SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended June 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-10574
THERMO VOLTEK CORP.
(Exact name of Registrant as specified in its charter)
Delaware 13-1946800
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
470 Wildwood Street, P.O. Box 2878
Woburn, Massachusetts 01888-1578
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1)
has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was
required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each
of the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at July 26, 1996
---------------------------- -----------------------------
Common Stock, $.05 par value 6,327,175
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO VOLTEK CORP.
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, December 30,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $12,810 $ 8,651
Available-for-sale investments, at quoted
market value (amortized cost of $21,245
and $25,795) (includes $1,508 and $1,482 of
related party investments) 21,457 26,038
Accounts receivable, less allowances of $543
and $447 11,046 8,680
Inventories:
Raw materials 3,396 3,598
Work in process 2,922 3,059
Finished goods 2,729 1,924
Prepaid income taxes and other current assets 1,192 1,022
------- -------
55,552 52,972
------- -------
Property, Plant and Equipment, at Cost 8,251 7,677
Less: Accumulated depreciation and
amortization 5,089 4,533
------- -------
3,162 3,144
------- -------
Other Assets 347 648
------- -------
Cost in Excess of Net Assets of Acquired
Companies 11,690 12,081
------- -------
$70,751 $68,845
======= =======
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THERMO VOLTEK CORP.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, December 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 1,237 $ 1,276
Accounts payable 4,373 3,966
Accrued payroll and employee benefits 1,011 1,128
Accrued income taxes 1,541 1,103
Customer deposits 467 223
Accrued commissions 699 468
Other accrued expenses 1,469 2,143
Due to parent company and Thermo
Electron Corporation 568 839
------- -------
11,365 11,146
------- -------
Subordinated Convertible Obligations
(includes $10,000 and $11,500 of related
party debt) 24,210 36,740
------- -------
Shareholders' Investment (Note 2):
Common stock, $.05 par value, 10,000,000
shares authorized; 6,069,042 and 4,881,099
shares issued 303 244
Capital in excess of par value 32,882 20,545
Retained earnings (accumulated deficit) 1,884 (185)
Treasury stock at cost, 2,291 and 1,958 shares (28) (20)
Cumulative translation adjustment (1) 229
Net unrealized gain on available-for-sale
investments 136 146
------- -------
35,176 20,959
------- -------
$70,751 $68,845
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO VOLTEK CORP.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
--------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $11,882 $ 8,554
------- -------
Costs and Operating Expenses:
Cost of revenues 6,153 4,512
Selling, general and administrative expenses 3,519 2,648
Research and development expenses 821 592
------- -------
10,493 7,752
------- -------
Operating Income 1,389 802
Interest Income 492 495
Interest Expense (includes $177 to related
party in 1996 and 1995) (402) (570)
------- -------
Income Before Provision for Income Taxes 1,479 727
Provision for Income Taxes 347 124
------- -------
Net Income $ 1,132 $ 603
======= =======
Earnings per Share:
Primary $ .19 $ .14
======= =======
Fully diluted $ .15 $ .10
======= =======
Weighted Average Shares:
Primary 5,861 4,250
======= =======
Fully diluted 9,091 9,019
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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THERMO VOLTEK CORP.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
--------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
--------------------------------------------------------------------------
Revenues $22,503 $15,862
------- -------
Costs and Operating Expenses:
Cost of revenues 11,543 8,332
Selling, general and administrative expenses 6,780 5,090
Research and development expenses 1,531 1,046
------- -------
19,854 14,468
------- -------
Operating Income 2,649 1,394
Interest Income 994 1,033
Interest Expense (includes $354 to related
party in 1996 and 1995) (837) (1,134)
Other Income - 14
------- -------
Income Before Provision for Income Taxes 2,806 1,307
Provision for Income Taxes 737 289
------- -------
Net Income $ 2,069 $ 1,018
======= =======
Earnings per Share:
Primary $ .37 $ .25
======= =======
Fully diluted $ .27 $ .18
======= =======
Weighted Average Shares:
Primary 5,589 4,077
======= =======
Fully diluted 9,093 9,013
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
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THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
--------------------
June 29, July 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 2,069 $ 1,018
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 829 720
Provision for losses on accounts receivable 97 70
Other noncash items - (11)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (2,724) 471
Inventories (575) (1,919)
Other current assets (174) 125
Accounts payable 238 374
Other current liabilities 254 (224)
------- -------
Net cash provided by operating
activities 14 624
------- -------
Investing Activities:
Acquisitions, net of cash acquired - (4,000)
Purchases of available-for-sale investments (2,500) (7,500)
Proceeds from sale and maturities of
available-for-sale investments 7,000 7,000
Purchases of property, plant and equipment (674) (494)
Other 91 334
------- -------
Net cash provided by (used in)
investing activities 3,917 (4,660)
------- -------
Financing Activities:
Net increase in short-term obligations 29 273
Repurchase of long-term obligations - (132)
Net proceeds from issuance of Company
common stock 94 117
------- -------
Net cash provided by financing
activities 123 258
------- -------
Exchange Rate Effect on Cash 105 (223)
------- -------
Increase (Decrease) in Cash and Cash Equivalents 4,159 (4,001)
Cash and Cash Equivalents at Beginning of Period 8,651 8,955
------- -------
Cash and Cash Equivalents at End of Period $12,810 $ 4,954
======= =======
6PAGE
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THERMO VOLTEK CORP.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
--------------------
June 29, July 1,
(In thousands) 1996 1995
-------------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired companies $ - $ 5,042
Cash paid for acquired companies - (4,000)
------- -------
Liabilities assumed of acquired companies $ - $ 1,042
======= =======
Conversions of subordinated convertible
obligations (includes $1,500 of related
party debt in 1996) $12,530 $ 1,000
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
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THERMO VOLTEK CORP.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo Voltek Corp. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of the financial position at June 29, 1996,
the results of operations for the three- and six-month periods ended June
29, 1996 and July 1, 1995, and the cash flows for the six-month periods
ended June 29, 1996 and July 1, 1995. Interim results are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995, filed with the Securities and
Exchange Commission.
2. Stock Split
In June 1996, the Company declared a three-for-two stock split in the
form of a 50% stock dividend, payable on August 23, 1996, to shareholders
of record as of August 9, 1996. The stock dividend is subject to
shareholder approval of an increase in the Company's authorized stock to 25
million shares, to be voted on at a special meeting of the Company's
shareholders to be held on August 8, 1996. Common shares outstanding as of
June 29, 1996, on a pro forma basis, to reflect the stock split would have
been 9,100,126.
Financial results for prior periods, except for share information in
the accompanying 1995 balance sheet, will be restated to reflect the stock
dividend, if approved.
The following tables present selected financial data on a pro forma
basis to reflect the stock split.
Three Months Ended
------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
-------------------------------------------------------------------------
Earnings per share:
Primary $ .13 $ .09
Fully diluted $ .10 $ .07
Weighted average shares:
Primary 8,791 6,375
Fully diluted 13,636 13,529
8PAGE
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THERMO VOLTEK CORP.
2. Stock Split (continued)
Six Months Ended
------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
-------------------------------------------------------------------------
Earnings per share:
Primary $ .25 $ .17
Fully diluted $ .18 $ .12
Weighted average shares:
Primary 8,383 6,115
Fully diluted 13,640 13,519
3. Subsequent Event
In July 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of Pacific Power Source Corporation
(Pacific Power) for approximately $5.5 million in cash. Pacific Power
manufactures programmable power amplifiers that can be incorporated into
electromagnetic compatibility test equipment to assess how well electronics
tolerate normal variations in the quality and quantity of AC voltage. These
amplifiers are also used in other kinds of test equipment and in
application-specific power supplies.
The acquisition will be accounted for using the purchase method of
accounting. The aggregate cost exceeded the estimated fair value of
acquired net assets by approximately $4.8 million, which will be amortized
over 40 years.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Description of Business
The Company designs, manufactures, and markets instruments that test
electronic and electrical systems and components for immunity to pulsed
electromagnetic interference (pulsed EMI) through its KeyTek Instrument
division (KeyTek), and designs, manufactures, and markets high-voltage
power-conversion systems, modulators, fast-response protection systems, and
related high-voltage equipment for industrial, medical, and environmental
processes, and for defense and scientific research applications, through
its Universal Voltronics division. Through its Comtest Instrumentation B.V.
and Comtest Limited subsidiaries (collectively, Comtest), the Company
provides electromagnetic compatibility (EMC) consulting and
systems-integration services, distributes a range of EMC-related products,
and manufactures and markets specialized power supplies for
telecommunications equipment. Comtest's Verifier division manufactures a
line of electrostatic discharge test equipment that performs electrical
stress tests for semiconductor devices. In March 1995, the Company acquired
Kalmus Engineering Incorporated and R. F. Power Labs, Incorporated
9PAGE
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THERMO VOLTEK CORP.
Description of Business (continued)
(collectively, Kalmus), which manufacture radio frequency power amplifiers
and systems used to test products for immunity to radiated or conducted
radio frequency interference and for medical imaging and telecommunications
applications.
Results of Operations
Second Quarter 1996 Compared With Second Quarter 1995
Revenues increased 39% to $11,882,000 in the second quarter of 1996
from $8,554,000 in the second quarter of 1995, due to an increase in
revenues at Comtest, KeyTek, and Kalmus of $1,717,000, $867,000, and
$844,000, respectively. The increase in revenues at Comtest resulted
primarily from an increase in demand for Verifier's electrostatic discharge
test equipment, as well as an increase in revenues from a radio frequency
interference immunity tester product line that was introduced in 1995.
Increased revenues at KeyTek resulted primarily from greater demand for its
electromagnetic compatibility test equipment. Kalmus increased shipments
during the quarter, relative to prior periods, due to the implementation of
manufacturing efficiencies.
The gross profit margin increased to 48% in the second quarter of 1996
from 47% in the second quarter of 1995, due primarily to an increase in
higher-margin domestic sales at Keytek.
Selling, general and administrative expenses as a percentage of
revenues decreased to 30% in the second quarter of 1996 from 31% in the
second quarter of 1995, due primarily to an increase in revenues. Research
and development expenses as a percentage of revenues was unchanged at 6.9%
in the second quarter of 1996 and 1995.
Interest expense decreased to $402,000 in the second quarter of 1996
from $570,000 in the second quarter of 1995 due to conversions of the
Company's subordinated convertible obligations during 1995 and 1996.
The effective tax rate was 23% and 17% in the second quarter of 1996
and 1995, respectively. The effective tax rates were below the statutory
federal income tax rate due primarily to the utilization of tax net
operating loss carryforwards, offset in part by the impact of state income
taxes. The effective tax rate increased in 1996 as the result of a decrease
in tax net operating loss carryforwards as a percentage of income before
provision for income taxes.
First Six Months 1996 Compared With First Six Months 1995
Revenues increased 42% to $22,503,000 in the first six months of 1996
from $15,862,000 in the first six months of 1995, due to an increase in
revenues at Comtest, KeyTek, and Kalmus of $3,380,000, $1,579,000, and
$1,970,000, respectively. Revenues at Comtest and Keytek increased for the
reasons discussed in the results of operations for the second quarter.
Revenues at Kalmus, which was acquired on March 1, 1995, increased
10PAGE
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THERMO VOLTEK CORP.
First Six Months 1996 Compared With First Six Months 1995 (continued)
$1,126,000 due to the inclusion of revenues for the full six months of 1996
and $844,000 for reasons discussed in the results of operations for the
second quarter.
The gross profit margin increased to 49% in the first six months of
1996 from 47% in the first six months of 1995, due primarily to an increase
in higher-margin domestic sales at KeyTek and the inclusion for a full six
months of higher-margin Kalmus revenues in 1996.
Selling, general and administrative expenses as a percentage of
revenues decreased to 30% in the first six months of 1996 from 32% in the
first six months of 1995, due primarily to an increase in revenues.
Research and development expenses as a percentage of revenues increased to
6.8% in the first six months of 1996 from 6.6% in the first six months of
1995 due to increased spending for research and development at KeyTek.
Interest expense decreased to $837,000 in the first six months of 1996
from $1,134,000 in the first six months of 1995 for the reason discussed in
the results of operations for the second quarter.
The effective tax rate was 26% and 22% in the first six months of 1996
and 1995, respectively. The effective tax rates were below the statutory
federal income tax rate due primarily to the utilization of tax net
operating loss carryforwards, offset in part by the impact of state income
taxes. The effective tax rate increased in 1996 as the result of a decrease
in tax net operating loss carryforwards as a percentage of income before
provision for income taxes.
Liquidity and Capital Resources
Working capital was $44,187,000 at June 29, 1996, compared with
$41,826,000 at December 30, 1995. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $34,267,000 at June
29, 1996, compared with $34,689,000 at December 30, 1995. During the first
six months of 1996, $14,000 of cash was provided by operating activities.
Cash flow from operations was reduced by an increase in accounts
receivable, which resulted primarily from an increase in revenues.
In July 1996, the Company acquired substantially all of the assets,
subject to certain liabilities, of Pacific Power Source Corporation for
approximately $5.5 million in cash.
During the first six months of 1996, the Company expended $674,000 for
purchases of property, plant and equipment. During the remainder of 1996,
the Company expects to expend approximately $800,000 on purchases of
property, plant and equipment. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
operations for the foreseeable future.
11PAGE
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THERMO VOLTEK CORP.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On May 20, 1996, at the Annual Meeting of Shareholders, the
shareholders reelected six incumbent directors to a one-year term expiring
in 1997. The directors reelected at the meeting were: Dr. Elias P.
Gyftopoulos, William W. Hoover, Sandra L. Lambert, Theo Melas-Kyriazi,
Peter Richman, and John W. Wood Jr. Each nominee for director received
4,811,729 shares voted in favor of election and 273 shares voted against.
No abstentions or broker nonvotes were recorded on the election of
directors.
Item 6 - Exhibits
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
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THERMO VOLTEK CORP.
SIGNATURES
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 thereunto duly authorized as of the 5th day of August 1996.
THERMO VOLTEK CORP.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Chief Financial Officer
13PAGE
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THERMO VOLTEK CORP.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
2.1 Asset Purchase Agreement dated as of July 3, 1996
between the Registrant and Pacific Power Source
Corporation. Pursuant to Item 601 (b)(2) of Regulation
S-K, schedules to this Agreement have been omitted. The
Company hereby undertakes to furnish supplementally a
copy of such schedules to the Commission upon request.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
between
THERMO VOLTEK CORPORATION
and
PACIFIC POWER SOURCE CORPORATION
July 3, 1996
PAGE
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TABLE OF CONTENTS
Page
----
ARTICLE I - THE PURCHASE 1
1.1 Purchase and Sale of Assets 1
1.2 Assumption of Liabilities 4
1.3 Purchase Price 7
1.4 The Closing 7
1.5 Allocation of Purchase Price 8
1.6 Further Assurances 8
1.7 Escrow 9
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE SELLER 9
2.1 Organization, Qualification and
Corporate Power 9
2.2 Authority 9
2.3 Noncontravention 10
2.4 Financial Statements 10
2.5 Absence of Certain Changes 11
2.6 Undisclosed Liabilities 11
2.7 Tax Matters 11
2.8 Ownership and Condition of Assets 12
2.9 Intellectual Property 13
2.10 Inventory 15
2.11 Subsidiaries and Other Investments 15
2.12 Contracts 15
2.13 Accounts Receivable; Contracts in Progress 17
2.14 Powers of Attorney 17
2.15 Real Property Leases 17
2.16 Litigation 18
2.17 Product Warranty 18
2.18 Employees 18
2.19 Employee Benefits 19
2.20 Environmental Matters 20
2.21 Legal Compliance 22
2.22 Permits 22
2.23 Certain Business Relationships With Affiliates 22
2.24 Brokers' Fees 23
2.25 Books and Records 23
2.26 Customers and Suppliers 23
2.27 Owned Real Property 23
2.28 Insurance Policies 23
2.29 Banking Facilities 24
2.30 Government Contracts 24
2.31 Disclosure 24
PAGE
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE BUYER 25
3.1 Organization 25
3.2 Authorization of Transaction 25
3.3 Noncontravention 25
3.4 Brokers' Fees 26
ARTICLE IV - CONDITIONS TO CLOSING 26
4.1 Conditions to Obligations of the Buyer 26
4.2 Conditions to Obligations of the Seller 27
ARTICLE V - POST-CLOSING COVENANTS 29
5.1 Proprietary Information 29
5.2 Solicitation and Hiring 29
5.3 Non-Competition; Referral of Customers 29
5.4 Sharing of Data 30
5.5 Use of Labels 31
5.6 Cooperation in Litigation 31
5.7 Collection of Accounts Receivable and
Contracts in Progress 31
5.8 Employees 31
5.9 Intercompany Agreements 32
5.10 Change of Name 32
ARTICLE VI - INDEMNIFICATION 33
6.1 Indemnification by Seller 33
6.2 Indemnification by Buyer 33
6.3 Claims for Indemnification 33
6.4 Defense by the Indemnifying Party 34
6.5 Payment of Indemnification Obligation 35
6.6 Survival 35
6.7 Limitations 36
ARTICLE VII - MISCELLANEOUS 36
7.1 Press Releases and Announcements 36
7.2 No Third Party Beneficiaries 36
7.3 Entire Agreement 36
7.4 Succession and Assignment 36
7.5 Counterparts 37
7.6 Headings 37
7.7 Notices 37
7.8 Governing Law 38
7.9 Amendments and Waivers 38
7.10 Severability 38
7.11 Expenses 38
7.12 Specific Performance 39
7.13 Submission to Jurisdiction 39
7.14 Construction 39
7.15 Incorporation of Exhibits and Schedules 39
PAGE
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Exhibit A - Assigned Contracts
Exhibit B - March 31, 1996 Balance Sheet
Exhibit C - Form of Bill of Sale
Exhibit D - Form of Instrument of Assumption of Liabilities
Exhibit E - Form of Escrow Agreement
Exhibit F - Financial Statements
Exhibit G - Form of Lease
Exhibit H - Form of Noncompetition Agreement
Exhibit I - Form of Opinion of Counsel to the Seller
Exhibit J - Form of Opinion of General Counsel for the Buyer
Disclosure Schedule
PAGE
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ASSET PURCHASE AGREEMENT
This Agreement is entered into as of July 3, 1996 by and
between Thermo Voltek Corporation, a Delaware corporation
(the "Buyer"), and Pacific Power Source Corporation, a California
corporation (the "Seller"). The Buyer and the Seller are
referred to together herein as the "Parties."
Preliminary Statement
---------------------
The Buyer desires to purchase, and the Seller desires to
sell, the business and assets comprising the Seller's business
of designing, developing, manufacturing, marketing and selling
power testing, conversion and conditioning products, including
without limitation AC power sources and frequency converters
(the "Business"), for the consideration set forth below and the
assumption of certain of the Seller's liabilities relating to the
Business set forth below, subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and covenants herein contained, the Parties agree as
follows.
ARTICLE I
THE PURCHASE
1.1 Purchase and Sale of Assets.
---------------------------
(a) Upon and subject to the terms and conditions of
this Agreement, the Buyer shall purchase from the Seller, and the
Seller shall sell, transfer, convey, assign and deliver to the
Buyer, at the Closing (as defined in Section 1.4(a)), for the
consideration specified in Section 1.3 below, all right, title
and interest in and to all of the assets of the Seller relating
to or used in the Business and existing as of the Closing
(collectively, the "Acquired Assets"), including without
limitation:
(i) all trade and other accounts receivable and
notes receivable (the "Accounts Receivable") and all unbilled
amounts for contracts in progress (the "Contracts in Progress");
(ii) all inventories of raw materials, work in
process, finished goods, supplies, packaging materials, spare
parts and similar items;
(iii) all machinery, equipment, tools and
tooling, furniture, fixtures, leasehold improvements and motor
vehicles, including without limitation those set forth in
Section 2.8(c) of the Disclosure Schedule;
PAGE
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(iv) all (A) patents, patent applications, patent
disclosures and all related continuation, continuation-in-part,
divisional, reissue, re-examination, utility model, certificate
of invention and design patents, patent applications,
registrations and applications for registrations, (B) trademarks,
service marks, trade drafts, logos, trade names and corporate
names (including without limitation the names "Smartsource,"
"PAC-EL" and "Pacific Power") and registrations and applications
for registration thereof and all goodwill associated therewith,
(C) copyrights and registrations and applications for
registration thereof, (D) mask works and registrations and
applications for registration thereof, (E) computer software,
data and documentation, (F) trade secrets and confidential
business information, whether patentable or nonpatentable and
whether or not reduced to practice, know-how, manufacturing and
product processes and techniques, research and development
information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information,
(G) other proprietary rights relating to any of the foregoing
(including without limitation remedies against infringements
thereof and rights of protection of interest therein under the
laws of all jurisdictions), and (H) copies and tangible
embodiments thereof (collectively, "Intellectual Property"),
including without limitation the Intellectual Property set forth
in Section 2.9(c) of the Disclosure Schedule;
(v) all rights under contracts, agreements or
instruments (including without limitation all letters of credit,
performance bonds and agreements or instruments securing any
amounts owed to the Seller in connection with the Business, any
leases or subleases for real property, any equipment leases, any
licenses or sublicenses issued to or by the Seller relating to
Intellectual Property and all confidentiality agreements between
the Seller and its employees), including without limitation those
contracts and licenses set forth on Exhibit A attached hereto
(collectively, the "Assigned Contracts");
(vi) all claims, prepayments, refunds, causes of
action, choses in action, rights of recovery, rights of setoff
and rights of recoupment, including any such item relating to the
payment of Taxes (as defined in Section 2.7) and all rights under
warranties;
(vii) all permits, licenses, registrations,
certificates, orders, approvals, franchises, variances and
similar rights ("Permits") issued by or obtained from any
foreign, federal, state or local governmental, regulatory or
administrative authority or agency, court or arbitrational
tribunal (a "Governmental Entity");
PAGE
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(viii) all cash, short-term investments,
deposits, bank accounts and similar assets;
(ix) all books, records, accounts, ledgers, files
(in all forms, including without limitation datafiles),
documents, correspondence, lists, product specifications,
employment records, manufacturing and procedural manuals,
advertising and promotional materials, studies, reports and other
printed or written materials; and
(x) all customer, supplier and marketing lists
and data.
