SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 22, 1996
CHARTER POWER SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9389 13-3314599
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
3043 Walton Road, Plymouth Meeting, Pennsylvania 19462
(Address of principal executive office) Zip Code
(610) 828-9000
(Registrant's telephone number, including area code)
<PAGE>
Item 2.
On February 22, 1996, an indirect subsidiary of the
registrant ("Purchaser") acquired certain equipment and inventory
of LH Research, Inc. ("Seller") used in the Seller's power supply
business, along with all rights to the name "LH Research." In
consideration of the assets acquired, Purchaser assumed certain
specified contracts to which Seller was a party and paid Seller
approximately $3.5 million. Seller retained its operations in
Malaysia, certain specified contracts and all pre-closing
liabilities other than under the assumed contracts. Purchaser
has also agreed to purchase certain of Seller's equipment and
inventory located in Malaysia on March 31, 1996 for an amount
which the registrant estimates will be approximately $0.6
million.
The registrant used available cash to finance the
acquisition. The Purchaser intends to continue using the assets
acquired in the Purchaser's power supply business.
Item 5. Other Events.
On March 8, 1996, the registrant's principal executive
office will move to 1400 Union Meeting Road, Blue Bell,
Pennsylvania 19422-0858. The registrant's new telephone number
will be (215) 619-2700.
Item 7. Financial Statements and Exhibits.
a) Financial Statements. It is impracticable to provide
any of the required financial statements of the business acquired
at the time of filing. All of the required financial statements
will be filed as an amendment to this Form 8-K as soon as
practicable, but not later than 60 days after the required filing
date of this Form 8-K.
b) Pro Forma Financial Information. The required pro
forma financial information will be filed as an amendment to this
Form 8-K at the time the required financial statements are filed.
c) Exhibits.
Exhibit 2.1 Asset Purchase Agreement, dated as of February 21,
1996, between LH Research, Inc. and International
Power Systems, Inc. (filed herewith).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CHARTER POWER SYSTEMS, INC.
March 7, 1996 BY: /s/ Alfred Weber
Alfred Weber
Chairman, President and Chief
Executive Officer
March 7, 1996 BY: /s/ Stephen E. Markert, Jr.
Stephen E. Markert, Jr.
Vice President Finance and
Treasurer
Principal Financial and Accounting
Officer
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of February 21, 1996
between
LH RESEARCH, INC.
and
INTERNATIONAL POWER SYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SALE AND PURCHASE OF ASSETS. . . . . . . . . . . . . . . 6
2.1 Asset Purchase . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Nonassignable Contracts and Authorizations . . . . . . . . 7
ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 The Closing. . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Obligations of Seller. . . . . . . . . . . . . . . . . . . 7
3.3 Obligations of Buyer . . . . . . . . . . . . . . . . . . . 8
3.4 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . 8
3.5 Conditions to Closing. . . . . . . . . . . . . . . . . . . 8
3.6 Malaysian Equipment. . . . . . . . . . . . . . . . . . . . 10
3.7 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . 10
4.1 Organization and Qualification . . . . . . . . . . . . . . 10
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 No Breach. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 Financial Statements; Sales Information;
Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 11
4.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Absence of Certain Changes or Events . . . . . . . . . . . 12
4.7 Related Party Transactions . . . . . . . . . . . . . . . . 12
4.8 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . 13
4.10 Contracts and Commitments. . . . . . . . . . . . . . . . . 14
4.11 Backlog. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.12 Customers and Suppliers. . . . . . . . . . . . . . . . . . 15
4.13 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . 15
4.14 Compliance with Law; Necessary Authorizations. . . . . . . 16
4.15 Consents and Approvals of Governmental
Authorities. . . . . . . . . . . . . . . . . . . . . . . . 16
4.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 16
4.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . 19
4.18 Environmental Matters. . . . . . . . . . . . . . . . . . . 19
4.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.20 Questionable Payments. . . . . . . . . . . . . . . . . . . 20
4.21 Product Warranties . . . . . . . . . . . . . . . . . . . . 21
4.22 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 21
(i)
<PAGE>
PAGE
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 21
5.1 Organization and Qualification . . . . . . . . . . . . . . 21
5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 No Breach. . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Finders. . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Certain Covenants of Seller. . . . . . . . . . . . . . . . 22
6.2 Obtaining Consents . . . . . . . . . . . . . . . . . . . . 24
6.3 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Records. . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Employee Matters . . . . . . . . . . . . . . . . . . . . . 24
6.6 Receipt of Payments on Accounts Receivable . . . . . . . . 25
6.7 Further Assurances . . . . . . . . . . . . . . . . . . . . 25
6.8 Warranty Claims. . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . 27
7.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Non-Competition. . . . . . . . . . . . . . . . . . . . . . 27
7.3 Non-Solicitation of Employees. . . . . . . . . . . . . . . 27
7.4 Non-Solicitation or Interference with Customers
and Suppliers. . . . . . . . . . . . . . . . . . . . . . . 28
7.5 Confidential Information . . . . . . . . . . . . . . . . . 28
7.6 Acknowledgements . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 28
8.1 Survival of Representations and Warranties . . . . . . . . 28
8.2 Indemnification by Seller. . . . . . . . . . . . . . . . . 28
8.3 Indemnification by Buyer . . . . . . . . . . . . . . . . . 29
8.4 Indemnification Procedures . . . . . . . . . . . . . . . . 29
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 31
9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 32
9.5 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Governing Law; Arbitration . . . . . . . . . . . . . . . . 33
9.9 Binding Effect; Assignment . . . . . . . . . . . . . . . . 34
9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . 34
9.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 34
(ii)
<PAGE>
PAGE
9.12 No Agency. . . . . . . . . . . . . . . . . . . . . . . . . 34
9.13 Third Parties. . . . . . . . . . . . . . . . . . . . . . . 34
9.14 Passage of Title and Risk of Loss. . . . . . . . . . . . . 34
(iii)
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February 21, 1996,
between among LH RESEARCH, INC., a California corporation ("Seller"),
and INTERNATIONAL POWER SYSTEMS, INC., an Arizona corporation
("Buyer").
WHEREAS, Seller is engaged in the Business (as hereinafter
defined);
WHEREAS, Seller desires to sell and transfer, and Buyer
desires to purchase and acquire certain of the assets, and assume
certain specified liabilities, of the Business; and
WHEREAS, in order to induce Buyer to enter into this
Agreement, Sunmark Capital Corporation, a Missouri corporation
("Sunmark"), has entered into a Guarantee dated as of the date hereof
in favor of Buyer;
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, OF THE
MUTUAL AGREEMENTS HEREINAFTER CONTAINED AND OF OTHER GOOD AND
VALUABLE
CONSIDERATION, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES
AGREE AS FOLLOWS:
ARTICLE I DEFINITIONS
The terms defined in this Article I, whenever used herein
(including the Exhibits and Schedules hereto), shall have the
following meanings for all purposes of this Agreement, except when the
context otherwise requires:
"AAA" shall have the meaning set forth in Section 9.8 of
this Agreement.
"Affiliate" means any person or entity which directly or
indirectly controls, is controlled by, or is under common control
with, another person or entity.
"Assumed Contracts" means the contracts, agreements,
commitments, and sales and purchase orders (including all unfilled
orders received by Seller) relating to the Business to which Seller is
a party listed in Exhibit 1A.
"Authorizations" means all licenses, permits, approvals,
authorizations, qualifications, or the like, issued by any federal,
state, local, domestic or foreign regulatory or governmental
authorities, relating to the Included Assets or the Business.
"Backlog List" means a list of outstanding and unfilled
orders that have been placed with the Seller with respect to the
Business as of a specified date.
<PAGE>
"Business" means the design, manufacture, assembly,
marketing, sale and servicing of standard and modified standard power
supplies.
"Buyer" shall have the meaning set forth in the caption of
this Agreement.
"Buyer Claimant" shall have the meaning set forth in Section
8.2 of this Agreement.
"Closing" means the closing of the transactions contemplated
by this Agreement, including but not limited to the completion of the
purchase of the Included Assets by Buyer.
"Closing Date" shall have the meaning set forth in Section
3.1 of this Agreement.
"Closing Documents" shall have the meaning set forth in
Section 4.2 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competition" shall have the meaning set forth in Section
7.1 of this Agreement.
"Costa Mesa Facility" means the facility located at 345
Baker Street, Costa Mesa, California, operated by Seller prior to the
Closing.
"Directly or Indirectly" shall have the meaning set forth in
Section 7.1 of this Agreement.
"DOL" shall have the meaning set forth in Section 4.16(a) of
this Agreement.
"Encumbrance" shall mean any lien, charge, encumbrance,
option, right of first refusal, security interest, easement,
obligation or claim or other third party right of any kind.
"Environment" means any surface or subsurface physical
medium or natural resource, including, air, land, soil, surface
waters, ground waters, stream and river sediments, and biota.
"Environmental Action" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation,
proceeding, judgment, letter or other communication from any Federal,
state, local, municipal or foreign agency, department, bureau, office
or other authority or any third party involving a Hazardous Substance
or any violation of any order, permit or Environmental Laws.
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<PAGE>
"Environmental Law" means each and every applicable Federal,
state, local, municipal and foreign law, statute, ordinance,
regulation, rule, judicial or administrative order or decree, permit,
license, approval, authorization or similar requirement of each and
every Federal and pertinent state, local, municipal and foreign
governmental agency or other governmental authority, including the
common law, pertaining to the protection of human health and safety or
the protection or pollution of the environment including, without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA), 42 U.S.C. 9601 et seq., the Resource
Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq., the
Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., and the
Water Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means National Bank of Southern California.
"Escrow Agreement" means the escrow agreement in the form
annexed hereto as Exhibit 1B.
"Escrowed Funds" shall have the meaning set forth in Section
6.8 of this Agreement.
"Financial Statements" means the balance sheet and related
statements of operations and of changes in financial position of
Seller at April 30, 1993, 1994 and 1995 and for the fiscal years then
ended (audited for the 1993 and 1994 statements; unaudited for the
1995 statement), and the unaudited balance sheet and related statement
of operations of the Company at January 3, 1996 and for the
eight-month period then ended (the "Interims"). All Financial
Statements except for the Interims exclude the Malaysian operations.
