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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
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): JULY 26, 1996
POWELL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 0-6050 88-0106100
(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION
NO.)
8550 MOSLEY DRIVE, HOUSTON, TEXAS 77075
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713/944-6900
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 26, 1996, U.S. Turbine Corp., a wholly-owned subsidiary of
Powell Industries, Inc. (the "Registrant"), sold substantially all of its
business and assets to Rolls-Royce Acquisition Corp., for consideration in the
form of assumption by the buyer of certain obligations and liabilities of U.S.
Turbine Corp., plus cash of approximately $3.5 million and a deferred
obligation of $1 million, subject to certain adjustments. Such consideration
was determined based on the net book value of the assets sold, subject to
certain adjustments. Other than such transacation, the purchaser does not have
any material relationship with the Registrant or any of its affiliates, any
director or officer of the Registrant, or any associate of any such director or
officer.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information.
It is impracticable to provide at this time the pro forma
financial information required pursuant to Article II of Regulation S-X;
therefore all required financial information will be filed with the Commission
no later than September 14, 1996 in the Registrant's report on Form 10-Q for
the quarter ending July 31, 1996. The financial reports will be restated for
the discontinued operations for all periods reported.
(c) Exhibits.
2.1 Asset Purchase Agreement dated as of June 20, 1996 by
and between Rolls-Royce North America, Inc. and
Rolls-Royce Acquisition Corp. and U.S. Turbine Corp.
and Powell Industries, Inc., without Schedules and
Exhibits thereto - such Schedules and Exhibits are
listed on the last page of this exhibit. The
Registrant agrees to furnish supplementally a copy of
any omitted Schedule or Exhibit to the Securities and
Exchange Commission upon request.
2.2 First Amendment to Asset Purchase Agreement dated
July 26, 1996, without Schedules and Exhibits thereto
- such Schedules and Exhibits are listed in this
exhibit. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or
Exhibit to the Securities and Exchange Commission
upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
POWELL INDUSTRIES, INC.
By: /s/ J. F. Ahart
----------------------------------------
J. F. Ahart, Vice President,
Chief Financial Officer,
Secretary, and Treasurer
DATE: August 8, 1996
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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2.1 Asset Purchase Agreement dated as of June 20, 1996 by and
between Rolls-Royce North America, Inc. and Rolls-Royce
Acquisition Corp. and U.S. Turbine Corp. and Powell
Industries, Inc., without Schedules and Exhibits thereto -
such Schedules and Exhibits are listed on the last page of
this exhibit. The Registrant agrees to furnish supplementally
a copy of any omitted Schedule or Exhibit to the Securities
and Exchange Commission upon request.
2.2 First Amendment to Asset Purchase Agreement dated July 26,
1996, without Schedules and Exhibits thereto - such Schedules
and Exhibits are listed in this exhibit. The Registrant
agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Securities and Exchange Commission
upon request.
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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
dated as of June 20, 1996
by and between
Rolls-Royce North America, Inc. and
Rolls-Royce Acquisition Corp.
and
U.S. Turbine Corp. and
Powell Industries, Inc.
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TABLE OF CONTENTS
PAGE
ARTICLE I
Purchase and Sale of Sale Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Sale Assets and Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3. Assumption of Certain Liabilities
and Nonassumption of Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.4. Consideration and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.5. Post-Closing Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 1.6. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1. Closing and Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.2. Transactions To Be Effected at
the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.1. Representations and Warranties of
Shareholder and Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.2. Representations and Warranties of
Buyer and RRNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.1. Covenants of Seller Relating to
Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.2. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.3. Legal Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.4. Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.5. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.6. Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.7. Collection of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.9. Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.10. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.11. Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.12. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.13. Passage of Title and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.14. Use of Seller's Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.15. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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SECTION 4.16. Inventory Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.17. Seller to Pay Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.18. Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.19. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.20. Product Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.21. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.22. Empire Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.23. Release of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.24. HSR Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.25. Sonoma Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.26. Environmental Remediation and Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.27. IES Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V
Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.1. Conditions to Each Party's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.2. Conditions to Obligations of Buyer
and RRNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5.3. Conditions to the Obligations of
Seller and Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.2. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.1. Indemnification by Shareholder
and Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.2. Indemnification by Buyer and RRNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.3. Limitations on Seller's and
Shareholder's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.4. Limitations on Buyer's and
RRNA's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 7.5. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.6. Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII
Alternative Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.1. Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.2 Arbitration and Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.3. Extension of Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 8.4. Other Relief; Statutes of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 8.5. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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ARTICLE IX
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 9.2. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 9.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.5. Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.7. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 9.8. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") has been
entered into this 20th day of June, 1996, by and among Rolls-Royce North
America, Inc., a Delaware corporation ("RRNA"), Rolls-Royce Acquisition Corp.,
a Delaware corporation ("Buyer"), U.S. Turbine Corp., a Nevada corporation
("Seller" or "Company"), and Powell Industries, Inc., a Nevada corporation and
the sole shareholder of Seller ("Shareholder").
Recitals
1. Seller is in the business of designing, developing,
assembling, selling and servicing skid-mounted electric generation or
cogeneration systems powered by certain gas turbines or reciprocating engines.
Seller also provides and installs such systems along with other related
equipment under turnkey contractual arrangements. Seller's customers are
principally industrial manufacturing companies and, secondarily, commercial or
electric utility companies. Seller's headquarters and principal place of
business are in Maineville, Ohio.
2. Seller wishes to sell to Buyer, Shareholder desires
to cause Seller to sell to Buyer, and Buyer wishes to purchase from Seller,
substantially all of the assets of Seller's business (other than the Excluded
Assets, as hereinafter defined).
3. The parties wish to set forth herein the terms and
conditions upon which such sale shall proceed.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties agree as follows:
ARTICLE I
Purchase and Sale of Sale Assets
SECTION 1.1. Purchase and Sale. Upon the terms and
subject to the conditions of this Agreement, Shareholder shall cause the Seller
to, and Seller shall, sell, assign, transfer, convey and deliver to Buyer, on
the Closing Date (as hereinafter defined), and Buyer shall purchase, on the
Closing Date, all of Seller's right, title and interest in, to and under the
Sale Assets (as hereinafter defined).
SECTION 1.2. Sale Assets and Excluded Assets.
(a) As used herein, the term "Sale Assets" means all the
business, properties, assets, goodwill and rights of Seller of
whatever kind and nature, real or personal, tangible or intangible,
other than the Excluded Assets
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(as defined in Section 1.2(b) below), owned, leased, held, enjoyed or
operated by Seller on the Closing Date, including but not limited to:
(i) all inventory, including, without limitation, raw
materials, work-in-process (including contracts in progress),
finished goods, spare parts and consignment stocks
("Inventory") of Seller that on the Closing Date is located on
the premises of any Owned Property or Leased Property (both as
defined in Section 3.1(h)) (the "Premises") or off-site, and
all other Inventory, including Inventory in transit to or from
Seller on the Closing Date;
(ii) all machinery, equipment, tools, vehicles, furniture,
office or other supplies, furnishings, trade fixtures,
containers and related spare parts of Seller located on the
Premises or at premises of suppliers or customers of the
Company or in transit to or from such Premises or premises,
together with all manuals, warranty rights and maintenance
records relating thereto, if any (collectively, the "Machinery
and Equipment");
(iii) all accounts receivable (net of rebates or credits)
of Seller, including retainage accounts receivable associated
with the Contracts (as hereinafter defined) included in the
Sale Assets, all refunds, credits, allowances, rebates and
other debit items owing by suppliers, vendors and others
furnishing goods and rendering services, and all choses in
action of Seller;
(iv) all patents (including all reissues, divisions,
continuations and extensions thereof), patent applications,
trademarks, trademark registrations, servicemarks, trade
names, copyrights, licenses with respect to the foregoing and
other such property ("Intellectual Property") and all computer
hardware and software owned, held or used by Seller including,
but not limited to those items listed on Schedule 3.1(l);
(v) all technology, trade secrets, inventions, know-how,
formulae, processes, procedures, research records, records of
inventions, test information, customer and mailing lists,
drawings, designs, engineering plans and specifications,
market surveys and marketing know-how ("Technology") owned by
Seller;
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(vi) all of Seller's right, title and interest in and to
all permits, licenses, franchises, approvals and
authorizations by governmental or regulatory authorities or
bodies which can lawfully be assigned ("Permits") held by
Seller;
(vii) all of Seller's right, title and interest in and to
all contracts, leases, indentures, agreements, commitments,
contract or bid proposals and all other legally binding
arrangements, whether oral or written ("Contracts"), to which
Seller is a party or by which Seller is bound that are listed
in Schedule 3.1(n) and all other Contracts that are not
required to be listed in Schedule 3.1(n) and which were
entered into in the ordinary course of Seller's business, to
the extent such Contracts can be lawfully assigned;
(viii) all interests of Seller in any corporation,
partnership, joint venture, trust, limited liability company
or other business association ("Investments");
(ix) all books of account, general, financial, accounting
and personnel records, files, invoices, suppliers' lists,
inventory lists, brochures, marketing or advertising
materials, sales lists, customer records, labels,
correspondence to and from customers and suppliers, and other
data owned or used by Seller on the Closing Date, except for
Seller's corporate minute books, capital stock records and tax
returns;
(x) all personal property of Seller on the Closing Date
and all right, title and interest of Seller to leasehold
improvements;
(xi) all prepaid items of Seller on the Closing Date; and
(xii) all goodwill of Seller and the right to use of
Seller's name.
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Notwithstanding the foregoing, the Sale Assets shall not include any
properties, assets or rights of Seller that are part of the Excluded
Assets.
(b) The term "Excluded Assets" means:
(i) all rights of Seller under this Agreement and
the agreements, instruments and certificates delivered in
connection with this Agreement;
(ii) all rights of Seller under (A) the
Cogeneration Contract, dated July 2, 1990, between Seller and
Empire Cogen, Inc. ("Empire"), as amended, (B) the Assignment
and Indemnification Agreement, dated July 30, 1993, between
Seller and Shareholder (together, the "Empire Contracts"), (C)
any other Contracts to which Seller is a party or by which
Seller is bound that are not described in Section 1.2(a)(vii)
above, (D) the Tax Allocation Agreement to which Seller is a
party, and (E) any other Contracts specified in writing by
Buyer to Seller or Shareholder prior to or at Closing as a
result of Buyer's due diligence review contemplated by Section
5.2(j);
(iii) the account receivable from Empire and the
portion of the account receivable in the approximate amount of
$31,000, representing an amount held back by the Indian
government as a tax payment;
(iv) all real property and interests in real
property owned in fee by Seller; and all rights of Seller
under the Sublease, dated April 17, 1984, between Penske Power
Systems, Inc., f/k/a Turbine Power Systems Co., as Landlord,
and Seller or its predecessor, as Tenant;
(v) all cash or cash items of Seller either on
hand or in banks, other than petty cash on hand on the Closing
Date, and any deferred tax assets;
(vi) any management systems or support afforded
Seller by Shareholder or any of Shareholder's other business
units or affiliates;
(vii) all rights, claims, actions and causes of
action relating to the Excluded Liabilities (as hereinafter
defined);
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(viii) insurance policies and coverages obtained or
owned by Seller with respect to the Sale Assets and in effect
prior to the Closing Date;
(ix) the items classified on Seller's balance
sheet as "Deposits - Workmen's Compensation" and "Prepaid
Insurance"; and
(x) the Carved Out Receivables, if any (as
defined in Section 1.4(b)).
SECTION 1.3. Assumption of Certain Liabilities and
Nonassumption of Others.
(a) Upon the terms and subject to the conditions of this
Agreement, Buyer agrees to assume, as of the Closing Date, and agrees
thereafter to pay, perform and discharge when due (the liabilities
identified in this Section 1.3(a) shall be referred to as the "Assumed
Liabilities"):
(i) all obligations and liabilities of the Seller
accruing or to be performed after the Closing Date under
Contracts that are included in the Sale Assets and "Progress
Billings" reflected on the Closing Balance Sheet relating to
such Contracts;
(ii) all accounts payable (other than those
excluded under Section 1.3(b)) incurred by Seller in the
ordinary course of business on or prior to the Closing Date
and all liabilities for real property taxes assessed against
Seller in respect of the Maineville Real Estate (as
hereinafter defined) on or before the Closing Date but which
are due and payable after the Closing Date, but only to the
extent such accounts payable and real property tax liabilities
are accurately reflected on the Closing Balance Sheet (as
hereinafter defined);
(iii) the warranty and maintenance obligations of
Seller to its customers with respect to products sold by
Seller in the ordinary course of business on or before the
Closing Date, but only to the extent that such obligations are
either (A) reflected in Contracts included in the Sale Assets
or (B) described on Schedule 3.1(x);
(iv) all obligations reflected on the Closing
Balance Sheet for accrued vacation pay; and
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(v) legal fees relating to the Sonoma job to the
extent reflected on the Closing Balance Sheet.
(b) Except for those Assumed Liabilities described in
Section 1.3(a) above, Buyer shall not assume, nor be responsible for,
any liability, obligation or commitment of Seller whatsoever, whether
actual, absolute, accrued, contingent or otherwise, arising out of or
in connection with any set of facts, acts or circumstances, including
without limitation any of the following:
(i) Any of Seller's liabilities or obligations
under this Agreement;
(ii) Any of Seller's liabilities or obligations
for expenses, taxes or fees incident to or arising out of the
negotiation, preparation, approval, or authorization of this
Agreement or the consummation (or preparation for the
consummation) of the transactions contemplated hereby,
including, without limitation, all attorneys' and accountants'
fees and expenses, and any brokerage fees and expenses;
(iii) Any liabilities or obligations under the
Empire Contracts, any collective bargaining agreement to which
Seller is a party, or any other Contract not included in the
Sale Assets;
(iv) Any of Seller's liabilities or obligations
against which Seller is insured or otherwise indemnified and
for which Seller receives payment from such insurer or
indemnitor;
(v) Any of Seller's liabilities or obligations
arising by reason of any violation of federal, state, local or
foreign law or any requirement of any governmental authority;
(vi) Any of Seller's liabilities or obligations
which would not have existed had each of the representations
and warranties herein been true and correct as of the Closing
Date;
(vii) Any of Seller's liabilities or obligations
arising as a result of breaches of, or transactions entered
into in violation of, this Agreement;
(viii) Any liabilities or obligations which relate
to any retirement, pension, profit sharing
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or other benefit or compensation plan of Seller or Shareholder
or by which Seller or Shareholder or any of the Sale Assets
are bound or affected;
(ix) Any of Seller's liabilities or obligations to
Shareholder (for management services or otherwise) or to
employees (except as expressly stated in Section 1.3(a)(iv));
(x) Any liabilities or obligations of Seller
relating to any action, suit, proceeding, hearing, order,
investigation, charge, complaint or claim arising out of or in
connection with the Sale Assets or the conduct of Seller or
its officers, directors, employees, consultants, agents,
affiliates or advisors (except to the extent, but only to the
extent, that the same arise out of or in connection with any
of the Assumed Liabilities), including, without limitation,
the Crossroads Litigation, the Kenetech Arbitration, the
Empire Litigation, the IPT Matter and the IES Matter, as such
terms are defined in Section 3.1(e) below;
(xi) Any amounts erroneously paid to or received
by Seller from any source, it being understood and agreed that
Seller shall be responsible for any refunds or the return of
any amounts paid to Seller or on Seller's behalf by any
person, any insurer or any federal, state or local
governmental agency, and no such return of monies shall be
made out of or otherwise affect the Sale Assets;
(xii) Any obligations, duties, claims or
liabilities relating to any fact, event or condition existing
or threatened on or prior to the Closing Date pertaining to
any past or present facility, property or operation of Seller
(or any predecessors) which at any time interferes with or
prevents continued compliance with, or gives rise to any
investigation, claim or liability under, any Environmental
Laws (as defined in Section 3.1(u) below) or any related
common law theories, including, without limitation, any
investigation, claim or liability arising out of the release
of products, the disposal of waste materials generated in
connection with the Company at regulated or unregulated sites,
any atmospheric emissions resulting from the conduct of the
Company and any seepage of waste materials at the Premises;
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(xiii) Any of Seller's liabilities for taxes of any
sort, property (except to the extent specified in Section
1.3(a)(ii)), payroll, income, sales or otherwise, whether
levied by federal, state, local or foreign authority;
(xiv) Any obligation, duty or claim relating to any
product or service sold, supplied or rendered by Seller prior
to Closing (as hereinafter defined) (except for warranty and
maintenance obligations to the extent specified in Section
1.3(a)(iii)) or related to any fact, event or condition
existing prior to Closing pertaining to any of the Sale
Assets; and
(xv) Any of Seller's liabilities or obligations,
contingent or otherwise, as surety or guarantor of any loan,
debt, obligation or commitment of any other party.