(b) Notwithstanding the provisions of Section 1.1(a),
the Acquired Assets shall not include (i) the existing lease for
the Seller's principal facility (the "Facility"), which lease
will be terminated upon execution of the lease to be entered into
at the Closing pursuant to Section 4.1(f) hereof, (ii) Account
No. 09619-01021 located at Bank of America, Springdale - Edinger
Branch 0961, Huntington Beach, California, which shall contain no
more than $100.00 immediately prior to the Closing, and (iii) all
distribution agreements and sales and manufacturers
representative agreements to which the Seller is a party which
are (A) for territories outside of the United States or (B) not
terminable by the Seller on not more than 30 days notice without
penalty or premium (such distribution agreements and sales and
manufacturers representative agreements being hereinafter
referred to as the "Excluded Sales Agreements"). The Buyer shall
offer each of the other parties to the Excluded Sales Agreements
the opportunity to enter into the Buyer's standard form of
distribution agreement or sales or manufacturers representative
agreement, as the case may be, promptly following the Closing.
(c) To the extent that the assignment of any Assigned
Contract to be assigned hereunder shall require the consent of
another party thereto, this Agreement shall not constitute an
agreement to assign the same if an attempted assignment would
constitute a breach thereof. The Seller agrees that it will use
all reasonable efforts to assist the Buyer in obtaining the
written consent to the assignment of all such Assigned Contracts
and any necessary novation agreements with respect to Assigned
Contracts between the Seller and any Governmental Entity. If
such consent or novation is not obtained, the Seller will
cooperate with the Buyer in any reasonable arrangement designed
to provide the Buyer with the benefits under such Assigned
Contract, and the Buyer shall assume the obligations of the
Seller to be performed on and after the Closing Date in
accordance with paragraph (d) below. Nothing contained in this
Section 1.1(c) shall affect the liability, if any, of the Seller
pursuant to this Agreement for failing to disclose the need for
such consents, approvals or novations to the extent required
under the representations and warranties set forth in this
Agreement.
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(d) To the extent that the Seller is unable to obtain
the consent or approval to the assignment of any such Assigned
Contract, or any novation agreement required with respect
thereto, prior to the Closing Date, (i) such Assigned Contract
(a "Nonassigned Contract") shall not constitute part of the
Acquired Assets unless and until such assignment or novation
agreement has been obtained, (ii) such Nonassigned Contract shall
be subject to the arrangements set forth below, and (iii) if
after the Closing Date the Seller or the Buyer shall obtain a
consent to assignment or novation agreement, such Nonassigned
Contract shall be assumed by the Buyer in the manner contemplated
herein and become part of the Acquired Assets. The Buyer and the
Seller hereby agree to the following arrangement with respect to
each Nonassigned Contract: (A) the Buyer shall perform all of
the Seller's obligations arising on or after the Closing Date
under the Nonassigned Contract on a prompt and punctual basis;
(B) the Buyer shall indemnify and hold the Seller harmless from
and against any and all loss, liability, claim, damage, cost or
expense (including reasonable attorneys' fees) arising out of or
in connection with the Nonassigned Contract relating to the
performance or breach (other than a breach of any prohibition
against assignment or subcontracting as a result of the operation
of this Section 1.1(d)) by the Buyer of the obligations under
such Nonassigned Contract on or after the Closing Date; and
(C) the Seller shall promptly and punctually pay to the Buyer, in
consideration of the obligations of the Buyer set forth in this
paragraph (d), all of the payments received by the Seller
pursuant to or under such Nonassigned Contract relating to
services performed on or after the Closing Date.
1.2 Assumption of Liabilities.
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(a) Upon and subject to the terms and conditions of
this Agreement, the Buyer shall assume and become responsible
for, from and after the Closing, the following liabilities of the
Seller and no other liabilities (collectively, the "Assumed
Liabilities"):
(i) the liabilities of the Seller incurred in
connection with the Business as set forth on the face of (and not
solely in any notes to) the statement of financial position of
the Seller as of March 31, 1996 attached hereto as Exhibit B
(the "March 31, 1996 Balance Sheet"), to the extent such
liabilities have not been paid or discharged prior to the
Closing;
(ii) all liabilities of the Seller which have
arisen after March 31, 1996 in the ordinary course of business
consistent with past custom and practice (including with respect
to frequency and amount) ("Ordinary Course of Business") and
which are of the same type as those set forth on the face of (and
not solely in any notes to) the March 31, 1996 Balance Sheet, to
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the extent such liabilities have not been paid or discharged
prior to the Closing, and all liabilities and obligations of the
Seller under the Assigned Contracts to the extent accruing after
the Closing; provided, however, that this clause (ii) shall not
encompass any such liabilities or obligations which relate to any
breach of contract, tort, infringement or violation of law or
which arose out of any charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand; and
(iii) the liabilities of the Seller for
unsecured property taxes on personal property for the period
commencing on July 1, 1996 and ending on June 30, 1997, in the
aggregate amount of $3,518.63, which are presently due but not
delinquent until August 31, 1996.
(b) The Buyer shall not assume or become responsible
for, and the Seller shall remain liable for, any and all
liabilities or obligations (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated,
whether accrued or unaccrued, whether due or to become due, and
whether claims with respect thereto are asserted before or after
the Closing) of the Seller which are not Assumed Liabilities
(collectively, the "Retained Liabilities"). The Retained
Liabilities shall include, without limitation, the following:
(i) all liabilities and obligations of the Seller
for income, transfer, sales, use or other Taxes arising in
connection with the consummation of the transactions contemplated
by this Agreement (other than any sales tax payable to the State
of California as a result of the sale of capital equipment to the
Buyer pursuant to this Agreement);
(ii) all liabilities and obligations of the Seller
for costs and expenses incurred in connection with this Agreement
or the consummation of the transactions contemplated by this
Agreement;
(iii) all liabilities and obligations of the
Seller under this Agreement or any agreement or instrument
attached as an exhibit hereto or contemplated to be entered into
in connection herewith (collectively, the "Ancillary
Agreements");
(iv) all liabilities and obligations of the Seller
for any Taxes (including without limitation deferred Taxes or
Taxes measured by income of the Seller earned prior to the
Closing, any liabilities for federal or state income tax and FICA
taxes of employees of the Seller which the Seller is legally
obligated to withhold prior to the Closing, any liabilities for
employer FICA and unemployment taxes incurred prior to the
Closing, and any liabilities for sales, use, ad valorem or excise
taxes or customs and duties incurred prior to the Closing);
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(v) all liabilities and obligations of the Seller
under any agreements, contracts, leases or licenses which are not
Assigned Contracts;
(vi) all liabilities and obligations of the Seller
arising prior to the Closing under the Assigned Contracts, and
all liabilities for any breach, act or omission by the Seller
prior to the Closing under any Assigned Contract;
(vii) all liabilities and obligations of the
Seller for any product liability claim relating to products sold
prior to the Closing;
(viii) all liabilities and obligations of the
Seller arising out of events, conduct or conditions existing or
occurring prior to the Closing that constitute a violation of or
noncompliance with any law, rule or regulation, any judgment,
decree or order of any Governmental Entity, or any Permit;
(ix) all liabilities and obligations of the Seller
resulting from: (A) any releases of any Materials of
Environmental Concern (as defined in Section 2.20(b)) into the
environment in connection with the operation of the Business or
any predecessor business or company prior to the Closing or for
which Seller is otherwise liable; (B) the existence, prior to the
Closing, of any Materials of Environmental Concern at any site on
which the business or operations of the Business or any
predecessor business or company was conducted prior to the
Closing; (C) any release, prior to the Closing, of any Materials
of Environmental Concern at any such location if such release
could give rise under any Environmental Law (as defined in
Section 2.20(b)) to liability on the part of the Seller or any
predecessor business or company; or (D) any violation of any
Environmental Law by the Seller or any predecessor business or
company which occurred prior to the Closing;
(x) all liabilities and obligations of the Seller
for injury to or death of persons or damage to or destruction of
property occurring prior to the Closing (including without
limitation any workers compensation claim);
(xi) all intercompany liabilities of the Seller;
(xii) all liabilities and obligations of the
Seller to pay severance or other benefits to any current or
former employee of the Seller whose employment is terminated (or
treated as terminated) in connection with the consummation of the
transactions contemplated by this Agreement and all liabilities
resulting from the termination of employment of employees of the
Seller prior to the Closing that arose under (A) any federal or
state law or (B) any Employee Benefit Plan (as defined in
Section 2.19(a)) established or maintained by the Seller;
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(xiii) all liabilities and obligations of the
Seller (A) for all compensation and benefits accrued by employees
of the Seller employed in the Business prior to the Closing,
including without limitation accrued vacation time and sick
leave, premiums or benefits under any Employee Benefit Plan and
severance pay, and (B) under the Seller's 401(k) plan. Without
limiting the foregoing, the Buyer shall not assume any
liabilities or obligations of the Seller for medical, dental and
disability (both long-term and short-term) benefits, whether
insured or self-insured, owed to current or former employees of
the Seller based upon (A) exposure to conditions in existence
prior to the Closing or (B) disabilities existing prior to the
Closing (including any such disabilities which may have been
aggravated following the Closing);
(xiv) all liabilities and obligations of the
Seller arising out of any claim, suit, action, arbitration,
proceeding, investigation or other similar matter which commenced
or relates to the ownership of the Acquired Assets or the
operation of the Business on or prior to the Closing; and
(xv) all liabilities and obligations of the Seller
arising out of events, conduct or conditions existing or
occurring prior to the Closing that do or allegedly constitute an
infringement or violation of, or do or allegedly constitute a
misappropriation of, any Intellectual Property rights of any
other person or entity.
1.3 Purchase Price. The purchase price to be paid by the
Buyer for the Acquired Assets shall be $5,500,000 (the "Purchase
Price"), of which amount $4,950,000 shall be delivered to the
Seller by a wire transfer of immediately available funds in
accordance with the Seller's wire transfer instructions delivered
prior to the Closing, and $550,000 shall be delivered to the
Escrow Agent pursuant to Section 1.7 hereof by a wire transfer of
immediately available funds in accordance with the Escrow Agent's
wire transfer instructions delivered prior to the Closing.
1.4 The Closing.
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(a) The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Hale and Dorr, 60 State Street, Boston, Massachusetts 02109,
commencing at 9:00 a.m., local time, on July 3, 1996
(the "Closing Date").
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the
various certificates, instruments, agreements and other documents
referred to in Section 4.1;
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(ii) the Buyer shall deliver to the Seller the
various certificates, instruments, agreements and other documents
referred to in Section 4.2;
(iii) the Seller shall execute and deliver to
the Buyer a bill of sale in the form attached hereto as Exhibit C
and execute and deliver or obtain, as appropriate, such other
instruments of conveyance (including without limitation
trademark, patent, copyright and other intellectual property
assignments) as the Buyer may reasonably request in order to
effect the sale, transfer, conveyance and assignment to the Buyer
of valid ownership of the Acquired Assets, including any required
consents, approvals or permits;
(iv) The Buyer shall execute and deliver to the
Seller an instrument of assumption of liabilities in the form
attached hereto as Exhibit D and such other instruments as the
Seller may reasonably request in order to effect the assumption
by the Buyer of the Assumed Liabilities;
(v) the Seller, the Buyer and the Escrow Agent
(as defined therein) shall execute and deliver an escrow
agreement in the form attached hereto as Exhibit E (the "Escrow
Agreement") and the Buyer shall deposit funds with the Escrow
Agent in accordance with Section 1.7 hereof;
(vi) the Buyer shall pay to the Seller the
Purchase Price as specified in Section 1.3;
(vii) the Seller shall deliver to the Buyer,
or otherwise put the Buyer in possession and control of, all of
the Acquired Assets of a tangible nature; and
(viii) the Buyer and the Seller shall execute
and deliver to each other a cross-receipt evidencing the
transactions referred to above.
1.5 Allocation of Purchase Price. Promptly following the
Buyer's completion of financial statements for the Business for
the period ended June 30, 1996, the Buyer and the Seller agree to
allocate the Purchase Price (and all other capitalizable costs)
among the Acquired Assets for all purposes (including financial
accounting and tax purposes). The Parties agree that such
allocation will be made in the manner required by Section 1060 of
the Internal Revenue Code of 1986, as amended (the "Code").
1.6 Further Assurances. At the Closing and at any time and
from time to time thereafter, at the request of the Buyer and
without further consideration, the Seller shall execute and
deliver such other instruments of sale, transfer, conveyance and
assignment and take such action as the Buyer may reasonably
determine is necessary to transfer, convey and assign to the
Buyer, and to evidence and confirm the Buyer's rights to, title
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in and ownership of, the Acquired Assets and to place the Buyer
in actual possession and operating control of the Business and
the Acquired Assets.
1.7 Escrow. At the Closing, $550,000 of the Purchase Price
otherwise payable by the Buyer to the Seller shall be paid by the
Buyer to the Escrow Agent for the purpose of securing the
obligations of the Seller under Article VI hereof. Such amount
(the "Escrow Fund") shall be held by the Escrow Agent pursuant to
the terms of the Escrow Agreement. The Escrow Fund shall be held
as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of
any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Escrow
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Buyer that the
statements contained in this Article II are true and correct,
except as set forth in the disclosure schedule attached hereto
(the "Disclosure Schedule"). The Disclosure Schedule shall be
delivered to the Buyer at least three business days before the
Closing, shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II,
and the disclosures in any paragraph of the Disclosure Schedule
shall qualify only the corresponding paragraph in this Article
II.
2.1 Organization, Qualification and Corporate Power. The
Seller is a corporation duly organized, validly existing and in
corporate and tax good standing under the laws of the state of
its incorporation. The Seller is duly qualified to conduct
business and is in corporate and tax good standing under the laws
of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such
qualification. The Seller has all requisite corporate power and
authority to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it.
2.2 Authority. The Seller has all requisite power and
authority to execute and deliver this Agreement and the Ancillary
Agreements and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the
Ancillary Agreements by the Seller and the performance by the
Seller of this Agreement and the Ancillary Agreements and the
consummation by the Seller of the transactions contemplated
hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Seller. This
Agreement has been duly and validly executed and delivered by the
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Seller and constitutes, and each of the Ancillary Agreements,
upon its execution and delivery by the Seller, will constitute, a
valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms.
2.3 Noncontravention. Neither the execution and delivery
of this Agreement or the Ancillary Agreements by the Seller, nor
the consummation by the Seller of the transactions contemplated
hereby or thereby, will, directly or indirectly (with or without
notice or lapse of time), (a) conflict with or violate any
provision of the Articles of Incorporation or By-laws, each as
amended to date, of the Seller or any resolution adopted by the
board of directors or the stockholders of the Seller, (b) require
on the part of the Seller any filing with, or any permit,
authorization, consent or approval of, any Governmental Entity or
give any governmental entity the right to challenge any of the
transactions contemplated by this Agreement or the Ancillary
Agreements, (c) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other
arrangement to which the Seller is a party or by which the Seller
is bound or to which any of the assets of the Seller is subject,
(d) result in the imposition of any Security Interest upon any of
the Acquired Assets, or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Seller or
any of the properties or assets of the Seller. For purposes of
this Agreement, "Security Interest" means any mortgage, pledge,
security interest, encumbrance, charge or other lien (whether
arising by contract or by operation of law).
2.4 Financial Statements. The Seller has provided to the
Buyer (a) the reviewed statements of financial position of the
Seller as of December 31, 1993, 1994 and 1995 and the related
financial statements for the years then ended (collectively, the
"Reviewed Financial Statements") and (b) the unaudited statement
of financial position of the Seller as of March 31, 1996 and the
related financial statements for the three months then ended
(collectively, the "Unaudited Financial Statements"). The
Reviewed Financial Statements and the Unaudited Financial
Statements (collectively, the "Financial Statements") are
attached hereto as Exhibit F and, in the case of the Reviewed
Financial Statements, have been reviewed by the Seller's
auditors. The Financial Statements present fairly, in all
material respects, the financial condition, retained earnings,
assets and liabilities of the Seller as of the dates indicated
therein and the results of operations and cash flows of the
Seller for the periods covered thereby. There has been no
material adverse change in the Net Tangible Assets (as defined
below) of the Seller since March 31, 1996, as set forth on the
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March 31, 1996 Balance Sheet. For purposes of this Section 2.4,
the term "Net Tangible Assets" shall mean, as of a date, the
excess of the tangible Acquired Assets over the Assumed
Liabilities as of the close of business on such date (without
giving effect to the transactions contemplated by this
Agreement), in each case calculated on a basis consistent with
the preparation by the Seller of the Reviewed Financial
Statements.
2.5 Absence of Certain Changes. Since March 31, 1996,
there has not been any material adverse change in the assets,
business, financial condition or results of operations of the
Business, nor has there occurred any event or development which
could reasonably be foreseen to result in such a material adverse
change in the future.
2.6 Undisclosed Liabilities. The Seller does not have any
liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, whether accrued
or unaccrued, and whether due or to become due, or otherwise),
relating to the Business, except for (a) liabilities shown on the
March 31, 1996 Balance Sheet, (b) liabilities which have arisen
after March 31, 1996 in the Ordinary Course of Business and which
are similar in nature and amount to the liabilities which arose
during the comparable period of the immediately preceding
financial period, and (c) contractual liabilities incurred in the
Ordinary Course of Business which are not required to be
reflected on the March 31, 1996 Balance Sheet and which are not
in the aggregate material.
2.7 Tax Matters.
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(a) The Seller has filed all Tax Returns (as defined
below) that it was required to file and all such Tax Returns were
correct and complete in all respects. The Seller has paid all
Taxes (as defined below) which relate to the Acquired Assets or
the Business that are shown to be due on any such Tax Returns.
The unpaid Taxes of the Seller for tax periods through March 31,
1996 do not exceed the accruals and reserves for Taxes set forth
on the March 31, 1996 Balance Sheet. The Seller has no actual or
potential liability for any obligation of any taxpayer to pay
Taxes (including without limitation any affiliated group of
corporations or other entities that included the Seller during a
prior period) other than the Seller. All Taxes that the Seller
(with respect to the Acquired Assets or the Business) is or was
required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the
proper Governmental Entity.
(b) For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other similar assessments or
liabilities, including without limitation income, gross receipts,
ad valorem, premium, value-added, excise, real property, personal
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property, sales, use, transfer, withholding, employment, payroll
and franchise taxes imposed by any Governmental Entity, and any
interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with
any tax or any contest or dispute thereof. For purposes of this
Agreement, "Tax Returns" means all reports, returns,
declarations, statements or other information required to be
supplied to a taxing authority in connection with Taxes.
(c) No deficiencies have been asserted or assessed as
a result of any audit of the Business by any Governmental Entity
and no such deficiency or audit has been proposed or threatened.
There are no liens for Taxes (other than for current Taxes not
yet due and payable) on the Acquired Assets. None of the
Acquired Assets (i) is property that is required to be treated as
being owned by any other person pursuant to the safe harbor lease
provisions of former Section 168(f)(8) of the Code, (ii) is "tax
exempt use property" within the meaning of Section 168(h) of the
Code, or (iii) directly or indirectly secures any debt the
interest on which is tax-exempt under Section 103(a) of the Code.
The Seller is not a person other than a United States person
within the meaning of the Code. The transactions contemplated
herein are not subject to tax withholding under Section 3406 of
the Code, under subchapter A of chapter 3 of the Code, or under
any other provision of law.
