SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report: May 9, 1997
APPLIED SCIENCE AND TECHNOLOGY, INC.
------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22646 04-2962110
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
35 Cabot Road, Woburn, Massachusetts 01801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 933-5560
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
TABLE OF CONTENTS
FORM 8-K
May 9, 1997
Item Page
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Item 2. Acquisition or Disposition of Assets. 3
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Item 7. Financial Statements and Exhibits. 4
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Signatures 5
Exhibits
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 9, 1997, Applied Science and Technology, Inc. (the "Company"),
through a wholly owned subsidiary, acquired substantially all of the assets of
Converter Power, Inc., ("CPI"), a Massachusetts corporation and a wholly owned
subsidiary of ILC Technology, Inc., a California corporation.
The acquisition was in the form of an asset purchase in which ASTeX/CPI
Acquisition Corp. ("AAC"), a wholly owned subsidiary of the Company, acquired
substantially all of the assets of CPI in exchange for $6,350,000 in cash and
45,000 unregistered shares of the Company's Common Stock (the "Shares"). In
accordance with the provisions of an escrow agreement, the Shares will be held
for a minimum of twelve months and a maximum of twenty-four months, following
the closing. If, by May 8, 1998, the Shares have not increased in value to
$1,000,000, the Company will pay CPI the difference between the market value and
$1,000,000, such difference to be paid in cash, stock of the Company or a
combination of both. The Company has agreed to use its best efforts to register
any additional shares which may be issued by the Company under this arrangement.
CPI, located in Beverly, Massachusetts, is a leading producer of
customized power supplies built to fit compactly into a variety of systems for
semiconductor capital equipment, medical and industrial lasers and
electro-optics. The Company intends to operate CPI as a wholly owned subsidiary.
The acquisition was funded by an $8,000,000 three-year revolving loan
from State Street Bank and Trust Company ("State Street") as well as by a
$4,983,051 term loan, also from State
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Street. The amount of consideration exchanged was determined by negotiations
between the parties. No material relationship existed between the parties prior
to the transaction.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)and (b) The required financial statements are not included in this
report. The Company intends to file the required financial
statements and pro forma financial information as soon as
practicable, but not later than 60 days from the date this
report must be filed.
(c) The following exhibits are filed herewith:
Exhibit
No. Title
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10(a) Asset Purchase Agreement, dated as of May 9, 1997, by and among
Applied Science and Technology, Inc., ASTeX/CPI Acquisition
Corp., Converter Power, Inc. and ILC Technology, Inc.
10(b) Assignment and Assumption Agreement, dated as of May 9, 1997,
by and among ILC Technology, Inc. and ASTeX/CPI Acquisition
Corp.
10(c) Warranty Bill of Sale dated as of May 9, 1997.
10(d) Unsecured Committed Revolver Loan Agreement ($8,000,000) by
and between the Company and State Street Bank and Trust
Company.
10(e) Unsecured Committed Revolver Promissory Note ($8,000,000)
from the Company to State Street Bank and Trust Company.
10(f) Term Loan Agreement ($4,983,051).
10(g) Term Promissory Note ($4,983,051).
99 Press Release dated May 9, 1997.
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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.
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/ Richard S. Post
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Richard S. Post, Ph.D., President
Date: May 22, 1997
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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.
APPLIED SCIENCE AND TECHNOLOGY, INC.
By: /s/Richard S. Post
-----------------------------------
Richard S. Post, Ph.D., President
Date: May 22, 1997
EXHIBIT 10(a)
ASSET PURCHASE AGREEMENT
BY AND AMONG
APPLIED SCIENCE AND TECHNOLOGY, INC.,
ASTEX/CPI ACQUISITION CORP.,
CONVERTER POWER, INC.
AND
ILC TECHNOLOGY, INC.
DATED
MAY 9, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<C> <C>
1. Sale and Purchase of the Converter Power, Inc. ("CPI") Assets ................................... 1
1.1 Sale and Purchase of the CPI Assets................................................... 1
2. Purchase Price and Method of Payment............................................................. 3
2.1 Purchase Price........................................................................ 3
2.2 Determination of Market Value of ASTeX Shares......................................... 4
2.3 Adjustments to Purchase Price......................................................... 4
2.4 Assumption of Certain Liabilities..................................................... 7
2.5 Closing............................................................................... 7
2.6 Taxes and Allocation of Purchase Price................................................ 8
3. Representations and Warranties of ILCT and CPI................................................... 8
3.1 Capitalization of CPI................................................................. 8
3.2 Authorization......................................................................... 9
3.3 Organization.......................................................................... 9
3.4 Subsidiaries.......................................................................... 9
3.5 Books and Records..................................................................... 9
3.6 Financial Statements.................................................................. 10
3.7 Accounts Receivable; Inventories...................................................... 10
3.8 Tax Matters........................................................................... 10
3.9 Title to Properties................................................................... 11
3.10 Assets Adequate for Business.......................................................... 12
3.11 Agreements, Contracts and Commitments................................................. 12
3.12 Employee Benefit and Pension Plans.................................................... 13
3.13 Required Consents, No Default......................................................... 14
3.14 Litigation............................................................................ 14
3.15 Broker's or Finder's Fees............................................................. 14
3.16 Copies of Documents................................................................... 15
3.17 Intangible Property................................................................... 15
3.18 Governmental Consents................................................................. 15
3.19 Compliance with Agreements and Laws................................................... 15
3.20 Employee Relations and Labor Matters.................................................. 16
3.21 Absence of Certain Changes or Events.................................................. 16
3.22 Indebtedness to and from Officers, Directors and Stockholders......................... 17
3.23 Conflicts of Interest................................................................. 17
3.24 CPI Personnel Information............................................................. 17
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3.25 Insurance of Properties............................................................... 18
3.26 Insurance of Independent Contractors.................................................. 19
3.27 Compliance with Environmental Laws.................................................... 19
3.28 Guarantees, Warranties and Discounts.................................................. 21
3.29 Tort Claims........................................................................... 21
3.30 Disclosure............................................................................ 22
3.31 Investment Purposes Only.............................................................. 22
3.32 Unregistered Securities............................................................... 22
4. Representations and Warranties of AAC and ASTeX.................................................. 23
4.1 Organization and Related Matters...................................................... 23
4.2 No Breach of Statute or Contract...................................................... 23
4.3 Authorization of Agreement............................................................ 23
4.4 Validity of ASTeX Shares.............................................................. 23
4.5 No Broker's or Finder's Fees.......................................................... 23
5. Conditions Precedent to the Obligations of AAC and ASTeX......................................... 24
5.1 Representations and Warranties of ILCT and CPI to be True and Correct................. 24
5.2 Opinion of Counsel to ILCT and CPI.................................................... 24
5.3 Required Consents..................................................................... 25
5.4 UCC Termination Statements............................................................ 25
5.5 Legal Proceedings..................................................................... 25
5.6 Assignment of Agreements.............................................................. 25
5.7 ILCT's Insurance Plan................................................................. 25
6. Conditions Precedent to the Obligations of ILCT and CPI.......................................... 26
6.1 Representations and Warranties of AAC and ASTeX to be True............................ 26
6.2 Opinion of Counsel to ASTeX and AAC................................................... 26
7. Post Closing Covenants........................................................................... 27
7.1 Hiring of CPI's Employees............................................................. 27
7.2 Change of Name........................................................................ 27
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Page
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8. Indemnification ................................................................................. 28
8.1 Subjects Indemnified Against by ILCT.................................................. 28
8.2 Subjects Indemnified Against by AAC and ASTeX......................................... 28
8.3 Conditions to Indemnification......................................................... 28
8.4 Payment for Indemnification .......................................................... 29
8.5 Survival of Indemnification........................................................... 30
8.6 Intent of Parties..................................................................... 30
8.7 Calculation of Claim Amount........................................................... 30
9. Registration of Additional ASTeX Shares.......................................................... 31
9.1 Definitions........................................................................... 31
9.2 Procedure............................................................................. 31
9.3 Obligations of ASTeX.................................................................. 32
9.4 Condition Precedent................................................................... 33
9.5 Indemnification....................................................................... 33
9.6 Transferability....................................................................... 35
9.7 Rule 144 Exception.................................................................... 35
10. Confidentiality.................................................................................. 35
10.1 Acknowledgement of Confidentiality.................................................... 35
10.2 Covenant Not to Disclose.............................................................. 36
10.3 Remedies for Breach of Confidentiality................................................ 36
10.4 Reverse Engineering and Modifications................................................. 36
10.5 Remedies.............................................................................. 36
10.6 Survival.............................................................................. 36
11. General . . . . . ............................................................................ 36
11.1 Survival of Representations, Warranties and Covenants................................. 36
11.2 Press Releases........................................................................ 37
11.3 Payment of Expenses................................................................... 37
11.4 Governing Law......................................................................... 37
11.5 Notices............................................................................... 37
11.6 Successors and Assigns................................................................ 38
11.7 Arbitration........................................................................... 38
11.8 Headings.............................................................................. 38
11.9 Counterparts.......................................................................... 39
11.10 Waiver................................................................................ 39
11.11 Severability.......................................................................... 39
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Page
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11.12 Force Majeure......................................................................... 39
11.13 Entire Agreement; Amendments.......................................................... 39
11.14 Additional Actions.................................................................... 39
11.15 Waiver of Bulk Sales Compliance....................................................... 39
11.16 No Successor Liability................................................................ 40
</TABLE>
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SCHEDULES
Schedule 1.1(a) Personal Property
Schedule 1.1(b) Inventories
Schedule 1.1(c) Material Contracts
Schedule 1.1(d) Intellectual Property
Schedule 1.1(h) Permits and Licenses
Schedule 1.1(i) Cash and Accounts Receivable
Schedule 2.3(a) Projected Balance Sheet
Schedule 2.6 Taxes and Allocation of Purchase Price
Schedule 3.2 Authorization
Schedule 3.5 Books and Records
Schedule 3.6 Audited Financial Statements
Schedule 3.7 Accounts Receivable; Inventories
Schedule 3.8 Taxes
Schedule 3.9 Title to Properties
Schedule 3.11 Agreements, Contracts and Commitments
Schedule 3.12 Employee Benefit and Pension Plans
Schedule 3.13 Required Consents, No Default
Schedule 3.14 Litigation
Schedule 3.17 Intangible Property
Schedule 3.18 Governmental Consents
Schedule 3.19 Compliance with Agreements and Laws
Schedule 3.20 Employee Relations and Labor Matters
Schedule 3.21 Absence of Certain Changes or Events
Schedule 3.22 Indebtedness to and from Officers, Directors and
Stockholders
Schedule 3.24 CPI Personnel Information
Schedule 3.25 Insurance of Properties
Schedule 3.26 Insurance of Independent Contractors
Schedule 3.27 Compliance with Environmental Laws
Schedule 3.28 Guarantees, Warranties and Discounts
Schedule 3.29 Tort Claims
Schedule 5.3 Required Consents
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Warranty Bill of Sale
Exhibit C Assignment and Assumption Agreement
Exhibit D Sales Representative Agreement
Exhibit E Officers' Certificates of ILCT and CPI
Exhibit F ASTeX's Non-Disclosure and Confidentiality Agreement
Exhibit G Officers' Certificates of ASTeX and AAC
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made on the 9th day
of May, 1997, by and among Applied Science and Technology, Inc., a Delaware
corporation having its principal place of business at 35 Cabot Road, Woburn,
Massachusetts 01801 ("ASTEX"), ASTeX/CPI Acquisition Corp., a Massachusetts
corporation having its principal place of business at 35 Cabot Road, Woburn,
Massachusetts 01801 ("AAC"), Converter Power, Inc., a Massachusetts corporation
having its principal place of business at 148 Sohier Road, Beverly,
Massachusetts 01915 ("CPI"), ILC Technology, Inc., a California corporation
having its principal place of business at 399 Java Drive, Sunnyvale, California
94089 ("ILCT"), and the sole stockholder of CPI.
RECITALS
WHEREAS, CPI is the owner of certain assets, as hereinafter defined,
including but not limited to, intellectual property rights, purchase orders, and
other assets relating to or comprising CPI's products and business; and
WHEREAS, AAC wishes to purchase from CPI and CPI wishes to sell to AAC,
all of the assets of every kind and nature relating to CPI's business, for the
consideration set forth below and the assumption of certain of CPI's liabilities
as set forth below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual premises and the representations, warranties and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. SALE AND PURCHASE OF THE CPI ASSETS.
1.1 SALE AND PURCHASE OF THE CPI ASSETS. Based on and subject to the
terms, provisions and conditions of this Agreement and upon the basis of the
representations and warranties made herein, CPI shall sell, convey, assign and
deliver to AAC, and AAC shall purchase from CPI, all right, title and interest
in and to the all of the assets, properties and rights owned, used or held for
use by CPI of every kind, nature and description, whether tangible or
intangible, real, personal or mixed and wherever located pertaining to the
business of CPI (the "BUSINESS") (collectively, the "ASSETS") of every kind and
nature, including but not limited to the following:
(a) Personal Property. All machinery, equipment, computers and
computer equipment, tools, supplies, spare parts, furniture, fixtures, leasehold
improvements, supplies and other items of tangible property used in the
Business, including but not limited to, tangible personal property as of April
30, 1997, plus (i) any replacements or additions thereto before the date of this
Agreement, and (ii) any express or implied warranty by the manufacturers or
sellers of any item or
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component part thereof, to the extent transferrable, and all maintenance
records, brochures, catalogues and other documents relating to such personal
property or to the installation or functioning thereof (collectively, the
"PERSONAL PROPERTY");
(b) Inventories. All inventories of raw materials,
work-in-process, finished goods and materials and supplies, wherever located,
which are related to the Business, including the inventory as indicated on
Schedule 1.1(b) as of April 30, 1997, plus any replacements or additions thereto
prior to the date of this Agreement less any inventory disposed of in the
ordinary course of business before the date of this Agreement (collectively, the
"INVENTORY");
(c) Contracts. All rights, benefits and interest of CPI under
all contracts, licenses, leases, commitments, agreements, purchase and sale
orders and other commitments, including but not limited to those material
contracts having a value of more than $5,000.00 each and listed on Schedule
1.1(c) (the "Material Contracts List") (collectively, the "CONTRACTS");
(d) Intellectual Property. All patents, patent applications,
inventions upon which patent applications have not yet been filed, service
marks, trade names, trademarks, trademark registrations and applications,
software, copyrighted registrations and applications, trade secrets, formulae,
technology, designs, processes, inventions, knowhow, and other intellectual
property rights, both foreign and domestic, and any and all goodwill associated
therewith, presently owned, possessed or used by CPI, including but not limited
to the intellectual property listed on Schedule 1.1(d) and including all rights
to the name "Converter Power, Inc." (collectively, the "INTELLECTUAL PROPERTY");
(e) CPI Software. All software, including all object and
source code, in machine readable and listing form), documentation (including,
but not limited to, internal documentation, documentation made available to
customers and training materials), flowcharts, source code notes, software
tools, compilers, test routines and information, in whatever form, and all
revisions, release levels and versions of the foregoing, used on or with CPI
products or in CPI's Business (collectively, the "SOFTWARE");
(f) Promotional Materials. All sales and promotional
literature, data sheets, instructional materials, catalogs and similar materials
of CPI relating to the Business, regardless of whether those materials exist in
written, electronic, magnetic or other form;
(g) Records. All financial, accounting, sales and promotional
and operating data, books and records of CPI, including, but not limited to,
records, files, customer lists, supplier lists, accounting records, cost and
pricing information, personnel records, business records, maintenance records,
customer and supplier lists, business plans, projections studies or reports,
statistical process control data and similar documents and records, whether
those materials exist in written, electronic, magnetic or other form;
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(h) Permits and Licenses. All permits, licenses, consents,
authorizations, certificates, registrations and other approvals granted by any
federal, state, local or foreign court or other governmental authority required
or useful in the conduct of the Business and listed on Schedule 1.1(h), to the
extent transferable (collectively, the "LICENSES");
(i) Cash and Accounts Receivable. All cash, banking accounts,
certificates of deposit, customer deposits, and accounts receivable related to
the Business, excluding, however, any and all rights to tax refunds for all
periods ending prior to March 31, 1997 (the "RECEIVABLES"), and all other
current assets, all as reflected on Schedule 1.1(i);
(j) Intangibles. All claims, causes or rights of action and
intangible property rights of CPI related to the Business, including, without
limitation, obsolete product designs, restrictive covenants, confidentiality
obligations and similar obligations of present and former employees, officers
and consultants of CPI; and
(k) Claims. All of CPI's claims against any parties relating
to any right, property or asset included in the Assets, or against any party to
the Contracts, including, without limitation, unliquidated rights under
manufacturers and vendors' warranties or guaranties.
2. PURCHASE PRICE AND METHOD OF PAYMENT.
2.1 PURCHASE PRICE. The purchase price for the Assets (the "PURCHASE
PRICE") shall be (i) Six Million Three Hundred Fifty Thousand Dollars
($6,350,000) (subject to adjustment as described in Section 2.3) in cash, (ii)
45,000 unregistered shares of ASTeX Common Stock, and (iii) the assumption of
certain liabilities of CPI, as described below, payable by AAC as follows:
(a) At Closing, by certified check or wire transfer, the sum
of Six Million Three Hundred Fifty Thousand Dollars ($6,350,000);
(b) The issuance immediately following the Closing (as defined
in Section 2.5) of 45,000 unregistered shares of ASTeX Common Stock, $.01 par
value (the "ASTEX SHARES"). The ASTeX Shares will be held in escrow by O'Connor,
Broude & Aronson (the "ESCROW AGENT"), to be released to CPI over time not to
exceed twenty four (24) months following the Closing (the "FINAL ESCROW RELEASE
DATE") in accordance with the terms of the Escrow Agreement attached hereto as
EXHIBIT A (the "ESCROW AGREEMENT") and Section 2.3 (f); and
(c) If the ASTeX Shares have not increased in market value to
at least $1,000,000 on May 8, 1998 (the "ESCROW MEASUREMENT DATE") based on the
Measurement Closing Price as defined in Section 2.2 below, then on May 9, 1998
(the "Initial Escrow Release Date"), ASTeX shall pay to CPI the difference
between the market value of the ASTeX Shares based on the Measurement Closing
Price for the ASTeX Shares and $1,000,000 (the "Guaranteed Value"), such
difference to be payable in cash, stock of ASTeX, or a combination of both, at
ASTeX's discretion; provided that, if the amount of such difference is $100,000
or less, ASTeX shall pay such amount in cash.
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Notwithstanding the foregoing, the Guaranteed Value shall be subject to
adjustment if any ASTeX Shares issued hereunder are returned to ASTeX in
accordance with the provisions of Sections 2.3(e) or 8.4 below. In such
instance, the $1,000,000 Guaranteed Value described above shall be reduced based
upon the following formula:
Guaranteed Value = $1,000,000 x (45,000 - N)
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45,000
N = Number of ASTeX Shares returned to ASTeX pursuant to
Section 2.3(e) or Section 8.4.
[For illustration purposes only, if 9,946 ASTeX Shares are returned to ASTeX
from escrow in accordance with Section 2.3(e) or 8.4, then additional
consideration would be payable to CPI only if the remaining 35,054 ASTeX Shares
did not increase in market value to $778,978 [$1,000,000 x (45,000 -
9,946)/45,000]. In such instance, the ASTeX Shares and the additional
consideration shall equal $778,978 with the value of any such shares calculated
using the Measurement Closing Price (as defined herein).]
2.2 DETERMINATION OF MARKET VALUE OF ASTEX SHARES. The aggregate market
value for the ASTeX Shares shall be determined by using the average of the
closing price of ASTeX's Common Stock, $.01 par value, as reported by the NASDAQ
National Market System, for the four calendar weeks immediately preceding the
Initial Escrow Release Date (the "MEASUREMENT CLOSING PRICE").
2.3 ADJUSTMENTS TO PURCHASE PRICE.
(a) Attached hereto as Schedule 2.3(a) is the projected
balance sheet of CPI at March 29, 1997 (the "PROJECTED BALANCE SHEET") prepared
in accordance with generally accepted accounting principles, consistently
applied ("GAAP").
(b) The Projected Balance Sheet reflects a projected book
value at that date (exclusive of intangible assets) for CPI of $3,917,000, prior
to reduction of an intercompany receivable of $696,000, yielding a projected net
book value of $3,221,000.
(c) Within ninety (90) days after the Closing, AAC, at its
cost and expense, shall cause KPMG Peat Marwick LLP (the "AUDITORS") to prepare
and deliver to AAC and ILCT a draft of the Final Balance Sheet of CPI as of
April 30, 1997 (as defined below). The draft Final Balance Sheet shall be
prepared in accordance with generally accepted accounting principles,
consistently applied, followed in the preparation of the Projected Balance
Sheet.
(d) Within ten (10) business days after its receipt of the
draft Final Balance Sheet, ILCT shall give AAC written notice indicating whether
it accepts the draft Final Balance Sheet or disputes the draft Final Balance
Sheet. The failure to give any notice within that time shall be
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deemed to constitute a notice that the draft Final Balance Sheet is accepted. If
the draft Final Balance Sheet is disputed, AAC, ILCT, accountants designated by
ILCT ("ILCT ACCOUNTANTS") and the Auditors shall meet to attempt to resolve the
dispute. If the dispute has not been resolved within fifteen (15) business days
after ILCT gives notice that it disputes the draft Final Balance Sheet, the
outstanding issues shall be submitted to another "Big 6" accounting firm
selected by the Auditors and the ILCT Accountants for final resolution. The only
issue to be resolved by such other firm shall be whether the draft Final Balance
Sheet was prepared in accordance with the accounting principles followed in the
preparation of the Projected Balance Sheet, consistently applied. The fees of
such other firm shall be shared and paid equally by AAC and ILCT. After any
disputes have been resolved, whether by agreement or by such other "Big 6"
accounting firm, the Auditors shall prepare a Final Balance Sheet which shall be
final and binding upon the parties and deliver these documents to ASTeX and
ILCT. The draft Final Balance Sheet, if there is no dispute under this Section,
or the final balance sheet as determined pursuant to this Section 2.3(d), if
there is a dispute, is referred to as the "FINAL BALANCE SHEET."
Notwithstanding anything herein to the contrary, the Final Balance
Sheet shall be subject to the following parameters: (i) the warranty reserve as
set forth on the Final Balance Sheet shall be the lower of (A) the warranty
reserve as determined pursuant to Section 2.3(d) without reference to this
sentence, and (B) the sum of the warranty reserve as set forth on the Projected
Balance Sheet plus $400,000; (ii) the obsolete inventory reserve as set forth on
the Final Balance Sheet shall be the lower of (A) the obsolete inventory reserve
as determined pursuant to Section 2.3(d) without reference to this sentence, and
(B) the sum of the obsolete inventory reserve as set forth on the Projected
Balance Sheet plus $50,000; (iii) the accrued taxes payable reserve as set forth
on the Final Balance Sheet shall be the lower of (A) the accrued taxes payable
reserve as determined pursuant to Section 2.3(d) without reference to this
sentence, and (B) the sum of the accrued taxes payable reserve as set forth on
the Projected Balance Sheet plus $100,000; and (iv) any reduction in the various
reserves pursuant to this sentence shall be added to the net book value as
reflected on the Final Balance Sheet.
(e) For purposes of this Section 2.3(e), the parties shall
create a "Modified Final Balance Sheet" by taking the Final Balance Sheet,
reducing the amount of any warranty reserve, obsolete inventory reserve and
accrued taxes payable reserve to the amount as reflected on the Projected
Balance Sheet, and adding the amount of such reductions to the net book value.
If the Modified Final Balance Sheet reflects the net book value of CPI as
defined above of less than $3,221,000, then a number of ASTeX Shares will be
returned to AAC from escrow, using a price of $22.22 per ASTeX Share on the
differential to determine the number of shares to be returned. For illustration
purposes only, if the Modified Final Balance Sheet reflects the net book value
of CPI of $3,000,000, then an aggregate of 9,946 ASTeX Shares will be returned
to AAC ($221,000 divided by $22.22).
(f) (i) On the Initial Escrow Release Date, AAC shall release
from escrow that number of ASTeX Shares equal to the total number of ASTeX
Shares then held in escrow, plus the number of shares payable pursuant to
Section 2.1(c), less the following:
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(a) 9001 shares, which shall continue to be
held in escrow with respect to any shortfall in the warranty reserve;
plus
(b) unless CPI has presented ASTeX with a
certificate from the Massachusetts Department of Revenue releasing any
liens against the Assets as a result of any tax liability of CPI, an
additional 4500 shares; plus
(c) a number of shares equal to (A) the
dollar amount of any liabilities incurred by AAC with respect to
product warranties (other than so-called "product liability" claims)
with respect to products shipped by CPI prior to the Closing, to the
extent such dollar amount exceeds the warranty reserve established on
the Projected Balance Sheet, (B) divided by $22.22; plus
(d) a number of shares equal to (X) the
dollar amount of any liabilities incurred by AAC with respect to
obsolete inventory included in the Assets, to the extent such dollar
amount exceeds the obsolete inventory reserve established on the
Projected Balance Sheet, (Y) divided by $22.22.
ASTeX and AAC agree that, to the greatest extent practicable, the shares to be
retained hereunder shall be the shares issued pursuant to Section 2.1(c), and
the shares to be released hereunder shall be the ASTeX Shares initially
delivered into escrow in connection with the Closing, and that the parties shall
promptly deliver such instructions to the Escrow Agent.
(ii) On the Final Escrow Release Date, AAC shall release from
escrow theremaining ASTeX Shares, and any shares issued pursuant to Section
2.1(c), less the following:
(a) a number of shares equal to the dollar
amount of any liabilities incurred by AAC with respect to any tax
liabilities assessed against CPI; plus
(b) a number of shares equal to (A) the
dollar amount of any liabilities incurred by AAC during the period May
9, 1998 through May 8, 1999 with respect to product warranties (other
than so-called "product liability" claims) with respect to products
shipped by CPI prior to the Closing, to the extent such dollar amount,
plus the amount of such warranty liabilities incurred during the period
May 9, 1997 through May 8, 1998, exceeds the warranty reserve
established on the Projected Balance Sheet, (B) divided by $22.22;
provided, that if AAC and ASTeX have previously received all or a portion of the
ASTeX Shares as payment for indemnification as provided in Section 8 of this
Agreement, or have made a claim for indemnification such that there are not
adequate ASTeX Shares remaining or reserved to address the sums due hereunder,
then CPI shall pay to AAC, in cash or in ASTeX Shares (valued at $22.22) the
sums equal to the deficiencies after adjustment for all ASTeX Shares remaining
in escrow prior to such claim.
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(iii) The provisions of Section 8 limiting the liability of
CPI and ILC to all claims in excess of $75,000 shall not apply to any claims
under this Section 2.3(f).
2.4 ASSUMPTION OF CERTAIN LIABILITIES.
(a) At the Closing, AAC shall assume and agree to pay when
due, perform and discharge in accordance with the terms thereof, and indemnify
and hold CPI and ILCT harmless from, all of the liabilities, obligations and
commitments of CPI (i) that are shown on the Projected Balance Sheet, (ii) that
are disclosed in any Schedule attached to this Agreement, (iii) that arise after
the Closing in connection with the Assets, including without limitation,
contracts set forth in the Material Contracts List, (iv) that arise after March
29, 1997 in the ordinary course of CPI's Business, and (v) that is accrued
vacation to CPI employees not to exceed $100,000 in the aggregate (collectively,
the "ASSUMED LIABILITIES").
