EXHIBIT 10.2
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MEMBERSHIP INTEREST TRANSFER AGREEMENT
This Agreement for the transfer and assignment of, in the aggregate, a
5% Class A Membership Interest in Arizona Pacific Materials, LLC (this
"Agreement"), is entered into on September 26, 2007, by and among the
transferor, WESTERN POWER & EQUIPMENT CORP., a Delaware corporation (the
"Transferor"), Arizona Pacific Material, LLC, an Arizona limited liability
company (the "Company") and the transferees signatory hereto (each a
"Transferee" and collectively the "Transferees"), with respect to the following
facts:
RECITALS
A. WHEREAS, the Transferor owns 90% of the membership interests in the
Company.
B. WHEREAS, in consideration for the Transferees (or their assignor in
interest) agreeing to waive the existence of certain events of defaults pursuant
to the certain Letter Agreement with the Transferor and Xxxxxxxx Investment
Master Fund Ltd., as agent, dated as of September 19, 2007 (the "Letter
Agreement") relating to the Transferor's Series A Variable Rate Secured
Convertible Debentures issued pursuant to that certain Securities Purchase
Agreement, dated June 8, 2005 by and among the Transferor and the purchasers
signatory thereto (the "Purchase Agreement"), the Transferees desire to receive
and the Transferor desires to grant, in the aggregate, a 5% Class A Membership
Interest in the Company, the only class of membership interests issued and
outstanding.
C. The 5% Class A Membership Interest in the Company is in addition to
the 10% Class A Membership Interest granted to the Transferees pursuant to that
certain Membership Interest Transfer Agreement dated April 17, 2007 giving the
Transferees, in the aggregate and as of the date hereof, a 15% Class A
Membership Interest in the Company.
D. NOW, THEREFORE, for and in consideration of the mutual agreements
set forth herein, and subject to the terms and conditions set forth below, the
parties agree as follows:
AGREEMENT
1. Transfer of Membership Interests. The Transferor hereby transfers,
free and clear of all encumbrances (except for any encumbrances created on
behalf of the Transferees hereunder) to the Transferees, and the Transferees
hereby acquire from the Transferor, in the aggregate, 5% the outstanding Class A
Membership Interests of the Company (the "Membership Interest"). Each Transferee
shall receive a portion of the Membership Interest equal to the percentage set
forth on the signature page of such
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Transferee attached hereto. The Transferees shall succeed to 5% of the capital
account of the Transferor as of the date hereof.
2. Consideration for Transfer. The transfer of the Membership Interest
pursuant to this Agreement is being granted hereunder in consideration for the
waiver of certain events of default pursuant to the Letter Agreement.
3. Closing. The closing of this transaction shall take place
contemporaneously with the execution of this Agreement. Within 5 business days
of the date hereof the Company shall deliver such membership certificates, if
any, evidencing the membership interests and any assignments of such interests
as may be required by law to transfer said interests. The Transferee(s) shall
also execute and deliver counterpart signature pages for the Operating Agreement
(as defined below in Section 5(c)).
4. The Transferors Representations and Warranties: The Transferor
represents and warrants that as of this date:
(a) AUTHORIZATION. The Transferor has the power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder, all of which have been duly authorized by all requisite
action. This Agreement has been duly authorized, executed and delivered
by it and constitutes its valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(b) NO CONSENTS. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or
other individual, partnership, corporation, joint stock company,
unincorporated organization or association, trust or joint venture, or
a governmental agency or political subdivision thereof (each, a
"Person") is necessary for the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated
hereby by it.
(c) OWNERSHIP OF THE SECURITIES. The Transferor owns the
Membership Interest beneficially and of record, free and clear of any
liens, claims or encumbrances (except for any encumbrances created on
behalf of the Transferees hereunder) (collectively, "Encumbrances").
The Transferor has not entered into any agreement, arrangement or other
understanding (i) granting any option, warrant or right of first
refusal with respect to the Membership Interest to any Person, (ii)
restricting its right to sell the Membership Interest to any Person, or
(iii) restricting any other of its rights with respect to the
Membership Interest. It has the absolute and unrestricted right, power
and capacity to assign and transfer the Membership Interest to the
Transferees free and clear of any Encumbrances (except for any
encumbrances created on behalf of the Transferees hereunder). Upon
execution of the Letter Agreement and this Agreement, the Transferees
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shall acquire good, valid and marketable title to the Membership
Interest, free and clear of any Encumbrances (except for any
encumbrances created on behalf of the Transferees hereunder).
