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Exhibit 2.1
EXHIBIT "A" - STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
INDUSTRIAL HOLDINGS, INC.
THE SHAREHOLDER OF
A & B BOLT & SUPPLY, INC.
AND
T-3 ENERGY SERVICES, INC.
DATED: MAY , 2001
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TABLE OF CONTENTS
PAGE
STOCK PURCHASE AGREEMENT.......................................................................1
RECITALS:......................................................................................1
AGREEMENT:.....................................................................................1
1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE................................................1
1.1. PURCHASE OF SHARES FROM SHAREHOLDERS............................................1
1.2. FURTHER ASSURANCES..............................................................2
1.3. CLOSING.........................................................................2
2. CONSIDERATION TO BE PAID BY BUYER..........................................................2
2.1. PURCHASE PRICE FOR SHARES.......................................................2
2.2. PAYMENT OF PURCHASE PRICE.......................................................2
2.3. PURCHASE PRICE ADJUSTMENT.......................................................3
3. REPRESENTATIONS AND WARRANTIES OF SELLER...................................................5
3.1. ORGANIZATION AND GOOD STANDING..................................................5
3.2. CORPORATE AUTHORITY.............................................................5
3.3. OWNERSHIP OF SHARES.............................................................5
3.4. CAPITALIZATION..................................................................6
3.5. FINANCIAL CONDITION.............................................................6
3.6. PROPERTY OF THE COMPANY.........................................................7
3.7. AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS....................................10
3.8. EMPLOYMENT AGREEMENTS; EMPLOYEE BENEFITS........................................10
3.9. LABOR AND EMPLOYMENT MATTERS....................................................14
3.10. LITIGATION.....................................................................15
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3.11. CONTRACTS......................................................................16
3.12. REGULATORY APPROVALS...........................................................17
3.13. COMPLIANCE WITH LAW............................................................17
3.14. INDEBTEDNESS FROM EMPLOYEES....................................................18
3.15. ACCOUNTS RECEIVABLE............................................................18
3.16. INSURANCE......................................................................18
3.17. POWERS OF ATTORNEY AND SURETYSHIPS.............................................18
3.18. NO UNDISCLOSED LIABILITIES.....................................................19
3.19. ENVIRONMENTAL MATTERS..........................................................19
3.20. CONFLICT OF INTEREST...........................................................20
3.21. TAXES..........................................................................20
3.22. LIENS..........................................................................26
3.23. OTHER INFORMATION..............................................................26
3.24. PROJECTIONS....................................................................27
3.25. CLAIMS.........................................................................27
3.26. NO OTHER REPRESENTATIONS.......................................................27
3.27. NO KNOWN BREACHES..............................................................27
4. REPRESENTATIONS AND WARRANTIES OF BUYER....................................................27
4.1. ORGANIZATION....................................................................28
4.2. CORPORATE AUTHORITY.............................................................28
4.3. AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS....................................28
4.4. INVESTMENT INTENT...............................................................28
4.5. REGULATORY AND OTHER APPROVALS..................................................28
4.6. NO KNOWN BREACHES...............................................................29
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4.7. OTHER INFORMATION...............................................................29
4.8. NO OTHER REPRESENTATIONS........................................................29
5. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.......................................29
5.1. COOPERATION IN LITIGATION.......................................................29
5.2. TAX MATTERS.....................................................................30
5.3. EMPLOYMENT AGREEMENTS...........................................................33
6. INDEMNIFICATION............................................................................35
6.1. INDEMNIFICATION BY SELLER.......................................................35
6.2. INDEMNIFICATION BY BUYER........................................................37
6.3. CLAIMS FOR INDEMNIFICATION......................................................38
6.4. DEFENSE BY INDEMNIFYING PARTY...................................................39
6.5. MANNER OF INDEMNIFICATION.......................................................39
6.6. LIMITATIONS ON INDEMNIFICATION..................................................40
6.7. SOLE BASIS FOR RECOVERY.........................................................41
7. DOCUMENTS TO BE DELIVERED AT CLOSING.......................................................41
7.1. CLOSING DOCUMENTS DELIVERED BY SELLER...........................................41
7.2. CLOSING DOCUMENTS DELIVERED BY BUYER............................................42
8. RELEASE....................................................................................42
9. MISCELLANEOUS..............................................................................43
9.1. NOTICES.........................................................................43
9.2. ASSIGNABILITY AND PARTIES IN INTEREST...........................................44
9.3. GOVERNING LAW...................................................................45
9.4. COUNTERPARTS....................................................................45
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9.5. INDEMNIFICATION FOR BROKERAGE...................................................45
9.6. PUBLICITY.......................................................................45
9.7. COMPLETE AGREEMENT..............................................................45
9.8. INTERPRETATION..................................................................46
9.9. SEVERABILITY....................................................................46
9.10. KNOWLEDGE: DUE DILIGENCE INVESTIGATION........................................46
9.11. EXPENSES OF TRANSACTIONS.......................................................46
9.12. LIMIT ON INTEREST..............................................................46
9.13. SUBMISSION TO JURISDICTION.....................................................46
9.14. ARBITRATION....................................................................47
9.15. WAIVER OF PUNITIVE DAMAGES.....................................................47
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EXHIBITS
EXHIBIT 2.3.1 FORM OF CLOSING BALANCE SHEET
EXHIBIT 5.3.1. EMPLOYMENT AGREEMENT
SCHEDULES
Schedule 2.2.1. Seller's Wire Transfer Instructions
Schedule 3.1. Louisiana Parishes and other jurisdictions (counties) in which the
Company does Business
Schedule 3.5.1. Financial Statements
Schedule 3.5.2. Exceptions to Absence of Changes
Schedule 3.6.1. List of Real Property owned or leased by/to the Company
Schedule 3.6.2. Inventory of the Company
Schedule 3.6.3. Tangible Personal Property of the Company
Schedule 3.6.4. Intangible Personal Property of the Company
Schedule 3.7. Required Consents to close
Schedule 3.8.1. Labor and Employment Matters
Schedule 3.8.2. Employee Benefit Plans
Schedule 3.10. Litigation by or against the Company
Schedule 3.11. List of Material Contracts
Schedule 3.14. Employee Indebtedness
Schedule 3.15. Accounts Receivable of the Company
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Schedule 3.16. Insurance Schedule of the Company
Schedule 3.20. Conflicts
Schedule 3.21.2. Taxable Years/Examinations
Schedule 3.21.3. Tax Returns, etc.
Schedule 3.21.3.5. Extension of Time to File Returns
Schedule 3.21.3.7. Tax Affiliates
Schedule 3.21.3.22. Tax Returns Within 60 Days
Schedule 3.21.3.23. Tax Jurisdictions
Schedule 3.22. Description of Company Indebtedness Guaranteed by Seller; Liens
on Assets
Schedule 6.1.8. Environmental Matters
Schedule 9.5. Brokerage Arrangements
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this day of May, 2001, but effective as of May 1, 2001, by and
between INDUSTRIAL HOLDINGS, INC., a Texas corporation (the "Seller"), being the
sole shareholder of A & B BOLT & SUPPLY, INC., a Louisiana corporation (the
"Company"), and T-3 ENERGY SERVICES, INC., a Delaware corporation ("Buyer").
RECITALS:
1. Seller owns all outstanding shares of the common stock, no par value
(the "Shares"), of the Company.
2. The Company is engaged in the business of distributing fastener
related products, pipes, valves, fitting and other supplies to companies in the
oil and gas and industrial fabrication industries.
3. Seller desires to sell to Buyer the Shares (as defined below), and
Buyer desires to acquire the Shares on the terms and conditions hereinafter set
forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the parties hereto covenant and agree as follows:
1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE.
1.1. PURCHASE OF SHARES FROM SELLER.
On the terms and subject to the conditions set forth herein,
Seller hereby sells, transfers, conveys, assigns and delivers to Buyer,
free and clear of all liens, pledges, encumbrances and claims
whatsoever, and Buyer hereby purchases, acquires and accepts from
Seller all the Shares. Seller shall deliver to Buyer the certificate
representing the Shares, duly endorsed for transfer at the Closing (as
defined in Section 1.3 hereof). The Purchased Shares are evidenced as
follows: Certificate No. 13 for 100 shares dated August 1, 1998.
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1.2. FURTHER ASSURANCES.
From time to time after the Closing, Seller and Buyer, and
each of their respective affiliates, will execute and deliver to the
other party such instruments of sale, transfer, conveyance, assignment
and delivery, consents, assurances, powers of attorney and other
instruments as may be reasonably requested by counsel for Buyer or
Seller in order to vest in Buyer all right, title and interest of
Seller in and to the Shares and otherwise in order to carry out the
purpose and intent of this Agreement.
1.3. CLOSING.
The closing (the "Closing") of the transactions herein
contemplated shall take place at the offices of Buyer located at 000
Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 and be effective as of
10:00 a.m., local time, on the date hereof (the "Closing Date"). All
actions taken and all documents delivered at the Closing shall be
deemed to have occurred simultaneously.
2. CONSIDERATION TO BE PAID BY BUYER.
2.1. PURCHASE PRICE FOR SHARES.
The purchase price for the Shares shall be an amount
("Purchase Price") equal to $15,000,000.00 plus or less, as the case
may be, any Adjustment Amount (as defined in Section 2.3.).
2.2. PAYMENT OF PURCHASE PRICE.
2.2.1. CASH TO SELLER
At the Closing, Buyer shall pay in immediately
available funds the Purchase Price to or for the account of
the Seller as set forth in Schedule 2.2.1. Not more than
$9,000,000.00 of the Purchase Price shall be applied by
Comerica Bank-Texas, N.A. ("Comerica") to Seller's and
Company's indebtedness to Comerica, and not less than
$6,000,000.00 of the Purchase Price shall be used by the
Company for working capital purposes.
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2.3. PURCHASE PRICE ADJUSTMENTS.
2.3.1. Seller shall prepare or cause to be prepared
and delivered to Buyer at the Closing a balance sheet of the
Company as of March 31, 2001, prepared in accordance with
generally accepted accounting principles consistently applied
("GAAP") on a basis consistent with the Financial Statements
as such term is used in Section 3.5.1. of this Agreement (the
"Preliminary Closing Balance Sheet"), which Preliminary
Closing Balance Sheet must be reasonably acceptable to Buyer.
Upon request, the Seller shall provide to the Buyer and its
representatives, accountants, and advisors with access to
copies of all work papers and other relevant documents to
verify the entries and balances contained in the Preliminary
Closing Balance Sheet. The Preliminary Closing Balance Sheet
must include a calculation of Net Working Capital (defined as
the Company's current assets minus the Company's current
liabilities, excluding short-term debt and the current portion
of long-term debt) in the minimum amount of $7,500,000.00. The
form of Closing Balance Sheet, prepared by the Buyer, for use
by Seller is attached to this Agreement as Exhibit 2.3.1.
2.3.2. In the event the preliminary determination of
Net Working Capital as set forth on the Preliminary Closing
Balance Sheet is less (applying GAAP) than $7,500,000.00, then
the Purchase Price shall be reduced by the Net Working Capital
deficiency amount. Further, in the event the Closing Balance
Sheet (as defined in Section 2.3.3 below) is not audited at
the election of the Buyer as provided in Section 2.3.3 below,
and the Closing Balance Sheet reflects a Net Working Capital
amount less than as provided on the Preliminary Balance Sheet,
then an adjustment to the Purchase Price shall be made in the
amount equal to the deficiency, and Seller shall pay such
deficiency amount to Buyer in immediately available funds by
wire transfer.