"Hazardous Substance" means petroleum, petroleum products,
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde,
asbestos or any materials containing asbestos, and any materials,
substances or wastes regulated or defines as or included in the
definition of "hazardous substances," "hazardous materials,"
"hazardous constituents," "hazardous wastes," "toxic substances,"
"pollutants," "contaminants," or any similar denomination intended to
classify substances by reason of toxicity, carcinogenicity,
ignitability, corrosivity or reactivity under any Environmental law.
The term "Hazardous Substance" shall also include raw materials used
or stored by Seller or Malaysian Sub, including without limitation
products manufactured by Seller or Malaysian Sub, any of which contain
Hazardous Substances.
"Included Assets" means the Included Equipment, the
Intellectual Property, the Prepaid Assets and the Assumed Contracts,
together with all computers and software, computer printouts,
databases and related items, copies of books and records,
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<PAGE>
correspondence, lists, records, reports, discs, tapes and other
computer-readable media, blueprints, schematics, reports, plans,
engineering records, files, and data and other technical information
pertaining to the Business, all manufacturers warranties with respect
to the foregoing to the extent transferable, and all of the other
assets owned by Seller in respect of the Business, tangible or
intangible; provided, that the term "Included Assets" shall not
include any of the following to the extent they arise out of the
operation of the Business prior to the Closing Date: accounts
receivable, cash or cash equivalents, notes receivable, causes or
choses in action receivable from pending or future litigation or any
other receivables or tax or similar refunds, and any other assets
specifically set forth on Schedule 4.8D.
"Included Equipment" means the items of machinery and
equipment set forth on Exhibit 1C and all other items of machinery,
equipment, tools, furniture and fixtures used in the Business.
"Included Liabilities" means liabilities in respect of
future performance obligations under the Assumed Contracts, except
with regard to breaches thereof occurring prior to the Closing Date,
and liabilities in respect of product repair warranties. All
liabilities of Seller other than the foregoing (including without
limitation all pending or threatened litigation, whether or not
disclosed hereunder) shall remain Seller's responsibility.
"Indemnitee" and "Indemnitor" shall have the meanings set
forth in Section 8.4 of this Agreement.
"Intellectual Property" means all patents and pending patent
applications, trademarks, service marks, trade names and copyrights,
and registrations and pending applications therefor, and all trade
secrets, computer programs and software, research and development,
know how, customer lists, inventions and other proprietary processes
and information of any kind owned by Seller or in which Seller has a
proprietary or ownership or usage right, and which are used in the
Business, and all software necessary or desirable to run Included
Equipment and stamping machinery used in the Business, including,
without limitation, all rights in the name "LH Research" and those
other items set forth on Schedule 4.9.
"Inventory" shall have the meaning set forth in the
Transition Services Agreement.
"IRS" shall have the meaning set forth in Section 4.16(a) of
this Agreement.
"Lease Documentation" means assignment or sublease
documentation relating to the lease for the Costa Mesa Facility,
including the consent and an estoppel certificate of the landlord.
"Losses" shall have the meaning set forth in Section 8.2 of
this Agreement.
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<PAGE>
"Malaysian Equipment" means Included Equipment located at
Seller's facility in Jahor Baru, Malaysia on the Closing Date.
"Nogales Facility" means Buyer's manufacturing facility in
Nogales, Sonora, Mexico.
"Person" means an individual, corporation, partnership,
joint venture, trust or other entity.
"Plan" shall have the meaning set forth in Section 4.16(a)
of this Agreement.
"Prepaid Assets" shall mean assets set forth on Schedule
4.8E.
"Purchase Price" shall have the meaning set forth in Section
2.2 of this Agreement.
"Real Property" shall have the meaning set forth in Section
4.18 of this Agreement.
"Related Party" shall have the meaning set forth in Section
4.7 of this Agreement.
"Restricted Territory" shall have the meaning set forth in
Section 7.1 of this Agreement.
"Seller" shall have the meaning set forth in the caption of
this Agreement.
"Seller Claimant" shall have the meaning set forth in
Section 8.3 of this Agreement.
"Seller Indemnitors" shall have the meaning set forth in
Section 8.2 of this Agreement.
"Seller's Products" shall have the meaning set forth in
Section 6.8 of this Agreement.
"Sunmark" shall have the meaning set forth in the recitals
to this Agreement.
"Tax" (or "Taxes" where the context requires) shall mean all
federal, state, county, provincial, local, foreign and other taxes
(including, without limitation, income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment
and payroll related and property taxes, import duties and other
governmental charges and assessments), whether attributable to
statutory or nonstatutory rules and whether or not
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<PAGE>
measured in whole or in part by net income, and including without
limitation interest, additions to tax or interest, charges and
penalties with respect thereto, and expenses associated with
contesting any proposed adjustment related to any of the foregoing.
"Tax Return" means each and every report, return,
declaration, information return, statement or other information
required to be supplied to a taxing or governmental authority with
respect to any Tax or Taxes, including without limitation any combined
or consolidated return for any group of entities including Seller and
its subsidiaries.
"Transferred Employees" means those employees of Seller
listed on a letter, dated as of the date hereof, by Buyer to Seller,
to whom Buyer intends to make offers of employment pursuant to Section
6.5.
"Transition Period" means a period commencing on the Closing
Date and ending March 31, 1996, unless earlier terminated pursuant to
the Transition Services Agreement.
"Transition Services Agreement" means the Transition
Services Agreement in the form annexed hereto as Exhibit 1E
ARTICLE II SALE AND PURCHASE OF ASSETS
2.1 Asset Purchase. Upon the terms and subject to the
conditions hereof, and upon the basis of the agreements,
representations and warranties contained in this Agreement:
(a) At the Closing, Seller shall sell, transfer,
assign, convey and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, all of the Included Assets free and clear of
Encumbrances of any kind, except that Malaysian Equipment shall be
delivered as soon as practicable after the end of the Transition
Period, at Seller's expense and risk of loss until delivery, to one of
Buyer's facilities in accordance with the terms of the Transition
Services Agreement.
(b) At the Closing, Seller shall assign and Buyer
shall assume, and agree subject to the limitations contained herein,
to perform, pay or discharge only the Included Liabilities.
(c) Except as expressly provided herein, Buyer shall
not assume, agree to perform, pay or discharge, indemnify the Seller
against, or otherwise have any responsibility for any other
liabilities or obligations of Seller, fixed or contingent, known or
unknown, matured or unmatured, liquidated or unliquidated, secured or
unsecured, and whether arising prior to, on or after the Closing.
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<PAGE>
2.2 Purchase Price. In consideration for the Included
Assets, Buyer shall pay Seller the Purchase Price, which shall consist
of, and be payable, as follows:
(a) At the Closing, the total amount of $1,314,892
(which represents $786,652 with respect to the Included Equipment
(other than Malaysian Equipment), and $28,840 with respect to the
Prepaid Assets at the Closing Date, and $500,000 with respect to the
name "LH Research").
(b) An aggregate $256,184 for the Malaysian Equipment,
upon delivery thereof in accordance with the terms of the Transition
Services Agreement.
2.3 Nonassignable Contracts and Authorizations. To the
extent that the assignment of any Assumed Contract or Authorization to
be assigned to Buyer pursuant to this Agreement shall require the
consent of any other party, this Agreement shall not constitute a
contract to assign the same if an attempted assignment would
constitute a breach thereof. Seller shall use all reasonable efforts,
and Buyer shall cooperate where appropriate, to obtain any consent
necessary to any such assignment where such consent is requested by
the Buyer. If any such consent is not obtained, Seller shall
cooperate with Buyer in any reasonable arrangement designed to provide
for Buyer the benefit, monetary or otherwise, of any such Assumed
Contract or Authorization including enforcement of any and all rights
of Seller against the other party thereto arising out of a breach or
cancellation thereof by such other party or otherwise.
ARTICLE III CLOSING
3.1 The Closing. Subject to the provisions of Section 3.5,
the Closing shall take place on the second business day after all
conditions hereto have been satisfied or waived or such other date as
the parties may agree (the "Closing Date"), at the offices of Buyer's
counsel, Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New
York, New York.
3.2 Obligations of Seller. At the Closing (or prior
thereto, as indicated below), Seller shall deliver to Buyer the
following:
(a) A duly executed bill of sale, in form and
substance satisfactory to Buyer, covering the Included Assets other
than Malaysian Equipment.
(b) A duly executed assignment, in form and substance
satisfactory to Buyer, of the Assumed Contracts.
(c) Such other instruments of assignment and
conveyance as may be required by Buyer to fully and effectively
transfer the Included Assets to Buyer, including without limitation
the Lease Documentation and an assignment of the United States
trademark application for the mark "LH Research".
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<PAGE>
(d) The Transition Services Agreement.
(e) The Escrow Agreement.
(f) A Backlog List as of a time no later than the
close of business on the date which is two days prior to the Closing
Date.
(g) All other documents, instruments and writings
required to be delivered by Seller at or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
3.3 Obligations of Buyer. At the Closing, Buyer shall
deliver to Seller the following:
(a) The amount set forth in Section 2.2(a) by wire
transfer in immediately available funds.
(b) A duly executed instrument of assumption pursuant
to which Buyer assumes the Included Liabilities.
(c) Assumption documents relating to the Leased
Equipment.
(d) The Transition Services Agreement and all funds
required to be paid thereunder on the Closing Date.
(e) The Escrow Agreement.
(f) The Lease Documentation.
(g) All other documents, instruments and writings
required to be delivered by Buyer at or prior to the Closing pursuant
to this Agreement or otherwise required in connection herewith.
3.4 Effectiveness. The consummation of the transactions
contemplated by this Agreement shall be deemed to have occurred
immediately after all, but not less than all, of the matters specified
in this Article III shall have occurred or been waived in writing by
the relevant party. All documents required to be delivered at the
Closing shall be in form and substance reasonably satisfactory to
Buyer and Seller.
