation
of Purchase Price Agreement in substantially the form of Exhibit 5.4. Seller and
Purchaser will file their respective tax returns in a manner consistent with
such agreement. If Seller or Purchaser fails to so file its tax returns, it
shall indemnify and save harmless the other in respect of any additional tax,
interest, penalty and legal and accounting costs paid or incurred by the other
of them as a result of the failure to so file.
6. CONSIGNMENT OF INVENTORY.
6.1 Consignment of Certain Inventory. Purchaser shall accept possession
of those items of Inventory identified on Exhibit 6.1 on consignment from Seller
(the "Consigned Inventory") for a period of three (3) years after the Closing
Date. The parties acknowledge that this is intended as a true consignment and
not as a "sale on approval" or "sale or return" or a consignment intended as
security.
6.2 Title. Title to the Consigned Inventory, and its proceeds, shall
remain vested in Seller, and the Consigned Inventory shall be at all times
subject to and under the direction and control of Seller. Title to the Consigned
Inventory shall pass directly from Seller to such person or persons to which the
Consigned Inventory is sold in the manner and on the terms contained in this
Section 6.
6.3 Sale of Consigned Inventory. Purchaser shall use reasonable efforts
in the sale of the Consigned Inventory. All sales shall be for cash or shall be
based on the credit terms established by Seller. All risk of loss relating to
any credit sales shall be borne exclusively by Seller. The Consigned Inventory
shall be sold for Seller's account on Seller's invoices. All credit sales (other
than those to Purchaser) shall be subject to Seller's prior approval. Seller
shall have no recourse against Purchaser for any uncollectible credit sales. All
invoices for the sale of the Consigned Inventory shall bear the following
notation:
THE GOODS COVERED BY THIS INVOICE HAVE BEEN PURCHASED BY PURCHASER "AS
IS" AND "WITH ALL FAULTS," AND PURCHASER ACKNOWLEDGES THAT THERE ARE NO
EXPRESS OR IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6.4 Accounting and Payment. Beginning one hundred twenty (120) days
after the Closing Date, Purchaser shall furnish Seller with a quarterly
statement itemizing all sales of the Consigned Inventory during the preceding
quarter. With the quarterly statement, Purchaser shall remit to Seller any money
received, together with any signed receipts or bills of lading for credit sales,
relating to the sale of Consigned Inventory during that quarter.
6.5 Return of Consigned Inventory. Purchaser may return any portion of
the Consigned Inventory that is not sold or used beginning six months after the
Closing Date and quarterly thereafter for a period of three years after the
Closing Date. Any Consigned Inventory that is returned shall be delivered to
Seller at a location to be designated by Seller. Seller shall bear the risk of
loss and the expenses incurred in returning any portion of the Consigned
Inventory. Purchaser shall not be liable for any costs or expenses associated
with any change in the original condition of the Consigned Inventory. Purchaser
agrees to store the Consigned Inventory in such a manner as to prevent direct
exposure to the weather. Purchaser's failure to segregate the Consigned
Inventory shall not operate as a waiver of Purchaser's right to return any
portion of the Consigned Inventory.
6.6 Risk of Loss; Insurance. Seller at all times assumes all risk of
loss or damage to the Consigned Inventory. Seller shall keep the Consigned
Inventory fully insured against loss by fire or other casualty for its own
benefit and at its own expense.
6.7 Financing Statement. At Seller's option, Purchaser shall sign a
Uniform Commercial Code financing statement covering the Consigned Inventory.
Seller shall file the financing statement or statements in the applicable state
and county offices and pay any filing fees required.
6.8 Setoff. Purchaser shall have the right to offset any claims for
Accounts Receivable uncollected by Purchaser beyond ninety (90) days after the
Closing Date against consignment payments to Seller.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to
Purchaser as follows:
7.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Utah, and has all corporate power and authority to carry on the Business as now
being conducted and to own, lease or otherwise hold its properties. Seller is
duly qualified as a foreign corporation where the conduct of its business
requires such qualification or where the failure to qualify would not have a
materially adverse effect on the Business, the Acquired Assets, the Assumed
Liabilities or the transactions contemplated by this Agreement. Those
jurisdictions in which the Company is licensed or qualified to transact business
are listed on Exhibit 7.1.
7.2 Authority. Seller has full power and authority to enter into and
consummate this Agreement. Seller's execution, delivery and performance of this
Agreement has been duly authorized by all requisite corporate action.
7.3 Validity. This Agreement constitutes, and each of the other
agreements, documents and instruments executed and delivered by Seller will
constitute the legal, valid and binding obligations of Seller enforceable in
accordance with their terms except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
7.4 Conflict with Other Instruments. The execution, delivery and
consummation by Seller of this Agreement and each other agreement provided for
herein will not (a) conflict with, violate or result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under the Articles of
Incorporation or Bylaws of Seller, any of the Contracts, or any other contracts
or obligations not assumed by Purchaser hereunder but to which Seller is a party
or is bound or materially affected, (b) result in the creation of a lien or
encumbrance on any of the Acquired Assets, (c) entitle any party to accelerate
payment of any of the Assumed Liabilities, (d) violate the terms of any
settlement, judgment or decree to which Seller is a party, or by which Seller or
any of its properties is bound, or (e) violate any applicable federal, state,
local or foreign law, regulation or order.
7.5 Compliance with Laws. Seller has not violated any laws, ordinances,
regulations, orders, licenses or permits affecting the Acquired Assets or the
operation of the Business (including, without limitation, Environmental Laws,
the Americans with Disabilities Act, laws relating to occupational health and
safety and the terms and conditions of those licenses and permits identified on
Exhibit 1.8), and Seller is not subject to any judgment, order, writ, injunction
or decree that materially affects the Acquired Assets.
7.6 Licenses and Permits. Seller holds all licenses and permits from
all appropriate federal, state, foreign and other public authorities necessary
for the conduct of the Business. Exhibit 1.8 sets forth a list and brief
description of each such license or permit.
7.7 Litigation. Except as listed and described on Exhibit 7.7, there is
no action, claim or investigation pending, or to Seller's knowledge, threatened,
against Seller relating to the Business or affecting any of the Acquired Assets
(including, without limitation, actions or claims relating to any warranties or
guaranties by Seller or any products or services of Seller), nor is there any
judgment of any court, governmental agency, instrumentality, or arbitration
outstanding against Seller relating to the Business. Seller has received no
notice of any violation of any law, regulation or ordinance applicable to the
Business or the Acquired Assets.
7.8 Inventory. All Non-Consigned Inventory as described in Section 6 is
of a quality and quantity usable or saleable in the ordinary course of business,
is now located at 2351 S.2300 West, Salt Lake City, Utah, and has been acquired
only in bona fide transactions entered into in the ordinary course of business.
