Form 8-K SEVCON, INC. For: Jan 28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

_____________________________

 

FORM 8-K

_____________________________

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  January 26, 2016

 

SEVCON, INC.

(Exact name of registrant as specified in its charter)

 

Delaware	001-9789	04-2985631
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

155 Northboro Road Southborough, MA	01772
(Address of principal executive offices)	(zip code)

 

(508) 281-5510

(Registrant’s telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[ ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 1.01.

Entry into a Material Definitive Agreement.

 

On January 26, 2016, Sevcon, Inc. (the “Company”) and its wholly-owned indirect subsidiary, Sevcon S.r.l. (“Sevcon Italy”), entered into a Quota Sale and Purchase Agreement (the "Purchase Agreement") with Bassi Holding S.r.l., an Italian limited liability company (the “Seller”), and the quota owners (shareholders) of the Seller (the “Seller Owners“), to acquire all the outstanding quotas of Bassi S.r.l., a limited liability company located in Lugo, Italy (“Bassi”). In order to fund the cash portion of the acquisition price, on January 27, 2016, the Company also entered into a Term Loan Agreement providing for a credit facility with Banca Monte dei Paschi di Siena S.p.A (the “Bank”). The closing of the acquisition and the borrowing under the credit facility occurred on January 29, 2016, as described in Items 2.01 and 2.03 below. The Company expects that Bassi will be merged into Sevcon Italy in the near future.

 

The material terms and conditions of the Purchase Agreement and the Term Loan Agreement are described below.

 

Quota Sale and Purchase Agreement

 

The purchase price payable to the Seller at closing consisted of €10 million in cash and 500,000 shares of the Company’s common stock. Sevcon Italy will also be required to distribute to the Seller outstanding dividends aggregating €3.38 million in increments over a three-year period post-closing.

 

The Purchase Agreement contains customary representations, warranties and covenants of Sevcon Italy, the Company, the Seller and the Seller Owners. The acquisition was subject to customary conditions precedent to closing, principally that the debt financing from the Bank become unconditional to disbursement.

 

The Purchase Agreement provides for Sevcon Italy to be indemnified for losses resulting from breaches of the Seller's and the Seller Owners' representations, warranties and covenants, and certain other matters. Recourse for claims made pursuant to such indemnities would be made through set-off against any portion of the aforementioned post-closing dividend amount up to maximum amount of €1.5 million.

 

A copy of the Purchase Agreement is attached as Exhibit 10.1 and is incorporated herein by reference. The foregoing description of the Purchase Agreement is qualified in its entirety by reference to the full text of the Purchase Agreement. 

 

Term Loan Agreement

 

The Term Loan Agreement provides for the Company to borrow to finance the Bassi acquisition in an amount not to exceed the lesser of €15 million or 80% of the acquisition purchase price.

 

The credit facility will mature on the fifth anniversary of the funding date, and may be repaid by the Company at any time after six months without penalty. Interest under the credit facility will be at a variable rate per annum equal to the EUROLIBOR Rate, as determined on the basis of the London Interbank offered rates for deposits in Euros in effect from time to time, plus specified margins as set forth in the Term Loan Agreement. The Company is required to pay a facility fee of .75% of the principal amount of the amount borrowed at the funding date.

 

The obligations under the credit facility are guaranteed by the Company’s US subsidiaries, Sevcon USA, Inc. (“Sevcon USA”) and Sevcon Security Corporation (“Sevcon Security”) and are secured by (i) all of the assets of Sevcon USA, (ii) a pledge of all of the capital stock of Sevcon USA and Sevcon Security, (iii) a pledge of a certain promissory note in the principal amount of the loan delivered to the Company by the Company’s UK subsidiary, Sevcon Limited, and (iv) a pledge of 60% of the stock of each of Sevcon Limited and the Company’s French subsidiary, Sevcon SAS.

 

The Loan Agreement imposes customary limitations on the Company’s ability to, among other things, pay dividends, make distributions, dispose of certain assets other than the sale of inventory in the ordinary course, incur liens, incur additional indebtedness, make investments, issue preferred stock or other stock providing for the mandatory payment of dividends, and engage in transactions with affiliates.

 

While the credit facility is outstanding, the Company together with its subsidiaries must maintain a leverage ratio, defined as the ratio of consolidated indebtedness of the Company and its subsidiaries, minus cash and marketable securities, to EBITDA of the Company and its subsidiaries, measured on a fiscal year-end basis, of not greater than 3.5:1.00 through September 30, 2017, and thereafter not greater than 3.0:1.00.

 

The Loan Agreement provides for events of default customary for credit facilities of this type, including, but not limited to, bankruptcy, a change of control, non-payment, breach of covenants, and insolvency. Upon an event of default, the interest rate will be increased and the Bank may elect a number of remedies including, but not limited to declaring all obligations (including principal, interest and expenses) immediately due and payable.

 

A copy of the Term Loan Agreement is attached as Exhibit 10.2 and is incorporated herein by reference. The foregoing description of the Term Loan Agreement is qualified in its entirety by reference to the full text of the Term Loan Agreement. 

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

 

On January 29, 2016, pursuant to the Purchase Agreement, Sevcon Italy completed the acquisition of 100% of the quotas of Bassi, paying to the Seller €10 million in cash, and the Company issued 500,000 shares of the Company’s common stock to the Seller on Sevcon Italy’s behalf. The information included in Item 1.01 above that is responsive to this Item 2.01 is incorporated herein by reference.

 

At the completion of the acquisition, Sevcon Italy also entered into a lease at a fair market rent pursuant to which it will lease the Bassi manufacturing facility from the Seller, and an employment agreement with Andrea Bassi, the previous chief executive officer of Bassi, who will serve as General Manager of Sevcon Italy.

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On January 29, 2016, pursuant to the Term Loan Agreement, the Company borrowed €14 million to fund the cash portion of the consideration payable to the Seller in the acquisition of Bassi and related expenses. The Company loaned the amount of the cash portion of the consideration downstream to its subsidiary, Sevcon Limited, which in turned loaned the funds downstream to its subsidiary, Sevcon Italy, to consummate the transaction. The information included in Item 1.01 above that is responsive to this Item 2.03 is incorporated herein by reference.

 

Item 3.02

Unregistered Sales of Equity Securities.

 

Upon the closing of the Bassi acquisition on January 29, 2016, pursuant to the January 26, 2016, Purchase Agreement, the Company issued 500,000 shares of its common stock, $0.10 par value, to the Seller. The issuance of the shares was exempt from registration under the Securities Act of 1933 pursuant to Section 4(a)(2) thereof on the basis that the transaction did not involve a public offering. The safe harbour of Regulation S under the Securities Act was also available. The shares will be subject to restrictions on resale pursuant to Commission Rule 144 under the Securities Act.

 

Item 7.01

Regulation FD Disclosure.

 

The Company issued a press release describing the Bassi acquisition on February 1, 2016, a copy of which is filed as Exhibit 99.1.

 

Item 9.01

Financial Statements and Exhibits.

 

(a) Financial statements of business acquired.

 

The financial statements of Bassi required by this Item will be filed by amendment within the period permitted by paragraph (a)(4) of Item 9.01 and Commission guidance.

 

(b) Pro Forma Financial Information.

 

The pro forma financial information required by this Item will be filed by amendment within the period permitted by paragraph (a)(4) of Item 9.01 and Commission guidance.

 

(d) Exhibits.

 

Exhibit Number	Description
10.1	Quota Sale and Purchase Agreement by and among Sevcon, Inc., Sevcon S.r.l., Bassi Holding S.r.l., Andrea Bassi, Bruno Bassi and Tiziana Rimini, dated January 26, 2016.
10.2	Term Loan Agreement by and between Sevcon, Inc. and Banca Monte dei Paschi di Siena S.p.A. , dated January 27, 2016.
99.1	Press Release of the Company, dated February 1, 2016.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SEVCON, INC.
Dated:  February 1, 2016	By:	/s/ Raymond J. Thibault Jr.
		Raymond J. Thibault Jr.
		Assistant Treasurer

                                                                             

 

 

Exhibit Number	Description
10.1	Quota Sale and Purchase Agreement by and among Sevcon, Inc., Sevcon S.r.l., Bassi Holding S.r.l., Andrea Bassi, Bruno Bassi and Tiziana Rimini, dated January 26, 2016.
10.2	Term Loan Agreement by and between Sevcon, Inc. and Banca Monte dei Paschi di Siena S.p.A. , dated January 27, 2016.
99.1	Press Release of the Company, dated February 1, 2016.

 

*The Registrant has omitted the exhibits and schedules to this agreement (the contents of which are listed on the signature page of the agreement) and will furnish copies of any of the omitted schedules and exhibits supplementally to the Securities and Exchange Commission upon request.

 

 

 

Exhibit 10.1

 

 

 

 

 

 

 

 

QUOTA SALE AND PURCHASE AGREEMENT

 

 

 

BETWEEN

 

 

BASSI HOLDING S.R.L.

 

 

IN AGREEMENT WITH ITS SHAREHOLDERS

 

Mr. ANDREA BASSI, MR. BRUNO BASSI, MRS. TIZIANA RIMINI

 

AND

 

SEVCON S.R.L.

 

AND

 

SEVCON INC.

 

 

 

 

 

 

 

 

Dated as of January 26, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QUOTA SALE AND PURCHASE AGREEMENT

 

This quota sale and purchase agreement (the “Agreement”) is made and entered into as of this January 26, 2016 (the “Signing Date”)

 

BETWEEN

 

Bassi Holding S.r.l., with registered office in Lugo (RA) S.M. in Fabriago, Via Mensa n. 3/2, VAT Code 00961820396, registered at Companies Register of Ravenna, n. RA – 111236, represented by Mr. Bruno Bassi, in his capacity of Chairman of the board of directors, duly authorized as per the resolution of the board of directors dated January 26, 2016, a copy of which is hereto attached as Exhibit A (“Seller”)

 

IN AGREEMENT WITH ITS SHAREHOLDERS

 

Mr. Andrea Bassi, Mr. Bruno Bassi and Mrs. Tiziana Rimini (each a “Shareholder” and collectively the “Shareholders”)

 

AND

 

Sevcon S.r.l., with registered office in Italy, Via D’Azeglio n. 25, Bologna, represented by Mr. Matthew Boyle, in his capacity of sole director, duly empowered by virtue of the by-laws and by the resolution of the shareholders’ meeting dated January 26, 2016 a copy of which is hereto attached as Exhibit B/1 (“Buyer”)

 

AND

 

Sevcon Inc., with registered office in 155 Northboro Road, Southborough, Massachussets, USA, represented by Mr. Matthew Boyle, in his capacity of CEO, duly authorized as per the board resolution dated January 26, 2016, a copy of which is hereto attached as Exhibit B/2 (“Sevcon”)

 

(the Seller, each Shareholder, the Buyer and Sevcon being a “Party” and, collectively, the “Parties”)

 

RECITALS

 

(A)         Bassi S.r.l. (“Bassi” or “Company”) is a limited liability company organized and existing under the laws of Italy, with registered office in Lugo (RA) S.M. in Fabriago, Via Mensa n. 3/2, corporate capital equal to Euro 100,000.00 (one hundred thousand/00) fully paid-up, Tax ID and VAT Code 02512370392.

 

(B)

Bassi’s activity mainly consists in planning, designing, developing, building, manufacturing and repairing of battery chargers for, inter alia, electric vehicles and industrial uses, power systems and UPS mainly for industrial, medical and telecom applications, and electronic instruments and equipment for battery laboratories, the export and trading of such products, the production, export, import and trading of raw materials, semi-finished products and excipients required for said production, the packaging of finished products and logistics operations relating to such products (the “Business”).

 

(C)

The Seller is the sole and exclusive owner of the quota representing 100% (one hundred percent) of the corporate capital of Bassi (the “Quota”) and the Shareholders are the individual owners, directly or indirectly, of all of the quotas of the Seller.

 

(D)         The Seller intends to sell the Quota to the Buyer, who intends to purchase it from the Seller, upon the terms and subject to the conditions set forth herein.

 

(E)         The transaction contemplated hereby does not require any antitrust filing.

 

NOW, THEREFORE, the Parties, in consideration of the mutual representations, warranties and covenants contained herein and subject to the terms and conditions hereinafter set forth, and intending to be legally bound, do hereby agree as follows:

 

1.

INTERPRETATION AND DEFINITIONS

 

1.1.           The recitals, the Exhibits, the Annexes and the Schedules listed below, form an integral and substantial part of this Agreement.

 

1.2.           As used in this Agreement, the following terms shall have the meanings set forth or as referenced below. Terms defined in the singular include the plural and vice versa.

 

	“Accounting Principles”	means the Italian principles concerning the drafting of the financial statements pursuant to law, as supplemented (but not replaced) by the national principles of the “Consiglio Nazionale dei Dottori Commercialisti e dei Ragionieri” and of the “Organismo Italiano di Contabilità (O.I.C.)”, or, should they not be sufficient, by the international accounting principles (International Accounting Standards – IAS / International Financial Reporting Standards – IFRS) prepared by the International Accounting Standards Committee (IASC).
	“Agreement”	means this quota sale and purchase agreement (including its attachments), as the same may be amended or supplemented from time to time in accordance with the terms hereof.
	“Andrea Bassi Employment Contract”	means the contract in form and substance as set out in Annex 7.2.1(e).
	“Andrea Bassi”	means Mr. Andrea Bassi.
	“Authority”	means any supranational, national, state or local judicial, legislative, executive or regulatory authority.
	“Available Cash”	means the cash available in the Company’s bank accounts as of the date hereof equal to Euro 1,440,000 (one million four hundred forty thousand).

 

	“Benefit”	means any pension, profit sharing, savings, retirement, health, life, disability, welfare, retiree medical, deferred compensation, incentive, severance, or fringe benefit plan, program, or arrangement maintained, for the benefit of any employee, by the Company.
	“Bruno Bassi”	means Mr. Bruno Bassi.
	“Business Day”	means any day other than Saturday, Sunday or a day on which banks in Bologna are closed for usual non-automated business.
	“Business”	means the activity currently carried out by the Company according to its bylaws and summarized in Recital (B).
	“Buyer”	has the meaning set out in the preamble.
	“Cap”	has the meaning set forth in Article 10.4.
	“Cash Amount”	has the meaning set forth in Article 3.1(a).
	“Claim”	has the meaning set forth in Article 10.2(a).
	“Closing Date”	has the meaning set forth in Article 7.1.
	“Closing”	means the completion of the sale and purchase of the Quota under this Agreement by the Seller and the Buyer and the payment by the Buyer to the Seller of the Purchase Price, as well as the fulfillment of all actions and the exchange of all documents to be fulfilled and/or exchanged at the Closing pursuant to this Agreement.
	“Conditions Precedent”	means the conditions precedent set out under Article 5.
	“Conditions Precedent Deadline”	has the meaning set forth in Article 5.4.
	“Confidential Information”	has the meaning set forth in Article 11.4.
	“Contracts”	has the meaning set forth in Article 9.21.
	“Customs Laws”	has the meaning set forth in Article 9.26(c).

 

	“Debt Financing”	means, collectively, the senior secured loan facility to be provided by the Lender(s) in favor of the Buyer and/or one or more affiliates thereof with a view to financing a portion of the Purchase Price, the refinancing facilities and the working capital facilities to be granted by the Lender(s) to the Company and/or one or more affiliates thereof in order to, inter alia, refinance the Company’ debt at the Closing Date and cover the Company’s working capital requirements.
	“Deed of Transfer”	has the meaning set forth in Article 7.4.
	“Employees”	has the meaning set forth in Article 9.23(a).
	“Environment”	means the natural and man-made environment, including all or any of the following media: air, water and land (including air within buildings and other material or man-made structures above or below the ground) and any living organisms (including man) or systems supported by those media.
	“Environmental Claim”	means any Order, action, suit, investigation, demand, claim, notice of non-compliance or violation, notice of liability by any Authority or any Person made under or in accordance with any Environmental Law or relating to Hazardous Substances and to contamination of soil, subsoil and waters by any Hazardous Substances.
	“Environmental Document”	means any document, report, letter, correspondence in the possession of the Seller containing information relating to any actual or alleged compliance with or liability under any Environmental Law or regarding any Hazardous Substances.
	“Environmental Laws”	means all applicable laws, statutes, regulations, secondary legislation, by-laws, directives, treaties and other measures, judgments and decisions of any court or tribunal, codes of practice and guidance notes which are legally binding and in force as at the date of this Agreement in so far as they relate to or apply to the Environment.
	“Environmental Permits”	means any permits, licenses, consents, certificates, registrations, notifications or other authorizations required under any Environmental Laws or Health and Safety Laws for the operation of the Business.

 

	“Hazardous Substances”	means any asbestos, polychlorinated biphenyls (PCBs), gasoline or petroleum or petroleum products, hazardous wastes, toxic substances, pollutants, contaminants or other substances, preparations or materials defined as such in or regulated under, or that could give rise to liability pursuant to, any applicable Environmental Law.
	“Health and Safety Laws”	means all applicable laws, statutes, regulations, secondary legislation, by-laws, directives, treaties and other measures, judgments and decisions of any court or tribunal, codes of practice and guidance notes which are legally binding and in force as at the date of this Agreement in so far as they relate to or apply to the health and safety of any person.
	“Indemnification Event”	has the meaning set forth in Article 10.2(a).
	“Indemnification Obligation”	has the meaning set forth in Article 10.1.
	“Independent Expert”	means (i) BDO Italia S.p.A. accounting company, Bologna Corte Isolani n. 1 or if such first firm shall be unable or unwilling to act (ii) Deloitte & Touche S.p.A. accounting company, Bologna office, currently at Via Angelo Finelli 8, provided that either of them has the requisite of independence, which shall act as expert (‘arbitratore’) pursuant to article 1349, paragraph 1, of the Italian Civil Code for the purposes set out in this Agreement.
	“Information Technology Systems”	has the meaning set forth in Article 9.27.
	“Initial Distribution”	has the meaning set forth in Article 3.4(b).
	“Insurances”	has the meaning set forth in Article 9.15.

 

	“Intellectual Property”	includes any and all intellectual and/or industrial property rights, either registered or unregistered, in any country and/or territory of the world and including, without limitation, registered trademarks and applications therefor, unregistered trademarks, trade names, Internet domain names, logos, other distinctive signs, patents for inventions and utility models and applications therefor, registered designs and applications therefor, unregistered designs, copyrights and neighboring rights including rights on computer software, semiconductor chip rights, sui generis rights on databases, rights on engineering projects, trade secrets, know-how and confidential business information, as well as any other proprietary and/or exploitation rights over immaterial goods and/or assets protected under any applicable laws.
	“Interim Financial Statements”	has the meaning set forth in Article 6.3; the relevant document is attached hereto as Annex 6.3.
	“Interim Period”	has the meaning set forth in Article 4.1.
	“Legal Requirements”	means any applicable law, directives, regulation, decree, rule or Order.
	“Lenders”	means Monte dei Paschi di Siena S.p.A. (acting through its New York branch, having an office at 55 East 59th Street, New York, New York 10022) and any other financial institution to whom the Debt Financing may be transferred or syndicated.
	“Lien(s)”	means any lien (including environmental and tax liens), security interest, pledge, hypothecation, mortgage, charge, lease, license, easement, restriction or condition of any kind, including any restriction on the use or transfer or other exercise of any attributes of ownership or similar encumbrance.

 

	“Loss”	means, as provided for under article 1223 of the Italian Civil Code, any liability, loss, tax loss, damage (both danno emergente and lucro cessante) incurred by Bassi or the Buyer that arise out of (a) any breach by the Seller of any of the Seller's representations and warranties made in this Agreement, subject however to exceptions herein set forth; (b) any breach by the Seller of any covenants contained in this Agreement, it being specified that (i) the term Loss shall include the costs actually incurred and the reasonable and documented expenses for legal assistance and/or other consultancy, and that (ii) any indemnification for any risk of Loss or for any potential Loss is expressly excluded, and that (iii) any indirect or consequential Loss is expressly excluded.
	“Notice of Acceptance”	has the meaning set forth in Article 10.2(b).
	“Notice of Objection”	has the meaning set forth in Article 10.2(b).
	“Order”	means any order, writ, judgment, injunction, decree, stipulation, determination issued by any Authority or award entered by or into with any Authority.
	“Party/Parties”	means individually the Buyer, a Shareholder, Sevcon or the Seller and collectively the Buyer, the Shareholders, Sevcon and the Seller.
	“Permitted Distribution”	has the meaning set forth under Article 3.4.
	“Person”	means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Authority or other entity or organization.
	“Products”	means the products planned and/or built and/or repaired or otherwise made available or distributed by the Company to any third party as part of the Business.
		has the meaning set forth in Article 6.4(a); the relevant document is attached hereto as Annex 6.4.
	“Provisional Pro Forma Financial Statements”
	“Purchase Price”	has the meaning set forth in Article 3.1.
	“Quota”	has the meaning set forth in Recital (C).
	“Records”	has the meaning set forth in Article 9.13(b).

 

	“Reference Date”	means December 31st, 2015.
	“Reference Pro Forma Financial Statements”	has the meaning set forth in Article 6.4(b);
	“Related Party Agreements”	means those agreements entered into by one or more of the Shareholders, the Seller and/ or their Related Parties on the one hand and the Company on the other hand.
	“Related Party”	has the meaning set forth in the International Accounting Standard – IAS No 24 as issued by the International Accounting Standards Board (IASB) adopted by the European Union, in the version applicable from time to time.
	“Residual Distribution”	has the meaning set forth in Article 3.4.
	“Restricted Territories”	has the meaning set forth in Article 9.26.
	“Seller”	means the company Bassi Holding S.r.l.
	“Seller Security”	has the meaning set forth in Article 10.7.
	“Sevcon Common Stock”	means the shares set forth in Article 3.1(b), part of the Purchase Price.
	“Sevcon”	means Sevcon Inc., with registered office in 155 Northboro Road, Southborough, Massachusetts, USA.
	“Shareholder”	has the meaning set out in the preamble means, individually, Andrea Bassi, Bruno Bassi and Tiziana Rimini.
	“Shareholders”	has the meaning set out in the preamble.
	“Signing Date”	means the date on which this Agreement may be considered as duly executed by the Parties according to Italian Law.

