ASSET PURCHASE AGREEMENT among
<?xml:namespace prefix =
o ns =
"urn:schemas-microsoft-com:office:office" />
DXP
ENTERPRISES, INC.,
INDIAN
FIRE AND
SAFETY, INC.,
LONE WOLF RENTAL, LLC
and
THE
OTHER PARTIES NAMED
HEREIN
Dated
as of October
18, 2007
This
ASSET
PURCHASE AGREEMENT (the “Agreement”) dated as of
October
18, 2007, by and among DXP Enterprises, Inc., a <?xml:namespace prefix = st1 ns
= "urn:schemas-microsoft-com:office:smarttags" />Texas corporation (“Purchaser”), Indian Fire &
Safety, Inc., a New
Mexico corporation (“IFS”), Lone Wolf Rental,
LLC, a
New Mexico limited liability company (“LWR”), Xxxxx Xxxxxxxx,
an
individual residing at 000 XX 0000 Xxxxxx, Xxxxx 00000 (“Executive”), Xxxxx Xxxxxxxx,
an
individual residing at 000 XX 0000 Xxxxxx, Xxxxx 00000, Xxxxx Xxxxxxxx,
an
individual residing in Denver City, Texas, and The Xxxxxx Xxx Xxxxxxxx
Irrevocable Trust, a trust organized under the laws of the State of New
Mexico. Each of IFS, LWR and
Executive are sometimes alternatively referred to individually herein as
a “Seller” and collectively as
“Sellers”.
Each
of Executive, Xxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx and The Xxxxxx Xxx Xxxxxxxx Irrevocable Trust are sometimes
alternatively referred to individually herein as an “Owner” and collectively as
“Owners”.
W
I T N E S S E T H:
WHEREAS,
Sellers presently conduct the
Business;
WHEREAS,
Sellers desire to sell,
transfer and assign to Purchaser, and Purchaser desires to acquire and
assume
from Sellers, all of the Purchased Assets and Assumed Liabilities, all
as more
specifically provided herein;
WHEREAS,
Owners, directly or
indirectly, own all of the outstanding shares of capital stock of IFS and
membership interests of LWR and, as a result thereof, it is in the best
interest
of each Owner to execute this Agreement inasmuch as each Owner will derive
substantial direct and indirect benefits from the sale, transfer and assignment
contemplated by this Agreement; and
WHEREAS,
certain terms used in this
Agreement are defined in Section 1.1;
NOW,
THEREFORE, in consideration of the
premises and the mutual covenants and agreements hereinafter contained,
the
parties hereby agree as follows:
For purposes of this
Agreement, the following terms shall have the meanings specified in this
Section 1.1:
“Affiliate”
means,
with respect
to any Person, any other Person that, directly or indirectly through one
or more
intermediaries, controls, or is controlled by, or is under common control
with,
such Person, and the term “control” (including the terms
“controlled by” and
“under
common control with”)
means the possession, directly or indirectly, of the power to direct or
cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
“Agreed
Principles” means the
accounting principles set forth on Schedule 3.3 for determination of Net
Working Capital of the Business.
“Business”
means
the businesses
and operations of IFS and LWR, including the provision of safety services
and
related products and rental of equipment to the oil and gas drilling industry
and the ancillary businesses and operations relating thereto.
“Business
Day” means any day of
the year on which national banking institutions in Houston, Texas are open
to
the public for conducting business and are not required or authorized to
close.
“Cash”
means
cash and cash
equivalents of the Business on hand and in deposit accounts as of the opening
of
business on the Closing Date, plus checks presented for payment prior to
such time but not yet credited to deposit accounts minus checks drawn
against deposit accounts prior to such time not yet presented for payment.
“Closing
Real Property Leases”
means the leases, in the form of Exhibits E-1 and E-2, to be
executed and delivered, and fully effective, as of the Closing Date, with
Purchaser as tenant and Little Wolf, LLC as lessor thereunder, for all
of the
interests in real property currently used, occupied or held for use in
connection with the Sellers’ operation of the Business.
“Closing
Working Capital” means
the Net Working Capital of the Business determined as of the open of business
on
the Closing Date.
“COBRA”
means
the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
“Code”
means
the Internal Revenue
Code of 1986, as amended.
“Contract”
means
any contract,
agreement, indenture, note, bond, mortgage, loan, instrument, lease, license,
commitment or other arrangement, understanding or undertaking, commitment
or
obligation.
“Current
Assets” means the
accounts receivable, inventory and prepaid expenses of the Business (as
set
forth in the “Working Capital Asset Accounts” on Schedule 3.3), excluding
Cash and any deferred tax assets (if any).
“Current
Liabilities” means the
accounts payable and other current liabilities of the Business (as set
forth in
the “Work Capital Liability Accounts” on Schedule 3.3), excluding any
liabilities paid on the Closing Date pursuant to this Agreement.
“Documents”
means
all files,
documents, instruments, papers, books, reports, records, tapes, microfilms,
photographs, letters, budgets, forecasts, ledgers, journals, lists of past,
present and/or prospective customers, supplier lists, regulatory filings,
operating data and plans, technical documentation (design specifications,
functional requirements, operating instructions, logic manuals, flow charts,
etc), user documentation (installation guides, user manuals, training materials,
release notes, working papers, etc.), marketing documentation (sales brochures,
flyers, pamphlets, web pages, etc.), and other similar materials related
to the
Business and the Purchased Assets, in each case whether or not in electronic
form.
“EBITDA”
means
for any twelve
(12) month period ending December 31, the sum of: (a) the net income (or loss), on
a cash
basis, of the Business excluding extraordinary items, (b) provisions for
taxes
based on income of the Business, (c) total interest expense of the Business
with
respect to indebtedness held by or for the benefit of the Business, (d)
to the
extent that net income of the Business has been reduced thereby, depreciation
expense, and (e) to the extent that net income for the Business has been
reduced
thereby, amortization expense, all as determined in accordance with GAAP;
provided, however, that such sum will be reduced by a reasonable
fair market lease charge as determined in good faith by Purchaser for such
applicable period for any capital equipment acquired by the Business after
the
Closing so long as such capital equipment was acquired by the Executive
on
behalf of the Business or otherwise without the objection of the Executive.
“Employee”
means
all individuals
(including common law employees, independent contractors and individual
consultants), as of the date hereof, who are employed or engaged by IFS
and/or
LWR in connection with the Business, together with individuals who are
hired in
respect of the Business after the date hereof.
“Environmental
Costs and
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, costs and
expenses (including all reasonable fees, disbursements and expenses of
counsel,
experts and consultants and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred as a result of any claim
or
demand by any other Person or in response to any violation of Environmental
Law,
whether known or unknown, accrued or contingent, to the extent based upon,
related to, or arising under or pursuant to any Environmental Law, Environmental
Permit, order or agreement with any Governmental Body or other Person,
which
relates to any environmental, health or safety condition, violation of
Environmental Law or a Release or threatened Release of Hazardous Materials.
“Environmental
Law” means any Law
in any way relating to the protection of human health and safety, the
environment or natural resources, including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. § 9601 etseq.), the Hazardous Materials Transportation Act (49 U.S.C. App.
§ 1801 etseq.), the Resource Conservation and Recovery
Act
(42 U.S.C. § 6901 etseq.), the Clean Water Act (33 U.S.C.
§ 1251 etseq.), the Clean Air Act (42 U.S.C.
§ 7401 etseq.), the Toxic Substances
Control Act (15 U.S.C.
§ 2601 etseq.), and the Occupational Safety and Health Act
(29 U.S.C. § 651 etseq.), as each has been or may be amended
and the regulations promulgated pursuant thereto.
“Environmental
Permit” means any
Permit required by Environmental Laws for the operation of the Business.
“ERISA”
means
the Employment
Retirement Income Security Act of 1974, as amended.
“Exchange
Act” means the
Securities Exchange Act of 1934, amended.
“Excluded
Contract” means the
Contract described with respect to subsection (i) of Schedule
5.12(a).
“Former
Employee” means all
individuals (including common law employees, independent contractors and
individual consultants) who were employed or engaged by IFS and/or LWR
in
connection with the Business but who are no longer so employed or engaged
on the
date hereof.
“Furniture
and Equipment” means
all furniture, fixtures, furnishings, equipment, vehicles, leasehold
improvements, and other tangible personal property owned or used in the
conduct
of the Business, including all artwork, desks, chairs, tables, Hardware,
copiers, telephone lines and numbers, telecopy machines and other
telecommunication equipment, cubicles and miscellaneous office furnishings
and
supplies.
“GAAP”
means
generally accepted
accounting principles in the United States.
“Governmental
Body” means any
government or governmental or regulatory body thereof, or political subdivision
thereof, whether foreign, federal, state, or local, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public
or
private).
“Hardware”
means
any and all
computer and computer-related hardware, including, but not limited to,
computers, file servers, facsimile servers, scanners, color printers, laser
printers and networks.
“Hazardous
Material” means any
substance, material or waste that is regulated, classified, or otherwise
characterized under or pursuant to any Environmental Law as “hazardous,”
“toxic,” “pollutant,” “contaminant,” “radioactive,” or words of similar meaning
or effect, including petroleum and its by-products, asbestos, polychlorinated
biphenyls, radon, mold or other fungi and urea formaldehyde insulation.
“Indebtedness”
of
any Person
means, without duplication, (i) the principal, accreted value, accrued and
unpaid interest, prepayment and redemption premiums or penalties (if any),
unpaid fees or expenses and other monetary obligations in respect of
(A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable;
(ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities
arising
in the Ordinary Course of Business) (other than the current liability portion
of
any indebtedness for borrowed money); (iii) all obligations of such Person
under leases required to be capitalized in accordance with GAAP; (iv) all
obligations of such Person for the reimbursement of any obligor on any
letter of
credit, banker’s acceptance or similar credit transaction; (v) all
obligations of such Person under interest rate or currency swap transactions
(valued at the termination value thereof); (vi) the liquidation value,
accrued
and unpaid dividends and prepayment
or redemption premiums and penalties (if any), unpaid fees or expense and
other
monetary obligations in respect of any and all redeemable preferred stock
of
such Person; (vii) all obligations of the type referred to in
clauses (i) through (vi) of any Persons for the payment of which such
Person is responsible or liable, directly or indirectly, as obligor, guarantor,
surety or otherwise, including guarantees of such obligations; and
(viii) all obligations of the type referred to in clauses (i) through (vii)
of other Persons secured by (or for which the holder of such obligations
has an
existing right, contingent or otherwise, to be secured by) any Lien on
any
property or asset of such Person (whether or not such obligation is assumed
by
such Person).
“Independent
Valuation Firm”
means an independent valuation firm mutually agreeable to Purchaser
and the
Executive.
“Intellectual
Property” means all
right, title and interest in or relating to intellectual property, whether
protected, created or arising under Law, including: (i) all patents and applications
therefor, including all continuations, divisionals, and continuations-in-part
thereof and patents issuing thereon, along with all reissues, reexaminations
and
extensions thereof (collectively, “Patents”); (ii) all
trademarks, service marks, trade names, service names, brand names, trade
dress
rights, logos, corporate names, trade styles, logos and other source or
business
identifiers and general intangibles of a like nature, together with the
goodwill
associated with any of the foregoing, along with all applications,
registrations, renewals and extensions thereof (collectively, “Marks”); (iii) all Internet
domain names; (iv) all copyrights and all mask work, database and design
rights, whether or not registered or published, all registrations and
recordations thereof and all applications in connection therewith, along
with
all reversions, extensions and renewals thereof (collectively, “Copyrights”); (iv) trade secrets
(“Trade Secrets”); (v) all
other intellectual property rights arising from or relating to Technology,
and
(vi) all Contracts granting any right relating to or under the foregoing.
“Intellectual
Property Licenses”
means (i) any grant by any of the Sellers to another Person of
any right
relating to or under the Purchased Intellectual Property and (ii) any grant
by
another Person to any of the Sellers of any right relating to or under
any third
Person’s Intellectual Property used or held for use in connection with the
conduct or operation of the Business.
“IRS”
means
the United States
Internal Revenue Service and, to the extent relevant, the United States
Department of Treasury.
“Knowledge
of Sellers” means the
actual knowledge, after due inquiry, of each of the Executive and the officers
and directors of IFS and the manager of LWR.
“Law”
means
any foreign, federal,
state or local law (including common law), statute, code, ordinance, rule,
regulation, Order or other requirement.
“Legal
Proceeding” means any
judicial, administrative or arbitral actions, suits, mediations, investigations,
inquiries, proceedings or claims (including counterclaims) by or before
a
Governmental Body.
“Liability”
means
any debt, loss,
damage, adverse claim, fines, penalties, liability or obligation (whether
direct
or indirect, known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, matured or unmatured, determined or determinable,
disputed
or undisputed, liquidated or unliquidated, or due or to become due, and
whether
in contract, tort, strict liability or otherwise), and including all costs
and
expenses relating thereto (including all fees, disbursements and expenses
of
legal counsel, experts, engineers and consultants and costs of
investigation).
“Lien”
means
any lien,
encumbrance, pledge, mortgage, deed of trust, security interest, claim,
lease,
charge, option, right of first refusal, easement, servitude, proxy, voting
trust
or agreement, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
“Material
Adverse Effect” means a
material adverse effect on (i) the historical or near-term or long-term
projected business, assets, properties, results of operations, condition
(financial or otherwise) or prospects of IFS and LWR or of the Business;
(ii)
the value of the Purchased Assets or a material increase in the amount
of
Assumed Liabilities; or (iii) a material adverse effect on the ability
of any of
the Sellers or Owners to consummate the transactions contemplated by this
Agreement or perform their obligations under this Agreement or the Seller
Documents.
“Net
Working Capital” means the
Current Assets of the Business reduced by the Current Liabilities of the
Business, in each case as determined in accordance with the Agreed
Principles. Attached hereto as part
of Schedule 3.3 is a schedule showing Net Working Capital as of May 31,
2007 after giving effect to adjustments (if any) required in the Agreed
Principles.
“Order”
means
any order,
injunction, judgment, doctrine, decree, ruling, writ, assessment or arbitration
award of a Governmental Body.
“Ordinary
Course of Business”
means the ordinary and usual course of normal day-to-day operations
of the
Business, as conducted by Sellers, through the date hereof consistent with
past
practice.
“Permits”
means
any approvals,
authorizations, consents, licenses, permits or certificates of a Governmental
Body.
“Permitted
Exceptions” means
(i) statutory liens for current Taxes, assessments or other governmental
charges not yet delinquent or the amount or validity of which is being
contested
in good faith by appropriate proceedings, provided an appropriate reserve
has been established therefor in the Financial Statements; (ii) mechanics’,
carriers’, workers’ and repairers’ Liens arising or incurred in the Ordinary
Course of Business that are not material to the Purchased Assets so encumbered
and that are not resulting from a breach, default or violation of any Contract
or Law; (iii) zoning, entitlement and other land use and environmental
regulations by any Governmental Body, providedthat such
regulations have not been violated; and (iv) title of a lessor under a
capital
or operating lease.
“Person”
means
any individual,
corporation, limited liability company, partnership, firm, joint venture,
association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.
“Purchased
Contracts” means all
of the Contracts attributable or otherwise related to the Business, other
than
the Excluded Contract.
“Purchased
Intellectual Property”
means all Intellectual Property owned by any of the Sellers related
to or used
in connection with the Business.
“Purchased
Technology” means all
Technology owned by any of the Sellers related to or used in connection
with the
Business.
“Release”
means
any release,
spill, emission, leaking, pumping, pouring, injection, deposit, dumping,
emptying, disposal, discharge, dispersal, leaching or migration into the
indoor
or outdoor environment, or into or out of any property.
“Remedial
Action” means all
actions including any capital expenditures undertaken to (i) clean up,
remove, treat or in any other way address any Hazardous Material;
(ii) prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment;
(iii) perform pre-remedial studies and investigations or post-remedial
monitoring and care; or (iv) to correct a condition of noncompliance with
Environmental Laws.
“Securities
Act” means the
Securities Act of 1933, as amended.
“SEC”
means
the United States
Securities and Exchange Commission.
“Software”
means
any and all
(i) computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object
code;
(ii) databases and compilations, including any and all data and collections
of data, whether machine readable or otherwise; (iii) descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, screens, user interfaces, report formats, firmware,
development tools, templates, menus, buttons and icons; and (iv) all
documentation, including user manuals and other training documentation
related
to any of the foregoing.
“Target
Working Capital” means
Net Working Capital of an amount of $881,783.83.
“Tax”
or
“Taxes”
means
(i) any and
all federal, state, local or foreign taxes, charges, fees, imposts, levies
or
other assessments, including all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory,
capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever; (ii) all
interest, penalties, fines, additions to tax or additional amounts imposed
by
any Taxing Authority in connection with any item described in clause (i);
and (iii) any liability in respect of any items described in clauses (i)
and/or (ii) payable by reason of Contract, assumption, transferee liability,
operation of law, Treasury Regulation section 1.1502-6(a) (or any predecessor
or
successor thereof or any analogous or similar provision under law) or
otherwise.
“Taxing
Authority” means the IRS
and any other Governmental Body responsible for the administration of any
Tax.
“Tax
Return” means any return,
report or statement required to be filed with respect to any Tax (including
any
elections, declarations, schedules or attachments thereto, and any amendment
thereof), including any information return, claim for refund, amended return
or
declaration of estimated Tax, and including, where permitted or required,
combined, consolidated or unitary returns for any group of entities that
includes any of Sellers or any of their respective Affiliates.