The Inventory is reflected on Seller's books and records at the lower of cost
(determined on a first-in, first-out method) or market value.
7.9 Intellectual Property
(a) The following items are described more fully in Exhibit
7.9 and true and correct copies of documents relating to such items have been
provided to Purchaser:
(i) All existing United States, common law and foreign
patents, trademarks, trade names, service marks and copyrights (including
without limitation, applications, registrations, and, if applicable, goodwill
for all of the foregoing), mask works, trade secrets, disclosures, know-how,
formulations, trade dress, designs, drawings, logos, technology, mailing lists,
inventions, uses of ideas, software rights, confidential information, industrial
and commercial property, whether any of the foregoing is owned, licensed or held
for use, including without limitation, the right to infringement and other
claims related thereto and used in or relating to the Business;
(ii).....Agreements to which Seller is a party
relating to Intellectual Property; and
(iii)....All registered, assumed or fictitious names
under which Seller is conducting business.
(b) Seller warrants and represents that:
(i)......All right, title and interest in and to the
Intellectual Property are owned by Seller without limitation or encumbrance.
(ii).....All Intellectual Property is in good standing
and without any challenge.
(iii)....The Intellectual Property has been in
continuous use since the date of their adoption and first use as shown in
Exhibit 7.9.
(iv).....Seller has acquired all rights to all
copyrights described in Exhibit 7.9.
(v)......Any trademarks, service marks or trade names
described in Exhibit 7.9 which have been obtained through transfer or assignment
include the associated goodwill.
(vi).....Seller has no knowledge of any infringement
or unlawful use of any of the Intellectual Property or any use of the same or
similar item so as to create a likelihood of confusion.
(vii)....No infringement of any Intellectual Property
has occurred, is known by Seller, or results from operation of the Business.
(viii)...Seller has no notice of, or knowledge of any
basis for, a claim against Seller that the Business infringes any intellectual
property rights of others.
(ix).....No proceedings or claims are pending or, to
the Seller's knowledge, threatened, with respect to the validity or ownership of
the Intellectual Property.
(x)......Seller has a valid and enforceable license to
use all software that is not owned by Seller.
7.10 Fixed Assets. Exhibit 7.10 contains a true and correct list of all
Fixed Assets used or useful in the Business. The Fixed Assets are in good
condition and repair, suitable for their intended use, ordinary wear and tear
excepted.
7.11 Customers. Exhibit 1.2 contains a true and complete list of all of
the customers of the Business during the fiscal year ended September 30, 1998
and for the period from October 1, 1998 through the date hereof. Since November
20, 1998 the Business has not lost any customer or customers which accounted
alone or together for more than 5% of the annual aggregate value of the products
and services sold or leased during the fiscal year ending September 30, 1998 and
there has not been any adverse change in the business relationship of Seller
with any of such customers. Seller has no knowledge that any of its customers
intends to reduce, and no customer has threatened to reduce, its purchases from
or business dealings with Seller, whether by reason of the consummation of this
Agreement or otherwise.
7.12 Books and Records. The books and records relating to the Business
have been previously delivered to Purchaser, are correct and complete and fairly
reflect the transactions to which Seller is a party or by which its properties
are subject or bound as they relate to the Business.
7.13 Absence of Changes. Since December 3, 1998 and except as disclosed
on Exhibit 7.13, Seller has not with respect to the Business:
(a) entered into or consummated any transaction or engaged in
any activity other than in the ordinary course, including without limitation,
the sale, transfer or conveyance of any assets or the making of or committing to
make any capital expenditures in an aggregate amount greater than $5,000;
(b) suffered any material adverse change to the Business or
the Acquired Assets, and no fact or condition exists, or to Seller's knowledge,
has been threatened, which could have such an effect in the future;
(c) sold or transferred any of the Acquired Assets, except in
the ordinary course of business;
(d) incurred the imposition of any lien, encumbrance or claim
upon any of the Acquired Assets or engaged in a material conveyance to secure
debt, except for any lien with respect to personal property taxes or real
property taxes not yet due and payable;
(e) discharged or reduced any lien or encumbrance other than
as required by its terms, or paid any material liability other than current
liabilities incurred in the ordinary course of business and paid in accordance
with their terms;
(f) incurred any default in any liability (accrued or
otherwise);
(g) made any change adverse to it in the terms of any
agreement or instrument to which it is a party;
(h) waived, canceled, sold or otherwise disposed of for less
than the face value thereof any claim or right it has against others in excess
of reserved amounts;
(i) made any change in the terms of any insurance policy, or
canceled or allowed any such insurance policy or coverage thereunder to lapse
without replacement with equivalent coverage;
(j) paid any bonus to or granted any increase in the rates of
pay or any increase in the pension, retirement or other benefits of its
directors, officers or other employees, other than normal cost-of-living and
merit salary increases made in accordance with regular employment policies;
(k) introduced any new method of accounting;
(l) incurred or agreed to incur any indebtedness or entered
into any capitalized leases;
(m) entered into any Contract except in the ordinary course of
business; or
(n) delayed payment of any account payable or other liability
of the Business beyond its due date.
7.14 Title to Assets. Seller has good and marketable title to all of
the Acquired Assets, whether real or personal, tangible or intangible, free and
clear of any liens or encumbrances, except liens for current personal and real
property taxes assessed but not yet due and payable. The Acquired Assets
constitute all assets necessary or useful to the operation of the Business.
7.15 Taxes. Except as disclosed in Exhibit 7.15, Seller has timely
filed all federal, state, and local tax returns relating to the Business and/or
the Acquired Assets (including without limitation, income, franchise, excise,
withholding, property, and sales and use tax returns) required to be filed by it
and has timely paid all taxes shown on such returns; each such return is
complete and correct in all material respects, and Seller has no tax liability
not disclosed on such returns or reflected on the Financial Statements (as
defined in Section 7.19 below), except for taxes not yet due and payable
resulting from the operation of the Business in the ordinary course or ownership
of the Acquired Assets by Seller from October 1, 1998 through the date hereof;
no assessments or notices of deficiency have been received by Seller, or to
Seller's knowledge, threatened against Seller with respect to any such return
which have not been paid or fully reserved against in the Financial Statements;
for the periods (or in the case of balance sheets, as of their respective dates)
covered by the Financial Statements, Seller fully accrued on the Financial
Statements all taxes which were not yet payable; Seller has not agreed to an
extension of the statute of limitations as to any tax return; and no amendments
or applications for refund have been filed or are planned with respect to any
such return. The last audit of any tax return of Seller is the current Utah
state sales and use tax audit.