 

	“Signing NFP”	shall mean the net financial position of the Company as of the signing date of this Agreement determined – by making reference to the scheme balance sheet under article 2424 of the Italian Civil Code and to the items referred to therein – the algebraic sum of the following:
		1. (i) Reference C.IV: Cash and Equivalents available; (ii) Reference C.III 6): Financial assets held for sale; (iii) Reference B.III 2) e 3); Short term financial accounts receivable; (iv) Reference C.II 4-bis); (v) Tax accounts receivable;
		2. (i) Reference D.3): Shareholders’ Financing; (ii) Reference D.4): Bank Debt Reference D.5); (iii) Debt to other financial institutions.
		It is specified that the Permitted Distribution shall no be considered as Shareholders’ Financing for the purposes of the Signing NFP.
	“Tax Authority”	means any government, state or municipality or any local, state, federal or other fiscal, revenue, customs or excise authority, body or official competent to impose, administer, levy, assess or collect Tax in Italy.
	“Tax Laws”	means any directive, statute, enactment, law or regulation wherever enacted or issued, coming into force or entered into providing for or imposing any Tax and shall include Orders, regulations, instruments, by-laws or other subordinate legislation made under the relevant statute or statutory provision and any directive, statute, enactment, law, Order, regulation or provision which amends, extends, consolidates or replaces the same or which has been amended, extended, consolidated or replaced by the same.
	“Tax”	means all forms of taxation and governmental, state, provincial, local, government or municipal charges, duties, imposts, contributions, levies, withholdings or liabilities and any penalty, fine, surcharge, interest, charges or costs relating thereto.
	“Territory”	has the meaning set forth in Article 11.2.
	“Third Party Claim”	has the meaning set forth in Article 10.3(a).
	“Tiziana Rimini”	means Mrs. Tiziana Rimini.
	“Trade Compliance Laws”	has the meaning set forth in Article 9.26.
	“Transaction Documents”	means this Agreement and all other corporate or contractual documents entered into or to be entered into pursuant to this Agreement.

 

“Transfer Agent”

means the transfer agent American Stock Transfer & Trust Company, LLC (AST).

 

 

1.3.

In the interpretation of this Agreement, the following provisions shall apply.

 

(a)

The index and the headings of articles and paragraphs contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

 

(b)

The words such as “herein”, “hereof”, “hereunder”, “here”, “hereinafter”, and other words with similar meanings, when used in this Agreement, refer to this Agreement as a whole and not merely to a subdivision in which such words appear, unless the context otherwise requires.

 

(c)

The words such as “comprised”, “included”, “including”, “in particular” and similar words shall be construed without limitation and therefore such words do not exclude the non-expressed cases.

 

(d)

Any reference to a specific Person refers to such Person and to its successors and, to the extent as permitted under this Agreement, to its assignee, if any.

 

(e)

Should any reference under this Agreement to a period of time be made by referring to a number of days, those days shall be computed by excluding the first day and by including the last day, unless the latter falls on a day which is not a Business Day, in which case the last day will fall on the following Business Day.

 

(f)

The obligation of a Party to use reasonable efforts or endeavors to accomplish a scope shall be construed as an ‘obbligazione di mezzi’ according to applicable Law, and shall not be construed as an absolute obligation to ensure that such scope is in fact reached, i.e. shall not be construed as an ‘obbligazione di risultato’, and the fact that the scope has not been reached will not determine any liability or expenditure of funds against the Party who has not achieved such scope for any reason whatsoever.

 

(g)

Any reference in this Agreement to an obligation of a Party to procure or cause that another Person complies with an obligation shall be construed as a ‘promessa dell’obbligazione o del fatto del terzo’ under article 1381 of the Italian Civil Code.

 

2.

SALE AND PURCHASE OF THE QUOTA

 

2.1.

Sale and purchase. Upon the terms and subject to the conditions of this Agreement, the Buyer will purchase from the Seller, who will sell to the Buyer, at Closing, the Quota, free and clear of any Lien, for the Purchase Price specified in Article 3.

 

2.2.

Waiver of Pre-Emption Rights. The Seller represents and warrants to the Buyer that the Company is a sole shareholder company and therefore no waiver to the pre-emption rights is required with respect to, or in connection with, the sale and purchase of the Quota.

 

2.3.

Rights in the Quota. With effect from Closing, the Buyer shall have the full ownership of the Quota together with all the rights attached thereto, in accordance with the terms of this Agreement including the right to receive any dividends or distributions declared, made or paid after the date of Closing, except for the Permitted Distribution and the payment of the Initial Distribution and the Residual Distribution set out under Article 3.4 below.

 

2.4.

Undertakings of Sevcon. Sevcon shall be a co-obligor jointly and severally liable with the Buyer in respect of (i) the payment of the Purchase Price, including the transfer to the Seller of the Sevcon Common Stock, pursuant to this Agreement, (ii) the timely and properly fulfilment of all other Buyer’s obligations, actions and other accomplishments pursuant to this Agreement to be completed at Closing and, thereafter, (iii) the listing on the NASDAQ market as common listed shares of the Sevcon Common Stock in accordance with this Agreement.

 

3.

PURCHASE PRICE

 

3.1.

Purchase Price. As purchase price for the purchase and sale of all the Seller’s rights, title and interest in the Quota, the Buyer shall pay to the Seller a purchase price consisting in the following (the “Purchase Price”):

 

(a)

a fixed cash amount equal to Euro 10,000,000 (ten million) (the Cash Amount”);

 

plus

 

(b)

a fixed number of 500,000 (five hundred thousand) shares of listed common stock of Sevcon (the “Sevcon Common Stock”) to be issued in favor of the Seller. For this purpose, Sevcon expressly undertakes to issue the Sevcon Common Stock in favor of the Seller as payment of this part of the Purchase Price on behalf of the Buyer according to Article 3.2(b).

 

3.2.           Payment of the Purchase Price. On the Closing Date, subject to the Closing actions in items in Articles 7.2.1 and 7.4 having been completed, the Buyer:

 

(a)

shall pay to the Seller the Cash Amount equal to Euro 10,000,000 (ten million) by wire transfer to the bank account communicated in writing by the Seller to the Buyer in due time prior to the Closing Date;

 

(b)       shall deliver to the Seller (i) a copy of the irrevocable and unconditional written instructions given to the Transfer Agent to transfer the Sevcon Common Stock to the Seller and (ii) a written confirmation of the completion of such transfer of the Sevcon Common Stock to the Seller and of the crediting on the Closing Date of the Sevcon Common Stock to the account in the name of the Seller opened with the Transfer Agent, it being agreed that Sevcon will cause the Transfer Agent to complete all subsequent accomplishments and formalities (such as the issue of the Sevcon Common Stock in certificated form) not later than three (3) Business Days following the Closing Date.

 

3.3.             Sevcon Common Stock. Sevcon and Buyer undertake to cause that, as soon as practicable, but in any case not later than twelve (12) months after the Closing Date, at no costs, expenses or liabilities for the Seller, the Sevcon Common Stock (i) will cease to be ‘restricted securities’, and (ii) will become listed on the NASDAQ market as common listed shares.

 

3.4.           Permitted Distribution. The Parties acknowledge that the Purchase Price has been so determined on the assumption that, prior to Closing, the Company shall resolve to distribute reserves to Seller for an amount of Euro 3,380,000 (three million three hundred eighty thousand) (the “Permitted Distribution”).

 

To this regard it is agreed as follows:

 

(a)

The Buyer expressly authorizes the Seller to cause the shareholders’ meeting of the Company to resolve, prior to the Closing Date, the Permitted Distribution in favour of the Seller and the undertaking of the Company to pay to the Seller the amount of the Permitted Distribution as set out below.

 

(b)

The Buyer shall cause the Company – by using Available Cash - to pay the Seller a portion of the Permitted Distribution equal to 1,000,000 (one million) by February 15th, 2016. (the “Initial Distribution”).

 

(c)

The Buyer shall cause the Company to pay to the Seller the residual amount of the Permitted Distribution, i.e. the balance between (i) the total amount of the Permitted Distribution and (ii) the amount of the Initial Distribution (the “Residual Distribution”) in two installments as follows (i) a first installment of Euro 880,000 (eight hundred eighty thousand) by January 31st, 2017 (ii) and the balance – equal to Euro 1,500,000 (one million five hundred thousand) – by January 31st, 2019.

 

(d)

For avoidance of doubt it is specified that no interest will accrue on the amount of the Residual Distribution until the above payment deadlines.

 

 

4.

Management of the COMPANY up to Closing

 

4.1.

Interim Period. From the date hereof until Closing (“Interim Period”), the Seller and the Shareholders shall cause the Company to:

 

(a)

operate and carry out its Business in the ordinary course of business and substantially in the same manner as previously conducted;

 

(b)       preserve intact its present business organization, reputation, goodwill and customer relations;

 

(c)

settle its debts and cash in its receivables in the ordinary course and consistent with past practice; and

 

(d)

preserve its current activities relating to the Business, operations or affairs as well as customers and suppliers.

 

4.2.           Except for the transactions expressly contemplated under this Agreement, and without prejudice to the general obligations in Article 4.1, the Seller and the Shareholders shall procure that, during the Interim Period, the Company will not without the Buyer’s prior written consent:

 

(i)         terminate or modify or assign any material agreement, including without limitation any material agreement related to the Business;

 

(ii)        dismiss any of its employees or change, or agree to change, any of their terms of employment;

 

(iii)       incur, create or assume any Lien with respect to any one or more of its assets;

 

(iv)      dispose of any asset outside of the ordinary course consistent with past practice;

 

(v)       enter into financing agreement or security arrangement or amend any such existing agreement;

 

(vi)      declare or pay any dividends or distribute reserves to Seller, except for the Permitted Distribution;

 

(vii)     settle, make admissions in respect of any claim or litigation or proceeding; admit any liability, waive any rights; initiate any legal proceedings;

 

(viii)    create, allot or issue any share capital or loan capital or any option to subscribe for the same;

 

(ix)      repay, redeem or repurchase any share capital or loan capital;

 

(x)       employ any new employee;

 

(xi)      breach any of its obligations against third parties or under the law;

 

(xii)     carry out any operations on corporate capital (including reductions or increases thereof), mergers, spin-offs, winding-ups, reorganizations or other extraordinary company restructuring operations;

 

(xiii)    incur new financial debt, indebtedness or borrowing;

 

(xiv)    acquire or agree to acquire any shares or similar assets or any interest in any business or enter into any joint venture or similar arrangement;

 

(xv)     make any material changes to the accounting procedures or principles by reference to which the Company’s accounts are drawn up;

 

(xvi)    enter into any (or modify any subsisting) agreement that relates to any works/family council;

 

(xvii)   incur or increase any one or more liabilities to the Seller, the Shareholders and/or their affiliates and Related Parties, except for liabilities owed under the Andrea Bassi’s current employment agreement and the current lease agreement between the Seller and the Company (in any case, on a basis consistent with terms and condition applied as of January 1^st 2015);

 

(xviii)  induce, or attempt to induce, any of the employees of the Company, whether directly or indirectly, to terminate their employment before the Closing Date;

 

(xix)    carry out any material structural alteration or addition to, or materially effect any change of use of, any real property owned or used by the Company;

 

(xx)     other than in the ordinary and usual course of business of the Company:

 

(a)

enter into any agreement or incur any commitment involving any capital expenditure in excess of Euro 5,000.00 (five thousand) per transaction and Euro 10,000.00 (ten thousand) in aggregate, exclusive of Tax;

 

(b)

enter into, or incur any commitment which is not capable of being terminated without compensation at any time by the Company with less than 1 month’s notice or which involves or may involve total annual expenditure in excess of Euro 10,000.00 (ten thousand) exclusive of Tax;

 

(c)

acquire or dispose of any material asset involving consideration, expenditure or liabilities in excess of Euro 5,000.00 (five thousand), exclusive of Tax; or

 

(d)

enter into any material contract.

 

4.3.           In the event that, during the Interim Period, the Company intends to carry out any of the actions referred to in Article 4.2 (other than those otherwise expressly contemplated by this Agreement or required as compulsory and non deferrable under the applicable laws (of which actions the Seller will nevertheless inform the Buyer as soon as possible and before the taking of such action if legally possible), the Seller shall cause the Company to request in writing to the Buyer its prior written consent. The Buyer shall communicate its decision to approve or not to approve the prospected action within 5 Business Days as from receipt of such notification, being understood that, should the Buyer fail to reply in writing within such deadline, the proposed action shall be considered as non approved.

 

4.4.

Information and Documents. From the date hereof until the Closing Date, upon reasonable advance notice, the Seller shall permit the Buyer and its representatives to have access, during regular business hours, to the Company’s premises and to its assets, employees, books and records, and shall furnish, or cause to be furnished, to the Buyer such financial, tax and operating data and other information with respect to the Company as the Buyer and its representatives shall from time to time reasonably request. From the date hereof until the Closing Date, the Seller shall give to the Buyer as soon as possible full details of any material or anticipated changes in the Business, operations, assets, position (financial, trading or otherwise), profits or prospects of the Company.

 

5.

CONDITIONS PRECEDENT

 

5.1.           For all Parties’ benefit. Closing shall be conditional on subject to the satisfaction of the Condition Precedent that there shall not (i) be in effect any Law or Order that makes illegal or enjoins, prevents or modifies in any respect the consummation of the transactions contemplated by this Agreement or (ii) have been commenced and be continuing, or threatened in writing, any action or proceeding by any Authority which prevents or restricts or modifies or makes illegal or unlawful in any respect the transactions contemplated by this Agreement.

 

5.2.           For the Buyer’s benefit. Closing shall be conditional upon the satisfaction of all the following Conditions Precedent, any or all of which conditions may be waived by Buyer, in its sole discretion:

 

(a)

the Seller and the Shareholders shall have performed in all material respects its obligations contained in this Agreement required to be performed by them at or before Closing;

 

(b)       Andrea Bassi shall have executed with the Company a settlement before the Direzione Provinciale del Lavoro or equivalent protected venue concerning his past relations with the Company, substantially in the form attached as Annex 5.2 and a copy of such settlement shall have been delivered to the Buyer;

 

(c)

no material adverse change in the business of the Company occurred during the Interim Period. For the purpose of this point (c) only, “material” means an event which could involve an adverse financial or economic effect equal to or exceeding Euro 200,000 (two hundred thousand);

 

(d)

the Lender(s) shall have disbursed the Debt Financing, and/or all conditions precedent in the facility agreement(s) pertaining to the Debt Financing shall have been met with the Buyer having received satisfactory confirmation from the Lender(s) that the Debt Financing will be disbursed on or before the Closing Date.

 

5.3.             For the Seller’s benefit. Closing shall be conditional upon the satisfaction of the following Conditions Precedent, any or all of which conditions may be waived by Seller, in its sole discretion:

 

(a)

the Buyer shall have performed in all material respects its obligations contained in this Agreement required to be performed by them at or before Closing; and

 

(b)

no material adverse change in the business of Sevcon occurred during the Interim Period. For the purpose of this point (b) only, “material” means an event which could involve an adverse financial or economic effect equal to or exceeding Euro 1.000,000 (one million).

 

5.4.

Conditions Precedent Deadline. All the above Conditions Precedent have to be satisfied, or waived by the Party for whose benefit Article 5 states such Condition Precedent are provided, on or prior the date agreed for the Closing under Article 7.1 (the “Conditions Precedent Deadline”).

 

5.5.

The Parties shall co-operate and use their respective reasonable endeavours promptly and in good faith, to take, and cause to be taken, all actions necessary to procure the satisfaction of each of the Conditions Precedent set out under Article 5.1 as soon as practicable after the Signing date of this Agreement, and in any event no later than the Conditions Precedent Deadline; in addition the Parties shall co-operate and use their respective reasonable endeavors promptly and in good faith, to take, and cause to be taken, all actions necessary (including instructing their relevant advisors) to provide such materially accurate information and documentation as may be reasonable and necessary to facilitate and procure the satisfaction of each of the conditions precedent set out under Article 5.1 as soon as practicable after the Signing Date, and in any event no later than the Conditions Precedent Deadline.

 

5.6.

The Seller and the Shareholders shall use their reasonable endeavours promptly and in good faith, to take, and cause to be taken, all actions necessary to procure the satisfaction of each of the Conditions Precedent set out under Article 5.2 as soon as practicable after the Signing Date, and in any event no later than the Conditions Precedent Deadline.

 

5.7.

The Buyer shall use its reasonable endeavors promptly and in good faith, to take, and cause to be taken, all actions necessary to procure the satisfaction of each of the Conditions Precedent set out under Article 5.3 as soon as practicable after the Signing Date, and in any event no later than the Conditions Precedent Deadline.

 

5.8.

Withdrawal by either Party. Should the Condition Precedent under Article 5.1 not be satisfied or waived by both Parties before the Conditions Precedent Deadline, either the Seller and the Buyer shall have the right to terminate this Agreement, without any compensation therefor payable by the terminating Party, but without prejudice to any liability accrued to any Party for any pre-termination breaches of this Agreement, by giving written notice thereof to the other Party with immediate effect.

 

5.9.

Withdrawal by the Buyer. Should any Conditions Precedent under Article 5.2 not be satisfied or waived by the Buyer before the Conditions Precedent Deadline, the Buyer shall have the right to terminate this Agreement, without any compensation therefor payable thereby, but without prejudice to any liability accrued to any Party for any pre-termination breaches of this Agreement, by giving written notice thereof to the Seller with immediate effect.

 

5.10.

Withdrawal by the Seller. Should any Conditions Precedent under Article 5.3 not be satisfied or waived by the Seller before the Conditions Precedent Deadline, the Seller shall have the right to terminate this Agreement, without any compensation payable thereby, but without prejudice to any liability accrued to any Party for any pre-termination breaches of this Agreement, by giving written notice thereof to the Buyer with immediate effect.

 

5.11.

In the event of withdrawal pursuant to Articles 5.8, 5.9 or 5.10 above, this Agreement shall, subject to Article 12.1 thereafter, terminate and have no further effect, except for any pre-termination liability incurred by any Party and except for the obligations of the Parties hereto contained in Articles 12.1 and in Articles 11.5, 13.1 and 14 hereof.

 

5.12.

For the avoidance of doubt any failure by the Buyer to exercise its right to withdraw from or terminate this Agreement in the events under Article 5.2, shall not affect any right which the Buyer would have to indemnification from the Seller under this Agreement in the event of breach of the Seller’s representations and warranties under Article 9.

 

6.

OTHER ACTIONS

 

6.1.

Amendments to certain Employment Agreements. The Seller shall use its best efforts to have, before the Closing Date, the employment agreements with certain employees listed under Annex 6.1 amended substantially in the form set out under such Annex 6.1, in order to specify that any invention is made or inventive activity is carried out by any of them in the framework of their employment relationship and for the benefit of the Company and is comprised in the remuneration provided for in the relevant employment agreement.

 

6.2.           Company’s By-Laws. It is mutually agreed that, on or prior the Closing Date, the current by-laws of the Company will be amended in order to allow the appointment of a board of directors composed by two members and to provide for such other amendments as may be indicated in due time by the Buyer.

 

6.3.

Interim Financial Statements. Attached hereto as Annex 6.3 are the financial statements of the Company for the interim period ending as at September 30, 2015 pre-Taxes (the “Interim Financial Statements”), which represent Company’s assets and liabilities statement and profits and losses for such period, except for the value of inventories (“esistenze finali”) which have been determined on an indicative basis.

 

6.4.

Pro forma financial statements.

 

(a)

Attached hereto as Annex 6.4 are the provisional pro forma financial statements of the Company for the period ending as at December 31st 2015 pre-Taxes (“Provisional Pro Forma Financial Statements”) which represent Company’s assets and liabilities statement and profits and losses for such period, prepared in accordance with the Accounting Principles except for the following items still to be defined: (i) commercial receivables (“clienti”); (ii) value of inventories (“esistenze finali”); (iii) severance indemnity (“trattamento fine rapporto”) and deferred compensations for Employees (“ratei passivi relativi ai Dipendenti”).

 

(b)

On the Closing Date, the Seller shall deliver to the Buyer an updated version of the pro forma financial statements of the Company for the period ending as at December 31st 2015 pre-Taxes (“Reference Pro Forma Financial Statements”) which shall be attached as Annex 6.4 in substitution of the the Provisional Pro Forma Financial Statements which will represent Company’s assets and liabilities statement and profits and losses for such period, prepared in accordance with the Accounting Principles inclusive of the following items: (i) commercial receivables (“clienti”); (ii) value of inventories (“esistenze finali”); (iii) severance indemnity (“trattamento fine rapporto”) and deferred compensations for Employees (“ratei passivi relativi ai Dipendenti”) it being understood that the value of inventories (“esistenze finali”) shall remain subject to adjustment in respect of slow moving items to be made in accordance with Accounting Principles, provided that as of the Reference Date the total value of inventories shall not be less than Euro 2,700,000 (two million seven hundred thousand).

 

6.5.

2015 Balance Sheet. The Parties agree that, as soon as practicable after the Closing Date, but in any case within March 31, 2016, the following actions shall be carried out.

 

(a)

Andrea Bassi, - in his capacity of Company’s director - shall prepare the draft project of the balance sheet of the Company as of December 31, 2015 (i) with the assistance and support of the Company, (ii) by applying Accounting Principles, (iii) in a substance consistent with the Reference Pro Forma Financial Statements (iv) complete with the final evaluation of the value of inventories after taking into consideration the slow moving items and (v) complete of Taxes item.

 

(b)

The Buyer shall cause that the draft project of the balance sheet of the Company as of December 31, 2015 so prepared by the Seller (i) is approved by the board of directors of the Company and (ii) is approved by the shareholders’ meeting of the Company. Such approval by the shareholders’ meeting (i.e. by the Buyer in its capacity of sole shareholder) can not be considered as a waiver by the Buyer (neither partial) to its indemnification right (with particular, but not sole, reference to Articles 9.13 and 10).

 

(c)

The balance sheet of the Company as of December 31, 2015 prepared by Andrea Bassi as per paragraph (a) above and approved by the Company’s bodies as per paragraph (b) above.

 

 

7.

CLOSING

 

7.1.           Closing. The Closing shall take place, subject to satisfaction and/or waiver of all the Conditions Precedent set out in Articles 5.1, 5.2 and 5.3 before the Conditions Precedent Deadline:

 

(a)       on January 29, 2016, or in such other subsequent date as may be mutually agreed upon in writing by the Seller and the Buyer (the “Closing Date”);

 

(b)

in Bologna, with the assistance of the notary public Dott. Luigi Stame.

 

7.2.

Items to be delivered and action to be taken by Seller

 

7.2.1.

