SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 27, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-4466
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COMPUTER PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation or organization)
59-1205269
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(I.R.S. Employer Identification No.)
7900 Glades Road, Suite 500, Boca Raton, Florida 33434
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 451-1000
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NOT APPLICABLE
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Former name, address and fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- --
The number of shares of Common Stock, $.01 par value, of the Registrant issued
and outstanding as of October 25, 1996, was 23,720,734 shares.
<PAGE>
COMPUTER PRODUCTS, INC.
INDEX TO FORM 10-Q
Page
Number
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Statements of Operations - For the Thirteen
and Thirty-Nine Weeks Ended September 27, 1996 and
September 29, 1995 3
Statements of Financial Condition - September 27, 1996
and December 29, 1995 4
Statements of Cash Flows - For the
Thirty-Nine Weeks Ended September 27, 1996 and
September 29, 1995 5
Notes to Condensed Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Exhibit No. 10.50
Exhibit No. 11
Exhibit No. 27
SIGNATURE
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTY-NINE WEEKS
ENDED ENDED
SEPT. 27, SEPT. 29, SEPT. 27, SEPT. 29,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $57,760 $46,905 $159,868 $138,518
COST OF SALES 37,301 28,515 101,481 86,451
------ ------ ------- ------
GROSS PROFIT 20,459 18,390 58,387 52,067
------ ------ ------ ------
EXPENSES
Selling, general & administrative 8,698 8,273 26,101 25,474
Research & development 4,523 3,983 12,877 12,016
----- ----- ------ ------
13,221 12,256 38,978 37,490
------ ------ ------ ------
OPERATING INCOME 7,238 6,134 19,409 14,577
----- ----- ------ ------
OTHER INCOME (EXPENSE)
Interest expense (673) (736) (2,036) (2,535)
Interest income 292 255 768 795
----- ----- ----- -----
(381) (481) (1,268) (1,740)
----- ----- -------- -------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM 6,857 5,653 18,141 12,837
PROVISION FOR INCOME TAXES 1,726 1,295 4,717 3,594
----- ----- ----- -----
INCOME BEFORE EXTRAORDINARY ITEM 5,131 4,358 13,424 9,243
EXTRAORDINARY ITEM - LOSS ON EARLY RETIREMENT OF
DEBT, NET OF INCOME TAX BENEFIT OF $187 - - - (397)
------ ------ ------ -----
NET INCOME $ 5,131 $ 4,358 $ 13,424 $ 8,846
======= ======= ======== ========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
PRIMARY-
Income Before Extraordinary Item $ 0.21 $ 0.18 $ 0.55 $ 0.40
Extraordinary Item - - - (0.02)
--------- --------- --------- -----------
Net Income $ 0.21 $ 0.18 $ 0.55 $ 0.38
========= ========= =========
ASSUMING FULL DILUTION-
Income Before Extraordinary Item $ 0.21 $ 0.18 $ 0.54 $ 0.42
Extraordinary Item - - - (0.02)
--------- --------- --------- -----------
Net Income $ 0.21 $ 0.18 $ 0.54 $ 0.40
========= ========= =========
COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING:
Primary 24,612 24,313 24,436 23,015
Fully Diluted 24,934 24,250 25,008 24,121
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands Except Par Value Amounts)
<TABLE>
<CAPTION>
SEPTEMBER 27, DECEMBER 29,
1996 1995
(UNAUDITED) (AUDITED)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 22,669 $ 26,650
Accounts receivable, net 38,050 29,933
Inventories, net 30,573 31,236
Prepaid expenses 1,893 2,575
Deferred income taxes, net 804 517
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Total current assets 93,989 90,911
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PROPERTY, PLANT & EQUIPMENT, NET 30,000 27,715
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OTHER ASSETS
Goodwill, net 20,297 13,532
Deferred income taxes, net 1,391 2,521
Other assets 1,443 1,812
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Total other assets 23,131 17,865
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$147,120 $136,491
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,687 $ 2,719
Accounts payable and accrued liabilities 34,464 36,200
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Total current liabilities 37,151 38,919
LONG-TERM DEBT 27,786 29,849
LEASE LIABILITIES 6,047 6,201
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TOTAL LIABILITIES 70,984 74,969
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SHAREHOLDERS' EQUITY
Preferred stock, par value $.01;
1,000,000 shares authorized; none issued
Common stock, par value $.01; 80,000,000 shares
authorized; 23,681,504 issued and outstanding in 1996
(23,052,781 shares in 1995) 237 231
Additional paid-in capital 43,766 40,633
Retained earnings 32,631 20,886
Foreign currency translation adjustment (498) (228)
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TOTAL SHAREHOLDERS' EQUITY 76,136 61,522
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$147,120 $136,491
========== ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
ENDED
SEPT. 27, SEPT. 29,
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $13,424 $ 8,846
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,859 3,881
Other non-cash charges 1,839 3,837
Changes in operating assets and liabilities:
Increase in accounts receivable (6,652) (3,219)
(Increase) decrease in inventories and prepaid expenses 208 (12,697)
Increase (decrease) in accounts payable and accrued
liabilities (910) 13,564
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NET CASH PROVIDED BY OPERATING ACTIVITIES 12,768 14,212
-------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant & equipment (5,671) (4,670)
Proceeds from sale of property, plant & equipment 100 1,522
Purchase of Jeta Power Systems, Inc, net of cash acquired (9,577) -
(Increase) decrease in other assets (55) 1,027
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NET CASH USED IN INVESTING ACTIVITIES (15,203) (2,121)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 24,375
Repurchase of convertible subordinated debentures - (24,505)
Principal payments on debt and capital leases (2,232) (1,306)
Proceeds from exercises of stock options 2,764 2,663
Repurchases of common stock (2,032) (8,307)
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NET CASH USED IN FINANCING ACTIVITIES (1,510) (7,080)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND EQUIVALENTS (36) 91
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (3,981) 5,102
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 26,650 20,211
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CASH AND EQUIVALENTS, END OF PERIOD $22,669 $25,313
======== =========
</TABLE>
[FN]
NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the acquisition of Jeta Power Systems, Inc, the Company
recorded assets with a fair value of $14.0 million and liabilities of $1.9
million.
In May 1995, holders of the Company's Debentures with a principal amount of
$9,121,000 converted the Debentures into 1,972,085 shares of the Company's
common stock.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SEPTEMBER 27, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Certain information and footnote disclosures required by
generally accepted accounting principles for complete financial statements have
been condensed or omitted.
In the opinion of management, the accompanying financial statements include all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the financial position, results of operations, and cash flows of
the Company. The results of operations for the thirteen and thirty-nine weeks
ended September 27, 1996 are not necessarily indicative of the results that may
be expected for fiscal year 1996. For further information, these Condensed
Consolidated Financial Statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1995 Annual
Report to Shareholders and Form 10-Q for the thirteen week period ended June
28, 1996.
2. INVENTORIES, NET
The components of inventory, net of allowances for slow-moving and obsolete
inventory, are as follows ($000s):
<TABLE>
<CAPTION>
September December
27, 29,
1996 1995
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<S> <C> <C>
Raw materials $15,120 $15,350
Work in process 5,657 4,215
Finished goods 9,796 11,671
-------- --------
$30,573 $31,236
======== =========
</TABLE>
3. PROPERTY, PLANT & EQUIPMENT, NET
Accumulated depreciation on property plant and equipment was $30,272,000 and
$25,720,000 at September 27, 1996 and December 29, 1995, respectively.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are as follows
($000s):
<TABLE>
<CAPTION>
September December
27, 29,
1996 1995
------ --------
<S> <C> <C>
Accounts payable $16,248 $17,041
Accrued liabilities:
Compensation and Benefits 6,386 8,948
Income Taxes Payable 3,928 2,272
Other 7,902 7,939
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$34,464 $36,200
========= =======
</TABLE>
5. INCOME TAXES
The provision for income taxes reflects federal, state, and foreign taxes. The
effective income tax rate on pretax earnings differs from that computed at the
United States federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
Thirty-Nine Weeks
Ended
Sept. Sept.
27, 29,
1996 1995
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<S> <C> <C>
Provision computed at United
States federal statutory rate 35.0% 34.0%
Effect of state income taxes 7.9 3.7
Amortization of goodwill 0.2 0.3
Foreign tax effects (2.0) (2.6)
Change in the valuation allowance (15.3) (7.7)
Other 0.2 0.3
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Effective tax rate 26.0% 28.0%
======= ======
</TABLE>
6. SHAREHOLDERS' EQUITY
During the first quarter of 1996, the Company repurchased and retired a total of
197,000 shares of its common stock pursuant to a share buy-back plan announced
in May 1995. No additional repurchases have been made since then. To date, the
Company has repurchased and retired a total of 1,335,000 shares of its common
stock of the 2,000,000 originally authorized in the buy-back plan. The excess of
the cost of shares repurchased over par value was allocated to additional paid-
in capital based on the pro-rata share amount of additional paid-in capital for
all shares issued with the difference charged to retained earnings.
During the thirty-nine weeks ended September 27, 1996, options for approximately
800,000 shares of common stock issued to members of the board of directors,
employees and former employees were exercised at prices ranging from $1.63 to
$7.375.
7. ACQUISITION
Effective August 23, 1996, the Company acquired the remaining 90% of the
outstanding capital stock of Jeta Power Systems, Inc. (``Jeta') which it didn't
already own for approximately $11.25 million in cash. Jeta designs,
manufactures and markets medium to high power systems in the 400 watt to 4
kilowatt range for applications in telecommunications, networking, computing and
instrumentation markets. The Company had purchased an initial 10% of Jeta's
capital stock during 1984 for approximately $433,000. The Company used cash on
hand to pay for the acquisition.
The acquisition was accounted for under the purchase method of accounting.
Accordingly, $7.9 million, representing the excess of the purchase price over
the estimated fair value of the net assets acquired, has been recorded as
goodwill and is being amortized on a straight line basis over a period of 20
years. Jeta's results of operations have been included in the Company's
consolidated financial statements from the date of acquisition. Pro forma
results of operations are not presented because the effect of the acquisition is
not significant.
8. EMPLOYEE BENEFIT PLAN
In May 1996, the Company's Board of Directors established a stock purchase plan
effective July 1, 1996 that allows substantially all employees to purchase
shares of the Company's common stock. through payroll deductions. Under the
terms of the plan, employees can choose each year to have from 2 to 6 percent of
their base salary withheld to purchase the Company's common stock. The shares
can be purchased for 85 percent of the market price on the tenth trading day
following each three-month offering period.
<PAGE>
ITEM II
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Effective August 23, 1996, the Company acquired all of the outstanding stock of
Jeta Power Systems, Inc. (`Jeta''), a California-based manufacturer of medium
to high power systems in the 400 watt to 4 kilowatt range for applications in
telecommunications, networking, computing and instrumentation markets. In
addition to using current distribution channels to offer Jeta's products to the
existing customer base, the Company believes the acquisition provides it with a
new opportunity to participate in the high power communications market. In
addition, the acquisition expands the Company's North American manufacturing
capacity and adds high power technology to its engineering capabilities.
During the quarter, a subsidiary of the Company entered into a long term private
label agreement with Alcatel Telecom, a division of France's Alcatel Alsthom.
In addition, the Company entered into a technology transfer and patent license
agreement with Yamabishi Electric Company of Japan.
Under the terms of the Alcatel agreement, the Company will provide power
products which allow Alcatel Converters to use the Company's modules in the
design of communication systems based on both Distributed Power Architecture and
Modular Centralized Systems. Based on discussions with Alcatel, the Company
anticipates that the annual sales volume associated with the agreement will
range between $10 and $20 million beginning in 1997. The agreement further
provides for the granting of a manufacturing license by Computer
Products to Alcatel Converters and the possible transfer of technology between
the two companies.
