<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED APRIL 2, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-29454
------------------------
POWER-ONE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0420182
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
740 CALLE PLANO, CAMARILLO, CA 93012
(Address of principal (zip code)
executive offices)
</TABLE>
(805) 987-8741
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
------------------------
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 a 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 / /
As of May 12, 2000 there were outstanding 24,351,006 shares of common stock,
$.001 par value.
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<PAGE>
POWER-ONE, INC.
INDEX
------------------------
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets--March 31, 2000 and
December 31, 1999......................................... 1
Consolidated Statements of Operations--for the Three Months
Ended March 31, 2000 and 1999............................. 2
Consolidated Statements of Comprehensive Loss--for the Three
Months Ended March 31, 2000 and 1999...................... 3
Consolidated Statements of Cash Flows--for the Three Months
Ended March 31, 2000 and 1999............................. 4
Notes to Consolidated Financial Statements................ . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 14
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................... . 15
SIGNATURES........................................................................ .
16
</TABLE>
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS
POWER-ONE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 47,603 $ 63,769
Accounts receivable:
Trade, less allowance for doubtful accounts:
$1,933--March 31, 2000; $1,918--December 31, 1999..... 54,164 45,805
Other................................................... 2,054 1,914
Inventories............................................... 67,935 61,834
Income taxes receivable................................... 356 --
Deferred income tax assets,net--current................... 2,365 1,916
Current portion of notes receivable from stockholders..... -- 30
Prepaid expenses and other current assets................. 1,889 1,795
-------- --------
Total current assets.................................. 176,366 177,063
PROPERTY & EQUIPMENT, net of accumulated depreciation and
amortization: $19,042--March 31, 2000;
$16,717--December 31, 1999................................ 56,062 55,608
INTANGIBLE ASSETS, NET...................................... 57,076 59,217
NOTES RECEIVABLE FROM STOCKHOLDERS, less current portion.... -- 79
OTHER ASSETS................................................ 5,066 3,137
-------- --------
TOTAL ASSETS................................................ $294,570 $295,104
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank credit facilities.................................... $ 4,523 $ 7,579
Current portion of long-term debt......................... 2,714 4,002
Current portion of long-term capital leases............... 812 897
Bank overdraft............................................ 1,972 5,804
Accounts payable.......................................... 15,621 13,107
Accrued payroll and related expenses...................... 3,062 2,583
Other accrued expenses.................................... 11,801 16,811
-------- --------
Total current liabilities............................. 40,505 50,783
LONG-TERM DEBT, less current portion........................ 3,015 3,379
LONG-TERM CAPITAL LEASES, less current portion.............. 674 842
DEFERRED INCOME TAX LIABILITY, noncurrent................... 2,726 2,757
OTHER LIABILITIES........................................... 109 112
STOCKHOLDERS' EQUITY
Common stock, par value $0.001, 60,000,000 shares
authorized; 24,303,789 and 23,987,408 shares issued and
outstanding at March 31, 2000 and December 31, 1999,
respectively............................................ 24 24
Additional paid-in capital................................ 226,337 212,196
Accumulated other comprehensive loss...................... (4,953) (3,476)
Retained earnings......................................... 26,133 28,487
-------- --------
Total stockholders' equity............................ 247,541 237,231
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY.................... $294,570 $295,104
======== ========
</TABLE>
See accompanying notes
1
<PAGE>
POWER-ONE, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
NET SALES................................................... $77,012 $38,920
COST OF GOODS SOLD.......................................... 44,956 24,286
------- -------
GROSS PROFIT.......................................... 32,056 14,634
EXPENSES:
Selling................................................... 6,605 5,276
General and administrative................................ 17,299 2,995
Engineering............................................... 9,371 3,384
Quality assurance......................................... 1,239 819
Amortization of intangible assets......................... 1,322 2,219
In-process research and development....................... -- 3,300
------- -------
Total expenses........................................ 35,836 17,993
LOSS FROM OPERATIONS........................................ (3,780) (3,359)
OTHER INCOME (EXPENSE):
Interest income........................................... 748 37
Interest expense.......................................... (312) (724)
Other income, net......................................... 135 352
------- -------
Total other income (expense).......................... 571 (335)
LOSS BEFORE TAXES........................................... (3,209) (3,694)
INCOME TAX BENEFIT.......................................... (1,720) (183)
------- -------
NET LOSS.................................................... $(1,489) $(3,511)
======= =======
BASIC LOSS PER COMMON SHARE................................. $ (0.06) $ (0.19)
======= =======
DILUTED LOSS PER COMMON SHARE............................... $ (0.06) $ (0.19)
======= =======
BASIC SHARES OUTSTANDING.................................... 24,108 18,905
======= =======
DILUTED SHARES OUTSTANDING.................................. 24,108 18,905
======= =======
</TABLE>
See accompanying notes
2
<PAGE>
POWER-ONE, INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
NET LOSS.................................................... $(1,489) $(3,511)
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustment................... (1,477) (3,021)
------- -------
COMPREHENSIVE LOSS.......................................... $(2,966) $(6,532)
======= =======
</TABLE>
See accompanying notes
3
<PAGE>
POWER-ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (1,489) $ (3,511)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization......................... . 3,760 3,772
Stock compensation...................................... 13,312 --
Purchased in-process research and development........... -- 3,300
Gain on sale of property and equipment.................. -- (95)
Deferred income taxes................................. . (437) (282)
Changes in operating assets and liabilities:
Accounts receivable, net................................ (8,949) (2,547)
Inventories............................................. (6,611) (2,124)
Prepaid expenses and other current assets............... (98) (258)
Accounts payable........................................ 2,576 2,328
Accrued expenses........................................ (4,692) (283)
Other liabilities....................................... 3 (162)
-------- --------
Net cash (used in) provided by operating activities... (2,625) 138
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (3,364) (2,862)
Proceeds from sale of property and equipment.............. -- 112
Investment in IPD, net of cash acquired (Note 4).......... -- (28,739)
Other assets.............................................. (1,929) (521)
-------- --------
Net cash used in investing activities................. (5,293) (32,010)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings on bank credit facilities........ 6,075 32,104
Repayments of borrowings on bank credit facilities........ (8,962) (8,584)
Bank overdraft............................................ (3,811) 2,138
Proceeds from borrowings on long-term debt................ -- 526
Repayments of long-term debt.............................. (1,395) (1,599)
Principal payments under capital lease obligations........ (241) (174)
Issuance of common stock-net.............................. 830 41
Proceeds from notes receivable from stockholders.......... 109 --
Distributions to stockholders............................. (865) --
-------- --------
Net cash (used in) provided by financing activities... (8,260) 24,452
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 12 (129)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS....................... (16,166) (7,549)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 63,769 10,971
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 47,603 $ 3,422
======== ========
</TABLE>
4
<PAGE>
POWER-ONE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest................................................ $ 376 $ 416
Income taxes............................................ $ 1,610 $ 102
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
On January 29, 1999, Power-One, Inc. ("Power One" or "the Company")
purchased all of the capital stock of International Power Devices, Inc. ("IPD")
for $29.5 million (See Note 4). In conjunction with the acquisition, liabilities
were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of tangible assets acquired...................... $ 21,248
Fair value of goodwill and other identifiable intangible
assets.................................................. . 17,454
Cash paid for capital stock............................... . (29,500)
--------
Liabilities assumed......................................... $ 9,202
========
</TABLE>
Capital lease obligations of $230 were incurred in the first quarter of 1999
when the Company entered into leases for new equipment.
See accompanying notes
5
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. In the opinion of management, adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. For further information, refer to the supplemental consolidated financial
statements and notes thereto for the year ended December 31, 1999, included in
the Company's Form 8-K dated February 29, 2000 and filed on April 20, 2000,
which were restated under the pooling of interests method of accounting to give
retroactive effect to the acquisition of HC Power, Inc. ("HCP") by Power-One
(see Note 4).
The Company's reporting period coincides with the 52- to 53-week period
ending on the Sunday closest to December 31 and its fiscal quarters are the 13-
to 14- week period ending on the Sunday nearest to March 31, June 30, September
30 and December 31. For simplicity of presentation, the Company has described
its year-ended January 2, 2000 as December 31, 1999 and the three-month periods
ended April 2, 2000 and March 28, 1999 as March 31, 2000 and 1999, respectively.
Certain reclassifications have been made to the amounts in the three-month
period ended March 31, 1999 to conform to the classifications in the three-month
period ended March 31, 2000.
NOTE 2--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- -------------
<S> <C> <C>
Raw materials............................................... $43,415 $40,970
Subassemblies-in-process.................................... 12,901 8,360
Finished goods.............................................. 11,619 12,504
------- -------
$67,935 $61,834
======= =======
</TABLE>
NOTE 3--EARNINGS PER SHARE
Basic earnings (loss) per share is computed by dividing net income (loss) by
the weighted average common shares outstanding for the period while diluted
earnings per share also includes the dilutive impact of stock options. Basic and
diluted (loss) per share for the three-month periods ended March 31 are
calculated as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
MARCH 31, 2000 MARCH 31, 1999
------------------------------ ------------------------------
NET AVERAGE PER NET AVERAGE PER
LOSS SHARES SHARE LOSS SHARES SHARE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net loss..................................... $(1,489) $(3,511)
Basic loss per share:
Shares outstanding......................... 24,108 18,905
------- ------ ------- ------
Basic loss per share....................... (1,489) 24,108 $(.06) (3,511) 18,905 $(.19)
----- -----
Dilutive securities --
Stock options............................
------- ------ ------- ------
Diluted loss per share:.................... $(1,489) 24,108 $(.06) $(3,511) 18,905 $(.19)
======= ====== ===== ======= ====== =====
</TABLE>
The dilutive effect of options outstanding at March 31, 2000 and 1999 was
not included in the calculation of diluted loss per share for the three-month
periods ended March 31, 2000 and 1999
6
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
because to do so would have had an anti-dilutive effect as the Company had a net
loss for both periods. The weighted average amount of such options excluded from
the diluted loss per share computation was approximately 945,000 and 400,000,
respectively.
NOTE 4--ACQUISITIONS
On February 29, 2000, the Company acquired HCP in a stock-for-stock
transaction, whereby the former shareholders of HCP received a total of
2,121,207 shares of Power-One's common stock for all shares of common stock of
HCP outstanding on the effective date of the merger. Of the total shares issued,
212,117 shares were placed in an escrow to fund possible indemnification claims
under the merger agreement. The merger has been accounted for as a pooling of
interests. Accordingly, all prior period consolidated financial statements
presented have been restated to give retroactive effect to the acquisition of
HCP by Power-One. All transactions between the Company and HCP have been
eliminated in the consolidated financial statements. Net sales and net income
(loss) for the separate companies and the combined amounts presented in the
consolidated financial statements follow:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
-----------------------
MARCH 31, MARCH 31,
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net Sales:
Power-One................................................. $66,765 $34,834
HCP....................................................... 10,247 4,086
Intercompany Eliminations................................. -- --
------- -------
Combined.................................................. $77,012 $38,920
Net Income (Loss):
Power-One................................................. $ 5,464 $(3,517)
HCP....................................................... (6,953) 6
Intercompany Eliminations................................. -- --
------- -------
Combined.................................................. $(1,489) $(3,511)
</TABLE>
HCP is based in Irvine, CA and is a supplier of power systems for
telecommunications and Internet service providers and OEM equipment
manufacturers. HCP's major service providers include Williams Communications,
CEA Telecom, Qwest, and Nextel, and its key OEMs include Motorola and Nortel
Networks.
HCP provided for stock bonus incentives to certain key employees. The stock
bonus agreements provided for the granting of HCP common stock to the employees
over specified vesting periods, ranging from three to twelve years. All stock
bonus agreements contained accelerated vesting provisions upon a change in
control of HCP. The unvested shares were granted and became vested at the time
of the acquisition of HCP by Power-One. 270,976 shares of Power One's common
stock were issued to the employees of HCP in exchange for the accelerated
shares. The Company recorded compensation expense of $13.3 million in the first
quarter of 2000 which was determined based on the fair value of the Company's
common stock on February 29, 2000.
In connection with the HCP acquisition, the Company amended its credit
agreement with lenders to waive certain requirements and amend certain
provisions.
On January 29, 1999, the Company completed its purchase of IPD for $31.8
million, including capitalized lease obligations and other indebtedness of IPD.
The total cash consideration paid was $28.3 million plus approximately
$1.2 million of transaction related costs. In addition, the Company
7
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
paid $13 million to IPD's former stockholders in the second quarter of 2000,
since IPD attained certain defined operations performance objectives in the
13 month period ending March 31, 2000. The source of funds for the acquisition
was a combination of the Company's available cash, as well as advances totaling
approximately $28 million under the Company's existing credit facility. In a
separate transaction, the Company acquired IPD's manufacturing facility from a
separate partnership for its appraised value. The purchase of the manufacturing
facility was completed in the second quarter of 1999 for approximately
$4.3 million and was funded by additional borrowings from credit facilities.
IPD, a Boston-based company, supplies high-density DC/DC power supplies,
which it sells primarily in North America. High density DC/DC power technology
is preferred in applications using high speed / low voltage logic, including the
fast growing voice and data communications industries. IPD sells over 90 models
of high-density DC/DC products to leading OEMs, including Cisco, Nortel and
Newbridge Networks. As part of the acquisition, the Company also acquired IPD's
49% ownership position in Shenzhen SED-IPD International Electronic Device Co.,
Ltd., a joint venture based in Shenzhen, China.
The acquisition was accounted for using the purchase method of accounting.
The net purchase price, plus transaction costs, was allocated to tangible assets
and intangible assets. The excess of the aggregate purchase price over the
estimated fair values of the net assets acquired was recognized as goodwill and
other identifiable intangible assets, and is being amortized over periods
ranging from five to 15 years. The fair value of IPD's assets and liabilities
have been included in the Company's balance sheet as of March 31, 2000 and
December 31, 1999. In connection with the IPD acquisition, the Company recorded
a one time charge of $3.3 million in the first quarter of 1999 for purchased in-
process technology that had not yet reached technical feasibility. In connection
with the IPD acquisition, the Company amended its credit agreement with lenders
to waive certain requirements and amend certain provisions.
The product lines acquired as a result of the IPD acquisition were
substantially similar to purchased technology related to a technology and
license agreement (the "Agreement") with another company entered into on
April 2, 1996 for which an intangible asset was being amortized over the term of
the Agreement. Consequently, the Company recorded a charge of approximately $1.0
million for the unamortized balance of the intangible asset value in the first
quarter of 1999.
NOTE 5--INTANGIBLE ASSETS
Intangible assets include cost in excess of net assets acquired in
connection with the acquisition of the Company in 1995, of Melcher Holding AG
("Melcher") in 1998 and of IPD in 1999 (see Note 4) which have been allocated
among certain intangible items determined by management to have value, such as
the company name, distribution network and product lines. Provision for
amortization has been made based upon the estimated useful lives of the
intangible asset categories, which range from five to 25 years, using the
straight-line method. Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- -------------
<S> <C> <C>
Goodwill and trade name..................................... $39,320 $40,093
Distribution network........................................ 5,207 5,207
Sales force................................................. 654 681
Product technology.......................................... 19,394 19,500
Assembled workforce......................................... 800 800
Customer relationships...................................... 4,700 4,700
------- -------
70,075 70,981
Less accumulated amortization............................... 12,999 11,764
------- -------
$57,076 $59,217
======= =======
</TABLE>
8
<PAGE>
POWER-ONE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--SUBSEQUENT EVENTS
Pursuant to an Amended and Restated Stock Purchase Agreement, dated as of
May 15, 2000, on May 16, 2000 the Company acuired Norwegian-based Powec AS for
approximately $70 million in cash and 127,098 shares of the Company's common
stock. Additionally, Powec has approximately $13 million in debt outstanding.
Certain additional payments may be made to Powec stockholders based on the
attainment of defined operational performance through 2001. The acquisition is
being accounted for using the purchase method of accounting.
Powec is a leading supplier of power systems for major service providers and
equipment manufacturers in the telecommunications industry. Powec's customers
include Nokia, Vodafone, Ericsson, Eircom, Telia, Hong Kong Telecom, Telenor,
Sonera and TeleDanmark.
On May 16, 2000, the Company also acquired a telecommunications product line
from a subsidiary of Crane Co. for $14 million in cash. This product line
includes the exclusive distribution rights for Powec's products in North, South
and Central America and extensive relationships with telecommunication equipment
manufacturers such as Motorola, Ericsson, and Nokia US.
The source of funds for the acquisitions was a combination of the Company's
available cash and credit facilities
On May 9, 2000, the Company's Board of Directors declared a three-for-two
stock split of the Company's common stock. The stock split will be effected in
the form of a 50% stock dividend payable June 2, 2000 to stockholders of record
on May 24, 2000. The dividend will increase the number of outstanding shares
from approximately 24.3 million to approximately 36.4 million.
On May 10, 2000, the Company entered into a Revolving Loan Agreement with
Union Bank of California, N.A., as administrative agent and lead arranger, which
provides the Company with a revolving line of credit of $125 million. The line
of credit bears interest on amounts outstanding payable quarterly based on the
Company's leverage ratio and one of the following rates as selected by the
Company: LIBOR plus 1.25% to 2.25%, or the bank's base rate plus 0% to 1.00%.
The credit agreement (a) provides for restrictions on additional borrowings,
leases and capital expenditures; (b) prohibits the Company, without prior
approval, from paying dividends, liquidating, merging, consolidating or selling
its assets or business; and (c) requires the Company to maintain a specified net
worth, maximum leverage ratio and minimum fixed charge coverage ratio.
Borrowings under this line of credit are collateralized by the capital stock of
each of the Company's domestic subsidiaries and 65% of the capital stock of each
of the Company's foreign subsidiaries.
As a result of the Revolving Loan Agreement with Union Bank of California,
N.A., we plan to repay all outstanding amounts under our $65 million revolving
line of credit with Bank of America, N.A. and terminate that agreement. At
March 31, 2000, amounts outstanding under our line of credit with Bank of
America, N.A. were $3.9 million, all of which was borrowed by Melcher.
Borrowings under this line of credit are collateralized by substantially all of
our assets.
9
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL. In January 1999, we broadened our portfolio of DC/DC products by
acquiring International Power Devices, Inc., or IPD, for $32 million, including
certain capitalized lease obligations and other indebtedness of IPD. In
February 2000, we acquired HC Power, Inc., or HCP, in a stock-for-stock
transaction, in which the former shareholders of HCP received a total of
2,121,207 shares of our common stock for all shares of common stock of HCP
outstanding on the effective date of the merger. HCP is based in Irvine, CA and
is a leading supplier of power systems for telecommunications and Internet
service providers and OEM equipment manufacturers. The acquisition of IPD was
accounted for using the purchase method of accounting, whereas, the acquisition
of HCP was accounted for as a pooling of interests. All prior periods have been
restated to give retroactive effect to the acquisition of HCP. As such, all
references to operating data for the three months ended March 31, 2000, include
three months of IPD and HCP. All references to operating data for the three
months ended March 31, 1999 include three months of HCP and two months of IPD.
NET SALES. Net sales increased $38.1 million, or 97.9%, to $77.0 million
for the three months ended March 31, 2000 from $38.9 million for the three
months ended March 31, 1999. The increase in net sales resulted primarily from
strong growth in unit shipments of our high-density DC/DC products to the
communications market, strong growth in our Telecom Systems Division (formerly
HC Power), and strong sales of our high power product line into the
ATE/semiconductor test equipment and industrial markets. The increase in net
sales was attributable to increases across all product lines. The main
contributors to the $38.1 million increase in net sales were DC/DC power
supplies which contributed $17.3 million, telecom power systems and high-range
power supplies, which each contributed $6.2 million, low-range power supplies,
which contributed $3.4 million, custom power supplies, which contributed $2.6
million and all other product lines combined, which contributed $2.4 million.
Quarter-over-quarter, a significant portion of the sales growth in this year's
first quarter is also due to the stronger demand for our high power product line
in the ATE/semiconductor test equipment market which was still recovering from
the industry slump in 1998 during last year's first quarter.
Net sales to OEMs in the first quarter of 2000 were $59.6 million, or 77.4%
of net sales, up from $30.7 million, or 79.0% of net sales, for the comparable
period in 1999. Cisco was the only customer to exceed 10% of net sales in the
first quarter of 2000. Net sales through distributors were $17.4 million, or
22.6% of net sales, in the first quarter of 2000, up from $8.2 million, or 21.0%
of net sales, in the same period in 1999.
The acquisitions of IPD and HCP have significantly broadened the Company's
customer base by increasing net sales to key OEMs and adding new OEMs in the
communications market. Sales by markets for the three months ended March 31,
2000 and 1999 were:
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Communications............................................. 55.3% 37.6%
Industrial................................................. 16.3% 20.4%
ATE/Semiconductor test equipment........................... 11.4% 3.5%
Transportation............................................. 4.6% 9.3%
Medical.................................................... 3.7% 9.3%
Computer, Retail and Other................................. 8.7% 19.9%
----- -----
Total.................................................... 100.0% 100.0%
</TABLE>
The Company's combined backlog on March 31, 2000 was $108.3 million, an
increase of 61.8% and 138.8% compared to backlog of $66.9 million on December
31, 1999 and $45.3 million on March 31, 1999, respectively. The overall bookings
trend remained very strong in the first quarter of this year, driven primarily
by strong order flow in our high-density DC-DC business, as well as robust
growth from the ATE/semiconductor test equipment market.
GROSS PROFIT. Gross profit increased $17.4 million, or 119.0%, to $32.0
million for the three months ended March 31, 2000 from $14.6 million for the
three months ended March 31, 1999. As a
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percent of net sales, gross profit increased to 41.6% for the first three months
of 2000 from 37.6% for the same period in 1999. The increase in gross profit
margin primarily resulted from the inventory write-up related purchase
accounting adjustments due to the IPD acquisition which negatively impacted the
prior year period. Excluding the non-recurring adjustments related to our IPD
acquisition in 1999, gross profit margin would have been 39.5% for the first
quarter of 1999. On this basis, the improved 2.1% profit margin in the first
quarter of 2000 versus the same period last year is primarily due to the
increase in net sales which allowed us to better leverage our fixed
manufacturing expenses, as well as the transfer of high-density DC-DC product
manufacturing from our Boston facility to our low cost manufacturing facility in
Mexico.
SELLING EXPENSE. Selling expense increased $1.3 million, or 25.2%, to $6.6
million for the three months ended March 31, 2000 from $5.3 million for the
comparable period in 1999. As a percent of net sales, selling expense decreased
to 8.6% for the first three months of 2000 from 13.6% for the comparable period
in 1999. The increase of $1.3 million in the first quarter of 2000 was primarily
due to higher employee costs and an increase in sales commissions due to the
increase in sales volume.
GENERAL AND ADMINISTRATIVE EXPENSE. Administrative expense increased $14.3
million, or 477.6%, to $17.3 million for the three months ended March 31, 2000
from $3.0 million for the three months ended March 31, 1999. As a percent of net
sales, administrative expense increased to 22.5% for the first three months of
2000 from 7.7% for the comparable period in 1999. The increase of $14.3 million
was primarily attributable to an $8.7 million stock compensation charge due to
HCP stock bonus agreements that vested on the date of acquisition, $2.4 million
in acquisition costs, with the remainder of the increase due to higher employee
costs and depreciation on our Oracle ERP system and other capital expenditures.
ENGINEERING EXPENSE. Engineering expense increased $6.0 million, or 176.9%,
to $9.4 million for the three months ended March 31, 2000 from $3.4 million for
the three months ended March 31, 1999. As a percent of net sales, engineering
expense increased to 12.2% for the first three months of 2000 from 8.7% for the
comparable period in 1999. The increase of $6.0 million was primarily due to a
$4.6 million stock compensation charge due to HCP stock bonus agreements that
vested on the date of acquisition, with the remainder of the increase due to
higher employee costs which are directly attributable to our commitment to make
strategic engineering investments in support of our future growth.