At Closing, the Seller shall deliver to the Buyer or procure the following:

 

(a)       the original resignation letters of the directors of the Company, effective as of the Closing Date, confirming that the resigning director have no claims for unpaid remuneration against the Company other than those claims for remuneration accrued (with sole reference to Mr. Andrea Bassi) and not received yet;

 

(b)       that a shareholders’ meeting of the Company is validly held in order to resolve the appointment of a new board of directors constituted by two members in the person of Mr. Matthew Boyle and Andrea Bassi;

 

(c)       execution by the Seller and the Company of a new lease agreement concerning the building owned by the Seller substantially in the text attached hereto as Annex 7.2.1(c);

 

(d)       evidence of the realization of the Conditions Precedent set forth in Article 5.2 (to the extension they have not been waived by the Buyer);

 

(e)       execution by the Company and Mr. Andrea Bassi of the Andrea Bassi Employment Contract in the text attached hereto as Annex 7.2.1 (e);

 

(f)        a release and waiver letter addressed to the Buyer and to the Company in the form of Annex 7.2.1(f) whereby Bruno Bassi and Tiziana Rimini (i) irrevocably and unconditionally waive any rights and claims that may have against the Company in any case to the fullest extent permitted by applicable laws, and (ii) irrevocably and unconditionally undertake to hold the Company harmless from any such liabilities and claims made by Bruno Bassi and or Tiziana Rimini;

 

(g)       a board of directors of the Company is validly held in order to grant to Mr. Matthew Boyle the powers necessary to ensure the Company’s full efficiency and immediately later on all or just a part of such powers are granted from Matthew Boyle to Andrea Bassi by means of a specific proxy.

 

7.3.           Items to be delivered and action to be taken by Buyer

 

7.3.1.

At Closing, Buyer shall deliver to Seller or procure the following:

 

(a)       the payment of the Purchase Price as per Article 3.2;

 

(b)       evidence of the realization of the Conditions Precedent set forth in Article 5.1 (to the extension they have not been waived by the Seller);

 

(c)       letters addressed to the resigning directors, in accordance with the text attached hereto as Annex 7.3.1(c), whereby the Buyer shall confirm – also on behalf of any Buyer’s successor – to irrevocably waive any action for liability against resigning directors arising by reason of their corporate status and excluding fraud, and to undertake to hold the resigning directors harmless from any action or claim made by the Buyer and/or the Buyer’s successor (and therefore with exclusion of the claim made by third parties) arising by reason of their corporate status and excluding fraud, and in any case to the maximum extent permitted by law.

 

7.3.2.       The Buyer shall cause that, at the first shareholders’ meeting held after the Closing Date, the Company ratifies the activities lawfully carried out by the resigning directors and confirms the waiver and the hold harmless undertaking provided for under Article 7.3.1(c) above.

 

7.4.

Actions to be taken by Seller and Buyer. At the Closing, the Parties will execute a deed of transfer of the Quota substantially in the text attached hereto as Annex 7.4 (“Deed of Transfer”).

 

The Deed of Transfer shall not impair, alter, amend, supersede or novate the terms and conditions of this Agreement and the rights and obligations of the Parties set forth herein, which shall continue to be binding upon the Parties notwithstanding the execution of the Deed of Transfer, and this Agreement shall prevail in all circumstances over such Deed of Transfer.

 

7.5.           Nature of the Closing. Parties acknowledge that all actions and deliveries provided for by this Agreement as of the Closing Date, regardless of their plurality, must be considered as one and indivisible and therefore, unless Parties agree otherwise, in case even only one of such actions and deliveries is not perfected, the sale of the Quota will not be considered as perfected.

 

8.               REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION OBLIGATIONS OF THE BUYER

 

8.1.           Validity. The Buyer and Sevcon represent and warrant to the Seller that all of the statements contained in this Article 8 are true and correct as of the date of this Agreement (or, if made as of a specified date, as of such date) and shall remain true and correct as of Closing Date, unless specifically otherwise provided for in this Agreement.

 

8.2.

Existence - Authorization. The Buyer represents and warrants to the Seller as follows.

 

(a)

The Buyer and Sevcon are duly organized, validly incorporated and in good standing under its laws of incorporation.

 

(b)

This Agreement has been duly authorized by the Buyer and Sevcon, has been duly executed and delivered by the Buyer and Sevcon and constitutes and shall constitute legal, valid and binding obligations of the Buyer and Sevcon, enforceable against the Buyer and Sevcon in accordance with its terms.

 

(c)

The execution of this Agreement by the Buyer and Sevcon and the performance of its obligations hereunder do not, and will not, conflict with, or constitute a breach of any law, agreement, or other obligation which the Buyer and Sevcon are subject to.

 

8.3.           Buyer Common Stock. The shares of Buyer Common Stock will, when issued and delivered to the Seller, be duly authorized, validly issued, fully paid-up, free of any Liens, and listed on NASDAQ. On the Closing Date, their issuance will not have been registered under the U.S. Securities Act of 1933 and such shares will be “restricted securities” that must be held until their resale is registered or an exemption from registration becomes available. As soon as practicable, but in any case not later than twelve (12) months after the Closing Date, at no costs, expenses or liabilities for the Seller, the Sevcon Common Stock (i) will cease to be ‘restricted securities’, and (ii) will become listed on the NASDAQ market as common listed shares.

 

8.4.

No Bankruptcy. The Buyer and Sevcon are not insolvent and is not subject to any bankruptcy or similar proceedings under any applicable law.

 

8.5.           Financial means. In any event the Buyer and Sevcon assure and warrant to the Seller that, at the Closing Date, all required financial means to complete the payment of the Purchase Price will be at disposal and available to the Buyer.

 

8.6.

The Buyer and Sevcon shall indemnify and hold harmless the Seller with respect to any Losses suffered by the Seller as consequence of any breaches (even partial) of the representations and warranties of the Buyer and Sevcon or a consequence of any breach of the covenants undertaken by the Buyer and Sevcon under this Agreement, provided that, with respect to Sevcon, the indemnification obligations under this Article 8.6 will be subject to the provisions under Article 2.4.

 

9.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

By means of the execution of this Agreement the Parties agree to waive to the Italian Code Civil provisions concerning the sale of goods, defects, lack of quality, sale of going concern, warranties concerning the items sold, such as articles 1495 and 1497 of the Italian Civil Code. The Parties acknowledge and agree that the provisions of Articles 9 and 10 hereof do constitute an independent procedure and mechanism of liabilities and remedies.

Representations and warranties set forth in this Article 9 will not be considered as warranties for defects or lack of qualities as per Italian Civil Code but will constitute specific contractual obligations undertaken by the Seller and any possible breach of a representation or warranty set forth in this Article 9 will be ruled solely by next Article 10, the Indemnification rights provided for in this Agreement shall represent the sole and exclusive remedy which the Buyer is entitled to in respect of any breach of the Seller’s representations and warranties and the Parties waive the application of further remedies such as termination for breach, termination for onerousness, termination for aliud pro alio.

With the sole exceptions set out in the Disclosure Schedule attached hereto as Annex 9, the Seller makes the following representations and gives the following warranties to the Buyer, each of which shall be true and accurate as at the date of this Agreement and shall be considered automatically repeated on Closing Date.

 

9.1.

Seller. The Seller and each Shareholder has full power and authority to execute this Agreement. This Agreement has been duly authorized by all necessary corporate actions and approvals by the Seller and each Shareholder and no further action is required in connection therewith.

The execution of the Agreement does not create nor constitute Liens over the Quota.

This Agreement constitutes Seller’s and, insofar as they are concerned, Shareholders’ legal, valid and binding obligation, enforceable against each of them in accordance with its terms.

 

The Seller is a company in good standing under its law of incorporation, is not insolvent; neither petition, decree nor any other decision relating to bankruptcy nor any other insolvency proceeding pursuant to the applicable law have been taken or threatened against, nor have been filed or issued in the name or on behalf of the Seller; Seller is not under voluntary or compulsory liquidation or winding up procedure and such procedures are neither pending nor threatened, nor have been taken, in respect to the Seller.

 

9.2.           No Conflict. The execution and delivery of this Agreement and the consummation of the transaction contemplated hereby will not conflict with, or result in a breach of, or constitute a default under, or give rise to a right of termination, withdrawal or cancellation of, the articles of incorporation or the by-laws of the Company, the Seller, or violate any judgment, Order, injunction, award, decree, law or regulation applicable to the Company, the Seller and/or any Shareholder.

 

9.3.           Company. The Company is a limited liability company duly organized, validly existing and has full power and authority to conduct its Business as presently conducted. The Company has been duly filed in the relevant books at Chamber of Commerce. No petition, decree nor any other decision relating to bankruptcy nor any other insolvency proceeding pursuant to the applicable law have been taken or threatened against, nor have been filed against the Company. The Company is not involved in agreements which concern the granting of assets to its creditors or restructuring, standstill, moratorium or similar agreements.

 

9.4.

Ownership of the Company. The Seller is the registered and sole beneficial owner of all the Quota, free from any Liens. There is no dispute concerning the title of the Seller to such Quota and no other Person has claimed to have title to the same or to be entitled to any interest therein. The Seller is not engaged in any litigation, arbitration or other proceedings in any way relating to its title to such Quota. There are no matters likely to give rise to any of the matters referred to in this Article 9.4.

On the Closing Date the Buyer will acquire the full and free ownership of 100% of the corporate capital of the Company. Neither the consummation of the Closing, nor the filing of the Buyer as new sole shareholder of the Company with the Chamber of Commerce is not subject to the approval of third parties, waivers to pre-emption right or other agreements which may limit the free transfer of the Quota.

 

The Shareholders collectively directly own and control 100% of the share capital of the Seller.

 

9.5.           Corporate Details. The corporate details of the Company as described in the Recitals are true. Other than this Agreement, there are no subsisting agreements, arrangements, commitments or understandings which provide for the present or future allotment, issue, transfer, redemption or repayment of, or grant to any person the right (whether conditional or otherwise) to require the allotment, issue, transfer, redemption or repayment of, any quota, security or loan capital in or in respect of the Company (including any option or right of pre-emption or conversion).

 

9.6.           Investments, associations and branches. The Company is not the holder or beneficial owner of, and has not agreed to acquire, any shareholding or other capital of, or investment in any other business, entity, company or corporation (wherever incorporated).

The Company is not, and has not agreed to become, a member of any partnership, joint venture, consortium or other unincorporated association, body or undertaking in which it is to participate with any other in any business or investment.

The Company has no branch, agency or place of business outside the jurisdiction of its incorporation.

 

9.7.           Compliance with Laws. The Company has conducted its Business in all material respects in accordance with all laws applicable in the jurisdictions were such Business was carried out and there is no Order, decree or judgment of any Authority outstanding against the Company which may have an adverse effect on the assets or Business.

 

9.8.

Business and Authorizations. Business is the sole activity carried out by the Company; in all material aspects the Company has carried out its Business in compliance with the laws and with a correct practice according to all the necessary authorizations.

Without prejudice to above, the Seller represents that the Company has duly filed the certified starting activity notice (i.e. Segnalazione Certificata di Inizio Attività – SCIA) for the Business carried out by the Company.

All authorizations necessary to utilize any of the assets of the Company or performing any aspect of the Business of the Company in the places and in the manner in which such Business is now carried on (with particular reference to, but not limited to, the United States and Canada) have been obtained and all of them are in full force and effect, except as noted in the Disclosure Schedule.

All reports, returns and information required by any law or as a condition of any authorization to be made or given to any Person or Authority in connection with the business of the Company have been properly made or given to the appropriate Person or Authority.

 

9.9.           Litigation. No litigation or arbitration of whatsoever nature or criminal proceedings or investigation or enquiry are pending or threatened by or against the Company or any of its managers, officers, agents or employees and there are no circumstances which may lead to such proceedings or investigation or enquiry.

 

9.10.

Health and Safety. The Company has, in relation to its fixed assets, its premises, its employees and any person who might be affected by the conduct of the business of the Company, complied with all requirements of all applicable Health and Safety Laws.

 

9.11.

Environmental.

 

Except as disclosed under Disclosure Schedule, it is represented as follows.

 

(a)

The Company has complied at all times with applicable Environmental Law and relevant Environmental Permits (all of which are valid and subsisting).

 

(b)

In particular:

 

(i)

the Company does not have to put in place any further air emission treatment system; the air emission stacks are in compliance with the applicable technical reference standards; the emissions are treated before their discharging to the atmosphere and comply with the relevant emission limit values, in accordance with all Environmental Laws and Environmental Permits; the Company is not liable for any violation of any of the prescriptions of the Authority included in the air emissions authorization, nor of the prescriptions as to the air emissions limit values provided under the applicable Environmental Laws;

 

(ii)

the Company is not liable for any violation of any Environmental Law and Environmental Permit relating to water discharges;

 

(iii)

the Company is registered in the so-called “SISTRI system” in relation to non-hazardous waste only while, as noted in the Disclosure Schedule, the accomplishments for extending such registration also to hazardous waste have still to be made. The Company is not responsible for the violation of any Environmental Laws relating to the waste management, including waste classification, storage, deposit, treatment and disposal; the Company correctly keeps the waste loading and unloading registers and the waste identification forms. All external contractors involved in the Company’s waste management comply with the applicable laws and regulations;

 

(iv)

the Company is not liable for any violation of the laws relating to the external acoustic emissions limit values;

 

(v)

the Company does not use, and has never used, asbestos, and no asbestos requiring interventions pursuant to the Environmental Laws is present in the premises or locations where the business of the Company is conducted or where the Employees work or the past employees of the Company have worked. The Company has always complied with its obligations under applicable laws and regulations with regard to the presence of asbestos in existing buildings. The Company is not liable for any violation of the laws relating to asbestos;

 

(vi)

no areas where the Company is materially located and/or no real properties used in connection with its Business, including soil, subsoil, surface waters, underground waters and aquifers: (a) are or have been contaminated by any Hazardous Substances; (b) has not been ascertained any contamination connected to activities carried out by the Company and/or previous owners of the same areas and properties, which may entail, after the Closing Date, any responsibility, obligation and/or liability of the Buyer;

 

(vii)

no written notice of any pending or threatened Environmental Claim has been received by the Company;

 

(viii)

the Company is not been claimed by any Authority as being liable for any violation of (and is fully compliant with) Legislative Decree of 3 April 2006, n. 152, Presidential Decree no. 151/2011, Presidential Decree n. 203/1988, Presidential Decree no. 59/2013, Legislative Decree n. 49 of March 14, 2014, Law 447/1995, DPCM 14 November 1997, Legislative Decree no. 27 of March 4, 2014, Law n. 257 of March 27, 1992, Ministerial Decree 6 September 1999, Ministerial Decree dated November 29, 2002.

 

(c)

The Seller has made available to the Buyer all existing Environmental Documents.

 

9.12.           Solvency.

 

(a)

No steps have been taken for the appointment of an administrator or receiver (including an administrative receiver) or other similar official over all or any part of the assets of the Company, and the Company is not subject to any bankruptcy, insolvency or liquidation proceedings or any situation provided for by articles 2482bis or 2482ter of the Italian Civil Code or similar proceeding in any other jurisdiction.

 

(b)

The Company has not made or proposed any arrangement or composition with its creditors or any class of its creditors (including the approval of a plan pursuant to art. 67, third paragraph, lett. (d), of the Italian Bankruptcy Law or the execution of a debt restructuring agreement pursuant to art. 182-bis of the Italian Bankruptcy Law) or similar arrangement in any other jurisdiction.

 

(c)

The Company is not insolvent nor unable to pay its debts within the meaning of the insolvency legislation or other requirements as to solvency applicable to it and has not stopped paying its debts as they fall due.

 

(d)

No Lien, charge, whether fixed or floating, pledge or other security interest created by the Company has crystallised or become enforceable and there are no circumstances likely to cause such a Lien or security interest to crystallise or become enforceable.

 

9.13.

Financial documents – Records

 

(a)       The Interim Financial Statements are, and the Reference Pro Forma Financial Statements will be – except as noted under Article 6.3 and under Article 6.4 – consistent and compliant with the Law and with the Accounting Principles, the relevant data set out therein are true and correct and represents truly and correctly the economic, financial and patrimonial situation of the Company with reference to the relevant period.

 

In particular – always except as noted under Article 6.3 and under Article 6.4 – the Interim Financial Statements and the Reference Pro Forma Financial Statements will:

 

(i)

show a true and correct view of the economic and financial status of the Company and correctly reflect the assets and liabilities of the Company to the relevant date, in accordance with the Accounting Principles;

 

(ii)

set out all the Company’s losses, contingent liabilities, liabilities and/or obligations of any nature whatsoever (whether accrued, absolute or contingent) in accordance with the Accounting Principles;

 

(iii)

correctly reflect the net equity of the Company, in accordance with the Accounting Principles.

 

It is agreed that after their preparation by the Seller pursuant to Article 6.5(b), the Reference Pro Forma Financial Statements shall be taken as the only reference financial statements for the purposes of the representation and warranties set forth in this Article 9.13 and the relating Indemnification Obligations of the Seller.

 

The Available Cash as of the date hereof is at least equal to Euro 1,440,000 (one million four hundred forty thousand).

 

The Signing NFP as of the date hereof shows a cash availability not lower than Euro 1,400,000 (one million four hundred thousand).

 

(b)       The Company maintains and has maintained all accounts, books, ledgers, financial and other records (“Records”) which it is or was mandatory for it to maintain. The Records:

 

(i)

have been duly, properly and accurately maintained on a consistent basis are up to date and in the possession and control of the Company and contain, in all material respects, true, complete and accurate records of all matters required by all applicable laws to be entered therein;

 

(ii)

do not contain or reflect any material inaccuracies or discrepancies;

 

(iii)

give and reflect a true and fair view of the financial, contractual and trading position of the Company and of its fixed and current assets and liabilities (actual and contingent), debtors and creditors (as appropriate) and all other matters which ought to or would normally be expected to appear therein; and

 

(iv)

no notice or allegation that any of the Records is incorrect or should be rectified has been received.

 

(c)       Since the Reference Date:

 

(i)

the Company has carried on its business in the ordinary and usual course so as to maintain it as a going concern and without any interruption or alteration in the nature, scope or manner of its business;

 

(ii)

there has been no material deterioration in the business, financial or trading position, profitability, prospects or turnover of the Company;

 

(iii)

there has been no significant event or occurrence (including, but not limited to the loss of any significant customer or supplier) which has had or may following Closing have a material detrimental effect on the Business of the Company or its value, profitability or prospects;

 

(iv)

the Company has not borrowed or raised any money under new financial facilities or entered into any form of new financial facility (whether pursuant to a factoring arrangement or otherwise) other than expressly permitted in this Agreement;

 

(v)

the Company has paid its creditors in accordance with the relevant credit terms and the past practice;

 

(vi)

the Company has not entered into any new capital commitments;

 

(vii)

no quotas, equity, convertible or loan capital or other financial instrument has been issued;

 

(viii)

the Company has not done or omitted to do anything which might, in any material respect, prejudicially affect its goodwill;

 

(ix)

the Company has not suffered any change, event or condition, that in the aggregate, has had or would reasonably be expected to have a material adverse effect on the business, the financial and economic situation, or the assets, the results or the prospects of the Company;

 

(x)

the Company has not agreed to do any of the above.

 

(d)       The Company’s turnover does not exceed the applicable antitrust thresholds relating to the target company’s turnover for the purposes of the filing or a notice of the transaction contemplated hereunder with the European Antitrust Authority or the Italian Antitrust Authority.

 

9.14.

Consequences of this Agreement.

 

(a)

As far as the Seller is concerned, no one is entitled to receive from the Company any finder’s fee, brokerage fee, or other intermediary commission in connection with the entering into and/or implementation of this Agreement.

 

(b)

Except as otherwise noted under the Disclosure Schedule, the entering into and/or implementation of this Agreement will not result in any outstanding indebtedness of the Company becoming due or capable of being declared due and payable prior to its stated maturity.

 

9.15.

Insurances.

 

The insurance policies (including the limit and basis of cover under each policy and the amount of the applicable excess) in force with the Company (the “Insurances”) are those listed under Schedule 9.15 and:

 

(a)

all the Insurances are in full force and effect and will be maintained in full force without alteration pending Closing and all premiums have been paid on time;

 

(b)

there are no circumstances which might lead to any liability under any of the Insurances being avoided by the insurers or the premiums being increased;

 

(c)

the Insurances contain no special or unusual terms, restrictions or premium rates;

 

(d)

there is no claim outstanding under any of the Insurances and there are no circumstances likely to give rise to a claim or which might cause any of the insurers to refuse to indemnify a claim or renew any insurance policies;

 

(e)

the Insurances for defective products duly cover the damages and the costs connected with the recall / reparation of the Products and the compensation for damages caused to third parties (to things and/or to people) in respect of the countries covered by such Insurance.

 

The Company timely filed all indemnification requests according to the terms and conditions set forth in each of the Insurances.

 

9.16.

Assets and charges.

 

(a)

Except for current assets disposed of in the ordinary course of its business, the Company is the legal and beneficial owner of and has good marketable title to (i) all assets reflected in the Reference Pro Forma Financial Statements and (ii) all assets which have been acquired by the Company since the Reference Date. With respect to such assets no Lien or encumbrance is outstanding nor is there any agreement or commitment to give or create or allow any Lien or encumbrance over or in respect of the whole or any part of the assets of the Company.

 

(b)

Since the Reference Date, save for disposals in the ordinary course of its business, the assets of the Company have been in the possession of, or under the control of, the Company.

 

(c)

No encumbrance or Lien in favour of the Company is void or voidable.

 

The Seller represents that as at the date of this Agreement the building in which the Company’s premises are located is subject to a mortgage in favor of Cassa di Risparmio di Forlì.

 

9.17.

Receivables.

 

(a)

Save to the extent of any provision or reserve therefore contained or reflected in the Reference Pro Forma Financial Statements, any receivables owed to the Company as recorded in the relevant company’s books and records are good and collectable in the ordinary course of business. The rights in respect of such receivables are valid and enforceable and are not subject to any defence, right of set-off or counter-claim, withholding or other deduction and no act has been done or omission permitted whereby any of them has ceased or might cease to be valid and enforceable in whole or in part. No amount included in the Reference Pro Forma Financial Statements as owing to the Company is now regarded as irrecoverable in whole or in part. The Company has not factored, sold or discounted any of its debts or other receivables or agreed to do so.

 

(b)

It is specified that, notwithstanding anything to the contrary in the Agreement, no warranty is given about the actual payment of commercial receivables by the respective debtors.

 

9.18.

Intellectual Property.

 

(a)

The Company is the sole and exclusive owner of the registered Intellectual Property listed in Schedule 9.18 and is the sole and exclusive owner of, or (in case of Intellectual Property owned by third parties) has valid licenses to use, all other Intellectual Property currently used in the Business.