Under the terms of Yamabishi agreement, Yamabishi will license the Company's
patented Zero Voltage Switching and Power Factor Correction technology for use
in designing and manufacturing its own range of AC to DC power supplies, AC
stabilizers and AC to AC converters. This agreement creates an important
new entry into the Japanese market.
The Company reported earnings of $5.1 million and $13.4 million, respectively,
for the thirteen and thirty-nine weeks ended September 27, 1996. Net income for
the quarter increased 18% as sales increased 23% to $57.8 million compared to
$46.9 million in the third quarter a year ago. For the first thirty-nine weeks
of 1996, sales totaled $159.9 million, up 15% from $138.5 million in 1995. Net
income rose 52% to $13.4 million, or $0.55 per share, up from $8.8 million or
$0.38 per share for the comparable period in 1995. The increase reflects
continued progress in the Company's efforts to improve earnings by expanding
operations, introducing new products, and modernizing production facilities.
Operating income increased over both comparable prior year periods ending
September 29, 1995 primarily as a result of higher sales volume and improved
production efficiencies. Selling, general and administrative expenses as a
percentage of sales declined to approximately 16% for the thirty-nine weeks
ended September 27, 1996 from 18% a year ago. Research and development expenses
were 8.1% of year-to-date sales as the Company continues to invest in new
product design and development for the rapidly expanding segments of the
communications industry.
RESULTS OF OPERATIONS
The following table displays sales by product category for the thirty-nine weeks
ended September 27, 1996 and September 29, 1995 ($000s):
<TABLE>
<CAPTION>
Sept. 27, Sept. 29,
1996 1995
--------- ---------
<S> <C> <C>
Power Conversion $135,733 $112,293
85.0% 81.0%
Computer Systems 13,635 14,357
8.4% 10.4%
Industrial Automation 10,500 11,868
6.6% 8.6%
-------- --------
Total $159,868 $138,518
======== ========
Sales for the thirteen and thirty-nine weeks ended September 27, 1996 increased
$10.9 million (23%) and $21.4 million (15%), respectively, over the comparable
prior year periods. Power Conversion year-to-date sales improved $23.4 million
or 21% as a result of new OEM customer programs in networking and
telecommunications product applications. Sales resulting from the acquisition of
Jeta were approximately $1.4 million for the thirteen and thirty-nine weeks
ended September 27, 1996.
Computer Systems sales decreased $0.7 million, or 5%, over the prior year-to-
date period. The primary reason for the decrease was the loss of a major
customer who filed for bankruptcy protection in the first quarter of 1996. With
its focus on the communications market and a record high backlog level entering
into the fourth quarter, this division is expected to gradually improve its
performance.
Industrial Automation year-to-date sales decreased $1.4 million, or 12%,
compared to the prior year period due to lower demand from utility customers and
lower than expected sales from new products in the industrial sector. With a
shift in focus from the utility to the industrial market, this division has been
concentrating on developing new products, outsourcing sub-assembly production to
reduce manufacturing costs, and hiring and training a new sales force targeted
at the industrial sector. All these factors are expected to contribute to
improved performance.
Gross profit for the thirteen and thirty-nine weeks ended September 27, 1996
increased by $2.1 million and $6.3 million, respectively, over the comparable
prior year periods. Gross margins of 35.4% and 36.5%, respectively, for the
thirteen and thirty-nine weeks ended September 27, 1996 were down compared to
the 39.2% and 37.6% reported for the same periods in 1995 as the Power
Conversion business incurred manufacturing start up costs for an unusually large
number of new custom and standard products that began shipping late in the
quarter. Margins were also adversely affected by lower sales in the industrial
automation and computer systems businesses combined with weakened demand from
the distribution channel.
Selling, general and administrative expenses for the thirteen and thirty-nine
weeks ended September 27, 1996 remained level with the comparable prior year
periods. However, SG&A expenses as a percentage of sales decreased from
approximately 18% for both the comparable prior year periods to approximately
16% for the thirteen and thirty-nine weeks ended September 27, 1996 due to the
Company's continued focus on cost control and the effect of higher sales volume.
Research and development spending increased 7% in the thirty-nine week period
compared to 1995 and was 8.1% of sales as the Company continues to invest in
new product design and development for the rapidly expanding segments of the
communications industry. The Company expects to maintain its current level
of investment in research and development for the remainder of the year.
The provision for income taxes as a percentage of pretax income for the thirty-
nine weeks ended September 27, 1996 decreased to 26% from 28% for the comparable
prior year period and prior fiscal year due to a decrease in the valuation
allowance. The net decrease in the valuation allowance resulted from a higher
than expected utilization of deferred tax assets. See Note 5 to the Condensed
Consolidated Financial Statements for the Company's effective tax rate
reconciliation.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased to $22.7 million at September 27, 1996 from $26.7
million at December 29, 1995 due mainly to the acquisition of Jeta for $9.6
million (net of cash acquired), the repurchase of 197,000 shares of the
Company's common stock for $2.0 million, purchases of plant and equipment for
$5.7 million and the $1.5 million principal installment payment on the Company's
$25 million term loan partially offset by net income for the period and proceeds
of $2.8 million from the exercise of stock options.
Accounts receivable, net increased $8.1 million at September 27, 1996 compared
to December 29, 1995 due to the growth in the 1996 year-to-date sales reported
principally in the Power Conversion business.
Net cash provided by operations decreased to $12.8 million for the thirty-nine
weeks ended September 27, 1996 from $14.2 million for the thirty-nine weeks
ended September 29, 1995 as a result of reduced growth in inventory and
decreased accounts payable partially offset by higher net income.
Net cash used in investing activities increased to $15.2 million for the thirty-
nine weeks ended September 27, 1996 from $2.1 million for the thirty-nine weeks
ended September 29, 1995 due to the acquisition of Jeta for $9.6 million (net of
cash acquired) and increased purchases of plant and equipment. The continued
growth in the Power Conversion business has required expansion of production
capabilities, additional workforce and investment in plant and equipment in
China and Ireland.
Net cash used in financing activities for the thirty-nine weeks ended September
27, 1996 of $1.5 consists of the repurchase of 197,000 shares of the Company's
common stock for $2.0 million and long-term debt principal payments partially
offset by $2.8 million proceeds from the exercise of stock options. Net cash
used in financing activities for the thirty-nine weeks ended September 29, 1995
of $7.1 million consisted of the issuance of the $25 million term loan, net of
debt issuance costs, and the $2.7 million proceeds from the exercise of stock
options, reduced by the repurchase of the Company's convertible subordinated
debentures for $24.5 million, the repurchase of 1,138,000 shares of the
Company's common stock for $8.3 million and by long-term debt principal
payments.
As of September 27, 1996, no amounts have been drawn on the Company's $20
million revolving line of credit. The Company believes its available credit
line, its cash flow from operations, and other financing activities are adequate
to fund its working capital requirements for the remainder of the fiscal year.
FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q constitute `forward-looking statements ''
within the meaning of the Private Securities Litigation Reform Act of 1995 and
are based on the Company's current expectations with respect to future sales,
operating efficiencies, growth and working capital needs. Such statements
involve risks and uncertainties which may cause actual results to differ
materially from those set forth in these forward-looking statements. Factors
that might affect such forward looking statements include, among others, general
economic conditions and growth in the power supply industry, competitive factors
and pricing pressures, changes in product mix, the timely development and
acceptance of new products, ability to attract and retain customers, ability to
attract and retain personnel, inventory risks due to shifts in market demand,
changes in absorption of manufacturing overhead, regulatory approvals and other
risks described in the Company's various reports filed with the Securities and
Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. 10.50 -- Agreement and Plan of Merger, dated August 23, 1996,
by and among Computer Products, Inc., JPS Acquisition Corp, Jeta Power
Systems Inc. and Jagdish C. Chopra.
Exhibit No. 11 -- Computation of earnings per common share.
Exhibit No. 27 -- Financial Data Schedule.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the thirteen-week period
ended September 27, 1996.
<PAGE>
SIGNATURE
---------
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.
COMPUTER PRODUCTS, INC.
-----------------------
(Registrant)
DATE: November 8, 1996 BY: /s/ Richard J. Thompson
-----------------------
Richard J. Thompson
Vice President Finance
Chief Financial Officer
</TABLE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated August 23, 1996, by and between
COMPUTER PRODUCTS, INC., a Florida corporation ("CPI"), JPS ACQUISITION CORP., a
Delaware corporation (the "Subsidiary"), JETA POWER SYSTEMS, INC., a California
corporation (the "Corporation"), and Jagdish C. Chopra, an individual and
principal stockholder of the Corporation ("Chopra").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Chopra, the stockholders listed on Schedule 2.22 hereto (the
"Stockholders"), and CPI are the owners of all of the issued and outstanding
capital stock of the Corporation, which is principally engaged in the design,
development and manufacture of switch mode power supplies principally for use in
computers and other electronic systems; and
WHEREAS, the Subsidiary is a wholly-owned subsidiary of CPI; and
WHEREAS, the Boards of Directors of CPI, the Subsidiary and the
Corporation deem it advisable and in the best interests of said corporations and
their respective stockholders that the Subsidiary be merged with and into the
Corporation in a transaction whereby the Corporation will become a wholly-owned
subsidiary of CPI (the "Merger"), all in accordance with the terms of this
Agreement and applicable law.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. The Merger.
----------
1. Surviving Corporation. The corporation which shall survive the
---------------------
Merger (the "Surviving Corporation") is, and after the Effective Date (as
defined in Section 1.8 hereof) shall continue to be, the Corporation. The name
of the Surviving Corporation shall remain unchanged as "JETA Power Systems,
Inc.".
2. Articles of Incorporation. The Articles of Incorporation of the
-------------------------
Corporation, as in effect on the Effective Date, shall, from and after the
Effective Date, be and continue to be, the Articles of Incorporation of the
Surviving Corporation, unless and until changed as provided by law.
3. Capitalization of Constituent Corporations. The manner and
------------------------------------------
basis of conversion of the capital stock of the Corporation and the Subsidiary
on the Effective Date shall be as follows:
1. The Stock. Subject to Section 1.5 hereof and except as
---------
otherwise provided in this Section 1.3.1, each share of the Corporation's common
stock, no par value, which is outstanding immediately prior to the Effective
Date (individually and collectively referred to as the "Stock"), shall be
converted, by virtue of the Merger, into the right to receive cash equal to
$11.03 (the "Merger Consideration") without any action on the part of any person
or entity; provided, however, that the maximum aggregate Merger Consideration to
-------- -------
be paid shall not exceed $11,269,305 without regard to the Adjustment Amount, if
any, as defined in Section 1.9 hereof. Notwithstanding the foregoing, each
issued share of Stock (i) held by the Corporation as treasury stock, or (ii)
owned by CPI or any subsidiary thereof prior to the Effective Date, shall be
cancelled and no Merger Consideration or other payment shall be made with
respect thereto. All outstanding options, warrants, rights, calls, commitments,
conversion rights or similar rights or agreements which provide for the purchase
or issuance by the Corporation of any of its capital stock ("Convertible Secu-
rities") shall terminate on the Effective Date and be deemed null and void.
2. Subsidiary Common Stock. Each share of the common stock,
-----------------------
no par value, of the Subsidiary which is outstanding immediately prior to the
Effective Date shall be converted, by virtue of the Merger and without any
action on the part of any person or entity, into one (1) share of Common Stock
of the Surviving Corporation.