(b) Notwithstanding the foregoing provisions of Section
2.4(a), AAC shall not assume or agree to perform, pay or discharge, and CPI
shall remain liable for, all obligations, liabilities and commitments, fixed or
contingent, of CPI other than the Assumed Liabilities. Without limiting the
foregoing, the Assumed Liabilities shall not include (i) any tax liabilities
that are not disclosed in any Schedule attached to this Agreement relating to
CPI's operations prior to the Closing or the transactions contemplated by this
Agreement, (ii) costs incurred by ILCT or CPI in connection with the
transactions contemplated hereby, (iii) liabilities with respect to judgments or
pending or threatened litigation or causes of action which occur prior to
Closing (other than warranty claims), (iv) any broker's or finder's fees or
commission and the fees of CPI and ILCT's legal counsel in connection with this
transaction incurred by CPI or ILCT, (v) any and all debt due to ILCT, employees
or affiliates of CPI, including sums due employees by CPI arising out of CPI's
health insurance programs that is not disclosed in any Schedule attached to this
Agreement, and (vi) obligations or liabilities arising from any warranties,
express or implied, with respect to any products shipped prior to Closing in
excess of any warranty reserves set forth in the Final Balance Sheet. AAC shall
assume all claims for product liability relating to products sold by CPI
accruing on or after the Closing Date.
2.5 CLOSING. The closing (the "CLOSING") of the sale and purchase of
the Assets under this Agreement shall take place at the offices of O'Connor,
Broude & Aronson at Waltham, Massachusetts, at 10:00 a.m. on the 8th day of May,
1997, or such other date and place as shall be agreed upon by the parties. The
date of the Closing is hereinafter referred to as the Closing. All proceedings
to be taken and all documents to be executed and delivered by all parties at the
Closing shall be deemed to have been taken and executed simultaneously, and no
proceedings shall be deemed to have been taken nor any documents executed or
delivered until all have been taken, executed and delivered. At Closing:
(a) AAC shall deliver to CPI the purchase price set forth
in Section 2.1(a);
(b) The parties and the Escrow Agent shall enter into the
Escrow Agreement;
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(c) ASTeX shall deliver to its transfer agent irrevocable
instructions authorizing the transfer agent to issue the ASTeX Shares in the
name of CPI and shall cause a certificate evidencing the ASTeX Shares to be
delivered to the Escrow Agent;
(d) CPI shall deliver to AAC a warranty bill of sale in the
form attached hereto as Exhibit B, and AAC shall deliver to ILCT payment
therefor as set forth above in this Section 2;
(e) The parties shall deliver the Certificates described in
Sections 5.1 and 6.1, and the Opinions of Counsel described in Sections 5.2 and
6.2 of this Agreement;
(f) CPI and AAC shall enter into the Assignment and Assumption
Agreement set forth in Exhibit C;
(g) AAC and ILCT shall enter into the Sales Representative
Agreement set forth in Exhibit D; and
(h) The parties shall deliver such additional documents,
including but not limited to, certified copies of charter documents,
certificates of officers and secretaries of each corporation, UCC-3 termination
statements, consents, as counsel to each of the parties may reasonably request.
2.6 TAXES AND ALLOCATION OF PURCHASE PRICE. ASTeX shall pay any and all
taxes arising by virtue of the sale or transfer of the Assets. CPI shall pay any
and all income and capital gains taxes arising by virtue of CPI's receipt of the
Purchase Price. The aggregate amount of the Total Purchase Price shall be
allocated among the Assets as set forth in Schedule 2.6. Schedule 2.6 shall be
prepared within ninety (90) days after the Closing and shall be reasonably
acceptable to both parties. The parties agree that the allocation to be
reflected in Schedule 2.6 will be arrived at by arm's-length negotiation and in
the judgment of the parties will properly reflect the fair market value of the
respective Assets. Such allocation will be binding on each party for federal and
state income tax purposes in connection with the purchase of the Assets and will
be consistently reflected by the parties in all of their tax returns.
3. REPRESENTATIONS AND WARRANTIES OF ILCT AND CPI.
Subject to the provisions of Section 11.1, ILCT and CPI jointly and
severally represent and warrant to AAC and ASTeX, upon which representations and
warranties AAC and ASTeX rely, and which representations and warranties shall
survive the Closing, notwithstanding any investigation of the affairs of ILCT
and CPI by AAC or ASTeX, as follows (items disclosed in any Schedule hereto are
deemed disclosed with respect to all representations and warranties set forth
herein):
3.1 CAPITALIZATION OF CPI. CPI's authorized capital stock consists
solely of 1,000 shares of Common Stock, no par value per share, of which all
1,000 shares are issued and outstanding on the date hereof and all of which are
held of record and beneficially solely by ILCT. All such issued
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and outstanding shares of CPI Common Stock have been duly and validly issued and
are, fully paid and non-assessable.
3.2 AUTHORIZATION. This Agreement has been duly and validly executed
and delivered by each of CPI and ILCT. This Agreement and all other agreements
and obligations entered into and undertaken in connection with the transactions
contemplated hereby to which CPI and ILCT are parties constitute the valid and
legally binding obligations of CPI and ILCT, as applicable, enforceable against
them in accordance with their respective terms except insofar as enforceability
may be limited by bankruptcy, insolvency, or similar laws affecting the rights
of creditors and general equitable principles. The execution, delivery and
performance by CPI and ILCT of this Agreement and the agreements provided for
herein, and the consummation by CPI and ILCT of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) except as set forth in Schedule 3.2, violate the
provisions of any law, rule or regulation applicable to CPI or ILCT; (b) violate
the provisions of the Articles of Organization, as amended, or the Bylaws, as
amended, of CPI or the Articles of Incorporation, as amended or Bylaws, as
amended, of ILCT; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator having jurisdiction over CPI or ILCT or any of
their respective assets or properties; or (d) except as set forth in Schedule
3.2, violate, conflict with or result in the breach or termination of any term
or provision of, or constitute a default under, or cause any acceleration of any
obligation under, or cause the creation of any indebtedness under, any contract,
agreement, commitment, instrument permit, lease or license, applicable to CPI or
ILCT, or any of the Assets.
3.3 ORGANIZATION. CPI is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts, and
has all requisite power and authority (corporate and other) to own its
properties and to carry on its business as now being conducted. CPI is duly
qualified to do business and in good standing in all jurisdictions in which its
ownership of property or the character of its business requires such
qualification and where failure to be so qualified would have a material adverse
effect on CPI. Certified copies of the Articles of Organization, as amended, and
Bylaws of CPI, as amended to date, have been delivered to ASTeX, and are
complete, and no amendments have been made thereto or have been authorized since
the date thereof, except as contemplated by Section 5.3.
3.4 SUBSIDIARIES. CPI has no Subsidiaries or foreign sales corporations
and CPI owns or holds of record and or beneficially no shares of any class in
the capital of any other corporations or in any other business enterprise.
"SUBSIDIARY" shall mean any corporation, partnership, joint venture or other
entity in which CPI has, directly or indirectly, an equity interest representing
10% or more of the capital stock thereof or other equity interests therein.
3.5 BOOKS AND RECORDS. Except as set forth in Schedule 3.5 (a) the
minute books of CPI provided to AAC for review contain an accurate record of all
meetings and other corporate action of the stockholders and directors of CPI,
and (b) the stock ledger of CPI produced for AAC's review contains an accurate
record of the holdings of the stock issued by CPI.
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3.6 FINANCIAL STATEMENTS.
(a) CPI Financial Statements. CPI has delivered to AAC true
and complete copies of its unaudited financial statements as of the three year
period ending September 30, 1996 and its unaudited financial statements for the
periods ending March 29, 1997, December 28, 1996, March 30, 1996 and December
30, 1995 (the "CPI FINANCIAL STATEMENTS"). The CPI Financial Statements are in
accordance with the books and records of CPI, and (i) present fairly the
financial position of CPI as of the respective dates and for the respective
periods indicated, (ii) include all required material adjustments, and (iii)
have been prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior periods and practices.
(b) No Adverse Changes or Undisclosed Liabilities. Except as
set forth on Schedule 3.6, since March 29, 1997, there has not occurred or
arisen, whether or not in the ordinary course of business: (i) any material
adverse change in the assets, financial condition, operations or business of
CPI, or (ii) any event, condition or state of facts of any character which has
or may reasonably be expected to materially and adversely affect the results of
operations, business, financial condition or prospects of CPI. Except as set
forth on Schedule 3.6, CPI has no material liabilities or obligations, fixed,
accrued, contingent or otherwise, which are not fully reflected or provided for
on, or disclosed in the notes to, the CPI Financial Statements except (i)
liabilities and obligations incurred in the ordinary course of business since
March 29, 1997, none of which individually or in the aggregate has been or is
materially adverse to the operations, business, financial condition or prospects
of CPI and (ii) liabilities and obligations permitted or contemplated by this
Agreement. Except for those liabilities described above, CPI or ILCT know of no
basis for assertion against CPI of any other liability, debt or obligation.
3.7 ACCOUNTS RECEIVABLE; INVENTORIES. The accounts receivable reflected
on the Unaudited Financial Statements have been collected or are collectible in
the amounts shown, subject to a reasonable allowance for doubtful accounts as
set forth in the CPI Financial Statements. All sales of CPI inventory as set
forth in the CPI Financial Statements are final, other than normal and customary
warranty rights. There are no significant refunds, reimbursements, discounts, or
other adjustments payable by CPI in respect to any of its accounts receivable,
and CPI does not know and has received no notice of any defenses, rights of
setoff, assignments, pledges, liens, encumbrances, claims, equities, or
conditions enforceable by third parties on or affecting the accounts receivable
or inventories of CPI, except as set forth in Schedule 3.7. The inventories
shown on the CPI Financial Statements and the inventories acquired since March
29, 1997 consist of items of a quantity and quality usable or salable in the
normal course of the business of CPI, and the value at which the inventories are
carried on the CPI Financial Statements reflect the lower of CPI's cost or
market value.
3.8 TAX MATTERS.
(a) Except as set forth on Schedule 3.8 attached hereto, CPI
has paid either directly or through consolidated tax returns filed by ILCT (and,
as to any of the following which are
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payable after the Closing, CPI has properly reserved against in accordance with
generally accepted accounting principles) all income taxes, capital gains taxes,
withholding and other employment taxes, capital taxes, sales and use taxes,
goods and services taxes, business taxes, ad valorem taxes, property taxes,
excise taxes, customs and import duties, imposts, rates, levies, assessments and
fees, and all other taxes of every kind, character or description, including all
interest, fines, and penalties relating thereto, imposed by any governmental or
quasi-governmental authority, domestic or foreign, whether federal, state, local
or municipal (collectively the "TAXES") required to be paid by CPI for all
periods prior to the Closing. CPI has provided AAC with true and correct copies
of all tax returns of CPI since 1994. No outstanding assessments, reassessments,
notices of determination, or notices of any kind whatsoever, or notices of
increases in tax rates with respect to any such Taxes exist or to the best
knowledge of CPI and ILCT could become a lien on the properties or assets of
CPI. CPI has duly and timely filed or caused to be filed all reports, returns
and other documents relating to or covering all such Taxes, which are due or
required to be filed at or prior to the date of Closing, and the Taxes or
applicable amount shown thereon have been timely accrued or paid. No such
filings have contained any misstatement or omitted any statement of any fact
that should have been included therein.
(b) None of the income tax returns for Taxes of CPI has been
audited by any taxing authority. No action, suit, proceeding, audit,
investigation or claim is pending or to the best knowledge of CPI or ILCT are
threatened, in respect of any Taxes for which CPI is liable, nor has CPI or ILCT
received any notice of any proposed or asserted deficiency or claim for any
Taxes. No waiver of any statute of limitations with respect to any taxation year
has been executed by CPI; and no agreement, waiver or consent providing for an
extension of time with respect to the assessment, reassessment or other
determination of any Taxes against CPI, and no power of attorney granted by CPI
with respect to any matters relating to Taxes is currently in force.
(c) Subject to the limitations described in Section 2.3(f),
all reserves established on the Final Balance Sheet for warranty claims or for
obsolete inventory are adequate to cover any and all costs and obligations for
any appropriate warranty claim (other than so-called "product liability" claims)
or for the write-off of any obsolete inventory.
3.9 TITLE TO PROPERTIES. Except as set forth in Schedule 3.9, CPI has
good and marketable title to all of its properties and assets reflected in the
Financial Statements or acquired since March 29, 1997 except properties and
assets disposed of in the ordinary course of business since March 29, 1997, and
none of such properties or assets is subject to any mortgage, pledge, lien,
security interest, lease, charge, encumbrance, objection, claim or joint
ownership. CPI is the sole and lawful owner of the Assets, and has and except as
set forth in Schedule 3.9, will convey to AAC good and marketable title and all
proprietary rights and interests in and to the Assets, free and clear of all
encumbrances of any kind (including claims for taxes) except for the Assumed
Liabilities. Except as set forth in Schedule 3.9, the delivery to AAC of the
instruments of transfer of ownership contemplated by this Agreement will vest
good and marketable title to the Assets in AAC, free and clear of all
encumbrances of any kind or nature whatsoever, except for the Assumed
Liabilities. The Assets include all assets currently used or useful in the
business or necessary for the operation of the
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Business as currently conducted and include all assets on the Projected Balance
Sheet, except materials and supplies consumed and accounts receivable paid in
the ordinary course of business and assets acquired after March 29, 1997. Except
as set forth in Schedule 3.9, all Assets owned or leased by CPI are in the
possession or under the control of CPI. All leases listed on Schedule 3.9 are
valid and in full force and effect, and CPI or ILCT have not received notice of
any alleged default (that has not been cured or validly waived in writing)
thereunder. Except for its interest as a tenant of real property leased to it,
or as set forth on Schedule 3.9, CPI does not own any right, title or interest
in or to real property of any kind.
3.10 ASSETS ADEQUATE FOR BUSINESS. The machinery, equipment and other
assets owned or leased by CPI are in good working order and are sufficient to
enable CPI to carry on its business as presently conducted. ILCT is not aware of
any defects in CPI's equipment that would require the replacement of, or major
repairs to, any item in excess of $25,000.00 in the aggregate.
3.11 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as shown on Schedule
3.11 or any other Schedule delivered by CPI hereunder, CPI is not a party to or
liable in connection with and has not made or granted any oral or written:
(a) employment agreement or profit-sharing, bonus, incentive,
deferred compensation, stock option or purchase, severance pay, employee benefit
or similar plan or arrangement;
(b) note, loan, credit, security or guaranty agreement or
other obligation relating to the borrowing of money;
(c) license agreement, or sales representative, distributor,
franchise, advertising or property management agreement;
(d) agreement for the future purchase by CPI of any material,
equipment, services or supplies in an amount in excess of $5,000 in any instance
or $25,000 in the aggregate;
(e) agreement for the future sale by CPI of any materials,
equipment, services or supplies in an amount in excess of $5,000 in any instance
or $25,000 in the aggregate;
(f) insurance or indemnity contract, bank account and other
depositary arrangement (including the names of persons authorized to draw
thereon) or power of attorney;
(g) agreement, not elsewhere specifically disclosed pursuant
to this Agreement, involving, or providing any benefit to, any officer,
director, employee or stockholder of CPI;
(h) agreement or arrangement for the sale of any of its assets
or the grant of any preferential rights to purchase any of its assets, property
or rights or requiring the consent of any party to the transfer and assignment
of such assets, property or rights;
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(i) any contracts, agreements or other arrangements imposing a
non-competition, non-solicitation or similar obligation on CPI; and
(j) any other material agreement whether or not in the
ordinary course of business.
No third party has given notice to CPI of any claim, dispute or
controversy with respect to any of the contracts listed on Schedule 3.11, nor
has CPI or ILCT received notice or warning of alleged nonperformance, delay in
delivery or other noncompliance by CPI with respect to its obligations under any
of such contracts, nor, to the best knowledge of CPI and ILCT, are there any
facts indicating that any of such contracts may be totally or partially
terminated or suspended by the other parties thereto, or that CPI is in default
of any of its obligations thereunder. CPI enjoys peaceful and undisturbed
possession under all leases under which it operates.
3.12 EMPLOYEE BENEFIT AND PENSION PLANS.
(a) Except as listed in Schedule 3.12 attached hereto, CPI
does not have, and is not subject to any present or future obligation or
liability under, any pension plan, deferred compensation plan, retirement income
plan, stock option or stock purchase plan, profit sharing plan, bonus plan or
policy, employee group insurance plan, hospitalization plan, disability plan or
other employee benefit plan, program, policy or practice, formal or informal,
with respect to any of its employees, other than health plans established
pursuant to statute. Schedule 3.12 also lists the general policies, procedures
and work-related rules in effect with respect to employees of CPI, whether
written or oral, including, but not limited to, policies regarding holidays,
sick leave, vacation, disability and death benefits, termination and severance
pay, automobile allowances and rights to company-provided automobiles and
expense reimbursements. (The plans, programs, policies, practices and procedures
listed in Schedule 3.12 are hereinafter collectively called the "BENEFIT
PLANS"). All reports and returns filed with any governmental agency with respect
to such benefit plans owned by CPI filed with any regulatory agency within three
(3) years prior to the date hereof have been provided to AAC.
(b) CPI has never had a defined benefit pension plan. The
pension plans included in the Benefit Plans are registered under and are in
compliance with all applicable federal and state legislation and all reports,
returns and filings required to be made thereunder have been made. Such pension
plans have been administered in accordance with their terms and the provisions
of applicable law. Each pension plan has been funded in accordance with the
requirements of such plans and based on actuarial assumptions which are
appropriate to the employees of CPI and the business of CPI. Based on such
assumptions, there is no unfunded liability under any such pension plan. No
changes have occurred since the date of the most recent actuarial report in
respect of such pension plans which makes such report misleading in any material
respect and, since the date of such report, neither ILCT nor CPI has not made or
granted or committed to make or grant any benefit improvements to which members
of the pension plans are or may become entitled which are not
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reflected in such actuarial report. No funds have been withdrawn by CPI from any
such pension plan or other Benefit Plans.
(c) No claims are pending or, to the best knowledge of CPI and
ILCT, threatened by any employee covered under the Benefit Plans or by any other
person which allege a breach of fiduciary duties or violation of governing law
or which may result in liability to CPI and, to the best knowledge of CPI and
ILCT, no basis for such a claim exists. No employees or former employees of CPI
are receiving from CPI any pension or retirement payments, or are entitled to
receive any such payments, not covered by insurance or by a pension plan to
which CPI is a party.
3.13 REQUIRED CONSENTS, NO DEFAULT. Except as described in Schedule
3.13, neither the execution and delivery of this Agreement nor compliance by CPI
and ILCT with its terms and provisions will require the affirmative consent,
approval, order or authorization of or any registration, declaration or filing
with any third party or governmental authority. CPI is not in default under or
in violation of any provision of its Articles of Organization, as amended or
Bylaws, as amended. CPI is not in default under or in violation of any provision
of any indenture, mortgage, lease, loan or other agreement to which it is a
party or is bound or to which its properties are subject, except such defaults
which in the aggregate are not materially adverse to the business or financial
condition of CPI. All of the rights of CPI under the Contracts extending beyond
Closing are assignable to AAC and upon assignment shall continue unimpaired and
unchanged in AAC on or after the Closing without (i) the consent of any person
(except for any consents(s) which have been or will be obtained in writing by
CPI at or before the Closing or as provided on Schedule 3.13) or (ii) the
payment of any penalty, the occurrence of any additional obligations or the
change of any term.
3.14 LITIGATION. Except as set forth on Schedule 3.14 attached hereto:
(a) there is no action, suit or proceeding to which CPI is a party (either as a
plaintiff or defendant) pending or, to the best knowledge of CPI and ILCT,
threatened before any court or governmental agency, authority, body or
arbitrator and, to the best knowledge of CPI and ILCT, there is no basis for any
such action, suit or proceeding; (b) neither CPI nor, to the best knowledge of
CPI and ILCT, any officer, director or employee of CPI has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any
governmental agency, authority or body from engaging in or continuing any
conduct or practice in connection with the business, assets, or properties of
CPI; and (c) there is not in existence on the date hereof any order, judgment or
decree of any court, tribunal or agency enjoining or requiring CPI to take any
action of any kind with respect to its business, assets or properties. To CPI
and ILCT's knowledge, CPI has delivered to AAC all files, letters and other
information with respect to complaints of customers of CPI in the past twelve
months.
3.15 BROKER'S OR FINDER'S FEES. Broadview Associates is acting on
behalf of ILCT and will be entitled to a broker's or finder's fee in connection
with the transactions contemplated herein, which sum will be paid solely by
ILCT.
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3.16 COPIES OF DOCUMENTS. Upon request, ILCT will make available or
cause CPI to make available for inspection and copying by AAC or ASTeX or its
attorneys or accountants true and correct copies of all documents referred to in
this Section 3 or in any Schedule delivered by ILCT or CPI to AAC in connection
with this Agreement and any other agreements and records of CPI which AAC
requests.
3.17 INTANGIBLE PROPERTY. Schedule 3.17 attached hereto sets forth: (i)
a true, correct and complete list and, where appropriate, a description of, all
items of intangible property owned by, or used or useful in connection with the
business of, CPI, including, but not limited to, patents, patent applications,
trademarks, proposed trademarks, trade secrets, know-how, any other confidential
information of CPI, trade names, industrial designs, business names and other
intangible property whether or not registered and applications for any of the
foregoing (the "INTANGIBLE PROPERTY"); and (ii) a true, correct and complete
list of all licenses or similar agreements or arrangements to which CPI is a
party, either as licensee or licensor, with respect to the Intangible Property,
except for software products that are generally commercially available. Except
as otherwise disclosed in Schedule 3.17. CPI owns or possesses adequate licenses
or other rights to use all Intangible Property used in the business of CPI, and
the same are sufficient to conduct its business as it has been and is now being
conducted. There are no licenses, sublicenses or grants relating to the use of
any of the Intangible Property that are not set forth in Schedule 3.17 (other
than licenses with respect to software products that are commercially
available). To the best knowledge of CPI and ILCT, the operations of CPI do not
conflict with or infringe any patent, trademark, trade secret or trade name,
registered or unregistered, owned, possessed or used by any third party. No
third party has given notice to CPI to the effect that the operations of CPI
conflict with or infringe any patent, patent right, copyright, computer software
right, mask work right, trademark, trade secret or trade name, registered or
unregistered, owned, possessed or used by any third party. To the best knowledge
of CPI and ILCT, there are no facts that would give rise to a valid claim that
CPI does not have the unrestricted right to use, free of any rights or claims of
others, all Intangible Property used in the conduct of the business of CPI.
3.18 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required to be obtained or made by
ILCT or CPI in connection with the execution and delivery of this Agreement or
the sale and delivery of the Assets, as contemplated by this Agreement, except
such filings as described in Schedule 3.18. All such filings have been made
prior to and shall be effective on and as of the Closing or will be timely made.
3.19 COMPLIANCE WITH AGREEMENTS AND LAWS. CPI has all requisite
licenses, permits and certificates, including environmental (other than those
permits and certificates referenced in Section 3.28) health and safety permits,
from federal, state and local authorities necessary to conduct its business as
currently conducted (collectively, the "PERMITS"). The Permits are listed on
Schedule 3.19, are valid and subsisting and in good standing and, except as set
forth in Schedule 3.19, will be unaffected by the transactions contemplated by
this Agreement. Except as set forth in Schedule 3.19, the business of CPI as
conducted through the date hereof has not violated any federal, state or local
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laws, regulations or orders (including, but not limited to, any of the foregoing
relating to employment discrimination, occupational safety, environmental
protection, hazardous waste, conservation, or corrupt practices), the
enforcement of which would have a material adverse effect on the business or
prospects and operations of CPI. Except as set forth on Schedule 3.19, CPI has
had no notice or communication from any federal, state or local governmental or
regulatory authority or otherwise of any such violation or noncompliance.
3.20 EMPLOYEE RELATIONS AND LABOR MATTERS.
(a) Except as set forth in Schedule 3.20, CPI is in compliance
with all federal, state and municipal laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and it is not
engaged in any unfair labor practice, and there are no arrears in the payment of
wages or social security taxes.
(b) None of the employees of CPI is represented by any labor
union, nor does CPI have any agreements, whether directly or indirectly, with
any labor union, employee association or other similar entity. CPI has not made
commitments to or conducted negotiations with any labor union or employee
association or similar entity with respect to any future agreements. No trade
union, employee association or other similar entity has any bargaining rights
acquired by either certification or voluntary recognition with respect to the
employees of CPI. There is no unfair labor practice complaint against CPI
pending before any federal, state or local agency. There is no pending labor
strike or other pending organizational drive.
(c) CPI is in compliance with all applicable and material
provisions of the Federal Fair Labor Standards Act or any similar state statute
and all rules and regulations under each. Except as disclosed in Schedule 3.20,
there have been no organizing attempts (known to ILCT or CPI), strikes or other
work stoppages which CPI has suffered. Neither ILCT nor CPI has reason to
believe that any such organizing attempt, strike or work stoppage is pending,
contemplated or threatened.
3.21 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.21 attached hereto, since March 29, 1997, (a) CPI has not entered
into any transaction that is not in the usual and ordinary course of business,
(b) and, to the best knowledge of CPI and ILCT, there has been no event,
circumstance or condition which has or could have a material adverse effect on
CPI's business. Neither CPI nor ILCT know of any existing or threatened
occurrence, event or development specific to the Business which, as far as can
be reasonably foreseen could have a material adverse effect on the Business.
Neither CPI nor ILCT have been notified by any (i) suppliers material to CPI
that such suppliers will not be willing to sell to AAC after the Closing the
lines of products presently sold to CPI, or (ii) customers material to CPI that
such customers will not be willing to continue purchasing from AAC after the
Closing, without significant reductions, products or services currently sold by
CPI. CPI and ILCT believe that CPI's relationships with its suppliers and
customers are good commercial working relationships.
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3.22 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND STOCKHOLDERS. CPI
is not indebted, directly or indirectly, to any person who is an officer,
director or stockholder of CPI, in any amount whatsoever other than for salaries
for services rendered or reimbursable business expenses, all of which have been
reflected on the Unaudited Financial Statements, and no such officer, director
or stockholder is indebted to CPI except for advances made to employees of CPI
in the ordinary course of business to meet reimbursable business expenses
anticipated to be incurred by such obligor. In addition, CPI is not a party to
any agreement or arrangement whereby it engages in a transaction of any kind
with any affiliate except on terms and conditions no less favorable to CPI than
would be customary for such transactions between unaffiliated parties or upon
terms and conditions on which similar transactions with others could fairly be
expected to be entered into. All agreements and arrangements with any affiliate
are fairly and accurately described in Schedule 3.22.
3.23 CONFLICTS OF INTEREST. No officer, director or stockholder of CPI
nor, to the best knowledge of CPI or ILCT, any affiliate of any such person, now
has or within the last two years had, either directly or indirectly:
(a) an equity or debt interest in any corporation,
partnership, joint venture, association, organization or other person or entity
which furnishes or sells or during such period furnished or sold services or
products to CPI or purchases or during such period purchased from CPI any goods
or services, or otherwise during such period did business with CPI, except for
ownership of not more than two percent (2%) of the outstanding voting stock of
any entity which is listed on a national securities exchange; or
(b) a beneficial interest in any contract, commitment or
agreement to which CPI is or was a party or under which CPI is or was obligated
or bound or to which any of CPI's properties may be or may have been subject,
other than stock options and other contracts, commitments or agreements between
CPI and such persons in their capacities as employees, officers or directors of
CPI.