 

(b)

All the Company’s Intellectual Property is valid and enforceable and nothing has been done, omitted or permitted whereby any such Intellectual Property has been abandoned or ceased or may cease to be valid and enforceable; without limitation to the foregoing, all confidential technical and business information owned by the Company have always been, and will remain until Closing Date, subject to security measures which are reasonably appropriate to keep them secret.

 

(c)

There are no Company’s inventions which have been invented by Company’s actual or past employees who have not been fairly remunerated by the Company in relation thereto, except for the inventions under the patents listed in Schedule 9.18 which have been invented by Andrea Bassi. Therefore there are no actual or past employees who could claim any economic rights to the Company for this purpose.

 

(d)

No third party (including any Employee, past employee or contractor) has title in or has or has alleged any claim of ownership or other rights of any kind, including without limitation moral rights of authorship and inventorship, in respect of, and/or in connection to, any of the Company’s Intellectual Property.

 

(e)

None of the Intellectual Property is being used by the Company without authorization, or is being claimed, applied for, opposed or challenged by any person.

 

(f)

The Company does not grant any licenses on, and/or any authorization to use, third party’s Intellectual Property without such third party’s prior consent.

 

(g)

There are no claims pending or threatened against the Company for (i) alleged infringement or violation of third party’s Intellectual Property and/or breach of agreements authorizing the Company to use third party’s Intellectual Property, (ii) alleged invalidity, nullity, unenforceability or misuse of the Company’s Intellectual Property, (iii) alleged acts of unfair competition, whether or not allegedly committed by using Intellectual Property, (iv) alleged unfair commercial practices, and/or (v) alleged violations of laws and/or regulations (including self-regulatory codes of conducts) concerning advertising.

 

(h)

The performance of the Business does not infringe third parties’ Intellectual Property neither is subject to the payment of any consideration to any third party.

 

9.19.           Products.

 

(a)

All the Products and have been and are duly tested, in accordance with applicable Laws and best practices, before being sold or delivered to the clients.

 

(b)

There are no Products with manufacturing defects, or whose manufacturing defects may cause damages to things, people, health, the environment and/or life.

 

(c)

All the Products are designed, built and repaired according with the applicable Laws and with the best practice.

 

(d)

The Products have not at any time and do not infringe or violate any Intellectual Property of any third party.

 

(e)

The terms and conditions of the Products’ warranty are, and have at all times been, in compliance with the applicable Law; all the liability limitations set forth therein are in compliance with the applicable law.

 

9.20.

Product Liability. The Products marketed and/or sold by the Company comply, and in the past have always complied, with the applicable Law in all jurisdictions where the Products have been sold by the Company, it being specified that (i) Products manufactured for sale in Europe are covered by the declaration of conformity ‘CE’ (ii) Products manufactured for sale in USA and Canada have obtained the ‘cCSAus’ certification.

Neither the Company nor the Seller has received claims stating that the products sold by it are defective, are not suitable for their intended purpose or have caused or contributed to damage or personal injury. Neither the Company nor the Seller has suffered any Losses in relation to Product recall nor do any circumstances exist that could give rise to any Product recalls, complaints or claims by any third parties.

The warranties given by the Company to third parties in relation to the Products sold by it are in accordance with the quality standards and performances of the Products.

As at the date of this Agreement there are no clients claiming (or whose claims have not been settled) the Products are defective or not suitable for their agreed purpose.

In respect of the product liability, the Company is covered by the Insurances.

 

9.21.

Company’s contracts.

 

In respect to the material commercial contracts outstanding with the Company (the “Contracts”) it is represented as follows.

 

(a)

Each of the Contracts is valid and binding, compliant with all applicable laws and no written notice of termination of any such Contract has been received.

 

(b)

The Company is not party to or subject to any Contract which:

 

(i)

involves or is likely to involve obligations, restrictions or expenditures for the Company of an unusual or exceptional or onerous nature; or

 

(ii)

is dependent on the guarantee or covenant of or security provided by any other person; or

 

(iii)

in any way restricts the Company to carry on the whole or any part of its Business in any part of the world, except for the Contracts containing exclusivity clauses listed under the Disclosure Schedule; or

 

(iv)

can be terminated amended or would be considered breached as a result of any change in the underlying ownership or control of the Company, except as noted in the Disclosure Schedule;

 

(v)

provides for limitation/release of liabilities, disclaimer, waiver in favor of the Company (including those set forth in any warranty granted by the Company to third parties) which are not compliant with all applicable laws and/or whose content can be limited according to the laws and/or by an Authority.

 

(c)

Neither the Company nor any other party to any Contract with the Company is in default thereunder, and neither the Seller nor the Company is aware of any contractual breach of the provisions of any Contract (other than change of control clauses) by the Company or the other party which would be the ground for termination, avoidance, rescission or repudiation of any Contract to which the Company is a party which, in any such case, would be material in the context of the financial or trading position of the Company.

 

(d)

All the Company’s suppliers are replaceable without significant difficulty.

 

(e)

The Company is not aware of any Contract where the Company has provided services or assets which qualify as credit and collections, investment, risk management, legal and fraud identification/detection services under applicable laws and regulations governing such activities.

 

(f)

The Company has obtained all necessary licenses, permits and authorizations required under applicable laws and regulations to provide the assets and services covered under any client agreement.

 

As of the Closing Date, no contracts or other contractual relationships between the Company and any Related Party will be outstanding, except for: (i) the credit of the Seller vis-à-vis the Company arising out the Permitted Distribution under Article 3.4; (ii) the employment relationship with Andrea Bassi and the new Andrea Bassi Employment Contract under Article (e); and (iii) the lease relationship with the Seller and the new lease agreement under Article 7.2.1(c).

 

9.22.         Sureties. Neither the Seller nor any other Person has given any guarantee of or security for: any overdraft, loan, loan facility or off-balance sheet financing granted to the Company. The Company has not given any guarantee of or security for: any overdraft, loan, loan facility or off-balance sheet financing granted to the Seller or to any other third party

Except for certain existing credit facilities not utilized by the Company, the Company is not part of financing agreements, loan agreements or similar financial facilities.

 

9.23.

Labour Relations, Employees and contractors.

 

Except as noted in the Disclosure Schedule, it is represented as follows.

 

(a)

The Company:

 

(i)        has now and shall at the Closing Date have as employees only and exclusively those which are listed in Schedule 9.23 (a) (the “Employees”), which also sets forth the qualification and the relevant Company costs. The Company has not given valid and sustainable legal grounds to any person other than the Employees to claim an employment relationship with it or to any Employee to claim a different qualification;

 

(ii)

is in compliance in all material respects with all applicable laws, rules and regulations (including applicable National Collective Bargaining Agreements) relating to employment, employment practices, labour, terms and conditions of employment, occupational safety and wages and hours, in each case, with respect to its employees as well as to employees seconded to the Company by third parties and its contractors whether past or present;

 

(iii)

has fulfilled, in compliance with all applicable laws and regulations, all of its obligations to pay withholding taxes, including, social security contributions and income taxes and has withheld all amounts required by law or by agreement to be withheld from the wages of its employees. All social security and welfare charges due under such laws and regulations have been fully and timely paid when due;

 

(iv)

has fulfilled, in compliance with all applicable laws and regulations and pursuant to the provisions of Employees’ employment contracts, its obligations towards the Employees and its former employees (including those relating to salary, indemnity, bonuses, their duties, rank and holidays) and it is not liable for any material arrears of wages or any penalty for failure to comply with any of the foregoing; has fulfilled its contractual and statutory obligations in relation to the fees to be paid to its contractors past or present; and there are no circumstances under which the Employees, its former employees or its contractors past or present may claim further compensation;

 

(v)

has fulfilled, in compliance with applicable law, Order and regulations, its obligation of hiring the required number of “protected” employees (c.d. ‘assunzioni protette’);

 

(vi)

is full in compliance with the law regulating the house-workers;

 

(vii)

has disclosed to the Buyer all salary, bonus, share options, incentives, benefits, pension payments and other sums due to the Employees and, from the Reference Date, has not entered into any individual agreement to change the rate of such salary, bonus, share options, incentives, benefits, pension payments or other sums due to the Employees;

 

(viii)

is not liable for any payment to any Authority (included but not limited to any Tax Authority, social security Authority as INPS-INAIL, trust or pension fund) with respect to unemployment compensation benefits, social security, pension fund or other Benefits for employees or contractors of the Company which is not reflected in the Reference Pro Forma Financial Statements, except for such payments that have matured after the Reference Date, in the ordinary course of business;

 

(ix)

is not liable for any payment of compensation to any employee or contractor past or present as the result of any court or tribunal judgment;

 

(x)

has correctly calculated and paid or allocated to the Employees and each of its past employees and contractors all amounts due until the Reference Date (including TFR and any kind of payment to be made on a pro rata basis) in accordance with the applicable law and National Collective Bargaining Agreements;

 

(xi)

has duly hired fixed-term employees and apprenticeship employees according to all the requirements and conditions provided by applicable laws, rules and regulations (including applicable National Collective Bargaining Agreements);

 

(xii)

has managed all its fixed-term employees and apprentices in such a manner as not to give valid and sustainable legal grounds to any of the aforesaid employees to claim a regular (open-ended) employment relationship with the Company;

 

(xiii)

has not hosted any third party’s (whether a supplier’s or otherwise) employees, collaborators or consultants in its premises and has not managed any third party’s employees, collaborators or consultants in a such a manner as to give valid and sustainable legal grounds to any of them to claim a regular (open-ended) employment relationship;

 

(xiv)

has not classified any individual as “independent contractor”, including agents (‘agenti’), distributors (‘distributori’), self-employees and consultants (‘collaboratori coordinate e continuativi e consulenti’), or of similar status who, according to the law of the relevant jurisdiction, should have been classified as an employee or of similar status and which classification could result in a loss or liability for the Company;

 

(xv)

has not carried out any individual or collective dismissal in breach of the relevant jurisdiction’s employment law;

 

(xvi)   has not entered into any plan, scheme, commitment or practice relating to redundancy.

 

(b)

No employee strike, work stoppage, lock-out or labour dispute is outstanding or has been threatened against the Company as of the date hereof.

 

(c)

The Company has not been engaged in any unfair labour practices.

 

(d)       The collective bargaining agreement applicable to the Company is that referred to under Schedule 9.23(d). No material collective bargaining or similar agreement is under negotiation or renegotiation by the Company.

 

(e)

No action, suit or complaint, by or before any Authority has been brought against the Company by or on behalf of any Employee or contractor or past employee or contractor and none is pending or threatened.

 

(f)

No Employee or past employee or contractor owes money to the Company.

 

(g)

No Employee or current contractor has given or is under notice of termination of his / her contract.

 

(h)

No past employee or person absent on maternity, paternity or adoption leave, sick or disability leave or absent on other grounds has the right to be re-instated or re-engaged.

 

(i)

No Employee is currently subject to disciplinary action and no Employee has brought a grievance.

 

(j)

Premiums referring to insurances concerning the Employees have been duly paid and all such insurances are valid and effective. There are no Employees which suffered a disability because of accidents at work.

 

(k)

All the amounts resolved by the shareholders’ meeting as consideration or severance indemnity to the directors are the sole amounts they are entitled to receive for their activity as directors of the Company and have been duly paid or set aside in the Financial Documents. There is no further consideration due to the directors referred to in this paragraph (k), except for the remuneration and the severance indemnity accrued or accruing by Andrea Bassi under its employment relationship.

 

For avoidance of doubt it is specified that the foregoing is subject to, and will not affect the contents of: (1) the Condition Precedent under Article 5.2(b) above; (2) the provision under Article 6.1; and (3) the provision under Article 7.2.1(f).

 

9.24.

Tax

 

(a)

The Company is and has always been in compliance with all applicable Tax Laws.

 

(b)

Full provision or reserve has been made in the Records, in accordance with the Accounting Principles, for all Tax assessable on the Company or for which the Company is or may become liable in respect of income, profits or gains earned, accrued or received on or before the Reference Date.

 

(c)

Since the Reference Date:

 

(i)

the Company has not been involved in any transaction which has given or may give rise to a Tax liability other than Tax on normal trading income or turnover arising in the normal course of business; and

 

(ii)

no payment has been made which will be wholly or partly disallowable as a deduction or charge in computing profits for Tax purposes.

 

(d)

The Company has properly and punctually made all returns and provided all information required for Tax purposes, all such returns and information remain correct and complete and no return or information is disputed by the relevant Tax Authority, and the relevant Tax Authority has, where so required, agreed the relevant accounts.

 

(e)

All Tax for which the Company has been or is liable, has been duly paid by the relevant due date and the Company has duly made all payments to the appropriate Tax Authority in respect of any Taxes for which it is liable, whether on behalf of itself or any other person, and has timely and correctly made all returns which it is required to make in connection with such payments.

 

9.25.         Infringement of Competition Laws. No agreement, practice or arrangement carried on by the Company or in which the Company is or was involved infringes or is in violation of any competition laws or regulations.

 

9.26.         Export Control Compliance.

 

(a)       The Company and its officers, directors, employees and agents acting in the name and on behalf of the Company have complied at all times, and are in compliance with all applicable laws relating to the regulation of exports, re-exports, transfers, releases, shipments, transmissions or any other provision of goods, technology, software or services (“Trade Compliance Laws”). The Company has not, directly or indirectly, exported, re-exported, sold or otherwise transferred any Products or services subject to Trade Compliance Laws in violation of Trade Compliance Laws. Without limitation to the above, (x) to the Seller’s and the Shareholders’ best knowledge (after making diligent inquiries including with the management of the Company), no client or customer of the Company has business operations in or related to Belarus, Burma (Myanmar), Cuba, Democratic Republic of Congo, Iran, Iraq, Ivory Coast, Liberia, Libya, North Korea, Somalia, Sudan, Syria and Zimbabwe (“Restricted Territories”) and (y) the Company has not provided its clients or customers with Products and/or services, including maintenance services: (i) within the Restricted Territories, or (ii) that are specific to, or adapted or configured for, financial, transactional or operational activities related to the Restricted Territories, except for the outstanding negotiations of the Company in respect of possible future export of Products in Iran as noted in the Disclosure Schedule.

 

(b)

There is no charge, proceeding or, investigation by any Authority, pending or threatened, with respect to a violation of any applicable Trade Compliance Laws.

 

(c)

The Company is in compliance with all applicable customs laws (“Customs Laws”), including any export or import declaration filing, payment of customs duties, compliance with import quotas, import registration or any other similar requirements related to the exportation or importation of Products or services.

 

(d)

Subject to the qualifications specified under Article 9.8, the Seller represents and warrants that the Company has all the authorizations and certifications in order to export its Products in the foreign markets in which such products have been or are currently exported by the Company. Such certifications and authorizations are valid and effective and there are no further authorizations or certificates that the Company needs in order to export its products and to perform its Business in all the foreign markets in which it currently exports products and/or carries out its Business.

 

9.27.

Information Technology

 

(a)       The information technology systems (including the computer and data processing systems and information and communication technologies) used by the Company (the “Information Technology Systems”) are adequate for the requirements of the Company and the Business in terms of functionality and performance.

 

(b)       The Information Technology Systems are either owned by, or properly leased to or licensed to the Company and there are no circumstances in which the ownership of, benefit of, or right to use the Information Technology Systems may be lost by the Company. The Company is in compliance with the relevant contracts pertaining to the Information Technology Systems.

 

9.28.

Anti-corruption compliance

 

(a)       None of the directors, officers or employees (past or present but during their employment with the Company), agents of or other persons acting on behalf of the Company has been engaged in or party to:

 

(i)

any unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity or to the making of any direct or indirect unlawful payment to government officials or employees in connection with their employment or relationship with the Company;

 

(ii)

the establishment or maintenance of any unlawful or unrecorded fund of moneys or other assets;

 

(iii)

the making of any false or fictitious entries in the books or records of the Company; or

 

(iv)

any fraudulent or unlawful use or misuse or appropriation of any assets (including moneys or financial assets) of the Company.

 

(b)

Neither the Company nor any of its officers or employees is or has at any time engaged in any activity, practice or conduct which would constitute an offence under the applicable provisions of the Italian Criminal Code related to bribery and corruption, of the US Foreign Corrupt Practices Act or any similar laws of any jurisdiction in which the Company has carried out its business.

 

(c)

No connected party of the Company has bribed another person (within the meaning given by the applicable any anti-bribery or anti-corruption legislation) intending to obtain or retain business or obtain or retain an advantage in connection with the Company’s business.

 

(d)

So far as the Seller and/or any Shareholder is aware (after making diligent inquiries including with the management of the Company), neither the Company nor any of its Related Parties or other connected parties is or has been the subject of any investigation, inquiry or enforcement proceedings by any governmental, administrative or regulatory body, Authority or any customer regarding any offence or alleged offence to any anti-bribery or anti-corruption legislation in any jurisdictions in which the Company operates.

 

9.29.         Privacy. The Company has complied with applicable privacy law as per D. Lgs. 196/2003. The Company did not receive any notice from any Authorities concerning the possible breach of the provisions of the said law.

 

9.30.         Lease agreement and building. Until the Closing Date the Company has been party to the lease agreement concerning the building leased to it by the Seller and executed on January 2^nd, 2015. Such lease agreement is valid, effective in force, all the relevant payments thereunder accrued until the Closing Date have been duly paid and such lease agreement has been duly filed by the Company and the Seller, except for the lease fee accruing by virtue of the current lease agreement until the Closing Date and not yet paid.

 

The Company received from the Seller the documentation and information certifying the energy performance of the premises subject to the aforementioned lease agreement and the relevant energy performance certificate has been attached to the said lease agreement.

 

The building leased to the Company by the Seller is in full compliance with the Law with reference to cadastral, zoning and building conformity, fitness for use requirements, plants conformity requirements.

 

In respect of the leased building the Company, as noted in the Disclosure Schedule:

 

(a)

has filed the application for obtaining the fire prevention certificate (‘Certificato Prevenzione Incendi’) and with the letter dated December 24, 2015 no. 0014237 the fire prevention Authority has listed the interventions required for the release of such fire prevention certificate;

 

(b)

has filed the application for obtaining the AUA permit (‘Autorizzazione Unica Ambientale’) on October 6, 2015 and with letter dated December 1, 2015 no. PGRA/2015/9692 the territorial environmental Authority has expressed favourable opinion and listed the conditions and/or interventions required for the release of such AUA permit.

 

The Parties acknowledge that on the Closing Date the aforementioned lease agreement will be amended and replaced by a new lease agreement according to Article 7.2.1 (d).

 

9.31.         Agreements with the Directors or with the Seller. There are no loans executed or issued (whether written or verbal) by the Company to the Seller, the Shareholders or to their respective directors or to relatives of the foregoing or to companies in which the foregoing hold a shareholding, except for the credit deriving from the Permitted Distribution.

There are no Liens or guarantees granted by the Company to guarantee loans or obligations of the Seller, any Shareholder, any directors of the foregoing or any relatives of any of the foregoing.

 

9.32.

Non Competition Agreements – With the sole exceptions of the agreements set forth in the Disclosure Schedule, the Company is not a party to any non competition agreements which may legally obligate the Company not to perform its Business or which may restrict the way or territories in which the Company carries out or may in the future carry out its business.

 

9.33.

Interim Period – From the date hereof the Seller will be in compliance with the provision set forth in Article 4 hereof concerning the Interim Period.

 

9.34.

Accuracy, Information – No representation or warranty contained in this Article 9 nor any document provided to the Buyer, contained, contains or will contain any untrue statement of a fact or omitted, omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances in which such statements were made. In particular:

 

(a)       the information concerning the Business and/or the Company delivered to the Buyer and/or its advisors, representatives or agents in, in connection with or pursuant to this Agreement is true, accurate and not misleading and has been provided in good faith;

 

(b)       no such information contains any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading;

 

(c)       neither the Seller nor any Shareholder has knowledge of any facts relating to the Company that could reasonably be expected to materially adversely affect the Company, any of its assets or financial standing.

 

10.

CLAIMS AND INDEMNIFICATION

 

10.1.         Losses. Subject to the terms, conditions and limitations set forth in this Article 10, the Seller will indemnify the Buyer – or the Company, if so indicated in writing by the Buyer at Buyer’s sole discretion – for 100% of the Losses actually suffered by the Buyer or by the Company, as consequence of any breaches (including without limitation partial breach) of any of the representations and warranties of the Seller or as a consequence of any breach of the covenants undertaken by the Seller and/or the Shareholders under this Agreement (the “Indemnification Obligation”).

 

10.2.

Claims.

 

(a)

Subject to this Article 10, if any event occurs which could give rise to the liability of the Seller under article 10.1 hereof (an “Indemnification Event”), the Buyer shall notify the Seller of the Indemnification Event as soon as possible after it becomes aware of such Indemnification Event and related Loss (“aware” in these circumstances meaning that the persons who are aware of the Loss are also aware that it is as a result of a breach of Article 9), in writing and by describing the event and the Loss, the amount or estimated amount thereof, if known or reasonably capable of estimation, and the method of computation of such Loss, all with reasonable details and containing a reference to the relevant provisions of this Agreement or any other agreement, instrument or certificate delivered pursuant hereto (the “Claim”).

 

(b)

The Seller will be entitled to reply in writing within 20 Business Days following the receipt of the Claim referred to in paragraph (a) above by sending to the Buyer either a notice of acceptance of the Claim (the “Notice of Acceptance”) or a notice of objection to challenge the Claim (the “Notice of Objection”); failing such reply the Claim will be deemed as accepted by the Seller for the purposes of this procedure.

 

(c)

Should the Seller sent to the Buyer a Notice of Objection within the term under paragraph (b) above and the Seller and the Buyer not reach an agreement in writing about the Claim within the 20 Business Days following the lapse of the term set out in paragraph (b) above:

 

(i)

if the Seller and the Buyer agree within the above 20 Business Days period that the Claim is of an accounting or quantitative nature, the provisions under Article 14.1 hereof shall apply; or

(ii)

otherwise the provisions under Article 14.2 hereof shall apply.

 

10.3.

Third Party Claims.

 

(a)

In the event of claims, actions, suits or proceedings brought by a third party (“Third Party Claim”) which may give rise to any Indemnification Obligation under Article 10.1, the Buyer shall promptly give to the Seller notice of such Third Party Claim, in any case within 20 Business Days from the Buyer becoming aware of such Third Party Claim (“aware” in these circumstances meaning that the persons who are aware of the Third Party Claim are also aware that it is as a result of a breach of Article 9), together with the estimated amount of such claim (to the extent such claim may be estimated at such time); provided, however, that the failure of the Buyer to give to the Seller notice as provided above shall not relieve the Seller of its obligations hereunder except to the extent such failure results in an actual and material prejudice to the Seller’s defense of a claim under Article 9 which relates to such Third Party Claim and except for any damages actually suffered by the Seller as a direct consequence of such delay.