3.5 Conditions to Closing.
(a) Conditions to Obligations of Seller. The
obligation of Seller to consummate the transactions contemplated
hereby at the Closing shall be subject to the fulfillment or the
waiver by it of each of the following conditions:
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(1) Buyer shall have made all deliveries required
under Section 3.3 hereof.
(2) Each of the representations and warranties
made by Buyer in this Agreement shall be true and correct as of the
date hereof and as of the Closing Date as if made on the Closing Date,
and Seller shall have received a certificate of an executive officer
of Buyer as to the foregoing.
(3) Buyer shall have performed all its
obligations under this Agreement to be performed by it on or prior to
the Closing Date, and Seller shall have received a certificate of an
executive officer of Buyer as to the foregoing.
(4) There shall be no injunction or court order
pending which purports to prohibit or affect the transactions
contemplated hereby.
(b) Conditions to Obligation of Buyer. The obligation
of Buyer to consummate the transactions contemplated hereby at the
Closing shall be subject to the fulfillment or the waiver by it of
each of the following conditions:
(1) Seller shall have made all deliveries
required under Section 3.2 hereof.
(2) All corporate proceedings of Seller related
to this Agreement and the transactions contemplated hereby shall be in
form and substance satisfactory to Buyer.
(3) Consent of the other party to the assignment
and assumption of the Assumed Contracts and Authorizations shall have
been obtained, on terms acceptable to Buyer, and such consents shall
be in full force and effect.
(4) Each of the representations and warranties
made by Seller in this Agreement shall be true and correct as of the
date hereof and as of the Closing Date as if made on the date thereof,
and Buyer shall have received a certificate of an executive officer of
Seller as to the foregoing.
(5) Except as set forth on Schedule 4.6, Seller
shall have conducted the Business only in the ordinary and usual
course consistent with past practice from May 1, 1995 to the Closing
Date. No material adverse change shall have occurred in the Included
Assets, the Business or the prospects of the Business from May 1, 1995
to the Closing Date.
(6) Seller shall have performed all of its
obligations under this Agreement to be performed by it on or prior to
the Closing Date, and Buyer shall have received a certificate of an
executive officer of Seller as to the foregoing.
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(7) There shall be no injunction or court order
pending which purports to prohibit or affect the transactions
contemplated hereby.
(8) Sunmark shall have released all of the liens
in favor of Sunmark described in Section 4.8.
3.6 Malaysian Equipment. On March 31, 1996, Seller shall
duly execute and deliver to Buyer a bill of sale, in form and
substance satisfactory to Buyer, covering the Malaysian Equipment.
Buyer shall pay for the Malaysian Equipment as provided in Section
2.2(b).
3.7 Inventory. Buyer's purchase of Inventory shall be
governed by the Transition Services Agreement.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
4.1 Organization and Qualification. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation with full
corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted.
Seller is duly licensed or qualified to transact business and is in
good standing as a foreign corporation in each jurisdiction in which,
because of the business conducted there or the nature of its
properties located there, it would be required to be so licensed or
qualified, all of which are listed on Schedule 4.1 hereto. Seller
makes no representations or warranties hereunder as to its authority
to conduct business in Malaysia.
4.2 Authority. Seller has all requisite power and
authority to execute and deliver this Agreement and all documents,
certificates, agreements, instruments and writings related hereto
("Closing Documents") to which it is a party and to perform, carry out
and consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement and the other
Closing Documents have been duly authorized by all necessary corporate
action on the part of Seller. This Agreement does, and when executed
by Seller, the other Closing Documents shall, constitute the legal,
valid and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms.
4.3 No Breach. Except as set forth on Schedule 4.3 hereto,
neither the execution and delivery of this Agreement or the other
Closing Documents by Seller nor the consummation of the transactions
contemplated hereby or thereby will: (a) violate any provision of the
Certificate of Incorporation or By-Laws of Seller; (b) conflict with,
result in a breach of or constitute a default (or an event which, with
or without notice, lapse of time or both, would constitute a default)
under any Assumed Contract or any
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other agreement or other instrument to which Seller is a party or by
which Seller or any of its properties or assets (including without
limitation the Included Assets) is subject or bound; (c) result in the
creation of, or give any party the right to create, any Encumbrance
upon assets or properties of Seller (including without limitation the
Included Assets); (d) conflict with, violate, result in a breach of or
constitute a default under any judgment, decree, order, or process of
any court or governmental authority; (e) conflict with or violate any
statute, law or regulation applicable to the business or Seller; or
(e) require Seller to obtain any authorization, consent, approval or
waiver from, or to make any filing with, any person or governmental or
regulatory authority.
4.4 Financial Statements; Sales Information; Undisclosed
Liabilities. (a) Prior to the date hereof, Seller has delivered to
Buyer the Financial Statements attached hereto as Schedule 4.4A. The
Financial Statements have been prepared from, and are in accordance
with, the books and records of Seller and the Financial Statements
present fairly the financial position of Seller as of the dates
thereof and their results of operations and cash flows for the periods
then ended in accordance with United States generally accepted
accounting principles applied on a consistent basis except as set
forth on Schedule 4.4B.
(b) Prior to the date hereof, Seller has provided
Buyer with detailed sales information, by customer, for the past three
fiscal years and for the period from the end of its last fiscal year
through December 31, 1995. Such information has been prepared from
the books and records of Seller and is true, complete and accurate in
all material respects.
(c) The books and records of Seller relating to the
Business are accurate and complete in all material respects and have
been maintained in accordance with good business practices.
(d) Seller has no material liabilities or obligations
of any nature, absolute or contingent, liquidated or unliquidated,
accrued or otherwise, which are (i) not reflected in the Financial
Statements or the schedules hereto or (ii) which arise under this
Agreement and the Transition Services Agreement. No representation is
made with regard to Seller's operations in Malaysia.
4.5 Taxes. Except as set forth on Schedule 4.5, Seller has
duly, timely and properly filed when due, all federal, state, local,
foreign and other Tax Returns required to be filed by them with
respect to the sales, income, business or operations of Seller and
such Tax Returns are true, complete and accurate. Seller has duly
paid all Taxes due as shown on such Tax Returns. True, complete and
correct copies of all of such Tax Returns for the past three fiscal
years have been previously provided to Buyer. All amounts required to
be withheld by Seller from customers with respect to the sale of
goods, or from or on behalf of employees for income, social security
and unemployment insurance taxes have been collected or withheld and
either paid to the appropriate governmental agency or set aside and,
to the extent required by law, held in accounts for
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such purpose. Except as set forth in Schedule 4.5, there are no
pending or threatened actions or proceedings by any applicable taxing
authority for the assessment, collection, adjustment or deficiency of
Taxes against Seller with respect to the sales, income, business or
operations of Seller. Seller is not a "United States real property
holding corporation" as defined in Section 897(c)(2) of the Code.
4.6 Absence of Certain Changes or Events. Except as set
forth on Schedule 4.6 hereto, and except as to Seller's operations in
Malaysia and Singapore (as to which no representations are made under
this Section 4.6), since May 1, 1995:
(a) The Business has been conducted only in the
ordinary and usual course consistent with past practice.
(b) Seller has not suffered any material adverse
change in its condition (financial or otherwise), operations or
assets.
(c) Seller (i) has not sold or transferred any assets
other than Inventory sold in the ordinary course; (ii) has not
accelerated performance of any contracts and have continued servicing
all its contracts in the ordinary course of business; (iii) has not
disposed of or abandoned or permitted to lapse, any rights to the use
of any Intellectual Property; and (iv) has not agreed, whether in
writing or otherwise, to take any action described in this Section
4.6(c).
4.7 Related Party Transactions. Except as set forth on
Schedule 4.7 hereto and except for loans to Seller or investments in
Seller by Sunmark or Sunmark's Affiliates (none of which will be
Included Liabilities), there are (and since May 1, 1992 there have
been) no contracts, leases, loans, commitments, arrangements or other
understandings, whether written or oral, between Seller and any
stockholder, director or officer of Seller or any Affiliate of the
Seller or Sunmark (each, a "Related Party") whereby any Related Party
provides or supplies any goods, equipment or services to or for the
benefit of Seller or purchases any goods or services from Seller and
that will, or the absence of which will, adversely affect the Business
in any material respect after the Closing.
4.8 Assets. (a) Subject only to the liens set forth on
Schedule 4.8A, all of which will be released at or prior to the
Closing, Seller has good and freely transferable title to each of the
Included Assets, free and clear of all Encumbrances, and has the
complete and unrestricted power and right to sell the Included Assets
to Buyer in accordance with the terms hereof, and is transferring to
Buyer good and freely transferable title to all of the Included
Assets, free and clear of all Encumbrances.
(b) Except as set forth on Schedule 4.8B or Schedule
4.8C, each piece of Included Equipment located at the Costa Mesa
Facility and each piece of Malaysian Equipment that has been used in
the manufacture or sale of power supplies or which was otherwise
material to the operation of the Business within 90 days prior to
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the date hereof is, and when delivered will be, in reasonable order
and working condition, ordinary wear and tear excepted (with due
regard to the age thereof), and no condition exists or will when such
equipment is delivered exist which interferes with the use thereof in
the manner used by Seller in the Business prior to the date hereof.
Seller has maintained such Included Equipment in accordance with
reasonable business practices. The Included Assets constitute all of
the properties and assets necessary to operate the Business as it has
been operated historically and immediately prior to the date hereof,
except for Inventory (as defined in the Transition Services
Agreement), except as set forth on Schedule 4.8D.
(c) All Prepaid Assets acquired by Buyer (all of which
are set forth on Schedule 4.8E) will be bona fide prepayments made in
the ordinary course of business and Buyer will be able to obtain the
full benefit thereof in the ordinary course of the Business after the
Closing.
(d) Except as set forth on Schedule 4.8F, Seller
neither owns any capital stock or other equity interests in any other
entity nor is a party to any partnership or joint venture agreement.
