ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT, dated as of April 3, 2006 (the “Agreement”),
is by
and among Total
Well Solutions, LLC, a Wyoming limited liability company (the
“Company”),
Total
Energy Technologies, LLC, a Delaware limited liability company (the
“Member”),
and
USA Petrovalve, Inc., a Texas corporation (“Buyer”).
WITNESSETH:
WHEREAS,
Buyer desires to purchase substantially all of the assets of the Company;
and
WHEREAS,
the Member has an ownership interest in the Company and thus would derive a
substantial benefit from the consummation of the purchase transaction
contemplated herein;
WHEREAS,
the Company, Xxxx Xxxxxxxx and Xxx Xxxxxxxx (collectively, the “Morrisons”)
have
entered into the following agreements concerning the patents listed on Schedule
A attached hereto (the “Patents”):
(i)
that certain Addendum to Agreement dated February 13, 2006 (the “Addendum”),
and
(ii) that certain Agreement dated April 18, 2005 (the “Xxxxxxxx
Agreement”);
NOW,
THEREFORE, in consideration of the premises and the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to
be
legally bound, agree as follows:
ARTICLE
I
THE
PURCHASE
Section
1.1. Purchase.
On and
subject to the terms and conditions of this Agreement, at the Closing, Buyer
will purchase from the Company, and the Company will sell to Buyer, the
following assets, rights, properties, and interests of the Company (the
“Acquired
Assets”):
(a) The
machinery, office equipment, tools, shop equipment, computers, office supplies,
vehicles, furnishings and fixtures, and other items of tangible personal
property of the Company, including specifically but not limited to the items
described on Schedule 1.1(a) (the “Tangible
Personal Property”);
(b) All
of
the following of the Company (collectively, the “Intellectual
Property Rights”):
(i)
inventions and discoveries that may be patentable (exclusive of the Intellectual
Property Rights associated with the Gas Separator, (“Inventions”),
(ii)
all of the rights of the Company pursuant to the Xxxxxxxx Agreement and/or
the
Addendum, (iii) all know-how, trade secrets, confidential and proprietary
information, technical information, data, process technology, plans, drawings,
and blue prints, including, but not limited to, all of the foregoing relating
to
the Patents) (collectively, “Trade
Secrets”),
and
(iv) trademarks, service marks, trade names, and copyrights.
(c) The
leasehold rights of the Company with respect to the items of personal property
which are described on Schedule 1.1(c) (the “Leased
Assets”);
(d) The
rights of the Company under the agreements listed on Schedule 1.1(d) (the
“Assigned
Agreements”);
(e) All
of
the customer lists, customer files (including credit applications and reports,
credit histories and applicable terms and conditions) books, records, ledgers,
files, documents, correspondence, plans, studies, and drawings of the Company,
including, but not limited to, any tangible renditions of the Intellectual
Property;
(f) The
inventories of finished goods, tooling inventory, work in progress and raw
materials of the Company as of the Effective Time (as hereinafter defined)
(the
“Purchased
Inventory”),
which
shall specifically include, but shall not be limited to, the inventory listed
on
Schedule 1.1(f) (the “Scheduled
Inventory”);
(g) All
of
the goodwill of the Company and all of the rights of the Company to use the
tradename “Total Well Services” or any similar name (subject to the permitted
use provided for in Section 5.6) (the “Tradename”).
Section
1.2 The
Patents.
At the
Closing, the Company and the Buyer will enter into and deliver a license
agreement in form and content reasonably satisfactory to Buyer and the Company
(the “License
Agreement”).
Section
1.3. Excluded
Assets.
Notwithstanding the foregoing, the Acquired Assets shall not include the assets
listed on Schedule 1.3.
Section
1.4. Purchase
Price for Acquired Assets.
As
consideration for the sale to it of the Acquired Assets, Buyer shall pay cash
at
Closing in the aggregate amount of $4,801,520.00 (the “Total
Cash Payment”),
allocated as follows: (i) $1,790,000.00 to be paid by Buyer to the Morrisons
at
Closing in satisfaction of the payment required to be made by the Company to
the
Morrisons pursuant to the Addendum (the “Morrisons
Payment”),
(ii)
$1,623,827.00 to be paid to the TWS Secured Noteholders, in exchange for their
Release of UCC-1 filing, (iii) $51,591.00 to be paid to release the liens on
the
TWS vehicles and
(iii)
$1,336,102.00 to be paid by Buyer to the Company at Closing, representing the
portion of the Total Cash Payment remaining after the Morrisons Payment has
been
made (the “Net
Cash Payment”).
Section
1.5. Assumption
of Liabilities.
Buyer
has not and will not assume from the Company any liability or
obligation.
-2-
Section
1.6. Allocation.
The
parties will allocate for all purposes (including, but not limited to, financial
accounting and tax purposes) the purchase price of the Acquired Assets as
indicated on Schedule 1.6.
Section
1.7. Closing.
The
closing (the “Closing”)
of the
transactions contemplated by this Agreement (the “Purchase
Transaction”)
shall
take place at the offices of the attorneys for Buyer in Houston, Texas as
promptly as practicable (but in any event within five business days) following
the date on which the last of the conditions set forth in Article VI is
fulfilled or waived, or at such other time and place as Buyer and the Company
shall agree. The date on which the Closing occurs is referred to in this
Agreement as the “Closing
Date.”