QUALITY ASSURANCE EXPENSE. Quality Assurance expense increased
$0.4 million, or 51.3%, to $1.2 million for the three months ended March 31,
2000 from $0.8 million for the three months ended March 31, 1999. As a percent
of net sales, quality assurance expense decreased slightly to 1.6% for the first
three months of 2000 from 2.1% for the comparable period in 1999. The increase
of $0.4 million was primarily due to higher employee costs.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles decreased
$0.9 million, or 40.4%, to $1.3 million for the three months ended March 31,
2000 from $2.2 million for the same period in 1999. The majority of the decrease
is attributable to a $1.0 million charge taken in the first quarter of 1999 to
write off the unamortized balance of the intangible asset value of a technology
and license agreement related to substantially similar product technology
acquired as a result of the IPD acquisition. This decrease was partially offset
by an additional month of amortization of intangibles recorded in the first
quarter of 2000 compared to the same period in 1999 related to the intangibles
initially recorded upon the acquisition of IPD on January 29, 1999.
IN-PROCESS RESEARCH AND DEVELOPMENT. As a result of the IPD acquisition,
the Company recorded a one time charge of $3.3 million in the first quarter of
1999 for purchased in-process technology that had not reached technological
feasibility and had no alternative future use.
LOSS FROM OPERATIONS. As a result of the items above, loss from operations
increased $0.4 million, or 12.5%, to $3.8 million for the three months ended
March 31, 2000 from $3.4 million for the
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comparable period in 1999. Excluding non-recurring items totaling approximately
$15.9 million related to the HCP acquisition consisting of acquisition costs of
$2.4 million, stock compensation charges of $13.3 million and payroll related
taxes of $0.2 million, income from operations would have been $12.1 million, or
15.8% of net sales in the first quarter of 2000. Excluding non-recurring items
totaling approximately $5.1 million related to the IPD acquisition consisting of
an inventory fair value write-up of $0.8 million, an in-process research and
development charge of $3.3 million and a write-off of $1.0 million for a
technology and license agreement, income from operations would have been $1.7
million, or 4.4% of net sales in the first quarter of 1999.
INTEREST INCOME. Interest income increased $711,000 to $748,000 for the
three months ended March 31, 2000 from $37,000 for the three months ended
March 31, 1999. The increase is primarily due to interest earned on proceeds
from the sale of our stock during a secondary offering in September and
October 1999 which were invested in short-term, interest bearing financial
instruments.
INTEREST EXPENSE. Interest expense decreased $412,000, or 56.9%, to
$312,000 for the three months ended March 31, 2000 from $724,000 for the
comparable period in 1999. The decrease is primarily due to the decrease in our
debt balance due to repayments using the net proceeds from the sale of our stock
in September and October 1999. Interest expense in the first quarter of 1999
related to debt incurred in connection with the acquisition of Melcher in the
third quarter of 1998 and IPD in the first quarter of 1999.
OTHER INCOME, NET. Other income, net, decreased $217,000, or 61.6%, to
$135,000 for the three months ended March 31, 2000 from $352,000 for the three
months ended March 31, 1999. Other income decreased primarily due to net gains
on sales of fixed assets and higher net gains recorded on foreign currency
transactions in the first quarter of 1999.
INCOME TAXES. The provision for income taxes was a $1.7 million benefit for
the three months ended March 31, 2000 compared to a $183,000 income tax benefit
for the same period in 1999. Included in the income tax benefit for the first
quarter of 2000 was a non-recurring benefit of $366,000 related to net deferred
tax assets recorded upon HCP's conversion from an S-corporation to a C-
corporation. The recorded loss for the first quarter of 1999 did not generate a
significant income tax benefit primarily due to the $3.3 million charge for in
process research and development and $304,000 amortization of goodwill related
to the IPD acquisition, both of which were nondeductible for tax purposes.
Excluding non-recurring items, the effective tax rate would have been
approximately 32.6% in the first quarter of 2000 compared to 39.3% in the first
quarter of 1999. The lower tax rate in the first quarter of 2000 is primarily
the result of the distribution of profit among our various subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents balance decreased $16.2 million, or 25.4% from
$63.8 million at December 31, 1999 to $47.6 million at March 31, 2000. Our
primary source of cash in the first quarter of 2000 consisted of borrowings from
our bank credit facilities of $6.1 million. The primary uses of cash in the
first quarter of 2000 consisted of $9.0 million for repayment of borrowings from
our bank credit facilities, $3.8 million decrease in our bank overdrafts,
$1.4 million for the repayment of long-term debt, $3.4 million for the
acquisition of property and equipment and $2.6 million for operating activities.
Cash used in operating activities in the first quarter of 2000 was $2.6
million and was primarily attributable to cash earnings from operations of $15.6
million (net loss plus depreciation, and stock compensation) offset by $18.2
million used for working capital. The $18.2 million use for working capital was
primarily due to an increase in accounts receivable and inventories of $8.9
million and $6.6 million, respectively, and a net decrease in accounts payable
and accrued expenses of $2.1 million.
The $3.4 million to acquire property and equipment included approximately
$0.5 million for hardware, software and implementation support related to our
Oracle ERP system conversion at our
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Caribbean facility, $1.7 million for manufacturing equipment and the balance for
additional property, plant and capital equipment expenditures consistent with
supporting our growth plans.
On May 10, 2000, we entered into a Revolving Loan Agreement with Union Bank
of California, N.A., as administrative agent and lead arranger, which provides
us with a revolving line of credit of $125 million. The line of credit bears
interest on amounts outstanding payable quarterly based on our leverage ratio
and one of the following rates as selected by us: LIBOR plus 1.25% to 2.25%, or
the bank's base rate plus 0% to 1.00%. The credit agreement (a) provides for
restrictions on additional borrowings, leases and capital expenditures;
(b) prohibits us, without prior approval, from paying dividends, liquidating,
merging, consolidating or selling our assets or business; and (c) requires us to
maintain a specified net worth, maximum leverage ratio and minimum fixed charge
coverage ratio. Borrowings under this line of credit are collateralized by the
capital stock of each of our domestic subsidiaries and 65% of the capital stock
of each of our foreign subsidiaries.
As a result of the Revolving Loan Agreement with Union Bank of California,
N.A., we plan to repay all outstanding amounts under our $65 million revolving
line of credit with Bank of America, N.A. and terminate that agreement. At March
31, 2000, amounts outstanding under our line of credit with Bank of America,
N.A. were $3.9 million, all of which was borrowed by Melcher. Borrowings under
this line of credit are collateralized by substantially all of our assets.
As a result of the Melcher acquisition, we have various credit facilities
with banks in Switzerland and Germany which can be drawn upon in the form of
term loans. The aggregate credit limit for all such credit facilities is
approximately $9.4 million. Melcher's credit facilities in Switzerland bear
interest on amounts outstanding payable at various time intervals and market
rates based on Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Some of
Melcher's credit agreements require Melcher to maintain certain financial
covenants and to provide certain financial reports to the lenders, none of which
materially restricts Melcher. At March 31, 2000, short-term (including current
portion of long-term debt) and long-term amounts outstanding under Melcher's
credit facilities were $3.3 million and $3.0 million, respectively.
In the first quarter of 2000 we repaid the outstanding balance on our $8
million revolving loan and $1 million equipment line of credit and cancelled the
agreements. Total principal amounts repaid were $6.2 million and $0.3 million,
respectively.
At March 31, 2000, short-term (including current portion of long-term debt)
and long-term amounts outstanding under all credit agreements with banks were
$7.2 million and $3.0 million, respectively.
We currently anticipate that our total capital expenditures for 2000 will be
approximately $35 million, of which approximately $2 million represents costs
related to the implementation of our Oracle ERP system at Power-Electronics,
Inc., as well as continued enhancements and upgrades at our Camarillo and Mexico
locations, approximately $15 million represents investments in surface-mount
technology automation and approximately $12 million represents investments in
manufacturing improvements. The amount of these anticipated capital expenditures
will frequently change during the year based on changes in expected revenues,
our financial condition and general economic conditions.
In addition, we paid $13 million to IPD's former stockholders in the second
quarter of 2000, since IPD attained certain defined operational performance
objectives in the 13 month period ended March 31, 2000.
Based on current plans and business conditions, we believe our existing
working capital and borrowing capacity, coupled with the funds generated from
our operations, will be sufficient to fund our anticipated working capital,
capital expenditures and debt payment requirements for the next twelve months.
However, if we make a large acquisition, it may be necessary to raise debt or
equity in the private or public securities markets.
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<PAGE>
ITEM 3--QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in
interest rates and changes in foreign currency exchange rates. Our exposure to
interest rate risk results from the financial debt instruments which arise from
transactions entered into during the normal course of business. We may enter
into derivative financial instrument transactions, such as swaps, in order to
manage or reduce our exposure to interest rate changes related to our portfolio
of borrowings. Under no circumstances do we enter into derivative or other
financial instrument transactions for speculative purposes.
DEBT. We are exposed to cash flow risk due to changes in market interest
rates related to our outstanding debt. For example, in Europe our credit
facilities bear interest on borrowings outstanding at various time intervals and
market rates based on Swiss LIBOR, an offshore rate that is similar to the
London Interbank Offered Rate ("LIBOR"), plus a margin ranging from 1.25% to
2.00%. Our principal risk with respect to our long-term debt is to changes in
these market rates.
The table below presents principal cash flows and related weighted average
interest rates for our credit facilities and long-term debt obligations at March
31, 2000 by expected maturity dates. The information is presented in U.S. dollar
equivalents, our reporting currency, and parenthetically in Swiss francs, where
applicable. Additionally, the U.S. dollar equivalent carrying value of Swiss
franc denominated debt is sensitive to foreign currency exchange rates. However,
a 10% change in the U.S. dollar exchange rate against the Swiss franc would not
have a significant effect on our future earnings.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
----------------------------------------------------------------- FAIR
2000 2001 2002 2003 2004 THEREAFTER TOTAL VALUE
-------- -------- -------- -------- -------- ---------- -------- --------
(AMOUNTS IN THOUSANDS EXCEPT FOR PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Credit facility:
Variable Rate (CHF 6,500)........ $3,920 $3,920 $3,920
Average Interest Rate.......... 3.7% 3.7%
Fixed Rate (CHF 1,000)........... $ 603 $ 603 $ 603
Average Interest Rate.......... 3.5% 3.5%
Long-term Debt:
Fixed Rate (CHF 9,500)........... $2,714 2,110 905 -- -- -- $5,729 $5,729
Average Interest Rate.......... 3.7% 3.8% 4.4% 3.8%
</TABLE>
FOREIGN CURRENCY. A significant portion of our business operations are
conducted in various countries in Europe. As a result, we have a certain degree
of market risk with respect to our cash flows due to changes in foreign currency
exchange rates when transactions are denominated in currencies other than our
functional currency. Historically, we have not actively engaged in substantial
exchange rate hedging activities, and at March 31, 2000, we had not entered into
any significant foreign exchange contracts.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934. The words
"expect," "believe," "anticipate" and similar expressions are intended to
identify forward-looking statements. Such forward-looking information involves
important risks and uncertainties that could materially alter results in the
future from those expressed in any forward-looking statements made by, or on
behalf of, the Company. These risks and uncertainties include, but are not
limited to, the Company's ability to meet expected revenues and maintain its
financial condition which could be affected by any of the following: general
domestic and international economic conditions including interest rate and
currency exchange rate fluctuations, electronics industry market conditions and
growth rates, acquisitions, the cyclical nature of the Company's business,
government and regulatory policies, technological developments and changes in
the competitive environment in which the Company operates. Persons reading this
Form 10-Q are cautioned that such forward-looking statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, readers should specifically consider the various
factors which could cause actual events or results to differ materially from
those indicated by such forward-looking statements.
14
<PAGE>
PART II--OTHER INFORMATION
ITEMS 1 THROUGH 5--NOT APPLICABLE
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 2.1--Amended and Restated Stock Purchase Agreement entered into as
of May 15, 2000 among Power-One, Inc. and the shareholders of Powec AS
(Norway)
Exhibit 27--Financial Data Schedule
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K dated February 29, 2000 was filed on March 13,
2000 to report the closing of the acquisition of HC Power, Inc. by
Power-One, Inc. in accordance with Item 2 of the Instructions to Form 8-K.
A Current Report on Form 8-K dated February 29, 2000 was filed on April 20,
2000 to provide supplemental consolidated financial statements giving
retroactive effect to the acquisition of HC Power, Inc. by Power-One, Inc.
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: May 17, 2000 POWER-ONE, INC.
By: /s/ STEVEN J. GOLDMAN
-----------------------------------------
Steven J. Goldman
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
By: /s/ EDDIE K. SCHNOPP
-----------------------------------------
Eddie K. Schnopp
SR.VICE PRESIDENT, FINANCE,
CHIEF FINANCIAL OFFICER AND SECRETARY
</TABLE>
16
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
BY AND AMONG
POWER-ONE, INC.
AND
THE STOCKHOLDERS OF POWEC A.S.
MAY 15, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I PURCHASE & SALE/CLOSING......................................................1
1.1 Purchase and Sale of Stock...................................................1
1.2 Purchase Price...............................................................2
1.3 Escrow Fund..................................................................2
1.4 Earnout Consideration........................................................2
1.5 Closing......................................................................5
1.6 Certificate Legends..........................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES BY SELLERS....................................5
2.1 Share Ownership..............................................................5
2.2 Authorization................................................................5
2.3 Governmental Authorization...................................................5
2.4 Non-contravention............................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NORWEGIAN SELLERS..........................6
3.1 Organization.................................................................6
3.2 Capitalization...............................................................6
3.3 Subsidiaries and Other Equity Investments....................................6
3.4 Financial Statements; Changes; Contingencies.................................7
3.5 Taxes........................................................................9
3.6 MaterialContracts...........................................................11
3.7 Title To Property; Condition Of Property; Leases............................11
3.8 Non-contravention...........................................................12
3.9 Intellectual Property.......................................................12
3.10 Legal Proceedings...........................................................12
3.11 Insurance...................................................................13
3.12 Compliance With Law.........................................................13
3.13 Employees...................................................................13
3.14 Employee Benefit Plans......................................................13
3.15 No Brokers or Finders.......................................................14
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
3.16 Inventories.................................................................15
3.17 Customers...................................................................15
3.18 Suppliers...................................................................15
3.19 Product Warranties..........................................................15
3.20 Environmental Law Compliance................................................16
3.21 Minute Books................................................................16
3.22 Due Diligence Materials.....................................................16
3.23 Year 2000 Compliance........................................................16
3.24 Related Party Transactions..................................................17
3.25 Acccounts Receivable........................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.....................................17
4.1 Organization And Related Matters............................................17
4.2 Corporate Authorization.....................................................17
4.3 Governmental Authorization..................................................18
4.4 Non-contravention...........................................................18
4.5 Legal Proceedings...........................................................18
4.6 Compliance With Law.........................................................18
4.7 No Brokers Or Finders.......................................................18
ARTICLE V COVENANTS OF SELLERS........................................................19
5.1 Access......................................................................19
5.3 Notification of Certain Matters.............................................21
5.4 Permits and Approvals.......................................................21
5.5 Conditions..................................................................21
ARTICLE VI COVENANTS OF BUYER..........................................................21
6.1 Notification of Certain Matters.............................................21
6.2 Permits and Approvals.......................................................22
6.3 Credit Agreement............................................................22
6.4 Registration of Stock Issued in Earnout.....................................22
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE VII CONDITIONS TO CLOSING.......................................................22
7.1 Conditions to Obligations of Buyer..........................................22
7.2 Conditions to Obligations of Sellers........................................23
ARTICLE VIII TERMINATION OF OBLIGATIONS..................................................24
8.1 Termination of Agreement....................................................24
8.2 Effect of Termination.......................................................25
ARTICLE IX INDEMNIFICATION.............................................................25
9.1 Obligations of Seller.......................................................25
9.2 Obligations of Buyer........................................................25
9.3 Procedure...................................................................26
ARTICLE X MISCELLANEOUS...............................................................26
10.1 Survival of Representations and Warranties..................................26
10.2 Public Announcements........................................................26
10.3 Confidentiality.............................................................26
10.4 Assignment..................................................................27
10.5 Seller Representative.......................................................27
10.6 Expenses....................................................................27
10.7 Notices.....................................................................28
10.8 Further Assurances..........................................................29
10.9 Sections and Other Headings.................................................29
10.10 Integrated Agreement........................................................29
10.11 Amendments; Waivers.........................................................29
10.12 Interpretation..............................................................29
10.13 Counterparts................................................................30
10.14 Severability................................................................30
10.15 Governing Law...............................................................30
10.16 Arbitration.................................................................30
10.17 Specific Performance........................................................30
</TABLE>
<PAGE>
PAGE
----
EXHIBIT A A-1
EXHIBIT B B-1
EXHIBIT C C-1
EXHIBIT D D-1
EXHIBIT E E-1
SCHEDULE 1.4 1
<PAGE>
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this "AGREEMENT")
is entered into as of May 15, 2000 among POWER-ONE, INC., a Delaware corporation
("BUYER"), and each of the other Persons listed on the signature page
(individually, except for Mark Tough, Alan Cooling and Mark Jearum, a "SELLER"
and collectively, except for these three individuals, the "SELLERS"), and amends
and restates in its entirety the Stock Purchase Agreement among the parties
dated as of March 31, 2000 (the "ORIGINAL AGREEMENT"). Certain capitalized terms
used in this Agreement are defined in the text or on EXHIBIT B.
RECITALS
A. Sellers own all of the outstanding shares of capital stock of Powec
A.S., a company incorporated and existing under the Laws of Norway, having its
registered domicile at Kobbervikdalen 75, 3007 Drammen, Norway (the "COMPANY").
B. Buyer desires to purchase from Sellers, and Sellers desire to sell
to Buyer, all of the outstanding capital stock of the Company, upon the terms
and conditions set forth in this Agreement.
C. Mark Tough, Alan Cooling and Mark Jearum (the "WITHDRAWING SELLERS")
were parties to the Original Agreement, have subsequently entered into separate
agreements with Buyer and wish to withdraw as parties to this Agreement.
The parties agree as follows:
ARTICLE 1
PURCHASE & SALE/CLOSING
1.1 PURCHASE AND SALE OF STOCK.
(a) Upon the terms and conditions of this Agreement, Buyer will
purchase and accept delivery from each Seller of, and each Seller will sell,
assign and transfer and deliver to Buyer, at the Closing provided for in SECTION
1.6, the shares of capital stock of the Company set forth below Eldec's name on
the signature page and on EXHIBIT A opposite each Norwegian Seller's name, free
and clear of all Encumbrances of any kind. The shares of capital stock of the
Company to be sold by the Sellers to Buyer, constituting all of the issued and
outstanding shares of capital stock of the Company are referred to in this
Agreement as the "SHARES."
(b) The Withdrawing Sellers have no rights or obligations under this
Agreement and are executing it simply to signify their withdrawal as parties.
1.2 PURCHASE PRICE. As consideration for the Shares, Buyer will
pay the Sellers at the Closing US$77,311,334 as follows (such amount paid to the
Sellers at the
1
<PAGE>
Closing as finally determined pursuant to this SECTION 1.2 is referred to in
this Agreement as the "ORIGINAL PURCHASE PRICE"):
(a) To the Norwegian Sellers: US$45,755,436 of the Original Purchase
Price less US$10,192,936.67 (I.E., the Original Escrow Amount less the portion
of the Original Escrow Amount to be paid by Mark Jearum and Susan J. Jearum
(collectively, the "JEARUMS")) by wire transfer in immediately available funds
to one bank account designated by the Seller Representative for subsequent
distribution by the Norwegian Sellers among themselves in accordance with the
percentage set forth opposite each Norwegian Seller's name on EXHIBIT A hereto
under the column entitled "Percentage of Original Purchase Price payable under
SECTION 1.2(a) to Norwegian Sellers"; and
(b) To Eldec: US$31,555,898 of the Original Purchase Price by wire
transfer in immediately available funds to a bank account designated by Eldec.
1.3 ESCROW FUND. At the Closing, Buyer will deliver to such bank as
Buyer and the Norwegian Sellers may mutually agree (the "ESCROW AGENT"), the
Original Escrow Amount; PROVIDED, HOWEVER, that Buyer will deposit $432,063.33
of the Original Escrow Amount on behalf of the Jearums in accordance with the
agreement between Buyer and the Jearums dated May 12, 2000 (the "JEARUM
AGREEMENT"); and PROVIDED FURTHER, that Buyer will have the option exercisable
in its sole discretion to deliver to the Escrow Agent as part of the Original
Escrow Amount up to 15% of the cash portion being paid to the Norwegian Sellers
(I.E., up to US$6,863,292) in shares of Buyer Common Stock valued at US$54 per
share (I.E. up to 127,098 shares). The Escrow Agent will hold and deliver the
Original Escrow Amount in accordance with the terms of an Escrow Agreement in
the form of EXHIBIT C, which the Buyer and the Seller Representative will
execute and deliver at the Closing (the "ESCROW AGREEMENT"). The Original Escrow
Amount will be adjusted from time to time for (i) amounts owed by Buyer to the
Norwegian Sellers pursuant to SECTION 1.4 and (ii) claims made by Buyer pursuant
to SECTION 9.1.
1.4 EARNOUT CONSIDERATION.
(a) As soon as practicable after December 31, 2000 and no later than
March 31, 2001, Buyer will deliver to the Seller Representative a draft
auditor's report on the Company's consolidated financial statements for the year
ended December 31, 2000 prepared in accordance with US GAAP and reflecting the
Company's Net Sales and Operating Profit Margin for the fiscal year ended
December 31, 2000 (the "YEAR 2000 FINANCIAL STATEMENTS"). If the acquisition of
the minority interests in the Company's subsidiaries referred to in SECTION
7.1(f), or the contribution of such shares to the Company by Buyer, requires the
Company to create goodwill on its balance sheet and to amortize such goodwill,
either the amortization of such good will be disregarded in determining
Operating Profit Margin or the formula for the Earnout regarding Operating
Profit Margin will be reduced to take into consideration such amortization. The
Seller Representative will have 30 days to review the Year 2000 Financial
Statements (such 30-day period being referred to herein as the "SELLER REVIEW
PERIOD"). Buyer will cooperate with the Seller Representative in this review of
and will make available to the Seller Representative all information and data
relating to the preparation of the Year 2000 Financial Statements as the Seller
Representative may reasonably request, and the Norwegian Sellers' independent
2
<PAGE>
accountants will be provided with customary access of the nature and extent
provided Buyer's independent accountants in connection with their review of the
Closing Date Balance Sheet to the work papers of the Sellers' independent
accountants relating thereto (subject to the Seller Representative's entering
into a customary waiver letter with Buyer's independent accountants). If the
Seller Representative disagrees with the determination of Net Sales or Operating
Profit Margin as calculated from the Year 2000 Financial Statements on or before
the Seller Review Period expires, the Seller Representative will notify Buyer of
the matters with which it disagrees on or before the Seller Review Period
expires, and the parties will use their best efforts to resolve any differences
promptly. If Buyer and the Seller Representative are unable to resolve any
disagreements that they may have with respect to the Year 2000 Financial
Statements or the determination of Net Sales or Operating Profit Margin within
30 days after the Seller Representative notifies Buyer of its disagreement, then
within ten (10) days after such 30-day period expires, the disputed matters will
be promptly referred for final determination to one of the "Big Five" accounting
firms that does not have an existing relationship with either Buyer or the
Company, or if such firm is unable or unwilling to make such final
determination, to such other independent accounting firm as the parties mutually
designate (the accounting firm making such determination is referred to herein
as the "INDEPENDENT ACCOUNTANTS"). The Year 2000 Financial Statements will be
deemed to be binding on the Norwegian Sellers and Buyer upon (i) the Seller
Representative's failure to deliver to Buyer a notice of disagreement before the
Seller Review Period Expires, (ii) resolution of any disagreement by mutual
agreement of the parties after a timely notice of disagreement has been
delivered to Buyer, or (iii) notification by the Independent Accountants of
their final determination of the items of disagreement submitted to them. The
costs and expenses associated with the preparation of the Year 2000 Statements
will be borne by Buyer. Any amounts paid to the Norwegian Sellers in accordance
with this SECTION 1.4 is referred to as the "EARNOUT."