4.9 Intellectual Property. Schedule 4.9 hereto lists (a)
all registered Intellectual Property which is owned or licensed by
Seller and used in the Business and (b) all licenses of Intellectual
Property to or from Seller with respect to the Business. All
annuities due with respect to the patents listed on Schedule 4.9 have
been paid. Seller had a registered United States trademark for the
name "LH Research" from January 22, 1986 to March 9, 1993, and has
used the mark "LH Research" continually in commerce at all times since
January 22, 1986. Seller has not affirmatively abandoned the
trademark "LH Research". No currently outstanding claims have been
asserted either in writing or, to the knowledge of Seller, orally to
Seller, by any person challenging the validity of or alleging
infringement by, or misuse of, any Intellectual Property used by
Seller or the name "LH Research", or challenging or questioning the
validity or enforceability of any license or agreement referred to on
Schedule 4.9, and no such claims have been asserted during the last
five years, and there is no valid basis for any such claim. Except as
set forth on Schedule 4.9, Seller has not, nor, to the knowledge of
Seller, has it been alleged to have, infringed upon or violated any
Intellectual Property right or misappropriated or misused any
invention, trade secret or other proprietary information entitled to
legal protection. Seller has not asserted any currently outstanding
claim of infringement, misappropriation or misuse of any Intellectual
Property or the name "LH Research" and knows of no basis for such a
claim, nor has Seller asserted any such claims during the last five
years. Seller is not subject to any lien, judgment, order or decree
which may adversely effect its ability to own and use the Intellectual
Property shown on Schedule 4.9 or the name "LH Research". Except as
set forth on Schedule 4.9, none of the Intellectual Property or the
name "LH Research" is subject to any license from any third party to
Seller or any Affiliate.
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4.10 Contracts and Commitments.
(a) The Assumed Contracts are all of the written
agreements, contracts and commitments of Seller, which either
individually or in conjunction with other agreements, contracts or
commitments with the same party and in connection with the same
matter, are material to the Business. To the knowledge of Seller,
there are no oral agreements, contracts or commitments of Seller which
either individually or in conjunction with any oral or written
agreements, contracts or commitments with the same party and in
connection with the same matter, are material to the Business.
(b) Seller is not in breach or default, nor is there
any basis for any valid claim of breach or default by Seller, under
any Assumed Contract. To the knowledge of Seller, none of the other
parties to the Assumed Contracts are in breach or default thereof.
Except as set forth on Schedule 4.10, all Assumed Contracts are valid
and in full force and effect, and consummation of the transactions
contemplated by this Agreement will not cause any Assumed Contract to
cease to be valid and in full force and effect. Accurate and complete
copies of all Assumed Contracts, including all amendments thereto,
have been heretofore delivered to Buyer.
(c) Except as set forth on Schedule 4.10, Seller is
not restricted by any agreement or other commitment from carrying on
its business as currently conducted anywhere in the world, except for
this Agreement.
(d) Except as set forth on Schedule 4.10, Seller is
not a party to any employment agreements or any other agreements,
arrangements or understandings relating to the employment, retainer or
compensation of any Transferred Employee, whether written or oral, and
each of the Transferred Employees is an employee-at-will.
(e) Seller has no (i) debt obligations, (ii)
outstanding loans to any person, (iii) powers of attorney outstanding
or (iv) obligations as a guarantor, surety or otherwise in respect of
the obligation of any other person, which constitute Included
Liabilities or which will be binding on the Business after the
Closing.
4.11 Backlog. Seller has previously delivered to Buyer a
materially complete and accurate Backlog List as of the close of
business on the day prior to the date hereof, which the parties have
initialled. The Backlog List to be delivered at the Closing shall be
complete and accurate as of its date . Seller's backlog of orders for
the products of the Business, as set forth on such Backlog List and on
the updated Backlog List to be delivered at the Closing, is and shall
be at a level consistent with its historical experience over the past
two fiscal years and is and shall be comprised of bona fide orders
from existing customers. Except as set forth on Schedule 4.11, Seller
has no reason to believe any such orders will be subject to
cancellation, deferral or renegotiation except to an extent consistent
with historical experience over the past two fiscal years.
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4.12 Customers and Suppliers.
(a) Schedule 4.12A hereto sets forth a list of sales
to each of Seller's customers during its last three fiscal years and
for the period from the end of the last fiscal year through December
31, 1995 showing the approximate total sales in dollars and product
description of sales by Seller to each such customer during each such
period. Such lists have been compiled from Seller's books and
records, and to Seller's best knowledge are true and complete. Seller
shall at the Closing furnish Buyer with a complete and correct list of
all of Seller's customers during its last two fiscal years and for the
period from the end of the last fiscal year through the Closing Date,
including the addresses, phone numbers and names of contact persons at
such customers.
(b) Schedule 4.12B hereto sets forth a list of
Seller's current suppliers showing the approximate total purchases in
dollars and product description of purchases by Seller from each
supplier from the end of the last fiscal year through December 31,
1995.
(c) Except as set forth on Schedule 4.12C, there has
not been any adverse change and there are no facts known to Seller
which may reasonably be expected to indicate that any adverse change
may occur in the business relationship of Seller with any customer or
supplier named on Schedule 4.12A or Schedule 4.12B.
(d) A complete and accurate list of all of Seller's
sales representatives and agents since May 1, 1995 is set forth as
Schedule 4.12D, which includes addresses, phone numbers and names of
contact persons. Except as set forth on Schedule 4.12D, Seller is
engaged in no disputes with any of such sales representatives or
agents. Except as set forth on Schedule 4.12D, each such sales
representative or agent has remitted to Seller all amounts collected
from customers and owed to Seller. After the Closing, Buyer will have
no obligation to utilize the services of Worldwide Agent Network in
connection with the Business and no obligation to pay such entity any
sums for any reason.
4.13 Litigation, Etc. Except as set forth on Schedule 4.13
hereto:
(a) There has not been in the twelve months prior to
the date hereof, nor is there currently, any claim, action, suit,
inquiry, proceeding or, to the best of Seller's knowledge,
investigation of any kind or nature whatsoever (including, but not
limited to, products liability issues), by or before any domestic or
foreign court or governmental or other regulatory or administrative
agency, commission or tribunal pending or, to the best of Seller's
knowledge, threatened against or involving Seller, or any of its
assets or the Business, or which questions or challenges the validity
of this Agreement or any action taken or to be taken by Seller
pursuant to this Agreement or in connection with the transactions
contemplated hereby. There is no valid basis for any such claim,
action, suit, inquiry, proceeding or investigation.
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(b) Seller is not subject to any judgment, order or
decree.
4.14 Compliance with Law; Necessary Authorizations.
(a) Except as listed or described on Schedule 4.14A
hereto, and except as to Seller's operations in Malaysia (as to which
no representations or warranties are made hereunder), Seller is and
has been conducting the Business, marketing its products and owning,
and operating all of the Included Assets, in compliance with all
applicable laws, rules, regulations, orders, building and other codes,
zoning and other ordinances, Authorizations, judgments and decrees of
all federal, state, local, foreign or other governmental authorities.
Seller has not received any written or oral notification of any
present failure so to comply.
(b) Schedule 4.14B lists or describes the Authoriza-
tions. Except as set forth in that Schedule, all Authorizations are
in full force and effect. Seller is in compliance with all
Authorizations and, to the best knowledge of Seller, there is no
reasonable basis for the revocation or suspension of any thereof.
Except as set forth on Schedule 4.14B, and except as to Seller's
operations in Malaysia (as to which no representations or warranties
are made hereunder), the Authorizations constitute all the permits,
licenses, approvals, qualifications or the like issued by any
regulatory authorities (federal, state or local, domestic or foreign)
required for Seller's ownership of the Included Assets and the
operation of the Business. No Authorizations are transferable.
4.15 Consents and Approvals of Governmental Authorities.
Except as set forth on Schedule 4.15, no consent, approval or
authorization of, or declaration, filing or registration with, or the
giving of notice to, any domestic or foreign governmental or
regulatory authority is required in connection with the execution,
delivery and performance by Seller of this Agreement or the
consummation by Seller of the transactions contemplated hereby.
4.16 Employee Benefit Plans. Except as to Seller's
operations in Singapore and Malaysia, as to which no representations
are made under this Section 4.16:
(a) Schedule 4.16 contains a true and complete list of
all "employee benefit plans," within the meaning of Section 3(3) of
ERISA, and any other bonus, profit sharing, compensation, pension,
severance, deferred compensation, fringe benefit, insurance, welfare,
medical, post-retirement health or welfare benefit, health, life,
stock option, stock purchase, tuition refund, service award, company
car, scholarship, relocation, disability, accident, sick pay,
vacation, termination, individual employment, executive compensation,
incentive, bonus, commission, payroll practices, retention or other
plan, agreement, policy, trust fund or arrangement, (whether written
or oral) maintained, sponsored or contributed to by Seller or any
entity that would be deemed a "single employer" with Seller under
Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA
(an "ERISA Affiliate") on behalf of any employee of Seller (whether
current, former or retired) or their beneficiaries or with respect to
which Seller or any ERISA Affiliate
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has or has had any obligation on behalf of any such employee or
beneficiary (each, a "Plan"). With respect to each Plan, true and
complete copies of (i) the documents embodying and relating to each
Plan, including, without limitation, the Plan document(s), all
amendments, investment management agreements, insurance contracts,
collective bargaining agreements, summary plan descriptions with each
summary of material modification and employee handbook(s), (ii)
written descriptions of each oral Plan, (iii) annual reports for the
last three years, (iv) actuarial valuation reports and financial
statements for the last three years, and (v) each material communi-
cation received by Seller or any ERISA Affiliate from the Internal
Revenue Service ("IRS"), U.S. Department of Labor ("DOL") or any other
governmental authority including, without limitation, the most recent
determination letter received from the IRS, have been delivered to
Buyer.
(b) None of the ERISA Affiliates, Seller or any of
their respective predecessors has ever contributed to or contribute
to, participated or participate in or has ever been obligated to
contribute to, (i) any "multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA or Section 414(f)of the Code), (ii) any
single employer pension plan (within the meaning of Section 4001(a)
(15) of ERISA) which is subject to Sections 4063 and 4064 of ERISA, or
(iii) any pension plan (within the meaning of Section 3(2) of ERISA)
which is subject to Section 412 of the Code or Section 302 of ERISA.
