STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 7th day of January, 1999, by and among
the person(s) identified on the signature pages of this Agreement as the
shareholder(s) (the "Shareholders") of McLaren Engines, Inc., a Delaware
Corporation ("McLaren") and ASHA Corporation, a Delaware corporation (the
"Buyer").
PREMISES
A. McLaren is a Delaware corporation and is engaged in the business of
developing, testing, manufacturing and selling high performance engines and
other automotive equipment (the "Business") at 00000 Xxxx Xxxxx Xxxx Xxxx,
Xxxxxxx, Xxxxxxxx 00000 (the "Premises").
B. The Shareholders presently own all of McLaren's issued and outstanding
capital stock, being 1,000 shares of voting common stock having a par value of
$1.00 per share ("McLaren Common Stock"). Buyer desires to purchase from
Shareholders, and Shareholders desire to sell to Buyer, all of the issued and
outstanding McLaren Common Stock (the "Purchased Shares") on the terms and
subject to the conditions of this Agreement.
C. Xx. Xxxxx X. XxXxx (the "Executive") is McLaren's chief operating officer
and is the controlling shareholder of McLaren as a result of a merger of a
company controlled by the Executive with McLaren. To accomplish the merger,
the Buyer agreed to loan and McLaren agreed to borrow $1,355,000 from the
Buyer pursuant to the terms and conditions of a Loan Agreement and a
Promissory Note dated as of January 5, 1999, each of which are, and this
Agreement is, subject to the express condition following the loan that the
purchase and sale transaction contemplated herein and acquisition by Buyer of
the Purchased Shares will occur and close automatically upon the tender of
consideration to the Shareholders and escrow thereof by Buyer.
D. Buyer is further induced by and is willing to purchase the Purchased
Shares from Shareholders, upon the express condition that the Executive agree
to execute, be employed by and carry out the obligations under an Employment
Agreement with McLaren in substantially the form set forth in Exhibit A
attached hereto (the "Employment Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the terms and
conditions set forth in this Agreement, each of the Shareholders, McLaren and
Buyer hereby agree as follows:
1. AGREEMENT OF PURCHASE AND SALE OF THE PURCHASED SHARES. On the terms and
subject to the conditions set forth in this Agreement, Shareholders agree to
sell, assign, transfer, set over, convey, and deliver to Buyer on the Closing
Date (as defined below) the Purchased Shares, free, clear, and discharged of
and from any and all Encumbrances (as defined below), and Buyer agrees to
purchase the Purchased Shares from Shareholders.
2. PURCHASE PRICE FOR PURCHASED SHARES.
2.1 Purchase Price. The consideration Buyer will pay to the Shareholders
for the Purchased Shares (the "Purchase Price") at the Closing shall be
150,000 shares of common stock of ASHA Corporation, which shall be restricted
as to transfer by the Shareholders pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended.
2.2 Payment of the Purchase Price. The Purchase Price shall be tendered
by Buyer to an escrow for the benefit of Shareholders (hereinafter "McLaren
Escrow") on the Closing Date by delivery of ASHA Corporation common stock
certificates to the McLaren Escrow registered respectively in the names of
each selling Shareholder as set forth in Schedule 2.2 against receipt of all
of the certificates representing the Purchased Shares of McLaren duly endorsed
for transfer or accompanied by duly executed stock powers. The McLaren Escrow
shall be established by and subject to the terms of that certain Escrow
Agreement attached hereto as Exhibit B.
3. OTHER AGREEMENTS. At the Closing, Executive shall execute and deliver to
Buyer the Employment Agreement, and the Executive on behalf of all of the
Shareholders and the Buyer shall execute the Escrow Agreement.
4. PRECLOSING ACTIONS. From the date hereof until the Closing:
4.1 Conduct of Business. Shareholders shall cause McLaren to carry on
and conduct the Business only in the ordinary course consistent with past
practice, without any change in the policies, practices, and methods McLaren
pursued before the date of this Agreement. Shareholders will use their best
efforts and cause McLaren to use its best efforts to preserve the Business
organization intact; to preserve the relationships with McLaren's customers,
suppliers, and others having business dealings with McLaren; and to preserve
the services of McLaren's employees, agents, and representatives. Without
limitation of the foregoing (a) Shareholders will cause McLaren not to
undertake without Buyer's prior written consent any action that, if taken
prior to the date of this Agreement, would be required to be disclosed on the
schedules attached hereto and (b) Shareholders will cause McLaren not to alter
the physical contents or character of any of its inventories in a way that
affects the nature of the Business or results in a change in the total dollar
valuation of the inventories or otherwise take action or refrain from taking
action that would result in any change in McLaren's assets or liabilities,
other than in the ordinary course of business (subject to the merger
transaction referenced above) consistent with past practices.
4.2 Access to Buyer. From the date of this Agreement through the
Closing, Executive shall provide to Buyer reasonable access to McLaren to
conduct a review of McLaren's business, financial, accounting, and legal
condition. No such investigation by Buyer or its representatives shall affect
the representations and warranties of Shareholders or Buyer's reliance on
them.