(d) The Seller has since December 1, 1986 been, and
until the Closing will continue to be, a valid S corporation
within the meaning of Section 1361 of the Code, has been treated
for tax purposes as an S corporation by each state in which the
Seller is liable for the payment of Taxes and has no corporate
liability for Taxes in such states.
2.8 Ownership and Condition of Assets.
---------------------------------
(a) The Seller is the true and lawful owner of, and
has good and marketable title to, all of the Acquired Assets,
free and clear of all Security Interests. Upon execution and
delivery by the Seller to the Buyer of the instruments of
conveyance referred to in Section 1.4(b)(iii), the Buyer will
become the true and lawful owner of, and will receive good and
marketable title to, the Acquired Assets, free and clear of all
Security Interests.
(b) The Acquired Assets are adequate for the conduct
of the Business as presently conducted and as presently proposed
to be conducted by the Seller. The tangible Acquired Assets are
free from defects, have been maintained in accordance with normal
industry practice, are in good operating condition and repair
(subject to normal wear and tear) and are suitable for the
purposes for which they presently are used.
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(c) Section 2.8(c) of the Disclosure Schedule lists
(i) all Acquired Assets which are fixed assets, indicating the
cost, accumulated book depreciation (if any) and the net book
value of each such fixed asset as of March 31, 1996, and (ii) all
other Acquired Assets of a tangible nature (other than
inventories) whose book value exceeds $5,000.
(d) Section 2.8(d) of the Disclosure Schedule lists
all assets of the Seller or its Affiliates (as defined in
Section 2.12(a)(vi)) used in connection with the Business at any
time during the last two years which are not Acquired Assets.
2.9 Intellectual Property.
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(a) The Seller owns or has the right to use all
Intellectual Property used in the operation of the Business or
necessary for the operation of the Business as presently proposed
to be conducted. Upon execution and delivery by the Seller to
the Buyer of the instruments of conveyance referred to in
Section 1.4(b)(iii), each such item of Intellectual Property
owned by the Seller will be owned by the Buyer immediately
following the Closing, and each such item of Intellectual
Property available for use by the Seller will be available for
use by the Buyer on identical terms and conditions immediately
following the Closing. The Seller has taken reasonable measures
to protect the proprietary nature of each item of Intellectual
Property, and to maintain in confidence all trade secrets and
confidential information, that it owns or uses in connection with
the Business. No other person or entity has any rights to any of
the Intellectual Property used in the Business (except pursuant
to agreements or licenses specified in Section 2.9(c) or 2.9(d)
of the Disclosure Schedule), and no other person or entity is
infringing, violating or misappropriating any of the Intellectual
Property used in the Business.
(b) The business, operations and activities of the
Business have not infringed or violated, or constituted a
misappropriation of, and do not now infringe or violate, or
constitute a misappropriation of, any Intellectual Property
rights of any other person or entity. The Seller has not
received any complaint, claim or notice alleging any such
infringement, violation or misappropriation.
(c) Section 2.9(c) of the Disclosure Schedule
identifies each patent or registration which has been issued or
is owned by the Seller with respect to any Intellectual Property
used in, relating to or arising out of the Business, identifies
each pending patent application or application for registration
which the Seller has made or which the Seller owns with respect
to any Intellectual Property used in, relating to or arising out
of the Business, and identifies each license or other agreement
pursuant to which the Seller has granted any rights to any third
party with respect to any such Intellectual Property. The
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Seller has delivered to the Buyer correct and complete copies of
all such patents, registrations, applications, licenses and
agreements (as amended to date) and has made available to the
Buyer correct and complete copies of all other written
documentation evidencing ownership of, and any claims or disputes
relating to, each such item. With respect to each such item of
Intellectual Property that the Seller owns:
(i) the Seller possesses all right, title and
interest in and to such item;
(ii) such item is not subject to any outstanding
judgment, order, decree, stipulation or injunction; and
(iii) the Seller has not agreed to indemnify
any person or entity for or against any infringement,
misappropriation or other conflict with respect to such item.
(d) Section 2.9(d) of the Disclosure Schedule
identifies each item of Intellectual Property (other than
commercially available software generally available to the
public, which is not listed in Section 2.9(d) of the Disclosure
Schedule but with respect to which the representations set forth
below in this Section 2.9(d) are true) used at any time in the
operation of the Business, or that the Seller plans to use in
connection with the operation of the Business in the future, that
is owned by a party other than the party using it. The Seller
has supplied the Buyer with correct and complete copies of all
licenses, sublicenses or other agreements (as amended to date)
pursuant to which the Seller uses such Intellectual Property, all
of which are listed on Section 2.9(d) of the Disclosure Schedule.
With respect to each such item of Intellectual Property:
(i) the license, sublicense or other agreement
covering such item is legal, valid, binding, enforceable and in
full force and effect;
(ii) with respect to items used by the Seller,
such license, sublicense or other agreement is assignable by the
Seller to the Buyer without the consent or approval of any party
and such license, sublicense or other agreement will continue to
be legal, valid, binding, enforceable and in full force and
effect without acceleration immediately following the Closing in
accordance with the terms thereof as in effect prior to the
Closing;
(iii) with regard to such license, sublicense
or other agreement, the Seller is not, and, to the Seller's
knowledge, no other party is, in breach or default, and no event
has occurred which with notice or lapse of time would constitute
a breach or default or permit termination, modification or
acceleration thereunder;
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(iv) the underlying item of Intellectual Property
is not, to the Seller's knowledge, subject to any outstanding
judgment, order, decree, stipulation or injunction; and
(v) the Seller has not agreed to indemnify any
person or entity for or against any interference, infringement,
misappropriation or other conflict with respect to such item.
2.10 Inventory. All inventory of the Seller relating to the
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Business, whether or not reflected on the March 31, 1996 Balance
Sheet, consists of a quality and quantity usable and saleable in
the Ordinary Course of Business, except for obsolete items,
excess items and items of below-standard quality, all of which
have been written-off or written-down to net realizable value on
the March 31, 1996 Balance Sheet. All inventories not
written-off have been priced at the lower of cost or market on a
first-in, first-out basis. The quantities of each type of
inventory, whether raw materials, work-in-process or finished
goods, are not excessive in the present circumstances of the
Business.
2.11 Subsidiaries and Other Investments. The Seller has no
----------------------------------
direct or indirect equity interest in any corporation,
partnership, joint venture or other entity.
2.12 Contracts.
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(a) Section 2.12 of the Disclosure Schedule lists the
following written arrangements (including without limitation
written agreements) of the Seller which relate to the Acquired
Assets or the Business:
(i) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $10,000 per
annum;
(ii) any written arrangement (or group of related written
arrangements) for the purchase, sale, supply or manufacture of
raw materials, commodities, supplies, products or other personal
property or for the furnishing or receipt of services (A) which
calls for performance over a period of more than one year, (B)
which involves more than the sum of $25,000 or (C) in which the
Seller has granted manufacturing rights, "most favored nation"
pricing provisions or marketing or distribution rights relating
to any products or territory or has agreed to purchase a minimum
quantity of goods or services, agreed to make a minimum payment
or has agreed to purchase goods or services exclusively from a
certain party;
(iii) any written arrangement forming a partnership or
joint venture;
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(iv) any written arrangement (or group of related written
arrangements) under which the Seller has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness (including capitalized lease obligations) involving
more than $25,000 or under which it has granted (or may grant) a
Security Interest on any of the Acquired Assets, tangible or
intangible;
(v) (A) the Seller's standard forms of written agreement
concerning confidentiality, non-competition and assignment of
inventions, indicating any exceptions to such standard forms for
current employees of the Seller, and (B) any other written
arrangement concerning confidentiality, noncompetition or
assignment of inventions;
(vi) any written arrangement involving any affiliate, as
defined in Rule 12b-2 under the Securities Exchange Act of 1934
(an "Affiliate"), of the Seller;
(vii) any written arrangement under which the
consequences of a default or termination could have a material
adverse effect on the assets, business, financial condition,
results of operations or future prospects of the Business or
could result in the granting to any third party of any rights in
or to any of the Acquired Assets; and
(viii) any other written arrangement (or group of related
written arrangements) either involving more than $25,000 or not
entered into in the Ordinary Course of Business.
(b) The Seller has delivered to the Buyer a correct
and complete copy of each written arrangement (as amended to
date) listed in Section 2.12 of the Disclosure Schedule. With
respect to each written arrangement so listed: (i) the written
arrangement is legal, valid, binding and enforceable and in full
force and effect; (ii) with respect to written arrangements to
which the Seller is a party, the written arrangement is
assignable by the Seller to the Buyer without the consent or
approval of any party and will continue to be legal, valid,
binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in
effect prior to the Closing; and (iii) the Seller is not, and to
the Seller's knowledge no other party is, in breach or default,
and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement, nor
is there any dispute between the parties thereto. The Seller is
not a party to any oral contract, agreement or other arrangement
which, if reduced to written form, would be required to be listed
in Section 2.12 of the Disclosure Schedule under the terms of
this Section 2.12.
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2.13 Accounts Receivable; Contracts in Progress. All
Accounts Receivable reflected on the March 31, 1996 Balance Sheet
are valid receivables subject to no setoffs or counterclaims and
are current and collectible (within 60 days after the invoice
date), net of the applicable reserve for bad debts shown on the
March 31, 1996 Balance Sheet. A complete list of all Accounts
Receivable reflected on the March 31, 1996 Balance Sheet, showing
the aging thereof, is included in Section 2.13 of the Disclosure
Schedule. All Accounts Receivable reflected in the financial or
accounting records of the Seller that have arisen since March 31,
1996 are valid receivables subject to no setoffs or counterclaims
and are collectible within 60 days after the invoice date, net of
a reserve for bad debts in an amount proportionate to the reserve
shown on the March 31, 1996 Balance Sheet. The Seller has no
Contracts in Progress which provide for or contemplate progress
billing or prepayments.
2.14 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Seller relating to the
Acquired Assets or the Business.
2.15 Real Property Leases. Section 2.15 of the Disclosure
Schedule lists all real property leased or subleased to the
Seller (other than the existing lease for the Facility which will
be terminated upon execution of the lease to be entered into at
the Closing pursuant to Section 4.1(f) hereof). The Seller has
delivered to the Buyer correct and complete copies of the leases
and subleases (as amended to date) listed therein. With respect
to each such lease and sublease:
(a) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect;
(b) the lease or sublease will continue to be legal,
valid, binding, enforceable and in full force and effect
immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing;
(c) neither the Seller nor, to the Seller's knowledge,
any other party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(d) there are no disputes, oral agreements or
forbearance programs to which the Seller is a party in effect as
to the lease or sublease;
(e) the Seller has not assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest
in the leasehold or subleasehold;
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(f) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(g) to the Seller's knowledge, the owner of the
facility leased or subleased has good and clear record and
marketable title to the parcel of real property, free and clear
of any Security Interest, easement, covenant or other
restriction, except for recorded mortgages, easements and
covenants and other restrictions which do not impair the intended
uses or occupancy of the property subject thereto by the Seller.
2.16 Litigation. Section 2.16 of the Disclosure Schedule
identifies, and contains a brief description of, (a) any
unsatisfied judgment, order, decree, stipulation or injunction
relating to the Acquired Assets or the Business, and (b) any
claim, complaint, action, suit, proceeding, hearing or
investigation of, in or brought before (by a private party or
otherwise) any Governmental Entity or before any arbitrator
relating to or affecting the Acquired Assets or the Business
which is currently pending or, to the knowledge of the Seller,
threatened. None of the complaints, actions, suits, proceedings,
hearings and investigations set forth in Section 2.16 of the
Disclosure Schedule could result in the imposition of any
liability on the Buyer or have a material adverse effect on the
assets, business, financial condition, results of operations or
future prospects of the Business.
2.17 Product Warranty. No product manufactured, sold,
leased or delivered by the Seller in connection with the Business
is subject to any guaranty, warranty, right of return, credit or
other indemnity beyond the applicable standard terms and
conditions of sale or lease, which are set forth in Section 2.17
of the Disclosure Schedule. Section 2.17 of the Disclosure
Schedule sets forth the aggregate expenses incurred by the Seller
in fulfilling its obligations under its guaranty, warranty, right
of return and indemnity provisions in connection with the
Business during each of the fiscal years covered by the Reviewed
Financial Statements; and the Seller does not know of any reason
why such expenses should materially increase as a percentage of
sales in the future.
2.18 Employees. Section 2.18 of the Disclosure Schedule
contains a list of all employees and officers employed by the
Seller in connection with the Business, along with the position
and the annual rate of compensation of each such person. If any
such employee has entered into a confidentiality and/or
assignment of inventions agreement with the Seller, a copy of
each such agreement has previously been delivered to the Buyer
and is assignable by the Seller to the Buyer. To the knowledge
of the Seller, no key employee or group of employees employed in
connection with the Business has any plans to terminate
employment with the Seller (other than for the purpose of
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accepting employment with the Buyer following the Closing) or not
to accept employment with the Buyer. The Seller is not a party
to or bound by any collective bargaining agreement, nor has the
Seller experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes, in
connection with the Business. The Seller has no knowledge of any
organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union
with respect to employees of the Seller employed in connection
with the Business. No employment or consulting agreement
relating to the Business exists that is not terminable at will
without penalty. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will trigger or otherwise result in any obligation of the
Seller to pay severance or related costs under any employment or
consulting agreement.
2.19 Employee Benefits.
-----------------
(a) Section 2.19(a) of the Disclosure Schedule
contains a complete and accurate list of all Employee Benefit
Plans (as defined below) maintained or contributed to by the
Seller, or any ERISA Affiliate (as defined below). For purposes
of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
any "employee welfare benefit plan" (as defined in Section 3(1)
of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement
compensation relating to any employee of the Seller employed in
connection with the Business. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a
controlled group of corporations (as defined in Section 414(b) of
the Code, (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an
affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code), any of
which includes the Seller. Complete and accurate copies of all
Employee Benefit Plans which have been reduced to writing have
been provided to the Buyer, and the Seller has provided the Buyer
with written summaries of any such plans which have not been
reduced to writing. All Employee Benefit Plans are in compliance
in all respects with the currently applicable provisions of ERISA
and the Code and the regulations thereunder.
(b) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received
determination letters from the Internal Revenue Service to the
effect that such Employee Benefit Plans are qualified and the
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plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and
revocation has not been threatened, and no such Employee Benefit
Plan has been amended since the date of its most recent
determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its
qualification or increase its cost.
(c) Section 2.19(c) of the Disclosure Schedule
discloses each: (i) agreement with any employee of the Seller
employed in connection with the Business (A) the benefits of
which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the
Seller of the nature of any of the transactions contemplated by
this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such
employee; and (ii) agreement or plan, including without
limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit
plan, or any Employee Benefit Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
2.20 Environmental Matters.
---------------------
(a) The Seller has complied with all Environmental
Laws (as defined below) applicable to the Acquired Assets or the
Business. There is no pending or, to the knowledge of the
Seller, threatened civil or criminal litigation, written notice
of violation, formal administrative proceeding, or investigation,
inquiry or information request by any Governmental Entity,
relating to any Environmental Law applicable to the Acquired
Assets or the Business. For purposes of this Agreement,
"Environmental Law" means any federal, state, regional, county,
local or foreign law, statute, rule or regulation or the common
law relating to the environment or occupational health and
safety, including without limitation any statute, regulation or
order pertaining to (i) treatment, storage, disposal, generation
and transportation of industrial, toxic or hazardous substances
or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including
without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants, pesticides or
chemicals; (v) the protection of wildlife, marine sanctuaries and
wetlands, including without limitation all endangered and
threatened species; (vi) storage tanks, vessels and containers;
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(vii) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed
receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution,
treatment, storage, disposal, transportation or handling of
pollutants, contaminants, pesticides, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or
solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the federal
Comprehensive Environmental Compensation, Liability and Response
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at
(i) any parcel of real property or any facility formerly or
currently owned, leased, operated or controlled by the Seller at
which the business or operations of the Business have been or are
currently conducted or (ii) any facility, including without
limitation any tolling facility, to which the Seller has
delivered products used in or sold by the Business for
manufacturing, processing, packaging or distribution. With
respect to any such releases of Materials of Environmental
Concern, the Seller has given all required notices to
Governmental Entities (copies of which have been provided to the
Buyer). The Seller is not aware of any releases of Materials of
Environmental Concern at parcels of real property or facilities
other than those owned, leased, operated or controlled by the
Seller at which the business or operations of the Business have
been or are currently conducted, that could reasonably be
expected to have an impact on such real property or facilities.
For purposes of this Agreement, "Materials of Environmental
Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined
under the federal Resources Conservation and Recovery Act),
pesticides, toxic materials, oil or petroleum and petroleum
products or any other material subject to regulation under any
Environmental Law.
(c) Set forth in Section 2.20(c) of the Disclosure
Schedule is a list of all environmental reports, site surveys,
subsurface studies, investigations and audits (whether conducted
by or on behalf of the Seller or a third party, and whether done
at the initiative of the Seller or directed by a Governmental
Entity or other third party) relating to premises currently or
previously owned, leased or operated by the Seller at which the
business or operations of the Business have been or are currently
conducted. Complete and accurate copies of each such report, or
the results of each such investigation or audit, have been
provided to the Buyer.
(d) Set forth in Section 2.20(d) of the Disclosure
Schedule is a list of all of the solid and hazardous waste
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transporters and treatment, storage and disposal facilities that
have been utilized by the Seller in connection with the Business.
The Seller is not aware of any environmental liability of any
such transporter or facility.
2.21 Legal Compliance. The Seller is conducting and has
conducted the business and operations of the Business in
compliance in all respects with all applicable federal, state,
local and foreign laws, regulations and orders. The Facility has
been maintained and currently is in compliance in all respects
with all applicable federal, state, local and foreign laws,
regulations and orders. Neither the Seller nor, with respect to
the Facility, the Seller's sole stockholder has since January 1,
1990 received any notice or communication from any Governmental
Entity alleging non-compliance with any applicable federal,
state, local or foreign laws, regulations or orders.
2.22 Permits. Section 2.22 of the Disclosure Schedule sets
-------
without limitation those issued or required under Environmental
Laws) issued to or held by the Seller relating to the Acquired
Assets or the Business. Such listed Permits are the only Permits
that are required for the Seller to conduct the Business as
presently conducted or as proposed to be conducted. Each such
Permit is in full force and effect and, to the knowledge of the
Seller, no suspension or cancellation of such Permit is
threatened and there is no basis for believing that such Permit
will not be renewable upon expiration. Each such Permit issued
to or held by the Seller is assignable by the Seller to the Buyer
without the consent or approval of any party and will continue in
full force and effect following the Closing.
2.23 Certain Business Relationships With Affiliates.
Neither the Seller (with respect to its operations other than the
Business) nor any Affiliate of the Seller (a) owns any property
(other than the Facility subject to the lease to be entered into
at the Closing pursuant to Section 4.1(f) hereof) or right,
tangible or intangible, which is used in the Business, (b) has
any claim or cause of action against the Seller in connection
with the Business, or (c) owes any money to the Seller in
connection with the Business. There are no transactions (other
than the existing lease for the Facility which will be terminated
upon execution of the lease to be entered into at the Closing
pursuant to Section 4.1(f) hereof) or relationships between the
Seller (with respect to its operations other than the Business)
and its Affiliates, on the one hand, and the Business, on the
other hand, which have occurred since January 1, 1990.
2.24 Brokers' Fees. The Seller has no liability or
obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this
Agreement.
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2.25 Books and Records. The books, records, accounts,
ledgers and files of the Seller relating to the Business are
accurate and complete in all respects and have been maintained in
accordance with good business and bookkeeping practices.
2.26 Customers and Suppliers. No unfilled customer order or
commitment arising out of the conduct of the Business obligating
the Seller to process, manufacture or deliver products or perform
services will result in a loss upon completion of performance
(other than any loss that may result notwithstanding the fact
that such order has been sold at the Seller's historical list
price). No purchase order or commitment relating to or arising
out of the conduct of the Business is in excess of normal
requirements, nor are prices provided therein in excess of
current market prices for the products or services to be provided
thereunder. No supplier to the Seller of materials, products,
components or services used in connection with the Business has
indicated that it will stop, or decrease the rate of, supplying
such materials, products, components or services, and no customer
of the Seller served by the Business has indicated that it will
stop, or decrease the rate of, buying materials, products or
components produced by, or services offered by, the Business.
Section 2.26 of the Disclosure Schedule sets forth a list of (a)
each customer that accounted for more than 5% of the revenues of
the Business during the last full fiscal year and the amount of
revenues accounted for by such customer during each such period
and (b) each supplier that is the sole or principal supplier of
any significant material, product, component or service used in
the Business.
2.27 Owned Real Property. The Seller does not own any real
property.