2.3.3. Within forty five days after the Closing, the
Buyer shall prepare a balance sheet of the Company as of April
30, 2001, prepared in accordance with GAAP, and a
reconciliation of all cash advances, cash receipts, and cash
disbursements for the period commencing May 1, 2001 through
the Closing Date (collectively, the "Closing Balance Sheet").
The Buyer will provide a copy of the Closing Balance Sheet to
the Seller and its representatives, accountants, and advisors,
and provide access to copies of all work papers and other
relevant documents to enable Seller to verify the entries and
balances contained in the Closing Balance Sheet. At the
election of Buyer, on or before 180 days after the Closing
Date, the Company shall cause the accounting firm of Xxxxxx
Xxxxxxxx LLP to audit the Closing Balance Sheet in accordance
with GAAP, and deliver the audited Closing Balance Sheet (the
"Audited Closing Balance Sheet") to Buyer and Seller in order
to determine the "Adjustment Amount" (as defined below in
Section 2.3.4.). Upon reasonable notice and during reasonable
business hours, Buyer agrees that the Company shall allow
Seller and Seller's accountant access to the persons involved
in the
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preparation of the Audited Closing Balance Sheet and to all of
their work-papers so as to permit Seller and Seller's
accountant to make copies of such work-papers supporting the
amounts included in the Audited Closing Balance Sheet and to
reasonably review the accounting procedures, tests, methods
and approaches utilized by Xxxxxx Xxxxxxxx LLP.
2.3.4. On or before the 55th day following delivery
of the Audited Closing Balance Sheet pursuant to Section
2.3.3. , Seller shall notify Buyer in writing of any
objections to the Audited Closing Balance Sheet (and the
determination of the Adjustment Amounts) as not complying with
the requirements of Section 2.3. , specifying in reasonable
detail any such objections (a "Dispute Notice"). If (i) Seller
does not deliver a Dispute Notice within the time period
specified above for delivery of a Dispute Notice (the "Notice
Period"), or (ii) prior to the expiration of the Notice
Period, Seller indicates in writing to Buyer that Seller
relinquishes its right to object to the Audited Closing
Balance Sheet, or (iii) Buyer and Seller agree on the
resolution of all such objections or changes at any time
subsequent to the expiration of the Notice Period, the Audited
Closing Balance Sheet, with any such changes as are agreed
upon, shall be final and binding on the parties hereto. If
Seller and Buyer are unable to resolve the matters addressed
in any Dispute Notice, each party shall within fourteen (14)
business days after the delivery of such Dispute Notice,
summarize its position with regard to such dispute in a
written document and submit such summaries to the Houston,
Texas office of, PriceWaterhouseCoopers, LLP, or such other
party as the parties may mutually select (the "Accounting
Arbitrator"), together with the Dispute Notice and any other
documentation either party may desire to submit. The
Accounting Arbitrator shall render a decision regarding such
dispute in accordance with this Agreement, based on the
materials described above and based upon the books and records
of the Company within twenty business days of the submission
of such materials. Any decision rendered by the Accounting
Arbitrator pursuant hereto shall be final and binding between
the parties for the purpose of determining the Adjustment
Amounts under this Section 2.3. Within ten (10) days after the
final determination of the Audited Closing Balance Sheet
pursuant to this Section 2.3.4., the following adjustment to
the Purchase Price shall occur: (i) to the extent that the Net
Working Capital balance on the Audited Closing Balance Sheet
(applying GAAP) is more than the Net Working Capital balance
set forth on the Preliminary Balance Sheet but less than or
equal to $7,500,000.00, then any amount in excess of the Net
Working Capital shown on the Preliminary Balance Sheet shall
be paid by Buyer to Seller and (ii) to the extent the Net
Working Capital on the Audited Closing Balance Sheet (applying
GAAP) is less than the Net Working Capital balance set forth
on the Preliminary Balance Sheet, the Seller shall pay to
Buyer any shortfall or deficiency amount. Payments under this
Section 2.3.4. shall be in immediately available funds by wire
transfer. The term "Adjustment Amount" as used in this
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Section 2.3. shall mean any adjustment to the Purchase Price
made by Buyer to Seller or by Seller to Buyer pursuant to
Sections 2.3.2. and 2.3.4. of this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer that:
3.1. ORGANIZATION AND GOOD STANDING.
The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed,
with full power to carry on its business as it is now and has since its
organization been conducted, and to own, lease or operate its assets.
The Company is duly authorized to do business and is in good standing
in such other jurisdictions in which the failure to so qualify would
have a material and adverse effect on the results of operations,
properties, assets, or condition (financial or otherwise) or
contemplated material prospects of the Company (a "Material Adverse
Effect"). Schedule 3.1. is a listing of the Louisiana parishes in which
the Company does business, the Louisiana parishes adjacent to offshore
waters in which the Company does business, and all other jurisdictions
and counties in which the Company does business.
3.2. CORPORATE AUTHORITY.
Seller has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
This Agreement and all other agreements and instruments to be executed
by Seller in connection herewith have been duly executed and delivered
by Seller, have been effectively authorized by all necessary action,
corporate or otherwise, and constitute legal, valid and binding
obligations of Seller, as the case may be.
3.3. OWNERSHIP OF SHARES.
The Shares are owned beneficially and of record by Seller, and
are being transferred to Buyer free and clear of all liens, mortgages,
charges, option rights, pledges, security interests, restrictions,
prior assignments, encumbrances and claims of any kind or nature
whatsoever. No Shares are subject to any restriction with respect to
their transferability (other than restrictions on transfer under
applicable Federal and state securities laws).
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3.4. CAPITALIZATION.
The authorized capital stock of the Company consists solely of
1000 shares of common stock, no par value per share, of which 100
shares of common stock are issued and outstanding and which are owned
by Seller. All of the Shares have been duly authorized, validly issued
(free of all past, present and future preemptive rights), and are fully
paid and non-assessable. There are no outstanding or authorized
options, warrants, subscriptions, calls, puts, conversion or other
rights, contracts, agreements, commitments or understandings of any
kind obligating the Company to issue, sell, purchase, return, redeem or
pay any distribution or dividend with respect to any shares of capital
stock of the Company or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of
capital stock of or other ownership interest in the Company.
3.5. FINANCIAL CONDITION.
3.5.1.
Financial Statements. Schedule 3.5.1. sets forth the
following financial information of the Company: the balance
sheet as of March 31, 2001, December 31, 2000, December 31,
1999, and December 31, 1998, and the related statements of
income for the three months ended March 31, 2001, and the
related statements of income for each of the three years in
the period ended December 31, 2000 (collectively, the
"Financial Statements"). The Financial Statements were
prepared in accordance with generally accepted accounting
principles in the United States, applied on a consistent
basis.
3.5.2.
Absence of Certain Changes. Since December 31, 2000
(the "Balance Sheet Date") there has not been (i) any damage,
destruction or loss, whether or not covered by insurance,
which, if not covered by insurance, could be a Material
Adverse Effect; (ii) any sale or transfer of any of the assets
of the Company except (a) sales in the ordinary course of the
business of inventory or immaterial amounts of other tangible
personal property and (b) for the sales and transfers
disclosed in any registration statement, proxy statement,
information statement or annual report on Form 10-K or
periodic reports and Forms 8-K filed by Seller with the
Securities and Exchange Commission ("SEC Filings") listed on
Schedule 3.5.2.; (iii) except as set forth on Schedule 3.5.2.,
any increase in, or commitment to increase, the compensation
payable or to become payable to any of the Company's employees
or any bonus payment (other than as included as an accrued
liability on the Company's December 31, 2000 Financial
Statement) or similar arrangement made to or with any of the
Company's employees other than routine increases made in the
ordinary course of business not exceeding the greater of five
percent per annum or Two Thousand Dollars ($2,000) per annum
for any of them
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individually; (iv) any adoption of a plan or agreement or
amendment to any plan or agreement providing any new or
additional fringe benefits; or (v) any material alteration in
the manner of keeping the Company's books, accounts or
records, or in the accounting practices therein reflected,
except as disclosed in SEC Filings. Since the Balance Sheet
Date, the Company has not (except as set forth on Schedule
3.5.2.): (a) entered into any material transaction not in the
ordinary course of business; or (b) materially amended,
modified, or terminated any material Contract (as defined in
Section 3.11.1.) other than in the ordinary course of its
business or as disclosed in SEC Filings.
3.6. PROPERTY OF THE COMPANY.
3.6.1.
Real Property. There is listed in Schedule 3.6.1. a
description of each parcel of real or material immovable
property owned by or leased to the Company, or owned by or
leased to Seller for use by the Company. Except as indicated
in Schedule 0.0.0.:
3.6.1.1.
Each of the leases described in Schedule
3.6.1. is a valid and binding obligation of the
Company or Seller, as the case may be, and Seller
does not have any knowledge that any of said leases
is not a valid and binding obligation of each of the
other parties thereto;
3.6.1.2.
The Company and Seller are not, and Seller
does not have any knowledge that any other party to
any such lease is, in default with respect to any
material term or condition thereof, and Seller does
not have any knowledge that any event has occurred
which through the passage of time or the giving of
notice, or both, would constitute a default
thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a
lien or encumbrance upon any asset of the Company;
3.6.1.3.
All of the buildings, fixtures and other
improvements located on the real or immovable
property described in Schedule 3.6.1. are in good
operating condition and repair, and the Company or
Seller, as the case may be, holds valid and effective
certificates of occupancy, underwriters' certificates
relating to electrical work, building, safety, fire
and health approvals and all other permits and
licenses required by
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applicable law relating to the operation of such real
properties and leaseholds. Neither the Company nor
Seller have received notice that the Company's
operations at the real or immovable property listed
in Schedule 3.6.1. as presently conducted is in
violation of any applicable building code, zoning
ordinance or other law or regulation;
3.6.1.4.
Neither the Company nor Seller, as the case
may be, have experienced during the two years
preceding the date hereof any material interruption
in the delivery of adequate quantities of any
utilities (including, without limitation,
electricity, natural gas, potable water, water for
cooling or similar purposes and fuel oil) or other
public services (including, without limitation,
sanitary and industrial sewer service) required by
the Company during such period.
3.6.2.
Inventory. The Company's Inventory as of March 31,
2001 has been valued in accordance with GAAP and is complete
and accurate in all material respects. There is listed in
Schedule 3.6.2. a description of all inventories of (i)
valves, flanges, bolts, nuts, and miscellaneous products; (ii)
raw material, work in progress, and finished goods; and (iii)
other similar items of the Company (the "Inventory"). Also
separately listed on Schedule 3.6.2 is a description of all
items of Inventory that are obsolete and/or slow moving for
which an Inventory reserve has been provided. Except for the
Inventory which is identified in such separate listing in
Schedule 3.6.2. for which a valuation reserve has been
provided, the Inventory of the Company has been valued at the
lower of cost or market not to exceed net realizable value.
