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EXHIBIT 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First
Amendment") has been entered into this 26th day of July, 1996, by and among
Rolls-Royce North America Inc., a Delaware corporation ("RRNA"), Rolls-Royce
Acquisition Corp., a Delaware corporation ("Buyer"), U.S. Turbine Corp., a
Nevada corporation ("Seller"), and Powell Industries, Inc., a Nevada
corporation and the sole shareholder of Seller ("Shareholder").
Recitals
1. The parties have entered into an Asset Purchase
Agreement, dated June 20, 1996 (the "Original Agreement"), whereby Buyer has
agreed to purchase, and Seller has agreed to sell, substantially all of the
assets of Seller's business.
2. The parties wish to amend the Original Agreement as
set forth herein.
3. Capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Original Agreement.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Original Agreement, the parties agree that the
Original Agreement is hereby amended as follows:
1. Section 1.2(b)(ii)(E) is hereby amended and restated
in its entirety as follows:
"(E) each of the Contracts listed or described on Schedule 1.2(b)
attached hereto;"
2. Schedule 1.2(b), in the form attached hereto, shall
be deemed to be a part of the Original Agreement from and as of the date of
execution of the Original Agreement.
3. A new Section 4.28 is hereby added to the Original
Agreement, which Section 4.28 shall read as follows:
"SECTION 4.28. Subcontracting Services. The parties shall
enter into a subcontract as of the Closing Date in the form attached
hereto as Exhibit 4.28A (the "Subcontract"), pursuant to which Buyer
shall perform services as a subcontractor to Seller under the
Contracts listed or described in Schedule 3.1(bb). Until the fifth
anniversary following completion of all services to be performed by
Buyer under the Subcontract, Seller shall maintain in effect (and
shall remain current in payment of all premiums with respect to)
general liability, excess liability and excess umbrella liability
insurance
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policies which insure the risks described, and with the aggregate
limit not lower than that specified, on Exhibit 4.28B attached hereto,
and such policies shall also cover services rendered to customers by
or on behalf of Seller before or after the Closing Date. All such
policies shall name Buyer as an additional named insured."
4. Exhibits 4.28A and 4.28B, in the forms attached
hereto, shall be deemed to be a part of the Original Agreement from and as of
the date of execution of the Original Agreement.
5. New subsections 7.1(f) and 7.1(g) are hereby added to
the Original Agreement, which subsections 7.1(f) and 7.1(g) shall read as
follows, and the current subsection 7.1(f) is hereby redesignated as subsection
7.1(h):
"(f) Any liabilities or obligations for special, indirect,
incidental, consequential or similar Damages arising out of or in
connection with the Subcontract or any contract, agreement, warranty
obligation or other commitment of any type of Seller (including,
without limitation, original equipment sales or service contracts,
maintenance contracts, aftermarket contracts, customer service or
supply contracts or engineering services agreements), INCLUDING,
WITHOUT LIMITATION, ANY SUCH DAMAGES THAT MAY BE INCURRED IN
CONNECTION WITH OR AS A RESULT OF ANY NEGLIGENCE ON THE PART OF BUYER
OR ANY OTHER INDEMNIFIED PARTY;
(g) Any liabilities or obligations for special, indirect,
incidental, consequential or similar Damages arising out of or in
connection with the Subcontract or any contract, agreement, warranty
obligation or other commitment of any type of Seller (including,
without limitation, original equipment sales or service contracts,
maintenance contracts, aftermarket contracts, customer service or
supply contracts or engineering services agreements), INCLUDING,
WITHOUT LIMITATION, ANY SUCH DAMAGES THAT MAY BE INCURRED IN
CONNECTION WITH OR AS A RESULT OF ANY RECKLESSNESS ON THE PART OF
BUYER OR ANY OTHER INDEMNIFIED PARTY; and"
6. A new clause (iv) is hereby added to Section 7.3(d)
of the Original Agreement, which clause (iv) shall read as follows:
", or (iv) any Damages described in subsection 7.1(f) or 7.1(g)."