“Technology”
means,
collectively,
all Software, information, designs, formulae, algorithms, procedures, methods,
techniques, ideas, know-how, research and development, technical data,
programs,
subroutines, tools, materials, specifications, processes, inventions (whether
patentable or unpatentable and whether or not reduced to practice), apparatus,
creations, improvements, works of authorship and other similar materials,
and
all recordings, graphs, drawings, reports, analyses, and other writings,
and
other tangible embodiments of the foregoing, in any form whether or not
specifically listed herein, and all related technology, that are used in,
incorporated in, embodied in, displayed by or relate to, or are used in
connection with the foregoing.
“WARN”
means
the Worker
Adjustment and Retraining Notification Act of 1988, as amended, and the
rules
and regulations promulgated thereunder.
1.2
Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have meanings
set
forth in the sections indicated:
|
Term |
Section |
|
Acquisition
Transaction |
7.5 |
|
Agreement |
Introductory
Paragraph |
|
Asset Acquisition
Statement |
2.7 |
|
Assumed Liabilities |
2.3 |
|
Balance Sheet |
5.4(a) |
|
Balance Sheet Date |
5.4(a) |
|
Basket |
10.4(a) |
|
Cap |
10.4(b) |
|
Cash Payment |
3.1(a) |
|
Closing |
4.1 |
|
Closing Date |
4.1 |
|
Closing Statement |
3.3(b)(i) |
|
Confidential
Information |
7.6(c) |
|
Copyrights |
1.1 (in Intellectual
Property definition) |
|
Earnout Rights |
3.1(c) |
|
Employee Benefit
Plans |
5.13(a) |
|
ERISA Affiliate |
5.13(a) |
|
ERISA Affiliate
Plans |
5.13(a) |
|
Estimated Closing
Balance
Sheet |
3.3(a)(i) |
|
Estimated Closing
Working
Capital |
3.3(a)(i) |
|
Excluded Assets |
2.2 |
|
Excluded Liabilities |
2.4 |
|
Executive |
Introductory
Paragraph |
|
Final Working
Capital |
3.3(b)(v) |
|
Financial Statements |
5.4(a) |
|
IFS |
Introductory
Paragraph |
|
Loss and Losses |
10.2(a) |
|
LWR |
Introductory
Paragraph |
|
Marks |
1.1 (in Intellectual
Property definition) |
|
Multiemployer Plans |
5.13(a) |
|
Multiple Employer
Plans |
5.13(a) |
|
Nonassignable Assets |
2.5(c) |
|
Owner and Owners |
Introductory
Paragraph |
|
Owner Documents |
5.2(b) |
|
Patents |
1.1 (in Intellectual
Property definition) |
|
Personal Property
Leases |
5.10(b) |
|
Purchase Note |
3.1(b) |
|
Purchase Price |
3.1(b) |
|
Purchased Assets |
2.1 |
|
Purchaser |
Introductory
Paragraph |
|
Purchaser Documents |
6.2 |
|
Purchaser Indemnified
Parties |
10.2(a) |
|
Related Persons |
5.21 |
|
Representatives |
7.5 |
|
Restricted Business |
7.6(a) |
|
Revised Statements |
2.7 |
|
Seller and Sellers |
Introductory
Paragraph |
|
Seller Documents |
5.2(a) |
|
Seller Indemnified
Parties |
10.2(b) |
|
Seller Marks |
7.9 |
|
Seller Permits |
5.16(b) |
|
Seller Property
and Seller
Properties |
5.9(a) |
|
Survival Period |
10.1 |
|
Tax Clearance
Certificates |
11.4 |
|
Termination Date |
4.2(a) |
|
Third Party Claim |
10.3(b) |
|
Total Consideration |
3.1(d) |
|
Trade Secrets |
1.1 (in Intellectual
Property definition) |
|
Transfer Taxes |
11.1 |
|
Transferred
Employees |
8.1 |
|
|
|
(a)
Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
Calculation of Time
Period. When calculating the
period of time before which, within which or following which, any act is
to be
done or step taken pursuant to this Agreement, the date that is the reference
date in calculating such period shall be excluded. If the last day of such period
is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars.
Any
reference in this Agreement to $
shall mean U.S. dollars.
Exhibits/Schedules.
The
Exhibits and Schedules to this
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement. All
Exhibits and Schedules annexed hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used
in any Schedule or Exhibit but not otherwise defined therein shall be defined
as
set forth in this Agreement.
Gender and Number.
Any
reference in this Agreement to
gender shall include all genders, and words imparting the singular number
only
shall include the plural and vice versa.
Headings.
The
provision of a Table of Contents,
the division of this Agreement into Articles, Sections and other subdivisions
and the insertion of headings are for convenience of reference only and
shall
not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement
to any
“Section” are to the corresponding Section of this Agreement unless otherwise
specified.
Herein.
The
words such as “herein,”
“hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and
not merely to a subdivision in which such words appear unless the context
otherwise requires.
Including.
The
word “including” or any variation
thereof means (unless the context of its usage requires otherwise) “including,
but not limited to,” and shall not be construed to limit any general statement
that it follows to the specific or similar items or matters immediately
following it.
(b)
The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question
of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall
arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
Article
II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1
Purchase and Sale
of Assets.
On the terms and subject to the conditions set forth in this Agreement,
at the Closing Purchaser shall purchase, acquire and accept from Sellers,
and
Sellers shall sell, transfer, assign, convey and deliver to Purchaser all
of
Sellers’ right, title and interest in, to and under the Purchased Assets, free
and clear of all Liens except for Permitted Exceptions. “Purchased
Assets” shall mean all
of the business, assets, properties, contractual rights, goodwill, going
concern
value, rights and claims of any (or any combination) of the Sellers related
to
the Business, wherever situated and of whatever kind and nature, real or
personal, tangible or intangible, whether or not reflected on the books
and
records of any of the Sellers (other than the Excluded Assets), including
each
of the following assets:
(a)
all accounts receivable (including those set forth in Schedule
2.1(a)) of Sellers relating to or in respect of the Business;
(b)
all inventory (including those items set forth in Schedule
2.1(b)) used or held for use in the Business;
(c)
all tangible personal property (including those items set
forth in
Schedule 2.1(c)) used or useful in the Business, including Furniture and
Equipment, other than such tangible personal property which is an Excluded
Asset;
(d)
all deposits (including customer deposits and security for
rent,
electricity, telephone or otherwise) and prepaid charges and expenses,
including
any prepaid rent, of Sellers relating to or in respect of the Business;
(e)
the Purchased Intellectual Property and the Purchased
Technology;
(f)
all rights of Sellers under the Purchased Contracts, including
all
claims or causes of action with respect to the Purchased Contracts;
(g)
all Documents that are related to the Business, including
Documents relating to products, services, marketing, advertising, promotional
materials, Purchased Intellectual Property, personnel files for Transferred
Employees and all files, customer files and documents (including credit
information), supplier lists, records, literature and correspondence, but
excluding personnel files for Employees of Sellers who are not Transferred
Employees;
(h)
all Permits, including Environmental Permits, used by any
of the
Sellers in the Business (which includes all Permits necessary to conduct
the
Business as currently conducted) and all rights, and incidents of interest
therein;
(i)
all supplies owned by any of the Sellers and used or held
for use
in connection with the Business;
(j)
all rights of Sellers under non-disclosure or confidentiality,
non-compete, or non-solicitation agreements with Former Employees, Employees
and
agents of any of the Sellers or with third Persons to the extent relating
to the
Business or the Purchased Assets (or any portion thereof);
(l)
all rights of Sellers under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
to the extent relating to products sold or services provided to Sellers
and
affecting any Purchased Assets;
(l)
all third-party property and casualty insurance proceeds,
and all
rights to third-party property and casualty insurance proceeds, in each
case to
the extent received or receivable in respect of the Business; and
(m)
all goodwill and other intangible assets associated with
the
Business, including the goodwill associated with the Purchased Intellectual
Property and the personal goodwill associated with the Executive.
2.2
Excluded Assets.
Nothing herein contained shall be deemed to sell, transfer, assign
or
convey the Excluded Assets to Purchaser, and Sellers shall retain all right,
title and interest to, in and under the Excluded Assets. “Excluded
Assets” shall mean each
of the following assets:
(a)
Cash;
(b)
the Excluded Contract;
(c)
all minute books, organizational documents, stock registers
and
such other books and records of IFS and LWR as pertain to ownership,
organization or existence of such of the Sellers and duplicate copies of
such
records as are necessary to enable Sellers to file Tax Returns; and
(d)
those assets listed or otherwise specifically described on
Schedule 2.2(d).
2.3 Assumption
of Liabilities.
On the terms and subject to the conditions set forth in this Agreement,
at the Closing Purchaser shall (or shall cause its designated Affiliate
or
Affiliates to) assume, effective as of the Closing, the following liabilities
of
Sellers (collectively, the “Assumed
Liabilities”):
(f)
all Liabilities of Sellers under the Purchased Contracts
that
arise out of or relate to the period from and after the Closing Date;
(g)
all trade accounts payable and other similar accrued Liabilities
of the Sellers as of the Closing Date arising in the Ordinary Course of
Business
prior to such date;
(h)
all Liabilities for Transfer Taxes; and
(i)
those Liabilities listed or otherwise specifically described
on
Schedule 2.3(d).
2.4
Excluded Liabilities.
Purchaser will not assume or be liable for any Excluded Liabilities. Sellers shall timely perform,
satisfy
and discharge in accordance with their respective terms all Excluded
Liabilities. “Excluded
Liabilities” shall mean
all Liabilities of any (or any combination) of the Sellers arising out
of,
relating to or otherwise in respect of the Business before the Closing
Date,
other than the Assumed Liabilities, and all other Liabilities of Sellers,
including the following Liabilities:
(a)
all Liabilities (other than those specifically assumed pursuant
to
Section 2.3(b)) in respect of any products sold and/or services performed
by Sellers in the conduct and operation of the Business before the Closing
Date;
(b)
all Environmental Costs and Liabilities, to the extent arising
out
of or otherwise related to (i) the ownership or operation by any of the
Sellers of (A) the Seller Properties (or any condition thereon) prior to
the Closing Date (including (i) the Release or continuing Release (if
existing as of the Closing) of any Hazardous Material, regardless of by
whom or
(ii) any noncompliance with Environmental Laws), (B) the Business
prior to the Closing Date, (C) the Excluded Assets or any other real
property formerly owned, operated, leased or otherwise used by any of the
Sellers or (ii) from the offsite transportation, storage disposal, treatment
or
recycling of Hazardous Material generated by and taken offsite by or on
behalf
of any of the Sellers prior to and through the Closing Date;
(c)
except to the extent specifically provided in
Article VIII, all Liabilities arising out of, relating to or
with
respect to (i) the employment or performance of services, or termination of
employment or services by any of the Sellers or any of their respective
Affiliates of any individual on or before the Closing Date, (ii) workers’
compensation claims against any of the Sellers that relate to the period
on or
before the Closing Date, irrespective of whether such claims are made prior
to
or after the Closing or (iii) any Employee Benefit Plan;
(d)
all Liabilities arising out of, under or in connection with
Contracts of any of the Sellers that are not Purchased Contracts and, with
respect to Purchased Contracts,
(e)
Liabilities in respect of a breach by or default accruing
under
such Contracts with respect to any period prior to Closing;
(f)
all Liabilities arising out of, under or in connection with
any
Indebtedness of Sellers (other than such Indebtedness specifically assumed
pursuant to Section 2.3(d));
(g)
all Liabilities for (i) Taxes of Sellers, (ii) Taxes that
relate
to the Purchased Assets or the Assumed Liabilities for taxable periods
(or
portions thereof) ending on or before the Closing Date, including, without
limitation, Taxes allocable to Sellers pursuant to Section 11.2 and the
obligations in respect of payroll and sales taxes as of the Closing Date,
and
(iii) payments under any Tax allocation, sharing or similar agreement;
(h)
all Liabilities in respect of any pending or threatened Legal
Proceeding, or any claim arising out of, relating to or otherwise in respect
of
(i) the operation of the Business to the extent such Legal Proceeding or
claim
relates to such operation prior to the Closing Date, (ii) any Excluded
Asset, or
(iii) the accident involving Xxxxxx X. Xxxxxxxxxxxx, then an employee of
IFS, in
Xxxxxxx County, Texas on August 24, 2007;
(i)
all Liabilities of any (or any combination) of the Sellers
based
upon, attributable to or arising under this Agreement; and
(j)
all Liabilities relating to any dispute with any client or
customer of the Business existing as of the Closing Date or based upon,
relating
to or arising out of events, actions, or failures to act prior to the Closing
Date.
(a)
From time to time following the Closing and except as prohibited
by Law, each of Sellers shall, or shall cause their respective Affiliates
to,
make available to Purchaser such data in personnel records of Transferred
Employees as is reasonably necessary for Purchaser to transition such Employees
into Purchaser’s records.
(b)
From time to time following the Closing, each of Sellers
and
Purchaser shall, and shall cause their respective Affiliates to, execute,
acknowledge and deliver all such further conveyances, notices, assumptions,
releases and aquittances and such other instruments, and shall take such
further
actions, as may be necessary or reasonably appropriate to assure fully
to
Purchaser and its respective successors or assigns, all of the properties,
rights, titles, interests, estates, remedies, powers and privileges intended
to
be conveyed to Purchaser under this Agreement and the Seller Documents
and to
assure fully to each of the Sellers and their respective Affiliates and
their
successors and assigns, the assumption of the liabilities and obligations
intended to be assumed by Purchaser under this Agreement and the Seller
Documents, and to otherwise make effective the transactions contemplated
hereby
and thereby. Purchaser shall
reimburse Sellers promptly for any out-of-pocket costs and expenses incurred
by
Sellers in performing their obligations under this Section 2.5(b) upon
presentation by Sellers to Purchaser of invoices or other reasonably documented
evidence thereof.
(c)
Nothing in this Agreement nor the consummation of the transactions
contemplated hereby shall be construed as an attempt or agreement to assign
any
Purchased Asset, including any Contract, Permit, certificate, approval,
authorization or other right, which by its terms or by Law is nonassignable
without the consent of a third party or a Governmental Body or is cancelable
by
a third party in the event of an assignment (“Nonassignable Assets”) unless
and until such consent shall have been obtained. Each of Sellers shall, and shall
cause
their respective Affiliates to, use its best efforts to cooperate with
Purchaser
at its request in endeavoring to obtain such consents promptly. To the extent permitted by applicable
Law, in the event consents to the assignment thereof cannot be obtained,
such
Nonassignable Assets shall be held, as of and from the Closing Date, by
the
applicable Seller or the applicable Affiliate of any such Seller in trust
for
Purchaser and the covenants and obligations thereunder shall be performed
by
Purchaser in such Seller’s or such Affiliate’s name and all benefits and
obligations existing thereunder shall be for Purchaser’s account. Each of the Sellers shall take
or cause
to be taken such actions in its name or otherwise as Purchaser may reasonably
request so as to provide Purchaser with the benefits of the Nonassignable
Assets
and to effect collection of money or other consideration that becomes due
and
payable under the Nonassignable Assets, and each of the Sellers or the
applicable Affiliate of any such Seller shall promptly pay over to Purchaser
all
money or other consideration received by it in respect of all Nonassignable
Assets. As of and from the Closing
Date, each of the Sellers on behalf of itself and its Affiliates authorizes
Purchaser, to the extent permitted by applicable Law and the terms of the
Nonassignable Assets, at Purchaser’s expense, to perform all the obligations and
receive all the benefits of such Seller or its Affiliates under the
Nonassignable Assets and appoints Purchaser its attorney-in-fact to act
in its
name on its behalf or in the name of the applicable Affiliate of such Seller
and
on such Affiliate’s behalf with respect thereto. Purchaser shall reimburse Sellers
promptly for any out-of-pocket costs and expenses incurred by Sellers in
performing their obligations under this Section 2.5(c) upon presentation
by Sellers to Purchaser of invoices or other reasonably documented evidence
thereof.
2.7
Purchase Price Allocation.
Purchaser and the Sellers have prepared an initial written statement,
in
the form of a copy of Form 8594 and any exhibits thereto as attached hereto
as
Schedule 2.7 (the “Asset
Acquisition Statement”) allocating the Total Consideration among the
Purchased Assets. Purchaser shall
prepare and deliver to Sellers from time to time revised copies of the
Asset
Acquisition Statement (the “Revised
Statements”) so as to report any matters on the Asset Acquisition
Statement that need updating (including purchase price adjustments, if
any,
pursuant to Article III hereof).
The Total Consideration
paid by Purchaser for the Purchased Assets shall
be allocated in accordance with the Asset Acquisition Statement or, if
applicable, the last Revised Statements, provided by Purchaser to Sellers,
and
all income Tax Returns and reports filed by Purchaser and Sellers shall
be
prepared consistently with such allocation. For purposes of this Section 2.7,
the Purchased Assets include the covenant not to compete as set forth in
Section 7.6.
2.8
Right to Control Payment.
Purchaser shall have the right, but not the obligation, to make
any
payment due from any of the Sellers with respect to any Excluded Liabilities
which are not paid by an
applicable Seller within five (5) Business Days following written request
for
payment from Purchaser; provided, however, that if such applicable
Seller advises Purchaser in writing during such five (5) Business Day period
that a good faith payment dispute exists or such Seller has valid defenses
to
non-payment with respect to such Excluded Liability, then Purchaser shall
not
have the right to pay such Excluded Liability. Each of the Sellers agrees to reimburse
Purchaser promptly and in any event within five (5) Business Days following
written notice of such payment by Purchaser for the amount of any payment
made
by Purchaser pursuant to this Section 2.8.