(b) As soon as practicable after December 31, 2001 and no later than
March 31, 2002, Buyer will deliver to the Seller Representative a draft
auditor's report on the Company's consolidated financial statements for the year
ended December 31, 2001 prepared in accordance with US GAAP reflecting the
Company's Net Sales and Operating Profit Margin for the fiscal year ended
December 31, 2001 (the "YEAR 2001 FINANCIAL STATEMENTS"). Buyer and the Seller
Representative will follow the same procedures with respect to the review and
final determination of the Net Sales and Operating Profit Margin of the Company
for the year ended December 31, 2001 reflected on the Year 2001 Financial
Statements as the procedures set forth in SECTION 1.4(a) above with respect to
the review and final determination of the Year 2000 Financial Statements.
(c) Buyer will pay in cash or, at Buyer's option exercisable in its
sole discretion, shares of Buyer's common stock valued at the average closing
price of Buyer's common stock as quoted on NASDAQ during the ten trading days
ending ten days before the date on which any amount owed to the Norwegian
Sellers pursuant to this SECTION 1.4 is finally determined, to the Escrow Agent
for the benefit of the Norwegian Sellers the following amounts:
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(1) As soon as practicable after the Company's Net Sales and Operating
Profit Margin for the year ended December 31, 2000 are finally determined in
accordance with the procedures set forth in SECTION 1.4(a) above, if the
Company's Operating Profit Margin is at least 10.6%, Buyer will pay the Escrow
Agent up to US$12 million determined in accordance with the following formula:
(X / US$26.6 million) x US$12 million
where X equals the excess of the Company's Net Sales for the year ended
December 31, 2000 over US$72.6 million;
and if the Company's Operating Profit is less than 10.6%, the amount of the
Earnout will be determined in accordance with SCHEDULE 1.4.
(2) As soon as practicable after the Company's Net Sales and Operating
Profit Margin for the year ended December 31, 2001 are finally determined in
accordance with the procedures set forth in SECTION 1.4(b) above, if the
Company's Operating Profit Margin is at least 10.6% Buyer will pay the Escrow
Agent up to US$12 million determined in accordance with the following formula:
(X / US$42.6 million) x US$12 million
where X equals the excess of the Company's Net Sales for the year ended
December 31, 2001 over US$116.2 million;
and if the Company's Operating Profit is less than 10.6%, the amount of the
Earnout will be determined in accordance with SCHEDULE 1.4.
(d) For purposes of converting the Company's monthly financial
statements from NOK into dollars, the parties shall use the average exchange
rate for such month based on the daily exchange rates published in The Wall
Street Journal.
(e) Any disagreements that Buyer and the Seller Representative have
failed to resolve among themselves in accordance with the provisions of this
SECTION 1.4, with respect to the Year 2000 Financial Statements or the Year 2001
Financial Statements will be determined by the Independent Accountants. The
scope of the Independent Accountants' review will be limited to the matters on
which Buyer and the Seller Representative disagree. The decision of the
Independent Accountants will be final and binding on the Buyer and the Seller
Representative. The Norwegian Sellers on the one hand, and Buyer, on the other,
will bear equally the costs and expenses of the Independent Accountants. The
amount to be borne by the Norwegian Sellers will be paid by the Escrow Agent out
of the Escrow Fund.
(f) Buyer will pay the Escrow Agent any amounts owed to the Norwegian
Sellers pursuant to SECTION 1.4(c) on the later of (i) April 15, 2001 or 2002,
as the case may be, and (ii) within ten (10) days after such amount is finally
determined in accordance with the procedures set forth above. Such amount will
be distributed to the Norwegian Sellers in accordance with the percentage set
forth opposite each Norwegian Seller's name on EXHIBIT A under the column
entitled "Percentage of Earnout."
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1.5 CLOSING. The Closing will take place at the offices of Wikborg Rein
& Co., Olav V gt 6, P.O. Box 1513 Vika, 0117 Oslo, Norway at 10:00 a.m. local
time, on the fifth business day after the parties have satisfied or waived the
conditions set forth in ARTICLE VII (the "CLOSING DATE").
1.6 CERTIFICATE LEGENDS. Any shares of common stock of Buyer to be
issued pursuant to this ARTICLE I will not be registered and will be
characterized as "restricted securities" under the federal securities laws of
the United States, and under such laws such shares may be resold without
registration under the Securities Act, only in certain limited circumstances.
Each certificate evidencing shares of common stock of Buyer that may be issued
pursuant to this ARTICLE I will bear a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR WITH THE
SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. SUCH
SHARES ARE BEING OFFERED PURSUANT TO, AMONG OTHER EXEMPTIONS FROM
REGISTRATION, A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE ACT ("REGULATION S"). SUCH SHARES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO U.S.
PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS SUCH SHARES
ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO A VALID EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS"
ARTICLE II
REPRESENTATIONS AND WARRANTIES BY SELLERS
Each Seller severally and not jointly represents to Buyer as follows:
2.1 SHARE OWNERSHIP. Such Seller owns all of the shares of the
Company's capital stock set forth opposite such Seller's name on EXHIBIT A or
below such Seller's name on the signature page hereto, free and clear of all
Encumbrances of any kind and has full power and legal right to sell, assign,
transfer and deliver the same.
2.2 AUTHORIZATION. Such Seller has all necessary power and authority to
execute, deliver and perform each Transaction Document to which it is a party.
The execution, delivery and performance of the Transaction Documents to which it
is a party have been duly authorized by all necessary action on the part of such
Seller. The Agreement constitutes, and the other Transaction Documents to which
it is a party when executed by such Seller will constitute, the valid and
binding obligations of such Seller enforceable against such Seller in accordance
with their respective terms.
2.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by such Seller of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby require no action by or in
respect of, or filing with, any Governmental Entity other than any filings and
Approvals described on SCHEDULE 2.3
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2.4 NON-CONTRAVENTION. The execution, delivery and performance by such
Seller of the Transaction Documents to which it is a party and the consummation
by such Seller of the transactions contemplated thereby do not and will not (i)
in the case of any such Seller that is a corporation, violate the charter
documents or bylaws of such Seller, (ii) assuming compliance with the matters
referred to in SECTION 2.3, violate any applicable Law or (iii) conflict with or
result in any breach or default under any provision of any Contract to which any
such Seller is a party or by which any such Seller is bound, except, in the case
of clauses (ii) and (iii) for such matters as would not materially impair the
ability of any Seller to consummate the transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NORWEGIAN SELLERS
The Norwegian Sellers jointly and severally represent and warrant to
Buyer as follows:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company has all corporate power and authority necessary to
carry on its business as now being conducted and as proposed to be conducted and
to own and operate the properties and assets now owned and being operated by it.
The Company is duly qualified or licensed to do business and is in good standing
in all jurisdictions in which the character or the location of the assets owned
or leased by it or the nature of the business conducted by it requires licensing
or qualification. SCHEDULE 3.1 correctly lists the current directors and
executive officers of the Company. True, correct and complete copies of the
charter documents of the Company as in effect on the date hereof have been
delivered to Buyer.
3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 193,598shares of common stock , all of which are outstanding. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable, and no such shares were,
or will be, issued in violation of any preemptive or other right. Except as set
forth in SCHEDULE 3.2 the Company is not a party to or bound by any Contract to
issue, sell or otherwise dispose of or redeem, purchase or otherwise acquire any
capital stock or any other security of the Company or any other security
exercisable or exchangeable for or convertible into any capital stock or any
other security of the Company, and, except for this Agreement, there is no
outstanding option, warrant or other right to subscribe for or purchase, or
Contract with respect to, any capital stock or any other security of the Company
or any other security exercisable or convertible into any capital stock or any
other security of the Company.
3.3 SUBSIDIARIES AND OTHER EQUITY INVESTMENTS. Except as set forth in
SCHEDULE 3.3, the Company does not own, directly or indirectly, any shares of
capital stock of any corporation or any equity investment in any partnership,
joint venture, limited liability company or other entity. With respect to each
Subsidiary, SCHEDULE 3.3 sets forth a true and complete list of (i) its name and
jurisdiction of incorporation, (ii) the jurisdictions in which it is duly
qualified or licensed to do business as a foreign corporation, (iii) its
authorized capital stock, (iv) the number of shares of each class thereof
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outstanding, (v) the number of shares of each such class and percentage of
outstanding voting stock owned by the Company or any of its Subsidiaries, (vi)
the names, addresses and titles of its directors and officers and (vii) the
name, address and number of shares of such Subsidiary owned by any Person other
than the Company. The Norwegian Sellers have delivered to Buyer complete and
correct copies of the charter documents of each Subsidiary as in effect on the
date of this Agreement. Except as set forth in SCHEDULE 3.3, no capital stock or
any other security (including any debt security) of any Subsidiary is held by
any Person other than the Company or a Subsidiary. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Each Subsidiary has all corporate
power and authority necessary to carry on its business as now being conducted
and as proposed to be conducted and to own and operate the properties and assets
now owned and being operated by it. Each Subsidiary is duly qualified or
licensed to do business and is in good standing in all jurisdictions in which
the character or the location of the assets owned or leased by it or the nature
of the business conducted by it requires licensing or qualification. All
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable, and no such shares were
issued in violation of any preemptive or other right. Except as set forth in
SCHEDULE 3.3, neither the Company nor any Subsidiary is a party to or bound by
any Contract to issue, sell or otherwise dispose of or redeem, purchase or
otherwise acquire any capital stock or any other security of any Subsidiary or
any other security exercisable or exchangeable for or convertible into any
capital stock or any other security of any Subsidiary, and there is no
outstanding option, warrant or other right to subscribe for or to purchase, or
Contract with respect to, any capital stock or any other security of any
Subsidiary or any other security exercisable or convertible into any capital
stock or any other security of any Subsidiary.
3.4 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) The Norwegian Sellers have delivered to Buyer consolidated balance
sheets for the Company and its Subsidiaries at December 31, 1999, 1998, 1997,
1996 and 1995 and the related consolidated statements of operations, changes in
stockholder's equity and changes in financial position or cash flow for the
periods then ended (the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial
Statements have been examined by the Auditors whose reports thereon are included
with such Financial Statements. The Audited Financial Statements have been
prepared in conformity with Norwegian GAAP applied on a consistent basis (except
for changes, if any, required by Norwegian GAAP and disclosed therein). The
statements of operations and cash flow included within the Audited Financial
Statements present fairly the results of operations and cash flows of the
Company and its Subsidiaries for the respective periods covered, and the balance
sheets present fairly the financial condition of the Company and its
Subsidiaries as of their respective dates. Since December 31, 1999, there has
been no change in any of the significant accounting policies, practices or
procedures of the Company or the Subsidiaries.
(b) The Norwegian Sellers have delivered to Buyer consolidated balance
sheets for the Company and its Subsidiaries at February 29, 2000, and the
related consolidated statements of operations for the periods then ended (the
"UNAUDITED FINANCIAL STATEMENTS"). Such Unaudited Financial Statements have been
certified by the president
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of the Company. The Unaudited Financial Statements have been prepared in
conformity with Norwegian GAAP applied on a consistent basis except for changes,
if any, required by Norwegian GAAP and disclosed therein. The statements of
operations and cash flows included as part of the Unaudited Financial Statements
present fairly the results of operations and cash flows of the Company and its
Subsidiaries for the respective periods covered, and the balance sheets present
fairly the financial condition of the Company as of their respective dates. The
Unaudited Financial Statements reflect all adjustments (which consist only of
normal recurring adjustments not material in amount and include estimated
provisions for year-end adjustments) necessary for a fair presentation. At the
dates of such balance sheets, neither the Company nor any Subsidiary had any
material liability (actual, contingent or accrued) that, in accordance with
Norwegian GAAP applied on a consistent basis, should have been shown or
reflected therein but was not.
Except as set forth on SCHEDULE 3.4(c), since the Balance Sheet Date,
there has not been, occurred or arisen:
(i) any event, occurrence, development or state of
circumstances or facts which would, individually or in the
aggregate, have a material adverse effect on the Business;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital
stock of the Company, other than the payment of the dividend
of NOK9,680,000 reflected on the Balance Sheet, or any
repurchase, redemption or other acquisition by the Company or
any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in,
the Company or any of its Subsidiaries;
(iii) any incurrence, assumption or guarantee by the Company
or any Subsidiary of any material indebtedness for borrowed
money, other than in the ordinary course of business;
(iv) any creation or other incurrence by the Company or any of
its Subsidiaries of any Encumbrance on any material asset;
(v) any making of any material loan, advance or capital
contributions to or investment in any Person other than loans,
advances or capital contributions to or investments in
wholly-owned Subsidiaries of the Company made in the ordinary
course consistent with past practices;
(vii) any material damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the Business
or any of its Subsidiaries;
(vii) any transaction or commitment made, or any Contract
entered into by the Company, or any of its Subsidiaries
involving the acquisition or disposition of any material
assets, other than in the ordinary course of business;
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(viii) any strike or labor dispute, other than routine
individual grievances, or, to the Knowledge of the Norwegian
Sellers, any activity or proceeding by a labor union or
representative thereof to organize any employees of the
Company or any of its Subsidiaries, which employees were not
subject to a collective bargaining agreement at the Balance
Sheet Date, or any material lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees;
(ix) any Tax election, change in accounting method or any
settlement or compromise of any material Tax liability; or
(x) (i) any grant of any severance or termination pay to any
current or former employee, officer or director of the Company
or any of its Subsidiaries, other than as required by the law
of the country in which such entity is formed, (ii) any
increase in benefits payable under any existing severance or
termination pay policies or employment Contract, (iii) the
entering into any employment, deferred compensation or other
similar Contract (or any amendment to any such existing
Contract) by the Company with any current or former director,
officer or employee of the Company or any of its Subsidiaries,
which provides for greater rights than are required under the
law of the country in which such entity is formed or provide
for an annual salary of more than NOK500,000, (iv) the
establishment, adoption or material amendment of (except as
required by applicable Law) any collective bargaining, bonus,
profit sharing, thrift, pension, retirement, deferred
compensation, compensation, stock option, restricted stock or
other benefit plan or arrangement covering any current or
former director, officer or employee of the Company or any of
its Subsidiaries, or (v) any increase in compensation, bonus
or other benefits payable to any current or former director,
officer or employee of the Company or any of its Subsidiaries.
(d) Neither the Company nor any Subsidiary has any liabilities of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, probable of assertion or not, except liabilities that (i) are
reflected or disclosed in the Balance Sheet, (ii) are operating expenses, or
indebtedness under existing credit lines, incurred after the Balance Sheet Date
in the ordinary course of business or (iii) are set forth in SCHEDULE 3.4(d).
3.5 TAXES.
Except as set forth on SCHEDULE 3.5:
(a) All Tax Returns required to be filed by or with respect to the
Company and the Subsidiaries have been timely filed, and all such Tax Returns
are complete and correct in all material respects. The Company and its
Subsidiaries have paid all Taxes that are due from or with respect to them for
the periods covered by such Tax Returns and have made all required estimated Tax
payments sufficient to avoid any penalties for underpayment. The accrual for
Taxes in the Balance Sheet is adequate to cover any and all unpaid Taxes
(whether or not disputed and whether or not due) of the Company and its
Subsidiaries with
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respect to all taxable periods or portions thereof ending on or before the date
of the Balance Sheet.
(b) The Tax Returns referred to in SECTION 3.5(a), other than those for
1999, have been examined by the appropriate Governmental Entity or the period
for assessment of the Taxes in respect of which such Tax Returns were required
to be filed has expired. There is no audit, examination, suit, investigation or
similar proceeding pending, proposed or threatened with respect to Taxes of the
Company or any Subsidiary, and no basis exists therefore.
(c) All Taxes that the Company and its Subsidiaries have been required
by Law to withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and added on the
books of the Company. The Company and its Subsidiaries have complied in all
material respects with all information reporting, backup or any other
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(d) Neither the Company nor any Subsidiary is liable for the Taxes of
any Person (other than any of the Company and its Subsidiaries) including as a
transferee by regulation or statutes, or otherwise as a result of any
contractual arrangement with any third party or any taxing authority.
(e) There are no liens for Taxes upon the assets of the Company or its
Subsidiaries.
(f) SCHEDULE 3.5 lists all of the jurisdictions in which the Company
and its Subsidiaries are subject to Tax or are required to file Tax Returns.
(g) The Company does not have and has never had more than 50% of its
stock owned by United States citizens.
(h) For the purposes of this clause (h) the term "VAT" means value
added tax or any similar sales or turnover tax of any relevant jurisdiction, and
"VAT LEGISLATION" means any relevant enactments or regulations in relation to
VAT and all notices, provisions and conditions made or issued thereunder
including the terms of any agreement reached with any relevant Governmental
Entity, and any concession disclosed to Buyer. Each of the Company and its
Subsidiaries; (A) is registered for the purposes of VAT if so required, and has
been so registered at all times that it has been required to be registered by
VAT legislation, and such registration is not subject to any conditions imposed
by or agreed with the relevant Governmental Entity; (B) has complied fully with
and observed in all material respects the terms of VAT legislation; (C) has
maintained and obtained at all times complete, correct and up-to-date records,
invoices and other documents (as the case may be) appropriate or requisite for
the purposes of VAT legislation and has preserved such records, invoices and
other documents in such form and for such periods as are required by VAT
legislation; and (D) is not and has not been treated as a member of a group for
the purpose of VAT legislation, and has not applied for such treatment.
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3.6 MATERIAL CONTRACTS. SCHEDULE 3.6 lists each Contract to which the
Company or any Subsidiary is a party or to which the Company, any Subsidiary or
any of their respective properties is subject or by which any thereof is bound
that is deemed a Material Contract under this Agreement. Unless otherwise so
noted on SCHEDULE 3.6, each such Contract was entered into in the ordinary
course of business. Each Contract that (a) after the Balance Sheet Date
obligates the Company to pay an amount of US$50,000 or more, (b) has an
unexpired term as of the date of this Agreement in excess of one year, (c)
represents a Contract upon which the Business is substantially dependent or
which is otherwise material to the Business, (d) relates to indebtedness for
money borrowed or provides for an extension of credit other than consistent with
normal credit terms, (e) limits or restricts the ability of the Company or any
Subsidiary to compete or otherwise to conduct its business in any manner or
place, (f) provides for a guaranty or indemnity by the Company or any
Subsidiary, (g) grants a power of attorney, agency or similar authority to
another Person, (h) contains a right or obligation of any Associate, Affiliate,
officer or director of the Company or any Subsidiary to the Company or any
Subsidiary, (i) is an employment Contract which provides for materially greater
rights, other than the payment of a monthly bonus, than are required under the
law of the country in which the Company or the applicable Subsidiary is formed
or provide for an annual salary of more than NOK500,000 or a consulting
Contract, stockholder agreement or voting trust, or (j) was not made in the
ordinary course of business, will be deemed to be a Material Contract and has
been identified on such SCHEDULE 3.6. True copies of the Material Contracts
appearing on SCHEDULE 3.6, including all amendments and supplements, and a
written description of the terms of any oral Material Contracts, have been
delivered to Buyer. Each Material Contract is valid and subsisting; the Company
or the applicable Subsidiary has duly performed all of its obligations
thereunder to the extent that such obligations to perform have accrued; and no
breach or default, alleged breach or default, or event which would (with the
passage of time, notice or both) constitute a breach or default thereunder by
the Company or any Subsidiary, as the case may be, or, to the Knowledge of the
Norwegian Sellers, any other party or obligor with respect thereto, has occurred
or as a result of this Agreement or performance hereof will occur. Consummation
of the transactions contemplated by this Agreement will not (and will not give
any Person a right to) terminate or modify any rights of, or accelerate or
augment any obligation of, the Company or any Subsidiary under any of the
Contracts on SCHEDULE 3.6.
3.7 TITLE TO PROPERTY; CONDITION OF PROPERTY; LEASES. Except as set
forth in SCHEDULE 3.7, the Company and each Subsidiary have good and marketable
title to all of their material assets free of Encumbrances. All material
tangible assets of the Company and each Subsidiary are in a good state of
maintenance and repair (except for ordinary wear and tear) and, assuming NOK 25
million of capital expenditures planned for the year ended December 31, 2000 and
NOK 20 million of capital expenditures for the year ended December 31, 2001 are
made, are adequate for the Business to achieve projected sales of NOK 600
million in 2000 and NOK 950 million in 2001. All leasehold properties held by
the Company or any Subsidiary as lessee are held under valid, binding and
enforceable leases. To the Knowledge of the Norwegian Sellers, there is no
pending or threatened Action that would materially interfere with the quiet
enjoyment of any such leasehold by the Company or any such Subsidiary.
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3.8 NON-CONTRAVENTION. The execution, delivery or performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby do not and will not (i) violate the charter documents or bylaws of the
Company, (ii) other than as described on SCHEDULE 3.8, require any consent or
other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or any of its Subsidiaries or to a loss of any benefit
to which the Company or any of its Subsidiaries is entitled under any provision
of any Material Contract or any Permit or Approval affecting, or relating in any
way to, the Business or (iii) result in the creation or imposition of any
Encumbrance on any material asset of the Company or any of its Subsidiaries
except, in the case of clauses (ii) and (iii) for such matters as would not,
individually or in the aggregate, have a material adverse effect on the
Business.
3.9 INTELLECTUAL PROPERTY. SCHEDULE 3.9 contains a complete and correct
list of (i) all Intellectual Property that is owned by the Company and any
Subsidiary and primarily related to, used in, held for use in connection with or
necessary for the conduct of, or otherwise material to, the Business, (ii) all
Contracts pursuant to which the Company or any Subsidiary has licensed
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted by, any other Person and (iii) all Contracts, other than those
acquired pursuant to the purchase of shrinkwrap software, pursuant to which the
Company or any Subsidiary has had Intellectual Property licensed to it or has
otherwise been permitted to use Intellectual Property. Except as set forth on
SCHEDULE 3.9, (a) the Company and its Subsidiaries have not assigned,
hypothecated or otherwise encumbered any Intellectual Property and (b) none of
the licenses included in the Intellectual Property of the Company and its
Subsidiaries purport to grant sole or exclusive licenses to another Person,
including sole or exclusive licenses limited to specific fields of use. Except
as set forth on SCHEDULE 3.9, the patents owned by the Company and its
Subsidiaries are valid and enforceable, and any patent issuing from patent
applications of the Company and its Subsidiaries will be valid and enforceable.
Except as set forth on SCHEDULE 3.9, the Norwegian Sellers have no Knowledge of
any infringement by any other Person of any Intellectual Property of the
Company, and the Company and its Subsidiaries have not entered into any
agreement to indemnify any other party against any charge of infringement of any
Intellectual Property. Except as set forth on SCHEDULE 3.9, the Company and its
Subsidiaries have not and do not violate or infringe any Intellectual Property
of any other Person, including the licenses issued by developers of shrinkwrap
software, and neither the Company nor any Subsidiary has received any
communication alleging that it violates or infringes the Intellectual Property
of any other Person. Except as set forth on SCHEDULE 3.9, the Company and its
Subsidiaries have not been sued for infringing any Intellectual Property of
another Person.
3.10 LEGAL PROCEEDINGS. No Order has been issued and no Action is
pending, or, to the Knowledge of the Norwegian Sellers, threatened against or
affecting the Company or any Subsidiary or any of their respective properties or
assets that individually or when aggregated with one or more other Orders or
Actions has or might reasonably be expected to have a material adverse effect on
(a) the Company or any Subsidiary, (b) the Business or (c) the Norwegian
Sellers' ability to perform their obligations under the Transaction Documents to
which they are a party or any aspect of the transactions contemplated thereby.
SCHEDULE 3.10 lists each Order or Action that involves a claim or potential
claim of aggregate liability in excess of US$50,000, whether or not covered by
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insurance, against, or that enjoins or compels or seeks to enjoin or to compel
any activity by, the Company or any Subsidiary. There is no matter as to which
the Company or any Subsidiary has received any notice, claim or assertion, or,
to the Knowledge of the Norwegian Sellers, which otherwise has been threatened
or is reasonably expected to be threatened or initiated, against or affecting
any director, officer, employee, agent or representative of the Company or any
Subsidiary or any other Person, nor to the Knowledge of the Norwegian Sellers is
there any reasonable basis therefor, in connection with which any such Person
has or may reasonably be expected to have, any right to indemnification by the
Company or any Subsidiary.
3.11 INSURANCE. The Company and its Subsidiaries are, and at all times
during the past two years have been, insured with reputable insurers against all
risks normally insured against by companies in similar lines of business and
selling to similar types of clients. SCHEDULE 3.11 lists all insurance policies
that are material to the Business and all claims under any insurance policies
made since January 1, 1994. All of the insurance policies listed on SCHEDULE
3.11 and its Subsidiaries are in full force and effect. Neither the Company nor
any Subsidiary is in default under any such policy.
