<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 28, 1995
------------------------------
NEWPORT CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-1649 094-0849175
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File Number) Identification No.)
1791 Deere Avenue, Irvine, CA 92714
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 863-3144
----------------------------
Not Applicable
- ------------------------------------------------------------------------------
(Former name or former address, if changed, since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On February 28, 1995 Newport Corporation (the "Company" or
"Newport") completed the purchase all of the shares of RAM Optical
Instrumentation Inc. ("ROI"). ROI is involved in the manufacture, sale,
maintenance, marketing and distribution of precision video-based measurement and
inspection systems, optical video probes, fiber optic illuminators and
accessories. The Company intends to continue to operate ROI in substantially the
same business and maintain it as a wholly-owned subsidiary of the Company. The
Company will change the fiscal year of ROI from March 31 to December 31 to
conform with the fiscal year end of the Company.
ROI was acquired by exchange of 1,251,000 shares of Newport common
stock for all of the common stock of ROI, an exchange ratio of 20.85 shares of
Newport common stock for each share of ROI common stock. The purchase price was
determined by arms-length negotiation between the parties. The acquisition will
be accounted for as a pooling of interests.
Pursuant to the Stock Purchase Agreement (as hereinafter defined),
the Company agreed to use its best efforts to file a registration statement on
Form S-3 under the Securities Act of 1933, as amended, to register the shares of
the Company's Common Stock issued to the Sellers (as hereinafter defined) in
connection with the acquisition. In addition, the Company has agreed to use its
best efforts to keep such registration statement effective for a period of three
(3) years following the closing of the acquisition.
The foregoing description of the purchase of ROI is qualified in its
entirety by reference to the Stock Purchase Agreement dated as of February 14,
1995, between Newport Corporation as Purchaser, RAM Optical Instrumentation,
Inc. and Mark G. Arenal, Harry J. Brown, The Harry & Patricia Brown Living Trust
1994, John G. Hartwell, and The John G. Hartwell Family Trust Established 1/3/90
as Sellers, a copy of which agreement is attached hereto as Exhibit 2.1.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
Audited Financial Statements of ROI as of March 31, 1994 and
for the year then ended.
Unaudited Financial Statements of ROI as of December 31, 1994
and for the nine-month periods ended December 31, 1994 and
1993.
(b) Pro Forma Financial Information.
--------------------------------
The pro forma financial information required to be filed under
this Item are not available and, accordingly, are not
included herein. By amendment to this Report to be filed as
soon as practicable, but in any event within sixty days of
this Report, the Company plans to submit such pro forma
information.
(c) Exhibits.
---------
Exhibit
Number
------
2.1 Stock Purchase Agreement dated as of February 14, 1995,
among Newport Corporation as Purchaser, RAM Optical
Instrumentation, Inc. and Mark G. Arenal, Harry J. Brown,
The Harry & Patricia Brown Living Trust 1994, John G.
Hartwell, and The John G. Hartwell Family Trust Established
1/3/90 as Sellers, (Schedules and Exhibits omitted - copies
of any Schedules and/or Exhibits omitted will be provided
to the Commission upon request).
99.1 Audited Financial Statements of ROI as of March 31,
1994 and for the year then ended (referenced in Item
7 (a) above).
99.2 Unaudited Financial Statements of ROI as of December 31,
1994 and for the nine-month periods ended December 31, 1994
and 1993 (referenced in Item 7 (a) above).
3
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWPORT CORPORATION
Date: March 14, 1995 By:____________________________
Robert C. Hewitt
Vice President and
Chief Financial Officer
4
<PAGE>
EXHIBIT INDEX
-------------
The following exhibits are attached hereto and incorporated herein by reference:
<TABLE>
<CAPTION>
Sequentially
Numbered
Page
----
<S> <C> <C>
2.1 Stock Purchase Agreement dated as of
February 14, 1995, among Newport Corporation
as Purchaser, RAM Optical Instrumentation,
Inc. and Mark G. Arenal, Harry J. Brown,
The Harry & Patricia Brown Living Trust 1994,
John G. Hartwell, and The John G. Hartwell
Family Trust Established 1/3/90 as Sellers,
(Schedules and Exhibits omitted - copies of
any Schedules and/or Exhibits omitted will be
provided to the Commission upon request). 6
99.1 Audited Financial Statements of ROI as of
March 31, 1994 and for the year then ended
(referenced in Item 7 (a) above). 37
99.2 Unaudited Financial Statements of ROI as of
December 31, 1994 and for the nine-month
periods ended December 31, 1994 and 1993
(referenced in Item 7 (a) above). 49
</TABLE>
5
<PAGE>
EXHIBIT 2.1
-----------
STOCK PURCHASE AGREEMENT
BETWEEN
NEWPORT CORPORATION
AS PURCHASER,
RAM OPTICAL INSTRUMENTATION, INC.
AND
MARK G. ARENAL, HARRY J. BROWN,
THE HARRY & PATRICIA BROWN LIVING TRUST 1994,
JOHN G. HARTWELL, AND
THE JOHN G. HARTWELL FAMILY TRUST ESTABLISHED 1/3/90
AS SELLERS
FEBRUARY 14, 1995
Exhibit 2.1 to Form 8-K
Newport Corporation
File number 0-1649
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Acquisition of RAM Shares....................................... 1
1.1 Tax-free Reorganization.................................... 1
1.2 Sale and Transfer of RAM Shares............................ 1
1.3 Closing.................................................... 1
2. Consideration from Newport for the RAM Shares................... 1
3. Representations and Warranties of RAM and the Sellers........... 2
3.1 Authority.................................................. 2
3.2 Organization and Good Standing; Subsidiaries............... 2
(a) Organization and Good Standing...................... 2
(b) Subsidiaries........................................ 3
3.3 Capital Stock and Title to Shares.......................... 3
(a) Capital Stock....................................... 3
(b) Title to Shares..................................... 3
3.4 Financial Condition........................................ 3
(a) Financial Statements................................ 3
(b) Absence of Certain Changes.......................... 4
(c) Minimum Net Tangible Book Value..................... 5
3.5 Property................................................... 5
(a) Real Property Owned or Leased....................... 5
(b) Fixed Assets Owned or Leased........................ 5
(c) Title and Quiet Enjoyment........................... 6
(d) Secured Obligations................................. 6
(e) Condition of Properties............................. 6
(f) Environmental Matters............................... 6
(g) Accounts Receivable................................. 7
(h) Inventories......................................... 7
(i) Trade Names and Trademarks; Other Intangibles....... 8
(j) Patents and Patent Rights........................... 8
(k) Trade Secrets....................................... 8
3.6 Contracts and Agreements................................... 9
3.7 Labor and Employment Agreements............................ 9
3.8 Agreement Will Not Cause Breach............................ 10
3.9 Insurance Coverage......................................... 10
3.10 Taxes and Tax Returns...................................... 10
3.11 Compliance with Law........................................ 10
3.12 Brokers' and Finders' Fees................................. 11
3.13 Full Disclosure............................................ 11
3.14 Litigation and Proceedings................................. 11
3.15 Certain Transactions....................................... 12
3.16 Investment Representation.................................. 12
4. Representations and Warranties of Newport....................... 12
4.1 Organization, Standing and Power........................... 12
4.2 Authority of Newport....................................... 12
4.3 Brokers and Finders........................................ 13
4.4 Compliance with Laws and Regulations....................... 13
4.5 SEC Reports of Newport..................................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.6 Newport's Financial Statements............................. 13
4.7 Absence of Certain Changes................................. 13
4.8 Litigation................................................. 13
4.9 Representations and Warranties............................. 13
4.10 Investment Representation.................................. 13
4.11 Capitalization............................................. 14
4.12 Newport Stock.............................................. 14
4.13 Brokers' and Finders' Fees................................. 14
5. Conduct of Business Pending the Closing......................... 14
5.1 Access..................................................... 14
5.2 Conduct of Company's Business.............................. 14
(a) Operation of Business............................... 14
(b) Organization........................................ 15
(c) Insurance........................................... 15
(d) Lawsuits, Claims.................................... 15
(e) Certain Changes..................................... 15
(f) Condition of Assets................................. 15
(g) Agreements..................... .................... 15
(h) Consents; Compliance with Laws...................... 16
(i) Taxes............................................... 16
(j) Dividends, etc...................................... 16
(k) Corporate Matters................................... 16
(l) Liabilities and Expenses............................ 17
5.3 Pooling of Interests....................................... 17
6. Obligations Pending and Following the Closing................... 17
6.1 Consents................................................... 17
6.2 Further Assurances......................................... 17
6.3 Notice of Breach........................................... 17
6.4 Investment Representation Agreement........................ 17
6.5 Form 8-K................................................... 17
6.6 Restrictions on Transfer of Newport Shares................. 17
7. Conditions Precedent to the Obligations of Newport.............. 18
7.1 Representations and Warranties............................. 18
7.2 Absence of Litigation...................................... 18
7.3 Performance of Obligations................................. 18
7.4 No Adverse Changes......................................... 18
7.5 Governmental Approvals and Permits......................... 18
7.6 Other Consents and Approvals............................... 18
7.7 Certificates............................................... 19
7.8 Opinion of Counsel......................................... 19
7.9 No Defaults................................................ 19
7.10 Additional Instruments..................................... 19
7.11 Noncompetition Agreements.................................. 19
7.12 Exchange of Option......................................... 19
7.13 Pooling of Interests....................................... 19
7.14 Payment of Expenses........................................ 20
7.15 Phase I Environmental Survey............................... 20
8. Conditions Precedent to Obligations of the Sellers.............. 20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.1 Representations and Warranties............................ 20
8.2 Performance............................................... 20
8.3 Employment Agreements..................................... 20
8.4 Certificates.............................................. 20
8.5 Opinion of Counsel........................................ 21
8.6 Additional Instruments.................................... 21
8.7 Newport Shares............................................ 21
8.8 Absence of Certain Changes or Events...................... 21
8.9 No Litigation............................................. 21
8.10 Further Assurances........................................ 21
8.11 Exchange of Option........................................ 21
9. Covenants of Newport and RAM.................................... 21
9.1 Profit Sharing and Bonus Payments......................... 21
9.2 Registration of Newport Shares............................ 22
10. Indemnification................................................. 23
10.1 Sellers' Indemnity........................................ 23
10.2 Newport's Indemnity....................................... 23
10.3 Defense of Claims......................................... 23
10.4 Limitations............................................... 24
11. General Provisions.............................................. 24
11.1 Expenses.................................................. 24
11.2 Notices................................................... 24
11.3 Successors and Assigns.................................... 25
11.4 Third Party Beneficiaries................................. 25
11.5 Counterparts.............................................. 25
11.6 Governing Law............................................. 25
11.7 Captions.................................................. 25
11.8 Waiver and Modification................................... 25
11.9 Attorneys' Fees........................................... 25
11.10 Entire Agreement.......................................... 26
11.11 Severability.............................................. 26
11.12 Nature and Survival of Representations and Warranties..... 26
11.13 Termination............................................... 26
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Exhibit Title
- ------- -----
<S> <C>
A Sellers
B Form of Investment Representation Letter
C Form of Opinion of Sellers' Counsel
D Form of Noncompetition Agreement
E Form of Nonstatutory Option Agreement
F-1 Employment Agreement with Mark G. Arenal
F-2 Employment Agreement with Harry J. Brown III
F-3 Employment Agreement with John G. Hartwell
F-4 Employment Agreement with Robert Yates
G Form of Opinion of Newport's Counsel
H Form of Indemnification Agreement
Schedules
- ---------
Seller's Disclosure Schedules
Newport's Schedule 4.2
</TABLE>
iv
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of this 14th day of February, 1995, among NEWPORT
CORPORATION, a Nevada corporation ("Newport"), RAM OPTICAL INSTRUMENTATION,
INC., a California corporation ("RAM") and the persons designated as
"Sellers" on Exhibit A attached hereto (hereinafter each such person is
sometimes referred to individually as "Seller" and collectively as
"Sellers," and RAM and the Sellers are sometimes collectively referred to
as the "Selling Parties").
R E C I T A L S :
A. Sellers own all of the issued and outstanding shares of
capital stock of RAM Optical Instrumentation, Inc., a California
corporation ("RAM").
B. Newport desires to acquire all of the issued and outstanding
shares of common stock of RAM on the terms and provisions hereof.
NOW, THEREFORE, in consideration of the mutual promises and
agreements of the parties herein contained, the parties hereby agree as
follows:
1. Acquisition of RAM Shares
-------------------------
1.1 Tax-free Reorganization. Newport, RAM and the Sellers adopt this
Agreement as a plan of reorganization under Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code").
1.2 Sale and Transfer of RAM Shares. At the Closing (as hereinafter
defined), each of the Sellers shall sell, transfer and convey to Newport,
and Newport shall acquire, the shares of common stock, no par value per
share, of RAM set forth opposite the name of each such Seller on Exhibit A
(hereinafter the shares owned by the Sellers as reflected on Exhibit A are
sometimes referred to as the "RAM Shares"), free and clear of all liens,
claims, encumbrances, pledges, options, security interests and any other
adverse interests. At the Closing (as defined below), each Seller shall
deliver to Newport all certificates evidencing the RAM Shares owned by him.