4.3 Accuracy of Representations and Warranties and Satisfaction of
Conditions. Executive will immediately advise Buyer in writing if (a) any of
the representations or warranties of Shareholders is untrue or incorrect in
any material respect, or (b) Shareholders become aware of the occurrence of
any event or state of facts that results in any of the representations and
warranties of Shareholders being untrue or incorrect as if Shareholders were
then making them. Shareholders will not take any action, or omit to take any
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action, and shall cause McLaren not to take any action, or omit to take any
action, that would result in any of Shareholders' representations and
warranties set forth in this Agreement to be untrue or incorrect as of the
Closing Date. Shareholders will use their best efforts to cause all conditions
set forth in Section 5 that are within their control to be satisfied as
promptly as practicable under the circumstances.
5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's obligation to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment (or waiver by Buyer) before or at the Closing of each of the
following conditions:
5.1 Accuracy of Representations and Warranties. The representations and
warranties of Shareholders contained in this Agreement and all related
documents shall be true and correct at and as of the Closing Date as though
such representations and warranties were made on that date.
5.2 Performance of Covenants. Shareholders shall have in all respects
performed and complied with all covenants, agreements, and conditions that
this Agreement requires, and with all other related documents to be performed
or complied with prior to or on the Closing Date. The Executive shall have
executed and delivered the Employment Agreement.
5.3 Satisfactory Due Diligence Review. Buyer shall have conducted a
review reasonably satisfactory to Buyer of the business, financial,
accounting, and legal aspects of McLaren, the Business, and any relevant
assets and liabilities.
5.4 No Casualty. Prior to the Closing Date, McLaren shall not have
incurred or be threatened with any damage, liability or casualty that would
materially impair the value of its assets.
5.5 Share Certificates. Shareholders shall have delivered to Buyer
certificates representing all of the Purchased Shares registered in the name
of, and held by Buyer under the terms of the Escrow Agreement, without any
restrictive legend, together with such instruments and items that shall
permit, in the reasonable opinion of Buyer's counsel, the sale and transfer of
such shares free, clear, and discharged of any legend or Encumbrance. The
certificates shall be duly endorsed in blank or with accompanying stock powers
or assignments duly signed. Shareholders shall also deliver to Buyer such
other instruments or documents that shall, in the reasonable opinion of the
Buyer's counsel, be reasonably required to vest good and marketable title in
Buyer to the Purchased Shares free, clear, and discharged of any and all
legends, liens and Encumbrances.
5.6 No Litigation. No action, suit, proceeding, or investigation shall
have been instituted before any court or governmental body, or instituted by
any governmental agency, to restrain or prevent the carrying out of the
transactions contemplated by this Agreement or that might affect Buyer's right
to own, operate, and control the Purchased Shares or the Business after the
Closing Date.
5.7 Lien Search. Buyer has received UCC lien searches in form and
content satisfactory to Buyer.
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5.8 Resignations. Each director and officer of McLaren shall have
delivered to the Executive and Buyer in form and content satisfactory to Buyer
resignations from their positions and any other positions held in, or by
appointment by or from, McLaren. Following the Closing, Buyer shall nominate
and appoint Executive as a Director of ASHA Corporation and McLaren and as the
President and Chief Operating Officer of McLaren pursuant to the terms of the
Employment Agreement. Buyer shall also appoint other directors and officers
of McLaren reasonably satisfactory to Executive following the Closing, subject
to compliance with Buyer's ongoing employment policies, terms and conditions.
5.9 Other Documents and Instruments. Buyer shall have received any other
documents and instruments as it may reasonably request.
5.10 Approvals by Buyer's Counsel. Buyer's counsel shall have reasonably
approved all legal matters and the form and substance of all documents Buyer
or McLaren is to deliver at the Closing.
6. CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS. Shareholders'
obligations to consummate the transactions contemplated by this Agreement are
subject to the fulfillment of each of the following conditions before or at
the Closing Date:
6.1 Accuracy of Representations and Warranties. Buyer's representations
and warranties contained in this Agreement and all related documents shall be
true and correct at and as of the Closing Date as though such representations
and warranties were made at that time.
6.2 Performance of Covenants. Buyer shall have in all respects performed
and complied with all covenants, agreements, and conditions required by this
Agreement and all related documents that must be performed or complied with
before and at the Closing Date.
7. CLOSING MATTERS.
7.1 Closing. The closing of the transactions contemplated in this
Agreement (the "Closing") shall take place automatically effective as of
January 7, 1999 upon notification in writing by Buyer to Executive that Buyer
has placed the Purchase Price in escrow for the benefit of Shareholders
pursuant to the terms of the McLaren Escrow, which such notification shall
take place on or before January 15, 1999.
7.2 Further Assurances. Shareholders shall cooperate with and assist
Buyer and take all other reasonable actions to ensure a smooth transition of
McLaren to Buyer. From time to time after the Closing Date, Shareholders
shall, at the request of Buyer, execute and deliver additional conveyances,
transfers, documents, instruments, assignments, applications, certifications,
papers, and other assurances that Buyer requests as necessary, appropriate,
convenient, useful, or desirable to effectively carry out this Agreement's
intent and to transfer the Purchased Shares to Buyer.