4. Exchange of Corporation's Stock Certificates. Subject to the
--------------------------------------------
escrow provisions of Section 8.3.4 hereof, on the Effective Date, each holder of
an outstanding certificate or certificates immediately theretofore representing
shares of Stock shall receive in exchange therefor, upon surrender of such
certificate or certificates and delivery of a signed Letter of Transmittal in
the form of Exhibit A hereto (the "Letter of Transmittal") to CPI, cash in an
amount equal to the product obtained by multiplying (i) the Merger Consideration
by (ii) the number of shares of Stock which shall have been converted. After
the Effective Date, until surrendered and exchanged, the outstanding certifi-
cates theretofore representing shares of Stock shall be deemed for all purposes
to represent the amount of cash into which said shares of Stock shall have been
converted. No interest shall be paid in respect of any Merger Consideration
paid subsequent to the Effective Date.
5. Dissenting Shares.
-----------------
1. Notwithstanding any provision of this Agreement to the
contrary, any shares of Stock held by a holder who has, subject to the following
sentence, exercised and perfected dissenter's rights for such shares in accor-
dance with Chapter 13 of the California General Corporation Law and who, as of
the Effective Date, has not effectively withdrawn, waived, surrendered or lost
such dissenter's rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration pursuant to Section 1.3
hereof, but the holder thereof shall only be entitled to such rights as are
granted by Chapter 13 of the California General Corporation Law.
2. Notwithstanding the provisions of Section 1.5.1 hereof,
if any holder of Dissenting Shares shall effectively withdraw, waive, surrender
or lose (through failure to perfect or otherwise) his or its dissenter's rights,
then, as of the later of the Effective Date and the occurrence of such event,
such holder's Stock shall automatically be converted into and represent only the
right to receive the Merger Consideration as provided in Section 1.3 hereof,
without interest, upon surrender of the certificate representing such Stock and
delivery of a signed Letter of Transmittal to CPI.
3. As soon as practicable prior to the Effective Date, the
Corporation shall give CPI (i) prompt notice of any written demand for the
purchase by the Corporation of any shares of Stock received by the Corporation
pursuant to the applicable provisions of Section 1301 of the California General
Corporation Law regarding dissenter's rights and (ii) the opportunity to
participate in all negotiations and proceedings with respect to such demands.
The Corporation shall not, except with the prior written consent of CPI,
voluntarily make any payment with respect to any such demands or offer to settle
or settle any such demands. After the Effective Date, CPI shall solely control
all negotiations and proceedings related to such demands.
6. Subsequent Cooperation. At any time, and from time to time,
----------------------
after the Effective Date, the last acting officers of the Corporation, or the
corresponding officers of the Surviving Corporation, may, in the name of the
Corporation, execute and deliver all such proper deeds, assignments and other
instruments and take or cause to be taken all such further or other action as
CPI or the Surviving Corporation may deem necessary or desirable in order to
vest, perfect or confirm in the Surviving Corporation title to and possession of
all of the Corporation's properties, rights, privileges, immunities, powers and
purposes, and to otherwise carry out the purposes of this Agreement.
7. Closing. The parties shall meet at the offices of O'Melveny &
-------
Myers LLP, 400 South Hope Street, Los Angeles, California 90071-2899 at 10:00
A.M., on August 23, 1996, or at such later date and place as shall be agreed
upon by CPI and the Corporation (the "Closing Date"). At such time, all the
certificates, opinions and other documents contemplated herein shall be
exchanged in order to determine whether any condition exists which would permit
any party hereto to terminate this Agreement and abandon the Merger. If this
Agreement is not terminated and the Merger is not abandoned in a manner
permitted by the provisions of this Agreement, a duly executed and verified
Articles of Merger in substantially the form of Exhibit B-1 hereto (the
"Articles of Merger") and a duly executed and verified Certificate of Merger in
substantially the form of Exhibit B-2 hereto (the "Certificate of Merger") shall
be respectively delivered for filing on the Closing Date, or as soon as
practicable thereafter, to the offices of the Secretary of State of the State of
California in accordance with Section 1103 of the California General Corporation
Law and to the offices of the Secretary of State of the State of Delaware in
accordance with Section 252 of the Delaware General Corporation Law.
8. Effective Date. The Merger shall become effective on the date
--------------
and at the time (i) when the Articles of Merger shall have been filed with and
accepted by the office of the Secretary of State of the State of California
pursuant to Section 1103 of the California General Corporation Law and (ii) when
the Certificate of Merger shall have been filed with and accepted by the office
of the Secretary of State of the State of Delaware pursuant to Section 103 of
the Delaware General Corporation Law (the "Effective Date").
9. Merger Consideration Adjustment; Closing Balance Sheet.
------------------------------------------------------
1. In the event that the balance sheet of the Corporation as
at the Closing Date without regard to any liability incurred prior to the Merger
by the Subsidiary but including any liabilities of the Partnership (as defined
in Section 2.24 hereof) and after giving effect to the acquisition by the
Corporation of the Partnership (the "Closing Balance Sheet") reflects (i) a
total Stockholders' Equity (as hereafter defined) of less than $3,900,000 and/or
(ii) a total of cash and cash equivalents (including U.S. Treasury Notes having
a maturity of three months or less from the Closing Date) of less than
$1,000,000, the aggregate Merger Consideration for the Stock shall be reduced by
a sum equal to the aggregate amount of any such deficiency or deficiencies (the
"Adjustment Amount"). The Adjustment Amount, if any, shall be deducted and paid
to CPI from the escrow funds deposited for such purpose in accordance with
clause (ii) of Section 8.3.4 hereof within three (3) days of the date the
Closing Balance Sheet shall be accepted by Chopra or otherwise shall become
final and binding upon the parties in accordance with Section 1.9.2 hereof.
After payment of the Adjustment Amount, the balance, if any, of the escrow funds
set aside in respect of the Adjustment Amount pursuant to clause (ii) of Section
8.3.4 hereof shall be promptly disbursed by the escrow agent to Chopra and the
Stockholders pro rata (including the custodial account for the benefit of Chopra
and the Stockholders as provided in the Escrow Agreement (as defined in Section
6.11)). For purposes of this Agreement, "Stockholders' Equity" shall mean the
total assets less the total liabilities of the Corporation, as set forth on the
Closing Balance Sheet, and shall include appropriate year-end expense accruals,
determined on a basis consistent with that of the year-end accruals reflected on
the balance sheet of the Company as at September 30, 1995.
2. CPI will prepare and deliver to Chopra the Closing Balance
Sheet within thirty (30) days of the Closing Date. Subject to Section 9.17
hereof, Chopra and Swadesh Chopra are hereby appointed by the Corporation to act
as its and the Stockholders' agents for purposes of reviewing, disputing and/or
accepting the Closing Balance Sheet. The Closing Balance Sheet shall be
prepared in accordance with generally accepted accounting principles applied in
a manner consistent with the application of such principles in the preparation
of the balance sheet of the Corporation as at September 30, 1995, and CPI shall
make available to Chopra such books, records and work papers of the Corporation
and provide access to such personnel (including independent auditors) as are
reasonably necessary in order to review the Closing Balance Sheet. Within
thirty (30) days after delivery of the Closing Balance Sheet to Chopra, Chopra
may give written notice of disagreement with the Closing Balance Sheet to CPI.
If within such 30-day period Chopra shall accept the Closing Balance Sheet by
written notice to CPI or shall not otherwise give written notice of disagreement
to CPI within such 30-day period, the Closing Balance Sheet shall be deemed
accepted. If Chopra shall give CPI notice of any disagreement, Chopra and CPI
will, if possible, resolve the matter(s) in dispute promptly after notice
thereof. Any disputed matter(s) that are not resolved by the parties within the
30-day period following CPI's receipt of such notice of disagreement (the
"Resolution Period") will be set forth in writing by Chopra and CPI and such
matter(s) shall be submitted to one arbitrator (the "Arbitrator") for final and
binding resolution. The Arbitrator shall be agreed upon between the parties
and, if the parties are unable to so agree within the 10-day period following
expiration of the Resolution Period, shall be selected by the American
Arbitration Association ("AAA"), with the parties hereto acknowledging and
directing that preference be given by the AAA in making such selection to an
independent accounting firm of nationally recognized standing which is willing
to perform such services (and which is not the principal accounting firm of
CPI). The Arbitrator shall be directed to consider only those matters in
dispute and to act promptly to resolve all disputed matters, and its decision
(which shall be in writing) with respect thereto shall be final and binding upon
the parties hereto. If a notice of disagreement is received by CPI, then the
Closing Balance Sheet shall be final and binding upon the parties hereto on the
earlier of (i) the date the parties resolve in writing all disputed matters and
(ii) the date all disputed matters are finally resolved in writing by the
Arbitrator. The fees and expenses, if any, of the Arbitrator shall be paid 50%
by CPI and 50% shall be deducted from the escrow funds deposited pursuant to
clause (ii) of Section 8.3.4 hereof.
2. Representations and Warranties as to the Corporation and Chopra. The
---------------------------------------------------------------
Corporation and Chopra hereby, jointly and severally, represent and warrant to,
and covenant and agree with, CPI as follows:
1. Organization, Standing and Power. The Corporation is a
--------------------------------
corporation duly organized, validly existing and in good standing and is
authorized to exercise its corporate powers, rights and privileges under the
laws of the State of California with full corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted by it. Schedule 2.1 hereto sets forth all States and other
jurisdictions in which the Corporation is duly qualified and in good standing to
do business as a foreign corporation. There are no other States or
jurisdictions in which the character and location of the properties owned or
leased by it, or the conduct of its business, make such qualification necessary
except where the failure to be so qualified would not result in a material
adverse effect to the Corporation, its business or financial condition. Copies
of the Corporation's Articles of Incorporation and all amendments thereto, and
of the Corporation's By-Laws as amended to date, have heretofore been furnished
to CPI and are complete and correct. The Corporation's minute books contain
accurate records of all corporate actions, whether by meeting or by written
consent, of the stockholders and Board of Directors of the Corporation
(including committees of its Board of Directors).
2. Capitalization. The authorized capital stock of the Corporation
--------------
consists solely of 10,000,000 shares of common stock, no par value, of which
1,129,983 shares are issued and outstanding as of the date hereof. Except as
set forth in Schedule 2.2 hereto, all issued shares of Stock have been duly and
validly issued, are fully paid and non-assessable and have been issued in
compliance with all applicable Federal and state securities laws. Except as set
forth in Schedule 2.2 hereto, there are no outstanding Convertible Securities or
agreements or arrangements to which the Corporation is a party or otherwise
bound which provide for the purchase or issuance by the Corporation of any
authorized but not outstanding, or authorized and outstanding, shares of capital
stock of the Corporation; provided, however, that no such Convertible
-------- -------
Securities, agreements or arrangements shall be outstanding or shall continue in
effect as of the Closing Date. There is no personal liability, and there are no
preemptive or similar rights, attached to the Stock.
3. Interests in Other Entities. Except as set forth in Schedule
---------------------------
2.3 hereto, the Corporation does not (i) own, directly or indirectly, of record
or beneficially, any shares of voting stock or other equity securities of any
other corporation, (ii) have any ownership interest, direct or indirect, of
record or beneficially, in any unincorporated entity, or (iii) have any
obligation, direct or indirect, present or contingent, to purchase or subscribe
for any interest in, advance or loan monies to, or in any way make investments
in, any person or entity, or to share any profits or capital investments in
other persons or entities, or both.
