SOUTH BEND — Interlogic Outsourcing Inc. would be sold to a Pennsylvania payroll company for $3.5 million under a proposed agreement.

The embattled Elkhart business informed the U.S. Bankruptcy Court in Northern Indiana on Thursday that an agreement had been reached with PrimePay LLC. The West Chester, Pennsylvania, company was the only qualified bidder when Interlogic went up for auction Wednesday.

IOI entered bankruptcy proceedings in August, shortly after KeyBank sued the company for millions of dollars in wire transfers it says owner Najeeb Khan made in July. The bank said there wasn’t enough money in company accounts to pay for the transactions.

Interlogic is also being sued by over 50 clients, who say in the joint action that the company withdrew their money to cover payroll taxes but never made those payments.

The sale agreement is subject to approval by the bankruptcy court. It sets an Oct. 11 deadline for closing on the deal.

Any objections to the sale must be made by Monday, according to the company’s announcement. A hearing on the sale motion is set for Sept. 26 in U.S. Bankruptcy Court in South Bend.

PrimePay would acquire assets including intellectual property, certain physical property, customer lists and other books and records, according to the agreement filed with the court. IOI would retain its cash on hand, bank accounts and real estate. 

PrimePay would also assume certain liabilities of IOI.

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