7. A new Section 3.1(bb) is hereby added to the Original
Agreement, which Section 3.1(bb) shall read as follows:
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"(bb) Consequential Losses. Schedule 3.1(bb) sets forth a
true and complete listing and description of all contracts,
agreements, warranty obligations or other commitments of any type of
Seller (including, without limitation, original equipment sales or
service contracts, maintenance contracts, aftermarket contracts,
customer service or supply contracts or engineering services
agreements) which do not specifically exclude liability or obligation
on the part of Seller for special, indirect, incidental, consequential
or similar losses, liabilities, claims, damages or expenses."
8. Schedule 3.1(bb), in the form attached hereto, shall
be deemed to be part of the Original Agreement from and as of the date of
execution of the Original Agreement.
9. Section 1.6 of the Original Agreement is hereby
amended and restated in its entirety as follows:
"SECTION 1.6. Allocation of Purchase Price. $50,000 of the
aggregate consideration payable by Buyer hereunder shall be allocated
to the covenant not to compete set forth in Section 4.15. The
remainder of the aggregate consideration payable by Buyer hereunder
shall be allocated for purposes of Section 1060 of the Internal
Revenue Code of 1986, as amended, in accordance with the fair market
values of the respective Sale Assets. Buyer and Seller hereby agree,
subject to the requirements of Section 1060 of the United States
Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder, to report consistently, in any tax
return completed or filed by any of them, the sale of the Sale Assets
pursuant to this Agreement in accordance with such allocation."
10. Exhibit A to the Original Agreement is hereby amended
as follows:
(a) A new subsection 2.3(c) shall be added which shall
read as follows:
"The assets shown on Schedule 3.1(j) as acquired in April 1984 were
revalued in April 1984 by Seller. For the purposes of calculating the
net book value of these assets, the acquired book value as set forth
on Schedule 3.1(j) will be deemed the actual cost, which will be
depreciated in accordance with Section 2.2 above."
(b) A new subsection 2.3(d) shall be added which shall
read as follows:
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"The Stated Value of the Owned Property shall not exceed One Hundred
Fifty Two Thousand Dollars ($152,000)."
(c) The first paragraph of Section 3.2 shall be amended
and restated in its entirety to read as follows:
"Inventories are stated at the lower of cost or market value where
cost includes direct costs i.e., actual material cost only plus duty
and freight where applicable. Inventory provisions will be made where
applicable in order to reduce the value of inventories to the lower of
cost or market value. The inventory provisions will include, but not
be limited to, the following:"
(d) The provision relating to "Production Inventory" in
the table in Section 3.2 shall be amended and restated in its entirety to read
as follows:
"100% provision against items deemed not usable in the foreseeable
future in the ordinary course of Seller's business."
(e) The provision associated with "Raw material
inventory" in the table in Section 3.2 shall be amended and restated to read in
its entirety as follows:
"100% provision against items considered to be inactive in the
ordinary course of Seller's business."
(f) The first sentence following the table in Section 3.2
shall be amended and restated to read in its entirety as follows:
"All parts that have been damaged, declared not saleable or
technologically obsolete will have such provisions made as are
necessary to value such items at the lower of cost or net realizable
value."
11. The Owned Property shall be included in the Sale
Assets and shall not constitute part of the Excluded Assets.
12. A new Section 4.29 is hereby added to the Original
Agreement, which Section 4.29 shall read as follows:
"SECTION 4.29. Deferred Maintenance. Buyer has entered into
a letter agreement with American Real Estate Holdings Limited
Partnership ("AREHLP") pursuant to which Buyer has agreed to undertake
certain repairs with respect to the Leased Property included in the
Maineville Real Estate in accordance with the property inspection
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report prepared by Don Schwartz, dated June 26, 1996, a copy of which
previously has been provided to Seller and Shareholder (the "Report").