7.16 Brokers and Finders. Seller has incurred no obligation for any
brokerage fees, agent's commissions or finder's fees in connection with this
Agreement.
7.17 Approvals or Consents. No governmental or other third-party
approval, release, consent or waiver is required as a condition to the validity
or consummation of this Agreement.
7.18 Receivables. Except as set forth in Exhibit 7.18, all of the
Receivables arose from bona fide transactions in the ordinary course of business
and the aging of the accounts receivable provided by Seller to Purchaser is true
and correct in all material respects. There has been no set-off or claim
asserted or, to any Seller's knowledge, threatened, with respect to any
Receivable, and no discount or credit has been agreed to with respect to any
Receivable except for ordinary course discounts for prompt payment. All of the
Receivables are collectable in full not later than the date which is ninety (90)
days after the Closing Date in the amount of the face value thereof calculated
in accordance with Seller's past practice. All Receivables are subject to the
terms and conditions of Seller's standard invoice.
7.19 Financial Statements. Attached as Exhibit 7.19 are copies of the
9/30/98 Balance Sheet (the "Financial Statements"). Except as noted in Exhibit
7.19, the Financial Statements (i) are true and correct in all material respects
and (ii) have been prepared in accordance with generally accepted accounting
principles, consistently applied ("GAAP"). The Financial Statements fairly
presents the financial condition of the Business as of the date thereof.
7.20 Liabilities. Except as disclosed in Exhibit 7.20, the Business has
no material liabilities, known or unknown, contingent or otherwise, other than
those reflected in the Financial Statements and no default exists as to any of
the material liabilities of the Business.
7.21 Contracts. Exhibit 7.21 sets forth a list of each contract,
agreement, real and personal property lease, license, obligation or commitment
pertaining to the Business to which Seller or any of the Acquired Assets is
bound or affected.
Except as set forth in Exhibit 7.21, all Contracts are in full
force and effect and are valid and binding obligations enforceable against the
parties thereto, except as may be limited by applicable equitable principles or
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally. Correct and complete copies of all Contracts have been
delivered to Purchaser. Except as set forth in Exhibit 7.21, Seller is not in
default under and, to Seller's knowledge, no other party is in default under,
and no condition exists which, with notice or the passage of time, or both,
would constitute a default by Seller under any of the Contracts. Except as set
forth in Exhibit 7.21, the validity and effectiveness of the Contracts will not
be adversely affected by this Agreement or its consummation and no consent,
waiver or approval from any party, other than Unisys as confirmed in Exhibit
7.21 is required to continue the Contracts on the same terms and conditions
after the Closing. Seller is not subject to any agreement requiring it to obtain
all or substantially all of its supply of any goods or services relating to the
Business from another person.
7.22 Employee Benefit Plans.
(a) Exhibit 7.22 contains a list of all material plans,
policies, arrangements and contracts, whether written or oral to or on behalf of
employees or former employees of the Business ("Employee Plans"), including,
without limitation, all employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") in effect at the date
hereof providing or relating to any retirement, profit sharing, stock bonus,
stock option, incentive compensation, deferred compensation, fringe benefit or
welfare benefit. Seller has provided Purchaser with summary plan or other
descriptions of the Employee Plans, and will, prior to the Closing, make
available to Purchaser, upon request, copies of the Employee Plans and any
related documents, including, without limitation, agreements with third-party
service providers. Each summary plan description, Employee Plan or other
document provided or made available pursuant to the preceding sentence is
correct and complete in all material respects.
(b) To Seller's knowledge and except as disclosed in Exhibit
7.22: (i) each of the Employee Plans is and has been at all times in compliance
with ERISA, the Internal Revenue Code of 1986, as amended (the "Code"), and all
other applicable laws, except for violations thereof which would not in the
aggregate give rise to a material obligation to pay money; (ii) each Employee
Plan intended to be qualified under Section 401(a) of the Code is so qualified;
(iii) no Employee Plan subject to Section 302 of ERISA or Section 412 of the
Code has incurred for any prior plan year and will not for its current plan year
incur an accumulated funding deficiency under Section 302 of ERISA or Section
412 of the Code; (iv) no claims are pending against Seller in respect of an
Employee Plan except for payment of benefits in the normal course of business,
and no employee of Seller and no beneficiary or dependent of an employee has
pending or, to Seller's knowledge, has threatened any appeal or litigation
regarding any denial of benefits under any Employee Plan; (v) neither Seller nor
any corporation or other trade or business (whether or not incorporated) which
together with Seller is an "employer" as defined in Section 4001(a) of ERISA (an
"ERISA Affiliate") has engaged in any transaction prohibited by Section 406 of
ERISA or Section 4975 of the Code; (vi) no reportable event (as defined in
Section 4043 of ERISA) has occurred with respect to any Employee Plan or any
other employee benefit plan covered by Title IV of ERISA maintained by Seller or
any ERISA Affiliate; (vii) neither Seller nor any ERISA Affiliate has incurred
any liability under Title IV of ERISA which remains outstanding, nor has the
Pension Benefit Guaranty Corporation or any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA asserted or threatened to assert any liability
against Seller or any ERISA Affiliate, other than the payments which have become
due and are unpaid; (viii) neither Seller nor any ERISA Affiliate has at any
time sponsored, maintained or contributed to a plan subject to Title IV of
ERISA; and (ix) Seller has complied with the health care continuation coverage
requirements of Section 4980(B) of the Code in respect of employees and former
employees of the Business and their dependents and beneficiaries.
(c) Except as set forth in Exhibit 7.22, no person has
asserted any claim under which the Business has any liability under any health
insurance, sickness, life insurance, disability, medical, surgical, hospital,
death benefit, or any other Employee Plan (whether or not disclosed on Exhibit
7.22) maintained by Seller or to which Seller is a party or may be bound, or
under any worker's compensation or similar law, which is not fully covered by
insurance maintained with responsible insurers or reserved for under the Audited
Financial Statement.
(d) Except as otherwise required by COBRA or disclosed on
Exhibit 7.22, the Business provides no benefits to retirees or former employees.
7.23 Insurance. Exhibit 7.23 contains a true and complete list of all
insurance policies and fidelity bonds covering the Acquired Assets or the
Business, including a brief description of the terms of each policy. All such
insurance is in full force and effect and is adequate for the nature and scope
of the risks inherent in the Business.
7.24 Environmental Protection.
(a) Except as set forth on Exhibit 7.24, to the extent
materially necessary for the Business, Seller has obtained all permits, licenses
and other authorizations which are required under federal, state and local laws,
regulations or orders (collectively, the "Environmental Laws") relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
or nuisance, and the transactions contemplated hereby will not materially alter
or impair any such permits, licenses and authorizations. Except as set forth in
Exhibit 7.24, Seller is in compliance with all terms and conditions of such
permits, licenses and authorizations and has complied with all other
Environmental Laws to the extent applicable to the Business.