(d) BALANCE SHEET: The Company is the owner or lessee, as
applicable, of the assets listed in the December 31, 2006, Balance
Sheet attached hereto as Exhibit A.
(e) PENDING SUITS: Except as set forth in Schedule 4(e)
attached hereto, no material suits, actions, or proceedings are
pending, or to the knowledge of the Transferor are threatened against
or affecting the Company or its property.
5. Covenants of the Transferor and the Company.
(a) AMENDMENT TO ORGANIC DOCUMENTS. The Company shall not, and
the Transferor shall not permit the Company to, directly or indirectly
amend its articles of organization, operating agreement or other
charter documents so as to materially, adversely and disproportionably
affect any rights of any Transferee.
(c) PARTICIPATION IN FUTURE FINANCINGS.
(i) From the date hereof until the date that a
Transferee no longer holds any Membership Interest in the
Company, upon any grant of any additional membership interests
in the Company (a "Subsequent Grant"), each Transferee (or its
designated assigns) shall have the right to participate in up
to an amount of the Subsequent Grant equal to a percentage of
the Subsequent Grant equal to the aggregate Membership
Interest then held by the Transferees (15% as of the date
hereof) on the same terms, conditions and price provided for
in the Subsequent Grant.
(ii) At least 10 Trading Days prior to the closing of
the Subsequent Grant, the Company shall deliver to each
Transferee a written notice of its intention to effect a
Subsequent Grant (a "Subsequent Grant Notice"). The Subsequent
Grant Notice shall describe in reasonable detail the proposed
terms of such Subsequent Grant, the amount of proceeds
intended to be raised thereunder and the Person or Persons
through or with whom such Subsequent Grant is proposed to be
effected and shall include a term sheet or similar document
relating thereto as an attachment.
(iii) Any Transferee desiring to participate in such
Subsequent Grant must provide written notice to the Company by
not later than 5:30 p.m. (New York City time) on the 10th
Trading Day after all of the Transferees have received the
Subsequent Grant Notice that the Transferee is willing to
participate in the Subsequent Grant, the amount of the
Transferee's participation, and that the Transferee has such
funds ready,
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willing, and available for investment on the terms set forth
in the Subsequent Grant Notice. If the Company receives no
notice from a Transferee as of such 10th Trading Day, such
Transferee shall be deemed to have notified the Company that
it does not elect to participate.
(iv) If by 5:30 p.m. (New York City time) on the 10th
Trading Day after all of the Transferees have received the
Subsequent Grant Notice, notifications by the Transferees of
their willingness to participate in the Subsequent Grant (or
to cause their designees to participate) is, in the aggregate,
less than the total amount of the Subsequent Grant, then the
Company may effect the remaining portion of such Subsequent
Grant on the terms and with the Persons set forth in the
Subsequent Grant Notice.
(v) If by 5:30 p.m. (New York City time) on the 10th
Trading Day after all of the Transferees have received the
Subsequent Grant Notice, the Company receives responses to a
Subsequent Grant Notice from Transferees seeking to purchase
more than the aggregate amount of the Subsequent Grant, each
such Transferee shall have the right to purchase its Pro Rata
Portion (as defined below) of the Subsequent Grant. "Pro Rata
Portion" means the ratio of (x) the Membership Interest
percentage held by a Transferee participating under this
Section 5(b) and (y) the sum of the aggregate percentage
Membership Interests held by all Transferees participating
under this Section 5(b).
(vi) The Company must provide the Transferees with a
second Subsequent Grant Notice, and the Transferees will again
have the right of participation set forth above in this
Section 5(b), if the Subsequent Grant subject to the initial
Subsequent Grant Notice is not consummated for any reason on
the terms set forth in such Subsequent Grant Notice within 60
days after the date of the initial Subsequent Grant Notice.
(c) OPERATING AGREEMENT. The Amended and Restated Operating
Agreement of the Company, dated June 1, 2000, attached hereto as
Exhibit B, is the operating agreement of the Company in effect as of
the date hereof ("Operating Agreement"). Except as expressly provided
for under this Agreement, the terms and conditions of which shall
supersede, modify and amend the terms of that Operating Agreement, the
terms and conditions of Operating Agreement shall remain in effect.