8. Representations and Warranties of McLaren and Executive. Executive and
McLaren hereby represent and warrant, as follows:
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8.1 Organization and Good Standing of McLaren. McLaren is a corporation
duly organized and existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to carry on its
business as now conducted, to own and to hold the properties used in
connection therewith, to enter into this Agreement and to consummate the
transactions contemplated herein. McLaren is duly licensed or qualified and
in good standing as a foreign corporation in each jurisdiction wherein the
business conducted by it or the character of the properties owned or leased by
it makes such licensing or qualification necessary, except where the failure
to be so qualified would not have a material adverse effect on McLaren.
8.2 Capitalization of McLaren. McLaren's authorized capitalization
consists of One Thousand (1,000) shares of voting common stock, par value
$1.00, of which a total of One Thousand (1,000) shares were issued and
outstanding as of the date hereof. Except as may be anticipated by this
Agreement, there is no other class of common stock nor any preferred stock of
McLaren authorized, issued or outstanding. All such issued and outstanding
shares of common stock have been validly issued, are fully paid and non-
assessable, and were issued in compliance with the provisions of all
applicable federal and state securities laws. Except as set forth on Schedule
8.2, there are no outstanding subscriptions, options, rights, warrants,
securities convertible into or other agreements or commitments obligating
McLaren to sell or issue any additional shares of its capital stock, or any
securities convertible into any shares of its capital stock. Except as set
forth on Schedule 8.2, there are no preemptive rights of shareholders of
McLaren with respect to the issuance or sale of any shares or other
securities. Except as disclosed on Schedule 8.2, McLaren is not a party to
any agreements with any of its shareholders, nor is it aware, after due
inquiry, of any such agreements among its shareholders, with respect to the
voting of or transfer of shares of its capital stock, including agreements for
rights of first refusal or rights of first offer.
8.3 Subsidiaries. Except as set forth on Schedule 8.3, McLaren does not
own, directly or indirectly, any interest in any corporation or other business
entity.
8.4 Financial Statements. McLaren's financial statements as of November
30, 1998 are set forth as Exhibit C (collectively, the "Financial
Statements"). Except as disclosed on Schedule 8.4, the Financial Statements
have been prepared in all material respects in accordance with generally
accepted accounting principles consistently applied, and fairly represent the
financial position of McLaren at the dates indicated thereon and the results
of McLaren's operations for the periods then ended in all material respects.
(a) Except as disclosed on Schedule 8.4, all material liabilities
at the close of business on November 30, 1998 are reflected on the Financial
Statements which would be required to be disclosed therein under generally
accepted accounting principles. Except as disclosed on Schedule 8.4, there are
no contingent liabilities which would be required to be noted on the Financial
Statements under generally accepted accounting principles.
(b) Except as reflected on the Financial Statements, the notes
thereto or on Schedule 8.4, McLaren owns outright all assets and properties
reflected thereon or acquired by it after the date of the Financial
Statements, in each case free and clear of all material mortgages, liens,
charges or encumbrances whatsoever.
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8.5 Intellectual Property. Except as disclosed on Schedule 8.5, McLaren
owns or possesses adequate licenses and other rights to all patents, trade
secrets, trademarks, trade names, service marks, know-how and copyrights or
other intellectual property necessary to carry on its business as presently
conducted without any infringement of or conflict with the rights of others,
except where the failure to do so would not have a material adverse effect on
the business of McLaren.
A list of all patents and patent licenses owned or used by McLaren
in connection with its engine design and development business (other than
commonly available software products) is attached hereto in Schedule 8.5. A
list of all trademarks, trade names and service marks owned or used by McLaren
in connection with its engine design and development business (other than
commonly available software products) is included in Schedule 8.5. All
agreements pursuant to which McLaren has agreed (i) to pay royalty, license or
similar fees for the use of intellectual property listed in Schedule 8.5 or
(ii) to license or assign intellectual property listed on Schedule 8.5 to
third parties are identified and described on Schedule 8.5.
8.6 Material Contracts. Except as set forth on Schedule 8.6, McLaren
has no currently existing contract, obligation or commitment of a material
nature (other than those relating to intellectual property identified on
Schedules 8.5)not cancelable upon thirty days' notice or less or which involve
payments of more than $10,000, including without limitation the following:
(a) employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, stock bonus, retirement, stock option, stock
purchase, phantom stock or similar plans;
(b) loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any property of McLaren, or any agreement or instrument
evidencing any guaranty by McLaren of payment or performance of any obligation
by any other person;
(c) agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
(d) agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including without limitation agreements with processors and subcontractors;
(f) any indenture, agreement or other document relating to the sale
or purchase of securities;
(g) any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which McLaren is a party;
(h) agreements limiting the freedom of McLaren to compete in any
line of business or in any geographic area in the world or with any person;
(i) agreements providing for disposition of the business, assets or
shares of McLaren, agreements of merger or consolidation to which McLaren is a
party or letters of intent with respect to the foregoing;
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(j) agreements involving, or letters of intent with respect to, the
acquisition of the business, assets or shares of any other entity; and
(k) any agreement granting or agreeing to grant licenses to use any
existing or hereafter acquired patent, know-how, or trade secrets of McLaren.