(c) Seller is not liable for and will not be liable
for any liability of any ERISA Affiliate (including predecessors) with
regard to any "employee benefit plan" (within the meaning of Section
3(3) of ERISA) including, without limitation, withdrawal liability,
liabilities to the PBGC (other than for required premium payments) or
liabilities under Section 412 of the Code or Section 302(a)(2) of
ERISA. Seller, each ERISA Affiliate, each Plan and each "plan
sponsor" (within the meaning of Section 3(16) of ERISA) of each
"welfare benefit plan" (within the meaning of Section 3(1) of ERISA
has complied in all respects with the requirements of Section 4980B of
the Code and Title I, Subtitle B, Part 6 of ERISA.
(d) To the knowledge of Seller, except as set forth on
Schedule 4.16, with respect to each of the Plans on Schedule 4.16:
(i) each Plan intended to qualify under Section
401(a) of the Code has received a determination letter from the IRS to
the effect that the Plan is qualified under Section 401 of the Code
and any trust maintained pursuant thereto is exempt from federal
income taxation under Section 501 of the Code and nothing has occurred
that caused or could cause the loss of such qualification or exemption
or the imposition of any penalty or tax liability;
(ii) all payments required by any Plan, any
collective bargaining agreement or by law (including all
contributions, insurance premiums or intercompany charges) with
respect to all periods through the Closing Date shall have been made
prior to the Closing (on a pro rata basis where such payments are
otherwise discretionary at year end) or provided for by Seller by full
accruals as if all targets
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required by such Plan had been or will be met at maximum levels) on
its financial statements;
(iii) there are no violations of or failures to
comply with ERISA with respect to the filing of applicable reports,
documents and notices regarding the Plan with the Secretary of Labor,
Secretary of the Treasury, the PBGC or other governmental authority,
or furnishing such documents to participants or beneficiaries, as the
case may be;
(iv) no claim, lawsuit, arbitration or other
action has been threatened, asserted, instituted or anticipated
against the Plans, any trustee or fiduciaries thereof, Seller or any
ERISA Affiliate, any director, officer or employee thereof, or any of
the assets of any trust or the Plans;
(v) all amendments required to bring the Plans
into conformity with applicable law, including, without limitation,
ERISA and the Code, have been duly adopted;
(vi) each Plan complies and has been maintained
and operated in accordance with its terms and the terms and the
provisions of applicable law, including, without limitation, ERISA and
the Code;
(vii) no "prohibited transaction," within the
meaning of Section 4975 of the Code and Section 406 of ERISA, has
occurred or is expected to occur with respect to any Plan which has
subjected or could subject Seller, any officer, director or employee
thereof or any trustee, administrator or other fiduciary, to a tax or
penalty on prohibited transactions imposed by either Section 502 of
ERISA or Section 4975 of the Code, or any other liability with respect
thereto;
(viii) no Plan is under audit or investigation
by the IRS or the DOL or any other governmental authority and no such
completed audit, if any, has resulted in the imposition of any tax or
penalty;
(ix) each Plan intended to meet requirements for
tax-favored treatment under Sections 79, 106, 117, 125, 129 or 132 of
the Code satisfies the applicable requirements under the Code;
(x) with respect to each Plan that is funded
mostly or partially through an insurance policy, neither Seller nor
any ERISA Affiliate has any liability in the nature of retroactive
rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events
occurring on or before the Closing Date; and
(xi) no Plan is maintained in connection with any
trust described in Section 501(c)(9) of the Code.
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(e) The consummation of the transactions contemplated
by this Agreement will not give rise to any liability, including,
without limitation, liability for severance pay, unemployment
compensation, termination pay or withdrawal liability, or accelerate
the time of payment or vesting or increase the amount of compensation
or benefits due to any current, former, or retired employee or their
beneficiaries solely by reason of such transactions. No amounts
payable under any Plan will fail to be deductible for federal income
tax purposes by virtue of Section 280G of the Code.
(f) Neither Seller nor any ERISA Affiliate maintains,
contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal
Social Security Act or a plan qualified under Section 401(a) of the
Code) to any current or future retiree or terminee.
(g) Seller has no commitment, whether formal or
informal, to create any additional plan or arrangement or modify any
Plan.
4.17 Labor Matters. Except to the extent set forth in
Schedule 4.17:
(a) there is no labor strike, or dispute, grievance,
arbitration proceeding, slowdown or stoppage, or charge of unfair
labor practice actually pending, threatened against or affecting
Seller;
(b) Seller has not, during the twelve (12) month
period prior to the date hereof, experienced any work stoppage or
other labor dispute including, without limitation, the filing of an
unfair labor practice complaint against it;
(c) there are no charges or complaints of
discrimination pending before the Equal Employment Opportunity
Commission or any state or local agency with respect to Seller;
(d) no union or collective bargaining agreement which
is binding on Seller restricts it from relocating or closing any of
its operations; and
(e) no unions or other collective bargaining units
have been certified or recognized by Seller as representing any of its
employees and there are no existing union organizing efforts or
representation questions with respect to any of the employees of
Seller.
4.18 Environmental Matters. Except as set forth in Schedule
4.18: (a) all of the current and past operations of the Business and
the Included Assets at or from the Costa Mesa Facility or any other
real property (other than the real property in Malaysia)
(collectively, the "Real Property") comply and have complied with all
applicable Environmental Laws; (b) neither Seller, nor, to the
knowledge of Seller, any other person or entity, has engaged in,
authorized, allowed or suffered any operations or activities upon any
of the Real Property for the purpose of or in any way involving the
handling,
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manufacture, treatment, processing, storage, use, generation, release,
discharge, emission, dumping or disposal of any Hazardous Substances
at, on or under the Real Property, except in compliance with all
applicable Environmental Laws; (c) the Real Property does not contain
any Hazardous Substances in, on, over, under or at it in
concentrations which would violate Environmental Laws or impose
liability or obligations on the present or former owner or operator of
the Real Property under the Environmental Laws for any investigation,
corrective action, remediation or monitoring of Hazardous Substances
in, on, over, under or at the Real Property; (d) none of the Real
Property is listed or proposed for listing on the National Priorities
List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), 42 U.S.C. subsection 9601
et seq., or any similar inventory of sites requiring investigation or
remediation maintained by any state; (e) Seller has not received any notice,
whether oral or written, from any governmental entity or third party
of any actual or threatened Environmental Liabilities with respect to
the Real Property, the Included Assets, or the conduct of the
Business; (f) there are no conditions existing at any Real Property
that require, or which with the giving of notice or the passage of
time or both may require remedial or corrective action, removal or
closure pursuant to the Environmental Laws; (g) Seller has all the
permits, authorizations and approvals necessary for the conduct of the
Business and for the operations on, in or at the Real Property that
constitutes the Included Assets which are required under applicable
Environmental Laws and is in full compliance with the terms and
conditions of all such permits, authorizations and approvals, and the
Company is capable of continued operation in compliance with
Environmental Laws; and (h) Seller is not aware of any liabilities
arising under the Environmental Laws related to the conduct of the
Business or the Included Assets to which Seller may have succeeded
contractually, statutorily, by common law or by operation of law.
4.19 Insurance. The Included Assets are presently insured
against casualty for no less than the greater of the replacement value
or book value of such assets, and Seller presently maintains liability
(including, without limitation, products liability) insurance coverage
with respect to the Business with a per occurrence limit of no less
than $1,000,000 and with an aggregate limit of no less than
$2,000,000. Copies of all insurance policies related thereto have
been previously delivered to Buyer. Seller knows of no reason why any
of such insurance policies will be terminated, suspended, modified or
amended, or not renewed on substantially identical terms (including
premium costs), during the period prior to the Closing.
4.20 Questionable Payments. To Seller's knowledge, none of
Seller or any director, officer, agent, employee, or any other person
acting on behalf of Seller has, directly or indirectly, used any
corporate funds for unlawful contributions, gifts or entertainment, or
other unlawful expenses relating to political activity; made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns
from corporate funds; established or maintained any unlawful fund of
corporate monies or other assets; given any favor or gift which is
unlawful; received any bribe, or any unlawful rebate, payoff,
influence payment, kickback or other payment of a
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comparable or similar nature; or made any bribe, kickback, or other
payment of a similar or comparable nature, to any person or entity,
private or public, regardless of form, whether in money, property or
services, to obtain favorable treatment in securing business or to
obtain special concessions, or to pay for favorable treatment for
business or for special concessions secured.
4.21 Product Warranties. Except as set forth on Schedule
4.21, there is no express warranty, service or repair policy
applicable to any product sold by Seller and there are no claims or
suits pending or, to the best of Seller's knowledge, threatened
concerning any products of Seller. Schedule 4.21 sets forth in
reasonable detail an accurate and complete summary of all product
warranty claims made by customers of Seller from January 1, 1994 to
the date hereof. There have been no product recalls since January 1,
1991. Since January 1, 1994, product warranty claims made by
customers to Seller have averaged approximately $16,667 per month.
4.22 Finders. None of Seller, any of its Affiliates or any
of their respective directors or officers has taken any action that,
directly or indirectly, would obligate Buyer or any of its Affiliates
to anyone acting as broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the
transactions contemplated hereby.
4.23 Disclosure. No representation or warranty by Seller in
this Agreement, or in any Schedules or Exhibits hereto, or in any
written material furnished to Buyer by or at the direction of Seller
or in any certificate delivered hereunder contains any untrue
statement of material fact or omits to state a material fact necessary
to make the statements contained therein not misleading, and there is
no fact which materially and adversely affects the Business or any of
the Included Assets which has not been set forth in this Agreement or
in any Schedule hereto.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing in its
jurisdiction of incorporation with full corporate power and authority
to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. Buyer is duly licensed and
qualified to transact business and is in good standing in each
jurisdiction in which, because of the business conducted there or the
nature of its property located there, it would be required to be so
licensed or qualified.
5.2 Authority. Buyer has all requisite power and authority
to execute and deliver this Agreement and the Closing Documents to
which it is a party and to perform, carry out and consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement and the other
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Closing Documents have been duly authorized by all necessary corporate
action on the part of Buyer. This Agreement does, and when executed
by Buyer, the other Closing Documents shall, constitute the legal,
valid and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms.