(All of which items in this Section 1.3(b) shall collectively be
referred to herein as the "Excluded Liabilities").
(c) Buyer shall acquire the Sale Assets free and clear of
all Liens, except Permitted Liens (both as defined in Section 3.1(g)).
SECTION 1.4. Consideration and Payment.
(a) The purchase price (the "Purchase Price") to be paid
by Buyer to the Seller for the Sale Assets and for Seller's and
Shareholder's covenants and agreements hereunder shall be Five Million
Three Hundred Sixty Six Thousand Seven Hundred Eighty Seven and 29/100
Dollars ($5,366,787.29), reduced or increased by any decrease or
increase (as applicable) in the Company Net Worth (as hereinafter
defined) from May 31, 1996, as derived from Seller's May 31, 1996
balance sheet included in the Financial Statements (as hereinafter
defined), to the Closing, as derived from the Closing Balance Sheet
(as hereinafter defined). As used in this Agreement, the term
"Company Net Worth" as of any date means the stated value amount, as
set forth on the Company's balance sheet as of such date after
application of all reserves or similar contra accounts (except that,
for purposes of such calculation, the accounts receivable reserve
shall be deemed to be zero) (such stated value amount after
application of such reserves and contra accounts being referred to
hereafter as the "Stated Value"), of all assets and properties of the
Company that would
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constitute Sale Assets if the Closing were held on such date, less the
stated value amount, as set forth on the Company's balance sheet as of
such date, of all liabilities of the Company that would constitute
Assumed Liabilities if the Closing were held on such date, in each
case determined on the basis of the accounting principles and
practices set forth on Exhibit A attached hereto (the "Agreed
Accounting Principles"). The attached Schedule 1.4(a) constitutes the
parties' agreement as to (i) the assets to be purchased, (ii) the
liabilities to be assumed and (iii) the calculation of the Purchase
Price as if the Closing had occurred on May 31, 1996 (the "May 31
Calculation").
(b) Notwithstanding anything to the contrary contained in
this Agreement, the parties agree that (i) the sum of the Purchase
Price plus the stated value amount of the Assumed Liabilities shall
not exceed Fourteen Million Eight Hundred Thousand Dollars
($14,800,000) (the "Maximum Total Consideration"); (ii) if the
foregoing sum would, but for the operation of this provision, exceed
the Maximum Total Consideration, then certain accounts receivable of
Seller shall be excluded from the Sale Assets in order to reduce such
sum to an amount less than or equal to the Maximum Total
Consideration; (iii) the specific accounts receivable to be excluded
(the "Carved Out Receivables") shall be determined by joint agreement
among the parties not less than five (5) business days prior to the
Closing Date.
(c) Not less than five (5) business days prior to the
Closing Date, Seller and Buyer each shall execute a joint certificate
which contains an estimate of the Purchase Price (the "Estimated
Purchase Price"), such estimate to be prepared consistent with the
methodology set forth on the May 31 Calculation. On the Closing Date,
Buyer shall pay to Seller, by wire transfer of immediately available
federal funds (to an account designated in writing by Seller at least
one business day prior to the Closing Date), an amount equal to the
Estimated Purchase Price less $1,000,000. In addition, on the Closing
Date, Buyer and RRNA shall deliver to Seller a non-negotiable
unsecured promissory note, substantially in the form attached hereto
as Exhibit 1.4(c) (the "Note"), in the principal amount of $500,000
and with a maturity of the first anniversary of the Closing Date. The
remaining $500,000 of the Purchase Price (together with any interest
accrued thereon from time to time, the "Buyer Retention") shall be
retained by Buyer for a period of twelve (12) months following the
Closing Date (the "Retention Period"). The Buyer
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Retention will accrue interest at a variable per annum rate equal to
the per annum rate of interest on the Note. Buyer shall be entitled
to offset against the Buyer Retention any amounts due to Buyer from
either Seller or Shareholder pursuant to Article VII of this
Agreement. At the end of the Retention Period, Buyer shall pay to
Seller the amount of the Buyer Retention less any offsets taken
pursuant to the preceding sentence; provided, however, that in the
event that any controversy or claim is pending at the end of the
Retention Period between Buyer and Seller or Shareholder for which
Buyer asserts a right to payment, Buyer shall be entitled to continue
to hold the Buyer Retention (but not more than Buyer, in its
reasonable judgment, deems necessary to satisfy its asserted right to
payment) until the final resolution of such controversy or claim.
SECTION 1.5. Post-Closing Adjustment.
(a) On or about the Closing Date, Seller and Buyer
jointly will conduct a physical inventory of the Sale Assets as of
such date in accordance with the Agreed Accounting Principles, as well
as such other reviews and procedures as the parties shall deem
necessary or appropriate.
(b) As soon as possible after the Closing Date, but not
later than thirty (30) days after the Closing Date, Buyer and Seller
jointly will prepare (i) an unaudited balance sheet, consisting
exclusively of the Sale Assets and the Assumed Liabilities as of the
Closing Date, such balance sheet to be prepared consistent with the
methodology employed in the May 31 Calculation (the "Closing Balance
Sheet"), which shall (A) reflect the Stated Value of the Sale Assets
and otherwise be prepared in accordance with the Agreed Accounting
Principles, and (B) reflect the results of the physical inventory and
other reviews and procedures, if any, conducted by the parties on or
about the Closing Date, and (ii) a calculation of the Purchase Price
(the "Purchase Price Calculation") prepared consistently with the
calculation of the Estimated Purchase Price (together, the "Adjustment
Documents"). In the event the Buyer and the Seller are unable to
agree upon the Adjustment Documents within such thirty (30) day
period, any disputed items will be resolved within thirty (30) days of
submission by either party of a request for binding arbitration by a
"Big Six" accounting firm designated jointly by Seller and Buyer
(which accounting firm shall not have maintained, within the preceding
twelve month period, a material professional relationship with either
Buyer or
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Seller) (the "Third Party Accountants"). The Third Party Accountants
will calculate only those portions of the Adjustment Documents that
have not been agreed upon by the parties, based only on the
information submitted to the Third Party Accountants by Buyer or
Seller, and the determination of the Third Party Accountants will be
final and binding on the parties. The Seller and Buyer will share
equally the fees and expenses of any Third Party Accountants.
(c) Within two (2) business days after agreement upon the
Adjustment Documents, Buyer and Seller shall execute a joint
certificate specifying the final agreed Purchase Price. Any amount by
which the final agreed Purchase Price exceeds the Estimated Purchase
Price shall be paid by Buyer or RRNA to Seller; conversely, any amount
by which the Estimated Purchase Price exceeds the final agreed
Purchase Price shall be paid by Seller or Shareholder to Buyer. Any
payment made by a party pursuant to this Section 1.5(c) shall be by
wire transfer of immediately available federal funds to an account
designated in writing by the recipient, and shall be due and payable
within two (2) business days after execution of such certificate.
(d) If, notwithstanding the exclusion of the Carved Out
Receivables (if any) from the Sale Assets, the sum of the final agreed
Purchase Price plus the stated value amount of the Assumed Liabilities
would, but for the operation of this subsection (d), exceed the
Maximum Total Consideration, then the parties shall, immediately upon
determination of the amount of such excess, agree upon certain other
accounts receivable to be excluded from the Sale Assets such that the
foregoing sum will not exceed the Maximum Total Consideration. If
such a further exclusion of accounts receivable is required, the time
for making the payment referred to in Section 1.5(c) shall be tolled
by the number of days needed to achieve agreement on the additional
accounts receivable to be excluded and, accordingly, the revised final
agreed Purchase Price. The parties shall promptly execute and deliver
any appropriate documents to effectuate the exclusion of any such
additional excluded accounts receivable.
SECTION 1.6. Allocation of Purchase Price. In accordance
with Section 5.1(c), on or prior to the Closing Date, the parties shall agree
upon an allocation of the consideration payable by Buyer hereunder among the
Sale Assets and the covenant not to compete set forth herein. Upon agreement
to such allocation, Buyer and Seller hereby acknowledge that such
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allocation shall have been arrived at by arms-length negotiation and Buyer and
Seller hereby agree, subject to the requirements of Section 1060 of the United
States Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder, to report consistently, in any tax return completed or
filed by any of them, the sale of the Sale Assets pursuant to this Agreement in
accordance with such allocation.
ARTICLE II
The Closing
SECTION 2.1. Closing and Closing Date. The closing of the
sale and transfer of the Sale Assets and assumption of the Assumed Liabilities
(hereinafter called the "Closing") shall take place at the offices of Baker &
Daniels, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana 46204, at
10:00 a.m., on such date as shall be fixed by agreement among the parties
hereto (the date the Closing occurs being hereinafter referred to as the
"Closing Date").
SECTION 2.2. Transactions To Be Effected at the Closing.
At the Closing:
(a) Seller and Shareholder shall deliver to Buyer (i)
appropriately executed bills of sale, assignments and other
instruments of transfer relating to the Sale Assets in form and
substance satisfactory to Buyer and its counsel and (ii) such other
documents as Buyer or its counsel may request to demonstrate
satisfaction of the conditions and compliance with the agreements set
forth in this Agreement;
(b) Buyer or RRNA shall make the payment, and Buyer and
RRNA shall deliver the Note, as specified in Section 1.4; and
(c) Buyer shall deliver to Seller such documents as are
appropriate to document the assumption of the Assumed Liabilities in
form and substance satisfactory to Seller and its counsel and to
demonstrate satisfaction of the conditions and compliance with the
agreements set forth in this Agreement.
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ARTICLE III
Representations and Warranties
SECTION 3.1. Representations and Warranties of Shareholder
and Seller. The Shareholder and Seller hereby jointly and severally represent
and warrant to Buyer and RRNA as follows:
(a) Organization, Standing and Power. Each of Seller and
Shareholder is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. Seller is duly
qualified in all jurisdictions in which it carries on or conducts a
material part of its business and where the failure to be so qualified
would have a material adverse effect on its business. Seller has the
requisite power and authority to own the Sale Assets owned by it and
to carry on its business as now being conducted. Seller has delivered
to Buyer true and complete copies of its Articles of Incorporation and
By-laws, in each case as amended through the date of this Agreement.
All of Seller's outstanding capital stock is owned of record and
beneficially by Shareholder.
(b) Authority. Each of Seller and Shareholder has all
corporate power and authority necessary to execute this Agreement and
the agreements to be entered into by it at the Closing pursuant hereto
(the "Seller Ancillary Documents") and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of Seller and Shareholder, or, in the case of the Seller
Ancillary Documents to be entered into by them, will be duly
authorized by all necessary corporate action prior to the Closing.
This Agreement has been duly executed and delivered by Seller and
Shareholder and constitutes, and each Seller Ancillary Document or
other agreement to be entered into by Seller or Shareholder will be
duly executed and delivered at the Closing and when so executed and
delivered will constitute, the legal, valid and binding obligation of
the Seller or Shareholder, as the case may be, enforceable against the
Seller or Shareholder, as the case may be, in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Agreement by the
Seller and the Shareholder does not, and the consummation of the
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transactions contemplated hereby and the compliance with the terms
hereof will not, except as specifically set forth in the schedules
hereto (i) violate any law, judgment, order, decree, statute,
ordinance, rule or regulation applicable to Seller or Shareholder,
(ii) conflict with any provision of Seller's or Shareholder's Articles
of Incorporation or By-laws, (iii) conflict with any Contract to which
Seller or Shareholder is a party or by which Seller or Shareholder or
any of their property is bound, except for those Contracts listed on
Schedule 3.1(n) which expressly prohibit Seller from transferring its
rights and obligations thereunder without the consent of the other
party thereto (such contracts being herein called "Conditional
Contracts") or (iv) require any consent, approval, order or
authorization of, or the registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a "Governmental
Entity"), or any individual, corporation, partnership, joint venture,
trust, business association or other entity (hereinafter, a "Person"
which term shall include a Governmental Entity), except for the
consents of the other parties to the Conditional Contracts.
(c) Financial Information. Seller has heretofore
provided to Buyer Seller's audited financial statements including
notes thereto for Seller's fiscal years ended October 31, 1992,
October 31, 1993, October 31, 1994, and October 31, 1995, and Seller's
monthly internal unaudited financial statements without notes for the
fiscal year to date and month ended May 31, 1996, copies of which are
attached hereto as Exhibit 3.1(c) (the "Financial Statements"). The
Financial Statements have been prepared in accordance with the Agreed
Accounting Principles which have been consistently applied throughout
the periods and fairly present, in all material respects, the
financial condition and results of operations of Seller as of and for
the periods then ended. The "Job Cost Summary Reports" prepared and
maintained for Seller's internal books of record for the end of
December, 1995 and May, 1996, are true and complete in all material
respects and have been prepared from the books and records of Seller
in accordance with the Agreed Accounting Principles.
(d) Compliance with Applicable Laws. Seller has complied
in all material respects with all laws, regulations, rules and orders
of all Governmental Entities applicable to it, including, without
limitation, the Foreign Corrupt Practices Act. Seller has not
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received any written notice of any asserted violation of any such
laws, regulations, rules or orders nor has it received any written
notice that any investigation or review by any Governmental Entity
with respect to Seller is pending or that any such investigation or
review is contemplated. This paragraph (d) does not relate to
Environmental Laws (as defined in Section 3.1(u)) for which Section
3.1(u) is applicable.
(e) Litigation; Decrees. Except as set forth in this
Section 3.1(e), there is no suit, action or proceeding pending or, to
the knowledge of Seller or the Shareholder, threatened against or
affecting Seller. Seller is not in default under any judgment, order,
injunction, rule, or decree of any Governmental Entity or arbitrator.
Seller is a defendant in a civil action filed in December,
1990, by Crossroads Cogeneration Corporation in the United States
District Court for the District of New Jersey against Cooper
Industries, Inc., Cooper Industries Energy Services Group (the "Cooper
Entities"), Seller and certain others (the "Crossroads Litigation").
Seller has a written agreement with the Cooper Entities indemnifying
Seller against any loss or liability in connection with the Crossroads
Litigation.
On October 23, 1995, Kenetech Facilities Management, Inc.
filed a claim for arbitration with Seller in the American Arbitration
Association office in East Hartford, Connecticut seeking a declaratory
judgment as to Kenetech's right to renew a maintenance agreement with
Seller and unspecified damages for failure and refusal to perform
repairs (the "Kenetech Arbitration").
Seller is not a party to the civil action filed in July, 1993,
by National Westminster Bank, plc, against Empire Energy Management
Systems, Inc., Brian Travis and Shareholder (the "Empire Litigation");
no party to the Empire Litigation has made any claims against Seller
in connection therewith; and Seller and Shareholder have no reason to
believe that Seller will be made a party to the Empire Litigation for
any purpose.
In a letter dated June 12, 1996, addressed to the President of
Seller, ELIN, a company located in Austria with whom Seller has
entered into a License Agreement, threatened to commence litigation
against Seller in connection with certain royalty payments or other
amounts allegedly due to ELIN from Seller under such License Agreement
(the "IPT Matter").
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International Energy Systems Corporation has threatened
litigation against Seller arising out of an Agreement of Purchase and
Sale dated May 26, 1995, between Seller and U.S. Turbine Holding Corp.