(b) In connection with the Business, there are no
circumstances or plans by Seller which would be likely to interfere with or
prevent compliance or continued compliance with any Environmental Laws, or which
may give rise to any material liability under any Environmental Law, including,
without limitation, liability under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or similar state or local laws, or
otherwise form the basis of any material claim, notice of violation, or
investigation, based on or related to a violation of any Environmental Laws or
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous material, substance or waste. Without in any way limiting the
foregoing, no release, emission or discharge into the environment of any
hazardous substance (as that term is currently defined under CERCLA or any
applicable analogous state law) has occurred or is currently occurring in
connection with the conduct of the Business by Seller or, to Seller's knowledge,
any predecessor or on the properties used in the operations of the Business by
Seller or any such predecessor, or, to Seller's knowledge, any site to which
such substances from Seller may have been taken at any time in the past.
(c) Seller has not received notification from any government
or political subdivision thereof that any of the properties, assets or
operations owned or used by Seller in connection with the Business are in
violation of any Environmental Laws.
7.25 Labor Relations. Except as set forth on Exhibit 7.25: no labor
union represents or purports to represent any employees of the Business; there
are no material controversies pending between the Business and any of its
employees, nor, to any Seller's knowledge, are any such material controversies
threatened; during the past three (3) years, the Business has not been the
subject of any labor organizing activity or labor dispute; Seller is not liable
for any arrears of wages or taxes or any penalties for failure to comply with
any of the foregoing; and Seller is not a party to and has no obligations under
any agreement (written, oral or implied) with any person or party regarding the
salary, rates of pay, benefits, or working conditions of any employees of the
Business and all of the employees of the Business are terminable at will. Seller
has no policy or past practice relating to payment of any severance or similar
benefit upon termination of employment. Seller is not involved in any
transaction or other situation with any employee, officer, director or affiliate
of the Business which may be generally characterized as a "conflict of
interest", including without limitation, direct or indirect interests in the
business of competitors, suppliers or customers of the Business; and no
situations exist with respect to the Business which involved or involves (i) the
use of any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to political activity, (ii) the making of any
direct or indirect unlawful payments to government officials or others from
corporate funds or the establishment or maintenance of any unlawful or
unrecorded funds, (iii) the receipt of any illegal discounts or rebates, or (iv)
any investigation by any federal, state, local or foreign government agency or
authority. Seller has delivered to Purchaser a list of employees of the Business
identifying job title, tenure, salary/wage and location, which list is complete
and correct.
7.26 Real Property. Exhibit 7.26 sets forth a true and correct list of
all real property owned or leased by Seller relating to the Business. Except as
set forth in Exhibit 7.26, all improvements thereon are in good condition and
repair, normal wear and tear excepted, and there exist no material patent or
latent defects. Except as disclosed in Exhibit 7.26, each lease covering any
property identified in Exhibit 7.26 is in full force and effect, and there has
not occurred an event of default by Seller (or an event, which with notice or
lapse of time would constitute an event of default) under any such lease, except
where such event or the absence of such lease would not have a material adverse
effect on the Business.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller as follows:
8.1 Organization and Standing. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Ohio and has all corporate power to conduct its business.
8.2 Authority. Purchaser has full power and authority to enter into and
consummate this Agreement. Purchaser's execution, delivery and performance of
this Agreement has been duly authorized by all requisite corporate action.
8.3 Validity. This Agreement constitutes, and each of the other
agreements, documents and instruments executed and delivered by Purchaser will
constitute the legal, valid and binding obligations of Purchaser enforceable in
accordance with their terms except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
8.4 Conflict with Other Instruments. The execution, delivery and
consummation by Purchaser of this Agreement and each other agreement provided
for herein will not (a) conflict with, violate or result in a breach of the
terms, conditions or provisions of, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under the Articles
of Organization of Purchaser, or any contracts or obligations to which Purchaser
is a party or is bound or materially affected, (b) violate the terms of any
settlement, judgment or decree to which Purchaser is a party, or by which
Purchaser or any of its properties is bound, or (c) violate any applicable
federal, state, local or foreign law, regulation or order.
8.5 Approvals or Consents. No governmental or other third party
approval, release, consent or waiver is required by Purchaser as a condition to
the validity and consummation of this Agreement.
8.6 Brokers and Finders. Purchaser has not incurred any obligation for
any brokerage fees, agent's commissions or finder's fees in connection with this
Agreement.
9. COVENANTS OF SELLER AND PURCHASER. The parties covenant and agree as follows:
9.1 Conduct of Business Prior to Closing. Until the Closing Date, and
unless Purchaser shall otherwise consent in writing or as provided herein,
Seller shall take the following actions:
(a) operate the Business as previously operated and only in
the ordinary course and use best efforts to preserve intact Seller's goodwill,
reputation, present business organization and relationships with persons having
business dealings with it;
(b) acquire or dispose of, or make any changes to, the
Business or the Acquired Assets or Assumed Liabilities reflected on the 9/30/98
Balance Sheet, only in the ordinary course of business;
(c) maintain all of Seller's properties used or useful in the
Business in good order and condition, reasonable wear and use excepted, and
maintain all policies of insurance covering such properties in effect on the
date hereof;
(d) pay Seller's accounts payable and collect its accounts
receivable relating to the Business in accordance with current business
practices;
(e) comply with all laws applicable to the conduct of the
Business; and
(f) maintain Seller's books and records relating to the
Business in the usual, regular and ordinary matter on a basis consistent with
past practices.
9.2 Notification of Material Adverse Changes. Between the date hereof
and the Closing Date, Seller shall promptly notify Purchaser in writing of the
occurrence of any of the matters described in Section 7.13 of which Seller has
knowledge. The parties shall promptly notify each other of any action, suit or
proceeding instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality of any transaction contemplated by this
Agreement. Seller shall promptly notify Purchaser of any lawsuit, claim,
proceeding or investigation that may be threatened or brought against Seller
that would have been listed on Exhibit 7.7 if such action had arisen prior to
the date thereof.
9.3 Other Transactions. Until the earlier of March 1, 1999 or
termination of this Agreement, Seller shall deal exclusively and in good faith
with Purchaser regarding the sale of the Acquired Assets and will not, and will
direct its officers, partners, directors, financial advisors, accountants,
agents and counsel not to, (i) solicit submission of offers from any person
relating to a sale of the Acquired Assets or any other transaction involving the
disposition by Seller of the Pen Technology Division, (ii) participate in any
discussions or negotiations regarding, or furnish any nonpublic information to
any person regarding, any such transaction involving any person other than
Purchaser, or (iii) enter into any agreement or understanding, whether oral or
written, that would have the effect of preventing consummation of this
Agreement. If Seller or its representatives or agents should receive any
proposal for a such a transaction or any inquiry regarding such a proposal from
a third party, Seller will promptly so inform Purchaser.