4. Authority. The execution and delivery by the Corporation and
---------
Chopra of this Agreement and all of the agreements, Schedules, Exhibits,
documents and instruments specifically provided for hereunder to be executed
and/or delivered by the Corporation and/or Chopra (all of the foregoing,
including this Agreement, being hereinafter sometimes collectively called the
"Executed Agreements"), the performance by the Corporation and Chopra (to the
extent that it or he is a party thereto) of their respective obligations under
the Executed Agreements, and the consummation of the transactions contemplated
by the Executed Agreements, have been duly and validly authorized by all
necessary action on the part of the Corporation and by Chopra and the Stockhold-
ers, subject to the filing and acceptance of the Articles of Merger and the
Certificate of Merger. The Executed Agreements are, or when executed and
delivered by the delivering parties shall be, the valid and binding obligations
of the delivering parties, enforceable in accordance with their respective
terms, except to the extent that enforceability may be limited by the operation
of bankruptcy, insolvency or similar laws. Neither the execution and delivery
by the Corporation and Chopra (to the extent that it or he is a party thereto)
of the Executed Agreements, nor the consummation of the transactions contem-
plated thereby, nor the performance by the Corporation and Chopra (to the extent
that it or he is a party thereto) of their respective obligations under the
Executed Agreements, shall (nor, with the giving of notice or the lapse of time
or both, would) (i) conflict with or result in a violation of any provision of
the Articles of Incorporation or By-Laws of the Corporation, (ii) give rise to a
default, or any right of termination, cancellation or acceleration, or otherwise
result in a loss of contractual benefits to the Corporation, under any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which the Corporation is
a party or by which it or any of its properties or assets may be bound, (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Corporation or Chopra or any of their respective properties or
assets, (iv) result in the creation or imposition of any lien, claim,
restriction, charge or encumbrance upon any of the properties or assets of the
Corporation, or (v) interfere with or otherwise materially adversely affect the
ability of the Corporation to carry on its business as now conducted.
5. Financial Statements. The Corporation has delivered to CPI
--------------------
copies of its audited balance sheet as of September 30, 1995, and the related
audited statements of income and cash flows for the period ended September 30,
1995 and its unaudited balance sheet as of March 30, 1996 (the "Balance Sheet")
and related unaudited statements of income and cash flows for the period ended
March 30, 1996. Except as set forth in Schedule 2.5 hereto, such financial
statements, including the notes thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be otherwise stated in said
financial statements and notes thereto and except for the absence of notes in
the March 30, 1996 financial statements). Such financial statements fairly
present the financial position of the Corporation at the dates thereof and the
results of its operations for the periods as indicated. The accounting books
and records of the Corporation are in all material respects complete and
correct, have been maintained in accordance with good business practices, and
accurately reflect the basis for the financial condition and results of
operations of the Corporation as set forth in the financial statements referred
to herein.
6. Absence of Undisclosed Liabilities. The Corporation does not
----------------------------------
have any liabilities or obligations, whether accrued, absolute, contingent or
otherwise, which have not been (i) reflected on the Balance Sheet in accordance
with GAAP, or (ii) in the case of liabilities and obligations not reflected on
the Balance Sheet, (A) specifically described on Schedule 2.6 hereto, or (B)
incurred, consistent with past practice, in the ordinary course of business
since the date of the Balance Sheet.
7. Properties. Except as set forth in Schedule 2.7 hereto, the
----------
Corporation has good and marketable title to all of the properties and assets
held or utilized in the Corporation's business (real, personal and mixed,
tangible and intangible) including those reflected on the Balance Sheet or
thereafter acquired (except properties or assets reflected on the Balance Sheet
and sold or otherwise disposed of in the ordinary course of business subsequent
to the date of the Balance Sheet), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever, except those referred
to in the Balance Sheet. Schedule 2.7 also contains an accurate list setting
forth all (i) real property owned, leased (whether as lessor or lessee) or
subject to contract or commitment of purchase or sale or lease (whether as
lessor or lessee) by the Corporation and (ii) personal property having a current
value of $20,000 or more leased by or to the Corporation or subject to a title
retention or conditional sales agreement or other security device. All leases
listed in Schedule 2.7 are valid, binding and enforceable in accordance with
their terms, and are in full force and effect, except to the extent that
enforceability may be limited by the operation of bankruptcy, insolvency or
similar laws; there are no existing defaults by the Corporation thereunder; no
event of default has occurred which (whether with or without notice, lapse of
time or both) would constitute a default by the Corporation thereunder; and all
lessors under such leases have consented (where such consent is necessary) to
the consummation of the transactions contemplated by this Agreement without
requiring modification of the rights and obligations of the Corporation under
such leases or any additional payments except as set forth in Schedule 2.7
hereto.
8. Accounts Receivable; Inventories. The accounts receivable as
--------------------------------
reflected on the Balance Sheet arose in the ordinary course of business and are
bona fide obligations due to the Corporation in the aggregate amounts recorded
- ---- ----
thereon. The accounts receivable of the Corporation thereafter added through
the Closing Date arose (or will arise) in the ordinary course of business and
are bona fide obligations due to the Corporation in the aggregate amounts
---- ----
recorded on the books of account of the Corporation. The inventories reflected
on the Balance Sheet and thereafter added through the Closing Date consist (or
will consist) of items of a quality and quantity usable or saleable in the
ordinary course of business, except for obsolete materials, materials of below
standard quality and not readily marketable items, all of which have been
written down to net realizable value or have been adequately reserved against on
the books and records of the Corporation in accordance with GAAP consistent with
past practice. All inventories are stated at the lower of cost or market in
accordance with GAAP applied on a consistent basis.
9. Absence of Certain Changes. Except as and to the extent set
--------------------------
forth in Schedule 2.9 hereto, since March 31, 1996, the Corporation has not:
(i) suffered any material adverse change in its financial
condition, assets, liabilities, business, operations or prospects;
(ii) incurred any material liabilities or obligations except
items incurred in the ordinary course of business and consistent with past
practice, or experienced any increase in, or change in any assumption underlying
or methods of calculating, any bad debt, contingency or other reserve;
(iii) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) which exceeds $10,000
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities and obligations
reflected or reserved against in the Balance Sheet or incurred in the ordinary
course of business and consistent with past practice since the date of the
Balance Sheet;
(iv) permitted or allowed any of its properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except those disclosed pursuant to Section 2.7 hereof;
(v) written down the value of any inventory or written off as
uncollectible or written down any notes or accounts receivable, except for
write-downs and write-offs in the ordinary course of business and consistent
with past practice, none of which are material;
(vi) cancelled, reduced or converted any debts owed to the
Corporation or waived any claims or rights in each case having a value $20,000
or more, or sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible), except in the ordinary
course of business and consistent with past practice;
(vii) disposed of or permitted to lapse any rights to use any
patent, trademark, trade name, copyright or other proprietary right, or disposed
of or disclosed (except as appropriate in the conduct of its business) to any
person any trade secret, formula, process or know-how not theretofore a matter
of public knowledge;
(viii) granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any material increase in
the compensation payable (including bonuses) or to become payable to any officer
or employee, and, unless otherwise indicated on Schedule 2.9, no such increase
is customary on a periodic basis or is required by agreement or understanding;
(ix) made any single capital expenditure or commitment in
excess of $20,000 for additions to property, plant, equipment or intangible
assets or made aggregate capital expenditures and commitments in excess of
$200,000 for additions to property, plant, equipment or intangible assets;
(x) declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock;
(xi) made any change in any method of accounting or accounting
practice;
(xii) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors, stockholders or employees or any "affiliate" or
"associate" of any of its officers, directors, stockholders or employees (as
such terms are defined in the rules and regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act")), except for compensation to officers and employees at rates
not significantly exceeding the rates of compensation paid during the year ended
December 31, 1995 and except for reimbursement of expenses in the ordinary
course of business consistent with past practice in each case not in excess of
$10,000 for the last 12 months; and
(xiii) agreed, whether in writing or otherwise, to take any
action described in this Section unless such action is specifically excepted
from this Section or described in Schedule 2.9.
10. Tax Matters. The Corporation has filed with the appropriate
-----------
governmental agencies all federal, state, local and foreign tax returns and
reports required to be filed by it ("Returns"), and has paid in full or, to the
extent lawfully permitted, made adequate provision for the payment of, all taxes
of every nature, including, but not limited to, income, sales and withholding
taxes ("Taxes"), together with interest, penalties, assessments and deficiencies
shown to be due or claimed to be due on such Returns. Except as set forth on
Schedule 2.10 hereto, the provisions for Taxes reflected on the Balance Sheet
are adequate for all accrued and unpaid taxes of the Corporation as of the date
of the Balance Sheet, whether (i) incurred in respect of or measured by income
of the Corporation for any periods prior to the close of business on that date,
or (ii) arising out of transactions entered into, or any state of facts
existing, on or prior to that date. The provision for Taxes reflected on the
books of account of the Corporation is adequate for all Taxes which have accrued
since the date of the Balance Sheet. There are no tax liens upon any property
or assets of the Corporation. Except as set forth on Schedule 2.10 hereto, the
Corporation has not executed or filed with any governmental authority any agree-
ment extending the period for the assessment or collection of any Taxes, and it
is not a party to any pending or, to Chopra's or the Corporation's knowledge,
threatened action or proceeding by any governmental authority for the assessment
or collection of Taxes. To the knowledge of Chopra and the Corporation, no
issue has arisen in any examination of the Corporation by any governmental
authority that if raised with respect to any other period not so examined would,
if upheld, result in a deficiency for any other period not so examined. There
is no unresolved claim by a governmental authority in any jurisdiction where the
Corporation does not file Returns that it is or may be subject to taxation by
such jurisdiction. There has been no examination or audit with respect to Taxes
with respect to any year except for regular audits in respect of sales taxes.
The Corporation is not required to make any adjustment pursuant to Section 481
of the Internal Revenue Code of 1986, as amended (the "Code"), by reason of a
change in accounting method or otherwise; to the knowledge of Chopra and the
Corporation, neither the Internal Revenue Service nor any other governmental
authority has proposed any such adjustment or change in accounting method in
respect of the Corporation, which proposal is currently pending and the
Corporation does not have an application pending with any governmental authority
requesting permission for any change in accounting method that relates to its
business and/or operations. There shall be no unpaid corporate surcharges at
the Closing Date for which the Corporation shall be liable.
11. Litigation. Other than as set forth in Schedule 2.11 hereto,
----------
there are no suits or actions, or administrative, arbitration or other
proceedings or governmental investigations, pending, or to the knowledge of
Chopra and the Corporation, threatened against the Corporation, or any of its
properties, assets or businesses or the transactions contemplated hereby. There
are no outstanding judgments, orders, stipulations, injunctions, decrees or
awards against the Corporation which are not satisfied.
12. No Violation of Law. The Corporation is not in violation of
-------------------
any law, rule, regulation, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to the Corporation or any of its properties (leased or owned),
products, operations, businesses, pension or other employee benefit plans, labor
practices, or employees, including, without limitation, any laws, rules and
regulations relating to air, water, solid or liquid waste disposal practices,
health or safety practices, advertising practices or hiring, promotion or
retirement practices except for such violations which involve or could
reasonably be expected to involve less than $20,000 individually or $50,000 in
the aggregate to remedy.
13. Intellectual Property. Schedule 2.13 hereto lists all
---------------------
licenses, patents, copyrights, or trademarks owned or used by the Corporation in
the conduct of its business and all applications therefor (the "Intellectual
Property"). Each trademark or patent registration and/or application listed on
Schedule 2.13 has been to the extent indicated on such Schedule duly registered
with or filed in or issued by the United States Patent and Trademark Office or
such other government entity as indicated in such Schedule, to the Corporation's
and Chopra's knowledge, and such registrations and filings remain in full force
and effect. Except for CPI, no officer or director, stockholder or employee of
the Corporation nor any of their affiliates or associates (each as defined in
the Securities Act) has any ownership or other interest (including licensing
rights) in any of the Intellectual Property. None of the Intellectual Property
infringes, and, to the knowledge of Chopra and the Corporation, none of the
Intellectual Property is being infringed upon by, any licenses, patents,
copyrights, trademarks or other intellectual property rights of any other person
or entity.