8.7 Compliance with Contractual Obligations, Laws and Regulations.
Except as set forth on Schedule 8.7, McLaren has complied with all material
provisions of the agreements identified on Schedules 8.5 and 8.6 and has
received no notice of the existence of any defaults under such agreements.
McLaren is in material compliance with all laws, rules, ordinances and
regulations applicable to them, except environmental laws, rules, ordinances
and regulations, which is the subject of a different representation herein,
the failure to comply with which would have a material adverse effect on
McLaren.
8.8 Litigation. Except as disclosed on Schedule 8.8, There are no
actions, claims, suits, proceedings, or investigations pending or threatened
by or against McLaren or threatened by or against any of the officers or
directors of McLaren in connection with the business of McLaren. There are no
defaults with respect to any order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality.
8.9 Violation of Other Instruments. The execution and delivery of this
Agreement has been duly authorized by all necessary corporate action, and this
Agreement constitutes a valid and binding obligation of McLaren enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, moratorium, or similar laws relating to the
enforcement of creditor's rights and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law or in equity). Except as disclosed on Schedule 8.9, the execution and
performance of this Agreement by McLaren does not violate any provision of law
or any judgment, order, writ, decree or government regulation and does not
conflict with or result in any breach of any of the provisions of the Articles
of Incorporation or the By-Laws of McLaren, nor do the same conflict with or
result in any breach of any of the provisions of, or constitute a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties, assets or outstanding stock of McLaren
under any indenture, mortgage, lease, agreement or other instrument to which
McLaren is a party or by which it or any of its property is bound or affected,
the results of which would have a material adverse effect on McLaren.
8.10 No Adverse Changes. Except as set forth in Schedule 8.10, since
the date of the Financial Statements, McLaren has not:
(a) incurred, discharged or satisfied any debts, obligations or
liabilities, whether absolute, accrued, contingent or otherwise, except for
the routine incurrence, discharge or satisfaction of (i) current liabilities
in the ordinary course of business; or (ii) obligations under contracts
entered into in the ordinary course of business;
(b) declared or made any dividend or other payment or distribution
to its shareholders as such, or purchased or redeemed any of its securities;
(c) sold, leased or otherwise disposed of any of its assets except
routine dispositions made in the ordinary course of business;
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(d) suffered any material physical damage, destruction or loss
(whether or not covered by insurance);
(e) encountered any labor difficulties or labor union organizing
activities;
(f) made or granted any increases in wages or salaries or in
employee benefits, except for routine increases that were made in the ordinary
course of business and were consistent with past practice;
(g) entered into any transaction other than in the ordinary course
of business;
(h) suffered or experienced any change in, or event or condition
affecting, its business, assets, liabilities, condition (financial or
otherwise), affairs or operations other than changes, events or conditions in
the ordinary course of business, any of which (either when taken by itself or
when taken in conjunction with all such other changes, events or conditions)
has been materially adverse; or
(i) mortgaged, pledged, or subjected to any lien, charge or any
other encumbrance, any of its assets, tangible or intangible.
8.11 Authorization. The issuance, sale and delivery of the Purchased
Shares to Buyer have been, or will have been as of the Closing Date, duly
authorized by all requisite corporate action, and the Purchased Shares, when
issued, sold and delivered against payment of the purchase price therefor,
shall be validly issued and outstanding, fully paid and non-assessable, and
shall not be subject to any preemptive rights or rights of first refusal or
first offer in favor of any other person, except as set forth in Schedule 8.2.
8.12 Title to Assets. Except as set forth on Schedule 8.12, McLaren has
good and marketable title to the assets reflected on the Financial Statements
(other than those since disposed of in the ordinary course of business), free
and clear of all security interests, charges and other encumbrances, except
(i) liens for taxes not yet due and payable, and (ii) encumbrances that are
incidental to the conduct of its business or its ownership of property, not
incurred in connection with the borrowing of money or the obtaining of credit
and which do not in the aggregate materially detract from the value of the
assets affected thereby or materially impair the use thereof by McLaren.
8.13 Tax Matters. All required tax returns of McLaren are true and
correct in all material respects and have been duly and timely filed, and all
taxes required to be paid with respect to the periods or transactions covered
by such returns have been duly and timely paid. McLaren is not delinquent in
the payment of any tax, assessment or governmental charge, has not had any tax
deficiency proposed or assessed against them, and has not executed any waiver
still in effect of any statute of limitations on the assessment or collection
of any tax. Except as set forth in Schedule 8.13, none of the federal or
state income tax returns or state franchise tax returns of McLaren have ever
been audited by governmental authorities at any time during the last three
years and no other audits are open as of the date of this Agreement. There is
no pending deficiency assessment or proposed adjustment of McLaren's taxes.
8.14 Officers and Directors. The officers, directors and shareholders
of McLaren on the date of this Agreement are set forth on Schedule 8.14.
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8.15 Corporate Records. Copies of the Articles of Incorporation, all
Amendments thereto, the By-Laws and any Minutes of the Directors, Shareholders
and Executive Committee, if any, of McLaren are contained in the Minute Books
of McLaren and are true and correct in the forms previously disclosed to
Buyer.