3.24 CPI PERSONNEL INFORMATION.
(a) Schedule 3.24 attached hereto is a true and complete list,
as of the date of this Agreement, setting forth:
(i) The names and business addresses and positions of
all directors and officers of CPI at the date hereof;
(ii) The names of all persons, if any, holding powers
of attorney from CPI, and a summary statement of the terms thereof;
(iii) The name and address of each bank or other
institution in which CPI has established an account for investment,
deposit, checking, savings or borrowing, or
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through which credit is extended, a brief description thereof, and the
names and titles of authorized signers and limits, if any;
(iv) A list of all employees and their annual
compensation together with their social security numbers and all
independent contractors, consultants, subcontractors with whom CPI has
contracted during the twelve (12) months preceding the date of this
Agreement, and the social security numbers and their commission and
monies owed or paid by CPI to such independent contractors, consultants
and subcontractors during said twelve (12) month period; and
(v) All employees who are parties to a written or
oral agreement of employment (including confidentiality and
non-competition agreements).
(b) All independent contractors, consultants and
subcontractors with whom CPI has contracted during the twelve (12) months
preceding the date of this Agreement have been treated as such by CPI and have
not been treated as employees of CPI for which any withholding taxes or other
applicable tax may be due from CPI.
(c) No oral contracts of employment have been entered into
with any employees employed by CPI which are not terminable in accordance with
applicable law and CPI has not entered into any agreements with such employees
with respect to the termination of employment. CPI does not have any obligation
to reinstate any employees.
(d) Except as disclosed in Schedule 3.24, there are no
outstanding, pending or, to the best knowledge of CPI and ILCT, threatened or
anticipated assessment, actions, causes of action, claims, complaints, demands,
orders, prosecutions or suits against CPI or any of its directors, officers, or
to the best knowledge of CPI and ILCT, employees pursuant to or under any
applicable rules, regulations, orders or laws, unemployment insurance, tax,
employer's health tax, employment standards, labor relations, occupational
health and safety, human rights, workers' compensation and pay equity laws
relating to any past or present employee or consultant of CPI, nor is CPI or
ILCT aware of any basis for any such assessments, actions, causes of action,
claims, complaints, demands, orders, prosecutions or suits.
(e) All vacation pay, bonuses, commissions and other benefits
relating to the employees of CPI are accurately reflected in all respects and
have been accrued in its Unaudited Financial Statements in accordance with
generally accepted accounting principles and except as otherwise disclosed
herein.
3.25 INSURANCE OF PROPERTIES. All of CPI's properties and operations
are adequately insured, by financially sound and reputable insurers, against
loss or damage of the kinds and in amounts to the best knowledge of CPI and ILCT
customarily insured against by such persons, and CPI carries, with such insurers
in customary amounts, such other insurance, including larceny, embezzlement or
other criminal misappropriation insurance and business interruption insurance,
as
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is to the best knowledge of CPI and ILCT usually carried by companies of
established reputation engaged in the same or a similar business similarly
situated. Schedule 3.25 attached hereto and made a part hereof contains a
complete and correct list of all policies of insurance of every kind and nature
covering CPI, including without limitation, policies of life, fire, theft,
employee fidelity, environmental and product liability coverage and other
casualty and liability insurance, indicating the insurer, the policy number, the
type of coverage, the amount of coverage and the expiration date of each policy.
Such policies have been since January 1, 1993, and are in full force and effect.
Except for Directors' and Officers' insurance policies, none of such policies
are "claims made" policies. Complete and correct copies of each such policy have
been made available to AAC prior to the execution of this Agreement.
3.26 INSURANCE OF INDEPENDENT CONTRACTORS. Except as set forth on
Schedule 3.26, CPI has received from all of its independent contractors,
consultants and subcontractors to whom it has paid $25,000.00 or more since
January 1, 1993, certificates or other valid evidence of insurance that such
independent contractors, consultants and subcontractors are adequately insured,
by financially sound and reputable insurers, against loss or damage of kinds and
in amounts reasonably deemed adequate by CPI.
3.27 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "ENVIRONMENTAL LAWS" means all applicable
federal, state, municipal and local laws, rules, regulations, ordinances and
orders issued by any governmental or regulatory agency relating to the
environment, occupational health and safety, product safety, product liability
and storage and transportation of goods; including, but not limited to the
federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time ("CERCLA"); the federal Hazardous Materials
Transportation Act, as amended from time to time; the federal Resource
Conservation and Recovery Act, as amended from time to time; and the federal
Toxic Substances Control Act, as amended from time to time; and the regulations
promulgated under such acts;
(ii) "HAZARDOUS SUBSTANCES" means any waste,
pollutant, contaminant, material or substance which is or may be dangerous,
hazardous, toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic or mutagenic or which could otherwise pose a risk to health, safety
or the environment or the value of the properties owned by CPI or which is the
subject of any Environmental Laws governing its Release, use, storage or
identification, including without limitation any substance which contains
polychlorinated biphenyls ("PCBS"), asbestos, lead, urea formaldehyde or radon
gas; and
(iii) "RELEASE" means any release, spill, leak,
emission, discharge, leach, dumping, emission, escape or other disposal.
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(b) CPI, the operation of its business, and the use,
maintenance and operation by CPI of the property and assets now or previously
owned or leased by CPI (collectively, the "PREMISES") have been and are in
compliance with all Environmental Laws and CPI has complied with all reporting
and monitoring requirements under all Environmental Laws. CPI has not received
any notice of any noncompliance with any Environmental Laws.
(c) CPI has obtained all permits, certificates, approvals,
registrations and licenses necessary to conduct its business and to own, use and
operate its properties and assets in compliance with all Environmental Laws.
(d) CPI has not used or stored any Hazardous Substances on or
in any of the properties or assets owned or used by CPI and, to the best
knowledge of CPI, no hazardous substances have been used or stored on or in such
properties or assets by any other person. CPI has not Released any Hazardous
Substances on or from the properties and assets of CPI and no such Release has
resulted from the operation of its business and the conduct of all other
activities of CPI or, to the best knowledge of CPI and ILCT, of any other
person. Except as disclosed in Schedule 3.27, CPI has not used any of its
properties or assets to produce, generate, store, treat, handle, transport or
dispose of any Hazardous Substances and none of the real properties or leased
premises has been or is being used by CPI or, to the best knowledge of CPI or
ILCT, by any other person, as a landfill or waste disposal site.
(e) Without limiting the generality of the foregoing, CPI and
ILCT are not aware of any underground or surface storage tanks or urea
formaldehyde foam insulation, asbestos, PCBs or radioactive substances located
on or in any of the properties or assets owned or used by CPI. CPI is not
responsible for any clean-up or corrective action under any Environmental Laws,
and CPI has not been notified of any claim that it may be responsible for any
such clean-up or corrective action. CPI has never conducted or had conducted an
environmental audit, assessment or study of any of the properties or assets of
CPI.
(f) The sale of the Assets pursuant to this Agreement will not
give rise to any loss of any such permits or licenses or any requirement to
obtain any approval or consent to such change of control in order to maintain
any of such licenses and permits in force and effect.
(g) There are no private or governmental claims, actions,
suits, arbitrations, investigations or proceedings pending against CPI by or
before any court or governmental or other regulatory or administrative body
pending, or, to the best knowledge of CPI and ILCT, threatened which relate to
the business of CPI or the premises in respect of any air, water, surface or
subsurface environmental conditions resulting directly or indirectly from the
use, treatment, storage, disposal, emission or discharge of Hazardous Substances
or other pollutants or contaminants in, about, or relating to the premises or
the business of CPI.
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(h) CPI has not been notified that it is a potentially
responsible party under CERCLA or its state counterparts, and has not received
any request for information under that Act or its state counterparts.
3.28 GUARANTEES, WARRANTIES AND DISCOUNTS. Except as described in
Schedule 3.28 or in Schedule 3.11:
(a) Neither CPI nor ILCT is a party to or bound by any
agreement of guarantee, indemnification, assumption or endorsement or any other
like commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any person with respect to or in connection with CPI's business;
(b) CPI has not given any guarantee or warranty in respect of
any of the products sold or the services provided by it, except warranties made
in the ordinary course of its business and which conform in all material
respects with the form of CPI's standard written warranty, a copy of which is
attached to Schedule 3.28;
(c) No repair contracts or maintenance obligations of CPI in
favor of the customers or users of its products exist, except obligations
incurred in the ordinary course of business and in accordance in all material
respects with CPI's standard terms, a copy of which has been provided to AAC;
(d) Schedule 3.28 reflects the warranty expense by product
category recorded by CPI since April 1, 1994;
(e) CPI is not now subject to any agreement or commitment, and
CPI has not, within three years prior to the date hereof, entered into any
agreement with or made any commitment to any customer which would require CPI to
repurchase any products sold to such customers or to adjust any price or grant
any refund, discount or other concession to such customer; and
(f) CPI is not required to provide any letters of credit,
bonds or other financial security arrangements in connection with any
transactions with its suppliers or customers.
3.29 TORT CLAIMS. Schedule 3.29 is a true and complete list of all
personal injury, property damage or other tort claims for which CPI has received
written notice of such claim, not including service calls, and all accidents
known to ILCT and CPI which could reasonably be expected to give rise to such a
claim, during the period from January 1, 1993 through the date of this Agreement
or claims which were made prior to January 1, 1993 and which had not been fully
resolved prior to that date, whether or not covered by insurance, including,
without limitation, claims involving any product distributed or sold by CPI.
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3.30 DISCLOSURE. No representation or warranty by ILCT or CPI in this
Agreement, nor any statement, certificate or Schedule furnished or to be
furnished by or on behalf of ILCT or CPI pursuant to this Agreement nor any
document or certificate delivered to ASTeX and AAC pursuant to this Agreement
contains or will contain any untrue or misleading statement of a material fact
or omits or will omit to state a material fact reasonably related to the
transactions covered by this Agreement, and all such representations and
warranties are and on the Closing will be accurate and complete in all material
respects.
3.31 INVESTMENT PURPOSES ONLY. CPI represents that it is acquiring the
ASTeX Shares and any additional shares issued pursuant to Section 2.1(c) for its
own account and not with a view to reselling or otherwise distributing such
shares in violation of any federal or state securities laws and understands and
agrees that the shares to be issued hereunder are restricted on transfer and
must be held unless (i) they are registered under the Securities Act of 1933, as
amended (the "ACT") or (ii) an exemption from registration is available, and
ASTeX has received an opinion of counsel, in form and substance satisfactory to
it, to such effect.
3.32 UNREGISTERED SECURITIES. CPI understands that the ASTeX Shares and
any additional shares issued pursuant to Section 2.1(c) have not been registered
under the Act, or the securities laws of any state, in reliance upon specific
exemptions from registration thereunder, and agree that such shares may be
neither sold, offered for sale, transferred, pledged, hypothecated or otherwise
disposed of except in compliance with the Act and applicable state securities
laws. The undersigned has been advised that ASTeX shall use its best efforts to
register the additional ASTeX Shares, if any, pursuant to Section 2.1(c) in
accordance with Section 8.3 below. CPI understands that it is not anticipated
that there will be any market for resale of such shares until such registration
is completed and that it may not be possible for CPI to liquidate an investment
in such shares on an emergency basis. CPI acknowledges that the following
restrictive legend shall be placed on the reverse side of the certificate
representing the ASTeX Shares issued pursuant to this Agreement and any
additional shares issued pursuant to Section 2.1(c):
"The Shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "ACT"), or under any
state law and, except pursuant to an effective registration statement
under the Act and other laws, may not be offered, sold, transferred, or
otherwise disposed of without an opinion of counsel, satisfactory to
the Company, that such disposition may be made without such
registration."
Notwithstanding the foregoing, CPI understands, and ASTeX agrees, that
the shares may be distributed to ILCT or transferred pursuant to Rule 144 under
the Securities Act of 1934, as amended, with an opinion of counsel, satisfactory
to ASTeX, that such transfer may be made without registration.
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4. REPRESENTATIONS AND WARRANTIES OF AAC AND ASTEX.
AAC and ASTeX severally represent and warrant to CPI and ILCT, upon
which representations and warranties CPI and ILCT rely, and which
representations and warranties shall survive Closing, as follows:
4.1 ORGANIZATION AND RELATED MATTERS. Each of AAC and ASTeX is a
corporation duly organized, validly existing and in good corporate standing
under the laws of the Commonwealth of Massachusetts and the State of Delaware,
respectively, and has full corporate power to enter into this Agreement and to
consummate the transactions contemplated hereby.
4.2 NO BREACH OF STATUTE OR CONTRACT. Neither the execution, delivery
and performance of this Agreement and the consummation by AAC and ASTeX, nor
compliance with the terms and provisions of this Agreement by AAC and ASTeX,
will conflict with or result in a breach of any of the terms, conditions or
provisions of the Articles of Organization, or Bylaws, of AAC or the Certificate
of Incorporation, as amended of ASTeX or the Bylaws, as amended of ASTeX, or any
agreement to which AAC or ASTeX is a party or by which it is bound.
4.3 AUTHORIZATION OF AGREEMENT. The execution, delivery and performance
of this Agreement by AAC and ASTeX has been duly and validly authorized and
approved by the Board of Directors of AAC and ASTeX and this Agreement has been
duly authorized and approved by ASTeX, as the sole stockholder of AAC. No other
proceedings on the part of AAC or ASTeX are necessary to authorize the
execution, delivery and performance of this Agreement by AAC or ASTeX including
the issuance by ASTeX of the ASTeX Shares and any additional ASTeX Shares
pursuant to Section 2.1(c).
4.4 VALIDITY OF ASTEX SHARES. The ASTeX Shares and any additional ASTeX
Shares issued pursuant to Section 2.1(c) have been duly authorized and, when
delivered to the Escrow Agent following the Closing or to CPI following the
Escrow Release Date, will have been validly issued and will be fully paid and
nonassessable. None of the ASTeX Shares nor any additional ASTeX Shares issued
pursuant to Section 2.1(c) will be subject to any restriction on transfer except
for those imposed by applicable securities laws and as contemplated by this
Agreement and the Escrow Agreement.
4.5 NO BROKER'S OR FINDER'S FEES. No agent, broker, investment banker,
person or firm acting on behalf of AAC or ASTeX or any of its affiliates or
under the authority of any of them is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated herein.
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5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF AAC AND ASTEX.
The obligations of AAC to purchase the CPI Shares at the Closing are
expressly subject to the fulfillment by ILCT and CPI, or waiver by AAC, of each
of the following conditions on or before the Closing:
5.1 REPRESENTATIONS AND WARRANTIES OF ILCT AND CPI TO BE TRUE AND
CORRECT. The representations and warranties of ILCT and CPI set forth in Section
3 hereof shall be true and correct in all respects on the Closing with the same
effect as though made at such time. CPI and ILCT shall have performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by them at or prior to the Closing.
Each of CPI and ILCT shall have delivered to AAC a certificate of CPI and ILCT,
substantially in the form of Exhibit E attached hereto, dated the Closing and
signed by a duly authorized officer of ILCT evidencing compliance with this
Section 5.1.
5.2 OPINION OF COUNSEL TO ILCT AND CPI. AAC shall have received from
Fenwick & West LLP and Lucash, Gesmer & Updegrove, LLP, counsel to ILCT and CPI,
respectively, opinions dated the Closing in form and substance satisfactory to
ASTeX substantially to the effect that:
(i) CPI is a corporation organized and validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and
is duly qualified to do business in good standing in all jurisdictions
in which its ownership of property or the character of its business
requires such qualification and where the failure to be so qualified
would have a material adverse effect on CPI;
(ii) CPI has the corporate power to carry on its business as
now being conducted and to consummate the transactions contemplated by
the Agreement;
(iii) the authorized capital stock of CPI consists of 1,000
shares of Common Stock, no par value per share, and the 1,000 shares of
Common Stock issued and outstanding constitute all of the issued and
outstanding shares of Common Stock and have been duly authorized, are
validly issued and outstanding, fully-paid, nonassessable and free of
preemptive rights and are held of record by ILCT. As of the date
hereof, the Board of Directors of CPI has not created or designated the
rights and preferences of any series of preferred stock and no shares
of preferred stock have been issued;
(iv) this Agreement has been duly and validly executed and
delivered by each of CPI and ILCT and constitutes the valid and binding
obligation of each of CPI and ILCT enforceable against them in
accordance with the terms hereof except insofar as enforceability may
be limited by bankruptcy, insolvency, or similar laws affecting the
rights of creditors and general equitable principles and;
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(v) neither the execution, delivery and performance by each of
ILCT and CPI of this Agreement, nor compliance with the terms and
provisions hereof, will conflict with or result in a breach of or
constitute a default under the Articles of Organization or Articles of
Incorporation, as amended, or Bylaws, as amended of CPI and ILCT or, to
the best knowledge of such counsel, any terms, conditions or provisions
of any agreement, contract, lease, license or commitment known to such
counsel to which CPI and ILCT are parties, or of any judgment, order,
decree or ruling of which such counsel has knowledge to which CPI and
ILCT are parties, or any injunction to which it or they are subject, of
any court or governmental authority;
(vi) except as set forth in any Schedule hereto, to the best
knowledge of such counsel, CPI is not engaged in or threatened with any
suit, action or legal, administrative, arbitration or other proceeding
or governmental investigation nor any legal impediment to the continued
operation and use by CPI of its properties and assets in the ordinary
course of its business, nor any material dispute or disagreement with
any employee of CPI or any union; and
(vii) all authorizations, consents and approvals of and
filings with any and all applicable governmental authorities required
in order to permit consummation by ILCT and CPI of the transactions
contemplated by this Agreement have been obtained or made and are in
full force and effect on the date hereof.
5.3 REQUIRED CONSENTS. ILCT shall have obtained or shall have caused
CPI to obtain the consent or approval of each person listed on Schedule 5.3
attached hereto, whose consent or approval is required in connection with this
Agreement and CPI shall have delivered to ASTeX and AAC votes of the Board of
Directors and stockholders of CPI authorizing Articles of Amendment to CPI's
Articles of Organization to effect, following Closing, a name change of CPI to a
name totally dissimilar from "Converter Power, Inc."
5.4 UCC TERMINATION STATEMENTS. CPI and ILCT shall have delivered to
AAC UCC-3 termination statements relating to the termination of those financing
statements set forth in Schedule 3.9.
5.5 LEGAL PROCEEDINGS. No action or proceeding by or before any court
or any governmental body shall have been instituted or threatened to restrain,
prohibit or invalidate the transactions contemplated by this Agreement which
might affect the right of AAC to own, operate or control CPI after the Closing
or which might subject CPI to material liability.
5.6 ASSIGNMENT OF AGREEMENTS. Except as provided in Schedule 3.13, each
of the contracts set forth on the Material Contracts List shall have been fully
assigned to ASTeX.
5.7 ILCT'S INSURANCE PLAN. ILCT shall keep its medical, dental and
vision self insurance plan open until September 1, 1997 for all claims prior to
the Closing Date submitted by
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participants in accordance with said plan, and ILCT shall promptly pay all such
claims reimbursable under such plan.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ILCT AND CPI.
The obligations of ILCT and CPI at the Closing are subject to the
fulfillment by AAC and ASTeX, or waiver by ILCT and CPI, of the following
conditions on or before the Closing:
6.1 REPRESENTATIONS AND WARRANTIES OF AAC AND ASTEX TO BE TRUE. The
representations and warranties of AAC and ASTeX under Section 4 hereof shall be
true in all respects at the Closing with the same effect as though made at such
time. AAC and ASTeX shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it prior to the Closing. AAC and ASTeX shall have delivered to ILCT and
CPI a certificate of AAC and ASTeX in the form of Exhibit G hereto, dated the
Closing and signed by authorized officers of each of AAC and ASTeX to all such
effects.
6.2 OPINION OF COUNSEL TO ASTEX AND AAC. ILCT and CPI shall have
received from O'Connor, Broude & Aronson, counsel to ASTeX and AAC, an opinion
dated the Closing in form and substance satisfactory to ILCT and CPI
substantially to the effect that:
(i) each of ASTeX and AAC is a corporation duly organized and
validly existing and in good standing under the laws of the State of
Delaware and the Commonwealth of Massachusetts, respectively;
(ii) each of ASTeX and AAC have the corporate power to carry
on its business as now being conducted and to consummate the
transactions contemplated by the Agreement;
(iii) the authorized capital stock of ASTeX consists of
10,000,000 shares of Common Stock, $.01 par value per share, and
1,000,000 shares of Preferred Stock, $.01 par value per share, and the
4,664,643 shares of Common Stock issued and outstanding constitute all
of the issued and outstanding shares of Common Stock and have been duly
authorized, are validly issued and outstanding, fully-paid,
nonassessable and free of preemptive rights. As of the date hereof, the
Board of Directors of ASTeX has not created or designated the rights
and preferences of any series of Preferred Stock and no shares of
Preferred Stock have been issued;
(iv) this Agreement has been duly and validly executed and
delivered by each of ASTeX and AAC and constitutes the valid and
binding obligation of each of ASTeX and AAC enforceable against them in
accordance with the terms hereof except insofar as enforceability may
be limited by bankruptcy, insolvency, or similar laws affecting the
rights of creditors and general equitable principles and; this
Agreement has been duly executed and delivered by each of ASTeX and AAC
and constitutes the valid and binding obligation of each of ASTeX and
AAC; the issuance of the ASTeX Shares and the additional shares, if
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any, issued pursuant to Section 2.1(c), have been duly authorized, and
the ASTeX Shares have been and the additional shares, when issued in
accordance with Section 2.1(c) will be, validly issued, fully paid and
non-assessable, subject to the terms and conditions of this Agreement
and the Escrow Agreement;
(v) neither the execution, delivery and performance by each of
ASTeX and AAC under this Agreement, nor compliance with the terms and
provisions hereof, will conflict with or result in a breach of or
constitute a default under the Certificate of Incorporation and
Articles of Organization, respectively of ASTeX and AAC, as amended, or
Bylaws, as amended of ASTeX and AAC or, to the best knowledge of such
counsel, any terms, conditions or provisions of any agreement,
contract, lease, license or commitment known to such counsel to which
ASTeX or AAC are parties, or of any judgment, order, decree or ruling
of which such counsel has knowledge to which ASTeX or AAC are parties,
or any injunction to which it or they are subject, of any court or
governmental authority;
(vi) except as set forth in any Schedule hereto, to the best
knowledge of such counsel, neither ASTeX nor AAC is engaged in or
threatened with any suit, action or legal, administrative, arbitration
or other proceeding or governmental investigation nor any legal
impediment to the continued operation and use by ASTeX or AAC of its
properties and assets in the ordinary course of its business; and
(vii) all authorizations, consents and approvals of and
filings with any and all applicable governmental authorities required
in order to permit consummation by ASTeX and AAC of the transactions
contemplated by this Agreement have been obtained or made and are in
full force and effect on the date hereof.
7. POST-CLOSING COVENANTS
7.1 HIRING OF CPI'S EMPLOYEES. AAC agrees that AAC shall hire at
Closing all employees of CPI listed on Schedule 3.24 and that each such person
shall be entitled to receive credit for the time he or she was employed by CPI
for purposes of determining such employee's eligibility to participate in the
various benefit plans including, without limitation, vacation, 401(k) retirement
plans, and health plan benefits then generally offered by AAC or ASTeX, as the
case may be. Nothing in this section shall be construed as any guarantee or
obligation of continuing employment by AAC to such individuals. ASTeX and AAC
agree that, from and after the Closing, all full-time employees shall be covered
by and participate in ASTeX's and/or AAC's health insurance plans (unless said
employee waives such coverage) on the same terms and conditions as are available
to all employees of ASTeX generally.
7.2 CHANGE OF NAME. CPI agrees to file Articles of Amendment to its
Articles of Organization with the Secretary of State of Massachusetts promptly
following Closing, to effect the name change referred to in Section 5.3.
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8. INDEMNIFICATION.
8.1 SUBJECTS INDEMNIFIED AGAINST BY ILCT. ILCT and CPI jointly and
severally agree to defend, indemnify and hold harmless AAC and ASTeX, and their
respective officers, directors, affiliates, advisors, successor, and assigns,
from and against any and all damages, losses and expenses suffered by AAC or
ASTeX, or any subsidiary of AAC or ASTeX, resulting from (i) any breach of
warranty or agreement or non-fulfillment of any obligation on the part of ILCT
and CPI under this Agreement (including the Schedules and Exhibits to this
Agreement), (ii) any misrepresentation in this Agreement or in any Schedule,
Exhibit, certificate or other instrument furnished by CPI or ILCT to AAC or
ASTeX hereunder or any failure to state herein or in any such Schedule, Exhibit
certificate or instrument any fact required by the terms hereof or therein to be
stated or necessary to be stated in order to make the statements made herein or
therein not misleading, and (iii) all demands, assessments, judgments,
settlements, reasonable costs and legal and other expenses arising from or in
connection with any action, suit, proceeding or claim by any third party
resulting in damage or loss to AAC, ASTeX or any subsidiary of AAC or ASTeX as a
consequence of any such misrepresentation, breach of warranty or nonfulfillment
of obligation.
8.2 SUBJECTS INDEMNIFIED AGAINST BY AAC AND ASTEX. AAC and ASTeX
jointly and severally agree to defend, indemnify and hold harmless ILCT and CPI,
and their respective officers, directors, affiliates, advisors, successor, and
assigns, from and against any and all damages, losses and expenses suffered by
ILCT or CPI, or any subsidiary of ILCT or CPI, resulting from (i) any breach of
warranty or agreement or non-fulfillment of any obligation on the part of AAC
and ASTeX under this Agreement (including the Schedules and Exhibits to this
Agreement), (ii) any misrepresentation in this Agreement or in any Schedule,
Exhibit, certificate or other instrument furnished by AAC or ASTeX to ILCT or
CPI hereunder or any failure to state herein or in any such Schedule, Exhibit
certificate or instrument any fact required by the terms hereof or therein to be
stated or necessary to be stated in order to make the statements made herein or
therein not misleading, and (iii) all demands, assessments, judgments,
settlements, reasonable costs and legal and other expenses arising from or in
connection with any action, suit, proceeding or claim by any third party
resulting in damage or loss to ILCT, CPI or any subsidiary of ILCT or CPI as a
consequence of any such misrepresentation, breach of warranty or nonfulfillment
of obligation.
8.3 CONDITIONS TO INDEMNIFICATION. The obligations and liabilities of
ILCT, CPI, AAC and ASTeX hereunder with respect to its indemnities pursuant to
this Section 8, resulting from any claim or other assertion of liability by
third parties, shall be subject to the following terms and conditions:
(a) The Indemnified Party (the party seeking indemnification)
must give the Indemnifying Party notice in writing within fifteen (15) days of
(i) any claim or potential claim, (ii) the commencement of any action or
proceeding, or (iii) the occurrence of any other event giving rise to
indemnification rights under this Section 8 with respect to a third party claim,
and, in each case, the basis therefor and the amount, or an estimate of the
amount of the claim, provided, however, that failure to give such notice within
such fifteen (15) day period shall not affect the Indemnified Party's
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right to be indemnified under this Agreement unless the failure to give such
notice within such time period adversely affects the Indemnifying Party's
ability to defend themselves against the claim giving rise to the Indemnified
Party's claim for indemnification or to cure the default giving rise to such
claim. The Indemnifying Party at their sole cost and expense may, upon written
notice to the Indemnified Party assume the defense of any such claim or legal
proceeding if the Indemnifying Party acknowledges in writing their obligations
to indemnify the Indemnified Party with respect to such claim and has counsel
reasonably acceptable to the Indemnified Party. In such event, the Indemnified
Party shall be entitled to participate in (but not control) the defense of any
such action, with its counsel and at its own expense.