14. Insurance. Schedule 2.14 hereto contains a complete and
---------
correct list and summary description of all policies of insurance in which the
Corporation or its officers or directors (in such capacity) is an insured party,
beneficiary or loss payable payee. Such policies are in full force and effect.
Schedule 2.14 also lists all pending claims under such policies, whether or not
actually or fully covered by insurance.
15. Bank Accounts and Powers of Attorney. Schedule 2.15 hereto
------------------------------------
contains a complete and correct list showing (i) the name of each bank in which
the Corporation has an account or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto, and (ii) the names of all
persons, if any, holding powers of attorney from the Corporation.
16. Employee Arrangements; ERISA.
----------------------------
1. Except as set forth on Schedule 2.16 hereto, the
Corporation has (i) no union, collective bargaining, employment, management,
severance or consulting agreements to which the Corporation is a party or
otherwise bound, and (ii) no compensation plans, bonus plans, deferred compen-
sation agreements, pension, benefit and retirement plans, profit-sharing plans,
stock purchase or stock option plans. Schedule 2.16 hereto contains a complete
and correct list and summary description of the Corporation's hospitalization,
disability, health and related insurance plans or arrangements providing for
benefits for employees of the Corporation. Such Schedule also lists the names
and compensation of all persons (i) whose total annual compensation (direct and
indirect) from the Corporation (whether salary, bonus, commission or other cash
compensation) during the last fiscal year was $60,000 or more, or (ii) who are
presently scheduled to receive compensation of at least $60,000 during the
current fiscal year, or (iii) whose employment is not terminable at will by the
Corporation. Except as set forth on Schedule 2.16 hereto, the Corporation does
not have nor ever maintained or been party to any employee benefits plan which
is qualified for federal income tax exemption under Sections 401 and 501 of the
Code or which is an "employee welfare benefit plan," or an "employee pension
benefit plan" as defined by the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Company does not contribute nor ever has
contributed to any "multi-employer plan" as defined in ERISA.
2. With respect to any employee benefit plan subject to ERISA
and any stock purchase plan, stock option plan, fringe benefit plan, bonus plan
and any other deferred compensation agreement, plan or funding arrangement
currently or previously sponsored or maintained by the Corporation or to which
contributions are or have been made by the Corporation for the benefit of its
past or present employees (each, a "Plan") and, collectively, the "Plans"),
(1) each such Plan has been administered in all material respects in
accordance with its terms and in compliance with the applicable provisions of
ERISA and the Code,
(2) all material reports, returns and similar documents with respect to
each such Plan required to be filed with any governmental agency or
distributed to any participant of each such Plan have been duly and timely
filed or distributed,
(3) no actions, suits or claims (other than routine claims for benefits
in the ordinary course) are pending, or to the knowledge of the Corporation
and Chopra, threatened,
(4) neither the Corporation and Chopra nor, to the knowledge of the
Corporation and Chopra, any other party has, with respect to the Plans,
engaged in a prohibited transaction, as such term is defined in Section 4975
of the Code or ERISA Section 406, which would subject the Corporation or the
Surviving Corporation to any material taxes, penalties or other liabilities
resulting from prohibited transactions,
(5) the Corporation has complied in all material respects with the
reporting and disclosure requirements of ERISA, and
(6) all insurance premiums required to be paid as of the Closing Date
have been paid in all material respects.
17. Certain Business Matters. Except as is set forth in Schedule
------------------------
2.17 hereto, (i) the Corporation is not a party to or bound by any
distributorship, dealership, sales agency, franchise, license or similar
agreement which relates to the sale or distribution of its products and ser-
vices, (ii) the Corporation does not have any sole-source supplier of
significant goods or services (other than utilities) with respect to which
practical alternative sources are not available on substantially equivalent
terms and conditions, (iii) there are not pending, and to Chopra's and the
Corporation's knowledge there are not threatened, any collective labor
negotiations, strikes or grievances involving or affecting the Corporation and,
to Chopra's and the Corporation's knowledge, no organizing activities involving
union representation exist in respect of any of its employees, (iv) the
Corporation neither gives nor is bound by any express warranties relating to its
products or services and, to the knowledge of Chopra and the Corporation, there
has been no assertion of any breach of product warranties which could have a
material adverse effect on the business or financial condition of the
Corporation and, to the knowledge of Chopra and the Corporation, there are no
general manufacturing or design defects with respect to any product or any
defective services sold by the Corporation whether relating to its safety,
efficacy, fitness for purpose sold or otherwise, (v) the Corporation is not a
party to or bound by any agreement which limits its freedom to compete in any
line of business or with any person, and (vi) the Corporation is not a party to
or bound by any agreement or involved in any transaction in which any officer,
director or stockholder, or any affiliate or associate (each as defined under
the Securities Act) of any such person has, or had when made, a direct or
indirect material interest (except solely by virtue of a Stockholder's ownership
of the Stock).
18. Certain Contracts. Schedule 2.18 hereto contains a complete
-----------------
and correct list of all contracts, leases, commitments, obligations and
undertakings, written or oral, which are not specifically set forth in any other
Schedule delivered hereunder and to which the Corporation is a party or
otherwise bound, except for each of those which (i) was made in the ordinary
course of business, (ii) involves aggregate payments to or by the Corporation of
$60,000 or less, provided that such agreements are not extraordinary (based upon
past operating practice) as to price, quantity, terms or conditions (or the
equivalent) calculated over the full term thereof, and (iii) does not otherwise
involve covenants relating to non-competition, non-solicitation,
confidentiality, licensing or utilization of Intellectual Property, loan or
indebtedness or is of a similar extraordinary nature. Complete and correct
copies of all such contracts, leases, commitments, obligations and undertakings
set forth on any of the Schedules attached hereto have been furnished or made
available to CPI, and except as expressly stated on the Schedule on which they
are set forth, each of them is valid, binding and enforceable in accordance with
its terms, is in full force and effect, the Corporation is not in default
thereunder and no other person or entity which is a party thereto or otherwise
bound thereby is, to the knowledge of Chopra and the Corporation, in default
thereunder, and, to the knowledge of Chopra and the Corporation, no event,
occurrence, condition or act exists which, with the giving of notice or the
lapse of time or both, would give rise to a default or right of cancellation
thereunder, and to Chopra's and the Corporation's knowledge, there have been no
threatened cancellations thereof and there are no outstanding disputes
thereunder.
19. Customers and Suppliers. Schedule 2.19 hereto contains a true
-----------------------
and complete list of all of the Corporation's top 10 major suppliers and top 20
customers by dollar volume in fiscal 1995. Since December 31, 1995, the
Corporation has received no notice stating that any such supplier or customer
expects to (i) terminate or suspend, or (ii) to the knowledge of Chopra and
senior management of the Corporation, materially reduce, its business with the
Corporation by reason of the transactions contemplated by this Agreement or for
any other reason whatsoever. The Corporation has no agreement or understanding
with any customer that upon return of any products to the Corporation that such
customer will be entitled to a credit for any amount other than the invoice
price of the products so returned.
20. Approvals. The Corporation has obtained and there remain in
---------
effect, all material governmental and administrative consents, permits,
appointments, approvals, licenses, certificates and franchises ("Approvals")
necessary for the operation of its business as presently conducted by it. All
Approvals shall remain in full force and effect following the consummation of
the Merger.
21. Brokers. No agent, broker, person or firm acting on behalf of
-------
the Corporation, Chopra, the Stockholders or under the authority of any of the
foregoing, is or shall be entitled to a brokerage commission, finder's fee, or
other like payment in connection with any of the transactions contemplated
hereby, from the Corporation or CPI.
22. Stockholders. Schedule 2.22 hereto accurately sets forth the
------------
names of Chopra and each of the Stockholders, their respective addresses as
reflected in the records of the Corporation, including the State in which each
is domiciled and the number of shares of Stock owned by Chopra and each
Stockholder and as to which Chopra and each such Stockholder is the registered
holder.
23. Environmental Matters. Except as set forth in Schedule 2.23
---------------------
hereto, the Corporation has complied in all respects with all Environmental Laws
as hereinafter defined except for such non-compliance which involves or could
reasonably expected to involve less than $20,000 individually or $50,000 in the
aggregate to remedy. The Corporation holds all permits, licenses, certificates
and other authorizations which are required with respect to its operation under
any Environmental Laws and all such permits, licenses, certificates and other
authorizations are listed on Schedule 2.23 hereto, each of which shall be
transferred to the Surviving Corporation pursuant to the Merger. To the knowl-
edge of Chopra and the Corporation, there is no investigation evaluating whether
any remedial action is needed to respond to any release of any substance into
the environment with respect to the Corporation, its facilities or its
properties or assets (whether leased or owned) and there are no remediation
projects pending or contemplated with respect to the Corporation's facilities or
any properties adjacent to such facilities. Except as set forth on Schedule
2.23, immediately after the Effective Date, the Surviving Corporation will be in
compliance with all Environmental Laws. "Environmental Laws" mean all federal,
state, local and foreign environmental laws, codes and ordinances and all rules
and regulations promulgated thereunder, including, without limitation laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation, air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial, solid, toxic or hazardous substances or wastes. As used in this
Agreement, the term "hazardous substances or wastes" includes, without
limitation, (i) all substances which are designated pursuant to Section
311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.
Section 1251 et seq.; (ii) any element, compound, mixture, solution, or
-- ----
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; (iii) any hazardous waste having the characteristics which
-- ----
are identified under or listed pursuant to Section 3001 of the Resource
Conversation and Recovery Act ("RCRA") 42 U.S.C. Section 6901 et seq.; (iv) any
-- ----
toxic pollutant listed under Section 307(a) of the FWPCA; (v) any hazardous air
pollutant which is listed under the Air Pollution Control Act, 42 U.S.C.
Section 7401 et seq.; (vi) any imminently hazardous chemical substance or
-- ----
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; and (vii) waste
-- ----
oil. Except as set forth in Schedule 2.23 hereto, there is no pending or, to
Chopra's or the Corporation's knowledge, threatened any civil, criminal or
administrative action, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter that affects or applies to
the Corporation, its business or assets, the products it has manufactured or the
services it has provided relating in any way to any Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder. To Chopra's and the
Corporation's knowledge, there are no facts, events or conditions relating to
the past or present properties, facilities or operations of the Corporation that
would prevent, materially hinder or limit continued compliance with
Environmental Laws or give rise to any material corrective, investigatory or
remedial obligations pursuant to any Environmental Law or give rise to any other
liabilities pursuant to any Environmental Law including, without limitation,
those liabilities relating to onsite or offsite releases or threatened releases
of hazardous materials, substances or wastes, personal injury, property damage
or natural resources damages.
24. Partnership Purchase Agreement. To the knowledge of Chopra and
------------------------------
the Corporation, the representations and warranties made by Compu-Power Research
Partners (the "Partnership") and by the partners of the Partnership pursuant to
the agreement amending the Corporation's option to purchase units in the
Partnership are true and correct. On the Closing Date, the Corporation will
have purchased all of the units in the Partnership in accordance with the terms
of such agreement, a copy of which has been furnished to CPI,
3. Representations and Warranties as to CPI and the Subsidiary. CPI
-----------------------------------------------------------
hereby represents and warrants to, and covenants and agrees with, Chopra and the
Corporation, as follows:
1. Organization, Standing and Power. CPI is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Florida, with full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted by it. CPI owns
108,400 shares of the Stock.