5.3 No Breach. Neither the execution and delivery of this
Agreement by Buyer nor the consummation of the transactions
contemplated herein will: (a) violate any provision of the
Certificate of Incorporation or By-laws of Buyer; (b) conflict with,
result in a breach of or constitute a default (or an event which, with
or without notice, lapse of time or both, would constitute a default)
under, or give any third party the right to terminate or modify, any
agreement or other instrument to which Buyer is a party or by which
Buyer or any of its assets is bound; (c) result in the creation of, or
give any party the right to create, any Encumbrance upon the
properties or assets of Buyer, except under the terms of Buyer's
parent corporation's credit arrangements; (d) conflict with, violate,
result in a breach of or constitute a default under any judgment,
decree, order or process of any court or governmental authority;
(e) conflict with or violate any statute, law or regulation applicable
to the business of Buyer; or (f) require Buyer to obtain any
authorization, consent, approval or waiver from, or to make any filing
with, any governmental or regulatory authority, other than such as
have been obtained or made.
5.4 Finders. None of Buyer, any of its Affiliates or any
of their respective directors or officers, has taken any action that,
directly or indirectly, would obligate Seller or any of its Affiliates
to anyone acting as a broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the
transactions contemplated hereby.
ARTICLE VI COVENANTS
6.1 Certain Covenants of Seller. Seller hereby covenants
that (unless Buyer otherwise gives its written approval in its sole
discretion) Seller shall at its sole cost and expense take the actions
set forth below:
(a) Prior to the Closing, Seller shall use its best
efforts to operate the Business in the ordinary course of business as
historically conducted, maintain the Included Assets in good operating
condition and pay its debts and accounts payable in the ordinary
course of business and on a timely basis, except that Sunmark shall
not be obligated to advance any funds to Seller to do so after the
date hereof. Prior to the Closing, Seller shall invoice customers
only in the ordinary course of business after inventory is shipped.
(b) Prior to and after the Closing, Seller shall
afford Buyer, its attorneys, accountants and representatives,
reasonable access to the Business, the Included Assets, the books and
records of Seller relating thereto and employees of Seller who are
familiar with the Business and Included Assets, at all reasonable
times upon reasonable notice and in such a manner that
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the Business is not disrupted, and shall provide to Buyer and its
representatives such additional financial and operating data and other
information as Buyer shall from time to time reasonably request. In
addition, from and after the date hereof, Seller shall cause its
employees, including members of Seller's "Tiger Team," to assist in
training Buyer's employees to operate the Business. After the
Closing, all documents (including information embodied in computer-
readable media) that are retained by Seller and that are related to
the Included Assets, the Included Liabilities or the operation of the
Business prior to the Closing Date shall be open for inspection by
representatives of Buyer at any time during regular business hours
upon reasonable advance notice, and Buyer may make such copies thereof
as it may reasonably request. Without limiting the generality of the
foregoing, Seller shall not destroy or give up possession of any item
referred to above without first offering to Buyer the opportunity, at
Buyer's expense (but without any other payment), to obtain the same.
(c) Prior to and after the Closing, Seller shall use
all reasonable efforts to preserve for Buyer the goodwill of the
customers and suppliers of the Business, and others having business
relations with Seller with respect to the Business and the Included
Assets, and prior to and after the Closing shall do all things
reasonably requested by Buyer for such purpose.
(d) Prior to the Closing, Seller shall promptly advise
Buyer in writing of the commencement or threat against Seller of any
suit, litigation or legal proceeding against either of them.
(e) Prior to the Closing, Seller shall cause all
casualty and liability insurance coverage currently in effect with
respect to the Included Assets or the Business to remain in effect and
apply all insurance proceeds in respect of casualty to the Included
Assets to the replacement or rebuilding of the Included Assets. After
the Closing, Seller shall maintain casualty insurance at levels
currently in effect on Malaysian Equipment, listing Buyer as sole loss
payee, until such time as the Included Equipment is delivered to Buyer
in accordance with the terms hereof.
(f) Prior to the Closing, Seller shall not, nor shall
it give its permission to or authorize any officer, director, employee
or representative to, solicit or enter into negotiations or
discussions of any kind with any party, other than Buyer, for the
purchase and sale of all or any portion of the Business, any of the
Included Assets or any Inventory (as defined in the Transition
Services Agreement).
(g) Promptly after the Closing, Seller shall change
its name to Capital Parade USA, Inc. and neither Seller nor any
Affiliate of Seller shall thereafter conduct any operations anywhere
in the world under a name or assumed name that contains the letters
"LH" either together or as separate letters in proximity to each
other, the phrase "LH Research" or a name confusingly similar to "LH
Research".
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6.2 Obtaining Consents. Prior to the Closing, Seller shall
permit Buyer to contact any or all of the contracting parties under
the Assumed Contracts for the purpose of determining and verifying the
precise terms and nature of their contract rights and Seller shall
cooperate and lend assistance to Buyer in connection therewith. Prior
to and after the Closing, Seller shall use all reasonable efforts to
obtain all consents to the assignment to Buyer of all of the Assumed
Contracts, in each case without any condition or qualification adverse
to Buyer. Prior to and after the Closing, Buyer and Seller shall use
all reasonable efforts to obtain all consents, approvals and waivers
from, and give all notices to, and make all declarations, filings and
registrations with, and governmental and regulatory agencies that are
required to consummate the transactions contemplated hereby and to
permit the continued operation of the Business after the Closing Date.
Buyer and Seller shall coordinate and cooperate with one another and
supply such assistance as may be reasonably requested by each in
connection with the foregoing.
6.3 Publicity. Prior to the Closing, none of Sunmark,
Seller or Buyer shall issue or make, or cause to have issued or made,
the publication or dissemination of any press release or other
announcement to divulge the existence of this Agreement or with
respect to the transactions contemplated hereby except after
consultation with and prior approval of the other party hereto, which
approval shall not be unreasonably withheld; provided, however, that
nothing herein shall prevent any party from making such public
announcement on filing with any governmental authority as that party
may consider necessary in order to satisfy its legal or contractual
obligations.
6.4 Records. After the Closing, Seller shall take all
actions reasonably requested by Buyer to transfer records relating to
the Business to Buyer, which may include making duplicate copies of
any records retained by Seller in the form of papers or computer
media. Such records shall include, without limitation, updated
customer records, bills of materials, computer aided design files,
inventory purchasing and usage records, materials handling records,
operations and manufacturing records, equipment maintenance records
and technical information for the installation and operation of
equipment.
6.5 Employee Matters. (a) As of the Closing Date, Seller
shall terminate all its employees located in California, and shall pay
to them amounts representing all accrued benefits and severance pay
and other obligations, including but not limited to accrued vacation
and sick leave, termination pay and any other obligations of any kind
or nature. Seller shall be solely responsible for all legal
obligations to such employees arising out of their employment by
Seller prior to the Closing Date or their termination.
(b) Buyer shall offer employment to the Transferred
Employees on such terms as Buyer in its sole discretion deems
appropriate. Any such offers shall be on terms which Buyer
customarily hires new employees (e.g., without assumption of
seniority). Seller knows of no reason why any such Transferred
Employee would not accept such an offer.
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(c) Buyer shall not assume or be responsible in any
way for the obligations, liabilities or responsibilities (whether
arising prior to, on or after the Closing) (i) of any Plan, (ii) of
any employee benefit plan or arrangement of any ERISA Affiliate which
is not a Plan, (iii) of Seller or ERISA Affiliate or any officer,
director or employee thereof or any fiduciary under, arising from, or
with respect to any Plan or employee benefit plan, agreement, policy,
trust fund or arrangement, (iv) of Seller or any ERISA Affiliate
relating to compensation, accrued vacation pay, sick leave or other
employee benefits, or otherwise with respect to employees (whether
current, former or retired) or their beneficiaries or with respect to
the employment or termination of any such employees by Seller or any
ERISA Affiliate, (v) arising from statutory or legal obligations of
Seller or any ERISA Affiliate, including without limitation the Worker
Adjustment and Retraining Notification Act (to the extent applicable
to the transactions contemplated hereby) or (vi) otherwise to any
employee of Seller or any ERISA Affiliate of Seller. Buyer shall not
be deemed to be a successor employer with respect to the employment of
any employee of Seller or with respect to any of Seller's employee
benefit plans.
(d) Buyer shall notify Seller if, within 60 days after
the Closing Date, Buyer terminates any Transferred Employees who
accept employment with Buyer.
6.6 Receipt of Payments on Accounts Receivable. For 90
days after the Closing, Buyer shall use commercially reasonable
efforts (which shall not include maintaining litigation or foreclosing
on any security interests) to collect accounts receivable of Seller
arising out of invoices sent by Seller prior to the Closing for goods
delivered prior to the Closing. If Buyer receives any payments with
respect thereto, Buyer shall hold such amounts in trust for Seller and
promptly remit such amounts to Seller.
6.7 Further Assurances. After the Closing, Buyer and
Seller shall and shall cause their respective Affiliates to, at the
request of the other without further cost or expense to the other,
execute and deliver such other instruments of conveyance and transfer
and assumption and take such other action as may be reasonably request
so as to more effectively sell, assign and transfer to Buyer title to
and possession of the Included Assets, to cause Buyer to assume the
Included Liabilities, to consummate the transactions contemplated by
this Agreement or to correct errors and defects.