1.3 Closing. The Closing of the purchase and sale of the RAM Shares
pursuant to this Agreement shall take place at 10:00 a.m. on February 28,
1995 at the offices of Stradling, Yocca, Carlson & Rauth, 660 Newport
Center Drive, Suite 1600, Newport Beach, California, or at such other time
and place as may be mutually agreed upon among the parties hereto in
writing.
2. Consideration from Newport for the RAM Shares.
---------------------------------------------
Newport covenants and agrees to deliver an aggregate of 1,251,000
shares of Newport's Common Stock, which shares shall be allocated among the
Sellers as set forth opposite the name of each Seller on Exhibit A (such
shares are hereinafter sometimes referred to as the "Newport Shares"). All
shares of Common Stock of Newport to be delivered pursuant to this Section
2 shall be delivered at the Closing.
3. Representations and Warranties of RAM and the Sellers.
-----------------------------------------------------
Subject to the exceptions set forth in the schedules attached to
this Agreement (the "Disclosure Schedules"), RAM and the Sellers hereby
jointly and severally (except for the representations and warranties in
Section 3.1 (as they relate to each Seller) and Section 3.3(b), which are
made severally, not jointly) represent and warrant as follows:
1
<PAGE>
3.1 Authority. Each Seller has the full legal right and capacity to
execute and deliver, and perform such Seller's obligations under, this
Agreement and such Seller's Non-Competition Agreement. RAM possesses full
corporate power and authority to execute and deliver, and perform RAM's
obligations under, this Agreement. RAM has taken, or will have taken prior
to the Closing, all actions necessary to authorize the execution and
delivery of this Agreement and the performance of all obligations to be
performed by it under this Agreement. This Agreement has been duly
executed and delivered by RAM and each Seller and the Non-Competition
Agreements will be executed by each Seller at the Closing. This Agreement
constitutes a legal, valid and binding obligation of RAM and each Seller
enforceable against RAM and each such Seller in accordance with its terms,
and each Non-Competition Agreement, when executed and delivered by the
respective Seller, will constitute the legal, valid and binding obligations
of such Seller, enforceable against such Seller in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of
creditors generally and by general equitable principles. Subject to any
exceptions set forth in Schedule 3.1 hereto, no further filings, notices,
actions, approvals or consents are necessary on the part of RAM or any
Seller, nor is it necessary for RAM or any Seller to obtain any action,
approvals or consents by or from any third persons, governmental or other,
to enable RAM or such Seller to enter into or perform its respective
obligations under this Agreement.
3.2 Organization and Good Standing; Subsidiaries.
--------------------------------------------
(a) Organization and Good Standing. RAM is a corporation duly
organized, validly existing and in good standing under the laws of the
state of California, and has full corporate power and authority to carry on
its business as it is now conducted and is entitled to own, lease and/or
operate the properties and assets which it now owns. RAM is authorized to
do business in each jurisdiction in which the character of the properties
owned by it or the nature of its business makes such authorization
necessary and where the failure to be so qualified would have a material
adverse effect on RAM or its business. Sellers have made available to
Newport true and correct copies of (i) the Articles of Incorporation of RAM
and all amendments thereto; (ii) the Bylaws of RAM (duly certified by the
corporate secretary of RAM) and all amendments thereto; (iii) the minute
and stock books of RAM; and (iv) any agreements relating to the RAM Shares
or any other securities of RAM. No actions or proceedings have been
commenced or threatened which, if adversely determined, and no agreements
or transactions have been entered into by the Company or any of the Sellers
which, if consummated, would give rights to any person, other than Newport,
in or to acquire any of the RAM Shares or any other shares of capital
stock, or any of the assets, of RAM or otherwise interfere with the
consummation of the transactions contemplated by this Agreement, or would
involve an amendment to any of the foregoing documents or a
recapitalization or reorganization of RAM or a redemption of any of its
equity securities.
(b) Subsidiaries. RAM does not own or control, directly or
indirectly, any outstanding stock or other equity interest in any joint
venture, corporation, partnership, or proprietorship.
3.3 Capital Stock and Title to Shares
---------------------------------
(a) Capital Stock. The authorized capital stock of RAM consists, and
as of the Closing will consist, solely of 1,000,000 shares of Common Stock,
no par value per share, of which 60,000 shares are issued and outstanding
at the date hereof and will be outstanding as of the Closing. No other
class of capital stock, or instrument that is convertible or exercisable
into or exchangeable for such stock, has been authorized or issued. All of
the issued and outstanding shares of RAM are validly issued and
outstanding, fully paid and non-assessable, are owned beneficially and of
record by Sellers, and were not issued in violation of any United States
federal or state securities laws or preemptive rights of any shareholder or
in violation or contravention of any agreement to which a Seller is, or
was, a party. Except as set forth on Schedule 3.3, there are no
outstanding options or warrants to purchase, nor any securities convertible
or exercisable into, shares of capital stock of RAM, nor are there any
agreements, commitments or understandings, oral or written, providing for
the grant of, subscriptions, options or other rights to purchase or
receive, or obligating RAM to issue, sell or otherwise transfer or to
repurchase or redeem, any shares of capital stock of RAM.
2
<PAGE>
(b) Title to Shares. Each Seller is, and at the Closing will be, the
owner, beneficially and of record, of the RAM Shares set forth opposite
such Seller's name on Exhibit A. All of the RAM Shares are being
transferred to Newport, free and clear of all liens, claims, encumbrances,
security interests, pledges, equities, options, charges, restrictions and
defects in title of any nature whatsoever, other than restrictions imposed
by federal and applicable state securities laws which do not constitute an
impediment to the transfer described in this Agreement. Each Seller has,
and at the Closing will have, full legal right, capacity and power to sell
and transfer the RAM Shares to Newport without obtaining the consent or
approval of any other person or governmental authority. No Seller has
granted, and as of the Closing no Seller shall have granted and no Seller
is a party to, and as of the Closing no Seller shall be a party to, any
agreements, commitments or understandings providing for the grant of, any
options to purchase or rights to acquire any of the RAM Shares or
obligating a Seller to sell any of the RAM Shares. The Sellers have not,
in the past five (5) years, purchased or otherwise acquired, and will not
be acquiring between the date hereof and the Closing, any shares of capital
stock of the Company or any equity interest in any subsidiary of the
Company from any other person or entity.
3.4 Financial Condition.
-------------------
(a) Financial Statements. RAM and the Sellers have delivered to
Newport unqualified audited financial statements of RAM consisting of a
balance sheet and a statement of income and retained earnings, and a
statement of cash flows, as at, and for the fiscal year ended March 31,
1994, as well as unaudited financial statements of RAM consisting of a
balance sheet and a statement of income and retained earnings, and a
statement of cash flows, as at, and for the nine-month period ended
December 31, 1994 (the foregoing financial statements are referred to
herein collectively as the "Financial Statements"). Except as otherwise
set forth in the Financial Statements, in the notes contained therein, or
in Schedule 3.4 hereto, all of the Financial Statements (i) were prepared
in accordance with generally accepted accounting principles consistently
applied ("GAAP"); and (ii) present fairly RAM's financial condition and the
results of operations as at the relevant dates thereof and for the periods
covered thereby. RAM does not have any liabilities or obligations which
are, individually or in the aggregate, material, whether due or to become
due, absolute, contingent or otherwise, which are not reflected in the
Financial Statements, other than liabilities or obligations incurred after
December 31, 1994 in the ordinary course of business consistent with past
practices.
(b) Absence of Certain Changes. Except as disclosed in Schedule 3.4
hereto, since December 31, 1994, the business of RAM has been conducted in
the ordinary course, in the same manner as theretofore conducted, and there
has not been, (i) any material transaction not in the ordinary course of
business; (ii) any material adverse change in financial condition, results
of operations, assets, liabilities or business; (iii) any material damage,
destruction or loss, whether or not covered by insurance, adversely
affecting the financial condition, properties or business of RAM; (iv) any
sale or transfer of any assets other than in the ordinary course of
business, or any waiver, release or cancellation of any debts owed to or
rights or claims; (v) the discontinuance of any business or operation
conducted as of December 31, 1994; (vi) any mortgage, pledge or subjection
to lien, charge or encumbrance of any kind, except liens for taxes not due,
on or affecting any assets which, individually or collectively, are
material; (vii) the execution of or commencement of performance under any
material contract or agreement not in existence on December 31, 1994 or any
amendment, termination or revocation of any material contract or agreement
to which RAM is, or as of December 31, 1994 was, a party or of any material
license, permit or franchise required for the continued operation of any
business operated by RAM; (viii) any increase in the compensation payable
or to become payable to any of the officers, directors, employees, agents
or independent contractors, other than increases in the ordinary course of
business and consistent with past practices, or the awarding or payment of
any bonus to any of such officers, directors, employees, agents or
independent contractors, or the adoption of any employee benefit plans;
(ix) any declaration, setting aside or payment of any dividends or
distributions in respect of the capital stock of RAM, or any direct or
indirect redemption, repurchase or other acquisition of any such stock or
any agreement to take such action; (x) any issuance or commitment to issue
any shares of Common Stock or other equity securities, or any options,
warrants, rights to purchase or securities convertible into any capital
stock or other equity securities of RAM (except pursuant to this
Agreement); (xi) any
3
<PAGE>
indebtedness incurred for borrowed money or any commitment to borrow money,
any capital expenditure or capital commitment requiring an expenditure of
monies in the future, any incurrence of a contingent liability or any
guaranty or commitment to guaranty the indebtedness of others, other than
customary transactions in the ordinary course of business not in excess of
Twenty Thousand Dollars ($20,000) in the aggregate (in the event such
transactions, in the aggregate, total more than such amount, RAM and the
Sellers shall disclose such fact on Schedule 3.4 hereto, listing
individually any transaction of over Ten Thousand Dollars ($10,000) (but
excluding any commitments or expenditures for demonstration equipment) and
other than borrowings under existing credit lines of RAM; (xii) any labor
or employee disputes which had, or may have, a material adverse effect on
RAM's business; (xiii) any changes in accounting methods or practices;
(xiv) any re-evaluations of any assets; (xv) any payment of any obligation
or liability other than current liabilities and obligations reflected in
the Financial Statements and current liabilities and obligations incurred
in the ordinary course of business since December 31, 1994, which, in the
aggregate, were material in amount; (xvi) any adoption of any new or any
increase in any existing profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement or other employee benefit plan,
payment or arrangement made to, for or with any officer, director or
employee; (xvii) any accrual or arrangement for or payment of any bonus or
special compensation of any kind or of any severance or termination pay,
except as disclosed in Schedule 3.4 hereto or as contemplated hereby; or
(xviii) any claim or threat of liability for any damages or alleged damages
for any actual or alleged negligence or other tort or breach of contract
which are in the aggregate material.
(c) Minimum Net Tangible Book Value. The Financial Statements shall
show a Net Tangible Book Value (as determined in accordance with GAAP) as
of December 31, 1994 of at least $2,050,000.
3.5 Property.
--------
(a) Real Property Owned or Leased. RAM owns no real property.
Schedule 3.5 sets forth the only real property leases to which RAM is a
party. True, correct and complete copies of all such leases have been
delivered to Newport, together with the names and addresses of the lessors
thereunder. RAM is not, and as of the Closing will not be, in default, and
no facts or circumstances have occurred which through the passage of time
or the giving of notice, or both, would constitute a default, under any of
such leases. In addition, RAM has delivered to Newport true, correct and
complete copies of all environmental studies and reports in the possession
of the Company or any Seller with respect to any of the real properties
described on Schedule 3.5. To the best knowledge of the Sellers and RAM,
all of the facilities on the real properties listed on Schedule 3.5 are
equipped in substantial conformity with laws and governmental regulations
applicable to the Company's business and the zoning of each parcel of real
property permits the presently existing improvements and continuation of
the business presently conducted thereon and no changes therein are pending
or are threatened, and no condemnation or similar proceedings are pending
or threatened against any of the real properties set forth on Schedule 3.5.
None of the leases contains any provisions which are not presently in
effect, but which are scheduled to become effective after the date hereof
and which would materially (i) hinder or prevent RAM from continuing to use
any of the properties which are the subject of such leases in the manner in
which they are currently used or (ii) impose any additional costs (other
than scheduled rental increases) or other requirements as a condition to
their continued use which are not currently in effect.
(b) Fixed Assets Owned or Leased. RAM and the Sellers have provided
to Newport a complete and accurate description of all fixed assets used by
RAM in connection with its business or otherwise owned or leased by RAM,
which description is set forth on Schedule 3.5 under the heading "Schedule
of Manufacturing Equipment." Schedule 3.5 also sets forth a list of all
fixed asset leases under which RAM is a lessee of any such fixed assets.
True, correct and complete copies of all such leases have been delivered to
Newport, together with the names and addresses of the lessors thereunder.
RAM is not, and as of the Closing will not be, in default, and no facts or
circumstances have occurred which through the passage of time or the giving
of notice, or both, would constitute a default, under any of such leases.
None of the leases contains any provisions which are not presently in
effect, but which are scheduled to become effective after the date hereof
and which
4
<PAGE>
would materially (i) hinder or prevent RAM from continuing to use any of
the assets which are the subject of such leases in the manner in which they
are currently used or (ii) impose any additional costs (other than
scheduled rental increases) or other requirements as a condition to their
continued use which are not currently in effect.