Seller and Shareholder, jointly and severally, agree to reimburse
Buyer promptly (and, in any event, within fifteen (15) days of receipt
of a request therefor) for fifty percent (50%) of any and all costs
incurred by Buyer in respect of performing or causing to be performed
the repairs or deferred maintenance items listed in the Report;
provided, however, that the maximum amount of reimbursement Seller
and/or Shareholder shall be required to provide hereunder shall be
Fifty-Five Thousand Dollars ($55,000). Such costs incurred by Buyer
shall be adequately supported by Buyer's itemized list of same. To
the extent repairs are made by a third party or materials are
purchased specifically for the purpose of such repairs from a third
party, copies of all such third party invoices or receipts shall
accompany such itemized list. To the extent that repairs are made by
Buyer, Buyer shall include with such itemized list a general
description of the work performed, the costs incurred and the manner
of calculation thereof. However, if any contractor is hired to
perform both repairs covered by the Report and other work not covered
by the Report, Buyer shall require such contractor either to submit
separate invoices or an invoice itemized in sufficient detail to
permit segregation of such items."
13. A new Section 4.30 is hereby added to the Original
Agreement, which Section 4.30 shall read as follows:
"SECTION 4.30. Performance of Obligations Under Lease. As of
the Closing Date, Buyer will become the assignee of the Agreement of
Lease, dated June 7, 1979, between Penske Power Systems, Inc., f/k/a
Turbine Power Systems Co. and American Property Investors IX, which
Agreement of Lease shall have been amended by the Amendment of Lease
by and between AREHLP, as successor to American Property Investors IX,
and Buyer (as amended, the "Lease"). Buyer covenants and agrees with
Seller that it will perform its obligations under the Lease."
14. A new Section 4.31 is hereby added to the Original
Agreement, which Section 4.31 shall read as follows:
"SECTION 4.31. AREHLP Legal Fees. As a condition to
consenting to the assignment and amendment of the Lease, AREHLP has
demanded that the legal fees of its counsel, McCarthy, Fingar,
Donovan, Drazen & Smith, be paid by Buyer and/or Seller. Buyer and
Seller each agree to pay one-half ( 1/2) of such legal fees up to a
maximum of
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Four Thousand Dollars ($4,000) to be payable by each party. The
parties agree that any party that pays such legal fees shall be
entitled to reimbursement from the other for the pro rata share of
such other party, which reimbursement will be made immediately upon
request therefor."
15. The following language shall be added to the end of
Section 7.2(c):
"and any liabilities arising from the termination of any of the
Consulting Agreements listed or described on Schedule 3.1(n)(i)."
16. Except as expressly set forth herein, the Original
Agreement shall not be amended, modified or revised and shall continue in full
force and effect in accordance with the terms and provisions set forth therein.
17. In the event of any irreconcilable inconsistency
between the terms of the Original Agreement and this First Amendment, the terms
of this First Amendment shall control.
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IN WITNESS WHEREOF, the parties have caused this First
Amendment to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ROLLS-ROYCE ACQUISITION CORP. ROLLS-ROYCE NORTH AMERICA, INC.
By: ________________________ By: ___________________________
Printed: ___________________ Printed:_______________________
Title: _____________________ Title: ________________________
U.S. TURBINE CORP. POWELL INDUSTRIES, INC.
By:_________________________ By:____________________________
Printed:____________________ Printed:_______________________
Title:______________________ Title:_________________________
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SCHEDULE 1.2(B)
Additional Excluded Contracts
1. All Contracts (as defined in the Asset Purchase Agreement) listed or
described on Schedule 3.1(bb).
2. Contracts with Stockholders listed on Schedule 3.1(n)(iii).
3. Guaranties listed on Schedule 3.1(n)(iv).
4. Powers of Attorney listed on Schedule 3.1(n)(v).
5. Canadian Chamber of Commerce Group Medical Contract, Aetna Life
Insurance Group 401(k) Plan Contract, and Retiree Medical Plan, each
of which is listed on Schedule 3.1(n)(x).
6. Agency/Representative Contract for Eastern Europe with Business
Development Corp. listed on Schedule 3.1(n)(xv).
7. License Agreement with International Power Technology, Inc. listed on
Schedule 3.1(n)(xvi) and described on Schedule 3.1(l).
8. The Consulting Agreements listed or described on Schedule 3.1(n)(i).
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