6.8 Warranty Claims. Seller shall bear the cost of
honoring outstanding warranties and guaranties and other replacements,
repairs and reruns, relating to products or services of the Seller
shipped, sold or furnished by the Seller prior to the Closing Date, or
of defective products in the Inventory located in Malaysia sold to
Buyer by Seller on or after the Closing Date but prior to the end of
the Transition Period (collectively, "Seller's Products") on the terms
set forth below. A customer's rights under guaranties or warranties
or to replacements, repairs or reruns shall be initially determined by
Buyer's management in accordance with Seller's historic policies
relating to such matters. If Buyer makes any repairs, accepts any
returns or grants any allowances with
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respect to any of Seller's Products, Buyer shall do so as agent of
Seller. Seller shall bear all reasonable costs thereof provided
Buyer's management in good faith has determined to make such repairs,
accept such returns or grant such allowances in a manner consistent
with Seller's historic policies relating to such matters and at
Seller's historic cost adjusted for any overhead or other charge by
Buyer. Seller represents that it has historically charged customers
for return freight costs, and accordingly Seller shall not be
responsible for return freight costs. Seller shall not bear the costs
of any repairs, returns or allowances which are granted for Seller's
Products which (i) were not defective and otherwise met customer's
specifications when delivered to the customer or (ii) in instances
where the product conformed to the customer's product specifications
but the customer's specifications were in error. Notwithstanding the
foregoing, Buyer shall use reasonable efforts to consult with Seller
prior to undertaking any repairs or accepting any returns with an
allowance exceeding $10,000 in any case. Concurrent with the
execution of this Agreement, Seller shall, pursuant to the Escrow
Agreement, deposit $200,000 (the "Escrowed Funds") with the Escrow
Agent which Escrowed Funds are to be held by the Escrow Agent for the
benefit of Seller and Buyer and paid out and delivered in accordance
with the following:
(a) A written notice signed by both Seller and Buyer;
(b) A written notice signed by Buyer stating that Seller
has consented to the delivery of Escrowed Funds or has not objected in
writing specifying the reasons for objection within 10 days after
being notified that Buyer would draw on the Escrowed Funds.
(c) On August 22, 1997, any remaining balance of the
Escrowed Funds to Seller, provided that in the event there is a
pending claim of Buyer to all or any part of the Escrowed Funds, only
the amount of the Escrowed Funds which exceeds the amount of Buyer's
claim shall be paid to Seller; or
(d) In the event Seller disputes any warranty claim
hereunder, then such dispute shall be resolved by AAA arbitration as
provided in Section 9.8 of this Agreement and Escrowed Funds shall be
disbursed in accordance with the order of the arbitrator; provided,
that:
(i) No matters shall be submitted to arbitration
unless either (x) disputed items that have not been settled exceed
$16,000 in the aggregate or (y) items of any amount are in dispute, at
the time specified for release of Escrowed Funds pursuant to Section
6.8(c).
(ii) All disputed claims shall be determined in a
single arbitration proceeding and such decision shall be
nonappealable;
(iii)There shall be only a single arbitrator appointed
by AAA;
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(iv) Each party shall be entitled to interview the
other party's employees and review such party's records pertaining to
the claim and Seller's historic practices but there shall not be any
formal discovery; and
(v) Each party shall bear its own costs in connection
with the arbitration and there shall be no award of attorneys' fees by
the arbitrator in the proceeding.
(e) In the event the Escrowed Funds are not sufficient to
cover all warranty claims, Seller shall thereafter directly promptly
reimburse Buyer for claims in excess of the Escrowed Funds.
6.9 Sales or Use Taxes. Buyer shall be responsible for all
sales or use taxes arising out of the transactions contemplated
hereby.
6.10 Application for Trademark. Within five (5) business
days of the date hereof, Seller shall file an application for the
trademark "LH Research, Inc." in form and substances satisfactory to
Buyer and shall assign such application to Buyer or an Affiliate of
Buyer to be designated by Buyer.
ARTICLE VII RESTRICTIVE COVENANTS
7.1 Definitions. The following terms when used in this
Article VII shall have the following meanings:
"Competition" means the design, development, manufacture,
sale or offering or promoting for sale of power supplies of any kind.
"Directly or Indirectly" means as an individual, partner,
shareholder, creditor, director, officer, principal, agent, employee,
trustee, consultant, advisor or in any other relationship or capacity.
"Restricted Territory" means the United States and its
possessions and territories, Canada, Mexico, the countries of the
European Economic Community, and East and Southeast Asia.
7.2 Non-Competition. None of Seller, Sunmark nor any
entity controlled by Sunmark for a period of three years after the
date hereof, directly or indirectly, engage in any Competition in the
Restricted Territory; provided, that Seller, Sunmark or an entity
controlled by Sunmark may without violating this covenant own as a
passive investment not in excess of 5% of the outstanding capital
stock of a corporation which engages in Competition if such capital
stock is a security which is actively traded on an established
national securities exchange.
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7.3 Non-Solicitation of Employees. None of Seller, Sunmark
or any entity controlled by Sunmark shall directly or indirectly, for
itself or on behalf of any other Person, hire any employee of Buyer,
including, without limitation, any employees of Seller that Buyer has
hired in its sole discretion, or induce nor attempt to induce any such
employee to leave his or her employment with Buyer at any time within
five years from the date hereof, except as the parties may otherwise
agree.
7.4 Non-Solicitation or Interference with Customers and
Suppliers. None of Seller, Sunmark or any entity controlled by
Sunmark shall, directly or indirectly, for itself or on behalf of any
other Person, solicit, divert, take away or attempt to take away any
of Buyer's customers or suppliers or the business or patronage of any
such customers or suppliers or in any way interfere with, disrupt or
attempt to disrupt any then existing relationships between Buyer and
any of its customers or suppliers or other Persons with whom it deals
or contact or enter into any business transaction with any such
customers or suppliers or other Persons for any purpose at any time
within five years from the date hereof.
7.5 Confidential Information. None of Seller, Sunmark of
any entity controlled by Sunmark shall at any time use or disclose to
any Person other than Buyer, any information, knowledge or data
relating to the business of Seller being transferred to Buyer here-
under (including without limitation information relating to accounts,
financial dealings, transactions, trade secrets, intangibles, customer
lists, pricing lists, catalogues, brochures, service manuals,
processes, formulae, plans and proposals) of or formerly belonging to
Seller or its affiliates whether or not marked or otherwise identified
as confidential or secret. Seller has obtained a signed employee's
invention assignment agreement from each employee currently employed
in respect of the Business, in the form previously delivered to Buyer,
and shall enforce such agreements for the benefit of Buyer.
7.6 Acknowledgements. Seller and Sunmark acknowledge that,
in view of the nature of the Business and the business objectives of
Buyer in acquiring it, and the consideration paid to the Seller
therefor, the restrictions contained in this Section are reasonably
necessary to protect the legitimate business interests of Buyer and
that any violation of such restrictions will result in irreparable
injury to Buyer and the business Buyer has acquired hereunder for
which damages will not be an adequate remedy. Seller and Sunmark
therefore acknowledge that, if any such restrictions are violated,
Buyer shall be entitled to preliminary and injunctive relief as well
as to an equitable accounting of earnings, profits and other benefits
arising from such violation.
ARTICLE VIII INDEMNIFICATION
8.1 Survival of Representations and Warranties. All
representations and warranties contained in Articles IV and V shall
survive the Closing and shall remain in full force and effect for a
period of two years from the Closing Date; provided, however, that the
representations and warranties contained in (i) Sections 4.5 and
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4.16 shall remain in full force and effect until four months after the
expiration of the applicable statute of limitations (after giving
effect to all extensions) and, (ii) Sections 4.1, 4.2, 4.18, 4.22,
5.1, 5.2 and 5.4 shall remain in full force and effect indefinitely.
8.2 Indemnification by Seller. Subject to Section 8.5,
from and after the Closing, Seller shall indemnify and save Buyer and
its Affiliates (including Sunmark) and their respective directors,
officers, employees, agents and representatives (each, a "Buyer
Claimant") harmless from and defend each of them from and against any
and all demands, claims, actions, liabilities, losses, costs, damages
or expenses whatsoever (including any reasonable attorneys' fees)
(collectively, "Losses") asserted against, imposed upon or incurred by
the Buyer Claimants resulting from or arising out of (a) any
inaccuracy or breach of any representation or warranty of Seller
contained herein or in any other document or agreement delivered in
connection with the transactions contemplated hereby; (b) any breach
of any covenant or obligation of Seller contained herein or in any
other document or agreement delivered in connection with the
transactions contemplated hereby; (c) Seller's ownership of its
retained assets and operation of its business from and after the
Closing Date; (d) any liability of Seller or the Business arising out
of events occurring, products sold or activities of Seller prior to
the Closing, except for Included Liabilities, whenever such
liabilities may arise; (e) any obligation to Worldwide Agent Network,
Inc.; (f) any personal injuries, death or property damage arising from
products sold by Seller prior to the Closing Date or any Inventory
sold by Seller to Buyer pursuant to the Transition Services Agreement;
(g) any Assumed Contract that should have been disclosed on
Schedule 4.10 but was omitted or as a result of any breach or default
by Buyer under any Assumed Contract arising from such omission; (h)
any of the obligations, liabilities or responsibilities referred to in
Sections 6.5(a) and (c) of the Agreement and any other liabilities to
Transferred Employees who accept employment with Buyer relating to
periods on or prior to Closing or to other employees of Seller or any
ERISA Affiliate of Seller relating to periods prior to or after
Closing (other than Buyer's reimbursement obligations under Section 8
of the Transition Services Agreement); (i) any Taxes imposed on Buyer
arising from Seller's operations prior to the Closing and any income
Taxes arising from the transactions contemplated hereby; and (j) any
liability or obligation of any nature, absolute or contingent,
liquidated or unliquidated, accrued or otherwise, arising out of or
related to the Business prior to Closing (whether asserted or known
before or after Closing) or the assertion against a Buyer Claimant of
a claim which, if valid, would constitute such a liability or
obligation, other than an Included Liability.
8.3 Indemnification by Buyer. Subject to Section 8.5, from
and after the Closing, Buyer shall indemnify and save Sunmark, Seller
and their Affiliates and their respective directors, officers,
employees, agents and representatives (each, a "Seller Claimant")
harmless from and defend each of them from and against any and all
Losses asserted against, imposed upon or incurred by the Seller
Claimants resulting from or arising out of (a) any inaccuracy or
breach of any representation or warranty of Buyer contained herein;
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(b) any breach of any covenant or obligation of Buyer contained
herein; and (c) any Included Liability or the assertion against a
Seller Claimant of a claim which, if valid, would constitute an
Included Liability.