2. Authority. The execution and delivery by CPI of this Agreement
---------
and of each of the other Executed Agreements to which it shall be a party, the
performance by CPI of its obligations under this Agreement or such Executed
Agreements and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate action
on the part of CPI and its stockholders, and CPI has all necessary power and
authority with respect thereto. This Agreement and the Executed Agreements are,
or when executed and delivered by CPI shall be, the valid and binding
obligations of CPI, enforceable in accordance with their respective terms,
except to the extent that enforceability may be limited by the operation of
bankruptcy, insolvency or similar laws. Neither the execution and delivery by
CPI of such of the Executed Agreements, nor the consummation of the transactions
contemplated thereby, nor the performance by CPI of its respective obligations
thereunder, shall (nor with the giving of notice or the lapse of time or both
would) (i) conflict with or result in a violation of any provision of the
Articles of Incorporation or By-Laws of CPI, (ii) give rise to a default, or any
right of termination, cancellation or acceleration, or otherwise result in a
loss of contractual benefit to CPI, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which CPI is a party or by which it or any of its
properties or assets may be bound and which is material to it, (iii) result in
the creation or imposition any lien, claim, restriction, charge or encumbrance
upon any of the material properties or assets of CPI, or (iv) violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to CPI or
any of its properties or assets.
3. Formation of the Subsidiary. CPI owns, beneficially and of
---------------------------
record, all of the issued and outstanding equity of the Subsidiary. The
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The execution and delivery by
the Subsidiary of this Agreement and of each Executed Agreement to which it
shall be a party, the performance by the Subsidiary of its obligations under
this Agreement and such Executed Agreements and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of the Subsidiary and
CPI, and do not conflict with the Subsidiary's Certificate of Incorporation or
By-Laws, and the Subsidiary has all necessary power and authority with respect
thereto. This Agreement and such Executed Agreements are the valid and binding
obligations of the Subsidiary enforceable in accordance with their respective
terms, except to the extent that enforceability may be limited by the operation
of bankruptcy, insolvency or similar laws. The Subsidiary was formed for the
purpose of consummating the transactions contemplated hereby, has been
capitalized by the capital contribution of $10.00 by CPI and has no other
assets.
4. Brokers. No agent, broker, person or firm acting on behalf of
-------
CPI or the Subsidiary or under their authority is or shall be entitled to a
brokerage commission, finder's fee, or other like payment in connection with any
of the transactions contemplated hereby.
4. INTENTIONALLY OMITTED
5. INTENTIONALLY OMITTED
6. Conditions to CPI's and the Subsidiary's Obligation to Close. The
------------------------------------------------------------
obligations of CPI and the Subsidiary to close under this Agreement are subject
to each of the following conditions:
1. Agreements and Conditions. On or before the Closing Date,
-------------------------
Chopra and the Corporation shall have complied with and duly performed all
agreements and conditions on his or its part to be complied with and performed
pursuant to or in connection with this Agreement on or before the Closing Date.
2. Representations and Warranties. The representations and
------------------------------
warranties of Chopra and the Corporation contained in this Agreement, including
the Schedules hereto, shall be true and correct in all material respects on and
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
3. Loss, Damage or Destruction. Between the date hereof and the
---------------------------
Closing Date there shall not have been loss, damage or destruction to or of any
of the assets, property or business of the Corporation in excess of $25,000 in
the aggregate, not fully covered by insurance, nor shall the assets, properties,
business or prospects of the Corporation have been materially adversely affected
in any way as a result of any fire, accident, or other casualty, war, civil
strife, riot or act of God or the public enemy or otherwise.
4. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain or prohibit the
transactions contemplated hereby, and on the Closing Date there will be no court
or governmental action or proceeding pending or threatened against or affecting
the Corporation, Chopra or the Stockholders which involve a demand for any
material judgment or liability, whether or not covered by insurance, and which
could reasonably be expected to result in any material adverse change in the
business, operations, properties or assets or in the financial condition of the
Corporation.
5. Certificate. CPI shall have received a certificate dated the
-----------
Closing Date and executed by Chopra, in his capacity as the principal
stockholder of the Corporation, and by an authorized officer on behalf of the
Corporation to the effect that, to his knowledge, the conditions expressed in
Sections 6.1, 6.2, 6.3, 6.4, 6.8 and 6.9 hereof have been fulfilled.
6. Consents. CPI shall have received all consents, approvals,
--------
waivers, authorizations, and orders ("Consents") necessary or reasonably
required to effectuate this Agreement and to consummate the transactions contem-
plated hereby. The Consents are listed on Schedule 6.6 hereto.
7. Employment Arrangements. The employees of the Corporation
-----------------------
listed on Schedule 6.7 hereto shall have executed and delivered Employee Letter
Agreements with the Surviving Corporation in form reasonably satisfactory to
CPI.
8. Partnership Acquisition. The Corporation shall have completed
-----------------------
the acquisition by it of all units of ownership interest of the Partnership
pursuant to the agreement in the form of Exhibit C hereto. All obligations
under any agreements or arrangements between the Partnership and the Corporation
shall have been satisfied in full and all such agreements or arrangements have
been terminated without further liability to the Corporation or its successors.
There shall be no claims or liabilities of any nature whatsoever outstanding,
pending or threatened against the Corporation in connection with the Partnership
or the acquisition of the Partnership by the Corporation.
9. Dissenting Shares. Dissenting Shares and shares of Stock for
-----------------
which dissenter's rights under the California General Corporation Law have not
been irrevocably waived or expired in accordance with the California General
Corporation Law shall not constitute more than 112,998 shares representing 10%
of the total number of shares of Stock outstanding on the Closing Date including
Stock owned by CPI immediately prior to the Merger.
10. Legal Opinion. CPI shall have received the legal opinion of
-------------
O'Melveny & Myers LLP, counsel to the Corporation and Chopra, substantially in
the form of Exhibit D hereto.
11. Escrow Agreement. CPI, the Corporation and Chopra shall have
----------------
duly executed the Escrow Agreement substantially in the form of Exhibit E hereto
(the "Escrow Agreement").
12. Capitalization. The number of shares of Stock outstanding on
--------------
the Closing Date shall not be more than 1,129,983 shares and there shall be no
Convertible Securities outstanding.
13. Resignations. The present officers and directors of the
------------
Corporation shall have resigned as of the Effective Date.
14. Stockholders' Agreements. The Corporation and Chopra shall
------------------------
furnish written evidence to CPI that all agreements among the Corporation,
Chopra and/or the Stockholders relating to the voting or issuance of the Stock
shall have been terminated with no further force or effect.
7. Conditions to Chopra's and the Corporation's Obligation to Close.
----------------------------------------------------------------
The obligations of Chopra and the Corporation to close under this Agreement are
subject to each of the following conditions:
1. Agreements and Conditions. On or before the Closing Date, CPI
-------------------------
and the Subsidiary shall have complied with and duly performed all agreements
and conditions on their part to be complied with and performed pursuant to or in
connection with this Agreement on or before the Closing Date.
2. Representations and Warranties. The representations and
------------------------------
warranties of CPI contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though such representations and warranties had been made on and as of the
Closing Date.
3. No Legal Proceedings. No court or governmental action or
--------------------
proceeding shall have been instituted or threatened to restrain or prohibit the
transactions contemplated hereby.
4. Certificate. The Corporation and the Agent shall have received
-----------
a certificate dated the Closing Date and executed by an authorized officer of
each of CPI and the Subsidiary to the effect that the conditions expressed in
Sections 7.1, 7.2 and 7.3 hereof have been fulfilled.
5. Legal Opinion. The Corporation and the Agent shall have
-------------
received the legal opinion(s) of Hertzog, Calamari & Gleason, special counsel to
CPI and the Subsidiary, and/or Bert Sager, Esq., Florida counsel to CPI and the
Subsidiary, substantially in the form of Exhibit F hereto.
6. Escrow Agreement. CPI, the Corporation and Chopra shall have
----------------
duly executed the Escrow Agreement.
8. Indemnification.
---------------
1. Right to Indemnification. Subject to Sections 8.3.2 and 8.3.3
------------------------
hereof, the Corporation and Chopra hereby, jointly and severally, agree on the
one hand, to indemnify, hold harmless, pay and reimburse CPI, the Subsidiary and
the Surviving Corporation, and CPI, the Subsidiary and the Surviving Corporation
hereby, jointly and severally, agree, on the other hand, to indemnify, hold
harmless, pay and reimburse the Corporation and Chopra from and against (i) any
and all losses, obligations, liabilities, damages, claims, deficiencies, costs
and expenses (including, but not limited to, the amount of any settlement en-
tered into pursuant hereto and all legal and other expenses including reasonable
attorneys' fees, incurred in connection with the investigation, prosecution, or
defense of the matter) (each, a "Loss" and, collectively, "Losses") sustained or
incurred by any indemnified party, whether or not in connection with any third
party claim, in connection with, arising out of or relating to any breach of any
of the representations, warranties, agreements and covenants in this Agreement
(including the Schedules attached hereto and any certificates delivered
hereunder) or in any Executed Agreement, (ii) Losses arising out of or in
connection with any undisclosed claims against, or obligations or liabilities of
the Corporation, which, either individually or in the aggregate are of a nature
which, if known on the Effective Date, would have been required to be disclosed
hereunder except that this clause (ii) shall not be construed to expand the
scope of the representations and warranties or agreements contained in Sections
2.17, 2.18, 2.23, 2.24 or 6.8 hereof to the extent such representations and
warranties are limited to the knowledge of Chopra or the Corporation and
(iii) Losses arising out of or in connection with the failure of the Corporation
to have complied with applicable state securities laws and/or regulations in
issuing shares of Stock.
2. Procedures for Indemnification. In the event that any claim is
------------------------------
asserted against any party hereto, or any party hereto is made a party defendant
in any action or proceeding, and such claim, action or proceeding involves a
matter which is the subject of this indemnification, then such indemnified party
(an "Indemnified Party") shall give written prompt notice thereof to the
indemnifying party (an "Indemnifying Party") of such claim, action or proceeding
(although the failure to give such notice shall not limit an Indemnified Party's
right to indemnification unless the Indemnifying Party is prejudiced in
defending such claim by such lack of notice), and such Indemnifying Party shall
have the right to join in the defense of said claim, action or proceeding at
such Indemnifying Party's own cost and expense and, if the Indemnifying Party
agrees in writing to be bound by and to promptly pay the full amount of any
final judgment from which no further appeal may be taken and if the Indemnified
Party is reasonably assured of the Indemnifying Party's ability to satisfy such
agreement, then at the option of the Indemnifying Party, such Indemnifying Party
may take over the defense of such claim, action or proceeding, except that, in
such case, the Indemnified Party shall have the right to join in the defense of
said claim, action or proceeding at its own cost and expense; provided, however,
-------- -------
that the Indemnifying Party shall not settle or compromise any claim, action or
proceeding without the prior written consent of the Indemnified Party which will
not be unreasonably withheld or delayed; and provided, further, that no consent
-------- -------
shall be necessary if the Indemnified Party shall be unconditionally released
and completely reimbursed for all Losses in respect of such claim. No claim
will be subject to indemnification which is not asserted prior to the expiration
of the Survival Period (as defined in Section 8.4 hereof). Subject to Section
9.17 hereof, after the Effective Date, Chopra and Swadesh Chopra are hereby ap-
pointed and shall act as agents for the Corporation and the Stockholders for
purposes of responding to indemnification claims by CPI and coordinating the
legal defense thereof if, in Chopra's or Swadesh Chopra's judgment it is
desirable and appropriate to assume such defense.
3. Limitations on Indemnification; Escrow.
--------------------------------------
1. Notwithstanding anything to the contrary contained in this
Agreement, no claim for indemnification under Section 8.1 hereof, may be brought
by an Indemnified Party unless the Losses against which indemnification is
sought shall individually or in the aggregate exceed $25,000 (the "Minimum
Indemnification Amount"), in which case the Indemnifying Party may seek
indemnification for all of such Losses including Losses up to the Minimum
Indemnification Amount.