9.4 Consents, Waivers and Approvals. Seller shall obtain prior to the
Closing all consents, waivers, approvals, and releases of liens, mortgages or
encumbrances necessary to permit the sale of the Acquired Assets to Purchaser
free and clear of any and all liens or encumbrances, including, but not limited
to, a termination of any and all liens relating to the Acquired Assets filed on
behalf of FINOVA, Seller's primary lender, and the operation of the Business by
Purchaser after the Closing Date in the ordinary course as operated by Seller
prior to Closing. Purchaser shall cooperate with and provide reasonable
assistance to Seller to obtain such consents, waivers, approvals and releases;
provided that Purchaser shall not be required to provide any consideration in
addition to that provided for herein. All such consents, waivers, releases and
approvals will be in writing and in form and substance satisfactory to
Purchaser, and copies thereof will be delivered to Purchaser promptly after
receipt thereof but in no event later than the Closing.
9.5 Supplemental Disclosure. Each of the parties hereto shall use best
efforts to refrain from taking any action which would render any representation
or warranty contained in this Agreement inaccurate as of the Closing Date
(provided, however, that a party shall still be liable hereunder for any breach
of such provisions, notwithstanding the exercise of reasonable efforts to
prevent such breach). Seller and Purchaser shall have the continuing obligation
up to and including the Closing Date to supplement promptly or amend the
Exhibits with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or listed in the Exhibits. For the purpose of the rights and
obligations of the parties hereunder, any such supplemental disclosure shall be
deemed to have been disclosed as of the date of this Agreement if Purchaser
proceeds with the consummation of this Agreement following receipt of such
supplemental or amended Exhibits.
9.6 Additional Reports. Promptly after they become available, Seller
will make available to Purchaser copies of all management and control reports
(including agings of accounts receivable, listings of accounts payable and
inventory control reports) and financial statements (including all internal
financial statements) furnished to the management of Seller relating to the
Business.
9.7 Conditions Precedent. Seller and Purchaser shall use their best
efforts in good faith to satisfy the conditions enumerated, respectively, in
Sections 10 and 11 hereof.
9.8 Purchaser's Due Diligence. Seller shall give Purchaser and its
counsel, accountants and other representatives full access during normal
business hours to all of the books, records, files, documents, assets,
properties, contracts, and commitments of Seller relating to the Business,
provided that such examinations shall be conducted in such a manner so as not to
unreasonably disrupt the normal business operations of Seller, and Seller shall
furnish Purchaser with such information concerning the affairs of Seller
relating to the Business which Purchaser may reasonably request, so that
Purchaser may have a full opportunity to verify the representations and
warranties contained in this Agreement and to ascertain such other matters
concerning the financial condition, operations, employees, business or prospects
of Seller relating to the Business as Purchaser may deem necessary or
appropriate. Seller shall deliver to Purchaser correct and complete copies of
all documents referred to in the Exhibits.
9.9 Further Assurances. From and after the Closing, Seller and
Purchaser agree, without further consideration, to execute and delivery promptly
to the other such further documents, and to take all such further actions, as
the parties may from time to time reasonably request in connection herewith.
9.10 Satisfaction of Obligations. From and after the Closing, Seller
shall satisfy and discharge in full the obligations set forth in Columns A and B
of Exhibit 7.13(n) in accordance with the terms set forth on such exhibit.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of
Purchaser to consummate this Agreement shall be subject to the satisfaction, on
or before the Closing Date, of the following conditions, all or any of which may
be waived by Purchaser.
10.1 Representations True at Closing. The representations and
warranties made by Seller in Section 7 hereof shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties had been made on such date (except for changes permitted by this
Agreement) and Seller shall deliver to Purchaser a certificate dated as of the
Closing Date to the foregoing effect.
10.2 Covenants of Seller. Seller shall have duly performed in all
material respects all of the covenants, acts and undertakings to be performed by
it on or prior to the Closing Date, and Seller shall deliver to Purchaser a
certificate dated as of the Closing Date to the foregoing effect.
10.3 No Injunction, Etc. No proceeding shall have been instituted or
threatened by any third party before any court or governmental agency to enjoin,
or prohibit, or to obtain substantial damages in respect of the consummation of
the transactions provided for in this Agreement.
10.4 Incumbency. Seller shall have delivered a certificate of
incumbency executed by the president and secretary (or persons exercising
similar functions) of Seller listing each officer of Seller executing this
Agreement and all related agreements and documents.
10.5 Consents, Waivers and Approvals. Purchaser shall have received a
true and correct copy of each consent, waiver or approval identified in Exhibit
7.17 hereto or otherwise required pursuant to Section 9.4.
10.6 Absence of Material Adverse Changes. Since September 30, 1998, (a)
Seller shall not have suffered any event which results in a material adverse
change to the Acquired Assets or the Business, and (b) Seller shall have taken,
omitted, permitted or suffered no transaction or event described in Section 7.13
hereof which is not described in Exhibit 7.13.
10.7 Certified Resolutions. Seller shall have delivered to Purchaser a
certificate executed by a duly authorized officer of Seller containing true and
correct copies of the resolutions duly adopted by the board of directors
approving and authorizing this Agreement and its consummation and the other
transactions and actions required of Seller hereunder. The applicable officers
shall certify that such resolutions have not been revoked or modified and remain
in full force and effect as of the Closing Date.
10.8 Retention of Employees. Purchaser shall have received confirmation
from those employees of Seller who have been identified by Purchaser as
essential to the operation of the Business that such employees are willing to
accept employment with Purchaser after the Closing if an offer of employment is
made by Purchaser.
10.9 Completion of Due Diligence. Purchaser shall have completed its
due diligence review of the Business and Acquired Assets and shall have
accepted, in its reasonable discretion, its findings.
10.10 Covenants Not to Compete. Members of the Board of Directors of
Seller shall have executed the Covenants Not to Compete described in Section 14.
10.11 Outstanding Obligations. Seller shall have delivered to Purchaser
a list of all creditors of Seller indicating the outstanding obligations for
indebtedness of Seller relating to the Business as of the Closing Date certified
by an officer of Seller as true and correct.
11. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligation of
Seller to consummate this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of the following conditions, all or any of which may be
waived by Seller.