2.28 Insurance Policies. Section 2.28 of the Disclosure
Schedule sets forth a list (including the name of the insurer,
the name of the policyholder, the name of each insured, the
policy number and periods of coverage, the scope of coverage and
a description of any retroactive premium adjustments or other
loss-sharing arrangements) of all policies of fire, theft,
casualty, liability, burglary, fidelity, workers compensation,
business interruption, environmental, product liability,
automobile and other forms of insurance under which the Seller
with respect to the Business has been a party, a named insured or
otherwise the beneficiary of coverage at any time since January
1, 1990. The Seller has not, with respect to the Business,
received any notice from the insurer under any such policy
disclaiming coverage, reserving rights with respect to a
particular claim or such policy in general, or cancelling or
amending any such policy. All premiums due and payable for such
insurance policies have been duly paid, and such policies or
extensions or renewals thereof in such amounts will be
outstanding and duly in full force without interruption until the
Closing Date.
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2.29 Banking Facilities. Section 2.29 of the Disclosure
Schedule sets forth a true, correct and complete list of:
(a) each bank, savings, loan, brokerage or similar
financial institution at which the Seller with respect to the
Business has an account, safety deposit box, line of credit or
credit facility and the numbers of the accounts or safety deposit
boxes maintained by the Seller with respect to the Business
thereat and details, including terms, of any line of credit or
credit facility; and
(b) the names of all persons authorized to draw on
each such account or to have access to any such safety deposit
box facility, together with a description of the authority (and
conditions thereof, if any) of each such person with respect
thereto.
2.30 Government Contracts. The Seller has not been
suspended or debarred from bidding on contracts or subcontracts
with any Governmental Entity; no such suspension or debarment has
been initiated or, to the Seller's knowledge, threatened; and the
consummation of the transactions contemplated by this Agreement
will not result in any such suspension or debarment of the
Business. The Seller has not been audited or investigated or is
now being audited or investigated by the U.S. Government
Accounting Office, the U.S. Department of Defense or any of its
agencies, the Defense Contract Audit Agency, the U.S. Department
of Justice, the Inspector General of any U.S. Governmental
Entity, any similar agencies or instrumentalities of any foreign
Governmental Entity, or any prime contractor with a Governmental
Entity nor, to the Seller's knowledge, has any such audit or
investigation been threatened. To the Seller's knowledge, there
is no valid basis for (a) the suspension or debarment of the
Business from bidding on contracts or subcontracts with any
Governmental Entity or (b) any claim pursuant to an audit or
investigation by any of the entities named in the foregoing
sentence. The Seller has no agreements, contracts or commitments
which require it to obtain or maintain a security clearance with
any Governmental Entity.
2.31 Disclosure. No representation or warranty by the
Seller contained in this Agreement, and no statement contained in
the Disclosure Schedule or any other document, certificate or
other instrument delivered to or to be delivered by or on behalf
of the Seller pursuant to this Agreement, and no other statement
made by the Seller or any of its representatives in connection
with this Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to
make the statements herein or therein not misleading. The Seller
has disclosed to the Buyer all material information relating to
the Business and the transactions contemplated by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization. The Buyer is a corporation duly
organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware.
3.2 Authorization of Transaction. The Buyer has all
requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder. The execution and delivery
of this Agreement and the Ancillary Agreements by the Buyer and
the performance by the Buyer of this Agreement and the Ancillary
Agreements and the consummation by the Buyer of the transactions
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly and validly executed and
delivered by the Buyer and constitutes, and each of the Ancillary
Agreements, upon its execution and delivery by the Buyer, will
constitute, a valid and binding obligation of the Buyer,
enforceable against the Buyer in accordance with its terms.
3.3 Noncontravention. Neither the execution and delivery
of this Agreement or the Ancillary Agreements by the Buyer, nor
the consummation by the Buyer of the transactions contemplated
hereby or thereby, will, directly or indirectly (with or without
notice or lapse of time), (a) conflict or violate any provision
of the Certificate of Incorporation or By-laws, each as amended
to date, of the Buyer or any resolution adopted by the board of
directors or stockholders of the Buyer, (b) require on the part
of the Buyer any filing with, or permit, authorization, consent
or approval of, any Governmental Entity or give any Governmental
Entity the right to challenge any of the transactions
contemplated by this Agreement or the Ancillary Agreements,
(c) conflict with, result in breach of, constitute a default
under, result in the acceleration of, create in any party any
right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security
Interest or other arrangement to which the Buyer is a party or by
which it is bound or to which any of its assets is subject, or
(d) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Buyer or any of its properties or
assets.
3.4 Brokers' Fees. The Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder
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or agent with respect to the transactions contemplated by this
Agreement.
ARTICLE IV
CONDITIONS TO CLOSING
4.1 Conditions to Obligations of the Buyer. The obligation
of the Buyer to consummate the transactions to be performed by it
in connection with the Closing is subject to the satisfaction, or
waiver by the Buyer, of the following conditions:
(a) the Seller shall have, at its expense, (i)
obtained all of the waivers, permits, consents, approvals or
other authorizations from third parties and Governmental
Entities, and effected all of the registrations, filings and
notices with or to Governmental Entities, as may be necessary to
permit the Seller to consummate the transactions contemplated by
this Agreement, and (ii) obtained all other waivers, permits,
consents, approvals or other authorizations from third parties
and Governmental Entities and effected all other registrations,
filings and notices necessary or desirable in connection with the
transactions contemplated by this Agreement, except in the case
of clause (ii) for any waivers, permits, consents, approvals or
authorizations which if not obtained or effected would not have a
material adverse effect on the right of the Buyer to own, operate
or control the Acquired Assets or conduct the Business following
the Closing or on the ability of the Parties to consummate the
transactions contemplated by this Agreement;
(b) the representations and warranties of the Seller
set forth in Article II shall be true and correct in all material
respects as of the Closing as if made as of the Closing, except
for representations and warranties made as of a specific date,
which shall be true and correct as of such specific date;
(c) the Seller shall have performed or complied in all
material respects with its agreements and covenants required to
be performed or complied with under this Agreement as of or prior
to the Closing;
(d) no action, suit or proceeding shall be pending
before any Governmental Entity wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent
consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, or
(iii) affect adversely the right of the Buyer to own, operate or
control any of the Acquired Assets or to conduct the Business as
currently conducted and as presently proposed to be conducted
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following the Closing, and no such judgment, order, decree,
stipulation or injunction shall be in effect;
(e) the Seller shall have delivered to the Buyer a
certificate (without qualification as to knowledge or materiality
or otherwise) to the effect that each of the conditions specified
in clauses (a) through (d) of this Section 4.1 is satisfied in
all respects;
(f) the Buyer and F.V. Taddeo shall have executed and
delivered to each other a lease in the form attached hereto as
Exhibit G;
(g) each of Les Taddeo, Russell Engle and Mark
Woodward shall have executed and delivered to the Buyer a
Noncompetition Agreement in the form attached hereto as
Exhibit H;
(h) the Seller, the Buyer and the Escrow Agent
(as defined therein) shall have executed and delivered the Escrow
Agreement;
(i) the Buyer shall have received from the Seller and
the Seller's officers all customary closing certificates as it
shall have requested;
(j) the Buyer shall have received from Roger A.
Saevig, counsel to the Seller, an opinion dated as of the Closing
Date in the form attached hereto as Exhibit I; and
(k) all actions to be taken by the Seller in
connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to the
Buyer.
4.2 Conditions to Obligations of the Seller. The
obligation of the Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to the
satisfaction, or waiver by the Seller, of the following
conditions:
(a) the Buyer shall have, at its expense, (i) obtained
all of the waivers, permits, consents, approvals or other
authorizations from third parties and Governmental Entities, and
effected all of the registrations, filings and notices with or to
Governmental Entities, as may be necessary to permit the Buyer to
consummate the transactions contemplated by this Agreement, and
(ii) obtained all other waivers, permits, consents, approvals or
other authorizations from third parties and Governmental Entities
and effected all other registrations, filings and notices
necessary or desirable in connection with the transactions
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contemplated by this Agreement, except in the case of clause (ii)
for any waivers, permits, consents, approvals or authorizations
in whose absence the Closing could be consummated without
materially adversely affecting the Seller;
(b) the representations and warranties of the Buyer
set forth in Article III shall be true and correct in all
material respects as of the Closing as if made as of the Closing,
except for representations and warranties made as of a specific
date, which shall be true and correct as of such date;
(c) the Buyer shall have performed or complied in all
material respects with its agreements and covenants required to
be performed or complied with under this Agreement as of or prior
to the Closing;
(d) the Buyer shall have delivered to the Seller a
certificate (without qualification as to knowledge or materiality
or otherwise) to the effect that each of the conditions specified
in clauses (a) through (c) of this Section 4.2 is satisfied in
all respects;
(e) the Buyer and F.V. Taddeo shall have executed and
delivered to each other a lease in the form attached hereto as
Exhibit G;
(f) the Seller shall have received from Seth
Hoogasian, General Counsel of the Buyer, an opinion dated as of
the Closing Date in the form attached hereto as Exhibit J;
(g) the Buyer shall have either paid off the balance
outstanding as of the Closing Date under the line of credit in
favor of the Seller contemplated by the Business Line of Credit
Agreement dated as of August 17, 1995 between the Seller and Bank
of America National Trust and Savings Association, as amended, or
arranged for the assignment of such line of credit to the Buyer
and the release of any liability thereunder for the Seller and
its sole stockholder; provided, however, that nothing in this
Section 4.2(g) shall release the Seller from any liability to the
Buyer for any amounts owing under such line of credit to the
extent that such amounts cause the Seller to be in breach of any
of its representations or warranties set forth in Article II of
this Agreement; and
(h) all actions to be taken by the Buyer in connection
with the consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Seller.
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ARTICLE V
POST-CLOSING COVENANTS
5.1 Proprietary Information. From and after the Closing,
the Seller shall hold in confidence, and shall cause all of its
Affiliates to hold in confidence, all knowledge, information and
documents of a confidential nature or not generally known to the
public with respect to the Business or the Buyer (including
without limitation the financial information, Intellectual
Property, technical information or data relating to the
materials, products or components sold, or the services offered,
in connection with the Business and names of customers of the
Business) and shall not disclose or make use of the same without
the written consent of the Buyer, except to the extent that such
knowledge, information or documents shall have become public
knowledge other than through a breach of this Agreement by the
Seller.
5.2 Solicitation and Hiring. For a period of two years
after the Closing Date, the Seller shall not, and shall cause its
Affiliates not to, either directly or indirectly as a
stockholder, investor, partner, director, officer, employee or
otherwise, (a) solicit or attempt to induce any Restricted
Employee (as defined below) to terminate his or her employment
with the Buyer or (b) hire or attempt to hire any Restricted
Employee. For purposes of this Agreement, a "Restricted
Employee" shall mean any person who either (i) was an employee of
the Buyer on either the date of this Agreement or the Closing
Date or (ii) was employed by the Seller in connection with the
Business on either the date of this Agreement or the Closing Date
and received an employment offer from the Buyer within five
business days following the Closing Date.
5.3 Non-Competition; Referral of Customers.
(a) For a period of five years after the Closing Date,
the Seller shall not, and shall cause its Affiliates not to,
either directly or indirectly as a stockholder, investor,
partner, director, officer, employee, consultant or otherwise,
(i) develop, manufacture, market, sell, perform or offer any
material, product, component or service which is competitive with
any material, product, component or service developed (or under
development), manufactured, marketed, sold or offered by the
Seller in connection with the Business on or prior to the Closing
Date or (ii) engage in any business competitive with the Business
as conducted on the date of this Agreement or as of the Closing
Date, in the United States or any other country in which the
Business was conducted (the conduct of the Business includes
without limitation the commencement of the process of filing or
applying for Permits, the preparation of marketing studies or the
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study of the feasibility of use of a product) during the five
years prior to the Closing Date.
(b) The Seller, for itself and on behalf of its
Affiliates, agrees that the duration and geographic scope of the
noncompetition provision set forth in this Section 5.3 are
reasonable. In the event that any court determines that the
duration or the geographic scope, or both, are unreasonable and
that such provision is to that extent unenforceable, the Parties
agree that the provision shall remain in full force and effect
for the greatest time period and in the greatest area that would
not render it unenforceable. The Parties intend that this
noncompetition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and
every state of the United States of America and each and every
political subdivision of each and every country outside the
United States of America where this provision is intended to be
effective.
(c) The Seller shall, and shall cause its Affiliates
to, refer all inquiries regarding the Business and its products
and services to the Buyer. The Seller shall notify its
Affiliates in writing promptly after the Closing that the
Business has been sold to the Buyer, and such notice shall inform
such Affiliates of their obligations under this Section 5.3.
Such notice shall be in form and substance reasonably
satisfactory to the Buyer.
5.4 Sharing of Data.
(a) The Seller or its authorized agent shall have the
right for a period of seven years following the Closing Date to
have reasonable access to such books, records and accounts,
including financial and tax information, correspondence,
production records, employment records and other records that are
transferred to the Buyer pursuant to the terms of this Agreement
for the limited purposes of concluding its involvement in the
Business as conducted by the Seller prior to the Closing Date and
for complying with its obligations under applicable securities,
tax, environmental, employment or other laws and regulations.
The Buyer or its authorized agent shall have the right for a
period of seven years following the Closing Date to have
reasonable access to those books, records and accounts, including
financial and tax information, correspondence, production
records, employment records and other records that are retained
by the Seller pursuant to the terms of this Agreement to the
extent that any of the foregoing is needed by the Buyer in order
to comply with its obligations under applicable securities, tax,
environmental, employment or other laws and regulations. Neither
the Buyer nor the Seller shall destroy any such books, records or
accounts retained by it without first providing the other Party
with the opportunity to obtain or copy such books, records or
accounts.
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(b) In addition to all files and documents required to
be provided pursuant to this Agreement or the Ancillary
Agreements, promptly upon request by the Buyer made at any time
following the Closing Date, the Seller shall authorize the
release to the Buyer of all files pertaining to the Acquired
Assets or the business or operations of the Business held by any
federal, state, county, local or foreign authorities, agencies or
instrumentalities.
5.5 Use of Labels. The Seller hereby authorizes the Buyer
to use the labels which constitute Acquired Assets and which
contain the name "Pacific Power Source Corporation" and to affix
such labels to products manufactured and sold as part of the
Business for a period of two years from the Closing Date.
5.6 Cooperation in Litigation. From and after the Closing
Date, each Party shall fully cooperate with the other in the
defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by
such other Party relating to or arising out of the conduct of the
Business prior to or after the Closing Date (other than
litigation arising out of the transactions contemplated by this
Agreement or the Ancillary Agreements). The Party requesting
such cooperation shall pay the reasonable out-of-pocket expenses
incurred in providing such cooperation (including legal fees and
disbursements) by the Party providing such cooperation and by its
officers, directors, employees and agents, but shall not be
responsible for reimbursing such Party or its officers,
directors, employees and agents for their time spent in such
cooperation.
5.7 Collection of Accounts Receivable and Contracts in
Progress. The Seller shall forward promptly to the Buyer any
monies, checks or instruments received by the Seller after the
Closing Date with respect to the Accounts Receivable and the
Contracts in Progress. The Seller hereby authorizes the Buyer to
open any and all mail addressed to the Seller (if delivered to
the Buyer) received on or after the Closing Date and hereby
grants to the Buyer a power of attorney to endorse and cash any
checks or instruments payable or endorsed to the Seller or its
order and received by the Buyer with respect to the Acquired
Assets. The Seller shall provide to the Buyer such reasonable
assistance as the Buyer may request with respect to the
collection of any such Accounts Receivable and Contracts in
Progress, provided the Buyer pays the reasonable out-of-pocket
expenses of the Seller and its officers, directors and employees
incurred in providing such assistance.
5.8 Employees.
(a) Effective as of the Closing, the Seller shall
transfer to the Buyer all of the Seller's employees. Subject to
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any limitations imposed by applicable California statutory and
case law, the employment of each such employee shall be
terminable at the will of the Buyer or as otherwise agreed to
between the Buyer and such employee. The Buyer shall have
complete discretion to change any of the terms or conditions of
employment, compensation or benefits relating to any such
employee at any time. The Seller hereby consents to the transfer
and hiring of such employees by the Buyer and waives, with
respect to the employment by the Buyer of such employees, any
claims or rights the Seller may have against the Buyer or any
such employee under any noncompetition, confidentiality or
employment agreement.
(b) The Buyer shall make such arrangements as may be
necessary for the transferred employees of the Seller who
continue their employment with the Buyer following the Closing to
continue their enrollment in and to receive benefits under the
Seller's insured health plan known as the "Pacificare Point of
Service Plan," a copy of which has previously been provided to
the Buyer; provided, however, that the Buyer expressly reserves
the right to modify or terminate such Plan at any time or from
time to time following the Closing.
5.9 Intercompany Agreements. All contracts, licenses,
agreements, commitments or other arrangements between Seller and
its Affiliates related to the Business, whether written or oral,
and whether express or implied, pursuant to which Seller or its
Affiliates provides management, administrative, legal, financial,
accounting, data processing, insurance, human resources,
technical support or other services to the Business, or the use
of any assets of Seller or its Affiliates other than the Acquired
Assets, or pursuant to which rights, privileges or benefits are
accorded to the Business as a unit of Seller, shall terminate as
of the Closing. After the Closing, the Buyer shall have no
rights or obligations under any similar contract, license,
agreement, commitment or arrangement with the Seller or its
Affiliates except rights under the Ancillary Agreements.
5.10 Change of Name. As soon as practicable after the
Closing, the Seller shall amend its Articles of Incorporation to
change its name from "Pacific Power Source Corporation" to
another available name selected by the Seller and not containing
the words "Pacific," "Power" or "Source" or any word or words
confusingly similar thereto and shall amend accordingly its
foreign corporation filings in all states or other jurisdictions
in which it is qualified to do business.
ARTICLE VI
INDEMNIFICATION
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6.1 Indemnification by Seller. The Seller shall indemnify
the Buyer in respect of, and hold the Buyer harmless against, any
and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether
known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation
amounts paid in settlement, interest thereon at the rate at which
interest is paid on the Escrow Fund from the date of liquidation
of the claim until paid, court costs, costs of investigators,
fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation)
(collectively, "Damages") incurred or suffered by the Buyer or
any Affiliate thereof resulting from, relating to or
constituting:
(a) any misrepresentation or breach of warranty by the
Seller contained in this Agreement or the Ancillary Agreements;
(b) any failure to perform any covenant or agreement
of the Seller contained in this Agreement or the Ancillary
Agreements;
(c) any Retained Liabilities; or
(d) the failure of the Buyer to obtain the protections
afforded by any applicable bulk transfer laws in connection with
the sale of the Acquired Assets.
6.2 Indemnification by Buyer. The Buyer shall indemnify
the Seller in respect of, and hold the Seller harmless against,
any and all Damages incurred or suffered by the Seller or any
Affiliate thereof resulting from, relating to or constituting:
(a) any misrepresentation or breach of warranty by the
Buyer contained in this Agreement or the Ancillary Agreements;
(b) any failure to perform any covenant or agreement
of the Buyer contained in this Agreement or the Ancillary
Agreements; or
(c) any Assumed Liabilities.
6.3 Claims for Indemnification. Whenever any claim shall
arise for indemnification hereunder, the Party seeking
indemnification (the "Indemnified Party") shall promptly notify
(in accordance with Section 7.7) the Party from whom
indemnification is sought (the "Indemnifying Party") of the claim
and, when known, the facts constituting the basis for such claim;
provided, however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any liability or obligation hereunder
except to the extent of any damage or liability caused by or
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arising out of such failure. In the event of any such claim for
indemnification hereunder resulting from or in connection with
any claim or legal proceedings by a third party, the notice to
the Indemnifying Party shall specify, if known, the amount or an
estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a
third party for which it is seeking indemnification hereunder
without the prior written consent of the Indemnifying Party
(which shall not be unreasonably withheld), unless the
Indemnifying Party shall not have taken control of the defense of
such claim as provided in Section 6.4 of this Agreement, after
notification thereof pursuant to this Section 6.3, in which case
the Indemnified Party may settle or compromise such claim without
the Indemnifying Party's consent.