3.12 COMPLIANCE WITH LAW. The Company and each of its Subsidiaries are,
have been in compliance with, are not under investigation with respect to, and
have not been threatened to be charged with or given notice of any violation of,
any applicable Law, the violation of which would have a material adverse effect
on the Business.
3.13 EMPLOYEES. Neither the Company nor any of its Subsidiaries has any
dispute existing, or to the Knowledge of the Norwegian Sellers, threatened,
involving strikes, work stoppages, slow downs or lockouts. There are no
grievance proceedings or claims of unfair labor practices filed or, to the
Knowledge of the Norwegian Sellers, threatened to be filed with any Government
Entity against the Company or any of its Subsidiaries. To the Knowledge of the
Norwegian Sellers there is no union representation or organizing effort pending
or threatened against the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has agreed to recognize any union or other
collective bargaining unit. The only employees of the Company who have indicated
a desire or intent to terminate employment with the Company for any reason in
the twelve (12) months preceding the date of this Agreement are listed in
SCHEDULE 3.13.
3.14 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in SCHEDULE 3.14 and except as provided under
the law in which the Company or Subsidiary, as applicable, is formed or common
practice within the Company's industry, neither the Company nor any of its
Subsidiaries has an employee benefit plan, whether written or unwritten, to
which the Company is or during the last five years has been a party or by which
any of them is or during the last five years has been bound, legally or
otherwise, including, (i) any profit-sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement, or (ii) any
plan, agreement or arrangement providing for "fringe benefits" or perquisites to
employees, officers, directors or agents, including but not limited to benefits
relating to company automobiles, clubs,
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vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance.
(b) The Norwegian Sellers have delivered to Buyer true and complete
copies of all documents and summary plan descriptions with respect to such
plans, agreements and arrangements, or summary descriptions of any such plans,
agreements or arrangements not otherwise in writing.
(c) There are no negotiations, demands or proposals that are pending or
have been made which concern matters now covered, or that would be covered, by
plans, agreements or arrangements of the type described in this section.
(d) The Company is in compliance in all material respects with the
applicable provisions of all Laws applicable with respect to all such employee
benefit plans, agreements and arrangements. The Company has performed in all
material respects all of its obligations under all such plans, agreements and
arrangements and all such plans, agreements and arrangements have been operated
in all material respects in compliance with their terms. To the Knowledge of the
Norwegian Sellers, there are no Actions (other than routine claims for benefits)
pending or threatened against such plans or their assets, or arising out of such
plans, agreements or arrangements, and, to the Knowledge of the Norwegian
Sellers, no facts exist that could give rise to any such Actions.
(e) All obligations of the Company under each such plan agreement and
arrangement (i) that are due before the Closing Date have been paid or will be
paid before that time and (ii) that have accrued before the Closing Date have
been or will be paid or properly accrued.
(f) Except as set forth in SCHEDULE 3.14, the Company may (except to
the extent prohibited by Law) in any manner and without the consent of any
employee, beneficiary or dependent, employees' organization or other person,
terminate, modify or amend each such plan or arrangement (or its participation
therein) effective as of any date before, on or after the Closing Date.
(g) Except as set forth in SCHEDULE 3.14, the consummation,
announcement or other action relating to the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
further acts or events) result in any (i) payment (whether of severance pay or
otherwise) becoming due from the Company to any officer, employee, former
employee, director, or former director thereof or to the trustee under any
"rabbi trust" or similar arrangement, or (ii) benefit under any such plan or
arrangement being established, accelerated, vested or payable.
3.15 NO BROKERS OR FINDERS. No agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of any
Norwegian Seller in connection with the negotiation, execution or performance of
this Agreement or the transactions contemplated by this Agreement is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions.
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3.16 INVENTORIES. All inventories of the Company and each Subsidiary
are of good merchantable quality, reasonably in balance, and salable or
currently usable in the ordinary course of business. The value of obsolete,
damaged or excess inventory and of inventory below standard quality has been
written down on the Balance Sheet to ascertainable market value, or adequate
reserves described on the Balance Sheet have been provided therefor, and the
value at which inventories are carried reflects the customary inventory
valuation policy of the Company and its Subsidiaries (which fairly reflects the
value of obsolete, spoiled or excess inventory) for stating inventory, in
accordance with Norwegian GAAP.
3.17 CUSTOMERS. SCHEDULE 3.17 lists the names of, and describes all
Contracts with and the appropriate percentage of Business attributable to, the
ten largest customers of the Business during the fiscal year ended December 31,
1999 and the ten largest customers projected for the fiscal years ended December
31, 2000 and 2001. Neither the Company nor any Subsidiary has received any
notice nor has any reason to believe that (i) any of such customers has ceased
to use, or will cease to use, or has materially reduced or will materially
reduce the use of, the products, goods or services of the Business, (ii) any of
such customers has materially reduced or will materially reduce the price it
will pay for products, goods or services of the Business, or (iii) the Company
will not obtain the projected sales to each customer set forth opposite such
customer's name on SCHEDULE 3.17, including in each case after the consummation
of the transactions contemplated by this Agreement. To the Knowledge of the
Norwegian Sellers, no customer of the Business listed on SCHEDULE 3.17 has
threatened to take any action described in the preceding sentence as a result of
the consummation of the transactions contemplated by this Agreement. The
Company's products and the technology within such projects are sufficient to
enable the Company to achieve the projected sales set forth on SCHEDULE 3.17
3.18 SUPPLIERS. SCHEDULE 3.18 lists the ten most significant suppliers
of the Business at the date of this Agreement, and any sole-source suppliers of
significant goods or services (other than electricity, gas, telephone or water)
to the Company or any Subsidiary with respect to which alternative sources of
supply are not readily available on comparable terms and conditions. The Company
has not experienced or been notified of any shortage in goods or services
provided by any of the suppliers listed on SCHEDULE 3.18 or by its sole-source
suppliers, which shortage would have a material adverse effect on the Business
or cause a material delay in product shipments by Seller. Neither the Company
nor any Subsidiary has received any notice nor has any reason to believe that
there has been any material adverse change in the price of raw materials,
supplies, goods, services or other merchandise provided by such suppliers or
that such suppliers will not continue to provide the Company with supplies at
any time after the Closing Date on terms and conditions similar to those used in
their current sales to the Business. To the Knowledge of the Norwegian Sellers,
no supplier listed on SCHEDULE 3.18 has threatened to take any action described
in the preceding sentence as a result of the consummation of the transactions
contemplated by this Agreement.
3.19 PRODUCT WARRANTIES. Except as set forth in SCHEDULE 3.19: (a)
there are no warranties, express or implied, written or oral, with respect to
the products of the Business; (b) there are no pending or threatened claims with
respect to any such warranty; (c) no returns of any single product sold by the
Company during the two years preceding
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the date of this Agreement have exceeded one percent (1%); (d) the Company has
no liability with respect to any such warranty, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due; (e)
there have been no product recalls or Actions pending or, to the Knowledge of
the Norwegian Sellers, threatened during such period relating to the Company's
products; and (f) to the Knowledge of the Norwegian Sellers, no customer of the
Company or any Subsidiary has experienced failures or serious product
performance defects greater than one percent (1%) for any product purchased from
the Company or any such Subsidiary within the twenty-four months preceding the
date of this Agreement. Adequate reserves have been provided on the Balance
Sheet for the Company's warranty obligations.
3.20 ENVIRONMENTAL LAW COMPLIANCE. Except as set forth on SCHEDULE
3.20, there are no pending or, to the Knowledge of the Norwegian Sellers,
threatened claims, suits or proceedings arising out of or related to any
noncompliance with any Environmental Laws in connection with the Business. The
Company and its Subsidiaries have complied and are in compliance with all Laws
applicable to the Business relating to environmental protection, including
standards relating to air, water, land and the generation, storage,
transportation, treatment or disposal of Hazardous Substances (collectively,
"ENVIRONMENTAL LAWS"), except where non-compliance with any such Laws would not
have a material adverse effect on the Business. The Company and its Subsidiaries
have received all Permits relating to environmental matters, including all air,
water and waste permits and permits for emission and/or disposal of solid,
liquid and gaseous materials from their operations, and the Company and its
Subsidiaries are operating the Business in conformance with such Permits. To the
Knowledge of the Norwegian Sellers there is no place on the Company's or its
Subsidiary's properties where Hazardous Substances have entered or are likely to
enter the air, soil or groundwater. Neither the Company nor any Subsidiary has
installed, used, buried or removed any and, to the Knowledge of the Norwegian
Sellers, there are no, surface impoundments or underground tanks or vessels or
sumps, drains or pipelines that hold Hazardous Substances on the Company's or
any Subsidiary's properties.
3.21 MINUTE BOOKS. The minute books of the Company and its Subsidiaries
accurately reflect all material actions and proceedings taken to date by the
stockholders, Board of Directors and committees of the Company and its
Subsidiaries, and such minute books contain true and complete copies of the
charter documents of the Company and its Subsidiaries and all related
amendments.
3.22 DUE DILIGENCE MATERIALS. All documents, agreements and other
materials provided by the Norwegian Sellers to Buyer or any representative of
Buyer in connection with the due diligence conducted in connection with the
transactions contemplated by this Agreement have been true, correct and complete
originals or copies of the documents, agreements and other materials purported
to be provided or to which access has been given.
3.23 YEAR 2000 COMPLIANCE. The Company and its Subsidiaries have
undertaken a concerted effort to ensure that all of the computer software,
computer firmware, computer hardware, and other similar or related items of
automated, computerized, and/or software system(s) that are used or relied on by
the Company and its
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Subsidiaries in the conduct of the Business will continue to function properly,
will generate correct data, and will provide correct results when processing,
providing and/or receiving (a) date-related data into and between the years 1999
and 2000 and (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries. Except as would not reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the Business, the Norwegian Sellers reasonably believe that such effort has been
successful.
3.24 RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE 3.24,
no director or officer of the Company or any Subsidiary and no Person related to
any of them by consanguinity or marriage has any direct or indirect interest in
(i) any equipment or other property, real or personal, tangible or intangible,
including any item of intellectual property, used in connection with or
pertaining to the Business, or (ii) any creditor, supplier, customer,
manufacturer, agent, representative, or distributor of products of the Company;
PROVIDED, HOWEVER, that (A) no such director or officer or other Person will be
deemed to have such an interest solely by virtue of the ownership of less than
3% of the outstanding voting stock or debt securities of any publicly held
company, the stock or debt securities of which are traded on a recognized stock
exchange or quoted on NASDAQ, and (B) no such director or officer or other
Person will be deemed to have such an interest solely by virtue of the ownership
by a partnership in which he is a partner of less than 10% of the outstanding
voting stock or debt securities of any privately held company.
3.25 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.25, the
accounts receivable reflected on the Balance Sheet, and all accounts receivable
arising since the Balance Sheet Date, arose from transactions in the ordinary
course of business, are not more than 90 days past due, and the goods involved
have been sold and delivered to the account obligor, or are in transit, and no
further goods or services are required to be provided in order to complete the
sale and to entitle the Company to collect the accounts receivable in full. No
defense or set off to any such receivable has been asserted in writing by the
receivable obligor, or, to the Knowledge of the Norwegian Sellers, exists.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
4.1 ORGANIZATION AND RELATED MATTERS. Buyer is a corporation duly
organized, validly existing and in good standing under the State of Delaware.
Buyer has all corporate power and authority necessary to carry on its business
as now being conducted and as proposed to be conducted and to own and operate
the assets and properties now owned and being operated by it. Buyer is duly
qualified or licensed to do business as a foreign corporation in good standing
in all jurisdictions in which the character or the location of the assets owned
or leased by it or the nature of the business conducted by it requires licensing
or qualification.
4.2 CORPORATE AUTHORIZATION. Buyer has all necessary corporate power
and authority to execute, deliver and perform each Transaction Document to which
it is a party. The execution, delivery and performance of the Transaction
Documents to which Buyer is
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a party have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement constitutes, and the other Transaction Documents to
which Buyer is a party when executed by Buyer will constitute, the valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms.
4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Buyer of the Transaction Documents to which Buyer is a party and the
consummation of the transactions contemplated thereby require no action by or in
respect of, or filing with, any Governmental Entity.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by Buyer
of the Transaction Documents to which Buyer is a party and the consummation by
Buyer of the transactions contemplated thereby do not and will not (i) violate
the Restated Certificate of Incorporation as Amended and Restated of Buyer, (ii)
assuming compliance with the matters referred to in SECTION 4.3, violate any
applicable Law, (iii) except under Buyer's credit agreement with Bank of
America, N.A., require any consent or other action by any Person under,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Buyer or to a loss of
any benefit to which Buyer is entitled under any provision of any Contract
binding upon Buyer or any Permit or Approval affecting, or relating in any way
to, the assets or business of Buyer or (iv) result in the creation or imposition
of any Encumbrance on any material asset of Buyer except, in the case of clauses
(ii), (iii) and (iv), for such matters as would not, individually or in the
aggregate, have a material adverse effect on Buyer or materially impair the
ability of Buyer to consummate the transactions contemplated by this Agreement.
Buyer does not know of any reason that the consent of Bank of America, N.A. will
not be given.
4.5 LEGAL PROCEEDINGS. No Order or Action is pending, or, to the
Knowledge of Buyer, threatened against or affecting Buyer or any of its
properties or assets that individually or when aggregated with one or more other
Orders or Actions has or might reasonably be expected to materially impair
Buyer's ability to perform the Transaction Documents to which it is a party.
4.6 COMPLIANCE WITH LAW. Buyer is and has been in compliance with and
are not under investigation with respect to and has not been threatened to be
charged with or given notice of any violation of, any applicable Law, the
violation of which would have a material adverse effect on Buyer or its ability
to perform its obligations under the Transaction Documents to which it is a
party..
4.7 NO BROKERS OR FINDERS. Other than Stephens Inc., whose fee Buyer
will bear, no agent, broker, finder or investment or commercial banker, or other
Person or firms engaged by or acting on behalf of Buyer or its Affiliates in
connection with the negotiation, execution or performance of this Agreement or
the transactions contemplated by this Agreement, is or will be entitled to any
broker's or finder's or similar fees or other commissions as a result of this
Agreement or such transactions.
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ARTICLE V
COVENANTS OF SELLERS
5.1 ACCESS. The Norwegian Sellers will cause the Company and its
Subsidiaries to make available for inspection by Buyer and its representatives,
during normal business hours and in a manner so as not to interfere with normal
business operations, all of the Company's and its Subsidiaries records
(including Tax records), books of account, premises, Contracts and all other
documents that are reasonably requested by Buyer and its representatives to
inspect and examine the business and affairs of the Company and its
Subsidiaries. The Norwegian Sellers will cause the Company's managerial
employees, counsel and regular independent accountants to be available upon
reasonable advance notice to answer questions of Buyer and Buyer's
representatives concerning the business and affairs of the Company. No
examination by Buyer and its representatives will, however, constitute a waiver
or relinquishment by Buyer of its rights to rely on the Sellers' covenants,
representations and warranties made herein or pursuant hereto.
5.2 CONDUCT OF THE COMPANY. From the date of this Agreement until the
Closing Date, the Norwegian Sellers will cause the Company and its Subsidiaries
to conduct their respective businesses in the ordinary course consistent with
past practice, including payment of accounts payable and collection of accounts
receivable, and will cause the Company and its Subsidiaries to use their
reasonable best efforts to preserve intact their business organizations and
relationships with third parties and to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date of this Agreement until the Closing Date, except as
consented to by Buyer in writing, the Norwegian Sellers will not cause or permit
the Company or any of its Subsidiaries to:
(a) adopt or propose any changes in their respective charter
documents or bylaws;
(b) merge or consolidate with any other Person or acquire a material
amount of assets or any capital stock or other securities of any other Person;
(c) sell, lease, license or otherwise dispose of any material assets or
property except pursuant to existing Contracts;
(d) take any action that would make any representation or warranty of
any Seller hereunder inaccurate at the Effective Time;
(e) enter into any licensing agreement, private label arrangement or
understanding or other similar arrangement with respect to any of the Company's
or any Subsidiary's Intellectual Property;
(f) (i) grant any severance or termination pay to any current or former
employee, officer or director of the Company or any of its Subsidiaries, (ii)
increase benefits payable under any existing severance or termination pay
policies or employment Contract, (iii) enter into any employment, deferred
compensation or other similar Contract (or any amendment to any such existing
Contract) with any current or former director,
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officer or employee of the Company or any of its Subsidiaries, (iv) establish,
adopt or amend (except as required by applicable law) any collective bargaining,
bonus, profit sharing, thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit plan or
arrangement covering any current or former director, officer or employee of the
Company or any of its Subsidiaries, or (v) increase compensation, bonus or other
benefits payable to any current or former director, officer or employee of the
Company or any of its Subsidiaries;
(g) issue any additional shares of capital stock, or issue, sell or
grant any option or right to acquire or otherwise dispose of or commit to
dispose of any of its authorized but unissued capital stock or other corporate
securities;
(h) declare or pay any dividends or make any other distribution in cash
or property on its capital stock or other equity interests;
(i) repurchase or redeem any shares of its capital stock or other
equity interests;
(j) grant any kind of Encumbrance with respect to any material part of
its assets, real or personal, tangible or intangible;
(k) amend any Tax Return, or make or change any Tax election or take
any Tax reporting position inconsistent with prior reporting practices;
(l) (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company, guarantee any debt
securities of another Person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice, or (ii) make any loans, advances or capital contributions
to, or investments in, any other Person;
(m) except as set forth on EXHIBIT 3.4(c), make or agree to make any
new capital expenditure or expenditures which, individually, is in excess of
US$100,000 or, in the aggregate, are in excess of US$250,000;
(n) except in the ordinary course of business, modify, amend or
terminate any Material Contract to which the Company is a party or waive,
release or assign any material rights or claims;
(o) make any change in any method of accounting or accounting practice
or policy other than those required by generally accepted accounting principles;
or
(p) agree or commit to do any of the foregoing.
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5.3 NOTIFICATION OF CERTAIN MATTERS. Each Seller will promptly notify
Buyer of (i) any event of which it obtains Knowledge which has had or might
reasonably be expected to have a material adverse effect on the Business or
which if known as of the date hereof would be required to be disclosed to Buyer
and (ii) any failure of any Seller to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement.
5.4 PERMITS AND APPROVALS. The Sellers will cooperate with Buyer and
use their best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices preliminary to)
all Approvals and Permits that may be necessary or which may be reasonably
requested by Buyer to consummate the transactions contemplated by this
Agreement.
5.5 CONDITIONS. Each Seller will use its best efforts to take all
actions reasonably necessary or appropriate to cause each condition set forth in
SECTION 7.1 to be fulfilled on or before the Closing. Eldec will use its best
efforts to take all actions reasonably necessary or appropriate to cause the
condition set forth in SECTION 7.3 to be fulfilled on or before the Closing.
5.6 DELIVERY OF MONTHLY FINANCIAL STATEMENTS. The Norwegian Sellers
shall cause the Company to deliver to Buyer within three weeks after each month
end a consolidated balance sheet for the Company and its Subsidiaries at the end
of the prior month, and the related consolidated statements of operations for
the periods then ended (the "MONTHLY FINANCIAL STATEMENTS"). Such Monthly
Financial Statements shall be certified by the president of the Company. The
Monthly Financial Statements shall be prepared in conformity with Norwegian GAAP
applied on a consistent basis except for changes, if any, required by Norwegian
GAAP and disclosed therein. The statements of operations and cash flows included
as part of the Monthly Financial Statements shall present fairly the results of
operations and cash flows of the Company and its Subsidiaries for the respective
periods covered, and the balance sheets shall present fairly the financial
condition of the Company as of their respective dates. The Monthly Financial
Statements shall reflect all adjustments (which shall consist only of normal
recurring adjustments not material in amount and shall include estimated
provisions for year-end adjustments) necessary for a fair presentation. At the
dates of such balance sheets, neither the Company nor any Subsidiary shall have
any material liability (actual, contingent or accrued) that, in accordance with
Norwegian GAAP applied on a consistent basis, should have been shown or
reflected therein but was not.
ARTICLE VI
COVENANTS OF BUYER
6.1 NOTIFICATION OF CERTAIN MATTERS. Buyer will promptly notify Eldec
and the Seller Representative of (i) the occurrence, or failure to occur, of any
event that would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate at any time from the date of this
Agreement to the Closing Date and (ii) any failure of Buyer to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement.
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6.2 PERMITS AND APPROVALS. Buyer will cooperate with the Sellers and
use its best efforts to obtain (and will immediately prepare all registrations,
filings and applications, requests and notices preliminary to) all Approvals and
Permits that may be necessary or which may be reasonably requested by the
Company to consummate the transactions contemplated by this Agreement.
6.3 CREDIT AGREEMENT. Buyer agrees to use its best efforts to obtain
any consent required from the Bank of America, N.A.
6.4 REGISTRATION OF STOCK ISSUED IN EARNOUT. If Buyer decides to issue
any of its shares in payment of the amounts payable under Section 1.4, it will
within 30 business days thereafter file a registration statement on Form S-3
with the Securities and Exchange Commission covering such shares in accordance
with the Registration Rights Agreement attached hereto as EXHIBIT D (the
"REGISTRATION RIGHTS AGREEMENT").
ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF BUYER. Unless waived, in whole or
part, in writing by Buyer, Buyer's obligations hereunder are subject, before or
at the Closing, to satisfaction of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Sellers contained in ARTICLE II and ARTICLE III will be true at the
Closing Date with the same effect as though made at such time. Each Seller will
have performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it at or before
the Closing Date, and the Seller Representative will have delivered to Buyer on
behalf of each Norwegian Seller, a certificate in form and substance
satisfactory to Buyer, dated the Closing Date and signed by the Seller
Representative to such effect and Eldec will have delivered to Buyer on its own
behalf a certificate to such effect in form and substance satisfactory to Buyer
dated the Closing Date and signed by an executive officer of Eldec.
(b) NO RESTRAINING ACTION. No Action shall have been instituted or
threatened against any Seller, the Company or its Subsidiaries before any
Governmental Entity seeking to restrain or prohibit the consummation of the
transactions contemplated hereby.
(c) MATERIAL ADVERSE CHANGE. There will not have been any material
adverse change in or affecting the Business since the Balance Sheet Date.
(d) OPINION OF COUNSEL. Buyer must have received at the Closing from
Tor Jakobsen, counsel to the Norwegian Sellers, and Schjodt and/or Tom
Ungerland, counsel to Eldec, opinions dated the Closing Date, in form and
substance satisfactory to Buyer.
(e) [INTENTIONALLY LEFT BLANK]
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(f) PURCHASE OF MINORITY INTERESTS. Buyer shall have entered into
agreements to acquire, contemporaneously with the Closing or immediately
thereafter, the minority interest of each Subsidiary not wholly-owned by the
Company other than Powec Pty Ltd.
(g) NON-COMPETITION AGREEMENTS. Buyer shall have received from each
employee of the Company or any Subsidiary who is participating in the earnout
described in Section 1.4, or in any other arrangement approved by Buyer in
connection with the acquisition of the minority interests of the Company's
subsidiaries, a non-competition agreement substantially in the form of EXHIBIT
E; PROVIDED, HOWEVER, that such agreements will not be required of Olav Hagen,
Tinma, Kjell 0vrebo, or Trond Wennberg.
(h) CORPORATE PROCEEDINGS. True and complete copies of all corporate
proceedings and documents effecting the authorization and approval of the
Transaction Documents and the transactions contemplated thereunder by each
Seller that is a corporation, certified by the Chief Executive Officer and the
Secretary of such corporation, will have been furnished to Buyer.
(i) TRANSACTION DOCUMENTS. Each Seller will have executed and delivered
the Transaction Documents to which it is a party other than this Agreement.
(j) APPROVALS AND PERMITS. The Sellers will have obtained all Approvals
and Permits necessary to consummate the transactions contemplated hereby, or all
filings shall have been made and the applicable waiting periods shall have
expired in those instances where no specific action for approval of a
governmental agency is required.