2.9
Proration of Certain Expenses.
Subject to Section 11.2 with respect to Taxes, all expenses and
other payments in respect of all rents and other payments (including any
prepaid
amounts) due under any leases constituting part of the Purchased Assets
shall be
prorated between the Sellers, on the one hand, and Purchaser, on the other
hand,
as of the Closing Date. The Sellers
shall be responsible for all rents (including any percentage rent, additional
rent and any accrued tax and operating expense reimbursements and escalations),
charges and other payments of any kind accruing during any period under
any such
leases up to and including the Closing Date. Purchaser shall be responsible
for all
such rents, charges and other payments accruing during any period under
such
leases after the Closing Date.
Purchaser shall pay the full amount
of any invoices received by it and
shall submit a request for reimbursement to Sellers for the Sellers’ share of
such expenses and Sellers shall pay the full amount of any invoices received
by
it and Purchaser shall reimburse Sellers for Purchaser’s share of such
expenses.
2.10
Receivables.
Each of the Sellers shall provide reasonable assistance to Purchaser
in
the collection of accounts receivable.
If any of the Sellers shall receive
payment in respect of accounts
receivable that are included in the Purchased Assets, then any such Seller
shall
promptly forward such payment to Purchaser.
3.1
Consideration.
The aggregate consideration for the Purchased Assets shall be (a)
an
amount in cash equal to $6,000,000 (subject to adjustment as provided in
Section 3.3(a) below, the “Cash Payment”), (b) a promissory
note in the form of Exhibit A in an original principal amount of
$3,000,000 (subject to adjustment as otherwise provided herein, the “Purchase Note”, and together
with the Cash Payment, but subject to adjustment as otherwise provided
herein,
the “Purchase Price”), (c)
the rights to the payments as provided under Section 3.4 (the “Earnout Rights”) and (d)
the
assumption of the Assumed Liabilities (together with the Purchase Price
and the
Earnout Rights, the “Total
Consideration”).
3.2
Payment of Purchase Price.
On the Closing Date, Purchaser shall (a) pay the Cash Payment to
Sellers,
which shall be paid by wire transfer of immediately available funds into
an
account designated by the Executive in writing not fewer than three Business
Days prior to the Closing Date and (b) deliver to the Executive the duly
executed Purchase Note.
(a)
Closing Date Purchase Price Adjustment.
(i)
Not later than three Business Days prior to the Closing Date,
Sellersshall provide Purchaser with
an estimated balance sheet of the Business as of the open of business on
the
Closing Date (the “Estimated Closing
Balance Sheet”) and a statement of the estimated Closing Working
Capital, derived from the Estimated Closing Balance Sheet (“Estimated Closing Working
Capital”). The Estimated
Closing Working Capital shall be prepared by the Sellers in accordance
with GAAP
applied using the same accounting methods, practices, principles, policies
and
procedures, with consistent classifications, judgments and valuation and
estimation and accrual methodologies (subject, in each case, to determination
and compliance with the Agreed Principles) that were used in the preparation
of
the Business’s Financial Statements for the most recent fiscal year end as if
such Estimated Closing Working Capital were being prepared as of a fiscal
year
end.
(ii)
If Estimated Closing Working Capital is less than Target
Working
Capital, then the Cash Payment portion of the Purchase Price payable at
Closing
will be decreased by an amount equal to such difference between Estimated
Closing Working Capital and Target Working Capital. If Estimated Closing Working Capital
is
more than Target Working Capital, then the Cash Payment portion of the
Purchase
Price payable at Closing will be increased by an amount equal to twenty-five
percent (25%) of such difference.
(b)
Post-Closing Date Purchase Price Adjustment.
(i)
No later than ninety (90) days after the Closing Date, Purchaser
shall cause to be prepared the closing statement (the “Closing Statement”), which shall
set forth therein Purchaser’s calculation of Closing Working Capital. Purchaser shall cause a copy of
the
Closing Statement to be delivered to the Executive on behalf of the Sellers.
(ii)
If the Executive (on behalf of the Sellers) disagrees with
Purchaser’s calculation of Closing Working Capital set forth in the Closing
Statement, the Executive may, within twenty (20) days after delivery of
the
Closing Statement, cause a notice to be delivered to Purchaser disagreeing
with
such calculation and setting forth the Sellers’ calculation of such amount. Any such notice of disagreement
shall
specify those items or amounts as to which the Sellers disagree, and the
Sellers
shall be deemed to have agreed with all other items and amounts contained
in the
Closing Statement and the calculation of Closing Working Capital delivered
pursuant to Section 3.3(b)(i).
(iii)
If a notice of disagreement shall be duly delivered pursuant
to
Section 3.3(b)(ii), Purchaser and the Executive (on behalf of the
Sellers) shall, during the fifteen (15) days following such delivery, use
their
commercially reasonable efforts to reach agreement on the disputed items
or
amounts in order to determine, as may be required, the amount of Closing
Working Capital, which amount shall not be less than the amount thereof
shown in
Purchaser’s calculation delivered pursuant to Section 3.3(b)(i) nor more
than the amount thereof shown in the Sellers’ calculation delivered pursuant to
Section 3.3(b)(ii). If the
parties so resolve all disputes, the computation of Closing Working Capital,
as
amended to the extent necessary to reflect the resolution of the dispute,
shall
be conclusive and binding on the parties.
If during such period, Purchaser
and the Executive are unable to reach an
agreement, they shall promptly thereafter cause the Independent Valuation
Firm
to review this Agreement and the disputed items or amounts for the purpose
of
calculating Closing Working Capital (it being understood that in making
such
calculation, the Independent Valuation Firm shall be functioning as an
expert
and not as an arbitrator). In
making such calculation, the Independent Valuation Firm shall consider
only
those items or amounts in the Closing Statement and Sellers’ calculation of
Closing Working Capital as to which Purchaser and Sellers have disagreed. The Independent Valuation Firm
shall
deliver to Purchaser and the Executive, as promptly as practicable (but
in any
case no later than thirty (30) days from the date of engagement of the
Independent Valuation Firm), a report setting forth such calculation. Such report shall be final and
binding
upon Purchaser and Sellers and judgment may be entered to enforce such
report in
any court of competent jurisdiction.
All proceedings conducted by the
Independent Valuation Firm shall take
place in Midland, Texas.
The fees, costs and expenses of
the Independent Valuation Firm shall be
allocated to and borne by Purchaser, on the one hand, and Sellers, on the
other
hand, based on the inverse of the percentage that the Independent Valuation
Firm’s determination (before such allocation) bears to the total amount of the
total items in dispute as originally submitted to the Independent Valuation
Firm. For example, should the items
in dispute total in amount to $1,000 and the Independent Valuation Firm
awards
$600 in favor of the Sellers’ position, 60% of the costs of its review would be
borne by Purchaser and 40% of the costs would be borne by Sellers.
(iv)
Purchaser and Sellers shall, and shall cause their respective
representatives to, cooperate and assist in the preparation of the Closing
Statement and the calculation of Closing Working Capital and in the conduct
of
the review referred to in this Section 3.3(b), including the making
available to the extent necessary of books, records, work papers and
personnel.
(v)
If the Final Working Capital is less than Estimated Closing
Working Capital, then the Purchase Price shall be further decreased by
reduction
of the principal amount payable (and any interest accruing with respect
to such
principal) under the Purchase Note in an amount equal to the amount by
which
Estimated Closing Working Capital exceeds Final Working Capital. Any reduction of the principal
amount of
the Purchase Note as provided in the immediately preceding sentence shall
be
applied to such payments of principal thereunder in reverse chronological
order
for the installments thereof. If
the Final Working Capital exceeds the amount of Estimated Closing Working
Capital, then the Purchase Price shall be increased by an aggregate amount
determined as follows: (x) with
respect to any amount of such Final Working Capital that is equal to or
less
than Target Working Capital, the Purchase Price shall be increased by an
amount equal to such excess (as a dollar-for-dollar increase) and (y) with
respect to any amount of such Final Working Capital that is more than Target
Working Capital, the Purchase Price shall be increased by an amount equal
to
twenty-five percent (25%) of such excess.
Purchaser shall pay the amount
of increase (if any) in the Purchase Price
as determined pursuant to the immediately preceding sentence promptly (but
no
later than five (5) Business Days after final determination of any such
applicable amount) by wire transfer of immediately available funds into
an
account designated by the Executive.
“Final
Working
Capital” means Closing Working Capital (i) as shown in Purchaser’s
calculation delivered pursuant to Section 3.3(b)(i) if no notice of
disagreement with respect thereto is duly delivered pursuant to Section
3.3(b)(ii); or (ii) if such a notice of disagreement is delivered, (A) as
agreed by Purchaser and the Executive pursuant to Section 3.3(b)(iii) or
(B) in the absence of such agreement, as shown in the Independent Valuation
Firm’s calculation delivered pursuant to Section 3.3(b)(iii);
provided, however, that in no event shall Final Working Capital
be
more than the Sellers’ calculation of Closing Working Capital delivered pursuant
to Section 3.3(b)(ii) or less than Purchaser’s calculation of Closing
Working Capital delivered pursuant to Section 3.3(b)(i).
3.4
Seller’s Earn Out.
In addition
to the Purchase Price, Purchaser shall pay to the Executive
as additional consideration for the purchase of his personal goodwill (as
part
of the Purchased Assets) additional earn-out amounts as set forth on Schedule
3.4 hereto.
4.1
Closing Date.
The consummation of the purchase and sale of the Purchased Assets
and the
assumption of the Assumed Liabilities provided for in Article II
hereof (the “Closing”) shall
take place at the offices of Xxxxxx, Xxxxxxxx & Xxxxxxx, P.C., located at
000 Xxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxx Xxxxxx 00000 (or at such other place
as
the parties may designate in writing) at 10:00 a.m. (New Mexico time) on
a date
to be specified by the parties (the “Closing Date”), which date shall
be no later than the third Business Day after satisfaction or waiver of
the
conditions set forth in Article IX (other than conditions that by their
nature are to be satisfied at Closing, but subject to the satisfaction
or waiver
of those conditions at such time), unless another time, date or place is
agreed
to in writing by the parties hereto.
4.2
Termination of Agreement.
This Agreement may be terminated prior to the Closing as
follows:
(a)
at the election of Sellers, on the one hand, or Purchaser,
on the
other hand, on or after October 31, 2007 (such date, the “Termination Date”), if the
Closing shall not have occurred by the close of business on such date,
provided
that the terminating party is not in material default of any of its obligations
hereunder;
(b)
by mutual written consent of Sellers and Purchaser;
(c)
by written notice from Purchaser to Sellers that there has
been an
event, change, occurrence or circumstance that, individually or in the
aggregate
with any such events, changes, occurrences or circumstances has had or
could
reasonably be expected to have a Material Adverse Effect;
(d)
by written notice from Purchaser, if any of the Sellers shall
have
breached or failed to perform any of their respective representations,
warranties, covenants or agreements set forth in this Agreement, or if
any
representation or warranty of any of the Sellers shall have become untrue,
in
either case such that the conditions set forth in Section 9.1(a) or
9.1(b) would not be satisfied and such breach is incapable of
being cured
or, if capable of being cured, shall not have been cured within ten (10)
days
following receipt by Sellers of notice of such breach from Purchaser; or
(e)
by written notice from Sellers, if Purchaser shall have breached
or failed to perform any of its representations, warranties, covenants
or
agreements set forth in this Agreement, or if any representation or warranty
of
Purchaser shall have become untrue, in either case such that the conditions
set
forth in Section 9.2(a) or 9.2(b) would not be satisfied and such
breach is incapable of being cured or, if capable of being cured, shall
not have
been cured within ten (10) days following receipt by Purchaser of notice
of such
breach from Sellers.
4.3
Procedure Upon Termination.
In the event of termination and abandonment by Purchaser or
Sellers, or both,
pursuant to Section 4.2 hereof, written notice thereof shall
forthwith be given to the other party or parties, and this Agreement shall
terminate, and the purchase of the
Purchased Assets hereunder shall be abandoned, without further action by
Purchaser or Sellers.
4.4
Effect of Termination.
In the event that this Agreement is validly terminated as provided
herein, then each of the parties shall be relieved of their duties and
obligations arising under this Agreement after the date of such termination
and
such termination shall be without liability to Purchaser or Sellers;
provided, however, that (a) the obligations of the parties set
forth in Articles X and XII hereof shall survive any such
termination and shall be enforceable hereunder and (b) nothing in this
Section 4.4 shall relieve Purchaser, Sellers or Owners of any liability
for a breach of this Agreement prior to the effective date of such
termination.
Each of the Sellers,
jointly
and severally, hereby represents and warrants to Purchaser that (and, for
purposes of Sections 5.1, 5.2 and 5.3 below, each of the
Owners also represents and warrants to Purchaser as set forth therein):
5.1
Organization and Good Standing.
IFS is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Mexico and has all requisite
corporate power and authority to own, lease and operate its properties
and to
carry on its business as now conducted and as currently proposed to be
conducted. LWR is a limited
liability company duly organized, validly existing and in good standing
under
the laws of the State of Mexico and has all requisite
limited
liability company power and authority to own, lease and operate its properties
and to carry on its business as now conducted and as currently proposed
to be
conducted. Each of IFS and LWR is
duly qualified or authorized to do business and is in good standing under
the
laws of each jurisdiction in which it owns or leases real property and
each
other jurisdiction in which the conduct of its business or the ownership
of its
properties requires such qualification or authorization. Sellers have delivered to Purchaser
true, complete and correct copies of IFS’s and LWR’s respective certificate of
incorporation and by-laws and comparable organizational documents as in
effect
on the date hereof. Neither
IFS nor LWR owns, directly or indirectly, any capital stock or equity securities
of any Person. The Owners represent
and warrant that all of the outstanding shares of capital stock of IFS
and LWR
are owned of record and beneficially, directly or indirectly (as the case may
be), by the Owners as set forth on Schedule 5.1 and, except as set forth
on Schedule 5.1, there is no existing option, warrant, call, right or
Contract to which any of the Sellers or the Owners is a party requiring,
and
there are no securities of either IFS or LWR outstanding which upon conversion
or exchange would require, the issuance, sale or transfer of any additional
shares of capital stock or other equity securities of IFS or LWR,
respectively.
(a)
IFS and LWR each have all requisite power, authority and
legal
capacity to execute and deliver this Agreement and has all requisite power,
authority and legal capacity to execute and deliver each other agreement,
document, instrument or certificate contemplated by this Agreement or to
be
executed by such Seller in connection with the transactions contemplated
by this Agreement (together with the Owner Documents, the “Seller Documents”), to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
The execution, delivery and performance
of this Agreement and each of the
Seller Documents and the consummation of the transactions contemplated
hereby
and thereby have been duly authorized and approved by all requisite
organizational action on the part of IFS and LWR. This Agreement has been, and each
of the
Seller Documents will be at or prior to the Closing, duly and validly executed
and delivered by IFS and LWR and (assuming the due authorization, execution
and
delivery by Purchaser) this Agreement constitutes, and each of the Seller
Documents when so executed and delivered will constitute, legal, valid
and
binding obligations of IFS and LWR enforceable against each of them.
(b)
Each of the Owners represents and warrants that: (i) such Owner has
all requisite
authority and legal capacity to execute and deliver this Agreement and
each
other agreement, document, or instrument or certificate contemplated by
this
Agreement or to be executed by such Owner in connection with
the consummation of the transactions contemplated by this Agreement (the
“Owner Documents”), and to
consummate the transactions contemplated hereby and thereby, (ii) the execution,
delivery and performance of this Agreement and each of the Owner Documents,
and
the consummation of the transactions contemplated hereby and thereby, has
been
duly authorized and approved by all required action on the part of such
Owner,
(iii) this Agreement has been, and each of the Owner Documents will be
at or
prior to the Closing, duly and validly executed and delivered by such Owner
and
(iv) assuming due authorization, execution and delivery by Purchaser, this
Agreement constitutes, and each of the Owner Documents when so executed
and
delivered will constitute, legal, valid and binding obligations of such
Owner,
enforceable against such Owner in accordance with its terms.
(a)
Each of the Sellers and the Owners represents and warrants
that,
except as set forth on Schedule 5.3(a), none of the execution and
delivery by any of the Sellers or the Owners of this Agreement or the Seller
Documents, the consummation of the transactions contemplated hereby or
thereby,
or compliance by Sellers or Owners with any of the provisions hereof or
thereof
will conflict with, or result in any violation or breach of, or conflict
with or
default (with or without notice or lapse of time, or both) under, or give
rise
to a right of termination, cancellation or acceleration of any obligation
or the
loss of a material benefit under, or give rise to any obligation of Seller
or
Owner to make any payment under, or to the increased, additional, accelerated
or
guaranteed rights or entitlements of any Person under, or result in the
creation
of any Liens upon any of the properties or assets of any Seller or Owner
under
any provision of (i) with respect to IFS, LWR and The Xxxxxx Xxx Xxxxxxxx
Irrevocable Trust, the certificate of incorporation and by-laws and
comparable organizational documents (as applicable) thereof; (ii) any
Contract or Permit to which any of the Sellers or Owners is a party or
by which
any of the properties or assets of any of the Sellers or Owners are bound;
(iii)
any Order applicable to any of the Sellers or Owners or by which any of
the
properties or assets of any of the Sellers or Owners are bound; or (iv)
any
applicable Law.
