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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest event reported)
February 3, 1997 (January 17, 1997)
------------------------------------
WESTERN POWER & EQUIPMENT CORP.
Delaware 0-26230 91-1688446
- --------------- ------------- ------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
4601 N.E. 77th Ave., Suite 200, Vancouver, WA 98662
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(Address of principal executive offices)
(360)253-2346
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report)
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ITEM 1 - ACQUISITION OF ASSETS
Pursuant to the terms of an Asset Purchase Agreement, dated January 17,
1997 (the "Purchase Agreement") by and among the Company's wholly-owned
subsidiary, Western Power & Equipment Corp., an Oregon Corporation ("WPE"), as
Purchaser, Sahlberg Equipment, Inc., as Seller ("Sahlberg Equipment"),
McLain-Rubin Realty Company, LLC ("MRR"), as purchaser of certain real estate,
and R&J Partners, a Washington general partnership ("R&J"), as seller of certain
real estate, substantially all of the operating assets used by Sahlberg
Equipment in connection with its business of servicing and distributing
construction, paving and other equipment at distribution facilities located in
Kent, Washington, Portland, Oregon, Spokane, Washington and Anchorage, Alaska
were sold to WPE by Sahlberg Equipment. The real property and improvements used
in connection with the Kent operation and upon which the Kent operation is
located, are being sold to MRR under the terms of a separate real property
purchase and sale agreement. MRR is a Delaware limited liability company the
owners of which are Messrs. C. Dean McLain, the President and a director of the
Company and WPE, and Robert M. Rubin, the Chairman and a director of the Company
and WPE.
The purchase price for Sahlberg Equipment was an aggregate of $5,289,616,
all of which was paid in cash (and by previous deposit) at closing, consisting
of $3,844,152 for equipment inventory, $796,914 for parts inventories, $625,326
for fixed assets and $23,224 for work-in-process. MRR agreed to acquire the
real property and improvements used in connection with and upon which the Kent
operation is located for an amount equal to the average of an existing appraisal
for $1,850,000 and a new appraisal to be obtained subsequent to closing. MRR
has a period of six months from closing of the Sahlberg Equipment purchase to
effect closing on the purchase of the Kent real estate from R&J. In the event
the closing of the Kent real estate purchase and sale agreement between R&J and
MRR does not occur, WPE will have to negotiate a new lease with the landlord
and/or enter into an agreement to purchase the Kent real estate in order to
continue to utilize the Kent facility.
The majority of the purchase price was financed by WPE through a loan
agreement with Case Credit Corporation ("Case Credit") dated January 17, 1997.
Under the loan agreement, WPE obtained two term loans from Case Credit in the
amounts of $3,844,152 for equipment inventory (the "Equipment Note") and
$1,422,240 for parts inventories and fixed assets (the "Parts Note"),
respectively. Both term loans bear interest at prime + 1.0% which is payable
monthly in arrears. The Equipment Note is payable in a single balloon payment
on January 17, 1998, provided, however, that in the event WPE sells any of the
items of inventory securing the note prior to January 17, 1998, the principal
portion of the note represented by such sold equipment becomes due and payable
at that time. The Parts Note is payable in twelve equal monthly installments of
principal and interst beginning February 21, 1997. Both notes are
cross-collateralized and secured by all the assets acquired in the Sahlberg
Equipment purchase as well as certain accounts receivable of WPE.
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Simultaneous with the closing of the Sahlberg Equipment acquisition, WPE entered
into sublease agreements for each of the four facilities as follows (Note that
all subleases are net leases with payment of insurance, property taxes and
maintenance costs by WPE):
Expiration Purchase
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Location Lessor Date Annual Rental Options
- -------- ------ ---- ------------- -------
913 S. Central R&J
Kent, WA 98032 Partners (1) $180,000 No
13691 NE Whitaker Way Sahlberg
Portland, OR 97230 Equipment,
Inc. 05/01/98 $77,700 No
3107 E Trent Sahlberg
Spokane, WA 99202 Equipment,
Inc. 09/01/98 $45,600 No
1702 Ship Ave. Sahlberg
Anchorage, AK 99501 Equipment,
Inc. 01/16/99 $94,200 No
(1) Expiration of the Kent sublease with Sahlberg Equipment is the earlier of
closing of the real estate purchase by MRR or the termination of such
agreement at which time it is anticipated that WPE will enter into a new
lease agreement with the landlord.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
None.
(b) EXHIBITS
DESCRIPTION OF DOCUMENT
10.1 Asset Purchase Agreement, dated January 17, 1997, among Sahlberg
Equipment, Inc., John Sahlberg and Robert Sahlberg, R & J Partners and
Western Power & Equipment Corp.
10.2 Terms of Employment for John and Robert Sahlberg.
10.3 Real Property Purchase and Sale Agreement for Kent facility.
10.4 Loan Agreement, dated January 17, 1997, between Western Power & Equipment
Corp. and Case Credit Corp. including related promissory notes.
10.5 Security Agreement, dated January 17, 1997, made by Western Power &
Equipment in favor of Case Credit Corporation to secure payment for and
collateralized by all assets acquired by Western Power & Equipment Corp.
from Sahlberg Equipment, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
WESTERN POWER & EQUIPMENT CORP.
(Registrant)
Dated: February 3, 1997 By: /s/ Thomas D. Berkompas
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Thomas D. Berkompas
Vice President, Chief Accounting and
Chief Financial Officer
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ASSET PURCHASE AGREEMENT
BY AND AMONG
SAHLBERG EQUIPMENT, INC.,
AS THE "SELLER"
JOHN SAHLBERG AND ROBERT SAHLBERG,
AS THE "SAHLBERGS"
R AND J PARTNERS,
AS THE "PARTNERSHIP"
AND
WESTERN POWER & EQUIPMENT CORP.,
AS THE "PURCHASER"
DATED
JANUARY ___, 1997
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TABLE OF CONTENTS
Page
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1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Meaning of "Knowledge" . . . . . . . . . . . . . . . . . . . 3
2. SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Delivery of the Assets . . . . . . . . . . . . . . . . . . . 3
2.2 Earnest Money Deposit. . . . . . . . . . . . . . . . . . . . 4
2.3 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Assumed Contracts. . . . . . . . . . . . . . . . . . . . . . 4
3. PURCHASE PRICE AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . 4
4. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . 5
4.2 Deliveries by Purchaser. . . . . . . . . . . . . . . . . . . 6
4.3 Possession . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Taxes and Fees . . . . . . . . . . . . . . . . . . . . . . . 6
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . . . 6
5.1 Authorizations and Enforceability. . . . . . . . . . . . . . 6
5.2 Effect of Agreement, Etc. . . . . . . . . . . . . . . . . . 7
5.3 Restrictions; Burdensome Agreements. . . . . . . . . . . . . 7
5.4 Government and Other Consents. . . . . . . . . . . . . . . . 7
5.5 Permits, Licenses, Compliance with Applicable Laws and
Court Orders . . . . . . . . . . . . . . . . . . . . . . . . 7
5.6 Financial Statements; Absence of Undisclosed Liabilities . . 8
5.7 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 Title to Properties; Absence of Liens and
Encumbrances, Etc. . . . . . . . . . . . . . . . . . . . . . 8
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Intangible Property. . . . . . . . . . . . . . . . . . . . . 9
5.11 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . 9
5.12 Licenses and Agreements. . . . . . . . . . . . . . . . . . . 10
5.13 Customers. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.14 Environmental Compliance . . . . . . . . . . . . . . . . . . 11
5.15 No Finder. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.16 Performance Bonds, Bid Bonds and Deposits. . . . . . . . . . 11
6. COVENANTS OF THE SELLER. . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Conduct of Business Until Closing Date . . . . . . . . . . . 11
6.2 Access to Properties and Records . . . . . . . . . . . . . . 12
6.3 Advice of Changes. . . . . . . . . . . . . . . . . . . . . . 12
6.4 Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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6.5 Fulfillment of Conditions; Bankruptcy Order. . . . . . . . . 12
6.6 Covenant of Confidentiality. . . . . . . . . . . . . . . . . 12
7. OTHER COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Kent Facility. . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Subleases. . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Personnel Matters. . . . . . . . . . . . . . . . . . . . . . 14
8. CONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . . . . . . . . . . . . 14
8.1 Accuracy of Representations and Warranties . . . . . . . . . 14
8.2 Performance of Covenants . . . . . . . . . . . . . . . . . . 14
8.3 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 14
8.4 Approval of Bankruptcy Court . . . . . . . . . . . . . . . . 15
8.5 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 Facility Agreements. . . . . . . . . . . . . . . . . . . . . 15
8.7 Terms of Employment and Non-Competition Agreements.. . . . . 15
8.8 Inventory Audit. . . . . . . . . . . . . . . . . . . . . . . 15
8.9 Environmental Review . . . . . . . . . . . . . . . . . . . . 15
9. CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . 16
9.1 Performance of Covenants . . . . . . . . . . . . . . . . . . 16
9.2 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 16
9.3 Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 16
9.4 Terms of Employment and Non-Competition Agreements.. . . . . 16
9.5 Facility Agreements. . . . . . . . . . . . . . . . . . . . . 16
10. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.1 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Survival of Representations and Warranties . . . . . . . . . 16
10.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.4 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.5 Announcements. . . . . . . . . . . . . . . . . . . . . . . . 17
10.6 Binding Effect; Benefits . . . . . . . . . . . . . . . . . . 17
10.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . 19
10.9 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . 19
10.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . 19
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10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 19
10.13 Gender; Singular and Plural. . . . . . . . . . . . . . . . . 19
10.14 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . 19
10.15 Jurisdiction, Venue and Governing Law. . . . . . . . . . . . 19
10.16 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . 20
10.17 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBITS
Exhibit A Allocation of Purchase Price
Exhibit B Form of Bill of Sale
Exhibit C Form of Sale Order
Exhibit D Officers' Certificate
Exhibit E Form of Real Property Purchase and Sale Agreement
Exhibit F Form of Sublease
Exhibit G Form of Terms of Employment and Noncompetition Agreement
Exhibit H Agreement Regarding 450 Hyundai
SCHEDULES (Provided separately but simultaneously with this Agreement)
Schedule 1.1 Excluded Assets
Schedule 1.2 Fixed Assets
Schedule 1.3 Inventory
Schedule 1.4 Work in Process
Schedule 2.4 Assumed Contracts
Schedule 5.2 Corporate Documents
Schedule 5.5 Permits, Licenses, Compliance with Laws
Schedule 5.6 Financial Statements; Liabilities
Schedule 5.8 Title to Machinery and Vehicles
Schedule 5.9 Litigation
Schedule 5.11 Employees
Schedule 5.12 Licenses and Agreements
Schedule 5.13 Customers
Schedule 5.16 Performance Bonds and Bid Bonds
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and entered into as of this ____ day
of January, 1997, by and among WESTERN POWER & EQUIPMENT CORP., an Oregon
corporation (the "Purchaser"), SAHLBERG EQUIPMENT, INC., a Washington
corporation (the "Seller"), JOHN SAHLBERG and ROBERT SAHLBERG (together, the
"Sahlbergs") and R AND J PARTNERS, a Washington general partnership of the
Sahlbergs (the "Partnership"). SAHLBERG GROUP COMPANIES, INC. is executing this
Agreement for purposes of Section 7.5 only.
RECITALS
A. The Seller is the owner and operator of a construction equipment
sales, service and leasing business (the "Business").
B. Seller is a debtor in possession under Chapter 11 of the United States
Bankruptcy Code, 11 U.S.C. Section 1101 ET SEQ. (the "Bankruptcy Code") in Case
No. 96-02787 (the "Bankruptcy Case") filed on March 13, 1996 (the "Filing Date")
in the United States Bankruptcy Court for the Western District of Washington
(the "Bankruptcy Court").
C. The Purchaser desires to purchase from the Seller certain of the
properties and assets relating to the Business, and the Seller is willing to
sell such assets and properties, on the terms and conditions hereinafter set
forth.
D. On or about September 20, 1996, Purchaser executed a Letter of Intent,
which the Seller, the Sahlbergs and Partnership accepted and agreed to. The
Letter of Intent was amended by the First Amendment to Letter of Intent on or
about October 10, 1996.
E. The Letter of Intent has been approved by the Bankruptcy Court
pursuant to the Order Approving Sale of Substantially All of the Debtor's Assets
Free and Clear of Liens, Claims and Interests dated October 11, 1996 (the "Sale
Order").
F. On November 1, 1996, the Bankruptcy Court signed the Order Confirming
Fourth Amended Plan of Reorganization (the "Plan Confirmation Order"), which
provides for the sale approved by the Sale Order.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as follows:
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1. DEFINITIONS
1.1 DEFINED TERMS. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the meanings set forth below:
"ASSETS" shall have the meaning set forth in Section 2.1.
"ASSUMED CONTRACTS" shall have the meaning set forth in
Section 2.4.
"BANKRUPTCY CASE" shall have the meaning set forth in Recital
B
"BUSINESS" shall have the meaning set forth in Recital A.
"CLOSING" shall have the meaning set forth in Section 4.
"CLOSING DATE" shall have the meaning set forth in Section 4.
"COMMITMENTS" shall have the meaning set forth in
Section 5.12.
"CONFIDENTIALITY AGREEMENT" shall mean the agreement signed by
Purchaser during its due diligence period.
"DEALER AGREEMENTS" shall mean those contracts to which the
Seller was a party before and after the Filing Date with Equipment Inventory
Manufacturers.
"ENVIRONMENTAL LAWS" shall mean any applicable federal, state
or local law, rule or regulation in effect on the date hereof: (a) relating to
releases or threatened releases of Hazardous Materials; (b) relating to the
manufacture, handling, transport, use, treatment, storage or disposal of
hazardous Materials or materials containing Hazardous Materials; or
(c) otherwise relating to pollution of the environment or the protection of
human health.
"EQUIPMENT INVENTORY MANUFACTURERS" shall mean the
manufacturers of the equipment and parts that the Seller is authorized to sell
in its dealership.
"EXCLUDED ASSETS" means those items described on Schedule 1.1.
"FIXED ASSETS" means all tangible assets, other than
Inventory, used in the Business (such as shop tools, furniture, fixtures and
equipment, and vehicles), including without limitation those items described on
Schedule 1.2.
"HAZARDOUS MATERIALS" shall mean materials that contain
substances defined as hazardous or toxic substances under the following
statutes, as well as such statutes' implementing regulations as in effect on the
date hereof: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
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Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Toxic Substances Control Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, and the Clean Air Act and any other
materials that a federal, state or local agency requires to be remediated
pursuant to any Environmental Law.
"INVENTORY" means the Seller's inventory of new equipment,
used equipment and parts described on Schedule 1.3, which reflects whether such
equipment and parts are new or used and the value of such equipment and parts.
"LETTER OF INTENT" means the September 20, 1996 Letter of
Intent amended as of October 10, 1996 approved by the Sale Order.
"PARTNERSHIP" means R and J Partners, a Washington general
partnership of the Sahlbergs.
"PLAN" means the Plan of Reorganization of the Seller
confirmed by the Plan Confirmation Order.
"PURCHASE PRICE" shall have the meaning set forth in
Section 3.1.
"PURCHASER" means Western Power & Equipment Corp., an Oregon
corporation.
"SALE ORDER" means the October 11, 1996 Order of the
Bankruptcy Court which approved the sale of substantially all of the Seller's
assets to Purchaser pursuant to the terms of the Letter of Intent.
"SCHEDULES" means all of the disclosure schedules required by
this Agreement, dated as of the date hereof, which are simultaneously delivered
to Purchaser and initialed by Purchaser for identification.
"SELLER" means Sahlberg Equipment, Inc., a Washington
corporation.
"SAHLBERGS" means John Sahlberg and Robert Sahlberg.
1.2 MEANING OF "KNOWLEDGE". Whenever any representation or
warranty of the Seller is expressed to be "to the knowledge" or "to the best
knowledge" of such party, or as being based upon facts or circumstances of which
the Seller or the Sahlbergs have knowledge, the knowledge of such party shall be
(a) the actual knowledge of such party or any executive officer or director of
such party or (b) the knowledge that such party would obtain after diligent
inquiry as to the matters represented or warranted.
2. SALE OF ASSETS
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2.1 DELIVERY OF THE ASSETS. On the terms and subject to the
conditions of this Agreement, including the payment of the Purchase Price as set
forth in Section 3, the Seller will, on the Closing Date, sell, assign, convey,
transfer and deliver to the Purchaser all right, title and interest in and to
the assets used or useful in the conduct of the Business, including, without
limitation, the Fixed Assets, the Inventory, work in process, customer orders,
contract rights, and goodwill, but excluding the Excluded Assets (the "Assets"),
free and clear of all liens, security interests, claims, charges and
encumbrances of any nature whatsoever, together with any other documents
necessary or reasonably requested by the Purchaser to transfer to the Purchaser
good and marketable title to the Assets.
2.2 EARNEST MONEY DEPOSIT. The Purchaser has deposited $25,000
(the "Deposit") in a trust account of Lane Powell Spears Lubersky ("LPSL"), to
be held by LPSL pending the Closing IN TRUST for the benefit of the Purchaser in
accordance with this Section. At the Closing, the Deposit shall be disbursed in
accordance with the joint instructions of the Seller and the Purchaser, and the
amount of the Deposit, with all interest earned thereon, shall be credited
against the Purchase Price. In the event that one of the contingencies set
forth in the Letter of Intent is not met, LPSL shall, promptly upon receipt of
the Purchaser's written notice to that effect, remit the Deposit and all
interest earned thereon to the Purchaser.
2.3 LIABILITIES. Except as specifically provided in this
Agreement, the Purchaser assumes no liabilities or debts of the Seller of any
nature whatsoever, whether absolute, accrued, contingent or otherwise, or
whether due or to become due, including any liability for taxes.
2.4 ASSUMED CONTRACTS. At Closing, the Seller shall assign and
the Purchaser shall assume all of Seller's rights and obligations under the
contracts described on Schedule 2.4 (the "Assumed Contracts").
3. PURCHASE PRICE AND PAYMENT
3.1 The purchase price for the Assets (the "Purchase Price") shall
be calculated as set forth in this Section 3. The Purchase Price shall be
allocated to the Assets as set forth on Exhibit A. The parties shall report
consistently with the allocation set forth on Exhibit A for all tax purposes.
3.2 The Purchase Price, which shall be paid in cash at Closing,
shall be equal to the sum of the purchase prices for each of the items making up
the Assets as follows:
(a) INVENTORY. Subject to adjustment as hereinafter
provided, the purchase price for the Inventory shall be $4,641,066 (the
"Inventory Purchase Price"), which shall be paid in cash at Closing. The
Inventory Purchase Price is the sum of $3,844,152 (the "Equipment Inventory
Purchase Price") and $796,914, which is the book value of the parts inventory as
set forth in the Letter of Intent. The Purchaser and the Seller have agreed
that the value of the equipment inventory purchased shall be as set forth on
Schedule 1.3 for purposes of
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establishing the Equipment Inventory Purchase Price. The Purchaser and the
Seller have further agreed that the Equipment Inventory Purchase Price reflects
a $25,000 reduction for warranty reserves. The Inventory Purchase Price also
reflects the agreement between the Purchaser and the Seller regarding the 450
Hyundai attached as Exhibit H. The final purchase price for parts has been
determined pursuant to the physical inventory performed jointly by Purchaser and
Seller immediately before Closing in accordance with the terms of the Letter of
Intent. Attached as Schedule 1.3 is a list of the parts inventory which
reflects the physical inventory referenced above. The Inventory Purchase Price
may be adjusted after Closing to correct any mistakes, errors or omissions in
accordance with the Letter of Intent by written agreement between the Purchaser
and the Seller.
(b) Fixed Assets. The purchase price for the Fixed Assets
shall be the sum of $625,326 for shop tools, furniture, fixtures and equipment,
and vehicles, which shall be paid in cash at Closing. The purchase price of the
Fixed Assets may be adjusted after Closing by written agreement between the
Purchaser and the Seller to correct any mistakes, errors or omissions in
accordance with the Letter of Intent. A list of the Fixed Assets is set forth
on Schedule 1.2.
(c) Work in Process. The Purchaser will assume at Closing
all service work orders of work just finished or in process, except for those
work orders for which Seller has filed a warranty claim. The purchase price for
the foregoing shall be eighty percent (80%) of the customer hourly rate of the
aggregate labor hours invested in such work in process. To the extent work in
process includes parts, the purchase price therefor shall be eighty percent
(80%) of the retail purchase price of such parts. See Schedule 1.4.
4. CLOSING. The closing of the transactions contemplated by Section 2
hereof (the "Closing") shall take place at the offices of Foster Pepper &
Shefelman, in Seattle, Washington, at noon, local time, on January 17, 1997, or
at such other time or place as the Purchaser and the Seller shall mutually agree
in writing (such date being hereinafter referred to as the "Closing Date") upon
payment of the Purchase Price. Upon payment of the Purchase Price, conveyance,
transfer, assignment and delivery of the Assets shall be by bills of sale,
certificates of transfer, endorsements, assignments and other instruments of
transfer and conveyance in such form as the Purchaser may request. The Seller
and the Purchaser will from time to time after the Closing make such further
conveyances, transfers, assignments and deliveries, and execute such further
instruments and documents, as the parties deem reasonably necessary in order to
effectuate and confirm the sale of the Assets and other transactions
contemplated by this Agreement.