 

(b)

The Seller and the Buyer shall endeavour to jointly and in good-faith agree on the defense and on any relevant decisions in relation to such Third Party Claim. If the Parties shall not have agreed on the defense and other relevant decisions within 10 calendar days from the receipt by the Seller of a notice from the Buyer under point (a) above or any shorter notice period if legally necessary to secure the defense by the Seller, the Buyer and/or the Company of the Third Party Claim, the following shall apply.

 

(i)

Within 20 Business Day from the receipt by the Seller of a notice concerning a Third Party Claim from the Buyer under paragraph (a) above, the Seller may communicate in writing to the Buyer the decision on whether it intends or not to participate in the defence against the Third Party Claim. The failure of such communication by the above deadline by the Seller shall be considered as a waiver of the Seller’s right to participate in such defence.

(ii)

In any event the Buyer (1) shall carry out or shall cause the Company to carry out – at their best and in good faith – the defense against the Third Party Request, and (2) shall ensure a reasonable and timely information to the Seller about the developments and the results of the defence of such Third Party Claim.

(iii)

If by the deadline under paragraph (i) above the Seller has communicated its intention to participate in the defence, the Seller shall be entitled to appoint its counsels at its own costs to support the counsels designated by the Buyer or by the Company, provided that the Buyer or the Company shall have full control of the defence and pursuit of such claim and related proceedings.

 

If a firm offer is made to the Company or to the Buyer to settle any Third Party Claim which the Buyer, but not the Seller, is willing to accept, the Buyer and/or the Company (as the case may be) will be free to enter into such settlement, at its own expenses, it being understood that such settlement shall not be considered as a conclusive evidence as to the liability of the Seller under the Indemnification Obligation under Article 10.

If a firm offer is made to the Company or to the Buyer to settle any Third Party Claim which the Seller, but not the Buyer, is willing to accept, the Buyer and/or the Company (as the case may be) shall be free not to enter into such settlement and to commence or continue the relevant litigation, at their own expense, it being understood that the Seller liability under Article 10 in connection thereof shall be limited to the amount of the proposed settlement offer.

 

10.4.         Limitations of liability. The Parties expressly agree that, notwithstanding any provision to the contrary under this Agreement, the Indemnification Obligations of the Seller shall be subject to the limits and exclusions specified below.

 

(a)       In no event will the Seller be liable to the Buyer or the Company in respect of any payment to be made pursuant to Article 10.1 in respect of Loss whose individual amount is below Euro 5,000 (five thousand), it being understood that any single Loss lower shall be disregarded unless such amount is exceeded because of two or more Losses originated by the same event or circumstance.

 

(b)       The Seller will not be liable for Losses arising under Article 10.1 hereof, except to the extent that the aggregate amount (calculated in accordance to this Agreement) of Losses exceeds Euro 50,000 (fifty thousand) and once such amount is exceeded the liability shall be limited to the excess of Euro 50,000 (fifty thousand).

 

(c)       In any event, the aggregate amounts payable by the Seller with respect to all Claims submitted by the Buyer to the Seller will not exceed an amount equal to Euro 1,500,000 (one million five hundred thousand) (the “Cap”), it being understood and agreed between the Parties that, when an amount equal to the Cap has been indemnified by the Seller, any further Claim shall be non-indemnifiable by the Seller (without prejudice to the provision set forth in Article 10.8).

 

(d)

No limitation of liability will apply with reference to Losses suffered by the Buyer or by the Company, as consequence of any breaches (including without limitation partial breach) of any of the representations and warranties of the Seller or as a consequence of any breach of the covenants undertaken by the Seller and/or the Shareholders under this Agreement made with fraud.

 

(e)       In calculating the amounts of the Losses indemnifiable by the Seller under Article 10.1 hereof:

 

(i)     such amounts shall not be duplicative of any other Losses, liabilities or amounts for which an indemnification has been paid by the Seller for the same issue; should the indemnifiable event consist of more transactions, acts, omissions, fact situations or other circumstances in respect of which, theoretically, one or more representations and warranties of the Seller and/or one or more Indemnification Obligations of the Seller hereunder could apply, this shall not imply de facto any duplication of the Indemnification due by the Seller;

 

(ii)    the amount of any indemnifiable Losses will be computed net of:

 

(A)

any amounts that the Company has recovered from any third party or under any insurance policy with respect to such Losses, it being agreed that the Buyer commits itself to make any notification or to cause any notification to be made to its insurers and/or Company’s insurers and/or to third parties, in order to allow the payment of insurance indemnities in relation to facts which may give rise to an Indemnification Obligation of the Seller, provided that nothing herein shall oblige the Buyer or the Company to subscribe for any such insurance;

(B)

any amounts for which a specific reserve or provision is set aside in the Reference Pro Forma Financial Statements;

 

(iii)   the amount of any indemnifiable Loss so calculated shall be gross of, and therefore without taking into consideration, any fiscal impact (i.e. any fiscal burden or fiscal benefit) arising from the payment of the indemnification to the Buyer or to the Company.

 

(f)

No Claim pursuant to Article 10.1 hereof may be brought or asserted, and the Seller will have no Indemnification Obligation to fulfill, for Indemnification Events specifically, fully and fairly disclosed in the Disclosure Schedules (i.e. if the disclosure is made in a manner that can be clearly ascertained from the contents of the Disclosure Schedule).

 

(g)

The obligations of the Seller to indemnify the Buyer pursuant to this Article 10.1 shall not be excluded or in any way limited by any investigation or review of the Company conducted by the Buyer or by its accountants, counsel or other representatives prior to or after the date hereof.

 

(h)

Any Claim for Losses pursuant to Article 10.1 hereof may be brought or asserted within the following time limits:

 

(i)        in respect of any Losses arising from a breach of the Seller’s representations and warranties contained in Article 9.24 (“Tax”), only until 60 Business Days after the expiration of the relevant statute of limitations set forth by the applicable law;

 

(ii)       in respect of any Losses arising from a breach of the Seller’s representations and warranties contained in Article 9.10 (“Health and Safety”), in Article 9.11 (“Environmental”), and in Article 9.23 (“Labour”) until the expiration of the fourth (4^th) year following the Closing Date;

 

(iii)      in respect of any Losses arising from any other breach of the Seller’s representations and warranties set forth under Article 9, only until the expiration of the 24^th month following the Closing Date.

 

It is specified that the Seller will be released from the Indemnification Obligations with respect to any Loss which has not been made the subject matter of a Claim within the relevant applicable time limit set forth above.

 

10.5.

Payment of indemnification – The Seller will pay the Buyer (or the Company if so requested by the Buyer) the due indemnifications within 20 Business Days from:

 

(a)

the date on which the Seller accepted a Claim according to Article 10.2 or the date on which a settlement agreement with a third party has been executed and the Seller approved in writing such settlement; or

 

(b)

the date on which the written report of the Independent Expert has been issued according to Article 14.1 or an award according to Article 14.2 has been issued which is stating the Buyer’s right to be indemnified by the Seller with consequent order of payment to the latter; or

 

(c)

the date on which an enforceable Order – even if temporary (“provvisoriamente esecutivo”) – has been issued by any Tax, judicial or arbitral Authority against the Company, provided that, in the event that, by virtue of the definitive decision or other procedure with the relevant Authority, the Buyer or the Company is entitled to subsequently recover, in whole or in part, any sum paid on an interim basis by the Seller as per this paragraph (c), the Buyer shall promptly repay, or shall cause that the Company promptly repays, such recovered sum to the Seller upon its first written request.

 

The Buyer shall be entitled to off-set against the Seller Security the amount so becoming due from time to time by the Seller.

 

10.6.

Exclusive Remedy – Subject to the rights of the Buyer to terminate this Agreement pursuant to the provisions of this Agreement, the indemnities provided in this Article 10 shall be the sole and exclusive remedy for breach of the Seller’s representations, warranties and covenants under this Agreement in lieu of any other right or remedy provided by law or otherwise.

 

10.7.         Seller Security. In order to guarantee the fulfillment by the Seller of its Indemnification Obligations pursuant to Article 10 of this Agreement, the Residual Distribution is hereby created by the Seller as a security up to the maximum amount of Euro 1,500,00 (one million five hundred thousand) (“Seller Security”).

On the Closing Date the Seller will execute with the Buyer a letter whereby the credit of the Seller vis-à-vis the Company deriving from the Residual Distribution is pledged in favour of the Buyer always up to the above maximum amount of Euro 1,500,00 (one million five hundred thousand).

 

10.8.           Specific Indemnity. It is agreed that in respect of the specific liabilities (if any) referred to below, the following specific indemnity provisions shall apply.

 

(a)

Should the Italian Authority Tax claim to the Buyer the payment of the register Tax as an effect of the transfer of the going concern from Bassi Holding S.r.l. to the Company and therefore – following the transaction under this Agreement – to the Buyer, then the Seller will completely and fully hold harmless the Buyer of the whole amount paid by the latter. Such reimburse has to be executed within 10 Business Days since the relevant payment. The Parties agree that no limitation of liability set forth in Article 10.4 will apply with reference to this indemnification obligation.

 

(b)

Should an Authority ask to the Company the payment of fines due to the violation of Environmental Laws and/or due to lack (even partial) of Environmental Permits, then the Seller will completely and fully hold harmless the Company of the whole amount paid by the latter. Such reimburse has to be executed within 10 Business Days since the relevant payment. The Parties agree that no limitation of liability set forth in Article 10.4 will apply with reference to this indemnification obligation.

 

11.             FURTHER OBLIGATIONS

 

11.1.         Bassi Chargers USA Inc. Andrea Bassi is the sole shareholder of the company named “HBA LLC Delaware” which holds the 100% of the corporate capital of the company named “Bassi Chargers USA Inc.”.

By the execution of this Agreement Andrea Bassi undertakes towards the Buyer that, within 90 calendar days of the Closing:

 

(a)

to procure that the company named “Bassi Chargers USA Inc.” ceases the use of the name “Bassi”; and

 

(b)

to procure the starting for winding up such company.

 

11.2.

Restrictions.

 

The Seller and each of the Shareholders, on an individual basis and without any joint obligation or liability or responsibility, hereby assume the following non-compete undertakings.

 

(a)       For a period of (3) three years as from Closing Date (with reference to Andrea Bassi such period will run from the date on which Andrea Bassi ceases to be an employee or a director of the Company) the Seller and the Shareholders shall not, either directly or indirectly, enter into competition (as shareholders, directors, officers or otherwise), or promote competition of third parties, with the activity of the Company, including without limitation with the Business, in the Italian territory, European Union, United States of America, Canada, Japan, South Korea, China, Brazil, Russia, India, Malaysia (the “Territory”).

 

(b)

The Seller and the Shareholders shall not, either directly or indirectly, for a period of (3) three years as from Closing, solicit any of the Company’s directors, and employees to take up work for the Seller or its shareholders or companies connected to the latter or for any other third party.

 

(c)

For a period of (3) three years as from Closing, the Seller and the Shareholders shall not, either directly or indirectly, within the scope of the Company’s business (including without limitation the Business) canvass or solicit or cause to be canvassed or solicited in relation to a business competing with the Company’s business (including without limitation the Business) the custom of any person who at any time during the 12 months prior to the Closing Date was a client or customer of the Company.

 

(d)

For a period of (3) three years as from Closing Date, the Seller and the Shareholders shall not, either directly or indirectly, interfere or seek to interfere or take steps as may interfere with supplies to the Company from any suppliers who have supplied goods or services to the Company for use in connection with the Business at any time during the 12 months prior to Closing.

 

(e)

The Parties acknowledge that the determination of the Purchase Price has been calculated taking into account the consideration for the obligations of the Seller and of the Shareholders set out in this Article 11.2, which consideration is therefore included in the Purchase Price.

 

11.3.         Certain specific works post Closing – The Parties acknowledge and agree that the costs linked to the following works shall be borne by the Seller up to the maximum amount of Euro 25,000 (twenty five thousand) and within 10 Business Days since the relevant payment by the Company: (i) the works still to be implemented for the issuance of the Fire Prevention Certificate (“Certificato Prevenzione Incendi”) listed under the letter dated December 24, 2015 no. 0014237 (copy of which is attached under the Appendix 1 of the Disclosure Schedule); (ii) to implement a secondary containment system for the chemical storage; (iii) to realize the vertical section and monitoring point in accordance with the applicable Law; and (iv) the replacement of the door insulation gasket of one of the three oven at the transformer production department.

For sake of clarity it is specified that this obligation of reimbursement will not be subject to the limitations set forth under Article 10.4.

 

11.4.

Confidentiality. Subject to Article 11.5, each Party:

 

(a)

shall treat as strictly confidential the provisions of this Agreement and the process of negotiation and any and all information about the other Party obtained or received by it as a result of negotiating, entering into or performing its obligations under this Agreement (“Confidential Information”); and

 

(b)

shall not, except with the prior written consent of each other Party, make use of (save for the purposes of performing its obligations under this Agreement) or disclose to any person any Confidential Information.

 

It being agreed and understood, however, that this confidentiality obligation shall not apply if and to the extent that the Party disclosing Confidential Information can demonstrate that:

 

(i)

such disclosure is required by law or is required or requested with a binding effect by any supervisory, regulatory, judicial, or governmental body having jurisdiction over it and whether or not the requirement or request has the force of law;

 

(ii)

such disclosure is to its professional advisers, directors, statutory auditors and senior officers and in relation to the negotiation, entry into or performance of this Agreement or any matter arising out of the same;

 

(iii)

such disclosure is necessary to facilitate the satisfaction of any of the conditions precedent set forth in this Agreement;

 

(iv)

such disclosure is necessary to facilitate a due diligence, the granting of financing by a bank or other credit institution, or the execution of any other transaction subject to any such third party, bank or credit institution agreeing to be bound by confidentiality obligations substantially similar to those set out in this Article;

 

(v)

in the case of a disclosure or use, the Confidential Information concerned was lawfully in its possession (as evidenced by written records) prior to it being obtained or received as described in this Article; or

 

(vi)

in the case of a disclosure or use, the Confidential Information concerned has come into the public domain other than through its fault.

 

11.5.         Publicity. Save as set out in the next sentence, none of the Parties shall, and the Seller and the Shareholders shall procure that the Company shall not, issue or cause the publication of any press release or other public announcement with respect to this Agreement or the sale and purchase herein provided, without the prior written consent of the Buyer, except as may be required by law or by any listing agreement with a national securities exchange or trading market, and a written opinion of counsel is provided to that effect, and then only with as much prior written notice to the other Parties as is practicable. The Buyer shall be permitted to announce the proposed and closed acquisition by the Buyer of the Quota and the Business and to answer questions from the media in relation to such proposed and closed acquisition.

 

11.6.         General. The Seller, the Shareholders and the Buyer shall undertake all actions reasonably necessary to ensure completion of the transaction, the sale and purchase of the Quota to the Buyer and the acquisition of the Sevcon Common Stock by the Seller in accordance with the terms set forth in this Agreement.

 

11.7.

Notification of Certain Matters.

 

(a)

The Seller and the Shareholders shall give prompt notice to the Buyer of the occurrence, or non-occurrence, of any event the occurrence or non-occurrence of which would be reasonably likely to cause any representation and warranty of the Seller contained in this Agreement to be untrue or inaccurate in any material respect at or prior to Closing.

 

(b)

Each Party shall give prompt notice to the other Parties of the occurrence, or non-occurrence, of any event the occurrence or non-occurrence of which would be reasonably likely to cause to the Seller, a Shareholder or the Buyer, as the case may be, to fail to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder,

 

provided however, that the delivery of any notice pursuant to this Article 11.7 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice.

 

12.             TERMINATION

 

Termination. Without prejudice to the withdrawal right set forth in Articles 5.8, 5.9 and 5.10, this Agreement may be terminated at any time prior to Closingby written agreement of the Parties.

 

12.1.         Effect of Termination.

(a)

In the event of the termination of this Agreement in accordance with Article 0 hereof, this Agreement shall subject to Article 12.1(b) thereafter become void and have no effect, and no Party hereto shall have any liability to any other Party hereto or its respective, directors, officers or employees, except for the obligations of the Parties hereto contained in this Article 12.1 and in Articles 11.5, 11.6, 13.1 and 14 hereof and any pre-termination breaches to the extent not waived.

 

(b)       In the event this Agreement shall be terminated and at such time any Party is in material breach of or default under any term or provision hereof, such termination shall be without prejudice to, and shall not affect, any and all rights to damages that the other Parties may have hereunder or otherwise under applicable law. The damages recoverable by a non-defaulting Party shall include, without limiting the generality of the immediately preceding sentence, all attorneys’ fees reasonably incurred by such Party in connection with the transactions contemplated hereby.

 

13.             MISCELLANEOUS

 

13.1.         Notices. All notices or other communications hereunder shall be in the English language, shall be made in writing (including e-mail transmission) to the following addresses (or such other address that will be communicated in writing in accordance with this Article 13.1):

 

	If to the Seller and/or the Shareholders, to:
	Bassi Holding S.r.l. – to the kind attention of Mr. Andrea Bassi
	Address:	Lugo (RA) S.M. in Fabriago, Via Mensa n. 3/2
	Mail:	[email protected]
	Copy to:	dott. Marco Leonelli, Via Farini n. 6 – 40124 – Bologna; [email protected]
	If to Buyer, to:
	Sevcon S.r.l. c/o its legal seat – to the kind attention of Mr. Matthew Boyle
	Mail:	[email protected]
	Copy to:	Mr. Federico Dettori, Via d’Azeglio n. 25 – 40124 – Bologna; [email protected]

 

13.2.

Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Parties hereto, or in the case of a waiver, by the Party against whom the waiver is to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

 

13.3.

Assignment. No Party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other Parties hereto.

 

13.4.

Entire Agreement. This Agreement (including all Schedules, Exhibits and Annexes) constitutes the entire agreement between the Parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

 

13.5.

Fulfillment of Obligations. Any obligation of any Party to another Party under this Agreement, which obligation is performed, satisfied or fulfilled by an affiliate of such Party, shall be deemed to have been performed, satisfied or fulfilled by such Party.

 

13.6.

Parties in Interest. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Buyer, the Seller, the Shareholders or their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.

 

13.7.

Taxes and expenses. Each Party will pay its counsel, attorney’s and all other advisors’ fees without charging the Company of any cost associated with this Agreement and the Transaction Documents and the transactions thereby contemplated, their preparation, execution and performance.

 

13.8.

Severability. Each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

 

13.9.

Shareholders. Each Shareholder is Party to this Agreement only for the purposes of the non-compete undertakings assumed by him/her pursuant to Articles 11.1 and 11.2 above.

For avoidance of doubt it is expressly agreed that no joint obligation or liability or responsibility will be among the Shareholders and between any the Shareholder and the Seller.

 

14.

DISPUTES - LAW AND JURISDICTION

 

14.1.         Arbitrator. The Parties agree that any dispute having merely an accounting or quantitative nature, including any dispute concerning the resolution of Claims that the Seller and the Buyer mutually consider in writing within 15 Business Days as from the expiration of the term set forth under Article 10.2(b) as having an accounting or quantitative nature, will be submitted, upon request of the Seller or the Buyer, to the Independent Expert who shall act as an arbitrator pursuant to article 1349, paragraph 1, of the Italian Civil Code and shall render its determination by applying the relevant provisions of this Agreement. In such event, the following procedure shall apply.

 

(a)       Upon its appointment, the Independent Expert – through an informal procedure – shall allow any Party concerned to explain its reasons in respect of the subject matter deferred to the Independent Expert.

 

(b)       Within 30 days from the date of its appointment, the Independent Expert shall communicate to both Parties its determinations through a summary written report inclusive of a summary of the reasons therefor.

 

(c)       The determinations of the Independent Expert shall be considered as final and binding upon the Parties, unless an event of obvious unfairness or error occurs pursuant to article 1349, paragraph 1, of the Italian Civil Code.

 

The compensation for the services of the Independent Expert shall be borne half by the Seller, and half by the Buyer. As an exception to the above, if the determinations of the Independent Expert are fully in line with the position of one of the Parties, the compensation for the services of the Independent Expert shall be borne entirely by the other Party.

 

14.2.

Governing Law; Jurisdiction. This Agreement shall be governed by Italian law.

All disputes arising out of this Agreement shall be finally settled by arbitration under the Rules of the Chamber of National and International Arbitration of Milan. The Arbitral Tribunal shall consist of a three arbitrators appointed in accordance with said Rules.

 

The arbitration shall be ‘rituale’ and shall be conducted in English and the arbitration venue shall be Milan. The arbitrators shall decide in accordance with the law governing this Agreement and shall render their award ‘secondo diritto’.

Without prejudice to the above, in respect of any dispute arising out of or related to this Agreement that, according to the applicable provision of the law, cannot be deferred to arbitration, the Court of Milan shall have the exclusive jurisdiction.

 

 

LIST OF EXHIBITS AND ANNEXES

 

Exhibit A	Powers of the Seller
Exhibit B	Powers of the Buyer and Sevcon
Annex 5.2	Andrea Bassi settlement
Annex 6.1	Amendment to certain employment agreements
Annex 6.3	Interim Financial Statements
Annex 6.4	Provisional Pro Forma Financial Statements
Annex 7.2.1(c)	New lease agreement
Annex 7.2.1(e)	Andrea Bassi Employment Contract
Annex 7.2.1(f)	Release and waiver letter to the Buyer / Company
Annex 7.3.1(c)	Release letter to the resigning directors
Annex 7.4	Deed of Transfer
Annex 9	Disclosure Schedule

 

IN WITNESS WHEREOF, the Parties have executed or caused this Agreement to be executed as of the date first written above.