(b)
Each of the Sellers and the Owners represents and warrants
that,
no consent, waiver, approval, Permit or authorization of or filing with,
or notification to, any Person or Governmental Body is required on the part
of any Seller or Owner in connection with (i) the execution and delivery of
this Agreement or the Seller Documents, the compliance by any of the Sellers
or
Owners with any of the provisions hereof and thereof, the consummation
of the
transactions contemplated hereby and thereby or the taking by any of the
Sellers
or Owners of any other action contemplated hereby or thereby, or (ii) the
continuing validity and effectiveness immediately following the Closing
of any
Contract or Permit of the Business, except as set forth on Schedule
5.3(b).
(a)
Sellers have delivered to Purchaser copies of (i) the balance
sheets of IFS as at March 31, 2007, 2006 and 2005 and the related statements
of
income of IFS for the years then ended, (ii) the balance sheets of LWR
as at
December 31, 2006 and 2005 and the related statements of income of LWR
for the
years then ended, (iii) the balance sheet of IFS as at June 30, 2007 and
the
related statement of income of IFS for the three-month period then ended,
and
(iv) the balance sheet of LWR as at June 30, 2007 and the related statement
of income of LWR for the six-month period then ended (such financial statements
are referred to herein as the “Financial Statements”).
Each
of the Financial Statements is
complete and correct in all material respects, has been prepared in accordance
with GAAP consistently applied (except (A) for such exceptions as noted on
Schedule 5.4(a) and (B) with respect to interim financial statements, for
normal recurring year-end adjustments that, individually or in the aggregate,
would not be material) without modification of the accounting principles
used in
the preparation thereof throughout the periods presented and presents fairly
in
all material respects the financial position, results of operations and
cash
flows of the Business as at the dates and for the periods indicated.
For the purposes hereof,
the
balance sheets of each of IFS and LWR as at March 31, 2007 and December
31,
2006, respectively, are collectively referred to as the “Balance Sheet” and March 31,
2007 and December 31, 2006, as applicable in respect of IFS’s and LWR’s
respective fiscal year-end date, are referred to as the “Balance Sheet Date.”
(b)
Sellers make and keep books, records and accounts which,
in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the Business’s assets.
Sellers maintain systems of internal
accounting controls sufficient to
provide reasonable assurances that:
(i) transactions are executed in
accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to
permit
the preparation of financial statements in conformity with GAAP and to
maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the actual
levels at reasonable intervals and appropriate action is taken with respect
to
any differences.
(c)
Sellers have established and maintain controls and procedures
with
respect to the Business designed to ensure that material information relating
to
the Business is made known to the Business’s principal executive officer and its
principal financial officer during the respective applicable financial
presentation periods and, to the Knowledge of Sellers, such controls and
procedures are effective in timely alerting such principal executive officer
and
principal financial officer to material information required to be included
in
such financial presentation.
5.5
No Undisclosed Liabilities.
The Business does not have any Liabilities other than those (i)
based up,
attributable to or arising under Contracts that are not due and have not
arisen
in respect of any breach of or default under any provision thereof, (ii)
specifically reflected in, fully reserved against or otherwise described
in the
Balance Sheet or the notes thereto, (iii) incurred in the Ordinary Course
of
Business since the Balance Sheet Date, or (iv) that are immaterial to the
Business.
5.6
Title to Purchased Assets; Sufficiency.
Sellers own and have good title to the Purchased Assets, free and
clear
of all Liens other than Permitted Exceptions. The Purchased Assets constitute
all of
the properties and assets used in or held for use in the Business, except
as set
forth on Schedule 5.6, and are sufficient for Purchaser to conduct the
Business from and after the Closing Date without interruption and in the
Ordinary Course of Business, as it has been conducted by Sellers.
5.7
Absence of Certain Developments.
Except as expressly contemplated by this Agreement or as set forth
on
Schedule 5.7, since the Balance Sheet Date, (i) Sellers
have conducted the
Business only in the Ordinary Course of Business and (ii) there has not
been any
event, change, occurrence or circumstance that, individually or in the
aggregate
with any such events, changes, occurrences or circumstances, has had or
could
reasonably be expected to have a Material Adverse Effect. Without limiting the generality
of the
foregoing, except as set forth on Schedule 5.7 since the Balance Sheet
Date:
(i)
there has not been any damage, destruction or loss, whether
or not
covered by insurance, with respect to the Purchased Assets having a replacement
cost of more than $15,000 for any single loss or $25,000 for all such
losses;
(ii)
there has not been any declaration, setting aside or payment
of
any dividend or other distribution in respect of any shares of capital
stock of
IFS or LWR or any repurchase, redemption or other acquisition by IFS or
LWR of
any outstanding shares of capital stock or other securities of, or other
ownership interest in, either IFS or LWR;
(iii)
except in the Ordinary Course of Business, Sellers have not
awarded or paid any bonuses to Former Employees or Employees, except to
the
extent accrued on the Balance Sheet or entered into any employment, deferred
compensation, severance or similar agreement (nor amended any such agreement)
or
agreed to increase the compensation payable or to become payable by it
to any of
IFS’s or LWR’s, or any of the Business’s, directors, officers, employees, agents
or representatives or agreed to increase the coverage or benefits available
under any severance pay, termination pay, vacation pay, company awards,
salary
continuation for disability, sick leave, deferred compensation, bonus or
other
incentive compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers, employees,
agents or representatives;
(iv)
there has not been any change by Sellers in accounting or
Tax
reporting principles, methods or policies applicable to the Business;
(v)
Sellers have not made or rescinded any election relating
to Taxes
or settled or compromised any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
except as
may be required by applicable law, made any change to any of its methods
of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of its most recently filed federal tax returns,
in
each case, to the extent related to the Business, the Purchased Assets
or the
Assumed Liabilities;
(vi)
Sellers have not failed to promptly pay and discharge current
liabilities of the Business except for liabilities not material in amount
that
are disputed in good faith by appropriate proceedings;
(vii)
IFS and LWR have not made any capital investment in, any
loan to,
or any acquisition of the securities or assets of, any other Person;
(viii)
Sellers have not mortgaged, pledged or subjected to any Lien
any
of the Business’s assets, or acquired any assets or sold, assigned, transferred,
conveyed, leased or otherwise disposed of any assets of the Business, except
for
assets acquired or sold, assigned, transferred, conveyed, leased or otherwise
disposed of in the Ordinary Course of Business;
(ix)
Sellers have not discharged or satisfied any Lien, or paid
any
obligation or Liability (in each case as applicable to the Business and
the
Purchased Assets), except in the Ordinary Course of Business;
(x)
Sellers have not canceled or compromised any debt or claim
or
amended, modified, canceled, terminated, relinquished, waived or released
any
Contract or right except in the Ordinary Course of Business and which,
in the
aggregate, would not be material to the Business;
(xi)
Neither Sellers nor the Business has issued, created, incurred,
assumed or guaranteed any Indebtedness, except in the Ordinary Course of
Business;
(xii)
Sellers have not made or committed to make any capital
expenditures in respect of the Business other than such expenditures arising
in
the Ordinary Course of Business;
(xiii)
Sellers have not instituted or settled any material Legal
Proceeding applicable to the Business, the Purchased Assets or the Assumed
Liabilities;
(xiv)
Sellers have not granted any license or sublicense of any
rights
under or with respect to any Purchased Intellectual Property;
(xv)
Sellers have not made any loan to, or entered into any other
transaction with, any of its shareholders (including, without limitation,
the
Owners), Affiliates, officers, directors, partners or employees as obligations
of the Business, the Purchased Assets or otherwise as Assumed Liabilities;
and
(xvi)
Sellers have not agreed, committed, arranged or entered into
any
understanding to do anything set forth in this Section 5.7.
(a)
(i) All Tax Returns required to be filed by or on behalf
of each
of Sellers and any Affiliated Group of which any of the Sellers is or was
a
member relating to the Business or the Purchased Assets have been duly
and
timely filed with the appropriate Taxing Authority in all jurisdictions
in which
such Tax Returns are required to be filed, and all such Tax Returns are
true,
complete and correct in all material respects; and (ii) all Taxes relating
to
the Business or the Purchased Assets have been fully and timely paid.
(b)
All deficiencies asserted or assessments made as a result
of any
examinations by any Taxing Authority of the Tax Returns relating to the
Purchased Assets or the Business have been fully paid, and there are no
other
audits or investigations by any Taxing Authority in progress, and Sellers
have
not received any notice from any Taxing Authority that it intends to conduct
such an audit or investigation relating to the Purchased Assets or the
Business. No issue has been raised
by written inquiry of any Governmental Authority, which, by application
of the
same principles, would reasonably be expected to affect the Tax treatment
of the
Purchased Assets, the Assumed Liabilities or the Business in any taxable
period
(or portion thereof) ending after the Closing Date.
(c)
Schedule 5.8(c) lists (i) all types of Taxes paid, and all
types of Tax Returns filed by or on behalf of Sellers in connection with,
or
with respect to, the Purchased Assets or the Business and (ii) all of the
jurisdictions that impose such Taxes or with respect to which Sellers have
a
duty to file such Tax Returns.
Sellers have made available complete
copies of material Tax Returns
relating to the Purchased Assets or the Business relating to taxable periods
that ended after December 31, 2003.
(d)
Sellers have complied in all material respects with all applicable
Laws relating to the payment and withholding of Taxes and have duly and
timely
withheld and paid over to the appropriate Taxing Authorities all amounts
required to be so withheld and paid over under all applicable Laws.
(e)
No claim has been made by a Taxing Authority in a jurisdiction
in
which Sellers do not currently file a Tax Return such that the Sellers
(in
respect of the Business and the Purchased Assets), the Business or the
Purchased
Assets are or may be subject to taxation by that jurisdiction.
(f)
No agreement, waiver or other document or arrangement extending
or
having the effect of extending the period for assessment or collection
of Taxes
(including, but not limited to, any applicable statute of limitation) or
the
period for filing any Tax Return, in each case with respect to the Business
or
the Purchased Assets, has been executed or filed with any Taxing Authority
by or
on behalf of any of the Sellers.
Sellers have not requested any
extension of time within which to file any
Tax Return with respect to the Business or the Purchased Assets, which
Tax
Return has since not been filed.
Sellers have not executed or entered
into any agreement with, or obtained
any consents or clearances from, any Taxing Authority, or has been subject
to
any ruling guidance specific to any of the Sellers, that would be binding
on
Purchaser for any taxable period (or portion thereof) ending after the
Closing
Date.
(g)
There are no Liens for Taxes upon the Purchased Assets, except
for
Permitted Exceptions.
(h)
None of the
Purchased
Assets is an interest (other than indebtedness within the meaning of section
163
of the Code) in an entity taxable as a corporation, partnership, trust
or real
estate mortgage investment conduit for federal income tax
purposes.
(i) No
power of attorney with respect to any Tax matter is currently in force
with
respect to the Purchased Assets or the Business that would, in any manner,
bind,
obligate or restrict Purchaser.
(a)
Other than such real property and interests therein subject
to the
Closing Real Property Leases (each individually a “Seller Property” and
collectively the “Seller
Properties”) and the lease described on Schedule 5.9, there is no
real property or interest in real property (including any interest in
improvements or easements appurtenant thereto) owned, occupied or held
for use
in connection with the Business or the Purchased Assets or which is necessary
for the continued operation of the Business and the Purchased Assets as
currently conducted and operated.
All of the Seller Properties and
buildings, fixtures and improvements
thereon (i) are in good operating condition without structural defects,
and all
mechanical and other systems located thereon are in good operating condition,
and no condition exists requiring material repairs, alterations or corrections
and (ii) are suitable, sufficient and appropriate in all respects for their
current and contemplated uses. None
of the improvements located on the Seller Properties constitute a legal
non-conforming use or otherwise require any special dispensation, variance
or
special permit under any Laws.
Seller Properties are not subject
to any leases, rights of first refusal,
options to purchase or rights of occupancy, except as provided in the Closing
Real Property Leases.
(b)
Upon execution and delivery thereof, Purchaser will have
a valid,
binding and enforceable leasehold interest as a lessee under each of the
Closing
Real Property Leases, free and clear of all Liens other than Permitted
Exceptions.
(c)
Sellers have all material certificates of occupancy and Permits
of
any Governmental Body necessary or useful for the current use and operation
of
each Seller Property, and Sellers have fully complied with all material
conditions of the Permits applicable to them. No default or violation, or event
that
with the lapse of time or giving of notice or both would become a default
or
violation, has occurred in the due observance of any Permit.
(d)
There does not exist any actual or, to the Knowledge of Sellers,
threatened or contemplated condemnation or eminent domain proceedings that
affect any Seller Property or any part thereof, and none of the Sellers
has
received any notice of the intention of any Governmental Body or other
Person to
take or use all or any part thereof.
(e)
Other than as contemplated in this Agreement, Sellers are
not
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell, assign or dispose of any
real
estate or any portion thereof or interest therein relating to the Business
or
the Purchase Assets.
(a)
IFS and LWR have good and marketable title to all of the
items of
tangible personal property used or held for use in the Business (except
as sold
or disposed of subsequent to the date thereof in the Ordinary Course of
Business and not in violation of this Agreement), free and clear of any
and all
Liens, other than Permitted Exceptions.
All such items of tangible personal
property which, individually or in
the aggregate, are material to the operation of the Business are in good
condition and in a state of good maintenance and repair (ordinary wear
and tear
excepted) and are suitable for the purposes used or proposed to be used.
(b)
Schedule 5.10 sets forth all leases of personal property
(“Personal Property Leases”)
involving annual payments in excess of $5,000 relating to personal property
used
in the Business or by which the Business or any of the Purchased Assets
is
bound. All of the items of personal
property under the Personal Property Leases are in good condition and repair
(ordinary wear and tear excepted) and are suitable for the purposes used,
and
such property is in all material respects in the condition required of
such
property by the terms of the lease applicable thereto during the term of
the
lease.
(a)
Schedule 5.11(a) sets forth an accurate and complete list
of all Patents, registered Marks, pending applications for registration
of
Marks, unregistered Marks, registered Copyrights, and pending applications
for
registration of Copyrights included in the Purchased Intellectual Property. Schedule 5.11(a) lists (i) the
jurisdictions in which each such item of Purchased Intellectual Property
has
been issued, registered, otherwise arises or in which any such application
for
such issuance and registration has been filed and (ii) the registration
or
application date, as applicable.
(b)
Except as disclosed in Schedule 5.11(b), Sellers (either
individually or collectively) are the sole and exclusive owner of all right,
title and interest in and to all of the Purchased Intellectual Property
and each
of the Copyrights in any works of authorship prepared by or for any of
the
Sellers that resulted from or arose out of any work performed by or on
behalf of
any of the Sellers or by any employee, officer, consultant or contractor
of any
of them. To the Knowledge of
Sellers, Sellers (either individually or collectively, as applicable),
are the
sole and exclusive owner of, or have valid and continuing rights to use,
sell
and license, as the case may be, all other Purchased Intellectual Property
as
the same is used, sold and licensed in the Business as presently conducted
and
proposed to be conducted, free and clear of all Liens or obligations to
others
(except for those specified licenses included in Schedule 5.11(e)). There
are no Orders to which any of the Sellers is a party or by which any of
the
Sellers are bound which restrict, in any material respect, any rights to
any
Purchased Intellectual Property.
The consummation of the transactions
contemplated hereby will not result
in the loss or impairment of Purchaser’s right to own or use any of the
Purchased Intellectual Property.
(c)
The Purchased Intellectual Property, the manufacturing, licensing,
marketing, importation, offer for sale, sale or use of any products and
services
in connection with the Business as presently and as currently proposed
to be
conducted, and the present and currently proposed business practices, methods
and operations of Sellers do not infringe, constitute an unauthorized use
of,
misappropriation or violate any Copyright, Xxxx, Patent, Trade Secret or
other
similar right of any Person and, to the Knowledge of Sellers, do
not infringe, constitute an unauthorized use of, misappropriate, dilute or
violate any other Intellectual Property or other right of any Person (including
pursuant to any non-disclosure agreements or obligations to which any of
the
Sellers or any of the Employees or Former Employees is a party). The Purchased Intellectual Property
and
the Intellectual Property Licenses include all of the Intellectual Property
necessary and sufficient to enable Sellers to conduct the Business in the
manner
in which such Business is currently being conducted and proposed to be
conducted. Sellers have, and will
transfer to Purchaser at the Closing, good and valid title to the Purchased
Intellectual Property and Intellectual Property Licenses, free and clear
of all
Liens other than Permitted Exceptions.
(d)
Except with respect to licenses of commercial off-the-shelf
Software available on reasonable terms for a license fee of no more than
$5,000,
and except pursuant to the Intellectual Property Licenses listed in Schedule
5.11(e), none of the Sellers is required, obligated, or under any liability
whatsoever, to make any payments by way of royalties, fees or otherwise
to any
owner, licensor of, or other claimant to, any Purchased Intellectual Property,
or any other Person, with respect to the use thereof or in connection with
the
conduct of the Business as currently conducted or proposed to be conducted.
(e)
Schedule 5.11(e) sets forth a complete and accurate list of
all Contracts (i) to which any of the Sellers is a party and relating to
the
conduct and operation of the Business and the Purchased Assets (A) granting
any
Intellectual Property License, (B) containing a covenant not to compete
or
otherwise limiting its ability to (x) exploit fully any of the Purchased
Intellectual Property or (y) conduct the Business in any market or geographical
area or with any Person or (ii) to which any of the Sellers is a party
and
relating to the conduct and operation of the Business and the Purchased
Assets
containing an agreement to indemnify any other Person against any claim
of
infringement, unauthorized use, misappropriation, dilution or violation
of
Intellectual Property.