The
Closing will be effective as of April 3, 2006 (the “Effective
Time”).
Section
1.8. Transfer
Documents.
At the
Closing, each of the parties hereto will perform such acts and deliver such
documents as are required pursuant to the terms hereof to be delivered at
Closing, including but not limited to:
(a) the
Company and the Member shall:
(i) execute,
acknowledge and deliver to Buyer all deeds, bills of sale, endorsements,
assignments, and other good and sufficient instruments of conveyance, sale,
transfer and assignment as shall be required to vest effectively in Buyer good
and indefeasible title in and to the Acquired Assets, free and clear of all
liens or encumbrances, including specifically, but not by way of limitation,
an
assignment and xxxx of sale in the form of Exhibit 1.8(a) (the “Assignment”);
(ii) deliver
or cause to be delivered to Buyer possession of all of the Acquired Assets
capable of being physically delivered; and
(iii) execute
and deliver to the Buyer the License Agreement.
(b) Buyer
shall:
(i)
deliver
to the Company the Net Cash Payment, in the form of bank check or wire transfer;
and
(ii) execute
and deliver the Assignment; and
(iii) execute
and deliver the License Agreement.
Section
1.9. Property
Taxes.
Any
general property and/or ad valorem tax assessed against or pertaining to the
Acquired Assets for the taxable period that includes the date of the Closing
shall be prorated between Buyer and the Company.
-3-
ARTICLE
II
REPRESENTATIONS
AND
WARRANTIES
OF BUYER
Buyer
represents and warrants to the Company and the Member as follows:
Section
2.1. Organization
and Qualification.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Texas and has the requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted.
Section
2.2. Authority;
Non-Contravention; Approvals.
(a) Buyer
has
full corporate power and authority to execute and deliver this Agreement to
consummate the transactions contemplated hereby. Other than the approval by
the
Board of Directors of Buyer, no corporate proceedings on the part of Buyer
are
necessary to authorize the execution and delivery of this Agreement or the
consummation by Buyer of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer, and, assuming the due
authorization, execution and delivery hereof by the Company and the Member,
constitutes a valid and legally binding agreement of Buyer enforceable against
it in accordance with its terms, except that such enforcement may be subject
to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) The
execution and delivery of this Agreement by Buyer and the consummation by Buyer
of the transactions contemplated hereby do not and will not violate or result
in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in
the termination of, or accelerate the performance required by, or result in
a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Buyer under any of the terms, conditions or provisions of (i) the
charter or bylaw of Buyer, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to Buyer or any of its properties or assets
or
(iii) any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind to which Buyer is now a party or by which Buyer or any of its
properties or assets may be bound or affected.
Section
2.3 Brokers
and Finders.
Buyer
has not entered into any contract, arrangement or understanding with any person
or firm which may result in the obligation of Buyer to pay any finder's fees,
brokerage or agent commissions or other like payments in connection with the
transactions contemplated hereby. There is no claim for payment by Buyer of
any
investment banking fees, finder's fees, brokerage or agent commissions or other
like payments in connection with the negotiations leading to this Agreement
or
the consummation of the transactions contemplated hereby.
-4-
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
OF
THE COMPANY AND THE MEMBER
The
Company and the Member jointly and severally represent and warrant to Buyer
that:
Section
3.1. Organization
and Qualification.
The
Company is a limited liability company duly organized, validly existing and
in
good standing under the laws of the State of Wyoming and has the requisite
power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. The Company is duly qualified
to
do business and is in good standing in each jurisdiction in which the properties
owned, leased, or operated by it or the nature of the business conducted by
it
makes such qualification necessary. True, accurate and complete copies of the
Company’s organizational documents, as in effect on the date hereof, including
all amendments thereto, have heretofore been delivered to Buyer.
Section
3.2. The
Member.
The
Member has an ownership interest in the Company.
Section
3.3. Other
Entities.
The
Company does not own stock or other ownership interests in any other
entity.
Section
3.4. Authority;
Non-Contravention; Approvals.
(a) The
Company has full limited liability company power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been approved by the managers of the Company and the members
of the Company to the extent required to consummate this transaction in
accordance with applicable law, including but not limited to the laws of the
State of Wyoming. No further actions on the part of the Company are necessary
to
authorize the execution and delivery of this Agreement or the consummation
by
the Company of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Member, and, assuming the
due
authorization, execution and delivery hereof by Buyer, constitutes a valid
and
legally binding agreement of the Company and the Member, enforceable against
the
Company and the Member in accordance with its terms, except that such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (b) general equitable principles.
(b) Except
as
set forth in the disclosure schedule attached to this Agreement (the
“Disclosure
Schedule”),
the
execution and delivery of this Agreement by the Company and the Member and
the
consummation by the Company and the Member of the transactions contemplated
hereby do not and will not violate or result in a breach of any provision of,
or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination
or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company under
any of the terms, conditions or provisions of (i) the organizational documents
of the Company, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its properties or assets, or
(iii)
any note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, or any agreement to which the Company is now a party or by which
the
Company or any of its properties or assets may be bound or
affected.