2. CPI and the Subsidiary acknowledge and agree that
indemnification for Losses arising out of breaches of representations and
warranties made by the Corporation or Chopra in this Agreement shall, subject to
Sections 8.3.3 and 8.3.4 hereof, be limited to $563,465 representing five (5%)
percent of the aggregate Merger Consideration which would otherwise be payable
for the Stock pursuant to this Agreement without regard to (i) any adjustment
pursuant to Section 1.9 hereof, or (ii) any amounts paid in respect of
Dissenting Shares (the "Maximum Indemnification Amount"). The Maximum Indemni-
fication Amount shall be deposited in escrow in accordance with clause (i) of
Section 8.3.4 hereof and the indemnification obligations of the Corporation and
Chopra after the Closing Date under Section 8.1 hereof, subject to Sections
8.3.3 and 8.3.4 hereof, shall be satisfied solely from such escrowed funds;
provided, however, that nothing contained herein shall constitute a waiver by
- -------- -------
CPI or the Subsidiary or as a limitation of any of their rights or remedies
against Chopra or the Corporation based on fraud.
3. In addition to the indemnification obligations of the
Corporation and Chopra pursuant to Section 8.1 hereof and of Chopra pursuant to
Section 8.3.4 hereof and notwithstanding anything contained herein to the
contrary, Chopra agrees to indemnify, hold harmless, pay and reimburse CPI, the
Subsidiary and the Surviving Corporation for all Losses actually incurred by
CPI, the Subsidiary and the Surviving Corporation to the extent such Losses were
caused by fraud and/or "Intentional Misrepresentation" by Chopra up to the
amount of the Merger Consideration payable to Chopra hereunder. Indemnification
obligations under this Section 8.3.3 shall be satisfied first from the funds
held in escrow pursuant to clause (i) of Section 8.3.4 hereof to the extent
available. For purposes of this Agreement, "Intentional Misrepresentation" by
Chopra shall mean a willful and intentional misrepresentation of any of the
matters contained herein by Chopra involving a present, conscious understanding
of the misrepresentation by him and an actual intent not to disclose
notwithstanding such understanding. In determining whether an Intentional
Misrepresentation occurred, Chopra shall not be deemed responsible for any other
person's knowledge or intent nor shall there be any constructive or imputed
knowledge.
4. Chopra and the Corporation agree that on the Effective Date
CPI shall deduct from the aggregate Merger Consideration to be paid for the
Stock (i) the Maximum Indemnification Amount and (ii) $390,000 solely to be used
to pay the Adjustment Amount, if any, and all or a portion of the balance of
which (if any, after payment of the Adjustment Amount, if any) may subsequently
be used to fund the custodial account as provided in the Escrow Agreement. CPI
shall deposit such funds with the escrow agent to be held, invested and
disbursed in accordance with the terms of the Escrow Agreement. Notwithstanding
anything contained herein to the contrary, in the event that the Adjustment
Amount payable to CPI exceeds $390,000, Chopra agrees to unconditionally
indemnify and pay CPI the amount of such excess promptly after receipt by Chopra
of a written demand by CPI therefor; provided, however, that nothing contained
-------- -------
herein shall be deemed to operate as a limitation or waiver of Chopra's right to
seek contribution from the Stockholders for any amounts paid by Chopra to CPI
pursuant to this Section 8.3.4 and any distribution by the escrow agent to
Chopra and the Stockholders of the funds representing the Maximum Indemnifi-
cation Amount (after payment to CPI for all Losses) shall first be distributed
to Chopra to reimburse him for any amounts so paid. In no event shall any party
be entitled to duplicative recovery of its damages hereunder or under applicable
law arising from the same underlying facts or harm. Notwithstanding the payment
of the Adjustment Amount, the indemnification obligations of the Corporation and
Chopra in Sections 8.1, 8.3.3 and 8.3.4 hereof shall remain in full force and
effect without modification or diminution thereof.
8.3.5. In the event that any funds reserved to pay the
Adjustment Amount are remaining for distribution to the Stockholders, $100,000
of such funds (or such lesser amount as is remaining for distribution to the
Stockholders from the the funds reserved to pay the Adjustment Amount) shall be
placed in a custodial account (the "Stockholder Expense Fund") and may be used
only for the purpose of paying expenses of the Stockholders (including Chopra)
in connection with this transaction, including, without limitation, expenses
incurred in reviewing, resolving or disputing any claim for indemnification made
against the funds held in escrow. CPI and Chopra agree to promptly give any
necessary instructions to the escrow agent to cause such funds to be placed in
the custodial account. At such time as all of the escrowed funds have been
distributed to the Stockholders and/or CPI, any amounts remaining in the
Stockholder Expense Fund shall be distributed to the Stockholders (including
Chopra), pro rata. Chopra and/or Swadesh Chopra are hereby appointed as agents
for the Stockholders in dealing with the Stockholder Expense Fund and shall have
the power and authority to disburse, invest and distribute the Stockholder
Expense Fund as they or either of them determines, in their sole discretion,
subject only to the limitations contained in this Section 8.3.5.
4. Survival of Representations. The parties hereto agree that the
---------------------------
representations and warranties contained herein or in any instrument or other
document delivered pursuant to this Agreement or in connection with the transac-
tions contemplated hereby shall survive the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and any
investigation or audit made by any party hereto for a period of 12 months from
the Effective Date (the "Survival Period").
8.5 Special Indemnification. Without regard to any other provision
-----------------------
of this Agreement, in the event that any claim is asserted or any legal action
is instituted against the Corporation (including, in this Section, the Surviving
Corporation) by or on behalf of Dr. Subhash Vatave ("Vatave") relating to facts
or events occurring at or prior to the Effective Date, the following provisions
of this Section 8.5 will apply.
8.5.1. Any Losses sustained or incurred in connection with a
claim or action involving the assertion by Vatave of dissenter's rights under
the California General Corporation Law will be borne by the Surviving
Corporation, and Chopra and the Stockholders shall have no liability therefor
whatsoever.
8.5.2. Any Losses sustained or incurred in connection with any
claim or action not subject to Section 8.5.1 asserted by Vatave against the
Corporation or CPI relating to facts or events occuring at or prior to the
Effective Date (a "Vatave Claim") shall be allocated among CPI and Chopra as
follows: Chopra shall bear the first $50,000 of such Losses; CPI shall bear the
next $50,000 of such Losses; thereafter, any Losses shall be borne 50% by Chopra
and 50% by CPI. Each of Chopra and CPI agree to promptly pay and disburse money
to each other and/or such third parties as is necessary to give effect to this
allocation of Losses.
8.5.3. The Corporation, CPI and Chopra agree to cooperate and
assist each other in the defense of any Vatave Claim. Upon receipt of any
Vatave Claim, the Corporation will promptly give written notice thereof to
Chopra. Chopra shall have the sole right to control the defense of a Vatave
Claim and may select counsel (who shall be reasonably satisfactory to CPI) to
investigate, defend and respond to (including asserting counterclaims) any
Vatave Claim. CPI acknowleges that O'Melveny & Myers LLP is satisfactory
counsel. (Unless there is a conflict between Chopra individually and the
Corporation, Chopra shall also be entitled to employ O'Melveny & Myers LLP to
represent him personally in any dispute with Vatave.) CPI may join in and
participate in the defense of any such Vatave Claim at its own cost and expense.
Chopra shall have the sole right to settle or compromise any Vatave Claim if
the Corporation is unconditionally released and completely reimbursed for all
Losses resulting therefrom. In the event that any proposed compromise or
settlement of a Vatave Claim involves Losses exceeding $50,000, Chopra may
compromise or settle such Vatave Claim only with the prior written consent of
CPI, which shall not be unreasonably withheld or delayed.
8.5.4. Chopra hereby waives any and all right to
indemnification from the Corporation in his capacity as a director and officer
of the Corporation in respect of any Vatave Claim. The risk of Loss with
respect to a Vatave Claim will be allocated solely as provided in this Section
8.5.
8.5.5. In the event that Losses are incurred in respect of a
Vatave Claim, whether such Losses relate to investigation, costs of defense and
or settlement, no allocation or apportionment of such Losses will be made to
Chopra individually merely because such Losses also benefitted Chopra
individually. By way of illustration and without limitation, if Chopra is a co-
defendant with the Corporation in a lawsuit relating to a Vatave Claim, amounts
expended by the parties hereto in defending such lawsuit which result in a
dismissal of all claims, including claims against Chopra which share common
facts or attributes, will not be apportioned to Chopra, but will instead be
allocated as provided in Section 8.5.2. If, however, claims are made against
Chopra which do not share common facts or legal defenses with Vatave Claims, any
costs of defending such claims against Chopra will be separately borne by Chopra
and will not be included in Losses allocated as provided in Section 8.5.2.
9. Miscellaneous Provisions.
------------------------
1. Public Announcements. The Corporation, Chopra, on the one hand
--------------------
and CPI on the other hand agree that they will consult the other before issuing
any press releases or otherwise making any public statements with respect to
this Agreement or the transactions contemplated hereby, subject to the
disclosure requirements of CPI under Federal securities law or pursuant to any
listing agreement to which CPI is a party or is subject.
2. Notification. Each party hereto shall give the other party or
------------
parties hereto prompt written notice of (i) the existence of any fact or the
occurrence of any event which constitutes, or with the giving of notice or the
passage of time or both would constitute, a breach of any representation or
warranty of the party giving such notice made herein or pursuant hereto and (ii)
the taking of any action by the party giving such notice that would breach or
violate, or constitute a default under, any agreement or covenant of such party
made herein or pursuant hereto. The giving of any such notice shall not affect,
modify or limit in any way any representation, warranty, agreement or covenant
of the parties made herein or pursuant hereto.
3. Noncompetition; Nonsolicitation; Confidentiality.
------------------------------------------------
1. During the 24-month period commencing on the Closing Date
(the "Restricted Period"), Chopra shall not, unless he receives the prior
written consent of CPI, directly or indirectly, own an interest in, manage,
operate, join, control, lend money or render financial or other assistance to or
participate in or be connected with, as an officer, employee, partner,
stockholder, consultant or otherwise, any individual, partnership, firm,
corporation or other business organization or entity that competes within the
United States with the business of the Surviving Corporation as conducted on the
Effective Date; provided, however, that this Section 9.3.1 shall not proscribe
-------- -------
Chopra's ownership, either directly or indirectly, of less than five (5%)
percent of any issue of stock or securities of any company or business entity
which has any class of securities listed on a national securities exchange or
quoted on The Nasdaq Stock Market.
2. During the Restricted Period, Chopra shall not, whether for
his own account or for the account of any other individual, partnership, firm,
corporation or other business organization (other than the Surviving Corpo-
ration), solicit or endeavor to entice away from the Surviving Corporation, or
otherwise interfere with the relationship of the Surviving Corporation with, any
person who is employed by or otherwise engaged to perform services for the
Surviving Corporation (including, but not limited to, any independent sales
representatives or organizations) or any person or entity who is, or was within
the 12-month period prior to such proscribed act, a customer or supplier of the
Surviving Corporation.
3. Following the Closing Date, Chopra shall hold in strict
confidence and not use for the benefit of Chopra or any other person or entity,
all proprietary information relating to the business of the Corporation or its
business, including policies, operational methods, customer lists, marketing
plans or strategies, product development techniques or plans, methods of
manufacture, technical processes, design projects, inventions and research
projects and Chopra shall not disclose them to others; provided, however, that
-------- -------
the foregoing restrictions shall not apply to any information that is part of or
becomes part of the public domain by publication or otherwise through no action
of Chopra or that is obtained by Chopra from a third party that has the legal
right to disclose such information or that Chopra is required in connection with
any legal process or procedure to disclose.