(c) Title and Quiet Enjoyment. Except for real or personal
properties which are held under the leases listed in Schedule 3.5 hereto
(the "Leased Assets"), RAM is the owner of, and has good and marketable
title to, all of its assets, which include, without limitation, the assets
described in Schedule 3.5 hereto and the assets included in the Financial
Statements, free and clear of restrictions on or conditions to transfer or
assignment, and free and clear of any mortgages, liens, pledges, charges,
encumbrances, equities, claims, and covenants, conditions or restrictions,
except for (i) those disclosed in the Financial Statements; (ii) the lien
of current taxes not yet due and payable; (iii) those disclosed in Schedule
3.5; and (iv) minor encumbrances and covenants, conditions and restrictions
that, in the aggregate, are not material in amount and do not detract from
or interfere with the present use of any property, nor impair the business
operations of RAM. Except as set forth on Schedule 3.5, all of the assets
of RAM that are needed for the conduct of its business or operations, as
presently conducted, are in the exclusive possession and control of RAM and
RAM has the unencumbered right to use such assets without interference from
others. The assets of RAM constitute all of the material assets,
properties, rights, privileges and interests necessary for the operation of
RAM's business substantially in the same manner as such business has been
conducted by RAM during the past twelve (12) months.
(d) Secured Obligations. RAM is not, nor has it received any notice
asserting that it is, in default of any of the obligations secured by
mortgages, liens or encumbrances on its assets. Except as set forth on
Schedule 3.5, no obligation secured by any such mortgage, lien or other
encumbrance will be accelerated or otherwise come into default as the
result of the execution of this Agreement or the performance of the
transactions contemplated by this Agreement.
(e) Condition of Properties. To the best knowledge of RAM and the
Sellers, all tangible properties and assets, real, personal and mixed, are
in good working condition, normal and reasonable wear and tear excepted.
(f) Environmental Matters. Except as set forth on Schedule 3.5, RAM
has complied, and the operation of its business is in compliance, in all
material respects, with all federal, state, local and regional statutes,
laws, ordinances, rules, regulations and orders relating to the protection
of human health and safety, natural resources or the environment,
including, but not limited to, air pollution, water pollution, noise
control, on-site or off-site hazardous substance discharge, disposal or
recovery, toxic or hazardous substances, training, information and warning
provisions relating to toxic or hazardous substances, and employee safety
(collectively the "Environmental Laws"); and no notice of violation of any
Environmental Laws or of any permit, license or other authorization
relating thereto has been received, nor is any such notice pending or, to
the best knowledge of RAM and the Sellers, threatened. To the best
knowledge of RAM and the Sellers, except as set forth on Schedule 3.5, no
underground or above-ground storage tanks or surface impoundments are
located on any of the real properties that are used, operated or leased by
RAM and (i) except in compliance with applicable Environmental Laws and any
licenses or permits relating thereto, there has been no generation, use,
treatment, storage, transfer, disposal, release or threatened release in,
at, under, from, to or into, or on such properties of toxic or hazardous
substances during the ownership or occupancy thereof by RAM or, to the best
knowledge of RAM and the Sellers, prior to such ownership or occupancy, and
(ii) in no event has there been any generation, use, treatment, storage,
transfer, disposal, release or threatened release in, at, under, from, to
or into, or on such properties of toxic or hazardous substances that has
resulted in or is reasonably likely to result in a material adverse effect
on RAM, its Business, assets, operating results, condition (financial or
otherwise), or prospects. Neither RAM nor the Sellers have received any
notice or claim to the effect that RAM is or may be liable to any
governmental authority or private party as a result of the release or
threatened release of any toxic or hazardous substances and none of the
operations of RAM is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond
to a release or a threatened release of any toxic or hazardous substances
at any of the real properties leased, used, operated or owned by RAM or at
any other properties as a
5
<PAGE>
result of the business conducted by or other activities of RAM. Neither RAM
nor the Sellers have disposed, or had disposed of on its or their behalf,
toxic or hazardous substances at any site other than a federal and state
licensed hazardous waste treatment, storage and disposal facility and, to
the best knowledge of RAM and the Sellers, each such facility is currently,
and at the time of such disposal was, licensed and operating in substantial
compliance with all applicable laws, is not currently listed, or threatened
to be listed, on any state or federal "superfund" list and there is no
proceeding, inquiry or investigation, formal or informal, with respect to
any release or threatened release of any toxic or hazardous substances at
any such site. For the purposes of this Section 3.5(f), "toxic or hazardous
substances" shall include any material, substance or waste that, because of
its quantity, concentration or physical or chemical characteristics, is
deemed under any federal, state, local or regional statute, law, ordinance,
regulation or order, or by any governmental agency pursuant thereto, to
pose a present or potential hazard to human health or safety or the
environment, including, but not limited to, (i) any material, waste or
substance which is defined as a "hazardous substance" pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (42 U.S.C. (S) 9601 et seq.), as amended ("CERCLA"), and its related
state and local counterparts, (ii) asbestos and asbestos containing
materials and polychlorinated biphenyls, and (iii) any petroleum
hydrocarbon including oil, gasoline (refined and unrefined) and their
respective constituents and any wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal energy.
(g) Accounts Receivable. RAM and the Sellers have delivered to
Newport (i) an accurate list, as of the end of December 1994 (and will
deliver as of the fiscal month immediately preceding the Closing), of all
accounts and notes receivable of RAM, including any accounts or notes
receivable not reflected in the Financial Statements, and (ii) an aging of
all such accounts and notes receivable showing amounts due in 30-day aging
categories. All accounts receivable of RAM shown on such list arose from,
and all accounts receivable of RAM created between the date of such
Financial Statements and the date hereof have arisen from, valid sales made
by RAM in the ordinary course of business.
(h) Inventories. The items comprising the inventories of RAM are of
merchantable quality and quantity and are currently saleable in the
ordinary course of business, except for items written-down to their net
realizable value or for which adequate reserves have been established on
the books of RAM or which have been written-off consistent with RAM's past
practices.
(i) Trade Names and Trademarks; Other Intangibles. Included in
Schedule 3.5 to this Agreement is a schedule of all trade names,
trademarks, service marks and copyrights used in the conduct of RAM's
business and the registrations owned by RAM or in which RAM has any rights
or licenses. Except as set forth in Schedule 3.5, RAM is not a party to
any license, agreement or arrangement, whether as licensor, licensee, or
otherwise, with respect to any trademarks, service marks, trade names or
copyrights, computer programs or software or other intellectual property.
RAM has not infringed, and is not now infringing, nor has RAM received any
written notice of infringement with respect to, any trade name, trademark,
service mark, copyright, or trade secret used in RAM's business, nor is RAM
improperly using the software of any other entity.
(j) Patents and Patent Rights. Schedule 3.5 to this Agreement
contains a complete schedule of all patents, inventions, industrial models,
processes, designs, and applications for patents owned by RAM or in which
it has any rights, licenses, or immunities. The patents and applications
for patents listed are valid and in full force and effect and are not
subject to any taxes, maintenance fees, or actions falling due within
ninety (90) days after the date hereof. There have been no interference
actions or other judicial, arbitration, or other adversary proceedings
concerning the patents or applications for patents. Each patent
application is awaiting action by its respective patent office. The
manufacture, use, or sale of the inventions, models, designs, and systems
covered by the patents and applications for patents do not violate or
infringe on any patent or any proprietary or personal right of any person,
firm, or corporation; and RAM has not infringed and is not now infringing
on any patent or other right belonging to any person, firm, or corporation.
RAM is not a party to any license, agreement, or arrangement, whether as
licensee, licensor, or otherwise, with respect to any patent, application
for patent, invention, design, model, process, trade secret, or formula.
RAM has the right and authority to use and to transfer to Newport such
inventions, trade secrets, processes, models, designs, and formulas as are
necessary to enable it to
6
<PAGE>
conduct and to continue to conduct all phases of its businesses in the
manner presently conducted by it, and that use does not, and will not,
conflict with, infringe on, or violate any patent or other rights of
others.
(k) Trade Secrets. Schedule 3.5 to this Agreement is a true and
complete list, without extensive or revealing descriptions, of RAM's trade
secrets, proprietary information, know-how and other technical data
(collectively, "trade secrets"). Each trade secret's documentation is
current, accurate, and sufficient in detail and content to identify and
explain it and to allow its full and proper use by Newport without reliance
on the special knowledge or memory of others.
RAM is the sole owner of each of these trade secrets, free and
clear of any liens, encumbrances, restrictions, or legal or equitable
claims of others. RAM has taken reasonable security measures to protect
the secrecy, confidentiality, and value of these trade secrets; any of
their employees and any other persons who, either alone or in concert with
others, developed, invented, discovered, derived, programmed, or designed
these secrets, or who have knowledge of or access to information relating
to them, have been put on notice and, if appropriate, have entered into
agreements that these secrets are proprietary to RAM and not to be divulged
or misused.
To the best knowledge of RAM and the Sellers, all these trade
secrets are presently valid and protectible and are not part of the public
knowledge or literature; nor to the best knowledge of RAM or the Sellers
have they been used, divulged, or appropriated for the benefit of any past
or present employees or other persons, or to the detriment of RAM.
3.6 Contracts and Agreements. Schedule 3.6 hereto contains an
accurate and complete list, and there has been delivered to Newport true
and correct copies, of all indentures, contracts, agreements, written
arrangements and commitments which require (i) the performance by RAM of
any obligation for a period of time extending beyond thirty (30) days from
the date of this Agreement, or (ii) payments in excess of Fifty Thousand
Dollars ($50,000), or (iii) the payment of a penalty or the incurrence of a
loss or the giving of more than thirty (30) days' notice in the event of
cancellation thereof by RAM. Each of such indentures, contracts,
agreements, written arrangements and commitments is a valid and binding
obligation of RAM and, except as set forth on Schedule 3.6, there have been
no defaults or claims of default and, to the best knowledge of RAM and the
Sellers, there are no facts or conditions that have occurred which, through
the passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto or the creation of a lien or encumbrance upon any asset of
RAM. Except as set forth on Schedule 3.6 or Schedule 3.8, no consent or
approval of any party (other than RAM) to any of contracts, agreements, and
commitments is necessary in order to permit RAM to consummate the
transactions contemplated hereby and to allow Newport to acquire the
Shares, without violating any such contracts, agreements or commitments.
3.7 Labor and Employment Agreements. Except as set forth in Schedule
3.7 hereto, RAM does not have, nor is its business subject to, any (i)
collective bargaining agreement or other labor agreement; (ii) employment,
profit sharing, deferred compensation, bonus, pension, retainer,
consulting, retirement, welfare or incentive plan or contract; (iii)
written or other formal personnel policies; or (iv) plan or agreement under
which "fringe benefits" (including, but not limited to, vacation plans or
programs, sick-leave plans or programs, option or stock purchase plans, and
related benefits) are afforded to its employees. True and correct copies
of all items set forth or referenced in Schedule 3.7 have been delivered to
Newport. There exists no actual or contingent material liabilities, funded
or otherwise, of RAM arising from any employee benefit plans (as defined in
Section 3(3) of ERISA) other than those liabilities that are provided for
in the Financial Statements. Each employee benefit plan maintained by RAM,
including any plan that provides health care benefits to employees,
complies in all material respects and has complied in all material respects
in the past with all applicable laws, rules and regulations, including the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the
Internal Revenue Code or the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"). Without limiting the generality of the foregoing,
neither RAM nor any employee benefit plan of RAM has engaged in any
prohibited transaction which would subject RAM to a penalty or tax on
prohibited transactions imposed under ERISA or the
7
<PAGE>
Internal Revenue Code; no employee of RAM has engaged in any transaction
which could subject RAM to liability if RAM is obligated to indemnify such
person against liability; each employee benefit plan that is an employee
pension benefit plan is qualified under Section 401(a) of the Code, and the
trust thereunder is exempt from income tax under Section 501(a) of the
Internal Revenue Code; and RAM has not incurred any accumulated funding
deficiency within the meaning of ERISA or any material liability to the
Pension Benefit Guaranty Corporation established under ERISA in connection
with any employee benefit plan. Except to the extent set forth in Schedule
3.7, (i) there has been no strike or other work stoppage by any of RAM's
employees during the past five (5) years; (ii) RAM has complied in all
material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice; and (iii) there is
no unfair labor practice complaint pending or, to the knowledge of RAM and
the Sellers, threatened against RAM. RAM and the Sellers have delivered to
Newport the following information: (i) a list of the names and annual rates
of salary and other compensation for all present officers, employees and
agents, including all bonus and fringe benefits, and (ii) a schedule of all
loans and advances that are presently outstanding to any director, officer
or employee of RAM, or any affiliate.
3.8 Agreement Will Not Cause Breach. Except as set forth in Schedule
3.8 hereto, neither the execution and delivery of, nor the consummation of
the transactions contemplated by, this Agreement will result in or
constitute any of the following: (i) a default or an event that, with
notice or lapse of time, or both, would be a default, breach or violation
of the Articles of Incorporation or Bylaws of RAM or of any material lease,
license, permit, franchise, promissory note, conditional sales contract,
commitment, indenture, mortgage, deed of trust, or other agreement,
instrument or arrangement to which RAM is a party or by which any of its
respective properties is bound; (ii) an event that would permit any person
to terminate any agreement or other business relationship material to, or
to accelerate the maturity of any material indebtedness or other obligation
of, RAM; (iii) the creation or imposition of any material lien, charge or
encumbrance on any of the properties of RAM or on the RAM Shares; (iv) a
violation or breach of any laws or government regulations applicable to RAM
or its properties or any writ, injunction or decree of any court or
governmental instrumentality to which RAM is a party or by which it or any
of its respective properties are bound; (v) the necessity for RAM to obtain
the consent or approval of, or give notice to or register with any
government agency or other third party; (vi) a loss of any license,
franchise or other authorization material to the conduct of any business of
RAM; or (vii) the imposition of any tax liabilities on RAM.