(the "IES Matter").
(f) Undisclosed Liabilities. Seller has no liabilities
or obligations of any nature or kind (absolute, accrued, contingent or
otherwise) except (i) as set forth in the Financial Statements (or
described in the notes thereto), (ii) as disclosed in the Schedules
hereto, (iii) for purchase contracts and orders for Inventory in the
ordinary course of business (none of which are reflected on the
Financial Statements), (iv) for liabilities incurred in the ordinary
course of business since May 31, 1996, and (v) for liabilities not
covered by clauses (i) through (iv) above in a total amount not in
excess of Twenty Thousand Dollars ($20,000) none of which is of a
nature which would have an adverse impact on the business of Seller.
(g) Title to Sale Assets. Seller has good, valid and
marketable title to all of the Sale Assets, free and clear of all
mortgages, claims, charges, liens, security interests, easements,
rights of way, pledges, restrictions or encumbrances of any nature
whatsoever (collectively, "Liens"), except for (A) mechanics',
carriers', workmen's, repairmen's, and other like Liens arising or
incurred in the ordinary course of business and which do not exceed
Five Thousand Dollars ($5,000) in the aggregate, (B) Liens for taxes,
assessments and other governmental charges that are not yet due and
payable or that may thereafter be paid without penalty, and (C)
imperfections of title and other encumbrances that, individually or in
the aggregate, do not in Buyer's reasonable judgment interfere with
the use of the Sale Assets in the business of the Company as presently
conducted (the foregoing Liens being herein referred to as "Permitted
Liens").
(h) Real Property. Schedule 3.1(h)-1 sets forth a
complete list of all real property and interests in real property
owned in fee by Seller (individually, an "Owned Property"). Schedule
3.1(h)-2 sets forth a complete list of all real property and interests
in real property leased by Seller (individually, a "Leased Property").
Seller has good and marketable fee title to all Owned Property, and
good and marketable leasehold interests in all Leased Property, free
and clear of all Liens other than (A) liens, mortgages, deeds of trust
and similar encumbrances, all of which are listed on
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Schedule 3.1(h)-1, and all of which will be released prior to Closing,
(B) Permitted Liens, (C) easements, covenants, rights-of-way, and
restrictions of record (all of which the Seller is presently in
compliance with), and (D) zoning, building and other similar
governmental restrictions (all of which the Seller is presently in
compliance with in all material respects), none of which items set
forth in clauses (B) through (D) above, individually or in the
aggregate, in Buyer's reasonable judgment, impair or conflict with the
continued use and operation of the Owned Property or Leased Property
in the business of Seller as presently conducted or the marketability
of the Owned Property. None of the Owned Property or the Leased
Property is subject to any pending or, to Seller's or Shareholder's
knowledge, threatened condemnation proceeding. Seller is the lessee
of all the Leased Property and is in possession of the premises
purported to be leased thereunder, and each lease or sublease for the
Leased Property is valid without any default thereunder by Seller or,
to Seller's or Shareholder's knowledge, by any other party thereto.
Seller has not received any notification from any Governmental Entity
of any pending or threatened assessments on or against the Owned
Property or Leased Property (or any portion thereof) for the cost of
improvements to be made with respect thereto. No portions of the
Owned Property or Leased Property are located in an area designated as
requiring flood insurance as established by the Flood Disaster Act of
1973, as amended. To the best of Seller's and Shareholder's knowledge
and belief, the Owned Property and Leased Property and all components
thereof and improvements thereon and Seller's current use thereof are
in full compliance with all applicable building codes, zoning and land
use laws and ordinances, and all other local, state and federal laws
and regulations.
(i) Inventories. All Inventory included in the Sale
Assets is in good, usable and currently marketable condition, saleable
in the ordinary course of business in accordance with Seller's past
practice and at or above cost (subject, in the case of raw materials
and work-in-process, to the completion of the production process);
subject, however, to the limitation that Inventory in an aggregate
amount not exceeding the "Provision For Obsolescence" set forth in the
Closing Balance Sheet may not be good, usable, marketable or saleable.
Except as stated in Schedule 3.1(i), all of the Inventory classified
on Seller's balance sheet as "contracts in progress" or "work in
progress" is being assembled and/or
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produced pursuant to a valid customer purchase order therefor which is
included in Schedule 3.1(n).
(j) Equipment. Schedule 3.1(j) sets forth a brief
description as of May 31, 1996, of each item of Machinery and
Equipment with an original cost in excess of one thousand dollars
($1,000), indicating, in each case, the original cost and accumulated
book depreciation through October 31, 1995. All of such items of
Machinery and Equipment, except for items which in ordinary course and
in amounts consistent with good operating practice are currently being
repaired, are in either good or in satisfactory operating condition.
Schedule 3.1(j) also identifies each item of Machinery and Equipment
purchased or disposed of by Seller since October 31, 1995 with an
original cost of more than $5,000. For purposes of such Schedule,
individual items of like kind with an original cost of less than
$5,000 shall be combined and, where the combined amount purchased or
disposed of exceeds $5,000, such items of like kind shall be
identified on Schedule 3.1(j).
(k) Accounts Receivable. Schedule 3.1(k) sets forth an
aging analysis of all accounts receivable of Seller as of May 31, 1996
and identifies by asterisk each account which Seller does not expect
to be collected within three (3) months after the date hereof. All
the accounts receivable listed in Schedule 3.1(k) and all accounts
receivable included in the Sale Assets (including, without limitation,
retainage accounts receivable) (i) represent or will represent actual
bona fide indebtedness incurred by the applicable accounts of debtors,
(ii) have or will have arisen in the ordinary course of Seller's
business, (iii) are or will be subject on the Closing Date to no prior
assignment, claim, Lien (other than a Permitted Lien), charge or
encumbrance of any nature whatsoever, and (iv) will be collectible in
full within one (1) year after the Closing Date (or, in the case of
retainage accounts receivable, within three (3) months of the first
day on which the same become due and payable), without resorting to
extraordinary collection procedures.
(l) Intellectual Property and Technology. Schedule
3.1(l) sets forth a true and complete list of all Intellectual
Property and, unless otherwise indicated on such Schedule, such
Intellectual Property has been duly registered in, filed in or issued
by the United States Copyright Office or the United States Patent and
Trademark Office, the appropriate offices in the various states of the
United States and the appropriate offices
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of such other jurisdictions where such registration, filing or
issuance is required for the conduct of the business of Seller.
Except as set forth on Schedule 3.1(l), Seller is the sole and
exclusive owner of all of the Intellectual Property and has received
no written notice from any other Person pertaining to or challenging
the right of Seller to use any of the Intellectual Property or any
rights thereunder. Except as set forth on Schedule 3.1(l), Seller has
not granted any licenses or other rights and Seller has no obligation
to grant licenses or other rights to any of the Intellectual Property
to any other Person. Seller has not made any claim of a violation or
infringement by others of its rights to or in connection with the
Intellectual Property and knows of no basis for the making of any such
claim. There are no interferences or other contested proceedings
pending in the United States Copyright Office, the United States
Patent and Trademark Office or any federal, state or local court or
before any other governmental agency or tribunal, relating to any
pending application with respect to any of the Intellectual Property,
nor to Shareholder's or Seller's knowledge are any such interferences
or proceedings threatened. Schedule 3.1(l) also lists, as of May 31,
1996, all software and hardware owned or used by the Seller indicating
instances in which the same was licensed by another to Seller. Except
as disclosed in such schedule, Seller is subject to no further or
continuing payment obligation for use of such software and hardware
and, except for standard commercial software packages generally
available for retail purchase, has full right to transfer its interest
therein. Since October 31, 1995, the Seller has not obtained (through
ownership, license or otherwise) the use of, or discontinued use of,
any software programs other than standard commercial software packages
generally available for retail purchase. Neither Seller nor
Shareholder has notice or knowledge of any patents, copyrights,
trademarks, trade secrets or proprietary rights of any third party
that are or will be infringed, violated or misappropriated by virtue
of continuation by Buyer of the business of Seller as it is presently
conducted.
(m) Insurance. All the properties and businesses
constituting any part of the Sale Assets are insured for the Seller's
benefit, and will be so insured through the Closing Date, in amounts
and against risks consistent with past practice. All such policies
currently in effect are in full force and effect, but shall be
terminated with respect to the Sale Assets as of the Closing Date.
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(n) Contracts. Except for Contracts listed on Schedule
3.1(n), Seller is not a party to or bound by any Contract which is or
includes a:
(i) Contract for the employment of any Person or
any consulting agreement with any Person;
(ii) Contract with any labor union or association;
(iii) Contract with any stockholder, director,
officer, subsidiary or affiliate of Seller;
(iv) Note, indenture, loan or credit agreement or
other Contract relating to the borrowing of money by Seller or
to the direct or indirect guarantee or assumption by Seller of
the obligation of any other Person, including any arrangement
which has the economic effect, although not the legal form, of
a guarantee;
(v) Power of attorney;
(vi) Contract not made in the ordinary course of
business;
(vii) Covenant not to compete or indemnification or
confidentiality agreement;
(viii) Lease or similar agreement under which (A)
Seller is a lessee of, or holds or operates, any real property
owned by any Person or (B) Seller is a lessor of, or makes
available for use by any Person, any real property owned or
held by Seller;
(ix) Lease or similar agreement under which (A)
Seller is lessee of, or holds or uses, any item of Machinery
and Equipment or other tangible personal property owned by any
Person or (B) Seller is a lessor of, or makes available for
use by any Person, any tangible personal property owned
(including ownership for tax purposes) by Seller;
(x) Contract (including purchase orders),
involving payment by Seller of more than Ten Thousand Dollars
($10,000); provided, however, that purchase orders outstanding
as of May 31, 1996, which are reflected in the accounts
payable in the May 31, 1996 balance sheet of Seller included
in the Financial Statements shall not be listed;
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(xi) Contract or proposed contract (including
sales orders, outstanding bid proposals and firm price quotes)
involving the obligation (or an obligation that will arise
upon acceptance by a third party) of Seller to deliver
products or perform services of a value exceeding Ten Thousand
Dollars ($10,000); provided, however, that proposals and
orders listed on Schedule 3.1(p) need not be listed on
Schedule 3.1(n);
(xii) Contract (A) for the sale of any of the Sale
Assets (other than Inventory sales in the ordinary course of
business) or (B) granting any preferential rights to purchase
any of the Sale Assets or (C) requiring the consent of any
party to the transfer thereof, (D) containing any express
warranty granted to any Person by the Seller with respect to
products sold or services rendered by Seller or (E) for the
maintenance of any equipment or products sold by Seller or any
third party;
(xiii) Mortgage, pledge, security agreement, deed of
trust, financing statement or other document granting a Lien
(including Liens upon properties acquired under conditional
sales, capital leases or other title retention or security
devices);
(xiv) Contract with any Governmental Entity;
(xv) Contract to which Seller is a party or by
which it or any of its assets or business is bound or subject
that is material to the use or operation of the Sale Assets of
a type not listed in the foregoing clauses (i)-(xiv) or the
following clauses (xvi) and (xvii);
(xvi) License or similar agreement under which
Seller is granted the right to use any intangible personal
property of any Person, except for standard commercial
software packages generally available for retail purchase; or
(xvii) Option agreement or similar right to enter
into any Contract of the types specified in this Section
3.1(n).
Except as disclosed in Schedule 3.1(n), each Contract listed in
Schedule 3.1(n) is in full force and effect and is a valid and binding
obligation of the parties thereto, enforceable in accordance with its
terms, subject to
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bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles. Except
as disclosed in Schedule 3.1(n), Seller is not (with or without the
lapse of time or the giving of notice, or both) in breach or default
in any respect under any Contract listed in Schedule 3.1(n), other
than an alleged breach or default existing on the Closing Date under
any Conditional Contract as a result of the assignment of such
Contract to Buyer without the consent of the other party thereto.
Insofar as Seller is aware, except as disclosed in Schedule 3.1(n),
none of the other parties to any such Contract is (with or without the
lapse of time or the giving of notice, or both) in breach or default
thereunder. The Seller has not, except as disclosed in Schedule
3.1(n), received any notice of the intention of any party to terminate
any such Contract. Complete and correct copies of all Contracts
referred to in Schedule 3.1(n), together with all modifications and
amendments thereto, have been delivered or made available to Buyer.
(o) Investments. There are no Investments owned by
Seller on the date of this Agreement.
(p) Customer Orders. Schedule 3.1(p) contains a true and
complete list, as of May 31, 1996, of all outstanding bid proposals
and customer orders made, taken or entered into by Seller. Such list
identifies the name of the party with respect to whom such bid was
made or order taken or entered into, and the dollar amount related
thereto. Each such bid proposal and customer order included in
Schedule 3.1(p), and any bid proposals and customer orders made, taken
or entered into by Seller since May 31, 1996, were made, taken or
entered into in the ordinary course of business, consistent with
Seller's past practices.
(q) Sufficiency of Sale Assets. The Sale Assets comprise
all the assets employed in connection with the Company's business and
contain all assets, including without limitation all Permits, required
for the conduct of Seller's business in the ordinary course,
consistent with past practices over the preceding twelve months. The
asset registers of Seller previously provided or made available to
Buyer contain complete and accurate records of all of Seller's
property, plant and equipment with a book value greater than One
Thousand Dollars ($1,000).
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(r) Absence of Certain Changes or Events. Seller has
conducted the business of the Company only in the ordinary course
consistent with past practice, and there has not been any material
adverse change in the business, prospects, assets, working capital,
financial condition, results of operations, known liabilities
(absolute, accrued, contingent or otherwise) or commitments of the
Company.
(s) Employees. Schedule 3.1(s) lists the name and
address of each employee of the Company as of a date not earlier than
fifteen (15) days prior to the date of this Agreement, and indicates
all employees of and consultants to the Company whose current annual
salary (including bonus) or compensation paid during the last
preceding calendar year is Twenty Thousand Dollars ($20,000) or more,
together with the current job title or relationship to the Company.
Seller is not a party to any collective bargaining or other labor
union contract applicable to its employees and is not obligated under
any law to recognize or negotiate with any collective bargaining
representative of its employees. Seller knows of no activities or
proceedings of any labor union (or representatives thereof) to
organize any of its employees, or of any strikes, slowdowns, work
stoppages, lock-outs, or threats thereof, by or with respect to any of
its employees. There are no material controversies pending or, to
Seller's knowledge, threatened between Seller and its employees.
There are no outstanding worker's compensation claims pending against
the Seller with respect to any of its employees. Except as described
on Schedule 3.1(s), since December 31, 1995, Seller has not extended
or increased its wages or salary commitments or increased its benefits
payable to employees.
(t) Employee Benefits and ERISA. Schedule 3.1(t) sets
forth a complete list of all employee benefit plans, as defined in
Subsection 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), as amended, covering any of Seller's current or former
employees ("ERISA Plans"), and all other arrangements, agreements, or
programs (other than ERISA Plans) for deferred compensation, bonuses,
severance pay, or employee fringe benefits covering any of Seller's
current or former employees ("Other Plans") that Seller currently
maintains or to which Seller contributes or is obligated to
contribute. The ERISA Plans, Other Plans, and all related trusts and
insurance contracts comply in form and operation in all material
respects with all applicable laws and regulations, including, without
limitation, the
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applicable requirements of ERISA and the Internal Revenue Code of
1986, as amended. None of the ERISA Plans is a multiemployer plan
within the meaning of ERISA Subsection 3(37), and neither Seller nor
Buyer will be subject to any withdrawal liability under Part I of
Subtitle E of Title IV of ERISA arising out of the purchase and sale
of the Sale Assets. Neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions herein
contemplated will cause Buyer to be liable to any Person pursuant to
the terms of the ERISA Plans, Other Plans or ERISA. Seller has
provided Buyer with copies of (i) the most recent summary plan
descriptions related to the ERISA Plans and any supplements to such
summary plan descriptions, and (ii) summaries or other documents
describing the Other Plans.
(u) Environmental Matters.