6.4 Defense by the Indemnifying Party.
(a) Subject to Section 6.4(b), in connection with any
claim for indemnification hereunder resulting from or arising out
of any claim or legal proceeding by a third party, the
Indemnifying Party at its sole cost and expense may, upon written
notice to the Indemnified Party given within 20 days after the
date of the notice of the claim from the Indemnified Party
pursuant to Section 6.3, assume the defense of such claim or
legal proceeding with counsel approved by the Indemnified Party,
which approval shall not be unreasonably withheld, if (i) the
Indemnifying Party acknowledges to the Indemnified Party in
writing the Indemnifying Party's obligations to indemnify the
Indemnified Party with respect to all elements of such claim,
(ii) the third party seeks monetary damages only, and (iii) an
adverse resolution of the third party's claim would not have a
material adverse effect on the goodwill or the reputation of the
Indemnified Party or the Business or the future conduct of the
business of the Indemnified Party or the Business. If the
Indemnifying Party so assumes such defense, the Indemnified Party
shall be entitled to participate in (but not control) such
defense, with its counsel and at its own expense (except that the
Indemnifying Party will be responsible for the reasonable fees
and expenses of the separate co-counsel to the extent the
Indemnified Party reasonably concludes that the counsel the
Indemnifying Party has selected has a conflict of interest). In
addition, if the Indemnifying Party so assumes such defense, it
shall take all steps necessary in the defense or settlement
thereof; provided, however, that the Indemnifying Party shall not
consent to any settlement or to the entry of any judgment with
respect to a claim or legal proceeding which does not include a
complete release of the Indemnified Party from all liability with
respect thereto or which imposes any liability on the Indemnified
Party without the written consent of the Indemnified Party. If
the Indemnifying Party does not (or is not permitted under the
terms hereof to) assume the defense of any such claim or legal
proceeding, (A) the Indemnified Party may defend against such
claim or legal proceeding (with the Indemnifying Party
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responsible for the reasonable fees and expenses of counsel for
the Indemnified Party) in such manner as it may deem appropriate,
including but not limited to settling such claim or legal
proceeding on such terms as the Indemnified Party may deem
appropriate, and (B) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with
its counsel and at its own expense.
(b) If a customer or supplier of the Business asserts
that the Business or the Buyer is liable to such party for a
monetary or other obligation which may constitute or result in
Damages for which the Buyer may be entitled to indemnification
pursuant to this Article VI, and the Buyer reasonably determines
that it has a valid business reason to fulfill such obligation,
then (i) the Buyer shall be entitled to satisfy such obligation,
without prior notice to or consent from the Seller, (ii) the
Buyer may make a claim for indemnification pursuant to this
Article VI in accordance with the provisions hereof, and (iii)
the Buyer shall be reimbursed, in accordance with the provisions
hereof, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI.
6.5 Payment of Indemnification Obligation. All
indemnification by the Indemnifying Party hereunder shall be
effected promptly as Damages are incurred by wire transfer of
immediately available funds to an account designated by the
Indemnified Party in the amount of the indemnification liability.
6.6. Survival. All representations, warranties, covenants
and obligations in this Agreement, the Ancillary Agreements, the
Disclosure Schedule and any other certificate or documents
delivered pursuant to this Agreement will survive the Closing,
and the right to indemnification, reimbursement or other remedy
based on such representations, warranties, covenants and
obligations will not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being
acquired) about the accuracy or inaccuracy of or compliance with,
any such representations, warranties, covenants or obligations.
An Indemnifying Party will have no liability for indemnification
with respect to any representation or warranty in Article II or
Article III, other than those in Sections 2.1, 2.2, 2.3, 2.8,
2.20, 2.21 and 2.22, unless on or before the second anniversary
of the Closing Date the Indemnifying Party is given notice of a
claim pursuant to Section 6.3 hereof. However, the preceding
sentence of this Section 6.6 will not apply to any breach of any
of the Indemnifying Party's representations and warranties of
which the Indemnifying Party had knowledge at any time prior to
the date on which such representation and warranty is made. A
claim with respect to Sections 2.1, 2.2, 2.3, 2.8, 2.20, 2.21 or
2.22, or a claim for indemnification or reimbursements not based
upon any representation or warranty in Article II or Article III,
may be made at any time.
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6.7 Limitations. An Indemnifying Party will have no
liability for indemnification pursuant to Section 6.1(a) or
6.2(a) until the total of all Damages with respect to such
matters exceeds $25,000 and then only for the amount by which
such Damages exceed $25,000 and are less than $1,000,000.
However, the preceding sentence of this Section 6.7 will not
apply to any breach of any of the Indemnifying Party's
representations and warranties of which the Indemnifying Party
had knowledge at any time prior to the date on which such
representation and warranty is made.
ARTICLE VII
MISCELLANEOUS
7.1 Press Releases and Announcements. The Seller shall not
issue any press release or announcement relating to the subject
matter of this Agreement without the prior written approval of
the Buyer.
7.2 No Third Party Beneficiaries. This Agreement
(including without limitation Section 5.8 hereof) shall not
confer any rights or remedies upon any person other than the
Parties and their respective successors and permitted assigns.
7.3 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement
between the Parties and supersedes any prior understandings,
agreements or representations by or between the Parties, written
or oral, that may have related in any way to the subject matter
hereof. Notwithstanding the foregoing, the provisions of the
Confidentiality Agreement, dated December 4, 1995, by and between
Buyer and Seller shall survive until the Closing, whereupon it
shall terminate.
7.4 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. The Buyer
may assign its rights, interests and/or obligations hereunder to
an Affiliate of the Buyer but, in such event, the Buyer shall
remain liable for all of its obligations hereunder. The Seller
may liquidate and distribute its assets (including the Purchase
Price received hereunder) to its stockholders so long as such
stockholders assume and becomes personally liable for all of the
obligations of the Seller hereunder and deliver written
instruments, satisfactory to the Buyer in form and substance, to
the foregoing effect. Except as provided in the preceding two
sentences, neither Party may assign either this Agreement or any
of its rights, interests or obligations hereunder without the
prior written approval of the other Party, and the Seller may not
liquidate or distribute any of its assets (including the Purchase
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Price received hereunder) among its stockholders without the
prior written approval of the Buyer.
7.5 Counterparts. 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.
7.6 Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
7.7 Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice,
request, demand, claim or other communication hereunder shall be
deemed duly delivered upon personal delivery or transmission by
telecopier, four business days after it is sent by U.S.
registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the
intended recipient as set forth below:
If to the Seller: Copy to:
---------------- -------
Pacific Power Source Corporation Roger A. Saevig, Esq.
15122 Bolsa Chica Street Law Office Management
Huntington Beach, CA 92649 2001 East 4th Street
Telecopy: (714) 898-5235 Suite 220
Attention: President Santa Ana, CA 92705
Telecopy: (714) 564-9039
If to the Buyer: Copies to:
--------------- ---------
Thermo Voltek Corporation Thermo Electron Corporation
81 Wyman Street 81 Wyman Street
P.O. Box 9046 P.O. Box 9046
Waltham, MA 02254-9046 Waltham, MA 02254-9046
Telecopy: (617) 622-1207 Telecopy: (617) 622-1296
Attention: President Attention: General Counsel
Hale and Dorr
60 State Street
Boston, MA 02109
Telecopy: (617) 526-5000
Attention: Hal J. Leibowitz,
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Either Party may give any notice, request, demand, claim or other
communication hereunder by personal delivery or telecopy, but no
such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any notice
sent by telecopy shall be followed by a confirmation copy sent by
reputable overnight business courier service. Either Party may
change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving
the other Party notice in the manner herein set forth.
7.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (and not the law
of conflicts) of the Commonwealth of Massachusetts.
7.9 Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to the Closing
with the prior authorization of their respective Boards of
Directors. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by either Party of any default,
misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
7.10 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this
Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
7.11 Expenses. Except as specifically set forth in this
Agreement and the Escrow Agreement, each Party shall bear its own
costs and expenses (including legal and accounting fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. In the event of any
litigation, claim or proceeding with respect to this Agreement or
the
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Ancillary Agreements, the prevailing Party shall be paid its
reasonable legal fees and expenses by the opposing Party.
7.12 Specific Performance. Each Party acknowledges and
agrees that the other Party would be damaged irreparably in the
event any of the provisions of this Agreement (including without
limitation Sections 5.1, 5.2 and 5.3 hereof) are not performed in
accordance with their specific terms or otherwise are breached.
Accordingly, each Party agrees that the other Party shall be
entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition
to any other remedy to which it may be entitled, at law or in
equity.
7.13 Submission to Jurisdiction. Each Party (a) submits to
the jurisdiction of any state or federal court sitting in the
Commonwealth of Massachusetts in any action or proceeding arising
out of or relating to this Agreement or the Ancillary Agreements,
(b) agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and (c) agrees not
to bring any action or proceeding arising out of or relating to
this Agreement or the Ancillary Agreements in any other court.
Each Party hereby waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any
bond, surety or other security that might be required of the
other Party with respect thereto. Either Party may make service
on the other Party by sending or delivering a copy of the process
to the Party to be served at the address and in the manner
provided for the giving of notices in Section 7.7. Nothing in
this Section 7.13, however, shall affect the right of either
Party to serve legal process in any other manner permitted by
law.
7.14 Construction. The language used in this Agreement
shall be deemed to be the language chosen by the Parties hereto
to express their mutual intent, and no rule of strict
construction shall be applied against either Party. Any
reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
7.15 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
THERMO VOLTEK CORPORATION
By:________________________________
Title:_____________________________
PACIFIC POWER SOURCE CORPORATION
By:________________________________
Title:
-----------------------------
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Exhibit C
BILL OF SALE
This Bill of Sale dated July 3, 1996 is executed and
delivered by Pacific Power Source Corporation, a California
corporation (the "Seller"), to Thermo Voltek Corporation, a
Delaware corporation (the "Buyer"). All capitalized words and
terms used in this Bill of Sale and not defined herein shall have
the respective meanings ascribed to them in the Asset Purchase
Agreement dated as of July 3, 1996 between the Seller and the
Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to
sell, transfer, convey, assign and deliver to the Buyer the
Acquired Assets.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Seller hereby agrees as follows:
1. The Seller hereby sells, transfers, conveys, assigns
and delivers to the Buyer, its successors and assigns, to have
and to hold forever, the Acquired Assets.
2. Notwithstanding the foregoing, the Acquired Assets to
be transferred to the Buyer under this Bill of Sale shall not
include the assets identified in Section 1.1(b) of the Agreement.
3. The Seller, by its execution of this Bill of Sale, and
the Buyer, by its acceptance of this Bill of Sale, each hereby
acknowledges and agrees that neither the representations and
warranties nor the rights and remedies of any party under the
Agreement shall be deemed to be enlarged, modified or altered in
any way by this Bill of Sale.
4. This Bill of Sales hall be governed by and construed in
accordance with the internal laws (and not the law of conflicts)
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Buyer and the Seller have caused
this instrument to be duly executed under seal as of the date
first above written.
PACIFIC POWER SOURCE CORPORATION THERMO VOLTEK CORPORATION
By:_______________________ By:_______________________
Title: Title:
-------------------- --------------------
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Exhibit D
INSTRUMENT OF ASSUMPTION OF LIABILITIES
This Instrument of Assumption of Liabilities dated July 3,
1996 is made by Thermo Voltek Corporation, a Delaware corporation
(the "Buyer"), in favor of Pacific Power Source Corporation, a
California corporation (the "Seller"). All capitalized words and
terms used in this Instrument of Assumption of Liabilities and
not defined herein shall have the respective meanings ascribed to
them in the Asset Purchase Agreement dated as of July 3, 1996
between the Seller and the Buyer (the "Agreement").
WHEREAS, pursuant to the Agreement, the Seller has agreed to
sell, transfer, convey, assign and deliver to the Buyer the
Acquired Assets; and
WHEREAS, in partial consideration therefor, the Agreement
requires the Buyer to assume the Assumed Liabilities;
NOW, THEREFORE, for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Buyer hereby agrees as follows:
1. The Buyer hereby assumes the Assumed Liabilities.
2. It is expressly understood and agreed that the Retained
Liabilities shall remain the sole obligation of the Seller.
3. The Buyer, by its execution of this Instrument of
Assumption of Liabilities, and the Seller, by its acceptance of
this Instrument of Assumption of Liabilities, each hereby
acknowledges and agrees that neither the representations and
warranties nor the rights and remedies of either party under the
Agreement shall be deemed to be enlarged, modified or altered in
any way by this Instrument of Assumption of Liabilities.
4. Nothing contained herein shall be deemed to deprive the
Buyer of any defense, set-offs or counterclaims which the Seller
may have had or which the Buyer shall have with respect to any of
the Assumed Liabilities (the "Defenses and Claims"). The Seller
hereby transfers, conveys and assigns to the Buyer all Defenses
and Claims and agrees to cooperate with the Buyer to maintain,
secure, perfect and enforce such Defenses and Claims, including
the signing of any documents, the giving of any testimony or the
taking of any such other action as is reasonably requested by the
Buyer in connection with such Defenses and Claims.
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5. This Instrument of Assumption of Liabilities shall be
governed by and construed in accordance with the internal laws
(and not the law of conflicts) of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Buyer and the Seller have caused
this instrument to be duly executed under seal as of the date
first above written.
PACIFIC POWER SOURCE CORPORATION THERMO VOLTEK CORPORATION
By:_______________________ By:_______________________
Title: Title:
-------------------- --------------------
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Exhibit E
ESCROW AGREEMENT
This Escrow Agreement is made and entered into this 3rd day
of July, 1996, by and among Pacific Power Source Corporation, a
California corporation (the "Seller"), Thermo Voltek
Corporation, a Delaware corporation (the "Buyer"), and BayBank, a
bank chartered under the laws of the Commonwealth of
Massachusetts (the "Escrow Agent").
WITNESSETH:
WHEREAS, Seller and Buyer have entered into that certain
Asset Purchase Agreement of even date herewith (the "Purchase
Agreement"), pursuant to which Seller has transferred to Buyer
certain assets of the Seller (the "Assets"); and
WHEREAS, Section 1.7 of the Purchase Agreement requires
Buyer and Seller to establish an escrow account and to place a
portion of the consideration for the Assets in escrow; and
WHEREAS, Seller and Buyer wish to appoint Escrow Agent as
escrow agent for such escrow account and Escrow Agent wishes to
accept such appointment, upon the terms and conditions set forth
below;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, agreements and provisions herein contained, the
parties hereto agree as follows:
Section (a) Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given
them in the Purchase Agreement.
Section (b) Establishment of Escrow Account. The parties
acknowledge that pursuant to Section 6.1 of the Purchase
Agreement, Buyer shall be indemnified against certain liabilities
and contingencies. As security for Seller's obligations under
Article VI of the Purchase Agreement, the parties hereby
establish an escrow account (the "Escrow Account") with Escrow
Agent. Escrow Agent acknowledges and accepts the deposit by
Buyer into the Escrow Account of $550,000 (the "Escrowed Funds").
Section (c) Investments. Escrow Agent shall invest the
Escrowed Funds, at the direction of Seller, in (i) obligations
issued or guaranteed by the United States of America of any
agency or instrumentality thereof, (ii) obligations (including
certificates of deposit and bankers' acceptances) of banks which
at the date of their last public reporting had total assets in
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excess of $500,000,000, (iii) commercial paper rated at least A-1
or P-1 or, if not rated, issued by companies having outstanding
debt rated at least AA or Aa, and (iv) money market mutual funds
invested exclusively in some or all of the securities described
in the foregoing clauses (i), (ii) and (iii). Income from any
such investment shall be held by Escrow Agent, shall be
reinvested in accordance with this Section 3 and shall be
considered part of the Escrowed Funds.
Section (d) Notice of Claims. In the event that, prior to
the second anniversary of the Closing Date (the "Termination
Date"), Buyer asserts any claim for indemnification against the
Escrowed Funds pursuant to Article VI of the Purchase Agreement,
it shall deliver to Escrow Agent and Seller a written notice
thereof (the "Notice of Claim") setting forth (a) a demand for
payment of a specified amount from the Escrowed Funds or, if such
amount can not be specified, the basis upon which the amount
would be determined and (b) a description of the asserted claim.
Section (e) Payment of Amounts from Escrow Account Upon
Demand Without Objection. If Buyer delivers to Seller and Escrow
Agent a Notice of Claim pursuant to Section 4 hereof and if no
written objection to such demand is received by Escrow Agent and
Buyer from Seller within 30 days following the delivery of such
Notice of Claim to Escrow Agent and Seller, then the Escrow Agent
shall pay the claim out of the Escrowed Funds by forthwith
transmitting the claimed amount of the Escrowed Funds to Buyer as
directed by Buyer. Seller acknowledges that in the event the
Escrowed Funds are insufficient to pay off a claim including
interest thereon, the Seller's liability shall not be limited to
the value of the Escrowed Funds and Seller shall be liable to the
Buyer for such insufficiency. Notwithstanding anything else to
the contrary herein, failure of Buyer to submit a claim pursuant
to Article VI of the Purchase Agreement during the escrow period
shall not limit Buyer's ability to bring such claim thereafter
irrespective of the termination of the escrow created hereunder
unless specifically limited by the express terms of Section 6.6
of the Purchase Agreement.
Section (f) Payment of Escrowed Funds After Notice of
Objection. If Buyer delivers a Notice of Claim pursuant to
Section 4 hereof, and if Seller shall give written objection
thereto to Escrow Agent and Buyer prior to the expiration of the
30-day period specified in Section 5, Escrow Agent shall make no
payment in respect of the demand set forth in such Notice of
Claim until it shall have received one of the following:
(a) written instructions signed on behalf of Buyer and
Seller; or
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(b) a final order of a court having jurisdiction of
the asserted claim.
Upon receipt of any such instructions or order, Escrow Agent
shall pay such amount from the Escrowed Funds to Buyer as may be
directed by such instructions or order; provided, however, that
in the event such Escrowed Funds are insufficient to pay off the
claim including interest thereon, Seller's liability shall not be
limited to the value of the Escrowed Funds transferred to Buyer
unless the liability for such claim is so limited by the express
terms of Article VI of the Purchase Agreement.
Section (g) Payment of Escrowed Funds to Seller.
(i) On the first anniversary of the date hereof,
Escrow Agent shall deliver to Buyer and Seller a statement of the
remaining balance, if any, of the Escrowed Funds and the total
amount of all claims paid hereunder or asserted pursuant to
Section 4 hereof and not theretofore resolved and paid (the
excess, if any, of $272,500 plus interest over the total amount
of such claims shall be referred to as the "Interim Escrow
Balance"). Buyer and Seller shall review the accuracy of the
Interim Escrow Balance and notify Escrow Agent within 20 days of
the foregoing statement of any asserted discrepancy. Within 30
days after receipt by Buyer and Seller of such statement, and if
Escrow Agent has not been notified of any discrepancy by Buyer or
Seller within the 20-day period specified in the preceding
sentence, Escrow Agent shall deliver to Seller an amount
representing the Interim Escrow Balance, free and clear of the
escrow created by this Agreement.
(ii) On the second anniversary of the date hereof,
Escrow Agent shall deliver to Buyer and Seller a statement of the
remaining balance, if any, of the Escrowed Funds plus interest
and the total amount of all claims asserted pursuant to Section 4
hereof and not theretofore resolved and paid (the excess, if any,
of such remaining balance over the total amount of such claims
shall be referred to as the "Final Escrow Balance"). Buyer and
Seller shall review the accuracy of the Final Escrow Balance and
notify Escrow Agent within 20 days of the foregoing statement of
any asserted discrepancy. Within 30 days after receipt by Buyer
and Seller of such statement, and if Escrow Agent has not been
notified of any discrepancy by Buyer or Seller within the 20-day
period specified in the preceding sentence, Escrow Agent shall
deliver to Seller an amount representing the Final Escrow
Balance, free and clear of the escrow created by this Agreement.
After the last asserted claim shall have been resolved pursuant
to Section 5 and 6 hereof, as the case may be, and paid, the
remaining balance, if any, of the Escrowed Funds shall be
delivered by Escrow Agent to the Seller, free and clear of the
escrow created by this Agreement; provided, however, that upon
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the disposition of any such claim prior to the disposition of all
such claims Escrow Agent shall deliver to Seller the Escrowed
Funds in excess of the amount of the remaining aggregate claims
as determined above.
Section (h) Responsibility of Escrow Agent. Escrow Agent
may act upon any instrument or other writing believed by it in
good faith to be genuine and to have been signed or presented by
the proper person and shall not be liable to any party hereto in
connection with the performance of its duties hereunder, except
for its own negligence or misconduct. Escrow Agent's duties
shall be determined only with reference to this Agreement and
applicable laws and Escrow Agent is not charged with knowledge
of, or any duties or responsibilities in connection with, any
other document or agreement. If in doubt as to its duties and
responsibilities hereunder, Escrow Agent may consult with counsel
of its choice and shall be protected in any action taken or
omitted in connection with the advice or opinion of such counsel.
If any party to this Agreement disagrees on any issue
or matter connected with this escrow, (i) Escrow Agent will not
have to settle the matter, (ii) Escrow Agent may wait for a
settlement by appropriate legal proceedings or other means it may
require, and in such event it will not be liable for interest or
damage, (iii) if Escrow Agent intervenes in or is made a party to
any legal proceedings, it will be entitled to such reasonable
compensation for services, costs and attorneys' fees as the court
may award, and (iv) Escrow Agent is entitled to hold assets
deposited in the Escrow Account pending settlement of the
disagreement by any of the above means.