3.9 Insurance Coverage. Schedule 3.9 hereto contains a complete list
of the insurance policies maintained by RAM pertaining to its business and
properties. All of such policies are in full force and effect and neither
RAM nor any of the Sellers has received any notice of cancellation,
material amendment, material adjustment of premium or dispute as to
coverage with respect to any such policies and all material claims under
such policies have been filed in a timely fashion.
3.10 Taxes and Tax Returns. Except as set forth on Schedule 3.10, RAM
has filed all federal, state, and local income tax returns required to be
filed on or before the date hereof, and has paid or accrued the taxes shown
to be due on such returns, except for such taxes, if any, as are being
contested in good faith, and as to which adequate reserves have been
established in the Financial Statements. The amount set-up as provision
for taxes in the Financial Statements is sufficient for the payment of all
unpaid federal, state, county and local income, property, sales and
employment taxes (including any interest or penalties) (collectively,
"Taxes") of RAM accrued for or applicable to the period ended on such date.
RAM has properly withheld and paid to appropriate federal, state and local
government agencies, all FICA and other employment related taxes which it
is required to withhold under applicable laws and government regulations.
True and correct copies of all state and federal income tax returns filed
by RAM have been provided to Newport.
3.11 Compliance with Law. Schedule 3.11 hereto contains a list of all
material licenses, permits, certificates, consents, rights and privileges
and governmental authorizations necessary or appropriate for the business
conducted by RAM. Except as disclosed in Schedule 3.11, (i) the operations
of RAM have not been and are not now in violation of any federal, state or
local laws, regulations or orders which violations have or could
8
<PAGE>
have a material and adverse effect on the business of RAM, and (ii) RAM has
all licenses, permits, and certificates from governmental agencies and
other non-governmental third parties that are material to the conduct of
its business as now conducted. Except as disclosed in Schedule 3.11, no
written claim has been made by any governmental authority (and to the best
knowledge of RAM and the Sellers, no such claim is threatened) to the
effect that the business conducted by RAM fails to comply, in any material
respect, with any law, rule, regulation or ordinance or that a license,
permit or order is necessary with respect thereto (without such license,
permit or order having been obtained promptly after the receipt of notice
of such claim). Except as disclosed in Schedule 3.11, and without limiting
the generality of this Section 3.11, there are no unresolved written
notices of deficiency or written charges of violation brought or, to the
knowledge of RAM and the Sellers, threatened against RAM under any federal,
state or local regulations which would have, individually or in the
aggregate, a material and adverse effect on the business of RAM, or which
could result in the revocation of any license or permit material to the
continued operation of any business now conducted by RAM or the institution
of proceedings therefor, and, to the knowledge of RAM and the Sellers,
there are no facts or circumstances upon which any such proceedings,
citations, notices or charges may be instituted, issued or brought
hereafter.
3.12 Brokers' and Finders' Fees. Except as disclosed in Schedule 3.12
attached hereto, neither Sellers nor RAM nor any of its officers or
employees has paid or agreed to pay, or has done any act which would give
rise to the payment of any fee, commission or consideration to any agent,
broker, finder or other person on account of services rendered as a broker
or finder in connection with this Agreement or any of the transactions
contemplated hereby, or which has resulted in or may give rise to any
obligation on the part of RAM or Newport therefor.
3.13 Full Disclosure. None of the information contained in the
representations and warranties of RAM and the Sellers set forth in this
Agreement, or in any of the schedules, lists, documents, exhibits or
instruments delivered by Sellers as contemplated by any provision of this
Agreement, contains any untrue statement of material fact; omits to state a
material fact required to be stated herein or therein; or omits to state a
material fact necessary to make the statements contained herein or therein,
in light of the circumstances under which they were made, not misleading.
3.14 Litigation and Proceedings. Except as disclosed in Schedule 3.14
attached hereto, there are not any actions, suits, proceedings,
investigations or claims pending or, to the best knowledge of RAM and the
Sellers, threatened against RAM, its business, properties or assets, at law
or in equity, before or by any federal, state, municipal or other
governmental court, department, commission, board, agency or
instrumentality, domestic or foreign, or any arbitration panel. RAM is not
subject to any continuing court or administrative order, writ, injunction
or decree applicable to it or to its business, property, assets or
employees, and RAM is not in default with respect to any order, writ,
injunction or decree of any court or federal, state, municipal or other
governmental department, commission, board, agency or instrumentality,
domestic or foreign, or any arbitration panel.
3.15 Certain Transactions. Except as set forth on Schedule 3.15
hereto or disclosed in this Agreement, RAM is not indebted, either directly
or indirectly, to any of its shareholders, officers, directors, or any
entity in which any of them have an interest ("Affiliates"); nor is any of
its shareholders, officers, directors, or any of their Affiliates indebted
to RAM. There are no transactions of a continuing nature between RAM, on
the one hand, and any of its shareholders, officers or directors, or any of
their Affiliates, on the other hand, which are not subject to cancellation
effective on written notice by RAM without liability or penalty to RAM and
which will continue beyond the date hereof, including, without limitation,
use of any assets of RAM for personal benefit with or without adequate
compensation, or similar transactions.
3.16 Investment Representation. Each Seller only as to himself,
herself or itself, confirms, represents and warrants that all Newport
Shares to be issued are being acquired for the purpose of investment and
not for the purpose of distribution or resale. Each such Seller is
concurrently herewith delivering an investment letter in the form attached
hereto as Exhibit B.
9
<PAGE>
4. Representations and Warranties of Newport.
-----------------------------------------
Newport represents and warrants to the Sellers as follows:
4.1 Organization, Standing and Power. Newport is duly organized and
existing under the laws of the State of Nevada. Newport has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted.
4.2 Authority of Newport. The execution and delivery by Newport of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of Newport and this Agreement is a valid and binding obligation of
Newport, enforceable against Newport in accordance with its terms except as
the enforceability hereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors of
California corporations generally, and by general equitable principles.
Neither the execution and delivery by Newport of this Agreement, nor the
consummation of the transactions contemplated herein, will: (i) conflict
with or result in a breach of Newport's Articles of Incorporation or
Bylaws, (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Newport or (iii) result in or constitute a default
or an event that, with notice or lapse of time, or both, would be a
default, breach or violation of any material lease, license, permit,
franchise, promissory note, conditional sales contract, commitment,
indenture, mortgage, deed of trust, or other agreement, instrument or
arrangement to which Newport is a party or by which any of its respective
properties is bound and which has been included or will be included as an
exhibit to Newport's annual reports on Form 10-K or its quarterly reports
on Form 10-Q filed or to be filed with the Securities and Exchange
Commission (the "Commission"). Except as set forth in Schedule 4.2, no
consent of, approval of, notice to or filing with any governmental
authority having jurisdiction over any aspect of the business or assets of
Newport, and no consent of, approval of, or notice to any other person or
entity, is required in connection with the execution and delivery by
Newport of this Agreement or the consummation by Newport of the
transactions contemplated hereby.
4.3 Brokers and Finders. Newport is not a party to any agreement
with any broker or finder relating to the transactions contemplated herein,
and neither the execution of this Agreement nor the consummation of the
transactions provided for herein will result in any liability to any broker
or finder.
4.4 Compliance with Laws and Regulations. To the best of Newport's
knowledge, it is not in default under, or in violation of, any law,
ordinance, rule or regulation promulgated by any governmental agency having
authority over it, where such default or violation would have a material
effect on its ability to perform all obligations hereunder.
4.5 SEC Reports of Newport. Newport has furnished Sellers with
copies of Newport's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, filed by Newport with the Commission, its Proxy
Statement for its 1994 Annual Meeting and its reports on Form 10-Q for the
quarters ended March 31, 1994, June 30, 1994 and September 30, 1994. Such
reports were accurate and complete in all material respects and did not
omit any material information required to be set forth therein.
4.6 Newport's Financial Statements. The financial statements of
Newport included in its Annual Report on Form 10-K for its fiscal year
ended December 31, 1993 and its reports on Form 10- for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994 are complete and
correct in all material respects and in accordance with the books of
account and records of Newport, and present fairly the financial position
of Newport at the dates indicated and the results of its operations and the
changes in its financial position for the periods then ended, in accordance
with generally accepted accounting principles consistently applied.
10
<PAGE>
4.7 Absence of Certain Changes. Since September 30, 1994, there has
been no adverse change in the business, prospects, or condition, financial
or otherwise, of Newport, except changes in the ordinary course of business
that in the aggregate have not been materially adverse.
4.8 Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of Newport, threatened against Newport, at law or in
equity, which challenge or in any manner relate to the transactions
contemplated in this Agreement or which, if adversely determined, would
have a material adverse effect on the business or financial condition of
Newport.
4.9 Representations and Warranties. No representation, warranty or
statement made or information provided by Newport in this Agreement or in
any certificates or documents to be delivered to the Sellers by Newport
pursuant to this Agreement, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements in
light of the circumstances under which such statements were made, not
misleading.
4.10 Investment Representation. Newport confirms, represents and
warrants that the RAM Shares are being acquired for the purpose of
investment and not for the purpose of distribution or resale, that Newport
has received a copy of and is familiar with the restrictive legends on the
stock certificates representing the RAM Shares.
4.11 Capitalization. The authorized capital stock of Newport consists
of 20,000,000 shares of Common Stock of which 7,102,658 shares are issued
and outstanding as of the date hereof. All outstanding shares of Newport's
Common Stock are duly authorized, validly issued, fully paid and non-
assessable, and have not been issued in violation of any preemptive rights
of stockholders. Except for shares of Common Stock reserved for issuance
pursuant to stock option and stock purchase plans, there are no outstanding
subscriptions, options, warrants, rights or other agreements or commitments
providing for the issuance of any capital stock of Newport or securities
convertible into or exchangeable for stock of Newport.
4.12 Newport Stock. The Newport Shares issuable pursuant to this
Agreement will be (a) duly authorized, validly issued, fully paid and
non-assessable voting stock, free from preemptive rights of existing
shareholders of Newport and (b) authorized for trading on the NASDAQ
National Market System.
4.13 Brokers' and Finders' Fees. Neither Newport nor any of its
officers or employees has paid or agreed to pay, or has done any act which
would give rise to the payment of any fee, commission or consideration to
any agent, broker, finder or other person on account of services rendered
as a broker or finder in connection with this Agreement or any of the
transactions contemplated hereby, or which has resulted in or may give rise
to any obligation on the part of RAM or Newport therefor.
5. Conduct of Business Pending the Closing.
---------------------------------------
Between the date hereof and the Closing, and except as otherwise
consented to by Newport in writing, RAM and each of the Sellers jointly and
severally covenant as follows:
5.1 Access. Subject to the provisions of the Non-Disclosure
Agreement dated November 3, 1994 previously executed by Newport and RAM
(the "Non-Disclosure Agreement"), RAM shall give to Newport and its
representatives, from and after the date of execution of this Agreement, on
prior request therefor from Newport or such representatives, such access to
the premises, employees, agents and consultants of RAM, and such copies of
RAM's financial statements, books and records, and contracts and leases and
other documentation, so as to enable Newport to inspect and evaluate all
aspects of the business and operations, assets, operating results,
financial condition, future prospects, capitalization, ownership, and legal
and regulatory affairs of RAM and to verify the accuracy of the information
heretofore furnished to Newport, and the representations and warranties
made in this Agreement, by RAM and the Sellers with respect to the
foregoing matters. The Sellers agree that
11
<PAGE>
RAM will furnish all information reasonably requested by Newport. Newport
agrees to conduct its review in a manner designed to minimize any
disruption of RAM's operations and in accordance with the terms of the Non-
Disclosure Agreement.