(i) Except as disclosed in Schedule 3.1(u)-1,
Seller is, and each of its Premises are, in compliance with
all federal, state, regional and local laws, statutes,
ordinances, judgments, rulings and regulations relating to any
matters of pollution, protection of the environment or
environmental regulation or control (collectively, the
"Environmental Laws").
(ii) Except as disclosed in Schedule 3.1(u)-2, (x)
Seller has not placed, held, located, released, transported or
disposed of any Hazardous Waste (as hereinafter defined) on,
under, at or from any of the Premises, and none of the
Premises or soils or groundwaters on, under, at, beneath or
within any of the Premises is contaminated with any Hazardous
Waste in excess of levels allowed by any applicable
Environmental Law, (y) the Seller has not placed, held,
located, released, transported or disposed of any Hazardous
Waste from the Premises at, to or upon any other location, or
(z) the Seller has not received any written notice relating to
its operations (i) of the violation of any Environmental Law
or any other law, statute, rule or regulation regarding
Hazardous Waste, (ii) of the institution or pendency of any
suit, action, claim, proceeding or investigation by any
Governmental Entity or any third party of any such violation
or (iii) requiring the removal of Hazardous Waste from any of
the Premises or any other location, or the remediation of
Hazardous Waste at the Premises or any other location, or
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notifying it of potential liability for such removal or
remediation. For purposes of this Agreement, the term
"Hazardous Waste" shall mean radon, regulated radioactive
materials, asbestos or any substances defined as, or included
in the definition of, "hazardous substance," "hazardous
waste," "hazardous materials," "toxic chemicals" or "hazardous
chemicals" under any Environmental Law.
(iii) Except as disclosed in Schedule 3.1(u)-3,
neither Seller nor any of its affiliates has used any of the
Premises for the storage, sale, and/or distribution of any
petroleum products; and no petroleum or petroleum product or
byproduct, including but not limited to gasoline, has been
disposed of, spilled, released, percolated or migrated into
any of the Premises. None of the improvements on the Premises
contain asbestos-containing material; and there are no
underground storage tanks at, on, or in any of the Premises.
To the best of Seller's knowledge, Seller is not a potentially
responsible party under any Environmental Law with respect to
any of the Premises or with respect to any location where
Hazardous Waste from the Premises may have been taken, stored
or disposed. Seller is not the subject of any pending, or to
the best of its knowledge threatened, criminal, civil, or
administrative action under any Environmental Laws.
(v) Taxes. Seller has filed all federal, state, local
and foreign tax returns which are required to have been filed to date,
has paid all taxes shown due on said returns to the extent that such
taxes have become due, and has properly reserved for all taxes not yet
due. Such returns have been audited for the periods shown on Schedule
3.1(v), and Seller has received no notice that any deficiency is
presently pending or threatened.
(w) Refunds and Rebates. Schedule 3.1(w) sets forth a
true and correct listing of all material, ongoing refund, rebate or
return policies or practices of Seller, either with respect to persons
supplying goods and services to Seller or with respect to Seller's
furnishing goods and services to others.
(x) Warranty and Maintenance Obligations. Schedule
3.1(x) sets forth a complete list and description of all warranty and
maintenance obligations of Seller to the extent not fully described in
the Contracts listed on Schedule 3.1(n), which description
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includes the names of the customers or third parties to whom such
obligations are owed, the duration of such obligations and the other
material terms and conditions with respect thereto. Schedule 3.1(x)
also sets forth Seller's existing reserves for warranty, contingency
and maintenance obligations as of May 31, 1996. Seller does not
believe, and has no reason to believe, that such reserves, in the
aggregate, are inadequate to cover the cost of its warranty,
contingency and maintenance obligations. There has been no material
change in such reserves for warranty, contingency and maintenance
obligations since May 31, 1996.
(y) Conflicting Interests. Except as disclosed on
Schedule 3.1(y), no affiliate or shareholder of Seller or, to the best
of Seller's and Shareholder's knowledge and belief, no officer or
director of Seller or Shareholder: (a) has any direct or indirect
interest in any Person which competes, directly or indirectly, with
the Seller or which is a supplier, creditor or lessor of Seller or any
Person which competes with Seller; (b) owns any property or assets now
being used, or necessary for use, in the conduct of Seller's business
or the business of any Person who competes with the Seller; and (c)
has any existing contractual relationship with the Seller other than
in the ordinary and usual course of business.
(z) Adequacy and Survival of Representations and
Warranties. Neither this Agreement, nor any Schedule hereto, nor any
certificate furnished by Seller or Shareholder, nor any representation
and warranty furnished or to be furnished by Seller or Shareholder
contains or will contain any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained herein or therein in light of the circumstances in which
they are made not misleading. All such representations and warranties
shall survive the Closing, notwithstanding any investigation by Buyer.
(aa) Extent of Representations and Warranties. Neither
Seller nor Shareholder makes, or has made, any representations or
warranties other than those expressly set out herein or in the Seller
Ancillary Documents. It is understood that, among other things, any
projections or estimates of revenues, costs, or other similar data or
information contained in any presentations, interviews, discussions,
memoranda or offering materials are not and should not be deemed to be
or to include representations or warranties of Seller or Shareholder
for purposes of this Agreement. No person has been authorized to
make,
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and Buyer may not rely upon, any representation or warranty other than
those expressly set forth in this Agreement.
SECTION 3.2. Representations and Warranties of Buyer and
RRNA. Buyer and RRNA hereby jointly and severally represent and warrant to
Seller as follows:
(a) Organization, Standing and Power. Each of Buyer and
RRNA is a corporation validly existing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted.
(b) Authority. Each of Buyer and RRNA has the corporate
power and authority to execute this Agreement and the agreements to be
entered into by it at the Closing pursuant hereto (the "Buyer
Ancillary Documents") and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Buyer
and RRNA, or, in the case of the Buyer Ancillary Documents to be
entered into by them, will be authorized by all necessary corporate
action prior to the Closing, and do not and will not require the
approval of the shareholders of Buyer or RRNA. This Agreement has
been duly executed and delivered by Buyer and RRNA and constitutes,
and each Buyer Ancillary Document to be entered into by Buyer or RRNA
will be duly executed and delivered at the Closing and when so
executed and delivered will constitute, a legal, valid and binding
obligation of Buyer or RRNA, as the case may be, enforceable against
Buyer or RRNA, as the case may be, in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The execution and delivery of this Agreement by the Buyer
and RRNA does not, and the consummation of the transactions
contemplated hereby and the compliance with the terms hereof will not
(i) violate any law, judgment, order, decree, statute, ordinance, rule
and regulation applicable to the Buyer or RRNA, (ii) conflict with any
provision of the Buyer's or RRNA's Certificate of Incorporation or
By-Laws, (iii) require any consent, approval, order or authorization
of or the registration, declaration or filing with, any Governmental
Entity, or (iv) conflict with any contract or agreement to which
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Buyer or RRNA is a party or by which Buyer or RRNA or any of their
property is bound.
(c) Actual Knowledge of Buyer. Based upon Buyer's due
diligence investigation of Seller, to the Actual Knowledge (as defined
below) of Barry Finan, Philip Musial, Rob Tockman and Daniel L.
Boeglin, none of Seller's or Shareholder's representations and
warranties set forth in Sections 3.1(c), (d), (n), (u) or (y) is
untrue. For purposes of this paragraph, the term "Actual Knowledge"
means the conscious awareness of such individuals as of the date of
execution of this Agreement and as of the Closing Date.
ARTICLE IV
Covenants
SECTION 4.1. Covenants of Seller Relating to Conduct of
Business. During the period from the date of this Agreement and continuing
until the Closing Date, the Shareholder and the Seller agree (except as
expressly provided in this Agreement or the Schedules or to the extent that
Buyer shall otherwise consent in writing) that:
(a) Ordinary Course. Seller shall carry on the business
of the Company and operate the Sale Assets in the ordinary course in
substantially the same manner as presently conducted, maintain the
business records of the Company in substantially the same manner as
presently maintained and use its best efforts to preserve intact the
Company's present business organization, keep available the services
of the Company's present officers and employees and preserve the
Company's relationships with customers, suppliers and others having
business dealings with the Company.
(b) No Other Bids. Neither Shareholder nor Seller shall,
nor shall either authorize or permit any officer, director or employee
of Shareholder or Seller or any investment banker, attorney,
accountant or other representative retained by Shareholder or Seller
to, solicit or encourage (including by way of furnishing information),
or take any other action to facilitate, any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead
to, any "other bid," or agree to endorse any "other bid." As used in
this paragraph, "other bid" shall mean any proposal to acquire in any
manner any of the Sale Assets,
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other than the transactions contemplated by this Agreement.
(c) No Dispositions. Seller shall not sell, lease,
distribute or otherwise dispose of, or agree to sell, lease,
distribute or otherwise dispose of, any of the Sale Assets, except in
the ordinary course of business consistent with prior practice, and
except for such sales or other dispositions as shall not, in the
aggregate, be material in relation to the business or the Sale Assets.
(d) No Employment Cost Increase. Seller will not extend
or increase its wages or salary commitments or increase benefits
payable to employees except for increases pursuant to existing written
agreements or commitments therefor.
(e) Other Actions. Seller shall take no action, except
in the ordinary course of business consistent with prior practice,
that would or might result in any of its representations and
warranties set forth in this Agreement becoming untrue (including the
accuracy of the Schedules), in any of the conditions of the Closing
set forth in Article V not being satisfied, or in any of the Sale
Assets becoming materially less valuable.
(f) Advice of Changes. Seller shall promptly advise
Buyer in writing of the occurrence of any matter or event that is
material to the business, prospects, assets, working capital,
financial condition, results of operations or liabilities of Seller,
or to the Closing conditions or the representations and warranties in
this Agreement.
SECTION 4.2. Access to Information. Seller shall afford
to Buyer and its lenders, accountants, counsel and other representatives
reasonable access during normal business hours during the period prior to the
Closing Date to all the properties, books, contracts, commitments, tax returns
and records of the Seller and, during such period shall furnish promptly to
Buyer any information concerning Seller as Buyer may reasonably request.
SECTION 4.3. Legal Conditions to Closing. Each of Buyer
and Seller will use its reasonable best efforts to take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
on it with respect to the Closing and will promptly cooperate with and furnish
information to each other and to other parties in connection with any such
legal requirements, including providing information relating to the pendency of
any inquiry or investigation that could lead to the failure of the condition
set forth in Section 5.1(b).
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SECTION 4.4. Third Party Consents. With respect to all
Conditional Contracts, Seller shall, prior to and following the Closing, use
its reasonable best efforts to obtain such consent and shall furnish copies of
each such consent to the Buyer promptly after receipt thereof. Buyer agrees to
cooperate in all reasonable respects with Seller in Seller's attempt to obtain
such consents, including providing information reasonably requested by the
other parties to such Conditional Contracts, but such cooperation shall not
extend to any agreement to amend the economic or other material terms thereof.
If any such consent shall not be obtained, the Seller agrees
to cooperate with the Buyer in entering into any reasonable arrangement which
does not adversely affect the Seller and which is designed to provide for the
Buyer the benefits under (subject to Buyer's assumption of the obligations of)
any such contract or other instrument, including delegation, without
assignment, of the performance of the contract, which contract shall continue
in Seller's name, and assignment of the resulting accounts receivable,
enforcement of any and all rights of the Seller against the other party thereto
arising out of the breach or cancellation thereof by such other party, or
subletting of the real property or equipment in each case as Buyer shall
direct.
SECTION 4.5. Employees. Buyer agrees to offer employment
to substantially all of Seller's employees as of the Closing Date with
compensation comparable to that paid by Seller to such employees as of the date
of this Agreement. Not less than three (3) days prior to the Closing Date,
Seller shall give Buyer a current roster of employees, and Buyer shall identify
to Seller and Shareholder those employees to whom it does not intend to offer
employment. With respect to Seller's employees who are not so identified,
Buyer shall not be obligated to employ those who are not medically able to
perform their duties as active employees on the Closing Date, whether
workplace-related or otherwise, until such time as they are released by
competent medical authority to resume active employee duties (all employees of
Seller hired by Buyer being hereinafter referred to as "Hired Employees").
Buyer agrees not to take any action within sixty-two (62) days after the
Closing Date with respect to the Hired Employees that would trigger the plant
closing notice requirements of the Worker Adjustment and Retraining
Notification Act. Except as specifically provided in the preceding sentence,
nothing in this Agreement shall obligate Buyer to employ the Hired Employees
for any specified period of time, and all of such employees shall be "at will"
employees who may be terminated for any reason or for no reason.
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SECTION 4.6. Employee Benefits.
(a) Buyer will provide the Hired Employees with employee
benefits, except retiree health benefits, stock options and any employee stock
ownership plan, that are comparable in the aggregate to those provided by
Seller to those employees as of the date of this Agreement.
(b) Except as otherwise required by applicable law, for
purposes of eligibility and vesting, Buyer shall grant to each Hired Employee
credit for periods of employment with Seller prior to the Closing Date, as if
employed by Buyer, under Buyer's vacation and sick time benefits plans and any
other employee benefits plans or arrangements that cover the Hired Employees as
of the Closing Date.
(c) Seller and Shareholder shall cause the accounts of
Seller's employees in the Powell Industries, Inc. Employees Incentive Savings
Plan and the Powell Industries, Inc. Employee Stock Ownership Plan (together,
the "Distributing Plans") to be fully vested as of the Closing Date. As soon
as administratively feasible after the Closing Date, Seller and Shareholder
shall make all contributions to the Distributing Plans to which the Hired
Employees are entitled as of the Closing Date. If the Buyer so requests, as a
condition to accepting rollovers of Hired Employees' distributions, Shareholder
shall provide reasonable evidence to Buyer that the Internal Revenue Service
has issued, or in the case of a subsequent plan amendment or the establishment
of a new plan, would not be prevented by the provisions of the amendment or new
plan from issuing or reaffirming, favorable determination letters that the
Distributing Plans, respectively, are qualified or would qualify under section
401 of the Internal Revenue Code of 1986, as amended.
(d) With respect to Buyer's group health insurance plan,
Buyer shall grant credit for deductibles and co-payments previously paid by any
Hired Employees during the portion of the current plan year prior to the
Closing Date, and Buyer shall not exclude from coverage any pre-existing
condition of any Hired Employee.
(e) Seller and/or Shareholder will retain responsibility for
providing health continuation coverage, pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), for all of Seller's former
employees and other qualified beneficiaries for whom COBRA qualifying events
occurred before or coincident with the Closing Date. Buyer shall not assume
any responsibility that Seller and/or Shareholder has with respect to retiree
medical benefits for all current retirees and for all employees of Seller,
including the Hired Employees.
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(f) Seller and Shareholder will cooperate with Buyer in all
reasonable respects to facilitate the transfer to Buyer of Seller's health
insurance, disability insurance and life insurance policies, including, without
limitation, contacting the applicable insurers to request such transfer and
providing to such insurers such information as they shall require in connection
therewith. Seller and Shareholder will also cooperate with the Buyer in all
reasonable respects to facilitate Buyer's obtaining workers' compensation
insurance and unemployment compensation coverage with respect to Seller's
former employees based upon Seller's claims experience, including, without
limitation, confirming to applicable insurers and Governmental Entities
Seller's and Shareholder's approval of such treatment and providing such
information as the insurers and Governmental Entities shall require.
SECTION 4.7. Collection of Receivables. From and after
the Closing, Buyer shall have the right and authority to collect for its own
account any accounts receivable (including, without limitation, retainage
accounts receivable) that are included in the Sale Assets (the "Included
Receivables") and to endorse with the name of Seller any checks or drafts
received with respect to any such Included Receivables. Seller and Shareholder
agree promptly to deliver to Buyer any cash or other property received directly
or indirectly by it with respect to such Included Receivables, including any
amounts payable as interest; provided, however, that unless any such interest
that has accrued on an Included Receivable prior to the Closing Date is
included in the assets of Seller on the Closing Balance Sheet, Seller shall not
be required to remit to Buyer such pre-Closing interest. Shareholder agrees
that if any of the Included Receivables have not been collected in full by
Buyer on or before a date which is one (1) year following the Closing Date, and
Buyer shall have pursued collection of such Included Receivables using Seller's
historic collection procedures (or equivalent or more diligent procedures),
Buyer shall have the right thereafter at any time or from time to time, upon
notice to Shareholder, to require Shareholder immediately to repurchase from
Buyer all or any part of the remaining Included Receivables for the full amount
thereof payable in cash, without reduction or offset of any kind.