8.16 Employees and Employee Benefit Plans. Except as set forth on
Schedule 8.16:
(a) Executive is not aware that any key employee of McLaren has any
plans to terminate employment with McLaren.
(b) Neither McLaren nor to Executive's knowledge any of its
employees is subject to any non-compete, nondisclosure, confidentiality,
employment, consulting or similar agreement with any person or entity other
than McLaren relating to the present or proposed business activities of
McLaren.
(c) Each of the key employees of McLaren is able to work without
legal restriction by contract or otherwise and without violation of unfair
competition or secrecy laws. Each of the employees of McLaren listed on
Schedule 8.16 attached hereto has executed a nondisclosure agreement
prohibiting the disclosure of automotive technology and manufacture know-how
to third parties without the consent of McLaren.
(d) Except as set forth on Schedule 8.16, McLaren does not presently
maintain or contribute to, or ever has maintained or contributed to during the
last five (5) years, any "employee benefit plan," as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to which McLaren is required to file Internal Revenue
Service Form 5500, and McLaren does not presently contribute to or ever has
contributed to any "multi-employer plan" as such term is defined in Section 3
of ERISA.
(e) With respect to each employee benefit plan listed on Schedule
8.16, all contributions required by law to have been made under any such plan
to any fund, trust or account established thereunder or in connection
therewith have been made by the due date thereof and each plan is properly
funded to extent required by its terms and section 412 of the Code.
8.17 Securities Laws. No registration in connection with the issuance of
the Purchased Shares is required under the Securities Act of 1933, as amended,
(the "Act") or any other applicable federal or state securities laws.
8.18 Governmental Consents. No consent, approval or authorization of or
designation, declaration or filing with any federal or state governmental
authority on the part of McLaren is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of
the Shares, or the consummation of any other transaction contemplated hereby.
8.19 Certain Transactions. Except as disclosed on Schedule 8.19 and on
the Financial Statements, McLaren is not indebted, directly or indirectly, to
any of its officers, directors or shareholders or to their respective
Affiliates, as hereinafter defined, and none of such officers, directors,
shareholders or Affiliates is indebted to McLaren. McLaren is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation
other than certain obligations disclosed on Schedule 8.19. No officer or
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director of McLaren, or, to the best knowledge of McLaren, shareholder of
McLaren and no Affiliate of any such officer, director or shareholder has any
direct or indirect ownership interest in any entity with which McLaren is
affiliated or with which McLaren has a material business relationship, or
which competes with McLaren, other than the ownership of publicly traded
stock. Except as disclosed on Schedule 8.19, no officer, director,
shareholder or any Affiliate thereof is, directly or indirectly, interested in
any material contract with McLaren. An "Affiliate" of an officer, director or
shareholder of McLaren shall mean, with respect to an entity, the ownership of
over 50% of the voting stock or interests therein, and, with respect to an
individual, a member of such individual's immediate family.
8.20 Insurance. Except as disclosed on Schedule 8.20, (a)all policies
and binders of insurance for professional liability, directors and officers,
property and casualty, fire liability, workers' compensation and other
customary matters held by or on behalf of McLaren, all of which have been made
available to Buyer; (b) all of said policies are in full force and effect and
McLaren is not in default with respect to any material provision contained in
any such policy; and (c) McLaren has not failed to give any notice of claim
under any such policy in due and timely fashion, nor has any coverage for
current claims been denied.
8.21 Environmental Matters. Except as disclosed on Schedule 8.21
attached hereto, there are no Hazardous Substances in, on or beneath the
surface of any real property owned, leased or used by McLaren, including the
Premises or in or on any improvements located on the Premises, except such
Hazardous Substances the presence of which would not have a material adverse
effect on the business of McLaren. The term "Hazardous Substance" means any
material: (i) the presence of which requires investigation or remediation
under any federal, state or local statute, regulation, ordinance, order,
action policy or common law; or (ii) which is defined as a "hazardous waste,"
"hazardous substance," pollutant or contaminant under any federal, state or
local statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. section 9601 et seq.) and or the Resource
Conservation and Recovery Act (42 U.S.C. section 6901 et seq.); or (iii) which
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated by any
governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of Michigan, or any political
subdivision thereof; or (iv) the presence of which on the Premises or causes
or threatens to cause a nuisance upon the Premises to adjacent properties or
poses a hazard to the health or safety of persons on or about the Premises; or
(v) without limitation which contains gasoline, diesel fuel or other petroleum
hydrocarbons.
8.22 Waivers. None of McLaren's Shareholders and none of McLaren's
officers or directors has a claim against McLaren for unpaid dividends,
bonuses, profit sharing, rights, or other claims of any kind, nature, or
description, except salaries and fringe benefits normally accrued prior to the
date of this Agreement.
8.23 Scope of Representations and Warranties. Neither this Agreement
nor any Schedule hereto contains any untrue statement of any material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
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9. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to
Shareholders that:
9.1 Organization and Standing. Buyer is a corporation duly organized and
validly existing under the laws of the State of Delaware, and Buyer has all
the requisite power and authority (corporate and otherwise) to own its
properties and to conduct its business as it is now being conducted.