(b) If the Indemnifying Party within fifteen (15) days after
notice of a claim hereunder fails to defend such claim, the Indemnified Party
shall be entitled to undertake the defense, compromise or settlement of such
claim at the reasonable expense of and for the account and risk of the
Indemnifying Party subject to the right of the Indemnifying Party to cooperate
in the defense of such claim with counsel of their choosing and reasonably
acceptable to the Indemnified Party at any time prior to the settlement,
compromise or final determination thereof.
(c) The Indemnifying Party will not, without the Indemnified
Party's written consent, which consent shall not be required as relating to
monetary payments by the Indemnifying Party, settle or compromise any claim or
consent to any entry or judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability with respect to such claim which , as to any
matters other than monetary payments will not be unreasonably withheld or
delayed. The Indemnified Party shall not settle or compromise any claim by a
third party for which it is entitled to indemnification hereunder without the
prior written consent of the Indemnifying Party, unless suit shall have been
instituted and the Indemnified Party shall have assumed the control of defense
of such claim in accordance with Section 8.2(b).
(d) Notwithstanding the foregoing, the parties acknowledge and
agree that O'Connor, Broude & Aronson, Fenwick & West LLP and Lucash, Gesmer &
Updegrove, LLP shall be acceptable counsel to defend, or participate in the
defense of, claims hereunder.
(e) Before seeking indemnification hereunder, the Indemnifying
Party shall use its reasonable efforts to obtain the proceeds of any applicable
insurance policies and apply such proceeds to the satisfaction of any claims.
Such insurance proceeds shall offset the liability of the Indemnifying Party
hereunder.
8.4 PAYMENT FOR INDEMNIFICATION. The Indemnifying Party shall pay to
the Indemnified Party the amount of established claims for indemnification
within fifteen (15) days after the establishment thereof (the "DUE DATE") in
cash or by certified check. The parties hereby agree that with respect to claims
where ILCT and/or CPI are the Indemnifying Party, such claim shall be satisfied
first, by releasing shares held under the Escrow Agreement (the "Escrowed
Shares") in the amount of such claim, calculated using a value per share of
$22.22, and second, if the amount of
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such claim is in excess of the value of the Escrowed Shares determined as
provided above, by delivery of cash or a certified check in the amount of such
excess, and where ASTeX and/or AAC are the Indemnifying Party, such claim shall
be satisfied by delivery of cash or a certified check in the amount of such
claim. Any amounts not paid by Indemnifying Party when due under this Section 8
shall bear interest from the Due Date thereof until the date paid at the lower
of eighteen percent (18%) per annum or the highest rate allowed by law. The
Indemnifying Party shall be required to indemnify the Indemnified Party for any
claims or liabilities hereunder unless and until the aggregate of such claims
exceeds $75,000, whereupon the Indemnifying Party shall be required to indemnify
the Indemnified Party for the excess, if any, of the full amount of all such
claims over $75,000 up to an amount not to exceed $6,350,000.
8.5 SURVIVAL OF INDEMNIFICATION. The indemnification provided in this
Section 8 shall survive the Closing as set forth in Section 11.1.
8.6 INTENT OF PARTIES. The parties hereto intend for the
indemnification provisions of this Section 8 to be construed as a full
indemnification in accordance with its terms, notwithstanding the use of any
"SUBSTANTIAL" or "MATERIAL" standard contained elsewhere in this Agreement. The
parties acknowledge and agree that subject to the provisions of the last
sentence of this Section 8.6, the provisions of this Section 8 shall be their
exclusive remedy for any monetary claims arising out of or related to this
Agreement and that no party shall have any other right to money damages for
breach of this Agreement, or in contract, tort or otherwise arising out of or
related to this Agreement, except as described in this Section 8.
Notwithstanding the foregoing, nothing in the preceding sentence shall preclude
any party from bringing a claim or claims based on common law fraud or other
similar remedies.
8.7 CALCULATION OF CLAIM AMOUNT.
(a) For purposes of this Section 8, damages, losses and
expenses suffered by AAC and ASTeX shall mean only the portion thereof that
exceeds the policy limits of any applicable insurance. Notwithstanding the
foregoing, AAC or ASTeX shall be entitled to file a claim for indemnification
hereunder and a Claim under the Escrow Agreement regardless of whether such
claim is covered by insurance. For purposes of this Section 8, should CPI or
ILCT be required to pay any consideration to AAC or ASTeX under this Section 8
(whether in cash, by return of ASTeX Shares, or other consideration acceptable
to ASTeX or AAC), CPI or ILCT shall pay to AAC the full amount due hereunder.
(b) The amount of any Claim shall be (i) increased to take
account of any net tax cost incurred by AAC or ASTeX arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net tax benefit realized by AAC or ASTeX arising from the
incurrence or payment of any such Claim, provided that for purposes of this
Section 8, tax costs and benefits shall not be deemed to occur to the extent
that an indemnity payment results in a reduction or increase in the basis of an
asset of AAC or ASTeX, provided further, that the amount of any Claim shall be
reduced by the amount of any tax benefit, as the case
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may be, when and only to the extent that AAC or ASTeX actually realizes such tax
benefit, provided, however, that such tax benefit is realized prior to the end
of ASTeX's 1999 fiscal year.
(c) Any payments made to AAC or ASTeX pursuant to the
provisions of this Section 8 shall be treated for tax purposes but not for
purposes of Section 2.3 as an adjustment to the Purchase Price.
9. REGISTRATION OF ADDITIONAL ASTEX SHARES.
9.1 DEFINITIONS. For purposes of this Section:
(a) The term "1933 ACT" means the Securities Act of 1933, as
amended;
(b) The term "REGISTER", "REGISTERED", and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement in compliance with the 1933 Act and the declaration or ordering of
effectiveness of such registration statement;
(c) The term "REGISTRABLE SECURITIES" means any additional
ASTeX Shares issued pursuant to Section 2.1(c) of this Agreement.
(d) The term "HOLDER" means CPI, ILCT and any person holding
Registrable Securities to whom these registration rights have been transferred
pursuant to this Section.
9.2 PROCEDURE. ASTeX shall use its best efforts to file as soon as
practical after the Escrow Release Date but in no event later than thirty (30)
days after the Escrow Release Date register the Registrable Securities, subject
to the following:
(a) ASTeX shall not be required to cause a registration
statement pursuant to this Section to become effective prior to thirty (30) days
following the effective date of an underwritten registration statement initiated
by ASTeX;
(b) ASTeX shall in no event be required to register
Registrable Securities pursuant to this Section having an aggregate market value
(before deduction of underwriting discounts and expenses of sale) of less than
One Hundred Thousand Dollars ($100,000.00).
(c) In the case of any registration effected pursuant to this
Section, the Holders shall bear underwriter's discounts and commissions (but not
underwriter's expenses, or ASTeX's legal, accounting or printing expenses or SEC
and state registration and qualification fees and expenses, which will be paid
by ASTeX) with such additional expenses of the registration being borne by all
Holders pro-rata on the basis of the amount of securities so registered;
provided, however, that if any such cost of expense is attributable solely to
one selling Holder and does not constitute a normal cost or expense of such a
registration, such cost or expense shall be allocated to
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that selling Holder. In addition, each selling Holder shall bear the fees and
costs of any separate counsel it may select.
(d) ASTeX, at its option, may include any of the Holders'
Registrable Securities in an underwriting, but only if such Holders accept the
terms of the underwriting as agreed upon between ASTeX and the underwriters
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by ASTeX. If the total
amount of securities that all selling stockholders request to be included in
such offering exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, ASTeX shall only be
required to include in the offering so many, if any, of the securities of the
selling Holders as the underwriters believe will not jeopardize the success of
the offering (the securities so included to be apportioned pro-rata among all
selling stockholders according to the total amount of securities owned by them).
9.3 OBLIGATIONS OF ASTEX. Whenever required under this Section to use
its best efforts to effect the registration of any Registrable Securities, ASTeX
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-3 with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become and remain effective; provided, however, that in connection
with any proposed registration intended to permit an offering of any securities
from time to time, ASTeX shall in no event be obligated to cause any such
registration to remain effective beyond such time as the Registrable Securities
are eligible for resale under Rule 144 of the 1933 Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that ASTeX shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities are to be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that
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jurisdiction be borne by selling shareholders, then such expenses shall be
payable by selling shareholders pro-rata, to the extent required by such
jurisdiction.
9.4 CONDITION PRECEDENT. It shall be a condition precedent to the
obligations of ASTeX to take any action pursuant to this Section that the
Holders shall furnish to ASTeX such information regarding themselves, the
Registrable Securities held by them, and the intended method of disposition of
such securities as ASTeX shall reasonably request and as shall be required in
connection with the action to be taken by ASTeX.
9.5 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section:
(a) To the extent permitted by law, ASTeX will indemnify and
hold harmless each Holder requesting or joining in a registration, any
underwriter (as defined in the 1933 Act) for it, and each person, if any, who
controls such Holder or underwriter within the meaning of the 1933 Act, against
any losses, claims, damages, or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based on any untrue or alleged untrue statement of any material fact contained
in such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading or arise out of any violation by ASTeX of any rule or
regulation promulgated under, or any provision of, the 1933 Act applicable to
ASTeX and relating to action or inaction required of ASTeX in connection with
any such registration; and will reimburse each such Holder, such underwriter, or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement (contained
in this Section) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
written consent of ASTeX which consent shall not be unreasonably withheld nor
shall ASTeX be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with information furnished in connection with registration by any
such Holder, underwriter, or controlling person.
(b) To the extent permitted by law, each Holder requesting or
joining in a registration will indemnify and hold harmless ASTeX, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls ASTeX within the meaning of the 1933 Act, and each
agent, advisor and any underwriter for ASTeX (within the meaning of the 1933
Act) against any losses, claims, damages, or liabilities to which ASTeX or any
such director, officer, controlling person, agent, advisor, or underwriter may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities to which ASTeX or any such director, officer,
controlling person, agent, advisor or underwriter may become subject, under the
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1933 Act or otherwise, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with information furnished by such
Holder for use in connection with such registration, and each such Holder will
reimburse any legal or other expenses reasonably incurred by ASTeX or any such
director, officer, controlling person, agent, advisor or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement (contained
in this Section) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld) and
provided further, that the total amounts payable in indemnity (including
reimbursement of expenses incurred referred to above) by a Holder under this
Section in respect of any violation shall not exceed the net proceeds received
by such Holder in the registered offering out of which such violation arises.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this subsection, notify the indemnifying party who shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel mutually satisfactory to the parties provided, however,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential conflict of interest between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to his ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this subsection, but the omission so to notify the
indemnifying party will not relieve him of any liability that he may have to any
indemnified party otherwise than under this Section.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 8 is applicable in accordance with its terms but for
any reason is held to be unavailable from ASTeX, the Holder or the underwriters,
the Company, the Holder and the underwriters will contribute to the total
losses, claims, liabilities, expenses and damages (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted, but
after deducting any contribution received by ASTeX or the Holder from persons
other than underwriters, such as persons who control ASTeX or the Holder within
the meaning of the Act, officers of ASTeX who signed the registration statement
and directors of ASTeX who also may be liable for contribution) to which ASTeX
or the Holders and any one or
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more of the underwriters may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by ASTeX and any selling
stockholders other than the Holder on the one hand and the Holder on the other.
If, but only if, the allocation provided by the foregoing sentence is not
permitted by applicable law, the allocation of contribution shall be made in
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of ASTeX and
the selling stockholders other than the Holders if any, on the one hand, and the
Holder, on the other, with respect to the statements or omissions which resulted
in such loss, claim, liability, expenses or damage, or action in respect
thereof, as well as any other relevant equitable considerations with respect to
such offering. Such relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by ASTeX,
other selling stockholders, the underwriters and the Holder, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. In no event shall the sums due by
Holder exceed the net proceeds received by such Holder in the registered
offering out of which such violation arises.
9.6 TRANSFERABILITY. The registration rights of the Holders under this
Section may be transferred to any transferee of any Registrable Securities
provided, however, that ASTeX is given written notice by the Holder at the time
of such transfer stating the name and address of the transferee and identifying
the securities with respect to which the rights under this Section are being
transferred.
9.7 RULE 144 EXCEPTION. Notwithstanding anything to the contrary in
this Section, ASTeX shall not be required to register any Registrable Securities
that, at the time such registration would occur, may be sold pursuant to Rule
144 under the 1933 Act.
10. CONFIDENTIALITY.
10.1 ACKNOWLEDGEMENT OF CONFIDENTIALITY. Each of CPI and ILCT recognize
and acknowledge that (i) all plans, systems, methods, designs, procedures, books
and records relating to CPI's business operations, technical information
(including functional and technical specifications, designs, drawings, analysis,
research, processes, computer programs, algorithms, methods, ideas and the
like), business information (sales and marketing research, materials, plans,
accounting and financial information and the like) personnel and practices
(whether instituted or commenced prior to or subsequent to the date hereto) and
other information designated as confidential expressly or by the circumstances
in which it is provided, (ii) all other records, documents and information
concerning its business activities, practices, and procedures, and any name or
style under which it shall have been operated prior hereto, and (iii) any logo
or other descriptive or illustrative form thereof, as they may have existed from
time-to-time, constitute and will constitute valuable, special and unique assets
to be transferred to AAC hereunder (collectively (i), (ii) and (iii) are
referred to as the "Confidential Information"). Each of CPI and ILCT therefore
covenants and agrees that it will not, following the date of this Agreement,
disclose any part thereof that is confidential, or use or permit to be used any
such name, style, logo or form, to or by any person, firm, corporation,
association or other entity, for any reason or purpose whatsoever. Confidential
Information does not
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include information ILCT and CPI can prove by clear and convincing evidence as
(i) in the public domain through no wrongful act of ILCT or CPI, or (ii)
received by ILCT or CPI from a third party who was not known to ILCT or CPI to
be bound by a confidentiality agreement relating to such information.
10.2 COVENANT NOT TO DISCLOSE. With respect to the Confidential
Information, ILCT and CPI hereby agree that at all times they shall not sell,
commercialize or disclose such Confidential Information to any person or entity.
10.3 REMEDIES FOR BREACH OF CONFIDENTIALITY. CPI and ILCT acknowledge
that the unauthorized use, commercialization or disclosure of the Confidential
Information would cause irreparable harm. CPI and ILCT acknowledge that remedies
at law would be inadequate to redress the actual or threatened unauthorized use,
commercialization or disclosure of such Confidential Information and that the
foregoing restrictions may be enforced by temporary and permanent injunctive
relief. In addition, any award of injunctive relief shall include recovery of
associated costs and expenses (including attorneys' fees).
10.4 REVERSE ENGINEERING AND MODIFICATIONS. Neither ILCT nor CPI shall
develop or market products or systems, etc. similar to the Assets that were
developed in whole or in part by reverse engineering or otherwise imitating the
functionality of the Assets. Neither ILCT nor CPI shall have the right at any
time to modify or permit modification of the Assets so as to create derivative
works, without the prior written consent of ASTeX and AAC.
10.5 REMEDIES. Nothing contained in this Section shall be construed as
prohibiting ASTeX or AAC from pursuing any other remedies available to either of
them for any such breach or threatened breach of the provisions of this Section
10, including recovery of damages and an equitable accounting of all earnings,
profits and other benefits arising from such violation.
10.6 SURVIVAL. The terms of this Section 10 shall survive the Closing
and shall not be subject to the limitations on indemnification provided in
Section 8 or the limitations on survival of representations, warranties and
covenants contained in Section 11.1.
11. GENERAL.
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of any party contained herein or in any Schedule
or certificate delivered hereunder, shall remain in full force and effect and
shall be unaffected by any investigation made by AAC or ASTeX hereunder and
shall survive the Closing and the consummation of the transactions contemplated
hereby for a period of eighteen (18) months; provided that the representations
and warranties described in Section 3.8(a) and (b) shall survive the Closing
until the expiration of any applicable statute of limitations relating thereto
and the representations and warranties described in Section 3.8(c) shall survive
the Closing for a period of two (2) years, and the covenants described in
Section 10 shall survive indefinitely. All claims and actions for indemnity
pursuant to Section 8 for breach of any representation or warranty shall be
asserted or maintained in writing on or prior to the
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expiration of the applicable period. All covenants and agreements contained
herein which are to be performed or fulfilled after the Closing shall survive
and remain in full force and effect.
11.2 PRESS RELEASES. No party shall issue any press release or written
statement for general circulation relating to the transactions contemplated
hereby, (except for such filings with the Securities and Exchange Commission as
are as required by law in the opinion of its counsel), without the prior written
consent of ILCT and ASTeX, which consent shall not be unreasonably withheld or
delayed.
11.3 PAYMENT OF EXPENSES. Whether or not the transactions contemplated
hereby are consummated, ASTeX shall pay its and AAC's own expenses, and ILCT
shall pay its own and CPI's expenses, in connection with the negotiation,
authorization, preparation, execution and performance of this Agreement,
including, without limitation, all fees and expenses of investment banking
firms, agents, representatives, counsel and accountants.
11.4 GOVERNING LAW. This Agreement shall be governed in all respects,
whether as to validity, construction, capacity, performance or otherwise, by the
internal laws of the Commonwealth of Massachusetts in which it has been executed
and in which it has a situs. ILCT and CPI consent to the exclusive jurisdiction
of the courts of the Commonwealth of Massachusetts, and any federal court
located therein, and to the appropriateness of the venue of such courts, in
connection with any dispute which may arise pursuant to this Agreement or is
related to the transactions contemplated hereby.
11.5 NOTICES. Any payments, notices or other communications required or
permitted hereunder shall be given in writing and deemed to have been properly
given if and when delivered personally or sent by certified mail or recognized
overnight delivery service, return receipt requested, postage prepaid, addressed
as follows:
if to ASTeX and AAC: Applied Science and Technology, Inc.
35 Cabot Road
Woburn, Massachusetts 01801
Attention:Richard S. Post, Ph.D., President
Mr. John M. Tarrh, Senior Vice President
with a copy to: O'Connor, Broude & Aronson
950 Winter Street, Suite 2300
Waltham, Massachusetts 02154
Attention: Neil H. Aronson, Esquire
if to CPI and ILCT: Converter Power, Inc.
148 Sohier Road
Beverly, Massachusetts 01915
Attention: Steve Joyner
Chief Operating Officer
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and if to ILCT: ILC Technology, Inc.
399 Java Drive
Sunnyvale, California 94089
Attention: Richard D. Capra
Chief Operating Officer
with copies to: Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 943306
Attention: Kathy Tallman Schuda, Esquire
Lucash, Gesmer & Updegrove, LLP
40 Broad Street
Boston, Massachusetts 02110
Attention: Jill Swaim, Esquire
or such other address as shall be furnished in writing by any party, and any
such payment, notice or communication shall be deemed to have been made or given
three business days after the date so mailed (except that a notice of change of
address shall not be deemed to have been given until received by the addressee)
or on the date of actual receipt, whichever first occurs.
11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors,
assigns, heirs, executors, administrators and legal representatives, provided,
however, that ILCT and CPI shall not delegate any of their obligations hereunder
to any party without the prior written consent of AAC and ASTeX other than in
accordance with a transfer of registration rights described in Section 9.6.
11.7 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, including, but not limited to, any breach, or as to
its existence, validity, interpretation, performance or non-performance, breach,
or damages, including claims in tort, shall be decided by a single neutral
arbitrator in binding arbitration pursuant to the commercial Arbitration Rules
of the American Arbitration Association then in effect. The arbitration shall
take place in Boston, Massachusetts, and in no other place. The parties to any
such arbitration shall be limited to the parties to this Agreement (or any
successor thereof). The arbitration shall be conducted in accordance with the
procedural laws of the United States Federal Arbitration Act, as amended. The
written decision of the arbitrator shall be final and binding, and may be
entered and enforced in any court of competent jurisdiction and each party
specifically acknowledges and agrees to waive any right to a jury trial in any
such forum. Each party to the arbitration shall pay its fees and expenses,
unless otherwise determined by the arbitrator.
11.8 HEADINGS. The descriptive headings of the several Sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
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11.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together shall considered one and the same agreement.
11.10 WAIVER. The failure of any party to this Agreement at any time or
times to required performance of any provision hereof shall in no manner affect
such party's right at a later time to enforce the same. No waiver by any party
of any condition, or of the breach of any term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or the breach of any other term, covenant, representation or warranty
of this Agreement.
11.11 SEVERABILITY. The parties intend that in the event that any one
or more of the provisions contained herein shall, for any reason, be held to be
invalid, illegal, or unenforceable in any respect, then such invalid, illegal or
unenforceable provision shall not affect the other provisions of this Agreement,
and this Agreement shall be construed as if such provision had never been
contained herein.
11.12 FORCE MAJEURE. Notwithstanding any other provision of this
Agreement, no party shall be deemed in default of this Agreement or bear
liability to the other parties for any delay, failure in performance, loss, or
damage arising from causes beyond its reasonable control, including, but not
limited to the following: fire, work stoppage, embargo, explosion, power
failure, earthquake, nuclear accident, volcanic action, flood, war, civil
disturbance, interventions of military authority, acts of God or public enemy,
or other causes beyond its reasonable control, whether or not similar to the
foregoing.
11.13 ENTIRE AGREEMENT, AMENDMENTS. This Agreement contains the entire
agreement among the parties hereto with respect to the transactions contemplated
herein, and supersedes all prior agreements and understandings, whether written
or oral, among the parties hereto with respect to the subject matter of this
Agreement. This Agreement may be supplemented, amended or revised only in
writing and signed by all of the parties hereto.
11.14 ADDITIONAL ACTIONS. At any time and from time to time after the
Closing, upon request and without further consideration, either party promptly
shall execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation and take such other action as may reasonably
requested to more effectively transfer, convey and assign to AAC and to confirm
AAC's title to, all of the Assets, to put AAC in actual possession and operating
control thereof, to assist AAC in exercising all rights with respect thereto and
to carry out the purpose and intent of this Agreement, and all agreements
referenced herein.
11.15 WAIVER OF BULK SALES COMPLIANCE. The parties acknowledge and
agree that CPI and ILCT have not complied with notification and other
requirements of the bulk sales laws in force in the jurisdictions where such
laws may be applicable to CPI, ILCT or the transactions contemplated by this
Agreement.
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11.16 NO SUCCESSOR LIABILITY. It is expressly understood that the
parties intend that neither AAC nor ASTeX shall be considered a successor to CPI
by reason of any theory of law or equity, and that AAC and ASTeX shall have no
liability except as otherwise provided in this Agreement for any obligation or
liability of CPI. Nothing in this Agreement will be construed as giving any
person, firm, corporation or other entity, other than the parties hereto and
their successors and permitted assigns, any right, remedy or claim under or in
respect of this Agreement or any provision hereof.
-40-
IN WITNESS WHEREOF, this Agreement has been signed by a duly authorized
officer of each of AAC, ASTeX, CPI and ILCT as of the day and year first above
written.
ASTeX/CPI ACQUISITION CORP. CONVERTER POWER, INC.
By: By:
------------------------------- ---------------------------
Richard S. Post, Ph.D. Steven Joyner
President President
APPLIED SCIENCE AND TECHNOLOGY,
INC. ILC TECHNOLOGY, INC.
By: By:
------------------------------- ---------------------------
Richard S. Post, Ph.D. Richard D. Capra
President President
-41-
EXHIBIT 10(b)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is entered
into on this 9th day of May, 1997, by and between ASTeX/CPI Acquisition Corp.
("AAC"), a Massachusetts corporation and Converter Power, Inc. ("CPI"), a
Massachusetts corporation.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, CPI hereby assigns and transfers to AAC all of its
right, title and interest, powers, remedies, benefits, options and privileges
in, to and under, at law and in equity, all contract, leases, instruments,
licenses, and other agreements described in Section 1.1 of the Asset Purchase
Agreement by and among Applied Science and Technology, Inc., AAC, ILC
Technology, Inc. and CPI (the "Contracts"). Nothing in this Agreement shall be
construed to be a modification of, or limitation on, any provision of the Asset
Purchase Agreement, including the representations and warranties set forth
therein.
Subject to the terms and conditions of the Asset Purchase Agreement and
the Escrow Agreement (as defined in the Asset Purchase Agreement), AAC hereby
assumes and agrees to pay, perform and discharge when due, the duties,
liabilities and obligations of CPI in accordance with the terms of Section 2.4
of the Asset Purchase Agreement. AAC agrees to defend, indemnify and hold
harmless CPI (including any director, officer, employee representative or agent)
and their successors, assigns or legal representatives, from and against any and
all damages, losses, costs, expenses or liabilities suffered or incurred by CPI
resulting from AAC's failure to pay, perform or discharge when due, in whole or
in part, the duties, liabilities and obligations arising subsequent to the date
hereof under the Contracts.
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption Agreement on the date set forth above.
CONVERTER POWER, INC. ASTEX/CPI ACQUISITION CORP.
By: By:
------------------------ ----------------------------
Duly Authorized Duly Authorized
EXHIBIT 10(d)
WARRANTY BILL OF SALE
KNOW ALL BY THESE PRESENTS, that Converter Power, Inc., a Massachusetts
corporation ("Grantor"), pursuant to appropriate corporate action heretofore
taken by the Grantor and an Asset Purchase Agreement dated as of May 9, 1997(the
"Agreement"), by and among Grantor, Applied Science and Technology, Inc., a
Delaware corporation, ASTeX/CPI Acquisition Corp., a Massachusetts corporation
("Grantee") and ILC Technology, Inc., a California corporation, for and in
consideration of the payment by the Grantee to the Grantor in accordance with
the terms and conditions as provided in the Agreement and for other good and
valuable consideration, the receipt of which is hereby acknowledged, Grantor
hereby sells, conveys, transfers, assigns and delivers to Grantee, and Grantee
hereby purchases and acquires from Grantor, all of the right, title and interest
in and to the Assets of Grantor (as defined in the Agreement) subject to, and
with the benefit of, the warranties, representations and terms set forth in the
Agreement including the Schedules thereto.
Grantor hereby covenants to execute and deliver to Grantee, upon its
request therefore, such further instruments of assignment and transfer as
Grantee shall prepare and submit to Grantor and as may be reasonably necessary
to: (a) pass to Grantee title to the properties, assets and rights assigned and
transferred or attempted to be assigned and transferred, or otherwise provided
for herein or in the Agreement; (b) evidence such assignment or transfer to
Grantee; or (c) otherwise fulfill and discharge Grantor's obligations under the
Agreement.
This Warranty Bill of Sale shall in all events be construed
consistently with the terms of the Agreement and shall not alter, diminish or
expand the identity of the assets acquired.
IN WITNESS WHEREOF, Converter Power, Inc. has caused this instrument to
be signed and its corporate seal to be hereto affixed by its proper officers
hereunto duly authorized as of this 9th day of May 1997.
Attest: CONVERTER POWER, INC.
_______________________________ By:_________________________________
______________________, President
(SEAL)
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX ss:
BEFORE ME, the undersigned authority, on this day personally appeared ,
President of Converter Power, Inc., and acknowledged to me that he executed the
foregoing instrument for the purposes and consideration therein expressed and as
the act and deed of said corporation.
GIVEN, under my hand and seal of office on this 9th day of May 1997.
---------------------------------------
------------------------, Notary Public
My commission expires:
-----------------
EXHIBIT 10(e)
UNSECURED COMMITTED REVOLVER LOAN AGREEMENT
This Unsecured Committed Revolver Loan Agreement (this "AGREEMENT") is
entered into this 1st day of May, 1997, by and between APPLIED SCIENCE AND
TECHNOLOGY, INC. ("BORROWER") a Delaware corporation with its principal place of
business at 35 Cabot Road, Woburn, Massachusetts 01801, and STATE STREET BANK
AND TRUST COMPANY ("Bank"), a Massachusetts trust company organized and existing
under the laws of the Commonwealth of Massachusetts.