Escrow Agent is to act as a depository agent only and
is hereby relieved of any liability in connection with any
representations made by the other parties hereto or any of their
agents. Escrow Agent shall not be responsible for and shall not
be under a duty to examine any other agreement.
Section (i) Indemnification and Fees of Escrow Agent. In
consideration of its acceptance of the appointment as Escrow
Agent, Seller and Buyer shall indemnify and hold Escrow Agent
harmless as to any liability incurred by it (other than for the
ordinary services contemplated by this Agreement) to any other
person, firm or corporation by reason of its having accepted the
same or in carrying out any of the terms hereof, and shall
reimburse the Escrow Agent for all its out-of-pocket expenses,
including, among other things, reasonable counsel fees and court
costs, incurred by reason of its position hereunder or actions
taken pursuant hereto, except in the event of the negligence or
misconduct of Escrow Agent. The fees and charges set forth in
Exhibit A for the services of Escrow Agent will be considered
compensation for Escrow Agent's ordinary services as contemplated
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by this Agreement. In the event Escrow Agent renders any service
not provided for in this Agreement or there is any assignment of
any interest in the subject matter of this escrow or modification
of any interest, Escrow Agent will be reasonably compensated for
such extraordinary services, and will be reimbursed for all
reasonable costs, attorney's fees and expenses occasioned
thereby, which compensation, costs, fees and expenses shall be
paid by the party requesting such additional service or whose
interest is assigned or modified.
Escrow Agent shall receive fees for its ordinary services
hereunder, payable upon presentation of a statement therefor, as
set forth on Exhibit A. Buyer shall pay one-half of such fees and
the Seller shall pay the other half of such fees.
Section (j) Resignation of Escrow Agent. Escrow Agent may
resign and be discharged from its duties hereunder at any time by
giving not less than 60 days' prior written notice of such
resignation to Buyer and Seller, which notice shall specify the
date when such resignation shall take effect. Upon such notice,
Buyer and Seller shall appoint a successor escrow agent. If
Buyer and Seller are unable to agree upon a successor escrow
agent within 30 days after such notice, Escrow Agent shall be
entitled to appoint its successor. Escrow Agent shall continue
to serve until its successor delivers to Buyer and Seller a duly
executed instrument of acceptance of the terms and conditions of
this Agreement and receives the Escrowed Funds.
Section (k) Termination. This Agreement shall terminate
upon the later of the Termination Date or the release by the
Escrow Agent of all of the Escrow Funds in accordance with this
Agreement; provided, that the provisions of Sections 8 and 9
shall survive such termination.
Section (l) Notices. All notices, requests, demands,
consents and other communications which are required or permitted
hereunder shall be in writing, and shall be deemed given when
actually received or if earlier, one day after deposit with a
nationally recognized air courier or express mail, charges
prepaid or three days after deposit in the U.S. mail by certified
mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Escrow Agent:
BayBank
Institutional Custody Department
7 New England Executive Park
Burlington, MA 01803
Attention: Mr. Walter Squires
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If to Buyer:
Thermo Voltek Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: President
With copies to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Hal J. Leibowitz, Esq.
If to Seller:
Pacific Power Source Corporation
15122 Bolsa Chica Street
Huntington Beach, CA 92649
Attention: President
With a copy to:
Law Office Management
2001 East 4th Street
Suite 220
Santa Ana, CA 92705
Attention: Roger A. Saevig, Esq.
or to such other address as any party hereto may designate in
writing to the other parties, specifying a change of address for
the purpose of this Agreement.
Section (m) No Implied Rights or Remedies. Except as
otherwise expressly provided herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or to
give any person, firm or corporation, other than the parties
hereto, any rights or remedies under or by reason of this
Agreement.
Section (n) Modification; Waiver. This Agreement may be
amended, modified or supplemented by a writing signed by the
parties against whom enforcement of any amendment is sought. The
parties hereto may, by a written signed instrument, extend the
time for or waive the performance of any of the obligations of
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another party hereto or waive compliance by such other party with
any of the covenants or conditions contained herein.
Section (o) Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not be a
part of or control or affect the meaning hereof.
Section (p) Severability. If any provision of this
Agreement shall be declared void or unenforceable by any judicial
or administrative authority, the validity of any other provision
shall not be affected thereby.
Section (q) Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
Section (r) Agreement Binding. This Agreement and the
rights and duties hereunder shall be binding upon and inure to
the benefit of the successors, assigns, heirs and legal and
personal representatives of the parties hereto.
Section (s) Governing Law. This Agreement shall be governed
exclusively by the laws of the Commonwealth of Massachusetts
without reference to conflicts of laws principles.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first written above.
THERMO VOLTEK CORPORATION
By:
Title:
PACIFIC POWER SOURCE CORPORATION
By:
Title:
BAYBANK
By:
Title:
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Escrow Agent Fees
Annual fee of $2,500 plus out of pocket expenses reasonably
incurred in the performance of duties under the Escrow Agreement.
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Exhibit G
N E T L E A S E
ARTICLE I
Reference Data
1.1 Subjects Referred To.
Each reference in this Lease to any of the following
subjects shall be construed to incorporate the data stated for
that subject in this Section 1.1.
(a) Date of this Lease: July 3, 1996
(b) Premises: The land and building thereon (the
"Building"), containing approximately 21,470 square feet,
commonly known as 15122 Bolsa Chica Street, Huntington Beach,
Orange County, California, more particularly shown on Exhibit A
attached hereto.
(c) Landlord: F V. Taddeo, an individual.
(d) Original Address of Landlord:
15122 Bolsa Chica Street
Huntington Beach, CA 92647
(e) Tenant: Thermo Voltek Corporation, a Delaware
corporation
(f) Original Address of Tenant: 81 Wyman Street
Post Office Box 9046
Waltham, MA 02254-9046
(g) Term: Five (5) Years.
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(h) Annual Fixed Rent Rate:
Rent Rate Per Square Foot
Lease Years: of space in Building
1 through 5 $7.20
(i) Permitted Uses: Designing, developing, manufacturing,
marketing and selling power testing, conversion and conditioning
products, including without limitation AC power sources and
frequency converters (the "Business") and all other uses
permitted by applicable law.
(j) Public Liability Insurance Limits:
Bodily Injury: $1,000,000
Property Damage: $1,000,000
(k) Option to Extend: As set forth in Section 2.3.
1.2 Exhibits.
The Exhibits listed below in this section are incorporated
in this Lease by reference and are to be construed as a part of
this Lease:
EXHIBIT A. Description of Premises.
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ARTICLE II
Premises and Term
2.1 Premises. Landlord hereby leases and demises to Tenant
and Tenant hereby leases from Landlord, subject to and with the
benefit of the terms, covenants, conditions and provisions of
this Lease, the Premises.
2.2 Term. TO HAVE AND TO HOLD for a term beginning on the
date hereof and continuing for the Term, unless sooner terminated
as hereinafter provided or extended as provided herein.
2.3 Option to Extend. Tenant shall have the right and
option to extend the Term for one additional period (the
"Extension Term") of five (5) years commencing upon the
expiration of the original Term referred to in Section 2.2 (the
"Original Term"), provided that Tenant shall give Landlord notice
of Tenant's exercise of such option at least six (6) months prior
to the expiration of the Original Term. Prior to the exercise by
Tenant of such option, the expression "Term" shall mean the
Original Term, and after the exercise by Tenant of such option,
the expression "Term" shall mean the Original Term as it has been
then extended by the Extension Term. All the terms, covenants,
conditions, provisions and agreements in this Lease shall be
applicable during the Extension Term, except that Annual Fixed
Rent Rate shall be the Extension Term Rent Rate determined as set
forth in Section 2.4. If for any reason the Annual Fixed Rent
Rate has not been determined as of the commencement of the
Extension Term, Tenant shall pay at the Annual Fixed Rent Rate as
set forth in Section 1.1(h) until the Annual Fixed Rent Rate for
the Extension Term is determined, at which time an appropriate
adjustment, if any, shall be made. If Tenant shall give notice
of its exercise of said option to extend in the manner and within
the time period provided aforesaid, the Term shall be extended
upon the giving of such notice without the requirement of any
further action the part of either Landlord or Tenant.
2.4 Extension Term Rent Rate. "Extension Term Rent Rate"
shall be equal to the Annual Fixed Rent Rate increased by a
percentage equal to the average annual increase in the "Consumer
Price Index" (as that term is defined below) for calendar years
1996, 1997, 1998, 1999 and 2000. The "Consumer Price Index"
shall mean the Consumer Price Index for All Urban Consumers
(CPI-U), Los Angeles-Anaheim-Riverside, California, All Items
(1982-84 = 100), as published by the United States Bureau of
Labor Statistics, or if said index is no longer published, a
similar successor index.
ARTICLE III
Condition and Use of Premises
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3.1 As Is. Tenant accepts the Premises in their "as is"
condition as of the date of this Lease. Landlord shall not be
required to construct any leasehold improvements as a condition
precedent to the commencement of the Term of this Lease.
Landlord represents and warrants that under applicable zoning and
other applicable land use laws and regulations the Premises may
be used for operation of the Business. If any governmental or
quasi-governmental regulatory entity or utility prohibits or
materially impairs the use of the Building for the conduct of the
Business, or if the representation of the Landlord contained in
the immediately preceding sentence is untrue in any material
respect, then upon ninety (90) days' notice to Landlord Tenant
may terminate this Lease.
ARTICLE IV
Rent
4.1 The Fixed Rent. Tenant covenants and agrees to pay
rent to Landlord at the Original Address of Landlord or at such
other place or to such other person or entity as Landlord may by
notice to Tenant from time to time direct, at the Annual Fixed
Rent Rate, in equal installments of 1/12th of the Annual Fixed
Rent Rate in advance on the first day of each calendar month
included in the Term; and for any portion of a calendar month at
the beginning or end of the Term, at that rate payable in advance
for such portion.
4.2 Additional Rent. This Lease is a NET LEASE, and
Landlord shall not be obligated to pay any charge or bear any
expense whatsoever against or with respect to the Premises except
to the extent hereinafter provided. In order that the Fixed Rent
shall be net to Landlord, Tenant covenants and agrees to pay, as
Additional Rent, taxes, betterment assessments, insurance costs,
and utility charges with respect to the Premises as provided in
this Section 4.2 as follows:
4.2.1 Real Estate Taxes. Tenant shall pay, directly
to the authority charged with collection thereof: (i) all real
property taxes, assessments, levies, fees, water and sewer rents
and charges which are, at any time prior to or during the Term
hereof, imposed or levied upon or assessed against the Premises
and (ii) all charges for utilities furnished to the Premises
which may become a lien on the Premises (collectively "taxes and
assessments" or if singular "tax or assessment"). Promptly after
payment of any tax or assessment, Tenant shall furnish to
Landlord evidence of such payment. If any tax or assessment
levied against the Premises may legally be paid in installments,
Tenant may elect to pay such tax or assessment in installments.
For each tax or assessment period, or installment period thereof,
wholly included in the Term, all such payments shall be made by
Tenant no later than the last date on which the same may be paid
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without interest or penalty; provided that for any fraction of a
tax or assessment period, or installment period thereof, included
in the Term at the beginning or end thereof, Tenant shall pay to
Landlord, within 20 days after receipt of invoice therefor, the
fraction of taxes and assessments so levied or assessed or
becoming payable which is allocable to such included period.
If Tenant shall deem itself aggrieved by any such tax
or assessment, and shall elect to contest the payment thereof,
Tenant may make such payment under protest or, if postponement of
such payment will not jeopardize Landlord's title to the Premises
nor prejudice Landlord's rights with respect to abatement
proceedings, Tenant may postpone the same.
Either party paying any tax or assessment shall be
entitled to recover, receive and retain for its own benefit all
abatements and refunds related thereto, unless it has previously
been reimbursed by the other party. Any abatement or refund
related to a tax or assessment the payment of which was
apportioned between the parties shall be first applied to the
costs of securing such abatement or refund, and the balance shall
be apportioned in like manner. Neither party shall discontinue
any abatement proceedings begun by it without first giving the
other party notice of its intent so to do and reasonable
opportunity to be substituted in such proceedings.
Notwithstanding any other provision of this Lease to the
contrary, neither party paying any tax or assessment shall make
such payment in such an amount, in such a manner, or at such a
time as would prejudice any abatement proceeding.
Nothing contained in this Lease shall, however, require
Tenant to pay any franchise, corporate, estate, inheritance,
succession, capital levy or transfer tax of Landlord, or any
income, profits or revenue tax or charge upon the rent payable by
Tenant under this Lease.
4.2.2 Insurance. Tenant shall take out and maintain
throughout the Term the following insurance protecting Landlord
as a named insured and with such additional insureds as Landlord
from time to time may designate by notice to Tenant:
4.2.2.1 All-risk insurance covering all buildings
and improvements now existing or hereafter erected upon the
Premises, and all equipment, fixtures, motors, machinery,
furnishings and furniture installed in or used in connection with
the Premises, with such additional endorsements as may be
necessary to include coverage for vandalism and malicious
conduct, floods, water damage, earthquake and debris removal and
demolition, with a co-insurance provision of 90% or an agreed
amount clause, in an amount equal to the replacement cost of all
such buildings, improvements, equipment, fixtures, motors,
machinery, furnishings and furniture (but not less than the
agreed amount if coverage is pursuant to an agreed amount clause)
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as such replacement cost may be determined from time to time.
Tenant shall not be required to provide insurance with respect to
any defect in the Premises or any obligation of Landlord existing
as of the commencement of the Term of this Lease.
4.2.2.2 Commercial general liability insurance
indemnifying Landlord and Tenant against all claims and demands
for any injury to person or property which may be claimed to have
occurred on or about the Premises or on the sidewalk or ways
adjoining the Premises, in amounts which shall, at the beginning
of the Term, be at least equal to the limits set forth in Section
1.1, and, from time to time during the Term, shall be for such
higher limits, if any, as are customarily carried in the area in
which the Premises are located on property similar to the
Premises and used for similar purposes; and workmen's
compensation insurance with statutory limits covering all of
Tenant's employees working on the Premises.
4.2.2.3 Insurance against loss or damage from
sprinklers and from leakage or explosion or cracking of boilers,
pipes carrying steam or water, or both, pressure vessels or
similar apparatus, in the so-called "broad form" and in such
amounts as Landlord may reasonably require.
4.2.2.4 All policies required under this
Section 4.2.2 shall be obtained from responsible companies
qualified to do business in the state in which the Premises are
located and in good standing therein, which companies and the
amount of insurance allocated thereto shall be subject to
Landlord's reasonable approval. Tenant agrees to furnish
Landlord with certificates evidencing all such insurance prior to
the beginning of the Term hereof and evidence of each renewal
policy at least 30 days prior to the expiration of the policy it
renews. Each such policy shall be non-cancellable with respect
to the interest of Landlord and the holders of any mortgages on
the Premises without at least 30 days' prior written notice
thereto.
4.2.2.5 All insurance which is carried by either
party with respect to the Premises or to furniture, furnishings,
fixtures or equipment therein or alterations or improvements
thereto, whether or not required, shall include provisions which
either designate the other party as one of the insured or deny
to the insurer acquisition by subrogation of rights of recovery
against the other party to the extent such rights have been
waived by the insured party prior to occurrence of loss or
injury, insofar as, and to the extent that such provisions may be
effective without making it impossible to obtain insurance
coverage from responsible companies qualified to do business in
the state in which the Premises are located (even though extra
premium may result therefrom). In the event that extra premium
is payable by either party as a result of this provision, the
other party shall reimburse the party paying such premium the
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amount of such extra premium. If at the request of one party,
this non-subrogation provision is waived as to such party, then
the obligation of reimbursement by such party shall cease for
such period of time as such waiver shall be effective, but
nothing contained in this Section 4.2.2.5 shall derogate from or
otherwise affect releases elsewhere herein contained of either
party for claims. Each party shall be entitled to have
duplicates or certificates of any policies containing such
provisions. Each party hereby waives all rights of recovery
against the other for loss or injury against which the waiving
party is protected by insurance containing said non-subrogation
provisions, reserving, however, any rights with respect to any
excess of loss or injury over the amount recovered by such
insurance.
4.2.3 Utilities. Tenant shall pay directly to the
proper authorities charged with the collection thereof all
charges for water, sewer, gas, electricity, telephone and other
utilities or services used or consumed on the Premises, whether
called charge, tax, assessment, fee or otherwise, including,
without limitation, water and sewer use charges and taxes, if
any, all such charges to be paid as the same from time to time
become due.
4.3 Late Payment of Rent. If any installment of Fixed Rent
or payment of Additional Rent is paid more than ten (10) days
after the date the same was due, it shall be subject to a late
charge equal to 5% of the amount overdue.
ARTICLE V
Additional Covenants
5.1 Affirmative Covenants. Tenant covenants at its sole
expense at all times during the Term and for such prior or
subsequent time as Tenant occupies the Premises or any part
thereof:
5.1.1 Perform Obligations. To perform promptly all of
the obligations of Tenant set forth in this Lease; and to pay
when due the Fixed Rent and Additional Rent and all charges,
rates and other sums which by the terms of this Lease are to be
paid by Tenant.
5.1.2 Use. To use the Premises only for the Permitted
Uses, and from time to time to procure all licenses and permits
necessary therefor at Tenant's sole expense.
5.1.3 Repair and Maintenance. Except as otherwise
provided in Article VI, to keep the Premises (but not the roof
and structure of the Premises, which shall be maintained by
Landlord in good condition during the Term except for Tenant's
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obligation to wash the roof as provided below) in good order,
condition and repair and in at least as good order, condition and
repair as they are in on the Commencement Date or may be put in
during the Term, reasonable use and wear, fire and other casualty
only excepted; to the extent permitted by law, to wash the roof
periodically with water to remove accumulation of bird excrement
and materials therefrom, provided, however, that Landlord
represents and warrants that Landlord has so washed the roof so
as to remove such excrement and materials within the last 20 days
prior to the date of this Lease; to maintain in good condition
all lawns and planted areas and keep in good repair and clean and
neat and free of snow and ice all surfaced roadways, walks, and
parking and loading areas; and to make all repairs and to do all
other work necessary for the foregoing purposes. Notwithstanding
the foregoing, in no event shall Tenant be required to do
anything prohibited by any law, regulation or order of any
governmental authority or to make any repair or replacement which
would be considered capital in nature under generally accepted
accounting principles, including without limitation replacement
of the air conditioning units which shall be Landlord's
responsibility, and Landlord shall make all such repairs or
replacements promptly after receipt of written notice from
Tenant.
5.1.4 Compliance with Law. To make all
non-structural, non-capital repairs, alterations, additions or
replacements to the Premises required by any law or ordinance or
any order or regulation of any public authority; to keep the
Premises equipped with all safety equipment required; to pay all
municipal, county, or state taxes assessed against the leasehold
interest hereunder, or against personal property of any kind on
or about the Premises; and to comply with the orders,
regulations, variances, licenses and permits of or granted by
governmental authorities with respect to zoning, building, fire,
health and other codes, regulations, ordinances or laws
applicable to the Premises, and the condition, use or occupancy
thereof, except that Tenant may defer compliance so long as the
validity of any such order, regulation, code, ordinance or law
shall be contested by Tenant in good faith and by appropriate
legal proceedings. Notwithstanding the foregoing, Landlord shall
make such repairs, alterations or replacements, shall furnish
such safety equipment, and shall otherwise bring the Premises
into compliance with all applicable laws as of the commencement
of the Term of this Lease.
5.1.5 Tenant's Work. To procure at Tenant's sole
expense all necessary permits and licenses before undertaking any
work on the Premises; to do all such work in a good and
workmanlike manner employing materials of good quality and so as
to conform with all applicable zoning, building, fire, health and
other codes, regulations, ordinances and laws; to pay promptly
when due the entire cost of any work on the Premises undertaken
by Tenant so that the Premises shall at all times be free of
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liens for labor and materials; to require such contractors
employed by Tenant to carry workmen's compensation insurance in
accordance with statutory requirements; to save Landlord harmless
and indemnified from all injury, loss, claims or damage to any
person or property occasioned by or growing out of such work; and
to obtain the landlord's prior approval of the plans for any work
which will cost in excess of $25,000 and for which a building
permit is required, which approval shall not be unreasonably
delayed, and to notify Landlord at least ten (10) days prior to
the commencement of any work for which Landlord's approval is
required hereunder.