(f)
Sellers have taken adequate security measures to protect
the
secrecy, confidentiality and value of all the Trade Secrets included in
the
Purchased Intellectual Property and any other non-public, proprietary
information included in the Purchased Technology, which measures are reasonable
in the industry in which the Business operates.
(g)
To the Knowledge of Sellers, no Person is infringing, violating,
misusing or misappropriating any Purchased Intellectual Property, and no
such
claims have been made against any Person by any of the Sellers.
(a)
Schedule 5.12(a) sets forth, by reference to the applicable
subsection of this Section 5.12(a), all of the following Contracts
relating to the conduct and operation of the Business to which any of the
Sellers is a party or by which the Business or any of the Purchased Assets
is
bound:
(i)
Contracts with any current or former officer, director,
stockholder, Employee (including any labor union or association representing
any
Employee) or Affiliate of any of the Sellers, including any management
service, employment, consulting or other similar type of contract or
agreement;
(ii)
Contracts for the sale of any of the assets of Sellers other
than
in the Ordinary Course of Business or for the grant to any Person of any
preferential rights to purchase any such Seller’s assets;
(iii)
Contracts for joint ventures, strategic alliances, partnerships,
licensing arrangements, or sharing of profits or proprietary information;
(iv)
Contracts containing covenants of a Seller not to compete
in any
line of business or with any Person in any geographical area or not to
solicit
or hire any Person with respect to employment or covenants of any other
Person
not to compete with any Seller in any line of business or in any geographical
area or not to solicit or hire any Person with respect to employment;
(v)
Contracts relating to the acquisition (by merger, purchase
of
stock or assets or otherwise) by any Seller of any operating business or
material assets or the capital stock of any other Person;
(vi)
Contracts relating to the incurrence, assumption or guarantee
of
any Indebtedness or imposing a Lien on any of the assets, including indentures,
guarantees, loan or credit agreements, sale and leaseback agreements, purchase
money obligations incurred in connection with the acquisition of property,
mortgages, pledge agreements, security agreements, or conditional sale
or title
retention agreements;
(vii)
all Contracts providing for payments by or to any of the
Sellers
in excess of $10,000 in any fiscal year or $50,000 in the aggregate during
the
term thereof;
(viii)
all Contracts (or group of related Contracts) requiring
performance by any party for a period of one year or more or requiring
any
Seller to purchase or sell a stated portion of its requirements or outputs;
(ix)
Contracts under which any Seller has made advances or loans
to any
other Person (other than in respect of account trade payables arising in
the
Ordinary Course of Business);
(x)
outstanding Contracts of guaranty, surety or indemnification,
direct or indirect, by any Seller; and
(xi)
Contracts otherwise material to the Business.
(b)
Each of the Purchased Contracts is in full force and effect
and is
the legal, valid and binding obligation of the Sellers (either individually
or
collectively) and of the other parties thereto, enforceable against such
Sellers
in accordance with its terms and, upon consummation of the transactions
contemplated by this Agreement, shall, except as otherwise stated in
Schedule 5.12(b), continue in full force and effect without penalty or
other adverse consequence. None of
the Sellers is in default under any Purchased Contract, nor, to the Knowledge
of
Sellers, is any other party to any Purchased Contract in breach of or default
thereunder, and no event has occurred that with the lapse of time or the
giving
of notice or both would constitute a breach or default by any of the Sellers
or
any other party thereunder. No
party to any of the Purchased Contracts has exercised any termination rights
with respect thereto, and no such party has given notice of any significant
dispute with respect to any Purchased Contract. Sellers have, and will transfer
to
Purchaser at the Closing, good and valid title to the Purchased Contracts,
free
and clear of all Liens other than Permitted Exceptions.
(a)
Schedule 5.13(a) sets forth a complete and correct list of:
(i) all “employee
benefit plans”, as
defined in Section 3(3) of ERISA, and all other employee benefit
arrangements or payroll practices, including bonus plans, consulting or
other
compensation agreements, incentive, equity or equity-based compensation,
or
deferred compensation arrangements, stock purchase, severance pay, sick
leave,
vacation pay, salary continuation, disability, hospitalization, medical
insurance, life insurance, scholarship programs maintained by any of the
Sellers
or to which any of the Sellers contributed or is obligated to contribute
thereunder for Employees or Former Employees (the “Employee Benefit Plans”), and
(ii) all “employee pension
plans”, as defined in Section 3(2) of ERISA, subject to
Title IV of ERISA or section 412 of the Code, maintained by any of the
Sellers and any trade or business (whether or not incorporated) which are
or
have ever been under common control, or which are or have ever been treated
as a
single employer, with any of the Sellers under Sections 414(b), (c), (m) or
(o) of the Code (“ERISA
Affiliate”) or to which any of the Sellers and any ERISA Affiliate
contributed or has ever been obligated to contribute thereunder (the “ERISA Affiliate Plans”).
Schedule 5.13(a)
separately
sets forth each Employee Benefit Plan or ERISA Affiliate Plan which is
a
multiemployer plan as defined in Section 3(37) of ERISA (“Multiemployer Plans”), or has
been subject to Sections 4063 or 4064 of ERISA (“Multiple Employer Plans”).
(b)
Each of the Employee Benefit Plans and ERISA Affiliate Plans
intended to qualify under section 401 of the Code so qualify and the trusts
maintained thereto are exempt from federal income taxation under
section 501 of the Code, and, except as disclosed on
Schedule 5.13(b), nothing has occurred with respect to the operation
of any such plan which could cause the loss of such qualification or exemption
or the imposition of any liability, penalty or tax under ERISA or the Code.
(c)
All contributions and premiums required by Law or by the
terms of
any Employee Benefit Plan or ERISA Affiliate Plan or any agreement relating
thereto have been timely made (without regard to any waivers granted with
respect thereto) to any funds or trusts established thereunder or in connection
therewith, and no accumulated funding deficiencies exist in any of such
plans
subject to section 412 of the Code, and all contributions for any period
ending on or before the Closing Date which are not yet due will have been
paid
or accrued on or prior to the Closing Date.
(d)
The benefit liabilities, as defined in Section 4001(a)(16) of
ERISA, of each of the Employee Benefit Plans and ERISA Affiliate Plans
subject
to Title IV of ERISA using the actuarial assumptions that would be used by
the Pension Benefit Guaranty Corporation in the event it terminated each
such
plan, do not exceed the fair market value of the assets of each such plan. The liabilities of each Employee
Benefit
Plan that has been terminated or otherwise wound up have been fully discharged
in full compliance with applicable Law.
(e)
There has been no “reportable event” as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to any
of the
Employee Benefit Plans or ERISA Affiliate Plans subject to Title IV of
ERISA which would require the giving of notice, or any event requiring
notice to
be provided under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(f)
There are no pending Legal Proceedings which have been asserted
or
instituted against any of the Employee Benefit Plans or ERISA Affiliate
Plans,
the assets of any such plans or the Business, or the plan administrator
or any
fiduciary of the Employee Benefit Plans or ERISA Affiliate Plans with respect
to
the operation of such plans (other than routine, uncontested benefit claims),
and there are no facts or circumstances which could form the basis for
any such
Legal Proceeding.
(g)
Each of the Employee Benefit Plans and ERISA Affiliate Plans
has
been maintained, in all material respects, in accordance with its terms
and all
provisions of applicable Law. All
amendments and actions required to bring each of the Employee Benefit Plans
and
ERISA Affiliate Plans into conformity in all material respects with all
of the
applicable provisions of ERISA and other applicable Laws have been made
or taken
except to the extent that such amendments or actions are not required by
law to
be made or taken until a date after the Closing Date and are disclosed
on
Schedule 5.13(g).
(h)
Neither the execution and delivery of this Agreement nor
the
consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any Employee; (ii) increase any benefits otherwise
payable under any Employee Benefit Plan or ERISA Affiliate Plan; or
(iii) result in the acceleration of the time of payment or vesting of any
such benefits.
(i)
None of the Sellers is a party to any contract, plan or commitment
to create any additional Employee Benefit Plan or ERISA Affiliate Plan,
or to
modify any existing Employee Benefit Plan or ERISA Affiliate Plan.
(j)
No stock or other security issued by any of the Sellers forms
or
has formed a material part of the assets of any Employee Benefit Plan or
ERISA
Affiliate Plan.
(k)
Any individual who performs services for any of the Sellers
(other
than through a contract with an organization other than such individual)
and who
is not treated as an employee for federal income tax purposes by any Seller
is
not an employee for such purposes.
5.14
Labor.
(a)
Except as set forth on Schedule 5.14(a), no Employees
are represented by any labor organization and there are no labor or collective
bargaining agreements which pertain to the Employees. No labor organization or group
of
Employees has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Knowledge of Sellers, threatened to be brought
or
filed, with the National Labor Relations Board or other labor relations
tribunal. There is no organizing
activity involving any of the Sellers pending or, to the Knowledge of Sellers,
threatened by any labor organization or group of Employees.
(b)
There are no (i) strikes, work stoppages, slowdowns, lockouts
or
arbitrations or (ii) material grievances or other labor disputes pending
or, to the Knowledge of Sellers, threatened against or involving any of
the
Sellers involving any Employee.
There are no unfair labor practice
charges, grievances or complaints
pending or, to the Knowledge of Sellers, threatened by or on behalf of
any
Employee or Former Employee.
(c)
Each of the Sellers is in compliance, in respect of the conduct
and operation of the Business and the Purchased Assets, with all Laws relating
to the employment of labor, including all such Laws relating to wages,
hours,
WARN and any similar state or local “mass layoff” or “plant closing” Law,
collective bargaining, discrimination, civil rights, safety and health,
workers’
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except for immaterial non-compliance.
5.15
Litigation.
Except as set forth in Schedule 5.15, there is no material
Legal Proceeding pending or, to the Knowledge of Sellers, threatened against
any
of the Sellers (or to the Knowledge of Sellers, pending or threatened,
against
any of the officers or directors of any Seller or Employees with respect
to
their business activities on behalf of the Business), or to which any Seller
is
otherwise a party, before any Governmental Body and relating to the conduct
and
operation of the Business and the Purchased Assets. Except as set forth on Schedule
5.15, no Seller is subject to any Order or in breach or violation of any
Order relating to or applying to the Business or any Purchased Assets (or
by
which they are bound). Except as
set forth on Schedule 5.15, no Seller is engaged in any legal action to
recover monies due it or for damages sustained by it in the conduct and
operation of the Business or any Purchased Assets. There are no Legal Proceedings
pending
or, to the Knowledge of Sellers, threatened against any Seller or to which
any
Seller is otherwise a party relating to this Agreement or any Seller Document
or
the transactions contemplated hereby or thereby.
(a)
Each of the Sellers is in compliance in all material respects
with
all Laws applicable to the operations or assets of the Business, including
the
Purchased Assets. No Seller has
received any written or other notice of or been charged with the violation
of
any Laws relating to or applying to the Business or any Purchased Assets
(or by
which they are bound). To the
Knowledge of Sellers, no Seller is under investigation with respect to
the
violation of any Laws relating to or applying to the Business or any Purchased
Assets (or by which they are bound) and there are no facts or circumstances
which could form the basis for any such violation. None of the Sellers or, to the
Knowledge
of Sellers, any director, officer, employee, or other Person associated
with or
acting on behalf of the Business or the Purchased Assets, has directly
or
indirectly made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property or services, in violation of any Law.
(b)
Schedule 5.16(b) contains a list of all Permits which
are required for the operation of the Business as presently conducted and
as
presently intended to be conducted (“Seller Permits”), other than
those the failure of which to possess is immaterial. IFS and LWR currently have all
Permits
which are required for the operation of the Business as presently conducted
and
as presently intended to be conducted, other than those the failure of
which to
possess is immaterial. No Seller is
in default or violation, and no event has occurred which, with notice or
the
lapse of time or both, would constitute a default or violation, in any
material
respect of any term, condition or provision of any Seller Permit and, to
the
Knowledge of Sellers, there are no facts or circumstances which could form
the
basis for any such default or violation.
There are no Legal Proceedings
pending or, to the Knowledge of Sellers,
threatened, relating to the suspension, revocation or modification of any
of the
Seller Permits. Except as otherwise
set forth on Schedule 5.16(b), none of the Seller Permits will be
impaired or in any way affected by the consummation of the transactions
contemplated by this Agreement.
5.17
Environmental Matters.
Except as set forth on Schedule 5.17 hereto:
(a)
the operations of the Sellers with respect to the Business,
are
and have been in material compliance with all applicable Environmental
Laws,
which compliance includes obtaining, maintaining in good standing and complying
with all Environmental Permits necessary to operate the Business and no
action
or proceeding is pending or, to the Knowledge of Sellers, threatened to
revoke,
modify or terminate any such Environmental Permit, and, to the Knowledge
of the
Sellers, no facts, circumstances or conditions currently exist that could
adversely affect such continued compliance with Environmental Laws and
Environmental Permits or require currently unbudgeted capital expenditures
to
achieve or maintain such continued compliance with Environmental Laws and
Environmental Permits;
(b)
with respect to the Business, no Seller is the subject of
any
outstanding written order or Contract with any Governmental Body or Person
respecting (i) Environmental Laws, (ii) Remedial Action or
(iii) any Release or threatened Release of a Hazardous Material;
(c)
to the Knowledge of Sellers, no facts, circumstances or conditions
exist with respect to the Business or any property currently or formerly
owned,
operated or leased by any of the Sellers or any property to which any of
the
Sellers arranged for the disposal or treatment of Hazardous Materials that
could
reasonably be expected to result in the Business incurring unbudgeted
Environmental Costs or Liabilities;
(d)
to the Knowledge of Sellers, there are no investigations
of
previously owned, operated or leased property of any Seller or the Business
pending or threatened which could lead to the imposition of any
Environmental Costs or Liabilities or Liens under Environmental Law;
(e)
there is not located at any of the Seller Properties, or
at any
property previously owned, operated or leased by any Seller, any
(i) underground storage tanks, (ii) landfill, (iii) surface
impoundment, (iv) asbestos-containing material or (v) equipment
containing polychlorinated biphenyls; and
(f)
Sellers have provided to Purchaser all environmentally related
audits, studies, reports, analyses and results of investigations that have
been
performed with respect to any currently or previously owned, leased or
operated
properties of the Business.
5.18
Insurance.
IFS and LWR have insurance policies in full force and effect (a)
for such
amounts as are sufficient for all requirements of Law and all Contracts
to which
IFS or LWR (as applicable) is a party or by which it is bound with respect
to
the conduct and operation of the Business and the Purchased Assets and
(b) which
are in such amounts, with such deductibles and against such risks and losses,
as
are reasonable for the conduct and operation of the Business and the Purchased
Assets. Set forth in Schedule
5.18 is a list of all insurance policies and all fidelity bonds held by
or
applicable to any Seller relating to the conduct or operation of the Business
or
the Purchased Assets, setting forth, in respect of each such policy, the
policy
name, policy number, carrier, term, type and amount of coverage and annual
premium, whether the policies may be terminated upon consummation of the
transactions contemplated hereby and if and to what extent events being
notified
to the insurer after the Closing Date are generally excluded from the scope
of
the respective policy. Excluding
insurance policies that have expired and been replaced in the Ordinary
Course of
Business, no insurance policy relating to the operation of the Business
or the
Purchased Assets has been cancelled within the last two years and, to the
Knowledge of Sellers, no threat has been made to cancel any insurance policy
relating to the operation of the Business or the Purchased Assets during
such
period.
5.19
Inventories.
The inventories of the Business are in good and marketable condition,
and
are saleable in the ordinary course of business. IFS and LWR have valid title to
all of
the Business’s inventories free and clear of Liens other than Permitted
Exceptions. The inventories of the
Business constitute sufficient quantities for the normal operation of the
Business in the Ordinary Course of Business.
(a)
All accounts and notes receivable included in the Purchased
Assets
have arisen from bona fide transactions in the Ordinary Course of Business
consistent with past practice and are payable on ordinary trade terms,
and are
good and collectible at the recorded amounts thereof. None of the accounts or the notes
receivable included in the Purchased Assets (i) are subject to any setoffs
or
counterclaims or (ii) represent obligations for goods sold on consignment,
on
approval or on sale-or-return basis or subject to any other repurchase
or return
arrangement.
(b)
All accounts payable included in the Assumed Liabilities
are the
result of bona fide transactions arising in the Ordinary Course of Business
and
are not yet due and payable.
5.21
Related Party Transactions.
Except
as set forth on Schedule
5.21, no Employee, officer, director, shareholder, partner or member of
any
Seller, any member of his or her immediate family or any of their respective
Affiliates (“Related
Persons”) (i) owes any amount to the Business nor does the Business owe
any amount to, or has any Seller on behalf of the Business committed to
make any
loan or extend or guarantee credit to or for the benefit of, any Related
Person,
(ii) is involved in any business arrangement or other relationship with
any
Seller in relating to the conduct or operation of the Business or the Purchased
Assets, (iii) owns any property or right, tangible or intangible, that
is used
by Seller in the conduct or operation of the Business or the Purchased
Assets,
(iv) has any claim or cause of action against the Business or any Seller
relating to the conduct or operation of the Business or any of the Purchased
Assets or (v) owns any direct or indirect interest of any kind in, or controls
or is a director, officer, employee or partner of, or consultant to, or
lender
to or borrower from or has the right to participate in the profits of, any
Person which is a competitor, supplier, customer, creditor or debtor of
the
Business or any Seller relating to the conduct or operation of the Business
or
any of the Purchased Assets.