-5-
Section
3.5. Financial
Statements.
The
Company has furnished Buyer with a balance sheet of the Company as of December
31, 2005, and the related statements of income for the calendar year then ended
(including the notes thereto) (collectively, the "Financial
Statement").
The
Financial Statement have been prepared in accordance with generally accepted
accounting principles, consistently applied, and are accurate and complete
and
fairly present the financial condition and result of operations of the
Company.
Section
3.6. Absence
of Undisclosed Liabilities.
Except
as disclosed in the Disclosure Schedule, the Company has not incurred any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature, except liabilities or obligations (a) which are provided for
in
the Financial Statements or reflected in the notes thereto, (b) which were
incurred after December 31, 2005, and were incurred in the ordinary course
of
business and consistent with past practices, or (c) liabilities or obligations
under this Agreement.
Section
3.7. Absence
of Certain Changes or Events.
Since
December 31, 2005, the business of the Company has been conducted in the
ordinary course of business consistent with past practices, and there has not
been any event, occurrence, development or state of circumstances or facts
which
has had, or could reasonably be anticipated to have, individually or in the
aggregate, a Material Adverse Effect. Specifically, but not by way of
limitation, since December 31, 2005, the Company has not engaged in or been
subject to any of the actions described in Section 4.1. "Material
Adverse Effect"
means
any event, occurrence, fact, condition, change, development or effect that
is or
could reasonably be anticipated to be materially adverse to the business, assets
(including intangible assets), liabilities, financial condition, results of
operations, properties (including intangible properties) or business prospects
of the Company, as applicable, taken as a whole.
Section
3.8. Tangible
Assets.
The
Tangible Personal Property and the Leased Assets constitute all of the tangible
personal property necessary for the conduct by the Company of its business
as
now conducted. The Company has good and indefeasible title to the Tangible
Personal Property, free and clear of all mortgages, liens, pledges, charges,
or
encumbrance of any nature whatsoever. The Tangible Personal Property and Leased
Assets are in good, serviceable condition and fit for the particular purposes
for which they are used in the business of the Company, subject only to normal
maintenance requirements and wear and tear reasonably expected in the ordinary
course of business.
-6-
Section
3.9. Employee
Benefits.
The
Disclosure Schedule contains a complete list of “employee welfare plans” (as
that term is defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974 (“ERISA”))
currently maintained by the Company or any person or trade or business under
common control with the Company, or in which active or former employees of
the
Company (collectively, the “Affected
Employees”)
currently participate (which plans are hereinafter referred to as “Welfare
Plans”).
The
Disclosure Schedule also contains a complete list of “employee pension benefit
plans” as that term is defined in Section 3(2) of ERISA maintained by the
Company or any person or trade or business under common control with the
Company, or in which any such entity currently contributes or is required to
contribute or in which Affected Employees currently participate (which plans
are
hereinafter referred to as “Pension
Plans”).
Neither the Company nor any of the Affected Employees participate or ever
participated in any “multiemployer plan” (as that term is defined in Section
3(37) of ERISA). The Welfare Plans and Pension Plans, and any other plans of
the
type described in the first two sentences of this Section previously applicable
at any time to the Company, are collectively referred to as the “Company
Plans”.
Each
Company Plan is or was in compliance with the provisions of all applicable
laws,
rules and regulations, including, without limitation, ERISA and the Code. None
of the Pension Plans has incurred any “accumulated funding deficiency” (as
defined in Section 412(a) of the Code). The Company has not incurred any
liability to the Pension Benefit Guaranty Corporation under Section 4062, 4063
or 4064 of ERISA, or any withdrawal liability under Title IV of ERISA with
respect to any multiemployer plan. The Disclosure Schedule describes all bonuses
and other compensation which will be payable to any of the employees of the
Company as a result of the consummation of the Purchase Transaction, and any
obligation to pay severance payments.
Section
3.10. Litigation.
There
are no claims, suits, actions, or proceedings pending or, to the Knowledge
of
the Company, threatened against or relating to the Company, before any court,
governmental department, commission, agency, instrumentality or authority,
or
any arbitrator. The Company is not subject to any judgment, decree, injunction,
rule or order of any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator. For purposes of this Agreement,
“Knowledge”
means
actual or constructive knowledge of officers of the Company after reasonable
inquiry.
Section
3.11. No
Violation of Law.
The
Company is not in violation of or has been given notice or been charged with
any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable Environmental Law) of any
governmental or regulatory body or authority. Except as disclosed in the
Disclosure Schedule, as of the date of this Agreement, to the Knowledge of
the
Company, no investigation or review by any governmental or regulatory body
or
authority is pending or threatened, nor has any governmental or regulatory
body
or authority indicated an intention to conduct the same. The governmental
permits or licenses of the Company (the “Permits”)
are
sufficient for the Company to conduct its business in the manner currently
conducted, and the Company is not in violation of the terms thereof. The Company
is not in violation of the terms of any of its Permits and is not required
to
possess any other permit, license, franchise, variance, exemption, order or
other governmental authorization, consent or approval.
-7-
Section
3.12. Labor
Matters.