4.1 Deliveries by Seller. At the Closing and upon payment of the
Purchase Price, the Seller will deliver to the Purchaser:
(a) A bill of sale in form attached hereto as Exhibit B;
(b) Assignments of the Assumed Contracts in form and
substance satisfactory to the Purchaser;
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(c) A final order of the Bankruptcy Court in the form of
Exhibit C (the "Sale Order"), all rights to appeal from which shall have expired
with no appeal having been filed;
(d) Any other documents required hereunder to be executed
or delivered by the Seller; and
(e) Such other documents and instruments as counsel for the
Purchaser may reasonably require to effectuate or evidence the transactions
contemplated hereby.
4.1.1 After Closing, the Seller shall be responsible
for providing the Purchaser with releases of financing statements and other
recorded encumbrances terminating recorded liens and encumbrances against, and
security interests in, any of the Assets. The Seller shall be responsible for
obtaining such releases from secured creditors as part of the claims resolution
process in the Bankruptcy Case.
4.2 Deliveries by Purchaser. At the Closing, the Purchaser will
deliver:
(a) A certified or cashier's check in the amount of the
Purchase Price, reflecting a credit for the Earnest Money Deposit described in
Section 2.2;
(b) Any other documents or instruments required hereunder
to be executed or delivered by the Purchaser; and
(c) Such other documents and instruments as counsel for the
Seller may reasonably require to effectuate or evidence the transactions
contemplated hereby.
4.3 Possession. The Purchaser shall take possession of the Assets
as of the Closing.
4.4 Taxes and Fees
(a) Any state transfer, sales, use or other tax, including
any transfer, filing or recording fees, payable on or with respect to the sale
of the Assets shall be paid when due by the Purchaser; provided however, that
the Real Property Purchase and Sale Agreement, Exhibit E, shall govern payment
of taxes in connection with the purchase of the Kent facility described in
Section 7.3.
(b) Any personal property taxes attributable to any of the
Assets shall be prorated as of the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to the Purchaser as follows:
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5.1 AUTHORIZATIONS AND ENFORCEABILITY. The Seller has all
requisite power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby as set forth in the corporate
documents in Schedule 5.2, the Officers' Certificate attached as Exhibit D, the
Plan and the Sale Order. This Agreement has been duly and validly authorized,
executed and delivered by the Seller and constitutes the valid and binding
obligation of the Seller fully enforceable in accordance with its terms.
5.2 EFFECT OF AGREEMENT, ETC. The execution, delivery and
performance of this Agreement by the Seller and the consummation of the
transactions contemplated hereby will not, with or without the giving of notice
of the lapse of time, or both: (a) violate any provision of law, statute, rule
or regulation to which the Seller is subject; (b) violate any judgment, order,
writ or decree of any court, arbitrator or governmental agency applicable to the
Seller; (c) have any effect on any of the permits, licenses, orders or approvals
referred to in Section 5.5 hereof or the ability of the Seller to make use of
such permits, licenses, orders or approvals; or (d) result in the breach of or
conflict with any term, covenant, condition or provision of, result in the
modification or termination of, constitute a default under, or result in the
creation or imposition of, any lien, security interest, charge or encumbrance
upon any of the Assets pursuant to any charter, bylaw, commitment, contract or
other agreement or instrument to which the Seller is a party or by which any of
the Assets is or may be bound or affected or from which the Seller derives
benefit, except for the Dealer Agreements, which Purchaser acknowledges must be
renegotiated with the Equipment Inventory Manufacturers.
5.3 RESTRICTIONS; BURDENSOME AGREEMENTS. None of the Assets are
subject to or bound or affected by any charter, bylaw or other corporate
restriction, or any order, judgment, decree, law, statute, ordinance, rule,
regulation or other restriction of any kind or character, which would (a)
prevent the Seller from entering into this Agreement or from consummating the
transactions contemplated hereby or (b) materially and adversely affect, the
Assets or the ability or prospects of the Purchaser to carry on a business
similar to that presently conducted by the Seller, or the ability of the
Purchaser to utilize the Assets in the manner in which they are presently
utilized, except for the Dealer Agreements, which Purchaser acknowledges must be
renegotiated with the Equipment Inventory Manufacturers.
5.4 GOVERNMENT AND OTHER CONSENTS. With the exception of the
approval of the Bankruptcy Court pursuant to the Sale Order, no consent,
authorization or approval of, or exemption by, or filing with any governmental,
public or self-regulatory body or authority is required in connection with the
execution, delivery and performance by the Seller of this Agreement or any of
the instruments or agreements herein referred to, or the taking of any action
herein contemplated.
5.5 PERMITS, LICENSES, COMPLIANCE WITH APPLICABLE LAWS AND COURT
ORDERS. The Seller has all requisite corporate power and authority, and all
permits, licenses, orders and approvals of governmental and administrative
authorities, to own, lease and operate its properties and to carry on its
business as presently conducted; all such permits, licenses, orders and
approvals material to the conduct of the business of the Seller are listed in
Schedule 5.5, are in
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full force and effect, and no suspension or cancellation of any of them is
pending or, to the knowledge of the Seller threatened. The Seller's conduct of
its business does not violate or infringe any domestic or foreign law, statute,
ordinance or regulation currently in effect, scheduled to come into effect or,
to the knowledge of the Seller and the Sahlbergs, proposed to be adopted, the
enforcement of which would adversely affect the financial condition, results of
operations, properties or business of the Seller. The Seller is not in default
in any respect under any executive, legislative, judicial, administrative or
private (such as arbitration) ruling, order, writ, injunction or decree.
5.6 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES. The
Seller's fiscal year ends December 31. A true and correct copy of the financial
statements of the Seller with a balance sheet as of December 31, 1995 and
December 31, 1994, including the related statements of operations for the
periods then ended and the accompanying notes to financial statements, are set
forth as Schedule 5.6. To the best of Seller's knowledge, the foregoing
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with that of prior years or
periods, are correct and complete and fairly present the financial position and
results of operations of the Seller as of said dates and for the periods
indicated, in accordance with generally accepted accounting principles, and no
event has occurred since the preparation of these statements which would render
either of them misleading in any respect. The Seller acknowledges that the
financial statements for the year ended December 31, 1995 have not been audited.
The financial statements of the Seller for the period ended December 31, 1995,
referred to above, are referred to herein as the "Financial Statements," and the
balance sheet of the Seller included therein is referred to herein as the
"Balance Sheet." Except as set forth in Schedule 5.6 and the bankruptcy
schedules filed in the Bankruptcy Case, the Seller has no debts or liabilities
of any nature whatsoever, whether accrued, absolute or contingent, whether due
or to become due (including without limitation liability for taxes of any nature
whatsoever, penalties, fees or interest).
5.7 TAX MATTERS. The Seller has prepared and filed, with the
appropriate United States, state and local governmental agencies and foreign
governmental agencies, all tax returns required to be filed and has paid all
taxes shown on such tax returns to be payable or which have become due pursuant
to any assessment, deficiency notice, thirty (30) day letter or similar notice
received by it. There are no pending open audits of any of the Seller's tax
returns for any of its taxable years. The Seller has not executed or filed with
the Internal Revenue Service or any other domestic or foreign taxing authority
any agreement extending the period for assessment or collection of any taxes and
is not a party to any pending action or proceeding by any governmental authority
for assessment or collection of taxes, and no claim for assessment or collection
of taxes has been asserted or threatened against the Seller for which provision
has not been made in the Financial Statements. The Seller has never consented
to have the provisions of Section 341(f) of the Code apply to it. Complete and
correct copies of the income tax returns of the Seller for the three (3) fiscal
years ending in 1995, 1994 and 1993, as filed with the Internal Revenue Service
and all state taxing authorities, together with all related correspondence and
notices, have previously been delivered to the Purchaser.
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5.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES, ETC.
The Seller owns no real property. Since entry of the Sale Order, the Seller is
in a position to transfer to the Purchaser good and marketable title to the
Assets, free and clear of all mortgages, security interests, claims, liens,
charges, encumbrances, restrictions on use or transfer or other defects in title
as set forth in the Sale Order. No default or event of default exists, and no
event which, with notice or lapse of time or both, would constitute a default,
has occurred and is continuing, under the terms or provisions, express or
implied, of any agreement or other instrument or under the terms or provisions
of any agreement to which any of such properties is subject, nor has the Seller
received notice of any claim of such default, nor has the Seller failed to
comply in any respect with any provision or condition of any such agreement or
other instrument except for the Dealer Contracts, which Purchaser acknowledges
it must renegotiate with the Equipment Inventory Manufacturers. The Seller has
not received a notice of violation of any applicable law, ordinance, regulation,
order or requirement relating to its operations or its owned or leased
properties. Schedule 5.8 is copies of all titles to all Seller's titled
machinery and vehicles.
5.9 LITIGATION. Except as set forth in Schedule 5.9, there is no
claim, action, suit, proceeding, arbitration, investigation or inquiry pending
before any federal, state, municipal, foreign or other court or any
governmental, administrative or self-regulatory body or agency, or any private
arbitration tribunal, or threatened against, relating to or affecting the Seller
or any of the assets, properties or businesses of the Seller, or the
transactions contemplated by this Agreement, nor is there any basis for any such
claim, action, suit, proceeding, arbitration, investigation or inquiry which may
have any adverse effect upon the assets, properties or business of the Seller or
the transactions contemplated by this Agreement. There is not in existence at
present any order, judgment or decree of any court or other tribunal or any
agency or self-regulatory body to which the Seller or the business, properties
or assets of the Seller are subject or by which they are bound, except the
orders entered in the Bankruptcy Case. The Seller is not in default under any
order, license, regulation or demand of any Federal, state or municipal or other
governmental agency or self-regulatory body or with respect to any order, writ,
injunction or decree of any court, except for a technical default under the Plan
related to the delay in Closing.
5.10 INTANGIBLE PROPERTY. The conduct of the Business as now
conducted does not and will not conflict with patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights or copyrights of others in any way likely to affect
adversely the Business, Assets or the condition, financial or otherwise, of the
Seller. To the best knowledge of the Seller, no other person or entity has
heretofore used or now uses any trademark, trade name or other intangible
property owned by or licensed to the Seller. Seller represents and warrants
that the Sahlberg trademark is owned by Sahlberg Group Companies, Inc., a
Washington corporation. Purchaser is being granted the right to use the said
trademark for a period of two (2) years pursuant to Section 7.5. No material
infringement of any proprietary right owned by or licensed by or to the Seller
is known to the Seller.
5.11 LABOR MATTERS. Schedule 5.11 is a list of the names, starting
dates of employment, salary or wage rate and functions of each employee of
Seller. The Seller is not a
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party to any collective bargaining agreement or other contract or agreement with
any labor organization or other representative of any of the Seller's employees,
nor is any such contract or agreement presently being negotiated. There are no
organizational activities or other labor controversies pending or, to the
knowledge of the Seller, threatened with respect to the Business, and there are
no grievances outstanding, or unfair labor practice charges and/or complaints
pending before the National Labor Relations Board, against the Seller in respect
of employees who are employed in the Business.
5.12 LICENSES AND AGREEMENTS. Except as set forth in Schedule 5.12
or another Schedule hereto, the Seller is not a party to, nor or any of the
Assets bound or affected by, any oral or written:
(a) lease agreement (whether as lessor or lessee) relating
to real or personal property;
(b) license agreement, assignment or other contract
(whether as licensor or licensee, assignor or assignee) relating to trademarks,
trade names, patents, copyrights (or applications therefor), unpatented designs
or styles, know-how or technical assistance;
(c) agreement with any supplier, distributor, franchisor,
dealer, sales agent or representative;
(d) agreement with any manufacturer, supplier or customer
with respect to discounts, allowances or buy-back options;
(e) joint venture or partnership agreement with any other
person;
(f) agreement for the borrowing or lending of money, or
guaranteeing, indemnifying or otherwise becoming liable for the obligations or
liabilities of another;
(g) agreement with any bank, factor, finance company or
similar organization regarding the financing of accounts receivable or other
extensions of credit;
(h) agreement granting any lien, security interest or
mortgage on any property or asset of the Seller, including, without limitation,
any factoring agreement for the assignment of accounts receivable;
(i) advertising agreement of any kind;
(j) agreement which restricts it from doing business
anywhere in the world;
(k) agreement, statute or regulation giving any party the
right to renegotiate or require a reduction in prices or the repayment of any
amount previously paid;
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(l) other agreement involving the payment or receipt in any
period of twelve consecutive months of more than $1,000 in any one case or of
more than $3,000 in the aggregate, or having a term of more than six (6) months;
(m) any agreement to defend, indemnify and/or hold harmless
any person; or
(n) warranties or implied warranties on any sold or leased
equipment.
Correct and complete copies of all such agreements, plans, policies and
arrangements (or, where they are oral, true and complete written summaries
thereof) (collectively referred to herein as the "Commitments") have been
delivered to the Purchaser or made available for the Purchaser's inspection
prior to the date hereof. Schedule 5.12 contains a true and correct listing of
all of the Commitments. Seller acknowledges that on or about October 30, 1996,
Purchaser notified Seller in writing of which leases Purchaser wishes Seller to
seek the appropriate Bankruptcy Court approval for their assumption and
assignment to Purchaser. Purchaser acknowledges that it must negotiate new
agreements with the Equipment Inventory Manufacturers.
5.13 CUSTOMERS. A list of the Seller's customers is attached in
Schedule 5.13.
5.14 ENVIRONMENTAL COMPLIANCE. The Business has, to the knowledge
of the Seller, been conducted in accordance with applicable Environmental Laws,
except as otherwise disclosed to the Purchaser in writing prior to the Closing
Date.
5.15 NO FINDER. The Seller has not taken any action which would
give to any firm, corporation, agency or other person a right to a consultant's
or finder's fee or any type of brokerage commission in relation to or in
connection with the transactions contemplated by this Agreement.
5.16 PERFORMANCE BONDS, BID BONDS AND DEPOSITS. A list of the
Seller's performance bonds and bid bonds is attached in Schedule 5.16. The
bonds and deposits are Excluded Assets.
6. COVENANTS OF THE SELLER. The Seller shall observe the following
covenants:
6.1 CONDUCT OF BUSINESS UNTIL CLOSING DATE. Except as the
Purchaser may otherwise consent in writing or as permitted by Section 6.4 or
required pursuant to terms of this Agreement, between the date hereof and the
Closing Date, the Seller shall:
(a) duly comply with all laws, ordinances and regulations
applicable to it, its properties and to the conduct of its business;
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(b) give the Purchaser prompt written notice of any offers
received regarding the acquisition of any of the Assets;
(c) neither: (i) encumber, mortgage, or voluntarily
subject to lien any of the Assets nor (ii) sell, lease or otherwise dispose of
any of the Assets; and
(d) not: (i) solicit, directly or indirectly, or cause any
other person to solicit any offer to acquire any of the Assets of the Seller;
(ii) afford any third party which may be considering the acquisition of any of
the assets of the Seller access to its properties, books or records; or (iii)
enter into any negotiations for, or enter into, any agreement or understanding
which provides for the acquisition of any assets of the Seller or any part
thereof to a person other than in connection with the transactions contemplated
herein.
6.2 ACCESS TO PROPERTIES AND RECORDS. The Seller shall give to
the Purchaser and to its counsel, accountants and other representatives full
access at any reasonable time to such of its properties, personnel, books, tax
returns, contracts, commitments and records as relate to the business of the
Seller and shall furnish to the Purchaser and its representatives all such
additional information and documents concerning the Seller as the Purchaser or
its representatives may from time to time request.
6.3 ADVICE OF CHANGES. Between the date hereof and the Closing
Date, the Seller shall advise the Purchaser promptly in writing of any fact,
which, if known at the date hereof, would have been required to be set forth or
disclosed in or pursuant to this Agreement, or which constitutes a breach of any
provision of this Section 6.
6.4 CONDUCT. Pending the Closing the Seller shall conduct the
Business in the ordinary course in compliance with applicable law and
regulation; PROVIDED that the Seller shall not enter into any transaction or
take any action which would result in any of the representations and warranties
of the Seller contained in this Agreement not being true and correct at and as
of (a) the time immediately after such action or transaction was entered into or
event has occurred with the same force and effect as though made on such date
and (b) the Closing Date with the same force and effect as though made on such
date.
6.5 FULFILLMENT OF CONDITIONS; BANKRUPTCY ORDER. Purchaser
acknowledges that the condition of approval of the Bankruptcy Court of the
Letter of Intent set forth in Section 8.4 has been fulfilled by the Sale Order.
6.6 COVENANT OF CONFIDENTIALITY. The Seller will not at any time
publish or disclose, or authorize or permit any of its agents or representatives
or any third party to publish or disclose, any information or other data,
including without limitation financial information, or business or financial
books, records or other information of or pertaining to the Purchaser which has
been furnished by or on behalf of the Purchaser in connection with this
Agreement or the discussions leading to this Agreement, and which is not
otherwise publicly available, except as required by law.
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7. OTHER COVENANTS
7.1 CONFIDENTIALITY. From the date hereof through Closing, the
Purchaser shall not publish or disclose and shall not authorize or permit any of
its officers, employees, directors, agents or representatives or any third party
to publish or disclose any trade secrets, or other confidential information or
any data or business or financial books, records or other information of or
pertaining to the Seller, which has been furnished to it by the Seller or to
which it or any of its officers, employees, directors, agents, attorneys or
accountants has had access during any investigation made in connection with this
Agreement, and which is not otherwise available to it, except as required by
law. Purchaser further acknowledges that until Closing, it is bound by the
terms of the Confidentiality Agreement.
7.2 INVENTORY. The Purchaser performed a final physical inventory
of inventory and fixed assets using methods acceptable to the Purchaser and the
Seller immediately prior to the Closing. The Seller observed and participated
in the Inventory.
7.3 KENT FACILITY. At the Closing, the Purchaser or its designee,
McLain-Rubin Realty Co. LLC, and the Partnership shall enter into a Purchase and
Sale Agreement in the form of Exhibit E. Except as provided in such Lease, the
Purchaser and its designee shall not acquire any other assets of the
Partnership, nor shall the Purchaser and its designee assume any liabilities of
the Partnership.
7.4 SUBLEASES. At Closing, the Purchaser and the Seller shall
enter into subleases with respect to the Seller's Spokane, Portland and
Anchorage facilities in substantially the form of Exhibit F. Except as provided
in such subleases, the Purchaser shall not assume any liability of the Seller
with respect to such facilities. The terms of each sublease shall be as
follows:
(a) The sublease of the Spokane facility shall provide for
a monthly rental rate of $3,800, and shall expire on September 1, 1999.
(b) The sublease of the Portland facility shall provide for
a monthly rental rate of $6,475, and shall expire on May 1, 1998.
(c) The sublease of the Anchorage facility shall provide
for a monthly rental rate of $7,850, and shall expire on the earlier to occur of
two (2) years from the Closing Date or the date of the sale of such facility by
its owner.
7.5 TRADEMARKS. The Seller and Sahlberg Group Companies, Inc.
("SGC") hereby grant the Purchaser a license to use (i) the "Sahlberg" name and
mark, and (ii) the registered "S DESIGN MARK" without additional compensation
for a period of two (2) years from the Closing Date. The rights to the
"Sahlberg" name and mark and the registered "S DESIGN MARK" shall revert to
Seller and SGC at the end of such two (2) year period; PROVIDED
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that Seller and SGC agree to negotiate in good faith for an extension of the use
of such name and marks at that time.
7.6 PERSONNEL MATTERS
(a) Compensation of, and bonuses for, all employees of the
Seller owed for all periods of employment of such employees through and
including the Closing Date shall be borne and paid for by the Seller.
Compensation of and any bonuses for all employees hired by the Purchaser for all
periods of employment subsequent to the Closing Date shall be borne and paid for
by the Purchaser. All vacation, sick day and holiday pay of all employees of
the Seller that have accrued or were earned prior to the Closing Date shall be
the sole responsibility of the Seller and shall be paid in full prior to the
Closing Date or accrued on the books of the Seller and remitted by the Seller to
the employee at the time of his or her vacation or holiday.
(b) Effective as of Closing, the Seller will have
terminated the employment of all hourly and salaried employees (collectively,
the "Employees"). At the Purchaser's sole option, it may offer employment to
Employees at rates, and terms and conditions, to be determined solely by the
Purchaser. The Purchaser shall NOT be liable for any severance pay or any other
obligations to any Employee of Seller. The Purchaser shall have no authority
prior to the Closing Date to hire, fire, discipline, manage or otherwise direct
or supervise employees of the Seller.
(c) Prior to Closing, the Seller must not assure any
employees of the Seller, whether or not in writing, (i) that nothing will change
with the Purchaser's purchase of the Assets, (ii) that such employees will be
hired by the Purchaser, (iii) that if any of such employees are employed by the
Purchaser the terms of their employment will remain the same and (iv) that the
Purchaser has agreed to honor the terms of any agreement covering such
Employees.