11.1 Representations True at Closing. The representations and
warranties made by Purchaser in Section 8 hereof shall be true and correct in
all material respects on the Closing Date as though such representations and
warranties had been made on such date (except for changes permitted by this
Agreement) and Purchaser shall deliver to Seller a certificate dated as of the
Closing Date to the foregoing effect.
11.2 Covenants of Purchaser. Purchaser shall have duly performed in all
material respects all of the covenants, acts and undertakings to be performed by
it on or prior to the Closing Date, and Purchaser shall deliver to Seller a
certificate dated as of the Closing Date to the foregoing effect.
11.3 No Injunction, Etc. No proceeding shall have been instituted or
threatened by any third party before any court or governmental agency to enjoin,
or prohibit, or to obtain substantial damages in respect of the consummation of
the transactions provided for in this Agreement.
11.4 Incumbency. Purchaser shall have delivered a certificate of
incumbency executed by the president and secretary (or persons exercising
similar functions) of Purchaser listing each officer executing this Agreement
and all related agreements and documents.
11.5 Certified Resolutions. Purchaser shall have delivered to Seller a
certificate executed by a duly authorized officer of Purchaser containing true
and correct copies of the resolutions duly adopted by the members approving and
authorizing this Agreement and its consummation and the other transactions and
actions required of Purchaser hereunder. The applicable officers shall certify
that such resolutions have not been revoked or modified and remain in full force
and effect as of the Closing Date.
12. CLOSING DATE.
12.1 Time and Place. Except as otherwise mutually agreed upon by the
parties, the closing of this Agreement (the "Closing") shall take place at the
offices of Coolidge Wall Womsley & Lombard in Dayton, Ohio on January 29, 1999
(the "Closing Date") or at such other time and place as the parties shall agree.
12.2 Transactions at the Closing. At the Closing, each of the following
transactions shall occur:
(a) Seller's Performance. Seller shall deliver the following
to Purchaser:
(i)...... all instruments of transfer conveying the
Acquired Assets to Purchaser free and clear of any claim or encumbrance, duly
executed and reasonably satisfactory in form and substance to Purchaser and its
counsel;
(ii).....the certificates of Seller required by
Sections 10.1 and 10.2 of this Agreement;
(iii)....copies of the consents, releases, approvals
and waivers required by Section 10.5 this Agreement not previously delivered to
Purchaser;
(iv).....certificates of incumbency required by
Section 10.4 of this Agreement;
(v)......certified copies of the resolutions required
by Section 10.7 of this Agreement;
(vi) ....a copy of the Certificate of Incorporation
of Seller, certified by the Secretary of State of Utah and a copy of the by-laws
of Seller, certified by Seller's secretary as true and correct as of the Closing
Date;
(vii)....a certificate of good standing of Seller
from the Secretary of State of Utah and evidence of Seller's payment of all
applicable state franchise taxes as of the Closing Date; and
(viii)...such other evidence of the performance of
all covenants and satisfaction of all conditions required of Seller by this
Agreement, at or prior to the Closing, as Purchaser or its counsel reasonably
requires.
(b) Purchaser's Performance. At the Closing, Purchaser shall
deliver the following to Seller:
(i)......the amount required under Section 5.1(a) of
this Agreement shall be paid to Seller in immediately available funds;
(ii).....certificates of incumbency required by
Section 11.5 of this Agreement;
(iii)....an assumption agreement relating to the
Assumed Liabilities;
(iv) ....a copy of the Articles of Organization of
Purchaser, certified by the Secretary of State of Ohio;
(v)......a certificate of good standing of Purchaser
from the Secretary of State of Ohio and evidence of Purchaser's payment of all
applicable state franchise taxes as of the Closing Date;
(vi).....the certificates of Purchaser required by
Sections 11.1 and 11.2 of this Agreement; and
(vii)....such other evidence of the performance of
all the covenants and satisfaction of all of the conditions required of
Purchaser by this Agreement, at or before the Closing, as Seller or its counsel
reasonably require.
12.3 Default at Closing. Notwithstanding the provisions of Section 1,
if either Seller or Purchaser shall fail or refuse to consummate the
transactions set forth in this Agreement on or prior to the Closing Date, and if
the other parties shall not then be in material breach under terms of this
Agreement, all other conditions to the Closing shall have been satisfied and the
other parties shall stand ready, willing and able to make tender of its
deliveries required under Section 12.2, then, in addition to any other remedies
available to it, the other parties may invoke any equitable remedies to cause
the consummation of this Agreement, including without limitation, an action or
suit for specific performance.
13. CONSULTING AGREEMENT. At the Closing, Purchaser and Seller agree to execute
the form of Consulting Agreement set forth as Exhibit 13 (the "Consulting
Agreement").
14. COVENANTS NOT TO COMPETE.
14.1 Covenants. Seller agrees not to compete, directly or indirectly,
with the Business in the United States for a period of two (2) years after the
Closing. "Compete" shall include participating in the custom-molded cable
business, hiring or soliciting for hire any persons who are then employees of
the Business, and selling, providing or soliciting customers or reasonably
likely prospects of the Business as of the Closing for the sale or provision of
the same or substantially similar products or services as those sold or provided
by the Business as of the Closing Date. Ownership of less than 5% of the voting
securities of an issuer listed on any national stock exchange or whose stock is
traded in the over-the-counter market shall not be a violation of the foregoing
prohibition. For purposes of this Section 14, Seller shall be permitted to
conduct the following two businesses: (i) cable and harnessing for use in
aircraft and (ii) cable interconnections for use exclusively on harnessing
products that are installed or used in equipment racks.
14.2 Remedies. Seller acknowledges that its commitments under this
Section 14 are conditions to Purchaser's execution of this Agreement, and that
in the event of its breach of this Section, Purchaser will not have an adequate
remedy available at law or in equity. Seller further agrees that in the event of
its breach or threatened breach of this Section 14, Purchaser shall be entitled
to injunctive relief and specific performance in addition to and not in lieu of
any other remedies available at law or in equity, and Seller to the extent
permitted by applicable law, hereby waives all defenses or objections to such
remedies. Seller agrees that the duration, geographical field of application and
subject matter of the restrictions of Section 14.1 are reasonable in light of
all the facts and circumstances.
14.3 Seller's Board of Directors. At the Closing, Seller's Directors
who are also officers shall execute Covenants Not to Compete in the form
attached as Exhibit 14.3.