 

Made in three (3) original versions as of the date hereof

 

For the Buyer
Sevcon S.r.l.		Sevcon Inc.
/s/ Matthew Boyle		/s/ Matthew Boyle
Name: Matthew Boyle		Name: Matthew Boyle
Title: Sole Director		Title: CEO
For the Seller
Bassi Holding S.r.l.
/s/ Bruno Bassi
Name: Bruno Bassi
Title: Chairman of the Board

 

 

For full acceptance of the provisions set forth in Articles 11.1 and 11.2

 

	Mr. Andrea Bassi		Mr. Bruno Bassi		Mrs. Tiziana Rimini
	/s/ Andrea Bassi		/s/ Bruno Bassi		/s/ Tiziana Rimini

 

 

 

 

48

 

 

 

 

Exhibit 10.2

TERM LOAN AGREEMENT


between


SEVCON, INC.


and


BANCA MONTE DEI PASCHI DI SIENA S.p.A.
acting through its New York branch


January 27, 2016

 

 

 

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS	1
ARTICLE II. TERM LOAN	9
2.1   Term Loan.	9
2.2   Use of Proceeds.	10
ARTICLE III. THE NOTE	10
3.1   Note.	10
ARTICLE IV. INTEREST RATES AND FEES	10
4.1   Interest Rate.	10
4.2   Facility Fee.	11
4.3   Prepayment.	11
4.4   Late Charges and Default Interest.	11
ARTICLE V. PAYMENTS AND PRINCIPAL	11
5.1   Type and Manner of Payment.	11
5.2   Payments of Principal and Interest.	12
5.3   Indemnity.	12
5.4   Regulatory Change.	12
ARTICLE VI. SECURITY	13
6.1   Security.	13
ARTICLE VII. REPRESENTATIONS AND WARRANTIES	13
7.1   Corporate Matters.	13
7.2   Subsidiaries.	14
7.3   Litigation.	15
7.4   No Default.	15
7.5   Solvency.	15
7.6   Employee Benefit Plans.	15
7.7   Environmental.	16
7.8   Brokerage Fees.	16
7.9   Intellectual Property.	16
7.10   Title to Properties; Liens.	16

 

  

TABLE OF CONTENTS

 

	Page
7.11   Leases.	16
7.12   Transactions with Affiliates.	16
7.13   Complete Disclosure.	17
7.14   Compliance with Laws.	17
7.15   Patriot Act.	17
7.16   Margin Stock.	17
7.17   Governmental Regulation.	17
7.18   OFAC.	17
7.19   Indebtedness.	18
ARTICLE VIII. COVENANTS OF BORROWER	18
8.1   Corporate Status, Financial Information and Obligations.	18
8.2   Financial Covenant.	19
8.3   Environmental.	19
8.4   Taxes.	19
8.5   Insurance.	19
8.6   Employee Benefits.	20
8.7   Other Agreements.	20
8.8   Use of Proceeds.	20
8.9   Corporate Organization.	21
8.10   Continuation of Business.	21
8.11   Additional Indebtedness and Activities.	21
8.12   Disposal of Assets.	21
8.13   Future Acquisitions.	21
8.14   Change Name.	21
8.15   Change of Control.	21
8.16   No Liens on Target’s Assets.	21
8.17   Dividends.	21
8.18   Restricted Payments.	22
8.19   No Issuance of New Preferred Stock.	22
8.20   Further Assurances; Power of Attorney.	22
8.21   Access to Books and Records.	22

 

 

TABLE OF CONTENTS

 

	Page
ARTICLE IX. EVENTS OF DEFAULT	22
9.1   Events of Default.	22
ARTICLE X. CONDITIONS PRECEDENT	24
ARTICLE XI. MISCELLANEOUS PROVISIONS	26
11.1   Waiver.	26
11.2   Consent to Jurisdiction; Service of Process and Waiver of Jury Trial.	26
11.3   Notices.	27
11.4   Costs, Expenses and Taxes.	28
11.5   Captions.	28
11.6   Governing Law.	28
11.7   Successors and Assigns.	28
11.8   Counterparts.	28
11.9   Revival and Reinstatement of Obligations.	28
11.10   Amendments.	29
11.11   Inconsistencies.	29
11.12   Performance of Obligations.	29
11.13   Assignments and Participations.	29
11.14   Right of Set-Off.	29
11.15   Severability.	29
11.16   Limitation of Liability.	30
11.17   Entire Agreement.	30
11.18   Patriot Act.	30
EXHIBIT A PROMISSORY NOTE
EXHIBIT B FORM OF GUARANTY
EXHIBIT C FORM OF SECURITY AGREEMENT
EXHIBIT D FORM OF PLEDGE AGREEMENT
EXHIBIT E FORM OF OPINION OF COUNSEL

TERM LOAN AGREEMENT

This TERM LOAN AGREEMENT, dated as of January 27, 2016, between SEVCON, INC., a Delaware corporation with offices at 155 Northboro Road, Southborough, Massachusetts 01772 (the “Borrower”) and BANCA MONTE DEI PASCHI DI SIENA S.p.A., acting through its New York branch, having an office at 55 East 59th Street, New York, New York 10022 (the “Bank”).

W I T N E S S E T H:

WHEREAS, the Borrower intends to acquire, through an indirect wholly-owned Subsidiary, the Target, as defined below (the “Acquisition”).

WHEREAS, in connection with the Acquisition, the Borrower has requested that the Bank make available to the Borrower an amount not to exceed the lesser of FIFTEEN MILLION and 00/100 EUROS (€15,000,000.00) or eighty percent (80%) of the Acquisition purchase price, which aggregate amount the Bank is willing to make available to the Borrower subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and to induce the Bank to make the Loan and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as follows:

ARTICLE I.
DEFINITIONS

As used herein, the following capitalized terms shall have the meaning set forth below:

"Acquisition" shall mean the meaning set forth in the recitals above.

"Acquisition Note" shall mean the promissory note in the approximate principal amount of the Loan delivered by Sevcon Limited to the Borrower.

“Affiliate” shall mean, as applied to any Person, any other Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” shall mean the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise.

“Agreement” shall mean this Term Loan Agreement, as the same may be amended or modified from time to time.

“Applicable EURIBOR Margin” shall mean 300 basis points (3.00%) per year.

“Applicable EUROLIBOR Margin” shall mean 300 basis points (3.00%) per year.

“Bank” has the meaning set forth in the preamble to this Agreement.

“Benefit Plan” shall mean a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which the Borrower or any Subsidiary or ERISA Affiliate of the Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Break Costs” shall mean such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate the Bank for any actual loss, cost, or expense incurred as a result of (i) any prepayment of the EUROLIBOR Loan other than on the last day of the applicable Interest Period for such EUROLIBOR Loan, or (ii) any failure by the Borrower to prepay the Loan on any date for payment specified in the Borrower’s written notice of intention to prepay such Loan.

“Business Day” shall mean a day other than a Saturday, Sunday or other day on which banking institutions are authorized or obligated to close under the laws of the United States of America or the State of New York.

“Change of Control” shall mean (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than the Permitted Investor, of Stock representing more than 40% of the aggregate ordinary voting power represented by the issued and outstanding Stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated or approved by the board of directors of the Borrower nor (ii) appointed by directors so nominated or approved; or (c) the Borrower shall cease to own, directly or indirectly, free and clear of all Liens or other encumbrances, at least 100% of the outstanding Stock of any Subsidiary except as may result from any merger, consolidation or other reorganization permitted under this Agreement.

“Code” shall mean the United States Internal Revenue Code of 1986, as revised from time to time.

“Default Rate” shall mean a per annum rate of interest equal to the rate of interest applicable to an Obligation determined pursuant to Section 4.1, plus three percent (3%).

“EBITDA” shall mean, for any period of determination and without duplication, the sum of (i) consolidated net income of the Borrower and its Subsidiaries for such period (computed without regard to any extraordinary items of gain or loss), plus (ii) to the extent included in the calculation of consolidated net income for such period, the sum of (A) interest expense, (B) income tax expense, (C) depreciation and amortization, (D) any extraordinary charges for such period, (E) any non-cash charges for such period related to stock options and restricted stock granting, (F) any other nonrecurring non-cash charges for such period (but excluding any non-cash charge in respect of an item that was included in consolidated net income in a prior period), (G) fees and expenses incurred in connection with the negotiation, execution and delivery on the Funding Date of this Agreement and the other Loan Documents and the transactions contemplated herein and therein, (H) fees and expenses incurred in connection with the negotiation, execution and delivery of the documents related to the Acquisition and (I) reasonable non-recurring cash expenses and losses arising from any integration costs, severance costs, retention costs, relocation costs, termination costs, consolidated of facilities costs and losses, minus (iii) non-cash gains.

“Environmental Law” shall mean any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on the Borrower or its Subsidiaries, relating to the environment, the effect of the environment on employee health, or Hazardous Materials, including the Comprehensive Environmental Response Compensation and Liability Act, 42 USC § 9601 et seq.; the Resource Conservation and Recovery Act, 42 USC § 6901 et seq.; the Federal Water Pollution Control Act, 33 USC § 1251 et seq.; the Toxic Substances Control Act, 15 USC § 2601 et seq.; the Clean Air Act, 42 USC § 7401 et seq.; the Safe Drinking Water Act, 42 USC § 3803 et seq.; the Oil Pollution Act of 1990, 33 USC § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC § 11001 et seq.; the Hazardous Material Transportation Act, 49 USC § 1801 et seq.; and the Occupational Safety and Health Act, 29 USC §651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of the Borrower or its Subsidiaries under Code Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of the Borrower or its Subsidiaries under Code Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the Code, any organization subject to ERISA that is a member of an affiliated service group of which the Borrower or any of its Subsidiaries is a member under Code Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the Code, any Person subject to ERISA that is a party to an arrangement with the Borrower or any of its Subsidiaries and whose employees are aggregated with the employees of the Borrower or its Subsidiaries under Code Section 414(o).

“EURIBOR Loan” shall mean the Term Loan when the interest thereon is determined by reference to the EURIBOR Rate.

“EURIBOR Rate” shall mean with respect to the EURIBOR Loan, for any Interest Period applicable thereto, the rate per annum as determined on the basis of the euro interbank offered rate administered by the Banking Federation of the European Union (or any other person which takes over the administration of that rate), as quoted by such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%) for a period of time comparable to such Interest Period for such EURIBOR Loan as of 11:00 a.m. central European time on the day that is two (2) Business Days preceding the first day of such Interest Period for such EURIBOR Loan. In the event that the Bank is unable to obtain any such quotation as provided above, it shall be deemed that the EURIBOR Rate pursuant to a EURIBOR Loan cannot be determined.

“Euro” and “€” shall mean lawful currency of the European Union.

“EUROLIBOR Loan” shall mean the Term Loan when the interest thereon is determined on the basis of rates referred to in the definition of “EUROLIBOR Rate,” below. All computations of interest for a EUROLIBOR Loan shall be made on the basis of a three hundred sixty (360) day year and the actual number of days elapsed.

“EUROLIBOR Rate” shall mean with respect to the EUROLIBOR Loan, for any Interest Period applicable thereto, the rate per annum as determined on the basis of the London Interbank offered rates for deposits in Euros, as quoted by such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%) for a period of time comparable to such Interest Period for such EUROLIBOR Loan as of 11:00 a.m. London time on the day that is two (2) London Business Days preceding the first day of such Interest Period for such EUROLIBOR Loan. In the event that the Bank is unable to obtain any such quotation as provided above, it shall be deemed that the EUROLIBOR Rate pursuant to a EUROLIBOR Loan cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to EUROLIBOR deposits of any Bank, then for any period during which such Reserve Percentage shall apply, the EUROLIBOR Rate shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. “Reserve Percentage” shall mean the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves), which is imposed on member banks of the Federal Reserve System against “Euro-currency Liabilities” as defined in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. The Bank shall use its best efforts to advise the Borrower of the EUROLIBOR Rate as soon as practicable after each change in the EUROLIBOR Rate; provided, however, that the failure of the Bank to so advise the Borrower on any one or more occasions shall not affect the rights of the Bank or the obligations of the Borrower hereunder.

“Event of Default” has the meaning set forth in ARTICLE IX hereof.

“Excluded Subsidiaries” shall mean Sevcon Asia Limited and Sevcon Japan KK.

“Execution Date” shall mean the date first set forth above in this Agreement.

“Funding Date” shall mean a date not more than 30 days subsequent to the Execution Date on which all of the conditions set forth in ARTICLE X have been satisfied.

“GAAP” for any Person, shall mean generally accepted accounting principles in the United States of America as in effect from time to time, applied by the Borrower on a basis consistent with the Borrower’s most recent financial statements furnished to the Bank pursuant to the provisions of this Agreement. All accounting terms used in this Agreement, unless otherwise defined, shall have the meanings ascribed to them under GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Bank shall so request, the Bank and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein.

“Governmental Authority” shall mean any domestic or foreign, federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

“Guarantors” shall mean Sevcon USA, Inc., a Delaware corporation and Sevcon Security Corporation, a Massachusetts corporation.

“Guaranties” shall mean the unconditional guaranties by the Guarantors of the Obligations, substantially in the form attached hereto as Exhibit B.

“Hazardous Materials” shall mean (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

“Indebtedness” shall mean any obligation of a Person for the payment of money to any other Person, including without limitation (i) indebtedness for money borrowed, (ii) purchase money obligations, (iii) leases evidencing the acquisition of capital assets, (iv) reimbursement obligations; provided, however, that reimbursement obligations supporting credit or liquidity facilities shall not constitute Indebtedness until such time as a reimbursement payment becomes due and payable under the agreement entered into in connection with such reimbursement obligations, and (v) guaranteed indebtedness, but excluding (a) obligations for supplies, services and pensions allocable to current operating expenses during the current or future fiscal years in which the supplies are to be delivered, the services rendered, or the pensions paid and (b) rentals payable in the current or future fiscal years under leases that are not capital leases and not required to be included as indebtedness under GAAP.

“Interest Period” shall mean with respect to the EUROLIBOR Loan, each period commencing on the date such Loan is made (or the last day of the next preceding Interest Period with respect to the Loan), and ending on the day that is 1, 2 or 3 months thereafter as selected by the Borrower (except that each such Interest Period that commences on the last London Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last London Business Day of the appropriate subsequent calendar month). Notwithstanding the foregoing: (i) each Interest Period that would otherwise end on a day that is not a London Business Day shall end on the next succeeding London Business Day; and (ii) no Interest Period shall end later than the Term Loan Maturity Date.

“Leverage Ratio” shall mean, as of any date of determination, the ratio of consolidated Indebtedness of the Borrower and its Subsidiaries minus cash and marketable securities of the Borrower and its Subsidiaries to EBITDA of the Borrower and its Subsidiaries for the 12 month period ended as of such date of determination.

“Lien” shall mean any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, irrespective of whether (a) such interest is based on the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances. Without limiting the generality of the foregoing, the term “Lien” includes the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, option, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes and also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting real property.

“Loan” shall mean the Term Loan.

“Loan Documents” shall mean this Agreement, the Note, the Guaranty, the Security Agreement, the Pledge Agreements and all documents, instruments and agreements relating to the foregoing, and any amendment, modification or supplement, from time to time, to any of the foregoing.

“Loan Parties” shall mean the Borrower and the Guarantors.

“London Business Day” shall mean a Business Day on which dealings in Euro deposits are carried out in the London interbank market.

“Margin Stock” has the meaning set forth in Regulation U of the Board of Governors as in effect from time to time.

“Material Adverse Change” shall mean a material adverse change with respect to (a) the business, operations, property, or financial condition of the Loan Parties and their Affiliates, or (b) the ability of the Loan Parties to perform their obligations under the Loan Documents.

“Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which a Borrower or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Note” shall mean the Promissory Note dated the Funding Date made by the Borrower to the Bank pursuant to this Agreement, substantially in the form attached as Exhibit A to this Agreement.

“OFAC” shall mean The Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Obligations” shall mean all of the Borrower’s liabilities, obligations and indebtedness to the Bank of any and every kind and nature arising under this Agreement.

“Organizational Documents” shall mean the certificate of incorporation and by-laws of each of the Borrower and Guarantors, as applicable, together with any and all other consents or resolutions and such other agreements related to the corporate governance of the Loan Parties; in each case including any and all modifications thereof as of the date of the document referring to such Organizational Document and any and all future modifications thereof.

“Patriot Act” has the meaning set forth in Section 7.15.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

“Permitted Investor” shall mean, collectively, Mario J. Gabelli/GGCP, Inc./GAMCO Investors, Inc.

“Person” shall mean any natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Plan” shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), subject to the provisions of Title IV of ERISA or Section 412 of the Code sponsored, maintained or contributed to by the Borrowers or any ERISA Affiliate.

“Pledge Agreements” shall mean (a) the pledge agreement substantially in the form attached hereto as Exhibit D pursuant to which the Borrower shall pledge to the Bank (i) 100% of the Stock of the Guarantors, and (ii) the Acquisition Note. and (b) with the exception of the Excluded Subsidiaries as to which no pledge is required, the documents governed by the laws of each of the Borrower’s first-tier non-U.S. Subsidiaries local jurisdiction of organization, pursuant to which the Borrower will pledge sixty percent (60%) of the Stock of such Subsidiaries to the Bank.

“Proceeds” shall mean “proceeds,” as such term is defined in Section 9 102(64) of the UCC and, to the extent not included in such definition, shall include, without limitation, (a) any and all proceeds of any insurance, indemnity, warranty, guaranty or letter of credit payable to any Loan Party from time to time with respect to any of the collateral, (b) all payments (in any form whatsoever) paid or payable to any Loan Party from time to time in connection with any taking of all or any part of the collateral by any Governmental Authority or any Person acting under color of any Governmental Authority, (c) all judgments in favor of any Loan Party in respect of the collateral and (d) all other amounts from time to time paid or payable or received or receivable under or in connection with any of the collateral.

“Property” shall mean any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.

“Regulatory Change” has the meaning set forth in Section 5.4 hereof.

“Reportable Event” shall mean any reportable event as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).

“Requirement of Law” shall mean, as to any Person, any law, rule, treaty, regulation or determination of any Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or assets or to which any such Person or any of its Property or assets may be bound or affected.

“Sanctioned Entity” shall mean (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

“Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals maintained by OFAC.

“Security Agreement” shall mean the security agreement of even date herewith substantially in the form attached hereto as Exhibit C, pursuant to which Sevcon USA, Inc. grants a security interest to the Bank in all its right, title and interest in all of the collateral described therein.

“Solvent” shall mean, with respect to any Person as of any date of determination, that (a) valued on a going concern basis, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, and (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is “solvent” or not “insolvent,” as applicable within the meaning given those terms and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

“Stock” shall mean all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, limited liability company interests or any other equity security.

“Subsidiary” of a Person shall mean a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity, but shall specifically exclude Sevcon New Energy Technology (Hubei) Company Limited.

“Target” shall mean Bassi S.r.l., an Italian limited liability company.

“Term Loan” has the meaning set forth in Section 2.1 hereof.

“Term Loan Maturity Date” shall mean the earliest to occur of (i) the fifth anniversary of the Funding Date, (ii) the date (if any) that the Bank declares an Event of Default pursuant to Article IX of this Agreement whereupon the Loan becomes or is declared to be immediately due and payable by the Bank or (iii) the date (if any) that the Borrower prepays in full the outstanding principal balance of the Loan.

“UCC” shall mean the Uniform Commercial Code in effect from time to time in the State of New York or, when the laws of any other state govern the method or manner of the perfection or enforcement of any security interest in any of the collateral, the Uniform Commercial Code as in effect from time to time in such state.

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

ARTICLE II.
TERM LOAN

2.1              Term Loan. Subject to the terms and conditions of this Agreement, the Bank shall make a term loan (the “Term Loan”) to the Borrower in the principal amount of Fifteen Million and 00/100 Euros (€15,000,000.00) or, if lower, the amount equal to eighty percent (80%) of the Acquisition purchase price. The final principal amount of the Term Loan shall be determined on the Funding Date.

2.2              Use of Proceeds. The Term Loan shall be used to pay a portion of the purchase price for the Acquisition.

ARTICLE III.
THE NOTE

3.1              Note. The Term Loan made by the Bank shall be evidenced by the Note, substantially in the form of Exhibit A attached hereto, which shall be payable to the order of the Bank and shall bear interest as provided in Article IV.

ARTICLE IV.
INTEREST RATES AND FEES

4.1              Interest Rate. (a) Outstanding amounts under the Note shall bear interest, at a variable rate per annum equal to the EUROLIBOR Rate in effect from time to time plus the Applicable EUROLIBOR Margin. Such EUROLIBOR Loan shall automatically be renewed on the last day of the current Interest Period for an Interest Period having the same duration as the current Interest Period unless the Borrower provides written notice to the Bank that it elects a different renewal Interest Period not less than two (2) Business Days prior to the expiration of the current Interest Period.

(b)               If the Bank shall determine that for any reason adequate and reasonable means do not exist for ascertaining EUROLIBOR with respect to the Loan, the Bank will give notice of such determination to the Borrower. Upon such determination and notice, the Bank may convert the EUROLIBOR Loan to a EURIBOR Loan and the Loan shall thereinafter bear interest at a variable rate per annum equal to the EURIBOR Rate in effect from time to time plus the Applicable EURIBOR Rate Margin. Thereafter, the Bank may not maintain the Loan as a EUROLIBOR Loan hereunder until the Bank revokes such notice in writing. If the Bank shall determine that the introduction of any law (statutory or common), treaty, rule, regulation, guideline or determination of an arbitrator or of a Governmental Authority or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful for the Bank to make a Loan as a EUROLIBOR Loan then, on notice thereof by the Bank to the Borrower, the Bank may suspend maintaining this Loan as a EUROLIBOR Loan until the Bank shall have notified the Borrower that the circumstances giving rise to such determination shall no longer exist and the Bank may convert the Loan from a EUROLIBOR Loan to a EURIBOR Loan. The Bank may, in its sole discretion, convert the EUROLIBOR Loan to a EURIBOR Loan upon the occurrence of an Event of Default. The Loan shall automatically convert from a EUROLIBOR Loan to a EURIBOR Loan on the date the Borrower commences, or has commenced against it, any proceeding or request for relief under any bankruptcy, insolvency or similar laws now or hereafter in effect in the United States of America or any state or territory thereof or any foreign jurisdiction or any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against or winding up of affairs of the Borrower. The Borrower shall be responsible for all Break Costs, if any, with respect to prepayment of the Loan or conversion of the Loan to a EURIBOR Loan as provided in Section 4.1(a).

4.2              Facility Fee. A facility fee of .75% of the principal amount of the Term Loan shall be paid by the Borrower to the Bank at or prior to the Funding Date.

4.3              Prepayment.

(a)                The Borrower may prepay all or any portion of the principal outstanding under the Note, at any time, upon at least three (3) Business Days prior written notice to the Bank (which notice shall be irrevocable), and any such prepayment shall occur only on the last day of the applicable Interest Period. No amount that is prepaid may be reborrowed. The Borrower shall pay to the Bank, Break Costs if any in the event that such prepayment is not made on the last day of the applicable Interest Period. If the prepayment is made on or before the six-month anniversary of the Funding Date, the Borrower shall pay to the Bank together with such prepaid an amount equal to one percent (1%) of the amount of the prepayment. All prepayments must be in a minimum amount of One Million Euros (€1,000,000) or whole multiples in excess thereof of Five Hundred Thousand Euros (€500,000).