(k) SECURITIES LAW COMPLIANCE. At any time when Buyer elects to issue
shares of its common stock to the Norwegian Sellers in accordance with this
Agreement, Buyer will be satisfied that such transaction is exempt from
registration under the Securities Act.
(l) AMENDMENT TO ARTICLES. The Company shall have amended it Articles
to delete the preemptive rights provision.
7.2 CONDITIONS TO OBLIGATIONS OF SELLERS. Unless waived, in whole or
part, in writing by Seller, Seller's obligations hereunder are subject, before
or at the Closing, to satisfaction of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in ARTICLE IV will be true at the Closing Date with the same
effect as though made at such time. Buyer will have performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or before the Closing Date, and Buyer will
have delivered to Eldec and the Seller Representative a certificate of Buyer in
form and substance satisfactory to Eldec and the Seller Representative, dated
the Closing Date and signed by its Chief Executive Officer and Chief Financial
Officer to such effect.
(b) NO RESTRAINING ACTION. No Action shall have been instituted or
threatened against Buyer before any Government Entity seeking to restrain or
prohibit the consummation of the transactions contemplated hereby.
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(c) CORPORATE PROCEEDINGS. True and complete copies of all corporate
proceedings and documents effecting the authorization and approval of the
Transaction Documents to which it is a party and the transactions contemplated
thereunder by Buyer, certified by the Chief Executive Officer and the Secretary
of Buyer, will have been furnished to the Seller Representative.
(d) TRANSACTION DOCUMENTS. Buyer must have executed and delivered each
Transaction Document to which it is a party other than this Agreement.
(e) REGISTRATION RIGHTS AGREEMENT. Buyer must have executed and
delivered to the Seller Representative on behalf of the Norwegian Sellers, the
Registration Rights Agreement.
7.3 CONDITION TO OBLIGATIONS OF ELDEC. Buyer and Eldec shall have
consummated the asset purchase agreement being entered into contemporaneously
with this Agreement pursuant to which Buyer has agreed to purchase substantially
all of the assets of Eldec's Telecom Power Business.
ARTICLE VIII
TERMINATION OF OBLIGATIONS
8.1 TERMINATION OF AGREEMENT. Notwithstanding anything herein to the
contrary, this Agreement and the transactions contemplated by this Agreement
will terminate if the Closing does not occur on or before the close of business
on June 30, 2000, unless extended by mutual consent in writing of Buyer, Eldec
and the Seller Representative and otherwise may be terminated at any time before
the Closing as follows and in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of Buyer, Eldec and
the Seller Representative.
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer by written
notice to Eldec and the Seller Representative if any event occurs or condition
exists which would render impossible the satisfaction of one or more conditions
to the obligations of Buyer to consummate the transactions contemplated by this
Agreement as set forth in SECTION 7.1.
(c) CONDITIONS TO SELLERS' PERFORMANCE NOT MET. The Sellers by written
notice to Buyer if any event occurs or condition exists which would render
impossible the satisfaction of one or more conditions to the obligation of the
Sellers to consummate the transactions contemplated by this Agreement as set
forth in SECTION 7.2.
(d) INACCURATE INFORMATION. By Buyer if any material information
(whether or not in writing) delivered to Buyer by or on behalf of any Seller,
the Company or any Subsidiary is inaccurate or incomplete in any material
respect.
(e) MATERIAL BREACH. By Buyer or Sellers if there has been a material
misrepresentation or other material breach by the other party in its
representations, warranties and covenants set forth herein; PROVIDED, HOWEVER,
that if such breach is susceptible to cure, the breaching party will have ten
business days after receiving notice
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from the other party of its intention to terminate this Agreement if such breach
continues in which to cure such breach.
8.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
SECTION 8.1, all further obligations of the parties under this Agreement will
terminate without further liability of any party to another; provided that the
obligations of the parties contained in SECTION 10.3 and SECTION 10.6 will
survive any such termination. A termination under SECTION 8.1 will not relieve
any party of any liability for a breach of, or for any misrepresentation under
this Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
misrepresentation.
ARTICLE IX
INDEMNIFICATION
9.1 OBLIGATIONS OF SELLER. Eldec and the Norwegian Sellers hereby
indemnify and hold harmless Buyer and each Buyer Subsidiary, and their
respective directors, officers, employees, Affiliates, agents and assigns from
and against any and all Losses of Buyer or any Buyer Subsidiary, directly or
indirectly, as a result of, or based upon or arising from (a) in the case of
Eldec, only and limited to, any inaccuracy in or breach or nonperformance of any
of the representations, warranties, covenants or agreements made by Eldec in or
pursuant to this Agreement, and in the case of the Norwegian Sellers, any
inaccuracy in or breach or nonperformance of any of the representations,
warranties, covenants or agreements made by the Norwegian Sellers in or pursuant
to this Agreement; or (b) in the case of the Norwegian Sellers, any third party
claims or demand regarding the conduct of the Business before the Closing,
whether asserted before or after the Closing, unless such claim or demand, or
the facts and circumstances giving rise to such claim or demand, have been
disclosed on the Disclosure Schedule. All amounts owed by the Norwegian Sellers
to Buyer will be paid out of the Escrow Fund in accordance with the Escrow
Agreement. Notwithstanding anything herein to the contrary, the Norwegian
Sellers will not be liable to indemnify any Person: (i) until the total amount
of all Indemnifiable Claims, other than those arising out of a breach of a
representation or warranty set forth in Article I, exceeds US$500,000, PROVIDED,
HOWEVER, that if said sum of US$500,000 is exceeded, the Norwegian Sellers'
obligation to Buyer hereunder will include payment of said US$500,000, as well
as the excess over that amount, or (ii) for aggregate Indemnifiable Claims ,
other than those arising out of a breach of a representation or warranty set
forth in Article I, in excess of amounts held in the Escrow Fund from time to
time. In no event will Eldec be liable to indemnify any party or persons in an
amount in excess of the Original Escrow Amount.
9.2 OBLIGATIONS OF BUYER. Buyer will indemnify and hold harmless the
Sellers from and against any Losses of the Sellers, directly or indirectly, as a
result of, or based upon or arising from, any inaccuracy in or breach or
nonperformance of any of the representations, warranties, covenants or
agreements made by Buyer in or pursuant to this Agreement or arising from
Buyer's conduct of the Business after the Closing.
9.3 PROCEDURE. Any party seeking indemnification with respect to any
Loss shall give notice to the party required to provide indemnity hereunder on
or before the date
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specified in SECTION 10.1. The Seller Representative will act on behalf of the
Norwegian Sellers for all purposes under this ARTICLE IX in accordance with
SECTION 10.5. If any claim, demand or liability is asserted by any third party
against any Indemnified Party, the Indemnifying Party will upon the written
request of the Indemnified Party, defend any Actions brought against the
Indemnified Party in respect of matters embraced by the indemnity with counsel
satisfactory to the Indemnified Party, but the Indemnified Party will have the
right to conduct and control the defense, compromise or settlement of any
Indemnifiable Claim if the Indemnified Party chooses to do so, on behalf of and
for the account and risk of the Indemnifying Party who will be bound by the
result so obtained to the extent provided herein, PROVIDED, HOWEVER, that no
Indemnifiable Claim will be settled by an Indemnified Party unless the
Indemnifying Party shall consent thereto, which consent shall not be
unreasonably withheld or delayed. If, after a request to defend any Action, the
Indemnifying Party neglects to defend the Indemnified Party, a recovery against
the latter suffered by it in good faith is conclusive in its favor against the
Indemnifying Party, provided however that, if the Indemnifying Party has not
received reasonable notice of the Action against the Indemnified Party, or is
not allowed to control its defense, judgment against the Indemnified Party is
only presumptive evidence against the Indemnifying Party. Each party hereto, to
the extent that it is or becomes an Indemnifying Party, hereby stipulates that a
judgment against the Indemnified Party will be conclusive upon the Indemnifying
Party. The parties will cooperate in the defense of all third party claims,
which may give rise to Indemnifiable Claims hereunder. In connection with the
defense of any claim, each party will make available to the party controlling
such defense any books, records or other documents within its control that are
reasonably requested in the course of such defense.
ARTICLE X
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and agreements contained in this Agreement will survive the Closing
until the second anniversary of the Closing Date and then expire in all
respects.
10.2 PUBLIC ANNOUNCEMENTS. Buyer, Eldec and the Seller Representative
will consult with each other before issuing any press releases or making any
public statement with respect to this Agreement or the transactions contemplated
hereby and will not issue any such press release or make any such public
statement before such consultation, unless required by law or the rules of
NASDAQ or The New York Stock Exchange.
10.3 CONFIDENTIALITY. All information disclosed by any party (or its
representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) will be kept
confidential by such other party and its representatives and will not be used by
any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, or as may otherwise be required by Law or (v) to
the extent such duty as to confidentiality is waived in writing by the other
party. If this Agreement is terminated,
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<PAGE>
each party shall use all reasonable efforts to return upon written request from
the other party all documents (and reproductions thereof) received by it or its
representatives from such other party (and, in the case of reproductions, all
such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this SECTION 10.3,
unless the recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
10.4 ASSIGNMENT. No party to this Agreement may assign this Agreement
without the prior consent of the other parties to this Agreement, except that
Buyer can assign this Agreement without the prior written consent of any other
party (i) to any wholly owned subsidiary of Buyer or (ii) in connection with the
sale of all or substantially all of the assets or stock of Buyer or the merger,
consolidation or similar reorganization of Buyer.
10.5 SELLER REPRESENTATIVE. Each Norwegian Seller by virtue of his or
its execution of this Agreement, will be deemed to have irrevocably constituted
and appointed, Jan Henrik Bryde effective as of the Closing Date, (together with
his permitted successors, the "SELLER REPRESENTATIVE"), as his or its true and
lawful agent and attorney-in-fact to (i) enter into, perform and bind such
Norwegian Seller to the terms of any agreement in connection with the
transactions contemplated by this Agreement, including but not limited to the
Registration Rights Agreement and the Escrow Agreement, (ii) to exercise all or
any of the powers, authority and discretion conferred on him under either this
Agreement, the Registration Rights Agreement or the Escrow Agreement, including
but not limited to the power and authority to authorize the Escrow Agent to
disburse to Buyer any portion of the amounts or shares deposited with the Escrow
Agent in accordance with the terms of the Escrow Agreement, (iii) to waive any
terms and conditions of any such agreement, and (iv) to give and receive notices
on their behalf and to be their exclusive representative with respect to any
Action arising with respect to any transaction contemplated by any such
agreement, including, the defense, settlement or compromise of any Action for
which Buyer may be entitled to indemnification, and the Seller Representative
agrees to act as, and to undertake the duties and responsibilities of, such
agent and attorney-in-fact. This power of attorney is coupled with an interest
and is irrevocable. The Seller Representative will not be liable for any action
taken or not taken by him in connection with his obligations under this
Agreement in the absence of his own gross negligence or willful misconduct. If
the Seller Representative is unable or unwilling to serve in such capacity, his
successor, who will serve and exercise the powers of Seller Representative
hereunder, shall be named by those persons holding a majority of the Shares.
10.6 EXPENSES. Except as otherwise provided herein, each of the parties
will bear all expenses incurred by it in connection with this Agreement and in
the consummation of the transactions contemplated hereby and in preparation
therefor.
10.7 NOTICES. All notices (including other communications required or
permitted) under this Agreement must be in writing and must be delivered: (a) in
person; (b) by registered, express or certified mail, postage prepaid, return
receipt requested; (c) by a generally recognized courier or messenger service
that provides written acknowledgement of receipt by the addressee; or (d) by
facsimile or other generally
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<PAGE>
accepted means of electronic transmission with a verification of delivery.
Notices are deemed delivered at the earlier of the date such notice is actually
received by a party or two days after such notice is given. Notices to Seller
must be given at the addresses below, but any party may furnish, from time to
time, other addresses for notices to it.
If to Buyer, at: with a copy to:
740 Calle Plano O'Melveny & Myers LLP
Camarillo, CA 93012 1999 Avenue of the Stars
Attn: Steven J. Goldman Suite 700
Los Angeles, California 90067
Telephone: (805) 987-8741
Telecopier: (805) 484-0445 Telephone: (310) 553-6700
Telecopier: (310) 246-6779
Attn: Kendall R. Bishop, Esq.
If to Norwegian Sellers, at: with a copy to:
Jan Henrik Bryde Advokatfirmaet Bo, Lieng og Jakobsen ANS
Kobbervikdalen 75 Torvet 6 A, 3181 Norway
Drammen, Norway N-3007 Attn: Tor V. Jakobsen
Telephone: 47.32.24.53.01 Telephone: 47.33.04.11.46
Telecopier: 47.32.24.53.90 Telecopier: 47.33.04.53.26
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If to Eldec, at: with a copy to:
Eldec Corporation Crane Co.
16700 13th Avenue West 100 First Stamford Pl.
Lynwood, WA 98037-8587 Stamford, CT 06902
U.S.A. U.S.A.
Attn: Chief Financial Officer Attn: Corporate Secretary
Telephone: 425-743-1313 Telephone: 203-363-7300
Telecopier: 425-743-8207 Telecopier: 203-363-7350
with a copy to:
Advokatfirmaet Schjodt AS
P.O. Box 2444 Solli
N-0201 Oslo, Norway
Attn: Christopher Groth
Telephone: 47.88.00.20.78
Telecopier: 47.22.83.17.12
The addresses to which notices or demands are to be given may
be changed from time to time by notice served as provided above. Delivery of
notice to the copied parties above is not notice to Buyer or the Seller
Representative, as the case may be.
10.8 FURTHER ASSURANCES. The Sellers will, upon the request of Buyer,
from time to time execute and deliver such additional certificates, agreements
and other documents and take such other actions as Buyer reasonably requests, to
render effective the transactions contemplated hereby.
10.9 SECTIONS AND OTHER HEADINGS. Sections or other headings
contained in this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation of this Agreement
10.10 INTEGRATED AGREEMENT. This Agreement and the exhibits and
schedules hereto constitute the entire agreement between the parties hereto, and
no agreements, understandings, restrictions, warranties or representations exist
between the parties other than those set forth herein or provided for herein.
All exhibits, schedules and appendices attached t o this Agreement are
incorporated herein.
10.11 AMENDMENTS; WAIVERS. All parties must approve any amendment to
this Agreement. Any waiver of any right or remedy requires the consent of the
party waiving it. Every amendment or waiver must be in writing and designated as
an amendment or waiver, as appropriate. No failure by any party to insist on the
strict performance of any provision of this Agreement, or to exercise any right
or remedy, will be deemed a waiver of such performance, right or remedy, or of
any other provision of this Agreement.
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10.12 INTERPRETATION. If any claim is made by a party relating to any
conflict, omission or ambiguity in the provisions of this Agreement, no
presumption or burden of proof or persuasion will be implied because this
Agreement was prepared by or at the request of any party or its counsel. The
parties waive any statute or rule of law to the contrary. Unless the context
otherwise requires: (i) a term has the meaning assigned to it; (ii) "or" is not
exclusive; (iii) words in the singular include the plural, and words in the
plural include the singular; (iv) "herein," "hereof" and other words of similar
import refer to this Agreement as a whole and not to any particular Section,
Subsection, paragraph, clause, or other subdivision; (v) all references to
"Section", "Schedule" or "Exhibit" refer to the particular Section, Schedule or
Exhibit in or attached to this Agreement; and (vi) "including" and "includes,"
when following any general provision, sentence, clause, statement, term or
matter, will be deemed to be followed by ", but not limited to," and ", but is
not limited to," respectively.
10.13 COUNTERPARTS. This Agreement is being signed in several
counterparts. Each of them is an original, and all of them constitute one
agreement.
10.14 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement will be deemed valid and
enforceable to the extent possible.
10.15 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the internal laws of the Kingdom of Norway (without reference
to its rules as to conflicts of Law).
10.16 ARBITRATION Any dispute arising out of this Agreement, whether
between the Norwegian Sellers and Buyer or between Eldec and Buyer, shall be
settled in arbitration according to the rules of Chapter 32 of the Norwegian
Code of Civil Procedure. Arbitration shall take place in Oslo, Norway and shall
be conducted in the English language.
10.17 SPECIFIC PERFORMANCE. The parties agree that irreparable damage
would occur if any provision of this Agreement was not performed in accordance
with the terms hereof and that the parties will be entitled to specific
performance of the terms hereof in addition to any other remedy to which they
are entitled at Law or equity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
POWER-ONE, INC.
By:
----------------------------------
Name:
Title:
--------------------------------------
Jan Henrik Bryde
--------------------------------------
Eva Abel
--------------------------------------
Hakon Hafnor
--------------------------------------
Arild Sagebo
--------------------------------------
Bjorg Nystad
--------------------------------------
Liv Gronvold
--------------------------------------
Viggo Olsen
--------------------------------------
Odd Roar Schmidt
--------------------------------------
Anne Elvegard
--------------------------------------
Tonje Wendelborg
31
<PAGE>
--------------------------------------
Terje Nilsen
--------------------------------------
Inger Solvi Jansen
--------------------------------------
Arne Strickert
--------------------------------------
Knut Aven
--------------------------------------
Knut Ramnaes
POWER INVENT AS
By:
----------------------------------
Name:
Title:
POWER ELECTRONICS AS
By:
----------------------------------
Name:
Title:
--------------------------------------
Olav Hagen
--------------------------------------
Ove Karlsen
32
<PAGE>
TINMA AS
By:
----------------------------------
Name:
Title:
--------------------------------------
Trond E. Wennberg
--------------------------------------
Kjell 0vrebo
ELDEC CORPORATION
By:
----------------------------------
Name:
Title:
No. Of Shares Owned: 87,272
--------------------------------------
Heidi Therese Hoff
--------------------------------------
Mark Tough
--------------------------------------
Alan Cooling
--------------------------------------
Mark Jearum
33
<PAGE>
EXHIBIT A
A-1
<PAGE>
EXHIBIT B
"ACTION" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"AGREEMENT" means this Agreement by and among Buyer and the Sellers as
may be amended, supplemented or modified from time to time.
"APPROVAL" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"ASSOCIATE" of a Person means
(i) a corporation or organization (other than a party to this
Agreement) of which such Person is an officer or partner or, directly or
indirectly, beneficially owns 10% or more of any class of equity securities;
(ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
(iii) any relative or spouse of such Person or any relative of
such spouse who has the same home as such person or who is a director or officer
of Seller or any of its Affiliates.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 3.4(a).
"AUDITORS" means Moller & Co. , independent public accountants to the
Company.
"BALANCE SHEET" means the balance sheet as of December 31, 1999
included within the Audited Financial Statements.
"BALANCE SHEET DATE" means December 31, 1999.
"BUSINESS" means the business of the Company and its Subsidiaries taken
as a whole, and will be deemed to include any of the following incidents of such
business: income, cash flow, operations, condition (financial or other),
assets/properties, anticipated revenues/income, prospects and liabilities.
"BUYER COMMON STOCK" means the common stock of Power-One, Inc., par
value $0.001 per share.
B-1
<PAGE>
"BUYER SUBSIDIARY" means International Power Devices, Inc., Melcher
Holding AG, HC Power, Inc., Power-Electronics, Inc. and Poder Uno de Mexico,
S.A. de C.V.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CLOSING" means the consummation of the transactions contemplated by
this Agreement.
"CLOSING DATE" has the meaning set forth in SECTION 1.5.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing, to which Seller or any Subsidiary is a party.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated the date of
this Agreement and delivered by the Sellers to Buyer on the date of this
Agreement. The Sections of the Disclosure Schedule will be numbered to
correspond to the applicable Section of this Agreement and, together with all
matters under such heading, will be deemed to qualify ONLY that section.
"EARNOUT" has the meaning set forth in SECTION 1.4(a).
"ELDEC" means Eldec Corporation, a Washington corporation.
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, Law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities Law.
"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 3.20.
"ESCROW AGENT" has the meaning set forth in SECTION 1.3.
"ESCROW AGREEMENT" has the meaning set forth in SECTION 1.3.
"ESCROW FUND" means all funds or shares of Buyer Common Stock, as the
case may be, deposited by Buyer with the Escrow Agent pursuant to this
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCIAL STATEMENTS" means the Audited Financial Statements and the
Unaudited Financial Statements."
"GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
B-2
<PAGE>
"HAZARDOUS SUBSTANCE" means (but is not limited to) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable Laws
as "hazardous substances," "hazardous materials," "hazardous wastes" or "toxic
substances," or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
"INDEBTEDNESS" means all interest-bearing indebtedness, guarantees and
capitalized lease obligations of the Company as calculated in accordance with
Norwegian GAAP and all guarantees and letters of credit to which the Company is
a party.
"INDEMNIFIABLE CLAIM" means any Loss for or against which any party is
entitled to indemnification under this Agreement.
"INDEMNIFIED PARTY" means the party entitled to indemnity under this
Agreement.
"INDEMNIFYING PARTY" means the party obligated to provide
indemnification under this Agreement.
"INDEPENDENT ACCOUNTANTS" has the meaning set forth in SECTION 1.4(a).
"INTELLECTUAL PROPERTY" means any trade secret, secret process or other
confidential information or know-how and any brand name, copyright, patent,
service mark, trademark or trade name, and all registrations or applications for
registration of any of the foregoing.
"JEARUM AGREEMENT" has the meaning set forth in SECTION 1.3.
"JEARUMS" has the meaning set forth in SECTION 1.2(b).
"KNOWLEDGE" of any Person means actual knowledge of such Person or
knowledge that such Person could reasonably be expected to have under the facts
and circumstances.
"LAW" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including interest or other carrying costs, penalties, legal, accounting and
other professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified Person.
B-3
<PAGE>
"MATERIAL CONTRACT" means any Contract material to the Business as of
or after the date hereof and includes but is not limited to those contracts
deemed material by SECTION 3.6.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"NET SALES" means the gross sales of the Company's products to third
parties, less any returns and customer and distributor special price discounts
or any other discounts from original invoiced price, by the Company and its
Subsidiaries from January 1, 2000 to the Closing Date and by the Company and its
Subsidiaries from and after the Closing Date, all as calculated in accordance
with U.S. GAAP as applied by Buyer.
"NORWEGIAN GAAP" means generally accepted accounting principles in
Norway, as in effect from time to time.
"NORWEGIAN SELLERS" means all Sellers other than Eldec.
"OPERATING PROFIT MARGIN" means the operating profit of the Company,
(before taxes, interest and amortization of goodwill attributable to the
transactions contemplated by this Agreement, including the acquisition of the
minority shares in the subsidiaries of the Company) divided by Net Sales, all
calculated in accordance with U.S. GAAP as applied by Buyer and in accordance
with the same financial principles used by Buyer in preparing its financial
statements
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"ORIGINAL ESCROW AMOUNT" means US$10,625,000, which, if Buyer exercises
its option to pay a portion of the Original Purchase Price and the same portion
of the initial purchase price payable to the Jearums under the Jearum Agreement
in Buyer Common Stock shall include such stock, valued at US$54 per share, with
the remainder in cash.
"ORIGINAL PURCHASE PRICE" has the meaning set forth in SECTION 1.2.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in SECTION
6.4.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning set forth in the preamble to this Agreement.
B-4
<PAGE>
"SELLER REPRESENTATIVE" is Jan Henrik Bryde.
"SHARES" has the meaning set forth in SECTION 1.1(a).
"SUBSIDIARY" means any Person in which the Company has a direct or
indirect equity or ownership interest in excess of 50%.
"TAX" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability.
"TAX RETURN" means a report, return or other in formation required to
be supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes Seller or any Subsidiary.
"TELECOM POWER BUSINESS" is defined to be the development, manufacture,
sale and distribution of telecommunications power supplies and power supply
systems which include converters, rectifiers, controllers and interconnect
hardware sold either individually or as a system or a subsystem, using
components manufactured, designed or supplied by the Company.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow Agreement, the
Non-Competition Agreements and the Registration Rights Agreement.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in SECTION
3.4(b).
"U.S. GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"VAT" has the meaning set forth in SECTION 3.5(h).
"VAT LEGISLATION" has the meaning set forth in SECTION 3.5(h).
"WITHDRAWING SELLERS" has the meaning set forth in RECITAL C.