9.2 Authorization. Buyer has taken all necessary corporate action (a) to
duly approve the execution, delivery, and performance of this Agreement and
(b) to consummate the transactions contemplated under these Agreements. Buyer
has duly executed and delivered this Agreement. This Agreement is the legal,
valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with its respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, or similar laws relating to the
enforcement of creditor's rights and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law or in equity).
9.3 Existing Agreements and Governmental Approvals.
(a) Except as set forth on Schedule 9.3, the execution, delivery,
and performance of this Agreement and the consummation of the transactions
contemplated by it (I) do not and will not conflict with, result in the breach
or termination of any provision of, or constitute a default under (in each
case whether with or without the giving of notice or the lapse of time, or
both) Buyer's Articles of Incorporation or By-laws or any indenture, mortgage,
lease, deed of trust, or other instrument, contract, or agreement or any
order, judgment, arbitration award, or decree to which Buyer is a party or by
which it or any of its assets and properties are bound.
(b) Except as set forth on Schedule 9.3, no approval, authority, or
consent of, or filing by Buyer with, or notification to, any federal, state,
or local court, authority, or governmental or regulatory body or agency or any
other corporation, partnership, individual, or other entity is necessary to
authorize Buyer's execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement or the purchase of the
Purchased Shares.
9.4 Investment Intent. Buyer is acquiring the Purchased Shares for its
own account for investment, and without any present intention to resell the
Purchased Shares. Buyer acknowledges and agrees that the Purchased Shares have
not and will not be registered under the Securities Act of 1933 or the
Michigan Uniform Securities Act, and Buyer will not resell the Purchased
Shares unless they are so registered or unless an exemption from registration
is available. Buyer consents to the imposition of a legend to this effect on
the certificates for the Purchased Shares and to a notation to this effect in
the appropriate records of McLaren.
9.5 Securities Laws. No registration in connection with the issuance of
the ASHA Shares is required under the Securities Act of 1933, as amended, (the
"Act") or any other applicable federal or state securities laws.
11
10. INDEMNIFICATION AND LIMIT.
10.1 Executive agrees to indemnify Buyer, and to hold it harmless from
and against all taxes, penalties, fines, damages, sanctions, losses,
assessments, liabilities, costs and other expenses (including reasonable
attorney fees) (collectively, "Losses"), arising out of any breach or other
default of any agreements, representations, warranties or covenants on the
part of McLaren or Executive contained in this Agreement.
10.2 Notwithstanding the foregoing, Executive shall have no obligation
to indemnify ASHA from and against any Losses until the aggregate amount of
the Losses suffered by ASHA is greater than Ten Thousand Dollars ($10,000)(the
"Aggregate Threshold Amount"). Executive will be responsible only for those
Losses in excess of the Aggregate Threshold Amount up to a maximum of the then
current closing NASDAQ market price of 150,000 shares of ASHA Common Stock as
of the date a claim for indemnification is satisfied (the "Cap Amount"), which
Cap Amount shall be reduced by any and all recoveries obtained by McLaren from
any third party, including but not limited to H. Xxxxxxx Xxxxx, Jr. and or
Xxxxxx X. Xxxxx, as contemplated under the Merger Agreement. The indemnity
obligations contained in this Section and all representations, warranties, and
covenants contained in this Agreement shall expire one year after the date of
this Agreement and the Executive will have no liability under the
indemnification provisions of this Section or otherwise in connection with
this Agreement unless ASHA gives written notice to Executive of its claim for
any such Losses, setting forth in reasonable detail the specific facts and
circumstances pertaining thereto, before the expiration of such one year
period. In addition, Executive shall have no indemnification obligations with
respect to matters listed in Schedules attached to this Agreement.
10.3 The parties agree that Executive's obligations under this indemnity
shall be secured and satisfied solely by the placement of 150,000 shares of
ASHA Common Stock into escrow pursuant to the terms of the Escrow Agreement
attached hereto as Exhibit B. Further, the parties agree no other assets of
Executive shall be subject to claim, attachment, or encumbrance by ASHA in
satisfaction of any liability incurred by Buyer under this section in excess
of the escrowed shares noted above.
10.4 In the event of a breach or other claim, the party claiming such
breach or other claim (the "Indemnitee") shall give written notice ("Notice")
to the party in breach or against whom such other claim is made (the
"Indemnitor") stating that payment of an amount described in the Notice is due
and payable to the Indemnitee under the provisions of this Agreement on
grounds set forth in the Notice, and that such payment is due immediately.