SECTION 4.8. Expenses. Whether or not the Closing takes
place, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense; provided, however, that any sales, use or other transfer taxes
applicable to the conveyance and transfer from Seller to Buyer of the Sale
Assets and any other transfer or documentary taxes or any filing or recording
fees applicable to such conveyance and transfer shall be paid by Seller; and
Seller shall indemnify Buyer against, and reimburse Buyer for, any such taxes
or fees imposed on or paid by Buyer. Each of Seller and Buyer agrees to use
its reasonable efforts to avail itself of
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any available exemptions from any such taxes or fees, and to cooperate with the
other in providing any information and documentation that may be necessary to
obtain such exemptions.
SECTION 4.9. Brokers or Finders. Each of Buyer, Seller
and Shareholder represents, as to itself and its affiliates, that no agent,
broker, investment banker or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement. Each of Buyer, on
the one hand, and Seller and Shareholder, on the other hand, agrees to
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any Person on the basis of any act or statement alleged to
have been made by the indemnifying party or its affiliate.
SECTION 4.10. Financial Information. After the Closing
Date, upon reasonable written notice, Buyer, Seller and Shareholder shall
furnish or cause to be furnished to each other and their respective
accountants, counsel and other representatives, reasonable access, during
normal business hours, to such information (including tax returns and other
records pertinent to the Company) and assistance relating to the Company as is
reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any returns, reports or forms or the defense of any
tax claim or assessment. In the case of Buyer, such assistance shall include
assisting Shareholder or Seller (including making its employees reasonably
available at reasonable expense to Seller) in defending any lawsuits or claims
against the Shareholder or Seller with respect to Excluded Liabilities. Buyer
shall retain the books and records of Seller included in the Sale Assets for a
period of seven years after the Closing Date and Seller shall also retain for a
period of seven years after the Closing Date any financial and other records
relating to the Company which are not included in the Sale Assets. After the
end of such seven year period, before disposing of such books or records, each
party shall give notice to such effect to the other and shall give the other,
at such party's cost and expense, an opportunity to remove and retain all or
any part of such books or records as the other may select.
Seller and Shareholder shall not after the Closing Date take
any position in any federal, state, local or foreign income, sales or other tax
return (including, without limitation, any amended return), or reach any
settlement or agreement on audit, which (i) is in any manner inconsistent with
any position taken by Seller or Shareholder in any filing, settlement or
agreement made by or with respect to Seller prior to the Closing Date if such
inconsistent position would require the payment by Buyer of more tax than would
have been required to be paid had such position not
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been taken or such settlement or agreement not been reached, (ii) adversely
affects the determination of useful life, basis or method of depreciation,
amortization or accounting of any of the Sale Assets or any of the properties,
assets or rights of Buyer, or (iii) accelerates the time at which any tax must
be paid by Buyer.
SECTION 4.11. Bulk Transfer Laws. Buyer hereby waives
compliance by Seller with the provisions of any so-called "bulk transfer law"
of any jurisdiction in connection with the sale of the Sale Assets to Buyer.
Seller agrees to indemnify and hold Buyer harmless from all loss, cost, damage
or expense by reason of any failure so to comply.
SECTION 4.12. Additional Agreements. Subject to the
provisions of Section 4.4, Seller and Shareholder will use their best efforts
to cause the satisfaction of conditions to Buyer's obligations and will use
their best efforts to facilitate and effect the implementation of the transfer
of the Sale Assets to Buyer and, for such purpose but without limitation,
Seller and Shareholder promptly will at and after the Closing Date execute and
deliver to Buyer such assignments, deeds, bills of sale, consents and other
instruments as Buyer or its counsel may reasonably request as necessary or
desirable for such purpose. Buyer will use its best efforts to cause the
satisfaction of conditions to Seller's and Shareholder's obligations.
SECTION 4.13. Passage of Title and Risk of Loss. Legal
title, equitable title and risk of loss with respect to the property and rights
to be transferred hereunder shall not pass to Buyer until the property or right
is transferred at the Closing and possession thereof is delivered to Buyer.
SECTION 4.14. Use of Seller's Name. Buyer shall have full
right to use or permit the use of the Seller's corporate name in connection
with the business of the Company after the Closing Date. Seller shall, within
five days after the Closing Date, change its corporate name to another
completely different name.
SECTION 4.15. Non-Competition. In order to induce Buyer
and RRNA to enter into this Agreement and consummate the purchase of the Sale
Assets, both the Shareholder and the Seller agree that, for a period of three
(3) years from and after the Closing Date, neither Shareholder nor Seller shall
engage, anywhere in the world, directly or indirectly, in the business of
designing, developing, assembling, selling or servicing electric generation or
cogeneration systems powered by gas turbines or reciprocating engines
("Gensets"), except that, so long as Shareholder and its affiliates do not
solicit or accept purchase orders or maintenance or service contracts for
Gensets, Shareholder and its affiliates may, in accordance with their historic
business practices, purchase from unaffiliated parties electric generation or
cogeneration
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systems, or portions thereof, or equipment or systems similar thereto, for
inclusion in electric power distribution or control systems being provided in
connection with the ongoing business activities of Shareholder or its
affiliates other than Seller. In the event such area or such period of time is
unreasonably broad or unreasonably long, then the prohibited area and
prohibited period shall be reduced to such area or period as is reasonable.
Seller and Shareholder hereby acknowledge that a violation of this Section by
either Seller or Shareholder shall cause such damage to Buyer as will be
irreparable and the exact amount of which will be impossible to ascertain, and
for that reason Shareholder and Seller each agrees that Buyer shall be
entitled, as a matter of right, to an injunction from any court of competent
jurisdiction restraining any further violation hereunder by Seller or
Shareholder.
SECTION 4.16. Inventory Repurchase. Schedule 4.16 sets forth
a listing of all items of Inventory valued as of May 31, 1996 on the books and
records of Seller (after application of associated obsolescence or revaluation
reserves) at more than $5,000 per extended line item total for such inventory
as is classified by Seller as active spare parts inventory, or at more than
$10,000 per extended line item total for such inventory as is classified by
Seller as production inventory (such listed items collectively hereinafter
defined as "Specified Inventory Items"). The following shall apply with
respect to the Specified Inventory Items:
(a) Nomenclature and Specification. Each individual item
of the Specified Inventory Items shall hereinafter be defined as a
"Unit." Each and every Unit shall be assigned, and shall continue to
bear for so long as any of the provisions of this Section 4.16 shall
be applicable, the part number, description and unit price set forth
on Schedule 4.16. Units which are, based on the current business
practice of Seller, substantially identical to other Units except for
their part number shall have the same common description, but the part
number of each individual Unit shall be unique and specific to such
Unit. Buyer will, for so long as a Unit is in Buyer's possession
under the terms of this Agreement, keep physically attached to each
and every Unit an appropriate inventory tag or other equivalent device
on which is listed the description and part number. The aggregate
number of Units for each description is set forth in Schedule 4.16
under the column entitled Number of Units.
(b) Unit's Closing Book Value. The Unit's Closing Book
Value shall be defined as the value of each Unit as of the Closing
Date as such value is, after application of associated obsolescence or
revaluation reserves, stated on the books and records of Seller which
are used
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to prepare the Closing Balance Sheet. A listing of the Unit's Closing
Book Value shall be prepared by the parties at the time of preparation
of the Closing Balance Sheet. Schedule 4.16 sets forth, on a pro
forma basis, the Unit Closing Book Value as if the Closing Date were
May 31, 1996.
(c) Units Subject to Shareholder's Repurchase Obligation.
In the event either (i) any Unit for which the aggregate number of
Units as set forth in Schedule 4.16 under the column entitled Number
of Units is one was, between the Closing Date and the end of the
calendar month in which the first anniversary of the Closing Date
(such date hereinafter defined as the "Anniversary Date") occurs, not
consumed, used, sold, borrowed, lost, disposed of or otherwise
substantially dissipated, or (ii) none of the Units for which the
aggregate number of Units as set forth in Schedule 4.16 under the
column entitled Number of Units is more than one was, between the
Closing Date and the Anniversary Date, consumed, used, sold, borrowed,
lost, disposed of or otherwise substantially dissipated, then in the
first case such Unit or in the second case all or any portion of such
Units, at Buyer's election and in compliance with the provisions of
Section 4.16(d), shall be repurchased by Shareholder for an amount
equal to sixty-two and one-half percent (62.5%) of the amount of the
Unit's Closing Book Value, subject however to the limitation that such
repurchase by Shareholder shall not be required unless at the time of
such repurchase the Unit is in substantially the same condition, fair
wear and tear excepted, as the Unit was in at the Closing Date.
(d) Notice and Payment Provisions. Buyer shall have the
right after the Anniversary Date but not later than thirty (30)
calendar days following the Anniversary Date to provide Shareholder
written notice of Buyer's election that Shareholder, subject to this
Section 4.16, repurchase all or any part of such Units as are therein
specified by Buyer. Shareholder shall have no obligation to
repurchase any Units if such election is not made within the thirty
(30) day period described in the previous sentence. Shareholder shall
have thirty calendar days following Shareholder's receipt of any such
repurchase election by Buyer to inspect such Units as Buyer has
elected that Shareholder repurchase, following which time Shareholder
shall remit to Buyer within five (5) calendar days payment for all
Units for which Shareholder does not dispute Buyer's repurchase
election in immediately available funds in the amount provided for in
Section 4.16(c) hereof to an account specified by
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Buyer. Upon Buyer's receipt of such payment, Buyer shall provide
Shareholder such documentation as is necessary to evidence
Shareholder's title to such Units. In the case of Shareholder's
dispute as to Buyer's right to make a repurchase election for any or
all of the Units, Buyer and Shareholder shall follow the procedures
set forth in Article VIII herein to resolve such dispute.
(e) Storage by and Consignment to Buyer. Following the
repurchase of any Units by Shareholder, if and to the extent so
requested in writing by Shareholder within thirty (30) days of such
repurchase, Buyer shall store on its premises and hold on consignment,
for a period of up to two (2) years following the repurchase date, all
or any part of the repurchased Units. During such period Buyer shall
use reasonable efforts to sell on behalf of Shareholder such
repurchased Units at the earliest possible time and at the highest
possible price on an as is, where is basis with no express or implied
warranty of Shareholder. In the event of a proposed sale of such
repurchased Units which have an aggregate value of $10,000 or more per
sale transaction, based on the amount paid by Shareholder to Buyer to
repurchase such Units, Buyer shall notify Shareholder prior thereto
and shall not consummate such sale without the oral or written consent
of Shareholder. The proceeds of any and all sales of repurchased
Units shall be remitted directly to Shareholder by either the
purchasing party or by Buyer, acting on behalf of Shareholder.
Notwithstanding the foregoing, however, Buyer shall not be obligated
to sell or attempt to sell any Units held on consignment if such sale
would, in Buyer's reasonable business judgment, not be in the best
interest of a prospective buyer or would require Buyer to forego the
opportunity to sell its own inventory or materials to such a
prospective buyer. Buyer will provide, at no costs or fees to
Shareholder, the same storage conditions and safeguards against
deterioration, damage or loss to the repurchased Units as Buyer
provides for its own inventory of a similar or comparable nature,
except (i) that Buyer shall have no duty to purchase or maintain
casualty insurance with respect to the repurchased Units and (ii)
Buyer shall receive a sales commission equal to ten percent (10%) of
the net sales proceeds received by Shareholder in connection with the
sale of any Units held under consignment by Buyer.
SECTION 4.17. Seller to Pay Excluded Liabilities. The
Seller and/or Shareholder, as applicable, agree to pay or perform all of the
Excluded Liabilities as the same are due for payment or required to be
performed in the ordinary course of business and
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consistent with past practices; provided, however, that Seller and Shareholder
need not pay or perform any Excluded Liability if and to the extent it is being
contested in good faith by appropriate proceedings. None of the Excluded
Liabilities consisting of property taxes presently are being, or are expected
to be, contested by Seller or Shareholder.
SECTION 4.18. Survey. Seller, at its cost and expense and
no less than ten (10) calendar days prior to the Closing, shall provide Buyer
with a survey for each parcel of the Owned Property and for the Seller's
operating facility in Maineville, Ohio, included in the Leased Property
(collectively, the "Maineville Real Estate"), which survey shall (a) be
satisfactory to Buyer, (b) conform to the ALTA standards that must be satisfied
for the title insurer to delete the standard exceptions from an ALTA owner's
policy of title insurance and issue an ALTA 3.1 zoning endorsement, (c) be
certified as of a current date by a land surveyor acceptable to Buyer, (d)
state that the Maineville Real Estate is not located in a flood way, flood
plain or flood hazard area, and (e) show that there are no encroachments on the
Maineville Real Estate, that the improvements are located entirely within the
bounds thereof, that all parcels comprising the Maineville Real Estate have
contiguous and abutting property lines so as to constitute a single parcel with
no gaps or gores, and that there are no matters which would adversely affect
Buyer's intended use or development thereof.
SECTION 4.19. Title Insurance. Seller, at its cost and
expense and within ten (10) business days after the date of this Agreement,
shall provide Buyer with commitments issued in the name of Buyer for an ALTA
leasehold policy of title insurance for each of the Owned Properties and each
of the Leased Properties that constitute a part of the Maineville Real Estate,
which commitment shall (a) be issued by an insurer acceptable to Buyer, and (b)
contain an agreement to insure for amounts to be agreed upon by the parties
each of the Owned Properties and good and marketable leasehold interests in
each of the Leased Properties that constitute a part of the Maineville Real
Estate, with such endorsements as Buyer shall reasonably request (including,
without limitation, zoning and contiguity endorsements) free of all exceptions
(including, without limitation, the standard exceptions), except only Permitted
Liens. At Closing, Seller, at its cost and expense, shall deliver to Buyer a
policy of title insurance issued in conformity with each such commitment.
SECTION 4.20. Product Liability Insurance. Shareholder
represents and warrants to Buyer that it maintains product liability insurance
with limits of $15 million per occurrence which covers liabilities of Seller
with respect to product liability claims relating to products shipped to
customers by Seller before the Closing Date. Shareholder agrees to maintain
such insurance
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for at least five (5) years after Closing and to provide to Seller evidence of
such insurance on an annual basis. Shareholder shall cause its insurance
company to provide not less than thirty (30) days advance notice to Buyer prior
to the cancellation, termination or nonrenewal of such insurance policy.
SECTION 4.21. Publicity. At all times hereafter until the
Closing Date, the parties hereto shall not, and shall not permit any of their
directors, officers, employees or agents to, issue any press release with
respect to, or otherwise reveal or disclose, this Agreement or the transactions
contemplated hereby without the prior consent of the other; provided, however,
that any party may (a) make such disclosures as may, in its judgment, be
required by any law or regulation, and (b) disclose such matters to its
counsel, accountants, brokers and other advisors (which persons will be
required to observe the restrictions in this Section); provided further, that
Buyer may disclose such matters to the extent necessary to enable it to assume
the operation of Seller's business on the Closing Date. After the Closing
Date, the parties shall not issue any press release or make any other public
announcement concerning this Agreement or the transactions consummated
hereunder without the joint approval of Seller and Buyer; provided, however,
that either party may make such disclosures as may, in its judgment, be
required by any law or regulation.