8. CONDITIONS TO PURCHASER'S OBLIGATIONS. The obligations of the
Purchaser hereunder are subject to the fulfillment, at or prior to the Closing,
of each of the following conditions, any or all of which may be waived in
writing by the Purchaser, in its sole discretion:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Seller contained in this Agreement shall
be true on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except as affected by transactions
contemplated hereby.
8.2 PERFORMANCE OF COVENANTS. The Purchaser acknowledges that the
Seller has performed and complied with all covenants, obligations and agreements
to be performed or complied with as set forth in the Letter of Intent.
8.3 LITIGATION, ETC.
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(a) NO CLAIMS, ETC. No claim, action, suit, proceeding,
arbitration, investigation or hearing or notice of hearing is pending or
threatened against or affecting the Seller which: (i) might result, or has
resulted, either in an action to enjoin or prevent or delay the consummation of
the transactions contemplated by this Agreement or in such an injunction or (ii)
could have a materially adverse effect on any of the Assets, except as provided
for herein.
(b) NO VIOLATIONS. No violation shall exist, or be alleged
by any governmental authority to exist, of any law, statute, ordinance or
regulation, the enforcement of which would materially adversely affect the
properties or business of the Seller.
(c) LAWS, ETC. No law, regulation or decree shall have
been proposed, adopted or promulgated, or have become effective, the enforcement
of which would materially adversely affect the ability of the Seller to
consummate the transactions contemplated by this Agreement.
8.4 APPROVAL OF BANKRUPTCY COURT. The Seller shall have obtained
from the Bankruptcy Court a final and non-appealable Sale Order providing for
the transfer of the Assets to the Purchaser pursuant to the Letter of Intent,
together with such final and non-appealable orders as may be necessary to
approve this Agreement and to authorize the Seller to perform all of its
obligations to the Purchaser hereunder. Furthermore, no stay pending appeal of
the Sale Order or other order of the Bankruptcy Court referred to above shall
have been obtained and be outstanding and no determination of any appeal shall
have been made with respect to the Sale Order or any order of the Bankruptcy
Court relating to this Agreement, that would prevent or hinder the consummation
of the transactions contemplated by this Agreement.
8.5 CERTIFICATE. As set forth in Exhibit D, the Purchaser shall
have received an accurate certificate signed by two officers of the Seller,
dated the Closing Date, satisfactory in form and substance to the Purchaser and
its counsel, certifying as to the fulfillment of the conditions specified in
Sections 8.1 through 8.3.
8.6 FACILITY AGREEMENTS. The Purchaser or its designee, McLain-
Rubin Realty Co. LLC, shall have entered into a binding agreement with the
Partnership with respect to the Kent facility as described in Section 7.3, and
the Purchaser shall have entered into binding agreements to sublease the other
facilities as described in Section 7.4 in form and substance satisfactory to the
Purchaser.
8.7 TERMS OF EMPLOYMENT AND NON-COMPETITION AGREEMENTS. Each of
the Sahlbergs shall have entered into terms of employment and non-competition
agreements with the Purchaser in the form of Exhibit G.
8.8 INVENTORY AUDIT. The Purchaser shall have completed a closing
physical inventory and audit of the Inventory.
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8.9 ENVIRONMENTAL REVIEW. The Purchaser shall have received and
reviewed environmental assessment data provided by the Seller. The Purchaser
acknowledges that it has received and reviewed environmental assessment data as
to the Spokane, Portland, Anchorage and Kent facilities.
9. CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of the Seller
hereunder are subject to the fulfillment, at or prior to the Closing, of each of
the following conditions:
9.1 PERFORMANCE OF COVENANTS. The Seller acknowledges that, upon
payment of the Purchase Price, the Purchaser has performed and complied with all
covenants, obligations and agreements to be performed or complied with by it
pursuant to this Agreement and the Letter of Intent.
9.2 LITIGATION, ETC. No claim, action, suit, proceeding,
arbitration, investigation or hearing or notice of hearing shall be pending or
threatened against or affecting the Purchaser which might result, or has
resulted, either in an action to enjoin or prevent or delay the consummation of
the transactions contemplated by this Agreement or in such an injunction.
9.3 CERTIFICATE. The Seller shall have received an accurate
certificate signed by the Purchaser, dated the Closing Date, satisfactory in
form and substance to the Seller and its counsel, certifying as to the
fulfillment of the conditions specified in Sections 9.1 and 9.2.
9.4 TERMS OF EMPLOYMENT AND NON-COMPETITION AGREEMENTS. The
Purchaser shall have entered into terms of employment and non-competition
agreements with the Sahlbergs in the form of Exhibit G.
9.5 FACILITY AGREEMENTS. The Purchaser or its designee,
McLain-Rubin Realty Co. LLC, shall have entered into a binding agreement with
the Partnership with respect to the Kent facility as described in Section 7.3,
and the Purchaser shall have entered into binding agreements to sublease the
other facilities as described in Section 7.4.
10. GENERAL
10.1 EXPENSES, ETC. Except as otherwise provided herein, whether
or not the transactions contemplated by this Agreement are consummated, each
party hereto shall pay its own expenses and the fees and expenses of its counsel
and accountants and other experts.
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements of the Seller shall
terminate effective upon Closing.
10.3 ASSIGNMENT. The Purchaser may assign its rights or a portion
of its rights under this Agreement to a wholly-owned subsidiary, provided that
no such assignment shall relieve Purchaser of its obligations hereunder.
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10.4 WAIVERS. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained here. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
10.5 ANNOUNCEMENTS. Each party hereto agrees that it shall not,
except as otherwise required by applicable law or regulations, make or release
any statement, announcement or publicity with respect to this Agreement or the
transactions contemplated hereby or permit any of its officers, directors or
employees to do so unless the form and content of any such statement,
announcement or publicity and the time of release thereof shall have been
approved by the Purchaser.
10.6 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of the parties hereto and shall be binding upon the parties hereto and
their respective heirs, personal representatives, successors and assigns.
10.7 NOTICES. All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or transmitted by telex or on receipt after dispatch by certified or
registered first class mail, postage prepaid, return receipt requested, to the
party to whom the same is so given or made.
(a) if to the Purchaser: Western Power & Equipment Corp.
4601 N.E. 77th Avenue, Suite 200
Vancouver, Washington 98662
Attention: President
Telecopy No.: (360) 253-4830
with a copy to: Foster, Pepper & Shefelman
101 S.W. Main Street, 15th Floor
Portland, Oregon 97204-3223
Attention: Kenneth Roberts
Telecopy No.: (503) 221-1510
(b) if to the Seller: Sahlberg Equipment, Inc.
913 So. Central
Kent, Washington 98032
Attention: Robert Sahlberg
Telecopy No.: (206) 859-8200
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with a copy to: Lane Powell Spears Lubersky
1420 5th Avenue, Suite 4100
Seattle, Washington 98101
Attention: Mary Jo Heston
Telecopy No.: (206) 223-7107
(c) if to the Sahlbergs: John Sahlberg
36008 6th Ave. S.W.
Federal Way, Washington 98023
Robert Sahlberg
28517 S.E. Mud Mountain Road
Enumclaw, Washington 98022
with copies to: Ogden Murphy Wallace
1601 Fifth Avenue, Suite 2100
Seattle, Washington 98101-1686
Attention: Carol Bernasconi
Telecopy No.: (206) 447-0215
Keller Rohrback L.L.P.
1201 Third Avenue, #3200
Seattle, Washington 98101
Attention: Kathleen Kim Coghlan
Telecopy No.: (206 623-3384
(d) if to the Partnership: Robert Sahlberg
R and J Partners
28517 S.E. Mud Mountain Road
Enumclaw, Washington 98022
John Sahlberg
R and J Partners
36008 6th Ave. S.W.
Federal Way, Washington 98023
with copies to: Ogden Murphy Wallace
1601 Fifth Avenue, Suite 2100
Seattle, Washington 98101-1686
Attention: Carol Bernasconi
Telecopy No.: (206) 447-0215
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Keller Rohrback L.L.P.
1201 Third Avenue, #3200
Seattle, Washington 98101
Attention: Kathleen Kim Coghlan
Telecopy No.: (206) 623-3384
or to such other address as any party may designate by giving notice to the
other parties hereto.
10.8 FURTHER ASSURANCES. The Seller shall, from time to time at or
after the Closing, at the request of the Purchaser, and without further
consideration, execute and deliver such other instruments and take such other
actions as may be required to confer to the Purchaser and its assignees the
benefits contemplated by this Agreement.
10.9 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
Exhibits and Schedules hereto) constitutes the entire agreement and supersedes
all prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. This Agreement (including the
Exhibits and Schedules hereto) may not be amended, modified or terminated
(except as provided in Section 10) unless in a written instrument executed by
the party or parties sought to be bound.
10.10 HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
10.11 SEVERABILITY. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section. If any provision of this Agreement is so broad
as to be unenforceable, such provision shall be interpreted to be only so broad
as is enforceable.
10.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall be deemed to be one and the same instrument.
10.13 GENDER; SINGULAR AND PLURAL. Any reference in this Agreement
in the masculine gender shall include the feminine and neuter genders, and vice
versa, as appropriate. Any reference in this Agreement in the singular shall
mean the plural, and vice versa, as appropriate.
10.14 THIRD PARTIES. Nothing in this Agreement, whether expressed
or implied, is intended to confer any rights or remedies on any person other
than the parties to this Agreement, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third party, nor
shall any provision give any third party any right of subrogation or action
against any party to this Agreement.
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10.15 JURISDICTION, VENUE AND GOVERNING LAW. In the event of any
action or proceeding arising out of this Agreement or the transactions
contemplated hereby, the parties agree that exclusive jurisdiction and venue
shall lie in either the United States District Court for the Western District of
Washington at Seattle, inclusive of the United States Bankruptcy Court, or the
Superior Court of the State of Washington for King County. This Agreement shall
be construed as to both validity and performance and enforced in accordance with
and governed by the internal laws of the state of Washington.
10.16 ATTORNEYS' FEES. In the event of any action or proceeding
arising out of or in connection with this Agreement, the prevailing party will
be entitled to all costs, expenses and reasonable attorneys' fees incurred with
or without suit and on appeal.
10.17 TIME OF ESSENCE. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement
as of the date first above written.
SELLER: SAHLBERG EQUIPMENT, INC.
----------------------------------------
By:
-------------------------------------
[Print Name]
Its:
------------------------------------
PURCHASER: WESTERN POWER & EQUIPMENT CORP.
----------------------------------------
By:
-------------------------------------
[Print Name]
Its:
------------------------------------
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PARTNERSHIP: R AND J PARTNERS
----------------------------------------
By:
-------------------------------------
[Print Name]
Its:
------------------------------------
----------------------------------------
By:
-------------------------------------
[Print Name]
Its:
-------------------------------------
For purposes of acknowledging the Seller's agreement to enter into this
Agreement, but not for the purpose of making any individual representations or
warranties or for assuming any personal obligations or liability:
SAHLBERGS:
----------------------------------------
John Sahlberg
----------------------------------------
Robert Sahlberg
21
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FOR PURPOSES OF
SECTION 7.5 ONLY: SAHLBERG GROUP COMPANIES, INC.
----------------------------------------
By:
-------------------------------------
[Print Name]
Its:
------------------------------------
22
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Schedule 1.1
EXCLUDED ASSETS
Accounts receivable
Cash on hand and on deposit at Key Bank
Prepaid expenses and deposits, including performance bonds and bid bonds,
including certificate of deposit for the State of Alaska
Warranty claims
Deferred income tax benefit
The note receivable in the approximate amount of $196,000 (principal) from the
Partnership
Key man life insurance
Seller's right to recover preferences, fraudulent conveyance and other causes of
action pursuant to Section 5 of the Bankruptcy Code and the claims against Key
Bank of Washington, N.A.
Receivables from employees for travel advances and commissions
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TERMS OF EMPLOYMENT
Western Power & Equipment Corp., an Oregon corporation with its
headquarters at Vancouver, Washington ("the Company"), and John Sahlberg ("the
Employee") agree as follows:
RECITALS
A. Effective January ____, 1997, Western Power & Equipment Corp. has
acquired a substantial portion of the assets of Sahlberg Equipment, Inc. ("the
asset sale") pursuant to the terms of an Asset Purchase Agreement between
Sahlberg Equipment, Inc., John Sahlberg, Robert J. Sahlberg, R and J Partners,
and Western Power & Equipment Corp. ("the Asset Purchase Agreement").
B. Employee is a former principal of Sahlberg Equipment, Inc. The
Company desires to employ Employee and Employee desires to become employed by
the Company.
AGREEMENT
1. THE EMPLOYMENT
1.1 In consideration of the mutual promises and agreements contained
herein, the Company agrees to hire and employ the Employee and the Employee
agrees to provide services to the Company under the following terms and
conditions.
1.2 The Employee is assigned to work in the capacity of General Sales
Manager and in such other capacities as the Company may require the Employee to
serve. Except as set forth herein, the terms of Employee's employment with the
Company shall be governed by the Company's Employee Handbook, as it may be
modified from time to time. If there is a conflict between this Terms of
Employment and the Employee Handbook, this Terms of Employment shall control.
1.3 The employment shall continue for an indefinite term at the will of
the Company and the will of the Employee. The
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employment may be terminated, with or without cause, at any time, with or
without notice, by either the Company or the Employee.
1.4 The Employee agrees as follows:
a. To devote his or her entire time, skill, labor and attention to
employment during the term of this employment. The phrase "entire
time" as used herein means the Employee's scheduled working hours and
such reasonable additional hours that the Company may, from time to
time, require the employee to work.
b. Not to engage in any other employment that will interfere with
his or her employment with the Company, except as permitted by the
terms of paragraph 3.3.
c. Immediately upon termination of employment with the Company, to
return all drawings, plans, specifications, manuals, procedures and
any and all other documents of any kind which were provided to or
generated by him or her in the course of, or in connection with, his
or her employment by the Company.
1.5 COMPENSATION AND BENEFITS.
a. BASE SALARY. As compensation for services rendered, the Company
agrees to pay the Employee a base salary of $50,000 per calendar year
during calendar years 1997, 1998, 1999, 2000 and 2001. The base
salary shall be paid in equal pro rata increments on the Company's
regular payroll schedule. Thereafter, the Company may unilaterally,
upon written notice to the Employee, change this sum as it deems
appropriate; any such change shall be effective only after notice is
given.
b. BONUS. For purposes of this subparagraph 1.5b, "Year One"
shall mean the continuous 12-month period following the closing of the
asset sale and "Year Two" shall mean the next continuous 12-month
period. Employee shall be entitled to receive a bonus of $30,000 in
Year One and a bonus of $30,000 in Year Two. The Year One and Year
Two bonuses shall be paid in equal pro rata
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<PAGE>
increments on the Company's regular payroll dates. Bonuses, if any,
for periods after Year Two shall be determined on the Company's fiscal
year basis. In years after Year Two, the Company may, in its sole
discretion, elect to pay such bonus as it deems appropriate based upon
specific performance criteria which the Company deems to be in the
Company's best interests.
c. NONCOMPETE BINDER. Employee shall receive a noncompete binder in
the amount of $100,000. Payment shall be paid semimonthly in 48 equal
pro rata increments, separate from salary and bonus checks, following
closing of the asset sale. In accordance with Employee's request, no
withholdings will be deducted from these noncompete binder payments.
d. BENEFITS. The Company agrees to provide such other vacation,
holiday, sick pay, leave of absence, education and training, and/or
expense reimbursement benefits as the Company may, from time to time,
provide its employees.
e. BENEFIT PLANS. Employee shall be eligible to participate, in
accord with the terms of the plan documents, in such employee welfare
benefit plans, 401(k) or similar savings plans, or retirement plans as
the Company may elect to provide, pursuant to the terms of such plans.
f. PAYMENTS UPON TERMINATION. If Employee's employment with the
Company terminates during calendar year 1997 or 1998, Employee shall
be paid salary and bonus on a pro rata basis through his last day
worked. In subsequent years, Employee shall be paid salary through
the last day worked. Unless Employee is terminated for "cause,"
Employee shall be entitled to a lump sum payment of the unpaid
balance, if any, of the noncompete binder. Solely for purposes of
this subparagraph, "cause" shall be defined as (1) commission of a
felony or any crime involving the business of the Company, moral
turpitude, or which subjects the Company to public disfavor; (2) a
flagrant violation of Company policy; (3) a material
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<PAGE>
violation of the noncompete or confidentiality provisions of
paragraphs 2 or 3 of this Agreement; or (4) any other material breach
of this Agreement, including representations contained herein. If
Employee is terminated for cause in less than two years, then the term
of Employee's noncompetition period will be accordingly reduced by a
term which has the same ratio to one year as the noncompete binder
payments received by Employee has to $100,000. (By way of example, if
Employee's employment with the Company terminates in 6 months, at
which time Employee has received 12 noncompete binder payments
totalling $25,000, then Employee's noncompetition period shall be
reduced from one year to three months.)
g. PRESERVATION OF AT WILL EMPLOYMENT. Nothing in this paragraph
1.5 shall be construed to alter, amend, or modify the "at will"
employment provisions of paragraph 1.3, to establish any definite term
of employment, or to require any notice or procedures prior to
termination.
2. CONFIDENTIAL AND PROPRIETARY INFORMATION
2.1 The Company possesses trade secrets, financial and other proprietary
information, technology, and supplier and customer information which constitutes
valuable, special, and unique assets of the Company ("confidential and
proprietary information"). The Company has incurred considerable expense and
risk in developing that confidential and proprietary information. As an
employee of the Company, Employee will receive and have access to confidential
and proprietary information which the Company desires to protect against
unauthorized use.
2.2 Employee agrees to treat as confidential all confidential and
proprietary information, and all drawings, records, manuals, or other documents
belonging to the Company, and all customer and supplier information including,
but not limited to, customers' and suppliers' identity, rates, services,
contract terms, the history of the relationship between the Company and its
customers, and the identity of the customers' contracting agents.
4
<PAGE>
2.3 Except as necessary in the performance of his duties as an employee of
the Company, Employee agrees never, directly or indirectly, to use, disseminate,
disclose or otherwise reveal any confidential and proprietary information or
materials to any person, firm, corporation, association or other entity
competing, or planning to compete with the Company for any reason or purpose
whatsoever without the prior written consent of the Company.
2.4 Employee agrees that, through his employment with the Company, and
after his employment has ended, he will not disclose to anyone outside the
Company, nor use for his benefit or the benefit of anyone other than the
Company, any confidential or proprietary information, trade names, trade
secrets, new conceptions, creations, writings, inventions, methods, processes,
or improvements which he created, conceived, or gained access to during his
employment at the Company.
2.5 Employee agrees that all documents, records, notebooks, and similar
repositories, containing or relating to the confidential and proprietary
information or customer and supplier information described above, including any
copy of the same, and all marks, logos and insignias of the Company are, and
will remain, the property of the Company.
3. NONCOMPETITION AGREEMENT
3.1 NONSOLICITATION. Employee agrees that, commencing with his employment
by the Company and for a period of one year from the date Employee ceases to be
employed by the Company, Employee shall not, directly or indirectly, solicit or
aid any person, firm, or corporation in the solicitation of any customer of the
Company to do business with or in any way become associated with any competitor
of the Company or any business which is in the business of selling, renting, or
servicing equipment similar to the equipment sold, rented or serviced by the
Company or any of its affiliated or related companies in the states of Oregon,
Washington, California, Nevada, Idaho or Alaska ("Competitor").
3.2 NONCOMPETITION. Employee agrees that, commencing with his employment
by the Company and for a period of one year from the date Employee ceases to be
employed by the Company, Employee shall not, directly or indirectly, be employed
by, own, manage, operate,
5
<PAGE>
join, provide services to, control, or participate in the ownership, management,
operation or control of, or be connected in any manner with, any person, firm,
or corporation that is a Competitor; provided, that nothing herein shall prevent
the purchase or ownership by Employee of shares of less than five percent of the
outstanding shares in a publicly or privately held corporation.
3.3 SPECIAL PROVISIONS REGARDING ENDEAVOR CORPORATION.
a. EXCEPTION TO NONCOMPETITION AGREEMENT. Employer acknowledges that
Employee is a shareholder in Endeavor Corporation ("Endeavor"), a
Washington corporation with its principal place of business in Spokane,
Washington. Employee and the Company acknowledge that Endeavor holds title
to certain equipment which is leased to persons or businesses that might
otherwise be customers of the Company ("the leases"). Employee
acknowledges that Endeavor Corporation is a Competitor of the Company as
defined in paragraph 3.1 and, without operation of this subparagraph,
Employee would be in breach of paragraphs 3.1 and 3.2. Employee and the
Company agree that, notwithstanding the provisions of paragraphs 3.1 and
3.2, Employee can participate in the ownership and management of Endeavor
and continue to receive income from Endeavor which is derived from the
leases in effect as of the effective date of the Asset Purchase Agreement.