3.6.3.
Other Tangible Personal Property. There is listed in
Schedule 0.0.0.: (i) a description and the location of each
item of tangible personal property (other than Inventory)
owned by the Company or in the possession of the Company
having on the date hereof a depreciated book value per unit in
excess of Five Thousand Dollars ($5,000); (ii) an
identification of the owner of, and any agreement relating to
the use of, each item of tangible personal property under
leases or other similar agreements which provide for rental
payments at a rate in excess of Two Hundred Fifty Dollars
($250) per month; and (iii) an identification of the owner of,
and any agreement relating to the use of, each motor vehicle
not owned by the Company, the rights to which are to be
transferred to Buyer pursuant hereto;
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3.6.4.
Intangible Personal Property. There is listed in
Schedule 0.0.0.: an identification of all (i) foreign and
United States Federal or state patents, patent applications,
invention disclosures, copyrights, copyright registrations,
trademarks, trademark registrations, service marks, service
xxxx registrations, trade names, trade name registrations and
applications for any of the foregoing, owned or used by the
Company; (ii) common law claims to trademarks, service marks
and tradenames; (iii) claims of copyright that exist although
no registrations have been issued with respect thereto; and
(iv) fictitious or assumed business name filings with any
state or local governmental authority ("intangible personal
property"). Schedule 3.6.4. also sets forth a true and
complete list of all licenses or similar agreements or
arrangements to which the Company is a party either as
licensee or licensor for each such item of intangible personal
property. Except as indicated in Schedule 0.0.0.:
3.6.4.1.
There have not been any regulatory actions
or other judicial or adversary proceedings involving
the Company concerning any of such items of
intangible personal property, nor is any such action
or proceeding threatened;
3.6.4.2.
To the Seller's knowledge, the Company has
the right and authority to use said items of
intangible personal property in connection with the
conduct of its business in the manner presently
conducted and, subject to the receipt of those
consents listed on Schedule 3.7., to convey such
right and authority to Buyer, and, to the Seller's
knowledge, such use does not conflict with, infringe
upon or violate any patent, trademark, servicemark,
trade name, registration or similar rights of any
other person, firm or corporation;
3.6.4.3.
There are no outstanding disputes or
disagreements with respect to any licenses or similar
agreements or arrangements described in Schedule
3.6.4., and to the Seller's knowledge, there is no
such threatened dispute; and
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3.6.4.4.
The conduct of its business by the Company
does not, to the knowledge of Seller, conflict with
any patents, trademarks, trade secrets, trade names
or similar rights of others.
3.6.5. SUBSIDIARIES
There is no entity in which the Company holds a 5% or
greater interest (the "Subsidiaries").
3.7. AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS.
The execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not result in
a breach of any of the terms and provisions of, or constitute a default
under, or conflict with: (i) any Contract or any other material
agreement, indenture or other instrument to which Seller or the Company
is a party or by which any of them is bound, subject to the receipt of
those consents listed on Schedule 3.7. which have been obtained and
provided to Buyer, (ii) the Articles of Incorporation and Bylaws of the
Company, (iii) any judgment, decree, order or award of any court,
governmental body or arbitrator, or (iv) any law, rule or regulation
applicable to Seller or the Company.
3.8. EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFITS.
3.8.1.
Except as set forth on Schedule 3.8.1., there are no
employment, consulting, change of control, incentive,
severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements of any
nature whatsoever (collectively, "Employment Agreements")
between the Company, on the one hand, and any current or
former stockholder, officer, director, employee, consultant,
or agent of the Company, on the other hand, that are currently
in effect or under which the Company has any continuing
obligations. Except as set forth on Schedule 3.8.1. there are
no Employment Agreements or any other similar agreements to
which the Company is a party or has any obligations under
which the transactions contemplated by this Agreement (i) will
require any payment by the Company or Buyer, or any consent or
waiver from any stockholder, officer, director, employee,
consultant or agent of the Company or Buyer, or (ii) will
result in any change in the nature of any rights of any
stockholder, officer, director, employee, consultant or agent
of the Company under any such Employment Agreement or other
similar agreement.
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3.8.2.
Schedule 3.8.2. sets forth all of the Employee
Benefit Plans. The Company has made true and correct copies of
all governing instruments, summary plan descriptions, and all
other related agreements pertaining to such benefit plans
available to Buyer.
3.8.3.
Neither the Company nor any of its ERISA Affiliates
sponsors, or has ever sponsored, maintained, contributed to,
or incurred an obligation to contribute to, any Employee
Pension Benefit Plan, any plan subject to Title IV of ERISA,
any "multiemployer plan" (as defined in Section 3(37) of
ERISA), any "multiple employer welfare arrangement" (as
defined in Section 3(40) of ERISA), or any plan that is part
of a "voluntary employees' beneficiary association" (as
defined in Section 501(c)(9) of the Code).
3.8.4.
No individual shall accrue or receive additional
benefits, service or accelerated rights to payments of
benefits under any Employee Benefit Plan, Employee Agreement,
or Benefit Arrangement, including the right to receive any
parachute payment, as defined in Section 280G of the Code, or
become entitled to severance, termination allowance or similar
payments as a result of the transactions contemplated by this
Agreement.
3.8.5.
No Employee Benefit Plan has participated in, engaged
in or been a party to any non-exempt Prohibited Transaction,
and neither the Company nor any of its ERISA Affiliates has
had asserted against it any claim for taxes under Chapter 43
of Subtitle A of the Code and Section 5000 of the Code, or for
penalties under ERISA Sections 502(c), (i) or (l), with
respect to any Employee Benefit Plan nor, to the knowledge of
the Seller, is there a basis for any such claim. No officer,
director or employee of the Company has committed a material
breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Employee
Benefit Plan.
3.8.6.
Other than routine claims for benefits, there is no
claim pending, or to the knowledge of the Seller, threatened,
involving any Employee Benefit Plan by any Person against such
plan, the Company or any ERISA Affiliate. There is no pending
or to the knowledge of the Seller threatened proceeding
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involving any Employee Benefit Plan before the IRS, the U.S.
Department of Labor or any other governmental authority.
3.8.7.
There is no violation of any reporting or disclosure
requirements imposed by ERISA or the Code with respect to any
Employee Benefit Plan, including, without limitation, the
timely filing of all applicable Forms 5500.
3.8.8.
Each Employee Benefit Plan is currently, and at all
times prior hereto has been, maintained in all material
respects, by its terms and in operation, in accordance with
ERISA, the Code, and all other applicable laws and
regulations. The Company and its ERISA Affiliates have made
full and timely payment of all amounts required to be
contributed under the terms of each Employee Benefit Plan and
applicable law or required to be paid as expenses under such
Employee Benefit Plan, and the Company and its ERISA
Affiliates shall continue to do so through the Closing. Each
Employer Benefit Plan intended to be qualified under Code
Section 401(a) has received a determination letter to that
effect from the Internal Revenue Service and no event has
occurred and no amendment has been made that would adversely
affect such qualified status. All individuals have been
properly classified by the Company for purposes of coverage
under any Employee Benefit Plan.
3.8.9.
With respect to any group health plans maintained by
the Company or its ERISA Affiliates, whether or not for the
benefit of the Company's employees, the Company and its ERISA
Affiliate have complied in all material respects with the
provisions of Parts 6 and 7 of Title I of ERISA and 4980B of
the Code. The Company is not obligated to provide health care
or other benefits of any kind (other than as required pursuant
to Section 601 of ERISA or pursuant to a plan intended to be
qualified within the meaning of Section 401(a) of the Code) to
its retired employees pursuant to any Employee Benefit Plan or
Benefit Arrangement, including without limitation any group
health plan, or pursuant to any agreement or understanding.
3.8.10.
The Company has made available to the Buyer a copy of
(i) the three (3) most recently filed Federal Form 5500 series
and accountant's opinion, if applicable, for each Employee
Benefit Plan and all applicable Internal Revenue Service
determination letters.
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3.8.11.
For purposes of this Section 3.8., the following
definitions shall apply:
3.8.11.1.
"Benefit Arrangement" means any benefit
arrangement that is not an Employee Benefit Plan,
including, without limitation, (i) each employment or
consulting agreement, including without limitation,
an Employment Agreement described in Section 3.8.1.,
(ii) each arrangement providing for insurance
coverage or workers' compensation benefits, (iii)
each incentive bonus or deferred bonus arrangement,
(iv) each arrangement providing termination
allowance, severance or similar benefits, (v) each
equity or incentive compensation plan, (vi) each
deferred compensation plan, and (vii) each
compensation policy and practice maintained by the
Company or any ERISA Affiliate covering the
employees, former employees, directors and former
directors of the Company, and the beneficiaries of
any of them.
3.8.11.2.
"COBRA" means the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, as set
forth in Section 4980B of the Code and Part 6 of
Title I of ERISA.
3.8.11.3.
"Code" means the Internal Revenue Code of
1986, as amended.
3.8.11.4.
"Employee Benefit Plan" means any employee
benefit plan, as defined in Section 3(3) of ERISA,
that is sponsored or contributed to by the Company or
any ERISA Affiliate covering employees or former
employees of the Company.
3.8.11.5.
"Employee Pension Benefit Plan" means any
employee pension benefit plan, as defined in Section
3(2) of ERISA, that is subject to Title IV of ERISA.
3.8.11.6.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
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3.8.11.7.
"ERISA Affiliate" of any person means any
other person that, together with such person as of
the relevant measuring date under ERISA, was or is
required to be treated as a single employer under
Section 414 of the Code.
3.8.11.8.
"Prohibited Transaction" means a transaction
that is prohibited under Section 4975 of the Code or
Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA,
respectively.
3.9. LABOR AND EMPLOYMENT MATTERS.
3.9.1.
There are no collective bargaining agreements binding
on the Company, and, no petition has been filed or proceedings
instituted by an employee or group of employees with any labor
relations board seeking recognition of a bargaining
representative, and there is no organizational effort
currently being made or threatened by or on behalf of any
labor union to organize any employees of the Company.
3.9.2.
(i) There is not now, and to the Seller's knowledge,
never has been, any labor strike, dispute, slow down or
stoppage pending or, to the Seller's knowledge, threatened,
against or directly affecting the Company, (ii) no grievance
or arbitration proceeding arising out of or under any
collective bargaining agreement is pending, and no claims
therefor exist; and (iii) neither the Company nor Seller has
received any notice or has any knowledge of any threatened
labor or civil rights dispute, controversy or grievance or any
other unfair labor practice proceeding or breach of contract
claim or action with respect to claims of, or obligations to,
any employee or group of employees of the Company.
3.9.3.
If required under the Workers Adjustment and
Retraining Notification Act or other applicable state law
regulating plant closing or mass layoffs, the Company has
timely caused there to be filed or distributed, as
appropriate, all required filings and notices with respect to
employment losses occurring through the Closing Date.
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3.9.4.
The Company has complied and is currently complying,
in respect of all employees of the Company with all applicable
laws respecting employment and employment practices and the
protection of the health and safety of employees, from
whatever source such law may be derived, including, without
limitation, statutes, ordinances, laws, rules, regulations,
policies, standards, judicial or administrative precedents,
judgments, orders, decrees, awards, citations, licenses,
official interpretations and guidelines , except for such
instances which are not, in the aggregate, material.