The
Disclosure Schedule sets forth a list of each of the employees of the Company,
and a description of the salaries and other compensation payable to such
individuals. Except as set forth in the Disclosure Schedule, (a) there are
no
material controversies pending or, to the Knowledge of the Company, threatened
between the Company on the one hand and any of its employees on the other,
(b)
the Company is not a party to a collective bargaining agreement of other labor
union contract applicable to persons employed by the Company, nor does the
Company have any Knowledge of any activities or proceedings of any labor union
to organize any such employees, (c) the Company is not a party to any written
agreement, memorandum, or understanding with respect to the employment of any
individual, and (d) neither the Company or the Member are aware of any intention
of any employee to terminate his or her employment with the Company, either
as a
result of the Purchase Transaction or otherwise.
Section
3.13. Customer
Relationships.
The
Disclosure Schedule lists all of the material customers of the Company. Except
as set forth in the Disclosure Schedule, there has not been (a) any adverse
change in the business relationship of the Company with any customer; or (b)
any
change in any term (including credit terms) of the agreements with any such
customer. The Company has not received any customer complaints concerning its
products and services.
Section
3.14. Environmental
Matters.
Except
as set forth in the Disclosure Schedule:
(a) no
notice, demand, request for information, citation, summons or order has been
received, no complaint has been served, no penalty has been assessed, and no
investigation, action, claim, suit, proceeding or review is pending or, to
the
Knowledge of the Company, is threatened by any governmental entity or other
person relating to or arising out of any environmental law;
(b) the
Company is and has been in compliance with all Environmental Laws and
environmental permits; and
(c) there
are
no liabilities of or relating to the Company of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, arising
under or relating to any environmental law and there are no facts, conditions,
situations or set of circumstances which could reasonable be expected to result
in or be the basis for any such liability.
Section
3.15. Material
Contracts.
Schedule 1.1(d) lists all agreements, leases, commitments, contracts,
undertakings or understandings, to which the Company is a party, including
but
not limited to service agreements, manufacturing agreements, purchase or sale
agreements, master service agreements, supply agreements, distribution or
distributor agreements, real estate leases, purchase orders, license agreements,
customer orders and equipment rental agreements, in addition to (i) that certain
Exclusive Distribution Agreement dated September 1, 2003 between the Company
and
Tianjin Eastern Pump Company Ltd. (the “Distribution
Agreement”),
(ii)
that certain Manufacturing Services and Supply Agreement dated September 1,
2003
between the Company and Tianjin Eastern Pump Company Ltd, (the “Manufacturing
Agreement”),
and
(iii) the Xxxxxxxx Agreement and the Addendum (the Assigned Agreements, the
Distribution Agreement, the Manufacturing Agreement, the Xxxxxxxx Agreement
and
the Addendum are referred to herein collectively as the "Operating
Agreements").
Each
Operating Agreement is a valid, binding and enforceable agreement of the Company
and, to the Knowledge of the Company, the other parties thereto. There has
not
occurred any breach or default under any Operating Agreement on the part of
the
Company or, to the Knowledge of the Company, any other parties thereto. No
event
has occurred which with the giving of notice or the lapse of time, or both,
would constitute a default under any Operating Agreement on the part of the
Company, or, to the Knowledge of the Company, any of the other parties thereto.
There is no dispute between the parties to any Operating Agreement as to the
interpretation thereof or as to whether any party is in breach or default
thereunder, and no party to any Operating Agreement has indicated its intention
to, or suggested it may evaluate whether to, terminate any Operating Agreement.
-8-
Section
3.16 Intellectual
Property.
(a) Upon
the
execution and delivery by the Morrisons of a patent assignment with respect
to
the Patents in form reasonably satisfactory to the Company and the Buyer, the
Company has the right to freely use the Patents and the Intellectual Property
Rights (collectively, the “Subject
Rights”)
and,
except as indicated on the Disclosure Schedule, owns the Subject Rights, free
of
any lien or encumbrance. The Company has no obligation to pay royalties or
other
compensation to third parties in exchange for the right to use any of the
Subject Rights. The Company has not assigned, hypothecated or otherwise
encumbered any of the Subject Rights.
(b) Upon
the
execution and delivery by the Morrisons of a patent assignment with respect
to
the Patents in form reasonably satisfactory to the Company and the Buyer, the
Company may freely license, assign or transfer all of the Subject Rights.
(c) The
Company has no Knowledge of any infringement by any other person of any of
the
Subject Rights, and the Company has not entered into any agreement to indemnify
any other party against any charge of infringement of any of the Subject Rights.
The Company has not and does not violate or infringe any intellectual property
right of any other person, and the Company has not received any communication
alleging that it violates or infringes the intellectual property rights of
any
other person. The Company has not been sued for infringing any intellectual
property right of another person.
(d) To
the
knowledge of the Company, all of the issued Patents are currently in compliance
with formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use), and are valid and enforceable.
No such Patent has been or is now involved in any interference, reissue,
reexamination, or opposition proceeding. To the knowledge of Company, there
is
no patent or patent application of any third party that potentially interferes
with any such Patent. None of the Patents have been challenged or threatened
in
any way or to the knowledge of the Company, is being infringed.