10.5 If any action, litigation, suit, investigation, arbitration or
other proceeding ("Proceeding") is brought against an Indemnitee for which the
Indemnitee is or may be entitled to indemnification from an Indemnitor
pursuant to Sections 10.1 or 10.2, Indemnitee shall promptly give a Notice to
Indemnitor of such Proceeding. Indemnitor shall, at its own expense, have the
opportunity to be represented by counsel of its choosing and to assume and
conduct the defense of any such Proceeding upon providing a written
undertaking to that effect to Indemnitee. If, after such opportunity,
Indemnitor or its counsel does not assume the defense of any such Proceeding,
it shall be bound by the results obtained by Indemnitee. In the event that
Indemnitee does not receive written notice from Indemnitor within ten (10)
days of having given Notice to Indemnitor of any such Proceeding Indemnitor
shall be deemed to have elected not to assume the defense of such Proceeding,
12
and in such event Indemnitee will have the right to conduct such defense and
to compromise and settle such Proceeding, provided Indemnitor consents
thereto, which consent may not be unreasonably withheld. In the event that
Indemnitor does elect to assume the defense of such Proceeding, Indemnitee
will cooperate with and make available to Indemnitor such assistance and
materials as may be reasonably requested by it, all at the expense of
Indemnitor, and Indemnitee will have the right at its expense to participate
in the defense; provided, however, that Indemnitee will have the right to
compromise or settle such Proceeding only with the prior written consent of
Indemnitor which shall not be unreasonably withheld. Any compromise or
settlement to which Indemnitor shall have consented in writing shall
constitute an admission of liability on the part of Indemnitor and shall
conclusively be deemed to be an obligation with respect to which Indemnitee is
entitled to indemnification under Sections 10.1 or 10.2, as the case may be.
10.6 The parties shall cooperate fully with each other after the date of
this Agreement with respect to any claims, demands, tax or other audits,
suits, actions, and proceedings by or against Executive, McLaren, Buyer or
McLaren's stock, whether or not notified by the other of a claim for indemnity
with respect to such matter.
11. EXPENSES. Each of the parties shall pay all of the costs that it incurs
incident to the preparation, execution, and delivery of this Agreement and the
performance of any related obligations, whether or not the transactions
contemplated by this Agreement shall be consummated; except that McLaren may
pay such expenses, provided, however, that McLaren's and Executive's expenses
for Xxxxx Xxxx professional fees in completing the Xxxxx Merger and the
transaction contemplated by this Agreement shall not exceed $100,000.
12. TERMINATION.
12.1 This agreement may be terminated at any time before the Closing
Date as follows:
(a) By Buyer and Shareholders in a written instrument.
(b) By either Buyer or Shareholders if the closing does not occur
on the Closing Date.
(c) By Buyer or Shareholders if there shall have been a material
breach of any of the representations or warranties set forth in this Agreement
on the part of the other, and this breach by its nature cannot reasonably be
cured to the satisfaction of the non-breaching party before the closing.
(d) By Buyer or Shareholders if there has been a breach of any of
the covenants or agreements set forth in this Agreement on the part of the
other, and this breach is not cured within 10 business days after the
breaching party or parties receive written notice of the breach from the other
party.
12.2 If terminated as provided in Section 12.1, this Agreement shall
forthwith become void and have no effect, except for Sections 12.3 and 13, and
except that no party shall be relieved or released from any liabilities or
damages arising out of the party's breach of any provision of this Agreement.
12.3 Buyer, on the one hand, and McLaren, on the other, warrant and
agree that if this Agreement is terminated, each party will not, during the
one-year period following the termination, directly or indirectly solicit any
employee of the other party to leave the employment of the other party.
13
13. MISCELLANEOUS PROVISIONS.
13.1 Representations and Warranties. All representations, warranties,
and agreements made by the parties pursuant to this Agreement shall survive
the consummation of the transactions contemplated by this Agreement for a
period of one year and shall thereafter expire and be of no further force and
effect.
13.2 Notices. All notices, demands, and requests required or permitted
to be given under the provisions of this Agreement shall be in writing and
shall be deemed given (a) when personally delivered or sent by facsimile
transmission to the party to be given the notice or other communication or (b)
on the business day following the day such notice or other communication is
sent by overnight courier to the following:
If to Shareholders to:
Xx. Xxxxx X. XxXxx
C/O McLaren Engines, Inc.
00000 Xxxx Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
With a copy to:
Xxxxx Hill PLC
Attn: Xxxx X. Xxxx, Xx., Esq.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Facsimile: 000-000-0000
If to Buyer to:
ASHA Corporation
C/O Mr. Xxxx XxXxxxxxx, President
000 X Xxxx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: 000-000-0000
With a copy to:
Xxxxxx X. Xxxxx, Esq.
Xxxxx & Xxxxxxx
00000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
or to such other address or facsimile number that the parties may designate in
writing.
13.3 Assignment. Neither Shareholders nor Buyer shall assign this
Agreement, or any interest in it, without the prior written consent of the
other, except that Buyer may assign any or all of its rights to any subsidiary
controlled by Buyer without Shareholders' consent.
14
13.4 Parties in Interest. This Agreement shall inure to the benefit of,
and be binding on, the named parties and their respective successors and
permitted assigns, but not any other person.
13.5 Choice of Law. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Michigan.
13.6 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each counterpart were
on the same instrument.
13.7 Entire Agreement. This Agreement and all related documents,
schedules, exhibits, attachments, or certificates, including the Employment
Agreement, the Escrow Agreement and the Stock Rights Agreement represent the
entire understanding and agreement between the parties with respect to the
subject matter and supersede all prior agreements or negotiations between the
parties. This Agreement may be amended, supplemented, or changed only by an
agreement in writing that makes specific reference to this Agreement or the
agreement delivered pursuant to it, and must be signed by the party against
whom enforcement of any such amendment, supplement, or modification is sought.