"WORKING CAPITAL" means the total current assets of the Company minus
the total current liabilities, other than short-term Indebtedness (E.G.,
Indebtedness due on or before the date that is one year from the date of the
relevant balance sheet), of the Company, calculated in accordance with Norwegian
GAAP.
"YEAR 2000 FINANCIAL STATEMENTS" has the meaning set forth in SECTION
1.4(a).
B-5
<PAGE>
"YEAR 2001 FINANCIAL STATEMENTS" has the meaning set forth in SECTION
1.4(b).
B-6
<PAGE>
EXHIBIT C
C-1
<PAGE>
EXHIBIT D
D-1
<PAGE>
EXHIBIT E
E-1
<PAGE>
SCHEDULE 1.4
1
<PAGE>
<TABLE>
<CAPTION>
<S><C>
REVISED POWEC AS EARNOUT PROPOSAL
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
ASSUMPTIONS: Projected FYE 12/31,
------------ --------------------
2000 2001
--------- --------
Upside Case $ 99,200 $158,800
Base Case 72,600 116,200
--------- --------
Potential Increase in Sales $ 26,600 $ 42,600 Upside Case minus Sales Base
========= ========
Operating Margin Target 10.6% 10.6%
Potential Earnout Value $ 12,000 $ 12,000
- --------------------------------------------------------------------------------
FORMULA FOR EARNOUT EXAMPLE FOR 2000
------------------- ----------------
Sales = $85,000
STEP 1: CALCULATE ADJUSTED SALES FIGURE Operating Margin = 10.0%
Adjusted Sales = Sales x Operating Margin % ** $85,000 x .10 = $80,189
------------------------------ ----------------------
Operating Margin Target 0.106
STEP 2: CALCULATE ADJUSTED INCREASE IN SALES
Adjusted Increase in Sales = Adjusted Sales minus
Sales Base $80,189 - $72,600 = $7,589
STEP 3: CALCULATE EARNOUT MULTIPLIER
Earnout Multiplier = Adjusted Increase in Sales $7,589 = 28.5%
------------------------------ --------------
Potential Increase in Sales $26,600
STEP 4: CALCULATE EARNOUT PAID
Earnout Paid = Earnout Multiplier x Potential Earnout Value $12,000 x 28.5% = $3,420
** IF OPERATING MARGIN IS GREATER THAN 10.6%, THEN ADJUSTED SALES WILL
EQUAL ACTUAL SALES. IN ADDITION, IF OPERATING MARGIN IS LESS THAN 8%,
NO EARNOUT WILL BE PAID.
- --------------------------------------------------------------------------------
FURTHER EXAMPLES: Projected FYE 12/31,
----------------- --------------------
2000 2001
--------- ---------
Sales = $ 99,200 $158,800
Operating Margin = 10.6% 10.6%
Earnout Paid = $ 12,000 $ 12,000
========= ========
SENSITIVITY ANALYSIS ASSUMED OPERATING MARGIN FOR POWEC
------------------- ------------------------------------------------
11.1% 10.6% 10.1% 9.6% 9.1%
--------- ------- --------- -------- -------
2000 SALES NEEDED TO:
Begin Earnout $ 72,600 $ 72,600 $ 76,194 $ 80,163 $ 84,567
Maximize Earnout 99,200 99,200 104,111 109,533 115,552
2001 SALES NEEDED TO:
Begin Earnout $116,200 $116,200 $121,952 $128,304 $135,354
Maximize Earnout 158,800 158,800 166,661 175,342 184,976
</TABLE>
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Number of Number of shares Percentage of Amount of Number of Percentage
shares for allocation of Orig. Pur. Price Orig Pur shares owned of Earnout
owned and Original Purchase payable under Price or deemed
to be sold Price payable Section 1.2(a) to be paid owned for
by Norwegian under Section 1.2(a) to Norwegian to Norwegian allocation
Sellers to Norwegian Sellers Sellers of
Sellers Earnout
<S> <C> <C> <C> <C> <C> <C> <C>
Bryde Jan Henrik 1,643 1,643 1.5452% 707,035 1,643 1.5452%
Abel Eva 2,639 2,639 2.4820% 1,135,645 2,639 2.4820%
Hafnor Hakon 11,548 11,548 10.8609% 4,969,469 11,548 10.8609%
Sagebo Arild 1,035 1,035 0.9734% 445,393 1,035 0.9734%
Nystad Bjorg 966 966 0.9085% 415,700 966 0.9085%
Gronvold Liv 1,515 1,515 1.4249% 651,952 1,515 1.4249%
Olsen Viggo 2,461 2,461 2.3146% 1,059,046 2,461 2.3146%
Schmidt Odd Roar 943 943 0.8869% 405,803 943 0.8869%
Elvegard Anne 138 138 0.1298% 59,386 138 0.1298%
Wendelborg Tonje 138 138 0.1298% 59,386 138 0.1298%
Nilsen Terje 1,154 1,154 1.0853% 496,603 1,154 1.0853%
Jansen Inger Solvi 552 552 0.5192% 237,543 552 0.5192%
Strickert Arne 3,160 3,160 2.9720% 1,359,848 3,160 2.9720%
Aven Knut 69 69 0.0649% 29,693 69 0.0649%
Ramnaes Knut 756 756 0.7110% 325,331 756 0.7110%
Power Invent AS 54,447 54,447 51.2076% 23,430,264 54,447 51.2076%
Power Electronics AS 8,490 8,490 7.9849% 3,653,515 8,490 7.9849%
Hagen Olav 1,535 1,535 1.4437% 660,559 1,535 1.4437%
Karlsen Ove 6,000 6,000 5.6430% 2,581,990 6,000 5.6430%
Tinma AS 1,449 1,449 1.3628% 623,550 1,449 1.3628%
Wennberg Trond E. 238 238 0.2238% 102,419 238 0.2238%
Ovrebo Kjell 3,450 3,450 3.2447% 1,484,644 3,450 3.2447%
Hoff Heidi Therese 2,000 2,000 1.8810% 860,663 2,000 1.8810%
TOTALS 106,326 106,326 100.0000% 45,755,436 106,326 100.0000%
</TABLE>
<PAGE>
ESCROW AGREEMENT
BY AND AMONG
POWER-ONE, INC.,
JAN HENRIK BRYDE, AS
SELLER REPRESENTATIVE,
AND
SKANDINAVISKA ENSKILDA BANKEN AB
MAY 16, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Interpretation and Definitions. . . . . . . . . . . . . . . . . . . . . . . . .1
2. Appointment of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. Seller Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Establishment and Adjustment of the Escrow Fund . . . . . . . . . . . . . . . .2
5. Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. Purposes of Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7. Distributions from the Escrow Fund. . . . . . . . . . . . . . . . . . . . . . .5
8. Breach of Non-Competition Agreement; Breach of Non-Competition or
Non-Interference Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . .5
9. Beneficial Ownership of Escrow Shares . . . . . . . . . . . . . . . . . . . . .6
10. Splits; Distributions; Dividends. . . . . . . . . . . . . . . . . . . . . . . .6
11. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
12. Investment of the Cash Funds. . . . . . . . . . . . . . . . . . . . . . . . . .7
13. Accrued Interest on the Cash Funds. . . . . . . . . . . . . . . . . . . . . . .7
14. Assertion and Settlement of Claims. . . . . . . . . . . . . . . . . . . . . . .7
15. Resolution of Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
16. Partial Release of Amounts Held in Escrow Fund. . . . . . . . . . . . . . . . .9
17. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
18. Limitations on Liability of Escrow Agent. . . . . . . . . . . . . . . . . . . .9
19. Release of Escrow Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
20. Compensation of Escrow Agent. . . . . . . . . . . . . . . . . . . . . . . . . 10
21. Resignation and Removal of Escrow Agent . . . . . . . . . . . . . . . . . . . 10
22. Appointment of Successor Escrow Agent . . . . . . . . . . . . . . . . . . . . 11
23. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
<PAGE>
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is entered into as of May
16, 2000, by and among Jan Henrik Bryde, as the Seller Representative,
Power-One, Inc., a Delaware corporation ("BUYER"), and Skandinaviska Enskilda
Banken AB, as escrow agent ("ESCROW AGENT"). The Buyer and the Seller
Representative are sometimes referred to together herein as the "INTERESTED
PARTIES."
R E C I T A L S
WHEREAS, pursuant to the Amended and Restated Stock Purchase
Agreement, dated as of May __, 2000 (the "PURCHASE AGREEMENT"), by and among
Buyer, Eldec Corporation, a Washington corporation and each of the Persons
listed on EXHIBIT A other than Mark Jearum (individually a "NORWEGIAN SELLER"
and collectively the "NORWEGIAN SELLERS"), Buyer will purchase all of the
outstanding shares of the capital stock of Powec A.S., a company incorporated
and existing under the Laws of Norway, having its registered domicile at
Kobbervikdalen 75, 3007 Drammen, Norway (the "COMPANY"); and
WHEREAS, contemporaneously with the consummation of the
transactions contemplated by the Purchase Agreement, Buyer will purchase from
Mark Jearum and Susan J. Jearum (collectively, the "JEARUMS") 6,000 shares of
the capital stock of Powec Ltd., a company incorporated and existing under the
laws of the United Kingdom and a subsidiary of the Company, which shares
represent all of the Jearums' 25% ownership interest in Powec Ltd., pursuant to
a Stock Purchase Agreement dated as of May 12, 2000 (the "JEARUM AGREEMENT");
and
WHEREAS, Buyer has withheld from the portion of the Original
Purchase Price payable to the Norwegian Sellers and from the Initial Purchase
Price payable to the Jearums certain amounts as security for any and all
eventual Indemnifiable Claims against the Norwegian Sellers under SECTION 9.1 of
the Purchase Agreement and against the Jearums under SECTION 7.1 of the Jearum
Agreement and for other matters specified in this Agreement, which amounts will
be placed and maintained in an escrow fund (the "ESCROW FUND") to be
administered by Escrow Agent in accordance with this Agreement; and
WHEREAS, the parties desire to arrange for such escrow and appoint
Escrow Agent as escrow agent in accordance with the terms hereof.
A G R E E M E N T
In consideration of the mutual promises contained herein and for
other good and valuable consideration, receipt of which is hereby acknowledged,
and intending to be legally bound, the parties agree as follows:
1. INTERPRETATION AND DEFINITIONS. This Agreement is being executed
and delivered pursuant to SECTION 1.3 and 9.1 of the Purchase Agreement and
SECTION 1.4 and 7.1 of the
<PAGE>
Jearum Agreement and is the Escrow Agreement referred to in such agreements. As
between the Interested Parties, the terms and conditions of the Purchase
Agreement and the Jearum Agreement are hereby incorporated by reference into
this Agreement, but only for such purposes as the context of this Agreement may
require. Capitalized terms not otherwise defined herein have the meaning
assigned to them in the Purchase Agreement or the Jearum Agreement, as the case
may be, as previously delivered to Escrow Agent. As used in this Escrow
Agreement, the following terms have the following meanings unless the context
otherwise requires:
"BUYER COMMON STOCK" means the common stock of Power-One, Inc.,
par value $0.001 per share.
"SELLERS" means, collectively, the Norwegian Sellers and the
Jearums.
"YEAR 2000 EARNOUT CONSIDERATION" means, collectively, amounts
owed, if any, to the Norwegian Sellers pursuant to SECTION 1.4(c)(1) of the
Purchase Agreement and to the Jearums pursuant to SECTION 1.5(c)(1) of the
Jearum Agreement.
"YEAR 2001 EARNOUT CONSIDERATION" means, collectively, amounts
owed, if any, to the Norwegian Sellers pursuant to SECTION 1.4(c)(2) of the
Purchase Agreement and to the Jearums pursuant to SECTION 1.5(c)(2) of the
Jearum Agreement.
2. APPOINTMENT OF ESCROW AGENT. Escrow Agent is hereby appointed to act
as escrow agent in accordance with the terms of this Agreement, and Escrow Agent
hereby accepts such appointment. Escrow Agent has all the rights, powers, duties
and obligations provided in this Agreement.
3. SELLER REPRESENTATIVE. In accordance with the provisions of the
Purchase Agreement and the Jearum Agreement, the Seller Representative is
serving as agent and attorney-in-fact of the Sellers for all actions or
decisions hereunder and any action taken, or instruction or authorization given,
by the Seller Representative may be relied upon by Buyer and Escrow Agent. The
Seller Representative represents and warrants to Escrow Agent that he has the
irrevocable right, power and authority (i) to enter into and perform this
Agreement and bind all of the Sellers to its terms, (ii) to give and receive
directions and notices hereunder; and (iii) to make all determinations that may
be required or that he deems appropriate under this Agreement. Until notified in
writing by the Seller Representative that he has resigned, Escrow Agent may act
upon the directions, instructions and notices of the Seller Representative named
above and, thereafter, upon the directions, instructions and notices of any
successor named in a writing executed by a majority-in-interest of the Sellers
filed with Escrow Agent.
4. ESTABLISHMENT AND ADJUSTMENT OF THE ESCROW FUND.
(a) On the Closing Date, Buyer will deliver to Escrow Agent for
deposit in the Escrow Fund:
(1) at its election, a certificate or certificates
representing the shares of Buyer Common Stock (valued at $54 per
share) issued to the Sellers as part of the
2
<PAGE>
Original Purchase Price in accordance with SECTION 1.3 of the
Purchase Agreement and SECTION 1.4 of the Jearum Agreement, if any
(collectively, the "ORIGINAL ESCROW SHARES"), and
(2) $10,625,000, less the aggregate value (determined in
accordance with SECTION 4(a)(1)) of the Original Escrow Shares, if
any, by wire transfer of immediately available funds to the Escrow
Agent. Such cash amount together with the Original Escrow Shares
are hereinafter referred to as the "ORIGINAL ESCROW AMOUNT."
Each Seller will be deemed to have deposited into the Escrow Fund the amount set
forth opposite such Seller's name on EXHIBIT A under the column entitled "Pro
Rata Portion of Original Escrow Amount."
(b) On the later of April 15, 2001 or within ten (10) days after
the Year 2000 Earnout Consideration, if any, is finally determined in accordance
with the Purchase Agreement and the Jearum Agreement (the "YEAR 2000 EARNOUT
PAYMENT DATE"), Buyer will deliver to Escrow Agent:
(1) the Year 2000 Earnout Consideration, if any, which, if
Buyer decides to pay any portion thereof in Buyer Common Stock,
will include such stock valued at the average closing price of
Buyer Common Stock as quoted on NASDAQ during the ten (10) trading
days ending ten (10) days before the Year 2000 Earnout Payment
Date (the "YEAR 2000 EARNOUT ESCROW SHARES"), with the remainder
paid in cash by wire transfer of immediately available funds; and
(2) a written notice to Escrow Agent identifying the funds
as Year 2000 Earnout Consideration and instructing Escrow Agent to
deposit such funds in the Escrow Fund in accordance with this
SECTION 4(b).
Escrow Agent will deposit into the Escrow Fund out of the Year 2000 Earnout
Consideration the lesser of (a) the amount necessary to cause the balance of the
Escrow Fund to be $10,625,000 in excess of the sum of (i) the aggregate amount
of all Liquidated Claims that have been settled or resolved in accordance with
this Agreement and for which Escrow Agent has disbursed, or is obligated to
disburse, payments to Buyer in accordance with this Agreement and (ii) the
aggregate amount of all Disputed Liquidated Claims and all Unliquidated Claims
existing on such date, and (b) the Year 2000 Earnout Consideration. Amounts
deposited into the Escrow Fund pursuant to the preceding sentence are
hereinafter referred to as the "YEAR 2000 EARNOUT ESCROW AMOUNT." As soon as
practicable thereafter, subject to SECTION 8, Escrow Agent will pay the excess
of the Year 2000 Earnout Consideration over the Year 2000 Earnout Escrow Amount
to the Sellers as set forth in SECTION 7.
(c) On the later of April 15, 2002 or within ten (10) days after
the Year 2001 Earnout Consideration, if any, is finally determined in accordance
with the Purchase Agreement and the Jearum Agreement (the "YEAR 2001 EARNOUT
PAYMENT DATE"), Buyer will deliver to
3
<PAGE>
(1) the Year 2001 Earnout Consideration, if any, which, if
Buyer decides to pay any portion thereof in Buyer Common Stock,
includes such stock valued at the average closing price of Buyer
Common Stock as quoted on NASDAQ during the ten (10) trading days
ending ten (10) days before the Year 2001 Earnout Payment Date
(the "YEAR 2001 EARNOUT ESCROW SHARES" and together with the
Original Escrow Shares and the Year 2000 Escrow Shares, the
"ESCROW SHARES"), with the remainder in cash paid by wire transfer
of immediately available funds; and
(2) a written notice to Escrow Agent identifying the funds
as Year 2001 Earnout Consideration and instructing Escrow Agent to
deposit such funds in the Escrow Fund in accordance with this
SECTION 4(c).
Escrow Agent will deposit into the Escrow Fund out of the Year 2001 Earnout
Consideration the amount necessary to cause the balance of the Escrow Fund to
equal the aggregate amount of all Disputed Liquidated Claims and all
Unliquidated Claims existing on such date. Amounts deposited in the Escrow Fund
pursuant to the preceding sentence are hereinafter referred to as the "YEAR 2001
EARNOUT ESCROW AMOUNT" and together with the Year 2000 Earnout Escrow Amount,
the "EARNOUT ESCROW FUNDS." As soon as practicable thereafter, subject to
SECTION 8, Escrow Agent will pay the excess of the Year 2001 Earnout
Consideration over the Year 2001 Earnout Escrow Amount to the Sellers as set
forth in SECTION 7.
(d) Escrow Agent will hold and safeguard the Escrow Fund during
the term of this Agreement, will treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of the Indemnified
Parties and will hold and dispose of the Escrow Fund only in accordance with the
terms of this Agreement.
(e) Only whole shares of Buyer Common Stock will be retained in or
released from the Escrow Fund pursuant to this Agreement. If Escrow Agent would
otherwise be required to disburse a fractional share of Buyer Common Stock from
the Escrow Fund, Buyer will deliver to Escrow Agent in exchange for one whole
share of Buyer Common Stock, a cash amount equal to the value of such share as
such value is determined in accordance with SECTION 7(b). Escrow Agent will then
disburse, in accordance with the terms of this Agreement, a cash amount in lieu
of such fractional share.
5. SHORTFALL. Two (2) business days after it receives any Earnout Escrow
Funds, Escrow Agent will disburse to Buyer an amount equal to all amounts that
would have been paid previously to Buyer in accordance with this Agreement but
for the fact that there were insufficient funds to do so in the Escrow Fund.
6. PURPOSES OF ESCROW FUND. The purposes of the Escrow Fund will be, and
the Escrow Fund will be applied to pay, any Losses incurred by or imposed on
Buyer or any Buyer Subsidiary with respect to the matters set forth in SECTION
9.1 of the Purchase Agreement and SECTION 7.1 of the Jearum Agreement, and the
amounts to be borne by the Sellers in connection with the Independent
Accountants' review, if any, pursuant to SECTION 1.4(e) of the Purchase
Agreement and SECTION 1.5(e) of the Jearum Agreement.
4
<PAGE>
7. DISTRIBUTIONS FROM THE ESCROW FUND. All distributions from the Escrow
Fund pursuant to this Agreement will be made in accordance with the following
provisions.
(a) Any distribution by Escrow Agent to Buyer will be made first
from the available cash in the Escrow Fund (the "CASH FUNDS") until such Cash
Funds are exhausted, and next from the Escrow Shares until such Escrow Shares
are exhausted. For purposes of this section, any distribution from the Escrow
Shares will be made first from the Escrow Shares with the highest value per
share as set forth in SECTION 7(b) below.
(b) For the purposes of determining the number of shares of Buyer
Common Stock to be distributed to Buyer or to the Sellers in accordance with
this Agreement, the shares of Buyer Common Stock will be valued in accordance
with SECTIONS 4(a)(1), 4(b)(1) and 4(c)(1). The Sellers will be deemed to
contribute shares from the Escrow Fund in satisfaction of any Claim pursuant to
SECTION 14 on a pro rata basis in accordance with the percentages set forth
opposite such Sellers' respective names on EXHIBIT A attached hereto under the
column entitled "Percentage of Amounts in Escrow Fund" (as the same may be
supplemented or replaced from time to time by written notice to Escrow Agent
from Buyer and Seller Representative).
(c) Subject to SECTION 8, any distribution by Escrow Agent to the
Sellers from the Escrow Fund will be made in accordance with the percentages set
forth opposite such Sellers' respective names on EXHIBIT A attached hereto under
the column entitled "Percentage of Amounts in Escrow Fund" (as the same may be
supplemented or replaced from time to time by written notice to Escrow Agent
from Buyer and the Seller Representative). Distributions to the Sellers will be
made by mailing checks or certificates representing shares of Buyer Common
Stock, as the case may be, to the Sellers at their respective addresses as shown
on EXHIBIT A (or such other address as may be provided in writing to Escrow
Agent by any such Seller or by the Seller Representative).
8. BREACH OF NON-COMPETITION AGREEMENT; BREACH OF NON-COMPETITION OR
NON-INTERFERENCE COVENANTS.
(a) If during the term of this Agreement (i) a Norwegian Seller is
in breach of the Non-Competition Agreement, dated as of the Closing Date, by and
between such Norwegian Seller and Buyer pursuant to SECTION 7.1(g) of the
Purchase Agreement (the "NON-COMPETITION AGREEMENT") or (ii) Mark Jearum or
Susan J. Jearum is in breach of the Non-Competition Covenants or
Non-Interference Covenants set forth in ARTICLE III of the Jearum Agreement,
then any amounts to which such breaching Seller would thereafter otherwise be
entitled pursuant to SECTION 1.4 of the Purchase Agreement or SECTION 1.5 of the
Jearum Agreement, as the case may be, and SECTIONS 4(b) and 4(c) of this
Agreement (such amounts, if any, the "FUTURE EARNOUT PAYMENTS") will instead be
paid to Buyer as set forth in SECTION 4 of the Non-Competition Agreement or
SECTION 3.3 of the Jearum Agreement, as the case may be. To assert its rights
under this provision, Buyer must deliver a written notice (a "NOTICE OF BREACH")
to such Seller, the Seller Representative and the Escrow Agent stating the
nature of the breach and the date such notice is being sent and asserting
Buyer's right to any such Future Earnout Payments, if any.
5
<PAGE>
(b) After receiving a Notice of Breach from Buyer, Escrow Agent
will disburse such Future Earnout Payments, if any, to Buyer:
(1) upon receipt by Escrow Agent of a written instruction
executed by such Seller and Buyer; or
(2) thirty (30) days after the Notice of Breach is
delivered by Buyer pursuant to this SECTION 8, provided that
Escrow Agent has not received from such Seller a written objection
to the disbursement in accordance with subsection (c); or
(3) upon receipt of a final arbitration decision issued in
accordance with the same procedures set forth in SECTION 15 for
resolution of claims ordering or instructing the Escrow Agent to
do so.
(c) Any objection by a Seller must be made in writing within
thirty (30) days of the Notice of Breach stating in reasonable detail such
Seller's basis for the objection, and such Seller must deliver a copy of any
such objection to Buyer, Seller Representative and Escrow Agent.
(d) If Escrow Agent receives from a Seller a timely objection to
the disbursement of the Future Earnout Payments to Buyer, Escrow Agent will hold
such amounts in the Escrow Fund until Escrow Agent receives (a) a joint written
instruction with respect to such disbursement executed by both Buyer and such
Seller that sets forth an agreement or resolution of the dispute or (b) a final
arbitration decision issued in accordance with the same procedures set forth in
SECTION 15 for resolution of claims ordering or instructing the Escrow Agent to
do so. Escrow Agent then will be authorized to and will promptly disburse the
Future Earnout Payments to Buyer in accordance with such documents.
9. BENEFICIAL OWNERSHIP OF ESCROW SHARES. Each Seller will be deemed to
beneficially own such number of Escrow Shares deposited in the Escrow Fund, if
any, determined in accordance with the percentage set forth opposite each
Seller's name on EXHIBIT A under the column entitled "Percentage of Amounts in
Escrow Fund," including for the receipt of dividends and distributions in
accordance with SECTION 10, determination of voting rights in accordance with
SECTION 11, and for purposes of distribution of the Escrow Shares in accordance
with the terms of this Agreement. The Sellers will not have the right to
substitute other property for the Escrow Shares.