15. CONFIDENTIALITY OF INFORMATION. The Non-Disclosure Agreement dated September
1, 1998, between Seller and Purchaser is incorporated herein by reference to
this Agreement and shall survive the Closing, except to the extent that it
conflicts or interferes with consummation of this Agreement. Purchaser shall not
be required to keep confidential any information regarding the Acquired Assets
or the Business in the public domain. After the Closing, Purchaser shall not be
required to keep confidential any information relating to the Acquired Assets or
the Business. Seller acknowledges that certain confidential and proprietary
information (the "Purchaser Information") regarding the business operations of
Purchaser will be disclosed to Seller in connection with this Agreement. Seller
agrees to hold such Purchaser Information in confidence on the same terms and
conditions as Purchaser's obligation to hold similar information of Seller in
confidence pursuant to the Non-Disclosure Agreement.
16. INDEMNIFICATION. The terms "Loss" and "Losses" shall mean any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including without limitation, interest,
penalties and reasonable attorneys' and other professional fees and expenses.
16.1 Agreement of Seller to Indemnify. Subject to the terms and
conditions of this Section 16.1, Seller agrees to indemnify, defend and hold
harmless Purchaser from, against, for and in respect of any and all Losses
asserted against or incurred by Purchaser by reason of (i) the breach of any
representation, warranty, covenant or agreement of Seller contained in or made
pursuant to this Agreement or in any agreement, certificate or Exhibit furnished
by Seller in connection with the execution and delivery of this Agreement or the
closing of the transactions contemplated hereby, (ii) the conduct of the
Business prior to the Closing Date, or (iii) for any Excluded Liability.
16.2 Agreement of Purchaser to Indemnify. Subject to the terms and
conditions of this Section 16.2, the Purchaser hereby agrees to indemnify,
defend and hold harmless Seller from, against, for and in respect of any and all
Losses asserted against or incurred by Seller by reason of: (i) the breach of
any representation, warranty, covenant or agreement of Purchaser, contained in
or made pursuant to this Agreement or in any agreement, certificate or Exhibit
furnished by Purchaser in connection with the execution and delivery of this
Agreement or the closing of the transactions contemplated hereby, or (ii) for
any Assumed Liability, or (iii) the conduct of the Business after the Closing
Date.
16.3 Procedures for Indemnification. "Indemnitor" shall mean the party
against whom indemnity is sought, and "Indemnitee" shall mean the party seeking
indemnification.
(a) A claim for indemnification ("Indemnification Claim")
shall be made by Indemnitee by delivery of a written declaration to Indemnitor
requesting indemnification and specifying the basis on which indemnification is
sought and the amount of asserted Losses and, in the case of a Third Party Claim
(as defined in Section 16.4 hereof), containing such other information as
Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim
the procedures set forth in Section 16.4 hereof shall be observed by Indemnitee
and Indemnitor.
(c) If the Indemnification Claim involves a matter other than
a Third Party Claim, the Indemnitor shall have thirty (30) business days to
object to such Indemnification Claim by delivery of a written notice of such
objection to Indemnitee specifying in reasonable detail the basis for such
objection. Failure to timely so object shall constitute acceptance of the
Indemnification Claim by the Indemnitor and the Indemnification Claim shall be
paid in accordance with Section 16.3(d). Failure to give prompt notice or to
provide copies of documents or to furnish relevant data shall not constitute a
defense (in whole or in part) to any claim for indemnification, except and only
to the extent that such failure shall have caused or increased such liability or
adversely affected the ability of the Indemnitor to defend against or reduce its
liability.
(d) Upon determination of the amount of an Indemnification
Claim, whether by agreement between Indemnitor and Indemnitee, by an arbitration
award or otherwise, Indemnitor shall pay the amount of such Indemnification
Claim within ten (10) days of the date such amount is determined.
16.4 Defense of Third Party Claims. Should any claim be made, or suit
or proceeding be instituted against Indemnitee which, if prosecuted
successfully, would be a matter for which Indemnitee is entitled to
indemnification under this Agreement (a "Third Party Claim"), the obligations
and liabilities of the parties hereunder with respect to such Third Party Claim
shall be subject to the following terms and conditions.
(a) The Indemnitee shall give the Indemnitor written notice of
any such claim promptly after receipt by the Indemnitee of actual notice
thereof, and the Indemnitor will undertake the defense thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee and
will confirm such in writing to Indemnitee within fifteen (15) days after
receipt of Indemnitee's notice, provided, however, that with respect to tax
audits, Indemnitee shall undertake defense of the claim. The assumption of the
defense of any such claim by the Indemnitor shall be an acknowledgment by the
Indemnitor of its obligation to indemnify the Indemnitee with respect to such
claim. If the Indemnitor fails or refuses to undertake the defense of such claim
(or fails to object by written notice to Indemnitee to a claim for which
Indemnitee has undertaken defense pursuant to the first sentence of this Section
16.4(a)) within such fifteen (15) day period, the Indemnitee shall have the
right to undertake the defense, compromise and settlement of such claim with
counsel of its own choosing. In the circumstances described in the preceding
sentence, the Indemnitee shall promptly, upon its assumption of the defense of
such claim, make an Indemnification Claim as specified in Section 16.3(a).
(b) The Indemnitee and Indemnitor shall cooperate with each
other in connection with the defense of any Third Party Claim, including making
available records relating to such claim and furnishing, without expense to the
Indemnitor, management employees of the Indemnitee as may be reasonably
necessary for the preparation of the defense of any such claim or for testimony
as a witness in any proceeding relating to such claim.
16.5 Non-exclusive Remedy. The indemnification provisions of this
Section 16 are in addition to, and not in lieu of, any statutory, equitable or
other legal remedy that may be available to any party with respect to this
Agreement.
17. SURVIVAL.
All representations, warranties, undertakings and agreements made by Seller,
Guarantors or Purchaser shall survive Closing for the applicable statute of
limitations periods.
18. EMPLOYEES.
18.1 Evaluation of Personnel. From the date hereof to the Closing,
Seller shall use best efforts to maintain existing relations with its employees
and not to alter current personnel policies and practices with respect to such
employees. Seller agrees to cooperate with Purchaser from the date of this
Agreement to the Closing in the evaluation of and transition planning for
personnel of the Business.
18.2 Employee Liabilities. On the Closing Date, Seller will terminate
all of its employees relating to the Business (the "Employees"). Seller will
permit Purchaser to hire such Employees on such terms and conditions as
Purchaser shall determine in its sole discretion; provided, however, that
Agreement shall not be construed as or deemed to be an obligation of Purchaser
to hire or retain any of the Employees or to offer them any specific terms,
benefits or compensation.
18.3 Employment Agreements. At the Closing, Purchaser will enter into a
letter agreement relating to the employment of Duke DeForest.