-9-
(e) With
respect to each Trade Secret, the documentation, if any, relating to such Trade
Secret is current and accurate. The Company has taken all reasonable precautions
to protect the secrecy, confidentiality, and value of all Trade Secret
(including the enforcement by the Company of a policy requiring each employee
or
contractor to execute proprietary information and confidentiality agreements
substantially in the standard form of the company and all current and former
employees and contractors of the company have executed such an agreement).
The
Company has good title and an absolute right to use the Trade Secrets. The
Trade
Secrets are not part of the public knowledge or literature, and, to the
Knowledge of the Company, have not been used, divulged, or appropriated either
for the benefit of any person (other than the company) or to the detriment
of
the company. To the Knowledge of the Company, no Trade Secret is subject to
any
adverse claim or has been challenged or threatened in any way or infringes
any
intellectual property right of any other person.
Section
3.17 Inventory.
The
Purchased Inventory consists of items that are usable and saleable in the
ordinary course of business by the Company. All items of Purchased Inventory
are
owned by the Company free and clear of any lien or encumbrance, and are in
good
condition. No items of Purchased Inventory are held by the Company on
consignment from others. As of the Effective Time the Scheduled Inventory is
located on the premises of the Company as the Effective Time as determined
by a
physical count conducted by the Company.
Section
3.18 Solvency.
Solvency.
After
taking into account any forbearance agreements entered into by any of the
creditors of the Company (other than Bovaro Partners LLC or its affiliates
or
Xxxxxx Xxxxxxxx) at or prior to the Closing, the Company will not be insolvent
as of the Closing and will not be rendered insolvent by the Purchase
Transaction. Taking into account the statements made in the preceding sentence
and after giving effect to the consummation of the Purchase Transaction and
License Agreement, the Company will be able to pay its liabilities as they
become due.
Section
3.19. Brokers
and Finders.
Buyer
has not entered into any contract, arrangement or understanding with any person
or firm which may result in the obligation of the Company or the Member to
pay
any finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. There is no claim for
payment by Buyer of any investment banking fees, finder's fees, brokerage or
agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby. Specifically, but not by way of limitation, Buyer shall not have any
such obligation with respect to any of the foregoing as a result of the Purchase
Transaction to Bovaro Partners LLC or its affiliates or Xxxxxx
Xxxxxxxx.
-10-
Section
3.20. Disclosure.
No
representation or warranty of the Company or the Member set forth hereunder
or
in the schedules attached hereto or in any certificate delivered pursuant to
Section 6.2(a) contains any untrue statement of the material fact or omits
to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
ARTICLE
IV
CONDUCT
OF BUSINESS PENDING THE CLOSING
Section
4.1. Conduct
of Business of the Company.
Prior
to the Effective Time, the Company shall operate its business in, and only
in,
the usual, regular and ordinary course of business in substantially the same
manner as operated on the date of this Agreement. The Member will assure that
the Company complies with the requirements of this Section. Without limiting
the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company will not:
(a) Sell,
lease or otherwise dispose of, or agree to sell, lease or otherwise dispose
of,
any of its assets other than inventory in the ordinary course of business
consistent with past practice;
(b) Adopt,
amend or terminate any Company Plan;
(c) Except
as
provided in Section 5.7, amend or terminate any Operating
Agreement;
(d) Enter
into or modify any employment or severance agreement with any director, officer,
or employee, or agree to increase the compensation of any officer, director
or
employee; and/or
(e) Incur
any
indebtedness other than indebtedness incurred in the ordinary course of
business.
Section
4.2. Business
Organization.
Prior
to the Effective Time, the Company and the Member shall use their respective
best efforts to (a) preserve intact the business organization of the Company,
(b) keep available the services of the officers and employees of the Company,
(c) preserve the goodwill of the Company, (d) maintain and keep the properties
and assets of the Company in as good a repair and condition as presently exists,
and (e) maintain in full force and effect its insurance coverage of the
Company.
ARTICLE
V
ADDITIONAL
AGREEMENTS
Section
5.1. Cooperation.
The
Company shall afford to Buyer and its accountants, counsel, financial advisors
and other representatives reasonable access during normal business hours
throughout the period prior to the Effective Time to all of its properties,
books, contracts, personnel, representatives of or contacts with governmental
or
regulatory authorities, agencies or bodies, commitments, and records (including,
but not limited to, tax returns and any and all records or documents which
are
within the possession of governmental or regulatory authorities, agencies or
bodies, and the disclosure of which the Company can facilitate or control)
and,
such parties as its representatives may reasonably request. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the Company or with the
performance of any of the employees of the Company. No investigation pursuant
to
this Section shall affect any representation or warranty made by any party.
Each
of the parties hereto shall use all reasonable efforts to take, or cause to
be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement,
-11-
Section
5.2. Further
Assurances.
The
Member and the Company shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered to Buyer such assignments or other
instruments of transfer, assignment and conveyance, in form and substance
satisfactory to counsel of Buyer, as shall be necessary to vest in Buyer all
of
the right, title and interest in and to the Acquired Assets, in each case free
and clear of all liens, charges, encumbrances, rights of others, mortgages,
pledges or security interests, and any other document reasonably requested
by
Buyer in connection with this Agreement.
Section
5.3. Expenses
and Fees.
All
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, regardless of whether the Closing occurs.