(b)               Required prepayments shall be applied to scheduled amortization installments set forth on the amortization schedule annexed to the Note as Schedule I in reverse order of maturity. Voluntary prepayments shall be applied to scheduled amortization installments in the order directed by the Borrower.

4.4              Late Charges and Default Interest. In the event that any payment of principal or interest due hereunder is not received by the Bank within fifteen (15) days following the date such payment is due, the Bank may assess the Borrower a late charge equal to four percent (4%) of the amount of the payment then due and owing. Notwithstanding anything herein to the contrary, upon the occurrence and continuation of an Event of Default, the Borrower shall pay interest at a rate equal to the Default Rate.

ARTICLE V.
PAYMENTS AND PRINCIPAL

5.1              Type and Manner of Payment. (a) The Borrower shall make each payment of principal and interest and any other amounts payable hereunder, not later than 12:00 noon (New York City time) on the date when due, as provided in section (b) below. All payments received by the Bank after 12:00 noon shall be deemed received on the next succeeding Business Day and any applicable interest or fees shall continue to accrue. Whenever any payment of principal or interest shall be due on a day which is not a Business Day, the date for such payment shall be extended to the next succeeding Business Day and interest shall accrue for such period. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall accrue for such extended time.

(b)               Each payment, repayment or prepayment, as applicable, of principal and interest, and each payment on account of any other fees, charges or other amounts payable under this Agreement or the Note shall be paid by the Borrower, without set-off or counterclaim to the Bank, by mail at its office located at 55 E. 59th Street, New York, New York 10022 for receipt on the day such payment is due, or by wire transfer to the Bank, in accordance with the instructions delivered by the Bank to the Borrower, or to such other location or accounts as the Bank may specify in writing to the Borrower from time to time, in immediately available funds.

5.2              Payments of Principal and Interest. Commencing on the second anniversary of the Funding Date and continuing on the last day of each three-month period thereafter until the Term Loan Maturity Date, the Borrower shall pay to the Bank installments of principal as set forth on the amortization schedule annexed to the Note as Schedule I; provided, however, that the final principal installment shall be in an amount equal to the aggregate principal amount, plus accrued unpaid interest to date, of the Term Loan outstanding on the Term Loan Maturity Date. Commencing on the last day of the first Interest Period after the Funding Date and on the last day of each Interest Period thereafter, the Borrower shall pay to the Bank interest as provided in Section 4.1 on the unpaid principal amount of the Loan.

5.3              Indemnity. The Borrower agrees to defend, protect, indemnify and hold harmless the Bank and each of its affiliates, officers, directors, employees, and agents (the “Indemnitee”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitee incurred in connection with any action or proceeding between any Loan Party or its Affiliates and any Indemnitee or between any Indemnitee and any third party or otherwise, whether or not relating to any investigative, administrative or judicial proceeding and whether or not such Indemnitee shall be designated a party thereto), imposed on, incurred by, or asserted against such Indemnitee (whether direct, indirect, special, consequential, punitive or treble and whether based on any federal, state or local, or foreign, laws or other statutory regulations, including, without limitation, environmental laws, securities and commercial laws and regulations, under common law or at equitable cause, or in contract or otherwise) in any manner relating to or arising out of the Loan Documents, or any act, event or transaction related or attendant thereto or contemplated thereby, or any action or inaction by an Indemnitee under or in connection therewith, any commitments of the Bank hereunder, or the making of the Loan, or the management of such Loan, or the use or intended use of the proceeds of any Loan, advance or other financial accommodation provided hereunder including, in each such case, any allegation of any such matters, whether meritorious or not (collectively, the “Indemnified Matters”); provided, however, that the Borrower shall not have any obligation to any Indemnitee hereunder with respect to Indemnified Matters to the extent caused by or resulting from the willful misconduct or gross negligence of an Indemnitee. The covenants of the Borrower contained in this Section 5.3 shall survive the payment in full of all amounts due and payable under the Loan Documents and the full satisfaction of all other obligations of the Borrower.

5.4              Regulatory Change. After the date hereof, if the introduction of any new, or any change in existing, applicable laws, rules or regulations or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, including, without limitation, the issuance of any rules, regulations or directives under the Dodd-Frank Wall Street Reform and Consumer Protection Act and any requests, rules, guidelines or directives thereunder or compliance by the Bank, with any new request or directive by any Governmental Authority (whether or not having the force of law); (hereinafter the “Regulatory Change”) (i) shall subject the Bank to any tax, duty or other charge with respect to this Agreement, based upon the charging and collecting of interest hereunder, or shall change the basis of taxation or payments to the Bank of the principal or interest on the Loan (other than imposition of, or a change in the rate of, net income or franchise or similar tax on the Bank); (ii) shall result in the imposition, modification or deemed applicability of any account of, or credit extended by the Bank; or (iii) shall impose on the Bank any other condition affecting the Loan or the charging and collecting of interest hereunder; and the result of any of the foregoing is to increase the cost to the Bank of charging and collecting interest hereunder, or to reduce the amount of any sum received or receivable by the Bank under the Loan by an amount deemed by the Bank to be material, then, upon notice by the Bank to the Borrower setting forth in reasonable detail the circumstances of such increase or reduction and the calculation of the amount thereof, the Borrower at its sole discretion shall either repay the Loan (including all interest and fees due thereon) in full upon or before any such Regulatory Change taking effect or pay to the Bank such additional amount or amounts as will compensate the Bank for such increased cost or reduction. Such payments shall be made on the first date for payment of interest hereunder following the date of the demand by the Bank and on each such payment date thereafter or shall be paid promptly on demand if the Borrower is not advised of the amount of such payment prior to any such payment date. Determinations by the Bank for purposes of this paragraph of the effect of any Regulatory Change on its costs of making or maintaining loans bearing interest, and of the additional amounts required to compensate the Bank in respect thereof, shall be conclusive, provided that such determinations are made in good faith and absent manifest error.

ARTICLE VI.
SECURITY

6.1              Security. As a condition precedent and material inducement to the Bank making the Loan:

(a)                the Guarantors shall deliver the Guaranties;

(b)               Sevcon USA, Inc. shall deliver the Security Agreement; and

(c)                the Borrower shall deliver the Pledge Agreements.

ARTICLE VII.
REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement and to make the Loan, the Borrower makes the following representations and warranties.

7.1              Corporate Matters.

(a)                Each of the Loan Parties and the Borrower’s Subsidiaries are duly organized, validly existing corporations subsisting under the laws of their jurisdictions of formation; have the power to own and hold the property they purport to own and hold and to carry on business as now being conducted and proposed to be conducted. Each Loan Party has the power to execute, deliver and perform its obligations under the Loan Documents.

(b)               The execution, delivery and performance of the Loan Documents by the Loan Parties have been duly authorized by all necessary corporate action; the Loan Documents are duly executed and validly delivered by the Loan Parties.

(c)                The execution, delivery and performance of the Loan Documents by the Loan Parties, and consummation by the Loan Parties of the transactions herein and therein contemplated, and compliance by the Loan Parties with the terms, conditions and provisions of the Loan Documents will not conflict with or result in a breach of any of the terms, conditions or provisions of (i) the Organizational Documents of the Loan Parties, (ii) any agreement or instrument to which any Loan Party or any of its Affiliates are now a party or by which they or their Property are bound, or result thereunder in the creation or imposition of any Lien of any nature whatsoever upon any of the properties or assets of the Borrower, the Guarantors or the Borrower’s Subsidiaries except as may be provided in the Loan Documents, (iii) any judgment or order, writ, injunction, decree or demand of any Governmental Authority, or (iv) any applicable Requirement of Law.

(d)               No material authorization, consent, approval or action of, or filing with or notice to, any Governmental Authority or any other Person, which has not been obtained, is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of the Loan Documents and the performance of the Loan Parties’ obligations thereunder. All material permits, licenses, authorizations, consents and approvals of all Governmental Authorities necessary for the Loan Parties and their Subsidiaries to conduct their businesses have been obtained and are in full force and effect and the Loan Parties and their Subsidiaries have obtained any and all consents from any Person required to effect the terms and conditions of Loan Documents.

(e)                All financial statements of the Loan Parties and their Subsidiaries delivered to the Bank have been prepared in accordance with GAAP, are true and correct in all material respects and fairly present the financial condition of the Loan Parties and their Subsidiaries as of the respective dates thereof and results of operations for the period then ended, and no Material Adverse Change has occurred in the financial condition reflected therein since the respective dates thereof.

(f)                The Loan Documents to which it is party are the legal, valid and binding obligations of the Borrower and the Guarantors as applicable, enforceable against the Borrower and the Guarantors, as applicable, in accordance with their respective terms, subject to limitations imposed by general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and the effect of applicable bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting creditors’ rights.

7.2              Subsidiaries. Schedule 7.2 sets forth the name and jurisdiction of incorporation of each Subsidiary of the Borrower or its Subsidiaries and, as to each such Subsidiary, the percentage of each class of Stock owned by the Borrower or by any Borrower’s Subsidiary. There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than those granted to employees, consultants or directors and directors’ qualifying shares) of any nature relating to any Stock of any of the Borrower’s Subsidiaries, except under the Loan Documents.

7.3              Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting any of the Loan Parties or any of their Subsidiaries or any material Property of any of the Loan Parties or any of their Subsidiaries, at law or in equity or before or by any Governmental Authority, which involve any of the transactions contemplated herein or which, if adversely determined against the applicable Person, could reasonably be expected to result in a Material Adverse Change. No Loan Party or any of their Subsidiaries is in default with respect to any judgment, order, writ, injunction, decree, rule or regulation of any Governmental Authority or any agreement with any Person, which involves a reasonable possibility of any Material Adverse Change.

7.4              No Default. There is no default on the part of any Loan Party under the Loan Documents and no event has occurred and is continuing which with notice or the passage of time or both would constitute a default or an Event of Default.

7.5              Solvency. Each Loan Party is Solvent and the Loan Parties on a consolidated basis are Solvent. No transfer of Property is being made by any Loan Party or its Subsidiaries and no obligation is being incurred by any Loan Party or its Subsidiaries in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of any Loan Party or its Subsidiaries.

7.6              Employee Benefit Plans. Each of the Borrower and the ERISA Affiliates is in compliance with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and the regulations and published interpretations thereunder and any similar applicable non-U.S. law, except for such noncompliance which could not reasonably be expected to result in a Material Adverse Change. No Reportable Event has occurred as to which the Borrower or any ERISA Affiliate was required to file a report with the PBGC, other than reports for which the 30 day notice requirement is waived, reports that have been filed and reports the failure of which to file could not reasonably be expected to result in a Material Adverse Change. There has been no failure by any Plan to meet the minimum funding standards (as defined in Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, in each instance, whether or not waived, nor has there been a filing pursuant to Sections 412 and 430 of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan where such events could reasonably be expected to result in a Material Adverse Change. None of the Borrower and the ERISA Affiliates has incurred or could reasonably be expected to incur any Withdrawal Liability that could reasonably be expected to result in a Material Adverse Change. None of the Borrower and the ERISA Affiliates has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, where such reorganization or termination has resulted or could reasonably be expected to result, through increases in the contributions required to be made to such Plan or otherwise, in a Material Adverse Change.

7.7              Environmental. (a) None of the Borrower’s or its Subsidiaries’ properties or assets has ever been used by the Borrower, or to the knowledge of Borrower, by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such use, production, storage, handling, treatment, release or transport was in violation, in any material respect, of any applicable Environmental Law, (b) none of the Borrower’s or its Subsidiaries’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) neither the Borrower nor any of its Subsidiaries has received notice that a Lien arising under any Environmental Law has attached to any revenues or to any real property owned or operated by the Borrower or its Subsidiaries, and (d) neither the Borrower nor any of its Subsidiaries has received a summons, citation, notice, or directive from the United States Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by the Borrower or its Subsidiaries resulting in the releasing or disposing of Hazardous Materials into the environment that individually or in the aggregate could reasonably be expected to result in a Material Adverse Change.

7.8              Brokerage Fees. No Loan Party nor any of its Subsidiaries has utilized the services of any broker or finder in connection with the Borrower’s obtaining financing from the Bank under this Agreement and no brokerage commission or finders fee is payable by any Loan Party or its Subsidiaries in connection herewith.

7.9              Intellectual Property. Each Loan Party and each of its Subsidiaries owns, or holds licenses in, or otherwise has the right to use all trademarks, trade names, copyrights, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted.

7.10          Title to Properties; Liens. Each Loan Party and each of its Subsidiaries has (i) valid leasehold interests in (in the case of material leasehold interests in real or personal property), or (ii) good title to (in the case of all other personal property), all of its material properties and assets reflected in the financial statements referred to in Section 7.1(e), except for assets disposed of since the date of such financial statements. Except as expressly permitted by this Agreement, all such properties and assets are free and clear of Liens.

7.11          Leases. Each Loan Party and each of its Subsidiaries enjoys peaceful and undisturbed possession under all leases material to its business and to which it is a party or under which it is operating, and all of such leases are valid and subsisting and no material default by any Loan Party or its Subsidiaries exists under any of them.

7.12          Transactions with Affiliates. No Loan Party or any Borrower’s Subsidiary has, directly or indirectly, entered into or permitted to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate on terms that are less favorable to a Loan Party or the Borrower’s Subsidiaries than those that might be obtained at the time from Persons who are not such an Affiliate.

7.13          Complete Disclosure. All factual information furnished by or on behalf of each Loan Party or its Subsidiaries in writing to the Bank or in the other Loan Documents for purposes of or in connection with this Agreement, the other Loan Documents, or any transaction contemplated herein or therein is, and all other such factual information hereafter furnished by or on behalf of each Loan Party or its Subsidiaries in writing to the Bank will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided.

7.14          Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in violation of any applicable Requirements of Law (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any Governmental Authority, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.

7.15          Patriot Act. To the extent applicable, each Loan Party and its Subsidiaries is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act of 2001) (the “Patriot Act”). No part of the proceeds of the loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

7.16          Margin Stock. No Loan Party or any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the loans made to the Borrower will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors.

7.17          Governmental Regulation. No Loan Party or any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. No Loan Party or any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

7.18          OFAC. No Loan Party or any of its Subsidiaries is in violation of any of the country- or list-based economic and trade sanctions administered and enforced by OFAC. No Loan Party or any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

7.19          Indebtedness. Neither Loan Party has any Indebtedness that is senior to the Indebtedness evidenced by the Note and this Agreement.

ARTICLE VIII.
COVENANTS OF BORROWER

From the date of this Agreement and thereafter until the Loan (including interest due thereon) and all fees to be paid by the Borrower to the Bank hereunder or under any of the Loan Documents are paid in full:

8.1              Corporate Status, Financial Information and Obligations.

The Borrower shall:

(a)                at all times preserve and keep in full force and effect the Borrower’s and its Subsidiaries’ valid existence and good standing and any rights and franchises material to its businesses;

(b)               furnish to the Bank (i) within ninety (90) days following the end of each respective fiscal year, copies of the audited consolidated financial statements of the Borrower and its Subsidiaries together with copies of management letters, prepared by independent certified public accountants selected by the Borrower and reasonably satisfactory to the Bank, all such financial statements to be prepared in accordance with GAAP; and (ii) as soon as available and in any event within sixty (60) days after the close of each quarter, a copy of the unaudited consolidated financial statements of the Borrower as of the end of such quarter and the related statements of income, balance sheets, revenue and expense statements, cash flow statements, balances, earnings, retained earnings and changes in financial position for such period, prepared in accordance with GAAP, certified by the chief financial or accounting officer of the Borrower, together with quarterly variance reports;

(c)                provide the Bank with copies of any audit reports or other material regulatory communications received from any Governmental Authority which could reasonably be expected to have a material impact on the Guarantor's or the Borrower’s ability to perform its obligations under the Loan Documents, and, from time to time, provide such other information regarding the operations, business affairs and financial condition of the Borrower as the Bank may reasonably request;

(d)               promptly, but in any event within 5 days after a senior officer of the Borrower has knowledge of any event or condition that constitutes a default or an Event of Default, notice thereof and a statement of the curative action that the Borrower proposes to take with respect thereto (if any);

(e)                promptly after the commencement thereof, but in any event within 5 days after the service of process with respect thereto on any Loan Party or any of its Subsidiaries, notice of all actions, suits, or proceedings brought by or against any Loan Party or any of its Subsidiaries before any Governmental Authority which reasonably could be expected to result in a Material Adverse Change; and

(f)                upon the request of the Bank, any other information reasonably requested relating to the financial condition of the Guarantors, the Borrower or its Subsidiaries.

8.2              Financial Covenant. The Borrower together with its Subsidiaries shall maintain a Leverage Ratio, measured on a fiscal year-end basis of not greater than 3.5:1.00 through September 30, 2017 and thereafter not greater than 3.0:1.00.

8.3              Environmental.

The Borrower shall, and shall cause its Subsidiaries to:

(a)                comply, in all material respects, with Environmental Laws and provide to the Bank documentation of such compliance which the Bank reasonably requests,

(b)               promptly notify the Bank of any release of a Hazardous Material in any reportable quantity from or onto property owned or operated by the Borrower or any of its Subsidiaries and take any remedial actions required by Environmental Law to abate said release or otherwise to come into compliance with applicable Environmental Law, and

(c)                promptly, but in any event within 5 days of its receipt thereof, provide the Bank with written notice of any of the following: (i) notice that any Lien with respect to violation of Environmental Laws has been filed against any of the real or personal property of the Borrower or its Subsidiaries, (ii) commencement of any action or notice that an action will be filed against the Borrower or its Subsidiaries regarding violation of Environmental Laws, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change.

8.4              Taxes. The Borrower shall cause all assessments and taxes, whether real, personal, or otherwise, due or payable by, or imposed, levied, or assessed against any Loan Party, its Subsidiaries, or any of their respective assets to be paid in full, before delinquency or before the expiration of any extension period or timely request such extension. The Borrower will and will cause its Subsidiaries to make timely payment or deposit of all tax payments and withholding taxes required of it and them by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, federal and foreign income taxes.

8.5              Insurance. The Borrower shall cause each Loan Party and its Subsidiaries to maintain insurance respecting each of the Loan Parties and their Subsidiaries’ assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Each policy of insurance shall (a) name the Bank as an additional insured thereunder as its interests may appear, and (b) in the case of any business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to the Bank, that names the Bank as the loss payee thereunder and (if obtainable by the Loan Parties using commercially reasonable efforts) provides for at least 30 days prior written notice to the Bank of any modification or cancellation of such policy.

8.6              Employee Benefits. The Borrower shall comply in all material respects with the applicable provisions of ERISA and the provisions of the Code relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the Bank (i) as soon as possible after, and in any event within 30 days after any executive officer of the Borrower or any ERISA Affiliate knows or has reason to know that, any Reportable Event has occurred, a statement of the Borrower signed by its chief financial officer or treasurer setting forth details as to such Reportable Event and the action proposed to be taken with respect thereto, together with a copy of the notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after any such executive officer learns of receipt thereof, a copy of any notice that the Borrower or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC to terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee to administer any such Plan, (iii) within 30 days after the due date for filing with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make a required installment or other payment with respect to a Plan, a statement of the Borrower signed by its chief financial officer or treasurer setting forth details as to such failure and the action proposed to be taken with respect thereto, together with a copy of any such notice given to the PBGC and (iv) promptly after any such executive officer learns thereof and in any event within 30 days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B) a determination that a Multiemployer Plan is, or is expected to be, terminated or in reorganization, in each case within the meaning of Title IV of ERISA.

8.7              Other Agreements. No Loan Party or any of its Subsidiaries will enter into any agreement containing any provision which would be violated or breached by the performance of the Loan Parties’ obligations under the Loan Documents.

8.8              Use of Proceeds. The proceeds of the Loan made under this Agreement will be used by the Borrower for the purposes set forth in this Agreement. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System. The Borrower shall use the proceeds of the Loan hereunder in compliance with all applicable legal and regulatory requirements of any Governmental Authority (including, without limitation, Regulations U and X of the Board of Governors of the Federal Reserve System, the Securities Exchange Act of 1934 and the Securities Act of 1933, and any regulations thereunder).

8.9              Corporate Organization. The Borrower shall cause each Loan Party and its Subsidiaries to maintain its corporate existence. Without the prior written consent of the Bank, the Borrower shall not materially change or amend its Organizational Documents, provided that Subsidiaries of the Company will be permitted to merge with one another without the prior written consent of the Bank.

8.10          Continuation of Business. The Borrower shall cause each Loan Party and its Subsidiaries to (a) maintain and preserve all of its properties which are material to the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, (b) maintain all material licenses, certifications and permits of all Governmental Authorities necessary to continue its operations and (c) comply with all of their material agreements and contracts.

8.11          Additional Indebtedness and Activities. The Borrower shall cause each Loan Party and its Subsidiaries not to, (a) other than Indebtedness owed to the Borrower or any of its other Subsidiaries (other than the Excluded Subsidiaries) and as set forth on Schedule 8.11, without prior written notice to the Bank incur any Indebtedness other than the Loan and in respect of the Acquisition, or (b) without the prior written consent of the Bank create or suffer to exist any Lien on its assets, other than in favor of the Bank and other than as set forth on Schedule 8.11.

8.12          Disposal of Assets. The Borrower shall cause each Loan Party not to, convey, sell, lease, license, assign, transfer, or otherwise dispose of (or enter into an agreement to convey, sell, license, assign, transfer or otherwise dispose of) any of its assets, without the prior written consent of the Bank, other than sale of inventory in the ordinary course.

8.13          Future Acquisitions. In the event that the Borrower acquires any additional Subsidiary, the Borrower shall pledge to the Bank, respectively, one hundred percent (100%) or sixty percent (60%) of the Stock of such additional U.S. or non U.S. Subsidiaries.

8.14          Change Name. The Borrower shall cause the Guarantors not to change, without providing thirty (30) days’ prior written notice of the Bank, such Guarantor’s name, organizational identification number, state of organization or organizational identity.

8.15          Change of Control. The Borrower shall not cause, permit, or suffer, directly or indirectly, any Change of Control.

8.16          No Liens on Target’s Assets. The Borrower shall cause the Target not to grant or permit to exist any Lien on any of its tangible and intangible personal property, including without limitation its accounts, equipment, contracts, patents, copyrights, trademarks, other general intangibles, intercompany notes and, in each case, proceeds thereof, without the prior written consent of the Bank.

8.17          Dividends. Subject to applicable Requirements of Law, the Borrower shall cause its Subsidiaries to pay dividends or other distributions to the Borrower in amounts sufficient to make the required payments of principal and interest on the Loan on or before the date such payments are due.