BACKGROUND
WHEREAS, the Borrower has requested that the Bank establish an
Unsecured Committed Revolver Loan (the "REVOLVER") in favor of the Borrower
payable in the principal amount of $8,000,000.00; and
WHEREAS, the Borrower has requested that, while the Revolver is
outstanding, the Bank issue from time to time, Standby Letters of Credit and
direct advances against such line of credit for the account of the Borrower; and
WHEREAS, the Bank has agreed to establish such a Line of Credit subject
to the terms and conditions hereof;
IN CONSIDERATION THEREOF, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.0 When used herein, the terms set forth below shall be defined as
follows:
"BORROWING BASE" shall mean as of any time, a sum equal to the total of
the percentages set forth below:
(a) 100% Borrower's cash on hand; plus
(b) 80% of all Eligible Accounts Receivable.
Notwithstanding the amount of the Borrowing Base, no Loans hereunder shall
exceed the sum of Eight Million ($8,000,000.00) Dollars.
"ELIGIBLE ACCOUNTS RECEIVABLE" shall have the meaning set forth in
Paragraph 2.7 herein.
"EVENT OF DEFAULT" shall mean each and every event specified in Article
IX of this Agreement or set forth under the Note, as an event of default.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, depositor arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential agreement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"LOAN DOCUMENTS" shall mean this Agreement, the Note, and any other
instrument or instruments entered into pursuant to or in connection with this
Agreement, as such instruments may be amended, supplemented or modified from
time to time.
"LOANS" shall mean Market Rate Loans, Prime Rate Loans and Standby
Letters of Credit issued by the Bank from time to time hereunder.
"MARKET RATE" shall mean an amount equal to the Base Market Rate (as
hereinafter defined) plus 150 basis points. For purposes of this definition, the
term "Base Market Rate" shall mean the fixed rate of interest quoted by the Bank
on the date the Loan funds under the Market Rate Note are advanced, in its sole
discretion, which rate shall be determined solely by the Bank based upon the
Bank's cost of funds.
"MARKET RATE LOAN" means that portion of the Loan for which interest is
based on the Market Rate as set forth in Article II hereof.
"NOTE" shall mean the Promissory Note of Borrower, executed as of the
date hereof and delivered simultaneously herewith.
"MAXIMUM ADVANCE LEVEL" shall have the meaning set forth in Paragraph
2.7 herein.
"OBLIGATIONS" shall mean any and all indebtedness, obligations and
liabilities of Borrower to Bank arising under any agreements with the Bank, of
every kind and description, direct or indirect, secured or unsecured, joint or
several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising; including, without limitation,
all indebtedness under the Loan (including by renewal or extension of the Loan)
any and all sums which may be advanced by Bank pursuant to this Agreement or any
other agreement between the Bank and the Borrower, and all interest, taxes,
fees, charges, expenses and reasonable attorney's fees chargeable to Borrower
under this Agreement.
"PRIME RATE" shall mean the rate of interest announced from time to
time by Bank at its head office in Boston, Massachusetts as its "Prime Rate".
"PRIME RATE LOAN" means that portion of the Loan for which interest is
based on the Prime Rate as set forth in Article II hereof.
"TANGIBLE NET WORTH" means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles ("GAAP") consistent
with those applied in the preparation of the financial statements referred to in
Section 6.7 excluding, however, from the determination of total assets all
assets which would be classified as intangible, without limitation, goodwill,
patents, trademarks, tradenames, copyrights, franchises, and intangibles.
1.1 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in the preparation of the Borrower's financial statements and all financial data
submitted pursuant to this Agreement shall be prepared in accordance with such
principles, except interim financial data may be subject to year-end
adjustments.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1. Revolver; Expiration. The Bank shall from time to time make Loans
to the Borrower under and pursuant to the terms of this Agreement and the
obligations to repay as evidenced under the Note of even date, in the form
annexed hereto as Exhibit 2.04, in an aggregate amount not to exceed Eight
Million ($8,000,000.00) Dollars and as further limited as provided in Sections
2.7 and 2.8 below. The Revolver specifically includes a maximum amount of
$8,000,000.00 under this section. The principal amount of the Revolver shall be
payable on expiration of this Agreement on May 31, 2000 (the "Expiration") or on
Event of Default (subject to and as provided herein).
2.2 Borrowing.
(1) Prime Rate Borrowing. The Borrower shall give the Bank a request
for Prime Rate Borrowing (effective upon receipt) of any Prime Rate Loans under
the Line of Credit, specifying the date and amount thereof, not later than 2:00
P.M. on the date of such request and upon fulfillment of the applicable
conditions set forth in Article III and assuming no Event of Default has
occurred or is occurring hereunder, the Bank shall make such Prime Rate Loan
available to the Borrower in immediately available funds by crediting the amount
thereof to Borrower's primary operating account with the Bank. Notwithstanding
the foregoing, the provisions of this Section 2.2 shall not apply in the event
the Borrower enters into a LMCS Agreement with Bank, a current form of which is
attached as Exhibit 2.2(1).
(2) Notice and Manner of Market Rate Loan Borrowing. The Borrower shall
give the Bank at least one (1) business day notice (effective upon receipt) of a
request for a loan based upon the Market Rate under the Line (a "Market Rate
Loan"), specifying the date and a maturity of either 30, 60, 90 or 180 days from
the date of the Bank's funding (if any) of such Market Rate Loan (the
"Maturity"). Not later than 2:00 p.m. on the date of such Market Rate Loan and
upon fulfillment of any applicable conditions set forth herein, the Bank shall
make such Loan available to the Borrower in immediately available funds by
crediting the amount thereof to the Borrower's primary operating account with
the Bank. In the event the Borrower and Bank enter into the Bank's LMCS
Agreement, the provisions above (except for any capitalized definitions and
limits on length of Maturity) shall not apply, and the manner and method of
borrowing requests by Borrower shall be governed by such LMCS Agreement.
Notwithstanding the foregoing, in no event shall the Maturity of any Market Rate
Loan be later in time than the Expiration. If the Borrower requests such Market
Loan with a Maturity after the Expiration, the Date of such Maturity of such
Loan shall be deemed to be the Expiration.
2.3. Interest.
(1) Prime Rate Loans. The Borrower shall pay interest monthly in
arrears to the Bank on the outstanding and unpaid principal amount of the Prime
Rate Loans, at a fluctuating interest rate per annum equal to the Bank's Prime
Rate in effect from time to time. Each change in such interest rate shall take
effect simultaneously with the corresponding change in such Prime Rate. Interest
on Prime Rate Loans shall be calculated on the basis of actual days elapsed and
a 360-day year.
(2) Market Rate Loans. The Borrower shall pay interest monthly in
arrears to the Bank on the outstanding and unpaid principal amount of the Market
Rate Loans at the Market Rate.
(3) Payment. Interest on the Loans shall be paid by debiting the
Borrower's primary operating account with the Bank on the first business day of
each month.
(4) Default Rate. Any principal amount not paid immediately upon
acceleration by reason of an Event of Default shall bear interest thereafter,
until paid, at a rate equal to the aggregate of the Prime Rate plus four (4%)
percent per annum (the "DEFAULT RATE").
(5) Additional Charges. In addition to all other amounts payable by the
Borrower hereunder and under the Note, the Borrower shall pay to the Bank a fee
of One-Fourth of One (1/4%) percent per annum on the unused portion of the Line
of Credit.
2.4. Note. All Loans relative to the Revolver made by the Bank under
this Agreement shall be evidenced by, and repaid with interest in accordance
with a promissory note of the Borrower in the form of Exhibit 2.4 duly completed
and fully executed in the principal amount of Eight Million ($8,000,000.00)
Dollars, dated the date of this Agreement and payable to the Bank. The Bank is
hereby authorized by the Borrower to endorse on any schedule attached to the
Note the amount of each Loan and of each payment of principal received by the
Bank on account of the Revolver or on any other schedule or record of the Bank,
which endorsement shall be prima facie as to the outstanding balance of the
Loans under the Line of Credit made by the Bank; provided, however, that the
failure to make such notation with respect to any Loan or payment shall not
limit or otherwise affect the obligations of the Borrower under this Agreement
or the Note.
2.5. Other Payments.
(1) Prime Rate Loans. Any Prime Rate Loan may be repaid in whole or
part without penalty. The Borrower shall pay all principal, interest, fees,
commissions and other charges due from it to Bank hereunder to Bank at its
offices at 225 Franklin Street, Boston, Massachusetts 02110, U.S.A., or at such
other address of which Bank may, from time to time give written notice to the
Borrower.
(2) Each Market Rate Loan shall be repaid in full on its Maturity. In
the event of prepayment of the Market Rate Loan, in whole or in part, either at
the Borrower's initiative or upon the exercise by the Bank of its rights in the
event of an Event of Default, the Borrower agrees to pay to the Bank its lost
net interest income resulting from the prepayment. Therefore, the Borrower's
payment to the Bank in respect of such prepayment shall consist of the principal
amount being prepaid, all interest owing up to the date of such prepayment,
together with the Bank's lost net interest income, if any, computed as described
below. As of the date of prepayment of any Market Rate Loan, the Bank will
determine the interest rate differential between the rate stated herein for such
Market Rate Loan and the yield on a United States Government Treasury Note with
the maturity closest to such Market Rate Loan as the same is reported in The
Wall Street Journal of that day (reporting the previous day's activity). In the
event that the rate differential so determined is such that the Treasury Note
yield is greater than the Market Rate Loan yield, no lost net interest income
shall be paid to the Bank, nor, in any event, shall any such sum be owed by the
Bank to the Borrower. In the event that the rate differential so determined is
such that the Market Rate Loan yield is greater than the Treasury Note yield,
the difference shall be multiplied by the principal amount of the Market Rate
Loan which is being prepaid, computed monthly for the remaining term of such
Market Rate Loan; the present value of such monthly compensation shall be
calculated and paid to the Bank as its lost net interest income. For the purpose
of computing present value, the interest rate used for discounting shall be the
bond equivalent yield of the United States Treasury Bill rate as reported in The
Wall Street Journal of that day (reporting the previous day's activity)
reflecting a term closest to the
remaining term of the Loan. Any lost net interest income paid or payable to the
Bank hereunder as a result of any prepayment of a Market Rate Loan is sometimes
referred to as a "Market Rate Premium". To the extent there is due from Borrower
to the Bank any Market Rate Premium, the amount of such Market Rate Premium
shall be reduced dollar for dollar by the amount the Borrower pays to the Bank
in default rate interest pursuant to the second paragraph of the Market Rate
Note.
2.6. Standby Letters of Credit.
The Bank may issue standby letters of credit for the account of the
Borrower for beneficiaries to be identified by the Borrower (the "STANDBY
LETTERS OF CREDIT") in an amount not to exceed $3,200,000.00 upon written
request of Borrower. Any Standby Letters of Credit issued hereunder shall be
evidenced by and subject to the Bank's Standby Letter of Credit Agreement
substantially in the form of Schedule 2.6 attached hereto (the "SLC Agreement").
The aggregate amount of Standby Letters of Credit issued by the Bank for the
accounts of the Borrower and outstanding, shall reduce dollar for dollar the
amounts available under the Revolver. Amounts drawn under Standby Letters of
Credit shall be deemed additional Loans under this Agreement and the Borrower
shall pay Bank such costs, interest and charges as set forth in the SLC
Agreement.
In the event an Event of Default occurs under this Agreement, the
Borrower shall deliver forthwith to the Bank, to be held by the Bank and treated
as collateral for the outstanding Standby Letters of Credit, cash of the
Borrower equal to One Hundred (100%) percent of the aggregate amount of
outstanding Standby Letters of Credit.
2.7. Limitations on Loans. The aggregate of the Loans outstanding to
the Borrower under the Note shall at no time exceed: the lesser of (a)
$8,000,000.00; and (b)(i) Eighty (80%) percent of the Borrower's Eligible
Accounts Receivable, plus (ii) One Hundred (100%) percent of the Borrower's cash
on hand ((i)-(ii), (the lesser of (a) and (b) the "MAXIMUM ADVANCE LEVEL"). If,
at any time, the aggregate Loans outstanding exceed the Maximum Advance Level,
the Borrower shall immediately pay to the Bank such sums as to bring the balance
down to the Maximum Advance Level.
For purposes of this Agreement, the term "ELIGIBLE ACCOUNTS RECEIVABLE"
shall mean Accounts (as defined in the Massachusetts Uniform Commercial Code)
owing to the Borrower which meet the following specifications:
(i) The Account is less than ninety (90) days past the invoice date
from a customer from whom there are no receivables in excess of one
hundred twenty (120) days past the invoice date except for
insignificant amounts; Notwithstanding the foregoing, with regard to
Accounts of customers who are reporting companies under the Securities
Exchange Act of 1934, as amended and are current in their reporting
under such Act, (the "Public Accounts") all Public
Accounts less than ninety (90) days past the invoice date shall be
Eligible Accounts Receivable, provided that not more than ten (10%)
percent of the Public Accounts are in excess of one hundred twenty
(120) days past due;
(ii) The Account arises from the performance of services or a bona fide
sale or lease of goods;
(iii) The Account is not subject to a prior assignment, claim, lien or
security interest;
(iv) The Account is not subject to set-off, credit, allowances or
adjustments, except discounts for prompt payment and allowances or
adjustments set forth on the original invoice;
(v) The Account is owed by an account debtor whose place of business is
not outside of the United States; and
(vi) The Account is not owed by subsidiary or affiliate of the
Borrower.
2.8. Exclusion of Certain Eligible Accounts Receivable From the
Borrowing Base. The Bank shall have the right in its sole discretion, at any
time and for any reason, to exclude any Eligible Accounts Receivable from the
Borrowing Base, except that the Bank shall be obligated to act in a reasonable
manner in making any such exclusion.
2.9. Certification of Borrowing Base. Prior to the making of the first
Loan relative to the Line of Credit hereunder and monthly thereafter the
Borrower will deliver to the Bank a Certificate, in substantially the form
attached as Exhibit 2.9 and approved by the Bank: (a) listing the Borrower's
then existing Accounts Receivable having been earned by performance; (b)
containing such information in respect to such Accounts Receivable and cash on
hand as the Bank may request; and (c) containing a calculation of the Borrowing
Base as of the date of the Certificate. Thereafter, at predetermined times
agreed to by the Bank and the Borrower, the Borrower will deliver to the Bank
similar Certificates in respect to all Accounts Receivable of the Borrower as to
which rights have been earned by performance not previously certified to the
Bank, and other information requested by the Bank. With each such Certificate,
the Borrower will upon request by the Bank, furnish to the Bank such information
as to each Account Receivable identified on the Certificate as the Bank may
request, together with a duplicate of the invoice copies of the shipping
documents or other evidence of delivery, if any, and all contracts, guaranties,
orders and other documents requested by the Bank, or, if the Bank at any time
shall relieve the Borrower of the obligation to furnish such documents with such
Certificates, the Borrower will keep all such documents segregated and available
for inspection by the Bank and will furnish same to the Bank upon request.
ARTICLE III
USE OF LOAN PROCEEDS
3.0 The proceeds of the Loans hereunder shall be used only for the
purpose of Standby Letters of Credit working capital needs as well as for the
acquisition of Sorbios GmbH and Converter Power, Inc. for no other purpose (the
"ACQUISITION").
ARTICLE IV
CONDITIONS PRECEDENT TO THE LOAN
4.0 The undertaking of the Bank to make Loans is subject to the
condition precedent that the Bank shall have received on or before the day of
such Loan each of the following in form and substance satisfactory to the Bank
and its counsel:
4.1 A certificate of even date herewith of an officer of Borrower,
identifying the officer or officers of Borrower, authorized to execute this
Agreement, the Note, and such other documents to be delivered pursuant to this
Agreement, and affixed thereto shall be true copies of resolutions of Borrower,
authorizing the transactions contemplated herein, the execution, delivery and
performance of this Agreement, the Note, and any other document or instrument to
be delivered pursuant hereto;
4.2 The Note, duly executed by Borrower and delivered to Bank;
4.3 An opinion of Borrower's counsel in form and substance satisfactory
to the Bank and its counsel.
4.4 Certificate of legal existence and tax good standing for Borrower;
4.5 A certified copy of the corporate charter documents of Borrower;
4.6 A certified copy of the By-Laws of Borrower;
4.7 Such other documents or certificates as may be reasonably requested
by Bank and/or as are required under the terms of this Agreement, and any other
documents or agreements to which Bank, and the Borrower are parties;
4.8 UCC-3 negative pledge statements duly executed by Borrower such
form and substance as the Bank or its counsel shall require.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.0 As a material inducement to Bank to make Loans to Borrower
hereunder, Borrower represents and warrants to Bank and such representations and
warranties shall be continuing representations and warranties during the term of
this Agreement and so long thereafter as any Obligations shall remain
outstanding, as follows:
5.1 The Borrower is a corporation duly incorporated, validly existing,
and in good standing under the laws of the state of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
5.2 The execution, delivery and performance by the Borrower of this
Agreement, the Note and other Loan Documents to which it is a party have been
duly authorized by all necessary corporate action and do not and will not (1)
require any consent or approval of the stockholders of the Borrower; (2)
contravene the Borrower's charter or bylaws; (3) violate any provision of any
law, rule, regulation (including, without limitation, Regulation U of the Board
of Governors of the Federal Reserve System), the violation of which would have a
material adverse effect on the business or operations of the Borrower or any
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability; (4) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease,
or instrument to which the Borrower is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower; and (6) cause the Borrower to be in violation of or
default under any such law, rule, regulation, or any such indenture, agreement,
lease, or instrument which default would have a material and adverse effect on
the business or operation of the Borrower or under any order, writ, judgment,
injunction, decree, determination or award.
5.3 This Agreement is, and each of the other Loan Documents when
delivered under this Agreement will be, legal, valid, and binding obligations of
the Borrower enforceable against the Borrower, in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally and general equity principles.
5.4 The consolidated balance sheet of the Borrower and its consolidated
subsidiaries as of June 29, 1996 and the related consolidated statements of
income, cash flows and stockholders' equity for the fiscal year then ended,
reported on by KPMG Peat Marwick LLP and set forth in the Borrower's 1996 Form
10-K, a copy of which has been delivered to the Bank, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such fiscal
year, and since the date through which the financial statements cover, there has
been (a) no material adverse change in the condition (financial or otherwise),
business, or operations of Borrower; (b) no damage, destruction or loss
materially adversely affecting Borrower's business; (c) no declaration of making
of any dividend or other distribution to stockholders of the Borrower with
respect to Borrower's capital stock or any direct or indirect redemption,
purchase or other acquisition of any such stock; (d) no increase in compensation
payable or to become payable by Borrower to any of its executive officers or any
general wage increase except in the ordinary course of the Borrower's business;
or (e) no materially adverse controversy with employees, labor unions or
governmental agencies. There are no liabilities of Borrower, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business.
5.5 Neither the business nor the properties of the Borrower are
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance) materially and
adversely affecting such business or properties or the operation of the
Borrower.
5.6 The Borrower has not materially violated, nor is the Borrower in
material violation of, any applicable law, regulation, or any order, judgment,
or decree which violation would have a material and adverse effect on the
business or operations of the Borrower. The Borrower is not a party to any
contract or other agreement, or subject to any restrictions under its charter
documents, bylaws or other corporate instrument, or subject to any order,
judgment, rule, regulation, or decree of any court or governmental authority,
which materially and adversely affects its business, properties, assets or
financial condition or which restricts or otherwise limits its incurring of the
Loan or its performance and observance of its Obligations. Neither the execution
and delivery by Borrower, nor the compliance by Borrower with the terms and
conditions, of this Agreement, or any Loan Document to which Borrower is a
party, conflicts or will conflict with, constitutes or will constitute a default
under, or results or will result in any violation of, the charter documents or
By-laws of Borrower, any award of any arbitrator, and any law, any order,
judgment, rule, regulation or decree of any court or governmental authority, or
any agreement or instrument to which Borrower is a party or any of its property
is subject; nor does the same result nor will it result in the creation or
imposition of any Lien upon any of its property except the Liens created by this
Agreement or any other Loan Document.
5.7 Except as set forth in Borrower's 1996 Form 10-K, there is no
pending or, to the Borrower's knowledge, threatened action or proceeding against
or affecting the Borrower before any court, governmental agency, or arbitrator
which may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties, or business of the Borrower or the
ability of the Borrower to perform its Obligations under the Loan Documents to
which it is a party.
5.8 The Borrower has satisfied all judgments and the Borrower is not in
default with respect to any judgment, writ, injunction, or decree of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
5.9 The Borrower has good and clear record and marketable title to all
properties and assets which it purports to own, free and clear of all mortgages,
liens, pledges, charges, security interests and encumbrances, other than those
being granted to the Bank, pursuant hereto, if any, and those reflected on
Schedule 5.9.
5.10 There are currently five subsidiaries of Borrower and except as
set forth on Schedule 5.10, Borrower has no investments in the stock or
securities of any other corporation, firm, trust or other entity.
5.11 To the best knowledge of the Borrower, the Borrower possesses, all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct its business substantially now as conducted and as
presently proposed to be conducted, and the Borrower is not in any material
violation of any rights of others with respect to any of the foregoing.
5.12 The Borrower has filed all income tax returns, excise tax returns
and other tax returns (federal, state, and local) required to be filed and has
paid all taxes, assessments, and governmental charges and levies thereon to be
due, including interest and penalties. To the best of the Borrower's knowledge,
no audit or investigation is presently being conducted with regard to any tax
return or tax obligation of Borrower.
5.13 No employee pension benefit plan or other plan (within the meaning
of Section 3(2) of the Employees Retirement Income Security Act of 1974, as
amended ("ERISA")) which is or was sponsored at any time, by Borrower or any
member of a controlled group of corporations within the meaning of Section
414(b) of the Internal Revenue Code of 1954, as amended (the "Code"), or any
member of a group of commonly controlled trades or businesses (whether or not
incorporated) within the meaning of Section 414(c) of the Code of which Borrower
is a member ("Plan"): (i) has incurred an "accumulated funding deficiency"
(within the meaning of Section 302(a)(2) of ERISA), or which could result in a
liability of Borrower (which liability could materially adversely affect the
financial conditions of Borrower) under Section 409 of ERISA or Section 4975 of
the Code or pursuant to any agreement or
statute with respect to liabilities incurred by an person under such sections.
No material liability to the Pension Benefit Guaranty Corporation ("PBGC"), to a
Plan, or to any participant in or beneficiary of a Plan has been or, to the
present knowledge of Borrower, is expected to be incurred with respect to any
Plan by Borrower, and there has been no event or condition which presents a risk
of termination of any Plan by PBGC. None of the following events has occurred
or, to the knowledge of Borrower, is expected to occur, with respect to any
multi-employer plan (as that term is defined in Section 3(37) of ERISA) to which
any Borrower or any member of a controlled group of corporations or any member
of a group of commonly controlled trades or businesses of which Borrower is a
member, contributes on behalf of its employees (the "Contributing Employers")
which has resulted or could result in any material liability of the Borrower to
PBGC, to such multi-employer plan, or to any participant in or beneficiary of
such multi-employer plan: (i) a withdrawal, either complete or partial, from any
such plan (within the meaning of Section 4203 or Section 4205, respectively, of
ERISA) by a Contributing Employer; (ii) the termination of any such plan; or
(iii) the recording of a reorganization index (as defined by Section 4241 of
ERISA) in excess of zero by any such plan.
5.14 Except as set forth in Schedule 5.14, the Borrower has never:
(a) owned, occupied, or operated a site or vessel on which any
hazardous material or oil was or is stored, transported, or
disposed of (the terms site, vessel, and hazardous material
respectively being used in this Agreement with the meaning given
those terms in M.G.L. c. 21E); or
(b) directly or indirectly transported, or arranged for the
transport of any hazardous material or oil; or
(c) caused or been legally responsible for any release or threat of
release of any hazardous material or oil; or
(d) received notification from any federal, state, or other
governmental authority of any potential or known release or
threat of release of any hazardous material or oil from any site
or vessel owned, occupied, or operated by the Borrower or any
person for whose conduct the Borrower is responsible, and/or of
the incurrence of any expense or loss by such governmental
entity.
5.15 Schedule 5.15 annexed hereto is a listing of all patents and/or
patents pending, trademarks, copyrights, licenses and similar agreements in
which the Borrower has an interest.
5.16 Schedule 5.16 is a complete and correct list of all credit
agreements, indentures, purchase agreements (other than for materials, supplies
and services entered into in the ordinary course of business), guaranties,
leases (requiring lease payments in the aggregate of $600,000.00 annually), and
other investments, agreements, and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of Standby Letters of Credit or for acceptance financing) in
respect of which the Borrower or any subsidiary is in any manner directly or
contingently obligated; and the maximum principal or face amounts of credit in
question, which are outstanding and which can be outstanding, are correctly
stated, and all Liens of any nature given or agreed to be given as security
therefor are correctly described or indicated in such Schedule.
5.17 Borrower is not in default with respect to any agreement to which
it is a party or by which it is bound, which default would have a material
adverse effect on the Borrower's business, operations and financial statement.
5.18 No consent or approval of any person, no waiver of any lien or
other similar right, and no consent, license, approval, authorization, or
declaration of any governmental authority, bureau, or agency is or will be
required in connection with the execution, delivery, performance, validity,
enforcement, or priority of this Agreement, the Note, or any other agreement,
instrument, or document to be executed or delivered in connection herewith.
5.19 No representation, warranty, or statement by Borrower contained
herein or in any certificate or other document furnished or to be furnished by
Borrower pursuant hereto contains or at the time of delivery shall contain any
untrue statement of material fact, or omits, or shall omit at the time of
delivery, to state a material fact necessary to make it not misleading.
5.20 The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
ARTICLE VI
AFFIRMATIVE COVENANTS
6.0 Borrower covenants and agrees that during the term of this
Agreement and so long thereafter as any Obligations remain outstanding the
Borrower will:
6.1 Keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied, subject to
year end adjustments, reflecting all financial transactions of the Borrower,
including complete records of all accounts of Borrower, as defined in the
Massachusetts Uniform Commercial Code.
6.2 Maintain, keep, and preserve all of its properties (tangible and
intangible) necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted. Borrower shall use
its best efforts to maintain in full force and effect all rights, patents,
licenses, permits and privileges necessary for the proper conduct of its
business.
6.3 Continue to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
6.4 Maintain insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as the Bank
shall reasonably require and as are usually carried by companies engaged in the
same or a similar business and similarly situated, which insurance may provide
for reasonable deductibility from coverage thereof.
6.5 Comply in all material respects with applicable laws, rules,
regulations, and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property, noncompliance with which would
have a material and adverse effect on the business and operations of the
Borrower.
6.6 At any reasonable time during business hours and from time to time,
permit the Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of the Borrower and to discuss the affairs, finances, and accounts of
the Borrower with any of their respective officers and directors and the
Borrower's independent accountants. Such visits will be conducted in a manner
which does not interfere with the normal operations of the Borrower.
6.7 Furnish to the Bank:
(1) Promptly after the commencement thereof, notice of all actions,
suits, and proceedings before any court or governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign, affecting the
Borrower, which, if determined adversely to the Borrower, could have a material
adverse effect on the financial condition, properties, or operations of the
Borrower;
(2) Such other information respecting the condition or operations,
financial or otherwise, receivables, inventory, machinery or equipment of the
Borrower as the Bank may from time to time reasonably request.
(3) Promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed.
(4) Within five business days of the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Borrower shall have filed with the
Securities and Exchange Commission.
(5) The Borrower will, at the time of delivery to the Bank of the
reports referred to in the above subsections (1) and (2) deliver to the Bank
certificates signed by any individual duly authorized by the Borrower certifying
that such individual has reviewed the provisions of this Agreement and stating
in his opinion, if such be the fact, that the Borrower has not been and is not
in default as to any of the covenants and agreements of the Borrower contained
in this Agreement.