Employee agrees that he will not cause Endeavor or aid, abet or encourage
Endeavor to enter into leases on any equipment of any kind or nature
whatsoever following the effective date of the Asset Purchase Agreement
without the express written consent of Dean McLain or his designee
following full disclosure of the terms of any such transaction. Such
consent will not be unreasonably withheld. If leased equipment comes back
into Endeavor's possession, the releasing of such equipment shall likewise
be subject to the express written consent of Dean McLain or his designee
following full disclosure of the terms of any such transaction, which
consent will not be unreasonably withheld. The provisions restricting
Endeavor Corporation shall terminate upon the termination of Employee's
noncompetition period.
6
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b. FULL DISCLOSURE REQUIRED. Employee represents that as of the date of
closing of the Asset Purchase Agreement, Endeavor Corporation holds no
leases. Employee agrees that, upon demand by the Company, Endeavor
Corporation will promptly provide the Company or its agents full and
complete access to all books, records, purchase orders, lease documents,
accounting records, or other documents concerning or relating to the
business of Endeavor Corporation.
c. OPERATION OF ENDEAVOR AS A SEPARATE BUSINESS. Employee agrees to
completely separate the business of Endeavor from the business of the
Company. In order to achieve a full and complete separation between the
business of Endeavor and the business of the Company the parties agree to
the following provisions.
(1) All obligations under the leases are the sole and exclusive
responsibility of Endeavor, including, but not limited to, all
obligations upon any warranty applicable to any equipment owned by
Endeavor. Employee agrees that he will not, either directly or
indirectly, state, suggest, or imply that the Company has any
obligation thereunder.
(2) Employee will not perform services for Endeavor during the
Company's regular business hours.
(3) Employee will not conduct, or cause to be conducted, any
transaction between Endeavor and the Company or its affiliated or
related companies, without obtaining prior written approval from Dean
McLain or his designee following full disclosure of all details of the
transaction.
(4) Employee will not use or cause to be used any of the Company's
facilities, equipment, parts, or supplies for the business purposes of
Endeavor.
(5) In the event that, in his capacity as an employee of Endeavor,
Employee desires to employ any other employee of the Company to
perform any services whatsoever for Endeavor, Employee agrees to
advise the Company in
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advance of any such request or assignment. Employee agrees that he
will not request or assign any Company employee to perform any
services for Endeavor during hours such employee is assigned to work
for the Company.
Employee acknowledges that employment by Endeavor is not
employment by the Company and that Endeavor shall be solely
responsible for payments of all wages owed to any such employee for
any services performed for Endeavor and for compliance with all local,
state, and federal laws governing the employment relationship between
Endeavor and its employees. In the event that, by reason of
Endeavor's employment of another employee of the Company, Endeavor and
the Company are deemed by any court or administrative agency to be
joint employers for the purpose of any law regulating the employment
relationship, Employee agrees that he will personally defend,
indemnify and hold the Company harmless from any and all costs,
attorney's fees, or judgments in any action brought by any such
employee based upon that employee's services for Endeavor.
3.4 ANY BREACH MATERIAL. Breach of any of the provisions of this
paragraph 3, including the provisions of paragraph 3.3, shall be a material
breach of this Agreement.
4. SPECIAL REMEDIES
The parties agree that, in the event of a breach or threatened breach of
any provision of paragraphs 2 or 3 hereof, it would be difficult, if not
impossible, to ascertain damages that might result to the Company. Therefore,
notwithstanding the provisions of paragraph 5, the Company shall be entitled, in
addition to any remedies it might have hereunder or at law, to seek injunctive
and other equitable relief in any court of competent jurisdiction to prevent or
curtail any threatened or actual breach by Employee.
5. OTHER PROVISIONS
5.1 This Terms of Employment shall be governed by the internal laws of the
State of Washington without reference to its choice of law provisions.
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5.2 In any litigation arising out of or related to this agreement or
Employee's employment at Company, the prevailing party shall be awarded
reasonable costs and attorneys' fees, including on appeal. Venue and
jurisdiction of any such lawsuit shall exist exclusively in state and federal
courts in Clark County, Washington, unless injunctive relief is sought by
Company and, in Company's judgment, that relief might not be effective unless
obtained in some other venue.
5.3 This Terms of Employment constitutes the entire agreement between the
parties with respect to the subject matter thereof, and supersedes all prior
written agreements or other communications and all prior or contemporaneous oral
agreements or understandings between the parties.
5.4 Except as to changes in pay as specified in paragraph 1.5, the terms
of this agreement may not be altered, amended, or otherwise modified except by
the express written agreement of the President of the Company.
5.5 If any provision of this Terms of Employment is held to be invalid or
unenforceable, the remaining provisions shall remain in full force and effect.
Dated this ____ day of _______________, 1997.
WESTERN POWER & EQUIPMENT EMPLOYEE
CORP.
- -------------------------------- --------------------------------
By:
---------------------------- --------------------------------
[Print Name] John Sahlberg
Its:
----------------------------
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REAL PROPERTY PURCHASE AND SALE AGREEMENT
THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT ("Agreement") is executed
this _____ day of January, 1997, by and between MCLAIN/RUBIN REALTY CO. L.L.C.,
a limited liability company ("Purchaser") and R&J PARTNERS, a Washington general
partnership ("Seller").
Seller is the owner of certain land and improvements comprising
approximately 4.4 acres situated in the City of Kent, County of King, State of
Washington, located at 913 South Central, Kent, Washington 98032 and more
particularly described below.
Seller currently leases the foregoing property to Sahlberg Equipment, Inc.
("Sahlberg"), which is a reorganized debtor under chapter 11 of the United
States Bankruptcy Code, 11 u.s.c. Section 1101 ET SEQ. in Case No. 96-02787
filed on March 13, 1996 in the United States Bankruptcy Court for the Western
District of Washington at Seattle.
In connection with the purchase by WESTERN POWER & EQUIPMENT CORP., an
Oregon corporation ("Western"), of certain property and assets (the "Assets"),
from Sahlberg (all as more particularly described in that certain "Asset
Purchase Agreement" of approximately even date herewith), Purchaser desires to
purchase from Seller the real property described herein, on the terms and
conditions hereinafter set forth.
In consideration of the mutual acknowledgements, agreements, covenants,
representations and warranties as herein contained, Purchaser and Seller agree:
1. PROPERTY. The property to be purchased by Purchaser (the
"Property") shall consist of (i) that certain real property comprising
approximately 4.4 acres situated in the City of Kent, County of King, State
of Washington, located at 913 South Central, Kent, Washington 98032 and more
particularly described on Exhibit A attached hereto and made a part hereof,
(ii) all improvements thereon, (iii) all personal property owned by Seller,
but not any personal property owned by Sahlberg, located at said real
property, (iv) all shrubs, trees, and plants thereon, (v) all oil, gas, water
and mineral rights and shares of stock pertaining to water or mineral rights,
whether or not appurtenant thereto, owned by Seller, (vi) all easements,
rights of way, and other rights appurtenant thereto, and (vii) all permits
and contract rights relating to the operation of the Property.
2. CLOSING. "Closing" means the consummation of the transactions
contemplated by this Agreement, namely the purchase and sale of the Property.
"Closing Date" shall mean the date on which the Closing occurs. Closing shall
occur on or before six (6) months following the closing of the Asset Purchase
Agreement (although Purchaser's obligations to close shall remain subject to the
conditions precedent set forth in Section 8. below and Sellers obligations to
close shall remain subject to the conditions precedent set forth in Section 9.
below)) or such other date
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as may be mutually agreed upon by the parties, at the Seattle, Washington office
of Chicago Title Insurance Company (the "Title Company"). The Title Company
shall also act as escrow agent ("Escrow Agent").
3. PURCHASE PRICE. The consideration to be paid to Seller by Purchaser
for purchase of the Property (the "Purchase Price") shall be the average of (a)
the July 25, 1996 MAI appraisal of the Property obtained by Seller (appraised
value: $1,850,000.00), and (b) the approved MAI appraisal of the Property to be
obtained by Purchaser; provided, that if the foregoing two appraisals differ by
more than ten percent (10%) of the lower of the two appraisals, then the parties
will jointly select a third MAI appraiser to determine the Purchase Price of the
Property. The cost of such third MAI appraiser shall be shared equally between
the parties.
4. TITLE.
a. TITLE BEFORE CLOSING.
i. PRELIMINARY TITLE REPORT. Seller shall, at Seller's expense,
within ten (10) days after the execution of this Agreement, furnish to Purchaser
a title commitment or preliminary title report applicable to the Property (the
"Title Report") issued by the Title Company, together with a copy of all items
listed as special exceptions in such Title Report.
ii. TITLE REPORT REVIEW. Purchaser has fifteen (15) days after
the date Purchaser receives the Title Report, to review the Title Report, and to
give written notice to Seller of any title matters, including special
exceptions, which are unacceptable to Purchaser (the "Title Objections"). If
Purchaser fails to object to any matter which is identified in the Title Report,
or to state any title indorsements which Purchaser desires, prior to the
expiration of the fifteen (15) day period, then, except for any security
instrument or lien affecting the Property, Purchaser shall be deemed to have
waived its right to object to any such matter or to the unavailability of any
such title indorsements, and each of such matters shall be deemed a permitted
title exception for purposes of this Agreement (all such matters, together with
those matters described in Section 4.v., collectively, the "Permitted
Exceptions"). Purchaser has ten (10) days after the date Purchaser receives any
supplemental reports (the "Supplemental Reports") from the Title Company to
review the Supplemental Reports, and at Purchaser's option, the Closing Date
will be postponed by the number of days necessary to give Purchaser three (3)
days to review any such Supplemental Reports. Purchaser may give Seller notice
of any additional Title Objections disclosed by the Supplemental Reports, which
were not of record or described in the Title Report on the effective date of the
Title Report. Upon receipt from Purchaser of a written notice of any Title
Objection, together with a copy of the underlying document evidencing such
matter, or of any requested title policy indorsement, Seller shall, within five
(5) days of receiving such notice, provide written notice to Purchaser that
Seller (a) will satisfy or correct, at Seller's expense, such Title Objection,
or cause the Title Company to issue the requested title indorsement at no cost
to Purchaser, or (b) refuses to satisfy or correct, in full or in part, such
Title Objection, stating with particularity which part of any Title Objection
will not be satisfied, or to make available such title indorsement. Seller will
be deemed to have agreed to satisfy or cure all Title Objections and to
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cause the Title Company to issue the required indorsements at no cost to
Purchaser except those of which it notifies Purchaser in writing as set forth
above that it will not satisfy or cure or cause to be issued.
iii. REFUSAL TO CURE. If Seller declines to satisfy or cure any
Title Objection or portion thereof or to make available a requested title
indorsement, then Purchaser shall have an additional fifteen (15) days after
receipt of Seller's written notice thereof in which Purchaser may elect either
to waive such Title Objections (which will then be added to the Permitted
Exceptions) or such title indorsement, or to terminate this Agreement with the
effect as set forth in Section 16(a) below.
iv. FAILURE TO CURE. As to those Title Objections which Seller
agrees, will be deemed to have agreed, or is otherwise required hereunder, to
satisfy or cure, Seller shall, on or before the Closing Date, satisfy or cure
same at its sole expense, and shall in addition satisfy, at its sole expense,
all security interests, liens or other monetary encumbrances affecting the
Property.
v. REMOVAL OF LIENS. Notwithstanding anything to the contrary
in this Agreement, Seller covenants and agrees that at or prior to Closing,
Seller shall (i) pay in full and cause to be canceled all loan security
documents which encumber the Property as of the date hereof, (ii) pay in full
and cause to be canceled and discharged or otherwise bond and discharge as liens
against the Property all mechanics' and contractors' liens which encumber the
Property as of the date hereof or which may be filed against the Property after
the date hereof and on or prior to the Closing Date (including without
limitation the lien(s) identified in Schedule 10.e attached hereto).
vi. PERMITTED EXCEPTIONS. Purchaser may not object to the
following title matters, all of which are considered "Permitted Exceptions":
(a) real property taxes or assessments due after Closing; (b) reserved oil
and/or mineral rights; (c) rights reserved in federal patents or state deeds;
and (d) governmental building and land use regulations, codes, ordinances and
statutes.
b. CONDITION OF TITLE. At Closing, Seller shall convey fee simple
title to the Property to Purchaser by statutory warranty deed (the "Statutory
Warranty Deed"), subject only to the Permitted Exceptions.
c. EVIDENCE OF TITLE. Seller shall, at Seller's expense, deliver to
Purchaser immediately upon receipt from the Title Company, an ALTA owner's
standard coverage policy of title insurance, Form B 1970 (revised 10/17/70) (the
"Title Policy"), issued by the Title Company containing all general exceptions
and the Permitted Exceptions, with a liability limit equal to the Purchase
Price.
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5. DELIVERIES FOR APPROVAL. Within ten (10) working days of the
execution of this Agreement, Seller shall deliver to Purchaser for Purchaser's
approval as to form and content, the following:
a. Copies of all maintenance, service and other agreements affecting
the Property (whether in the name of Seller or Seller's past or existing tenants
thereof).
b. Copies of all construction and equipment warranties affecting the
Property.
c. All plans, specifications, surveys, soils reports, environmental
assessments or other environmental studies, and calculations related thereto and
appraisals of the Property prepared prior to the date of this Agreement and in
the possession or subject to the control of Seller.
d. All certificates of occupancy, building permits, architect's
statements of completion and similar documents in possession or subject to the
control of Seller evidencing appropriate regulatory approval of the completion
of construction of improvements at the Property.
6. DELIVERIES AT CLOSING
a. SELLER'S DELIVERIES. At Closing, Seller shall deliver to Escrow
Agent, the following documents (all of which shall be duly signed and
acknowledged where required) and other deliveries (if appropriate):
i. Statutory Warranty Deed;
ii. Real Estate Excise Tax Affidavit, with respect to the deed;
iii. A certification that Seller is not a foreign person under
Section 1445 of the Internal Revenue Code of 1986, as amended (the "Code"), and
that Purchaser is not required to withhold a portion of the proceeds of the sale
contemplated hereby under such section of the Code;
iv. A certificate restating and reaffirming Seller's
representations and warranties pursuant to Section 10. hereof, with such changes
as shall be necessary to make such representations true, complete, and accurate
as of the date and time of Closing; and
v. Such other documents, if any, as may be reasonable requested
by Purchaser to enable Purchaser to consummate and close the transactions
contemplated by this Agreement pursuant to the terms and provisions and subject
to the limitations hereof.
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b. PURCHASER'S DELIVERIES. At Closing, Purchaser shall deliver to
Escrow Agent, the following documents (all of which shall be duly signed and
acknowledged where required by Purchaser, as appropriate) and other deliveries:
i. Real Estate Excise Tax Affidavit, with respect to the
Property;
ii. The entire Purchase Price in immediately available funds;
iii. A certificate restating and reaffirming Purchaser's
representations and warranties pursuant to Section 12. hereof, with such changes
as shall be necessary to make such representations true, complete, and accurate
as of the date and time of Closing; and
iv. The amount for prorations, if any is payable by Purchaser to
Seller in accordance with the provisions of Section 7. below, in immediately
available funds.
7. COSTS AT CLOSING
a. At Closing, Seller is responsible for payment of the following:
i. The cost of obtaining the Preliminary Title Report and the
Title Policy;
ii. Any real estate excise tax or any other sales or transfer
taxes;
iii. Any personal property excise tax or any other sales or
transfer taxes, (if any);
iv. One-half of the escrow fee; and
v. The costs of Seller's counsel.
b. At Closing, Purchaser is responsible for payment of the
following:
i. The costs of any endorsements to the Title Policy;
ii. One-half of the escrow fee;
iii. The costs of Purchaser's counsel; and
iv. The fee for recording the Statutory Warranty Deed.
c. Real estate taxes and assessments, personal property taxes, (if
any), rents, water and other utilities shall be prorated as of Closing by the
Escrow Agent.
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8. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION. Purchaser's
obligation to close the transactions contemplated by this Agreement is subject
to and contingent upon the following:
a. TITLE POLICY. The Title Company is prepared to issue the Title
Policy, subject only to the Permitted Exceptions.
b. APPROVAL OF DOCUMENTS. Purchaser's approval of all documents
required to be delivered to Purchaser pursuant to Section 5. of this Agreement,
(which approval shall be deemed to have been given unless Purchaser notifies
Seller in writing within twenty (20) days after mutual execution hereof)
c. CLOSING OF ASSET PURCHASE AGREEMENT. Closing of the transactions
contemplated by the Asset Purchase Agreement.
d. WARRANTIES AND REPRESENTATIONS. Each of Seller's warranties and
representations contained in Section 10. are true and correct as of the date of
this Agreement and as of the Closing Date.
e. COVENANTS. Each of Seller's covenants contained in Section 13.
have been performed in accordance with this Agreement.
f. LEASE. Delivery into escrow of a counterpart of the Lease
described in Section 15 hereinbelow, executed by Seller.
g. MECHANICAL INSPECTION; ENVIRONMENTAL ASSESSMENT. Purchaser's
review and approval within thirty (30) days following mutual execution hereof,
of: (i) a satisfactory inspection of all equipment, systems, and appliances at
the Property performed by a qualified engineer of Purchaser's choosing at
Purchaser's expense, which inspection reflects, to Purchaser's sole
satisfaction, that all equipment, systems, and appliances (including, without
limitation, heating, ventilation, plumbing, electrical and air conditioning
systems, and wiring, paving, roofing and other amenities) at the Property are in
good working order; and (ii) environmental assessment data provided by Seller
pursuant to Section 5 above and any other environmental assessment data provided
to Purchaser by a qualified environmental engineer of Purchaser's choosing at
Purchaser's expense. If on the expiration of such thirty (30) day period,
Purchaser has not satisfied itself as to the foregoing, Purchaser may either
terminate this Agreement (without such termination being deemed a default),
whereupon the parties shall have no further obligations toward each other, or
waive the condition. If Purchaser does not notify Seller in writing of the
failure of this condition, Purchaser shall be deemed to have satisfied or waived
it.
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<PAGE>
h. REMEDIES. If on the Closing Date, any of these conditions are
not satisfied, Purchaser may: (i) refuse to close this transaction until such
condition is satisfied, (ii) terminate this Agreement in accordance with Section
16., or (iii) waive the condition, in writing, and close the transactions
contemplated by this Agreement. However, if the conditions described in
subsections 8(a), 8(d) or 8(e) above are not satisfied on the Closing Date for
any reason other than a default or breach hereunder by Purchaser, or if the
conditions described in subsections 8(b), 8(c) or 8(f) above are not satisfied
on the Closing Date due to Seller's breach or other default hereunder, Seller
shall be deemed in default hereunder and Purchaser shall have all rights and
remedies (including without limitation termination of this Agreement) set forth
in Section 17 below.
9. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION. Seller's obligation to
close the transactions contemplated by this Agreement is subject to and
contingent upon the following:
a. CLOSING OF ASSET PURCHASE AGREEMENT. Closing of the transactions
contemplated by the Asset Purchase Agreement.
b. WARRANTIES AND REPRESENTATIONS. Each of Purchaser's warranties
and representations contained in Section 12. are true and correct as of the date
of this Agreement and as of the Closing Date.
c. COVENANTS. Each of Purchaser's covenants contained in Section
14. have been performed in accordance with this Agreement.
d. LEASE. Delivery into escrow of a counterpart of the Lease
described in Section 15 hereinbelow, executed by Western.
e. REMEDIES. If on the Closing Date, any of these conditions are
not satisfied, Seller may: (i) refuse to close this transaction until such
condition is satisfied, (ii) terminate this Agreement in accordance with Section
16., or (iii) waive the condition, in writing, and close the transactions
contemplated by this Agreement. However, if the conditions described in
subsections 9(b) or 9(c) above are not satisfied on the Closing Date for any
reason other than a default or breach hereunder by Seller, or if the conditions
described in subsections 9(a) or 9(d) above are not satisfied on the Closing
Date due to Purchaser's breach or other default hereunder, Purchaser shall be
deemed in default hereunder and Seller shall have all rights and remedies
(including without limitation termination of this Agreement) set forth in
Section 17 below.
10. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby makes the
following representations and warranties to Purchaser, which representations
shall be true as of the Closing and shall survive the Closing and delivery of
the Statutory Warranty Deed:
a. The building and improvements on the Property, and all systems
therein, and the use being made thereof at Closing, conform to all fire, zoning,
health, environmental,
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subdivision, building, labor and other federal, state and local codes, laws,
rules and regulations, and there are no violations thereof with respect to the
Property not heretofore removed or corrected; and Seller has received no notices
of any action or government proceeding in eminent domain, zoning change or
otherwise, which would affect the Property; nor does Seller know of any fact
which might give rise to such proceeding.
b. No part of any improvements on the Property encroaches upon any
property adjacent thereto or upon any easements, nor are there any encroachments
upon the Property.
c. There are no leases or rental agreements affecting the Property,
and (b) no party has any right to the present or future possession or use of the
Property other than Seller.
d. There are no maintenance, advertising, management, leasing,
employment, service, or other contracts affecting the Property which will be in
effect at Closing, other than those evidenced by copies delivered to Purchaser
by Seller prior to Closing, pursuant to Section 5. above, and which must be
assigned to Purchaser at Closing pursuant to an assignment document reasonably
acceptable to Purchaser and Seller.
e. All equipment, systems, and appliances at the Property are in
good working order, including, without limitation, heating, ventilation,
plumbing, electrical and air conditioning systems, and wiring, paving, roofing
and other amenities.
f. All applicable permits, declarations, and other evidences of
compliance from regulatory authorities required to be obtained at the Property,
the sale of the Property to Purchaser, and the operation and use of the
Property, including, without limitation, those regulating the division of real
property and environmental matters, have been obtained; the improvements have
been constructed pursuant to contracts which are in accordance with such
permits, declarations and evidences of compliance; all warranties (which have
not by their terms expired) in favor of Seller from contractors having
constructed said improvements are in full force and effect; to the best of
Seller's knowledge, there are no defects in said improvements or the materials
or workmanship furnished in the construction thereof; to the best of Seller's
knowledge, said improvements were constructed in substantial conformity with the
plans and specifications of said improvements transferred to Purchaser on or
before Closing; and to the best of Seller's knowledge, said improvements were
not constructed with and do not contain any materials containing asbestos, urea
formaldehyde or other hazardous substances.
g. Other than as set forth in Schedule 10.e. (which shall be
satisfied, cured or otherwise removed from title to the Property by Closing),
there are no mechanics', materialmen's or similar claims or liens presently
claimed or which will be claimed against the Property for work performed or
commenced prior to Closing. Seller agrees to hold Purchaser harmless from all
costs, expenses, liabilities, losses and charges arising from or relating to any
such lien or any similar lien claimed against the Property and arising from work
performed or commenced prior to Closing.
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h. All documents delivered to Purchaser on or before Closing are
true and correct copies of the originals of such documents. The original
documents have not been amended or modified, other than as evidenced in copies
of documents delivered to Purchaser. No documents that should have been set
forth as exhibits hereto or copies of which should have been delivered to
Purchaser on or before Closing have not been so set forth or delivered. Seller
has not failed to state or disclose any material fact.
i. Seller has the capacity and requisite authority to enter into and
carry out this Agreement and the transactions contemplated hereby.
j. Seller does not have knowledge of any brokerage commission,
finder's fee or like payment arising out of or in connection with the purchase
and sale of the Property. Seller hereby indemnifies and holds Purchaser
harmless from any claim, liability, loss or expense for any brokerage
commission, finder's fee, acquisition fee, or like payment asserted against
Purchaser in connection with the sale of the Property to Purchaser pursuant to
this Agreement.
k. Except for Sahlberg's pending bankruptcy case, there is no suit,
action or arbitration, or legal or other proceeding or governmental
investigation pending which affects the Property.
l. Seller is not a foreign person, nonresident alien, foreign
corporation, foreign partnership, foreign trust, or foreign estate, as those
terms are defined in the Internal Revenue Code and the Income Tax Regulations
promulgated thereunder. At Closing, Seller shall deliver to Purchaser a
certificate of non-foreign status in form required by the Income Tax Regulations
and reasonably acceptable to Purchaser. In the event Seller shall not deliver
such certificate to Purchaser at Closing, Purchaser may withhold 10% of the
Purchase Price and submit such withholding to the Internal Revenue Service
pursuant to Section 1445 of the Internal Revenue Code.
As to the representations and warranties contained in Section 10.b. above,
Purchaser acknowledges that Seller has not obtained, and is not required by
Purchaser, for the purposes of making that representation and warranty, to
obtain an ALTA or similar survey of the Property, is making those
representations and warranties without any such or similar survey, and is not
required to obtain an ALTA or similar survey in order to have conducted
"diligent inquiry".
11. [intentionally deleted.]
12. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby makes
the following representations and warranties to Seller, which representations
shall be true as of the Closing and shall survive the Closing and delivery of
the Statutory Warranty Deed:
a. Purchaser has the capacity and requisite authority to enter into
this Agreement, perform its obligations, and carry out and consummate the
transactions contemplated hereby.
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b. Purchaser does not have knowledge of any brokerage commission,
finder's fee or like payment arising out of or in connection with the purchase
and sale of the Property. Purchaser hereby indemnifies and holds Seller
harmless from any claim, liability, loss or expense for any brokerage
commission, finder's fee, acquisition fee, or like payment asserted against
Seller by anyone claiming through Purchaser in connection with the sale of the
Property to Purchaser pursuant to this Agreement.
13. COVENANTS OF SELLER. Seller shall observe the following covenants:
a. ADVICE OF CHANGES. Between the date of this Agreement and the
Closing Date, Seller shall advise Purchaser promptly in writing of any fact,
which, if known at the date of this Agreement, would have been required to be
set forth or disclosed in or pursuant to this Agreement, or which constitutes a
breach of any provision of this Agreement.
b. CONDUCT OF BUSINESS. Pending the Closing, Seller shall conduct
its affairs in the ordinary course; PROVIDED that Seller shall not enter into
any transaction, take any action, or omit to take any action, any of which would
result in (i) any of the representations and warranties of Seller becoming not
true and correct at and as of (a) the time immediately after such transaction,
action or omission was entered into, taken or not taken, or (b) the Closing
Date, or (ii) Seller being unable to perform its obligations under this
Agreement, including carrying out and consummating the transactions contemplated
by this Agreement.
c. NO ENCUMBRANCES. Except as may have been otherwise expressly
provided herein, Seller shall not further encumber the Property or any of the
improvements or personal property thereon.
14. [Intentionally deleted].
15. LEASE. Contemporaneously with the execution of this Agreement, Seller
shall lease the Property to Western pursuant to that certain lease in the form
attached hereto as Exhibit B, and incorporated herein by this reference
("Lease").
16. TERMINATION.
a. CIRCUMSTANCES OF TERMINATION. In addition to any and all
remedies available to the parties pursuant to Section 17 below, this Agreement
may be terminated at any time prior to the Closing Date:
i. by mutual consent of Purchaser and Seller;
ii. by Purchaser pursuant to Section 4(a)(iii), (iv) or (v), or
Section 8(h);
iii. by Seller pursuant to Section 9(e);
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iv. by either Purchaser or Seller if there has been a material
misrepresentation, material breach of warranty or material breach of covenant on
the part of the other party with respect to the representations and warranties
or covenants set forth in this Agreement, which misrepresentation or breach has
not been cured (assuming such cure is possible) within three (3) days (or such
longer period necessary to cure, provided such party immediately and diligently
pursues such cure) after written notice thereof has been delivered to such other
party;
v. upon the termination of the Asset Purchase Agreement, at the
option of the non-breaching party, for breach or default by the breaching party;
vi. By Seller if the Lease is terminated due to a default
thereunder by Western, and by Purchaser if the Lease is terminated due to a
default thereunder by Seller;
vii. by either Purchaser or Seller if the transactions
contemplated hereby have not been consummated by the end of the period in which
Closing is required to occur pursuant to Section 2 above (even if either party
is diligently pursuing cure under Section 16.a.iv.); provided that neither
Purchaser nor Seller is entitled to terminate this Agreement pursuant to this
Section 16.a.vii. if the act or failure to act of such party, or of any entity
affiliated with that party, has prevented the consummation of the transactions
contemplated hereby.
b. EFFECT OF TERMINATION. If this Agreement is terminated as
provided above, this Agreement will become void and of no further force or
effect, provided that the parties shall have any and all additional remedies
available pursuant to Section 17.
17. REMEDIES. The parties agree and acknowledge that the Property is of a
unique nature and that, in the event of a breach of or default under this
Agreement, monetary compensation may not fully compensate the non-breaching
party for its loss. In the event of any breach of this Agreement, the parties
agree that the non-breaching party may avail itself of any and all available
remedies, at law or in equity, including injunctive relief, the right to
specific performance of the terms of this Agreement, and the right to sue for
damages notwithstanding any termination hereof (provided that any recovery by
either party for damages shall be limited to actual damages, excluding
incidental or consequential damages).
18. INDEMNIFICATION.
a. SELLER'S INDEMNITY. Seller shall indemnify and defend Purchaser
(and Purchaser's affiliates) and hold Purchaser (and Purchaser's affiliates)
harmless from and against any claims, demands, causes of action, debts,
liabilities, judgments, losses, damages and expenses, and attorneys' fees and
court costs (collectively, the "Claims") incurred by Purchaser (or any of
Purchaser's affiliates) on account of (a) Claims by persons or entities other
than Purchaser (or any of Purchaser's affiliates) arising out of or in
connection with the ownership, operation or maintenance of the Property by
Seller (or any of Seller's affiliates or tenants), or any fact, circumstance or
event which occurred, prior to the Closing Date; and (b) Claims resulting
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from or arising directly or indirectly, in whole or in part, out of the breach
of any representation, warranty, covenant or agreement of Seller contained in
this Agreement. However, the obligations of Seller hereunder do not apply to,
and Seller is not liable to Purchaser (or any of Purchaser's affiliates) in
respect of, any Claim to the extent resulting from or arising directly or
indirectly, in whole or in part out of: (i) Western's right to use and occupy
the Property under the Lease (or any agreement or arrangement in substitution
therefor or replacement thereof) at any time prior to the Closing Date, or (ii)
the breach of any representation, warranty, covenant or agreement of Seller
contained in this Agreement, if prior to Closing, Purchaser had knowledge of
such breach or if Seller disclosed the existence of such breach to Purchaser
pursuant to Section 13 of this Agreement, and Purchaser chose, with such
knowledge, to close the transactions contemplated by this Agreement. The
indemnities herein shall survive the Closing and delivery of the Statutory
Warranty Deed.
b. PURCHASER'S INDEMNITY. Purchaser shall indemnify and defend
Seller and hold Seller (and Seller's affiliates) harmless from and against any
Claims incurred by Seller (or any of Seller's affiliates) on account of (a)
Claims by persons or entities other than Seller (or any of Seller's affiliates)
arising out of or in connection with the use or occupation of the Property by
Western between the date of mutual execution hereof and the Closing Date; (b)
Claims by persons or entities other than Seller (or any of Seller's affiliates)
arising out of or in connection with the ownership, operation or maintenance of
the Property during Purchaser's period of ownership; and (c) Claims resulting
from or arising directly or indirectly, in whole or in part, out of the breach
of any representation, warranty, covenant or agreement of Purchaser contained in
this Agreement. However, the obligations of Purchaser hereunder do not apply
to, and Purchaser is not liable to Seller (or any of Seller's affiliates) in
respect of, any Claim resulting from or arising directly or indirectly, in whole
or in part out of the breach of any representation, warranty, covenant or
agreement of Purchaser contained in this Agreement, if prior to Closing, Seller
had knowledge of such breach or if Purchaser disclosed the existence of such
breach to Seller pursuant to Section 14 of this Agreement, and Seller chose,
with such knowledge, to close the transactions contemplated by this Agreement.
The indemnities herein shall survive Closing and delivery of the Statutory
Warranty Deed.
19. CONDEMNATION OR DESTRUCTION.
a. CONDEMNATION. Seller hereby represents and warrants that Seller
has no knowledge of any action or proceeding pending or instituted for
condemnation or other taking of all or any part of the Property by friendly
acquisition or statutory proceeding by any governmental entity. Seller agrees
to give Purchaser immediate written notice of such actions or proceedings that
may result in the taking of all or a part of the Property. If prior to Closing
all or any part of the Property is subject to a bona fide threat or is taken by
eminent domain or condemnation, or sale in lieu thereof, then Purchaser, by
notice to Seller given within twenty (20) days of Purchaser's receiving actual
notice of such threat, condemnation, or taking by any governmental entity, may
elect to terminate this Agreement. In the event Purchaser continues or is
obligated to continue this Agreement, Seller shall at Closing, assign to
Purchaser its entire right, title and interest in and to any condemnation award.
During the term of this Agreement, Seller shall not
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stipulate or otherwise agree to any condemnation award without the prior written
consent of Purchaser.
b. DAMAGE OR DESTRUCTION. Prior to Closing, Seller shall bear the
risk of loss of or damages to the Property by reason of any insured or uninsured
casualty. In the event of any material damage to or destruction of the
Property, the Improvements thereon or any portion thereof (notice of which shall
be given to Purchaser by Seller immediately upon its occurrence), which damage
or destruction is fully insured and can reasonably be repaired or replaced by
Seller prior to the Closing Date, Seller agrees to do so and in a manner
reasonably satisfactory to Purchaser. If such damage or destruction is material
and is not fully insured or if the repair or replacement of such material damage
or destruction cannot be reasonably be completed prior to the Closing Date,
Purchaser may, at its option, by written notice to Seller given within twenty
(20) days after Purchaser's receipt of all information reasonably requested
regarding the cost of restoration and the amount of insurance proceeds
available, (a) unilaterally terminate this Agreement or (b) elect to continue
this Agreement and purchase the Property, without any reduction of the Purchase
Price, but with an assignment to Purchaser in a form satisfactory to Purchaser
of all insurance proceeds otherwise payable to Seller (and the payment to
Purchaser of any deductible). In the event of nonmaterial damage to the
Property or any portion thereof (other than ordinary wear and tear), Seller
shall repair or restore the Property prior to the Closing, or if that is
impossible, promptly following the Closing. Such work shall be performed in a
good and workmanlike manner, shall be completed "broom clean" and lien free and
shall be to the reasonable satisfaction of Purchaser and its representatives.
c. POSTPONEMENT OF CLOSING. The Closing Date shall be postponed, if
necessary, to permit the full running of the respective twenty (20) day periods
described in Sections 20.a. and 20.b. above.
20. MISCELLANEOUS.
a. NOTICES. All notices, consents and approvals required by this
Agreement shall be either:
i. personally delivered; or
ii. placed in the United States mail, properly addressed and
with full first-class postage prepaid, certified mail with a return receipt; or
iii. delivered to an overnight services.
Said notices, consents and approvals shall be deemed received on the
earlier of (x) the date actually received, or (y) forty-eight (48) hours after
being mailed or delivered as described in ii. and iii. above.
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Said notices, consents and approvals shall be sent to the parties hereto at
the following addresses, unless otherwise notified in writing:
Seller: R&J Partners
28517 S.E. Mud Mountain Road
Enumclaw, Washington 98022
Attention: Robert Sahlberg
and to: R&J Partners
36008 6th Avenue SW
Federal Way, Washington 98023
Attention: John Sahlberg
With a copy to: Ogden Murphy Wallace P.L.L.C.
1601 Fifth Avenue, Suite 2100
Seattle, Washington 98101-1686
Attention: Carol Bernasconi
Purchaser: McLain-Rubin Realty Co. LLC
38207 NE Gerber Road
Yacolt, Washington 98675
With a copy to: Foster, Pepper & Shefelman
101 S.W. Main Street, 15th Floor
Portland, Oregon 97204-3223
Attention: Kenneth Roberts
b. ATTORNEYS' FEES. In the event that either party hereto brings an
action or proceeding for a declaration of the rights of the parties under this
Agreement, for injunctive relief, or for an alleged breach or default of, or any
other action arising out of this Agreement or the transactions contemplated
hereby, the prevailing party in any such action shall be entitled to an award of
reasonable attorneys' fees and any court costs incurred in such action or
proceeding, in addition to any other damages or relief awarded, regardless of
whether such action proceeds to final judgment.
c. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement, together with
any Exhibits referred to herein, constitute the final and complete expression
between the parties hereto and supersedes any and all prior arrangements or
understandings between the parties. This Agreement can be amended only by a
writing signed by Purchaser and Seller.
d. SEVERABILITY. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
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<PAGE>
e. COUNTERPARTS. This Agreement may be signed in one or more
counterparts, all of which taken together shall constitute one and the same
instrument.
f. EXHIBITS. All exhibits are hereby incorporated and made a part
hereof by this reference. Any exhibits which are not attached hereto upon
execution of this Agreement, shall be agreed to in form and content by Seller
and Purchaser. The parties shall jointly submit such agreed exhibits to the
Escrow Agent for attachment to this Agreement.
g. TIME OF THE ESSENCE. Time is of the essence in connection with
each and every provision of this Agreement.
h. CHOICE OF LAW. This Agreement and each and every related
document is to be governed by, and construed in accordance with, the laws of the
State of Washington. The venue of any action hereunder shall be in the
appropriate court in King County, Washington.
i. SUCCESSORS. Except as otherwise provided herein, the provisions
and covenants contained herein shall inure to and be binding upon the heirs,
successors and assigns of the parties hereto. However, Seller shall have no
right to assign any of its rights, privileges, duties or obligations under this
Agreement or to convey, transfer or otherwise encumber the Property prior to
Closing without the prior written consent of Purchaser. Purchaser shall be
entitled to assign Purchaser's interest under this Agreement to Western or any
affiliate of Purchaser.
j. SECTION HEADINGS. The headings of the Sections of this Agreement
are inserted solely for convenience of reference, and are not intended to
govern, limit or aid in the construction of any term or provision hereof.
k. WAIVER. No claim of waiver, consent or acquiescence with respect
to any provision of this Agreement shall be made against either party except on
the basis of a written instrument executed by or on behalf of such party.
l. FURTHER ACTIONS. Purchaser and Seller agree to execute such
further documents, and take such further actions, as may reasonably be required
to carry out the provisions of this Agreement, or any agreement or document
relating hereto or entered into in connection herewith.
m. MEMORANDUM. Purchaser and Seller agree to execute, and following
satisfaction or waiver of Purchaser's title and inspection contingencies set
forth in Sections 4 and 8(g) above, Purchaser may record a memorandum of this
Agreement in substantially the form attached hereto as Exhibit C to provide
constructive notice hereof. Purchaser and Seller also agree to execute a
Release of Memorandum in substantially the form attached hereto as Exhibit D and
to deliver same to Escrow Agent with instructions to redeliver such Release to
Seller in the event this Agreement is terminated without closing.
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IN WITNESS WHEREOF, the undersigned have executed this document as of the
day and year first hereinabove written.
PURCHASER: McLAIN-RUBIN CO. LLC
---------------------------------
By:
[Print Name]
Its:
SELLER: R & J PARTNERS
---------------------------------
By:
[Print Name]
Its:
---------------------------------
By:
[Print Name]
Its:
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LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into as of this 17th
day of January, 1997 by and between Western Power & Equipment Corp. (the
"Company"), an Oregon corporation with its principal offices located at Suite
200, 4601 N.E. 77th Avenue, Vancouver, Washington 98662, and Case Credit
Corporation (the "Lender"), a Delaware corporation with its principal offices at
233 Lake Avenue, Racine, Wisconsin 53404.
Subject to the terms and conditions of this Agreement, the Lender has
agreed to make available to the Company certain term loans, the proceeds of
which will be used by the Company solely to purchase certain assets from
Sahlberg Equipment, Inc.
ARTICLE I
LOANS AND NOTES
1.1 TERM LOANS. At any time on or prior to January 17, 1997, and
subject to all of the terms and conditions of this Agreement, the Company may
obtain two term loans (the "Loans") from the Lender in amounts which in the
aggregate shall equal [the purchase price paid by the Company for the Purchased
Assets pursuant to the terms and conditions of the Asset Purchase Agreement],
but which in no event shall be more than $5,266,392.00. The Loans shall be
evidenced by promissory notes (the "Notes") payable to the order of the Lender
in the principal amounts advanced, dated as of the date that the loans are made
to the Company, in the forms of Exhibits A-1 and A-2 attached hereto,
respectively. The Notes shall be executed by the Company and delivered to the
Lender prior to or simultaneously with the making of the Loans.
1.2 USE OF PROCEEDS. The Company represents, warrants and agrees
that the proceeds of the Loans made hereunder will be used solely for the
purchase by the Company of the Purchased Assets from Sahlberg Equipment, Inc.
pursuant to the terms of the Asset Purchase Agreement.
1.3 OPTIONAL PREPAYMENT. The Notes may be prepaid in whole or in
part at the option of the Company without premium or penalty. Prepayment shall
be applied first to any accrued and unpaid interest on the Note with respect to
which the prepayment
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is made and, second, to the principal balance of such Note in inverse order of
maturity.
1.4 COMPUTATIONS; NON-BUSINESS DAYS. All interest payable on the
Notes shall be computed for the actual number of days elapsed, using a daily
rate determined by dividing the annual rate by 360. Whenever any payment to be
made hereunder or under the Notes shall be stated to be due on a Saturday,
Sunday or a public holiday under the laws of the State of Wisconsin, such
payment may be made on the next succeeding business day, and such extension of
time shall be included in the computation of interest under the Notes.
ARTICLE II
CONDITIONS OF BORROWING
Without limiting any of the other terms of this Agreement, the Lender
shall not be required to make the Loans to the Company hereunder:
2.1 REPRESENTATIONS. Unless the representations and warranties
contained in Article III hereof continue to be true and correct on the date of
the Loans; no Default or Event of Default hereunder shall have occurred and be
continuing; and at least two (2) business days' prior to the date of the Loans
the Lender shall have received a written request therefor in the form of Exhibit
B annexed hereto.
2.2 SECURITY AGREEMENT. Unless the Company shall have executed and
delivered to the Lender a security agreement in the form attached hereto as
Exhibit C (the "Security Agreement") and financing statements, in form
satisfactory to the Lender, covering the collateral described in the Security
Agreement.