5.22
Customers and Suppliers.
Since
the Balance Sheet Date, no material
customer or supplier of the Business has terminated its relationship with
the
Business or materially reduced or changed the pricing or other terms of
its
business with the Business and, to the Knowledge of Sellers, no material
customer or supplier of the Business has notified any Seller that it intends
to
terminate or materially reduce or change the pricing or other terms of
its
business with the Business.
5.23
Product Warranty; Product Liability.
None
of the Sellers has any liability
for replacement or repair of any product manufactured, sold or delivered
by a
Seller or the Business or other damages in connection therewith or any
other
customer or product obligations not reserved against on the Balance Sheet. None of the Sellers has in the
conduct
or operation of the Business or any of the Purchased Assets sold any products
or
delivered any services that included a warranty for a period of longer
than one
(1) year. None of the Sellers has
any material liability arising out of any injury to individuals or property
as a
result of the ownership, possession, or use of any product designed,
manufactured, assembled, repaired, maintained, delivered, sold or installed,
or
services rendered, by or on behalf of the Business. None of the Sellers has committed
any
act or failed to commit any act which would result in, and there has been
no
occurrence which would give rise to or form the basis of, any product liability
or liability for breach of warranty (whether covered by insurance or not)
on the
part of Purchaser with respect to products designed, manufactured, assembled,
repaired, maintained, delivered, sold or installed or services rendered
by or on
behalf of a Seller or the Business.
5.24
Banks.
Schedule 5.24 contains a complete and correct list of (a) the
names and locations of all banks in which any of the Sellers has accounts
or
safe deposit boxes relating to the conduct and operation of the Business,
(b)
the account numbers of all such accounts and (c) the names of all persons
authorized to draw
thereon or to have access thereto.
Except as set forth on Schedule 5.24, no person holds a power
of
attorney to act on behalf of any of the Sellers in respect of the conduct
or
operation of the Business.
Article
VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents
and warrants to Sellers that:
6.1
Organization and Good Standing.
Purchaser is a corporation duly organized, validly existing and
in good
standing under the laws of the State of Texas.
6.2
Authorization of Agreement.
Purchaser has full corporate power and authority to execute and
deliver
this Agreement and each other agreement, document, instrument or certificate
contemplated by this Agreement or to be executed by Purchaser in connection
with
the consummation of the transactions contemplated hereby and thereby (the
“Purchaser Documents”), and to
consummate the transactions contemplated hereby and thereby. The execution, delivery and performance
by Purchaser of this Agreement and each Purchaser Document have been duly
authorized by all necessary corporate action on behalf of Purchaser. This Agreement has been, and each
Purchaser Document will be at or prior to the Closing, duly executed and
delivered by Purchaser and (assuming the due authorization, execution and
delivery by the other parties hereto and thereto) this Agreement constitutes,
and each Purchaser Document when so executed and delivered will constitute,
the
legal, valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms.
(a)
None of the execution and delivery by Purchaser of this Agreement
and of the Purchaser Documents, the consummation of the transactions
contemplated hereby or thereby, or the compliance by Purchaser with any
of the
provisions hereof or thereof will conflict with, or result in violation
of or
default (with or without notice or lapse of time, or both) under, or give
rise
to a right of termination or cancellation under any provision of (i) the
certificate of incorporation and by-laws of Purchaser; (ii) any Contract or
Permit to which Purchaser is a party or by which any of the properties
or assets
of Purchaser are bound; (iii) any Order of any Governmental Body applicable
to
Purchaser or by which any of the properties or assets of Purchaser are
bound; or
(iv) any applicable Law.
(b)
No consent, waiver, approval, Order, Permit or authorization
of,
or declaration or filing with, or notification to, any Person or Governmental
Body is required on the part of Purchaser in connection with the execution
and
delivery of this Agreement or the Purchaser Documents or the compliance
by
Purchaser with any of the provisions hereof or thereof, except for such
consents, waivers, approvals, Orders, Permits, authorizations, declarations,
filings or notifications that, if not obtained, made or given, would not,
individually or in the aggregate, have a material adverse effect on the
ability
of Purchaser to consummate the transactions contemplated by this Agreement.
6.4
Litigation.
There are no Legal Proceedings pending or, to the knowledge of Purchaser,
threatened that are reasonably likely to prohibit or restrain the ability
of
Purchaser to enter into this Agreement or consummate the transactions
contemplated hereby.
7.1
Access to Information.
Sellers shall afford to Purchaser and its accountants, counsel and
other
representatives full access, during normal business hours upon reasonable
notice
throughout the period prior to the Closing, to its properties and facilities
(including all real property and the buildings, structures, fixtures,
appurtenances and improvements erected, attached or located thereon), books,
financial information (including working papers and data in the possession
of
Sellers or the Business’s independent public accountants and internal reports),
Contracts, commitments and records and, during such period, shall furnish
promptly such information concerning the Business, properties and personnel
of
Sellers as Purchaser shall reasonably request; provided, however,
such investigation shall not unreasonably disrupt the Business’s
operations. Prior to the Closing,
Sellers shall generally keep Purchaser informed as to all material matters
involving the conduct and operations of the Business. Sellers shall authorize and direct
the
appropriate directors, managers and employees of Sellers to discuss matters
involving the operations and business of the Business. Notwithstanding the foregoing,
Sellers
shall not be required to disclose any information if such disclosure would
contravene any applicable Law.
(a)
Except as otherwise expressly provided by this Agreement
or with
the prior written consent of Purchaser, between the date hereof and the
Closing,
Sellers shall:
(i)
conduct the Business only in the Ordinary Course of Business;
(ii)
use their respective reasonable best efforts to (A) preserve
the
present business operations, organization (including Employees) and goodwill
of
the Business (including, without limitation, all Purchased Intellectual
Property) and (B) preserve the present relationships with Persons having
business dealings with the Business (including customers and suppliers);
(iii)
maintain (A) all of the assets and properties of, or used
by,
Sellers in the Business in their current condition, ordinary wear and tear
excepted, and (B) insurance upon all of the assets and properties of the
Business in such amounts and of such kinds comparable to that in effect
on the
date of this Agreement;
(iv)
(A) maintain the books, accounts and records of the Business
in
the Ordinary Course of Business, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and without
discounting or accelerating payment of such accounts, and (C) comply with
all contractual and other obligations of Sellers in respect of the conduct
and operation of the Business and the Purchased Assets; and
(v)
comply in all material respects with all applicable Laws.
(b)
Without limiting the generality of the foregoing, except
as
otherwise expressly provided by this Agreement or with the prior written
consent
of Purchaser, Sellers shall not:
(i)
amend the certificate of incorporation or by-laws (as applicable)
of any Seller;
(ii)
take any action which would adversely affect the ability
of the
parties to consummate the transactions contemplated by this Agreement;
(iii)
change or modify its credit, collection or payment policies,
procedures or practices, including acceleration of collections or receivables
(whether or not past due);
(iv)
terminate, amend, restate, supplement or waive any rights
under
any Permit;
(v)
enter into any transaction or enter into, modify or renew
any
Contract which by reason of its size or otherwise is not in the Ordinary
Course
of Business or enter into any Contract, understanding or commitment that
restrains, restricts, limits or impedes the ability of the Business, or
the
ability of Purchaser, to compete with or conduct any business or line of
business in any geographic area or solicit the employment of any persons;
(vi)
modify the terms of any Indebtedness or other Liability of
the
Business;
(vii)
enter into or agree to enter into any merger or consolidation
with
any other Person; or
(viii)
agree to do anything (A) prohibited by this
Section 7.2, (B) that would make any of the representations
and
warranties of Sellers in the last sentence of Section 5.7 untrue or
incorrect in any respect (or would be required to be disclosed in respect
of
such representations and warranties on Schedule 5.7) or would make any of
the other representations and warranties of Sellers in this Agreement or
any of
the Seller Documents untrue or incorrect in any material respect or could
result
in any of the conditions to the Closing not being satisfied or (C) that
would be
reasonably expected to have a Material Adverse Effect.
7.3
Consents.
Each of the Sellers and the Owners shall use his, her or its respective
reasonable efforts to obtain at the earliest practicable date all consents,
waivers, approvals and notices are required
to consummate, or in
connection with, the transactions contemplated by this Agreement, including
the
consents, waivers, approvals and notices referred to in
Section 5.3(b) hereof.
All such consents, waivers,
approvals and notices shall be in form and
substance satisfactory to Purchaser.
7.4
Further Assurances.
Each of Sellers, the Owners and Purchaser shall use his, her or
its (as
the case may be) commercially reasonable efforts to (i) take, or cause
to be
taken, all actions necessary or appropriate to consummate the transactions
contemplated by this Agreement and (ii) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations
to
consummate the transactions contemplated by this Agreement.
7.5
Exclusivity.
Each
of the Owners and Sellers shall
not, and shall not permit any of their respective Affiliates, directors,
officers, Employees, representatives or agents of (collectively, the “Representatives”) to, directly
or indirectly, (i) discuss, encourage, negotiate, undertake, initiate,
authorize, recommend, propose or enter into, either as the proposed surviving,
merged, acquiring or acquired corporation, any transaction involving a
merger,
consolidation, business combination, purchase or disposition of any material
amount of the Purchased Assets or any capital stock of any of the Sellers
other
than the transactions contemplated by this Agreement (an “Acquisition Transaction”),
(ii) facilitate, encourage, solicit or initiate discussions, negotiations
or submissions of proposals or offers in respect of an Acquisition Transaction,
(iii) furnish or cause to be furnished, to any Person, any information
concerning the business, operations, properties or assets of any of the
Sellers
in connection with an Acquisition Transaction, or (iv) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage,
any
effort or attempt by any other Person to do or seek any of the foregoing. Each of the Sellers and Owners
agrees
not to release any third party from the confidentiality and standstill
provisions of any agreement to which he, she or it (as the case may be)
is a
party or by which his, her or its (as the case may be) assets and properties
are
bound.
(a)
For a period from the date hereof until the fifth (5th)
anniversary of the Closing Date, each of the Sellers and Owners shall not
and
shall cause their respective Affiliates not to, directly or indirectly,
own,
manage, operate, control, be employed by, engage in, or participate in
the
ownership, management, operation, control or engagement of, any business,
whether in corporate, proprietorship or partnership form or otherwise,
engaged
in the business of providing safety services and related products or the
rental
of safety equipment to the oil and gas drilling industry within the States
of
New Mexico, Colorado, Wyoming and/or Texas or in any business that otherwise
competes with the Business (a “Restricted Business”);
provided, however,
that the restrictions contained in this
Section 7.6(a) shall neither restrict the acquisition by any of the
Sellers or Owners, directly or indirectly, of less than three percent (3%)
of
the outstanding capital stock of any publicly traded company engaged in a
Restricted Business nor restrict the Owners or any Employee from working
for, or
in association with, Purchaser or any of its Affiliates. The parties hereto specifically
acknowledge and agree that the remedy at law for any breach of the foregoing
will be inadequate and that Purchaser, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive
relief
without the necessity of proving actual damage or posting any bond
whatsoever.
(b)
For a period from the date hereof to the fifth (5th)
anniversary of the Closing Date, each of the Sellers and Owners shall not,
and
shall cause their respective directors, officers, employees and Affiliates
not
to: (i) cause, solicit, induce
or encourage any Employee or other employee of the Business or Purchaser
to
leave such employment; or (ii) cause, induce or encourage any material
actual or prospective client, customer, supplier or licensor of the Business
(including any existing or former customer of any Seller and any Person
that
becomes a client or customer of the Business after the Closing) or any
other
Person who has a material business relationship with the Business or the
Purchaser, to terminate or modify any such actual or prospective relationship.
(c)
From and after the date hereof, each of the Sellers and Owners
shall not, and shall cause their respective Affiliates and their respective
officers, directors and employees not to, directly or indirectly, disclose,
reveal, divulge or communicate to any Person other than authorized officers,
directors and employees of Purchaser or use or otherwise exploit for its
own
benefit or for the benefit of anyone other than the Purchaser, any Confidential
Information (as defined below).
Each of the Sellers and Owners
and their respective officers, directors
and Affiliates shall not have any obligation to keep confidential any
Confidential Information if and to the extent disclosure thereof is specifically
required by law; provided, however, that in the event disclosure
is required by applicable Law, such Seller, Owner or officer, director
or
Affiliate (as the case may be, whomever such disclosure obligation is imposed
upon) shall, to the extent reasonably possible, provide Purchaser with
prompt
notice of such requirement prior to making any disclosure so that Purchaser
may
seek an appropriate protective order.
For purposes of this Section 7.6(c), “Confidential
Information” means
any information with respect to the Business, including methods of operation,
customers, customer lists, products, prices, fees, costs, Technology,
inventions, Trade Secrets, know-how, Software, marketing methods, plans,
personnel, suppliers, competitors, markets or other specialized information
or
proprietary matters. Confidential
Information does not include, and there shall be no obligation hereunder
with
respect to, information that (i) is generally available to the public on
the
date of this Agreement or (ii) becomes generally available to the public
other
than as a result of a disclosure not otherwise permissible thereunder.
(d)
The covenants and undertakings contained in this
Section 7.6 relate to matters which are of a special, unique
and
extraordinary character and a violation of any of the terms of this
Section 7.6 will cause irreparable injury to the Business and
Purchaser, the amount of which will be impossible to estimate or determine
and
which cannot be adequately compensated.
Accordingly, the remedy at law
for any breach of this Section 7.6
will be inadequate. Therefore,
Purchaser will be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction in the event
of any
breach of this Section 7.6 without the necessity of proving actual
damages or posting any bond whatsover.
The rights and remedies provided
by this Section 7.6 are
cumulative and in addition to any other rights and remedies which Purchaser
may
have hereunder or at law or in equity.
In the event that Purchaser were
to seek damages for any breach of this
Section 7.6, the portion of the Purchase Price which is allocated by
the parties to the foregoing covenant shall not be considered a measure
or limit
on such damages.
(e)
The parties hereto agree that, if any court of competent
jurisdiction in a final nonappealable judgment determines that a specified
time
period, a specified geographical area, a specified business limitation
or any
other relevant feature of this Section 7.6 is unreasonable,
arbitrary or against public policy, then a lesser time period, geographical
area, business limitation or other relevant feature which is determined
by such
court to be reasonable, not arbitrary and not against public policy may
be
enforced against the applicable party.
(a)
Each of the Sellers, Owners and Purchaser agree to preserve
and
keep the records held by it or their respective Affiliates relating to
the
Business for a period of seven (7) years from the Closing Date and shall
make
such records and personnel available to the other as may be reasonably
required
by such party in connection with, among other things, any insurance claims
by,
legal proceedings against or governmental investigations of any Seller,
Owner or
Purchaser or any of their respective Affiliates or in order to enable a
Seller,
Owner or Purchaser to comply with its respective obligations under this
Agreement and each other agreement, document or instrument contemplated
hereby
or thereby; provided, however, that (i) any such access shall be
had or done in such a manner as to not unreasonably interfere with the
normal
conduct of the Business or the business of the Purchaser and its Affiliates
or
the Sellers, Owners and their respective Affiliates (as the case may be),
(ii)
neither Purchaser nor any Seller or Owner shall be required to provide
access to
any confidential record or records, the disclosure of which would violate
any
governmental statute or regulation, and (iii) neither Purchaser nor any
Seller
or Owner shall be required to provide access to any confidential record
or
records, the disclosure of which would cause it or any of its respective
Affiliates to waive its attorney-client privilege or attorney work product
privilege; provided, further, that the restrictions set forth in
(i)-(iii) above shall not be used to limit access to records and documents
related to the obligation and rights under Sections 3.3 and 3.4
except to the extent that appropriate confidentiality arrangements between
the
parties cannot be made without waiving legal privileges. In the event a Seller or Owner
wishes to
destroy (or permit to be destroyed) such records after such seven-year
period,
such Seller or Owner shall first give ninety (90) days prior written notice
to
Purchaser and Purchaser shall have the right at its option and expense,
upon
prior written notice given to such Seller or Owner party within that ninety-day
period, to take possession of the records within 180 days after the date
of such
notice.
(b)
In addition (and not in limitation) to subsection (a) above,
each
of the Sellers shall, if requested by Purchaser and at Purchaser’s expense,
reasonably cooperate and assist in preparing such financial statements
of the
Business that Purchaser may reasonably require by furnishing the necessary
information to Purchaser’s financial officers and accountant in order to permit
Purchaser to prepare such financial statements in connection with the filing
by
Purchaser of a Current Report on Form 8-K (if necessary) with the SEC in
accordance with the Exchange Act in connection with the transactions
contemplated hereby, and to comply with any other financial disclosure
requirements with respect to the Business applicable to Purchaser under
the
Exchange Act and the Securities Act.
7.8
Publicity.
None
of the Sellers, Owners or Purchaser
shall issue any press release or public announcement concerning this Agreement
or the transactions contemplated hereby without obtaining the prior written
approval of the other parties hereto, which approval will not be unreasonably
withheld or delayed, unless, in the sole judgment of Purchaser, Sellers
or
Owners, as applicable, disclosure is otherwise required by applicable Law
(including securities Law) or by the applicable rules of any stock exchange
on
which Purchaser, a Seller or a Owner lists securities, providedthat, to the extent required by applicable Law, the party intending
to
make such release shall use its commercially reasonable efforts consistent
with
such applicable Law to consult with the other party with respect to the
timing
and content thereof. Each of the
Sellers, Owners and Purchaser agrees that the terms of this Agreement shall
not
be disclosed or otherwise made available to the public and that copies
of this
Agreement shall not be publicly filed or otherwise made available to the
public,
except where such disclosure, availability or filing is required by applicable
Law.