6.8 From time to time, execute and deliver to the Bank all such other
and further instruments or documents and take or cause to be taken all such
other and further action as the Bank may reasonably request in order to effect
and confirm or vest more securely in the Bank all rights contemplated in this
Agreement.
6.9 Other than its subsidiaries, maintain all of its operating Accounts
with the Bank.
6.10 Conform, adhere to, and observe all covenants and warranties
contained in any other agreement between the Bank and the Borrower, or
instrument furnished by the Borrower to the Bank.
6.11 Preserve and maintain its corporate existence and good standing in
the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required.
6.12 Use the proceeds of the Loans only for the purpose intended. The
Borrower acknowledges the Loans have been and shall be made available subject to
the terms hereof.
6.13 The Borrower will punctually and promptly make all payments and
perform all other obligations which may be required of it with respect to any
indebtedness (whether for money borrowed, goods purchased, services rendered or
however such indebtedness may otherwise arise) owing to persons, firms or
corporations other than the Bank, including, without limitation, indebtedness
which may be secured by a security interest in assets of the Borrower or
property of the Borrower, and all obligations under the terms of any lease in
which the Borrower is the lessee. The provisions of this section shall not
preclude the Borrower from contesting in good faith and diligently defending
against any such indebtedness or obligation.
6.14 Pay and/or perform promptly when due all of the Obligations and
liabilities of Borrower including, without limitation, the payment of all sales,
use, excise, personal property, income, withholding, corporate, franchise, and
other taxes, assessments, and governmental charges upon or relating to its
ownership or use of any of its assets or its income, or the
operation of its business or otherwise for which Borrower is or may be liable
except to the extent the same are being diligently contested in good faith and
adequate provision has been made for payment and upon such request shall submit
to Bank proof satisfactory to Bank that such payments and/or deposits have been
made.
6.15 Pay or cause to be paid when due all amounts necessary to fund in
accordance with their terms all such deferred compensation plans, whether now in
existence or hereafter created, and the Borrower will not withdraw from
participation in, permit the termination or partial termination of, or permit
the occurrence of any other event with respect to, any deferred compensation
plan maintained for the benefit of its employees under circumstances that could
result in liability to the Pension Benefit Guaranty Corporation, or any of its
successors or assigns, or to the entity which provides funds for such deferred
compensation plan.
6.16 Promptly notify Bank if any time (i) a Plan incurs an "accumulated
funding deficiency" (as defined in Sections 412(a) of the Code), whether or not
waived; (ii) a "reportable event" (within the meaning of Section 4043(b) of
ERISA) occurs with respect to a Plan; (iii) Borrower engages in any transaction
which violates Section 406 or Section 407 of ERISA or which could result in a
liability under Section 409, 501 or 502 of ERISA or Section 4975 of the Code or
pursuant to any agreement or statute with respect to liabilities incurred by any
person under such sections, which liability could materially affect the
financial condition of such Borrower; (iv) Borrower incurs a material liability
to the PBGC or to any participant in or beneficiary of a Plan with respect to
any Plan; (v) an event occurs or a condition arises which presents a risk of
termination of any Plan by the PBGC; (vi) Borrower is notified by the Internal
Revenue Service or the Department of Labor that the Plan is not or may not be
qualified under Section 401(a) of the Code or that the trust established
thereunder is not or may not be exempt from tax under Section 501(a) of the
Code; (vii) any of the following events occurs with respect to any
multi-employer plan (as defined in Section 3(37) of ERISA) to which the borrower
or any member of a group of commonly controlled trades or businesses within the
meaning of Section 414(c) of the Code of which any Borrower is a member or
contributes on behalf of its employees: (A) a withdrawal, either complete or
partial, from any such plan (within the meaning of Section 4202 or Section 205,
respectively, or ERISA) by a Contributing Employer or a decision by the
Contributing Employer to withdraw completely or partially from such plan; (B)
the termination of any such plan; or (C) the recording of a reorganization index
(as defined by Section 4241 of ERISA) in excess of zero by any such plan.
6.17 (a) Provide the Bank with written notice upon the Borrower's
obtaining knowledge of any potential or known release or threat of release of
any hazardous material or oil at or from any site owned, occupied, or operated
by the Borrower (the Bank acknowledges receipt of notice of the matters
contained in Schedule 5.14); upon the Borrower's receipt of any notice to such
effect from any federal, state, or other governmental authority; and/or upon the
Borrower's obtaining knowledge of any incurrence of any expense or loss by such
governmental authority in connection with the assessment, containment, or
removal of any hazardous material or oil for which expense or loss the Borrower
may be liable; and (b) in the event of a release of hazardous material or oil,
take all such action, including without limitation, the conducting of
engineering tests (at the expense of the Borrower) to confirm that no hazardous
material or oil is or ever was stored on any site owned, occupied, or operated
by the Borrower.
ARTICLE VII
NEGATIVE COVENANTS
7.0 Borrower agrees that during the term of this Agreement and so long
thereafter as any Obligations remain outstanding, it will not, without the prior
written consent of Bank, which consent shall not be unreasonably withheld or
delayed:
7.1 (i) sell or convey all or substantially all of the Borrower's
assets, (ii) except for the Acquisition Transaction enter into any merger or
consolidation or (iii) effect any reorganization or recapitalization.
7.2 Create, incur, assume, or suffer to exist, or permit any subsidiary
(if any exist) to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(3) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings, provided they do not adversely
affect the Borrower in a material way;
(4) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement of a capital lease;
(5) Permitted Encumbrances, as identified on Schedule 5.9;
(6) Any Lien existing on any asset of any corporation at the time such
corporation becomes a consolidated subsidiary of Borrower;
(7) Any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a
consolidated subsidiary;
(8) Any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a consolidated subsidiary and not created in contemplation of
such acquisition;
7.3 Except with respect to the Acquisition Transaction, redeem any
shares of the Borrower, merge or consolidate with (unless it is the survivor
corporation) or sell, assign, lease, or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any person.
7.4 Create, incur, assume, or suffer to exist, or permit any subsidiary
(if at any time existing) to create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except: (1) leases existing on the date of this Agreement and any extensions or
renewals thereof; (2) leases, of which the total annual obligation under any
such lease is not more than $600,000.
7.5 Sell, lease, assign, transfer, or otherwise dispose of, any of its
now owned or hereafter acquired assets (including, without limitation, shares of
stock and indebtedness of subsidiaries, receivables, and leasehold interests),
except: (1) for inventory disposed of in the ordinary course of business; (2)
the sale or other disposition of assets no longer used or useful in the conduct
of its business or (3) in connection with the Acquisition Transaction.
7.6 Assume, guarantee, endorse, or otherwise be or become directly or
contingently responsible or liable, or permit any subsidiary (if at any time
existing) to assume, guarantee, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or to maintain a minimum working
capital or net worth, or otherwise to assure the creditors of any person or
entity against loss) for obligations of any person or entity, except (1)
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (2) in connection with
the Acquisition Transaction; and (3) guaranties of residential real estate
mortgages of employees not to exceed $500,000 for any single mortgage and
$1,000,000 in the aggregate.
7.7 Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any affiliate, or permit any subsidiary to enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any affiliate, or the making of advances to
any affiliates except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such subsidiary
than would obtain in a comparable arm's-length transaction with a party not an
affiliate.
7.8 Declare or pay any dividends; or purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on
or for the purchase, redemption, or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock; or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Borrower or another
Subsidiary, except that (1) the Borrower may declare and deliver dividends and
make distributions payable solely in common stock of the Borrower or any
subsidiary; (2) the Borrower may declare dividends in an amount sufficient to
pay taxes, for profits not distributed, if the Borrower elects S Corporation
status; and (3) with the written consent of the Bank, which shall not be
unreasonably withheld, the Borrower may purchase or otherwise acquire shares of
its capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock.
7.9 Except with respect to the Acquisition Transaction, make, or permit
any subsidiary to make, any loan or advance to any party (except loans to
employees, each of which shall not exceed $50,000 at any time), or purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any capital stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any interest in any entity,
except: (1) direct obligations of the United States of any agency thereof with
maturities of one year or less from the date of acquisition; (2) commercial
paper of a domestic issuer rated at least "A-1" by Standard & Poor's Corporation
or "P-1" by Moody's Investor's Service, Inc,; (3) certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank having capital and surplus in excess of One Hundred Million
($100,000,000) Dollars; (4) stock, obligations, or securities received in
settlement of debts (created in the ordinary course of business owing to the
Borrower or any Subsidiary; and (5) investments made pursuant to the Borrower's
investment policy as set forth in Schedule 7.9.
7.10 Except as otherwise provided above, issue evidence of indebtedness
or create, assume, become contingently liable for, or suffer to exist bank debt
in addition to Obligations to the Bank; provided, however, that the Borrower may
incur liabilities which are incurred or arise in the ordinary course of
Borrower's business other than indebtedness arising with respect to money
borrowed or the issuance of Standby Letters of Credit for the account of the
Borrower both of which shall be prohibited.
7.11 Sell or otherwise dispose of any shares of capital stock of any
subsidiary, except in connection with a transaction permitted under Section 7.3,
or permit any subsidiary to issue any additional shares of its capital stock,
except director's qualifying shares.
7.12 Change its name without prior written notification to the Bank.
7.13 Without prior written notice to the Bank, open or operate any
place of business other than those places listed on Schedule 7.13, attached
hereto and made a part hereof.
7.14 Except in connection with the Acquisition Transaction, make any
loan, advance, pay any bonus, or grant any extension of credit to any
corporation, partnership, person or other entity, except extensions of credit to
customers or otherwise in the ordinary course of business.
7.15 Except in connection with the Acquisition Transaction, make or
permit any substantial change in, or cease in whole or in part, its present
business, or engage in any other activities apart from its present business.
7.16 Undertake negative covenants in substance similar to those set
forth herein in favor of any other party.
ARTICLE VIII
FINANCIAL COVENANTS
8.0 So long as the Note shall remain unpaid or the Bank shall have any
commitment under this Agreement:
(1) The Borrower will maintain Minimum Working Capital of not less than
$13,000,000.00 at the end of each calendar quarter.
(2) The Borrower will maintain at all times a Maximum Debt to Tangible
Net Worth ratio of no more than: (i) 2.0:1 by fiscal year end 1997; (ii) 1.75:1
by fiscal year end 1998; and (iii) 1.50:1 by fiscal year end 1999.
(3) As of June 28, 1997, the Borrower's fourth quarter, the Borrower
will maintain a Tangible Net Worth of not less than $13,500,000.00. Thereafter,
the Borrower's Tangible Net Worth will increase (as of the end of each of the
Borrower's quarters) by a minimum of 40% of the prior quarter's Net Income.
(4) The Borrower will maintain Minimum Debt Service Coverage defined as
the ratio of aggregate Net Income of the Borrower plus aggregate depreciation,
plus aggregate amortization, less aggregate Capital Expenditures not financed on
a long-term basis to Current Maturities of Long Term Debt of the Borrower of
0.75:1 at fiscal year end 1997, 1.15:1 at fiscal year end 1998, and 1.75:1 at
fiscal year end 1999 and thereafter. This covenant shall be tested on a rolling
quarterly basis for a four fiscal quarter period.
(5) The Borrower will not suffer a negative Net Income during any two
consecutive quarters.
(6) The Bank acknowledges that Borrower anticipates writing off
research and development costs in fiscal year 1997 and agrees to amend where
appropriate the financial covenants in this Article VIII to make them consistent
with such write off.
All of the foregoing covenants shall be tested quarterly beginning June
28, 1997. Notwithstanding the foregoing covenants listed above, the Bank, in its
sole discretion may revise such covenants to reflect the in-process research and
development write-off in connection with the Acquisition.
Capitalized terms otherwise not defined herein shall be defined in
accordance with GAAP.
ARTICLE IX
EVENTS OF DEFAULT, ACCELERATION AND SETOFF
9.0 The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
(1) Failure of the Borrower to pay within ten (10) days the principal
of, or interest on, the Note as and when due and payable; or
(2) Any material representation or warranty made or deemed made by the
Borrower in this Agreement, or in any of the Loan Documents, or which is
contained in any certificate, document, opinion, or financial or other statement
furnished at anytime under or in connection with any Loan Document shall prove
to have been incorrect in any material respect on or as of the date made or
deemed made; or
(3) The Borrower shall fail to perform or observe any material term,
covenant, or agreement contained in any Loan Document (other than the Note) on
its part to be performed or observed within twenty (20) days after receipt of
notice from the Bank; or
(4) The Borrower shall (a) fail to pay any indebtedness for borrowed
money (other than the Note) of the Borrower or any interest or premium thereon,
when due, subject to any grace or cure period relating to such indebtedness,
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise), (whether or not related to this transaction or owed to the Bank or
another person) or (b) fail to perform or observe any material term, covenant,
or condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, subject to any grace or cure period relating to such indebtedness, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration after the giving of notice or passage of time, or both, of the
maturity of such indebtedness, unless such failure to perform or observe shall
be waived by the holder of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(5) There exists any Breach or Default under:
(i) that certain $8,000,000.00 Term Loan Agreement among
Bank and Borrower dated December 21, 1995 as amended by
that certain Amendment and Ratification of Term Loan
Agreement of even date herewith and all documents and
certificates executed in connection therewith, including
without limitation that certain Term Promissory Note
(Market Rate) as of December 21, 1995 delivered by
Borrower to Bank;
(ii) that certain $4,983,051,00 Term Loan Agreement among
Bank and Borrower of even date hereof and all documents
and certificates executed in connection therewith,
including without limitation, that certain Term
Promissory Note (Market Rate) and Term Promissory Note
(Prime Rate).
(6) The Borrower (a) shall generally not, or shall be unable to, or
shall admit in writing its inability to pay its debts as such debts become due;
or (b) shall make an assignment for the benefits of creditors, petition or apply
to any tribunal for the appointment of a custodian, receiver, or trustee for it
or a substantial part of its assets; or (c) shall file a petition or application
or otherwise commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (d) shall have any such
petition or application filed or any such proceeding commenced against it in
which an order for relief is entered or adjudication or appointment is made; or
(e) by any act or omission shall indicate its consent to, approval of, or
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any custodianship,
receivership, or trusteeship; or
(7) One or more judgments, decrees, or orders for the payment of money
in excess of an aggregate of Ten Thousand ($10,000.00) Dollars in the aggregate
shall be rendered against the Borrower or any of their Subsidiaries and such
judgments, decrees, or orders shall continue unsatisfied and in effect for a
period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal; or
(8) The service of any process on the Bank attaching by trustee process
any assets of the Borrower held by the Bank in an amount greater than
$25,000.00; or
(9) Borrower shall suffer any uninsured material loss, uninsured theft,
uninsured substantial damage, to or of any property;
9.1 If any Event of Default shall occur and continue beyond any grace
period provided under this Agreement then or at any time thereafter, Bank may
declare all Obligations to be due and payable, without notice except as
expressly required, protest, presentment or demand, all of which are hereby
expressly waived by Borrower.
9.2 Simultaneously with the sending of a notice of default Bank shall
have the right to setoff any and all deposits or other sums at any time or times
credited by or due from Bank to Borrower, whether in a special account or other
account or represented by a certificate of deposit, which deposits and other
sums shall at all times constitute additional security for the Obligations and
may be setoff against all or any part of the Obligations at any time if Borrower
is the primary obligor with respect to such Obligations, or, at or after the
maturity of Obligations if Borrower is secondary obligor.
ARTICLE X
TERM OF AGREEMENT;
10.0 The term of this Agreement shall commence on the date hereof and
shall continue in full force and effect and be binding upon Borrower until the
later of the Expiration or all Obligations shall have been fully paid and
satisfied.
ARTICLE XI
GENERAL PROVISIONS
11.0 The failure of Bank at any time or times hereafter to require
strict performance by Borrower of any of the provisions, warranties, terms, and
conditions contained in this Agreement or in any other agreement, guaranty,
note, instrument, now or at any time or times hereafter executed by Borrower and
delivered to Bank shall not waive, affect, or diminish any right of Bank at any
time or times hereafter to demand strict performance thereof; and no rights of
Bank hereunder shall be deemed to have been waived by any act or knowledge of
Bank, its agents, officers, or employees
unless such waiver is contained in an instrument in writing signed by an officer
of Bank and directed to Borrower specifying such waiver. No waiver by Bank of
any of its rights shall operate as a waiver of any other of its rights or any of
its rights on a future occasion.
11.1 All notices and other communications provided for under this
Agreement and under the other Loan Documents to which the Borrower is a party
shall be in writing and mailed or hand delivered:
If to the Borrower: Applied Science and Technology,
Inc.
35 Cabot Road
Woburn, MA 01801
ATTN: John M. Tarrh
With a copy to: Neil H. Aronson, Esquire
O'Connor, Broude & Aronson
950 Winter Street
Waltham, MA 02154
If to the Bank: State Street Bank and Trust
Company
225 Franklin Street
Boston, MA 02110
ATTN: Suzanne L. Dwyer
With a copy to: Bradley W. Snyder, Esquire
Ron M. Hadar, Esquire
Looney & Grossman
101 Arch Street
Boston, MA 02110
or such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section 11.1.
All such notices and communication shall be effective when deposited in the
mail, addressed as aforesaid, registered or certified mail, return receipt
requested, or sent by messenger or overnight courier with a signed receipt, or
the date of actual receipt, whichever first occurs.
11.2 This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated herein and such
understanding shall not be modified except in writing signed by or on behalf of
the parties hereto.
11.3 Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law.
Should any portion of this Agreement be declared invalid for any reason in any
jurisdiction, such declaration shall have no effect upon the remaining portions
of this Agreement, and furthermore, the entirety of this Agreement shall
continue in full force and effect in all other jurisdictions and said remaining
portions of this Agreement shall continue in
full force and effect in the subject jurisdiction as if this Agreement had been
executed with the invalid portions thereof deleted.
11.4 The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of Bank and the Borrower,
provided, however, that the Borrower may not assign any of its rights or
delegate any of its obligations hereunder without the prior written consent of
Bank, which consent shall not be unreasonably withheld or delayed.
11.5 This Agreement, the Note and all other documents hereunder have
been made and delivered in The Commonwealth of Massachusetts and shall be
governed by, and construed in all respects in accordance with the laws and
decisions of The Commonwealth of Massachusetts and Borrower submits to the
Jurisdiction of Massachusetts for all purposes with respect to this Agreement
and all other documents hereunder and its relationship with Bank.
11.6 The Borrower will pay or reimburse the Bank, on demand, for all
reasonable expenses (including, without limitation, reasonable counsel fees and
expenses) incurred or paid by the Bank in connection with the enforcement by the
Bank of its rights as against the Borrower or any other person primarily or
secondarily liable to the Bank hereunder or thereunder; and after an Event of
Default or demand, for the administration, supervision, protection or
realization on any collateral held by the Bank as security for any obligation of
the Borrower or any other person primarily or secondarily liable with respect
thereto; and in the defense of any action against the Bank with respect to its
rights or liabilities hereunder or thereunder. In addition, the Borrower shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of any
of the Loan documents and the other documents to be delivered under any such
Loan documents.
11.7 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
11.8 The section headings herein are included for convenience only and
shall not be deemed to be a part of this Agreement.
11.9 BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY THE BORROWER MAY HAVE IN
ANY ACTION OR PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS AGREEMENT.
BORROWER AND BANK HEREBY KNOWINGLY AND VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR
IN CONNECTION WITH THIS AGREEMENT. BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT
TO JURY TRIAL PROVISION. BORROWER ACKNOWLEDGES THAT BANK HAS BEEN INDUCED TO
ENTER INTO BANK'S LENDING RELATIONSHIP WITH BORROWER BY, AMONG OTHER THINGS, THE
PROVISIONS OF THIS PARAGRAPH.
11.10 No delay or omission on Bank's part in exercising any right,
remedy or option shall operate as a waiver or such or any other right, remedy or
option or of any default.
11.11 The terms of the Commitment Letter issued by the Bank in
connection with the Loan, as modified by the Loan Documents, shall survive the
Closing.
11.12 No provision of this Agreement or the Note or any other Loan
document shall require the payment or permit the collection of interest in
excess of the maximum permitted by law. If any such excess interest is provided
for herein or in the Note or any other Loan document, Borrower shall not be
obligated to pay such excess, and the right to demand the payment of any excess
is hereby waived.
11.13 Nothing contained herein or in any Loan Document shall affect the
terms of any agreements between the Borrower and the Bank with respect to other
loans.
11.14 Any matter disclosed by Borrower in this Agreement or any Schedule
hereto, or excepted from any representation, warranty or covenant of Borrower
herein, shall be deemed disclosed for all purposes of this Agreement and to be
an exception from all such representations, warranties and covenants.
11.15 In the event the Acquisition Transaction does not close, this
Agreement shall be null and void with no further force or effect and no
liabilities to the parties hereunder, except the Borrower shall pay the Bank's
reasonable legal and processing costs.
ARTICLE XII
ASSIGNMENT BY BANK
12.0 If at any time or times, by assignment or otherwise, Bank transfers
or assigns any Obligations and/or security therefor, such transfer shall carry
with it the power and rights of Bank under this Agreement with respect to the
Obligations and security assigned or transferred and the assignee or transferee
shall become vested with said powers and rights whether or not they are
specifically referred to in the transfer or assignment. If and to the extent
Bank retains any Obligations or security, Bank shall continue to have the rights
and powers herein set forth with respect thereto.
ARTICLE XIII
SECURITY
13.0 After an Event of Default, the Bank in its sole and absolute
discretion may require a security interest in any or all of the Borrower's
assets, including without limitation any trademarks, patents, copyrights or
other intellectual property (the "Secured Assets"). In the event Bank so
requests, the Borrower hereby grants to Bank a security interest in such Secured
Assets and the Borrower will execute and deliver to the Bank any
writings, UCC Financing Statements, US Patents and Trademark Office Filings and
do all things reasonably necessary, effectual or requested by the Bank to create
and perfect a security interest in the Secured Assets (the "Security
Documents"). A carbon, photographic or other reproduction of this Agreement or
any financing statements executed pursuant to the terms hereof shall be
sufficient as a financing statement for the purpose of filing with the
appropriate authorities.
13.1 In addition to any other rights provided herein, Documents and the
Borrower hereby irrevocably constitutes and appoints the Bank as the Borrower's
true and lawful attorney, with full power of substitution, at the sole cost and
expense of the Borrower but for the sole benefit of the Bank, to sign and file
or record on behalf of the Borrower any financing or other statement in order to
perfect or protect the Bank's security interest. All powers conferred upon the
bank by this Agreement, being coupled with an interest, shall be irrevocable so
long as any Obligation of the Borrower to the Bank shall remain unpaid.
[THIS SECTION INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be signed in their name and behalf by an officer or officers,
thereunto duly authorized as an instrument under seal as of the day and year
first written above.
BORROWER:
APPLIED SCIENCE AND
TECHNOLOGY, INC.
By:____________________________
John M. Tarrh
Its: Senior Vice President and
Chief Financial Officer
BANK:
STATE STREET BANK AND TRUST
COMPANY
By:____________________________
Its:___________________________
----------------------------
(Print Name)
EXHIBITS AND SCHEDULES
2.2(1) LMCS Agreement
2.4 Promissory Note
2.6 Form of Standby Letter of Credit Agreement
2.9 Form Borrowing Base Certificate
5.9 Permitted Encumbrances
5.10 Subsidiaries
5.14 Environmental Matters
5.15 Patents/Licenses/Trademarks
5.16 Debt
7.9 Investment Policy
7.13 Places of Business
SCHEDULE 5.9
PERMITTED ENCUMBRANCES
SCHEDULE 5.10
SUBSIDIARIES AND AFFILIATES OF BORROWER
SCHEDULE 5.14
ENVIRONMENTAL MATTERS
SCHEDULE 5.15
PATENTS/LICENSES/TRADEMARKS
SCHEDULE 5.16
DEBT
SCHEDULE 7.9
INVESTMENT POLICY
SCHEDULE 7.13
PLACES OF BUSINESS
EXHIBIT 10(f)
UNSECURED COMMITTED REVOLVER PROMISSORY NOTE
$8,000,000.00 May 1, 1997
Principal Sum Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned APPLIED SCIENCE AND TECHNOLOGY,
INC., a Delaware corporation (hereinafter called the "BORROWER") hereby promises
to pay to the order of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company (hereinafter called the "BANK") at the office of the Bank located
at 225 Franklin Street, Boston, Massachusetts 02110, or such other places as the
holder hereof shall designate, EIGHT MILLION AND 00/100 ($8,000,000.00) DOLLARS,
or, if less, the aggregate unpaid principal amount of all loans made by the Bank
to the Borrower, together with interest commencing on June 1, 1997 on unpaid
balances as follows: (i) on Prime Rate Loans pursuant to that certain Unsecured
Committed Revolver Loan Agreement, dated as of the date hereof, between the
Borrower and the Bank (the "REVOLVER AGREEMENT"), at the Prime Rate (as defined
below) payable monthly in arrears on the first day of each calendar month; (ii)
on Market Rate Loans (as defined in the Revolver Agreement) at the Market Rate
(as defined below) plus one hundred and fifty basis points (1.50%) payable
monthly in arrears on the first of each month until the sooner of Maturity (as
defined in the Revolver Agreement). Notwithstanding the foregoing, all loans
made by Bank for the Borrower hereunder shall be due and payable with all
interest hereon (if any) on the Expiration (as defined in the Revolver
Agreement). Interest based upon the Prime Rate shall fluctuate based upon the
Bank's Prime Rate in effect from time to time. Each change in the Prime Rate of
interest shall take effect simultaneously with the corresponding change in such
Prime Rate. "PRIME RATE" shall mean the rate of interest announced by the Bank
in Boston from time to time as its "Prime Rate". "MARKET RATE" shall mean the
fixed rate of interest quoted by the Bank on the date a Market Rate Loan is made
by the Bank (in its sole discretion), which rate shall be determined solely by
the Bank based upon the Bank's cost of funds. After acceleration, or maturity,
interest shall accrue and be payable at the Prime Rate plus Four (4%) Percent
per annum. Any rate of interest set forth herein shall be calculated on the
basis of actual days elapsed and a 360-day year.
All loans hereunder and all payments on account of principal and
interest hereof shall be recorded by the Bank and, prior to any transfer hereof,
endorsed on a grid on the last page of this Note. The entries on the records of
the Bank (including any appearing on this Note) shall be prima facie evidence of
amounts outstanding hereunder.
Prime Rate Loans, as defined in the Revolver Agreement, may be prepaid
without premium or penalty. In the event that less than the total outstanding
balance is prepaid, payments shall first be applied to outstanding charges, if
any, then to
-1-
interest, with the balance to principal to be applied to the next principal
installments(s) due or in the inverse order of maturity, at the option of the
Borrower to be exercised in writing. If no written direction is given, then said
payment shall be applied to principal in the inverse order of maturity. In the
event any Market Rate Loan (as defined in the Revolver Agreement) is prepaid in
part or in whole, such prepayment shall be made together with the applicable
amounts computed as provided in the Revolver Agreement. In the event that less
than the total outstanding balance is prepaid, payments shall first be applied
to outstanding charges, if any, then to interest, with the balance to principal.
If any one or more of the Events of Default, as defined in the Revolver
Agreement, shall occur, the entire unpaid principal amount of this Note and all
of the unpaid interest accrued thereon may become or be declared due and payable
in the manner and with the effect provided in the Revolver Agreement.