5.2 Conduct of Company's Business. Unless Newport gives its prior
written consent for actions to be taken to the contrary, from the date of
this Agreement and until the Closing or termination of this Agreement,
whichever first occurs, RAM shall, and the Sellers shall cause RAM to:
(a) Operation of Business. Operate and conduct RAM's business and
operations diligently and only in the ordinary course of business
consistent with past practices. RAM shall not increase the amount due and
owing to any lender for borrowed money or increase the compensation or
benefits of any employee, independent contractor or agent or adopt or amend
any commission plan or arrangement or any employee benefit plan or
arrangement of any type above those existing on the date hereof, or
otherwise lend or advance any sum or extend credit to any employee,
director or shareholder or any of their respective affiliates;
(b) Organization. Preserve intact RAM's organization and use its
reasonable best efforts to retain all employees of and the services of all
vendors, suppliers, agents and consultants to RAM, commensurate with the
requirements of RAM's business;
(c) Insurance. Maintain RAM's existing insurance, consistent with
past practices and, unless comparable insurance is substituted therefor or
is not generally available to businesses of the type conducted by RAM, not
take any action to terminate or modify, nor permit the lapse or termination
of, the present insurance policies and coverages of RAM as set forth in
Schedule 3.9 hereto;
(d) Lawsuits, Claims. Promptly notify Newport of all lawsuits,
claims, proceedings or investigations that are, or which any officers of
RAM or any of the Sellers, as a result of events or circumstances actually
known to them, has reason to believe may be, threatened, brought, asserted
or commenced against RAM or any of its officers or directors, involving or
affecting in any way RAM's Business or operations, or any of its assets, or
the Shares or the transactions contemplated hereby; and not settle any
action or proceeding which would materially and adversely affect RAM, its
business, financial condition or operating results and, not release,
settle, compromise or relinquish any claims, causes of action or rights
which RAM may have against any other persons, including, without
limitation, claims or rights to reimbursement or payment for services
rendered by RAM;
(e) Certain Changes. Not sell or otherwise dispose, or enter into
any agreement for the sale, of any of its assets or properties, except for
sales of inventory and obsolete equipment in the ordinary course of
business and consistent with past practices, and not permit or allow, or
enter into any agreements providing for or permitting, any of its assets or
properties to be subjected to any mortgage, security interest, pledge,
option, lien, charge or encumbrance other than liens or security interests
in existence on the date hereof and statutory liens to secure taxes that
are not yet due and payable, all of which are listed on Schedule 3.5
hereto;
(f) Condition of Assets. Maintain in good working order and
condition, ordinary wear and tear excepted, and in compliance in all
material respects with all applicable laws and regulations, all vehicles,
machinery, equipment, computers, furniture, fixtures, tools, and other
material tangible assets, wherever located, that are used, leased or owned
by RAM;
(g) Agreements. Observe and perform all terms, conditions, covenants
and obligations contained in all existing agreements between RAM and third
parties the violation of which would have, individually or in the
aggregate, a material adverse effect on RAM or its business, financial
condition, operating results or future prospects; and, except as required
by any existing agreements, not enter into any new agreements or
transactions, or incur any expenditures, liabilities or obligations, or
renew, extend, amend or modify any existing agreement involving any
commitments, obligations, liabilities or requiring any expenditures; not
take any action which would cause a breach or violation of or default under
any material agreement, lease, contract, or other
12
<PAGE>
written instrument, commitment or arrangement, or under any permit,
license, franchise, judgment, writ or order, applicable to or affecting RAM
or its business, and promptly notify Newport in writing of the occurrence
of any such breach or default; and not enter into any transaction with any
shareholder, director or officer or any person or entity related to or
affiliated with any such person other than those transactions that are
described on Schedule 3.15 hereto;
(h) Consents; Compliance With Laws. Use its reasonable best efforts to
obtain and maintain all consents, assignments or approvals of, and
licenses, permits and franchises and rights to operate granted by,
governmental authorities and agencies and other third parties, in form and
substance reasonably satisfactory to Newport, the absence or loss of which
would have a material adverse effect on the operations, operating results,
financial condition or future prospects of RAM either prior to or following
the Closing; and not take any action which would result in a violation of
or the noncompliance with any laws, regulations, consents or approvals
applicable to RAM or any conditions imposed on RAM under any of its
permits, franchises, contracts or licenses, where such violation or non-
compliance could have a material adverse effect on the Business or
operations of RAM, or result in the incurrence of any material liability by
RAM or in the revocation, modification or loss of any license, permit or
right needed for the operation of RAM's business as presently conducted by
RAM, or which would adversely affect the obtaining of government approvals
needed for Newport's acquisition of the Shares; and cooperate with Newport
and render to Newport such assistance as Newport may reasonably request in
obtaining such governmental approvals;
(i) Taxes. Pay, when due, and prior to the imposition or assessment
of any interest, penalties or liens by reason of the non-payment of, all
Taxes (as defined in Section 3.10 hereof) assessed against RAM, any of its
assets or its operations;
(j) Dividends, etc. Not: (i) declare or pay any dividends or make
any distributions with respect to or redeem any shares of RAM's capital
stock; (ii) accelerate the payment of or prepay any indebtedness or other
obligations of RAM, except shareholder debt described on Schedule 3.15;
(iii) approve or effect any reclassification or recapitalization of RAM or
its authorized or outstanding shares; (iv) merge or consolidate RAM with or
sell any of its assets to a third party other than sales of assets in the
ordinary course of business and consistent with past practices; (v) approve
or commence any proceedings for the liquidation of RAM; and (vi) enter into
any agreement to do any of the foregoing; and
(k) Corporate Matters. Not: (i) amend in any manner the Articles of
Incorporation or Bylaws of RAM; (ii) alter the composition or membership of
RAM's Board of Directors; (iii) authorize or issue any shares of capital
stock of any class or series; (iv) create or issue any warrants,
obligations, subscriptions, options, convertible securities or other
commitments under which any additional shares of the capital stock of any
class or other equity securities of RAM may be directly or indirectly
authorized, issued or transferred; or (v) agree to do any of the above.
(l) Liabilities and Expenses. Not: create or incur (whether as
principal, surety or otherwise) any actual or contingent liabilities or
expenses other than liabilities and expenses incurred in the ordinary
course of business consistent with past practices.
5.3 Pooling of Interests. RAM shall take, each Seller shall take,
and the Sellers shall cause RAM to take, all actions reasonably necessary
to allow the purchase and sale of the RAM Shares to be accounted for as a
pooling of interests. Each Seller represents that he or it will comply
with the requirements of the Commission concerning risk sharing in business
combinations accounted for as pooling of interests, and pursuant thereto
will not sell or in any other way reduce his or its risk relative to any
common shares received in the business combination until such time as
financial results covering at least 30 days of post-closing combined
operations have been published.
13
<PAGE>
6. Obligations Pending and Following the Closing.
---------------------------------------------
6.1 Consents. Each party to this Agreement shall use its reasonable
best efforts to obtain or cause to be obtained at the earliest practicable
date, and prior to the Closing, all consents, approvals and licenses, if
any, which such party requires to permit it to consummate the transactions
contemplated hereby without violating any material agreement, contract,
instrument or applicable law or regulation, license or permit, to which it
is a party or to which it or its assets are subject. The parties hereto
shall cooperate with each other in their efforts to obtain all such
consents, approvals and licenses.
6.2 Further Assurances. Each party hereto shall execute and deliver,
both before and after the Closing, such instruments and take such other
actions as the other party or parties, as the case may be, may reasonably
request in order to carry out the intent of this Agreement or to better
evidence or effectuate the transactions contemplated herein.
6.3 Notice of Breach. Each party to this Agreement will immediately
give notice to the other parties of the occurrence of any event, or the
failure of any event to occur, that results in a breach by it of any
representation or warranty or a failure by it to comply with or fulfill any
covenant, condition or agreement contained herein.
6.4 Investment Representation Agreement. At the time of the issuance
of the Newport Shares to each Seller at the Closing, each Seller shall
execute and deliver to Newport, as a condition to the issuance of such
Newport Shares, an Investment Representation Letter in the form of Exhibit
B hereto.
6.5 Form 8-K. The Sellers shall use their best efforts to cooperate
with, and to cause RAM's independent auditors to cooperate with, Newport in
the filing of a report on Form 8-K regarding the transactions provided for
in this Agreement. Newport shall bear any costs of third parties
(including without limitation such independent auditors) incurred in
connection with such matters.
6.6 Restrictions on Transfer of Newport Shares. Each of the Sellers
agrees that it shall not, under any circumstances, sell, convey, transfer
or mortgage any of the Newport Shares prior to the filing by Newport of its
first report on Form 10-Q which includes at least thirty (30) days of
combined operations of RAM and Newport.
7. Conditions Precedent to the Obligations of Newport. The
obligations of Newport to consummate the purchase of the RAM Shares and to
perform its other obligations under this Agreement shall be subject to the
fulfillment, or waiver by Newport, at or prior to the Closing, of each of
the following conditions (provided that any such waiver by Newport, to be
effective, must be in writing and executed by them):
7.1 Representations and Warranties. The representations and
warranties made by the Sellers in or pursuant to this Agreement or in the
Schedules hereto shall have been true and correct on the date hereof, and
also at and as of the Closing Date with the same force and effect as if
made again at and as of that time.
7.2 Absence of Litigation. Absence of litigation, whether brought
against RAM, Newport or any of the Sellers, seeking to prevent the
consummation of the transactions contemplated by this Agreement, and no
such litigation shall have been threatened nor shall there be in effect any
order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect
thereto. There shall be no pending or threatened litigation, or asserted
or unasserted claims, assessments, or other loss contingencies, materially
affecting RAM, its Business or any of its assets other than as disclosed in
the Schedules delivered pursuant hereto as of the date of this Agreement.
14
<PAGE>
7.3 Performance of Obligations. RAM and the Sellers shall have
performed and complied, in all material respects, with all covenants,
conditions and obligations required by this Agreement to have been
performed by RAM and the Sellers at or prior to the Closing.
7.4 No Adverse Changes. Absence, since December 31, 1994, of any
material adverse change in (i) the condition or prospects, financial or
otherwise, and operating results of RAM, and (ii) the ability of RAM to
continue to conduct its business in the usual and ordinary course.
7.5 Governmental Approvals and Permits. Receipt from each of the
government agencies and other authorities which issued or granted a license
or permit listed on Schedule 3.11 (collectively, the "Authorities") of
evidence satisfactory in form and substance to Newport that such
Authorities have approved the transfer of ownership of RAM to Newport, or
such Authorities have officially advised Newport in writing that such
approval is not required under applicable laws and regulations; and, if
required as a result of the transfer of ownership of RAM to Newport, shall
have issued to Newport and/or RAM such approvals and permits (the "New
Permits") as such Authorities, or counsel for Newport, determine to be
required to entitle Newport to own the Shares and permit RAM to continue to
conduct, after the Closing, the business theretofore conducted by RAM in
substantially the same manner as RAM has conducted its business during the
twelve (12) months prior to the date hereof, without the imposition of any
conditions or requirements on Newport or RAM that were not applicable to
RAM on the date hereof.
7.6 Other Consents and Approvals. Receipt of all consents and
approvals, in addition to those referenced in Subsection 8.5 above,
required for the consummation of the transactions contemplated by this
Agreement and to permit Newport to acquire all of the Shares of RAM
pursuant hereto, in form and substance reasonably acceptable to Newport.
7.7 Certificates. Receipt of a certificate or certificates executed
by the President and Chief Financial Officer of RAM, in their capacities as
such, and by the Sellers, dated as of the Closing Date and reasonably
satisfactory in form and substance to Newport, certifying that (i) each of
the representations and warranties of the Sellers contained herein was true
and correct when made and is true and correct in all material respects on
and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on the Closing Date, (ii) RAM
and the Sellers have performed and complied in all material respects with
all agreements, obligations, covenants and conditions required to be
performed or complied with by them pursuant hereto on or prior to the
Closing Date, except as may have been waived in writing by Newport, and
(iii) except for the permits and approvals already obtained therefor, there
are no other permits, approvals or consents from any government agencies
having jurisdiction over, or from any third parties, governmental and
other, that have agreements with, RAM that are required to permit the
Shares to be sold and transferred to Newport or to enable RAM to operate
its business following the Closing as a wholly-owned subsidiary of Newport.
15
<PAGE>
7.8 Opinion of Counsel. Receipt of a favorable opinion dated the
date of Closing from O'Melveny & Myers, counsel to RAM and the Sellers,
substantially in the form of Exhibit C hereto.
7.9 No Defaults. There shall be no defaults under any of the
contracts, agreements and commitments set forth on Schedule 3.6 that would
have a material adverse effect on RAM, its business, financial condition,
results of operations or prospects.
7.10 Additional Instruments. RAM shall have delivered to Newport
certified copies of resolutions duly adopted by RAM's Board of Directors
and, if required under applicable law, by the shareholders of RAM,
approving this Agreement and authorizing the transactions contemplated
hereby, and such other or additional instruments, consents, endorsements
and documents as Newport reasonably deems to be necessary to enable the
transactions contemplated by this Agreement to be consummated as provided
in this Agreement. All other proceedings in connection with this
Agreement and the transactions contemplated hereby, and all documents and
instruments incident to such transactions, shall be reasonably satisfactory
in form and substance to Newport and its counsel.
7.11 Noncompetition Agreements. Newport shall have received a
Noncompetition Agreement, substantially in the form attached hereto as
Exhibit D, duly executed by each of the Sellers.
7.12 Exchange of Option. Robert Yates ("Yates") shall have
surrendered to Newport that certain option held by Yates to purchase 3,500
shares of common stock of RAM and shall have executed a Nonqualified Option
Agreement, in the form attached hereto as Exhibit E, which provides that
Yates shall have the option to purchase up to 72,975 shares of Newport
Common Stock at an exercise price of $2.398 per share, or $175,000 in the
aggregate, at any time prior to April 9, 1998, all as more particularly set
forth in such agreement.
7.13 Pooling of Interests. Newport shall have received an opinion of
its outside accounting firm that the purchase and sale of the RAM Shares
may be accounted for as a pooling of interests.
7.14 Payment of Expenses. The Sellers shall have paid to RAM, in
cash, an amount equal to the amount by which the sum of the legal,
accounting and other expenses incurred or paid by RAM in connection with
this Agreement and the transactions contemplated thereby (other than the
costs of the audit provided for in Section 3.4 above) exceeds an aggregate
of $20,000.00.