3.9.5.
All individuals who are performing or have performed
services for the Company and are or were classified by the
Company as "independent contractors" qualify for such
classification under Section 530 of the Revenue Act of 1978 or
Section 1706 of the Tax Reform Act of 1986, as applicable,
except for such instances which are not, in the aggregate,
material.
3.9.6.
The Company has substantially complied and is
currently complying with the Americans With Disabilities Act,
42 U.S.C. ss.12101, et seq., and all applicable state laws
prohibiting discrimination against qualified individuals with
disabilities and requiring access accommodations.
3.10. LITIGATION.
3.10.1.
Except for (i) claims listed in Schedule 3.10. and
(ii) claims for the collection of accounts arising out of the
sale or purchase of goods or services in the ordinary course
of business involving less than $10,000 individually or
$50,000 in the aggregate, there are no claims, disputes,
actions, proceedings or investigations of any nature pending
or, to the knowledge of Seller, threatened against the
Company, or any of the officers, partners, shareholders,
affiliates or employees of the Company.
3.10.2.
No claim, action, suit, investigation, or other
proceeding is pending or threatened before any court or
governmental agency which presents a risk of the restraint or
prohibition of the transactions contemplated by this Agreement
or the obtaining of indemnification or other relief in
connection therewith.
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3.11. CONTRACTS.
3.11.1.
Schedule 3.11. sets forth a true and correct list of
each contract to which the Company is a party, including but
not limited to any and all master service contracts, or to
which any Seller is a party and which relates to the business
of the Company ("Contracts"), except (i) those contracts
disclosed in SEC Filings, and (ii) the following:
3.11.1.1.
Agreements for the purchase by the Company
of goods, materials or services in the ordinary
course of business involving annual expenditures of
less than $50,000 in consideration in each such case;
3.11.1.2.
Agreements for the sale, rental or service
by the Company of goods or services in the ordinary
course of business in which the payment to be
received pursuant to each such agreement is less than
$50,000 annually for each such non-listed agreement;
3.11.1.3.
Agreements which are terminable at will by
the Company upon no more than 60 days notice without
penalty, default or liability and involving an amount
less than $50,000; and
3.11.1.4.
Agreements continuing for a period of one
year or less involving an amount less than $50,000
for each such nonlisted agreement.
3.11.2.
Except as set forth in Schedule 3.11.
3.11.2.1.
Each Contract is a valid and binding
agreement of the Company, and, to the knowledge of
Seller, of the other parties thereto, subject to the
effect of bankruptcy and creditors' rights generally;
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3.11.2.2.
The Company has fulfilled all material
obligations required pursuant to each Contract to
have been performed by it or on its part prior to the
date hereof, and to the knowledge of the Seller,
there is no condition which would prevent the Company
from fulfilling, when due, all of its obligations
under the Contracts which remain to be performed
after the date hereof;
3.11.2.3.
There has not occurred any material default
under any Contract on the part of the Company or, to
the knowledge of Seller, on the part of the other
parties thereto; and there has not occurred any event
which with the giving of notice or the lapse of time,
or both, would constitute any material default under
any of the Contracts; and
3.11.2.4.
Except as provided in the Contracts, the
Company is not, outside the ordinary course of
business, under any liability or obligation with
respect to the return of inventory or products sold,
rented or serviced by it which are in the possession
of distributors, wholesalers, retailers or other
customers.
3.11.2.5. Except as set forth in Schedule
3.11, the Company has not committed a past breach of
any of its master service contracts.
3.12. REGULATORY APPROVALS.
All material consents, approvals, authorizations and other
requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Company or Seller and which are necessary
for the execution and delivery by Seller of this Agreement and the
documents to be executed and delivered by Seller in connection herewith
have been obtained and satisfied. Seller has obtained all material
permits, approvals, and consents of all governmental bodies or agencies
necessary or appropriate so that consummation of the transactions
contemplated by this Agreement will be in compliance with applicable
law.
3.13. COMPLIANCE WITH LAW.
The Company has not, and its business as presently conducted
does not, violate, in any respect any Federal, state, local or foreign
laws, regulations or orders (including, but not limited to, any of the
foregoing relating to employment discrimination, occupational safety,
the Americans With Disabilities Act, environmental protection,
conservation, or corrupt practices), the enforcement of
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which would have a Material Adverse Effect, and the Company has not
received any notice of any such violation.
3.14. INDEBTEDNESS FROM EMPLOYEES.
Except as set forth in Schedule 3.14. no employee of the
Company is indebted to the Company, except for advances made to any
employees in the ordinary course of business to meet reimbursable
business expenses anticipated to be incurred by such employee.
3.15. ACCOUNTS RECEIVABLE.
Except as set forth in Schedule 3.15., the accounts, accounts
receivable, notes and notes receivable of the Company existing on
December 31, 2000 arose out of the sales of inventory or services in
the ordinary course of business and are collectible in full, net of the
reserve set forth in the Company's December 31, 2000 Financial
Statement included in Schedule 3.5.1., which reserves are reasonable
and were calculated consistent with past practices.
3.16. INSURANCE.
Schedule 3.16. sets forth a true and correct list of all
insurance policies either maintained by the Company or maintained by
any other person which relate to the Company in any manner whatsoever
at the date hereof. There are no outstanding requirements or
recommendations by any insurance company that issued any such policy or
by any Board of Fire Underwriters or other similar body exercising
similar functions or by any governmental authority exercising similar
functions which requires or recommends any changes in the conduct of
the business of, or any repairs or other work to be done on or with
respect to any of the properties or assets of, the Company. The Company
has not received any notice or other communication from any such
insurance company within the three (3) years preceding the date hereof
canceling or materially amending or materially increasing the annual or
other premiums payable under any of said insurance policies, and no
such cancellation, amendment or increase of premiums is threatened. The
life insurance policies owned by the Company will, with Buyer's
consent, be surrendered for the cash surrender value prior to Closing,
and the cash received will be distributed.
3.17. POWERS OF ATTORNEY AND SURETYSHIPS.
Except for guarantees by the Company of the indebtedness owed
by Seller to Comerica, the Company has no general or special powers of
attorney outstanding (whether as grantor or grantee thereof) and has no
obligation or liability (whether actual, accrued, accruing, contingent
or otherwise) as guarantor, surety, co-signer,
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endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture,
association, organization or other entity, except as endorser or maker
of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
3.18. NO UNDISCLOSED LIABILITIES.
Except as and to the extent specifically reflected or reserved
against in the Company's December 31, 2000 Financial Statement or
otherwise disclosed herein, the Company has no liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due (including, without
limitation, any liability for taxes and interest, penalties and other
charges payable with respect to any such liability or obligation) in
accordance with GAAP which in the aggregate would constitute a Material
Adverse Effect.
3.19. ENVIRONMENTAL MATTERS.
As of the date hereof, (a) the Company has generated,
utilized, stored, delivered for disposal, disposed of, treated,
transported, and otherwise managed all materials, substances, and
wastes, whether toxic, hazardous or otherwise, in compliance with all
laws, rules, regulations, ordinances, guidelines, and the common law,
except to the extent any such failure would not have a Material Adverse
Effect; (b) the real or immovable property owned, leased, or operated
by either (i) Seller relating to the Company, or (ii) the Company is
not listed on the National Priorities List, CERCLIS, RCRIS, or any
comparable state listing which identifies sites for removal, remedial,
clean-up or investigatory actions; (c) no amounts, which require
remediation or reporting under applicable law, of asbestos, PCB's,
ureaformaldehyde, hazardous and solid wastes, hazardous or toxic
substances, petroleum products, pollutants or contaminates, and no
above or underground storage tanks, have become located on the real or
immovable property owned, leased, or currently operated by the Company,
except to the extent the existence or remediation of such substances
would not result in a Material Adverse Effect; and (d) the real or
immovable property owned, leased, or operated by the Company has not
been contaminated, tainted or polluted in any manner whatsoever
(including, without limitation, any contamination of or injury or
damage to soils, groundwater, biota, and wildlife located on, in, under
or originating from such premises) with pollutants, contaminants or
other substances or materials so as to give rise to a removal,
remediation, clean-up, or investigatory obligation or action, and
Seller does not now have knowledge of any removal, remediation,
investigatory or clean-up obligation or action which the Company has
with respect thereto under any law, rule, regulation, guideline,
ordinance, whether
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domestic or foreign, Federal, state, or local, or the common law,
except to the extent any failure to comply with any such obligation
would not result in a Material Adverse Effect.
3.20. CONFLICT OF INTEREST.
Except as disclosed in Schedule 3.20. or in SEC Filings, no
officer, director or shareholders of the Company or any affiliate of
any such person now has or within the last three (3) years had, either
directly or indirectly:
3.20.1.
any equity or debt interest in any corporation,
partnership, joint venture, association, organization or other
person or entity which furnishes or sells or during such
period furnished or sold services or products to the Company,
or purchases or during such period purchased from the Company
any goods or services, or otherwise does or during such period
did business with the Company; or
3.20.2.
a beneficial interest in any contract, commitment or
agreement, formal or informal, to which the Company is or was
a party or under which it was obligated or bound or to which
its properties may be or may have been subject, other than
stock options and other contracts, commitments or agreements
between the Company and such persons in their capacities as
employees, officers or directors of the Company.
3.20.3.
loaned money to or borrowed money from the Company.
3.21. TAXES.
3.21.1.
For purposes of this Agreement: (i) the term "Taxes"
means (A) all Federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem,
value added, intangible, unitary, capital gain, transfer,
franchise, profits, license, lease, service, service use,
withholding, backup withholding, payroll, employment,
estimated, excise, severance, stamp, occupation, premium,
property, prohibited transactions, windfall or excess profits,
customs, duties or other taxes, fees, assessments or charges
of
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any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts with respect
thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of
being a member of an affiliated, consolidated, combined,
unitary or other similar group for any period, or otherwise
through operation of law and (C) any liability for the payment
of amounts described in clauses (A) or (B) as a result of any
tax sharing, tax indemnity or tax allocation agreement or any
other express or implied agreement to indemnify any other
Person; and the term "Tax" means any one of the foregoing
Taxes; and (ii) the term "Returns" means all returns,
declarations, reports, statements and other documents required
to be filed in respect of Taxes; and the term "Return" means
any one of the foregoing Returns.
3.21.2.
Schedule 3.21.2. sets forth: (i) the taxable years of
the Company and Tax Affiliates (as defined in Section 3.21.3.)
as to which the respective statutes of limitations on the
assessment of United States Federal income and any applicable
state, local or foreign income or franchise Taxes have not
expired, and (ii) with respect to such taxable years sets
forth those years for which examinations by the IRS or the
state, local or foreign taxing authority have been completed,
those years for which examinations by such agencies are
presently being conducted, those years for which notice of
pending or threatened examination or adjustment has been
received, those years for which examinations by such agencies
have not been initiated, and those years for which required
Returns for such Taxes have not yet been filed. Except to the
extent indicated in Schedule 3.21.2., all deficiencies
asserted or assessments made as a result of any examinations
by the IRS or state, local or foreign Tax authority have been
fully paid, or are fully reflected as a liability in the
Company's December 31, 2000 Financial Statement, or are fully
described in Schedule 3.21.2., are being contested in good
faith and an adequate reserve therefor has been established
and is fully reflected in the Company's December 31, 2000
Financial Statement to the extent required by GAAP. Except as
described in Schedule 3.21.2., there are no Returns that are
presently under examination with respect to Taxes, there are
no proposed (whether oral or written) or final adjustments,
assessments or deficiencies with respect to Taxes currently
pending, and there are no outstanding notices of proposed or
actual audit, examination or investigation with respect to
Taxes.