5.1.6 Tenant's and Landlord's Indemnification. Except
as may be otherwise provided in Section 5.3, Tenant shall defend
all actions against Landlord, any partner, trustee, stockholder,
officer, director, employee or beneficiary of Landlord, holders
of mortgages on the Premises and any other party having an
interest in the Premises (herein, "Landlord Indemnified Parties")
with respect to, and shall pay, protect, indemnify and save
harmless, to the extent permitted by law, all Landlord
Indemnified Parties from and against, any and all liabilities,
losses, damages, costs, expenses (including reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or
judgments of any nature arising from (i) injury to or death of
any person, or damage to or loss of property, on or about the
Premises or on adjoining sidewalks, streets or ways, or connected
with the use, condition or occupancy of any thereof, unless such
injury, death or damage was caused by the negligence or willful
misconduct of Landlord or its agents, contractors, licensees or
invitees, (ii) violation by Tenant of this Lease, or (iii) any
act, fault, omission, or other misconduct of Tenant or its
agents, contractors, licensees, sublessees or invitees.
Except as may be otherwise provided in Section 5.3, Landlord
shall defend all actions against Tenant, any partner, trustee,
stockholder, officer, director, employee or beneficiary of Tenant
(herein, "Tenant Indemnified Parties") with respect to, and shall
pay, protect, indemnify and save harmless, to the extent
permitted by law, all Tenant Indemnified Parties from and
against, any and all liabilities, losses, damages, costs,
expenses (including reasonable attorneys' fees and expenses),
causes of action, suits, claims, demands or judgments of any
nature arising from (i) injury to or death of any person, or
damage to or loss of property, on or about the Premises or on
adjoining sidewalks, streets or ways, or connected with the use,
condition or occupancy of any thereof caused by the negligence or
willful misconduct of Landlord or its agents, contractors,
licensees or invitees, (ii) violation by Landlord of this Lease,
or (iii) any act, fault, omission, or other misconduct of
Landlord or its agents, contractors, licensees, sublessees or
invitees.
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5.1.7 Landlord's Right to Enter. To permit Landlord
and its agents to enter the Premises at reasonable times during
business hours to examine the Premises, and at reasonable times
after reasonable prior notice to make such repairs and
replacements as Landlord may elect or as Landlord may be required
to perform hereunder, and to show the Premises to prospective
purchasers, lenders and tenants, and, during the last six months
of the Term, to keep affixed in suitable places notices of
availability of the Premises. Notwithstanding the foregoing, in
the event of an emergency no notice shall be required from
Landlord prior to entry and Landlord agrees to notify Tenant
promptly after such entry in the event of an emergency.
5.1.8 Personal Property at Tenant's Risk. All of the
furnishings, fixtures, equipment, effects and property of every
kind, nature and description of Tenant and of all persons
claiming by, through or under Tenant which, during the
continuance of this Lease or any occupancy of the Premises by
Tenant or anyone claiming under Tenant, may be on the Premises,
shall be at the sole risk and hazard of Tenant and if the whole
or any part thereof shall be destroyed or damaged by fire, water
or otherwise, or by the leakage or bursting of water pipes, steam
pipes, or other pipes, by theft or from any other cause, no part
of said loss or damage is to be charged to or to be borne by
Landlord, except that Landlord shall in no event be indemnified
or held harmless or exonerated from any liability to Tenant or to
any other person for any injury, loss, damage or liability caused
by Landlord's negligence or willful misconduct.
5.1.9 Yield Up. At the expiration of the Term or
earlier termination of this Lease: to surrender all keys to the
Premises, to remove all furnishings, trade fixtures, equipment
and other personal property now or hereafter located in the
Premises, and to deliver and yield up the Premises broom-clean
and in the same condition the Premises are in as of the date
hereof, reasonable wear and tear, fire and other casualty
excepted.
5.1.10 Estoppel Certificate. Upon not less than 20
days' prior notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing, addressed to such
party as Landlord shall designate in its notice to Tenant,
certifying that this Lease is unmodified and in full force and
effect and that Tenant has no defenses, offsets or counterclaims
against its obligations to pay the Fixed Rent and Additional Rent
and any other charges and to perform its other covenants under
this Lease (or, if there have been any modifications that the
same is in full force and effect as modified and stating the
modifications and, if there are any defenses, offsets or
counterclaims, setting them forth in reasonable detail), the
dates to which the Fixed Rent and Additional Rent and other
charges have been paid and a statement that Landlord is not in
default hereunder (or if in default, the nature of such default,
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in reasonable detail). Any such statement delivered pursuant to
this Section 5.1.10 may be relied upon by any prospective
purchaser or mortgagee of the Premises, or any prospective
assignee of any such mortgagee.
5.2 Negative Covenants. Tenant covenants at all times
during the Term and for such further time as Tenant occupies the
Premises or any part thereof:
5.2.1 Assignment and Subletting. Not to assign,
transfer, mortgage or pledge this Lease or to grant a security
interest in Tenant's rights hereunder, or to sublease (which term
shall be deemed to include the granting of concessions and
licenses and the like) or permit anyone other than Tenant to
occupy all or any part of the Premises or suffer or permit this
Lease or the leasehold interest hereby created or any other
rights arising under this Lease to be assigned, transferred or
encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law, unless, in each instance
the prior written consent of Landlord thereto shall have been
obtained, which consent shall not be unreasonably withheld,
conditioned or delayed. Tenant may assign this Lease or sublet
any portion or all of the Premises to any corporation,
partnership, trust, association or other business or organization
(x) directly or indirectly controlling and beneficially owning
Tenant, (y) directly or indirectly controlled by and beneficially
owned by Tenant, or (z) in common control with Tenant, or to any
successor of Tenant by merger, consolidation or acquisition of
substantially all of the assets of Tenant, without the prior
written consent of Landlord.
If for any assignment or sublease or occupancy by
another, Tenant receives rent or other consideration, either
initially or over the term of the assignment, sublease or
occupancy, after payment of any expenses incurred in connection
therewith, in excess of the rent called for hereunder, or in case
of sublease of part of the Premises, in excess of such rent
fairly allocable to the part so subleased, after appropriate
adjustments to assure that all other payments called for
hereunder are appropriately taken into account, Tenant shall pay
to Landlord, as Additional Rent, 50% of the excess of each such
payment of rent or other consideration received by Tenant
promptly after its receipt.
Any attempted assignment, transfer, mortgage, pledge,
grant of security interest, sublease or other encumbrance, except
as permitted by this Section 5.2.1, shall be void. No
assignment, transfer, mortgage, grant of security interest,
sublease or other encumbrance, whether or not approved, and no
indulgence granted by Landlord to any assignee, sublessee or
occupant shall in any way impair Tenant's continuing primary
liability (which after an assignment or subletting shall be joint
and several with the assignee or sublessee) of Tenant hereunder,
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and no approval in a particular instance shall be deemed to be a
waiver of the obligation to obtain Landlord's approval in any
other case.
5.2.2 Overloading and Nuisance. Not to injure,
overload, deface or otherwise harm the Premises; nor commit any
nuisance; not to dump, flush, or in any way introduce any
hazardous substances or any other toxic substances into the
septic, sewage or other waste disposal system serving the
Premises in violation of law; not to generate, store, use or
dispose of hazardous or toxic substances in or on the Premises in
violation of law, or dispose of hazardous or toxic substances
from the Premises to any other location, or commit or suffer to
be committed in or on the Premises any act in violation of law.
"Hazardous substances" and "toxic substances", as used in this
Section and Section 5.3, shall include without limitation any
petroleum product, any flammable, explosive or radioactive
material, or any hazardous or toxic waste, substance or material,
including without limitation substances defined as "hazardous
substances", "hazardous materials," "solid waste" or "toxic
substances" under any applicable laws relating to hazardous or
toxic materials and substances, air pollution (including noise
and odors), water pollution, liquid and solid waste, pesticides,
drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances,
radiation, wetlands, endangered species, environmental permitting
and petroleum products, which laws may include, but not be
limited to, the Federal Insecticide, Fungicide, and Rodenticide
Act, as amended; the Toxic Substances Control Act, as amended;
the Clean Water Act, as amended; the Solid Waste Disposal Act, as
amended; the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended; the Hazardous Materials
Transportation Act, as amended; the Resource Conservation and
Recovery Act, as amended; the Clean Air Act, as amended; the
Emergency Planning and Community Right-to-Know Act, as amended;
the Occupational Safety and Health Act, as amended; comparable
state laws; and all rules and regulations promulgated pursuant to
such laws and ordinances.
5.3 Environmental Indemnification. Landlord agrees to
indemnify, defend and hold harmless Tenant, its parent,
subsidiaries and affiliates, and their respective officers,
directors, shareholders and employees, from and against any and
all liabilities, losses, damages, suits, actions, causes of
action, costs, expenses (including without limitation reasonable
attorneys' fees and disbursements and court costs), penalties,
fines, demands, judgments, claims or liens (including without
limitation claims or liens imposed under any so-called
"Superfund" or other environmental legislation) arising from or
in connection with the presence at the time of Tenant's taking
possession of the Premises of any hazardous substances and toxic
substances on, or the subsequent removal thereof from, the
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Premises. Landlord shall have the right to assume exclusive
control of the defense of any such suit, action or claim, and
Tenant agrees to cooperate reasonably with landlord in the
performance by Landlord of its obligations under this Section.
Tenant agrees to indemnify, defend and hold harmless
Landlord from and against any and all liabilities, losses,
damages, suits, actions, causes of action, costs, expenses
(including without limitation reasonable attorneys' fees and
disbursements and court costs), penalties, fines, demands,
judgments, claims or liens (including without limitation claims
or liens imposed under any so-called "Superfund" or other
environmental legislation) arising from or in connection with the
release or discharge of any hazardous substances and toxic
substances which are stored, generated or otherwise brought onto
the Premises by or at the direction of Tenant. Tenant shall have
the right to assume exclusive control of the defense of any such
suit, action or claim, and Landlord agrees to cooperate
reasonably with Tenant in the performance by Tenant of its
obligations under this Section. Tenant shall have the right, at
Tenant's sole election and at Tenant's sole cost and expense, to
perform or cause to be performed, from time to time during the
Term (as the same may be extended), environmental testing to
determine the presence of hazardous substances on the Premises.
ARTICLE VI
Casualty or Taking
6.1 Termination. In the event that the Premises, or any
material part thereof, shall be taken by any public authority or
for any public use, or shall be destroyed or damaged by fire or
casualty, or by the action of any public authority, then this
Lease may be terminated at the election of Tenant. Such
election, which may be made notwithstanding the fact that
Landlord's entire interest may have been divested, shall be made
by the giving of notice within 30 days after the right of
election accrues. Notwithstanding the foregoing, in the event of
destruction or damage to no more than 40% of the Premises (based
on the useable square footage of the Building) and if the
destroyed or damaged portion of the Premises can be restored or
repaired within 90 days of said destruction or damage, then
Tenant shall not have the right to terminate this Lease but rent
shall be abated as provided in Section 6.2. In the event that
such restoration or repairs are not completed within said 90-day
period, this Lease may thereafter be terminated at the election
of Tenant.
6.2 Restoration. If this Lease is not terminated as
aforesaid, this Lease shall continue in force and a just
proportion of the rent reserved, according to the nature and
extent of the damages sustained by the Premises, shall be
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suspended or abated until the Premises, or what may remain
thereof, shall be put by Landlord in proper condition for use,
which Landlord covenants to do with reasonable diligence.
ARTICLE VII
Defaults
7.1 Events of Default. (a) If Tenant shall default in the
performance of any of its obligations to pay the Fixed Rent or
Additional Rent hereunder and if such default shall continue for
20 days after notice from Landlord designating such default or if
within 30 days after notice from Landlord to Tenant specifying
any other default or defaults Tenant has not commenced diligently
to correct the default or defaults so specified or has not
thereafter diligently pursued such correction to completion, or
(b) if Tenant becomes insolvent or fails to pay its debts as they
fall due, or (c) if a trust mortgage or assignment is made by
Tenant for the benefit of creditors, or (d) if Tenant proposes a
composition, arrangement, reorganization or recapitalization with
creditors, or (e) if the leasehold estate under this Lease or any
substantial part of the property of Tenant is taken on execution,
or by other process of law, or is attached or subjected to any
other involuntary encumbrance, or (f) if a receiver, trustee,
custodian, guardian, liquidator or similar agent is appointed
with respect to Tenant, or if any such person or a mortgagee,
secured party or other creditor takes possession of the Premises
or of any substantial part of the property of Tenant, and, in
either case, if such appointment or taking of possession is not
terminated within 90 days after it first occurs, or (g) if a
petition is filed by or with the consent of Tenant under any
federal or state law concerning bankruptcy, insolvency,
reorganization, arrangement, or relief from creditors, or (h) if
a petition is filed against Tenant under any federal or state law
concerning bankruptcy, insolvency, reorganization, arrangement,
or relief from creditors, and such petition is not dismissed
within 90 days thereafter, or (i) if Tenant dissolves or is
dissolved or liquidates or adopts any plan or commences any
proceeding, the result of which is intended to include
dissolution or liquidation, then, and in any of such cases,
Landlord and the agents and servants of Landlord lawfully may, in
addition to and not in derogation of any remedies for any
preceding breach of covenant, immediately or at any time
thereafter and without demand or notice and with or without
process of law enter into and upon the Premises or any part
thereof in the name of the whole or mail a notice of termination
addressed to Tenant, and repossess the same as of Landlord's
former estate and expel Tenant and those claiming through or
under Tenant and remove its and their effects without being
deemed guilty of any manner of trespass and without prejudice to
any remedies which might otherwise be used for arrears of rent or
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prior breach of covenant, and upon such entry or mailing as
aforesaid this Lease shall terminate.
7.2 Remedies. In the event that this Lease is terminated
under any of the provisions contained in Section 7.1 or shall be
otherwise terminated for breach of any obligation of Tenant,
Tenant covenants to pay forthwith to Landlord, as compensation,
the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the
Term. In calculating the rent reserved there shall be included,
in addition to the Fixed Rent and Additional Rent, the value of
all other considerations agreed to be paid or performed by Tenant
for said residue. Tenant further covenants as additional and
cumulative obligations after any such termination to pay
punctually to Landlord all the sums and to perform all the
obligations which Tenant covenants in this Lease to pay and to
perform in the same manner and to the same extent and at the same
time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant pursuant to the next preceding
sentence Tenant shall be credited with the portion of any amount
paid to Landlord as compensation as in this Section 7.2 provided,
allocable to the corresponding portion of the Term and also with
the net proceeds of any rent obtained by Landlord by reletting
the Premises, after deducting all Landlord's reasonable expenses
in connection with such reletting, including, without limitation,
all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such
reletting, it being agreed that Landlord shall use reasonable
efforts to relet the Premises and to mitigate damages.
Nothing contained in this Lease shall, however, limit or
prejudice the right of Landlord to prove for and obtain in
proceedings under any federal or state law relating to bankruptcy
or insolvency or reorganization or arrangement, an amount equal
to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, the
damages are to be proved, whether or not the amount be greater
than the amount of the loss or damages referred to above.
7.3 Remedies Cumulative. Any and all rights and remedies
which Landlord or Tenant may have under this Lease, and at law
and equity, shall be cumulative and shall not be deemed
inconsistent with each other, and any two or more of all such
rights and remedies may be exercised at the same time insofar as
permitted by law.
7.4 Landlord's and Tenant's Right to Cure Defaults. Either
Landlord or Tenant may, but shall not be obligated to, cure, at
any time, following 10 days' prior notice to the other party
hereto, except in cases of emergency when no notice shall be
required, any default by the other party hereto under this Lease;
and whenever the non-defaulting party so elects, all costs and
expenses incurred by such non-defaulting party, including
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reasonable attorneys' fees, in curing a default shall be paid by
the defaulting party on demand, together with interest thereon at
the rate provided in Section 4.3. In the event Landlord fails to
reimburse any such amount paid by Tenant within ten (10) days
after demand, Tenant shall have the right to offset such amount
against the Fixed Rent and Additional Rent payable by Tenant
hereunder.
7.5 Effect of Waivers of Default. Any consent or
permission by Landlord or Tenant to any act or omission which
otherwise would be a breach of any covenant or condition herein,
or any waiver by Landlord or Tenant of the breach of any covenant
or condition herein, shall not in any way be held or construed
(unless expressly so declared) to operate so as to impair the
continuing obligation of any covenant or condition herein, or
otherwise, except as to the specific instance, operate to permit
similar acts or omissions.
The failure of Landlord or Tenant to seek redress for
violation of, or to insist upon the strict performance of, any
covenant or condition of this Lease shall not be deemed a waiver
of such violation nor prevent a subsequent act, which would have
originally constituted a violation, from having all the force and
effect of an original violation. The receipt by Landlord of rent
with knowledge of the breach of any covenant of this Lease shall
not be deemed to have been a waiver of such breach by Landlord,
or by Tenant, unless such waiver be in writing signed by the
party to be charged. No consent or waiver, express or implied,
by Landlord or Tenant to or of any breach of any agreement or
duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
7.6 No Accord and Satisfaction. No acceptance by Landlord
of a lesser sum than the Fixed Rent, Additional Rent or any other
charge then due shall be deemed to be other than on account of
the earliest installment of such rent or charge due, unless
Landlord elects by notice to Tenant to credit such sum against
the most recent installment due, nor shall any endorsement or
statement on any check or any letter accompanying any check or
payment as rent or other charge be deemed a waiver, an agreement
or an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy in this
Lease provided.
ARTICLE VIII
Mortgages
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8.1 Rights of Mortgage Holders. The word "mortgage" as
used herein includes mortgages, deeds of trust or other similar
instruments evidencing other voluntary liens or encumbrances, and
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modifications, consolidations, extensions, renewals, replacements
and substitutes thereof. The word "holder" shall mean a
mortgagee, and any subsequent holder or holders of a mortgage.
Until the holder of a mortgage shall enter and take possession of
the Premises for the purpose of foreclosure, such holder shall
have only such rights of Landlord as are necessary to preserve
the integrity of this Lease as security. Upon entry and taking
possession of the Premises for the purpose of foreclosure, such
holder shall have all the rights of Landlord. Notwithstanding
any other provision of this Lease to the contrary, including
without limitation Section 9.4, no such holder of a mortgage
shall be liable either as mortgagee or as assignee, to perform,
or be liable in damages for failure to perform, any of the
obligations of Landlord unless and until such holder shall enter
and take possession of the Premises for the purpose of
foreclosure. Upon entry for the purpose of foreclosure, such
holder shall be liable to perform all of the obligations of
Landlord accruing from and after such entry, subject to and with
the benefit of the provisions of Section 9.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a
conveyance under said provisions to the owner of the Premises.
No Fixed Rent, Additional Rent or any other charge shall be paid
more than 30 days prior to the due dates thereof and payments
made in violation of this provision shall (except to the extent
that such payments are actually received by a mortgagee in
possession or in the process of foreclosing its mortgage) be a
nullity as against such mortgagee and Tenant shall be liable for
the amount of such payments to such mortgagee.
The covenants and agreements contained in this Lease with
respect to the rights, powers and benefits of a holder of a
mortgage (including, without limitation, the covenants and
agreements contained in this Section 8.1) constitute a continuing
offer to any person, corporation or other entity, which by
accepting a mortgage subject to this Lease, assumes the
obligations herein set forth with respect to such holder; such
holder is hereby constituted a party of this Lease as an obligee
hereunder to the same extent as though its name were written
hereon as such; and such holder shall be entitled to enforce such
provisions in its own name. Tenant agrees on request of Landlord
to execute and deliver from time to time any agreement which may
be necessary to implement the provisions of this Section 8.1.
8.2 Lease Superior or Subordinate to Mortgages. This Lease
is and shall continue to be subject and subordinate to any
presently existing mortgage or mortgages secured by the Premises,
and to any and all advances hereafter made thereunder, and to the
interest of the holder or holders thereof in the Premises. The
holder of any such presently existing mortgage shall have the
election to subordinate the same to this Lease, exercisable by
filing with the appropriate recording office a notice of such
election, whereupon this Lease shall have priority over such
mortgage. A copy of such filing shall be given to Tenant. Such
PAGE
<PAGE>
election by the holder of any presently existing mortgage shall
not affect priority with respect to this Lease of any other
presently existing mortgage.
Any mortgage or other voluntary lien or other encumbrance
recorded subsequent to the recording of the notice or short form
referred to in Section 9.3 shall be subject and subordinate to
this Lease unless Landlord and the holder of any such subsequent
mortgage and the holders of all mortgages prior to such
subsequent mortgage elect to subordinate this Lease to such
subsequent mortgage and to any and all advances thereafter made
thereunder and to the interest of the holder thereof in the
Premises, such election to be exercisable by Landlord and all
such holders by filing with the appropriate recording office (a)
a notice of such election and (b) an agreement between the holder
of such subsequent mortgage and Tenant, consented to by holders
of all mortgages having priority over such subsequent mortgage,
by the terms of which such holder will agree to recognize the
rights of Tenant under this Lease and to accept Tenant as tenant
of the Premises under the terms and conditions of this Lease in
the event of acquisition of title by such holder through
foreclosure proceedings or otherwise and Tenant will agree to
recognize the holder of such subsequent mortgage as Landlord in
such event, which agreement shall be made expressly to bind and
inure to the benefit of the successors and assigns of Tenant and
of such holder and upon anyone purchasing said Premises at any
foreclosure sale brought by such holder. Tenant and Landlord
agree to execute and deliver any appropriate instruments
necessary to carry out the agreements contained in this Section
8.2.