(d) TRANSFERABILITY OF MEMBERSHIP INTEREST. Subject to
compliance with any applicable securities laws the Membership Interest
and all rights thereunder and hereunder are transferable in whole or in
part. Upon a surrender of any certificate(s) (if any) representing the
transferred Membership Interest the Company shall execute and deliver a
new certificate in the name of the assignee or assignees and in the
denomination or denominations as requested by the transferor, and shall
issue to transferor a new certificate evidencing the portion of
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the Membership Interest not so assigned and the surrendered certificate
shall be cancelled. Notwithstanding anything in the Operating Agreement
to the contrary, the Transferor shall have no option to purchase the
Membership Interest upon a transfer of all or part of such interest
hereunder under Section VIII of the Operating Agreement.
(e) CONSENT AS MEMBER. The Transferor hereby consents to the
transfer of the Membership Interest contemplated hereunder and approves
the admittance of the Transferees as full members of the Company.
(f) ADDITIONAL CAPITAL CONTRIBUTIONS. The Transferees shall
not be subject to any demand for additional capital contributions to
the Company pursuant to Section 3.2.2 of the Operating Agreement or any
other provision thereof; provided, however, if a Transferee does not
participate in any such capital call (or participates for less than its
share), such Transferee's Membership Interest shall be diluted in
proportion to the size of the capital call and the fair market value of
the Company at the time of such capital call; provided, further, in the
event the Transferee disputes the fair market value of the Company such
Transferee shall have the right to retain the services of an
independent third party appraiser at its expense and reasonably
acceptable to the Company to provide a fair market valuation of the
Company which shall binding on the parties.
(g) TAX LIABILITY DISTRIBUTIONS. Notwithstanding anything in
the Operating Agreement to the contrary, in the event that a Transferee
shall incur any tax liability on account of any allocations or
distributions by the Company, the Company, subject to having the
available cash, shall promptly (and in any event prior to the date such
Transferee is required to pay such tax liability) make a cash
distribution to the Transferees in an amount equal to such tax
liability based on an assumed combined federal and state tax rate of
forty percent (40%).
(h) MANAGEMENT, FIDUCIARY DUTY AND DUTY OF LOYALTY.
(i) NO MANAGEMENT RIGHTS. Notwithstanding anything to
the contrary in the Operating Agreement, management of the
Company shall not be vested in all of the Class A Members of
the Company but shall be vested the holders of a majority of
the Class A Members or in a manager appointed by a majority of
the Class A Members of the Company.
(ii) NO FIDUCIARY DUTY. Notwithstanding anything in
the Operating Agreement to the contrary, the Transferees shall
have the same status and duty as a limited partner in a
partnership and therefore shall not be accountable to the
Company or the other members of the Company as a fiduciary.
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(iii) NO DUTY OF LOYALTY. Notwithstanding anything to
the contrary in the Operating Agreement, the Transferees shall
owe no duty of loyalty to the Company or the other members of
the Company.
6. Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, when delivered by courier, three days after
being deposited in the mail (registered or certified mail, postage prepaid,
return receipt requested), or when received by facsimile transmission upon
receipt of a confirmed transmission report, as follows:
If to the Transferor: As set forth in the Purchase Agreement.
If to the Company: Same as the Transferor.
If to the Transferees: as set forth on the signature page of the
Transferees attached hereto.
Any party hereto, by notice given to the other parties hereto in
accordance with this Section 6 may change the address or facsimile transmission
number to which such notice or other communications are to be sent to such
party.
7. Expenses. Each of the parties hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated herein.
8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be determined in accordance with the provisions of the
Purchase Agreement.
9. Assignment; Successors and Assigns; No Third Party Rights. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, permitted assigns and legal
representatives. This Agreement shall be for the sole benefit of the parties to
this Agreement and their respective heirs, successors, permitted assigns and
legal representatives and is not intended, nor shall be construed, to give any
Person, other than the parties hereto and their respective heirs, successors,
assigns and legal representatives, any legal or equitable right, remedy or claim
hereunder.
10. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
11. Amendment and Waivers. The terms of this Agreement, along with the
Letter Agreement and the Transaction Documents referenced in the Letter
Agreement
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shall not be otherwise changed, altered, waived or amended without the prior
written consent of a majority in interest of the Transferees.