7.9
Use of Name.
The Sellers hereby agree that upon the Closing, Purchaser shall
have the
sole right (as between Sellers and any and all of their respective Affiliates
(including, without limitation, the Owners), on the one hand, and Purchaser,
on
the other hand) to the use of the names “Indian Fire & Safety”, “Lone Wolf
Rental” or similar names, and any service marks, trademarks, trade names, d/b/a
names, fictitious names, identifying symbols, logos, emblems or signs containing
or comprising the foregoing, or otherwise used in the Business, including
any
name or xxxx confusingly similar thereto (collectively, the “Seller Marks”) and Sellers shall
not, and shall not permit any Affiliate to, use such name or any variation
or
simulation thereof. As soon as
legally practicable after, the Closing (but in any event within ten (10)
days
after the Closing Date), Sellers shall, and shall cause their respective
Affiliates to, remove any Seller Xxxx from its legal name by appropriate
legal
proceedings in the jurisdiction of its organization and in each jurisdiction
where such entity has registered to do business.
7.10
Notification of Certain Matters.
Each of the Sellers and the Owners, on the one hand, shall give
notice to
Purchaser and Purchaser, on the other hand, shall give notice to the Sellers
and
the Owners, as promptly as reasonably practicable upon becoming aware of
(a) any
fact, change, condition, circumstance, event, occurrence or non-occurrence
that
has caused or is reasonably likely to cause any representation or warranty
in
this Agreement made by it to be untrue or inaccurate in any respect at
any time
after the date hereof and prior to the Closing, (b) any material failure
on its
part to comply with or satisfy any covenant, condition or agreement to
be
complied with or satisfied by it hereunder or (c) the institution of or
the
threat of institution of any Legal Proceeding against Purchaser or any
of the
Sellers or Owners related to this Agreement or the transactions contemplated
hereby; provided that the delivery of any notice pursuant to this Section
7.10 shall not limit or otherwise affect the remedies available hereunder
to
the party receiving such notice, or the representations or warranties of,
or the
conditions to the obligations of, the parties hereto.
EMPLOYEES
AND EMPLOYEE BENEFITS
8.1
Employment.
Purchaser
shall offer employment (on an “at will basis”) to the Employees as of the
Closing (such individuals who accept such offer are referred to herein
as “Transferred Employees”).
A
list of the Employees and their
current hourly rates or salary is set forth on Schedule 8.1. No later than three (3)
Business Days
prior to the Closing Date, Sellers shall deliver an update to Schedule
8.1 setting forth a list of the Employees and their current hourly rates
or
salary as of the Closing Date, and Purchaser will be entitled to rely
definitively on the information presented in such update for purposes of
fulfillment of its obligations hereunder.
Purchaser shall not assume any
Liabilities or obligations of the Sellers
with respect to the Employees.
Nothing contained in this Section 8.1 is intended to confer
upon
any of the Employees any right to continued employment after evaluation
by
Purchaser of its employment needs after the Closing Date and Purchaser
shall have the right (on and after the Closing Date) to dismiss any or
all
Transferred Employees at any time, with or without cause, and to change
the
terms and conditions of their employment (including compensation and employee
benefits provided to them). Notwithstanding
any other provision of
this Agreement, the parties hereto do not intend to create any third-party
beneficiary rights respecting any of the Employees or Former Employees
as a
result of the provisions herein and specifically hereby negate any such
intention.
8.2
Employee Benefits.
(a)
Purchaser shall not be liable or obligated under any Employee
Benefit Plan or for any other employee benefits that may have been established
by the Sellers for the Employees prior to the Closing, and Sellers expressly
acknowledge that they have sole liability for all employee benefit costs
accrued
as of the Closing whether or not any or all of such employees become Transferred
Employees. Without limiting the
generality of the foregoing, Sellers acknowledge and agree that Purchaser
does
not assume the sponsorship of, the responsibility of contributions to,
or any
liabilities in connection with any Employee Benefit Plan maintained by
Sellers
for active employees, retirees, former employees, their beneficiaries or
any
other Person and any personnel policy, stock option plan, bonus plan or
arrangement, incentive award plan or arrangement, vacation policy, severance
pay
plan, policy or agreement, deferred compensation agreement arrangement,
executive compensation or supplemental income arrangement, consulting agreement,
employment agreement and each other employee benefit plan, agreement,
arrangement, program, practice or understanding.
(b)
With respect to Transferred Employees, Sellers will remain
responsible for medical expenses covered under the Employee Benefit Plans
(i)
actually incurred prior to the Closing Date or (ii) actually incurred with
respect to any hospitalization that began prior to the Closing Date until
such
hospitalization ends, and Purchaser will be responsible for all other medical
expenses incurred on or after the Closing Date to the extent covered under
its
plans without the application of any waiting period for coverage generally
applicable to newly hired employees.
Sellers shall provide medical coverage
to the Transferred Employees with
respect to any pre-existing medical conditions to the extent required by
applicable Law. To the fullest
extent permitted under their applicable policies of insurance, Sellers
shall
maintain health, hospitalization, life, travel and accident insurance coverage
for the Transferred Employees in effect for so long as Purchaser shall
request,
provided that the cost of such insurance coverage from and after the
Closing Date shall be borne by Purchaser.
Sellers shall cooperate with Purchaser
to provide continuity of such
insurance coverage to such Transferred Employees.
(c)
Sellers shall be exclusively responsible for complying with
COBRA
with respect to the Employees (including the Transferred Employees) and
their
qualified beneficiaries by reason of any such employees’ termination of
employment with the Sellers, and Purchaser shall not have any obligation
or
liability to provide rights under COBRA on account of any such termination
of
employment.
(d)
Sellers shall pay Transferred Employees their accrued and
unused
vacation, for all accrued and unused vacation through the Closing Date. Effective as of the Closing Date,
Sellers shall cause the tax‑qualified 401(k) plans in which Transferred
Employees were eligible to participate immediately prior to the Closing
Date to
fully vest such employees’ accrued benefit through the Closing Date
thereunder.
(e)
Purchaser will give credit for the Transferred Employee’s length
of service with the Sellers in determining such employees’ paid time off
(including vacation) under Purchaser’s plans and policies for such paid time
off. Purchaser will, in accordance
with and subject to applicable Laws, permit Transferred Employees to participate
under Purchaser’s Section 401(k) plan as soon as practicable after the Closing
Date (and in any event within ninety (90) days of service with Purchaser.
8.3
Reporting of Data.
Each of Purchaser,
Sellers and Owners (as the case may be) shall complete
and furnish to each other such other employee data as shall be reasonably
required from time to time for each party to perform and fulfill its obligations
under this Article VIII. In
addition to, and not in limitation of, the obligations under the immediately
preceding sentence, pursuant to the “Standard Procedure” provided in section 4
of Revenue Procedure 2004-53, 2004-34 IRB 320, (i) Purchaser, Sellers and
Owners (as the case may be) shall report on a predecessor/successor basis
as set
forth therein, (ii) Sellers will not be relieved from filing a Form W‑2
with respect to any Transferred Employees, and (iii) Purchaser will
undertake to file (or cause to be filed) a Form W‑2 for each such Transferred
Employee only with respect to the portion of the year during which such
Employees are employed by the Purchaser that includes the Closing Date,
excluding the portion of such year that such Employee was employed by
Sellers.
9.1
Conditions Precedent to Obligations of Purchaser.
The obligation of Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment, on or prior to the Closing
Date, of each of the
following conditions (any or all of which may be waived by Purchaser in
whole or
in part to the extent permitted by applicable Law):
(a)
the representations and warranties of the Sellers and the
Owners
set forth in this Agreement qualified as to materiality (including as to
any
Material Adverse Effect) shall be true and correct, and those not so qualified
shall be true and correct in all material respects, as of the date of this
Agreement and as of the Closing as though made at and as of the Closing,
except
to the extent such representations and warranties expressly relate to an
earlier
date (in which case such representations and warranties qualified as to
materiality (including as to any Material Adverse Effect) shall be true
and
correct, and those not so qualified shall be true and correct in all material
respects, on and as of such earlier date);
(b)
the Sellers and the Owners shall have performed and complied
in
all respects with all obligations and agreements required in this Agreement
to
be performed or complied with by them on or prior to the Closing Date,
and
Purchaser shall have received copies of such documents evidencing the
performance thereof as Purchaser may reasonably request;
(c)
Purchaser shall have received a certificate signed by each
Seller
and Owner or, as applicable, an authorized officer thereof, each in form
and
substance reasonably satisfactory to Purchaser, dated the Closing Date,
to the
effect that each of the conditions specified above in Sections 9.1(a) and
(b) have been satisfied in all respects;
(d)
no Legal Proceedings shall have been instituted or threatened
or
claim or demand made against any of the Sellers, Owners or Purchaser seeking
to
restrain or prohibit, or to obtain substantial damages with respect to,
the
consummation of the transactions contemplated hereby, and there shall not
be in
effect any Order by a Governmental Body of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby;
(e)
Sellers and Owners (as the case may be) shall have obtained
all
consents, approvals, waivers, orders or authorizations of, or registrations,
declarations, notifications or filings with, any Person or Governmental
Body
required (including those referred to in Section 5.3(b)) to be obtained
or made in connection with the execution and delivery of this Agreement
or the
performance of the transactions contemplated herein, in a form satisfactory
to
Purchaser and shall have delivered a copy thereof to Purchaser;
(f)
Purchaser shall have obtained the issuance, reissuance or
transfer
of all Permits (including Environmental Permits) required for Purchaser
to
conduct the operations of Business on and immediately following the Closing
Date;
(g)
Sellers shall have delivered, or caused to be delivered,
to
Purchaser a duly executed xxxx of sale in the form of Exhibit B
hereto;
(h)
Sellers shall have delivered, or caused to be delivered,
to
Purchaser a duly executed assignment and assumption agreement in the form
of
Exhibit C hereto and duly executed assignments of the registrations and
applications included in the Purchased Intellectual Property, in a form
reasonably acceptable to Purchaser and suitable for recording in the U.S.
Patent
and Trademark Office, U.S. Copyright Office or equivalent agency, as applicable,
and general assignments of all other Purchased Intellectual Property;
(i)
Sellers shall have delivered, or caused to be delivered,
to
Purchaser, a duly executed power of attorney in the form of Exhibit D
hereto;
(j)
Each of the respective lessors under the Closing Real Property
Leases shall have delivered, or caused to be delivered, to Purchaser respective
duly executed leases in the respective forms of Exhibits E-1 and
E-2 hereto;
(k)
Sellers shall have delivered, or caused to be delivered,
to
Purchaser each of (i) certified copies, as applicable, of (A) the resolutions
duly adopted by each Sellers’s (as applicable) board of directors (or
commensurate governing body) authorizing the execution, delivery and performance
of this Agreement and each of the other Seller Documents contemplated hereby
and
the consummation of the transactions contemplated hereby and thereby, and
(B)
the certificate of incorporation and the by-laws of IFS and comparable
organizational documents of LWR as in effect as of Closing, and (ii) good
standing certificates of each of IFS and LWR from their respective jurisdictions
of organization and each jurisdiction in which they are qualified to do
business, in each case dated no more than ten (10) Business Days prior
to the
Closing Date;
(l)
each of the employment agreements of Xxxxx Xxxxxxxx, Xxxxxxx
Xxxxxx, Xxxxx Xxxxxxxx and Xxxxx Xxxxxxxxxxxx with Purchaser, dated as
of the
date hereof to be effective upon the Closing Date, shall be in full force
and
effect and all of such persons shall be willing and able to perform in
accordance with such employment agreements; and
(m)
Sellers shall have delivered all instruments and documents
necessary to release any and all Liens on the Purchased Assets, including
appropriate UCC financing statement amendments (termination statements).
9.2
Conditions Precedent to Obligations of Sellers.
The obligations of Sellers and Owners to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to
or on
the Closing Date, of each of the following conditions (any or all of which
may
be waived by Sellers and Owners in whole or in part to the extent permitted
by
applicable Law):
(a)
the representations and warranties of Purchaser set forth
in this
Agreement qualified as to materiality shall be true and correct, and those
not
so qualified shall be true and correct in all material respects, as of
the date
of this Agreement and as of the Closing as though made at and as of the
Closing,
except to the extent such representations and warranties expressly relate
to an
earlier date (in which case such representations and warranties qualified
as to
materiality shall be true and correct, and those not so qualified shall
be true
and correct in all material respects, on and as of such earlier date);
(b)
Purchaser shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement
to be
performed or complied with by Purchaser on or prior to the Closing Date;
(c)
Sellers shall have received a certificate signed by an authorized
officer of Purchaser, in form and substance reasonably satisfactory to
Sellers,
dated the Closing Date, to the effect that each of the conditions specified
above in Sections 9.2(a) and (b) have been satisfied in all
respects;
(d)
there shall not be in effect any Order by a Governmental Body
of competent jurisdiction restraining, enjoining or otherwise prohibiting
the
consummation of the transactions contemplated hereby;
(e)
Purchaser shall have obtained or, as applicable, made any
consent,
approval, order or authorization of, or registration, declaration, notification
or filing with, any Person or Governmental Body required (including those
referred to in Section 6.3(b)) to be obtained or made by it in connection
with the execution and delivery of this Agreement or the consummation of
the
transactions contemplated hereby;
(f)
Purchasers shall have delivered, or caused to be delivered,
to
Executive (i) evidence of the wire transfer referred to in
Section 3.2 hereof and (ii) the duly executed Purchase Note;
(g)
Purchaser shall have delivered, or caused to be delivered,
to
Sellers a duly executed assignment and assumption agreement in the form
attached
hereto as Exhibit C hereto;
(h)
Purchaser shall have delivered, or caused to be delivered,
to the
respective lessors under the Closing Real Property Leases duly executed
leases
in the respective forms of Exhibits E-1 and E-2 hereto;
and
(i)
Purchaser shall have delivered, or caused to be delivered,
to
Sellers each of (i) a certification of a duly authorized officer of Purchaser
concerning the Purchaser’s board of directors adoption and authorization of the
execution, delivery and performance of this Agreement and each of the other
Purchaser Documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby, (ii) a certified copy of the articles
of
incorporation and the by-laws of Purchaser, and (iii) a good standing
certificate for Purchaser from its jurisdiction of organization dated no
more
than ten (10) Business Days prior to the Closing Date.
10.1
Survival of Representations and Warranties.
The representations and warranties of the parties contained in this
Agreement, any certificate delivered pursuant hereto or any Seller Document
or
Purchaser Document shall survive the Closing through and including the
first
(1st) anniversary of the
Closing Date; provided, however, that the representations and
warranties (a) of the Sellers and Owners (as the case may be) set forth
in
Sections 5.1 (organization and good standing), 5.2 (authorization
of agreement), and 5.6 (title to purchased assets; sufficiency) shall
survive the Closing indefinitely, (b) of the Sellers set forth in Sections
5.8 (taxes), and 5.17 (environmental matters) shall survive the
Closing until the expiration of the applicable statute of limitations,
and (c)
of Purchaser set forth in Sections 6.1 (organization and good standing)
and 6.2 (authorization of agreement) shall survive the Closing
indefinitely (in each case, the “Survival Period”);
provided, however,
that any obligations under Sections
10.2(a)(i) and 10.2(b)(i) shall not terminate with respect to any
Losses as to which the Person to be indemnified shall have given notice
to the
indemnifying party in accordance with Section 10.3(a) before the
termination of the applicable Survival Period.
10.2
Indemnification.
(a)
Subject to Sections 10.1 and 10.4 hereof, the
Sellers and Owners hereby agree, jointly and severally, to indemnify and
hold
Purchaser and its Affiliates and their respective directors, officers,
employees, shareholders, members, partners, agents, attorneys, representatives,
successors and assigns (collectively, the “Purchaser Indemnified Parties”)
harmless from and against, and pay to the applicable Purchaser Indemnified
Parties the amount of, any and all losses, liabilities, claims, obligations,
deficiencies, demands, judgments, damages (including incidental and
consequential damages), interest, fines, penalties, claims, suits, actions,
causes of action, assessments, awards, costs and expenses (including costs
of
investigation and defense and attorneys’ and other professionals’ fees), or any
diminution in value, whether or not involving a third party claim (individually,
a “Loss” and, collectively,
“Losses”):
(i)
based upon, attributable to or resulting from the failure
of any
of the representations or warranties made by Sellers or Owners in this
Agreement
or in any Seller Document to be true and correct in all respects at and
as of
the date hereof and at and as of the Closing Date;
(ii)
based upon, attributable to or resulting from the breach
of any
covenant or other agreement on the part of Sellers or Owners under this
Agreement or in any Seller Document;
(iii)
attributable to any Transferred Employee resulting from or
based
upon (A) any employment-related liability (statutory or otherwise) with
respect
to employment or termination of employment on or prior to the Closing Date,
(B)
any liability relating to, arising under or in connection with any Employee
Benefit Plan, including any liability under COBRA, whether arising prior
to, on
or after the Closing Date and (C) any liability under WARN;
(iv)
arising out of, based upon or relating to any Excluded Asset
or
any Excluded Liability; and
(v)
arising from or related to any fees, commissions or like
payments
by any Person having acted or claiming to have acted, directly or indirectly,
as
a broker, finder or financial advisor for Seller in connection with the
transactions contemplated by this Agreement.