3.21.3.
Seller represents and warrants to Buyer that, except
as described in Schedule 0.00.0.:
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3.21.3.1.
the Company, and every other person for
whose Taxes the Company is or could be held liable
(whether by reason of being a member of a
consolidated, combined, unitary, or other similar
group for Tax purposes, by reason of being a
successor, by agreement or otherwise (for the taxable
period(s) or portions thereof with respect to which
the Company is or could be held for such other
Person's Taxes) (all such persons collectively
referred to herein as "Tax Affiliates"), have filed
on a timely basis all Returns required to have been
filed by it and have paid on a timely basis all Taxes
shown thereon as due. All such Returns are true,
complete and correct in all material respects. The
provisions for Taxes in the Company's December 31,
2000 Financial Statement sets forth the maximum
liability of the Company and Tax Affiliates for Taxes
as of the date thereof. No liability for Taxes has
been incurred by the Company or any Tax Affiliate
since December 31, 2000 other than in the ordinary
course of their business. No director, officer or
employee of the Company or any Tax Affiliate having
responsibility for Tax matters is in discussions with
Tax authorities or has reason to believe that any Tax
authority has valid grounds to claim or assess any
additional Tax with respect to the Company or any Tax
Affiliate in excess of the amounts shown on the
Company's December 31, 2000 Financial Statement for
the period ending on such date;
3.21.3.2.
with respect to all amounts in respect of
Taxes imposed upon the Company or Tax Affiliates, or
for which the Company is or could be liable, whether
to taxing authorities (as, for example, under law) or
to other persons or entities (as, for example, under
tax allocation agreements), and with respect to all
taxable periods or portions of periods ending on or
before the Closing, all applicable Tax laws and
agreements have been fully complied with in all
material respects, and all such amounts required to
be paid by the Company and Tax Affiliates to Tax
authorities or others have been paid;
3.21.3.3.
none of the Returns required to be filed by
the Company or any Tax Affiliate contains, or were
required to contain (in order to avoid the imposition
of a penalty), a disclosure statement under Section
6662 (or any predecessor provision) of the Code, or
any similar provision of state, local or foreign law;
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3.21.3.4.
all amounts that were required to be
collected or withheld by the Company or any Tax
Affiliate have been duly collected or withheld in all
material respects, and all such amounts that were
required to be remitted to any Tax authority have
been duly remitted in all material respects;
3.21.3.5.
except as set forth on Schedule 3.21.3.5.,
the Company and Tax Affiliates have not requested an
extension of time to file any Return not yet filed,
and have not granted any waiver of any statute of
limitations with respect to, or any extension of a
period for the assessment of, any Tax. No power of
attorney granted by the Company or any Tax Affiliate
with respect to Taxes is in force;
3.21.3.6.
Seller, the Company and Tax Affiliates have
not taken any action not in accordance with past
practice that would have the effect of deferring any
material Tax liability of the Company or any Tax
Affiliate from any taxable period or portion thereof
ending on or before or including the Closing to any
subsequent taxable period;
3.21.3.7.
Schedule 3.21.3.7. sets forth all Tax
Affiliates during all periods with respect to which
the applicable statue of limitations on the
assessment of Taxes remains open;
3.21.3.8.
there are no current actual or deemed
elections under Section 338 of the Code, protective
carryover basis elections, offset prohibition
elections or similar elections applicable to the
Company or any Tax Affiliate;
3.21.3.9.
neither the Company nor any Tax Affiliate is
required to include in income any adjustment pursuant
to Sections 481 or 263A of the Code (or similar
provisions of other law or regulations) by reason of
a change in accounting method or otherwise, following
the Closing, and Seller have no knowledge that the
IRS (or other Tax authority) has
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proposed, or is considering, any such change in
accounting method or other adjustment;
3.21.3.10.
there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the
assets of the Company;
3.21.3.11.
the Company is not party to any agreement,
contract, arrangement or plan that has resulted or
would result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the
meaning of Section 280G of the Code, whether by
reason of the Closing or otherwise;
3.21.3.12.
the Company is not, and has not been, a
United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section
897(c)(1)(A)(ii) of the Code (or any corresponding
provision of state, local or foreign Tax law);
3.21.3.13.
neither the Company nor any Tax Affiliate
has or has had a permanent establishment in any
foreign country, as defined in any applicable Tax
treaty or convention between the United States of
America and such foreign country and the Company has
not engaged in a trade or business within any foreign
country;
3.21.3.14.
neither the Company nor any Tax Affiliate is
a party to any joint venture, partnership, or other
arrangement or contract which could be treated as a
partnership for Federal income tax purposes;
3.21.3.15.
intentionally deleted;
3.21.3.16.
neither the Company nor any Tax Affiliate
has filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of
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the Code (or any corresponding provision of state,
local or foreign income Tax law) or agreed to have
Section 341(f)(2) of the Code (or any corresponding
provision of state, local or foreign income Tax law)
apply to any disposition of any asset owned by any of
them;
3.21.3.17.
neither the Company nor any Tax Affiliate
has participated in an international boycott within
the meaning of Section 999 of the Code;
3.21.3.18.
the Company is not a party to or bound by
any Tax sharing agreement, and has no current or
contingent contractual obligation to indemnify any
other person with respect to Taxes, other than
obligations to indemnify a lessor for property Taxes,
sales/use Taxes or gross receipts Taxes (but not
income or franchise Taxes) imposed on lease payments
arising from terms that are customary for leases of
similar property;
3.21.3.19.
the Company is not a party to or bound by
any closing agreement or offer in compromise with any
Tax authority;
3.21.3.20.
none of the assets of the Company is
property that the Company is required to treat as
being owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former
Section 168(f)(8) of the Internal Revenue Code of
1954, as amended; none of the assets of the Company
directly or indirectly secures any debt the interest
on which is tax exempt under Section 103(a) of the
Code; none of the assets of the Company is
"tax-exempt use property" within the meaning of
Section 168(h) of the Code;
3.21.3.21.
no material election with respect to Taxes
of the Company or Tax Affiliates has been made from
and after the date of this Agreement;
3.21.3.22.
Schedule 3.21.3.22. sets forth all Returns
with respect to the Company and Tax Affiliates the
due dates for which (including any
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valid extensions thereof) are sixty or fewer days
following the Closing, and the Taxes for which
estimated or final payments may, based on the current
operations of the Company and Tax Affiliates, become
due in sixty or fewer days following the Closing;
3.21.3.23.
Schedule 3.21.3.23. sets forth all state,
local or foreign jurisdictions in which the Company
is or at any time during the past five years has been
subject to Tax;
3.21.3.24.
the Company has not incurred any liability
for Taxes pursuant to Section 1374 or 1375 of the
Code (and any predecessor provision and any similar
provision applicable state, local or other Tax law);
3.21.3.25.
there are no outstanding options to acquire
equity of the Company that purport to or were
otherwise intended (when issued) to be treated as
"incentive stock options" ("ISOs") within the meaning
of Section 422 of the Code (and any predecessor
provision and any similar provision applicable state,
local or other Tax law); and
3.21.3.26.
there has not been a previous ownership
change to the Company under Section 382 of the Code.
3.22. LIENS.
Except as disclosed on Schedule 3.22., none of the properties
and assets owned, leased, and/or used by the Company is subject to any
lien, charge, mortgage, pledge, security interest, or other encumbrance
of any kind. Schedule 3.22 also sets forth a description of any
indebtedness owed by the Company which is guaranteed in writing by the
Seller and/or secured by collateral granted by the Seller.
3.23. OTHER INFORMATION.
The information provided by Seller to Buyer in this Agreement
or in the Schedules does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein
or therein, in light of the circumstances in which they are made, not
false or misleading. Copies of all documents heretofore
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delivered or made available to Buyer were complete and accurate records
of such documents in all respects.
3.24. PROJECTIONS.
The Company as of the date hereof is performing in line with
all business and financial projections for the Company for the year
2001.
3.25. CLAIMS.
The Seller has no knowledge of any claims against the Buyer
and its affiliates and their respective officers, directors, agents,
representatives and employees as of the date of this Agreement.
3.26. NO OTHER REPRESENTATIONS.
Seller is not making any representation or warranty, express
or implied, of any nature whatsoever, except as specifically set forth
in this Agreement and the other documents executed in connection
herewith.
3.27. NO KNOWN BREACHES.
Seller has no knowledge that Buyer's representations and
warranties in this Agreement are untrue and Seller shall not be
entitled to make any indemnity claims pursuant to Section 6. hereof
with respect to any matters constituting a breach of this Section 3.25.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Seller that:
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4.1. ORGANIZATION.
The Buyer is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was formed,
with full power to carry on its business as it is now and has since its
organization been conducted, and to own, lease or operate its assets.
The Buyer is duly authorized to do business and is in good standing in
such other jurisdictions in which the failure to so qualify would have
a material and adverse effect on the results of operations, properties,
assets or condition (financial or otherwise) of the Buyer.
4.2. CORPORATE AUTHORITY.
The Buyer has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
This Agreement and all other agreements and instruments herein
contemplated to be executed by the Buyer in connection herewith have
been duly executed and delivered by Buyer, have been effectively
authorized by all necessary action, corporate or otherwise, and
constitute legal, valid and binding obligations of the Buyer, as the
case may be.
4.3. AGREEMENT NOT IN BREACH OF OTHER INSTRUMENTS.
The execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby and the fulfillment of the
terms hereof will not result in a breach of any of the terms or
provisions of, or constitute a default under, or conflict with, any
material agreement, indenture or other instrument to which Buyer is a
party or by which it is bound, Buyer's Certificate of Incorporation or
Bylaws, any judgment, decree, order or award of any court, governmental
body or arbitrator, or any law, rule or regulation applicable to Buyer.
4.4. INVESTMENT INTENT.
Buyer is acquiring the Shares with the intention as of the
date hereof of holding the Shares for purposes of investment, and Buyer
has no intention as of the date hereof of selling the Shares in a
public distribution in violation of Federal securities laws or any
applicable state securities laws.
4.5. REGULATORY AND OTHER APPROVALS.
All consents, approvals, authorizations and other requirements
prescribed by any law, rule or regulation, including any third party
consents, which must be obtained or satisfied by Buyer and which are
necessary for the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have
been obtained and satisfied. Buyer has obtained all material permits,
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approvals, and consents of all governmental bodies or agencies
necessary or appropriate so that consummation of the transactions
contemplated by this Agreement will be in compliance with applicable
law.
4.6. NO KNOWN BREACHES.
Buyer has no knowledge that Seller' representations and
warranties in this Agreement are untrue, and Buyer shall not be able to
make any indemnity claims pursuant to Section 6. hereof with respect to
any matters constituting a breach of this Section 4.6.