12. Titles and Headings. The titles and headings in this Agreement are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
13. Entire Agreement. This Agreement constitute the entire agreement
among the parties with respect to the matters covered hereby and thereby and
supersede all previous written, oral or implied understandings among them with
respect to such matters.
14. Severability. The invalidity of any portion hereof shall not affect
the validity, force or effect of the remaining portions hereof. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be enforced to the
maximum extent permitted by law.
15. Interpretation. Unless otherwise indicated to the contrary herein
by the context or use thereof: (i) the words, "herein," "hereto," "hereof" and
words of similar import refer to this Agreement as a whole and not to any
particular Section or paragraph hereof; (ii) words importing the masculine
gender shall also include the feminine and neutral genders, and vice versa; and
(iii) words importing the singular shall also include the plural, and vice
versa.
16. Consent to Spin-off. Each Transferee, severally and not jointly
with the other Transferees, hereby does consent to (a) the conversion of the
Company into a corporation in connection with any spin-off of the Company's
securities to the public stockholders of the Transferor (the "Spin-Off"), (b)
the Spin-Off and (c) the receipt and acceptance of the Company's securities
distributed in connection with Spin-Off on the same terms and subject to the
same conditions applicable to the Transferor's public stockholders.
Notwithstanding anything herein to the contrary, the consent above to not in any
way waive the fiduciary obligations of the Company and the Transferors to the
Transferees in undertaking such actions.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement:
TRANSFEROR:
WESTERN POWER & EQUIPMENT CORP.
By: /s/ Xxxx XxXxxx
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Name: Xxxx XxXxxx
Title: President
COMPANY:
ARIZONA PACIFIC MATERIALS, LLC
By: /s/ Xxxx XxXxxx
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Name: Xxxx XxXxxx
Title: President
[SIGNATURE PAGE OF TRANSFEREES FOLLOW]
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[SIGNATURE PAGE OF TRANSFEREES]
APM ACQUISITION CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx
Title: President
% Membership Interest (as a percentage of whole Company): ____%
Address for Notice: c/x Xxxxxxxx Capital, LLC
150 East 58t Street, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx
e-mail: xx@xxxxxxxxxxxxxxx.xxx
Tel: (000) 000 0000
PORTSIDE WPEC CORPORATION
By: /s/ Xxxx Xxxx
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Name: Xxxx Xxxx
Title: Authored Signatory
% Membership Interest (as a percentage of whole Company): ____%
Address for Notice: c/o Ramius Capital Group, L.L.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx / Xxxx Xxxxxxx
e-mail: xxxxxx@xxxxxx.xxx / xxxxxxxx@xxxxxx.xxx
Tel: (000) 000-0000 / (000) 000-0000
CORAL LTD.
By: /s/ Xxxx X. Chill
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Name: Xxxx X. Chill
Title: Authorized Signatory
% Membership Interest (as a percentage of whole Company): ____%
Address for Notice: c/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxx X. Xxxxxx/Xxxx X. Chill
e-mail: xxx.xxxxxx@xxxxx.xxx/xxxx.xxxxx@xxxxx.xxx
Tel: (000) 000-0000
Fax: (000 000-0000
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Schedule 4(e)
Pending Litigation
In April, 2006, Arizona Pacific Materials, L.L.C. ("APM") commenced an action
against Copper Basin Railway, Inc. and others in the Superior Court, Pinal
County, State of Arizona. The First Amended Complaint seeks a declaratory
judgment and injunctive relief. The litigation concerns a dispute over
maintaining access to APM's property via a particular road.
There is a railroad line that runs down the border of APM's property. One of the
roads used to access APM's property runs along the side of the railroad line.
The defendant railroad claims that the road infringes upon its railroad
easement. APM has commenced this action for a declaration that it has an
easement relative to this roadway and to prevent the railroad from taking any
action to disrupt access to APM's property. The railroad has counterclaimed for
a declaration of the railroad's rights, ejectment of APM from use of this road,
and rent for alleged wrongful use of this road by APM.
The case is pending without a trial date. Cross motions for summary judgment
have both been denied. The railroad has filed a motion for reconsideration of
the denial of its motion for summary judgment. A finding for the railroad would
make accessing APM's property more difficult but probably not overly
problematic.
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