Any deposits or other sums at any time credited by or due from the
holder to any maker, endorser or guarantor hereof in the possession of the
holder may at all times be held and treated as collateral security for the
payment of this Note. The holder may apply or set off such deposits or other
sums against said liabilities at any time in the case of the maker, but only
with respect to matured liabilities in the case of any endorser or guarantor.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right and/or remedy on any future occasions.
Every maker, endorser and guarantor of this Note, or of the obligation
represented hereby, waives presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assents to any substitution, exchange or
release of collateral, and/or to the addition or release of any other party or
person primarily or secondarily liable.
The undersigned will pay all reasonable expenses of every kind of the
enforcement of this Note, or of any of the rights hereunder, and hereby agrees
to pay to the holder on demand the amount of any and all such expenses incurred
by it. After deducting all reasonable legal or other expenses and costs of
collection of this Note and all costs of storage, custody, sale and delivery of
collateral held hereunder, the residue of any proceeds of collection or sale
shall be applied to the payment of principal or interest on this Note or on any
or all the other liabilities aforesaid, due or to become due, in such order of
preference as the holder shall determine, proper allowance for interest on
liabilities not then being made, and any over surplus shall be returned to
undersigned.
-2-
As herein used, the word "holder" shall mean the payee, or other
endorsee of this Note, or bearer if it is at the time payable.
This Note shall take effect as a sealed instrument and shall be
governed by the laws of The Commonwealth of Massachusetts.
THE BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY THE BORROWER MAY HAVE IN
ANY ACTION OR PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS NOTE. THE
BORROWER AND THE BANK HEREBY KNOWINGLY AND VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH THIS NOTE. THE BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER
OF RIGHT TO JURY TRIAL PROVISION. THE BORROWER ACKNOWLEDGES THAT THE BANK HAS
BEEN INDUCED TO ENTER INTO THE BANK'S LENDING RELATIONSHIP WITH THE BORROWER BY,
AMONG OTHER THINGS, THE PROVISIONS OF THIS PARAGRAPH.
IN WITNESS WHEREOF, this Note has been duly executed and delivered as
an instrument under seal as of the day and year first written above.
APPLIED SCIENCE AND TECHNOLOGY, INC.
____________________________ By:_______________________________
Witness John M. Tarrh
Its: Senior Vice President and
Chief Financial Officer
EXHIBIT 10(g)
TERM LOAN AGREEMENT
This Term Loan Agreement (this "AGREEMENT") is entered into this 1st
day of May, 1997, by and between APPLIED SCIENCE AND TECHNOLOGY, INC.
("BORROWER") a Delaware corporation with its principal place of business at 35
Cabot Road, Woburn, Massachusetts 01801, and STATE STREET BANK AND TRUST COMPANY
("BANK"), a Massachusetts trust company organized and existing under the laws of
the Commonwealth of Massachusetts.
W H E R E A S:
Borrower desires to borrow the sum of Four Million Nine Hundred
Eighty-Three Thousand Fifty-One Dollars ($4,983,051.00) from Bank, which
borrowing is sometimes referred to herein as (the "LOAN"), for its working
capital needs as well as for the acquisition of Sorbios GmbH and Converter
Power, Inc. (the "Acquisition Entities"). Bank is willing to make the Loan in
consideration of the undertakings of Borrower set forth herein and in the other
documents evidencing and/or constituting the Loan.
IN CONSIDERATION THEREOF, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.0 When used herein, the terms set forth below shall be defined as
follows:
"EVENT OF DEFAULT" shall mean each and every event specified in Article
IX of this Agreement or set forth under the Note, as an event of default.
"NOTE" shall mean the Term Promissory Note of Borrower, executed as of
the date hereof and delivered simultaneously herewith.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, and any other
instrument or instruments entered into pursuant to or in connection with this
Agreement, as such instruments may be amended, supplemented or modified from
time to time.
"LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, depositor arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential agreement, charge, or encumbrance of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
-1-
"MARKET RATE" shall mean an amount equal to the Base Market Rate (as
hereinafter defined) plus 150 basis points. For purposes of this definition, the
term "Base Market Rate" shall mean the fixed rate of interest quoted by the Bank
on the date the Loan funds under the Market Rate Note are advanced, in its sole
discretion, which rate shall be determined solely by the Bank based upon the
Bank's cost of funds.
"MARKET RATE LOAN(S)" means that portion of the Loan for which interest
is based on the Market Rate as set forth in Article II hereof.
"OBLIGATIONS" shall mean any and all indebtedness, obligations and
liabilities of Borrower to Bank arising under any agreement with the Bank, of
every kind and description, direct or indirect, secured or unsecured, joint or
several, absolute or contingent, due or to become due, whether for payment or
performance, now existing or hereafter arising; including, without limitation,
all indebtedness under the Loan (including by renewal or extension of the Loan)
any and all sums which may be advanced by Bank pursuant to this Agreement or any
other agreement between the Bank and the Borrower, and all interest, taxes,
fees, charges, expenses and reasonable attorney's fees chargeable to Borrower
under this Agreement.
"PRIME RATE" shall mean the rate of interest announced from time to
time by Bank at its head office in Boston, Massachusetts as its "Prime Rate".
"PRIME RATE LOAN(S)" means that portion of the Loan for which interest
is based on the Prime Rate as set forth in Article II hereof.
"TANGIBLE NET WORTH" means the excess of total assets over total
liabilities, (total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles) ("GAAP") consistent
with those applied in the preparation of the financial statements referred to in
Sections 6.7(1) and (2) excluding, however, from the determination of total
assets all assets which would be classified as intangible, without limitation,
goodwill, patents, trademarks, tradenames, copyrights, franchises, and
intangibles.
1.1. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in the preparation of the Borrower's financial statements, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
such principles, except interim financial data which may be subject to year-end
adjustments.
-2-
ARTICLE II
AMOUNT AND TERMS OF LOANS
2.0 Promptly following the execution and delivery of the Note, Bank,
agrees to make advances to Borrower under the Loan under and subject to the
following terms and conditions:
(a) The Loan is structured as a $4,983,051.00 unsecured term loan.
Funds shall be available under the Loan only in accordance with the terms of
this Agreement. The Loan will be due May 31, 2002 ("Maturity") and will be
evidenced by a Term Promissory Note of Borrower dated the date hereof and issued
in the original principal amount of $4,983,051.00.
(b) The Borrower shall pay interest to the Bank on the outstanding and
unpaid principal amount of the Loan, at interest rates as called for in each
Note. Interest shall be calculated on the basis of actual days elapsed and a
360-day year.
(c) The Borrower may at any time prepay any Prime Rate Loans portion of
the Loan in whole or in part without penalty with accrued interest to the date
of such repayment on the amount prepaid. To the extent any part of the Loan is a
Prime Rate Loan, Borrower may at anytime convert such Loan to a Market Rate
Loan. Notwithstanding the foregoing. To the extent Bank has made a Market Rate
Loan to Borrower, such Loan may not be pre-paid except pursuant to the
provisions of sub-section (d) hereof.
(d) In the event of prepayment of the Market Rate Loan, in whole or in
part, either at the Borrower's initiative or upon the exercise by the Bank of
its rights in the event of, an Event of Default, the Borrower agrees to pay to
the Bank its lost net interest income resulting from the prepayment. Therefore,
the Borrower's payment to the Bank in respect of such prepayment shall consist
of the principal amount being prepaid, all interest owing up to the date of such
prepayment, together with the Bank's lost net interest income, if any, computed
as described below. As of the date of prepayment of any Market Rate Loan, the
Bank will determine the interest rate differential between the rate stated
herein for such Market Rate Loan and the yield on a United States Government
Treasury Note with the maturity closest to such Market Rate Loan as the same is
reported in The Wall Street Journal of that day (reporting the previous day's
activity). In the event that the rate differential so determined is such that
the Treasury Note yield is greater than the Market Rate Loan yield, no lost net
interest income shall be paid to the Bank, nor, in any event, shall any such sum
be owed by the Bank to the Borrower. In the event that the rate differential so
determined is such that the Market Rate Loan yield is greater than the Treasury
Note yield, the difference shall be multiplied by the principal amount of the
Market Rate Loan which is being prepaid, computed monthly for the remaining term
of such Market Rate Loan; the present value of such monthly compensation shall
be calculated and paid to the Bank as its lost net interest income. For the
purpose of computing
-3-
present value, the interest rate used for discounting shall be the bond
equivalent yield of the United States Treasury Bill rate as reported in The Wall
Street Journal of that day (reporting the previous day's activity) reflecting a
term closest to the remaining term of the Loan. Any lost net interest income
paid or payable to the Bank hereunder as a result of any prepayment of a Market
Rate Loan is sometimes referred to as a "MARKET RATE PREMIUM". To the extent
there is due from Borrower to the Bank any Market Rate Premium, the amount of
such Market Rate Premium shall be reduced dollar for dollar by the amount the
Borrower pays to the Bank in default rate interest pursuant to the second
paragraph of the Market Rate Note.
ARTICLE III
USE OF LOAN PROCEEDS
3.0 The proceeds of the Loan hereunder shall be used only for the
Borrower's acquiring the Acquisition Entities and for no other purpose (the
"ACQUISITION TRANSACTION") and refinancing certain of the Borrower's prior
obligations to Bank made in connection with the acquisition by Borrower of ETO,
Inc.
ARTICLE IV
CONDITIONS PRECEDENT TO THE LOAN
4.0 The undertaking of the Bank to make the Loan is subject to the
condition precedent that the Bank shall have received on or before the day of
such Loan each of the following in form and substance satisfactory to the Bank
and its counsel:
4.1 A certificate of even date herewith of an officer of Borrower,
identifying the officer or officers of Borrower, authorized to execute this
Agreement, the Note, and such other documents to be delivered pursuant to this
Agreement, and affixed thereto shall be true copies of resolutions of Borrower,
authorizing the transactions contemplated herein, the execution, delivery and
performance of this Agreement, the Note, and any other document or instrument to
be delivered pursuant hereto;
4.2 The Note, duly executed by Borrower and delivered to Bank;
4.3 An opinion of Borrower's counsel in form and substance satisfactory
to the Bank and its counsel.
4.4 Certificate of legal existence and tax good standing for Borrower;
4.5 Documents and Certificates evidencing registration and good
standing in all jurisdictions where the Borrower has applied for such
registration;
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4.6 A certified copy of the corporate charter documents of Borrower;
4.7 A certified copy of the By-Laws of Borrower;
4.8 UCC-3 Negative Pledge Statements executed by Borrower in such form
and substance as Bank and its counsel shall require.
4.9 Such other documents or certificates as may be reasonably requested
by Bank and/or as are required under the terms of this Agreement, and any other
documents or agreements to which Bank, and the Borrower are parties;
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.0 As a material inducement to Bank to make the Loan to Borrower
hereunder, Borrower, represents and warrants to Bank and such representations
and warranties shall be continuing representations and warranties during the
term of this Agreement and so long thereafter as any Obligations shall remain
outstanding, as follows:
5.1 The Borrower is a corporation duly incorporated, validly existing,
and in good standing under the laws of the state of its incorporation; has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged in; and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required.
5.2 The execution, delivery, and performance by the Borrower of this
Agreement, the Note and other Loan Documents to which it is a party have been
duly authorized by all necessary corporate action and do not and will not (1)
require any consent or approval of the stockholders of the Borrower; (2)
contravene the Borrower's charter or bylaws; (3) violate any provision of any
law, rule, regulation (including, without limitation, Regulation U of the Board
of Governors of the Federal Reserve System), the violation of which would have a
material adverse effect on the business or operations of the Borrower or any
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability; (4) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other agreement, lease,
or instrument to which the Borrower is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower; and (6) cause the Borrower to be in violation of or
default under any such law, rule, regulation, or any such indenture, agreement,
lease, or instrument which default would have a material and adverse effect on
the business or operation of the Borrower or under any order, writ, judgment,
injunction, decree, determination or award.
-5-
5.3 This Agreement is, and each of the other Loan Documents when
delivered under this Agreement will be, legal, valid, and binding obligations of
the Borrower enforceable against the Borrower, in accordance with their
respective terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, and other similar laws affecting creditors'
rights generally and general equity principles.
5.4 The consolidated balance sheet of the Borrower and its consolidated
subsidiaries as of June 29, 1996 and the related consolidated statements of
income, cash flows and stockholders' equity for the fiscal year then ended,
reported on by KPMG Peat Marwick LLP and set forth in the Borrower's 1996 Form
10-K, a copy of which has been delivered to the Bank, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash flows for such fiscal
year, and since the date through which the financial statements cover, there has
been (a) no material adverse change in the condition (financial or otherwise),
business, or operations of Borrower; (b) no damage, destruction or loss
materially adversely affecting Borrower's business; (c) no declaration of making
of any dividend or other distribution to stockholders of the Borrower with
respect to Borrower's capital stock or any direct or indirect redemption,
purchase or other acquisition of any such stock; (d) no increase in compensation
payable or to become payable by Borrower to any of its executive officers or any
general wage increase except in the ordinary course of the Borrower's business;
or (e) no materially adverse controversy with employees, labor unions or
governmental agencies. There are no liabilities of Borrower, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business.
5.5 Neither the business nor the properties of the Borrower are
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance) materially and
adversely affecting such business or properties or the operation of the
Borrower.
5.6 The Borrower has not materially violated, nor is the Borrower in
material violation of, any applicable law or regulation, which violation would
have a material and adverse effect on the business or operations of the Borrower
or any order, judgment, or decree. The Borrower is not a party to any contract
or other agreement, or subject to any restrictions under its charter documents,
bylaws or other corporate instrument, or subject to any order, judgment, rule,
regulation, or decree of any court or governmental authority, which materially
and adversely affects its business, properties, assets or financial condition or
which restricts or otherwise limits its incurring of the Loan or its performance
and observance of its Obligations. Neither the execution and delivery by
Borrower, nor the compliance by Borrower
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with the terms and conditions, of this Agreement, or any Loan Document to which
Borrower is a party, conflicts or will conflict with, constitutes or will
constitute a default under, or results or will result in any violation of, the
charter documents or By-laws of Borrower, any award of any arbitrator, and to
Borrower's knowledge, any law, any order, judgment, rule, regulation or decree
of any court or governmental authority, or any agreement or instrument to which
Borrower is a party or any of its property is subject; nor does the same result
nor will it result in the creation or imposition of any Lien upon any of its
property except the Liens created by this Agreement or any other Loan Document.
5.7 Except as set forth in Borrower's 1996 Form 10-K, there is no
pending or, to the Borrower's knowledge, threatened action or proceeding against
or affecting the Borrower before any court, governmental agency, or arbitrator
which may, in any one case or in the aggregate, materially adversely affect the
financial condition, operations, properties, or business of the Borrower or the
ability of the Borrower to perform its Obligations under the Loan Documents to
which it is a party.
5.8 The Borrower has satisfied all judgments and the Borrower is not in
default with respect to any judgment, writ, injunction, or decree of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
5.9 The Borrower has good and clear record and marketable title to all
properties and assets which it purports to own, free and clear of all mortgages,
liens, pledges, charges, security interests and encumbrances, other than those
being granted to the Bank, pursuant hereto, if any, and those reflected on
Schedule 5.9.
5.10 There are currently five wholly-owned subsidiaries of Borrower and
except as set forth on Schedule 5.10, Borrower has no investments in the stock
or securities of any other corporation, firm, trust or other entity.
5.11 To the best knowledge of the Borrower, the Borrower possesses, all
licenses, permits, franchises, patents, copyrights, trademarks, and trade names,
or rights thereto, to conduct its business substantially now as conducted and as
presently proposed to be conducted, and the Borrower is not in any material
violation of any rights of others with respect to any of the foregoing.
5.12 The Borrower has filed all income tax returns, excise tax returns
and other tax returns (federal, state, and local) required to be filed and has
paid all taxes, assessments, and governmental charges and levies thereon to be
due, including interest and penalties. To the Borrower's knowledge, no audit or
investigation is presently being conducted with regard to any tax return or tax
obligation of Borrower.
-7-
5.13 No employee pension benefit plan or other plan (within the meaning
of Section 3(2) of the Employees Retirement Income Security Act of 1974, as
amended ("ERISA")) which is or was sponsored at any time, by Borrower or any
member of a controlled group of corporations within the meaning of Section
414(b) of the Internal Revenue Code of 1954, as amended (the "Code"), or any
member of a group of commonly controlled trades or businesses (whether or not
incorporated) within the meaning of Section 414(c) of the Code of which Borrower
is a member ("Plan"): (i) has incurred an "accumulated funding deficiency"
(within the meaning of Section 302(a)(2) of ERISA), or which could result in a
liability of Borrower (which liability could materially adversely affect the
financial conditions of Borrower) under Section 409 of ERISA or Section 4975 of
the Code or pursuant to any agreement or statute with respect to liabilities
incurred by an person under such sections. No material liability to the Pension
Benefit Guaranty Corporation ("PBGC"), to a Plan, or to any participant in or
beneficiary of a Plan has been or, to the present knowledge of Borrower, is
expected to be incurred with respect to any Plan by Borrower, and there has been
no event or condition which presents a risk of termination of any Plan by PBGC.
None of the following events has occurred or, to the knowledge of Borrower, is
expected to occur, with respect to any multi-employer plan (as that term is
defined in Section 3(37) of ERISA) to which any Borrower or any member of a
controlled group of corporations or any member of a group of commonly controlled
trades or businesses of which Borrower is a member, contributes on behalf of its
employees (the "Contributing Employers") which has resulted or could result in
any material liability of the Borrower to PBGC, to such multi-employer plan, or
to any participant in or beneficiary of such multi-employer plan: (i) a
withdrawal, either complete or partial, from any such plan (within the meaning
of Section 4203 or Section 4205, respectively, of ERISA) by a Contributing
Employer; (ii) the termination of any such plan; or (iii) the recording of a
reorganization index (as defined by Section 4241 of ERISA) in excess of zero by
any such plan.
5.14 Except as set forth in SCHEDULE 5.14, the Borrower has never:
(a) owned, occupied, or operated a site or vessel on which any
hazardous material or oil was or is stored, transported, or
disposed of (the terms site, vessel, and hazardous material
respectively being used in this Agreement with the meaning given
those terms in M.G.L. C. 21E); or
(b) directly or indirectly transported, or arranged for the
transport of any hazardous material or
oil; or
(c) caused or been legally responsible for any release or threat of
release of any hazardous material or oil; or
-8-
(d) received notification from any federal, state, or other
governmental authority of any potential or known release or
threat of release of any hazardous material or oil from any site
or vessel owned, occupied, or operated by the Borrower or any
person for whose conduct the Borrower is responsible, and/or of
the incurrence of any expense or loss by such governmental
entity.
5.15 SCHEDULE 5.15 annexed hereto is a listing of all patents and/or
patents pending, trademarks, copyrights, licenses and similar agreements in
which the Borrower has an interest.
5.16 SCHEDULE 5.16 is a complete and correct list of all credit
agreements, indentures, purchase agreements (other than for materials, supplies
and services entered into in the ordinary course of business), guaranties,
leases (requiring lease payments in the aggregate of $600,000.00 annually), and
other investments, agreements, and arrangements presently in effect providing
for or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which the Borrower or any subsidiary is in any manner directly or contingently
obligated; and the maximum principal or face amounts of credit in question,
which are outstanding and which can be outstanding, are correctly stated, and
all Liens of any nature given or agreed to be given as security therefor are
correctly described or indicated in such Schedule.
5.17 Borrower is not in default with respect to any agreement to which
it is a party or by which it is bound, which default would have a material
adverse effect on the Borrower's business, operations and financial statement.
5.18 No consent or approval of any person, no waiver of any lien or
other similar right, and no consent, license, approval, authorization, or
declaration of any governmental authority, bureau, or agency is or will be
required in connection with the execution, delivery, performance, validity,
enforcement, or priority of this Agreement, the Note, or any other agreement,
instrument, or document to be executed or delivered in connection herewith.
5.19 No representation, warranty, or statement by Borrower contained
herein or in any certificate or other document furnished or to be furnished by
Borrower pursuant hereto contains or at the time of delivery shall contain any
untrue statement of material fact, or omits, or shall omit at the time of
delivery, to state a material fact necessary to make it not misleading.
5.20 The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
-9-
ARTICLE VI
AFFIRMATIVE COVENANTS
6.0 Borrower covenants and agrees that during the term of this
Agreement and so long thereafter as any Obligations remain outstanding the
Borrower will:
6.1 Keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, subject to year end adjustments, reflecting all financial
transactions of the Borrower, including complete records of all accounts of
Borrower, as defined in the Massachusetts Uniform Commercial Code.
6.2 Maintain, keep, and preserve all of its properties (tangible and
intangible) necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted. Borrower shall use
its best efforts to maintain in full force and effect all rights, patents,
licenses, permits and privileges necessary for the proper conduct of its
business.
6.3 Continue to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
6.4 Maintain insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as the Bank
shall reasonably require and as are usually carried by companies engaged in the
same or a similar business and similarly situated, which insurance may provide
for reasonable deductibility from coverage thereof.
6.5 Comply in all material respects with applicable laws, rules,
regulations, and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property, noncompliance with which would
have a material and adverse effect on the business and operations of the
Borrower.
6.6 At any reasonable time during business hours and from time to time,
permit the Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of the Borrower and to discuss the affairs, finances, and accounts of
the Borrower with any of their respective officers and directors and the
Borrower's independent accountants. Such visits will be conducted in a manner
which does not interfere with the normal operations of the Borrower.
6.7 Furnish to the Bank:
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(1) Promptly after the commencement thereof, notice of all actions,
suits, and proceedings before any court or governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign, affecting the
Borrower, which, if determined adversely to the Borrower, could have a material
adverse effect on the financial condition, properties, or operations of the
Borrower;
(2) Such other information respecting the condition or operations,
financial or otherwise, receivables, inventory, machinery or equipment of the
Borrower as the Bank may from time to time reasonably request.
(3) Promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed.
(4) Within five business days of the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Borrower shall have filed with the
Securities and Exchange Commission.
(5) The Borrower will, at the time of delivery to the Bank of the
reports referred to in the above subsections (1) and (2) deliver to the Bank
certificates signed by any individual duly authorized by the Borrower certifying
that such individual has reviewed the provisions of this Agreement and stating
in his opinion, if such be the fact, that the Borrower has not been and is not
in default as to any of the covenants and agreements of the Borrower contained
in this Agreement.
6.8 From time to time, execute and deliver to the Bank all such other
and further instruments or documents and take or cause to be taken all such
other and further action as the Bank may reasonably request in order to effect
and confirm or vest more securely in the Bank all rights contemplated in this
Agreement.
6.9 Other than its subsidiaries, maintain all of its operating Accounts
with the Bank.
6.10 Conform, adhere to, and observe all covenants and warranties
contained in any other agreement between the Bank and the Borrower, or
instrument furnished by the Borrower to the Bank.
6.11 Preserve and maintain its corporate existence and good standing in
the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required.
6.12 Use the proceeds of the Loan only for the purpose intended. The
Borrower acknowledges the Loan has been and shall be made available subject to
the terms hereof.
-11-
6.13 The Borrower will punctually and promptly make all payments and
perform all other obligations which may be required of it with respect to any
indebtedness (whether for money borrowed, goods purchased, services rendered or
however such indebtedness may otherwise arise) owing to persons, firms or
corporations other than the Bank, including, without limitation, indebtedness
which may be secured by a security interest in assets of the Borrower or
property of the Borrower, and all obligations under the terms of any lease in
which the Borrower is the lessee. The provisions of this section shall not
preclude the Borrower from contesting in good faith and diligently defending
against any such indebtedness or obligation.
6.14 Pay and/or perform promptly when due all of the Obligations and
liabilities of Borrower including, without limitation, the payment of all sales,
use, excise, personal property, income, withholding, corporate, franchise, and
other taxes, assessments, and governmental charges upon or relating to its
ownership or use of any of its assets or its income, or the operation of its
business or otherwise for which Borrower is or may be liable except to the
extent the same are being diligently contested in good faith and adequate
provision has been made for payment and upon such request shall submit to Bank
proof satisfactory to Bank that such payments and/or deposits have been made.
6.15 Pay or cause to be paid when due all amounts necessary to fund in
accordance with their terms all such deferred compensation plans, whether now in
existence or hereafter created, and the Borrower will not withdraw from
participation in, permit the termination or partial termination of, or permit
the occurrence of any other event with respect to, any deferred compensation
plan maintained for the benefit of its employees under circumstances that could
result in liability to the Pension Benefit Guaranty Corporation, or any of its
successors or assigns, or to the entity which provides funds for such deferred
compensation plan.
6.16 Promptly notify Bank if any time (i) a Plan incurs an "accumulated
funding deficiency" (as defined in Sections 412(a) of the Code), whether or not
waived; (ii) a "reportable event" (within the meaning of Section 4043(b) of
ERISA) occurs with respect to a Plan; (iii) Borrower engages in any transaction
which violates Section 406 or Section 407 of ERISA or which could result in a
liability under Section 409, 501 or 502 of ERISA or Section 4975 of the Code or
pursuant to any agreement or statute with respect to liabilities incurred by any
person under such sections, which liability could materially affect the
financial condition of such Borrower; (iv) Borrower incurs a material liability
to the PBGC or to any participant in or beneficiary of a Plan with respect to
any Plan; (v) an event occurs or a condition arises which presents a risk of
termination of any Plan by the PBGC; (vi) Borrower is notified by the Internal
Revenue Service or the Department of Labor that the Plan is not or may not be
qualified under Section 401(a) of the Code or that the trust established
thereunder is not or may not be exempt from tax under Section
-12-
501(a) of the Code; (vii) any of the following events occurs with respect to any
multi-employer plan (as defined in Section 3(37) of ERISA) to which the borrower
or any member of a group of commonly controlled trades or businesses within the
meaning of Section 414(c) of the Code of which any Borrower is a member or
contributes on behalf of its employees: (A) a withdrawal, either complete or
partial, from any such plan (within the meaning of Section 4202 or Section 205,
respectively, or ERISA) by a Contributing Employer or a decision by the
Contributing Employer to withdraw completely or partially from such plan; (B)
the termination of any such plan; or (C) the recording of a reorganization index
(as defined by Section 4241 of ERISA) in excess of zero by any such plan.
6.17 (a) Provide the Bank with written notice upon the Borrower's
obtaining knowledge of any potential or known release or threat of release of
any hazardous material or oil at or from any site owned, occupied, or operated
by the Borrower (the Bank acknowledges receipt of notice of the matters
contained in Schedule 5.14); upon the Borrower's receipt of any notice to such
effect from any federal, state, or other governmental authority; and/or upon the
Borrower's obtaining knowledge of any incidence of any expense or loss by such
governmental authority in connection with the assessment, containment, or
removal of any hazardous material or oil for which expense or loss the Borrower
may be liable; and (b) in the event of a release of hazardous material or oil,
take all such action, including without limitation, the conducting of
engineering tests (at the expense of the Borrower) to confirm that no hazardous
material or oil is or ever was stored on any site owned, occupied, or operated
by the Borrower.
ARTICLE VII
NEGATIVE COVENANTS
7.0 Borrower agrees that during the term of this Agreement and so long
thereafter as any Obligations remain outstanding, it will not, without the prior
written consent of Bank, which consent shall not be unreasonably withheld or
delayed:
7.1 (i) sell or convey all or substantially all of the Borrower's
assets, (ii) except for the Acquisition Transaction enter into any merger or
consolidation; (iii) effect any reorganization or recapitalization; or (iv)
except with respect to the Acquisition Transaction, redeem any shares of the
Borrower, merge or consolidate with (unless it is the survivor corporation) or
sell, assign, lease, or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any person.