Section
5.4. Notification
of Certain Matters.
Each of
the parties agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (a) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement
to be
untrue or inaccurate in any material respect (or in all respects in the case
of
any representation or warranty containing any materiality qualification) at
any
time from the date hereof to the Effective Time and (b) any material failure
(or
any failure in the case of any covenant, condition or agreement containing
any
materiality qualification) on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
hereunder.
Section
5.5. Employee
Matters.
(a) Effective
immediately following the Closing, Buyer shall offer employment to all of the
employees of the Company, each of which who accepts a position shall hereinafter
be referred to as a “Affected
Employee”
and
shall become an employee of Buyer, terminable at will. In order to facilitate
the foregoing, the Company shall, effective immediately following the Closing,
terminate the employment of all employees of the Company and take all
appropriate steps necessary to comply with applicable law in connection with
the
termination of such employees.
-12-
(b) Notwithstanding
anything to the contrary contained in this Section, the parties acknowledge
and
agree that they do not intend to create any third-party beneficiary rights
respecting any employee of the Company as a result of the provisions hereof
and
specifically hereby negate any intention to so create any third-party
beneficiary rights.
(c) With
respect to employees who accept employment with Buyer, the Company will remain
responsible for medical insurance premiums and other medical related benefits
relating to periods prior to the Effective Time and Buyer will be responsible
for all other medical insurance premiums and other medical related benefits
relating to periods after the Closing to the extent covered under their plans
without the application of any waiting period for coverage generally applicable
to newly hired employees. The Company shall make available, at such Affected
Employee’s expense, medical coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, to the Affected Employees to the extent
required by applicable law. The Company and Buyer shall cooperate and coordinate
with each other to provide continuity of health, hospitalization, life, travel
and accident insurance coverage for the Affected Employees. The cost of
insurance coverage for the Affected Employees from and after the Effective
Time
shall be borne by Buyer and not the Company, based on the terms of the health
insurance policies of the Buyer which are applicable from time to time with
respect to employee premium contributions and other matters.
(d) Buyer
and
the Company shall complete and furnish to each other any other employee data
as
shall be reasonably required from time to time for each party to perform and
fulfill its obligations under this Section 5.5.
(e) The
Company agrees that it shall be solely responsible for all liability, costs
and
expenses (including attorneys’ fees) for all claims relating to their
employment, including but not limited to arbitrations, unfair labor practice
charges, employment discrimination charges, wrongful termination claims,
workers’ compensation claims, any employment-related tort claim or other claims
or charges (collectively, “Employment Claims”)
by any
employee or former employee of the Company which accrued prior to the Effective
Time relating to arbitrations, unfair labor practice charges, employment
discrimination charges, wrongful termination claims, workers’ compensation
claims, any employment-related tort claim or other claims or charges of or
by
employees of the Company. Buyer agrees that it shall be responsible for all
Employment Claims by any Affected Employee who accepts employment with Buyer
which accrues after the Effective Time. The Disclosure Schedule sets forth
a
brief description of any known Employment Claims that have been filed or may
be
filed after the date hereof arising out of conditions, actions or events that
occurred before the Effective Time.
Section
5.6 The
Tradename.
The
Company will not use the Tradename after the Closing other than to collect
receivables attributable to periods prior to Closing. The Company will change
its name to a name dissimilar to the Tradename within 10 days of Closing.
-13-
Section
5.7 China
Contracts.
The
Company will use its best efforts to assist Buyer in entering into a new
Distribution Agreement and the Manufacturing Agreement with Tianjin Eastern
Pump
Company Ltd. on terms acceptable to the Buyer.
ARTICLE
VI
CONDITIONS
TO CLOSING
Section
6.1. Conditions
to Obligation of the Company to Effect the Purchase Transaction.
Unless
waived by the Company, the obligation of the Company to effect the Purchase
Transaction shall be subject to the fulfillment at or prior to the Effective
Time of the following additional condition:
(a) Buyer
shall have performed in all material respects (or in all respects in the case
of
any agreement containing any materiality qualification) its agreements contained
in this Agreement required to be performed on or prior to the Closing Date
and
the representations and warranties of Buyer contained in this Agreement shall
be
true and correct in all material respects (or in all respects in the case of
any
representation or warranty containing any materiality qualification) on and
as
of the date made and on and as of the Closing Date as if made at and as of
such
date, and the Company shall have received a certificate executed on behalf
of
Buyer by the President or a Vice President of Buyer and on behalf of Buyer
by
the Chief Executive Officer of Buyer to that effect.
Section
6.2. Conditions
to Obligations of Buyer to Effect the Purchase Transaction.