4.7. OTHER INFORMATION.
The information provided by Buyer to Seller in this Agreement
or in the Schedules does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein
or therein, in light of the circumstances in which they are made, not
false or misleading.
4.8. NO OTHER REPRESENTATIONS.
Buyer is not making any representation or warranty, express or
implied, of any nature whatsoever, except as specifically set forth in
this Agreement and the other documents executed in connection herewith.
5. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.
5.1. COOPERATION IN LITIGATION.
Each party will fully cooperate with the other in the defense
or prosecution of any litigation or proceeding already instituted or
which may be instituted hereafter against or by such party relating to
or arising out of the conduct of the Company prior to or after the
Closing Date (other than litigation arising out of the transactions
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contemplated by this Agreement). The party requesting such cooperation
shall pay the out-of-pocket expenses (including legal fees and
disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in
connection with providing such cooperation, but shall not be
responsible to reimburse the party providing such cooperation for such
party's time spent in such cooperation or the salaries or costs of
fringe benefits or other similar expenses paid by the party providing
such cooperation to its officers, directors, employees and agents while
assisting in the defense or prosecution of any such litigation or
proceeding.
5.2. TAX MATTERS.
5.2.1. PRE-CLOSING RETURNS.
Seller will be responsible for and will cause to be
prepared and duly filed all Returns for federal income taxes,
Texas franchise taxes, Louisiana corporate income taxes, and
Louisiana franchise taxes payable by the Company for all
taxable periods ending on or before the Closing. All such
Returns shall be prepared in a manner consistent with prior
periods. All such Returns filed after the Closing shall be
submitted to Buyer no later than thirty days prior to the due
date and filing thereof, and Buyer shall have the right to
review and comment thereon (without reduction of Seller's
obligations to indemnify under this Agreement). Seller will
pay or cause to be paid, and shall indemnify and hold Buyer
and the Company harmless against, all Taxes to which such
Returns relate; provided, however, that to the extent such
Taxes are included in and specifically identified on the
Closing Balance Sheet (or an attachment or schedule thereto)
or the Audited Closing Balance Sheet (as finally determined,
if audited pursuant to Section 2.3.3) or an attachment or
schedule thereto, Buyer shall reimburse Seller for such Taxes
within ten business days following the later of: (i) the
receipt by Buyer of written evidence of actual payment of such
Taxes by Seller or (ii) if the Closing Balance Sheet is
audited pursuant to Section 2.3.3., the date the Audited
Closing Balance Sheet becomes final and binding.
5.2.2. OVERLAP PERIOD RETURNS
Other than Returns to be prepared by Seller pursuant
to Section 5.2.1., Buyer and/or the Company will prepare or
cause to be prepared all Returns of the Company for any and
all taxable periods ending on or before the Closing, all
taxable periods which include and end after the Closing (the
"Overlap Period"), and any taxable period beginning after the
Closing. Seller will be responsible for and will indemnify and
hold harmless Buyer and the Company with respect to (i) all
Taxes for Returns to be prepared by Buyer or the Company for
taxable periods ending on or before the Closing and (ii) all
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Taxes for the Overlap Period in an amount equal to the
liability for Taxes that would have resulted had the Overlap
Period ended at the Closing (utilizing, if applicable, the
actual tax rate imposed on a particular category of income by
the applicable taxing jurisdiction), except to the extent such
Taxes are included in and specifically identified on the
Closing Balance Sheet (or an attachment or schedule thereto)
or Audited Closing Balance Sheet (as finally determined, if
audited pursuant to Section 2.3.3.) or an attachment or
schedule thereto. Any amount so payable by Seller will be
remitted to Buyer at least ten business days prior to the due
date of the respective Returns pursuant to written notice by
the Buyer of such due date; provided that Seller approve of
the amount (such approval not to be unreasonably withheld).
5.2.3. AMENDED RETURNS.
Except as may be otherwise expressly provided in this
Agreement, from and after the date hereof, Seller and its
affiliates shall not file or cause to be filed any amended
Return with respect to the Company, and Seller and its
affiliates shall not file a claim for refund of Taxes paid by
or on behalf of the Company. Further, Buyer agrees that
without the prior written consent of Seller, which consent
shall not be unreasonably withheld, the Buyer shall not file
or cause the Company to file an amended Return with respect to
the Company for a taxable period ending on or before the
Closing. Any refund resulting from any such amended Return
filed by the Buyer or the Company shall be the property of the
Buyer.
5.2.4. MATERIAL ELECTIONS.
Neither Seller nor the Company shall make any
material election with respect to Taxes following the date
hereof, of the Company or any Tax Affiliate without the prior
written approval of Buyer (such approval not to be
unreasonably withheld).
5.2.5. TAX INFORMATION.
After the Closing, Seller, on the one hand, and Buyer
and the Company, on the other hand, will make available to the
other, as reasonably requested, all information, records or
documents relating to liabilities for Taxes for all periods
prior to or including the Closing and will preserve such
information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
5.2.6. INTENTIONALLY DELETED.
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5.2.7. CERTAIN TAXES.
All sales, value added, use, transfer, registration,
stamp and similar Taxes imposed in connection with the sale of
the Shares shall be borne by Seller.
5.2.8 SECTION 338(h)(10) ELECTIONS.
Within 60 days after the Closing Date, the Seller
shall deliver all information reasonably requested by Buyer
regarding the tax attributes of (i) the Seller or (ii) the
Company (to the extent such information regarding the Company
is in the possession of the Seller) in order to allow Buyer to
determine whether to make any Section 338 (h)(10) Elections
(as defined below) with respect to the acquisition of the
Shares pursuant to this Agreement. With respect to the
acquisition of the Shares, Buyer may give written notice to
the Seller within 180 days after the Closing Date of its
intention to require the making of an election under Section
338(h)(10) of the Code (such Section 338(h)(10) elections and
any available elections under any similar state, local or
foreign law which Buyer specifies in its notice are
collectively referred to as "Section 338(h)(10) Elections"),
with respect to the Company. Such written notice, if any,
shall specify any similar state, local or foreign elections to
be made with respect to the acquisition of the Shares. In that
event, the Seller, on the one hand, and Buyer, on the other
hand, shall (i) report the purchase of the Shares under this
Agreement consistent with any Section 338(h)(10) Elections,
(ii) take no position contrary thereto in any Tax Return, any
proceeding before any taxing authority or otherwise, and (iii)
cooperate with each other to take all other actions necessary
and appropriate to effect and preserve timely Section
338(h)(10) Elections.
Buyer shall be responsible for, and shall pay all
expenses associated with, the preparation and filing of all
forms related to or required by any Section 338(h)(10)
Election (including forms related to any similar state, local
or foreign elections) ("Section 338 Forms"), and Buyer shall
deliver such Section 338 Forms to the Seller within 210 days
after the Closing Date. The Seller shall (A) cooperate with
Buyer in preparing all Section 338 Forms; (B) deliver to Buyer
all information required to complete such forms and comply
with Seller' obligations under this Section; and (C) execute
and deliver all Section 338 Forms to Buyer within 15 days
after receipt thereof.
In the event of each Section 338(h)(10) Election,
Buyer and the Seller agree that Buyer shall determine the
amount of the Modified Aggregate Deemed Sale Price ("MADSP"),
as defined under the Treasury Regulations applicable to a
Section 338(h)(10) Election, and the allocation of such MADSP
among the assets subject to a Section 338(h)(10) Election.
Such allocation of the MADSP shall be made in accordance with
the Code and any applicable Treasury Regulations. The Seller,
on the one hand, and the Buyer, on the other hand, shall (i)
be bound by such allocation for purposes of determining any
Taxes, (ii) prepare and file all Tax Returns to be filed with
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any taxing authority in a manner consistent with such
allocation, and (iii) take no position inconsistent with such
allocation in any Tax Return, any proceeding before any taxing
authority or otherwise. In the event that such allocation is
disputed by any taxing authority, the party receiving notice
of such dispute shall promptly notify the other parties
concerning resolution of such dispute. To the extent that the
Purchase Price is adjusted by reason of any payment under this
Agreement or otherwise, (i) the MADSP shall be adjusted to
reflect such change, (ii) the provisions of this Section
5.2.8. shall be followed in redetermining the allocation of
the MADSP, and (iii) the parties to this Agreement will, to
the extent required by law, file amended Tax Returns
consistent with such revised allocation.
5.2.9. CARRYBACKS.
The Seller will immediately pay to the Buyer any Tax
refund (or reduction in Tax liability) resulting from a
carryback of a post-acquisition Tax attribute of the Company
into the Buyer's consolidated Tax Return, when such refund or
reduction is realized by the Buyer. The Buyer will cooperate
with the Seller and the Company in obtaining such refunds (or
reduction in Tax liability), including the filing of amended
Tax Returns or refund claims. The Buyer agrees to indemnify
Seller for any Taxes resulting from the disallowance of such
postacquisition Tax attribute on audit or otherwise.
5.2.10. NO RETENTION OF CARRYOVERS.
The Seller agrees that it shall not elect to retain
any net operating loss carryovers and capital loss carryovers
of the Company as permitted by Reg. Section 1.1502-20(g) of
the Code.
5.3. EMPLOYMENT AND CONFIDENTIALITY AGREEMENTS.
5.3.1. At the Closing, Company shall enter into an
employment agreement with Xxxxxxx Xxxxx, Xxxxxx Xxxxxx, and
Xxxxx Xxxxx in substantially the form attached hereto as
Exhibit 5.3.1., which employment agreement shall contain
confidentiality provisions and one-year non-compete provisions
commencing upon termination of employment.
5.3.2. EMPLOYEE BENEFITS.
5.3.2.1. Continuation of Employee Benefits
and Credit for Service. From and after the Closing,
the Buyer agrees to provide or cause to be provided
to employees of the Company retained by the Buyer,
including those listed in Section 5.3.1. (the
"Employees"), all
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employee benefit plans (including welfare benefits,
medical, dental and other health plans, disability
pay, vacation pay, retirement and pension benefits,
but not including any executive or incentive
compensation plans or programs or benefit accruals
under any defined benefit pension plan) maintained or
contributed to by the Buyer for its own employees
(collectively, the "Buyer Employee Benefit Plans"),
with credit for eligibility purposes to participate
and vesting, levels of benefits, and vacation benefit
accruals for full and partial years of service with
the Company, the Seller, or their respective
affiliates which were accrued by the Employees prior
to THE Closing, except where such crediting would
result in the duplication of benefits.
Notwithstanding any provision hereof to the contrary,
Buyer expressly reserves the right to amend or
terminate any Buyer Employee Benefit Plan at any
time.
5.3.2.2. Preexisting Conditions, Exclusions
and Waiting Periods; Deductibles. The Company, the
Buyer and their respective affiliates shall (i) waive
all limitations as to preexisting conditions
exclusions and waiting periods with respect to
participation and coverage requirements applicable to
employees of the Company retained by Buyer under any
of the Buyer Employee Benefit Plans that are employee
welfare benefit plans (within the meaning of Section
3(1) of ERISA) in which such employees may be
eligible to participate after the Closing, other than
exclusions or waiting periods that are already in
effect with respect to such employees and that have
not been satisfied as of the Closing and (ii) provide
each of the employees with credit for any co-payments
and deductibles paid by such employees prior to the
Closing for purposes of satisfying any applicable
deductible or out-of-pocket requirements under any
such welfare plans that such employee is eligible to
participate in after the Closing, but only if and to
the extent that such information regarding credited
co-payments and deductibles is timely provided to the
Buyer.