7.15 Phase I Environmental Survey. Newport shall have received a
Phase I environmental survey reasonably satisfactory to it with respect to
each of the facilities leased by RAM; provided, however, that this
condition shall be deemed satisfied if such survey is not received on or
before February 28, 1995.
8. Conditions Precedent to Obligations of the Sellers.
--------------------------------------------------
The obligations of the Sellers to consummate the sale of the Shares to
Newport and to perform their other obligations under this Agreement shall
be subject to the fulfillment, or the waiver by the Sellers, at or prior to
the Closing, of each of the following conditions (provided that any such
waiver, to be effective, must be in writing and signed by the Sellers):
16
<PAGE>
8.1 Representations and Warranties. The representations and
warranties made by Newport in this Agreement shall have been true and
correct at and as of the date hereof, and they shall be true and correct at
and as of the Closing with the same force and effect as though made at and
as of that time.
8.2 Performance. Newport shall have performed and complied, in all
material respects, with all of their respective covenants, conditions and
obligations required by this Agreement to be performed or complied with by
them at or prior to the Closing.
8.3 Employment Agreements. Upon the Closing, RAM shall have executed
and delivered Employment Agreements, in the forms of Exhibit F-1, Exhibit
F-2, Exhibit F-3 and Exhibit F-4 hereto, to Mark G. Arenal, Harry J. Brown,
III, John G. Hartwell and Robert Yates, respectively, unless this condition
is waived in writing by the Sellers.
8.4 Certificates. Receipt from Newport of certificates, each dated
as of the date of Closing and signed by the President or the Chief
Financial Officer of Newport, certifying that (i) each of its
representations and warranties contained herein was true and correct when
made and is true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on the Closing Date, (ii) it has performed and
complied in all material respects with all agreements, obligations,
covenants and conditions required to be performed or complied with by it
pursuant hereto on or prior to the Closing Date, except as may be waived in
writing by the Sellers, and (iii) except for the permits and approvals
already obtained therefor, there are no other permits, approvals or
consents from any government agencies having jurisdiction over, or from any
third parties, governmental and other, that have agreements with, Newport
that are required to permit the Newport Shares to be sold and transferred
to the Sellers.
8.5 Opinion of Counsel. Receipt of an opinion dated the date of
Closing from Stradling, Yocca, Carlson & Rauth, a Professional Corporation,
substantially in the form of Exhibit G hereto.
8.6 Additional Instruments. Newport shall have delivered to RAM
certified copies of resolutions duly adopted by Newport's Board of
Directors and, if required under applicable law, by the shareholders of
Newport, approving this Agreement and authorizing the transactions
contemplated hereby, and such other or additional instruments, consents,
endorsements and documents as RAM reasonably deems to be necessary to
enable the transactions contemplated by this Agreement to be consummated as
provided in this Agreement. All other proceedings in connection with this
Agreement and the transactions contemplated hereby, and all documents and
instruments incident to such transactions, shall be reasonably satisfactory
in form and substance to RAM and its counsel.
8.7 Newport Shares. The Newport Shares issuable in connection with
this Agreement shall have been authorized for trading on the NASDAQ
National Market System.
8.8 Absence of Certain Changes or Events. Since September 30, 1994,
there has not been any material adverse change in the financial condition
or in the results of operation or the business, properties, assets or
liabilities of Newport and its subsidiaries, taken as a whole.
8.9 No Litigation. No preliminary or permanent injunction or other
order by any federal or state court which prevents the consummation of the
transactions contemplated hereby shall have been issued and remain in
effect.
8.10 Further Assurances. Newport shall have delivered to Sellers
certificates of Newport's officers as may be requested by Sellers relating
to the operation of the RAM business subsequent to the Closing in order to
ensure the tax-free nature of the exchange of the Newport Shares for the
RAM Shares as contemplated hereby.
17
<PAGE>
8.11 Exchange of Option. Robert Yates ("Yates") shall have
surrendered to Newport that certain option held by Yates to purchase 3,500
shares of common stock of RAM and shall have executed a Nonqualified Option
Agreement, in the form attached hereto as Exhibit E, which provides that
Yates shall have the option to purchase up to 72,975 shares of Newport
Common Stock at an exercise price of $2.398 per share, or $175,000 in the
aggregate, at any time prior to April 9, 1998, all as more particularly set
forth in such agreement.
9. Covenants of Newport and RAM.
----------------------------
9.1 Profit Sharing and Bonus Payments. At or following the Closing,
Newport shall cause RAM to make, and RAM shall make, in a manner reasonably
calculated to preserve all tax deductions, the following payments:
(a) Profit Sharing Contribution for the fiscal year ended March
31, 1995 in the maximum permitted by law for qualified contributions
consistent with prior years but in no event more than 15% of payroll;
(b) Bonus Payment to the Sellers in an aggregate amount equal to
the average of (i) 5.9% of the net sales of RAM for the fiscal year ended
March 31, 1995 and (ii) 60.5% of RAM's pretax profit before provision for
the Bonus Payment for the same twelve-month period, which amount shall be
rounded to the nearest multiple of $3,000, and which amount shall be
divided equally among the three Sellers. In calculating pretax profit for
purposes of this Section 9.1, costs of the audit to be performed pursuant
to Section 3.4 and legal, accounting and other expenses of up to $20,000
incurred or paid by RAM in connection with this Agreement and the
transactions contemplated hereby shall not be deducted from income.
9.2 Registration of Newport Shares.
(a) Newport shall use its best efforts to register for resale
the Newport Shares issued to the Sellers under the Securities Act of 1933,
as amended (the "Securities Act"). With respect to the Newport Shares to be
registered, Newport shall take the following actions:
(i) Prepare, file by April 15, 1995, cause to become
effective as soon as possible and keep effective for a period of three (3)
years following the Closing, with the Commission, a registration statement
or statements or similar documents (the "Registration Statement"), and
reasonable and necessary amendments, to include such Newport Shares;
(ii) Furnish to the Sellers such numbers of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the Securities
Act;
(iii) Register and qualify the securities covered by the
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions deemed necessary by Newport, and prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to maintain
such registration and qualification as necessary;
(iv) Notify the Sellers, at any time when a prospectus
relating to securities covered by the Registration Statement 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 light of the circumstances then
existing. Newport will promptly amend or supplement the Registration
Statement to correct any such untrue statement or omission;
18
<PAGE>
(v) Notify the Sellers of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for the purpose; and
(vi) Do such other actions or make available to the Sellers
such documents as reasonably required under the Securities Act and as
reasonably requested in relation to the registration of securities covered
by the Registration Statement.
(b) Notwithstanding the foregoing, Newport shall not be
obligated to take any action pursuant to this Section 9.2:
(i) in any particular jurisdiction in which Newport would
be required to execute a general consent to service of process in affecting
such registration, qualification or compliance, unless Newport is already
subject to service in such jurisdiction and except as may be required by
the Securities Act; or
(ii) if, at such time, the Newport Shares held by the
Sellers are freely tradeable without regard to any volume restrictions
under Rule 144 promulgated under the Securities Act.
(c) All expenses incurred in connection with registrations
pursuant to this Section 9.2, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for Newport, blue sky fees and
expenses, the expense of any special audits incident to or required by any
such registration and the reasonable fees and disbursements of one counsel
for all of the Sellers, shall be borne by Newport. All underwriting
discounts, selling commissions and stock transfer taxes applicable to the
Newport Shares being registered by the Sellers shall be borne by the
Sellers. Newport's obligations to use its best efforts to register such
Newport Shares pursuant to this Section 9.2 shall be conditioned upon the
execution and delivery by the Sellers of indemnification agreements, in
form attached as Exhibit H.
(d) The obligations of Newport to register the Newport Shares,
shall not be transferable by the Sellers except (i) in connection with a
transfer of the Newport Shares to a Seller's ancestors, decedents or spouse
(or former spouse in connection with dissolution proceedings) on death or
otherwise, or to a trust from their benefit, or, in the case of the Seller
which is a trust, to the trustee(s) or beneficiaries of such trust, or (ii)
if the Registration Statement is not effective by July 31, 1995, in
connection with a transfer of the Newport Shares, prior to the
effectiveness of the Registration Statement, by a Seller to a Qualified
Institutional Buyer as defined in Rule 144A under the Securities Act.
Sellers shall give prompt notice of any such transfer.
10. Indemnification.
---------------
10.1 Sellers' Indemnity. Sellers shall jointly and severally
indemnify and hold harmless Newport from and against any and all claims,
actions, suits, legal or other proceedings, liabilities, damages, losses,
costs and expenses, including reasonable attorneys' fees (collectively,
"Damages"), arising out of or based upon the breach of any representation
or warranty of Sellers, or the failure by Sellers to perform or comply with
any covenant, agreement or other obligation, under this Agreement, provided
however that Sellers shall be liable severally, and not jointly with
respect to the representations in Section 3.1(c) as they relate to each
Seller and Section 3.3(b). Newport shall notify each Seller in writing as
to any claims hereunder, and shall provide to each Seller reasonable
documentation or other evidence on which such claim is based.
10.2 Newport's Indemnity. Newport shall indemnify and hold harmless
Sellers from and against any and all claims, actions, suits, legal or other
proceedings, liabilities, damages, losses, costs and expenses, including
reasonable attorneys' fees, arising out of or based upon the breach of any
representation or warranty of Newport, or the failure by Newport to perform
or comply with any covenant, agreement or other obligation, under this
Agreement.
19
<PAGE>
10.3 Defense of Claims. If a claim (a "Claim") is to be made by a
party entitled to indemnification hereunder against the indemnifying party,
the party claiming such indemnification shall, subject to Section 11.12,
give written notice to the indemnifying party as soon as practicable after
the party entitled to indemnification becomes aware of any fact, condition
or event which may give rise to indemnification. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party
that the indemnifying party shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects, (i) to take control
of the defense and investigation of such lawsuit or action, (ii) to employ
and engage attorneys of its own choice to handle and defend the same, at
the indemnifying party's cost, risk and expense; and (iii) to compromise or
settle such claim, which compromise or settlement shall be made only with
the written consent of the indemnified party.
10.4 Limitations.
-----------
Subject to the limitations set forth below, the Sellers'
obligation to indemnify Newport under Section 10.1 shall be limited as
follows:
Notwithstanding the joint and several nature of the Sellers'
liability under this Agreement, the aggregate indemnification obligation of
each Seller to Newport under Section 10.1 shall not exceed the value of the
Newport Shares issued to such Seller pursuant to this Agreement, calculated
using the closing sale price of Newport Common Stock on the NASDAQ National
Market System on the date hereof; and
The Sellers shall not be obligated to indemnify Newport for
Damages unless and until such Damages, in the aggregate, exceed $250,000,
in which event Sellers shall be obligated to indemnify Newport for all such
Damages that exceed $100,000 in the aggregate.
11. General Provisions.
------------------
11.1 Expenses. Except as provided in Section 7.14, each party
hereto shall pay its own costs and expenses, including, but not limited to,
those of its attorneys and accountants, in connection with this Agreement
and transactions covered and contemplated hereby.
11.2 Notices. All notices, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered in person, or by United States mail, certified or registered,
with return receipt requested, or otherwise actually delivered, as follows:
If to Sellers, at the addresses set forth on Exhibit A,
with a copy to:
O'Melveny & Myers
610 Newport Center Drive
Suite 1700
Newport Beach, California 92660
Attention: Gary J. Singer, Esq.
If to Newport, at the following address:
1791 Deere Avenue
Irvine, CA 92714
Attention: Robert C. Hewitt
20
<PAGE>
with a copy to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive
Suite 1500
Newport Beach, California 92660
Attention: William R. Rauth III, Esq.
The persons or addresses to which mailings or deliveries shall be
made may change from time to time by notice given pursuant to the
provisions of this Section 7.2. Any notice, demand or other communication
given pursuant to the provisions of this Section 7.2 shall be deemed to
have been given on the date actually delivered or three days following the
date mailed, as the case may be. For purposes of this Section 7.2, any
facsimile transmission shall constitute notice when transmitted.
11.3 Successors and Assigns. All terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective transferees, successors and assigns.
11.4 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit, or create any right or cause of action in or
on behalf of, any person other than the parties hereto.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one instrument.
11.6 Governing Law. This Agreement is made and entered into in the
State of California and the laws of that State shall govern the validity
and interpretation hereof and the performance of the parties hereto of
their respective duties and obligations hereunder.
11.7 Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
11.8 Waiver and Modification. No waiver of any term, provision or
condition of this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this
Agreement. This Agreement may be modified or amended only by an instrument
of equal formality signed by the parties or their duly authorized agents.
11.9 Attorneys' Fees. In the event any of the parties to this
Agreement brings an action or suit against any other party by reason of any
breach of any covenant, agreement, representation, warranty or other
provision hereof, or any breach of any duty or obligation created hereunder
by such other party, the prevailing party in whose favor final judgment is
entered shall be entitled to have and recover of and from the losing party
all reasonable costs and expenses incurred or sustained by such prevailing
party in connection with such suit or action, including, without
limitation, legal fees and court costs (whether or not taxable as such).