ARTICLE IX
Miscellaneous Provisions
9.1 Notices from One Party to the Other. All notices
required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at the Original Address of Tenant or
such other address as Tenant shall have last designated by notice
in writing to Landlord and, if to Landlord, at the Original
Address of Landlord or such other address as Landlord shall have
last designated by notice in writing to Tenant. Any notice shall
be deemed duly given when mailed to such address postage prepaid,
registered or certified mail, return receipt requested, or when
delivered to such address by hand or by nationally recognized
overnight courier service.
9.2 Quiet Enjoyment. Landlord agrees that upon Tenant's
paying the rent and performing and observing the terms,
covenants, conditions and provisions on its part to be performed
and observed, Tenant shall and may peaceably and quietly have,
hold and enjoy the Premises during the Term without any manner of
PAGE
<PAGE>
hindrance or molestation from Landlord or anyone claiming under
Landlord.
9.3 Lease not to be Recorded. Tenant agrees that it will
not record this Lease. Both parties shall, upon the request of
either, execute and deliver a notice or short form of this Lease
in such form, if any, as may be permitted by applicable statute.
If this Lease is terminated before the Term expires the parties
shall execute, deliver and record an instrument acknowledging
such fact and the actual date of termination of this Lease.
9.4 Bind and Inure. The obligations of this Lease shall
run with the land, and this Lease shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
9.5 Acts of God. In any case where either party hereto is
required to do any act, delays caused by or resulting from Acts
of God, war, civil commotion, fire, flood or other casualty,
labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes
beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed,
whether such time be designated by a fixed date, a fixed time or
a "reasonable time", and such time shall be deemed to be extended
by the period of such delay.
9.6 Landlord's Default. Landlord shall not be deemed to be
in default in the performance of any of its obligations hereunder
unless it shall fail to perform such obligations and such failure
shall continue for a period of 30 days following receipt of
notice from Tenant, or such additional time as is reasonably
required with the exercise of reasonable diligence to correct any
such default, after notice has been given by Tenant to Landlord
specifying the nature of Landlord's default.
9.7 Brokerage. Landlord and Tenant each warrants and
represents to the other party hereto that it has had no dealings
with any broker or agent in connection with this Lease and
covenants to defend, hold harmless and indemnify the other party
hereto from and against any and all cost, expense or liability
for any compensation, commissions and charges claimed by any
broker or agent with respect to such party's dealings in
connection with this Lease or the negotiation thereof.
9.8 Applicable Law and Construction.
9.8.1 Applicable Law. This Lease shall be governed by
and construed in accordance with the laws of the state in which
the Premises are located. If any term, covenant, condition or
provision of this Lease or the application thereof to any person
or circumstances shall be declared invalid, or unenforceable by
the final ruling of a court of competent jurisdiction having
PAGE
<PAGE>
final review, the remaining terms, covenants, conditions and
provisions of this Lease and their application to persons or
circumstances shall not be affected thereby and shall continue to
be enforced and recognized as valid agreements of the parties,
and in the place of such invalid or unenforceable provision,
there shall be substituted a like, but valid and enforceable
provision which comports to the findings of the aforesaid court
and most nearly accomplishes the original intention of the
parties.
9.8.2 No Other Agreement. There are no oral or
written agreements between Landlord and Tenant affecting this
Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by
Landlord and Tenant.
9.8.3 Titles. The titles of the several Articles and
Sections contained herein are for convenience only and shall not
be considered in construing this Lease.
9.8.4 "Landlord" and "Tenant". Unless repugnant to
the context, the words "Landlord" and "Tenant" appearing in this
Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and
assigns, and those claiming through or under them respectively.
If there be more than one tenant the obligations imposed by this
Lease upon Tenant shall be joint and several.
9.9 Submission Not an Offer. The submission of a draft of
this Lease or a summary of some or all of its provisions does not
constitute an offer to lease or demise the Premises, it being
understood and agreed that neither Landlord nor Tenant shall be
legally bound with respect to the leasing of the Premises unless
and until this Lease has been executed by both Landlord and
Tenant and a fully executed copy delivered.
WITNESS the execution hereof under seal as of the day and
year set forth in Section 1.1.
Landlord:
F.V. Taddeo
Tenant:
THERMO VOLTEK CORPORATION
PAGE
<PAGE>
By:
Title:
PAGE
<PAGE>
Exhibit H
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE ("Agreement") is entered into
as of the 3rd day of July, 1996, by and between Thermo Voltek
Corporation, a Delaware corporation with its principal place of
business at 81 Wyman Street, Waltham, Massachusetts 02254
("Thermo Voltek"), and _______________, the
_________________________ (the "Obligee") of Pacific Power Source
Corporation, a California corporation ("Pacific Power") with a
principal place of business at 15122 Bolsa Chica Street,
Huntington Beach, California 92649. Thermo Voltek and the
Obligee are referred to collectively herein as the "Parties."
Introduction
Pacific Power is engaged in the business of designing,
developing, manufacturing, marketing and selling power testing,
conversion and conditioning products, including without
limitation AC power sources and frequency converters (such
business as conducted by Pacific Power at any time during the two
year period preceding the date hereof being hereinafter referred
to as the "Pacific Power Business"). Thermo Voltek and Pacific
Power have entered into an Asset Purchase Agreement of even date
herewith (the "Asset Purchase Agreement"), pursuant to which
Thermo Voltek has agreed to purchase, and Pacific Power has
agreed to sell, certain of the assets and business of Pacific
Power, and Thermo Voltek has agreed to assume certain of Pacific
Power's liabilities. In connection with the consummation of the
transactions contemplated by the Asset Purchase Agreement, the
Obligee will be employed by Thermo Voltek. The value of the
assets and business of Pacific Power to be acquired by Thermo
Voltek would be significantly diminished if the Obligee were to
compete against Thermo Voltek or its subsidiaries in certain
geographic areas where Pacific Power has conducted the Pacific
Power Business.
In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties agree as
follows:
1. Non-Compete
1.1 During the period commencing on the date of execution
of this Agreement and ending [five/two] years from the date
thereof, the Obligee will not directly or indirectly as
-78-
PAGE
<PAGE>
a partner, stockholder, joint venturer or investor
(other than as the holder of not more than ten percent (10%) of
the total outstanding stock of a publicly-held company):
(a) engage in, operate or establish, in any
jurisdiction in which Pacific Power conducts on the date hereof
or has conducted at any time within two years prior to the date
hereof, any aspect of the Pacific Power Business; or
(b) solicit, divert or take away, or attempt to
solicit, divert or take away, the business or patronage of any
individual, corporation or other entity which was or is a
prospective client, customer or account of Pacific Power at the
time of execution of this Agreement, or had been a client,
customer or account of Pacific Power within a period of two years
prior to the execution of this Agreement.
1.2 During the period commencing on the date of execution
of this Agreement and ending [five/two] years from the date
thereof, the Obligee will not directly or indirectly recruit,
solicit or induce any employee or subcontractor of Thermo Voltek,
any of its subsidiaries or any other corporation owned by or
affiliated with Thermo Electron Corporation or its subsidiaries
to terminate their employment with, or otherwise cease their
relationship with, Thermo Voltek or any such other corporation.
In addition, the Obligee will not hire, employ or enter into any
subcontracting or other arrangement with any present or former
employee of Thermo Voltek, Pacific Power, any of their respective
subsidiaries or any other corporation owned by or affiliated with
Thermo Electron Corporation or its subsidiaries for a period of
one year from such employee's completion of his/her assignment
with Thermo Voltek, Pacific Power or any such other corporation,
as the case may be, without the prior written consent of an
authorized executive officer of Thermo Voltek.
1.3 In the event that any court of competent jurisdiction
determines that the duration or the geographic scope, or both, of
the non-competition and non-solicitation provisions set forth in
this Agreement are unreasonable and that such provisions are to
that extent unenforceable, the parties hereto agree that the
provisions shall remain in full force and effect for the greatest
time period and in the greatest area that would not render them
unenforceable. The parties intend that these non-competition and
non-solicitation provisions shall be deemed to be a series
of separate covenants, one for each and every county of each and
every state of the United States of America and each and every
political subdivision of each and every country outside the
United States of America where this Agreement is intended to be
effective.
2. Entire Agreement
PAGE
<PAGE>
This Agreement constitutes the entire agreement between the
Parties and supersedes all prior understandings and agreements,
written or oral, that may have related in any way to the subject
matter of this Agreement.
3. Amendment
This Agreement may be amended or modified only by a written
instrument executed by Thermo Voltek and the Obligee.
4. Applicable Laws and Jurisdiction
This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of
Massachusetts without reference to the conflict of laws
provisions thereof. The Obligee (a) submits to the jurisdiction
of any state or federal court sitting in the Commonwealth of
Massachusetts in any action or proceeding arising out of or
relating to this Agreement, (b) agrees that all claims in respect
of the action or proceeding may be heard and determined in any
such court, and (c) agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court.
The Obligee hereby waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives
any bond, surety or other security that might be required of
Thermo Voltek with respect thereto. Either party to this
Agreement may make service on the other party by sending or
delivering a copy of the process to the party to be served at the
address and in the manner provided for the giving of notices in
Section 6. Nothing in this Section 4, however, shall affect the
right of either party to serve legal process in any other manner
permitted by law.
5. Succession and Assignment
This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other Party;
provided, that Thermo Voltek may assign this Agreement and its
rights, interest and obligations hereunder to (a) an affiliate of
Thermo Voltek, and (b) a person who acquires (whether by stock or
asset purchase or otherwise) all or substantially all of the
business or assets of Thermo Voltek or the business of Thermo
Voltek to which this Agreement relates.
6. Notices
All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice,
request, demand, claim or other communication hereunder shall be
deemed duly delivered two business days after it is sent by
PAGE
<PAGE>
registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the
intended recipient as set forth below:
If to the Obligee:
-----------------
______________________
______________________
______________________
If to Thermo Voltek:
--------------------
Thermo Voltek Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attention: President
Copies to:
----------
Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attention: General Counsel
Hale and Dorr
60 State Street
Boston, MA 02109
Attention: Hal J. Leibowitz, Esq.
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been
duly given unless and until it actually is received by the
individual for whom it is intended. Any Party may change the
address to which notices, request, demands, claims and other
communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
7. Miscellaneous
7.1 No delay or omission by Thermo Voltek in exercising any
right under this Agreement shall operate as a waiver of that or
any other right. A waiver or consent given by Thermo Voltek on
any one occasion shall be effective only in that instance and
shall not be construed as a bar or waiver of any right on any
other occasion.
PAGE
<PAGE>
7.2 The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
7.3 In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity,
legality and enforceability of the remaining provisions shall in
no way be affected or impaired thereby. If any restriction set
forth in this Agreement is found by any court of competent
jurisdiction to be unenforceable because it extends for too long
a period of time or over too great a range of activities or in
too broad a geographic area, it shall be interpreted to extend
only over the maximum period of time, range of activities or
geographic area as to which it may be enforceable.
7.4 The restrictions contained in this Agreement are
necessary for the protection of the business and goodwill of
Thermo Voltek and are considered by the Obligee to be reasonable
for such purpose. The Obligee agrees that a breach of this
Agreement would not be adequately remedied by money damages, and,
therefore, in the event of any breach, in addition to such other
remedies which may be available, at law or in equity, Thermo
Voltek shall have the right to specific performance and
injunctive relief.
7.5 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.
7.6 Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Asset
Purchase Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the day and year first set forth above.
THERMO VOLTEK CORPORATION
By:_______________________________
Title:
PAGE
<PAGE>
Exhibit I
Form of Opinion of Counsel to the Seller
(a) The Seller is a corporation duly organized, validly
existing and in corporate and tax good standing under the laws of
the State of California. The Seller is duly qualified to conduct
business and is in corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the
ownership or leasing of its properties requires such
qualification. The Seller has all requisite corporate power and
authority to carry on the business in which it has engaged and to
own and use the properties owned and used by it.
2. The Seller has all requisite power and authority to
execute and deliver the Agreement and the Escrow Agreement and to
consummate the transactions contemplated thereby. The execution
and delivery of the Agreement and the Escrow Agreement and the
consummation of the transactions contemplated thereby have been
duly and validly authorized by all necessary corporate and
fiduciary action on the part of the Seller. The Agreement and
the Escrow Agreement have been duly and validly executed and
delivered by the Seller, and constitute valid and binding
obligations of the Seller enforceable against the Seller in
accordance with their respective terms.
3. The Seller has the right and power to sell, convey,
assign, transfer and deliver the Acquired Assets as provided in
the Agreement, and, to the knowledge of such counsel, after due
inquiry, there is no mortgage, pledge, lease, lien, security
interest, charge, title retention or other security arrangement
or any other encumbrance upon or affecting the Acquired Assets.
4. To the knowledge of such counsel, the Seller has good,
valid and marketable title to all of the Acquired Assets. The
Bill of Sale and other agreements and documents therein
contemplated to be delivered by the Seller to effect the transfer
of the Acquired Assets are, or will be when executed and
delivered, sufficient to effect the sale, transfer, conveyance
and assignment of all of the Seller's right, title and interest
in the Acquired Assets.
5. Neither the execution and delivery of the Agreement and
the Escrow Agreement, nor the consummation of the transactions
contemplated thereby, (i) conflicts with or violates any
provision of the Articles of Incorporation or By-laws of the
Seller; (ii) requires on the part of the Seller any filing with,
or permit, authorization, consent or approval of, any
Governmental Entity, other than any filing, permit,
authorization, consent or approval which (a) has been obtained or
(b) if not obtained or
PAGE
<PAGE>
made would not have a material adverse effect in the financial
condition, operations or prospects of the business or operations
of the Seller ("Material Adverse Effect"); (iii) conflicts with,
results in a breach of, constitutes (with or without due notice
or lapse of time or both) a default under, results in the
acceleration of, creates in any party the right to accelerate,
terminates, modifies or cancels or requires any notice, consent
or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage
for borrowed money, instrument of indebtedness, Security Interest
or other arrangement known to such counsel to which the Seller is
a party or by which the Seller is bound or to which any of its
assets is subject, other than any conflict, breach, default,
acceleration, termination, modification or cancellation which
individually or in the aggregate would not have a Material
Adverse Effect; (iv) to the knowledge of such counsel, results in
the imposition of any Security Interest upon any assets of the
Seller; or (v) to the knowledge of such counsel, violates any
order, writ, injunction or decree specifically naming the Seller,
or any of the property or assets of the Seller or any of its
property or assets, or any statute, rule or regulation applicable
to the Seller or any of its property or assets, other than any
such violation which individually or in the aggregate would not
have a Material Adverse Effect.
6. To the best of the knowledge of such counsel after due
inquiry, the Seller (i) is not subject to any unsatisfied
judgment, order, decree, stipulation or injunction and (ii) is
not a party to, or to the knowledge of such counsel, is
threatened to be made a party to, any complaint, action, suit,
proceeding, hearing or investigation of or in any court or
administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
PAGE
<PAGE>
Exhibit J
Form of Opinion of General Counsel to the Buyer
1. The Buyer is a corporation duly organized, validly
existing and in corporate good standing under the laws of the
State of Delaware. The Buyer has all requisite power and
authority to carry on its business as now being conducted, to
execute and deliver the Agreement and the Escrow Agreement, and
to consummate the transactions contemplated thereby.
2. The execution and delivery of the Agreement and the
Escrow Agreement and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all
necessary corporate action on the part of the Buyer.
3. The Agreement and the Escrow Agreement have been duly
and validly executed and delivered by the Buyer and constitute
valid and binding obligations of the Buyer, enforceable against
the Buyer in accordance with their respective terms.
4. Neither the execution and delivery of the Agreement and
the Escrow Agreement, nor the consummation of the transactions
contemplated thereby, (i) conflicts with or violates any
provision of the Certificate of Incorporation or By-laws of the
Buyer; (ii) requires on the part of the Buyer any filing with, or
permit, authorization, consent or approval of, any Governmental
Entity, other than any filing, permit, authorization, consent or
approval which (a) has been obtained or (b) if not obtained or
made would not have a material adverse effect on the assets,
business, financial condition or results of operations of the
Buyer and its subsidiaries taken as a whole (a "Material Adverse
Effect"); (iii) conflicts with, results in a breach of,
constitutes (with or without due notice or lapse of time or both)
a default under, results in the acceleration of, creates in any
party the right to accelerate, terminates, modifies or cancels or
requires any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument
of indebtedness, Security Interest or other written arrangement
to which the Buyer is a party and filed as an exhibit to any of
the Buyer's periodic reports under the Securities Exchange Act of
1934, as amended, other than any conflict, breach, default,
acceleration,
PAGE
<PAGE>
termination, modification or cancellation which
individually or in the aggregate would not have a Material
Adverse Effect; or (iv) to the knowledge of such counsel,
violates any order, writ, injunction or decree specifically
naming the Buyer or any of its property or assets or any statute,
rule or regulation applicable to the Buyer or any of its property
or assets, other than any such violation which individually or in
the aggregate would not have a Material Adverse Effect.
5. To the knowledge of such counsel, there is no action,
proceeding, suit or investigation pending or threatened against
the Buyer which may have an adverse effect on the Buyer's ability
to perform its obligations under the Agreement or the Escrow
Agreement.
Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share
Six Months Ended
------------------------
June 29, July 1,
1996 1995
- -------------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $2,069,000 $1,018,000
---------- ----------
Shares:
Weighted average shares outstanding 5,410,144 4,076,562
Add: Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 178,649 -
---------- ----------
Weighted average shares outstanding,
as adjusted (b) 5,588,793 4,076,562
---------- ----------
Primary Earnings per Share (a) / (b) $ .37 $ .25
========== ==========
Computation of Fully Diluted Earnings per Share:
Income:
Net income $2,069,000 $1,018,000
Add: Convertible debt interest, net of tax 427,000 596,000
---------- ----------
Income applicable to common stock assuming
full dilution (c) $2,496,000 $1,614,000
---------- ----------
Shares:
Weighted average shares outstanding 5,410,144 4,076,562
Add: Shares issuable from assumed conversion
of subordinated convertible obligations 3,500,768 4,780,357
Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 182,209 155,863
---------- ----------
Weighted average shares outstanding,
as adjusted (d) 9,093,121 9,012,782
---------- ----------
Fully Diluted Earnings per Share (c) / (d) $ .27 $ .18
========== ==========
PAGE
<PAGE>
Exhibit 11
THERMO VOLTEK CORP.
Computation of Earnings per Share
Three Months Ended
------------------------
June 29, July 1,
1996 1995
- -------------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $1,132,000 $ 603,000
---------- ----------
Shares:
Weighted average shares outstanding 5,685,212 4,108,204
Add: Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 175,658 141,713
---------- ----------
Weighted average shares outstanding,
as adjusted (b) 5,860,870 4,249,917
---------- ----------
Primary Earnings per Share (a) / (b) $ .19 $ .14
========== ==========
Computation of Fully Diluted Earnings per Share:
Income:
Net income $1,132,000 $ 603,000
Add: Convertible debt interest, net of tax 195,000 296,000
---------- ----------
Income applicable to common stock assuming
full dilution (c) $1,327,000 $ 899,000
---------- ----------
Shares:
Weighted average shares outstanding 5,685,212 4,108,204
Add: Shares issuable from assumed conversion
of subordinated convertible obligations 3,230,020 4,755,004
Shares issuable from assumed exercise of
options (as determined by the application
of the treasury stock method) 175,658 155,863
---------- ----------
Weighted average shares outstanding,
as adjusted (d) 9,090,890 9,019,071
---------- ----------
Fully Diluted Earnings per Share (c) / (d) $ .15 $ .10
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
VOLTEK CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIANANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 12,810
<SECURITIES> 21,457
<RECEIVABLES> 11,589
<ALLOWANCES> 543
<INVENTORY> 9,047
<CURRENT-ASSETS> 55,552
<PP&E> 8,251
<DEPRECIATION> 5,089
<TOTAL-ASSETS> 70,751
<CURRENT-LIABILITIES> 11,365
<BONDS> 14,210
0
0
<COMMON> 303
<OTHER-SE> 34,873
<TOTAL-LIABILITY-AND-EQUITY> 70,751
<SALES> 22,503
<TOTAL-REVENUES> 22,503
<CGS> 11,543
<TOTAL-COSTS> 11,543
<OTHER-EXPENSES> 1,531
<LOSS-PROVISION> 97
<INTEREST-EXPENSE> 837
<INCOME-PRETAX> 2,806
<INCOME-TAX> 737
<INCOME-CONTINUING> 2,069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,069
<EPS-PRIMARY> .37
<EPS-DILUTED> .27
</TABLE>