5.3.2.3. COBRA. The Buyer shall be
responsible and liable for providing the appropriate
COBRA notices and coverage to all employees of the
Company retained by Buyer who experience a
"qualifying event" after the Closing, and related
COBRA qualified beneficiaries. The Seller shall be
responsible and liable for providing the appropriate
COBRA notices and coverage, as required, to all
employees of the Company (and their eligible
dependents) other than the employees of the Company
retained by Buyer.
5.4. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE.
Buyer shall pay the insurance premiums required for any
extension of the Company's officers' and directors' liability insurance
policy that is in
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force at the date hereof following the Closing Date for a "discovery"
period elected under such insurance policy covering the officers and
directors of the Company for a period of four years or shall provide
substantially similar coverage for the same period under Buyer's
directors' and officers' insurance policy for all directors and
officers of the Company.
6. INDEMNIFICATION.
6.1. INDEMNIFICATION BY SELLER.
Seller shall indemnify and hold harmless Buyer, the Company,
and their respective officers (including without limitation Xxxxxxx X.
Xxxxxxxxxx and Xxxxxxx X. Xxxx), employees, agents, attorneys
(including without limitation Liskow & Xxxxx and Xxxxxx & Xxxxxx and
their respective shareholders, partners, associates and other
employees) and shareholders (collectively, the "Buyer Group") in
respect of any and all claims, losses, damages, liabilities and
expenses (including, without limitation, settlement costs and any
reasonable legal, accounting and other expenses for investigating or
defending any actions or threatened actions) incurred (collectively,
"Losses") by the Buyer Group, together with interest on cash
disbursements in connection therewith at the rate equal to the Wall
Street Journal prime rate as published from time to time, plus 1
percent per annum (the "Reference Rate") from 60 days after the date
such Losses were incurred by the Buyer Group until paid by Seller, in
connection with each and all of the following:
6.1.1.
any material breach of any representation or warranty
made by Seller in this Agreement;
6.1.2.
the material breach of any covenant, agreement or
obligation of Seller contained in this Agreement or any other
instrument delivered at the Closing;
6.1.3.
any material misrepresentation contained in any
Schedule, certificate or other documents furnished by Seller
pursuant to this Agreement;
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6.1.4.
the failure to pay when due any and all liabilities
for Taxes (as defined in Section 3.21.1.) that (i) accrued
with respect to any taxable periods of the Company ending on
or before the Closing Date, (ii) accrued with respect to the
assets, operations or business of the Company during all
periods up to and including the Closing whether or not such
periods are taxable periods, or (iii) are incurred and become
payable by the Company or Buyer as a result of the
transactions contemplated by this Agreement;
6.1.5.
any material claim, demand or cause of action
asserted or brought by any person for breach of warranty, or
similar claims in connection with sales of products sold or
leased by the Company at any time prior to the Closing Date or
which comprised any part of the Inventory existing on the
Closing Date and which was sold by Buyer within 90 days after
the Closing Date;
6.1.6.
any material claim, demand or cause of action
asserted or brought by any person for physical injury to,
death of, or property damage suffered by such person or any
other person which was approximately caused by any products
sold or leased by the Company at any time prior to the Closing
Date;
6.1.7.
the material violation of any Federal, state, local
or foreign laws, regulations, orders, requirements or
ordinances, including those dealing with environmental
matters, prior to the Closing Date by Seller, the Company or
any of their affiliates, agents or assigns; and
6.1.8.
(a) conditions existing at, or caused by events prior
to the Closing Date which are violations of any Federal, state
or local environmental statute, regulation, requirement or
ordinance prior to the Closing Date with respect to the
Company or any of its assets, and (b) any other environmental
conditions in existence as of the Closing Date on the real or
immovable property owned, leased or used by the Company,
whether or not described in Schedule 3.6.1(a) and (b) being
collectively referred to herein as "Environmental
Conditions"), which as of the Closing, or will in the future
as a result of the operation of the Company prior to Closing,
require remediation, removal, or other corrective actions,
including without limitation the Environmental Conditions
listed in Schedule 6.1.8. With respect to each and every
Environmental Condition, Seller's obligation to indemnify the
Buyer Group from any Losses shall include but not be limited
to: (i) fines, penalties, assessments and judgments (whether
related to current or past activities); (ii) costs associated
with
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obtaining any necessary permits, certificates or other
governmental approval or complying with environmental
reporting or record keeping requirements, including (A)
remediation costs, (B) removal costs, (C) costs of
implementing monitoring equipment which are necessary to
obtain such permits, certificates or approvals, and (D) late
fees and filing fees; and (iii) any costs which Buyer deems
reasonably necessary in connection with the foregoing,
including without limitation costs of environmental audits,
surveys, reports, waste characterizations, monitoring xxxxx,
soil borings, tests and samples, provided that such costs
incurred by Buyer pursuant to this Section 6.1.8. must be
approved by Seller in advance, which consent will be timely
given and not unreasonably withheld, collectively,
"Environmental Costs").
6.2. INDEMNIFICATION BY BUYER.
Buyer shall indemnify and hold harmless Seller, and its
respective officers (including without limitation Xxxxxx Xxxx, Xxxxxx
Xxxxxxx, Xxxxxxxxx Xxxxx and Xxxxxxx Xxxxxx), employees, agents, and
attorneys (including without limitations LeBoeuf, Lamb, Xxxxxx, &
XxxXxx L.L.P. and their respective shareholders, partners, associates,
and other employees), and shareholders (collectively, the "Seller
Group"), in respect of any and all Losses incurred by the Seller Group,
together with interest on cash disbursements in connection therewith at
the Reference Rate from 60 days after the date that such Losses were
incurred by the Seller Group until paid by Buyer, in connection with
each and all of the following:
6.2.1.
any material breach of any representation or warranty
made by Buyer in this Agreement.
6.2.2.
the material breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or any other
instrument delivered at the Closing;
6.2.3.
any material misrepresentation contained in any
Schedule, certificate or any other document furnished by Buyer
pursuant to this Agreement;
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6.2.4.
the operation of the Company after the Closing Date;
6.2.5.
any material claim, demand or cause of action
(including warranty claims and claims relating to physical
injury, death or property damage) relating to or approximately
caused by either (i) products manufactured by the Company
after the Closing Date or (ii) any products sold or leased by
the Company more than 90 days after the Closing Date;
6.2.6.
the material violation of any Federal, state, local
or foreign laws, regulations, orders, requirements or
ordinances, including those dealing with environmental
matters, on or after the Closing Date by Buyer and its
affiliates, agents or assigns in relation to the Company,
except with regard to existing practices of the Company;
6.2.7.
any Environmental Condition relating to the Company
which, except with regard to the existing practices of the
Company, result from the operations of the Company on or after
the Closing Date or which came into existence on or after the
Closing Date (including, but not limited to, Environmental
Costs to the extent they directly arise from such violations);
6.2.8.
except as set forth in Section 6.1.6., any material
claim, demand or cause of action asserted or brought by any
person for physical injury to, death of, or property damage
suffered by such person or any other person which was
approximately caused by any products sold or leased by the
Company after the Closing Date.
6.3. CLAIMS FOR INDEMNIFICATION.
Whenever any claim shall arise for indemnification hereunder,
the party entitled to indemnification (the "indemnified party") shall
promptly notify the other party (the "indemnifying party") of the claim
and, when known, the facts constituting the basis for such claim. In
the event of any claim for indemnification hereunder resulting from or
in connection with any claim or legal proceedings by a third party,
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the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability potentially
arising therefrom. The indemnified party shall not settle or compromise
any claim by a third party for which it is entitled to indemnification
hereunder, without the prior written consent of the indemnifying party;
provided, however, that if such consent is not granted the amount of
indemnity provided by the indemnifying party shall not be limited by
Section 6.4. or 6.6. and, if Buyer is the indemnified party, at the
election of Buyer, only the portion of any loss equal to the refused
settlement shall be deducted or payable from the Escrow Account, all
other amounts shall be paid directly to Buyer by wire transfer by
Seller or the distributees of the assets of the Seller.
6.4. DEFENSE BY INDEMNIFYING PARTY.
In connection with any claim giving rise to indemnity
hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the
indemnifying party at its sole cost and expense may, upon written
notice to the indemnified party given within 30 days after delivery of
the written notice referred to in Section 6.3. hereof, assume the
defense of any such claim or legal proceeding if it acknowledges to the
indemnified party in writing its obligations to indemnify the
indemnified party with respect to all elements of such claim. The
indemnified party shall be entitled to participate in (but not control)
the defense of any such action, with its own counsel and at its own
expense. If the indemnifying party does not assume the defense of any
such claim or litigation resulting therefrom, (a) the indemnified party
may defend against such claim or litigation, in such manner as it may
deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the indemnifying party,
on such terms as the indemnified party may deem appropriate, and (b)
the indemnifying party shall be entitled to participate in (but not
control) the defense of such action, with its counsel and at its own
expense. If the indemnifying party thereafter seeks to question the
manner in which the indemnified party defended such third party claim
or the amount or nature of any such settlement, the indemnifying party
shall have the burden to prove by a preponderance of the evidence that
the indemnified party did not defend or settle such third party claim
in a reasonably prudent manner as a prudent businessman would if his
own funds were subject to such suit.
6.5. MANNER OF INDEMNIFICATION.
All indemnification by either party hereunder shall be
effected by payment of cash or delivery of a certified or official bank
check in immediately available funds in the amount of the
indemnification liability.
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6.6. LIMITATIONS ON INDEMNIFICATION.