Unless
waived by Buyer, the obligations of Buyer to effect the Purchase Transaction
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) the
Company and the Member shall have performed in all material respects (or in
all
respects in the case of any agreement containing any materiality qualification)
their respective agreements contained in this Agreement required to be performed
on or prior to the Closing Date and the representations and warranties of the
Company and the Member contained in this Agreement shall be true and correct
in
all material respects (or in all respects in the case of any representation
or
warranty containing any materiality qualification) on and as of the date made
and on and as of the Closing Date as if made at and as of such date, and Buyer
shall have received a certificate executed on behalf of the Company by the
President and Chief Executive Officer of the Company to that
effect;
(b) Except
as
stated in the Disclosure Statement, since December 31, 2005, there shall have
been no changes that constitute, and no event or events shall have occurred
which have resulted in or constitute, a Material Adverse Effect;
(c) the
Morrisons shall have executed and delivered to the Company a patent assignment
with respect to the Patents in a form reasonably satisfactory to the
Buyer;
-14-
(d) the
Company shall have received the opinion letter of Hawks & Associates, L.C.
regarding the effect of Wyoming law on this transaction with the opinion letter
in a form that is acceptable to the Buyer, in its sole discretion);
(e) the
Buyer
and the Morrisons shall have entered into employment agreements with Buyer
acceptable to Buyer, in its absolute discretion.
ARTICLE
VII
INDEMNIFICATION
Section
7.1. Indemnification
of Buyer.
The
Member and the Company shall jointly and severally indemnify Buyer, its
affiliates, and their respective officers, directors, employees and agents
against, and hold each of them harmless from and against, any and all claims,
actions, causes of action, arbitrations, proceedings, losses, damages,
liabilities, judgments and expenses (including, without limitation, reasonable
attorneys' fees) ("Indemnified
Amounts")
incurred by the indemnified party as a result of (a) any error, inaccuracy,
breach or misrepresentation in any of the representations and warranties made
by
or on behalf of the Company or the Member in this Agreement, (b) any violation
or breach by the Company or the Member of or default by the Company or the
Member under the terms of this Agreement, and/or (c) any event or occurrence
relating to the business of the Company occurring prior to the Effective Time.
The indemnified party shall be entitled to recover its reasonable and necessary
attorneys' fees and litigation expenses incurred in connection with successful
enforcement of its rights under this Section. Upon and conditional upon the
consummation of the Closing, the Company hereby releases the Morrisons, from
and
all claims held by the releasing party against the released party, known or
unknown, actual or contingent, including but not limited to any claims relating
to the employment by the Company of the Morrisons.
Section
7.2. Indemnification
of the Member and the Company.
Buyer
shall indemnify the Member and the Company against, and hold each of them
harmless from and against, any and all Indemnified Amounts incurred by the
Member or the Company as a result of (a) any error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by or on
behalf of Buyer in this Agreement, and/or (b) any violation or breach by Buyer
of or default by Buyer under the terms of this Agreement. The indemnified party
shall be entitled to recover its reasonable and necessary attorneys' fees and
litigation expenses incurred in connection with successful enforcement of his
rights under this Section.
Section
7.3. Procedure.
The
defense of any claim, action, suit, proceeding or investigation subject to
indemnification under this Article shall be conducted by the indemnifying party.
If the indemnifying party fails to conduct such defense, the indemnified parties
may retain counsel satisfactory to them and the indemnifying party shall pay
all
reasonable fees and expenses of such counsel for the indemnified parties
promptly as statements therefor are received. The party not conducting the
defense will use reasonable efforts to assist in the vigorous defense of any
such matter, provided that such party shall not be liable for any settlement
of
any claim effected without its written consent, which consent, however, shall
not be unreasonably withheld. Any indemnified party wishing to claim
indemnification under this Article VII, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify the indemnifying party (but
the
failure so to notify a party shall not relieve such party from any liability
which it may have under this Article VII except to the extent such failure
materially prejudices such party). If the indemnifying party is responsible
for
the attorneys’ fees of the indemnified parties, then the indemnified parties as
a group may retain only one law firm to represent them with respect to each
such
matter unless there is, under applicable standards of professional conduct,
a
conflict on any significant issue between the positions of any two or more
indemnified parties.
-15-
Section
7.4. Express
Negligence Rule.
The
indemnification obligations under this Article VII shall apply regardless of
whether any suit or action results solely or in part from the active, passive
or
concurrent negligence of the indemnified party.
The
rights of the parties to indemnification under this Article VII shall not be
limited due to any investigations heretofore or hereafter made by such parties
or their representatives, regardless of negligence in the conduct of any such
investigations.
ARTICLE
VIII
MISCELLANEOUS
Section
8.1. Termination.
This
Agreement may be terminated at any time prior to the Effective Time, as
follows:
(a) the
Company shall have the right to terminate this Agreement:
(i) if
the
representations and warranties of Buyer shall fail to be true and correct in
all
material respects (or in all respects in the case of any representation or
warranty containing any materiality qualification) on and as of the date made
or, except in the case of any such representations and warranties made as of
a
specified date, on and as of any subsequent date as if made at and as of the
subsequent date and such failure shall not have been cured in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) within 30 days after written notice
of
such failure is given to Buyer by the Company;
(ii) if
the
Purchase Transaction is not completed by April
5,
2006
(provided that the right to terminate this Agreement under this Section
8.1(a)(ii) shall not be available to the Company if the failure of the Company
to fulfill any obligation to Buyer under or in connection with this Agreement
has been the cause of or resulted in the failure of the Purchase Transaction
to
occur on or before such date); or
(iii) if
Buyer
(A) fails to perform in any material respects any of its covenants (or in all
respects in the case of any covenant containing any materiality qualification)
in this Agreement and (B) does not cure such default in all material respects
(or in all respects in the case of any covenant containing any materiality
qualification) within 30 days after written notice of such default is given
to
Buyer by the Company.