(b)
Subject to Section 10.1 and 10.4, Purchaser
hereby agrees to indemnify and hold Sellers and their respective Affiliates
(including, without limitation, the Owners) and their respective shareholders,
directors, officers, employees, members, partners, agents, attorneys,
representatives, successors and permitted assigns (collectively, the “Seller Indemnified Parties”)
harmless from and against, and pay to the applicable Seller Indemnified
Parties
the amount of, any and all Losses:
(i)
based upon, attributable to or resulting from the failure
of any
of the representations or warranties made by Purchaser in this Agreement
or in
any Purchaser Document to be true and correct in all respects at the date
hereof
and as of the Closing Date;
(ii)
based upon, attributable to or resulting from the breach
of any
covenant or other agreement on the part of Purchaser under this Agreement
or any
Purchaser Document;
(iii)
arising out of, based upon or relating to any Assumed
Liability;
(iv)
arising from or related to any fees, commissions or like
payments
by any Person having acted or claiming to have acted, directly or indirectly,
as
a broker, finder or financial advisor for Purchaser in connection with
the
transactions contemplated by this Agreement; and
(v)
arising out of, based upon or relating to the operation of
the
Business and the Purchased Assets from and after the Closing Date.
(c)
For purposes of calculating Losses hereunder, any materiality
or
Material Adverse Effect qualifications in the representations, warranties,
covenants and agreements shall be disregarded.
(a)
A claim for indemnification for any matter not involving
a Third
Party Claim may be asserted by notice to the party from whom indemnification
is
sought; provided, however, that failure to so notify the
indemnifying party shall not preclude the indemnified party from any
indemnification which it may claim in accordance with this Article
X. For so long as any
principal, interest or other amount remains payable and outstanding from
Purchaser to Executive under the Purchase Note, Purchaser may, upon the
occurrence of an indemnification obligation owing to Purchaser by any of
the
Sellers or Owners under this Section 10.3(a), have the right to set-off
and apply any payment that otherwise would be in respect of such principal,
interest or other amount to the payment of such indemnification obligation
(and
any such set-off or applied amount shall be deemed to have been paid under
the
Purchase Note and no longer payable thereunder)
(b)
In the event that any Legal Proceedings shall be instituted
or
that any claim or demand shall be asserted by any third Person in respect
of
which indemnification may be sought under Section 10.2 hereof
(regardless of the limitations set forth in Section 10.4) (“Third Party Claim”), the
indemnified party shall promptly cause written notice of the assertion
of any
Third Party Claim of which it has knowledge which is covered by this indemnity
to be forwarded to the indemnifying party.
The failure of the indemnified
party to give reasonably prompt notice of
any Third Party Claim shall not release, waive or otherwise affect the
indemnifying party’s obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss and prejudice as a result
of
such failure. Subject to the provisions of this Section 10.3, the
indemnifying party shall have the right, at its sole expense, to be represented
by counsel of its choice, which must be reasonably satisfactory to the
indemnified party, and to defend against, negotiate, settle or otherwise
deal
with any Third Party Claim which relates to any Losses indemnified against
by it
hereunder; provided that the indemnifying party shall have acknowledged
in writing to the indemnified party its unqualified obligation to indemnify
the
indemnified party as provided hereunder.
If the indemnifying party elects
to defend against, negotiate, settle or
otherwise deal with any Third Party Claim which relates to any Losses
indemnified against by it hereunder, it shall within five (5) days of the
indemnified party’s written notice of the assertion of such Third Party Claim
(or sooner, if the nature of the Third Party Claim so requires) notify
the
indemnified party of its intent to do so; provided that the indemnifying
party must conduct its defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard. If the indemnifying party elects
not to
defend against, negotiate, settle or otherwise deal with any Third Party
Claim
which relates to any Losses indemnified against by it hereunder, fails
to notify
the indemnified party of its election as herein provided or contests its
obligation to indemnify the indemnified party for such Losses under this
Agreement, the indemnified party may defend against, negotiate, settle
or
otherwise deal with such Third Party Claim. If the indemnified party defends
any
Third Party Claim, then the indemnifying party shall reimburse the indemnified
party for the expenses of defending such Third Party Claim upon submission
of
periodic bills. If the indemnifying
party shall assume the defense of any Third Party Claim, the indemnified
party
may participate, at his or its own expense, in the defense of such Third
Party
Claim; provided, however, that such indemnified party shall be
entitled to participate in any such defense with separate counsel at the
expense
of the indemnifying party if (i) so requested by the indemnifying party
to
participate or (ii) in the reasonable opinion of counsel to the indemnified
party a conflict or potential conflict exists between the indemnified party
and
the indemnifying party that would make such separate representation advisable;
and provided, further, that the indemnifying party shall not be
required to pay for more than one such counsel (plus any appropriate local
counsel) for all indemnified parties in connection with any Third Party
Claim. Each party hereto agrees to
provide reasonable access to each other party to such documents and information
as may reasonably be requested in connection with the defense, negotiation
or
settlement of any such Third Party Claim.
Notwithstanding anything in this
Section 10.3 to the contrary,
neither the indemnifying party nor the indemnified party shall, without
the
written consent of the other party, settle or compromise any Third Party
Claim
or permit a default or consent to entry of any judgment unless the claimant (or
claimants) and such party provide to such other party an unqualified release
from all liability in respect of the Third Party Claim. If the indemnifying party makes
any
payment on any Third Party Claim, the indemnifying party shall be subrogated,
to
the extent of such payment, to all rights and remedies of the indemnified
party to any insurance benefits or other claims of the indemnified party
with
respect to such Third Party Claim.
(c)
After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction and the expiration
of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying party shall
have
arrived at a mutually binding agreement, in each case with respect to an
Third
Party Claim hereunder, the indemnified party shall forward to the indemnifying
party notice of any sums due and owing by the indemnifying party pursuant
to
this Agreement with respect to such matter and the indemnifying party shall
pay
all of such remaining sums so due and owing to the indemnified party by
wire
transfer of immediately available funds within five (5) Business Days after
the
date of such notice; provided, however, that for so long as any
principal, interest or other amount remains payable and outstanding from
Purchaser to Executive under the Purchase Note, Purchaser may, upon the
occurrence of an indemnification obligation owing to Purchaser by Sellers
or
Owners under this Agreement, have the right to set-off and apply any payment
that otherwise would be in respect of such principal, interest or other
amount
to the payment of such indemnification obligation (and any such set-off
or
applied amount shall be deemed to have been paid under the Purchase Note
and no
longer payable thereunder).
(a)
An indemnifying party shall not have any liability under
Section 10.2(a) or 10.2(b) hereof unless the aggregate amount
of Losses incurred by the indemnified parties and indemnifiable thereunder
exceeds $200,000 (the “Basket”) and, in such event,
the
indemnifying party shall be required to pay only the amount of all such
Losses
in excess of the Basket amount; providedthat the Basket
limitation shall not apply to Losses related to the failure to be true
and
correct of any of the representations and warranties set forth in Sections
5.1 (organization and good standing), 5.2 (authorization of
agreement), 5.6 (title to purchased assets; sufficiency), 5.8
(taxes), 6.1 (organization and good standing) and 6.2
(authorization of agreement) of this Agreement.
(b)
Sellers and Owners shall not be required to indemnify any
Person
under subsections (i), (ii) and (v) of Section
10.2(a) for an aggregate amount of Losses exceeding an amount equal to
one-half (1/2) of the Purchase Price (the “Cap”); provided, that (i)
there shall be no Cap with respect to Losses for which indemnification
is
provided under Section 10.2(a)(i) relating to the failure to be true and
correct of any of the representations or warranties contained in Sections
5.1 (organization and good standing), 5.2 (authorization of
agreement), 5.6 (title to purchased assets; sufficiency) and 5.8
(taxes) of this Agreement and (ii) the limitation on indemnification provided
by
the Cap shall not apply in respect of subsection (ii) of Section
10.2(a) for any breach(es) described thereunder that arise or occur after
the Closing.
10.5
Tax Treatment of Indemnity Payments.
The Sellers, Owners and Purchaser agree to treat any indemnity payment
made pursuant to this Article X as an adjustment to the Purchase Price
for all income tax purposes. If,
notwithstanding the treatment required by the preceding sentence, any indemnification
payment under
Article X (including this Section 10.5) is determined to be
taxable to the party receiving such payment by any Taxing Authority, the
paying
party shall also indemnify the party receiving such payment for any Taxes
incurred by reason of the receipt of such payment and any Losses incurred
by the
party receiving such payment in connection with such Taxes (or any asserted
deficiency, claim, demand, action, suit, proceeding, judgment or assessment,
including the defense or settlement thereof, relating to such Taxes).
11.1
Transfer Taxes.
Purchaser shall (i) be responsible for any and all sales, use, stamp,
documentary, filing, recording, transfer, gross receipts, registration,
duty or
similar fees or taxes or governmental charges as levied by any Taxing Authority
in connection with the transactions contemplated by this Agreement
(collectively, “Transfer
Taxes”) and (ii) timely file or cause to be filed all necessary
documents (including all Tax Returns) with respect to Transfer Taxes.
11.2
Prorations.
Sellers shall bear all ad
valorem Tax liability with respect to the Purchased Assets if the Lien or
assessment date arises prior to the Closing Date irrespective of the reporting
and payment dates of such Taxes.
All other property Taxes or ad
valorem obligations and similar recurring Taxes and fees on the Purchased
Assets for taxable periods beginning before, and ending after, the Closing
Date,
shall be prorated between Purchaser, on the one hand, and Sellers, on the
other
hand, as of the Closing Date.
Sellers shall be responsible for
all such Taxes and fees on the Purchased
Assets accruing during any period up to and including the Closing Date. Purchaser shall be responsible
for all
such Taxes and fees on the Purchased Assets accruing during any period
after the
Closing Date. With respect to Taxes
described in this Section 11.2, Sellers shall timely file all Tax Returns
due before the Closing Date with respect to such Taxes and Purchaser shall
prepare and timely file all Tax Returns due after the Closing Date with
respect
to such Taxes. If one party remits
to the appropriate Taxing Authority payment for Taxes, which are subject
to
proration under this Section 11.2 and such payment includes the other
Person’s share of such Taxes, such other Person shall promptly reimburse the
remitting Person for its share of such Taxes.
11.3
Cooperation on Tax Matters.
Purchaser, the Owners and Sellers shall furnish or cause to be furnished
to each other, as promptly as practicable, such information and assistance
relating to the Purchased Assets and the Assumed Liabilities as is reasonably
necessary for the preparation and filing of any Tax Return, claim for refund
or
other filings relating to Tax matters, for the preparation for any Tax
audit,
for the preparation for any Tax protest, for the prosecution or defense
of any
suit or other proceeding relating to Tax matters.
11.4
Tax Clearance Certificates. At Purchaser’s request,
Sellers shall
notify all of the Taxing Authorities for the jurisdictions set forth on
Schedule 5.8(c) of the transactions contemplated by this Agreement in the
form and manner required by such Taxing Authorities, if the failure to make
such notifications or receive any available tax clearance certificate (“Tax Clearance Certificate”)
could subject Purchaser to any Taxes of Sellers. If, in respect to any application
for
Tax Clearance Certificates made pursuant to this Section 11.4, any
Governmental Body asserts that Sellers are liable for any Tax, Sellers
shall
promptly pay and all such amounts and shall provide evidence to Purchaser
that
such Liabilities have been paid in full or otherwise satisfied.
12.1
Expenses.
Except as otherwise provided in this Agreement, each of the Sellers,
Owners and Purchaser shall bear his, her or its (as the case may be) own
expenses incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contemplated
by this
Agreement and the consummation of the transactions contemplated hereby
and
thereby.
12.2
Specific Performance.
The Sellers and Owners acknowledge and agree that the breach of
this
Agreement would cause irreparable damage to Purchaser and that Purchaser
will
not have an adequate remedy at law.
Therefore, the obligations of the
Sellers and Owners under this
Agreement, including Sellers’ obligations to sell the Purchased Assets to
Purchaser, shall be enforceable by a decree of specific performance issued
by
any court of competent jurisdiction, and appropriate injunctive relief
may be
applied for and granted in connection therewith. Such remedies shall, however, be
cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
12.3
Entire Agreement; Amendments and Waivers.
This Agreement (including the schedules and exhibits hereto) represents
the entire understanding and agreement between the parties hereto with
respect
to the subject matter hereof. This
Agreement can be amended, supplemented or changed, and any provision hereof
can
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf
of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate
or
be construed as a further or continuing waiver of such breach or as a waiver
of
any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising,
any
right, power or remedy hereunder shall operate as a waiver thereof, nor
shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
12.4
Governing Law; Jurisdiction.
This Agreement shall be governed by and construed in accordance
with the
laws of the State of Texas without giving effect to choice
of law
principles. The parties
hereto hereby irrevocably submit to the non-exclusive jurisdiction of any
federal or state court located within the State of Texas over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby and each party hereby irrevocably agrees that all claims
in
respect of such dispute or any suit, action or proceeding related thereto
may be
heard and determined in such courts.
The parties hereby irrevocably
waive, to the fullest extent permitted by
applicable Law, any objection which they may now or hereafter have to the
laying
of venue of any such dispute, suit, action or proceeding brought in such
court
or any defense of inconvenient forum for the maintenance of such dispute,
suit,
action or proceeding. Each of the
parties hereto agrees that a judgment in any such dispute, suit, action
or
proceeding may be enforced in other jurisdictions by suit on the judgment
or in
any other manner provided by law.
Each of the parties hereto hereby
consents to process being served by any
party to this Agreement in any dispute, suit, action or proceeding by the
delivery of a copy thereof in accordance with the provisions of Section
12.5.
12.5
Notices.
All notices and other communications under this Agreement shall
be in
writing and shall be deemed given (i) when delivered personally by hand
(with
written confirmation of receipt), (ii) when sent by facsimile (with written
confirmation of transmission) or (iii) one (1) Business Day following the
day
sent by overnight courier (with written confirmation of receipt), in each
case
directed to the applicable party at the following respective addresses
and
facsimile numbers (or to such other address or facsimile number as a party
may
have specified by notice given to the other party pursuant to this
provision):
If
to any Seller or Owner, to: X.X. Xxx 0000
(or 000 XX 0000, for overnight courier delivery)
Xxxxxx, XX00000
Attn: Xx. Xxxxx Xxxxxxxx
(or 000 XX 0000, for overnight courier delivery)
Xxxxxx, XX00000
Attn: Xx. Xxxxx Xxxxxxxx
With
a
copy to:
Xxxxxx, Xxxxxxxx & Xxxxxxx, P.C.
P.O. Box 2508
Xxxxx, NM88241-2508
Attn: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
P.O. Box 2508
Xxxxx, NM88241-2508
Attn: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
If
to
Purchaser, to:
0000 Xxxxxxxx
Xxxxxxx, XX00000
Attn: Xxxxx X. Xxxxxx, CEO
Facsimile: (000) 000-0000
Xxxxxxx, XX00000
Attn: Xxxxx X. Xxxxxx, CEO
Facsimile: (000) 000-0000
With
a
copy to:
Xxxxxx, Xxxx & XxXxxx, P.C.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx,XX00000
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx,XX00000
Attn:
Xxxxxxx
X. Xxxxxxx
Facsimile: (000) 000-0000
Facsimile: (000) 000-0000
12.6
Severability.
If any term or other provision of this Agreement is invalid, illegal,
or
incapable of being enforced by any law or public policy, all other terms
or
provisions of this Agreement shall nevertheless
remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to
any
party. Upon such determination that
any term or other provision is invalid, illegal, or incapable of being
enforced,
the parties hereto shall negotiate in good faith to modify this Agreement
so as
to effect the original intent of the parties as closely as possible in
an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent
possible.
12.7
Binding Effect; Assignment.
This Agreement shall be binding upon and inure to the benefit of
the
parties and their respective successors and permitted assigns. No assignment of this Agreement
or of
any rights or obligations hereunder may be made by any of the Sellers,
Owners or
Purchaser (by operation of law or otherwise) without the prior written
consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that Purchaser may
assign this Agreement and any or all rights or obligations hereunder (including,
without limitation, Purchaser’s rights to purchase the Purchased Assets and
assume the Assumed Liabilities and Purchaser’s rights to seek indemnification
hereunder) to any Affiliate of Purchaser, any Person from which it has
borrowed
money or any Person to which Purchaser or any of its Affiliates proposes
to
merge or consolidate or sell all or substantially all of the assets relating
to
the Business; providedfurther that no such assignment shall
relieve Purchaser of its obligations under this Agreement. Upon any such permitted assignment,
the
references in this Agreement to Purchaser shall also apply to any such
assignee
unless the context otherwise requires.
12.8
Counterparts.
This Agreement may be executed in one or more counterparts, each
of which
will be deemed to be an original copy of this Agreement and all of which,
when
taken together, will be deemed to constitute one and the same
agreement.
[Remainder
of Page
Intentionally Left Blank]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first written above.
PURCHASER:
DXP ENTERPRISES, INC.
By:
Name:
Xxx
XxXxxxxxx
Title:
Chief
Financial Officer and
Secretary
SELLERS
AND OWNERS:
INDIAN FIRE AND SAFETY, INC.
By:
Name:
Xxxxx
Xxxxxxxx
Title:
President
LONE WOLF RENTAL, LLC
By:
Name:
Xxxxx
Xxxxxxxx
Title:
Manager
XXXXX XXXXXXXX
XXXXX XXXXXXXX
XXXXX XXXXXXXX
THE
XXXXXX XXX XXXXXXXX IRREVOCABLE TRUST
By:
Name:
Xxxxx
Xxxxxxxx
Title:
Trustee