7.2 Create, incur, assume, or suffer to exist, or permit any subsidiary
(if any exist) to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:
-13-
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(3) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings, provided they do not adversely
affect the Borrower in a material way;
(4) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement of a capital lease;
(5) Permitted Encumbrances, as identified on Schedule 5.9;
(6) Any Lien existing on any asset of any corporation at the time such
corporation becomes a consolidated subsidiary of Borrower;
(7) Any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a
consolidated subsidiary;
(8) Any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a consolidated subsidiary and not created in contemplation of
such acquisition;
7.3 Create, incur, assume, or suffer to exist, or permit any subsidiary
(if at any time existing) to create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal property,
except: (1) leases existing on the date of this Agreement and any extensions or
renewals thereof; (2) leases, of which the total annual obligation under any
such lease is not more than $600,000.00.
7.5 Sell, lease, assign, transfer, or otherwise dispose of, any of its
now owned or hereafter acquired assets (including, without limitation, shares of
stock and indebtedness of subsidiaries, receivables, and leasehold interests),
except: (1) for inventory disposed of in the ordinary course of business; (2)
the sale or other disposition of assets no longer used or useful in the conduct
of its business or (3) in connection with the Acquisition Transaction.
-14-
7.6 Assume, guarantee, endorse, or otherwise be or become directly or
contingently responsible or liable, or permit any subsidiary (if at any time
existing) to assume, guarantee, endorse, or otherwise be or become directly or
contingently responsible or liable (including, but not limited to, an agreement
to purchase any obligation, stock, assets, goods, or services, or to supply or
advance any funds, assets, goods, or services, or to maintain a minimum working
capital or net worth, or otherwise to assure the creditors of any person or
entity against loss) for obligations of any person or entity, except (1)
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; (2) in connection with
the Acquisition Transaction; and (3) guaranties of residential real estate
mortgages of employees not to exceed $500,000 for any single mortgage and
$1,000,000 in the aggregate.
7.7 Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any affiliate, or permit any subsidiary to enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any affiliate, or the making of advances to
any affiliates except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrower or such subsidiary
than would obtain in a comparable arm's-length transaction with a party not an
affiliate.
7.8 Declare or pay any dividends; or purchase, redeem, retire or
otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution of assets to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on
or for the purchase, redemption, or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock; or permit any of its Subsidiaries to
purchase or otherwise acquire for value any stock of the Borrower or another
Subsidiary, except that (1) the Borrower may declare and deliver dividends and
make distributions payable solely in common stock of the Borrower or any
subsidiary; (2) the Borrower may declare dividends in an amount sufficient to
pay taxes, for profits not distributed, if the Borrower elects S Corporation
status; and (3) with the written consent of the Bank, which shall not be
unreasonably withheld, the Borrower may purchase or otherwise acquire shares of
its capital stock by exchange for or out of the proceeds received from a
substantially concurrent issue of new shares of its capital stock.
7.9 Except with respect to the Acquisition Transaction, make, or permit
any subsidiary to make, any loan or advance to any party (except loans to
employees, each of which shall not exceed $50,000.00 at any time), or purchase
or otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any capital stock, assets, obligations, or other securities of, make
-15-
any capital contribution to, or otherwise invest in or acquire any interest in
any entity, except: (1) direct obligations of the United States of any agency
thereof with maturities of one year or less from the date of acquisition; (2)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investor's Service, Inc,; (3) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank having capital and surplus in excess of One Hundred
Million ($100,000,000) Dollars; (4) stock, obligations, or securities received
in settlement of debts (created in the ordinary course of business owing to the
Borrower or any Subsidiary; and (5) investments made pursuant to the Borrower's
investment policy as set forth in Schedule 7.9.
7.10 Except as otherwise provided above, issue evidence of indebtedness
or create, assume, become contingently liable for, or suffer to exist bank debt
in addition to Obligations to the Bank; provided, however, that the Borrower may
incur liabilities which are incurred or arise in the ordinary course of
Borrower's business other than indebtedness arising with respect to money
borrowed or the issuance of letters of credit for the account of the Borrower
both of which shall be prohibited.
7.11 Sell or otherwise dispose of any shares of capital stock of any
subsidiary, except in connection with a transaction permitted under Section 7.3,
or permit any subsidiary to issue any additional shares of its capital stock,
except director's qualifying shares.
7.12 Change its name without prior written notification to the Bank.
7.13 Without prior written notice to the Bank, open or operate any
place of business other than those places listed on SCHEDULE 7.13, attached
hereto and made a part hereof.
7.14 Except in connection with the Acquisition Transaction, make any
loan, advance, pay any bonus, or grant any extension of credit to any
corporation, partnership, person or other entity, except extensions of credit to
customers or otherwise in the ordinary course of business.
7.15 Except in connection with the Acquisition Transaction, make or
permit any substantial change in, or cease in whole or in part, its present
business, or engage in any other activities apart from its present business.
7.16 Undertake negative covenants in substance similar to those set
forth herein in favor of any other party.
-16-
ARTICLE VIII
FINANCIAL COVENANTS
8.0 So long as the Note shall remain unpaid or the Bank shall have any
commitment under this Agreement:
(1) The Borrower will maintain Minimum Working Capital of not less than
$13,000,000.00 at the end of each calendar quarter.
(2) The Borrower will maintain at all times a Maximum Debt to Tangible
Net Worth ratio of no more than: (i) 2.0:1 by fiscal year end 1997; (ii) 1.75:1
by fiscal year end 1998; and (iii) 1.50:1 by fiscal year end 1999.
(3) As of June 28, 1997, the Borrower's fourth quarter, the Borrower
will maintain a Tangible Net Worth of not less than $13,500,000.00. Thereafter,
the Borrower's Tangible Net Worth will increase (as of the end of each of the
Borrower's quarters) by a minimum of 40% of the prior quarter's Net Income.
(4) The Borrower will maintain Minimum Debt Service Coverage defined as
the ratio of aggregate Net Income of the Borrower plus aggregate depreciation,
plus aggregate amortization, less aggregate Capital Expenditures not financed on
a long-term basis to Current Maturities of Long Term Debt of the Borrower of
.75:1 at fiscal year end 1997, 1:15:1 at fiscal year end 1998, and 1.75:1 at
fiscal year end 1999 and thereafter. This covenant shall be tested on a rolling
quarterly basis for a four fiscal quarter period.
(5) The Borrower will not suffer a negative Net Income during any two
consecutive quarters.
Capitalized terms otherwise not defined herein shall be defined in
accordance with GAAP.
All of the above covenants shall be tested quarterly beginning June 28,
1997. Notwithstanding the covenants listed above, the Bank in its discretion may
revise such covenants to reflect the in-process research and development
write-off in connection with the Acquisition.
ARTICLE IX
EVENTS OF DEFAULT, ACCELERATION AND SETOFF
9.0 The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
(1) Failure of the Borrower to pay within ten (10) days, the principal
of, or interest on, the Note as and when due and payable; or
-17-
(2) Any material representation or warranty made or deemed made by the
Borrower in this Agreement, or in any of the Loan Documents, or which is
contained in any certificate, document, opinion, or financial or other statement
furnished at anytime under or in connection with any Loan Document shall prove
to have been incorrect in any material respect on or as of the date made or
deemed made; or
(3) The Borrower shall fail to perform or observe any material term,
covenant, or agreement contained in any Loan Document (other than the Note) on
its part to be performed or observed within twenty (20) days after receipt of
notice from the Bank; or
(4) The Borrower shall (a) fail to pay any indebtedness for borrowed
money (other than the Note) of the Borrower or any interest or premium thereon,
when due, subject to any grace or cure period relating to such indebtedness,
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise), (whether or not related to this transaction or owed to the Bank or
another person) or (b) fail to perform or observe any material term, covenant,
or condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, subject to any grace or cure period relating to such indebtedness, if
the effect of such failure to perform or observe is to accelerate, or to permit
the acceleration after the giving of notice or passage of time, or both, of the
maturity of such indebtedness, unless such failure to perform or observe shall
be waived by the holder of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(5) There exists any breach or default of the Borrower under:
(i) that certain $8,000,000.00 Term Loan Agreement among
Bank and Borrower dated December 21, 1995 as amended by
that certain Amendment and Ratification of Term Loan
Agreement of even date herewith and all documents and
certificates executed in connection therewith,
including without limitation that certain Term
Promissory Note (Market Rate) of December 21, 1995
delivered by Borrower to Bank;
(ii) that certain $8,000,000.00 Unsecured Committed Revolver
Loan Agreement among Bank and Borrower of even date
herewith and all documents and certificates executed in
connection therewith, including without limitation,
that certain Unsecured Committed Revolver Promissory
Note of even date herewith delivered by Borrower to
Bank.
-18-
(6) The Borrower (a) shall generally not, or shall be unable to, or
shall admit in writing its inability to pay its debts as such debts become due;
or (b) shall make an assignment for the benefits of creditors, petition or apply
to any tribunal for the appointment of a custodian, receiver, or trustee for it
or a substantial part of its assets; or (c) shall file a petition or application
or otherwise commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (d) shall have any such
petition or application filed or any such proceeding commenced against it in
which an order for relief is entered or adjudication or appointment is made; or
(e) by any act or omission shall indicate its consent to, approval of, or
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or any
substantial part of its properties; or (f) shall suffer any custodianship,
receivership, or trusteeship; or
(7) One or more judgments, decrees, or orders for the payment of money
in excess of an aggregate of Ten Thousand ($10,000.00) Dollars in the aggregate
shall be rendered against the Borrower or any of their Subsidiaries and such
judgments, decrees, or orders shall continue unsatisfied and in effect for a
period of thirty (30) consecutive days without being vacated, discharged,
satisfied, or stayed or bonded pending appeal; or
(8) The service of any process on the Bank attaching by trustee process
any assets of the Borrower held by the Bank in an amount greater than
$25,000.00; or
(9) Borrower shall suffer any uninsured material loss, uninsured theft,
uninsured substantial damage, to or of any property;
9.1 If any Event of Default shall occur and continue beyond any grace
period provided under this Agreement then or at any time thereafter, Bank may
declare all Obligations to be due and payable, without notice except as
expressly required, protest, presentment or demand, all of which are hereby
expressly waived by Borrower.
9.2 Simultaneously with the sending of a notice of default Bank shall
have the right to setoff any and all deposits or other sums at any time or times
credited by or due from Bank to Borrower, whether in a special account or other
account or represented by a certificate of deposit, which deposits and other
sums shall at all times constitute additional security for the Obligations and
may be setoff against all or any part of the Obligations at any time if Borrower
is the primary obligor with respect to such Obligations, or, at or after the
maturity of Obligations if Borrower is secondary obligor.
-19-
ARTICLE X
TERM OF AGREEMENT
10.0 The term of this Agreement shall commence on the date hereof and
shall continue in full force and effect and be binding upon Borrower until all
Obligations shall have been fully paid and satisfied.
ARTICLE XI
GENERAL PROVISIONS
11.0 The failure of Bank at any time or times hereafter to require
strict performance by Borrower of any of the provisions, warranties, terms, and
conditions contained in this Agreement or in any other agreement, guaranty,
note, instrument, now or at any time or times hereafter executed by Borrower and
delivered to Bank shall not waive, affect, or diminish any right of Bank at any
time or times hereafter to demand strict performance thereof; and no rights of
Bank hereunder shall be deemed to have been waived by any act or knowledge of
Bank, its agents, officers, or employees unless such waiver is contained in an
instrument in writing signed by an officer of Bank and directed to Borrower
specifying such waiver. No waiver by Bank of any of its rights shall operate as
a waiver of any other of its rights or any of its rights on a future occasion.
11.1 All notices and other communications provided for under this
Agreement and under the other Loan Documents to which the Borrower is a party
shall be in writing and mailed or hand delivered:
If to the Borrower: Applied Science and Technology,
Inc.
35 Cabot Road
Woburn, MA 01801
ATTN: John M. Tarrh
With a copy to: Neil H. Aronson, Esquire
Peggy Hill, Esquire
O'Connor, Broude & Aronson
950 Winter Street
Waltham, MA 02154
If to the Bank: State Street Bank and Trust
Company
225 Franklin Street
Boston, MA 02110
ATTN: Suzanne L. Dwyer
With a copy to: Bradley W. Snyder, Esquire
Ron M. Hadar, Esquire
Looney & Grossman, LLP
101 Arch Street
Boston, MA 02110
-20-
or such other address as shall be designated by such party in a written notice
to the other party complying as to delivery with the terms of this Section 11.1.
All such notices and communication shall be effective when deposited in the
mail, addressed as aforesaid, registered or certified mail, return receipt
requested, or sent by messenger or overnight courier with a signed receipt, or
the date of actual receipt, whichever first occurs.
11.2 This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated herein and such
understanding shall not be modified except in writing signed by or on behalf of
the parties hereto.
11.3 Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law.
Should any portion of this Agreement be declared invalid for any reason in any
jurisdiction, such declaration shall have no effect upon the remaining portions
of this Agreement, and furthermore, the entirety of this Agreement shall
continue in full force and effect in all other jurisdictions and said remaining
portions of this Agreement shall continue in full force and effect in the
subject jurisdiction as if this Agreement had been executed with the invalid
portions thereof deleted.
11.4 The provisions of this Agreement shall be binding upon and shall
inure to the benefit of the successors and assigns of Bank and the Borrower,
provided, however, that the Borrower may not assign any of its rights or
delegate any of its obligations hereunder without the prior written consent of
Bank, which consent shall not be unreasonably withheld or delayed.
11.5 This Agreement, the Note and all other documents hereunder have
been made and delivered in The Commonwealth of Massachusetts and shall be
governed by, and construed in all respects in accordance with the laws and
decisions of The Commonwealth of Massachusetts and Borrower submits to the
Jurisdiction of Massachusetts for all purposes with respect to this Agreement
and all other documents hereunder and its relationship with Bank.
11.6 The Borrower will pay or reimburse the Bank, on demand, for all
reasonable expenses (including, without limitation, reasonable counsel fees and
expenses) incurred or paid by the Bank in connection with the enforcement by the
Bank of its rights as against the Borrower or any other person primarily or
secondarily liable to the Bank hereunder or thereunder; and after an Event of
Default or demand, for the administration, supervision, protection or
realization on any collateral held by the Bank as security for any obligation of
the Borrower or any other person primarily or secondarily liable with respect
thereto; and in the defense of any
-21-
action against the Bank with respect to its rights or liabilities hereunder or
thereunder. In addition, the Borrower shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of any of the Loan documents and the
other documents to be delivered under any such Loan documents.
11.7 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
11.8 The section headings herein are included for convenience only and
shall not be deemed to be a part of this Agreement.
11.9 BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY THE BORROWER MAY HAVE IN
ANY ACTION OR PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS AGREEMENT.
BORROWER AND BANK HEREBY KNOWINGLY AND VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER, OR
IN CONNECTION WITH THIS AGREEMENT. BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT
TO JURY TRIAL PROVISION. BORROWER ACKNOWLEDGES THAT BANK HAS BEEN INDUCED TO
ENTER INTO BANK'S LENDING RELATIONSHIP WITH BORROWER BY, AMONG OTHER THINGS, THE
PROVISIONS OF THIS PARAGRAPH.
11.10 No delay or omission on Bank's part in exercising any right,
remedy or option shall operate as a waiver or such or any other right, remedy or
option or of any default.
11.11 The terms of the Commitment Letter issued by the Bank in
connection with the Loan, as modified by the Loan Documents, shall survive the
Closing.
11.12 No provision of this Agreement or the Note or any other Loan
document shall require the payment or permit the collection of interest in
excess of the maximum permitted by law. If any such excess interest is provided
for herein or in the Note or any other Loan document, Borrower shall not be
obligated to pay such excess, and the right to demand the payment of any excess
is hereby waived.
11.13 Nothing contained herein or in any Loan Document shall affect the
terms of any agreements between the Borrower and the Bank with respect to other
loans.
11.14 Any matter disclosed by Borrower in this Agreement or any Schedule
hereto, or excepted from any representation, warranty or covenant of Borrower
herein, shall be deemed disclosed for all purposes of this Agreement and to be
an exception from all such representations, warranties and covenants.
-22-
11.15 In the event the ACQUISITION Transaction does not close, this
Agreement shall be null and void with no further force or effect and no
liabilities to the parties hereunder, except the Borrower shall pay the Bank's
reasonable legal and processing costs.
ARTICLE XII
ASSIGNMENT BY BANK
12.0 If at any time or times, by assignment or otherwise, Bank transfers
or assigns any Obligations and/or security therefor, such transfer shall carry
with it the power and rights of Bank under this Agreement with respect to the
Obligations and security assigned or transferred and the assignee or transferee
shall become vested with said powers and rights whether or not they are
specifically referred to in the transfer or assignment. If and to the extent
Bank retains any Obligations or security, Bank shall continue to have the rights
and powers herein set forth with respect thereto.
ARTICLE XIII
SECURITY
13.0 After an Event of Default, the Bank in its sole and absolute
discretion may require a security interest in any or all of the Borrower's
assets (the "SECURED ASSETS"). In the event Bank so requires, the Borrower
hereby grants to Bank a security interest in such Secured Assets and the
Borrower will execute and deliver to the Bank any writings UCC Financing
Statements and do all things reasonably necessary, effectual or requested by the
Bank to create and perfect a security interest in the Secured Assets (the
"SECURITY Documents"). A carbon, photographic or other reproduction of this
Agreement or any financing statements executed pursuant to the terms hereof
shall be sufficient as a financing statement for the purpose of filing with the
appropriate authorities..
13.1 In addition to any other rights provided herein, the Borrower
hereby irrevocably constitutes and appoints the Bank as the Borrower's true and
lawful attorney, with full power of substitution, at the sole cost and expense
of the Borrower but for the sole benefit of the Bank, to sign and file or record
on behalf of the Borrower any financing or other statement in order to perfect
or protect the Bank's security interest in the Secured Assets. All powers
conferred upon the bank by this Agreement, being coupled with an interest, shall
be irrevocable so long as any Obligation of the Borrower to the Bank shall
remain unpaid.
-23-
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be signed in their name and behalf by an officer or officers,
thereunto duly authorized as an instrument under seal as of the day and year
first written above.
BORROWER:
APPLIED SCIENCE AND
TECHNOLOGY, INC.
By:____________________________
John M. Tarrh
Its: Senior Vice President and
Chief Financial Officer
BANK:
STATE STREET BANK AND TRUST
COMPANY
By:___________________________
Its duly authorized
----------------------------
(Print Name)
-24-
EXHIBITS AND SCHEDULES
5.9 Permitted Encumbrances
5.10 Subsidiaries
5.14 Environmental Matters
5.15 Patents/Licenses/Trademarks
5.16 Debt
7.9 Investment Policy
7.13 Places of Business
-25-
SCHEDULE 5.9
PERMITTED ENCUMBRANCES
SCHEDULE 5.10
SUBSIDIARIES AND AFFILIATES OF BORROWER
SCHEDULE 5.14
ENVIRONMENTAL MATTERS
SCHEDULE 5.15
PATENTS/LICENSES/TRADEMARKS
SCHEDULE 5.16
DEBT
SCHEDULE 7.9
INVESTMENT POLICY
SCHEDULE 7.13
PLACES OF BUSINESS
EXHIBIT 10(h)
TERM PROMISSORY NOTE
$4,983,051.00 BOSTON, MASSACHUSETTS
PRINCIPAL SUM MAY 1, 1997
FOR VALUE RECEIVED, APPLIED SCIENCE AND TECHNOLOGY, INC., a Delaware
corporation (the "BORROWER") with its principal place of business at 35 Cabot
Road, Woburn, Massachusetts 01801, promises to pay to the order of STATE STREET
BANK AND TRUST COMPANY (the "BANK"), a Massachusetts trust company organized and
existing under the laws of The Commonwealth of Massachusetts, the principal sum
of Four Million Nine Hundred Eighty Three Thousand Fifty One ($4,983,051.00)
Dollars to be paid in principal payments of $83,050.85 beginning on June 1, 1997
and on the first day of each month thereafter for 59 consecutive months,
together with interest on the principal amount hereof from the date hereof, at a
rate per annum: (i) for Prime Rate Loans (as defined in the Term Loan Agreement
(as hereafter defined)), a fluctuating interest rate equal to the Bank's Prime
Rate in effect from time to time; and (ii) for Market Rate Loans (as defined in
the Term Loan Agreement) at the Market Rate. All Market Rate Loans and Prime
Rate Loans are due and payable on the maturity date, May 31, 2002(subject to the
provisions hereof relating to the Events of Default). Each change in the
interest rate on Prime Rate Loans will take effect simultaneously with the
corresponding change in such Prime Rate. "Prime Rate" shall mean the rate of
interest announced by the Bank in Boston from time to time as its "PRIME RATE".
"MARKET RATE" shall mean an amount equal to the Base Market Rate (as hereinafter
defined) plus 150 basis points. The term "BASE MARKET RATE" shall mean the fixed
rate of interest quoted by the Bank on the date the loan funds under this Note
are advanced, in its sole discretion, which rate shall be determined solely by
the Bank based upon the Bank's cost of funds.
Interest shall be calculated on the basis of actual days elapsed and a
360 day year. If this Note is not paid in accordance with the terms hereof,
interest on unpaid balances shall thereafter be payable on demand at a
fluctuating interest rate per annum equal to four percent (4%) above the Bank's
Prime Rate in effect from time to time.
Capitalized terms which are not defined in this Note but which are
defined in the Term Loan Agreement between the Bank and the Borrower, dated as
of the date hereof (the "TERM LOAN AGREEMENT") shall have the meanings assigned
to those terms in the Term Loan Agreement. The Borrower is referred to in this
Note as a "Maker." This Note is issued pursuant to the Term Loan Agreement and
the holder is entitled to the benefit and protection of all of the covenants,
terms and conditions of said Term Loan Agreement.
-1-
The Borrower has the right under certain circumstances and the
obligation under certain other circumstances to prepay the entire amount of the
principal of this Note on the terms and conditions specified in the Term Loan
Agreement. In the event of prepayment, in whole or in part, either at the
Borrower's initiative or upon the exercise by the Bank of its right in the event
of demand or an Event of Default hereunder or under the Term Loan Agreement, the
Borrower shall pay to the Bank its lost net interest income resulting from such
prepayment as provided for in the Term Loan Agreement.
If any one or more of the Events of Default, as defined in the Term
Loan Agreement, shall occur, the entire unpaid principal amount of this Note and
all of the unpaid interest accrued thereon may become or be declared due and
payable in the manner and with the effect provided in the Term Loan Agreement.
Any deposits or other sums at any time credited by or due from the
holder to any maker, endorser or guarantor hereof in the possession of the
holder may at all times be held and treated as collateral security for the
payment of this Note. The holder may apply or set off such deposits or other
sums against said liabilities at any time in the case of the maker, but only
with respect to matured liabilities in the case of any endorser or guarantor.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right and/or remedy on any future occasions.
Every maker, endorser and guarantor of this Note, or of the obligation
represented hereby, waives presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assents to any substitution, exchange or
release of collateral, and/or to the addition or release of any other party or
person primarily or secondarily liable. Nothing in this paragraph shall be
construed to prevent any maker, endorser or guarantor from paying all
obligations under this Note at its stated maturity, namely May 31, 2002.
The undersigned will pay all reasonable expenses of every kind of the
enforcement of this Note, or of any of the rights hereunder, and hereby agrees
to pay to the holder on demand the amount of any and all such expenses incurred
by it. After deducting all reasonable legal or other expenses and costs of
collection of this Note and all costs of storage, custody, sale and delivery of
collateral held hereunder, the residue of any proceeds of collection or sale
shall be applied to the payment of principal or interest on this Note or on any
or all the other liabilities aforesaid, due or to become due, in such order of
-2-
preference as the holder shall determine, proper allowance for interest on
liabilities not then being made, and any over surplus shall be returned to
undersigned.
As herein used, the word "holder" shall mean the payee, or other
endorsee of this Note, or bearer if it is at the time payable.
This Note shall take effect as a sealed instrument and shall be
governed by the laws of The Commonwealth of Massachusetts.
THE BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY THE BORROWER MAY HAVE IN
ANY ACTION OR PROCEEDING, IN LAW OR EQUITY, IN CONNECTION WITH THIS NOTE. THE
BORROWER AND THE BANK HEREBY KNOWINGLY AND VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER,
OR IN CONNECTION WITH THIS NOTE. THE BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER
OF RIGHT TO JURY TRIAL PROVISION. THE BORROWER ACKNOWLEDGES THAT THE BANK HAS
BEEN INDUCED TO ENTER INTO THE BANK'S LENDING RELATIONSHIP WITH THE BORROWER BY,
AMONG OTHER THINGS, THE PROVISIONS OF THIS PARAGRAPH.
IN WITNESS WHEREOF, this Note has been duly executed and delivered as
an instrument under seal as of the day and year first written above.
APPLIED SCIENCE AND TECHNOLOGY,
INC.
____________________________ By:_______________________________
Witness John M. Tarrh
Its: Senior Vice President and
Chief Financial Officer
Due: May 31, 2002
-3-
EXHIBIT 99
ASTeX Acquires Converter Power, Inc
WOBURN, Mass., May 9 /PRNewswire/ -- Applied Science and Technology, Inc.
(Nasdaq: ASTX) ("ASTeX") today announced that it has acquired all of the assets
of Converter Power Inc. ("CPI") of Beverly, MA. CPI, a subsidiary of ILC
Technology, Inc. (Nasdaq: ILCT), is a leading producer of customized power
supplies built to fit compactly into a variety of systems for semiconductor
capital equipment, medical and industrial lasers and electro-optics.
ASTeX acquired all of CPI's assets for $6.35 million in cash and 45,000 shares
of ASTeX Common Stock; ASTeX Common Stock will be escrowed for a minimum of
twelve months. State Street Bank & Trust Company of Boston, MA, provided
financing for the acquisition through a three-year revolving loan facility and a
five-year term loan. Over the past four years, CPI has tripled its revenues to
$12.2 million in its most recent fiscal year ending September 28, 1996, and been
a profitable contributor to ILCT's business.
Dr. Richard Post, President and Chief Executive Officer, stated, "CPI's core
technology complements our existing product lines and fits well with our overall
growth strategy. The switching power supplies it manufactures are used in all of
our microwave, RF and ozone products. This acquisition takes advantage of CPI's
focus on switching power supplies so that ASTeX can continue to focus on system
solutions and our ETO subsidiary can focus on high-powered RF solutions. This is
one more step in building a strong global company, and is an example of the
continuing consolidation of the supplier base for the semiconductor capital
equipment market. With CPI, ASTeX gains major new customers and new markets for
its products, while significantly expanding its manufacturing and product
development capabilities. We expect CPI to be accretive to annual earnings going
forward, although we will have a non-recurring expense for CPI's in-process
research and development, which will be accounted for in the fourth quarter of
fiscal 1997."
ASTeX is a leading provider of innovative production technology through delivery
of components and systems for semiconductor, medical, and CVD diamond
applications. ASTeX markets its systems to producers of CVD diamond, while its
microwave and RF power generators, plasma sources and ozone generators and
subsystems are marketed to the world's leading semiconductor and medical capital
equipment manufacturers. Typical semiconductor applications include manufacture
of leading edge devices such as Pentium and PowerPC chips, while medical
applications include diagnostic imaging and sterilization.
"Safe Harbor" statement under the Private Securities Litigation Reform Act of
1995: This release contains forward-looking statements that are subject to risks
and uncertainties, including, but not limited to, the impact of competitive
products and pricing, product demand and market acceptance, new product
development, reliance on key strategic alliances, availability of raw materials,
the regulatory environment, fluctuations in operating results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission.