-16-
(b) Buyer
shall have the right to terminate this Agreement:
(i) if
the
representations and warranties of the Company shall fail to be true and correct
in all material respects (or in all respects in the case of any representation
or warranty containing any materiality qualification) on and as of the date
made
or, except in the case of any such representations and warranties made as of
a
specified date, on and as of any subsequent date as if made at and as of such
subsequent date and such failure shall not have been cured in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) within 30 days after written notice
of
such failure is given to the Company by Buyer;
(ii) if
the
Purchase Transaction is not completed by April 5, 2006 (provided that the right
to terminate this Agreement under this Section 8.1(b)(ii) shall not be available
to Buyer if the failure of Buyer to fulfill any obligation to the Company under
or in connection with this Agreement has been the cause of or resulted in the
failure of the Purchase Transaction to occur on or before such date);
or
(iii) if
the
Company or the Member (A) fails to perform in any material respect (or in all
respects in the case of any covenant containing any materiality qualification)
any of their covenants in this Agreement and (B) do not cure such default in
all
material respects (or in all respects in the case of any covenant containing
any
materiality qualification) within 30 days after notice of such default is given
to the Company by Buyer.
Section
8.2. Effect
of Termination.
In the
event of termination of this Agreement by either Buyer or the Company pursuant
to the provisions of Section 8.1, this Agreement shall forthwith become void
and
there shall be no further obligations on the part of the Company, Buyer, or
its
respective officers or directors, or the Member to perform any covenant or
provision of this Agreement which otherwise would be required to be performed
after the date of termination (except as set forth in this Section 8.2 and
in
Sections 5.3 and 8.9, all of which shall survive the termination). Nothing
in
this Section 8.2 shall relieve any party from liability for any breach of this
Agreement.
Section
8.3. Remedies.
If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or proceeding
in addition to any other relief to which it or he may be entitled at law or
equity.
Section
8.4. Notices.
All
notices, consents, demands or other communications required or permitted to
be
given pursuant to this Agreement shall be deemed sufficiently given: (i) when
delivered personally during a business day to the appropriate location described
below or telefaxed to the telefax number indicated below, or (ii) five (5)
business days after the posting thereof by United States first class, registered
or certified mail, return receipt requested, with postage fee prepaid and
addressed:
-17-
| If to Buyer: |
0000 Xxxxxx Xxxxxxx Xxxxx
Xxxxxxx,
Xxxxx 00000
Telefax
No. (000) 000-0000
|
|
| With a copy to: |
Xxxxx
X. Xxxxxxx
Xxxxxxx
& Xxxxxxx LLP
0000
Xx. Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
Telefax
No. (000) 000-0000
|
|
|
If to the Company or
the Member:
|
Xxxx X. Xxxxx
0000
X. Xxxxxx Xx.
Xxxxxx,
XX 00000
|
|
Section
8.5. Successors.
This
Agreement shall be binding upon each of the parties upon their execution, and
inure to the benefit of the parties hereto and their successors and assigns.
Section
8.6. Severability.
In the
event that any one or more of the provisions contained in this Agreement or
in
any other instrument referred to herein, shall, for any reason, be held to
be
invalid, illegal, or unenforceable in any respect, such invalidity, illegality,
or unenforceability shall not affect any other provision of this Agreement
or
any such other instrument.
Section
8.7. Section
Headings.
The
section headings used herein are descriptive only and shall have no legal force
or effect whatsoever. Except to the extent the context specifically indicates
otherwise, all references to articles and sections refer to articles and
sections of this Agreement, and all references to the exhibits and schedules
refer to exhibits and schedules attached hereto, each of which is made a part
hereof for all purposes.
Section
8.8. Gender.
Whenever the context so requires, the masculine shall include the feminine
and
neuter, and the singular shall include the plural and conversely.
Section
8.9. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Texas, U.S.A., applicable to agreements and contracts executed and
to
be wholly performed there, without giving effect to the conflicts of law
principles thereof.
Section
8.10. Multiple
Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original.
-18-
Section
8.11. Waiver.
Any
waiver by either party to be enforceable must be in writing and no waiver by
either party shall constitute a continuing waiver.
Section
8.12. Entire
Agreement.
This
Agreement and the other agreements referred to herein set forth the entire
understanding of the parties hereto relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings among or between
any of the parties relating to the subject matter hereof and
thereof.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first set forth above.
|
THE
COMPANY:
TOTAL WELL SOLUTIONS, LLC
|
||
| |
|
|
| By: | /s/ Xxxx X. Xxxxx | |
|
Name: Xxxx X. Xxxxx |
||
| Title: Managing Member | ||
|
BUYER:
USA PETROVALVE, INC.
|
||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxx, Xx. | |
|
Xxxxx X. Xxxxx, Xx., Chairman and Chief |
||
| Executive Officer | ||
|
THE
MEMBER:
TOTAL
ENERGY TECHNOLOGIES, LLC
|
||
| |
|
|
| By: | /s/ Xxxx X. Xxxxx | |
|
Name: Xxxx X. Xxxxx |
||
| Title: Managing Member | ||
-19-