4. Chopra acknowledges and agrees that the covenants contained
in this Section 9.3 by Chopra are unique and of extraordinary character and in
the event of the breach by Chopra of the terms of this Section 9.3, CPI and/or
the Surviving Corporation shall be entitled, if they so elect, to institute and
prosecute proceedings, subject to Section 9.9 hereof, in any court of competent
jurisdiction, either at law or in equity, to obtain damages for any breach of
the terms and provisions hereunder, to enforce the specific performance by
Chopra of the covenants in this Section 9.3 and to enjoin him from performing
services for any other party in violation of this Agreement or otherwise acting
in violation of this Agreement. The remedies mentioned specifically herein are
in addition to those otherwise available, at law or in equity, to CPI or the
Surviving Corporation, and the enumeration of remedies herein shall not be con-
strued to prevent CPI and/or the Surviving Corporation, as they may elect, from
invoking any such additional remedies in the event of any breach or threatened
breach hereof by Chopra.
4. Execution in Counterparts. This Agreement may be executed in
-------------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
5. Notices. All notices, requests, demands and other
-------
communications which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed duly given when delivered by
hand, sent via facsimile, or posted in the United States mail by registered or
certified mail with postage pre-paid, return receipt requested, (i) if to CPI or
the Subsidiary, to Computer Products, Inc., 7900 Glades Road, Suite 500, Boca
Raton, Florida 33434, Attention: Richard J. Thompson, Vice President/Finance,
Chief Financial Officer, with a copy to Stephen A. Ollendorff, Esq. and Stephen
R. Connoni, Esq., at Hertzog, Calamari & Gleason, 100 Park Avenue, New York, NY
10017; and (ii) if to Chopra or the Corporation, to 6351 Sattes Drive, Rancho
Palos Verdes, California 90275, Attention: Jagdish C. Chopra, with a copy to
O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California 90071-
2899, Attention: D. Stephen Antion, Esq., or to such other addresses as shall
be specified by like notice to the other parties.
6. Amendments. This Agreement may be amended or modified at any
----------
time prior to the Closing Date, but only by a written instrument executed by all
of the parties hereto.
7. Entire Agreement. This Agreement (together with the other
----------------
agreements, instruments and documents delivered pursuant hereto) constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, oral and
written, among the parties hereto with respect to the subject matter hereof.
8. Applicable Law. This Agreement and the legal relations among
--------------
the parties hereto shall be governed by and construed in accordance with the
laws of the State of California applicable to contracts made and to be wholly
performed therein.
9. Arbitration. Any controversy, dispute or claim arising out of or
-----------
relating to this Agreement or the breach hereof which cannot be settled by
mutual agreement shall be finally settled by arbitration as follows: Any party
who is aggrieved shall deliver a notice to the other party setting forth the
specific points in dispute. Any points remaining in dispute twenty (20) days
after the giving of such notice shall be submitted to arbitration in Los
Angeles, California, to the AAA. Arbitration shall be by a panel of three
arbitrators with each of CPI, on the one hand, and Chopra and/or the
Corporation, on the other hand, who or which is a party to the dispute,
appointing one arbitrator and the third appointed by the two so appointed.
Appointment shall be within thirty (30) days of the demand for arbitration. If
within the 30-day period following the demand for arbitration a party shall fail
to choose an arbitrator, then, at the request of the other party, an arbitrator
shall be chosen by the AAA. The arbitrators may enter a default decision
against any party who fails to participate in the arbitration proceedings. The
decision of the arbitrators on the points in dispute will be final, unappealable
and binding and judgment on the award may be entered in any court having
jurisdiction thereof. The parties agree to execute such joint written
instructions to the escrow agent as shall be necessary to give effect to any
such decision by the arbitrators and that any party seeking to enforce such
agreement in a court of competent jurisdiction shall be entitled to specific
performance thereof. The fees of the arbitrators and the reasonable attorneys'
fees and expenses of the parties shall be borne by the non-prevailing party or
parties in the arbitration. The parties agree that this Section is intended to
facilitate the rapid and inexpensive resolution of any disputes between them
with respect to this Agreement, and that this Section shall be grounds for
dismissal of any court action commenced by either party with respect to this
Agreement, other than post-arbitration actions seeking to enforce an arbitration
award. The parties shall keep confidential, and shall not disclose to any
person, except as may be required by law or any listing agreement to which CPI
is a party or is subject, the existence of any controversy hereunder, the
referral of any such controversy to arbitration or the status or resolution
thereof.
10. Termination. This Agreement may be terminated at any time
-----------
prior to the Closing Date by any of the following:
(i) By mutual written agreement of CPI and the Corporation;
(ii) By either CPI or the Corporation, if the Closing has not
occurred by September 30, 1996, upon written notice by such terminating party,
provided that at the time such notice is given a material breach of this
Agreement by such terminating party shall not be the principal reason for the
Closing's failure to occur;
(ii) Subject to the provisions of Section 9.11 hereof, by CPI,
by written notice to the Corporation, if there has been a material violation or
breach of any of Chopra's or the Corporation's covenants or agreements made
herein or in connection herewith or if any representation or warranty of Chopra
or the Corporation made herein or in connection herewith proves to be materially
inaccurate or misleading; or
(iii) Subject to the provisions of Section 9.11 hereof, by
Chopra, by written notice to CPI, if there has been a material violation or
breach of any of CPI's covenants or agreements made herein or in connection
herewith or if any representation or warranty of CPI made herein or in
connection herewith proves to be materially inaccurate or misleading.
11. Effects of Termination. If this Agreement is terminated as
----------------------
provided in Section 9.10 hereof, then this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of any party hereto
(or any of their respective stockholders, officers, directors or employees),
except based upon the agreements regarding public announcements contained in
Section 9.1 hereof; provided, however, that if CPI terminates this Agreement
-------- -------
pursuant to Section 9.10(iii) hereof, or Chopra terminates this Agreement
pursuant to Section 9.10(iv) hereof, the non-terminating party shall remain
liable for any breach hereof.
12. Headings. The headings contained herein are for the sole
--------
purpose of convenience of reference, and shall not in any way limit or affect
the meaning or interpretation of any of the terms or provisions of this Agree-
ment.
13. Fees and Disbursements. CPI shall pay its own expenses, and
----------------------
the fees and disbursements of the counsel, accountants or auditors retained by
it in connection with the preparation, execution and delivery of this Agreement
("Transaction Costs"). The Corporation shall pay Transaction Costs incurred by
it and/or, to the extent legally permissible, Chopra, up to $100,000. Chopra
(and not the Corporation) shall pay Transaction Costs incurred by the
Corporation and Chopra in excess of $100,000 and such obligation shall not be
subject to the limitations set forth in Section 8.3 hereof. Nothing contained
herein shall operate as a waiver of Chopra's right to seek contribution from the
Stockholders.
14. Transfer Taxes. Any Taxes in the nature of a sales or transfer
--------------
tax (including any realty transfer tax or realty gains transfer tax), and any
stock transfer tax, payable on the sale or transfer of all or any portion of the
Stock or the consummation of any other transaction contemplated hereby shall be
paid by Chopra (and not the Corporation).
15. Assignment. This Agreement may not be assigned by any party
----------
hereto without the prior written consent of the other parties hereto.
16. Binding Effect; Benefits. This Agreement shall inure to the
------------------------
benefit of, and be binding upon, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective heirs, legal representatives, successors
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
17. Appointment of Agent. Chopra and/or Swadesh Chopra shall give
--------------------
CPI 20 days prior written notice of his or her inability or unwillingness to
serve as agent pursuant to Sections 1.9.2, 8.2 and/or 8.3.5 hereof. If Chopra
and/or Swadesh Chopra are unable or unwilling to act as agent pursuant to
Sections 1.9.2, 8.2 and/or 8.3.5 hereof, a majority in interest of the
Stockholders shall be entitled to appoint a substitute agent(s) for such
purpose. Chopra, Swadesh Chopra or any substitute agent shall have no liability
to the Stockholders in acting as agent except for actions taken by any such
agent not in good faith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
COMPUTER PRODUCTS, INC.
By: Richard J. Thompson
--------------------
Richard J. Thompson
Vice President
By: Stephen A. Ollendorff
----------------------
Stephen A. Ollendorff
Assistant Secretary
JPS ACQUISITION CORP.
By: Richard J. Thompson
--------------------
Richard J. Thompson
Vice President
By: Stephen A. Ollendorff
----------------------
Stephen A. Ollendorff
Assistant Secretary
JETA POWER SYSTEMS, INC.
By: Jagdish C. Chopra
-------------------
Jagdish C. Chopra
President
By: Swadesh Chopra
---------------
Swadesh Chopra
Secretary
Jagdish C. Chopra
------------------
EXHIBIT NO. 11
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE-PRIMARY
(In Thousands)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTY-NINE WEEKS
ENDED ENDED
SEPT. 27, SEPT. 29, SEPT. 27, SEPT. 29,
1996 1995 1996 1995
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares outstanding 23,534 22,522 23,291 21,622
Net effect of dilutive stock
options--based on the treasury
stock method using average market price 1,078 1,791 1,145 1,393
--------- --------- --------- ---------
Common and common equivalent
shares outstanding 24,612 24,313 24,436 23,015
========= ========= ========= =========
</TABLE>
EXHIBIT NO. 11
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE-FULLY DILUTED
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTY-NINE WEEKS
ENDED ENDED
SEPT. 27, SEPT. 29, SEPT. 27, SEPT. 29,
1996 1995 1996 1995
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Shares outstanding 23,682 22,365 23,682 22,365
Net effect of dilutive stock options -
based on the treasury stock method
using the greater of month-end market
price or average market price 1,252 1,885 1,326 1,756
------- -------- --------- -------
Totals 24,934 24,250 25,008 24,121
======= ======== ========= =======
* * * * *
Income before extraordinary item $5,131 $4,358 $13,424 $9,243
Add convertible debenture interest
and amortization, net of applicable
income taxes - - - 788
------- -------- --------- ---------
$5,131 $4,358 $13,424 $10,031
======= ======== ========= =========
Per share amounts $ 0.21 $ 0.18 $ 0.54 $ 0.42
======= ======== ======== =========
* * * * *
Net income $5,131 $4,358 $13,424 $8,846
Add convertible debenture interest
and amortization, net of applicable
income taxes - - - 788
------- -------- --------- ---------
$5,131 $4,358 $13,424 $9,634
======= ======== ========= =========
Per share amounts $ 0.21 $ 0.18 $ 0.54 $ 0.40
======= ======== ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> SEP-27-1996
<CASH> 22,669
<SECURITIES> 0
<RECEIVABLES> 39,514
<ALLOWANCES> 1,464
<INVENTORY> 30,573
<CURRENT-ASSETS> 93,989
<PP&E> 60,272
<DEPRECIATION> 30,272
<TOTAL-ASSETS> 147,120
<CURRENT-LIABILITIES> 37,151
<BONDS> 27,786
0
0
<COMMON> 44,003
<OTHER-SE> 32,133
<TOTAL-LIABILITY-AND-EQUITY> 147,120
<SALES> 159,868
<TOTAL-REVENUES> 159,868
<CGS> 101,481
<TOTAL-COSTS> 101,481
<OTHER-EXPENSES> 38,978
<LOSS-PROVISION> 83
<INTEREST-EXPENSE> 2,036
<INCOME-PRETAX> 18,141
<INCOME-TAX> 4,717
<INCOME-CONTINUING> 13,424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,424
<EPS-PRIMARY> .55
<EPS-DILUTED> .54
</TABLE>