2.3 FILINGS. Unless any documents (including, without limitation,
financing statements) required to be filed, registered or recorded in order to
create, in favor of the Lender, perfected security interests in the collateral
in the jurisdictions listed on Schedule 1 to the Security Agreement shall have
been properly filed, registered or recorded in each office in each such
jurisdiction which such filings, registrations and recordations are required;
the Lender shall
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have received acknowledgment copies of all such filings, registrations and
recordations stamped by the appropriate filing, registration or recording
officer (or, in lieu thereof, other evidence satisfactory to the Lender that all
such filings, registrations and recordations have been made); and the Lender
shall have received such evidence as it may deem satisfactory that all necessary
filing, recording and other similar fees, and all taxes and other expenses
related to such filings, registrations and recordings have been paid in full.
2.4 PRIORITY. Unless the Lender shall have received, in form and
substance satisfactory to the Lender, such lien searches, title insurance
policies and other evidence of lien priority covering the security interest
granted to the Lender hereunder as the Lender may require.
2.5 INSURANCE CERTIFICATE. Unless the Lender shall have received
evidence satisfactory to it that the Company maintains hazard and liability
insurance coverage reasonably satisfactory to the Lender.
2.6 COUNSEL OPINION. Unless the Lender shall have received from its
counsel and from Company's counsel, satisfactory opinions as to such matters
relating to the Company, the validity and enforceability of this Agreement, the
Loans to be made hereunder and the other documents required by this Article II
as the Lender shall reasonably require. The Company shall execute and/or
deliver to the Lender or its counsel such documents concerning its corporate
status and the authorization of such transactions as may be requested.
2.7 PROCEEDINGS SATISFACTORY. Unless all proceedings taken in
connection with the transactions contemplated by this Agreement, and all
instruments, authorizations and other documents applicable thereto, shall be
satisfactory in form and substance to the Lender and its counsel.
2.8 VIOLATION OF ENVIRONMENTAL LAWS. If in the opinion of the
Lender there exists any uncorrected violation by the Company of an Environmental
Law or any condition which requires, or may require, a cleanup, removal or other
remedial action by the Company under any Environmental Laws.
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2.9 CLOSING OF ASSET PURCHASE. Unless contemporaneous with the
closing of the Loans to be made hereunder, all conditions to the obligations of
the Company under the Asset Purchase Agreement so set forth therein have been
satisfied and the purchase by the Company of the Purchased Assets pursuant to
the terms and conditions of the Asset Purchase Agreement shall have occurred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the Loans as provided herein,
the Company represents and warrants to the Lender as follows as of the date of
this Agreement and as of the date the Loans are made:
3.1 ORGANIZATION. The Company is a corporation duly organized and
existing in good standing or active status under the laws of the State of Oregon
and has all requisite power and authority, corporate or otherwise, to conduct
its business and to own its properties. The Company has no Subsidiary. The
Company is duly licensed or qualified to do business in all jurisdictions in
which such qualification is required, and failure to so qualify could have a
material adverse effect on the property, financial condition or business
operations of the Company.
3.2 AUTHORITY. The execution, delivery and performance of this
Agreement, the Notes and the documents required by Article II (the "Collateral
Documents") are within the corporate powers of the Company, have been duly
authorized by all necessary corporate action and do not and will not (a) require
any consent or approval of the stockholders of the Company, (b) violate any
provision of the articles of incorporation or by-laws of the Company or of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to the Company; (c) require
the consent or approval of, or filing or registration with, any governmental
body, agency or authority; or (d) result in a breach of or constitute a default
under, or result in the imposition of any lien, charge or encumbrance upon any
property of the Company pursuant to, any indenture or other agreement or
instrument under which the Company is a party or by
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which it or its properties may be bound or affected. This Agreement
constitutes, and the Note and the Collateral Documents when executed and
delivered hereunder will constitute, legal, valid and binding obligations of the
Company or other signatory enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy or similar laws affecting the
enforceability of creditors' rights generally.
3.3 INVESTMENT COMPANY ACT OF 1940. The Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.4 EMPLOYEE RETIREMENT INCOME SECURITY ACT. All Plans are in
compliance in all material respects with the applicable provisions of ERISA.
The Company has not incurred any material "accumulated funding deficiency"
within the meaning of Section 302(a)(2) of ERISA in connection with any Plan.
There has been no Reportable Event for any Plan, the occurrence of which would
have a materially adverse effect on the Company, nor has the Company incurred
any material liability to the Pension Benefit Guaranty Corporation under Section
4062 of ERISA in connection with any Plan. The Plans do not have any unfunded
liabilities. The Company is not a member of any Multiemployer Plan.
3.5 FINANCIAL STATEMENTS. The balance sheet of the Company as of
July 31, 1996, and the statement of profit and loss and cash flow of the Company
for the year-to-date period ended on that date, as prepared by the Company and
audited by Price Waterhouse and heretofore furnished to the Lender, are correct
and complete, are prepared in accordance with GAAP consistently applied and
fairly present the financial condition and results of operations of the Company
as of and for the financial period ended on such date. Since such date, there
has been no material adverse change in the property, financial condition or
business operations of the Company.
3.6 DIVIDENDS AND REDEMPTIONS. The Company has not, since its
inception, paid or declared any dividend, or made any other distribution on
account of any shares of any class of its stock, or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of any class of its
stock. The Company is
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not a party to any agreement which may require it to redeem, purchase or
otherwise acquire any shares of any class of its stock.
3.7 LIENS. The Company has good and marketable title to all of its
assets, real and personal, free and clear of all liens, security interests,
mortgages and encumbrances of any kind, except Permitted Liens. All owned and
leased buildings and equipment of the Company are in good condition, repair and
working order in all material respects and, to the best of the Company's
knowledge and belief, conform in all material respects to all applicable laws,
regulations and ordinances.
3.8 CONTINGENT LIABILITIES. The Company does not have any
guarantees or other contingent liabilities outstanding (including, without
limitation, liabilities by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor or otherwise to assure the creditor against loss), except those
permitted by Section 4.10 hereof.
3.9 TAXES. Except as expressly disclosed in the financial
statements referred to in Section 3.5 above, the Company does not have any
material outstanding unpaid tax liability (except for taxes which are currently
accruing from current operations and ownership of property, which are not
delinquent), and no tax deficiencies have been proposed or assessed against the
Company. There have been no audits of the Company's federal or state income tax
returns. All taxes shown by such returns have been paid.
3.10 ABSENCE OF LITIGATION. The Company is not a party to any
litigation or administrative proceeding, nor so far as is known by the Company
is any litigation or administrative proceeding threatened against it, which in
either case (a) relates to the execution, delivery or performance of this
Agreement, the Notes, or any of the Collateral Documents, (b) could, if
adversely determined, cause any material adverse change in its property,
financial condition or the conduct of its business, (c) asserts or alleges that
the Company violated Environmental Laws, (d) asserts or alleges that the Company
is required to cleanup, remove, or take remedial or other response action due to
the disposal, depositing, discharge, leaking or
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other release of any hazardous substances or materials, (e) asserts or alleges
that the Company is required to pay all or a portion of the cost of any past,
present or future cleanup, removal or remedial or other response action which
arises out of or is related to the disposal, depositing, discharge, leaking or
other release of any hazardous substances or materials by the Company.
3.11 ABSENCE OF DEFAULT. No event has occurred, which either of
itself or with the lapse of time or the giving of notice or both, would give any
creditor of the Company the right to accelerate the maturity of any indebtedness
of the Company for borrowed money. The Company is not in default under any
other lease, agreement or instrument, or any law, rule, regulation, order, writ,
injunction, decree, determination or award, noncompliance with which could
materially adversely affect its property, financial condition or business
operations.
3.12 NO BURDENSOME AGREEMENTS. The Company is not a party to any
agreement, instrument or undertaking, or subject to any other restriction, (a)
which materially adversely affects or may in the future so affect the property,
financial condition or business operations of the Company, or (b) under or
pursuant to which the Company is or will be required to place (or under which
any other person may place) a lien upon any of its properties securing
indebtedness either upon demand or upon the happening of a condition, with or
without such demand.
3.13 TRADEMARKS, ETC. The Company possesses adequate trademarks,
trade names, copyrights, patents, permits, service marks and licenses, or rights
thereto, for the present and planned future conduct of its business
substantially as now conducted, without any known conflict with the rights of
others which might result in a material adverse effect on the Company.
3.14 LEASES. The Company is not a party to any lease or similar
arrangement, except those permitted by Section 4.11 hereof.
3.15 PARTNERSHIPS; JOINT VENTURES. The Company is not a member of
any partnership or joint venture.
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3.16 FISCAL YEAR. The fiscal year of the Company ends on July 31 of
each year.
3.17 DUMP SITES. With respect to the period during which the Company
owned or occupied its real estate, and to the Company's knowledge after
reasonable investigation, with respect to the time before the Company owned or
occupied its real estate, no person or entity has caused or permitted materials
to be stored, deposited, treated, recycled or disposed of on, under or at any
real estate owned or occupied by the Company, which materials, if known to be
present, would require cleanup, removal or some other remedial action under
Environmental Laws.
3.18 TANKS. There are not now, nor to the Company's knowledge after
reasonable investigation have there ever been, tanks or other facilities on,
under, or at any real estate owned or occupied by the Company which contained
materials which, if known to be present in soils or ground water, would require
cleanup, removal or some other remedial action under Environmental Laws.
3.19 OTHER ENVIRONMENTAL CONDITIONS. To the Company's knowledge
after reasonable investigation, there are no conditions existing currently or
likely to exist during the term of the Note which would subject the Company to
damages, penalties, injunctive relief or cleanup costs under any Environmental
Laws or which require or are likely to require cleanup, removal, remedial action
or other response pursuant to Environmental Laws by the Company.
3.20 CHANGES IN LAWS. To the Company's knowledge after reasonable
investigation, there are no proposed or pending changes in Environmental Laws
that would adversely affect the Company.
3.21 ENVIRONMENTAL JUDGMENTS, DECREES AND ORDERS. The Company is not
subject to any judgment, decree, order or citation related to or arising out of
Environmental Laws and has not been named or listed as a potentially responsible
party by any governmental body or agency in a matter arising under any
Environmental Laws.
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3.22 ENVIRONMENTAL PERMITS AND LICENSES. The Company has all
permits, licenses and approvals required under Environmental Laws, all of which
are listed on SCHEDULE 3.22 attached to this Agreement.
3.23 FULL DISCLOSURE. No information, exhibit or report furnished by
the Company to the Lender in connection with the negotiation or execution of
this Agreement contained any material misstatement of fact as of the date when
made or omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading as of the date when made.
ARTICLE IV
NEGATIVE COVENANTS
While the credit granted to the Company is available and while any
part of the principal of or interest on either of the Notes remain unpaid, the
Company shall not do any of the following, without the prior written consent of
the Lender:
4.1 RESTRICTION OF INDEBTEDNESS. Create, incur, assume or have
outstanding any indebtedness for borrowed money or the deferred purchase price
of any asset (including obligations under Capitalized Leases except as permitted
by Section 4.2), except:
(a) the Notes issued under this Agreement;
(b) indebtedness secured by Permitted Liens; and
(c) unsecured loans or advances to the Company by the Company's
parent corporation made in the ordinary course of business.
4.2 CAPITAL EXPENDITURES. Create, incur or assume any Capital
Expenditures other than those created, incurred or assumed in the ordinary
course of business and in no event exceeding, in the aggregate, $1,000,000.
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4.3 AMENDMENTS AND PREPAYMENTS. Agree to any amendment,
modification or supplement, or obtain any waiver or consent in respect of
compliance with any of the terms of, or call or redeem, or make any purchase or
prepayment of or with respect to, any instrument or agreement evidencing or
relating to any indebtedness for borrowed money or for the deferred purchase
price of any asset, including Capitalized Leases.
4.4 RESTRICTION ON LIENS. Create or permit to be created or allow
to exist any mortgage, pledge, encumbrance or other lien upon or security
interest in any property or asset now owned or hereafter acquired by the
Company, except Permitted Liens.
4.5 SALE AND LEASEBACK. Except for real estate, enter into any
agreement providing for the leasing by the Company of property which has been or
is to be sold or transferred by the Company to the lessor thereof, or which is
substantially similar in purpose to property so sold or transferred.
4.6 DIVIDENDS AND REDEMPTIONS. Pay or declare any dividend, or make
any other distribution on account of any shares of any class of its stock, or
redeem, purchase or otherwise acquire directly or indirectly, any shares of any
class of its stock.
4.7 ACQUISITIONS AND INVESTMENTS. Acquire any other business or
make any loan, advance or extension of credit to, or investment in, any other
person, corporation or other entity, including investments acquired in exchange
for stock or other securities or obligations of any nature, or create or
participate in the creation of any subsidiary or joint venture, except:
(a) investments in (i) bank repurchase agreements; (ii) savings
accounts or certificates of deposit in a financial institution of
recognized standing; (iii) obligations issued or fully guaranteed by
the United States; and (iv) prime commercial paper maturing within 90
days of the date of acquisition by the Company; and
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(b) loans and advances made to employees and agents in the
ordinary course of business, such as travel and entertainment advances
and similar items;
4.8 LIQUIDATION; MERGER; DISPOSITION OF ASSETS. Liquidate or
dissolve; or merge with or into or consolidate with or into any other
corporation or entity; or sell, lease, transfer or otherwise dispose of all or
any substantial part of its property, assets or business (other than sales made
in the ordinary course of business).
4.9 ACCOUNTS RECEIVABLE. Except for the sale of accounts pursuant
to Case's credit card program, discount or sell with or without recourse, or
sell for less than the face amount thereof, any of its notes or accounts
receivable, whether now owned or hereafter acquired.
4.10 CONTINGENT LIABILITIES. Guarantee or become a surety or
otherwise contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) for any obligations of others, except pursuant to the
deposit and collection of checks and similar items in the ordinary course of
business and pursuant to repurchase obligations with Government Customers.
4.11 LEASES. Incur or permit to be outstanding lease or rental
obligations as lessee of real or personal property, under leases which are not
Capitalized Leases, exceeding in the aggregate $7,500,000, calculated on the
basis of total lease or rental obligations of the Company over the terms of such
leases.
4.12 AFFILIATES. Suffer or permit any transaction with any
Affiliate, except on terms not less favorable to the Company than would be usual
and customary in similar transactions with non-affiliated persons.
4.13 PARTNERSHIPS; JOINT VENTURES. Become a member of any
partnership or joint venture.
4.14 FISCAL YEAR. Change its fiscal year.
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4.16 DERIVATIVES. Enter into any interest rate, commodity or foreign
currency exchange, swap, collar, cap or similar agreement except to hedge
against actual interest rate, foreign currency or commodity exposure.
ARTICLE V
AFFIRMATIVE COVENANTS
While the credit granted to the Company is available and while any
part of the principal of or interest on either of the Notes remain unpaid, the
Company shall unless waived in writing by the Lender:
5.1 FINANCIAL STATUS.
(a) MINIMUM EQUITY PERCENTAGE. Maintain at all times a Minimum
Equity Percentage greater than 22%.
(b) DEBT TO EQUITY RATIO. Maintain at all times a Debt To
Equity Ratio of not more than 3.5:1.
(c) CURRENT RATIO. Maintain at all times a Current Ratio of
not less than 1:1.
5.2 INSURANCE. Maintain insurance in such amounts and against such
risks as is customary by companies engaged in the same or similar businesses and
similarly situated. The Company shall at all times retain all the incidents of
ownership of such insurance and shall not borrow upon or otherwise impair its
right to receive the proceeds of such insurance. Upon the request of the
Lender, the Company will provide evidence to the Lender that all premiums in
respect of such insurance policy have been paid.
5.3 CORPORATE EXISTENCE; OBLIGATIONS. Do all things necessary to:
(a) maintain its corporate existence and all rights and franchises necessary or
desirable for the conduct of its business; (b) comply with all applicable laws,
rules, regulations and ordinances, and all restrictions imposed by governmental
authorities, including those relating to environmental standards and controls;
and (c) pay, before the
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same become delinquent and before penalties accrue thereon, all taxes,
assessments and other governmental charges against it or its property, and all
of its other liabilities, except to the extent and so long as the same are being
contested in good faith by appropriate proceedings in such manner as not to
cause any material adverse effect upon its property, financial condition or
business operations, with adequate reserves provided for such payments.
5.4 BUSINESS ACTIVITIES. Continue to carry on its business
activities in substantially the manner such activities are conducted on the date
of this Agreement and not make any material change in the nature of its
business.
5.5 PROPERTIES. Keep its properties (whether owned or leased) in
good condition, repair and working order, ordinary wear and tear and
obsolescence excepted, and make or cause to be made from time to time all
necessary repairs thereto (including external or structural repairs) and
renewals and replacements thereof.
5.6 ACCOUNTING RECORDS; REPORTS. Maintain a standard and modern
system for accounting in accordance with GAAP consistently applied throughout
all accounting periods and consistent with those applied in the preparation of
the financial statements referred to in section 3.5; and furnish to the Lender
such information respecting the business, assets and financial condition of the
Company as the Lender may reasonably request and, without request, furnish to
the Lender:
(a) Within 30 days after the end of each fiscal year of
Company, a balance sheet and statements of income and cash flow of
Company as of the close of such year and of the preceding fiscal year,
all prepared in accordance with GAAP and certified as true and correct
(subject to audit and normal year-end adjustments) by the chief
financial officer of Company.
(b) Within 15 days after the end of each month, a balance sheet
and statements of income and cash flow for such month, for the year to
date and for the corresponding periods of the preceding fiscal year,
all
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prepared in accordance with GAAP consistently applied and certified as true
and correct (subject to audit and normal year-end adjustments) by the chief
financial officer of the Company.
(c) As soon as available, copies of all reports or materials
submitted or distributed to shareholders of the Company or filed with
the SEC or other governmental agency having regulatory authority over
the Company or with any national securities exchange; and
(d) Promptly after the furnishing thereof, copies of any
statement or report furnished to any other holder of obligations of
the Company pursuant to the terms of any indenture, loan or similar
agreement and not otherwise required to be furnished to the Lender
pursuant to any other clause of this Section 5.6; and
(e) Promptly, and in any event within 10 days, after the
Company has knowledge thereof a statement of the chief financial
officer of the Company describing: (i) any event which, either of
itself or with the lapse of time or the giving of notice or both,
would constitute a default hereunder or under any other material
agreement to which the Company is a party, together with a statement
of the actions which the Company proposes to take with respect
thereto; (ii) any pending or threatened litigation or administrative
proceeding of the type described in Section 3.10; and (iii) any fact
or circumstance which is materially adverse to the property, financial
condition or business operations of the Company; and
(f)(i) Promptly, and in any event within 30 days, after the
Company knows that any Reportable Event with respect to any Plan has
occurred, a statement of the chief financial officer of the Company
setting forth details as to such Reportable Event and the action which
the Company proposes to take with respect thereto, together with a
copy of any notice of such Reportable Event given to the Pension
Benefit Guaranty
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Corporation if a copy of such notice is available to the Company, (ii)
promptly after the filing thereof with the Internal Revenue Service, copies
of each annual report with respect to each Plan administered by the Company
and (iii) promptly after receipt thereof, a copy of any notice (other than
a notice of general application) the Company or any member of the
Controlled Group may receive from the Pension Benefit Guaranty Corporation
or the Internal Revenue Service with respect to any Plan administered by
the Company.
The financial statements referred to in (a) above shall be accompanied
by a certificate by the chief financial officer of the Company that, as of the
close of the last period covered in such financial statements, no condition or
event had occurred which constitutes a default hereunder or which, after notice
or lapse of time or both, would constitute a default hereunder (or if there was
such a condition or event, specifying the same).
5.7 INSPECTION OF RECORDS. Permit representatives of the Lender to
visit and inspect any of the properties and examine any of the books and records
of the Company at any reasonable time and as often as may be reasonably desired.
5.8 COMPLIANCE WITH ENVIRONMENTAL LAWS. Timely comply with all
applicable Environmental Laws.
5.9 ORDERS, DECREES AND OTHER DOCUMENTS. Provide to the Lender,
immediately upon receipt, copies of any correspondence, notice, pleading,
citation, indictment, complaint, order, decree, or other document from any
source asserting or alleging a circumstance or condition which requires or may
require a financial contribution by Company or a cleanup, removal, remedial
action, or other response by or on the part of the Company under Environmental
Laws which seeks damages or civil, criminal or punitive penalties from Company
for an alleged violation of Environmental Laws.
5.10 AGREEMENT TO UPDATE. Advise the Lender in writing as soon as
Company becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or inaccurate.
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ARTICLE VI
DEFAULTS
6.1 DEFAULTS. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Company shall fail to pay any principal or interest due
hereunder when the same shall have become due.
(b) The Company shall fail to pay as and when due (whether as
principal, guarantor or other surety and whether at maturity, by
acceleration or otherwise) all or any part of the principal, interest
or other obligation due to the Lender.
(c) The Company shall fail to pay within 30 days after the due
date (whether as principal, guarantor or other surety and whether at
maturity, by acceleration or otherwise) all or any part of the
principal, interest or other obligation due to Case Corporation.
(d) The Company shall fail to pay as and when due (whether as
principal, guarantor or other surety and whether at maturity, by
acceleration or otherwise) all or any part of the principal, interest
or other obligation which involves or could involve the amount of
$100,000 or more due or becoming due.