SECTION 4.22. Empire Project. If requested by Shareholder
after the Closing, Buyer will act as a subcontractor to Shareholder for work
related to the completion of the MacDill Air Force Base project. Buyer agrees
that its charge for such work shall not exceed its fully absorbed costs
including full overhead allocation plus a five percent net pre-tax margin on
the selling price. The other contractual terms and conditions of such
arrangement must be reasonably satisfactory to Buyer in all respects.
SECTION 4.23. Release of Bonds. Buyer and RRNA will use
their best efforts to cause Shareholder and Seller to be released at the
Closing or as soon as practicable thereafter from the performance, delivery and
similar bonds identified on Schedule 4.23 attached hereto and from other
similar bonds provided in the ordinary course of business by Seller or
Shareholder after the date hereof but prior to the Closing Date, but only to
the extent such bonds arise solely in connection with any of the Assumed
Liabilities (the "Bonds"). With respect to any Bonds from which Shareholder
and/or Seller are not released within fifteen (15) days after Closing, Buyer or
RRNA shall provide a like bond to Shareholder or Seller, as the case may be, at
such time.
SECTION 4.24. HSR Filings. If Buyer, on the one hand, and
Seller and Shareholder, on the other hand, agree that a
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premerger notification filing is required in connection with the transactions
contemplated by this Agreement pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), then each party shall (a)
take promptly all actions necessary to make the filings required of it under
the HSR Act, which filings shall comply in all material respects with the
requirements of the HSR Act, (b) comply at the earliest practicable date with
any request for additional information received by such party from the Federal
Trade Commission or Antitrust Division of the Department of Justice pursuant to
the HSR Act, (c) cooperate with the other party in connection with such other
party's filings under the HSR Act, (d) request early termination of the
applicable waiting period, and (e) share evenly the filing fee required to be
paid pursuant to the HSR Act.
SECTION 4.25. Sonoma Escrow Account. Shareholder guarantees
to Buyer that the escrow fund related to the Sonoma project, which is reflected
on Seller's May 31, 1996 balance sheet included in the Financial Statements
under the caption "Short Term Investment" in the amount of $241,588.99, and
which is included in the Sale Assets, will be collected in full by Buyer on or
before August 31, 1996. If such amount has not been collected in full by such
date, Shareholder shall, upon request by Buyer, pay to Buyer any portion
thereof which has not been collected by Buyer as of such date, such payment to
be made in immediately available funds by wire transfer to an account specified
by Buyer no later than two (2) business days following request therefor.
SECTION 4.26. Environmental Remediation and Disclosure.
Subsequent to the Closing, Buyer shall engage a reputable environmental
consulting/remediation firm through which Buyer shall undertake remediation of
contamination in "Area 3" as described on Figure 2 of Dames & Moore's Phase II
Subsurface Investigation Report dated May 9, 1996. The actual cost of such
remediation and activities in connection therewith shall be fully reimbursed by
Shareholder or Seller, immediately upon request and submission of appropriate
invoices or other documentation therefor by Buyer, up to a maximum of $20,000.
Such remediation shall be completed on or before the first anniversary of the
Closing Date. Effective as of the Closing Date, the provisions of the letter
agreement, dated May 31, 1996, between Shareholder and Rolls-Royce, plc,
limiting the rights of Rolls-Royce to communicate with Penske Power Systems,
Inc. or American Real Estate Partners, L.P., or any other officers, employees,
agents, attorneys, consultants or representatives, concerning the environmental
condition of the Maineville Real Estate are hereby terminated.
SECTION 4.27. IES Matter. The parties agree that neither
Buyer and RRNA, on the one hand, nor Seller and Shareholder, on the other hand,
shall seek or have any right to indemnification from the other pursuant to this
Agreement in
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connection with the IES Matter. In the event of any claim, action or
proceeding brought against any of the parties hereto in connection with the IES
Matter, all of the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention, after reasonable notice of the need
therefor and (upon the other party's request) the provision to the other party,
of records and information which are reasonably relevant to such claim, action
or proceeding, and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
ARTICLE V
Conditions Precedent
SECTION 5.1. Conditions to Each Party's Obligation. The
obligation of Buyer to purchase the Sale Assets and assume the Assumed
Liabilities, and the obligation of Seller to sell, assign, convey and deliver
the Sale Assets to Buyer, shall be subject to the satisfaction prior to the
Closing of the following conditions:
(a) Other Approvals. All authorizations, consents,
permits, orders or approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any Governmental Entity
necessary for the consummation of the transactions contemplated by
this Agreement, or for Buyer's conduct of the business of the Company,
shall have been obtained or filed or shall have occurred.
(b) No Injunctions, or Restraints. No temporary
restraining order, preliminary or permanent injunction or other legal
restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement shall be in effect, nor
shall Buyer have notice of, and have verified, the pendency of an
inquiry or investigation by any Governmental Entity in respect of the
transactions contemplated by this Agreement which could reasonably
result in any such order, preliminary or permanent injunction or other
legal restraint or prohibition.
(c) Allocation of Purchase Price. The parties shall have
agreed upon, and jointly executed a document reflecting, the
methodology by which the consideration payable by Buyer for the Sale
Assets shall be allocated among the Sale Assets and the covenant not
to compete set forth herein.
SECTION 5.2. Conditions to Obligations of Buyer and RRNA.
The obligation of Buyer to purchase the Sale Assets and
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assume the Assumed Liabilities and the obligations of RRNA hereunder are
subject to the satisfaction, on and as of the Closing Date, of each of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Shareholder and the Seller set forth in this
Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, and Buyer shall have received a
certificate of Seller to such effect signed by its President and a
certificate of Shareholder to such effect signed by its chief
financial officer.
(b) Performance of Obligations of Seller and Shareholder.
Seller and Shareholder shall have performed or complied in all
material respects with all obligations, conditions and covenants
required to be performed by them under this Agreement on or prior to
the Closing Date, and Buyer shall have received a certificate of
Seller to such effect signed by its President and a certificate of
Shareholder to such effect signed by its chief financial officer.
(c) Opinion of Seller's Counsel. Buyer shall have
received an opinion, dated the date of the Closing, of counsel to
Seller and Shareholder, to the effect that:
(i) Each of Seller and Shareholder is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada.
(ii) Each of Seller and Shareholder has the
requisite corporate power and authority to execute this
Agreement and to consummate the transactions contemplated
hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part
of Seller and Shareholder, and this Agreement has been duly
executed and delivered by Seller and Shareholder and
constitutes a legal, valid and binding obligation of Seller
and Shareholder, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles (such counsel being entitled to
rely, in respect of the enforceability opinion set forth
above, upon an
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opinion of Ohio counsel to the Seller, a copy of which shall
be furnished to the Buyer).
(iii) The execution and delivery of this Agreement
by Seller and Shareholder does not, and consummation by Seller
and Shareholder of the transactions contemplated hereby will
not, (A) violate (1) the corporate law of the State of Nevada,
(2) any federal law or the laws of the State of Texas, or (3)
the laws of the State of Ohio, or (B) conflict with any
provision of the Articles of Incorporation or By-laws of
Seller and Shareholder or any contract, agreement, order, or
decree known to such counsel by which either of them is bound
(such counsel being entitled to rely, in respect of the
opinion set forth in clause (iii)(A)(3) above, upon an opinion
of Ohio counsel to the Seller, a copy of which shall be
furnished to the Buyer).
(iv) Any consent, approval, order or authorization
of, any registration, declaration or filing with, and any
waiting period imposed by, any Governmental Entity under (1)
the corporate law of the State of Nevada, (2) any federal law
or the laws of the State of Texas, or (3) the laws of the
State of Ohio, which is required by or with respect to Seller
or Shareholder in connection with the execution and delivery
of this Agreement by Seller and Shareholder or the
consummation by Seller and Shareholder of the transactions
contemplated hereby, has been obtained or made or, in the case
of any such waiting period, has expired, as specified in such
opinion (such counsel being entitled to rely, in respect of
the opinion set forth in clause (iv)(A)(3) above, upon an
opinion of Ohio counsel to the Seller, a copy of which shall
be furnished to the Buyer).
(d) Bills of Sale; Warranty Deeds. Seller shall have
delivered to Buyer bills of sale conveying the personal property and
warranty deeds for the real property, if any, included in the Sale
Assets, in each case in form and substance reasonably satisfactory to
Buyer and its counsel.
(e) Other Documents. Seller shall have furnished to
Buyer such other documents relating to the assignment of the Sale
Assets, Seller's corporate existence and authority (including, without
limitation, certified copies of resolutions of its board of
directors), and
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such other similar matters as Buyer or its counsel may reasonably
request.
(f) No Material Adverse Change. Since October 31, 1995,
there shall have been no material adverse change, nor any development
or event involving a prospective material adverse change, in the
business, financial condition or results of operations of the Seller,
or relating to the Sale Assets or Assumed Liabilities, whether or not
arising in the ordinary course of business.
(g) Lien Releases. Buyer shall have received all
releases and waivers of Liens (except Permitted Liens) affecting the
Sale Assets as Buyer shall have reasonably requested, in form and
substance reasonably satisfactory to Buyer and its counsel.
(h) Real Estate Matters. Buyer shall have entered into
and consummated arrangements, satisfactory to Buyer in its sole
discretion, for the lease, sublease or purchase (as Buyer deems
necessary or desirable) of any or all of the Premises, on terms and
conditions acceptable to Buyer. In addition, Buyer shall have
determined, in its sole discretion, that: (a) there are no conditions
existing on or with respect to the Maineville Real Estate that would
materially adversely affect Buyer's intended use or development
thereof; (b) the current zoning of the Maineville Real Estate is proper
for and will permit Buyer's intended use thereof; (c) except as
disclosed in Schedules 3.1(u)-1, -2 or -3, the Maineville Real Estate
is free and clear of any and all asbestos, pollutants, toxic or
hazardous materials, substances and contaminants and/or the material
threat of contamination thereby and there are no conditions existing on
or about the Maineville Real Estate that might give rise to any future
civil, criminal or administrative environmental proceedings or
investigations with respect thereto or to Seller's use thereof; and (d)
all improvements and all mechanical and electrical components of the
Premises are structurally sound, in good working order and in
compliance with all applicable laws, ordinances, codes, rules,
regulations, orders and requirements of all Governmental Entities.
(i) Accounts Receivable. Seller shall have delivered to
Buyer a true and complete listing, as of the Closing Date, of all
Included Receivables in such form as may be acceptable to Buyer, which
listing shall separately identify any Included Receivables that Seller
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reasonably anticipates will not be collected within three (3) months
after the Closing Date.
(j) Due Diligence Review of Contracts. Buyer shall have
completed to its satisfaction its due diligence review of Seller's
Contracts and shall be satisfied that any risk exposure to
consequential or similar damages, liability or loss is properly
limited or that adequate arrangements have been entered into with
Seller and Shareholder with respect to insurance coverage for any such
damages, liability or loss.
SECTION 5.3. Conditions to the Obligations of Seller and
Shareholder. The obligation of Seller to sell, assign, convey, and deliver the
Sale Assets and the obligations of the Shareholder hereunder are subject to the
satisfaction on or prior to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Buyer and RRNA set forth in this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date, and Seller shall have received a certificate signed by
an authorized officer of each of Buyer and RRNA to such effect.
(b) Performance of Obligations of Buyer and RRNA. Buyer
and RRNA shall have performed or complied in all material respects
with all obligations required to be performed by them under this
Agreement on or prior to the Closing Date, and Seller shall have
received a certificate signed by an authorized officer of each of
Buyer and RRNA to such effect.
(c) Opinion of Buyer's Counsel. Seller shall have
received one or more opinions, each dated the Closing Date, of counsel
to Buyer and RRNA (which, in either or both cases, may be Thomas P.
Dale) and which, when read together, are to the effect that:
(i) Each of Buyer and RRNA is a corporation
validly existing under the laws of the State of Delaware and
has the requisite corporate power and authority to carry on
its business as now being conducted.
(ii) Each of Buyer and RRNA has the requisite
corporate power and authority to execute this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of
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this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Buyer and RRNA and this
Agreement has been duly executed and delivered by the Buyer
and RRNA and constitutes a legal, valid and binding obligation
of Buyer and RRNA, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles (such counsel being entitled to
rely, in respect of the enforceability opinion set forth
above, upon an opinion of Ohio counsel to the Buyer and RRNA,
a copy of which shall be furnished to the Seller).
(iii) The execution and delivery of this Agreement
by Buyer and RRNA does not, and consummation by Buyer and RRNA
of the transactions contemplated hereby will not, conflict
with any provision of the Certificate of Incorporation or
By-laws of Buyer or RRNA or any contract, agreement, order, or
decree known to such counsel by which Buyer or RRNA is bound.
ARTICLE VI
Termination, Amendment and Waiver
SECTION 6.1. Termination.
(a) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i) by mutual written consent of Shareholder,
Seller, Buyer and RRNA;
(ii) by Shareholder and Seller if any of the
conditions set forth in Sections 5.1 or 5.3 shall have become
incapable of fulfillment, and shall not have been waived by
Seller;
(iii) by Buyer and RRNA if any of the conditions
set forth in Sections 5.1 or 5.2 shall have become incapable
of fulfillment, and shall not have been waived by Buyer; or
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(iv) by Shareholder, Seller, Buyer or RRNA, if the
Closing does not occur on or prior to July 31, 1996;
provided, however, that the party seeking termination pursuant to
clause (ii), (iii), or (iv) is not in breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement.
(b) In the event of termination by Shareholder, Seller,
Buyer or RRNA pursuant to this Section 6.1, written notice thereof
shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated, without further
action by any party. If the transactions contemplated by this
Agreement are terminated as provided herein:
(i) Buyer shall return all documents and other
material received from Seller relating to the transactions
contemplated hereby, whether so obtained before or after the
execution hereof, to Seller;
(ii) all confidential information received by
Buyer with respect to the business of Seller shall be treated
in accordance with the confidentiality agreement between the
parties, which shall remain in full force and effect
notwithstanding the termination of this Agreement; and
(iii) this Agreement shall become null and void and
of no further force and effect, except for the provisions of
(A) Section 4.8 relating to expenses and similar matters, (B)
Section 4.9 relating to finder's fees and broker's fees and
(C) this Section 6.1, except that nothing in this Section 6.1
shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this
Agreement and liability for same shall survive termination by
the other party.
SECTION 6.2. Amendments and Waivers. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto. By an instrument in writing, Buyer and RRNA, on the one
hand, or Seller and Shareholder, on the other hand, may waive compliance by the
other party with any term or provision of this Agreement that such other party
was or is obligated to comply with or perform.
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ARTICLE VII
Indemnification
SECTION 7.1. Indemnification by Shareholder and Seller.
Subject to Sections 7.3 and 7.5, the Shareholder and the Seller, jointly and
severally, hereby agree to indemnify Buyer and RRNA and their respective
affiliates, officers, directors, employees, stockholders, agents and
representatives against, and agree to hold them harmless from, any
out-of-pocket loss, liability, claim, damage or expense (including reasonable
legal fees and expenses) (collectively, "Damages"), as incurred, for or on
account of or arising from or in connection with or otherwise with respect to:
(a) Any breach on the part of the Shareholder or the
Seller of any representation or warranty contained in this Agreement
or any Seller Ancillary Document;
(b) Any breach of any covenant of the Shareholder or the
Seller contained in this Agreement or any Seller Ancillary Document;
(c) Any deficiency in or underpayment of any taxes
attributable to any pre-Closing tax period;
(d) The noncompliance of the parties to this Agreement
with the bulk transfer laws of any jurisdiction;
(e) Except to the extent provided in Sections 4.27 and
7.3(e) hereof, all liabilities and obligations falling within the
definition of Excluded Liabilities in this Agreement, including,
without limitation, any liabilities and obligations arising out of any
Environmental Laws, the Crossroads Litigation, the Kenetech
Arbitration, the Empire Litigation or the IPT Matter; and
(f) Any and all reasonable costs, expenses and all other
Damages (including any reasonably foreseeable consequential Damages)
incurred by Buyer or RRNA in remedying any breach, misrepresentation,
deficiency, underpayment, nonperformance or inaccuracy described
above, including, by way of illustration and not limitation, all legal
and accounting fees, other professional fees or expenses, and all
filing fees and collection costs incident thereto and all such fees,
costs and expenses incurred in connection with investigating and
defending claims which, if successfully prosecuted, would have
resulted in Damages.
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For purposes of the foregoing, any offset made against an
Included Receivable based upon or arising from any Excluded Liability shall be
a loss for which indemnification is provided hereunder.
SECTION 7.2. Indemnification by Buyer and RRNA. Subject
to Sections 7.4 and 7.5, Buyer and RRNA, jointly and severally, hereby agree to
indemnify Shareholder and Seller and their respective affiliates, officers,
directors, employees, stockholders, agents and representatives against, and
agrees to hold them harmless from, any Damages, as incurred, for or on account
of or arising from or in connection with or otherwise with respect to:
(a) Any breach on the part of Buyer or RRNA of any
representation or warranty contained in this Agreement or any Buyer
Ancillary Document;
(b) Any breach of any covenant of Buyer or RRNA contained
in this Agreement or any Buyer Ancillary Document;
(c) Any liabilities and obligations falling within the
definition of Assumed Liabilities in this Agreement;
(d) Any and all liabilities and obligations of Buyer or
RRNA arising out of the post-Closing operation of the Sale Assets;
and
(e) Any and all reasonable costs, expenses and all other
Damages (including reasonably foreseeable consequential Damages)
incurred by Seller or Shareholder in remedying any breach,
misrepresentation, nonperformance or inaccuracy described above,
including, by way of illustration and not limitation, all legal and
accounting fees, other professional fees or expenses, and all filing
fees and collection costs incident thereto, and all such fees, costs
and expenses incurred in connection with investigating and in
defending claims which, if successfully prosecuted, would have
resulted in Damages.
SECTION 7.3. Limitations on Seller's and Shareholder's
Indemnification.
(a) Notwithstanding the other provisions of this Article
VII, the Seller and Shareholder shall not be liable to indemnify the
Buyer or RRNA for their Damages unless:
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(i) In the case of any indemnification arising
out of any investigation, claim or action brought by a
Governmental Entity or other third party, the Buyer or RRNA
notifies Seller or Shareholder in writing of its claim or
potential claim for indemnification not later than thirty (30)
days after the expiration of the statute of limitations
governing the period within which such Governmental Entity or
other third party may bring a claim or action;
(ii) In the case of any indemnification arising
out of any pending third party claim or action (including,
without limitation, the Empire Litigation, Crossroads
Litigation or Kenetech Arbitration), the Buyer or RRNA
notifies Seller or Shareholder in writing of their claim or
potential claim for indemnification not later than thirty (30)
days after the entry of a final, non-appealable ruling,
judgment or dismissal of such claim or action; and
(iii) In the case of any other claim by the Buyer
or RRNA for indemnification, the Buyer or RRNA notifies Seller
or Shareholder in writing of their claim or potential claim
for indemnification not later than the second anniversary of
the Closing Date.
(b) The aggregate liability of the Seller or Shareholder
to the Buyer or RRNA for indemnification pursuant to this Agreement
shall not exceed the sum of (i) the Purchase Price, and (ii) the net
book value as of the Closing Date, determined on the basis of the
Agreed Accounting Principles, of the Assumed Liabilities.
(c) The Seller or Shareholder shall not be liable to
indemnify the Buyer or RRNA for their Damages pursuant to Section
7.1(a), and neither Buyer nor RRNA shall request Seller or Shareholder
to pay after the Closing Excluded Liabilities relating to the business
purchased for which invoices are presented to Buyer or RRNA by third
parties in the ordinary course of business, until such time as the
aggregate amount of otherwise indemnifiable Damages plus any such
Excluded Liabilities paid by Buyer or RRNA exceeds Twenty Thousand
Dollars ($20,000), and thereafter Seller's or Shareholder's
indemnification obligation pursuant thereto shall only apply to the
excess Damages over such amount. Neither
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Seller nor Shareholder shall direct any such third parties to present
invoices for Excluded Liabilities to the Buyer or RRNA.
(d) Notwithstanding the foregoing, the limitations in
this Section 7.3 shall not apply to any claim by Buyer or RRNA for
indemnification based on (i) the Buyer's failure to receive good,
marketable and indefeasible title to any of the Sale Assets, (ii) any
material breach of any covenant or agreement of Seller or Shareholder
in this Agreement or any Seller Ancillary Document, or (iii) any
material misrepresentation or material breach of warranty known to
Seller or Shareholder at the time of Closing and not disclosed to the
Buyer or RRNA.
(e) Notwithstanding any other provision of this Article
VII, Seller and Shareholder shall not be liable to indemnify the Buyer
or RRNA for any costs associated with any cleanup or remedial work
with respect to the Maineville Real Estate that are incurred in
response to a requirement or order of any Governmental Entity
resulting from any contact initiated by Buyer or RRNA with such
Governmental Entity. With respect to any other such costs incurred in
response to such a requirement or order of any Governmental Entity,
Seller and Shareholder shall not be liable to indemnify the Buyer or
RRNA in an amount exceeding $150,000, nor for any claim for such
indemnification not brought on or prior to the second anniversary of
the Closing Date. The parties acknowledge, however, that Buyer and
RRNA do not release or waive, and hereby expressly preserve, whatever
rights they may have, now or at some future time, under or pursuant to
any applicable federal, state or local law, regulation or ordinance,
to recover or receive a contribution from Seller or Shareholder for
any work, costs or charges of any kind whatsoever by reason of the
presence, suspected presence, release or threatened release of any
pollutant, contaminant or other materials in, on, or into the air,
soil, surface water, groundwater or subsurface of the Premises,
regardless of whether such condition was known or unknown as of the
Closing Date.
SECTION 7.4. Limitations on Buyer's and RRNA's
Indemnification.
(a) Notwithstanding the other provisions of this Article
VII, the Buyer and RRNA shall not be liable to indemnify the Seller or
Shareholder for their Damages unless:
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(i) In the case of any indemnification arising
out of any investigation, claim or action brought by a
Governmental Entity or other third party, the Seller or
Shareholder notifies Buyer or RRNA in writing of their claim
or potential claim for indemnification not later than thirty
(30) days after the expiration of the statute of limitations
governing the period within which such Governmental Entity or
other third party may bring a claim or action;
(ii) In the case of any indemnification arising
out of any pending third party claim or action, Seller or
Shareholder notifies Buyer or RRNA in writing of their claim
or potential claim for indemnification not later than thirty
(30) days after the entry of a final, non-appealable ruling,
judgment or dismissal of such claim or action; and
(iii) In the case of any other claim by the Seller
or Shareholder for indemnification, the Seller or Shareholder
notifies Buyer or RRNA in writing of their claim or potential
claim for indemnification not later than the second
anniversary of the Closing Date.
(b) The aggregate liability of the Buyer or RRNA to the
Seller or Shareholder for indemnification pursuant to this Agreement
shall not exceed the sum of (i) the Purchase Price, and (ii) the net
book value, as included in the Closing Balance Sheet, of any Assumed
Liabilities that have not been discharged by the Buyer or RRNA, and
which remain outstanding, as of the date on which Buyer's or RRNA's
indemnification liability is established. Such aggregate liability
shall decline on a dollar-for-dollar basis as Buyer or RRNA discharges
the Assumed Liabilities.
(c) The Buyer and RRNA shall not be liable to indemnify
the Seller or Shareholder for their Damages pursuant to Section
7.2(a), and neither Seller nor Shareholder shall request Buyer or RRNA
to pay after the Closing Assumed Liabilities for which invoices are
presented to Seller or Shareholder by third parties in the ordinary
course of business, until such time as the aggregate amount of
otherwise indemnifiable Damages plus any such Assumed Liabilities paid
by Seller or Shareholder exceeds Twenty Thousand Dollars ($20,000),
and thereafter Buyer's or RRNA's indemnification
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obligation pursuant thereto shall only apply to the excess Damages
over such amount. Neither Buyer nor RRNA shall direct any such third
party to present invoices for Assumed Liabilities to Seller or
Shareholder.
(d) Notwithstanding the foregoing, the limitations in
this Section 7.4 shall not apply to any claim by Seller or Shareholder
for indemnification based on (i) any material breach of any covenant
or agreement of Buyer or RRNA in this Agreement or any Buyer Ancillary
Document, or (ii) any material misrepresentation or material breach of
warranty known to Buyer or RRNA at the time of Closing and not
disclosed to the Seller or Shareholder.
SECTION 7.5. Procedure.
(a) In order for a party (the "indemnified party"), to be
entitled to any indemnification provided for under this Agreement in
respect of, arising out of or involving a claim made by any Person
against the indemnified party (a "Third Party Claim") where the amount
in dispute exceeds Two Thousand Five Hundred Dollars ($2,500), such
indemnified party must notify the indemnifying party in writing of the
Third Party Claim within twenty (20) business days after receipt by
such indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the
indemnifying party can demonstrate actual monetary prejudice as a
direct or indirect result of such failure. Thereafter, the
indemnified party shall deliver to the indemnifying party, within five
(5) business days' after the indemnified party's receipt thereof,
copies of all notices and documents (including court papers) received
by the indemnified party relating to the Third Party Claim.
(b) Subject to Section 7.5(c) below, if a Third Party
Claim is made against an indemnified party, the indemnifying party
will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the
indemnifying party but reasonably satisfactory to the indemnified
party. Should the indemnifying party so elect to assume the defense
of a Third Party Claim, the indemnifying party will not be liable to
the indemnified party for any legal expenses subsequently incurred by
the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall
have the right to participate in the defense
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thereof and to employ counsel, which shall be at its own expense. The
indemnifying party shall be liable for the fees and expenses of
counsel employed by the indemnified party for any period during which
the indemnifying party has not assumed the defense thereof (other than
after the twenty (20)-day period described in Section 7.5(a) if the
indemnified party shall have failed to give notice of the Third Party
Claim). If the indemnifying party chooses to defend or prosecute a
Third Party Claim, all the parties hereto shall cooperate in the
defense or prosecution thereof. Such cooperation shall include the
retention, after reasonable notice of the need therefor and (upon the
indemnifying party's request) the provision to the indemnifying party,
of records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
(c) With respect to any Third Party Claim or set off
against an account receivable by any Person against an indemnified
party where the amount in dispute is equal to or less than Two
Thousand Five Hundred Dollars ($2,500) ("Small Claim"), then the
foregoing provisions of this Section 7.5 shall not apply, and the
indemnified party may investigate and defend and settle such Small
Claim in good faith on a commercially reasonable basis, taking into
account the claimant's relationship to the Company, without the
assistance or approval of the indemnifying party.
(d) In the event that any indemnified party shall have a
claim against any indemnifying party hereunder that does not involve a
Third Party Claim, the indemnified party shall transmit to the
indemnifying party a written notice (the "Indemnity Notice")
describing in reasonable detail the nature of the claim, an estimate
of the amount of damages attributable to such claim to the extent
feasible (which estimate shall not be conclusive of the final amount
of such claim), and the basis of the indemnified party's request for
indemnification under this Agreement. If the indemnifying party does
not notify the indemnified party within thirty (30) days after its
receipt of the Indemnity Notice that the indemnifying party disputes
such claim, the claim specified by the indemnified party in the
Indemnity Notice shall be deemed a liability of the indemnifying party
hereunder.
SECTION 7.6. Right of Offset. Buyer and RRNA shall have
the right to offset against the Buyer Retention any amounts
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due from Seller or Shareholder under this Article VII. In the event of any
disputed claim for indemnification, the amount of such claim shall not be
offset formally prior to resolution of such dispute in accordance with Article
VIII or otherwise, but any such delay in formally offsetting such amount shall
be without prejudice to the extension of the Retention Period as provided in
Section 1.4(c) of this Agreement.
ARTICLE VIII
Alternative Dispute Resolution
SECTION 8.1. Negotiation. In the event that any
controversy or claim between or among the parties (including, without
limitation, any disputed claim for indemnification) should arise out of the
interpretation of or performance under this Agreement for which no method of
resolution is specifically provided elsewhere in this Agreement, the parties
will refrain from initiating any legal or other proceeding until all of the
procedures set forth in this Article VIII have been exhausted. The parties to
the dispute, including officers of each party who are authorized to negotiate
and enter into a settlement on behalf of such party (the "Authorized
Officers"), will meet at least once and will attempt to resolve the matter.
Any party may, by delivery to the other of a written notice of the dispute,
request the other to meet within fifteen (15) days of delivery of such notice,
at a mutually agreed time and place in Cincinnati, Ohio.
SECTION 8.2 Arbitration and Mediation. If the matter has
not been resolved by negotiation within seventy five (75) days of delivery of
the notice described in Section 8.1, the parties shall finally settle such
dispute by binding arbitration conducted expeditiously by a sole arbitrator in
accordance with the then-current Commercial Arbitration Rules (including the
Supplementary Procedures for Large, Complex Disputes) of the American
Arbitration Association (the "AAA"). The place of arbitration shall be
Cincinnati, Ohio, unless some other location is mutually selected. At any time
during the pendency of the arbitration proceeding, either party may make a
request for non-binding mediation in accordance with the then-current
Commercial Mediation Rules of the AAA. Upon the making or receipt of a request
for mediation, the parties, including the Authorized Officers, shall endeavor
to settle the dispute by holding at least one mediation session no later than
forty-five (45) days following delivery of the mediation request.
SECTION 8.3. Extension of Deadlines. All deadlines
specified in this Article VIII may be extended by mutual agreement of the
parties.
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SECTION 8.4. Other Relief; Statutes of Limitations.
Except as otherwise allowed by this Agreement, the procedures specified in this
Article VIII shall be the sole and exclusive procedures for the resolution of
disputes between or among the parties arising out of or relating to this
Agreement; provided, however, that a party may seek a preliminary injunction or
other preliminary judicial relief for the purpose of maintaining the status quo
if in its judgment such action is necessary to avoid irreparable damage.
Despite such action, the parties will continue to participate in good faith in
the procedures specified in this Article VIII. All applicable statutes of
limitation shall be tolled while the procedures specified in this Article VIII
are pending. The parties will take such action, if any, required to effectuate
such tolling. Upon the entry of an award in any arbitration proceeding, the
recipient may file an action in any court of competent jurisdiction for
enforcement of the award.
SECTION 8.5. Costs. The cost of the mediation and
arbitration will be shared equally by the parties to the controversy or claim.
ARTICLE IX
General Provisions
SECTION 9.1. Notices. All notices and other
communications hereunder shall be in writing (including wire, telex, telecopy
or similar writing) and shall be sent, delivered or mailed, addressed, telexed
or telecopied:
(a) if to Buyer or RRNA, to
Rolls-Royce North America, Inc.
11911 Freedom Drive
Reston, Virginia 22090-5602
Attention: General Counsel
Fax: (703) 318-9033
with copies to:
Rolls-Royce plc
P.O. Box 31
Derby DE24 8BJ England
Attention: Mr. J. David Harvey
Fax: 011 44 1332 245315
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and
B.J. Finan
Finance Director
Rolls-Royce
Industrial & Marine Power Limited
Ansty, Coventry CV7 9JR.
England
Fax: 011 44 1203 623407
and
Daniel L. Boeglin, Esq.
Baker & Daniels
300 North Meridian, Suite 2700
Indianapolis, Indiana 46204
Fax: (317) 237-1000
(b) if to Seller or Shareholder, to
Powell Industries, Inc.
8550 Mosley Drive
Houston, Texas 77075
Attention: Mr. J.F. Ahart
Fax: (713) 947-4435
with a copy to:
David M. Washburn, Esq.
Winstead Sechrest & Minick, P.C.
910 Travis
Suite 1700
Houston, Texas 77002
Fax: (713) 951-3800
Each such notice, request or other communication shall be given (i) by hand
delivery, (ii) by telex, with appropriate answerback to be received, (iii) by
nationally recognized courier service or (iv) by telecopy, receipt confirmed by
recipient. Each such notice, request or communication shall be effective (i)
if delivered by hand or by nationally recognized courier service, when
delivered at the address specified in this Section 9.1 (or in accordance with
the latest unrevoked direction from such party) and (ii) if given by telex or
telecopy, when such telex or telecopy is transmitted to the telex or telecopy
number, as the case may be, specified in this Section 9.1 (or in accordance
with the latest unrevoked direction from such party), if confirmation is
received from the recipient of the notice.
SECTION 9.2. Interpretation. When a reference is made in
this Agreement to a Section, Schedule or Exhibit, such reference
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shall be to a Section, Schedule or Exhibit of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." All accounting terms not defined in this
Agreement shall have the meanings determined by generally accepted accounting
principles.
SECTION 9.3. Severability. If any provision of this
Agreement, or the application thereof to any Person, place or circumstances,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable, or void, the remainder of this Agreement and such provisions as
applied to other persons, places, and circumstances shall remain in full force
and effect; provided, however, that in the event that the terms and conditions
of this Agreement are materially altered as a result of this paragraph, the
parties will renegotiate the terms and conditions of this Agreement to resolve
any inequities.
SECTION 9.4. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 9.5. Entire Agreement; No Third Party
Beneficiaries. This Agreement (including the Seller Ancillary Documents, and
Buyer Ancillary Documents and other documents and instruments referred to
herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
person, other than the parties hereto and any other indemnified parties, any
rights or remedies hereunder.
SECTION 9.6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law.
SECTION 9.7. Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that Buyer may assign any part of or all its rights and obligations to
one or more corporations or other entities all or substantially all the capital
stock or equity interests in which are owned by Buyer or any affiliate of Buyer
in which event all the rights and powers of Buyer hereunder shall
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extend to and be enforceable by each such corporation or other entity;
provided, however, that any such assignment shall not release Buyer or RRNA
from its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, enure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 9.8. Merger. The undertakings of the parties
herein that survive the Closing shall continue to be enforceable directly and
shall not be deemed to have been merged into any document or ancillary document
delivered at Closing except as such document expressly indicates an intention
that such merger shall have occurred as respects that document.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ROLLS-ROYCE ACQUISITION CORP.
By: [ILLEGIBLE]
---------------------------------
Printed: [ILLEGIBLE]
----------------------------
Title: V.P. SALES & MARKETING
----------------------------
Attest:
By: [ILLEGIBLE]
--------------------------
Printed: [ILLEGIBLE]
----------------------
Title: Corporate Secretary
----------------------
ROLLS-ROYCE NORTH AMERICA, INC.
By: [ILLEGIBLE]
---------------------------------
Printed: [ILLEGIBLE]
----------------------------
Title: President
----------------------------
Attest:
By: [ILLEGIBLE]
--------------------------
Printed: [ILLEGIBLE]
----------------------
Title: Co-Secretary
----------------------
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U.S. TURBINE CORP.
By: /s/ LARRY D. DAVIS
---------------------------------
Printed: LARRY D. DAVIS
----------------------------
Title: President
----------------------------
POWELL INDUSTRIES, INC.
By: [ILLEGIBLE]
---------------------------------
Printed: [ILLEGIBLE]
----------------------------
Title: Vice President
----------------------------
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LIST OF SCHEDULES AND EXHIBITS
Schedule No. Description
------------ -----------
1.4(a) May 31 Calculation
3.1(h)-1 Owned Property
3.1(h)-2 Leased Property
3.1(i) Inventory
3.1(j) Equipment
3.1(k) Accounts Receivable
3.1(l) Intellectual Property
3.1(n) Contracts
3.1(p) Customer Orders
3.1(s) Employees
3.1(t) Benefit Plans
3.1(u)-1, -2 and -3 Environmental Matters
3.1(v) Tax Audits
3.1(w) Refunds and Rebates
3.1(x) Warranty and Maintenance Obligations
3.1(y) Conflicting Interests
4.16 Specified Inventory Items
4.23 Bonds
Exhibit No. Description
----------- -----------
A Agreed Accounting Principles
1.4(c) Note
3.1(c) Financial Statements
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EXHIBIT 2.2
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (the "First
Amendment") has been entered into this 26th day of July, 1996, by and among
Rolls-Royce North America Inc., a Delaware corporation ("RRNA"), Rolls-Royce
Acquisition Corp., a Delaware corporation ("Buyer"), U.S. Turbine Corp., a
Nevada corporation ("Seller"), and Powell Industries, Inc., a Nevada
corporation and the sole shareholder of Seller ("Shareholder").
Recitals
1. The parties have entered into an Asset Purchase
Agreement, dated June 20, 1996 (the "Original Agreement"), whereby Buyer has
agreed to purchase, and Seller has agreed to sell, substantially all of the
assets of Seller's business.
2. The parties wish to amend the Original Agreement as
set forth herein.
3. Capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Original Agreement.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and in the Original Agreement, the parties agree that the
Original Agreement is hereby amended as follows:
1. Section 1.2(b)(ii)(E) is hereby amended and restated
in its entirety as follows:
"(E) each of the Contracts listed or described on Schedule 1.2(b)
attached hereto;"
2. Schedule 1.2(b), in the form attached hereto, shall
be deemed to be a part of the Original Agreement from and as of the date of
execution of the Original Agreement.
3. A new Section 4.28 is hereby added to the Original
Agreement, which Section 4.28 shall read as follows:
"SECTION 4.28. Subcontracting Services. The parties shall
enter into a subcontract as of the Closing Date in the form attached
hereto as Exhibit 4.28A (the "Subcontract"), pursuant to which Buyer
shall perform services as a subcontractor to Seller under the
Contracts listed or described in Schedule 3.1(bb). Until the fifth
anniversary following completion of all services to be performed by
Buyer under the Subcontract, Seller shall maintain in effect (and
shall remain current in payment of all premiums with respect to)
general liability, excess liability and excess umbrella liability
insurance
2
policies which insure the risks described, and with the aggregate
limit not lower than that specified, on Exhibit 4.28B attached hereto,
and such policies shall also cover services rendered to customers by
or on behalf of Seller before or after the Closing Date. All such
policies shall name Buyer as an additional named insured."
4. Exhibits 4.28A and 4.28B, in the forms attached
hereto, shall be deemed to be a part of the Original Agreement from and as of
the date of execution of the Original Agreement.
5. New subsections 7.1(f) and 7.1(g) are hereby added to
the Original Agreement, which subsections 7.1(f) and 7.1(g) shall read as
follows, and the current subsection 7.1(f) is hereby redesignated as subsection
7.1(h):
"(f) Any liabilities or obligations for special, indirect,
incidental, consequential or similar Damages arising out of or in
connection with the Subcontract or any contract, agreement, warranty
obligation or other commitment of any type of Seller (including,
without limitation, original equipment sales or service contracts,
maintenance contracts, aftermarket contracts, customer service or
supply contracts or engineering services agreements), INCLUDING,
WITHOUT LIMITATION, ANY SUCH DAMAGES THAT MAY BE INCURRED IN
CONNECTION WITH OR AS A RESULT OF ANY NEGLIGENCE ON THE PART OF BUYER
OR ANY OTHER INDEMNIFIED PARTY;
(g) Any liabilities or obligations for special, indirect,
incidental, consequential or similar Damages arising out of or in
connection with the Subcontract or any contract, agreement, warranty
obligation or other commitment of any type of Seller (including,
without limitation, original equipment sales or service contracts,
maintenance contracts, aftermarket contracts, customer service or
supply contracts or engineering services agreements), INCLUDING,
WITHOUT LIMITATION, ANY SUCH DAMAGES THAT MAY BE INCURRED IN
CONNECTION WITH OR AS A RESULT OF ANY RECKLESSNESS ON THE PART OF
BUYER OR ANY OTHER INDEMNIFIED PARTY; and"
6. A new clause (iv) is hereby added to Section 7.3(d)
of the Original Agreement, which clause (iv) shall read as follows:
", or (iv) any Damages described in subsection 7.1(f) or 7.1(g)."
7. A new Section 3.1(bb) is hereby added to the Original
Agreement, which Section 3.1(bb) shall read as follows:
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"(bb) Consequential Losses. Schedule 3.1(bb) sets forth a
true and complete listing and description of all contracts,
agreements, warranty obligations or other commitments of any type of
Seller (including, without limitation, original equipment sales or
service contracts, maintenance contracts, aftermarket contracts,
customer service or supply contracts or engineering services
agreements) which do not specifically exclude liability or obligation
on the part of Seller for special, indirect, incidental, consequential
or similar losses, liabilities, claims, damages or expenses."
8. Schedule 3.1(bb), in the form attached hereto, shall
be deemed to be part of the Original Agreement from and as of the date of
execution of the Original Agreement.
9. Section 1.6 of the Original Agreement is hereby
amended and restated in its entirety as follows:
"SECTION 1.6. Allocation of Purchase Price. $50,000 of the
aggregate consideration payable by Buyer hereunder shall be allocated
to the covenant not to compete set forth in Section 4.15. The
remainder of the aggregate consideration payable by Buyer hereunder
shall be allocated for purposes of Section 1060 of the Internal
Revenue Code of 1986, as amended, in accordance with the fair market
values of the respective Sale Assets. Buyer and Seller hereby agree,
subject to the requirements of Section 1060 of the United States
Internal Revenue Code of 1986, as amended, and the Treasury
Regulations promulgated thereunder, to report consistently, in any tax
return completed or filed by any of them, the sale of the Sale Assets
pursuant to this Agreement in accordance with such allocation."
10. Exhibit A to the Original Agreement is hereby amended
as follows:
(a) A new subsection 2.3(c) shall be added which shall
read as follows:
"The assets shown on Schedule 3.1(j) as acquired in April 1984 were
revalued in April 1984 by Seller. For the purposes of calculating the
net book value of these assets, the acquired book value as set forth
on Schedule 3.1(j) will be deemed the actual cost, which will be
depreciated in accordance with Section 2.2 above."
(b) A new subsection 2.3(d) shall be added which shall
read as follows:
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"The Stated Value of the Owned Property shall not exceed One Hundred
Fifty Two Thousand Dollars ($152,000)."
(c) The first paragraph of Section 3.2 shall be amended
and restated in its entirety to read as follows:
"Inventories are stated at the lower of cost or market value where
cost includes direct costs i.e., actual material cost only plus duty
and freight where applicable. Inventory provisions will be made where
applicable in order to reduce the value of inventories to the lower of
cost or market value. The inventory provisions will include, but not
be limited to, the following:"
(d) The provision relating to "Production Inventory" in
the table in Section 3.2 shall be amended and restated in its entirety to read
as follows:
"100% provision against items deemed not usable in the foreseeable
future in the ordinary course of Seller's business."
(e) The provision associated with "Raw material
inventory" in the table in Section 3.2 shall be amended and restated to read in
its entirety as follows:
"100% provision against items considered to be inactive in the
ordinary course of Seller's business."
(f) The first sentence following the table in Section 3.2
shall be amended and restated to read in its entirety as follows:
"All parts that have been damaged, declared not saleable or
technologically obsolete will have such provisions made as are
necessary to value such items at the lower of cost or net realizable
value."
11. The Owned Property shall be included in the Sale
Assets and shall not constitute part of the Excluded Assets.
12. A new Section 4.29 is hereby added to the Original
Agreement, which Section 4.29 shall read as follows:
"SECTION 4.29. Deferred Maintenance. Buyer has entered into
a letter agreement with American Real Estate Holdings Limited
Partnership ("AREHLP") pursuant to which Buyer has agreed to undertake
certain repairs with respect to the Leased Property included in the
Maineville Real Estate in accordance with the property inspection
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report prepared by Don Schwartz, dated June 26, 1996, a copy of which
previously has been provided to Seller and Shareholder (the "Report").
Seller and Shareholder, jointly and severally, agree to reimburse
Buyer promptly (and, in any event, within fifteen (15) days of receipt
of a request therefor) for fifty percent (50%) of any and all costs
incurred by Buyer in respect of performing or causing to be performed
the repairs or deferred maintenance items listed in the Report;
provided, however, that the maximum amount of reimbursement Seller
and/or Shareholder shall be required to provide hereunder shall be
Fifty-Five Thousand Dollars ($55,000). Such costs incurred by Buyer
shall be adequately supported by Buyer's itemized list of same. To
the extent repairs are made by a third party or materials are
purchased specifically for the purpose of such repairs from a third
party, copies of all such third party invoices or receipts shall
accompany such itemized list. To the extent that repairs are made by
Buyer, Buyer shall include with such itemized list a general
description of the work performed, the costs incurred and the manner
of calculation thereof. However, if any contractor is hired to
perform both repairs covered by the Report and other work not covered
by the Report, Buyer shall require such contractor either to submit
separate invoices or an invoice itemized in sufficient detail to
permit segregation of such items."
13. A new Section 4.30 is hereby added to the Original
Agreement, which Section 4.30 shall read as follows:
"SECTION 4.30. Performance of Obligations Under Lease. As of
the Closing Date, Buyer will become the assignee of the Agreement of
Lease, dated June 7, 1979, between Penske Power Systems, Inc., f/k/a
Turbine Power Systems Co. and American Property Investors IX, which
Agreement of Lease shall have been amended by the Amendment of Lease
by and between AREHLP, as successor to American Property Investors IX,
and Buyer (as amended, the "Lease"). Buyer covenants and agrees with
Seller that it will perform its obligations under the Lease."
14. A new Section 4.31 is hereby added to the Original
Agreement, which Section 4.31 shall read as follows:
"SECTION 4.31. AREHLP Legal Fees. As a condition to
consenting to the assignment and amendment of the Lease, AREHLP has
demanded that the legal fees of its counsel, McCarthy, Fingar,
Donovan, Drazen & Smith, be paid by Buyer and/or Seller. Buyer and
Seller each agree to pay one-half ( 1/2) of such legal fees up to a
maximum of
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Four Thousand Dollars ($4,000) to be payable by each party. The
parties agree that any party that pays such legal fees shall be
entitled to reimbursement from the other for the pro rata share of
such other party, which reimbursement will be made immediately upon
request therefor."
15. The following language shall be added to the end of
Section 7.2(c):
"and any liabilities arising from the termination of any of the
Consulting Agreements listed or described on Schedule 3.1(n)(i)."
16. Except as expressly set forth herein, the Original
Agreement shall not be amended, modified or revised and shall continue in full
force and effect in accordance with the terms and provisions set forth therein.
17. In the event of any irreconcilable inconsistency
between the terms of the Original Agreement and this First Amendment, the terms
of this First Amendment shall control.
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IN WITNESS WHEREOF, the parties have caused this First
Amendment to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ROLLS-ROYCE ACQUISITION CORP. ROLLS-ROYCE NORTH AMERICA, INC.
By: ________________________ By: ___________________________
Printed: ___________________ Printed:_______________________
Title: _____________________ Title: ________________________
U.S. TURBINE CORP. POWELL INDUSTRIES, INC.
By:_________________________ By:____________________________
Printed:____________________ Printed:_______________________
Title:______________________ Title:_________________________
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SCHEDULE 1.2(B)
Additional Excluded Contracts
1. All Contracts (as defined in the Asset Purchase Agreement) listed or
described on Schedule 3.1(bb).
2. Contracts with Stockholders listed on Schedule 3.1(n)(iii).
3. Guaranties listed on Schedule 3.1(n)(iv).
4. Powers of Attorney listed on Schedule 3.1(n)(v).
5. Canadian Chamber of Commerce Group Medical Contract, Aetna Life
Insurance Group 401(k) Plan Contract, and Retiree Medical Plan, each
of which is listed on Schedule 3.1(n)(x).
6. Agency/Representative Contract for Eastern Europe with Business
Development Corp. listed on Schedule 3.1(n)(xv).
7. License Agreement with International Power Technology, Inc. listed on
Schedule 3.1(n)(xvi) and described on Schedule 3.1(l).
8. The Consulting Agreements listed or described on Schedule 3.1(n)(i).
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