Subject to any limitations contained therein, all
representations and warranties made by the parties herein or in any
instrument or document furnished in connection herewith shall survive
the Closing and any investigation at any time made by or on behalf of
the parties hereto and shall expire on the earlier of eighteen (18)
months after the Closing Date or the closing of the transactions
contemplated by that certain Agreement and Plan of Merger between the
Seller and the Buyer of even date herewith, except (i) as to any matter
as to which a claim is submitted in writing to the indemnifying party
prior to the applicable expiration date and identified as a claim for
indemnification pursuant to this Agreement; (ii) as to any
representation or warranty relating to ownership or title to the Shares
or the Company's assets, including real or immovable property, which
shall not expire; (iii) as to any matter which is based upon willful
fraud by the indemnifying party, with respect to which the
representations and warranties set forth in this Agreement shall expire
only upon expiration of the applicable statute of limitations plus 60
days; (iv) as to any representation or warranty concerning tax or
environmental matters, which shall expire only upon the expiration of
the applicable statute of limitations plus 45 days; and (v) as to any
representation or warranty concerning the authority to execute this
Agreement or any of the other documents contemplated hereby, which
shall not expire. No claim or action for indemnity pursuant to Sections
6.1. or 6.2. hereof for breach of any representation or warranty shall
be asserted or maintained by any party hereto after the expiration of
such representation or warranty pursuant to the preceding sentence
except for claims made in writing prior to such expiration and actions
(whether instituted before or after such expiration) based on any claim
made in writing prior to such expiration. Notwithstanding any other
provisions contained in this Agreement, neither Buyer nor Seller shall
be entitled to receive any amount under this Section 6. which exceeds
the Purchase Price; provided, however, the limit on indemnification
shall exclude any obligations specifically assumed by any party in this
Agreement, including without limitation, the obligations relating to
Taxes and brokers as described in Sections 3.2.1., 5.2., and 9.5.
respectively. Further, notwithstanding any other provisions in this
Agreement, (a) Buyer shall not be entitled to payment under this
Section 6. for a breach of any representation or warranty by Sellers
contained in this Agreement except for the amount by which the
aggregate of all breach of warranty or representation claims hereunder
which have not theretofore been reimbursed to Buyer exceeds the sum of
$300,000.00, and (b) Seller shall not be entitled to payment under this
Section 6. except for the amount by which the aggregate of all claims
hereunder which have not theretofore been reimbursed to Seller, exceeds
$300,000.00. In the event the $300,000.00 threshold mentioned in clause
(a) or (b) of the preceding sentence is exceeded, Buyer or Seller, as
the case may be, shall then have the right to seek reimbursement of
said threshold amount from Seller or Buyer, as the case may be, under
this Section 6. Further, the Buyer and the Seller acknowledge that
negotiations are pending for a merger of the Buyer and Seller. If such
merger is accomplished, the Buyer and Seller unconditionally agree that
the recovery of any Losses by Buyer and Seller pursuant to Section 6.
of this Agreement shall be pursuant
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to the issuance of additional stock by the surviving entity of the said
merger to the party suffering the Losses, all as more expressly set
forth in the contemplated Agreement and Plan of Merger by and between
the Seller and the Buyer.
6.7. SOLE BASIS FOR RECOVERY.
Unless specifically provided for elsewhere in this Agreement,
the parties intend Section 6. to be the exclusive method for
compensating each other for, or indemnifying each other against, claims
relating to the Company and the transactions contemplated by this
Agreement.
7. DOCUMENTS TO BE DELIVERED AT CLOSING.
7.1. CLOSING DOCUMENTS DELIVERED BY SELLER.
Buyer shall have received at the Closing the following
documents, dated as of the Closing date:
7.1.1. The Employment Agreements referred to in
Section 5.3.1. above, duly executed by Xxxxxxx Xxxxx, Xxxxxx
Xxxxxx, and Xxxxx Xxxxx;
7.1.2. Stock certificate(s) representing the Shares,
duly endorsed for transfer.
7.1.3. An opinion of counsel to Seller in a form
reasonably acceptable to counsel to Buyer regarding the
ownership of the Shares and the authority of the Seller to
enter into this Agreement and to consummate the transactions
contemplated hereby.
7.1.4. Any other documents, certificates, or
instruments contemplated by this Agreement to be delivered by
Seller to Buyer, including but not limited to the Consents
listed in Schedule 3.7, which include all necessary lender and
creditor Consents.
7.1.5. A fully executed certification of non-foreign
status described in Treasury Regulation Section 1.1445-2(a)(2)
(and applicable provisions of state
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law), in form and substance reasonably satisfactory to counsel
to Buyer, from each Seller.
7.1.6. Executed letters of resignation by each
officer and director of the Company.
7.1.7. Executed release and termination agreements
evidencing the release and termination of all security
interests and mortgage liens affecting the Shares and the
assets of the Company.
7.2. CLOSING DOCUMENTS DELIVERED BY BUYER.
Seller shall have received at the Closing the following
documents, dated as of the Closing date:
7.2.1. Any documents, certificates, or instruments
contemplated by this Agreement to be delivered by Buyer to
Seller, and
7.2.2. An opinion of counsel to Buyer in a form
reasonably acceptable to counsel to Seller regarding the
authority of the Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby.
8. RELEASE.
(a) As of the Closing Date, and except as may be set forth in Section
6.2. of this Agreement, the Seller does hereby for itself and its successors and
assigns remise, release, acquit and forever discharge the Company and its
affiliates, successors and assigns, of and from any and all claims, demands,
liabilities, responsibilities, disputes, causes of action and obligations of
every nature whatsoever, liquidated or unliquidated, known or unknown, matured
or unmatured, fixed or contingent, that Seller or its affiliates now has, owns
or holds or has at any time previously had, owned or held against such parties,
including without limitation all liabilities created as a result of the
negligence, gross negligence and willful acts of the Company and its employees
and agents, or under a theory of strict liability, existing as of the Closing
Date or relating to any action, omission or event occurring on or prior to the
Closing Date. Notwithstanding the foregoing, however, any claims, liabilities,
debts or causes of action that may arise in connection with the failure of any
of the parties hereto to perform any of their obligations hereunder or under any
other agreement relating to the transactions contemplated hereby or from any
breaches by any of them of any representations or warranties herein or in
connection with any of such other agreements shall not be released or discharged
pursuant to this Agreement.
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(b) Seller represents and warrants that, he has not previously assigned
or transferred, or purported to assign or transfer, to any person or entity
whatsoever all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations released herein.
Seller covenants and agrees that Seller will not assign or transfer to any
person or entity whatsoever all or any part of the claims, demands, liabilities,
responsibilities, disputes, causes of action or obligations to be released
herein. Seller represents and warrants that Seller has read and understands all
of the provisions of this Section 8. and that Seller has been represented by
legal counsel of its own choosing in connection with the negotiation, execution
and delivery of this Agreement.
(c) The release provided by the Seller pursuant to this Section 8.
shall apply notwithstanding that the matter for which release is provided may
relate to the ordinary, sole or contributory negligence, gross negligence,
willful misconduct or violation of law by a released party, including the
Company and its respective officers, directors, employees and agents, and for
liabilities based on theories of strict liability, and shall be applicable
whether or not negligence of the released party is alleged or proven, it being
the intention of the parties to release the released party from and against its
ordinary, sole and contributory negligence and gross negligence as well as
liabilities based on the willful actions or omissions of the released party and
liabilities based on theories of strict liability.
9. MISCELLANEOUS.
9.1. NOTICES.
All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally or sent by fax during normal business hours of the
recipient, the next business day if sent by a national overnight
delivery service, charges prepaid, or three (3) days after mailed by
certified or registered mail, postage prepaid, return receipt
requested, to the parties, their successors in interest or their
assignees at the following addresses, or at such other addresses as the
parties may designate by written notice in the manner aforesaid:
If to Buyer:
T-3 Energy Services, Inc.
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxxx
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With a copy to:
First Reserve Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
and
Liskow & Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Seller:
Industrial Holdings, Inc.
0000 Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
With copies to:
LeBouef, Lamb, Xxxxxx & XxxXxx LLP
0000 Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Born, Esq.
9.2. ASSIGNABILITY AND PARTIES IN INTEREST.
Seller or Buyer may, with the written consent of the other
party (which will not be unreasonably withheld if such assignee has the
financial capacity to assume and honor the indemnity obligations
hereunder), assign the rights and obligations under this Agreement
among their affiliates or in connection with a sale of their business.
In either case, any such assignee must expressly assume all indemnity
obligations hereunder. This Agreement shall inure to the benefit of and
be binding upon Buyer and Seller and their respective permitted
successors and assigns.
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9.3. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THAT
STATE.
9.4. COUNTERPARTS.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
9.5. INDEMNIFICATION FOR BROKERAGE.
Buyer and Seller each represent and warrant that, except as
set forth in Schedule 9.5, no broker or finder has acted on its behalf
in connection with this Agreement or the transactions contemplated
hereby. In addition to the indemnification obligations contained in
Section 6., each party hereto agrees to indemnify and hold harmless the
others from any claim or demand for commissions or other compensation
by any broker, finder or similar agent who is or claims to have been
employed by or on behalf of such party.
9.6. PUBLICITY.
Seller and Buyer agree that press releases and other
announcements to be made by any of them with respect to the
transactions contemplated hereby shall be subject to mutual agreement.
Notwithstanding the foregoing, Seller and Buyer may respond to
inquiries relating to this Agreement and the transactions contemplated
hereby by the press, securities analysts, employees, or customers
without any notice or further consent of the other parties hereto.
9.7. COMPLETE AGREEMENT.
This Agreement, the Exhibits hereto, the Schedules and the
documents delivered pursuant to this Agreement contain or will contain
the entire agreement between the parties hereto with respect to the
transactions contemplated herein and shall supersede all previous oral
and written and all contemporaneous oral negotiations, commitments, and
understandings.
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9.8. INTERPRETATION.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9. SEVERABILITY.
Any provision of this Agreement which is invalid, illegal, or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality, or
unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of
this Agreement invalid, illegal, or unenforceable in any other
jurisdiction.
9.10. KNOWLEDGE.
As used in this Agreement, references to the "knowledge" of
any party shall mean the actual knowledge of the executive officers of
such party and of the senior employees or managers of such party
responsible for the area of operations of such party to which such
party's knowledge relates, based on and assuming a reasonable
investigation of such matters.
9.11. EXPENSES OF TRANSACTIONS.
All fees, costs and expenses incurred by Buyer or Seller in
connection with the transactions contemplated by this Agreement shall
be borne by the party incurring the same.
9.12. LIMIT ON INTEREST.
Notwithstanding anything in this Agreement to the contrary,
neither party hereto shall be obligated to pay interest at a rate
higher than the maximum rate permitted by applicable law.
9.13. SUBMISSION TO JURISDICTION.
Each of the parties hereto irrevocably consents that any legal
action or proceeding against it or any of its property with respect to
this Agreement or any other agreement executed in connection herewith
may be brought in any court of the
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State of Texas, any Federal court of the United States of America
located in Texas, and by the execution and delivery of this Agreement
each party hereto hereby accepts with regard to any such action or
proceeding for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts.
9.14. ARBITRATION.
Except as provided in Section 2.3., any controversy, dispute,
or claim arising out of, in connection with, or in relation to, the
interpretation, performance or breach of this Agreement, including,
without limitation, the validity, scope, and enforceability of this
Section 9.14., may at the election of Buyer or Seller be solely and
finally settled by confidential arbitration conducted in Houston, TX.
The arbitration shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1 et seq., and administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules. The
arbitrators shall not be allowed to award punitive, exemplary or
multiple damages. The arbitrators may only award compensatory damages.
The parties hereby expressly waive any right any of them may have to
punitive, exemplary or multiple damages. The parties intend that this
agreement to arbitrate be valid, enforceable and irrevocable.
Notwithstanding the foregoing, this Section 9.14. shall not apply nor
be interpreted to affect the resolution of a Dispute Notice through the
arbitration procedures set forth in Section 2.3.4. of this Agreement.
9.15. WAIVER OF PUNITIVE, EXEMPLARY AND MULTIPLE DAMAGES.
The parties hereby expressly waive any right any of them may
have to punitive, exemplary or multiple damages.
(THIS REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the undersigned duly execute this Agreement as of
the date first written above.
SELLER:
INDUSTRIAL HOLDINGS, INC.,
a Texas corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxx
Title: President and Chief Executive
Officer
BUYER:
T-3 ENERGY SERVICES, INC.,
a Delaware corporation
By:
--------------------------------------
Xxxxxxx X. Xxxxxxxxxx
Title: President
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