(e) The Company is in default in the performance of or
compliance with (i) any term of any evidence of any indebtedness owing
to Case or (ii) any term of any evidence of any other indebtedness in
an aggregate outstanding principal amount of $100,000 or more, or
(iii) any term of any mortgage, indenture or other agreement relating
to indebtedness described in either (i) or (ii).
(f) The Company shall default in the performance or observance
of any agreement, covenant, condition,
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provision or term contained in Sections 4.1 through 4.8 or 5.1 of this
Agreement.
(g) The Company shall default in the performance or observance
of any of the other agreements, covenants, conditions, provisions or
terms in this Agreement or the Collateral Documents which are not
remedied within 15 days after occurrence.
(h) An event of default shall have occurred under any agreement
with the Lender or Case.
(i) Failure to replace or reinstate any expired or lapsed
insurance within 30 days.
(j) Any representation or warranty made by the Company in
connection with this Agreement (including any financial statement
delivered to the Lender) shall prove to have been false in any
material respect as of the time when made or given the Company is
diligently seeking a cure for such misstatement and after such
misstatement shall have been cured, the Lender shall be in the same
position as it would have been in as if such misstatement had not been
made.
(k) The Company shall: (i) become insolvent; or (ii) be
unable, or admit in writing its inability to pay its debts as they
mature; or (iii) make a general assignment for the benefit of
creditors or to an agent authorized to liquidate any substantial
amount of its property; or (iv) commence an action for an "order of
relief" within the meaning of the United States Bankruptcy Code; (v)
has a preceding commenced by another party seeking that the Company
become the subject of an "order for relief" within the meaning of the
United States Bankruptcy Code and such preceding is not terminated
within 30 days; or (vi) become the subject of a creditor's petition
for liquidation, reorganization or to effect a plan or other
arrangement with creditors and such petition is not terminated within
30 days; or (vii) apply to a court for the appointment of a custodian
or receiver for any of its assets; or (viii) have a custodian or
receiver
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appointed for any of its assets (with or without its consent) and such
matters is not terminated within 30 days; or (ix) have any of its assets
garnished, seized or forfeited, or threatened with garnishment, seizure or
forfeiture; (x) otherwise becomes the subject of any insolvency proceedings
or proposed which remains outstanding for 30 days or (xi) enters into any
other formal or informal composition or arrangement with its creditors.
(l) A final judgment which, together with other outstanding
final judgments against the Company, exceeds an aggregate of $100,000
shall be entered against the Company and shall remain outstanding and
unsatisfied, unbonded, unstayed or uninsured after 30 days from the
date of entry thereof.
(m) The Company shall engage in any "prohibited transaction"
(as defined in ERISA) involving any employee pension benefit plan
subject to Title IV of ERISA (a "Plan"), or any "accumulated funding
deficiency" (as defined in ERISA) shall exist with respect to any Plan
or any lien in favor of the Pension Benefit Guaranty Corporation or a
Plan shall arise on the assets of the Company or any event shall occur
which could result in the termination of a Plan under Title IV of
ERISA or the Company or a commonly controlled entity shall incur any
liability in connection with a withdrawal from (or the insolvency or
reorganization of) a multi-employer Plan, or any other event or
condition shall occur or exist with respect to a Plan, and in each
case described above such event or condition, together with all other
such events or conditions, if any, could have a material adverse
effect on the business, financial condition or properties of the
Company.
(n) This Agreement, any of the Note or any Collateral Document
shall, at any time after their respective execution and delivery, and
for any reason, cease to be in full force and effect or be declared
null and void, or be revoked or terminated, or the validity or
enforceability thereof or hereof shall be
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contested by the Company or any shareholder of the Company, or the Company
shall deny that it has any or further liability or obligation thereunder or
hereunder, as the case may be.
(o) The Company ceases to be an authorized Case dealer.
6.2 ACCELERATION OF OBLIGATIONS. Upon the occurrence of any Event
of Default:
(a) As to any Event of Default (other than an Event of Default
under section 6.1(k)) and at any time thereafter, and in each case,
the Lender may, by written notice to the Company, immediately declare
the unpaid principal balance of the Notes, together with all interest
accrued thereon, to be immediately due and payable; and the unpaid
principal balance of and accrued interest on the Notes shall thereupon
be due and payable without further notice of any kind, all of which
are hereby waived, and notwithstanding anything to the contrary herein
or in the Notes contained;
(b) As to any Event of Default under Section 6.1(k), the unpaid
principal balance of the Notes, together with all interest accrued
thereon, shall immediately and forthwith be due and payable, all
without presentment, demand, protest, or further notice of any kind,
all of which are hereby waived, notwithstanding anything to the
contrary herein or in the Notes contained; and
(c) As to each Event of Default, the Lender shall have all the
remedies for default provided by the Collateral Documents, as well as
applicable law.
ARTICLE VII
MISCELLANEOUS
7.1 ACCOUNTING TERMS; DEFINITIONS. Except as otherwise provided,
all accounting terms shall be construed in accordance GAAP consistently applied
and consistent with those
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applied in the preparation of the financial statements referred to in Section
3.5, and financial data submitted pursuant to this Agreement shall be prepared
in accordance with such principles. As used herein:
(a) The term "Affiliate" means any person, firm or corporation,
which, directly or indirectly, controls, is controlled by, or is under
common control with, the Company.
(b) The term "Asset Purchase Agreement" shall mean that certain
Asset Purchase Agreement dated January 17, 1997 by and among Sahlberg
Equipment, Inc., John and Robert Sahlberg, R&J Partners, and Western
Power & Equipment Corp., with all exhibits and schedules thereto, a
correct and complete copy of which has been furnished to the Lender.
(c) The term "Capital Expenditures" means with respect to any
period shall mean the sum of the aggregate of all expenditures
(whether paid in cash, capitalized as an asset or accrued as a
liability) during such period which, in accordance with GAAP, are or
should be included in "capital expenditures" or similar items
reflected in the consolidated statement of cash flows.
(d) The term "Capitalized Lease" means any lease which is
capitalized on the books of the lessee, or should be so capitalized
under generally accepted accounting principles.
(e) The term "Case" shall mean Case Credit Corporation and Case
Corporation, both Delaware corporations.
(f) The term "Controlled Group" means a controlled group of
corporations as defined in Section 1563 of the Internal Revenue Code
of 1986, as amended, of which the Company is a part.
(g) The term "Current Ratio" shall mean the relationship,
expressed as a numerical ratio, between
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the Company's current assets and current liabilities, each as determined in
accordance with GAAP and shown on its financial statements required to be
delivered to the Lender.
(h) The term "Debt to Equity Ratio" means the relationship,
expressed as a numerical ratio, between the Company's total
liabilities, including capitalized lease obligations, and its
shareholders' equity, each as determined in accordance with GAAP and
shown on its financial statements required to be delivered to the
Lender.
(i) The term "Default" means any condition or event which with
the passage of time or the giving of notice or both would constitute
an Event of Default.
(j) The term "ERISA" means the Employee Retirement Income
Security Act of 1974, as the same may be in effect from time to time.
(k) The term "Environmental Laws" means all federal, state and
local laws including rules of common law, statutes, regulations,
ordinances, codes, rules and other governmental restrictions and
requirements relating to the discharge of air pollutants, water
pollutants or process waste water or otherwise relating to the
environment or hazardous substances including, but not limited to, the
Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and
Recovery Act of 1976, the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Toxic Substances
Control Act, the Hazardous Materials Transportation Act, regulations
of the Environmental Protection Agency, regulations of the Nuclear
Regulatory Agency, and regulations of any state department of natural
resources or state environmental protection agency now or at any time
hereafter in effect.
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<PAGE>
(l) The term "Financing Lease" means any lease of property,
real or personal, the obligations of the lessee in respect of which
are required in accordance with GAAP to be capitalized on a balance
sheet of the lessee.
(m) The term "GAAP" means generally accepted accounting
principles in the United States of America in effect on the date
hereof.
(n) The term "Government Customers" means those customers
identified as such in the "Dealer Operating Guide," as amended from
time to time, as published by Case.
(o) The term "Indebtedness" at any date means without
duplication (i) all indebtedness for borrowed money or for the
deferred purchase price of property or services (other than trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness
which is evidenced by a note, bond, debenture or similar instrument,
(iii) all obligations under Financing Leases, (iv) all obligations in
respect of acceptances issued or created for the account of the
Company (v) all liabilities secured by an lien on any property owned
by the Company even though the Company has not assumed or otherwise
become liable for the payment thereof (vi) all net liabilities of the
Company in respect of interest rate agreements and (vii) all
liabilities in respect of any guaranty, reimbursement, counter
indemnity or similar obligation under which the Company guarantees any
of the types of indebtedness or liabilities set forth in (i) through
(vi) above of any third party.
(p) The term "Minimum Equity Percentage" means the
relationship, expressed as a percentage, of the Company's
shareholders' equity to its total assets, as determined in accordance
with GAAP and shown on its financial statements required to be
delivered to the Lender.
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<PAGE>
(q) The term "Multiemployer Plan" means a multiemployer pension
plan within the meaning of the Multiemployer Pension Plan Act, as
amended from time to time.
(r) The term "Permitted Liens" means:
(i) liens outstanding on December 31, 1996 and listed
on Schedule 7.1(r);
(ii) liens for taxes, assessments or governmental
charges, and liens incident to construction, which are either not
delinquent or are being contested in good faith by the Company by
appropriate proceedings which will prevent foreclosure of such
liens, and against which adequate reserves have been provided;
(iii) liens or deposits in connection with worker's
compensation or other insurance or to secure customs' duties,
public or statutory obligations in lieu of surety, stay or appeal
bonds, or to secure performance of contracts or bids (other than
contracts for the payment of money borrowed), or deposits
required by law or governmental regulations or by any court
order, decree, judgment or rule as a condition to the transaction
of business or the exercise of any right, privilege or license;
or other liens or deposits of a like nature made in the ordinary
course of business;
(iv) purchase money liens on property acquired in the
ordinary course of business, to finance or secure a portion of
the purchase price thereof, and liens on property acquired
existing at the time of acquisition; provided that in each case
such lien shall be limited to the property so acquired and the
liability secured by such lien does not exceed either the
purchase
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<PAGE>
price or the fair market value of the asset acquired; and
(v) liens required by this Agreement as security for
the Note.
(s) The term "Plan" means any employee pension benefit plan
subject to Title IV of ERISA maintained by the Company or any member
of the Controlled Group, or any such plan to which the Company or any
member of the Controlled Group is required to contribute on behalf of
any of its employees.
(t) The term "Purchased Assets" means the assets to be
purchased by the Company pursuant to the Asset Purchase Agreement.
(u) The term "Reportable Event" means a reportable event as
that term is defined in Title IV of ERISA.
(v) The term "Subsidiary" means a corporation, partnership or
other entity of which the Company owns, directly or through another
Subsidiary, at the date of determination, more than 50% of the
outstanding stock (or other shares of beneficial interest) having
ordinary voting power for the election of directors, irrespective of
whether or not at such time stock of any other class or classes might
have voting power by reason of the happening of any contingency, or
holds at least a majority of partnership or similar interests, or is a
general partner, and any other Affiliate that is included in
consolidated financial statements of the Company furnished to the
Lender.
(w) The term "Unfunded Liabilities" means, with regard to any
Plan, the excess of the current value of the Plan's benefits
guaranteed under ERISA over the current value of the Plan's assets
allocable to such benefits.
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<PAGE>
7.2 EXPENSES; INDEMNITY.
(a) The Company shall pay or reimburse the Lender for (i) all
out-of-pocket costs and expenses (including, without limitation,
attorneys' fees up to $10,000 and expenses) paid or incurred by the
Lender in connection with the negotiation, preparation, execution and
delivery of this Agreement, the Notes, the Collateral Documents and
any other document required hereunder or thereunder, (ii) all
reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, including the
fees and expenses of in-house counsel) paid or incurred in connection
with any amendment, supplement, modification or waiver of or to this
Agreement, the Notes, the Collateral Documents or any other document
required hereunder or thereunder; (iii) all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses, including the fees and expenses of
in-house counsel) paid or incurred by the Lender before and after
judgment in enforcing, protecting or preserving its rights under this
Agreement, the Notes, the Collateral Documents and other document
required hereunder or thereunder, including, without limitation, the
enforcement of rights against, or realization on, any collateral or
security therefor or in defending against any claim made against the
Lender by the Company or any third party as a result of or in any way
relating to any matter referred to in subsection (i),(ii) or (iii) of
this section; and (iv) any and all recording and filing fees and any
and all stamp, excise, intangibles and other taxes, if any,
(including, without limitation, any sales, occupation, excise, gross
receipts, franchise, general corporation, personal property, privilege
or license taxes, but not including taxes levied upon the net income
of the Lender by the federal government or the State of Wisconsin),
which may be payable or determined to be payable in connection with
the negotiation, preparation, execution, delivery, administration or
enforcement of this Agreement, the Notes, the Collateral Documents or
any other document required
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<PAGE>
hereunder or thereunder or any amendment, supplement, modification or
waiver of or to any of the foregoing, or consummation of any of the
transactions contemplated hereby or thereby whether such taxes are levied
by reason of the acts to be performed by the Company hereunder or are
levied upon the Lender, the Company, the property of the Lender or
otherwise, including all costs and expenses incurred in contesting the
imposition of any such tax, and any and all liability with respect to or
resulting from any delay in paying the same, whether such taxes are levied
upon the Lender, the Company or otherwise.
(b) The Company agrees to indemnify the Lender against any and
all losses, claims, damages, liabilities and expenses, (including,
without limitation, reasonable attorneys' fees and expenses, including
the fees and expenses of in-house counsel) incurred by the Lender
arising out of, in any way connected with, or as a result of (i) any
acquisition or attempted acquisition of stock or assets of another
person or entity by the Company or any Subsidiary, (ii) the use of any
of the proceeds of any loans made hereunder by the Company or any
Subsidiary for the making or furtherance of any such acquisition or
attempted acquisition, (iii) any breach or alleged breach by the
Company of or any liability or alleged liability of the Company under
any Environmental Law, or any liability or alleged liability incurred
by the Lender under any Environmental Law in connection with this
Agreement, any Collateral Document or the transactions contemplated
hereunder or thereunder, (iv) the negotiation, preparation, execution,
delivery, administration, and enforcement of this Agreement, the
Notes, the Collateral Documents and any other document required
hereunder or thereunder (subject to the limitation to the extent
applicable in Section 7.1(a)(i)), including without limitation any
amendment, supplement, modification or waiver of or to any of the
foregoing or the consummation or failure to consummate the
transactions contemplated hereby or thereby, or the performance by the
parties of their obligations hereunder or thereunder, (v) any claim,
litigation,
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<PAGE>
investigation or proceedings related to any of the foregoing, whether or
not the Lender is a party thereto; provided, however, that such indemnity
shall not apply to any such losses, claims, damages, liabilities or related
expenses arising from (A) any unexcused breach by the Lender of its
obligations under this Agreement or (B) any commitment made by the Lender
to a person other than the Company or any Subsidiary which would be
breached by the performance of the Lender's obligations under this
Agreement.
(c) The foregoing agreements and indemnities shall remain
operative and in full force and effect regardless of termination of
this Agreement, the consummation of or failure to consummate either
the transactions contemplated by this Agreement or any amendment,
supplement, modification or waiver, the repayment of any loan made
hereunder, the invalidity or unenforceability of any term or provision
of this Agreement or the Notes or any Collateral Document, or any
other document required hereunder or thereunder, any investigation
made by or on behalf of the Lender, the Company or any Subsidiary, or
the content or accuracy of any representation or warranty made under
this Agreement, any Collateral Document or any other document required
hereunder or thereunder.
7.3 SUCCESSORS. The provisions of this Agreement shall inure to the
benefit of any holder of the Notes, and shall inure to the benefit of and be
binding upon any successor to any of the parties hereto. No delay on the part
of the Lender or any holder of either of the Notes in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein specified are cumulative and are not
exclusive of any rights or remedies which the Lender or the holder of either of
the Notes would otherwise have.
7.4 SURVIVAL. All agreements, representations and warranties made
herein shall survive the execution of this Agreement, the making of the Loans
hereunder and the execution
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<PAGE>
and delivery of the Notes.
7.5 WISCONSIN LAW. This Agreement and the Notes issued hereunder
shall be governed by and construed in accordance with the internal laws of the
State of Wisconsin, except to the extent superseded by federal law.
7.6 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
7.7 NOTICES. All communications or notices required under this
Agreement shall be deemed to have been given on the date when deposited in the
United States mail, postage prepaid, and addressed as follows (unless and until
any of such parties advises the other in writing of a change in such address):
(a) if to the Company, with the full name and address of the Company as set
forth in this Agreement; and (b) if to the Lender with the full name and address
of the Lender as set forth in this Agreement, to the attention of the officer of
the Lender executing the form of acceptance of this Agreement.
7.8 ENTIRE AGREEMENT; NO AGENCY. This Agreement and the other
documents referred to herein contain the entire agreement between the Lender and
the Company with respect to the subject matter hereof, superseding all previous
communications and negotiations, and no representation, undertaking, promise or
condition concerning the subject matter hereof shall be binding upon the Lender
unless clearly expressed in this Agreement or in the other documents referred to
herein. Nothing in this Agreement or in the other documents referred to herein
and no action taken pursuant hereto shall cause the Company to be treated as an
agent of the Lender, or shall be deemed to constitute the Lender and the Company
a partnership, association, joint venture or other entity.
7.9 NO THIRD PARTY BENEFIT. This Agreement is solely for the
benefit of the parties hereto and their permitted successors and assigns. No
other person or entity shall have any rights under, or because of the existence
of, this Agreement.
7.10 CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OF FEDERAL
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COURT SITUATED IN MILWAUKEE COUNTY, WISCONSIN, AND WAIVES ANY OBJECTION BASED ON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS, WITH
REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS
AGREEMENT, THE NOTE, ANY OF THE COLLATERAL DOCUMENTS, OR ANY OTHER DOCUMENT
DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, OR ANY TRANSACTION ARISING FROM
OR CONNECTED TO ANY OF THE FOREGOING. THE COMPANY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS UPON IT, AND CONSENTS TO ALL SUCH SERVICE OF PROCESS MADE BY
MAIL OR BY MESSENGER DIRECTED TO IT AT THE ADDRESS SPECIFIED BELOW. Nothing
herein shall affect the Lender's right to serve process in any manner permitted
by law, or limit the Lender's right to bring proceedings against the Company or
its property or assets in the competent courts of any other jurisdiction or
jurisdictions.
7.11 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER HEREBY JOINTLY
AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTE, ANY OF THE COLLATERAL
DOCUMENTS, OR ANY OTHER DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION HEREWITH,
OR ANY TRANSACTION ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING. THE
COMPANY AND THE LENDER EACH REPRESENT THAT THIS WAIVER IS KNOWINGLY, WILLINGLY
AND VOLUNTARILY GIVEN.
7.12 LIMITATION OF LIABILITY. THE COMPANY AND THE LENDER HEREBY
WAIVE ANY RIGHT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO CLAIM OR RECOVER FROM
THE OTHER ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES.
IN WITNESS WHEREOF, the Company and the Lender have executed this
Agreement as of the date first above written.
WESTERN POWER & EQUIPMENT CORP.
By:
----------------------------------
(CORPORATE SEAL) President
And:
----------------------------------
Secretary
CASE CREDIT CORPORATION
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By:
----------------------------------
Its:
-----------------------------
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EXHIBIT A-1
PROMISSORY NOTE (EQUIPMENT INVENTORY)
$_________________ January 17, 1997
FOR VALUE RECEIVED, Western Power & Equipment Corp., an Oregon
corporation (the "Company"), promises to pay to the order of Case Credit
Corporation (the "Lender") at its main office in Racine, Wisconsin, without
setoff or counterclaim, the principal sum of _____________________________
_____________________________________________ Dollars ($_______________),
payable on January 17, 1998; provided, however, that (i) in the event the
Company sells any of the items of inventory listed on Schedule 1 attached
hereto, the Company shall pay to the Lender upon the occurrence of such sale, an
amount equal to the appraised value of such item as listed on Schedule 1, and
(ii) in the event the Company leases for a scheduled term of six months or more
any of the items of inventory listed on Schedule 1 attached hereto, the Company
shall pay to the Lender an amount equal to 80% of the rental or lease payments
theretofore received with respect to any such items, payable immediately upon
entering into such lease, and 80% of all rental or lease payments received
thereafter with respect to such items, payable when received, which amounts in
(i) or (ii) above shall be applied to payments of the principal balance hereof.
The unpaid principal balance hereof shall bear interest, payable on the
last business day of each month, computed at a rate per annum equal to ____ %.
From and after the occurrence and during the continuance of an Event of Default
as defined in the Loan Agreement dated January 17, 1997 by and between the
Company and the Lender (the "Agreement"), the entire outstanding principal
amount hereof, and all interest and other amounts due and unpaid hereunder and
under the Agreement, shall bear interest computed at a rate equal to the lesser
of (i) 3.5% per annum plus the rate otherwise payable hereunder, (ii) 20% per
annum, or (iii) the highest rate permitted by law. All amounts payable under
this Note and the Agreement shall be payable in lawful money of the United
States of America.