13.8 Arbitration.
(a) Any dispute, controversy, or claim arising out of or relating
to this Agreement or relating to the breach, termination, or invalidity of
this Agreement, whether arising in contract, tort, or otherwise, shall at the
request of any party be resolved in binding arbitration. This arbitration
shall proceed in accordance with Title 9 of the United States Code, as it may
be amended or re-codified from time to time ("Title 9"), and the current
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association ("AAA"), to the extent that Title 9 and the
Arbitration Rules do not conflict with any provision of this Section 13.8.
(b) No provision of or the exercise of any rights under this
Section 13.8 shall limit the right of any party to seek and obtain provisional
or ancillary remedies (such as injunctive relief, attachment, or the
appointment of a receiver) from any court having jurisdiction before, during,
or after the pendency of an arbitration proceeding under this Section. The
institution and maintenance of any such action or proceeding shall not
constitute a waiver of the right of any party (including the party taking the
action or instituting the proceeding) to submit a dispute, controversy, or
claim to arbitration under this Section.
(c) Any award, order, or judgment made pursuant to arbitration
shall be deemed final and may be entered in any court having jurisdiction over
the enforcement of the award, order, or judgment. Each party agrees to submit
to the jurisdiction of any court for purposes of the enforcement of the award,
order, or judgment.
(d) The arbitration shall be held before one arbitrator
knowledgeable in the general subject matter of the dispute, controversy, or
claim and selected by AAA in accordance with the Arbitration Rules.
(e) The arbitration shall be held at the office of AAA located in
Southfield, Michigan (as the same may be from time to time relocated), or at
another place the parties agree on.
15
(f) In any arbitration proceeding under this Section 13.8, subject
to the award of the arbitrator(s), each party shall pay all its own expenses,
an equal share of the fees and expenses of the arbitrator. The arbitrator(s)
shall have the power to award recovery of costs and fees (including reasonable
attorney fees, administrative and AAA fees, and arbitrators' fees) among the
parties as the arbitrators determine to be equitable under the circumstances.
(g) The interpretation and construction of this Section, including
but not limited to its validity and enforceability, shall be governed by Title
9 of the U.S. Code, notwithstanding the choice of law set forth in Section
13.5 of this Agreement.
13.9 Rule 144 Compliance. With a view to making available the benefits
of certain rules and regulations of the Securities and Exchange Commission
(the "Commission") that may permit the sale of the ASHA Shares to the public
without registration, ASHA agrees diligently to use all reasonable efforts to:
(a) Make and keep public information regarding ASHA available as
those terms are understood and defined in Rule 144 under the Securities Act,
at all times;
(b) File with the Commission in a timely manner all reports and
other document required of the Company under the Securities Act, as amended,
and the Exchange Act, as amended; and
(c) So long as a Shareholder owns any ASHA Shares, furnish to the
Shareholder forthwith upon written request a written statement by ASHA as to
its compliance with the reporting requirements of Rule 144, and of the
Securities Act, as amended, and the Exchange Act, as amended, a copy of the
most recent annual or quarterly report of ASHA, and such other reports and
documents so filed as a Shareholder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Shareholder to sell any
such securities without registration. In addition to the extent required or
requested by any exchange or market system on which the common stock of ASHA
may be traded, or at the request of any broker or dealer, ASHA will, at its
expense, cause to be prepared any and all required or requested opinions of
counsel, and pay any other reasonable fees and expenses incurred by a
Shareholder in connection with selling the ASHA Shares.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth on the first page of this Agreement.
McLAREN ENGINES, INC.
/s/ Wiley X. XxXxx
By: Wiley X. XxXxx
Its: President
ASHA CORPORATION (BUYER)
/s/ Xxxx X. XxXxxxxxx
By: Xxxx X. XxXxxxxxx
Its: President
16
SHAREHOLDERS
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
/s/ Xxxx Xxxxxxxxx
Xxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
/s/ Xxxxx Xxx
Xxxxx Xxx
/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/ Xxxx Xxx
Xxxx Xxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
/s/ Xxxxxxx XxXxxxxx
Xxxxxxx XxXxxxxx
/s/ Xxxxx XxXxx
Xxxxx XxXxx
/s/ Xxxxxx X. Xxxxxx
Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxx
Xxxxx Xxxxx
/s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
/s/ Xxxxxx Xxx Xxxx
Xxxxxx Xxx Xxxx
17
Table of Exhibits and Schedules
Item Letter/Number
A. Schedules
List of Shareholders s2.2
November Balance Sheet s2.3(a)
Outstanding Options s8.2
List of Subsidiaries s8.3
List of Patents, Trademarks, etc. s8.5
Contracts s8.6
Contract Defaults s8.7
Tax Returns s8.13
Officers, Directors and Shareholders s8.14
Employee Benefit Plans s8.16(c)
Employee Non-disclosure Agreements s8.16(d)
Debts, Guaranties, Non-Competition s8.21
Environmental Matters s9.3
B. Exhibits
Employment Agreement A
Escrow Agreement B
Financial Statements C
Stock Rights Agreement D