11.10 Entire Agreement. The making, execution and delivery of this
Agreement by the parties hereto have not been induced by any
representations, statements, warranties or agreements other than those
herein expressed. This Agreement embodies the entire understanding of the
parties and there are not any further or other agreements or
understandings, written or oral, in effect between the parties relating to
the subject matter hereof, unless expressly referred to by reference
herein.
11.11 Severability. If any portion of this Agreement shall be deemed
by a court of competent jurisdiction to be unenforceable, the remaining
portions shall be valid and enforceable only if, after excluding the
portion deemed to be unenforceable, the remaining terms hereof shall
provide for the consummation of the transactions contemplated herein in
substantially the same manner as originally set forth at the date this
Agreement was executed.
21
<PAGE>
11.12 Nature and Survival of Representations and Warranties. All of
the representations and warranties set forth in this Agreement, or in any
Exhibits, Disclosure Schedules or documents, certificates or other
instruments delivered pursuant hereto, shall, unless waived in writing by
the party or parties for whose benefit such representation or warranty was
made, remain in full force and effect regardless of any investigation,
verification or approval by any party hereto or by anyone or on behalf of
any party hereto, for a period of two (2) years following the Closing,
except that, the representations and warranties of the Sellers pursuant to
Sections 3.1 and 3.3 shall remain in full force and effect without any time
limitation whatsoever, and the representations and warranties of the
Sellers pursuant to Section 3.10 shall remain in full force and effect
until expiration of the applicable statute of limitations under applicable
law.
11.13 Termination. This Agreement may be terminated at any time prior
to the Closing (a) by mutual written consent of Newport, RAM and the
Sellers, or (b) by any of Newport, RAM or the Sellers if the Closing shall
not have occurred on or before June 30, 1995. In the event of termination
of this Agreement pursuant to this Section 11.13, written notice thereof
shall forthwith be given to the other party or parties hereto and the
transactions contemplated herein shall be abandoned without further action
by Newport or RAM or the Sellers. In addition, if this Agreement is
terminated as provided herein:
Each party will redeliver all documents, workpapers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the
party furnishing the same; and
All information of a confidential nature received by any
party hereto with respect to the business of any other party (other than
information which is a matter of public knowledge or which has heretofore
been or is hereafter published in any publication for public distribution
or filed as public information with any governmental authority) shall not
at any time be disclosed to third parties by such party to the detriment of
the party who furnished such information.
Except as hereinabove provided in this Section 11.13, the
respective obligations of the parties hereto under this Agreement shall
terminate, provided that if any party hereto has breached any of its
material obligations or representations or warranties under this Agreement
prior to the termination of this Agreement, termination of this Agreement
shall not release such party from liability therefor to the other party.
For purposes hereof, RAM and the Sellers shall be deemed to be a single and
the same party.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
NEWPORT CORPORATION
By: _________________________________
Its: _________________________________
RAM OPTICAL INSTRUMENTATION, INC.
By: _________________________________
Its: _________________________________
"Sellers"
_______________________________________
Mark G. Arenal
THE HARRY & PATRICIA BROWN
LIVING TRUST 1994
By: ___________________________________
Harry J. Brown III, Trustee
By: ___________________________________
Patricia Brown, Trustee
_______________________________________
Harry J. Brown III, individually
THE JOHN G. HARTWELL FAMILY TRUST
ESTABLISHED 1/3/90
By: ___________________________________
John G. Hartwell, Trustee
_______________________________________
John G. Hartwell, individually
23
<PAGE>
EXHIBIT A
SELLERS
<TABLE>
<CAPTION>
Number of RAM Allocable Number
Name and Address Shares Owned of Newport Shares
---------------------------------------------------------------------------
<S> <C> <C>
Mark G. Arenal 20,000 417,000
27202 Woodbluff Road
Laguna Hills, CA 92653
The Harry & Patricia Brown 20,000 417,000
Living Trust 1994
c/o Harry J. Brown III, Trustee
16079 Mesquite Circle
Fountain Valley, CA 92648
The John G. Hartwell Family 20,000 417,000
Trust Established 1/3/90
c/o John G. Hartwell, Trustee
P.O. Box N
Huntington Beach, CA 92648
</TABLE>
For purposes of Sections 3, 5, 6, 10 and 11, Harry J. Brown III and John G.
Hartwell shall be deemed "Sellers", provided however, that for purposes of
the limitations in Section 10.4(a)(i), The Harry & Patricia Brown Living
Trust 1994 and Harry J. Brown III shall be deemed the same Seller and The
John G. Hartwell Family Trust Established 11/3/90 and John G. Hartwell
shall be deemed the same Seller.
24
<PAGE>
EXHIBIT B
FORM OF INVESTMENT REPRESENTATION LETTER
Newport Corporation
1791 Deere Avenue
Irvine, California 92714
Gentlemen:
1. (a) In connection with the acquisition of 417,000 shares of
the no par value Common Stock of Newport Corporation, a Nevada corporation
(the "Company"), by the undersigned, the undersigned represents that the
shares which the undersigned is acquiring are being acquired for investment
and not with a view to the sale or distribution of any part thereof, and
that the undersigned has no present intent of selling or otherwise
distributing the same.
You have advised the undersigned that the shares have
not been registered under the Securities Act of 1933 (the "Act"), as the
offering of the shares is to be effected pursuant to an exemption from the
registration provisions of the Act, and, in this connection, you are
relying in part on the representations of the undersigned set forth herein.
Without in any way limiting the representations set
forth above, the undersigned further agrees in no event to make any
disposition of all or any part of said shares unless and until (A) a
registration statement covering the resale of the shares has been declared
effective, in which case the undersigned shall comply with the applicable
prospectus delivery requirements of the Act, and so certify to the Company
or (B) (i) the undersigned shall have notified you of the proposed
disposition; (ii) the undersigned shall have furnished you with an opinion
of counsel to the effect that such disposition will not require
registration of such shares under the Act, and (iii) such opinion of
counsel shall have been concurred in by the Company's counsel and shall
have advised you of such concurrence.
(b) The undersigned acknowledges receipt of all such information
as the undersigned deems necessary and appropriate to enable the
undersigned to evaluate the financial risk inherent in acquiring said
shares and acknowledges receipt of satisfactory and complete information
covering the business and financial condition of , including the
opportunity to obtain information regarding 's financial status, in
response to all inquiries in respect thereof.
2. The undersigned understands and agrees that the certificate
evidencing said shares will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED
BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS MAY BE AUTHORIZED
UNDER THE SECURITIES ACT OF 1933, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
3. (a) The undersigned recognizes that said shares are unregistered
and must be held indefinitely unless they are subsequently registered under
the Act or an exemption from such registration is available, and further
recognizes that, except as set forth in that certain Stock Purchase
Agreement dated February __, 1995 among the Company and the Sellers set
forth therein, including the undersigned, you are under no obligation to
register said shares or to comply with any exemption from such
registration.
(b) The undersigned further recognizes that, if Rule 144 of the
Act is available, and no assurances can be made that Rule 144 will be
available, the undersigned understands that sales of securities made in
reliance thereof could be made only in certain limited amounts, after
certain holding periods and only when
25
<PAGE>
there was available specified current public information, all in accordance
with the terms and conditions of said Rule. The undersigned understands
that, in the case of securities to which said Rule is not applicable,
compliance with some other exemption under the Act will be required.
(c) Upon compliance with the requirements of Rule 144(k) under
the Act, and upon request of the undersigned, the Company will remove the
foregoing restrictive legend from the shares.
Dated: February __, 1995 By: ________________________________
[Seller's Name]
26
<PAGE>
EXHIBIT 99.1
------------
RAM OPTICAL INSTRUMENTATION, INC.
FINANCIAL STATEMENTS
MARCH 31, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report.............................................. 1
Balance Sheet............................................................. 2
Statement of Income and Retained Earnings................................. 3
Statement of Cash Flows................................................... 4
Schedule of Operating Expenses - Schedule 1............................... 5-6
Schedule of Research and Development Expenses - Schedule 2................ 7
Notes to Financial Statements............................................. 8-10
</TABLE>
<PAGE>
Board of Directors
Ram Optical Instrumentation, Inc.
15192 Triton Lane
Huntington Beach, CA 92649
Independent Auditors' Report
----------------------------
We have audited the accompanying balance sheet of Ram Optical
Instrumentation, Inc. as of March 31, 1994, and the related statement of income
and retained earnings, statement of cash flows and supplementary schedules for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Ram Optical
Instrumentation, Inc. as of March 31, 1994, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
WIEGEL, SZEKEL AND WALKER
AN ACCOUNTANCY CORPORATION
Orange, California
February 1, 1995
1
<PAGE>
<TABLE>
<CAPTION>
RAM OPTICAL INSTRUMENTATION, INC.
Balance Sheet
March 31, 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash - Note 1 $ 105,613
Accounts receivable - trade - Notes 1 and 7 1,262,349
Inventory - Notes 1 and 2 1,211,107
Prepaid income taxes 131,450
Prepaid expenses 118
----------
Total Current Assets $2,710,637
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - NOTE 1
Manufacturing equipment $ 122,791
Office equipment 86,108
Automotive equipment 11,326
Demonstration equipment 284,828
Technological equipment 66,570
Leasehold improvements 18,861
----------
590,484
Less accumulated depreciation (265,229) 325,255
----------
OTHER ASSETS
Deposits $ 8,095
Cash value of life insurance 21,014
Software license, net of accumulated
amortization of $3,000 12,000 41,109
---------- ----------
TOTAL ASSETS $3,077,001
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - Note 7 $ 152,538
Sales and payroll taxes payable 20,680
Accrued commissions 94,275
Accrued salaries and vacation 525,207
Accrued expenses 2,854
Dividend payable - Note 6 18,000
Wage garnishment 590
Income taxes payable 482
Profit sharing plan contribution payable - Note 4 267,867
----------
Total Current Liabilities $1,082,493
LONG-TERM LIABILITIES
Deferred income taxes - Note 3 14,638
COMMITMENTS - NOTE 8 0
STOCKHOLDERS' EQUITY
Common stock - 1,000,000 shares authorized - 60,000
shares issued and outstanding - no par value $ 160,252
Retained earnings 1,819,618 1,979,870
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,077,001
==========
</TABLE>
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
2
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Statement of Income and Retained Earnings
For the Year Ended March 31, 1994
<TABLE>
<CAPTION>
% of
Sales
-----
<S> <C> <C>
SALES $8,743,004 100.3
Less returns and allowances 24,453 .3
---------- -----
Total Sales 8,718,551 100.0
---------- -----
COST OF SALES
Purchases 3,360,982 38.6
Direct labor 204,275 2.3
Overhead 1,125,885 12.9
---------- -----
Total Cost of Sales 4,691,142 53.8
---------- -----
GROSS PROFIT ON SALES 4,027,409 46.2
---------- -----
EXPENSES
Operating expenses - Schedule 1 3,289,227 37.7
Research and development expenses -
Schedule 2 - Note 1 459,580 5.3
---------- -----
Total Expenses 3,748,807 43.0
---------- -----
OPERATING PROFIT 278,602 3.2
---------- -----
OTHER INCOME (EXPENSE)
Purchase discounts taken 24,830 .3
Interest income 4,065 .0
Miscellaneous income 25,181 .3
Gain on sale of asset 0 .0
---------- -----
Total Other Income (Expense) 54,076 .6
---------- -----
INCOME BEFORE TAXES 332,678 3.8
Provision for taxes - Note 3 86,831 1.0
---------- -----
NET INCOME 245,847 2.8
-----
RETAINED EARNINGS - BEGINNING 1,591,771
Less dividends declared - Note 6 (18,000)
----------
RETAINED EARNINGS - ENDING $1,819,618
----------
</TABLE>
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
3
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Statement of Cash Flows
For the Year Ended March 31, 1994
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 245,847
Noncash items included in net income
Depreciation $ 65,411
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 217,655
Decrease (Increase) in inventory (73,772)
Decrease (Increase) in prepaid expenses 20,386
Decrease (Increase) in prepaid income taxes (131,450)
Decrease (Increase) in cash surrender life insurance (9,384)
Increase (Decrease) in accounts payable (149,683)
Increase (Decrease) in sales and payroll taxes payable (3,172)
Increase (Decrease) in accrued commissions and royalties (20,091)
Increase (Decrease) in accrued salaries and contract
labor (64,259)
Increase (Decrease) in accrued expenses (17,333)
Increase (Decrease) in dividends payable 18,000
Increase (Decrease) in deposit from customer (67,782)
Increase (Decrease) in income taxes payable (46,287)
Increase (Decrease) in deferred taxes payable 11,732
Increase (Decrease) in wage garnishment 182
Increase (Decrease) in profit sharing contribution
payable 33,018
---------
Total adjustments (216,829)
---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 29,018
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and leasehold improvements $ (186,726)
-----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (186,726)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from shareholder's loans $ 225,000
Principle repayments of shareholder's loans (225,000)
Dividends paid (24,000)
---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (24,000)
---------
NET (DECREASE) IN CASH (181,708)
CASH BALANCE - BEGINNING 287,321
---------
CASH BALANCE - ENDING $ 105,613
---------
DISCLOSURES
Interest paid, for the fiscal year ended March 31, 1994 $ 15,030
---------
Taxes paid, for the fiscal year ended March 31, 1994 $ 308,299
---------
</TABLE>
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
4
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Schedule of Operating Expenses Schedule 1
For the Year Ended March 31, 1994
<TABLE>
<CAPTION>
% of
Sales
-----
<S> <C> <C>
OPERATING EXPENSES
Advertising $ 116,449 1.3
Amortization of software licenses 3,000 .0
Auto expense 73,534 .8
Auto leasing 20,289 .2
Bank charges 4,347 .0
Bonuses - Christmas 12,025 .1
Bonus - General 510,000 5.9
Commissions 447,933 5.1
Contributions 1,680 .0
Contract labor 47,499 .5
Credit card fees 330 .0
Credit reports 1,456 .0
Customer service 48,582 .5
Depreciation 62,411 .7
Dues and subscriptions 558 .0
Employee benefits 1,408 .0
Employee procurement 1,488 .0
Entertainment 26,888 .3
Equipment rental 3,674 .1
Freight and delivery 17,575 .2
Holiday pay 24,928 .3
Import duty 123 .0
Insurance - general 24,420 .3
Insurance - workers' compensation 12,302 .1
Insurance - health 33,755 .4
Insurance - life 16,452 .2
Insurance - keyman 80,313 .9
Insurance - group ltd. 8,025 .0
Insurance - individual ltd. 3,350 .0
Interest expense 15,030 .2
Legal and accounting 18,640 .3
Licenses and permits 653 .0
Office supplies 37,093 .4
Payroll taxes 91,250 1.1
Postage 10,125 .1
Product literature 55,219 .6
Promotion and trade shows 54,839 .6
Profit sharing contribution 171,182 2.0
Profit sharing administration 1,840 .0
Property taxes 13,288 .2
---------- ----
Subtotal $2,073,953 23.4
</TABLE>
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
5
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Schedule of Operating Expenses Schedule 1
For the Year Ended March 31, 1994 Page 2
<TABLE>
<CAPTION>
OPERATING EXPENSES (CONTINUED)
% of
Sales
-----
<S> <C> <C>
Balance forward $2,073,953 23.4
Rent 60,484 .7
Repairs and maintenance 13,728 .2
Relocation expense 2,644 .0
Salaries - administration 158,625 1.8
Salaries - sales 662,516 7.6
Salaries - clerical 47,132 .6
Salaries - accounting 41,524 .6
Sales supplies 17,574 .2
Sales tax 23,908 .3
Security 1,542 .0
Seminars and conventions 1,415 .0
Sick pay 244 .0
Storage 638 .0
Telephone - general 30,125 .4
Telephone - cellular 22,838 .3
Travel 103,410 1.3
Utilities 14,682 .2
Vacation 12,245 .1
---------- ----
TOTAL OPERATING EXPENSES $3,289,227 37.7
---------- ----
</TABLE>
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
6
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Schedule of Research and Development Expenses Schedule 2
For the Year Ended March 31, 1994
<TABLE>
<CAPTION>
% of
Sales
-----
<S> <C> <C>
RESEARCH AND DEVELOPMENT EXPENSES
Purchases $102,007 1.2
Labor 354,613 4.1
Overhead 2,960 .0
-------- ---
TOTAL RESEARCH AND DEVELOPMENT EXPENSES $459,580 5.3
-------- ---
See Independent Auditors' Report and
Accompanying Notes to Financial Statements
</TABLE>
7
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Notes to Financial Statements
March 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Ram Optical Instrumentation, Inc. is a design and manufacturing company of
optical equipment. The Corporation is based in Southern California. The
Corporation also has offices in Pennsylvania, Michigan and Illinois.