This Note constitutes one of the promissory notes issued under the
Agreement, to which Agreement reference is hereby made for a statement of the
terms and conditions on which the loan evidenced hereby was made and for a
description of the
<PAGE>
terms and conditions upon which this Note may be prepaid, in whole or in part,
or its maturity accelerated.
This Note is secured by and entitled to the benefit of all of the
Collateral Documents referred to in the Agreement and all other existing and
future mortgages and security agreements between the Company and Lender.
WESTERN POWER & EQUIPMENT CORP.
By:
----------------------------------
President
(CORPORATE SEAL)
And:
----------------------------------
Secretary
<PAGE>
SCHEDULE 1
INVENTORY ITEM APPRAISED VALUE
-------------- ---------------
<PAGE>
EXHIBIT A-2
PROMISSORY NOTE (PARTS INVENTORY, EQUIPMENT AND FIXTURES)
$______________ January 17, 1997
FOR VALUE RECEIVED, Western Power & Equipment Corp., an Oregon
corporation (the "Company"), promises to pay to the order of Case Credit
Corporation (the "Lender") at its main office in Racine, Wisconsin, without
setoff or counterclaim, the principal sum of _____________________________
_______________________________________________ Dollars ($______________),
together with interest on the unpaid principal balance hereof computed at a rate
per annum equal to ____ %, payable on the dates and in the amounts set forth in
Schedule 1 attached hereto. From and after the occurrence and during the
continuance of an Event of Default as defined in the Loan Agreement dated
January 17, 1997 by and between the Company and the Lender (the "Agreement"),
the entire outstanding principal amount hereof, and all interest and other
amounts due and unpaid hereunder and under the Agreement, shall bear interest
computed at a rate equal to the lesser of (i) 3.5% per annum plus the rate
otherwise payable hereunder, (ii) 20% per annum, or (iii) the highest rate
permitted by law. All amounts payable under this Note and the Agreement shall
be payable in lawful money of the United States of America.
This Note constitutes one of the promissory notes issued under the
Agreement, to which Agreement reference is hereby made for a statement of the
terms and conditions on which the loan evidenced hereby was made and for a
description of the
<PAGE>
terms and conditions upon which this Note may be prepaid, in whole or in part,
or its maturity accelerated.
This Note is secured by and entitled to the benefit of all of the
Collateral Documents referred to in the Agreement and all other existing and
future mortgages and security agreements between the Company and the Lender.
WESTERN POWER & EQUIPMENT CORP.
By:
----------------------------------
President
(CORPORATE SEAL)
And:
----------------------------------
Secretary
<PAGE>
SCHEDULE 1
PAYMENT SCHEDULE
<PAGE>
EXHIBIT B
LOAN REQUEST
January 17, 1997
Case Credit Corporation
233 Lake Avenue
Racine, Wisconsin 53404
Re: Loan Agreement Dated as of January 17, 1997
Gentlemen:
The undersigned hereby applies to you for the loans under the
above-referenced Loan Agreement to be made on January 17, 1997 in the principal
amounts of $________________ and $________________, respectively. The
undersigned delivers to you herewith the Promissory Notes payable to you in the
appropriate amounts, as required by the Loan Agreement.
The undersigned hereby certifies as follows:
(a) All of the representations and warranties set forth in Article III of
the Loan Agreement continue to be true and correct on the date hereof.
(b) At the date hereof, no Default or Event of Default under the Loan
Agreement has occurred and is continuing.
Very truly yours,
WESTERN POWER & EQUIPMENT CORP.
By:
----------------------------------
President
And:
----------------------------------
Secretary
(CORPORATE SEAL)
<PAGE>
SECURITY AGREEMENT
The undersigned Debtor agree with Case Credit Corporation ("Secured
Party"), with its principal offices located at 233 Lake Avenue, Racine,
Wisconsin 53404, as follows:
1. SECURITY INTEREST
To secure payment of the Obligations defined below, Debtor grants
Secured Party a security interest in all of the property described below in
which Debtor has or acquires an interest, wherever located, whether now owned or
hereafter acquired, and all additions and accessions to and all proceeds,
products and profits of any of it ("Collateral"):
(a) All equipment, fixtures, inventory (including, without
limitation, all goods held for sale, lease or demonstration or to be
furnished under contracts of service, goods leased to others,
trade-ins and repossessions and materials or supplies used or consumed
in Debtor's business) and all documents relating to the same, which
have been or shall be acquired by Debtor under that certain Asset
Purchase Agreement dated January 17, 1997, by and among Sahlberg
Equipment, Inc., John and Robert Sahlberg, R&J Partners and Debtor,
including, without limitation, those items described on Exhibit A
attached hereto (collectively, the "Purchased Assets"); and
(b) Those accounts receivable of Debtor arising in whole or in
part from the sale or performance of services by Debtor, including,
without limitation, the portion of such accounts receivable, if any,
attributable to the sale of parts (the "Service Accounts").
The term "Obligations" is used herein in its most comprehensive sense
and includes (without limitation) any and all present and future debts,
obligations and liabilities of Debtor to Secured Party pursuant to that certain
Loan Agreement dated January 17, 1997 between Debtor and Secured Party (the
"Loan Agreement"), including, without limitation, all debts,
<PAGE>
obligations and liabilities of Debtor under the Notes (as such term is defined
in the Loan Agreement), and any and all other debts, obligations, and
liabilities of Debtor to Secured Party, heretofore, now or hereafter made,
incurred, or created, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, secured or unsecured, whether any Debtor is liable
individually or jointly with others, whether for principal, interest or other
debts, obligations or liabilities, and whether or not any or all such debts,
obligations and liabilities are or become barred by any statute of limitations
or otherwise unenforceable, including, without limitation, all obligations of
Debtor under this Agreement, letters of credit and bankers' acceptances, and
interest rate swap, cap, floor, collar, option and other derivative
transactions.
2. DEBTOR'S WARRANTIES
Debtor warrants that while any of the Obligations are unpaid:
(a) OWNERSHIP. Debtor is the owner of the Collateral free of all
encumbrances and security interests except Secured Party's security interest and
Permitted Liens, as defined in the Loan Agreement. Chattel paper constituting
Collateral evidences a perfected security interest in the goods covered by it,
free from all other encumbrances and security interests.
(b) OTHER FINANCING. Unless waived by Secured Party in writing, no
financing statement (other than Secured Party's) is on file covering the
Collateral or its products or proceeds.
(c) DOCUMENTS. If inventory constituting Collateral is represented
or covered by documents of title, Debtor is the owner of such documents, free of
all encumbrances and security interests other than Secured Party's security
interest.
(d) CONDITION. The inventory constituting Collateral is in good
condition and, in the case of those goods held for sale constituting Collateral
(other than trade-ins or repossessed goods), is new and unused except as Secured
Party may otherwise consent in writing.
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(e) SALE OF GOODS OR SERVICES RENDERED. Each account constituting
Collateral arose from the performance of services by Debtor or from a bona fide
sale of parts, which have been delivered or shipped to the account debtor and
for which Debtor has genuine invoices, shipping documents or receipts.
(f) ENFORCEABILITY. Each account constituting Collateral is genuine
and (except as disclosed to Secured Party in writing) enforceable against the
account debtor according to its terms. It and the transaction out of which it
arose comply with all applicable laws and regulations. The amount represented
by Debtor to Secured Party as owing by each account debtor is the amount
actually owing and is not subject to setoff, credit, allowance or adjustment,
except discount for prompt payment, nor (except as disclosed to Secured Party in
writing) has any account debtor returned the goods or disputed its liability.
There has been no default as of the date of this Agreement according to the
terms of any Collateral and no step has been taken to foreclose the security
interest it evidences or otherwise enforce its payment. As of the date of this
Agreement Debtor has no notice or knowledge of anything which might impair the
credit standing of any account debtor.
(g) AUTHORITY TO CONTRACT. The execution and delivery of this
Agreement and any instruments evidencing Obligations will not violate or
constitute a breach of Debtor's articles of incorporation or bylaws or any
agreement or restriction to which Debtor is a party or is subject.
(h) ACCURACY OF INFORMATION. All information, certificates or
statements given to Secured Party pursuant to this Agreement shall be true and
complete when given.
(i) FIXTURES. If any of the Collateral is to be attached to real
estate, the legal description of such real estate and the name of the record
owner are annexed hereto as Schedule 1.
(j) NAMES AND ADDRESSES. The name appearing below is the correct
name of Debtor, and Debtor does not do business under any other name. Debtor
shall immediately advise Secured Party of a change of name, identity, or
corporate structure. The address appearing below Debtor's signature is Debtor's
chief executive
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office. The address where the Collateral will be kept, if different from that
appearing below Debtor's signature, is set forth in Schedule 1. No location
shall be changed without the prior written consent of Secured Party, but the
parties intend that the Collateral, wherever located, is covered by this
Agreement.
(k) FAIR LABOR STANDARDS ACT. All inventory constituting Collateral
has been and will be produced in compliance with all applicable requirements of
Sections 6, 7 and 12 of the Fair Labor Standards Act, as amended, and all
regulations and orders of the United States Department of Labor issued under
Section 14 thereof.
(l) ENVIRONMENTAL LAWS. (i) No substances or materials have been,
are or will be stored, deposited, treated, recycled or disposed of on, under or
at any real estate now or at any time owned or occupied by Debtor ("Property")
which substances or materials, if known to be present on, at or under the
Property, would require cleanup, removal or some other remedial action under any
federal, state or local laws, regulations, ordinances, codes or rules relating
to the discharge of air pollutants, water pollutants, or process wastewater or
otherwise relating to hazardous or toxic substances or materials ("Environmental
Laws"), (ii) there are no conditions existing currently or likely to exist
during the term of this Agreement which would subject Debtor to damages,
penalties, injunctive relief or cleanup costs under Environmental Laws, and
(iii) Debtor is not subject to any judgment, decree, order or citation relating
to or arising out of Environmental Laws.
3. SALE AND COLLECTIONS
(a) PROCEEDS OF COLLATERAL. So long as no default exists under any
of the Obligations or this Agreement, and subject to the terms and conditions of
the Loan Agreement and the Notes, Debtor may, (1) sell inventory constituting
Collateral in the ordinary course of Debtor's business for cash or on terms
approved by Secured Party, at prices not less than the minimum sale price shown
on instruments evidencing Obligations and describing inventory, (2) lease
inventory constituting Collateral in the ordinary course of business for lease
terms of less than six months, or (3) with the prior written consent of Secured
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Party, for leases not covered by clause (2) above, lease inventory constituting
Collateral on terms approved by Secured Party. Unless otherwise agreed by
Secured Party, all proceeds of Collateral received by Debtor shall be held by
Debtor upon an express trust for Secured Party, shall not be commingled with any
other funds or property of Debtor, and shall be turned over to Secured Party not
later than the business day following the day of their receipt. All proceeds
received by Secured Party shall be applied against the Obligations in such order
and at such times as Secured Party shall determine.
(b) VERIFICATION AND NOTIFICATION. Secured Party may verify accounts
constituting Collateral in any manner, and Debtor shall assist Secured Party in
so doing. Secured Party may at any time and Debtor shall, upon request of
Secured Party, notify the account debtors with respect to accounts constituting
Collateral to make payment directly to Secured Party and Secured Party may
enforce collection of, settle, compromise, extend or renew the indebtedness of
such account debtors. Until account debtors are otherwise notified, Debtor, as
agent of Secured Party, shall make collections on the Collateral. Secured Party
may at any time notify the bailee of any inventory constituting Collateral of
its security interest.
4. DEBTOR'S COVENANTS
Debtor agrees:
(a) MAINTENANCE OF COLLATERAL. Debtor shall: maintain the
Collateral in good condition and repair and not permit its value to be impaired;
keep it free from all liens, encumbrances and security interests (other than
Secured Party's security interest); defend it against all claims and legal
proceedings by persons other than Secured Party; pay and discharge when due all
taxes, license fees, levies and other charges upon it; not sell, lease or
otherwise dispose of it or permit it to become a fixture or an accession to
other goods, except for sales or leases of inventory authorized as provided in
this Agreement; not permit it to be used in violation of any applicable law,
regulation or policy of insurance; and, as to Collateral consisting of chattel
paper, preserve rights in it against prior parties. Loss of or damage to the
Collateral shall not release Debtor from any of the Obligations.
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(b) INSURANCE. Unless otherwise agreed in writing by Secured Party,
Debtor shall keep the Collateral and Secured Party's interest in it insured
under policies with such provisions, for such amounts and by such insurers as
shall be satisfactory to Secured Party from time to time, and shall furnish
evidence of such insurance satisfactory to Secured Party. Debtor assigns (and
directs any insurer to pay) to Secured Party the proceeds of all such insurance
and any premium refund, and authorizes Secured Party to endorse in the name of
Debtor any instrument for such proceeds or refunds and, at the option of Secured
Party, to apply such proceeds and refunds to any unpaid balance of the
Obligations whether or not due, and/or to restoration of the Collateral,
returning any excess to Debtor. Secured Party is authorized, in the name of
Debtor or otherwise, to make, adjust, settle claims under and/or cancel any
insurance on the Collateral.
(c) MAINTENANCE OF SECURITY INTEREST. Debtor shall pay all expenses
and, upon request, take any action reasonably deemed advisable by Secured Party
to preserve the Collateral or to establish, determine priority of, perfect,
continue perfected, terminate and/or enforce Secured Party's interest in it or
rights under this Agreement. A carbon, photographic or other reproduction of
this Agreement or any financing statement shall be sufficient as a financing
statement.
(d) COLLATERAL RECORDS AND STATEMENTS. Debtor shall keep accurate
and complete records respecting the Collateral in such form as Secured Party may
approve. At such times as Secured Party may require, Debtor shall furnish to
Secured Party a statement certified by Debtor and in such form and containing
such information as may be prescribed by Secured Party, showing the current
status and value of the Collateral. Debtor shall furnish to Secured Party
financial statements at least annually and such other financial information
respecting Debtor at such times and in such form as Secured Party may request.
(e) INSPECTION OF COLLATERAL. At reasonable times, Secured Party may
examine the Collateral and Debtor's records pertaining to it, wherever located,
and make copies of records. Debtor shall assist Secured Party in so doing.
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(f) CHATTEL PAPER. Chattel Paper constituting collateral shall be on
forms approved by Secured Party. Debtor shall promptly mark all such chattel
paper, and all copies, to indicate conspicuously the Secured Party's interest
and, upon request, deliver them to Secured Party.
(g) MODIFICATIONS. Without the prior written consent of Secured
Party, Debtor shall not alter, modify, extend, renew or cancel any Collateral.
(h) RETURNS AND REPOSSESSIONS. Debtor shall promptly notify Secured
Party of the return to or repossession by Debtor of goods underlying any
Collateral and Debtor shall hold and dispose of them only as Secured Party
directs.
(i) UNITED STATES CONTRACTS. If any accounts constituting Collateral
arise out of contracts with the United States or any of its departments,
agencies or instrumentalities, Debtor will notify Secured Party and execute
writings required by Secured Party in order that all money due or to become due
under such contracts shall be assigned to Secured Party and proper notice of the
assignment given under the Federal Assignment of Claims Act.
(j) TAXES AND OTHER CHARGES. Debtor shall pay and discharge all
lawful taxes, assessments and governmental charges upon Debtor or against its
properties prior to the date on which penalties attach, unless and to the extent
only that such taxes, assessments and charges are contested in good faith and by
appropriate proceedings by Debtor.
5. RIGHTS OF SECURED PARTY
(a) AUTHORITY TO PERFORM FOR DEBTOR. If Debtor fails to act as
required by this Agreement or the Obligations, Secured Party is authorized, in
Debtor's name or otherwise, to take any such action including, without
limitation, signing Debtor's name or paying any amount so required, and the cost
shall be one of the Obligations secured hereby and shall be payable by Debtor
upon demand with interest from the date of payment by Secured Party at the
highest rate then payable on the Obligations.
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(b) POWER OF ATTORNEY. Debtor irrevocably appoints any officer of
Secured Party as Debtor's attorney, with power (exercisable at any time after
default) to receive, open and dispose of all mail addressed to Debtor; to notify
the Post Office authorities to change the address for delivery of all mail
addressed to Debtor to such address as Secured Party may designate; and to
endorse the name of Debtor upon any instruments which may come into Secured
Party's possession.
The power of attorney created by this Section 5(b) may be revoked by
Debtor only by written notice to Secured Party and no such revocation shall
affect any instruments executed or actions taken prior to the receipt by Secured
Party of such notice. All acts of such attorney are ratified and approved. He
is not liable for any act or omission or for any error of judgment or mistake of
fact or law taken without willful misconduct.
(c) NONLIABILITY OF SECURED PARTY. Secured Party has no duty to
protect, insure, collect or realize upon the Collateral or preserve rights in it
against prior parties. Debtor releases Secured Party from any liability for any
act or omission relating to the Obligations, the Collateral or this Agreement,
except Secured Party's willful misconduct.
6. DEFAULT
Upon the occurrence of any Event of Default, as defined in Section 6.1
of the Loan Agreement, or any other default under any instrument, document or
agreement evidencing or governing any of the Obligations, all of the Obligations
shall, at the option of Secured Party and without notice or demand, become
immediately payable; and Secured Party shall have all rights and remedies for
default provided by the Uniform Commercial Code, as well as any other applicable
law and the Obligations. With respect to such rights and remedies,
(a) REPOSSESSION. Secured Party may enter into premises where any
Collateral may be located, and may take possession of Collateral, all without
notice or hearing.
(b) ASSEMBLING COLLATERAL. Secured Party may require Debtor to
assemble the Collateral and to make it available to
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Secured Party at any convenient place designated by Secured Party. It is agreed
that Secured Party will not have an adequate remedy at law if this obligation is
breached, and accordingly that Debtor's obligation to assemble Collateral shall
be specifically enforceable.
(c) NOTICE OF DISPOSITION. Written notice, when required by law,
sent to any address of Debtor in this Agreement at least 10 calendar days
(counting the day of sending) before the date of a proposed disposition of the
Collateral is reasonable notice.
(d) DISPOSITION. Secured Party may sell Collateral on credit (and
reduce the Obligations only when payment is actually received from the buyer) at
wholesale and with or without an agent or broker; and Secured Party may but need
not complete, process or repair any Collateral prior to disposition.
(e) EXPENSES AND APPLICATION OF PROCEEDS. Debtor shall reimburse
Secured Party for any expense incurred by Secured Party in protecting or
enforcing its rights under this Agreement before and after judgment including,
without limitation, reasonable attorneys' fees and legal expenses and all
expenses of taking possession, holding, preparing for disposition and disposing
of the Collateral. After deduction of such expenses, Secured Party may apply
the proceeds of disposition to the other Obligations in such order and amounts
as it elects.
(f) WAIVER. Secured Party may permit Debtor to remedy any default
without waiving the default so remedied, and Secured Party may waive any default
without waiving any other subsequent or prior default by Debtor.
7. PERSONS BOUND
This Agreement benefits Secured Party, its successors and assigns,
including every holder or owner of any of the Obligations, and binds Debtor and
its successors and assigns.
8. INTERPRETATION
The validity, construction and enforcement of this Agreement are
determined and governed by the internal laws of
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State of Wisconsin. All terms not otherwise defined have the meanings assigned
to them by Articles I and IX of the Uniform Commercial Code. Invalidity of any
provision of this Agreement shall not affect the validity of any other
provision. This Agreement supplements, and does not supersede or replace, any
previous security agreement between Debtor and Secured Party. In the event of
inconsistency, this Agreement shall control.
9. CONSENT TO JURISDICTION
DEBTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT SITUATED IN MILWAUKEE COUNTY, WISCONSIN, AND WAIVES ANY OBJECTION
BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS,
WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS
AGREEMENT, ANY COLLATERAL, OR ANY DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION
HEREWITH, OR ANY TRANSACTION ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING.
DEBTOR WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS, AND CONSENTS TO ALL SUCH
SERVICE OF PROCESS MADE BY MAIL OR BY MESSENGER DIRECTED TO THE ADDRESS
SPECIFIED BELOW. Nothing herein shall affect the Secured Party's right to serve
process in any manner permitted by law, or limit the Secured Party's right to
bring proceedings against Debtor or its property or assets in the competent
courts of any other jurisdiction or jurisdictions.
10. WAIVER OF JURY TRIAL
DEBTOR HEREBY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT, ANY COLLATERAL, OR ANY DOCUMENT
DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, OR ANY TRANSACTION ARISING FROM
OR CONNECTED TO ANY OF THE FOREGOING. DEBTOR REPRESENTS THAT THIS WAIVER IS
KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
11. LIMITATION OF LIABILITY
DEBTOR HEREBY WAIVES ANY RIGHT IT MAY NOW OR HEREAFTER HAVE TO CLAIM
OR RECOVER FROM THE SECURED PARTY ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE
DAMAGES.
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Signed on this day of January, 1997.
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DEBTOR:
WESTERN POWER & EQUIPMENT CORP.
By:
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Title:
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By:
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Title:
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Address:
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SCHEDULE 1
Addresses where collateral will be kept:
