AGREEMENT
FOR THE
SALE OF CERTAIN ASSETS OF
ROTARY POWER INTERNATIONAL, INC.,
A DELAWARE CORPORATION
TO ROTARY POWER ENTERPRISE, INC.,
A NEVADA CORPORATION
DATED MAY , 1998
AGREEMENT
THIS AGREEMENT, dated as of May , 1998, between ROTARY POWER ENTERPRISE, a
Nevada Corporation ("Purchaser"), having its principal place of business at
__________________________________________________, and ROTARY POWER
INTERNATIONAL, INC., a Delaware Corporation ("RPI"), having its principal place
of business at Xxx Xxxxxxx Xxxxxx, Xxxx-Xxxxx, XX 00000. RPI and Purchaser are
together referred to in this Agreement as the "Parties".
W I T N E S S E T H
WHEREAS, RPI is engaged in the business of selling engines and
related parts and equipment;
WHEREAS, RPI has certain assets, including but not limited to
intellectual property, licenses, contracts, inventory and manufacturing
capability in the field of natural gas and propane fueled engines, which assets
are part of RPI's natural gas engine business;
WHEREAS, RPI desires to sell to Purchaser, and Purchaser desires to
purchase from RPI certain of the assets of RPI, including all of the assets
employed or used in RPI's natural gas and propane engine business (the "NG
Business"); and
WHEREAS, the Parties intend to effect such acquisition upon the
terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements stated in this Agreement, the Parties agree as follows:
1. Sale of Assets. RPI agrees to sell, convey, transfer, assign, and deliver
to Purchaser, and Purchaser agrees to purchase from RPI, all of its right,
title and interest in the following assets (the "NG Business Assets"):
1.1. The entire right, title and interest in and to RPI's rotary power
natural gas and propane engine business, which includes the
exclusive right to sell Mazda rotor engines modified for natural
gas/propane service in North America (Mexico, USA and Canada) for
all natural gas and propane applications, except passenger
automobiles and minivan applications.
1.2. All right, tit le, and interest in and to the Mazda Agreement
dated April 1, 1997, by and between RPI and Mazda, a copy of which
is attached to this Agreement as Exhibit A.
1.3. All of the assets of RPI listed on Exhibit B attached hereto.
1.4. In addition to the assets listed on Exhibit B, all intangible
assets and financial statements and information used or related to
the operation of the NG Business, including but not limited to
intellectual property, documents, papers, financial statements,
books, advertising, show display materials used by RPI in
conducting said
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business, and all business records relating to the NG Business
including property records, sales records, purchase orders,
customer lists, catalogs and brochures.
1.5. All right, title and interest in and to the Hussmann Agreement
dated October 16, 1995, a copy of which is attached hereto as
Exhibit C, including the transfer of all rights and technical
development of the GRI/Hussmann Contract completed to date,
subject to Hussmann's approval of such assignment.
2. Assets to be Sold Free of All Liabilities. The NG Business Assets
shall be transferred, assigned and conveyed to Purchaser free and clear of
all claims, liabilities, obligations, liens and encumbrances. Purchaser is
not agreeing to assume or pay any accounts payable or other obligation or
liability of RPI (except as specifically set forth in Section 3.2 of this
Agreement), and Purchaser is not agreeing to assume or otherwise perform any
contractual duty or obligation of RPI, except those specific duties and
obligations to be performed under the Mazda Agreement and the Hussmann
Agreement arising after the effective date of Purchaser's acceptance of the
assignment of the Mazda Agreement and the Hussmann Agreement as provided for
in this Agreement.
3. Purchase Price for NG Business Assets. The purchase price of the
NG Business Assets shall be $360,265.00 to be paid as follows:
3.1. $30,000 to be paid to RPI at the time of, and contingent upon, the
full performance and satisfaction of the Closing Contingencies, as
defined below.
3.2. $21,017 to be paid by Purchaser to Mazda and applied against
outstanding invoices (accounts payable balance) issued by Mazda to
RPI for the purchase of four engines. This payment shall be made
at the time of, and contingent upon, the full performance and
satisfaction of the Closing Contingencies.
3.3. $50,000 to be paid upon the assignment and transfer of all of the
NG Business Assets to Purchaser (the date of such assignment and
transfer is referred to in this Agreement as the "Closing" or
"Closing Date").
3.4. $217,000 to be credited to RPI at Closing by forgiveness and
cancellation of an accounts payable balance due from RPI to
PowerCold Corporation ("PowerCold") for the purchase of 60 engines
by RPI. At Closing, PowerCold shall release its outstanding UCC
filings and security interest in the 60 engines sold to RPI and
any other assets of RPI.
3.5. $24,000 to be paid to RPI upon the sale by Purchaser of twelve
(12) finished RPI 65 Series GRI completed engines, with $2,000 to
be remitted by Purchaser to RPI within sixty (60) days following
Purchaser's sale of, and delivery to the buyer of a sales invoice
for, each engine, until the balance shall be paid in full. Any
remaining unpaid balance due to RPI under this subparagraph 3.5
shall become due and payable in full on the later of December 31,
1998, or 180 days following the date of Closing.
3.6. $18,248 to be paid to RPI upon the sale of sixty-four (64) Mazda
13B short block NG engines, with $285 to be remitted by Purchaser
to RPI within sixty (60) days following
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Purchaser's sale of, and delivery to the buyer of a sales invoice
for, each engine, until the balance shall be paid in full.
4. Closing Contingencies. Closing and Purchaser's obligation to make certain of
the payments representing a part of the purchase price for the NG Business
Assets under Sections 3.1 and 3.2 of this Agreement are conditioned and
contingent upon the following (the "Closing Contingencies"):
4.1. Mazda's approval of the assignment of the existing Mazda Agreement
to Purchaser, and the assignment thereof to Purchaser without any
modification or condition except as approved by Purchaser in
writing..
4.2. Mazda's execution and delivery to Purchaser of a new agreement for
natural gas and propane engines, in form and content acceptable to
Purchaser in its sole discretion, and Purchaser's execution and
acceptance of such new agreement.
4.3. Mazda's execution and delivery to Purchaser of an agreement for the
partial staged shipment of one hundred and twenty (120) engines
currently in inventory at Mazda in Flat Rock, Michigan, in form and
content acceptable to Purchaser in its sole discretion, and
Purchaser's execution and acceptance of such agreement.
4.4. Hussmann's approval of the assignment of the existing Hussmann
Agreement dated October 16, 1995 between RPI and Hussmann
Corporation, to Purchaser, and the assignment thereof to Purchaser,
without any modification or condition except as approved by
Purchaser in writing, and said assignment shall include the transfer
to Purchaser of all rights and technical development of the
GRI/Hussmann Contract completed to date.
5. Representations and Warranties of RPI. RPI represents and warrants
to Purchaser that at and as of the Closing Date:
5.1. RPI is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware with all
requisite corporate power to own and operate its properties and to
carry on its business as presently conducted;
5.2. RPI has all requisite corporate power and authority to enter into,
execute and deliver this Agreement, and has taken all necessary
corporate action, including obtaining any required shareholder
and/or lender approvals, to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby;
5.3. RPI has the right to enter into this Agreement and perform all of
its obligations in this Agreement without the consent or approval of
any third parties;
5.4. The NG Business Assets will be sold and transferred to Purchaser at
Closing free and clear of all liens, claims and encumbrances of any
nature whatsoever, and upon such sale and transfer, no creditor of
RPI will have or retain any security or other interest in the NG
Business Assets, or any of them, and no such creditor claim or
interest will be chargeable or enforceable against any of the NG
Business Assets;
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5.5. The NG Business Assets do not constitute all or substantially all of
the assets of RPI;
5.6. RPI and the NG Business Assets are not subject to any bankruptcy,
insolvency or receivership proceedings of any nature whatsoever, and
RPI is not insolvent;
5.7. The transactions contemplated by this Agreement will not violate or
result in a breach of or constitute a default under any provision of
any agreement, charter, bylaw, order, judgment, decree, ordinance,
or regulation to which RPI or its assets are subject or by which RPI
is bound;
5.8. RPI has good and marketable title to the NG Business Assets free and
clear of all claims, liabilities, liens and encumbrances whatsoever,
and has not entered into any contract, arrangement or agreement
providing for the hypothecation, sale, transfer or other disposition
of the NG Business Assets, except this Agreement;
5.9. RPI is not in default in any material respect of its obligations
under the Mazda Agreement or the Hussmann Agreement, except as set
forth on Exhibit D attached hereto, and each of the NG Business
Assets listed on Exhibit B attached hereto are in salable and
merchantable condition without material defects or deficiencies,
latent or otherwise, except as specifically disclosed on Exhibit B;
5.10. There are no judgments, actions or proceedings in any court or
before any federal, state or local administrative agency pending
against RPI relating to or affecting this contemplated transaction
or the NG Business Assets;
5.11. The licensing, distribution and marketing of the 580 Series engines
and the 40 Series engines by Purchaser pursuant to the Engine
Distributor Agreement to be entered into between RPI and Purchaser
has been duly and validly authorized by RPI, does not require the
consent or approval of any third parties, is legally binding upon
and valid and enforceable against RPI, and does not and will not
infringe any rights of any person or entity; and
5.12. Up to and including the Closing Date, RPI has paid or will pay
before same shall become past due all amounts which have accrued or
become payable under the Mazda Agreement and the Hussmann Agreement,
except as specifically provided in this Agreement are to be paid by
Purchaser, and RPI has paid and will pay any and all debts,
obligations, fees and taxes which constitute, or if unpaid would
constitute, a lien on all or any portion of the NG Business Assets.
Purchaser's Representations and Warranties.
6. Purchaser represents and warrants to RPI that at and as of the Closing Date:
6.1. Purchaser is a corporation duly organized and validly existing and
in good standing under the laws of the State of Nevada with all
requisite corporate power to own and operate its properties and to
carry on its business as presently conducted;
6.2. Purchaser has all requisite power and authority to enter into,
execute and deliver this Agreement and has taken all necessary
corporate action, including the obtaining of all
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required Board of Director approvals (if any), to authorize the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby; and
6.3. The transactions contemplated by this Agreement will not violate or
result in a breach of or constitute a default under any provision of
any agreement, charter, bylaw, order, judgment, decree, ordinance,
regulation or any other restriction to which Purchaser is subject or
by which it is bound.
7. Survival of Representations and Warranties. The representations and
warranties made herein shall be effective on and as of the date hereof and on
and as of the Closing Date and shall survive the Closing Date.
8. Covenants.
8.1. RPI's Pre-Closing Covenants. RPI covenants and agrees that up to and
including the Closing Date:
8.1.1. RPI will continue to perform its obligations under the Mazda
Agreement and the Hussmann Agreement, and will use its best efforts
to preserve the good will of its customers, suppliers, independent
contractors and others having business relations with RPI;
8.1.2. RPI will not enter into any material contracts or agreements
outside of the ordinary course of business in connection with the NG
Business;
8.1.3. RPI will not take any action which would render any representation
or warranty made herein materially untrue or incorrect as of such
date;
8.1.4. RPI will cooperate fully with Purchaser, assist Purchaser and act
diligently and in good faith to cause all of the Closing
Contingencies and conditions precedent to Closing under this
Agreement to be satisfied and performed from and after the date of
this Agreement through the Closing Date; and
8.1.5. RPI will comply with any and all applicable bulk sales or similar
laws, including the timely notification of creditors of RPI of the
transactions contemplated by this Agreement, so that the NG Business
Assets can and will be sold and transferred to Purchaser at Closing
free and clear of all liens, claims and encumbrances, including but
not limited to any claim on the part of any creditor of RPI that it
may assert its claim against Purchaser or the NG Business Assets.
8.2. Purchaser's Pre-Closing Covenant. Purchaser covenants and agrees
that up to and including the Closing Date, Purchaser will not take
any action which would render any representation or warranty made
herein materially untrue or incorrect as of said date.
8.3. RPI's Post-Closing Covenants. The parties acknowledge that the
natural gas engine business of RPI is very competitive, and that to
protect the interests of Purchaser, RPI has agreed to abide by and
comply with the restrictive covenants in this Section 8.3.
Accordingly, RPI hereby agrees that, as a material condition of
Purchaser's obligations under this Agreement, and in consideration
of this Agreement and the payment of the
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Purchase Price and other consideration to RPI provided for herein,
RPI from and after the Closing Date, and for a period of ten (10)
years thereafter, will be subject to the following restrictive
covenants:
8.3.1. RPI will not divulge, use, furnish, disclose or make available to
anyone other than Purchaser or its subsidiaries or affiliates, any
Confidential Information. For purposes of this Agreement,
"Confidential Information" shall mean any and all information, data
and knowledge that (i) has been created, discovered, developed or
otherwise become known to RPI, or in which property rights have been
assigned or otherwise conveyed to RPI, which information, data or
knowledge has commercial value in the NG Business. By way of
illustration, but not limitation, Confidential Information includes
trade secrets, business and customers links and relations,
processes, formulas, know-how, improvements, discoveries,
developments, designs, inventions, techniques, marketing plans,
strategies, forecasts, new products, unpublished financial
statements or parts thereof, budgets, projections, licenses, prices,
costs, and employee, customer and supplier lists or parts thereof,
and any information relating to the legal or business affairs of RPI
or any affiliate thereof.
8.3.2. RPI agrees that it shall not make or retain a copy of, nor make or
cause to be made any notes of, any document or recording
incorporating any trade secret or Confidential Information belonging
to or relating to RPI's NG Business, or any of the intellectual
property or other documents comprising part of the NG Business
Assets being sold and transferred to Purchaser under this Agreement.
RPI will not take or possess, or deliver to any other person or
entity, any of the foregoing or any reproduction of any of the
foregoing.
8.3.3. RPI shall not itself, or by through any parent, subsidiary or
affiliate (or in any other relationship or capacity), directly or
indirectly, conduct or engage in the NG Business, and shall not,
directly or indirectly, market, promote, distribute, or sell any
natural gas engines, natural gas engine parts or spare parts, or
enter into any contract, agreement or arrangement to do any of the
foregoing, in the United States, Canada and Mexico.
8.3.4. RPI shall not itself, or by through any parent, subsidiary or
affiliate (or in any other relationship or capacity), directly or
indirectly (i) solicit or induce, or in any manner attempt to
solicit or induce any person employed by, or acting as an agent of
Purchaser or any affiliate of Purchaser to leave the employment or
engagement by Purchaser or any affiliate, or to join another
enterprise or company as an employee or agent; or (ii) divert, or
attempt to divert any person, concern, or entity which is furnished
services by Purchaser or any such affiliate or furnishes services
for or to Purchaser or any such affiliate from doing business with
Purchaser or any such affiliate; or (iii) induce or attempt to
induce any customer or supplier of Purchaser or any affiliate to
cease being a customer or supplier of Purchaser or any affiliate.
8.3.5. If RPI commits a breach of any of the provisions of this Section
8.3, Purchaser shall have the right and remedy to have the
provisions of this Agreement specifically enforced by way of
preliminary and/or permanent injunction by any court having
jurisdiction, it being acknowledged and agreed by RPI and Purchaser
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that any such breach will cause irreparable injury to Purchaser
and that money damages will not provide an adequate remedy to
Purchaser. Such right and remedy shall be in addition to, and not in
lieu of, any other rights and remedies available to Purchaser
under law or in equity.
8.3.6. If any of the covenants or provisions contained in this Section 8.3,
or any subsection or part thereof, is hereafter construed to be
invalid or unenforceable in any respect, the same shall not affect
the remainder of the covenant, covenants or provisions which shall
be given the maximum effect possible without regard to the invalid
portions and the remainder shall then be fully enforceable.
8.3.7. If any of the covenants contained in this Sections 8.3, or any
subsection or part thereof, is held to be unenforceable because of
the duration of such provision or the geographical or
product/business area covered thereby, the parties agree that such
provisions shall be reformed and construed to reduce the duration
and/or area of such provision to the extent necessary for
enforceability and, in its reduced form, said provision shall then
be fully enforceable.
8.3.8. The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in this Section 8.3, upon the courts
of the Commonwealth of Pennsylvania (and the federal courts resident
in such State).
8.3.9. The covenants and provisions of this Article 8 shall survive Closing
under this Agreement. Conditions Precedent to Closing.
9.0 Conditions Precedent to Closing.
9.1. Conditions to Purchaser's Obligations. The obligations of Purchaser
under this Agreement, including but not limited to Purchaser's
obligations to make the payments required under Sections 3.3, 3.4,
3.5 and 3.6 of this Agreement, are conditioned and contingent upon
the satisfaction on or prior to the Closing Date of the following
conditions, any of which may be waived by Purchaser in its sole
discretion, but no such waiver shall be effective unless delivered
in writing to RPI by Purchaser:
9.1.1. RPI shall have performed all obligations and agreements and
complied with all covenants contained in this Agreement to be
performed andcomplied with by it at or prior to the Closing Date;
9.1.2. The representations and warranties of RPI herein contained shall
be true and correct in all material respects on and as of the date
of this Agreement and the Closing Date with the same force and
effect as though made on and as of such date, except as affected
by the transactions contemplated hereby;
9.1.3. RPI shall have executed and delivered to Purchaser that certain
master Engine Distributor Agreement ("Engine Distributor Agreement")
for distribution of the 580 Series NG engines in the form attached
hereto as Exhibit E;
9.1.4. RPI shall have executed and delivered to Purchaser a master Engine
Distributor Agreement for the 40 Series NG engines, in form and
content
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satisfactory to Purchaser, or have amended the Engine Distributor
Agreement to cover the distribution of the 40 Series NG engines by
an amendment in form and content satisfactory to Purchaser;
9.1.5. All of the Closing Contingencies shall have occurred or been
fully satisfied, performed and completed to Purchaser's
satisfaction; and 9.1.6. RPI shall have delivered to Purchaser an
opinion of counsel in form and content reasonably acceptable to
Purchaser.
9.2. Conditions to RPI's Obligation. The obligations of RPI under this
Agreement are conditioned and contingent upon the satisfaction on or
prior to the Closing Date of the following conditions, any of which
may be waived by RPI in its sole discretion, but no such waiver shall
be effective unless delivered in writing to Purchaser by RPI:
9.2.1. Purchaser shall have performed all obligations and agreements
contained in this Agreement to be performed by it prior to the
Closing Date; and
9.2.2. The representations and warranties of Purchaser herein contained
shall be true and correct in all material respects on and as of the
date of this Agreement and the Closing Date with the same force and
effect as though made on and as of such date, except as affected by
transactions contemplated hereby.
10. Closing Date and Closing Procedure.
10.1. Closing. Closing will occur on or before thirty (30) days following
the satisfaction and performance of the Closing Contingencies. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby at Closing shall be performed
through the execution and exchange of executed counterpart documents
and the delivery of funds and other documents either at Purchaser's
counsel's office in Philadelphia, Pennsylvania, or, with Purchaser's
consent, via Federal Express or other courier services. The Closing
Date shall occur no later than _________, 1998, unless otherwise
agreed in writing by Purchaser and RPI.
10.2. RPI's Deliveries at Closing. At the Closing, RPI shall deliver or
cause to be delivered to Purchaser (or any other person or entity
designated by Purchaser) any and all bills of sale, certificates,
assignments or other documents of transfer as shall be necessary or
appropriate, in the opinion of Purchaser's counsel, to vest in
Purchaser or its designee good and marketable title to the NG
Business Assets. Such documents shall be provided by Purchaser to
RPI at or prior to the Closing for RPI's execution, and may be
signed and held in escrow by RPI's or Purchaser's counsel for
delivery at the Closing. As soon as practicable, but in no event
less than five (5) days before the scheduled Closing Date, RPI shall
deliver all of the assets listed on Exhibit B and all documents in
the possession or control of RPI relating to the conduct of the NG
Business, including but not limited to all financial statements,
books, advertising, show display materials and business records to
such place or places specified by Purchaser.
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10.3. Sales Taxes. Purchaser shall pay all sales, use, transfer and
documentary taxes, if any, payable in connection with the sale,
transfer, assignment and delivery of the NG Business Assets to
Purchaser hereunder.
10.4. RPI to Settle Production Parts Accounts Payable Obligation.
Purchaser shall be entitled to be paid on or before the Closing Date
all amounts owed to Purchaser on book account, including but not
limited to the currently due account payable to Purchaser in the
amount of Seventeen Thousand Nine Hundred Seventy-seven Dollars
($17,977).
10.5. RPI to Use Closing Proceeds to Pay Other Creditor Obligations. RPI
shall provide to Purchaser, five (5) days prior to the scheduled
Closing Date and again at Closing, a true, correct and up to date
list of all accounts payable and other amounts owed to all creditors
of RPI. RPI agrees that all amounts to be paid to RPI at Closing by
Purchaser for the NG Business Assets shall be allocated equitably
among and paid to all such listed creditors out of the Closing net
proceeds of the transaction contemplated by this Agreement. In the
event that any such creditor claims are disputed, RPI shall so
notify Purchaser of such dispute, and the Closing net proceeds that
would have been allocated and paid to the holders of such disputed
claims shall be placed in escrow and not distributed or released
until such disputed claims are finally settled or resolved.
11. Additional Rights and Obligations.
11.1. Additional Documentation. Subsequent to Closing, RPI will execute
and deliver from time to time at the request of Purchaser all such
further instruments of transfer and assignment, as may be necessary
in order to vest and confirm in Purchaser title to and the right to
use and enjoy the NG Business Assets hereby agreed to be transferred
and assigned to Purchaser. Purchaser agrees to execute and deliver
from time to time at the request of RPI all such instruments
necessary to effectuate its undertakings hereunder. RPI shall
deliver to Purchaser copies of any and all documents, books,
records, papers, plans, drawings, specifications, patents, licenses,
contracts and other materials as may be necessary or appropriate for
Purchaser to fully market, promote, develop, operate, utilize,
maintain, repair, and service the NG Business Assets acquired under
this Agreement.
11.2. S580 Natural Gas Engine Development Plan. RPI has agreed to
undertake certain research and development to lower the production
cost of the Series 580 natural gas engine, which is intended to
allow Purchaser to distribute, market and sell such engines as a
master distributor under the Engine Distributor Agreement. Purchaser
has agreed to pay to RPI the sum of $25,000 in installments for the
purpose of conducting such research and development, to be paid upon
achievement or performance of certain development milestones as set
forth in Exhibit F attached hereto. RPI shall undertake and perform
the research and development in accordance with Exhibit F, and
Purchaser shall contribute said installments aggregating $25,000, as
provided for in Exhibit F.
11.3. RPI to Assist Purchaser. RPI shall, without charge to Purchaser,
make its key natural gas engineer, Xxxx Xxxx, available to Purchaser
for not less than four (4) hours per week (engineering time) with
regard to the 65 Series NG engine. In addition, RPI shall, without
charge to Purchaser, make its personnel available to Purchaser to
provide
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assistance, training and instruction of Purchaser's personnel with
regard to all aspects of the marketing, sale, operation,
maintenance, repair and servicing of the natural gas engines being
acquired as part of the NG Business or being sold by Purchaser under
the Engine Distributor Agreement. If RPI's personnel are required to
travel off-site to provide any services for Purchaser (other than
warranty work), Purchaser will reimburse RPI for all reasonable
expenses incurred by RPI personnel for travel, meals and lodging.
11.4. Exclusive Right to Distribute RPI Series 580 Natural Gas Engine. RPI
grants Purchaser the exclusive right to distribute, market and sell
(and in certain circumstances manufacture under license) the Series
580 natural gas/propane engine in the territory defined in the
Engine Distributor Agreement for stationary industrial/commercial
applications and oil and gas field applications, except for air
compression applications where air compression is not the primary
load. The distribution terms and conditions are set forth in the
Engine Distributor Agreement attached to this Agreement as Exhibit
E.
11.5. Exclusive Right to Distribute RPI Series 40 Natural Gas Engine. RPI
grants Purchaser the exclusive right to distribute, market and sell
(and in certain circumstances manufacture under license) the Series
40 natural gas/propane engine in the territory defined in the Engine
Distributor Agreement for stationary industrial/commercial
applications and oil and gas field applications, except for air
compression applications where air compression is not the primary
load. The Series 40 NG engines are not currently in production by
RPI. The distribution terms and conditions are set forth in Exhibit
G attached to this Agreement. Upon request of Purchaser, RPI will
enter into an amendment of the Engine Distributor Agreement, or a
separate master engine distribution agreement with Purchaser, for
the distribution and/or manufacture of the Series 40 NG engines.
11.6. PowerCold Interest in Transaction. RPI acknowledges that Purchaser
will be a subsidiary of PowerCold on or before the Closing Date, and
that PowerCold has participated in the negotiation of this
Agreement. RPI and its Board of Directors have independently
evaluated the terms and conditions of this Agreement, and its Board
of Directors has approved this Agreement as being in the best
interests of RPI and further as being on terms and conditions that
are fair and as favorable to RPI as could be obtained from any
independent third party purchaser. RPI further acknowledges and
agrees that the terms and conditions of this Agreement were the
product of extensive negotiations between representatives of RPI and
the Purchaser, and that such negotiations were conducted on an arms
length basis.
11.7. Release. Because of certain disputes and commercial dealings between
RPI and PowerCold preceding the date of this Agreement, the parties
intend that upon entering this Agreement, and as additional
consideration for Purchaser entering into this Agreement, RPI shall
release Purchaser and PowerCold from any and all claims and
liabilities of any nature whatsoever that may have existed prior to
the date of this Agreement. Accordingly, RPI, in consideration of
Purchaser entering into this Agreement, and other good and valuable
consideration, does hereby remise, release and forever discharge
Purchaser, PowerCold, and all of their respective officers,
directors, principals, affiliates, employees, agents and
shareholders (the "Released Parties"), and their respective
successors and assigns, of and from any and all claims,
counterclaims,
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demands, actions, causes of action, suits, debts, dues, accounts,
awards, bonds, covenants, contracts, agreements, judgments, losses,
damages, expenses or liabilities, of any nature whatsoever
(together, the "Claims"), whether at law or in equity, which against
the Released Parties, RPI, or its successors and assigns, or any of
them, now has or hereafter can or may have, for or by reason of or
relating in any way to any cause, matter or thing whatsoever, known
or unknown, relating in any way to the business of RPI, or any
property or assets owned by RPI, or any business dealings or
agreements by and between or among RPI and any one or more of the
Released Parties, or any stock ownership interest held in RPI by any
of the Released Parties, through and including the date of this
Agreement. Notwithstanding anything to the contrary herein, this
Release is not intended to release, and shall have no effect upon,
the obligations of RPI and Purchaser set forth in this Agreement.
RPI covenants that it has not and will not commence or bring any
legal or other proceedings of any nature whatsoever against the
Released Parties or any of them to recover for or enforce any Claim
or Claims, or seek any remedy or relief with respect thereto. The
provisions of this Section 11.6 shall survive termination of, or
Closing under, this Agreement.
12.Indemnification.
12.1. RPI Indemnity. RPI hereby agrees that it shall and shall be liable
to indemnify, defend and hold harmless Purchaser from and against
any and all claims, demands, liens, encumbrances, liabilities,
losses, damages, costs and expenses, including reasonable
attorneys' fees and costs, asserted against or incurred by
Purchaser in connection with (i) any breach of any representation
or warranty, or failure to perform its obligations, under this
Agreement, or (ii) any actual or alleged breach of contract or
negligent or wrongful act or omission by RPI before the Closing
Date regarding the NG Business and/or the NG Business Assets,
including but not limited to a breach of any express or implied
warranties given by RPI to any customers, and this indemnity
paragraph shall survive the Closing for a period of five (5) years
thereafter.
12.2. Purchaser's Indemnity. Purchaser hereby agrees that it shall and
shall be liable to indemnify, defend and hold harmless RPI from and
against any and all claims, demands, liens, encumbrances,
liabilities, losses, damages, costs and expenses, including
reasonable attorneys' fees and costs, asserted against or incurred
by RPI in connection with (i) any breach of any representation or
warranty, or failure to perform its obligations, under this
Agreement, or (ii) any liability of RPI to Mazda or Hussmann
arising, in whole or in part, from the failure of Purchaser to
perform, after the Closing Date, any duty or obligation assumed by
Purchaser as assignee of RPI's interest in the Mazda Agreement or
the Hussmann Agreement, and this indemnity paragraph shall survive
the Closing for a period of five (5) years thereafter.
12.3. Indemnification Procedure. The party seeking indemnification
hereunder (the "Indemnitee") shall give the party obligated to
provide indemnification (the "Indemnitor") prompt written notice of
any claims which may give rise to liability for indemnification
hereunder. The Indemnitor shall have the right to control the
defense or settlement of any such claim and the defense of any
action or proceeding shall be at the sole cost and expense of the
Indemnitor. Should the Indemnitor fail to defend any such action
within a reasonable period of time following receipt of such notice,
then, in
11
addition to any other remedies, the Indemnitee may settle
(provided that no settlement shall be accepted by the Indemnitee
unless ten (10) days prior written notice of the terms thereof and
the right to reject the same, and instead, to undertake such defense
shall have been given to the Indemnitor) or defend such action or
proceeding through legal counsel of the Indemnitee's own choosing
and the amount of such settlement, demand, or any judgment or decree
and all of the costs and expenses of the Indemnitee including
Indemnitee's reasonable legal fees and costs, with respect thereto,
shall be damages hereunder.
12.4. Survival. The provisions of this Section 12 shall survive
termination of, or Closing under, this Agreement.
13. Default. Neither party hereunder shall exercise any right or remedy under
this Agreement for a breach or default of any term or provision of this
Agreement unless such party has first given notice of default to the other
in accordance with the notice provisions of this Agreement, and (i) such
breach or default is not cured or corrected within thirty (30) days after
receipt of such notice, or (ii) in the case of any non-monetary default,
action is not commenced to cure or correct such breach or default within
such thirty (30) day period and diligently pursued until such cure or
correction is completed.
14. Miscellaneous.
14.1. Expenses. Each party hereto shall pay its own expenses of the
transactions contemplated hereby and, in the event this Agreement is
not consummated for any reason, each of the parties shall pay its
own costs and expenses incident hereto, including, without
limitation, the fees and expenses of its respective counsel and
accountants.
14.2. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been given
when delivered in person or by overnight air courier or when
postmarked, if mailed by registered or certified mail, return
receipt requested, postage prepaid, and addressed as follows:
If to RPI:
Xxx Xxxxx, President
ROTARY POWER
INTERNATIONAL, INC.
Xxx Xxxxxxx Xxxxxx
Xxxx-Xxxxx, XX 00000
12
Copy to:
If to Purchaser:
Xxxx Xxxxxx, President
ROTARY POWER
ENTERPRISES, INC.
00 Xxxxxxx Xxxxxx
Xxxx-Xxxxx, XX 00000
Copy to:
Xxxxxxx X. Xxxxxx
Xxxxxxxx Xxxxxxx Chicco
Foxman Oxholm & Xxxxx
0000 Xxxxxx Xxxxxx - 0xx Xxx.
Xxxxxxxxxxxx, XX 00000
and
Xxxxx Xxxxxx, President
PowerCold Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
or such other address as may be specified by the parties hereto
pursuant to notice given to the other party in accordance with the
provisions of this Section.
14.3. Entire Agreement. The exhibits attached to this Agreement are
incorporated into this Agreement. This Agreement and the exhibits,
schedules and documents delivered pursuant hereto, and the Engine
Distributor Agreement to be entered into between the Parties at
Closing, constitute the entire agreement between the parties,
supplanting in their entirety all previous agreements, memoranda,
oral representations and other understandings between or among the
parties, their principals, agents, or employees, and shall not be
construed against or for any party on account of such party having
drafted or not drafted this Agreement or any portion thereof.
14.4. Amendment and Modification. No term or provision of this Agreement
may be amended or modified in any respect except in writing signed
by the parties to this Agreement.
14.5. Successors and Assigns. Unless otherwise stated herein, each and
every representation, warranty, covenant, agreement, indemnification
and provision of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties.
14.6. Governing Law. This Agreement shall be interpreted and governed in
accordance with the laws of the Commonwealth of Pennsylvania.
13
14.7. Waiver. No waiver of any term, provision or condition of this
Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition of this
Agreement.
14.8. Severability. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of
the balance of this Agreement.
14.9. Costs and Fees. In the event that any of the parties hereto
institutes any action, suit or proceeding to enforce the provisions
of this Agreement, or for breach thereof, or to declare the rights
of the parties with respect thereto, the non-prevailing party agrees
to pay the prevailing party's reasonable costs and expenses,
including reasonable attorney's fees and costs incurred in the
furtherance of such action, suit or proceeding.
14.10. Neither Party Agent of the Other. Neither party to this Agreement
shall be the agent of the other, and neither party shall have the
right to bind the other to any agreement or obligation unless such
other party shall agree in writing to be so bound.
14.11. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall
constitute but one agreement.
14.12. No Assignment. Neither party shall have the right to assign this
Agreement or any rights hereunder without the prior written consent
of the other party, such consent not to be unreasonably withheld or
delayed, except that Purchaser shall have the right without RPI's
consent to assign this Agreement to any entity controlled, directly
or indirectly, by PowerCold.
14.13. Limitation of Liability. Neither party shall be liable for any
incidental, indirect, special, or consequential damages, or loss of
revenue or profit, even if it is has been advised of the possibility
of such damage.
14.14. Confidentiality and Non-Disclosure. All information concerning the
terms and business transactions contemplated in this Agreement shall
for all purposes be regarded as strictly confidential and may not be
disclosed except to the Parties, their respective attorneys,
accountants and other professional advisers. Nothing herein shall
prevent disclosure as may be required pursuant to any legal
requirements or the order of any court, or as may be required to
satisfy any Closing Contingencies or conditions precedent to Closing
hereunder. The provisions of this section shall be effective for a
period of one (1) year following the earlier of Closing or the
termination of this Agreement for any reason whatsoever.
15.Arbitration. In the event of any controversy, dispute or claim arising out of
or related to this Agreement, the parties shall negotiate in good faith in an
attempt to reach a mutually acceptable settlement of such dispute. If
negotiations in good faith do not result in a settlement of any such
controversy, dispute or claim, it shall be finally settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, except to the extent deemed modified by the following:
14
15.1. The expenses of the arbitration shall be borne equally by each
party; and each party shall bear its own legal fees and expenses,
except that a party shall be awarded its reasonable attorney's fees
and expenses if an award is rendered by the Arbitrator in its favor.
15.2. The Arbitrator shall determine whether and to what extent any party
shall be entitled to damages under this Agreement. No party shall be
entitled to punitive damages, and each party waives all such rights,
if any.
15.3. Each party shall prepare a submission and proposed finding with such
affidavits, memoranda of law, exhibits and other documents as are
appropriate to support the position taken by such party. The
Arbitrator shall take such evidence in the hearing or request
further submissions that the Arbitrator believes would be necessary
to evaluate the submission or the credibility of the evidence,
provided that the Arbitrator will use reasonable efforts to avoid a
general hearing. The Arbitrator shall select one or the other or the
proposed findings as the final determination of the matter in
controversy. The Arbitrator shall not have the power to add nor
modify any of the terms or conditions of the proposed findings or
this Agreement.
15.4. The Arbitrator's written decision shall be rendered within 60 days
of the submission by both parties, or if the Arbitrator determines
to hold a hearing, then within 60 days of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the
parties as to the matter in dispute. To the extent that the relief
or remedy granted by the Arbitrator is relief or a remedy on which a
court could enter a judgment, a judgment upon the award rendered by
the Arbitrator shall be entered in any court of competent
jurisdiction (unless in the case of an award of damages, the full
amount of the award is paid within 10 days of its determination by
the Arbitrator). Otherwise, the award shall be binding on the
parties in connection with their continuing performance of this
Agreement and in any subsequent arbitration or judicial proceedings
between the parties.
15.5. The arbitration shall take place in Philadelphia, Pennsylvania.
15.6. The arbitration proceeding and all filings, testimony, documents and
information relating to or presented during the arbitration
proceeding shall be disclosed exclusively for the purpose of
facilitating the arbitration process and for no other purpose and
shall be deemed to be confidential.
15.7. Except as otherwise provided herein, the parties shall continue
performing their respective obligations under this Agreement
notwithstanding the existence of a dispute while the dispute is
being resolved unless and until such obligations are terminated or
expire in accordance with the provisions hereof.
15.8. Discovery shall be permitted pursuant to the Pennsylvania Rules of
Civil Procedure. The parties may obtain information including
depositions, interrogatories, production of documents, exchange of
summaries of testimony or exchange of statements of position, and
the Arbitrator shall limit such disclosure to avoid unnecessary
burden to the parties and shall schedule promptly all discovery and
other procedural steps and otherwise assume case management
initiative and control to effect an efficient and expeditious
15
resolution of the dispute. At any oral hearing of evidence in
connection with an arbitration proceeding, each party and its
counsel shall have the right to examine its witnesses and to
cross-examine the witnesses of the other party who testify at the
hearing.
15.9. Notwithstanding the dispute resolution procedures contained in this
Section, either party may apply to any court having jurisdiction (i)
to enforce the Agreement to arbitrate, (ii) to seek provisional
injunctive relief so as to maintain the status quo until the
arbitration award is rendered or the dispute is otherwise resolved,
or (iii) to challenge or vacate any final judgment, award or
decision of the Arbitrator that does not comport with the express
provisions of the Section.
IN WITNESS WHEREOF, the parties have signed this Agreement by their
officers thereunto duly authorized, as of the day and date set forth
above.
ROTARY POWER INTERNATIONAL, INC.
By:
-------------------------------
Xxx Xxxxx, President
ROTARY POWER ENTERPRISE, INC.
By:
-------------------------------
Xxxx Xxxxxx, President
16
EXHIBIT A
Mazda Agreement
17
EXHIBIT B
MAZDA Engines and Parts Inventory
NATURAL GAS ENGINE INVENTORY SUMMARY
(12) RPI 65 Series GRI completed engines
(01) RPI 65 Series Show model engine
(44) Mazda 00X Xxxxx Xxxxxx in sealed cartons
(10) Mazda 00X Xxxxx Xxxxxx in opened cartons
(04) Mazda 00X Xxxxx Xxxxxx work in process
(02) Mazda 13B Short Blocks test in process
(All) Natural gas production parts located in Natural Gas production
storage cage currently valued at $33,188 per RPI September 23, 1997
inventory list
(All) Spare parts inventory
(03) Damaged Mazda Short Blocks in opened cartons
PRODUCTION TOOLS
Tooling i.e. - Exhaust manifold, intake adapter, intake collector, "S" Tube,
oil filter bracket, etc.
Pallet Racks dependent on availability
Five (5) Engine Assembly Stands
Parts Shelves and Fencing
Engine Timing Tool
Belt Tension Testers
Mazda Compression Tester to be located
Timing Light
Torque Wrench to be located
One (1) Xxxxxx Cabinet with production hardware
Office Equipment for (4) Office Suits
18
MAZDA Engines and Parts Inventory- (con't)
INTELLECTUAL PROPERTY
N.G. Engineering Drawings
N.G. Bills of Materials
N.G. Vendor Lists
N.G. Copies of Vendors Purchase Orders
N.G. Engineering Samples and Components
N.G. Manufacturing Assembly Instructions
N.G. Manufacturing Test Instructions
N.G. All Previous Engines Test Reports
N.G. GRI Test Reports
19
EXHIBIT C
Hussmann Agreement
20
EXHIBIT D
Defaults Under Mazda and/or Hussmann Agreements
21
EXHIBIT E
Engine Distributor Agreement
22
EXHIBIT F
S580 Natural Gas Development Plan
RPI shall undertake and perform the following development plan for Natural Gas
Engines:
Est. Date Item Description
-------------------------------------------------------------------------------------------------------------------------------
5/15/98 1.a. Locate parts in house for Mk 0 NGRE engine; intake manifolds, rotor castings, housings, etc. for 1st engine
-------------------------------------------------------------------------------------------------------------------------------
5/30/98 1.b. Identify sources and suppliers of Mk 0 NGRE parts for 2nd engine
-------------------------------------------------------------------------------------------------------------------------------
5/30/98 1.c. Define production schedule for completion of 2 Mk 0 NGRE engines
-------------------------------------------------------------------------------------------------------------------------------
2.a. Complete 1st engine
-------------------------------------------------------------------------------------------------------------------------------
2.b. Complete 2nd engine
-------------------------------------------------------------------------------------------------------------------------------
7/1/98 3.a. Install 1st engine on NGRE test stand
-------------------------------------------------------------------------------------------------------------------------------
3.b. Run tip seal design alternatives: gopalite vs ceramic, unitary ceramic vs 3 pc ceramic
-------------------------------------------------------------------------------------------------------------------------------
3.c. Refine and tune carburation and ignition parameters
-------------------------------------------------------------------------------------------------------------------------------
3.d. Test 2nd engine on test stand
-------------------------------------------------------------------------------------------------------------------------------
4.a. Tear down 1st engine and inspect for end housing wear
-------------------------------------------------------------------------------------------------------------------------------
4.b. Tear down 2nd engine and inspect for end housing wear, if necessary
-------------------------------------------------------------------------------------------------------------------------------
9/30/98 4.c. Reassemble both engines, run final tests
-------------------------------------------------------------------------------------------------------------------------------
Purchaser will contribute $25,000 toward this test program on a milestone basis
as follows:
Item Payment
----------------------------------
1.c. $10,000
----------------------------------
2.b. $5,000
----------------------------------
3.d. $5,000
----------------------------------
4.c. $5,000
----------------------------------
RPI will undertake a Value Improvement Program (VIP) to reduce the cost of the
S580 NGRE rotors from $20,000 to $7,500 (a target cost, not a contractual
obligation). Purchaser will contribute $25,000 toward this VIP on a milestone
basis to be defined.
23
EXHIBIT G
Master Distributor Agreement for Series 40 NGRE Engines
1. RPI is not in production with the Series 40 engine and has not currently
defined a plan for the production of this engine.
2. If RPI does define a plan for the production of Series 40 NGRE engines, and
such plan calls for outside production of these engines by an unrelated third
party, then RPI will offer Purchaser the opportunity to manufacture these
engines under the same terms and conditions as the first party, on a first
right of refusal basis. Since engine manufacture is a capital-intensive
business, Purchaser will have to demonstrate sufficient financial strength to
fund economic build quantities and to provide a satisfactory build plan for
these engines. Purchaser will also have to accept the rights of failure to
meet acceptable manufacturing volumes and pricing requirements as defined in
the Engine Distributor Agreement for S580 NGRE engines, and accept the
necessary computer systems and quality control standards allowing integration
into the planned RPI systems and according to RPI's quality and warranty
standards.
3. Purchaser will have 90 days to respond to the proposal, after which the first
right of refusal will expire and the contract will go to the first party.
4. If RPI produces, either in house or through third parties, the Series 40 NGRE
engine, then RPI will negotiate with Purchaser, in good faith, a Master
Distributor Agreement for Series 40 NGRE engines for those markets and
territories served by Purchaser under any existing Series 580 NGRE
distribution agreement in good standing.
24