Inventory
---------
Inventory valuation is based at the lower of cost or market using the first-
in, first-out method of pricing. Inventory cost includes materials, direct
labor and an allocable portion of direct and indirect manufacturing
overhead.
Accounts Receivable
-------------------
Bad debts are charged to operations in the year in which the account is
determined uncollectible. If the reserve method of accounting for
uncollectible accounts were used, it would not have a material effect on the
financial statements.
Equipment and Leasehold Improvements
------------------------------------
Equipment and leasehold improvements are recorded at cost and depreciated
over their estimated useful lives using the straight-line method. Estimated
useful lives of the assets range from one to five years. Betterments and
improvements that extend the useful life of an asset are capitalized.
Maintenance and repairs are charged to expense as incurred. When depreciable
assets are retired or otherwise disposed, the cost and related accumulated
depreciation are eliminated from the accounts and the resulting gain or loss
is reflected in the income statement.
Sales
-----
Revenues and expenses are recognized in the period in which they are earned
or incurred using the accrual basis of accounting. Sales are recorded at the
time the goods are shipped.
Research and Development Cost
-----------------------------
Research and development cost for new equipment products are expensed until
feasibility for the product is established. The amount of research and
development cost expensed was $459,580 in the year ended March 31, 1994.
Cash
----
Cash balances include checking accounts and cash management account (CMA)
money accounts.
2. INVENTORY
Inventory consists of the following at March 31, 1994:
Materials $1,126,536
Work-in-process 84,571
----------
$1,211,107
----------
See accompanying notes.
8
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Notes to Financial Statements
March 31, 1994
3. INCOME TAXES
Income tax expense for the year ended March 31, 1994, consists of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Taxes Currently Payable
Federal $130,842
Less research credit (45,958)
--------
Total Federal Tax-Net $ 84,884
California tax $ 36,986
Less research credit (18,383)
--------
Total California Tax-Net 18,603
Michigan tax 1,704
Pennsylvania tax 1,998
Illinois tax 482
--------
Total State taxes 107,671
Deferred Taxes
Federal $ 12,398
California 2,240
--------
Total Deferred Taxes 14,638
Less overstatement of prior year tax (35,478)
--------
Total Provision For Taxes $ 86,831
========
</TABLE>
Deferred income taxes result from differences in the timing of revenue and
expense recognition for tax and financial reporting purposes. Principally,
the difference is between tax and financial depreciation.
At March 31, 1994, the Company has a California alternative minimum tax
credit carryforward of approximately $16,451.
4. PROFIT SHARING PLAN
The Company sponsors a defined contribution profit sharing plan. Employees
become eligible for the plan after completing one year of service and
reaching the age of 18. Vesting begins after two years of eligible service
with full vesting reached after six years of eligible service.
Contributions are determined by the Company and are paid only from net
profits. For the year ended March 31, 1994, the contribution to the profit
sharing plan was $267,867.
5. LINE OF CREDIT
At March 31, 1994, the Company had an available line of credit with Merrill
Lynch Business Financial Services, Inc. in the amount of $1,000,000, with
interest at a rate of 1 point over the Prime Rate published in the Wall
Street Journal. Interest is payable monthly and the note is secured by
accounts receivable and inventory. At March 31, 1994, there was no balance
outstanding on this line of credit. Prior to October 11, 1994, the line of
credit was personally guaranteed by the shareholders. Since this date, the
line of credit is secured by accounts receivable and inventory, excluding
the inventory purchased from Panasonic.
6. DIVIDEND PAYABLE
The Company declared a dividend of $.30 per share of the outstanding common
stock as of March 31, 1994. The dividend is payable July 1, 1994 to
shareholders of record on March 31, 1994.
See accompanying notes.
9
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
Notes to Financial Statements
March 31, 1994
7. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk, consist principally of accounts receivable and purchases.
The Company purchased sixteen percent of total purchases from one vendor.
The Company had two receivables that totaled twenty-six percent of total
accounts receivable.
8. LEASE COMMITMENTS
The Company is obligated under noncancellable leases for personal property
which are accounted for as operating leases in accordance with Statement of
Financial Accounting Standards No. 13.
The Company leases property under long-term lease arrangements which
generally provide that the Company bear the cost of taxes, insurance,
maintenance, and repairs and other operating expenses.
Rental expense for the Company's premises for the year ended March 31, 1994
was $120,968.
The Company leases three vehicles for which payments for the year ended
March 31, 1994 was $20,289.
Future minimum payments under noncancellable operating leases which expire
in 1998 are:
<TABLE>
<CAPTION>
Fiscal Year
Payments
-----------
<S> <C>
1995 $133,361
1996 127,344
1997 133,194
1998 139,044
--------
Total Minimum Commitment $532,943
--------
</TABLE>
9. STOCK PURCHASE OPTION
On April 9, 1992, the Board of Directors of the Company authorized an
employee to be eligible to participate in the stock option program. Under
this plan, the Company has offered an option to the employee to purchase
3,500 shares of common stock at a price of $50.00 per share. The employee
may purchase 1,750 shares of stock within 72 months from the date of
execution and the remaining 1,750 shares of stock after 24 months, but
before 72 months from the date of execution. If the employee terminates or
resigns his position of employment, this option will terminate and becomes
void.
10. STOCK PURCHASE AGREEMENT
On March 31, 1990, the Company and its shareholders entered into a Buy-Sell
Agreement. Upon the death of a shareholder, the estate of the shareholder
must sell and the Company must redeem all of the withdrawing shareholder's
stock. The redemption value of the stock is determined by a formula in the
Buy-Sell Agreement. As of March 31, 1994, this agreement is funded by life
insurance.
Subsequent to March 31, 1994, the shareholders of Ram Optical
Instrumentation, Inc. entered into an agreement, whereby, the Company is to
be acquired by Newport Corporation. The projected date for the completion
of the pooling of interests is February 10, 1995.
See accompanying notes.
10
<PAGE>
EXHIBIT 99.2
------------
RAM OPTICAL INSTRUMENTATION INC.
CONDENSED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) Nine Months
Ended December 31,
-------------------
1994 1993
------ ------
<S> <C> <C>
Net sales $6,003 $6,682
Cost of sales 3,039 3,461
------ ------
Gross profit 2,964 3,221
Selling, general and administrative expense 2,269 2,391
Research and development expense 489 293
------ ------
Income from operations 206 537
Interest expense (20) (13)
Other expense, net (20) (4)
------ ------
Income before income taxes 166 520
Income tax provision 57 209
------ ------
Net income $ 109 $ 311
------ ------
</TABLE>
See accompanying notes.
1
<PAGE>
RAM OPTICAL INSTRUMENTATION INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C>
December 31, March 31
1994 1994
------------ --------
ASSETS
Current assets:
Cash and cash equivalents $ 4 $ 106
Customer receivables, net 1,600 1,262
Inventories 1,226 1,211
Other current assets 21 132
------ ------
Total current assets 2,851 2,711
Property, plant and equipment, at cost, net 312 325
Other assets 29 41
------ ------
$3,192 $3,077
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 297 $ 153
Accrued payroll and related expenses 486 804
Taxes based on income (24) --
Short-term borrowings 249 --
Other accrued liabilities 80 125
------ ------
Total current liabilities 1,088 1,082
Deferred income taxes 15 15
------ ------
Total liabilities 1,103 1,097
------ ------
Stockholders' equity:
Common stock, no par value, 1,000,000 authorized,
60,000 issued and outstanding 160 160
Retained earnings 1,929 1,820
------ ------
Total stockholders' equity 2,089 1,980
------ ------
$3,192 $3,077
====== ======
</TABLE>
See accompanying notes.
2
<PAGE>
RAM OPTICAL INSTRUMENTATION INC.
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) Nine Months
Ended December 31,
-----------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 109 $ 311
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 59 52
Changes in operating assets and liabilities:
(Increase) decrease in receivables (338) 103
Increase in inventories (15) (227)
Decrease in other current assets 111 3
Decrease in other assets 12 --
Increase (decrease) in accounts payable and
other accrued expenses (201) (262)
Increase (decrease) in accrued income taxes (24) (52)
----- -----
Net cash provided by operating activities (287) (72)
----- -----
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (net) (46) (72)
Purchases of marketable securities -- (76)
----- -----
Net cash used in investing activities (46) (148)
----- -----
FINANCING ACTIVITIES:
Increase in short-term borrowings (net) 249 --
Cash dividends paid (18) (24)
----- -----
Net cash provided by financing activities 231 (24)
----- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (102) (244)
Cash and cash equivalents at beginning of period 106 287
----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4 $ 43
===== =====
</TABLE>
See accompanying notes.
3
<PAGE>
RAM OPTICAL INSTRUMENTATION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994
(UNAUDITED)
1. INTERIM REPORTING
GENERAL
The accompanying unaudited financial statements present the accounts of the
RAM Optical Instrumentation, Inc. (ROI).
In the opinion of management, all adjustments necessary for a fair
presentation of the information in the unaudited condensed financial
statements have been made and consist of only normal recurring accruals.
Although the Company believes that the disclosures in these financial
statements are adequate to make the information presented not misleading,
certain information and footnote information normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to rules and regulations
of the Securities and Exchange Commission, and consequently, these
statements should be read in conjunction with ROI's audited financial
statements and notes thereto, for the year ended March 31, 1994, presented
herein on Exhibit 99.1.
2. CUSTOMER RECEIVABLES
Customer receivables aggregated $1,600,000 and 1,262,000 at December 31,
1994 and March 31, 1994, respectively. Bad debts are charged to operations
in the year in which the account is determined uncollectible. If the
reserve method of accounting for uncollectible accounts were used, it would
not have a material effect on the financial statements. Receivables from
customers are generally unsecured.
3. INVENTORIES
Inventories are stated at cost, determined using the first-in, first-out
(FIFO) basis, and do not exceed net realizable value.
Inventory consists of the following at December 31, 1994 (in
thousands):
Materials $1,221
Work-in-process 5
------
$1,226
======
4