19. TERMINATION. This Agreement may be terminated and the transactions
contemplated herein abandoned (a) by the mutual written consent of Seller and
Purchaser; (b) by either Seller or Purchaser upon the failure of the other to
comply with its conditions precedent to Closing and other obligations set forth
herein on or before the Closing Date; or (c) automatically on March 1, 1999, if
the Closing has not been completed by that time. Termination pursuant to this
Section shall relieve the parties of their obligations hereunder with each party
responsible for its own fees, costs and expenses; provided, however that if the
Agreement is terminated pursuant to (b) or (c) above because one party fails to
use its reasonable efforts to fulfill its obligations hereunder, such party
shall remain liable to the other party for all losses, costs, expenses
(including attorneys' fees) and liabilities incurred by such other party as a
result of such failure.
20. TRANSACTION EXPENSES.
20.1 Brokers. Purchaser and Seller each represent and warrant to the
other that no broker or finder has acted for it or them in connection with this
Agreement.
20.2 Expenses. All expenses incurred by the parties in connection with
or related to the authorization, preparation, execution and consummation of this
Agreement, including without limitation, all fees and expenses of agents,
representatives, investment bankers, brokers, printers, counsel and accountants
employed by any such party, shall be borne solely by the party which has
incurred the same.
21. MISCELLANEOUS.
21.1 Notice. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed given and received (a) on the
date of delivery when delivered by hand or when transmitted by confirmed
simultaneous telecopy, (b) on the following business day when sent by receipted
overnight courier, or (c) three (3) business days after deposit in the United
States Mail when mailed by registered or certified mail, return receipt
requested, first class postage prepaid, as follows:
(a) If to Purchaser to:
Pen Cabling Technologies, LLC
Attn: David Smith
1501 Webster Street
Dayton, OH 45404
FAX: (888) 467-1839
with a copy to:
Barbara L. Sager, Esq.
Coolidge, Wall, Womsley & Lombard
600 IBM Building
Dayton, Ohio 45402
FAX: (937) 223-6705
(b) If to Seller:
Pen Interconnect, Inc.
Attn: Stephen J. Fryer
1601 Alton Parkway
Irvine, CA 92606
FAX: (949) 261-3199
with a copy to:
James W. Lucas, Esq.
Law Offices of Oscar Folger
Suite 2400
521 Fifth Avenue
New York, NY 10175
FAX: (212) 697-7833
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other parties in the manner
above provided for giving notice.
21.2 Assignment; Binding Effect. This Agreement may not be assigned by
any of the parties hereto without the prior written consent of the other parties
hereto, provided that Purchaser may assign its rights under this Agreement to an
affiliated entity without the prior consent of Seller, provided that such
assignee also agrees to become a party to this Agreement with joint liability
for the obligations of Purchaser hereunder. This Agreement shall be binding upon
the parties hereto and their respective permitted successors, assigns and
transferees. Seller agrees not to sell substantially all of its assets or engage
in a similar transaction with another entity after the Closing Date unless the
acquiring entity agrees to be bound by the terms of this Agreement applicable to
Seller.
21.3 Headings; Exhibits and Schedules. The Section, Subsection and
other headings in this Agreement are inserted solely as a matter of convenience
and for reference, and are not a part of this Agreement. The Exhibits and
Schedules attached hereto are a material part of this Agreement and are
incorporated herein by this reference.
21.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one counterpart has been signed by each party and
delivered to the other party hereto.
21.5 Integration of Agreement. Except as otherwise provided herein,
this Agreement supersedes all prior agreements, oral and written, between the
parties hereto with respect to the subject matter hereunder. Neither this
Agreement, nor any provision hereof, may be changed, waived, discharged,
supplemented or terminated orally, but only by an agreement in writing signed by
the party against which the enforcement of such change, waiver, discharge or
termination is sought.
21.6 Time of Essence. Time is of the essence in this Agreement.
21.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio.
21.8 Partial Illegality or Unenforceability. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be illegal or unenforceable in any respect,
such illegality or unenforceability shall not affect any other provisions of
this Agreement, and this Agreement shall be construed as if such illegal or
unenforceable provision or provisions had never been contained herein unless the
deletion of such provision or provisions would result in such a material change
as to cause completion of the transactions contemplated hereby to be
unreasonable. To the extent any of the provisions of Section 14 are held to be
unenforceable, they shall not be deleted but shall be reformed to the minimum
extent necessary to make them enforceable.
21.9 Right to Proceed. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 10 have not been
satisfied, Purchaser shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 11 have not been satisfied, Seller shall
have the right to proceed with the transactions contemplated hereby without
waiving any of its rights hereunder.
21.10 Effect of Investigation. Any inspection, preparation or
compilation of information or Exhibits or audit of the inventories, properties,
financial condition or other matters relating to the Acquired Assets or the
Business conducted by or on behalf of Purchaser pursuant to this Agreement shall
in no way limit, affect or impair the ability of Purchaser to rely upon the
representations, warranties, covenants and agreements of Seller set forth
herein.
21.11 Arbitration.
(a) Any controversy, dispute or claim arising out of or
relating to this Agreement shall be submitted to arbitration in accordance with
the commercial rules of the American Arbitration Association ("AAA"), by which
each party will be bound.
(b) If the parties have not agreed during their negotiations
on a single arbitrator to whom the controversy, dispute or claim will be
submitted, either party may select an arbitrator and send written notice to the
other party of the selection. The party receiving such notice will have ten (10)
days from the date such party receives such notice of such selection to select a
second arbitrator and send notice of such to the party who selected the first
arbitrator. Failure to select the second arbitrator and to send timely notice,
as provided above, empowers the arbitrator first selected to resolve the
controversy. If both arbitrators have been duly named, they will as soon as is
reasonably practicable (but within thirty (30) days from the date the latter of
the two arbitrators is named) name a third arbitrator, and the controversy shall
be resolved by majority vote of the three arbitrators. The provisions of the
Federal Rules of Civil Procedure and the Federal Rules of Evidence shall be
applicable to any such arbitration.
(c) Any arbitration proceedings will be conducted in Dayton,
Ohio unless the parties otherwise agree.
(d) The parties agree to be bound by the decision of the
arbitrator and the decision thereof to be entered into any appropriate court or
other jurisdiction. Unless otherwise provided in this Agreement, the prevailing
party in the arbitration shall be promptly reimbursed for its reasonable costs
and fees (including attorneys' fees) incurred in connection with the arbitration
and shall not be responsible for the costs of arbitration.
The parties have caused this Agreement to be executed effective as of
the 29th day of January, 1999.
PEN INTERCONNECT, INC.
By: /s/Stephen J. Fryer
Title: President and Chief Operating Officer
PEN CABLING TECHNOLOGIES, LLC
BY: CTG, INC., Sole Member
By: /s/Michael R. Shane
Michael R. Shane
Chairman and Chief Executive Officer