Letter Agreement Regarding Corrective Actions and Holdback Deduction – Case Dealer Holding Company LLC and Western Power & Equipment Corp.

Summary

This agreement is between Case Dealer Holding Company LLC (the buyer) and Western Power & Equipment Corp. (the sellers) in connection with their prior asset sale and purchase agreement. The parties agree that the seller will be responsible for up to $700,000 in costs for corrective actions at the acquired locations, which the buyer may deduct from the holdback amount. The buyer will provide the seller with relevant contractor reports and allow the seller to monitor the corrective work. This agreement clarifies how certain conditions at the acquired locations will be addressed to allow the transaction to close.

EX-10.2 3 exhibit10-2_16091.txt LETTER AGREEMENT EXHIBIT 10.2 ------------ CASE DEALER HOLDING COMPANY LLC (f/k/a CNH Dealer Holding Company LLC) 621 State Street Racine, WI 53402 August 29, 2008 Western Power & Equipment Corp. (Oregon) 6407-B N.E. 117th Avenue Vancouver, WA 98662 Western Power & Equipment Corp. (Delaware) 6407-B N.E. 117th Avenue Vancouver, WA 98662 Re: Acquired Locations Gentlemen: Reference is made to that certain Assets Sale and Purchase Agreement dated June 20, 2008 (the "Purchase Agreement") by and among Western Power & Equipment Corp., an Oregon corporation ("WPE"), Western Power & Equipment Corp., a Delaware corporation and the sole shareholder of WPE ("WPE Parent" and, together with WPE, "Sellers"), and Case Dealer Holding Company LLC, a Delaware limited liability company (f/k/a CNH Dealer Holding Company LLC) (the "Buyer"). Capitalized terms used herein and not defined shall have the meanings given them in the Purchase Agreement. In the course of its due diligence review of the Business, Buyer has determined that certain conditions exist on the Acquired Locations which Buyer believes should be corrected. Under the provisions of Section 8.2(d) of the Purchase Agreement, Buyer has notified Sellers that it is unwilling to close the Transactions unless the parties agree on the manner in which the aforesaid conditions will be addressed. Sellers have determined that it is in their best interests to close the Transactions, and accordingly have agreed to the following provisions of this letter agreement, with the stipulation that their execution and delivery of this letter agreement shall not be construed as an admission that the Acquired Locations are not in full compliance with applicable laws, which Sellers expressly deny. Subject to the foregoing, Sellers agree that WPE shall be responsible for the cost of those corrective actions described on Exhibit A attached hereto (or such other corrective actions in lieu of the corrective actions described on Exhibit A, which Buyer determines, in its dole discretion, are adequate to address the conditions that exist on the Acquired Locations) (the "WPE Actions"), up to an aggregate amount of $700,000 (the "WPE Payment Amount"). Buyer is hereby authorized to and shall deduct the costs of the WPE Actions from the Holdback Amount at such time and from time to time as Buyer contracts for such corrective actions to be performed, up to the total WPE Payment Amount, with the same effect as if such deduction were made in satisfaction of an Indemnification Obligation as provided in Section 9.5 of the Purchase Agreement. Subject to Sellers' obligations of confidentiality under Section 7.1 of the Purchase Agreement, Buyer shall provide WPE with copies of any reports produced by Buyer's contractor(s) as they relate to such work, and shall permit representatives of WPE, at WPE's sole cost and upon reasonable notice and at reasonable times, to monitor the such work. Please indicate your agreement with the foregoing by executing the Acknowledgment below and returning a signed copy to my attention. CASE DEALER HOLDING COMPANY LLC By: /s/ James Hasler ---------------------------- James Hasler Chief Executive Officer and President ACKNOWLEDGMENT -------------- Intending to be legally bound, the undersigned have executed this letter agreement as of the date set forth above. WESTERN POWER & EQUIPMENT CORP., AN OREGON CORPORATION By: /s/ C. Dean McLain -------------------------------- C. Dean McLain Chief Executive Officer and President WESTERN POWER & EQUIPMENT CORP., A DELAWARE CORPORATION By: /s/ C. Dean McLain -------------------------------- C. Dean McLain Chief Executive Officer and President