8.4 Indemnification Procedures.
(a) The rights and obligations of each party claiming
a right to indemnification hereunder ("Indemnitee") from the other
party ("Indemnitor") shall be governed by the following rules:
(i) The Indemnitee shall give prompt written
notice to the Indemnitor of any state of facts which Indemnitee
determines will give rise to a claim by the Indemnitee against the
Indemnitor based on the indemnity agreements contained herein, stating
the nature and basis of said claims and the amount thereof, to the
extent known. No failure to give such notice shall affect the
indemnification obligations of Indemnitor hereunder except to the
extent Indemnitor can demonstrate such failure materially prejudiced
such Indemnitor's ability to successfully defend the matter giving
rise to the indemnification claim. The Indemnitor shall have no
obligation to indemnify the Indemnitee for claims arising from the
inaccuracy or breach of any representation or warranty unless such
notice is given within the survival period set forth in Section 8.1,
but if such notice is timely given the claim shall continue to be
indemnifiable hereunder notwithstanding the expiration of the relevant
representation or warranty has expired.
(ii) In the event any action, suit or proceeding
is brought against the Indemnitee, with respect to which the
Indemnitor may have liability under the Indemnity agreements contained
herein, then upon the written acknowledgment by the Indemnitor within
thirty days of the bringing of such action, suit or proceeding that it
is undertaking and will prosecute the defense of the claim under such
indemnity agreements and confirming that the claim is one with respect
to which the Indemnitor is obligated to indemnify and that it will be
able to pay the full amount of potential liability in connection with
any such claim, the action, suit or proceeding (including all
proceedings on appeal or for review which counsel for the Indemnitee
shall deem appropriate) may be defended by the Indemnitor. The
Indemnitee shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the
Indemnitee's own expense unless (a) the employment of such counsel and
the payment of such fees and expenses both shall have been
specifically authorized by the Indemnitor in connection with the
defense of such action, suit or proceeding, or (b) the Indemnitee
shall have reasonably concluded and specifically notified the
Indemnitor that there may be specific defenses available to it which
are different from or additional to those available to the Indemnitor,
or that such action, suit or proceeding involves or could have an
effect upon matters beyond the scope of the indemnity agreements
contained herein. However, in the event the Indemnitor shall not
offer reasonable assurances as to its financial capacity to satisfy
any final judgment or settlement, the Indemnitee may assume the
defense and dispose of the claim, after thirty (30) days prior written
notice to the Indemnitor.
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(iii) In addition, in any event specified in
clause (b) of the second sentence of subparagraph (ii) above, the
Indemnitor, to the extent made necessary by such different or
additional defenses, shall not have the right to direct the defense of
such action, suit or proceeding on behalf of the Indemnitee. If
Indemnitor and Indemnitee cannot agree on a mechanism to separate the
defense of matters extending beyond the scope of indemnification, such
matters shall be defended on the basis of joint consultation.
(iv) The Indemnitee shall be kept fully informed
by the Indemnitor of such action, suit or proceeding at all stages
thereof, whether or not it is represented by counsel. The Indemnitor
shall, at the Indemnitor's expense, make available to the Indemnitee
and its attorneys and accountants all books and records of the
Indemnitor relating to such proceedings or litigation, and the parties
hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
(b) The Indemnitor shall make no settlement without
Indemnitee's consent of any claims which Indemnitor has undertaken to
defend, unless (i) the Indemnitor fully indemnifies the Indemnitee for
all Losses, (ii) the Indemnitee receives an unconditional release with
respect to the facts underlying the claim, (iii) there is no finding
or admission of violation of law by, or effect on any other claims
that may be made against, the Indemnitee and (iv) the relief granted
in connection therewith requires no action or inaction on the part of
and has no effect on the Indemnitee.
(c) In the event any claim of a right to
indemnification is made by a Buyer Claimant hereunder, such party may,
at its sole option, satisfy all or a portion of its Losses by way of
setoff against any payments due Seller hereunder. Such right to
setoff is without prejudice to Seller's right to challenge its
liability hereunder. This Section in no way constitutes a limitation
on rights hereunder and each Buyer may seek full indemnification for
all damages suffered and may pursue all rights and remedies available
to it, at law or in equity, against any party hereto, jointly with
other parties hereto or severally, without seeking recourse against
any other party and without exercising any right of offset.
8.5 Limits on Indemnification. Except with respect to
warranty claims under Section 6.9 (which shall be without limitation
hereunder), no Indemnitor shall be required to indemnify an Indemnitee
hereunder unless the aggregate, cumulative sum of all amounts for
which indemnity would otherwise be due to any and all Buyer Claimants
(in the case of indemnification by Seller) or Seller Claimants (in the
case of indemnification by Buyer), as the case may be, exceeds the sum
of $30,000, in which case the Indemnitor shall be responsible for the
entire amount due up to an aggregate maximum of $2,000,000.
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ARTICLE IX MISCELLANEOUS
9.1 Termination. Either party may terminate this Agreement
at any time upon written notice to the other if the Closing has not
occurred on or prior to the close of business on February 29, 1996.
9.2 Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except that Seller shall
pay all sales, transfer and other similar taxes, levies and charges
that may be imposed, levied or assessed in connection with the
consummation of the transactions contemplated hereby.
9.3 Amendment. This Agreement may not be modified,
amended, altered or supplemented except by a written agreement
executed by the parties hereto.
9.4 Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, the instruments and other documents
delivered pursuant to this Agreement contains the entire agreement of
the parties relating to the subject matter of this Agreement and
supersedes all prior agreements and understandings of any kind between
the parties respecting such subject matter.
9.5 Waivers. Waiver by any party of any breach of or
failure to comply with any provision of this Agreement by the other
party shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any other breach of, or failure to
comply with, any other provision of this Agreement. No waiver of any
such breach or failure or of any term or condition of this Agreement
shall be effective unless in a written notice signed by the waiving
party and delivered, in the manner required for notices generally, to
each affected party.
9.6 Notices. Except as otherwise expressly provided in
this Agreement, all notices and other communications hereunder shall
be in writing and shall be delivered personally or shall be sent by
U.S. certified mail, postage fully prepaid, return receipt requested,
or by courier, or transmitted by facsimile as follows, and all legal
process hereunder shall be validly served when served in accordance
with applicable law at the following address:
If to Seller:
LH Research, Inc.(or, after the Closing, Capital Parade USA,
Inc.)
c/o Sunmark Capital Corporation
510 Maryville College Drive
Suite 210
St. Louis, MO 63141
Attn: Thomas O'Brien
Telecopier: (314) 453-0959
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With copies to:
Richard H. Bruck, Esq.
Bruck & Perry
One Newport Place
Tenth Floor
Newport Beach, CA 92660
Telecopier: (714) 955-0835
If to Buyer:
International Power Systems, Inc.
c/o C&D Charter Power Systems, Inc.
3043 Walton Road
Plymouth Meeting, Pennsylvania 19462
Attention: President
Telecopier: (215) 834-7307
With copies to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Steven L. Kirshenbaum, Esq.
Telecopier: (212) 969-2900
or to such other address, attention or telecopier number as a party
may have furnished to the other parties in writing in accordance
herewith, except that notices of change of address, attention or
telecopier number shall only be effective upon receipt. Any notice
which is so mailed shall be deemed delivered on the fourth business
day after mailing; any notice which is transmitted by telecopier shall
be deemed delivered when transmitted to the telecopier number
specified above and acknowledgement of receipt of such facsimile is
received.
9.7 Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate
counterparts each of which when executed shall be deemed to be an
original, but all of which together shall constitute one and the same
document.
9.8 Governing Law; Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without regard to principles of conflicts of laws. Any
controversy or claim arising out of or relating to this Agreement
shall be resolved by binding arbitration before a single arbitrator
administered by the Los Angeles office of the American Arbitration
Association ("AAA") in accordance with the AAA Commercial Arbitration
Rules as amended and effective as of the time of
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the filing of the request for arbitration. The AAA shall appoint such
arbitrator from the AAA Panel of Neutrals for Los Angeles, California
and arbitration hereunder shall be conducted in Los Angeles,
California. Any arbitration hereunder shall be governed by the United
States Arbitration Act, 9 U.S.C. subsections 1-16, and judgment upon the
award rendered by the arbitrator may be entered by any court of competent
jurisdiction. In connection with any arbitration hereunder, the
arbitrator shall permit each party to take a reasonable number of
depositions and interrogatories and to make reasonable requests for
the production of documents in addition to any other discovery he or
she may permit. The party not prevailing shall pay the fees and
expenses of the arbitrator.
9.9 Binding Effect; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors and assigns; provided, however, that
neither this Agreement nor any right or obligation hereunder may be
assigned or transferred, except that Buyer may designate an Affiliate
to acquire some or all of the Included Assets and assume some or all
of the Included Liabilities provided that Buyer shall remain primarily
liable hereunder.
9.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of
this Agreement nevertheless shall remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party.
9.11 Headings. The headings contained in this Agreement
(including the Exhibits and Schedules) are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
9.12 No Agency. No party hereto shall be deemed hereunder
to be an agent of, or partner or joint venturer with, any other party
hereto.
9.13 Third Parties. Nothing herein is intended or shall be
construed to confer upon or give to any person other than the parties
hereto any rights or remedies under or by reason of this Agreement
except for Buyer Claimants and Seller Claimants pursuant to Article
VIII.
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9.14 Passage of Title and Risk of Loss. Legal title,
equitable title and risk of loss with respect to the Included Assets
will not pass to Buyer until the Included Assets are transferred at
the Closing; provided, that Seller will retain legal title and risk of
loss for Malaysian Equipment until it is delivered to Buyer pursuant
to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date first above written.
SELLER:
LH RESEARCH, INC.
By: /s/ Peter W. Sognefest
Title: Peter W. Sognefest, President
BUYER:
INTERNATIONAL POWER SYSTEMS, INC.
By: /s/ A. Gordon Goodyear
Title: A. Gordon Goodyear, Vice President
and General Manager
Agreed to as to Article 7:
SUNMARK:
SUNMARK CAPITAL CORPORATION
By: /s/ Thomas F. O'Brien
Title: Thomas F. O'Brien, President
and Chief Executive Officer
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End Document
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