10. SPLITS; DISTRIBUTIONS; DIVIDENDS. Any shares of Buyer Common Stock or
other equity securities issued or distributed by Buyer (including shares issued
upon a stock split) ("NEW SHARES") in respect of shares of Buyer Common Stock
that have not been released from the Escrow Fund pursuant to this Agreement will
be deposited with the Escrow Agent and added to the Escrow Fund and become a
part thereof. Cash dividends on shares of Buyer Common Stock held in the Escrow
Fund will be added to the Escrow Fund and will not be distributed to the Sellers
until this Agreement terminates. New shares and cash will be allocated among the
6
<PAGE>
Sellers pro rata in accordance with the percentage set forth opposite each
Seller's name on EXHIBIT A under the column entitled "Percentage of Amounts in
Escrow Fund."
11. VOTING RIGHTS. Each Seller will have voting rights with respect to
the shares of Buyer Common Stock beneficially owned by such Seller that have not
been released from the Escrow Fund pursuant to this Agreement (and on any voting
securities added to the Escrow Fund in respect of such shares of Buyer Common
Stock).
12. INVESTMENT OF THE CASH FUNDS.
(a) During the term of this Agreement, Escrow Agent will deposit
the Cash Funds in an account with SE-Bank that provides for immediate access to
the funds at any time.
(b) Escrow Agent will have no liability for any investment losses.
Escrow Agent will (to the extent permitted by the terms of applicable
investment) sell or redeem any such investment as necessary to make any payments
required pursuant to this Agreement and will not be responsible for any bank
commissions, expense, losses or penalties incurred as a result of any such sale
or redemption. Any such bank commissions and expenses, and the risk of any such
losses or penalties, will be borne by the Escrow Fund, and Buyer will have no
obligation to contribute additional funds to the Escrow Fund, except as set
forth in SECTION 4 above.
13. ACCRUED INTEREST ON THE CASH FUNDS. Interest and earnings accrued on
the Cash Funds will be added to the Escrow Fund and will be held by Escrow Agent
and reinvested as set forth herein and will be available for any payment to be
made by Escrow Agent under this Agreement. Buyer and Seller Representative
acknowledge and agree that for all income tax purposes, the amount earned on any
investment of the Cash Funds, or portion thereof, is for the benefit of the
Sellers and will be received by Escrow Agent as the nominee of the Sellers.
14. ASSERTION AND SETTLEMENT OF CLAIMS.
(a) From time to time during the term of this Agreement, Buyer may
assert any claim (each, a "CLAIM") for payment of Losses under SECTION 9.1 of
the Purchase Agreement and SECTION 7.1 of the Jearum Agreement and may demand
satisfaction thereof from the Escrow Fund. To assert a Claim, Buyer must deliver
a written notice to the Seller Representative and Escrow Agent stating the
amount of the Claim if such amount is ascertainable (a "LIQUIDATED CLAIM"), the
basis of such Claim in general terms and the date such notice is being sent
(such notice, a "CERTIFICATE OF CLAIM"). If Buyer cannot ascertain the amount of
any such Claim (an "UNLIQUIDATED CLAIM"), then to assert such Claim, Buyer must
deliver to each of the Seller Representative and Escrow Agent a written notice
stating Buyer's then estimate of the anticipated maximum amount of such Claim,
the basis of such Claim in general terms and the date such notice is being sent
(such notice, a "NOTICE OF EXPECTED CLAIM"). The date such Certificate of Claim
or Notice of Expected Claim is delivered to the Seller Representative and Escrow
Agent is referred to herein as the "NOTICE DATE."
7
<PAGE>
(b) Escrow Agent, without concerning itself with Buyer's
explanation as to the basis for any Liquidated Claim, may disburse the Escrow
Fund, or any portion thereof, to Buyer to satisfy any such Liquidated Claim
asserted by Buyer:
(1) upon receipt by Escrow Agent of a written instruction
executed by the Seller Representative and Buyer; or
(2) thirty (30) days after the Notice Date of a Liquidated
Claim delivered by Buyer pursuant to this SECTION 14, provided
that Escrow Agent must not have received from the Seller
Representative a written objection to the disbursement (an
"OBJECTION"); or
(3) upon receipt of a final decision from an arbitrator
pursuant to SECTION 15 ordering or instructing Escrow Agent to do
so.
Any Objection by the Seller Representative must include a statement in
reasonable detail of the Seller Representative's basis for the Objection, and
the Seller Representative must deliver a copy of any Objection to Buyer and
Escrow Agent. If the Seller Representative delivers to Escrow Agent and Buyer an
Objection before such Liquidated Claim is satisfied from the Escrow Fund in
accordance with this SECTION 14(b), such Liquidated Claim will remain pending to
the extent an Objection has been received by Escrow Agent until resolved as
provided herein (a "DISPUTED LIQUIDATED CLAIM"). If, after receiving an
Objection from the Seller Representative, Escrow Agent receives (1) the written
consent of the Seller Representative to the disbursement by Escrow Agent of the
amount of such Disputed Liquidated Claim, or (2) a written agreement executed by
Buyer and the Seller Representative revising the amount of such Disputed
Liquidated Claim and instructing Escrow Agent to disburse to Buyer such revised
amount, or (3) a final decision from an arbitrator pursuant to SECTION 15
obliging the Sellers to pay any amount specified therein (including attorney's
cost payable by the Sellers), then Escrow Agent will be authorized to and will
promptly disburse the Escrow Fund or portion thereof to Buyer in accordance with
such documents.
(c) Upon receipt by Escrow Agent of a written instruction of
settlement executed by both Buyer and the Seller Representative that sets forth
an agreement or settlement of an Unliquidated Claim, then Escrow Agent will be
authorized to and will promptly disburse the Escrow Fund or portion thereof in
accordance with such written instruction.
(d) At such time as any Unliquidated Claim becomes fully
liquidated and known, it will be settled in accordance with the procedures for
the settlement of Liquidated Claims set forth in this SECTION 14.
15. RESOLUTION OF CLAIMS. For a thirty (30) day period following delivery
of any Objection, Buyer and the Seller Representative must attempt to resolve
any differences that they may have with respect to any matter specified in an
Objection. The Seller Representative and Buyer will promptly execute a joint
instruction to Escrow Agent regarding the resolution of all undisputed matters,
and Escrow Agent will, promptly after receiving such instruction, disburse the
indicated amount to Buyer. If, at the end of such thirty (30) day period, Buyer
and the Seller
8
<PAGE>
Representative have failed to reach written agreement with respect to all of
such matters, then all such matters as to which agreement has not been reached
(the "DISPUTED MATTERS") will be finally settled in arbitration according to the
rules of Chapter 32 of the Norwegian Code of Civil Procedure. Any such
arbitration will be held in Oslo, Norway and the proceedings will be conducted
in the English language. The decision of the arbitrator or arbitrators, as the
case may be, will be final and binding on the parties hereto, and final judgment
on such decision may be entered in and enforced by any court of competent
jurisdiction. The costs of such arbitration proceedings (including any expenses
of Escrow Agent related thereto) will be borne equally by the Seller
Representative and Buyer; PROVIDED, HOWEVER, that the Seller Representative's
portion of such costs will be paid out of the Escrow Fund.
16. PARTIAL RELEASE OF AMOUNTS HELD IN ESCROW FUND. On the later of (a)
the first anniversary of the date of this Agreement or (b) five (5) days after
the Year 2000 Payment Date (the "RELEASE DATE"), the Escrow Agent will pay to
the Sellers any amount in excess of the sum of (x) $5,312,500, (y) any amount
reserved for payment of all Liquidated Claims and Unliquidated Claims asserted
on or before the Release Date by Buyer and not settled by such date, and (z)
disbursements required pursuant to SECTION 5. Any distribution by the Escrow
Agent to the Sellers pursuant to this SECTION 16 will be paid first from the
Escrow Shares, then, to the extent necessary, from the Cash Funds. For purposes
of this section, Escrow Agent will first distribute the Original Escrow Shares
before distributing the Year 2000 Earnout Escrow Shares, if any.
17. TERMINATION. Subject to SECTION 16 above, Escrow Agent will hold the
Escrow Fund in escrow until the later of (a) April 16, 2002 (the "FINAL CLAIMS
TERMINATION DATE"), or (b) five (5) days after (i) all Liquidated Claims and
Unliquidated Claims asserted on or before the Final Claims Termination Date, by
Buyer and not settled by such date (the "PENDING CLAIMS") have been settled or
resolved in accordance with the provisions of this Agreement, and the full
amount of all payments to Buyer required thereby have been disbursed to Buyer
and (ii) all Pending Claims have been paid (the "FINAL SETTLEMENT TIME").
Promptly after the Final Settlement Time, Escrow Agent will disburse the
remaining amounts in the Escrow Fund, if any, to the Sellers, and this Agreement
will terminate; PROVIDED, HOWEVER, that if at any time after the Earnout Escrow
Funds have been paid to Escrow Agent (or a determination has been made that no
such funds are due) and before the Final Settlement Time, the Escrow Fund equals
zero, then this Agreement will terminate at such earlier time.
18. LIMITATIONS ON LIABILITY OF ESCROW AGENT.
(a) Escrow Agent may act upon any written notice, certificate,
instrument, request, instruction (including, without limitation, wire transfer
instructions, whether incorporated herein or provided in a separate written
instruction), waiver, consent, paper, or other document that Escrow Agent in
good faith reasonably believes to be genuine and to have been made, sent,
signed, prescribed, or presented by the proper person or persons. Escrow Agent
will not be liable for any action taken or omitted by it in connection with the
performance of its duties and obligations hereunder, except for its own gross
negligence or willful misconduct in performing its obligations hereunder. Escrow
Agent will be under no obligation to institute or defend any action, suit or
legal proceeding in connection with the Escrow Fund or this
9
<PAGE>
Agreement unless it is indemnified to its satisfaction by the party or parties
who desire that it undertake such action.
(b) Escrow Agent will not be liable for the sufficiency,
correctness or genuineness as to form, manner of execution or validity of any
instrument deposited, nor as to the identity, authority, or rights of any person
executing the same, except as above provided.
(c) Should Escrow Agent during the term of this Agreement receive
or become aware of any conflicting demands or claims with respect to the Escrow
Fund or any part thereof or the rights of any of the parties hereto, or any
money deposited herein or affected hereby, Escrow Agent will have the right to
discontinue all further acts on its part until such conflict is resolved to its
and the parties' satisfaction.
19. RELEASE OF ESCROW AGENT. The retention and distribution of the Escrow
Fund in accordance with the terms and provisions of this Agreement will fully
and completely release Escrow Agent from any obligations or liabilities assumed
under this Agreement with respect to this Agreement or the Escrow Fund.
20. COMPENSATION OF ESCROW AGENT.
(a) Escrow Agent will be entitled to compensation pursuant to the
schedule of fees attached as EXHIBIT B, and to reimbursement of fees, costs and
expenses, including reasonable attorneys' fees suffered or incurred by Escrow
Agent in connection with the performance of its duties and obligations
hereunder. Buyer and the Seller Representative will each pay one-half of such
compensation, fees, costs and expenses (the "ESCROW EXPENSES"), and will
promptly, upon demand by Escrow Agent, pay or reimburse Escrow Agent for all
such amounts. Escrow Agent may withhold an amount from the Escrow Fund equal to
one-half of the aggregate Escrow Expenses, representing the Seller
Representative's portion of such expenses.
21. RESIGNATION AND REMOVAL OF ESCROW AGENT. Escrow Agent or any
successor to it may resign and be discharged of its duties and obligations
hereunder (other than obligations of Escrow Agent arising before the resignation
date and not discharged as of that date) by delivering written notice to Buyer
and the Seller Representative specifying the effective date of such resignation,
which date must not be earlier than 30 days following the receipt by Buyer and
the Seller Representative of the notice of resignation. Such resignation will
take effect on the date specified in the notice of resignation, unless a
successor escrow agent has been appointed in accordance with the provisions of
SECTION 22 and has accepted such appointment at an earlier date, in which case
such resignation will take effect immediately upon receipt by such successor
escrow agent of the Escrow Fund. Escrow Agent maybe removed by the joint action
of Buyer and the Seller Representative, with or without cause, at any time upon
30 days' prior written notice to Escrow Agent, which notice may be waived by
Escrow Agent.
Notwithstanding any resignation or removal of Escrow Agent pursuant to
this SECTION 21, Escrow Agent will continue to serve in its capacity as escrow
agent until (i) a successor escrow agent is appointed in accordance with the
provisions of SECTION 22 and has accepted such appointment and (ii) the Escrow
Fund has been transferred to and received by such successor
10
<PAGE>
escrow agent. Buyer and the Seller Representative will promptly take the
necessary action to appoint a successor escrow agent in accordance with the
provisions of SECTION 22.
22. APPOINTMENT OF SUCCESSOR ESCROW AGENT. If at any time Escrow Agent
resigns, is removed or otherwise becomes incapable of acting as escrow agent
pursuant to this Agreement, or if at any time a vacancy occurs in the office of
Escrow Agent for any other cause, a successor escrow agent will be appointed by
Buyer, which successor escrow agent must be reasonably satisfactory to the
Seller Representative, by a written instrument delivered to the successor escrow
agent. If no successor escrow agent has been appointed at the effective date of
resignation or removal of Escrow Agent or within 30 days after the time Escrow
Agent became incapable of acting or a vacancy occurred in the office of Escrow
Agent, any party hereto may petition a court of competent jurisdiction for an
appointment of a successor escrow agent and Escrow Agent will have the right to
refuse to make any payments from the Escrow Fund until a successor escrow agent
is appointed and has accepted such appointment. Upon the appointment and
acceptance of any successor escrow agent hereunder, Escrow Agent will transfer
the Escrow Fund to its successor. Upon receipt by the successor escrow agent of
the Escrow Fund, Escrow Agent will be discharged from any continuing duties or
obligations under this Agreement, but such discharge will not relieve Escrow
Agent from any liability incurred before such event, and the successor escrow
agent will be vested with all rights, powers, duties and obligations of Escrow
Agent under this Agreement.
23. MISCELLANEOUS.
(a) NOTICES. All notices (including other communications required
or permitted) under this Agreement must be in writing and must be delivered: (i)
in person; (ii) by registered, express or certified mail, postage prepaid,
return receipt requested; (iii) by a generally recognized courier or messenger
service that provides written acknowledgement of receipt by the addressee; or
(iv) by facsimile or other generally accepted means of electronic transmission
with a verification of delivery. Notices are deemed delivered at the earlier of
the date such notice is actually received by a party or two days after such
notice is given. Notices must be given at the addresses below, but any party may
furnish, from time to time, other addresses for notices to it.
IF TO SELLER REPRESENTATIVE: Jan Henrik Bryde
Kobbervikdalen 75
Drammen, Norway N-3007
Telephone: 47.32.24.53.01
Telecopier: 47.32.24.53.90
with copy to: Akvokatfirmaet Bo, Lieng og Jakobsen
ANS
Torvet 6 A, 3181 Norway
Attn: Tor V. Jakobsen
Telephone: 47.33.04.11.46
Telecopier: 47.33.04.53.26
11
<PAGE>
IF TO BUYER: Power-One, Inc.
740 Calle Plano
Camarillo, CA 93012, U.S.A.
Attn: Steven J. Goldman, CEO
Telephone: (805) 987-8741
Telecopier: (805)484-0445
with copy to: O'Melveny & Myers LLP
1999 Avenue of the Stars, Suite 700
Los Angeles, California 90067, U.S.A.
Attn: Kendall R. Bishop, Esq.
Telephone: (310) 553-6700
Telecopier: (310) 246-6779
IF TO ESCROW AGENT: Skandinaviska Enskilda Banken AB
P.O. Box 1843 Vika
N-0123 Oslo, Norway
Attn: Erling Amundsen/Tone F. Lorenzini
Telephone: +47 22 82 70 00
Telecopier: +47 22 82 71 04
or to such other address or to such other person as any party has last
designated by such notice to the other parties. Each such notice or other
communication will be deemed received hereunder (i) if given by
telecommunication, when transmitted to the applicable number so specified in (or
pursuant to) this SECTION 23(a), (ii) if given by mail or courier service, three
business days after such communication is dispatched, addressed as aforesaid or
(iii) if given by any other means, when actually received at such address.
Delivery of notice to the copied parties above is not notice to Buyer or the
Seller Representative, as the case may be.
(b) BUYER'S ACCOUNT. Any portion of the Escrow Shares to be paid
to Buyer hereunder must be delivered to Buyer at the address specified in
SECTION 23(a). Any Cash Funds to be paid to Buyer hereunder must be
wire-transferred to the following account:
ACCOUNT NAME: Power-One, Inc.
ACCOUNT #: 3030153277
ABA TRANSIT ROUTING #: 122000496
BANK NAME: Union Bank
CONTACT: Sharon Jacques
(c) ASSIGNMENT. The respective rights of buyer and the Seller
Representative under this Agreement are not assignable without the prior written
consent of the other party, except that Buyer can assign this Agreement without
the prior written consent of any other party (i) to any wholly-owned subsidiary
of Buyer or (ii) in connection with the sale of all or substantially all of the
assets of Buyer or the merger, consolidation or similar reorganization of Buyer.
12
<PAGE>
(d) FURTHER ASSURANCES. Each party will from time to time execute
and deliver such additional certificates, agreements and other documents and
take such other actions as are commercially reasonable and necessary to render
effective the transactions contemplated hereby.
(e) SECTIONS AND OTHER HEADINGS. Sections or other headings
contained in this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation o f this Agreement.
(f) INTEGRATED AGREEMENT. This Agreement and the exhibits hereto
constitute the entire agreement between the parties hereto, and no agreement,
understanding, restriction, warranty or representation exists between the
parties other than those set forth herein or provided for herein. All exhibits,
schedules and appendices attached to this Agreement are incorporated herein.
(g) AMENDMENTS; WAIVERS. All parties must approve any amendment to
this Agreement. Any waiver of any right or remedy requires the consent of the
party waiving it. Every amendment or waiver must be in writing and designated as
an amendment or waiver, as appropriate. No failure by any party to insist on the
strict performance of any provision of this Agreement, or to exercise any right
or remedy, will be deemed a waiver of such performance, right or remedy, or of
any other provision of this Agreement.
(h) INTERPRETATION. If any claim is made by a party relating to
any conflict, omission or ambiguity in the provisions of this Agreement, no
presumption or burden of proof or persuasion will be implied because this
Agreement was prepared by or at the request of any party or its counsel. The
parties waive any statute or rule of law to the contrary. Unless the context
otherwise requires: (i) a term has the meaning assigned to it; (ii) "or" is not
exclusive; (iii) words in the singular include the plural, and words in the
plural include the singular; (iv) "herein," "hereof" and other words of similar
import refer to this Agreement as a whole and not to any particular Section,
Subsection, paragraph, clause, or other subdivision; (v) all references to
"Section", "Schedule" or "Exhibit" refer to the particular Section, Schedule or
Exhibit in or attached to this Agreement, the Purchase Agreement or the Jearum
Agreement, as the case may be; and (vi) "including" and "includes," when
following any general provision, sentence, clause, statement, term or matter,
will be deemed followed by ", but not limited to," and ",but is not limited to,"
respectively.
(i) COUNTERPARTS. This Agreement is being signed in several
counterparts. Each of them is an original, and all of them constitute one
agreement.
(j) SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement will be deemed valid and
enforceable to the extent possible.
(k) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the internal laws of Norway (without reference to
its rules as to conflicts of law).
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<PAGE>
(l) SPECIFIC PERFORMANCE. The parties agree that irreparable
damage would occur if any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties will be entitled to
specific performance of the terms hereof in addition to any other remedy to
which they are entitled at law or equity.
[Remainder of page intentionally left blank]
14
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on the day and year first above written.
BUYER: Power-One, Inc.
By:
----------------------------
Name:
Title:
ESCROW AGENT: Skandinaviska Enskilda Banken AB
By:
----------------------------
Name:
Title:
SELLER REPRESENTATIVE:
---------------------------------
Jan Henrik Bryde
S-1
<PAGE>
EXHIBIT A
SELLERS
A-1
<PAGE>
EXHIBIT B
ESCROW AGENT SCHEDULE OF FEES
B-1
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Number of
shares owned Percentage of Pro Rata Portion
or deemed owned Amounts in of Original
Address for Escrow Escrow Fund Escrow Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bryde Jan Henrik 1,643 1.4824% 157,506.11
Abel Eva 2,639 2.3811% 252,987.60
Hafnor Hakon 11,548 10.4193% 1,107,048.44
Sagebo Arild 1,035 0.9338% 99,220.22
Nystad Bjorg 966 0.8716% 92,605.54
Gronvold Liv 1,515 1.3669% 145,235.40
Olsen Viggo 2,461 2.2205% 235,923.64
Schmidt Odd Roar 943 0.8508% 90,400.65
Elvegard Anne 138 0.1245% 13,229.36
Wendelborg Tonje 138 0.1245% 13,229.36
Nilsen Terje 1,154 1.0412% 110,628.15
Jansen Inger Solvi 552 0.4980% 52,917.45
Strickert Arne 3,160 2.8511% 302,933.24
Aven Knut 69 0.0623% 6,614.68
Ramnaes Knut 756 0.6821% 72,473.90
Power Invent AS 54,447 49.1253% 5,219,558.93
Power Electronics AS 8,490 7.6602% 813,893.43
Hagen Olav 1,535 1.3850% 147,152.70
Karlsen Ove 6,000 5.4136% 575,189.70
Tinma AS 1,449 1.3074% 138,908.31
Wennberg Trond E. 238 0.2147% 22,815.86
0vrebo Kjell 3,450 3.1128% 330,734.08
Hoff Heidi Therese 2,000 1.8045% 191,729.90
Jearum Mark 4,372 3.9447% 419,121.56
Jearum Susan J. 135 0.1218% 12,941.77
TOTALS 110,833 100.0000% $10,625,000.00
</TABLE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered
into as of May 16, 2000, by and among Power-One, Inc., a Delaware corporation
(the "COMPANY"), and the Seller Representative (as defined below).
RECITALS
WHEREAS, the Company concurrently with the execution of this
Agreement is consummating a Stock Purchase Agreement (the "PURCHASE AGREEMENT")
with the Holders other than Mark Jearum and Susan J. Jearum pursuant to which
the Company is acquiring all of the shares of Powec AS, a Norwegian company
("POWEC");
WHEREAS, the Company concurrently with the execution of this
Agreement is consummating a Stock Purchase Agreement with Mark Jearum and Susan
J. Jearum (the "JEARUM AGREEMENT") pursuant to which the Company is acquiring
6,000 shares of the capital stock of Powec Ltd., a company incorporated and
existing under the laws of the United Kingdom.
WHEREAS, pursuant to the Purchase Agreement the Company may be
obligated to make certain earnout payments (the "EARNOUT") to the Holders in
accordance with the provisions of Section 1.4 of the Purchase Agreement and
Section 1.5 of the Jearum Agreement;
WHEREAS, the Company may pay the Earnout in shares of the common
stock of the Company, par value $0.001 per share (the "COMPANY COMMON STOCK");
and
WHEREAS, the due execution and delivery of a registration rights
agreement between the Company and the Seller Representative on behalf of the
Holders is a condition to the consummation of the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms listed below have the
following meanings:
"BUSINESS DAY" means any day that is not a day on which banking
institutions in New York or California are authorized or obligated
by law or executive order to close.
"CLOSING DATE" means the date on which the transactions contemplated by
the Purchase Agreement are consummated.
<PAGE>
"FORM S-3" means a registration statement on Form S-3 that includes only
those items and that information required to be included in Parts
I and II of such Form, and does not include any additional or
extraneous items or information (i.e., a lengthy description of
the Company or the Company's business, strategy or strengths).
"HOLDER" and "HOLDERS" means the individuals listed in SCHEDULE A.
"PERSON" means any natural person, corporation (stock or nonstock),
limited liability company, limited partnership, general
partnership, joint stock company, joint venture, association
(profit or nonprofit), company, estate, trust, bank, trust
company, land trust, business trust or other organization, whether
or not a legal entity, and any government agency or political
subdivision thereof.