8.18          Restricted Payments. So long as (A) after giving pro forma effect to such payment, the Borrower remains in compliance with Section 8.2, (B) no Event of Default shall have occurred and be continuing and (C) the Borrower has provided prior written notice to the Bank, the Borrower may declare and pay any dividends or other distributions upon the common Stock of the Borrower.

8.19          No Issuance of New Preferred Stock. The Borrower shall not authorize or issue any shares of preferred Stock, or other Stock providing for the mandatory payment of dividends, in addition to any shares of preferred Stock of the Borrower currently outstanding unless at least 25.0% of the net cash proceeds received by the Borrower from such issuance are used to promptly prepay the Loan and so long as after giving pro forma effect to the payment of any dividends, the Borrower remains in compliance with Section 8.2.

8.20          Further Assurances; Power of Attorney. The Borrower shall promptly, upon the reasonable request of the Bank and at the Borrower’s expense, execute, acknowledge, and deliver, or cause the execution, acknowledgement, and delivery of, any document or instrument supplemental to or confirmatory to the Loan Documents or otherwise necessary or desirable in the Bank’s reasonable opinion for the creation, preservation, and/or perfection of any security interests in the collateral that are given by the Borrower to the Bank. The Borrower hereby irrevocably constitutes and appoints the Bank, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower to take any appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of the Loan Documents. The powers conferred on the Bank shall not impose any duty upon the Bank to exercise any such power.

8.21          Access to Books and Records. The Borrower will cause the Loan Parties and their Subsidiaries to properly maintain their books and records and permit the Bank, by its officers and representatives, to have reasonable access to the officers of the Loan Parties and their Subsidiaries and examine, at all reasonable times and upon reasonable prior written notice to the Borrower, the properties, minute books and other corporate records and books of account and financial records of the Loan Parties and their Subsidiaries.

ARTICLE IX.
EVENTS OF DEFAULT

9.1              Events of Default.

(a)                The occurrence of any one or more of the following events and the continuation thereof beyond the applicable grace period herein provided, if any, shall constitute an “Event of Default” under this Agreement:

(1)               the Borrower fails to pay all or any portion of principal due under the Note on the date due;

(2)               the Borrower fails to pay all or any portion of interest due under the Note or any fees or other amounts due under this Agreement for a period of five (5) Business Days after the date due;

(3)               any Loan Party fails to comply with any of the other terms, conditions, or covenants in the Loan Documents and such default shall continue for thirty (30) days following written notice, delivered to the Borrower by the Bank, specifying such default and requiring the same to be remedied;

(4)               any Loan Party fails to pay when due, beyond any applicable grace or cure period, any indebtedness in excess of $500,000 under any other loan agreement, or credit facility, or guaranty;

(5)               any representation or warranty made by the Borrower herein or any Loan Party in any other Loan Document shall, at the time made, be false or misleading in any material respect;

(6)               any Loan Party or any of its Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its Property, or shall consent to any such relief or to the appointment of or taking possession by any such official in the involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors;

(7)               any involuntary case or other proceeding shall be commenced against the any Loan Party or any of its Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its Property and such case or proceeding is not dismissed within sixty (60) days;

(8)               a judgment in excess of $100,000 over the amount of insurance coverage therefor (where the underwriter has agreed in writing to pay such judgment) shall be rendered against any Loan Party and shall remain undischarged, undismissed and unstayed for more than ten (10) days;

(9)               a Change of Control shall occur;

(10)           any judicial decision, legislative or regulatory change or any change in any Loan Party’s or its Subsidiaries’ right to conduct business materially and adversely affects the present business, financial condition or operation of the such Person or its properties and assets in such a manner that with the passage of time the Borrower could not comply with the terms, conditions and covenants in this Agreement;

(11)           a Reportable Event or Reportable Events, or a failure to make a required installment or other payment (within the meaning of Section 412(n)(1) of the Code), shall have occurred with respect to any Plan, (ii) a trustee shall be appointed by a United States district court to administer any Plan, (iii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan, (iv) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan and the Borrower or such ERISA Affiliate does not have reasonable grounds for contesting such Withdrawal Liability or is not contesting such Withdrawal Liability in a timely and appropriate manner, (v) the Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (vii) a failure by any Plan to meet the minimum funding standards (as defined in Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, in each instance, whether or not waived, (viii) a filing pursuant to Section 412(d) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan or (ix) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (ix) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Change; or

(12)           any Lien purported to be created under any Loan Document shall cease to be, or shall be asserted by any Loan Party or Borrower’s Subsidiary not to be, a valid and perfected Lien on any collateral, with the priority required by the applicable security document, or any guarantee purported to be created under any Loan Document shall cease to be, or shall be asserted by any Loan Party not to be, in full force and effect, in each such case except as a result of the sale or other disposition of the applicable collateral in a transaction permitted under the Loan Documents.

(b)               If any Event of Default shall occur, the Bank may declare the entire outstanding principal amount of the Loan or any portion thereof together with interest thereon and any other fees, costs and charges then payable under the Loan Documents, immediately due and payable, whereupon the same shall become immediately due and payable, without presentment, protest or further demand or notice of any kind, all of which are hereby expressly waived by the Borrower; and in addition to the foregoing, the Bank may immediately exercise any and all other rights, remedies, and recourse available to it at law or in equity or under the Loan Documents. If an Event of Default specified in subsections 5 or 6 of this Section occurs, all amounts payable under the Loan Documents by the Borrower that would otherwise be due after the date of such Event of Default shall become immediately due and payable without any declaration or other act on the part of the Bank.

ARTICLE X.
CONDITIONS PRECEDENT

The obligation of the Bank to make the Loan is subject to the satisfaction, in the sole judgment of the Bank, of the following conditions:

10.1 The Bank shall receive on or before the Execution Date:

(a)                this Agreement executed by the Borrower;

(b)               the Guaranties executed by the Guarantors;

(c)                the Security Agreement executed by the Sevcon USA, Inc.;

(d)               the Pledge Agreement with respect to the shares of stock of the Guarantors;

(e)                evidence of termination and release of the lien of RBS Citizens, National Association against all of the Borrower’s Stock of Sevcon USA, Inc., including a payoff letter from RBS Citizens, National Association, and a UCC-3 financing statement termination;

(f)                evidence of termination and release of the lien of RBS Citizens, National Association against all of the assets of the Sevcon USA, Inc. including a payoff letter from RBS Citizens, National Association, and a UCC-3 financing statement termination;

(g)               a UCC financing statement against all of the Borrower’s Stock of the Guarantors in form and substance satisfactory to the Bank;

(h)               a UCC financing statement against all of the assets of Sevcon USA, Inc. in form and substance satisfactory to the Bank;

(i)                 a certificate of good standing for each of the Borrower and the Guarantors issued by the Secretary of State of each corporation's state of incorporation;

(j)                 resolutions of the Borrower authorizing the borrowing and the execution and delivery of the Loan Documents, and appointing an authorized individual of the Borrower to execute and deliver the Loan Documents;

(k)               resolutions of each Guarantor authorizing the execution and delivery of the Guaranty and, if applicable, the Security Agreement and appointing an authorized individual of the Guarantors to execute and deliver such documents;

(l)                 evidence of any third party consent needed to authorize the execution and delivery of the Loan Documents by the Borrower or the Guarantors;

(m)             certified copies of the Borrower’s and the Guarantors' Organizational Documents;

(n)               such documents as shall be requested by the Bank in connection with its Know Your Customer and Anti-Money Laundering Requirements;

(o)               an opinion of counsel to the Borrower substantially in the form attached hereto as Exhibit E; and

(p)               any other document reasonably requested by the Bank in order to implement the requirements of this Agreement or any of the Loan Documents.

10.2 The Bank shall receive on or before the Funding Date:

(a)                The Loan Documents other than the Term Loan Agreement, the Guaranties, the Security Agreement, and the Pledge Agreement with respect to the Guarantors, including the Note and Pledge Agreements with respect to the shares of stock of Sevcon SAS and Sevcon Limited, executed by the Borrower and all other necessary parties, as applicable.

(b)               a copy of the fully executed purchase agreement for the Acquisition;

(c)                original stock certificates representing the shares of stock subject to the Pledge Agreement with respect to the shares of stock of Sevcon Limited, together with appropriate instruments of transfer;

(d)               original stock certificates representing the shares of stock of the Guarantors subject to the Pledge Agreement referred to in Section 10.1(d) above, and the original Acquisition Note, together with appropriate instruments of transfer;

(e)                an opinion of counsel to the Borrower in form and substance acceptable to the Bank;

(f)                payment of the facility fee provided for in Section 4.2, and reasonable fees and expenses of counsel to the Bank as well as any other fees and out-of-pocket expenses of the Bank incurred in connection with the Loan; and

(g)               any other document reasonably requested by the Bank in order to implement the requirements of this Agreement or any of the Loan Documents.

ARTICLE XI.
MISCELLANEOUS PROVISIONS

11.1          Waiver. No delay on the part of the Bank in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right, power or remedy preclude the further exercise thereof, or the exercise of any other right, power or remedy.

11.2          Consent to Jurisdiction; Service of Process and Waiver of Jury Trial. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK, NEW YORK, WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH FEDERAL OR STATE COURT IN NEW YORK TO THE EXTENT PERMITTED BY LAW. THE BANK AND THE BORROWER WAIVE TRIAL BY JURY. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF IN ACCORDANCE WITH SECTION 11.2 OF THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

11.3          Notices. Except as otherwise expressly provided herein, all notices hereunder shall be in writing. Notices given by mail shall be deemed to have been given five (5) days after the date sent if sent by registered or certified mail, postage prepaid, the day after the date sent if sent by overnight mail by means of a reputable overnight delivery service and the date of delivery if sent by hand delivery. Notice shall be given to the following addressees:

If to the Borrower, to:

Sevcon, Inc.
155 Northboro Road

Southborough, Massachusetts 01772

 

And with a copy to:

Locke Lord LLP
111 Huntington Avenue
Boston, Massachusetts 02199
Attention: Matthew Dallett, Esq.

If to the Bank, to:

BANCA MONTE DEI PASCHI DI SIENA S.p.A,
acting through its New York branch
55 East 59th Street
New York, New York 10022
Attention: Nicolas Kanaris

With a courtesy copy to:

Withers Bergman LLP
430 Park Avenue
10^th Floor
New York, New York 10022-3505
Attention: Brenda T. Simensky, Esq.

or in the case of either party, such other address as such party may have designated, by written notice given in accordance with this Agreement and received by the other party to this Agreement, as its address for notices.

11.4          Costs, Expenses and Taxes. The Borrower agrees to pay the reasonable fees of the Bank’s counsel arising in connection with the preparation of the Loan Documents, and the enforcement of the Bank’s rights hereunder, plus any reasonable out-of-pocket expenses incurred by the Bank’s counsel. In addition, the Borrower agrees to pay, and to save the Bank harmless from any liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the execution and delivery of the Note. All obligations provided for in this Section 11.4 shall survive any termination of this Agreement.

11.5          Captions. Section captions used in this Agreement are for convenience only and shall not be deemed to be a part of this Agreement.

11.6          Governing Law. The Loan Documents have been negotiated and delivered in the State of New York, shall be deemed to have been made in the State of New York and shall be governed by the laws of the State of New York without regard to its choice of law provisions. All obligations of the Borrower and rights of the Bank expressed herein, and in the Note shall be in addition to and not in limitation of those provided by applicable law.

11.7          Successors and Assigns. This Agreement shall become effective when it shall have been executed by the Borrower and the Bank, and thereafter shall be binding upon the Borrower, its successors and assigns, and upon the Bank, its successors and assigns, and shall inure to the benefit of the Borrower, the Bank and their respective successors and assigns. In the event this Agreement and the Note are assigned to another branch of the Bank, the Borrower agrees to reimburse the Bank for any additional expenses, including any applicable withholding taxes. However, the Borrower may not assign its rights or obligations under the Loan Documents without the prior written consent of the Bank and the Bank may assign its rights in accordance with Section 11.13.

11.8          Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument and all of which shall constitute a single agreement. Delivery of an executed counterpart of this Agreement by telefacsimile, pdf file or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile, pdf file or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis.

11.9          Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by the Borrower or the Guarantors or the transfer to the Bank of any Property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the United States Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if the Bank is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that the Bank is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of the Bank related thereto, the liability of the Borrower or the Guarantors automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

11.10      Amendments. No amendment, modification or waiver of, or consent with respect to, any provision of the Loan Documents shall in any event be effective unless the same shall be in writing and signed and delivered by the Bank and the Borrower or the Guarantor, as applicable, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.

11.11      Inconsistencies. The Loan Documents shall be construed to the extent reasonable to be consistent, one with the other, but to the extent that the terms and conditions of this Agreement are actually inconsistent with the terms and conditions of any Loan Document, the terms and conditions of this Agreement shall govern.

11.12      Performance of Obligations. The Borrower acknowledges and agrees that if the Borrower has failed to make any payment or to take any action required under the terms of the Loan Documents, then the Bank may, but shall have no obligation to, make any payments or perform any act required of the Borrower under the Loan Documents or take any other action which the Bank in its discretion deems necessary or desirable to protect or preserve the collateral including, without limitation, any action to pay or discharge taxes, liens, security interests, or other encumbrances levied or placed on or threatened to be placed on any collateral, provided that, in any such case, the Bank shall have given the Borrower not less than five (5) Business Days’ notice before taking action and the Borrower shall not have cured or commenced to cure such failure within such five (5) Business Day period.

11.13      Assignments and Participations. The Bank shall have the unrestricted right at any time and from time to time, to assign its obligations and rights hereunder to one or more banks or other financial institutions (other than a hedge fund or a competitor of the Borrower) or to grant to one or more banks or other financial institutions (each, a “Participant”) participating interests in the Bank’s obligations and rights hereunder. The Bank may furnish any information concerning the Borrower in its possession from time to time to prospective assignees and Participants.

11.14      Right of Set-Off. The Bank shall have with respect to the Borrower’s obligations to the Bank under this Agreement a contractual possessory security interest in and a contractual right of set-off against all of the Borrower’s right, title and interest in and to, any depository account of the Borrower maintained at the Bank. Such right of set-off may be exercised without demand upon or notice to the Borrower and shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunder without any action of the Bank, although the Bank may enter such set-off on its books and records at later time.

11.15      Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction.

11.16      Limitation of Liability. The Borrower agrees that no claim may be made by the Borrower or any other person against the Bank or its affiliates, directors, officers, employees, or agents for any special, indirect, consequential, punitive or treble damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by the Loan Documents, or any act, omission or event occurring in connection herewith or therewith; and the Borrower hereby waives, releases and agrees not to sue upon any claim for any and all special, indirect, consequential, punitive or treble damages, whether or not accrued and whether or not known or suspected to exist in its favor. Nothing in this Section 11.16 shall limit the liability of the Bank, its affiliates, directors, officers, employees, or agents for their gross negligence or willful misconduct.

11.17      Entire Agreement. This Agreement and the other Loan Documents constitute the entire agreement between the Bank and the Borrower with respect to the Loan and the written and executed form of this Agreement and the Loan Documents expressly supersede any previous writings or oral agreements between and among the Bank and the Borrower and their Affiliates, agents and employees.

11.18      Patriot Act. The Bank hereby notifies the Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the credit parties, which information includes the names and addresses of the Borrower and other information that will allow the Bank to identify the Borrower in accordance with the Patriot Act and as specifically requested in writing by the Bank. In addition, if the Bank is required by law or regulation or internal policies to do so, it shall have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary individual background checks for the Loan Parties and (b) OFAC/PEP searches and customary individual background checks for the Loan Parties’ senior management and key principals, and the Borrower agrees to cooperate in respect of the conduct of such searches and further agrees that the reasonable costs and charges for such searches shall constitute expenses hereunder and be for the account of the Borrower.

[Signature pages follow]

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be delivered as of the day and year first written above.

		SEVCON, INC.
		By:	/s/ Paul Farquhar
			Paul Farquhar
			Treasurer

 

		BANCA MONTE DEI PASCHI DI SIENA S.p.A.,
		acting through its New York branch
		By:	/s/ Vincenzo Ciancio
			Vincenzo Ciancio
			Senior Vice President and
			General Manager
		By:	/s/ Brian R. Landy
			Brian R. Landy
			Vice President

 

 

 

 

 

2

EXHIBIT 99.1

 

Sevcon Targets Accelerated Growth With Acquisition of Bassi Srl

 

Adds Bassi Battery Charging and Power Management Systems Capabilities

 

Combination with Sevcon Advanced Motor Control Technologies Strengthens Sevcon as a 
Leading Global Supplier of Industrial and Automotive Electrification Solutions 

 

SOUTHBOROUGH, Mass., Feb. 01, 2016 (GLOBE NEWSWIRE) -- Sevcon, Inc. (Nasdaq: SEV) today announced that it has acquired privately held Bassi S.r.l.  Based near Bologna, Italy, Bassi designs and manufactures battery chargers for electric vehicles. The Bassi product line includes fast charging technologies suitable for a wide range of electrification markets, including rapid, high voltage and high power sectors. Bassi also designs and manufactures power management and uninterrupted power source (UPS) systems for industrial, medical and telecom applications, as well as electronic instrumentation for battery laboratories. In 2015, Bassi generated approximately $16 million in annual sales and was profitable. The acquisition is expected to be immediately accretive to Sevcon’s earnings in the first year of combined operations, excluding transaction costs.

 

Bassi’s executive team will continue to manage the business. Bassi will operate as a division of Sevcon from its present facility and no changes in employment levels are anticipated.

 

Acquiring Bassi will enable Sevcon to:

 

•	Expand its addressable share of the high-growth vehicle electrification market by approximately 35%
•	Integrate battery charger and power management technology with Sevcon’s new GEN5 family of motor controllers to offer a unified suite of electronics for on-road vehicles
•	Pursue opportunities to cross-sell Sevcon products to Bassi customers
•	Sell Bassi’s products through Sevcon’s sales channel, including its joint venture in China, to access the Company’s large global customer base
•	Enhance earnings by adding an immediately accretive business

 

“This acquisition is an important milestone for Sevcon that we believe will accelerate our strategic growth and create significant long-term value for our stockholders,” said Sevcon President and Chief Executive Officer Matt Boyle. “Battery charging and power management represent a rapidly growing sector of the electrification market that is highly complementary to Sevcon’s products. Customers regularly ask for charging solutions in conjunction with our new Gen5 motor controller line, especially in high voltage and high power applications. Bassi has world-class technology that offers an attractive integration opportunity with the Gen5. By offering customers a broader product portfolio that eliminates motor controller/battery charger interoperability concerns, we believe we can secure a greater share of the on-road and industrial electrification markets.” 

 

Bassi Srl Chief Executive Officer Andrea Bassi said, “We believe this transaction is an opportunity to combine two outstanding and complementary organizations. Sevcon’s 50-plus year record at the forefront of electric vehicle control technology mirrors our more than 40 years of experience in battery charging and power management. Both companies are recognized globally for their commitment to innovation and customer service. Operating as part of Sevcon will enable Bassi to grow faster than it could on its own, while providing Bassi customers with greater access to Sevcon’s industry-leading control technologies. Most important, we are joining an outstanding company with a history of consistent achievement and extraordinary opportunities for future growth.” 

 

The acquisition was funded with cash provided under a five-year term loan facility provided by the New York City branch of the Italian bank Monte dei Paschi di Siena and Sevcon equity. Further details of the acquisition and the financing are available in the Form 8-K being filed today by the Company with the SEC and tomorrow’s first quarter news release and in the investor conference call at 9:00 a.m. ET on Wednesday, February 3.  Those who wish to listen to the conference call webcast should visit the Investor Relations section of the Company’s website at www.sevcon.com. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328 prior to the start of the call. If you are unable to listen to the live call, the webcast will be archived on the Company’s website.

 

About Bassi Srl

 

Bassi Srl is a privately owned company with global manufacturing and headquarters in Lugo di Ravenna, Italy. The Company has more than 40 years of experience in designing and manufacturing battery chargers for electric vehicles, power management and uninterrupted power source (UPS) systems for industrial, medical and telecom applications, and electronic instrumentation for battery laboratories. The Company’s portfolio includes a wide range of products from on-board units to products suitable for public charging infrastructure projects. Bassi’s world-class engineering and production teams specialize in providing complete turn-key battery charging and power management solutions to customers around the world, in markets where performance, efficiency and reliability are critical.  The Company sells its products mainly in the US and Europe, and has served more than 2,000 customers.

 

About Sevcon, Inc.

 

Sevcon is a world leader in the design and manufacture of controls for zero emission electric and hybrid vehicles. The controls are used to vary the speed and movement of vehicles, to integrate specialized functions and to optimize the energy consumption of the vehicle's power source. The Company supplies customers throughout the world from its operations in the U.S., the U.K., France, China and the Asia Pacific region and through an international dealer network. Sevcon's customers are manufacturers of on- and off-road vehicles including cars, trucks, buses, motorcycles, fork lift trucks, aerial lifts, mining vehicles, airport tractors, sweepers and other electrically powered vehicles. For more information visit www.sevcon.com.

 

Forward-Looking Statements

 

Statements in this release about the anticipated impact of the Bassi acquisition and Sevcon's future financial results are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those we anticipate. In particular: Customers of Bassi may not grow as predicted and demand for chargers may fall short of forecasts; we may not be able to successfully integrate the two companies’ operations and financial controls; we may not be able to combine the two companies product lines as effectively as we anticipate, and the market for the combined products may not be as great as we believe; there are risks inherent in Bassi’s sole source manufacturing that may hinder us from producing as much Bassi product as we anticipate; capital markets are cyclical and weakness in the United States and international economies may continue to harm our business; global demand for electric and hybrid vehicles incorporating our products may not grow as much as we expect; our customers' products may not be as successful as those of other entrants in the electric and hybrid vehicle markets who are supplied by our competitors; we may not be able to attract and retain the level of high quality engineering staff that we need to develop the new and improved products we need to be successful; we are dependent on a few key suppliers and subcontractors for most components, sub-assemblies and finished products, and we may not be able to establish alternative sources of supply in time if supplies are interrupted; and companies we acquire may be more costly to acquire and integrate, or may not generate as much revenue and earnings, as we anticipate. Please see our most recent Forms 10-K and 10-Q on file with the SEC for further information regarding Sevcon's risk factors.

 

Contact:
David Calusdian
Sharon Merrill Associates
1 (617) 542 5300 
[email protected]

Matt Boyle
President and CEO
1 (508) 281 5503
[email protected]

 

 

 

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