"QUESTIONNAIRE" means a Selling Securityholder Questionnaire containing
the information specified in Item 507 or 508 of Regulation S-K, as
applicable, of the Securities Act and such other information with
respect to a Holder and the intended distribution of any
Registrable Securities as may be required under the rules and
regulations of the SEC in connection with the Registration
Statement.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration
statement or document.
"REGISTRABLE SECURITIES" means all shares of Company Common Stock, if
any, issued to the Holders as part of the Earnout which are not
retained by the Escrow Holder pursuant to the Escrow Agreement
entered into as part of the Agreement.
"REGISTRABLE SECURITIES THEN OUTSTANDING" means the number of shares of
Company Common Stock that are Registrable Securities and are then
issued and outstanding.
"REGISTRATION STATEMENT" means the registration statement on Form S-3 to
be filed by the Company with the SEC in accord with the terms
hereof, at the time such registration statement becomes effective,
as amended and supplemented by any post-effective amendment or
supplement.
"SEC" or "COMMISSION" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute thereto, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in
effect at the time.
"SELLER REPRESENTATIVE" means Jan Henrik Bryde, who is acting pursuant to
the authority granted to him in the Purchase Agreement.
2
<PAGE>
ARTICLE 2
DEMAND REGISTRATION
2.1 COMPANY'S OBLIGATION. The Company will file a Form S-3 within 30 Business
Days after the issuance of any Registrable Securities covering the registration
of the Registrable Securities held by each Holder. Within 20 Business Days after
the issuance of any Registrable Securities in an Earnout, each Holder must
notify the Company of the number of Registrable Securities, if any, such Holder
wishes to include in such Form S-3 together with a completed Questionnaire. The
Company will use its reasonable best efforts to have declared and keep such Form
S-3 continuously effective, supplemented and amended to the extent necessary to
ensure that it is available for sales of shares of the Company Common Stock
included therein by the Holders, and to ensure that it conforms with the
requirements of this Agreement, the Securities Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
180 days following the date on which such Form S-3 first became effective under
the Securities Act, or such shorter period as will terminate when all
Registrable Securities covered by such Form S-3 have been sold pursuant thereto;
PROVIDED, that such 180-day period will be extended by the number of days of
such period, if any, that fall during a "blackout period" in which employees and
affiliates of the Company may not sell shares of Company stock due to a plan or
program of the Company for avoidance of insider trading if any such affected
employee or affiliate is a Holder whose Registrable Securities are included in
such Form S-3 and as a consequence such employee or affiliate cannot sell
Registrable Securities in such period.
2.2 COMPANY/OTHER SHAREHOLDER PIGGYBACK. The Company may elect to include shares
of Common Stock for its own account or the account of any of its other
shareholders on the Form S-3 filed under this ARTICLE 2.
2.3 DELAYS. With respect to the required registration pursuant to this ARTICLE
2, if a material event has occurred or is likely to occur that has not been
publicly disclosed and this material event, if disclosed, would have a material
adverse effect on the Company and its ability to make the offering, then the
Company will have the right to defer taking action with respect to such filing
for a period of 30 days, PROVIDED, that the Company will not be required to
disclose any such non-public information to the Holders.
2.4 EXPENSES. All expenses incident to the Company's performance of or
compliance with the registration pursuant to ARTICLE 2, including without
limitation all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger expenses,
telephone and delivery expenses, and fees and disbursements of Company counsel
and of independent certified public accountants of the Company, will be borne by
the Company. The Company will also pay its internal expenses, the expense of any
annual audit and the fees and expenses of any Person that it retains. In
addition, the Company agrees to pay all reasonable fees and disbursements of one
counsel to the Holders selling shares in such offering. All fees and commissions
with respect to the sale by any Holder of the Registrable Securities covered by
such Form S-3, and all transfer taxes, if any, will be borne by such Holder.
ARTICLE 3
OBLIGATIONS OF THE COMPANY AND THE HOLDERS
3
<PAGE>
3.1 COMPANY ACTIONS. The Company will use its reasonable best efforts to:
(a) prepare and file with the SEC such amendments and supplements to the
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement;
(b) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as they reasonably may
request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration;
(c) register and qualify the securities covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as will reasonably be requested by the Holders, provided
that the Company will not be required in connection therewith or as a
condition thereto to qualify to do business, subject itself to taxes, or
to file a general consent to service of process in any such states or
jurisdictions;
(d) cause all such Registrable Securities registered pursuant to this
Agreement to be listed on each securities exchange or quotation system on
which the Company's Common Stock is then listed;
(e) provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such
registration;
(f) notify each Holder covered by the Registration Statement at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing; and at the request of the Holders promptly prepare and furnish
to the Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made;
(g) advise each selling Holder promptly (i) when the prospectus or any
prospectus supplement relating to the Form S-3 filed on behalf of such
selling Holders or post-effective amendment has been filed, and, with
respect to such registration statement or any post-effective amendment
thereto, when the same has become effective, (ii) of any request by the
Commission for amendments to such registration statement or amendments or
supplements relating to the registration statement filed on behalf of
such selling Holders to the prospectus or for additional information
relating thereto, or (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the
4
<PAGE>
Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Registration
Securities for offering or sale in any jurisdiction, or the initiation of
any proceeding for any of the preceding purposes.
3.2 FINANCIAL STATEMENTS IN THE ORDINARY COURSE. In connection with the
registration of the Registrable Securities required pursuant to the provisions
hereof, unless required by the SEC, the Company will not be required to include
in the Form S-3 financial statements for any period other than a period for
which the Company regularly prepares financial statements in the regular conduct
of its business, or to furnish audited financial statements for any period other
than its regular fiscal year, or to furnish any such financial statements
(audited or unaudited) at any time other than the time when such financial
statements are made available by the Company in the regular conduct of its
business.
ARTICLE 4
INDEMNIFICATION
4.1 BY THE COMPANY. To the extent permitted by law, the Company will indemnify
and hold harmless each Holder selling shares in the offering against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "1934 ACT"), or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"):
(a) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including any preliminary or
final prospectus contained therein, or any amendments or supplements
thereto; or
(b) the omission or alleged omission to state in the Registration
Statement, including any preliminary or final prospectus contained
therein, or any amendments or supplements thereto, a material fact
required to be stated therein, or necessary to make the statements
therein not misleading in light of the circumstances under which they
were made.
The Company will also reimburse each such Holder for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating,
defending or settling any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the indemnity agreement contained in this SECTION 4.1
will not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent will not be unreasonably withheld, nor will the Company
be liable in any such case for any such loss, claim, damage, liability or action
(i) to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder or (ii) if
the Registrable Securities in respect of which such loss, claim, damage,
liability or action is asserted has been delivered after a sale that was not
accompanied or preceded by a final prospectus.
5
<PAGE>
4.2 BY HOLDERS. To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, officers, each
Person, if any, who controls the Company within the meaning of the Securities
Act and any other Holder selling securities under the Registration Statement
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, or other such
Holder may become subject under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration. Each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, or other Holder in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, that the indemnity agreement contained in this SECTION 4.2
will not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder, which consent will not be unreasonably withheld; PROVIDED, FURTHER, that
the total amounts payable in indemnity by a Holder under this SECTION 4.2 in
respect of any Violation will not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation arises.
4.3 NOTICE. Promptly after receipt by an indemnified party under this ARTICLE 4
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this ARTICLE 4, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party will have
the right to participate in and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; PROVIDED,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) will have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if, in the opinion of such indemnifying party's counsel, representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing of interests between
such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, will relieve such indemnifying party of
any liability to the indemnified party under this ARTICLE 4, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
ARTICLE 4.
4.4 CONTRIBUTION. In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder exercising rights under this Agreement makes a claim for indemnification
pursuant to this ARTICLE 4 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this ARTICLE 4 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
in circumstances for which indemnification is provided under this ARTICLE 4
then, and in each such case, the Company and such Holder will contribute to the
6
<PAGE>
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
Registration Statement bears to the public offering price of all securities
offered by and sold under the Registration Statement, and the Company and other
selling Holders will be responsible for the remaining portion; PROVIDED,
HOWEVER, that, in any such case, (A) no such Holder will be required to
contribute any amount in excess of the net proceeds of all such Registrable
Securities offered and sold by such Holder pursuant to the Registration
Statement and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
ARTICLE 5
OTHER AGREEMENTS
5.1 RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the shares of Common Stock of the Company held by the Holders to the public
without registration, the Company agrees for two years from the Closing Date to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
in accordance with the requirements of Rule 144(c); and
(b) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the 1934 Act (at any time after it has
become subject to such reporting requirements).
ARTICLE 6
GENERAL PROVISIONS
6.1 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
assignable by the Holders and shall inure to the benefit of (i) the Holders'
respective transferees, and upon assignment such transferees will become Holders
under this Agreement, so long as such transferees agree in writing to be bound
by the terms of this Agreement and (ii) any lender in connection with a loan to
a Holder that is secured by Registrable Securities, so long as such lender
agrees in writing to be bound by the terms of this Agreement. Other than as set
forth above, this Agreement will not be assignable.
6.2 AMENDMENT OF RIGHTS. Unless otherwise provided for herein, any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Holders (and/or any of the
Holders' respective permitted successors or assigns) holding Registrable
Securities then outstanding representing a majority of all of the Holders'
Registrable Securities then outstanding.
7
<PAGE>
6.3 NOTICES. All notices, requests, claims, demands and other communications
under this Agreement will be in writing and will be deemed given upon (i)
transmitter's confirmation of a receipt of a facsimile transmission and
telephonic notice or (ii) confirmed delivery by a standard overnight carrier or
when delivered by hand, addressed at the following addresses:
(a) if to a Holder, at such Holder's respective address as set forth
on SCHEDULE A; and
(b) if to the Company, at 740 Calle Plano, Camarillo, CA 93012.
Any party may by notice so given change its address for future notices hereunder
by giving five Business Days advance notice to all other parties.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and is not
intended to confer upon any Person other than the parties hereto and the Holders
any rights or remedies hereunder.
6.5 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflict of laws.
6.6 SEVERABILITY. If any term, provision, covenant or restriction herein is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement will remain in full
force and effect and will in no way be affected, impaired or invalidated.
6.7 CAPTIONS. The captions to sections of this Agreement have been inserted for
identification and reference purposes only and will not be used to construe or
interpret this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
will be deemed an original, but all of which together will constitute one and
the same instrument.
6.9 SPECIFIC PERFORMANCE. The Holders, in addition to being entitled to exercise
all rights provided herein or granted by law, including recovery of damages,
will be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reasons of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
[ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
POWER-ONE, INC., A DELAWARE CORPORATION:
By:
---------------------------------------
Name: Steven J. Goldman
Title: Chairman and Chief Executive Officer
Address: 740 Calle Plano, Camarillo, CA 93012
HOLDERS:
By:
---------------------------------------
Name: Jan Henrik Bryde
Their: Seller Representative
Address: Powec AS
Kobbervikdalen 75
Drammen, Norway N-3007
S-1
<PAGE>
SCHEDULE A
SCHEDULE OF HOLDERS
NAME ADDRESS
Jan Henrik Bryde
Eva Abel
Hakon Hafnor
Arild Sagebo
Bjorg Nystad
Liv Gronvold
Viggo Olsen
Odd Roar Schmidt
Anne Elvegard
Tonje Wendelbor
Terje Nilsen
Inger Solvi Jansen
Arne Strickert
Knut Aven
Knut Ramnaes
Power Invent AS
Power Electronics AS
Olav Hagen
Ove Karlsen
Tinma AS
Trond E. Wennberg
Kjell Ovrebo
Heidi Therese Hoff
Mark Jearum
Susan J. Jearum
<PAGE>
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "AGREEMENT") is dated as of
May 16, 2000, by and between Power-One, Inc., a Delaware corporation
("POWER-ONE"), and _____________ ("SHAREHOLDER"). Shareholder agrees as follows:
A. Pursuant to that certain Amended and Restated Stock Purchase
Agreement, dated as of May __, 2000 (the "PURCHASE AGREEMENT"), by and among
Power-One and each of the other Persons listed on the signature page thereto,
including Shareholder, Power-One will purchase all of the outstanding shares of
capital stock of Powec A.S., a company incorporated and existing under the laws
of Norway, having its registered domicile at Kobbervikdalen 75, 3007 Drammen,
Norway (the "COMPANY").
B. Pursuant to the Purchase Agreement, Power-One will pay amounts
owed to the Norwegian Sellers, including Shareholder, pursuant to SECTION 1.4(c)
thereof, if any (the "EARNOUT CONSIDERATION") to the Escrow Agent for the
benefit of the Norwegian Sellers, which amounts will be disbursed to the
Norwegian Sellers in accordance with the provisions of that certain Escrow
Agreement, dated as of May 16, 2000 (the "ESCROW AGREEMENT"), by and among
Power-One, Jan Henrik Bryde, as the Seller Representative, and Skandinaviska
Enskilda Banken AB, as escrow agent ("ESCROW AGENT").
C. Under the terms of the Purchase Agreement and as a condition to
Power-One's obligations thereunder, Shareholder has agreed to enter into this
Agreement.
1. DEFINITIONS. Capitalized terms used in this Agreement but not
separately defined herein will have the meanings ascribed to them in the
Purchase Agreement and the Escrow Agreement. As used in this Agreement, the
following terms will have the meanings ascribed to them below:
(a) "ARBITRATOR" has the meaning set forth in SECTION 6(k)
and includes the plural.
(b) "BUSINESS" means the business of the Company, including
the design, manufacture, marketing or sale of power semiconductor
products, as conducted by the Company as of the Closing Date.
(c) "FINAL EARNOUT PAYMENT DATE" means the date on which,
pursuant to SECTION 4(c) of the Escrow Agreement, the Escrow Agent
disburses to the Norwegian Sellers the excess, if any, of the Year 2001
Earnout Consideration over the Year 2001 Earnout Escrow Amount.
(d) "FUTURE EARNOUT PAYMENTS" means any amounts to which
Shareholder would otherwise be entitled, absent a breach of this
Agreement, pursuant to SECTION 1.4 of the Purchase Agreement and SECTIONS
4(b) and 4(c) of the Escrow Agreement.
(e) "NON-COMPETITION COVENANTS" has the meaning set forth
in SECTION 2(b).
<PAGE>
(f) "NON-INTERFERENCE COVENANTS" has the meaning set forth
in SECTION 3(a).
(g) "TERM" has the meaning set forth in SECTION 5.
(h) "TERRITORY" means the worldwide marketing area served
by the Company as of the Closing Date.
2. COVENANT NOT TO COMPETE.
(a) NON-COMPETITION COVENANTS. During the Term, Shareholder
covenants and agrees that he will not, directly or indirectly, alone or
as a member of a partnership, association or joint venture, or as an
officer, director, shareholder, consultant, lender, landlord, or employee
of any entity, or in any other capacity, engage in any activity
competitive with the Business within the boundaries of the Territory;
provided that Shareholder may purchase for investment any securities or
interest in any organization engaged in a business similar to the
Business so long as his aggregate holdings in any such organization do
not exceed 2% of its total equity.
(b) SEPARATE COVENANTS. The covenants contained in SECTION
2(a) (the "NON-COMPETITION COVENANTS") will be construed to be divided
into separate and distinct non-competition covenants with respect to (i)
each jurisdiction of the Territory and (ii) each matter or type of
conduct described therein. Each of such divided Non-Competition Covenants
will be separate and distinct from all such other non-competition
covenants with respect to the same or any aspect of the Business.
(c) JUDICIAL LIMITATION. Notwithstanding the foregoing, if
at any time, despite the express agreement of Power-One and Shareholder,
an Arbitrator holds that any portion of any Non-Competition Covenant is
unenforceable by reason of its extending for too great a period of time
or over too great a geographical area or by reason of its being too
extensive in any other respect, such Non-Competition Covenant will be
interpreted to extend only over the maximum period of time, maximum
geographical area, or maximum extent in all other respects, as the case
may be, as to which it may be enforceable, all as determined by such
Arbitrator.
3. NON-INTERFERENCE.
(a) COVENANTS. During the Term, Shareholder covenants and
agrees that he will not, directly or indirectly, alone or as a member of
a partnership, association or joint venture, or as an officer, director,
shareholder, consultant, lender, landlord, or employee of any entity, or
in any other capacity, (i) interfere with the Business by soliciting,
inducing, attempting to solicit or induce, or influence any employees,
officers, directors, agents, representatives, contractors, suppliers,
distributors, third party payors or referral sources of the Company to
terminate their positions with the Company to become an employee, agent
or independent contractor to or for any other entity whose business is
similar to the Business; (ii) induce or attempt to induce any party to
any contract with the Company to terminate or materially and adversely
modify its relationship with the Company; or (iii) in any other manner
interfere with, disturb, disrupt, decrease, or
2
<PAGE>
otherwise jeopardize the Business or do anything that may diminish the
trade, Business or good will of the Company (the "NON-INTERFERENCE
COVENANTS").
(b) JUDICIAL LIMITATION. Notwithstanding the foregoing, if
at any time, despite the express agreement of Power-One and Shareholder,
an Arbitrator holds that any portion of any Non-Interference Covenant is
unenforceable by reason of its extending for too great a period of time
or by reason of its being too extensive in any other respect, such
covenant will be interpreted to extend only over the maximum period of
time or to the maximum extent in all other respects, as the case may be,
as to which it may be enforceable, all as determined by such Arbitrator.
4. EFFECT OF BREACH ON PAYMENT OF EARNOUT CONSIDERATION. If at any
time during the Term, Shareholder is in breach of this Agreement, Shareholder
authorizes Escrow Agent to pay any Future Earnout Payments, if any, to Power-One
in accordance with the provisions of SECTION 8 of the Escrow Agreement.
5. TERM OF AGREEMENT. The term (the "TERM") of this Agreement
will begin on the Closing Date and end on the Final Earnout Payment Date.
6. OTHER MATTERS.
(a) BINDING EFFECT; PARTIES IN INTEREST. Subject to the
other provisions of this Agreement, this Agreement is binding on and
benefits only the parties and their respective heirs, executors,
administrators, personal representatives, permitted successors and
assigns. Nothing in this Agreement gives any rights or remedies to any
Person other than the parties and their respective heirs, executors,
administrators, personal representatives, permitted successors and
assigns, nor does anything in this Agreement relieve or discharge any
obligation or liability of any third Person to any party. No provision of
this Agreement gives any third Person any right of subrogation or action
over or against any party to this Agreement.
(b) ASSIGNMENT. No party may assign this Agreement without
the prior written consent of the other party to this Agreement, except
that Power-One may assign this Agreement without the prior written
consent of the other party in connection with the sale of all or
substantially all of the assets or stock of Power-One, or the merger,
consolidation or similar reorganization of Power-One.
(c) AMENDMENTS; WAIVERS. All parties must approve any
amendment to this Agreement. Any waiver of any right or remedy requires
the consent of the party waiving it. Every amendment or waiver must be in
writing and designated as an amendment or waiver, as appropriate. No
failure by any party to insist on the strict performance of any provision
of this Agreement, or to exercise any right or remedy, will be deemed a
waiver of such performance, right or remedy, or of any other provision of
this Agreement.
3
<PAGE>
(d) INTERPRETATION. If any claim is made by a party
relating to any conflict, omission or ambiguity in the provisions of this
Agreement, no presumption or burden of proof or persuasion will be
implied because this Agreement was prepared by or at the request of any
party or its counsel. The parties waive any statute or rule of Law to the
contrary. Unless the context otherwise requires: (i) a term has the
meaning assigned to it; (ii) "or" is not exclusive; (iii) words in the
singular include the plural, and words in the plural include the
singular; (iv) "herein," "hereof" and other words of similar import refer
to this Agreement as a whole and not to any particular Section,
Subsection, paragraph, clause, or other subdivision; and (v) "including"
and "includes," when following any general provision, sentence, clause,
statement, term or matter, will be deemed followed by ", but not limited
to," and ",but is not limited to," respectively.
(e) GOVERNING LAW. This Agreement is to be construed and
enforced in accordance with the laws of Norway (without reference to its
rules as to conflicts of law).
(f) ATTORNEYS' FEES AND COSTS. If any legal action,
arbitration or other proceeding is brought to enforce or interpret this
Agreement or matters relating to it in accordance with SECTION 6(k), the
substantially prevailing party will be entitled to recover from the other
party reasonable attorneys' fees and other costs incurred in such action,
arbitration or proceeding, in addition to any other relief to which the
prevailing party is entitled.
(g) NOTICES. All notices (including communications required
or permitted) under this Agreement must be in writing and must be
delivered: (i) in person; (ii) by registered, express or certified mail,
postage prepaid, return receipt requested; (iii) by a generally
recognized courier or messenger service that provides written
acknowledgement of receipt by the addressee; or (iv) by facsimile or
other generally accepted means of electronic transmission with a
verification of delivery. Notices are deemed delivered at the earlier of
the date such notice is actually received by a party or two days after
such notice is given. Notices must be given at the addresses below, but
any party may furnish, from time to time, other addresses for notices to
it.
If to Power-One, at: with a copy to:
740 Calle Plano O'Melveny & Myers LLP
Camarillo, CA 93012 1999 Avenue of the Stars, Suite 700
Telephone: (805) 987-8741 Los Angeles, CA 90067
Telecopier: (805) 484-0445 Telephone: (310) 553-6700
Attn: Steven J. Goldman Telecopier: (310) 246-6779
Attn: Kendall R. Bishop, Esq.
If to Shareholder, at the address set forth below his name on the
signature page.
The addresses to which notices or demands are to be given may be
changed from time to time by notice served as provided above. Delivery of notice
to the copied party above is not notice to Power-One.
4
<PAGE>
(h) SPECIFIC PERFORMANCE. The parties agree that
irreparable damage would occur if any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties will
be entitled to specific performance of the terms hereof in addition to
any other remedy to which they are entitled at law or equity.
(i) COUNTERPARTS. This Agreement may be signed in several
counterparts. Each of them will be deemed an original, and all of them
will constitute one agreement.
(j) SECTIONS AND OTHER HEADINGS. Sections or other headings
contained in this Agreement are for reference purposes only and will not
affect in any way the meaning or interpretation of this Agreement.
(k) ARBITRATION OF DISPUTED MATTERS. Except as otherwise
provided in this Agreement, any controversy or dispute arising out of
this Agreement, the interpretation of any of its provisions, or the
action or inaction of any party under this Agreement, will be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules (as finally determined pursuant to this
Section, the "ARBITRATOR" or collectively the "ARBITRATORS," as the case
may be). Any such arbitration will be held in Oslo, Norway and the
proceedings will be conducted in the English language. Any award or
decision obtained from any such arbitration proceeding will be final and
binding on the parties, and judgment upon any such award may be entered
in and enforced by any court having jurisdiction. No action at law or in
equity based upon any claim arising out of or related to this Agreement
will be instituted in any court by any party except (i) an action to
compel arbitration pursuant to this SECTION 6(k) or (ii) an action to
enforce an award obtained in an arbitration proceeding in accordance with
this SECTION 6(k).
(l) SEVERABILITY. If any provision of this Agreement is
held to be unenforceable for any reason, it will be adjusted rather than
voided, if possible, to achieve the intent of the parties to the extent
possible. In any event, all other provisions of this Agreement will be
deemed valid and enforceable to the extent possible.
[Remainder of page intentionally left blank]
5
<PAGE>
IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed on its behalf as of the date first above written.
POWER-ONE, INC.
By:
--------------------------------
Name:
Title:
SHAREHOLDER
------------------------------------
Name:
Address:
S-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 47,603
<SECURITIES> 0
<RECEIVABLES> 56,097
<ALLOWANCES> 1,933
<INVENTORY> 67,935
<CURRENT-ASSETS> 176,366
<PP&E> 75,104
<DEPRECIATION> 19,042
<TOTAL-ASSETS> 294,570
<CURRENT-LIABILITIES> 40,505
<BONDS> 3,798
0
0
<COMMON> 24
<OTHER-SE> 247,517
<TOTAL-LIABILITY-AND-EQUITY> 294,570
<SALES> 77,012
<TOTAL-REVENUES> 77,012
<CGS> 44,956
<TOTAL-COSTS> 44,956
<OTHER-EXPENSES> 35,836
<LOSS-PROVISION> 90
<INTEREST-EXPENSE> 312
<INCOME-PRETAX> (3,209)
<INCOME-TAX> (1,720)
<INCOME-CONTINUING> (1,489)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (1,489)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
